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Pursuant to your request, we herewith submit our analysis pertaining to aproposal to develop a 206-room luxury hotel in downtown Greensboro,North Carolina. The purpose of our analysis is to assist the City ofGreensboro in reviewing a Notification of Intent to Request Recovery ZoneEconomic Development and Facility Bonds submitted by Urban HotelGroup, LLC and Elm Street Center, LLC for a proposed luxury hotel to bedeveloped at 200 S. Davie Street in Greensboro, North Carolina.Our opinions can be summarized as follows: The developer’s positioned average daily rate for the first five years ofoperation is reasonable for a luxury or upper upscale hotel as proposedfor downtown Greensboro, but not at the occupancy rate projected. The developer’s projection of occupancy at the proposed hotel over thefirst five years is highly unlikely to be achieved given the recentoccupancy levels achieved by the four hotels that will be primarycompetitors of the proposed hotel. The revenue per available room (RevPAR) projected by HVS for theproposed hotels is well below the level necessary to cover debt serviceand a return on and return of the equity investment. The Food & Beverage revenue projected by the developer on a peroccupied room (POR) basis is reasonable for a luxury or upper upscalefull-service hotel, but is highly dependent on the type and quality of therestaurant(s) and bar(s) located in the hotel, as well as the quality of thebanquet and catering department. The 2009 HVS Hotel Valuation Index report issued in October 2009 listsGreensboro (ranked 63) near the bottom of 65 cities in the U.S. forprojected changes in per-room value from 2006 to (Projected) 2013. Hotelvalues in Greensboro are projected by HVS to fall -47.7% between 2006and 2013.We hereby certify that we have no undisclosed interest in the property, andour employment and compensation are not contingent upon our findingsand opinions. This consulting services letter is subject to the commentsmade throughout this report and to all assumptions and limiting conditionsset forth herein.Sincerely,W&R Hospitality Services, Inc.

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Consulting Services Letter Proposed Luxury Hotel Greensboro Greensboro, North Carolina

Property Location:

Proposed

200 S. Davie Street Greensboro, North Carolina Prepared by: W&R Hospitality Services, Inc. dba HVS Global Hospitality Services 7883 South Locust Court Centennial, Colorado 80112 +1 303 771-4104 +1 303 290-6533 FAX Submitted to: Mr. Andrew Scott City of Greensboro 300 W. Washington Street Greensboro, North Carolina 27402 336-373-2002 [email protected]

January 18, 2010 Mr. Andrew Scott City of Greensboro 300 W. Washington Street Greensboro, North Carolina 27402 336-373-2002 [email protected]

7883 South Locust Court Centennial, Colorado 80112 +1 303 771-4104 +1 303 290-6533 FAX www.hvs.com

Re:

Proposed Luxury Hotel Greensboro Greensboro, North Carolina HVS Reference: 2010180001

Dear Mr. Scott: Pursuant to your request, we herewith submit our analysis pertaining to a proposal to develop a 206-room luxury hotel in downtown Greensboro, North Carolina. The purpose of our analysis is to assist the City of Greensboro in reviewing a Notification of Intent to Request Recovery Zone Economic Development and Facility Bonds submitted by Urban Hotel Group, LLC and Elm Street Center, LLC for a proposed luxury hotel to be developed at 200 S. Davie Street in Greensboro, North Carolina. Our opinions can be summarized as follows:  The developer’s positioned average daily rate for the first five years of operation is reasonable for a luxury or upper upscale hotel as proposed for downtown Greensboro, but not at the occupancy rate projected. The developer’s projection of occupancy at the proposed hotel over the first five years is highly unlikely to be achieved given the recent occupancy levels achieved by the four hotels that will be primary competitors of the proposed hotel. The revenue per available room (RevPAR) projected by HVS for the proposed hotels is well below the level necessary to cover debt service and a return on and return of the equity investment. The Food & Beverage revenue projected by the developer on a per occupied room (POR) basis is reasonable for a luxury or upper upscale full-service hotel, but is highly dependent on the type and quality of the restaurant(s) and bar(s) located in the hotel, as well as the quality of the banquet and catering department.

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The 2009 HVS Hotel Valuation Index report issued in October 2009 lists Greensboro (ranked 63) near the bottom of 65 cities in the U.S. for projected changes in per-room value from 2006 to (Projected) 2013. Hotel values in Greensboro are projected by HVS to fall -47.7% between 2006 and 2013.

We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and opinions. This consulting services letter is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Sincerely, W&R Hospitality Services, Inc.

Richard D. Williams, MAI, Managing Director [email protected], +1 303 771-4104

HVS Global Hospitality Services

Table of Contents

Table of Contents

Section
1 2 3 Addenda

Title
Executive Summary Statement of Assumptions and Limiting Conditions Certification

Penetration Explanation Qualifications of Richard D. Williams, MAI

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-1

1. Executive Summary

Subject of the Consulting Assignment

We have been asked to provide the City of Greensboro with our analysis of the projections of revenue included in the Notification of Intent to Request Recovery Zone Economic Development and Facility Bonds submitted by Urban Hotel Group, LLC and Elm Street Center, LLC for a proposed luxury hotel to be developed at 200 S. Davie Street in Greensboro, North Carolina. The Proposed Luxury Hotel Greensboro is to be a 206-room full-service lodging facility, which is expected to be affiliated with an unidentified national hotel brand. Although the body of the Notification of Intent states that the hotel will contain 206 rooms, the five-year projection of revenue and expense included in the Notification is based on the hotel having 200 rooms. Therefore, for the purpose of our analysis and to avoid confusing the readers of our analysis, we also have assumed the hotel will contain 200 rooms. Six rooms more or less will have little impact on projected occupancy and average rate that can reasonably be projected for the proposed hotel. The developer has projected that the proposed hotel will open January 1, 2012; we have relied upon the developer’s projected opening date in our analysis. The Notification of Intent proposes a “Luxury” hotel, but this may be a misclassification of the proposed property. Luxury hotels include such brands as Fairmont, Four Seasons, Mandarin Oriental, Le Meridien, Ritz-Carlton, and W Hotels. Upper Upscale brands include DoubleTree, Embassy Suites, Hilton Hotels, Hyatt, Marriott, Omni, Renaissance, Sheraton, and Westin hotels to name a few. The final selection of a brand will determine the level of finish and amenities that will be expected by the hotel brand, and will determine the average rate positioning of the hotel. We have not inspected the subject site for this assignment, but we are familiar with the greater Greensboro hotel market from previous visits to the city. We have not been asked to express any opinions regarding the feasibility of the proposed hotel. However, by comparing the hotel’s average daily rate (ADR), average occupancy, and RevPAR (Revenue Per Available Room) projected by the Urban Hotel Group, LLC and Elm Street Center, LLC in their Notification of Intent to historic occupancy and average rate compiled by Smith Travel

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-2

Research, and to the same aggregate data for four hotels located in or near downtown Greensboro that would be expected to compete directly with the proposed luxury hotel, we can render an opinion as to the reasonableness of the developer’s projections of revenue for the proposed hotel for a five-year period commencing January 1, 2012. In order to render an opinion regarding the food and beverage revenue projected by the developer we have compared the developer’s projected food and beverage revenue to the revenue generated by a sample of similar hotels on a dollar amount per occupied room (POR). Overview of Local Area Lodging Market Trends – Smith Travel Trends Report The 200-room Proposed Luxury Hotel Greensboro will be located in Greensboro, North Carolina. The greater market area surrounding the proposed subject property offers numerous hotels in all quality and price categories. We have chosen a sample of 9 hotels, comprising 1,695 rooms that are most reflective of the market segment in which the proposed luxury hotel would compete, based on an evaluation of the occupancy, rate structure, market orientation, chain affiliation, location, facilities, amenities, reputation, and quality of each area hotel. Smith Travel Research will not allow any one hotel of a specific brand to comprise more than 40% of the number of hotel rooms in the sample to protect the confidentiality of the occupancy and average rate for any one hotel or brand. This limitation poses a challenge in the greater Greensboro hotel market because including the 988-room Sheraton Hotel Greensboro would necessitate using a sample of more than 2,470 hotel rooms to keep the Sheraton’s percentage of rooms under 40% of the sample. Including the two full-service Marriott hotels (downtown and airport), requires a sample of more than 1,450 hotel rooms if the Sheraton hotel is omitted from the sample. Because the proposed luxury hotel is to contain between 200 and 206 hotel rooms, we have intentionally excluded the 988-room Sheraton from the STR sample, as we believe it would skew the averages in the report. In order to include the two Marriott hotels we needed to add the Hilton Garden Inn and Hyatt Place hotel, resulting in a sample of 9 hotels comprising 1,695 rooms. Smith Travel Research (STR) is an independent research firm that compiles data on the lodging industry; its published data is routinely used by typical hotel buyers. STR has compiled historical supply and demand data for hotels operating in the Greensboro market that are anticipated to be primarily or secondarily competitive with the proposed hotel.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-3

Figure 1-1

Historical Supply and Demand Trends (STR)
Average Daily Available Room Room Count Nights 1,382 1,350 1,350 1,372 1,537 1,695 1,695 1,695 504,515 492,750 492,750 500,924 561,072 618,675 515,280 515,280 Occupied Room Nights 301,354 304,808 305,544 320,312 334,274 355,218 311,503 269,857 Average Rate $104.19 105.65 108.73 114.28 121.41 122.10 $123.29 116.11

Year 2003 2004 2005 2006 2007 2008 2008 2009

Change — (2.3) % 0.0 1.7 12.0 10.3 — 0.0 % 4.2 %

Change — 1.1 % 0.2 4.8 4.4 6.3 — (13.4) % 3.3 % Number of Rooms 281 175 124 131 147 185 134 299 219

Occupancy 59.7 % 61.9 62.0 63.9 59.6 57.4 60.5 % 52.4

Change — 1.4 % 2.9 5.1 6.2 0.6 — (5.8) % 3.2 %

RevPAR $62.23 65.35 67.42 73.07 72.33 70.10 $74.53 60.81

Change — 5.0 % 3.2 8.4 (1.0) (3.1) — (18.4) % 2.4 %

Year-to-Date Through October

Average Annual Compounded Change: 2003-2008 Hotels Included in Sample Marriott Greensboro Downtown Doubletree Greensboro Hyatt Place Greensboro O Henry Hotel Proximity Hotel Wyndham Garden Hotel Greensboro Hilton Garden Inn Greensboro Marriott Greensboro High Point Airport Embassy Suites Greensboro Airport

Year Affiliated Dec-00 Oct-07 Oct-07 Nov-98 Oct-07 Jun-08 Nov-06 Jun-83 Feb-89

Year Opened Jun 1984 Jun 1972 Oct 1995 Nov 1998 Oct 2007 Mar 1974 Nov 2006 Jun 1983 Feb 1989

