Investment Overview of the U.S. Lodging Industry

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Breakfast Conference November 7, 2007 Daniel H.

1 Investment Overview of the U.S. Lodging Industry Presented to: NYSSCPA/FAE Restaurant and Hospitality Breakfast Conference November 7, 2007 Daniel H. Lesser Senior Managing Director Industry Leader Hospitality & Gaming Group CB Richard Ellis, Inc. One Penn Plaza, Suite 1835 Phone:

2 Overview of U.S. Hotel Economic Performance Overview of Q CB Richard Ellis Significant U.S. Hotel Sales (over $10 million) Return Analysis of Three Recent Significant U.S. Hotel Sales Valuation/Pricing Challenges in Today s Market Lodging Industry Risk Considerations Summary

3 Twelve Month Moving Average 1989 to August Supply % Change Demand % Change

4 Twelve Month Moving Average 1989 to August Occ % Chg ADR % Chg

5 Twelve Month Moving Average 1989 to August Occupancy Percent

6 Twelve Month Moving Average 1989 to August Average Daily Rate

7 Twelve Month Moving Average 1989 to August RevPAR % Chg

8 Twelve Month Moving Average August Occupancy (%) ADR ($) Peak $ August 2007 $ August Peak 64.6% June % August

9 Twelve Months Ended August Luxury Upper Upscale Upscale Midscale W/FB Midscale w/o FB Economy

10 Twelve Months Ended August Luxury Upper Upscale Upscale Midscale W/FB Midscale w/o FB Economy

11 San Diego, CA Oahu Island, HI New York, NY Orlando, FL Seattle, WA Miami-Hialeah, FL San Francisco/San Mateo, CA Anaheim-Santa Ana, CA Los Angeles-Long Beach, CA Denver, CO Boston, MA Houston, TX Chicago, IL Phoenix, AZ San Antonio, TX Philadelphia, PA-NJ Washington, DC-MD-VA Nashville, TN August 2007 YTD Detroit, MI Dallas, TX St Louis, MO-IL Norfolk-Virginia Beach, VA Total United States Atlanta, GA Tampa-St Petersburg, FL Minneapolis-St Paul, MN-WI

12 Miami-Hialeah, FL Oahu Island, HI New York, NY Boston, MA Washington, DC-MD-VA Chicago, IL San Diego, CA San Francisco/San Mateo, CA Phoenix, AZ Anaheim-Santa Ana, CA Philadelphia, PA-NJ Seattle, WA Los Angeles-Long Beach, CA Orlando, FL Tampa-St Petersburg, FL San Antonio, TX Total United States Denver, CO Minneapolis-St Paul, MN-WI August 2007 YTD $250 $200 $150 $100 $50 St Louis, MO-IL Detroit, MI Atlanta, GA Nashville, TN Houston, TX Dallas, TX Norfolk-Virginia Beach, VA

13 Miami-Hialeah, FL Oahu Island, HI New York, NY Boston, MA Washington, DC-MD-VA San Diego, CA San Francisco/San Mateo, CA Seattle, WA Anaheim-Santa Ana, CA Los Angeles-Long Beach, CA Chicago, IL Phoenix, AZ Orlando, FL Philadelphia, PA-NJ San Antonio, TX Total United States Tampa-St Petersburg, FL Denver, CO August 2007 YTD $225 $175 $125 $75 St Louis, MO-IL Dallas, TX Atlanta, GA $25 Norfolk-Virginia Beach, VA Nashville, TN Houston, TX Minneapolis-St Paul, MN-WI

14 Change From Last Year Phase August 2007 August 2006 Difference % Change In Construction 194, ,020 32, % Final Planning 59,157 59, % Planning 310, ,102 8, % Active Pipeline 564, ,808 40, % Pre-Planning 113,098 78,314 34, % Total 677, ,122 75, % Source: STR / TWR / Dodge Construction Pipeline

15 Q3 06 Q1 07 Q3 05 Q1 06 Q1 05 Q3 04 Q Q Rooms in Thousands In Construction In Planning Q1 00 Q3 00 Q1 01 Q3 01 Q1 02 Q3 02 Q1 03 Q3 03 Q1 04 *Source: STR / TWR / Dodge Construction Pipeline 31 18

16 Construction Costs Interest Rates Steel, Concrete, Lumber Availability Land (Competition for Sites) Hurricanes Rising Operating Costs Energy Natural Gas, Electricity Insurance Health Care, Property, Liability Labor Visa Caps, Union Contracts, Aging Work Force

17 August 2007 Market # Rooms Existing Supply Las Vegas 14, % New York 8, % Washington, DC 7, % Chicago 6, % Phoenix 6, % San Antonio 4, % LA Long Beach 4, % Source: STR / TWR / Dodge Construction Pipeline

