MARKET STUDY Proposed Hotel @ 63rd and Prospect Avenue

63RD STREET & PROSPECT AVENUE KANSAS CITY, MISSOURI

SUBMITTED TO:PR OPOSED PREPARED BY: Mr. Jeffrey Williams HVS Consulting & Valuation City of Kansas City Division of TS Worldwide, LLC 414 East 12th Street, 16th Floor 33972 North Oak Drive Kansas City, Kansas, 64106 Pequot Lakes, Minnesota, 59472

816-513-2890 +1 (303) 588-6558

January-2016

January 12, 2016

Mr. Jeffrey Williams City of Kansas City 414 East 12th Street, 16th Floor Kansas City, Kansas, 64106

HVS MINNEAPOLIS Re: Proposed Hotel @ 63rd and Prospect Avenue 33972 North Oak Drive Pequot Lakes, Minnesota, 59472 Kansas City, Missouri +1 (303) 588-6558 HVS Reference: 2015021744 +1 (970) 493-2919 FAX www.hvs.com Dear Mr. Williams:

Pursuant to your request, we herewith submit our market study pertaining to the

above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Kansas City, Missouri area. We have studied the proposed project, and the results of our fieldwork and analysis are presented in this report. We have also reviewed the proposed improvements for this site. Our report was prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Foundation.

We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is

subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein.

Sincerely, TS Worldwide, LLC

Sara E. Olson, Vice President [email protected], +1 (402) 690-0407

Tanya J. Pierson, MAI, Managing Director [email protected], +1 (303) 588-6558

Superior results through unrivaled hospitality intelligence. Everywhere.

Table of Contents

SECTION TITLE PAGE 1. Executive Summary 1 2. Description of the Site and Neighborhood 10 3. Market Area Analysis 17 4. Supply and Demand Analysis 38 5. Description of the Proposed Project 67 6. Projection of Occupancy and Average Rate 74 7. Projection of Income and Expense 83 8. Statement of Assumptions and Limiting Conditions 101 9. Certification 104

Addenda

Qualifications

1. Executive Summary

Subject of the The subject of the market study is a 958,320-square-foot (22.00-acre) parcel to be Market Study partially improved with a lodging facility. Based on our evaluation of the southern Kansas City lodging market, as well as our interviews with major demand generators in the area, we would recommend potential development of a midscale, economy-oriented, extended-stay hotel for the subject site. While the land area is capable of accommodating a larger select- or full-service hotel, given the required amenities and facilities, as well as the price sensitivity of travelers in the area, the cost difference could not be justified. It is our recommendation that the hotel be branded as either a TownePlace Suites by Marriott or Home2 Suites by Hilton. These brands belong to two of the strongest parent companies with major rewards programs, particularly for corporate travelers, who make up more than 50% of the room nights in the competitive market area. Given the differences in franchise costs, for the purpose of our analysis, we have assumed that the hotel would be branded as a TownePlace Suites by Marriott throughout our projections. The property, which is expected to open on April 1, 2017, is positioned as an 80 room hotel, inclusive of a breakfast dining area, an indoor pool and whirlpool, a fitness room, a business center, a market pantry, and a guest laundry room. The hotel will also contain all necessary back-of-the-house space.

The proposed hotel will be part of a greater 22-acre site at East 63rd Street and Prospect Avenue. While no additional development at the site is currently confirmed, city officials have expressed interest in future mixed-use office, multi- family, and restaurant uses. In the early 2000s, a multimillion-dollar shopping center with restaurants, a grocery store, and a housing development was planned by a previous developer; however, after the developer failed to control asbestos contamination following the demolition of older homes on several of the parcels, the project collapsed because of environmental and financial conflicts. The City of Kansas City later acquired the site, controlling it through a 99-year lease with the Tax Increment Financing Commission of Kansas City. According to city officials, in 2014, the site was cleaned, and all asbestos contamination was removed. The subject site’s location is 63rd Street & Prospect Avenue, Kansas City, Missouri, 64130.

Pertinent Dates The effective date of the report is January 12, 2016. The subject site was inspected by Sara E. Olson on November 19, 2015. Tanya J. Pierson, MAI participated in the analysis and reviewed the findings, but did not personally inspect the property.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 1

Ownership, Franchise, The developer of the proposed subject hotel is Sunflower Development Group, and Management which is based in Kansas City, Missouri. The subject site is part of a larger 22-acre Assumptions set of parcels owned by the Tax Increment Financing Commission of Kansas City. The developing entity is expected to lease a smaller portion of the site for a nominal payment of $1 for a period of 99 years. The subject site has reportedly not been sold in several years and is neither listed for sale nor under contract.

Details pertaining to management terms were not yet determined at the time of this report; however, we assume that the proposed hotel will be managed by a professional hotel-operating company, with fees deducted at rates consistent with current market standards. We have assumed a market-appropriate total management fee of 3.0% of total revenues in our study.

We recommend that the proposed subject hotel operate as a midscale, extended- stay, limited-service property. While we have placed heavy consideration on the TownePlace Suites by Marriott brand, which is affiliated with Marriott International, a specific franchise affiliation and/or brand has yet to be finalized. Based on our review of the agreement’s terms or expected terms, the TownePlace Suites by Marriott franchise is reflected in our forecasts with a royalty fee of 5% of rooms revenue, and a marketing assessment of 1.5% of rooms revenue.

Summary of Hotel Local employers and regional development activity, as well as interstate travelers Market Trends and local residents, represent the primary sources of demand for the selected competitive market. Occupancy levels were relatively subdued in the years following the national recession, between 2009 and 2013, failing to rise above 50% occupancy. Demand began to strengthen somewhat in 2014, a trend that continued through the majority of 2015, pushing the year-to-date occupancy above 60% for the first time in the last ten years. In recent years, the market's demand growth has been supported by an increase in development activity in the southern Kansas City area. For the southernmost hotels in this competitive set, demand generators include the new NNSA (National Nuclear Security Administration) and USDA facilities in and around the CenterPoint KCS Intermodal Center, as well as the Cerner Trails campus. Demand growth for hotels in the northern half of the competitive set has been driven largely by activity at the Truman Sports Complex. Given that the MLB Royals baseball team made the playoffs in 2015, additional demand was generated by World Series games hosted in Kansas City.

The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by STR.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 2

FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR)

Average Daily Available Room Occupied Room Average Year Room Count Nights Change Nights Change Occupancy Rate Change Re vPAR Change 2003 614 224,110 — 117,009 — 52.2 % $67.10 — $35.03 — 2004 614 224,110 0.0 % 126,475 8.1 % 56.4 71.13 6.0 % 40.14 14.6 % 2005 614 224,110 0.0 129,911 2.7 58.0 74.20 4.3 43.01 7.1 2006 614 224,110 0.0 129,532 (0.3) 57.8 78.55 5.9 45.40 5.6 2007 614 224,110 0.0 129,056 (0.4) 57.6 79.88 1.7 46.00 1.3 2008 614 224,110 0.0 119,994 (7.0) 53.5 80.43 0.7 43.07 (6.4) 2009 614 224,110 0.0 112,095 (6.6) 50.0 78.58 (2.3) 39.31 (8.7) 2010 661 241,444 7.7 105,569 (5.8) 43.7 80.51 2.5 35.20 (1 0.4) 2011 695 253,675 5.1 109,657 3.9 43.2 82.38 2.3 35.61 1.2 2012 695 253,675 0.0 115,324 5.2 45.5 84.67 2.8 38.49 8.1 2013 695 253,675 0.0 114,366 (0.8) 45.1 87.45 3.3 39.42 2.4 2014 691 252,204 (0.6) 138,664 21.2 55.0 90.28 3.2 49.64 25.9

Year-to-Date Through October 2014 693 210,663 — 118,342 — 56.2 % $90.47 — $50.82 — 2015 681 207,024 (1.7) % 131,666 11.3 % 63.6 95.31 5.3 % 60.62 19.3 % Average Annual Compounded Change: 2003 - 2014 1.1 % 1.6 % 2.7 % 3.2 % 2003 - 2007 0.0 2.5 4.5 7.0 2007 - 2010 2.5 (6.5) 0.3 (8.5) 2010 - 2014 1.1 7.1 2.9 9.0 Number Year Year Hotels Included in Sample of Rooms Affiliated Opened Four Points by Sheraton Kansas City Sports Complex 168 Jun 2013 May 1975 Drury Inn & Suites Kansas City Stadium 123 May 1984 May 1984 Best Western Plus Seville Plaza Hotel 75 Nov 2010 Jun 1985 Courtyard Kansas City South 149 Sep 1990 Sep 1990 Days Inn & Suites Kansas City South 85 Oct 2014 Jul 1993 Holiday Inn Express & Suites Kansas City Sports Complex Area 81 Jun 2010 Jun 2010

Total 681

Source: STR

The following tables reflect our estimates of operating data for hotels on an individual basis. These trends are presented in detail in the Supply and Demand Analysis chapter of this report.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 3

FIGURE 1-2 PRIMARY COMPETITORS – OPERATING PERFORMANCE

Est. Segmentation Estimated 2014 Estimated 2015

Weighted Weighted Annual Annual Number of Room Room RevPAR Occupancy Yield

Property Rooms Commercial/ Count Occ. Average Rate RevPAR Count Occ. Average Rate RevPAR Change Penetration Penetration Extended-Stay Leisure Group

Best Western Plus Seville Plaza Kansas City 75 50 % 35 % 15 % 75 65 - 70 % $85 - $90 $60 - $65 75 75 - 80 % $90 - $95 $70 - $75 18.0 % 120 - 130 % 120 - 130 % Courtyard by Marriott Kansas City South 149 70 20 10 149 65 - 70 90 - 95 60 - 65 149 65 - 70 95 - 100 65 - 70 6.3 110 - 120 110 - 120 Days Inn & Suites Kansas City South 85 70 25 5 98 40 - 45 70 - 75 30 - 35 85 45 - 50 75 - 80 35 - 40 17.2 80 - 85 65 - 70 Drury Inn & Suites Kansas City Stadium 123 45 40 15 123 45 - 50 100 - 105 50 - 55 123 55 - 60 105 - 110 60 - 65 20.8 90 - 95 100 - 110 Four Points by Sheraton Kansas City Sports Complex 168 40 35 25 168 50 - 55 85 - 90 40 - 45 168 55 - 60 90 - 95 50 - 55 19.0 90 - 95 85 - 90 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 81 55 35 10 81 45 - 50 95 - 100 45 - 50 81 55 - 60 100 - 105 55 - 60 22.6 90 - 95 100 - 110

Totals/Averages 681 54 % 31 % 15 % 694 45.0 % $90.33 $49.78 681 61.2 % $94.94 $58.09 16.7 % 100.0 % 100.0 %

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 4

Summary of Forecast Based on our analysis presented in the Projection of Occupancy and Average Rate Occupancy and chapter, we have chosen to use a stabilized occupancy level of 64% and a base- Average Rate year rate position of $85.00 for the proposed subject hotel. The following table reflects a summary of our market-wide and proposed subject hotel occupancy and average rate projections.

FIGURE 1-3 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST

Area-wide Market (Calendar Year) Subject Property (Calendar Year)

Average Rate Average Average Rate Average Average Rate Year Occupancy Growth Rate Occupancy Growth Rate Penetration

Base Year 61.2 % — $94.94 — — $85.00 89.5 % 2016 61.8 4.0 % 98.74 — 4.0 % 88.40 89.5 2017 59.2 3.5 102.19 56.0 % 3.5 91.49 89.5 2018 59.0 3.0 105.26 60.0 3.0 94.24 89.5 2019 59.3 3.0 108.42 64.0 3.0 97.07 89.5 2020 59.3 3.0 111.67 64.0 3.0 99.98 89.5

The following table summarizes the proposed subject hotel’s forecast, reflecting fiscal years and opening-year rate discounts as applicable.

FIGURE 1-4 FORECAST OF AVERAGE RATE

Average Rate Average Rate Year Occupancy Before Discount Discount After Discount

2017/18 57 % $92.17 5.0 % $87.56 2018/19 61 94.94 0.0 94.94 2019/20 64 97.78 0.0 97.78

Summary of Forecast Our positioning of each revenue and expense level is supported by comparable Income and Expense operations or trends specific to this market. Our forecast of income and expense is Statement presented in the following table.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 5

FIGURE 1-5 DETAILED FORECAST OF INCOME AND EXPENSE

2017/18 Begins April 2018/19 Stabilized 2020/21 Number of Rooms: 80 80 80 80 Occupancy: 57% 61% 64% 64% Average Rate: $87.56 $94.94 $97.78 $100.72 RevPAR: $49.91 $57.91 $62.58 $64.46 Days Open: 365 365 365 365 Occupied Rooms: 16,644 %Gross PAR POR 17,812 %Gross PAR POR 18,688 %Gross PAR POR 18,688 %Gross PAR POR OPERATING REVENUE Rooms $1,457 98.0 % $18,213 $87.54 $1,691 98.1 % $21,138 $94.94 $1,827 98.2 % $22,838 $97.76 $1,882 98.2 % $23,525 $100.71 Other Operated Departments 29 1.9 357 1.72 30 1.7 375 1.68 31 1.7 392 1.68 32 1.7 403 1.73 Miscellaneous Income 2 0.1 24 0.11 2 0.1 25 0.11 2 0.1 26 0.11 2 0.1 27 0.12 Total Operating Revenues 1,487 100.0 18,593 89.37 1,723 100.0 21,537 96.73 1,860 100.0 23,255 99.55 1,916 100.0 23,955 102.55 DEPARTMENTAL EXPENSES * Rooms 346 23.7 4,324 20.78 366 21.6 4,570 20.52 384 21.0 4,797 20.53 395 21.0 4,941 21.15 Other Operated Departments 13 46.1 164 0.79 14 45.4 170 0.77 14 45.0 176 0.75 15 45.0 181 0.78 Total 359 24.1 4,488 21.57 379 22.0 4,740 21.29 398 21.4 4,973 21.29 410 21.4 5,122 21.93 DEPARTMENTAL INCOME 1,128 75.9 14,105 67.80 1,344 78.0 16,797 75.44 1,463 78.6 18,282 78.26 1,507 78.6 18,833 80.62 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 162 10.9 2,026 9.74 172 10.0 2,145 9.63 179 9.6 2,235 9.57 184 9.6 2,302 9.85 Info. & Telecom. Systems 12 0.8 152 0.73 13 0.7 161 0.72 13 0.7 168 0.72 14 0.7 173 0.74 Marketing 61 4.1 760 3.65 64 3.7 804 3.61 67 3.6 838 3.59 69 3.6 863 3.70 Franchise Fee 95 6.4 1,184 5.69 110 6.4 1,374 6.17 119 6.4 1,484 6.35 122 6.4 1,529 6.55 Prop. Operations & Maint. 57 3.8 709 3.41 60 3.5 751 3.37 63 3.4 782 3.35 64 3.4 806 3.45 Utilities 81 5.4 1,013 4.87 86 5.0 1,072 4.82 89 4.8 1,117 4.78 92 4.8 1,151 4.93 Total 468 31.4 5,845 28.09 505 29.3 6,307 28.32 530 28.5 6,624 28.36 546 28.5 6,823 29.21 GROSS HOUSE PROFIT 661 44.5 8,260 39.70 839 48.7 10,491 47.12 933 50.1 11,658 49.91 961 50.1 12,010 51.41 Management Fee 45 3.0 558 2.68 52 3.0 646 2.90 56 3.0 698 2.99 57 3.0 719 3.08 INCOME BEFORE NON-OPER. INC. & EXP. 616 41.5 7,703 37.02 788 45.7 9,844 44.21 877 47.1 10,960 46.92 903 47.1 11,291 48.33 NON-OPERATING INCOME AND EXPENSE Property Taxes 56 3.8 700 3.37 57 3.3 718 3.22 59 3.2 739 3.17 61 3.2 762 3.26 Insurance 21 1.4 263 1.27 22 1.3 271 1.22 22 1.2 279 1.20 23 1.2 288 1.23 Reserve for Replacement 30 2.0 372 1.79 52 3.0 646 2.90 74 4.0 930 3.98 77 4.0 958 4.10 Total 107 7.2 1,336 6.42 131 7.6 1,635 7.34 156 8.4 1,949 8.34 161 8.4 2,008 8.59 EBITDA LESS RESERVE $509 34.3 % $6,367 $30.60 $657 38.1 % $8,209 $36.87 $721 38.7 % $9,011 $38.58 $743 38.7 % $9,283 $39.74 *Departmental expenses are expressed as a percentage of departmental revenues.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 6

FIGURE 1-6 TEN-YEAR FORECAST OF INCOME AND EXPENSE

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Number of Rooms: 80 80 80 80 80 80 80 80 80 80 Occupied Rooms: 16,644 17,812 18,688 18,688 18,688 18,688 18,688 18,688 18,688 18,688 Occupancy: 57% 61% 64% 64% 64% 64% 64% 64% 64% 64% Average Rate: $87.56 % of $94.94 % of $97.78 % of $100.72 % of $103.74 % of $106.85 % of $110.06 % of $113.36 % of $116.76 % of $120.26 % of RevPAR: $49.91 Gross $57.91 Gross $62.58 Gross $64.46 Gross $66.39 Gross $68.38 Gross $70.44 Gross $72.55 Gross $74.73 Gross $76.97 Gross OPERATING REVENUE Rooms $1,457 98.0 % $1,691 98.1 % $1,827 98.2 % $1,882 98.2 % $1,939 98.2 % $1,997 98.2 % $2,057 98.2 % $2,118 98.2 % $2,182 98.2 % $2,247 98.2 % Other Operated Departments 29 1.9 30 1.7 31 1.7 32 1.7 33 1.7 34 1.7 35 1.7 36 1.7 37 1.7 39 1.7 Miscellaneous Income 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 3 0.1 Total Operating Revenue 1,487 100.0 1,723 100.0 1,860 100.0 1,916 100.0 1,974 100.0 2,034 100.0 2,095 100.0 2,157 100.0 2,222 100.0 2,288 100.0 DEPARTMENTAL EXPENSES* Rooms 346 23.7 366 21.6 384 21.0 395 21.0 407 21.0 419 21.0 432 21.0 445 21.0 458 21.0 472 21.0 Other Operated Departments 13 46.1 14 45.4 14 45.0 15 45.0 15 45.0 15 45.0 16 45.0 16 45.0 17 45.0 17 45.0 Total 359 24.1 379 22.0 398 21.4 410 21.4 422 21.4 435 21.4 448 21.4 461 21.4 475 21.4 489 21.4 DEPARTMENTAL INCOME 1,128 75.9 1,344 78.0 1,463 78.6 1,507 78.6 1,552 78.6 1,599 78.6 1,647 78.6 1,696 78.6 1,747 78.6 1,799 78.6 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 162 10.9 172 10.0 179 9.6 184 9.6 190 9.6 195 9.6 201 9.6 207 9.6 213 9.6 220 9.6 Info. & Telecom. Systems 12 0.8 13 0.7 13 0.7 14 0.7 14 0.7 15 0.7 15 0.7 16 0.7 16 0.7 16 0.7 Marketing 61 4.1 64 3.7 67 3.6 69 3.6 71 3.6 73 3.6 75 3.6 78 3.6 80 3.6 82 3.6 Franchise Fee 95 6.4 110 6.4 119 6.4 122 6.4 126 6.4 130 6.4 134 6.4 138 6.4 142 6.4 146 6.4 Prop. Operations & Maint. 57 3.8 60 3.5 63 3.4 64 3.4 66 3.4 68 3.4 70 3.4 73 3.4 75 3.4 77 3.4 Utilities 81 5.4 86 5.0 89 4.8 92 4.8 95 4.8 98 4.8 101 4.8 104 4.8 107 4.8 110 4.8 Total 468 31.4 505 29.3 530 28.5 546 28.5 562 28.5 579 28.5 597 28.5 614 28.5 633 28.5 652 28.5 GROSS HOUSE PROFIT 661 44.5 839 48.7 933 50.1 961 50.1 990 50.1 1,020 50.1 1,050 50.1 1,081 50.1 1,114 50.1 1,147 50.1 Management Fee 45 3.0 52 3.0 56 3.0 57 3.0 59 3.0 61 3.0 63 3.0 65 3.0 67 3.0 69 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 616 41.5 788 45.7 877 47.1 903 47.1 931 47.1 959 47.1 987 47.1 1,016 47.1 1,047 47.1 1,078 47.1 NON-OPERATING INCOME AND EXPENSE Property Taxes 56 3.8 57 3.3 59 3.2 61 3.2 63 3.2 65 3.2 67 3.2 69 3.2 71 3.2 73 3.2 Insurance 21 1.4 22 1.3 22 1.2 23 1.2 24 1.2 24 1.2 25 1.2 26 1.2 27 1.2 27 1.2 Reserve for Replacement 30 2.0 52 3.0 74 4.0 77 4.0 79 4.0 81 4.0 84 4.0 86 4.0 89 4.0 92 4.0 Total 107 7.2 131 7.6 156 8.4 161 8.4 165 8.4 170 8.4 176 8.4 181 8.4 186 8.4 192 8.4 EBITDA LESS RESERVE $509 34.3 % $657 38.1 % $721 38.7 % $743 38.7 % $765 38.7 % $788 38.7 % $812 38.7 % $836 38.7 % $861 38.7 % $887 38.7 % 1 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 7

As illustrated, the hotel is expected to stabilize at a profitable level. Please refer to the Forecast of Income and Expense chapter of our report for a detailed explanation of the methodology used in deriving this forecast.

Scope of Work The methodology used to develop this study is based on the market research and valuation techniques set forth in the textbooks authored by Hospitality Valuation Services for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,1 Hotels, Motels and Restaurants: Valuations and Market Studies,2 The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,3 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations,4 and Hotels and Motels – Valuations and Market Studies.5

1. All information was collected and analyzed by the staff of TS Worldwide, LLC. Information was supplied by the client and/or the property’s development team. 2. The subject site has been evaluated from the viewpoint of its physical utility for the future operation of a hotel, as well as access, visibility, and other relevant factors. 3. The subject property's proposed improvements have been reviewed/recommended for their expected quality of construction, design, and layout efficiency. 4. The surrounding economic environment, on both an area and neighborhood level, has been reviewed to identify specific hostelry-related economic and demographic trends that may have an impact on future demand for hotels. 5. Dividing the market for hotel accommodations into individual segments defines specific market characteristics for the types of travelers expected to utilize the area's hotels. The factors investigated include purpose of visit,

1 Stephen Rushmore, The Valuation of Hotels and Motels. (Chicago: American Institute of Real Estate Appraisers, 1978). 2 Stephen Rushmore, Hotels, Motels and Restaurants: Valuations and Market Studies. (Chicago: American Institute of Real Estate Appraisers, 1983). 3 Stephen Rushmore, The Computerized Income Approach to Hotel/Motel Market Studies and Valuations. (Chicago: American Institute of Real Estate Appraisers, 1990). 4 Stephen Rushmore, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations (Chicago: Appraisal Institute, 1992). 5 Stephen Rushmore and Erich Baum, Hotels and Motels – Valuations and Market Studies. (Chicago: Appraisal Institute, 2001).

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 8

average length of stay, facilities and amenities required, seasonality, daily demand fluctuations, and price sensitivity. 6. An analysis of existing and proposed competition provides an indication of the current accommodated demand, along with market penetration and the degree of competitiveness. Unless noted otherwise, we have inspected the competitive lodging facilities summarized in this report. 7. Documentation for an occupancy and average rate projection is derived utilizing the build-up approach based on an analysis of lodging activity. 8. A detailed projection of income and expense made in accordance with the Uniform System of Accounts for the Lodging Industry sets forth the anticipated economic benefits of the subject property.

January-2016 Executive Summary Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 9

2. Description of the Site and Neighborhood

The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its ultimate marketability. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site.

The subject site is located in southern Kansas City, in the northwest quadrant of the intersection formed by East 63rd Street and Prospect Avenue. This site is in the city of Kansas City, Missouri.

Physical Characteristics The subject site is part of a larger parcel which measures approximately 22.00 acres, or 958,320 square feet. The subject site is expected to be located within a larger development that comprises 113 parcels totaling approximately 22 acres. All parcels are currently owned by the City of Kansas City; however, the larger site is anticipated to be partitioned and redeveloped among redistributed parcels of land. We recommend that the proposed hotel be located on the land at the southeast corner of the larger site. The remainder of the greater site is expected to be developed with mixed-use office, residential, retail, and restaurant components. The parcel's adjacent uses are set forth in the following table.

FIGURE 2-1 SUBJECT PARCEL'S ADJACENT USES

Direction Adjacent Use

North Residential South East 63rd Street East Prospect Avenue West Residential

Primary vehicular access to the subject site is provided by East 63rd Street. Access is also available from Prospect Avenue. The topography of the parcel is gently rolling. As illustrated in the following exhibit, the shape of the parcel should permit efficient use of the site for building and site improvements, including ingress and egress.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 10

VIEW OF SUBJECT SITE

Site Utility Upon completion of construction, the subject site is not expected to contain any significant portion of undeveloped land that could be sold, entitled, and developed for alternate use. It is expected that the site will be developed fully with building and site improvements, thus contributing to the overall profitability of the hotel.

AERIAL PHOTOGRAPH

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 11

VIEW FROM SITE TO THE NORTH VIEW FROM SITE TO THE SOUTH

VIEW FROM SITE TO THE EAST VIEW FROM SITE TO THE WEST

Access and Visibility It is important to analyze the site with respect to regional and local transportation routes and demand generators, including ease of access. The subject site is readily accessible to a variety of local and county roads, as well as state and interstate highways.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 12

MAP OF REGIONAL ACCESS ROUTES

Primary regional access through the area is provided by east/west Interstate 70, which extends to such cities as Topeka to the west and Columbia, Missouri to the east. North/south Interstate 35 is another major thoroughfare, which provides access to such cities as Des Moines, Iowa to the north and Wichita to the southwest. Interstate 435 represents a loop route of Interstate 35 that encircles the majority of the Kansas City metropolitan area in Kansas and Missouri. The subject market is served by a variety of additional local highways, which are illustrated on the map.

The subject site is located at a busy intersection and is relatively simple to locate from Interstate 435, which is the nearest major highway. The proposed subject hotel is anticipated to have adequate signage at the street, as well as on its façade. Overall, the subject site benefits from good accessibility, and the proposed hotel is expected to enjoy good visibility from within its local neighborhood.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 13

Airport Access The proposed subject hotel will be served by the Kansas City International Airport, which is located approximately 20 miles to the northwest of the subject site.

Neighborhood The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section of the report investigates the subject neighborhood and evaluates any pertinent location factors that could affect its future occupancy, average rate, and overall profitability.

The subject site is located in the Blue Hills neighborhood of Kansas City, which is generally defined by Swope Parkway to the north, Prospect Avenue to the east, East 63rd Street to the south, and The Paseo to the west. This neighborhood is in the stable stage of its life cycle; however, new development potential exists within the larger subject site. Within the immediate proximity of the site, land use is primarily residential in nature. The neighborhood is characterized by residential homes and parks, with commercial and medical offices located just south of East 63rd Street.

The immediate neighborhood is primarily residential; however, in the greater area, some specific businesses and entities include the Research Medical Hospital, AT&T call center, CVS Pharmacy, and Pener Plaza shopping center. Less than one mile east of the subject neighborhood is the Kansas City Zoo and Swope Park. Few restaurants are within immediate proximity of the subject site; however, within a one-mile radius, restaurants include Mo's Italian Spot, KFC, McDonald's, and Texas Toms. The proposed subject hotel's opening should be a positive influence on the area; the hotel should be in character with and complement surrounding land uses.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 14

MAP OF NEIGHBORHOOD

Overall, the immediate area is considered appropriate for and conducive to the operation of a hotel. The proposed subject hotel is expected to be developed on a small portion of a greater, city-owned site; the potential future additional development of this land would be anticipated to improve the supportive nature of the area.

Utilities The subject site will reportedly be served by all necessary utilities.

Soil and Geological and soil reports were not provided to us or made available for our Subsoil Conditions review during the preparation of this report. We are not qualified to evaluate soil conditions other than by a visual inspection of the surface; no extraordinary conditions were apparent.

Nuisances We were not informed of any site-specific nuisances or hazards, and there were no and Hazards visible signs of toxic ground contaminants at the time of our inspection. Because we are not experts in this field, we do not warrant the absence of hazardous waste and urge the reader to obtain an independent analysis of these factors.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 15

Flood Zone According to the Federal Emergency Management Agency, the subject site is located in flood zone C. The flood zone definition for the C designation is as follows: areas of minimal flooding.

Zoning According to the local planning office, the subject property is zoned as follows: B4- 2, B3-2, R-5, R-2.5 - Heavy Business, Community Business, Residential. The larger site features multiple zoning designations that allow for either commercial or residential uses. Upon the redevelopment of the site, the entirety of the land is expected to be available for commercial and mixed-use construction, including hotels and motels. We assume that all necessary permits and approvals will be secured (including the appropriate liquor license if applicable) and that the subject property will be constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the site.

Easements and We are not aware of any easements attached to the property that would Encroachments significantly affect the utility of the site or marketability of this project.

Conclusion We have analyzed the issues of size, topography, access, visibility, and the availability of utilities. The subject site is located at a busy intersection nearby State Highway 71, which is a major thoroughfare connecting the southern suburbs to Downtown Kansas City. In general, the site should be well suited for future hotel use, with acceptable access, visibility, and topography for an effective operation.

January-2016 Description of the Site and Neighborhood Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 16

3. Market Area Analysis

The economic vitality of the market area and neighborhood surrounding the subject site is an important consideration in forecasting lodging demand and future income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project lodging demand. The purpose of the market area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stabilize, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand, with the objective of forecasting the amount of growth or decline in visitation by individual market segment (e.g., commercial, meeting and group, and leisure).

Market Area Definition The market area for a lodging facility is the geographical region where the sources of demand and the competitive supply are located. The subject site is located in the city of Kansas City, the county of Jackson, and the state of Missouri. Kansas City is a thriving cultural and economic center at the heart of the United States. First a trading post and river port settlement, the city developed after the Civil War as a link in the intercontinental railroad network, which led to prosperous grain, livestock, and meat-packing industries. During the 20th century, Kansas City garnered a national reputation for its distinctive architecture, boulevard system, and innovations in urban redevelopment; this redevelopment has continued into the 21st century. Growth and redevelopment efforts have been especially notable in the metropolitan's urban core, with the H&R Block Headquarters relocation to the Power & Light District in 2006, the opening of the Sprint Center in 2007, and the opening of the Kauffman Center for the Performing Arts in November 2011. Additionally, the Overland Park area, south of Downtown Kansas City, is home to over 40 corporate headquarters, including Sprint, YRC Worldwide, Waddell & Reed, and Black & Veatch, among others.

