Feasibility Study

Proposed Alton Hotel

Alton, Illinois

Property Location:
Downtown Alton
Alton, Illinois 62002
Prepared by:
HVS Consulting and Valuation Services
Division of TS Worldwide, LLC
2386 Clower Street, Suite C101
Snellville, Georgia 30078
(678) 639-3334
(678) 302-7048 FAX
Submitted to:
Phil Roggio
The City of Alton, Illinois
101 East 3rd Street
Alton, Illinois 62002
(618) 463-3532
(618) 463-0972 FAX
 April 24, 2009

Phil Roggio
The City of Alton, Illinois
101 East 3rd Street
Alton, Illinois 62002
(618) 463-3532
(618) 463-0972 FAX

Re: Proposed Alton Hotel

Alton, Illinois
2386 Clower Street, Suite C101 HVS Reference: 2009380010
Snellville, Georgia 30078

(678) 639-3334

(678) 302-7048 FAX Dear Mr. Roggio:

www.hvs.com
Pursuant to your request, we herewith submit our feasibility study
pertaining to the above-captioned property. We have inspected the real
estate and analyzed the hotel market conditions in the Alton, Illinois area.
We have studied the proposed project, and the results of our fieldwork and
Atlanta
Boston
analysis are presented in this report. We have also reviewed the proposed
Boulder improvements for this site. Our report was prepared in accordance with the
Chicago Uniform Standards of Professional Appraisal Practice (USPAP), as provided
Dallas/Fort Worth by the Appraisal Foundation.
Denver
Mexico City We hereby certify that we have no undisclosed interest in the property, and
Miami
our employment and compensation are not contingent upon our findings.
New York
This study is subject to the comments made throughout this report and to all
Newport
San Francisco
assumptions and limiting conditions set forth herein.
Toronto
Vancouver Sincerely,
Washington TS Worldwide, LLC
Athens
Buenos Aires
Dubai
Hong Kong
London
Madrid
Michael Brophy, Vice President
Mumbai
New Delhi
[email protected], (678) 628-6577
Sao Paulo
Shanghai
Singapore

Rod Clough, MAI, Managing Director

Specialists in Hotel Consulting and
Appraisal Worldwide [email protected], (214) 629-1136
HVS Consulting and Valuation Services Table of Contents

Table of Contents

Section Title
1 Executive Summary
2 Description of the Site and Neighborhood
3 Market Area Analysis
4 Supply and Demand Analysis
5 Description of the Proposed Project
6 Projection of Occupancy and Average Rate
7 Projection of Income and Expense
8 Feasibility Analysis
9 Statement of Assumptions and Limiting Conditions
10 Certification

Addenda

Explanation of the Penetration Analysis

Explanation of the Simultaneous Valuation Formula
Qualifications

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-1

1. Executive Summary

Subject of the The subject of the feasibility study is a proposed hotel that will be constructed
Feasibility Study on a yet to be determined site in Downtown Alton, Illinois. We have
considered two scenarios in this study; the first scenario includes a stand-
alone hotel and the second scenario includes a hotel and adjacent conference
center. The hotel is expected to be affiliated with a nationally recognized
brand; we have suggested two possible franchises. We have assumed an
opening date for the property of April 1, 2011 and have recommended that it
include 110 rooms, a lounge, a breakfast dining area, an indoor pool, an
indoor whirlpool, an exercise room, a business center, a market pantry,
vending areas, and a guest laundry room. Under the hotel-only scenario, the
facility would include 6,000 square feet of meeting space. The hotel and
conference center would include 12,000 square feet of meeting space. The
hotel should also feature all necessary back-of-the-house space.

The purpose of this report is to determine the market demand and feasibility
of two separate development scenarios in the Downtown Alton
neighborhood: a hotel or a hotel with an adjacent conference center. After
researching and analyzing the market, we are recommending the optimal
characteristics for these facilities, including guestroom count, food and
beverage facilities, amount of meeting space, and recreational facilities. We
have also recommended that the hotel be branded with a national franchise.
We have suggested the SpringHill Suites by Marriott brand for the proposed
property; however, our facility recommendations and performance
projections are not contingent on this particular brand affiliation. In general,
we suggest that the proposed subject property be located near the Mississippi
River, which is a primary attraction for the area, and incorporate a river
theme into the naming, marketing, design, and dcor of the proposed
property. Additionally, the design and exterior of the building(s) should
complement the quaint, historic nature of many of the existing buildings in
the neighborhood. The subject site will be located in Downtown Alton, Alton,
Illinois, 62002.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-2

Pertinent Dates The effective date of the report is April 24, 2009. The neighborhood for the
proposed subject property was inspected by Dan McCoy on March 11, 2009.
Michael Brophy and Rod Clough, MAI participated in the analysis and
reviewed the findings, but did not personally inspect the area.

Ownership, Franchise, A developer for the proposed subject property has not yet been determined.
and Management This report is being prepared for the City of Alton, Illinois, to determine the
Assumptions feasibility of developing a hotel or a hotel and conference center in
Downtown Alton. A specific site for the proposed development has not been
determined; however, for the purposes of this report, we have assumed that a
site in the desired neighborhood, measuring between two and three acres,
would be acquired for development of the proposed subject property.

Details pertaining to management terms were not yet determined at the time
of this report; therefore, our forecast fees represent a blended average of what
would be expected on a base-fee and incentive-fee basis. We have assumed a
market-appropriate total management fee of 3.0% of total revenues in our
study.

A specific franchise affiliation and/or brand for the proposed subject property
has yet to be selected. We recommend that the proposed subject property
operate as an upscale, select-service hotel. We have placed heavy
consideration on the SpringHill Suites brand, which is affiliated with Marriott
International. This brand's all-suite product offering is popular with group
and leisure travelers, while its strong national reservation system helps attract
commercial demand. Additionally, we note that Marriott-affiliated brands are
currently under-represented in the market. Another possible brand for the
proposed subject property is Hilton Garden Inn, which is affiliated with
Hilton Hotels Corporation. Based on our review of the agreements terms or
expected terms, the SpringHill Suites by Marriott franchise is reflected in our
forecasts with a royalty fee of 5% of rooms revenue, and a marketing
assessment of 2.5% of rooms revenue. Reservations fees will also be due, and
are included in the rooms expense line item of our forecast.

Summary of Hotel Lodging trends in this market have been relatively stable for most of the
Market Trends illustrated period with local employers, tourists, and weekend visitors serving
as consistent sources of demand. New supply entered the market in 2007,
which caused a temporary drop in occupancy levels. This new supply was
quickly absorbed as market occupancy rebounded in 2008 and reached its
highest level of the last ten years. This sharp rebound and unprecedented
growth resulted from increased demand related to area construction projects.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-3

These include the ongoing expansion of the ConocoPhillips refinery, the

addition of a new wing at Alton Memorial Hospital, the construction of the
Great Rivers Research Center, and the extension of Interstate 255 to Seminary
Road. Additionally, in the fall of 2008, a Days Inn in Alton was closed because
of building code violations, which diverted demand to other hotels in the
area. Major area construction projects are expected to continue to positively
impact demand through 2009, into 2010 and 2011.

The following table provides a long-term perspective on the supply and

demand trends for a selected set of hotels, as provided by Smith Travel
Research.

Table 1-1 Historical Supply and Demand Trends (STR)

Average Daily Available Room Occupied Room Average

Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change
1999 355 129,475 88,312 68.2 % $59.12 $40.32
2000 398 145,270 12.2 % 97,483 10.4 % 67.1 63.21 6.9 % 42.41 5.2 %
2001 398 145,270 0.0 97,963 0.5 67.4 65.02 2.9 43.85 3.4
2002 398 145,270 0.0 96,278 (1.7) 66.3 66.78 2.7 44.26 0.9
2003 398 145,270 0.0 92,497 (3.9) 63.7 67.77 1.5 43.15 (2.5)
2004 398 145,270 0.0 96,639 4.5 66.5 67.31 (0.7) 44.77 3.8
2005 398 145,270 0.0 98,338 1.8 67.7 70.29 4.4 47.58 6.3
2006 398 145,270 0.0 97,306 (1.0) 67.0 72.95 3.8 48.86 2.7
2007 422 154,054 6.0 99,309 2.1 64.5 76.30 4.6 49.19 0.7
2008 470 171,550 11.4 118,023 18.8 68.8 81.58 6.9 56.13 14.1
Year-to-Date Through February
2008 470 27,730 13,350 48.1 % $77.02 $37.08
2009 470 27,730 0.0 % 16,687 25.0 % 60.2 78.72 2.2 % 47.37 27.8 %
Average Annual Compounded Change: 1999-
2008 3.2 % 3.3 % 3.6 % 3.7 %
Number Year Year
Hotels Included in Sample of Rooms Affiliated Opened

Holiday Inn Alton 137 Jul 1982 Jul 1982

Super 8 Alton 63 Sep 1989 Sep 1989
Comfort Inn & Conference Center St Louis 71 Oct 1994 Oct 1994
Comfort Inn Alton 62 Jun 1996 Jun 1996
Holiday Inn Express & Suites Pontoon Beach 65 Sep 1999 Sep 1999
Hampton Inn Suites St Louis Edwardsville 72 Sep 2007 Sep 2007

Total 470
Source: Smith Travel Research

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-4

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-5

Table 1-2 Primary Competitors Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008

Weighted Weighted Weighted

d
l
ercia

ng an
Annual Annual Annual

Gr oup

re
Number of Room Average Room Average Room Average Occupancy Yield

Co m m

Meeti

Leisu
Property Rooms Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR Penetration Penetration

Holiday Inn 137 60 % 25 % 15 % 137 60 % $93.00 $55.80 137 63 % $93.00 $58.59 137 63 % $105.00 $66.15 92.1 % 114.9 %
Comfort Inn 62 65 15 20 62 70 68.00 47.60 62 70 73.00 51.10 62 73 73.00 53.29 106.7 92.6

Sub-Totals/Averages 199 62 % 22 % 17 % 199 63.1 % $84.36 $53.25 199 65.2 % $86.31 $56.26 199 66.1 % $93.99 $62.14 96.7 % 108.0 %

Secondary Competitors 261 68 % 18 % 15 % 133 71.3 % $63.53 $45.28 148 64.3 % $68.12 $43.78 179 70.9 % $73.96 $52.46 103.7 % 91.2 %

Totals/Averages 460 65 % 20 % 16 % 332 66.4 % $75.41 $50.06 347 64.8 % $78.61 $50.93 378 68.4 % $84.15 $57.56 100.0 % 100.0 %

Table 1-3 Secondary Competitors Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008

Weighted Weighted Weighted
d
l
ercia

Total Annual Annual Annual

ng an
Group

re

Number of Competitive Room Average Room Average Room Average

Co m m

Meeti

Leisu

Property Rooms Level Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR

Super 8 63 70 % 10 % 20 % 60 % 38 68 % $55.00 $37.40 38 68 % $58.00 $39.44 38 73 % $58.00 $42.34

Holiday Inn Express 65 75 15 10 75 49 75 70.00 52.50 49 70 75.00 52.50 49 73 75.00 54.75
Hampton Inn & Suites 62 65 20 15 75 0 0 0.00 0.00 16 35 90.00 31.50 47 70 95.00 66.50
Comfort Inn Edwardsville 71 60 25 15 65 46 70 63.00 44.10 46 65 65.00 42.25 46 68 65.00 44.20

Totals/Averages 261 68 % 18 % 15 % 69 % 133 71.3 % $63.53 $45.28 148 64.3 % $68.12 $43.78 179 70.9 % $73.96 $52.46

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-6

Summary of Forecast Based on our analysis presented in the Projection of Occupancy and Average
Occupancy and Rate chapter, we have chosen to use a stabilized occupancy level of 67% and a
Average Rate base-year rate position of $110.00 for the proposed subject property in the first
scenario. The following table reflects a summary of our market-wide and
proposed subject property occupancy and average rate projections, for the
first scenario.

Table 1-4 Market and Subject Property Occupancy and Average Rate Forecast First Scenario

Areawide (Calendar Year) Subject Property (Calendar Year)

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

Base Year 68.4 % $84.15 $110.00 130.7 %

2009 68.0 1.5 % 85.41 1.5 % 111.65 130.7
2010 68.2 2.0 87.12 2.0 113.88 130.7
2011 64.7 3.5 90.17 57.0 % 3.5 117.87 130.7
2012 64.1 4.5 94.23 62.0 4.5 123.17 130.7
2013 64.7 3.5 97.52 67.0 3.5 127.48 130.7
2014 65.1 3.0 100.45 69.0 3.0 131.31 130.7

The following table summarizes the proposed subject propertys first-scenario

forecast, reflecting fiscalization and opening-year rate discounts as applicable.

Table 1-5 Fiscalized Forecast of Occupancy and Average Rate First Scenario

Average Rate Before Average Rate After

Year Occupancy Discount Discount Discount

2011/12 58 % $119.18 3.0 % $115.60

2012/13 63 124.24 1.5 122.37
2013/14 67 128.43 0.0 128.43

We have chosen to use a stabilized occupancy level of 70% and a base-year

rate position of $106.00 for the proposed subject property in the second
scenario. The following table reflects a summary of our market-wide and
proposed subject property occupancy and average rate projections, for the
second scenario.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-7

Table 1-6 Market and Subject Property Occupancy and Average Rate Forecast Second Scenario

Areawide (Calendar Year) Subject Property (Calendar Year)

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

Base Year 68.4 % $84.15 $106.00 126.0 %

2009 68.1 1.5 % 85.41 1.5 % 107.59 126.0
2010 68.3 2.0 87.12 2.0 109.74 126.0
2011 65.2 3.5 90.17 59.0 % 3.5 113.58 126.0
2012 64.5 4.5 94.23 64.0 4.5 118.69 126.0
2013 65.1 3.5 97.52 69.0 3.5 122.85 126.0
2014 65.6 3.0 100.45 72.0 3.0 126.53 126.0

The following table summarizes the proposed subject propertys second-

scenario forecast, reflecting fiscalization and opening-year rate discounts as
applicable.

Table 1-7 Fiscalized Forecast of Occupancy and Average Rate Second Scenario

Average Rate Before Average Rate After

Year Occupancy Discount Discount Discount

2011/12 60 % $114.84 3.0 % $111.40

2012/13 65 119.72 1.5 117.92
2013/14 70 123.76 0.0 123.76

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-8

Table 1-8 Detailed Forecast of Income and Expense First Scenario

2011/12 Begins April 2012/13 Stabilized 2014/15 2015/16

Number of Rooms: 110 110 110 110 110
Occupancy: 58% 63% 67% 67% 67%
Average Rate: $115.60 $122.37 $128.43 $132.28 $136.25
RevPAR: $67.05 $77.09 $86.05 $88.63 $91.29
Days Open: 365 365 365 365 365
Occupied Rooms: 23,287 %Gross PAR POR 25,295 %Gross PAR POR 26,901 %Gross PAR POR 26,901 %Gross PAR POR 26,901 %Gross PAR POR
REVENUE
Rooms $2,692 79.6 % $24,473 $115.60 $3,095 80.2 % $28,136 $122.36 $3,455 80.7 % $31,409 $128.44 $3,558 80.7 % $32,345 $132.27 $3,665 80.7 % $33,318 $136.24
Food 472 14.0 4,292 20.28 521 13.5 4,738 20.60 565 13.2 5,141 21.02 582 13.2 5,295 21.65 600 13.2 5,454 22.30
Beverage 144 4.3 1,312 6.20 159 4.1 1,448 6.30 173 4.0 1,571 6.42 178 4.0 1,618 6.62 183 4.0 1,666 6.81
Telephone 9 0.3 83 0.39 10 0.3 92 0.40 11 0.3 100 0.41 11 0.3 103 0.42 12 0.3 106 0.43
Other Income 65 1.9 592 2.79 72 1.9 656 2.85 79 1.8 714 2.92 81 1.8 735 3.01 83 1.8 757 3.10
Total Revenues 3,383 100.0 30,751 145.26 3,858 100.0 35,070 152.51 4,283 100.0 38,935 159.21 4,411 100.0 40,097 163.96 4,543 100.0 41,302 168.89
DEPARTMENTAL EXPENSES *
Rooms 663 24.6 6,023 28.45 704 22.7 6,399 27.83 743 21.5 6,752 27.61 765 21.5 6,955 28.44 788 21.5 7,164 29.29
Food & Beverage 462 75.0 4,201 19.84 490 72.1 4,457 19.38 517 70.0 4,698 19.21 532 70.0 4,839 19.79 548 70.0 4,984 20.38
Telephone 21 227.3 188 0.89 22 217.2 199 0.87 23 210.0 210 0.86 24 210.0 216 0.88 24 210.0 223 0.91
Other Expenses 29 43.9 259 1.23 30 41.6 273 1.19 31 40.0 286 1.17 32 40.0 294 1.20 33 40.0 303 1.24
Total 1,174 34.7 10,672 50.41 1,246 32.3 11,329 49.27 1,314 30.7 11,946 48.85 1,354 30.7 12,305 50.32 1,394 30.7 12,674 51.82
DEPARTMENTAL INCOME 2,209 65.3 20,080 94.85 2,612 67.7 23,741 103.24 2,969 69.3 26,989 110.36 3,057 69.3 27,792 113.65 3,149 69.3 28,628 117.07
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 308 9.1 2,801 13.23 322 8.3 2,924 12.71 334 7.8 3,037 12.42 344 7.8 3,127 12.79 354 7.8 3,221 13.17
Marketing 127 3.8 1,153 5.45 131 3.4 1,192 5.19 135 3.1 1,226 5.01 139 3.1 1,263 5.16 143 3.1 1,301 5.32
Franchise Fee 202 6.0 1,835 8.67 232 6.0 2,110 9.18 259 6.1 2,356 9.63 267 6.1 2,426 9.92 275 6.1 2,499 10.22
Prop. Operations & Maint. 138 4.1 1,254 5.92 149 3.9 1,357 5.90 161 3.7 1,460 5.97 165 3.7 1,504 6.15 170 3.7 1,549 6.33
Utilities 186 5.5 1,690 7.98 196 5.1 1,781 7.75 206 4.8 1,869 7.64 212 4.8 1,925 7.87 218 4.8 1,982 8.11
Total 961 28.5 8,734 41.26 1,030 26.7 9,365 40.73 1,094 25.5 9,947 40.67 1,127 25.5 10,245 41.89 1,161 25.5 10,552 43.15
HOUSE PROFIT 1,248 36.8 11,345 53.59 1,581 41.0 14,376 62.52 1,875 43.8 17,042 69.69 1,930 43.8 17,548 71.75 1,988 43.8 18,076 73.92
Management Fee 101 3.0 923 4.36 116 3.0 1,052 4.58 128 3.0 1,168 4.78 132 3.0 1,203 4.92 136 3.0 1,239 5.07
INCOME BEFORE FIXED CHARGES 1,147 33.8 10,423 49.23 1,466 38.0 13,324 57.94 1,746 40.8 15,874 64.91 1,798 40.8 16,345 66.84 1,852 40.8 16,837 68.85
FIXED EXPENSES
Property Taxes 173 5.1 1,575 7.44 176 4.6 1,599 6.95 179 4.2 1,631 6.67 185 4.2 1,680 6.87 190 4.2 1,730 7.07
Insurance 48 1.4 440 2.08 50 1.3 454 1.97 51 1.2 467 1.91 53 1.2 481 1.97 55 1.2 496 2.03
Reserve for Replacement 68 2.0 615 2.91 116 3.0 1,052 4.58 171 4.0 1,557 6.37 176 4.0 1,604 6.56 182 4.0 1,652 6.76
Total 289 8.5 2,631 12.43 341 8.9 3,104 13.50 402 9.4 3,655 14.95 414 9.4 3,765 15.39 427 9.4 3,878 15.86
NET INCOME $857 25.3 % $7,792 $36.81 $1,124 29.1 % $10,220 $44.44 $1,344 31.4 % $12,218 $49.96 $1,384 31.4 % $12,580 $51.44 $1,426 31.4 % $12,959 $52.99

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-9

Table 1-9 Ten-Year Forecast of Income and Expense - First Scenario

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Number of Rooms: 110 110 110 110 110 110 110 110 110 110
Occupied Rooms: 23,287 25,295 26,901 26,901 26,901 26,901 26,901 26,901 26,901 26,901
Occupancy: 58% 63% 67% 67% 67% 67% 67% 67% 67% 67%
Average Rate: $115.60 % of $122.37 % of $128.43 % of $132.28 % of $136.25 % of $140.34 % of $144.55 % of $148.88 % of $153.35 % of $157.95 % of
RevPAR: $67.05 Gross $77.09 Gross $86.05 Gross $88.63 Gross $91.29 Gross $94.02 Gross $96.85 Gross $99.75 Gross $102.74 Gross $105.83 Gross
REVENUE
Rooms $2,692 79.6 % $3,095 80.2 % $3,455 80.7 % $3,558 80.7 % $3,665 80.7 % $3,775 80.7 % $3,888 80.7 % $4,005 80.7 % $4,125 80.7 % $4,249 80.7 %
Food 472 14.0 521 13.5 565 13.2 582 13.2 600 13.2 618 13.2 636 13.2 656 13.2 675 13.2 695 13.2
Beverage 144 4.3 159 4.1 173 4.0 178 4.0 183 4.0 189 4.0 194 4.0 200 4.0 206 4.0 213 4.0
Telephone 9 0.3 10 0.3 11 0.3 11 0.3 12 0.3 12 0.3 12 0.3 13 0.3 13 0.3 14 0.3
Other Income 65 1.9 72 1.9 79 1.8 81 1.8 83 1.8 86 1.8 88 1.8 91 1.8 94 1.8 97 1.8
Total 3,383 100.0 3,858 100.0 4,283 100.0 4,411 100.0 4,543 100.0 4,680 100.0 4,820 100.0 4,965 100.0 5,113 100.0 5,267 100.0
DEPARTMENTAL EXPENSES*
Rooms 663 24.6 704 22.7 743 21.5 765 21.5 788 21.5 812 21.5 836 21.5 861 21.5 887 21.5 914 21.5
Food & Beverage 462 75.0 490 72.1 517 70.0 532 70.0 548 70.0 565 70.0 582 70.0 599 70.0 617 70.0 636 70.0
Telephone 21 227.3 22 217.2 23 210.0 24 210.0 24 210.0 25 210.0 26 210.0 27 210.0 28 210.0 28 210.0
Other Expenses 29 43.9 30 41.6 31 40.0 32 40.0 33 40.0 34 40.0 35 40.0 36 40.0 38 40.0 39 40.0
Total 1,174 34.7 1,246 32.3 1,314 30.7 1,354 30.7 1,394 30.7 1,436 30.7 1,479 30.7 1,523 30.7 1,569 30.7 1,616 30.7
DEPARTMENTAL INCOME 2,209 65.3 2,612 67.7 2,969 69.3 3,057 69.3 3,149 69.3 3,244 69.3 3,341 69.3 3,441 69.3 3,544 69.3 3,651 69.3
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 308 9.1 322 8.3 334 7.8 344 7.8 354 7.8 365 7.8 376 7.8 387 7.8 399 7.8 411 7.8
Marketing 127 3.8 131 3.4 135 3.1 139 3.1 143 3.1 147 3.1 152 3.1 156 3.1 161 3.1 166 3.1
Franchise Fee 202 6.0 232 6.0 259 6.1 267 6.1 275 6.1 283 6.1 292 6.1 300 6.1 309 6.1 319 6.1
Prop. Operations & Maint. 138 4.1 149 3.9 161 3.7 165 3.7 170 3.7 175 3.7 181 3.7 186 3.7 192 3.7 197 3.7
Utilities 186 5.5 196 5.1 206 4.8 212 4.8 218 4.8 225 4.8 231 4.8 238 4.8 245 4.8 253 4.8
Total 961 28.5 1,030 26.7 1,094 25.5 1,127 25.5 1,161 25.5 1,196 25.5 1,231 25.5 1,268 25.5 1,306 25.5 1,346 25.5
HOUSE PROFIT 1,248 36.8 1,581 41.0 1,875 43.8 1,930 43.8 1,988 43.8 2,048 43.8 2,109 43.8 2,173 43.8 2,238 43.8 2,305 43.8
Management Fee 101 3.0 116 3.0 128 3.0 132 3.0 136 3.0 140 3.0 145 3.0 149 3.0 153 3.0 158 3.0
INCOME BEFORE FIXED CHARGES 1,147 33.8 1,466 38.0 1,746 40.8 1,798 40.8 1,852 40.8 1,908 40.8 1,965 40.8 2,024 40.8 2,085 40.8 2,147 40.8
FIXED EXPENSES
Property Taxes 173 5.1 176 4.6 179 4.2 185 4.2 190 4.2 196 4.2 202 4.2 208 4.2 214 4.2 221 4.2
Insurance 48 1.4 50 1.3 51 1.2 53 1.2 55 1.2 56 1.2 58 1.2 60 1.2 61 1.2 63 1.2
Reserve for Replacement 68 2.0 116 3.0 171 4.0 176 4.0 182 4.0 187 4.0 193 4.0 199 4.0 205 4.0 211 4.0
Total 289 8.5 341 8.9 402 9.4 414 9.4 427 9.4 439 9.4 453 9.4 466 9.4 480 9.4 495 9.4
NET INCOME $857 25.3 % $1,124 29.1 % $1,344 31.4 % $1,384 31.4 % $1,426 31.4 % $1,468 31.4 % $1,512 31.4 % $1,558 31.4 % $1,604 31.4 % $1,653 31.4 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-10

Our forecast of income and expense for the second scenario is presented in
the following table.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-11

Table 1-10 Detailed Forecast of Income and Expense Second Scenario

2011/12 Begins April 2012/13 Stabilized 2014/15 2015/16

Number of Rooms: 110 110 110 110 110
Oc cupancy : 60% 65% 70% 70% 70%
Average Rate: $111.40 $117.92 $123.76 $127.47 $131.29
RevPAR: $66.84 $76.65 $86.63 $89.23 $91.91
Days Open: 365 365 365 365 365
Oc cupied Rooms: 24,090 %Gross PAR P OR 26,098 %Gross PAR POR 28,105 %Gross PAR POR 28,105 %Gross PAR POR 28,105 %Gross PAR POR
REVENUE
Rooms $2,684 73.7 % $24,400 $111.42 $3,077 74.4 % $27,973 $117.90 $3,478 75.0 % $31,618 $123.75 $3,583 75.0 % $32,573 $127.49 $3,690 75.0 % $33,545 $131.29
Food 680 18.6 6,178 28.21 748 18.1 6,803 28.67 821 17.7 7,460 29.20 845 17.7 7,684 30.07 871 17.7 7,914 30.97
Beverage 190 5.2 1,730 7.90 210 5.1 1,905 8.03 230 5.0 2,089 8.18 237 5.0 2,151 8.42 244 5.0 2,216 8.67
Telephone 9 0.3 86 0.39 10 0.3 95 0.40 11 0.2 104 0.41 12 0.2 108 0.42 12 0.2 111 0.43
Other Inc ome 81 2.2 735 3.36 89 2.2 813 3.43 98 2.1 895 3.50 101 2.1 922 3.61 104 2.1 950 3.72
Total Revenues 3,644 100.0 33,129 151.27 4,135 100.0 37,588 158.43 4,638 100.0 42,166 165.03 4,778 100.0 43,437 170.01 4,921 100.0 44,736 175.09
DEPARTMENTAL EXPENSES *
Rooms 665 24.8 6,042 27.59 705 22.9 6,412 27.03 748 21.5 6,798 26.61 770 21.5 7,002 27.41 793 21.5 7,212 28.23
Food & Beverage 590 67.8 5,360 24.48 625 65.2 5,681 23.94 662 63.0 6,016 23.54 682 63.0 6,196 24.25 702 63.0 6,382 24.98
Telephone 22 228.6 196 0.90 23 218.7 207 0.87 24 210.0 219 0.86 25 210.0 226 0.88 26 210.0 233 0.91
Other Expenses 36 44.1 324 1.48 38 41.9 341 1.44 39 40.0 358 1.40 41 40.0 369 1.44 42 40.0 380 1.49
Total 1,312 36.0 11,923 54.44 1,390 33.6 12,641 53.28 1,473 31.8 13,391 52.41 1,517 31.8 13,793 53.98 1,563 31.8 14,207 55.60
DEPARTMENTAL INCOME 2,333 64.0 21,206 96.83 2,744 66.4 24,948 105.15 3,165 68.2 28,775 112.62 3,261 68.2 29,644 116.02 3,358 68.2 30,529 119.49
UNDISTRIBUTED OP ERATING EXPENSES
Administrative & General 337 9.3 3,067 14.00 352 8.5 3,197 13.48 366 7.9 3,328 13.03 377 7.9 3,428 13.42 388 7.9 3,531 13.82
Marketing 157 4.3 1,426 6.51 162 3.9 1,473 6.21 167 3.6 1,518 5.94 172 3.6 1,564 6.12 177 3.6 1,611 6.30
Franchise Fee 201 5.5 1,830 8.36 231 5.6 2,098 8.84 261 5.6 2,371 9.28 269 5.6 2,443 9.56 277 5.6 2,516 9.85
Prop. Operations & Maint. 149 4.1 1,353 6.18 161 3.9 1,462 6.16 173 3.7 1,577 6.17 179 3.7 1,624 6.36 184 3.7 1,673 6.55
Utilities 203 5.6 1,846 8.43 214 5.2 1,944 8.19 225 4.8 2,044 8.00 232 4.8 2,105 8.24 239 4.8 2,168 8.49
Total 1,047 28.8 9,523 43.48 1,119 27.1 10,173 42.88 1,192 25.6 10,838 42.42 1,228 25.6 11,164 43.70 1,265 25.6 11,499 45.00
HOUSE PROFIT 1,285 35.2 11,683 53.35 1,625 39.3 14,774 62.27 1,973 42.6 17,937 70.20 2,033 42.6 18,480 72.33 2,093 42.6 19,031 74.48
Management Fee 109 3.0 994 4.54 124 3.0 1,128 4.75 139 3.0 1,265 4.95 143 3.0 1,303 5.10 148 3.0 1,342 5.25
INCOME BEFORE FIX ED CHARGES 1,176 32.2 10,689 48.81 1,501 36.3 13,647 57.52 1,834 39.6 16,672 65.25 1,889 39.6 17,177 67.23 1,946 39.6 17,689 69.23
FIXED EXPENSES
Property Taxes 173 4.8 1,575 7.19 176 4.3 1,599 6.74 179 3.9 1,631 6.38 185 3.9 1,680 6.57 190 3.9 1,730 6.77
Insurance 61 1.7 550 2.51 62 1.5 567 2.39 64 1.4 584 2.29 66 1.4 601 2.35 68 1.4 619 2.42
Reserve for Replacement 73 2.0 663 3.03 124 3.0 1,128 4.75 186 4.0 1,687 6.60 191 4.0 1,737 6.80 197 4.0 1,789 7.00
Total 307 8.5 2,788 12.73 362 8.8 3,293 13.88 429 9.3 3,901 15.27 442 9.3 4,019 15.73 455 9.3 4,139 16.20
NET INCOME $869 23.7 % $7,901 $36.08 $1,139 27.5 % $10,353 $43.64 $1,405 30.3 % $12,770 $49.98 $1,447 30.3 % $13,158 $51.50 $1,490 30.3 % $13,549 $53.03

*Departmental expenses a re expressed as a percentage of departme ntal revenues.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-12

Table 1-11 Ten-Year Forecast of Income and Expense - Second Scenario

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Number of Rooms: 110 110 110 110 110 110 110 110 110 110
Occupied Rooms: 24,090 26,098 28,105 28,105 28,105 28,105 28,105 28,105 28,105 28,105
Occupancy: 60% 65% 70% 70% 70% 70% 70% 70% 70% 70%
Average Rate: $111.40 % of $117.92 % of $123.76 % of $127.47 % of $131.29 % of $135.23 % of $139.29 % of $143.47 % of $147.77 % of $152.21 % of
RevPAR: $66.84 Gross $76.65 Gross $86.63 Gross $89.23 Gross $91.91 Gross $94.66 Gross $97.50 Gross $100.43 Gross $103.44 Gross $106.54 Gross
REVENUE
Rooms $2,684 73.7 % $3,077 74.4 % $3,478 75.0 % $3,583 75.0 % $3,690 75.0 % $3,801 75.0 % $3,915 75.0 % $4,032 75.0 % $4,153 75.0 % $4,278 75.0 %
Food 680 18.6 748 18.1 821 17.7 845 17.7 871 17.7 897 17.7 924 17.7 951 17.7 980 17.7 1,009 17.7
Beverage 190 5.2 210 5.1 230 5.0 237 5.0 244 5.0 251 5.0 259 5.0 266 5.0 274 5.0 283 5.0
Telephone 9 0.3 10 0.3 11 0.2 12 0.2 12 0.2 13 0.2 13 0.2 13 0.2 14 0.2 14 0.2
Other Income 81 2.2 89 2.2 98 2.1 101 2.1 104 2.1 108 2.1 111 2.1 114 2.1 118 2.1 121 2.1
Total 3,644 100.0 4,135 100.0 4,638 100.0 4,778 100.0 4,921 100.0 5,069 100.0 5,221 100.0 5,377 100.0 5,538 100.0 5,705 100.0
DEPARTMENTAL EXPENSES*
Rooms 665 24.8 705 22.9 748 21.5 770 21.5 793 21.5 817 21.5 842 21.5 867 21.5 893 21.5 920 21.5
Food & Beverage 590 67.8 625 65.2 662 63.0 682 63.0 702 63.0 723 63.0 745 63.0 767 63.0 790 63.0 814 63.0
Telephone 22 228.6 23 218.7 24 210.0 25 210.0 26 210.0 26 210.0 27 210.0 28 210.0 29 210.0 30 210.0
Other Expenses 36 44.1 38 41.9 39 40.0 41 40.0 42 40.0 43 40.0 44 40.0 46 40.0 47 40.0 48 40.0
Total 1,312 36.0 1,390 33.6 1,473 31.8 1,517 31.8 1,563 31.8 1,610 31.8 1,658 31.8 1,708 31.8 1,759 31.8 1,812 31.8
DEPARTMENTAL INCOME 2,333 64.0 2,744 66.4 3,165 68.2 3,261 68.2 3,358 68.2 3,459 68.2 3,563 68.2 3,669 68.2 3,780 68.2 3,893 68.2
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 337 9.3 352 8.5 366 7.9 377 7.9 388 7.9 400 7.9 412 7.9 424 7.9 437 7.9 450 7.9
Marketing 157 4.3 162 3.9 167 3.6 172 3.6 177 3.6 182 3.6 188 3.6 194 3.6 199 3.6 205 3.6
Franchise Fee 201 5.5 231 5.6 261 5.6 269 5.6 277 5.6 285 5.6 294 5.6 302 5.6 311 5.6 321 5.6
Prop. Operations & Maint. 149 4.1 161 3.9 173 3.7 179 3.7 184 3.7 190 3.7 195 3.7 201 3.7 207 3.7 213 3.7
Utilities 203 5.6 214 5.2 225 4.8 232 4.8 239 4.8 246 4.8 253 4.8 261 4.8 268 4.8 276 4.8
Total 1,047 28.8 1,119 27.1 1,192 25.6 1,228 25.6 1,265 25.6 1,303 25.6 1,342 25.6 1,382 25.6 1,424 25.6 1,466 25.6
HOUSE PROFIT 1,285 35.2 1,625 39.3 1,973 42.6 2,033 42.6 2,093 42.6 2,156 42.6 2,221 42.6 2,287 42.6 2,356 42.6 2,427 42.6
Management Fee 109 3.0 124 3.0 139 3.0 143 3.0 148 3.0 152 3.0 157 3.0 161 3.0 166 3.0 171 3.0
INCOME BEFORE FIXED CHARGES 1,176 32.2 1,501 36.3 1,834 39.6 1,889 39.6 1,946 39.6 2,004 39.6 2,064 39.6 2,126 39.6 2,190 39.6 2,256 39.6
FIXED EXPENSES
Property Taxes 173 4.8 176 4.3 179 3.9 185 3.9 190 3.9 196 3.9 202 3.9 208 3.9 214 3.9 221 3.9
Insurance 61 1.7 62 1.5 64 1.4 66 1.4 68 1.4 70 1.4 72 1.4 74 1.4 77 1.4 79 1.4
Reserve for Replacement 73 2.0 124 3.0 186 4.0 191 4.0 197 4.0 203 4.0 209 4.0 215 4.0 222 4.0 228 4.0
Total 307 8.5 362 8.8 429 9.3 442 9.3 455 9.3 469 9.3 483 9.3 498 9.3 512 9.3 528 9.3
NET INCOME $869 23.7 % $1,139 27.5 % $1,405 30.3 % $1,447 30.3 % $1,490 30.3 % $1,535 30.3 % $1,581 30.3 % $1,629 30.3 % $1,677 30.3 % $1,728 30.3 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-13

As illustrated, the hotel is expected to stabilize at a profitable level under both

scenarios. Please refer to the Forecast of Income and Expense chapter of our
report for a detailed explanation of the methodology used in deriving these
forecasts.

Feasibility Conclusion Detailed construction budgets for the two scenarios were not prepared under
the scope of this assignment. It is our general opinion that the total project
cost of the first scenario should fall at or below the net present value result;
thus, this confirms the feasibility of the hotel-only scenario. The total project
cost would likely need to include the costs associated with the land, as well as
a designated entrepreneurial profit. In contrast, it is our general opinion that
the total project cost of the second scenario would fall somewhat above the
net present value result; thus, the hotel-and-conference-center scenario is not
considered feasible at this time.