18 Existing Supply In Construction Planning Las Vegas, NV Orlando, FL Chicago, IL Washington, DC LA-Long Beach, CA Atlanta, GA New York, NY Dallas, TX Houston, TX San Diego, CA Number of Rooms (thousands)

19 100% 90% 20.0% 5.0% 80% 70% 60% 74.0% 53.0% 50% 40% 80.0% 95.0% 30% 20% 10% 26.0% 47.0% 0% PrePlanning Planning Final Planning Under Constrution Opened Abandoned Source: STR / TWR / Dodge Construction Pipeline

20 Average Duration From Construction Start to Open Luxury 23.9 Upper Upscale 20.3 Months Upscale 15.8 Midscale w/f&b 13.7 Midscale w/out F&B 12.9 Economy Source: STR / TWR / Dodge Construction

21 Number of Rooms Closed 3 Year Moving Average 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,

22 P Supply % Chg Demand % Chg P 2008P (P) - Projection

23 P P 2008P (P) - Projection

24 P P 2008P (P) - Projection

25 P P 2008P (P) - Projection

26 P P 2008P (P) - Projection

27 P P 2008P (P) - Projection

28 (Billions $) Estimated $40.00 $35.00 $ Billions $25.00 $20.00 $ $ $5.00 $ $5.00 -$ E 07E Source: PWC 2007, 2008 & 2009 Estimates (July 07)

29 By Estimated Sales Price Property Location No. of Rooms Estimated Sales Price Estimated Price/Room Buyer Seller Resorts East Chicago Hotel & Casino East Chicago IN 291 $675,000,000 $2,319,588 Ameristar Casinos Inc. Resort Holdings (Co Capital) Maui Prince Hotel/Makena Resort Westin Boston Waterfront Makena, HI 310 $575,000,000 $1,854,839 JV between Morgan Stanley RE Fund V US, Trinity Investments Boston, MA 793 $330,000,000 $416,141 DiamondRock Hospitality Co. Lokelani Resort Co Boston Convention C Hotel, LLC Hilton Washington Washington DC 1119 $290,000,000 $259,160 Canyon-Johnson Urban Fund & Lowe Enterprises Hilton Hotels Corpor Boston Marriott Long Wharf Hotel Boston, MA 402 $228,200,000 $567,662 Sunstone Hotel Investors Boston Propertie On the Ave Hotel New York, NY 269 $204,000,000 $758,364 Highgate Holdings Rockpoint Group Hyatt Regency San Francisco San Francisco, CA 803 $200,000,000 $249,066 JV between Dune Capital & DiNapoli Capital Strategic Hotel Cap Anaheim Hilton Anaheim, CA 1572 $200,000,000 $127,226 Makar Properties DDRM Paramount Hotel New York, NY 567 $200,000,000 $352,734 Walton Street Capital LLC Hilton Atlanta & Towers Atlanta, GA 1226 $180,000,000 $146,819 Westmont Hospitality Group Becker Ventures N/A Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information is thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

30 By Estimated Room Price Property Location No. of Rooms Estimated Sales Price Estimated Price/Room Buyer Seller Resorts East Chicago Hotel & Casino East Chicago IN 291 $675,000,000 $2,319,588 Ameristar Casinos Inc. Resort Holdings (Co Capital) Maui Prince Hotel/Makena Resort Makena, HI 310 $575,000,000 $1,854,839 JV between Morgan Stanley RE Fund V US, Trinity Investments Lokelani Resort Co Casa Malibu Inn Malibu, CA 21 $20,000,000 $952,381 Larry Ellison N/A St. Regis Hotel, Washington, DC Associates & New V Washington DC 193 $170,000,000 $880,829 Claret Capital JV between Brickm Corp On the Ave Hotel New York, NY 269 $204,000,000 $758,364 Highgate Holdings Rockpoint Group Dylan Hotel New York, NY 107 $78,000,000 $728,972 HOTUSA Group & Losan Hotels World Fortuna Realty Gro Lodge & Spa at Cordillera Edwards, CO 56 $35,000,000 $625,000 Behringer Harvard & Cordillera Partners Cordillera Lodge & LLC Boston Marriott Long Wharf Hotel Boston, MA 402 $228,200,000 $567,662 Sunstone Hotel Investors Boston Propertie Hotel Jerome Aspen, CO 92 $50,000,000 $543,478 Elysian Worlwide LLC & Lodging Capital Partners Campton Place Hotel San Francisco, CA 110 $58,000,000 $527,273 Taj Hotels Resorts & Palaces Oklahoma Publishing Kor Hotel Group Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information is thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

