HVS Combined Report - Hotel and Convention Center Studies - Cedar Rapids IA 01 27 2011

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MEMORANDUM
To: From: Re:
111 N. Wabash, Suite 1717 Chicago, Illinois 60602 Phone (312) 526-3885 Fax (213) 285-4958 Email: [email protected] www.hvs.com New York San Francisco Boulder Denver Boston Miami Dallas Chicago Washington, DC Newport, RI Atlanta Mexico City Vancouver Toronto London Madrid Athens Dubai Moscow Beijing New Delhi Mumbai Singapore Hong Kong São Paulo Buenos Aires Lima Shanghai Bahamas

John Frew Hans Detlefsen HVS Global Hospitality Services Summary of Hotel and Convention Center Studies January 27th, 2011

Date:

_____________________________________________________

Dear Mr. Frew, At your request, we are pleased to summarize the findings of two HVS studies: (1) the Hotel Study and (2) the Convention Center Study, both pertaining to developments in downtown Cedar Rapids, Iowa. As we discussed, we assume the Crowne Plaza Five Seasons hotel will undergo a ±$21 million renovation to become an upperupscale, full-service convention hotel with branding as a Sheraton or a brand of similar quality. We also assume the development of a ±$67 million convention center attached to the hotel. We assume a single operator will manage both the hotel and convention center complex, which includes dedicated banquet and exhibition spaces. For planning purposes, we also show assumed operating revenues and expenses associated with the U.S. Cellular Center, which is the stand-alone arena and its associated auxiliary meeting space. The following table shows our original forecast of combined financial operations for the renovated hotel and convention center, discussed in greater detail in the attached Hotel Study.

Table 1 - Detailed Forecast of Income and Expense (from Original Hotel Study in October 2010)
Number of Rooms: Occupancy: Average Rate: RevPAR: Days Open: Occupied Rooms: REVENUE Rooms $2,969 70.8 % $10,796 $74.69 Food 928 22.1 3,375 23.35 Beverage 139 3.3 505 3.49 Telephone 4 0.1 16 0.11 Convention Center** 0 0.0 0 0.00 Other Income 152 3.6 552 3.82 Total Revenues 4,192 100.0 15,243 105.46 DEPARTMENTAL EXPENSES * Rooms 1,394 46.9 5,068 35.07 Food & Beverage 1,218 114.1 4,427 30.63 Telephone 19 431.1 68 0.47 Convention Center** 0 0.0 0 0.00 Other Expenses 86 56.6 312 2.16 Total 2,716 64.8 9,876 68.33 DEPARTMENTAL INCOME 1,476 35.2 5,367 37.13 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 596 14.2 2,168 15.00 Marketing 769 18.3 2,795 19.33 Franchise Fee 0 0.0 0 0.00 Prop. Operations & Maint. 484 11.6 1,761 12.19 Utilities 534 12.7 1,942 13.44 Total 2,383 56.9 8,666 59.96 HOUSE PROFIT (907) (21.6) (3,299) (22.83) Management Fee 105 2.5 381 2.64 INCOME BEFORE FIXED CHARGES (1,012) (24.1) (3,680) (25.46) FIXED EXPENSES Property Taxes 215 5.1 781 5.41 Insurance 51 1.2 185 1.28 Lease Expense 128 3.1 465 3.22 Reserve for Replacement 0 0.0 0 0.00 Total 650 15.5 2,365 16.36 NET INCOME ($1,662) (39.7) % ($6,045) ($41.82) Historical Operating Results 2009 Fiscal Year Ending December 275 40% $74.69 $29.58 365 39,749 %Gross PAR POR 2012/13 Begins September 238 53% $109.39 $57.98 365 46,041 %Gross PAR $5,036 46.5 % $21,160 1,455 13.4 6,112 431 4.0 1,811 16 0.1 65 3,592 33.2 15,091 301 2.8 1,267 10,831 100.0 45,506 1,427 28.3 1,569 83.2 18 114.9 2,807 78.2 158 52.5 5,979 55.2 4,851 44.8 744 769 403 595 620 3,130 1,721 325 1,396 329 52 28 217 626 $771 6.9 7.1 3.7 5.5 5.7 28.9 15.9 3.0 12.9 3.0 0.5 0.3 2.0 5.8 7.1 % 5,997 6,591 75 11,795 665 25,122 20,384 3,126 3,230 1,693 2,500 2,605 13,153 7,231 1,365 5,866 1,381 219 119 910 2,629 $3,237 2013/14 238 63% $113.73 $71.65 365 54,728 %Gross 2014/15 238 67% $117.14 $78.48 365 58,203 %Gross Stabilized 238 68% $120.65 $82.04 365 59,072 %Gross 2016/17 238 68% $124.27 $84.50 365 59,072 %Gross

POR $109.38 31.60 9.36 0.34 78.01 6.55 235.24 31.00 34.07 0.39 60.97 3.44 129.86 105.37 16.16 16.70 8.75 12.93 13.46 67.99 37.38 7.06 30.32 7.14 1.13 0.61 4.70 13.59 $16.74

PAR

POR $113.73 31.00 9.18 0.34 77.24 5.94 237.43 28.59 31.10 0.35 58.25 3.02 121.33 116.10 14.49 14.98 9.10 11.59 12.08 62.24 53.87 7.12 46.74 6.10 0.98 0.56 7.12 14.76 $31.98

PAR

POR $117.14 31.42 9.31 0.35 76.15 5.86 240.24 28.36 30.74 0.35 57.18 2.94 119.57 120.67 14.19 14.66 9.37 11.35 11.82 61.39 59.28 7.21 52.07 5.85 0.95 0.56 9.61 16.96 $35.11

PAR

POR $120.65 32.25 9.55 0.36 77.63 5.97 246.41 28.96 31.35 0.36 58.22 2.99 121.87 124.54 14.44 14.92 9.65 11.55 12.03 62.58 61.96 7.39 54.56 5.93 0.96 0.57 9.86 17.32 $37.25

PAR

POR $124.27 33.21 9.84 0.37 79.96 6.15 253.80 29.83 32.29 0.37 59.97 3.08 125.53 128.28 14.87 15.36 9.94 11.89 12.39 64.46 63.82 7.61 56.20 6.11 0.99 0.58 10.15 17.84 $38.37

$6,224 47.9 % $26,151 1,696 13.1 7,128 503 3.9 2,112 19 0.1 78 4,227 32.5 17,761 325 2.5 1,366 12,994 100.0 54,596 1,565 25.1 1,702 77.4 19 104.3 3,188 75.4 165 50.8 6,640 51.1 6,354 48.9 793 820 498 635 661 3,406 2,948 390 2,558 334 54 31 390 808 $1,750 6.1 6.3 3.8 4.9 5.1 26.2 22.7 3.0 19.7 2.6 0.4 0.2 3.0 6.2 13.5 % 6,575 7,152 82 13,396 694 27,899 26,698 3,332 3,444 2,092 2,666 2,777 14,311 12,386 1,638 10,749 1,402 225 130 1,638 3,394 $7,354

$6,818 48.8 % $28,647 1,829 13.1 7,685 542 3.9 2,277 20 0.1 85 4,432 31.7 18,624 341 2.4 1,433 13,982 100.0 58,750 1,651 24.2 1,789 75.5 20 100.8 3,328 75.1 171 50.2 6,959 49.8 7,023 50.2 826 853 545 661 688 3,573 3,450 419 3,031 340 55 32 559 987 $2,044 5.9 6.1 3.9 4.7 4.9 25.5 24.7 3.0 21.7 2.4 0.4 0.2 4.0 7.0 14.7 % 6,937 7,517 86 13,983 719 29,241 29,509 3,469 3,585 2,292 2,775 2,891 15,013 14,496 1,762 12,734 1,430 232 136 2,350 4,147 $8,586

$7,127 49.0 % $29,945 1,905 13.1 8,003 564 3.9 2,371 21 0.1 89 4,586 31.5 19,267 353 2.4 1,482 14,556 100.0 61,159 1,710 24.0 1,852 75.0 21 100.0 3,439 75.0 176 50.0 7,199 49.5 7,357 50.5 853 881 570 682 711 3,697 3,660 437 3,223 350 57 33 582 1,023 $2,200 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 % 7,187 7,781 89 14,451 741 30,249 30,910 3,583 3,702 2,396 2,866 2,986 15,533 15,377 1,835 13,543 1,472 239 141 2,446 4,298 $9,244

$7,341 49.0 % $30,845 1,962 13.1 8,243 581 3.9 2,443 22 0.1 92 4,723 31.5 19,845 363 2.4 1,527 14,993 100.0 62,994 1,762 24.0 1,907 75.0 22 100.0 3,542 75.0 182 50.0 7,415 49.5 7,577 50.5 878 908 587 703 732 3,808 3,770 450 3,320 361 59 34 600 1,054 $2,266 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 % 7,403 8,014 92 14,884 763 31,156 31,838 3,690 3,813 2,468 2,952 3,075 15,999 15,839 1,890 13,949 1,517 246 145 2,520 4,427 $9,522

*Departmental expenses are expressed as a percentage of departmental revenues. **An independent feasibility study for the convention center had not been completed at the time of this report; as such, our revenue and expense projections are subject to change in this department, depending on the results of a detailed study.

Due to constraints of time and budget, we developed a preliminary opinion in our Hotel Study about the convention center’s revenue and expense potential based on a summary review of financial operating statistics from comparable properties. This opinion represented an “extraordinary assumption” as defined by the Appraisal Institute; therefore, we recommended conducting a detailed market analysis for the convention center. Subsequently, our detailed Convention Center Study concluded several significant findings that differed from our extraordinary assumption presented in the preceding financial projections. These differences can be summarized in the following manner: 1. The convention center is likely to experience significantly lower revenue than previously assumed due, in part, to lower demand projections and to less food and beverage revenue forecasted for the convention center. (In our combined final summary, we include all food and beverage revenue into the food and beverage department line item. But the net increase in this department is less than our initial Hotel Study assumption would have indicated if we had allocated part of the convention center department’s revenue to the food and beverage line item.) 2. The convention center will have a significantly more profitable operating margin than previously assumed due, in part, to the fact that food and beverage is no longer blended into this departmental line item. This conclusion is also the result of a more detailed understanding of demand potential. 3. Incremental food and beverage revenue to the combined hotel and convention center operation will be roundly $400,000 in a stable operating year, as a result of events taking place in the convention center. Instead of generating revenue of ±$4 million, as reflected in our original assumption, the detailed convention center market analysis led us to revise these revenue estimates to ±$2 million in a stable operating year. Instead of the assumed operating expenses of ±$3, the convention center market analysis resulted in a forecast of ±$1 million in operating expenses. These new findings, concluded in our Convention Center Study, are summarized in the following table. At your request, we also include

projected total operating revenue and expense for the U.S. Cellular Center, also referred to as the arena.

Table 2 – Five-Year Statement of Departmental Operations (from Convention Center Study in January 2011)
2012/13 Convention Center Revenue * (Less Exhibit Hall F&B Revenue) Convention Center Departmental Revenue Convention Center Expenses * (Less Exhibit Hall F&B Expenses) Convention Center Departmental Expenses Convention Center Departmental Income Arena Revenue Arena Expenses Arena Departmental Income/(Loss) $1,126,000 (200,000) 926,000 $540,000 (130,000) 410,000 $516,000 $2,469,000 2,713,000 ($244,000) 2013/14 $1,481,000 (279,000) 1,202,000 $729,000 (181,000) 548,000 $654,000 $2,666,000 2,863,000 ($197,000) 2014/15 $1,781,000 (353,000) 1,428,000 $891,000 (229,000) 662,000 $766,000 $2,864,000 3,012,000 ($148,000) 2015/16 $2,006,000 (402,000) 1,604,000 $1,012,000 (261,000) 751,000 $853,000 $2,954,000 3,104,000 ($150,000) 2016/17 $2,068,000 (414,000) 1,654,000 $1,042,000 (269,000) 773,000 $881,000 $3,047,000 3,200,000 ($153,000)

* Exhibit hall food & beverage revenues and expenses are included in the Food & Beverage department in the combined pro forma.

Taking these conclusions from the Convention Center Study, we then developed revised financial projections for the jointly operated hotel and convention center. The resulting financial projections assume the anticipated renovations to the hotel and the new convention center development, as previously discussed. We also assume joint management of the hotel and convention center by a qualified operator. After completing the Convention Center Study, HVS revised the financial projections for a jointly managed hotel and convention center to reflect our updated findings from the Convention Center Study. Changes since the original financial projections are shown in the following detailed tables and can be summarized as: 1. Decreased convention center revenue; 2. Improved convention center profitability; 3. Increased food and beverage revenue, resulting from convention center catering (but this line item increase is not as large as the convention center line item decrease); and 4. Minor changes to undistributed operating expenses resulting from changes in convention center revenue and food and beverage revenue projections. The following two financial tables reflect revised projections for the proposed hotel and convention center operation. For planning purposes, we also include anticipated total revenues and expenses from the arena.

Table 3 - Detailed Forecast of Income and Expense (Updated Hotel Study)
Number of Rooms: Occupancy: Average Rate: RevPAR: Days Open: Occupied Rooms: REVENUE Rooms Food & Beverage Telephone Convention Center Other Income Total Revenues DEPARTMENTAL EXPENSES * Rooms Food & Beverage Telephone Convention Center Other Expenses Total DEPARTMENTAL INCOME UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Franchise Fee Prop. Operations & Maint. Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Lease Expense Reserve for Replacement Total NET INCOME FROM HOTEL & CC TOTAL REVENUES FROM ARENA TOTAL EXPENSES FROM ARENA NET INCOME FROM ARENA NET INCOME FROM HOTEL, CC, & ARENA 2012/13 Begins September 238 53% $109.39 $57.98 365 46,041 %Gross PAR $5,036 60.2 % $21,160 2,086 24.9 8,764 16 0.2 65 926 11.1 3,891 301 3.6 1,267 8,365 100.0 35,146 1,427 28.3 1,699 81.5 18 114.9 410 44.3 158 52.5 3,712 44.4 4,653 55.6 751 776 403 601 626 3,158 1,495 251 1,244 329 52 26 167 574 $670 $2,469 $2,713 ($244) 9.0 9.3 4.8 7.2 7.5 37.8 17.8 3.0 14.8 3.9 0.6 0.3 2.0 6.8 8.0 % 5,997 7,139 75 1,723 665 15,598 19,548 3,157 3,262 1,693 2,525 2,631 13,268 6,281 1,054 5,226 1,381 219 109 703 2,412 $2,814 2013/14 238 63% $113.73 $71.65 365 54,728 %Gross 2014/15 238 67% $117.14 $78.48 365 58,203 %Gross Stabilized 238 68% $120.65 $82.04 365 59,072 %Gross 2016/17 238 68% $124.27 $84.50 365 59,072 %Gross

POR $109.38 45.30 0.34 20.11 6.55 181.68 31.00 36.90 0.39 8.91 3.44 80.63 101.05 16.32 16.86 8.75 13.05 13.60 68.59 32.47 5.45 27.02 7.14 1.13 0.57 3.63 12.47 $14.55

PAR

POR $113.73 45.28 0.34 21.96 5.94 187.25 28.59 34.41 0.35 10.01 3.02 76.39 110.86 14.31 14.79 9.10 11.45 11.93 61.59 49.28 5.62 43.66 6.10 0.98 0.52 5.62 13.21 $30.45

PAR

POR $117.14 46.80 0.35 24.53 5.86 194.68 28.36 34.67 0.35 11.37 2.94 77.70 116.98 13.94 14.41 9.37 11.15 11.62 60.49 56.49 5.84 50.65 5.85 0.95 0.51 7.79 15.10 $35.55

PAR

POR $120.65 48.61 0.36 27.15 5.97 202.74 28.96 35.77 0.36 12.71 2.99 80.78 121.96 14.18 14.65 9.65 11.34 11.82 61.64 60.31 6.08 54.23 5.93 0.96 0.53 8.11 15.53 $38.70

PAR

POR $124.27 50.06 0.37 28.00 6.15 208.85 29.83 36.84 0.37 13.09 3.08 83.20 125.66 14.61 15.09 9.94 11.68 12.17 63.49 62.16 6.27 55.90 6.11 0.99 0.54 8.35 16.00 $39.90

$6,224 60.7 % $26,151 2,478 24.2 10,412 19 0.2 78 1,202 11.7 5,050 325 3.2 1,366 10,248 100.0 43,058 1,565 25.1 1,883 76.0 19 104.3 548 45.6 165 50.8 4,180 40.8 6,067 59.2 783 810 498 627 653 3,370 2,697 307 2,390 334 54 28 307 723 $1,667 $2,666 $2,863 ($197) 7.6 7.9 4.9 6.1 6.4 32.9 26.3 3.0 23.3 3.3 0.5 0.3 3.0 7.1 16.2 % 6,575 7,912 82 2,303 694 17,565 25,493 3,292 3,401 2,092 2,633 2,743 14,162 11,332 1,292 10,040 1,402 225 119 1,292 3,038 $7,002

$6,818 60.2 % $28,647 2,724 24.0 11,445 20 0.2 85 1,428 12.6 6,000 341 3.0 1,433 11,331 100.0 47,610 1,651 24.2 2,018 74.1 20 100.8 662 46.4 171 50.2 4,522 39.9 6,809 60.1 811 839 545 649 676 3,521 3,288 340 2,948 340 55 30 453 879 $2,069 $2,864 $3,012 ($148) 7.2 7.4 4.8 5.7 6.0 31.1 29.0 3.0 26.0 3.0 0.5 0.3 4.0 7.8 18.2 % 6,937 8,479 86 2,782 719 19,001 28,608 3,410 3,523 2,292 2,728 2,841 14,793 13,815 1,428 12,386 1,430 232 126 1,904 3,691 $8,695

$7,127 59.5 % $29,945 2,871 24.0 12,064 21 0.2 89 1,604 13.4 6,739 353 2.9 1,482 11,976 100.0 50,320 1,710 24.0 2,113 73.6 21 100.0 751 46.8 176 50.0 4,772 39.8 7,204 60.2 838 866 570 670 698 3,641 3,563 359 3,204 350 57 31 479 917 $2,286 $2,954 $3,104 ($150) 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 19.1 % 7,187 8,878 89 3,155 741 20,050 30,270 3,519 3,637 2,396 2,815 2,933 15,300 14,970 1,510 13,460 1,472 239 131 2,013 3,855 $9,605

$7,341 59.5 % $30,845 2,957 24.0 12,425 22 0.2 92 1,654 13.4 6,950 363 2.9 1,527 12,337 100.0 51,838 1,762 24.0 2,176 73.6 22 100.0 773 46.7 182 50.0 4,915 39.8 7,423 60.2 863 892 587 690 719 3,751 3,672 370 3,302 361 59 32 493 945 $2,357 $3,047 $3,200 ($153) 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 19.1 % 7,403 9,145 92 3,248 763 20,650 31,188 3,625 3,746 2,468 2,900 3,021 15,759 15,428 1,555 13,873 1,517 246 134 2,074 3,971 $9,903

$426

$1,470

$1,921

$2,136

$2,204

*Departmental expenses are expressed as a percentage of departmental revenues.

Table 4 – Ten-Year Forecast of Income and Expense (Updated Hotel Study)
2012/13 Number of Rooms: Occupied Rooms: Occupancy: Average Rate: RevPAR: REVENUE Rooms Food & Beverage Telephone Convention Center Other Income Total DEPARTMENTAL EXPENSES* Rooms Food & Beverage Telephone Convention Center Other Expenses Total DEPARTMENTAL INCOME UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Franchise Fee Prop. Operations & Maint. Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Lease Expense Reserve for Replacement Total NET INCOME FROM HOTEL & CC TOTAL REVENUES FROM ARENA TOTAL EXPENSES FROM ARENA NET INCOME FROM ARENA NET INCOME FROM HOTEL, CC, & ARENA 238 46,041 53% $109.39 % of $57.98 Gross $5,036 60.2 % 2,086 24.9 16 0.2 926 11.1 301 3.6 8,365 100.0 1,427 28.3 1,699 81.5 18 114.9 410 44.3 158 52.5 3,712 44.4 4,653 55.6 751 776 403 601 626 3,158 1,495 251 1,244 329 52 26 167 574 $670 1 $2,469 $2,713 ($244) $426 9.0 9.3 4.8 7.2 7.5 37.8 17.8 3.0 14.8 3.9 0.6 0.3 2.0 6.8 8.0 % 2013/14 238 54,728 63% $113.73 % of $71.65 Gross $6,224 60.7 % 2,478 24.2 19 0.2 1,202 11.7 325 3.2 10,248 100.0 1,565 25.1 1,883 76.0 19 104.3 548 45.6 165 50.8 4,180 40.8 6,067 59.2 783 810 498 627 653 3,370 2,697 307 2,390 334 54 28 307 723 7.6 7.9 4.9 6.1 6.4 32.9 26.3 3.0 23.3 3.3 0.5 0.3 3.0 7.1 2014/15 238 58,203 67% $117.14 % of $78.48 Gross $6,818 60.2 % 2,724 24.0 20 0.2 1,428 12.6 341 3.0 11,331 100.0 1,651 24.2 2,018 74.1 20 100.8 662 46.4 171 50.2 4,522 39.9 6,809 60.1 811 839 545 649 676 3,521 3,288 340 2,948 340 55 30 453 879 7.2 7.4 4.8 5.7 6.0 31.1 29.0 3.0 26.0 3.0 0.5 0.3 4.0 7.8 2015/16 238 59,072 68% $120.65 % of $82.04 Gross $7,127 59.5 % 2,871 24.0 21 0.2 1,604 13.4 353 2.9 11,976 100.0 1,710 24.0 2,113 73.6 21 100.0 751 46.8 176 50.0 4,772 39.8 7,204 60.2 838 866 570 670 698 3,641 3,563 359 3,204 350 57 31 479 917 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2016/17 238 59,072 68% $124.27 % of $84.50 Gross $7,341 59.5 % 2,957 24.0 22 0.2 1,654 13.4 363 2.9 12,337 100.0 1,762 24.0 2,176 73.6 22 100.0 773 46.7 182 50.0 4,915 39.8 7,423 60.2 863 892 587 690 719 3,751 3,672 370 3,302 361 59 32 493 945 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2017/18 238 59,072 68% $128.00 % of $87.04 Gross $7,561 59.5 % 3,046 24.0 22 0.2 1,703 13.4 374 2.9 12,706 100.0 1,815 24.0 2,242 73.6 22 100.0 796 46.7 187 50.0 5,062 39.8 7,644 60.2 889 918 605 711 741 3,863 3,781 381 3,400 372 60 33 508 973 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2018/19 238 59,072 68% $131.84 % of $89.65 Gross $7,788 59.5 % 3,137 24.0 23 0.2 1,754 13.4 385 2.9 13,088 100.0 1,869 24.0 2,310 73.6 23 100.0 820 46.8 193 50.0 5,215 39.8 7,873 60.2 915 946 623 732 763 3,979 3,894 393 3,501 383 62 34 524 1,003 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2019/20 238 59,072 68% $135.79 % of $92.34 Gross $8,022 59.5 % 3,231 24.0 24 0.2 1,808 13.4 397 2.9 13,482 100.0 1,925 24.0 2,378 73.6 24 100.0 845 46.7 199 50.0 5,371 39.8 8,111 60.2 943 974 642 754 786 4,099 4,013 404 3,608 394 64 35 539 1,033 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2020/21 238 59,072 68% $139.87 % of $95.11 Gross $8,262 59.5 % 3,328 24.0 25 0.2 1,860 13.4 409 2.9 13,884 100.0 1,983 24.0 2,450 73.6 25 100.0 870 46.8 204 50.0 5,532 39.8 8,352 60.2 971 1,003 661 777 809 4,221 4,131 417 3,714 406 66 36 555 1,064 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7 2021/22 238 59,072 68% $144.06 % of $97.96 Gross $8,510 59.5 % 3,428 24.0 25 0.2 1,917 13.4 421 2.9 14,302 100.0 2,042 24.0 2,523 73.6 25 100.0 896 46.7 211 50.0 5,698 39.8 8,604 60.2 1,000 1,033 681 800 833 4,348 4,256 429 3,827 418 68 37 572 1,096 7.0 7.2 4.8 5.6 5.8 30.4 29.8 3.0 26.8 2.9 0.5 0.3 4.0 7.7

$1,667 16.2 % 1 $2,666 $2,863 ($197) $1,470

$2,069 18.2 % 1 $2,864 $3,012 ($148) $1,921

$2,286 19.1 % 1 $2,954 $3,104 ($150) $2,136

$2,357 19.1 % 1 $3,047 $3,200 ($153) $2,204

$2,427 19.1 % 1 $3,137 $3,293 ($156) $2,271

$2,499 19.1 % 1 $3,231 $3,392 ($161) $2,338

$2,575 19.1 % 1 $3,328 $3,495 ($167) $2,408

$2,651 19.1 % 1 $3,427 $3,601 ($174) $2,477

$2,732 19.1 % 1 $3,531 $3,706 ($175) $2,557

*Departmental expenses are expressed as a percentage of departmental revenues.

A key assumption in our analysis is that the hotel and convention center will be jointly managed by a single hotel operator with experience managing adjoined hotels and convention centers. In this operating model, there will be significant operational efficiencies; for example, only one General Manager and one Director of Sales will be needed for a jointly managed hotel and convention center complex. The anticipated operational efficiencies of a jointly managed hotel and convention center are reflected in our financial projections. These operational efficiencies are not present at facilities such the MidAmerica Center in Council Bluffs, the RiverCenter in Davenport, and the Five Flags Center in Dubuque. Each of these properties has its own dedicated operational staff. Although adjacent hotel properties may serve a large proportion of guests attending these facilities, these hotels and convention/event facilities each have separate management. This is one contributing factor to the resulting financial operating deficits at these convention/event facilities; however, there may be good reasons (other than financial operating results) for having separate facility management companies operating such facilities. In contrast, hotel and convention properties that are jointly managed by a single operator often experience both (a) overall profitability and also (b) profitable convention center departments. HVS reviewed several confidential profit and loss statements from comparable jointly operated facilities, from more than five different qualified operators, to inform this conclusion. If the hotel and convention center were not operated jointly, then we would anticipate significantly reduced operational efficiencies at both the hotel and the convention center. Although we have not projected the hotel’s performance under such a scenario, it would likely result in substantial declines in occupancy, rooms-department revenue, and food and beverage revenues. Since many expense line items have a significant component of fixed costs, then, the resulting net operating income would likely be significantly lower and may lead to a different branding strategy for the hotel. At your request, we have developed the following summary table with our projections of financial operations at the convention center and arena (combined), assuming the convention center is not jointly managed by the hotel operator.

Table 5 – Ten Year Forecast of Income and Expense (stand-alone Convention Center & Arena)
2012/13 OPERATING REVENUE Facility Rental Facility Fees Food & Beverage (Gross) Event Services (Gross) Merchandise (Net) Advertising & Sponsorships Naming Rights Suite Revenue Other Revenue Total OPERATING EXPENSES Salaries & Benefits Food & Beverage Costs Event Services Costs Administrative & General Contractual Services Marketing & Sales Repair & Maintenance Supplies & Equipment Utilities Other Expense Total OPERATING INCOME (LOSS) NON-OPERATING EXPENSES Management Fees Insurance Capital Maintenance Reserve Total TOTAL NET INCOME (LOSS) $812,000 88,000 1,480,000 991,000 60,000 325,000 162,000 49,000 8,000 $3,975,000 $1,432,000 1,110,000 892,000 128,000 87,000 135,000 69,000 76,000 898,000 20,000 $4,847,000 ($872,000) $216,000 141,000 159,000 $516,000 ($1,388,000) 2013/14 $970,000 98,000 1,713,000 1,187,000 66,000 334,000 167,000 50,000 8,000 $4,593,000 $1,475,000 1,285,000 1,068,000 132,000 89,000 139,000 71,000 78,000 925,000 24,000 $5,286,000 ($693,000) $223,000 145,000 184,000 $551,000 ($1,245,000) 2014/15 $1,109,000 107,000 1,940,000 1,359,000 71,000 344,000 172,000 52,000 9,000 $5,163,000 $1,520,000 1,455,000 1,223,000 135,000 92,000 143,000 73,000 80,000 953,000 28,000 $5,702,000 ($539,000) $230,000 149,000 207,000 $585,000 ($1,125,000) 2015/16 $1,202,000 111,000 2,100,000 1,474,000 73,000 355,000 177,000 53,000 9,000 $5,554,000 $1,565,000 1,575,000 1,327,000 140,000 95,000 148,000 76,000 83,000 981,000 30,000 $6,020,000 ($466,000) $236,000 154,000 222,000 $612,000 ($1,076,000) 2016/17 $1,238,000 115,000 2,163,000 1,519,000 76,000 365,000 183,000 55,000 9,000 $5,723,000 $1,612,000 1,622,000 1,367,000 144,000 97,000 152,000 78,000 85,000 1,011,000 31,000 $6,199,000 ($476,000) $244,000 158,000 229,000 $631,000 ($1,108,000) 2017/18 $1,275,000 118,000 2,228,000 1,564,000 78,000 376,000 188,000 56,000 9,000 $5,892,000 $1,660,000 1,671,000 1,408,000 148,000 100,000 157,000 80,000 88,000 1,041,000 32,000 $6,385,000 ($493,000) $251,000 163,000 236,000 $650,000 ($1,141,000) 2018/19 $1,314,000 122,000 2,295,000 1,611,000 80,000 388,000 194,000 58,000 10,000 $6,072,000 $1,710,000 1,721,000 1,450,000 152,000 103,000 161,000 83,000 90,000 1,072,000 33,000 $6,575,000 ($503,000) $258,000 168,000 243,000 $669,000 ($1,176,000) 2019/20 $1,353,000 125,000 2,364,000 1,659,000 83,000 399,000 200,000 60,000 10,000 $6,253,000 $1,762,000 1,773,000 1,493,000 157,000 106,000 166,000 85,000 93,000 1,105,000 34,000 $6,774,000 ($521,000) $266,000 173,000 250,000 $689,000 ($1,211,000) 2020/21 $1,394,000 129,000 2,435,000 1,709,000 85,000 411,000 206,000 62,000 10,000 $6,441,000 $1,814,000 1,826,000 1,538,000 162,000 110,000 171,000 88,000 96,000 1,138,000 35,000 $6,978,000 ($537,000) $274,000 178,000 258,000 $710,000 ($1,247,000) 2021/22 $1,435,000 133,000 2,508,000 1,760,000 88,000 424,000 212,000 64,000 11,000 $6,635,000 $1,869,000 1,881,000 1,584,000 167,000 113,000 176,000 90,000 99,000 1,172,000 36,000 $7,187,000 ($552,000) $282,000 184,000 265,000 $731,000 ($1,285,000)

If the convention center is not operated jointly by the hotel, then we project aggregated net losses at the convention center and arena in excess of ±$1.0 million annually. As indicated previously, therefore, we conclude that joint management of the hotel and convention center complex will result in significant operational efficiencies that will maximize the overall potential to generate net operating income available for debt service by each of these properties. Please contact us any time with questions or to discuss details. Sincerely,

Hans Detlefsen Managing Director HVS Global Hospitality Services

Summary Appraisal Report Crowne Plaza Five Seasons Cedar Rapids, Iowa

Property Location: 350 1st Avenue Northeast Cedar Rapids, Iowa 52401-1108 Prepared by: HVS Consulting and Valuation Services Division of CCG Holdings, LLC 205 West Randolph Street, Suite 1650 Chicago, Illinois 60606 +1 312 587-9900 +1 312 587-9908 FAX Submitted to: Mr. Jeffrey A. Pomeranz City of Cedar Rapids 3851 River Ridge Drive NE Cedar Rapids, IA, 52402 +1 319 286-5080 [email protected]

October 6, 2010

Mr. Jeffrey A. Pomeranz City of Cedar Rapids 3851 River Ridge Drive NE Cedar Rapids, IA, 52402 Re:
205 West Randolph Street, Suite 1650 Chicago, Illinois 60606 +1 312 587-9900 +1 312 587-9908 FAX www.hvs.com

Crowne Plaza Five Seasons Cedar Rapids, Iowa HVS Reference: 2010410028

Atlanta Boston Boulder Chicago Dallas Denver Las Vegas Mexico City Miami Nassau New York Newport San Francisco Toronto Vancouver Washington Athens Buenos Aires Dubai Hong Kong Lima London Madrid Mumbai New Delhi Sao Paulo Shanghai Singapore Specialists in Hotel Consulting and Appraisal Worldwide

Dear Mr. Pomeranz: As you requested, we are pleased to submit our summary appraisal report for the above-captioned hotel. We have inspected the real estate and analyzed the market conditions in the Cedar Rapids, Iowa area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Foundation. Based on our analysis, it is our opinion that the “when complete” prospective market value of the fee simple interest in the Crowne Plaza Five Seasons, as of September 1, 2012, is: $19,100,000 NINETEEN MILLION ONE HUNDRED THOUSAND DOLLARS This value estimate equates to $80,000 per room, based on an assumed reduction in guestroom inventory to 238 units. Based on our analysis, it is our opinion that the “when stabilized” prospective market value of the fee simple interest in the Crowne Plaza Five Seasons, as of September 1, 2015, is: $23,100,000 TWENTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS This value estimate equates to $97,000 per room, based on an assumed reduction in guestroom inventory to 238 units.

We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein, including several extraordinary assumptions detailed in this report.

Sincerely,

Hans Detlefsen, MPP, MAI Managing Director CCG Holdings, LLC A licensee of the HVS service mark State Appraiser License CG03100 (IA) [email protected], +1 312 587-9900 ext. 15

HVS Consulting and Valuation Services

Table of Contents

Table of Contents

Section
1 2 3 4 5 6 7 8 9 10 Addenda

Title
Summary of Salient Data and Conclusions Nature of the Assignment Description of the Real Estate Supply and Demand Analysis Projection of Occupancy and Average Rate Income Capitalization Approach Sales Comparison Approach Reconciliation of Value Indications Statement of Assumptions and Limiting Conditions Certification

Addendum A – Stress Test Scenario Analysis

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Summary of Salient Data and Conclusions 1

1. Summary of Salient Data and Conclusions

Property: Location: Interest Appraised: Highest and Best Use (as improved): Land Description Area: Zoning: Assessor's Parcel Number(s): Flood Zone: Improvements Description Year Opened: Property Type: Building Area: Guestrooms (after renovation): Number of Stories: Food and Beverage Facilities: Meeting Space (after renovation): Additional Facilities: Parking Spaces (assumption):

Crowne Plaza Five Seasons 350 1st Avenue Northeast Cedar Rapids, Iowa 52401 Fee Simple Full-service lodging facility

0.38 acres, or 16,351 square feet C5 - Central Business District 14213-77001-02000 X

1979 Full-service lodging facility 199,139 square feet 238 16 A restaurant, a lounge 28,500 square feet An indoor pool, an exercise room, a business center, and a vending area Access to 238 parking spaces for useful life of hotel

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Summary of Salient Data and Conclusions 2

Opinions of “When Complete” Prospective Market Value – September 1, 2012 Income Capitalization Approach: Prospective Market Value Conclusion per Room: Sales Comparison Approach: Cost Approach: $19,100,000 $80,000 $18,300,000 to $20,900,000 Not Applicable

Opinions of “When Stabilized” Prospective Market Value – September 1, 2015 Income Capitalization Approach: Market Value Conclusion per Room: Assignment Conditions Extraordinary Assumptions: We have made several extraordinary assumptions specific to the subject property. (1) We assume all necessary capital improvements will be made to allow the property to maintain its brand and reopen as a Crowne Plaza in 2012. (2) We assume the adjacent U.S. Cellular Arena will complete a major refurbishment that will make the venue more attractive and enhance all common areas that are used by hotel guests. (3) We assume the new convention center will be adjacent to the subject property, with adequate connectivity to allow the subject property to serve as the convention center's headquarters hotel. (4) We assume the new convention center will perform as projected, as no detailed market study has been completed as of our report date. (5) We assume the proposed convention center will be developed at a cost of approximately $67 million and offer 60,000 square feet of rentable function space while the subject property's complete renovation and redevelopment will cost approximately $21 million. (6) We assume that all of these projects except the convention center (1/1/2013 open) will be completed as of September 1, 2012, which is the effective value date for this appraisal. Additionally, several important general assumptions have been made that apply to $23,100,000 $97,000

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Summary of Salient Data and Conclusions 3

this appraisal and our valuations of hotels in general. These aspects are set forth in the Assumptions and Limiting Conditions chapter of this report. Hypothetical Conditions: Capital Expenditure (if applicable): We have made no assumptions of hypothetical conditions in our report. We assume all capital expenditures will be completed prior to the first projection year of the stabilization period. As such, no capital deduction is applied to the prospective market value opinion.

