Addendum No. 3

ADDENDUM NO. 3

Ernest N. Morial New Orleans Exhibition Hall Authority 900 Convention Center Boulevard New Orleans, LA 70130

Project Name: Request for Qualifications Master Developer Convention Center District Development Project

Contract No.: C-1564

Date: October 3, 2019

To: All Recorded Holders of RFQ Documents

The provisions of this addendum are hereby incorporated into, supplement and become a part of: 1) the Contract Documents, 2) each qualification document submitted by each Proposer and 3) any contract executed by the parties. Changes made by Addenda shall take precedence over any conflicting provisions in the original documents. The Proposer shall be responsible to notify the Owner of any changes caused by this addendum which may affect other items in the Contract Documents and which are not addressed in this Addendum prior to the Submission of a qualification document. Any such condition which is not addressed in advance and discovered after the qualification documents have been received shall be resolved in a manner acceptable to the Owner without additional cost.

Item No. 1: Q&A Clarification:

The following questions have been received. Responses are included below each question.

Evaluation Criteria:

Q1: What is the basis for scoring under financial considerations given the fact that no financial information has been requested?

A1: Financial strength and capabilities of the proposed developer/development team.

Reference:

Q2: Should references be provided for supporting team members (e.g. architects, engineers, planners, etc.)? A2: Not necessary

Q3: Please clarify if you want 3 references for each team member firm or 3 references for the entire submitting team?

A3: Three references should be provided for each company participating in the team’s proposal. Individual references may be submitted but are not required.

Format:

Q4: Where would you like the Small and Emerging Business Plan to go in the proposal response?

A4: Include the plan within the material for section 2.3 Overview of the Master Developer Team.

Small and Emerging Business Plan:

Q5: Please clarify further as to what the participation difference is between “SEB/DBE Goods and Services” and “SEB/DBE Direct Participation.

A5: SEB/DBE Direct Participation is a direct contract between the Authority and an SEB/DBE business. As such, any member of a Proposer’s team that is either an owner or joint venturer will count toward this goal. Further, any SEB/DBE that the Proposer intends to contract with as an operator of the development will count toward this goal. The SEB/DBE Goods and Services Goal refers to subcontractors that the Proposer intends to hire through a subcontract for goods or services.

Q6: In the pre-qualification meeting it was stated that a “SEB/DBE Form” will be sent out via

addendum and is expected back as part of the proposal response outlining the vendors, scope of work and contract dollar values. Addendum No. 1 has eliminated “Section 2.5 Scope of Work and Cost Qualification”. Are we to assume that the SEB/DBE Form is not going to be required at this phase of solicitation given we are no longer required to submit scope of work and cost information with this qualifications response?

A6: Correct. The form will not be distributed nor a part of the qualification response. SEB/DBE forms will be part of the RFP process.

Technical Questions:

Q7: Have appraisals been performed regarding the Authority property? If so, we respectfully request that the Authority furnish us with any such appraisals?

A7: Yes. Appraisals are part of Addendum No. 3.

Q8: Have market studies (residential, retail, hotel, entertainment) and economic impact studies been conducted for the Authority regarding its property? If so, we respectfully request that the Authority provide those reports to us?

A8: No. Studies have not been performed.

Q9: Has the matter of Top Golf leasing the 7.16 acre Parcel G on Attachment 1 to the RFQ been resolved or is there any likelihood of that lease being resuscitated? If so, we respectfully request that the Authority advise as to the current status of this matter? Furthermore, has the Authority engaged in other discussions with other prospective end users regarding Parcel G? If so, please advise as to their names and the most recent discussions that have taken place.

A9: There have been no proposals nor are there any active prospects.

Q10: It is our understanding that an Economic Development District was established affecting the subject property. We respectfully request that Authority furnish us with any and all information regarding the EDD and how it will be applied as to the subject property and what impact it may have on end users in any development on the respective parcels.

A10: Louisiana Revised Statutes Title 33 Sections 130.861 through 130.867 are attached. Additionally, City of New Orleans Ordinance No. 27261 created a new overlay district called “Convention Center Height Overlay District” that encompasses the subject property. The stated purpose of the district is “to create a process to request additional height allowances through the Planned Development for properties in the South of Convention Center opportunity site.” The ordinance is attached.

Q11: Is the new street grid depicted in Attachment 1 to the RFQ final or will the Master Developer (“MD”) of the 20 acres have some flexibility in this regard? Will the Authority apply for any re- subdivision or street grid changes?

A11: The proposed street grid is not final. The Master Developer will have some flexibility in this regard. The Authority will work with the Developer to apply for any necessary re-subdivision or street grid changes

Q12: In our opinion, visual and physical access to the Mississippi River is critical to the successful development of the 20 acres. Are there any agreements and/or understandings between the Authority and the owner(s) of the land between the subject 20 acres and the river that would guarantee visual and/or physical access to the river for those occupying the 20 acres? If not, to your knowledge, are there any provisions or restrictions that would prevent the owner(s) of the subject waterfront property from erecting any structures or new buildings that would impede visual and/or physical access to the river?

A12: The Authority has no agreements or understandings with owners of the riverfront sites. The Authority has no knowledge of any provisions or restrictions that would prevent the owner(s) of such property from erecting any structures or new buildings that would impede visual and/or physical access to the river.

Q13: Are there any restrictions that would keep the Master Developer from building additional hotel rooms on the 20 acre site?

A13: No

Entertainment Venue Questions

Q14: It is the opinion of our group that a strong focus on entertainment is critical to the successful development of the 20 acre tract; and, accordingly, we believe that the entertainment component should be coordinated by the MD and woven into the entire fabric of the neighborhood to achieve long term success of the overall project. Accordingly, why did the Authority withdraw the entertainment venue (EV) from the acreage to be developed by the MD?

A14: The Authority is involved in discussions with an entertainment venue and determined this development component would be managed by the Authority.

Q15: Secondly, how did the Authority determine that the EV should occupy 2.2 acres? It seems such an allocation of land was certainly not arbitrary; some measure of planning must have been done to arrive at the 2.2 acre site. What was the rationale for that allocation? Was that determination made by architects working for the Authority or was that determination made by a potential EV developer that

might be or has been awarded the rights to develop the EV? If it was made by a third party EV developer, please furnish the name of that EV developer and the names of their people the Authority dealt with.

A15: The Authority is not in a position to disclose the name of the EV at present, since active discussions are occurring.

Q16: Thirdly, are there any restrictions to other entertainment components throughout the 20 acre development? If so, please advise as to the specifics of those restrictions.

A16: No – there are no current restrictions; however, we reserve the right to approve any proposed entertainment concepts.

Q17: Was an RFQ and/or RFP issued by the Authority for the EV? If so, please furnish same to us. If an RFQ and/or RFP was not issued, please furnish us with the names of that company or those companies with whom the Authority staff has dealt regarding selection of the EV developer. Is an EV developer soon to be selected or has an EV developer already been targeted or selected? If so, please furnish their names(s) and the name(s) of the contact person or people.

A17: There was no RFP or RFQ. The EV is to be determined.

Q18: Section 1.4 of the RFQ states “The Authority recognizes that it will fund certain infrastructure costs associated with site planning activities and other costs that provide a benefit to the public. (Attachment 5).” On page 4 of Attachment 5: Preliminary Infrastructure Analysis – Phase II dated August 20, 2019, it states, “the NOMCC/Developer will pay for construction of the roads, including all surface amenities and subsurface utilities.” We hereby respectfully request that that the Authority clarify who will be responsible for the cost and actual installation of surface infrastructure amenities and subsurface infrastructure and utilities? And if the MD is responsible for any of these items, would the Authority clarify what infrastructure will be the responsibility of the MD?

A18: The Authority is responsible for all such infrastructure costs.

Q19: Our group is perplexed by the short time period to respond to the subject RFQ. Our reading “between the lines” suggests that there are development groups who may have been in communication with the Authority about this project involving the subject 20 acres before the September 6, 2019, RFQ distribution date. We wish to know the names of all parties who were notified, such as my company, to respond to the subject RFQ. We hereby respectfully request that the Authority furnish the names of those companies and/or persons who were so notified to respond to the RFQ? Furthermore, of the companies and/or persons so notified, we hereby respectfully request that the Authority specify which of these parties have been in communication with the Authority staff or third party architects prior to the RFQ distribution date? Finally, we hereby respectfully request that

you advise as to the approximate date of initial contact by each of these parties with the Authority and/or its architects regarding the subject 20 acre tract?

A19: All developers/prospective developers received the RFQ at the same time.

Q20: Formal Request to Extend the deadline to submit responses: We were first notified of the subject RFQ by email on September 6, 2019 with a submittal deadline of October 4, 2019. If the Authority wants each company that has been contacted regarding the subject RFQ to have an equal opportunity to respond with a strong and convincing submission by the deadline, more than 28 DAYS should be allowed for responses.

Based on the current RFQ submittal deadline, we are expected to perform the following in less than 28 DAYS, among other development challenges and details: a. assemble a deep and multi-dimensional development team with the necessary skills, experience and “horsepower” that can work together in a cohesive fashion for this most complicated and very capital intensive project; b. accumulate sufficient background information as to the many aspects, interests and parties that impact the subject property; c. identify and generate the capital and assets necessary to support this team through what will be years of development; d. define and establish the very complex network of responsibilities among the development team; e. generate our detailed vision for the project; and f. present the compelling qualifications of our team and articulate our unique and compelling vision for the project on the 20 acres. Does the Authority really think this 28 day window to respond to the RFQ gives sufficient amount of time for a competitive and equal opportunity for developers to provide the best proposal for this large and vital swath of land? We would argue that we are at a distinct disadvantage compared to those groups who have been in communication with the Authority before, and likely well before, the September 6, 2019, RFQ Distribution Date. Why rush a project of this economic magnitude? We understand that the hotel project is moving ahead of the 20 acre development, but doesn’t the Authority want to get this right? We have already assembled what will be a very strong local group that will make a bid for this project, but we need to round out our team with that final “cornerstone” partner who has not only executed the type of project envisioned for this 20 acres but has executed it many times and in many places. Currently, we have arranged to sit down this week in Washington, D.C. at a prestigious industry conference with four such potential partners. Nevertheless, selecting that critical partner then finalizing our structure so as to bring that partner into the fold in such a short time period requires time. If all goes as we expect it this week, we will only have a few days to then assemble the entire team, develop our vision and then produce a strong submittal. We trust you now might better understand the hardship this current deadline places on our team.

We cannot see what the Authority loses by granting additional time – at least to November 1,

2019 – for the RFQ Submittal Deadline. A more reasonable deadline will allow every party, even those first notified on September 6, 2019, a fair and equal opportunity to submit a strong response. We would argue that this arbitrary deadline of October 4, 2019, might effectively eliminate an experienced, visionary and diverse team with strong local presence from consideration for this project. If we assume you haven’t already made up your mind as to the Master Developer then it makes no sense why you wouldn’t grant the additional few weeks in order to ensure the best candidates are fully considered. Accordingly, I hereby reiterate my above formal request that the Authority amend the RFQ Submittal Deadline to at least Friday, November 1.

A20: The deadline has been extended to October 18th, 2019 at 2:00p.m. CST.

Please submit your qualification documents accordingly.

900 Convention Center Boulevard EFFECTIVE DATE OF MARKET VALUE: October 5, 2018 New Orleans, LA 70130

PREPARED FOR: PREPARED BY: FILE # 18-1564 Mr. Bryan Hayden P.M. McEnery, MAI, CRE Ernest N. Morial New Orleans Baldwin R. Justice Exhibition Hall Authority The McEnery Company 900 Convention Center Boulevard 810 Union Street, Fourth Floor New Orleans, Louisiana 70130 New Orleans, LA 70112

Appraisal Report – Undeveloped Land Adjacent to the New Orleans Convention Center

The McEnery Company

Established 1980

www.mceneryco.com

October 25, 2018

Mr. Bryan Hayden Ernest N. Morial New Orleans Exhibition Hall Authority 900 Convention Center Boulevard New Orleans, Louisiana 70130

Re: 900 Convention Center Boulevard New Orleans, LA 70130

Our File Number: 18-1564

Dear Mr. Hayden:

In accordance with your letter of engagement, we have examined the referenced property and analyzed matters applicable to the determination of its current market value. Enclosed is our report that describes our method of approach and contains relevant data gathered and used to reach a final value estimate.

This appraisal complies with the reporting requirements mandated by the 2018-2019 Edition of the United Standards of Professional Appraisal Practice (USPAP) adopted by the Appraisal Standards Board of The Appraisal Foundation. Additionally, as per Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) minimum appraisal standards, we HAVE completed previous appraisals of commercial properties similar to the subject property in this area.

This is an appraisal containing a total of 194 numbered pages. This report is intended for use only by Ernest N. Morial New Orleans Exhibition Hall Authority as represented by Mr. Bryan Hayden. We are not responsible for unauthorized use of this report.

The subject of this report is a 49.6 acre tract of vacant land made up of 5 parcels just south of Interstate‐10 where it passes over Tchoupitoulas Street in an area known as the Lower Garden District in New Orleans, Louisiana. The purpose of this appraisal is to determine the market value of the Fee Simple Interest in and to subject property. Within this appraisal, we have developed the land/site valuation with land residual analysis in our highest and best use section. Integral to the conclusions herein are the inferences drawn from the included level Level C market and marketability analysis.

810 Union Street, Fourth Floor 170 Moores Road New Orleans, Louisiana 70112 Mandeville, Louisiana 70471 Telephone: 504-274-2701 Telephone: 985-246-3900 Facsimile: 504-274-2702 Facsimile: 985-246-3901

Real Estate Licenses and Certifications held in Louisiana, Mississippi, Alabama, Florida, Texas and Arkansas

Mr. Hayden Page Two October 25, 2018

According to the City of New Orleans Bureau of the Treasury, the 2018 ad valorem taxes of the property have been paid with the exception of $115.00 owed from 11/1/2008 on the parcel located at 431 Orange Street Tax Bill Number 101100903. Assessment information can be found in the Scope of the Appraisal section of this report.

The opinion of value expressed in this report is conditioned on the Statement of Certification and the Statement of Assumptions and Limiting Conditions that are included within the report.

Based on the data and analyses contained herein, it is our opinion that the Market Value of the Fee Simple Interest of the subject tracts of land as of October 5, 2018 are:

Site Value (Rounded) Size (SF) Price per SF

Hotel $30,245,000* 263,000 $115.00

Phase 1 $66,035,000* 880,463 $75.00

"Other" $51,135,000* 511,342 $100.00

Phase 2 $18,785,000* 300,606 $62.50

"Existing to Remain $12,705,000* 203,278 $62.50

Total $178,905,000* 2,158,689 $82.88

This is to certify that we have no interest, present or contemplated, in the appraised property. Our opinions of value are subject to the General and Special Assumptions and Limiting Conditions, Certification and Restriction Upon Disclosure and Use which are stated in the body of the report.

Respectfully submitted,

______P.M. McEnery, MAI, CRE Baldwin R. Justice Louisiana State Certified Louisiana State Certified General Real Estate Appraiser #G1102 General Real Estate Appraiser #G3000

SUMMARY OF SALIENT FACTS AND CONCLUSIONS GENERAL Property Address: Undeveloped Land Adjacent to the New Orleans Convention Center

Client: Ernest N. Morial New Orleans Exhibition Hall Authority, as represented by Mr. Bryan Hayden

Ownership: Ernest N. Morial Convention Center

Interest Appraised Fee Simple

Type of Value: Market Value

Date of Report: October 25, 2018

Property Inspected By: Baldwin R. Justice

Intended Use: The intended use is for consideration in investment and/or development decisions.

Intended User(s): The intended user is Ernest N. Morial New Orleans Exhibition Hall Authority, as represented by Mr. Bryan Hayden

Sale History: The subject property has not changed ownership within the past three years. To the best of our knowledge, the subject property has not been recently marketed for sale, nor is it known to be encumbered by a pending sale/purchase agreement. Except for the ongoing operations and potential mortgage loan considerations, we are unaware of any other transactions that may affect the property.

Legal Description: The subject consists of several parcels of land adjacent to the New Orleans Morial Convention Center. Complete legal descriptions of the parcels are included in the addenda of this report.

Zoning: MU-2, High Intensity Mixed-Use City of New Orleans Planning and Zoning

Flood Zone X

iii

Highest and Best Use (As Vacant): Mixed-Use Development

Estimated Marketing and Exposure Time: Less than 12 months

VALUE INDICATIONS

Site Value (Rounded) Size (SF) Price per SF

Hotel $30,245,000 263,000 $115.00

Phase 1 $66,035,000 880,463 $75.00

"Other" $51,135,000 511,342 $100.00

Phase 2 $18,785,000 300,606 $62.50

"Existing to Remain $12,705,000 203,278 $62.50

Total $178,905,000 2,158,689 $82.88

MARKET RENT CONCLUSIONS

Site Market Rent (Rounded) Size (SF) Price per SF

Hotel $1,580,000 263,000 $6.00

Phase 1 $3,520,000 880,463 $4.00

"Other" $2,555,000 511,342 $5.00

Phase 2 $975,000 300,606 $3.25

"Existing to Remain $660,000 203,278 $3.25

AERIAL VIEW

Existing to Remain

Other

Hotel

Phase II

Phase I

-Site Boundaries Are Approximate-

iii

SITE VIEWS

iii

TABLE OF CONTENTS

Summary of Salient Facts and Conclusions ...... iii Aerial View ...... v Site Views ...... iii Table of Contents ...... v Certification...... 1 Scope of Work ...... 2 Assessment and Taxes ...... 6 Zoning...... 7 Subject Property Description ...... 8 Site Analysis ...... 8 Potential Development Discussion ...... 11 Market Area Analysis ...... 13 Market and Marketability Analysis ...... 28 Highest and Best Use ...... 72 Land/Site Valuation – Hotel Site ...... 105 Land/Site Valuation Reconciliation and Conclusion – Hotel Site ...... 142 Land Comparables Analysis Grid – Phase I ...... 146 Phase I Land/Site Reconciliation: ...... 147 Land Comparables Analysis Grid – Other Site ...... 149 Other Site Reconciliation: ...... 150 Land Comparables ...... 152 Market Ground Rent Analysis ...... 187 Final Reconciliation and Value Conclusion ...... 194 Assumptions And Limiting Conditions ...... Addenda ...... Glossary ......

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 are our personal, impartial, and unbiased professional analyses, opinions and conclusions.  We have no present or prospective interest in the property that is the subject of this appraisal report and we have no personal interest or bias with respect to the parties involved.  We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.  Our engagement in this assignment was not contingent upon developing or reporting predetermined results.  Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.  We have performed no other services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.  The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.  Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.  The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.  No one other than associates in this office or outside consultants as noted provided significant professional assistance in the preparation of this report.  Baldwin R. Justice made a personal inspection of the property that is the subject of this report. P. M. McEnery, MAI, CRE did not make a personal inspection of the property that is the subject of this report.  Matthew T. Palmer provided significant professional assistance in the preparation of this report. A summary of this assistance may be found within the Scope of the Appraisal.  As of the date of this report, P. M. McEnery, MAI, CRE has completed the continuing education program for Designated Members of the Appraisal Institute.  P. M. McEnery, MAI, CRE is a licensed real estate broker and is active in the buying and selling of real estate.

Date Signed: October 25, 2018

______P.M. McEnery, MAI, CRE Baldwin R. Justice Louisiana State Certified Louisiana State Certified General Real Estate Appraiser #G1102 General Real Estate Appraiser #G3000

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SCOPE OF WORK According to the Uniform Standards of Professional Appraisal Practice, it is our responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, we must identify and consider:

● the client and intended users; ● the intended use of the report; ● the type and definition of value; ● the effective date of value; ● assignment conditions; ● typical client expectations; and ● typical appraisal work by peers for similar assignments.

The purpose of the appraisal is to estimate the current 'As Is' market value for financing purposes of the Fee Simple Interest in and to the subject property.

The subject property is one of the most marketable tracts of land in the region in terms of the development potential that exists on such a large parcel in immediate proximity to the Warehouse District / CBD neighborhoods, as well as the Mississippi River. Due to the vacant nature of the property, a Land/Site Valuation is the best methodology to employ in order to determine the market value of the subject. Due to the fact that we have been provided with a breakdown of the site which notes five separate parcels and thus, our Land/Site Valuation includes five sets of analysis, which all for five individual value conclusions to be reached. This information is presented in the following grid.

Site Size (SF) Acres Hotel 263,000 6.04 Phase 1 880,463 20.21 "Other" 511,342 11.74 Phase 2 300,606 6.90 "Existing to Remain 203,278 4.67 Total 2,158,689 49.56

As will be discussed, the 263,000 square foot portion of the property that is primed for hotel development is the most marketable of the five separate parcels that comprise the subject property. Having said this, we have performed an additional analysis that focuses as on the net present value of that site, which will be described below in more detail.

In a separate subsequent section we present a residual analysis of the proposed headquarters hotel project. In this exercise, we estimate the cost to construct the subject hotel, we project the net operating cash flows of the hotel during the holding period, and lastly we conclude a reversion value at the end of the holding period. We discount these cash flows, both positive and negative, to a net present value which is the value associated to the portion of the site designated for hotel construction.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

SCOPE OF WORK Client: Ernest N. Morial New Orleans Exhibition Hall Authority, as represented by Mr. Bryan Hayden

Intended Use: The intended use is for consideration in investment and/or development decisions.

Intended User(s): The intended user is Ernest N. Morial New Orleans Exhibition Hall Authority, as represented by Mr. Bryan Hayden

Type of Value: Market Value

Effective Date of Value: October 5, 2018

Report Type: This is an Appraisal Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(a). This format provides a summary or description of the appraisal process, subject and market data and valuation analyses.

Inspection: A complete exterior inspection of the subject property has been made, and photographs were taken.

Market Analysis Level: Level C

Valuation Analyses Within this appraisal we concluded value opinions of the subject site as though it is vacant and ready for its legal optimum, highest and best use. In doing so we have identified and analyzed the details of similar properties that have recently sold in the New Orleans market. The sold properties are compared to the subject using elements of comparison that are deemed the most appropriate and reasonable. Additionally we conduct a land residual analysis of the portion of the subject site that is identified for construction of a new headquarters hotel.

Hypothetical Conditions:  There are no hypothetical conditions employed in this appraisal.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

Extraordinary Assumptions:  An extraordinary assumption being the sizes of the sites as determined by our office are accurate and true. As we were not provided with complete site surveys to definitively calculate the site sizes of all components of the subject parcels, we reserve the right to revisit our value conclusions of the subject property should the completion of a survey conclude dissimilar results.

We have determined this scope of work such that it meets the expectations of regularly intended users of similar assignments and meets or exceeds what our peers' actions would be. Our peers are defined as other appraisers who have expertise and competency in similar assignments. The scope of the work performed is referenced in the Letter of Engagement which is included in the Addendum section of this report.

Marketing and Exposure Time: The definition of Market Value is based on a reasonable time allowed for exposure to the market. Reasonable time is a subjective time period and will vary depending on the type property, marketing effort and price. Marketing Time is a prospective perspective or provides a perspective that is futuristic for the date of valuation with a presumed sale of the property under the assumption the property will sell at market value. Exposure Time is retrospective in perspective and provides a perspective that is historic for the date of valuation with a presumed sale of the property under the assumption that the property will sell at market value. For purposes of this appraisal, it is assumed that the property would be reasonably priced and aggressively marketed.

The Marketing and Exposure Time for the subject property is estimated to be less than 12 months if priced to the market and aggressively marketed.

Comments:

 Baldwin R. Justice visited the subject property on October 5, 2018. A complete exterior inspection of the subject property has been made, and photographs were taken.

 In the process of concluding a value, data has been gathered and analyzed by the undersigned appraisers. Comparable sales and operating data have been analyzed.

 The scope is further augmented by the applicable approaches to value employed in this assignment, the analyses resulting in value conclusion(s) rendered which is dependent upon all known information about the subject property and marketing conditions and available market data.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

 Matthew T. Palmer provided significant professional assistance in the preparation of this report. This assistance includes the research of applicable subject property attributes and the input of this information into this report. These attributes include the marketing and sales history, ad valorem taxes, zoning designation, legal description, and flood zone. Additionally, assistance was given by formatting and inserting subject photographs, the subject sketch, aerial images and other relevant documents. All pertinent property data has been verified by a signatory appraiser.

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ASSESSMENT AND TAXES

Taxing Authority City of New Orleans Bureau of the Treasury

Assessment Year 2018

*Below is a summary of the subject property assessment information. Complete information can be found in the Orleans Parish Assessor’s Records.

The subject site is exempt from real estate property taxes. According to the City of New Orleans Bureau of the Treasury, the 2018 ad valorem taxes of the subject property have been paid with the exception of $115.00 owed from 11/1/2008 on the parcel located at 431 Orange Street, Tax Bill Number 101100903.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

ZONING According to the City of New Orleans Planning and Zoning Department the subject property is situated in a MU-2, High Intensity Mixed-Use District. According to the city zoning ordinance this district, “is intended encourage walkable neighborhood centers and corridors conducive to transit, with a mix of residential and supportive commercial and office uses. Buildings may contain vertical mixed-use as well as single purpose uses designed to be located both at neighborhood centers and along major arterial corridors.” The subject is also within the Convention Center Height Overlay District and the Short Term Rental Interim Zoning District. The current use of the subject property is a conforming use. A copy of the district regulations is located in the Addenda to this report. A zoning map is below.

Subject Property

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SUBJECT PROPERTY DESCRIPTION SITE ANALYSIS Location: The subject property is located on several parcels of land just south of Interstate 10 where it passes over Tchoupitoulas Street in an area known as the Lower Garden District in New Orleans, Louisiana.

Current Use of Property: Vacant Land / Parking

Site Size: Total: 49.56 acres; 2,158,689 square feet

Shape: The site is roughly square.

Frontage/Access: The subject property has good access located adjacent to access point for Interstate 10. The property has frontage on several streets including Tchoupitoulas, Henderson, Melpomene, Thalia, Euterpe, St. peters, Orange, and Race Streets as well as Convention Center Boulevard.

Topography: Level

Utilities: Electricity: Entergy Sewer: City sewer Water: Municipal Supply Natural Gas: Entergy Underground Utilities: The site is serviced by above-ground and underground utilities. Adequacy: The subject's utilities are typical and adequate for the market area.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

Flood Zone: The subject is located in FEMA flood zone X, which is not classified as a flood hazard area. FEMA Map Number: 22071C0237F FEMA Map Date: September 30, 2016

Zone X (areas outside of 100 Year flood plain and areas of 500 year flood plain) is the flood insurance rate zone that correspond to areas outside the 1-percent annual chance floodplain, areas of 1-oercent annual chance sheet flow flooding where average depths are less than 1 foot, areas of 1-percent annual chance stream flooding where the contributing drainage area is less than 1 square mile, or areas protected from the 1-percent annual chance flood by levees. No base flood elevations or depths are shown within this zone. Insurance purchase is not required in this zone.

Wetlands/Watershed: No wetlands were observed during our site inspection.

Environmental Issues: We were not provided a Phase I Environmental Impact Assessment. However, no adverse environmental conditions were noted upon inspection.

Encumbrance/Easements: There are no known easements or encumbrances effecting the marketability of the subject property.

Comments/Conclusions: The site has average and typical utility. The site is of adequate size and shape to accommodate a variety of large scale uses.

Site Size (SF) Acres Hotel 263,000 6.04 Phase 1 880,463 20.21 "Other" 511,342 11.74 Phase 2 300,606 6.90 "Existing to Remain 203,278 4.67 Total 2,158,689 49.56

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SITE MAP

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POTENTIAL DEVELOPMENT DISCUSSION

As addressed in more detail in the Highest and Best Use section of the report, we conclude that the best and most suitable use of the subject is a mixed-use development site. A mixed-use development is a “real estate project with planned integration of some combination of retail, office, residential, hotel, recreation or other functions. It is pedestrian-oriented and contains elements of a live-work-play environment. It maximizes space usage, has amenities and architectural expression and tends to mitigate traffic and sprawl.” This definition was presented at a recent conference on the topic sponsored by four professional organizations in the real estate industry -- ICSC, NAIOP, NMHC & BOMA.

Mixed-use developments are not a homogenous product. They can differ in location as they can be built in an urban setting or a suburban setting. The density levels are generally higher in an urban setting but not necessarily. Developments can differ in relation to its surroundings. It can be a higher density infill project in an established urban setting or it can be a development in the growth corridor in a suburban setting. It can also differ in configuration. A mixed-use development can take four general forms.

 First, it can be a single high-rise structure on a single site that contains two or more uses integrated into the structure. Typically, this form of the mixed-use development has retail on the street level with offices over the retail and either residential units or hotel space over the office space. This type of development is common in the current downtown New Orleans landscape.

• Second, it can be two or more high-rise structures on a single site with each structure holding a different use. The office building, residential tower (condominium ownership) and a hotel are the typical combination. Retail, but different forms of it, can also exist on the ground levels of each use. This is more common in highly developed urban areas.

 Third, the mixed-use development can be a combination of different low rise structures on a single site with retail on the ground level with residential units above in one structure and office space above in another structure. With the exception of a proposed high-rise hotel, this is what is envisioned at the subject property.

 Fourth, it can be a single mid-rise structure on a single site typically in an urban setting with retail on the ground and residential or office above. Depending on the developer’s insights and opportunities, each of the four forms of mixed-use developments in the previous paragraph can be built in an urban or a suburban setting, and it can be considered an infill project or an expansion project.

Two differentiating terms about the uses in a mixed-use development appear in real estate texts. They are “cornerstone use” and “dominant use.” The cornerstone use is the most viable and profitable use in the project.

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It drives the development concept as well as the decisions about the suitability and compatibility of the other uses in the project. The dominant use is the use that takes up the most space in the project. The dominant use might not be the cornerstone use but it needs to be financially strong.

From the developer’s perspective a mixed-use development is identified as being a popular format because it is perceived as providing the following benefits:  Convenience of live-work-play options in a single location.  Satisfying the desire to live in more of a small-town (e.g. "Main Street") environment. This desire is brought about by changing demographics and psychographics favoring the property type.  Reducing traffic congestion

Again from the developer’s perspective a mixed-use development is fostered by the following events:  Rising land prices  Encouragement by local public agencies (economic development, planning, zoning board, etc.)