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 17

KANSAS CITY

The proposed subject property’s market area can be defined by its Combined Statistical Area (CSA): Kansas City-Overland Park-Kansas City, MO-KS. The CSA represents adjacent metropolitan and micropolitan statistical areas that have a moderate degree of employment interchange. Micropolitan statistical areas represent urban areas in the United States based around a core city or town with a population of 10,000 to 49,999; the MSA requires the presence of a core city of at least 50,000 people and a total population of at least 100,000 (75,000 in New England). The following exhibit illustrates the market area.

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 18

MAP OF MARKET AREA

Economic and A primary source of economic and demographic statistics used in this analysis is Demographic Review the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc.—a well-regarded forecasting service based in Washington, D.C. Using a database containing more than 900 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole, and all dollar amounts have been adjusted for inflation, thus reflecting real change.

These data are summarized in the following table.

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 19

FIGURE 3-1 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY

Average Annual Compounded Change 2000 2010 2014 2020 2000-10 2010-14 2014-20

Resident Population (Thousands) Jackson County 655.7 675.0 680.9 688.1 0.3 % 0.2 % 0.2 % Kansas City, MO-KS MSA 1,817.9 2,013.7 2,099.5 2,251.7 1.0 1.0 1.2 Kansas City-Overland Park-Kansas City, MO-KS CSA 2,132.5 2,347.9 2,441.8 2,606.0 1.0 1.0 1.1 State of Missouri 5,607.3 5,995.7 6,140.6 6,404.6 0.7 0.6 0.7 United States 282,162.4 309,330.2 320,976.9 340,554.3 0.9 0.9 1.0 Per-Capita Personal Income* Jackson County $36,291 $38,769 $39,996 $43,020 0.7 0.8 1.2 Kansas City, MO-KS MSA 39,052 40,881 42,641 46,097 0.5 1.1 1.3 Kansas City-Overland Park-Kansas City, MO-KS CSA 37,406 39,492 41,222 44,565 0.5 1.1 1.3 State of Missouri 33,545 35,813 37,461 40,462 0.7 1.1 1.3 United States 36,473 39,144 41,079 44,387 0.7 1.2 1.3 W&P Wealth Index Jackson County 98.0 96.1 94.6 94.0 (0.2) (0.4) (0.1) Kansas City, MO-KS MSA 106.9 104.4 103.7 103.7 (0.2) (0.2) 0.0 Kansas City-Overland Park-Kansas City, MO-KS CSA 102.9 101.1 100.5 100.6 (0.2) (0.1) 0.0 State of Missouri 92.8 91.7 91.3 91.2 (0.1) (0.1) (0.0) United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0 Food and Beverage Sales (Millions)* Jackson County $1,061 $1,181 $1,257 $1,347 1.1 1.6 1.2 Kansas City, MO-KS MSA 2,518 2,976 3,257 3,665 1.7 2.3 2.0 Kansas City-Overland Park-Kansas City, MO-KS CSA 2,869 3,402 3,717 4,167 1.7 2.2 1.9 State of Missouri 7,298 8,280 8,907 9,790 1.3 1.8 1.6 United States 368,842 447,396 490,340 548,160 1.9 2.3 1.9 Total Retail Sales (Millions)* Jackson County $10,533 $9,074 $9,796 $10,451 (1.5) 1.9 1.1 Kansas City, MO-KS MSA 27,983 28,578 32,004 36,440 0.2 2.9 2.2 Kansas City-Overland Park-Kansas City, MO-KS CSA 31,451 32,424 36,211 41,015 0.3 2.8 2.1 State of Missouri 79,654 80,027 87,862 96,967 0.0 2.4 1.7 United States 3,902,969 4,149,070 4,617,326 5,187,469 0.6 2.7 2.0

* Inflation Adjusted Source: Woods & Poole Economics, Inc.

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 20

The U.S. population has grown at an average annual compounded rate of 0.9% from 2010 through 2014. The county’s population has grown more slowly than the nation’s population; the average annual growth rate of 0.2% between 2010 and 2014 reflects a gradually expanding area. Following this population trend, per- capita personal income increased slowly, at 0.8% on average annually for the county between 2010 and 2014. Local wealth indexes have remained stable in recent years, registering a relatively modest 94.6 level for the county in 2014.

Food and beverage sales totaled $1,257 million in the county in 2014, versus $1,181 million in 2010. This reflects a 1.6% average annual change, which is stronger than the 1.1% pace recorded in the prior decade, the latter years of which were adversely affected by the recession. Over the long term, the pace of growth is forecast to moderate to a more sustainable level of 1.2%, which is forecast through 2020. The retail sales sector demonstrated an annual decline of -1.5% registered in the decade 2000 to 2010, followed by an increase of 1.9% in the period 2010 to 2014. An increase of 1.1% average annual change is expected in county retail sales through 2020.

Workforce The characteristics of an area's workforce provide an indication of the type and Characteristics amount of transient visitation likely to be generated by local businesses. Sectors such as finance, insurance, and real estate (FIRE); wholesale trade; and services produce a considerable number of visitors who are not particularly rate-sensitive. The government sector often generates transient room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Contributions from manufacturing, construction, transportation, communications, and public utilities (TCPU) employers can also be important, depending on the company type.

The following table sets forth the county workforce distribution by business sector in 2000, 2010, and 2014, as well as a forecast for 2020.

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 21

FIGURE 3-2 HISTORICAL AND PROJECTED EMPLOYMENT (000S)

Average Annual Compounded Change Percent Percent Percent Percent Industry 2000 of Total 2010 of Total 2014 of Total 2020 of Total 2000-2010 2010-2014 2014-2020

Farm 0.9 0.2 % 0.8 0.2 % 0.8 0.2 % 0.7 0.2 % (2.0) % (0.4) % (0.3) % Forestry, Fishing, Related Activities And Other 0.2 0.0 0.2 0.0 0.2 0.0 0.2 0.0 0.0 (0.1) 0.8 Mining 0.3 0.1 0.3 0.1 0.4 0.1 0.3 0.1 (0.6) 2.9 (0.7) Utilities 2.8 0.6 2.8 0.7 2.8 0.6 2.9 0.6 0.1 (0.3) 0.5 Construction 26.7 5.7 21.0 4.8 21.2 4.8 22.5 5.0 (2.4) 0.2 1.0 Manufacturing 32.8 7.0 24.7 5.7 23.2 5.3 20.7 4.6 (2.8) (1.6) (1.9) Total Trade 66.0 14.1 56.9 13.1 58.3 13.2 59.3 13.1 (1.5) 0.6 0.3 Wholesale Trade 20.7 4.4 16.9 3.9 17.2 3.9 17.2 3.8 (2.0) 0.4 0.0 Retail Trade 45.3 9.6 40.0 9.2 41.1 9.3 42.1 9.3 (1.2) 0.7 0.4 Transportation And Warehousing 14.7 3.1 10.9 2.5 11.0 2.5 11.0 2.4 (2.9) 0.2 0.0 Information 28.3 6.0 12.0 2.8 10.8 2.4 11.2 2.5 (8.2) (2.6) 0.6 Finance And Insurance 33.6 7.2 32.7 7.5 33.8 7.6 35.4 7.8 (0.3) 0.8 0.8 Real Estate And Rental And Lease 15.2 3.2 17.4 4.0 16.6 3.7 16.7 3.7 1.4 (1.2) 0.1 Total Services 183.1 39.0 189.2 43.4 197.1 44.6 205.4 45.4 0.3 1.0 0.7 Professional And Technical Services 31.2 6.6 35.3 8.1 37.3 8.4 40.0 8.9 1.3 1.4 1.2 Management Of Companies And Enterprises 7.6 1.6 7.2 1.7 7.8 1.8 8.1 1.8 (0.5) 1.9 0.6 Administrative And Waste Services 30.1 6.4 24.1 5.5 23.8 5.4 23.7 5.2 (2.2) (0.3) (0.1) Educational Services 7.2 1.5 9.1 2.1 9.7 2.2 10.5 2.3 2.4 1.7 1.4 Health Care And Social Assistance 43.4 9.2 48.7 11.2 51.8 11.7 53.9 11.9 1.2 1.6 0.7 Arts, Entertainment, And Recreation 8.3 1.8 9.8 2.2 10.4 2.3 11.5 2.5 1.6 1.5 1.8 Accommodation And Food Services 30.8 6.6 31.5 7.2 32.4 7.3 32.9 7.3 0.2 0.6 0.3 Other Services, Except Public Administration 24.6 5.2 23.5 5.4 24.0 5.4 24.7 5.5 (0.5) 0.6 0.5 Total Government 64.9 13.8 66.7 15.3 65.5 14.8 65.9 14.6 0.3 (0.5) 0.1 Federal Civilian Government 17.5 3.7 18.0 4.1 18.3 4.1 19.1 4.2 0.3 0.4 0.7 Federal Military 2.8 0.6 2.5 0.6 2.5 0.6 2.5 0.5 (1.2) (0.5) 0.1 State And Local Government 44.6 9.5 46.3 10.6 44.8 10.1 44.4 9.8 0.4 (0.8) (0.1)

TOTAL 469.5 100.0 % 435.7 100.0 % 441.5 100.0 % 452.3 100.0 % (0.7) % 0.3 % 0.4 %

MSA 1,201.5 — 1,240.2 — 1,307.8 — 1,427.2 — 0.3 % 1.3 % 1.5 % U.S. 165,371.0 — 173,626.7 — 183,038.2 — 198,343.5 — 0.7 1.3 1.3

Source: Woods & Poole Economics, Inc.

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Woods & Poole Economics, Inc. reports that during the period from 2000 to 2010, total employment in the county contracted at an average annual rate of -0.7%. This trend was below the growth rate recorded by the MSA and also lagged the national average. More recently, the pace of total employment growth in the county accelerated to 0.3% on an annual average from 2010 to 2014, reflecting the initial years of the recovery.

Of the primary employment sectors, Total Services recorded the highest increase in number of employees during the period from 2010 to 2014, increasing by 7,918 people, or 4.2%, and rising from 43.4% to 44.6% of total employment. Of the various service sub-sectors, Health Care And Social Assistance and Professional And Technical Services were the largest employers. Strong growth was also recorded in the Total Trade sector, as well as the Finance And Insurance sector, which expanded by 2.4% and -6.2%, respectively, in the period 2010 to 2014. Forecasts developed by Woods & Poole Economics, Inc. anticipate that total employment in the county will change by 0.4% on average annually through 2020. The trend is below the forecast rate of change for the U.S. as a whole during the same period.

Radial Demographic The following table reflects radial demographic trends for our market area Snapshot measured by three points of distance from the subject site.

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FIGURE 3-3 DEMOGRAPHICS BY RADIUS

0.00 - 1.00 miles 0.00 - 3.00 miles 0.00 - 5.00 miles Population 2020 Projection 11,314 82,005 217,895 2015 Estimate 11,520 83,053 219,350 2010 Census 11,841 84,871 222,572 2000 Census 14,432 95,668 246,381 Growth 2015-2020 -1.8% -1.3% -0.7% Growth 2010-2015 -2.7% -2.1% -1.5% Growth 2000-2010 -18.0% -11.3% -9.7% Households 2020 Projection 4,789 36,704 100,676 2015 Estimate 4,810 36,802 100,291 2010 Census 4,839 37,050 100,193 2000 Census 5,390 40,785 109,041 Growth 2015-2020 -0.4% -0.3% 0.4% Growth 2010-2015 -0.6% -0.7% 0.1% Growth 2000-2010 -10.2% -9.2% -8.1% Income 2015 Est. Average Household Income $36,525 $67,088 $63,552 2015 Est. Median Household Income 29,550 40,172 40,872 2015 Est. Civ. Employed Pop 16+ by Occupation 4,393 39,314 107,377 Architect/Engineer 14 537 1,505 Arts/Entertainment/Sports 31 1,131 3,234 Building Grounds Maintenance 306 1,891 4,940 Business/Financial Operations 132 2,354 6,360 Community/Social Services 85 670 2,197 Computer/Mathematical 36 934 2,881 Construction/Extraction 83 799 3,043 Education/Training/Library 163 2,564 6,444 Farming/Fishing/Forestry 7 41 133 Food Prep/Serving 314 2,613 7,418 Health Practitioner/Technician 304 3,114 8,014 Healthcare Support 465 1,465 3,714 Maintenance Repair 92 572 1,797 Legal 26 1,242 2,818 Life/Physical/Social Science 28 380 1,028 Management 259 4,459 10,999 Office/Admin. Support 745 4,997 14,973 Production 312 1,392 4,459 Protective Services 82 577 1,622 Sales/Related 380 4,182 11,204 Personal Care/Service 197 1,408 3,629 Transportation/Moving 332 1,991 4,967 Source: The Nielsen Company

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This source reports a population of 219,350 within a five-mile radius of the subject site, and 100,291 households within this same radius. Average household income within a five-mile radius of the subject site is currently reported at $63,552, while the median is $40,872.

The following table illustrates historical and projected employment, households, population and average household income data as provided by REIS for the overall Kansas City Office market.

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FIGURE 3-4 HISTORICAL & PROJECTED EMPLOYMENT, HOUSEHOLDS, POPULATION, AND HOUSEHOLD INCOME STATISTICS

Total Office Industrial Household Year Employment % Chg Employment % Chg Employment % Chg Households % Chg Population % Chg Avg. Income % Chg

2002 950,070 — 286,598 — 143,743 — 730,250 — 1,867,330 — $86,151 — 2003 953,830 0.4 % 288,004 0.5 % 142,481 (0.9) % 737,610 1.0 % 1,883,520 0.9 % 87,983 2.1 % 2004 966,770 1.4 295,435 2.6 144,400 1.3 745,220 1.0 1,900,620 0.9 91,463 4.0 2005 977,000 1.1 303,552 2.7 143,799 (0.4) 753,430 1.1 1,920,150 1.0 94,713 3.6 2006 994,400 1.8 311,181 2.5 145,055 0.9 762,100 1.2 1,943,410 1.2 100,728 6.4 2007 1,008,900 1.5 318,814 2.5 144,766 (0.2) 773,240 1.5 1,964,490 1.1 105,304 4.5 2008 1,001,770 (0.7) 316,573 (0.7) 143,383 (1.0) 783,240 1.3 1,984,160 1.0 108,436 3.0 2009 961,130 (4.1) 309,254 (2.3) 132,367 (7.7) 789,010 0.7 2,005,110 1.1 104,226 (3.9) 2010 968,470 0.8 314,400 1.7 134,364 1.5 795,360 0.8 2,019,670 0.7 105,925 1.6 2011 979,530 1.1 320,045 1.8 134,258 (0.1) 802,150 0.9 2,031,590 0.6 110,283 4.1 2012 991,830 1.3 326,652 2.1 132,856 (1.0) 810,360 1.0 2,047,230 0.8 116,386 5.5 2013 1,005,030 1.3 327,983 0.4 135,298 1.8 817,510 0.9 2,063,380 0.8 115,802 (0.5) 2014 1,028,330 2.3 335,185 2.2 139,585 3.2 819,350 0.2 2,076,280 0.6 119,746 3.4

Forecasts 2015 1,039,410 1.1 % 339,994 1.4 % 139,016 (0.4) % 826,160 0.8 % 2,083,810 0.4 % $121,595 1.5 % 2015 1,044,990 0.5 342,301 0.7 139,380 0.3 828,830 0.3 2,086,610 0.1 123,307 1.4 2016 1,068,810 2.3 351,651 2.7 140,982 1.1 839,670 1.3 2,098,200 0.6 129,465 5.0 2017 1,090,550 2.0 359,933 2.4 142,517 1.1 851,130 1.4 2,109,840 0.6 136,588 5.5 2018 1,106,860 1.5 366,072 1.7 143,600 0.8 859,530 1.0 2,121,550 0.6 142,664 4.4

Average Annual Compound Change 2002 - 2014 0.7 % 1.3 % (0.2) % 1.0 % 0.9 % 2.8 % 2002 - 2007 1.2 2.2 0.1 1.2 1.0 4.1 2007 - 2010 (1.4) (0.5) (2.5) 0.9 0.9 0.2 2010 - 2014 1.5 1.6 1.0 0.7 0.7 3.1 Forecast 2014 - 2019 1.5 % 1.8 % 0.6 % 1.0 % 0.4 % 3.6 %

Source: REIS Report, 3rd Quarter, 2015

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For the Kansas City Office market, of the roughly 1,000,000 persons employed, 33% are categorized as office employees, while 14% are categorized as industrial employees. Total employment decreased by an average annual compound rate of - 1.4% during the recession of 2007 to 2010, followed by an improvement of 1.5% from 2010 to 2014. By comparison, office employment reflected compound change rates of -0.5% and 1.6%, during the same respective periods. Total employment is expected to expand by 1.1% in 2015, while office employment is forecast to expand by 1.4% in 2015. From 2014 through 2018, REIS anticipates that total employment will improve at an average annual compound rate of 1.5%, while office employment will improve by 1.8% on average annually during the same period.

The number of households is forecast to improve by 1.0% on average annually between 2014 and 2018. Population is forecast to expand during this same period, at an average annual compounded rate of 0.4%. Household average income is forecast to grow by 3.6% on average annually from 2014 through 2018.

Unemployment The following table presents historical unemployment rates for the proposed Statistics subject hotel’s market area.

FIGURE 3-5 UNEMPLOYMENT STATISTICS

Year County MSA State U.S. 2005 6.4 % 5.6 % 5.4 % 5.1 % 2006 5.7 5.0 4.8 4.6 2007 5.9 5.1 5.1 4.6 2008 6.9 5.9 6.1 5.8 2009 10.2 8.7 9.3 9.3 2010 10.7 8.7 9.6 9.6 2011 9.5 7.8 8.5 8.9 2012 7.8 6.5 7.0 8.1 2013 7.7 6.3 6.7 7.4 2014 7.1 5.6 6.1 6.2 Recent Month - Oct 2014 6.3 % 4.9 % 5.0 % 5.7 % 2015 5.3 4.2 4.3 5.0

* Letters shown next to data points (if any) reflect revised population controls and/or model re-estimation implemented by the BLS. Source: U.S. Bureau of Labor Statistics

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After declining to an annual average of 4.6% in 2006 and 2007, the Great Recession, which spanned December 2007 through June 2009, resulted in heightened unemployment rates. The unemployment rate peaked at 10.0% in October 2009, after which job growth resumed; the national unemployment rate has steadily declined since 2010. Total nonfarm payroll employment increased by a robust 271,000 and 211,000 jobs in October and November 2015, respectively, following lesser gains of 153,000 and 137,000 jobs in August and September, respectively. The strongest gains in November employment were in the construction, professional and technical services, and healthcare sectors. The unemployment rate remained at 5.0% in November, the lowest rate since the first quarter of 2008. The positive gains in employment reflect steady progress by the U.S. economy.

Locally, the unemployment rate was 7.1% in 2014; for this same area in 2015, the most recent month’s unemployment rate was registered at 5.3%, versus 6.3% for the same month in 2014. After showing year-over-year improvement, unemployment began to rise in 2007 as the region entered an economic slowdown, and this trend continued through 2010 as the height of the national recession took hold. However, unemployment declined in 2011 as the economy rebounded, a trend that continued through 2014. The most recent comparative period illustrates ongoing improvement, indicated by the lower unemployment rate in the latest available data for 2015. Local economic development officials reported that healthcare, manufacturing, logistics, and bioscience entities provide strong employment in the market.

Major Business and Providing additional context for understanding the nature of the regional Industry economy, the following table presents a list of the major employers in the subject property’s market.

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FIGURE 3-6 MAJOR EMPLOYERS

Number of Rank Firm Employees

1 Federal Government 27,000 2 Cerner Corporation 10,160 3 Fort Leavenworth 9,000 4 HCA MidAmerica 8,650 5 Whiteman Air Force Base 7,642 6 Sprint Corporation 7,500 7 Children's Mercy Hospitals & Clinics 7,415 8 Ford Motor Company 7,400 9 University of Kansas Hospital 6,500 10 State of Kansas 6,263

Source: Kansas City Area Development Council, 2015

The following bullet points highlight major demand generators for this market:

• The federal, state, and city governments act as one of the area's largest employment sectors. Kansas City houses the Charles Evans Whittaker U.S. Courthouse, which includes 16 courtrooms, the U.S. Circuit Court of Appeals, Judge’s Chambers, U.S. Attorney’s office, U.S. Marshall’s offices, and other court-related agencies. Although Independence retains its status as the original county seat, Kansas City serves as a second county seat and the center of county government for Jackson County. The Kansas City Hall and the Richard Bolling Federal Building are also located within the Government District. Lastly, the Federal Reserve Bank and the Internal Revenue Service operate offices in Kansas City, and although neither is located within the Government District, both are important components of the city's integration with the federal government. • The Sprint Nextel Corporation maintains its headquarters and a large campus in the city of Overland Park. The company operates the fourth-largest telecommunications network in the United States, with more than 58.6 million customers as of November 2015. The Sprint World Headquarters Campus in Overland Park includes 17 buildings comprising 3.9 million square feet of office space. In addition to housing Sprint, the office park subleases to major companies including Great-West Financial (which purchased JP Morgan Retirement Plan Services in 2014), KeyBank, and Apria Healthcare. • The Kansas City metropolitan area is home to nine Fortune 1000 company headquarters. One of these Fortune 1000 companies, Cerner, broke ground in

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late 2014 on a 290-acre campus in southern Kansas City, on a site formerly occupied by Bannister Mall and Benjamin Plaza. The new campus, referred to as Cerner's Trails Campus, will be the company's seventh and largest Kansas City location. When completed, the campus is expected to house 16,000 workers within 16 buildings and 4.7 million square feet of space. The first two buildings were under construction as of late 2015; employees are anticipated to begin moving in by early 2017. As the largest city in the state of Missouri and anchor city of the Kansas City metropolitan area, the Kansas City market benefits from a diverse economic base. Aside from a strong governmental component, several Fortune 500 and Fortune 1000 companies, as well as a number of other large national and international companies, call Kansas City home. The Kansas City region remains one of the most cost-efficient places to live and do business in the United States. Its combination of big-city business amenities and small-market ease of living has historically made the metro area a magnet for investment. As such, Kansas City remains an economic stalwart and its strong economic base should continue to bolster the area's economy in the near term.

Office Space Statistics Trends in occupied office space are typically among the most reliable indicators of lodging demand, as firms that occupy office space often exhibit a strong propensity to attract commercial visitors. Thus, trends that cause changes in vacancy rates or occupied office space may have a proportional impact on commercial lodging demand and a less direct effect on meeting demand. The following table details office space statistics for the pertinent market area.

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FIGURE 3-7 OFFICE SPACE STATISTICS – MARKET OVERVIEW

Inventory Occupied Office Vacancy Average Asking Submarket Buildings Square Feet Space Rate Lease Rate

1 Wyandotte/Leavenworth 15 1,056,000 779,300 26.2 % $18.85 2 Overlnd Park/South Johnson 233 12,783,000 11,146,800 12.8 22.43 3 North Johnson 110 5,003,000 4,092,500 18.2 18.41 4 Clay 44 1,759,000 1,484,600 15.6 20.21 5 Downtown 52 6,838,000 5,607,200 18.0 17.51 6 State Line 31 1,552,000 1,353,300 12.8 18.57 7 Platte 34 2,211,000 1,432,700 35.2 16.37 8 Midtown 94 8,171,000 7,174,100 12.2 22.29 9 South 44 2,140,000 1,780,500 16.8 14.61 10 East Jackson 57 1,676,000 1,030,700 38.5 15.24 Totals and Averages 714 43,189,000 35,881,700 16.9 % $19.87

Source: REIS Report, 3rd Quarter, 2015

The greater Kansas City Office market comprises a total of 43.2 million square feet of office space. For the 3rd Quarter of 2015, the market reported a vacancy rate of 16.9% and an average asking rent of $19.87. The subject property is located in the South submarket, which houses 2,140,000 square feet of office space. The submarket's vacancy rate of 16.8% is on par with the overall market average. The average asking lease rate of $14.61 is below the average for the broader market.

The following table illustrates a trend of office space statistics for the overall Kansas City Office market and the South submarket.

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FIGURE 3-8 HISTORICAL AND PROJECTED OFFICE SPACE STATISTICS – GREATER MARKET VS. SUBMARKET

Kansas City Office Market South Submarket Available Occupied Vacancy Asking Available Occupied Vacancy Asking Year Office Space % Chg Office Space % Chg Rate Lease Rate % Chg Office Space % Chg Office Space % Chg Rate Lease Rate % Chg

2002 43,229,000 — 35,569,000 — 17.7 % $18.01 — 2,411,000 — 1,632,000 — 32.3 % $15.12 — 2003 43,191,000 (0.1) % 35,558,000 (0.0) % 17.7 18.24 1.3 % 2,411,000 0.0 % 1,712,000 4.9 % 29.0 15.03 (0.6) % 2004 43,385,000 0.4 35,447,000 (0.3) 18.3 17.87 (2.0) 2,411,000 0.0 1,717,000 0.3 28.8 13.87 (7.7) 2005 42,919,000 (1.1) 35,468,000 0.1 17.4 17.96 0.5 2,332,000 (3.3) 1,912,000 11.4 18.0 13.72 (1.1) 2006 42,893,000 (0.1) 35,495,000 0.1 17.2 18.02 0.3 2,306,000 (1.1) 1,914,000 0.1 17.0 13.65 (0.5) 2007 42,886,000 (0.0) 36,422,000 2.6 15.1 18.38 2.0 2,241,000 (2.8) 1,914,000 0.0 14.6 13.81 1.2 2008 43,292,000 0.9 36,286,000 (0.4) 16.2 18.69 1.7 2,212,000 (1.3) 1,900,000 (0.7) 14.1 14.12 2.2 2009 43,244,000 (0.1) 36,109,000 (0.5) 16.5 18.80 0.6 2,212,000 0.0 1,882,000 (0.9) 14.9 14.20 0.6 2010 42,951,000 (0.7) 35,481,000 (1.7) 17.4 18.75 (0.3) 2,140,000 (3.3) 1,825,000 (3.0) 14.7 14.10 (0.7) 2011 43,160,000 0.5 35,824,000 1.0 17.0 18.91 0.9 2,140,000 0.0 1,808,000 (0.9) 15.5 13.97 (0.9) 2012 43,160,000 0.0 35,435,000 (1.1) 17.9 19.17 1.4 2,140,000 0.0 1,821,000 0.7 14.9 14.84 6.2 2013 43,466,000 0.7 36,119,000 1.9 16.9 19.34 0.9 2,140,000 0.0 1,813,000 (0.4) 15.3 15.04 1.3 2014 43,315,000 (0.3) 35,854,000 (0.7) 17.2 19.59 1.3 2,140,000 0.0 1,751,000 (3.4) 18.2 14.44 (4.0)

Forecasts 2015 43,189,000 (0.3) % 35,882,000 0.1 % 16.9 % $19.87 1.4 % 2,140,000 0.0 % 1,780,000 1.7 % 16.8 % $14.61 1.2 % 2015 43,189,000 0.0 35,949,000 0.2 16.8 19.97 0.5 2,140,000 0.0 1,787,000 0.4 16.5 14.69 0.5 2016 43,720,000 1.2 36,724,000 2.2 16.0 20.52 2.8 2,150,000 0.5 1,804,000 1.0 16.1 14.97 1.9 2017 44,289,000 1.3 37,501,000 2.1 15.3 21.33 3.9 2,164,000 0.7 1,828,000 1.3 15.5 15.33 2.4 2018 44,995,000 1.6 38,395,000 2.4 14.7 22.30 4.5 2,188,000 1.1 1,857,000 1.6 15.2 15.73 2.6

Average Annual Compound Change 2002 - 2014 0.0 % 0.1 % 0.7 % (1.0) % 0.6 % (0.4) % 2002 - 2007 (0.2) 0.5 0.4 (1.5) 3.2 (1.8) 2007 - 2010 0.1 (0.9) 0.7 (1.5) (1.6) 0.7 2010 - 2014 0.2 0.3 1.1 0.0 (1.0) 0.6 Forecast 2014 - 2019 0.8 % 1.4 % 2.6 % 0.4 % 1.2 % 1.7 %

Source: REIS Report, 3rd Quarter, 2015

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The inventory of office space in the Kansas City Office market remained relatively stable from 2002 through 2014, while occupied office space also remained relatively stable at an average annual rate of 0.1% over the same period. During the period of 2002 through 2007, occupied office space expanded at an average annual compound rate of 0.5%. From 2007 through 2010, occupied office space contracted at an average annual compound rate of -0.9%, reflecting the impact of the recession. The onset of the recovery is evident in the 0.3% average annual change in occupied office space from 2010 to 2014. From 2014 through 2018, the inventory of occupied office space is forecast to increase at an average annual compound rate of 1.4%, with available office space expected to increase 0.8%, thus resulting in an anticipated vacancy rate of 14.7% as of 2018.

Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers may require hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area.

Kansas City International Airport (MCI) is located 15 miles northwest of Kansas City, Missouri. MCI passenger terminals have a unique structure comprising three terminals in the shape of rings. Each ring has short-term parking in its center; the Kansas City Airport also has several off-site airport parking facilities. Kansas City International is not a hub of any major airline, allowing the city to benefit from ample choices of flights among many airlines, which accordingly keeps travel costs into and out of the airport relatively low. In 2013, city officials approved preliminary plans to move forward with the long-discussed conversion of the airport to a single-terminal facility. However, this $1.2-billion project is contingent upon public bond issues and other financial considerations. The final recommendation currently has a deadline of May 2016.

The following table illustrates recent operating statistics for the Kansas City International Airport, which is the primary airport facility serving the proposed subject hotel’s submarket.

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FIGURE 3-9 AIRPORT STATISTICS - KANSAS CITY INTERNATIONAL AIRPORT

Passenger Percent Percent Year Traffic Change* Change**

2005 9,730,909 — — 2006 10,569,590 8.6 % 8.6 % 2007 11,275,951 6.7 7.6 2008 10,469,892 (7.1) 2.5 2009 9,774,972 (6.6) 0.1 2010 9,912,203 1.4 0.4 2011 10,158,452 2.5 0.7 2012 9,749,507 (4.0) 0.0 2013 9,644,264 (1.1) (0.1) 2014 10,166,879 5.4 0.5 Year-to-date, Nov 2014 9,330,124 — — 2015 9,625,297 3.2 % —

*Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data

Source: Kansas City International Airport

FIGURE 3-10 LOCAL PASSENGER TRAFFIC VS. NATIONAL TREND

10% 8% 6% 4% 2% 0% -2% -4%

Change in Passenger Activity Passenger in Change -6% -8% 2006 2007 2008 2009 2010 2011 2012 2013 2014

Local Passenger Volume National Passenger Volume

Source: HVS, Local Airport Authority

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This facility recorded 10,166,879 passengers in 2014. The change in passenger traffic between 2013 and 2014 was 5.4%. The average annual change during the period shown was 0.5%.

