MARKET STUDY & FINANCIAL PROJECTIONS Proposed Hyatt Place Perry, Georgia Mr. Stephen Shimp Executive Director Georgia National Fairgrounds & Agricenter 401 Larry Walker Parkway Perry, Georgia 31069 CBRE, Inc. 225 Water Street, Suite 110 Jacksonville, FL 32202 +1 904 634 1200 Office Henry B. Staley, Jr., MAI, CPA +1 904 610 9679 Mobile Managing Director CBRE Hotels, Advisory [email protected] www.cbrehotels.com March 14, 2018 Mr. Stephen Shimp Executive Director Georgia National Fairgrounds & Agricenter 401 Larry Walker Pkwy Perry, Georgia 31069 Dear Mr. Shimp: In accordance with our engagement letter, we have prepared a market analysis and projections of occupancy, average daily rate (ADR) and cash flow for a proposed 100-unit Hyatt Place hotel to be attached to the Miller-Murphey Howard Building, at the Georgia National Fairgrounds & Agricenter, in Perry, Georgia. The following paragraphs present our conclusions. EXECUTIVE SUMMARY Metropolitan Warner Robins MSA Overview . The Warner Robins metropolitan statistical area (MSA) is a three-county area in Central Georgia, including Peach, Houston and Pulaski Counties. Perry is the county seat of Houston County, approximately 25 miles south of Macon and 100 miles southeast of Atlanta. This area is often called the crossroads of Georgia, a popular stopover for vacationers headed from the north to Florida. The three-county Warner Robins MSA is the eighth largest in the state with an estimated 2016 population of 189,800. During the period from 2011 to 2016, the population of the MSA increased at a compound annual rate of 0.7 percent. It is anticipated to grow to 208,700 by 2026, reflecting a 1.0 percent compounded annual growth rate. Between 2011 and 2016, total nonagricultural employment in the MSA grew at a compound annual rate of 0.4 percent. Employment trends turned positive in 2015, with 2,400 jobs added between 2015 and 2016. Based on preliminary figures, average monthly employment increased 1.6 percent year-to-date November 2017 versus the Mr. Stephen Shimp March 14, 2018 same period in 2016. Forecasts by Woods & Poole Economics, Inc. indicate compound annual employment growth of 1.3 percent for both the MSA and Houston County through 2026. Site and Neighborhood Evaluation . The subject is on the grounds of the Georgia National Fairgrounds & Agricenter (GNFA), attached to the Miller-Murphey Howard Building, at the entrance gates. This site is visible from I-75 and equidistant from two interstate highway interchanges at Golden Isles Parkway and Perry Parkway. It is less than two-miles from downtown Perry. GNFA is the dominant feature in the neighborhood, located on some 1,000-acres, with five arenas, exhibit halls, two 480-stall horse barns, four ponds, a carnival midway, and parking for 13,000 vehicles. The 11 days of the Georgia National Fair in September/October draws over 500,000 attendees. This is supplemented by over 200 non-fair events throughout the year, with annual attendance cumulatively totaling approximately 450,000 attendees. On balance, the site is considered adequately suited to hotel development. Though the interchange lacks an array of support facilities (e.g. restaurants, retail, entertainment, etc.), the presence of GNFA and the lodging demand it generates mitigates this competitive disadvantage to a substantial degree. Recommended Facilities . We recommend a 100-unit Hyatt Place featuring a fitness room, a business center, a swimming pool, complimentary parking and all of the typical features and services of the brand. At least 60 percent of the guest rooms should be double queen bedded. Dedicated meeting space at the hotel should not exceed 1,200 square feet given the property’s proximity to GNFA. Food and beverage outlets in the hotel should include the brand’s proprietary concepts: the 24/7 Gallery Menu and Coffee to Cocktails Bar, the 24/7 Gallery Market, and complimentary breakfast offered in the Gallery Kitchen. We have assumed separate food and beverage operations between the hotel and the Fairgrounds. For purposes of this analysis, we have assumed a January 1, 2020 opening date. Supply and Demand Analysis . There are 12 properties with a total of 992 guest rooms in the MSA which would compete to varying degrees with the subject 100-unit Hyatt Place. Market area occupancy and ADR are estimated to have been approximately 68 percent and $109.62, respectively, for 2017. The properties garner 58 percent of their accommodated demand from business travelers, 31 percent from leisure guests and 11 percent from groups. We have identified four additions to the competitive supply other than the subject. An 82- unit Home2 Suites is being built between the Hampton Inn and Hilton Garden Inn in Warner Robins. The three properties will be commonly owned. The Home2 Suites is expected to be complete by February 2019. A 72-unit LaQuinta Inn & Suites is scheduled for a November 2018 delivery, as a renovation project in Perry. Additional hotels 2 Mr. Stephen Shimp March 14, 2018 proposed in Perry include a 95-unit Avid by IHG and a 75-unit Comfort