Finally, a developer’s “optimal land use plan” for a mixed-use development has been stated as:  Highest land density  Most rapid absorption of finished sites at the highest price  Highest present value of the project

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MARKET AREA ANALYSIS (Economic Base Analysis)

An essential part of every appraisal is an analysis of the subject's regional or local market area with the focus on the neighborhood in which the appraised property is situated along with the components of the economic base in not only a general manner, but with specificity as they may relate to the property being appraised. Regions, neighborhoods and the market area are all studied under varying degrees of analysis. A broad regional analysis is typically a report on the climate, topography, natural features, governmental frameworks, economic base and the inter- relations of these to the national and global economies in which we interact.

Definitions and Analysis Type: A regional analysis is considered under an economic base analysis which is defined as: “A survey of the industries and businesses that generate employment and income in a community as well as the rate of population growth and levels of income, both of which are functions of employment. Economic base analysis is used to forecast the level and composition of future economic activity. Specifically, the relationship between basic employment (which brings income into a community) and non-basic employment (which provides services for workers in the basic employment sector) is studied to predict population, income, or other variables that affect real estate values or land utilization.”

A more specific analysis is that of the immediate area or neighborhood in which a property is located. The term "neighborhood" is defined in the Dictionary of Real Estate Appraisal, 6th Edition, published by the Appraisal Institute, dated 2015, as "a group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises." The boundaries of a neighborhood can be identified by determining the area within which the four forces affect all properties in the same manner. A clear distinction can be drawn between a neighborhood and a district. A district is a type of neighborhood that is characterized by homogeneous land use. A residential neighborhood, for example, may contain single-family homes and commercial properties that provide services for local residents. Districts are commonly composed of apartments, commercial, or industrial properties. The four forces which create, modify, and destroy the value of real estate are: social trends, economic circumstances, government controls and regulations, and environmental conditions.

A “market area analysis” is defined as: “The objective analysis of observable or quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values; focuses on four sets of considerations that influence value: social, economic, governmental, and environmental factors.” Under the hedonic model testing for the market and the marketability of the subject being appraised, the four sets of considerations that influence value are then analyzed using any of four levels of analysis which are commonly known as Level A, B, C or D. Levels A and B are inferred analyses in which very basic data sets may be analyzed and from which inferences may be drawn regarding value. Inferred analyses are applicable within a static data set or the absence of major shifts in trend lines.

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Levels C and D analyses are more complex and are considered fundamental in that they draw on confirmed and verified data which relates to the four considerations impacting value from which obvious conclusions result and are not dependent on inference alone. Based on the Scope of Work under which this appraisal assignment is made, one of the four levels of analysis is performed, and in this case, a Level Level C Analysis has been performed.

Economic Base and Trends (National): The most relevant trends, for our purpose of analyzing the economic base, are interest rates, real property prices, the illusive issues of GDP and consumption, and employment. Real estate markets nationwide are subject to the multitude of pressures and influences created by this interplay.

Interest Rates: The Federal Reserve raised short term interest rates for the first time in nearly a decade in December of 2015. While the increase was small, a quarter of one percent, from a range of 0% - 0.25% to 0.25% - 0.5%, the immediate effects were thought to portend and be felt in many industries with anticipated increased cost of capital. After the 2015 rates hike, the Federal Reserve increased rates five times, slowly bringing interest rates back to pre-recession levels. It is also anticipated that another three interest increases similar to the recent increases will occur during 2018, raising the overall rates for short term instruments. The Kiplinger Report suggests that overall, rates will not reach 3% until 2020. The Dow Jones Industrial Index tends to respond to actions by the Fed, although the recent rise in December of 2016 appears to have had no negative impact on the market indices. From their meeting in March 2018, The Federal Open Market Committee determined to increase the federal funds rate from a range of 1.25% - 1.50% to 1.50% - 1.75%, effective March 22, 2018, citing a strengthened economy and labor market.

Notably, the results of the recent presidential election appear to have contradicted many pundit’s forecasts. With Donald J. Trump, as president, the DOW Industrial average has risen to historic levels, almost breaking 25,000 in December 2017. The current president and Congress won a huge victory by bringing the first significant tax reform to the American people since 1986 with the $1.5 trillion tax relief of the Tax Cuts and Jobs Act of 2017. Although unable to forecast accurately the impact of this reform, pundits suggest with a lower corporate tax rate, full scale deregulation at the federal level, simplification and lowering of personal income tax rates, strong trade policies favoring the United States, strict enforcement of immigration policies, and a plethora of other offerings from the West Wing, the US economy should grow out of the moribund and hide bound overall GDP growth of an average of 2% per year under the previous administration. In this regard, much remains to be seen. Notably, general business sentiment appears to be growing. According to Moody’s Analytics Survey of Business Confidence, “business sentiment is strong and consistent with an economy that is expanding just above its growth potential”.

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Even with the recent interest rate increase by the Fed and future increases expected, interest rates have been at historically low levels, with US Treasuries remaining at or near all-time lows with the 10-year note under holding steady over the past two months at 2.89% to 2.98%. Interest rates are expected to generally remain low through the sorting out period that follows a new president, the troubles in the Euro Zone, upcoming European elections favoring populist candidates and the continued Brexit angst.

The chart below is from the U. S. Department of the Treasury, records historic rates and the treasury yield curve, noting the 10-year rate is the bench mark for real estate lending.

The key to the above chart depicts the 2-year nominal rate in green, the 10-year nominal rate in blue and the difference in grey. As can be seen, the spread between the two has reflected a clearly symbiotic relationship through mid-2015 with a dominant preference in the difference for the 2- year yield curve through 2016 continuing to the present. This suggests a trending of the difference to favor the 10-year curve suggesting higher short-term rates. With all this said, our reality is the top rates for the 10-year hovering between 2.5% and 3% is still reflective of historic lows when compared to “normal” cost and experience for long term real estate lending based on the 10-year treasury rate. In short, although the cost of borrowing for CRE (commercial real estate) will rise, the increase is not presently viewed as a major impediment to continued CRE investment.

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We might expect to see a lessening in the compression or lowering of going-in capitalization rates on investment real estate; yet, even this may be tempered if positive overall business sentiment continues to influence the economic outlook once the initial jerks and spikes settle down from a most unusual election cycle and the breakneck pace the new president has approached his job.

The trending to increased cost of funds for real estate investment, with the offering of a still low rate environment as a safe haven in treasuries, money managers and investors will still find themselves under pressure to chase yield. The result of this can manifest in cap rate compression, higher PE ratios, and perhaps a deadened sense to being “risk off” when warranted, especially in light of a generally high business sentiment index.

Low interest rates are viewed as generally positive for real estate. The resulting issue of bubble mania that can result can lead to major problems associated with cyclical corrections.

A big question still remains: Although the music score has changed, “when will the music stop”?

Economic activity in the United States has continued to expand at a moderate, if somewhat uneven pace. The New Year brought a new head of the Federal Reserve, Jerome H. Powell, who is President Trumps choice to lead the central banking system. In his remarks to the House Financial Services Committee in Congress, Mr. Powell said the job market and business investment continues to strengthen, and that headwinds once holding back the American economy had now turned into tailwinds. Mr. Powell said the Fed will, “continue to strike a balance between avoiding an overheated economy” and continuing to allow inflation to tick up towards their target of 2% annually. He then commented on how to accomplish these initiatives: “Further gradual increase is the federal funds rate will best promote attainment of both of our objectives.” This emphasizes that he plans to continue the policies of his predecessor, Janet Yellen, by gradually raising rates while still encouraging economic growth.

The Fed is expected to have three more rate increases in 2018, however, when asked about on Capitol Hill, Mr. Powell did not want to prejudge a number of rate increases, instead he answered “We’ve seen continuing strength in the labor market. We’ve seen some data that will, in my case, add some confidence to my view that inflation is moving up to target. We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more simulative,”

With revised Real GDP numbers of 2.2% for Q1, 2018, we are primed for a strong 2018. The following chart tracks Real GDP, adjusted for inflation, which remains at historic lows.

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The above chart shows that with the previous administration, GDP was at the lowest sustained level during any prior presidency. On the other hand, President Trump and his team of economy advisors, envision economic growth in the coming year to be robust, and certainly higher than it has been experienced over the previous administration. Others suggest average growth to be modest; and still others, notably Janet Yellen –former Fed Chairwoman suggest 2% to be the norm for the foreseeable future. No one appears to know. Many believe that should the president be able to lower corporate and personal tax rates (which he has already accomplished with The Tax Reform Act), set in place policies that allow for increased employment, and greatly reduce the burden of regulatory compliance, then the sky is the limit. A prudent person might conclude that it is still too early to properly conclude what will be the results of a totally new political environment in Washington D. C. In the real theater of human endeavor, the work-a-day world of Middle America is awaiting a change for the better.

Real Property Pricing: Real property values appreciated approximately 85% from 1997-2006, the only time in history that real property values outpaced inflation by more than 25%. However, in mid-2007 the real estate bubble burst, resulting in the largest collapse in the real estate market in almost 100 years. The National Association of Realtors stated that 2007 was the largest drop in existing home sales in 25 years.

The extreme expansion in real estate pricing beginning more than a decade ago was created by a variety of factors, but none bigger than the loose credit standards of major lenders in response to the growing popularity of risky mortgage-backed securities, called collateralized debt obligations (CDO’s). This added to the increase in household debt that was fueled by massive consumer borrowing, low interest rates, speculative fever, and excessively high debt levels associated with home mortgages.

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According to the Bank Credit Analyst, November 2010, the ratio of debt to household income nearly doubled from 68% in 1980 to a peak level of 130% in 2007. These extremely high levels of debt led the United States, as well as the rest of the world, into one of its longest and deepest recessions in its history. According to the Federal Reserve report dated March 2018, aggregate household debt balances increased in the first quarter of 2018 with total aggregate debt of $13.21 trillion, a $63 billion (0.5%) increase from the fourth quarter of 2017.

The continued increase in student loan debt to $1.41 trillion and auto debt to $1.21 trillion still suggests unresolved debt issues noting the less than spectacular overall GDB numbers for the reporting period. On the following page is a graph depicting household debt through Q1 2018:

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As indicated from data from the end of Q1 2018, mortgage balances, the largest component of household debt, increased in the fourth quarter. Mortgage balances shown on consumer credit reports stood at $8.94 trillion, a $157 billion increase from 2017 Q4. In 2017:Q4, balances on home equity lines of credit (HELOC) continue to drop to $436 billion, down $8 billion from a year earlier.

Generally speaking, the US real estate market bottomed out in early 2012 and has since undergone a slow recovery. However, it is important to realize that a healthy recovery does not mean that real estate markets will revert to the same characteristics as seen a decade ago. Although the existing supply of new homes for sale in the US is shrinking and home prices are trending up, 2015 was a continuation of the prior year with the housing market still in a state of recovery.

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According to the US Census, homeownership at the end of Q1 2018 remains low at 64.2% and is unchanged from the fourth quarter of 2017.

This drop extends a trend from the last housing boom with first time buyers being squeezed out of the market place due to affordability issues. Further, the graph below depicts a consistent decline in homeownership for the younger millennial generation, stifled by student loan debt and a lack of wage increase since The Great Recession.

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Household Income: American household income has been problematic as it has been outpaced by inflation. According to a US Census Bureau report, Income and Poverty in the United States: 2016, the real median household income increased 3.2% between 2015 and 2016. The number of full time workers increased by 1.2 million in 2016. The official poverty rate fell by .8% between 2015 and 2016. On the other hand, median household income was 8.3% lower in 2014 than in 2007, the year before the most recent recession. However, between 2011 and 2012 median household income only decreased by 0.2% suggesting stabilization. Even with the announced economic recovery, it appears the trend for median household income is continuing its slow growth through 2016 as shown in the graph below. From 2015 to 2016 there was a 3.2% increase in median household income.

The 2012 poverty rate was 15%, which is 2.5 percentage points higher than in 2007. The 2016 announced poverty rate dropped to 12.7% down from the previous high but still at a very elevated level. However, this is the second consecutive decline in poverty; since 2014 the poverty rate has fallen 2.1%. As the overall poverty rate continues to improve across the U.S., including those in the Southern region and outside of metropolitan areas.

With a reported 40.6 million persons now classified as living in poverty, this is a looming negative issue that presents itself in terms of the ongoing economic recovery.

The median household income for all races is reportedly $59,039, up 3.2% for 2016.

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According to the US census most recent reporting, there are currently 40.6 million people living below the poverty level in this country with an overall poverty rate of 12.7%, down .8% from 2015.

Unemployment/Inflation: According to the US Bureau of Labor Statistics, total nonfarm payroll employment rose by 2.1 million, or 1.4%, the year ending December 2017. The unemployment rate was reported as being 4.1% for the sixth consecutive month, the lowest the unemployment rate has been since 2000. The official numbered of unemployed persons stood at 6.6 million, noting this counts only those considered to be in the job market. It is important to recognize this number does not include the number of people who are no longer receiving unemployment benefits, those who have simply stopped looking for work, and those who are marginally employed.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.3 million people, and has shown little movement since the beginning of the year. The labor participation rate is at an all-time low of 62.9%.

As reported by Shadow Government Statistics the current, alternate unemployment rate for May 2018 is 21.5 percent or almost 5 times the official monthly reported unemployment rate. The rate of inflation reported by this website suggests a rate of inflation running at 5.9%, well above the official rate reported by the government of 2.1%. It is interesting to note that whether official or unofficial, inflation appears to be trending up. When the official unemployment and inflation rates are paired as a “pain threshold index”, the official rates and those portrayed by Shadow Government Statistics, differ widely as is depicted in the charts below and on the following page.

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Commercial Real Estate Markets: After the 2007-8 credit collapse and related financial displacements, US commercial real estate (CRE) values appear to have troughed in early 2012 and real estate in distressed regions outperformed treasuries for the first time since the recession began.

The 2nd Half CBRE Cap Rate Survey suggested the following:

U.S. cap rates in the second half of 2017 either largely stayed the same or increased from the prior survey.

Among the major commercial real estate sectors:

 The industrial sector remained the most stable of all. Several metro markets reported small decreases in cap rates.  CBD office also held its value fairly well. However, suburban office cap rates, on average, increased by 10 basis points (bps). Expected returns on cost for value-add CBD Class A office properties had a slight tightening in cap rates.  The multifamily sector continued to reflect the lowest cap rates among the major property sectors, while hotels had the highest. Both the multifamily and hotel sectors experienced only small cap rate increases from the prior survey.

The 2017: Q4 Realty Rates report states that “During the 3rd Quarter of 2017, movements in operating fundamentals were overall positive for all property types in most markets nationwide. Overall capitalization rates were down somewhat for all property types in most markets except Offices Buildings, which were up slightly from the prior quarter, and Anchored Retail which were unchanged from the prior quarter. Meanwhile, average sales prices moved up somewhat for all property types in most markets.” Further, “The general feeling noted over the last year that the commercial markets will continue to improve has once more returned in spite or perhaps because of the uptick in interest rates that appears to have enhanced financing possibilities. However, consumer spending and the shift to online purchasing and their combined effect on the Retail sector continue to be a concern.”

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The following chart provided by (Situs RERC 2017: Q4) details current cap rate covering the spectrum of CRE.

Based on a recent informal survey during a panel session before The Counselors of Real Estate at their recent annual convention held in Washington DC, there was an evenly mixed set of opinions with some suggesting recession within two years and some suggesting things were going to improve overall over the next two years. In general, the downward pressure on cap rates over the past several years is attributable to greater buyer interest coupled with affordable financing for qualified buyers. This trend accelerated as a result of the Federal Reserve’s efforts to keep interest rates at historic lows. Looking forward, cap rates are expected to shift upwards as interest rates are expected to steadily rise, and/or corrections occur. The generally mixed opinions suggest a continuation of the past, noting attention will be paid to the likely changes that are coming in the cost of funds associated with financing CRE.

Conclusion: “Better days ahead” has been a mantra of forecasters since the Great Recession, and with a most markets supporting a strong 2017, the outlook for continued growth in 2018 is bright.

The current administration has completed their first full year in office, and has made splash with everything from tax reform, to deregulation, and immigration. The Tax Reform Act passed in this quarter, brought the corporate tax rate down to 21% and ignited corporations to bring jobs back to the United States and pass saving off to employees. One can expect that these saving will also transfer into investment in infrastructure which could be a significant payoff for CRE.

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Tax savings also were passed on to individual investors, who may be inclined to diversify portfolios. The stock market continues to climb into the new year on the heels of Trump’s election, however for some time analysts have been calling for a correction that may scare some out of the market. Healthy cap rates will continue to lure investment into commercial real estate.

Under the previous administration, predictions were viewed through a lens of skepticism. In 2013 debt limit brinksmanship, a government shutdown, ongoing financial crises in Europe and unemployment all contributed to preventing the arrival of these illusive better days. As 2016 closed, many of these restraints dating from several years ago remained as obstacles to economic growth.

At the Federal Reserve, “kicking the can down the road” was an appropriate and heavily used analogy for actions on debt issues throughout the aftermath of the Great Recession. Two debt ceiling suspensions and one short-term debt increase occurred to ward off a United States Treasury default and more deadlines loomed in early 2014. By the end of 2014, the new congress was hurriedly passing the 2015 fiscal budget before the Christmas break. While the possibility of another federal government shutdown was adverted, the debt ceiling and related political posturing did rear its head.

2018 brought a new Chairman of the Federal Reserve, Jerome H. Powell. Mr. Powell’s resume goes in line with the majority of Mr. Trump’s other financial appointments, coming from a private sector career in investment banking career. As stated above, Mr. Powell does intend to slowly rate interest rates, while working towards a 2% inflation rate. Mr. Powell’s outlook on the US economy is positive and will work to maintain a GDP growth rate of 3%.

There is still partisan gridlock on Capitol Hill, which makes Trump’s victory on tax reform even more impressive. With this recent reform, it does appear that we have entered the beginning of a new era in our nation’s capital. We would not be surprised if a significant difference in the environment of business as usual changes dramatically under the new regime.

Irrespective of the data sources surveyed, there is little doubt the U.S. recovery in real estate was fragile during the initial stages of the general economic recovery. When the economic cycle accelerated and its range extended, Wall Street was happy even though on main street sentiment was very mixed. Today the unemployment rate is at its lowest since 2008, and the current pickup in hiring is spurring an increase in the labor force, as more would-be workers are encouraged to once again start looking for jobs. If hiring continues to increase, optimism among out-of-work individuals will increase, and the overall workforce will expand. This means the unemployment rate will tick-up temporarily before it can trend down over the long term because of the return of many job seekers.

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Many private sector balance sheets are flush with cash due to increased profits and the halt in significant capital expenditures, which could lead to higher compensation for corporate executives. Homeowners in the upper tier pricing of the market tend to follow the school calendar year when buying or selling homes and recreational properties, and last summer was bullish for the very high end real estate market. On the other hand, the relative lack of corporate capital expenditure, which includes significant hiring, has had a negative trickle-down effect to the median to low level housing market.

Although perceived as a relatively safe, transparent investment industry, the market for real estate is still considered as somewhat stagnant in many areas of the country due to record numbers of home foreclosures, tightened credit availability, and a still comparatively low level of new construction activity in both the housing and commercial real estate markets. Although speculative real estate investors have started increasing allocations to real estate acquisitions and development, many would-be investors remain on the sidelines or are committed to high quality income producing real estate in large markets.

As we continue 2018 following an acrimonious election, a politically divided America is still apparent. While the Trump administration was heralded as business friendly with major policy changes on the horizon, thus far deregulation of existing burdensome rules have been scaled back largely through executive orders despite Republican control of both legislative houses as well as the White House. Significant progress on major legislation has largely stalled with major issues such as a roll back of unfavorable trade policies, repeal and replacement of the Affordable Care Act and an effective and enforceable immigration policy still await significant action.

With a Fed policy of a rise in interest rate over the past year, current public debt levels, unsettled global flash points including major concerns about the fallout of Brexit and existing high levels of unemployment in Europe, a prudent analyst might well portend a view of cautious growth in select real estate markets; yet, overall economic growth rates both domestically and abroad continue to be favorable. US stocks continue to push higher under the new administration with the S&P 500 surging to 6.12% in the fourth quarter 2017. The continued growth marks the ninth year of a bull market which leads many analysts to surmise that a correction looms, however as a recent Business Insider article noted, “the stock market as it stands today should be viewed through a lens unique to history, since it’s dealing with some unprecedented circumstances.” http://www.businessinsider.com/wall-street-boldly-ignoring-stock-market-history-performance-2017-7

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MARKET AND MARKETABILITY ANALYSIS (Level C Analysis)

Through 2017 and 2018, the US real estate market continued its recovery and growth after bottoming out in early 2012. The prevailing opinion among market participants is that the national economy should continue on sustained growth; however, there are risks of a potential contraction or recession on the horizon. More than anything this is tied to the fact that slow and spotty growth has been the norm for just under a decade now with an expanding economy and the potential for a peak followed by valley may be on the horizon. In Louisiana, the general sentiment is cautiously optimistic with a slowing economy due to the decline in the oil and gas industry. There have been some signs of recovery in the energy sector, which is bringing some level of optimism back to the statewide market place. The focus of our analysis is the market for similarly positioned commercial properties in the New Orleans - Metairie market. Putting the snapshot of the national economic base in the proper perspective is the backdrop of the regional economic base. Given the optimistic yet fragile outlook for the economy, it is important to focus on the historic nature of the regional base, one tied to the public employment sector, natural resources, port industry, and tourism.

The Central Business District is one of the older and more developed areas of the City of New Orleans and was developed in the early 1800’s as the commercial hub of the region. To the north of the subject property is the Vieux Carre, or the French Quarter. The French Quarter is the oldest community within the City of New Orleans, and is currently the epicenter of the local tourism industry. The subject neighborhood is bounded to the south by the Warehouse District, which has traditionally consisted of extensive warehouse and industrial use property. It was not until the advent of the World’s Fair Exposition in 1984 that this neighborhood became known as the Warehouse District. Since that time, there has been more significant development in and throughout the Warehouse District. Most recently, this has become one of the most popular residential neighborhoods with most of the redevelopment including hotel, condominium and apartment projects.

Today, the New Orleans Central Business District is the hub of business activity within the greater New Orleans Metropolitan area. It is within walking distance of significant tourist attractions including Harrah’s Casino, The Audubon Aquarium, Bourbon Street, The Superdome, and the New Orleans Arena. The specific subject market is the CBD in New Orleans, which is currently one of the best performing neighborhoods in the broad regional market. New investment is fairly widespread and the general outlook is very optimistic.

Development in the Warehouse District area is a combination of residential condominium and apartment buildings with ground floor retail, as well as standard retail, office and industrial properties. The main corridors and defining streets of the subject property neighborhood are Poydras Street, Canal Street, Tchoupitoulas Street, Carondelet Street, Camp Street, Julia Street, and Girod Street.

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Typical development along Poydras Street consists of large‐scale office buildings, public use facilities, as well as retail and other commercial outlets. This thoroughfare is the defining corridor of the New Orleans Central Business District. Downtown New Orleans is a neighborhood with a wide variety of commercial developments – many of which are historical in nature.

Lavish hotels, world renowned restaurants, a plethora of retail establishments, a land based casino, major professional sports arenas, and grand office buildings are among the many commercial edifices within the CBD.

Real estate values within the Central Business District and Warehouse District of Downtown New Orleans as a whole continue to move upward, and there is still an allure associated with owning Downtown New Orleans property. Buildings in the Central Business District and Warehouse District generally range in size from 2 to 5 story, mixed use buildings similar to the subject property, to upwards of 40 plus story high rises such as the Entergy Centre, the Pan American Life Building, Place St. Charles, One Shell Square and Poydras Plaza.

Overall, the New Orleans Central Business District and Warehouse Districts have weathered economic storms in recent years to remain to be viable and occupied business centers that, in many regards, along with the Vieux Carre, are considered to be the heart of the city. The subject neighborhood’s proximity to the Vieux Carre has a positive bearing on the subject market.

The historic and established neighborhoods in New Orleans are outperforming most other metropolitan areas relative to marginal demand for apartment product, lodging and commercial space. The overall pace of new development that is taking place in these neighborhoods is undoubtedly impressive in light of the backdrop of the slow but steady national recovery coming out of the Great Recession.

The five steps employed to assess the market and marketability for the subject property are titled as follows:  Market Area Delineation  Property Productivity Analysis  Supply and Demand Analysis  Interaction of Supply and Demand  Forecast of Subject Capture

A truncation of these sets presents the analysis in three broad categories, namely the market area delineation, the property’s productivity along with its competitive advantages and disadvantages, and a supply/demand analysis, the interaction therein with our forecast for absorption forecast, or subject capture rate.

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Market Area Delineation: The subject property’s market area has been delineated as an extension of the Central Business District and Warehouse District. The definitive boundaries of these neighborhoods vary depending on who one asks. For instance, some will say that the Warehouse district is strictly bounded by Convention Center Boulevard, Interstate 10, Poydras Street and Magazine Street, which would mean that the rest of the area southwest of the Poydras Street and extending to Loyola Avenue would be included within the Central Business District. Others will say that the area between Loyola Avenue and Magazine Street is actually part of the Warehouse District and that the CBD is strictly bounded by Canal Street, Poydras Street, the Mississippi River and Loyola Avenue. Overall, however, most would agree that the CBD/Warehouse District overall market is bounded by the Interstate to the south, Claiborne Avenue Overpass to the west, Canal Street to the north and the Mississippi River to the east.

Although the subject site is positioned just to the southeast of the traditional geographic boundaries of the CBD/Warehouse District neighborhood, that is still the most relevant and similar market area upon which our analysis should focus. The majority of the subject property is across the street from the Convention Center and that structure not only extends into the Warehouse District, but also is considered to be the anchor of the immediate area. Any development that eventually occurs on the subject site will inevitably be focused on the proximity of that land to the Convention Center and the surrounding downtown neighborhood. As such, the inherent value of the majority of the subject site is most similar to that of parcels in the CBD and Warehouse District from a marketability standpoint.

These areas have experienced significant revitalization over the past two decades that continues today. This includes numerous redevelopments of historic structures, most commonly to accommodate mixed-use commercial and residential uses. Some of the more notable projects will be highlighted further within this analysis.

The surrounding Warehouse District / CBD neighborhood is seeing numerous redevelopment projects take place, many of which have already been completed, as has been outlined within this report. These changes are already in the process of giving new life to the immediate area and making this neighborhood one of the more attractive places to live and work in New Orleans. The strong market for residential space in the CBD, especially for newly renovated units, is demonstrated by the high occupancy figures seen within the downtown market. There is also very high demand for hotel rooms in the local market, as will be discussed shortly.

Overall the subject is situated in a readily accessible neighborhood, aside from large scale tourist events that create significant traffic issues in and around the Central Business District such as the Sugar Bowl, the Bayou Classic, and Mardi Gras. Following a Saints game in the fall and early winter or a Pelican’s Game, traffic and parking can become more of a problem.

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The regular pedestrian traffic in the immediate area is a tremendous plus for any property situated between Poydras and Canal Street.

Aerial View of Subject Market

Central Business District

Warehouse District

Subject Property

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Broad Map of Downtown Neighborhoods

Subject Property

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The area to the west of Loyola Avenue and south of Poydras street will be defined as the Entertainment District, while the area north of that will be part of the newly termed Bio District. Downtown New Orleans features a diverse array of commercial development, many of which have historical significance. Upscale hotels, world renowned restaurants, Harrah’s casino, grand office buildings, and an assortment of retail establishments are among the many commercial edifices within the area.

The surrounding Warehouse District / CBD neighborhood is seeing numerous redevelopment projects take place, many of which have already been completed, as has been outlined within this report. These changes are already in the process of giving new life to the immediate area and making this neighborhood one of the more attractive places to live and work in New Orleans. The strong market for residential space in the Warehouse District and CBD, especially for newly renovated units, is demonstrated by the high occupancy figures seen within the downtown market. There is also very high demand for hotel rooms in the local market.

Overall the subject is situated in a readily accessible neighborhood, aside from large scale tourist events that create significant traffic issues in and around the Central Business District such as the Sugar Bowl, the Bayou Classic, and Mardi Gras. Following a Saints game in the fall and early winter or a Pelican’s game, traffic and parking can become more of a problem. The regular pedestrian traffic in the immediate area is a tremendous plus for any property situated between Poydras and Canal Street.

On the following pages are several notable recently completed and ongoing developments near the subject property within downtown New Orleans.

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316 St. Charles Avenue - Residence Inn

Ground was broken in August 2017 toward development of a new 19-story, 238 room Residence Inn. Local media reported the development cost is upward of $40 million. The underlying 13,511 square foot site was purchased in February 2014 for $3,990,000 or $295.31 per square foot, which made it one of the highest prices on a per square foot basis ever in New Orleans. While there has been little publicly disclosed about this development, in addition to upper floor guest rooms, the project will feature a ground floor bar and restaurant as well as a second floor terrace overlooking St. Charles Avenue. The development is anticipated to be completed in the spring of 2019.

730 Julia Street - The Julia The Julia is a $50 million large-scale mixed-use development in the Warehouse District bounded by Julia Street, Carondelet Street and St. Charles Avenue. The project is a joint venture between Woodward Interest and Audubon Capital Partners and will feature more than 17,000 square feet of ground floor retail space, 197 upper floor apartments as well as 140 indoor garage parking spaces. The development is slated for construction completion in Q4 2018.

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317 Baronne Street – NOPSI Hotel

The building at 317 Baronne Street was originally constructed in 1927 and housed the headquarters for New Orleans Service Incorporated (NOPSI), the city’s utility company. The building, as well as an adjacent two story building on the corner of Union Street and O’Keefe Street, was purchased in February 2015 for $11.6 million. The vacant property gained approval in early 2016 for conversion into a 217-room luxury hotel. The $30.3 million project includes a ballroom, bar and restaurant, rooftop pool and landscaped courtyard which was completed in 2017.

The Ace Hotel

One of the newer hospitality offerings in the downtown New Orleans market is the Ace Hotel located at 600 Carondelet Street. The property was redeveloped at a cost of $80 million over an approximately two-year period beginning in 2014 that transformed a nine-story Art Deco building originally built in 1928 into a modern 234-room hotel. The property originally housed a furniture retailer for many years and was purchased in 2013 for $5,508,990 by the Domain Companies. The new hotel features numerous amenities including a rooftop pool and lounge area, several restaurants and bars, a music venue, attached ground floor coffee shop as well as several retail

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36 units fronting along Carondelet Street. The New Orleans location marks the 10th Ace property. The brand has proven popular with younger travelers and the interior of rooms as well as lobby areas feature eclectic furnishings and décor.