Tourist Attractions The market benefits from a variety of tourist and leisure attractions in the greater Kansas City area. The peak season for tourism in this area is from May to September. During other times of the year, weekend demand comprises travelers passing through en route to other destinations, people visiting friends or relatives, and other similar weekend demand generators. Primary attractions in the area include the following:

• Swope Park is an 1,800-acre park located in southern Kansas City, which includes the Starlight Theatre, an 8,000-seat outdoor theater, the Swope Soccer Village complex, the Kansas City Zoo, various athletic venues including the Swope Memorial Golf Course, and the Lakeside Nature Center. In 2015, the $13.4-million Swope Soccer Village complex was completed as part of a private-public partnership between the City of Kansas City's parks department and Sporting Kansas City of Major League Soccer. The facility is expected to host both college and youth soccer tournaments and will also be home to the Swope Park Rangers, a newly formed United Soccer League club that is set to begin play in 2016. • The Kansas City Zoo is located in Swope Park and encompasses 202 acres of zoo land. Founded in 1909, the zoo features over 1,300 animals. Since 2007, the Zoo has invested over $85 million in capital projects including the Discovery Barn, the Zoo Learning Center, a habitat for river otters, a habitat for trumpeter swans, an Endangered Species Carousel, the Polar Bear Passage, the African Sky Safari, the Tiger Terrace, and the Helzberg Penguin Plaza. • Contained within one block of the new Power & Light District, Kansas City Live features a multilevel design with dining and entertainment options, surrounding a covered center atrium that houses events ranging from live music to family festivals. In addition, Arrowhead Stadium, home to the NFL's Kansas City Chiefs; Kauffman Stadium, home of the Kansas City Royals baseball team; and Kemper Arena are all located in the Truman Sports Complex, approximately eight miles southeast of the metropolitan core. Kansas City also features an MLS soccer club, Sporting Club, which plays at Sporting Park. In 2015, commissioners from the Unified Government of Wyandotte County/Kansas City approved Sporting Club's plans to construct a $75-million National Training and Coaching Development Center that will serve as a home base for the U.S. Soccer Federation and its national teams. The 190-acre soccer village will be located in Wyandotte County, near Sporting Park; U.S. Soccer has already agreed to a 20-year lease of the Center, making this entity the primary tenant.

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• The 96-acre, $36-million Overland Park Soccer Complex features twelve lighted, synthetic turf fields. Furthermore, the facility provides nearly 1,100 square feet of meeting space for events. The soccer complex hosts several tournaments throughout the year, including the U.S. Youth Soccer Region II President's Cup; furthermore, it hosted the U.S. Youth Soccer National Championships in 2013.

ARROWHEAD STADIUM

Conclusion This section discussed a wide variety of economic indicators for the pertinent market area. Kansas City is experiencing a period of economic strength and expansion, led by the financial services and healthcare sectors, as well as the manufacturing industry. The significant presence of federal and local government entities also supplies consistent economic benefits to the city. Furthermore, many of the corporations or institutions that support this area, such as Sprint Corporation, H&R Block, AT&T, BNSF Railway, Asurion, Cerner, Farmers Insurance Group, Hallmark Cards, Harley-Davidson, General Motors, Honeywell, and Ford Motor Company, are renowned entities working with a multitude of clients. The outlook for the market area is positive.

Our analysis of the outlook for this specific market also considers the broader context of the national economy. The U.S. economy has entered a new phase of sustained economic expansion, recording positive, albeit fluctuating, growth for the past three years, with the exception of the first quarter of 2014. In early 2014,

January-2016 Market Area Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 36

the decline was principally attributed to the severe winter weather that hampered normal business activity throughout much of the country. Robust 4.6% and 4.3% growth rates were registered in the second and third quarters of 2014, respectively, fueled by increases in personal consumption expenditures (PCE) and private inventory investment. Growth in the fourth quarter of 2014 moderated to 2.1%, as decreases in federal government spending and increased imports offset growth in other sectors. Another harsh winter caused a drop in the pace of GDP growth in the first quarter of 2015, as slower levels of domestic investment were unable to offset a widening trade gap.

FIGURE 3-11 UNITED STATES GDP GROWTH RATE

4.6 4.6 5.0 4.3 3.9 3.9 3.8 3.9 4.0 3.2 2.8 2.8 3.0 3.0 2.3 2.5 1.9 2.1 2.1 2.0 1.6 1.6 1.3 1.1 0.8 1.0 0.6 0.1 0.0 -1.0 -0.9 -2.0 -1.3 2010 2011 2012 2013 2014 2015

Source: tradingeconomics.com, Bureau of Economic Analysis

GDP growth accelerated to 3.9% in the second quarter of 2015, driven by increases in PCE and state and local government spending. Higher levels of exports combined with a deceleration in imports also contributed to this trend. Growth then decelerated to 2.1% in the third quarter of 2015, due in large part to downturns in private inventory investment and less-than-anticipated PCE growth. U.S. economic growth is anticipated to support continued expansion of lodging demand, which in turn is generating strong interest in hotel investments by a diverse array of market participants.

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4. Supply and Demand Analysis

In the lodging industry, price varies directly, but not proportionately, with demand and inversely, but not proportionately, with supply. Supply is measured by the number of guestrooms available, and demand is measured by the number of rooms occupied; the net effect of supply and demand toward equilibrium results in a prevailing price, or average rate. The purpose of this section is to investigate current supply and demand trends, as indicated by the current competitive market, and to set forth a basis for the projection of future supply and demand growth.

Definition of Subject The subject site is located in the greater Kansas City lodging market. This greater Hotel Market lodging market spans nearly 300 open and operating lodging facilities totaling approximately 32,400 guestrooms. Of this larger supply set, the proposed subject hotel will compete with a smaller set of hotels based on various factors. These factors may include location, price point, product quality, length of stay (such as an extended-stay focus vs. non-extended-stay focus), room type (all-suite vs. standard), hotel age, or brand, among other factors. We have reviewed these pertinent attributes and established a competitive set based upon this review.

National Trends The subject property’s local lodging market is most directly affected by the supply Overview and demand trends within the immediate area. However, individual markets are also influenced by conditions in the national lodging market. We have reviewed national lodging trends to provide a context for the forecast of the supply and demand for the proposed subject hotel’s competitive set.

STR is an independent research firm that compiles and publishes data on the lodging industry, and this information is routinely used by typical hotel buyers. The following STR diagram presents annual hotel occupancy and average rate data since 1987. The next two tables contain information that is more recent; the data are categorized by geographical region, price point, type of location, and chain scale, and the statistics include occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate and provides an indication of how well rooms revenue is being maximized.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 38

FIGURE 4-1 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS

70.0% $120

$100 65.0%

$80 60.0%

$60 55.0% $40

50.0% $20

$0 45.0% 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RevPAR Average Rate Occupancy

Source: STR

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FIGURE 4-2 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – YEAR-TO-DATE DATA

Occupancy - Thru November Average Rate - Thru November RevPAR - Thru November

2014 2015 % Change 2014 2015 % Change 2014 2015 % Change United States 65.5 % 66.7 % 1.8 % $115.07 $120.33 4.6 % $75.38 $80.27 6.5 % Region New England 65.0 % 66.4 % 2.2 % $140.40 $147.28 4.9 % $91.23 $97.80 7.2 % Middle Atlantic 67.9 68.7 1.1 159.41 160.97 1.0 108.22 110.51 2.1 South Atlantic 65.8 67.5 2.6 110.97 116.65 5.1 73.01 78.78 7.9 East North Central 61.9 62.9 1.6 110.19 105.48 5.3 62.03 66.36 7.0 East South Central 60.3 62.2 3.1 86.32 91.11 5.6 52.08 56.68 8.8 West North Central 61.0 61.1 0.2 90.37 93.51 3.5 55.12 57.16 3.7 West South Central 64.8 64.2 (1.1) 96.51 98.80 2.4 62.58 63.38 1.3 Mountain 64.3 66.3 3.2 103.14 108.78 5.5 66.27 72.14 8.9 Pacific 72.4 74.4 2.7 142.13 151.47 6.6 102.96 112.64 9.4 Class Luxury 70.6 % 71.9 % 1.9 % $267.93 $277.61 3.6 % $189.05 $199.64 5.6 % Upper Upscale 73.1 73.9 1.0 167.22 174.18 4.2 122.27 128.67 5.2 Upscale 72.6 73.6 1.4 128.90 135.19 4.9 93.60 99.51 6.3 Upper Midscale 67.0 68.3 1.9 106.24 110.94 4.4 71.22 75.81 6.4 Midscale 60.0 61.4 2.2 86.77 90.64 4.5 52.10 55.62 6.8 Economy 58.4 59.6 2.0 62.80 66.00 5.1 36.70 39.34 7.2 Location Urban 73.4 % 74.3 % 1.1 % $168.28 $174.55 3.7 % $123.57 $129.63 4.9 % Suburban 66.6 68.0 2.1 97.18 102.36 5.3 64.71 69.60 7.6 Airport 73.5 74.8 1.7 103.20 110.08 6.7 75.88 82.34 8.5 Interstate 57.9 58.6 1.2 78.93 81.46 3.2 45.66 47.71 4.5 Resort 66.9 69.0 3.2 155.35 162.78 4.8 103.89 112.31 8.1 Small Metro/Town 57.6 58.4 1.3 93.11 96.46 3.6 53.67 56.35 5.0 Chain Scale Luxury 75.8 % 76.3 % 0.6 % $302.13 $315.42 4.4 % $228.94 $240.51 5.1 % Upper Upscale 74.8 75.4 0.8 168.88 176.01 4.2 126.38 132.79 5.1 Upscale 75.0 75.6 0.8 127.87 134.34 5.1 95.91 101.57 5.9 Upper Midscale 67.6 68.9 1.9 104.92 109.54 4.4 70.96 75.51 6.4 Midscale 59.4 60.7 2.2 80.19 83.64 4.3 47.65 50.80 6.6 Economy 58.4 59.3 1.5 56.38 59.26 5.1 32.92 35.13 6.7 Independents 61.7 63.3 2.6 113.29 118.48 4.6 69.87 74.97 7.3

Source: STR - November 2015 Lodging Review

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FIGURE 4-3 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – CALENDAR YEAR DATA

Occupancy Average Rate RevPAR

2013 2014 % Change 2013 2014 % Change 2013 2014 % Change United States 62.2 % 64.4 % 3.6 % $110.30 $115.32 4.6 % $68.58 $74.28 8.3 % Region New England 62.4 % 63.7 % 2.1 % $131.85 $138.68 5.2 % $82.22 $88.32 7.4 % Middle Atlantic 65.9 66.9 1.6 155.90 160.45 2.9 102.73 107.40 4.5 South Atlantic 61.9 64.8 4.8 106.63 111.20 4.3 65.96 72.09 9.3 East North Central 59.0 60.6 2.7 95.64 99.65 4.2 56.47 60.40 7.0 East South Central 56.8 59.1 4.1 82.00 86.35 5.3 46.54 51.01 9.6 West North Central 57.7 59.6 3.3 86.52 90.13 4.2 49.97 53.76 7.6 West South Central 61.4 63.7 3.8 93.06 96.44 3.6 57.10 61.42 7.6 Mountain 60.2 63.2 4.9 98.97 104.47 5.6 59.62 65.99 10.7 Pacific 69.4 71.5 3.0 133.75 142.44 6.5 92.83 101.85 9.7 Price Luxury 68.6 % 70.0 % 2.2 % $256.22 $269.13 5.0 % $175.64 $188.47 7.3 % Upper upscale 70.1 71.8 2.4 159.84 167.25 4.6 112.12 120.16 7.2 Upscale 69.4 71.8 3.4 123.14 129.07 4.8 85.48 92.64 8.4 Upper midscale 63.2 65.8 4.0 101.44 105.77 4.3 64.15 69.55 8.4 Midscale 56.8 59.0 3.9 83.13 86.37 3.9 47.19 50.93 7.9 Economy 55.2 57.4 4.0 60.02 63.02 5.0 33.11 36.17 9.2 Location Urban 70.5 % 72.3 % 2.7 % $160.81 $167.99 4.5 % $113.31 $121.53 7.3 % Suburban 62.8 65.4 4.1 92.60 97.16 4.9 58.15 63.50 9.2 Airport 69.7 72.4 3.9 97.37 102.80 5.6 67.87 74.43 9.7 Interstate 54.7 56.8 3.8 76.23 78.85 3.4 41.70 44.75 7.3 Resort 64.0 66.2 3.6 150.30 158.15 5.2 96.13 104.75 9.0 Small Metro/Town 54.7 56.5 3.3 89.45 92.66 3.6 48.91 52.34 7.0 Chain Scale Luxury 74.6 % 75.2 % 0.9 % $290.61 $306.83 5.6 % $216.71 $230.84 6.5 % Upper Upscale 71.9 73.6 2.3 160.98 169.09 5.0 115.82 124.47 7.5 Upscale 71.6 73.9 3.3 121.74 127.80 5.0 87.14 94.48 8.4 Mid-scale w/ F&B 63.8 66.4 4.0 100.37 104.45 4.1 64.05 69.34 8.2 Mid-scale w/o F&B 55.9 58.3 4.3 76.64 79.63 3.9 42.82 46.39 8.3 Economy 55.2 57.3 3.8 53.83 56.37 4.7 29.73 32.33 8.7 Independents 58.5 60.7 3.7 109.02 113.84 4.4 63.82 69.12 8.3 Source: STR - December 2014 Lodging Review

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Following the significant occupancy and RevPAR decline experienced during the last recession, demand growth resumed in 2010, led by select markets that had recorded growth trends in the fourth quarter of 2009. The pace of demand growth accelerated through the year; in 2010, lodging demand in the U.S. increased by 7.3% over that registered in 2009. A return of business travel and some group activity contributed to these positive trends. The resurgence in demand was partly fueled by the significant price discounts that were widely available in the first half of 2010. These discounting policies were largely phased out in the latter half of the year, balancing much of the early rate loss. Average rate decreased by only 0.1% in 2010 when compared to 2009.

Demand growth remained strong, but decelerated from 2011 through 2013, increasing at rates of 4.7%, 2.8%, and 2.0%, respectively. Demand growth then surged to 4.0% in 2014, driven by a strong economy, a robust oil and gas sector, and limited new supply, among other factors. Average rate rebounded by respective rates of 3.8% and 4.2% in 2011 and 2012, followed by increases of 4.0% and 4.6%, respectively, in 2013 and 2014. In 2012, occupancy reached 61.3% (exceeding the ten-year average); moreover, occupancy gained another point in 2013, ending the year at 62.2%. The nation's occupancy in 2014 registered an additional gain of just over two points, finishing the year at 64.4% and approaching a level not experienced since the mid-1990s. Average rate finished the year just over $110 in 2013, with a 4.6% gain registered in 2014; as a result, average rate ended 2014 at $115.32. As shown, demand and average rates continue to strengthen. These trends, combined with the low levels of supply growth anticipated through the end of this year, should boost occupancy beyond its prior mid-1990's peak in 2015. We forecast U.S. hotel occupancy to reach 65.5% and 66.0% in 2015 and 2016, respectively. On a national average, strengthening occupancy levels should also permit hotels to increase room rates by 5.5% in both 2015 and 2016, above the 4.6% achieved in 2014.

Historical Supply As previously noted, STR is an independent research firm that compiles and and Demand Data publishes data on the lodging industry, routinely used by typical hotel buyers. HVS has ordered and analyzed an STR Trend Report of historical supply and demand data for a group of hotels considered applicable to this analysis for the proposed subject hotel. This information is presented in the following table, along with the market-wide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate and provides an indication of how well rooms revenue is being maximized.

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FIGURE 4-4 HISTORICAL SUPPLY AND DEMAND TRENDS

Average Daily Available Room Occupied Room Average Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change 2003 614 224,110 — 117,009 — 52.2 % $67.10 — $35.03 — 2004 614 224,110 0.0 % 126,475 8.1 % 56.4 71.13 6.0 % 40.14 14.6 % 2005 614 224,110 0.0 129,911 2.7 58.0 74.20 4.3 43.01 7.1 2006 614 224,110 0.0 129,532 (0.3) 57.8 78.55 5.9 45.40 5.6 2007 614 224,110 0.0 129,056 (0.4) 57.6 79.88 1.7 46.00 1.3 2008 614 224,110 0.0 119,994 (7.0) 53.5 80.43 0.7 43.07 (6.4) 2009 614 224,110 0.0 112,095 (6.6) 50.0 78.58 (2.3) 39.31 (8.7) 2010 661 241,444 7.7 105,569 (5.8) 43.7 80.51 2.5 35.20 (10.4) 2011 695 253,675 5.1 109,657 3.9 43.2 82.38 2.3 35.61 1.2 2012 695 253,675 0.0 115,324 5.2 45.5 84.67 2.8 38.49 8.1 2013 695 253,675 0.0 114,366 (0.8) 45.1 87.45 3.3 39.42 2.4 2014 691 252,204 (0.6) 138,664 21.2 55.0 90.28 3.2 49.64 25.9

Year-to-Date Through October 2014 693 210,663 — 118,342 — 56.2 % $90.47 — $50.82 — 2015 681 207,024 (1.7) % 131,666 11.3 % 63.6 95.31 5.3 % 60.62 19.3 % Average Annual Compounded Change: 2003 - 2014 1.1 % 1.6 % 2.7 % 3.2 % 2003 - 2007 0.0 2.5 4.5 7.0 2007 - 2010 2.5 (6.5) 0.3 (8.5) 2010 - 2014 1.1 7.1 2.9 9.0 Number Year Year Hotels Included in Sample of Rooms Affiliated Opened Four Points by Sheraton Kansas City Sports Complex 168 Jun 2013 May 1975 Drury Inn & Suites Kansas City Stadium 123 May 1984 May 1984 Best Western Plus Seville Plaza Hotel 75 Nov 2010 Jun 1985 Courtyard Kansas City South 149 Sep 1990 Sep 1990 Days Inn & Suites Kansas City South 85 Oct 2014 Jul 1993 Holiday Inn Express & Suites Kansas City Sports Complex Area 81 Jun 2010 Jun 2010

Total 681

Source: STR

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It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample; furthermore, not every property reports data in a consistent and timely manner. These factors can influence the overall quality of the information by skewing the results, and these inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, STR data provide the best indication of aggregate growth or decline in existing supply and demand; thus, these trends have been considered in our analysis. Opening dates, as available, are presented for each reporting hotel in the previous table.

The southern Kansas City lodging market along U.S. Highway 71 is relatively limited, with the nearest clusters of hotels located to the northeast, near the Truman Sports Complex; to the northwest, at the upscale Country Club Plaza; and to the southwest, in the Leawood Overland Park market area in Kansas. We have reviewed the supply of hotels in this greater area and evaluated the location, market orientation, facilities, amenities, reputation, and quality of each area hotel. Additionally, we have interviewed management representatives at select properties. Based on this research, we have identified several properties that would compete to some degree for overlapping demand with a proposed hotel on the subject site. The STR data for the competitive set reflect a market-wide occupancy level of 55.0% in 2014, which compares to 45.1% for 2013. The overall average occupancy level for the calendar years presented equates to 47.0%. The STR data for the competitive set reflect a market-wide average rate level of $90.28 in 2014, which compares to $87.45 for 2013. The average across all calendar years presented for average rate equates to $84.27. These occupancy and average rate trends resulted in a RevPAR level of $49.64 in 2014.

Local employers and regional development activity, as well as interstate travelers and local residents, represent the primary sources of demand for the selected competitive market. Occupancy levels were relatively subdued in the years following the national recession, between 2009 and 2013, failing to rise above 50% occupancy. Demand began to strengthen somewhat in 2014, a trend that continued through the majority of 2015, pushing the year-to-date occupancy above 60% for the first time in the last ten years. In recent years, the market's demand growth has been supported by an increase in development activity in the southern Kansas City area. For the southernmost hotels in this competitive set, demand generators include the new NNSA (National Nuclear Security Administration) and USDA facilities in and around the CenterPoint KCS Intermodal Center, as well as the Cerner Trails campus. Demand growth for hotels in the northern half of the competitive set has been driven largely by activity at the Truman Sports Complex. Given that the MLB Royals baseball team made the playoffs in 2015, additional demand was generated by World Series games hosted in Kansas City.

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Average rate in the local market declined slightly in 2009 as hotel managers discounted rates in order to capture as much demand as possible during the recession. Since 2010, average rate levels have steadily improved year-over-year; however, growth has been relatively modest. Given the limited sources of commercial demand in this market, major accounts are reportedly able to negotiate relatively favorable rates. Additionally, it should be noted that a significant portion of the market's demand base, including much of the increased demand over the past couple years, is extended-stay in nature, which is typically accommodated at lower rates than transient business.

Seasonality Monthly occupancy and average rate trends are presented in the following tables.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 45

FIGURE 4-5 MONTHLY OCCUPANCY TRENDS

Month 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

January 35.4 % 43.1 % 42.6 % 41.3 % 37.1 % 41.0 % 35.8 % 25.5 % 25.9 % 25.7 % 29.9 % 25.9 % 35.6 % February 45.1 42.4 44.1 50.6 47.8 47.2 43.8 35.2 31.1 36.1 37.5 33.7 44.4 March 52.7 55.8 52.7 57.9 52.2 52.4 53.5 44.4 39.1 46.5 41.7 50.5 62.7 April 47.8 53.6 60.6 53.2 49.5 50.1 49.5 44.9 43.6 41.6 44.6 52.4 60.7 May 51.1 57.8 59.3 59.2 57.0 55.9 53.5 47.6 46.5 51.0 41.1 56.8 65.9 June 66.7 70.6 74.2 70.8 75.7 70.6 61.5 59.9 58.9 64.9 59.0 81.2 73.3 July 64.9 69.8 74.0 70.0 70.0 63.5 61.4 58.4 54.0 59.0 60.9 66.1 79.4 August 62.1 66.2 64.8 65.2 70.7 62.1 53.0 45.9 51.0 51.2 53.8 66.6 70.5 September 57.9 58.1 63.4 72.1 69.4 58.6 55.6 52.3 50.5 51.9 49.4 63.3 71.6 October 52.4 60.1 59.5 57.0 58.8 52.0 53.0 41.5 42.7 48.3 48.3 64.1 70.5 November 46.3 49.8 54.2 49.8 59.0 47.9 43.3 34.9 41.2 37.7 39.4 54.7 — December 43.8 48.7 45.6 46.3 43.6 41.0 36.0 31.5 33.8 31.1 34.9 43.3 —

Annual Occupancy 52.2 % 56.4 % 58.0 % 57.8 % 57.6 % 53.5 % 50.0 % 43.7 % 43.2 % 45.5 % 45.1 % 55.0 % —

Year-to-Date 53.7 57.9 59.6 59.8 58.9 55.4 52.1 % 46.0 % 44.4 % 47.7 % 46.7 % 56.2 % 63.6 %

Source: STR

FIGURE 4-6 MONTHLY AVERAGE RATE TRENDS

Month 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

January $65.30 $69.58 $72.72 $74.29 $80.91 $77.46 $76.58 $73.50 $80.43 $77.06 $78.24 $80.65 $74.59 February 64.90 65.81 69.30 73.40 76.83 77.91 76.43 73.49 76.70 75.57 78.68 80.77 80.54 March 63.00 67.51 71.44 72.83 77.61 79.04 76.12 74.87 75.71 74.95 79.29 82.18 86.61 April 62.40 67.41 71.92 75.57 80.13 82.68 78.57 79.04 79.43 85.76 87.08 85.99 89.30 May 63.36 67.84 72.92 76.48 78.98 80.07 77.67 76.04 81.07 83.27 90.63 89.54 96.21 June 69.03 73.61 76.15 82.12 82.33 81.60 84.50 84.89 87.36 91.61 97.32 99.60 97.96 July 67.62 70.63 70.97 80.72 81.81 79.32 78.50 82.48 82.11 93.27 84.81 91.81 100.67 August 71.14 72.70 76.99 76.73 79.57 81.36 78.28 83.60 86.93 85.83 91.51 87.63 101.06 September 69.90 70.91 76.26 84.52 82.37 84.77 80.07 85.02 83.69 85.16 91.83 93.26 96.58 October 67.74 73.61 80.38 80.25 80.59 80.78 82.07 84.10 84.54 88.74 91.61 97.83 110.39 November 67.90 70.76 75.37 80.10 79.55 79.19 75.66 80.35 85.83 83.13 83.77 93.51 — December 70.39 81.43 73.70 81.90 74.49 79.02 74.83 78.59 78.27 78.31 84.77 83.77 —

Annual Average Rate $67.10 $71.13 $74.20 $78.55 $79.88 $80.43 $78.58 $80.51 $82.38 $84.67 $87.45 $90.28 — Year-to-Date $66.76 $70.28 $74.13 $78.16 $80.32 $80.65 $79.09 $80.67 $82.38 $85.21 $87.96 $90.47 $95.31

Source: STR

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 46

The illustrated monthly occupancy and average rates patterns reflect important seasonal characteristics. We have reviewed these trends in developing our forthcoming forecast of market-wide demand and average rate.

Patterns of Demand A review of the trends in occupancy and average rate by day of the week provides some insight into the impact that the current economic conditions have had on the competitive lodging market. The data, as provided by STR, are illustrated in the following table(s).

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 47

FIGURE 4-7 OCCUPANCY BY DAY OF WEEK (TRAILING 12 MONTHS)

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Nov - 14 52.9 % 42.2 % 58.0 % 55.8 % 44.7 % 54.9 % 71.1 % 54.7 % Dec - 14 40.7 32.9 36.9 44.1 35.5 49.2 67.6 43.3 Jan - 15 25.2 31.8 39.3 40.1 33.1 36.7 41.9 35.6 Feb - 15 30.8 40.4 45.5 44.2 38.9 51.6 59.7 44.4 Mar - 15 40.9 50.8 63.2 57.8 59.4 86.6 88.5 62.7 Apr - 15 40.1 51.2 58.1 58.6 61.4 75.9 80.1 60.7 May - 15 47.4 44.2 65.5 61.8 56.0 88.7 90.3 65.9 Jun - 15 46.6 55.3 71.2 83.1 76.2 89.1 96.9 73.3 Jul - 15 57.3 80.0 89.5 73.8 71.1 91.7 92.8 79.4 Aug - 15 46.0 59.9 74.3 81.4 63.6 91.7 82.3 70.5 Sep - 15 51.6 57.0 75.6 79.9 74.7 75.5 83.6 71.6 Oct - 15 64.1 58.2 73.3 74.0 60.4 75.8 85.4 70.5 Average 45.4 % 50.3 % 62.5 % 63.0 % 56.3 % 72.3 % 78.0 % 61.1 %

Source: STR

FIGURE 4-8 AVERAGE RATE BY DAY OF WEEK (TRAILING 12 MONTHS)

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Nov - 14 $106.08 $87.43 $89.93 $88.59 $85.71 $85.65 $101.23 $93.51 Dec - 14 81.87 78.42 81.43 82.53 78.12 77.69 98.18 83.77 Jan - 15 72.13 77.81 80.45 76.71 72.72 71.92 71.62 74.59 Feb - 15 75.75 84.68 85.03 81.57 74.59 79.86 80.51 80.54 Mar - 15 82.91 84.91 85.50 85.15 83.75 88.70 91.79 86.61 Apr - 15 80.57 89.50 87.47 88.10 89.52 92.64 92.61 89.30 May - 15 89.05 88.15 91.63 89.91 90.92 103.71 104.51 96.21 Jun - 15 84.77 87.83 95.15 96.68 94.54 101.48 114.67 97.96 Jul - 15 87.30 95.29 108.75 96.65 92.54 107.08 109.63 100.67 Aug - 15 89.74 95.36 98.67 99.93 97.48 107.53 110.60 101.06 Sep - 15 86.60 87.66 93.53 98.92 102.86 97.58 102.98 96.58 Oct - 15 104.78 103.93 114.91 117.31 99.44 108.61 118.68 110.39

Average $89.00 $89.59 $94.36 $93.75 $90.59 $96.73 $102.11 $94.49

Source: STR

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 48

FIGURE 4-9 OCCUPANCY, AVERAGE RATE AND REVPAR BY DAY OF WEEK (MULTIPLE YEARS)

Occupancy (%) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year

Nov 12 - Oct 13 30.5 % 36.2 % 41.8 % 41.8 % 40.5 % 56.2 % 65.5 % 44.6 % Nov 13 - Oct 14 37.9 45.3 52.3 51.6 49.0 63.2 71.3 53.0 Nov 14 - Oct 15 45.4 50.3 62.5 63.0 56.3 72.3 78.0 61.1 Change (Occupancy Points) FY 13 - FY 14 7.5 9.2 10.6 9.9 8.5 7.0 5.8 8.4 FY 14 - FY 15 7.5 4.9 10.1 11.3 7.3 9.2 6.7 8.2

ADR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year

Nov 12 - Oct 13 $83.99 $87.64 $88.74 $88.54 $84.63 $84.07 $90.21 $87.05 Nov 13 - Oct 14 86.05 89.86 92.51 91.28 86.24 88.49 92.03 89.74 Nov 14 - Oct 15 89.00 89.59 94.36 93.75 90.59 96.73 102.11 94.49 Change (Dollars) FY 13 - FY 14 $2.06 $2.22 $3.77 $2.74 $1.61 $4.42 $1.82 $2.69 FY 14 - FY 15 2.95 -0.26 1.85 2.47 4.35 8.24 10.08 4.74 Change (Percent) FY 13 - FY 14 2.5 % 2.5 % 4.2 % 3.1 % 1.9 % 5.3 % 2.0 % 3.1 % FY 14 - FY 15 3.4 -0.3 2.0 2.7 5.0 9.3 11.0 5.3

RevPAR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year

Nov 12 - Oct 13 $25.59 $31.71 $37.07 $36.97 $34.30 $47.24 $59.11 $38.84 Nov 13 - Oct 14 32.65 40.75 48.42 47.14 42.24 55.89 65.60 47.55 Nov 14 - Oct 15 40.42 45.05 58.95 59.03 50.96 69.99 79.60 57.77 Change (Dollars) FY 13 - FY 14 $7.06 $9.03 $11.35 $10.17 $7.94 $8.65 $6.49 $8.71 FY 14 - FY 15 7.77 4.30 10.54 11.89 8.73 14.09 14.00 10.22 Change (Percent) FY 13 - FY 14 27.6 % 28.5 % 30.6 % 27.5 % 23.2 % 18.3 % 11.0 % 22.4 % FY 14 - FY 15 23.8 10.6 21.8 25.2 20.7 25.2 21.3 21.5

Source: STR

In most markets, business travel, including individual commercial travelers and corporate groups, is the predominant source of demand on Monday through Thursday nights. Leisure travelers and non-business-related groups generate a majority of demand on Friday and Saturday nights.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 49

SUPPLY Based on an evaluation of the occupancy, rate structure, market orientation, chain affiliation, location, facilities, amenities, reputation, and quality of each area hotel, as well as the comments of management representatives, we have identified several properties that are expected to be primarily competitive with the proposed subject hotel. If applicable, additional lodging facilities may be judged only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primary competitive supply, they are expected to compete with the proposed subject hotel to some extent.

