Presentation overview

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2 Presentation overview Retail is a key component of tourist and business destinations and can act as major draw Retail is #1 or #2 leisure activity among travelers One of most important reasons meeting planners select a destination Hotels connected to retail malls outperform broader market Adding hotel to retail can boost retail sales travelers often specifically seek out hotels close to retail and entertainment options Complementary effect of hotel and retail can vastly enhance destination

3 Market characteristics, size and spending

4 Sq. Ft. Sq. Ft. per Resident Comparative size of market U.S. U.S. Size of Market 14,000,000, Retail stock in U.S. is 5x size of hotel stock 12,000,000,000 10,000,000, ,000,000, ,000,000, ,000,000,000 2,000,000, Retail Hotel - Sq. Ft. Sq. Ft. per Resident Note: Retail sq. ft. pertains to Gross Leasable Area; Hotel sq. ft. is computed assuming each room translates into 600 sq. ft. of building space on average Source: JLL, Smith Travel Research, CoStar

5 Comparative size of market U.S. Summary of retail center types in U.S. and complementary hotel use Retail Size by Type Type General Retail Malls Power Center Shopping Center Specialty Center Total Definition Freestanding general-purpose buildings with parking, often single-tenant Enclosed shopping mall, includes lifestyle center and regional mall Consists of several freestanding, unconnected anchors and a minimum amount of small specialty tenants (250,000 to 600,000 sq. ft.) Community center, neighborhood center and strip center Includes airport retail, outlet center and theme/festival center Sq. Ft. (millions) 6,158 1, , ,410 Suitable Hotel Type to Build Source: JLL Less applicable due to more fragmented retail space Full service as anchor (upper upscale or even luxury could be viable), several select service hotels Branded select service hotel(s) Branded select service hotel(s) Branded select service hotel(s)

6 Spending patterns U.S. A closer look at the U.S. shows that the proportion of spend on hotel rooms has steadily increased; suggests that emerging markets will move similarly and see increased growth in hotel spend as more immediate retail needs are met 40% 35% 30% 25% 20% 15% 10% 5% 0% Spend on hotel room revenue as proportion of retail spend (U.S.) Spend on hotel room revenue as proportion of retail spend Note: Real Consumer Spending - Clothing and footwear Source: Smith Travel Research, Bureau of Economic Analysis, JLL

7 Spend patterns mature vs. emerging markets Key LatAm countries: Spend on retail is nearly 10x that of hotel accommodations and eating out; in mature economies the gap is a lesser fivefold; implies that retail spend is a leading indicator as residents rise into middle class, followed by hotel spend 100% As markets become more mature, proportion of spend on hotel accommodations increases; supports strategy to add hotel to retail areas once retail is established 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Proportion of Spend - Key Leisure Categories LatAm Key Economies Spend on Retail Mature markets Spend on Accomodation Services Spend on Eating Out Source: Oxford Economics

8 US$ Billions Size of market key LatAm economies In terms of total spend on retail and accommodations and eating out, Brazil is as large as the next largest markets combined Estimated Size of Market (2013) - Brazil Mexico Colombia Peru Retail Spend Accomodations and Eating Out Source: Oxford Economics, JLL

9 Percent Change (Real) Spend projections key LatAm economies and U.S. Emerging markets to see outsized growth in retail and travel spend vs. mature economies; underpins viability of retail/hotel investment in LatAm LatAm: Retail spending growth rate leads overall GDP growth; accommodations and eating out growth has lagged GDP but expected to lead in half of future years 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Growth Rates - Key LatAm Economies and U.S. U.S.: Overall growth rates are lower; more volatility during downturn but same pattern as LatAm in outlook horizon whereby retail growth leads the pack Source: Oxford Economics GDP - LatAm Accomodations and Eating Out - LatAm Retail - US Retail - LatAm GDP - US Accomodations and Eating Out - US

10 Correlation of retail and hotel sales Retail sales and hotel average daily rates show very significant correlation in most major markets Travel and retail spend are closely impacted by consumer confidence and overall economic sentiment Retail Sales and Hotel ADR Performance Market Correlation Miami 0.99 Washington, DC 0.98 St. Louis 0.98 Honolulu 0.98 San Diego 0.97 Los Angeles 0.96 Nortolk 0.96 Houston 0.95 Tampa 0.95 Minneapolis 0.95 Orlando 0.94 New York 0.94 Chicago 0.93 Philadelphia 0.93 San Francisco 0.92 Dallas 0.91 Atlanta 0.89 Boston 0.86 New Orleans 0.86 Phoenix 0.85 Detroit 0.85 Source: CoStar, JLL