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Nature of the Assignment 4

2. Nature of the Assignment

Subject of the Appraisal

The subject of the appraisal is the fee simple interest in a 16,351-square-foot (0.38-acre) parcel improved with a full-service lodging facility known as the Crowne Plaza Five Seasons. The property opened in 1979 and currently features 275 rooms, a restaurant, a lounge, 22,362 square feet of meeting space, an indoor pool, an exercise room, a business center, and a vending area. The hotel also features all necessary back-of-the-house-space. The hotel's civic address is 350 1st Avenue Northeast, Cedar Rapids, Iowa, 52401. The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple estate is defined as “absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat."1 The Crowne Plaza Five Seasons is appraised as a going concern (i.e., an open and operating facility).

Property Rights Appraised

Pertinent Dates

The effective date of the “when stabilized” prospective market value conclusion is September 1, 2015. The subject property was inspected by Hans Detlefsen, MPP, MAI, on September 23, 2010. The subject property is currently owned by CWCapital LLC, a subsidiary of CW Financial Services, which is based in Washington, D.C. The subject property was last sold in 2007; Kronos bought the hotel from Lodgian for a reported sum of $6.7 million on June 13, 2007. A group of lenders, including CWCapital LLC foreclosed on the borrower in October of 2008; CWCapital LLC was appointed receiver on November 19, 2008 and has owned the property since that time. No other transfers of the property have reportedly occurred within the last three years. The hotel is currently listed for sale; however, a listing price has not been disclosed. Jones Lang LaSalle is the
1

Ownership, Franchise, and Management History and Assumptions

Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago Appraisal Institute, 2002).

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Nature of the Assignment 5

reported broker. We are unaware of any pending sale; the City has the right to match or beat any offer to purchase the hotel. This appraisal is being prepared for strategic planning purposes related to the City's rights to purchase the hotel. The hotel is managed by Prism Hotels & Resorts. Details pertaining to management terms were not available for our review. We have assumed a market-appropriate total management fee of 3.0% of total revenues in our study. Please refer to the income capitalization approach chapter for additional discussion pertaining to our management fee assumptions. As mentioned, the property is currently branded as a Crowne Plaza, under the InterContinental Hotels Group offering of brands. InterContinental Hotels Group is a leading global hospitality group with 4,186 hotels and 619,851 guestrooms worldwide. In 1994, the upscale Crowne Plaza brand was established; there were more than 350 properties located in major markets worldwide as of year-end 2009. These hotels feature guestrooms with data ports and voicemail, a 24-hour business center, wireless high-speed Internet access in the lobby, a fitness center, a swimming pool (in most hotels), finedining restaurants, and concierge service. Highest and Best Use Based on our analysis of the subject site, including its location, the surrounding land-use patterns, the available alternate uses, and the market influences of supply and demand, it is our opinion that the property’s highest and best use as improved is its current use as a full-service lodging facility. The objective of the appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Cedar Rapids area for the purpose of developing an opinion of the subject property’s market value. The following definition of market value has been agreed upon by the agencies that regulate federal financial institutions in the United States: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated;

Objective of the Appraisal

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Nature of the Assignment 6

2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.2 “As is” market value is defined by the Appraisal Institute as follows: The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.3 Intended Use of the Appraisal Identification of the Client and Intended User(s) Assignment Conditions This summary report is being prepared for use for the asset evaluation of the subject property. The client for this engagement is the City of Cedar Rapids, Iowa. This report is intended for the City of Cedar Rapids and its representatives, and may not be distributed to or relied upon by other persons or entities. We have made several important general assumptions have been made that apply to this appraisal and our valuations of hotels in general. These aspects are set forth in the Assumptions and Limiting Conditions chapter of this report. We have made no assumptions of hypothetical conditions in our report. We have not made any jurisdictional exceptions to the Uniform Standards of Professional Appraisal Practice in our analysis or report. Exposure Period The exposure period, referring to the amount of time necessary for the real estate to have been exposed retrospectively, prior to our date of value, is estimated to be less than or equal to nine months. Published surveys report marketing time, not the exposure period. Marketing time is an opinion of the amount of time it might take to sell a property at the concluded market value level during the period immediately after the effective date of an appraisal. Currently, marketing time for full-service and luxury/upper-upscale hotels is
Federal Register, Vol. 55, No. 165, August 24, 1990: 34696. Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).
3 2

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Nature of the Assignment 7

averaging 9.31 and 10.38 months, respectively, according to the Korpacz Real Estate Investor Survey - First Quarter 2010, published by PricewaterhouseCoopers. Overall marketing time is averaging 10.0 months for hotels, as reported by the Real Estate Research Corporation’s Fall 2009 Real Estate Survey. Competency Our qualifications are available upon request. These qualifications reflect that we have the competence required to complete this engagement, in accordance with the competency provision of the Uniform Standards of Professional Appraisal Practice. Our knowledge and experience is appropriate for the complexity of this assignment. In appraising real estate for market value, the professional appraiser has three approaches from which to select: income capitalization, cost, and sales comparison. Although all three valuation models are considered, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which model will provide supportable estimates of market value. The appraiser then selects one or more of the appropriate approaches in arriving at a final value estimate. Data such as operating history and descriptions of the subject property were supplied by corporate management. The subject property was personally inspected by Hans Detlefsen for the purpose of this appraisal. The subject property’s historical and future operating performances were analyzed. The hotel’s financial performance, market, and physical condition were discussed with the General Manager via in-person interviews. We have reviewed improved sales, as well as capitalization and equity-yield rates. We have analyzed this information and have considered the sales comparison and income capitalization approaches to value. Based on our findings, we have prepared a forecast of income and expense and have capitalized the net income based on current required debt and equity returns. Based on our experience with hotel investors, the cost approach is better suited for new and proposed properties and has been excluded in the valuation of the subject property. Our value conclusion is based upon this investigation and analysis and is conveyed in this summary report.

Scope of Work

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Description of the Real Estate 8

3. Description of the Real Estate

LAND

The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. The subject property is located in the Central Business District, directly east of Interstate 380, southwest of the intersection formed by Fourth Street and First Avenue. The street address of the Crowne Plaza Five Seasons is 350 1st Avenue Northeast, Cedar Rapids, Iowa, 52401.

IMPROVEMENTS Property Overview

The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. Due to the age of the subject property, some functional obsolescence is to be expected. Although the subject hotel suffers from an inefficient layout, we assume all of the functional obsolescence is curable and each item will be adequately cured as part of the proposed renovation. A summary of the subject property’s facilities is presented in the following table.

Functional Obsolescence

Summary of the Facilities

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Description of the Real Estate 9

Figure 3-1

Facilities Summary
Number of Units 130 142 3 275 Pre-Renovation 238 Post-Renovation Seating Capacity 96 20 Square Footage 300 300 750 675 960 750 750 750 12,996 1,131 750 750 750 750 22,362 Pre-Renovation 28,464 Post-Renovation

Guestroom Configuration King Queen/Queen One-Bedroom Suite Total

Food & Beverage Facilities 16 at the Top Top of the Five Lounge Meeting & Banquet Facilities 4th Floor Boardroom 5th Floor Boardroom Ambassador Boardroom 1020 Commerce Club Crown Diplomat Executive Grand Ballroom Monarch Seasons A Seasons B Seasons C Seasons D Total

Amenities & Services Indoor Swimming Pool Vending Areas Ice Machines Exercise Room Business Center Skywalk to Arena and Parkade

Infrastructure Parking Spaces Elevators Life-Safety Systems Construction Details No on-site parking 4 Guest, 2 Service Sprinklers, Smoke Detectors Steel, Reinforced Concrete

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Supply and Demand Analysis 10

4. Supply and Demand Analysis

Definition of Subject Hotel Market

The 275-room Crowne Plaza Five Seasons is located in Cedar Rapids, Iowa. The greater market surrounding the subject property offers 113 hotels and motels, spanning 7,911 rooms. The two largest hotels (besides the subject property) are the 286-room Marriott Coralville and the 234-room Sheraton Iowa City. Of this larger supply set, the subject property competes with a smaller set of hotels based on various factors. These factors may include location, price point, product quality, length of stay (such as an extended-stay focus vs. nonextended-stay focus), room type (all-suite vs. standard), hotel age, or brand, among other factors. We have reviewed these pertinent attributes and established a competitive set based upon this review. Our review of the subject property’s specific competitive set within the Cedar Rapids area begins after our review of national occupancy, average rate, and RevPAR trends.

Historical Supply and Demand Data

Smith Travel Research (STR) is an independent research firm that compiles and publishes data on the lodging industry, routinely used by typical hotel buyers. STR has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the market-wide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate and provides an indication of how well rooms revenue is being maximized.

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Supply and Demand Analysis 11

Figure 4-1

Historical Supply and Demand Trends (STR)
Average Daily Room Count 1,030 1,030 1,030 1,030 1,030 1,030 1,030 1,150 1,316 1,316 1,419 1,419 1,419 Available Room Nights 375,950 375,950 375,950 375,950 375,950 375,950 375,950 419,708 480,340 480,340 517,935 300,828 300,828 Oc cupied Room Nights 264,330 249,938 225,850 224,854 218,116 232,643 233,185 262,867 298,161 318,240 307,580 180,308 182,162 Average Rate $72.59 73.36 74.79 72.17 72.38 72.45 79.83 87.34 92.43 99.63 96.43 $95.93 95.39

Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2009 2010

Change — 0.0 % 0.0 0.0 0.0 0.0 0.0 11.6 14.4 0.0 7.8 — 0.0 % 3.3 %

Change — (5.4) % (9.6) (0.4) (3.0) 6.7 0.2 12.7 13.4 6.7 (3.3) — 1.0 % 1.5 % Number of Rooms 106 157 275 220 106 83 83 286 103

Occupancy 70.3 % 66.5 60.1 59.8 58.0 61.9 62.0 62.6 62.1 66.3 59.4 59.9 % 60.6

Change — 1.1 % 1.9 (3.5) 0.3 0.1 10.2 9.4 5.8 7.8 (3.2) — (0.6) % 2.9 %

RevPAR $51.04 48.77 44.93 43.16 41.99 44.83 49.51 54.70 57.37 66.01 57.26 $57.50 57.76

Change — (4.4) % (7.9) (3.9) (2.7) 6.8 10.4 10.5 4.9 15.0 (13.2) — 0.5 % 1.2 %

Year-to-Date Through July

Average Annual Compounded C hange: 1999-2009 Hotels Included in Sample Best Western Long Branch Hotel & Conv Ctr Clarion Hotel & Conv Ctr Cedar Rapids Crowne Plaza Cedar Rapids Five Seasons Marriott Cedar Rapids Hampton Inn Cedar Rapids Holiday Inn Express Cedar Rapids Collins Rd Holiday Inn Express & Suites Cedar Rapids I 380 Marriott Coralville Hotel & C onf Center Hampton Inn Suites Cedar Rapids North

Year Affiliated Apr-78 Jun-02 Jul-97 Sep-04 Jun-94 May-96 Nov-97 Aug-06 Jan-09

Year Opened Jun 1968 Jun 1976 Jun 1979 Aug 1988 Jun 1994 May 1996 Nov 1997 Aug 2006 Jan 2009

Total

1,419

Source: Smith Travel Research

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Supply and Demand Analysis 12

Figure 4-2

Historical Supply and Demand Graph
600,000 500,000 100 90 80 70 60 50 40 30

Room Nights

400,000 300,000 200,000 100,000 0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Room Supply

Room Demand

Occupancy

Source: Smith Travel Research

It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, STR data provide the best indication of aggregate growth or decline in existing supply and demand; thus, these trends have been considered in our analysis. The average daily room count in 2009 was 1,419 for this reporting set, showing an average annual rate of change of 3.3% over the period. Opening dates, as available, are presented for each reporting hotel in the previous table. These data reflect an overall market average rate level of $96.43 in 2009, which compares to $99.63 for 2008. These occupancy and average rate trends resulted in a RevPAR level of $57.26 in 2009. SUPPLY The following tables summarize the important operating characteristics of the primary competitors and the secondary competitors (if applicable). This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property’s penetration factors; penetration is the ratio between a specific hotel’s operating results and the corresponding data for the market. If

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

2009

Occupancy %

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Supply and Demand Analysis 13

the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the market-wide average. The room count of each secondary competitor has been weighted based on its assumed degree of competitiveness with the subject property.

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Supply and Demand Analysis 14

Figure 4-3

Primary Competitors – Operating Performance
Est. Segmentation Weighted Annual Room Count 275 220 286 781 401 1,182
Comm ercia l Meeti ng an d Group

Estimated 2007 Weighted Annual Room Count 275 220 286 781 401 1,182

Estimated 2008 Weighted Annual Room Count 275 220 286 781 473 1,254

Estimated 2009

Leisu re

Property Crowne Plaza Cedar Rapids Marriott Cedar Rapids Marriott Coralville Hotel & Conference Center Sub-Totals/Averages Secondary Competitors Totals/Averages

Number of Rooms 275 220 286 781 638 1,419

Occ. 66 % 70 56 63.4 % 60.2 % 62.3 %

Average Rate $74.54 121.00 106.00 $99.18 $81.77 $93.47

RevPAR $48.97 84.70 59.36 $62.84 $49.25 $58.23

Occ. 48 % 74 65 61.6 % 72.4 % 65.3 %

Average Rate $79.14 123.00 116.00 $108.23 $87.16 $100.30

RevPAR $38.07 91.02 75.40 $66.65 $63.13 $65.46

Occ. 40 % 72 62

Average Rate $74.69 115.00 109.00

RevPAR $29.58 82.80 67.58 $58.49 $54.34 $56.92

RevPAR Change (22.3) % (9.0) (10.4) (12.3) % (13.9) % (13.0) %

Occupancy Penetration 67.5 % 122.7 105.6 97.0 % 104.9 % 100.0 %

Yield Penetration 52.0 % 145.5 118.7 102.7 % 95.5 % 100.0 %

25 % 40 % 50 30 35 55 38 % 42 % 54 % 23 % 44 % 35 %

35 % 20 10 20 % 23 % 21 %

56.9 % $102.73 61.6 % 58.7 % $88.23 $97.00

Figure 4-4

Secondary Competitors – Operating Performance
Est. Segmentation Weighted Total Annual Competitive Room Level Count 80 % 80 70 70 70 70 74 % 85 126 0 74 58 58 401
Comm ercia l Meet ing a nd Group Leisu re

Estimated 2007 Weighted Annual Room Count 85 126 0 74 58 58 401

Estimated 2008 Weighted Annual Room Count 85 126 72 74 58 58 473

Estimated 2009

Property Best Western Longbranch Clarion Cedar Rapids Hampton Inn & Suites Cedar Rapids North Hampton Inn Cedar Rapids Holiday Inn Express Holiday Inn Express & Suites Totals/Averages

Number of Rooms 106 157 103 106 83 83 638

Occ. 65 % 51 0 59 71 64 60.2 %

Average Rate $65.00 78.00 0.00 90.00 93.00 91.00 $81.77

RevPAR $42.25 39.78 0.00 53.10 66.03 58.24 $49.25

Occ. 70 % 67 0 78 76 77 72.4 %

Average Rate $75.00 78.00 0.00 94.00 100.00 99.00 $87.16

RevPAR $52.50 52.26 0.00 73.32 76.00 76.23 $63.13

Occ. 55 % 55 58 69 71 71 61.6 %

Average Rate $75.00 70.00 109.00 93.00 97.00 98.00 $88.23

RevPAR $41.25 38.50 63.22 64.17 68.87 69.58 $54.34

25 % 40 70 70 65 60 54 %

50 % 25 % 35 25 15 15 10 20 10 25 10 30 23 % 23 %

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

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Supply and Demand Analysis 15

Supply Changes

It is important to consider any new hotels that may have an impact on the subject property’s operating performance. According to the local planning office, and our research and inspection (as applicable), new supply expected to be competitive within the subject property's competitive submarket is outlined in the following table.

Figure 4-5

New Supply
Number of Rooms 71 95 404 Total Competitive Level 30 20 Estimated Opening Date July 26, 2010 August 13, 2010

Proposed Property Hotel at Kirkwood Center Homewood Suites Totals/Averages

Development Stage Recently Opened Recently Opened

While we have taken reasonable steps to investigate proposed hotel projects and their status, due to the nature of real estate development, it is impossible to determine with certainty every hotel that will be opened in the future, or what their marketing strategies and effect in the market will be. Depending on the outcome of current and future projects, the future operating potential of the subject property may be positively or negatively affected. Future improvement in market conditions will raise the risk of increased competition. Our forthcoming forecast of stabilized occupancy and average rate is intended to reflect such risk. Supply Conclusion We have identified various properties that are competitive to some degree with the subject property. We have also investigated potential increases in competitive supply in this Cedar Rapids submarket. The Crowne Plaza Five Seasons will continue to operate in a dynamic market of varying product types and price points. Next, we will present our forecast for demand change, using the historical supply data presented as a starting point. The following table presents the most recent trends for the subject hotel market as tracked by HVS. These data pertain to the subject and competitors discussed previously in this section; performance results are estimated, rounded for the competition, and in some cases weighted if there are secondary competitors present. In this respect, the information in the table differs from the previously presented STR data and is consistent with the supply and demand analysis developed for this appraisal.

DEMAND

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Supply and Demand Analysis 16

Figure 4-6
Year Est. 2007 Est. 2008 Est. 2009

Historical Market Trends
Accommodated Room Nights 268,721 281,508 268,589 % Change — 4.8 % (4.6) Room Nights Avai lable 431,357 431,357 457,674 % Change — 0.0 % 6.1 Market Occupancy 62.3 % 65.3 58.7 Market ADR $93.47 100.30 97.00 % Change — 7.3 % (3.3) Market RevPAR $58.23 65.46 56.92 % Change — 12.4 % (13.0)

Avg. Annual Compounded Chg., Est. 2007-Est. 2009:

(0.0) %

3.0 %

1.9 %

(1.1) %

Demand Analysis Using Market Segmentation

For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 2009 distribution of accommodated room night demand as follows.
Figure 4-7 Accommodated Room Night Demand
Marketwide Accommodated Percentage Demand of Total 118,426 93,348 56,815 268,589 44 % 35 21 100 %

Market Segment Commercial Meeting and Group Leisure Total

The market’s demand mix comprises commercial demand, with this segment representing roughly 44% of the accommodated room nights in this Cedar Rapids submarket. The remaining portion comprises meeting and group at 35%, with the final portion leisure in nature, reflecting 21%. Using the distribution of accommodated hotel demand as a starting point, three segments were defined as representing the subject property’s lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates.

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Supply and Demand Analysis 17

Figure 4-8

Average Annual Compounded Market Segment Growth Rates

Market Segment Commercial Meeting and Group Leisure Base Demand Growth

2010 1.0 % 1.0 1.5 1.1 %

2011 1.5 % 1.5 1.5 1.5 %

Annual Growth Rate 2012 2013 2014 2.0 % 1.5 1.5 1.7 % 1.5 % 1.5 1.5 1.5 % 0.5 % 0.5 0.5 0.5 %

2015 0.5 % 0.5 0.5 0.5 %

2016 0.5 % 0.5 0.5 0.5 %

Latent Demand

A table presented earlier in this section illustrated the accommodated room night demand in the subject property’s competitive market. Because this estimate is based on historical occupancy levels, it includes only those hotel rooms that were used by guests. Latent demand reflects potential room night demand that has not been realized by the existing competitive supply; 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 the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated-room-night demand. If additional lodging facilities are expected to enter the market, it is reasonable to assume that these guests will be able to secure hotel rooms in the future, and it is therefore necessary to quantify this demand. Unaccommodated demand is further indicated if the market is at all seasonal, with distinct high and low seasons; such seasonality indicates that although year-end occupancy may not average in excess of 70%, the market sells out many nights during the year. The following table presents our estimate of unaccommodated demand in the subject market.

Unaccommodated Demand

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Supply and Demand Analysis 18

Figure 4-9

Unaccommodated Demand Estimate
Accommodated Room Night Demand 118,426 93,348 56,815 268,589 Unaccommodated Demand Percentage 0.5 % 0.4 0.2 0.4 % Unaccommodated Room Night Demand 537 344 106 987

Market Segment Commercial Meeting and Group Leisure Total

Induced Demand

Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can result in induced demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. The following table summarizes our estimate of induced demand.
Figure 4-10 Induced Demand Estimate
Market Segment Commercial Meeting and Group Leisure Total 2010 0 0 0 0 2011 0 0 0 0 2012 0 375 0 375 Induced Room Nights 2013 0 14,250 0 14,250 2014 0 21,000 0 21,000 2015 0 27,000 0 27,000 2016 0 27,000 0 27,000

The new convention center, which will be a new facility directly connected to the subject property, should induce a considerable amount of meeting and group demand into the market. The preceding table includes our assumptions; however, no market study or economic impact study has been completed at this time for the convention center. Moreover, the renovation and expansion of the meeting spaces at the subject property should also induce a small amount meeting and group demand into the market as well. Accommodated Demand and Marketwide Occupancy Based upon a review of the market dynamics in the subject property’s competitive environment, we have forecast growth rates for each market segment. Using the calculated potential demand for the market, we have determined market-wide accommodated demand based on the inherent limitations of demand fluctuations and other factors in the market area.

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Supply and Demand Analysis 19

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

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Supply and Demand Analysis 20

Figure 4-11 Accommodated Demand
2012 Commercial Base Demand Unaccommodated Demand Total Demand Growth Rate Meeting and Group Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Leisure Base Demand Unaccommodated Demand Total Demand Growth Rate 123,832 561 124,394 2.0 % 97,131 358 375 97,863 1.9 % 59,410 111 59,521 1.5 % 2013 125,690 570 126,260 1.5 % 98,588 363 14,250 113,201 15.7 % 60,301 113 60,414 1.5 % 2014 2015 2016

126,318 126,950 127,585 573 575 578 126,891 127,525 128,163 0.5 % 0.5 % 0.5 % 99,081 99,576 100,074 365 367 368 21,000 27,000 27,000 120,445 126,943 127,442 6.4 % 5.4 % 0.4 % 60,603 113 60,716 0.5 % 60,906 114 61,020 0.5 % 61,211 114 61,325 0.5 %

Totals Base Demand Unaccommodated Demand Induced Demand Total Demand less: Residual Demand Total Accommodated Demand Overall Demand Growth Existing Hotel Supply Proposed Hotels Crowne Plaza Cedar Rapids Five Seasons Hotel at Kirkwood Center Homewood Suites Expansion to Existing Hotels Crowne Plaza Cedar Rapids Available Rooms per Night Nights per Year Total Supply Rooms Supply Growth Marketwide Occupancy
¹ ² ³ A

280,374 1,030 375 281,778 58,616 223,162 (11.0) % 1,255 ¹ ² ³
A

284,579 1,045 14,250 299,874 349 299,526 34.2 % 1,254 238 21 19 -275 458,878 365 1,257 14.4 % 65.3 %

286,002 1,050 21,000 308,053 1,167 306,886 2.5 % 1,254 238 21 19 -275 458,878 365 1,257 0.0 % 66.9 %

287,432 1,056 27,000 315,488 2,789 312,698 1.9 % 1,254 238 21 19 -275 458,878 365 1,257 0.0 % 68.1 %

288,869 1,061 27,000 316,930 3,145 313,786 0.3 % 1,254 238 21 19 -275 458,878 365 1,257 0.0 % 68.4 %

79 21 19 -275 401,044 365 1,099 -6.8 % 55.6 %

Opening in September 2012 of the 100% competitive, 238-room Crowne Plaza Cedar Rapids Five Seasons Opening in July 2010 of the 30% competitive, 71-room Hotel at Kirkwood Center Opening in August 2010 of the 20% competitive, 95-room Homewood Suites Change of room count in August 2011 of the 100% competitive, Crowne Plaza Cedar Rapids

These room night projections for the market area will be used in forecasting the subject property's occupancy and average rate in the following chapter.

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Projection of Occupancy and Average Rate 21

5. Projection of Occupancy and Average Rate

Along with average rate results, the occupancy levels achieved by a hotel are the foundation of the property's financial performance and market value. Most of a lodging facility's other revenue sources (such as food, beverages, and telephone income) are driven by the number of guests, and many expense levels also vary with occupancy. To a certain degree, occupancy attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by a typical, professional hotel management team to achieve an optimal mix of occupancy and average rate. Forecast of Subject Property’s Occupancy As the subject property recovers from a period of inattentive management and disruptions to marketing and sales efforts, occupancies have been increasing, despite the current status of the property. If the proposed renovation and grand opening occurs, occupancies are expected to increase further, reflecting significant improvements in the subject’s penetration of the commercial and group segments.

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Projection of Occupancy and Average Rate 22

Figure 5-1

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 Occupanc y Total Penetration

2012 93,390 4.3 % 4,016 60 % 77,520 6.5 % 5,020 90 % 52,252 7.0 % 3,661 98 % 12,697 28,798 44 % 401,044 7% 223,162 6% 56 % 79 %

2013 126,113 13.5 % 16,979 71 % 113,069 19.5 % 22,080 103 % 60,344 18.5 % 11,183 98 % 50,242 86,870 58 % 458,878 19 % 299,526 17 % 65 % 89 %

2014 126,411 14.9 % 18,875 79 % 119,988 22.3 % 26,801 118 % 60,486 18.5 % 11,210 98 % 56,886 86,870 65 % 458,878 19 % 306,886 19 % 67 % 98 %

2015 126,400 15.6 % 19,778 83 % 125,818 22.3 % 28,103 118 % 60,480 18.5 % 11,208 98 % 59,090 86,870 68 % 458,878 19 % 312,698 19 % 68 % 100 %

2016 126,894 15.6 % 19,856 83 % 126,176 22.3 % 28,183 118 % 60,716 18.5 % 11,252 98 % 59,291 86,870 68 % 458,878 19 % 313,786 19 % 68 % 100 %

Based on our analysis of the subject property and market area, we have selected a stabilized occupancy level of 68%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability.

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Projection of Occupancy and Average Rate 23

These projections reflect years beginning September 1, 2012, corresponding to the first projection year for the subject property’s forecast of income and expense.
Figure 5-2 Forecast of Occupancy
Subject Property's Occupancy 53 % 63 67 68

Year 2012/13 2013/14 2014/15 2015/16

Average Rate Analysis

The following table illustrates the projected average rate and the growth rates assumed. As a context for the average rate growth factors, note that we have applied a base underlying inflation rate of 3.0% annually throughout our projection period.

Figure 5-3

Market and Subject Property Average Rate Forecast

Area-wide Market (Calendar Year) Average Rate Growth — 0.0 % 1.0 2.0 6.0 3.0 3.0 Average Rate $97.00 97.00 97.97 99.92 105.92 109.10 112.37

Subject Property (Calendar Year) Average Rate Growth — 2.0 % 10.0 25.0 6.0 3.0 3.0 Average Rate $75.00 76.50 84.15 105.19 111.50 114.84 118.29 Average Rate Penetration 77.3 % 78.9 85.9 105.3 105.3 105.3 105.3

Year Base Year 2010 2011 2012 2013 2014 2015

Occupancy 58.7 % 59.7 58.2 55.6 65.3 66.9 68.1

Occupancy — — — 44.0 % 58.0 65.0 68.0

As illustrated above, a 2.0% rate of change is expected for the subject property's room rate in 2010. This is followed by rates of 10.0% and 25.0% in 2011 and 2012, respectively. The subject property’s room rate is expected to increase substantially when the renovation is completed and the convention center opens. In the stable-year forecast, we have positioned the subject

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Projection of Occupancy and Average Rate 24

property with an ADR roughly $10.00 below the Marriott Cedar Rapids, which is expected to remain the rate leader in this market. Moreover, if the subject property did not have any significant rate growth after the proposed renovation and followed the same growth rate as the market, the subject property’s base year rate assumption would have been $102.10, instead of $75. The following average rates will be used to project the subject property's rooms revenue; this forecast reflects years which begin September 1, 2012 and correspond with our financial projections.
Figure 5-4 Forecast of Average Rate
Year 2012/13 2013/14 2014/15 2015/16 Average Rate 109.39 113.73 117.14 120.65

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Income Capitalization Approach 25

6. Income Capitalization Approach

Review of Operating History

Because the Crowne Plaza Five Seasons is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The following income and expense statements were provided by current ownership. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for the Lodging Industry.

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Income Capitalization Approach 26

Figure 6-1

Historical Operating Performance

Number of Rooms: Occupied Rooms: Days Open: Occupancy: Average Rate: RevPAR:

2009 Calendar Year 275 39,749 365 Amount per 39.6% $74.69 Percentage Available $29.58 of Revenue Room 70.8 % 22.1 3.3 0.1 3.6 100.0 46.9 114.1 431.1 56.6 64.8 35.2 14.2 18.3 11.6 12.7 56.9 (21.7) 2.5 (24.1) 5.1 1.2 3.1 6.1 15.5 (39.6) % $10,796 3,375 505 16 552 15,243 5,068 4,427 68 312 9,876 5,367 2,168 2,795 1,761 1,942 8,666 (3,299) 381 (3,680) 781 185 465 933 2,365 ($6,045)

Amount per Occupied Room $74.69 23.35 3.49 0.11 3.82 105.46 35.07 30.63 0.47 2.16 68.33 37.13 15.00 19.33 12.19 13.44 59.96 (22.83) 2.64 (25.46) 5.41 1.28 3.22 6.45 16.36 ($41.82)

REVENUE Rooms $2,969 Food 928 Beverage 139 Telephone 4 Other Income 152 Total 4,192 DEPARTMENTAL EXPENSES* Rooms 1,394 Food & Beverage 1,218 Telephone 19 Other Expenses 86 Total 2,716 DEPARTMENTAL INCOME 1,476 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 596 Marketing 769 Prop. Operations & Maint. 484 Utilities 534 Total 2,383 HOUSE PROFIT (907) Management Fee 105 INCOME BEFORE FIXED CHARGES (1,012) FIXED EXPENSES Property Taxes 215 Insurance 51 Lease Expense 128 Other Income/Expense 257 Total 650 NET INCOME ($1,662)

*Departmental expenses are expressed as a percentage of departmental revenues.

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Income Capitalization Approach 27

Clearly the historical operating performance levels are not sustainable, as the property is losing money on an operational basis. As new management and a major renovation take place, expenses are expected to be cut sharply in the near-term; after the renovation is complete, revenues are expected to increase substantially to allow the property to be operated profitably. Premise of Forecast While occupancy gains have been considerable on a nationwide basis, average rates have yet to show a strong movement upward. With stronger demand in place for much of 2010, hotel operators should be able to command increases for 2011. Operators and investors in the market therefore expect an acceleration of revenue growth thereafter as the economy and lodging market gain traction in the present recovery; this outlook is reflected in our forecasts. Operators typically respond with stronger expense controls during periods when revenues decline. Hotel operations, on a national basis, are expected to see modest levels of improving revenues in 2010, but with continued controls on expenses to maximize the recovery in profitability. The expectations are for stronger growth in the following years, with some expense-control strategies having a positive longer-term impact on overall net operating income. HVS uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then increased in tandem with the underlying rate of inflation, while the variable component is adjusted for a specific measure of volume such as total revenue. Comparable Operating Statements HVS evaluated the performance of several hotels that are considered comparable to the subject property after its planned renovations and grand opening. All financial data is presented according to the three most common measures of industry performance: ratio to sales (RTS), amounts per available room (PAR), and amounts per occupied room night (POR). These historical income and expense statements will be used as benchmarks in our forthcoming forecast of income and expense.

