CHARLOTTE LODGING OVERVIEW

VALUATION & ADVISORY HOSPITALITY & GAMING CHARLOTTE LODGING OVERVIEW YEAR END 2016

A Cushman & Wakefield Valuation & Advisory Publication CHARLOTTE LODGING OVERVIEW Looking back on 2016, the Charlotte lodging market had another record-breaking year despite notable challenges. RevPAR was up 6.6 percent over 2015, placing Charlotte among the top metro markets nationally in year-over-year RevPAR growth. This comes in the face of some extreme headwinds, including millions of dollars in lost revenue from HB2, a lackluster season for the Carolina Panthers and business disruptions from protests following the Keith Scott shooting in September. Fortunately, the banking and energy industries, among others, helped Charlotte hotels escape what could have been an otherwise disappointing year. Charlotte RevPAR Growth 8.6% vs. 4.8% Limited service hotels vs. full service hotels 9.7% vs. 5.5% Lower tier hotels vs. upper tier hotels 2

Fundamentals remain strong, but revenue growth will moderate going forward, as the market reaches a state of relative equilibrium following seven consecutive years of near double-digit annual RevPAR growth. Revenue growth for 2017 is expected to decelerate somewhat, but remain in the 3-5 percent range, driven largely by ADR increases. Market-wide, ADR exceeded $100 for the first time in history in 2015 and increased an additional 4.5 percent during 2016. Operators will be forced to be more competitive on rate going forward, as new supply is introduced and the area nears a price ceiling. There are exceptions, notably in the Uptown submarket, where a handful of new upper-upscale and luxury or near-luxury hotels will be ushered in over the next few years. This should enhance the rate stability of Uptown, as well as peripheral submarkets, though to a lesser degree. Overall, aboveinflationary RevPAR growth appears to be a safe bet for the foreseeable future. Lodging Inventory (Charlotte MSA) Year End 2016 34,149 rooms 306 hotels There are eight distinct submarkets that collectively encompass the Charlotte MSA, including: Uptown, Airport, University/East Mecklenburg, Rock Hill/I-77 South, Gastonia/West Mecklenburg, Salisbury/Concord, South Charlotte/Ballantyne and North Mecklenburg/I-77 North. Below is a map outlining the various submarkets in the Charlotte MSA: RevPAR Growth Most Growth Rock Hill/I-77 South 12.6% North Meck/I-77 North 8.8% University/East Meck 7.7% Smallest Growth Southpark/Ballantyne 2.0% New supply is not overly concerning among most operators, although the volume of projects that have recently opened or are under construction is significant enough to elicit some caution among investors. Currently, there are approximately 3,700 hotel rooms in 30 projects that have recently opened or are under construction, which represents more than an 11 percent increase in room inventory. In the current market cycle, Charlotte has been successful in absorbing new supply as latent demand has been satisfied, and overall demand has outpaced supply over the past eight consecutive years; however, supply growth has never been above 3.0 percent. With double-digit supply growth forthcoming, there will undoubtedly be an adverse impact on occupancy levels, at least temporarily. The most active new supply submarkets are Uptown, Southpark/Ballantyne and the Airport. These submarkets will certainly experience a direct impact from new product, but surrounding submarkets that rely on compression from Uptown will also feel the pinch. Going forward, decelerated RevPAR growth, combined with increasing rates and new supply, will limit asset value appreciation. Cash flow upside will not be as frothy as in years past, but this should help narrow the bid/ask spread and, combined with an abundance of maturing loans, lead to an uptick in transaction activity for higher-quality assets. 3