The following table summarizes the important operating characteristics of the future primary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property’s penetration factors; penetration is the ratio between a specific hotel’s operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the market-wide average.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 50

FIGURE 4-10 COMPETITORS – OPERATING PERFORMANCE

Est. Segmentation Estimated 2014 Estimated 2015

Weighted Weighted Annual Annual Number of Room Room RevPAR Occupancy Yield

Property Rooms Commercial/ Count Occ. Average Rate RevPAR Count Occ. Average Rate RevPAR Change Penetration Penetration Extended-Stay Leisure Group

Best Western Plus Seville Plaza Kansas City 75 50 % 35 % 15 % 75 65 - 70 % $85 - $90 $60 - $65 75 75 - 80 % $90 - $95 $70 - $75 18.0 % 120 - 130 % 120 - 130 % Courtyard by Marriott Kansas City South 149 70 20 10 149 65 - 70 90 - 95 60 - 65 149 65 - 70 95 - 100 65 - 70 6.3 110 - 120 110 - 120 Days Inn & Suites Kansas City South 85 70 25 5 98 40 - 45 70 - 75 30 - 35 85 45 - 50 75 - 80 35 - 40 17.2 80 - 85 65 - 70 Drury Inn & Suites Kansas City Stadium 123 45 40 15 123 45 - 50 100 - 105 50 - 55 123 55 - 60 105 - 110 60 - 65 20.8 90 - 95 100 - 110 Four Points by Sheraton Kansas City Sports Complex 168 40 35 25 168 50 - 55 85 - 90 40 - 45 168 55 - 60 90 - 95 50 - 55 19.0 90 - 95 85 - 90 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 81 55 35 10 81 45 - 50 95 - 100 45 - 50 81 55 - 60 100 - 105 55 - 60 22.6 90 - 95 100 - 110

Totals/Averages 681 54 % 31 % 15 % 694 45.0 % $90.33 $49.78 681 61.2 % $94.94 $58.09 16.7 % 100.0 % 100.0 %

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 51

The following map illustrates the locations of the proposed subject hotel and its future competitors.

MAP OF COMPETITION

Our survey of the primarily competitive hotels in the local market shows a range of lodging types and facilities. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below.

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PRIMARY COMPETITOR #1 - BEST WESTERN PLUS SEVILLE PLAZA KANSAS CITY

Best Western Plus FIGURE 4-11 ESTIMATED HISTORICAL OPERATING STATISTICS Seville Plaza Kansas City Wtd. Annual Occupancy Yield 4309 Main Street Year Room Count Occupancy Average Rate RevPAR Penetration Penetration Kansas City, MO Estimated 2013 75 45 - 50 % $85 - $90 $40 - $45 110 - 120 % 100 - 110 % Estimated 2014 75 65 - 70 85 - 90 60 - 65 120 - 130 120 - 130 Estimated 2015 75 75 - 80 90 - 95 70 - 75 120 - 130 120 - 130

The Best Western Plus Seville Plaza Kansas City is owned and operated by Seville Plaza Hotel Association. Facilities include a breakfast dining area (a complimentary continental breakfast is served), a fitness room, a business center, and 1,000 square feet of meeting space. The hotel, which was built in 1985, was renovated in 2003; upgrades included new guestroom softgoods, case goods, and carpeting, as well as updates to all public areas. The Best Western benefits from its location along Main Street, proximate to a variety of the area's major demand generators, including the Country Club Plaza. Overall, the property appeared to be in good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 53

PRIMARY COMPETITOR #2 - COURTYARD BY MARRIOTT KANSAS CITY SOUTH

Courtyard by Marriott FIGURE 4-12 ESTIMATED HISTORICAL OPERATING STATISTICS Kansas City South 500 East 105th Street Wtd. Annual Occupancy Yield Kansas City, MO Year Room Count Occupancy Average Rate RevPAR Penetration Penetration Estimated 2013 149 60 - 65 % $90 - $95 $55 - $60 130 - 140 % 140 - 150 % Estimated 2014 149 65 - 70 90 - 95 60 - 65 120 - 130 120 - 130 Estimated 2015 149 65 - 70 95 - 100 65 - 70 110 - 120 110 - 120

The Courtyard by Marriott Kansas City South is owned and operated by Hospitality Inc. Facilities and amenities include The Bistro, an indoor pool and whirlpool, a fitness room, a business center, a market pantry, a guest laundry room, and approximately 1,600 square feet of meeting space. The hotel, which opened in 1990, was renovated in 2010; upgrades included new guestroom softgoods and flat-screen televisions, as well as new case goods and flooring in the lobby and the addition of The Bistro. This hotel benefits from its location along Interstate 435 and its proximity to the new Cerner campus. Overall, the property appeared to be in good condition. Its accessibility is superior to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 54

PRIMARY COMPETITOR #3 - DAYS INN & SUITES KANSAS CITY SOUTH

Days Inn & Suites FIGURE 4-13 ESTIMATED HISTORICAL OPERATING STATISTICS Kansas City South 8601 Hillcrest Road Wtd. Annual Occupancy Yield Kansas City, MO Year Room Count Occupancy Average Rate RevPAR Penetration Penetration Estimated 2013 99 35 - 40 % $70 - $75 $25 - $30 80 - 85 % 65 - 70 % Estimated 2014 98 40 - 45 70 - 75 30 - 35 80 - 85 60 - 65 Estimated 2015 85 45 - 50 75 - 80 35 - 40 80 - 85 65 - 70

The Days Inn & Suites Kansas City South is owned and operated by Ganesh Hospitality, LLC. Facilities and amenities include a breakfast dining area (a complimentary breakfast is served), a fitness room, a lobby workstation, and a guest laundry room. The hotel, which opened in 1993, was rebranded from a Baymont Inn & Suites in late 2014. Select updates to the hotel's décor and softgoods were completed at that time. This hotel benefits from its proximity to the Kansas City Zoo and Starlight Theatre but is disadvantaged by its lack of a swimming pool and its dated interior finishes. Overall, the property appeared to be in fair condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 55

PRIMARY COMPETITOR #4 - DRURY INN & SUITES KANSAS CITY STADIUM

Drury Inn & Suites FIGURE 4-14 ESTIMATED HISTORICAL OPERATING STATISTICS Kansas City Stadium 3830 Blue Ridge Cutoff Wtd. Annual Occupancy Yield Kansas City, MO Year Room Count Occupancy Average Rate RevPAR Penetration Penetration Estimated 2013 123 35 - 40 % $95 - $100 $35 - $40 85 - 90 % 95 - 100 % Estimated 2014 123 45 - 50 100 - 105 50 - 55 85 - 90 100 - 110 Estimated 2015 123 55 - 60 105 - 110 60 - 65 90 - 95 100 - 110

The Drury Inn & Suites Kansas City Stadium is owned and operated by Drury Development Corporation. Facilities and amenities include a breakfast dining area (a complimentary breakfast is served), an outdoor pool, a fitness room, a business center, a guest laundry room, and approximately 2,600 square feet of meeting space. The hotel, which opened in 1984, was renovated in 2012; upgrades included new guestroom carpet, bedding, window treatments, and bathroom vanities. This hotel benefits from its proximity to Kaufmann Stadium and Arrowhead Stadium. Overall, the property appeared to be in good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 56

PRIMARY COMPETITOR #5 - FOUR POINTS BY SHERATON KANSAS CITY SPORTS COMPLEX

Four Points by FIGURE 4-15 ESTIMATED HISTORICAL OPERATING STATISTICS Sheraton Kansas City Sports Complex Wtd. Annual Occupancy Yield 4011 Blue Ridge Cutoff Year Room Count Occupancy Average Rate RevPAR Penetration Penetration Kansas City, MO Estimated 2013 168 35 - 40 % $80 - $85 $30 - $35 85 - 90 % 80 - 85 % Estimated 2014 168 50 - 55 85 - 90 40 - 45 90 - 95 85 - 90 Estimated 2015 168 55 - 60 90 - 95 50 - 55 90 - 95 85 - 90

The Four Points by Sheraton Kansas City Sports Complex is owned and operated by Hulsing Hotels. Facilities and amenities include the Boulevard Bar & Grill, an indoor pool, a fitness room, a business center, a market pantry, a guest laundry room, and 5,340 square feet of meeting space. The hotel, which opened in 1975, was renovated in 2012 and 2013 when the hotel was converted from a Clarion Hotel & Suites. This hotel benefits from its proximity to Kaufmann Stadium and Arrowhead Stadium. Overall, the property appeared to be in good condition. Its accessibility is similar to the accessibility attributes of the subject site, while its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 57

PRIMARY COMPETITOR #6 - HOLIDAY INN EXPRESS HOTEL & SUITES KANSAS CITY SPORTS COMPLEX AREA

Holiday Inn Express FIGURE 4-16 ESTIMATED HISTORICAL OPERATING STATISTICS Hotel & Suites Kansas City Sports Complex Wtd. Annual Occupancy Yield Area Year Room Count Occupancy Average Rate RevPAR Penetration Penetration 8551 East Blue Parkway Estimated 2013 81 35 - 40 % $95 - $100 $35 - $40 80 - 85 % 90 - 95 % Kansas City, MO Estimated 2014 81 45 - 50 95 - 100 45 - 50 85 - 90 90 - 95 Estimated 2015 81 55 - 60 100 - 105 55 - 60 90 - 95 100 - 110

The Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area is owned and operated by Dilip and Jayshri Desai. Facilities and amenities include a breakfast dining area (a complimentary breakfast is served), an indoor pool and whirlpool, a fitness room, a business center, a market pantry, a guest laundry room, and 1,675 square feet of meeting space. Reportedly, the hotel has not undergone any major renovations since its opening in 2010. This hotel benefits from its newer facilities. Overall, the property appeared to be in very good condition. Its accessibility is similar to the accessibility attributes of the subject site, while its visibility is similar to the expected visibility of the Proposed Hotel @ 63rd and Prospect Avenue.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 58

Supply Changes It is important to consider any new hotels that may have an impact on the proposed subject hotel’s operating performance. Based upon our research and inspection (as applicable), new supply considered in our analysis is presented in the following table.

FIGURE 4-17 NEW SUPPLY

Total Weighted Number Competitive Room Estimated Opening Proposed Property of Rooms Level Count Date Development Stage

Proposed Subject Property 80 100 % 80 April 1, 2017 Early Development

Totals/Averages 80 80

While we have taken reasonable steps to investigate proposed hotel projects and their status, due to the nature of real estate development, it is impossible to determine with certainty every hotel that will be opened in the future, or what their marketing strategies and effect in the market will be. Depending on the outcome of current and future projects, the future operating potential of the proposed subject hotel may be affected. Future improvement in market conditions will raise the risk of increased competition. Our forthcoming forecast of stabilized occupancy and average rate is intended to reflect such risk.

Supply Conclusion We have identified various properties that are expected to be competitive to some degree with the proposed subject hotel. We have also investigated potential increases in competitive supply in this Kansas City submarket. The Proposed Hotel @ 63rd and Prospect Avenue should enter a dynamic market of varying product types and price points. Next, we will present our forecast for demand change, using the historical supply data presented as a starting point.

DEMAND The following table presents the most recent trends for the subject hotel market as tracked by HVS. These data pertain to the competitors discussed previously in this section; performance results are estimated, rounded for the competition, and in some cases weighted if there are secondary competitors present. In this respect, the information in the table differs from the previously presented STR data and is consistent with the supply and demand analysis developed for this report.

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 59

FIGURE 4-18 HISTORICAL MARKET TRENDS

Accommodated Room Nights Market Market Year Room Nights % Change Available % Change Occupancy Market ADR % Change RevPAR % Change Est. 2013 114,048 — 253,675 — 45.0 % $87.45 — $39.32 — Est. 2014 139,605 22.4 % 253,310 (0.1) % 55.1 90.33 3.3 % 49.78 26.6 % Est. 2015 152,099 8.9 248,565 (1.9) 61.2 94.94 5.1 58.09 16.7

Avg. Annual Compounded Chg., Est. 2013-Est. 2015: 15.5 % (1.0) % 4.2 % 21.6 %

Demand Analysis For the purpose of demand analysis, the overall market is divided into individual Using Market segments based on the nature of travel. Based on our fieldwork, area analysis, and Segmentation knowledge of the local lodging market, we estimate the 2015 distribution of accommodated-room-night demand as follows.

FIGURE 4-19 ACCOMMODATED ROOM-NIGHT DEMAND

Marketwide Accommodated Percentage Market Segment Demand of Total

Commercial/Extended-Stay 82,758 54 % Leisure 47,253 31 Group 22,089 15

Total 152,099 100 %

The market’s demand mix comprises commercial/extended-stay demand, with this segment representing roughly 54% of the accommodated room nights in this Kansas City submarket. The remaining portion comprises leisure at 31%, with the final portion group in nature, reflecting 15%.

Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room-night demand.

Commercial/Extended- Commercial demand consists mainly of individual businesspeople passing through Stay Segment the subject market or visiting area businesses, in addition to high-volume corporate accounts generated by local firms. Brand loyalty (particularly frequent- traveler programs), as well as location and convenience with respect to businesses and amenities, influence lodging choices in this segment. Companies typically

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 60

designate hotels as “preferred” accommodations in return for more favorable rates, which are discounted in proportion to the number of room nights produced by a commercial client. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday night. It is relatively constant throughout the year, with marginal declines in late December and during other holiday periods.

Extended-stay demand consists of individuals who require accommodations for more than five nights; typically, the length of stay ranges from ten to fourteen nights, but can stretch to a month or more. The three principal categories of extended-stay demand are business-related (typically associated with long-term projects), family-oriented, and relocation demand. Extended-stay patrons usually prefer hotels located near shopping centers, restaurants, entertainment venues, and service-retail uses such as grocery stores, dry cleaners, and fueling stations. Extended-stay demand tends to trend in line with an area’s corporate expansion and/or population growth; commercial growth has a direct correlation with longer-term training activities that may be occurring in the area, while changes in population typically support related relocation demand. Large-scale construction projects, prevalent in growing metropolitan areas, also generate significant levels of extended-stay demand.

Commercial and extended-stay demand in this submarket is largely generated by regional development activity. Research Hospital, located just south of 63rd Street, generates room nights through out-of-town patients, as well as visiting physicians and nurses. According to hospital officials, over 8,500 room nights for patients alone were generated from visiting patients and their families during the last twelve months. Currently, there are few hotel options located near this medical facility. Furthermore, a resumption of development activity in the past few years has positively affected demand within this segment; major projects include a new NNSA facility and the Cerner Trails Campus. The Cerner Trails Campus is one of the largest economic development projects in Missouri history; moreover, construction is anticipated to continue for ten years. The continuing development of these facilities, as well as the expected demolition and environmental remediation of the Bannister Federal Complex, should continue to provide strong commercial and extended-stay demand going forward.

Leisure Segment Leisure demand consists of individuals and families spending time in an area or passing through en route to other destinations. Travel purposes include sightseeing, recreation, or visiting friends and relatives. Leisure demand also includes room nights booked through Internet sites such as Expedia, Hotels.com, and Priceline; however, leisure may not be the purpose of the stay. This demand may also include business travelers and group and convention attendees who use these channels to take advantage of any discounts that may be available on these

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 61

sites. Leisure demand is strongest Friday and Saturday nights, and all week during holiday periods and the summer months. These peak periods represent the inverse of commercial visitation trends, underscoring the stabilizing effect of capturing weekend and summer tourist travel. Future leisure demand is related to the overall economic health of the region and the nation. Trends showing changes in state and regional unemployment and disposable personal income correlate strongly with leisure travel levels.

Leisure demand in this market is primarily generated by travelers passing through the area in/out of Downtown Kansas City on U.S. Highway 71, guests visiting local friends and relatives, and tourists to the attractions in the greater Kansas City area that are seeking comparatively inexpensive lodging options. Additionally, the market includes major attractions such as Kauffman Stadium and Arrowhead Stadium at the Harry Truman Sports Complex, the Kansas City Zoo, and Starlight Theatre in Swope Park. Average rates in this market are relatively low compared to similar properties in other submarkets of Kansas City; as such, this market attracts a disproportionate share of value-conscious leisure travelers. Going forward, we anticipate modest but steady demand growth to occur within this segment, paced by overall economic and population growth in the area.

Group Segment In the limited-service sector, group demand is most commonly generated by groups that require ten or more room nights, but need little to no meeting space within the hotel. Examples of these groups include family reunions, sports teams, and bus tours. In some markets, limited-service hotels may also accommodate demand from groups or individuals attending events at the local convention center or at one of the larger convention hotels in the area.

Group demand in this market has historically been relatively limited. Given the distance from the Kansas City and Overland Park convention centers, hotels in this submarket rarely, if ever, accommodate convention demand or realize overflow from compression caused by large citywide events. The majority of the group demand in the area is generated by youth sport teams, including from tournaments held at the Swope Soccer Village Complex. This demand is expected to increase modestly going forward, as the soccer fields were completed in 2015. A modest amount of group demand is generated by companies in the area, but given the lack of larger full-service properties in the market, there is not a significant level of demand from larger corporate meetings.

Base Demand Growth The purpose of segmenting the lodging market is to define each major type of Rates demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property’s lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect

January-2016 Supply and Demand Analysis Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 62

changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market-segment growth rates.

FIGURE 4-20 AVERAGE ANNUAL COMPOUNDED MARKET SEGMENT GROWTH RATES

Annual Growth Rate Market Segment 2016 2017 2018 2019 2020

Commercial/Extended-Stay 1.0 % 2.0 % 1.5 % 0.5 % 0.0 % Leisure 2.0 3.0 2.0 0.5 0.0 Group 1.0 1.0 1.5 0.5 0.0

Base Demand Growth 1.3 % 2.2 % 1.7 % 0.5 % 0.0 %

Latent Demand A table presented earlier in this section illustrated the accommodated-room-night demand in the subject property’s competitive market. Because this estimate is based on historical occupancy levels, it includes only those hotel rooms that were used by guests. Latent demand reflects potential room-night demand that has not been realized by the existing competitive supply, further classified as either unaccommodated demand or induced demand.

Unaccommodated Unaccommodated demand refers to individuals who are unable to secure Demand accommodations in the market because all the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated-room-night demand. If additional lodging facilities are expected to enter the market, it is reasonable to assume that these guests will be able to secure hotel rooms in the future, and it is therefore necessary to quantify this demand.

Unaccommodated demand is further indicated if the market is at all seasonal, with distinct high and low seasons; such seasonality indicates that although year-end occupancy may not average in excess of 70%, the market may sell out certain nights during the year. To evaluate the incidence of unaccommodated demand in the market, we have reviewed the average occupancy by the night of the week for the past twelve months for the competitive set, as reflected in the STR data. This is set forth in the following table.

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FIGURE 4-21 OCCUPANCY BY NIGHT OF THE WEEK

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Nov - 14 52.9 % 42.2 % 58.0 % 55.8 % 44.7 % 54.9 % 71.1 % 54.7 % Dec - 14 40.7 32.9 36.9 44.1 35.5 49.2 67.6 43.3 Jan - 15 25.2 31.8 39.3 40.1 33.1 36.7 41.9 35.6 Feb - 15 30.8 40.4 45.5 44.2 38.9 51.6 59.7 44.4 Mar - 15 40.9 50.8 63.2 57.8 59.4 86.6 88.5 62.7 Apr - 15 40.1 51.2 58.1 58.6 61.4 75.9 80.1 60.7 May - 15 47.4 44.2 65.5 61.8 56.0 88.7 90.3 65.9 Jun - 15 46.6 55.3 71.2 83.1 76.2 89.1 96.9 73.3 Jul - 15 57.3 80.0 89.5 73.8 71.1 91.7 92.8 79.4 Aug - 15 46.0 59.9 74.3 81.4 63.6 91.7 82.3 70.5 Sep - 15 51.6 57.0 75.6 79.9 74.7 75.5 83.6 71.6 Oct - 15 64.1 58.2 73.3 74.0 60.4 75.8 85.4 70.5 Average 45.4 % 50.3 % 62.5 % 63.0 % 56.3 % 72.3 % 78.0 % 61.1 %

Source: STR

Our interviews with market participants found that the market has frequently sold out on the weekends throughout much of the last year. Extended-stay demand associated with the Cerner Trails Campus is reportedly being accommodated at hotels in Country Club Plaza, approximately eight miles to the north. Additionally, youth soccer teams utilizing the Swope Soccer Village are reportedly staying in Overland Park, to the west. A portion of the demand, which is currently turned away or shifted to other submarkets, should partially return to the subject submarket concurrent with the supply increase. The following table presents our estimate of unaccommodated demand in the subject market.

FIGURE 4-22 UNACCOMMODATED DEMAND ESTIMATE

Accommodated Room Unaccommodated Unaccommodated Market Segment Night Demand Demand Percentage Room Night Demand

Commercial/Extended-Stay 82,758 0.7 % 568 Leisure 47,253 4.9 2,304 Group 22,089 3.1 677

Total 152,099 2.3 % 3,549

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Accordingly, we have forecast unaccommodated demand equivalent to 2.3% of the base-year demand, resulting from our analysis of monthly and weekly peak demand and sell-out trends.

Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can result in induced demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. Although increases in demand are expected in the local market, we have accounted for this growth in the determination of market-segment growth rates rather than induced demand.

Accommodated Based upon a review of the market dynamics in the subject property’s competitive Demand and Market- environment, we have forecast growth rates for each market segment. Using the wide Occupancy calculated potential demand for the market, we have determined market-wide accommodated demand based on the inherent limitations of demand fluctuations and other factors in the market area.

The following table details our projection of lodging demand growth for the subject market, including the total number of occupied room nights and any residual unaccommodated demand in the market.

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FIGURE 4-23 FORECAST OF MARKET OCCUPANCY

2016 2017 2018 2019 2020 Commercial/Extended-Stay Base Demand 83,585 85,257 86,536 86,969 86,969 Unaccommodated Demand 573 585 594 597 597 Total Demand 84,159 85,842 87,129 87,565 87,565 Growth Rate 1.7 % 2.0 % 1.5 % 0.5 % 0.0 %

Leisure Base Demand 48,198 49,644 50,636 50,890 50,890 Unaccommodated Demand 2,350 2,420 2,469 2,481 2,481 Total Demand 50,547 52,064 53,105 53,370 53,370 Growth Rate 7.0 % 3.0 % 2.0 % 0.5 % 0.0 %

Group Base Demand 22,310 22,533 22,871 22,985 22,985 Unaccommodated Demand 684 691 701 705 705 Total Demand 22,994 23,224 23,572 23,690 23,690 Growth Rate 4.1 % 1.0 % 1.5 % 0.5 % 0.0 %

Totals Base Demand 154,093 157,433 160,043 160,843 160,843 Unaccommodated Demand 3,607 3,696 3,764 3,782 3,782 Total Demand 157,700 161,129 163,807 164,626 164,626 less: Residual Demand 4,047 911 0 0 0 Total Accommodated Demand 153,653 160,218 163,807 164,626 164,626 Overall Demand Growth 1.0 % 4.3 % 2.2 % 0.5 % 0.0 % Market Mix Commercial/Extended-Stay 53.4 % 53.3 % 53.2 % 53.2 % 53.2 % Leisure 32.1 32.3 32.4 32.4 32.4 Group 14.6 14.4 14.4 14.4 14.4 Existing Hotel Supply 681 681 681 681 681 Proposed Hotels Proposed Subject Property ¹ 60 80 80 80

Available Rooms per Night 248,565 270,565 277,765 277,765 277,765 Nights per Year 365 365 365 365 365 Total Supply 681 741 761 761 761 Rooms Supply Growth 0.0 % 8.9 % 2.7 % 0.0 % 0.0 % Marketwide Occupancy 61.8 % 59.2 % 59.0 % 59.3 % 59.3 %

¹ Opening in April 2017 of the 100% competitive, 80-room Proposed Subject Property

These room-night projections for the market area will be used in forecasting the proposed subject hotel's occupancy and average rate in Chapter 6.

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5. Description of the Proposed Improvements

The quality of a lodging facility's physical improvements has a direct influence on marketability, attainable occupancy, and average room rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's proposed physical improvements and personal property in an effort to determine how they are expected to contribute to attainable cash flows.

Project Overview The proposed hotel will be part of a greater 22-acre site at East 63rd Street and Prospect Avenue. While no additional development at the site is currently confirmed, city officials have expressed interest in future mixed-use office, multi- family, and restaurant uses. In the early 2000s, a multimillion-dollar shopping center with restaurants, a grocery store, and a housing development was planned by a previous developer; however, after the developer failed to control asbestos contamination following the demolition of older homes on several of the parcels, the project collapsed because of environmental and financial conflicts. The City of Kansas City later acquired the site, controlling it through a 99-year lease with the Tax Increment Financing Commission of Kansas City. According to city officials, in 2014, the site was cleaned, and all asbestos contamination was removed. Based on our evaluation of the southern Kansas City lodging market, as well as our interviews with major demand generators in the area, we would recommend potential development of a midscale, economy-oriented, extended-stay hotel for the subject site. While the land area is capable of accommodating a larger select- or full-service hotel, given the required amenities and facilities, as well as the price sensitivity of travelers in the area, the cost difference could not be justified. It is our recommendation that the hotel be branded as either a TownePlace Suites by Marriott or Home2 Suites by Hilton. These brands belong to two of the strongest parent companies with major rewards programs, particularly for corporate travelers, who make up more than 50% of the room nights in the competitive market area. Given the differences in franchise costs, for the purpose of our analysis, we have assumed that the hotel would be branded as a TownePlace Suites by Marriott throughout our projections.

TownePlace Suites by Marriott is Marriott’s mid-priced, extended-stay brand; the concept, created in 1997, was based on the success of Residence Inn by Marriott. The brand targets business travelers staying for multiple nights or weeks. Each TownePlace Suites by Marriott hotel provides a complimentary breakfast, free Internet, a swimming pool, an exercise room, a market pantry, and a guest laundry room. Guestroom suites offer separate living and working areas, as well as fully

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equipped kitchens. As of year-end 2014, there were 240 TownePlace Suites by Marriott hotels (23,973 rooms) in the U.S. In 2014, the brand operated at an average occupancy level of 74.7%, with an average rate of $96.84 and a RevPAR of $72.38 for its North American properties.

TYPICAL TOWNEPLACE SUITES BY MARRIOTT EXTERIOR

Summary of the Based on information provided by the proposed subject hotel’s development Facilities representatives, the following table summarizes the facilities that are expected to be available at the proposed subject hotel.

The Proposed Hotel @ 63rd and Prospect Avenue will be an extended-stay lodging facility containing 80 rentable units. The four-story property will open on April 1, 2017

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FIGURE 5-1 PROPOSED FACILITIES SUMMARY

Guestroom Configuration Number of Units Studio 64 (80%) One-Bedroom Suite 4 (5%) Two-Bedroom Suite 12 (15%)

Total 80

Food & Beverage Facilities Seating Capacity Breakfast Dining Area 15+ Seats

Amenities & Services Indoor Swimming Pool Business Center Indoor Whirlpool Market Pantry Fitness Room Guest Laundry Area

Infrastructure Parking Spaces 80 Elevators 2 Guest Life-Safety Systems Sprinklers, Smoke Detectors Construction Details Wood Framing, Poured Concrete

Site Improvements and Once guests enter the site, ample parking is expected be available on a surface lot Hotel Structure around the perimeter of the hotel. Site improvements should include freestanding signage, which would be anticipated to be located on the eastern and southern sides of the site. We assume that all signage will adequately identify the property and meet brand standards. Landscaping should allow for a positive guest impression and competitive exterior appearance. Sidewalks are expected to be present along the front entrance and around the perimeter of the hotel, and a trash area should be located toward the rear of the property.

The hotel structure is expected to be constructed of poured concrete and concrete panels. The exterior of the hotel will likely be finished with EIFS or stucco, featuring stone accents on the ground level and near the main entrance. Several elevators and stairways will provide internal vertical transportation within the main structure as needed. The hotel roof will most likely be constructed of wood trusses, covered with plywood and shingles, if pitched. Double-paned windows should be installed to reduce noise transmission into the rooms. Heating and cooling is anticipated to be provided by centralized systems. The building components are expected to be normal for a hotel of this type and should meet the standards for this market. We assume that all structural components will meet

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local building codes and that no significant defaults will occur during construction that would affect the future operating potential of the hotel or delay its assumed opening date.

Public Areas Guests should enter the hotel through a single set of automatic doors, which open to a vestibule, and then through a second set of automatic doors. The lobby should be modest in size, appropriate for a TownePlace Suites by Marriott or similar midscale, extended-stay brand. The lobby walls should be finished with wallcovering, and the floor finished with carpet and ceramic tiles. The front desk is expected to feature a granite countertop, installed with appropriate property management and telephone systems. The furnishings and finishes in this space should offer an appropriate first impression, and the design of the space should lend itself to adequate efficiency. We assume that all property management and guestroom technology will be appropriately installed for the effective management of hotel operations. The specific design concept will be finalized with input from the pursued future brand for the proposed subject hotel.

TYPICAL TOWNEPLACE SUITES BY MARRIOTT LOBBY

The hotel’s breakfast dining area is anticipated to be located adjacent to the lobby. Its size and layout should be appropriate for a limited-service hotel. The furnishings of the restaurant and lounge are expected to be of a similar style and finish as lobby and guestroom furnishings.

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TYPICAL TOWNEPLACE SUITES BY MARRIOTT DINING AREA

The hotel is not expected to offer any meeting space.

The hotel is expected to offer an indoor pool, an indoor whirlpool, and a fitness room as recreational facilities. Restrooms should be present off of the pool area. It is recommended that restrooms be present off the pool area.

Other amenities are expected to include a business center, a market pantry, and a guest laundry room. Overall, the supporting facilities should be appropriate for a hotel of this type, and we assume that they will meet brand standards.

Guestrooms The hotel is expected to feature studio, one-bedroom, and two-bedroom suites, with guestrooms present on all levels of the property within the one building. The guestroom suites are anticipated to average approximately 400 square feet and offer typical amenities for this product type. In addition to the standard furnishings, suites should feature a kitchen with a full-size refrigerator, a stovetop (with an oven in select suites), a coffeemaker, a microwave, a dishwasher, a sink, and basic cooking and dining utensils. In-room amenities should include high- speed, wireless Internet access and an iron and ironing board. All guestroom suites are expected to offer separate living and sleeping areas.