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Income Capitalization Approach 28

Figure 6-2

Comparable Operating Statements: Ratio to Sales
Comp 1 Year: 2009/10 Number of Rooms: 170 to 220 Occupied Rooms: 51,822 Days Open: 365 Occupancy: 71% $118.23 Average Rate: $84.35 RevPAR: Comp 2 2007/08 180 to 230 47,872 366 65% $112.88 $73.09 54.9 % 11.8 0.0 0.1 30.8 2.4 100.0 21.9 78.2 282.6 81.2 22.2 47.0 53.0 5.2 2.1 3.3 2.8 3.7 17.0 36.0 3.0 33.0 10.8 1.0 0.0 4.0 15.8 17.2 % Comp 3 2007/08 210 to 260 57,794 366 67% $109.15 $73.65 73.0 % 20.6 0.0 0.2 0.0 6.2 100.0 27.7 80.3 457.1 0.0 21.9 39.2 60.8 10.6 8.1 4.6 6.0 4.3 33.6 27.2 3.0 24.2 0.0 1.3 3.3 4.0 8.6 15.6 % Comp 4 2007 190 to 240 50,771 365 65% $107.90 $70.13 71.3 % 26.5 0.0 0.3 0.0 1.9 100.0 24.6 79.0 144.0 0.0 36.1 39.7 60.3 10.3 7.0 4.8 6.0 5.6 33.6 26.7 3.0 23.7 3.1 1.0 0.0 4.0 8.1 15.6 % Comp 5 2005/06 190 to 250 56,534 365 70% $108.61 $76.46 57.4 % 40.9 0.0 0.4 0.0 1.3 100.0 23.7 59.7 89.7 0.0 0.0 38.4 61.6 8.0 10.7 3.7 3.7 4.5 30.6 31.0 3.0 28.0 3.7 0.9 0.0 4.0 8.6 19.4 % Comp 6 2005 270 to 330 73,733 365 67% $109.92 $74.02 55.1 % 6.3 2.9 0.3 34.0 1.4 100.0 25.1 75.0 126.5 60.2 0.0 41.6 58.4 9.0 9.8 2.1 3.7 5.1 29.8 28.6 2.6 26.0 2.8 0.9 0.0 0.0 3.7 22.3 %

REVENUE Rooms Food Beverage Telephone Convention Center Other Income Total DEPARTMENTAL EXPENSES* Rooms Food & Beverage Telephone Convention Center 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 Ground Lease Reserve for Replacement Total NET INCOME

51.8 % 30.5 5.7 0.1 7.1 4.8 100.0 25.1 76.7 1,018.2 63.4 80.0 50.0 50.0 12.5 8.5 0.0 4.5 6.1 31.6 18.4 3.0 15.3 0.0 1.0 0.0 4.0 5.0 10.3 %

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

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Income Capitalization Approach 29

Figure 6-3

Comparable Operating Statements: Amounts Per Available Room
Comp 1 Year: 2009/10 Number of Rooms: 170 to 220 Occupied Rooms: 51,822 Days Open: 365 Occupancy: 71% $118.23 Average Rate: $84.35 RevPAR: Comp 2 2007/08 180 to 230 47,872 366 65% $112.88 $73.09 $26,752 5,758 0 29 15,020 1,156 48,716 5,860 4,504 82 12,203 257 22,906 25,810 2,530 1,005 1,591 1,363 1,793 8,283 17,527 1,461 16,065 5,270 501 0 1,949 7,719 $8,346 Comp 3 2007/08 210 to 260 57,794 366 67% $109.15 $73.65 $26,957 7,598 0 90 0 2,286 36,932 7,457 6,103 410 0 500 14,470 22,462 3,932 2,974 1,688 2,226 1,603 12,423 10,039 1,108 8,931 0 487 1,231 1,477 3,195 $5,736 Comp 4 2007 190 to 240 50,771 365 65% $107.90 $70.13 $25,598 9,537 0 117 0 673 35,925 6,299 7,537 168 0 243 14,248 21,678 3,706 2,505 1,710 2,168 2,000 12,089 9,589 1,078 8,511 1,107 346 0 1,437 2,890 $5,621 Comp 5 2005/06 190 to 250 56,534 365 70% $108.61 $76.46 $27,909 19,891 0 177 0 609 48,586 6,614 11,882 159 0 0 18,655 29,932 3,905 5,191 1,782 1,805 2,182 14,864 15,068 1,458 13,611 1,791 414 (18) 1,943 4,130 $9,481 Comp 6 2005 270 to 330 73,733 365 67% $109.92 $74.02 $27,017 3,103 1,427 163 16,665 680 49,055 6,780 3,398 207 10,039 0 20,423 28,632 4,407 4,830 1,047 1,817 2,507 14,607 14,025 1,267 12,759 1,377 443 0 0 1,820 $10,939

REVENUE Rooms Food Beverage Telephone Convention Center Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Convention Center 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 Ground Lease Reserve for Replacement Total NET INCOME

$30,789 18,121 3,377 55 4,196 2,844 59,382 7,719 16,482 563 2,658 2,276 29,698 29,683 7,452 5,035 0 2,683 3,623 18,794 10,889 1,781 9,108 0 568 0 2,375 2,943 $6,165

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Income Capitalization Approach 30

Figure 6-4

Comparable Operating Statements: Amounts Per Occupied Room
Comp 1 Year: 2009/10 Number of Rooms: 170 to 220 Occupied Rooms: 51,822 Days Open: 365 Occupancy: 71% $118.23 Average Rate: $84.35 RevPAR: Comp 2 2007/08 180 to 230 47,872 366 65% $112.88 $73.09 $112.88 24.30 0.00 0.12 63.38 4.88 205.56 24.73 19.00 0.35 51.49 1.08 96.65 108.91 10.68 4.24 6.72 5.75 7.57 34.95 73.96 6.17 67.79 22.24 2.11 0.00 8.22 32.57 $35.22 Comp 3 2007/08 210 to 260 57,794 366 67% $109.15 $73.65 $109.15 30.76 0.00 0.36 0.00 9.26 149.53 30.19 24.71 1.66 0.00 2.02 58.59 90.94 15.92 12.04 6.83 9.01 6.49 50.30 40.65 4.49 36.16 0.00 1.97 4.98 5.98 12.94 $23.22 Comp 4 2007 190 to 240 50,771 365 65% $107.90 $70.13 $107.90 40.20 0.00 0.49 0.00 2.84 151.43 26.55 31.77 0.71 0.00 1.02 60.05 91.37 15.62 10.56 7.21 9.14 8.43 50.95 40.42 4.54 35.87 4.67 1.46 0.00 6.06 12.18 $23.69 Comp 5 2005/06 190 to 250 56,534 365 70% $108.61 $76.46 $108.61 77.40 0.00 0.69 0.00 2.37 189.07 25.74 46.24 0.62 0.00 0.00 72.59 116.48 15.19 20.20 6.93 7.02 8.49 57.84 58.64 5.67 52.97 6.97 1.61 (0.07) 7.56 16.07 $36.90 Comp 6 2005 270 to 330 73,733 365 67% $109.92 $74.02 $109.92 12.63 5.80 0.66 67.81 2.77 199.59 27.59 13.82 0.84 40.84 0.00 83.10 116.50 17.93 19.65 4.26 7.39 10.20 59.43 57.07 5.15 51.91 5.60 1.80 0.00 0.00 7.41 $44.50

REVENUE Rooms Food Beverage Telephone Convention Center Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Convention Center 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 Ground Lease Reserve for Replacement Total NET INCOME

$118.23 69.58 12.97 0.21 16.11 10.92 228.03 29.64 63.29 2.16 10.21 8.74 114.04 113.99 28.62 19.34 0.00 10.30 13.91 72.17 41.82 6.84 34.98 0.00 2.18 0.00 9.12 11.30 $23.68

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Income Capitalization Approach 31

The following table summarizes a compilation of several historical operating statements taken from these comparable properties.
Figure 6-5 Composite Financial Operating Statement – Comparable Facilities
Number of Rooms: 1,369 Occupied Rooms: 338,526 Days Open: 365 Occupancy: 67.7% Amount per Amount per Occupied Average Rate: $110.96 Percentage Available RevPAR: $75.17 of Revenue Room Room REVENUE Rooms Food Beverage Telephone Convention Center Other Income Total DEPARTMENTAL EXPENSES Rooms Food & Beverage Telephone Convention Center 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 $37,562 13,895 1,100 151 8,869 1,817 63,393 9,302 10,864 358 6,006 674 27,203 36,190 5,888 5,028 1,788 2,736 3,118 18,559 17,631 1,840 15,791 59.3 % 21.9 1.7 0.2 14.0 2.9 100.0 24.8 78.2 237.0 67.7 37.1 42.9 57.1 9.3 7.9 2.8 4.3 4.9 29.3 27.8 2.9 24.9 $27,438 10,150 804 110 6,478 1,327 46,306 6,795 7,936 261 4,387 492 19,871 26,436 4,301 3,673 1,306 1,999 2,278 13,557 12,879 1,344 11,535 $110.96 41.05 3.25 0.45 26.20 5.37 187.26 27.48 32.09 1.06 17.74 1.99 80.36 106.91 17.39 14.85 5.28 8.08 9.21 54.82 52.08 5.44 46.65

The comparable operations of other similar properties indicate a substantial upside compared to the historical operating performance of the subject property. We considered this composite statement as well as numerous individual operating statements from individual comparable hotel operations in positioning the subject property for its “when stabilized” value.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

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Income Capitalization Approach 32

Inflation Assumption

In consideration of the most recent trends, the projections set forth previously, and our assessment of probable property appreciation levels, we have applied an underlying inflation rate of 2.0% in 2012/13, 2.0% in 2013/14, and 3.0% in 2014/15 and thereafter. This stabilized inflation rate takes into account normal, recurring inflation cycles. Inflation is likely to fluctuate above and below this level during the projection period. Any exceptions to the application of the assumed underlying inflation rate are discussed in our write-up of individual income and expense items. Based on an analysis that will be detailed throughout this section, we have formulated a forecast of income and expense. The following table presents a detailed forecast through the first several projection years, including amounts per available room and per occupied room. The second table illustrates our ten-year forecast of income and expense, presented with a lesser degree of detail. The forecasts pertain to years beginning September 1, 2012 and are expressed in inflated dollars for each year.

Summary of Projections

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

Figure 6-6

Detailed Forecast of Income and Expense and Trailing-12-Month Operating History
Historical Operating Results 2009 Fiscal Year Ending December 275 40% $74.69 $29.58 365 39,749 %Gross PAR POR 2012/13 Begins September 238 53% $109.39 $57.98 365 46,041 %Gross PAR $5,036 46.5 % $21,160 1,455 13.4 6,112 431 4.0 1,811 16 0.1 65 3,592 33.2 15,091 301 2.8 1,267 10,831 100.0 45,506 1,427 28.3 1,569 83.2 18 114.9 2,807 78.2 158 52.5 5,979 55.2 4,851 44.8 744 769 403 595 620 3,130 1,721 325 1,396 329 52 28 217 626 $771 6.9 7.1 3.7 5.5 5.7 28.9 15.9 3.0 12.9 3.0 0.5 0.3 2.0 5.8 7.1 % 5,997 6,591 75 11,795 665 25,122 20,384 3,126 3,230 1,693 2,500 2,605 13,153 7,231 1,365 5,866 1,381 219 119 910 2,629 $3,237 2013/14 238 63% $113.73 $71.65 365 54,728 %Gross 2014/15 238 67% $117.14 $78.48 365 58,203 %Gross Stabilized 238 68% $120.65 $82.04 365 59,072 %Gross 2016/17 238 68% $124.27 $84.50 365 59,072 %Gross

Number of Rooms: Occupancy: Average Rate: RevPAR: Days Open: Occupied Rooms: REVENUE Rooms $2,969 70.8 % $10,796 $74.69 Food 928 22.1 3,375 23.35 Beverage 139 3.3 505 3.49 Telephone 4 0.1 16 0.11 Convention Center** 0 0.0 0 0.00 Other Income 152 3.6 552 3.82 Total Revenues 4,192 100.0 15,243 105.46 DEPARTMENTAL EXPENSES * Rooms 1,394 46.9 5,068 35.07 Food & Beverage 1,218 114.1 4,427 30.63 Telephone 19 431.1 68 0.47 Convention Center** 0 0.0 0 0.00 Other Expenses 86 56.6 312 2.16 Total 2,716 64.8 9,876 68.33 DEPARTMENTAL INCOME 1,476 35.2 5,367 37.13 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 596 14.2 2,168 15.00 Marketing 769 18.3 2,795 19.33 Franchise Fee 0 0.0 0 0.00 Prop. Operations & Maint. 484 11.6 1,761 12.19 Utilities 534 12.7 1,942 13.44 Total 2,383 56.9 8,666 59.96 HOUSE PROFIT (907) (21.6) (3,299) (22.83) Management Fee 105 2.5 381 2.64 INCOME BEFORE FIXED CHARGES (1,012) (24.1) (3,680) (25.46) FIXED EXPENSES Property Taxes 215 5.1 781 5.41 Insurance 51 1.2 185 1.28 Lease Expense 128 3.1 465 3.22 Reserve for Replacement 0 0.0 0 0.00 Total 650 15.5 2,365 16.36 NET INCOME ($1,662) (39.7) % ($6,045) ($41.82)

POR $109.38 31.60 9.36 0.34 78.01 6.55 235.24 31.00 34.07 0.39 60.97 3.44 129.86 105.37 16.16 16.70 8.75 12.93 13.46 67.99 37.38 7.06 30.32 7.14 1.13 0.61 4.70 13.59 $16.74

PAR

POR $113.73 31.00 9.18 0.34 77.24 5.94 237.43 28.59 31.10 0.35 58.25 3.02 121.33 116.10 14.49 14.98 9.10 11.59 12.08 62.24 53.87 7.12 46.74 6.10 0.98 0.56 7.12 14.76 $31.98

PAR

POR $117.14 31.42 9.31 0.35 76.15 5.86 240.24 28.36 30.74 0.35 57.18 2.94 119.57 120.67 14.19 14.66 9.37 11.35 11.82 61.39 59.28 7.21 52.07 5.85 0.95 0.56 9.61 16.96 $35.11

PAR

POR $120.65 32.25 9.55 0.36 77.63 5.97 246.41 28.96 31.35 0.36 58.22 2.99 121.87 124.54 14.44 14.92 9.65 11.55 12.03 62.58 61.96 7.39 54.56 5.93 0.96 0.57 9.86 17.32 $37.25

PAR

POR $124.27 33.21 9.84 0.37 79.96 6.15 253.80 29.83 32.29 0.37 59.97 3.08 125.53 128.28 14.87 15.36 9.94 11.89 12.39 64.46 63.82 7.61 56.20 6.11 0.99 0.58 10.15 17.84 $38.37

$6,224 47.9 % $26,151 1,696 13.1 7,128 503 3.9 2,112 19 0.1 78 4,227 32.5 17,761 325 2.5 1,366 12,994 100.0 54,596 1,565 25.1 1,702 77.4 19 104.3 3,188 75.4 165 50.8 6,640 51.1 6,354 48.9 793 820 498 635 661 3,406 2,948 390 2,558 334 54 31 390 808 $1,750 6.1 6.3 3.8 4.9 5.1 26.2 22.7 3.0 19.7 2.6 0.4 0.2 3.0 6.2 13.5 % 6,575 7,152 82 13,396 694 27,899 26,698 3,332 3,444 2,092 2,666 2,777 14,311 12,386 1,638 10,749 1,402 225 130 1,638 3,394 $7,354

$6,818 48.8 % $28,647 1,829 13.1 7,685 542 3.9 2,277 20 0.1 85 4,432 31.7 18,624 341 2.4 1,433 13,982 100.0 58,750 1,651 24.2 1,789 75.5 20 100.8 3,328 75.1 171 50.2 6,959 49.8 7,023 50.2 826 853 545 661 688 3,573 3,450 419 3,031 340 55 32 559 987 $2,044 5.9 6.1 3.9 4.7 4.9 25.5 24.7 3.0 21.7 2.4 0.4 0.2 4.0 7.0 14.7 % 6,937 7,517 86 13,983 719 29,241 29,509 3,469 3,585 2,292 2,775 2,891 15,013 14,496 1,762 12,734 1,430 232 136 2,350 4,147 $8,586

$7,127 49.0 % $29,945 1,905 13.1 8,003 564 3.9 2,371 21 0.1 89 4,586 31.5 19,267 353 2.4 1,482 14,556 100.0 61,159 1,710 24.0 1,852 75.0 21 100.0 3,439 75.0 176 50.0 7,199 49.5 7,357 50.5 853 881 570 682 711 3,697 3,660 437 3,223 350 57 33 582 1,023 $2,200 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 % 7,187 7,781 89 14,451 741 30,249 30,910 3,583 3,702 2,396 2,866 2,986 15,533 15,377 1,835 13,543 1,472 239 141 2,446 4,298 $9,244

$7,341 49.0 % $30,845 1,962 13.1 8,243 581 3.9 2,443 22 0.1 92 4,723 31.5 19,845 363 2.4 1,527 14,993 100.0 62,994 1,762 24.0 1,907 75.0 22 100.0 3,542 75.0 182 50.0 7,415 49.5 7,577 50.5 878 908 587 703 732 3,808 3,770 450 3,320 361 59 34 600 1,054 $2,266 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 % 7,403 8,014 92 14,884 763 31,156 31,838 3,690 3,813 2,468 2,952 3,075 15,999 15,839 1,890 13,949 1,517 246 145 2,520 4,427 $9,522

*Departmental expenses are expressed as a percentage of departmental revenues. **An independent feasibility study for the convention center had not been completed at the time of this report; as such, our revenue and expense projections are subject to change in this department, depending on the results of a detailed study.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

Figure 6-7

Ten-Year Forecast of Income and Expense
2012/13 2013/14 238 54,728 63% $113.73 $71.65 2014/15 238 58,203 67% $117.14 $78.48 2015/16 238 59,072 68% $120.65 $82.04 2016/17 238 59,072 68% $124.27 $84.50 2017/18 238 59,072 68% $128.00 $87.04 2018/19 238 59,072 68% $131.84 $89.65 2019/20 238 59,072 68% $135.79 $92.34 2020/21 238 59,072 68% $139.87 $95.11 2021/22 238 59,072 68% $144.06 $97.96

Number of Rooms: Occupied Rooms: Occupancy: Average Rate: RevPAR: REVENUE Rooms Food Beverage Telephone Convention Center** Other Income Total DEPARTMENTAL EXPENSES* Rooms Food & Beverage Telephone Convention Center** Other Expenses Total DEPARTMENTAL INCOME UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Franchise Fee Prop. Operations & Maint. Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Lease Expense Reserve for Replacement Total NET INCOME

238 46,041 53% $109.39 % of $57.98 Gross $5,036 46.5 % 1,455 13.4 431 4.0 16 0.1 3,592 33.2 301 2.8 10,831 100.0 1,427 28.3 1,569 83.2 18 114.9 2,807 78.2 158 52.5 5,979 55.2 4,851 44.8 744 769 403 595 620 3,130 1,721 325 1,396 329 52 28 217 626 6.9 7.1 3.7 5.5 5.7 28.9 15.9 3.0 12.9 3.0 0.5 0.3 2.0 5.8

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

$6,224 47.9 % 1,696 13.1 503 3.9 19 0.1 4,227 32.5 325 2.5 12,994 100.0 1,565 25.1 1,702 77.4 19 104.3 3,188 75.4 165 50.8 6,640 51.1 6,354 48.9 793 820 498 635 661 3,406 2,948 390 2,558 334 54 31 390 808 6.1 6.3 3.8 4.9 5.1 26.2 22.7 3.0 19.7 2.6 0.4 0.2 3.0 6.2

$6,818 48.8 % 1,829 13.1 542 3.9 20 0.1 4,432 31.7 341 2.4 13,982 100.0 1,651 24.2 1,789 75.5 20 100.8 3,328 75.1 171 50.2 6,959 49.8 7,023 50.2 826 853 545 661 688 3,573 3,450 419 3,031 340 55 32 559 987 5.9 6.1 3.9 4.7 4.9 25.5 24.7 3.0 21.7 2.4 0.4 0.2 4.0 7.0

$7,127 49.0 % 1,905 13.1 564 3.9 21 0.1 4,586 31.5 353 2.4 14,556 100.0 1,710 24.0 1,852 75.0 21 100.0 3,439 75.0 176 50.0 7,199 49.5 7,357 50.5 853 881 570 682 711 3,697 3,660 437 3,223 350 57 33 582 1,023 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0

$7,341 49.0 % 1,962 13.1 581 3.9 22 0.1 4,723 31.5 363 2.4 14,993 100.0 1,762 24.0 1,907 75.0 22 100.0 3,542 75.0 182 50.0 7,415 49.5 7,577 50.5 878 908 587 703 732 3,808 3,770 450 3,320 361 59 34 600 1,054 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0

$7,561 49.0 % 2,021 13.1 599 3.9 22 0.1 4,865 31.5 374 2.4 15,442 100.0 1,815 24.0 1,965 75.0 22 100.0 3,649 75.0 187 50.0 7,638 49.5 7,805 50.5 905 935 605 724 754 3,922 3,883 463 3,419 372 60 35 618 1,085 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0

$7,788 49.0 % 2,081 13.1 617 3.9 23 0.1 5,011 31.5 385 2.4 15,906 100.0 1,869 24.0 2,024 75.0 23 100.0 3,758 75.0 193 50.0 7,867 49.5 8,039 50.5 932 963 623 745 776 4,040 3,999 477 3,522 383 62 37 636 1,118 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0

$8,022 49.0 % 2,144 13.1 635 3.9 24 0.1 5,161 31.5 397 2.4 16,383 100.0 1,925 24.0 2,084 75.0 24 100.0 3,871 75.0 199 50.0 8,103 49.5 8,280 50.5 960 992 642 768 800 4,161 4,120 491 3,628 394 64 38 655 1,151 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0

$8,262 49.0 % 2,208 13.1 654 3.9 25 0.1 5,316 31.5 409 2.4 16,874 100.0 1,983 24.0 2,147 75.0 25 100.0 3,987 75.0 204 50.0 8,346 49.5 8,528 50.5 989 1,021 661 791 824 4,286 4,243 506 3,736 406 66 39 675 1,186 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 %

$8,510 49.0 % 2,274 13.1 674 3.9 25 0.1 5,475 31.5 421 2.4 17,380 100.0 2,042 24.0 2,211 75.0 25 100.0 4,107 75.0 211 50.0 8,596 49.5 8,784 50.5 1,018 1,052 681 815 848 4,414 4,370 521 3,849 418 68 40 695 1,221 $2,627 1 5.9 6.1 3.9 4.7 4.9 25.5 25.0 3.0 22.0 2.4 0.4 0.2 4.0 7.0 15.0 %

$771 7.1 % $1,750 13.5 % $2,044 14.7 % $2,200 15.0 % $2,266 15.0 % $2,334 15.0 % $2,404 15.0 % $2,477 15.0 % $2,550 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues. **An independent feasibility study for the convention center had not been completed at the time of this report; as such, our revenue and expense projections are subject to change in this department, depending on the results of a detailed study.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

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Income Capitalization Approach 35

Forecast of Income and Expense

The following description sets forth the basis for the forecast of income and expense. We anticipate that it will take four years for the subject property to reach a stabilized level of operation. Each revenue and expense item has been forecast based upon our review of the subject property’s operating history, operating budget, and comparable income and expense statements. Our forecast is based upon fiscal years beginning September 1, 2012 and is expressed in inflated dollars for each year. • The subject property is expected to stabilize at 68% with an average rate of $120.65 in 2015/16. Following the stabilized year, the subject property’s average rate is projected to increase along with the underlying rate of inflation. We project food and beverage revenue to be $31.60 and $9.36 per occupied room, respectively, in the first projection year, or 28.9% and 8.6% of rooms revenue. These per-occupied-room amounts change to $32.25 and $9.55 for respective food and beverage revenue categories by the stabilized year, or respectively 26.7% and 7.9% of rooms revenue. On a percentage of food revenue, beverage revenue is forecast at 29.6% in the first projection year as well as the stabilized year. We forecast the subject property’s telephone revenue to stabilize at 0.3% of rooms revenue or $0.36 per occupied room by the stabilized year, 2015/16. Our forecast is highly tied to the subject property’s operating history, which is directly reflective of the telephone use trends of guests in this Cedar Rapids market. We forecast the subject property’s convention center income to stabilize at $77.63 per occupied room by the stabilized year, 2015/16. We forecast the subject property’s other income to stabilize at $5.97 per occupied room by the stabilized year, 2015/16. We have projected rooms expense for the subject at 28.3% in the first year (or $31.00 per occupied room), stabilizing at 24.0% in 2015/16. In the first projection year, we have projected administrative and general expense for the subject property to be $3,126 per available room, or 6.9% of total revenue. By the 2015/16 stabilized year, these amounts change to $3,583 per available room and 5.9% of total revenue.





• • • •

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

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Income Capitalization Approach 36



In the first projection year, we have projected marketing expense for the subject property to be $3,230 per available room, or 7.1% of total revenue. By the 2015/16 stabilized year, these amounts change to $3,702 per available room and 6.1% of total revenue. The hotel is expected to undergo a major renovation and we assume that the subject property will keep its flag as a Crowne Plaza after the renovation. We note that the current franchise agreement would automatically be terminated upon sale of the property. We have assumed that a buyer would secure a new license agreement that would reflect the terms as published in the hotel company’s Uniform Franchise Offering Circular (UFOC). Such a new license would likely require substantial upgrades, repairs, and renovations to the property in order to comply with prevailing brand standards, which would necessitate additional investment. In the first projection year, we have projected property operations and maintenance expense for the subject property to be $2,500 per available room, or 5.5% of total revenue. By the 2015/16 stabilized year, these amounts change to $2,866 per available room and 4.7% of total revenue. We have projected utilities expense for the subject property to be 5.7% of total revenue or $2,605 per available room in year one, stabilizing at 4.9% of total revenue or $2,986 per available room. Management fees for the subject property have been forecast at 3.0% of total revenue. Based on our review of historical levels and comparable data, we project the subject property's insurance expense at $239 per available room by the stabilized year. This stabilized level equates to 0.4% of total revenue.







• •

INCOME CAPITALIZATION – DISCOUNTED CASH FLOW TECHNIQUE Overall Discount Rate and Discounted Cash Flow Analysis

The subject property has been valued via the income approach through the application of a ten-year, discounted cash-flow analysis. For the purpose of the prospective, “when stabilized” value, we conducted the following discounted cash flow analysis. The income approach can also be applied through the application of an overall discount rate. A 12.3% discount rate was derived, in part, from the mortgage-equity analysis. This discount rate was then applied to the hotel’s

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Income Capitalization Approach 37

net income before debt service (free-and-clear cash flow) to the derived value, calculated as follows:
Figure 6-8 Value Derived by Application of Overall Discount Rate
Stabilized Year Discount Rate Terminal Cap Transaction Costs Year 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Net Income $2,200,000 2,266,000 2,334,000 2,404,000 2,477,000 2,550,000 2,627,000 2,706,000 2,787,000 33,219,000 * 4 12.3 % 9.5 2.5 Discount Factor @ 12.3% 0.89011 0.79229 0.70522 0.62772 0.55874 0.49733 0.44268 0.39403 0.35073 0.31219 Estimated Value (SAY) Reversion Analysis 11th Year's Net Income Capitalization Rate Per Room Discounted Cash Flow $1,958,000 1,795,000 1,646,000 1,509,000 1,384,000 1,268,000 1,163,000 1,066,000 977,000 10,371,000 $23,137,000 $23,100,000 $97,000 $2,957,000 9.5% $31,126,000 778,000 30,348,000

Total Sales Proceeds Less: Transaction Costs @ 2.5% Net Sales Proceeds (Say)

*10th year net income of $2,871,000 plus sales proceeds of $30,348,000

The discount rate selected is considered appropriate for the subject property given the anticipated benefits of the proposed renovation and grand reopening. Conclusion Using the income capitalization approach, the subject property was valued by a mortgage-equity valuation analysis, a straightforward discounted cash flow analysis, as well as a direct capitalization. Based on our review of each method and their inherent strengths and weaknesses, as well as investor attitudes and methodologies, we have reconciled the stabilized value indication via the income capitalization approach to $23,100,000, or $97,000 per room.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

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Sales Comparison Approach 38

7. Sales Comparison Approach

The following transactions involved hotels that have some degree of similitude with the subject property.
Figure 7-1 Summary of Selected Comparable Sales

Property Marriott West Des Moines Holiday Inn Columbus DoubleTree Guest Suites Lexington DoubleTree at Warren Place Tulsa

Location West Des Moines, Iowa Columbus, Ohio Lexington, Kentucky Tulsa, Oklahoma

Sale Date Jun-10 Apr-09 Jun-07 Apr-07

Price $29,297,601 20,000,000 12,587,395 31,000,000

Rooms 219 243 155 370

Price/Rm $133,779 82,305 81,209 83,784

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Sales Comparison Approach 39

Review of Comparable Sales
Figure 7-2

The following table sets forth the adjustment grid used to account for differences between the transacted properties and the subject property.

Comparable Sales Adjustment Grid
Sale #1 Subject Property Marriott West Des Moines, West Des Moines, Iowa $29,297,601 219 $133,779 June-10 Sale #2 Holiday Inn Columbus, Columbus, Ohio $20,000,000 243 $82,305 April-09 Sale #3 Sale #4

Elements of Comparison Sale Price Number of Rooms Price per Room Date of Sale

DoubleTree Guest DoubleTree at Suites Lexington, Warren Place Tulsa, Lexington, Kentucky Tulsa, Oklahoma $12,587,395 155 $81,209 June-07 $31,000,000 370 $83,784 April-07

238

Adjustments for Transaction Characteristics (Per Room) Property Rights Conveyed Adjustment Adjusted Sales Price Financing Terms Adjustment Adjusted Sales Price Conditions of Sale Adjustment Adjusted Sales Price Market Conditions Adjustment Adjusted Sales Price Adjusted Price Adjustments for Property Characteristics Location/Market Adjustment Physical Condition/Facilities Adjustment Other Revenue Sources Adjustment Cumulative Percentage Adjustment Net Adjust. for Property Characteristics Final Adjusted Unit Price Superior (20.0) % Superior (20.0) % Similar 0.0 % (40.0) % (58,863) $88,000 Superior (20.0) % Inferior 5.0 % Similar 0.0 % (15.0) % (15,432) $87,000 Superior (5.0) % Similar 0.0 % Similar 0.0 % (5.0) % (4,060) $77,000 Superior (5.0) % Similar 0.0 % Similar 0.0 % (5.0) % (4,189) $80,000 Fee Simple Fee Simple 0.0 % 133,779 Cash Equivalent 0.0 % 133,779 Normal 0.0 % 133,779 Inferior 10.0 % 147,157 $147,157 Fee Simple 0.0 % 82,305 Cash Equivalent 0.0 % 82,305 Normal 0.0 % 82,305 Inferior 25.0 % 102,881 $102,881 Fee Simple 0.0 % 81,209 Cash Equivalent 0.0 % 81,209 Normal 0.0 % 81,209 Similar 0.0 % 81,209 $81,209 Fee Simple 0.0 % 83,784 Cash Equivalent 0.0 % 83,784 Normal 0.0 % 83,784 Similar 0.0 % 83,784 $83,784

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Sales Comparison Approach 40

Adjustments for market conditions were applied to all sales to reflect the prospective nature of the “when stabilized” effective value date for the subject property. Additional adjustments were considered for the location, physical condition, facility attributes, and revenue sources of each comparable sale relative to the prospective position of the subject property upon stabilization. Conclusion Prior to adjustments, the comparable sales transacted for amounts ranging from $81,000 to $134,000 per room. Following quantitative and qualitative adjustments, we have positioned an appropriate value at $77,000 to $88,000 per room, or $18,300,000 to $20,900,000, for the 238-room subject property.

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Reconciliation of Value Indications 41

8. Reconciliation of Value Indications

The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final value conclusion is arrived at after reviewing the estimates indicated by the income capitalization and sales comparison approaches. The relative significance, applicability, and defensibility of each indicated value are considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property; our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we have analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property.

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HVS Consulting and Valuation Services

Reconciliation of Value Indications 42

Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render these sales prices applicable to the subject property. The adjustments, which tend to be subjective, diminish the reliability of the sales comparison approach; furthermore, typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $77,000 to $88,000 per available room. The income capitalization approach indicates a per room value of $80,000 (rounded). This information supports the “when complete” value indicated by the income capitalization approach. Cost Approach Due to the practices of typical hotel buyers and sellers in today’s market, the cost approach was not employed in arriving at a “when stabilized” market value estimate. However, we considered the renovation budget and cost requirements in determining our forecasts for the subject property’s future performance levels. Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach.

Value Conclusion

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Reconciliation of Value Indications 43

Based on our analysis, it is our opinion that the “when complete” prospective market value of the fee simple interest in the Crowne Plaza Five Seasons, as of September 1, 2012, is: $19,100,000 NINETEEN MILLION ONE HUNDRED THOUSAND DOLLARS This value estimate equates to $80,000 per room, based on an assumed reduction in guestroom inventory to 238 units. The estimates of market value include the land (if applicable), the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. Based on our analysis, it is our opinion that the “when stabilized” prospective market value of the fee simple interest in the Crowne Plaza Five Seasons, as of September 1, 2015, is: $23,100,000 TWENTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS This value estimate equates to $97,000 per room, based on an assumed reduction in guestroom inventory to 238 units. The estimates of market value include the land (if applicable), the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. We have made several extraordinary assumptions specific to the subject property. (1) We assume all necessary capital improvements will be made to allow the property to maintain its brand and re-open as a Crowne Plaza in 2012. (2) We assume the adjacent U.S. Cellular Arena will complete a major refurbishment that will make the venue more attractive and enhance all common areas that are used by hotel guests. (3) We assume the new convention center will be adjacent to the subject property, with adequate connectivity to allow the subject property to serve as the convention center's headquarters hotel. (4) We assume the new convention center will perform as projected, as no detailed market study has been completed as of our report date. (5) We assume the proposed convention center will be developed at a cost of approximately $67 million and offer 60,000 square feet of rentable function space while the subject property's complete renovation and redevelopment will cost approximately $21 million. (6) We assume that all of these projects except the convention center (1/1/2013 open) will be completed

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Reconciliation of Value Indications 44

as of September 1, 2012, which is the effective value date for this appraisal. Additionally, several important general assumptions have been made that apply to this appraisal and our valuations of hotels in general. These aspects are set forth in the Assumptions and Limiting Conditions chapter of this report. We have made no assumptions of hypothetical conditions in our report.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Statement of Assumptions and Limiting Conditions 45

9. Statement of Assumptions and Limiting Conditions

1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the subsoil or structures, such as underground storage tanks, that would render the property more or less valuable. 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 such as asbestos, urea formaldehyde foam insulation, any form of toxic waste, polychlorinated biphenyls (PCB), pesticides, mold, or lead-based paints. The appraisers 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 conducted no specific compliance survey to determine whether the subject property has been designed in accordance with the various detailed requirements of the ADA. It is possible that the design does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible noncompliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the described real estate is within the boundaries of the property described, and that there is no encroachment or trespass unless noted.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Statement of Assumptions and Limiting Conditions 46

7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by CCG Holdings, LLC are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. 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. 12. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per-diem fees and travel costs are paid prior to the appearance. 13. 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. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. 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 and the value estimate. 16. The financial analysis presented in this report is based upon assumptions, estimates, and evaluations of the market conditions in the local and national economy, which may be subject to sharp rises and declines. Over the projection period considered in our analysis, wages and other operating expenses may increase or decrease due to market volatility and economic forces outside the control of the hotel’s management. We assume that the price of hotel rooms, food, beverages, and other sources

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Statement of Assumptions and Limiting Conditions 47

of revenue to the hotel will be adjusted to offset any increases or decreases in related costs. We do not warrant that our estimates will be attained, but they have been developed 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(s) of valuation. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. 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. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Foundation. 23. This study was prepared by CCG Holdings, LLC. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of CCG Holdings, LLC as employees, rather than as individuals.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Certification 48

10. Certification

The undersigned hereby certify that, to the best of our knowledge and belief: 1. the statements of fact presented in this report are true and correct; 2. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions; 3. we have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved; 4. we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; 5. our engagement in this assignment was not contingent upon developing or reporting predetermined results; 6. our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal; 7. our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice; 8. Hans Detlefsen, MPP personally inspected the property described in this report; Jimmy Bae participated in the analysis, but did not personally inspect the property; 9. no one other than those listed above and the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this appraisal report; 10. the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Certification 49

Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute; 11. the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and 12. as of the date of this report, Hans Detlefsen, MPP, MAI, has completed the requirements of the continuing education program of the Appraisal Institute.