Maison De La Luz

A follow up sister project to the above Ace Hotel, the 67 room Maison De La Luz is anticipated to be completed in spring 2019. The property at 546 Carondelet Street is being developed by The Domain Cos. In partnership with Atelier Ace, the company behind the Ace Hotel Brand. The six-story building sits directly across the street from the Ace Hotel and most recently was utilized as a law office. Guest rooms at the Maison De La Luz are described as being smaller and quieter than the adjacent Ace Hotel with fewer amenities.

The South Market District The South Market District is the most significant example of mixed use downtown development to be seen in the New Orleans market in decades. This $500 million project is spearheaded by the Domain Companies out of New York which has completed four of the five phases of development since first breaking ground in 2012. This new market tax credit driven project encompasses a four block area, most of which were previously utilized as surface parking lots. This development when finished will include a total of approximately 200,000 square feet of retail and restaurant space, more than 600 luxury apartments, 635 garage parking spaces and 89 luxury condominiums. A summary of each phase of development is below:

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-The Paramount: $48 million mixed-use building with 209 residential units and ground level shops and restaurants. Opened 2014.

-The Park: 435 parking spaces and approximately 27,000 square feet of retail space anchored by CVS Pharmacy and Arhaus Furniture. Completed October 2014.

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-The Beacon: $40 million mixed-use building featuring 20,000 square feet of ground floor retail/restaurant space and 124 upper floor luxury apartments. Completed March 2016.

-The Standard: $80 million 15-Story luxury condominium building featuring 89 upper floor units and 24,000 square feet of ground floor retail space. The 89 condos will feature a mix of one, two and three bedroom units as well as ground floor retail space and a 30,000 square foot amenity deck with pool. The ground up construction of this new building marks the tallest construction project in Downtown New Orleans since the 2010 opening of the nearby 930 Poydras building.

Condominium pricing at this development are among the highest in the city and start at $650,000 for a one bedroom. Opened May 2018.

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-The Odeon: $106 million mixed-use development with 12,000 square feet of ground floor retail space, 200 parking spaces and 271 upper floor apartments. Construction commenced in May 2018 with an anticipated opening in 2020.

The Jung Hotel

The Jung Hotel, located on the corner of Canal and LaSalle Streets, originally opened in 1907 and is listed on the National Register of Historic Places. The hotel sat vacant for years following flooding damage from Hurricane Katrina. A $140 million renovation was completed in Q1 2018 which brought the property back into commerce officially as the Jung Hotel & Residences.

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The property includes 171 hotel rooms and 113 one and two bedroom luxury apartments on the 8th through 19th floor including a top-floor penthouse. The renovated property also includes a 400 car parking garage, fitness center, spa, meeting space, ballroom, lobby bar and full service restaurant.

The project qualified for state and federal historic tax credits and received an RTA (restoration tax abatement) from the City of New Orleans, and is the first project in New Orleans to receive EB-5 funding. The McDonnel Group of Metairie served as the primary contractor for the development, which was designed by Trahan Architects. According to The McDonnel Group, over $700 million in new development has been generated within a two-block radius of The Jung Hotel since the project began in 2015.

WWII Museum Continued Expansion and Hotel

The National WWII Museum is in the midst of a $370 million expansion, with 16 projects on the drawing board and several currently under construction. When the expansion is complete, the six- building campus will expand over three and a half square blocks within the Warehouse District. According to the museum’s website, “Additional stages of the Museum's expansion plan include renovation of the original Louisiana Memorial Pavilion, construction of the Hall of Democracy pavilion for academic and outreach programs and additional exhibit space, and construction of the Liberation Pavilion, focused on end-of-war and postwar experiences. To unify the six-acre campus and create a formal entry to Museum grounds, exterior improvements will include a Founder's Plaza spanning Andrew Higgins Drive and the Bollinger Canopy of Peace, which will symbolize the hope and promise unleashed by the end of WWII hostilities.”

As of late 2016, $80 million in projects were in the planning and design stage. In addition to these expansion projects, the museum plans to build a 107-foot-tall hotel at 1000 Magazine Street for an estimated $41 million. The building will run the full length of the block and feature a ground-floor bar and restaurant, conference and meeting space, and 234 guest rooms.

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600-700 Block of Magazine

Developer Brian Gibbs and Reilly Foods have proposed a large mixed-use redevelopment, which will span two city blocks in the Warehouse District. The buildings will feature the existing municipal addresses 618 Magazine, 640 Magazine, and 700 Magazine. The development will include 90 residential units, 27,650 square feet of retail space, and 347 parking spaces. The project was originally proposed in January 2016 and approved by the CBD Historic District Landmarks Commission in April 2016. The development is currently under construction.

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Proposed Four Seasons Hotel and Private Residences at the Former World Trade Center

The newest addition to the Four Seasons Hotels and Resorts family is planned to be in the World Trade Center New Orleans building at 2 Canal Street. Formerly known as the International Trade Mart or ITM Building, it was constructed to a design by Edward Durell Stone and in its heyday was home to several foreign consulates as well as the headquarters for the Port of New Orleans. The building is a 33-story, 407 foot tall skyscraper that has been vacant since Hurricane Katrina hit New Orleans in 2005.

Four Seasons Hotels and Resorts operates 95 distinctly iconic five-star hotels and resorts in choice destinations around the world. Travel + Leisure and Zagat Survey rank Four Seasons at the very top of the list of luxury hotels worldwide. Carpenter Company and Woodward Interests have been selected as co-developers for the $450 million redevelopment project. The redevelopment plan includes a 395 room Four Seasons Hotel, 80 hotel serviced residential condos, a restaurant, an urban green space on top of two newly constructed buildings that will flank the current structure on either side, a public observation deck overlooking the river, and a New Orleans history and cultural attraction. After several years of lingering legal issues, the renovation commenced on May 1, 2018 and has a target opening in the fall of 2019.

According to publicized details of the lease agreement with the city, the terms will include a $1 million nonrefundable deposit at lease signing and a $4 million deposit in escrow that goes to the city once financing closes. Base rent of $100,000 per month will be paid during construction. Once the hotel opens, annual rent of $3.25 million will be paid for ten years, $3.75 million for the second ten years, then rent adjusts with inflation. Beginning in year 2, in addition to the base rent, 5% of gross revenues from the top floor cultural attraction will be due. In the 11th year and thereafter, 5% of gross revenues from all other revenue generators of the project will become due.

This development by a major luxury hotel chain serves as a significant sign of optimism in the downtown New Orleans market.

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1031 Canal Street – Proposed Hard Rock Hotel/Condominiums

1031 Canal Street is an 18-story mixed-use, ground up development currently under construction at the site of the former Woolworth building at the corner of Canal and Rampart Streets. Since Hurricane Katrina, the site saw several proposed projects which never came to fruition, although in 2014 the former improvements were demolished under one proposed plan. The current development will feature a 350-room Hard Rock Hotel, 62 residential condominiums, 400 parking spaces, and an upscale restaurant. Construction completion is anticipated to be in the spring of 2019.

The Outlet Collection at the Riverwalk

The Outlet Collection at the Riverwalk opened on May 22, 2014. The Hughes Corp. purchased the Riverwalk Marketplace out of bankruptcy in 2011 and started construction in 2013 to turn the center into an upscale outlet mall. The center is the nation’s first downtown outlet mall. Howard Hughes spent $70 million on the renovations, which added 50,000 square feet of space to the mall, bringing it to a total of 250,000 square feet. The layout of the shopping center has remained the same, but many of the store slots on the mall’s upper levels have widened to accommodate the demands of the national tenants coming in.

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Dave & Buster’s – 1200 Poydras Street

Construction of a large mixed use development containing a 40,000 square foot Dave and Busters at 1200 Poydras Street was completed in May 2017. In addition to the Dave & Busters, the development includes 18,000 square feet of retail and a 400-space parking garage, for a total of 264,000 square feet.

The Greater New Orleans Foundation – 919 St. Charles Avenue

The Greater New Orleans Foundation completed construction on the new Center for Philanthropy in 2017. The building is prominently located on St. Charles Avenue at Lee Circle. The center houses offices for GNOF as well as a restaurant and spaces for their community of donors, nonprofits and neighborhood leaders to meet and exchange ideas.

The New Orleans Advocate – 840 St. Charles Avenue

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The New Orleans Advocate announced in February 2014 that the newspaper intends to take over a 23,000-square-foot former car dealership turned dance hall at 840 St. Charles Avenue. The structure was erected in the early 1950s for Klein Motors, which sold cars made by the Kaiser- Frazer Corp. The building was remodeled in the 1970s and in its most recent use was Michaul’s, a dance hall and restaurant. The newspaper will move into about one-third of the mid-20th-century building’s 17,500 square foot first floor. The design also calls for a commercial kitchen and a coffee shop fronting St. Charles Avenue.

Downtown New Orleans features a diverse array of commercial development, many of which have historical significance. Within the subject’s immediate neighborhood, development is primarily a combination of residential condominium/apartment buildings, hospitality properties, multi-level office buildings, ground floor retail outlets, commercial establishments, along with some light industrial properties. Typical buildings within the Central Business and Warehouse district range from two-story to five-story structures, with many utilized as mixed use properties. There are also a handful of 40+ story, high rise buildings located in downtown New Orleans, namely the Entergy Centre, the Pan American Life Building, Place St. Charles, One Shell Square and Poydras Plaza.

The land use in the area is primarily commercial and the subject area’s density of commercial activity is reflective of a typical central business district. The juxtaposition of this neighborhood between the French Quarter and the Warehouse District has been a positive influence on the CBD in recent years. The Warehouse District and Central Business District is poised to see significant positive changes in the near future, some of which are already underway or completed.

A map showing several additional new developments in the Warehouse District is presented below:

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The New Orleans market has also experienced steady growth in the tourism section, as detailed in the charts below.

New Orleans broke its own record again in 2017, hosting 10.989 million visitors who spent $7.51 billion, according to the University of New Orleans' Hospitality Research Center. Those numbers beat out the records set in 2016 of 10.45 million visitors, who spent $7.05 billion. More than 80 percent of New Orleans visitors spent the night in 2017, with an average stay of 4.36 days. Furthermore, the HRC reports that more than 80 percent are leisure travelers.

This expansionary movement is fueled by a compilation of ingredients including the following:

 The pairing of New Market Tax Credit qualifying zip codes into sub-markets that can actually sustain new project development

 Still present federal dollars ear-marked for Katrina recovery

 An existing stock of historic property that could fuel years of Historic Tax Credit driven redevelopment

 A relatively healthy apartment sector and an expanding employment sector driven by an expanding and improving Charter school system, an accompanying influx of young adults to the City, and a continuously operating local film production industry to boot

 When all of the aforementioned trends are paired with the historic strength of a solid tourism base, international port, off-shore exploration, along with expanding health care and banking sectors, the result is a surprisingly healthy economy

The coupling of these “extra-market” incentives which fuel the redevelopment activities with the indicated trending of high income persons migrating into the area suggests the immediate outlook

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47 for these districts is healthy. One major event worth noting is that International tech firm DXC Technology announced plans in November 2017 to open a Digital Transformation Center in New Orleans. The new center is slated to bring about 2,000 jobs to the downtown area over the next five years and is heralded as “a victory we will celebrate for a long time to come,” according to Governor John Bell Edwards.

DXC Technology is a Virginia-based company with 155,000 employees in more than 70 countries that provides information technology and consulting services to over 6,000 businesses and governments. Formed in April 2017 from the merger of two longstanding tech companies, CSC and HP Enterprise Services, the firm has continued to grow and is the 110th largest company in the world. DXC reports strong earnings with a $265 million net income for the second quarter of 2017, and is valued at $27.33 billion. Analysts predict healthy future earnings forecasts.

The company opened its New Orleans office within the former Freeport McMoran building on Poydras Street in May 2018 and is on track to hire 300 people by the end of the year. The company estimates 2,000 jobs are expected to be in place by 2024 and that they will achieve a total payroll of over $130 million. As of the opening date, only one floor of the building was occupied, however the company plans to expand to 10 floors total. The average salary is expected to be $63,000 plus benefits initially and $73,000 as hiring continues. Jobs will include a mix of professional and tech positions such as project managers, software developer and engineers, consultants, administrators, and business analysts.

To secure the Digital Transformation Center deal, state and city officials worked with the company’s leadership for over a year and a half and ultimately offered a package of incentives estimated at about $120 million. The package includes various grants and some off-the-shelf incentives such as participating in the state’s FastStart job training and Quality Jobs Programs, which provides a cash rebate up to 6% of a company’s annual payroll for as long as a decade.

About $25 million is being targeted at local higher education through grants over five years for faculty, curriculum, and other instructional resources linked to DXC. Contingent upon job creation, the city is promising between $5 million and $10 million towards the incentive package. In all, the state and city incentives coupled with commitments from higher education institutions to create a talent pipeline, helped New Orleans beat out cities in 30 other states vying to partner with DXC.

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During a press conference announcing the Digital Transformation Center, Governor Edwards cited estimates from the LSU Economics & Policy Research Group, stating that “between 2018 and 2025, this project will generate more than $64 million in Louisiana taxes, over $868 million in new household earnings, and a total economic output during those years of more than $3.2 billion.” Louisiana Economic Development (LED) estimates another 2,257 indirect jobs will be created for a total of more than 4,250 jobs as a result of the project.

With the opening of New Orleans’s Tricentennial celebrations just days before DXC’s announcement, officials predicted that the Tricentennial year will be a turning point for the city. As of 2015 census estimates, the median household income was $36,792 in New Orleans and $49,948 in Orleans Parish. This influx of high wage jobs is a major economic development announcement for a sluggish regional economy with high inequality and limited opportunity.

Currently, tech employment in the New Orleans metro area stands around 16,500 workers, and DXC’s presence in the Crescent City will mark a 12% increase. DXC will join national companies like GE Digital and Gamestop as well as several smaller local startups in building an increasingly competitive knowledge-based economy. The former Mayor Mitch Landrieu noted that DXC’s presence will attract more tech firms to the Crescent City as it develops a reputation as a viable, low-cost, high culture alternative to other metro areas.

DXC’s effect on the local economy will be visible immediately as the company is expected to lease approximately 300,000 square feet of office space in the CBD within the. A prolonged downturn in the energy industry has taken a toll on the New Orleans office market over the past few years. Class A offices have generally maintained occupancy levels while other office properties have struggled, particularly as some energy-related companies downsize or relocate to Houston and other market. In addition, transforming traditional office space into hotels, shared work environments, or condos has emerged as a popular trend that is offsetting strains in the CBD market. A new large-scale tenant will further bolster the CBD’s office occupancy levels as DXC builds its presence in New Orleans.

Many market participants have noted an overdue reset in New Orleans’ residential market as housing prices have increased for eight straight years while household incomes have remained stagnant. Though some DXC employees will have to relocate, the firm has committed to hiring locals based on specialized training programs in state higher educational institutions. The immediate impact of DXC’s expansion on the residential market is predicted to be slight; however, the forecasted growth of wages and job opportunities bodes well for long term levels of demand.

After decades of underperformance in job growth and economic diversification, New Orleans should see DXC’s commitment to the city as a major win. Recent predictions have cited the end of the post-Katrina boom and a return to a sluggish local economy. DXC’s Digital Transformation Center will create job opportunities and diversify the local and regional economy, potentially attracting more tech-related firms to the area. Quality jobs, growing incomes, and better opportunities will hopefully be a game changer for New Orleans.

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As previously mentioned, the subject is technically situated within the Lower Garden District neighborhood of New Orleans, one of the oldest pockets of development in the city. The following map outlines the boundaries of this neighborhood, which is adjacent to the Warehouse District and CBD.

This neighborhood is closer to downtown and is generally a slightly inferior location relative to the neighboring Garden District, which is arguably the most or second most affluent area in the City of New Orleans with numerous homes and structures listed on the National Register of Historic Places. The Lower Garden District features a wealth of 19th Century architecture. The area remains a mixture of residences and small commercial properties primarily intended to support the residential and population bases of the neighborhood. St. Charles Avenue, Prytania Avenue, and Magazine Street are the primary commercial / retail corridors in this area. These streets run parallel with one another leading from the Uptown neighborhood into the CBD. More specifically speaking, the subject property is located along Prytania Street, one of the most desirable addresses in New Orleans. Prytania runs for over five miles from the Lee Circle/Westbank Expressway overpass all the way to Audubon Park.

Over the past 10+ years, there have been several multi-family housing developments in the Lower Garden District which have kick started and fueled an ongoing revitalization process. This includes the River Garden Apartments with over 500 mixed income buildings as well as a four-story residential building with 25,094 square feet of retail space on the first floor situated on the site of the former St. Thomas Housing Development.

The site also features the River Garden Elderly Apartments, which is a four story, 49,970 square foot elderly home that was completed in December 2007. Additionally, five of the remaining buildings from the former St. Thomas Housing Development were renovated into affordable apartments. The completion some years ago of the Super Wal‐Mart on Tchoupitoulas Street is a very notable response to the closing of the St. Thomas Housing project.

The Saulet Apartments is the final large-scale multi-family building of note. This is an approximately 700‐unit luxury apartment community that stretches over four city blocks. The development was originally built in 2001 and was renovated and reopened in 2008 after extensive damage due to Hurricane Katrina.

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Also in the subject’s immediate market area is the Second Line Stages building, located at 800 Richard Street. This is a $32 million development, which included the renovation of a historic warehouse using both historic and new market tax credits, and construction of a new, state‐of‐the art LEED Certified Building. The complex was completed in 2010 and contains a total of 220,000 square feet, including sound stages, warehouses, office space, dressing and make‐up rooms, and even a screening theatre. The company expanded into an additional two‐story, 36,000 square foot building located two blocks from headquarters at 1523 Constance Street. The renovated building features a mix of second‐floor office space, as well as first‐floor parking and support space. The second floor houses temporary tenants working on film productions as well as New Orleans‐based production companies on long‐term leases. These projects represent significant developments in both the immediate neighborhood and for the New Orleans film industry, which has a solid presence in the Lower Garden District.

Magazine Street is the most marketable commercial corridor in the subject’s immediate area and always features new restaurants, retail buildings, etc. A recent major renovation along this corridor is the banquet hall called Il Mercato located at 1911 Magazine Street. This 12,100‐squarefoot building bounded by Magazine, Camp and St. Mary Streets, is on the site of what was once the Magazine Street Market, which dates back to the 1850s and features Spanish style architecture.

The building was purchased for $2,000,000 in October 2013 and the owner reportedly spent about $750,000 on restoration and new construction, which included new electrical, mechanical, and HVAC systems. Additionally, the building’s Spanish‐style architectural features will be restored to the original look and the building’s small parking lot will be used as an outdoor courtyard lined with stucco walls and wood and iron gates for weddings, parties, corporate events, etc. An image of this development is presented below.

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Also, located several blocks from the subject is a recently completed mixed-use development situated on a 26,482 square foot vacant corner lot located at 1581 Magazine Street, arguably one of the last remaining development tracts in the neighborhood and along the Magazine Street corridor. The ground floor of the structure contains 3,326 square feet of retail space – of which roughly 950 square feet is still available for lease. The ground floor retail has three tenants – Mariposa Spa, Cherry Espresso Bar and Paint’d. All tenants pay roughly $35.00 per square foot on NNN terms for the space. There is also paved parking to accommodate 48 cars with 24 spaces being outdoor covered parking and the remaining 24 spaces being situated on a rear surface lot.

The improvements also include three levels of upper floor apartment space with 36,471 square feet of rentable area carved into 36 apartment units. The apartments are a mixture of 1 BR / 1 BA and 2 BR / 2 BA units. Additionally, the building contains 8,842 square feet of residential common area and 926 square feet of building services area. The third floor also features a roof deck and some of the interior amenities throughout the building include a lobby, a fitness center and elevator service. A photo of this completed project, as seen from the subject site, is presented below:

Mr. Joe Jaeger recently acquired the Market Street power plant, located directly behind the subject property. This power plant has been shut down for several years, and was purchased by a group of investors from Entergy in 2007 who envisioned a $2.2 billion retail, residential, and entertainment center for the property.

Mr. Jaeger was one of the major investors in the project, and later provided additional financing, though nothing ever moved forward and he eventually moved to foreclose on the property. While there are no announced plans at present for this major property in the immediate vicinity of the subject. It does appear that it will likely be incorporated at some point into what materializes with the Trade District.

Mr. Jaeger and Barry Kern recently entered into a purchase agreement to acquire the 105,000 square foot warehouse at 601 Market Street, about 5 – 10 blocks northwest of the subject. It is anticipated that Mr. Kern will use the property in conjunction with his nearby Mardi Gras World development for the next few years, but given the parties involved, eventually redevelopment to a more intensive use is highly likely. While more exact details are not available about this deal which has yet to close, it still represents the increased interest and demand in the subject’s immediate

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52 neighborhood, which is one of the last areas in the urban core with any relevant amount of vacant land and vacant properties suitable for development or redevelopment.

Overall, the Lower Garden District neighborhood has experienced significant revitalization over the past 10 to 15 years starting with the development of River Gardens and the anchor Wal-Mart. New development and redevelopment is still occurring at a rapid pace, and what will perhaps be the single-largest mixed-use development in the city is proposed just a few blocks away. These large- scale projects are in addition to various renovations and re-purposed uses of small scale buildings along Magazine Street. Overall, the short-term and long-term outlook for this area is good.

Also worth noting are two luxury apartment renovation projects located along Howard Avenue and as well as The Quisby Hostel, located at 1225 St. Charles Avenue in the former Audubon Hotel, which have opened in recent years. These three projects were all driven by the procurement of historic tax credits and are located very proximate to the subject property. The two apartment buildings are located just north of Interstate 10 while the hostel is one block north of the subject on the other side of St. Charles Avenue. The following images show the redeveloped Quisby Hostel which opened in January 2017.

One of the subject’s most attractive elements is the fact that it encompasses a full city block in the heart of the Lower Garden District several blocks from the foot of the convention center which is poised for a major expansion in the coming years.

Convention Center and Potential Development for Subject Site: Plans for the Ernest N. Morial Convention Center’s renovation and expansion continue to be mired in controversy as watchdog group’s question the developer’s request for tax breaks for development of an Omni-branded hotel. The most recent plan envisions a five-year, $557 million renovation and expansion that will create a Convention Center Development District. Officials have recently divided up the project by separating the hotel from the other elements in an effort to keep the plans from getting bogged down. Imagery of the 47-acre site and the subject site as it relates to the proposed site (demarked by a yellow star) are presented below.

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Development of the Convention Center District will bring one of the largest swaths of unused land in the New Orleans market back to commerce and transform Convention Center Boulevard into a pedestrian-friendly street that will connect the Warehouse District and French Quarter. As of summer 2018, the Convention Center Development district project included a $79 million 7.5-acre pedestrian park, a 1,200-room Omni Hotel, and $379 million in renovations to existing

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54 improvements. The latter will include technological and meeting space updates to make the center competitive with more modern facilities nationwide.

The development team includes local businessmen Darryl Berger and Joe Jaeger as well as a Texas- based finance company and a Texas-based real estate company. Developers are seeking $41 million in up-front cash, a 50-year land lease from the Convention Center with four 10-year extensions, a 40-year property tax freeze, and a complete rebate to the hotel of a 10% occupancy tax and a 4% sales tax on other hotel revenue. Officials initially aimed to commence construction by the end of 2018, but plans have been delayed over questions of the necessity and of these incentives.

Much of the controversy involves the Omni-branded hotel, which will site on an 8.1-acre site and consist of at least 150,000 square feet of ballroom and meeting space. Fiscal watchdogs have scrutinized the Convention Center’s spending plans, particularly whether it is wise for the Convention Center to be investing tens of millions in tax dollars when the city has billions of dollars in infrastructure needs.

A convention-commissioned feasibility study performed by HVS Convection, Sports and Entertainment Facilities Consulting was released later in August highlighted the positive impact of the hotel and entertainment complex. The study forecasted that the hotel would generate $282 million annually for the city and create 1,900 permanent jobs. HVS also predicted that the new hotel would propel demand for another 172,000 hotel rooms per night and help the convention center recapture at least 19 of the 275 events it lost over the last two years. If this study successfully sways officials to approve the proposed plans, convention center officials hope to break ground in early 2019 and have the hotel rooms in market by the 2024 Super Bowl.

On the following pages, we present a pocket analysis of the subject’s market area with regard to demographics, income statistics and other pertinent data within the Warehouse District and CBD neighborhood. The demographic data contained on the following pages is shown as excerpted from a report generated using the Site to do Business (www.STDBonline.com).

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Executive Summary

900 Convention Center Blvd, New Orleans, Louisiana, Prepared by Esri Drive Time: 5, 10, 15 minute radii Latitude: 29.94296 Longitude: -90.06447 5 minutes 10 minutes 15 minutes P opula tion 2000 Population 2,759 63,514 320,897 2010 Population 3,542 44,578 247,033 2018 Population 4,013 50,767 273,929 2023 Population 4,255 53,059 283,525 2000- 2010 Annual Rate 2.53% - 3.48% - 2.58% 2010- 2018 Annual Rate 1.52% 1.59% 1.26% 2018- 2023 Annual Rate 1.18% 0.89% 0.69% 2018 Male Population 56.3% 52.5% 49.2% 2018 Female Population 43.7% 47.5% 50.8% 2018 Median Age 35.1 35.3 37.0

In the identified area, the current year population is 273,929. In 2010, the Census count in the area was 247,033. The rate of change since 2010 was 1.26% annually. The five- year projection for the population in the area is 283,525 representing a change of 0.69% annually from 2018 to 2023. Currently, the population is 49.2% male and 50.8% female.

Me dia n Age The median age in this area is 35.1, compared to U.S. median age of 38.3. Race and Ethnicity 2018 White Alone 72.9% 36.5% 43.7% 2018 Black Alone 18.8% 56.2% 48.5% 2018 American Indian/Alaska Native Alone 0.3% 0.4% 0.3% 2018 Asian Alone 3.7% 2.1% 1.8% 2018 Pacific Islander Alone 0.0% 0.1% 0.1% 2018 Other Race 1.9% 2.5% 3.3% 2018 Two or More Races 2.4% 2.3% 2.3% 2018 Hispanic Origin (Any Race) 8.0% 7.5% 9.1%

Persons of Hispanic origin represent 9.1% of the population in the identified area compared to 18.3% of the U.S. population. Persons of Hispanic Origin may be of any race. The Diversity Index, which measures the probability that two people from the same area will be from different race/ethnic groups, is 64.4 in the identified area, compared to 64.3 for the U.S. as a whole. House holds 2000 Households 1,538 23,700 130,907 2010 Households 2,272 19,645 106,774 2018 Total Households 2,592 23,064 119,766 2023 Total Households 2,761 24,361 124,496 2000- 2010 Annual Rate 3.98% - 1.86% - 2.02% 2010- 2018 Annual Rate 1.61% 1.96% 1.40% 2018- 2023 Annual Rate 1.27% 1.10% 0.78% 2018 Average Household Size 1.46 1.95 2.20

The household count in this area has changed from 106,774 in 2010 to 119,766 in the current year, a change of 1.40% annually. The five- year projection of households is 124,496, a change of 0.78% annually from the current year total. Average household size is currently 2.20, compared to 2.22 in the year 2010. The number of families in the current year is 57,023 in the specified area.

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Property Productivity: As will be seen within the Land/Site Valuation, in light of the clear evidence to support the conclusion that market adjustments are necessary to a number of the comparable sales, we will apply adjustments to some of the older comparable sales based on a tempered application of 10 to 15%, depending on the date of sale. Clearly, this major increase in pricing will not be the case for every property in this immediate market and we cannot expect a similar level of growth to occur over the next few years, but the indicators are nonetheless very noteworthy in this analysis.

The three most marketable portions of the subject site are: The Hotel Site, the Phase 1 Site and the “Other” Site, while the Phase 2 Site and the “Existing to Remain” Site are not as appealing. The specific location of the Hotel Site adjacent to the convention center, as well as in immediate proximity to the Mississippi River makes that site truly shine as the most marketable. On the other end of the spectrum is the “Existing to Remain” Site as that parcel is located the furthest from the river and convention center and it is also situated immediately adjacent to the interstate/bridge which could deter developers from an aggressive vertical construction plan. In terms of ranking the properties from a marketability standpoint, the following numbers apply:

Hotel Site: Rank 1 “Other” Site: Rank 2 Phase 1: Rank 3 Phase 2: Rank 4 “Existing” Site: Rank 5

For purposes of analyzing supply and demand for various improved property types, we have analyzed the current rental market for similar properties. In doing so, data for retail and apartments is presented herein. CoStar’s 3rd Quarter 2018 report for retail space for the New Orleans/Metairie/Kenner office market indicates the data on the following page.

In addition to that data, it is worth noting that recent major retail changes to properties like the Riverwalk serve as an example of the strong demand for retail space, especially in the immediate area of the subject property. Other high-end retail properties like Canal Place present additional support for strong demand figures for retail in the downtown market.

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New Orleans Metro Area Apartment Trends: As previously outlined, at the national level many view rental properties as more affordable than home ownership. The following table obtained from the Site To Do Business (stdb.com) shows recent housing trending in Orleans Parish.

The above table shows that housing units in Orleans Parish are increasingly renter occupied as rental units increased by over 15,000 from 2010 – 2017. This trend is anticipated to continue with an additional 7,000+ units forecast to be renter occupied by 2022. Worth noting is that from 2010 – 2017, owner occupied housing units remained generally stagnant increasing by approximately 700 units and decreasing from 35.8% to 32.00% share of housing.

The following data is obtained from a 3rd Quarter 2017 (the most recent data from this publication) MPF Market Research report and shows the historical occupancy rate for the broad metro market.

Overall, occupancy has remained strong while total supply has been increasing consistently with over 4,000 total new units in a 5-year period.

The New Orleans market is also seeing a growing trend for owners to operate multi-family units as short term rental properties. This is a much more widespread a practice in the downtown market given that this area is a tourist heavy neighborhood. Many multi-family property owners in this neighborhood either operate units as short term rentals or lease units to third party operators while other developers and owners are leasing entire floor or buildings out to operators under master lease agreements. These properties would have likely been developed as multi-family units in years past.