31 By Number of Rooms Property Location No. of Rooms Estimated Sales Price Estimated Price/Room Buyer Seller Anaheim Hilton Anaheim, CA 1572 $200,000,000 $127,226 Makar Properties DDRM Hilton Atlanta & Towers Atlanta, GA 1226 $180,000,000 $146,819 Westmont Hospitality Group Hilton Washington Washington DC 1119 $290,000,000 $259,160 Canyon-Johnson Urban Fund & Lowe Enterprises N/A Hilton Hotels Corpor Hyatt Regency San Francisco Westin Boston Waterfront San Francisco, CA 803 $200,000,000 $249,066 JV between Dune Capital & DiNapoli Capital Boston, MA 793 $330,000,000 $416,141 DiamondRock Hospitality Co. Strategic Hotel Cap Boston Convention C Hotel, LLC Marriott Branded Complex Miami Int'l Airport Miami, FL 777 $57,500,000 $74,003 Thayer Lodging Group Marriott Internationa Fairmont New Orleans New Orleans, LA 700 $17,000,000 $24,286 Dimension Developmentl Co. N/A Doubletree Chicago Hotel O' Hare Airport Rosemont, IL 660 $65,000,000 $98,485 Dow Hotel Co. Lowe Enterprises Innisbrook Resort & Golf Club Palm Harbor, FL 620 $35,000,000 $56,452 Salamander Hospitality LLC N/A Paramount Hotel New York, NY 567 $200,000,000 $352,734 Walton Street Capital LLC Becker Ventures Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information is thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

32 By Market Market Area Number of Property Transactions Los Angeles/ Southern California Area 8 New York/New Jersey Area 8 Miami/South Florida Area 7 Chicago, IL Area 5 San Francisco/ Northern California Area 5 Washington, DC Area 4 Boston, MA Area 4 Hawaii Area 3 Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

33 Most Active Buyers Buyer Number of Properties Acquired American Property Hospitality Management 3 Sunstone Hotel Investors, Inc. 3 Behringer Harvard 2 Interstate Hotels & Resorts 2 Lowe Enterprises 2 McSam Hotel Group LLC 2 NCH Corp. 2 Shamrock-Hostmark Hotel Fund 2 Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

34 Most Active Sellers Seller Number of Properties Sold Blackstone Group 7 Field Hotel Associates 2 Source: CB Richard Ellis (CBRE) has compiled the above information from sources deemed reliable, and the information thought to be correct, however CBRE cannot warrant absolute accuracy of all the data. Use of this information without verification from original sources is at your own risk.

35 Trailing 12 Months Gross Revenues $18,000, % Implied Cap Rate Assumed $50 Million Sa GOP Before Mgt Fees and Reserves $4,320, % 8.6% Gross Management Fee $540, % Incentive Management Fee $180, % Reserve for Replacement $900, % $ % of Gross Revenues NOI After Base Management Fee $3,780, % 7.6% NOI After Base & Incentive Management Fee $3,600, % 7.2% NOI After Base & Incentive Management Fee & Reserves $2,700, % 5.4% Projected Year One $ % of Gross Revenues Gross Revenues $20,000, % GOP Before Management Fee $5,200, % 10.4% Base Management Fee $600, % Incentive Management Fee $200, % Reserve for Replacement $1,000, % Implied Cap Rate Assumed $50 Million Sa NOI After Base Management Fee $4,600, % 9.2% NOI After Base & Incentive Management Fee $4,400, % 8.8% NOI After Base & Incentive Management Fee & Reserves $3,400, % 6.8%

36 $50,000,000 Transaction $10,000,000 = Land $7,500,000 = FF&E $32,500,000 = Building, which would typically depreciate over 39 years for Federal tax purposes Cost Segregation reclassifies 18% of Building as Personal Property which depreciates over 5 years and 15% of Building as Site Improvements which depreciate over 15 years This creates $1,000,000 in additional cash flow in the first year Projected Year One With Cost Segregation % of Gross Revenue Implied Cap Rate NOI After Base Management Fee $5,600, % 11.2% NOI After Base & Incentive Management Fee $5,400, % 10.8% NOI After Base & Incentive Management Fee & Reserves $4,400, % 8.8%

37 Event Risk Labor Unrest Rising Cost of Employee Benefits Rising Energy Costs Continued Room Pricing Pressure from Internet Websites Housing Market Bubble Rising Interest Rates Economic Recession

38 Supply Growth Accelerates Demand Growth Stabilizes Occupancy Levels Off Aggressive Room Rate Pricing Continues Increased Profitability

39 Investment Overview of the U.S. Lodging Industry Presented to: NYSSCPA/FAE Restaurant and Hospitality Breakfast Conference November 7, 2007 Daniel H. Lesser Senior Managing Director Industry Leader Hospitality & Gaming Group CB Richard Ellis, Inc. One Penn Plaza, Suite 1835 Phone:

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