A Cushman & Wakefield Valuation & Advisory Publication CHARLOTTE HISTORICAL HOTEL PERFORMANCE The following charts illustrate supply, demand, occupancy, ADR and RevPAR statistics for the overall Charlotte MSA and uppertier, lower-tier, full-service and limited-service segments since 2009. The Hotel Snapshot table following the charts provides a comparison of supply, demand, occupancy, ADR and RevPAR statistics between year end 2015 and year end 2016 for the overall Charlotte MSA and its eight submarkets. Occupancy for year-end 2016 was reported at 72.2 percent a 2.0 percent increase from year end 2015 and a 15-year record high for Charlotte. ADR also peaked at $105.53, resulting in a record $76.15 RevPAR. This represents a 4.5 percent increase and 6.7 percent, respectively, over year-end 2015 figures. Going forward, rate growth is expected to drive overall RevPAR increases and moderate slightly above inflationary levels. The lower tiered segment and secondary submarket locations also continue to lead the market in RevPAR growth, which is not surprising as these categories tend to lag the upper tiered segment and high barrier locations that have already rebounded earlier in the cycle. Further, upper tiered hotels that regained their occupancy position in 2013 and 2014 have since been more aggressive in growing ADR. As a result, travel deals that were prevalent among the upper tier hotels in the earlier stages of the recovery are no longer available, and cost conscious travelers have returned to the more affordable options. Continued low gas prices have also fueled increased travel from rate sensitive guests and SMERF (social, military, educational, religious and fraternal) business in the group segment. Travel deals that were prevalent among the upper tier hotels in the earlier stages of the recovery are no longer available. Charlotte Supply, Demand, Occupancy, ADR and RevPAR YEAR SUPPLY % CHANGE DEMAND % CHANGE OCC % % CHANGE ADR % CHANGE REVPAR % CHANGE 2009 11,270,522 ----- 5,802,420 ----- 51.5% ----- $81.18 ----- $41.79 ----- 2010 11,579,428 2.7% 6,620,789 14.1% 57.2% 11.1% $80.72-0.6% $46.16 10.4% 2011 11,585,348 0.1% 7,119,854 7.5% 61.5% 7.5% $82.34 2.0% $50.60 9.6% 2012 11,726,151 1.2% 7,471,154 4.9% 63.7% 3.7% $89.21 8.4% $56.84 12.3% 2013 11,922,045 1.7% 7,674,042 2.7% 64.4% 1.0% $89.32 0.1% $57.50 1.2% 2014 12,067,243 1.2% 8,321,710 8.4% 69.0% 7.1% $93.36 4.5% $64.38 12.0% 2015 12,077,611 0.1% 8,542,112 2.6% 70.7% 2.6% $100.96 8.1% $71.41 10.9% 2016 12,208,694 1.1% 8,809,991 3.1% 72.2% 2.0% $105.53 4.5% $76.15 6.6% Avg Annual % Change 1.1% 6.1% 4.9% 3.8% 8.9% 4

Charlotte Operating Statistics 80.0% $120.00 60.0% 40.0% $100.00 $80.00 $60.00 20.0% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 ADR RevPAR Occupancy $40.00 $20.00 $0.00 Full Service Limited Service 80.0% $160.00 80.0% $100.00 60.0% $140.00 $120.00 60.0% $80.00 $100.00 $60.00 40.0% $80.00 40.0% $60.00 $40.00 20.0% $40.00 $20.00 20.0% $20.00 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 $0.00 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 $0.00 ADR RevPAR Occupancy ADR RevPAR Occupancy Upper Tier Lower Tier 80.0% $140.00 80.0% $80.00 $120.00 60.0% $100.00 60.0% $60.00 40.0% $80.00 $60.00 40.0% $40.00 20.0% $40.00 20.0% $20.00 $20.00 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 $0.00 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 $0.00 ADR RevPAR Occupancy ADR RevPAR Occupancy 5