That said, this trend for multi-family units operating as short term rentals is not as widespread a practice outside the downtown market. While there are exceptions, most medium to large scale multi-family complexes outside the downtown market will likely continue to operate as traditional multi-family properties.

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Investors continue to be interested in developing more multi-family units in the city. Several notable and recent multi-family projects in New Orleans include a $106 million, 29-story luxury apartment tower, called the Odeon, announced in March 2018. The Odeon is the next phase of the South Market District development in downtown New Orleans and will include 271 residential units, 12,000 square feet of ground floor retail space, three floors of off-street parking and amenities such as a pool and fitness center. Clearly some investors in the upper end level of multi- family product still have a strong outlook for the future of the New Orleans market.

Also worth noting is a 187 unit mixed use property proposed for development on Algiers Point. This plan originally included 354 units when it was presented to the city planning commission in February 2018, however since has been scaled down due to 187. This is a secondary location on the Westbank of the Mississippi River in Orleans Parish. This location is atypical for a large-scale multi-family development and certainly indicates that some investors still view the market as underserved. This also highlights fewer and fewer sites available which can accommodate these kinds of projects in more marketable areas of the city.

Construction on an approximately $35 million, 208 unit mixed use development located in the 1300 block of Annunciation Street in the Lower Garden District is also underway. This project is being developed by the same subject property developers. The project, like the subject, has received a tax break in the form of a PILOT program. The project will include 10 rent-restricted units and the developers said they envision this as a workforce housing project targeting renters in the 80% - 120% of the area’s median income range. This somewhat bucks the trend as most new developments we are aware of are developed and marketed as luxury units.

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One final major apartment development currently under construction which we are aware of is the Parkway Apartments. This mixed use development will feature 207 residential units, 13,766 square feet of retail space and 313 space parking garage. This will be one of the largest developments in Gert Town, which is adjacent to Mid-City, and is anticipated to be ready for occupancy in the spring of 2019. A representative of the developer noted they have not set any price points or begun marketing units in this development.

During this study, we have surveyed many large-scale multi-family developments and will discuss these properties in the forthcoming supply and demand analysis as well as the Income Approach. Most of the property managers noted that rental rates have remained generally consistent or have decreased slightly to maintain strong occupancy. Only one property we surveyed, The American Can, reported a major drop in occupancy, however this property appears to be maintaining rental rates on par with what historically the property has garnered.

Most high quality multi-family developments have been reporting very strong occupancy rates and many have seen consistently increasing rents in recent years. The comments of the various property managers indicate that the market has likely begun to respond to the large volume of units delivered in recent years or about to come to market in the next year or so.

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We also consulted the most recent REIS Apartment survey from Q3 2018 for the metro New Orleans market. This report provides an overview of the entire New Orleans market compared to the Southeastern US and United States as a whole:

We have also conducted our own research of several significant recent developments and in doing so, we have found that occupancy figures around New Orleans for attractive apartment units are currently close to capacity.

Address Name Unit Count Occupancy 611 O'Keefe The Paramount 209 97% 1000 Girod The Beacon 124 98% 800 Common The Maritime 105 95% 234 Loyola The Pythian 69 86% 1111 Tulane The California 167 75% 837 Gravier Gravier Place 232 99% 909 Gravier The Strand 192 100% 812 Gravier Hibernia Tower 175 90% 927 Poeyfarre Nine 27 Apartments 76 100% 344 St. Joseph Woodward Lofts 192 99%

Based on these figures and the number of additional residential apartment developments that are in the works, the demand for upscale apartments appear to exceed the existing inventory for such units. That being said, there is the potential for softening in market conditions on the horizon as inventory continues to grow. This is a natural cyclical component of the multi-family sector and really all forms of real estate.

A recent trend in the New Orleans metro area has been the utilization of multi-family product for short term rental uses as this typically generated the maximum revenue for this property type. Recently, legislation has been discussed, which would limit or in some cases ban short term rental use in certain neighborhoods. This would be viewed as an opportunity for the lodging industry, as they would likely be able to capture the existing demand that is currently penetrated or capture by short term rental properties.

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Retail Trends: With respect to the Retail sector our survey of the market indicates that occupancy rates have remained strong in recent years with rental rates continuing to increase. Below is a recent survey of the retail market as provided by Costar in the 3rd Quarter of 2018:

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The reality of the situation with respect to supply and demand factors pertaining to hotel, retail and residential space in the immediate CBD and Warehouse District market is that demand currently outweighs supply, especially from a rental point of view. This decreases the risk associated with a development property from an investment perspective.

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NEW ORLEANS METRO HOTEL MARKET

New Orleans has always been considered a top destination for its historic charm and vibrant music scene, but there has been a noteworthy boom in the tourism industry over the last decade. Since 2009, New Orleans has witnessed a steady rise in both visitors and visitor spending, with each consecutive year outperforming the last. There are numerous factors, particularly the construction of new hotels, contributing to these positive results In addition to the hotel boom, the unveiling of the new airport terminal scheduled to debut in early 2019, and the run of major sporting and music events have also influenced the thriving market. Despite the recent decline in film production and the oil industry, which have historically helped the tourism economy, the industry is soaring with record numbers.

The graph featured below illustrates the growing trend in the tourism industry, focusing on the annual number of visitors and visitor spending from 2004-2016. Each year shows record numbers while maintaining the upward trend. Although the data from 2017 is not shown, neworleans.com reported that both tourism visitation and visitor spending broke records last year.

Even though the most recent expansions, such as the University Medical Center and the VA in Mid- City, are taking place outside the city’s Central Business District, there are major upcoming projects expected to unveil in the CBD. Along with the growing tourism industry, there is a notable expansion in the development of luxury hotels, which reflects the demand for upscale establishments when traveling. In the next two years, around 1,400 available rooms are expected in the city’s French Quarter, CBD and Warehouse District.

Evidently, New Orleans’s hotel industry is evolving to match the demands of tourists. The expansions of the convention center and the new airport terminal will provide the potential for more growth. According to the HVS Hotel Market Performance, “Upscale hotels, particularly those that are lifestyle-oriented, are expected to dominate the new supply pipeline in the CBD and French Quarter submarkets over the next five years.”

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In 2014, the first AC Hotel by Marriot in North America debuted in the city’s French Quarter, adding 220 rooms to the supply. This was one of the first upscale hotels that entered the market, setting the trend for future developments. In 2017, four new hotels became available in the Central New Orleans market—three opened in the CBD and one in Uptown. In 2018, the number of proposed hotels more than doubled from the previous year. Additionally, there are a handful of proposed projects for 2019, including the Ernest N. Morial Convention Center Headquarters Hotel, the Harrah’s Expansion, and the Hard Rock Hotel, only a few of the projects expected to result in a 9.3% increase in rooms by the end of the year. This increase of available rooms will meet the upward demand of the tourism industry in New Orleans.

Below is a chart illustrating the room supply increases since 2014 and the proposed projects through 2019.Many feared the effects of short term rental properties on the hotel industry. Unlike hotels, AirBnB offers last-minute cancelations, and shorter booking windows.

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With the addition of these luxury hotels, however, travelers would not be as likely to choose AirBnB according to HVS. Although AirBnB offers a certain level of convenience, tourists are attracted to these lifestyle-oriented hotels located in the CBD and French Quarter.

Furthermore, tensions between AirBnB and the City of New Orleans have grown substantially over the past year. In the past, many citizens cited short term rentals as the cause of the rising housing costs in New Orleans and pushed for city restrictions on companies like AirBnB.

In June, AirBnB decided to remove New Orleans’s pass-through registration system, an important feature used by city inspectors to identify properties violating city regulations, from their website. The license number, which used to be shown with the individual listings, has been removed from the website. Without the pass-through registration system, it is more difficult for authorities to locate the illegal rentals, and therefore putting innocent hosts at risk to enforcement penalties by the city.

Overall, the growing tourism economy is a direct correlation to the rising hotel industry in Central New Orleans, with emphasis on the CBD and French Quarter submarkets. Although the demand is outpacing the supply, the proposed hotel developments of 2019 will only promote future growth of the tourism industry, ensuring a strong overall economy in New Orleans.

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Primary Competitive Market HVS is one of the leading suppliers of data on hotel markets. They collect occupancy and room rate data on a large number of hotels in the US and are one of the leading source of information relative to trends in these areas. They track and report statistics for markets/submarkets as well as by chain scale. Below are several statistics regarding the hotel market in New Orleans:

We do note that this is the market average and in reality, the subject property would compete towards the higher end of the range. Below is a survey of directly competitive hotels and their corresponding REVAR figures.

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Opportunity Zones Note: Recent legislation has passed, which designates certain areas as being “Opportunity Zones”. This legislation aims to boost private interments in low-income areas. A total of 150 low-income census tract areas were nominated within the State of Louisiana. The Opportunity Zones program was enacted as a part of the Tax Cuts and Jobs Act of 2017 under President Donald J. Trump. Eligible tracts were required to have poverty rates of at least 20%, or those with median family incomes of no more than 80% of statewide or metro area family income.

The primary attraction for investing in Opportunity Zones is deferring and lowering federal taxes on capital gains. For a qualified Opportunity Zones investment, capital gains taxes may be deferred the first five years; after Year 5, taxes may be cancelled on 10 percent of the original capital gains investment and deferred for the remainder; in Year 7 through Year 10, taxes may be cancelled on 15 percent of the original capital gains investment, and the remainder may be deferred through 2026; for Opportunity Zones investments lasting longer than 10 years, investors are exempt from capital gains taxes on the Opportunity Zones investment itself, in addition to the other benefits for capital gains carried into the investment.

The goal is to couple private dollars with existing programs, such as New Market Tax Credits, Enterprise Zones and Low Income Housing Credits, because the law allows for benefits to be stacked on top of each other.

Michael Kressig, a partner with Novogradac & Co., of St. Louis, who specializes in community development and affordable housing, said the aim is to get passive capital back into the economy. Kressig said there are more than $6 trillion in unrealized capital gains from the stock market alone.

The Treasury Department last week proposed long-awaited guidelines that give investors enough certainty to begin the process. Billions of dollars have started piling into new real-estate funds targeting opportunity zones. Now that the government has clarified the rules, these fund managers are poised to begin collecting money and investing.

But even before Treasury’s announcement, sales activity had already picked up in opportunity zones throughout the country. Eager investors studied maps and bought property, anticipating that prices would rise when the new funds put the money to work. Sales of development sites in opportunity zones nationwide have spiked 80% in the first three quarters of 2018, compared with the same period last year, according to data firm Real Capital Analytics. Meanwhile, owners have marked up asking prices for land or properties in some zones by more than 50%, market participants say.

“The enormity of capital the opportunity funds could channel into these limited and defined geographic areas could really be profound,” said Robert White Jr., the founder of data provider Real Capital, in an email. “It is like 1031 on steroids,” he said, referring to the 1031 tax break, which until now has been one of the most popular among commercial-property investors.

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As it pertains to the subject property, it happens to be located in an Opportunity Zone – as shown by the map below:

This is clearly a very marketable trait regarding the subject property; however, we have yet to see any signficant premium paid for vacant tracts of land located in Opportunity Zones. Neverthelss, this has been considered in our value conclusion for the subject tracts of land.

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Conclusion: Based on the above discussion and data, the inferences that can be drawn are as follows:

- The CBD and Warehouse District in general have experienced significant growth of the past few years, which adds significantly to the appeal of the subject property.

- The subject is located in a marketable pocket adjacent to the convention center, which is a key factor that allows for a variety of development possibilities from a wide range of local, regional and national investors.

- Sites such as the subject are in high demand currently and there is essentially no supply of like-kind parcels, not only locally, but also within the entire region or perhaps even the country.

- The owners of the subject are in a very favorable position from a market value perspective. This is especially the case for all sites that are well suited for mixed use/apartment or hotel development as the statistics continue to trend towards increased downtown living, and strong tourism.

- Subject capture is forecasted between $60 per square foot and $115 per square foot of site area.

- The most likely market participant who would be interested in a property such as the subject property would be an extremely well-capitalized investor with experience in hotel and mixed use development projects.

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HIGHEST AND BEST USE The most recent interpretation of this concept which defines value in use in real estate defines the highest and best use of a property according to The Appraisal of Real Estate, The Fourteenth Edition, Page 332, as "the reasonably probable use of property that results in the highest value.” The Fourteenth Edition goes on to say “to be reasonably probable, a use must meet certain conditions:  The use must be physically possible (or it is reasonably probable to render it so).  The use must be legally permissible (or it is reasonably probable to render it so).  The use must be financially feasible.

Uses that meet the three criteria of reasonably probable uses are tested for economic productivity, and the reasonably probable use with the highest value is the highest and best use.” The level of analysis under the Highest and Best Use for the subject site is a level “Level C” analysis.

As Vacant: When determining the highest and best use of the subject property, four factors must be tested, they are as follows:

Legal Permissibility: the first consideration relative to determination of the highest and best use "as vacant" is to determine whether or not a proposed use would be allowed under the zoning designation in which the subject property is situated. The subject property is zoned MU-2, High Intensity Mixed-Use District. At the onset on this assignment the client indicated that we should assume zoning and entitlements are not a barrier to development.

Physical Possibility: the next consideration relative to determination of the highest and best use "as vacant" is determine whether or not a proposed use would be physically possible relative to the shape and size of the subject site. The subject property contains 49.6 acres. It can potentially accommodate a variety of large scale development projects. In fact this is the largest contiguous development tract in principal New Orleans market.

Physical site factors suitable for a horizontal and/or vertical mixed-use development on a single parcel of land containing residential, retail, hotel, office, etc. include the following.

 Appropriate site size and shape to hold all the elements of the development.  Easy ingress/egress to/from the site and its parking area.  Convenient pedestrian flow among the uses.  Easy access and connectivity to adjacent and proximate land users.  High visibility of the project, also visible and attractive signage.  Attractive characteristics internal to the project, attractive streetscapes.  Proper topography, flat acreage is preferred.  Vehicle circulation that is unobtrusive for both drivers and pedestrians.  Storm water drainage capability.

The subject property meets each of the attributes of the points addressed above. These characteristics add to the subject’s marketability as a large scale development site.

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Financial Feasibility and Maximum Productivity: this consideration is integral in determining the proposed use of a vacant site. This test determines whether or not construction costs and land acquisition are justified by the anticipated cash flows associated with a proposed subject property.

In a subsequent section of this appraisal report we provide a detailed analysis of project feasibility of the proposed subject hotel, this includes a full discussion of the anticipated supply and demand of that project. The only qualification to this assignment is to consider the development of a headquarters hotel with a minimum of 1,000 keys.

Financial feasibility defines the situation when the return on the investment in a mixed-use development meets or exceeds the expected or the required return of the developer and/or the investor in the project. An alternative but less precise expression is the financial success of the project.

The topic of risk in mixed-use development does not have a definitive answer. Some developers believe that the added financial and physical complexity of a mixed-use development amplifies the uncertainty associated with the project and thereby increases risk. Other developers believe that a mixed-use project spreads risk across the uses. In fact, both of these situations can arise for a specific project. Using financial feasibility in a retrospective view, a comparison between the expected pro forma and the actual performance of the property is the best measurement of financial success.

Factors leading to the financial success of a mixed-use development can be collected in the following categories: Economic and Market, Financial, Physical, Design and Public Issues

1) Economic and Market- Each use on the site must entice a substantial level of market demand on its own. This is often stated as attracting an adequate demand in the market for each use on the site. The uses need to be compatible and complementary. They need to be mutually supportive, and they need to achieve synergy among themselves. If this synergy is achieved, it increases both the investment value and the market value of the project.

Generating and maintaining strong linkages to other land users external to the mixed-use development are also important market factors. For example, on-site restaurants also need to serve customers living or working in close proximity to the project. Retail establishments should also be able to do the same.

Competition with external projects needs to be considered. For example, building retail space near a highly successful super-regional mall surrounded by power centers, community centers and a lifestyle center may lead to high retail space vacancy when the office and residential components are successful. Similarly, building hotel space on the same site could be a problem if the existing economic node has excess hotel space.

Market analysis is important in determining the demand and supply positions of each use. It should be used in the same manner as it is used to analyze a single use project.

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As was thoroughly demonstrated within the Market Area Analysis, the reality of the situation with respect to supply and demand factors pertaining to hotel, retail and residential space in the immediate CBD and Warehouse District market is that demand outweighs supply, especially from a rental point of view. This decreases the risk associated with a development property from an investment perspective and allows for a variety of hotel, retail and residential applications within the overall site plan.

2) Financial – These issues can make it more difficult to finance the mixed-use development than a single use project of equal or equivalent size. Some noteworthy characteristics are discussed as follows.

 Equity requirements can be substantially higher for the mixed-use project than for a single use development of equal size.  The mixed-use development requires a longer development period with phasing over longer periods. This makes it more difficult to finance a mixed use development than a single use development of equal size given the uncertainty of the cyclical nature of economic cycles within which a large scale development may have to endure the entirely of a cycle or have its development time frame extended from one cycle into another.  Larger capital requirements limit the number of potential development firms and financial institutions that have the resources to undertake a mixed-use project.  Additional complexity occurs as each use is underwritten separately.  Financial entities often focus on specific single use property types, viewing mixed-use development as too complex and complicated. Investors providing initial equity understand mixed-use development as an investment opportunity and perceive it as a higher risk investment.  More money in the capital markets for real estate is causing developers to take on mixed- use projects in the wrong location, with wrong structure, without the proper understanding of the market.  Initial planning costs are much larger for the mixed-use development.  Sites for mixed-use development require the ability to serve different property markets so the land costs are generally higher.  Construction costs for a single structure mixed-use development are generally higher.

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PROJECT ASSESSMENT OF SUBJECT HOTEL SITE

Capital investment decisions that involve real estate development are often among the most important decisions undertaken by a business or public entity. These decisions typically involve the commitment of large sums of money that will affect the investor/developer over a number of years. Additionally, the capital outlay to develop must be paid out immediately, whereas the income or benefits accrue over time.

Because the benefits are based on future events and the ability to foresee the future is inadequate, we must make a considerable effort to evaluate the investment as thoroughly as possible and the most important task of development analysis is gathering the appropriate data.

Various techniques can be used to evaluate real estate investments, including the payback period and internal rate of return, the most commonly accepted technique is net present value, otherwise known as “discounted cash flow.” Using concept of the time value of money, we can determine the net present value (NPV) for a development option as the sum of the annual cash flows discounted for any delay in receiving them, minus the investment outlay, construction costs.

There are five steps to complete this net present value analysis procedure:

 1. Calculate the value of the cash outlay required (construction cost).  2. Calculate the benefits or annual net cash flow for each year from the investment over the holding period.  3. Choose an appropriate discount rate to reflect the time value of money.  4. Calculate the present value of the annual net cash flows, including the revision at the end of the holding period.  5. Compute the net present value.

In this section we address the financial feasibility of the hotel development with the premise that this will be a 1,200 room convention oriented hotel.

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COST ANALYSIS-PROPOSED HOTEL

In the course of this assignment we have not been provided with detailed building plans or a development budget.

Without a detailed development budget for the proposed subject, we rely solely on the construction cost reports of similar convention hotels as our basis for the determination of the likely project cost of the subject hotel component. We have identified and summarized below the pertinent details of eleven similar convention center oriented hotel development projects that are either ongoing or recently completed.

Project Project Total Cost Municipality Franchise Completion Rooms Floors Cost per Room Nashville, TN Omni 2013 800 21 $250,000,000 $312,500 Washington, DC Marriott Marquis 2014 1,175 18 $520,000,000 $442,553 Spokane, WA Marriott Autograph 2015 721 15 $135,000,000 $187,240 Austin, TX JW Marriott 2015 1,012 34 $300,000,000 $296,443 W. Palm Beach, FL Hilton 2016 400 12 $110,000,000 $275,000 Chicago, IL Marriott Marquis 2016 1,206 50 $390,000,000 $323,383 Houston, TX Marriott Marquis 2016 1,000 29 $350,000,000 $350,000 Cleveland, OH Hilton 2016 600 32 $276,000,000 $460,000 Portland, OR Hyatt Regency 2017 600 15 $213,000,000 $355,000 Miami Beach, FL To Be Determined 2018 800 22 $405,000,000 $506,250 Kansas City, MO Hyatt 2020 800 23 $300,000,000 $375,000 Minimum 400 12 $110,000,000 $187,240 Average 829 25 $295,363,636 $353,034 Maximum 1,206 50 $520,000,000 $506,250

As shown above, the projects range in completion date from 2013 for the Omni hotel in Nashville to a target completion date of 2020 for the Hyatt in Kansas City. On a cost per room basis the range is from $187,240 in Spokane, WA to $506,250 in Miami Beach, FL. We recognize that this is propriety information and we are working with the best information available as of the report date. Some of these cost figures may have land acquisition pricing built into the project cost, however in our research of the varied projects, only the Austin-JW Marriott is determined to be built entirely by a private entity. In each of the other developments there is some form of public partnership to make development feasible. The public involvement is often in the form of bond issuance, land donation, tax abatements or a combination thereof. In our findings the land was either donated or highly subsidized to make most of the convention hotel developments financially feasible.

To conclude a likely development cost for the subject we focus on the most similar convention center hotel projects, specifically those with the largest room-counts; 1,175-room Washington DC- Marriott Marquis, 1,012-room Austin-JW Marriott and the Marriott Marquis in Chicago and Houston with 1,206 and 1,000 rooms respectively. Isolating these four developments, the costs range from $296,443 to $442,553 per room to build and they average $353,095 per room.

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Washington DC Marriott Marquis The Washington D.C - Marriott Marquis project cost represents the estimated cost of the structure, exclusive of land. This project included the deep excavation necessary for the construction of an underground concourse connecting the hotel to the Walter E Washington Convention Center. A photo taken in October of 2014 of the completed hotel is shown to the right. The property features an atrium with a glass skylight and a 56-foot lobby sculpture. Roughly 18,000 square feet of space on the mezzanine overlooks the atrium. Six hospitality suites exist on the mezzanine level as well. Other amenities include a concierge level lounge with outdoor patio, and a two-story 8,000-square-foot fitness centers.

The hotel has 1,175 guest rooms, including 46 suites. 2 suites are very large 'Presidential suites' and 6 are medium-sized 'Vice Presidential suites.'

Five restaurants are located on the ground floor, and include: Anthem, a casual dining restaurant; The Dignitary, an upscale lounge; High Velocity, a high-tech sports bar; the Lobby Bar; a specialty restaurant; and a traditional restaurant with 2 private dining rooms.

Four meeting levels are located underground. Meeting Level 1, just below the ground floor, contains small meeting rooms. Meeting Level 2 below it contains the Marquis Ballroom, a 30,000 square feet room with no columns and 22-foot high ceilings. The foyer of the ballroom receives natural light from the atrium above. A large delivery area in back permits large exhibits and automobiles to access the ballroom. The Walter E. Washington Convention Center is also accessible from this level via an underground concourse. Meeting Level 3 contains additional meeting room space, although these rooms are larger than those on Meeting Level 1. Meeting Level 4 contains two ballrooms, the Independence Ballroom and the Liberty Ballroom. Each ballroom has 10,800 square feet of column-free space, and 20-foot-high ceilings. Numerous additional small meeting rooms are also located on this level.

Considering the cost of excavation and construction of underground tunnels in the nation’s capital, this project cost is an outlier in terms of providing an indication of the likely cost of constructing the subject hotel. Construction took a full year longer than usual due to the deep excavation needed in this project.

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Austin JW Marriott The Austin-JW Marriott opened in February 2015 approximately two and a half years after the hotel first broke ground; completion was ahead of schedule. The 34- story hotel, pictured right, is not only the largest hotel in Austin, but also the largest JW Marriott in North America and the second-largest JW Marriott in the world. The hotel has a fifth-floor pool deck and bar, large guest rooms with city views, and a full-service Starbucks. The hotel also feature three restaurants— Osteria Pronto, Corner and Burger Bar.

Key interior design elements are in line with an Austin and the state of Texas theme. Unique design features include large columns throughout the hotel and lobby built from Texas limestone; a topographical map of Austin illustrated in the lobby ceiling and floor; illuminated artwork behind the check-in area that resembles a magnified cactus graphic; and a large outline of the state of Texas etched into the bottom of the fifth-floor pool.

The JW Marriott Austin is designed to host large conventions and meetings, with more than 112,000 square feet of event space, 42 meeting rooms and 1,012 guest rooms.

This is project, at $296,443 per key, offers a good indication of the likely cost to build the subject property.

Chicago Marriott Marquis This 1,206-room project is being built by the Metropolitan Pier and Exposition Authority (MPEA). The MPEA owns McCormick Place, the largest exhibition and meeting facility in North America, and the Hyatt Regency McCormick Place Hotel. The center offers 2.6 million square feet of exhibition space along Chicago’s lakefront, McCormick Place features 173 meeting rooms, the 4,249-seat Arie Crown Theater and one of the largest ballrooms in the world.

This under construction hotel (rendering shown to the right) is located across the street from McCormick Place Event Center and the existing 1,258 room Hyatt McCormick Place Event Center further enhancing Chicago’s competitive position with the concentration of a substantial number of hotel rooms that offers mid-to larger size shows the option of on-site hotel convenience for their

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79 core attendees and major convention functions. The new hotel will include specialty suites, 90,000 square feet of meeting room space which includes two 25,000 square-foot ballrooms, a great room-style restaurant and bar as well as a Marketplace food court which will feature local food and retail entrepreneurs. The hotel project will include the renovation of the historic American Book Company and two pedestrian bridges spanning two roadways, which will connect the hotel and event center to each other and to the convention center.

The construction cost of this development ($323,383 per room) is generally supportive of the likely costs of the subject property.

Houston Marriott Marquis The 29-story Marriott Marquis is under construction next to the north end of the George R. Brown Convention Center in Houston Texas, across from Discovery Green Park, bookending with the Hilton Americas-Houston to its south. A recent photo of the construction underway is shown to the right. Houston will be only the sixth city to carry the Marriott Marquis designation, which is reserved for large convention hotels of iconic design in the nation's gateway cities.

A skybridge will connect the 1,000-room hotel to the GRB's north end. The building is scheduled to open in 2016. Amenities at this Houston project will include: a rooftop infinity pool overlooking Discovery Green, with a children’s splash pad; a rooftop lazy river; a 3,500 square foot event pavilion; five restaurants; retail space; a 40,000 square foot ballroom; a 22,000 square foot junior ballroom; and 166,000 square feet of meeting space.

The construction cost of this project ($350,000 per room) is generally supportive of the likely cost of the subject property.

Focusing on these four largest convention hotel development from through the US we can narrow down the expected costs of the subject. Again, we were not provided with detailed specifications of the subject’s design so we must select from the benchmark framework. In terms of ranking by relevance to what we expect at the subject, the Austin project is most similar, followed by Houston and Chicago. The DC project is outside the bounds of typical hotel construction with its deep excavation and prolonged construction timeline. With primary emphasis on the identified properties we believe a reasonable construction cost for the subject is $325,000 per room, or $390,000,000.

($325,000 x 1,200 rooms = $390,000,000).

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INCOME ANALYSIS-PROPOSED HOTEL –FEASIBILITY STUDY

Next we will calculate the benefits or annual cash flow for each year from the investment over the holding period. This is usually done within the framework of an Income Approach to value, which is based on the present worth of the future rights to income. This type of analysis considers the property from an investor's point of view, the basic premise being that the amount and quality of the income stream are the basis for value of the property.

The beginning point of the income capitalization approach is making a projection of revenue and expenses for the property. The projection is based on analysis of market comparables. Market comparables include the “competitive set” analysis and expense comparables presented herein. These analyses are used to develop a projection of revenues, expenses, and net operating income (NOI) for the subject property.

We have also relied on the findings within a feasibility study, as provided by HVS in August of 2018.

Analysis of Most Competitive Properties Again, the proposed subject is a 1,200-room convention oriented hotel to be located adjacent to the Ernest N. Morial Convention Center. Given the hotel’s proximity to the New Orleans CBD and French Quarter neighborhoods and its proposed upscale or luxury franchise affiliation, it will compete primarily with other large-scale, full-service hotels in downtown New Orleans. The subject’s location is prime, perhaps one of the best sites in the city on which to construct a hotel. The property’s immediacy to the existing convention center offers a competitive advantage that no other hotelier, existing or otherwise, can equal.

We have interviewed hotel management and employees at the competing properties in an attempt to understand the market in which the subject operates. Each property chose not to disclose proprietary operating information relating to their respective occupancy and ADR. Therefore, in preparing this analysis, we have relied confidential internal documentation retained in the appraisal work file. A map showing the location of the competitive properties followed by detailed information sheets for each of the competitive properties is included on the following pages.

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Summary of Competitive Set Hotel Name Opened/Renovated # Rooms Proposed Convention Center Hotel -- 1200 Marriott Convention Center 2005 331 Hilton Riverside 1977 1622 Hyatt Regency 1976 1193 Sheraton 1982 1110 Marriott 1972 1333 Crowne Plaza 2002 693 Waldorf Astoria 2009 504 Ritz Carlton 2000 527

Total # Rooms 8,513 Average # of Rooms 946

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Subject Property

Property Summary Property Proposed Convention Center Hotel Condition New Construction Address Henderson & Race Streets Corridors -- Location New Orleans, LA Rooms 1200 Classification -- Rack Rates -- Year Built -- Room Mix -- Amenities Market Mix -- Transient Commercial -- Transient Leisure --

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Hotel Competition Comparable Number 1

Property Summary Property Marriott Convention Center Condition Excellent Address 859 Convention Ctr. Blvd. Corridors Interior Location New Orleans, LA Rooms 331 Classification Upper Upscale Rack Rates $183 - $379 Year Built 2005 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 24,464 sf of Event Space Transient Commercial 80% Fitness Center Coffee Shop Transient Leisure 20% Outdoor Pool Business Center

 Comments: This riverfront hotel is housed in a renovated 19th century cotton mill. The property is across the street from the New Orleans Convention Center. Amenities include rooftop pool, meeting space, a ballroom, Starbucks and Wolfe’s Restaurant. The renovations utilized a Restoration Tax Abatement.