Jimmy Bae Senior Associate CCG Holdings, LLC A licensee of the HVS service mark

Hans Detlefsen, MPP, MAI Managing Director CCG Holdings, LLC A licensee of the HVS service mark State Appraiser License CG03100 (IA)

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Stress Test Scenario 50

Addendum A – Stress Test Scenario

Overview

Considering the financial, political, and other potential risks associated with a project of this nature, representatives of the City of Cedar Rapids asked HVS to develop a second scenario as a “stress test” to determine the impact on projected income and expense if lodging demand does not materialize as expected. Specifically, this scenario assumes: Subject stabilized occupancy of 60% Subject stabilized ADR of less than $100 (in base year dollars) In order to reach occupancies of only 60% at the subject property, this scenario implies the following assumptions about market demand: 0% growth in base lodging demand in Cedar Rapids 67% reduction in induced demand from new convention center and subject property’s additional meeting spaces This scenario still assumes a 238-room Crowne Plaza hotel will re-open on September 1st, 2012, following a one-year complete renovation that would cost approximately $21 million. The projections in this scenario are not intended to reflect the expectations of typical market participants. Rather, these projections are intended to be used for internal planning purposes by the City of Cedar Rapids. The following table provides a ten-year, detailed forecast of income and expense line items subject to the preceding assumptions.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

HVS Consulting and Valuation Services

Stress Test Scenario 51

Ten-Year Forecast of Income and Expense
2012/13 Number of Rooms: Occupied Rooms: Occupancy: Average Rate: RevPAR: REVENUE Rooms Food Beverage Telephone Convention Center** Other Income Total DEPARTMENTAL EXPENSES* Rooms Food & Beverage Telephone Convention Center** Other Expenses Total DEPARTMENTAL INCOME UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Franchise Fee Prop. Operations & Maint. Utilities Total HOUSE PROFIT Management Fee INCOME BEFORE FIXED CHARGES FIXED EXPENSES Property Taxes Insurance Lease Expense Reserve for Replacement Total NET INCOME 238 42,566 49% $103.92 % of $50.92 Gross $4,424 46.0 % 1,327 13.8 393 4.1 14 0.1 3,197 33.2 269 2.8 9,624 100.0 1,216 27.5 1,403 81.6 16 111.9 2,492 78.0 140 52.0 5,267 54.7 4,357 45.3 749 774 354 599 624 3,100 1,256 289 968 329 52 29 192 602 7.8 8.0 3.7 6.2 6.5 32.2 13.1 3.0 10.1 3.4 0.5 0.3 2.0 6.2 2013/14 238 48,647 56% $108.04 $60.50 2014/15 238 51,253 59% $111.28 $65.66 2015/16 238 52,122 60% $114.62 $68.77 2016/17 238 52,122 60% $118.06 $70.84 2017/18 238 52,122 60% $121.60 $72.96 2018/19 238 52,122 60% $125.25 $75.15 2019/20 238 52,122 60% $129.01 $77.40 2020/21 238 52,122 60% $132.88 $79.73 2021/22 238 52,122 60% $136.86 % of $82.12 Gross $7,134 47.7 % 2,007 13.4 595 4.0 22 0.1 4,831 32.3 372 2.5 14,961 100.0 1,712 24.0 1,951 75.0 22 100.0 3,623 75.0 186 50.0 7,495 50.1 7,466 49.9 1,018 1,052 571 815 848 4,304 3,162 449 2,713 418 68 40 598 1,125 $1,588 1 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6 10.6 %

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

% of Gross

$5,256 46.7 % 1,505 13.4 446 4.0 17 0.1 3,738 33.2 288 2.6 11,249 100.0 1,315 25.0 1,506 77.2 17 103.8 2,818 75.4 146 50.7 5,802 51.6 5,447 48.4 794 821 420 635 662 3,333 2,114 337 1,777 334 54 31 337 756 7.1 7.3 3.7 5.6 5.9 29.6 18.8 3.0 15.8 3.0 0.5 0.3 3.0 6.8

$5,704 47.5 % 1,611 13.4 477 4.0 18 0.1 3,909 32.5 301 2.5 12,020 100.0 1,383 24.2 1,578 75.5 18 100.9 2,935 75.1 151 50.2 6,064 50.5 5,956 49.5 825 853 456 660 688 3,483 2,473 361 2,112 340 55 32 481 909 6.9 7.1 3.8 5.5 5.7 29.0 20.5 3.0 17.5 2.8 0.5 0.3 4.0 7.6

$5,974 47.7 % 1,681 13.4 498 4.0 19 0.1 4,046 32.3 311 2.5 12,529 100.0 1,434 24.0 1,634 75.0 19 100.0 3,035 75.0 156 50.0 6,277 50.1 6,252 49.9 853 881 478 682 711 3,605 2,647 376 2,272 350 57 33 501 942 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6

$6,153 47.7 % 1,731 13.4 513 4.0 19 0.1 4,168 32.3 321 2.5 12,904 100.0 1,477 24.0 1,683 75.0 19 100.0 3,126 75.0 160 50.0 6,465 50.1 6,439 49.9 878 908 492 703 732 3,713 2,727 387 2,340 361 59 34 516 970 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6

$6,338 47.7 % 1,783 13.4 528 4.0 20 0.1 4,293 32.3 330 2.5 13,292 100.0 1,521 24.0 1,734 75.0 20 100.0 3,219 75.0 165 50.0 6,659 50.1 6,633 49.9 905 935 507 724 754 3,824 2,809 399 2,410 372 60 35 532 999 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6

$6,528 47.7 % 1,837 13.4 544 4.0 20 0.1 4,421 32.3 340 2.5 13,691 100.0 1,567 24.0 1,786 75.0 20 100.0 3,316 75.0 170 50.0 6,859 50.1 6,832 49.9 932 963 522 745 776 3,939 2,893 411 2,482 383 62 37 548 1,029 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6

$6,724 47.7 % 1,892 13.4 560 4.0 21 0.1 4,554 32.3 350 2.5 14,101 100.0 1,614 24.0 1,839 75.0 21 100.0 3,415 75.0 175 50.0 7,065 50.1 7,037 49.9 960 992 538 768 800 4,057 2,980 423 2,557 394 64 38 564 1,060 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6

$6,926 47.7 % 1,948 13.4 577 4.0 22 0.1 4,691 32.3 361 2.5 14,525 100.0 1,662 24.0 1,894 75.0 22 100.0 3,518 75.0 180 50.0 7,276 50.1 7,248 49.9 989 1,021 554 791 824 4,179 3,070 436 2,634 406 66 39 581 1,092 6.8 7.0 3.8 5.4 5.7 28.7 21.2 3.0 18.2 2.8 0.5 0.3 4.0 7.6 10.6 %

$366 3.9 % $1,021 9.0 % $1,204 9.9 % $1,330 10.6 % $1,369 10.6 % $1,411 10.6 % $1,453 10.6 % $1,497 10.6 % $1,542 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues. **An independent feasibility study for the convention center had not been completed at the time of this report; as such, our revenue and expense projections are subject to change in this department, depending on the results of a detailed study.

Crowne Plaza Five Seasons - Cedar Rapids, Iowa

Proposed Convention Center
CEDAR RAPIDS, IOWA

SUBMITTED TO:

EXISTING

PREPARED BY:
HVS Convention, Sport& Entertainment Facilities Consulting 205 West Randolph Suite 1650 Chicago, Illinois. 60610 312-587-9900

City of Cedar Rapids 825 17th Street Southeast Cedar Rapids, Iowa, 52403 [email protected] +1 319 286-5080

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

January 21, 2011

205 West Randolph Suite 1650 Chicago, Illinois 60610 +1 312-587-9900 +1 312-587-9909 FAX www.hvs.com

Mr. Jeff Pomeranz City of Cedar Rapids 825 17th Street Southeast Cedar Rapids, Iowa, 52403 [email protected] Re: Proposed Convention Center Cedar Rapids, Iowa

Atlanta Boston Boulder Chicago Dallas Denver Las Vegas Mexico City Miami Nassau New York Newport San Francisco Toronto Vancouver Washington Athens Buenos Aires Dubai Hong Kong Lima London Madrid Mumbai New Delhi Sao Paulo Shanghai Singapore

Dear Mr. Pomeranz: Pursuant to your request, we herewith submit our Market Study of a Proposed Convention Center in Cedar Rapids, Iowa. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. It has been a pleasure working with you. Please let us know if we can provide any additional services. Sincerely, HVS Convention, Sports & Entertainment Facilites Consulting

Thomas A Hazinski Managing Director

Catherine Sarrett Project Manager

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

Table of Contents
SECTION
1. 2. 3. 4. 5. 6. 7. 8. 9.

TITLE
Introduction and Executive Summary Market Area Overview Industry Trends Comparable Venues Survey Findings Demand Analysis Financial Analysis Statement of Assumptions and Limiting Conditions Certification

Addenda Appendix A - Detailed Survey Results Appendix B - Descriptions of Comparable Venues

Convention, Sports & Entertainment   Facilities Consulting  Chicago, Illinois 

 

1. Introduction and Executive Summary 
Nature of the   Assignment  The City of Cedar Rapids, Iowa engaged HVS Convention, Sports & Entertainment  Facilities Consulting (“HVS”) to conduct a Market Study of a new convention center  in  downtown  Cedar  Rapids,  Iowa.  This  proposed  convention  center  would  be  located  adjacent  to  and  integrated  into  the  existing  Crowne  Plaza  Five  Seasons  hotel  (”Crowne  Plaza”)  and  the  renovated  U.S.  Cellular  Center  arena  (“USCC”).  These  three  facilities  would  be  operated  jointly  as  the  proposed  Cedar  Rapids  Convention Complex (“CRCC”), and make up the City’s main convention, sports and  entertainment  assets.  In  June  2008,  the  majority  of  downtown  Cedar  Rapids,  including  the  USCC  and  lower  levels  of  the  Crowne  Plaza,  was  affected  by  the  flooding of the Cedar River.   In June of 2010, the Urban Land Institute (“ULI”) submitted an Advisory Services  Panel  Report  which  recommends  several  key  initiatives  and  strategies  which  the  City  of  Cedar  Rapids  could  undertake  to  revitalize  its  downtown.  The  report  identifies four key recommendations regarding the Crowne Plaza and USCC.  • Retaining and remodeling the Crowne Plaza Cedar Rapids–Five Seasons Hotel  so  that  it  acts  as  a  true  conference  center  hotel  with  highly  amenitized  conference  space  and  excellent  audiovisual  capabilities,  and  purchase  of  the  hotel by the city  Retaining and remodeling the U.S. Cellular Center  Reimaging  the  arena,  hotel,  and  conference  center  street  presence  on  1st  Avenue  Establishing an iconic architectural focus in the remodeled U.S. Cellular Center  at the terminus of 3rd Street 

• • •

Other  recommendation  made  in  the  2010  ULI  report  represent  a  series  of  complementary  actions  that  would  both  strengthen  the  Cedar  Rapids  downtown  and  support  the  successful  operation  of  the  proposed  CRCC.  Specifically,  these  recommendations include the following.  • • • Planning  for  and  nurturing  a  new  arts,  culture,  and  entertainment  (ACE)  district focused on the area between 4th Street and the Cedar River  Establishing  and  incentivizing  new  approaches  to  encourage  a  variety  of  housing in downtown to attract pent‐up demand  Expanding downtown management and programming for events and activities 

 January 21, 2011   

Introduction and Executive Summary  Market Study Proposed Convention Center  

1-1

Convention, Sports & Entertainment   Facilities Consulting  Chicago, Illinois 

 

This  study  is  a  companion  to  an  HVS  Hotel  Market  Analysis  which  forecasts  the  operation  of  the  convention  center  and  hotel  as  an  integrated  venue.  This  study  provides a detailed analysis of the convention center and arena components of the  project.  Ownership and  Management  The City of Cedar Rapids owns the USCC and recently purchased the Crowne Plaza  hotel. The USCC originally opened in 1979 as the Five Seasons Center. The facility  is  a  multi‐purpose  arena  hosting  a  variety  of  sporting,  entertainment,  and  community  events.  The  USCC  has  approximately  5,500  fixed  seats  and  a  total  concert  capacity  of  approximately  10,000.  The  16‐story  Crowne  Plaza  hotel,  also  opened in 1979, was built directly above the USCC and features 275 guest rooms, a  restaurant,  a  lounge,  22,362  square  feet  of  meeting  space,  an  indoor  pool,  an  exercise  room,  a  business  center,  and  a  vending  area.  The  Crowne  Plaza  is  scheduled  to  suspend  operations  in  February  2011  in  order  to  begin  the  major  renovation.  The City of Cedar Rapids has a contract with VenuWorks, Inc. to manage the USCC.  Management  duties  include  all  services  required  for  the  successful  marketing,  promotion, and operation of the venue.   Methodology    HVS performed the following tasks:  1. Thomas Hazinksi and Catherine Sarrett travelled to Cedar Rapids, Iowa in  the  week  of  December  6,  2010  during  which  they  performed  a  site  inspection,  reviewed  plans  for  the  proposed  expansion,  met  with  key  industry  participants,  visited  other  venues  in  the  city,  and  gathered  relevant data,  Reviewed  the  previously  issued  HVS  Summary  Appraisal  Report  for  the  Crowne Plaza,  Reviewed  the  2009  EDA  Grant  Application  and  subsequent  2010  Programming Plan Update prepared by VenuWorks,  Reviewed the 2009 ULI Advisory Services Panel Report for Cedar Rapids,  Analyzed the economic and demographic factors that indicate the extent to  which  the  local  market  area  is  supportive  of  the  Convention  Center  Complex,  Conducted and analyzed a survey of state and regional event planners and  sports organizers to assess their interest in using the proposed Convention  Center Complex,  Reviewed and analyzed historical event and operating data for the USCC, 

2. 3. 4. 5.

6.

7.

 January 21, 2011   

Introduction and Executive Summary  Market Study Proposed Convention Center  

1-2

Convention, Sports & Entertainment   Facilities Consulting  Chicago, Illinois 

 

8. 9. 10.

Reviewed  currently  proposed  facility  program  plan  to  forecast  event  demand of the proposed convention center and renovated arena,  Compiled data on nine comparable national venues to inform and test the  reasonableness of the building program,  Compiled  data  on  15  state  and  regional  competitors  to  inform  the  reasonableness of the building program, demand projections, and financial  projections,  Forecast  the  financial  operations  of  the  proposed  convention  center  and  renovated arena.  

11.

HVS  Convention,  Sports  &  Entertainment  staff  collected  and  analyzed  all  information contained in this report. HVS sought out reliable sources and deemed  information obtained from third parties to be accurate. Key findings are presented  below.  Description of the  Project  The  proposed  Cedar  Rapids  Convention  Center  Complex  would  consist  of  three  main program elements as described below.  A new convention center would be constructed adjacent to and west of the existing  U.S. Cellular Center. The two‐story facility would house a 44,064 square foot multi‐ purpose  floor  capable  of  hosting  a  variety  of  events  including  conventions,  trade  shows,  consumer  show  and  banquets.  Additionally,  the  convention  center  would  contain a 13,033 square foot ballroom on the second level and 5,037 square feet of  break  out  meeting  space  on  the  event  level.  Floor  plans  for  the  proposed  convention center are presented in the figures below. 

 January 21, 2011   

Introduction and Executive Summary  Market Study Proposed Convention Center  

1-3

Convention, Sports & Entertainment   Facilities Consulting  Chicago, Illinois 

 

FIGURE 1‐1 CONVENTION CENTER FLOOR PLANS 

  Event Level 

  Second Level  

 January 21, 2011   

Introduction and Executive Summary  Market Study Proposed Convention Center  

1-4

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The  second  element  of  the  proposed  CRCC  would  be  the  renovated  Crown  Plaza  hotel. Existing renovation plans indicate that the number of hotel rooms decrease  from  275  to  238  rooms.  Additionally,  the  hotel  would  house  another  19,458  square feet of meeting space which includes function space on its third and fourth  floor  floors  as  well  as  junior  ballroom  on  the  hotel’s  16th  floor.  The  figure  below  presents the floor plans for meeting related spaces within the renovated hotel. 

FIGURE 1‐2 RENOVATED HOTEL FLOOR PLANS OF MEETING SPACE 

  Level 3  

  Level 4  

  Level 16   The  third  element  of  the  proposed  CRCC  is  the  renovated  U.S.  Cellular  Center  arena.  Current  plans  indicate  the  arena  concourses  would  undergo  major  renovation  creating  improved  patron  circulation,  concession  stands  and  other  amenities.  While  the  square  footage  of  the  arena  floor  would  remain  at 

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approximately 23,200 square feet, the number of fixed seats would increase from  approximately 5,500 to approximately 6,900. The arena event level also contains a  3,461  square  foot  meeting  room.  Floor  plans  for  the  renovated  arena  are  presented below. 

FIGURE 1‐3 RENOVATED ARENA FLOOR PLANS 

  Event Level 

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    Second Level  In  total,  the  functional  elements  of  the  proposed  complex  are  summarized  as  follows:  • • • • • Market Area  67,263 square feet of multi‐purpose exhibit space  13,033 square feet of ballroom space  27,965 square feet of meeting space  6,900 fixed arena seats  238 hotel rooms 

Cedar  Rapids  continues  to  address  the  long‐term  effects  of  a  devastating  2008  flood,  but  has  maintained  a  stable  economy  through  2010,  as  evidenced  by  its  relatively  low  unemployment  rate  and  the  opening  of  two  hotels  in  2010.  Additionally,  the  area  is  projected  to  see  some  growth  in  population  and  retail  sales  through  2015.  While  the  airport  passenger  traffic  has  declined  in  recent  years,  it  will  likely  increase  in  the  coming  years  as  the  new  runway  opens.  The  hotel inventory reflects the current demand in the city, and does not offer the ideal 

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mix for a downtown convention market. However, there are a number of upscale  and  midscale  properties  outside  of  the  downtown  area  that  can  accommodate  convention  demand.  Assuming  the  area  continues  to  grow  as  projected  in  employment in the services sector, and in population and retail sales, its ability to  serve convention center business will improve.  Industry Trends   Over  the  past  few  decades,  the  meeting  and  convention  industry  has  evolved  dramatically  from  a  budding  industry  to  an  important  driver  of  the  national  economy.  As  a  mature  industry,  the  rapid  growth  of  the  last  four  decades  is  not  likely to persist. However, continued evolution and growth can be expected as the  economy  as  a  whole  changes.  As  competition  among  cities  has  become  more  intense, meeting planner expectations for quality have increased. For example, the  proximity  of  full‐service  hotels  to  event  facilities  has  become  a  primary  factor  in  the decision to host a meeting at a particular location. Cities lacking suitable hotel  properties typically lose business to cities with a superior "hotel package."   For many communities, convention centers have become an opportunity to spawn  a  mixed‐use  attraction  ‐  an  area  often  including  hotels,  retail,  dining,  sports  venues, and entertainment options. Convention centers have become the center of  their  own  “districts”  offering  almost  everything  a  delegate,  event  organizer  or  exhibitor  could  want  in  one  area.  The  growth  of  mixed‐use  developments  will  continue to change the meeting and convention industry as supply transforms.  Recent  design  of  spectator  sports  arenas  seeks  to  maximize  revenue  by  diversifying capacity to host a variety of events and activities. Rather than focusing  exclusively  on  spectator  events,  a  new  wave  of  arena  design  and  utilization  has  emerged  in  which  spectator  arenas  also  accommodate  community  activities  such  as  amateur  sports,  recreations  activities  and  other  community  events.  This  combination  of  sports  and  entertainment  with  community  activities  not  only  improves financial viability, but also creates a stronger rationale for public sector  participation in their development, as is common in other community center and  recreational infrastructure.  With no major investment in its convention and arena facilities since 1979, Cedar  Rapids  has  fallen  well‐behind  smaller  cities  throughout  the  Midwest  which  have  built venues to cater to the growing demand and emerging trends. Once a popular  destination in the meetings industry, Cedar Rapids is no longer considered a viable  destination for many state association‐based events which now travel to Dubuque,  Ames, and Coralville.  With  meeting  industry  trends  pointing  to  demand  growth  and  a  slower  than  normal  supply  increases,  Cedar  Rapids  should  act  quickly  to  reenter  the  market  and  regain  its  position  in  the  industry  that  it  has  lost  over  the  last  decade. 

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However, the importance of delivering a product that suits the needs and desires  of  meeting  planners  cannot  be  underestimated.  With  an  increased  number  of  destination  choices,  it  is  imperative  that  the  proposed  Cedar  Rapids  Convention  Center  Complex  be  a  state‐of‐the‐art  facility  with  high  quality  features  in  both  amenity and operation.  Comparable Venues  Cedar  Rapids  competes  directly  with  other  cities  in  the  region,  the  state,  and  across the U.S. for a share of the meetings market. HVS prepared a comprehensive  analysis  of  the  proposed  CRCC  building  program  and  compared  its  features  with  three sets of competing and comparable venues.  • Convention  and  conference  facilities  in  Iowa  that  offer  exhibit,  ballroom  and  meeting  space  and  would  compete  directly  with  the  Proposed  Convention  Center Complex for state association and regional business.  Convention  and  conference  facilities  in  the  Midwest  that  offer  exhibit,  ballroom  and  meeting  space  that  would  compete  directly  with  the  Proposed  Convention Center Complex for regional and national business.  Comparable national convention and conference facilities which are operated  as a department of an attached hotel property.   



•  

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FIGURE 1‐4 

SUMMARY OF TOTAL FUNCTION SPACE 
L o catio n T o tal Fu n ctio n Sp ace

Nam e o f V e n u e L o cal A r e a C o m p e tito r s Clay County Regional Ev ents Center Iow a Ev ents Center Mid-A meric a Center Riv er Center Coralv ille Marriott and Conf erenc e Center Grand Riv er Center Fiv e Sulliv an Brothers Conv ention Center Fairf ield A rts and Conv ention Center Iow a State Center C o m p ar ab le Re g io n al V e n u e s DeV os Plac e Mid-A meric a Center Monona Terrac e Conv ention Center Peoria Civ ic Center Sioux Falls Conv ention Center St. Cloud Civ ic Center C o m p ar ab le Natio n al V e n u e s Brans on Conv ention Center Chattanoogan Hotel Conf erenc e Center Conf erenc e Center Niagara Falls Embas s y Suites Hotel and Conf erenc e Center Fris c o Tinley Park Conv ention Center Durham Conv ention Center Coralv ille Marriott and Conf erenc e Center Hilton V anc ouv er W as hington Marriott Prov o Hotel and Conf erenc e Center

Spenc er Des Moines Counc il Bluf f s Dav enport Coralv ille Dubuque W aterloo Fairf ield A mes

IA IA IA IA IA IA IA IA IA

32,286 s f 74,081 78,000 54,575 57,388 54,000 30,961 12,700 82,600

Grand Rapids Counc il Bluf f s Madis on Peoria Sioux Falls St. Cloud

MI IA WI IL SD MN

234,000 s f 78,000 68,370 152,593 56,372 55,346

Brans on Chattanooga Niagara Falls Fris c o Tinley Park Durham Coralv ille V anc ouv er Prov o

MO TN NY TX IL NC IA WA UT

87,710 s f 20,944 52,866 54,600 36,907 35,700 57,388 29,751 22,644

Sourc e: Res pec tiv e V enues

 

With the combined convention center, arena and hotel development, the proposed  Convention Center Complex would offer over 108,000 square feet of total function  space, more than any of its local area competitors and within the top three of its  regional  comparables.  The  facility  would  also  contain  more  function  space  than  any of the comparable combined hotel/convention center operations in this study.  In terms of supply, the proposed CRCC would be capable of hosting the majority of  events currently taking place in competing venues.   Survey Results  HVS  conducted  a  survey  of  event  planners  to  provide  a  basis  for  assessing  the  potential  demand  for  the  proposed  convention  center  in  Cedar  Rapids.  HVS  surveyed  220  contacts  compiled  from  the  Cedar  Rapids  Area  Convention  and  Visitors Bureau. HVS received a total of 37 responses, representing a response rate  of 18 percent. The event planners survey results allow HVS to draw the following  conclusions about future event demand: 

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• • • •

The  demand  potential  for  Cedar  Rapids  is  largely  in  Iowa  State  conventions,  conferences, and meetings.  The  development  of  the  proposed  Convention  Center  would  significantly  increase the attractiveness of the destination.  Cedar Rapids has limited appeal as a regional destination and would rarely be  considered for national events.  The connected hotel would provide a competitive advantage over many Iowa  destinations and the available room block would be sufficient for a majority of  events.  The provision for on‐site parking is a key component of the project that needs  to  be  implemented  along  with  the  development  of  the  Convention  Center  Complex.   The  proposed  Convention  Center  will  have  ample  capacity  to  host  nearly  all  prospective  events.  Exhibition  space  and  ballroom  capacity  in  the  proposed  Convention  Center  will  be  rarely  used  to  capacity  but  would  allow  for  simultaneous events during peak seasons.   





Demand and Financial  Analysis 

HVS based event demand projections at the proposed Convention Center Complex  on the following research and analysis.  • • • • The facility program provided to HVS as detailed above,  Interviews with USCC management personnel,  Interviews with government officials and other stakeholders,  Interviews  with  representatives  of  the  Cedar  Rapids  Convention  and  Visitors  Bureau  (CRCVB),  the  Cedar  Rapids  Chamber  of  Commerce  and  the  Cedar  Rapids Downtown District,  Industry data and trends reports,   Key market and economic indicators,  Comparable venue program and operating data,  Existing state and regional competitive venues,  User surveys. 

• • • • •

In  developing  the  demand  projections,  HVS  assumes  that  all  recommendations  throughout  this  report  are  implemented.  Projections  assume  that  the  proposed  facility  opens  on  September  1,  2012.  HVS  estimates  that  event  demand  will  stabilize in the fourth year of operation—fiscal year 2015‐2016 

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FIGURE 1‐5 

FIVE‐YEAR EVENT DEMAND ESTIMATES 
2012/13 2013/14              7            10            40          300          357              8            19            19              6            52          409 2014/15              9            11            45          338          403              9            20            20              6            55          458 2015/16            10            12            50          375          447            10            20            20              6            56          503 2016/17            10            12            50          375          447            10            20            20              6            56          503

Convention Center Events Conventi ons  & Tra des hows Cons umer Shows Ba nquets Meeti ngs  & Conferences Tota l Arena Events As s embl i es Sports Concerts  & Enterta i nment Other Tota l Total Convention Center Average Attendance Conventi ons  & Tra des hows Cons umer Shows Ba nquets Meeti ngs  & Conferences Arena Average Attedance As s embl i es Sports Concerts  & Enterta i nment Other Convention Center Total Attendance Conventi ons  & Tra des hows Cons umer Shows Ba nquets Meeti ngs  & Conferences Tota l Arena Total Attendance As s embl i es Sports Concerts  & Enterta i nment Other Tota l Total

             5              8            35          263          311              9            18            18              5            50          361

         500       3,000          400            75       2,500       4,000       3,800       5,300       2,500     24,000     14,000     19,725     60,225     22,500     72,000     68,400     26,500 189,400     249,625

          500        3,000           400             75        2,500        4,000        3,800        5,300       3,500     30,000     16,000     22,500     72,000     20,000     76,000     72,200     31,800   200,000   272,000

          500        3,000           400             75        2,500        4,000        3,800        5,300       4,500     33,000     18,000     25,350     80,850     22,500     80,000     76,000     31,800   210,300   291,150

          500        3,000           400             75        2,500        4,000        3,800        5,300       5,000     36,000     20,000     28,125     89,125     25,000     80,000     76,000     31,800   212,800   301,925

          500        3,000           400             75        2,500        4,000        3,800        5,300       5,000     36,000     20,000     28,125     89,125     25,000     80,000     76,000     31,800   212,800   301,925

 

Based  upon  the  above  demand  and  attendance  estimates,  HVS  projects  the  following statement of financial operations for the proposed CRCC. 

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FIGURE 1‐6 FIVE‐YEAR  STATEMENT OF FINANCIAL OPERATIONS 
2012/13 2013/14 2014/15 2015/16 2016/17 OPERATING REVENUE Convention Center Event Revenues Facility Rental $343,000 $461,000 $558,000 $632,000 $651,000 Facility Fees               11,000               15,000               17,000               19,000               20,000 Food & Beverage (Gross) * 200,000 279,000 353,000 402,000 414,000 Event Services (Gross) 446,000 596,000 720,000 816,000 841,000 Total $1,000,000 $1,351,000 $1,648,000 $1,869,000 $1,926,000 Arena Event Revenues Facility Rental $476,000 $517,000 $560,000 $580,000 $598,000 Facility Fees 76,000 83,000 90,000 92,000 95,000 Food & Beverage (Gross) 877,000 959,000 1,037,000 1,068,000 1,101,000 Event Services (Gross) 562,000 611,000 663,000 685,000 706,000 Merchandise (Net)               60,000               66,000               71,000               73,000               76,000 Total $2,051,000 $2,236,000 $2,421,000 $2,498,000 $2,576,000 Convention Center Non‐Event Revenue Naming Rights $41,000 $42,000 $43,000 $44,000 $46,000 Advertising & Sponsorships 81,000 84,000 86,000 89,000 91,000 Other Revenue 4,000 4,000 4,000 4,000 5,000 Total 126,000 130,000 133,000 137,000 142,000 Arena Non‐Event Revenue Naming Rights $122,000 $125,000 $129,000 $133,000 $137,000 Advertising & Sponsorships 243,000 251,000 258,000 266,000 274,000 Suite Revenue 49,000 50,000 52,000 53,000 55,000 Other Revenue 4,000 4,000 4,000 4,000 5,000 Total 418,000 430,000 443,000 456,000 471,000 Total OPERATING EXPENSES Convention Center Expenses Food & Beverage Costs * Event Services Costs Other Expense Total Arena Expenses Food & Beverage Costs Event Services Costs Salaries & Benefits Administrative & General Contractual Services Marketing & Sales Repair & Maintenance Supplies & Equipment Utilities Other Expense Total Total OPERATING INCOME (LOSS) $3,595,000 2012/13 $130,000 401,000 9,000 $540,000 $570,000 450,000 644,000 19,000 43,000 108,000 35,000 38,000 519,000 12,000 $2,438,000 $2,978,000 $617,000 $4,146,000 2013/14 $181,000 536,000 12,000 $729,000 $624,000 489,000 663,000 20,000 45,000 111,000 36,000 39,000 535,000 13,000 $2,575,000 $3,303,000 $843,000 $126,000 72,000 89,000 $288,000 $555,000 $4,646,000 2014/15 $229,000 648,000 14,000 $891,000 $674,000 530,000 683,000 21,000 46,000 115,000 37,000 40,000 551,000 14,000 $2,711,000 $3,602,000 $1,044,000 $130,000 75,000 97,000 $301,000 $743,000 $4,963,000 2015/16 $261,000 735,000 16,000 $1,012,000 $695,000 548,000 703,000 21,000 47,000 118,000 38,000 41,000 568,000 15,000 $2,794,000 $3,806,000 $1,158,000 $134,000 77,000 100,000 $310,000 $847,000 $5,112,000 2016/17 $269,000 757,000 16,000 $1,042,000 $715,000 565,000 725,000 22,000 49,000 122,000 39,000 43,000 585,000 15,000 $2,880,000 $3,920,000 $1,192,000 $138,000 79,000 103,000 $320,000

ARENA NON‐OPERATING EXPENSES Arena Management Fee $122,000 Insurance 70,000 Capital Maintenance Reserve 82,000 Total TOTAL NET INCOME (LOSS) $275,000 $342,000

$872,000   * Food and beverage revenues and expenses are for those events held in the multi‐purpose hall. 

All other F&B revenues are included in the hotel operations. 

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The  HVS  analysis  of  the  operations  of  the  proposed  hotel  incorporates  the  operations  of  the  convention  center  in  the  pro  forma  financial  statement.  The  figure  below  shows  the  revenue  and  expenses  assigned  to  the  convention  center  and  food  and  beverage  departments  and  breaks  out  the  arena  revenue  and  expenses. 

FIGURE 1‐7 

FIVE‐YEAR STATEMENT OF DEPARTMENTAL OPERATIONS 
2012/13 2013/14 2014/15 2015/16 2016/17

Conventi on Center Revenue * (Les s  Exhi bi t Ha l l  F&B Revenue) Conventi on Center Depa rtmenta l  Revenue

$1,126,000 $1,481,000 $1,781,000 $2,006,000 $2,068,000         (200,000)         (279,000)         (353,000)         (402,000)         (414,000)         926,000      1,202,000      1,428,000      1,604,000      1,654,000

Conventi on Center Expens es $540,000 $729,000 $891,000 $1,012,000 $1,042,000 * (Les s  Exhi bi t Ha l l  F&B Expens es )         (130,000)         (181,000)         (229,000)         (261,000)         (269,000) Conventi on Center Depa rtmenta l  Expens es         410,000         548,000         662,000         751,000         773,000 Conventi on Center Depa rtmenta l  Income $516,000 $654,000 $766,000 $853,000 $881,000 Arena  Revenue Arena  Expens es Arena  Depa rtmenta l  Income
$2,469,000 $2,666,000 $2,864,000 $2,954,000 $3,047,000      2,713,000      2,863,000      3,012,000      3,104,000      3,200,000 ($244,000) ($197,000) ($148,000) ($150,000) ($153,000)

* Exhi bi t ha l l  food & bevera ge revenues  a nd expens es  a re i ncl uded i n the Food & Bevera ge depa rtment     i n the combi ned pro forma .  

 



The  preceding  event  demand  and  financial  estimates  are  subject  to  the  assumptions  and  limited  conditions  described  throughout  the  report.  In  addition, we highlight the following assumptions that are important factors in  achieving the forecasted operating results.  A single operator manages the hotel and the convention center components of  the  project.  In  modeling  the  operations  of  the  convention  center  as  a  department of the hotel, we show only the departmental revenue and expenses  of  the  convention  center.  Certain  overhead  costs  normally  associated  with  a  convention  center  operation  such  as  administration,  marketing,  utilities,  and  other overhead expenses are assumed to be part of the hotel undistributed and  fixed  expenses.  A  companion  study  by  HVS  on  hotel  operations  includes  estimates of these overhead and other expenses.  As  the  primary  sales  and  marketing  arm  for  the  City  of  Cedar  Rapids,  the  CRCVB is adequately funded to successfully implement an approved sales and  marketing strategy which may include additional staffing, media campaigns, a  rental subsidy fund and other sales incentives. 





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Adequate surface and/or garage parking is available for event attendees which  is  both  proximate  to  the  proposed  CRCC  and  conveniently  accessible  to  patrons.  Collateral  development  within  the  ACE  district  proceeds  commensurate  with  the  development  of  the  proposed  CRCC,  and  an  adequate  number  of  retail,  dining and entertainment options are available for event attendees during the  initial years of operation.  The operator and brand selection process for the renovated hotel proceeds on  schedule with a high quality operator in place at opening. 





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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

2. Market Area Overview
This market area analysis reviews economic and demographic data that describe the overall condition of the local economy in Cedar Rapids, Iowa. Characteristics of the area economy and trends that indicate growth or decline provide indicators of the performance of the Proposed Convention Center Complex. HVS analyzed the following indicators: population, income, sales, work force characteristics, employment levels, major businesses, airport access, hotel supply, and tourism attractions. Market Area Definition The market area for a convention center consists of the geographical region that offers transportation access, lodging, and other amenities to users of the Proposed Convention Center Complex. For the purposes of this study HVS defined the market area as the Metropolitan Statistical Area of Cedar Rapids, IA, which includes Benton, Jones, and Linn Counties. The following map shows market area.

FIGURE 2-1 CEDAR RAPIDS, IOWA - SITE MAP

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

Iowa is centrally located in the heart of North America, spanning 56,290 miles. With the Missouri River to the west and the Mississippi to the east, Iowa is the only state bordered by two navigable rivers. Minnesota borders from the north, while Missouri borders from the south. Cedar Rapids is known as the “City of Five Seasons,” which includes the traditional four seasons and the fifth “season” of taking time to enjoy natural beauty; this nickname is commemorated by the Tree of Five Seasons statue that stands in downtown Cedar Rapids. The state’s capital is Des Moines, located in the south central part of the state. Smaller rural cities surround the capital throughout the state, providing excellent opportunity for agriculture. Interstate 80 extends east/west through the southern portion of the state, while Interstate 35 extends on a north/south axis through the center of the state. The largest source of income is manufacturing, followed by services, retail/wholesale trade, and government. Agriculture is a leading industry in Iowa, as it produces food, clothing, and medicine for the United States and the rest of the world. The Cedar Rapids area is part of the greater eastern Iowa economic base. The area enjoys a diverse economy, balancing its historical agribusiness base with technology-based industries. The diversity has created a stable local economy that is able to weather downturns in individual sectors. The city is also an important link in the global economy; the area boasts over 275 manufacturing plants, two dozen Fortune 500 companies, and record amounts of international exports. Economic and Demographic Review A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, D.C. Using a database containing more than 900 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole, and all dollar amounts have been adjusted for inflation, thus reflecting real change. These data are summarized in the following table.