A Cushman & Wakefield Valuation & Advisory Publication Charlotte Hospitality Snapshot YEAR END 2016 YEAR END 15 VS. YEAR END 16 % CHANGE SUBMARKET HOTELS ROOMS OCC. ADR REVPAR ROOMS OCC. ADR REVPAR Charlotte Overall 306 34,149 72.2% $105.53 $76.15 1.1% 2.0% 4.5% 6.7% Charlotte Full Service 62 11,471 71.5% $139.67 $99.91 0.2% 1.9% 2.8% 4.8% Charlotte Limited Service 244 22,678 72.5% $87.95 $63.76 1.6% 2.1% 6.3% 8.6% Charlotte Upper Tier 154 21,612 73.8% $131.24 $96.86 1.8% 1.9% 3.5% 5.5% Charlotte Lower Tier 152 12,537 69.4% $59.63 $41.38-0.1% 2.2% 7.4% 9.7% Uptown Overall 18 4,581 71.9% $170.99 $122.91 0.2% 2.1% 3.5% 5.6% Uptown Full Service 12 3,591 70.4% $175.63 $123.64 0.2% 2.9% 3.2% 6.2% Uptown Limited Service 6 990 77.3% $155.67 $120.25 - -0.6% 4.2% 3.6% Airport 63 7,691 73.0% $87.42 $63.86 1.3% 0.2% 5.8% 6.0% South Charlotte/Ballantyne 16 2,281 74.7% $152.55 $113.99 1.5% -0.1% 2.2% 2.0% Rock Hill/I-77 South 48 4,325 71.0% $93.98 $66.71 2.5% 4.7% 7.5% 12.6% North Meck/I-77 North 32 2,726 68.2% $96.32 $65.64-5.1% 3.5% 8.8% University/East Meck 55 5,985 74.4% $79.53 $59.16 0.9% 1.7% 5.9% 7.7% Gastonia/West Meck 31 2,718 73.7% $86.54 $63.76 1.7% -1.2% 6.6% 5.3% Salisbury/Concord 38 3,716 69.0% $116.95 $80.66 0.5% 4.1% 2.2% 6.4% NEW SUPPLY As of year end 2016, there were 23 hotels under construction, 23 in the final planning stage looking for approvals, financing, or both. In addition, 22 projects, representing more than 2,800 rooms, are in planning, preliminary planning or rumored. These 22 projects under construction will add 2,946 rooms to the Charlotte lodging market, almost all of which are expected to deliver in 2017. There are 23 projects and 2,697 hotel rooms in final planning, which, combined with the hotels already under construction, represents more than a 16 percent increase in existing inventory over the next couple of years. This is a significant addition of new supply; however, developers and local industry experts believe the Charlotte market is under served with quality hotels, particularly those in the upscale segment. Further, market participants generally believe projects that are planned, but not under construction, or in late planning phases scheduled to deliver after 2017 have a high likelihood of getting shelved or delayed until the next market cycle. This is due in large measure to the growing scarcity of debt capital for ground-up projects and more conservative underwriting among lenders. The table on the following page shows recent deliveries, under construction projects and proposed hotels in various stages of planning and rumored development. Market participants continue to express some concern over the high volume of new supply under construction or planned for the Uptown submarket. As of year end, there were six projects representing 1,003 hotel rooms under construction and eleven projects representing 1,711 hotel rooms in various stages of planning (including projects in the Southend neighborhood). If all of the new projects deliver, this would increase hotel inventory in the CBD by nearly 60 percent. Notwithstanding the strong performance and momentum of the submarket, there is no question that this would place downward pressure on occupancy levels, at least temporarily, until the new product is absorbed. Even then, long-term occupancy levels will likely be reduced to the low to mid-60s. However, there has been a severe tightening in lending for new projects. Anecdotally, the only new deals getting funded are limited to well capitalized and very experienced operators, and even these deals are not without challenges. This is welcome news to existing hotel owners and developers with projects under construction as the threat of market saturation in the coming years, in the midst of a softening economy, is reduced. The Charlotte lodging market is in a growth phase of the development cycle. Underlying supply and demand metrics relative to construction costs and risk adjusted returns suggest that new supply is financially feasible for select locations, while marginal in others. What is noticeable, but not surprising, is that most of the hotels under construction or recently delivered are either Marriott or Hilton affiliated hotels and all are franchised and in the upper-midscale or higher in terms of chain scale segmentation. This further highlights the shift in consumer demand for quality and projects with amenities, and a gravitation to brands linked to highly popular guest rewards programs and strong central reservations systems. 6