Intended Use of the This feasibility report is being prepared for use in the development of the
Feasbility Study proposed subject property.

Identification of the The client for this engagement is The City of Alton, Illinois. This report is
Client and Intended intended for the addressee firm, and may not be distributed to or relied upon
User(s) by other persons or entities.

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

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Executive Summary 1-14

1. All information was collected and analyzed by the staff of TS Worldwide,

LLC. Information was supplied by the client and/or the propertys
development team.
2. The subject site has been evaluated from the viewpoint of its physical
utility for the future operation of a hotel, as well as access, visibility, and
other relevant factors.
3. The subject property's proposed improvements have been reviewed for
their expected quality of construction, design, and layout efficiency.
4. The surrounding economic environment, on both an area and
neighborhood level, has been reviewed to identify specific hostelry-
related economic and demographic trends that may have an impact on
future demand for hotels.
5. Dividing the market for hotel accommodations into individual segments
defines specific market characteristics for the types of travelers expected to
utilize the area's hotels. The factors investigated include purpose of visit,
average length of stay, facilities and amenities required, seasonality, daily
demand fluctuations, and price sensitivity.
6. An analysis of existing and proposed competition provides an indication
of the current accommodated demand, along with market penetration
and the degree of competitiveness. Unless noted otherwise, we have
inspected the competitive lodging facilities summarized in this report.
7. Documentation for an occupancy and average rate projection is derived
utilizing the build-up approach based on an analysis of lodging activity.
8. A detailed projection of income and expense made in accordance with the
Uniform System of Accounts for the Lodging Industry sets forth the
anticipated economic benefits of the subject property.
9. A feasibility analysis is performed that compares the net present value of
the forecast cash flows to the development cost of the hotel.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Site and Neighborhood 2-1

2. Description of the Site and Neighborhood

The suitability of the land for the operation of a lodging facility is an

important consideration affecting the economic viability of a property and its
ultimate marketability. Factors such as size, topography, access, visibility, and
the availability of utilities have a direct impact on the desirability of a
particular site.

The subject site will be located in the downtown district of Alton, Illinois;
however, the specific site has yet to be determined. A potential site on
Landmarks Boulevard is currently being considered and investigated by the
City of Alton, but no land has been purchased and no plans have been
finalized. As such, while we have inspected this potential site and considered
it in our analysis, the recommendations and results of this report are not
contingent upon that location. This site is in the city of Alton, Illinois.

Physical Considerations in selecting a subject site should include adequate vehicular

Characteristics access to and from adjacent roadways, as well as the site topography. We
note that many parcels in Downtown Alton, including the potential site
identified by the City, are significantly sloped. Development of a sloped site
may incur additional costs related to grading or atypical design and
construction.

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

Access and Visibility It is important to analyze the site in regard to ease of access with respect to
regional and local transportation routes and demand generators. We
anticipate that the subject site will be readily accessible to a variety of local,
county, state, and interstate highways.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Site and Neighborhood 2-2

Map of Regional Access Routes

Primary regional access through the area is provided by east/west Interstate

70, which extends to such cities as Indianapolis, Indiana to the northeast and
Kansas City, Missouri to the west. North/south Interstate 55 is another major
Interstate, which provides access to such cities as Springfield, Illinois to the
north and Memphis, Tennessee to the south. East/west Interstate 64 traverses
the St. Louis area, providing access to cities such as Chesterfield to the west
and Louisville, Kentucky to the east. Interstates 270 and 255 form a loop
around the St. Louis metro area. We note that Interstate 255 has been
extended north from its intersection with Interstate 270 during the last three
years, and current plans call for extending it to U.S. Highway 67, just north of
Alton. The subject market is served by a variety of additional local highways,
which are illustrated on the map.

From Interstate 270, motorists exit onto northbound State Highway 367,
which merges with and becomes U.S. Highway 67. Motorists proceed north

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Site and Neighborhood 2-3

on this thoroughfare approximately ten miles, traveling over the Lewis and
Clark Bridges, which span the Missouri and Mississippi Rivers, respectively.
U.S. Highway 67 leads directly into Downtown Alton, where it is locally
known as Landmarks Boulevard. We note that Landmarks Boulevard is part
of the Meeting of the Great Rivers National Scenic Byway. The subject site
should be located proximate to Landmarks Boulevard, and direct access to
and from the thoroughfare would be optimal. The proposed subject property
is expected to have adequate signage at the street, as well as on its faade;
thus, the proposed hotel should benefit from very good visibility and
accessibility from within its local neighborhood. In terms of regional access,
the proposed subject property's Alton location is considered fair in
comparison to other municipalities in the St. Louis region that benefit from
more central locations and/or superior interstate access. Following its
anticipated completion in 2011, the planned extension of Interstate 255 should
improve regional access to the Alton area.

Airport Access The proposed subject property will be well served by the Lambert-St. Louis
International Airport, which is located approximately 13 miles to the
southwest of Downtown Alton. From the airport, motorists will follow signs
to Interstate 270 and travel east on this thoroughfare to State Highway 367,
continuing to the proposed subject property as previously noted.

Neighborhood The neighborhood surrounding a lodging facility often has an impact on a

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

The proposed subject property's neighborhood is generally defined by Union

Street to the north, Washington Avenue to the west, the Mississippi River to
the south, and Belle Street to the east. In general, this neighborhood is in the
revitalization stage of its life cycle, with pockets of redevelopment occurring
in the retail and residential sectors. Additionally, in 2008, a new open-air
amphitheatre was constructed along the bank of the Mississippi River, in
River Front Park. Within the downtown area, there is a mix of commercial
and residential land uses. The neighborhood is characterized by restaurants,
antique shops, boutiques, a casino, a marina, a business park, and a significant
number of single-family homes.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Site and Neighborhood 2-4

Some specific businesses in the area include the Argosy Casino, Alton Marina,
Imperial Manufacturing Group, and American Waterworks. During the last
few years, redevelopment projects including Mississippi Landing, the Laura
Lofts, and the Lincoln Lofts have transformed aging historic buildings into
revitalized residential and retail spaces. Additional redevelopment projects
for the area are reportedly in the planning stages. In general, we would
characterize the neighborhood as 35% restaurant/retail/office use, 35%
residential use, 5% vacant, 5% light industrial use, 10% parks and green
space, and 10% other. The proposed subject property's opening should be a
positive influence on the area; the hotel should be designed to complement
the quaint, historic nature of many of the surrounding buildings.

Map of Neighborhood

Overall, the supportive nature of the development in the immediate area is

considered appropriate for and conducive to the operation of a hotel.

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HVS Consulting and Valuation Services Description of the Site and Neighborhood 2-5

Utilities The subject site will reportedly be served by all necessary utilities. We assume
that these will be acquired from the most cost-effective providers within the
local market.

Soil and Geological and soil reports for the site were not available, given that the
Subsoil Conditions location of the proposed subject property has not yet been determined. We
have assumed that no extraordinary soil conditions will be present at the
subject site.

Nuisances We have assumed that no extraordinary nuisances or hazards will be present

and Hazards at the subject site.

Zoning We assume that all necessary permits and approvals will be secured
(including an appropriate liquor license if applicable) and that the subject
property will be constructed in accordance with local zoning ordinances,
building codes, and all other applicable regulations.

Easements and We have assumed that the subject site will not be impacted be any
Encroachments extraordinary easements or encroachments that would affect the utility of the
site or marketability of this project.

Conclusion We have analyzed the issues of size, topography, access, visibility, and the
availability of utilities. The area that has been selected for the subject site is
located near many attractions on the Mississippi River, as well as the shops
and restaurants of Downtown Alton. In general, a site in this area should be
well suited for future hotel use, with acceptable access, visibility, and
topography for an effective operation.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-1

3. Market Area Analysis

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

Market Area Definition The market area for a lodging facility is the geographical region where the
sources of demand and the competitive supply are located. The proposed
subject property will be located in the city of Alton, the county of Madison,
and the state of Illinois. Located near the confluence of the Illinois, Missouri,
and Mississippi Rivers, the City of Alton is part of the greater St. Louis area,
which has long been a regional center for commerce and transportation. The
St. Louis area was originally settled by French fur traders in the mid 1700s,
prior to being transferred into Spanish and then American possession.
Throughout the 1800s, the area grew and thrived as a major port for
steamboats plying the waterways of the Midwest. Today, the metropolitan
area continues to serve as an economic hub for the Midwest and is home to 21
of the Fortune 1000 companies. Throughout the last few decades, the metro
area has steadily expanded westward; however, development and expansion
have recently increased toward the east and in Illinois. The City of Alton,
located in the northeast section of the metro area, was established on the
banks of the Mississippi as a center for river-based trade. In the 19th and 20th
centuries, the Alton economy grew with the establishment of manufacturing
industries in the area. During the last several decades, many of the area's
manufacturing operations downsized or closed, negatively impacting the
area. However, in the wake of this decline, the city's economic focus has

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-2

shifted once again toward the river. The designation of a national scenic
byway through the area and the development of a marina, a museum, and a
network of bike and walking trials along the riverfront has helped revitalize
the local economy through tourism.

The proposed subject propertys market area can be defined by its

Metropolitan Statistical Area (MSA): St. Louis, MO-IL MSA. The MSA is the
most standard definition used in comparative studies of metropolitan areas.
The federal government defines an MSA as a large population nucleus,
which, together with adjacent counties, has a higher degree of social
integration. The following exhibit illustrates the market area.

Map of Market Area

Illinois Overview Illinois is located in the Midwest United States, spanning 55,593 square miles.
It borders Wisconsin to the north, Indiana to the east, Kentucky to the
southeast, Missouri and Iowa to the west, and Lake Michigan at the northeast

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-3

corner. The Mississippi River forms a natural western boundary. Two

additional rivers, the Wabash and the Ohio, border Illinois to the southeast
and converge before merging with the Mississippi River at the southern tip of
the state. Interstates 55 and 57 extend in a north/south direction through the
state, while Interstates 70 and 80 are primary east/west thoroughfares.

The state capital of Illinois is Springfield, located in the central part of the
state. Illinois is home to many of the nations largest companies. Motorola,
Sara Lee, and Amoco are just a few of the many companies represented
throughout the state. Illinois is also home to Chicago, the third largest city in
the United States.

Economic and A primary source of economic and demographic statistics used in this analysis
Demographic Review 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.

We note that the Woods & Poole forecasts have not been adjusted to take into
consideration the current downturn in the national economy or the recent
increases in unemployment. These factors will affect the economy and
employment levels, and thus the lodging market, in the near term; however,
given the cyclical nature of economic activity, the growth trends on which the
forecasts are predicated are expected to be sustained over the long term.
These data are summarized in the following table.

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HVS Consulting and Valuation Services Market Area Analysis 3-4

Table 3-1 Economic and Demographic Data Summary

Average Annual
Compounded Change
1990 2000 2008 2015 1990-00 2000-08 2008-15

Resident Population (Thousands)

Madison County 249.7 259.1 267.5 269.5 0.4 % 0.4 % 0.1 %
St. Louis, MO-IL MSA 2,604.7 2,724.5 2,839.9 2,932.3 0.5 0.5 0.5
St. Louis-St. Charles-Farmington, MO-IL CSA 2,653.7 2,780.2 2,903.4 3,000.8 0.5 0.5 0.5
State of Illinois 11,453.3 12,439.2 12,919.1 13,418.9 0.8 0.5 0.5
United States 249,622.8 282,194.3 304,579.4 326,038.5 1.2 1.0 1.0
Per-Capita Personal Income*
Madison County $24,073 $28,615 $30,596 $33,506 1.7 0.8 1.3
St. Louis, MO-IL MSA $27,248 $33,697 $35,887 $39,531 2.1 0.8 1.4
St. Louis-St. Charles-Farmington, MO-IL CSA $27,047 $33,452 $35,587 $39,182 2.1 0.8 1.4
State of Illinois $28,039 $34,887 $36,668 $40,194 2.2 0.6 1.3
United States $26,226 $32,350 $35,005 $38,039 2.1 1.0 1.2
W&P Wealth Index
Madison County 91.0 101.2 91.9 93.7 1.1 (1.2) 0.3
St. Louis, MO-IL MSA 104.4 104.7 103.6 104.6 0.0 (0.1) 0.1
St. Louis-St. Charles-Farmington, MO-IL CSA 103.7 103.9 102.7 103.7 0.0 (0.1) 0.1
State of Illinois 106.4 108.3 105.7 106.4 0.2 (0.3) 0.1
United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Total Retail Sales (Millions)*
Madison County $2,082 $2,629 $2,912 $3,134 2.4 1.3 1.1
St. Louis, MO-IL MSA $24,225 $31,663 $34,941 $38,595 2.7 1.2 1.4
St. Louis-St. Charles-Farmington, MO-IL CSA $24,606 $32,219 $35,606 $39,365 2.7 1.3 1.4
State of Illinois $104,265 $138,048 $152,320 $169,812 2.8 1.2 1.6
United States $2,295,496 $3,184,392 $3,649,917 $4,196,092 3.3 1.7 2.0

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-5

The U.S. population has grown at an average annual compounded rate of

1.0% from 2000 through 2008. The countys population has grown more
slowly than the nations population; the average annual growth rate of 0.4%
between 2000 and 2008 reflects a gradually expanding area. Following this
population trend, per-capita personal income increased slowly, at 0.8% on
average annually for the county between 2000 and 2008. Local wealth indexes
have remained stable in recent years, registering a relatively modest 91.9 level
for the county in 2008.

Retail sales totaled $479.3 million in the county in 2008, versus $433.9 million
in 2000. This represents an average annual change of 1.3%. A modestly slower
1.1% average annual change is expected in county retail sales through 2015.

Workforce The characteristics of an area's workforce provide an indication of the type

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

The following table sets forth the county workforce distribution by business
sector in 1990, 2000, and 2008, as well as a forecast for 2015.

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HVS Consulting and Valuation Services Market Area Analysis 3-6

Table 3-2 Historical and Projected Employment (000s)

Average Annual
Compounded Change
Percent Percent Percent Percent
Industry 1990 of Total 2000 of Total 2008 of Total 2015 of Total 1990-2000 2000-2008 2008-2015

Farm 1.9 1.6 % 1.6 1.3 % 1.5 1.1 % 1.5 1.1 % (1.3) % (1.2) % 0.5 %
Forestry, Fishing, Related Activities And Other 0.1 0.1 0.1 0.1 0.2 0.1 0.2 0.1 4.8 2.2 0.7
Mining 0.4 0.4 0.4 0.3 0.3 0.2 0.3 0.2 (0.8) (3.0) 0.4
Utilities 0.4 0.3 0.4 0.3 0.4 0.3 0.4 0.3 0.8 (0.1) 0.6
Construction 7.7 6.8 8.5 6.8 10.0 7.7 10.9 7.9 1.1 2.1 1.1
Manufacturing 22.6 20.0 21.0 16.8 14.0 10.7 12.9 9.4 (0.7) (4.9) (1.2)
Total Trade 16.3 14.4 18.4 14.8 20.4 15.6 21.5 15.7 1.2 1.3 0.8
Wholesale Trade 3.4 3.0 3.3 2.6 3.7 2.8 3.7 2.7 (0.5) 1.5 0.1
Retail Trade 12.9 11.4 15.1 12.1 16.7 12.8 17.8 13.0 1.6 1.2 0.9
Transportation And Warehousing 4.3 3.8 4.7 3.7 5.6 4.3 6.2 4.5 0.8 2.2 1.4
Information 1.2 1.1 1.3 1.0 1.3 1.0 1.3 1.0 0.9 (0.2) 0.3
Finance And Insurance 4.2 3.7 4.9 3.9 5.5 4.2 5.8 4.2 1.5 1.4 0.9
Real Estate And Rental And Lease 2.6 2.3 3.1 2.5 4.8 3.7 5.5 4.0 1.5 5.6 2.0
Professional And Technical Services 3.9 3.5 4.8 3.9 6.4 4.9 7.3 5.3 2.0 3.6 2.0
Management Of Companies And Enterprises 0.2 0.2 0.2 0.2 0.3 0.2 0.2 0.2 2.0 3.4 (1.5)
Administrative And Waste Services 3.1 2.7 3.7 3.0 5.0 3.8 5.6 4.1 1.8 3.8 1.6
Educational Services 1.0 0.8 1.2 0.9 1.5 1.1 1.7 1.3 2.0 2.8 2.4
Health Care And Social Assistance 11.3 10.0 13.8 11.0 14.7 11.3 16.1 11.7 2.0 0.8 1.3
Arts, Entertainment, And Recreation 3.1 2.7 3.7 3.0 3.5 2.7 3.5 2.5 1.9 (0.8) 0.1
Accommodation And Food Services 7.1 6.3 8.6 6.9 9.6 7.4 10.4 7.5 1.9 1.5 1.0
Other Services, Except Public Administration 6.0 5.3 7.4 5.9 9.0 6.9 10.1 7.3 2.1 2.5 1.6
Total Government 16.0 14.1 17.0 13.6 16.6 12.7 15.9 11.6 0.6 (0.3) (0.7)
Federal Civilian Government 0.7 0.6 0.8 0.6 0.6 0.5 0.7 0.5 1.0 (2.5) 0.3
Federal Military 0.9 0.8 0.6 0.5 0.5 0.4 0.5 0.4 (4.3) (1.6) 0.1
State And Local Government 14.3 12.6 15.6 12.5 15.5 11.9 14.7 10.7 0.9 (0.1) (0.7)

TOTAL 113.3 100.0 % 124.8 100.0 % 130.5 100.0 % 137.3 100.0 % 1.0 % 0.6 % 0.7 %

MSA 1,488.8 1,673.7 1,773.1 1,906.7 1.2 % 0.7 % 1.0 %

U.S. 139,380.8 166,758.7 182,657.7 198,640.3 1.5 1.1 1.2

Source: Woods & Poole Economics, Inc.

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HVS Consulting and Valuation Services Market Area Analysis 3-7

Woods & Poole Economics, Inc. reports that the most significant employment
sector in this area is the Total Trade industry. In 2008, this sector represented
15.6% of total employment. This source reports that between 2000 and 2008,
the most significant employment growth occurred in the Total Trade sector.
During this time frame, Total Trade employment increased by 1,200 persons.
Woods & Poole forecasts indicate expected employment growth at a rate of
0.7% annually through 2015, while the rate of change for national
employment is forecast at 1.2% during the same time period.

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

Table 3-3 Major Employers

Number of
Rank Firm Employees

1 Olin Corporation 1,800

2 Global Brass and Copper 1,500
3 Saint Anthony's Health Center 928
4 Alton Memorial Hospital 866
5 Conoco Phillips Refinery 809
6 Alton Community Unit School District 803
7 Argosy Casino 700
8 Lewis and Clark Community College 577
9 Beverly Farm 470
10 American Water 460

Source: River Bend Growth Association

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

The Olin Corporation, a Fortune 1000 company that is based in St. Louis,
is the largest employer for the Alton area. Its subsidiary, Winchester
Ammunition, is headquartered in East Alton. The company produces
cartridges and ammunition for the United States military, as well as for
law enforcement, industrial use, and public sale. In January of 2009,
Winchester reported fourth-quarter 2008 revenues of $121.4 million, up
from $102.7 million for the same quarter in 2007. Formerly owned by the
Olin Corporation, Global Brass and Copper is also located in East Alton; it

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HVS Consulting and Valuation Services Market Area Analysis 3-8

was purchased by a private equity fund in 2007. The company is among

the world's leading developers and producers of high-performance
copper alloys for use in automotive, housing, electronics, coin, and
ammunition applications. We note that since the change of ownership,
and concurrent with the national economic slowdown, the company has
reportedly reduced its labor force.
BJC HealthCare is one of the largest non-profit healthcare organizations in
the United States, delivering services to residents primarily in the greater
St. Louis, southern Illinois and mid-Missouri regions. The organization,
which is the largest employer in the greater St. Louis area, operates Alton
Memorial Hospital. The hospital is currently undergoing a 78,000-square-
foot, $45-million expansion. Scheduled for completion in 2010, the new
wing will provide 78 additional patient rooms. Additionally, a new
privately owned and operated, supportive-living facility opened on the
hospital's campus in 2008. Glenhaven Gardens, which was constructed at
a cost of approximately $9.2 million, includes 92 apartments and various
community areas.
ConocoPhillips operates a crude-oil refinery in nearby Roxana. In
September of 2008, the company began work on a $2-billion expansion of
the facility that will increase its daily processing capacity by an estimated
60,000 barrels of oil to a total of approximately 300,000 barrels. The project
is expected to be completed in 2011 and, in the meantime, draw at least
1,500 temporary workers to the area from across the country. When
complete, the expansion is expected to increase ConocoPhillips' local
workforce by approximately 100 workers. Several area operations that
work closely with ConocoPhillips, including Cope Plastics, Marathon Oil
Company, and Fabritech, are expanding their facilities as well.
In contrast to recent national and regional economic trends, this market
continues to benefit from growth and development. The previously
mentioned expansions at Alton Memorial Hospital and the ConocoPhillips
refinery have helped offset the impact of local downsizing in the
manufacturing sector and weakened national and regional economies.
Additionally, the recent extension of Interstate 255 to Seminary Road and the
ongoing construction of the National Great Rivers Research Center are
positively impacting the market. The further expansion of Interstate 255
through the Alton area was reportedly granted funding from the American
Recovery and Reinvestment Act, and construction is expected to begin in
2009. Overall, the outlook for the market is positive, and growth is
anticipated for the foreseeable future.

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HVS Consulting and Valuation Services Market Area Analysis 3-9

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

Table 3-4 Unemployment Statistics

City of
Year Alton MSA Illinois U.S.
1999 6.0 % 3.5 % 4.5 % 4.2 %
2000 5.6 3.5 4.5 4.0
2001 6.6 4.6 5.4 4.7
2002 7.4 5.4 6.5 5.8
2003 8.4 5.8 6.7 6.0
2004 8.1 6.0 6.2(d) 5.5
2005 7.3 5.6 5.8(d) 5.1
2006 6.5 5.1 4.6(d) 4.6
2007 7.2 5.7 5.1(d) 4.6
2008 8.7 6.7 6.5(d) 5.8
Recent Month - January
2008 8.1 % 6.4 % 6.3(d) % 4.9 %
2009 10.8(p) 9.1(p) 8.5 7.6

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

The national unemployment rate was 4.6% in 2007, reflecting no overall

change from 2006. During the first half of 2007, the national unemployment
rate was below that of the corresponding period in 2006; however, 2007
unemployment rates rose for the months of September through December to
levels higher than those of the corresponding months in 2006. This trend
continued into 2008, with the unemployment rate posting increases during
most months, ending at 7.2% in December of 2008, compared to 4.9% in
January of that year; nationwide, the average unemployment rate was 5.8%
for 2008. In the year-to-date period, unemployment has continued to rise,
with significant increases noted in select economic sectors. Most economists
anticipate that the national unemployment rate will continue to rise through
at least mid-year 2009 and remain heightened into 2010. Locally, the
unemployment rate was 8.7% in 2008; for this same area in 2009, the most
recent months unemployment rate was registered at 10.8(p)%, versus 8.1%
for the same month in 2008.

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HVS Consulting and Valuation Services Market Area Analysis 3-10

Unemployment rates in the Alton area have fluctuated during the historical
period shown but have remained relatively high in comparison to regional,
state-wide, and national levels. These comparatively high levels are a direct
result of the challenges witnessed within the local manufacturing industries.
Despite this trend, employment has remained strong at such entities as Lewis
and Clark Community College and American Water. Additionally, the
ongoing expansions at ConocoPhillips and Alton Memorial hospital are
expected to positively impact employment going forward. Our interviews
with local economic development officials reflect a promising outlook for the
area.

Convention Activity A convention center serves as a gauge of visitation trends to a particular

market. Convention centers also generate significant levels of demand for
area hotels and serve as a focal point for community activity. Typically, hotels
within the closest proximity to a convention center up to three miles away
will benefit the most. Hotels serving as headquarters for an event benefit the
most by way of premium rates and hosting related banquet events. During
the largest of conventions, peripheral hotels may benefit from compression
within the city as a whole.

America's Center, which includes the St. Louis Executive Conference Center
and the Edward Jones Dome, is the region's primary conference and
convention venue. Originally constructed in 1977 as the Cervantes
Convention Center, the center was expanded in 1993 and now provides more
than 500,000 square feet of prime exhibit space. The Edward Jones Dome, a
convention facility and stadium that was formerly called the Trans World
Dome, seats over 64,000 people and was constructed in 1995 following the
demolition of a Sheraton Hotel, which had previously occupied the site. The
St. Louis Executive Conference Center is located on the third floor of the
America's Center. It is reportedly the only conference center in the U.S. that is
located inside a convention center and that has also been certified by the
International Association of Conference Centers.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-11

Convention Center

The following table illustrates recent use statistics for this facility.

Table 3-5 Convention Center Statistics

Percent Percent
Year Number of Conventions Change Number of Delegates Change

2001 31 261,313
2002 28 (9.7) % 219,278 (16.1) %
2003 35 25.0 243,625 11.1
2004 34 (2.9) 207,599 (14.8)
2005 41 20.6 245,477 18.2
2006 56 36.6 277,038 12.9
2007 55 (1.8) 253,324 (8.6)
2008 45 (18.2) 274,935 8.5

Source: America's Center

We note that the subject market rarely captures demand from events held at
America's Center; however, we have included usage statistics for the facility
as a point of reference. Within the subject market, there are a number of
small and mid-sized event facilities, most of which are affiliated with area
restaurants, associations, or educational institutions. Usages statistics for
these facilities were not available for our review; however, interviews with

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HVS Consulting and Valuation Services Market Area Analysis 3-12

management revealed that these facilities are heavily used and in high
demand.

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

Lambert-St. Louis International Airport (STL) is the primary airport for St.
Louis, Missouri and the surrounding area. STL is a hub for American Airlines,
while Southwest Airlines notes the second-largest presence at the airport.
Additional commercial airlines that service Lambert-St. Louis International
Airport include Continental, Delta, Frontier, USA 3000, AirTran, United, and
US Airways. In the fall of 2006, construction on a new runway was
completed, and in February of 2007, airport officials announced plans for a
$105-million terminal renovation. The three-phase project commenced
construction in the spring of 2008 and is scheduled for completion in 2012. In
February of 2009, Delta and AirTran both added to their offerings of daily,
non-stop flights, and USA 3000 resumed service to Fort Meyers, Florida,
which had previously been eliminated due to high fuel prices.

The following table illustrates recent operating statistics for the primary
airport facility serving the subject propertys submarket.

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HVS Consulting and Valuation Services Market Area Analysis 3-13

Table 3-6 Airport Statistics

Passenger Percent Percent

Year Traffic Change* Change**
1999 30,188,973
2000 30,558,991 1.2 % 1.2 %
2001 26,695,019 -12.6 -6.0
2002 25,626,114 -4.0 -5.3
2003 20,431,132 -20.3 -9.3
2004 13,405,988 -34.4 -15.0
2005 14,697,263 9.6 -11.3
2006 15,289,719 4.0 -9.3
2007 15,384,556 0.6 -8.1
2008 14,431,471 -6.2 -7.9
*Annual average compounded percentage change from the previous year
**Annual average compounded percentage change from first year of data
Source: Lambert-St. Louis International Airport

Chart 3-7 Local Passenger Traffic vs. National Trend

1,650 35,000
1,550
30,000
1,450
25,000
1,350
20,000
National 1,250 Local
Activity 1,150 15,000 Activity
1,050
10,000
950
5,000
850
750 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

National Passenger Activity (Millions) Local Passenger Activity (000)

Source: HVS, Local Airport Authority

This facility recorded 14,431,471 passengers in 2008. The change in passenger

traffic between 2007 and 2008 was -6.2%. The average annual change during
the period shown was -7.9%. The decline in passenger traffic shown by the

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-14

most recent year-end data can be attributed to two forces. The ongoing
national economic downturn has decreased passenger demand throughout
the country, while high fuel prices in the summer of 2008 also forced some
airlines to decrease the number of flights offered to and from Lambert-St.
Louis.

Tourist Attractions This market benefits from a variety of tourist and leisure attractions in the
area. Alton is a growing tourism destination for regional, national, and even
international travelers. The area's scenic river vistas, quaint historic charm,
and abundance of recreation activities have helped it attract visitors by car,
boat, and bus year-round. In addition to tourism, weekend demand is also
generated by amateur sports and family events that are held in the area.
Primary attractions in the area include:

The Meeting of the Great Rivers National Scenic Byway follows the
eastern bank of the Mississippi River for 33 miles. Extending north from
the village of Hartford, through Alton, and terminating at Pere Marquette
State Park, the route includes natural wonders, historic sites, and cultural
attractions. Among these are the Lewis and Clark State Historic Site; the
National Great Rivers Museum; the confluence of the Missouri, Illinois,
and Mississippi Rivers; and numerous shops, wineries, and restaurants.
Audio tours of the byway, highlighting these and other attractions, are
available at the Alton Regional Convention and Visitors Bureau.
Alton's Riverfront Park is home to several attractions including Argosy
Casino, the Alton Marina, and a new outdoor amphitheatre. The
amphitheatre, which has a maximum attendance capacity of
approximately 4,000, was completed in 2008. Talks are currently
underway with national promotion companies to bring touring
performers to the venue; additionally, the facility will be used for
community performances and private social events. Argosy Casino offers
slot machines, gaming tables, four restaurants, and a live entertainment
venue. The Alton Marina provides boaters from throughout Missouri and
Illinois with dock-side services, recreational amenities, and convenient
access to the Missouri, Mississippi, and Illinois Rivers. Additionally, the
marina hosts a large number of transient boaters that are traveling down
these major waterways to the Gulf of Mexico.
Alton and the surrounding area offer an abundance of outdoor recreation
activities throughout the year. In the fall, visitors marvel at the beautiful
foliage lining the riverside bluffs and can pick their own produce at area
apple orchards and pumpkin patches. Winter offers visitors an

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Market Area Analysis 3-15

opportunity to watch the hundreds of American Bald Eagles that migrate

to the area. Spring and summer offer hiking, biking, kayaking, golfing,
and bird watching opportunities.
The Alton area features a rich history with sites and landmarks devoted to
a wide range of interests including President Lincoln and the Civil War;
abolitionists and the Underground Railroad; Native American culture;
and early explorers such as Lewis, Clark, Marquette, and Joliet.
Additional historic attractions include haunted mansion tours and a
monument to Alton's own Robert Wadlow, the tallest human on record at
eight feet and eleven inches.

Meeting of the Great Rivers National Scenic Byway

Conclusion This section discussed a wide variety of economic indicators for the pertinent
market area. After a period of economic decline, concurrent with the
deterioration of area manufacturing industries, the local economy has
stabilized and begun to benefit from redevelopment projects and a growing
tourism industry. Ongoing expansion projects at major area employers have
helped shelter Alton from the full impact of the ongoing regional and national
economic slowdowns. Going forward, the area is expected to benefit from

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HVS Consulting and Valuation Services Market Area Analysis 3-16

continued development, including the extension of an interstate highway to

the area. Given these circumstances, the outlook for the market is generally
favorable, but cautious in light of broader economic trends and circumstances.

Our analysis of the outlook for this specific market also considers the broader
context of the national economy. According to a recent World Bank report,
"The stresses in the financial markets in the United States that first emerged in
the summer of 2007 transformed themselves into a full-blown global financial
crisis in the fall of 2008." In the US, credit markets froze, the stock market
crashed, and consumer spending dropped at the fastest rate since the 1930s.
While the near-term outlook is problematic, this downturn must be
considered in the context of the economic picture over the longer term.
Economic activity is cyclical in nature, and past downturns in the national
economy have been followed by periods of growth and recovery. Thus, over
the longer term, the outlook includes a return to stable growth, with the
potential for a period of strong growth as the economy rebounds from the
current conditions.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-1

4. Supply and Demand Analysis

In the economic principle of supply and demand, price varies directly, but not
proportionately, with demand and inversely, but not proportionately, with
supply. In the lodging industry, supply is measured by the number of
guestrooms available, and demand is measured by the number of rooms
occupied; the net effect of supply and demand towards equilibrium results in
a prevailing price, or average rate. The purpose of this section is to investigate
current supply and demand trends as indicated by the current competitive
market, and set forth a basis for the projection of future supply and demand
growth. We also provide an overview of national occupancy and average rate
trends, both on an overall basis and by chain scale.

Definition of Subject The Proposed Alton Hotel will be located in Alton, Illinois. The greater market
Hotel Market surrounding the proposed subject property offers 356 hotels and motels,
spanning 38,476 rooms. The two largest hotels are the 1,073-room Renaissance
Grand & Suites and the 910-room Hyatt Regency.

Of this larger supply set, the proposed subject property is expected to

compete with a smaller set of hotels based on various factors. These factors
may include location, price point, product quality, length of stay (such as an
extended-stay focus vs. non-extended-stay focus), room type (all-suite vs.
standard), hotel age, or brand, among other factors. We have reviewed these
pertinent attributes and established an expected competitive set based upon
this review. Our review of the proposed subjects specific competitive set
within the Alton area begins on page 4-5.

National Trends The U.S. lodging industry has entered a period of RevPAR decline, driven
Overview primarily by supply increases, weakening demand, and slowing average rate
growth. While year-end results for 2007 reflected 1.2% growth in room nights
sold, representing a slight gain on the 1.1% growth in 2006, the trends for
2008 reflected a decline of 1.6%, accelerating from the decline of 0.3%
registered near the mid-point of 2008. The increase in available rooms also
went from 2.4% mid-year to 2.7% by the conclusion of 2008, contributing to
an occupancy decline of 4.2% for the year. The increase in supply for 2008 was

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-2

up from a 1.4% increase in 2007 and a 0.6% increase in 2006. Occupancy

declined from 63.1% to 60.4% in 2008. This accelerated from the 0.3-point loss
in national occupancy between 2007 and 2008.

Average rate growth continued to decelerate in 2008, with a nearly 4.0% gain
registered mid-year diminishing to a 2.4% increase by year-end, compared
with increases of 5.9% in 2007 and 7.0% in 2006. These trends contributed to a
1.9% RevPAR decline in 2008, down significantly from a 5.7% RevPAR gain in
2007 and a 7.5% gain in 2006.

Chart 6-1 National Occupancy and Average Rate Trends

70 $110
68 $100
66
$90
64
62 $80
Occupancy Average
60 $70 Rate
Percentage
58 $60
56
$50
54
52 $40

50 $30
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Occupancy 63.4 63.4 64.3 63.5 61.9 62.7 63.6 64.8 65.1 65.0 64.5 63.7 63.3 63.7 59.8 59.1 59.1 61.3 63.1 63.3 63.1 60.4
Average Rate 53.01 54.81 56.83 58.55 58.66 59.51 61.11 63.52 66.57 70.96 75.11 78.52 81.87 85.92 84.45 83.35 83.11 86.24 90.95 97.89 104.04 106.55
RevPAR 33.58 34.78 36.56 37.19 36.30 37.28 38.86 41.14 43.35 46.10 48.41 50.05 51.81 54.77 50.50 49.26 49.12 52.87 57.39 61.96 65.65 64.36

Source: STR

After experiencing years of strong pricing power, managers are now facing a
much tougher economic climate where rate discounting is becoming more
prevalent in order to keep primary accounts in place. Industry professionals
are attempting to maintain rate integrity by offering more complimentary
services to top accounts, including breakfast coupons or free Internet access.
In some markets, this practice should contribute to better average rate
stability than that seen in past cycles; however, this will have an adverse
impact on profitability. Furthermore, a shift in market mix at full-service
hotels from less price-sensitive corporate groups to more budget-conscious
meeting-space users is negatively impacting the net overall average rates.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-3

Table 6-2 National Occupancy and Average Rate Trends

Occupancy Average Room Rate RevPAR

2007 2008 % Change 2007 2008 % Change 2007 2008 % Change

United States 63.1 % 60.4 % (4.3) % $104.04 $106.55 2.4 % $65.65 $64.36 (2.0) %
Region
New England 61.1 % 59.4 % (2.8) % $118.62 $120.90 1.9 % $72.48 $71.81 (0.9) %
Middle Atlantic 66.7 64.8 (2.8) 148.49 152.50 2.7 99.04 98.82 (0.2)
South Atlantic 62.2 58.7 (5.6) 104.44 106.08 1.6 64.96 62.27 (4.1)
East North Central 57.6 55.6 (3.5) 90.12 91.70 1.8 51.91 50.99 (1.8)
East South Central 59.3 56.1 (5.4) 74.88 77.94 4.1 44.40 43.72 (1.5)
West North Central 59.2 57.6 (2.7) 76.10 79.09 3.9 45.05 45.56 1.1
West South Central 62.1 62.4 0.5 83.54 87.77 5.1 51.88 54.77 5.6
Mountain 66.3 61.4 (7.4) 101.16 103.31 2.1 67.07 63.43 (5.4)
Pacific 68.5 65.4 (4.5) 122.07 125.12 2.5 83.62 81.83 (2.1)
Price
Luxury 70.4 % 67.1 % (4.7) % $167.01 $168.43 0.9 % $117.58 $113.02 (3.9) %
Upscale 64.7 62.0 (4.2) 113.81 115.96 1.9 73.64 71.90 (2.4)
Midprice 60.2 57.6 (4.3) 81.95 84.21 2.8 49.33 48.50 (1.7)
Economy 57.6 55.1 (4.3) 61.56 62.94 2.2 35.46 34.68 (2.2)
Budget 59.2 57.2 (3.4) 50.42 51.56 2.3 29.85 29.49 (1.2)
Location
Urban 68.5 % 66.7 % (2.6) % $149.43 $154.26 3.2 % $102.36 $102.89 0.5 %
Suburban 63.3 60.3 (4.7) 90.34 92.45 2.3 57.19 55.75 (2.5)
Airport 69.4 66.5 (4.2) 99.74 101.83 2.1 69.22 67.72 (2.2)
Interstate 57.9 55.3 (4.5) 67.08 70.04 4.4 38.84 38.73 (0.3)
Resort 65.9 62.2 (5.6) 144.04 145.28 0.9 94.92 90.36 (4.8)
Small Metro/Town 57.1 55.3 (3.2) 79.13 81.78 3.3 45.18 45.22 0.1
Source: STR - December 2008 Lodging Review

In this period of economic decline, both urban and small metro/town areas
reported a minimal net gain in RevPAR, while all other categories contracted.
The resort and suburban categories showed the greatest RevPAR declines. All
price categories registered a RevPAR decline, with mid-price and budget
hotels faring best with RevPAR declines under 2.0%. By region, West North
Central and West South Central still registered RevPAR gains, with West
South Central achieving a notably strong gain of 5.6%. Conversely, the South
Atlantic and Mountain regions contracted at levels in excess of 4.0%.