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Guestroom bathrooms should be of a standard size, with a shower-in-tub, commode, and single sink with vanity area. The floors are expected to be finished with tile and the walls finished with wallcovering. Bathroom amenities should include a hairdryer and complimentary toiletries.

TYPICAL TOWNEPLACE SUITES BY MARRIOTT GUESTROOM

The interior guestroom corridors are expected to be wide and functional, permitting the easy passage of housekeeping carts. Corridor carpet, wallcovering, signage, and lighting should be in keeping with the overall look and design of the rest of the property.

Back-of-the-House The hotel should be served by the necessary back-of-the-house space, including an in-house laundry facility, administrative offices, and a breakfast preparation area. These spaces should be adequate for a hotel of this type and should allow for the efficient operation of the property under competent management.

ADA and We assume that the property will be built according to all pertinent codes and Environmental brand standards. Moreover, we assume its construction will not create any environmental hazards (such as mold) and that the property will fully comply with the Americans with Disabilities Act.

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Capital Expenditures Our analysis assumes that, after its opening, the hotel will require ongoing upgrades and periodic renovations in order to maintain its competitive level in this market and to remain compliant with relevant brand standards. These costs should be adequately funded by the forecasted reserve for replacement, as long as a successful, ongoing preventive-maintenance program is employed by hotel staff.

Conclusion Overall, the proposed subject hotel should offer a well-designed, functional layout of support areas and guestrooms. All typical and market-appropriate features and amenities are expected to be included in the hotel's design. We assume that the building will be fully open and operational on the stipulated opening date and will meet all local building codes and applicable brand standards. Furthermore, we assume that the hotel staff will be adequately trained to allow for a successful opening and that pre-marketing efforts will have introduced the product to major local accounts at least six months in advance of the opening date.

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6. Projection of Occupancy and Average Rate

Along with average rate results, the occupancy levels achieved by a hotel are the foundation of the property's financial performance and market value. Most of a lodging facility's other revenue sources (such as food, beverages, other operated departments, and rentals and other income) are driven by the number of guests, and many expense levels vary with occupancy. To a certain degree, occupancy attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by a typical, professional hotel management team to achieve an optimal mix of occupancy and average rate.

Penetration Rate The subject property's forecasted market share and occupancy levels are based Analysis upon its anticipated competitive position within the market, as quantified by its penetration rate. The penetration rate is the ratio of a property's market share to its fair share.

Historical Penetration In the following table, the penetration rates attained by the primary competitors Rates by Market are set forth for each segment for the base year. Segment FIGURE 6-1 HISTORICAL PENETRATION RATES

tended-Stay Property Comme rcia l/Ex Leis ure Group Overall

Best Western Plus Seville Plaza Kansas City 114 % 140 % 128 % 124 % Courtyard by Marriott Kansas City South 147 74 79 114 Days Inn & Suites Kansas City South 105 66 28 82 Drury Inn & Suites Kansas City Stadium 77 120 96 93 Four Points by Sheraton Kansas City Sports Complex 70 107 163 95 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 93 103 63 92

The Courtyard by Marriott Kansas City South achieved the highest penetration rate within the commercial/extended-stay segment. The highest penetration rate in the leisure segment was achieved by the Best Western Plus Seville Plaza Kansas City, while the Four Points by Sheraton Kansas City Sports Complex led the market with the highest group penetration rate.

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Forecast of Subject Because the supply and demand balance for the competitive market is dynamic, Property’s Occupancy there is a circular relationship between the penetration factors of each hotel in the market. The performance of individual new hotels has a direct effect upon the aggregate performance of the market, and consequently upon the calculated penetration factor for each hotel in each market segment. The same is true when the performance of existing hotels changes, either positively (following a refurbishment, for example) or negatively (when a poorly maintained or marketed hotel loses market share).

A hotel’s penetration factor is calculated as its achieved market share of demand divided by its fair share of demand. Thus, if one hotel’s penetration performance increases, thereby increasing its achieved market share, this leaves less demand available in the market for the other hotels to capture and the penetration performance of one or more of those other hotels consequently declines (other things remaining equal). This type of market share adjustment takes place every time there is a change in supply, or a change in the relative penetration performance of one or more hotels in the competitive market.

Our projections of penetration, demand capture, and occupancy performance for the subject property account for these types of adjustments to market share within the defined competitive market. Consequently, the actual penetration factors applicable to the subject property and its competitors for each market segment in each projection year may vary somewhat from the penetration factors delineated in the previous tables.

The following tables set forth, by market segment, the projected adjusted penetration rates for the subject property and each hotel in the competitive set.

FIGURE 6-2 COMMERCIAL/EXTENDED-STAY SEGMENT ADJUSTED PENETRATION RATES

Hotel 2015 2016 2017 2018 2019 2020

Best Western Plus Seville Plaza Kansas City 114 % 114 % 111 % 108 % 107 % 107 % Courtyard by Marriott Kansas City South 147 147 143 140 138 138 Days Inn & Suites Kansas City South 105 105 102 100 99 99 Drury Inn & Suites Kansas City Stadium 77 77 75 73 72 72 Four Points by Sheraton Kansas City Sports Complex 70 70 67 66 66 66 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 93 93 90 88 87 87 Proposed Subject Property — — 136 143 151 151

If developed as TownePlace Suites by Marriott or other similar brand, the proposed subject hotel would become the foremost choice for extended-stay demand in the local market, with its all-suite product and in-room kitchens being designed for this type of traveler. Additionally, the proposed subject property will

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be located almost directly next to the Research Hospital, which is likely to produce the majority of the hotel's commercial and extended-stay room nights. The proposed subject hotel is anticipated to perform most similarly to the Courtyard by Marriott South, which benefits from its proximity to the development at Cerner and the NNSA.

FIGURE 6-3 LEISURE SEGMENT ADJUSTED PENETRATION RATES

Hotel 2015 2016 2017 2018 2019 2020

Best Western Plus Seville Plaza Kansas City 140 % 140 % 147 % 149 % 148 % 148 % Courtyard by Marriott Kansas City South 74 74 77 78 78 78 Days Inn & Suites Kansas City South 66 66 69 70 69 69 Drury Inn & Suites Kansas City Stadium 120 120 126 127 127 127 Four Points by Sheraton Kansas City Sports Complex 107 107 112 113 113 113 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 103 103 108 109 109 109 Proposed Subject Property — — 42 48 53 53

Given the lack of retail and restaurant options nearby the subject site, the proposed subject hotel is expected to perform at a below-market-average level in this segment. The hotel should benefit from travelers along U.S. Highway 71 who are looking for a low-cost alternative to the nearby Country Club Plaza area, as well as a low-cost alternative to Downtown Kansas City. The proposed subject property should also benefit from its location near the Starlight Theatre and the Kansas City Zoo.

FIGURE 6-4 GROUP SEGMENT ADJUSTED PENETRATION RATES

Hotel 2015 2016 2017 2018 2019 2020

Best Western Plus Seville Plaza Kansas City 128 % 128 % 133 % 132 % 132 % 132 % Courtyard by Marriott Kansas City South 79 79 81 81 81 81 Days Inn & Suites Kansas City South 28 28 29 29 29 29 Drury Inn & Suites Kansas City Stadium 96 96 99 99 99 99 Four Points by Sheraton Kansas City Sports Complex 163 163 169 168 168 168 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 63 63 65 65 65 65 Proposed Subject Property — — 62 72 72 72

The proposed subject hotel is not expected to feature any meeting space, which will somewhat limit its penetration in the group segment; however, the hotel is anticipated to be a popular choice for youth teams that are traveling to sports fields located nearby. Youth teams should be attracted to the large room size that is provided by an extended-stay facility, the complimentary breakfast offering, and the lower price point of a midscale hotel. Additionally, given the large tract of land

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on which the hotel will be constructed, there should be room to add tour bus and RV-sized parking spaces.

These positioned segment penetration rates result in the following market segmentation forecast.

FIGURE 6-5 MARKET SEGMENTATION FORECAST – SUBJECT PROPERTY

2017 2018 2019 2020

Commercial/Extended-Stay 76 % 75 % 74 % 74 % Leisure 14 15 16 16 Group 9 10 10 10

To tal 100 % 100 % 100 % 100 %

The proposed subject hotel's occupancy forecast is set forth as follows, with the adjusted projected penetration rates used as a basis for calculating the amount of captured market demand.

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FIGURE 6-6 FORECAST OF SUBJECT PROPERTY'S OCCUPANCY

Market Segment 2017 2018 2019 2020

Commercial/Extended-Stay Demand 85,698 87,129 87,565 87,565 Market Share 11.0 % 15.0 % 15.8 % 15.8 % Capture 9,448 13,053 13,855 13,855 Penetration 136 % 143 % 151 % 151 %

Leisure Demand 51,467 53,105 53,370 53,370 Market Share 3.4 % 5.0 % 5.5 % 5.5 % Capture 1,760 2,666 2,961 2,961 Penetration 42 % 48 % 53 % 53 %

Group Demand 23,054 23,572 23,690 23,690 Market Share 5.0 % 7.6 % 7.6 % 7.6 % Capture 1,163 1,791 1,800 1,800 Penetration 62 % 72 % 72 % 72 %

Total Room Nights Captured 12,370 17,511 18,616 18,616 Available Room Nights 22,000 29,200 29,200 29,200 Subject Occupancy 56 % 60 % 64 % 64 % Marketwide Available Room Nights 270,565 277,765 277,765 277,765 Fair Share 8 % 11 % 11 % 11 % Marketwide Occupied Room Nights 160,218 163,807 164,626 164,626 Market Share 8 % 11 % 11 % 11 % Marketwide Occupancy 59 % 59 % 59 % 59 % Total Penetration 95 % 102 % 108 % 108 %

Based on our analysis of the proposed subject hotel and market area, we have selected a stabilized occupancy level of 64%, which equates to an occupancy penetration of 108%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability.

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Average Rate Analysis One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories.

Competitive Position Although the average rate analysis presented here follows the occupancy projection, these two statistics are highly correlated; in reality, one cannot project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the historical average rate and the RevPAR of the subject property’s future primary competitors.

FIGURE 6-7 BASE YEAR AVERAGE RATE AND REVPAR OF THE COMPETITORS

Rooms Revenue Estimated 2015 Av erag e Ro om Per Available RevPAR Property Av erage Ro om Rate Rate Penetration Room (RevPAR) Penetration

Best Western Plus Seville Plaza Kansas City $90 - $95 95 - 100 % $70 - $75 120 - 130 % Courtyard by Marriott Kansas City South 95 - 100 100 - 110 65 - 70 110 - 120 Days Inn & Suites Kansas City South 75 - 80 80 - 85 35 - 40 65 - 70 Drury Inn & Suites Kansas City Stadium 105 - 110 110 - 120 60 - 65 100 - 110 Four Points by Sheraton Kansas City Sports Complex 90 - 95 90 - 95 50 - 55 85 - 90 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 100 - 105 100 - 110 55 - 60 100 - 110

Overall Average $94.94 $58.09

The defined primarily competitive market realized an overall average rate of $94.94 in the 2015 base year, improving from the 2014 level of $90.33. The Drury Inn & Suites achieved the highest estimated average rate in the local competitive market, by a minimal margin, because of its location near the sports stadiums. Many of the hotels on the south side of the competitive set attract significant amounts of extended-stay business and group business, which has a negative affect on average rate. The selected rate position for the proposed subject hotel, in base-year dollars, is lower than the average competitor rate, primarily due to the expectation of significant extended-stay business, as well as the lack of retail and restaurant amenities nearby. In order to remain competitive for occupancy, a hotel

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at this location would require discounted average rates. We have selected the rate position of $85.00, in base-year dollars, for the proposed subject.

Market-wide rates began to trend upward in 2010. We expect average rates to continue to improve at a steady pace given the larger-scale development projects occurring in the southern parts of Kansas City, as well as the stability of the leisure demand generators farther north.

Based on these considerations, the following table illustrates the projected average rate and the growth rates assumed. As a context for the average rate growth factors, note that we have applied underlying inflation rates of 2.0%, 2.5%, and 3.0% thereafter for each respective year following the base year of 2015.

FIGURE 6-8 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST

Area-wide Market (Calendar Year) Subject Property (Calendar Year)

Average Rate Average Average Rate Average Average Rate Year Occupancy Growth Rate Occupancy Growth Rate Penetration

Base Year 61.2 % — $94.94 — — $85.00 89.5 % 2016 61.8 4.0 % 98.74 — 4.0 % 88.40 89.5 2017 59.2 3.5 102.19 56.0 % 3.5 91.49 89.5 2018 59.0 3.0 105.26 60.0 3.0 94.24 89.5 2019 59.3 3.0 108.42 64.0 3.0 97.07 89.5 2020 59.3 3.0 111.67 64.0 3.0 99.98 89.5

As illustrated above, a 4.0% rate of change is expected for the proposed subject hotel's positioned 2015 room rate in 2016. This is followed by growth rates of 3.5% and 3.0% in 2017 and 2018, respectively. The southeastern Kansas City market should experience rate growth through the near term. The proposed subject hotel's rate position should reflect growth similar to market trends because of the proposed hotel's new facility and anticipated strong brand affiliation. The proposed subject hotel’s penetration rate is forecast to reach 89.5% by the stabilized period, largely due to the lower-rated extended-stay business the subject property is expected to cater to.

The following table provides a comparison of the historical performance and forecasts for the competitive set, as well as the forecasts for the proposed subject property.

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FIGURE 6-9 COMPARISON OF HISTORICAL AND PROJECTED OCCUPANCY, AVERAGE RATE, AND REVPAR – PROPOSED SUBJECT PROPERTY AND MARKET

Projected 2013 2014 2015 2016 2017 2018 2019 2020 2021 Proposed Hotel @ 63rd and Prospect Avenue Occupancy — 56.2 % 60.0 % 63.8 % 63.8 % 63.8 % Change — — 6.6 % 6.3 % 0.0 % 0.0 % Occupancy Penetration — 95.0 % 101.7 % 107.6 % 107.6 % 107.6 % Average Rate $85.00 $88.40 $91.49 $94.24 $97.07 $99.98 $102.98 Change — 3.5 % 3.0 % 3.0 % 3.0 % 3.0 % Average Rate Penetration 89.5 % 89.5 % 89.5 % 89.5 % 89.5 % 89.5 % RevPAR — $51.45 $56.51 $61.88 $63.74 $65.65 Change — — 9.8 % 9.5 % 3.0 % 3.0 % RevPAR Penetration — 85.0 % 91.0 % 96.3 % 96.3 % 96.3 % Historical (Estimated) Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021

Kansas City Submarket Occupancy 45.0 % 55.1 % 61.2 % 61.8 % 59.2 % 59.0 % 59.3 % 59.3 % 59.3 % Change — 22.6 % 11.0 % 1.0 % (4.2) % (0.4) % 0.5 % 0.0 % 0.0 % Average Rate $87.45 $90.33 $94.94 $98.74 $102.19 $105.26 $108.42 $111.67 $115.02 Change — 3.3 % 5.1 % 4.0 % 3.5 % 3.0 % 3.0 % 3.0 % 3.0 % RevPAR $39.32 $49.78 $58.09 $61.04 $60.51 $62.07 $64.26 $66.18 $68.17 Change — 26.6 % 16.7 % 5.1 % (0.9) % 2.6 % 3.5 % 3.0 % 3.0 % * The forecast for the proposed subject property does not include rate discounts that are expected to occur during the initial year(s) of operation.

January-2016 Projection of Occupancy and Average Rate Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 81

The North American lodging market bottomed out in late 2009, at which time demand rebounded and the supply pipeline diminished. In 2010, occupancy rebounded strongly, and by 2011, average rates in most U.S. markets showed increases. By year-end 2014, occupancy approached the levels realized during the 1994–1996 timeframe, and average rate remained well above the prior 2008 peak. In many primary markets, strong occupancy levels and a lack of new supply are allowing hotel operators to make continued, aggressive average rate gains in 2015. While average rate growth is strong in some secondary and tertiary markets, it may be limited in the near term by the entrance of new supply. With demand now recovered from the correction in 2009, and new supply remaining muted in 2015 and 2016, markets should be able to support continued, healthy average rate gains in the near term.

A new property must establish its reputation and a client base in the market during its ramp-up period; as such, the proposed subject hotel’s average rate in the initial operating period has been discounted to reflect this likelihood. We forecast a 5.0% discount to the proposed subject hotel’s forecast room rate in the first operating year, which would be typical for a new operation of this type.

The following occupancies and average rates will be used to project the subject property's rooms revenue. This forecast reflects years beginning on April 1, 2017 and corresponds with our financial projections.

FIGURE 6-10 FORECAST OF OCCUPANCY, AVERAGE RATE, AND REVPAR

Average Rate Average Rate Year Occupancy Before Discount Discount After Discount RevPAR

2017/18 57 % $92.17 5.0 % $87.56 $49.91 2018/19 61 94.94 0.0 94.94 57.91 2019/20 64 97.78 0.0 97.78 62.58

January-2016 Projection of Occupancy and Average Rate Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 82

7. Projection of Income and Expense

In this chapter of our report, we have compiled a forecast of income and expense for the proposed subject hotel. This forecast is based on the facilities program set forth previously, as well as the occupancy and average rate forecast discussed previously.

The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. The ten- year period reflects the typical holding period of large real estate assets such as hotels. In addition, the ten-year period provides for the stabilization of income streams and comparison of yields with alternate types of real estate. The forecasted income streams reflect the future benefits of owning specific rights in income-producing real estate.

Comparable Operating In order to project future income and expense for the proposed subject hotel, we Statements have included a sample of individual comparable operating statements from our database of hotel statistics. All financial data are presented according to the three most common measures of industry performance: ratio to sales (RTS), amounts per available room (PAR), and amounts per occupied room night (POR). The following data reflect the performance of five hotel properties, which were chosen based on similarities in product, market orientation, brand affiliation, size, and price positioning. All five properties represent midscale, extended-stay hotels. These historical income and expense statements will be used as benchmarks in our forthcoming forecast of income and expense.

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 83

FIGURE 7-1 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2014/15 2014/15 2014 2013/14 2013/14 2015 Number of Rooms: 60 to 90 80 to 100 60 to 90 70 to 100 80 to 110 80 Days Open: 365 365 365 365 365 365 Occupancy: 79% 81% 87% 68% 65% 64% Average Rate: $79 $69 $69 $89 $94 $87 RevPAR: $62 $56 $60 $61 $61 $56 REVENUE Rooms 97.6 % 98.7 % 98.4 % 98.3 % 98.7 % 98.2 % Other Operated Departments 1.3 0.9 0.5 1.7 1.3 1.7 Rentals & Other Income 1.1 0.5 1.1 0.0 0.0 0.1 Total 100.0 100.0 100.0 100.0 100.0 100.0 DEPARTMENTAL EXPENSES* Rooms 22.4 19.1 20.0 21.1 22.1 21.0 Other Operated Departments 130.8 163.7 359.5 49.2 159.7 45.0 Total 23.5 20.2 21.6 21.6 23.8 21.4 DEPARTMENTAL INCOME 76.5 79.8 78.4 78.4 76.2 78.6 OPERATING EXPENSES Administrative & General 11.2 11.7 8.1 9.7 13.8 9.6 Info. and Telecom. Systems 0.0 0.0 0.0 0.0 0.0 0.7 Marketing 8.5 4.4 1.6 3.7 0.2 3.6 Franchise Fee 6.8 7.9 7.4 6.4 8.2 6.4 Property Operations & Maintenance 7.9 3.9 3.2 6.5 3.5 3.4 Utilities 5.6 5.4 5.5 4.3 4.6 4.8 Total 40.0 33.2 25.8 30.6 30.3 28.5 HOUSE PROFIT 36.5 46.6 52.6 47.8 45.9 50.1 Management Fee 3.2 0.0 2.9 3.0 0.0 3.0 INCOME BEFORE FIXED CHARGES 33.2 46.6 49.8 44.8 45.8 47.1

* Departmental expense ratios are expressed as a percentage of departmental revenues

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 84

FIGURE 7-2 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2014/15 2014/15 2014 2013/14 2013/14 2015 Number of Rooms: 60 to 90 80 to 100 60 to 90 70 to 100 80 to 110 80 Days Open: 365 365 365 365 365 365 Occupancy: 79% 81% 87% 68% 65% 64% Average Rate: $79 $69 $69 $89 $94 $87 RevPAR: $62 $56 $60 $61 $61 $56 REVENUE Rooms $22,608 $20,285 $22,026 $22,170 $22,133 $20,295 Other Operated Departments 302 175 116 393 285 348 Rentals & Other Income 245 101 243 0 0 23 Total 23,156 20,561 22,385 22,563 22,418 20,666 DEPARTMENTAL EXPENSES Rooms 5,056 3,872 4,410 4,678 4,890 4,262 Other Operated Departments 395 287 418 193 454 157 Total 5,451 4,159 4,828 4,872 5,345 4,419 DEPARTMENTAL INCOME 17,705 16,402 17,557 17,691 17,073 16,248 OPERATING EXPENSES Administrative & General 2,593 2,396 1,821 2,178 3,095 1,985 Info. and Telecom. Systems 0 0 0 0 0 149 Marketing 1,958 903 349 843 55 745 Franchise Fee 1,584 1,626 1,649 1,441 1,842 1,319 Property Operations & Maintenance 1,839 793 716 1,475 787 695 Utilities 1,295 1,110 1,233 972 1,023 993 Total 9,269 6,828 5,768 6,910 6,803 5,886 HOUSE PROFIT 8,436 9,574 11,789 10,781 10,270 10,362 Management Fee 739 0 640 676 0 620 INCOME BEFORE FIXED CHARGES 7,697 9,574 11,149 10,105 10,270 9,742

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 85

FIGURE 7-3 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2014/15 2014/15 2014 2013/14 2013/14 2015 Number of Rooms: 60 to 90 80 to 100 60 to 90 70 to 100 80 to 110 80 Days Open: 365 365 365 365 365 365 Occupancy: 79% 81% 87% 68% 65% 64% Average Rate: $79 $69 $69 $89 $94 $87 RevPAR: $62 $56 $60 $61 $61 $56 REVENUE Rooms $78.64 $68.62 $68.97 $89.37 $93.91 $86.88 Other Operated Departments 1.05 0.59 0.36 1.58 1.21 1.49 Rentals & Other Income 0.85 0.34 0.76 0.00 0.00 0.10 Total 80.54 69.55 70.10 90.95 95.12 88.47 DEPARTMENTAL EXPENSES Rooms 17.58 13.10 13.81 18.86 20.75 18.24 Other Operated Departments 1.38 0.97 1.31 0.78 1.93 0.67 Total 18.96 14.07 15.12 19.64 22.68 18.91 DEPARTMENTAL INCOME 61.58 55.49 54.98 71.31 72.44 69.55 OPERATING EXPENSES Administrative & General 9.02 8.10 5.70 8.78 13.13 8.50 Info. and Telecom. Systems 0.00 0.00 0.00 0.00 0.00 0.64 Marketing 6.81 3.06 1.09 3.40 0.24 3.19 Franchise Fee 5.51 5.50 5.16 5.81 7.82 5.65 Property Operations & Maintenance 6.40 2.68 2.24 5.95 3.34 2.97 Utilities 4.50 3.76 3.86 3.92 4.34 4.25 Total 32.24 23.10 18.06 27.85 28.87 25.19 HOUSE PROFIT 29.34 32.39 36.92 43.46 43.58 44.36 Management Fee 2.57 0.00 2.00 2.73 0.00 2.65 INCOME BEFORE FIXED CHARGES 26.77 32.39 34.91 40.73 43.58 41.71

The comparables’ departmental income ranged from 76.2% to 79.8% of total revenue. The comparable properties achieved a house profit ranging from 36.5% to 52.6% of total revenue. We will refer to the comparable operating data in our discussion of each line item, which follows later in this section of the report.

Fixed and Variable HVS uses a fixed and variable component model to project a lodging facility's Component Analysis revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then increased in tandem with the underlying

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 86

rate of inflation, while the variable component is adjusted for a specific measure of volume such as total revenue.

The actual forecast is derived by adjusting each year’s revenue and expense by the amount fixed (the fixed expense multiplied by the inflated base-year amount) plus the variable amount (the variable expense multiplied by the inflated base-year amount) multiplied by the ratio of the projection year’s occupancy to the base-year occupancy (in the case of departmental revenue and expense) or the ratio of the projection year’s revenue to the base year’s revenue (in the case of undistributed operating expenses). Fixed expenses remain fixed, increasing only with inflation. Our discussion of the revenue and expense forecast in this report is based upon the output derived from the fixed and variable model. This forecast of revenue and expense is accomplished through a systematic approach, following the format of the Uniform System of Accounts for the Lodging Industry. Each category of revenue and expense is estimated separately and combined at the end in the final statement of income and expense.

Inflation Assumption A general rate of inflation must be established that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations.

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 87

FIGURE 7-4 INFLATION ESTIMATES

Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) June Dec June Dec June Name (Sample from Survey) Firm 2015 2015 2016 2016 2017

Lewis Alexander Nomura Securities International 0.3 % 1.8 % 2.1 % 2.1 % — Paul Ashworth Capital Economics 0.3 1.0 2.0 2.2 2.5 % David Berson Nationwide Insurance 0.1 1.1 2.0 2.3 2.1 Brian Bethune Tufts University 0.0 1.0 1.5 2.2 2.2 Steven Blitz ITG Investment Research 0.0 0.4 0.8 1.8 2.5 Beth Ann Bovino Standard and Poor's -0.2 0.7 2.1 2.4 2.3 Joseph Carson AllianceBernstein 0.7 1.0 2.0 2.5 3.0 Mike Cosgrove Econoclast 0.2 1.0 2.4 2.5 2.3 David Crowe National Association of Home Builders 1.9 2.0 2.1 2.1 2.1 J. Dewey Daane Vanderbilt University 0.0 1.5 2.0 2.0 2.0 Rajeev Dhawan Georgia State University -0.4 1.5 2.3 2.5 2.5 Douglas Duncan Fannie Mae -0.1 0.7 2.0 2.1 2.2 Maria Fiorini Ramirez/Joshua Shapiro MFR, Inc. -0.2 1.0 2.3 2.2 — Mike Fratantoni Mortgage Bankers Association 0.6 1.8 2.3 2.5 2.9 Michael Gregory BMO Capital 0.0 0.7 2.1 2.4 2.2 Doug Handler IHS Global Insight 0.0 1.2 1.5 2.1 2.4 Maury Harris UBS 0.0 0.8 2.0 2.8 — Jan Hatzius Goldman, Sachs & Co. -0.2 0.8 2.1 2.1 2.3 Stuart Hoffman PNC Financial Services Group 0.1 1.5 2.2 2.4 2.4 Derek Holt Scotiabank 0.1 1.0 2.0 2.2 2.0 Jack Kleinhenz National Retail Federation 0.0 1.5 2.0 2.2 2.3 Joseph LaVorgna Deutsche Bank Securities, Inc. -0.1 0.9 2.5 2.7 2.6 Edward Leamer/David Shulman UCLA Anderson Forecast 0.1 1.2 3.0 3.2 3.2 Kevin Logan HSBC Securities 0.0 0.9 1.5 2.1 — John Lonski Moody's Investors Service -0.2 0.9 1.7 1.8 2.0 Jim Meil ACT Research 0.0 1.2 1.8 2.1 2.2 Michael Moran Daiwa Capital 0.0 0.8 1.9 2.0 2.2 Joel Naroff Naroff Economic Advisors 0.0 1.4 3.0 2.9 2.6 Mark Nielson MacroEcon Global Advisors 1.0 2.6 3.4 3.2 3.1 Lindsey Piegza Stifel, Nicoulas and Company, Inc. -0.3 0.0 0.3 — — Tom Porcelli RBC Capital 0.4 1.6 1.9 2.2 — Russell Price Ameriprise Financial 0.0 1.6 2.3 2.4 2.3 Arun Raha Eaton Corp. 0.2 1.5 1.8 1.8 2.0 Vincent Reinhart Morgan Stanley 0.1 1.5 1.8 2.0 — Ian Shepherdson Pantheon Macroeconomics 0.1 1.5 2.0 2.2 2.5 Allen Sinai Decision Economics, Inc. 0.1 1.0 1.5 1.8 2.0 James F. Smith Parsec Financial Management 1.6 1.8 1.7 1.4 1.6 Neal Soss CSFB 0.0 0.8 1.7 1.9 — Stephen Stanley Pierpont Securities 0.3 2.2 3.0 3.2 3.3 Kevin Swift American Chemisty Council 0.0 0.8 2.3 2.5 2.8 Diane Swonk Mesirow Financial 0.0 0.6 1.9 2.1 2.1 US Economics Team BNP Paribas 0.2 1.8 2.3 2.8 2.7 Bart van Ark The Conference Board -0.1 0.8 2.2 2.0 — William T. Wilson The Heritage Foundation 0.0 0.5 1.2 1.7 1.7 Lawrence Yun National Association of Realtors 0.2 2.8 3.1 3.2 3.0

Averages: 0.2 % 1.1 % 1.9 % 2.1 % 2.2 % Source: wsj.com, July 1, 2015

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 88

As the preceding table indicates, the financial analysts who were surveyed in June 2015 anticipated inflation rates ranging from -0.1% to 2.8% (on an annualized basis) for December 2015; the average of these data points was 1.1%. The same group expects annualized inflation rates of 1.9% and 2.1% for June 2016 and December 2016, respectively, slightly lower than the inflation rate forecasts for June 2017, which average 2.2%.

As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index (CPI-U). Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective.

FIGURE 7-5 NATIONAL CONSUMER PRICE INDEX (ALL URBAN CONSUMERS)

National Consumer Percent Change Year Price Index from Previous Year

2004 188.9 — 2005 195.3 3.4 % 2006 201.6 3.2 2007 207.3 2.8 2008 215.3 3.8 2009 214.5 -0.4 2010 218.1 1.6 2011 224.9 3.1 2012 229.6 2.1 2013 233.0 1.5 2014 234.8 0.8

Average Annual Compounded Change 2004 - 2014: 2.2 % 2009 - 2014: 1.8

Source: Bureau of Labor Statistics

Between 2004 and 2014, the national CPI increased at an average annual compounded rate of 2.2%; from 2009 to 2014, the CPI rose by a slightly lower average annual compounded rate of 1.8%. In 2014, the CPI rose by 0.8%, a decrease from the level of 1.5% recorded in 2013.