Hotel Construction Pipeline Charlotte MSA (Rooms) Chain Scale Independent Economy Midscale Upper Midscale Upscale Upper Upscale Luxury N/A Total RECENTLY DELIVERED Airport 99 315 113 527 Rock Hill/I-77 S 111 111 University/East Meck 105 105 Recently Delivered Total 743 UNDER CONSTRUCTION Airport 180 40 220 Gastonia/West Meck 119 119 Rock Hill/I-77 S 399 129 528 Salisbury/Concord 127 90 115 332 South Charlotte/Ballantyne 240 405 645 University/East Meck 99 99 Uptown 42 495 466 1,003 Under Construction Total 2,946 FINAL PLANNING Airport 108 48 136 292 Gastonia/West Meck 40 40 North Meck/I-77 North 238 174 412 Rock Hill/I-77 S 98 130 331 559 Salisbury/Concord 194 171 365 South Charlotte/Ballantyne 103 103 University/East Meck 101 332 433 Uptown 268 225 493 Final Planning Total 2,697 PLANNING Airport 199 199 Rock Hill/I-77 S 190 64 92 346 Salisbury/Concord 197 197 South Charlotte/Ballantyne 300 300 Uptown 150 120 125 298 225 918 Planning Total 1,960 PRE-PLANNING/RUMORED Rock Hill/I-77 S 100 100 South Charlotte/Ballantyne 123 170 175 468 Uptown 300 300 Pre-Planning/Rumored Total 868 TOTALS BY CHAIN SCALE 430 99 593 2,917 2,912 1,463 225 575 9,214 7