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Hotel Competition Comparable Number 2

Property Summary Property Hilton Riverside Condition Excellent Address 2 Poydras Street Corridors Interior Location New Orleans, LA Rooms 1622 Classification Upper Upscale Rack Rates $259 - $319 Year Built 1977 Room Mix Singles and Doubles Amenities Market Mix Restaurant/Bar 130,000 sf of Event Space Transient Commercial 70% Fitness Center Coffee Shop Transient Leisure 30% Outdoor Pool Business Center

Comments: Overlooking the Mississippi River, this contemporary convention hotel is convenient to Harrah's Casino and 4 blocks from the French Quarter. All rooms offer contemporary decor and custom-designed beds. Drago’s restaurant, a renowned seafood restaurant, is onsite. There's also a fitness center, 2 outdoor pools and an indoor tennis court. Business facilities include over 130,000 square feet of meeting space and on-site planners.

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Hotel Competition Comparable Number 3

Property Summary Property Hyatt Regency Condition Excellent Address 601 Loyola Ave. Corridors Interior Location New Orleans, LA Rooms 1193 Classification Upper Upscale Rack Rates $189 - $324 Year Built 1976 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 200,000 sf of Event Space Transient Commercial 70% Fitness Center Coffee Shop Transient Leisure 30% Outdoor Pool Business Center

Comments: This is part of a complex of connected buildings, which includes the Mercedes-Benz Superdome, 1250 Poydras Plaza, Entergy Tower, and the Benson Tower. Originally opened in 1976, it was designed by Welton Becket and Associates. The hotel was heavily damage during Hurricane Katrina and remained closed for six years afterwards. The previous hotel owners, Chicago-based Strategic Hotels and Resorts Inc., planned to redevelop the area around the Superdome (including the adjacent hotel) into a performance art park called the "National Jazz Center". The plan, designed was later abandoned. Poydras Properties Hotel Holdings acquired the Hyatt from Strategic Hotels & Resorts Inc. for $32 million in 2007. In February 2009, the State Bond Commission approved $225 million in special low-cost bonds to help renovate the property. The hotel was renovated at a cost of $275 million. The redesign of the 32-story building, just next door to the Louisiana Superdome, called for 200,000 square feet of meeting and exhibition space, two restaurants, two bars, and a coffee bar. The hotel reopened in October 2011.

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Hotel Competition Comparable Number 4

Property Summary Property Sheraton Condition Excellent Address 500 Canal Street Corridors Interior Location New Orleans, LA Rooms 1110 Classification Upper Upscale Rack Rates $180 - $799 Year Built 1982 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 105,700 sf of Event Space Transient Commercial 70% Fitness Center Coffee Shop Transient Leisure 30% Outdoor Pool Business Center

Comments: This hotel recently completed $50 million in renovations, the hotel is completely transformed with a refreshed lobby, guest rooms, state-of-the-art fitness center, and meeting/event spaces.

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Hotel Competition Comparable Number 5

Property Summary Property Marriott Condition Excellent Address 555 Canal Street Corridors Interior Location New Orleans, LA Rooms 1333 Classification Upper Upscale Rack Rates $199 - $498 Year Built 1972 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 80,000 sf of Event Space Transient Commercial 70% Fitness Center Coffee Shop Transient Leisure 30% Outdoor Pool Business Center Comments: In 2008 this hotel underwent a comprehensive renovation encompassing every aspect of the hotel and totaling nearly $38 million. The guest rooms, concierge lounge, fitness center, lobby, restaurant, ballroom, and meeting spaces were brought up to date in the renovation.

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Hotel Competition Comparable Number 6

Property Summary Property Crowne Plaza Condition Excellent Address 739 Canal Street Corridors Interior Location New Orleans, LA Rooms 693 Classification Upscale Rack Rates $129-$303 Year Built 2002 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 32,000 sf of Event Space Transient Commercial 60% Fitness Center Coffee Shop Transient Leisure 40% Outdoor Pool Business Center Comments: Built in 2002, the Astor Crowne Plaza is a located at the corner of Bourbon and Canal streets. The hotel includes Dickie Brennan’s Bourbon House restaurant. The hotel recently increased meeting space to 32,000 square feet with outdoor balconies overlooking Bourbon, Canal and Iberville streets. The Astor Crowne Plaza completed an extensive $11 million renovation in January 2009. It was the first since the hotel’s opening in 2002. The project received the Renovation Award at the InterContinental Hotels Group’s Americas Investors & Leadership Conference, this was one of 47 hotels considered for the award from a portfolio of over 4,300 hotels.

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Hotel Competition Comparable Number 7

Property Summary Property Waldorf Astoria Condition Excellent Address 121 Baronne Street Corridors Interior Location New Orleans, LA Rooms 504 Classification Luxury Rack Rates $239 - $4,000 Year Built 2009 Room Mix Singles, Doulbes, Suites Amenities Market Mix Restaurant/Bar 60,000 sf of Event Space Transient Commercial 70% Fitness Center Coffee Shop Transient Leisure 30% Outdoor Pool Business Center Comments: First Class Hotels purchased this hotel in 2007 for $17 million from Roosevelt Ventures, LLC. The new owners reportedly spent $100 million to convert the hotel to one of Hilton's premium hotels in their Waldorf Astoria Collection chain. The entire hotel was completely renovated with modern systems. The design of the hotel was a nod to the grand days of the hotel in the 1930s and 1940s. The lobby was restored to the look of that period. The Sazerac Bar was restored to its look of the 1940s. The space that housed Bailey's was renovated and now houses the Domenica Restaurant. The other store front on Baronne Street was converted into the Roosevelt Emporium, the hotel's Gift Shop. The rooftop tennis courts were converted to a new pool facility with showers, a bar and kitchen. The new owners selected Waldorf Astoria Hotels and Resorts to manage the property. On reopening of the hotel in 2009, the owners reverted the name of the hotel to the "Roosevelt" title it had held from 1923 to 1965.

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Hotel Competition Comparable Number 8

Property Summary Property Ritz Carlton Condition Excellent Address 921 Canal Street Corridors Interior Location New Orleans Rooms 527 Classification Luxury Rack Rates $299 - $799 Year Built 2000 Room Mix Singles, Doubles, Suites Amenities Market Mix Restaurant/Bar 60,000 sf of Event Space Transient Commercial Fitness Center Coffee Shop Transient Leisure Outdoor Pool Business Center

Comments: This hotel opened in October 2000, bringing new life to a pair of architectural landmarks, the Maison Blanche and Kress buildings. In preparation of opening, the hotel underwent a $250 million restoration effort to preserve the turn-of-the-century design elements (1909 and 1910 respectively). In the summer of 2011, the hotel will underwent a $9 million room renovation.

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The data from the preceding “comp set” analysis is typically used to analyze the subject’s operating position in the marketplace with respect to occupancy and average daily rate. The ultimate goal of this process is to produce a projection of occupancy and average daily rate for the subject going forward. Occupancy and ADR are projected on an annual basis for purposes of this appraisal. Further, these projections start as of the date of appraisal; and reflect fiscal years going forward.

We also note the following competitive data set provided by HVS:

’

We also note the following proposed hotel supply entering the competitive market place:

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Occupancy Projection Occupancy is a function of room nights available in the marketplace relative to room night demand. Further, occupancy for the subject is dependent on the property’s position in the market and its ability to compete based on branding, location, amenities, service/management, and pricing. The sections to follow focus on issues relating to these factors; room night supply, room night demand, and market penetration.

Below is a ranking of market occupancy for the New Orlins market, as well as other metro areas in the United States.

The year end market occupancy for the New Orleans market hovered around 67%. We note a new STR report in the the New Orleans City Business Magazine that indicates the current market occupancy for the lodging industry hovers around 70%.

We also note the following occupancy levels of the competitive hotels on the page below:

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The appraisal projects the subject’s occupancy at 45% in Year 1, 64% in Year 2 and stabilizing at 70% in Year 3.

Average Daily Rate The section that follows focuses on developing a projection of Average Daily Rate (ADR) for the subject property. Below is a breakdown of the ADR figures of the majority of directly competitive hotels within the immediate area:

We also look to the STR report indicated the Year end 2017 Market ADR figure for the New Orleans market:

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The above graph indicates the New Orleans ADR figure hovering $150 per night for 2017. The subject property would likely compete well above this figure given its excellent location adjacent to the Convention Center.

The HVS Feasibility Study provided indicated a projected ADR of approximately $225 per night.

Based on the information provided herein, the appraisal forecast the subject’s ADR at $225 per night in Year 1, growing by 3% in Year 2 and thereafter, near the long term rate of inflation. It is important to remember that our Year 1 projection does not begin until roughly three years from the appraisal date, giving the market multiple years to build on the exiting ADR

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Revenue and Expense Projections The next steps is to make projections of revenues and operating expenses for the property. The projections give consideration to revenue and expense levels for similar hotel properties.

Operating History/Projections Revenue and expense data has been collected and analyzed on a full-service, luxury hotel within the competing New Orleans market for use as an expense comparable. Due to the confidential nature of the operating statement of the expense comparable, the individual identification is kept in the appraisers’ files. An overview of the benchmark data is included in the following chart.

Summary of Expense Comparables: Comparable Type Affiliation Number of Rooms Host Full-Service, Luxury Franchise 319 Host Full-Service, Urban Franchise 389 Host Full-Service, Upper Upscale Franchise 407 A Interstate, Limited Service Franchise 450-750

The pages to follow include, data on the comparable property and The Host Report, followed by our Year 1 income projection for the subject.

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COMPARABLE INCOME/EXPENSE DATA 96 The 2014 Host Study The 2014 Host Study The 2014 Host Study Expense Comparable A Full-Service Luxury Class Full-Service Urban Full-Service Upper Upscale % (POR) (PAR) % (POR) (PAR) % (POR) (PAR) % (POR) (PAR)

Revenues Rooms 56.4% $286.16 $76,352 66.4% $194.66 $52,862 62.8% $167.14 $44,351 ## 73.7% $143.81 $41,783 Food & Beverage 34.5% $175.03 $46,701 28.7% $84.29 $22,890 31.2% $83.05 $22,038 ## 21.4% $41.71 $12,119 Other Operated Departments (A) 9.0% $45.80 $12,220 4.9% $14.31 $3,886 5.9% $15.76 $4,182 ## 4.9% $9.54 $2,773 Total Revenue 100.0% $506.99 $135,273 100.0% $293.26 $79,638 100.0% $265.95 $70,571 100.0% $195.07 $56,674 Departmental Expenses (B) Room Expense 28.4% $81.24 $21,676 27.9% $54.24 $14,729 26.7% $44.62 $11,840 ## 23.9% $34.43 $10,002 Food and Beverage 72.1% $126.18 $33,667 71.4% $60.19 $16,345 65.6% $54.52 $14,467 ## 78.4% $32.70 $9,499 Other Operated Departments 65.0% $29.76 $7,940 52.5% $7.51 $2,039 52.3% $8.25 $2,189 ## 30.6% $2.92 $850 Total Departmental Expenses 46.8% $237.18 $63,283 41.6% $121.94 $33,114 40.4% $107.39 $28,496 35.9% $70.05 $20,351 Undistributed Expenses Administration & General 8.3% $42.03 $11,214 8.1% $23.66 $6,425 7.8% $20.80 $5,519 ## 9.7% $18.92 $5,496 Sales and Marketing 6.2% $31.40 $8,378 7.3% $21.50 $5,839 8.0% $21.31 $5,655 ## 8.3% $16.11 $4,680 Property Operation & Maintenance 4.2% $21.35 $5,697 4.1% $12.08 $3,280 4.4% $11.59 $3,075 ## 5.6% $10.96 $3,184 Utilities 3.0% $14.99 $4,000 3.2% $9.24 $2,509 3.5% $9.41 $2,497 ## 4.8% $9.33 $2,711 Total Undistributed Expenses 21.7% $109.77 $29,288 22.7% $66.48 $18,053 23.7% $63.11 $16,747 28.4% $55.31 $16,070 Management Fees 2.2% $11.17 $2,980 2.3% $6.72 $1,825 2.3% $6.12 $1,624 ## 3.0% $5.85 $1,700

Fixed Charges Property and Other Taxes 3.1% $15.62 $4,168 5.6% $10.81 $2,936 3.0% $7.99 $2,120 0.0% $0.00 $0 Insurance 1.2% $6.24 $1,665 1.5% $2.98 $809 1.1% $2.97 $788 ## 2.4% $4.58 $1,332 Total Fixed Charges 4.3% $21.86 $5,833 7.1% $13.79 $3,745 4.1% $10.96 $2,908 2.4% $4.58 $1,332 Replacement Reserves 2.0% $10.25 $2,735 1.8% $5.25 $1,426 1.9% $4.99 $1,324 ## 5.0% $9.75 $2,834 Total Expenses 77.0% $390.23 $104,119 73.0% $214.18 $58,163 72.4% $192.57 $51,099 74.6% $145.55 $42,288 Income Before Other Fixed Charges: (C) 23.0% $116.76 $31,153 27.0% $79.08 $21,475 27.6% $73.38 $19,472 25.4% $49.52 $14,387

NOTES: (A) Other income may be reported as net income. (B) Departmental expense ratios shown as % of related department's revenues. (C) Income before deducting depreciation, rent, interest, amortization and income taxes.

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ANALYSIS OF REVENUE Revenue sources for limited service hotels typically include room sales, and other income. This differs from full-service hotels, which often have food and beverage departments and larger banquet/meeting space.

Rooms Revenue There are two major factors to estimate when considering the room’s revenue for the income statement: the average daily room rate, and a projection of the occupancy for the facility. Various features of a particular hotel affect the rate and occupancy level that can be achieved. These include proximity to local demand generators, rate structure in relation to the competitive market, seasonality, supply of competitive properties, and the different hotel amenities that are offered.

Food and Beverage The food revenue category includes income derived from the sale of food and nonalcoholic beverages such as coffee, milk, tea and soft drinks and premises rental. The beverage category covers the sale of beer, wine and other alcoholic beverages. This category also includes rental revenue from the conference/banquet space. This source makes up the majority of the subject property’s F&B revenue.

Food & Beverage Revenue Host Study Exp Comp Appraisal Forecast Luxury Urban Upper-Upscale A Year 1 Year 2 Year 3 $ POR $175.03 $84.29 $83.05 $41.71 $85.00 $87.55 $90.18 $ PAR $46,701 $22,890 $22,038 $12,119 $14,870 $20,421 $24,189

Obviously, food and beverage revenue can vary significantly depending upon the location of a given property, level of the restaurant/lounge operations, conference/banquet activities, etc. The comparable benchmarks indicate a range of $41.71 to $175.03 per occupied room. We are projecting $85.00 per occupied room in Year 1 for the subject. This is consistent with data presented in the full-service “urban” and “upper-upscale” classifications in the Host Study.

This will grow based on the increase in occupancy level.

Other Operated Departmental Revenue Other operated departmental income includes revenue from the suite shop, telephone revenue, vending, guest laundry and other services provided by the hotel. The following table summarizes the rentals and other income generated from comparable hotels and the subject property.

Other Operated Departments Host Study Exp Comp Appraisal Forecast Luxury Urban Upper-Upscale A Year 1 Year 2 Year 3 $ POR $45.80 $14.31 $15.76 $9.54 $15.75 $16.22 $16.71 $ PAR $12,220 $3,886 $4,182 $2,773 $2,755 $3,784 $4,482

Other departmental revenue also tends to vary from property to property depending upon the market mix of guests and the nature of the individual property in terms of additional services.

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Based on the subject’s expected amenities and the expense comparable reports, other departmental revenue is projected at $15.75 per occupied room.

Expense Projections We have not included a detailed discussion of every line item expense. However, the charts to follow provide an overview of the projections along with the comparisons of the expense comparable and Host Study.

We also support our forecasted expense with the feasibility study provided by HVS, which indicated a total operating expense ratio of 65% for the property subject property upon stabilization.

Expense Reconciliation The following chart provides a comparison of the comparable property, HOST Study and the Years 1-3 projection. Comparisons are shown as a percentage of total revenue, per occupied room and per available room.

Expense Reconciliation Host Study Exp Comp Appraisal Forecast Luxury Urban Upper-Upscale A Year 1 Year 2 Year 3 $ POR $390.23 $214.18 $192.57 $145.55 $239.78 $245.65 $252.48 $ PAR $104,119 $58,163 $51,099 $42,288 $41,947 $57,298 $67,726 % of Total Revenue 77.0% 73.0% 72.4% 74.6% 72.5% 72.1% 72.0%

We have forecasted an operating expense ratio of 70% in Year 1, 68% in Year 2, and 65% in Year 3, as well as the remainder of the term.

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Cash Flow Projection-Upon Completion Proposed Convention Center Hotel New Orleans, LA Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Number of Rooms 1,200.00 1,200.00 1,200.00 1,200.00 1,200.00 1,200.00 Available Room Nights 438,000 438,000 438,000 438,000 438,000 438,000 Occupancy Rate 50.0% 64.0% 70.0% 70.0% 70.0% 70.0% Occupied Room Nights 219,000 280,320 306,600 306,600 306,600 306,600 Average Daily Rate {ADR} $225.00 $231.75 $238.70 $245.86 $253.24 $260.84 RevPar $112.50 $148.32 $167.09 $172.10 $177.27 $182.59

Revenues Rooms $49,275,000 $64,964,160 $73,186,187 $75,381,772 $77,643,225 $79,972,522 Food & Beverage $18,615,000 $23,827,200 $26,061,000 $26,061,000 $26,061,000 $26,061,000 Other Operated Departments $3,449,250 $4,415,040 $4,828,950 $4,828,950 $4,828,950 $4,828,950 Total Revenues $71,339,250 $93,206,400 $104,076,137 $106,271,722 $108,533,176 $110,862,472

Total Expenses ($49,937,475) ($63,380,352) ($67,649,489) ($69,076,620) ($70,546,564) ($72,060,607)

Net Operating Income $21,401,775 $29,826,048 $36,426,648 $37,195,103 $37,986,611 $38,801,865 Expense Ratio -70.0% -68.0% -65.0% -65.0% -65.0% -65.0%

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Discount Rates

 Most investors believe hotels are risky because of inherent uncertainties relative to economic life.

 Hospitality properties are subject to constant changes in consumer tastes and require significant expenditures to continually update.

 Hospitality properties have higher expense ratios and lower profit margins than typical real estate investments and they are more management intensive. Consequently, required levels of return tend to be greater on hospitality properties.

The above survey indicates going in capitalization rates from full service hotel properties ranging from 5.21% to 14.69% with a mean of 11.30%. Given the subject’s premiere location and excellent views of the Mississippi River, a going-in capitalization rate towards the low end of the range is justified.

We also note the following surveys from HVS for capitalization rates and discount rate:

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The HVS survey illustrates discount rates hovering around 10.50%. Given the subject’s premiere location and proposed excellent condition, we believe a discounted rate below this average is reasonable.

As evidenced by the REIT acquisition activity in recent years in the New Orleans hotel market we expect the subject property would be extremely marketable offering relatively low risk to an investor. As such this appraisal adopts a discount rate of 9.00%, toward the low end of the range suggested by the market surveys.

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Terminal Cap Rate In addition to discounting the net income stream, the reversionary value of the end of the holding period is also discounted. By the 7th year, the property will have operated on a stabilized basis for several years. Consequently, capitalizing the estimated 8th year income at an appropriate overall capitalization rate can approximate its value.

As previously discussed in the discount rate section, the subject will be a unique hotel asset actively competing in a dynamic hotel market. Even at the end of the holding period the property will be like new construction having been open for only five years. With this in mind we consider the “Going-In” rates shown from Realty Rates in preceding pages.

As expected the going-in OARs are slightly lower than the terminal rates, but due to the short holding period in our exercise these are worth considering. Based on the investment surveys, market tier, franchising, etc. we have selected a terminal overall capitalization rate of 7.45%. The calculation of the reversion is shown as at the bottom of the discounted cash analysis in the following charts.

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CASH FLOW PROJECTION The page to follow includes a cash flow projection for the subject based on the parameters discussed in the preceding sections. This page is followed by a discounted cash flow analysis, whereby the construction cost outlays, annual cash flows and estimated reversion are discounted to a net present value.

Recapping, the estimated construction cost of the hotel is $325,000 per key or $390,000,000. Further, we expect it will take approximately 3 years to build the hotel, as such we divide the construction cost by three and apply this construction cost outlay in the first three years. We recognize that the upfront cost will not be equally divided among the first three years of the project but this is suitable in this exercise to develop a net present value figure.

Obviously, it is impossible to accurately project economic conditions and cash flows 8 years into the future as there will be inevitable cycles in the market. Generally, the DCF assumes that over time, the property will follow long term inflationary influences. Relative to a current market value opinion, it is not important that the projections actually materialize. Rather, it is more important that they be reflective of how market participants might model the financial projections in making current pricing decisions.

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Yield Capitalization Analysis PV Factor @ Present Value Year Cash Flows 9.00% of Cash Flows

0 = ($130,000,000) x 1.000000 = ($130,000,000) 1 = ($130,000,000) x 0.917431 = ($119,266,055) 2 = ($130,000,000) x 0.841680 = ($109,418,399) Year 1 (subject opens) = $21,401,775 x 0.772183 = $16,526,097 Year 2 = $29,826,048 x 0.708425 = $21,129,524 Year 3 = $36,426,648 x 0.649931 = $23,674,822 Year 4 = $37,195,103 x 0.596267 = $22,178,225 Year 5 $37,986,611 0.547034 = $20,779,977 Present Value of Cash Flows ($254,395,809) Reversion Analysis Net Operating Income at Year 6 $38,801,865 Terminal Capitalization Rate 7.45%

Indicated Resale Price $520,830,407 Sale Costs @ 0.15% $781,246

Net Proceeds From Sale $520,049,161 Discounted @ 9.00% 0.547034 Present Value of Reversion $284,484,700

Net Present Value of Hotel Development $30,088,891 Rounded $30,100,000

The net present value method (NPV) of evaluating the hotel development allows us to consider the time value of money. Essentially, it helps determine the present value in “today’s dollars” of the future net cash flow of the hotel project. This analysis demonstrates that the test of financial feasibility is best met by hotel development on the hotel site. Furthermore, mixed use development would be suggested for the remainder of the subject property and thus the maximally productive use of the property is hotel development on the hotel site and mixed used development across the other four parcels that comprise the subject property.

Thus, the highest and best use of the subject site "as vacant" is clearly mixed use development with a specific hotel development focus on the parcel designated as “Hotel” site. The most likely market participant who would be interested in a property such as the subject property would be an extremely well-capitalized investor with experience in hotel and mixed use development projects. The most likely exposure and marketing time is estimated to be less than 12 months.

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LAND/SITE VALUATION – HOTEL SITE The subject’s land value has been developed via the sales comparison approach.

Sales Comparison Approach – Land Valuation The Sales Comparison Approach is based on the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the Sales Comparison Approach.

 The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed.

 The most pertinent data is further analyzed and the quality of the transaction is determined.

 The most meaningful unit of value for the subject property is determined.

 Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject property.

 The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach.

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Land Comparables We have researched ten comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources and verified by a party to the transaction unless otherwise noted.

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Comparable Land Sale #1

3969, 3965, 3961, 3957 Tchoupitoulas Street; 500 Austerlitz Street; 3968, 3958 Annunciation Street, New Orleans, LA 70115

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Comparable Land Sale #1

MCECO ID 30490

ADDRESS 3969, 3965, 3961, 3957 Tchoupitoulas Street; 500 Austerlitz Street; 3968, 3958 Annunciation Street, New Orleans, LA 70115

DATE September 18, 2018

RECORDATION NA#2018-36688

PARISH/COUNTY Orleans

VENDOR TRK Holdings LLC

VENDEE Gernon Properties LLC

SALES PRICE $1,500,000

TERMS/FINANCING Cash to seller

ZONING HU-MU, Historic Neighborhood Mixed-Use & HU-RD2 Historic Urban Two-Family Residential

FLOOD ZONE X

VERIFICATION New Orleans Notarial Archives

SITE UNIT PRICE $48.38 PSF

SITE SIZE 0.71 acres / 31,003 SF

LEGAL DESCRIPTION Lots 5, 6, 7, 8, 9, 10, 15, 16, & 17, Square 111, Sixth Municipal District, City of New Orleans, Orleans Parish, State of Louisiana

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COMMENTS The property had been on the market for several years having initially been priced at $1,775,000 before being lowered to $1,725,000 or $55.62 per square foot in June 2017. The listing agent noted there was good interest shown in the marketing period. The seller initially was unwilling to accept a discounted sale price, however after such a lengthy marketing period eventually accepted the final sale price of $1,500,000. The listing agent was not privy to the purchaser’s intentions with the property.

CONFIRMATION Prior 2018 McEnery Co. Appraisal; Listing Agent Ben Jacobson 504.301.1002

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Comparable Land Sale #2

4842, 4858, 4866, 4870 & 4888 Tchopitoulas; 4875 & 4851 S Front Street; 401 & 405 Upplerine Street, New Orleans, LA 70115

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Comparable Land Sale #2

MCECO ID 29859

ADDRESS 4842, 4858, 4866, 4870 & 4888 Tchopitoulas; 4875 & 4851 S Front Street; 401 & 405 Upplerine Street, New Orleans, LA 70115

DATE August 22, 2018

RECORDATION Notarial Archive Number 2018-33078

PARISH/COUNTY Orleans

VENDOR A. M. Realty, LLC & Anna Ledet

VENDEE Lyons Development Company, LLC

SALES PRICE $5,050,000

ZONING MU-1

FLOOD ZONE X

VERIFICATION Orleans Parish Assessor's Office

SITE UNIT PRICE $96.82 PSF

SITE SIZE 1.20 acres / 52,160 SF

LEGAL DESCRIPTION Part of Lots 1, 5 B A, and L and Lots 5A, 7-A, 7B A, 8,9, 10, and M, Square 78, Sixth Municipal District, City of New Orleans, Orleans Parish, Louisiana

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COMMENTS This property formerly operated as a family-owned sanitation supply company. It was listed for $5,500,000 and on the market for about one year before going under contract. The listing agent stated that this property received very strong levels of interest while on the market, noting its location along a transitioning corridor and neighborhood. The prospective purchaser plans to convert the property for use as a self-storage facility demolition the existing improvements. Of note is that the property includes a double residential home on Tchopitoulas that is partially leased to a residential occupant. This income is viewed as secondary with minimal leased fee implications. They have since leased this house for sale at a price of $450,000. If this figure is deducted from the overall purchase price, the effective land acquisition equates to $5,050,000.

CONFIRMATION Listing agent Reed Wiley (504) 236-7816

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Comparable Land Sale #3

439 S. Rampart, 1123 Poydras Street, and 424 Loyola Avenue, New Orleans, LA 70112

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Comparable Land Sale #3 ADDRESS 439 S. Rampart, 1123 Poydras Street, and 424 Loyola Avenue, New Orleans, LA 70112

DATE February 7, 2018

RECORDATION Instrument Number 2018-04721

PARISH/COUNTY Orleans

VENDOR Arlene and Joseph Mereaux Charitable Foundation

VENDEE River Park One, LLC and Morning Park, LLC

SALES PRICE $4,920,000

ZONING CBD-1

FLOOD ZONE X

VERIFICATION Orleans Parish Clerk of Court

SITE UNIT PRICE $237.57 PSF

SITE SIZE 0.48 acres / 20,710 SF

LEGAL DESCRIPTION Lots 9, 10, E, 5, B, C, 20, 28, and portions of 11, 12, 13, and A, Square 297, 1st Municipal District, Orleans Parish, State of Louisiana.

COMMENTS This is the sale of a 20,710 square foot tract of land located in the CBD of New Orleans. The site was acquired by an adjoining landowner who intended to form a large assemblage for future development. This was an off market transaction and the purchaser is a seasoned real estate investor. Based on a total size of 20,710 square feet, the contract price equates to $237.57 per square foot. The site was improved with a surface parking lot area, which generated some level of income in the interim.

CONFIRMATION Previous Appraisal - The McEnery Company 2018

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Comparable Land Sale #4

1339 & 1314 Magazine Street, 1026 Thalia Street, New Orleans, LA 70130

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Comparable Land Sale #4

MCECO ID 29116

ADDRESS 1339 & 1314 Magazine Street, 1026 Thalia Street, New Orleans, LA 70130

DATE June 7, 2017

RECORDATION Instrument #2017-22142

PARISH/COUNTY Orleans

VENDOR Earline Steib Lalla

VENDEE 1335 Magazine, LLC

SALES PRICE $3,600,000

ZONING HU-MU

FLOOD ZONE X

VERIFICATION Orleans Parish Notarial Archives

SITE UNIT PRICE $59.33 PSF

SITE SIZE 1.39 acres / 60,675 SF

LEGAL DESCRIPTION Lots 1, 2, 5, 15, D, First District, Square 154, City of New Orleans, Parish of Orleans, State of Louisiana and Lots B, 5, 6, 7, 8, 9, Square 141, First District, City of New Orleans, Parish of Orleans, State of Louisiana

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COMMENTS We spoke with the listing broker who was unable to provide the exact sale price of the property due to a confidentiality agreement. That said he confirmed it was very close to the asking price. Additionally we have confirmed via other sources that the sale price hovered around 3,600,000 or roughly 5% below the asking price. As such we have utilized this figure within the sale write up. The purchaser is a real estate development group known as Felicity Property Company who intends to construct a mixed-use property comprised of ground floor retail and upper floor office units. The development has constructed a number of different developments around the city included mixed-use retail office and a dining hall concept. The construction team on the proposed property known as the 'Framework' is Palmisano Contractors. This site was on the market for roughly 6 months and was originally priced at $3,800,000.

CONFIRMATION Listing Broker, Matt Eaton, RE/MAX Commercial, (504)-339-2136, confidential sources, multiple periodicals

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Comparable Land Sale #5

Conti Street, New Orleans, LA --

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Comparable Land Sale #5

MCECO ID 30822

ADDRESS Conti Street, New Orleans, LA

DATE December 13, 2016

RECORDATION Instrument Number 2016-50237

PARISH/COUNTY Orleans

VENDOR Bayou JTK, LLC

VENDEE Edwards Nola Midcity Apartments, LLC

SALES PRICE $10,490,000

=ZONING MU-1, Medium Intensity District

FLOOD ZONE X

VERIFICATION Orleans Parish Notorial Archives

SITE UNIT PRICE $48.26 PSF

SITE SIZE 4.99 acres / 217,364 SF

LEGAL DESCRIPTION A 1.94 acre tract located in Square 508, in the 2nd Municipal District, Lot X-1 in Square 501 in the 2nd Municipal District, Orleans Parish, State of Louisiana.