In consideration of the most recent trends, the projections set forth previously, and our assessment of probable property appreciation levels, we have applied underlying inflation rates of 2.0%, 2.5%, and 3.0% thereafter for each respective year following the base year of 2015. This stabilized inflation rate takes into

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 89

account normal, recurring inflation cycles. Inflation is likely to fluctuate above and below this level during the projection period. Any exceptions to the application of the assumed underlying inflation rate are discussed in our write-up of individual income and expense items.

Summary of Based on an analysis that will be detailed throughout this section, we have Projections formulated a forecast of income and expense. The following table presents a detailed forecast through the fifth projection year, including amounts per available room and per occupied room. The second table illustrates our ten-year forecast of income and expense, presented with a lesser degree of detail. The forecasts pertain to years that begin on April 1, 2017, expressed in inflated dollars for each year.

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 90

FIGURE 7-6 DETAILED FORECAST OF INCOME AND EXPENSE

2017/18 Begins April 2018/19 Stabilized 2020/21 Number of Rooms: 80 80 80 80 Occupancy: 57% 61% 64% 64% Average Rate: $87.56 $94.94 $97.78 $100.72 RevPAR: $49.91 $57.91 $62.58 $64.46 Days Open: 365 365 365 365 Occupied Rooms: 16,644 %Gross PAR POR 17,812 %Gross PAR POR 18,688 %Gross PAR POR 18,688 %Gross PAR POR OPERATING REVENUE Rooms $1,457 98.0 % $18,213 $87.54 $1,691 98.1 % $21,138 $94.94 $1,827 98.2 % $22,838 $97.76 $1,882 98.2 % $23,525 $100.71 Other Operated Departments 29 1.9 357 1.72 30 1.7 375 1.68 31 1.7 392 1.68 32 1.7 403 1.73 Miscellaneous Income 2 0.1 24 0.11 2 0.1 25 0.11 2 0.1 26 0.11 2 0.1 27 0.12 Total Operating Revenues 1,487 100.0 18,593 89.37 1,723 100.0 21,537 96.73 1,860 100.0 23,255 99.55 1,916 100.0 23,955 102.55 DEPARTMENTAL EXPENSES * Rooms 346 23.7 4,324 20.78 366 21.6 4,570 20.52 384 21.0 4,797 20.53 395 21.0 4,941 21.15 Other Operated Departments 13 46.1 164 0.79 14 45.4 170 0.77 14 45.0 176 0.75 15 45.0 181 0.78 Total 359 24.1 4,488 21.57 379 22.0 4,740 21.29 398 21.4 4,973 21.29 410 21.4 5,122 21.93 DEPARTMENTAL INCOME 1,128 75.9 14,105 67.80 1,344 78.0 16,797 75.44 1,463 78.6 18,282 78.26 1,507 78.6 18,833 80.62 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 162 10.9 2,026 9.74 172 10.0 2,145 9.63 179 9.6 2,235 9.57 184 9.6 2,302 9.85 Info. & Telecom. Systems 12 0.8 152 0.73 13 0.7 161 0.72 13 0.7 168 0.72 14 0.7 173 0.74 Marketing 61 4.1 760 3.65 64 3.7 804 3.61 67 3.6 838 3.59 69 3.6 863 3.70 Franchise Fee 95 6.4 1,184 5.69 110 6.4 1,374 6.17 119 6.4 1,484 6.35 122 6.4 1,529 6.55 Prop. Operations & Maint. 57 3.8 709 3.41 60 3.5 751 3.37 63 3.4 782 3.35 64 3.4 806 3.45 Utilities 81 5.4 1,013 4.87 86 5.0 1,072 4.82 89 4.8 1,117 4.78 92 4.8 1,151 4.93 Total 468 31.4 5,845 28.09 505 29.3 6,307 28.32 530 28.5 6,624 28.36 546 28.5 6,823 29.21 GROSS HOUSE PROFIT 661 44.5 8,260 39.70 839 48.7 10,491 47.12 933 50.1 11,658 49.91 961 50.1 12,010 51.41 Management Fee 45 3.0 558 2.68 52 3.0 646 2.90 56 3.0 698 2.99 57 3.0 719 3.08 INCOME BEFORE NON-OPER. INC. & EXP. 616 41.5 7,703 37.02 788 45.7 9,844 44.21 877 47.1 10,960 46.92 903 47.1 11,291 48.33 NON-OPERATING INCOME AND EXPENSE Property Taxes 56 3.8 700 3.37 57 3.3 718 3.22 59 3.2 739 3.17 61 3.2 762 3.26 Insurance 21 1.4 263 1.27 22 1.3 271 1.22 22 1.2 279 1.20 23 1.2 288 1.23 Reserve for Replacement 30 2.0 372 1.79 52 3.0 646 2.90 74 4.0 930 3.98 77 4.0 958 4.10 Total 107 7.2 1,336 6.42 131 7.6 1,635 7.34 156 8.4 1,949 8.34 161 8.4 2,008 8.59 EBITDA LESS RESERVE $509 34.3 % $6,367 $30.60 $657 38.1 % $8,209 $36.87 $721 38.7 % $9,011 $38.58 $743 38.7 % $9,283 $39.74 *Departmental expenses are expressed as a percentage of departmental revenues.

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 91

FIGURE 7-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Number of Rooms: 80 80 80 80 80 80 80 80 80 80 Occupied Rooms: 16,644 17,812 18,688 18,688 18,688 18,688 18,688 18,688 18,688 18,688 Occupancy: 57% 61% 64% 64% 64% 64% 64% 64% 64% 64% Average Rate: $87.56 % of $94.94 % of $97.78 % of $100.72 % of $103.74 % of $106.85 % of $110.06 % of $113.36 % of $116.76 % of $120.26 % of RevPAR: $49.91 Gross $57.91 Gross $62.58 Gross $64.46 Gross $66.39 Gross $68.38 Gross $70.44 Gross $72.55 Gross $74.73 Gross $76.97 Gross OPERATING REVENUE Rooms $1,457 98.0 % $1,691 98.1 % $1,827 98.2 % $1,882 98.2 % $1,939 98.2 % $1,997 98.2 % $2,057 98.2 % $2,118 98.2 % $2,182 98.2 % $2,247 98.2 % Other Operated Departments 29 1.9 30 1.7 31 1.7 32 1.7 33 1.7 34 1.7 35 1.7 36 1.7 37 1.7 39 1.7 Miscellaneous Income 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 2 0.1 3 0.1 Total Operating Revenue 1,487 100.0 1,723 100.0 1,860 100.0 1,916 100.0 1,974 100.0 2,034 100.0 2,095 100.0 2,157 100.0 2,222 100.0 2,288 100.0 DEPARTMENTAL EXPENSES* Rooms 346 23.7 366 21.6 384 21.0 395 21.0 407 21.0 419 21.0 432 21.0 445 21.0 458 21.0 472 21.0 Other Operated Departments 13 46.1 14 45.4 14 45.0 15 45.0 15 45.0 15 45.0 16 45.0 16 45.0 17 45.0 17 45.0 Total 359 24.1 379 22.0 398 21.4 410 21.4 422 21.4 435 21.4 448 21.4 461 21.4 475 21.4 489 21.4 DEPARTMENTAL INCOME 1,128 75.9 1,344 78.0 1,463 78.6 1,507 78.6 1,552 78.6 1,599 78.6 1,647 78.6 1,696 78.6 1,747 78.6 1,799 78.6 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 162 10.9 172 10.0 179 9.6 184 9.6 190 9.6 195 9.6 201 9.6 207 9.6 213 9.6 220 9.6 Info. & Telecom. Systems 12 0.8 13 0.7 13 0.7 14 0.7 14 0.7 15 0.7 15 0.7 16 0.7 16 0.7 16 0.7 Marketing 61 4.1 64 3.7 67 3.6 69 3.6 71 3.6 73 3.6 75 3.6 78 3.6 80 3.6 82 3.6 Franchise Fee 95 6.4 110 6.4 119 6.4 122 6.4 126 6.4 130 6.4 134 6.4 138 6.4 142 6.4 146 6.4 Prop. Operations & Maint. 57 3.8 60 3.5 63 3.4 64 3.4 66 3.4 68 3.4 70 3.4 73 3.4 75 3.4 77 3.4 Utilities 81 5.4 86 5.0 89 4.8 92 4.8 95 4.8 98 4.8 101 4.8 104 4.8 107 4.8 110 4.8 Total 468 31.4 505 29.3 530 28.5 546 28.5 562 28.5 579 28.5 597 28.5 614 28.5 633 28.5 652 28.5 GROSS HOUSE PROFIT 661 44.5 839 48.7 933 50.1 961 50.1 990 50.1 1,020 50.1 1,050 50.1 1,081 50.1 1,114 50.1 1,147 50.1 Management Fee 45 3.0 52 3.0 56 3.0 57 3.0 59 3.0 61 3.0 63 3.0 65 3.0 67 3.0 69 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 616 41.5 788 45.7 877 47.1 903 47.1 931 47.1 959 47.1 987 47.1 1,016 47.1 1,047 47.1 1,078 47.1 NON-OPERATING INCOME AND EXPENSE Property Taxes 56 3.8 57 3.3 59 3.2 61 3.2 63 3.2 65 3.2 67 3.2 69 3.2 71 3.2 73 3.2 Insurance 21 1.4 22 1.3 22 1.2 23 1.2 24 1.2 24 1.2 25 1.2 26 1.2 27 1.2 27 1.2 Reserve for Replacement 30 2.0 52 3.0 74 4.0 77 4.0 79 4.0 81 4.0 84 4.0 86 4.0 89 4.0 92 4.0 Total 107 7.2 131 7.6 156 8.4 161 8.4 165 8.4 170 8.4 176 8.4 181 8.4 186 8.4 192 8.4 EBITDA LESS RESERVE $509 34.3 % $657 38.1 % $721 38.7 % $743 38.7 % $765 38.7 % $788 38.7 % $812 38.7 % $836 38.7 % $861 38.7 % $887 38.7 % 1 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues.

January-2016 Projection of Income and Expense Proposed Hotel @ 63rd and Prospect Avenue – Kansas City, Missouri 92

Forecast of Income and The following description sets forth the basis for the forecast of income and Expense expense. We anticipate that it will take three years for the subject property to reach a stabilized level of operation. Each revenue and expense item has been forecast based upon our review of the proposed subject hotel's operating budget and comparable income and expense statements. The forecast is based upon fiscal years beginning April 1, 2017, expressed in inflated dollars for each year.

Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. We projected occupancy and average rate in a previous section of this report. The proposed subject hotel is expected to stabilize at an occupancy level of 64% with an average rate of $97.78 in 2019/20. Following the stabilized year, the subject property’s average rate is projected to increase along with the underlying rate of inflation.

Other Operated According to the Uniform System of Accounts, other operated departments include Departments Revenue any major or minor operated department other than rooms and food and beverage. The proposed subject hotel's other operated departments revenue sources are expected to include the hotel's telephone revenues and market pantry income. Based on our review of operations with a similar extent of offerings, we have positioned an appropriate revenue level for the proposed subject hotel.

The comparable operating statements illustrate other operated departments revenue ranging from $0.36 to $1.58 per occupied room. We forecast the proposed subject hotel’s other operated departments revenue to stabilize at 1.7% of rooms revenue or $1.68 per occupied room by the stabilized year, 2019/20.

Miscellaneous Income The miscellaneous income sources comprise those other than guestrooms, food and beverage, and the other operated departments. The proposed subject hotel's miscellaneous income revenues are expected to be generated primarily by minor items, such as the hotel's cancelation and damage fees. Based on our review of operations with a similar extent of offerings, we have positioned an appropriate revenue level for the proposed subject hotel. Miscellaneous revenue for the comparables ranged 0.5% to 1.1% of rooms revenue or $0.34 to $0.85 on a per- occupied-room basis. Changes in this revenue item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy. We forecast the proposed subject hotel’s miscellaneous income to stabilize at $0.11 per occupied room by the stabilized year, 2019/20.

Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy and managers can generally scale the level of service staff on hand to meet an expected occupancy level, much of a hotel's payroll is fixed. A base level of front desk

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personnel, housekeepers, and supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy.

Commissions and reservations are usually based on room sales, and thus are highly sensitive to changes in occupancy and average rate. While guest supplies vary 100% with occupancy, linens and other operating expenses are only slightly affected by volume.

The comparables illustrated rooms expense ranging between 19.1% and 22.4% of rooms revenue; on a per-occupied-room basis, the range was between $13.10 and $20.75. We have projected rooms expense for the proposed subject hotel at 23.7% in the first year (or $20.78 per occupied room), stabilizing at 21.0% in 2019/20 (or $20.53 per occupied room). The proposed subject hotel's rooms department expense has been positioned based upon our review of the comparable operating data and our understanding of the hotel's future service level and price point.

Other Operated Other operated departments expense includes all expenses reflected in the Departments Expense summary statements for the divisions associated in these categories. This was previously discussed in this chapter. The comparables illustrated other operated departments expense ranging between $0.78 and $1.93 per occupied room. We have projected a stabilized expense ratio of 45.0% in 2019/20. The proposed subject hotel's other operated departments revenue sources are expected to include the hotel's telephone revenues and market pantry income. Based on our review of operations with a similar extent of offerings, we have positioned an appropriate revenue level for the proposed subject hotel.

Administrative and Administrative and general expense includes the salaries and wages of all General Expense administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category.

Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume.

As a percentage of total revenue, the comparable operations indicate an administrative and general expense range from 8.1% to 13.8%, or $1,821 to $3,095 per available room. Based upon our review of the comparable operating data and the expected scope of facility for the proposed subject hotel, we have positioned the administrative and general expense level at a market- and

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property-supported level. In the first projection year, we have projected administrative and general expense for the proposed subject hotel to be $2,026 per available room, or 10.9% of total revenue. By the 2019/20 stabilized year, these amounts change to $2,235 per available room and 9.6% of total revenue.

Information and Information and telecommunications systems expense consists of all costs Telecommunications associated with a hotel’s technology infrastructure. This includes the costs of cell Systems Expense phones, administrative call and Internet services, and complimentary call and Internet services. Expenses in this category are typically organized by type of technology, or the area benefitting from the technology solution. We expect the proposed subject hotel's information and telecommunications systems to be well managed. Expense levels should stabilize at a typical level for a property of this type.

Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities.

The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately.

Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months.

As a percentage of total revenue, the comparable operations indicate a marketing expense range from 0.2% to 8.5%, or $55 to $1,958 per available room. Based upon our review of the comparable operating data and the expected scope of facility for the proposed subject hotel, we have positioned the marketing expense level at a market- and property-supported level. In the first projection year, we have projected marketing expense for the proposed subject hotel to be $760 per available room, or 4.1% of total revenue. By the 2019/20 stabilized year, these amounts change to $838 per available room and 3.6% of total revenue.

Franchise Fee As previously discussed, the proposed subject property is expected to be franchised under the TownePlace Suites by Marriott brand. Costs associated with this franchise are summarized in the introductory chapter in this report.

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Property Operations Property operations and maintenance expense is another expense category that is and Maintenance largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time.

Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance.

The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term.

As a percentage of total revenue, the comparable operations indicate a property operations and maintenance expense range from 3.2% to 7.9%, or $716 to $1,839 per available room. We expect the proposed subject hotel's maintenance operation to be well managed. Expense levels should stabilize at a typical level for a property of this type. Changes in this expense item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy. In the first projection year, we have projected property operations and maintenance expense for the proposed subject hotel to be $709 per available room, or 3.8% of total revenue. By the 2019/20 stabilized year, these amounts change to $782 per available room and 3.4% of total revenue.

Utilities Expense The utilities consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel utilities are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service.

Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their utility

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requirements with less expensive sources, such as gas and oil, for heating and cooking.

As a percentage of total revenue, the comparable operations indicate a utilities expense range from 4.3% to 5.6%, or $972 to $1,295 per available room. The changes in this utilities line item through the projection period are a result of the application of the underlying inflation rate and projected changes in occupancy. In the first projection year, we have projected utilities expense for the proposed subject hotel to be $1,013 per available room, or 5.4% of total revenue. By the 2019/20 stabilized year, these amounts change to $1,117 per available room and 4.8% of total revenue.

Management Fee Management expense consists of the fees paid to the managing agent contracted to operate the property. Some companies provide management services and a brand- name affiliation (first-tier management company), while others provide management services alone (second-tier management company). Some management contracts specify only a base fee (usually a percentage of total revenue), while others call for both a base fee and an incentive fee (usually a percentage of defined profit). Basic hotel management fees are often based on a percentage of total revenue, which means they have no fixed component. While base fees typically range from 2% to 4% of total revenue, incentive fees are deal- specific and often are calculated as a percentage of income available after debt service and, in some cases, after a preferred return on equity. Total management fees for the proposed subject hotel have been forecast at 3.0% of total revenue.

Property Taxes Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments.

Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. We have based our estimate of the proposed subject property's market value (for tax purposes) on an analysis of assessments of comparable hotel properties in the local municipality.

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FIGURE 7-8 COUNTY-ASSESSED VALUE OF COMPARABLE HOTELS

Number Total Assessment Hotel of Rooms Total

Best Western Seville Plaza Kansas City 75 $925,832 Days Inn & Suites Kansas City South 85 288,000 Drury Inn Kansas City/stadium 123 1,494,400 Four Points by Sheraton Kansas City Sports Complex 168 965,701 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 81 422,822 Assessments per Room Best Western Seville Plaza Kansas City $12,344 Days Inn & Suites Kansas City South 3,388 Drury Inn Kansas City/stadium 12,150 Four Points by Sheraton Kansas City Sports Complex 5,748 Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area 5,220

Positioned Subject - Per Room 80 $6,500 Positioned Subject - Total $520,000

Source: Jackson County Assessor

We have positioned the future assessment levels of the subject site and proposed improvements based upon the illustrated comparable data. We have positioned these assessments closest to the Holiday Inn Express Hotel & Suites Kansas City Sports Complex Area because of the similarities, including product type and location; overall, the positioned assessments are well supported by the market data.

Tax rates are based on the city and county budgets, which change annually. The most recent tax rate in this jurisdiction was reported at 10.56435. The following table shows changes in the tax rate during the last several years.

FIGURE 7-9 COUNTY TAX RATES

Real Property Year Tax Rate

2012 10.45441 2013 10.55576 2014 10.56435

Source: Jackson County Assessor

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Based on comparable assessments and the tax rate information, the proposed subject property's projected property tax expense levels are calculated as follows.

FIGURE 7-10 PROJECTED PROPERTY TAX EXPENSE

Assessed Value Property Tax Year Real Property Total Tax Rate Forecast

Positioned $520,000 $520,000 10.56 $54,935 2017/18 $520,000 $520,000 10.78 $56,033 2018/19 520,000 520,000 11.05 57,434 2019/20 520,000 520,000 11.38 59,157

Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. General insurance costs also include premiums relating to liability, fidelity, and theft coverage. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy.

Based on comparable data and the structural attributes of the proposed project, we project the proposed subject hotel's insurance expense at $279 per available room by the stabilized year (positioned at $250 on a per-available-room basis in base-year dollars). This forecast equates to 1.2% of total revenue on a stabilized basis. In subsequent years, this amount is assumed to increase in tandem with inflation.

Reserve for Furniture, fixtures, and equipment are essential to the operation of a lodging Replacement facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use.

Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but affect an owner's cash flow, a forecast of income and expense should reflect these expenses in the form of an appropriate reserve for replacement.

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The International Society of Hospitality Consultants (ISHC) undertook a major industry-sponsored study of the capital expenditure requirements for full- service/luxury, select-service, and extended-stay hotels. The most recent findings of the study were published in a report in 2007.6 Historical capital expenditures of well-maintained hotels were investigated through the compilation of data provided by most of the major hotel companies in the United States. A prospective analysis of future capital expenditure requirements was also performed based upon the cost to replace short- and long-lived building components over a hotel's economic life. The study showed that the capital expenditure requirements for hotels vary significantly from year and depend upon both the actual and effective ages of a property. The results of this study showed that hotel lenders and investors are requiring reserves for replacement ranging from 4% to 5% of total revenue.

Based on the results of this study, our review of the subject asset and comparable lodging facilities, and our industry expertise, we estimate that a reserve for replacement of 4% of total revenues is sufficient to provide for the timely and periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is ramped up during the initial projection period.

Conclusion In conclusion, our analysis reflects a profitable operation, with net income expected to total 38.7% of total revenue by the stabilized year. The stabilized total revenue comprises primarily rooms revenue, with a secondary portion derived from other income sources. On the cost side, departmental expenses total 21.4% of revenue by the stabilized year, while undistributed operating expenses total 28.5% of total revenues; this assumes that the property will be operated competently by a well-known hotel operator. After a 3.0% of total revenues management fee, and 8.4% of total revenues in fixed expenses, a net income ratio of 38.7% is forecast by the stabilized year.

6 The International Society of Hotel Consultants, CapEx 2007, A Study of Capital Expenditure in the U.S. Hotel Industry.

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8. Statement of Assumptions and Limiting Conditions

1. This report is set forth as a market study of the proposed subject hotel; this is not an appraisal report. 2. This report is to be used in whole and not in part. 3. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed marketable and free of any deed restrictions and easements. The property is evaluated as though free and clear unless otherwise stated. 4. We assume that there are no hidden or unapparent conditions of the sub- soil or structures, such as underground storage tanks, that would affect the property’s development potential. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 5. We have not considered the presence of potentially hazardous materials or any form of toxic waste on the project site. We are not qualified to detect hazardous substances and urge the client to retain an expert in this field if desired. 6. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have assumed the proposed hotel would be designed and constructed to be in full compliance with the ADA. 7. We have made no survey of the site, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the described real estate will be within the boundaries of the property described, and that no encroachment will exist. 8. All information, financial operating statements, estimates, and opinions obtained from parties not employed by TS Worldwide, LLC are assumed true and correct. We can assume no liability resulting from misinformation. 9. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 10. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including the appropriate liquor license if applicable), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser.

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11. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 12. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 13. We are not required to give testimony or attendance in court because of this analysis without previous arrangements, and shall do so only when our standard per-diem fees and travel costs have been paid prior to the appearance. 14. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 15. We take no responsibility for any events or circumstances that take place subsequent to the date of our field inspection. 16. The quality of a lodging facility's onsite management has a direct effect on a property's economic viability. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results. 17. The financial analysis presented in this report is based upon assumptions, estimates, and evaluations of the market conditions in the local and national economy, which may be subject to sharp rises and declines. Over the projection period considered in our analysis, wages and other operating expenses may increase or decrease because of market volatility and economic forces outside the control of the hotel’s management. We assume that the price of hotel rooms, food, beverages, and other sources of revenue to the hotel will be adjusted to offset any increases or decreases in related costs. We do not warrant that our estimates will be attained, but they have been developed based upon information obtained during the course of our market research and are intended to reflect the expectations of a typical hotel investor as of the stated date of the report. 18. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 19. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors.

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20. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 21. Evaluating and comprising financial forecasts for hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final forecasts are subjective and may be influenced by our experience and other factors not specifically set forth in this report. 22. This study was prepared by TS Worldwide, LLC. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of TS Worldwide, LLC as employees, rather than as individuals.

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9. Certification

The undersigned hereby certify that, to the best of our knowledge and belief:

1. the statements of fact presented in this report are true and correct; 2. he 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; 3. we have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved; 4. we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; 5. our engagement in this assignment was not contingent upon developing or reporting predetermined results; 6. our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined result or direction in performance that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this study; 7. our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice; 8. Sara E. Olson personally inspected the property described in this report; Tanya J. Pierson, MAI participated in the analysis and reviewed the findings, but did not personally inspect the property; 9. neither Sara E. Olson nor Tanya J. Pierson, MAI has performed appraisal or consulting work on the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment; 10. 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 the Standards of Professional Appraisal Practice of the Appraisal Institute; 11. the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and

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12. as of the date of this report, Sara E. Olson has completed the Standards and Ethics Education Requirements for Candidates of the Appraisal Institute; and as of the date of this report, Tanya J. Pierson, MAI has completed the continuing education program for Designated Members of the Appraisal Institute.

Sara E. Olson Vice President TS Worldwide, LLC

Tanya J. Pierson, MAI Managing Director TS Worldwide, LLC

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Sara Olson

EMPLOYMENT

2011 to present HVS CONSULTING AND VALUATION SERVICES Boulder, Colorado

2010 – 2011 HYATT SUMMERFIELD SUITES HOTEL Broomfield, Colorado

February – June 2010 HOSPITALITY REAL ESTATE COUNSELORS Denver, Colorado

June – December 2009 THE MAGNOLIA HOTEL Omaha, Nebraska

EDUCATION AND OTHER BSBA – Hotel, Restaurant, and Tourism Management; University of Denver TRAINING Other Specialized Training Classes Completed: Uniform Standards of Professional Appraisal Practice – 15 hours Basic Appraisal Procedures – 30 hours Basic Appraisal Principles – 30 hours General Appraiser Income Approach – 60 hours General Appraiser Market Analysis and HBU – 30 hours General Appraiser Site Valuation and Cost Approach – 30 hours General Appraiser Sales Comparison Approach – 30 hours General Appraiser Report Writing and Case Studies – 30 hours Statistics, Modeling and Finance – 15 hours Advanced Income Capitalization – 40 hours Business Practices and Ethics – 7 hours Advanced Market Analysis & HBU – 35 hours Quantitative Analysis – 35 hours Advanced Concepts and Case Studies – 40 hours Advanced Highest and Best Use – 35 hours USPAP Update – 2014 Comp Exam for the MAI Designation – Passed

STATE CERTIFICATIONS California, Colorado, Connecticut, Iowa, Kansas, Nebraska, New Mexico, New York, Utah, Wyoming

HVS, Boulder, Colorado Qualifications of Sara Olson 1

PUBLISHED ARTICLES

HVS Journal “Five Key Takeaways: 2015 NYU International Hospitality Industry Investment Conference,” June 2015

HVS Journal “In Focus: Cheyenne, WY,” co-authored with Katy Black, April 2014

HVS Journal “Market Intelligence Report 2013: Colorado Springs,” September 2013

HVS Journal “Demand High, Hotel Supply Low in Eastern Montana and Western North Dakota,” co- authored with Desiree Flanary, January 2013

HVS Journal “HVS Hotel Market Intelligence Report: Des Moines, Iowa,” co-authored with Ryan Bee, May 2012

HVS, Boulder, Colorado Qualifications of Sara Olson 2

EXAMPLES OF CORPORATE AND Inland Pacific Companies Vestin Originations INSTITUTIONAL CLIENTS SERVED Interbank Washington Trust JP Morgan Chase WBP Hospitality 1st Bank Justin Bhullar Wells Fargo Accor North America Kilpatrick/Torchlight Western Commerce Bank Aileron Capital Management Larimer Associates Wilshire Archon Group LF Station Realty LLC WRK, LLC Ashford Hospitality Trust Loews Aspen FSP – ABR LLC Lowe Enterprises Aureus Hospitality Group M&I Bank Bank of America Marriott International Bank of Jackson Hole Metro City Bank Barclays Capital Morgan Stanley Borrego Springs Bank Morris, Manning & Martin, LLP Bryan Cave Mountain 1st Bank & Trust Business Development Finance Corp. Natixis Butler Burgher Group Neil Hospitality Capital Funding Group New Mexico Bank & Trust Centrue Bank Pacific City Bank CIBC PMC Trust Citibank Porcelli Ventures LLP Citigroup Prime Finance City of Brighton, Colorado Propel Development City of Loveland, Colorado Rama Tika Management LLC Citywide Banks RBS Community South Redwood Mortgage Creststone Development Regions Bank Cushman & Wakefield Related Companies CW Capital Rialto Mortgage Finance CWB Bank Sage Hospitality Deutsche Bank San Diego Private Bank EKS&H ScanlanKemperBard Companies Excel National Bank Security Bank of Kansas City Ferrara Jerum International Shinhan Bank Fidelity Bank of Florida Simon Group First Home Savings Bank Starwood Capital FirstBank Starwood Mortgage Five Points Bank Stonehill Strategic Capital Flying Horse Club Summit Hotel Properties GE Commercial Mortgage Tebo Development Hamister Group The World Company Hana Financial Thrivent Financial Bank Hana Small Business Lending Town & Country Resort Hanmi Bank Trancas Capital Hermes Group UBS Securities, LLC ING/Northmarq US Bank ING/Summit Vectra Bank

HVS, Boulder, Colorado Qualifications of Sara Olson 3

EXAMPLES OF PROPERTIES APPRAISED Proposed Boomerang Hotel, Aspen Proposed Courtyard by Marriott, OR EVALUATED Proposed Hotel North Boulder, Highlands Ranch Boulder Hot Sulphur Springs Resort & Spa, Hot PORTFOLIO ANALYSIS Best Western Brighton Inn, Brighton Sulphur Springs Proposed Hotel Brighton, Brighton Holiday Inn, Lakewood Quarterly Clarion Portfolio of 17 Hyatt Summerfield Suites, Broomfield Candlewood Suites, Loveland Courtyard Hotels, Various Locations Proposed Fairfield Inn by Marriott, Proposed Full-Service Hotel, Loveland Broomfield Proposed Residence Inn by Marriott, ARIZONA TownePlace Suites, Broomfield Mammoth Lakes Americas Best Value Inn, Colorado Comfort Inn, Parachute Mainstay Suites, Casa Grande Springs The Peaks Resort and Spa, Telluride Ventana Canyon Resort, Tucson Clarion/Quality Inn, Colorado Springs Proposed Extended-Stay Hotel, Proposed Holiday Inn Express Hotel & Westminster CALIFORNIA Suites, Colorado Springs Proposed Wolcott Inn, Wolcott Proposed Limited-Service Hotel, SLS Hotel, Beverly Hills Colorado Springs CONNECTICUT Embassy Suites, Brea Proposed Renaissance, Colorado Homewood Suites, Carlsbad Springs Proposed Steelpointe Harbor Hotel, Motel 6, Carlsbad Radisson Hotel, Colorado Springs Bridgeport DoubleTree Hotel, Commerce Best Western Sundance, Delta Homewood Suites, La Quinta Comfort Inn Merchandise Mart, FLORIDA Embassy Suites, Lompoc Denver Courtyard by Marriott, Long Beach DoubleTree DTC, Denver Proposed Westin, Daytona Beach Savage Lodge & Trading Post, Microtel Inn, Denver DoubleTree East, Orlando Mariposa Motel 6, Denver Sheraton Downtown, Orlando Proposed Hotel, Napa Proposed Best Western Plus Gateway Embassy Suites Tampa USF/Busch Embassy Suites, Ontario Park, Denver Gardens, Tampa Homewood Suites, Palm Desert Proposed Cherry Creek Hotel, Denver Hampton Inn, Tampa Courtyard, Rancho Cordova Proposed Hampton/Homewood Days Inn, Richmond Tower, Denver GEORGIA Hampton Inn & Suites, Riverside Proposed Boutique Hotel – Sloan Lake, SpringHill Suites, Roseville Denver Fairfield Inn & Suites Suwanee, Atlanta TownePlace Suites, Roseville Ramada Hotel & Suites, Denver Hampton Inn Buckhead, Atlanta Residence Inn San Diego Mission Ramada Limited DIA, Denver Valley, San Diego Proposed TownePlace Suites DTC, ILLINOIS Towne & Country Resort & Conference Englewood Center, San Diego Heritage Inn, Evans Homewood Suites by Hilton, Chicago Holiday Inn Express Fisherman’s Courtyard by Marriott, Fort Collins Courtyard by Marriott, Elmhurst Wharf, San Francisco Hilton Garden Inn, Fort Collins Hampton Inn, Gurnee Embassy Suites, San Luis Obispo Marriott, Fort Collins Comfort Inn, Moline Embassy Suites, Santa Ana Plaza Hotel, Fort Collins Hampton Inn, Naperville Proposed Hyatt Place, Santa Cruz Residence Inn by Marriott, Fort Collins Holland Inn & Suites, Taft Proposed Boutique Hotel, Fort Collins IOWA Embassy Suites, Temecula Comfort Inn, Fruita TownePlace Suites Federal Center, Best Western Crossroads, Council COLORADO Golden Bluffs Country Inn & Suites, Council Bluffs