Total

1,695

Source: Smith Travel Research

Since 2003, the average daily room count has grown by the opening of new hotels and the remodeling and conversion of existing hotels. The 175-room Doubletree was formerly a Howard Johnson hotel, which moved into the Upper Upscale category with its remodel in 2007. The former Holiday Inn at the airport was remodeled and changed brands in 2008, becoming a Wyndham Garden Hotel, which is the only Mid-Range hotel with Food & Beverage chain scale included in the sample. The Upper Upscale hotels in the sample include the Marriott Greensboro Downtown, the Doubletree, the Marriott Greensboro High Point Airport hotel, and the Embassy Suites Airport hotel. The proposed hotel would be included in the Luxury or Upper Upscale category, depending upon the hotel’s brand affiliation. The two Independent chain scale classification hotels are the O. Henry and the Proximity hotels. The Hyatt Place and Hilton Garden Inn are classified in the Upper chain scale category. We note that in today’s competitive market for hotel rooms, it is common for Upscale category hotels, which are considered

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-4

to be “Select-Service” rather than “Full-Service” hotels, to attain average rates equal to or above average rates achieved by the full-service properties. The select-service hotels are typically more profitable to operate than a full-service hotel because they do not have all of the meeting space, restaurants, and bars found in full-service hotels. The proposed luxury hotel is likely to compete directly with the two Marriott full-service hotels, the O. Henry and Proximity hotels, and to a lesser extent, with the Embassy Suites and Doubletree hotels. Smith Travel Research reported an average occupancy of 57.4% for the sample in 2008. Year-to-date through October 31, 2009, occupancy has declined (13.4)% over the same period in 2008, declining from 60.5% to 52.4%. The lower-priced, limitedservice hotels are performing better than the full-service hotels, as some fullservice hotels have lowered rates and offered free breakfast to compete for the reduced demand that still exists. The average ADR in 2008 was $122.10. Year-to-date through October 31, 2009, average rate has fallen from $123.29 to $116.11, or (5.8)%. The decline can be attributed to the national recession and high unemployment, which has negatively impacted business, leisure, and group & meeting demand for hotel rooms worldwide. Demand has lagged growth in new supply, as shown in the STR data. While supply grew 1.7% in 2006, 12.0% in 2007, and 10.3% in 2008 in the Greensboro sample, demand, as reflected by Occupied Room Nights grew 4.8% in 2006, 4.4% in 2007, and 6.3% in 2008. Average Daily Rate of the Competition The proposed subject property is expected to compete with other full-service hotels in the Greensboro market. In order to evaluate the reasonableness of the average daily rate projected for the proposed luxury hotel, we have obtained operating data from four Greensboro full-service hotels: the DoubleTree Greensboro, the Marriott Greensboro Downtown, the O. Henry Hotel, and the Proximity Hotel. We selected these four hotels because they would be primary competitors with the proposed luxury hotel due to their operating style, age and condition of their facilities, geographical proximity to downtown Greensboro, and their actual achieved average rate and occupancy. The primary competitors performed better than the market in 2007, but the aggregate ADR for this group of four hotels fell in 2008 as the addition of 322 hotel rooms to the market in the fourth quarter of 2007 began to be absorbed. The group of four primary competitors continued to lose occupancy in 2009 as the recession deepened and luxury and upper upscale hotels began to

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-5

experience cancellations of group and meeting business. The collapse of Wall Street banks, lead by Bear Stearns in March 2008 and Lehman Brothers in September 2008, created a global economic meltdown. Following this unprecedented event, a panic on Wall Street ensued, as the markets fluctuated violently and consumer confidence evaporated. In 2008, the U.S. saw five of the eight largest bankruptcy filings in the history of the United States – Washington Mutual, Thornburg Mortgage, General Motors, Chrysler, and Lehman Brothers. This recession has been the worst in the U.S. since the Great Depression 70 years ago. The hotel business has been particularly hard hit because the three major market segments that comprise demand for hotel rooms and hotel food & beverage have been severely impacted. These three market segments are commercial, group & meeting, and leisure. Commercial demand has fallen as companies have drastically cut back employee travel to cut costs. In addition, the mass layoffs have resulted in a national unemployment rate above 10%, further reducing the number of business travelers needing hotel rooms. Group and meeting business has also fallen sharply, especially in the luxury and upper upscale classes of hotels in the U.S. as companies cancelled corporate gatherings and incentive travel after the negative publicity generated by the insurer A.I.G. hosting a lavish corporate retreat at the St. Regis Resort in Monarch Beach, California the same week that the company received an $85 billion bailout from the Federal Government. The public outrage over this corporate behavior lead to A.I.G. cancelling a planned corporate retreat scheduled the week of October 12, 2008 at the Ritz-Carlton – Half Moon Bay Resort in California as the company received an additional $37.5 billion from taxpayers. The negative publicity lead many more corporations to cancel planned events at luxury hotels, whether or not they were receiving taxpayer bailout money, which resulted in these companies paying hundreds of thousands of dollars in cancellation fees to hotels and banquet facilities. The group and meeting business referred to in the hotel industry as SMERFE (Social, Military, Educational, Religious, Fraternal, Ethnic), has also been negatively impacted by the recession as these groups have canceled meetings, cut back on amounts paid for hotel rooms, and the amount spent for food & beverage during the meetings. Leisure travel has also declined as unemployment rose to 9% and 10% nationally, with many parts of the country experiencing unemployment

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-6

levels approaching 15% and higher. Leisure travel is discretionary to a large extent. People can cancel vacations if they lose their job, are in fear of losing their job, or are being more budget-conscious. Hotel managers typically lower rates during periods of falling demand in order to capture a larger percentage of the demand that remains. History has shown that this strategy is difficult to reverse once the market begins to turn around, and increases in average rate typically lag behind increases in occupancy by 12 to 24 months, depending on the supply of hotel rooms in a particular market and the rate at which demand for hotel rooms returns to the market. Currently, there is a great deal of discounting occurring in the greater Greensboro-High Point hotel market. The discounting is occurring not only during traditionally slow months but also in April and October for the High Point Furniture Market. According to Brian Casey, President and CEO of the High Point Market Authority, hotel rates are almost 25% less than last spring, while eliminating any restrictions for minimum-night stays. The following table sets forth rates for approximately 50 hotels for the Spring Market scheduled for April 17 – 22, 2010. In addition, most hotels previously imposed minimum stays of five to six nights; for 2010, hotels are not imposing any minimum stay requirements.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-7

Figure 1-2

Hotel Rates for Spring 2010 Furniture Market
Hotel Name Airport Marriott Ashford Suites Baymont Inn & Suites Best Western Airport Best Western High Point Best Western Windsor Suites Biltmore Suites Clarion Airport Comfort Inn Archdale Comfort Suites Airport Comfort Suites Four Seasons Comfort Suites Hanes Mall Country Inn & Suites - Archdale Country Inn & Suites - Greensboro Courtyard - Airport Courtyard - Hanes Mall Courtyard - Wendover Crestwood Suites High Point Days Inn Four Seasons DoubleTree Hotel Embassy Suites - Greensboro Embassy Suites - Winston-Salem Fairfield Inn & Suites Hanes Mall Fairfield Inn & Suites - Archdale Fairfield Inn & Suites - Wendover Grandover Hampton Inn Airport Hampton Inn - Archdale Hampton Inn - Four Seasons Hampton Inn - Hanes Mall Hawthorne Inn Hilton Garden Inn Wendover Hilton Garden Inn Hanes Mall Holiday Inn Express - Archdale Holiday Inn Express & Suites - Airport Holiday Inn Express & Suites - East (Cedar Park Road) Homewood Suites Hotel North Carolina Hyatt Place Innkeeper - Archdale Marriott Downtown Greensboro Marriott Winston-Salem Microtel Hanes Mall Microtel - Wendover Park Lane Quality Inn & Suites Airport Quality Inn & Suites Hanes Mall Quality Inn High Point Sheraton Four Seasons Sleep Inn Hanes Mall SpringHill Suites - Wendover SpringHill Suites - Hanes Mall Wingate by Wyndham Wyndham Garden Hotel Source: www.highpointmarket.org - 1/17/10 Rates $159 $169 $99 $94 $210 $94 $109 $79 $119.95 $149 $109 $89 $149 $99.99 $139 $109 $129 $99.99 $69 $139 $159 $159 $99 $149 $119 $225 $149 $129 $119 $129 $89 $139 $129 $129 $149 $109.99 $139 $79 $189 $79 $169.95 $159 $60 $79 $100 $99 $79.99 $89 $142 $65 $159 $109 $129 $99

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-8

When hotel markets become distressed due to a fall in demand for rooms, as is currently the case in most markets around the U.S., but particularly so in the Greensboro market, savvy hotel owners and managers may resist cutting rates, and instead tolerate a decline in occupancy as they lose business to hotels willing to discount. There is strong evidence that this has occurred in the Greensboro hotel market, as the market already had an oversupply of hotel rooms before the recession began. HVS is currently projecting that demand for hotel rooms nationally will commence a recovery in 2011. Once the demand for hotel rooms begins to recover in 2011, it will take a longer time for hotels that did not discount room rates to recover occupancy than it does for the lower-priced hotels in the market that drove occupancy higher by discounting rates to the point that these hotels were able to steal business away from the other hotels in the market area. To judge the effectiveness of either strategy we will need to compare the differences in RevPAR among the competitive hotels in the market, which will be addressed later in this report. The opening of the DoubleTree and the Proximity in the fourth quarter 2007 gave an indication of how the addition of 322 new hotel rooms impacted the existing downtown, or near downtown, hotels in this market. In order to protect confidential operating data provided to HVS, we have aggregated the four properties in order to provide overall average daily rate (ADR), occupancy, and RevPAR for the four hotels sampled. We also have included the STR sample of nine Greensboro hotels, which included the four primary comparables, three Upper Upscale hotels, one Upscale hotel, and one Midlevel hotel with food and beverage hotel. The 988-room Sheraton Hotel Greensboro was not included in the STR sample because the large number of rooms in the hotel would skew the averages reported downward.
Figure 1-3 Aggregate Average Daily Rate of Four Primary Competitors vs. STR Sample
2007 Primary Comparables - # of Rooms Primary Comparables - ADR STR Sample - # of Rooms STR Sample - ADR 458 $140.22 1,537 $121.41 2008 734 $141.01 1,695 $122.10 2009 734 $134.58 1,695 $116.11

In addition to the four primary competitors set forth previously, the STR sample included the Embassy Suites Greensboro Airport, the Hyatt Place Greensboro, the Hilton Garden Inn Greensboro, the Marriott Greensboro

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-9

High Point Airport, and the Wyndham Garden Hotel Greensboro. The aggregate average daily rate for these nine competitors was $121.41 in 2007, $122.10 in 2008 and $116.11 in 2009 through October, which was the most recent data available from Smith Travel Research when the sample was run. Developer’s Projection of Average Daily Rate The development team for the proposed 200 to 206-room subject hotel has projected average rates for the first five years of operation, which is assumed to begin on January 1, 2012 when the hotel is projected to open. These projections are set forth in the following table.

