Proposed Courtyard by Marriott

MARKET STUDY Proposed Courtyard by Marriott TIGER DRIVE MARSHALL, MINNESOTA SUBMITTED TO:PR OPOSED Mr. Colin McDonald Gatehouse Capital 1501 Dragon Street, Suite 101 Dallas, Texas, 75207 +1 (214) 922-4314 PREPARED BY: HVS Consulting & Valuation Division of TS Worldwide, LLC 205 West Randolph Street, Suite 1650 Chicago, Illinois, 60606 +1 (419) 367-3879

December 2, 2016 HVS CHICAGO Mr. Colin McDonald Gatehouse Capital 1501 Dragon Street, Suite 101 Dallas, Texas, 75207 205 West Randolph Street, Suite 1650 Chicago, Illinois, 60606 +1 (419) 367-3879 +1 (516) 742-3059 FAX www.hvs.com Re: Dear Mr. McDonald: Proposed Courtyard by Marriott Marshall, Minnesota HVS Reference: 2016021636 Pursuant to your request, we herewith submit our market study pertaining to the above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Marshall, Minnesota area. We have studied the proposed project, and the results of our fieldwork and analysis are presented in this report. We have also reviewed the proposed improvements for this site. Our report was prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Foundation. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Sincerely, TS Worldwide, LLC Stacey E. Nadolny, MAI, Managing Director, Senior Partner snadolny@hvs.com, +1 (419) 367-3879 Superior results through unrivaled hospitality intelligence. Everywhere.

Table of Contents SECTION TITLE PAGE 1. Executive Summary 1 2. Description of the Site and Neighborhood 12 3. Market Area Analysis 22 4. Supply and Demand Analysis 38 5. Description of the Proposed Project 66 6. Projection of Occupancy and Average Rate 73 7. Projection of Income and Expense 81 8. Statement of Assumptions and Limiting Conditions 101 9. Certification 104 Addenda Qualifications

1. Executive Summary Subject of the Market Study The subject of the market study is a parcel to be improved with a select-service lodging facility; the hotel will be affiliated with the Courtyard by Marriott brand. The property, which is expected to open on July 1, 2018, is anticipated to feature 104 rooms, a restaurant and lounge, an indoor pool, a fitness room, a lobby workstation, a market pantry, and a guest laundry room. The hotel should also contain the appropriate parking capacity and all necessary back-of-the-house space. The proposed hotel is anticipated to be developed as a part of a larger development, encompassing the recently constructed Red Baron Arena and a proposed conference center. The proposed conference center is expected to feature approximately 16,000 square feet of meeting space and should be marketed with the Red Baron Arena, allowing conventions to use the arena as additional expo space. We have assumed that the Red Baron Arena operator would also operate the conference center. The proposed subject hotel is also anticipated to feature a minimal amount of meeting space per the brand requirements. The subject site s location will be located in the larger community development located at Tiger Drive, Marshall, Minnesota, 56258. Pertinent Dates Ownership, Franchise, and Management Assumptions The effective date of the report is December 2, 2016. The subject site was inspected by Meghan Bean on October 26, 2016. In addition to the inspection, Meghan Bean participated in the research for this assignment and assisted in the report s preparation. Stacey E. Nadolny, MAI participated in the analysis and reviewed the findings, but did not personally inspect the property. The developer of the proposed subject hotel is Gatehouse Capital, which is based in Dallas, Texas. We note that the subject site had yet to be selected at the time of this study. The proposed subject hotel will be managed by Aimbridge Hospitality. Details pertaining to management terms were not yet determined at the time of this report; however, we assume that the proposed hotel will be managed by a professional hotel-operating company, with fees deducted at rates consistent with current market standards. We have assumed a market-appropriate total management fee of 3.0% of total revenues in our study. The proposed subject hotel will reportedly operate under a franchise agreement with Marriott International as a Courtyard by Marriott; the agreement is expected Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 1

to span 30 years. Based on our review of the agreement s terms or expected terms, the Courtyard by Marriott franchise is reflected in our forecasts with a royalty fee of 6% of rooms revenue, and a marketing assessment of 2% of rooms revenue. Summary of Hotel Market Trends Average rate first peaked for this selected set of competitive hotels in 2008, resulting in a RevPAR of nearly $60.00, before declining to a low point of roughly $29.00 by year-end 2009 because of the recession. A rapid recovery began in 2010 that extended through 2011, at which time the prior RevPAR peak was exceeded. We note that occupancy levels during 2011 were bolstered following the effects of a destructive tornado, which displaced many local residents and caused a record RevPAR given the high hotel occupancies. Occupancy and RevPAR decreased in 2012 as the demand from the tornado dissipated. Average rate realized continuous growth from 2011 through 2015, while occupancy realized growth from 2013 through 2014; however, the entrance of the new Sleep Inn & Suites in 2014 prompted the occupancy decline in 2015. Year-to-date data illustrate a softening in occupancy, as the new supply becomes absorbed, and a roughly $1.50 gain in average rate, which can be attributed to the higher rates commanded by the Sleep Inn & Suites. RevPAR reached its most recent high point in the summer of 2015. The entrance of new, higher-rated supply and the overall strong economy contributed to the latest trend for 2016. The outlook for the remaining months of 2016 is cautionary given that the new supply is still being absorbed by the market. The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by STR. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 2

FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR) Year Average Daily Room Count Available Room Nights Change Occupied Room Nights Change Occupancy Average Rate Change RevPAR Change 2005 397 144,905 87,314 60.3 % $66.08 $39.82 2006 397 144,905 0.0 % 89,949 3.0 % 62.1 68.93 4.3 % 42.78 7.4 % 2007 397 144,905 0.0 95,545 6.2 65.9 74.66 8.3 49.23 15.1 2008 397 144,905 0.0 91,237 (4.5) 63.0 79.35 6.3 49.96 1.5 2009 477 173,963 20.1 92,618 1.5 53.2 82.22 3.6 43.77 (12.4) 2010 484 176,660 1.6 101,519 9.6 57.5 82.00 (0.3) 47.12 7.7 2011 484 176,660 0.0 110,157 8.5 62.4 86.60 5.6 54.00 14.6 2012 484 176,660 0.0 99,005 (10.1) 56.0 90.04 4.0 50.46 (6.6) 2013 484 176,660 0.0 101,989 3.0 57.7 92.71 3.0 53.52 6.1 2014 534 195,020 10.4 115,216 13.0 59.1 93.60 1.0 55.30 3.3 2015 544 198,560 1.8 114,355 (0.7) 57.6 94.40 0.9 54.37 (1.7) Year-to-Date Through September 2015 544 148,512 90,410 60.9 % $94.39 $57.46 2016 544 148,512 0.0 % 84,361 (6.7) % 56.8 95.86 1.6 % 54.45 (5.2) % Average Annual Compounded Change: 2004-2015 3.2 % 2.7 % 3.6 % 3.2 % 2005-2007 0.0 4.6 6.3 11.2 2007-2010 6.8 % 2.0 % 3.2 % (1.4) % 2010-2015 2.4 2.4 2.9 2.9 Hotels Included in Sample Number of Rooms Ramada Marshall 100 Feb 2010 Jun 1973 Super 8 Marshall 47 Oct 1977 Oct 1977 Quality Inn Marshall 50 Apr 2016 Mar 1990 Fairfield Inn & Suites Brookings 76 Oct 1994 Oct 1994 AmericInn Marshall 62 Nov 1998 Nov 1998 Holiday Inn Express & Suites Brookings 62 Apr 2004 Apr 2004 Hampton Inn Suites Brookings 87 Feb 2009 Feb 2009 Sleep Inn & Suites Marshall 60 Mar 2014 Mar 2014 Total 544 Source: STR Year Affiliated Year Opened The following tables reflect our estimates of operating data for hotels on an individual basis. These trends are presented in detail in the Supply and Demand Analysis chapter of this report. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 3

FIGURE 1-2 PRIMARY COMPETITORS OPERATING PERFORMANCE Est. Segmentation Estimated 2014 Estimated 2015 Property Number of Rooms Weighted Annual Room Count Occ. Average Rate RevPAR Weighted Annual Room Count Occ. Average Rate RevPAR Commercial Leisure Group Occupancy Penetration Yield Penetration Sleep Inn & Suites Marshall 60 75 % 15 % 10 % 50 55-60 % $95 - $100 $50 - $55 60 55-60 % $100 - $105 $60 - $65 100-110 % 110-120 % AmericInn Marshall 62 60 20 20 62 55-60 85-90 50-55 62 55-60 90-95 50-55 100-110 100-110 Ramada Marshall 100 50 25 25 100 50-55 75-80 35-40 100 45-50 70-75 30-35 80-85 65-70 Quality Inn Marshall 50 60 25 15 50 55-60 85-90 50-55 50 55-60 80-85 45-50 95-100 90-95 Super 8 Marshall 47 60 30 10 47 50-55 65-70 35-40 47 50-55 60-65 30-35 85-90 60-65 Sub-Totals/Averages 319 60 % 23 % 17 % 309 55.7 % $82.09 $45.72 319 53.4 % $82.22 $43.90 94.9 % 86.6 % Secondary Competitors 225 64 % 23 % 13 % 113 63.9 % $107.44 $68.70 113 64.3 % $108.84 $70.01 114.4 % 138.1 % Totals/Averages 544 61 % 23 % 16 % 422 57.9 % $89.56 $51.85 432 56.2 % $90.16 $50.70 100.0 % 100.0 % * Specific occupancy and average rate data was utilized in our analysis, but is presented in ranges in the above table for the purposes of confidentiality. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 4

FIGURE 1-3 SECONDARY COMPETITORS OPERATING PERFORMANCE Est. Segmentation Estimated 2014 Estimated 2015 Property Hampton Inn & Suites Brookings Fairfield Inn by Marriott Brookings Holiday Inn Express & Suites Brookings Number of Rooms Total Competitive Level Weighted Annual Room Count Occ. Average Rate RevPAR Weighted Annual Room Count Occ. Average Rate RevPAR Commercial Leisure Group 87 65 % 20 % 15 % 50 % 44 60-65 % $105 - $110 $65 - $70 44 60-65 % $110 - $115 $70 - $75 76 65 25 10 50 38 60-65 105-110 65-70 38 60-65 105-110 65-70 62 60 25 15 50 31 60-65 105-110 65-70 31 60-65 105-110 70-75 Totals/Averages 225 64 % 23 % 13 % 50 % 113 63.9 % $107.44 $68.70 113 64.3 % $108.84 $70.01 * Specific occupancy and average rate data was utilized in our analysis, but is presented in ranges in the above table for the purposes of confidentiality. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 5

Summary of Forecast Occupancy and Average Rate Based on our analysis presented in the Projection of Occupancy and Average Rate chapter, we have chosen to use a stabilized occupancy level of 67% and a baseyear rate position of $116.00 for the proposed subject hotel. We note that we have made the extraordinary assumption that a 16,000-square-foot conference center will be constructed and will bring induced demand to the market. Our projections of occupancy and average rate factor in the proposed conference center and would differ greatly if the conference center were not constructed. The following table reflects a summary of our market-wide and proposed subject hotel occupancy and average rate projections. FIGURE 1-4 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST Area-wide Market (Calendar Year) Subject Property (Calendar Year) Year Occupancy Average Rate Growth Average Rate Occupancy Average Rate Growth Average Rate Average Rate Penetration Base Year 56.2 % $90.16 $116.00 128.7 % 2016 53.9 1.5 % 91.51 1.5 % 117.74 128.7 2017 55.1 2.5 93.80 2.5 120.68 128.7 2018 52.5 3.0 96.61 60.0 % 3.0 124.30 128.7 2019 51.7 3.0 99.51 63.0 3.0 128.03 128.7 2020 53.0 3.0 102.50 67.0 3.0 131.87 128.7 2021 53.0 3.0 105.57 67.0 3.0 135.83 128.7 The following table summarizes the proposed subject hotel s forecast, reflecting fiscal years and opening-year rate discounts as applicable. FIGURE 1-5 FORECAST OF AVERAGE RATE Year Occupancy Average Rate Before Discount Discount Average Rate After Discount 2018/19 62 % $126.15 0.5 % $125.52 2019/20 65 129.94 0.5 129.29 2020/21 67 133.84 0.0 133.84 Summary of Forecast Income and Expense Statement Our positioning of each revenue and expense level is supported by comparable operations or trends specific to this market. Our forecast of income and expense is presented in the following table. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 6