A Cushman & Wakefield Valuation & Advisory Publication CHARLOTTE HOTEL SALES As presented in the following table, 26 hotels consisting of a combined 2,442 rooms have traded over the past 12 months. Generally, the volume and pricing of hotel transactions has improved considerably over the past few years, as market fundamentals improved and RevPAR reaches record levels. The transaction pace was healthy over the past 12 months, but concentrated in lower tiered deals. As a result, the average transaction price was modest in 2016. Brokers reported that most of the better performing assets and brands that are going to trade during this cycle have already transacted in 2013 and 2014. There were a limited number of quality hotels available as sellers were not overly motivated to dispose of assets that were commanding near double-digit revenue increases in a static to upward trending cap rate environment. The second wave of investment activity that took place over the past 12 months was mainly in non-marriott and non-hilton affiliated products. The decreasing availability of financing has spurred the more entrepreneurially driven, allowing local and regional owner/operators and small investment groups to become more active in the economy and midscale limited service arena. Of the 26 trades, only two were considered portfolio transactions, and one of those was only a two-property trade; the balance represented one-off deals. The average price per room was $57,640, and only three properties traded for more than $100,000 per room. Going forward, market participants anticipate investor returns to rise slightly in light of less favorable NOI upside and rising interest rates, which will in turn cause asset pricing to moderate or dip slightly. We also anticipate continued transaction activity among owner/operators going forward, but as Charlotte continues to secure its position as a legitimate investment market among institutional buyers, we also expect an uptick in higher priced asset transactions. COMPARABLE SALES SUMMARY CHARLOTTE MSA SALE NO. NAME SUBMARKET SALE DATE PRICE NO. OF ROOMS PRICE/ROOM 1 SpringHill Suites Charlotte Airport** Airport Feb-17 $11,500,000 95 $121,053 2 Hyatt Place Charlotte Uptown Jan-17 $40,850,000 172 $237,500 3 Budget Inn Gastonia Gastonia/West Meck Dec-16 $1,200,000 97 $12,371 4 Independent Motel University/East Meck Dec-16 $1,350,000 103 $13,107 5 Studio 6 Airport Nov-16 $2,300,000 124 $18,548 6 Sleep Inn Northlake North Meck / I-77 North Nov-16 $3,800,000 71 $53,521 7 Homestead Lodge Airport Oct-16 $4,200,000 60 $70,000 8 Mainstay Suites* Rock Hill/I-77 S Oct-16 $5,786,097 77 $75,144 9 Red Carpet Inn & Suites Gastonia/West Meck Oct-16 $1,156,000 110 $10,509 10 Quality Inn Crown Point University/East Meck Oct-16 $5,300,000 100 $53,000 11 Howard Johnson Rock Hill Rock Hill/I-77 S Aug-16 $2,300,000 54 $42,593 12 Red Roof Inn Airport Jul-16 $2,650,000 84 $31,548 13 Home2 Suites* Airport Jul-16 $13,000,000 89 $146,067 14 Quality Inn Rock Hill/I-77 S Jun-16 $3,840,000 68 $56,471 15 Wingate Inn Airport Jun-16 $7,400,000 122 $60,656 16 Quality Inn Rock Hill/I-77 S Jun-16 $2,575,000 61 $42,213 17 Quality Inn Rock Hill/I-77 S Jun-16 $3,300,000 127 $25,984 18 Quality Inn Salisbury/Concord May-16 $1,900,000 54 $35,185 19 Sleep Inn Carowinds Rock Hill/I-77 S May-16 $2,600,000 80 $32,500 20 Comfort Inn Executive Park Airport Mar-16 $5,600,000 140 $40,000 21 Rodeway Inn Airport Mar-16 $2,575,000 115 $22,391 22 Microtel Inn North Meck / I-77 North Mar-16 $1,800,000 60 $30,000 23 Candlewood Suites University/East Meck Mar-16 $4,300,000 75 $57,333 24 Quality Inn & Suites Airport Feb-16 $4,700,000 130 $36,154 25 Comfort Suites Salisbury/Concord Feb-16 $3,700,000 78 $47,436 26 Days Inn North Meck / I-77 North Feb-16 $1,075,000 96 $11,198 Total/Avg $140,757,097 2,442 $57,640 * Portfolio Allocation ** Under Contract Source: CoStar Comps, RCA Analytics, Buyer, Seller, or Broker Compiled by Cushman & Wakefield of North Carolina, Inc. 8

26 hotels, consisting of a combined 2,442 rooms, have traded over the past 12 months. 9

A Cushman & Wakefield Valuation & Advisory Publication SUMMARY As of year end 2016, Charlotte retains its position as one of the more desirable hotel investment markets on the east coast. Positive market forces related to white-collar job growth, economic and employment diversity and limited new supply have allowed Charlotte to be somewhat inoculated from the weakened market conditions prevalent in other areas of the country beginning mid-year 2015. New supply has also remained in check, although projects under construction or in advanced stages of planning will place temporary downward pressure on occupancy over the next couple of years. Still, the threat of inventory saturation does not appear to be a legitimate concern among most owners and RevPAR growth for the Charlotte hotel market reached nearly 7.0 percent in 2016, and profitability continued to surge with the majority of revenue growth coming in the form of rate increases. operators due to the depth and diversity of local demand sources, robust population growth, positive trends in white collar job growth and more disciplined underwriting practices among hotel lenders. Further, new large-scale commercial and residential projects that are under construction will induce new lodging demand over time that will be satisfied by new hotel inventory. The new hotel projects are also expected to be phased in one or two at a time rather than all at once, which should prevent severe occupancy fluctuations. Transaction activity in 2016 generally mirrored that of 2015. Going forward, decelerated RevPAR growth, combined with increasing interest rates and new supply, will limit value appreciation in the near-term. Cash flow upside will not be as high as in years past, but this should help narrow the bid/ask spread and, combined with an abundance of maturing loans, promote more transaction activity. The Charlotte market will undoubtedly go through a year of change in 2017. The uncertainty of the effectiveness of the recent resolution of HB2, and its potential lingering impact will also continue to cause concern and create budget challenges for managers. At this point, it is impossible to quantify the long term impact it is not known which companies chose not to locate or expand in Charlotte or which groups don t even consider Charlotte as a result of the bill. On a broader scale, a new presidential administration and a Republic sweep in the House and Senate will certainly shake things up in the hotel industry. The new administration has created some optimism among local hoteliers. Meaningful changes in tax policies, along with healthcare and regulatory reform, should enhance top line performance and ease some operating costs, namely employee healthcare costs. On the other hand, changes in immigration and domestic security policies could put serious pressure on labor costs and reduce demand from international travelers. On the whole, there is a high degree of uncertainty on what will actually materialize (which creates anxiety and short-term budgeting challenges), but the mood is generally net positive. 10