Figure 1-4

Developer’s Projection of Average Daily Rate for Five Years

Year 1 2012 Developer's Projection $155.79

Year 2 2013 $163.58

% Increase 5.0%

Year 3 2014 $170.12

% Increase 4.0%

Year 4 2015 $175.23

% Increase 3.0%

Year 5 2016 $180.48

% Increase 3.0%

HVS Opinion as to Average Daily Rate

The average daily rates projected by the developer for the first five years of operation are not unreasonable for a luxury or upper upscale hotel located in downtown Greensboro beginning in 2012, and are within the range of average daily rates currently being achieved by the four primary competitors sampled for our analysis. However, the projected average daily rate is unlikely to be achieved at the occupancy projected by the developer. Average daily rate (ADR) is calculated by dividing the total rooms revenue achieved during a specified period of time by the number of rooms sold and occupied during the same period. Average rate is highly correlated with occupancy. One cannot project occupancy without making specific assumptions regarding average daily rate. In other words, a hotel owner can set the average rate at a level that he or she would like to attain, but the market determines if the rate is too high, just right, or too low, which is reflected in the actual occupancy achieved. This relationship is best illustrated by revenue per available room (RevPAR), which reflects a hotel property’s ability to maximize rooms revenue and will be discussed later. To test the reasonableness of the developer’s projected average daily rate, we have positioned the average rate for the proposed hotel at $147 in 2009 dollars, which is approximately $12.00 above the estimated average rate in 2009 for the four primary competitors, and approximately $26.00 above the STR sample of nine Greensboro hotels. We have considered the current economic conditions in the downtown Greensboro hotel market in selecting

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-10

inflation factors to be applied to the positioned base rate throughout the projection period. Based upon the competitive data set forth previously and the projected opening date of January 1, 2012, it is our opinion that the average daily rate likely to be achieved by the Proposed Luxury Hotel Greensboro will be as shown in the table below. We expected the marketwide average rate for the nine hotels included in the STR sample to continue to show contraction of average rate in 2010 as the hotel market hits bottom, before beginning to recover in 2011. Once recovery begins, average rate inflation is expected to grow rapidly between 2011 and 2015, as hotel owners raise rates in an attempt to recover the losses they have incurred since hotel demand began to collapse in the fourth quarter of 2008.
Figure 1-5 HVS Projection of Average Daily Rate Growth for the Greensboro Market and the Proposed Luxury Hotel
2009 — $134.58 147.00 2010 -1.0 % $133.24 145.53 2011 1.0 % $134.57 146.99 2012 4.0 % $139.95 152.86 2013 5.0 % $146.95 160.51 2014 5.0 % $154.30 168.53 2015 4.0 % $160.47 175.27 2016 3.0 % $165.29 180.53

0 Marketwide Average Rate Growth Marketwide Average Rate HVS Projection of ADR

The HVS projections of ADR for the proposed subject hotel are slightly below the projections provided in the Notification of Intent supplied by the development group. Occupancy of the Competition In order to evaluate the reasonableness of the occupancy projected by the developer in its Notification of Intent for the proposed luxury hotel, it is necessary to have some understanding of the concepts of Latent Demand, Unaccommodated Demand, and Induced Demand. Latent Demand reflects potential room night demand that has not been realized by the existing competitive supply of hotel rooms. This type of demand can be divided into unaccommodated demand and induced demand. Unaccommodated Demand refers to individuals who are unable to secure accommodations in the market because all of 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. The

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-11

demand created by the Furniture Market in April and October every year is an excellent example of Unaccommodated Demand. Because there are a limited number of hotel rooms in High Point, Furniture Market attendees are forced to stay in other communities that are farther away from High Point, depending on how far in advance a prospective attendee attempts to reserve a room. If the attendee is unable to reserve a hotel room and cancels plans to attend the show, the demand did not yield any occupied room nights, and is considered to be Unaccommodated 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 therefore would be included in a calculation of Unaccommodated 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 sells out many nights during the year. HVS considers unaccommodated demand to exist in any month where occupancy exceeds 70% and available rooms are sold out. Over the past six years from 2003 through 2009, there have been very few months that hotel occupancy in Greensboro exceeded 70%; the typical exceptions being April and October each year when the High Point Furniture Market is held. Total full-year occupancy between 2003 and 2008 ranged between 57.4% and 63.9%, with an average of 60.6% for the six-year period. Occupancy in 2009 for the ten months through October 31, which included the high-occupancy months of April and October, was 52.4% 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 company headquarters, the expansion of a convention center, or the addition of a professional sports team and ballpark or stadium. In some instances, with Las Vegas being a prime example, the addition of a new hotel with a distinct chain affiliation or unique facilities can induce visitation to the market that might not have occurred otherwise. The addition to downtown Greensboro of the proposed 200- to 206-room luxury hotel is not considered to be significant enough to induce additional demand into the market. The current and historical demand for higher-end hotel rooms is already being accommodated by the existing independent and upper upscale hotels. It is more likely that the proposed hotel will cannibalize existing demand away from other hotels in the market, which will make it far more difficult for these hotels to recover from the current recession. Adding a 200-room hotel to the

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-12

market in 2012 will cause a setback to these hotels just after the recovery is projected to begin in 2011. We have obtained operating data from the same four Greensboro full-service hotels used to analyze the ADR projections previously shown: the DoubleTree Greensboro, the Marriott Greensboro Downtown, the O.Henry Hotel, and the Proximity Hotel. We also have included the aggregate results provided by the STR sample of nine Greensboro hotels, including the four primary competitors listed, shown in the table below.
Figure 1-6 Aggregate Occupancy of Four Primary Competitors and STR Sampled Hotels
2007 Primary Competitors STR Sample 63.4% 59.6% 2008 53.2% 57.4% 2009 48.5% 52.4%

The occupancy achieved by the four primary competitors declined from 63.4% in 2007, to 53.2% in 2008, and 48.5% in 2009. The STR sample of nine competitors achieved occupancy of 59.6% in 2007, 57.4% in 2008, and 52.4% in 2009. The STR sampled hotels held up fairly well in 2008, losing 2.2% in occupancy while average rate increased 0.57%, or $0.69. The full impact of the recession became apparent in 2009, as all of the primary competitors and the STR sample lost occupancy, or, if they managed to increase occupancy, the increase was achieved by discounting room rates. Developer’s Projection of Occupancy The development team for the proposed 200 to 206-room subject hotel has projected occupancy for the first five years of operation, which is assumed to begin on January 1, 2012 when the hotel is projected to open. These projections are set forth in the following table.

Figure 1-7

Developer’s Occupancy Projections

Year 1 2012 Developer's Projection 64%

Year 2 2013 65%

% Increase 1.6%

Year 3 2014 67%

% Increase 3.1%

Year 4 2015 68%

% Increase 1.5%

Year 5 2016 67%

% Increase -1.5%

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-13

HVS Opinion as to Occupancy

Based upon a review of the market dynamics in the proposed subject hotel’s competitive environment, we have forecast growth rates for each market segment. Using the calculated potential demand for the market we have determined accommodated demand for the existing four primary competitors, and assumed the addition of the proposed subject 200-room hotel in 2012. Our calculations consider 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 Greensboro market, including the total number of occupied room nights and any residual unaccommodated demand in the market.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-14

Figure 1-8

Unaccommodated Demand
2012 Commercial Base Demand Unaccommodated Demand Total Demand Growth Rate Meeting and Group Base Demand Unaccommodated Demand Total Demand Growth Rate Leisure Base Demand Total Demand Growth Rate 62,612 636 63,248 4.0 % 50,127 509 50,636 4.0 % 25,139 25,139 4.0 % 2013 65,743 667 66,410 5.0 % 52,633 534 53,168 5.0 % 26,396 26,396 5.0 % 2014 69,030 701 69,731 5.0 % 55,265 561 55,826 5.0 % 27,716 27,716 5.0 % 2015 71,446 725 72,171 3.5 % 57,199 581 57,780 3.5 % 28,686 28,686 3.5 % 2016 73,589 747 74,336 3.0 % 58,915 598 59,513 3.0 % 29,547 29,547 3.0 %

Totals Base Demand 137,878 Unaccommodated Demand 1,144 Total Demand 139,023 less: Residual Demand 1,144 Total Accommodated Demand 137,878 Overall Demand Growth 4.0 % Existing Hotel Supply 734 Proposed Hotels Proposed Luxury Hotel Greensboro ¹ 200 Available Rooms per Night Nights per Year Total Supply Rooms Supply Growth Marketwide Occupancy
¹

144,772 1,202 145,974 1,202 144,772 5.0 % 734 200 340,910 365 934 0.0 % 42.5 %

152,011 1,262 153,273 1,262 152,011 5.0 % 734 200 340,910 365 934 0.0 % 44.6 %

157,331 1,306 158,637 1,306 157,331 3.5 % 734 200 340,910 365 934 0.0 % 46.2 %

162,051 1,345 163,396 1,345 162,051 3.0 % 734 200 340,910 365 934 0.0 % 47.5 %

340,910 365 934 27.2 % 40.4 %

Opening in January 2012 of the 100% competitive, 200-room Proposed Luxury Hotel Greensboro

These room night projections for the downtown Greensboro market area will be used in forecasting the subject property’s occupancy.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-15

Because the supply and demand balance for the competitive market is dynamic, there is a circular relationship between the subject property’s forecasted market share and occupancy levels, based upon its anticipated competitive position within the market. The proposed subject property’s occupancy forecast is set forth in the table on the following page, with the adjusted projected penetration rates used as a basis for calculating the amount of captured market demand. (The concept of penetration as it applies to hotels is explained in an addendum to this letter report).

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-16

Figure 1-9

Forecast of Subject Property’s Occupancy

Market Segment Commercial Demand Market Share Capture Penetration Meeting and Group Demand Market Share Capture Penetration Leisure Demand Market Share Capture Penetration Total Room Nights Captured Available Room Nights Subject Occupancy Marketwide Available Room Nights Fair Share Marketwide Occupied Room Nights Market Share Marketwide Occupancy Total Penetration

2012 62,612 19.7 % 12,331 92 % 50,127 20.7 % 10,393 97 % 25,139 18.8 % 4,728 88 % 27,452 73,000 38 % 340,910 21 % 137,878 20 % 40 % 93 %

2013 65,743 20.4 % 13,405 95 % 52,633 21.1 % 11,093 98 % 26,396 19.7 % 5,198 92 % 29,696 73,000 41 % 340,910 21 % 144,772 21 % 42 % 96 %

2014 69,030 21.1 % 14,548 98 % 55,265 21.4 % 11,834 100 % 27,716 20.6 % 5,699 96 % 32,081 73,000 44 % 340,910 21 % 152,011 21 % 45 % 99 %

2015 71,446 21.4 % 15,299 100 % 57,199 21.4 % 12,248 100 % 28,686 21.4 % 6,143 100 % 33,690 73,000 46 % 340,910 21 % 157,331 21 % 46 % 100 %

2016 73,589 21.4 % 15,758 100 % 58,915 21.4 % 12,616 100 % 29,547 21.4 % 6,327 100 % 34,700 73,000 48 % 340,910 21 % 162,051 21 % 48 % 100 %

The above table shows the occupancy projected for the subject property and the market consisting of the four existing primary competitors for a projection period of five years. We project that the subject property will open with an occupancy rate of 38% in the first year of operation, 2012, and growing to 48% by the fifth year of operation, 2016. It is typical for a new luxury hotel operating in a depressed market to take four to five years to reach a stabilized level of operation. We anticipate that it will take four years for the subject property to penetrate the marketwide occupancy at 100% in 2015.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-17

Comparison of Occupancy Projections

The following table sets forth the developer’s projection of occupancy and the HVS projection of occupancy for a five-year period, commencing with the projected opening of the hotel on January 1, 2012.