FIGURE 1-6 DETAILED FORECAST OF INCOME AND EXPENSE 2018/19 Begins July 2019/20 Stabilized 2021/22 2022/23 Number of Rooms: 104 104 104 104 104 Occupancy: 62% 65% 67% 67% 67% Average Rate: $125.52 $129.29 $133.84 $137.85 $141.99 RevPAR: $77.82 $84.04 $89.67 $92.36 $95.13 Days Open: 365 365 365 365 365 Occupied Rooms: 23,535 %Gross PAR POR 24,674 %Gross PAR POR 25,433 %Gross PAR POR 25,433 %Gross PAR POR 25,433 %Gross PAR POR OPERATING REVENUE Rooms $2,954 89.1 % $28,404 $125.51 $3,190 89.2 % $30,673 $129.29 $3,404 89.4 % $32,731 $133.84 $3,506 89.4 % $33,712 $137.85 $3,611 89.4 % $34,721 $141.98 Food & Beverage 315 9.5 3,028 13.38 336 9.4 3,229 13.61 354 9.3 3,403 13.91 364 9.3 3,505 14.33 375 9.3 3,610 14.76 Other Operated Departments 41 1.2 392 1.73 43 1.2 409 1.72 44 1.2 425 1.74 46 1.2 438 1.79 47 1.2 451 1.85 Miscellaneous Income 7 0.2 65 0.29 7 0.2 68 0.29 7 0.2 71 0.29 8 0.2 73 0.30 8 0.2 75 0.31 Total Operating Revenues 3,316 100.0 31,889 140.91 3,576 100.0 34,380 144.91 3,809 100.0 36,630 149.78 3,924 100.0 37,727 154.27 4,041 100.0 38,857 158.89 DEPARTMENTAL EXPENSES * Rooms 669 22.7 6,435 28.44 702 22.0 6,750 28.45 732 21.5 7,037 28.77 754 21.5 7,248 29.64 776 21.5 7,465 30.53 Food & Beverage 244 77.4 2,345 10.36 255 75.9 2,453 10.34 265 75.0 2,552 10.44 273 75.0 2,628 10.75 282 75.0 2,707 11.07 Other Operated Departments 17 40.6 159 0.70 17 40.3 165 0.69 18 40.0 170 0.70 18 40.0 175 0.72 19 40.0 180 0.74 Total 930 28.0 8,939 39.50 974 27.2 9,368 39.48 1,015 26.6 9,759 39.91 1,045 26.6 10,052 41.10 1,077 26.6 10,353 42.34 DEPARTMENTAL INCOME 2,387 72.0 22,950 101.41 2,601 72.8 25,012 105.43 2,795 73.4 26,871 109.88 2,878 73.4 27,676 113.17 2,964 73.4 28,504 116.56 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 268 8.1 2,573 11.37 279 7.8 2,679 11.29 289 7.6 2,783 11.38 298 7.6 2,866 11.72 307 7.6 2,952 12.07 Info. & Telecom. Systems 26 0.8 254 1.12 28 0.8 264 1.11 29 0.7 275 1.12 29 0.7 283 1.16 30 0.8 291 1.19 Marketing 201 6.1 1,930 8.53 209 5.8 2,009 8.47 217 5.7 2,087 8.53 224 5.7 2,150 8.79 230 5.7 2,214 9.05 Franchise Fee 236 7.1 2,272 10.04 255 7.1 2,454 10.34 272 7.1 2,618 10.71 280 7.1 2,697 11.03 289 7.1 2,778 11.36 Prop. Operations & Maint. 100 3.0 965 4.26 110 3.1 1,061 4.47 121 3.2 1,159 4.74 124 3.2 1,194 4.88 128 3.2 1,230 5.03 Utilities 123 3.7 1,179 5.21 128 3.6 1,228 5.18 133 3.5 1,275 5.22 137 3.5 1,314 5.37 141 3.5 1,353 5.53 Total 954 28.8 9,173 40.53 1,008 28.2 9,695 40.87 1,061 27.8 10,198 41.70 1,092 27.8 10,504 42.95 1,125 27.9 10,818 44.24 GROSS HOUSE PROFIT 1,433 43.2 13,777 60.88 1,593 44.6 15,317 64.56 1,734 45.6 16,673 68.18 1,786 45.6 17,172 70.22 1,839 45.5 17,686 72.32 Management Fee 99 3.0 957 4.23 107 3.0 1,031 4.35 114 3.0 1,099 4.49 118 3.0 1,132 4.63 121 3.0 1,166 4.77 INCOME BEFORE NON-OPER. INC. & EXP. 1,333 40.2 12,820 56.65 1,486 41.6 14,285 60.21 1,620 42.6 15,574 63.68 1,668 42.6 16,040 65.59 1,718 42.5 16,520 67.55 NON-OPERATING INCOME AND EXPENSE Property Taxes 114 3.4 1,098 4.85 117 3.3 1,125 4.74 121 3.2 1,159 4.74 124 3.2 1,194 4.88 128 3.2 1,230 5.03 Insurance 34 1.0 328 1.45 35 1.0 338 1.42 36 0.9 348 1.42 37 0.9 358 1.47 38 0.9 369 1.51 Reserve for Replacement 66 2.0 638 2.82 107 3.0 1,031 4.35 152 4.0 1,465 5.99 157 4.0 1,509 6.17 162 4.0 1,554 6.36 Total 215 6.4 2,063 9.12 259 7.3 2,494 10.51 309 8.1 2,972 12.15 318 8.1 3,061 12.52 328 8.1 3,153 12.89 EBITDA LESS RESERVE $1,119 33.8 % $10,757 $47.53 $1,226 34.3 % $11,791 $49.70 $1,311 34.5 % $12,602 $51.53 $1,350 34.5 % $12,979 $53.07 $1,390 34.4 % $13,367 $54.66 *Departmental expenses are expressed as a percentage of departmental revenues. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 7

