i.
SUMMARY APPRAISAL OF THE ROGER SMITH HOTEL 501 LEXINGTON AVENUE NEW YORK, NEW YORK
BLOCK 1302, LOT 21
VALUATION AS OF SEPTEMBER 4, 2012
Prepared for
Phoebe Knowles Vice President The Roger Smith Hotel 501 Lexington Avenue New York, New York 10017
Prepared by
JEROME HAIMS REALTY, INC. 630 Third Avenue, 22nd Floor New York, New York 10017
The Roger Smith Hotel 501 Lexington Avenue New York, New York ii.
TABLE OF CONTENTS
Page No.
Title Page ...... i. Table of Contents ...... ii. Letter of Transmittal ...... 1 Summary of Salient Facts and Conclusions ...... 6 Purpose of the Appraisal ...... 8 Intended Use and User of the Appraisal ...... 8 Property Rights Appraised ...... 8 Dates of Value and Inspection ...... 8 Date of Report ...... 8 Definition of Market Value ...... 8 Scope of Work ...... 9 Underlying Assumptions and Limiting and Qualifying Conditions ...... 10 Hotel Market Analysis ...... 12 Neighborhood Analysis ...... 21 Description of Property ...... 25 Land Description ...... 25 Improvement Description ...... 27 Zoning Analysis ...... 30 Assessed Value and real Estate Tax Analysis ...... 31 History of the Subject Property ...... 33 Highest and Best Use Analysis ...... 34
VALUATION: Introduction ...... 36 Income Capitalization Approach ...... 38 Sales Comparison Approach ...... 56 Final Value Opinion ...... 58 Certification ...... 60
ADDENDA: Comparable Income and Expense Data ...... 61 The Historical Cash Flow Summary ...... 63 PKF Comparable Income and Expenses Data ...... 64
Qualifications of Appraisers………………………………….……………………...... 65
JEROME HAIMS REALTY, INC. JEROME HAIMS REALTY, INC. REAL ESTATE APPRAISERS & CONSULTANTS 630 THIRD AVENUE, NEW YORK, NY 10017 212-687-0154, FAX 212-986-4017
December 12, 2012
Phoebe Knowles Vice President The Roger Smith Hotel 501 Lexington Avenue New York, New York 10017
Re: The Roger Smith Hotel 501 Lexington Avenue New York, New York
Block 1302, Lot 21
Dear Ms. Knowles:
As you requested and in accordance with our agreement, we have inspected and appraised the above-referenced property. The subject of this appraisal is comprised of a 17-story and basement, elevator, full-service hotel, containing 130 guestrooms, a ground floor restaurant and three retail stores. The subject property was constructed in 1927 and has a gross building area of 92,501 square feet (as per New York City records).
The subject property is located on the northeast corner of Lexington Avenue and East 47th Street, in the Midtown East section of the borough of Manhattan, city, county and state of New York.
The subject site is irregular in shape and has 100.42 feet of frontage on the east side of Lexington Avenue and 50.00 feet of frontage on the north side of East 47th Street, containing 6,050 square feet of lot area.
The subject site is located in a C5-3 general commercial zoning district within the Special Midtown District. The maximum allowable floor area ratio (FAR) for commercial uses is 15.0 and 10.0 for residential use.
The date of value is September 4, 2012, the date of our property inspection. The date of the appraisal report is December 12, 2012.
Phoebe Knowles Vice President The Roger Smith Hotel Re: The Roger Smith Hotel 501 Lexington Avenue New York, New York 2.
The intended use of the appraisal is for estate planning purposes. The intended user of the appraisal is our client, Phoebe Knowles, Vice President of The Roger Smith Hotel.
The summary report contained herein complies with the Uniform Standards of Professional Appraisal Practice.
This summary report outlines the relevant data used in arriving at our opinion of market value and presents the basic approaches to value. Comprehensive data and analysis, upon which this opinion is based, are retained in our work file.
We have inspected the subject property and have thoroughly investigated neighborhood and area influences that affect the property’s marketability and our value. In arriving at the appraised value, we have addressed all three standard approaches to value: the Income Capitalization Approach, the Sales Comparison Approach and the Cost Approach.
We have relied on the Income Capitalization Approach since the subject property is an income producing property. The Sales Comparison Approach was used to test the reasonableness of our conclusion via the Income Capitalization Approach. The Cost Approach was not used to value the subject considering the difficulty in estimating accrued depreciation from all sources from an improvement constructed in 1927.
We refer the reader to the “Scope of Work” section of the appraisal report, which includes, but is not limited to: 1) the extent to which the property is identified, 2) the extent to which the tangible property is inspected, 3) the type and extent of data researched, and 4) the type and extent of analyses applied to arrive at opinions or conclusions.
JEROME HAIMS REALTY, INC. Phoebe Knowles Vice President The Roger Smith Hotel Re: The Roger Smith Hotel 501 Lexington Avenue New York, New York 3.
Based on the assumptions and limiting conditions contained in this report, our opinion of the market value of the fee simple estate in the subject real estate, as of September 4, 2012, is:
$53,100,000
(FIFTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS)
We appreciate this opportunity to provide you with this summary appraisal. If you have any questions concerning its content, please do not hesitate to call.
Very truly yours,
JEROME HAIMS REALTY, INC.
Eric P. Haims, MAI, MRICS, CCRA Senior Vice President Certified New York State General Real Estate Appraiser Certificate No. 46000045128
Man-Keung A. Lau, MAI, CPA Vice President Certified New York State General Real Estate Appraiser Certificate No. 46000048434
LD
JEROME HAIMS REALTY, INC. 4.
View of The Roger Smith Hotel
5.
View East on East 47th Street from Lexington Avenue
View North on Lexington Avenue from East 47th Street
The Roger Smith Hotel 501 Lexington Avenue New York, New York 6.
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Address: The Roger Smith Hotel 501 Lexington Avenue New York, New York
Block/Lot: 1302/21
Location: The subject property is located on the northeast corner of Lexington Avenue and East 47th Street, in the Midtown East section of the borough of Manhattan, city, county and state of New York.
Description: The subject site is currently improved with a 17-story and basement, elevator, full-service hotel, containing 130 rooms and suites, a ground floor restaurant and three retail stores.
Year Built: 1927
Lot Dimensions: 100.42 feet of frontage on the east side of Lexington Avenue and 50.00 feet of frontage on the north side of East 47th Street
Lot Shape and Area: The subject site is irregular in shape and has 6,050 square feet of lot area.
Gross Building Area: 92,501 square feet (as per New York City records)
Zoning/FAR: C5-3/15.0 FAR for commercial uses and 10.0 FAR for residential use (Special Midtown District)
Highest and Best Use: Current use as a full-service hotel
Date of Report: December 12, 2012
Date of Inspection: September 4, 2012
Date of Value: September 4, 2012
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Summary of Salient Facts and Conclusions -- continued
Interest Appraised: Fee Simple Estate
Opinion of Market Value: $53,100,000
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PURPOSE OF THE APPRAISAL The purpose of the appraisal is to provide our client with an opinion of the market value of the fee simple estate in the subject real estate.
INTENDED USE AND USER OF THE APPRAISAL The intended use of the appraisal is for estate planning purposes. The intended user of the appraisal is our client, Phoebe Knowles, Vice President of The Roger Smith Hotel.
PROPERTY RIGHTS APPRAISED We have valued the subject’s fee simple estate. A fee simple estate is defined as: “Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat.”1
DATES OF VALUE AND INSPECTION The date of value is September 4, 2012, the date of our property inspection.
DATE OF REPORT The date of the summary appraisal report is December 12, 2012.
DEFINITION OF MARKET VALUE Market Value as used herein is defined as: “The most probable price as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms for which the specified property should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest and assuming that neither is under undue duress.”2
1 The Dictionary of Real Estate Appraisal, 5th ed., compiled and published by the Appraisal Institute, p. 78 2 The Dictionary of Real Estate Appraisal, 5th ed., Appraisal Institute, Chicago, Illinois, 2010, p. 122
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SCOPE OF WORK According to the Uniform Standards of Professional Appraisal Practice and Advisory Opinions (USPAP), scope of work is defined as “the type and extent of research and analyses in an assignment.”
The scope of work in this appraisal assignment included: A personal interior inspection of the subject property, a review of New York City records (including the plot plan) in order to gather information about the physical and legal characteristics of the subject property that are relevant to the valuation problem;
An analysis of regional and local area characteristics and trends as of the September 4, 2012, date of value;
An analysis of the subject property’s zoning and any imminent zoning changes as of the date of value;
A determination of the subject’s highest and best use;
Research and confirmation of sales of comparable properties located in the subject’s area and which have transpired prior to the September 4, 2012, the date of value;
Review of the subject’s income and expenses statements;
Review of the subject’s historical average daily room rates (ADRs) and occupancy rates and those of the subject’s market area;
Analysis of comparable income and expenses data provided by Smith Travel Research and PKF Hospitality Research;
Research of hotel operating trends and forecasts in the subject’s market;
Research of retail rental rates and occupancy rates in the subject’s area;
Application of the Income Capitalization Approach which involved a review of historical income and expenses, an estimate of the subject’s stabilized net cash flow and the selection of appropriate overall capitalization rate with consideration given to the location, age and condition, potential for increasing room rates and occupancy, and overall market conditions at the subject property; and
The reporting of our opinion and conclusion in a summary report format, as requested by our client.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 10.
UNDERLYING ASSUMPTIONS AND LIMITING AND QUALIFYING CONDITIONS This appraisal is subject to the following Underlying Assumptions and Qualifying and Limiting Conditions:
1. The appraisal covers the property as described in this report and the areas and dimensions as shown herein are assumed to be correct.
2. The appraiser has made no survey of the property and assumes no responsibility in connection with such matters. Any sketch or identified survey of the property included in this report is only for the purpose of assisting the reader to visualize the property.
3. Responsible ownership and competent management are assumed.
4. No responsibility is assumed for matters involving legal or title consideration.
5. This report has been prepared in accordance with the requirements of the Appraisal Institute.
6. The information identified in this report as being furnished by others is believed to be reliable, but no responsibility for its accuracy is assumed.
7. That the present zoning will remain in force, unless otherwise adjusted in the zoning section of this report.
8. That the appraisal report will not be utilized in any present or proposed, public or private syndication of any of the interests in the property unless prior written agreement has been obtained from the signatories to this report.
9. The Bylaws and Regulations of the Appraisal Institute require each member and candidate to control the use and distribution of each appraisal report signed by such member or candidate. Therefore, except as hereinafter provided, the party for whom this appraisal report was prepared may distribute copies of this appraisal report, in its entirety, to such third parties as may be selected by the party for whom this appraisal report was prepared; however, selected portions of this appraisal report shall not be given to third parties without the prior written consent of the signatories of this appraisal report. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of advertising media, public relations media, news media, sales media or other media for public communication without the prior written consent of the signatories of this appraisal report.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 11.