Figure 1-10 Comparison of Occupancy Projections Presented by the Developer and Those Projected by HVS

Year 1 2012 Developer's Projection HVS Projection* 64% 38%

Year 2 2013 65% 41%

% Increase 1.6% 8.2%

Year 3 2014 67% 44%

% Increase 3.1% 8.0%

Year 4 2015 68% 46%

% Increase 1.5% 5.0%

Year 5 2016 67% 48%

% Increase -1.5% 3.0%

* HVS has rounded the average occupancy projectons to the nearest whole percentage point, while the % increase is calculated on unrounded numbers.

As shown in the above table, there is a very wide discrepancy between the developer’s projections of occupancy, and the occupancy projected by HVS. We note that the developer may be presenting projections made by the Atlanta office of HVS in early 2008, as well as projections made by at least one other hotel consultant. We have not reviewed the feasibility study prepared in February 2008 by HVS – Atlanta for Mr. Randall Kaplan. We believe that any feasibility study performed prior to the fourth quarter of 2008 can no longer be relied upon as the market for hotel accommodations has deteriorated drastically since that time, and available financing for new hotel projects has disappeared. The major upheaval in the banking industry including the demise of Wall Street banks, specifically Bear Stearns in March 2008 and Lehman Brothers in September 2008, multiplied the severity of the recession that began in December 2007. Any market or feasibility study performed prior to the fourth quarter of 2008 is unlikely to have anticipated the rapid and deep decline in hotel occupancy, average rate, and RevPAR that has actually occurred in 2009 and is forecast for 2010. Hotel industry and banking experts are predicting a record number of hotel foreclosures, bankruptcies, and loan restructurings in 2010 and 2011. As hotel values continue to fall, borrowers will be unable to roll over, or refinance, loans made in 2005, 2006, and 2007, when hotel occupancies and average rates were at an all-time high. Nationally, hotel owners are increasingly having difficulty servicing their hotel debt, and values have fallen 40% to 50%, or more, which leaves hotel asset values well below the level required by banks to refinance an existing loan.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-18

RevPAR of the Competition

RevPAR, which stands for revenue per available room, is calculated by multiplying the occupancy percentage of a hotel by the hotel’s average rate. It is useful as a measure to show the true revenue generating capability of a hotel property, and to compare one hotel to another even though they may not have the same number of rooms, have different occupancy rates, and different average daily rates. For example, a hotel operating at 52% occupancy with a room rate of $150 has a RevPAR of 52% X $150, or $78.00. Despite its high room rate, this hotel is generating less room revenue than a hotel with 70% occupancy and a room rate of $115, which has a RevPAR of 70% X $115, or $80.50. In order to evaluate the reasonableness of the RevPAR projected for the proposed luxury hotel, we have considered operating data from same four Greensboro full-service hotels used previously: the DoubleTree Greensboro, the Marriott Greensboro Downtown, the O.Henry Hotel, and the Proximity Hotel. The following table shows the projected RevPAR for the proposed subject based on the developer’s projection of occupancy and average rate, and the HVS projection of occupancy and average rate.

Figure 1-11 Developer’s RevPAR Projections Compared to HVS RevPAR Projections

Year 1 2012 Developer's Projection HVS Projection $99.71 $57.48

Year 2 2013 $106.33 $65.29

% Increase 6.6% 13.6%

Year 3 2014 $113.98 $74.07

% Increase 7.2% 13.4%

Year 4 2015 $119.16 $80.89

% Increase 4.5% 9.2%

Year 5 2016 $120.92 $85.82

% Increase 1.5% 6.1%

There is a large gap between the developer’s projection of RevPAR and the HVS projection of RevPAR. Even though HVS is projecting ADR to be very similar to the ADR projected by the developer, the difference in occupancy projected by the developer and the occupancy projected by HVS is substantial, resulting in a much lower RevPAR. In 2009 the RevPAR for the four primary competitors averaged $65.31, having fallen -26.5% from $88.88 in 2007, to $75.05 in 2008, and to $65.31 in 2009. The STR sample of nine Greensboro hotels reported average RevPAR of $72.33 in 2007, $70.10 in 2008, and $60.81 year-to-date through October 2009. The subject property’s projected RevPAR in the first year of operation is expected to be lower than the primary competitors as it is at the beginning of its ramp-

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-19

up period, which is expected to take five years before the proposed hotel reaches a stabilized level of operation. HVS Opinion as to RevPAR If average daily rate is kept high, as is projected by the developer and HVS, occupancy will be at the same levels as the primary competitors, and will grow slowly as the subject’s 200 to 206 rooms are absorbed by the market. Based upon the competitive data set forth previously and the projected opening date of January 1, 2012, it is our opinion that the RevPAR likely to be achieved by the Proposed Luxury Hotel Greensboro will be $57.48 in Year 1, growing to $85.82 in Year 5 of the projection period, which is 29.0% lower than the RevPAR projected by the developer. A common industry measurement of food & beverage sales used to compare one hotel to another is the amount of income or expense on a Per Occupied Room basis. This number can be calculated for any income or expense line item on a hotel’s financial statement by dividing the income or expense item by the number of rooms occupied during the period in question. The following table shows the developer’s projection of food & beverage sales per occupied room for the five-year projection period beginning in 2012.

F&B Revenue Per Occupied Room

Figure 1-12 Developer’s Projection of Food & Beverage Revenue Per Occupied Room (POR)
Year 1 2012 Developer's Proj. Occ. Room Nts. 46,720 Developer's Proj. F&B Revenue $4,672,000 Developer's Proj. F&B Rev. POR $100.00 Year 2 2013 47,450 $5,033,971 $106.09 Year 3 2014 48,910 $5,344,528 $109.27 Year 4 2015 49,640 $5,587,026 $112.55 Year 5 2016 48,910 $5,670,009 $115.93

% Increase 1.6% 7.7% 6.1%

% Increase 3.1% 6.2% 3.0%

% Increase 1.5% 4.5% 3.0%

% Increase -1.5% 1.5% 3.0%

Source: Urban Hotel Group, LLC and Elm Street Center, LLC Notification of Intent dated January 11, 2010

Comparable Operating Statements – F&B Revenue Per Occupied Room

The most appropriate method of projecting food & beverage revenue for hotel restaurant facilities in a hotel is to first consider the proposed menu pricing in each outlet, estimate the seat turnover per meal period per day, and multiply the seat turnover by the check average for each meal period or day-part in order to project annual sales in each outlet. In addition, other restaurants in the market, whether in hotels or free-standing, should be surveyed in an attempt to estimate their average check for food & beverage, and the average number of customers served per meal period, per day. Banquet food and beverage revenue is estimated by surveying other banquet facilities in the market, estimating the number and size of parties likely to be

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-20

held at the hotel in a year’s time, and multiplying the anticipated check average by the number of guests served in a year. A simpler method, given the limited information provided in the Notice of Intent, is to research income and expense data for hotels of a similar size with the same or similar brand. Income and expenses are reported as a percentage of revenue, i.e., as a ratio to department or total sales; and on a per occupied room basis, which is calculated by dividing the total income or expense line item by the number of hotel rooms that were actually occupied in the accounting period. We have researched the HVS database for food & beverage revenue as a ratio of total sales, and on a per occupied room basis for comparable full-service hotels. The following tables set forth information on a per occupied room basis for a sample of Westin, Marriott, and a variety of other branded hotels in a size range of 170 to 250 rooms. This operating data is proprietary and confidential. Therefore, we have not identified the specific hotels, but rather grouped them by brand and number of rooms. It is important to note that resort hotels often have higher food and beverage revenues than do hotels located in an urban or suburban market. This is due to the fact that resort hotels cater to corporate groups that use the banquet facilities and restaurants in the hotel in order to keep their groups together while efficiently feeding them and then having them get back to their meetings. Also, conference organizers offer sponsored cocktail parties along with other meals to encourage networking and other business purposes. Resort hotels often serve a captive clientele due to their remote locations and limited choices for dining. Hotels located in cities and well-developed suburban areas often have numerous dining choices in close proximity to the hotel, which allow guests to seek other dining options outside the hotel. The following table provides revenue and expenses for three Westin brand hotels. Comp 1 is located in a resort setting, which is the reason that its food & beverage revenue was reported to be $156.66 per occupied room. The other two Westin properties reported food & beverage revenue of $100.76 and $87.86 per occupied room, which is more typical for hotels located in an urban setting.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-21

Figure 1-13 Comparable Westin Hotel Operating Statements: Amounts Per Occupied Room
Comp 1 Comp 2 Comp 3

Year: 2008/09 2007/08 2006/07 Number of Rooms: 270 to 340 200 to 250 220 to 290 Occupied Rooms: 61,246 49,714 63,353 Days Open: 365 366 365 Occupancy: 56% 60% 68% Average Rate: $165 $152 $178 RevPAR: $92 $91 $121 REVENUE Rooms Food & Beverage Combined Telephone Rental Income Garage/Parking Other Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Garage/Parking Other Operating Departments Other Expenses Total DEPARTMENTAL INCOME OPERATING EXPENSES Administrative & General Marketing Franchise Fee Property Operations & Maintenance Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Equipment Lease Miscellaneous Fixed Expenses Reserve for Replacement Total NET INCOME $164.85 156.66 2.55 0.00 0.00 0.00 17.90 341.96 40.82 106.99 3.09 0.00 0.00 4.90 155.80 186.15 25.70 25.20 0.00 15.70 12.57 79.17 106.99 15.60 91.39 15.30 2.25 0.00 0.00 13.68 31.22 $60.17 $151.51 100.76 2.31 0.00 0.00 7.95 11.51 274.03 42.97 63.52 3.16 0.00 0.00 7.00 116.65 157.38 22.75 24.82 8.53 9.01 17.22 82.33 75.05 8.07 66.98 9.11 2.45 0.00 9.88 10.96 32.41 $34.57 $177.89 87.86 3.52 0.79 7.70 8.49 7.50 285.26 40.55 66.25 2.83 3.52 3.52 0.98 114.12 171.14 25.63 21.70 4.28 11.90 10.53 74.05 97.09 8.56 88.54 2.13 2.87 0.82 0.82 11.41 17.23 $71.31

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-22

We have included a sample of five full-service Marriott brand hotels that bracket the number of rooms proposed for the subject luxury hotel. The combined food & beverage revenue reported by these five hotels ranges from $31.95 to $92.29 per occupied room. The hotels that achieved food & beverage sales between $75.54 and $92.28 per occupied room are located in downtown areas of larger cities, while the hotels with lower food & beverage sales are located in suburban locations with less meeting and banquet space.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-23

Figure 1-14 Comparable Marriott Hotel Operating Statements: Per Occupied Room
Comp 1 Year: 2008/09 Comp 2 2008/09 Comp 3 2008/09 Comp 4 2008/09 Comp 5 2008/09