Also pertinent to this analysis is a review of lodging statistics by chain scale,

which provides a greater indication of differences between price segments

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-4

and occupancies based on product quality level. The following table illustrates
these chain-scale statistics for 2007 and 2008.

Table 6-3 Operating Results by Chain Scale

Occupancy Average Room Rate RevPAR

2007 2008 % Change 2007 2008 % Change 2007 2008 % Change

Luxury 71.5 % 67.9 % (5.0) % $288.63 $288.79 0.1 % $206.54 $195.87 (5.2) %
Upper Upscale 71.2 68.7 (3.5) 159.85 157.81 (1.3) 112.36 109.75 (2.3)
Upscale 69.2 66.8 (3.5) 119.82 118.50 (1.1) 82.05 80.09 (2.4)
Mid-scale w/ F&B 59.0 55.8 (5.4) 88.26 85.63 (3.0) 50.52 49.23 (2.6)
Mid-scale w/o F&B 65.4 62.3 (4.7) 90.19 87.20 (3.3) 57.02 56.16 (1.5)
Economy 56.9 54.4 (4.4) 54.32 53.78 (1.0) 30.62 29.55 (3.5)
Independents 61.2 58.6 (4.2) 104.51 101.58 (2.8) 62.14 61.27 (1.4)

Source: STR - December 2008 Lodging Review

Chart 6-4 RevPAR Results by Chain Scale

$250.00

$200.00

$150.00

RevPAR

$100.00

$50.00

$0.00
2004 2005 2006 2007 2008

Luxury $157.53 $173.72 $193.00 $206.54 $195.87

Upper Upscale $90.76 $100.12 $107.32 $112.36 $109.75
Upscale $65.58 $72.13 $78.35 $82.05 $80.09
Mid-scale w/ F&B $42.11 $45.85 $48.90 $50.52 $49.23
Mid-scale w/o F&B $44.36 $49.60 $53.97 $57.02 $56.16
Economy $26.45 $28.48 $29.89 $30.62 $29.55
Independents $51.74 $54.19 $58.16 $62.14 $61.27

Source: STR - December 2008 Lodging Review

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-5

The RevPAR change among the luxury chains reflected a 5.2% decline in 2008,
with the majority of the contraction occurring in the fourth quarter. This is a
sharp contrast to the categorys 7.0% gain in 2007 and the 10.0%+ gains seen
in 2004 through 2006. While several categories showed RevPAR gains mid-
year, no category was able to hold onto this gain by the end of 2008. RevPAR
growth seen through mid-year 2008 decelerated then turned negative as
occupancy cuts grew more significant in the third and fourth quarters.
Although average rate growth in a few categories equaled or exceeded the
rate of inflation, significant decreases in occupancy offset these increases,
resulting in RevPAR contraction across most categories. Moreover, increases
in supply accelerated slightly, which compounded the adverse affect on
occupancy levels.

Indications for 2009 point to a continued deterioration of both occupancy and

average rate levels, as recessionary conditions prevalent in the national
economy are causing dramatic decreases in both corporate and consumer
spending. Falling demand levels are putting pressure on average rates, as
some hotel managers seek to support occupancy levels with rate discounts or
shifts in market mix to more price-sensitive users. As a result, forecasts for
year-end 2009 anticipate RevPAR growth to moderate from the 2008 decline
of 1.9% to a further contraction of 8.0% to 10.0% on a national average. As is
evident in the statistics by region and product type, some areas and hotel
categories will fare better than others, but realizing RevPAR increases in 2009
will be challenging. The industry is expected to stabilize in 2010, with a period
of recovery accelerating into 2011 and 2012.

Historical Supply Smith Travel Research (STR) is an independent research firm that compiles
and Demand Data and publishes data on the lodging industry, routinely used by typical hotel
buyers. STR has compiled historical supply and demand data for a group of
hotels considered applicable to this analysis for the proposed subject
property. 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.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-6

Table 4-5 Historical Supply and Demand Trends

Average Daily Available Room Occupied Room Average

Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change
1999 355 129,475 88,312 68.2 % $59.12 $40.32
2000 398 145,270 12.2 % 97,483 10.4 % 67.1 63.21 6.9 % 42.41 5.2 %
2001 398 145,270 0.0 97,963 0.5 67.4 65.02 2.9 43.85 3.4
2002 398 145,270 0.0 96,278 (1.7) 66.3 66.78 2.7 44.26 0.9
2003 398 145,270 0.0 92,497 (3.9) 63.7 67.77 1.5 43.15 (2.5)
2004 398 145,270 0.0 96,639 4.5 66.5 67.31 (0.7) 44.77 3.8
2005 398 145,270 0.0 98,338 1.8 67.7 70.29 4.4 47.58 6.3
2006 398 145,270 0.0 97,306 (1.0) 67.0 72.95 3.8 48.86 2.7
2007 422 154,054 6.0 99,309 2.1 64.5 76.30 4.6 49.19 0.7
2008 470 171,550 11.4 118,023 18.8 68.8 81.58 6.9 56.13 14.1
Year-to-Date Through February
2008 470 27,730 13,350 48.1 % $77.02 $37.08
2009 470 27,730 0.0 % 16,687 25.0 % 60.2 78.72 2.2 % 47.37 27.8 %
Average Annual Compounded Change: 1999-
2008 3.2 % 3.3 % 3.6 % 3.7 %
Number Year Year
Hotels Included in Sample of Rooms Affiliated Opened

Holiday Inn Alton 137 Jul 1982 Jul 1982

Super 8 Alton 63 Sep 1989 Sep 1989
Comfort Inn & Conference Center St Louis 71 Oct 1994 Oct 1994
Comfort Inn Alton 62 Jun 1996 Jun 1996
Holiday Inn Express & Suites Pontoon Beach 65 Sep 1999 Sep 1999
Hampton Inn Suites St Louis Edwardsville 72 Sep 2007 Sep 2007

Total 470
Source: Smith Travel Research

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-7

Chart 4-6 Historical Supply and Demand Graph

200,000 100
180,000
90
160,000
140,000 80
120,000 70 Occupancy
Room
100,000
Nights 60 %
80,000
60,000 50
40,000
40
20,000
0 30

20
20
20
20
20
20
20
20
20
19

0
0
0
03
0

02
0
99

08
05

7
4
1
0

6
Room Supply Room Demand Occupancy
Source: S mith Travel Resea rch

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. Opening dates, as available, are
presented for each reporting hotel in the previous table.

Monthly occupancy trends are presented in the following table.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-8

Table 4-7 Monthly Occupancy Trends

Month 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
January 64.4 % 48.2 % 54.8 % 48.2 % 48.0 % 49.6 % 50.8 % 52.8 % 52.9 % 41.7 % 59.7 %
February 68.4 67.0 71.3 67.7 52.8 63.3 56.5 63.3 60.1 55.3 60.7
March 82.1 68.3 70.3 74.2 65.3 74.9 71.5 65.5 69.0 68.4
April 67.0 68.9 66.1 68.1 61.9 75.4 70.8 69.0 68.9 65.6
May 71.6 65.7 70.4 68.3 68.5 68.5 66.2 66.9 75.3 69.7
June 78.2 81.0 80.5 82.2 72.8 72.2 75.4 73.5 82.0 78.3
July 83.6 71.4 72.4 73.7 75.4 75.5 79.7 74.4 70.5 75.1
August 77.6 74.9 73.9 72.1 72.8 61.7 71.6 69.9 71.4 74.4
September 64.7 73.8 68.9 67.2 68.6 66.1 71.1 72.4 58.3 82.0
October 58.6 67.4 68.2 68.3 70.1 70.8 82.1 71.4 62.4 88.0
November 56.7 64.1 60.9 54.5 58.7 64.4 62.9 62.9 56.7 67.5
December 53.1 55.2 52.1 51.1 48.4 56.1 53.1 61.7 51.1 58.7
Annual Occupancy 68.2 % 67.1 % 67.4 % 66.3 % 63.7 % 66.5 % 67.7 % 67.0 % 64.5 % 68.8 %
Year-to-Date 66.3 % 57.1 % 62.7 % 57.5 % 50.3 % 56.1 % 53.5 % 57.7 % 56.3 % 48.1 % 60.2 %
Source: Smith Travel Research

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-9

These data reflect an overall market occupancy level of 68.8% in 2008, which
compares to 64.5% for 2007. The overall average occupancy level for the
calendar years presented equates to 66.4%. Lodging trends in this market
have been relatively stable for most of the illustrated period with local
employers, tourists, and weekend visitors serving as consistent sources of
demand. New supply entered the market in 2007, which caused a temporary
drop in occupancy levels. This new supply was quickly absorbed as market
occupancy rebounded in 2008 and reached its highest level of the last ten
years. This sharp rebound and unprecedented growth resulted from
increased demand related to area construction projects. These include the
ongoing expansion of the ConocoPhillips refinery, the addition of a new wing
at Alton Memorial Hospital, the construction of the Great Rivers Research
Center, and the extension of Interstate 255 to Seminary Road. Additionally, in
the fall of 2008, a Days Inn in Alton was closed because of building code
violations, which diverted demand to other hotels in the area. Major area
construction projects are expected to continue to positively impact demand
through 2009, into 2010 and 2011. Monthly average rate trends are presented
in the following table.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-10

Table 4-8 Monthly Average Rate Trends

Month 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
January $59.29 $60.86 $59.67 $64.61 $66.80 $63.87 $65.38 $68.20 $73.72 $77.38 $78.95
February 55.82 59.57 54.50 64.57 65.64 63.74 67.07 70.91 72.20 76.71 78.46
March 55.66 59.71 63.87 63.89 63.93 64.66 69.30 69.43 73.58 81.57
April 58.32 60.23 66.31 64.58 67.04 67.97 72.56 71.15 76.18 82.11
May 58.91 65.84 66.60 69.48 68.12 68.70 72.16 73.80 73.60 83.07
June 61.17 65.81 68.02 69.65 69.60 68.88 72.14 76.05 76.15 84.36
July 62.55 64.34 68.86 69.02 70.95 70.48 72.91 76.53 78.60 84.33
August 59.87 65.65 69.20 69.43 70.69 70.37 70.73 74.55 79.95 83.32
September 58.88 64.21 64.85 67.07 67.18 68.87 71.19 73.68 78.65 83.08
October 60.78 65.27 66.41 68.20 68.85 68.44 69.73 73.82 77.61 81.66
November 57.85 63.11 64.25 63.63 65.81 65.92 69.54 72.58 77.57 78.97
December 59.54 61.83 65.04 64.47 65.93 63.69 67.70 72.47 76.50 77.89
Annual Average Rate $59.12 $63.21 $65.02 $66.78 $67.77 $67.31 $70.29 $72.95 $76.30 $81.58
Year-to-Date $57.59 $60.14 $56.88 $64.59 $66.22 $63.80 $66.23 $69.60 $72.95 $77.02 $78.72
Source: Smith Travel Research

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-11

These data reflect an overall market average rate level of $81.58 in 2008, which
compares to $76.30 for 2007. The average across all calendar years presented
for average rate equates to $73.06. This market has experienced steady
average rate growth during the last ten years, with only one year of minimal
decline. Relatively steady demand levels have given area hotels pricing
power and allowed them to consistently increase rates year-over-year. In
contrast to national trends, average rates in this market have continued to
strengthen thus far in 2009, thanks to strengthening demand.

These occupancy and average rate trends resulted in a RevPAR level of $56.13
in 2008. We note that the national average for RevPAR was $64.36 for 2008,
roughly 2.0% below the 2007 level of $65.65.

Seasonality and A review of the historical monthly and day of week occupancy and average
Demand Patterns rate performance shows the patterns of market-wide demand. The following
table shows the occupancy and average rate performance by month and day
of week for the subject market, as provided by Smith Travel Research.

Table 4-9 Seasonality: Occupancy By Month and Day of Week

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month
Mar - 08 48.6 % 67.5 % 77.5 % 73.9 % 71.0 % 74.4 % 70.9 % 68.4 %
Apr - 08 42.6 68.6 71.6 69.0 61.9 67.7 75.3 65.6
May - 08 47.1 57.4 75.0 79.4 72.5 73.1 79.5 69.7
Jun - 08 52.7 78.9 87.6 89.9 80.1 80.3 85.0 78.3
Jul - 08 52.6 71.1 81.0 74.5 73.7 85.8 86.1 75.1
Aug - 08 52.9 71.4 80.0 79.6 75.5 77.1 85.9 74.4
Sep - 08 66.6 77.6 88.1 85.8 78.3 84.6 93.0 82.0
Oct - 08 65.8 91.5 94.7 93.0 85.9 89.3 94.9 88.0
Nov - 08 44.5 73.7 77.0 77.2 72.3 66.8 67.2 67.5
Dec - 08 44.2 60.6 62.2 67.9 56.7 58.5 57.3 58.7
Jan - 09 41.2 66.4 75.6 75.2 59.2 53.2 51.1 59.7
Feb - 09 39.1 61.5 67.1 68.7 58.6 57.7 72.1 60.7
Average 49.8 % 70.6 % 77.9 % 77.7 % 70.7 % 72.4 % 76.0 % 70.7 %

Source: Smith Travel Research

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-12

Table 4-10 Seasonality: Average Rate By Month and Day of Week

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month
Mar - 08 $74.86 $76.01 $78.84 $78.27 $101.39 $81.28 $80.96 $81.57
Apr - 08 79.42 81.18 80.79 82.45 79.63 83.98 86.00 82.11
May - 08 81.16 80.09 80.58 83.45 81.20 84.84 87.37 83.07
Jun - 08 81.11 82.22 84.34 84.25 83.42 86.69 88.14 84.36
Jul - 08 80.16 82.02 82.50 82.83 85.55 87.70 87.90 84.33
Aug - 08 84.37 82.00 81.04 82.53 81.75 84.31 86.05 83.32
Sep - 08 80.51 81.21 82.26 82.79 81.66 85.30 87.29 83.08
Oct - 08 77.07 79.51 79.83 79.83 80.03 86.10 87.57 81.66
Nov - 08 76.73 77.59 78.69 79.01 79.52 78.91 81.48 78.97
Dec - 08 76.41 76.66 77.76 78.26 77.39 79.54 79.06 77.89
Jan - 09 76.20 76.53 80.03 79.62 82.22 79.49 76.87 78.95
Feb - 09 74.35 78.08 79.63 77.98 77.69 77.44 81.85 78.46

Average $78.78 $79.51 $80.67 $81.02 $82.72 $83.47 $84.66 $81.69

Source: Smith Travel Research

The peak demand periods suggest the timing and nature of unaccommodated
demand and serve as a basis for our forthcoming estimate of this demand
category presented later in this chapter (as applicable).

SUPPLY Based on an evaluation of the occupancy, rate structure, market orientation,

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

The following table summarizes the important operating characteristics of the

future primary competitors and the aggregate 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 propertys penetration factors; penetration is the
ratio between a specific hotels operating results and the corresponding data
for the market. If the penetration factor is greater than 100%, the property is
performing better than the market as a whole; conversely, if the penetration is

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-13

less than 100%, the hotel is performing at a level below the market-wide
average.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-14

Table 4-11 Primary Competitors Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008

Weighted Weighted Weighted

d
l
ercia

ng an
Annual Annual Annual

Gr oup

re
Number of Room Average Room Average Room Average Occupancy Yield
Co m m

Meeti

Leisu
Property Rooms Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR Penetration Penetration

Holiday Inn 137 60 % 25 % 15 % 137 60 % $93.00 $55.80 137 63 % $93.00 $58.59 137 63 % $105.00 $66.15 92.1 % 114.9 %
Comfort Inn 62 65 15 20 62 70 68.00 47.60 62 70 73.00 51.10 62 73 73.00 53.29 106.7 92.6

Sub-Totals/Averages 199 62 % 22 % 17 % 199 63.1 % $84.36 $53.25 199 65.2 % $86.31 $56.26 199 66.1 % $93.99 $62.14 96.7 % 108.0 %

Secondary Competitors 261 68 % 18 % 15 % 133 71.3 % $63.53 $45.28 148 64.3 % $68.12 $43.78 179 70.9 % $73.96 $52.46 103.7 % 91.2 %

Totals/Averages 460 65 % 20 % 16 % 332 66.4 % $75.41 $50.06 347 64.8 % $78.61 $50.93 378 68.4 % $84.15 $57.56 100.0 % 100.0 %

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-15

Map of Competition

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-16

Holiday Inn

Holiday Inn Table 4-12 Estimated Historical Operating Statistics

3800 Homer Adams
Parkway Wtd. Annual Average Occupancy Yield
Alton, IL Year Room Count Occupancy Rate RevPAR Penetration Penetration
Estimated 2006 137 60 % $93 $56 90.4 % 111.5 %
Estimated 2007 137 63 93 59 97.2 115.0
Estimated 2008 137 63 105 66 92.1 114.9

The Holiday Inn is owned and operated by Albanese Development

Corporation under the legal name of Alton Partnership. Facilities include a
restaurant, a lounge, an atrium bar, an indoor pool and whirlpool, a sauna, a
game room, an exercise room, a business center, a guest laundry facility, and
5,424 square feet of meeting space, including a 4,800-square-foot ballroom.
The hotel, which was built in 1982, underwent a total renovation in various
stages from 2002 through 2005. Additional upgrades are planned for 2009 as
part of InterContinental Hotel Group's worldwide re-launch of the Holiday
Inn brand. Planned upgrades include new guestroom carpet and bedding, as
well as new exterior signage and paint. This hotel benefits from its status as
the only full-service hotel in the market area. In contrast, this hotel suffers
somewhat from its dated layout and design. Overall, the property appeared
to be in good condition. Its accessibility is similar when compared to the
subject neighborhood, and its visibility is similar when compared to the
expected visibility of the Proposed Alton Hotel.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-17

Comfort Inn

Comfort Inn Table 4-13 Estimated Historical Operating Statistics

11 Crossroads Court
Alton, IL Wtd. Annual Average Occupancy Yield
Year Room Count Occupancy Rate RevPAR Penetration Penetration
Estimated 2006 62 70 % $68 $48 105.5 % 95.1 %
Estimated 2007 62 70 73 51 108.0 100.3
Estimated 2008 62 73 73 53 106.7 92.6

The Comfort Inn Alton is owned and operated by Shivam Hotel LLC.
Facilities include a breakfast dining area (a complimentary breakfast is
served), an indoor pool, and a business center. The hotel, which was built in
1996, was in the process of completing a renovation at the time of our
inspection; upgrades included new guestroom case goods. This hotel benefits
from its status as the only mid-scale, limited-service hotel in the city of Alton.
Overall, the property appeared to be in very good condition. Its accessibility is
similar when compared to the subject neighborhood, and its visibility is
similar when compared to the expected visibility of the Proposed Alton Hotel.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-18

Secondary We have also reviewed other area lodging facilities to determine whether any
Competitors may compete with the proposed subject property on a secondary basis. The
room count of each secondary competitor has been weighted based on its
assumed degree of competitiveness in the future with the proposed subject
property. By assigning degrees of competitiveness, we can assess how the
subject property and its competitors may react to various changes in the
market, including new supply, changes to demand generators, and
renovations or franchise changes of existing supply. The following table sets
forth the pertinent operating characteristics of the secondary competitor(s).

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-19

Table 4-14 Secondary Competitor(s) Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008

Weighted Weighted Weighted

d
l
ercia

ng an
Total Annual Annual Annual

Gr oup

re
Number of Competitive Room Average Room Average Room Average

Co m m

Meeti

Leisu
Property Rooms Level Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR

Super 8 63 70 % 10 % 20 % 60 % 38 68 % $55.00 $37.40 38 68 % $58.00 $39.44 38 73 % $58.00 $42.34

Holiday Inn Express 65 75 15 10 75 49 75 70.00 52.50 49 70 75.00 52.50 49 73 75.00 54.75
Hampton Inn & Suites 62 65 20 15 75 0 0 0.00 0.00 16 35 90.00 31.50 47 70 95.00 66.50
Comfort Inn Edwardsville 71 60 25 15 65 46 70 63.00 44.10 46 65 65.00 42.25 46 68 65.00 44.20

Totals/Averages 261 68 % 18 % 15 % 69 % 133 71.3 % $63.53 $45.28 148 64.3 % $68.12 $43.78 179 70.9 % $73.96 $52.46

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-20

We have identified several hotels that are expected to compete with the
proposed subject property on a secondary level. The Super 8 is expected to
be competitive on the basis of its location in Alton; however, this economy
hotel offers a budget-oriented product. The Holiday Inn Express, Hampton
Inn & Suites, and Comfort Inn Edwardsville are expected to be competitive
on the basis of their mid-scale product offerings; however, these hotels are
located outside the Alton area.

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

Table 4-15 New Supply

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

Proposed Alton Hotel 110 100 % April 1, 2011 Early Development

Sleep Inn & Suites 62 50 June 1, 2009 Under Construction

Totals/Averages 172

The Sleep Inn & Suites will be competitive on the basis of its limited-service,
mid-scale product offering; however, due to the ten-mile distance between it
and the proposed downtown Alton location of the proposed subject property,
this property has been weighted secondarily competitive. Furthermore, we
note that the 54-room Spring Green Lodge and Conference Center was
approved for construction approximately 13 miles from the proposed
Downtown Alton location of the proposed subject property. However,
according to the project's developer, it has encountered funding problems
and has been put on hold indefinitely. Therefore, the possibility of this hotel
entering the market has only been considered qualitatively in our positioning
of the proposed subject property's stabilized occupancy level.

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Supply and Demand Analysis 4-21

of the proposed 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 expected to be competitive to
some degree with the proposed subject property. We have also investigated
potential increases in competitive supply in this Alton submarket. The
Proposed Alton Hotel should enter a dynamic market of varying product
types and price points. Next, we will present our forecast for demand change,
using the historical supply data presented as a starting point.

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

Table 4-16 Historical Market Trends

Accommodated Room Nights Market Market

Year Room Nights % Change Available % Change Occupancy Market ADR % Change RevPAR % Change
Est. 2006 80,363 121,071 66.4 % $75.41 $50.06
Est. 2007 82,116 2.2 % 126,744 4.7 % 64.8 78.61 4.2 % 50.93 1.7 %
Est. 2008 94,419 15.0 138,043 8.9 68.4 84.15 7.1 57.56 13.0

Avg. Annual Compounded

Chg., Est. 2006-Est. 2008: 8.4 % 6.8 % 5.6 % 7.2 %

Demand Analysis For the purpose of demand analysis, the overall market is divided into
Using Market individual segments based on the nature of travel. Based on our fieldwork,
Segmentation area analysis, and knowledge of the local lodging market, we estimate the
2008 distribution of accommodated room night demand as follows.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-22

Table 4-17 Accommodated Room Night Demand

Marketwide
Accommodated Percentage
Market Segment Demand of Total

Commercial 61,027 65 %
Meeting and Group 18,549 20
Leisure 14,843 16

Total 94,419 100 %

The markets demand mix comprises commercial demand, with this segment
representing roughly 65% of the accommodated room nights in this Alton
submarket. The remaining portion comprises meeting and group at 20%, with
the final portion leisure in nature, reflecting 16%.

Using the distribution of accommodated hotel demand as a starting point, we

will analyze the characteristics of each market segment in an effort to
determine future trends in room night demand.

Commercial Segment The commercial segment consists of individual businesspeople who are
visiting various firms in the subject propertys market. This demand is
strongest Monday through Thursday nights, declines significantly on Friday
and Saturday, and increases somewhat on Sunday. In markets where the
weekday occupancy often exceeds 90%, some unaccommodated commercial
demand is likely to be present. The typical length of stay for commercial
guests ranges from one to three days, and the rate of double occupancy is a
low 1.2 to 1.3 people per room. Commercial demand is relatively constant
throughout the year, although some declines are noticeable in late December
and during other holiday periods.

The commercial segment includes numerous smaller classifications; however,

the primary categories considered in this analysis are individual business
travelers and high-volume corporate accounts. Most individual business
travelers are visiting firms in the immediate area or passing through en route
to other destinations. Their lodging choices are influenced by brand loyalty
(and frequent traveler programs in particular), as well as location and
convenience with respect to businesses and amenities. High-volume
corporate accounts are generated by local companies; demand in this sub-
segment may include employees of the firm or its affiliates, and often consists

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-23

of training groups. These companies typically designate hotels as preferred

accommodations; in return, the selected lodging facilities generally offer a
significant discount from their published rates. Typically, these rates are
negotiated on an annual basis, and the size of the discount is tied to the
number of room nights produced.

Major factors considered in the development of our growth rates include

several construction projects that are currently underway or are planned for
the area. The recent extension of Interstate 255 to Seminary Road has
contributed to demand growth for the area, and the interstate's further
extension to U.S. Highway 67 is expected to serve as a catalyst for future
economic development and demand growth. Likewise, the ongoing
expansion of the ConocoPhillips refinery has generated increased demand
and spurred expansions of other area businesses. This project should
continue to positively impact demand levels going forward and, when
complete, will contribute to growth of the market's employment base.

All of the economic and demographic data presented earlier have some
influence on commercial lodging demand. The trends that have the most
direct correlation are changes in FIRE, service, wholesale trade, and total
employment; occupied office space; and air passenger counts. Considering
these historical trends, we project demand change rates of 2.0% in 2009, 3.0%
in 2010, and 3.5% in 2011. After these first three projection years, we have
forecast demand change rates of 2.5% in 2012 and 1.5% in 2013.

Meeting and Group The meeting and group market includes meetings, seminars, conventions,
Segment trade association shows, and similar gatherings of ten or more people. Peak
convention demand typically occurs in the spring and fall. Because of
vacations, the summer months represent the slowest period for this market
segment, while winter demand varies. Although there are numerous
classifications within the meeting and group segment, the primary categories
considered in this analysis are corporate groups, associations, and SMERFE
(social, military, ethnic, religious, fraternal, and educational) groups.

Corporate groups are one of the most profitable components of this segment
because they exhibit limited price sensitivity and often sponsor banquets and
other events that generate revenue for the host hotel. This demand may take
the form of training programs, sales meetings, division conferences, and
similar events with a business purpose. Corporate groups generally meet
during the work week, thus generating lodging demand on Monday through
Thursday nights. Association demand is generally divided on a geographical

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-24

basis: the most common categories are national, regional, and state
associations. Depending on their nature, these associations may be more rate-
sensitive than commercial groups. The scheduling pattern of associations also
depends on the nature of the group. The SMERFE market consists of groups
that are social, military, ethnic, religious, fraternal, or educational in nature.
These groups are budget-conscious and have a strong preference for
weekend and summer meeting times, when rates are generally lower.

Meeting and group demand in this market is generated by a variety of

sources including area corporations, educational institutions, tour groups,
and associations, as well as family-related social events. Our market research
revealed that meeting and banquet space are in high demand, especially
during weekends and the peak summer and fall seasons, when many
weddings, reunions, and other social functions area held. Our interviews
revealed that during these times, venues are often booked over a year in
advance. Based on these reports, we have projected increased demand for
this segment going forward, particularly after the proposed subject property's
anticipated opening.

Future meeting and group demand is closely related to growth in the

commercial segment. Because most meetings have either a direct or an
indirect business purpose, the economic considerations that have an impact
on commercial travel also affect meeting and group demand. The exception
is non-commercial meetings, which are tied to the economic factors that
influence leisure travel. It should be noted that meetings and similar events
are booked in advance, and thus growth in this segment tends to lag slightly
behind increases in commercial demand. Considering these historical trends,
we project demand change rates of 1.0% in 2009 and 1.0% in 2010. After these
first three projection years, we have forecast demand change rates of 3.0% in
2011, 2.5% in 2012, and 2.0% in 2013 for the first scenario. Considering the
addition of a conference center in the second scenario, we have forecast
demand change rates of 4.0% in 2011, 3.0% in 2012, and 2.5% in 2013.

Leisure Segment The leisure market segment consists of individuals and families who are
spending time in the area or passing through en route to other destinations.
Their travel purposes may include sightseeing, recreation, visiting friends and
relatives, or numerous other non-business activities. Leisure demand is
strongest Friday and Saturday nights and all week during holiday periods
and the summer months. These peak periods are negatively correlated with
commercial visitation, underscoring the stabilizing effect of capturing
weekend and summer tourist travel.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-25

The typical length of stay ranges from one to four days, depending on the
destination and travel purpose, and the rate of double occupancy typically
ranges from 1.8 to 2.5 people per room. Price sensitivity tends to vary with
product type. All-suite properties with inclusive food and beverage will tend
to drive strong leisure room rates, while highway properties with limited
amenities typically offer more discounted leisure room rates.

Leisure demand in the area is generated by a variety of attractions along the

Mississippi River, including historical sites, outdoor activities, and numerous
shops, restaurants, and wineries. These attractions reportedly draw a
significant number of tourists to the area throughout the year. The opening
of a new amphitheatre in Alton's River Front Park is expected to draw
additional visitors to the area and provide a venue for touring performances.
Additionally, we note that the ongoing national economic downturn is
shifting leisure travel patterns in the United States. More travelers are
choosing more cost-efficient domestic locations for vacations, making regional
destinations, such as Alton, an increasingly attractive option. As such, we
anticipate that this market will realize increased leisure demand going
forward.

Future leisure demand is related to the overall economic health of the region
and the nation. Trends showing changes in state and regional
unemployment and disposable personal income often have a strong
correlation to non-commercial visitation. Of the economic and demographic
data presented earlier in this report, trends in retail sales, retail sector
employment, total employment, and air passenger counts tend to have the
strongest influence on leisure demand. Considering these historical trends,
we project demand change rates of 1.5% in 2009, 1.5% in 2010, and 2.5% in
2011. After these first three projection years, we have forecast demand change
rates of 3.0% in 2012 and 2.0% in 2013.

Conclusion The purpose of segmenting the lodging market is to define each major type of
demand, identify customer characteristics, and estimate future growth trends.
Starting with an analysis of the local area, three segments were defined as
representing the subject propertys 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 for the first scenario.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-26

Table 4-18 Average Annual Compounded Market Segment Growth Rates First Scenario

Annual Growth Rate

Market Segment 2009 2010 2011 2012 2013 2014

Commercial 2.0 % 3.0 % 3.5 % 2.5 % 1.5 % 1.0 %

Meeting and Group 1.0 1.0 3.0 2.5 2.0 1.5
Leisure 1.5 1.5 2.5 3.0 2.0 1.0

Base Demand Growth 1.7 % 2.4 % 3.2 % 2.6 % 1.7 % 1.1 %

We forecast the following average annual compounded market segment

growth rates for the second scenario.

Table 4-19 Average Annual Compounded Market Segment Growth Rates Second Scenario

Annual Growth Rate

Market Segment 2009 2010 2011 2012 2013 2014

Commercial 2.0 % 3.0 % 3.5 % 2.5 % 1.5 % 1.0 %

Meeting and Group 1.0 1.0 4.0 3.0 2.5 1.5
Leisure 1.5 1.5 2.5 3.0 2.0 1.0

Base Demand Growth 1.7 % 2.4 % 3.4 % 2.7 % 1.8 % 1.1 %

While local economic conditions bear the greatest significance on the forecast
of demand change presented in this section, our forecast also takes into
consideration the currently sluggish economic climate on a national level. As
previously discussed, the national economy is in a state of decline; the gross
national product contracted by 0.5% in the third quarter of 2008, after posting
a 2.8% increase in the second quarter. Moreover, unemployment remains on
the rise, and the financial sector remains strained by the subprime crisis.
Accordingly, we expect demand to continue its decline for most of 2009,
following the similar trend of 2008 for the U.S. hotel industry overall.
Together with the continued introduction of new supply, this decline in
demand is expected to produce a compounded negative effect on the national
average occupancy level.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-27

Latent Demand A table presented earlier in this section illustrated the accommodated room
night demand in the subject propertys 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 Unaccommodated demand refers to individuals who are unable to secure

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

Unaccommodated demand is further indicated if the market is at all seasonal,

with distinct high and low seasons; such seasonality indicates that although
year-end occupancy may not average in excess of 70%, the market sells out
many nights during the year.

The following table presents our estimate of unaccommodated demand in the

subject market for the first scenario.

Table 4-20 Unaccommodated Demand Estimate First Scenario

Accommodated Room Night Unaccommodated Unaccommodated

Market Segment Demand Demand Percentage Room Night Demand

Commercial 61,027 16.8 % 10,270

Meeting and Group 18,549 26.3 4,871
Leisure 14,843 30.2 4,479

Total 94,419 20.8 % 19,620

The following table presents our estimate of unaccommodated demand in the

subject market for the second scenario.

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-28

Table 4-21 Unaccommodated Demand Estimate Second Scenario

Accommodated Room Night Unaccommodated Unaccommodated

Market Segment Demand Demand Percentage Room Night Demand

Commercial 61,027 16.8 % 10,270

Meeting and Group 18,549 30.7 5,694
Leisure 14,843 30.2 4,479

Total 94,419 21.7 % 20,443

Our interviews with market participants found that the market frequently
sells out. Mid-week sellouts are generated by strong commercial demand in
the spring; in the summer and fall, increased demand relating to tourism and
social events, coupled with healthy commercial demand levels, results in
more frequent sellouts throughout the week and weekend. Additionally,
market participants reported that a portion of demand in the area is currently
being diverted to other markets in the region because of the lack of upscale
accommodations. A portion of this demand, which is currently turned away,
should return to the market concurrent with the supply increases.

We interviewed management at several area meeting and banquet facilities,

as well as officials at the Alton Area Convention and Visitors Bureau, in order
to gauge market demand for meeting facilities. These market participants
revealed that meeting space is in high demand and that the market is
currently under-supplied. In particular, they indicated that there is a
significant amount of unfulfilled demand for facilities with the following
characteristics: modern amenities, high-quality furnishings and finishes,
attached or near hotel rooms, and proximate to riverfront attractions. These
participants indicated that the most common uses for meeting space are
family-related social events, group association events, and corporate
meetings. Those interviewed reported that demand from events with 200 to
400 attendees is very strong, with these events occurring, on average,
multiple times a week at each facility. Demand from events with over 400
attendees was reported to be less frequent and sporadic; however, the
participants noted that groups of this size are not actively pursued due to
capacity constraints. A market study of demand for area meeting space,
which was performed by a third party in 2002, was provided for our review
by the Alton Area Convention and Visitors Bureau. The study surveyed 88

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-29

meeting planners from corporations and associations throughout the region

to gauge what type and size of facility would draw them to Alton. The study
indicated that the amount of meeting space desired by these planners ranged
from zero to 15,000 square feet, with 90% of responses falling between 500
and 6,000 square feet. Additionally, the planners indicated a need for nearby
hotel rooms ranging in number from zero to 350 rooms, with 60% of
responses falling between ten and 100 rooms.

Based upon an analysis of monthly and weekly peak demand and sell-out
trends, as well as interviews with market participants, we have forecast 20.8%
of the base-year demand to be classified as unaccommodated in the first
scenario and 21.7% of the base-year demand to be classified as
unaccommodated in the second scenario.

Accommodated Based upon a review of the market dynamics in the subject propertys
Demand and Market- competitive environment, we have forecast growth rates for each market
wide Occupancy 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.