Inn & Suites. These properties are scheduled for completion in January 2020 and January 2021, respectively. Considering recent trends in the market, base growth rates are expected to be moderate. An additional level of “supply-driven” growth is anticipated to be generated by the five new hotels, along with a 2018 to 2020 demand spike in the group and leisure segments associated with construction at GNFA. Estimated Levels of Utilization . The proposed Hyatt Place is expected to achieve penetration levels in excess of its fair market share in the group and leisure segments, and below its fair share in the corporate segment. Projected market penetration, occupancy, ADR and revenue per available room (RevPAR) are presented in the table below: ESTIMATED MARKET PENETRATION, OCCUPANCY, AVERAGE DAILY RATE AND REVPAR PROPOSED 100-UNIT HYATT PLACE PERRY, GEORGIA CALENDAR 2020 THROUGH 2024 Average Daily Rate Occupancy Constant Inflated RevPAR Year Penetration1 Occupancy 2017 Dollars Dollars2 (Inflated $) 2020 93% 61% $131.00 $143.25 $ 87.13 2021 101 64 133.00 149.75 95.59 2022 105 67 135.00 156.50 105.05 2023 105 68 135.00 161.25 110.00 2024 105 69 135.00 166.00 114.61 1 Presented as a percentage of fair market share. 2 Inflated annually at 3.0 percent and rounded to the nearest $0.25. Inflation rates were based on the results of recent investor surveys. Financial Projections . Projected cash flows from operations before debt service and income taxes, in constant 2017 and inflated dollars, are depicted in the following table. 3 Mr. Stephen Shimp March 14, 2018 PROJECTED CASH FLOWS FROM OPERATIONS BEFORE DEBT SERVICE AND INCOME TAXES PROPOSED 100-UNIT HYATT PLACE PERRY, GEORGIA CALENDAR 2020 THROUGH 2024 Constant Inflated Year 2017 Dollars Dollars 2020 $ 930,000 $1,018,000 2021 1,066,000 1,201,000 2022 1,216,000 1,409,000 2023 1,253,000 1,497,000 2024 1,281,000 1,575,000 METROPOLITAN WARNER ROBINS MSA OVERVIEW An analysis of the economic characteristics of a given market area is critical in assessing historical and future growth patterns and their impact on levels of lodging demand. Such an analysis also contributes to a proper evaluation of market risks. For instance, a market heavily oriented towards a single demand generator (e.g., a military installation) often carries a high level of inherent risks. Conversely, a market having a diverse economy typically is less vulnerable to downturns. Further, the sheer size of a market can impact risks through its ability to recover from conditions of oversupply. The Warner Robins MSA is a three-county area in Central Georgia, including Peach, Houston and Pulaski Counties. Perry is the county seat of Houston County, approximately 25 miles south of Macon and 100 miles southeast of Atlanta. Given the convergence of Interstates 16 and 75, this area is a popular stopover for vacationers headed from the northeast and midwest to Florida. The maps on the following pages depict the location of the subject site within the region and metropolitan area. Population: Population growth is an important factor in determining the economic strength of a given area. Although the growth of a local population is not related directly to room-night demand for hotels, it does reflect employment growth and future employment concentration which, in turn, typically influence levels of commercial room-night demand. 4 Mr. Stephen Shimp March 14, 2018 REGIONAL LOCATION 5 Mr. Stephen Shimp March 14, 2018 METROPOLITAN LOCATION 6 Mr. Stephen Shimp March 14, 2018 The three-county Warner Robins metropolitan statistical area (MSA) is the eighth largest in the state with an estimated 2016 population of 189,800. During the period from 2011 to 2016, the population of the MSA increased at a compound annual rate of 0.7 percent. Houston County, which contains the subject site and nearly 80 percent of the metropolitan population exhibited growth, while Peach and Pulaski County experienced declines. With limited employment opportunities in the MSA’s more rural counties, population growth has been constrained by a loss of younger people moving elsewhere to find work. Further, outbound migration is weighted heavily to a reduction in government payrolls. Over the next 10 years, however, population is projected to increase in all three counties at an average rate of 1.0 percent compounded annually, slightly below that of Georgia, but near the level of the U.S. The following table depicts population characteristics for all three counties, the MSA, the state and the nation. POPULATION HOUSTON, PEACH AND PULASKI COUNTIES, THE WARNER ROBINS MSA, GEORGIA AND THE UNITED STATES 2011, 2016 AND 2026 (in thousands) Compound Compound Annual Change Annual Change 2011 2016 2011-2016 2026 2016-2026 Houston County 144.2 151.5 1.0% 167.8 1.0% Peach County 27.6 26.9 (0.5) 29.2 0.8 Pulaski County 11.9 11.4 (0.9) 11.7 0.3 Warner Robins MSA 183.7 189.8 0.7 208.7 1.0 Georgia 9,812.3 10,388.6 1.1 11,741.5 1.2 United States 311,718.8 324,161.0 0.8 355,562.0 0.9 Bibb County’s Share of MSA 78.5% 79.8% 80.4% Source: Woods & Poole Economics, Inc.