Number of Rooms: 180 to 240 250 to 310 550 to 680 270 to 340 170 to 220 Occupied Rooms: 50,052 59,166 136,634 84,145 33,485 Days Open: 365 365 366 371 365 Occupancy: 65% 58% 61% 73% 46% Average Rate: $117 $131 $155 $129 $108 RevPAR: REVENUE Rooms Food & Beverage Combined Telephone Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Other Expenses Total DEPARTMENTAL INCOME OPERATING EXPENSES Administrative & General Marketing Franchise Fee Property Operations & Maintenance Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Incentive Management Fee Miscellaneous Fixed Expenses Reserve for Replacement Total NET INCOME $76 $116.73 45.03 1.08 4.41 167.24 26.31 25.76 1.95 0.70 54.72 112.52 14.28 12.30 9.44 5.44 9.97 51.43 61.09 5.85 55.23 8.50 1.10 0.25 0.34 0.00 9.94 $45.29 $76 $131.46 75.54 1.98 1.25 210.22 27.71 42.96 1.55 0.57 72.78 137.44 13.44 14.20 10.99 6.68 6.03 51.34 86.10 7.36 78.74 10.32 1.49 0.00 0.08 0.00 11.88 $66.86 $94 $155.09 80.81 2.44 4.78 243.13 34.50 50.31 2.03 0.36 87.20 155.93 22.30 19.64 0.00 10.47 8.14 60.55 95.38 7.30 88.08 9.48 1.11 12.32 13.52 14.84 38.94 $49.14 $95 $129.34 92.28 1.24 6.57 230.83 29.85 58.23 2.58 0.78 92.92 137.90 24.89 14.99 0.00 10.04 11.53 61.44 76.46 6.93 69.53 6.23 0.77 0.00 1.00 11.54 19.54 $49.99 $50 $107.60 31.95 0.33 3.73 143.62 24.52 14.54 0.45 1.43 40.94 102.67 16.34 3.34 16.13 7.14 12.99 55.94 46.74 4.30 42.44 6.54 0.93 0.00 0.72 5.73 13.92 $28.52

The five comparable hotels in the next table include full-service Sheraton, Sofitel, and Hilton brand properties. Combined food & beverage revenue ranges from a low of $43.18 per occupied room in a suburban hotel, to $96.90

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-24

for a downtown hotel. Four of the five comparables reported food & beverage revenue ranging between $82.88 and $96.90 per occupied room.
Figure 1-15 Comparable 170 to 250-Room Branded Full-Service Hotels: Amounts Per Occupied Room
Comp 1 Comp 2 Comp 3 Comp 4 Comp 5

Year: 2008/09 2008/09 2008/09 2008 2008/09 Number of Rooms: 180 to 230 210 to 270 180 to 230 170 to 220 160 to 210 Occupied Rooms: 53,052 65,571 52,484 49,464 41,315 Days Open: 365 365 365 365 365 Occupancy: 72% 76% 69% 68% 62% $128 $274 $126 $142 $126 Average Rate: $91 $208 $87 $97 $79 RevPAR: REVENUE Rooms Food & Beverage Telephone Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Other Expenses Total DEPARTMENTAL INCOME OPERATING EXPENSES Administrative & General Marketing Franchise Fee Property Operations & Maintenance Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Reserve for Replacement Total NET INCOME $127.74 86.16 1.60 3.79 219.29 25.18 47.05 1.39 1.38 75.00 144.29 16.10 17.85 13.33 7.71 9.18 64.16 80.13 6.48 73.64 6.97 2.41 8.76 21.73 $51.91 $274.01 83.04 0.00 18.94 375.99 68.77 71.05 0.00 11.29 151.10 224.89 27.44 22.16 0.00 14.82 15.08 79.50 145.38 11.29 134.10 19.02 1.85 12.17 38.00 $96.10 $125.92 82.88 1.45 2.61 212.86 34.70 65.32 2.40 1.16 103.57 109.29 20.04 12.67 10.44 14.19 19.74 77.09 32.20 5.16 27.04 9.98 1.30 0.00 11.87 $15.17 $142.31 96.90 0.18 0.26 239.65 29.23 83.70 0.65 0.00 113.58 126.07 26.16 29.01 0.00 7.97 12.01 75.15 50.93 11.04 39.89 6.27 1.29 0.00 7.56 $32.33 $126.23 43.18 0.12 2.18 171.71 26.00 29.82 0.94 1.60 58.36 113.35 18.52 12.66 10.92 11.23 15.03 68.35 45.00 4.26 40.74 4.96 1.38 0.00 6.34 $34.40

While hotel food & beverage revenue is dependent on the market served and the quality of the hotel and its kitchen and dining staff, there is a similarity in

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-25

food & beverage revenue generated among these comparable hotels because hotels with similar quality compete with each other for group & meeting business, as well as local social catering business, and are limited in how much they can charge for food and beverage by the competition in the market. The developer has projected food & beverage revenue to equate to $100 per occupied room in the first projection year, increasing to $115.93 by the fifth year of operation. Whether or not these projections are reasonable and achievable will depend upon the quality of the restaurant(s) and bar(s) located in the hotel, as well as the quality of the catering function, including the banquet space, food, beverage, and service quality, and the degree to which these facilities meet with acceptance by the public. Members of Elm Street Center, LLC have local food & beverage experience by virtue of the Empire Room catering operation that will become part of the proposed hotel. The City should request income and expense data for this facility in order to assess the reasonableness of the developer’s food & beverage revenue and expense projections. The developer’s first year projected revenue on a per occupied room basis is approximately three times greater than the food and beverage sales achieved by the downtown Marriott hotel over the past three years. The operating history of the Empire room is the best indicator of how the proposed hotel’s food and beverage department might perform in the downtown Greensboro market. HVS 2009 U.S. Hotel Valuation Index The HVS 2009 United States Hotel Valuation Index report, published in October 2009, provides historical and projected per-room hotel values for 65 U.S. cities and the United States overall. The purpose of the Hotel Valuation Index (HVI) is to present a general estimate of market value for hotels in the 65 cities tracked by HVS. The HVI was created in 1987 by HVS and is derived from the income capitalization approach used to value hotel real estate. The HVI is developed by utilizing market area data provided by Smith Travel Research (STR) and historical operational information from HVS’s extensive global experience in hotel feasibility studies and valuations. The data are then aggregated to produce pro-forma performance estimates for a typical fullservice hotel in each respective market in the U.S. Based on our experience of real-life hotel financing structures gained from valuing thousands of hotels each year, we then apply appropriate valuation parameters for each market, including loan-to-value ratios, real interest rates, and equity return expectations. Our newly developed refinancing model forms the basis of our estimation of value per room for the HVI markets. These market-specific

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-26

valuation parameters are applied to the net operating income for a typical full-service hotel in each city. Sixty of the 66 markets reviewed (including the United States as a whole) experienced declines in per room values in 2008. While not as drastic as the 2001 change in per-room values, the severity of the current recession upon hotel values is illustrated in the fact that two-thirds of the markets experienced declines in 2007, and 60 markets were projected to decline in 2009, once all data was in. Per-room values for over two-thirds of the markets are expected to continue to decline in 2010. The four years of per-room value declines for over half of all major U.S. markets is unprecedented in the history of the HVI. HVS projects that it will take roughly five years (by 20132014) for values to return to the highs recorded in 2006 and 2007, provided that new hotel supply does not grow faster than 0.9% per year on average over the next six years. The HVI was reset in 2005 since the 2008 version of the index was released. Therefore, a typical U.S. hotel, which was previously indexed 1.000 in 1987, has now been indexed at 1.000 in 2005. The Greensboro market area has had an oversupply of hotels for a number of years. The HVI for Greensboro has been well below the index for the U.S. as a whole for the past five years as illustrated by the following table.
Figure 1-16 Greensboro HVI Compared to U.S. HVI
CAGR* (2005 - 2008) -19.50% -0.50%

2005 Greensboro HVI United States 0.639 1.000

2006 0.769 1.214

2007 0.617 1.154

2008 0.334 0.985

2009 0.180 0.669

* CAGR is the Compounded Annual Growth Rate Source: HVS 2009 United States Hotel Valuation Index

The HVS projection for per-room value in the Greensboro market from 2009 through 2013 is set forth in the following table.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-27

Figure 1-17 Greensboro Per-Room Value as Projected by HVS in the HVI

Proj. Value Per Room Greensboro

2009 $14,849

2010 $530

2011 $4,779

2012 $15,274

2013 $33,150

Source: HVS 2009 United States Hotel Valuation Index

Over the past 15 months, the deepening economic recession has had a profound impact on hotel values. Not only have weakening demand levels contributed to this trend, but the evaporation of credit has also contributed significantly to the decline in hotel real estate values. Generally, hotel values are projected to bottom out in 2010. Based on the economic and financial trends that we have observed, hotel values are expected to recover over a five-year period, if or when earnings have recovered and the credit markets have returned to some semblance of normalcy. Today, there are approximately $40 billion in distressed hotel loans. Capital market participants are expected to either foreclose on such assets or restructure and work out their loan requirements. Considering such factors, savvy investors with access to equity are expected to capitalize on such opportunities and purchase distressed assets with an upside, at significantly discounted prices, well below replacement cost. This possibility has serious implications with regard to any new hotels proposed for the Greensboro market within the next five years. It is likely that hotel buyers will be able to purchase existing hotels at prices well below replacement cost, renovate and rebrand the hotel, and re-open the hotel charging rates well below the level necessary to support new hotel construction. Greensboro already has a good example of this strategy as evidenced by the sale and conversion of the Howard Johnson hotel to a DoubleTree hotel in 2007. The hotel was purchased in May 2005 for a reported $2,850,000. The buyer invested an additional $14,700,000 plus incidental costs for a total investment of approximately $18,580,000, or $106,170 per room for the 175room property. Compare this cost to the projected total project cost of the proposed luxury hotel to be built in downtown Greensboro at $54,486,248, or $264,496 per room for the 206-room hotel, and it is clear that the proposed hotel will not be able to compete at an economically viable level.

Greensboro, NC

HVS Global Hospitality Services

Executive Summary 1-28

There will be more opportunities for smart buyers to buy properties in the Greensboro market at a deep discount and renovate and rebrand them at below replacement cost levels for the next two to three years. Adding a new 206-room luxury or upper upscale hotel to the Greensboro market will be a setback to the four primary competitive hotels we have identified just as they begin to recover average rate, occupancy, and RevPAR in 2011 or 2012.

Greensboro, NC

HVS Global Hospitality Services

Statement of Assumptions and Limiting Conditions 2-1

2. Statement of Assumptions and Limiting Conditions

1. This consulting services letter is set forth as an analysis and opinion letter; this is not a market study, a feasibility study, or an appraisal report. 2. No responsibility is assumed for matters of a legal nature. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would impact the property’s development potential. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials or any form of toxic waste on the project site. The consultants are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. 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. 6. We have made no survey of the site, and we assume no responsibility in connection with such matters. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by W&R Hospitality Services, Inc. are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. 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.