FIGURE 1-7 TWENTY-YEAR FORECAST OF INCOME AND EXPENSE 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 Number of Rooms: 104 104 104 104 104 104 104 104 104 104 Occupied Rooms: 23,535 24,674 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 Occupancy: 62% 65% 67% 67% 67% 67% 67% 67% 67% 67% Average Rate: $125.52 % of $129.29 % of $133.84 % of $137.85 % of $141.99 % of $146.25 % of $150.63 % of $155.15 % of $159.81 % of $164.60 RevPAR: $77.82 Gross $84.04 Gross $89.67 Gross $92.36 Gross $95.13 Gross $97.98 Gross $100.92 Gross $103.95 Gross $107.07 Gross $110.28 OPERATING REVENUE Rooms $2,954 89.1 % $3,190 89.2 % $3,404 89.4 % $3,506 89.4 % $3,611 89.4 % $3,720 89.4 % $3,831 89.4 % $3,946 89.4 % $4,064 89.4 % $4,186 89.4 % Food & Beverage 315 9.5 336 9.4 354 9.3 364 9.3 375 9.3 387 9.3 398 9.3 410 9.3 423 9.3 435 9.3 Other Operated Departments 41 1.2 43 1.2 44 1.2 46 1.2 47 1.2 48 1.2 50 1.2 51 1.2 53 1.2 54 1.2 Miscellaneous Income 7 0.2 7 0.2 7 0.2 8 0.2 8 0.2 8 0.2 8 0.2 9 0.2 9 0.2 9 0.2 Total Operating Revenue 3,316 100.0 3,576 100.0 3,809 100.0 3,924 100.0 4,041 100.0 4,163 100.0 4,287 100.0 4,416 100.0 4,548 100.0 4,685 100.0 DEPARTMENTAL EXPENSES* Rooms 669 22.7 702 22.0 732 21.5 754 21.5 776 21.5 800 21.5 824 21.5 848 21.5 874 21.5 900 21.5 Food & Beverage 244 77.4 255 75.9 265 75.0 273 75.0 282 75.0 290 75.0 299 75.0 308 75.0 317 75.0 326 75.0 Other Operated Departments 17 40.6 17 40.3 18 40.0 18 40.0 19 40.0 19 40.0 20 40.0 21 40.0 21 40.0 22 40.0 Total 930 28.0 974 27.2 1,015 26.6 1,045 26.6 1,077 26.6 1,109 26.6 1,142 26.6 1,177 26.6 1,212 26.6 1,248 26.6 DEPARTMENTAL INCOME 2,387 72.0 2,601 72.8 2,795 73.4 2,878 73.4 2,964 73.4 3,054 73.4 3,145 73.4 3,239 73.4 3,336 73.4 3,436 73.4 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 268 8.1 279 7.8 289 7.6 298 7.6 307 7.6 316 7.6 326 7.6 335 7.6 346 7.6 356 7.6 Info. & Telecom. Systems 26 0.8 28 0.8 29 0.7 29 0.7 30 0.8 31 0.7 32 0.8 33 0.8 34 0.8 35 0.8 Marketing 201 6.1 209 5.8 217 5.7 224 5.7 230 5.7 237 5.7 244 5.7 252 5.7 259 5.7 267 5.7 Franchise Fee 236 7.1 255 7.1 272 7.1 280 7.1 289 7.1 298 7.1 306 7.1 316 7.1 325 7.1 335 7.1 Prop. Operations & Maint. 100 3.0 110 3.1 121 3.2 124 3.2 128 3.2 132 3.2 136 3.2 140 3.2 144 3.2 148 3.2 Utilities 123 3.7 128 3.6 133 3.5 137 3.5 141 3.5 145 3.5 149 3.5 154 3.5 158 3.5 163 3.5 Total 954 28.8 1,008 28.2 1,061 27.8 1,092 27.8 1,125 27.9 1,159 27.8 1,194 27.9 1,229 27.9 1,266 27.9 1,304 27.9 GROSS HOUSE PROFIT 1,433 43.2 1,593 44.6 1,734 45.6 1,786 45.6 1,839 45.5 1,895 45.6 1,951 45.5 2,010 45.5 2,070 45.5 2,132 45.5 Management Fee 99 3.0 107 3.0 114 3.0 118 3.0 121 3.0 125 3.0 129 3.0 132 3.0 136 3.0 141 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 1,333 40.2 1,486 41.6 1,620 42.6 1,668 42.6 1,718 42.5 1,770 42.6 1,823 42.5 1,878 42.5 1,934 42.5 1,992 42.5 NON-OPERATING INCOME AND EXPENSE Property Taxes 114 3.4 117 3.3 121 3.2 124 3.2 128 3.2 132 3.2 136 3.2 140 3.2 144 3.2 148 3.2 Insurance 34 1.0 35 1.0 36 0.9 37 0.9 38 0.9 40 0.9 41 0.9 42 0.9 43 0.9 44 0.9 Reserve for Replacement 66 2.0 107 3.0 152 4.0 157 4.0 162 4.0 167 4.0 171 4.0 177 4.0 182 4.0 187 4.0 Total 215 6.4 259 7.3 309 8.1 318 8.1 328 8.1 338 8.1 348 8.1 358 8.1 369 8.1 380 8.1 EBITDA LESS RESERVE $1,119 33.8 % $1,226 34.3 % $1,311 34.5 % $1,350 34.5 % $1,390 34.4 % $1,432 34.5 % $1,475 34.4 % $1,519 34.4 % $1,564 34.4 % $1,611 34.4 % 1 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues. % of Gross Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 8

