The Hotel Industry Outlook U.S. Hotel Transactions

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1 The Hotel Industry Outlook U.S. Hotel Transactions Suzanne R. Mellen, MAI, CRE, FRICS, ISHC Senior Managing Director Hotel and Casino Consulting & Valuation HVS San Francisco, Las Vegas, Los Angeles

2 Historical Sales (Total Assets >$2.5M) $140,000 Sales Volume Price Per Key 35.0 Price Per Key $120,000 $100,000 $80, $ in Billions $60, * *2013 statistics are preliminary. 0.0 Source: Real Capital Analytics (RCA) 2

3 Historical Sales Volume (Assets >$10M) $220,000 Sales Volume Price Per Key 30.0 Price Per Key $190,000 $160,000 $130, $ in Billions $100, * Source: Real Capital Analytics (RCA) *2013 statistics are preliminary

Historical Sales (Assets $2.5-10M) $55,000 Sales Volume Price Per Key 6.0 $50,000 5.

4 Historical Sales (Assets $2.5-10M) $55,000 Sales Volume Price Per Key 6.0 $50, Price Per Key $45,000 $40,000 $35,000 $30, * Source: Real Capital Analytics (RCA) *2013 statistics are preliminary $ in Billions 4

Comparison of $ Sales Volumes $ in Billions 35 30 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012

5 Comparison of $ Sales Volumes $ in Billions * +44.6% >$10M $2.5-10M +32.7% *2013 statistics are preliminary. Source: Real Capital Analytics (RCA) 5

6 Comparison of # Properties Sold 2,000 1,500 1, , * *December statistics are preliminary. Source: Real Capital Analytics (RCA) +22.9% >$10M $2.5-10M +31.1% 6

7 MM Hotel Outperforming in 2013 RCA US CPPI Source: Real Capital Analytics (RCA)/Moody s 7

8 2013 Sales by Total Price Paid: $10M+ Count Volume 56% 261 7% 33 7% 35 13% 55 18% 83 14% 19% 20% 28% 20% > $200M 100 to 200M 50 to 100M 25 to 50M 10 to 25M Source: Real Capital Analytics (RCA) 8

9 Sales By Price Per Room: $10M+ # of Properties $750k+ $ k $ k $ k $ k <$100k Source: HVS and Real Capital Analytics (RCA) 9

10 Three Sales > $1 Million Per Key Park Lane Hotel Manhattan (605 rooms) Buyer: The Witkoff Group/Jynwel Capital Seller: Helmsley Charitable Trust Interest: Fee Simple Price: $660,000,000 Price/Room: $1,090,909 Langham Place Fifth Avenue Manhattan (214 rooms) Buyer: Pacific Eagle Holdings Seller: Bizzi & Partners Dev. Interest: Fee Simple, Leased Fee Price: $229,000,000 Price/Room: $1,070,093 Calistoga Ranch Napa Valley, California (50 rooms) Buyer: Auberge Partners Calistoga Seller: Olympus Real Estate Partners, LLC Interest: Leasehold Price: $55,000,000 Price/Room: $1,100,000 10

Three Sales > $500M Purchase Price Grand Wailea Resort & Spa Maui, HI (780 rooms) Price: $774,000,000 Price/Room: $992,308 Hyatt Regency Orlando Convention

11 Three Sales > $500M Purchase Price Grand Wailea Resort & Spa Maui, HI (780 rooms) Price: $774,000,000 Price/Room: $992,308 Hyatt Regency Orlando Convention Center Orlando, FL (1,641 rooms) Price: $717,000,000 Price/Room: $436,929 Park Lane Hotel Manhattan (605 rooms) Price: $660,000,000 Price/Room: $1,090,909 11

Omni Enters Resort Market in Big Way La Costa

$365,800,000 Price/Room: $598,691 Rancho Las

$103,011,710 Price/Room: $232,008 Grove Park Inn

$128,594,739 Price/Room: $251,162 Homestead

12 Omni Enters Resort Market in Big Way La Costa Resort & Spa San Diego, CA (532 rooms) Price: $365,800,000 Price/Room: $598,691 Rancho Las Palmas Palm Springs, CA (444 rooms) Price: $103,011,710 Price/Room: $232,008 Grove Park Inn Resort & Spa Asheville, NC (512 rooms) Price: $128,594,739 Price/Room: $251,162 Homestead Resort Hot Springs, VA (483 rooms) Price: $102,593,396 Price/Room: $212,409 12

GIC Singapore Enters Resort Market Biltmore Resort

Price/Room: $353,983 Grand Wailea Resort & Spa

13 GIC Singapore Enters Resort Market Biltmore Resort & Spa Phoenix, AZ (740 rooms) Price: $321,394,785 Price/Room: $434,317 La Quinta Resort & Spa Palm Springs, CA (796 rooms) Price: $281,770,770 Price/Room: $353,983 Grand Wailea Resort & Spa Maui, HI (780 rooms) Price: $774,000,000 Price/Room: $992,308 13