Greensboro, NC

HVS Global Hospitality Services

Statement of Assumptions and Limiting Conditions 2-2

9. We are not required to give testimony or attendance in court or at public hearings by reason of this consulting letter without previous arrangements, and only when our standard per-diem fees and travel costs are paid prior to the appearance. 10. 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. 11. We take no responsibility for any events or circumstances that take place subsequent to the date of our letter report. 12. The quality of a lodging facility's on-site 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. 13. The 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 due to market volatility and economic forces outside the control of the hotel’s management. We do not warrant that our estimates will be attained, but they have been developed on the basis of information obtained during the course of our market research and are intended to reflect the expectations of a typical hotel buyer as of the stated date of this report. 14. This analysis assumes continuation of all provisions of the Internal Revenue Code of 1986, as amended to date. 15. 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. 16. 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

Greensboro, NC

HVS Global Hospitality Services

Statement of Assumptions and Limiting Conditions 2-3

to the terms and conditions set forth in our engagement letter with the client. 17. Evaluating and comprising financial forecasts for hotels is both a science and an art. The forecasts are subjective and may be influenced by our experience and other factors not specifically set forth in this report. 18. This study was prepared by W&R Hospitality Services, Inc.. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of W&R Hospitality Services, Inc. as employees, rather than as individuals.

Greensboro, NC

HVS Global Hospitality Services

Certification 3-1

3. Certification

The undersigned hereby certifies that, to the best of my knowledge and belief: 1. The statements of fact presented in this report are true and correct; 2. The reported market data are limited only by the reported assumptions and limiting conditions; 3. I have no present or prospective interest in the property that is the subject of this letter and no personal interest with respect to the parties involved; 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; 5. My engagement in this assignment was not contingent upon developing or reporting predetermined results; 6. My 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. Richard D. Williams, MAI did not inspect the property described in this report; 8. No one other than the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this report; 9. The reported market data was obtained, 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; 10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and

Greensboro, NC

HVS Global Hospitality Services

Certification 3-2

11. As of the date of this report, Richard D. Williams, MAI has completed the requirements of the continuing education program of the Appraisal Institute.

Richard D. Williams, MAI Managing Director W&R Hospitality Services, Inc. dba HVS Global Hospitality Services

Greensboro, NC

HVS Global Hospitality Services

Penetration Explanation 1

Penetration Explanation

Let us illustrate the penetration adjustment with an example. A market has three existing hotels with the following operating statistics:
Base-Year Occupancy and Penetration Levels
Number of Rooms 100 125 200 425 Meeting and Group 20 % 10 60 38 %

Property Hotel A Hotel B Hotel C Totals/Average

Fair Share 23.5 % 29.4 47.1 100.0 %

Commercial 60 % 70 30 47 %

Leisure 20 % 20 10 15 %

Occupancy 75.0 % 65.0 80.0 74.4 %

Penetration 100.8 % 87.4 107.5 100.0 %

Based upon each hotel’s room count, market segmentation, and annual occupancy, the annual number of room nights accommodated in the market from each market segment can be quantified, as set forth below.
Market-wide Room Night Demand
Annual Room Night Demand 54,704 43,481 17,246 115,431

Market Segment Commercial Meeting and Group Leisure Total

Percentage of Total 47.4 % 37.7 14.9 100.0 %

The following discussion will be based upon an analysis of the commercial market segment. The same methodology is applied for each market segment to derive an estimate of a hotel’s overall occupancy. The table below sets forth

Greensboro, NC

HVS Global Hospitality Services

Penetration Explanation 2

the commercial demand accommodated by each hotel. Each hotel’s commercial penetration factor is computed by: 1) calculating the hotel’s market share % of commercial demand (commercial room nights accommodated by subject hotel divided by total commercial room nights accommodated by all hotels) and 2) dividing the hotel’s commercial market share % by the hotel’s fair share %. The following table sets forth each hotel’s fair share, commercial market share, and commercial penetration factor.
Commercial Segment Penetration Factors
Number of Rooms 100 125 200 425 Commercial Capture 16,425 20,759 17,520 54,704 Commercial Market Share 30.0 % 37.9 32.0 100.0 % Commercial Penetration 127.6 % 129.0 68.1 100.0 %

Property Hotel A Hotel B Hotel C Totals/Average

Fair Share 23.5 % 29.4 47.1 100.0 %

If a new 100-room hotel enters the market, the fair share of each hotel changes due to the new denominator, which has increased by the 100 rooms that have been added to the market.
Commercial Segment Fair Share
Number of Rooms 100 125 200 100 525

Property Hotel A Hotel B Hotel C New Hotel Total

Fair Share 19.0 % 23.8 38.1 19.0 100.0 %

The new hotel’s penetration factor is projected for its first year of operation. It is estimated that the hotel will capture (penetrate) only 85% of its fair share as it establishes itself in the market. The new hotel’s market share and room

Greensboro, NC

HVS Global Hospitality Services

Penetration Explanation 3

night capture can be calculated based upon the hotel’s estimated penetration factor. When the market share of the existing hotels and that of the new hotel are added up, they no longer equal 100% because of the new hotel’s entry into the market. The market share of each hotel must be adjusted to reflect the change in the denominator that comprises the sum of each hotel’s market share. This adjustment can be mathematically calculated by dividing each hotel’s market share percentages by the new denominator of 97.1%. The resulting calculations reflect each hotel’s new adjusted market share. The sum of the adjusted market shares equals 100%, indicating that the adjustment has been successfully completed. Once the market shares have been calculated, the penetration factors can be recalculated (adjusted market share divided by fair share) to derive the adjusted penetration factors based upon the new hotel’s entry into the market. Note that each existing hotel’s penetration factor actually increases because the new hotel is capturing (penetrating) less than its fair share of demand.
Commercial Segment Projections (Year 1)
Hist./Proj. Penetration Factor 127.6 % 129.0 68.1 85.0 Adjusted Market Share 25.0 % 31.6 26.7 16.7 100.0 % Adjusted Penetration Factor 131.4 % 132.8 70.1 87.5

Property Hotel A Hotel B Hotel C New Hotel Totals/Average

Number of Rooms 100 125 200 100 525

Fair Share 19.0 % 23.8 38.1 19.0 100.0 %

Hist./Proj. Market Share 24.3 % 30.7 25.9 16.2 97.1 %

Projected Capture 13,688 17,299 14,600 9,117 54,704

In its second year of operation, the new hotel is projected to penetrate above its fair share of demand. A penetration rate of 130% has been chosen, as the new hotel is expected to perform at a level commensurate with Hotel A and Hotel B in this market segment. The same calculations are performed to adjust market share and penetration factors. Note that now the penetration factors of the existing hotels decline below their original penetration rates because of the new hotel’s above-market penetration. Also note that after the market share adjustment, the new hotel retains a penetration rate commensurate with Hotel A and Hotel B, though the penetration rates of all three hotels have declined by approximately nine percentage points due to the reapportionment of demand.

Greensboro, NC

HVS Global Hospitality Services

Penetration Explanation 4

Once the market shares of each hotel have been adjusted to reflect the entry of the new hotel into the market, the commercial room nights captured by each hotel may be projected by multiplying the hotel’s market share percentage by the total commercial room-night demand. This calculation is shown below.
Commercial Segment Projections (Year 2)
Hist./Proj. Penetration Factor 131.4 % 132.8 70.1 130.0 Adjusted Market Share 23.1 % 29.3 24.7 22.9 100.0 % Adjusted Penetration Factor 121.5 % 122.9 64.8 120.3

Property Hotel A Hotel B Hotel C New Hotel Totals/Average

Number of Rooms 100 125 200 100 525

Fair Share 19.0 % 23.8 38.1 19.0 100.0 %

Hist./Proj. Market Share 25.0 % 31.6 26.7 24.8 108.1 %

Projected Capture 12,662 16,004 13,507 12,531 54,704

Greensboro, NC

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

HVS Global Hospitality Services 7883 S. Locust Court Centennial, Colorado 80112 303-771-4104 FAX 303-290-6533

Richard D. Williams, MAI
Employment September 1993 - Present HVS GLOBAL HOSPITALITY SERVICES HVS FOOD & BEVERAGE SERVICES Divisions of W&R Hospitality Services, Inc. President Centennial, Colorado ARBITRATOR – PROPERTY TAX Arapahoe, Boulder, Denver, Douglas, El Paso and Jefferson Counties R.D. WILLIAMS & ASSOCIATES - Owner Restaurant & Hotel Appraisal Centennial, Colorado COLDWELL BANKER COMMERCIAL REAL ESTATE SERVICES Broker Licensed in Colorado Denver, Colorado CAFÉ KANDAHAR Managing Partner Littleton, Colorado BUCKHORN EXCHANGE RESTAURANT Managing Partner Denver, Colorado CHATEAU PYRENEES RESTAURANT Executive Chef Englewood, Colorado CAFÉ PROMENADE Sous Chef Denver, Colorado R.D. WILLIAMS CATERING, INC. President Denver, Colorado

October 1993 - Present

April 1989 – Present

January 1984 – April 1989

October 1982 – June 1983

October 1978 – October 1982

September 1976 – October 1978

February 1970 – September 1976

April 1973 – April 1984

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

Education and Other Training

CORNELL UNIVERSITY Bachelor of Science - Hotel & Restaurant Administration (1970) UNIVERSITY OF COLORADO – DENVER Post Graduate Courses Completed: BUSN 6000 Accounting for Managers BUSN 6020 Quantitative Business Analysis BUSN 6040 Human Behavior in Organizations BUSN 6060 Marketing Management BUSN 6080 Management of Operations BUSN 6100 Management of Information Systems APPRAISAL INSTITUTE Member of the Appraisal Institute (MAI) Classes Completed: Course 1A1 – Real Estate Appraisal Principles Course 1A2 – Basic Valuation Procedures Course 1BA – Capitalization Theory and Techniques, Part A Course 1BB – Capitalization Theory and Techniques, Part B Course 540 – Report Writing and Valuation Analysis Course 550 – Advanced Applications Course SPP – Standards of Professional Practice, Part A & B Course 410 – Standards of Professional Practice, Part A Course 420 – Standards of Professional Practice, Part B Course 520 – Highest and Best Use, and Market Analysis Course 430 – Standards of Professional Practice Part C Course 800 – Separating Real & Personal Property from Intangible Business Assets Course 400 – USPAP Update 2003, 2005 & 2007 Course 510 – Advanced Income Capitalization Course 310 – Basic Income Capitalization An Introduction to Valuing Green Buildings, 2008 Case Studies in Partnership and Common Tenancy Valuation, 2008 Appraisal Curriculum Overview (2-Day General), 2009

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

General Appraiser Certifications Held

Colorado and New Mexico Licensed Real Estate Broker – Colorado Appraisal Institute – Member (MAI) Cornell Hotel Society, Rocky Mountain Chapter Board of Directors, 1982 to present Cornell Club of Colorado President, 1986 to 1994 Board of Directors, 1986 to 1998 Colorado Restaurant Association Culinary Advisor, American Express Openforum.com, 2008 Hyatt Mountain Lodge Board of Directors, 2008 to present

Memberships and Affiliations

Ownership Interests

BUCKHORN EXCHANGE RESTAURANT Denver, Colorado W&R HOSPITALITY SERVICES, INC. Centennial, Colorado R. D. WILLIAMS & ASSOCIATES Centennial, Colorado Stuck on Cooking, Children’s Cookbook Co-Author, 1990 Real Estate Workouts & Asset Management, “Arbitration: A Better Way to Lower the Property Tax of Your Hospitality Property,” April 1994 HVS Food & Beverage Hospitality Report “Meeting the Challenges of a Slowing Economy,” October 2001 HVS Food & Beverage Hospitality Report “Five Common Mistakes in Valuing a Hotel or Restaurant for Property Tax Purposes,” April 15, 2002 HVS Food & Beverage Hospitality Report “What is My Restaurant Business Worth? Part 1 and Part II,” June & July, 2002 The Real Estate Finance Journal, Fall 2002 “What is a Restaurant Business Worth?” Mortgage and Real Estate Report, September 1, 2002 “Restaurants: Valuing the Real Estate”