As we move beyond the peak of the current market cycle, Charlotte will not be without its share of challenges. New supply, while measured, will capture some market share from existing operators and force some to cut rates in order to maintain occupancy. The positive impact from robust population growth and business expansion will be somewhat offset by supply side forces and an uncertain political landscape. Nevertheless, the supply and demand balance is healthy, fundamentals on the whole are sound, and the overall outlook for the Charlotte lodging market should continue to be favorable over the long term horizon. For more information about the Charlotte Lodging Market or our Valuation & Advisory services, please contact: Tommy Crozier, MAI, CRE, CCIM, ASA Senior Director, Hospitality & Gaming Valuation & Advisory +1 704 916 4444 tommy.crozier@cushwake.com Jeff Hoffmann Appraiser, Hospitality & Gaming Valuation & Advisory +1 704 916 1568 jeffrey.hoffmann@cushwake.com Valuation & Advisory Our Valuation & Advisory (V&A) group is one of the largest and most respected real estate valuation practices in the industry. For over 30 years, Cushman & Wakefield has been the trusted valuation advisor to corporations, institutions and investors around the globe. Well resourced to advise our clients on important equity and debt decisions, we are widely recognized for providing the most sophisticated advice involving complex real estate on a global scale. Our V&A professionals have access to real-time market data and insights of our leasing, research and capital markets experts. Our model unique to the industry combines the best of research analytics and real estate consulting expertise. We offer an extensive range of valuation and advisory services related to acquisition, disposition, financing, litigation and financial reporting, along with specialized expertise in various industry sectors. Hospitality & Gaming Practice Group The Hospitality & Gaming Practice Group offers a full range of valuation, advisory, property tax and litigation support services. The team is distinguished by its combination of industry experience, local market knowledge, global coverage and responsive service. The Hospitality & Gaming Practice Group operates in four continents with offices across the globe Australia, Brazil, Canada, China, Czech Republic, Hungary, India, Italy, Japan, Mexico, Portugal, Singapore, Spain, Turkey, the United Kingdom and the United States. In addition, our staff of seasoned professionals has extensive experience and the ability to draw upon the diverse disciplines available from other Cushman & Wakefield core businesses, including Capital Markets, Consulting, Corporate Occupier & Investor Services and Leasing. This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information, and we do not guarantee that the information is accurate or complete. Published by Corporate Communications. 2017 Cushman & Wakefield, Inc. All rights reserved. cushmanwakefield.com 11

About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter. Tommy Crozier, MAI, CRE, CCIM, ASA Senior Director, Hospitality & Gaming Valuation & Advisory 5605 Carnegie Boulevard, Suite 100 Charlotte, NC 28209 +1 704 916 4444 tommy.crozier@cushwake.com cushmanwakefield.com Copyright 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.