FIGURE 1-8 TWENTY-YEAR FORECAST OF INCOME AND EXPENSE 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 2034/35 2035/36 2036/37 2037/38 Number of Rooms: 104 104 104 104 104 104 104 104 104 104 Occupied Rooms: 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 Occupancy: 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% Average Rate: $169.54 % of $174.63 % of $179.86 % of $185.26 % of $190.82 % of $196.54 % of $202.44 % of $208.51 % of $214.77 % of $221.21 RevPAR: $113.59 Gross $117.00 Gross $120.51 Gross $124.12 Gross $127.85 Gross $131.68 Gross $135.63 Gross $139.70 Gross $143.89 Gross $148.21 OPERATING REVENUE Rooms $4,312 89.3 % $4,441 89.3 % $4,574 89.3 % $4,711 89.3 % $4,853 89.3 % $4,998 89.3 % $5,148 89.3 % $5,303 89.3 % $5,462 89.3 % $5,626 89.3 % Food & Beverage 448 9.4 462 9.4 476 9.4 490 9.4 505 9.4 520 9.4 535 9.4 551 9.4 568 9.4 585 9.4 Other Operated Departments 56 1.2 58 1.2 59 1.2 61 1.2 63 1.2 65 1.2 67 1.2 69 1.2 71 1.2 73 1.2 Miscellaneous Income 9 0.2 10 0.2 10 0.2 10 0.2 11 0.2 11 0.2 11 0.2 11 0.2 12 0.2 12 0.2 Total Operating Revenue 4,825 100.0 4,970 100.0 5,119 100.0 5,273 100.0 5,431 100.0 5,594 100.0 5,762 100.0 5,934 100.0 6,112 100.0 6,296 100.0 DEPARTMENTAL EXPENSES* Rooms 927 21.0 955 21.0 984 21.0 1,013 21.0 1,043 21.0 1,075 21.0 1,107 21.0 1,140 21.0 1,174 21.0 1,210 21.0 Food & Beverage 336 75.0 346 75.0 357 75.0 367 75.0 378 75.0 390 75.0 401 75.0 413 75.0 426 75.0 439 75.0 Other Operated Departments 22 40.0 23 40.0 24 40.0 24 40.0 25 40.0 26 40.0 27 40.0 28 40.0 28 40.0 29 40.0 Total 1,286 26.2 1,324 26.2 1,364 26.2 1,405 26.2 1,447 26.2 1,490 26.2 1,535 26.2 1,581 26.2 1,629 26.2 1,678 26.2 DEPARTMENTAL INCOME 3,540 73.8 3,646 73.8 3,755 73.8 3,868 73.8 3,984 73.8 4,103 73.8 4,226 73.8 4,353 73.8 4,484 73.8 4,618 73.8 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 367 7.7 378 7.7 389 7.7 401 7.7 413 7.7 425 7.7 438 7.7 451 7.7 464 7.7 478 7.7 Info. & Telecom. Systems 36 0.8 37 0.8 38 0.8 40 0.8 41 0.8 42 0.8 43 0.8 45 0.8 46 0.8 47 0.8 Marketing 275 5.7 283 5.7 292 5.7 300 5.7 309 5.7 319 5.7 328 5.7 338 5.7 348 5.7 359 5.7 Franchise Fee 345 7.1 355 7.1 366 7.1 377 7.1 388 7.1 400 7.1 412 7.1 424 7.1 437 7.1 450 7.1 Prop. Operations & Maint. 153 3.2 157 3.2 162 3.2 167 3.2 172 3.2 177 3.2 182 3.2 188 3.2 193 3.2 199 3.2 Utilities 168 3.5 173 3.5 178 3.5 184 3.5 189 3.5 195 3.5 201 3.5 207 3.5 213 3.5 219 3.5 Total 1,343 28.0 1,384 28.0 1,425 28.0 1,468 28.0 1,512 28.0 1,557 28.0 1,604 28.0 1,652 28.0 1,702 28.0 1,753 28.0 GROSS HOUSE PROFIT 2,196 45.8 2,262 45.8 2,330 45.8 2,400 45.8 2,472 45.8 2,546 45.8 2,622 45.8 2,701 45.8 2,782 45.8 2,865 45.8 Management Fee 145 3.0 149 3.0 154 3.0 158 3.0 163 3.0 168 3.0 173 3.0 178 3.0 183 3.0 189 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 2,051 42.8 2,113 42.8 2,176 42.8 2,242 42.8 2,309 42.8 2,378 42.8 2,449 42.8 2,523 42.8 2,599 42.8 2,677 42.8 NON-OPERATING INCOME AND EXPENSE Property Taxes 153 3.2 157 3.2 162 3.2 167 3.2 172 3.2 177 3.2 182 3.2 188 3.2 193 3.2 199 3.2 Insurance 46 1.0 47 1.0 49 1.0 50 1.0 52 1.0 53 1.0 55 1.0 56 1.0 58 1.0 60 1.0 Reserve for Replacement 193 4.0 199 4.0 205 4.0 211 4.0 217 4.0 224 4.0 230 4.0 237 4.0 244 4.0 252 4.0 Total 392 8.2 403 8.2 415 8.2 428 8.2 441 8.2 454 8.2 467 8.2 482 8.2 496 8.2 511 8.2 EBITDA LESS RESERVE $1,660 34.6 % $1,710 34.6 % $1,761 34.6 % $1,814 34.6 % $1,868 34.6 % $1,924 34.6 % $1,982 34.6 % $2,041 34.6 % $2,103 34.6 % $2,166 34.6 % *Departmental expenses are expressed as a percentage of departmental revenues. % of Gross Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 9

As illustrated, the hotel is expected to stabilize at a profitable level. Please refer to the Forecast of Income and Expense chapter of our report for a detailed explanation of the methodology used in deriving this forecast. 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. All information was collected and analyzed by the staff of TS Worldwide, LLC. Information was supplied by the client and/or the property s 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. 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). Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 10