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

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-30

Table 4-22 Forecast of Market Occupancy First Scenario

2009 2010 2011 2012 2013 2014

Commercial
Base Demand 62,248 64,115 66,359 68,018 69,039 69,729
Unaccommodated Demand 10,475 10,790 11,167 11,446 11,618 11,734
Total Demand 72,723 74,905 77,527 79,465 80,657 81,463
Growth Rate 19.2 % 3.0 % 3.5 % 2.5 % 1.5 % 1.0 %

Meeting and Group

Base Demand 18,735 18,922 19,490 19,977 20,376 20,682
Unaccommodated Demand 4,920 4,969 5,118 5,246 5,351 5,432
Total Demand 23,655 23,891 24,608 25,223 25,728 26,114
Growth Rate 27.5 % 1.0 % 3.0 % 2.5 % 2.0 % 1.5 %

Leisure
Base Demand 15,066 15,292 15,674 16,144 16,467 16,632
Unaccommodated Demand 4,546 4,614 4,729 4,871 4,969 5,018
Total Demand 19,612 19,906 20,403 21,016 21,436 21,650
Growth Rate 32.1 % 1.5 % 2.5 % 3.0 % 2.0 % 1.0 %

Totals
Base Demand 96,048 98,329 101,523 104,139 105,882 107,043
Unaccommodated Demand 19,941 20,373 21,015 21,564 21,938 22,184
Total Demand 115,989 118,702 122,538 125,703 127,820 129,227
less: Residual Demand 16,998 16,863 4,062 4,210 5,159 5,788
Total Accommodated Demand 98,991 101,839 118,476 121,493 122,661 123,439
Overall Demand Growth 4.8 % 2.9 % 16.3 % 2.5 % 1.0 % 0.6 %

Market Mix
Commercial 62.7 % 63.1 % 63.3 % 63.2 % 63.1 % 63.0 %
Meeting and Group 20.4 20.1 20.1 20.1 20.1 20.2
Leisure 16.9 16.8 16.7 16.7 16.8 16.8
Existing Hotel Supply 381 378 387 378 378 378
Proposed Hotels
Proposed Alton Hotel 83 110 110 110
Sleep Inn & Suites 18 31 31 31 31 31

Available Rooms per Night 145,638 149,358 183,018 189,508 189,508 189,508
Nights per Year 365 365 365 365 365 365
Total Supply 399 409 501 519 519 519
Rooms Supply Growth 5.5 % 2.6 % 22.5 % 3.5 % 0.0 % 0.0 %
Marketwide Occupancy 68.0 % 68.2 % 64.7 % 64.1 % 64.7 % 65.1 %

Opening in April 2011 of the 100% competitive, 110-room Proposed Alton Hotel

Opening in June 2009 of the 50% competitive, 62-room Sleep Inn & Suites

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-31

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

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-32

Table 4-23 Forecast of Market Occupancy Second Scenario

2009 2010 2011 2012 2013 2014

Commercial
Base Demand 62,248 64,115 66,359 68,018 69,039 69,729
Unaccommodated Demand 10,475 10,790 11,167 11,446 11,618 11,734
Total Demand 72,723 74,905 77,527 79,465 80,657 81,463
Growth Rate 19.2 % 3.0 % 3.5 % 2.5 % 1.5 % 1.0 %

Meeting and Group

Base Demand 18,735 18,922 19,679 20,269 20,776 21,088
Unaccommodated Demand 5,751 5,808 6,041 6,222 6,377 6,473
Total Demand 24,485 24,730 25,720 26,491 27,153 27,561
Growth Rate 32.0 % 1.0 % 4.0 % 3.0 % 2.5 % 1.5 %

Leisure
Base Demand 15,066 15,292 15,674 16,144 16,467 16,632
Unaccommodated Demand 4,546 4,614 4,729 4,871 4,969 5,018
Total Demand 19,612 19,906 20,403 21,016 21,436 21,650
Growth Rate 32.1 % 1.5 % 2.5 % 3.0 % 2.0 % 1.0 %

Totals
Base Demand 96,048 98,329 101,712 104,432 106,282 107,448
Unaccommodated Demand 20,772 21,212 21,937 22,540 22,964 23,226
Total Demand 116,820 119,541 123,649 126,971 129,246 130,674
less: Residual Demand 17,707 17,560 4,411 4,774 5,794 6,432
Total Accommodated Demand 99,114 101,981 119,238 122,198 123,452 124,242
Overall Demand Growth 5.0 % 2.9 % 16.9 % 2.5 % 1.0 % 0.6 %

Market Mix
Commercial 62.3 % 62.7 % 62.7 % 62.6 % 62.4 % 62.3 %
Meeting and Group 21.0 20.7 20.8 20.9 21.0 21.1
Leisure 16.8 16.7 16.5 16.6 16.6 16.6
Existing Hotel Supply 381 378 387 378 378 378
Proposed Hotels
Proposed Alton Hotel and Conference
Center 83 110 110 110
Sleep Inn & Suites 18 31 31 31 31 31

Available Rooms per Night 145,638 149,358 183,018 189,508 189,508 189,508
Nights per Year 365 365 365 365 365 365
Total Supply 399 409 501 519 519 519
Rooms Supply Growth 5.5 % 2.6 % 22.5 % 3.5 % 0.0 % 0.0 %
Marketwide Occupancy 68.1 % 68.3 % 65.2 % 64.5 % 65.1 % 65.6 %

Opening in April 2011 of the 100% competitive, 110-room Proposed Alton Hotel and Conference Center

Opening in June 2009 of the 50% competitive, 62-room Sleep Inn & Suites

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HVS Consulting and Valuation Services Supply and Demand Analysis 4-33

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

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HVS Consulting and Valuation Services Description of the Proposed Project 5-1

5. Description of the Proposed Project

The quality of a lodging facility's physical improvements has a direct

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

Project Overview The Proposed Alton Hotel should be a select-service lodging facility
containing 110 rentable units. The property has been projected to open on
April 1, 2011. The purpose of this report is to determine the market demand
and feasibility of two separate development scenarios in the Downtown Alton
neighborhood; a hotel or a hotel with an adjacent conference center. After
researching and analyzing the market, we are recommending the optimal
characteristics for these facilities, including guestroom count, food and
beverage facilities, amount of meeting space, and recreational facilities. We
have also recommended that the hotel be branded with a national franchise.
We have suggested the SpringHill Suites by Marriott brand for the proposed
property; however, our facility recommendations and performance
projections are not contingent on this particular brand affiliation. In general,
we suggest that the proposed subject property be located near the Mississippi
River, which is a primary attraction for the area, and incorporate a river
theme into the naming, marketing, design, and dcor of the proposed
property. Additionally, the design and exterior of the building(s) should
complement the quaint, historic nature of many of the existing buildings in
the neighborhood.

The SpringHill Suites by Marriott brand targets primarily corporate-transient

demand during the mid-week period; however, it is also popular with
weekend leisure travelers given the mix of amenities and spacious
guestrooms, which are approximately 25% larger than traditional hotel
rooms. SpringHill Suites offer complimentary continental breakfast, free local
calls, same-day dry cleaning, guest laundry facilities, an indoor swimming

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HVS Consulting and Valuation Services Description of the Proposed Project 5-2

pool, a whirlpool, and an exercise room. Guestrooms feature separate

working, dining, and sleeping areas. Each room contains a mini-refrigerator
and a microwave, along with a desk with phone and data ports. The main
competitors of the SpringHill Suites by Marriott brand include Hilton Garden
Inn, AmeriSuites, Country Inn & Suites, La Quinta, Sheraton Four Points,
Wingate Inn, and DoubleTree Club, among others. As of year-end 2007, there
were 177 SpringHill Suites by Marriott locations in the United States and
Canada. In 2007, the SpringHill Suites by Marriott brand averaged a 73.2%
occupancy level at a $106.49 average rate (6.5% higher than 2006).

Summary of the The following table summarizes the facilities that we have recommended to
Facilities be available at the proposed subject property under each scenario.

Table 5-1 Proposed Facilities Summary First Scenario

Guestroom Configuration Number of Units

King 35
Queen/Queen 75

Total 110

Food & Beverage Facilities Seating

Breakfast Dining Area TBD
Lounge TBD

Meeting & Banquet Facilities Square Footage

Ballroom 4,500
Breakout Room 1,000
Boardroom 500

Total 6,000

Amenities
Indoor Pool Exercise Room
Indoor Whirlpool Business Center
Vending Areas Market Pantry
Guest Laundry Facility

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HVS Consulting and Valuation Services Description of the Proposed Project 5-3

Table 5-2 Proposed Facilities Summary Second Scenario

Guestroom Configuration Number of Units

King 35
Queen/Queen 75

Total 110

Food & Beverage Facilities Seating

Breakfast Dining Area TBD
Lounge TBD

Meeting & Banquet Facilities Square Footage

Ballroom 7,500
Junior Ballroom 4,000
Boardroom 500

Total 12,000

Amenities
Indoor Pool Exercise Room
Indoor Whirlpool Business Center
Vending Areas Market Pantry
Guest Laundry Facility

Site Improvements and Once guests enter the site, ample parking should be available on a surface lot
Hotel Structure or in a parking garage. Due to the sloped nature of many parcels in the
downtown area, a parking garage located under the facility may be optimal.
Site improvements should include free-standing monument signage;
additional signage should also be placed on the exterior of the building. We
assume that all signage will adequately identify the property and meet brand
standards. Landscaping should provide a positive guest impression and
competitive exterior appearance. Sidewalks should be present along the front
entrance and around the perimeter of the hotel (and conference center if
applicable). Overall, the recommended site improvements should allow the
proposed subject property to be competitive in this market.

The structure will comprise either one single hotel building or two buildings
containing the hotel and meeting spaces separately. The exterior of the hotel
should be finished with brick, or with similar materials that will complement
surrounding buildings. Stairways and elevators should provide internal

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HVS Consulting and Valuation Services Description of the Proposed Project 5-4

vertical transportation within the main structure. The hotel's roof should be
constructed to provide adequate protection from the weather and
complement the style of surrounding buildings. Double-paned windows
should reduce noise transmission into the rooms. Heating and cooling will
likely be provided by through-the-wall units in the guestrooms and several
large units for the public areas. Overall, the building components are
expected to be normal for a hotel of this type and should meet the standards
for this market and the selected brand. We assume that all structural
components will meet local building codes and that no significant defaults
will occur during construction that may impact the future operating potential
of the hotel or delay its assumed opening date.

Lobby Guests should enter the hotel through automatic doors, which should open to
a vestibule, and then through a second set of automatic doors. The lobby
should be spacious, appropriate for a SpringHill Suites or similar upscale,
select-service brand. The lobby walls should be attractively finished with an
upscale material that is in line with brand standards. The front desk should
feature a high-quality countertop and is expected to be installed with
appropriate property management and telephone systems. The furnishings
and finishes in this space should offer an appropriate first impression, and the
design of the space should lend itself to adequate efficiency. The specific
design concept will be finalized with input from the pursued future brand for
the proposed subject property. We assume that all property management
and guestroom technology will be appropriately installed for the effective
management of hotel operations.

Food and Beverage The hotel should offer a breakfast dining area and a lounge, which should be
Facilities located on the first floor. The size and layout of each facility is expected to be
appropriate for the hotel. The furnishings of these spaces are expected to be
of a similar style and finish as lobby and guestroom furnishings.

Overall, the hotel is expected to provide a competitive offering of food and

beverage facilities for an upscale, select-service property.

Meeting and Banquet A select-service, upscale hotel in this location should offer a significant
Space amount of modern and technologically advanced meeting space. We have
considered two different scenarios regarding the recommended extent of
these facilities. In the first, hotel-only scenario, we have recommended a mid-
sized, fully divisible ballroom, as well as an additional breakout room and
boardroom. Our market research revealed that these facilities should be
adequate to compete in the market and capture a significant amount of

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Proposed Project 5-5

existing meeting and group demand. In the second, hotel and conference
center scenario, we have recommended a large, fully divisible ballroom; a
mid-sized, fully divisible junior ballroom; and a boardroom. Our market
research revealed that these facilities should be adequate to attract new
regional meetings and events to the market, as well as capture existing
meeting and group demand. In both scenarios, we would expect public
restrooms to be integrated into this space, as well as additional reception and
hallway areas.

Recreational Amenities The hotel should offer standard recreational amenities for this market and
select-service product type, including an exercise room, an indoor pool, and a
whirlpool.

Additional Amenities Additional amenities should include a business center, a market pantry, a
guest laundry facility, and wireless Internet access in the public areas. Ice
machines and vending areas should be located on each guestroom floor.
Overall, these supporting facilities should be appropriate for a hotel of this
type, and we assume that they will meet brand standards.

Guestrooms The hotel is expected to feature standard and/or suite-style guestroom

configurations. Guestrooms are expected to be present on all levels of the
property within the hotel building. The guestrooms should be large and offer
standard amenities for an upscale product type, including a comfortable bed
with quality linens, a work desk with chair, and a flat-panel television. In
addition, rooms are expected to feature amenities such as an iron and ironing
board, a coffeemaker, and high-speed Internet access. Overall, the
recommended guestroom facilities should offer a competitive product for this
neighborhood.

Guestroom bathrooms are expected to be of a standard size, with a shower-in-

tub, commode, and single sink with vanity area, featuring a stone countertop.
The floors should be finished with tile, and the walls should be finished with
an upscale material that complies with brand standards. Bathrooms
amenities should include a hairdryer and complimentary toiletries. Overall,
the recommended bathroom facilities should be appropriate for a product of
this type.

The interior guestroom corridors should be wide and functional, permitting

the easy passage of housekeeping carts. Corridor carpet, wall vinyl, signage,
and lighting should be in keeping with the overall look and design of the rest
of the property and comply with the standards of the selected brand.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Description of the Proposed Project 5-6

Back-of-the-House, The hotel should be served by the necessary back-of-the-house space,

ADA, and including an in-house laundry facility, administrative offices, and a full-
Environmental service kitchen to serve the needs of the breakfast area, lounge, and meeting
space. These spaces should be adequate for a hotel of this type and should
allow for the efficient operation of the property under competent
management.

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

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

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-1

6. Projection of Occupancy and Average Rate

Along with average rate results, the occupancy levels achieved by a hotel are
the foundation of the property's financial performance and market value.
Most of a lodging facility's other revenue sources (such as food, beverages,
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.

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

Historical Penetration In the following table, the penetration rates attained by the primary
Rates by Market competitors and the aggregate secondary competitors are set forth for each
Segment segment for the base year.

Table 6-1 Historical Penetration Rates

G r a nd
l
c ia

p
er

ng
ou

re

al l
mm

eti

isu

er

Property
Me

Le
Co

Ov

Holiday Inn 86 % 117 % 88 % 92 %

Comfort Inn 107 81 136 107
Secondary Competition 109 93 97 104

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-2

The secondary competition achieved the highest penetration rate within the
commercial segment. The highest penetration rate in the meeting and group
segment was achieved by the Holiday Inn, while the Comfort Inn led the
market with the highest leisure penetration rate.

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

A hotels penetration factor is calculated as its achieved market share of

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

Our projections of penetration, demand capture and occupancy performance

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

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-3

Table 6-2 Commercial Segment Adjusted Penetration Rates First Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 86 % 84 % 83 % 87 % 87 % 86 % 85 %
Comfort Inn 107 106 104 109 109 107 107
Secondary Competition 109 110 110 115 115 114 113
Proposed Alton Hotel 76 84 88 90
Sleep Inn & Suites 99 105 113 113 112 112

Within the commercial segment, the proposed subject hotels penetration is

positioned to be modestly below the market-average level by the stabilized
period due to the proposed subject property's location in Downtown Alton.
In comparison, other hotels in the competitive set benefit from superior access
and proximity to major highways and commercial demand generators.
Despite these factors, the proposed subject property is expected to capture a
significant amount of commercial demand and outperform the nearby
Holiday Inn in this market segment. The proposed subject property's
national-brand affiliation, as well as its status as the only upscale product
offering the market, should help it achieve the forecasted penetration levels
for this segment.

Table 6-3 Meeting and Group Segment Adjusted Penetration Rates First Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 117 % 119 % 120 % 118 % 114 % 111 % 109 %

Comfort Inn 81 83 83 82 79 77 76
Secondary Competition 93 95 95 94 91 89 87
Proposed Alton Hotel 106 117 126 132
Sleep Inn & Suites 66 72 74 71 69 68

Under our first, hotel-only scenario, the proposed subject property is

expected to become the foremost choice for meeting and group demand in
the market area. While the nearby Holiday Inn encompasses a similar
amount of meeting space, the space is somewhat dated and does not feature
upscale furnishings or finishes. Additionally, the proposed subject property's
location near the Mississippi River and riverfront attractions should provide it
with a significant advantage over the Holiday Inn and the rest of the

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-4

competitive set. Therefore, we believe that the proposed subject property will
become the leading choice for corporate meetings, association events, and
social banquets. Furthermore, we anticipate that the opening of the proposed
subject property will draw previously unaccommodated groups to the market
that are seeking an upscale product with modern amenities in a desirable
location.

Table 6-4 Leisure Segment Adjusted Penetration Rates First Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 88 % 89 % 89 % 87 % 83 % 81 % 80 %
Comfort Inn 136 137 138 134 129 126 124
Secondary Competition 97 98 98 96 92 90 88
Proposed Alton Hotel 113 123 132 137
Sleep Inn & Suites 76 81 82 79 77 76

The proposed subject property's leisure penetration rate is positioned above

the range of existing competitors, supported by the hotels proposed
downtown location in Alton. This location, which is proximate to the
Mississippi River, National Great Rivers Scenic Byway, Alton Marina, and
Argosy Casino, as well as shops and restaurants, is considered a focal point
for tourism to the area. With the proposed subject propertys location being
so favorable to group bus tours, individual tourists, and other leisure visitors,
we would expect the hotel to experience high levels of weekend demand,
especially during peak travel seasons and special events. As such, the
proposed subject property is expected to realize the highest leisure
penetration level in the market by the stabilized year.

These positioned segment penetration rates result in the following market

segmentation forecast under the first scenario.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-5

Table 6-5 Market Segmentation Forecast Subject Property First Scenario

2011 2012 2013 2014

Commercial 55 % 55 % 54 % 53 %
Meeting and Group 24 24 25 25
Leisure 21 21 21 22

Total 100 % 100 % 100 % 100 %

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-6

Table 6-6 Forecast of Subject Property's Occupancy - First Scenario

Market Segment 2011 2012 2013 2014

Commercial
Demand 75,236 76,854 77,465 77,886
Market Share 12.6 % 17.8 % 18.7 % 19.0 %
Capture 9,497 13,673 14,457 14,803
Penetration 76 % 84 % 88 % 90 %
Meeting and Group
Demand 23,677 24,369 24,678 24,932
Market Share 17.6 % 24.8 % 26.6 % 28.0 %
Capture 4,164 6,037 6,562 6,991
Penetration 106 % 117 % 126 % 132 %
Leisure
Demand 19,563 20,271 20,518 20,621
Market Share 18.8 % 26.1 % 27.9 % 29.0 %
Capture 3,681 5,300 5,722 5,980
Penetration 113 % 123 % 132 % 137 %

Total Room Nights Captured 17,342 25,010 26,741 27,775

Available Room Nights 30,360 40,150 40,150 40,150
Subject Occupancy 57 % 62 % 67 % 69 %
Marketwide Available Room Nights 183,018 189,508 189,508 189,508
Fair Share 17 % 21 % 21 % 21 %
Marketwide Occupied Room Nights 118,476 121,493 122,661 123,439
Market Share 15 % 21 % 22 % 23 %
Marketwide Occupancy 65 % 64 % 65 % 65 %
Total Penetration 88 % 97 % 103 % 106 %

We have chosen to use a stabilized occupancy level of 67%. 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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-7

and temporary economic downturns to force the occupancy below this

selected point of stability.

These projections reflect years beginning April 1, 2011, corresponding to the

first projection year for the subject propertys forecast of income and expense.

Table 6-7 Forecast of Occupancy - First Scenario

Subject
Property's
Year Occupancy

2011/12 58 %
2012/13 63
2013/14 67

Forecast of Subject The following tables illustrate our forecasts for each segment under the
Propertys Occupancy - second scenario.
Second Scenario
Table 6-8 Commercial Segment Adjusted Penetration Rates Second Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 86 % 84 % 83 % 87 % 87 % 86 % 85 %
Comfort Inn 107 106 104 109 109 107 107
Secondary Competition 109 110 110 115 115 114 113
Proposed Alton Hotel and Conference
Center 76 84 88 90
Sleep Inn & Suites 99 105 113 113 112 112

Table 6-9 Meeting and Group Segment Adjusted Penetration Rates Second Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 117 % 119 % 120 % 116 % 111 % 108 % 105 %

Comfort Inn 81 83 83 81 77 75 73
Secondary Competition 93 95 95 93 88 86 84
Proposed Alton Hotel and Conference
Center 114 128 138 145
Sleep Inn & Suites 66 72 72 69 67 65

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-8

Table 6-10 Leisure Segment Adjusted Penetration Rates Second Scenario

Hotel 2008 2009 2010 2011 2012 2013 2014

Holiday Inn 88 % 89 % 89 % 87 % 83 % 81 % 80 %
Comfort Inn 136 137 138 134 129 126 124
Secondary Competition 97 98 98 96 92 90 88
Proposed Alton Hotel and Conference
Center 113 123 132 137
Sleep Inn & Suites 76 81 82 79 77 76

Penetration rates in the commercial and leisure segments for the second,
hotel-and-conference-center scenario mirror those of the first scenario. In
contrast, we anticipate that the additional meeting space included in the
second scenario would allow the proposed subject property to over-penetrate
the market in the meeting and group segment to an even greater degree.
Under the second scenario, we have thus projected the proposed subject
property to achieve somewhat higher penetration rates in the meeting and
group segment than in the first scenario. These increased penetration levels
translate into modestly higher occupancy levels throughout the projection
period. We note that the addition of a conference center would allow the
proposed subject property to attract larger groups from a broader region, as
well as accommodate multiple groups at the same time; however, the ability
to attract this demand would be somewhat limited by the availability of hotel
rooms in the immediate vicinity of the facility. These positioned segment
penetration rates result in the following market segmentation forecast.

Table 6-11 Market Segmentation Forecast Subject Property Second Scenario

2011 2012 2013 2014

Commercial 53 % 53 % 52 % 51 %
Meeting and Group 26 27 27 28
Leisure 21 20 21 21

Total 100 % 100 % 100 % 100 %

The proposed subject property's occupancy forecast is set forth as follows for
the second scenario.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-9

Table 6-12 Forecast of Subject Property's Occupancy - Second Scenario

Market Segment 2011 2012 2013 2014

Commercial
Demand 75,099 76,534 77,112 77,533
Market Share 12.6 % 17.8 % 18.7 % 19.0 %
Capture 9,479 13,616 14,391 14,736
Penetration 76 % 84 % 88 % 90 %
Meeting and Group
Demand 24,614 25,485 25,924 26,191
Market Share 18.9 % 27.0 % 29.2 % 30.8 %
Capture 4,663 6,889 7,560 8,060
Penetration 114 % 128 % 138 % 145 %
Leisure
Demand 19,525 20,178 20,416 20,518
Market Share 18.8 % 26.1 % 27.9 % 29.0 %
Capture 3,674 5,276 5,693 5,951
Penetration 113 % 123 % 132 % 137 %

Total Room Nights Captured 17,817 25,781 27,644 28,747

Available Room Nights 30,360 40,150 40,150 40,150
Subject Occupancy 59 % 64 % 69 % 72 %
Marketwide Available Room Nights 183,018 189,508 189,508 189,508
Fair Share 17 % 21 % 21 % 21 %
Marketwide Occupied Room Nights 119,238 122,198 123,452 124,242
Market Share 15 % 21 % 22 % 23 %
Marketwide Occupancy 65 % 64 % 65 % 66 %
Total Penetration 90 % 100 % 106 % 109 %

The following table presents the summary of forecast occupancy levels for
this scenario.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-10

Table 6-13 Forecast of Occupancy - Second Scenario

Subject
Property's
Year Occupancy

2011/12 60 %
2012/13 65
2013/14 70

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

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

Table 6-14 Base Year Average Rate and RevPAR of the Competitors

Rooms Revenue
Estimated 2008 Per Available
Property Average Room Rate Room

Holiday Inn $105.00 $66.15

Comfort Inn 73.00 53.29
Average - Primary Competitors $93.99 $62.14
Average - Secondary Competitors 73.96 52.46

Overall Average $84.15 $57.56

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-11

The defined primarily competitive market realized an overall average rate of

$93.99 in the 2008 base year, improving from the 2007 level of $86.31. The
Holiday Inn achieved the highest estimated average rate in the local
competitive market, by a measurable margin, because of its well-established
position as the only full-service product in the area. Our market research
revealed that competitive hotels outside of Alton experience higher levels of
commercial demand, providing them with mid-week pricing power. In
contrast, Alton hotels experience very strong weekend demand during peak
travel seasons, which allows them to command a significant rate premium at
those times. In respect to the first scenario, the selected rate position for the
proposed subject property, in base-year dollars, takes into consideration
factors such as its desirable location, upscale product offering, and anticipated
meeting space component. We have selected the rate position of $110.00, in
base-year dollars, for the proposed subject under the first scenario.

As illustrated previously, the average rate for the primarily competitive

market averaged $86.31 in 2007, before reaching $93.99 in 2008. Based upon
our research and analysis, we would expect a positive trend for average rate
growth in the future for the subject market. The projected increases are
somewhat conservative and balance the ongoing demand growth in the
subject market with the currently retracting national and regional economies.
Contrary to national trends, hotels in this market have maintained their rate
integrity in the face of the current recession, in large part due to strengthened
demand from area development projects.

Based on these considerations, the following table illustrates the projected

average rate and the growth rates assumed for the first scenario. 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.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-12

Table 6-15 Market and Subject Property Average Rate Forecast First Scenario

Areawide (Calendar Year) Subject Property (Calendar Year)

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

Base Year 68.4 % $84.15 $110.00 130.7 %

2009 68.0 1.5 % 85.41 1.5 % 111.65 130.7
2010 68.2 2.0 87.12 2.0 113.88 130.7
2011 64.7 3.5 90.17 57.0 % 3.5 117.87 130.7
2012 64.1 4.5 94.23 62.0 4.5 123.17 130.7
2013 64.7 3.5 97.52 67.0 3.5 127.48 130.7
2014 65.1 3.0 100.45 69.0 3.0 131.31 130.7

As illustrated above, a 1.5% rate of change is expected for the subject

property's positioned 2008 room rate in 2009. This is followed by growth rates
of 2.0% and 3.5% in 2010 and 2011, respectively. This market should enjoy
positive, albeit conservative, rate growth through the near term. The
proposed subject property's rate position should reflect growth similar to
market trends because of its new facility, anticipated national-brand
affiliation, and upscale product offering. The proposed subject propertys
penetration rate is forecast to reach 130.7% by the stabilized period under the
first scenario.

Under the second scenario, the proposed subject property is expected to

capture additional meeting and group demand. As a result, this segment is
expected to represent a greater percentage of the proposed subject property's
overall occupancy. Meeting and group demand is generally lower rated than
transient demand, as hotels are more willing to negotiate rates in order to
guarantee large blocks of room nights. In respect to the second scenario, the
selected rate position for the proposed subject property's, in base-year dollars,
is modestly below the first-scenario position. However, it is still positioned at
the top of the market, reflecting the proposed subject property's desirable
location and upscale product offering. Our forecast of future average rate
change for the market and proposed subject property under the second
scenario is presented in the following table.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-13

Table 6-16 Market and Subject Property Average Rate Forecast Second Scenario

Areawide (Calendar Year) Subject Property (Calendar Year)

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

Base Year 68.4 % $84.15 $106.00 126.0 %

2009 68.1 1.5 % 85.41 1.5 % 107.59 126.0
2010 68.3 2.0 87.12 2.0 109.74 126.0
2011 65.2 3.5 90.17 59.0 % 3.5 113.58 126.0
2012 64.5 4.5 94.23 64.0 4.5 118.69 126.0
2013 65.1 3.5 97.52 69.0 3.5 122.85 126.0
2014 65.6 3.0 100.45 72.0 3.0 126.53 126.0

A new property must establish its reputation and a client base in the market
during its ramp-up period; as such, the proposed subject propertys average
rates in the initial operating period have been discounted to reflect this
likelihood. Under both scenarios, we forecast 3.0% and 1.5% discounts to the
proposed subject propertys forecast room rates in the first two operating
years, which would be typical for a new operation of this type.

The following average rates will be used to project the subject property's
rooms revenue in the first scenario; this forecast reflects years which begin
April 1, 2011 and correspond with our financial projections.

Table 6-17 Forecast of Average Rate First Scenario

Average Rate Before Average Rate After

Year Occupancy Discount Discount Discount

2011/12 58 % $119.18 3.0 % $115.60

2012/13 63 124.24 1.5 122.37
2013/14 67 128.43 0.0 128.43

The following average rates will be used to project the subject property's
rooms revenue in the second scenario; this forecast reflects years which begin
April 1, 2011 and correspond with our financial projections.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 6-14

Table 6-18 Forecast of Average Rate Second Scenario

Average Rate Before Average Rate After

Year Occupancy Discount Discount Discount

2011/12 60 % $114.84 3.0 % $111.40

2012/13 65 119.72 1.5 117.92
2013/14 70 123.76 0.0 123.76

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-1

7. Projection of Income and Expense

In this chapter of our report, we have compiled forecasts of income and

expense for the proposed subject propertys two scenarios. This forecast is
based on the facilities programs set forth previously, as well as the occupancy
and average rate forecasts discussed previously.

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

Comparable Operating In order to project future income and expense for the proposed subject
Statements property, we have included a sample of individual comparable operating
statements from our database of hotel statistics. 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). A composite statement is also illustrated. We have selected
a set of comparable operating statements from mid- and upscale hotels
containing significant meeting space. The selected statements represent a
range of meeting facilities and their capacities, encompassing both of our
scenarios. Therefore, these statements have been used to project operating
performances for both scenarios. These historical income and expense
statements will be used as benchmarks in our forthcoming forecasts of income
and expense.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-2

Table 7-1 Comparable Operating Statements: Ratio to Sales

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

Year: 2007 2006/07 2006/07 2006 2007 2006

Number of Rooms: 170 to 220 150 to 190 110 to 150 100 to 140 130 to 170 70 to 90
Days Open: 365 365 365 365 365 365
Occupancy: 66% 68% 75% 69% 63% 65%
Average Rate: $102 $113 $116 $101 $101 $110
RevPAR: $67 $77 $87 $70 $63 $72
REVENUE
Rooms 77.0 % 91.6 % 90.4 % 84.0 % 80.4 % 91.7 %
Food & Beverage 19.6 7.3 7.3 13.4 18.0 5.8
Telephone 0.2 0.2 0.5 0.7 0.1 0.7
Other Income 3.2 0.9 1.9 2.0 1.5 1.7
Total 100.0 100.0 100.0 100.0 100.0 100.0
DEPARTMENTAL EXPENSES*
Rooms 18.8 21.0 23.5 23.0 22.4 19.2
Food & Beverage 72.8 75.8 82.9 69.7 61.5 70.0
Telephone 369.2 208.3 122.7 195.8 366.7 162.5
Other Expenses 29.2 52.3 0.0 70.8 29.7 94.7
Total 30.5 25.7 27.9 31.3 30.0 24.5
DEPARTMENTAL INCOME 69.5 74.3 72.1 68.7 70.0 75.5
OPERATING EXPENSES
Administrative & General 5.4 7.4 9.2 6.7 9.4 10.5
Marketing 4.8 4.5 4.1 5.0 2.1 3.9
Franchise Fee 5.8 7.1 7.7 6.9 6.0 6.4
Property Operations & Maintenance 2.7 4.8 3.8 5.4 6.7 4.4
Utilities 6.1 5.5 4.0 4.8 5.9 2.3
Total 24.8 29.3 28.9 28.8 30.1 27.6
HOUSE PROFIT 44.7 45.0 43.2 39.9 39.9 47.9
Management Fee 3.8 4.4 4.5 2.6 3.0 3.8
INCOME BEFORE FIXED CHARGES 41.0 40.6 38.7 37.3 36.9 44.2
FIXED EXPENSES
Property Taxes 3.8 3.4 2.4 4.8 6.0 5.7
Insurance 0.5 1.0 0.5 1.2 0.5 0.5
Miscellaneous Fixed Expenses 0.0 0.0 0.0 0.0 0.8 0.0
Reserve for Replacement 0.0 4.0 0.0 0.0 4.0 4.0
Total 4.3 8.4 2.9 6.0 11.3 10.2
NET INCOME 36.7 % 32.2 % 35.8 % 31.3 % 25.6 % 34.0 %

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-3

Table 7-2 Comparable Operating Statements: Amounts Per Available Room

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

Year: 2007 2006/07 2006/07 2006 2007 2006

Number of Rooms: 170 to 220 150 to 190 110 to 150 100 to 140 130 to 170 70 to 90
Days Open: 365 365 365 365 365 365
Occupancy: 66% 68% 75% 69% 63% 65%
Average Rate: $102 $113 $116 $101 $101 $110
RevPAR: $67 $77 $87 $70 $63 $72
REVENUE
Rooms $24,546 $28,108 $31,774 $25,612 $23,067 $26,205
Food & Beverage 6,263 2,251 2,556 4,091 5,160 1,667
Telephone 67 72 165 198 40 205
Other Income 1,005 263 669 595 427 487
Total 31,881 30,695 35,165 30,496 28,693 28,564
DEPARTMENTAL EXPENSES
Rooms 4,619 5,898 7,481 5,884 5,173 5,026
Food & Beverage 4,557 1,707 2,120 2,851 3,173 1,167
Telephone 247 150 203 388 147 333
Other Expenses 294 138 0 421 127 462
Total 9,716 7,892 9,805 9,545 8,620 6,987
DEPARTMENTAL INCOME 22,165 22,802 25,361 20,950 20,073 21,577
OPERATING EXPENSES
Administrative & General 1,732 2,257 3,248 2,041 2,707 3,000
Marketing 1,541 1,383 1,451 1,537 593 1,128
Franchise Fee 1,840 2,174 2,699 2,099 1,727 1,833
Property Operations & Maintenance 866 1,473 1,353 1,653 1,920 1,244
Utilities 1,933 1,701 1,414 1,455 1,680 667
Total 7,912 8,988 10,165 8,785 8,627 7,872
HOUSE PROFIT 14,253 13,814 15,196 12,165 11,446 13,705
Management Fee 1,196 1,353 1,586 793 860 1,077
INCOME BEFORE FIXED CHARGES 13,057 12,461 13,609 11,372 10,587 12,628
FIXED EXPENSES
Property Taxes 1,222 1,036 835 1,455 1,720 1,615
Insurance 165 299 188 372 153 141
Miscellaneous Fixed Expenses 0 0 0 0 233 0
Reserve for Replacement 0 1,228 0 0 1,147 1,141
Total 1,387 2,563 1,023 1,826 3,253 2,897
NET INCOME $11,670 $9,898 $12,586 $9,546 $7,334 $9,731

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-4

Table 7-3 Comparable Operating Statements: Amounts Per Occupied Room

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

Year: 2007 2006/07 2006/07 2006 2007 2006

Number of Rooms: 170 to 220 150 to 190 110 to 150 100 to 140 130 to 170 70 to 90
Days Open: 365 365 365 365 365 365
Occupancy: 66% 68% 75% 69% 63% 65%
Average Rate: $102 $113 $116 $101 $101 $110
RevPAR: $67 $77 $87 $70 $63 $72
REVENUE
Rooms $102.17 $113.25 $116.32 $101.41 $100.79 $110.46
Food & Beverage 26.07 9.07 9.36 16.20 22.55 7.03
Telephone 0.28 0.29 0.61 0.79 0.17 0.86
Other Income 4.18 1.06 2.45 2.36 1.86 2.05
Total 132.71 123.67 128.73 120.75 125.38 120.40
DEPARTMENTAL EXPENSES
Rooms 19.22 23.76 27.39 23.30 22.61 21.18
Food & Beverage 18.97 6.88 7.76 11.29 13.87 4.92
Telephone 1.03 0.60 0.74 1.54 0.64 1.41
Other Expenses 1.22 0.55 0.00 1.67 0.55 1.95
Total 40.44 31.80 35.89 37.80 37.67 29.45
DEPARTMENTAL INCOME 92.26 91.87 92.84 82.95 87.71 90.95
OPERATING EXPENSES
Administrative & General 7.21 9.10 11.89 8.08 11.83 12.65
Marketing 6.42 5.57 5.31 6.09 2.59 4.76
Franchise Fee 7.66 8.76 9.88 8.31 7.54 7.73
Property Operations & Maintenance 3.60 5.94 4.95 6.54 8.39 5.24
Utilities 8.05 6.85 5.17 5.76 7.34 2.81
Total 32.94 36.21 37.21 34.79 37.70 33.18
HOUSE PROFIT 59.33 55.66 55.63 48.17 50.02 57.77
Management Fee 4.98 5.45 5.81 3.14 3.76 4.54
INCOME BEFORE FIXED CHARGES 54.35 50.21 49.82 45.03 46.26 53.23
FIXED EXPENSES
Property Taxes 5.09 4.17 3.06 5.76 7.52 6.81
Insurance 0.69 1.21 0.69 1.47 0.67 0.59
Miscellaneous Fixed Expenses 0.00 0.00 0.00 0.00 1.02 0.00
Reserve for Replacement 0.00 4.95 0.00 0.00 5.01 4.81
Total 5.77 10.33 3.74 7.23 14.22 12.21
NET INCOME $48.58 $39.88 $46.08 $37.80 $32.04 $41.02

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-5

Table 7-4 Comparable Operating Statements: Composite Statement

Number of Rooms: 843

Days Open: 365
Occupancy: 67.5% Amount per Amount per
Average Rate: $107.25 Percentage Available Occupied
RevPAR: $72.43 of Revenue Room Room
REVENUE
Rooms $22,285 85.0 % $26,435 $107.25
Food & Beverage 3,330 12.7 3,950 16.03
Telephone 93 0.4 110 0.45
Other Income 502 1.9 595 2.42
Total 26,210 100.0 31,091 126.14
DEPARTMENTAL EXPENSES
Rooms 4,756 21.3 5,642 22.89
Food & Beverage 2,363 71.0 2,803 11.37
Telephone 195 209.7 231 0.94
Other Expenses 186 37.1 221 0.90
Total 7,500 28.6 8,897 36.10
DEPARTMENTAL INCOME 18,710 71.4 22,195 90.05
OPERATING EXPENSES
Administrative & General 2,032 7.8 2,410 9.78
Marketing 1,086 4.1 1,288 5.23
Franchise Fee 1,735 6.6 2,058 8.35
Property Operations & Maintenance 1,179 4.5 1,399 5.67
Utilities 1,327 5.1 1,574 6.39
Total 7,359 28.1 8,730 35.42
HOUSE PROFIT 11,351 43.3 13,465 54.63
Management Fee 978 3.7 1,160 4.71
INCOME BEFORE FIXED CHARGES 10,373 39.6 12,305 49.92
FIXED EXPENSES
Property Taxes 1,081 4.1 1,282 5.20
Insurance 186 0.7 221 0.90
Miscellaneous Fixed Expenses 35 0.1 42 0.17
Reserve for Replacement 466 1.8 553 2.24
Total 1,768 6.7 2,097 8.51
NET INCOME $8,605 32.8 % $10,208 $41.41

The comparables departmental income ranged from 68.7% to 75.5% of total

revenue, averaging 71.4%. The comparable properties achieved a house profit
ranging from 39.9% to 47.9% of total revenue, averaging 43.3%. We will refer
to the comparable operating data in our discussion of each line item, which
follows later in this section of the report.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-6

Premise of Forecast The national and international economies are currently in a volatile state.
With declines in stock markets across the world and government intervention
in many forms, the economy of the United States in now officially in a state of
recession. Although equity for hotel investments is available, the lack of
ready debt has severely curtailed acquisitions and new construction. Market
participants are unsure when solvency will be restored and active investment
will return.