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land at $4,196,000, which indicates a total acquisition price for both tracts at $10,490,000 or $48.26 per square foot. We have not been able to verify this sale within the Clerk of Court's Office; however, the development group stated this was a reasonable estimate of the sale price. The property is being developed for a multi-family development known as the Lafitte Greenway Apartments. The tracts of land were part of a larger acquisition that occurred in 2015 by Sidney Torres IV, who then sold this portion to the development group out of Ohio.

CONFIRMATION Previous Appraisal - The McEnery Company 2018

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Comparable Land Sale #6

2537 Tulane Avenue, New Orleans, LA 70119

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Comparable Land Sale #6

MCECO ID 26603

ADDRESS 2537 Tulane Avenue, New Orleans, LA 70119

DATE April 11, 2016

RECORDATION Notarial Archive Instrument Number 2016-14312

PARISH/COUNTY Orleans

VENDOR Jenmaddi, Inc.

VENDEE 2537 Tulane Properties, LLC

SALES PRICE $5,800,000

TERMS/FINANCING Cash

ZONING MU-1, Medium Intensity Mixed Use District

FLOOD ZONE AE and X

VERIFICATION Clerk of Civil District Court for the Parish of Orleans

SITE UNIT PRICE $78.85 PSF

SITE SIZE 1.69 acres / 73,553 SF

LEGAL DESCRIPTION Lots 1, 2, 3, 4, 5, A, 7A, 8B, 9, 10, 11, 14, 15, 16, and 17 and a portion of Lots 18, D, E, F, G, and 36 situated in Square 577, First Municipal District, City of New Orleans, Parish of Orleans, Louisiana

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operated as a Dixie Brewing Co. warehouse. There have been rumors that the property will be used for a mixed-use redevelopment, but the listing agent could not confirm the buyer's intended use of the property. The purchasers subsequently filed a demolition permit with the city for $200,000. When this expense is added to the actual sales price, we obtain an effective sales price of $5,800,000; which has been utilized herein.

CONFIRMATION Listing Agent - Andrea A Huseman (504) 587-1450

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Comparable Land Sale #7

923 Julia Street, New Orleans, LA 70113

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Comparable Land Sale #7

ADDRESS 923 Julia Street, New Orleans, LA 70113

DATE December 1, 2015

RECORDATION Notarial Archive Instrument Number 2015-51426

PARISH/COUNTY Orleans

VENDOR 919 Julia Street, LLC

VENDEE Park Investment Properties, LLC

SALES PRICE $1,525,000

TERMS/FINANCING Cash

ZONING CBD-5 Urban Core Neighborhood Mixed-Use District

FLOOD ZONE X

VERIFICATION New Orleans Notarial Archives

SITE UNIT PRICE $124.53 PSF

SITE SIZE 0.28 acres / 12,246 SF

LEGAL DESCRIPTION A certain tract of land situated in Square 257 in the First District of the City of New Orleans, Orleans Parish, State of Louisiana

COMMENTS 923 Julia Street was listed for $1,533,000 and was on the market for 106 days prior to selling for $1,525,000. The listing agent could not be reached, but we did verify the sale price within the Notarial Archives. When marketed, the lot was leased on a month-to-month basis for parking. The buyer's intended use was most likely for a future development, however as of 2017 the property was still utilized as a parking lot.

CONFIRMATION Public Record

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Comparable Land Sale #8

731 St. Charles Avenue, New Orleans, LA 70130

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Comparable Land Sale #8

MCECO ID 27565

ADDRESS 731 St. Charles Avenue, New Orleans, LA 70130

DATE July 2, 2015

RECORDATION Instrument #2015-28451

PARISH/COUNTY Orleans Parish

VENDOR Carondelet - Charles Realty, LLC

VENDEE 731 St. Charles Ave., LLC

SALES PRICE $6,350,000

TERMS/FINANCING Cash to Seller

ZONING CBD-5, Urban Core Neighborhood Lower Intensity Mixed-Use

FLOOD ZONE X

VERIFICATION New Orleans Notarial Archives

SITE UNIT PRICE $215.80 PSF

SITE SIZE 0.68 acres / 29,425 SF

LEGAL DESCRIPTION Lots 12 & 13, Square 218, First District of the City of New Orleans, Parish of Orleans, State of Louisiana

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COMMENTS This property was sold on July 2, 2015 by Carondelet - Charles Realty, LLC to 731 St. Charles Ave., LLC for the recorded amount of $100. However, after speaking to listing agents Hayden Wren and Bobby Talbot, we learned that the property was on the market at an asking price of $6,000,000 for only two days before it was under contract for $5,500,000 to Kenny Lobell. While the property was still under contract, Mr. Lobell sold the right to buy the property at the contract price to Oliver Montagnet Jr (731 St. Charles Ave., LLC) for $550,000. Making the effective purchase price paid by Mr. Montagnet $6,050,000. In addition to the cost of purchasing the property, the buyer is also responsible for clean-up and removal of asbestos in the amount of $300,000. All of these factors lead to an overall effective purchase price of $6,350,000 paid by the buyer 731 St. Charles Ave., LLC. The property is proposed to be improved with a 67-unit, five-story high grade condominium development known as 731 St. Charles which is presently on hold due to the construction loan being impacted by the closing of FNBC Bank.

CONFIRMATION Listing Agents - Hayden W. Wren, III and Bobby Talbot

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Comparable Land Sale #9

632 Tchoupitoulas Street, New Orleans, LA 70130

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Comparable Land Sale #9

MCECO ID 21089

ADDRESS 632 Tchoupitoulas Street, New Orleans, LA 70130

DATE July 10, 2014

RECORDATION NA #: 2014-27206

PARISH/COUNTY Orleans

VENDOR Ambassador Parking, LLC

VENDEE FC 632 632 Tchoup, LLC

SALES PRICE $4,300,000

TERMS/FINANCING Cash

ZONING CBD-8 Central Business District; HT-5 Interim Zoning District

FLOOD ZONE X

VERIFICATION Orleans Parish Civil District Court

SITE UNIT PRICE $236.35 PSF

SITE SIZE 0.42 acres / 18,193 SF

LEGAL DESCRIPTION Lots 2, 3, 4, 26, 27, 55A, 57, 59 & 61, Square 60, First Municipal District of New Orleans, Orleans Parish, State of Louisiana

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COMMENTS This is the sale of an 18,193 square foot interior parcel that stretches the east-west length of Square 60 with 49 feet 5 inches of frontage along the east side of Tchoupitoulas Street and 150 feet 2 inches along the west side of Commerce Street. The site is fully paved and has historically been utilized as a surface parking lot. The purchasers initially planned to develop a 178 room Cambria Suites hotel on the site, which would be divided into two buildings; one of which would be 95 feet in height on Commerce Street, while the other would have a height of 65 feet on Tchoupitoulas Street. However, the site is subject to the HT-5 Interim Zoning District, which limits development to 5 stories or 65 feet and thus, the purchasers offered a scaled back version of their variance request which would lower the height of the Commerce Street building from 95 feet to 75 feet. After, that plan was met by additional opposition by the surrounding residents, the developers lowered the proposed height to 65 feet for both buildings in order for the City Council to approve the plans in July of 2014. The updated room count for this new hotel design has not been made public, although we assume that the initial proposal of 178 rooms has been decreased somewhat. We have not been able to reach either party directly related to the sale. However, we have confirmed all of the details of the transaction with the Orleans Parish Civil District Court. In addition, there have numerous articles written about the plans for the proposed hotel development upon the site, as well as the issues surrounding the City Council's eventual approval of said plans. Lisa Blank, who specializes in hotel site acquisition and development, also confirmed the details of this sale.

CONFIRMATION Lisa Blank - (203) 858-6315

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Comparable Land Sale #10

Various Parcels - 4 Downtown City Blocks - South Market District, New Orleans, LA 70113

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Comparable Land Sale #10 ADDRESS Various Parcels That Comprise Nearly 4 Downtown City Blocks, New Orleans, Louisiana 70113 – South Market District

DATE Various Acquisitions Dating from 12/21/10 – 10/30/14

RECORDATION Various Instrument Numbers, as noted in the Comments Section

PARISH Orleans

VENDOR Various Vendors, as noted in the Comments Section

VENDEE Various Vendees, as noted in the Comments Section

SALES PRICE $16,800,018

TERMS Cash

ZONING Various CBD designations

VERIFICATION Orleans Parish Civil District Court

SITE UNIT PRICE (per SF) $74.57 PSF

SITE SIZE (SF) 225,282 sf

SITE SIZE (ACRES) 5.17 acres

HIGHEST AND Mixed Use Development BEST USE

LEGAL Various Lots That Comprise All Of Squares 273,274 and 293, as well as a DESCRIPTION portion of Square 258, First Municipal District of New Orleans, Orleans Parish, State of Louisiana

COMMENTS The site encompasses three full city blocks, as well as a significant portion of a fourth block. The overall site size equates to 225,282 square feet, or 5.17 acres.

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This assemblage was purchased through numerous individual transactions starting in 2010 and running through the most recent sale in 2014. There are a wide variety of vendee names. However, we have confirmed with the buying group that all of those entities are owned by the same principals.

A full breakdown of the individual sales is described below:

1006 Lafayette Street was purchased from Arlene and Joseph Meraux Charitable Foundation by Americana New Orleans, LLC on December 21, 2010 for $825,000, filed under instrument number 481461.

1020 Lafayette Street was purchased from Timothy G Morales, et al by Americana New Orleans, LLC on December 21, 2010 for $660,000. This sale is recorded under Instrument Number 481462.

610-612 South Rampart Street was purchased from Chavez Properties- University Place, LP by Americana New Orleans, LLC on December 21, 2010 for $235,000. This sale is recorded under Instrument Number 481463.

622 South Rampart Street was purchased from CW Jones Properties, INC by Americana New Orleans, LLC on December 21, 2010 for $2,650,000. This sale is recorded under Instrument Number 481460.

1007 Julia Street, which is a 3,775 square foot section of the site that is recorded as Lot 2 and a Portion of Lot 1, was purchased from Lawrence D. Weidemann, et al. by New Orleans Power & Light, LLC for $194,000 on May 20, 2011. This is recorded under Instrument #490513.

754 South Rampart Street, which is a 2,137 square foot section of the site, was purchased from the Succession of Shirley Shuster Glaser by South Market District, LLC for $95,000 on September 6, 2011. This is recorded under Instrument #496813.

744-56 South Rampart Street, which is a 12,014 square foot section of the site, was purchased from Gail Rose Fayard, et al. by South Market District, LLC for $758,918 on January 23, 2012. This is recorded under Instrument #504973.

739-741 O’Keefe Avenue, which is an 8,864 square foot section of the site, was purchased from 747 O’Keefe LLC, et al. by South Market District, LLC for $580,000 on February 10, 2012. This is recorded under Instrument #506048.

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734 South Rampart Street, which is a 3,682 square foot section of the site, was purchased from French Eighth by South Market District, LLC for $212,000 on February 9, 2012. This is recorded under Instrument #506045.

738 South Rampart Street, which is a 2,806 square foot section of the site, was purchased from Judy Agular, et al. by South Market District, LLC for $165,000 on April 18, 2012. This is recorded under Instrument #509894.

700 South Rampart Street, which is a 32,188 square foot portion (Lots A, 2, 3, 4, 5, 7, 9 & 11, 10, 11, 17 and 18), along with a 61,586 square foot site across South Rampart Street from the subject, bearing the municipal address 700 Loyola Avenue, was sold by WWL-TV, Inc. to South Market District, LLC for $6,125,100 on June 23, 2011. This is recorded under Instrument number 492206. Although these two properties were purchased together through one act of sale, it is worth noting that these two sites were initially under separate purchase agreements in which 700 South Rampart Street was to be purchased for $2,562,550, which equates to $79.61 per square foot and 700 Loyola Avenue was to be purchased for $3,562,550, which equates to $57.85 per square foot. Obviously, these two purchase prices were added together in order to get the $6,125,100 overall purchase price that eventually took place.

929 Girod Street, which is a 36,131 square foot portion of the site that was purchased from 43222 Pecan Ridge by Americana New Orleans, LLC for $2,700,000 on January 5, 2011. This is recorded under Instrument #481978.

1011 Julia Street, was purchased from D II S Investments, LLC by South market District, LLC on November 12, 2013 for $1,000,000. This sale is recorded under Instrument Number #544541.

730 South Rampart Street, was purchased from Da Big Dawg House, LLC by South market District, LLC on October 30, 2014 for $600,000. This sale is recorded under Instrument Number #544541. The two most recent sales were each improved with old buildings at the time of sale. However, the purchasers plan to demolish the structures and no attributable value was given to the improvements in the purchase price of either sale.

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It is worth noting that the 2010 sale prices were negotiated prior to the public awareness that Rouse's Grocery store would be opening around the corner and also prior to the finalization of the Loyola Streetcar Line Planning and Approval and the realization of the re-opening of the Hyatt Hotel across Loyola from these sites.

CONFIRMATION Previous Appraisals, The McEnery Company

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Land Comparables Map

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Land Comparables Analysis Grid – Hotel Site

Sale# Subject 1 2 3 4 5 6 7 8 9 10 Date 9/18/2018 8/22/2018 2/7/2018 6/7/2017 12/13/2016 4/11/2016 12/1/2015 7/2/2015 7/10/2014 10/30/2014 Address 900 Convention 3969, 3965, 3961, 4842, 4858, 4866, 439 S. Rampart, 1123 1339 & 1314 Conti Street 2537 Tulane Avenue 923 Julia Street 731 St. Charles 632 Tchoupitoulas Various Parcels - 4 Sales Price Center Boulevard 3957$1,500,000 Tchoupitoulas 4870$5,050,000 & 4888 Poydras$4,920,000 Street, and Magazine$3,600,000 Street, $10,490,000 $5,800,000 $1,525,000 $6,350,000Avenue $4,300,000Street Downtown$16,800,018 City Land SF 263,000 31,003 52,160 20,710 60,675 217,364 73,553 12,246 29,425 18,193 225,282 Acres 6.04 0.71 1.20 0.48 1.39 4.99 1.69 0.28 0.68 0.42 5.17 Flood Zone X X X X X X AE and X X X X X Zoning MU-2 HU-MU, Historic MU-1 CBD-1 HU-MU MU-1, Medium MU-1, Medium CBD-5 Urban Core CBD-5, Urban Core CBD-8 Central Various CBD Neighborhood Mixed- Intensity District Intensity Mixed Use Neighborhood Mixed- Neighborhood Lower Business District; HT- designations

Land SF Unit Price $0.00 $48.38 $96.82 $237.57 $59.33 $48.26 $78.85 $124.53 $215.80 $236.35 $74.57 COS/Market Adj. 0.00% 0.00% 0.00% 0.00% 5.00% 5.00% 10.00% 10.00% 10.00% 15.00% Adjusted Land SF Unit Price $48.38 $96.82 $237.57 $59.33 $50.67 $82.80 $136.98 $237.38 $259.99 $85.76 Adjustments Size -15.00% -5.00% -20.00% -5.00% 0.00% -5.00% -30.00% -15.00% -20.00% 0.00% Location 25.00% 25.00% -15.00% 10.00% 25.00% 25.00% 0.00% 0.00% 0.00% 0.00% Flood Zone 0.00% 0.00% 0.00% 0.00% 0.00% 2.50% 0.00% 0.00% 0.00% 0.00% Zoning 10.00% 0.00% 0.00% 10.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Shape/Utility 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Composite Adjustment 20.00% 20.00% -35.00% 15.00% 25.00% 22.50% -30.00% -15.00% -20.00% 0.00%

Adjusted Land SF Unit Price $58.06 $116.18 $154.42 $68.23 $63.34 $101.43 $95.89 $201.78 $207.99 $85.76

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COMPARABLE SALE ADJUSTMENTS The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

 Property Rights Sold  Market Trends  Financing  Location  Conditions of Sale  Physical Characteristics

Conditions of Sale All of the comparable sales were confirmed to be arm’s length transactions and no adjustments were necessary for conditions of sale.

Market Trends We have applied upwards market condition adjustments to the sales that occurred prior to 2016 for the continual upwards movement in terms of pricing for development land within the New Orleans metro market area. We have also considered the continual rise in the tourism industry, as well as the rise in occupancy levels/rental rates for commercial property.

In recent years, there has been significant growth in inventory of hotel rooms, which is exacerbated by short term rentals throughout the City of New Orleans. There has also been a large growth in the inventory of multi-family units throughout the city that could potentially result in a softening of market conditions. As such, we have kept our adjustments modest with respect to our comparable land sales.

Size Adjustments have been applied to the comparable sales based on the concept of economies of scale. In doing so, the majority of the comparable sales required downwards adjustments for their smaller site areas, which can result in slightly inflated pricing relative to larger development tracts of land.

Location Sales #1, 2, 5, and 6 have required heavy upwards adjustment for their inferior locations in the Uptown and Mid-City markets. Sales #1 and 2 are both located along the Tchoupitoulas corridor, but further upriver in the Uptown neighborhoods of New Orleans. This is an inferior stretch of Tchoupitoulas Street that is primary residential in nature with some spotted commercial development. This location is considered inferior to the subject “Hotel Site”, which is located adjacent to the Convention Center and just upriver from the New Orleans Warehouse District.

Sales #5 and 6 are located in the Mid-City market of New Orleans, which is also considered substantially inferior to the subject’s location.

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Flood Zone A small upwards adjustment was applied to Sale #6 to account for the fact that this property was located in a flood zone area.

Zoning Sales #1 and 4 have been adjusted upwards for their more restrictive zoning ordinances that limit their height and development potential.

The balance of the indicators either share similar zoning or somewhat superior zoning ordinances, relative to the subject property. That being said, the subject hotel site would likely be able to achieve a superior zoning designation for physical development and limited restrictions. Thus, no adjustments have been applied for the balance of these indicators.

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LAND/SITE VALUATION RECONCILIATION AND CONCLUSION – HOTEL SITE

Land Value Ranges & Reconciled Value Number of Comparables: 10 Unadjusted Adjusted % Δ Low: $48.26 $58.06 20% High: $237.57 $207.99 -12% Average: $122.05 $115.31 -6% Median: $87.84 $98.66 12% St. Dev. $78.01 $55.01 -29% Reconciled Value/Unit Value: $88 $4,985,000 $115.00 land sf Subject Size: 263,000 Indicated Value: $30,245,000 Reconciled Final Value: $30,245,000 Thirty Million Two Hundred Forty Five Thousand Dollars

Following the application of adjustments, the data set tightens and the standard deviation has decreased from $78.01 per square foot to $55.01 per square foot. The mean of the range is $115.31 per square foot and the range is admittedly large.

The subject property is one of the premiere locations in the regional markets. There are simply not many densely developed major cities in the country with prime vacant land available adjacent or proximate to a famous body of water. In addition, the subject site is located adjacent to the Convention Center, which suggests that the highest and best use of this property is for hotel development.

At the low end of the range are Sales #1, 4, and 5, which are both located in more residential areas that are vastly inferior to the subject’s location. Sale #1 is located further upriver from the subject property along Tchoupitoulas Street along a stretch of the corridor that is largely residential and cannot support hotel development. The highest and best use for this tract was for multi-family development.

Sale #4 is located in the lower garden district proximate to the subject property; however, it does not have the same level of premiere location. It is located along a residential stretch of the Lower Garden District and was acquired for a mixed-use development.

Sale #5 is located in the Mid-City neighborhood and was acquired for the development of a multi- family complex. It also cannot support hotel development and is considered inferior to the subject site. A value call should fall well above both of these indicators.

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At the high end of the adjusted range are Sales #8 and 9, which are located in the CBD and Warehouse market, respectively. These sales have arguably superior locations as they are considered more stabilized and proven locations, whereas the subject is situated in area that has been slated for development for years but never come to fruition. That said, in recent years the Lower Garden District has made great strides in becoming a highly desirable neighborhood adjacent to the Warehouse District. We have opted not to apply adjustments to the comparables located in the CBD for location, as they are considered comparable to the subject.

Sales #8 and 9 were also far smaller than the subject property, which tends to result in much higher achievable pricing on a per square foot basis. Pricing should fall below these two indicators and more in line with the balance of the data set.

Once the high and low end indicators are extracted from the data set, the range tightens considerably from $85 per square foot to $154 per square foot and a mean of $110 per square foot.

Sale #10 is one of the better indicators of value within the data set. This was an assemblage of roughly 5.17 acres of land within the New Orleans CBD that has been developed as the South Market District. This assemblage occurred between 2010-2014 and results in an unadjusted price of $74.57 per square foot. After adjustments, this indicator suggests a price of $86 per square foot. In reality, this assemblage occurred during a period of much softer market conditions from 2010- 2014 in the City of New Orleans and the developers were able to secure favorable pricing. Furthermore, the area that is now the South Market District was far less desirable during the assemblage period. As such, a value call above this adjusted indicator is reasonable and justified for the subject site.

The remaining indicators suggest pricing between $95 to $154 per square foot. Sale #3 represents this high end, as this was a very strongly located parcel at the corner of Poydras and Rampart Street in the New Orleans CBD. In some ways, this is a comparable location to the subject property – as it would be an excellent hotel site within the CBD given its proximity to the Superdome and the French Quarter. That being said, this was a much smaller site with only 20,710 square feet and a more proven location. A value should fall below this indicator.

With weight given to Sale #10, as well as the balance of the range discussed above without the high and low end outliers, we have reconciled to a price per square foot of $115 per square foot for the subject site. This considers the subject’s strong location adjacent to the Convention Center, as well as the upwards trending in market conditions over the past 4 years.

Applying this price per square foot the subject 263,000 square feet of site area, results in an overall opinion of value of $30,245,000 for the hotel site.

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Due to the determination that this portion of the overall subject property should be utilized for hotel development, we will perform an additional analysis that takes into account the pricing of vacant sites in the downtown market that were purchased for hotel development with a specific planned hotel room count in mind. In doing so, a price per room data set can be displayed as a means of checking the value call that was reached through the traditional price per square foot vacant land analysis.

The following more dated comparables were purchased for hotel development and with a specific hotel room count planned at the time of sale. The following grid breaks down these specific figures.

Hotel Site Acquisition Grid

Sale # 1 2 3 4

Date 9/7/2016 7/10/2014 6/2/2014 2/24/2014

632 744 316 Location Elysian Fields Tchoupitoulas St. Charles St. Charles

Sales Price $3,747,308 $4,300,000 $2,000,000 $3,990,000

Site Size (SF) 35,980 18,193 9,664 13,511

Planned Room Count 133 178 100 225

Price per Room $28,175 $24,157 $20,000 $17,733

When the determined value of $30,245,000 for the subject parcel is applied to the anticipated room count of 1,200 keys, it would equate to a site acquisition of $25,204 per key. This figure is within the presented range price per key indicators. When the notably superior location of the subject parcel is taken into account, it is reasonable for such high room count to still be in line with price per key indicators of sales that are not quite as marketable as the subject in terms of location. As such, this additional analysis serves as strong support for the price per square foot value already concluded.

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Furthermore, the $30,100,000 value reached through the residual analysis within the Highest and Best Use section of this report is very much in line with our market value conclusion at $30,245,000 concluded within this Land/Site Valuation for the hotel site, which adds excellent strength to the reliability of the conclusions reached herein.

OPINION OF MARKET VALUE VIA LAND/SITE VALUATION FOR HOTEL SITE: $30,245,000

Next, we will analyze the market value of the parcel referred to as “Phase 1”. As discussed in the beginning of the Land/Site Valuation, we will utilize the same set of 10 comparable sales for the Phase 1 parcel. Our comparable sale maps and adjustment grid, as well as the subsequent value reconciliation can be found on the following pages.

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LAND COMPARABLES ANALYSIS GRID – PHASE I

Sale# Subject 1 2 3 4 5 6 7 8 9 10 Date 9/18/2018 8/22/2018 2/7/2018 6/7/2017 12/13/2016 4/11/2016 12/1/2015 7/2/2015 7/10/2014 10/30/2014 Address 900 Convention 3969, 3965, 3961, 4842, 4858, 4866, 439 S. Rampart, 1123 1339 & 1314 Conti Street 2537 Tulane Avenue 923 Julia Street 731 St. Charles 632 Tchoupitoulas Various Parcels - 4 Sales Price Center Boulevard 3957$1,500,000 Tchoupitoulas 4870$5,050,000 & 4888 Poydras$4,920,000 Street, and Magazine$3,600,000 Street, $10,490,000 $5,800,000 $1,525,000 $6,350,000Avenue $4,300,000Street Downtown$16,800,018 City Land SF 880,463 31,003 52,160 20,710 60,675 217,364 73,553 12,246 29,425 18,193 225,282 Acres 20.21 0.71 1.20 0.48 1.39 4.99 1.69 0.28 0.68 0.42 5.17 Flood Zone X X X X X X AE and X X X X X Zoning MU-2 HU-MU, Historic MU-1 CBD-1 HU-MU MU-1, Medium MU-1, Medium CBD-5 Urban Core CBD-5, Urban Core CBD-8 Central Various CBD Neighborhood Mixed- Intensity District Intensity Mixed Use Neighborhood Mixed- Neighborhood Lower Business District; HT- designations

Land SF Unit Price $0.00 $48.38 $96.82 $237.57 $59.33 $48.26 $78.85 $124.53 $215.80 $236.35 $74.57 COS/Market Adj. 0.00% 0.00% 0.00% 0.00% 5.00% 5.00% 10.00% 10.00% 10.00% 15.00% Adjusted Land SF Unit Price $48.38 $96.82 $237.57 $59.33 $50.67 $82.80 $136.98 $237.38 $259.99 $85.76 Adjustments Size -35.00% -20.00% -35.00% -20.00% -10.00% -15.00% -40.00% -35.00% -35.00% -10.00% Location 20.00% 20.00% -10.00% 5.00% 20.00% 20.00% 0.00% 0.00% 0.00% 0.00% Flood Zone 0.00% 0.00% 0.00% 0.00% 0.00% 2.50% 0.00% 0.00% 0.00% 0.00% Zoning 10.00% 0.00% 0.00% 10.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Shape/Utility 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Composite Adjustment -5.00% 0.00% -45.00% -5.00% 10.00% 7.50% -40.00% -35.00% -35.00% -10.00%

Adjusted Land SF Unit Price $45.96 $96.82 $130.66 $56.37 $55.74 $89.01 $82.19 $154.30 $168.99 $77.18

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PHASE I LAND/SITE RECONCILIATION:

The only major difference in terms of adjustment for the Phase I and the hotel site is on account of the size discrepancies. We have applied slightly more tapered upwards adjustments to the comparables with inferior locations. The Phase I site is located along Tchoupitoulas further from the Convention Center and the Mississippi River. As such, it is considered less marketable and adjustments to the comparables for their inferior locations have been tapered, relative to the adjustments for the hotel site analysis.

Land Value Ranges & Reconciled Value Number of Comparables: 10 Unadjusted Adjusted % Δ Low: $48.26 $45.96 -5% High: $237.57 $168.99 -29% Average: $122.05 $95.72 -22% Median: $87.84 $85.60 -3% St. Dev. $78.01 $42.45 -46% Reconciled Value/Unit Value: $88 $4,985,000 $75.00 land sf Subject Size: 880,463 Indicated Value: $66,034,725 Reconciled Final Value: $66,035,000 Sixty Six Million Thirty Five Thousand Dollars

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Following the application of adjustments, the data set has tightened and the standard deviation has decreased from $78.01 per square foot to $42.45 per square foot.

Within the data set Sales #3, 8, and 9 again set the high end of the range. These are all far smaller parcels with generally similar or superior locations in more proven/stabilized areas of New Orleans.

The balance of the data set suggests pricing between $45.96 to $89.01 per square foot with a mean of $71.90 per square foot. Given the subject’s strong location, but very large size – a value call in line with the mean of this range is justified.

Sale #10 is the largest indicator within the data set and it suggests a value call of $77.18 per square foot. With weight assigned to this indicator, as well as the mean of the range discussed above, we reconciled to a price per square foot of $75 per square foot for the Phase I site.

It is also worth noting Sale #5, which was a 5 acre site acquired for development of a multi-family property in the Mid-City neighborhood. This was a far inferior location and a value call above this adjusted indicator at $56 per square foot is justified.

Applying this price per square foot the subject 880,463 square feet of site area, results in an overall opinion of value of $66,034,725 for the Phase I site.

INDICATION OF MARKET VALUE OF PHASE I SITE: $66,035,000

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LAND COMPARABLES ANALYSIS GRID – OTHER SITE

Sale# Subject 1 2 3 4 5 6 7 8 9 10 Date 9/18/2018 8/22/2018 2/7/2018 6/7/2017 12/13/2016 4/11/2016 12/1/2015 7/2/2015 7/10/2014 10/30/2014 Address 900 Convention 3969, 3965, 3961, 4842, 4858, 4866, 439 S. Rampart, 1123 1339 & 1314 Conti Street 2537 Tulane Avenue 923 Julia Street 731 St. Charles 632 Tchoupitoulas Various Parcels - 4 Sales Price Center Boulevard 3957$1,500,000 Tchoupitoulas 4870$5,050,000 & 4888 Poydras$4,920,000 Street, and Magazine$3,600,000 Street, $10,490,000 $5,800,000 $1,525,000 $6,350,000Avenue $4,300,000Street Downtown$16,800,018 City Land SF 511,342 31,003 52,160 20,710 60,675 217,364 73,553 12,246 29,425 18,193 225,282 Acres 11.74 0.71 1.20 0.48 1.39 4.99 1.69 0.28 0.68 0.42 5.17 Flood Zone X X X X X X AE and X X X X X Zoning MU-2 HU-MU, Historic MU-1 CBD-1 HU-MU MU-1, Medium MU-1, Medium CBD-5 Urban Core CBD-5, Urban Core CBD-8 Central Various CBD Neighborhood Mixed- Intensity District Intensity Mixed Use Neighborhood Mixed- Neighborhood Lower Business District; HT- designations

Land SF Unit Price $0.00 $48.38 $96.82 $237.57 $59.33 $48.26 $78.85 $124.53 $215.80 $236.35 $74.57 COS/Market Adj. 0.00% 0.00% 0.00% 0.00% 5.00% 5.00% 10.00% 10.00% 10.00% 15.00% Adjusted Land SF Unit Price $48.38 $96.82 $237.57 $59.33 $50.67 $82.80 $136.98 $237.38 $259.99 $85.76 Adjustments Size -25.00% -15.00% -30.00% -15.00% -5.00% -15.00% -35.00% -25.00% -30.00% -5.00% Location 20.00% 20.00% -10.00% 5.00% 20.00% 20.00% 0.00% 0.00% 0.00% 0.00% Flood Zone 0.00% 0.00% 0.00% 0.00% 0.00% 2.50% 0.00% 0.00% 0.00% 0.00% Zoning 10.00% 0.00% 0.00% 10.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Shape/Utility 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Composite Adjustment 5.00% 5.00% -40.00% 0.00% 15.00% 7.50% -35.00% -25.00% -30.00% -5.00%

Adjusted Land SF Unit Price $50.80 $101.66 $142.54 $59.33 $58.27 $89.01 $89.04 $178.04 $181.99 $81.47

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OTHER SITE RECONCILIATION:

The only major difference in terms of adjustment for the Other Site the hotel site is on account of the size discrepancies. We have applied slightly more tapered upwards adjustments to the comparables with inferior locations. This site is located directly in front of the Convention Center, which makes it a marketable location for potential hospitality or mixed-use development; however, it is further from the Mississippi River. As such, it is considered less marketable and adjustments to the comparables for their inferior locations have been tapered, relative to the adjustments for the hotel site analysis.