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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FIGURE 2-2

ECONOMIC AND DEMOGRAPHIC DATA SUMMARY
Average Annual Compounded Change 1990-00 2000-09 2009-15

1990 Resident Population (Thousands) Li nn County Ceda r Ra pi ds , IA MSA Sta te of Iowa Uni ted Sta tes Per-Capita Personal Income* Li nn County Ceda r Ra pi ds , IA MSA Sta te of Iowa Uni ted Sta tes W&P Wealth Index Li nn County Ceda r Ra pi ds , IA MSA Sta te of Iowa Uni ted Sta tes Food and Beverage Sales (Millions)* Li nn County Ceda r Ra pi ds , IA MSA Sta te of Iowa Uni ted Sta tes Total Retail Sales (Millions)* Li nn County Ceda r Ra pi ds , IA MSA Sta te of Iowa Uni ted Sta tes
* Inflation Adjusted

2000

2009

2015

169.3 211.2 2,781.0 249,622.8 $26,919 25,642 23,414 26,226 103.5 99.2 91.2 100.0 $193 207 2,209 250,451 $2,104 2,353 27,192 2,545,947

192.3 237.8 2,928.0 282,171.9 $33,973 32,412 28,787 32,352 106.2 102.0 91.3 100.0 $247 264 2,788 332,342 $2,927 3,296 36,181 3,516,734

210.6 257.5 3,015.5 307,050.4 $35,796 34,427 32,441 35,142 102.7 98.8 92.8 100.0 $267 280 3,013 388,117 $2,951 3,305 34,197 3,544,629

222.7 270.3 3,097.7 325,421.9 $38,797 37,355 35,001 37,963 102.8 99.1 92.7 100.0 $280 294 3,115 415,376 $3,387 3,775 38,258 4,093,326

1.3 % 1.2 0.5 1.2 2.4 2.4 2.1 2.1 0.3 0.3 0.0 0.0 2.5 2.5 2.4 2.9 3.4 3.4 2.9 3.3

1.0 % 0.9 0.3 0.9 0.6 0.7 1.3 0.9 (0.4) (0.3) 0.2 (0.0) 0.9 0.6 0.9 1.7 0.1 0.0 (0.6) 0.1

0.9 % 0.8 0.4 1.0 1.4 1.4 1.3 1.3 0.0 0.0 (0.0) 0.0 0.8 0.8 0.6 1.1 2.3 2.2 1.9 2.4

Source: Woods & Pool e Economi cs , Inc.

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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Both Linn County and the Cedar Rapids MSA population growth rate have historically matched or exceeded that of the State of Iowa and the Country. Through 2015, annual population growth is projected to remain at nearly 1% for both Linn County and the Cedar Rapids MSA. Per Capita income in Linn County has exceeded, and is projected to continue to exceed, the per capita income of the State of Iowa and the Country. The wealth index for Linn County and the Cedar Rapids MSA dipped between 2000 and 2009, but is projected to flatten through 2015. Growth in total retail sales through 2015 are projected to nearly meet the Country’s rate in both Linn County and the Cedar Rapids MSA. Workforce Characteristics The characteristics of an area's workforce indicate the type and amount of transient visitation likely to be generated by local businesses. The government sector often generates transient room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Sectors such as finance, insurance, and real estate (FIRE); wholesale trade; and services produce a considerable number of visitors who are not particularly rate sensitive. Contributions from manufacturing, construction, transportation, communications, and public utilities (TCPU) employers can also be important, depending on the company type. The following table shows the Cedar Rapids MSA workforce distribution by business sector.

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FIGURE 2-3

HISTORICAL AND PROJECTED EMPLOYMENT (000S)
Average Annual Compounded Change

Industry Fa rm Fores try, Fi s hing, Rel ated Acti vi ti es And Other Mi ni ng Uti l i ti es Cons tructi on Ma nufacturi ng Total Tra de Whol es a l e Tra de Reta i l Tra de Tra ns portati on And Wa rehous i ng Informati on Fi nance And Ins ura nce Rea l Es tate And Rental And Lea s e Total Servi ces Profess i ona l And Techni cal Servi ces Management Of Compa ni es And Enterpri ses Admi ni s trati ve And Wa s te Servi ces Educati ona l Servi ces Hea l th Ca re And Soci al As s i s tance Arts , Enterta i nment, And Recrea ti on Accommoda tion And Food Servi ces Other Servi ces , Except Publ i c Admi ni s tra ti on Total Government Federa l Ci vi l ia n Government Federa l Mi l i ta ry Sta te And Loca l Government TOTAL MSA U.S.

1990 5.2 0.4 0.1 1.0 7.5 21.9 23.6 6.4 17.3 3.4 5.4 6.1 3.2 39.9 5.4 0.2 5.2 2.1 10.8 1.5 7.6 7.2 14.7 1.3 1.2 12.2 132.5 132.5 139,380.8

Percent of Total 4.0 % 0.3 0.1 0.7 5.7 16.6 17.8 4.8 13.0 2.6 4.1 4.6 2.4 30.1 4.1 0.1 3.9 1.6 8.1 1.1 5.7 5.4 11.1 1.0 0.9 9.2 100.0 % — —

2000 4.3 0.4 0.1 1.4 10.4 23.7 26.4 6.3 20.1 6.9 7.8 8.4 4.7 55.7 7.0 0.2 10.5 2.8 15.1 2.4 9.3 8.3 16.2 1.4 1.1 13.7 166.4 166.4 166,758.8

Percent of Total 2.6 % 0.2 0.1 0.8 6.3 14.2 15.9 3.8 12.1 4.1 4.7 5.1 2.8 33.5 4.2 0.1 6.3 1.7 9.1 1.5 5.6 5.0 9.8 0.9 0.7 8.2 100.0 % — —

2009 3.9 0.4 0.2 1.8 11.0 22.9 26.6 6.4 20.2 7.1 5.7 11.0 4.9 61.8 7.9 0.8 8.6 3.7 18.5 2.9 9.9 9.4 17.3 1.2 1.0 15.0 174.5 174.5 177,667.2

Percent of Total 2.2 % 0.2 0.1 1.0 6.3 13.1 15.2 3.7 11.6 4.1 3.3 6.3 2.8 35.4 4.5 0.5 4.9 2.1 10.6 1.6 5.7 5.4 9.9 0.7 0.6 8.6 100.0 % — —

2015 3.9 0.4 0.2 2.0 12.3 22.8 28.2 6.3 21.9 7.6 5.6 12.0 5.5 67.5 8.8 1.0 9.0 4.1 20.7 3.2 10.8 10.0 17.9 1.2 1.0 15.7 186.0 186.0 192,313.7

Percent of Total 2.1 % 0.2 0.1 1.1 6.6 12.2 15.2 3.4 11.8 4.1 3.0 6.5 2.9 36.3 4.7 0.5 4.8 2.2 11.1 1.7 5.8 5.4 9.6 0.7 0.5 8.4 100.0 % — —

1990-2000 (1.9) % (0.1) (0.3) 3.6 3.3 0.8 1.1 (0.2) 1.5 7.3 3.6 3.2 4.0 3.4 2.7 1.4 7.4 2.8 3.4 5.2 2.1 1.5 1.0 1.1 (0.7) 1.2 2.3 % 2.3 % 1.3

2000-2009 (1.2) % 1.4 7.2 2.7 0.6 (0.4) 0.1 0.2 0.0 0.4 (3.4) 3.1 0.6 1.2 1.3 16.1 (2.2) 3.2 2.3 1.8 0.8 1.3 0.7 (1.7) (1.2) 1.0 0.5 % 0.5 % 0.7

2009-2015 0.4 % 0.7 0.3 1.8 1.9 (0.1) 1.0 (0.1) 1.3 1.1 (0.1) 1.4 1.7 1.5 1.9 2.6 0.7 1.5 1.9 1.8 1.4 1.1 0.7 0.1 0.1 0.7 1.1 % 1.1 % 1.3

Source: Woods & Pool e Economi cs , Inc.

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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The services sector dominates employment within the Cedar Rapids MSA, driven by health care and social assistance. Retail trade and manufacturing constitute more than 20 percent of employment in the area, although manufacturing has seen a decline in employment growth since 2000 and is projected to decline slightly. The greatest projected annual growth in employment through 2015 is expected to be in the services sector, particularly management of companies and enterprises, professional and technical services, and health care and social assistance. Major Business and Industry Providing additional context for understanding the nature of the regional economy, the following table presents a list of the major employers in the market area.

FIGURE 2-4

MAJOR EMPLOYERS
R ank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 F irm R o ck w e l l Co l l i n s , I n c AEG ON U S A W h i rl p o o l Co rp o ra ti o n M e rcy M e d i ca l Ce n te r S t. Lu k e 's H o s p i ta l Q u a k e r F o o d a n d S n a ck s Ye l l o w b o o k U S A Al l i a n t En e rg y N o rd s tro m D i re ct Ki rk w o o d Co m m u n i ty Co l l e g e V e ri zo n B u s i n e s s G e n e ra l M i l l s N e xtEra En e rgy D u a n e Arn o l d , LLC G E F i n a n ci a l APA C Cu s to m e r S e rvi ce To yo ta F i n a n ci a l S e rvi ce s U .S . Ce l l u l a r W e s t S i d e Tra n s p o rt, I n c Pa e te c Arch e r D a n i e l s M i d l a n d Ca rgi l l , I n c CR S T PM X I n d u s tri e s , I n c U n i te d F i re G ro u p S t. Lu k e 's Ph ys i ci a n s & Cl i n i cs I n te rn a ti o n a l Pa p e r V a n M e te r I n d u s tri a l Ph ys i ci a n s ' Cl i n i c o f I o w a W o rl e y W a re h o u s i n g S o u rce : Pri o ri ty On e Eco n o m i c D e ve l o p m e n t D i vi s i o n N um ber of Em ploy ees 8,600 3,987 2,300 1,724 1,644 667 906 881 851 785 700 667 619 600 600 585 549 530 518 470 420 400 397 394 347 346 344 335 300

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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Manufacturing is still prevalent in the area, with nine (31%) of the top employers in the manufacturing sector, as compared to the remainder who are in the services sector. The area does have a diverse mix of business. Major employers in the area range from traditional agribusiness to technology-based companies and financial services companies. The Cedar Rapids area has historically been dominated by the services sector, with a strong manufacturing sector. The prevalent health care sector and projected growth in the services sector, indicate that the area is poised for greater growth in needed services, while manufacturing will remain stable or decline slightly. As the profile of the economy changes over time to encompass more services, the meeting and conference space needs of local businesses will change. Unemployment Statistics Unemployment statistics provide a measure of the health of the local economy in comparison to state and national trends. The following table presents historical unemployment rates for the market area.

FIGURE 2-5
Year

UNEMPLOYMENT STATISTICS
County 2.4 3.1 4.4 4.8 4.8 4.3 3.7 3.7 4.2 5.7 % MSA 2.4 3.1 4.4 4.8 4.8 4.4 3.7 3.8 4.3 5.7 5.9 6.6 % State 2.8 3.3 3.9 4.4 4.6 4.3 3.7 3.7 4.4 6.0 6.0 6.6 % Country 4.0 4.7 5.8 6.0 5.5 5.1 4.6 4.6 5.8 9.3 9.7 9.6 %

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Recent Month - Augus t 2009 6.0 2010 6.6

Source: US Cens us Burea u

The national unemployment rate in the U.S. fluctuated within a narrow range of between 4% and 6% in the decade spanning 1997 to 2007. The recession that began in late 2007 and the subsequent financial crisis in 2008 forced many businesses to downsize or cease operations. Over 3 million jobs were lost in 2008, and another 4.1 million were lost in 2009; as a result, the national unemployment rate reached 10.0% in the fourth quarter of 2009. However, beginning in the fourth quarter of 2009, the pace of job losses slowed dramatically and the national

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Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

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economy began to exhibit positive trends. Job growth resumed in January of 2010, and excluding the fluctuations related to the loss of temporary jobs associated with the 2010 Census collection of data, the pace of job growth improved steadily in the following months. Slow to moderate growth is anticipated over the balance of 2010. Forecasts for 2011 anticipate an accelerating pace of job growth throughout the year. Nevertheless, it is expected to take several years to regenerate the jobs that were lost during the recession, and most economists expect unemployment to remain somewhat heightened over the near term. Locally, Linn County and the Cedar Rapids MSA, with almost identical unemployment figures, have maintained unemployment rates considerably below national rates. Through August of 2010, Linn County and the Cedar Rapids MSA had an unemployment rate of 6.6%, identical to the State of Iowa, and significantly below the 9.3% unemployment rate of the Country. Airport Traffic Since airport access is an important consideration for event planners, airport passenger counts provide an indication of the ability of a market to support convention events. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area. The Eastern Iowa Airport is a commercial airport that serves Cedar Rapids, Iowa City and other communities in eastern Iowa. It was renamed The Eastern Iowa Airport in 1997 in order to reflect its status as a regional airport. The small to midsized single-concourse airport is serviced by Allegiant Air, American Airlines, Delta Air Lines, Northwest Airlines, and United Airlines, which provide flights to eleven nonstop destinations. The airport’s main runway is expected to be rebuilt with almost $45 million in federal grants and local funding. The following table illustrates recent operating statistics for the primary airport facility serving the subject property’s submarket.

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FIGURE 2-6

AIRPORT STATISTICS
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Passenger Traffic 1,001,219 878,323 877,215 921,986 938,555 1,004,265 1,023,872 1,060,771 991,512 945,350 Percent Change* — (12.3) (0.1) 5.1 1.8 7.0 2.0 3.6 (6.5) (4.7) % Percent Change** — (12.3) (6.4) (2.7) (1.6) 0.1 0.4 0.8 (0.1) (0.6) %

*Percent change from the previous year **Compounded percent change from first year of data

Source: Ea s tern Iowa Ai rport

Eastern Iowa Airport currently offers flights to and from Chicago, Dallas, Denver, Minneapolis, Detroit and Las Vegas. This provides convenient transportation to convention and sporting event attendees from major markets in the Midwest and western U.S. While the airport has lost passenger traffic in 2008 and 2009, the new runway may expand the existing flight schedules and passenger traffic. Tourist Attractions The market benefits from a variety of tourist and leisure attractions in the area. The peak season for tourism in this area is from May to September. During other times of the year, weekend demand comprises travelers passing through en route to other destinations, people visiting friends or relatives, and other similar weekend demand generators. Primary attractions in the area include the following: · The Cedar Rapids Museum of Art holds the world’s largest collection of paintings by Grant Wood, including the original American Gothic, as well as works by other important artists from America and around the world. The Lost Island Waterpark is Iowa’s newest and largest water park, consisting of a wave pool, a lazy river, a water volleyball court, and eleven body and raft rides, including two for small children. The National Czech & Slovak Museum & Library is internationally known for its permanent and changing exhibits featuring exquisite Czech and Slovak folk art and costumes, fine art, political history, maps, and militaria. Visitors may also tour a restored 1880 Czech immigrant home and visit the library, which
Market Area Overview Market Study Proposed Convention Center – Cedar Rapids, Iowa

·

·

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contains a large collection of books and archival materials about Czech and Slovak history and culture. · Orchestra Iowa performs world-class classical and chamber music, as well as family/children's concerts. Until the Paramount Theatre is reopened in 2012, the symphony currently hosts its shows in Sinclair Auditorium and other venues in Cedar Rapids and Iowa City. The group’s nationally honored Symphony School reaches 30,000 people annually with programs for all age groups.

Lodging Supply

A convention center’s ability to attract out-of-town groups depends greatly on the availability of adjacent or nearby hotel rooms within walking distance. The figure below shows the inventory of hotels within the Cedar Rapids area that may serve the Proposed Convention Center.

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FIGURE 2-7
Hotel Name

LODGING SUPPLY
Year Opened 1979 1988 1987 1968 1994 1977 2009 1990 1987 2010 1996 2000 1997 1996 2001 1968 1973 2002 1998 2010 1997 1998 1985 2004 1995 1988 1989 1991 1957 1994 1993 1989 1961 STR Chain Scale Ups ca l e Upper Ups ca l e Mi ds ca l e w/o F&B Mi ds ca l e w/F&B Mi ds ca l e w/o F&B Economy Mi ds ca l e w/o F&B Economy Mi ds ca l e w/F&B Ups ca l e Economy Mi ds ca l e w/o F&B Mi ds ca l e w/o F&B Mi ds ca l e w/o F&B Ups ca l e Indepe nde nt Mi ds ca l e w/F&B Mi ds ca l e w/o F&B Mi ds ca l e w/o F&B Indepe nde nt Ups ca l e Indepe nde nt Economy Economy Economy Mi ds ca l e w/o F&B Mi ds ca l e w/o F&B Economy Mi ds ca l e w/F&B Economy Indepe nde nt Economy Indepe nde nt

Number of Rooms Crowne Pl a za Ceda r Ra pi ds Fi ve Se a s ons 275 Ma rri ott Ceda r Ra pi ds 220 Hea rtl a nd I nn Ce da r Ra pi ds 113 Be s t Wes te rn Pl us Longbra nch Hotel & Conventi on Center 106 Ha mpton Inn Ceda r Ra pi ds 106 Motel 6 Ceda r Ra pi ds 105 Ha mpton Inn Sui tes Ceda r Ra pi ds North 103 Re d Roof Inn Ce da r Ra pi ds 100 Howa rd Johns on Ceda r Ra pi ds 100 Home wood Sui tes Ceda r Ra pi ds North 95 Da ys Inn & Sui te s Ceda r Ra pi ds 90 Ba ymont Ceda r Ra pi ds 85 Hol i da y Inn Expre s s & Sui te s Ceda r Ra pi ds I 380 83 Hol i da y Inn Expre s s Ceda r Ra pi ds Col l i ns Rd 83 Ha wthorn Sui tes by Wyndha m Ceda r Ra pi ds 82 Budget Inn 75 Be s t Wes te rn Coope r`s Mi l l Hotel 75 Ma i ns ta y Sui tes Ceda r Ra pi ds 75 Country Inn & Sui tes Ce da r Ra pi ds 74 The Hotel @ Ki rkwood Center 71 Re s i de nce Inn Ceda r Ra pi ds 66 Col l i ns Inn & Sui te s 64 Super 8 Ce da r Ra pi ds Ea s t 62 Ameri cInn Ce da r Ra pi ds 62 Super 8 Ce da r Ra pi ds Wes t 61 Comfort Inn Ceda r Ra pi ds South 60 Comfort Inn North Ceda r Ra pi ds 59 Econo Lodge Ce da r Ra pi ds 50 Qua l i ty Inn Ceda r Ra pi ds 49 Rodewa y Inn Ce da r Ra pi ds 47 As pen Inn 42 Economy Inn & Sui te s 40 Ced Rel Motel 24 Source: STR

There is an inventory of 33 hotels, a majority of which (24), have fewer than 100 hotel rooms. The inventory of hotels is fairly new, with 19 hotels having opened since 1990, and two properties having opened in 2010. The quality of the hotels also indicates the market ability to support the Proposed Convention Center. Different events have different preferences with respect to the types of hotels that best meet the needs of their delegates and attendees. Most planners of professional conventions, conferences, and tradeshows prefer large blocks of full-service hotel rooms in nationally branded upper or upscale hotels. Some consumer show and assembly event planners prefer less expensive, limited-

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service hotel options that offer guest amenities such as complementary breakfast and free internet connections. The figure below summarizes the lodging supply by service level.

FIGURE 2-8

SUMMARY OF LODGING SUPPLY BY SERVICE LEVEL
STR Chain Scale Upper Ups ca le Ups ca le Mids ca l e w/F&B Mids ca l e w/o F&B Economy Independent Total Number of Hotels 1 4 4 10 9 5 33 % of Hotels 3% 12% 12% 30% 27% 15% Number of Rooms 220 518 330 841 630 263 2,802 % of Rooms 8% 18% 12% 30% 22% 9% -

Source: STR

According to STR, the Cedar Rapids hotel market is largely comprised of midscale without food and beverage properties (30%) and economy properties (27%). The number of hotel rooms is led by the midscale without food and beverage properties, but are relatively evenly split between upscale, midscale with food and beverage, and economy properties. The current hotel inventory, which is comprised of only one upper upscale property and numerous midscale without food and beverage and economy class hotels, does not represent the ideal inventory for convention markets. Nonetheless, the market does offer a number of upscale properties and midscale with food and beverage properties that could attract the price-sensitive convention market. Conclusion The Cedar Rapids area continues to address the long-term issues from the flood, but has maintained a stable economy through 2010, as evidenced by its relatively low unemployment rate and the opening of two hotels in 2010. Additionally, the area is projected to see some growth in population and retail sales through 2015. While the airport passenger traffic has declined, it will likely increase in the coming years after the new runway opens. The hotel inventory reflects the current demand in the city, and does not offer the ideal mix for a convention market, although there are a number of upscale and midscale properties that can accommodate sections of the convention market. As the area continues its projected growth in employment, the services sector, and population and retail sales, the ability of the area to accommodate the demands of a convention center would increase.

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

3. Industry Trends
In the following section, HVS presents an analysis of the convention, tradeshow and meeting industry, including trends in the supply and demand of meeting and convention facilities and trends in expenditures and meeting planner preferences. This section also includes an analysis of the recent trends in the concert and entertainment industry, including facility usage and design and the touring entertainment industry. These trends analyses provide background information necessary to assess the potential for the proposed Convention Center Complex in Cedar Rapids. This section of the report also provides definitions of industry terms used throughout the remainder of this report. OASIS© Event Classification System Convention centers measure their performance by tracking event activity, but the definition and classification of events lacks consistency throughout the industry. Each convention center or marketing organization has their own way of classifying and measuring event demand. HVS has developed a proprietary method of event classification called OASIS Event Classification Method© or OASIS©, which is a convenient acronym for five criteria of event categorization: Organization, Attendees, Scope, Industry, and Set-up. See the figure below.

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Industry Trends Market Study Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

FIGURE 3-1

OASIS EVENT CLASSIFICATION SYSTEM

©

All rights reserved.

The criteria in the OASIS Event Classification Method© and the categories within he in each are defined as follows: ORGANIZATION—the ORGANIZATION the organization that sponsors or owns the event provides an important area of classification and can be described in seven mutually exclusive categories: · Corporations—corporations, Corporations corporations, or private business interests, are responsible for organizing the majority of events. The event organizers may be internal to the business or professional meeting plann planners. Associations—associations Associations associations are usually membership organizations centered on specific business types, professions or political purposes. Government—international, Government international, national, state or local government organizations sponsor events. This category is particularly important in markets with a large particularly government office presence. Exhibition Company exhibiting organizations are companies or subsidiaries Company—exhibiting of companies for the purpose of owning and promoting exhibiting events, such as trade and consumer shows.

· ·

·

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Industry Trends Market Study Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

·

Event Promoter—event promoters are organizations that exist for the purpose of promoting concerts, entertainment and other types of live events that require production set-up. Sports Enterprise—sports enterprises are companies or subsidiaries of companies that exist for the purpose of owning and promoting sporting events. Social, Military, Educational, Religious, Fraternal and Ethnic (“SMERFE”)—although similar to associations, this category includes the types of organizations described in the title. SMERFE represents a distinct category because members of this category tend to be more price-sensitive and less profit-oriented than associations.

· ·

The organization criterion is most useful to marketing and sales organizations that rely on this information to make decisions on the allocation of staff and resources according to the type of organization sponsoring the event. Other industry participants, such as destination management companies and venue operators, also need to understand the type of organizations active in sponsoring events and value personal relationships with the event planners that represent them. ATTENDEES–Event attendees can be placed in four distinct categories that distinguish among the ways in which attendees gain access to events: · Private—attendees come to the event by invitation only and do not pay a registration or admission fee. Private attendees may be individually asked to attend, as to a wedding, or invited by virtue of belonging to a certain group, such as company employees or shareholders. Registered—attendees do not necessarily need an invitation, but must pay an advance registration fee to attend the event. Registered attendees are often called delegates or qualified buyers and they usually attend an event for multiple days. Public—the event is open to the general public. Attendees may need to purchase a ticket for admission such as at a consumer show. Other civic events may be free of charge. Combination—combination shows typically have an initial period of attendance by registered attendees only, and later by the public.

·

·

·

This category is particularly important to venue operators and industry analysts. Understanding the type of attendee is critical for assessing the impact on convention center operations and projecting the economic impact of events. The length of stay of attendees and their spending patterns varies considerably among the types of attendees.

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SCOPE—this category refers to the geographic origin of the attendees. Events are classified accordingly if a significant proportion of the attendees come from the indicated geographic region surrounding the convention center. Five categories capture all the potential geographic scopes and are self-explanatory: · · · · · International National Regional State/Provincial Local

Understanding the origin of attendees is critical to event planners and in the estimation of the economic impact of events. Events that draw attendees from larger geographic regions tend to have higher new spending associated with the event. The allocation of marketing and sales resources may also break down according to the geographic scope of events. INDUSTRY—in North America, HVS recommends relying on the North American Industry Classification System (“NAICS”) which replaced the previously used U.S. Standard Industrial Classification (“SIC”) system. NAICS was developed jointly by the U.S., Canada and Mexico to provide new comparability in statistics about business activity across North America. Other economic regions and countries have similar industrial classification systems that are widely used and can be adopted for the purposes of classifying events by industry. NAICS has hundreds of categories but these categories are organized hierarchically in five levels. All categories can be rolled up into twenty of the top levels in the hierarchy. However, not all top level industry classifications are useful for event classification because little or no event activity is associated with them. Other top level categories, such as Manufacturing, are too broad to provide meaningful information, and level two or three categories can be used to form a useful classification of events. The choice of industry classifications should result in a reasonable share of events falling into each category. According to the Tradeshow Week data book, the leading industries that are represented by conventions, tradeshows and exhibition include: · · Medical and Health Care Home Furnishings and Interior Design

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· · · · · · · ·

Sporting Goods and Recreation Apparel Building and Construction Landscape and Garden Supplies Computers and Computer Applications Education Gifts Associations

Use of the NAICS codes allows for the orderly roll-up of industrial classifications across different events and venues, regardless of the categories or the hierarchical levels that different people may choose to use. Industrial classification information is useful for those planning to develop new events and for other analysts that need to understand how trends in economic health of the underlying industries affect the success of particular events and venues. SPACE SETUP—this final criterion provides for the categorization of events by set-up of the function spaces they utilize. Unlike all the other criteria, these categories are not mutually exclusive as events may use any combination of the four primary types of event set-up. · Breakout—typically involves the use of meeting rooms, boardrooms or other multi-purposes spaces for meeting functions in a classroom or meeting setting. This set-up may involve some catering services such as coffee breaks or lunches. Banquet—includes the set-up for catered banquets events such as a wedding and may include some staging for presentations such as at a general session event. Exhibit—includes the set-up displays in exhibition halls or other multipurpose space. Concession services and buffet lunches are often a component of this set-up. Assembly—includes set-up in theater style seating in plenary halls and fixed seat theaters or other multi-purpose spaces that are used primarily for assemblies and general sessions. Production—includes the set-up for concerts, entertainment, sporting events and other types of events that require significant staging, lighting, and other live-event related set-up.

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Event Types

Application of the OASIS© system can provide precise definitions of commonly used event classifications. All commonly used terms for event types can be defined by a combination of three OASIS© categories: organization, attendees and space set-up. · Conventions—associations, government, and SMERFE organizations register attendees for multi-day events. Facility set up includes breakout, banquet and exhibit space set-up and may include plenary sessions. Typically, the primary purpose of a convention is information exchange. Tradeshows—provide a means for wholesalers and retailers to transact business with industry buyers. Like conventions, tradeshows offer a forum for exchanging industry ideas. In order to clearly differentiate conventions from tradeshows, HVS assumes that only corporations and enterprises can sponsor and produce tradeshows. Similar to conventions, tradeshows require registered attendees. While they often require exhibit space set-up, they only sometimes require banquet or breakout space set-up. Combination Shows—are either corporate or enterprise produced, with a part of the shows being a public event, and the rest of the show being a registered event. Always requiring exhibit set-up, they sometimes require plenary, banquet and/or breakout set-up for additional portions of their show. Consumer Shows—are public, ticketed events featuring the exhibitions of merchandise for sale or display. Only enterprises produce consumer shows, as they provide a means of product distribution and advertising. They only require exhibit space set-up. Conferences—require a mix of banquet and breakout space set-up, but do not require any exhibit set-up. Conferences can be corporate, association, government or enterprise, but always require attendees to register. Meetings—only require breakout space set-up. Like conferences, they can be produced from any of the above named organization types, but unlike conferences, they are private events. Banquets—only require a banquet set-up for food and beverage meal service. These events also can be produced by any organizational type, but are also private. Assemblies—usually involve a ceremony, a speech, or another similar activity that attracts a crowd of spectators. Graduations are a common Assembly event. Produced only by SMERFE groups (social, military, educational, religious, fraternal and ethnic), they are always public events. Additionally, assemblies only require a plenary set-up.

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·

Fairs—usually involve an exhibit booth set-up for a public event in which a number of organizations or companies represent themselves and/or a product or service, with a similar theme or purpose uniting the event. Associations, governments or SMERFE groups may present a fair. Civic Events—is typically a local event, always produced by some form of government entity. These are public events that always only require a plenary set-up. Entertainment—usually a concert or some other form of live entertainment, such as family shows and live theater. Entertainment events are typically owned and organized by an event promoter for the public. Entertainment events only require a production set-up. Sports—require only a production set-up. Attendees to sporting events, which are always organized by sports enterprises, may be public, or registered. Some sporting events have both a registered and public aspect to the event over the span of a few days.

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Convention Industry Trends

The purpose of this section is to describe trends in the convention, exhibition, and meeting industry and to analyze trends in the number of events, attendance, and the supply of meeting and exposition facilities. There are four measures of exhibition demand: the net square footage (NSF) of exhibition space rented, the number of exhibitors, the number of attendees and the total revenue earned by convention facilities. The following figure demonstrates how these four measures have trended since a 2000 base year.

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FIGURE 3-2 MEASURES OF EXHIBITION DEMAND

Source: Center for Exhibition Industry Research

All four measures of demand followed similar growth patterns before peaking in 2007. Throughout the national economic downturn, all have fallen back to year 2000 levels with the number of exhibitors falling to approximately 95 percent of that found in the base year. The following figure further demonstrates how the combined or “Total” demand index shown in the above chart moves in step with the U.S. GDP.

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FIGURE 3-3 RELATIONSHIP BETWEEN GDP AND EXHIBITION DEMAND

Source: Center for Exhibition Industry Research

The following graph shows the historical growth in exhibit-space square footage, the number of trade and consumer shows, and the net square footage of space that exhibitors use. Tradeshow Week data focus on larger consumer shows, trade shows, and conventions in the United States and Canada with exhibitions that typically occur in convention and exhibition centers.

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FIGURE 3-4
20% 15% 10% 5% 0% -5% -10%

SUPPLY AND DEMAND FOR EXHIBITION SPACE

SF Supply

SF Used

Source: Tradeshow Week

Overall supply growth in the industry is expected to be low in the near future for several reasons. First, the pipeline of pending convention center projects is historically small. Second, governmental budgets are stressed, resulting in fewer convention center projects even being considered. Third, once envisioned, convention venue projects have long lead times due to planning, financing and construction requirements. Event planners are reporting a more optimistic outlook in coming years as the U.S. economy continues to recover. The following figure provides a 2010 snapshot of how meeting planners foresee their own booking patterns to change as compared to a similar survey taken in 2009.

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FIGURE 3-5

EVENT PLANNERS SURVEY
0% 5% 10% 15% 20% 25% 30%

Greater than 10% better 6%-10% better 1%-5% better Flat 1%-5% worse 6%-10% worse Greater than 10% worse 2010 2009

Source: Future Watch 2010 Meeting Planners International

Emerging Trends

Over the past few decades, the meeting and convention industry has evolved dramatically from a budding industry to an important driver of the national economy. Currently, industry expenditure estimates are over $40 billion per year. As a mature industry, the rapid growth of the last four decades is not likely to persist. However, continued evolution and growth can be expected on a controlled scale. We have identified the following emerging industry trends. Quality of Supply—as the industry has matured and competition among cities has become more intense, meeting planner expectations for quality have increased. For example, the proximity of full-service hotels to event facilities has become a primary determinant in the decision to locate a meeting at a particular location. Cities lacking suitable hotel properties typically lose business to cities with a superior "hotel package." Similarly, advanced communications technologies in event centers are now routinely expected. Furthermore, surveys of meeting planners show that expectations for quality service have become one of the most important site-selection criteria. In an oversupplied market, quality expectations are likely to increase in importance. Supply and Demand Equilibrium—since the majority of convention and meeting facilities involve public funding, the expected relationship between supply and demand found in the private sector does not necessarily hold true for the meeting

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and convention industry. Public entities are motivated to develop event centers because they seek to stimulate local economic activity by attracting new visitors to the community. These public entities are not constrained by the need to achieve a return on investment in the facility. Rather, convention and meeting facilities are considered "loss leaders" for overall expenditures in the local economy. This disconnect between the rationale for an increase in supply and the given available demand has the potential to lead to an overbuilt situation as currently planned new construction and expansions are completed. However, public entities are constrained by limitations on tax resources to support these developments. If event facilities do not produce the expected economic impacts, the justification for increasing public support of convention and meeting facility development will become less politically viable. These political constraints are likely, in the long run, to keep the supply of space commensurate with demand. Emergence of "Destination Meeting Resorts"—several resort communities such as Las Vegas and Orlando have emerged as primary meeting resort destinations. These cities have undergone rapid growth in the supply of hotels, resort conference centers, and convention center facilities, and this new supply has been quickly absorbed with new business. Destination meeting resorts have a strong tourist appeal and an attractive climate in common, and they offer an appealing experience for the event attendee. Their ability to attract a large number of attendees is a prime consideration in site selection. Cities with such strong appeal are likely to continue to be the most successful event destinations in terms of overall number of attendees. Propensity to Travel—the declining cost of travel (in real terms) and the increase in the propensity to travel are the primary drivers of long-term growth in the meeting industry. Recent increases in travel costs and tightening in budgets have decreased the desire to travel for planners and attendees. In the long run, however, expansions in the transportation system and continued innovations, as well as changing economic conditions, that reduce costs and increase the ease of and affordability to travel are likely to support the growth of the meeting industry. Improved Communications Technology—over the past decade, industry experts have speculated a great deal that improvements in telecommunications technology would supplant the need for face-to-face meeting. To date, there is no evidence that video conferencing or the Internet have become a viable substitute for inperson communication. Society still prefers person-to-person interaction to exchange ideas and information and build relationships. To the extent that improvements in communications technology have contributed to overall economic growth, they have more likely fostered the growth of the meeting industry.