HVS, Boulder, Colorado Qualifications of Sara Olson 4

Hampton Inn, Des Moines TR Hotel (Holiday Inn), Toms River SOUTH CAROLINA Americas Best Value Inn, Osceola NEW MEXICO Proposed Residence Inn by Marriott, KANSAS Greenville Proposed Hotel Chaco, Albuquerque Proposed SpringHill Suites by Proposed Hotel, Lawrence Ansazi Inn, Farmington Marriott, Greenville Chase Suites, Overland Park Comfort Inn & Suites, Las Cruces Proposed Courtyard by Marriott, Econo Lodge, Lordsburg Sumter LOUISIANA NEW YORK TENNESSEE Hilton New Orleans, New Orleans Hampton Inn & Suites, Albany DoubleTree, Johnson City MICHIGAN Hilton, Albany DoubleTree, Oak Ridge Holiday Inn Express, Albany Days Inn, Holland SpringHill Suites Long Island TEXAS Brookhaven, Bellport MISSISSIPPI Best Western, Brooklyn Fairmont Hotel, Dallas Proposed Limited-Service Hotel 22nd Staybridge Suites, Plano Wingate by Wyndham, Biloxi Street, Brooklyn La Quinta Inn & Suites, Brandon Proposed Limited-Service Hotel East UTAH Regency Hotel, Jackson New York Avenue, Brooklyn Proposed Select-Service Hotel, Mineola TownePlace Suites, Orem MISSOURI Comfort Inn – The Pointe, Niagara Park City Peaks Hotel, Park City Falls Days Inn, Salt Lake City TownePlace Suites, Joplin Proposed Hotel, Niagara Falls Motel 6, Salt Lake City Chase Suites, Kansas City Proposed Hotel, Oyster Bay Residence Inn by Marriott, Salt Lake City MONTANA NORTH CAROLINA Best Western Capital Reef, Torrey

Motel 6, Billings Proposed Courtyard by Marriott and VIRGINIA Residence Inn by Marriott, Charlotte NEBRASKA Aloft, Chesapeake NORTH DAKOTA SpringHill Suites by Marriott, Residence Inn by Marriott Omaha Chesapeake West, Elkhorn Proposed Savannah Suites, Dickinson Holiday Inn Express, Williamsburg Proposed Hotel, Grand Island Proposed Limited-Service Hotel, Minot Proposed Hotel, Hastings WASHINGTON Proposed Hotel, Lincoln OHIO Proposed Fallbrook Hotel, Lincoln Belfair Motel, Belfair Value Place, Omaha Proposed Hampton Inn, Alliance Holiday Inn Express, Marysville Baymont Inn & Suites, Cambridge Days Inn, Port Orchard NEW JERSEY Holiday Inn Express, Sumner OREGON Proposed Courtyard by Marriott, WYOMING Carteret Hotel Eastlund, Portland Proposed Holiday Inn Express, Jersey Hampton Inn & Suites, Green River City

HVS, Boulder, Colorado Qualifications of Sara Olson 5

INTERNATIONAL

Esperanza Resort, Los Cabos, Mexico

HVS, Boulder, Colorado Qualifications of Sara Olson 6

Tanya Pierson, MAI

EMPLOYMENT

1994 to present HVS CONSULTING AND VALUATION SERVICES Denver, Colorado and Minneapolis, Minnesota

1993 - 1994 TABLE MOUNTAIN INN Golden, Colorado

1993 RICHFIELD HOTEL MANAGEMENT Denver, Colorado

1992 - 1993 HOTEL BOULDERADO Boulder, Colorado

1991 CAESARS TAHOE Stateline, Nevada

1990 LA QUINTA MOTOR INN Denver, Colorado

EDUCATION AND OTHER BSBA – Hotel, Restaurant and Tourism Management, University of Denver TRAINING Certified General Appraiser Classes Completed: NCRE: 200 - Basic Appraisal Principles and Procedures NCRE: 201 - Basic Appraisal Applications NCRE: 208 - Standards and Ethics NCRE: 203 - Small Residential Income Properties NCRE: 211 - Certified Residential: Reporting, Reviewing, and Analyzing Appraisals NCRE: 215 - Appraisal Principles and Advanced Applications NCRE: 216 - Income Capitalization NCRE: 219 - Commercial Case Studies

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 1

EDUCATION AND OTHER Continuing Education Courses: TRAINING (CONTINUED) Real Estate Finance Course 400: National USPAP Update Appraisal Loss Prevention Seminar Market Valuation & Financial Considerations Developing & Growing an Appraisal Practice Capitalization Rate Models Feasibility, Market Value & Investment Timing Using Your HP12C Small Hotel/Motel Valuation Internet Search Strategies for Appraisers Valuation of Detrimental Conditions in Real Estate Analyzing Operating Expenses What Commercial Clients Would Like Appraisers to Know Course 550: Advanced Applications Course 530: Advanced Sales Comparison and Cost Approach Course 510: Advanced Income Capitalization General Appraiser Market Analysis and HBU Advanced Applications Business Practices and Ethics Report Writing Risky Business: Ways to Minimize Your Liability Mortgage Fraud – Protect Yourself Perspectives from Commercial Review Appraisers Ad Valorem Tax Consultation Introduction to Legal Description Fundamentals of Separating Real, Personal Property, and Intangible Business Assets CA Law Class Appraisal Applications of Regression Analysis Land and Site Valuation Appraisal of Assisted Living Facilities Annual USPAP Updates Appraisal Institute Comprehensive Exam – Passed

STATE CERTIFICATIONS Colorado, Illinois, Indiana, Minnesota, North Dakota, Texas, Wisconsin

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 2

ARTICLES AND MENTIONS

HVS Journal “Five Key Takeaways – ALIS Conference The Americas Lodging Investment Summit,” co- authored with Susan Furbay and Brett Russell, February 2015

HVS Journal “Market Intelligence Report 2013: Minneapolis,” August 2013

HVS Journal “HVS Market Intelligence Report: Minneapolis, Minnesota,” co-authored with Tess Federer, June 2012

Minneapolis-St. Paul ”Grand Hotel for Sale as Wirth Tests the Waters,” October 2, 2009 Business Journal

Denver Business Journal “Seven Hotels Retain U.S. 36 Plans,” October 3, 2008

Missoulian “Foreclosure won't shutter Holiday Inn Parkside,” March 25, 2005

The Hotel Valuation Journal "Major U.S. Transactions-Mid-Year 2004," August 2004

The Hotel Valuation Journal "Telecommunication Evolution and its Impact on the Hotel Industry," January 2003

Colorado Real Estate “US 36 Hotel Market Diversifies,” April 18, 2001 Journal e-hospitality.com “Too Many Rooms: Lessons to Learn from Salt Lake City,” August 8, 2000 – Feature Article

The Hotel Valuation Journal "Why Hotel Markets Crash – Salt Lake City as a Blueprint," September 2000

The Hotel Valuation Journal "From Lodging to Senior Housing – A Natural Trend?" September 1998

The Hotel Valuation Journal "The South Pacific - Paradise Lost or Found?" June 1997

CONFERENCE ENGAGEMENTS Panelist at Hunter Hotel Investment Conference – March 2013

Panelist at the Lodging Conference – September 2010

HVS Valuation Summit, Minneapolis – June 2012, May 2013

Minnesota Real Estate Journal, Hotel & Hospitality Conference – September 2012

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 3

EDITING AND LECTURE Guest Speaker, HRTM 3500: Lodging III - University of Denver – October 1999, February ASSIGNMENTS 2000, November 2000 Guest Speaker, TOM 3400: Hotel Management and Opportunities- University of Colorado – January 2004, September 2004 Guest Speaker, HRTM 4440: Hotel Asset Management – University of Denver – May 2004 Guest Speaker, Lodging Valuation – University of Denver – May 2007, May 2008, May 2009, May 2010 Contributing Editor, Hotel Investments Handbook, 1997

PROFESSIONAL Appraisal Institute – Designated Member (MAI) AFFILIATIONS Boulder, Colorado CVB – Advisory Board, 2008 – 2011 Eastern Carolina University – Hospitality Management Advisory Board, 2008 – 2011 University of Denver Visiting Committee, 1997/98 University of Denver MBA Curriculum Review Committee, 2000 University of Denver HRTM Society Eta Sigma Delta

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 4

EXAMPLES OF COROPRATE AND Concept Restaurants, Inc. Hypo Real Estate Capital Corp. INSTITUTIONAL CLIENTS SERVED Contritrade Services, LLC Independence Bank One of California CP Sanibel LLC ING/Northmarq 1st Bank Credit Lyonnaise Inland Pacific Colorado, LLC 21c Hotels Crested Butte Mountain Resort Interlocken Advanced Technology 9920 Hotels LLC CW Capital Intervest Property Company Access Point Financial Daiwa Securities International Investco Adams Bank & Trust Debartolo Holdings Island Inn & Suites Aldrich, Eastman & Waltch, L.P. Denver Athletic Club ITT Sheraton Corporation Allegro Hotels and Resorts Deutsche Bank Securities Ivory Tusk, LLC American Financial Mortgage Dollar Bank FSB JD Ford and Company Amstar Group Limited Dougherty Funding LLC Jefferies LoanCore Archon Group, L.P. Driftwood Ventures JP Morgan Chase Ashford Financial Corporation Equity Inns Kettler Ashford Hospitality Trust Finova Capital Krisch Hotels Ballard, Spahr, Andrews & Ingersoll, Fiol & Associates Labovitz Enterprises LLP FirstBank Larken, Inc. Banc One First National Bank of Boulder LaSalle Bank Bank of America First National Bank of Omaha LeBoeuf Lamb Green & MacRae Bank of Boston First National Bank of Santa Fe Lehman Brothers Bank of the West First National Bank of South Dakota Lennar Partners Bankers Trust First Security Commercial Mortgage Larimer Associates Barclays Capital Firstar Bank Lexington Mortgage BBG FirsTier Bank Lincoln National Life Best Western International Focus Enterprises, Inc. Lion Hotel Group BHA Stonehouse Association Franchise Concepts Unlimited LNR Boykin Lodging Company GE Capital Macy Development Bremer Bank Glacier Bank Madison Capital Management Manor Butler Burgher Group GMAC Commercial Mortgage Care Capmark Finance Inc. GoldenTree Asset Management Madison Hospitality Group CDC Mortgage Capital Goldman Sachs Marriott International Centier Bank Great Western Bank Marshall Investments Corporation Chase Manhattan Bank Greenwich Capital McGough Companies CIBC World Markets Guaranty Bank & Trust Meridian Group CNL Real Estate Advisors Gustin Property Group Merrill Lynch Capital CS First Boston Hamister Group Mesa West Capital CSM Corporation HEI Hotels Meta Bank Choice Hotels International Heller Financial Mille Lacs Band of Ojibwe Citibank Henley Holding Company Miller & Schroeder Citizens National Bank HilMAC MONY Life Insurance Company City of Boulder Hilton Mortgage Acceptance Morgan Stanley City of Westminster Corporation Morrissey Hospitality Colonial Bank Hinshaw & Culbertson LLC Mortenson Development Colony Capital Acquisitions, LLC Hodges Ward Elliott MSP Metropolitan Airports Columbia Sussex Corporation Hospitality Properties Trust Commission Column Financial Host Marriott National Bank of Indianapolis Compass Bank HVS Hotel Management National Lodging

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 5

Nations Bank Tebo Development Company Portfolio of 34 Athletic Clubs Facilities, Nevada Gold & Casino, Inc. Telemark Owners Association Various Locations New Mexico Bank & Trust The Capital Company of America Portfolio of 13 Suburban Lodges, Nomura Securities International The Guardian Life Insurance Company Various Locations North Central Group of America Portfolio of 21 Equity Inns Properties, North Hill Suites, LLC The Weglarz Group Various Locations OPPUBCO Development Corp. Titan Development Portfolio of 10 Marriott Properties, Paine Webber UBS Various Locations Patriot American Hospitality United Properties Portfolio of 6 Summerfield Suites, PNC Bank, National Association UrbanAmerica Various Locations Principal Real Estate USA Property Management LLC Portfolio of 5 Heart of America Prudential US Bancorp Properties, Various Locations RAM Hotels US Bank Multiple Portfolios of Summit-Owned Raymond James US Bank Piper Jaffary Properties, Various Locations RBS VVI Corporation Portfolio of 8 La Quinta Properties, Rialto Capital Walker Field Airport Authority Various Locations Richfield Hospitality Services, Inc. Waterford Development Corp. Portfolio of 11 Real Estate Capital Riskpro Wells Fargo Bank Partners-Owned Properties, River Valley Development Corp. Westin Hotels and Resorts California Riverwood Bank WestRock Association, LLC Portfolio of 26 Summit-Owned Rodeo Capital WestStar Bank Properties, Various Locations RREEF White Lodging Services Corp. Portfolio of 11 Tharaldson-Managed Ryan Companies Windmill Inns of America Properties, Various Locations Sage Hospitality Wintrust Financial Corporation Portfolio of 5 LNR-Owned Properties, Sagecrest, LLC Woodbine Development Corp. Various Locations Salomon Brothers Realty WPB Hospitality Multiple Portfolios of Highland-Owned Security Bank The World Company Properties, Various Locations Self-Help Bank W.P. Carey & Co. LLC Portfolio of 8 Hyatt Place Properties, Self Help Credit Union WRK, LLC Various Locations Servico, Inc. Wyndham International, Inc. Portfolio of 5 DoubleTree Hotels, Seva Holdings Tennessee Shaner Hotel Group EXAMPLES OF PROPERTIES APPRAISED Portfolio of 160 Tharaldson-Managed Signature Hospitality OR EVALUATED Properties, Various Locations Skopbank Portfolio of 28 Hotels for Citibank, Sonmar Hospitality PORTFOLIO ANALYSIS Various Locations Sonnenblick Goldman Portfolio of 9 Suburban and Snow Goose Investments Portfolio of 650 Extended StayAmerica Candlewood Hotels, Virginia and Starwood Capital Hotels, Various Locations North Carolina Starwood Property Trust Portfolio of 365 La Quinta-Owned Portfolio of 99 Marriott and Hilton Steptoe & Johnson, LLP Hotels, Various Locations Hotels, Various Locations Stone Mountain Partners Portfolio of 11 Boykin-Owned Hotels, Portfolio of 27 Hotels for Citibank, Stonebridge Companies Various Locations Various Locations Stout Street Hospitality Portfolio of 48 Hotels, Various Portfolio of 56 Value Place Hotels, Studio Ventures Locations (Due Diligence) Various Locations Suburban Capital Portfolio of 57 RFS-Owned Hotels, Portfolio of 5 Hampton Inn and Summit Hotel Properties Various Locations Residence Inn Properties, Various Sunrise Banks Locations

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 6

Hampton Inn & Suites, Goodyear CALIFORNIA ALABAMA Proposed Hotel Site, Goodyear Residence Inn by Marriott, Mesa Sheraton Disneyland, Anaheim Proposed Hotel, Auburn Proposed Hotel, Oro Valley Embassy Suites, Arcadia Hilton, Birmingham Proposed Hampton Inn & Suites, Page Proposed Hilton Garden, Arcadia Hilton Garden Inn Lakeshore, Arizona Biltmore Resort & Spa, Proposed SpringHill Suites by Birmingham Phoenix Marriott, Arcadia Hilton Garden Inn Liberty Park, Crowne Plaza, Phoenix Claremont Resort & Spa, Berkeley Birmingham Embassy Suites, Phoenix Radisson Hotel, Brisbane Holiday Inn, Birmingham Fairfield Inn by Marriott, Phoenix Hampton Inn & Suites, Camarillo Hampton Inn, Dothan Hampton Inn, Phoenix Proposed Residence Inn by Marriott, Holiday Inn, Dothan Holiday Inn West, Phoenix Carlsbad Holiday Inn Express, Gadsden Homewood Suites, Phoenix Proposed Courtyard by Marriott, Proposed 4-Star Hotel, Huntsville Hyatt Place Phoenix North, Phoenix Carlsbad Clarion Hotel, Mobile Proposed Hampton Inn, Phoenix Courtyard by Marriott, Century City Proposed USA Hotel, Mobile Proposed Hotel Palomar, Phoenix DoubleTree Hotel, Commerce Proposed Hotel, Montgomery Proposed Hotel Site, Phoenix Hardage Hotel, Emeryville Proposed Hotel, Prattville Radisson, Phoenix Courtyard by Marriott, Fresno Holiday Inn, Sheffield Holiday Inn Express, Prescott Piccadilly Airport Hotel, Fresno Hilton Resort, Scottsdale Hampton Inn, Goleta ALASKA Proposed Fairfield Suites by Marriott, Holiday Inn Express, Hesperia Scottsdale Clarion Roosevelt, Hollywood Hampton Inn, Anchorage Scottsdale Market Area Overview, La Quinta Resort & Club, La Quinta Holiday Inn, Anchorage Scottsdale Courtyard by Marriott, Livermore Marriott, Anchorage TownePlace Suites by Marriott, Hotel D’Orsay, Long Beach Proposed Embassy Suites, Anchorage Scottsdale Four Points LAX, Los Angeles Proposed Candlewood Suites, L’Auberge de Sedona, Sedona Marriott LAX, Los Angeles Fairbanks Hampton Inn, Sedona The Standard Hotel, Los Angeles Proposed Hampton Inn, Fairbanks Four Points Tempe (Conversion to Beverly Heritage Hotel, Milpitas Westmark Baranoff Hotel, Juneau Moxy), Tempe Sheraton Hotel, Milpitas Proposed Residence Inn, Tempe DoubleTree Hotel, Mission Valley ARIZONA Wyndham Buttes Resort, Tempe Courtyard, Modesto Embassy Suites Airport, Tucson Silverado Resort, Napa Carefree Resort, Carefree JW Marriott Starr Pass Resort, Tucson Courtyard by Marriott, Oyster Point Courtyard by Marriott, Chandler Sheraton El Conquistador, Tucson Residence Inn by Marriott, Oyster Hampton Inn, Chandler Proposed Comfort Suites, Tucson Point Homewood Suites, Chandler Ramada Palo Verde, Tucson Holiday Inn Express, Palm Desert Proposed Home2 Suites, Chandler Residence Inn by Marriott, Tucson Homewood Suites, Palm Desert Proposed Hotel Site, Chandler Renaissance Hotel, Palm Springs AmeriSuites, Flagstaff ARKANSAS Four Points by Sheraton, Pleasanton Courtyard by Marriott, Flagstaff Sierra Suites, Pleasanton Embassy Suites, Flagstaff Four Points by Sheraton, Bakersfield Summerfield Suites by Wyndham, Howard Johnson, Flagstaff Courtyard by Marriott, Bentonville Pleasanton SpringHill Suites, Flagstaff Fairfield Inn, Little Rock Wyndham Garden, Pleasanton Proposed Home2 Suites, Glendale Residence Inn by Marriott, Little Rock Hampton Inn & Suites, Poway Proposed Hotel, Glendale Proposed Marriott, West Little Rock Homewood Suites, Rancho Cucamonga Holiday Inn Express, Goodyear Holiday Inn, Riverside

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 7

DoubleTree, Sacramento Sleep Inn, Aurora Colorado Athletic Club Leetsdale, Residence Inn by Marriott, Sacramento Suburban Lodge, Aurora Denver Proposed Hotel, San Bernadino Hyatt Regency Beaver Creek, Avon Courtyard by Marriott, Denver DoubleTree, San Diego Proposed Hotel, Avon DoubleTree DTC, Denver Hardage Hotel, San Diego Proposed Timeshare, Avon Embassy Suites, Denver Hilton Harbor Island, San Diego Ritz-Carlton Bachelor Gulch, Avon Four Points by Sheraton, Denver Holiday Inn Mission Valley Stadium, Proposed TBD Hotel, Basalt Hampton Inn, Denver San Diego Alps Boulder Canyon Inn, Boulder Hampton Inn DIA, Denver Towne & Country Resort & Conference Clarion Harvest House, Boulder Hampton Inn & Suites, Denver Center, San Diego Proposed Hotel Hilton DTC, Denver Westin, San Diego Renovation/Expansion, Boulder Hilton Garden Inn Downtown, Denver Wyndham Emerald Plaza, San Diego Proposed Marriott, Boulder Holiday Inn Central, Denver Hilton Fisherman’s Wharf, San Proposed St. Julien Hotel, Boulder Holiday Inn Express, Denver Francisco Aloft Arista, Broomfield International Airport Holiday Inn Express Fisherman’s Interlocken Club & Spa, Broomfield JW Marriott, Denver Wharf, San Francisco Omni Interlocken Resort, Broomfield Proposed Best Western Plus Gateway Hotel Rex, San Francisco Proposed Interlocken Resort, Park, Denver Courtyard by Marriott, San Luis Broomfield Proposed Boutique Hotel – Sloan Lake, Obispo Proposed NYLO, Broomfield Denver Courtyard, Santa Rosa Proposed Summerfield Suites, Proposed Cherry Creek Hotel, Denver Radisson Valley Center Hotel, Sherman Broomfield Proposed Denver Athletic Club Hotel, Oaks Proposed Aloft, Broomfield Denver Sonoma Valley Inn, Sonoma Proposed Holiday Inn, Clifton Proposed Executive Tower Hotel, Four Points SFO, South San Francisco Academy Hotel, Colorado Springs Denver Maple Tree Inn, Sunnyvale Best Western Academy, Colorado Proposed Full-Service Hotel, Denver Sheraton, Sunnyvale Springs Proposed Hilton Garden Inn, Denver Holiday Inn Express, Temecula DoubleTree, Colorado Springs Proposed Hotel at DU, Denver Courtyard by Marriott, Thousand Oaks Embassy Suites, Colorado Springs Proposed JW Marriott Hotel, Denver TownePlace Suites by Marriott, Hampton Inn, Colorado Springs Proposed Limited-Service DTC Hotel, Thousand Oaks Holiday Inn Express, Colorado Springs Denver Residence Inn by Marriott, Torrance Homewood Suites, Colorado Springs Proposed Metro State Hotel, Denver Courtyard, Vacaville Proposed Brighton Gardens, Colorado Proposed Residence Inn by Marriott, Holiday Inn, Ventura Springs Denver Ventura Beach Marriott, Ventura Proposed Homewood Suites by Hilton, Proposed Union Station Hotel, Denver Wyndham Bel Age, West Hollywood Colorado Springs Ritz-Carlton Downtown, Denver Marriott Warner Center, Woodland Proposed Hotel, Colorado Springs Wyndham DTC, Denver Hills Proposed Mining Exchange Hotel, Days Inn, Denver International Airport Colorado Springs Ramada Limited, Denver International COLORADO Holiday Inn, Craig Airport Grande Butte Hotel, Crested Butte Proposed Sheraton, Denver Denver Marriott, Aurora Irwin Mountain Lodge, Crested Butte International Airport DoubleTree Denver Southeast, Aurora MountainLair Hotel, Crested Butte Proposed Jackson Creek Ranch, Hilton Garden Inn DIA, Aurora Sheraton Hotel, Crested Butte Douglas County Proposed Residence Inn Gateway Park, Imperial Hotel & Casino, Cripple Creek Holiday Inn & Suites, Durango Aurora Colorado Athletic Club Downtown, Proposed Holiday Inn, Durango Proposed Woolley Classic Suites, Denver AmericInn, Eagle Aurora 24 Hour Fitness, Englewood

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 8

Colorado Athletic Club Inverness, Colorado Athletic Club DTC, Proposed Limited-Service Hotel, Englewood Greenwood Village Woodland Park Courtyard by Marriott, Englewood Greenwood Athletic Club, Greenwood Proposed Select-Service Hotel, Proposed Courtyard by Marriott, Village Woodland Park Englewood Proposed Westin Hotel, Greenwood Proposed Residence Inn by Marriott, Village CONNECTICUT Englewood AmericInn, Lakewood Residence Inn by Marriott, Englewood Hampton Inn, Lakewood Radisson, Enfield Sheraton Denver Tech Center, Proposed Brighton Gardens, Holiday Inn, East Hartford Englewood Lakewood Courtyard by Marriott, Orange Summerfield Suites by Wyndham, Sheraton Denver West, Lakewood DoubleTree Hotel, Windsor Locks Englewood Holiday Inn Express, Littleton The Stanley Hotel, Estes Park Element Hotel, Lone Tree DELAWARE Courtyard by Marriott, Fort Collins Proposed Hotel, Longmont Homewood Suites, Fort Collins Raintree Plaza, Longmont Residence Inn by Marriott, Wilmington Marriott, Fort Collins, Comfort Inn, Louisville Residence Inn by Marriott, Fort Collins Courtyard by Marriott, Louisville DISTRICT OF COLUMBIA Holiday Inn, Frisco Proposed Residence Inn by Marriott, Hampton Inn & Suites, Glendale Louisville Proposed Embassy Suites Staybridge Suites, Glendale Hampton Inn, Louisville Proposed Residence Inn - Navy Yards Courtyard by Marriott, Glenwood Embassy Suites, Loveland Springs Fairfield Inn by Marriott, Loveland FLORIDA Residence Inn by Marriott, Glenwood Rock ‘N River Property, Lyons Springs Holiday Inn Express, Montrose Boca Athletic Club, Boca Raton Fairfield Inn/AmericInn, Golden Ramada Limited, Northglenn Fairfield Inn by Marriott, Brandon Golden Hotel, Golden Hampton Inn, Parker Courtyard by Marriott, Brandon Hampton Inn, Golden Marriott Convention Center, Pueblo Mayfair House, Coconut Grove Proposed Holiday Inn Express, Golden Proposed Hilton Garden Inn, Superior Holiday Inn, Coral Gables Ramada Inn Denver West, Golden Proposed Hotel, Superior Hyatt, Coral Gables Proposed Residence Inn by Marriott, Proposed Westin, Telluride DoubleTree Hotel, Fort Lauderdale Golden Peaks at Telluride, Telluride DoubleTree Guest Suites, Fort Proposed Courtyard by Marriott, The Owners Club, Telluride Lauderdale Golden Rosewood Resort, Telluride Hampton Inn, Fort Lauderdale Table Mountain Inn, Golden Radisson Graystone Castle, Thornton Marriott Sanibel Harbour Resort, Fort Adams Mark, Grand Junction Chateau Vail, Vail Myers Comfort Inn, Grand Junction Lodge at Vail, Vail Sanibel Harbour Resort & Spa, Ft. Hilton Hotel, Grand Junction Vail Village Inn, Vail Myers Proposed Candlewood Suites, Grand Proposed Vail Plaza, Vail Holiday Inn, Fort Pierce Junction Proposed Four Seasons, Vail Aloft, Jacksonville Proposed Courtyard by Marriott, Proposed Bradford Homesuites, Hampton Inn, Jacksonville Grand Junction Westminster Holiday Inn Sunspree, Jacksonville Proposed Hampton Inn, Grand Proposed Comfort Suites, Westminster Beach Junction Proposed SpringHill Suites by Proposed Aloft, Jacksonville Proposed Holiday Inn, Grand Junction Marriott, Westminster Residence Inn by Marriott, Jacksonville Proposed Residence Inn by Marriott, Proposed Westin, Westminster Westin, Key Largo Grand Junction Westin Hotel, Westminster Courtyard by Marriott, Key West Proposed Hotel, Grand Junction Holiday Inn, Key West