14 Top 10 Active Markets by $ Volume Market $ Volume (Millions) $/Room # Properties NYC Metro $2,528.4 $336, Hawaii $1, , San Francisco Metro $1, , Miami Metro $1, , Orlando $ , Los Angeles $ , Houston $ , San Diego $ , Chicago (tie) $ , Atlanta (tie) $ , Boston $ , Source: Real Capital Analytics (RCA) 14

15 Top 10 Active Markets by Properties Sold Market $ Volume (Millions) $/Room # Properties Dallas / Fort Worth $ , Miami Metro $1, , Houston $ , LA $ , Atlanta $ , SF Metro $1, , Orlando $ , Chicago $ , Phoenix $ , NYC Metro $2, , Source: Real Capital Analytics (RCA) 15

16 Hotel Buyer Composition Q3 Source: Real Capital Analytics (RCA) 16

17 Top 25 Buyers/Sellers by $ Volume Source: Real Capital Analytics (RCA) 17

18 Hotel Lender Composition Past 5 Years Source: Real Capital Analytics (RCA) 18

Comparative CRE Cap Rates - PWC 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.

19 Comparative CRE Cap Rates - PWC Regional Mall CBD Office Suburban Office Apartment Full-Service Lodging Limited-Service Lodging Luxury Lodging Select Service Lodging Source: PriceWaterhouseCoopers Real Estate Investor Survey 19

20 Hotel Cap Rates Steady Full-Service Lodging Limited-Service Lodging Luxury Lodging Select Service Lodging Source: PriceWaterhouseCoopers Real Estate Investor Survey 20

Hotel Cap Rates Steady 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.

21 Hotel Cap Rates Steady Full-Service Lodging Limited-Service Lodging Luxury Lodging Select Service Lodging Source: PriceWaterhouseCoopers Real Estate Investor Survey 21

22 Derived Cap Rates Steady Full Service SS & ES Ltd. Service Full 2011 Service 2012 Ltd Service Source: Derived from hotel s appraised by HVS at time of sale 22

Comparative Rates of Return - 2013 22.5 20.0 17.5 17.4 18.2 20.1 15.0 12.5 10.0 7.5 6.2 7.4 9.2 7.3 8.5 10.3 10.6 11.1 12.

23 Comparative Rates of Return Full Service SS & ES Ltd. Service Historical NOI 1st Year NOI Discount Rate Equity IRR Source: Derived from hotel s appraised by HVS at time of sale 23

24 Cap Ex Impacts Cap Rates and Values 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Years 200, , ,000 80,000 40,000 0 Range # of Rooms Source: ISHC CapEx 2000 and STR 24

25 Cap Ex Impacts Cap Rates and 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Years 200, , ,000 80,000 40,000 0 Range # of Rooms +5 Years Source: ISHC CapEx 2000 and STR 25

26 Cap Ex Impacts Cap Rates and Values 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Years 200, , ,000 80,000 40,000 0 Range # of Rooms +10 Years Source: ISHC CapEx 2000 and STR 26

27 OUTLOOK FOR 2014 Ideal conditions for another strong transaction year activity expected to equal or exceed that of 2013 Debt ceiling fight in spring unlikely to derail markets, but a risk Wide array of buyers will continue to pursue hotel investments More sellers will come to the table as sales prices near peak pricing Availability of debt will continue, with lender competition putting pressure on interest rates and loan-to-value ratios Interest rates expected to rise only moderately no major concern Capitalization rates expected to remain steady despite rise in NOI due to availability of capital and buyer competition for quality assets 27

28 Thank You! Please Contact Me With Any Questions

29 Suzanne R. Mellen, MAI, CRE, FRICS, ISHC Suzanne R. Mellen is the Senior Managing Director of HVS Consulting & Valuation and HVS Gaming Services, and is responsible for operation of the firm s San Francisco, Los Angeles and Las Vegas offices. HVS is a full-service consulting and valuation firm specializing in hotel, gaming, and hospitality properties worldwide. HVS offices under her leadership are renowned for excellence and integrity. Ms. Mellen has appraised thousands of hotels, gaming assets, and related real estate over the past 36 years. She has authored numerous articles and is a frequent lecturer and expert witness on the valuation of hotels, casinos, and related issues. Ms. Mellen has a B.S. degree in Hotel Administration from Cornell University and holds the following designations: MAI (Appraisal Institute), CRE (Counselor of Real Estate), FRICS (Fellow of the Royal Institution of Chartered Surveyors), and ISHC (International Society of Hospitality Consultants). Suzanne Mellen s professional experience includes consulting and appraisal positions with HVS New York, Morgan Guaranty Trust, Laventhol & Horwath, and Helmsley-Spear Hospitality Services, Inc. in New York City and Harley-Little Associates in Toronto, Canada. 29

Outlook for Lodging Accommodations

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