Land Value Ranges & Reconciled Value Number of Comparables: 10 Unadjusted Adjusted % Δ Low: $48.26 $50.80 5% High: $237.57 $181.99 -23% Average: $122.05 $103.22 -15% Median: $87.84 $89.02 1% St. Dev. $78.01 $48.21 -38% Reconciled Value/Unit Value: $88 $4,985,000 $100.00 land sf Subject Size: 511,342 Indicated Value: $51,134,200 Reconciled Final Value: $51,135,000 Fifty One Million One Hundred Thirty Five Thousand Dollars

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Following the application of adjustments, the data set has tightened and the standard deviation has decreased from $78.01 per square foot to $48.21 per square foot.

The balance of the data set suggests pricing between $50.80 to $101.66 per square foot with a mean of $75.65 per square foot. Given the subject’s strong location, a value call in line with the higher end of the range is supportable.

This considers the fact that this is an ideal site for some type of commercial development including a parking garage, mixed-use development, or hospitality use with the proximate location to the Convention Center. Furthermore, the site is closer in size to the hotel site, which would allow it to capture higher pricing on a per square foot basis.

Based on the preceding discourse, we have reconciled to a price per square foot of $100 per square foot. This is well supported by the mean of the range of the entire adjusted range.

Applying this price per square foot the subject 511,342 square feet of site area, results in an overall opinion of value of $51,134,200 – rounded to $51,135,000 for the Other Site.

INDICATION OF MARKET VALUE OF OTHER SITE: $51,135,000

Next, we will analyze the market value of the market value of the parcel referred to as “Phase 2” and the “Existing Site to Remain”. We will utilize a slightly different data set for these two subject sites in order to best demonstrate the range of values for these two tracts. Our comparable sales maps and adjustment grid, as well as subsequent value reconciliation can be ground on the following pages.

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LAND COMPARABLES

We have researched eight comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources and verified by a party to the transaction.

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Comparable Land Sale #1

1328 Oretha Castle Haley Boulevard, New Orleans, LA 70113

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Comparable Land Sale #1

MCECO ID 30743

ADDRESS 1328 Oretha Castle Haley Boulevard, New Orleans, LA 70113

DATE September 27, 2018

RECORDATION Instrument Number 2018-37952

PARISH/COUNTY Orleans Parish

VENDOR Southern Foods Group LLC

VENDEE AG 2018, LLC

SALES PRICE $3,465,000

ZONING MU-2, High Intensity Mixed-Use

FLOOD ZONE X

VERIFICATION New Orleans Civil Clerk of Court

SITE UNIT PRICE $38.93 PSF

SITE SIZE (SF) 89,000 SF / 2.04 acres

LEGAL DESCRIPTION Lot X, 5-B, 3, 4, 5, 6, 13, 2, 3, B, 11, 7, 3, 27, 26, 8, 2, and 4, of Square 252, in the 1st Municipal District, Orleans Parish, State of Louisiana.

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COMMENTS This is the sale of an 89,000 square foot redevelopment site located along Oretha Castle Haley Boulevard in the Central City neighborhood of New Orleans. The tract is almost a full block of land; however, there is a small duplex structure and several other lots of land along Thalia Street that did not transfer ownership with the property. The site fronts roughly 220 linear feet along Oretha Castle Haley, 390’ along Erato, 250' along Baronne Street and approximately 200 feet along Thalia Street. This property was listed originally with several other tracts of land as an assemblage for a price of $14,625,000 or $46.47 per square foot. The total assemblage equated to a site area of 314,719 square feet or 7.22 acres. Only this tract of land has closed and it was originally priced at $4,000,000 or $45 per square foot.

The subject tract is being acquired for mixed-use development with ground floor retail and upper floor residential units. The developer is a seasoned development group that specializes in low and mixed-use properties throughout the City of New Orleans.

CONFIRMATION Listing Broker, Jonathan D. Shaver 504-838-0001, and Listing Broker, Richard E. Juge 504-838-0001 - Personal Inspection

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Comparable Land Sale #2

3969, 3965, 3961, 3957 Tchoupitoulas Street; 500 Austerlitz Street; 3968, 3958 Annunciation Street, New Orleans, LA 70115

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Comparable Land Sale #2

MCECO ID 30490

ADDRESS 3969, 3965, 3961, 3957 Tchoupitoulas Street; 500 Austerlitz Street; 3968, 3958 Annunciation Street, New Orleans, LA 70115

DATE September 18, 2018

RECORDATION NA#2018-36688

PARISH/COUNTY Orleans

VENDOR TRK Holdings LLC

VENDEE Gernon Properties LLC

SALES PRICE $1,500,000

TERMS/FINANCING Cash to seller

ZONING HU-MU, Historic Neighborhood Mixed-Use & HU-RD2 Historic Urban Two-Family Residential

FLOOD ZONE X

VERIFICATION New Orleans Notarial Archives

SITE UNIT PRICE $48.38 PSF

SITE SIZE (SF) 31,003 SF / 0.71 acres

LEGAL DESCRIPTION Lots 5, 6, 7, 8, 9, 10, 15, 16, & 17, Square 111, Sixth Municipal District, City of New Orleans, Orleans Parish, State of Louisiana

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CONFIRMATION Prior 2018 McEnery Co. Appraisal; Listing Agent Ben Jacobson 504.301.1002

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Comparable Land Sale #3

4842, 4858, 4866, 4870 & 4888 Tchopitoulas; 4875 & 4851 S Front Street; 401 & 405 Upplerine Street, New Orleans, LA 70115

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Comparable Land Sale #3

MCECO ID 29859

ADDRESS 4842, 4858, 4866, 4870 & 4888 Tchopitoulas; 4875 & 4851 S Front Street; 401 & 405 Upplerine Street, New Orleans, LA 70115

DATE August 22, 2018

RECORDATION Notarial Archive Number 2018-33078

PARISH/COUNTY Orleans

VENDOR A. M. Realty, LLC & Anna Ledet

VENDEE Lyons Development Company, LLC

SALES PRICE $5,050,000

TERMS/FINANCING --

ZONING MU-1

FLOOD ZONE X

VERIFICATION Orleans Parish Assessor's Office

SITE UNIT PRICE $96.82 PSF

SITE SIZE (SF) 52,160 SF / 1.20 acres

LEGAL DESCRIPTION Part of Lots 1, 5 B A, and L and Lots 5A, 7-A, 7B A, 8,9, 10, and M, Square 78, Sixth Municipal District, City of New Orleans, Orleans Parish, Louisiana

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CONFIRMATION Listing agent Reed Wiley (504) 236-7816

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Comparable Land Sale #4

1339 & 1314 Magazine Street, 1026 Thalia Street, New Orleans, LA 70130

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Comparable Land Sale #4

MCECO ID 29116

ADDRESS 1339 & 1314 Magazine Street, 1026 Thalia Street, New Orleans, LA 70130

DATE June 7, 2017

RECORDATION Instrument #2017-22142

PARISH/COUNTY Orleans

VENDOR Earline Steib Lalla

VENDEE 1335 Magazine, LLC

SALES PRICE $3,600,000

ZONING HU-MU

FLOOD ZONE X

VERIFICATION Orleans Parish Notarial Archives

SITE UNIT PRICE $59.33 PSF

SITE SIZE (SF) 60,675 SF / 1.39 acres

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CONFIRMATION Listing Broker, Matt Eaton, RE/MAX Commercial, (504)-339- 2136, confidential sources, multiple periodicals

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Comparable Land Sale #5

Conti Street, New Orleans, LA --

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Comparable Land Sale #5

MCECO ID 30822

ADDRESS Conti Street, New Orleans, LA --

DATE December 13, 2016

RECORDATION --

PARISH/COUNTY Orleans

VENDOR Bayou JTK, LLC

VENDEE Edwards Nola Midcity Apartments, LLC

SALES PRICE $10,490,000

ZONING MU-1, Medium Intensity District

FLOOD ZONE X

VERIFICATION Orleans Parish Notorial Archives

SITE UNIT PRICE $48.26 PSF

SITE SIZE (SF) 217,364 SF / 4.99 acres

LEGAL DESCRIPTION A 1.94 acre tract located in Square 508, in the 2nd Municipal District, Lot X-1 in Square 501 in the 2nd Municipal District, Orleans Parish, State of Louisiana.

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COMMENTS This transaction included two tracts of land with 1.94 acres and 3.053 acres, respectively. The tracts of land are both rectangular in shape with frontage along Conti Street, South Cortez Street, and North Scott Street. The larger tract has estimated dimensions of 510' x 285', whereas the smaller tract is estimate as having dimensions of 350' x 285'. We spoke with the development group regarding this acquisition. They confirmed that 40% of the sale price was allocated to the smaller tract of land at $4,196,000, which indicates a total acquisition price for both tracts at $10,490,000 or $48.26 per square foot. We have not been able to verify this sale within the Clerk of Court's Office; however, the development group stated this was a reasonable estimate of the sale price. The property is being developed for a multi-family development known as the Lafitte Greenway Apartments. The tracts of land were part of a larger acquisition that occurred in 2015 by Sidney Torres IV, who then sold this portion to the development group out of Ohio.

CONFIRMATION Previous Appraisal - The McEnery Company 2018

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Comparable Land Sale #6

2537 Tulane Avenue, New Orleans, LA 70119

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Comparable Land Sale #6

MCECO ID 26603

ADDRESS 2537 Tulane Avenue, New Orleans, LA 70119

DATE April 11, 2016

RECORDATION Notarial Archive Instrument Number 2016-14312

PARISH/COUNTY Orleans

VENDOR Jenmaddi, Inc.

VENDEE 2537 Tulane Properties, LLC

SALES PRICE $5,800,000

TERMS/FINANCING Cash

ZONING MU-1, Medium Intensity Mixed Use District

FLOOD ZONE AE and X

VERIFICATION Clerk of Civil District Court for the Parish of Orleans

SITE UNIT PRICE $78.85 PSF

SITE SIZE (SF) 73,553 SF / 1.69 acres

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COMMENTS This property was originally listed for $6,619,500 and sold for $5,600,000 after approximately six months on the market. The listing agent confirmed an arm's length transaction. She stated that the buyer, Jeffery Feil, is a real estate investor who is active in the Greater New Orleans area. The property historically operated as a Dixie Brewing Co. warehouse. There have been rumors that the property will be used for a mixed- use redevelopment, but the listing agent could not confirm the buyer's intended use of the property. The purchasers subsequently filed a demolition permit with the city for $200,000. When this expense is added to the actual sales price, we obtain an effective sales price of $5,800,000; which has been utilized herein.

CONFIRMATION Listing Agent - Andrea A Huseman (504) 587-1450

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Comparable Land Sale #7

225 State Street, New Orleans, LA 70115

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Comparable Land Sale #7

MCECO ID 30522

ADDRESS 225 State Street, New Orleans, LA 70115

DATE June 25, 2015

RECORDATION Instrument Number 2015-26551

PARISH/COUNTY Orleans

VENDOR State/Tchoupitoulas, LLC

VENDEE 1224 Nashville Avenue, LLC

SALES PRICE $6,000,000

ZONING HU-RD2

FLOOD ZONE X

VERIFICATION Orleans Parish Notorial Archives

SITE UNIT PRICE $70.60 PSF

SITE SIZE (SF) 84,987 SF / 1.95 acres

LEGAL DESCRIPTION Lots V, U-1, U-3, U-6, U-7, X-1, J-2, K-1, L-1, and M-1, of Square 4, in the 6th Municipal District, Orleans Parish, State of Louisiana.

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COMMENTS This is the sale of a redevelopment property located at the corner of State Street and Tchoupitoulas within the Uptown neighborhood of New Orleans. At the time of the sale the property was improved with multiple garden-style apartment buildings that were substantially depreciated and in overall fair condition although they were habitable at the time of the sale. The property was an operating multi-family development and generating a cash flow; however the highest and best use was for redevelopment of the site and that was the intentions of the purchaser. We spoke with the seller of the property who indicated that the true sale price equated to 60000000; although it was listed as 3000000 in the deed. He confirmed that the buyer intended to have the zoning changed in order to develop a new multi-family use. The purchaser Jim McPhaile intended to demolish the 70 apartment units and building a six-story building with 48 luxury condominiums. The proposed development known as 225 State Street never received approval from the neighborhood association and also was unable to have the zoning changed which resulted in the project being placed on hold. Nevertheless this sale is worth of inclusion as it was a redevelopment play in which case the property was purchased for the underlying site. Recent court documents do indicate that the purchaser may have finally been able to receive permitting for the proposed condominium project.

CONFIRMATION Seller - Ben Gravolet/ Multiple Periodicals

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Comparable Land Sale #8

500 North Carrollton Avenue, New Orleans, LA 70119

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Comparable Land Sale #8

MCECO ID 23539

ADDRESS 500 North Carrollton Avenue, New Orleans, LA 70119

DATE May 29, 2015

RECORDATION Notarial Archives Number: 2015-23054

PARISH/COUNTY Orleans

VENDOR Rouse Land Company, LLC

VENDEE First BTS N Carrollton, LLC

SALES PRICE $7,695,000

TERMS/FINANCING Cash Sale

ZONING MU-1 Medium Intensity Mixed-Use District

FLOOD ZONE A4

VERIFICATION New Orleans Clerk of Civil District Court

SITE UNIT PRICE $51.19 PSF

SITE SIZE (SF) 150,330 SF / 3.45 acres

LEGAL DESCRIPTION Lot WD, Square 527A, District Two, City of New Orleans, Orleans Parish, State of Louisiana

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COMMENTS This 3.45 acre former Home Depot site was purchased by First BTS N Carrollton, LLC from Rouse Land Company, LLC on May 29, 2015. The recorded purchase price in the New Orleans Notarial Archives is $100 and other valuable considerations but after speaking with parties involved in the transaction we were able to confirm a sale price of $7,695,000 or $51.18 per square foot. The purchasers have plans to redevelop the site. They are currently in the process of a partial demolition of the former Home Depot building with plans of renovating the rear portion of the building into two large commercial retail spaces. The purchasers are also planning to build a CVS Pharmacy on the N Carrollton Avenue and Toulouse Street corner of the property. On the N Carrollton Avenue and Lafitte Greenway corner they are planning three additional smaller retail spaces. As proposed the property will have six retail units with a total of 51,270 square feet of retail space and 188 parking spaces.

CONFIRMATION Wished to remain anonymous

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Land Comparables Map – Phase 2 Map

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Comparable Land Sales Grid

Sale# Subject 1 2 3 4 5 6 7 8 Date 9/27/2018 9/18/2018 8/22/2018 6/7/2017 12/13/2016 4/11/2016 6/25/2015 5/29/2015 Address Convention Center 1328 Oretha Castle 3969, 3965, 3961, 4842, 4858, 4866, 1339 & 1314 Conti Street 2537 Tulane Avenue 225 State Street 500 North Carrollton Sales Price Haley$3,465,000 Boulevard 3957$1,500,000 Tchoupitoulas 4870$5,050,000 & 4888 Magazine$3,600,000 Street, $10,490,000 $5,800,000 $6,000,000 $7,695,000Avenue Land SF 300,606 89,000 31,003 52,160 60,675 217,364 73,553 84,987 150,330 Acres 6.90 2.04 0.71 1.20 1.39 4.99 1.69 1.95 3.45 Flood Zone X X X X X X AE and X X A4 Zoning MU-2 MU-2, High Intensity HU-MU, Historic MU-1 HU-MU MU-1, Medium MU-1, Medium HU-RD2 MU-1 Medium Mixed-Use Neighborhood Mixed- Intensity District Intensity Mixed Use Intensity Mixed-Use

Land SF Unit Price $0.00 $38.93 $48.38 $96.82 $59.33 $48.26 $78.85 $70.60 $51.19 COS/Market Adj. 0.00% 0.00% 0.00% 0.00% 5.00% 10.00% 10.00% 10.00% Adjusted Land SF Unit Price $38.93 $48.38 $96.82 $59.33 $50.67 $86.74 $77.66 $56.31 Adjustments Size -5.00% -15.00% -10.00% -10.00% 0.00% -5.00% -5.00% -5.00% Location 25.00% 10.00% 10.00% 5.00% 10.00% 10.00% -10.00% 0.00% Flood Zone 0.00% 0.00% 0.00% 0.00% 0.00% 2.50% 0.00% 5.00% Zoning 0.00% 10.00% 0.00% 10.00% 0.00% 0.00% 10.00% 0.00% Shape/Utility 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Composite Adjustment 20.00% 5.00% 0.00% 5.00% 10.00% 7.50% -5.00% 0.00%

Adjusted Land SF Unit Price $46.72 $50.80 $96.82 $62.30 $55.74 $93.25 $73.78 $56.31

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COMPARABLE SALE ADJUSTMENTS The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

 Property Rights Sold  Market Trends  Financing  Location  Conditions of Sale  Physical Characteristics

Conditions of Sale All of the comparable sales were confirmed to be arm’s length transactions and no adjustments were necessary for conditions of sale.

Market Trends We have applied upwards market condition adjustments to the sales that occurred prior to 2017 for the continual upwards movement in terms of pricing for development land within the New Orleans metro market area. We have also considered the continual rise in the tourism industry, as well as the rise in occupancy levels/rental rates for commercial property.

Location All of the comparable sales save Sales #7 and 8 have been adjusted upwards for their inferior locations, relative to the subject property. Realistically, all of the indicators have somewhat comparable locations within the Uptown, Mid-City, Lower Garden District, and Central City neighborhoods; however upwards adjustments are necessary. The subject property has a marketable location across the street from the Convention Center and adjacent to the Warehouse District. Additionally, this area of the lower Garden District has seen substantial growth in recent years.

Sale #8 was the only indicator, which did not require adjustment as it is located along the commercial corridor of New Orleans. This is a strong location that in our opinion is generally comparable to the subject site.

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Sale #7 was actually adjusted downwards as it is located along a strong pocket of Tchoupitoulas Street in the Uptown market of New Orleans. This area is very strong with strong demographics in the immediate area and proximate to Audubon Park.

Flood Zone Small upwards adjustments were applied to Sales #6 and 8 to account for the fact that these properties were located in flood zone areas.

Zoning Sales #2, 4, and 7 required upwards adjustments for their inferior zoning designations.

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LAND/SITE VALUATION RECONCILIATION AND CONCLUSION – PHASE 2

Land Value Ranges & Reconciled Value Number of Comparables: 8 Unadjusted Adjusted % Δ Low: $38.93 $46.72 20% High: $96.82 $96.82 0% Average: $61.55 $66.96 9% Median: $55.26 $59.30 7% St. Dev. $19.27 $19.13 -1% Reconciled Value/Unit Value: $55 $5,425,000 $60.00 land sf Subject Size: 300,606 Indicated Value: $18,036,360 Reconciled Final Value: $18,035,000 Eighteen Million Thirty Five Thousand Dollars

Following the application of adjustments, the data set tightens and the standard deviation has decreased from $19.27 per square foot to $19.13 per square foot. The mean of the range is $66.96 per square foot and the range is admittedly large.

The subject site’s location is certainly marketable due to its general proximity to the Warehouse District and CBD, as well as the convention center and Mississippi River. That being said, the specific area upon, which the subject parcel is situated is not nearly as appealing as the portions of the subject property that are on the southeastern site of Tchoupitoulas Street, as those areas are more naturally affiliated with the marketable draws to the convention center and Mississippi River.

This is a much tighter range of values with a low of $46.72 per square foot and a high of $96.82 per square foot producing a mean of $66.96 per square foot.

The low end of the range is set by Sale #1, which is the most recent indicator of a 2 acre tract of land located in the Central City neighborhood of New Orleans. Though this area along the Oretha Castle Haley corridor has made great strides in the past few years, this location is considered far inferior to the subject and a value call above this indicator is justified.

The high end of the range is set by Sale #3, which was marketed as a redevelopment site with some improvements located on the site. This was in an inferior stretch of Tchoupitoulas Street and is a high end outlier.

Following the extraction of this indicator, the data set tightens considerably and suggests a mean of $62.70 per square foot.

This is a very tight range of values with all of the indicators being credible and reliable. Giving weight to the mean of this range discussed above, we have reconciled to a price per square foot indicator of $62.50.

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This falls just above Sales #5 and 8, which are the two most comparable indicators in terms of size. Sale #5 has an inferior location and a value call just above this indicator is supportable. Sale #8 is somewhat dated and given upwards trending market conditions, a value call above this indicator is justified.

With 300,606 square feet of site area, the value of the Phase 2 site is determined to be $18,787,875 – rounded to $18,785,000.

OPINION OF VALUE OF PHASE 2 SITE: $18,785,000

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Comparable Land Sales Grid

Sale# Subject 1 2 3 4 5 6 7 8 Date 9/27/2018 9/18/2018 8/22/2018 6/7/2017 12/13/2016 4/11/2016 6/25/2015 5/29/2015 Address Convention Center 1328 Oretha Castle 3969, 3965, 3961, 4842, 4858, 4866, 1339 & 1314 Conti Street 2537 Tulane Avenue 225 State Street 500 North Carrollton Sales Price Haley$3,465,000 Boulevard 3957$1,500,000 Tchoupitoulas 4870$5,050,000 & 4888 Magazine$3,600,000 Street, $10,490,000 $5,800,000 $6,000,000 $7,695,000Avenue Land SF 203,278 89,000 31,003 52,160 60,675 217,364 73,553 84,987 150,330 Acres 4.67 2.04 0.71 1.20 1.39 4.99 1.69 1.95 3.45 Flood Zone X X X X X X AE and X X A4 Zoning MU-2 MU-2, High Intensity HU-MU, Historic MU-1 HU-MU MU-1, Medium MU-1, Medium HU-RD2 MU-1 Medium Mixed-Use Neighborhood Mixed- Intensity District Intensity Mixed Use Intensity Mixed-Use

Land SF Unit Price $0.00 $38.93 $48.38 $96.82 $59.33 $48.26 $78.85 $70.60 $51.19 COS/Market Adj. 0.00% 0.00% 0.00% 0.00% 5.00% 10.00% 10.00% 10.00% Adjusted Land SF Unit Price $38.93 $48.38 $96.82 $59.33 $50.67 $86.74 $77.66 $56.31 Adjustments Size -2.50% -10.00% -7.50% -7.50% 0.00% -5.00% -2.50% 0.00% Location 25.00% 10.00% 10.00% 5.00% 10.00% 10.00% -10.00% 0.00% Flood Zone 0.00% 0.00% 0.00% 0.00% 0.00% 2.50% 0.00% 5.00% Zoning 0.00% 10.00% 0.00% 10.00% 0.00% 0.00% 10.00% 0.00% Shape/Utility 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Composite Adjustment 22.50% 10.00% 2.50% 7.50% 10.00% 7.50% -2.50% 5.00%

Adjusted Land SF Unit Price $47.69 $53.22 $99.24 $63.78 $55.74 $93.25 $75.72 $59.12

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“EXISTING SITE TO REMAIN” LAND/SITE RECONCILIATION:

The only major difference in terms of adjustment for the Phase 2 and the existing site to remain is on account of the size discrepancies

Land Value Ranges & Reconciled Value Number of Comparables: 8 Unadjusted Adjusted % Δ Low: $38.93 $47.69 23% High: $96.82 $99.24 3% Average: $61.55 $68.47 11% Median: $55.26 $61.45 11% St. Dev. $19.27 $19.08 -1% Reconciled Value/Unit Value: $55 $5,425,000 $62.50 land sf Subject Size: 203,278 Indicated Value: $12,704,875 Reconciled Final Value: $12,705,000 Twelve Million Seven Hundred Five Thousand Dollars

Following the application of adjustments, the data set has tightened and the standard deviation has decreased from $19.27 per square foot to $19.08 per square foot.

Within the data set the set Sale #3 sets the high end of the range and appears to be an outlier. Sale #6 is an additional high end outlier located along the Tulane Avenue corridor.

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Following the extraction of these two indicators, the range tightens and suggests a value call between $47.69 per square foot to $75.72 per square foot and a mean of $59.21 per square foot.

Giving weight to the mean of this range, while considering the subject’s strong location and size, we reconcile to a price per square foot of $62.50 per square foot.

Applying this price per square foot the subject 203,278 square feet of site area, results in an overall opinion of value of $12,704,875 – rounded to $12,705,000 for the Existing Site to Remain.

INDICATION OF MARKET VALUE OF “Existing Site to Remain”: $12,705,000

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The five separate value conclusions reached within this analysis are presented in the following grid:

Site Value (Rounded) Size (SF) Price per SF

Hotel $30,245,000 263,000 $115.00

Phase 1 $66,035,000 880,463 $75.00

"Other" $51,135,000 511,342 $100.00

Phase 2 $18,785,000 300,606 $62.50

"Existing to Remain $12,705,000 203,278 $62.50

Total $178,905,000 2,158,689 $82.88

OPINION OF MKT. VALUE VIA LAND/SITE VALUATION FOR SUBJECT PROPERTY: $178,905,000*

*This value is contingent on the Extraordinary Assumption(s) as stated within this report.

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MARKET GROUND RENT ANALYSIS As per request of the client, we have also determined a market ground lease rate for each individual tract of land, as well. The first methodology in determining a reasonable market ground rent is to consider a market extracted capitalization rate applied to the fee simple land value in order to reach a reasonable rate of return on annual basis.

Below is a Realty Rates survey from the 3rd Quarter 2018 of capitalization rates:

With respect to all properties – the range is from 2.90% to 17.01% with a mean of 8.11%. Additionally, we have considered the following ground lease comparbales from the subject’s market area:

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Ground Rent Comparables Address Size (SF) Size (Ac.) Annual Rate $/SF Use Term Photo

Melpomene, Annuciation, Mixed Use Thalia, & Constance Streets, 113,464 2.60 $288,935 $2.55 Apartment 70 Years New Orleans, LA Building

3640 Veterans Memorial 20 Years w/ Eight 444,748 10.21 $2,202,426 $4.95 Lowe's Retail Boulevard, Metairie, LA 5 Year Options

6001 France Road, New 35 Years w/ Five 1,368,655 31.42 $387,223 $0.28 RV Park/Marina Orleans, LA (5) Year Options

10 Years w/ 10- 3727 Veterans Boulevard, 92,354 2.12 $519,673 $5.63 Car Dealership Three Year Metairie, LA Options

8000 Lakeshore Drive, New Waterfront 52,897 1.21 $181,500 $3.43 16 Years Orleans, LA Restaurant

730 Julia Street, New 63,412 1.46 N/A $9.60 Mixed-Use N/A Orleans, LA

St. Charles Avenue 14,400 0.33 $177,579 $12.33 Bank Branch 30 Years Confidential

Confidential, New Orleans, 389,426 8.94 $780,000 $2.00 Entertainment 60 Years Confidential LA

Average Rent/SF $5.10

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The rental indicators on the preceding pages indicate ground leases throughout the New Orleans Metro area ranging from a low of $0.28 per square foot to $12.33 per square foot with an average of $5.10 per square foot.

The last two ground leases are confidential and we are not permitted to provide their exact locations. That said, we can confirm that they are located within the New Orleans market and that their contract rental rates accurate.

Additionally, we should note that ground lease located at 730 Julia Street is an estimate provided by the leasing agent for this building. He confirmed that the site was encumbered by a long term ground lease, which suggest an overall price on the land of $160 per square foot if capitalized at a “reasonable rate”. Applying a market based rental rate of 6% to this figure indicates an annual rent per square foot at $9.60 per square foot.

Finally, we would like to note the following lease from the New Orleans CBD market.

Four Seasons (Former World Trade Center) - Building Shell/Site Lease

The former World Trade Center located along the Mississippi River was recently leased to a development group that is converting the property into a Four Seasons hotel. Following the opening of the hotel, the property will be leased at an annual rate of $3.25 million. According to the City of New Orleans Tax Assessor’s Office, the property has roughly 5 acres of site area with views along the Mississippi River. On a per square foot basis of the underlying site – this equates to a rental rate of $14.92 per square foot.

Realizing that the property is improved with 670,670 square feet of gross building area that can ultimately be utilized for redevelopment - there is value over and above just the land. As such, this indicator would suggest a lower rent if it were a vacant site.

According to Marshall and Swift Cost Estimate, the replacement cost of a 670,670 square foot office building shell with Reinforced Concrete framing and 33-Storys equates to $80.39 per square foot of gross building area or $53,915,162, overall.

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We have applied a deprecation factor 60% - which indicates a remaining value of $32 per square foot or $21,461,440.

If we apply a reasonable rate of return of say 8.0% to the improvements – this indicates an annual rent of $1,716,915. Deducting this “improvement” rent from the overall market rent discussed above suggests an annual rate of $1,533,085 just to the land.

On a per square foot basis, this effective residual land rent equates to $306,617 per acre or $7.04 per square foot.

We have discussed this supplemental indicator, as it is a similar site that is on a long term lease with the City of New Orleans with excellent views of the Mississippi River. This property does have a superior location to the subject property and a rate should fall below this indicator.

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Hotel Site: The hotel site is the most marketable property with the subject assemblage. With respect to the market rent comparables, a rate above the mean of the range is justified for this site. The World Trade Center leases is arguably the best comparable, given its similarity in terms of location. Additionally, we have deducted a large estimated figure associated with the improvements tied to this lease agreement in order to make it a true comparison.