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. Executive Summary Proposed Courtyard by Marriott Marshall, Minnesota 11

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 selected subject site is anticipated to be located east of Downtown Marshall, in the northeast quadrant of the intersection formed by State Highway 19 and State Highway 23. The site is located adjacent to the Red Baron Arena, to the southwest of the building. This site is in the city of Marshall, Minnesota. Physical Characteristics The parcel's adjacent uses are set forth in the following table. FIGURE 2-1 SUBJECT PARCEL'S ADJACENT USES Direction North South East West Adjacent Use Tiger Drive Victory Drive Red Baron Arena Commencement Boulevard Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 12

VIEW OF SUBJECT SITE Topography and Site Utility The topography of the proposed site is generally flat, and the shape of the site would permit efficient use of the site for building and site improvements, including ingress and egress. Upon completion of construction, the subject site will not contain any significant portion of undeveloped land that could be sold, entitled, and developed for alternate use. It is expected that the site will be developed fully with building and site improvements, thus contributing to the overall profitability of the hotel. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 13

AERIAL PHOTOGRAPH Access and Visibility It is important to analyze the site with respect to regional and local transportation routes and demand generators, including ease of access. The subject site is readily accessible to a variety of local and county roads, as well as state and interstate highways. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 14

MAP OF REGIONAL ACCESS ROUTES Regional access to/from the city of Marshall is considered fair. We note that there are no major interstates connecting Marshall to other regional hubs in Minnesota. The subject market is served by a variety of additional local highways, which are illustrated on the map. Vehicular access to the first proposed subject site would be provided by Tiger Drive. The subject site is located near a busy intersection and is relatively simple to locate from State Highway 23, which is the nearest major highway. The proposed subject hotel is anticipated to have adequate signage at the street, as well as on its façade. Overall, the subject site benefits from good accessibility, and the proposed hotel is expected to enjoy very good visibility from within its local neighborhood. Airport Access The proposed subject hotel will be served by the Sioux Falls Regional Airport, which is located approximately 65 miles to the southwest. The region is also served by the Minneapolis/St. Paul International Airport. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 15

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 neighborhood that surrounds the subject site is generally defined by 290th Street to the north, 28th Avenue to the east, State Highway 19 to the south, and Jewett Street to the west. The neighborhood is characterized by restaurants, office buildings, and retail shopping centers along the primary thoroughfares, with residential areas located along the secondary roadways. Some specific businesses and entities in the area include Red Baron Arena, Southwest Minnesota State University, and Kruse Buick GMC; nearby hotels include Ramada, Traveler's Lodge, and Quality Inn. Restaurants located near the subject site include Arby's, Mike's Cafe, and El Rancho. In general, this neighborhood is in the stable stage of its life cycle. Notable changes in this neighborhood include the construction of the Red Baron Arena in 2015/16. The proposed subject hotel's opening should be a positive influence on the area; the hotel should be in character with and should complement surrounding land uses. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 16

MAP OF NEIGHBORHOOD Proximity to Local Demand Generators and Attractions The subject site is located near the area's primary generators of lodging demand. A sample of these demand generators is reflected on the following map, including respective distances from and drive times to the proposed subject site. Overall, the subject site is well situated with respect to demand generators. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 17

ACCESS TO DEMAND GENERATORS AND ATTRACTIONS FIGURE 2-2 ACCESS TO DEMAND GENERATORS Demand Generator Driving Time Distance 1 The Schwan Food Company 8 minutes 2 miles 2 Runnings Corporate Headquarters 8 minutes 2.5 miles 3 Turkey Valley Farms 9 minutes 2 miles 4 Red Baron Arena 1 minute 0.1 miles 5 US Bank 10 minutes 3 miles 6 Southwest Minnesota State University 2 minutes.5 miles 7 Avera Marshall Regional Medical Center 6 minutes 1.5 miles Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 18

Utilities Soil and Subsoil Conditions Nuisances and Hazards Flood Zone The subject site will reportedly be served by all necessary utilities. Geological and soil reports were not provided to us or made available for our review during the preparation of this report. We are not qualified to evaluate soil conditions other than by a visual inspection of the surface; no extraordinary conditions were apparent. We were not informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because we are not experts in this field, we do not warrant the absence of hazardous waste and urge the reader to obtain an independent analysis of these factors. According to the Federal Emergency Management Agency map illustrated below, the subject site is located in X. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 19

COPY OF FLOOD MAP AND COVER The flood zone definition for the X designation is as follows: areas outside the 500- year flood plain; areas of the 500-year flood; areas of the 100-year flood with average depths of less than one foot or with drainage areas less than one square mile and areas protected by levees from the 100-year flood. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 20

Zoning According to the local planning office, the subject property is zoned as follows: B-3 - General Business. This zoning designation allows for most commercial uses, including small office complexes, retail centers, service industries, and hotels and motels. We assume that all necessary permits and approvals will be secured (including the 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. Our zoning analysis should be verified before any physical changes are made to the site. Easements and Encroachments Conclusion We are not aware of any easements attached to the property that would significantly affect the utility of the site or marketability of this project. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities. The proposed subject site is favorably located along a welltraveled commercial corridor. In general, the site is well suited for hotel use, with acceptable access, visibility, and topography for an effective operation. Description of the Site and Neighborhood Proposed Courtyard by Marriott Marshall, Minnesota 21

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 (e.g., 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 subject site is located in the city of Marshall, the county of Lyon, and the state of Minnesota. Marshall, seat of Minnesota's Lyon County, is the largest city in the county and acts as a regional hub for the Southwest Minnesota. The city first grew during the Dakota boom years of the late 19th century with the arrival of the railroad, which allowed for the nationwide transportation of granite. The city was named after Governor William R. Marshall, who was the fifth governor of Minnesota. Today, Marshall is home to several major headquarter operations, such as The Schwan Food Company, Runnings, and Turkey Valley Farms, as well as the regional headquarters for U.S. Bank Corp. Healthcare is also an economic cornerstone for the market given Marshall's standing as the regional hub. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 22