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Mixed-Use Developments—in the past few years, convention centers have become part of a larger picture. For many cities, states, areas and developers convention centers have become an opportunity to spawn a mixed-use attraction an area often including hotels, retail, dining, sports venues, and entertainment options, in addition to a housing a convention center. Convention centers have become the center of their own “districts” offering almost everything a delegate, event organizer of exhibitor could want in one area. The growth of mixed-use developments will continue to change the meeting and convention industry as supply transforms. Spectator Arena Trends Over the past decade, innovations in arena design have spread from large urban arenas with major professional sports franchises to suburban and mid-sized metropolitan arenas. Following the design innovations in major league professional sports venues in the 1990’s, many mid-size facilities have created new revenue streams and added amenities that increase the value of the patron experience. New features include luxury suites, club seats, restaurants, VIP lounges, and more elaborate and convenient concessions services. Once rare in minor league venues, these features are now prevalent in new or retrofitted facilities, regardless of market or venue size. The growth in popularity of minor league sports has led to the construction of several small- to mid-sized arenas as various markets seek to tap into the industry. As the cost of attending major league sporting events has continued to increase and other economic forces have strained the availability of disposable income, families are increasingly turning to minor league sports for a more affordable alternative. Mid-sized facilities that host minor league teams are designed with seating capacity and amenities that address the event demand in sub-markets and secondary population centers. They provide a more readily accessible and costeffective alternative for entertainment and sporting activities. Recent design of spectator sports arenas seeks to maximize revenue by diversifying capacity to host a variety of events and activities. Rather than focusing exclusively on spectator events, a new wave of arena design and utilization has emerged in which spectator arenas also accommodate community activities such as amateur sports, recreations activities and other community events. This combination of sports and entertainment with community activities not only improves financial viability, but also creates a stronger rationale for public sector participation in their development, as is common in other community center and recreational infrastructure. Recently built venues also put a greater emphasis on exterior spaces and their connection to the surrounding urban environment. Entertainment plazas and pedestrian malls have replaced the sidewalks and parking lots that have

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traditionally surrounded arenas. Incorporation of a vibrant urban setting with residential, commercial, retail, dining and entertainment spaces around a venue has been an integral part of recent arena design trends. Concert Industry Trends Concerts and other family entertainment provide another important source of event demand for arenas. Concerts and entertainment events are typically booked through a third party promoter who pays a percentage of gate receipts to the venue as rent. Some venues may promote or co-promote events, but concert promoters drive the majority of events in the industry. The North American concert industry is roughly a $3.0 billion business annually. Concert promoters and talent buyers form agreements with artists and concert venues to book live music acts. Under most circumstances a promoter offers the artist a guaranteed fee or a share of gross ticket revenues in exchange for the exclusive rights to book and promote an act on a certain date. The promoter also books a venue and pays a rental fee or offers a share of gross ticket revenues in exchange for use of a concert venue on a certain date. Hence, the promoter assumes the financial risk and must sell enough tickets at high enough prices to pay the artist, the venue, and make a profit. The number of concert promoters in the US has consolidated significantly over the past decade, with Live Nation and AEG Live remaining as the two main national contenders. Both of these firms have expanded their businesses by vertically integrating into venue ownership and online ticket sales. Ownership of arenas, stadiums, theaters, and outdoor pavilions across the country allows these two firms to book the touring acts which they are promoting into venues which they own. Independent promoters remain in the market, but their numbers have dwindled. These independent promoters tend to book events in smaller venues and markets and would be the likely source of concert and other entertainment events in the proposed convention complex. The concert industry is seasonal. Approximately two-thirds of acts tour during the months of May through September, allowing them to book outdoor venues. If a show has success in a particular market, it may re-book during the winter at a smaller indoor venue to take advantage of this popularity. The proposed convention complex may have success in booking a handful of these shows; however, the venue will compete with casinos which have begun to take advantage of this trend. Casinos often offer promoters lucrative deals to book shows in their much smaller venues as a way to entice new patrons. Through much of the recent economic downturn, the concert industry seemed to be thriving. Big name acts were still able to sell tickets, ticket prices increased, and tour schedules were full. 2010, however, has brought a marked shift in an industry

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that had been able to resist recessionary pressures. North American touring shows have seen a significant drop in three key concert indicators. § First, the combined gross of the top one hundred North American tours dropped by nearly $200 million in the first and second quarter of 2010. This represents a 17 percent drop from the same period in 2009. Second, the number of tickets sold at these same tours fell to 15.9 million, a 12 percent decline from 2009. Average per show ticket sales declined by nine percent, despite a six percent drop in ticket prices as compared to 2009. Sluggish sales resulted in a number of cancelled performances by some of the industry’s most popular performers.

§ §

Prior to the recent recession, the live music industry experienced tremendous growth. The proliferation of arenas and the renovation of historic theaters and concert halls provided an increasing supply of potential concert venues. The increasing supply of venues and strong consumer demand for live entertainment gave talent the upper hand in contract negotiations. Acts have been able to demand large guarantees from concert promoters, often as large as the maximum potential ticket sales revenue for an event. This leaves the promoter and the venue to share in concession, novelty, and other revenue. This dynamic helped to push ticket prices to record highs, as promoters attempted to maximize revenue in any way possible. Recent data on concert industry performance suggests that it has run into price resistance and declining consumer demand. Implications for Cedar Rapids With no major investment in its convention and arena facilities since 1979, Cedar Rapids has fallen well-behind other small cities throughout the Midwest which have built venues to cater to the growing demand and emerging trends. Once a popular destination in the meetings industry, Cedar Rapids is no longer considered a viable stop for many state association based events which now travel to Dubuque, Ames, and Coralville. With meeting industry trends pointing to demand growth and a slower than normal supply increases, Cedar Rapids should act quickly to reenter the market and regain its position in the industry that it has lost over the last decade. However, the importance of delivering a product that suits the needs and desires of meeting planners cannot be understated. With an increased number of destination choices, it is imperative that the proposed Cedar Rapids Convention Center Complex be a state-of-the-art facility with high quality features in both amenity and operation. With the advent of a number of smaller cities developing “major league”-quality arena venues, the renovated arena should, to the extent possible, be modeled after
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its major-league counterparts. The quality of amenity and patron service, including concessions, ticketing, restrooms, security, and back of house areas, would prove an important factor in overall event and attendance demand. With venue profitability as the goal, the renovated arena should continue to maintain its current flexibility in booking events, whether spectator or participatory in nature. As a community venue, the renovated arena would become an important option for a number of community-based events and programs, thus maximizing its utilization. The importance of collateral development in and around the proposed Convention Center Complex is crucial to its overall success. Because future development in downtown Cedar Rapids, including the ACE District, is master planned as a vibrant and active mixed-use community, the proposed convention complex would be able to interact with the other elements of the city on a daily basis, thus increasing public use and ultimately, profitability.

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4. Comparable Venues
This analysis of comparable venues provides a basis for forecasts of event demand and financial operations. The analysis compares the function spaces in each of the facilities, adjacent hotel capacities, and characteristics of the markets that are relevant to the success of the venues. It concludes with an assessment of the relative strengths and weaknesses of the proposed Cedar Rapids Convention Complex. Cedar Rapids competes directly with other cities in the region, the state, and across the U.S. for a share of the meetings market. Event planners select host cities for their events based on the overall package that a city may offer. Several factors determine a city’s overall strength and potential in the meetings market. These factors include the attributes of the convention facilities, lodging supply, the economic and demographic profile of the community, transportation access, tourism amenities, and overall destination appeal. This analysis will help in understanding the competitiveness of Cedar Rapids and the proposed Convention Center. HVS analyzed three sets of venues: · Convention and conference facilities in Iowa that offer exhibit, ballroom and meeting space and would compete directly with the proposed Convention Center Complex for state association and regional business. Convention and conference facilities in the Midwest that offer exhibit, ballroom and meeting space that would compete directly with the proposed Convention Center Complex for regional and national business. Comparable national convention and conference facilities which are operated as a department of an attached hotel property.

·

·

HVS analyzed competitive venues shown in the figure below.

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FIGURE 4-1

COMPARABLE VENUES
Location Total Function Space

Nam e of Venue Local Area Com petitors Clay County Regional Events Center Iow a Events Center Mid-America Center River Center Coralville Marriott and Conference Center Grand River Center Five Sullivan Brothers Convention Center Fairfield Arts and Convention Center Iow a State Center Com parable Regional Venues DeVos Place Mid-America Center Monona Terrace Convention Center Peoria Civic Center Sioux Falls Convention Center St. Cloud Civic Center Com parable National Venues Branson Convention Center Chattanoogan Hotel Conference Center Conference Center Niagara Falls Embassy Suites Hotel and Conference Center Frisco Tinley Park Convention Center Durham Convention Center Coralville Marriott and Conference Center Hilton Vancouver Washington Marriott Provo Hotel and Conference Center

Spencer IA Des Moines IA Council Bluffs IA Davenport IA Coralville IA Dubuque IA Waterloo IA Fairfield IA Ames IA

32,286 sf 74,081 78,000 54,575 57,388 54,000 30,961 12,700 82,600

Grand Rapids MI Council Bluffs IA Madison WI Peoria IL Sioux Falls SD St. Cloud MN

234,000 sf 78,000 68,370 152,593 56,372 55,346

Branson Chattanooga Niagara Falls Frisco Tinley Park Durham Coralville Vancouver Provo

MO TN 0 TX IL NC IA WA UT

87,710 sf 20,944 52,866 54,600 36,907 35,700 57,388 29,751 22,644

Source: Respective Venues

Exhibition Space Assessment

Exhibition space is critical for several types of events such as conventions, tradeshows, and consumer shows. The amount and quality of exhibition space determines the size and types of events that the venue can accommodate. The exhibition space available at each of the selected comparable facilities provides an indication of the amount of space that is appropriate for Cedar Rapids.

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FIGURE 4-2

EXHIBITION SPACE IN COMPARABLE VENUES
Local Area Competitors Proposed Cedar Rapids Convention Center Complex Iowa Sta te Center Mid-America Center Ri ver Center Cora lvill e Marri ott a nd Conference Center Gra nd Ri ver Center Iowa Events Center Cla y County Regiona l Events Center Five Sull iva n Brothers Convention Center Avera ge Comparable Regional Venues DeVos Pla ce Peori a Civic Center Proposed Cedar Rapids Convention Center Complex Mid-America Center Del ta Pl ex Arena a nd Convention Center St. Cl oud Civic Center Monona Terra ce Convention Center Avera ge sf 67,263 62,600 54,000 46,420 30,000 30,000 27,025 24,000 19,080 36,809 sf 162,000 108,688 67,263 54,000 42,300 42,000 37,200 68,381 sf 67,263 47,712 32,300 30,000 18,120 18,000 6,787 0 0 0 31,455 # halls 4 3 0 2 1 2 0 0 0 2 # halls 3 0 4 0 0 3 2 3 # halls 4 2 1 1 3 0 5 0 0 0 3

Comparable National Venues Proposed Cedar Rapids Convention Center Complex Bra ns on Convention Center Conference Center Ni a ga ra Fa l ls Cora lvill e Marri ott a nd Conference Center Durha m Convention Center Tinley Pa rk Convention Center Cha tta nooga n Hotel Conference Center Embas s y Sui tes Hotel a nd Conference Center Fris co Hilton Va ncouver Wa s hington Ma rri ott Provo Hotel a nd Conference Center Avera ge Source: Res pective Venues

The combination of multi-purpose hall and arena floor would create the greatest amount of total available exhibit space under the same roof in the state of Iowa and placed the proposed Convention Center Complex in the top three of the competing regional venues. The total exhibit area would also be well above that offered at any of the comparable national hotel properties. Ballroom Space Assessment
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Banquet space is important for convention centers as facility operators attempt to grow food service revenues at their facilities and event planners seek a high level of service for their attendees. In addition to social events such as weddings and
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fundraisers, several other types of events, such as conventions and tradeshows, typically require food services in a ballroom setting. General assemblies at conventions and tradeshows are held in a ballroom and with a theater or banquet set-up. Consequently, the size of the ballroom can determine a venue’s event size capacity, divisibility, and its ability to host simultaneous events that require banquet space. The figure below compares available banquet space in the comparable venues.

FIGURE 4-3

BALLROOM SPACE IN COMPARABLE VENUES
Local Area Competitors Mid-America Center Coral vi ll e Ma rri ott and Conference Center Proposed Cedar Rapids Convention Center Complex Grand Ri ver Center Cl ay County Regi onal Events Center Iowa Events Center Ri ver Center Fi ve Sul l ivan Brothers Conventi on Center Fai rfi el d Arts and Conventi on Center Average Comparable Regional Venues DeVos Pl ace Peoria Ci vi c Center Mid-America Center Sioux Fal l s Convention Center Monona Terrace Convention Center Proposed Cedar Rapids Convention Center Complex St. Cl oud Ci vi c Center DeltaPlex Arena and Conventi on Center Average sf 23,000 22,000 13,033 12,000 7,560 0 0 0 0 15,519 sf 40,000 26,550 23,000 16,800 13,524 13,033 8,426 2,300 17,954 sf 41,800 22,703 22,000 14,500 14,074 14,070 13,033 10,500 8,142 16,857 # divisions 4 10 3 4 6 0 0 3 0 5 # divisions 4 9 4 0 4 3 7 0 5 # divisions 9 2 10 0 6 4 3 2 4 5

Comparable National Venues Embas s y Sui tes Hotel and Conference Center Fris co Brans on Conventi on Center Coral vi ll e Ma rri ott and Conference Center Tinley Park Convention Center Hil ton Va ncouver Was hi ngton Durham Conventi on Center Proposed Cedar Rapids Convention Center Complex Conference Center Nia ga ra Fal ls Marriott Provo Hotel and Conference Center Average Source: Res pecti ve Venues

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When considering only the area of the Ballroom located on the second level of the proposed Convention Center, ballroom capacity in Cedar Rapids would be below average on all three comparable venue sets. However, if needed, a portion of the multi-purpose hall located on the event level of the complex may also be utilized as a 35,000 square foot grand ballroom, providing a banquet area consistent with that found in some of the largest of the comparable venues. Meeting/Break-out Room Assessment Meeting rooms can accommodate sub-groups as they break out of larger general sessions at conventions and tradeshows. Additionally, these smaller rooms can accommodate self-contained meetings, training sessions, seminars, classes, and a variety of small meeting functions. A facility’s meeting rooms are often its most frequently used function spaces. Generally, convention centers should offer meeting space that is proportionate to the amount of exhibition space available at the facility. However, the optimum amount of meeting space can vary depending on a facility’s target market. The following figure presents a comparison of available meeting space.

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FIGURE 4-4

MEETING SPACE IN COMPARABLE VENUES
Local Area Competitors Iowa Events Center Proposed Cedar Rapids Convention Center Complex Iowa Sta te Center Gra nd Ri ver Center Fi ve Sul l i va n Brothers Conventi on Center Ri ver Center Cora l vi l l e Ma rri ott a nd Conference Center Fai rfi el d Arts a nd Conventi on Center Mi d-Ameri ca Center Cl ay County Regi ona l Events Center Avera ge Comparable Regional Venues DeVos Pl a ce Del ta Pl ex Arena a nd Conventi on Center Proposed Cedar Rapids Convention Center Complex Monona Terra ce Conventi on Center Peori a Ci vi c Center Si oux Fa l l s Conventi on Center St. Cl oud Ci vi c Center Mi d-Ameri ca Center Avera ge sf 47,056 27,965 20,000 12,000 11,880 8,155 5,388 5,000 1,000 726 13,917 sf 32,000 30,500 27,965 17,646 17,355 5,972 4,920 1,000 17,170 sf 27,965 17,295 15,677 14,502 12,800 10,066 6,405 5,388 4,407 3,500 11,801 # rooms 28 23 21 6 9 11 10 3 6 2 12 # rooms 26 6 23 14 16 10 5 6 13 # rooms 23 15 14 17 10 12 13 10 7 6 13

Comparable National Venues Proposed Cedar Rapids Convention Center Complex Bra ns on Conventi on Center Hi l ton Vancouver Wa s hi ngton Ma rri ott Provo Hotel a nd Conference Center Embas s y Sui tes Hotel a nd Conference Center Fri s co Conference Center Ni a ga ra Fa l l s Cha ttanooga n Hotel Conference Center Cora l vi l l e Ma rri ott a nd Conference Center Ti nl ey Pa rk Conventi on Center Durha m Conventi on Center Avera ge Source: Res pecti ve Venues

With approximately 28,000 square feet of total meeting space housed in the proposed Convention Center, arena and the renovated hotel, Cedar Rapids would offer the second greatest amount of meeting space in the state of Iowa, second only to the state capital of Des Moines. The amount of meeting space would also be in the top three amongst the regional venues and greatest in the national set.
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Hotel Capacity

The quality and proximity of hotel supply has increasingly become one of the most important selection factors for facility users in recent years. To attract out-of-town groups, an adequate supply of nearby hotel rooms should support the lodging needs of delegates, exhibitors, and other attendees. Proximity and connectivity are critical factors that event planners consider in evaluating overall hotel packages in competing communities. Generally, the number of rooms offered at one or more hotels that are adjacent or connected to the convention center is the key point of comparison. In the HVS survey of meeting planners, 78 percent of respondents consider an adjacent, full-service convention hotel as an important or very important consideration. Other factors that can be important are hotel brands, service levels, building ages, management, and available meeting and banquet spaces in these hotels.

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FIGURE 4-5

ADJACENT OR INTEGRATED HOTEL CAPACITY
Local Area Competitors Iowa Events Center Cora l vi l l e Ma rri ott a nd Conference Center Proposed Cedar Rapids Convention Center Complex Fi ve Sul l i va n Brothers Conventi on Center Ri ver Center Grand Ri ver Center Mi d-Ameri ca Center Cl ay County Regi ona l Events Center Fai rfi el d Arts a nd Conventi on Center Iowa Sta te Center Avera ge Comparable Regional Venues DeVos Pl a ce Si oux Fa l l s Conventi on Center Monona Terra ce Conventi on Center Proposed Cedar Rapids Convention Center Complex Mi d-Ameri ca Center St. Cl oud Ci vi c Center Peori a Ci vi c Center Del ta Pl ex Arena a nd Conventi on Center Avera ge Comparable National Venues Conference Center Ni aga ra Fal l s Embas s y Sui tes Hotel and Conference Center Fri s co Ma rri ott Provo Hotel a nd Conference Center Bra ns on Conventi on Center Cora l vi l l e Ma rri ott a nd Conference Center Proposed Cedar Rapids Convention Center Complex Hi l ton Vancouver Wa s hi ngton Cha ttanooga n Hotel Conference Center Ti nl ey Pa rk Conventi on Center Durha m Conventi on Center Avera ge Source: Res pecti ve Hotel s 415 280 238 228 221 193 133 0 0 0 244 682 243 240 238 133 103 0 0 273 391 330 330 293 280 238 226 202 202 189 268

At 238 guest rooms, the renovated hotel would rank behind the Marriott attached to the Iowa Events Center and the Coralville Marriott, but would provide a greater hotel room block than most state and regional competitors. As compared to the national list of combined hotel and convention center properties, the proposed Convention Center Complex would offer a slightly below average number of hotel rooms.
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In addition to adjacent hotel capacity, the supply of market wide hotel rooms is also an important selection factor for meeting planners. Many convention events would require room block commitments greater than those offered by the renovated hotel. Additionally, 17 percent of survey respondents prefer to reserve a hotel room block greater than 250 rooms. For those events, arrangements with other city hotels would be required. The figure below present the total marketwide hotel rooms for the competing Iowa cities

. FIGURE 4-6 MARKET WIDE HOTEL CAPACITY
City Des Moi nes Ceda r Ra pi ds Counci l Bl uffs Da venport Dubuque Cora l vi l l e Wa terl oo Ames Spencer Fa i rfi el d City-Wide Hotel Rooms 4,077 2,802 2,554 2,021 1,695 1,652 1,445 1,370 252 121 Source: Smi th Tra vel Res ea rch

In terms of room quantity, Cedar Rapids ranks second only to Des Moines, however, as noted in Section 2, the Cedar Rapids hotel supply has relatively few full service properties which are typically preferred by convention attendees. Outside of the adjacent hotel, the Cedar Rapids downtown does not have a full service property proximate to the proposed Convention Center Complex. Population Comparison Local area population data and income demographics can provide evidence of a community’s overall economic size and ability to support public services and visitor amenities that are important for convention center users. Because most convention centers primarily target out-of-town users, local area population figures rarely have a direct correlation with overall demand potential. However, population and income data can provide a basis for understanding a community’s ability to support and sustain a convention center, the surrounding neighborhood and market. Additionally, demand potential for arena events and certain types of convention events such as locally-generated meetings, banquets, religious events, graduation ceremonies, and consumer shows can be linked to population.

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FIGURE 4-7

POPULATION AND INCOME COMPARISON
Average Household Income 71,141 74,582 62,778 66,435 62,873 62,771 52,605 68,416 56,780 56,372 63,475 71,141 64,741 78,609 68,351 66,435 70,377 64,600 68,624 62,391 72,854 61,408 71,590 66,435 65,037 103,277 55,788 83,203 68,416 71,040

2010 Local Area Competitors Population Counci l Bl uffs 851,996 De s Moi nes 572,378 Da venport 380,390 Cedar Rapids 259,991 Dubuque 93,663 Ames 89,179 Wa terl oo 67,541 Cora l vi l l e 19,183 Spencer 16,658 Fa i rfi el d 8,932 AVERAGE 235,991 Comparable Regional Venues Counci l Bl uffs 851,918 Gra nd Ra pi ds 780,918 Ma di s on 572,775 Peori a 375,372 Cedar Rapids 259,991 Si oux Fa l l s 241,508 St. Cl oud 189,713 AVERAGE 506,639 Comparable National Venues Ni a ga ra Fa l l s 1,118,585 Provo 578,064 Cha tta nooga 525,357 Durha m 506,717 Cedar Rapids 259,991 Va ncouver 172,337 Fri s co 109,047 Bra ns on 81,038 Ti nl ey Pa rk 54,663 Cora l vi l l e 19,183 AVERAGE 342,498 Source: Demogra phi cs Now

Cedar Rapids ranks favorably amongst its in-state competitors in both population and household income statistics, suggesting that the local area market is capable of supporting the proposed Convention Center Complex and would compete effectively with its competitors. When compared to areas surrounding similar regional and national facilities, Cedar Rapids is slightly below average in both population and household income, but is within the range established by the comparables.
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Air Service Capacity

Transportation linkages, including airports, can play a critical role in the success of convention centers that target regional and national user groups. One of the best indicators of an airport’s ability to enhance a convention center’s draw is its service capacity, generally measured as total annual passenger volume, or traffic. An airport with relatively high annual passenger volumes generally is more convenient and has a wider draw than an airport with relatively low annual passenger volumes. In the case of Cedar Rapids, the majority of event attendees would arrive by car. Of the event planners surveyed, 86 percent report that the majority of their attendees travel by car to events, while only 7 percent report that most fly. With recent success in attracting collegiate and amateur sporting events to Cedar Rapids, the CRCVB hopes to expand to more national events. Flight accessibility and affordability would be crucial to securing these events. The following figure shows how the Eastern Iowa Airport, which serves Cedar Rapids, Coralville and Fairfield, compares to other regional airports in the total number of annual passengers.

FIGURE 4-8 AIR SERVICE AT PRIMARY AIRPORTS IN COMPETITIVE SET
Airport Eppl e y Ai rfie l d Gera ld Ford Inte rna ti ona l Ai rport Des Moi nes Inte rna ti ona l Ai rport Qua d Ci ti es Interna tiona l Ai rport Ea s tern Iowa Ai rport Si oux Fa l l s Regi ona l Ai rport Dubuque Regiona l Ai rport Spencer Muni cipa l Ai rport Wa terl oo Re gi ona l Ai rport Markets Served Council Bl uffs Gra nd Ra pids Des Moi nes , Ame s Da venport Ceda r Ra pi ds , Cora l vi l le , Fa i rfie l d Si oux Fa l l s Dubuque Spe ncer Wa te rl oo Source: Res pective Airports Annual Passengers 4,200,000 1,771,000 1,534,000 957,000 945,000 667,000
Limited major carrier service Limited major carrier service Limited major carrier service

Air service capacity to and from Cedar Rapids is well below some of its regional competitors, suggesting limited options for prospective visitors to the area. Air service may be a factor when competing for events with participants and other attendees from a regional or national base. Conclusion The proposed Convention Center could become one of the largest and premier convention centers in the State of Iowa and position Cedar Rapids to compete effectively with existing venues in the rest of the state. Cedar Rapids could also move into a position to compete with regional centers, although its economic and demographics are not as strong as the competition. Low levels of air service, high costs, and lack of destination appeal may preclude Cedar Rapids from competing effectively on a national level.
Comparable Venues Proposed Convention Center

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5. Survey Findings

Overview

HVS conducted a survey of event planners to provide a basis for assessing the potential demand for the proposed convention center in Cedar Rapids. HVS surveyed 210 contacts compiled from the Cedar Rapids Area Convention and Visitors Bureau. Surveys were conducted via email starting on December 13th and as of this writing, HVS received a total of 37 responses to date, representing a response rate of 18 percent. The aggregate responses to each survey question are presented in an appendix to this report. This section highlights key results that indicate the potential performance of the proposed convention center. The figure below shows the type of events survey respondents indicated they would hold at a convention center in Cedar Rapids.

Event Characteristics

FIGURE 5-1 EVENT TYPES
Meetings Conventions (w/exhibits) Conferences Sports Competitions/Events Banquets Conventions (w/o exhibits) Tradeshows Other Consumer Shows Entertainment Shows/Events 54% 54% 51% 24% 22% 16% 14% 5% 0% 0%

Over 50 percent of all respondents said they would plan meetings, conventions with exhibits, or conferences in the convention center. Twenty-four percent stated they would hold sports competitions/events and 22 percent would hold banquets. Geographic Scope HVS asked respondents to identify the geographic scope of their events, as shown in the following:

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FIGURE 5-2 GEOGRAPHIC SCOPE OF EVENTS
Local 9%

National & Int'l 19%

Statewide 64% Regional & Multi State 7%

Nearly 75 percent of all respondents said their events are either statewide or local. Location of Events Fifty-seven percent of respondents stated they have held an event in Cedar Rapids in the past three years. Five respondents host their event at the Marriott on Collins Road, three at the U.S. Cellular Center, two at the Kirkwood Community College Conference Center, and one at the Crowne Plaza Hotel in conjunction with the US Cellular Center. HVS asked respondents to provide names of other Iowa facilities where they have held events in the past. Twenty-two respondents stated Des Moines, with the Iowa Events Center (8) and the Des Moines Marriott (4) as the top named facilities. Other facilities include the Coralville Marriott, Sheraton Iowa City, and the Sheraton Wes Des Moines, all with three responses. HVS asked respondents to answer questions regarding the types of spaces required for their largest event. Their responses are summarized as follows: · · · A large majority or respondents (88 percent) require less than 40,000 square feet of exhibit space The majority (75 percent) of respondents require banquet seating for 400 or less, while twenty five percent require seating for between 400 and 800. Over ninety percent (91) require 8 breakout meeting rooms or less.

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·

The majority (63 percent) of respondents host events with fewer than 500 attendees. One fourth (25 percent) host events with attendees in the range of 501 to 1,500, and twelve percent host events with 3,000 or more attendees. Over forty percent (41) of respondents expect attendance at their events to increase in the next five year and nearly half expect attendance to stay the same. The average number of exhibitors per event is 57, with a minimum of 4, and maximum of 200.

·

· Hotel Requirements

HVS asked respondents to rate the importance of a full-service hotel connected to the facility where their event is held, as shown in the following figure.

FIGURE 5-3 IMPORTANCE OF AN ADJACENT FULL–SERVICE HOTEL
Not Important 19%

Not a Cons ideration 4% Important 47%

Very Important 31%

The majority of the respondents (78 percent) stated that the presence of a full service hotel is very important or important. HVS asked respondents to answer questions regarding hotel room blocks and room rates. Their responses are summarized as follows: · Nearly half of respondents (45 percent) require a minimum room block of 100 or less and 38 percent require a room block of 100 – 249.

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· ·

Only 17 percent require a room block of more than 250. A majority (75 percent) of respondents prefer a room rate of under $150.

HVS asked respondents to rate a variety of full-service hotel brands, as shown in the following figure.

FIGURE 5-4 AVERAGE RANKING OF HOTEL BRANDS
Marriott Hyatt Sheraton Westin Hilton Crowne Plaza Radisson Renaissance Wyndham Embassy Suites Holiday Inn Double Tree Low Preference 3.2 2.9 2.8 2.7 2.7 2.6 2.5 2.5 2.5 2.4 2.4 2.2 High

Marriott, Hyatt, and Sheraton received the highest ratings, with Embassy Suites, Holiday Inn, and Doubletree at the bottom. Cedar Rapids Market HVS asked respondents to rate their knowledge of Cedar Rapids as a convention and meeting destination. Half of respondents (51 percent) stated they were “Knowledgeable” of Cedar Rapids as a convention and meetings designation, and 16 percent stated they were “Very Knowledgeable” and one third (30 percent) stated they were “Not Knowledgeable.” HVS asked respondents to rate Cedar Rapids on a variety of criteria as a location for their events. The figure below shows the responses.

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FIGURE 5-5 CRITIERIA FOR LOCATION SELECTION
Cleanliness Convenience for Drive-In Visitors Price of Hotel Rooms Price of Meeting Facility Rentals Availability of Hotel Rooms Safety Ability to Attract Attendees Overall Level of Destination Appeal Availability of Meeting Space Availability of Banquet Space Dining & Entertainment Options Availability of Exhibit Space Availability of Air Travel Recreation, Tourism & Cultural Activities Not Important 3.8 3.7 3.7 3.7 3.6 3.5 3.5 3.4 3.4 3.2 3.0 2.7 2.7 2.7 Important

Cleanliness, convenience for drive-in visitors and price of hotel rooms were the top ranked criteria for the respondents. Availability of exhibit space, availability of air travel, and recreation, tourism and cultural activities were ranked as lowest in importance. HVS asked respondents to rank the importance of potential improvements to Cedar Rapids’ overall ability to attract and host their events, as shown in the following figure.

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FIGURE 5-6 IMPORTANCE OF POTENTIAL IMPROVEMENTS
More On-Si te Parking Improved Full-Servi ce Hotel Rooms Improved Pedestrian Acces s Addi tional Meeting Rooms More Exhi bit Space More Banquet Space More On-Si te Dining & Enterta inment
Not Important

2.6 2.3 2.1 2.1 1.6 1.6 1.6
Im portant

More on-site parking and improved full service hotel room were the top ranked potential improvements. Increased banquet space and more on-site dining and entertainment options were ranked as least desirable improvements. The figure below shows respondent’s ranking of the overall attractiveness of Iowa facilities as a destination for their events.

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FIGURE 5-7

ATTRACTIVENESS OF IOWA FACILITIES
Iowa Events Center (Des Moines) Coralville Marriott (Coralville)

2.27 2.17 2.14 1.90 1.82 1.43 1.34 1.25 0.88 0.84
Attractive

Proposed New Convention Center in Cedar Rapids Iowa State Center (Ames) Grand River Center (Dubuque) River Center/Adler Theater (Davenport) Five Sullivan Brothers Convention Center (Waterloo) Mid-America Center (Council Bluffs) Clay County Regional Events Center (Spencer) Fairfield Arts & Convention Center (Fairfield) Unattractive

The proposed convention center in Cedar Rapids ranked third in attractiveness among the Iowa facilities. The Iowa Events Center in Des Moines and the Coralville Marriott in Coralville ranked above Cedar Rapids in attractiveness. HVS also asked respondents to rate Iowa cities in overall attractiveness as a location for their events, as shown in the figure below.

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FIGURE 5-8

ATTRACTIVENESS OF IOWA CITIES
Des Moines Ceda r Ra pids Iowa Ci ty Cora l ville Wa terloo Dubuque Da venport Si oux Ci ty 1.1 1.0 1.0 Attractive 1.3 1.5 2.2 2.1 2.0 2.5

Counci l Bluffs Unattractive

Cedar Rapids ranked second among Iowa cities in attractiveness as a location for events. HVS asked respondents to rate the likelihood of holding their event in Cedar Rapids if the new convention center was built and the hotel renovated. Responses are shown in the figure below.

FIGURE 5-9
Very Likely Somewhat Likely Neutra l Unl ikel y Hi ghly Unl ikel y Never 25% 19% 31% 17% 6% 3%

HVS also asked respondents how the majority of their attendees/exhibitors would travel to Cedar Rapids if their event was held in the proposed facility. Nearly 90 percent said their attendees/exhibitors would travel to Cedar Rapids by car, while 11 percent would travel by plane.

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Implications for Cedar Rapids

The event planners survey results inform the HVS forecast of event demand in the following ways: · · · · The demand potential for Cedar Rapids is largely in Iowa State conventions, conferences, and meetings. The development of the proposed Convention Center would significantly increase the attractiveness of the destination. Cedar Rapids has limited appeal as a regional destination and would rarely be considered for national events. The connected hotel would provide a competitive advantage over many Iowa destination and the available room block would be sufficient for a majority of events. The provision for on-site parking is a key component of the project that needs to be implemented along with the development of the Convention Center Complex. The proposed Convention Center will have ample capacity to host nearly all prospective events. Exhibition space and ballroom capacity in the proposed Convention Center will be rarely used to capacity but would allow for simultaneous events during peak seasons.

·

·

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6. Demand Analysis
HVS based event demand projections at the proposed Convention Center Complex on the following research and analysis. · · · · The facility program provided to HVS and detailed in Section 1, Interviews with USCC management personnel, Interviews with government official and other stakeholders, Interviews with representatives of the Cedar Rapids Convention and Visitors Bureau (CRCVB), the Cedar Rapids Chamber of Commerce and the Cedar Rapids Downtown District, Industry data and trends reports, Key market and economic indicators outlined in Section 2, Comparable venue program and operating data, Existing state and regional competitive venues, User surveys.

· · · · ·

In developing the demand projections, HVS assumes that all recommendations throughout this report are implemented. Projections assume that the proposed facility opens on September 1, 2012. HVS estimates that event demand will stabilize in the fourth fiscal year of operation—2015-16 For this analysis, event demand projections have been segregated into those events which will be held in the new convention center and those which will be held in the renovated U.S. Cellular Center (“USCC”). Convention center events include conventions and trade shows, consumer shows, banquets, and meetings. Arena events include sports, concerts and entertainment, assembly, and other events. In practice, certain events will not follow these guidelines. For instance, some consumer shows may be held on the arena floor, and some sporting events may utilize the convention center’s multi-purpose event space. However, for the purpose of this study and analysis, these venue guidelines will be followed. Convention Center Demand Projections Market research, interviews with key local stakeholders, an analysis of comparable and competitive convention venues, and a detailed user survey suggest that the proposed convention center should be able to attract a significant number of statebased conventions and trade shows as well as a modest number of regional events.

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Additionally, as the ACE District evolves into a vibrant downtown community, the proposed CRCCC would again become a focal point for local corporate and other group meetings. The figure below shows the number of convention center events and attendance by event type projected for the proposed CRCCC for its first five years of operations.