Publications and Awards

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

Real Estate Monitor, Summer 2002 “Valuing Restaurant Real Estate” HVS Food & Beverage Hospitality Report “Technology Issues In Restaurants – Summary of FS/TEC 2002 Presentation,” November 2002 HVS Food & Beverage Hospitality Report “Getting Your Restaurant Ready for the Holiday Season,” November 2002 HVS Property Tax Services Hospitality Report “How to Lower the Property Taxes on Your Hotel or Restaurant,” January 2003 HVS Food & Beverage Hospitality Report “When Do I Need An Appraisal of My Restaurant’s Real Estate?,” May 2004 HVS International Global Hospitality Report “Restaurant Rent: How Much is Too Much?,” October 2006 HVS Global Hospitality Report “Why New Restaurants Fail”, February 2008 OpenForum.com “What’s Hot in the Restaurant Business”, October 2008 Northwest Stir “2009 Restaurant Trends,” January 2009 Florida Restaurant & Lodging “Future-Proof Your Business,” January 2009 Outstanding Achievement in Real Estate Marketing, Top Producer for Coldwell Banker’s Downtown Denver Retail Department, 1986 Speaking Engagements The Lodging Conference at the Biltmore, Scottsdale, AZ, September 1999, “Repositioning Your Hotel Restaurant” Hotel Design 2000 Expo & Conference, Las Vegas, NV, April 2000, Destination Dining Panel Resort Forum, Newport Beach, CA, June 2000, Developing, Managing and Marketing All Season Resorts – “Determining the Highest and Best Use of Space at Your Property” Hotel Food & Beverage Educational Forum 2002, Washington, D.C., February 2002, Keynote Speaker “10 Ways to Meet the Challenges of a Slowing Economy” FS/TEC 2002, Orlando, FL, October 2002, “Food & Beverage Cost Control and Financial Management Systems”

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

Colorado Chapter of the Appraisal Institute – Copper Mountain, Colorado, September 2003, “Food for Thought - Restaurant Appraisal Methodology & Management Issues” University of Colorado School of Business, Boulder, Colorado, October 2003 and March 2004, Guest lecturer: “Food & Beverage Issues in the Hotel Business” University of Denver School of Hotel Restaurant & Tourism Management, Denver, Colorado, April 2005, Guest Lecturer: “Hotel & Restaurant Appraisal” Hotel Valuation: The Players; What, Why & How They Do It!, Atlantic City, New Jersey, November 2006, Speaker Colorado Chapter of the Appraisal Institute, Breckenridge, Colorado, September 2007, Moderator: “Tourism = Value” University of Denver School of Hotel Restaurant & Tourism Management, Denver, Colorado, May 2008, Guest Lecturer: “Restaurant Appraisal” CNN, December 2008, “How the Tables Have Turned” Colorado Art Institute, Denver, Colorado, February 2009, Guest Lecturer: “Restaurant Entrepreneurship”

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

Examples of Corporate and Institutional Clients Served Arapahoe County, Colorado Baker & Hostetler LLP Banff Centre BB&T Beneficial Savings Bank Capmark Finance, Inc. Chart House, Inc. Cherokee County, Georgia Cipriani USA, Inc. Citicorp City and County of Denver City of Salem, Virginia Columbia Sussex Corporation Crescent Real Estate Deutsche Bank Douglas County, Colorado El Paso County, Colorado Equity Inns Evans & Petree Faulkner USA Firstar Bank GE Real Estate GMAC Capital Corporation GMAC Commercial Mortgage Harp Group Hilton Hotels Corporation Host Marriott Jefferson County, Colorado M Booth & Associates Marriott International MeriStar Hospitality Corporation MONY Capital Services NC State University North Fork Bank Novack and Macey Paragon Development Piper Jaffray & Co. Quaintance Weaver Restaurants and Hotels Shaner Hotel Group Shinsei Bank Shreck Brignone Southeast Restaurant Properties

South Suburban Park & Recreation District SpiritBank of Tulsa Starwood Resorts & Hotels Worldwide Stonebridge Companies Suitt Construction Texas Tech University UBS AG University of Arizona Science & Technology Park University of Arkansas University of Delaware University of Missouri-Kansas City University of Texas - Austin US Bank Vail Resorts Village of Wheeling, Illinois Young, de Normandie & Oscarsson, P.C. Wells Fargo – American Commercial Credit White Lodging Services Corp. Willow Grove Bank Xanterra Parks & Resorts Examples of Properties Appraised or Evaluated

& Conference Center, Tucson Proposed Homewood Suites, Tucson

ARKANSAS
Proposed Conversion of Carnall Hall to Hotel Use, University of Arkansas, Fayetteville Green Leaf Hotel, Little Rock

CALIFORNIA
Embassy Suites, Los Angeles International Airport Radisson San Francisco Airport at Sierra Point, Brisbane Radisson LAX, Los Angeles

COLORADO
Best Western Country Villa Inn, Wheat Ridge Best Western Inn at Pueblo West, Pueblo Brown Palace Hotel, Denver Burnsley Hotel, Denver Comfort Inn, Denver Days Inn, Ft. Morgan Fairfield Inn by Marriott, Denver Hampton Inn, Aurora Proposed Hampton Inn, Loveland Proposed Hampton Inn, Louisville Hampton Inn, Englewood Hampton Inn, Pueblo Hampton Inn Southwest, Lakewood Proposed Holiday Inn Express, Boulder Holiday Inn Southeast, Denver Holiday Inn, Ft. Collins Lodge at Vail, Vail The Lodge & Spa at Cordillera, Edwards Proposed Longmont Hotel, Longmont

ARIZONA
Proposed Hampton Inn & Suites, Goodyear Holiday Inn, Kingman Proposed Clarion Suites Hotel, Scottsdale Holiday Inn Express, Tucson Proposed Hotel, Conference Center & Golf Course, University of Arizona Science & Technology Park, Tucson Windmill Inn Suites, Chandler Windmill Inn Suites, Tucson Windmill Inn Suites, Surprise Proposed Hawthorn Suites Hotel

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

COLORADO (CONTINUED )
Marriott Hotel, Ft. Collins Ramada Inn, Ft. Collins Marriott Mark Resort, Vail Oxford Alexis Hotel, Denver Red Lion Inn, Durango Proposed Sleep Inn, Durango Super 8 Motel, Glenwood Springs Super 8 Motel, Wheat Ridge Tabor Lake Inn, Wheat Ridge Vail Athletic Club, Vail Warwick Hotel, Denver Winchester Inn, Ft. Collins Winter Park Ski Resort, Winter Park Radisson Inn - North, Colorado Springs Proposed Comfort Inn, Colorado Springs Proposed Hampton Inn & Suites, Pueblo Proposed Holiday Inn Express, Glenwood Springs Proposed Comfort Inn & Suites Glenwood Springs Hyatt Regency Beaver Creek, Avon Drury Inn, Colorado Springs Proposed Bradford Homesuites, Westminster Proposed Bradford Homesuites, Colorado Springs Proposed AmeriSuites, Colorado Springs Proposed Homewood Suites, Colorado Springs Proposed Comfort Suites, Highlands Ranch Proposed Fairfield Inn by Marriott Highlands Ranch West Vail Lodge, West Vail Executive Tower Inn, Denver Howard Johnson Lodge, Denver Lazy L Motel, Boulder Proposed Lakeshore at Keystone, Keystone Hampton Inn Denver West, Golden

St. Regis Resort, Aspen Boulder Outlook Hotel & Suites Boulder Two Keystone Sites, Dillon Steamboat Sheraton Hotel & Golf Course, Ski Time Square, Thunderhead Lodge and Condominiums, Steamboat Springs Four Points by Sheraton Denver Southeast, Denver Galatyn Lodge, Vail

Lombard Proposed Kaskaskia Hotel, LaSalle Proposed Westin-North Shore Hotel with Signature Restaurant, Wheeling Proposed Hotels, Maywood InterContinental Chicago O’Hare, Rosemont

INDIANA
Proposed Fairfield Inn by Marriott, Mishawaka Proposed Courtyard by Marriott, South Bend

DELAWARE
Proposed Courtyard by Marriott, University of Delaware, Newark

IOWA
Courtyard by Marriott, Clive Hilton Hotel, Sioux City

FLORIDA
Residence Inn by Marriott, Miami Holiday Inn & Marina, Sarasota Proposed Residence Inn by Marriott, Naples Tiffany House Assisted Living, Ft. Lauderdale Proposed Focused-Service Hotel, Banquet Facility & Conference Center, Fort Myers Gaylord Palms Hotel & Convention Center, Kissimmee

KENTUCKY
Proposed Trailhead Inn, Shepherdsville

LOUISIANA
Courtyard by Marriott, Baton Rouge Proposed Carter Plantation Hotel & Conference Center, Springfield Proposed Staybridge Suites at Southgate, Baton Rouge Proposed Holiday Inn & Suites, Lake Charles Proposed Candlewood Suites, Lake Charles

GEORGIA
Proposed Cherokee County Hotel, Canton

HAWAII
Proposed Courtyard by Marriott, Honolulu

MARYLAND
Super 8, College Park Super 8, Lexington Park Holiday Inn – Inner Harbor, Baltimore Holiday Inn North, Glen Burnie

ILLINOIS
Proposed Hotel & Conference Center with Two Restaurants,

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

MARYLAND (CONTINUED )
Holiday Inn, Belmont Holiday Inn, Towson Holiday Inn, Silver Spring Town Center Hotel, Silver Spring Holiday Inn, Frederick Proposed Radisson Hotel & Waterpark, Linthicum Heights Gaylord National Resort & Convention Center, National Harbor

NEW JERSEY
Proposed Bradford Homesuites, Secaucus Howard Johnson Inn, Atlantic City

NEW MEXICO
AmeriSuites, Albuquerque Hampton Inn, Las Cruces Hilton Garden Inn, Rio Rancho Marriott Hotel, Albuquerque Proposed Convention Center Hotel, Albuquerque Proposed Hilton Garden Inn, Albuquerque Proposed Country Inn & Suites, Albuquerque Rancho Encantado, Santa Fe Residence Inn by Marriott, Santa Fe Proposed Hilton Garden Inn, Roswell Proposed Marriott Resort Hotel & Spa, Santa Fe Proposed Rio Rancho Hotel, Rio Rancho Proposed Resort Hotel, Taos Ski Valley Proposed Residential Village, Taos Ski Valley

Howard Johnson, Statesville Hampton Inn, Statesville Proposed Conference Center Hotel and Golf Course, NCSU, Raleigh Proposed Proximity Hotel, Greensboro O.Henry Hotel, Greensboro Proposed 21C Museum Hotel, Durham