10. The appraiser is authorized by the client to disclose all or any portion of this appraisal report and the related appraisal data to appropriate representative of the Appraisal Institute if such disclosure is required to enable the appraisers to comply with the Bylaws and Regulations of the Institute now or hereafter in effect.
11. The appraiser is not required to give testimony or attendance in court by reason of this appraisal unless arrangements have been previously made therefore.
12. Unless stated otherwise, the appraiser has not learned of any asbestos, hazardous waste or toxic material in existence at the subject property. In any event, the appraisers are not qualified to detect such substances and urge that a qualified expert be employed for this procedure. The appraisal and indicated value, therefore, do not consider any costs to correct that may arise from hazardous material contained at the property, unless separately noted herein.
13. Unless stated otherwise in the appraisal, the appraiser has not considered compliance with the requirements of the Americans With Disabilities Act of 1990 (ADA) in the estimate of value in this appraisal. The appraisers are not qualified to determine such compliance and recommend a qualified expert be employed for this procedure. Failure to comply with the requirements of the ADA, including the costs to cure any non-complying items, can negatively affect the value estimated herein.
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HOTEL MARKET ANALYSIS Our discussion regarding the city’s hotel market will focus on: visitation, hotel occupancy and room rates, new hotel construction, and hotel sales.
Visitation, Hotel Occupancy, and Room Rates New York City has always been a premiere travel destination. The city’s culture, shopping, nightlife and sights draw in millions of people from all over the world. The city boasts preeminent parks, museums and restaurants. Major tourism demand generators include: business, finance and cultural centers, Wall Street, the Statue of Liberty, Ellis Island, the Empire State Building, retail shops, restaurants and night life, museums, Times Square, Broadway, professional sports and the Jacob K. Javits Convention Center. The September 11 Memorial and Museum at the World Trade Center is expected to draw a significant amount of visitors. An estimated 50.2 million visitors came to New York City in 2011, an all-time record. Of these, 10.1 million came from international markets, maintaining the city’s rank as the number one United States destination for overseas travelers. The total number of visitors in 2011 increased 3.1% when compared to the total number of visitors in 2010. The amount of visitors to the area has been integral in helping the city to weather the recession. According to NYC & Company, total visitor spending in 2011 was $32 billion which helped support approximately 320,000 jobs within New York City.
The following graph was constructed from information provided by NYC & Company and shows the total number of visitors to the area from 2001 to 2011.
New York City Visitors (in millions) 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Domestic Visitors International Visitors
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The following pair of charts was prepared from information provided by Smith Travel:
Average Daily Room Rate (4Q 2011) Occupancy Rate (4Q 2011) $300.00 100% $250.00 80% $200.00 60% $150.00 40% $100.00 $50.00 20% $- 0%
The charts located above indicate that in the 4th Quarter of 2011, the New York City hotel market had a higher average daily room rate and occupancy level than all major metropolitan areas in the United States. New York City’s average daily room rate in the 4th Quarter of 2011 was $282.60, which is approximately 1.9 times more than the $152.02 average daily room rate posted in Boston (the second highest average daily room rate) during the same period. Similarly, New York City had the highest occupancy rate when compared to other metropolitan areas. The occupancy rate for New York City was 84% in the 4th Quarter of 2011. The average occupancy rate for the other major metropolitan areas ranged from 62% to 67%.
In 2009, many industry experts anticipated that the surge of new hotel openings combined with poor economic conditions would cause this market segment to drastically falter. Therefore, many industry watchdogs have been astonished at the unexpectedly fast recovery of the New York City hotel market. This has spurred renewed interest in new projects and projects that were previously stalled. Unlike the city’s residential and office markets, where construction is increasing at a modest pace, development in the city’s hotel market has increased more quickly because of improved hotel revenues.
The onset of the recession and the economic turmoil caused occupancy rates to decline within New York City’s hotel market. Local hotel operators combated the decreasing occupancy rates by lowering room rates in order to help lure visitors during the downturn. The strategy was effective since it helped New York City maintain the highest occupancy rate over the past several years, when compared to all other major metropolitan areas.
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However, with the hotel market improving, the average daily room rate and the revenue per room available (RevPar) has been increasing as of late. In December 2011, the average daily room rate was 0.93% higher than the average daily room rate in the same month of the previous year. During the same period, the RevPar in New York City has increased 5.4%.
The following chart was developed from information contained within the PKF Consulting Trends In The Hotel Industry report.
PERFORMANCE OF NEW YORK CITY HOTELS $400.00 100.0% $350.00 95.0% $300.00 90.0% $250.00 85.0% $200.00 80.0%
$150.00 75.0%
$100.00 70.0%
$50.00 65.0%
$0.00 60.0% Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11
Average Daily Room Rate RevPar Occupancy
The robust tourism and increasing need of hotel rooms for corporate travel has helped create strong fundamentals in all metrics for the hospitality industry. Industry experts expect RevPar to continue to increase market wide through to 2013. An increase in the average daily room rate is also expected during 2012. RevPar was at a pre-recession high in 2008, and it is generally expected that RevPar will approach the high posted in 2008 in 2013 and eventually surpass it by 2014.
The improved confidence in the hotel sector has also caused financing to become more readily available. This sector, at one time, was considered the least favorite sector for lenders. However, with the positive outlook and improved metrics, financing has been slowly returning for both development and acquisitions.
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New Hotel Construction The hotel construction market has been active. The improved hotel market will also likely revitalize projects that were previously placed on hold and spark new projects.
According to the Real Deal Data Book 2012, the majority of hotels within the pipeline are in Midtown West and in Lower Manhattan. The reason for the high number of construction of hotels in Lower Manhattan is the anticipation of a large number of office space that will be added to the area at the World Trade Center site. The new office space will bring increased corporate travel to the area, for which additional accommodation will be needed. In addition, the September 11 Memorial and Museum, the East River Waterfront Park, and new retail stores will serve to reiterate Lower Manhattan as a popular tourist destination. The expectation of visitors arriving to the site has also prompted hotel development in the area. Since 2001, the number of hotels south of Chambers Street has more than tripled.
The potential transformation of the Hudson Rail Yards and the renovation of the Jacob Javits Center have helped to spur hotel development on the west side of New York. If completed as planned, the Hudson Yards district will become the fourth largest central business district in the United States, after Midtown, Lower Manhattan’s Financial District, and the Chicago Loop.
The chart below illustrates the anticipated supply of new hotels in Manhattan by hotel type:
Anticipated Supply of New Hotels in Manhattan by Type
Upper Upscale 10% 10% Upper Midscale 2% 10% Midscale 1% Economy 11% Luxury 56% Independent Upscale
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The chart below lists new hotels that are currently planned to open in 2012:
NEW YORK CITY HOTEL DEVELOPMENT IN 2012 No. of Scheduled No. Project Address Rooms Opening Status Developer
Midtown West 1 TRYP Times Square South 345 West 35th Street 173 January 2012 In construction Eros Management & Realty, LLC 2 Holiday Inn 30 West 31st Street 122 March 2012 In construction 30-32 West 31, LLC 3 The NoMad Hotel 1170 Broadway 165 March 2012 In construction 1170 Broadway Associates, LLC 4 Gem Hotel Union Square 52-54 West 13th Street 114 May 2012 In construction Gemini Real Estate Advisors 5 Holiday Inn Express 60 West 36th Street 135 August 2012 In construction Magna Hospitality Group 6 Hyatt Place 52-54 West 36th Street 188 September 2012 In construction Brisam East 52nd Street 7 Courtyard by Marriott 960 Sixth Avenue 168 September 2012 In construction 960 Associates, LLC 8 The Out NYC 510 West 42nd Street 97 October 2012 In construction Parkview Developers, LLC 9 Best Western Plus 50 West 36th Street 94 November 2012 In construction N/A 10 Holiday Inn Express 509-13 West 43rd Street 203 December 2012 Final planning SCW West, LLC
Midtown East 11 Pod Too 145 East 39th Street 369 August 2012 In construction BD Hotel, LLC
Downtown Manhattan 12 Hyatt Regency Union Square 134 Fourth Avenue 177 January 2012 In construction Hersha Hospitality 13 Wyndham Garden Hotel 93 Bowery Street 106 March 2012 In construction 93 Bowery Holdings, LLC 14 Hampton Inn 32 Pearl Street 82 March 2012 In construction McSam Hotel Group 15 Hotel Indigo 180 Orchard Street 151 July 2012 In construction LES Realty Group, LLC 16 Cosmopolitan Hotel Expansion 125 Chambers Street 25 September 2012 Final planning Do-Bar Hotel Corporation 17 Holiday Inn 150 Delancey Street 132 December 2012 In construction McSam Hotel Group
Source: Real Deal Data Book 2012
According to New York City and Company, New York City experienced the most rapid development of hotels between January 2006 and December 2011 on record. In the two decades proceeding this period, the average annual increase in net inventory was a mere 1.1%. The year-over-year net gains over the past few years were 2.7% (2008 vs. 2007), 5.8% (2009 vs. 2008), and 5.0% (2010 vs. 2009). In 2011, the net increase in room inventory averaged over 5.0%.
The city has reached almost 90,000 rooms in active inventory by the end of 2011, a 24% increase in accommodations since 2006. Even with the substantial increase in room inventory, the city’s hotels average occupancy rates are significantly above the national average and demand continues to remain strong. The city averages 2.2 million room nights sold per month.
Notable hotel opening in 2011 include the Mondrian SoHo, Four Points by Sheraton, Yotel New York Times Square West, the Nolitan, Hyatt 48Lex, Dream Downtown, Flatiron Hotel Toshi, Hotel Americano, Conrad New York, and TRYP New York City.
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Several hotels are undergoing major renovations which include the Sheraton New York, the Roosevelt, the Moderne, and the Grand Hyatt. The historic Algonquin Hotel is also slated for renovations in 2012.
Hotel Sales During 2011, Manhattan was the most liquid city for hotel transactions across the globe and garnered significant investor attention. London, Singapore, San Diego, and Paris were the other top markets in terms of hotel transaction volume in 2011. The Ritz-Carlton Moscow topped the international list with a reported sales price of $600 million. Meanwhile, the largest hotel sale in New York was the sale of the New York Palace on Madison Avenue for $400 million, which was the fourth largest international deal of the year.