MARSHALL The following exhibit illustrates the market area. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 23

MAP OF MARKET AREA Economic and Demographic Review A primary source of economic and demographic statistics used in this analysis 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. These data are summarized in the following table. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 24

FIGURE 3-1 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY Average Annual Compounded Change 2000 2010 2014 2020 2000-10 2010-14 2014-20 Resident Population (Thousands) Lyon County 25.5 25.9 26.3 27.0 0.2 % 0.4 % 0.4 % State of Minnesota 4,933.7 5,310.7 5,516.1 5,871.5 0.7 1.0 1.0 United States 282,162.4 309,330.2 320,976.9 340,554.3 0.9 0.9 1.0 Per-Capita Personal Income* Lyon County $32,006 $37,975 $39,400 $43,551 1.7 0.9 1.7 State of Minnesota 39,215 41,837 44,061 47,525 0.6 1.3 1.3 United States 36,473 39,144 41,079 44,387 0.7 1.2 1.3 W&P Wealth Index Lyon County 91.3 98.1 97.1 98.8 0.7 (0.2) 0.3 State of Minnesota 108.8 106.7 107.0 106.8 (0.2) 0.1 (0.0) United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0 Food and Beverage Sales (Millions)* Lyon County $25 $33 $35 $39 2.6 2.0 1.6 State of Minnesota 6,586 7,405 8,074 9,016 1.2 2.2 1.9 United States 368,842 447,396 490,340 548,160 1.9 2.3 1.9 Total Retail Sales (Millions)* Lyon County $432 $388 $422 $460 (1.1) 2.2 1.4 State of Minnesota 75,983 74,467 82,916 93,390 (0.2) 2.7 2.0 United States 3,902,969 4,149,070 4,617,326 5,187,469 0.6 2.7 2.0 * Inflation Adjusted Source: Woods & Poole Economics, Inc. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 25

The U.S. population has grown at an average annual compounded rate of 0.9% from 2010 through 2014. The county s population has grown more slowly than the nation s population; the average annual growth rate of 0.4% between 2010 and 2014 reflects a gradually expanding area. Following this population trend, percapita personal income increased slowly, at 0.9% on average annually for the county between 2010 and 2014. Local wealth indexes have remained stable in recent years, registering a relatively near average 97.1 level for the county in 2014. Food and beverage sales totaled $35 million in the county in 2014, versus $33 million in 2010. This reflects a 2.0% average annual change, which is weaker than the 2.6% pace recorded in the prior decade. Over the long term, the pace of growth is forecast to moderate to a more sustainable level of 1.6%, which is forecast through 2020. The retail sales sector demonstrated an annual decline of -1.1% registered in the decade 2000 to 2010, followed by an increase of 2.2% in the period 2010 to 2014. An increase of 1.4% average annual change is expected in county retail sales through 2020. Workforce Characteristics The characteristics of an area's workforce provide an indication of the type 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 2000, 2010, and 2014, as well as a forecast for 2020. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 26

FIGURE 3-2 HISTORICAL AND PROJECTED EMPLOYMENT (000S) Percent Percent Percent Percent Industry 2000 of Total 2010 of Total 2014 of Total 2020 of Total Average Annual Compounded Change 2000-2010 2010-2014 2014-2020 Farm 1.1 5.9 % 1.0 5.4 % 1.0 5.0 % 1.0 4.6 % (0.9) % (0.7) % 0.3 % Forestry, Fishing, Related Activities And Other 0.1 0.5 0.4 2.0 0.2 0.8 0.2 0.8 14.0 (18.4) 0.6 Mining 0.0 0.1 0.1 0.3 0.1 0.3 0.1 0.3 7.8 4.1 0.3 Utilities 0.0 0.1 0.0 0.1 0.0 0.2 0.0 0.2 5.4 5.1 0.5 Construction 1.1 5.8 1.0 5.1 1.0 5.1 1.1 4.7 (1.3) 1.5 0.2 Manufacturing 4.4 22.5 2.2 11.4 2.2 10.8 2.2 10.1 (6.7) 0.2 0.4 Total Trade 3.0 15.3 2.8 14.6 3.0 14.5 3.2 14.3 (0.6) 1.4 1.2 Wholesale Trade 0.6 3.3 0.7 3.9 0.8 4.1 1.0 4.5 1.4 3.0 3.1 Retail Trade 2.3 11.9 2.1 10.7 2.1 10.4 2.2 9.7 (1.2) 0.8 0.3 Transportation And Warehousing 0.4 1.9 0.8 4.4 1.1 5.5 1.3 6.1 8.5 7.5 3.0 Information 0.2 1.0 0.2 0.8 0.2 0.8 0.2 0.8 (2.1) 0.9 0.9 Finance And Insurance 1.1 5.7 1.4 7.4 1.5 7.2 1.6 7.0 2.6 0.6 1.1 Real Estate And Rental And Lease 0.3 1.6 0.5 2.5 0.5 2.5 0.6 2.5 4.2 1.7 1.7 Total Services 4.7 24.1 5.9 30.5 6.7 32.6 7.6 34.1 2.3 3.2 2.2 Professional And Technical Services 0.3 1.4 0.6 2.9 0.6 2.9 0.7 3.0 7.7 1.7 1.9 Management Of Companies And Enterprises 0.1 0.6 0.5 2.6 0.7 3.2 0.8 3.6 15.2 7.4 3.3 Administrative And Waste Services 0.3 1.6 0.4 2.3 0.6 3.0 0.7 3.2 3.4 8.6 2.8 Educational Services 0.2 0.8 0.2 1.2 0.3 1.4 0.3 1.4 3.9 5.1 2.1 Health Care And Social Assistance 1.5 7.9 1.7 9.1 1.9 9.1 2.0 8.9 1.3 1.5 1.1 Arts, Entertainment, And Recreation 0.2 1.1 0.3 1.4 0.3 1.5 0.3 1.5 2.8 2.4 1.8 Accommodation And Food Services 1.0 5.1 1.1 5.9 1.3 6.5 1.6 7.3 1.5 3.7 3.7 Other Services, Except Public Administration 1.1 5.6 1.0 5.1 1.0 5.1 1.1 5.0 (0.9) 1.5 1.2 Total Government 3.0 15.4 3.0 15.4 3.0 14.7 3.2 14.5 (0.0) 0.3 1.3 Federal Civilian Government 0.2 0.8 0.1 0.7 0.1 0.6 0.1 0.6 (1.1) (1.3) 0.1 Federal Military 0.1 0.5 0.1 0.5 0.1 0.5 0.1 0.4 0.2 (0.3) 0.2 State And Local Government 2.7 14.1 2.7 14.2 2.8 13.6 3.0 13.5 0.0 0.4 1.4 TOTAL 19.3 100.0 % 19.2 100.0 % 20.4 100.0 % 22.2 100.0 % (0.1) % 1.5 % 1.4 % U.S. 165,371.0 173,626.7 183,038.2 198,343.5 0.7 1.3 1.3 Source: Woods & Poole Economics, Inc. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 27