The economic turmoil and credit crisis are also affecting business and
consumer spending throughout the United States. With problematic access to
credit, businesses are cutting back on expenses and consumers have reduced
spending. Hotel use is especially vulnerable to these trends. Travel for
business and pleasure is often viewed as a discretionary expense and can be
suspended without much forewarning. Hotels are already experiencing
cancellations of or reductions in events such as meetings and trainings. Some
companies are reviewing their travel policies quarterly and others have
instigated travel freezes.

Many operators prepared their budgets for 2009 during the fourth quarter of
2008. With the continued deterioration of the economy and hotel
performance since that time, some operators are revising their forecasts
quarterly. While the eventual magnitude of the decline in individual hotel
markets cannot be foreseen at this time, national RevPAR trends are forecast
to notably lower than 2008. Hotel operators are expecting RevPAR declines
across North America. Starwood Hotels is expecting 12% to 15% RevPAR
declines, Marriott recently announced potential RevPAR decreases of 12% to
17%, and Choice Hotels expects a RevPAR decline of 10% for 2009.
PricewaterhouseCoopers is projecting a RevPAR decline of approximately
11.2% for 2009, while other forecasts of RevPAR are similarly negative
Morgan Stanley is forecasting a 9.1% RevPAR decline, PKF Consulting is
forecasting a decline of 7.8%, and Smith Travel Research is forecasting a
decline of 5.9%. Operators typically respond with stronger expense controls
during periods when revenues decline. Hotel budgets are expected to reflect
moderating revenues, but with commensurate adjustments in expenses to
minimize the impact on profitability.

The duration and outcome of the present economic situation are uncertain at
this time. Our forecasts reflect operators and investors current outlook for
the market, with the expectation of a bottoming-out of the recession in 2009,
and a resumption of some growth in 2010 and a rebound thereafter.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-7

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

The following table illustrates the revenue and expense categories that can be
projected using this fixed and variable component model. These percentages
show the portion of each category that is typically fixed and variable; the
middle column describes the basis for calculating the percentage of variability,
while the last column sets forth the fixed percentage that has been utilized in
this valuation.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-8

Table 7-5 Range of Fixed and Variable Ratios

Selected
Category Percent Fixed Percent Variable Index of Variability Fixed Ratio
Revenues
Food & Beverage 25 - 50 % 50 - 75 % Occupancy 25 %
Telephone 10 - 40 60 - 90 Occupancy 10
Other Income 30 - 70 30 - 70 Occupancy 10
Departmental Expenses
Rooms 50 - 70 30 - 50 Occupancy 60
Food & Beverage 35 - 60 40 - 65 Food & Beverage Revenue 55
Telephone 40 - 60 40 - 60 Telephone Revenue 60
Other Expenses 30 - 70 30 - 70 Other Income 70
Undistributed Operating Expenses
Administrative & General 65 - 85 15 - 35 Total Revenue 75
Marketing 65 - 85 15 - 35 Total Revenue 75
Prop. Operations & Maint. 55 - 75 25 - 45 Total Revenue 75
Utilities 75 - 95 5 - 25 Total Revenue 75
Management Fee 0 100 Total Revenue 0
Fixed Expenses
Property Taxes 100 0 Total Revenue 100
Insurance 100 0 Total Revenue 100
Reserve for Replacement 0 100 Total Revenue 0

Our fixed and variable projection model is based upon variables that we
input for each revenue and expense item for a base year, which in this case
is the year 2008. The base-year forecast sets forth the ratios to revenue,
amounts per available room, or amounts per occupied room that we believe
can be achieved at the stated base-year average rate and occupancy. Our
input variables are derived from the comparable hotel statements. The model
then calculates a base-year forecast of income and expense in these base-year
dollars.

The actual forecast is derived by adjusting each years revenue and expense
by the amount fixed (the fixed expense multiplied by the inflated base-year
amount) plus the variable amount (the variable expense multiplied by the
inflated base-year amount) multiplied by the ratio of the projection years
occupancy to the base-year occupancy (in the case of departmental revenue
and expense) or the ratio of the projection years revenue to the base-years
revenue (in the case of undistributed operating expenses). Fixed expenses

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-9

remain fixed, increasing only with inflation. Our discussion of the revenue
and expense forecast in this report is based upon the output derived from the
fixed and variable model. This forecast of revenue and expense is
accomplished through a step-by-step approach, following the format of the
Uniform System of Accounts for the Lodging Industry. Each category of revenue
and expense is estimated separately and combined at the end in the final
statement of income and expense.

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-10

Table 7-6 Inflation Estimates

Projected Increase in Consumer Price
Previous Index (Annualized Rate
Projections Versus 12 Months Earlier)
through June December
Name Firm December 2008 2009 2009
Scott Anderson Wells Fargo & Co. 4.4 % (0.6) % 0.2 %
Paul Ashworth Capital Economics 3.0 (2.0) 1.0
Nariman Behravesh Global Insight 6.6 (3.6) 0.2
Richard Berner/David Greenlaw Morgan Stanley 4.8 (1.8) 0.4
Ram Bhagavatula Combinatorics Capital 3.2 (1.0) 1.0
Jay Brinkmann Mortgage Bankers Association 4.3 (1.8) 0.6
Joseph Carson AllianceBernstein 4.2 (1.0) 0.0
Mike Cosgrove Econoclast 3.8 (0.5) 0.4
Lou Crandall Wrightson ICAP 4.7 (1.8) 1.3
Joan Crary/Stanley Sedo RSQE, U. of Michigan 3.7 (0.4) 1.8
J. Dewey Daane Vanderbilt University 4.5 1.0 1.0
Richard DeKaser National City Corporation 3.0 (2.0) 2.0
Douglas Duncan Fannie Mae 4.0 (1.5) 0.1
Brian Fabbri BNP Paribas 4.8 (1.9) 1.8
Maria Fiorini Ramirez/Joshua Shapiro MFR, Inc. 4.0 (1.1) 0.0
Stephen Gallagher Societe Generale 4.6 (2.2) 1.6
Ethan S. Harris/Dean Maki Barclays Capital 5.2 (1.8) 2.5
Ethan S. Harris Lehman Brothers 3.3
Maury Harris UBS 4.0 (0.2) 2.0
Jan Hatzius Goldman Sachs & Co. 4.2 (1.0) 0.4
Tracy Herrick The Private Bank 4.3 1.0 0.5
Stuart Hoffman PNC Financial Services Group 3.9 0.2 1.2
Peter Hooper/Joseph A. LaVorgna Deutsche Bank Securities Inc. 4.3 (0.5) 0.4
Gene Huang FedEx Corp. 3.7 (0.5) 1.3
William B. Hummer Wayne Hummer Investments LLC 3.4 (1.0) 0.9
Dana Johnson Comerica Bank 2.8 (2.0) 1.1
Kurt Karl Swiss Re 6.1 (2.4) 0.7
Bruce Kasman JP Morgan Chase & Co. 4.2 (1.7) 0.8
Paul Kasriel The Northern Trust 3.6 (2.2) 1.8
Daniel Laufenberg Ameriprise Financial 3.3 1.3 2.2
Edward Leamer/David Shulman UCLA Anderson Forecast 3.7 (1.2) 0.1
Mickey D. Levy Bank of America 2.9 (1.8) 1.5
John Lonski Moody's Investors Service 3.3 (1.5) 1.5
David Malpass Encima Global LLC 0.3 1.8
Dean Maki Barclays Capital 5.2
Jim Meil/Richard Kaglic Eaton Corp. 3.8 (1.0) 0.8
Mark Nielson, Ph. D. MacroEcon Global Advisors 4.2 4.5 4.8
Michael P. Niemira International Council of Shopping Centers 3.0 0.4 2.1
Nicholas S. Perna Perna Associates 3.5 (1.5) 1.1
Joel Prakken/Chris Varvares Macroeconomic Advisers 4.5 1.4 (0.9)
Arun Raha Economic and Revenue Forecast Council (1.4) 3.4
David Resler Nomura Securities International Inc. 4.5
John Ryding/Conrad DeQuadros RDQ Economics (1.0) 2.0
Ian Shepherdson High Frequency Economics 4.4 (2.5) 1.5
John Silvia Wachovia Corp. 3.2 (1.4) 2.5
Allen Sinai Decision Economics Inc. 3.8 (0.8) 2.8
James F. Smith Western Carolina Univ. and Parsec Financial Mgmt. (0.4) 0.9 1.0
Sung Won Sohn California State University 3.5 1.1 1.9
Neal Soss Credit Suisse 4.8 (2.0) 2.2
Stephen Stanley RBS Greenwich Capital 4.2 (1.8) 1.7
Susan M. Sterne Economic Analysis 2.8 0.8 1.1
Diane Swonk Mesirow Financial 4.7 (1.9) 0.0
Bart van Ark The Conference Board 4.6 (2.1) (0.2)
Brian S. Wesbury/Robert Stein First Trust Advisors, L.P. 4.5 (1.4) 2.5
William T. Wilson National Bank of Kuwait 3.8 0.9 (2.3)
David Wyss Standard and Poor's 6.6 (2.2) (2.3)
Lawrence Yun National Association of Realtors 2.9 (0.8) 1.2
Averages 4.0 % (0.9) % 1.1 %
Actual Inflation for the Period 3.8 %
Source: wsj.com, January 15, 2009

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-11

As the preceding table indicates, the financial analysts who were surveyed in
late-2008 anticipated inflation rates ranging from -3.6% to 4.5% (on an
annualized basis) for the six-month period ending June 2009; the average
estimate was -0.9%. The same group forecast 4.0 % inflation for the six-month
period ending December 2008, and the actual inflation rate during this period
was 3.8 %.

As a further check on these inflation projections, we have reviewed historical

increases in the Consumer Price Index (CPI-U). Because the value of real
estate is predicated on cash flows over a relatively long period, inflation
should be considered from a long-term perspective.

Table 7-7 National Consumer Price Index (All Urban Consumers)

National Consumer Percent Change

Year Price Index from Previous Year

1999 166.6
2000 172.2 3.4 %
2001 177.1 2.8
2002 179.9 1.6
2003 184.0 2.3
2004 188.9 2.7
2005 195.3 3.4
2006 201.6 3.2
2007 207.3 2.8
2008 215.3 3.8

Average Annual Compounded Change,

1999 - 2008: 2.9 %
2004 - 2008: 3.3

Source: Bureau of Labor Statistics

Between 1999 and 2008, the national CPI increased at an average annual
compounded rate of 2.9%; from 2004 to 2008, the CPI rose by a modestly
higher average annual compounded rate of 3.3%. In 2008, the CPI increased
by 3.8%, a increase from the levels of 3.2% and 2.8% recorded in 2006 and
2007, respectively.

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 3.0% annually. This stabilized

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-12

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.

Summary of Based on an analysis that will be detailed throughout this section, we have
Projections formulated a forecast of income and expense for each of the two scenarios.
The following tables present detailed forecasts through the fifth projection
year, including amounts per available room and per occupied room. The
second set of tables illustrate our ten-year forecasts of income and expense,
presented with a lesser degree of detail. The forecasts pertain to years
beginning April 1, 2011 and are expressed in inflated dollars for each year.

Proposed Alton Hotel - Alton, Illinois

Table 7-8 Detailed Forecast of Income and Expense First Scenario

2011/12 Begins April 2012/13 Stabilized 2014/15 2015/16

Number of Rooms: 110 110 110 110 110
Occupancy: 58% 63% 67% 67% 67%
Average Rate: $115.60 $122.37 $128.43 $132.28 $136.25
RevPAR: $67.05 $77.09 $86.05 $88.63 $91.29
Days Open: 365 365 365 365 365
Occupied Rooms: 23,287 %Gross PAR POR 25,295 %Gross PAR POR 26,901 %Gross PAR POR 26,901 %Gross PAR POR 26,901 %Gross PAR POR
REVENUE
Rooms $2,692 79.6 % $24,473 $115.60 $3,095 80.2 % $28,136 $122.36 $3,455 80.7 % $31,409 $128.44 $3,558 80.7 % $32,345 $132.27 $3,665 80.7 % $33,318 $136.24
Food 472 14.0 4,292 20.28 521 13.5 4,738 20.60 565 13.2 5,141 21.02 582 13.2 5,295 21.65 600 13.2 5,454 22.30
Beverage 144 4.3 1,312 6.20 159 4.1 1,448 6.30 173 4.0 1,571 6.42 178 4.0 1,618 6.62 183 4.0 1,666 6.81
Telephone 9 0.3 83 0.39 10 0.3 92 0.40 11 0.3 100 0.41 11 0.3 103 0.42 12 0.3 106 0.43
Other Income 65 1.9 592 2.79 72 1.9 656 2.85 79 1.8 714 2.92 81 1.8 735 3.01 83 1.8 757 3.10
Total Revenues 3,383 100.0 30,751 145.26 3,858 100.0 35,070 152.51 4,283 100.0 38,935 159.21 4,411 100.0 40,097 163.96 4,543 100.0 41,302 168.89
DEPARTMENTAL EXPENSES *
Rooms 663 24.6 6,023 28.45 704 22.7 6,399 27.83 743 21.5 6,752 27.61 765 21.5 6,955 28.44 788 21.5 7,164 29.29
Food & Beverage 462 75.0 4,201 19.84 490 72.1 4,457 19.38 517 70.0 4,698 19.21 532 70.0 4,839 19.79 548 70.0 4,984 20.38
Telephone 21 227.3 188 0.89 22 217.2 199 0.87 23 210.0 210 0.86 24 210.0 216 0.88 24 210.0 223 0.91
Other Expenses 29 43.9 259 1.23 30 41.6 273 1.19 31 40.0 286 1.17 32 40.0 294 1.20 33 40.0 303 1.24
Total 1,174 34.7 10,672 50.41 1,246 32.3 11,329 49.27 1,314 30.7 11,946 48.85 1,354 30.7 12,305 50.32 1,394 30.7 12,674 51.82
DEPARTMENTAL INCOME 2,209 65.3 20,080 94.85 2,612 67.7 23,741 103.24 2,969 69.3 26,989 110.36 3,057 69.3 27,792 113.65 3,149 69.3 28,628 117.07
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 308 9.1 2,801 13.23 322 8.3 2,924 12.71 334 7.8 3,037 12.42 344 7.8 3,127 12.79 354 7.8 3,221 13.17
Marketing 127 3.8 1,153 5.45 131 3.4 1,192 5.19 135 3.1 1,226 5.01 139 3.1 1,263 5.16 143 3.1 1,301 5.32
Franchise Fee 202 6.0 1,835 8.67 232 6.0 2,110 9.18 259 6.1 2,356 9.63 267 6.1 2,426 9.92 275 6.1 2,499 10.22
Prop. Operations & Maint. 138 4.1 1,254 5.92 149 3.9 1,357 5.90 161 3.7 1,460 5.97 165 3.7 1,504 6.15 170 3.7 1,549 6.33
Utilities 186 5.5 1,690 7.98 196 5.1 1,781 7.75 206 4.8 1,869 7.64 212 4.8 1,925 7.87 218 4.8 1,982 8.11
Total 961 28.5 8,734 41.26 1,030 26.7 9,365 40.73 1,094 25.5 9,947 40.67 1,127 25.5 10,245 41.89 1,161 25.5 10,552 43.15
HOUSE PROFIT 1,248 36.8 11,345 53.59 1,581 41.0 14,376 62.52 1,875 43.8 17,042 69.69 1,930 43.8 17,548 71.75 1,988 43.8 18,076 73.92
Management Fee 101 3.0 923 4.36 116 3.0 1,052 4.58 128 3.0 1,168 4.78 132 3.0 1,203 4.92 136 3.0 1,239 5.07
INCOME BEFORE FIXED CHARGES 1,147 33.8 10,423 49.23 1,466 38.0 13,324 57.94 1,746 40.8 15,874 64.91 1,798 40.8 16,345 66.84 1,852 40.8 16,837 68.85
FIXED EXPENSES
Property Taxes 173 5.1 1,575 7.44 176 4.6 1,599 6.95 179 4.2 1,631 6.67 185 4.2 1,680 6.87 190 4.2 1,730 7.07
Insurance 48 1.4 440 2.08 50 1.3 454 1.97 51 1.2 467 1.91 53 1.2 481 1.97 55 1.2 496 2.03
Reserve for Replacement 68 2.0 615 2.91 116 3.0 1,052 4.58 171 4.0 1,557 6.37 176 4.0 1,604 6.56 182 4.0 1,652 6.76
Total 289 8.5 2,631 12.43 341 8.9 3,104 13.50 402 9.4 3,655 14.95 414 9.4 3,765 15.39 427 9.4 3,878 15.86
NET INCOME $857 25.3 % $7,792 $36.81 $1,124 29.1 % $10,220 $44.44 $1,344 31.4 % $12,218 $49.96 $1,384 31.4 % $12,580 $51.44 $1,426 31.4 % $12,959 $52.99

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

Proposed Alton Hotel - Alton, Illinois

Table 7-9 Detailed Forecast of Income and Expense Second Scenario

2011/12 Begins April 2012/13 Stabilized 2014/15 2015/16

Number of Rooms: 110 110 110 110 110
Oc cupancy : 60% 65% 70% 70% 70%
Average Rate: $111.40 $117.92 $123.76 $127.47 $131.29
RevPAR: $66.84 $76.65 $86.63 $89.23 $91.91
Days Open: 365 365 365 365 365
Oc cupied Rooms: 24,090 %Gross PAR P OR 26,098 %Gross PAR POR 28,105 %Gross PAR POR 28,105 %Gross PAR POR 28,105 %Gross PAR POR
REVENUE
Rooms $2,684 73.7 % $24,400 $111.42 $3,077 74.4 % $27,973 $117.90 $3,478 75.0 % $31,618 $123.75 $3,583 75.0 % $32,573 $127.49 $3,690 75.0 % $33,545 $131.29
Food 680 18.6 6,178 28.21 748 18.1 6,803 28.67 821 17.7 7,460 29.20 845 17.7 7,684 30.07 871 17.7 7,914 30.97
Beverage 190 5.2 1,730 7.90 210 5.1 1,905 8.03 230 5.0 2,089 8.18 237 5.0 2,151 8.42 244 5.0 2,216 8.67
Telephone 9 0.3 86 0.39 10 0.3 95 0.40 11 0.2 104 0.41 12 0.2 108 0.42 12 0.2 111 0.43
Other Inc ome 81 2.2 735 3.36 89 2.2 813 3.43 98 2.1 895 3.50 101 2.1 922 3.61 104 2.1 950 3.72
Total Revenues 3,644 100.0 33,129 151.27 4,135 100.0 37,588 158.43 4,638 100.0 42,166 165.03 4,778 100.0 43,437 170.01 4,921 100.0 44,736 175.09
DEPARTMENTAL EXPENSES *
Rooms 665 24.8 6,042 27.59 705 22.9 6,412 27.03 748 21.5 6,798 26.61 770 21.5 7,002 27.41 793 21.5 7,212 28.23
Food & Beverage 590 67.8 5,360 24.48 625 65.2 5,681 23.94 662 63.0 6,016 23.54 682 63.0 6,196 24.25 702 63.0 6,382 24.98
Telephone 22 228.6 196 0.90 23 218.7 207 0.87 24 210.0 219 0.86 25 210.0 226 0.88 26 210.0 233 0.91
Other Expenses 36 44.1 324 1.48 38 41.9 341 1.44 39 40.0 358 1.40 41 40.0 369 1.44 42 40.0 380 1.49
Total 1,312 36.0 11,923 54.44 1,390 33.6 12,641 53.28 1,473 31.8 13,391 52.41 1,517 31.8 13,793 53.98 1,563 31.8 14,207 55.60
DEPARTMENTAL INCOME 2,333 64.0 21,206 96.83 2,744 66.4 24,948 105.15 3,165 68.2 28,775 112.62 3,261 68.2 29,644 116.02 3,358 68.2 30,529 119.49
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 337 9.3 3,067 14.00 352 8.5 3,197 13.48 366 7.9 3,328 13.03 377 7.9 3,428 13.42 388 7.9 3,531 13.82
Marketing 157 4.3 1,426 6.51 162 3.9 1,473 6.21 167 3.6 1,518 5.94 172 3.6 1,564 6.12 177 3.6 1,611 6.30
Franchise Fee 201 5.5 1,830 8.36 231 5.6 2,098 8.84 261 5.6 2,371 9.28 269 5.6 2,443 9.56 277 5.6 2,516 9.85
Prop. Operations & Maint. 149 4.1 1,353 6.18 161 3.9 1,462 6.16 173 3.7 1,577 6.17 179 3.7 1,624 6.36 184 3.7 1,673 6.55
Utilities 203 5.6 1,846 8.43 214 5.2 1,944 8.19 225 4.8 2,044 8.00 232 4.8 2,105 8.24 239 4.8 2,168 8.49
Total 1,047 28.8 9,523 43.48 1,119 27.1 10,173 42.88 1,192 25.6 10,838 42.42 1,228 25.6 11,164 43.70 1,265 25.6 11,499 45.00
HOUSE PROFIT 1,285 35.2 11,683 53.35 1,625 39.3 14,774 62.27 1,973 42.6 17,937 70.20 2,033 42.6 18,480 72.33 2,093 42.6 19,031 74.48
Management Fee 109 3.0 994 4.54 124 3.0 1,128 4.75 139 3.0 1,265 4.95 143 3.0 1,303 5.10 148 3.0 1,342 5.25
INCOME BEFORE FIX ED CHARGES 1,176 32.2 10,689 48.81 1,501 36.3 13,647 57.52 1,834 39.6 16,672 65.25 1,889 39.6 17,177 67.23 1,946 39.6 17,689 69.23
FI XED EXPENSES
Property Taxes 173 4.8 1,575 7.19 176 4.3 1,599 6.74 179 3.9 1,631 6.38 185 3.9 1,680 6.57 190 3.9 1,730 6.77
Insurance 61 1.7 550 2.51 62 1.5 567 2.39 64 1.4 584 2.29 66 1.4 601 2.35 68 1.4 619 2.42
Reserve f or Replacement 73 2.0 663 3.03 124 3.0 1,128 4.75 186 4.0 1,687 6.60 191 4.0 1,737 6.80 197 4.0 1,789 7.00
Total 307 8.5 2,788 12.73 362 8.8 3,293 13.88 429 9.3 3,901 15.27 442 9.3 4,019 15.73 455 9.3 4,139 16.20
NET INCOME $869 23.7 % $7,901 $36.08 $1,139 27.5 % $10,353 $43.64 $1,405 30.3 % $12,770 $49.98 $1,447 30.3 % $13,158 $51.50 $1,490 30.3 % $13,549 $53.03

*Departmental expenses a re expressed as a percentage of departme ntal revenues.

Proposed Alton Hotel - Alton, Illinois

Table 7-10 Ten-Year Forecast of Income and Expense First Scenario

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Number of Rooms: 110 110 110 110 110 110 110 110 110 110
Occupied Rooms: 23,287 25,295 26,901 26,901 26,901 26,901 26,901 26,901 26,901 26,901
Occupancy: 58% 63% 67% 67% 67% 67% 67% 67% 67% 67%
Average Rate: $115.60 % of $122.37 % of $128.43 % of $132.28 % of $136.25 % of $140.34 % of $144.55 % of $148.88 % of $153.35 % of $157.95 % of
RevPAR: $67.05 Gross $77.09 Gross $86.05 Gross $88.63 Gross $91.29 Gross $94.02 Gross $96.85 Gross $99.75 Gross $102.74 Gross $105.83 Gross
REVENUE
Rooms $2,692 79.6 % $3,095 80.2 % $3,455 80.7 % $3,558 80.7 % $3,665 80.7 % $3,775 80.7 % $3,888 80.7 % $4,005 80.7 % $4,125 80.7 % $4,249 80.7 %
Food 472 14.0 521 13.5 565 13.2 582 13.2 600 13.2 618 13.2 636 13.2 656 13.2 675 13.2 695 13.2
Beverage 144 4.3 159 4.1 173 4.0 178 4.0 183 4.0 189 4.0 194 4.0 200 4.0 206 4.0 213 4.0
Telephone 9 0.3 10 0.3 11 0.3 11 0.3 12 0.3 12 0.3 12 0.3 13 0.3 13 0.3 14 0.3
Other Income 65 1.9 72 1.9 79 1.8 81 1.8 83 1.8 86 1.8 88 1.8 91 1.8 94 1.8 97 1.8
Total 3,383 100.0 3,858 100.0 4,283 100.0 4,411 100.0 4,543 100.0 4,680 100.0 4,820 100.0 4,965 100.0 5,113 100.0 5,267 100.0
DEPARTMENTAL EXPENSES*
Rooms 663 24.6 704 22.7 743 21.5 765 21.5 788 21.5 812 21.5 836 21.5 861 21.5 887 21.5 914 21.5
Food & Beverage 462 75.0 490 72.1 517 70.0 532 70.0 548 70.0 565 70.0 582 70.0 599 70.0 617 70.0 636 70.0
Telephone 21 227.3 22 217.2 23 210.0 24 210.0 24 210.0 25 210.0 26 210.0 27 210.0 28 210.0 28 210.0
Other Expenses 29 43.9 30 41.6 31 40.0 32 40.0 33 40.0 34 40.0 35 40.0 36 40.0 38 40.0 39 40.0
Total 1,174 34.7 1,246 32.3 1,314 30.7 1,354 30.7 1,394 30.7 1,436 30.7 1,479 30.7 1,523 30.7 1,569 30.7 1,616 30.7
DEPARTMENTAL INCOME 2,209 65.3 2,612 67.7 2,969 69.3 3,057 69.3 3,149 69.3 3,244 69.3 3,341 69.3 3,441 69.3 3,544 69.3 3,651 69.3
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 308 9.1 322 8.3 334 7.8 344 7.8 354 7.8 365 7.8 376 7.8 387 7.8 399 7.8 411 7.8
Marketing 127 3.8 131 3.4 135 3.1 139 3.1 143 3.1 147 3.1 152 3.1 156 3.1 161 3.1 166 3.1
Franchise Fee 202 6.0 232 6.0 259 6.1 267 6.1 275 6.1 283 6.1 292 6.1 300 6.1 309 6.1 319 6.1
Prop. Operations & Maint. 138 4.1 149 3.9 161 3.7 165 3.7 170 3.7 175 3.7 181 3.7 186 3.7 192 3.7 197 3.7
Utilities 186 5.5 196 5.1 206 4.8 212 4.8 218 4.8 225 4.8 231 4.8 238 4.8 245 4.8 253 4.8
Total 961 28.5 1,030 26.7 1,094 25.5 1,127 25.5 1,161 25.5 1,196 25.5 1,231 25.5 1,268 25.5 1,306 25.5 1,346 25.5
HOUSE PROFIT 1,248 36.8 1,581 41.0 1,875 43.8 1,930 43.8 1,988 43.8 2,048 43.8 2,109 43.8 2,173 43.8 2,238 43.8 2,305 43.8
Management Fee 101 3.0 116 3.0 128 3.0 132 3.0 136 3.0 140 3.0 145 3.0 149 3.0 153 3.0 158 3.0
INCOME BEFORE FIXED CHARGES 1,147 33.8 1,466 38.0 1,746 40.8 1,798 40.8 1,852 40.8 1,908 40.8 1,965 40.8 2,024 40.8 2,085 40.8 2,147 40.8
FIXED EXPENSES
Property Taxes 173 5.1 176 4.6 179 4.2 185 4.2 190 4.2 196 4.2 202 4.2 208 4.2 214 4.2 221 4.2
Insurance 48 1.4 50 1.3 51 1.2 53 1.2 55 1.2 56 1.2 58 1.2 60 1.2 61 1.2 63 1.2
Reserve for Replacement 68 2.0 116 3.0 171 4.0 176 4.0 182 4.0 187 4.0 193 4.0 199 4.0 205 4.0 211 4.0
Total 289 8.5 341 8.9 402 9.4 414 9.4 427 9.4 439 9.4 453 9.4 466 9.4 480 9.4 495 9.4
NET INCOME $857 25.3 % $1,124 29.1 % $1,344 31.4 % $1,384 31.4 % $1,426 31.4 % $1,468 31.4 % $1,512 31.4 % $1,558 31.4 % $1,604 31.4 % $1,653 31.4 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

Proposed Alton Hotel - Alton, Illinois

Table 7-11 Ten-Year Forecast of Income and Expense Second Scenario

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Number of Rooms: 110 110 110 110 110 110 110 110 110 110
Occupied Rooms: 24,090 26,098 28,105 28,105 28,105 28,105 28,105 28,105 28,105 28,105
Occupancy: 60% 65% 70% 70% 70% 70% 70% 70% 70% 70%
Average Rate: $111.40 % of $117.92 % of $123.76 % of $127.47 % of $131.29 % of $135.23 % of $139.29 % of $143.47 % of $147.77 % of $152.21 % of
RevPAR: $66.84 Gross $76.65 Gross $86.63 Gross $89.23 Gross $91.91 Gross $94.66 Gross $97.50 Gross $100.43 Gross $103.44 Gross $106.54 Gross
REVENUE
Rooms $2,684 73.7 % $3,077 74.4 % $3,478 75.0 % $3,583 75.0 % $3,690 75.0 % $3,801 75.0 % $3,915 75.0 % $4,032 75.0 % $4,153 75.0 % $4,278 75.0 %
Food 680 18.6 748 18.1 821 17.7 845 17.7 871 17.7 897 17.7 924 17.7 951 17.7 980 17.7 1,009 17.7
Beverage 190 5.2 210 5.1 230 5.0 237 5.0 244 5.0 251 5.0 259 5.0 266 5.0 274 5.0 283 5.0
Telephone 9 0.3 10 0.3 11 0.2 12 0.2 12 0.2 13 0.2 13 0.2 13 0.2 14 0.2 14 0.2
Other Income 81 2.2 89 2.2 98 2.1 101 2.1 104 2.1 108 2.1 111 2.1 114 2.1 118 2.1 121 2.1
Total 3,644 100.0 4,135 100.0 4,638 100.0 4,778 100.0 4,921 100.0 5,069 100.0 5,221 100.0 5,377 100.0 5,538 100.0 5,705 100.0
DEPARTMENTAL EXPENSES*
Rooms 665 24.8 705 22.9 748 21.5 770 21.5 793 21.5 817 21.5 842 21.5 867 21.5 893 21.5 920 21.5
Food & Beverage 590 67.8 625 65.2 662 63.0 682 63.0 702 63.0 723 63.0 745 63.0 767 63.0 790 63.0 814 63.0
Telephone 22 228.6 23 218.7 24 210.0 25 210.0 26 210.0 26 210.0 27 210.0 28 210.0 29 210.0 30 210.0
Other Expenses 36 44.1 38 41.9 39 40.0 41 40.0 42 40.0 43 40.0 44 40.0 46 40.0 47 40.0 48 40.0
Total 1,312 36.0 1,390 33.6 1,473 31.8 1,517 31.8 1,563 31.8 1,610 31.8 1,658 31.8 1,708 31.8 1,759 31.8 1,812 31.8
DEPARTMENTAL INCOME 2,333 64.0 2,744 66.4 3,165 68.2 3,261 68.2 3,358 68.2 3,459 68.2 3,563 68.2 3,669 68.2 3,780 68.2 3,893 68.2
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 337 9.3 352 8.5 366 7.9 377 7.9 388 7.9 400 7.9 412 7.9 424 7.9 437 7.9 450 7.9
Marketing 157 4.3 162 3.9 167 3.6 172 3.6 177 3.6 182 3.6 188 3.6 194 3.6 199 3.6 205 3.6
Franchise Fee 201 5.5 231 5.6 261 5.6 269 5.6 277 5.6 285 5.6 294 5.6 302 5.6 311 5.6 321 5.6
Prop. Operations & Maint. 149 4.1 161 3.9 173 3.7 179 3.7 184 3.7 190 3.7 195 3.7 201 3.7 207 3.7 213 3.7
Utilities 203 5.6 214 5.2 225 4.8 232 4.8 239 4.8 246 4.8 253 4.8 261 4.8 268 4.8 276 4.8
Total 1,047 28.8 1,119 27.1 1,192 25.6 1,228 25.6 1,265 25.6 1,303 25.6 1,342 25.6 1,382 25.6 1,424 25.6 1,466 25.6
HOUSE PROFIT 1,285 35.2 1,625 39.3 1,973 42.6 2,033 42.6 2,093 42.6 2,156 42.6 2,221 42.6 2,287 42.6 2,356 42.6 2,427 42.6
Management Fee 109 3.0 124 3.0 139 3.0 143 3.0 148 3.0 152 3.0 157 3.0 161 3.0 166 3.0 171 3.0
INCOME BEFORE FIXED CHARGES 1,176 32.2 1,501 36.3 1,834 39.6 1,889 39.6 1,946 39.6 2,004 39.6 2,064 39.6 2,126 39.6 2,190 39.6 2,256 39.6
FIXED EXPENSES
Property Taxes 173 4.8 176 4.3 179 3.9 185 3.9 190 3.9 196 3.9 202 3.9 208 3.9 214 3.9 221 3.9
Insurance 61 1.7 62 1.5 64 1.4 66 1.4 68 1.4 70 1.4 72 1.4 74 1.4 77 1.4 79 1.4
Reserve for Replacement 73 2.0 124 3.0 186 4.0 191 4.0 197 4.0 203 4.0 209 4.0 215 4.0 222 4.0 228 4.0
Total 307 8.5 362 8.8 429 9.3 442 9.3 455 9.3 469 9.3 483 9.3 498 9.3 512 9.3 528 9.3
NET INCOME $869 23.7 % $1,139 27.5 % $1,405 30.3 % $1,447 30.3 % $1,490 30.3 % $1,535 30.3 % $1,581 30.3 % $1,629 30.3 % $1,677 30.3 % $1,728 30.3 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-17

Forecast of Income The following description sets forth the basis for the forecasts of income and
and Expense expense. We anticipate that it will take three years for the subject property to
reach a stabilized level of operation. Each revenue and expense item has been
forecast based upon our review of the subject's operating budget and
comparable income and expense statements. Our forecasts are based upon
fiscal years beginning April 1, 2011 and are expressed in inflated dollars for
each year.

Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate.
We projected occupancy and average rate in a previous section of this report.
In the first scenario, the subject property is expected to stabilize at an
occupancy level of 67% with an average rate of $128.43 in 2013/14. In the
second scenario, the subject property is expected to stabilize at an occupancy
level of 70% with an average rate of $123.76 in 2013/14. Following the
stabilized year, the subject propertys average rate is projected to increase
along with the underlying rate of inflation.

Food and Beverage Food and beverage revenue is generated by a hotel's restaurants, lounges,
Revenue coffee shops, snack bars, banquet rooms, and room service. In addition to
providing a source of revenue, these outlets serve as an amenity that assists in
the sale of guestrooms. With the exception of properties with active lounges
or banquet facilities that draw local residents, in-house guests generally
represent a substantial percentage of a hotel's food and beverage patrons. In
the case of the Proposed Alton Hotel, food and beverage department will
include a lounge, a breakfast dining area. Banquet and meeting space is
expected to span 6,000 square feet in the first scenario and 12,000 square feet
in the second scenario.

Although food and beverage revenue varies directly with changes in

occupancy, the small portion generated by banquet sales and outside capture
is relatively fixed. The comparable statements illustrated collections for food
and beverage revenue between $7.03 and $26.07 per occupied room, or 6.4%
to 25.5% of rooms revenue. The composite statement indicated an average
food and beverage revenue collection of $16.03 per occupied room, or 14.9%
of rooms revenue.