The New York City hospitality sector experienced robust growth, with over $3.2 billion in sales. Sales were up 148% over 2010 and up 524% over 2009. Moreover, hotel sales in 2011 reached a five-year high. There were 38 hotel sector transactions during the year and the large transactions of over $100 million accounted for approximately 78% of the total sales volume.
According to Jones LangSalle Hotel’s Intelligence New York report, approximately 50% of the city’s acquisition volume was driven by real estate investment trusts in 2011. The firm’s hotel transactions experts predict 2012 will bring much the same, as New York is expected to remain the most active hotel transaction market in the United States. Hotel deal volume is expected to range from $2.2 billion to $2.6 billion in 2012, representing approximately 15% of the United States’ total transaction volume. While the pace is slightly below the 2011 records levels, New York City is expected to continue to be the most liquid hotel market in the world. Private equity, institutional and off-shore buyers will likely dominate the hotel acquisition landscape in Manhattan. The city will also continue to be one of the most attractive hotel investment markets for public REITs. As previously indicated, the room supply is expected to increase by 3.4% with 17 new hotels totaling 2,500 new rooms coming to the market in 2012.
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$444,939 $470,506 $441,370 $470,852 $404,516 $621,739 $460,637 $805,556 $787,879 $348,485 $459,016 $627,586 $491,379 $496,429 $365,044 $348,485 $587,179 $470,679 $1,698,936 $1,698,936 Price/Room $490.65 $765.43 $624.31 $639.65 $783.78 $484.77 $803.86 $483.16 $483.16 $985.76 $934.40 $1,064.95 $1,085.87 $1,521.69 $1,273.86 $1,777.32 $1,134.32 $1,733.33 $1,105.25 $1,777.32 Price/SF $91,000,000 $85,500,000 $83,400,000 $82,500,000 $82,500,000 Sale Price Sale $400,000,000 $335,000,000 $335,000,000 $319,400,000 $315,000,000 $313,500,000 $286,000,000 $275,000,000 $145,000,000 $130,000,000 $115,000,000 $112,000,000 $400,000,000 $213,956,250 $210,000,000 Min: Avg: Max: Med: Seller Alexico Group Alexico Krauss Family HEI Hospitality HEI The Lam Group Assa Properties Related Companies Related Morgans Hotel Group Hotel Morgans Royal Family of Brunei Family Royal Rosewood Property Co. Property Rosewood Estate of Leona Helmsley ofEstate Leona Westport Partners Capital Walton LLC Capital, Street Whitehall Real Estate Funds and Highgate Holdings Whitehall Highgate Funds and Estate Real Whitehall and Holdings Funds Estate Real Highgate Walton Westbrook Capital, Street Holdings Highgate Partners, and Highgate Holdings, Whitehall RockwoodHoldings, Capital Funds, and Estate Highgate Real Buyer RFR Realty Host Hotels Chetrit Group Chetrit Andres Balazs Andres RLJ Development Gehr Development Felcor Lodging TrustFelcor Lodging IFA Hotels & Resorts & IFA Hotels New WorldNew Development Sunstone Hotel Investors Hotel Sunstone Cornerstone RE Advisors Cornerstone RE Northwood Investors, LLC Investors, Northwood FelCor Lodging Trust, Lodging FelCor Inc. Dune Capital Management Capital Dune DiamondRock Hospitality Co. DiamondRock Hospitality HNA Property Holding Group of China Holding Property HNA Sale Jul-11 LARGEST NEW YORK CITY HOTEL SALES IN 2011 SALES HOTEL CITY YORK NEW LARGEST Apr-11 Apr-11 Jan-11 Jun-11 Jan-11 Jan-11 Jun-11 Jun-11 Sep-11 Aug-11 Nov-11 Aug-11 Dec-11 May-11 May-11 Date of 899 712 759 188 669 775 460 597 180 165 330 244 145 174 168 226 No. of Rooms 73,144 98,738 52,500 77,358 815,240 314,568 437,661 294,142 207,007 502,158 447,123 215,879 185,000 237,226 103,750 170,750 GBA (SF) GBA Address 455 Madison Avenue Avenue Lexington 511 Avenue Lexington 569 Street 76th East 35 West440 Street 42nd Street 42nd East 212 Broadway 1568 West245 Street 46th Street 77th East 25 West70 Street 45th Broadway 1466 West326 Street 40th Square Cooper 25-33 West59 Street 44th West44 Street 44th West222 Street 23rd Property York Palace New Lexington Radisson Metropolitan Doubletree The Carlyle Yotel York New Helmsley Guest Suites Doubletree Times Hotel Square House Carlton Helmsley Cassa Hotel Knickerbocker Hotel Hotel 26 Fashion Hotel Square Cooper The Algonquin Royalton Chelsea Hotel 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 No. Source: Real Deal Data Book 2012 and CoStar
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Conclusion New York City will always be a premiere travel destination for American and international tourists. The culture and activities provided by the city should continue to draw crowds and visitors to the area. An estimated 50.2 million visitors came to New York City in 2011, which is an all-time record. Industry experts indicate that the hotel occupancy rate will remain high and the average daily rate and RevPar are expected to increase. Numerous forecasts indicate that the RevPar should exceed pre-recession levels by 2013. Numerous hotel developments are underway as developers seek to cover every niche and attract all kinds of travelers from seasonal vacationers to corporate visitors. This has particularly been the case in Lower Manhattan, in which developers are vying to finish developments in anticipation of increased visitors to the area due to the arrival of the September 11 Memorial and Museum and the East River Waterfront Park. This also holds true for the west side of Manhattan in which developers are anticipating additional demand for rooms due to the future development of Hudson Yards. Although financing is still challenging to obtain, lenders are beginning to show a willingness to provide loans for acquisitions and development. The prospects for the New York City hotel sector for 2012 and beyond are positive.
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NEIGHBORHOOD MAP
The Roger Smith Hotel 501 Lexington Avenue New York, New York 21.
NEIGHBORHOOD ANALYSIS
LOCATION The subject property is located in the Turtle Bay section of the borough of Manhattan, city, county and state of New York. Turtle Bay is generally bound by East 59th Street on the north, the East River on the east, East 43rd Street on the south, and Lexington Avenue on the west. The area is bordered on the north by Sutton Place and the Upper East Side. Midtown is to the west of Turtle Bay. The eastern boundary is the East River, and Murray Hill and Tudor City are on the southern border.
AREA CHARACTERISTICS The west side of Turtle Bay has many office buildings including the Lipstick Building between East 53rd and East 54th Streets, Citicorp Center on East 53rd Street, and the Chrysler Building on East 42nd Street. Part of the Plaza District is in Turtle Bay. The Plaza District, an upscale and expensive office area, spans from about Second to Fifth Avenues and East 50th to East 61st Streets. The east side of Turtle Bay is home to the United Nations, which spans from East 42nd to East 48th Streets on the eastern border of Turtle Bay. There are hundreds of missions and diplomatic residences within Turtle Bay. One, Two, Three, and 100 United Nations Plazas are just west of the United Nations World Headquarters across First Avenue. Trump World Tower on East 48th Street, the Dag Hammarskjold Plaza on East 47th Street, and the Ford Foundation on East 43rd Street are across the avenue from the United Nations World Headquarters, as well.
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Turtle Bay is mostly residential, and this is more evident in the middle and east side of Turtle Bay. The residential buildings range from small walk-up apartment buildings to luxury high rises. Except for the United Nations and its immediate area, residential towers and walk-up apartment buildings with retail shops line both First and Second Avenues. The Turtle Bay Gardens Historic District is located between East 48th and East 49th Streets and between Second and Third Avenues. The Turtle Bay Gardens Historic District was designated on June 21, 1966. There are also many parks along the riverfront immediately to the south and north of the United Nations World Headquarters.
ACCESSIBILITY The Numbers 4, 5 and 6 subway lines run along Lexington Avenue from the north and turns to Park Avenue once it reaches Grand Central. Grand Central is just to the west of Turtle Bay’s southwest corner. The Number 7 train and Metro-North also make a stop at Grand Central. There is also a station for the E and V trains at Lexington Avenue and East 53rd Street.
The only subway trunk line east of Central Park in Manhattan further pushed the need for the Second Avenue Line as capacity and safety concerns rose. The MTA's final environmental impact statement was approved in April 2004; the latest proposal is for a two-track line from East 125th Street and Lexington Avenue in Harlem, down Second Avenue to Hanover Square in the Financial District. The new subway line will actually carry two services. The full length Second Avenue line, extending from Harlem to the financial district, probably will be given the “T” letter designation. Construction on the Second Avenue subway line is currently underway.
The area is well served by buses. The M15 bus goes north on First Avenue and south on Second Avenue. The M101, M102, and M103 buses go north on Third Avenue and south on Lexington Avenue. There are also cross-town buses on 42nd, 49th, 50th, and 57th Streets. The Franklin D. Roosevelt Drive also runs along the East River for the entire length of Turtle Bay’s east side.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 23.
MANHATTAN COMMUNITY DISTRICT NUMBER SIX
Turtle Bay is within the boundaries of Manhattan Community District Number Six. Community District Number Six covers East 14th to East 59th Streets from the East River to as far as Madison Avenue. The community district covers 888.4 total acres. Land use in Manhattan Community District Number Six, as of 2011, was comprised of predominantly multi-family residences, mixed-use buildings and institutions, as evidenced by the chart above.
POPULATION AND EMPLOYMENT According to “Site To Do Business Online,” Turtle Bay had a population of 24,844 in 2000. The population in the area was estimated at 26,023 in 2010, representing a 0.45 percent change annually. The five-year projection for the population in the area is 26,454, representing a change of .33 percent annually from Years 2010 to 2015. Approximately 93.2 percent of the civilian labor force in Turtle Bay was employed in 2010 versus 89.2 percent of the civilian labor force for the entire United States.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 24.
HOUSEHOLDS According to “Site To Do Business Online,” there were 17,076 households in this area in 2010, and 16,524 households in 2000. The five-year projection of households is 17,365. Average household size is 1.51 in 2010, compared to 1.49 in 2000. Average household income in 2010 is $149,367 compared to $70,173 for all United States households. In 2000, average household income for Turtle Bay was $117,761, and it is projected to be $179,825 in 2015.
HOUSING According to “Site To Do Business Online,” approximately 26.9 percent of the 20,555 housing units were owner-occupied; 56.2 percent of the housing units were renter occupied; and 16.9 percent of the housing units were vacant in 2010. In 2000, there were 19,190 housing units: 27.5 percent were owner occupied, 58.7 percent were renter occupied and 13.8 percent were vacant. The median home value in this market was $548,399, compared to a median home value of $157,913 for the United States in 2010. The home value in Turtle Bay is projected to change by 6.08 percent annually for the next five years to $736,783 by 2015.