FIGURE 6-1 CONVENTION CENTER DEMAND PROJECTIONS
2012/13 Convention Center Events Conventi ons & Tra des hows Cons umer Shows Ba nquets Meeti ngs & Conferences Tota l 5 8 35 263 311 2013/14 7 10 40 300 357 500 3,000 400 75 3,500 30,000 16,000 22,500 72,000 2014/15 9 11 45 338 403 500 3,000 400 75 4,500 33,000 18,000 25,350 80,850 2015/16 10 12 50 375 447 500 3,000 400 75 5,000 36,000 20,000 28,125 89,125 2016/17 10 12 50 375 447 500 3,000 400 75 5,000 36,000 20,000 28,125 89,125

Convention Center Average Attendance Conventi ons & Tra des hows 500 Cons umer Shows 3,000 Ba nquets 400 Meeti ngs & Conferences 75 Convention Center Total Attendance Conventi ons & Tra des hows Cons umer Shows Ba nquets Meeti ngs & Conferences Tota l 2,500 24,000 14,000 19,725 60,225

HVS assumes that convention center demand would ramp up relatively slowly during the first three years of operation and reach full potential in year four. This slower ramp up scenario would allow Cedar Rapids’ other downtown development initiatives to unfold and eventually fully support the convention center marketing initiatives to attract visiting groups back to downtown Cedar Rapids. Prior to full permanent development of the ACE District retail, dining and entertainment, HVS recommends that temporary events, such as downtown festivals and outdoor markets be scheduled to coincide with major convention events. These events would include: Conventions & Trade Shows— Conventions and trade shows are events that require a combination of banquet, meeting, and exhibition space. The multipurpose hall and ballrooms would be divided and set up in various configurations to accommodate these events. The source of convention events would be primarily state associations that would rotate to Cedar Rapids for their annual events. Also included in this demand category are regional and potentially

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national SMERF conventions which also rotate to venues throughout the upper Midwest. Consumer Shows—Consumer shows are ticketed events that would attract local attendees such as home and garden shows, craft fairs, and gun shows. The multipurpose hall would be used as the exhibit space. The arena floor could also be used as exhibit space for larger events or as an alternate location if the multi-purpose hall has a schedule conflict. Some meeting space would also be necessary for these events. Food and beverage services would be limited to concessions. Banquets—Banquets would be generated from local corporations, social and civic organizations, and private clients. With a high quality banquet hall and kitchen, HVS estimates that the proposed convention complex could again provide an attractive alternative to suburban hotels and halls. Again, the successful completion of collateral downtown initiatives would be crucial to fully realizing the demand potential of the convention complex for these local events. Meetings and Conferences—Meeting and conferences are events that require breakout meeting space but would not use banquet or exhibit space. Food service would be limited to coffee breaks, breakfasts, or luncheons that would be served in meeting rooms. Local area businesses, civic organizations, government agencies, and associations would host meetings and conferences. Although the size of the meetings and conferences could range from 25 to 300 persons, most meetings and conferences would be small events that use a single meeting room. The ballrooms and multipurpose hall could also be used to handle larger meetings or several smaller simultaneous meetings. Historical USCC Demand The USCC has not been renovated or reconfigured since its original opening in 1979. In this time, several competing regional cities have developed modern convention venues to serve the needs of the meetings industry. As such, meeting event demand at the USCC which was once strong has tapered significantly over the years as the venue’s attractiveness in the market has dwindled. The City of Cedar Rapids is no longer in the market to compete for traveling association meetings and conventions and recent demand at the USCC has relied heavily on locally promoted events. The venue has been able to maintain its presence in the sports markets, hosting several collegiate and amateur tournaments and special events throughout the year. Similarly, the venue has been able to remain an active location for concerts and family entertainment. The figure below presents the number of events by event type from 1995 through 2008, illustrating that the USCC was clearly losing market share in the meetings industry to other competing venues even before the 2008 flood.

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FIGURE 6-2

HISTORICAL USCC EVENT DEMAND (FY1995 – FY2008)
FY95 26 51 11 7 6 12 41 1 155 FY96 35 43 9 3 6 8 57 0 161 FY97 36 38 10 2 4 8 40 6 144 FY98 33 40 10 4 9 8 33 3 140 FY99 43 35 11 0 7 11 26 3 136 FY00 37 49 10 7 24 8 41 3 179 FY01 45 35 14 4 9 18 22 2 149 FY02 49 37 16 6 10 12 25 8 163 FY03 37 29 14 7 11 23 37 20 178 FY04 21 26 12 0 9 60 55 14 197 FY06 16 18 10 1 10 43 38 10 146 FY07 16 24 7 2 10 30 29 1 119 FY08 4 11 7 6 9 22 48 1 108

Conve ntions & Tradeshow s Consum er Show s Fundraise r/Banque ts Mee tings & Conferences Assemblies Sports Concerts & Entertainment Other Total

Source: EDA Grant Application

A detailed analysis of recent demand at the USCC provides the foundation for arena-based demand in the proposed Convention Center Complex.

FIGURE 6-3 USCC EVENT ANALYSIS (2010)
Number of Events 1 6 1 2 10 16 19 6 61 Average Days Total Event per Event Days 2.0 2 2.8 17 1.0 1 1.0 2 1.0 10 1.9 30 1.8 34 2.0 12 108 Average Attendance 521 2,868 2,914 65 2,506 3,767 3,797 5,292 Total Attendance 521 17,205 2,914 130 25,055 60,273 72,151 31,754 210,003

Conventions & Tradeshows Consumer Shows Banquets Meetings & Conferences Assemblies Sports Concerts & Entertainment Other Total

Source: U.S. Cellular Center

Arena Event Demand Projections

Market research and interviews with key local stakeholders suggest that the renovated USCC should be able to increase its current demand level for sporting events and maintain its current demand for other arena-based events. The figure below shows the number of spectator events and attendance by event type projected for the proposed CRCCC for its first five years of operations.

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FIGURE 6-4 ARENA DEMAND PROJECTIONS
2012/13 2013/14 Arena Events Assemblies Sports Concerts & Entertainment Other Total Arena Average Attedance Assemblies Sports Concerts & Entertainment Other Arena Total Attendance Assemblies Sports Concerts & Entertainment Other Total 9 18 18 5 50 2,500 4,000 3,800 5,300 22,500 72,000 68,400 26,500 189,400 8 19 19 6 52 2,500 4,000 3,800 5,300 20,000 76,000 72,200 31,800 200,000 2014/15 9 20 20 6 55 2,500 4,000 3,800 5,300 22,500 80,000 76,000 31,800 210,300 2015/16 10 20 20 6 56 2,500 4,000 3,800 5,300 25,000 80,000 76,000 31,800 212,800 2016/17 10 20 20 6 56 2,500 4,000 3,800 5,300 25,000 80,000 76,000 31,800 212,800

HVS assumes that arena demand would ramp up relatively quickly during the first three years of operation and reach full potential in year 4. This strong start would be due to Cedar Rapids’ established presence in the sports and entertainment industry and successful marketing efforts already being made by the CRCVB and arena management. A brief description of the event types follows. Sports—Without a regulation floor size, the USCC would continue to be unsuitable for any of the minor league and other arena-based sports which require playing surfaces dictated by a regulation hockey rink, including hockey, lacrosse, football, and soccer. An NBA development league team would be a possible tenant, however, to date; no potential owners have come forward. Current sports demand includes the Cedar Rapids Roller Girls events as well as a number of high school basketball, volleyball, and wrestling competitions. Additionally, the USCC has selfpromoted darts and pool championship events. Most promising are the CRCVB’s efforts in securing collegiate level championship events, including the NCAA Division III wrestling championships, held in March 2010. With continued emphasis on marketing to sports events at all levels of competition and the addition of the convention center space as a source of additional playing surfaces, HVS assumes that the annual number of sports events will increase to 20. HVS projects that the average event duration will increase to two days per event as more multi-day tournaments are booked.

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Concerts & Entertainment— This event category includes concerts, live theater, family entertainment and other performances. For national touring events, such as rock concerts, family shows and comedy performances, competition comes from a number of regional arenas, including the Iowa Events Center in Des Moines, the Mid America Center in Council Bluff, and the iWireless Arena in Moline, IL. Additionally, casinos have been aggressively targeting arena-based concerts and comedy acts with higher guarantees to promoters, despite their lower seating capacities, as a means to attract new customers into their casinos. Despite this formidable regional competition, given Cedar Rapids’ strong demographic profile and the lack of any direct local competition, HVS projects that the renovated USCC would successfully maintain its current level of entertainment demand and book approximately 20 events annually. Average event duration would remain consistent with the current 1.8 days per event. Assemblies— Assemblies include religious events, lectures, large meetings, graduations and other civic ceremonies which require a large seating capacity. HVS projects demand consistent with the current level of 6 assembly events each year. Assemblies are typically single day events. Other— Other events include a variety of local-oriented facility rentals which have included such events as dance recitals, family recreation, and marching band competitions. Private rentals, blood drives, and other civic uses would also be placed in this other category. Demand projections for other event categories which are currently held at the USCC, such as consumer shows, trade shows and meetings, have been designated as Convention Center events for the purpose of this analysis and are presented above. Combined Demand Projections and Comparable Analysis The figure below presents the combined event and attendance demand projections for the proposed Convention Center Complex.

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FIGURE 6-5 COMBINED DEMAND PROJECTIONS
2012/13 Convention Center Events Conve nti ons & Tra de s hows Cons ume r Shows Ba nque ts Me e ti ngs & Confe re nce s Tota l Arena Events As s e mbl i e s Sports Conce rts & Ente rta i nme nt Othe r Tota l Total Convention Center Average Attendance Conve nti ons & Tra de s hows Cons ume r Shows Ba nque ts Me e ti ngs & Confe re nce s Arena Average Attedance As s e mbl i e s Sports Conce rts & Ente rta i nme nt Othe r Convention Center Total Attendance Conve nti ons & Tra de s hows Cons ume r Shows Ba nque ts Me e ti ngs & Confe re nce s Tota l Arena Total Attendance As s e mbl i e s Sports Conce rts & Ente rta i nme nt Othe r Tota l Total 5 8 35 263 311 9 18 18 5 50 361 500 3,000 400 75 2,500 4,000 3,800 5,300 2013/14 7 10 40 300 357 8 19 19 6 52 409 500 3,000 400 75 2,500 4,000 3,800 5,300 3,500 30,000 16,000 22,500 72,000 20,000 76,000 72,200 31,800 200,000 272,000 2014/15 9 11 45 338 403 9 20 20 6 55 458 500 3,000 400 75 2,500 4,000 3,800 5,300 4,500 33,000 18,000 25,350 80,850 22,500 80,000 76,000 31,800 210,300 291,150 2015/16 10 12 50 375 447 10 20 20 6 56 503 500 3,000 400 75 2,500 4,000 3,800 5,300 5,000 36,000 20,000 28,125 89,125 25,000 80,000 76,000 31,800 212,800 301,925 2016/17 10 12 50 375 447 10 20 20 6 56 503 500 3,000 400 75 2,500 4,000 3,800 5,300 5,000 36,000 20,000 28,125 89,125 25,000 80,000 76,000 31,800 212,800 301,925

2,500 24,000 14,000 19,725 60,225 22,500 72,000 68,400 26,500 189,400 249,625

Since no directly comparable venues are currently situated in Cedar Rapids, the forecast of demand for the Convention Center Complex needs to be based on reasonable assumptions about future demand. The mix of actual events could vary significantly from these forecasts. The following analysis of comparable venues provides a test of the reasonableness of these event demand forecasts. The following figure presents recent historical demand for four venues within the State of Iowa that would compete directly with the proposed Convention Center Complex for state and regional business.

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FIGURE 6-6 HISTORICAL DEMAND - STATE VENUES
Clay County R eg ional Ev ents Center Iow a E v ents Center M id-Am erica Center Proposed Conv ention Center Com plex Av erag e* N um ber of E v ents Co n ve n ti o n s & Tra d e s h o w s Co n s u m e r S h o w s B a n q u e ts M e e ti n g s & Co n fe re n ce s As s e m b l i e s S p o rts Co n ce rts & En te rta i n m e n t O th e r Tota l Av erag e Attenda nce Co n ve n ti o n s & Tra d e s h o w s Co n s u m e r S h o w s B a n q u e ts M e e ti n g s & Co n fe re n ce s As s e m b l i e s S p o rts Co n ce rts & En te rta i n m e n t O th e r Tota l Attendance Co n ve n ti o n s & Tra d e s h o w s Co n s u m e r S h o w s B a n q u e ts M e e ti n g s & Co n fe re n ce s As s e m b l i e s S p o rts Co n ce rts & En te rta i n m e n t O th e r Tota l *A ve rage the only available data. 1,039 13,835 9,282 8,847 0 1,986 4,731 11,007 50,727 36,374 84,003 7,474 28,347 0 0 0 42,727 198,925 19,358 33,380 17,386 19,634 28,170 109,291 61,223 73,753 362,195 3,063 68,931 29,287 8,232 0 0 0 72,321 181,834 19,598 62,105 18,049 18,738 28,170 109,291 61,223 62,934 5,000 36,000 20,000 28,125 25,000 80,000 76,000 31,800 301,925 260 532 172 54 0 993 676 647 3,307 4,941 299 450 0 0 0 763 1,210 1,043 285 155 971 2,102 3,601 210 766 9,847 751 62 0 0 0 1,019 1,761 5,277 445 222 971 2,102 3,601 664 500 3,000 400 75 2,500 4,000 3,800 5,300 4 26 54 165 0 2 7 17 275 11 17 25 63 0 0 0 56 172 16 32 61 127 29 52 17 352 686 4 7 39 132 0 0 0 71 253 10 19 42 107 29 52 17 160 10 12 50 375 10 20 20 6 503

R iv er Center

Because of the unique operating structure of the proposed Convention Complex which combines the operation of a convention center with both an arena and an adjacent hotel property, none of the competing venues in the above figure are perfect comparables. Taking this and other market factors into consideration, the demand projections for the proposed Convention Center Complex are consistent with event demand currently found in its state-wide competition. Specific conclusions include the following. · The average size of conventions and trade shows is based on both market factors and the proposed facility program. While HVS did not develop the

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recommended program, meeting planner survey responses indicate that the proposed Convention Center Complex would be programmed to accommodate the majority of events with adequate exhibit hall space as well as meeting and ballroom capacity. · Because all hotel generated group demand is incorporated into the demand projections for proposed Convention Complex, the resulting demand for standalone meetings and conference is disproportionately higher than the other venues. Because the projections include hotel group demand, the average meeting attendance is projected lower than the average of the other venues. The presence of an arena creates sports and entertainment demand that is not found in a stand-alone convention center. In this respect, the proposed convention complex most closely resembles the Mid America Center, albeit with a slightly lower event demand potential based on market and arena specific factors Demand for locally generated events, such as sports, concerts and consumer shows, depend heavily on local market factors which are specific to each venue. These factors include local competition, population demographics, and the local market economy. These factors should be considered when comparing local event demand amongst the venues. Due to its close proximity to Cedar Rapids, the Coralville Marriott and Conference Center would represent the greatest competition to the proposed CRCCC. The Coralville Marriott has excellent highway access and visibility, and the addition of the adjacent Riverbend mixed-use development which is currently under construction, creates a highly desirable destination for meeting attendees. Because many rotating events will select either Cedar Rapids or Coralville in their rotation, Cedar Rapids must offer an attractive and convenient destination. Throughout the last decade, other competing cities in Iowa have also made significant investment into their meeting and convention assets. The proposed Convention Complex would reestablish Cedar Rapids as a potential destination for a number of meetings that it is currently unable to host. As a destination, complementary downtown development is essential for Cedar Rapids to be successful in booking these events.

· ·

·

·

·

A second set of comparable demand was analyzed to further assess the competition and overall potential of the Proposed Convention Center Complex. The figure below represents event demand for a set of comparable regional facilities which may compete with the proposed Convention Center complex for regional and national events.

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FIGURE 6-7 HISTORICAL DEMAND - REGIONAL VENUES
Monona Terrace Convention Center Peoria Civic Center Sioux Falls Convention Center St. Cloud Civic Center Average* Number of Events Co n ve n ti o n s & Tra d e s h o ws Co n s u m e r Sh o w s B a n q u e ts Me e ti n gs & Co n fe re n ce s As s e m b l i e s Sp o rts Co n ce rts & En te rta i n m e n t Oth e r Total Average Attendance Co n ve n ti o n s & Tra d e s h o ws Co n s u m e r Sh o w s B a n q u e ts Me e ti n gs & Co n fe re n ce s As s e m b l i e s Sp o rts Co n ce rts & En te rta i n m e n t Oth e r Total Attendance Co n ve n ti o n s & Tra d e s h o ws Co n s u m e r Sh o w s B a n q u e ts Me e ti n gs & Co n fe re n ce s As s e m b l i e s Sp o rts Co n ce rts & En te rta i n m e n t Oth e r Total *Average the only available data. 27,175 25,785 72,403 55,081 0 0 18,250 17,252 215,946 114,174 52,120 22,708 18,901 0 24,442 3,669 0 236,014 53,342 58,904 35,429 42,588 0 0 0 21,436 211,519 32,225 78,000 29,965 23,885 0 0 0 1,135 174,078 66,580 63,008 29,367 28,458 0 24,442 3,669 11,286 5,000 36,000 20,000 28,125 25,000 80,000 76,000 31,800 301,925 823 1,719 264 193 0 0 676 186 951 3,066 307 129 0 1,222 524 0 1,667 6,545 448 190 0 0 0 1,191 826 4,588 277 117 0 0 0 52 1,148 4,733 344 145 0 1,222 524 621 500 3,000 400 75 2,500 4,000 3,800 5,300 33 15 274 286 0 0 27 93 728 120 17 74 147 0 20 7 0 385 32 9 79 224 0 0 0 18 362 39 17 108 205 0 0 0 22 391 64 14 87 192 0 20 7 20 10 12 50 375 10 20 20 6 503 Proposed Convention Center Complex

The above venues have successfully penetrated their own state markets as well as regional and national rotating events. Cedar Rapids is not expected to match these demand levels for convention and trade shows, however, the above figure does confirm that overall demand projections are consistent when considering market factors.

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7. Financial Analysis
HVS uses a proprietary financial operating model to estimate revenues and expenses at conventions centers and arenas. This model quantifies the key variables and operating ratios that determine revenue potential and expenses levels. Unless otherwise indicated, the model assumes an annual inflation rate of 3.0 percent applies both to revenues and expenses. This finanacial analysis of the operation of the convention center and arena should be read in conjunction with the HVS memo dated January 12, 2011. This memo includes the full combined pro forma for the hotel, convention center and arena. For the purposes of this study, HVS assumes that the proposed Convention Center Complex, including the proposed convention center, the renovated arena and the renovated hotel, would be owned by the City of Cedar Rapids. The City would contract with a hotel operator to actively manage both the hotel and the convention center spaces as a single entity. The convention center spaces are therefore considered a department of the hotel and only direct event revenues and expenses are attributed to the convention center. Other non-event related expenses, such as administration, marketing, maintenance and energy costs, are included in the combined pro forma presented in the January 12, 2011 memo from HVS. Additionally, food and beverage revenues and expenses from certain events are captured in the food and beverage line item in the combined pro forma. HVS further assumes that the hotel manager would contract with a third party arena operator to manage the daily operations of the renovated arena. Arena operations are therefore considered as a separate, stand-alone operation. All direct event revenues and expense line items attributed to arena events described in Section 6 are included as well as all non-event related expenses. Convention Center Revenues Convention Center revenue line items include facility rental, food and beverage sales, facility ticket fees, and event services. The model uses a series of revenue assumptions based on attendance or floor area utilization that reflect the projected utilization levels of function space. Floor area utilization is measured in Gross Square Foot Days (“GSFD”)—the amount of floor area rented times the number of days it is rented including move-in and move-out days. To formulate the revenue assumptions, HVS relied on industry information, knowledge of the performance of comparable venues, information on price levels from local area sources, and the historical operations of the USCC. We
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adjusted the assumptions for inflation and other anticipated trends in price levels. The figure below summarizes the departmental income assumptions for the proposed Convention Center by type of event.

FIGURE 7-1 CONVENTION CENTER REVENUE ASSUMPTIONS
Facility Rental per GSFD Conventions & Tradeshows $ Consumer Shows Banquets M eetings & Conferences Facility Fees per Attendee $ 0.45 Food & Beverage (Gross) per Attendee 50.00 $ 2.50 Event Services (Gross) per GSFD 0.15 0.15 0.05 0.05

Type

0.12 $ 0.12 0.03

Facility Rental—Facility rental revenue includes the revenue the Convention Center receives from clients that reserve one or more function areas in the facility. Despite having published rates, convention centers typically charge rental fees based on negotiated daily rental fees. Not all events are charged a facility rental fee. A facility may waive the space rental charges if the event meets a certain minimum of food and beverage charges as is usually the case for most banquets, meetings, and conferences. Food and Beverage—most events that use the Convention Center’s function space will also arrange for food service for their attendees during their events. This food service includes catering which can range from coffee breaks associated with a meeting to a full dinner associated with a convention or banquet. Consumer shows may generate concessions revenue. Most conventions and conferences generate demand for multiple meals during the course of these multi-day events. Meetings and banquets generally include a single meal or refreshment services. HVS projects estimated gross food and beverage revenues on a per capita basis depending on the type of event. Events like conventions and tradeshows typically spend the most per attendee. Consumer shows have lower per capita spending. For this purpose of this analysis, food and beverage revenues associated with stand-alone meeting and banquets which do not utilize the 44,000 square foot multipurpose space are not included. These food and beverage revenues are captured in the pro forma for hotel operations.

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Event Services—Event Services include the fees charged to tenants for services that could include business services, audio and video technical assistance, set-up and take down of function spaces, cleaning services, security services, electricity and other utilities, commissions from decorators and other services provided by third-party contractors at events. Many events also require audio, video, communications and Internet services. Banquets and other upscale events can often require elaborate decorating services. Almost all events require cleaning services; cleaning of common areas may be complimentary for most events while cleaning services offered to individual exhibitors can represent a significant source of revenue. Service charges vary by type of event. Some of these services may be included in the rental charges for using the facility, but others will be add-on service charges. The HVS model estimates event services revenue based on the amount of space rented. Facility Ticket Fees—Facilities which host ticketed events often assess a facility fee on tickets sold for events at the facility as a means of generating additional revenue. Although no such fee is generated at the USCC today, HVS assumes a fee would be implemented upon opening of the Convention Center Complex. The venue would receive a portion of convenience fees charged by third party ticket sellers like Ticketmaster. Not all consumer shows would be subject to this fee. In addition to variable event revenues, the convention center would also earn other revenues as described below. Advertising and Sponsorship Revenue—This line item includes revenue from the sale of fixed advertising signage on concourses, interior and exterior fascia, and outdoor marquee displays. The rates a convention center is able to charge is dependent upon the estimated number of events and the total attendance. Advertising and sponsorship agreements may be linked to both the convention center and arena. As a result, HVS projects that the total facility would generate approximately $300,000 in advertising and sponsorship revenue annually. HVS further estimates that 25 percent of this total revenue would be attributed to the convention center. This figure reflects current advertising and sponsorship revenue earned at the USCC. Revenue estimates should be reassessed as design of advertising elements progresses. Naming Rights Revenue—Naming rights, which can be sold to corporations or individuals, may apply to the entire venue or to a given section or designated area. For the purpose of this analysis, HVS assumes that a $150,000 per year naming rights deal would include both the convention center and the arena, and that 25 percent of this naming rights revenue would be attributed to the convention center. Historically, naming rights agreements typically lasted ten
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years; however, as many corporations have decided to not renew or even walked away from naming deals, many new contracts have been signed for much shorter durations. For small to medium-sized facilities which have a regional rather than national focus, the success of signing a naming rights agreement is highly dependent on local factors and the overall interest of local corporations wishing to support a venue. Local and regional branding has, therefore, become more prevalent in recent years for these smaller venues. The current naming rights deal with U.S. Cellular is set to expire on December 31, 2011. Annual payments are based on a sliding attendance-based scale. Annual payments have ranged from $110,000 to $169,000 in recent years. Other Revenue—Other revenue could include damages billed to tenants, special fees or dues, interest income, and certain non-recurring income. This is typically a relatively small portion of overall revenues Convention Center Operating Expenses HVS estimated direct event expenses for the proposed Convention Center as a percentage of operating revenues as summarized below.

FIGURE 7-2 CONVENTION CENTER EXPENSE ASSUMPTIONS
Expenditure Food & Beverage Costs Event Services Costs Percentage Revenue 65.0% of Food & Beverage (Gross) 90.0% of Event Services (Gross) Fixed Expense for Base Year

Food and Beverage Costs—HVS assumes that the food and beverage operation would be operated in-house by the hotel operator. Costs are food service are therefore estimated as a percentage of gross food and beverage sales. Event Services Costs—Event services costs are the costs incurred by the facility for client reimbursed expenses such as audio visual set-up, security, cleaning, event set-up and event labor Arena Revenues. Arena revenue line items include facility rental, food and beverage sales, facility ticket fees, and event services. The model uses a series of revenue assumptions based on attendance or floor area utilization that reflect the projected utilization levels of function space. Floor area utilization is measured in Gross Square Foot Days (“GSFD”)—the amount of floor area rented times the number of days it is rented including move-in and move-out days.

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To formulate the revenue assumptions, HVS relied on historical events and financial date provided by USCC management, industry knowledge of the performance of comparable venues, and information on price levels from local area sources. We adjusted the assumptions for inflation and other anticipated trends in price levels. The figure below summarizes the revenue assumptions for the proposed renovated arena by type of event.

FIGURE 7-3 ARENA REVENUE ASSUMPTIONS
Facility Rental Facility Fees Type per GSFD As s embli es Sports Concerts & Enterta inment Other 0.12 0.19 0.15 0.12 per Attendee 0.50 0.50 Food & Beverage (Gross) per Attendee 5.00 6.00 1.50 Event Services (Gross) per GSFD 0.10 0.20 0.25 0.10 Merchandise (Net) per Attendee 0.30 0.50 -

Facility Rental— The arena would receive rental revenue from its tenants, independent event promoters, and sports organizations. Rental rates vary based on the type of event and agreements regarding the distribution of other event revenues. Additionally, the USCC currently hosts several self-promoted events in all event categories in which all ticket revenues flow to the venue. HVS assumes that facility rental by event type is based on a fixed daily fee, and based this rate on the rental and self -promotion revenue currently earned at the USCC. Facility Ticket Fees—Facilities which host ticketed events often assess a facility fee on tickets sold for events at the facility as a means of generating additional revenue. The venue would receive a portion of convenience fees charged by third party ticket sellers like Ticketmaster. Not all sporting events and concerts would be subject to this fee, which would typically range from $1$2 per ticket. Food and Beverage Sales—Because concessions stands would be undergoing major renovation, the assumptions regarding per capita food and beverage sales vary by type of event, based upon the actual experience by event type at comparable facilities rather than on historical operations of the USCC. The model assumes that the concessions operation is modern and resembles “major league” caliber concessions with a variety of food options, including grilled
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items. The recommended ratio of seating capacity to points of sales is 115 to 1. The attractiveness and convenience of concessions are key factors in the sales potential in this type of facility. It is further assumed that concessions operations would be run by a competent third party operator and that the venue’s commission on gross concessions revenue would be 25 percent. Event Services—Event Services include the fees charged to tenants for services that could include ushers and other event staff, business services, audio and video technical assistance, set-up and take down of stage and rigging, cleaning services, security services, electricity and other utilities. Service charges vary by type of event. Some of these services may be included in the rental charges for using the facility, but others will be add-on service charges. The HVS model estimates event services revenue based on the amount of space rented. Merchandise Sales—The HVS model assumes that the facility receives, on average, 15 percent of revenue from gross merchandise sales, including apparel, souvenirs, and various other items. Per capita assumptions are based on current merchandise revenue earned at the USCC. The actual net revenue from novelties would likely vary for different types of events, depending upon the individual agreements reached with different facility users. In addition to variable event revenues, the renovated arena would also earn other revenues as described below. Advertising and Sponsorship Revenue—This line item includes revenue from the sale of fixed advertising signage on scoreboards, LED ribbons, concourses, interior and exterior fascia, vomitories, and outdoor marquee displays. The rates an arena is able to charge is dependent upon the estimated number of events, the total attendance, the number of televised events and the number of tie-ins, such as program advertising and public address announcements. With minimal to no television coverage expected, the proposed arena’s advertising and sponsorship potential is less than that of other venues of similar capacity which average $350,000 to $400,000 annually. Advertising and sponsorship agreements may be linked to both the convention center and arena. As a result, HVS projects that the total facility would generate approximately $300,000 in advertising and sponsorship revenue annually. HVS further estimates that 75 percent of this total revenue would be attributed to the arena. This figure reflects current advertising and sponsorship revenue earned at the USCC. Revenue estimates should be reassessed as design of scoreboard and other advertising elements progresses. Naming Rights Revenue—Naming rights, which can be sold to corporations or individuals, may apply to the entire venue or to a given section or designated
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area. For the purpose of this analysis, HVS assumes that a $150,000 per year naming rights deal would include both the convention center and the arena, and that 75 percent of this naming rights revenue would be attributed to the arena. Historically, naming rights agreements typically lasted ten years; however, as many corporations have decided to not renew or even walked away from naming deals, many new contracts have been signed for much shorter durations. For small to medium-sized venues which have a regional rather than national focus, the success of signing a naming rights agreement is highly dependent on local factors and the overall interest of local corporations wishing to support a venue. Local and regional branding has, therefore, become more prevalent in recent years for these smaller venues. The current naming rights deal with U.S. Cellular is set to expire on December 31, 2011. Annual payments are based on a sliding attendance-based scale. Annual payments have ranged from $110,000 to $169,000 in recent years. Suite Revenue—The renovated arena would not contain traditional suite seating. Suite revenue, therefore, refers to additional revenue earned from the nine box seat sections located in the seating bowl. Revenue estimates are based on the current level of box seat revenue earned at the USCC. Other Revenue— Other revenue could include damages billed to tenants, special fees or dues, interest income, and certain non-recurring income. This is typically a relatively small portion of overall revenues. Other event revenues projections reflect historical levels at the USCC. Arena Operating Expenses Salaries & Benefits—HVS created a detailed projection of salaries and associated benefits for permanent full and part-time employees dedicated to administration, marketing, building operations, and other functions. This category does not include part time food & beverage and event staffing, which are included in departmental costs. The proposed staffing schedule reflects what HVS considers to be a minimum level of staffing required to effectively operate the arena and achieve the level of revenues projected. The salary and benefit expense is roughly based on the current level at the USCC. The following figure presents a proposed staffing schedule with 13 full time equivalent positions.

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FIGURE 7-4 ARENA STAFFING SCHEDULE
Position ADMINISTRATION/FINANCE Genera l Ma na ger Executi ve As s i s ta nt Bus i nes s Ma na ger DEVELOPMENT/MARKETING Di rector-Sa l es & Ma rketi ng Ma rketi ng As s i s ta nt TICKET OFFICE Box Offi ce Ma na ger Ti cket Sa l es Pers onnel EVENT SERVICES Event Ma nager BUILDING OPERATIONS Opera ti ons Ma nager Ma i ntena nce Techni ci ans Cus todi a l Ma na ger Set-up / Cus todi a l Sta ff TOTALS FTE Salary Total Salary

1 1 1

$80,000 25,000 45,000

$80,000 25,000 45,000

1 1

50,000 25,000

50,000 25,000

1 1

45,000 22,000

45,000 22,000

1

35,000

35,000

1 1 1 2 13 Benefi ts

40,000 35,000 30,000 22,000

40,000 35,000 30,000 44,000 $476,000 119,000 $595,000

25%

HVS estimated the remaining operating expenses as a combination of fixed and variable components. Variable expenses are calculated as a percentage of certain operating revenues. The figure below summarizes the expense assumptions for the proposed renovated arena.

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FIGURE 7-5 ARENA EXPENSE ASSUMPTIONS
Expenditure Food & Bevera ge Cos ts Event Servi ces Cos ts Admi ni s tra ti ve & Genera l Contra ctua l Servi ces Ma rketi ng & Sa l es Repa i r & Ma i ntena nce Suppl i es & Equi pment Uti l i ti es Other Expens e Arena Ma na gement Fee Ins ura nce 2.5% of Fa ci l i ty Renta l $113,000 $65,000 Percentage Revenue 75.0% of 80.0% of Food & Bevera ge (Gros s ) Event Servi ces (Gros s ) $18,000 $40,000 $100,000 $32,000 $35,000 $480,000 Fixed Expense for Base Year

Food & Beverage Costs—HVS assumes that a third-party concessionaire would be contracted to run the concessions at arena events. To simulate a 35 percent commission earned by the arena, food and beverage costs are assumed at 65 percent of sales. Event Services Costs—Event services such as ushers, security, cleaning, event set-up and event labor would be provided by the facility. Administrative & General—Office and administrative operations incur day-today facility expenses. Such expenses typically include travel, telephone, printing, permits and other miscellaneous services Contractual Services—The facility may require outsourced operations and maintenance services as well as professional services in conducting arena operations such as legal, accounting, tax, consulting or other advice. Marketing and Sales—Marketing costs include the costs associated with promoting the facility and its events. These may include advertising fees, printing and other costs associated with creating promotion materials. Repair & Maintenance—Both routine and one-time facility maintenance expenses are primarily the responsibility of in-house facility operations personnel. More specialized activities, such as HVAC system maintenance, electrical work, and maintenance of other mechanical systems often must be contracted out to third parties.
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Supplies & Equipment—Items such as computers, office machines, furniture, consumables, and chemicals are required to support the operations of the facility. Utilities—Utilities, including electricity, gas, water, and other charges often represent one of the largest expenses incurred by facility operators. Other Expenses—These other expenses could include expenses such as special training expenses, special costs associated with managing volunteer workers, collection costs, credit losses, bank fees, and other small miscellaneous expenses. Non-Operating Arena Expenses Management Fees—Management fees would be paid to a third party management firm for the successful marketing, operation, and maintenance of the arena. Insurance—This item represents the cost of providing building insurance for the arena. Capital Maintenance Reserve—An annual contribution based upon 4 percent of total arena operating revenues would be used to fund major capital improvements as the arena ages. Combined Venue Operating Pro Forma The figure below present the ten-year financial projections for the proposed Convention Center Complex including group, meeting, and event demand at the Convention Center, the renovated hotel meeting space and the renovated arena. The projections are in inflated dollars beginning September 1, 2012, the first full fiscal year of projected operation.