Under both scenarios, the proposed subject property's food and beverage
operation is expected to be an important component of the hotel. Therefore,
based upon our review of comparable operating statements, we have
positioned this property at appropriate levels under each scenario given the
extent of the recommended facilities and anticipated price points. We note

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-18

that food and beverage revenue under the second scenario is somewhat
higher than the first, reflecting the additional business that would be
generated by the more extensive meeting facilities. We would expect future
moderate growth to occur within these categories, under both scenarios, after
the hotel's opening.

In the first scenario, we project food and beverage revenue to be $20.28 and
$6.20 per occupied room, respectively, in the first projection year, or
respectively 17.5% and 5.4% of rooms revenue. These per-occupied-room
amounts increase to $21.02 and $6.42 for respective food and beverage
revenue categories by the stabilized year, or respectively and of rooms
revenue. On a percentage of food revenue, beverage revenue is forecast at
30.6% in the first projection year, stabilizing at 30.6%.

In the second scenario, we project food and beverage revenue to be $28.21

and $7.90 per occupied room, respectively, in the first projection year, or
respectively 25.3% and 7.1% of rooms revenue. These per-occupied-room
amounts increase to $29.20 and $8.18 for respective food and beverage
revenue categories by the stabilized year, or respectively and of rooms
revenue. On a percentage of food revenue, beverage revenue is forecast at
28.0% in the first projection year, stabilizing at 28%.

Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-
distance calls to their rooms, and by individuals who use the property's public
telephones. According to the comparable operating statements, telephone
revenue ranged from $0.17 to $0.86 on a per-occupied-room basis. For both
scenarios, we forecast the subject propertys telephone revenue to stabilize at
$0.41 per occupied room by the stabilized year, 2013/14.

Other Income Other income is derived from sources other than guestrooms, food and
beverage, and telephone services. Comparables in this category show revenue
collections ranging from $1.06 to $4.18 on a per-occupied-room basis with
$2.42 as an average. Changes in this revenue item through the projection
period result from the application of the underlying inflation rate and
projected changes in occupancy. In the first scenario, we forecast the subjects
propertys other income to stabilize at $2.92 per occupied room by the
stabilized year, 2013/14. In the second scenario, we forecast the subjects
propertys other income to stabilize at $3.50 per occupied room by the
stabilized year, 2013/14. The proposed subject property's other income sources
are expected to be generated primarily from the hotel's market pantry, guest
laundry facility, in-room movie and game charges, and vending areas. Based

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-19

on our review of operations with a similar extent of offerings, we have

positioned an appropriate revenue level for the proposed subject property
under each scenario. We note that other income revenue under the second
scenario is modestly higher than the first, reflecting the impact of additional
guests and meeting attendees associated with the more extensive meeting
facilities

Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms
and public space. Salaries, wages, and employee benefits account for a
substantial portion of this category. Although payroll varies somewhat with
occupancy and managers can generally scale the level of service staff on hand
to meet an expected occupancy level, much of a hotel's payroll is fixed. A base
level of front desk personnel, housekeepers, and supervisors must be
maintained at all times. As a result, salaries, wages, and employee benefits are
only moderately sensitive to changes in occupancy.

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

The comparables illustrated rooms expense ranging between 18.8% and 23.5%
of rooms revenue; on a per-occupied-room basis, the range was between
$19.22 and $27.39. Overall, rooms expense of the comparable properties
equated to 21.3% of rooms revenue (or $22.89 per occupied room). In the first
scenario, we have projected rooms expense for the subject at 24.6% in the first
year (or $28.45 per occupied room), stabilizing at 21.5% in 2013/14 (or $27.61
per occupied room). In the second scenario, we have projected rooms
expense for the subject at 24.8% in the first year (or $27.59 per occupied
room), stabilizing at 21.5% in 2013/14 (or $26.61 per occupied room). The
proposed subject property's rooms department expense has been positioned
based upon our review of the comparable operating data and our
understanding of the hotel's future service level and price point.

Food and Beverage Food expenses consist of items necessary for the primary operation of a
Expense hotel's food and banquet facilities. The costs associated with food sales and
payroll are moderately to highly correlated to food revenues. Items such as
china, linen and uniforms are less dependent on volume. Although the other
expense items are basically fixed, they represent a relatively insignificant
factor. Beverage expenses consist of items necessary for the operation of a

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-20

hotels lounge and bar areas. The costs associated with beverage sales and
payroll are moderately to highly correlated to beverage revenues.

The comparables illustrated food and beverage expense ranging between

61.5% and 82.9% of food and beverage revenue; overall, food and beverage
expense of the comparable properties equated to 71.0% of food and beverage
revenue. In the first scenario, we have projected a stabilized expense ratio of
70.0% in 2013/14. In the second scenario, we have projected a stabilized
expense ratio of 63.0% in 2013/14. The proposed subject property's food and
beverage operation is expected to be efficiently managed and operate at an
expense level that is in line with other comparable operations. We note that
food and beverage expenses are expected to be somewhat lower, as a
percentage of revenue, in the second scenario, based on the efficiencies of
scale that are present with the additional meeting space.

Telephone Expense Telephone expense consists of all costs associated with this department. In
the case of small hotels with automated systems, the operation of telephones
may be an additional responsibility of front desk personnel; however, most
large properties employ full-time operators. The bulk of the telephone
expense consists of the cost of local and long-distance calls billed by the
telephone companies that provide these services. With the decrease in
telephone usage and revenues, the actual cost of calls has decreased.
However, the labor costs associated with a dedicated switchboard staff remain
in place, as the principal role of these individuals is to direct incoming calls,
and respond to and/or direct calls from hotel guests. Consequently, in those
hotels with a dedicated switchboard staff, the profitability of the telephone
department has decreased, and in many instances these departments now
operate at a loss. In properties where the calls are handled by the front desk
staff, profit levels have decreased, but most continue to generate a modest
profit margin.

The comparables illustrated telephone expense ranging between 122.7% and

369.2% of telephone revenue; overall, telephone expense of the comparable
properties equated to 209.7% of telephone revenue. For both scenarios, we
have projected a stabilized expense ratio of 210.0% in 2013/14.

Other Other income expense consists of costs associated with other income and is
Income Expense dependent on the nature of the revenue. For example, if a hotel leases its gift
shop to an outside operator, the gift shop expenses are limited to items such
as rental fees and commissions. If the property operates its own gift shop,

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-21

both revenues and expenses will be higher, and the hotel is responsible for
the cost of goods sold, payroll, and so forth.

The comparables illustrated other income expense ranging between 29.2%

and 94.7% of other income. For both scenarios, we have projected a stabilized
expense ratio of 40.0% in 2013/14. Expenses related to the proposed subject
property's other income sources should be minimal and associated with the
other revenue components discussed previously.

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

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

The composite result of administrative and general expense for the

comparable operations equated to $2,410 per available room; comparable
statements ranged from $1,732 to $3,248 per available room. On a percentage
of total revenue basis, the comparable operations indicate an administrative
and general expense range from 5.4% to 10.5% (averaging 7.8% overall).
Based upon our review of the comparable operating data and the expected
scope of facilities for the proposed subject property under each scenario, we
have positioned the administrative and general expense levels at market- and
property-supported levels. We note that administrative and general expenses
are modestly higher, on a per-available-room basis, in the second scenario,
reflecting the additional administrative costs associated with the more
extensive meeting facilities.

In the first projection year of the first scenario, we have projected

administrative and general expense for the proposed subject property to be
$2,801 per available room, or 9.1% of total revenue. By the 2013/14 stabilized
year, these amounts change to $3,037 per available room and 7.8% of total
revenue.

In the first projection year of the second scenario, we have projected

administrative and general expense for the proposed subject property to be

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-22

$3,067 per available room, or 9.3% of total revenue. By the 2013/14 stabilized
year, these amounts change to $3,328 per available room and 7.9% of total
revenue.

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

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

Marketing expenditures are unusual because although there is a lag period

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

The composite result of marketing expense for the comparable operations

equated to $1,288 per available room; comparable statements ranged from
$593 to $1,541 per available room. On a percentage of total revenue basis, the
comparable operations indicate a marketing expense range from 2.1% to 5.0%
(averaging 4.1% overall). Based upon our review of the comparable operating
data and the expected scope of facilities for the proposed subject property
under each scenario, we have positioned the marketing expense levels at
market- and property-supported levels. We note that marketing expenses are
modestly higher, on a per-available-room basis, in the second scenario,
reflecting the additional marketing costs associated with the more extensive
meeting facilities.

In the first projection year of the first scenario, we have projected marketing
expense for the proposed subject property to be $1,153 per available room, or
3.8% of total revenue. By the 2013/14 stabilized year, these amounts change to
$1,226 per available room and 3.1% of total revenue.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-23

In the first projection year of the second scenario, we have projected

marketing expense for the proposed subject property to be $1,426 per
available room, or 4.3% of total revenue. By the 2013/14 stabilized year, these
amounts change to $1,518 per available room and 3.6% of total revenue.

Franchise Fee As previously discussed, we have recommended that the subject be

franchised under the SpringHill Suites by Marriott brand. Costs associated
with this franchise are summarized in Chapter Two.

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

Maintenance is an accumulating expense. If management elects to postpone

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

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

The composite result of property operations and maintenance expense for the
comparable operations equated to $1,399 per available room; comparable
statements ranged from $866 to $1,920 per available room. On a percentage of
total revenue basis, the comparable operations indicate a property operations
and maintenance expense range from 2.7% to 6.7% (averaging 4.5% overall).
We expect the proposed subject property's maintenance operation to be well
managed, and expense levels should stabilize at a typical level for a property
of this type. We note that property operations and maintenance expenses are
modestly higher, on a per-available-room basis, in the second scenario,

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HVS Consulting and Valuation Services Projection of Income and Expense 7-24

reflecting the additional operational and maintenance costs associated with

the more extensive meeting facilities. Changes in this expense item through
the projection period result from the application of the underlying inflation
rate and projected changes in occupancy.

In the first projection year of the first scenario, we have projected property
operations and maintenance expense for the proposed subject property to be
$1,254 per available room, or 4.1% of total revenue. By the 2013/14 stabilized
year, these amounts change to $1,460 per available room and 3.7% of total
revenue.

In the first projection year of the second scenario, we have projected property
operations and maintenance expense for the proposed subject property to be
$1,353 per available room, or 4.1% of total revenue. By the 2013/14 stabilized
year, these amounts change to $1,577 per available room and 3.7% of total
revenue.

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

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

The composite result of utilities expense for the comparable operations

equated to $1,574 per available room; comparable statements ranged from
$667 to $1,933 per available room. On a percentage of total revenue basis, the
comparable operations indicate a utilities expense range from 2.3% to 6.1%
(averaging 5.1% overall). The changes in this utilities line item through the
projection period are a result of the application of the underlying inflation
rate and projected changes in occupancy.

In the first projection year of the first scenario, we have projected utilities
expense for the proposed subject property to be $1,690 per available room, or
5.5% of total revenue. By the 2013/14 stabilized year, these amounts change to
$1,869 per available room and 4.8% of total revenue.

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HVS Consulting and Valuation Services Projection of Income and Expense 7-25

In the first projection year of the second scenario, we have projected utilities
expense for the proposed subject property to be $1,846 per available room, or
5.6% of total revenue. By the 2013/14 stabilized year, these amounts change to
$2,044 per available room and 4.8% of total revenue.

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

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

Depending on the taxing policy of the municipality, property taxes can be

based on the value of the real property or the value of the personal property
and the real property. We have based our estimate of the proposed subject
property's market value (for tax purposes) on an analysis of county
assessments of comparable hotel properties in the local county.

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HVS Consulting and Valuation Services Projection of Income and Expense 7-26

Table 10-12 County-Assessed Value of Comparable Hotels

Number Total Assessment

Hotel of Rooms Land Improvements Total

Comfort Inn 62 $107,020 $601,960 $708,980

Holiday Inn 137 261,040 1,454,610 1,715,650
Hampton Inn & Suites 72 243,910 1,457,000 1,700,910
Assessments per Room
Comfort Inn $1,726 $9,709 $11,435
Holiday Inn 1,905 10,618 12,523
Hampton Inn & Suites 3,388 20,236 23,624

Positioned Subject - Per Room 110 $2,500 $18,000 $20,500

Positioned Subject - Total $275,000 $1,980,000 $2,255,000

Source: Madison County Assessor

We have positioned the proposed subject property's future assessment levels

based upon the illustrated comparable data. We have positioned the
assessment closest to the Hampton Inn & Suites because of its recent
construction; overall, the positioned assessment is well supported by the
market data.

Tax rates are based on the city and county budgets, which change annually.
The most recent tax rate in this jurisdiction was reported at 7.60760%. The
following table shows changes in the tax rate during the last several years.

Table 10-13 County Tax Rates

Real Property
Year Tax Rate
2006 7.56750
2007 7.62720
2008 7.60760

Source: Madison County Assessor

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

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HVS Consulting and Valuation Services Projection of Income and Expense 7-27

Table 7-14 Projected Property Tax Expense

Assessed Value Property Tax

Year Land Improvements Total Tax Rate Forecast

Positioned $275,000 $1,980,000 $2,255,000 7.61 $171,551

2011/12 $275,000 $1,980,000 $2,255,000 7.68 $173,267
2012/13 275,000 1,980,000 2,255,000 7.80 175,866
2013/14 275,000 1,980,000 2,255,000 7.95 179,383

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

The comparable properties we identified indicated a range of $141 to $372 per

available room, or 0.7% of total revenue.

Based on these levels and the structural attributes of the proposed project, in
the first scenario we project the proposed subject property's insurance
expense at $467 per available room by the stabilized year (positioned at $400
on a per-available-room basis in base-year dollars). This forecast equates to
1.2% of total revenue on a stabilized basis. In subsequent years, this amount is
assumed to increase in tandem with inflation.

In the second scenario, we project the proposed subject property's insurance

expense at $584 per available room by the stabilized year (positioned at $500
on a per-available-room basis in base-year dollars). This forecast equates to
1.4% of total revenue on a stabilized basis. In subsequent years, this amount is
assumed to increase in tandem with inflation.

Reserve for Furniture, fixtures, and equipment are essential to the operation of a lodging
Replacement facility, and their quality often influences a property's class. This category
includes all non-real estate items that are capitalized, rather than expensed.
The furniture, fixtures, and equipment of a hotel are exposed to heavy use

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Projection of Income and Expense 7-28

and must be replaced at regular intervals. The useful life of these items is
determined by their quality, durability, and the amount of guest traffic and
use.

Periodic replacement of furniture, fixtures, and equipment is essential to

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

The International Society of Hospitality Consultants (ISHC) undertook a

major industry-sponsored study of the capital expenditure requirements for
full-service/luxury, select-service, and extended-stay hotels. The most recent
findings of the study were published in a report in 20076. Historical capital
expenditures of well-maintained hotels were investigated through the
compilation of data provided by most of the major hotel companies in the
United States. A prospective analysis of future capital expenditure
requirements was also performed based upon the cost to replace short- and
long-lived building components over a hotel's economic life. The study
showed that the capital expenditure requirements for hotels vary significantly
from year to year, and depend upon both the actual and effective age of a
property. The results of this study showed that hotel lenders and investors
are requiring reserves for replacement ranging from 4% to 5% of total
revenue.

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

Conclusion In conclusion, our analysis of the first scenario reflects a profitable operation,
with net income expected to total 31.4% of total revenue by the stabilized
year. The stabilized total revenue comprises primarily rooms and food and
beverage revenue, with a secondary portion derived from other income

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

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HVS Consulting and Valuation Services Projection of Income and Expense 7-29

sources. On the cost side, departmental expenses total 30.7% of revenue by

the stabilized year, while undistributed operating expenses total 25.5% of
total revenues; this assumes that the property will be operated competently
by a well-known hotel operator. After a 3.0% of total revenues management
fee, and 9.4% of total revenues in fixed expenses, a net income ratio of 31.4%
is forecast by the stabilized year.

Our analysis of the second scenario reflects a profitable operation, with net
income expected to total 30.3% of total revenue by the stabilized year. The
stabilized total revenue comprises primarily rooms and food and beverage
revenue, with a secondary portion derived from other income sources. On
the cost side, departmental expenses total 31.8% of revenue by the stabilized
year, while undistributed operating expenses total 25.6% of total revenues;
this assumes that the property will be operated competently by a well-known
hotel operator. After a 3.0% of total revenues management fee, and 9.3% of
total revenues in fixed expenses, a net income ratio of 30.3% is forecast by the
stabilized year.

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HVS Consulting and Valuation Services Feasibility Analysis 8-1

8. Feasibility Analysis

The feasibility of the subject project hinges upon the net value added by the
planned improvements. If the value added by the project results in a return
that is in excess of the projects all-in cost, that project is deemed feasible.
Therefore, the following steps are taken.

1. A net present value indication is developed for the property in its when
complete state, assuming the planned improvements were to be made to
the site. This is performed by taking the cash flow projections developed
in the previous chapter and using discounted cash flow techniques to
comprise a net present value estimate.
2. The all-in cost for the project is stated and reviewed to serve as the
benchmark for feasibility.
3. The cost is then deducted from the net present value added by the
improvements. If the net result is a positive number, the project is feasible
and there is an adequate return on investment. If the net result is a
negative number, the project is not feasible at the market return rates
used in the analysis.
Net Present Value The first step is to provide an indication of the net present value of the subject
Indication When property in its completed state, assuming all previously discussed future
Complete State improvements were made to the site. This benchmark is best achieved by a
utilizing a discounted cash flow approach, which appropriately considers all
changes in income over the first ten years of operation.

We have developed a total property yield, or discount rate, through a

mortgage-equity valuation method, which is presented in the addenda to this
report. The variables utilized to establish this rate are set forth in the
following discussion.

Mortgage Component Data for the mortgage component may be developed from statistics of actual
hotel mortgages made by long-term lenders. The American Council of Life
Insurance, which represents 20 large life insurance companies, publishes

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HVS Consulting and Valuation Services Feasibility Analysis 8-2

quarterly information pertaining to the hotel mortgages issued by its member

companies.

Because of the six- to nine-month lag time in reporting and publishing hotel
mortgage statistics, it was necessary to update this information to reflect
current lending practices. Our research indicates that the greatest degree of
correlation exists between the average interest rate of a hotel mortgage and
the concurrent yield on an average A corporate bond.

The following chart summarizes the average mortgage interest rates of the
hotel loans made by these lenders. For the purpose of comparison, the
average A corporate bond yield (as reported by Moody's Bond Record) is also
shown.

Chart 8-1 Average Mortgage Interest Rates and Average A Corporate Bond Yields

9.0
8.0

7.0
6.0
Rate
5.0

4.0
3.0
01- 01- 01- 01- 02 - 02 - 02 - 02 - 03 - 03 - 03 - 03 - 04 - 04 - 04 - 04 - 05 - 05 - 05 - 05 - 06 - 06 - 06 - 06 - 07 - 07 - 07 - 07 - 08 - 08 - 08 -
1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd 4th 1st 2n 3rd

Avg. Interest Rate 8 8.1 7.6 7.4 7.3 6.6 6.4 6.5 5.6 5.5 5.4 5.9 6.215.80 6 5.65 5.735.66 5.4 5.80 5.8 6.406.996.335.705.90 6.186.076.426.016.64
Avg. A Corp. Bond Yield 7.68 7.817.60 7.57 7.467.39 6.956.886.64 6.156.466.275.996.40 6.1 5.855.64 5.47 5.5 5.8 5.9 6.4 6.18 6.285.90 6.16 6.286.10 6.336.18 6.48

Sources: American Council of Life Insurance, Moody's Bond Record, HVS

The relationship between hotel interest rates and the yields from the average
A corporate bond can be detailed through a regression analysis, which is
expressed as follows.

Y = 1.27067400 X 1.54707000

Where: Y = Estimated Hotel/Motel Mortgage Interest Rate

X = Current Average A Corporate Bond Yield
(Coefficient of correlation is 94%)

The December 19, 2008, average yield on average A corporate bonds, as

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HVS Consulting and Valuation Services Feasibility Analysis 8-3

reported by Moodys Investors Service, was 6.32%. When used in the

previously presented equation, a factor of 6.32 produces an estimated
hotel/motel interest rate of 6.5% (rounded).

In addition to the mortgage interest rate estimate derived from this regression
analysis, HVS constantly monitors the terms of hotel mortgage loans made by
our institutional lending clients. Fixed-rate debt, while not readily available
in today's more cautious lending environment, is being priced at roughly 450
to 600 basis points over the corresponding yield on treasury notes. As of
February 25, 2009, the yield on the ten-year T-bill was 2.8%, indicating an
interest rate range from 7.3% to 8.8%. In the current lending environment,
floating-rate debt priced at a spread over LIBOR is more readily available and
offers a more favorable interest rate to borrowers. Spreads are typically
quoted at 600 to 750 basis points over the three-month LIBOR, which was
yielding 1.3% as of February 25, 2009, resulting in an interest rate range of
7.3% to 8.8%.

Chart 8-2 Historical Trend of Three-Month LIBOR, Prime Rate, and Ten-Year Treasury Bill

9.0

8.0

7.0

6.0

Rate 5.0

4.0

3.0

2.0

1.0

0.0
01- 01- 01- 01- 02 - 02 - 02 - 02 - 03 - 03 - 03 - 03 - 04 - 04 - 04 - 04 - 05 - 05 - 05 - 05 - 06 - 06 - 06 - 06 - 07 - 07 - 07 - 07 - 08 - 08 - 08 -
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd

3-mo. LIBOR 5.3 4.2 3.5 2.2 1.9 1.9 1.8 1.6 1.3 1.2 1.1 1.2 1.1 1.3 1.7 2.3 2.8 3.3 3.8 4.3 4.8 5.2 5.4 5.4 5.4 5.4 5.5 5 3.3 2.8 2.9
Prime Rate 8.6 7.3 6.6 5.2 4.8 4.8 4.8 4.5 4.3 4.2 4 4 4 4 4.4 4.9 5.4 5.9 6.4 7 7.4 7.9 8.3 8.3 8.3 8.3 8.2 7.5 6.2 5.1 5
10-yr. T-Bill 5 5.3 5 4.8 5.1 5.1 4.3 4 3.9 3.6 4.2 4.3 4 4.6 4.3 4.2 4.3 4.2 4.2 4.5 4.6 5.1 4.9 4.6 4.7 4.9 4.8 4.3 3.7 3.9 3.9

Sources: U.S. Treasury, Bankrate.com

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HVS Consulting and Valuation Services Feasibility Analysis 8-4

At present, we find that lenders who are active in the market are using loan-
to-value ratios of 50% to 65% and amortization periods of 20 to 25 years; ratios
of 55% to 60% are most prevalent. While loan-to-value ratios above 70% were
available prior to the credit crisis, our loan-to-value selection reflects today's
stricter lending environment. The exact terms offered depend on specific
factors, such as the propertys location, the expected quality of the proposed
facility and salability of the concept within its target market, local hostelry
market conditions, and (perhaps most significantly) the profile of the
developer/borrower. The strongest projects typically command the highest
loan-to-value ratios.

Based on our analysis of the current lodging industry mortgage market and
adjustments for specific factors, such as the propertys location, proposed
facility, and conditions in the Alton hotel market, it is our opinion that a
7.50% interest, 25-year amortization mortgage with a 0.088679 constant is
appropriate for the subject property. In the mortgage-equity analysis, we
have applied a loan-to-value ratio of 60%, which is reasonable to expect based
on this interest rate and current parameters.

Equity Component & The remaining capital required for a hotel investment generally comes from
Equity Yield Rate the equity investor. The rate of return that an equity investor expects over a
ten-year holding period is known as the equity yield. Unlike the equity
dividend, which is a short-term rate of return, the equity yield specifically
considers a long-term holding period (generally ten years), annual inflation-
adjusted cash flows, property appreciation, mortgage amortization, and
proceeds from a sale at the end of the holding period. To establish an
appropriate equity yield rate, we have used two sources of data: past
appraisals and investor interviews.

Each appraisal performed by HVS uses a similar mortgage-equity approach in

which income is projected and then discounted to a current value at rates
reflecting the cost of debt and equity capital. In the case of hotels that were
sold near the date of our valuation, we were able to determine an appropriate
equity yield rate by inserting the projection into a valuation model, and
adjusting the appraised value to reflect the actual sales price by modifying the
return assumptions. The following table shows a representative sample of
hotels that were sold shortly after we appraised them, along with the
imputed equity return based on our valuation approach.

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HVS Consulting and Valuation Services Feasibility Analysis 8-5

Table 8-3 Sample of Hotels Sold

Overall Rate Based on

Net Operating Income
Total
Number Date Property Equity Historical Projected Stabilized Equity
Hotel Location of Rooms of Sale Yield Yield Year Year One Year Dividend

Hyatt Regency Phoenix, AZ 696 Jul-08 12.5 % 19.5 % 10.3 % 9.0 % 9.6 % 9.0 %
Hilton Lincoln Center Dallas, TX 500 Jun-08 11.0 17.3 6.9 4.4 9.4 4.4
Holiday Inn Sunspree Resort Lake Buena Vista, FL 507 May-08 14.5 21.8 1.4 11.5 1.4
Sheraton Hotel Iowa City, IA 234 Apr-08 11.0 19.5 3.0 5.6 8.8 5.6
Four Points Columbus Airport Columbus, OH 177 Jan-08 12.9 24.7 8.4 8.7 9.9 8.7
Hotel 57 New York, NY 200 Jan-08 10.1 16.7 4.9 3.6 7.5 3.6
Hyatt Regency Milwaukee, WI 483 Jan-08 11.9 20.7 6.1 8.5 8.7 10.8
JW Marriott New Orleans, LA 494 Jan-08 11.0 19.8 1.5 8.1
Sheraton Hotel Salt Lake City, UT 362 Dec-07 12.0 20.1 7.4 6.0 9.9 2.2
Hyatt Regency New Orleans, LA 1184 Dec-07 16.3 26.4 8.1 6.8 13.4 3.8
Aberdeen Woods Conference Center Peachtree City, GA 233 Nov-07 11.5 19.2 1.1 1.6 9.7
Marriott BWI Airport Hotel Linthicum, MD 309 Nov-07 10.7 21.9 8.8 7.9 7.8 10.9
Crown Plaza Phoenix, AZ 248 Oct-07 10.7 19.2 7.3 8.0 8.5 8.2
Westin Airport Atlanta, GA 495 Aug-07 11.6 21.7 6.6 8.1 9.0 8.7
Holiday Inn LAX Los Angeles, CA 405 Aug-07 13.8 26.8 6.9 7.7 10.2 7.6
Hilton Downtown St. Louis, MO 195 Aug-07 11.3 20.8 6.8 7.8 8.6 7.8
Hotel Palomar San Francisco, CA 195 Aug-07 11.1 21.0 5.0 7.6 8.8 8.7
Sheraton Hotel Nashua, NH 336 Jun-07 13.2 25.2 5.5 8.0 10.4 7.9
Sheraton Oklahoma City, OK 395 Apr-07 13.8 27.5 7.4 9.2 10.6 9.2
St. Louis Marriott West St. Louis, MO 300 Mar-07 10.2 18.2 5.8 6.8 8.0 6.8
Renaissance Mayflower Washington, DC 657 Feb-07 9.6 17.7 3.9 5.5 7.5 5.5
Villa Florence San Francisco, CA 182 Feb-07 9.1 15.1 3.5 5.2 7.0 5.2
Hilton Westchase & Towers Houston, TX 297 Feb-07 8.6 13.9 5.8 7.2 7.5 7.2
Sheraton Austin Austin, TX 365 Jan-07 11.5 21.2 5.3 6.6 8.9 6.6
Stanford Court Hotel San Francisco, CA 393 Dec-06 8.1 11.7 1.4 8.0 1.4
Sheraton Hotel North Charleston, NC 289 Nov-06 11.0 20.4 4.9 8.1 8.3 8.1
Hyatt Regency Lexington, KY 365 Nov-06 12.0 21.2 2.3 2.7 10.7 2.7
Sheraton Danbury, CT 242 Oct-06 9.8 16.3 3.9 4.0 8.2
Hilton Arlington Arlington, TX 308 Oct-06 10.0 17.5 4.8 7.2 8.3 4.9
Westin Southfield Detroit Southfield, MI 388 Oct-06 9.7 17.4 8.6 8.8 7.9 13.1
Sheraton College Park, MD 462 Oct-06 12.5 23.7 7.7 7.5 9.6 7.7
Westin Hotel Stamford, CT 462 Oct-06 9.3 15.1 4.1 4.0 7.9 4.0

Source: HVS

The longer-term historical trend of equity yield rates (alternately known as

leveraged yield rates), as tracked by HVS, is illustrated in the following
chart.

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HVS Consulting and Valuation Services Feasibility Analysis 8-6

Chart 8-4 Historical Trend of Equity Yields

24.0

22.0

Equity 20.0
Yield 18.0
Rate
16.0

14.0
12.0
1999 - 1999 - 2000 - 2000 - 2001- 2001- 2002 - 2002 - 2003 - 2003 - 2004 - 2004 - 2005 - 2005 - 2006 - 2006 - 2007 - 2007 - 2008 - 2008 -
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2

Rate 18.2 18.5 18.5 18.9 21.7 23.0 22.7 21.2 23.0 20.6 20.9 19.5 19.5 19.3 19.5 19.5 18.7 19.0 19.5 20.8

Source: HVS

We note that the averages illustrated in the previous table are derived from a
wide array of data points and a range of reasonableness extends both lower
and higher than the indicated data point. Based on the assumed 60% loan-to-
value ratio, the risk inherent in achieving the projected income stream, and
the age, condition, and anticipated market position of the subject property, it
is our opinion that an equity investor is likely to require an equity yield rate of
17.0%. The widespread availability of equity sources, including capital from
international sources that are currently benefiting from the weak dollar, has
continued to put downward pressure on equity yield rates. With a limited
number of assets currently available for sale, competition for high-quality
assets remains healthy, despite a much stricter lending environment. These
influences are keeping equity yields relatively low.

Terminal Capitalization Inherent in this valuation process is the assumption of a sale at the end of the
Rate ten-year holding period. The estimated reversionary sales price as of that date
is calculated by capitalizing the projected eleventh-year net income by an
overall terminal capitalization rate. An allocation for the selling expenses is
deducted from this sales price, and the net proceeds to the equity interest
(also known as the equity residual) are calculated by deducting the
outstanding mortgage balance from the reversion.

As a point of reference, the terminal capitalization rate can be compared to

the going-in rate implied by the subject property's estimated value. The

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-7

going-in rate reflects the capitalization rate that would be applicable if the
hotel were operating at a stabilized level as of the date of value. This rate is
calculated by dividing the stabilized net income (expressed in current dollars
as of the date of value) by the value indicated by the income capitalization
approach. Generally, the terminal capitalization rate is approximately 50 to
150 basis points above the stabilized going-in rate, depending on the
characteristics of the property and market.

We have also reviewed several recent investor surveys. The following chart
summarizes the averages presented for terminal capitalization rates in various
investor surveys during the past decade.

Chart 8-5 Historical Trend of Terminal Capitalization Rates

12.0
11.5
11.0
10.5
10.0
Terminal 9.5
Cap Rate 9.0
8.5
8.0
7.5
7.0
1999 - 1999 - 2000 - 2000 - 2001- 2001- 2002 - 2002 - 2003 - 2003 - 2004 - 2004 - 2005 - 2005 - 2006 - 2006 - 2007 - 2007 - 2008 - 2008 -
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2

Korpacz - Full-Service 10.54 10.58 10.57 10.56 10.56 10.62 10.91 10.67 10.67 10.73 10.53 10.25 9.78 9.50 9.24 9.13 9.06 8.98 9.08 9.24
Korpacz - Luxury 9.86 9.85 9.83 9.63 9.65 9.90 10.55 10.15 10.20 10.13 10.17 10.03 9.63 9.21 9.07 8.68 8.69 8.71 8.72 8.71
CRE/RERC - First Tier 11.30 10.90 11.40 11.50 11.60 11.00 11.08 11.50 11.40 11.50 11.30 10.70 10.60 10.15 9.55 9.60 9.28 8.94 8.98 9.45

We note that the averages illustrated in the previous table are derived from
wide arrays of data points and a range of reasonableness extends both lower
and higher than the indicated data points. For purposes of this analysis, we
have applied a terminal capitalization rate of 10.5%. Our final position for the
terminal capitalization rate reflects the current trends in hotel lending, which
are resulting in rates higher than those seen prior to the onset of the credit
crisis.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-8

Mortgage-Equity The valuation of the mortgage and equity components is accomplished using
Method - an algebraic equation that calculates the exact amount of debt and equity that
Opinion of Net Present the hotel will be able to support based on the anticipated cash flow (as
Value First Scenario estimated by the forecast of income and expense) and the specific return
requirements demanded by the mortgage lender (interest) and the equity
investor (equity yield). Thus, the anticipated net income (before debt service
and depreciation) is allocated to the mortgage and equity components based
on market rates of return and loan-to-value ratios. The total of the mortgage
component and the equity component equals the value of the property. Using
this method of the income capitalization approach with the variables set
forth, we estimate the net present value of the subject propertys first
sceanrio, as of April 1, 2011, to be $12,500,000.

The net present value is mathematically proven by confirming the market-

derived yields are met for the lender and equity participant during the
projection period. After applying the assumed loan-to-value ratio of 60%, the
mortgage component equates to $7,473,000 and the equity component
equates to $4,982,000. Annual debt service equates to $662,698 after the
application of the mortgage constant of 0.088679 to the mortgage component.
The value of the mortgage component is confirmed as follows.

Table 8-6 Value of the Mortgage Component First Scenario

Total Annual Present Worth of $1 Discounted

Year Debt Service Factor at 7.4% Cash Flow

2011/12 $663,000 x 0.930811 = $617,000

2012/13 663,000 x 0.866409 = 574,000
2013/14 663,000 x 0.806463 = 535,000
2014/15 663,000 x 0.750664 = 498,000
2015/16 663,000 x 0.698727 = 463,000
2016/17 663,000 x 0.650382 = 431,000
2017/18 663,000 x 0.605383 = 401,000
2018/19 663,000 x 0.563497 = 374,000
2019/20 663,000 x 0.524509 = 348,000
2020/21 6,620,000 * x 0.488219 = 3,232,000

Value of Mortgage Component $7,473,000

*10th year debt service of $663,000 plus outstanding mortgage balance of $5,957,000

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-9

The following table illustrates the cash flow to equity after deducting the debt
service from the projected net income before debt service.

Table 8-7 Net Income to Equity First Scenario

Net Income
Available for Total Annual Net Income
Year Debt Service Debt Service to Equity

2011/12 $857,000 - $663,000 = $194,000

2012/13 1,124,000 - 663,000 = 461,000
2013/14 1,344,000 - 663,000 = 681,000
2014/15 1,384,000 - 663,000 = 721,000
2015/16 1,426,000 - 663,000 = 763,000
2016/17 1,468,000 - 663,000 = 805,000
2017/18 1,512,000 - 663,000 = 849,000
2018/19 1,558,000 - 663,000 = 895,000
2019/20 1,604,000 - 663,000 = 941,000
2020/21 1,653,000 - 663,000 = 990,000

The equity residual at the end of the tenth year is calculated by deducting
brokerage and legal fees and the mortgage balance from the reversionary
value. The reversionary value is calculated as the eleventh year's net income
capitalized by the terminal capitalization rate. The calculation is shown as
follows.
Reversionary Value ( $ 1,703,000/0.105) $16,219,000
Less:
Brokerage and Legal Fees 487,000
Mortgage Balance 5,957,000
Net Sale Proceeds to Equity $9,775,000
Based on these assumptions, the value of the equity component is confirmed
as follows.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-10

Table 8-8 Value of the Equity Component First Scenario

Net Income Present Worth of $1 Discounted

Year to Equity Factor at 17.0% Cash Flow

2011/12 $194,000 x 0.854731 = $166,000

2012/13 461,000 x 0.730566 = 337,000
2013/14 681,000 x 0.624438 = 425,000
2014/15 721,000 x 0.533726 = 385,000
2015/16 763,000 x 0.456193 = 348,000
2016/17 805,000 x 0.389922 = 314,000
2017/18 849,000 x 0.333279 = 283,000
2018/19 895,000 x 0.284864 = 255,000
2019/20 941,000 x 0.243482 = 229,000
2020/21 10,765,000 * x 0.208112 = 2,240,000

Value of Equity Component $4,982,000

*10th year net income to equity of $990,000 plus sales proceeds of $9,775,000

We have added the calculated value of the equity component to the assumed
mortgage amount, which results in the calculated total property net present
value. These totals and the associated yields are illustrated in the following
table.

Table 8-9 Total Property Net Present Value and Internal Rates of Return

Projected Yield
(Internal Rate of Return)
Position Value Over Holding Period

Total Property $12,455,000 12.1 %

Mortgage $7,473,000 7.4
Equity $4,982,000 17.0

Note: Whereas the mortgage constant and value are calculated on the basis of monthly
mortgage payments, the mortgage yield in this proof assumes single annual payments.
As a result, the proof's derived yield may be slightly less than that actually input.

The position of the total property yield reflects our full consideration of the
current credit situation and change in lending climate that has rippled
through the market. Prior to the onset of the credit crisis, total property

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-11

yields for high-quality hotel assets would have been positioned below current
levels.