OHIO
Mentor Country Inn, Mentor Holiday Inn, Dayton Holiday Inn, Lima Holiday Inn, Columbus Proposed 21c Hotel, Cincinnati

MASSACHUSETTS
Regal Bostonian Hotel, Boston
Super 8, Lexington Park

MICHIGAN
Carlton Lodge, Benton Harbor Carlton Lodge, Goshen

OKLAHOMA
Howard Johnson Inn, Tulsa Ramada Inn, Norman

MISSOURI
Regency Inn, Columbia Proposed University of MissouriKansas City Hotel, Kansas City

PENNSYLVANIA
Normandy Farm Hotel and Conference Center, Blue Bell

NEBRASKA
Proposed Hampton Inn & Suites, Grand Island

SOUTH CAROLINA
Days Inn, Myrtle Beach Lodge Alley Inn, Charleston (Timeshare) Shore Crest II, Myrtle Beach (Timeshare) Ramada Plaza, Fort Mill (Bankruptcy) Proposed Holiday Inn & Waterpark, Myrtle Beach

NEW YORK
The Regent Wall Street, New York City

NEVADA
Proposed Hampton Inn, Las Vegas Proposed Embassy Suites, Las Vegas Proposed Residence Inn by Marriott, Las Vegas Comfort Inn, North Las Vegas Westgate Planet Hollywood, Las Vegas

NORTH CAROLINA
Holiday Inn, Dortches Sheraton Inn, Charlotte Holiday Inn Select, Winston-Salem Proposed Comfort Suites, WinstonSalem Comfort Inn, Buxton (Cape Hatteras) Holiday Inn, Statesville

SOUTH DAKOTA
Radisson Encore Hotel, Sioux Falls Proposed Hotel & Conference Center, Sioux Falls

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

TENNESSEE
Holiday Inn – Airport, Memphis Proposed Fairfield Inn by Marriott, Memphis French Quarter Hotel, Memphis Hampton Inn - East, Memphis Howard Johnson Plaza, Memphis AmeriSuites, Cordoba Embassy Suites, East Memphis Homewood Suites, East Memphis Homewood Suites, Germantown Embassy Suites at Vanderbilt, Nashville Marriott Nashville Airport, Nashville SpringHill Suites Nashville Airport, Nashville

Proposed Courtyard by Marriott, Addison Proposed Texas Tech University Campus Hotel and Conference Center, Lubbock Hampton Inn, Lubbock Courtyard by Marriott, Lubbock Fairfield Inn by Marriott, Lubbock Proposed 21C Museum Hotel, Austin Proposed Westin @ Domain, Austin

Proposed Focused-Service Hotel, Salem

WASHINGTON
Proposed Fair Haven Inn, Bellingham Proposed Westin Hotel, Bellevue Summerfield Suites, Seattle

WASHINGTON, D.C.
Washington Hilton & Towers

VIRGINIA
Comfort Inn, Virginia Beach Courtyard by Marriott, Hampton Fairfield Inn by Marriott, Hampton Holiday Inn, Covington Holiday Inn Executive Center, Virginia Beach Holiday Inn, Lexington Holiday Inn, Marion Holiday Inn, Salem Sheraton Inn, Roanoke Super 8, Culpeper Super 8, Fredericksberg Super 8, Tappahannock Holiday Inn, Chesapeake Courtyard by Marriott, Richmond Quality Inn, Richmond Holiday Inn Surfside, Virginia Beach Courtyard by Marriott, Virginia Beach Fairfield Inn by Marriott, Virginia Beach Clarion Hotel, Virginia Beach Comfort Inn, Tysons Corner (Vienna) Proposed Courtyard by Marriott, Tysons Corner Proposed Homewood Suites, Alexandria Proposed Aloft Hotel, Chantilly Proposed Comfort Suites, Salem

WISCONSIN
Comfort Suites, Pewaukee

TEXAS
Proposed Residence Inn by Marriott, Brownsville Proposed Courtyard by Marriott, Brownsville La Quinta Inn, Houston Proposed Residence Inn by Marriott, Irving Proposed Courtyard by Marriott, San Antonio Proposed Fairfield Inn by Marriott, Austin Holiday Inn South, Austin Proposed Bradford Homesuites, Austin Proposed Conference Hotel – University of Texas, Austin Proposed Fairfield Inn by Marriott, San Antonio Residence Inn by Marriott, Lubbock Proposed Residence Inn by Marriott, Plano Proposed Courtyard by Marriott, Plano Proposed Marriott Suites Hotel, Dallas Market Center

International
ARGENTINA
Market Survey, Buenos Aires

BRAZIL
Market Survey, São Paul Market Survey, Rio de Janeiro Market Survey, Belo Horizonte

MEXICO
Camino Real, Mazatlan Howard Johnson, San José del Cabo, Baja California Sur Proposed Hilton Cabo Real, Los Cabos, Baja California Sur Proposed Boutique Hotel, Cabo San Lucas, Baja California Sur Proposed Condo-Hotel, Cabo San Lucas, Baja California Sur Vacant Land, San José del Cabo, Baja California Sur

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

ITALY
Proposed Hotel Cipriani, Palermo, Sicily

TURKS & CAICOS ISLANDS
Proposed Third Turtle Club CondoHotel, Providenciales

URUGUAY
Market Survey, Punta del Esté

Food and Beverage Consulting & Restaurant Appraisal
ARKANSAS
Proposed Ella’s Restaurant, University of Arkansas, Fayetteville

Lone Tree Golf Club and Hotel, Lone Tree Embassy Suites Downtown, Denver Spencer’s Restaurant, Beaver Run Resort, Breckenridge Tivoli Deer Restaurant, Kittridge Wendy’s Restaurant, Glenwood Springs Wendy’s Restaurant, Golden Wendy’s Restaurant, Silverthorne Char’s Restaurant, Aspen Stuart Anderson’s Black Angus Restaurant, Lone Tree Proposed Hilton Garden Inn, Denver Arrowhead Golf Club, Littleton Park Hill Golf Club, Denver Silver Creek Restaurant, Granby Flatirons Golf Course, Boulder

CONNECTICUT
Burning Tree Country Club, Greenwich Avon Old Farms Inn, Avon

South Beach, Miami Beach Bennigan’s Restaurant, Bradenton Proposed Bennigan’s Restaurant, Naples Popeyes Chicken & Biscuits, Spring Hill Proposed Fairwind Restaurant & Bar, South Beach, Miami Beach Popeyes Chicken & Biscuits, New Port Richey Proposed Carrabba’s Italian Grill Restaurant, Miami Beach Popeyes Chicken & Biscuits, Holiday Islander Beach Club, New Smyrna Beach Proposed Landmark Entertainment Facility, Ft. Lauderdale Proposed Cipriani Banquet Facility and Hotel F&B Facilities, Miami Beach Proposed Banquet Facility & Conference Center, Fort Myers Big Chef, Holiday

CALIFORNIA
Chart House Restaurant – San Diego Rowing Club Sea World, San Diego - Ballroom Expansion Market Study Tazzina Bistro, Woodland

DELAWARE
Christiana Hilton, Newark

ILLINOIS
Illinois Machine Shed, Rockford Planted Earth Café, Moline Thunder Bay Grille, Rockford Proposed Gibson’s Bar & Steakhouse, Lombard Proposed Renovation of Kaskaskia Hotel & Banquet Facility, La Salle Thunder Bay Grille, Pewaukee Wisconsin Machine Proposed Hugo’s Frog Bar & Fish House, Wheeling Proposed Restaurant, Rockford Proposed Wildfire Grill, Chicago

FLORIDA
Walt Disney World, Orlando Proposed Shooters Waterfront Café U.S.A., Sarasota Popeyes Chicken & Biscuits, Fort Myers Popeyes Chicken & Biscuits Palm Beach Blvd., Fort Myers Popeyes Chicken & Biscuits, Clearwater Popeyes Chicken & Biscuits, North Fort Myers Popeyes Chicken & Biscuits, Tampa The Clevelander Restaurant & Bar,

COLORADO
Beaver Run Resort, Breckenridge Jackson’s Hole Sports Grills, Denver Tivoli Mall Student Union, Denver Brittany Hill Restaurant, Denver Denver Athletic Club, Denver El Rancho Restaurant, El Rancho South Suburban Park and Recreation Golf Course Restaurant, Centennial

IOWA
Iowa Machine Shed, Davenport Iowa Machine Shed, Urbandale Thunder Bay Grille, Davenport

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

KANSAS
Kansas Machine Shed, Olathe

KENTUCKY
Proposed Trailhead Restaurant & Music Hall, Clermont

MICHIGAN
Quality Inn and Convention Center, Coldwater Proposed Dining Club, Grand Rapids

Palace, Plainview Cipriani 42nd Street, New York City Proposed Trump on the Ocean Banquet/Catering Facility, Wantagh Crest Hollow Country Club, Woodbury Proposed Williamsburg Hotel Restaurants, Bars, Museum, and Club, Brooklyn Proposed Restaurant, Saratoga Springs

UTAH
Proposed Hotel & Convention Center, Logan

VIRGINIA

Ramada Inn & Convention Center, Lynchburg

WASHINGTON
Yakima Grill, Seattle

NORTH CAROLINA
O. Henry Hotel, Greensboro Lone Star Steakhouse, WinstonSalem Proposed Proof Restaurant, Durham

WISCONSIN

NEVADA
Boison’s Restaurant, Las Vegas

Thunder Bay Grille, Pewaukee Wisconsin Machine Shed, Pewaukee

WYOMING
Yellowstone National Park Restaurants

NEW MEXICO
Radisson Picacho Hotel, Santa Fe Proposed Damon’s, Las Cruces Proposed Denny’s, Las Cruces Proposed KFC/Long John Silver’s, Santa Rosa

OKLAHOMA
Popeyes Chicken & Biscuits, Tulsa Popeyes Chicken & Biscuits Muskogee

RESTAURANT PORTFOLIOS
90 Restaurants on La Quinta Outparcels 78 Restaurants on La Quinta Outparcels

NEW YORK
Cipriani International – Rainbow Room, New York City Buffalo Hilton Hotel, Buffalo J.G. Melon Restaurant, New York City The Castle at Tarrytown and Equus Restaurant, Tarrytown Barneys New York/Pierre Hotel, New York City Cipriani 55 Wall Street, New York City Proposed Restaurant, Newburgh Former Chi Chi’s Restaurant, Johnson City NROTB Teletheater and Race

OREGON
Proposed Restaurant & Gift Shop, Crater Lake National Park

INTERNATIONAL
Market & Feasibility Study for a Proposed Planet Hollywood, Kuwait City, Kuwait Proposed Enoch Cree Restaurants & Food Court, Edmonton, Alberta, Canada Fish House in Stanley Park, Vancouver, British Columbia, Canada The Cannery Seafood House, Vancouver, British Columbia, Canada The Banff Centre, Banff, Alberta,

PENNSYLVANIA
Normandy Farm Restaurant, Conference Center, and Banquet Facility, Blue Bell

TEXAS
Proposed Restaurant Development, Corpus Christi Proposed Proof Restaurant, Austin

HVS, Centennial, Colorado

Qualifications of Richard D. Williams, MAI

Canada Restaurant Research, India Hotel Food & Beverage Consulting, Dubai

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