CONCLUSION In summary, Turtle Bay has a great location next to Midtown. It has a commercial atmosphere on the west and residential on the east. It houses and is greatly impacted by the United Nations. With construction on the Second Avenue subway line underway, this area’s future looks bright.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 25.
DESCRIPTION OF PROPERTY
Address: The Roger Smith Hotel 501 Lexington Avenue New York, New York
Location: The subject property is located on the northeast corner of Lexington Avenue and East 47th Street, in the Midtown East section of the borough of Manhattan, city, county and state of New York.
Description: The subject site is currently improved with a 17-story and basement, elevator, full-service hotel, containing 130 rooms and suites, a ground floor restaurant and three retail stores. The subject property was constructed in 1927 and has a gross building area of 92,501 square feet (as per New York City records).
LAND DESCRIPTION
Block/Lot: 1302/21
Lot Dimensions: 100.42 feet of frontage on the east side of Lexington Avenue and 50.00 feet of frontage on the north side of East 47th Street
Lot Shape and Area: The subject site is irregular in shape and has 6,050 square feet of lot area.
Utilities: All available, including New York City water and sewer, Con Edison gas and electric.
Floodplain: The property is located in Zone X according to Panel Number 3604970088F of the FEMA flood maps dated September 5, 2007. Zone X is an area determined to be an area of minimum flood hazard.
JEROME HAIMS REALTY, INC. 26.
PLOT PLAN
The Roger Smith Hotel 501 Lexington Avenue New York, New York 27.
IMPROVEMENT DESCRIPTION The subject is comprised of a 17-story and basement, elevator, full-service hotel, containing 130 rooms and suites, a ground floor restaurant and three retail stores. The improvements were constructed in 1927 and have a gross building area of 92,501 square feet (as per the New York City records).
Construction Features The following are highlights of the general physical features, based on our visual inspection and information provided by the management.
Exterior Facade: The building has a masonry façade on the lower floors and a brown brick façade on the higher floors. Metal sculptures were hung on the front and the side facades.
Entrances: The entrance, consisting of double-swing glass and bronze doors and a single-swing glass and bronze door, is located on the east side of Lexington Avenue. The freight entrance is located on the north side of East 47th Street.
Windows: Double-paned glass windows in metal frames
Roofs: Flat, built-up roofs and brick parapet walls. The subject’s main roof contains an elevator machine room and one wooden water tank for domestic water and one wooden tank for fire prevention. The subject’s roof on the 16th floor features tile floor and is landscaped with chairs and tables for guest uses. This roof is being used as an outdoor bar seasonally.
Lobby: Finishes consist of carpeted floors, painted sheetrock and carved wood walls, and painted ceilings with hung and recessed lighting. The ground floor houses a lobby, a concierge deck, a restaurant, a bar and a kitchen.
Hallways: Carpeted floors, painted walls and painted ceilings, with hung fluorescent lighting.
Elevators: There are two passenger elevators and one freight elevator.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 28.
Guest Rooms: There are 130 guest rooms and suites, consisting of 78 standard rooms and 52 suites. The room type includes:
50 standard rooms with a queen bed (204 SF) 28 standard rooms with two double beds (280 SF) 13 junior suite with a queen bed (289 SF) 13 junior suite with two double beds (289 SF) 17 one-bedroom suite with a king bed (443 SF) two one-bedroom suite with two double beds (443 SF) seven deluxe suites (538 SF)
The subject’s hotel room and suites are located between the third floor and the 16th floor.
Meeting and Events: The hotel contains two conference/event rooms located on the 17th floor and the second floor.
Fitness Center: There is no fitness center on site.
Basement: The basement houses offices, locker rooms, storage rooms, a boiler room, a laundry facility, and various mechanical rooms.
Fire Protection: The subject hotel is partially sprinklered. The sprinklered areas include hallways, lobby, the second and the 17 floors and basement.
HVAC: Cooling is provided by wall units and heat is provided by Con Edison steam.
Comments: At the time of our property inspection, the subject was in average condition.
JEROME HAIMS REALTY, INC. 29.
ZONING MAP
The Roger Smith Hotel 501 Lexington Avenue New York, New York 30.
ZONING ANALYSIS The subject site is located in a C5-3 commercial zoning district within the Special Midtown District.
C5 is a central commercial district intended for offices and high-end retail establishments that serve the entire metropolitan region and for streets where continuous retail frontage is desired. Famous shopping districts, such as Fifth Avenue, from 34th to 59th Streets, and Madison Avenue, from 57th and 87th Streets, are C5 districts. Luxury department stores, large office buildings, and mixed buildings with residential space above office or commercial floors, are typical C5 uses. The maximum allowable floor area ratio (FAR) is 15.0 for commercial uses and 10.0 for residential uses.
Based on a lot area of 6,050 square foot, the subject site could be developed with 90,750 square feet. The existing improvements contain a gross building area of 92,501 square feet, which exceeds the current zoning allowance by 1,751 square feet. Due to the unique floor calculation under the zoning regulations, the actual gross building area can be larger than the maximum allowable developable area. Therefore, the subject improvement is a legal conforming use.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 31.
ASSESSED VALUE AND REAL ESTATE TAX ANALYSIS The subject property is identified on the New York County tax maps as Block 1302, Lot 21. The 2012/13 assessed values and real estate taxes are as follows:
2012/2013 Assessed Values
Transitional Actual Land $3,506,400 $3,708,000 Building 5,603,600 8,411,850
Total $9,110,000 $12,119,850
Any increase in the real estate tax assessment for a New York City property is phased in via equal installments over a five-year period. The actual, or target assessed value reflects the new total while the transitional figure reflects the stage of the phasing, as of the individual fiscal tax year. Real estate taxes are typically computed on the basis of the transitional figure, unless the actual assessment is lower.
The subject property is designated as a Tax Class IV property. For the purpose of establishing tax rates, the city of New York has divided all properties into four classes, as follows:
2011/12 Tax Description Tax Rates Class I 1, 2 and 3 Family Residential Property 18.205% II All Other Residential Property 13.433% III Utility Property 12.473% IV All Other Real Property 10.152%
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 32.
We have used the 2011/12 Class IV tax rate of 10.152% to determine the subject’s real estate taxes since the 2012/13 tax rates were not available as of the date of value. The subject’s 2012/13 real estate taxes are thereby computed as follows:
2011/2012 Class IV Tax Rate $10.152 per $100 of assessed value Real Estate Taxes $924,847.20 $924,847.00 Rounded
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 33.
HISTORY OF THE SUBJECT PROPERTY According to the published public records, there have been no transfers of the subject in the past five years. Therefore, the current owners of the subject property are as follows:
THE STOCKHOLDERS OF UNIT NO. 3 CORPORATION; AND THE COMPANY OF WOODWIND, INC.
Name of Stockholder Number of Shares
1. UNIT NO. 3 CORPORATION
A. Suzanne de Lima Knowles 2,774.66 Voting Common Stock 5,113.73 Non-Voting Common Stock Suzanne de Lima Knowles’ Children Trust under the Will of Oscar A. de Lima 2,189.90 Non-Voting Common Stock f/b/o Phoebe de Lima Knowles
Trust under the Will of Oscar A. de Lima 2,189.90 Non-Voting Common Stock f/b/o John Brattle Knowles
Trust under the Will of Oscar A. de Lima 2,189.90 Non-Voting Common Stock f/b/o Alexandra Parker Knowles
Trust under the Will of Oscar A. de Lima 2,189.90 Non-Voting Common Stock f/b/o James Burbank Knowles, III
B. Elizabeth A. de Lima 2,774.66 Voting Common Stock Trustees of the Elizabeth A. de Lima 1996 2,641.33 Non-Voting Common Stock Trust dated November 4, 1996
Elizabeth A. de Lima’s Children Trust under the Will of Oscar A. de Lima 3,744.00 Non-Voting Common Stock f/b/o Austin de Lima Alter
Trust under the Will of Oscar A. de Lima 3,744.00 Non-Voting Common Stock f/b/o Suzanna June Alter
Elias Henry Alter 3,744.00 Non-Voting Common Stock
C. Virginia A. de Lima 2,774.66 Voting Common Stock 13,873.33 Non-Voting Common Stock
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 34.
HIGHEST AND BEST USE ANALYSIS Highest and Best Use is generally defined as: “The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.” 3
The valuation of the subject in terms of highest and best use criteria is as follows:
HIGHEST AND BEST USE OF THE SITE AS IF VACANT
Legally Permissible: The subject site is located in a C5-3 general commercial zoning district. The maximum allowable floor area ratio (FAR) for commercial uses is 15.0 and 10.0 for residential uses.
Physically Possible: The subject property is located on the northeast corner of Lexington Avenue and East 47th Street. The subject site is irregular in shape and has 100.42 feet of frontage on the east side of Lexington Avenue and 50.00 feet of frontage on the north side of East 47th Street, containing 6,050 square feet of lot area.
Given the size and shape of the subject site, we are of the opinion that the subject site is suitable for development with a hotel that is consistent with those found throughout the subject’s neighborhood.
Financially Feasible: After determining the uses that are physically possible and legally permissible, we have further analyzed those uses in order to determine whether they are likely to produce an adequate return on investment. There currently exists strong demand for hotel rooms in the subject neighborhood. We are of the opinion that the development of the subject site with a hotel is financially feasible.
3 The Dictionary of Real Estate Appraisal, 5th ed., Appraisal Institute, Chicago, Illinois, 2010, p. 93
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 35.
Maximally Productive: The highest, best, and most profitable use is that use which meets all of the preceding criteria and will produce the highest net return on the investment, thus indicating the highest land value. The aforementioned financially feasible use for hotel development would generate the highest unit price for the land.
In consideration of the four highest and best use constraints, we are of the opinion that a hotel development of the site is the highest and best use of the subject site as if vacant.
HIGHEST AND BEST USE OF PROPERTY AS IMPROVED
Legally Permissible: The subject site is located in a C5-3 general commercial zoning district. The maximum allowable floor area ratio (FAR) for commercial uses is 15.0 and 10.0 for residential uses.
Physically Possible: The subject of this appraisal is a 17-story and basement, elevator, full-service hotel, containing 130 rooms and suites, a ground floor restaurant and three retail stores. The subject enjoys a location in a well- established neighborhood. The subject’s use is consistent with improvements in the immediate area and is further supported by the area’s overall characteristics. The subject improvement is a legal conforming use.
Financially Feasible: Continued use of the property appears to be financially feasible.
Maximally Productive: We are of the opinion that the existing use is the maximally productive use of the property.
The highest and best use for the subject property as improved, in light of the current room rates and occupancy, is as currently utilized as a full-service hotel with ground floor retail stores.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 36.