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 9

Super 8, Lantana Hyatt Regency, Savannah Hilton Walt Disney Work, Lake Buena Hampton Inn, Alpharetta Radisson Hotel, Savannah Vista Marriott, Alpharetta Westin, Savannah Sheraton, Maitland Residence Inn by Marriott, Alpharetta Holiday Inn, Valdosta Holiday Inn, Melbourne Courtyard by Marriott, Atlanta Fairfield Inn by Marriott, Valdosta Doral Golf Resort & Spa, Miami Courtyard Vinings, Atlanta Ramada Inn, Warner Robins DoubleTree Club Hotel, Miami Crowne Plaza Ravinia, Atlanta Hilton Garden Inn Miami Airport, Days Inn, Atlanta HAWAII Miami DoubleTree Guest Suites, Atlanta Hilton Miami Downtown, Miami Georgian Terrace, Atlanta Fairmont Orchid, Big Island Homewood Suites Miami Airport, Hyatt Place Airport, Atlanta Ritz-Carlton Kapalua, Maui Miami Marriott Hotel, Atlanta Royal Hawaiian, Oahu Proposed Aloft South Beach, Miami Northeast Athletic Club, Atlanta Sheraton Moana Surfrider, Oahu TownePlace Suites by Marriott, Miami Residence Inn by Marriott, Atlanta Sheraton Princess, Oahu Summerfield Suites by Wyndham, Ritz-Carlton Downtown, Atlanta Miami Sheraton Colony Square, Atlanta IDAHO Grand Beach Hotel, Miami Beach Sheraton Downtown, Atlanta TownePlace Suites by Marriott, Miami Westin Perimeter North, Atlanta DoubleTree Hotel, Boise Lakes Wyndham Vining Inn, Atlanta Holiday Inn, Boise Proposed Hilton, Naples Days Inn Downtown, Augusta Red Lion Downtowner, Boise Proposed Residence Inn by Marriott, Fairfield Inn by Marriott, Augusta Proposed Cambria Suites, Boise Naples Holiday Inn Gordon Hwy, Augusta Red Lion Riverside, Boise DoubleTree Orlando at SeaWorld, Holiday Inn West, Augusta Shilo Inn, Boise Orlando Holiday Inn, Brunswick SpringHill Suites, Boise Hyatt Place Convention Center, Courtyard by Marriott, Buckhead The Grove Hotel, Boise Orlando Residence Inn by Marriott, Buckhead Holiday Inn Express, Coeur d’Alene Hyatt Place Universal, Orlando Sierra Suites, Buckhead Shilo Inn, Idaho Falls Residence Inn by Marriott, Orlando Hampton Inn, Buford Proposed Resort, McCall Radisson Parkway Resort, Orlando SpringHill Suites, Buford AmericInn, Twin Falls Holiday Inn Express, Pensacola Hilton Garden Inn, Duluth Holiday Inn University Mall, Pensacola Holiday Inn Gwinnett Center, Duluth ILLINOIS Hampton Inn, Pensacola Proposed Holiday Inn Express, Duluth Sheraton Suites, Plantation Residence Inn by Marriott, Duluth Holiday Inn, Arlington Heights Hyatt Regency, Sarasota Hyatt Place Atlanta Airport, East Point Sheraton Chicago Northwest, SpringHill Suites by Marriott, Sarasota Residence Inn by Marriott, Gwinnett Arlington Heights Proposed Radisson Hotel, Tallahassee Holiday Inn, Jekyll Island Courtyard by Marriott, Bedford Park Hampton Inn Ybor City, Tampa Fairfield Inn, Kennesaw Fairfield Inn by Marriott, Bedford Park Harbour Island Athletic Club, Tampa SpringHill Suites, Kennesaw Holiday Inn Express, Bedford Park Holiday Inn Express Hotel & Suites, Emerald Pointe Resort, Lake Lanier Proposed Holiday Inn Select, Bedford Tampa Islands Park Crowne Plaza, West Palm Beach SpringHill Suites, Lithia Springs Hampton Inn, Bloomington Residence Inn by Marriott, West Palm Comfort Inn, Marietta Proposed Hyatt Place, Bloomington Beach Holiday Inn & Suites, Marietta Proposed JW Marriott, Bloomington Sheraton, West Palm Beach Hyatt Regency, Marietta SpringHill Suites, Burr Ridge Holiday Inn, Winter Haven Wyndham Peachtree Center, Crowne Plaza Avenue Hotel & Office Peachtree City Building, Chicago GEORGIA Courtyard by Marriott, Savannah Hyatt Printers Row, Chicago

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 10

Proposed Holiday Inn Express, Chicago Hampton Inn, Indianapolis Homewood Suites, Overland Park Ritz Carlton, Chicago Hyatt Regency, Indianapolis AmericInn, Salina Sheraton Hotel & Towers, Chicago Proposed Boutique Hotel, Indianapolis Holiday Inn, Wichita Wyndham NW, Chicago Proposed Canopy Hotel, Indianapolis Proposed Hotel – Bowllagio, Wichita Holiday Inn, Crystal Lake Proposed Curio Hotel, Indianapolis Proposed Downtown Hotel, Wichita DoubleTree Club Hotel, Des Plaines Proposed Independent Hotel, Proposed Hotel – Greenwich, Wichita Holiday Inn, Downers Grove Indianapolis Proposed Hotel – Southfork, Wichita Proposed Staybridge Suites by Holiday Proposed InterContinental, Inn, Elgin Indianapolis KENTUCKY SpringHill Suites, Elmhurst Residence Inn by Marriott, Fairfield Inn by Marriott, Forsyth Indianapolis Courtyard by Marriott, Florence Holiday Inn, Glen Ellyn Proposed Hampton Inn, Lawrenceburg Hilton Garden Inn Northeast, DoubleTree Hotel, Glenview Residence Inn by Marriott, Merrillville Louisville Fairfield Inn by Marriott, Glenview Proposed SpringHill Suites by Holiday Inn, Louisville Proposed Hotel, Gurnee Marriott, Munster Proposed Aloft Hotel, Louisville Hyatt Place, Hoffman Estates Proposed Casino, Paxton Radisson, Louisville Holiday Inn, Itasca Knights Inn, Seymour Courtyard by Marriott, Paducah Wyndham NW Chicago, Itasca Proposed Fairfield Inn, South Bend Super 8, Prestonburg Wyndham, Lisle Hilton Garden Inn Wabash Landing, Wyndham Garden, Naperville West Lafayette LOUISIANA Proposed Radisson, Normal Proposed Hotel, Peoria IOWA Comfort Inn, Baton Rouge Holiday Inn, Rolling Meadows Fairfield Inn by Marriott, Baton Rouge Proposed Radisson Hotel, Schaumburg Crowne Plaza, Cedar Rapids SpringHill Suites by Marriott, Baton Wyndham Garden, Schaumburg Wildwood Lodge, Clive Rouge DoubleTree Hotel, Skokie Best Western Metro, Council Bluffs TownePlace Suites by Marriott, Baton Proposed Residence Inn, Wilmette Proposed Candlewood Suites, Rouge Wyndham Garden, Wood Dale Davenport Courtyard by Marriott, Lafayette Comfort Suites, Des Moines Holiday Inn, Lafayette INDIANA Country Inn & Suites, Des Moines Courtyard by Marriott, Metairie Proposed Holiday Inn Express, Des Quality Inn, Metairie Holiday Inn, Bloomington Moines Residence Inn by Marriott, Metairie Proposed Residence Inn by Marriott, Savery Hotel, Des Moines Astor Crowne Plaza, New Orleans Bloomington Sleep Inn, Des Moines Bourbon Orleans, New Orleans Proposed Staybridge Suites, Carmel Four Points, West Des Moines Courtyard Convention Center, New Residence Inn by Marriott, Fishers Sheraton, Iowa City Orleans Courtyard by Marriott Downtown, Crowne Plaza, New Orleans Fort Wayne KANSAS Hyatt Regency, New Orleans Hilton, Fort Wayne Maison DuPuy, New Orleans Holiday Inn, Fort Wayne Holiday Inn Express, Hays Radisson, New Orleans Proposed Courtyard, Fort Wayne Holiday Inn, Lawrence SpringHill Suites Convention Center, Proposed Hotel, Fort Wayne Proposed Hotel, Lawrence New Orleans Staybridge Suites by Holiday Inn, Fort Proposed MainStay Suites, Lawrence Wayne Holiday Inn, Manhattan MARYLAND French Lick Resort, French Lick Comfort Suites, Olathe AmeriSuites, Indianapolis AmeriSuites, Overland Park Marriott, Annapolis Fairfield Inn by Marriott, Indianapolis Hampton Inn, Overland Park Radisson, Annapolis

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 11

Brookshire Suites, Baltimore Holiday Inn, Alexandria Homewood Suites/Hilton Garden Inn Proposed TownePlace Suites, Ann Proposed Holiday Inn Express, Inner Harbor, Baltimore Arbor Alexandria Proposed Extended-Stay Hotel, Residence Inn by Marriott, Ann Arbor Holiday Inn, Arden Hills Baltimore Fairfield Inn by Marriott, Auburn Hills Proposed Country Inn, Bemidji Proposed Staybridge Suites, Baltimore Hilton Suites, Auburn Hills Cambria Suites, Bloomington Wyndham Inner Harbor Hotel, Proposed TownePlace Suites, Auburn Crowne Plaza, Bloomington Baltimore Hills Hampton Inn & Suites, Bloomington Bel Air Athletic Club, Bel Air Fairfield Inn by Marriott, Canton Holiday Inn, Bloomington Holiday Inn, Belmont Lifetime Fitness Center, Canton Holiday Inn Express, Bloomington Residence Inn by Marriott, Bethesda Courtyard by Marriott, Dearborn Le Bourget Aero Suites (conversion to Hilton, Columbia Hyatt Regency, Dearborn Holiday Inn Express), Bloomington Holiday Inn, Cromwell Bridge TownePlace Suites by Marriott, Northwest Athletic Club 98th Street, Holiday Inn, Frederick Dearborn Bloomington Summerfield Suites by Wyndham, DoubleTree Hotel Airport, Detroit Northwest Athletic Club Normandale, Gaithersburg Courtyard by Marriott, Flint Bloomington Holiday Inn Airport, Linthicum Heights Holiday Inn, Flint Proposed Courtyard by Marriott, DoubleTree, Rockville Proposed TownePlace Suites by Bloomington Days Inn, Silver Spring Marriott, Grand Rapids Proposed Full-Service Hotel, Holiday Inn, Silver Spring Holiday Inn West, Lansing Bloomington Proposed TownePlace Suites by Proposed Hampton Inn & Suites, MASSACHUSETTS Marriott, Livonia Bloomington TownePlace Suites by Marriott, Proposed Home2 Suites, Bloomington Wyndham, Billerica Livonia Proposed Hyatt, Bloomington Atlantic Avenue Athletic Club, Boston Fairfield Inn by Marriott, Madison Proposed JW Marriott, Bloomington Charles Square Athletic Club, Boston Heights Proposed MOA Hotel, Bloomington Commonwealth Athletic Club, Boston Hampton Inn, Northville Proposed Radisson Blu, Bloomington Courtyard by Marriott, Boston Wyndham Garden, Novi Proposed Residence Inn by Marriott, Proposed Intercontinental Hotel, Quality Inn, Plymouth Bloomington Boston Proposed Marriott, Pontiac Ramada Mall of America, Bloomington Westin Copley Place, Boston Lifetime Fitness Center, Rochester Renaissance Hotel, Bloomington Wyndham Hotel, Boston Hills Wyndham Garden, Bloomington Summerfield Suites by Wyndham, Fairfield Inn by Marriott, Romulus Northwest Athletic Club Highway 100, Burlington Proposed Hilton Garden Inn, Romulus Brooklyn Center TownePlace Suites by Marriott, Courtyard by Marriott, Southfield Cragun's Resort, Brainerd Danvers Holiday Inn, Southfield Northland Inn, Brooklyn Park Residence Inn by Marriott, Dedham Proposed TownePlace Suites, Sterling Northwest Athletic Club Burnsville, Proposed Courtyard by Marriott, Heights Burnsville Natick Comfort Inn, Traverse City Holiday Inn, Duluth Newton Athletic Club, Newton Courtyard by Marriott, Troy Proposed Cambria Suites, Duluth Summerfield Suites by Wyndham, Drury Inn, Troy Proposed GrandStay Hotel & Suites, Waltham Hilton Inn Northfield, Troy Duluth Proposed Courtyard by Marriott, Courtyard by Marriott, Warren Proposed Holiday Inn Express, Duluth Woburn Fairfield Inn by Marriott, Warren Proposed Mixed-Use Development, Crowne Plaza, Worcester Duluth MINNESOTA Proposed Home2 Suites, Eagan MICHIGAN Proposed Hotel, Eagan

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 12

Residence Inn by Marriott, Eagan Proposed Full-Service Hotel, Proposed Hyatt Place, St. Paul Hilton Garden Inn, Eden Prairie Minneapolis Proposed Hotel, Wabasha Northwest Athletic Club Crosstown, Proposed Hampton Inn, Minneapolis Proposed Holiday Inn, Waite Park Eden Prairie Proposed Hotel at MSP, Minneapolis Proposed Staybridge Suites, Waite Flagship Athletic Club, Eden Prairie Proposed Hyatt Place (conversion), Park Proposed TownePlace Suites by Minneapolis Proposed Limited-Service Hotel, Marriott, Eden Prairie Proposed Limited-Service Hotel, Willmar Hawthorn Suites, Edina Minneapolis Sheraton, Woodbury Northwest Athletic Club Midwest, Proposed Minneapolis Stadium Hotel, Edina Minneapolis MISSISSIPPI Northwest Athletic Club St. Louis Park, Proposed Terminal Hotel, Minneapolis Edina Proposed TownePlace Suites, Hampton Inn, Harrisburg Proposed Hotel Market Study, Edina Minneapolis Comfort Inn, Hattiesburg Westin, Edina Proposed Westin, Minneapolis Courtyard by Marriott, Jackson Northwest Athletic Club Moore Lake, Radisson Metrodome, Minneapolis Holiday Inn Express, Jackson Fridley The Grand Hotel, Minneapolis Proposed Conference Resort, Proposed Microtel, Hastings The Marquette Hotel, Minneapolis Jackson Proposed Hampton Inn, Mankato W Minneapolis The Foshay, Ramada, McComb Northwest Athletic Club Maple Grove, Minneapolis Holiday Inn Express, Milford Maple Grove Hampton Inn, Minnetonka Homewood Suites, Ridgeland Proposed Hilton Garden Inn, Maple Holiday Inn Express, Minnetonka Staybridge Suites, Ridgeland Grove Northwest Athletic Club Oakdale, Proposed Staybridge Suites by Minnetonka MISSOURI Marriott, Maple Grove Sheraton Minneapolis West, Airport Market Area Overview, Minnetonka Branson Landing Hilton, Branson Minneapolis Proposed Hilton Garden, Oakdale Hilton Branson Convention Center, Comfort Suites, Minneapolis Proposed Home2 Suites by Hilton, Branson Days Inn University of MN, Oakdale Sheraton, Clayton Minneapolis Extended StayAmerica North, Hampton Inn, Kansas City Homewood Suites Mall of America, Rochester Proposed Residence Inn by Marriott, Minneapolis Extended StayAmerica South, Kansas City Hampton Inn & Suites, Minneapolis Rochester Residence Inn by Marriott, Kansas City Hotel Ivy, Minneapolis Proposed Cambria Suites, Rochester Country Club Hotel & Spa, Lake Ozark Hotel Minneapolis, Minneapolis Proposed Embassy Suites, Rochester Big Cedar Lodge, Ridgedale Hyatt Place, Minneapolis Proposed Hilton Hotel, Rochester Comfort Inn, St. Louis Le Meridien Chambers Hotel, Proposed Hotel, Rochester Holiday Inn North, St. Louis Minneapolis Comfort Inn, Roseville Radisson Hotel, St. Louis Northwest Athletic Club Arena, Proposed Residence Inn by Marriott, Minneapolis Roseville MONTANA Proposed AC Hotel, Minneapolis Holiday Inn West, St. Louis Park Proposed Canopy Hotel, Minneapolis Proposed Extended-Stay Hotel, St. Crowne Plaza, Billings Proposed Conrad Hotel, Minneapolis Louis Park Proposed TownePlace Suites by Proposed Courtyard by Marriott, Proposed Hilton Garden Inn, St. Louis Marriott, Billings Minneapolis Park Best Western Butte Plaza Inn, Butte Proposed Extended-Stay Hotel, Proposed Hotel, St. Louis Park Proposed Holiday Inn Express, Minneapolis Holiday Inn, St. Paul Glendive Proposed Element Hotel, St. Paul

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 13

Proposed Holiday Inn Express, Great Embassy Suites, Las Vegas Proposed Residence Inn, Albuquerque Falls Marriott Suites, Las Vegas Proposed SpringHill Suites, Holiday Inn Express, Helena Proposed Hotel, Las Vegas Albuquerque Proposed Holiday Inn Express, Helena SpringHill Suites, Las Vegas Riverpoint Athletic Club, Albuquerque Wingate Inn, Helena Homewood Suites, Reno Suburban Lodge, Albuquerque Proposed Homewood Suites, Kalispell Hyatt Place, Reno Holiday Inn Express, Farmington Proposed Hotel, Missoula Hilton Garden Inn, Las Cruces Proposed TownePlace Suites, Missoula NEW HAMPSHIRE Proposed Resort, Pojoaque TownePlace Suites by Marriott, Hilton Garden Inn, Rio Rancho Missoula Fairfield Inn by Marriott, Merrimack Courtyard by Marriott, Santa Fe Proposed Best Western, Shelby Eldorado Hotel, Santa Fe Best Western, Sidney NEW JERSEY Encantado Resort, Santa Fe Proposed Best Western, Sidney Hilton, Santa Fe Richland Motor Inn, Sidney Trump Marina Hotel & Casino, Atlantic Holiday Inn, Santa Fe Proposed Hotel, Whitefish City Hotel Chimayo, Santa Fe Summerfield Suites by Wyndham, Proposed Hotel, Santa Fe NEBRASKA Bridgewater Courtyard by Marriott, Edison NEW YORK Proposed Hotel, Ashland Leisure Park Retirement Community, Proposed Hotel, Beatrice Lakewood Crowne Plaza, Albany Proposed Hotel, Grand Island Summerfield Suites by Wyndham, Omni Hotel, Albany Proposed Hotel, Hastings Morristown Proposed Hilton Garden Inn, Buffalo Hampton Inn, Lincoln Hilton Gateway Plaza, Newark Holiday Inn Express, Cooperstown Proposed Fallbrook Hotel, Lincoln Hilton, Parsippany Residence Inn by Marriott, Fishkill Proposed Hotel, Lincoln Residence Inn by Marriott, Princeton Hyatt Place, Garden City Courtyard by Marriott, La Vista Courtyard by Marriott, Secaucus Holiday Inn, Grand Island Proposed Hotel, Lincoln DoubleTree, Somerset Holiday Inn, Jamestown Best Western Central, Omaha Residence Inn by Marriott, Tinton Falls Sofitel, New York DoubleTree, Omaha Summerfield Suites by Wyndham, Four Points, Niagara Falls Hampton Inn, Omaha Whippany Holiday Inn Select, Niagara Falls Marriott Hotel, Omaha Proposed Hotel, Niagara Falls Proposed Marriott, Omaha NEW MEXICO Embassy Suites, Syracuse Ramada Inn, Omaha Fairfield Inn by Marriott, Syracuse Sheraton Inn, Omaha Andaluz, Albuquerque Holiday Inn, Syracuse Proposed Hotel, Waverly Del Norte Athletic Club, Albuquerque Wyndham Hotel, Syracuse DoubleTree by Hilton, Albuquerque NEVADA Downtown Athletic Club, Albuquerque NORTH CAROLINA Hilton Garden Inn Uptown, Candlewood Suites, Henderson Albuquerque Sleep Inn & Suites, Albemarle Hampton Inn & Holiday Inn Express, Highpoint Athletic Club, Albuquerque DoubleTree Biltmore, Asheville Henderson Holiday Inn Express, Albuquerque Hotel Indigo, Asheville Proposed Holiday Inn Express, Hotel Albuquerque, Albuquerque Renaissance, Asheville Henderson La Posada, Albuquerque Hilton Garden Inn Ayrsley, Charlotte Proposed Timeshare Resort, Lake Midtown Athletic Club, Albuquerque Homewood Suites, Charlotte Tahoe Proposed Hilton Garden Inn, Residence Inn by Marriott, Charlotte Alexis Park Suites, Las Vegas Albuquerque Westin Hotel, Charlotte Courtyard by Marriott, Las Vegas Proposed Hotel Indigo, Albuquerque

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 14

Proposed Select-Service Hotel, AmeriSuites, Columbus Holiday Inn, Greentree Charlotte Courtyard Easton, Columbus Crowne Plaza, Harrisburg Holiday Inn Express, Clemmons DoubleTree Guest Suites, Columbus Proposed Hotel – King of Prussia Mall, Hilton Garden Inn, Concord Hilton Easton, Columbus King of Prussia Proposed 21c Hotel, Durham Hilton Polaris, Columbus Four Points by Sheraton, Mars Proposed Hotel, Durham Westin, Columbus Holiday Inn, McKnight Holiday Inn, Fayetteville DoubleTree Guest Suites, Dayton Holiday Inn, Monroeville Radisson Inn, Greensboro AmeriSuites, Forest Park DoubleTree, Moon Township Holiday Inn Express, Henderson Harley Hotel, Independence DoubleTree Club, Philadelphia Days Inn RPT, Raleigh Comfort Inn, Marietta Proposed Ritz-Carlton, Philadelphia Holiday Inn, Raleigh Harley Hotel, Middleburg Heights Proposed Sofitel, Philadelphia Proposed Hotel, Raleigh Holiday Inn, Richfield Residence Inn by Marriott, Renaissance Hotel, Raleigh Homewood Suites, Sharonville Philadelphia Fairfield Inn by Marriott, Rocky Mount Holiday Inn, Strongsville Sofitel, Philadelphia Ramada Hotel, Willoughby Wyndham Franklin Plaza, Philadelphia NORTH DAKOTA Crowne Plaza, Pittsburgh OKLAHOMA Holiday Inn, Pittsburgh Proposed University Hotel, Bismarck Holiday Inn Parkway East, Pittsburgh Proposed Dakota Suites, Dickinson Hampton Inn, Oklahoma City Windsor Court Hotel Conversion, Holiday Inn, Fargo Park Inn, Oklahoma City Pittsburgh Proposed Limited-Service Hotel, Fargo Proposed Boutique Hotel, Oklahoma Wyndham, Pittsburgh Proposed Wingate Inn, Fargo City DoubleTree Guest Suites, Plymouth Ramada Plaza Conversion, Fargo Proposed NYLO Hotel, Oklahoma City Meeting Hyatt House, Minot Westin, Oklahoma City Nittany Lion, State College North Hills Suites Conversion to Hyatt Courtyard by Marriott, Tulsa Penn Stater, State College House, Minot Hampton Inn, Tulsa Holiday Inn Meadowlands, Proposed Extended-Stay Hotel, Minot Washington Park Proposed Limited-Service Hotel, Minot OREGON Holiday Inn, York Proposed Baymont Inn & Suites, South Heart Windmill Inn, Ashland RHODE ISLAND Proposed Candlewood Suites, West Best Western Pier Point Inn, Florence Fargo Residence Inn by Marriott, Lake Proposed WoodSpring Suites Market Overview, Williston Oswego Signature, Providence Proposed Hotel(s), Williston Proposed Candlewood Suites, Medford Residence Inn by Marriott, Warwick Supply Update, Williston Windmill Inn, Medford Proposed NYLO Hotel, Warwick DoubleTree Downtown, Portland OHIO DoubleTree Lloyd Center, Portland SOUTH CAROLINA Marriott, Portland Fairfield Inn by Marriott, Akron Proposed Hilton Garden Inn, Portland Best Western, Charleston Proposed Hilton, Chippewa Lake Residence Inn by Marriott, Portland Clarion, Charleston Radisson, Cincinnati Windmill Inn, Roseburg Lodge Alley, Charleston Courtyard by Marriott, Cleveland DoubleTree, Springfield Holiday Inn, Columbia Holiday Inn Beachwood, Cleveland Holiday Inn, Wilsonville Hilton Garden Inn, Greenville Holiday Inn Westlake, Cleveland Best Western, Hilton Head Marriott East, Cleveland PENNSYLVANIA Holiday Inn, Hilton Head Marriott North, Cleveland Hampton Inn Oceanside, Myrtle Beach Radisson, Cleveland Hilton Garden Inn, Fort Washington Holiday Inn Sunspree, Myrtle Beach

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 15

Shorecrest II, Myrtle Beach Holiday Inn Express, Amarillo Hawthorn Suites, Irving DoubleTree Hotel, North Charleston Courtyard by Marriott South Arlington, Holiday Inn Express, Irving Holiday Inn, Rock Hill Arlington Hyatt Place, Irving Residence Inn South Arlington, Marriott DFW Airport, Irving SOUTH DAKOTA Arlington Proposed Convention Hotel, Irving Courtyard by Marriott, Austin Hawthorn Suites, Killeen Proposed GrandStay Suites, Aberdeen Fairfield Inn & Suites North, Austin Residence Inn, Killeen Proposed TownePlace Suites, Hampton Inn & Suites Downtown, Hampton Inn, Laredo Aberdeen Austin Proposed NYLO, Las Colinas TownePlace Suites by Marriott, Hawthorn Suites Central, Austin Proposed Campus Hotel, Lubbock Aberdeen Hawthorn Suites South, Austin Embassy Suites, McAllen Courtyard by Marriott, Sioux Falls Hilton Garden Inn, Austin Proposed Hotel, McKinney SpringHill Suites, Sioux Falls Holiday Inn, Austin Holiday Inn, New Braunfels Holiday Inn NW, Austin Best Western, Odessa TENNESSEE Holiday Inn South, Austin Proposed NYLO, Plano Proposed Courtyard by Marriott, Courtyard by Marriott, Richardson Courtyard by Marriott, Clarksville Austin Hampton Inn, Richardson Fairfield Inn by Marriott, Chattanooga Sheraton, Austin Proposed Hotel, Riviera Courtyard by Marriott, Germantown Proposed Spillman Ranch, Bee Cave DoubleTree, San Antonio Fairfield Inn by Marriott, Jackson Courtyard by Marriott, Corpus Christi Homewood Suites, San Antonio Hampton Inn & Suites East, Knoxville DoubleTree Campbell Center, Dallas JW Marriott Hill Country, San Antonio Hotel Market Supply and Demand Holiday Inn Market Center, Dallas Marriott Plaza, San Antonio Study, Knoxville Le Meridien, Dallas Proposed Aloft, San Antonio Proposed Convention Hotel, Knoxville Proposed Boutique Hotel, Dallas Residence Inn by Marriott Airport, San Proposed Courtyard by Marriott, Proposed NYLO, Dallas Antonio Knoxville Residence Inn by Marriott, Dallas Staybridge Suites, Stafford Adams Mark, Memphis Holiday Inn Select, D/FW Airport Marriott Hotel & Conference Center, AmeriSuites, Memphis Hyatt D/FW Airport Sugar Land Courtyard by Marriott, Memphis Courtyard by Marriott, El Paso Residence Inn, Temple French Quarter Hotel, Memphis Hilton Garden Inn, Fort Worth Holiday Inn, Tyler Hampton Inn, Memphis Residence Inn by Marriott, Fort Worth Residence Inn by Marriott, Tyler Ramada Inn, Memphis TownePlace Suites by Marriott, Fort Courtyard by Marriott, Waco Country Inn, Murfreesboro Worth Proposed SpringHill/Residence Inn, Proposed NYLO Hotel, Frisco UTAH Nashville Proposed Resort, Horseshoe Bay Renaissance Hotel, Nashville Crowne Plaza, Houston Crystal Inn, Brigham City SpringHill Suites by Marriott, Nashville Hampton Inn, Houston Residence Inn by Marriott, Hampton Inn, Pigeon Forge Hawthorn Suites, Houston Cottonwood Hampton Inn, Smyrna Hilton Garden Inn Energy Corridor, Suburban Lodge, Midvale Hilton Garden Inn, Smyrna Houston Brookfield Inn, Park City Hilton Garden Inn Galleria, Houston Chateaux at Silver Lake, Park City TEXAS Hotel Icon, Houston Olympia Park, Park City Kingwood Athletic Club, Houston Park City Peaks, Park City Courtyard by Marriott, Abilene Magnolia Hotel, Houston The Lodges at Deer Valley, Park City Comfort Inn, Amarillo Ramada Plaza, Houston Comfort Inn Airport, Salt Lake City Crowne Plaza, Amarillo Westin Galleria, Houston Crystal Inn, Salt Lake City Days Inn, Amarillo Westin Oaks, Houston Embassy Suites, Salt Lake City

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 16

Hilton Airport, Salt Lake City Embassy Suites, Richmond Proposed Residence Inn by Marriott, Hilton Downtown, Salt Lake City Westin, Richmond Milwaukee Holiday Inn Express, Salt Lake City Proposed MainStay Suites, Roanoke Comfort Suites, Pewaukee Peery Hotel, Salt Lake City Sheraton Airport, Roanoke Proposed Holiday Inn Express, Proposed Comfort Suites, Salt Lake Super 8, Roanoke Platteville City Holiday Inn, Salem Holiday Inn Express, Superior Proposed Courtyard by Marriott, Salt Country Inn, Stafford Proposed Hotel, Verona Lake City Super 8, Waynesboro Holiday Inn, Wauwatosa Proposed Embassy Suites, Salt Lake City WASHINGTON WYOMING Proposed Hilton Garden Inn, Salt Lake City DoubleTree Bellevue Center, Bellevue Holiday Inn, Casper Proposed Residence Inn by Marriott, SpringHill Suites by Marriott, Bothell Snake River Lodge, Jackson Salt Lake City Proposed Holiday Inn Express, Lacey Proposed Resort, Teton Village Quality Inn, Salt Lake City Proposed Mt. Rainer Resort, Park Proposed Americas Best Value Inn, Quality Inn Midvalley, Salt Lake City Junction Wheatland Residence Inn by Marriott, Salt Lake Renaissance Hotel, Seattle City Summerfield Suites by Wyndham, Residence Inn City Center, Salt Lake Seattle INTERNATIONAL City DoubleTree Spokane Valley, Spokane University Park, Salt Lake City Residence Inn by Marriott, Vancouver Canada Holiday Inn Express & Suites, Sandy SpringHill Suites, Wenatchee Proposed Embassy Suites, Sandy DoubleTree, Yakima Horseshoe Valley Ski Resort, Barrie, Suburban Lodge, S. Salt Lake City Ontario Proposed Cambria Suites, S. Jordan WEST VIRGINIA Hilton, Windsor, Ontario Bottle Hollow Resort, Uinitah Travelodge, Windsor, Ontario Aspen Suites (Holiday Inn Express Hampton Inn & Suites, Ontario VERMONT Conversion), Charleston Residence Inn by Marriott, Charleston Caribbean Fairfield Inn by Marriott, Colchester Hampton Inn, Morgantown Aruba Marriott & Casino, Aruba VIRGINIA WISCONSIN Americana Resort, Aruba Westin, Aruba Hilton Garden Inn, Chesapeake Proposed Country Inn, Brookfield Holiday Inn Nassau, Bahamas Super 8, Christiansburg Proposed Hilton Garden Inn, Paradise Island Fun Club, Bahamas Holiday Inn, Covington Brookfield Little Dix Bay, Virgin Gorda, BVI AmeriSuites, Glen Allen Wyndham Garden, Brookfield Club St. Lucia, Castries, British West Super 8, Harrisonburg Telemark Resort, Cable Indies Holiday Inn, Lexington Ramada Hotel and Conference Center, Marriott Resort, Grand Cayman, Super 8, Lexington Eau Claire British West Indies Courtyard by Marriott, McLean Proposed Hilton Garden, Kimberly Ritz Carlton San Juan, Puerto Rico Proposed Tysons Corner Hotel, Proposed Hampton Inn, La Crosse Sands Hotel & Casino, Puerto Rico McClean Proposed AC Hotel, Madison Wyndham El San Juan, Puerto Rico Staybridge Suites by Holiday Inn, Proposed Courtyard by Marriott, Hyatt Regency St. John, USVI McLean Madison Proposed Limited-Service Hotel, St. Super 8, Norton Proposed Kimpton Hotel, Milwaukee John USVI Super 8, Radford Proposed Marriott, Milwaukee Westin Resort, St. John, USVI

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 17

Caneel Bay, St. John, USVI Marriott Frenchman’s Reef and Morningstar Resort, St. Thomas, USVI

Mexico

Royal Sands, Cancun

HVS, Minneapolis, Minnesota Qualifications of Tanya Pierson, MAI 18