11 Adjacency to retail mall can boost hotel performance Hotels connected to/adjacent to retail space typically outperform the other hotels in their competitive set that are situated farther away from retail space Potential Performance Penetration Rates for Hotel Connected to Retail (U.S. Examples) Set of Hotels Connected to Malls in U.S. Occupancy Average Daily Rate Revenue per Available Room Penetration Rate 110% 120% 130% In addition, research has found that adding a upper upscale or luxury, full service hotel to a retail center can increase retail sales 20% to 40% 1. 1 Jeffer Mangels Butler & Mitchell LLP Source: JLL

12 Average retail spend per conference attendee U.S. Retail is one of largest spend categories aside from hotel room Proportion of Average Conference Delegate Spend Lodging 31% All Other Restaurants 15% Retail 13% Exhibitor/Association Expenditure 13% Entertainment & Sightseeing 9% Restaurants in Hotels 7% Local Transportation 5% Gas 5% Car Rental 2% Total Note: Excludes travel to the destination Source: JLL Furthermore, the offerings of a city (retail and dining, etc.) typically rank as meeting planners second most important consideration after the actual meeting facilities when selecting a destination.

13 Case studies of successful retail and hotel interplay

14 Successful hotel/retail interplay Mall of America Mall of America, Minneapolis, Minnesota is now surrounded by 9,000 hotel rooms Largest shopping mall in U.S., with 42 million annual visitors and $1 billion in annual sales 5 of the 7 largest hotels in the market are within one mile of the mall Number one tourist destination in the Midwest U.S. 40% of visitors live outside of 150-mile radius and are resultantly potential hotel guests 2.5 million visitors annually are from outside of the U.S. Room stock has grown 67% since opening of mall in 1992 compared to national supply growth of 42% 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Mall opening Source: JLL, Smith Travel Research Hotel Rooms Bloomington, MN 67% Growth National Growth Rate: 42%

15 Successful hotel/retail interplay Las Vegas Casinos traditionally brought room demand, retail now enhances appeal for non-gamblers Las Vegas is largest hotel market in U.S. with 165,000 rooms Gambling spend and hotel average rates are not back to previous peaks Hotel occupancy however has surpassed previous peak, and retail sales have surpassed previous highs With increased international arrivals, retail accounts for a rapidly growing share of total spend Las Vegas Average Spend per Visitor Retail spending: 15% average annual growth since ,200 1, % 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Sightseeing Shows Local transport F&B Gambling Shopping Retail proportion of total % Source: Las Vegas CVB

16 Successful hotel/retail interplay Honolulu Retail: big draw for international guests for whom beach is of secondary importance Retail submarket closest to the main hotel corridor has highest rents Ala Moana Center is one of America's largest outdoor malls New hotel development most likely to be situated right by retail area Without the extensive shopping options, proportion of guests from Asia, for instance, would likely be far lower Other Asia visitor count, which includes China, increased by 19% in 2013 Honolulu and U.S. Comparison Source: JLL, CoStar U.S. Honolulu Retail Sq. Ft. per Resident 39 sq. ft. 102 sq. ft.

17 Conclusions and outlook

18 Conclusion: Retail/hotel mixed-use potential benefits Shopping # 1 or 2 tourist activity Increase appeal of both hotel and retail Demonstrable increase in retail sales Ability to share facilities parking, F&B, fitness Decrease construction and operating costs Increase security Greater cash flow Brand extension Hotel anchor may draw stronger anchor retail tenants and customers Coupling hotels and retail can create an Enhanced destination experience appeal that retail owners strive for.

19 Conclusion: Retail/hotel mixed-use potential issues Operational conflicts Legal structuring Financing Exit strategy Cross contamination Security Liability Main risk is that hotel and retail revenues are influenced by same factors which means during a downturn, profitability of both can be hampered. However, the pros outweigh the cons in building retail and hotels to enhance destination appeal.

20 Conclusion: Steps for success as retail owner Don t tie up hotel brand too early on in process Put deal structure together yourself rather than selling land to separate developer this will give you more control over the process Consider owning the hotel and selling it upon stabilization Make the hotel parcel a separate legal parcel Conduct the hotel development in a private entity outside of your holding company Understand that financing environment is different for hotel vs. retail Retail is a key component of tourist and business destinations and can act as major draw. Prudent strategic planning and a sound business plan can create enhanced environment which mutually boosts performance of retail space and hotel.

21 Thank you