VALUATION The appraisal of real property typically utilizes three traditional methods of valuation: the Income Capitalization Approach, the Sales Comparison Approach and the Cost Approach.
The Income Capitalization Approach is based on the principle of anticipation, which states that value is created by the expectation of future benefits. In this approach, the appraiser analyzes the actual operating performance of the subject property as well as other similar properties. From this, an estimate of stabilized net income is developed for a single year or period of years. This data is then processed into value using the appropriate capitalization technique to produce an indication of value.
Due to the income generating capabilities of the subject, the Income Capitalization Approach represents a reasonable method of valuation and, therefore, has been relied upon herein.
The Sales Comparison Approach is based on the principle of substitution. In this technique, the sales data for similar properties are researched and analyzed. The sales prices for these transactions are converted to a unit indication of value such as price per unit. These figures are then adjusted for any elements of difference between the property sold and the property being appraised. Such elements may include location, physical characteristics, date of sale and financing. The final unit of value thus derived is then multiplied by the unit size of the subject property to produce an indication of value.
The Sales Comparison Approach was used to test the reasonableness of our conclusion via the Income Capitalization Approach.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 37.
The Cost Approach is based on the principle of substitution, which states that an informed purchaser will pay no more for a property than the cost of producing a substitute property with the same or similar utility. In this approach, the cost of constructing or otherwise producing a similar property is estimated. Depreciation from physical, functional and economic sources is deducted from this cost. The value of the underlying land is then added to this cost to produce an opinion of value. The Cost approach was not used to value the subject considering the difficulty in estimating accrued depreciation from all sources from an improvement constructed in 1927.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 38.
INCOME CAPITALIZATION APPROACH The Income Capitalization Approach is based on the principle of anticipation. We have placed most emphasis in our valuation of the subject property on this approach. This method assumes that there is a relationship between the quality and the quantity of income that a property will earn. In this approach, value is created through the expectation or anticipation of future benefits from ownership and operation of the property. These include annual cash flows at a reasonable return, plus the profitable sale of the property after a projected period of ownership. The anticipated annual net operating income is processed to produce an indication of present value. The two primary techniques of converting net operating income into value in the Income Capitalization Approach are:
Direct Capitalization using an overall capitalization rate; and
Yield Capitalization, or Discounted Cash Flow Analysis, utilizing a discount rate (internal rate of return) and a terminal capitalization rate.
In the Direct Capitalization method, the net operating income for a single stabilized 12-month period is converted into value by the use of an overall capitalization rate. The Yield Capitalization method, or Discounted Cash Flow Analysis, converts the projected cash flow over a period of years including the reversionary value (i.e., property resale at the termination of the investment period), into net present value, using an internal rate of return (discount rate). We have used Direct Capitalization in order to value the subject’s fee simple estate.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 39.
The subject is comprised of a 17-story and basement, elevator, full-service hotel, containing 130 rooms and suites, a ground floor restaurant and three retail stores. The subject hotel is located in the Plaza office sub-district of Midtown office district.
In our valuation of the subject property, we have primarily relied on the subject’s historical data as well as market forecasts, in order to estimate the subject’s stabilized average daily room rate and occupancy rate.
We were provided with a copy of the subject’s income and expenses statements for Years 2006/07 to 2010/11. The subject’s historical income and expenses were reported on the fiscal year for the period ending on September 30.
A copy of the Historical Cash Flow Summary can be found in the Addenda of this appraisal report.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 40.
Departmental Revenues Room revenues are equal to the product of a hotel’s average daily rate (ADR) and occupancy, multiplied by the number of guest rooms and 365 days. As stated previously, we have primarily relied on the subject’s historical data as well as market forecasts, in order to estimate the subject’s stabilized average daily room rate (ADR) and occupancy. The subject’s historical average daily room rate (ADR), occupancy, and revenue per available room (RevPar) for the past five years are shown in the tables below. Increase/ Year ADR (Decrease) 2007 $ 224.98 N/A 2008 $ 239.26 6.3% 2009 $ 177.46 -25.8% 2010 $ 202.49 14.1% 2011 $ 224.17 10.7%
Increase/ Year Occpancy (Decrease) 2007 91.1% N/A 2008 93.3% 2.4% 2009 85.8% -8.0% 2010 87.9% 2.5% 2011 86.0% -2.2%
Increase/ Year RevPar (Decrease) 2007 $ 204.91 N/A 2008 $ 223.16 8.9% 2009 $ 152.27 -31.8% 2010 $ 178.05 16.9% 2011 $ 192.83 8.3%
The subject’s average daily room rate in 2011 was at $224.17, an increase of 10.7% when compared to the prior year of $202.49, and the occupancy was at 86.0% in 2011, a 2.2% decrease over the prior year. As such, the subject’s RevPar in 2011 was up by 8.3%, when compared to 2010. The subject property experienced a dramatic drop in total room revenue in 2009, which is then followed by a strong recovery in 2010 and 2011.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 41.
We have utilized various published materials, including PKF Consulting, in regard to the Manhattan hotel market. The average daily room rate for the group with an ADR between $200 and $250 was $202.02 in 2011, an increase of 7.3%, when compared to the same period in prior year. The average occupancy was at 88.1% in 2011 for the same group, up 1.7% from the prior period at 86.7%. As a result, RevPar in 2011 was at $178.04, or 9.0% increase over the prior year.
According to the same publication, RevPar for the group has shown similar trend as the subject property in the past four years: +0.3% in 2008, -26.6% in 2009, +13.7% in 2010, and +9.0% in 2011.
In view of the subject’s historical trends, we have forecasted the subject’s growth of the average daily room rate and occupancy rate to be in line of the overall Manhattan hotel market. As such, we have projected the subject’s average daily to grow at 13.4%4 between December 2011 and August 2013. The subject’s occupancy is estimated to be stabilized below the peak years in 2007 and 2008. Therefore, our opinions of the subject’s stabilized average daily room rate and the stabilized occupancy rate to be at $254.00 and 90% in Year 2012/13.
Therefore, based on the estimated ADR and occupancy rate, and 130 guest rooms, the subject’s room revenues are estimated to be $10,847,000 in the stabilized Year 2012/13. In other words, we have projected the 2012/13 revenue per available room (RevPar) at 20% above the level achieved in 2010/11.
4 The growth rate for ADR is based on the market forecast contained in 2012 Manhattan Hotel Market Overview, published by Hospitality Valuation Service.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 42.
Food and beverage revenues, based on the historical data, range from 4.4% to 18.5% of total revenues, or $10.03 to $45.18 per occupied room. We have estimated the subject’s food and beverage revenues to be $20.00 per occupied room, or 7.2% of total revenues in the stabilized Year 2012/13. At the time of our property inspection, the subject’s restaurant was not in operation due to the weakened economy and higher labor costs. Therefore, our estimate of the subject’s food and beverages revenues in Year 2012/13 is based on limited operation of the hotel restaurant and bar.
Telecommunications revenues, based on the historical data, range from $0.07 to $0.35 per occupied room, or 0.0% to 0.2% of total revenues. We have estimated the subject’s telecommunications revenues to be $0.15 per occupied room, or 0.1% of total revenues in Year 2012/13.
Other operated departments include revenues from meeting room rentals and other miscellaneous sources. The revenues from this department range from $0.88 to $2.33 per occupied room, or 0.3% to 0.9% of total revenues. Therefore, we have estimated this revenue item to be $2.40 per occupied room, or 0.9% of total revenues in Year 2012/13.
Total Revenues The total revenues are estimated at $11,809,000, or $276.55 per occupied room in the stabilized Year 2012/13. Our estimated stabilized total revenues in Year 2012/13 are 10% above the level achieved in Year 2010/11.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 43.
In order to estimate the subject’s stabilized expenses in Year 2012/13, we have selected five comparable hotels located in Midtown Manhattan. This data set was compiled and provided by Smith Travel Research. These five comparable hotels include: Jolly Madison Towers Hotel (3-diamond, 242-room independent hotel), Autograph Collection Algonquin Hotel (4-diamond, 174-room upper-upscale hotel), The Benjamin (4-diamond, 209-room independent hotel), Hilton Manhattan East (3-diamond, 300-room upper-upscale hotel), and The Alex Hotel (4-diamond, 202-room independent hotel). All of the five comparable hotels are located in Midtown Manhattan, with similar price points and size.
We have also reviewed the subject’s historical income and expenses statements from Years 2006/07 to 2010/11. In our estimate of the subject’s stabilized expenses, we have primarily relied on comparable hotel expenses as discussed above.
In addition to the data from the five selected comparable hotels, we have also reviewed the 2011 income and expenses data for the nationwide full-service hotels, the nationwide full-service hotels with room rate over $200.00, and New England/Middle Atlantic full-service hotels. This data was compiled by PKF and can be found in the Addenda of this appraisal report.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 44.
Departmental Expenses Room department expenses consist of salaries and wages, uniforms, travel agent commissions, reservation expenses, guest supplies, paper goods, cleaning, laundry, linen, and other items for maintaining guest rooms.
The subject’s expenses range from $73.81 to $91.69 per occupied room, or 33.1% to 46.1% of room revenues for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, room department expenses for Year 2011 were $89.72 per occupied room, or 35.3% of room revenues. We have estimated the subject’s room expenses to be 34.6% of room revenues, or $88.00 per occupied room in the stabilized Year 2012/13.
Food and beverage expenses include direct costs of food and beverage, salaries and fringes, and other operational expenses. The subject’s expenses range from 142.0% to 204.3% of food and beverage revenue for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, food and beverage expenses for Year 2011 were 121.0% of food and beverage revenues. We have estimated the subject’s food and beverage expenses to be 140.0% of food and beverage revenue in the stabilized Year 2012/13.
Telecommunications expenses reflect the cost of sales, including guests’ local and long distance calls, salaries and wages, and other operational expenses. The subject’s expenses range from $0.09 to $0.57 per occupied room for Years 2006/07 to 2009/10. Telecommunications expenses for Year 2010/11 were not reported separately. We have estimated the subject’s telecommunications expenses to be $0.20 per occupied room in the stabilized Year 2012/13.
The total departmental expenses are $4,963,000, or $116.20 per occupied room with an expense ratio of 42.0% of total revenues in the stabilized Year 2012/13.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 45.
Departmental Income Departmental income (total revenues less total departmental expenses) is estimated at $6,846,000, or $160.35 per occupied room in the stabilized Year 2012/13.