The other New Orleans CBD comparable located along Julia Street is a reliable indicator; however, it is far smaller than the subject property. Given the subject’s strong location and overall size, we reconcile to a market rent per square foot of $6.00 for the subject’s hotel site.

This indicates the following annual rent:

263,000 SF x $6.00 per SF = $1,578,000 – rounded to $1,580,000 per annum

Applying this annual rent to our value conclusion of $30,245,000 indicates an annual rate of return of 5.22%, which is well bracketed and supported by the land lease capitalization rates shown in the previous pages. Well located commercial sites tend to secure capitalization rates in the range of 5.0%-7.0%. Our rate at 5.22% is well supported by the data provided.

Phase I Site: The Phase I site is much larger than the hotel site at 880,463 square feet and it is inferior in terms of location. Given the much larger size of this tract of land and its inferior positioning – we have reconciled to a rent per square foot figure of $4.00 per square foot. This is supported by several large scale ground rents along Veterans Avenue.

This indicates the following annual rent:

880,463 SF x $4.00 per SF = $3,521,852 – rounded to $3,520,000 per annum

Applying this annual rent to our value conclusion of $66,035,000 indicates an annual rate of return of 5.33%, which is well bracketed and supported by the land lease capitalization rates shown in the previous pages. Well located commercial sites tend to secure capitalization rates in the range of 5.0%-7.0%. Our rate at 5.33% is well supported by the data provided.

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

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Other Site: The “Other” site is much larger than the hotel site at 511,342 square feet and it is inferior in terms of location. Given the much larger size of this tract of land and its inferior positioning – we have reconciled to a rent per square foot figure of $5.00 per square foot.

This indicates the following annual rent:

511,342 SF x $5.00 per SF = $2,556,710 – rounded to $2,555,000 per annum

Applying this annual rent to our value conclusion of $51,135,000 indicates an annual rate of return of 5.00%, which is well bracketed and supported by the land lease capitalization rates shown in the previous pages. Well located commercial sites tend to secure capitalization rates in the range of 5.0%-7.0%. Our rate at 5.33% is well supported by the data provided.

Phase 2: The Phase 2 site has an inferior location on the northern side of Tchoupitoulas Street and it is far less marketable than the Hotel Site. Taking this into consideration, we have reconciled to a rental rate of $3.25 per square foot.

This indicates the following annual rent:

300,606 SF x $3.25 per SF = $976,970 – rounded to $975,000 per annum

Applying this annual rent to our value conclusion of $18,785,000 indicates an annual rate of return of 5.19%, which is well bracketed and supported by the land lease capitalization rates shown in the previous pages. Well located commercial sites tend to secure capitalization rates in the range of 5.0%-7.0%. Our rate at 5.19% is well supported by the data provided.

Existing Site: The Existing to Remain site has an inferior location on the northern side of Tchoupitoulas Street and it is far less marketable than the Hotel Site. Taking this into consideration, we have reconciled to a rental rate of $3.25 per square foot.

This indicates the following annual rent:

203,278 SF x $3.25 per SF = $660,654 – rounded to $660,000 per annum

Applying this annual rent to our value conclusion of $12,705,000 indicates an annual rate of return of 5.19%, which is well bracketed and supported by the land lease capitalization rates shown in the previous pages. Well located commercial sites tend to secure capitalization rates in the range of 5.0%-7.0%. Our rate at 5.19% is well supported by the data provided.

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Site Market Rent (Rounded) Size (SF) Price per SF

Hotel $1,580,000 263,000 $6.00

Phase 1 $3,520,000 880,463 $4.00

"Other" $2,555,000 511,342 $5.00

Phase 2 $975,000 300,606 $3.25

"Existing to Remain $660,000 203,278 $3.25

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

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FINAL RECONCILIATION AND VALUE CONCLUSION The process of reconciliation involves the analysis of each approach to value. The quality of data applied, the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other.

Based on the data and analyses developed in this appraisal, it is our opinion that the Market Value of the Fee Simple Interest of the subject tracts of land as of October 5, 2018 are:

The five separate value conclusions reached within this analysis are presented in the following grid:

VALUE INDICATIONS

Site Value (Rounded) Size (SF) Price per SF

Hotel $30,245,000 263,000 $115.00

Phase 1 $66,035,000 880,463 $75.00

"Other" $51,135,000 511,342 $100.00

Phase 2 $18,785,000 300,606 $62.50

"Existing to Remain $12,705,000 203,278 $62.50

Total $178,905,000 2,158,689 $82.88

MARKET RENT CONCLUSIONS

Site Market Rent (Rounded) Size (SF) Price per SF

Hotel $1,580,000 263,000 $6.00

Phase 1 $3,520,000 880,463 $4.00

"Other" $2,555,000 511,342 $5.00

Phase 2 $975,000 300,606 $3.25

"Existing to Remain $660,000 203,278 $3.25

THE MCENERY COMPANY REAL ESTATE APPRAISAL, BROKERAGE AND CONSULTING

ASSUMPTIONS AND LIMITING CONDITIONS

This report is subject to the following conditions and to such specifications and limiting conditions that also might be set forth in this report. These conditions affect the analyses; opinions, and value conclusions contained in this report.

1. It is assumed that the property is owned in Fee Simple Title. Fee Simple Title implies that the property is owned free and clear, unencumbered and unless otherwise specified. There are to be no leases, liens, easements, encroachments or other encumbrances on the subject property that have not been specified in this report.

2. No responsibility is assumed for matters of a legal nature affecting the appraised property or title. This appraisal assumes that the subject property is presented with a good and marketable title unless otherwise specified. The appraiser has not rendered an opinion as to the title and does not have the expertise to do so. Data on ownership and legal descriptions were obtained from sources generally considered reliable.

3. The property is appraised assuming it is to be under responsible ownership and competent management. Unless otherwise specified, the property is assumed to be available for its highest and best use.

4. Any survey contained in this report is assumed to be true and correct, and it is also assumed that there are no hidden encroachments upon the property appraised except as noted. Any sketch prepared by the appraiser and included in this report may show approximate dimensions and is included to assist the reader in visualizing the property only. The appraiser has not made a survey of the property and does not warrant any surveys or other presented plans or sketches.

5. The appraiser assumes that there are no hidden or unapparent conditions of the property, subsoil, or other structures, which would render it more or less valuable. The appraiser assumes no responsibility for such conditions or for engineering which might be required to discover these factors. This includes the presence of unusual/extraordinary mineral deposits or subsurface rights not typically transferred with normal comparable data (i.e. valuable mineral rights associated with oil/gas production, etc., are not part of this assignment).

6. Any distributions of the valuation of the report between land and improvements apply only under the existing program of utilization. The separate valuation for land and building must not be used in conjunction with any other appraisal and are invalid if used in conjunction with any other appraisal.

7. No responsibility is assumed for changes in matters that are legal, political, social, or economic which could affect real estate values that take place after the effective date of this evaluation.

8. Information, estimates, and opinions furnished to the appraiser, and contained in the report, were obtained from sources considered reliable and believed to be true and correct. However, no responsibility for the accuracy of such information furnished to the appraiser during the appraisal process is warranted by the appraiser. The appraiser assumes no responsibility for the accuracy of such information as measurements, survey, title information, and other information furnished by comparable sales data found in courthouse records and information obtained from Realtors and other parties during any type of comparable survey.

9. This report is predicated upon the assumption that the property has reached a stabilized occupancy as of the date of valuation, unless otherwise noted.

10. On all appraisals, subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusion are contingent upon completion of the improvements in a workmanlike manner and in accord with the referred to plans and specifications.

11. The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question, unless required to do so by a court.

12. Disclosure of the contents of this appraisal report is governed by the By-Laws and Regulations of the Appraisal Institute.

13. Neither all nor any part of the contents of this report, especially any conclusions as to value, identity of the appraiser or the firm with which he (they) is connected or any reference to the Appraisal Institute shall be disseminated to the public through advertising media, public relations media, news media, sales media, or any other public means of communication without prior consent of the undersigned.

14. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea- formaldehyde foam insulation, or other potentially hazardous materials or gases may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. This report further assumes that there are no under/above ground storage tanks of any kind on the property (unless otherwise noted). Possible leakage problems have not been addressed. The site history of the subject property has not been explored, nor has the historical land use patterns of surrounding properties been investigated. Again, the appraiser has not addressed any environmental issues that might affect value. This report assumes that no such issues of any kind are present or affecting the Fee Simple Value in any manner (unless otherwise noted). The appraiser urges the client to retain an outside environmental expert to determine the subject property’s status from this perspective.

15. We have personally inspected the property and found no obvious evidence of structural deficiencies except as stated in the report. However, no responsibility for hidden or unnoticed defects is assumed. No responsibility for conformity to specific governmental requirements (such as fire, building and safety, earthquake, or occupancy codes) can be assumed without provisions of specific professional or governmental inspections.

16. We have personally inspected the subject property and found no evidence of termite damage or infestation (unless otherwise noted). No termite inspection report was made available to the appraiser; the appraiser is not responsible for damages resulting from any type of insect infestation whatsoever. This is beyond the scope of the appraisal assignment.

ACCEPTANCE OF AND USE OF THIS APPRAISAL REPORT CONSTITUTES ACCEPTANCE OF ABOVE

ADDENDA Letter of Engagement Qualifications of the Appraisers Legal Description Survey Zoning Ordinance Flood Map Regional Map Neighborhood Map Subject Photos

Letter of Engagement

Peter M. McEnery, MAI, CRE

Business Affiliations:  Farnsworth-Samuel, Ltd. - Commercial Sales Manager (1976 – 1980)  Murphy, McEnery and Company, LLC – Member-Manager (2002 - March, 2010)  The McEnery Company, Incorporated, President (1980 - Present) Related Business Experience:  First Financial Bank, FSB, New Orleans, Louisiana – Banking Officer (1986 - 1988) Real Estate Practical Experience:  Appraisal of all types of commercial properties including: o Acreage (timber, swamp, marsh, agricultural) o Land Mitigation Banks o USWF – NWR (environmentally sensitive large acreage tracts – LA, MS, AL, AR) o Subdivision Analysis o Shopping and Retail Centers o Convenience Stores/Truck Stops/Casinos o Office o Industrial o Multi-family o Historic Restorations o Deep Water Port Facilities o Hotels/Nursing Homes/Hospitals o Expropriation (condemnation): Louisiana DOTD; Louisiana Timed Managers  Litigation Support Services  Qualified as Expert Witness: Federal District Court; Federal Bankruptcy Court; State District Courts  Brokerage/Development: o The McEnery Company Incorporated - brokerage and development interests  Finance and Consulting: o Industrial Revenue Bonds (historic restoration financing) o Tax Credit Consulting o General Real Estate Consulting  Banking: o Managed Commercial REO Portfolio Memberships, Licenses, Etcetera:  Member – The Counselors of Real Estate ®, awarded designation of CRE  Member – The Appraisal Institute ®, awarded designation of MAI  Member – The National Association of Realtors ®

 State of Louisiana Certified General Real Estate Appraiser No.: G-1102  State of Mississippi Certified General Real Estate Appraiser No.: GA-802  State of Alabama Certified General Real Property Appraiser No.: G00778  State of Florida Certified General Appraiser No.: RZ3357  State of Arkansas Certified General Appraiser No. CG3898  State of Texas Certified General Appraiser No.: 1380008

 Louisiana Real Estate Broker License-Broker No.: 23772  Mississippi Real Estate Broker License-Broker No.: B17298

 Alabama Real Estate Broker License-Broker No.: 95787-0  Arkansas Real Estate Broker License- Broker No.:PB00079104

 Louisiana DOTD: Real Estate Agent Consultant Panel  Louisiana DOTD: Real Estate Appraiser Panel  Southeastern Louisiana University, Instructor, REP and P (2001)  LREC approved instructor: Special Seminar CE instructor (2003)  Land Use Committee, New Direction 2025, St. Tammany Parish, Louisiana  Central St. Tammany Land Owner’s Association

 Member/Manager – McEnery Management, LLC  Member/Manager-McEnery Properties, LLC  Member/Manager-Iolar Holdings, LLC

Education: Real Estate Continuing Education-thru 2016 Appraisal Institute – Chicago, Illinois  Course 00A (1-A): Basic Appraisal Principles, Methods and Techniques  Course 00B (1-B): Capitalization Theory and Techniques  Course 410-A: Standards of Professional Appraisal Practice  Course 420-B: Standard of Professional Appraisal Practice  Course 510: Advanced Income Capitalization  Course 520: Highest and Best Use and Market Analysis  Course 530: Advanced Sales Comparison and Cost Approaches  Course 540: Report Writing  Course 550: Advanced Applications  Course/Seminar – Partial Interest Valuation – Divided  Course/Seminar – Appraisal Consultation  Course/Seminar – Real Estate Disclosure  Course/Seminar – Scope of the Work  Course/Seminar – Appraising Convenience Stores  Course/Seminar – Valuation of Conservation Easements  Course/Seminar - Analyzing the Effects of Environmental Contamination on Real Property  Course - The Appraiser as an Expert Witness  Course - Litigation Appraising: Specialized Topics and Applications  Course - Condemnation Appraising: Principles & Applications  USPAP – 2016-2017 International Right of Way Association  Course 501-Residential Relocation Assistance  Course 502-Business Relocation  Course 505-Advanced Relocation Assistance I (Residential) Commercial Investment Real Estate Institute Chicago, Illinois  Course CI 101: Financial Analysis for Commercial Real Estate  Course CI 202: Market Analysis for Commercial Real Estate  Course CI 301: Decision Analysis for Commercial Real Estate  Course CI 404: Advanced Tax Planning for Commercial Real Estate  Course CI 405/406: Selling/Negotiation Analysis for Commercial Real Estate

Tulane University – New Orleans, Louisiana  College of Arts and Sciences, Bachelor of Arts Degree – 1976 Saint Stanislaus College – Bay St. Louis, Mississippi – 1971

Client Summary:  Private individuals, corporate clients, institutional lenders, public jurisdictions  (References available upon request)

CURRICULUM VITAE BALDWIN R. JUSTICE

Primary Real Estate Business Experience:

 The McEnery Company, Inc., New Orleans, Louisiana – Director of Valuation Services (April 2010 - Present)

Practical Real Estate Experience - Institutional Lending/Private Client Appraisal:

 Medical and Office Buildings  Mixed-Use Buildings  Industrial Warehouses, Office Warehouses, Warehouse Condominiums  Land – Commercial Lots, Bulk Acreage and Subdivision Analyses  Multi-family Buildings  Special Use Properties (Marinas, RV Parks, Shipyards, Bowling Centers)  Net Leased Properties  Bed and Breakfast Properties/Hotel Properties  Convenience Stores-Gasoline Stations  Self-Storage Facilities  Funeral Homes  Subdivisions  Acreage tracts  Timberland  Industrial Shipyards  High-Rise Office Buildings

Memberships, Licenses, Etcetera:  State of Louisiana Certified General Real Estate Appraiser #G3000  State of Mississippi Certified General Real Estate Appraiser #GA-1208  State of Alabama Certified General Real Estate Appraiser #G01336

Primary Education:

 University of Alabama – Tuscaloosa, Al o Culverhouse College of Commerce and Business Administration – (August 2005 – December 2009) . Department of Economics, Finance, and Legal Studies o Bachelor of Science (December 2009) o Major: Finance o Concentration Areas: Real Estate o Real Estate Related Courses: FI 331/Principles of Real Estate; FI 334/Introduction to Real Estate Property Management; FI 432/Real Estate Appraisal; FI 436/ Real Estate Finance

Real Estate Related Education:

 Appraisal Institute – Chicago, Illinois – 2010 – Present

o Course 110 - Appraisal Principles (Nashville, TN – 2010) o Course 120 - Appraisal Procedures (Nashville, TN – 2010) o 15 Hour National USPAP (Nashville, TN – 2010)

o Course 300 - Real Estate Finance, Statistics, and Valuation Modeling (Online – 2012)

o Course 401G - General Appraiser Sales Comparison Approach (Dallas, TX – 2012)

o Course 400G - General Appraiser Market Analysis and H & B Use (Ft. Lauderdale, FL – 2012)

o Course 402G - General Appraiser Site Valuation & Cost Approach (Online – 2014)

o Course 403G - General Appraiser (Online - 2014) Income Approach/Part 1

General Appraiser Report (Online - 2014) Writing and Case Studies

o General Appraiser Income (Online - 2015) Approach/ Part 2

Advanced Market Area Analysis (Atlanta, GA – September 2015) and Highest and Best Use

o Advanced Income Capitalization (Atlanta, GA – April 2018)

Email: [email protected]

Legal Description

Survey

Survey of Portion of the subject property – Hotel and Phase I Site

Zoning Ordinance

Flood Map

Regional Map

Neighborhood Map

Subject Photographs

GLOSSARY This glossary contains the definitions of common words and phrases, used throughout the appraisal industry, as applied within this document. Please refer to the publications listed in the Works Cited section below for more information.

Works Cited: . Appraisal Institute. The Appraisal of Real Estate. 13th ed. Chicago: Appraisal Institute, 2008. Print. . Appraisal Institute. The Dictionary of Real Estate Appraisal. 5th ed. 2010. Print.

Band of Investment landscaped areas and sometimes the A technique in which the capitalization rates exterior walls of the buildings. attributable to components of a capital  CAM can refer to all operating investment are weighted and combined to expenses. derive a weighted-average rate attributable  CAM can refer to the reimbursement to the total investment. (Dictionary, 5th by the tenant to the landlord for all Edition) expenses reimbursable under the lease. Sometimes reimbursements Common Area have what is called an administrative 1. The total area within a property that is load. An example would be a 15% not designed for sale or rental but is addition to total operating expenses, available for common use by all owners, which are then prorated among tenants, or their invitees, e.g., parking tenants. The administrative load, also and its appurtenances, malls, sidewalks, called an administrative and landscaped areas, recreation areas, public marketing fee, can be a substitute for toilets, truck and service facilities. or an addition to a management fee. 2. In a shopping center, the walkways and 2. The amount of money charged to tenants areas onto which the stores face and for their shares of maintaining a center’s which conduct the flow of customer common area. The charge that a tenant traffic. (ICSC) (Dictionary, 5th Edition) pays for shared services and facilities such as electricity, security, and maintenance Common Area Maintenance (CAM) of parking lots. 1. The expense of operating and maintaining common areas; may or may not include The area maintained in common by all management charges and usually does tenants, such as parking lots and common not include capital expenditures on passages. The area is often defined in the tenant improvements or other lease and may or may not include all improvements to the property. physical area to be paid for by all tenants.  CAM can be a line-item expense for a Items charged to common area group of items that can include maintenance may include cleaning maintenance of the parking lot and services, parking lot sweeping and maintenances, snow removal, security,

and upkeep. (ICSC) (Dictionary, 5th appraisal; a retrospective estimate based Edition) on an analysis of past events assuming a competitive and open market. Debt Coverage Ratio (DCR) (Dictionary, 5th Edition) The ratio of net operating income to annual debt service (DCR = NOI/Im), which measures Excess Land the relative ability of a property to meet its Land that is not needed to serve or support debt service out of net operating income; the existing improvement. The highest and also called debt service coverage ratio best use of the excess land may or may not (DSCR). A larger DCR indicates a greater be the same as the highest and best use of ability for a property to withstand a the improved parcel. Excess land may have downturn in revenue, providing an improved the potential to be sold separately and is safety margin for a lender. (Dictionary, 5th valued separately. (Dictionary 5th Edition) Edition) External Obsolescence Discount Rate An element of depreciation; a diminution in A yield rate used to convert future payments value caused by negative externalities and or receipts into present value; usually generally incurable on the part of the owner, considered to be a synonym for yield rate. landlord, tenant. (Dictionary, 5th Edition) (Dictionary, 5th Edition) Extraordinary Assumption Effective Age An assumption, directly related to a specific The age of property that is based on the assignment, which, if found to be false, could amount of observed deterioration and alter the appraiser’s opinions or conclusions. obsolescence it has sustained, which may be Extraordinary assumptions presume as fact different from its chronological age. otherwise uncertain information about (Dictionary, 5th Edition) physical, legal, or economic characteristics of the subject property; or about conditions Effective Date external to the property such as market 1. The date on which the analyses, opinion, conditions or trends; or about the integrity of and advice in an appraisal, review, or data used in an analysis. (USPAP, 2016-2017 consulting service apply. ed.) (Dictionary, 5th Edition) 2. In a lease document, the date upon which the lease goes into effect. (Dictionary, 5th Fee Simple Estate Edition) Absolute ownership unencumbered by any other interest or estate, subject only to the Exposure Time limitations imposed by the governmental 1. The time a property remains on the powers of taxation, eminent domain, police market. power, and escheat. (Dictionary, 5th Edition) 2. The estimated length of time the property interest being appraised would have been Functional Obsolescence offered on the market prior to the The impairment of functional capacity of a hypothetical consummation of a sale at property according to market tastes and market value on the effective date of the standards. (Dictionary, 5th Edition)

and best use must meet are legal Functional Utility permissibility, physical possibility, financial The ability of a property or building to be feasibility, and maximum productivity. useful and o perform the function for which it Alternatively, the probable use of land or is intended according to current market improved property—specific with respect to tastes and standards; the efficiency of a the user and timing of the use—that is building’s use in terms of architectural style, adequately supported and results in the design and layout, traffic patterns, and the highest present value. (Dictionary, 5th size and type of rooms. (The Appraisal of Real Edition) Estate, 13th Edition) Highest and Best Use of Land or a Site as Going Concern Value Though Vacant 1. The market value of all the tangible and Among all reasonable, alternative uses, the intangible assets of an established and use that yields the highest present land value, operating business with an indefinite life, as if after payments are made for labor, capital, sold in aggregate; more accurately termed and coordination. The use of a property the market value of the going concern. based on the assumption that the parcel of land is vacant or can be made vacant by 2. The value of an operating business demolishing any improvements. (Dictionary, enterprise. Goodwill may be separately 5th Edition) measured but is an integral component of going-concern value when it exists and is Highest and Best Use of Property as recognizable. (Dictionary, 5th Edition) Improved The use that should be made of a property as Gross Building Area (GBA) it exists. An existing improvement should be Total floor area of a building, excluding renovated or retained as is so long as it unenclosed areas, measured from the continues to contribute to the total market exterior of the walls of the above-grade area. value of the property, or until the return from This includes mezzanines and basements if a new improvement would more than offset and when typically included in the region. the cost of demolishing the existing building (Dictionary, 5th Edition) and constructing a new one. (Dictionary, 5th Edition) Gross Leasable Area (GLA) Total floor area designed for the occupancy Hypothetical Condition and exclusive use of tenants, including That which is contrary to what exists but is basements and mezzanines; measured from supposed for the purpose of analysis. the center of joint partitioning to the outside Hypothetical conditions assume conditions wall surfaces. (Dictionary, 5th Edition) contrary to known facts about physical, legal, or economic characteristics of the subject Highest & Best Use property; or about conditions external to the The reasonably probable and legal use of property, such as market conditions or vacant land or an improved property that is trends; or about the integrity of data used in physically possible, appropriately supported, an analysis. (Dictionary, 5th Edition) financially feasible, and that results in the highest value. The four criteria the highest Investment Value

The value of a property interest to a should sell for in a competitive market particular investor or class of investors based after a reasonable exposure time, as of a on the investor’s specific requirements. specified date, in cash, or in terms Investment value may be different from equivalent to cash, under all conditions market value because it depends on a set of requisite to a fair sale, with the buyer and investment criteria that are not necessarily seller each acting prudently, typical of the market (Dictionary, 5th Edition) knowledgeably, for self-interest, and assuming that neither is under duress. Leased Fee Interest A freehold (ownership interest) where the 2. Market value is described in the Uniform possessory interest has been granted to Standards of Professional Appraisal another party by creation of a contractual Practice (USPAP) as follows: A type of landlord-tenant relationship (i.e., a lease). value, stated as an opinion, that presumes (Dictionary, 5th Edition) the transfer of a property (i.e., a right of ownership or a bundle of such rights), as Leasehold Interest of a certain date, under specific The tenant’s possessory interest created by a conditions set forth in the definition of lease. (Dictionary, 5th Edition) the term identified by the appraiser as applicable in an appraisal. (USPAP, 2016- Market Area 2017 ed.) USPAP also requires that certain The area associated with a subject property items be included in every appraisal that contains its direct competition. report. Among these items, the following (Dictionary, 5th Edition) are directly related to the definition of market value: Market Rent  Identification of the specific property The most probably rent that a property rights to be appraised. should bring is a competitive and open  Statement of the effective date of the market reflecting all conditions and value opinion. restrictions of the lease agreement, including  Specification as to whether cash, permitted uses, use restrictions, expense terms equivalent to cash, or other obligations, term, concessions, renewal and precisely described financing terms purchase options, and tenant improvements are assumed as the basis of the (TIs). (Dictionary, 5th Edition) appraisal.  If the appraisal is conditioned upon Market Value financing or other terms, specification The major focus of most real property as to whether the financing or terms appraisal assignments. Both economic and are at, below, or above market legal definitions of market value have been interest rates and/or contain unusual developed and refined. conditions or incentives. The terms of above—or below—market interest 1. The most widely accepted components of rates and/or other special incentives market value are incorporated in the must be clearly set forth; their following definition: The most probable contribution to, or negative influence price that the specified property interest on, value must be described and

estimated; and the market data follows: The estimated amount for which supporting the opinion of value must a property should exchange on the date be described and explained. of valuation between a willing buyer and a willing seller in an arm’s-length 3. The following definition of market value is transaction after proper marketing used by agencies that regulate federally wherein the parties had each acted insured financial institutions in the United knowledgeably, prudently, and without States: The most probable price that a compulsion. (International Valuation property should bring in a competitive Standards, 8th ed., 2007) and open market under all conditions requisite to a fair sale, the buyer and the 5. Market value is the amount in cash, or on seller each acting prudently and terms reasonably equivalent to cash, for knowledgeably, and assuming the price is which in all probability the property not affected by undue stimulus. Implicit in would have sold on the effective date of this definition is the consummation of a the appraisal, after a reasonable exposure sale as of a specified date and the passing of time on the open competitive market, of title from seller to buyer under from a willing and reasonably conditions whereby: knowledgeable seller to a willing and  Buyer and seller are typically reasonably knowledgeable buyer, with motivated; neither acting under any compulsion to  Both parties are well informed or well buy or sell, giving due consideration to all advised, and acting in what they available economic uses of the property consider their best interests; at the time of the appraisal. (Uniform  A reasonable time is allowed for Standards for Federal Land Acquisitions) exposure in the open market; (Dictionary, 5th Edition)

 Payment is made in terms of cash in Marketing Time U.S. dollars or in terms of financial An opinion of the amount of time it might arrangements comparable thereto; take to sell a real or personal property and interest at the concluded market value level  The price represents the normal during the period immediately after the consideration for the property sold effective date of the appraisal. Marketing unaffected by special or creative time differs from exposure time, which is financing or sales concessions granted always presumed to precede the effective by anyone associated with the sale. date of an appraisal. (Advisory Opinion 7 of (12 C.F.R. Part 34.42(g); 55 Federal the Standards Board of The Appraisal Register 34696, August 24, 1990, as Foundation and Statement on Appraisal amended at 57 Federal Register Standards No. 6, “Reasonable Exposure Time 12202, April 9, 1992; 59 Federal in Real Property and Personal Property Register 29499, June 7, 1994) Market Value Opinions” address the determination of reasonable exposure and 4. The International Valuation Standards marketing time). (Dictionary, 5th Edition) Council defines market value for the purpose of international standards as Net Operating Income (NOI)

The actual or anticipated net income that the dominant portion of the permanent remains after all operating expenses are building walls, excluding any major vertical deducted from effective gross income but penetrations of the floor. Alternatively, the before mortgage debt service and book amount of space on which the rent is based; depreciation are deducted. (Dictionary, 5th calculated according to local practice. Edition) (Dictionary, 5th Edition)

Obsolescence Replacement Cost One cause of depreciation; an impairment of The estimated cost to construct, at current desirability and usefulness caused by new prices as of the effective appraisal date, a inventions, changes in design, improved substitute for the building being appraised, processes for production, or external factors using modern materials and current that make a property less desirable and standards, design, and layout. (Dictionary, 5th valuable for a continued use; may be either Edition) functional or external. (Dictionary, 5th Edition) Retrospective Value Opinion A value opinion effective as of a specified Parking Ratio historical date. The term does not define a A ratio of parking area or parking spaces to an type of value. Instead, it identifies a value economic or physical unit of comparison. opinion as being effective at some specific Minimum required parking ratios of various prior date. Value as of a historical date is land uses are often stated in zoning frequently sought in connection with ordinances. (Dictionary, 5th Edition) property tax appeals, damage models, lease renegotiation, deficiency judgments, estate Prospective Opinion of Value tax and condemnation. Inclusion of the type A value opinion effective as of a specified of value with this term is appropriate, e.g., future date. The term does not define a type “retrospective market value opinion.” of value. Instead, it identifies a value opinion (Dictionary, 5th Edition) as being effective at some specific future date. An opinion of value as of a prospective Scope of Work date is frequently sought in connection with The type and extent of research and analyses projects that are proposed, under in an assignment. (Dictionary, 5th Edition) construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. (Dictionary, 5th Edition) Stabilized Occupancy Rentable Area An expression of the expected occupancy of a For office buildings, the tenant’s pro rata property in its particular market considering portion of the entire office floor, excluding current and forecasted supply and demand, elements of the building that penetrate assuming it is priced at market rent. through the floor to the areas below. (Dictionary, 5th Edition) The rentable area of a floor is computed by measuring to the inside finished surface of Surplus Land

Land that is not currently needed to support the existing improvement but cannot be separated from the property and sold off. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel. (Dictionary 5th Edition)

Tenant Improvements (TIs) 1. Fixed improvements to the land or structures installed and paid for use by a lessee. 2. The original installation of finished tenant space in a construction project; subject to periodic change for succeeding tenants. (Dictionary, 5th Edition)

Vacancy and Collection Loss A deduction from potential gross income (PGI) made to reflect income reductions due to vacancies, tenant turnover, and non- payment of rent; also called vacancy and credit loss or vacancy and contingency loss. Often vacancy and collection loss is expressed as a percentage of potential gross income and should reflect the competitive market. Its treatment can differ according to the interest being appraised, property type, capitalization method, and whether the property is at stabilized occupancy. (Dictionary, 5th Edition)