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FIGURE 7-6 PROJECTED TEN YEAR FINANCIAL OPERATIONS
2012/13 OPERATING REVENUE Convention Center Event Revenues Facility Rental $343,000 Facility Fees 11,000 Food & Beverage (Gross) * 200,000 Event Services (Gross) 446,000 Total $1,000,000 Arena Event Revenues Facility Rental $476,000 Facility Fees 76,000 Food & Beverage (Gross) 877,000 Event Services (Gross) 562,000 M erchandise (Net) 60,000 Total $2,051,000 Convention Center Non-Event Revenue Naming Rights $41,000 Advertising & Sponsorships 81,000 Other Revenue 4,000 Total 126,000 Arena Non-Event Revenue Naming Rights $122,000 Advertising & Sponsorships 243,000 Suite Revenue 49,000 Other Revenue 4,000 Total 418,000 Total $3,595,000 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

$461,000 15,000 279,000 596,000 $1,351,000 $517,000 83,000 959,000 611,000 66,000 $2,236,000 $42,000 84,000 4,000 130,000 $125,000 251,000 50,000 4,000 430,000 $4,146,000

$558,000 17,000 353,000 720,000 $1,648,000 $560,000 90,000 1,037,000 663,000 71,000 $2,421,000 $43,000 86,000 4,000 133,000 $129,000 258,000 52,000 4,000 443,000 $4,646,000

$632,000 19,000 402,000 816,000 $1,869,000 $580,000 92,000 1,068,000 685,000 73,000 $2,498,000 $44,000 89,000 4,000 137,000 $133,000 266,000 53,000 4,000 456,000 $4,963,000

$651,000 20,000 414,000 841,000 $1,926,000 $598,000 95,000 1,101,000 706,000 76,000 $2,576,000 $46,000 91,000 5,000 142,000 $137,000 274,000 55,000 5,000 471,000 $5,112,000

$671,000 20,000 426,000 866,000 $1,983,000 $616,000 98,000 1,134,000 727,000 78,000 $2,653,000 $47,000 94,000 5,000 146,000 $141,000 282,000 56,000 5,000 484,000 $5,266,000

$691,000 21,000 439,000 892,000 $2,043,000 $634,000 101,000 1,168,000 749,000 80,000 $2,732,000 $48,000 97,000 5,000 150,000 $145,000 291,000 58,000 5,000 499,000 $5,424,000

$712,000 22,000 452,000 919,000 $2,105,000 $653,000 104,000 1,203,000 771,000 83,000 $2,814,000 $50,000 100,000 5,000 155,000 $150,000 299,000 60,000 5,000 514,000 $5,586,000

$733,000 22,000 466,000 946,000 $2,167,000 $673,000 107,000 1,239,000 794,000 85,000 $2,898,000 $51,000 103,000 5,000 159,000 $154,000 308,000 62,000 5,000 529,000 $5,754,000

$755,000 23,000 480,000 975,000 $2,233,000 $693,000 110,000 1,276,000 818,000 88,000 $2,985,000 $53,000 106,000 5,000 164,000 $159,000 318,000 64,000 5,000 546,000 $5,927,000

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FIGURE 7-6 PROJECTED TEN YEAR FINANCIAL OPERATIONS (CONT.)
OPERATING EXPENSES Convention Center Expenses Food & Beverage Costs * Event Services Costs Other Expense Total Arena Expenses Food & Beverage Costs Event Services Costs Salaries & Benefits Administrative & General Contractual Services Marketing & Sales Repair & Maintenance Supplies & Equipment Utilities Other Expense Total Total OPERATING INCOME (LOSS) 2012/13 $130,000 401,000 9,000 $540,000 $570,000 450,000 644,000 19,000 43,000 108,000 35,000 38,000 519,000 12,000 $2,438,000 $2,978,000 $617,000 2013/14 $181,000 536,000 12,000 $729,000 $624,000 489,000 663,000 20,000 45,000 111,000 36,000 39,000 535,000 13,000 $2,575,000 $3,303,000 $843,000 $126,000 72,000 89,000 $288,000 $555,000 2014/15 $229,000 648,000 14,000 $891,000 $674,000 530,000 683,000 21,000 46,000 115,000 37,000 40,000 551,000 14,000 $2,711,000 $3,602,000 $1,044,000 $130,000 75,000 97,000 $301,000 $743,000 2015/16 $261,000 735,000 16,000 $1,012,000 $695,000 548,000 703,000 21,000 47,000 118,000 38,000 41,000 568,000 15,000 $2,794,000 $3,806,000 $1,158,000 $134,000 77,000 100,000 $310,000 $847,000 2016/17 $269,000 757,000 16,000 $1,042,000 $715,000 565,000 725,000 22,000 49,000 122,000 39,000 43,000 585,000 15,000 $2,880,000 $3,920,000 $1,192,000 $138,000 79,000 103,000 $320,000 $872,000 2017/18 $277,000 779,000 17,000 $1,073,000 $737,000 582,000 746,000 23,000 50,000 125,000 40,000 44,000 602,000 15,000 $2,964,000 $4,038,000 $1,228,000 $142,000 82,000 106,000 $329,000 $899,000 2018/19 $286,000 803,000 17,000 $1,106,000 $759,000 599,000 769,000 23,000 52,000 129,000 41,000 45,000 620,000 16,000 $3,053,000 $4,159,000 $1,265,000 $146,000 84,000 109,000 $339,000 $926,000 2019/20 $294,000 827,000 18,000 $1,139,000 $782,000 617,000 792,000 24,000 53,000 133,000 43,000 47,000 639,000 16,000 $3,146,000 $4,284,000 $1,303,000 $150,000 86,000 113,000 $349,000 $953,000 2020/21 $303,000 852,000 18,000 $1,173,000 $805,000 636,000 816,000 25,000 55,000 137,000 44,000 48,000 658,000 17,000 $3,241,000 $4,412,000 $1,342,000 $155,000 89,000 116,000 $360,000 $982,000 2021/22 $312,000 877,000 19,000 $1,208,000 $829,000 655,000 840,000 25,000 56,000 141,000 45,000 49,000 678,000 17,000 $3,335,000 $4,544,000 $1,382,000 $160,000 92,000 119,000 $371,000 $1,011,000

ARENA NON-OPERATING EXPENSES Arena Management Fee $122,000 Insurance 70,000 Capital Maintenance Reserve 82,000 Total TOTAL NET INCOME (LOSS) $275,000 $342,000

* Convention Center Food & Beverage Revenues and Expenese only reflect those event held in the multi-purpose hall. Other meetings and banquets are included hotel pro forma.

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HVS financial projections are intended to show the expected levels of revenues and expenses over a ten year period. Projections show smooth growth over time. However, event demand and booking cycles are not always smooth. Business can be affected by unpredictable local and national economic factors. Event demand is often cyclical, based on rotation patterns and market conditions. Therefore, HVS recommends interpreting the financial projections as a mid-point of a range of possible outcomes and over a multi-year period rather than relying on projections for any one specific year.

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8. Statement of Assumptions & Limiting Conditions

1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature. 3. We have not considered the presence of potentially hazardous materials on the proposed site, such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphenyls, pesticides, or lead-based paints. 4. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 5. All information, estimates, and opinions obtained from parties not employed by HVS are assumed to be true and correct. We can assume no liability resulting from misinformation. 6. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 7. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 8. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 9. 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.

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10. We take no responsibility for any events or circumstances that take place subsequent to the date of our field inspection. 11. The quality of a convention/event center facility's on-site management and organization that market the facility have a direct effect on a center’s economic viability. The forecasts presented in this analysis assume responsible ownership, competent management and effective marketing and sales. Any departure from this assumption may have a significant impact on the projected operating results. 12. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 13. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting, a division of HVS Global Hospitality Services. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of these two organizations, as employees, rather than as individuals. 14. This report is set forth as a market study of the proposed subject project; this is not an appraisal report.

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9. Certification

We, the undersigned, hereby certify: 1. that the statements of fact presented in this report are true and correct to the best of our knowledge and belief; 2. that the reported analyses, opinions, and conclusions presented in this report are limited only by the assumptions and limiting conditions set forth, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions; 3. that Tom Hazinski and Catherine Sarrett personally inspected the site and market described in this report; Christina Vetter participated in the analysis and research supporting this study, but did not personally inspect the subject site and market; 4. that we have no current or contemplated interests in the real estate that is the subject of this report; 5. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 6. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 7. that the fee paid for the preparation of this report is not contingent upon our conclusions, or the occurrence of a subsequent event directly related to the intended use of this report; 8. that our engagement in this assignment was not contingent upon developing or reporting predetermined results; and 9. that no one other than those listed above and the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this market study.

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Catherine Sarrett Project Manager HVS Convention Sports & Entertainment Facilities Consulting

Tom Hazinski Managing Director HVS Convention Sports & Entertainment Facilities Consulting

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Appendix A - Detailed Survey Results
Overview HVS conducted a survey of event planners to help determine how event planners view the Cedar Rapids area as a potential location for events. The Cedar Rapids Convention and Visitors Bureau (“CRCVB”) provided HVS with the names and email addresses of event planners that the CRCVB considers potential users of the convention center. HVS designed the survey instrument and conducted all surveys via e-mail. HVS received 31 responses of the 220 verified e-mail addresses for a response rate of roughly 14 percent. The following shows the questions and results of the event planner survey. Survey Questions and Responses 1. What types of events does your organization conduct or plan? (Check all that apply)
Event Types Meetings Conventions (w/exhibits) Conferences Sports Competitions/Events Banquets Conventions (w/o exhibits) Tradeshows Other Consumer Shows Entertainment Shows/Events 54% 54% 51% 24% 22% 16% 14% 5% 0% 0% Percent of respondents

2. Which categories best describe the geographic scope of the event(s) you conduct or plan? (Check all that apply)
Na ti ona l /Int'l Regi ona l/Mul ti Sta te Sta tewi de Loca l 9 3 28 4 24% 8% 76% 11%

3. Have you held an event in Cedar Rapids in the past three years?
No Yes 57% 43%

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4. If so, in what venue?
Other Venues Ma rri ott Col l ins Pl a za (5) US Cel lula r Center (3) Kirkwood Communi ty Col l ege Conference Ce nter (2) The Crowne Pl a za Hote l (1) Ha wkeye Downs (1) Ice Hockey Arena (1)

5. Please indicate some other cities where you have held events in the past.
Des Moi nes Cora l vi l l e Dubuque Wes t Des Moi nes Ames Iowa Ci ty Al toona Ama na Ceda r Ra pi ds Counci l Bl uffs Decora h Si oux Ci ty Wa terl oo Ankeny Ceda r Fa l l s De Vos 22 7 7 6 5 4 2 2 2 2 2 2 2 1 1 1 Fort Dodge Eugene, OR Ka l a ma zoo, Mi La ke Okoboji La wrence, Ka ns a s Ma rs ha l town New Ul m Ottumwa Ri vers i de Roches ter, MN S. Si oux Ci ty, NE South Bend, IN Spri ngfi el d, IL St. Loui s Storm La ke Wi s cons i n Del l s ,WI 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Please answer the following questions for your largest event. 6. How much exhibit space (in square feet) does your event require?
None Les s than 20,000 SF 20,000-40,000 SF 40,000-60,000 SF 60,000-80,000 SF 18% 38% 32% 9% 3%

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7. How much banquet space (seating capacity) does your event require?
Les s tha n 200 200-400 400-600 600-800 800-1,000 1,000 + 30% 45% 15% 9% 0% 0%

8. How many breakout-meeting rooms does your event require?
0-4 5-8 9-12 13- 16 17-20 21+ 58% 33% 6% 3% 0% 0%

9. How many delegates / attendees typically attend this event?
Under 250 251 - 500 501-1,000 1,000 - 1,500 1,501 - 2,000 2,001 - 3,000 3,001 - 4,000 4,001 - 5,000 5,000 + 26% 37% 11% 14% 0% 0% 3% 0% 9%

10. Over the next five years, do you anticipate that attendance at your event will:
Increa s e Decrea s e Sta y the Sa me 41% 11% 49%

11. If your event has exhibitors, how many does it typically have?
Minimum Maximum Average Median 4 200 57 45

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12. What is the length of your event (in number of days)?
Length of Event Move-In Da ys Event Da ys Move-Out Da ys Min 0.0 1.0 0.0 Max 5.0 14.0 3.0 Average 1.0 2.8 0.6

13. What size of a hotel room block (number of rooms) does your event require?
Room Block Minimum < 100 100-249 250-499 500-999 45% 38% 7% 10%

Preferred number of rooms Under 100 32% 100-249 39% 250-499 14% 500-999 11% 1,000-1,499 0% 1,500-1,999 4%

14. What is the typical hotel room rate (dollars) you consider for your events?
Maximum room rate Under $150 $150-$199 $200-$249
Preferred room rate Under $150 $150-$199 96% 4%

79% 18% 4%

15. How important is it that you have a full-service headquarters hotel connected to the convention center where you hold your event?
Very Importa nt Importa nt Not Importa nt Not A Cons i dera ti on 31% 47% 19% 3%

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16. Please rate the following full-service hotel brands according to how attractive they would be for your event and to your membership.

Marriott Hyatt Sheraton Westin Hilton Crowne Plaza Radisson Renaissance Wyndham Embassy Suites Holiday Inn Double Tree Low

3.2 2.9 2.8 2.7 2.7 2.6 2.5 2.5 2.5 2.4 2.4 2.2 High Preference

17. Please rate your level of knowledge regarding Cedar Rapids, Iowa as a convention and meeting destination.
Very Knowl edgea ble Knowl edgea bl e Not Knowledgea bl e 16% 51% 30%

18. Please rate Cedar Rapids on the following criteria as a location for your events relative to other cities in which you have held or may hold events.
Cleanliness Convenience for Drive-In Visitors Price of Hotel Rooms Price of Meeting Facility Rentals Availability of Hotel Rooms Safety Ability to Attract Attendees Overall Level of Destination Appeal Availability of Meeting Space Availability of Banquet Space Dining & Entertainment Options Availability of Exhibit Space Availability of Air Travel Recreation, Tourism & Cultural Activities Not Important 3.8 3.7 3.7 3.7 3.6 3.5 3.5 3.4 3.4 3.2 3.0 2.7 2.7 2.7 Important

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19. Please rate the relative importance of the following potential improvements to the Cedar Rapids’ overall ability to attract and host your events.

More On-Site Parking Improved Full-Service Hotel Rooms Improved Pedestrian Access Additional Meeting Rooms More Exhibit Space More Banquet Space More On-Site Dining & Entertainment
Not Important

2.6 2.3 2.1 2.1 1.6 1.6 1.6
Important

20. Please rate the overall attractiveness of the following facilities as a destination for your event(s).

Iowa Events Center (Des Moines) Coralville Marriott (Coralville) Proposed New Convention Center in Cedar Rapids Iowa State Center (Ames) Grand River Center (Dubuque) River Center/Adler Theater (Davenport) Five Sullivan Brothers Convention Center (Waterloo) Mid-America Center (Council Bluffs) Clay County Regional Events Center (Spencer) Fairfield Arts & Convention Center (Fairfield) Unattractive

2.27 2.17 2.14 1.90 1.82 1.43 1.34 1.25 0.88 0.84
Attractive

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21. Please rate the overall attractiveness of the following Iowa cities as a location for your event(s).

Des Moines Cedar Rapids Iowa City Coralville Waterloo Dubuque Davenport Sioux City Council Bluffs Unattractive 1.1 1.0 1.0 1.3 1.5 2.2 2.1 2.0

2.5

Attractive

22. Please rate the overall attractiveness of the following regional facilities as a destination for your event(s).

DeltaPlex Arena & Convention Center (Grand Rapids, MI) Monona Terrace (Madison, WI) 0.4

0.6

DeVos Place (Grand Rapids, MI) Sioux Fall Convention Center (Sioux Falls, SD) Peoria Convention Center (Peoria, IL)

0.4

0.4

0.4
Attractive

Unattractive

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23. Assuming that Cedar Rapids built a new convention center and renovated the hotel, would you consider holding your event in Cedar Rapids, IA?
Very Li kel y Somewha t Li kel y Neutra l Unl i kel y Hi ghl y Unl ikely Never 25% 19% 31% 17% 6% 3%

24. If your organization held an event at the proposed facility, how would the majority of your attendees/exhibitors travel to Cedar Rapids?
Ca r Pla ne 86% 11%

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25. In your own words, please describe what you believe to be the key strengths and weaknesses of Cedar Rapids as a convention and meeting destination. Please provide any additional comments you would like to add.
STRENGTHS 1 2 3 4 Good location for attendees NV Population center It is not the capitol city so it is more affordable. It is central in the state. Downtown shopping and the Art's NV NV Location Has meeting amenities we would need For our assoication, it is the 2nd largest market in Iowa for us 1 2 3 4 WEAKNESSES Currently, nothing to fit our needs. Don't like 'run down' facility. Location Not central in Iowa Pedestrian access to shops and attractions. Skywalk seems to go no-where. No walk paths, upscale shopping districts (East Village, Des Moines comes to mind), botanical center, city park number of hotel rooms, parking location-not in central Iowa Needs to be more centrally located COST not centrally located Small airport is a plus (quick access) and minus (not many flight options at end of day) size.../......not appealing to our delegates needs to finish rebuilding and cleaning up the city expense Location

5 6 7 8 9 10

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

11 Not sure as I do not know the area 12 Friendly people, ease of getting around, attractions, and enertainment 13 Location, German-American region 14 Great venue top play volleyball Cooperativeness of US Cellular and CVB Staff 15 The central location of Cedar Rapids in the state and the arena seating in the celluar center are the main attractions for me. 16 NV 17 US Cellular Center connected with a major hotel is very important 18 Great convention and visitors bureau to work with 19 NV 20 none

Poor locker rooms

The lack of hotel selections downtown. NV Lack of entertainment/resturants in downtown Size of facility for our event NV if the city and county continue to discriminate against the majority of construction workers in Iowa by using union-only PLA's to build their projects we will never hold a major event in your city again NV Not centrally located for the entire state of Iowa Restaurants, entertainment options, airline flights, full service hotels, exhibit space NV NV The limiting factor for some sites in Iowa for us is "Size". There are some locations that we can't go to be cause of the size/space constraints. No unionized facilities or hotels; unionized facilities and/or hotels that meet our needs would receive the highest preference Not very centrally located, expensive to get speakers there (flights) NV Getting around downtown For our needs, we see no weaknesses in Cedar Rapids other than maybe having access to larger airport for economical travel for speakers, etc.
We prefer a m central location in Iowa ore O m ne ajor convention site com bining hotel and exhibit space NV NV NV NV

21 NV 22 Centrally Located for Eastern Iowa 23 CVB and Cellular Center Staff, Strong support from the wrestling community, central location 24 We depend upon a local host 25 We depend upon a local host 26 Location - Good location in eastern part of the state

21 22 23 24 25 26

27 Geographical location; access to interstates

27

28 Small city, easy to get around

28 29 30 31

29 Our group likes larger cities 30 Location within the state 31 Good central location for a statewide trade association/hotel
sales staffs are willing to work with w/us/better negotiation outside of Des Moines

32 33 34 35 36 37

NV Num of hotel room easy to get around town ber s, NV NV Location NV

32 33 34 35 36 37

N indicates the survey respondent did not include a strength/weakness. V

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Appendix B - Descriptions of Comparable Venues

Local Area Competitors

Convention and conference facilities in Iowa that offer exhibit, ballroom and meeting space and would compete directly with the Proposed Events Center for state association and regional business. Local Area Competitors include the Clay County Regional Events Center, Iowa Events, Center, the Mid-America Center, the River Center, the Coralville Marriott and Conference Center, the Grand River Center, the Five Sullivan Brothers Convention Center, the Fairfield Arts and Convention Center, and the Iowa State Center. The following decriptions provide information on onwerhip, management, and operations of the Local Area Competitors. Comparable national convention and conference facilities which are operated as a department of an attached hotel property include: Branson Convention Center, Chattanoogan Hotel Conference Center, Conference Center Niagara Falls, Embassy Suites Hotel and Conference Center Frisco, Tinley Park Convention Center, Durham Convention Center, Coralville Marriott and Conference Center, Hilton Vancouver Washington, Marriott Provo Hotel and Conference Center. The following decriptions provide information on onwerhip, management, and operations of the Comparable National Venues. Convention and conference facilities in the midwest that offer exhibit, ballroom and meeting space would compete directly with the Proposed Events Center for regional and national business. Comparable Regional Venues include: DeVos Place, Monona Terrace Convention Center, Peoria Civic Center, Sioux Falls Convention Center, St. Cloud Civic Center, and Deltaplex Arena and Convention Center. The following decriptions provide information on onwerhip, management, and operations of the Comparable Regional Venues.

Comparable National Venues

Comparable Regional Venues

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CLAY COUNTY REGIONAL EVENTS CENTER
The Clay County Regional Events Center ("CCEC") opened at the north end of downtown Spencer, Iowa in 2003 and is managed by VenuWorks. The facility has 32,286 square feet of total function space and is located five miles from the Spencer Municipal Airport. The CCEC is 15 minutes south of Lake Okoboji, a major tourist attraction in nothern Iowa. There is no hotel adjacent to the CCEC or the adjacent Clay County Fairgrounds. The CCEC features an arena with full seating capacity of 3,400 and 24,000 square feet of rentable floor space. It also offers a ballroom of 7,560 square feet, divisible into six sections, a boardroom of 522 square feet and an event office of 204 square feet.

FLOOR PLANS

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IOWA EVENTS CENTER
The Iowa Events Center ("IEC") opened in Des Moines, Iowa in 2002. The facility offers 74,081 square feet of total function space and is connected to the 415-room Marriott Hotel. The Iowa Events Center complex, built at a cost of $217, includes the Veterans Memorial Auditorium, Polk County Convention Complex, Hy-Vee Hall, and Wells Fargo Arena. Polk County owns the facility, but transferred management of the complex in 2004 to Global Spectrum. The facility is located five miles from the Des Moines International Airport.

FLOOR PLANS

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MID-AMERICA CENTER
The Mid-America Center ("MAC") sits in Council Bluffs, Iowa, roughly four miles from downtown Council Bluffs and downtown Omaha. The MAC, operated by SMG, opened in 2002. The facility offers 78,000 square feet of function space, 2,600 parking spaces, and is adjacent to the 133-room Country Inn and Suites. The Center sits five miles from the Omaha Eppley Airfield. The MAC features an arena with concert seating capacity for 9,000 and 30,000 square feet of rentable arena floor space. The convention center features additional exhibition space with a 24,000 square foot exhibition hall. It also offers a 23,000 square foot ballroom divisible into four sections and six meeting rooms totaling 1,000 square feet.

FLOOR PLANS

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RIVER CENTER
The River Center Convention Center ("RCCC") is located in downtown Davenport, Iowa, near the Mississippi River. The RCCC originally opened 1983 and underwent an expansion in 2003 adding the Great Hall South and four meeting rooms, in addition to 2 square parks. The facility is roughly 17 minutes from the Quad City International Airport and is roughly 50 miles from the nearest Amtrak station in Galesburg. The 221-room Radisson Quad City Plaza is connected to the RCCC. The River Center Convention Center features two exhibit halls totaling 46,420 square feet of column-free exhibition space and 11 meeting rooms offering 8,155 square feet of meeting space. Additionally, the facility features the Adler Theatre and two large square parks for outdoor events.

FLOOR PLANS

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CORALVILLE MARRIOTT AND CONFERENCE CENTER
The Coralville Marriott and Conference Center ("CMCC"), located adjacent to the Iowa River and the University of Iowa, sits in Coralville, Iowa near Iowa City and the other Quad Cities. The 280-room CMCC was developed as part of the Iowa River Landing Project, which includes a retail/apartment building adjacent to the CMCC. The CMCC has 57,388 square feet of total function space. The facility features a 30,000 square foot exhibit hall, a 15,000 square foot ballroom, divisible into five sections, and a 7,200 square foot ballroom, also divisible into five sections. The second floor features ten meeting rooms totaling 5,388 square feet.

FLOOR PLANS

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GRAND RIVER CENTER
The Grand River Center ("GRC") is located along the banks of the Mississippi River near downtown Dubuque, Iowa. The GRC opened 2003 and is a part of the $188 million America's River Project at the Port of Dubuque which also features a museum & aquarium, a casino, restaurants, hotels and an indoor waterpark. The 193-room Grand Harbor Resort and Waterpark is connected to the GRC via pedestrian skywalk. The Grand River Center features a 30,000 square foot exhibit hall, a 12,000 square foot ballroom and 6 meeting rooms offering 12,000 square feet of meeting space. The facility also features and outdoor plaza and a parking garage.

FLOOR PLANS

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FIVE SULLIVAN BROTHERS CONVENTION CENTER
The Five Sullivan Brother Convention Center (FSBCC) is located in downtown Waterloo, Iowa along the banks of the Cedar River. The FSBCC opened 1972 as the ConWay Civic Center and underwent a $1.5 million renovation in 2003. The 228-room Ramada Hotel is connected to the FSBCC via pedestrian skywalk. The FSBCC features over 40,000 square feet of flexible function space including a 19,000 square foot exhibit hall and 10 meeting rooms with almost 12,000 square feet of meeting space. The facility was renamed in 1988 after the five Sullivan brothers who were killed in action in WWII.

FLOOR PLANS

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FAIRFIELD ARTS AND CONVENTION CENTER

The Fairfield Arts and Convention Center (FACC) in located in downtown Fairfield, Iowa. The FACC opened 2007 and features 12,700 square feet of flexible meeting space including 7,700 square foot exhibit hall and 3 meeting rooms with 5,000 square feet of meeting space. The FACC also houses the 522-seat Sondheim Center for the Performing Arts.

FLOOR PLANS
None Available

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IOWA STATE CENTER
The Iowa State Center (ISC) in located in Ames, Iowa, on the campus of Iowa State University. The ISC opened 1969 and is comprised of three separate facilities, the Scheman Building, the Hilton Coliseum Arena, and the C.Y. Stephens Auditorium. Flexible meeting space includes 62,600 square feet of exhibit space in both the Scheman Building exhibit hall and the floor of the Hilton Coliseum arena. Additionally, the Scheman Building houses 21 meeting rooms with 20,000 square feet of meeting space. The Stephens Auditorium is a 2,747-seat performance hall.

FLOOR PLANS

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

DEVOS PLACE
DeVos Place ("DP") is located in downtown Grand Rapids, Michigan, about fifteen minutes from Gerald Ford International Airport. The facility is attached via walkway to the 682room Amway Grand Plaza Hotel and the 329room JW Marriott. DP is managed by SMG, but owned by the Grand Rapids-Kent County Convention/Arena Authority. DP features 162,000 square feet of exhibition space with three possible divisions, 26 meeting rooms totaling 32,000 square feet, and a 40,000 square foot ball room divisible into four sections. In addition, the Place has a 2,404-seat performing theater, is adjacent to the 12,000-seat Van Andel Arena, and has 685 on-site parking spaces.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

MONONA TERRACE CONVENTION CENTER
The Monona Terrace Convention Center ("MTCC") is located in Madison, Wisconsin and overlooks Lake Monona. Renowned architect Frank Lloyd Wright conceived of the MTCC in 1938, though the building was not constructed until 1997. The MTCC is jointly owned by the City of Madison and State of Wisconsin. The City of Madison handles day-to-day operations. Total development cost of the facility was estimated at $67 million. The MTCC features 38,000 square feet of exhibition space, divisible into two halls, a 13,500 square-foot ballroom that can be divided into four sections, 17,600 square feet of meeting space over 14 rooms, and a 320-seat lecture hall. In addition, there is a rooftop garden that provides 45,000 square feet of function space for events, when weather permits. The facility is attached, via skywalk, to the 240 room Hilton Madison Monona Center and 600 parking spaces. Construction of the $29 million hotel was mainly financed by Marcus Corp., the hotel developer and operator, with the remaining balance of the project being funded by an incremental financing district tax. The Hilton features four meeting rooms comprising 2,400 square feet of space.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

PEORIA CIVIC CENTER
The Peoria Civic Center ("PCC"), in Peoria, Illinois, opened in 1982. The facility underwent a $55 million expansion in 2008. The SMGoperated and Peoria Civic Center Authority-owned facility features a number of buildings including an arena, theater, and convention center space. Close to the Peoria Civic Center are a Staybridge Suites with 106 rooms and the Hotel Pere Marquette with 288 rooms. The PCC features four contiguous exhibit halls totaling 108,688 square feet, a ballroom of 26,500 square feet, divisible into nine sections, and 16 meeting rooms totaling 17,355 square feet. The PCC also features a 12,036-seat arena and 2,177seat theater.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

SIOUX FALLS CONVENTION CENTER
The Sioux Falls Convention Center is located in Sioux Falls, South Dakota. The facility connects with the Sioux Falls Arena, and sits across from the Sioux Falls Regional Airport. The Sheraton, with 243 guest rooms, connects by an enclosed walkway. Owned by the City of Sioux Falls, the Sioux Falls Convention Center is operated by Global Spectrum. The Sioux Falls Convention Center offers 33,600 square feet of exhibit space, a 16,800 square-foot ballroom, and a 4,320 square-foot ballroom. The facility also has ten meeting rooms totaling 5,972 square feet. Further, the facility offers 3,400 parking spaces.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

ST. CLOUD CIVIC CENTER
The St. Cloud Civic Center ("SCSS") is situated in St. Cloud, Minnesota, located in central Minnesota, more than one hour from Minneapolis. The SCSS sits in the downtown area St. Cloud, along the Mississippi River, six miles from the St. Cloud Regional Airport. Owned and operated by the City of St. Cloud, the SCSS opened in 1989. The Radisson Suite Hotel St. Cloud, with 103 guest rooms, connects directly to the SCSS via a skywalk. On the first floor of the SCSS are two exhibit halls: one exhibit hall of 16,000 square feet, divisible into two sections and an exhibit hall of 26,000 square feet. Additionally on the first floor is a small ballroom of 3,924 square feet, divisible into two meeting rooms, and a boardroom of 700 square feet. The second floor offers a ballroom of 4,502 square feet, divisible into five meeting rooms, and four additional meeting rooms totaling 4,220 square feet. The SCSS features 365 underground parking spaces. The adjoining Radisson Suite offers a ballroom of 2,400 square feet and two meeting rooms.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

DELTAPLEX ARENA AND CONVENTION CENTER
The DeltaPlex Arena and Convention Center (DPACC) in located in Grand Rapids, MI. The DPACC originally opened in 1952 as the Stadium Arena. It was purchased by the Langlois family in the late 1990s, underwent a major renovation, and was reopened in 1998 as the DeltaPlex. Flexible meeting space includes 42,300 square feet of exhibit space in both the arena and West River Hall. Additionally, the facility houses an additional 30,500 square feet of flexible meeting space and a 2,300 square foot ballroom. The DeltaPlex Arena has 4,500 fixed seats and a total capacity of approximately 6,500 patrons.

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None Available

January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

BRANSON CONVENTION CENTER

The Branson Convention Center ("BCC") is located in Branson, Missouri and opened in 2007; it is a part of the larger public/private Branson Landing Project. The facility has 87,710 square feet of function space and is connected to the 293-room Hilton hotel. Both facilities are managed by Hilton Hotels Corporation. BCC has two exhibit halls totaling 47,712 square feet, 22,703 square feet of ballroom space over two halls, and fifteen meeting rooms totaling 17,295 square feet.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

CHATTANOOGAN HOTEL CONFERENCE CENTER
The Chattanoogan Hotel Conference Center ("CHCC") is located in Chatanooga, Tennessee and opened in 2001. The facility has 20,944 square feet of function space, 1,200 parking spots, and has 202 guest rooms. It is owned by the City and operated by Benchmark Hospitality. CHCC has five exhibit halls totaling 6,787 square feet, 13 meeting rooms over 6,405 square feet, and a 7,752 square foot ballroom. Directly across the street is the Chattanooga Convention Center which caters to larger group events.

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January 21, 2011 Market Study

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

CONFERENCE CENTER NIAGARA FALLS
The Conference Center Niagara Falls ("CCNF"), opened in 2004, is located in Niagara Falls, New York. The facility has 32,200 square feet of exhibit space in one hall, a 10,500 square foot ballroom that is divisible into two sections, and 12,826 square feet of meeting space over sixteen rooms. CCNF is owned by the City and operated by Sentry Hospitality. The 391room Crowne Plaza hotel serves as the headquarters hotel and is also managed by Sentry Hospitality. In addition, the 604-room Seneca Niagara Casino & Resort opened in 2005 is one block from the center, but does not actively seek group business from the CCNF.

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January 21, 2011 Market Study

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

EMBASSY SUITES HOTEL AND CONFERENCE CENTER FRISCO
The Embassy Suites Hotel and Conference Center Frisco ("ESF") opened in 2005 in Frisco, Texas, approximately 30 miles north of Dallas. The facility has 54,600 square feet of total function space and has 330 guest rooms. The City of Frisco owns the conference center while John Q Hammons, Inc. (JQH) owns the hotel. JQH is responsible for the daily management of both the hotel and the conference center. The ESF sits adjacent to the Stonebriar Centre mall and across from both the Dr. Pepper Star Centre and Dr. Pepper Ballpark, in addition to being proximate to a number of large corporate headquarters. The conference center has 54,600 square feet of total function space, including a ballroom of 41,000 square feet, divisible into nine sections, and six meeting rooms totaling 12,800 square feet.

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January 21, 2011 Market Study

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

TINLEY PARK CONVENTION CENTER
The Tinley Park Convention Center ("TPCC") sits in Tinley Park, Illinois, roughly 30 minutes southwest of Chicago. The facility, opening in 2000, is less than a half mile from the Odyssey Fun World and near a country club, a business park, and a number of small recreational parks. The Village of Tinley Park owns the convention center. The convention center, which is attached to the 202room Holiday Inn Select, features an 18,000 square foot exhibit hall, a 14,500 square-foot ballroom, and seven meeting rooms over 4,407 square feet. Both the convention center and hotel are managed by Tinley Park Hotel and Convention Center, LLC. Construction has begun an expansion that is projected to be completed in 2011. Expansion plans include 20 additional breakout rooms, a new catering kitchen, expanded storage and loading capability as well as upgraded lighting and wifi-access throughout the venue. The attached Holiday Inn is adding 68 guest rooms to bring the total guest rooms available to 270.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

DURHAM CONVENTION CENTER
Located in downtown Durham, the Durham Convention Center ("DCC") is integrated with the Durham Marriott, a 189-room hotel. The City of Durham and Durham County jointly own the convention center space. The Durham Convention Center Authority (the "Authority"), with board members appointed by the City and the County oversees the operation of the DCC. The Authority granted Shaner Hotel Group ("Shaner") air rights to build and own the hotel improvements. The air rights agreement requires Shaner to maintain a franchise agreement with the Marriott Corporation. Shaner operates the hotel and the convention center as an integrated complex. That is, the hotel does not have its own complement of meeting and ballroom space and depends on the DCC space in booking group business. The DCC has an 18,000 square foot ballroom divisible into three sections, 14,000 square foot junior ballroom that divides into four sections, and a 3,500 square foot meeting room block that divides into six sections.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

CORALVILLE MARRIOTT AND CONFERENCE CENTER
The Coralville Marriott and Conference Center ("CMCC"), located adjacent to the Iowa River and the University of Iowa, sits in Coralville, Iowa near Iowa City and the other Quad Cities. The 280-room CMCC was developed as part of the Iowa River Landing Project, which includes a retail/apartment building adjacent to the CMCC. The CMCC has 57,388 square feet of total function space. The facility features a 30,000 square foot exhibit hall, a 15,000 square foot ballroom, divisible into five sections, and a 7,200 square foot ballroom, also divisible into five sections. The second floor features ten meeting rooms totaling 5,388 square feet.

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January 21, 2011 Market Study

Comparable Venues Proposed Convention Center

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

HILTON VANCOUVER WASHINGTON
The Hilton Vancouver Washington ("HVW"), built in 2005, is owned by the City of Vancouver and operated by Hilton Hospitality, Inc. The 226room facility, which is LEED certified, sits in downtown Vancouver, Washington, roughly twelve miles from the Portland International Airport and ten miles from downtown Portland. The facility features a grand ballroom of roughly 14,000 square foot ballroom, a 7,500 square foot junior ballroom, and nine meeting rooms totaling 8,338 square feet.

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January 21, 2011 Market Study

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Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

MARRIOTT PROVO HOTEL AND CONFERENCE CENTER
The Marriott Provo Hotel & Convention Center ("MPHCC") is located in downtown Provo, Utah, set amongst the Wasatch Mountains. The facility has 330 guest rooms and suites. The MPHCC has an 8,100 square foot ballroom which is divisible into 4 sections and 17 meeting rooms with 14,500 square feet of meeting space. A 117 fixed-seat amphitheater is also available.

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January 21, 2011 Market Study

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