Unallocated Expenses Administrative and general expenses represent payroll costs and other expenses for management and administrative staff, legal and accounting expenses, credit card commissions, travel and entertainment, printing and stationery, postages, telephone and bad debt expense, etc. The subject’s administrative and general expenses range from 11.0% to 14.5% of total revenues, or $8,928 to $12,014 on a per available room basis for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, administrative and general expenses for Year 2011 were 10.9% of total revenues, or $10,476 per available room. We have estimated the subject’s administrative and general expenses at 9.0% of total revenues, or $8,177 per available room in the stabilized Year 2012/13. Our estimated administrative and general expenses are substantially below the subject’s historical expenses. The subject’s historical expenses include minimal management fees which could have been charged to this account.
Sales and marketing expenses include sales and marketing payroll, and direct advertising costs, including print advertising and electronic marketing. The subject’s expense ranges from 8.8% to 13.1% of total revenues, or $7,248 to $9,240 on a per available room basis for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, sales and marketing expenses for Year 2011 were 3.4% of total revenues, or $3,276 per available room. We have estimated the subject’s sales and marketing expenses at 3.5% of total revenues, or $3,177 per available room in the stabilized Year 2012/13. We have relied on the comparable expenses in our estimate of the subject’s sales and marketing expenses for the stabilized Year 2012/13.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 46.
Repairs and maintenance include the payroll costs of the maintenance and engineering staffs, elevator maintenance, various maintenance contracts and supplies. The subject’s expense ranges from 7.6% to 15.6% of total revenues, or $5,343 to $13,928 on a per available room basis for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, repairs and maintenance expenses for Year 2011 were 4.6% of total revenues, or $4,440 per available room. Considering the subject’s condition and quality, we have estimated this expense at 5.0% of total revenues, or $4,538 per available room in the stabilized Year 2012/13. We have relied on the comparable expenses in our estimate of the subject’s repairs and maintenance expenses for the stabilized Year 2012/13. The subject’s historical repairs and maintenance expenses are atypical high, which can be attributable to capital expenses to be classified as repairs and maintenance expenses. The subject’s income and expenses statements do not include a separate line for capital expenditures or reserves.
Utility costs include steam, gas, electricity and water and sewer expenses. The subject’s expense ranges from 5.0% to 6.4% of total revenues, or $4,435 to $4,656 on a per available room basis for Years 2006/07 to 2010/11. Based on the comparable hotels located in Midtown, utility expenses for Year 2011 were 4.0% of total revenues, or $3,811 per available room. We have estimated this expense at 4.6% of total revenues, or $4,177 per available room in the stabilized Year 2012/13.
The total unallocated expenses are $2,609,000, or $20,069 per available room in the stabilized Year 2012/13.
Fixed Expenses Management fee has been estimated at 3.0% of total revenues. This reflects the current market for third party management agreements. According to First Quarter 2012, Korpacz Real Estate Investor Survey, base management fees for National Full-Service Lodging Segments ranged from 2.50% to 5.00%. The same survey indicates that base management fees of National Luxury/Upper-Upscale Lodging Segment range from 2.0% to 5.0%.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 47.
Based on our comparable hotels in Midtown, insurance expenses for Year 2011 were 0.7% of total revenues, or $660 per available room. The subject’s insurance expenses were combined with real estate taxes and were not separately stated in the income and expenses statements. We have estimated the subject’s insurance expense to be $638 per available room in the stabilized Year 2012/13.
Real estate taxes have been estimated based upon the subject property’s assessed value for 2012/2013 and the 2011/12 Class IV tax rate. A detail discussion of real estate taxes can be found in the Assessed Value and Real Estates Tax Analysis section of this appraisal report.
Reserve for replacement represents a reserve set aside to provide for the periodic replacement of furniture, fixtures, and equipment during the life of the building. The International Society of Hospitality Consultants (ISHC) has performed industry-sponsored studies of the capital expenditure requirements for full-service and limited-service hotels. The findings of the most recent study were published in a report in 20005. This study revealed that the capital expenditure requirements for hotels vary significantly from year to year, and depend upon both the actual and the effective age of a property. According to the Korpacz Real Estate Investor Survey, First Quarter 2012, reserves for replacement of fixed assets of National Full-Service Lodging Segment range from 1.0% to 5.0%. The same survey indicates that reserves for replacement of National Luxury/Upper-Upscale Lodging Segment range from 1.0% to 5.0%, as well. Based on the survey and the subject’s condition, we have estimated replacement reserves at 4.0% of total revenues.
The total fixed expenses are $1,833,847 in the stabilized Year 2012/13.
Cash Flow The cash flow from hotel operation (gross operating profit less total fixed expenses) is $2,403,153 in the stabilized Year 2012/13.
5 The International Society of Hotel Consultants, CapEx 2000, A Study of Capital Expenditures in the U.S. Hotel Industry, 2000.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 48.
ANALYSIS OF RETAIL TENANCY The subject property contains 1,400 square feet of ground floor retail space, divided into three retail stores. These retail stores are leased on a short term basis. According to the subject’s management, these stores could be rented for a few days or a few months. The subject’s annual retail rental income for the past five years range from $225,000 to $252,500, with an average of $233,259.
We were not provided with the subject’s short-term leases. For the purpose of this appraisal, we have estimated a market rent for the subject’s retail stores, and the rental income is added to the subject’s net cash flow, in order to derive the market value for the subject hotel.
We have surveyed comparable retail rents located on the subject’s market area. A survey of comparable retail rentals and the comparable retail rental location map are located on the following pages.
The comparable retail rentals exhibited on the chart are located in the subject’s market area, between 49th and 62nd Streets, and Lexington Avenue and the Avenue of Americas. Overall, the comparable rental rentals are reflective of rent levels for the type of retail space located in the subject’s market area. The rents have been compared to the subject property for differences in location, size and retail frontage, although, we have not adjusted for these differences in an adjustment grid.
Typically, retail spaces such as the subject’s when rented are leased on a “semi-gross” basis and include periodic rent increases in base rents and/or a CPI escalation clause. Tenants are required to pay for their pro-rata share of the increases in real estate taxes over a base year. Electric usage is either separately metered or sub-metered and paid for by tenants.
JEROME HAIMS REALTY, INC. 49.
COMPARABLE RETAIL RENTALS LOCATION MAP
The Roger Smith Hotel 501 Lexington Avenue New York, New York 50.
Comments
Reported by Real Deal. Real by Reported
Reported by NY Post NY by Reported
Includes 400 SF basement SF 400 Includes
Includes 1,000 SF basement SF 1,000 Includes
N/A
N/A
N/A
N/A
N/A
N/A
Type
Lease
Sq. Ft. Sq.
$224.88
$202.13
$375.00
$150.00
$150.00
$170.00
$204.26
$375.00
$200.00
$250.00
Rent per Rent
5 5
10 10
N/A
N/A
N/A
N/A
Term
(years)
Median
Average
Minimum
Maximum
235
235
800
1,557
1,850
2,404
1,700
2,404
2,000
2,200
Rentable
Area (Sq.Ft.) Area
Ground Floor Ground
Date
Start
Jul-12
Lease
Apr-11
Asking
Asking
Mar-11
May-12
Average
Median
Maximum
Minimum
SURVEY OF COMPARABLE RETAIL RENTALS RETAIL OF COMPARABLE SURVEY
Asking
Asking
Potbelly
Tenant/Use
Paul's Corner Inc. Paul's
Community National Bank CommunityNational
OumarCisse Anta Cisse &
46 West 46 Street 56th
12 East 52nd Street 52nd East 12
132 1/2 East 1/2 132 Street 62nd
801 Lexington Avenue Lexington 801
599 Lexington Avenue Lexington 599
541 Lexington Avenue Lexington 541
Address
6
5
4
3
2
1 No.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 51.
The comparables (asking and actual rentals) range from $150.00 per square foot to $375.00 per square foot. Two of the six comparable retail rentals are ground floor retail space available for lease. Comparable Retail Rental Number 1 is a 2,200-square-foot ground floor retail space located one block north of the subject, and is at the base of the W hotel. This retail rental also includes 1,000 square feet of basement storage space. The asking rent is $250.00 per square foot for this comparable retail rental.
Comparable Retail Rental Number 2 is a 2,000-square-foot ground floor retail space located four blocks north of the subject. The asking rent is $200.00 per square foot for this comparable retail rental.
Four of the six comparable retail rentals are actual rentals located on Lexington Avenue and the side streets of the subject’s area. The comparable actual rentals range from a low of $150.00 per square foot to a high of $375.00 per square foot, with an average of $224.82 per square foot.
According to the Spring 2012 Retail Report by the Real Estate Board of New York, the Manhattan’s retail market as a whole has declined slightly over the past year. Manhattan average asking rents for all available space, including ground floor, lower level, upper level and mezzanine retail spaces, dropped to $114 per square foot, a 0.9% decrease over the prior year. Midtown average asking rents for all available space increased to $150 per square foot, a 4.2% increase over the prior year.
Based on the above discussions, we are of the opinion that the market rent for the subject’s 800-square-foot corner retail store is $180.00 per square foot, and $230.00 per square foot for the two smaller retail stores (300-square-foot each). We have estimated a 10.0% general vacancy and collection loss for the subject’s retail income. The 10.0% general vacancy and collection loss was applied to the subject’s retail rental income. Therefore, the subject’s 2012/13 retail rental income (net of vacancy and collection loss) has been estimated at $253,800 ($282,000 – $28,200).
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 52.
OVERALL CAPITALIZATION RATE DISCUSSION The purpose of the capitalization rate is to convert the future benefits anticipated from an investment (i.e., the net operating income from a single stabilized year) into an opinion of present value. This overall rate is selected from rates indicated in both the real estate market and alternative markets competing for investment capital.
We must ascertain current market yields and relate them to the subject property in light of the physical characteristics and alternative investment vehicles and rates in the marketplace. As real estate competes with investments in the capital markets, long-term mortgage and bond rates must also be considered.
An overall capitalization rate can also be selected from alternative markets competing for investment capital. A prudent investor will ascertain current market yields for different investments and relate them to the subject property in terms of their character regarding risk and reward, liquidity and physical attributes which may include maintenance, depreciation, obsolescence, and warehousing. These alternatives may include a wide array of financial instruments such as stocks and bonds as well as tangible assets like commodities and collectables.
The traditional financial investment instruments found below are frequently published and easily monitored in terms of yield, risk and liquidity.
Competitive Rates of Return Investment June 2012 Prime Rate 3.25% 10-Year Treasury Notes 1.62% 30-Year Treasury Bonds 2.70% Aaa Corporate Bonds 3.64% Baa Corporate Bonds 5.02%
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 53.
An investor considering a real estate investment would weigh these alternative investments with the advantages and disadvantages associate with real estate. Advantages include the tax write-offs through interest and depreciation expense, and the possibility of appreciation. The disadvantages include the burden of management and the greater illiquidity and risk.