Mortgage-Equity We estimate the net present value of the subject propertys second sceanrio,
Method - as of April 1, 2011, to be $13,000,000.
Opinion of Net Present
Value Second The net present value is mathematically proven by confirming the market-
Scenario derived yields are met for the lender and equity participant during the
projection period. After applying the assumed loan-to-value ratio of 60%, the
mortgage component equates to $7,772,000 and the equity component
equates to $5,182,000 in the first scenario. Annual debt service equates to
$689,213 after the application of the mortgage constant of 0.088679 to the
mortgage component. The value of the mortgage component is confirmed as
follows.

Table 8-10 Value of the Mortgage Component Second Scenario

Total Annual Present Worth of $1 Discounted

Year Debt Service Factor at 7.4% Cash Flow

2011/12 $689,000 x 0.930873 = $641,000

2012/13 689,000 x 0.866525 = 597,000
2013/14 689,000 x 0.806625 = 556,000
2014/15 689,000 x 0.750865 = 517,000
2015/16 689,000 x 0.698961 = 482,000
2016/17 689,000 x 0.650644 = 448,000
2017/18 689,000 x 0.605667 = 417,000
2018/19 689,000 x 0.563799 = 388,000
2019/20 689,000 x 0.524825 = 362,000
2020/21 6,885,000 * x 0.488546 = 3,364,000

Value of Mortgage Component $7,772,000

*10th year debt service of $689,000 plus outstanding mortgage balance of $6,196,000

The following table illustrates the cash flow to equity after deducting the debt
service from the projected net income before debt service.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-12

Table 8-11 Net Income to Equity Second Scenario

Net Income
Available for Total Annual Net Income
Year Debt Service Debt Service to Equity

2011/12 $869,000 - $689,000 = $180,000

2012/13 1,139,000 - 689,000 = 450,000
2013/14 1,405,000 - 689,000 = 716,000
2014/15 1,447,000 - 689,000 = 758,000
2015/16 1,490,000 - 689,000 = 801,000
2016/17 1,535,000 - 689,000 = 846,000
2017/18 1,581,000 - 689,000 = 892,000
2018/19 1,629,000 - 689,000 = 940,000
2019/20 1,677,000 - 689,000 = 988,000
2020/21 1,728,000 - 689,000 = 1,039,000

The equity residual at the end of the tenth year is calculated by deducting
brokerage and legal fees and the mortgage balance from the reversionary
value. The reversionary value is calculated as the eleventh year's net income
capitalized by the terminal capitalization rate. The calculation is shown as
follows.
Reversionary Value ( $ 1,780,000/0.105) $16,952,000
Less:
Brokerage and Legal Fees 509,000
Mortgage Balance 6,196,000
Net Sale Proceeds to Equity $10,247,000
Based on these assumptions, the value of the equity component is confirmed
as follows.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-13

Table 8-12 Value of the Equity Component Second Scenario

Net Income Present Worth of $1 Discounted

Year to Equity Factor at 17.0% Cash Flow

2011/12 $180,000 x 0.854675 = $154,000

2012/13 450,000 x 0.730469 = 329,000
2013/14 716,000 x 0.624313 = 447,000
2014/15 758,000 x 0.533585 = 404,000
2015/16 801,000 x 0.456041 = 365,000
2016/17 846,000 x 0.389767 = 330,000
2017/18 892,000 x 0.333124 = 297,000
2018/19 940,000 x 0.284712 = 268,000
2019/20 988,000 x 0.243337 = 240,000
2020/21 11,287,000 * x 0.207974 = 2,347,000

Value of Equity Component $5,181,000

*10th year net income to equity of $1,039,000 plus sales proceeds of $10,248,000

We have added the calculated value of the equity component to the assumed
mortgage amount, which results in the calculated total property net present
value. These totals and the associated yields are illustrated in the following
table.

Table 8-13 Total Property Net Present Value and Internal Rates of Return

Projected Yield
(Internal Rate of Return)
Position Value Over Holding Period

Total Property $12,954,000 12.1 %

Mortgage $7,772,000 7.4
Equity $5,182,000 17.0

Note: Whereas the mortgage constant and value are calculated on the basis of monthly
mortgage payments, the mortgage yield in this proof assumes single annual payments.
As a result, the proof's derived yield may be slightly less than that actually input.

The position of the total property yield reflects our full consideration of the
current credit situation and change in lending climate that has rippled
through the market. Prior to the onset of the credit crisis, total property

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-14

yields for high-quality hotel assets would have been positioned below current
levels.

Discounted Cash Flow The process of converting the projected income stream into an estimate of net
Analysis present value via the discounted cash flow method is described as follows.

1. The forecast of income and expense is expressed in current dollars for

each year. The stabilized year is intended to reflect the anticipated
operating results of the property over its remaining economic life, given
any or all applicable stages of build-up, plateau, and decline in the life
cycle of the hotel. Thus, income and expense estimates from the stabilized
year forward exclude from consideration any abnormal relationship
between supply and demand, as well as any nonrecurring conditions that
may result in unusual revenues or expenses. The stabilized year's net
income is then extended into an eleven-year forecast of income and
expense by applying the assumed underlying inflation rate to each
revenue and expense item from the stabilized year forward, unless
otherwise noted. The eleven-year forecast of net income then forms the
basis of a ten-year discounted cash flow analysis where ten years of net
income and a reversion derived from the capitalized eleventh year's net
income are discounted back to the date of value and summed to derive an
estimate of market value. The ten-year period reflects the typical holding
period of large real estate assets such as hotels. In addition, the ten-year
time frame provides for the stabilization of income streams and
comparison of yields with alternate types of real estate. The forecasted
income streams reflect the future benefits of owning specific rights in
income-producing real estate.
2. An appropriate discount rate is selected to apply to the projected net
income before debt service. This rate reflects the "free and clear" internal
rate of return to an all-cash purchaser or a blended rate of debt and equity
return requirements. The discount rate takes into consideration the
degree of perceived risk, anticipated inflation, market attitudes, rates of
return on other investment alternatives, and availability and cost of
financing. The discount rate is chosen by reviewing sales transactions and
investor surveys and interviewing market participants.
3. A reversionary value reflecting the sales price of the property at the end of
the ten-year holding period is calculated by capitalizing the eleventh-year

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-15

net income by the terminal capitalization rate and deducting typical

brokerage and legal fees.
4. Each year's forecasted net income before debt service and depreciation
and the reversionary sales proceeds at the end of the ten-year holding
period are converted to a present value by multiplying the cash flow by
the chosen discount rate for that year in the forecast. The sum of the
discounted cash flows equates to the net present value of the subject
property.
The following chart summarizes the averages presented for discount rates in
various investor surveys during the past decade.

Table 8-14 Historical Trend of Discount Rates

16.0
15.0

14.0

Discount 13.0
Rate 12.0
11.0
10.0

9.0
8.0
1999 - 1999 - 2000 - 2000 - 2001- 2001- 2002 - 2002 - 2003 - 2003 - 2004 - 2004 - 2005 - 2005 - 2006 - 2006 - 2007 - 2007 - 2008 - 2008 -
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2

HVS 12.62 12.70 12.70 12.80 14.10 14.70 14.50 13.90 14.70 13.50 13.40 12.50 12.10 11.50 11.20 11.00 10.00 10.25 10.50 10.60
Korpacz - Full-Service 13.17 13.11 13.20 13.28 13.21 13.59 13.85 13.51 13.51 13.42 13.20 12.81 12.23 11.84 11.56 11.35 11.26 11.02 10.84 10.98
Korpacz - Luxury 12.81 12.77 12.73 12.73 12.76 12.94 13.68 13.05 12.85 12.85 12.67 12.47 11.84 11.14 11.11 10.93 10.83 10.64 10.56 10.64
CRE/RERC - First Tier 12.90 12.60 14.10 13.50 13.70 13.70 13.60 13.30 13.20 13.30 12.10 12.20 11.90 11.48 11.10 10.80 10.30 10.04 10.50 10.68

We note that the averages illustrated in the previous table are derived from
wide arrays of data points and a range of reasonableness extends both lower
and higher than the indicated data points. Based on our review of these
surveys, sales transactions (see total property yields shown in the table titled
Sample of Hotels Sold), and interviewing market participants, we have selected
a discount rate of 12.00% for our analysis. Similar to the developed total
property yield, our selected discount rate reflects consideration of the present
credit situation. Prior to the current credit crisis, the developed total property

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-16

yield for an asset of this quality and location would have been positioned
below the current level reflected in our analysis.

Utilizing the discount rate set forth, the discounted cash flow procedure is
summarized as follows.

Table 8-15 Discounted Cash Flow Analysis First Scenario

Discount Factor Discounted

Year Net Income @ 12.0% Cash Flow

2011/12 $857,000 0.89286 $765,179

2012/13 1,124,000 0.79719 896,046
2013/14 1,344,000 0.71178 956,633
2014/15 1,384,000 0.63552 879,557
2015/16 1,426,000 0.56743 809,151
2016/17 1,468,000 0.50663 743,734
2017/18 1,512,000 0.45235 683,952
2018/19 1,558,000 0.40388 629,250
2019/20 1,604,000 0.36061 578,418
2020/21 17,385,000 * 0.32197 5,597,658
Estimated Value $12,539,578
(SAY) $12,500,000

Reversion Analysis
11th Year's Net Income $1,703,000
Capitalization Rate 10.5%
Total Sales Proceeds $16,219,048
Less: Transaction Costs @ 3.0% 486,571

Net Sales Proceeds $15,732,476

*10th year net income of $1,653,000 plus sales proceeds of $15,732,000

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Feasibility Analysis 8-17

Table 8-16 Discounted Cash Flow Analysis Second Scenario

Discount Factor Discounted

Year Net Income @ 12.0% Cash Flow

2011/12 $869,000 0.89286 $775,893

2012/13 1,139,000 0.79719 908,004
2013/14 1,405,000 0.71178 1,000,051
2014/15 1,447,000 0.63552 919,595
2015/16 1,490,000 0.56743 845,466
2016/17 1,535,000 0.50663 777,679
2017/18 1,581,000 0.45235 715,164
2018/19 1,629,000 0.40388 657,926
2019/20 1,677,000 0.36061 604,743
2020/21 18,172,000 * 0.32197 5,850,836
Estimated Value $13,055,357
(SAY) $13,100,000

Reversion Analysis
11th Year's Net Income $1,780,000
Capitalization Rate 10.5%
Total Sales Proceeds $16,952,381
Less: Transaction Costs @ 3.0% 508,571

Net Sales Proceeds $16,443,810

*10th year net income of $1,728,000 plus sales proceeds of $16,444,000

Feasibility Conclusion Detailed construction budgets for the two scenarios were not prepared under
the scope of this assignment. It is our general opinion that the total project
cost of the first scenario should fall at or below the net present value result;
thus, this confirms the feasibility of the hotel-only scenario. The total project
cost would likely need to include the costs associated with the land, as well as
a designated entrepreneurial profit. In contrast, it is our general opinion that
the total project cost of the second scenario would fall somewhat above the
net present value result; thus, the hotel-and-conference-center scenario is not
considered feasible at this time.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Statement of Assumptions and Limiting Conditions 9-1

9. Statement of Assumptions and Limiting

Conditions

1. This report is set forth as a feasibility study of the proposed subject

property; this is not an appraisal report.
2. This report is to be used in whole and not in part.
3. No responsibility is assumed for matters of a legal nature, nor do we
render any opinion as to title, which is assumed to be marketable and
free of any deed restrictions and easements. The property is evaluated
as though free and clear unless otherwise stated.
4. We assume that there are no hidden or unapparent conditions of the
sub-soil or structures, such as underground storage tanks, that would
impact the propertys development potential. No responsibility is
assumed for these conditions or for any engineering that may be
required to discover them.
5. We have not considered the presence of potentially hazardous
materials or any form of toxic waste on the project site. The
consultants are not qualified to detect hazardous substances, and we
urge the client to retain an expert in this field if desired.
6. The Americans with Disabilities Act (ADA) became effective on
January 26, 1992. We have assumed the proposed hotel would be
designed and constructed to be in full compliance with the ADA.
7. We have made no survey of the site, and we assume no responsibility
in connection with such matters. Sketches, photographs, maps, and
other exhibits are included to assist the reader in visualizing the
property. It is assumed that the use of the described real estate will be
within the boundaries of the property described, and that no
encroachment will exist.
8. All information, financial operating statements, estimates, and
opinions obtained from parties not employed by TS Worldwide, LLC

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Statement of Assumptions and Limiting Conditions 9-2

are assumed to be true and correct. We can assume no liability

resulting from misinformation.
9. Unless noted, we assume that there are no encroachments, zoning
violations, or building violations encumbering the subject property.
10. The property is assumed to be in full compliance with all applicable
federal, state, local, and private codes, laws, consents, licenses, and
regulations (including a liquor license where appropriate), and that all
licenses, permits, certificates, franchises, and so forth can be freely
renewed or transferred to a purchaser.
11. All mortgages, liens, encumbrances, leases, and servitudes have been
disregarded unless specified otherwise.
12. None of this material may be reproduced in any form without our
written permission, and the report cannot be disseminated to the
public through advertising, public relations, news, sales, or other
media.
13. We are not required to give testimony or attendance in court 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.
14. If the reader is making a fiduciary or individual investment decision
and has any questions concerning the material presented in this
report, it is recommended that the reader contact us.
15. We take no responsibility for any events or circumstances that take
place subsequent to the date of our field inspection.
16. The quality of a lodging facility's on-site management has a direct
effect on a property's economic viability. The financial forecasts
presented in this analysis assume responsible ownership and
competent management. Any departure from this assumption may
have a significant impact on the projected operating results.
17. The estimated operating results presented in this report are based on
an evaluation of the overall economy, and neither take into account
nor make provision for the effect of any sharp rise or decline in local
or national economic conditions. To the extent that wages and other
operating expenses may advance during the economic life of the
property, we expect that the prices of rooms, food, beverages, and
services will be adjusted to at least offset those advances. We do not
warrant that the estimates will be attained, but they have been

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Statement of Assumptions and Limiting Conditions 9-3

prepared on the basis of information obtained during the course of

this study and are intended to reflect the expectations of a typical
hotel investor.
18. This analysis assumes continuation of all Internal Revenue Service tax
code provisions as stated or interpreted on either the date of value or
the date of our field inspection, whichever occurs first.
19. Many of the figures presented in this report were generated using
sophisticated computer models that make calculations based on
numbers carried out to three or more decimal places. In the interest of
simplicity, most numbers have been rounded to the nearest tenth of a
percent. Thus, these figures may be subject to small rounding errors.
20. It is agreed that our liability to the client is limited to the amount of
the fee paid as liquidated damages. Our responsibility is limited to the
client, and use of this report by third parties shall be solely at the risk
of the client and/or third parties. The use of this report is also subject
to the terms and conditions set forth in our engagement letter with
the client.
21. Evaluating and comprising financial forecasts for hotels is both a
science and an art. Although this analysis employs various
mathematical calculations to provide value indications, the final
forecasts are subjective and may be influenced by our experience and
other factors not specifically set forth in this report.
22. This study was prepared by TS Worldwide, LLC. All opinions,
recommendations, and conclusions expressed during the course of
this assignment are rendered by the staff of TS Worldwide, LLC as
employees, rather than as individuals.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Certification 10-1

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 result or direction in
performance that favors the cause of the client, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related
to the intended use of this study;
7. our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice;
8. Dan McCoy personally inspected the property described in this report;
Michael Brophy and Rod Clough, MAI participated in the analysis and
reviewed the findings, but did not personally inspect the property;
9. Michael Brophy and Dan McCoy provided significant assistance to Rod
Clough, MAI, and 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 report;

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Certification 10-2

10. the reported analyses, opinions, and conclusions were developed, and
this report has been prepared, in conformity with the requirements of the
Code of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute;
11. the use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives; and
12. as of the date of this report, Rod Clough, MAI has completed the
requirements of the continuing education program of the Appraisal
Institute.

Michael Brophy
Vice President

Rod Clough, MAI

Managing Director
TS Worldwide, LLC

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Penetration Explanation 1

Penetration Explanation

Let us illustrate the penetration adjustment with an example.

A market has three existing hotels with the following operating statistics:

Base-Year Occupancy and Penetration Levels

Estimated Market Segmentation

Number of
Property Rooms Fair Share Commercial Meeting Leisure Occupancy Penetration

Hotel A 100 23.5% 60% 20% 20% 75.0% 100.8%

Hotel B 125 29.4 70 10 20 65.0 87.4
Hotel C 200 47.1 30 60 10 80.0 107.5

Total/Average 425 100.0% 47% 38% 15% 74.4% 100.0%

Based upon each hotels room count, market segmentation, and annual
occupancy, the annual number of room nights accommodated in the market
from each market segment can be quantified, as set forth below.

Market-wide Room Night Demand

Annual Room Percentage of

Market Segment Night Demand Total

Commercial 54,704 47.4%

Meeting 43,481 37.7
Leisure 17,246 14.9

Total 115,431 100.0%

The following discussion will be based upon an analysis of the commercial

market segment. The same methodology is applied for each market segment
to derive an estimate of a hotels overall occupancy. The chart below sets forth

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Penetration Explanation 2

the commercial demand accommodated by each hotel. Each hotels

commercial penetration factor is computed by:

1) calculating the hotels market share % of commercial demand (commercial

room nights accommodated by subject hotel divided by total commercial
room nights accommodated by all hotels) and

2) dividing the hotels commercial market share % by the hotels fair share
%.

The following chart sets forth each hotels fair share, commercial market
share, and commercial penetration factor.

Commercial Segment Penetration Factors

Number of Commercial Commercial Commercial

Property Rooms Fair Share Capture Market Share Penetration

Hotel A 100 23.5% 12,973 30.0% 127.6%

Hotel B 125 29.4 14,054 37.9 129.0
Hotel C 200 47.1 27,677 32.0 68.1

Total/Average 425 100.0% 54,704 100.0% 100.0%

If a new 100-room hotel enters the market, the fair share of each hotel
changes due to the new denominator, which has increased by the 100 rooms
that have been added to the market.

Commercial Segment Fair Share

Number of
Property Rooms Fair Share

Hotel A 100 19.0%

Hotel B 125 23.8
Hotel C 200 38.1
New Hotel 100 19.0

Total 525 100.0%

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Penetration Explanation 3

The new hotels penetration factor is projected for its first year of operation. It
is estimated that the hotel will capture (penetrate) only 85% of its fair share as
it establishes itself in the market. The new hotels market share and room
night capture can be calculated based upon the hotels estimated penetration
factor. When the market share of the existing hotels and that of the new hotel
are added up, they no longer equal 100% because of the new hotels entry
into the market. The market share of each hotel must be adjusted to reflect
the change in the denominator that comprises the sum of each hotels market
share.

This adjustment can be mathematically calculated by dividing each hotels

market share percentages by the new denominator of 97.1%. The resulting
calculations reflect each hotels new adjusted market share. The sum of the
adjusted market shares equals 100%, indicating that the adjustment has been
successfully completed. Once the market shares have been calculated, the
penetration factors can be recalculated (adjusted market share divided by fair
share) to derive the adjusted penetration factors based upon the new hotels
entry into the market. Note that each existing hotels penetration factor
actually increases because the new hotel is capturing (penetrating) less than
its fair share of demand.

Commercial Segment Projections (Year 1)

Number of Hist./Proj. Hist./Proj. Market Adjusted Adjusted Penetration Projected

Property Rooms Fair Share Penetration Factor Share Market Share Factor Capture

Hotel A 100 19.0% 127.6% 24.3% 25.0% 131.4% 13,687

Hotel B 125 23.8 129.0 30.7 31.6 132.8 17,299
Hotel C 200 38.1 68.1 25.9 26.7 70.1 14,600
New Hotel 100 19.0 85.0 16.2 16.7 87.5 9,117

Total 525 100.0% 97.1% 100.0% 54,704

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

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Penetration Explanation 4

commensurate with Hotel A and Hotel B, though the penetration rates of all
three hotels have declined by approximately nine percentage points due to
the reapportionment of demand.

Once the market shares of each hotel have been adjusted to reflect the entry
of the new hotel into the market, the commercial room nights captured by
each hotel may be projected by multiplying the hotels market share
percentage by the total commercial room night demand. This calculation is
shown below.

Commercial Segment Projections (Year 2)

Number of Hist./Proj. Hist./Proj. Market Adjusted Adjusted Penetration Projected

Property Rooms Fair Share Penetration Factor Share Market Share Factor Capture

Hotel A 100 19.0% 131.4% 25.0% 23.1% 121.5% 12,662

Hotel B 125 23.8 132.8 31.6 29.3 122.9 16,004
Hotel C 200 38.1 70.1 26.7 24.7 64.8 13,507
New Hotel 100 19.0 130.0 24.8 22.9 120.3 12,531

Total 525 100.0% 97.1% 100.0% 54,704

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 1

Explanation of the Simultaneous Valuation

Formula

The algebraic equation known as the simultaneous valuation formula, which

solves for the total property value using a ten-year mortgage and equity
technique, was developed by Suzanne R. Mellen, CRE, MAI, and Managing
Director of the San Francisco office of HVS. A complete discussion of the
technique is presented in her article entitled Simultaneous Valuation: A New
Technique.7

The process of solving for the value of the mortgage and equity components
begins by deducting the annual debt service from the projected income before
debt service, leaving the net income to equity for each year. The net income as
of the eleventh year is capitalized into a reversionary value using the terminal
capitalization rate. The equity residual, which is the total reversionary value
less the mortgage balance at that point in time and less any brokerage and
legal costs associated with the sale, is discounted to the date of value at the
equity yield rate. The net income to equity for each projection year is also
discounted back to the date of value. The sum of these discounted values
equals the value of the equity component. Because the equity component
comprises a specific percentage of the total value, the value of the mortgage
and the total property can be computed easily. This process can be expressed
in two algebraic equations that set forth the mathematical relationships
between the known and unknown variables using the following symbols.

7
Suzanne R. Mellen. "Simultaneous Valuation: A New Technique," Appraisal Journal,
April, 1983.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 2

NI = Net income available for debt service

V = Value
M = Loan-to-value ratio
f = Annual debt service constant
n = Number of years in the projection period
de = Annual cash available to equity
dr = Residual equity value
b = Brokerage and legal cost percentage
P = Fraction of the loan paid off during the projection
period
fp = Annual constant required to amortize the entire
loan during the projection period
Rr = Overall terminal capitalization rate that is applied
to net income to calculate the total property
reversion (sales price at the end of the projection
period)
1/Sn = Present worth of $1 factor (discount factor) at the
equity yield rate
Using these symbols, the following formulas can be used to express some of
the components of this mortgage and equity valuation process.

Debt Service A property's debt service is calculated by first determining the

mortgage amount that equals the total value (V) multiplied by the loan-to-
value ratio (M). Debt service is derived by multiplying the mortgage amount
by the annual debt service constant (f). The following formula represents debt
service.

f x M x V = Debt Service

Net Income to Equity (Equity Dividend) The net income to equity (de) is
the property's net income before debt service (NI) less debt service. The
following formula represents the net income to equity.

NI - (f x M x V) = de

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 3

Reversionary Value The value of the hotel at the end of the tenth year is
calculated by dividing the eleventh-year net income before debt service (NI11)
by the terminal capitalization rate (Rr). The following formula represents the
property's tenth-year reversionary value.

(NI11/Rr) = Reversionary Value

Brokerage and Legal Costs When a hotel is sold, certain costs are associated
with the transaction. Normally, the broker is paid a commission and the
attorney collects legal fees. In the case of hotel transactions, brokerage and
legal costs typically range from 1% to 4% of the sales price. Because these
expenses reduce the proceeds to the seller, they are usually deducted from
the reversionary value in the mortgage and equity valuation process.
Brokerage and legal costs (b), expressed as a percentage of reversionary value
(NI11/Rr), are calculated by application of the following formula.

b (NI11/Rr) = Brokerage and Legal Costs

Ending Mortgage Balance The mortgage balance at the end of the tenth
year must be deducted from the total reversionary value (debt and equity) in
order to determine the equity residual. The formula used to determine the
fraction of the loan remaining (expressed as a percentage of the original loan
balance) at any point in time (P) takes the annual debt service constant of the
loan over the entire amortization period (f) less the mortgage interest rate (i),
and divides it by the annual constant required to amortize the entire loan
during the ten-year projection period (fp) less the mortgage interest rate. The
following formula represents the fraction of the loan paid off (P).

(f - i)/(fp - i) = P

If the fraction of the loan paid off (expressed as a percentage of the initial loan
balance) is P, then the remaining loan percentage is expressed as 1 - P. The
ending mortgage balance is the fraction of the remaining loan (1 - P)
multiplied by the initial loan amount (M x V). The following formula
represents the ending mortgage balance.

(1 - P) x M x V

Equity Residual Value The value of the equity upon the sale at the end of
the projection period (dr) is the reversionary value less the brokerage and

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 4

legal costs and the ending mortgage balance. The following formula
represents the equity residual value.

(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr

Annual Cash Flow to Equity The annual cash flow to equity consists of the
equity dividend for each projection year plus the equity residual at the end of
the tenth year. The following formula represents the annual cash flow to
equity.

NI1 - (f x M x V) = de1

NI2 - (f x M x V) = de2

NI10 - (f x M x V) = de10

(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr

Value of the Equity If the initial mortgage amount is calculated by

multiplying the loan-to-value ratio (M) by the property value (V), then the
equity value is one minus the loan-to-value ratio multiplied by the property
value. The following formula represents the value of the equity.

(1 - M) V

Discounting the Cash Flow to Equity to the Present Value The cash flow to
equity in each projection year is discounted to the present value at the equity
yield rate (1/Sn). The sum of these cash flows is the value of the equity (1 - M)
V. The following formula represents the calculation of equity as the sum of
the discounted cash flows.

(de1 x 1/S1) + (de2 x 1/S2) + . . . + (de10 x 1/S10) + (dr x 1/S10) = (1 - M) V

Combining the Equations: Annual Cash Flow to Equity and Discounting

the Cash Flow to Equity to the Present Value The last step is to arrive at
one overall equation that shows that the annual cash flow to equity plus the
yearly discounting to the present value equals the value of the equity.

((NI1 - (f x M x V)) 1/S1) + ((NI2 - (f x M x V)) 1/S2) + . . .

((NI10 - (f x M x V)) 1/S10) +

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 5

(((NI11/Rr) - (b (NI11/Rr)) - ((1 - P) x M x V)) 1/S10) = (1 -M) V

Because the only unknown in this equation is the property's value (V), it can
be solved readily.

Ten-Year Projection of Income and Expense Because the fixed and variable
forecast of income and expense is carried out only to the stabilized year, it is
necessary to continue the projection to the eleventh year. In most cases, net
income before debt service beyond the stabilized year is projected at an
assumed inflation rate. By increasing a property's revenue and expenses at
the same rate of inflation, net income remains constant as a percentage of
total revenue, and the dollar amount escalates at the annual inflation rate.
The ten-year forecast of income and expense illustrates the subject property's
net income, which is assumed to increase by 3.0% annually subsequent to the
hotel's stabilized year of operation.

The following values are assigned to the variable components for the
purposes of this valuation. We note that these values represent our findings
for the first scenario. This section is for informational purposes only;
therefore, we have not included an additional aanlaysis for the second
scenario in this section.

Summary of Known Variables

Annual Net Income NI See Ten-Year Forecast

Loan-To-Value Ratio M 60 %
Interest Rate i 7.50 %
Debt Service Constant f 0.088679
Equity Yield Ye 17.0 %
Transaction Costs b 3.0 %
Annual Constant Required to
Amortize the Loan in Ten Years fp 0.142442
Terminal Capitalization Rate Rr 10.5 %

The following table illustrates the present worth of a $1 factor at the 17.0%
equity yield rate.

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 6

Present Worth of $1 Factor at the Equity Yield Rate

Year Present Worth of $1

Ending Factor at 17.0%

2011/12 0.854731
2012/13 0.730566
2013/14 0.624438
2014/15 0.533726
2015/16 0.456193
2016/17 0.389922
2017/18 0.333279
2018/19 0.284864
2019/20 0.243482
2020/21 0.208112

Using these known variables, the following intermediary calculations must be

made before applying the simultaneous valuation formula. The fraction of the
loan paid off during the projection period is calculated as follows.

P=( 0.088679 - 0.0750 ) / ( 0.142442 - 0.0750 ) = 0.202825

The annual debt service is calculated as f x M x V.

(f x M x V)= 0.088679 x 0.60 x V = ( 0.053207 )V

Inserting the known variables into the hotel valuation formula produces the
following.

( 857,000 - 0.05321 V) x 0.854701 +

( 1,124,000 - 0.05321 V) x 0.730514 +
( 1,344,000 - 0.05321 V) x 0.624371 +
( 1,384,000 - 0.05321 V) x 0.53365 +
( 1,426,000 - 0.05321 V) x 0.456111 +
( 1,468,000 - 0.05321 V) x 0.389839 +
( 1,512,000 - 0.05321 V) x 0.333195 +
( 1,558,000 - 0.05321 V) x 0.284782 +
( 1,604,000 - 0.05321 V) x 0.243404 +
( 1,653,000 - 0.05321 V) x 0.208037 +

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Explanation of the Simultaneous Valuation Formula 7

((( 1,703,000 / 0.105 ) - ( 0.030 x ( 1,703,000 / 0.105 )) -

(( 1- 0.202825 ) x 0.6 x V)) x 0.2080374 )= ( 1 - 0.6 )V

Like terms are combined as follows.

$9,308,730 - 0.347377V = (1 - 0.60)V

$9,308,730 = 0.74738V
V = $9,308,730 / 0.74738
V = $12,455,194

Total Property Value as Indicated by

the Income Capitalization
Approach (Say) = $12,500,000

Proposed Alton Hotel - Alton, Illinois

HVS Consulting and Valuation Services Qualifications of Mike Brophy

HVS Consulting and Valuation Services - Atlanta

2386 Clower Street, Suite C101
Snellville, GA, 30078
(678) 628-6577
Fax (678) 639-3335

Mike Brophy

Employment
2004 Present HVS CONSULTING AND VALUATION SERVICES
Atlanta, Georgia

2001 2003 TWO RIVERS CONVENTION CENTER/AVALON

THEATRE
Grand Junction, Colorado

1998 2001 SOUTHFORK RANCH EVENT AND CONFERENCE

CENTER
Dallas, Texas

1995 1998 WYNDHAM INTERNATIONAL

San Rafael, California; Commerce, California; Dallas,
Texas

Education and Other Training EAST STROUDSBURG STATE UNIVERSITY

Bachelor of Science

Certified General Appraiser Classes Completed:

Real Estate Appraisal 60 hours
Uniform Residential Appraisal Report 15 hours
Uniform Standards of Professional Appraisal
Practice 15 hours
Basic Income Capitalization 39 hours
Apartment Appraisal 15 hours
Residential Report Writing and Case Studies 15 hours
General Appraiser Market Analysis and HBU 30 hours
USPAP Update 7 hours

Memberships & Affiliations American Hotel & Lodging Association

Flower Mound Chamber of Commerce
HVS Consulting and Valuation Services Qualifications of Mike Brophy

Examples of Corporate and Eastdil Secured Paragon Hotel Company

Institutional Clients Served Elm Street Center, LLC Park National Bank
Falor Companies Peoples Bank Biloxi
American Hotel Development First Hartford Realty Principal Real Estate Investors
Partners Galleria Ventures ProHomes, LLC
American Property Management Ganesh Ventures LLC Quarterage Hotel
Archon Hospitality GE Capital Quincy Investments
Ardmore Tourism Authority Gencom Ranger Properties
Ascent Hospitality LLC Goldman Sachs Remington
Assent Capital LLC Guy Mitchell Rilea Group
Avista Hall Financial River Hall Partnership
Aztec Group, Inc. Harrell Hospitality Rolarco
Baha Mar Development Company Holloway Lodging REIT Sabra Enterprises
Bankers Bank HomePlace Developers Silverton Bank
Bank MidWest Impact Properties Site Realty
Bank of America ING Clarion Partners Somerock University Mall
Bank of Hampton Roads Investcorp Holdings, LLC
Barclays Jackson State Bank & Trust Specialty Finance Group
Bear Stearns Jones Lang LaSalle State Bank of Texas
Behringer Harvard JP Morgan Chase Steiner
Benchmark Development Kent State University Textron Financial
Berkshire Hotels Group KMW Real Estate The Blackstone Group
Branch Banking & Trust Co. Lake Real Estate TIB Bank
Brotherhood Bank & Trust Latitude Hospitality, Inc. TJ, LLC
Buena Vista Hospitality Group Laureate Capital Torgerson Properties
Cabi Developers Lehman Brothers Tramz Hotels
Camden National Bank Lennar TransInns
Cava Construction LRP TriState Bank
CB Richard Ellis MainSource Bank TVO North America
Cheeca Holdings, LLC Mellon Bank UBS Investment Bank
CIBC World Markets Merrill Lynch Upscale Companies
CIT MetroFund Group Vintage Companies
Citigroup MMA Realty, Inc. WG Yates and Sons Construction
City of Chattanooga Mockingbird Properties Windmill Development
Columbus Bank & Trust Moody National Companies Winslow Homes, LLC
Column Financial Morgan Stanley WPM Construction LLC
Commerce National Bank Mutual Bank
Countrywide Natixis Real Estate Capital
Credit Suisse Neptune Hospitality
CS First Boston Nock Investments, Inc.
CU Business Capital Nomura
CWCapital North Ocean Management Group
Delco Development Northview Hotel Group
Dillon Read NRF Capital
Dimension Development OConnor Capital
HVS Consulting and Valuation Services Qualifications of Mike Brophy

Examples of Properties Appraised or Embassy Suites Monterey Bay, Days Inn, Port Charlotte
Evaluated Seaside Hampton Inn, Port Charlotte
Fairmont Mission Inn, Sonoma Sanibel Inn, Sanibel Island
ALABAMA Sundial Beach Resort, Sanibel Island
Tradewinds Resort, St. Petersburg
Hampton Inn, Bessemer COLORADO Holiday Inn, Tallahassee
Proposed aloft, Birmingham Proposed Element, Tampa
Residence Inn, Birmingham Homewood Suites, Boulder
Proposed Fairfield Inn by Marriott, Sheraton, Colorado Springs
Greenville GEORGIA
Baymont Inn & Suites, Oxford
CONNECTICUT The Glenn Hotel, Atlanta
Homewood Suites, Atlanta
ARIZONA Mayflower Inn & Spa, Washington Residence Inn, Atlanta
Courtyard by Marriott, Waterbury Proposed Candlewood Suites,
Phoenix Highland Hotel, Phoenix Athens
Phoenix Inn, Phoenix Proposed Courtyard by Marriott,
Phoenix Place Hotel and Suites DELAWARE Buford
(DoubleTree Conversion), Residence Inn, Hapeville
Phoenix Courtyard by Marriott, Wilmington Proposed Hotel, Lake Oconee
Radisson, Phoenix McIntosh Hotel, Wilmington Proposed Hotel, Macon
DoubleTree, Tuscon Proposed Cambria Suites,
Savannah
FLORIDA Proposed Extended-Stay, Savannah
ARKANSAS Proposed Indigo Hotel, Savannah
South Seas Resort, Captiva Island Residence Inn, Torrence
Radisson, Fayetteville Hilton, Clearwater Beach
Embassy Suites, Little Rock Hilton, Cocoa Beach
La Quinta, Little Rock Omni, Coral Gables ILLINOIS
Proposed Sheraton, Rogers Hawks Cay, Duck Key
Hampton Inn & Suites, Springdale Ramada Inn, Hialeah Lenox Suites, Chicago
Holiday Inn, Springdale Cheeca Lodge & Spa, Islamorada Proposed Renaissance, Chicago
Sheraton, Key Largo Radisson, Chicago
Crowne Plaza, Key West Wyndham Downtown, Chicago
CALIFORNIA Inn at Key West, Key West Residence Inn, Deerfield
Proposed Hotel, Key West Wyndham Northwest, Itasca
Ventana Inn & Spa, Big Sur Hilton, Melbourne Crowne Plaza Chicago OHare,
DoubleTree, Commerce Quality Suites, Melbourne Rosemont
Sheraton Four Points, Los Angeles Mayfair, Miami
Westin Century Plaza, Los Angeles Best Western, Ocala
Embassy Suites, Monterey Bay Hilton Garden Inn, Orange Park IOWA
Best Western, Poway DoubleTree, Orlando
La Quinta, San Diego Proposed Condo Hotel, Orlando Marriott (Collins Plaza), Cedar
Casa Madrona, Sausalito Hilton, Palm Beach Rapids
Ocean Club Beach Resort, Palm Beach Proposed Sheraton, Davenport
HVS Consulting and Valuation Services Qualifications of Mike Brophy

Radisson, Davenport Proposed Courtyard, Pittsfield Barton Hill, Lewiston

Sierra Suites, Waltham Proposed Hotel, New York City
DoubleTree, Westborough Proposed Homewood Suites,
LOUISIANA Sierra Suites, Westborough Ronkonkoma
Sierra Suites, Woburn Staten Island Hotel, Staten Island
Proposed Candlewood Suites,
Baton Rouge
Holiday Inn Westbank, Gretna MAINE NORTH CAROLINA
Proposed Candlewood Suites,
Lafayette Econo Lodge Inn & Suites, Augusta Sheraton, Atlantic Beach
Proposed Homewood Suites, Hilton Garden Inn, Portland Proposed Tweetsie Railroad Hotel,
Lafayette Blowing Rock
Proposed Holiday Inn, New Hampton Inn, Boone
Orleans NEBRASKA Proposed SpringHill Suites,
Charlotte
Country Inn & Suites, Omaha Proposed Hyatt Place, Concord
MICHIGAN

