February 24, 2015 Mr. Brian Berry Purchasing & Contraction Administration California State University, Northridge 18111 Nordhoff Street Northridge, California 91330 Dear Mr. Berry: Pursuant to your request, we have completed our analysis of the potential market demand, facilities recommendations and statements of estimated annual operating results for the proposed hotel to be located at the California State University, Northridge in the community of Northridge, California. This report represents the culmination of our research and analysis. As in all studies of this type, the estimated results assume, and are based upon, competent and efficient management and presume no significant changes in the competitive position of the lodging industry in the market area from those set forth in this report. The conclusions reached are based upon our present knowledge of the area lodging market as of the completion of our fieldwork concluded in February 2015. The terms of our engagement are such that we have no obligation to revise this report or the estimated operating results to reflect events or conditions that occur subsequent to the date of the completion of our fieldwork. However, we are available to discuss the necessity for revision in view of changes in the economic or market factors affecting the proposed project. Since the estimated operating results are based on estimates and assumptions that are subject to uncertainty and variation, we do not represent them as results that will actually be achieved. This report is subject to the attached Statement of Assumptions and Limiting Conditions in the Addenda. This report has been prepared for your internal use in decision-making with regard to the type and size of the proposed facility. The report and its contents, however, may not be quoted in any appraisal, prospectus or other document without our prior written consent. We would be pleased to hear from you if we can be of further assistance in the interpretation of our findings. We express our appreciation to you and your associates for the cooperation extended to us during the course of this engagement and look forward to working with you further. Sincerely, PKF Consulting Bruce Baltin Senior Vice President PKF Consulting USA, a Subsidiary of CBRE, Inc. | 400 S. Hope Street, 25th Floor | Los Angeles, CA 90071 TEL: 213-680-0900 | FAX: 213-613-3005 | www.pkfc.com ii TABLE OF CONTENTS Page Number SECTION I INTRODUCTION ................................................................................................. I-1 ASSUMPTIONS USED FOR PROJECTIONS ......................................................... I-1 SCOPE AND METHODOLOGY ........................................................................... I-1 AREA OVERVIEW ................................................................................................ I-2 MARKET RESEARCH ............................................................................................ I-3 PREPARATION OF MARKET SUPPLY AND DEMAND ESTIMATES ...................... I-3 SUBJECT OCCUPANCY AND AVERAGE DAILY RATE PROJECTIONS ................. I-3 ESTIMATED ANNUAL OPERATING RESULTS ..................................................... I-3 SUMMARY OF CONCLUSIONS .......................................................................... I-3 SECTION II ANALYSIS OF SITE LOCATION ........................................................................... II-2 LOCATION ........................................................................................................ II-2 ACCESS AND VISIBILITY .................................................................................... II-3 SITE ADVANTAGES AND DISADVANTAGES ..................................................... II-3 Advantages .................................................................................. II-3 Disadvantages .............................................................................. II-4 SITE ENVIRONS: CALIFORNIA STATE UNIVERSITY, NORTHRIDGE .................. II-4 Student Population ................................................................................... II-5 Colleges ................................................................................................... II-5 CSUN Matadors Athletics ......................................................................... II-6 Valley Performing Arts Center .................................................................. II-7 University Student Union (USU) .............................................................. II-7 RELATIONSHIP TO DEMAND GENERATORS .................................................... II-9 California State University, Northridge Campus Demand ......................... II-9 Demand Characteristics ........................................................................... II-9 Non-University Related Demand............................................................ II-10 Commercial Demand Segment ................................................... II-10 Leisure Demand Segment ........................................................... II-11 Group Demand Segment ............................................................ II-11 SUMMARY ....................................................................................................... II-11 SECTION III AREA REVIEW AND NEIGHBORHOOD ANALYSIS .......................................... III-2 INTRODUCTION .............................................................................................. III-2 LOS ANGELES COUNTY OVERVIEW ................................................................ III-2 LAX Modernization ................................................................................. III-4 REGIONAL INFRASTRUCTURE ......................................................................... III-6 Port of Los Angeles ................................................................................. III-6 Rail and Bus ............................................................................................ III-6 TOURISM INDICATORS .................................................................................... III-8 Total Visitor Volume ............................................................................... III-9 Transient Occupancy Tax........................................................................ III-9 Los Angeles Convention Center ................................................. III-10 AREA CONCLUSIONS ..................................................................................... III-13 iii TABLE OF CONTENTS Page Number NEIGHBORHOOD ANALYSIS ......................................................................... III-14 SAN FERNANDO VALLEY OVERVIEW ............................................................ III-14 REGIONAL INFRASTRUCTURE ....................................................................... III-15 Rail ....................................................................................................... III-15 Air Service ............................................................................................ III-15 Burbank Bob Hope Airport Traffic ............................................. III-15 Bob Hope Airport Regional Intermodal Transit Center (RITC) .... III-16 Van Nuys Airport (VNY) ............................................................ III-17 ECONOMIC AND DEMOGRAPHIC OVERVIEW ............................................. III-17 Population Trends ................................................................................. III-17 Residential ............................................................................................ III-18 Employment ......................................................................................... III-18 Education.............................................................................................. III-19 Retail .................................................................................................... III-19 Office ................................................................................................... III-19 Industrial .............................................................................................. III-19 TOURISM ........................................................................................................ III-20 The Great Wall of Los Angeles .............................................................. III-20 Japanese Garden ................................................................................... III-20 Discovery Cube .................................................................................... III-20 Universal Studios Hollywood ................................................................ III-21 New Attractions ........................................................................ III-21 SAN FERNANDO VALLEY LODGING MARKET .............................................. III-22 COMMUNITY OF NORTHRIDGE ................................................................... III-22 History and Overview ........................................................................... III-22 Regional Infrastructure .......................................................................... III-23 Freeway System ........................................................................ III-23 Rail and Bus .............................................................................. III-24 Economic Drivers ................................................................................. III-24 California