According to Korpacz First Quarter 2012 Real Estate Investor Survey, overall capitalization rates for the National Full-Service Lodging Segment range from 6.00% to 10.00%, with an average of 8.04%. Overall capitalization rates for the National Luxury/Upper-Upscale Lodging Segment range from 6.00% to 10.00%, with an average of 8.05%. According to our survey of Comparable Manhattan Hotel Sales located on Page Number 57, the capitalization rate for the sale of Morgans and Royalton Hotels is 7.3% and 4.8% for Doubletree Metropolitan Hotel. Capitalization rates were not available for other hotel sales located in our survey.
Based on the subject’s location, condition and its type, we have chosen an overall capitalization rate of 5.00%. Our selected overall capitalization rate of 5.0% is within the range of our survey of Comparable Manhattan Hotel Sales, but is below the ranges of the surveys for both the National Full-Service Lodging Segment and the National Luxury/Upper-Upscale Lodging Segment. The subject is located in Midtown Manhattan, and is in close proximity to employment centers, tourist attractions, and residential neighborhoods. Furthermore, Manhattan Hotel Market is one of the strongest hotel markets located in the United States. Therefore, the selected rate appropriately reflects the risks associated with the subject property.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 54.
501 LEXINGTON AVENUE NEW YORK, NEW YORK
DIRECT CAPITALIZATION As of September 4, 2012
ADR $254.00 Occupancy 90.0% Available Rooms 130
Percent Per Per of Available Occupied Revenues Room Room Departmental Revenues Rooms $10,847,000 91.9% $83,438 $254.00 Food & Beverage 854,000 7.2% 6,569 20.00 Telecommunications 6,000 0.1% 46 0.15 Other Operated Departments 102,000 0.9% 785 2.40
Total Revenues 11,809,000 100.0% 90,838 276.55
Departmental Expenses Rooms 3,758,000 34.6% 28,908 88.00 Food & Beverage 1,196,000 140.0% 9,200 28.00 Telecommunications 9,000 150.0% 69 0.20 Other Operated Departments 0 0.0% 0 0.00 Total 4,963,000 42.0% 38,177 116.20
Gross Operating Income 6,846,000 58.0% 52,662 160.35
Unallocated Expenses Admin. & General 1,063,000 9.0% 8,177 24.89 Sales & Marketing 413,000 3.5% 3,177 9.67 Repairs & Maintenance 590,000 5.0% 4,538 13.82 Utility Costs 543,000 4.6% 4,177 12.72 Total Unallocated Expenses 2,609,000 22.1% 20,069 61.09
Gross Operating Profit 4,237,000 35.9% 32,592 99.26
Fixed Expenses Management Fees 354,000 3.0% 2,723 8.29 Insurance 83,000 0.7% 638 1.94 Taxes 924,847 7.8% 7,114 21.66 Reserves 472,000 4.0% 3,631 11.05 Total Fixed Expenses 1,833,847 15.5% 14,107 42.94
Net Cash Flow $2,403,153 20.3% $18,486 $56.31
Retail Rental Income $253,800
Adjusted Net Cash Flow $2,656,953
Capitalization Rate 5.00%
Capitalized Value $53,139,056 Rounded $53,100,000 Per Room $408,462 Per Square Foot of GBA $574.05
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 55.
CONCLUSION OF VALUE VIA THE INCOME CAPITALIZATION APPROACH We have utilized the Income Capitalization Approach to value the fee simple estate in the subject property. Given a net cash flow of $2,656,953 and our overall capitalization rate of 5.00%, the subject’s capitalized value is $53,139,056.
Therefore, the Income Capitalization Approach indicates a value for the subject property of $53,100,000 (rounded), which is equivalent to $574.05 per square foot of gross building area, or $408,462 per room.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 56.
SALES COMPARISON APPROACH The Sales Comparison Approach is based on the principle of substitution, whereby prudent, well informed investors would pay no more for a particular property than they would for another, similar property. The application of this methodology involves the survey of open market sales of properties similar to the subject. The Sales Comparison Approach is presented as a test of our value conclusion via the Income Capitalization Approach.
Sales of comparable hotels located in Manhattan have been included as support for our conclusion of value via the Income Capitalization Approach. The sales researched included comparable sales which contract dates have occurred before the September 4, 2012, date of value.
The unit of comparison is based on the price of per room, although the price per square foot of gross building area is also shown in the Summary of Comparable Manhattan Hotel Sales. Unadjusted unit sales prices range from a low of $404,516 to a high of $496,454 per room, with an average of $452,313 per room and a median of $459,866 per room.
The lower unit prices of the comparable hotel sales (Comparable Sales Numbers 1 and 5) are generally hotel sales that require upgrades for rooms and/or common areas by the purchasers. The higher unit prices of the comparable hotel sales (Comparable Sales Numbers 2 and 4) have been renovated or upgraded prior to the sales.
Our conclusion of the value via the Income Capitalization Approach is $53,100,000, which equates to $408,462 per room. An investor for the subject hotel is expected to invest additional capital to upgrade the subject hotel immediately after the purchase in order to maximize the return on investment. Therefore, the subject’s unit value at the low end of our survey of comparable hotel sales is deemed to be appropriate. On the following page are the selected comparable hotel sales that were used to test our value conclusion via the Income Capitalization Approach.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 57.
812.03
896.97
624.31
765.43
624.31
800.95
812.03
N/A
1,273.86
1,105.25
1,273.86
Priceper
SFGBA of
$
$
$
$
$
$
$
$ $
$
459,866
452,313
496,454
404,516
441,370
404,516
496,454
491,379
459,866
420,290
N/A Room
Priceper
$
$
$
$
$
$
$
$
$ $
N/A
Sale
Price
85,500,000
335,000,000
313,500,000
140,000,000
275,000,000
116,000,000
$
$
$
$
$
$
Median
Average Maximum
Minimum
N/A
Sale
Date
6/1/11
3/24/11
5/23/11
5/31/12 12/22/10
10/18/11
N/A
Date
4/3/11
5/9/11
6/5/11
2/10/12
11/23/10
12/21/10
Contract
77,358
92,501
(SF)
GBA
437,661
502,158
174,793
215,879
142,851
759
775
282
174
598
276
130
Number Number
of Rooms of
Year
Built
1960
1980
1902
1961
1902
1927
1898& 1926
Lot
(SF)
15062
19034
9,221
6,050
32,325
29,625
15,016
19
40
12
18
12
17
Height
13&17
(Stories)
Buyer
SUMMARY OF COMPARABLE MANHATTAN HOTEL SALES HOTEL MANHATTAN COMPARABLE OF SUMMARY
RLJ RLJ Trust Lodging
HostHotels & Resorts,LP
FelCorTrust, Lodging Inc.
CornerstoneReal Estate Advisers
RFR Realty LLC Realty RFR
TheChetrit Group, LLP
N/A
Address
569Lexington Avenue
212East 42ndStreet
237-239Madison Avenue
44West 44thStreet &
59West 44thStreet
235West 46thStreet
29East 29thStreet
501Lexington Avenue
6
4
5
2
3
Name
1
DoubletreeMetropolitan Hotel
New York Helmsley Hotel Helmsley York New
Morgans & Morgans Royalton Hotels
Algonquin HotelAlgonquin
Paramount Hotel
HotelLola
(Subject)
TheSmith Roger Hotel
6
5
4
3
2
1
No.
According to Costar, the $201.26 is RevPar for 2010, an of ADR with $210.70 and a 95.5% occupancy. The capitalization rate for the transaction reported was at 4.8%.
According to sources, news the buyer plans to spend approximately $50 millions on renovations, equates which to $64,516 per room.
Both hotels had the renovations $22 in Royalton with receiving previous millions years the over past threeand years the a $10.8 having Morgans millions in 2008. According to Costar, the capitalization rate for the transaction 7.3%. was
According to Costar, the $245 a was ADR 91% with occupancy.
We have not beenable the topurchase verify price. The hotel underwent a$40 million renovation in 2009, includingmodernizing the and lobby a European-style swapping sportsbar for the more chic Paramount Bar.The hotel received
According to The Real Deal, be the renamed boast property will eventually as restaurant and design, lobby York, anew to new aswell will & King New Grove andbar lounge concepts.
6
5
4
3
landmarkstatus in 2009. According to Costar, $250 the 95% was RevPar with occupancyat thetime of the sale, equateswhich to an of ADR $263.
2 1
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 58.
FINAL VALUE OPINION The summary report contained herein complies with the requirements of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice. The purpose of the appraisal is to provide our client with an opinion of market value of the fee simple estate in the subject real estate.
This summary report outlines the relevant data used in arriving at our opinion of market value and presents the basic approaches to value. Comprehensive data and analysis, upon which this opinion to value is based, are retained in our work file.
We have inspected the subject property and have thoroughly investigated neighborhood and area influences that affect the property’s marketability and value. In arriving at the appraised value, we have addressed all three standard approaches to value: the Income Capitalization Approach, the Sales Comparison Approach and the Cost Approach.
The Income Capitalization Approach is appropriate for the appraisal problem, since hotel properties are typically purchased for their income producing capabilities. It is believed that this approach is a reflection of a prudent investor's analysis of an income producing property, as it takes into consideration the most current income and expenses incurred by the property, as well as a reflection of mortgage and equity positions for similar properties and the anticipated rate of return on the investment. The results of this analysis indicated an opinion of market value of $53,100,000 for the subject property.
We have used the Sales Comparison Approach as a test of reasonableness for our conclusion of value via the Income Capitalization Approach. The Cost Approach was not used to value the subject considering the difficulty in estimating accrued depreciation from all sources from an improvement constructed in 1927.
JEROME HAIMS REALTY, INC. The Roger Smith Hotel 501 Lexington Avenue New York, New York 59.
Based on the analysis and conclusions presented herein, our opinion of the market value of the fee simple estate in the subject real estate, as of September 4, 2012, is:
$53,100,000
(FIFTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS)
JEROME HAIMS REALTY, INC. 60.
CERTIFICATION
We certify that, to the best of our 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 is our personal, unbiased professional analyses, opinions, and conclusions.
We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or 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 this report.
Our analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
As of the date of this report, we have completed the requirements of the continuing education program of the Appraisal Institute.
Man-Keung A. Lau has made a personal interior inspection of the property that is the subject of this report.
No one other than the undersigned prepared the analyses, opinions, and conclusions concerning the value of the real estate set forth in this appraisal report.
We have performed no (or the specified) services, as an appraiser or in any other capacity, regarding the subject property within the three-year period immediately preceding this assignment.