Residence Inn, Kalamazoo NEW JERSEY NORTH DAKOTA

Fairfield Inn, East Rutherford Hilton Garden Inn, Grand Forks

MINNESOTA DoubleTree Newark Airport,
Elizabeth
DoubleTree Park Place, Four Points Newark Airport, OHIO
Minneapolis Elizabeth
Proposed Homewood Suites, New Proposed Hotel, Mt. Laurel Residence Inn, Akron
Brighton Courtyard by Marriott, Lyndhurst Proposed Conference Center Hotel,
Proposed Homewood Suites, St. Proposed Hotel, Millville Canton
Louis Park Proposed TownePlace Suites, Residence Inn, Cincinnati
Millville Proposed Cambria Suites,
Hilton, Newark Columbus
MISSOURI Renaissance, Rutherford Proposed Hotel Developments,
Hampton Inn, Woodbridge Rockside
Hotel President, Kansas City
Proposed Full-Service Hotel,
Kansas City NEW MEXICO OKLAHOMA
Quarterage Hotel, Kansas City
Courtyard by Marriott, Springfield SpringHill Suites, Las Cruces Proposed Lake Murray Resort,
Holiday Inn Airport West, St. Louis Hilton, Santa Fe Ardmore
Holiday Inn Riverport, St. Louis Holiday Inn Express, Jenks
Courtyard by Marriott, Oklahoma
NEW YORK City
MASSACHUSETS Four Points, Oklahoma City
DoubleTree, East Syracuse Sheraton, Oklahoma City
Nine Zero, Boston Holiday Inn, Jamaica Staybridge Suites, Tulsa
HVS Consulting and Valuation Services Qualifications of Mike Brophy

Bradford Suites, Austin

OREGON DoubleTree Club, Austin UTAH
Holiday Inn Express, Austin
Embassy Suites, Portland Park Plaza (old Hilton), Austin Homewood Suites, Midvale
Holiday Inn Express, Austin Best Western Capitol Reef, Torrey
Proposed Galleria Hotel, Dallas
PENNSYLVANIA Radisson Love Field, Dallas
Radisson, Dallas VIRGINIA
Marriott Pittsburgh Airport, The Stoneleigh, Dallas
Caraopolis Wyndham Market Center, Dallas Proposed Beacon Hotel,
Proposed Embassy Suites, Erie Proposed Hotel, Edinburg Charlottesville
Comfort Inn, Langhorne Proposed Hilton Garden Inn, El Best Western, Exmore
Crowne Plaza Airport, Pittsburgh Paso Homewood Suites, Glen Allen
Residence Inn by Marriott, Residence Inn, Fort Worth Proposed Courtyard by Marriott,
Pittsburgh Proposed Hilton Garden Inn, Frisco Newport News
SpringHill Suites, Pittsburgh Proposed Sheraton, Frisco Residence Inn by Marriott, Tysons
Proposed Staybridge Suites, Westin Stonebriar, Frisco Corner
Royersford Proposed Hotel, Georgetown Proposed Hotel, Virginia Beach
Shawnee Resort, Shawnee on the Hyatt Place, Grand Prairie Lexington George Washington Inn,
Delaware AmeriSuites, Grapevine Williamsburg
Embassy Suites, Grapevine
Courtyard by Marriott, Irving
SOUTH CAROLINA Proposed Element, Irving WASHINGTON
SpringHill Suites Las Colinas,
Hilton Garden Inn, Columbia Irving Hilton Garden Inn, Seattle
Holiday Inn Express, Fort Mill Summerfield Suites Las Colinas,
Quality Inn, Greenville Irving
Wild Dunes, Isle of Palms Holiday Inn Express, Plainview DISTRICT OF COLUMBIA
Holiday Inn Express, Murrells Inlet Hawthorn Suites, San Antonio
Springmaid Beach Resort, Myrtle Homewood Suites, San Antonio Courtyard by Marriott Navy Yard
Beach Proposed Element, San Antonio DoubleTree
Proposed Embassy Suites, San
Antonio
TENNESSEE Proposed Four Points, San Antonio INTERNATIONAL
Proposed Hilton Garden Inn, San
Embassy Suites, Franklin Antonio
Hilton Hotel, Knoxville Proposed Omni, San Antonio MEXICO
Proposed Starwood Luxury
Collection, San Antonio Park Royal, Acapulco
TEXAS Sheraton Gunter, San Antonio Hyatt Cancun Caribe, Cancun
Wyndham St. Anthony, San Park Royal Piramides, Cancun
Crowne Plaza, Addison Antonio Park Royal, Cozumel
Residence Inn, Addison Proposed Hotel, Waco Radisson Resort, Ixtapa
Summerfield Suites, Addison Holiday Inn Express, Weatherford Park Royal, Los Cabos
Residence Inn, Arlington Proposed Hotel, Playa del Carmen
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

HVS Consulting and Valuation Services

2601 Sagebrush Drive, Suite 101
Flower Mound, Texas 75028
(972) 899-5400
Fax (972) 899-1057

Rod Clough, MAI

Employment

2001 Present HVS INTERNATIONAL

Dallas/Fort Worth, Texas
Managing Director

2003 Present US HOTEL APPRAISALS

Dallas/Fort Worth, Texas
Managing Director

1995 2001 HVS INTERNATIONAL

Mineola, New York; Boulder, Colorado

1994 1995 THE MIRAGE

Las Vegas, Nevada
(Rooms Division Management)

1993 HYATT REGENCY DENVER DOWNTOWN

Denver, Colorado
(Rooms Division Management)

1991 1994 THE STATLER HOTEL AND JW MARRIOTT

EXECUTIVE EDUCATION CENTER
Cornell University, Ithaca, New York
(Rooms Division Management)

1988 1990 UNIVERSITY OF COLORADO CATERING

Boulder, Colorado
(Food and Beverage Management)
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Professional Affiliations Appraisal Institute Designated Member (MAI)

Cornell Hotel Society
American Hotel and Motel Association

Education and Other Training CORNELL UNIVERSITY

Bachelor of Science - Hotel Administration
With Honors

Appraisal Institute Classes Completed:

410 Standards of Professional Practice Part A
420 Standards of Professional Practice Part B
510 Advanced Income Capitalization
520 Highest and Best Use and Market Analysis
530 Adv. Sales Comparison and Cost Approach
540 Report Writing and Valuation Analysis
550 Advanced Applications

Other Specialized Training Classes Completed:

TALCB-ACE - Income Property Analysis - 2003
24-Hour Comprehensive Appraisal Workshop - 2002
Mandatory 8-Hour Broker Standards - 2001 Update
Anatomy of a Mortgage, URAR 2005
USPAP 2001, 2003, 2004, 2005, 2006 Update
Solutions Approach Appraisal Institute, 2006

Certified General Appraiser Classes Completed, through the

University of Colorado Continuing Education Department:
NCRE-200 Registered Appraiser
NCRE-201 Basic Appraisal Applications
NCRE-203 Small Residential Income Properties
NCRE-208 Standards and Ethics
NCRE-211 Certified Residential
NCRE-215 Appraisal Principles and Advanced
Applications
NCRE-216 Income Capitalization
NCRE-219 Commercial Case Studies

State Certifications (Sample) Alabama, Arkansas, Arizona, California, Colorado,

Georgia, Kansas, Kentucky, Louisiana, Michigan,
Missouri, Nebraska, New Mexico, Ohio, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas, Utah,
Virginia, Washington
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Speaking Engagements University of Colorado Resort Tourism, October 2000

Urban Land Institute Conference

Developing Resorts in Mexico, Cancun, Mexico, April 2000

Default Loan Conference, Dallas/Fort Worth, Texas

Hotel Trends Overview, Frisco, Texas, May 2002
Appraisals and Valuations, Grapevine, Texas, March 2004

Pennsylvania State University Hotel Management,

October 2002

AAHOA National Convention and Tradeshow

Hotel Investment Trends Overview, Grapevine, Texas,
April 2004

FIABI World Conference

Worldwide Trends in the Hotel Industry, Houston, Texas,
May 2004

Published Articles Mortgage Banking, Have Hotels Reached Their Peak?

July 1997
Colorado Business Journal, Tracking Denvers Hotel
Projects, October 1998
HVS International Journal, The Survival of the Full-Service
Hotel, June 1999
Boulder County Business Report, An Emerging Market,
August 2000
HVS International Journal, Evaluating an Emerging Hotel
Market, September 2000

Colorado Real Estate Journal, What Denver Submarkets

Still Have Upside Hotel Potential? September 2000
HVS International Journal, Central America Insight: Hotel
Branding. December 2000
Colorado Real Estate Journal, Appraisal Hot Topics.
January 2001
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Published Articles (Continued) HVS International Journal, The Texas Hotel Industry:
Stabilization on the Horizon. February 2002
Hotel News Resource & HVS International Lodging Report,
What does the bankruptcy of Enron mean for the
downtown Houston hotel industry? February 2002
Real Estate Finance Journal, Apartment or hotel? Todays
budget, extended-stay hotels blur the line between
property types. Spring 2002
HVS International Journal, The Upside: Potential Returns Can
Be Big When Buying Hotels In The Down Cycle. June 2002
HVS International Global Hospitality Report, U.S. Lodging
Industry Update. March 2003
HVS International Global Hospitality Report, Texas
Convention Centers Overview. October 2003
HVS International Global Hospitality Report, Houstons
Hotels Get Ready For Superbowl Sunday. January 2004
HVS International Global Hospitality Report, Lower Cost
Hotels Hold RevPAR in 2003. February 2004
HVS International Global Hospitality Report, U.S. Hotels
Improve RevPAR in 2003. February 2004
HVS International Global Hospitality Report, Transactions
Activity Gains Momentum in 2004. June 2004
HVS Major and Mid-Market Transactions Reports, Annual
Publications, 2004 - 2007
HVS Library (www.hvs.com), HVS Market Intelligence
Report: Dallas. August 25, 2007

Mentions Real Estate Forum, Las Vegas Update September 2000

Business Travel Executive, Home Style September 2000
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Examples of Corporate and Finova Capital Corporation Nomura

Institutional Clients Served First Financial Bancorp Norwest Financial
First Midwest Bank OCWEN Financial Group
3D/International First Mortgage Corporation Orix Capital Markets
Aereal Bank First Source Bank Paine Webber
AEW Capital Management First Union Bank Pia Investments, Inc.
Amstar Group, Ltd. Firstar Bank Peabody Hotels
Argones Properties FirsTier Bank PNC Bank
Aries Capital Fremont Investment and Loan Premier Commercial Bank
Arlington Hospitality Frost National Bank President Casinos
Ashford Financial Corporation Gatehouse Capital President Development Group
Baltimore Development Corp. GE Capital Presidio Hotel Group
Banc One Gencom Prime Hospitality
Bank of America GMAC Pullman Bank and Trust
Bay County Planning Authority Golf Lodging, LLC Quorum Hotels and Resorts
Bear Stearns Griffin Group Ryan Companies
Broadway Bank Hamilton Properties Corp. Sage Hospitality Resources
CapEx Corporation HEI Hotels Samantha Investments
Capital Center Incorporated Heller Financial Shaner Hotel Group
Capital Company of America Hodges Ward Elliott Signature Hospitality Resources
Capitol Hotel Group Hospitality Properties Trust Simon DeBartolo Group
CapStar Hotels Horizon Bank Simpson, Thacher, & Bartlett
CB Richard Ellis Hyatt Corporation Starwood Lodging Corporation
CDC Mortgage Capital, Inc. IFGP Corporation (Insignia) Stearns Bank
Chase Manhattan Bank ITLA Funding Corporation Stevens Holtze Corporation
CIBC Commercial Mortgage Jackson Creek Development Co. Stonebridge Companies
CIGNA Investment Management Jefferson Banking Company Sumitomo Bank Ltd.
Citicorp Real Estate, Inc. JER Partners Temecula Bank
Citizens Financial Services, FSB JP Morgan Terrabrook
City of Dallas, TX Kimberly Clark The Blackstone Group
City of Fort Worth, TX Landmark Organization UBS Warburg
City of Huntsville, AL Leddy Ventures UBS Paine Webber
CNL Hospitality Corporation Lehman Brothers, Inc. Unity Bank
Commercial Capital Initiatives, Inc. Lennar Partners US Bancorp Piper Jaffray
Credit Lyonnais Lincoln National Life Washington Mutual
Credit Suisse First Boston Magnolia Hotels Waxahachie 37, LLC
CRIIMI Mae Services, Inc. Marathon Bank Waypoint Bank
Crow Holdings Marshall Investments Weglarz Group
DAIWA Securities Mercantile National Bank Wells Fargo Bank
Depfa Bank Mercury Capital Western Security Bank
Deutsche Bank Securities Merrill Lynch White Lodging Services Corp.
Dresner Bank Midland Loan Windmill Inns
Fairmont Hotel Management Co. Miller & Schroeder Winegardner & Hammons, Inc.
Faison, Inc. National Republic Bank of Chicago Woodbine Development Corp.
FelCor Lodging Trust, Inc. Neptune Hospitality Advisors WR Henderson Construction
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

PARTIAL LIST OF HOTELS AND MOTELS APPRAISED OR EVALUATED

BY RODNEY G. CLOUGH, MAI

PORTFOLIO ANALYSIS Proposed Residence Inn by Marriott, COLORADO

Mesa
Various Portfolios of Lodgian- Hampton Inn, Phoenix Fairfield Inn, Aurora
Owned Hotels, Various Locations Proposed Kierland Hotel, Phoenix Proposed Fairfield Suites by
Annual Portfolio of AEW-owned Holiday Inn Express, Sahuarita Marriott, Aurora
Hotels, Various Locations Hyatt Regency, Scottsdale Econo Lodge/Quality Inn, Boulder
Portfolio of 9 Boykin Hotels, Various Proposed Hilton Garden Inn, Proposed Embassy Suites, Boulder
Locations Scottsdale Sandy Point Inn, Boulder
Portfolio of 5 Blackacre Hotels, MainStay Suites, Tempe Comfort Inn, Brighton
Various Locations Proposed Suite Hotel, Tucson Hampton Inn, Colorado Springs
Portfolio of 36 Sunburst Hotels, Super 8, Tucson Holiday Inn, Colorado Springs
Various Locations Embassy Suites, Colorado Springs
Portfolio of 6 Innkeepers Hotels, ARKANSAS Comfort Inn, Colorado Springs
Various Locations Eight Proposed TownePlace Suites,
Portfolio of 8 FelCor Hotels, Various Days Inn, Little Rock Denver Area
Locations Hilton, Little Rock Adams Mark, Denver
Portfolio of 10 GF Management- Hampton, Searcy Best Western Landmark Hotel,
Owned Hotels, Various Locations Holiday Inn, Springdale Denver
Portfolio of 96 Hilton Hotels, Hampton Inn & Suites, Springdale Brown Palace, Denver
Various Locations Comfort Inn Downtown, Denver
CALIFORNIA Courtyard by Marriott Downtown,
ALABAMA Denver
Proposed Sheraton Resort, Aliso DoubleTree Stapleton, Denver
Holiday Inn Redmont, Birmingham Viejo Embassy Suites East, Denver
The Tutweiler, Birmingham Sheraton, Anaheim Embassy Suites Southeast, Denver
Proposed Marriott Hotel, Marriotts Laguna Cliffs Resort, Executive Tower Inn, Denver
Birmingham Dana Point Fairfield Inn by Marriott Central,
Holiday Inn, Birmingham Proposed AmeriHost, Fresno Denver
Proposed Hotel, Huntsville Hilton Garden Inn, Calabasas Glenarm Place, Denver
Adams Mark, Mobile Chase Suites, Fullerton Hampton Inn DIA, Denver
Ramada, Montgomery Comfort Inn, Hanford Holiday Inn Downtown, Denver
Residence Inn by Marriott, Chateau Marmont, Los Angeles Holtze Executive Place, Denver
Montgomery Le Parc Suites, Los Angeles Hotel Teatro, Denver
Super 8, Los Angeles Hyatt Regency Denver Tech Center,
ALASKA Hyatt Regency, Monterey Denver
Hyatt Rickeys, Palo Alto Hyatt Regency Downtown, Denver
Hampton Inn, Searcy Proposed AmeriHost, Palmdale Proposed Marriott Convention
Westin Mission Hills, Rancho Center Hotel, Denver
ARIZONA Mirage Westin Tabor Center, Denver
Hilton Garden Inn, Rancho Mirage Comfort Suites, Dillon
EconoLodge, Flagstaff Best Western, Santa Barbara Proposed Windmill Inn, Douglas
Holiday Inn, Flagstaff Shutters on the Beach, Santa Monica County
Sleep Inn, Mesa Comfort Suites, Stevenson Ranch Proposed Stonegate Hotel, Douglas
County
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Embassy Suites South, Englewood DELAWARE Proposed Golf Lodge, Sarasota

Hampton Inn, Englewood DoubleTree, Tallahassee
Proposed Conference Center Hotel, Proposed Courtyard by Marriott, Floridan Hotel, Tampa
Fort Collins Newark Hilton Garden Inn North, Tampa
Proposed Hampton Inn & Suites, Courtyard by Marriott, Wilmington Hyatt Regency Downtown, Tampa
Glendale McIntosh Hotel, Wilmington Hyatt Regency Westshore, Tampa
Proposed Courtyard and Residence Wyndham, Wilmington Sheraton (Proposed), Tampa
Inn by Marriott, Golden Marriott, West Palm Beach
Proposed Hampton Inn, Golden DISTRICT OF COLUMBIA Residence Inn, West Palm Beach
Proposed Homewood Suites,
Golden Best Western New Hampshire GEORGIA
Comfort Suites, Littleton DoubleTree
Fairfield Inn by Marriott, Littleton Embassy Row Hilton Clubhouse Inn, Atlanta
Proposed Marriott Hotel, Littleton Latham Hotel Crowne Plaza Ravinia, Atlanta
Proposed SpringHill Suites by Park Hyatt Days Inn Merchandise Mart, Atlanta
Marriott, Littleton Proposed Convention Hotel Marriott Century City, Atlanta
Proposed Courtyard and Residence Hyatt Regency, Atlanta
Inn by Marriott, Longmont FLORIDA Wyndham Garden Midtown,
Hampton Inn, Loveland Atlanta
Proposed Inn at Palmer Divide Ritz-Carlton, Amelia Island Hampton Inn, Austell
Resort & Conference Center, Comfort Inn, Bradenton Fairfield Inn, Augusta
Palmer Fairfield Inn by Marriott, Brandon Holiday Inn, Augusta
Hampton Inn, Pueblo Courtyard by Marriott, Brandon Sheraton, Augusta
Proposed Hotel, Thornton Howard Johnsons, Deerfield Beach Residence Inn by Marriott,
Proposed Hotel, Trinidad Marriott, Ft. Lauderdale Hapeville
Comfort Suites I-25 North, Grenelefe Gold and Tennis Resort, Hyatt Regency, Savannah
Westminster Haines City Westin, Savannah
Proposed Fairfield Inn by Marriott I- Fairfield Inn (Proposed),
25 North, Westminster Jacksonville HAWAII
Holiday Inn Sunspree, Jacksonville
CONNECTICUT Beach Kahala Resort, Honolulu
Marriott, Jacksonville Kona Beach Hotel, Kailua-Kona
Village Motel, Clinton Hyatt Regency, Key West Embassy Suites, Maui
Comfort Inn, Cromwell Ramada, Kissimmee Marriott, Waikiki Beach
Radisson, Cromwell Econo Lodge, Kissimmee
Holiday Inn, East Hartford Holiday Inn Select, Kissimmee IDAHO
Holiday Inn Express, East Windsor Ritz-Carlton, Manalapan
Proposed Hilton Garden Inn, Summerfield Suites, Miami Red Lion Parkcenter Suites, Boise
Fairfield Best Western, Miami Beach Proposed Hotel, Sun Valley
Residence Inn by Marriott, Meriden Holiday Inn Express, Orlando
Best Western, Mystic Peabody, Orlando ILLINOIS
Heritage Inn, Southbury Residence Inn International Drive,
Westport Inn, Westport Orlando Proposed Hilton Garden Inn,
Residence Inn Seaworld, Orlando Aurora
Casa Monica Hotel, St. Augustine Courtyard by Marriott, Bedford Park
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Fairfield Inn by Marriott, Bedford Courtyard by Marriott, Mishawaka Le Meridien, New Orleans
Park Proposed SpringHill Suites by Proposed Convention Headquarters
Hampton Inn, Bedford Park Marriott, Mishawaka Hotel, New Orleans
Proposed Holiday Inn Express, Fairfield Inn, Noblesville Best Western, Shreveport
Bedford Park Super 8, Markle Clarion, Shreveport
Sleep Inn, Bedford Park Fairfield Inn, Princeton Holiday Inn, Shreveport
Proposed Hotel, Carbondale Hampton Inn, Terre Haute Proposed Convention Hotel,
Carlton Inn, Chicago Shreveport
Days Inn, Chicago IOWA
Hotel 71, Chicago MAINE
Hyatt at University Village, Chicago Collins Plaza Marriott, Cedar Rapids
Hyatt Regency OHare, Chicago Embassy Suites, Des Moines TownePlace Suites, Scarborough
The Fairmont, Chicago Ramada West, Des Moines
Hyatt Regency, Deerfield Savery, Des Moines MARYLAND
Holiday Inn, Hillside
Hyatt Regency, Oak Brook KANSAS Holiday Inn, Aberdeen
Proposed Residence Inn by Marriott, Convention Center Hotel
Schaumburg Proposed Lake Clinton Resort & (Proposed), Baltimore
Proposed SpringHill Suites by Conference Center, Lawrence Hyatt Regency, Baltimore
Marriott, Schaumburg Clubhouse Inn, Overland Park Paramount Hotel, Baltimore
Crowne Plaza, Springfield Holtze Inn, Overland Park Radisson, Baltimore
Holiday Inn Express, Springfield Red Carpet Inn, Topeka Proposed Broadway Hotel,
Broadview Hotel, Wichita Baltimore
INDIANA Clubhouse Inn, Wichita Proposed Campus Hotel, Fairfax
Hilton, Gaithersburg
Courtyard, Bloomington KENTUCKY Residence Inn, Greenbelt
Proposed Residence Inn by Marriott, Comfort Inn, Frederick
Carmel Holiday Inn, Bowling Green Hilton Garden Inn, Linthicum
Proposed SpringHill Suites by Clarion Hotel, Covington Holiday Inn, Linthicum
Marriott, Carmel Super 8, Florence Woodfin Suites, Rockville
Staybridge Suites, Fishers Hyatt Regency, Louisville
Courtyard by Marriott, Goshen Proposed Residence Inn by Marriott, MASSACHUSETTS
American Inn, Hammond Louisville
AmeriSuites North, Indianapolis Proposed SpringHill Suites by Ramada Inn, Bedford
Days Inn, Indianapolis Marriott, Louisville Wyndham, Billerica
Proposed Hilton Hotel, Indianapolis Copley Plaza Hotel, Boston
Radisson North, Indianapolis LOUISIANA Residence Inn by Marriott, Boston
Proposed Hilton Garden Inn, Residence Inn, Dedham
Indianapolis Holiday Inn, Alexandria Hampton Inn, Lawrence
New England Suites, Indianapolis Best Western, Baton Rouge Hampton Inn, Worcester
Fairfield Inn by Marriott, Courtyard by Marriott, Lafayette
Indianapolis Best Western, Lake Charles MICHIGAN
Residence Inn by Marriott, Quality Inn and Suites, Metairie
Indianapolis Best Western, New Orleans Grand Traverse Resort, Acme
Super 8, Indianapolis Hyatt Regency, New Orleans Township
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Residence Inn, Ann Arbor Annabelle Inn, Vicksburg Hamilton Park Conference Center,
Proposed Conference Center, Bay Proposed Staybridge Suites, Florham Park
City Vicksburg TownePlace Suites, Mount Laurel
Holiday Inn, Bay City Howard Johnson Plaza, Saddle
Courtyard by Marriott, Benton MISSOURI Brook
Harbor
Sleep Inn, Charlevoix Clayton Athletic Club, Clayton NEW MEXICO
New England Suites, Grand Rapids MainStay Suites, Kansas City
Courtyard by Marriott, Flint Proposed Hotel President, Kansas DoubleTree, Albuquerque
Harley Hotel, Lansing City Fairfield Inn by Marriott,
Drury Inn, Troy Mayfair, St. Louis Albuquerque
St. Louis Athletic Club, St. Louis Hilton, Albuquerque
MINNESOTA SpringHill Suites, Las Cruces
NEBRASKA Comfort Inn, Santa Fe
Days Inn, Austin Holiday Inn, Santa Fe
Holiday Inn, Austin Days Inn, Norfolk
Proposed Sheraton, Columbia Clubhouse Inn, Omaha NEW YORK
Heights Country Inn & Suites, Omaha
Proposed Sheraton, Duluth Embassy Suites, Omaha Crowne Plaza, Albany
Staybridge Suites, Eagan Ardsley Acres, Ardsley
Hawthorn Suites, Edina NEVADA Hotel Gregory, Brooklyn
Super 8, Fairmont Park Plaza, Cheektowaga
Holiday Inn, Fairmont Hyatt Regency Lake Tahoe, Incline LaGuardia Ramada, East Elmhurst
Hyatt Regency, Minneapolis Village Holiday Inn, Grand Island
Proposed Sheraton, Minneapolis Alexis Park, Las Vegas Best Western, Holtsville
Best Western, Rochester Courtyard by Marriott, Las Vegas Grand Hyatt, New York City
Colonial Inn, Rochester Embassy Suites, Las Vegas Roosevelt Hotel, New York City
Days Inn Downtown, Rochester Holiday Inn Express, Las Vegas Four Points, Niagara Falls
Days Inn South, Rochester Proposed Mountain Spa Resort, Las Holiday Inn Select, Niagara Falls
Econo Lodge, Rochester Vegas Holiday Inn Express, Poughkeepsie
Econo Lodge South, Rochester Residence Inn by Marriott, Las Staten Island Hotel, Staten Island
Super 8, Rochester Vegas Radisson, Syracuse
Travelodge, Rochester Tarrytown House, Tarrytown
Comfort Inn, Wilmar NEW HAMPSHIRE
Days Inn, Wilmar NORTH CAROLINA
Holiday Inn, Wilmar Best Western, Keene
Residence Inn by Marriott, Cricket Inn, Charlotte
MISSISSIPPI Merrimack Wyndham Garden, Charlotte
Crowne Plaza, Nashua Hampton Inn, Concord
Broadwater Beach Hotel, Biloxi Proposed Currituck Hotel, Corolla
Crystal Inn, Gulfport NEW JERSEY Marriott, Durham
Proposed Conference Center, Radisson, High Point
Jackson Grand Hotel, Cape May Hampton Inn, Matthews
Proposed Hotel, Meridien Marquis de Lafayette, Cape May Hampton Inn, Pineville
Ramada, Natchez Holiday Inn Select, Clark Super 8, Raleigh
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Hampton Inn, Statesville Sheraton, Langhorne TEXAS

Holiday Inn, Statesville Hampton Inn, Manheim
Holiday Inn Express, Statesville Hampton Inn, Oaks Metroplex Projects
Econo Lodge, Wilson Park Hyatt at the Bellevue, Proposed SpringHill Suites by
Holiday Inn Select, Winston-Salem Philadelphia Marriott, Addison
Sheraton Rittenhouse Square, Lexington Hotel Suites, Arlington
NORTH DAKOTA Philadelphia Proposed Hotel, Arlington
Wyndham, Philadelphia Suburban Lodge North, Arlington
Hilton Garden Inn, Grand Forks Hawthorn Suites, Pittsburgh Suburban Lodge South, Arlington
Holiday Inn, Pittsburgh Hawthorn Suites, Arlington
OHIO Marriott, Pittsburgh Holiday Inn West, Bedford
Proposed Renaissance, Pittsburgh Adams Mark, Dallas
Embassy Suites, Blue Ash Comfort Inn, Stanton Convention Center Hotel
Residence Inn by Marriott, Blue Ash Hampton Inn, State College (Proposed), Dallas
Days Inn, Cambridge Comfort Inn, West Mifflin Davis Hotel (Proposed), Dallas
Four Points, Cincinnati Holiday Inn, York DoubleTree Lincoln Center, Dallas
Hyatt Regency, Columbus DoubleTree Market Center, Dallas
Holiday Inn, Dayton RHODE ISLAND DoubleTree Club, Dallas
Hawthorn Suites, Dublin Embassy Suites Galleria, Dallas
Days Inn, Mason Newport Harbor Hotel, Newport The Grand, Dallas
Red Roof Inn, Mason Residence Inn, Warwick Fairmont Hotel, Dallas
Hampton Inn, Streetsboro Hawthorn Suites, Dallas
Proposed Hotel, Youngstown SOUTH CAROLINA Holiday Inn Market Center, Dallas
Holiday Inn Select Central
OKLAHOMA Proposed Inn, Charleston Expressway, Dallas
Fairfield Inn by Marriott, North Hotel Sante Fe, Dallas
Sheraton, Oklahoma City Charleston Magnolia Hotel, Dallas
Adams Mark, Tulsa Super 8, North Charleston Suburban Lodge, Dallas
Courtyard by Marriott, Tulsa Fairfield Inn by Marriott, Columbia W (Proposed), Dallas
Holiday Inn Select, Tulsa Ramada, Columbia Wilson World, Dallas
Holiday Inn Express, Weatherford Holiday Inn Express, Fort Mill Wyndham Garden Park Central,
Comfort Inn, Hardeeville Dallas
OREGON Proposed Golf Lodge, Myrtle Beach Hilton Garden Inn (Proposed),
Duncanville
Ramada, Corvallis TENNESSEE Best Western, Duncanville
Proposed Downtown Hotel, Westin Stonebriar, Frisco
Portland Marriott, Chattanooga Convention Center Hotel and T&P
Ramada Airport, Portland River Terrace Hotel, Gatlinburg (Proposed), Fort Worth
Clubhouse Inn, Knoxville Courtyard by Marriott, Fort Worth
PENNSYLVANIA Holiday Inn, Memphis Green Oaks Hotel, Fort Worth
Proposed Marriott, Memphis Hyatt Regency DFW Airport, Fort
Hilton Garden Inn, Gettysburg Hilton Garden Inn, Nashville Worth
Holiday Inn Express, Harrisburg Holiday Inn Express, Nashville Ramada Plaza, Fort Worth
Mainstay Suites, King of Prussia Hotel Preston, Nashville Renaissance, Fort Worth
Sleep Inn, King of Prussia Residence Inn, Fort Worth
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

TownePlace Suites, Fort Worth Homewood Suites, Clear Lake Fairfield Inn by Marriott, San
Best Western, Haltom City Adams Mark, Houston Antonio
Country Inn & Suites, Irving Best Western, Houston Proposed All-Suite Riverwalk Hotel,
Holiday Inn Select DFW North, Courtyard and Residence Inn, San Antonio
Irving (Proposed) Houston Proposed Sheraton, San Antonio
Holiday Inn Select DFW South, Crowne Plaza, Houston Concord Athletic Club, San Antonio
Irving Days Inn Astrodome, Houston D&D Motel, Von Ormy
Marriott D/FW Airport, Irving Hawthorn Suites, Houston
Wyndham Garden Las Colinas, Holiday Inn Astrodome, Houston Other Texas Areas
Irving Homewood Suites (Proposed), Ambassador Suites, Abilene
Convention Hotel (Proposed), Plano Houston Courtyard by Marriott, Abilene
DoubleTree Legacy, Plano Hyatt Regency Intercontinental, Ambassador, Amarillo
Mainstay Suites, Plano Houston Days Inn, Amarillo
Hawthorn Suites, Richardson Embassy Suites South, Houston Hampton Inn, Amarillo
Omni Hotel, Richardson Magnolia Hotel, Houston Holiday Inn Express, Amarillo
Radisson, Richardson NASA Hotel (Proposed), Houston Clarion, Corpus Christi
Hilton Garden Inn (Proposed), Radisson Town and Country, Convention Hotel (Proposed),
Rockwall Houston Corpus Christi
Proposed Hotel, Waxahachie Renaissance (Proposed), Houston Embassy Suites, El Paso
Proposed Full-Service Resort, Residence Inn by Marriott, Houston Hilton Garden Inn UTEP
Westlake Sheraton Astrodome, Houston (Proposed), El Paso
Sheraton Suites, Houston Marriott, El Paso
Austin Metro Projects Travelodge, Houston Hampton Inn, Laredo
Embassy Suites (Proposed), Bee Westin Galleria & Oaks, Houston Best Western, Longview
Caves Wellesley Inn & Suites, Houston Best Western, Marshall
DoubleTree Club, Austin Kingwood Athletic Club, Kingwood Embassy Suites, McAllen
Embassy Suites Arboretum, Austin Courtyard by Marriott, Sugarland Days Inn, Orange
Four Points by Sheraton, Austin Best Western (Proposed), Riviera
Hawthorn Suites, Austin Central San Antonio Metro Projects Radisson, South Padre Island
Hawthorn Suites, Austin Northwest Holiday Inn, New Braunfels Holiday Inn, Tyler
Hawthorn Suites, Austin South Bandera Motel, San Antonio Residence Inn, Tyler
Hilton Downtown, Austin Best Western, San Antonio Clarion, Waco
Hilton Inn/Super 8, Austin Concord Athletic Club, San Antonio Best Western, Weslaco
Holiday Inn South, Austin Courtyard by Marriott, San Antonio Hampton Inn, Wichita Falls
Homewood Suites, Austin Crossroads Inn, San Antonio
Marriott at the Capitol, Austin Days Inn, San Antonio UTAH
Residence Inn and Courtyard Hampton Inn, San Antonio
Downtown (Proposed), Austin Hawthorn Suites, San Antonio Hilton Garden Inn, Layton
Residence Inn by Marriott South, Hyatt Regency Hill Country, San Crystal Inn, Murray
Austin Antonio Peery Hotel, Salt Lake City
SpringHill Suites, Austin Holiday Inn Riverwalk North/Four Proposed Embassy Suites, Sandy
Residence Inn by Marriott, Round Points by Sheraton, San Antonio Crystal Inn, West Valley City
Rock Holiday Inn Northeast, San Antonio
Holiday Inn Northwest, San VIRGINIA
Houston Metro Projects Antonio
HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

Hilton Hotel and Towers, Arlington AmeriHost Inn, Pinedale Hotel Plaza Las Glorias, San Carlos,
DoubleTree Hotel, Crystal City Mexico
Hyatt Regency, Crystal City Hotel Plaza Las Glorias, Tijuana,
Sheraton, Crystal City INTERNATIONAL Mexico
Courtyard by Marriott, Dulles Continental Plaza Hotel, Zacatecas,
Lansdowne Resort, Lansdowne Hyatt Regency, Aruba Mexico
Marriott Norfolk Proposed Resort, Bahamas
Ritz-Carlton, Pentagon City Hyatt Regency, Dorado Beach,
Renaissance, Portsmouth Puerto Rico
Days Inn, South Boston Hyatt Regency, Cerromar, Puerto
Proposed Golf Lodge, Virginia Rico
Beach Elbow Beach Hotel, Paget, Bermuda
Hyatt Regency, Vancouver, BC
WASHINGTON Carambola Resort, St. Croix, US
Virgin Islands
Proposed Fairfield Suites by Proposed Hotel, St. Croix, US Virgin
Marriott, Bothell Islands
Best Western, Federal Way Hotel Parador del Sol, Acapulco,
Embassy Suites, Seattle Mexico
La Quinta, Seattle Hotel Plaza Las Glorias, Acapulco,
Ramada, Seattle Mexico
Holiday Inn Express, Spokane Park Royal, Acapulco, Mexico
Quality Inn Valley Suites, Spokane Sheraton, Acapulco, Mexico
Embassy Suites, Tukwila El Pueblito, Cancun, Mexico
Park Royal Piramides, Cancun,
WEST VIRGINIA Mexico
Sheraton, Cancun, Mexico
Embassy Suites, Charleston Westin Regina, Cancun, Mexico
Marriott, Charleston Park Royal, Cozumel, Mexico
Radisson Resort, Ixtapa, Mexico
WISCONSIN Hotel Plaza Las Glorias, Manzanillo,
Mexico
Hilton Garden Inn, Appleton Desire Resort, Los Cabos, Mexico
Embassy Suites, Brookfield Esperanza, Los Cabos, Mexico
Residence Inn, Glendale Park Royal, Los Cabos, Mexico
Hilton Garden Inn, Green Bay Proposed Luxury Resort, Los Cabos,
Marriott, Madison Mexico
Hyatt Regency, Milwaukee Sheraton, Mexico City, Mexico
Hilton Garden Inn, Oshkosh Paraiso de la Bonita, Puerto Morelos,
Mexico
WYOMING Hotel Sierra Golf & Spa, Puerto
Vallarta, Mexico
Hampton Inn, Cheyenne Westin Regina, Puerto Vallarta,
Proposed Hampton Inn & Suites, Mexico
Green River