Eric P. Haims, MAI, MRICS, CCRA Man-Keung A. Lau, MAI, CPA Senior Vice President Vice President Certified New York State Certified New York State General Real Estate Appraiser General Real Estate Appraiser Certificate No. 46000045128 Certificate No. 46000048434
61.
STR CUSTOM HOST REPORT: 2011 FULL-SERVICE SELECTED NY PROPERTIES
62.
63.
THE HISTORICAL CASH FLOW SUMMARY
0.00
1.21
8.75
0.00
0.00 2.33
0.14
25.88
24.67
96.89
14.13
21.42
23.08
38.26
65.83
91.69
39.85
105.64
157.53
263.17
($17.14)
Per Per
$220.84
Room
Occupied
0
0
0
45
381
732
8,126
7,745
2,746
4,435
6,726
7,248
30,423
12,014
33,168
49,460
20,670
28,790
82,628
12,513
($5,380)
Per Per
$69,339
2011
Room
Available Available
Calendar Yr Yr Calendar
130
9.8%
0.0%
9.4%
0.5%
3.3%
5.4%
8.1%
8.8%
0.0%
0.0%
0.9%
0.1%
-6.5%
86.0%
36.8%
14.5%
40.1%
59.9%
41.5%
15.1%
83.9%
165.2%
100.0%
of
2010/11
$224.17
Percent
Revenues
0
0
-
5,785
49,500
95,140
356,952
576,541
874,334
942,195
1,056,374
1,006,874
3,954,932
1,561,862
4,311,884
6,429,781
2,687,095
3,742,686
1,626,672
$228,748
($470,674)
($699,422)
10,741,665
$9,014,068
0.00
1.01
0.00
0.09
2.22
0.07
(5.36)
24.94
23.94
94.35
14.09
20.78
24.51
34.97
89.00
64.17
90.44
45.18
154.70
243.70
($30.30)
Per Per
$196.23
Room
Occupied
0
0
28
22
323
713
8,005
7,682
4,521
6,668
7,867
(1,719)
30,282
11,225
28,563
49,650
20,594
29,027
78,213
14,499
Per Per
($9,724)
2010
$62,978
Room
Available Available
Calendar Yr Yr Calendar
130
0.0%
9.8%
0.4%
5.8%
8.5%
0.0%
0.9%
0.0%
-2.2%
87.9%
10.2%
38.7%
10.1%
14.4%
36.5%
63.5%
46.1%
18.5%
80.5%
-12.4%
of
2009/10
125.1%
142.0%
100.0%
$202.49
Percent
Revenues
0
-
3,637
2,908
42,000
92,663
998,669
587,780
866,902
-223,437
1,040,669
3,936,633
1,022,736
1,459,215
3,713,196
6,454,442
2,677,283
3,773,522
1,884,877
$230,045
10,167,638
$8,187,190
($1,034,061)
($1,264,106)
0.00
1.03
0.99
0.00
0.57
1.33
0.26
19.02
17.99
89.37
14.30
17.06
29.50
28.51
90.36
54.03
80.03
30.34
134.63
224.99
($18.03)
Per Per
$193.06
Room
Occupied
0
0
82
323
311
179
416
5,958
5,635
4,478
5,343
9,240
8,928
9,503
27,990
28,301
42,165
16,923
25,063
70,466
Per Per
($5,647)
2009
$60,466
Room
Available Available
Calendar Yr Yr Calendar
130
8.5%
0.0%
8.0%
0.5%
0.4%
6.4%
7.6%
0.0%
0.6%
0.1%
-8.0%
85.8%
39.7%
13.1%
12.7%
40.2%
59.8%
41.5%
13.5%
85.8%
of
2008/09
218.9%
178.1%
100.0%
$177.46
Percent
Revenues
0
-
42,000
40,406
23,219
54,128
10,609
774,492
732,492
582,200
694,650
3,638,690
1,201,238
1,160,602
3,679,096
5,481,505
2,200,033
3,258,253
9,160,601
1,235,343
$252,500
($481,586)
($734,086)
$7,860,521
0.00
0.16
0.00
0.37
0.88
0.28
19.16
19.00
39.99
13.16
40.91
24.15
28.81
33.88
80.76
17.20
$20.83
107.03
147.02
115.01
262.02
Per Per
$243.67
Room
Occupied
0
0
54
94
124
301
6,522
6,468
4,480
8,220
9,810
5,854
$7,091
13,613
36,438
13,928
50,051
39,152
11,536
27,492
89,203
Per Per
2008
$82,955
Room
Available Available
Calendar Yr Yr Calendar
130
7.9%
7.3%
0.0%
7.3%
0.1%
5.0%
9.2%
0.0%
0.3%
0.1%
6.6%
93.3%
15.3%
40.8%
15.6%
11.0%
56.1%
43.9%
33.1%
93.0%
of
2007/08
132.5%
197.0%
100.0%
$239.26
Percent
Revenues
0
-
7,000
16,184
39,065
12,215
847,844
840,844
582,452
761,050
1,769,638
4,736,968
1,810,608
1,068,650
1,275,258
6,506,606
5,089,817
1,499,646
3,573,987
$230,000
$921,794
11,596,423
$1,151,794
$10,784,093
0.00
0.00
0.00
0.37
1.03
0.35
17.38
17.38
44.27
87.38
14.00
18.69
23.98
30.71
94.67
20.49
73.81
10.03
$26.88
131.65
226.32
Per Per
$214.90
Room
Occupied
0
0
0
122
344
117
5,779
5,779
4,656
6,212
7,972
6,813
3,335
$8,937
14,716
29,049
10,209
43,765
31,473
24,538
75,238
Per Per
2007
$71,442
Room
Available Available
Calendar Yr Yr Calendar
130
7.7%
0.0%
7.7%
0.0%
6.2%
8.3%
0.0%
0.5%
0.2%
4.4%
91.1%
11.9%
19.6%
38.6%
10.6%
13.6%
58.2%
41.8%
34.3%
95.0%
of
2006/07
104.4%
204.3%
100.0%
$224.98
Percent
Revenues
0
0
-
15,848
44,724
15,186
751,273
751,273
605,260
807,534
885,752
433,533
1,913,124
3,776,323
1,036,367
1,327,162
5,689,447
4,091,520
3,189,920
9,780,967
$225,000
$1,386,851
$1,161,851
$9,287,524
Available Rooms Available
Occupancy (Calendar Year) (Calendar Occupancy
ADR (Calendar Year) (Calendar ADR
Adjusted Net Cash Net Flow Adjusted
Retail Rental Income Rental Retail
Net Cash Flow
Total Expenses Fixed
Reserves
Taxes Insurance and
Management Fees
Fixed Expenses
Gross Profit Operating
Total Unallocated Expenses Total Unallocated
Utility Costs Utility
Repairs & Maintenance & Repairs
Sales & Marketing & Sales
Admin. General &
Unallocated Expenses
Gross Income Operating
Total
Other Departments Operated
Telecommunications
Food & Beverage & Food
Rooms
DepartmentalExpenses
Total Revenues
Other Departments Operated
Telecommunications
Food & Beverage & Food
Rooms
DepartmentalRevenues
Fiscal Year Fiscal
HISTORICAL CASH FLOW SUMMARY CASH HISTORICAL
NEW YORK, NEW YORK 501 LEXINGTON501 AVENUE 64.
PKF COMPARABLE INCOME AND EXPENSES DATA
TRENDS - 2012 EDITION COMPARABLE INCOME & EXPENSES RATIOS
Nationwide Nationwide - Rate over $200.00 New England/Middle Altantic Full Service Full Service
Ratio Per Per Ratio Per Per Ratio Per Per to Available Occupied to Available Occupied to Available Occupied Sales Room Room Sales Room Room Sales Room Room Departmental Revenues Rooms 67.5% $38,346 $149.87 63.4% $82,337 $298.39 69.8% $53,895 $200.62 Food & Beverage 27.3% 15,490 60.54 29.3% 38,016 137.77 25.9% 20,032 $74.57 Other Operated Departments 4.0% 2,252 8.80 5.5% 7,199 26.09 3.2% 2,452 $9.13 Rentals and Other Income 1.3% 730 2.85 1.7% 2,240 8.12 1.1% 866 $3.22 Total Revenues 100.0% 56,818 222.06 100.0% 129,792 470.36 100.0% 77,245 287.54
Departmental Expenses Rooms 27.4% 10,525 $41.13 29.6% 24,338 $88.20 27.7% 14,945 55.63 Food & Beverage 77.3% 11,967 46.77 85.1% 32,370 117.31 82.5% 16,530 61.53 Other Operated Departments 73.4% 1,653 6.46 77.8% 5,601 20.30 80.5% 1,975 7.35 Total 42.5% 24,145 94.37 48.0% 62,309 225.81 43.3% 33,450 124.52
Gross Operating Income 57.5% 32,673 127.70 52.0% 67,483 244.56 56.7% 43,795 163.02
Unallocated Expenses Admin. & General 9.3% 5,293 20.69 9.1% 11,750 42.58 8.8% 6,786 25.26 Sales & Marketing 8.9% 5,042 19.71 6.8% 8,858 32.10 7.8% 6,048 22.51 Property Operations & Maintenance 4.7% 2,671 10.44 4.4% 5,722 20.74 4.3% 3,352 12.48 Energy 4.1% 2,312 9.04 3.2% 4,212 15.26 4.0% 3,063 11.40 Total Unallocated Expenses 27.0% 15,318 59.87 23.5% 30,542 110.68 24.9% 19,249 71.65
Gross Operating Profit 30.5% 17,355 67.83 28.5% 36,941 133.87 31.8% 24,546 91.37
Fixed Expenses Management 3.1% 1,738 6.79 2.9% 3,720 13.48 3.0% 2,284 8.50 Insurance 1.1% 613 2.40 1.0% 1,336 4.84 0.8% 582 2.17 Taxes 3.7% 2,114 8.26 3.9% 5,125 18.57 4.9% 3,761 14.00 Reserves 0.0% 0 0.00 0.0% 0 0.00 0.0% 0 0.00 Total Fixed Expenses 7.9% 4,465 17.45 7.8% 10,181 36.90 8.6% 6,627 24.67
Net Operating Income 22.7% $12,890 $50.38 20.6% $26,760 $96.98 23.2% $17,919 $66.70
Property Type Full Service Full Service - Rate over $200.00 All Area Nationwide Nationwide New England/Middle Altantic Average Number of Room 260 305 274 Average Daily Rate $149.88 298.25 200.67 Percentage of Occupancy 70.1% 75.6% 73.6% RevPar $105.06 $225.58 $147.66 Year 2011 2011 2011 Source: PKF Consulting
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.