Woods & Poole Economics, Inc. reports that during the period from 2000 to 2010, total employment in the county contracted at an average annual rate of -0.1%. This trend lagged the national average. More recently, the pace of total employment growth in the county accelerated to 1.5% on an annual average from 2010 to 2014, reflecting the initial years of the recovery. Of the primary employment sectors, Total Services recorded the highest increase in number of employees during the period from 2010 to 2014, increasing by 796 people, or 13.6%, and rising from 30.5% to 32.6% of total employment. Of the various service sub-sectors, Health Care And Social Assistance and Accommodation And Food Services were the largest employers. Strong growth was also recorded in the Transportation And Warehousing sector, as well as the Total Trade sector, which expanded by 33.3% and 5.7%, respectively, in the period 2010 to 2014. Forecasts developed by Woods & Poole Economics, Inc. anticipate that total employment in the county will change by 1.4% on average annually through 2020. The trend is above the forecast rate of change for the U.S. as a whole during the same period. Radial Demographic Snapshot The following table reflects radial demographic trends for our market area measured by three points of distance from the subject site. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 28

FIGURE 3-3 DEMOGRAPHICS BY RADIUS 0.00-1.00 miles 0.00-3.00 miles 0.00-5.00 miles Population 2021 Projection 2,152 13,779 14,878 2016 Estimate 2,129 13,617 14,729 2010 Census 2,113 13,554 14,710 2000 Census 1,972 12,665 13,834 Growth 2016-2021 1.1% 1.2% 1.0% Growth 2010-2016 0.8% 0.5% 0.1% Growth 2000-2010 7.1% 7.0% 6.3% Households 2021 Projection 816 5,487 5,913 2016 Estimate 799 5,400 5,828 2010 Census 783 5,335 5,776 2000 Census 599 4,875 5,291 Growth 2016-2021 2.1% 1.6% 1.4% Growth 2010-2016 2.0% 1.2% 0.9% Growth 2000-2010 30.8% 9.4% 9.2% Income 2016 Est. Average Household Income $44,950 $67,617 $69,102 2016 Est. Median Household Income 31,588 47,643 48,833 2016 Est. Civ. Employed Pop 16+ by Occupation 1,178 7,390 8,035 Architect/Engineer 36 97 102 Arts/Entertainment/Sports 23 133 138 Building Grounds Maintenance 57 238 263 Business/Financial Operations 26 360 392 Community/Social Services 22 154 165 Computer/Mathematical 7 301 325 Construction/Extraction 22 269 299 Education/Training/Library 53 435 482 Farming/Fishing/Forestry 9 206 223 Food Prep/Serving 106 549 585 Health Practitioner/Technician 12 249 272 Healthcare Support 47 108 112 Maintenance Repair 13 277 315 Legal 7 49 51 Life/Physical/Social Science 9 40 44 Management 100 623 715 Office/Admin. Support 222 1,039 1,110 Production 86 864 924 Protective Services 28 102 109 Sales/Related 146 666 714 Personal Care/Service 86 248 261 Transportation/Moving 63 384 433 Source: The Nielsen Company Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 29

This source reports a population of 14,729 within a five-mile radius of the subject site, and 5,828 households within this same radius. Average household income within a five-mile radius of the subject site is currently reported at $69,102, while the median is $48,833. Unemployment Statistics The following table presents historical unemployment rates for the proposed subject hotel s market area. FIGURE 3-4 UNEMPLOYMENT STATISTICS Year County State 2006 3.3 % 4.0 % 4.6 % 2007 3.8 4.6 4.6 2008 4.4 5.4 5.8 2009 5.8 7.8 9.3 2010 5.6 7.4 9.6 2011 5.3 6.5 8.9 2012 4.4 5.6 8.1 2013 4.1 4.9 7.4 2014 3.6 4.2 6.2 2015 3.2 3.7 5.3 Recent Month - Sep 2015 2.5 % 3.2 % 5.1 % 2016 2.8 3.4 5.0 * 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 Country After the U.S. unemployment rate declined to an annual average of 4.6% in 2006 and 2007, the Great Recession, which spanned December 2007 through June 2009, resulted in heightened unemployment rates. The unemployment rate peaked at 10.0% in October 2009, after which job growth resumed; the national unemployment rate has steadily declined since 2010. Total nonfarm payroll employment increased by 252,000, 167,000, and 156,000 jobs in July, August, and September 2016, respectively. The strongest gains in September were recorded in the professional and business services and health care sectors. The national unemployment rate was reported to be 4.9% in July and August, and moved slightly higher to 5.0% in September; it has remained near the 5.0% mark since August 2015, reflecting a trend of relative stability and the overall strength of the U.S. economy. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 30

Locally, the unemployment rate was 3.2% in 2015; for this same area in 2016, the most recent month s unemployment rate was registered at 2.8%, versus 2.5% for the same month in 2015. Unemployment began to rise in 2007 as the region entered an economic slowdown, and this trend continued through 2009 as the height of the national recession took hold. However, unemployment declined in 2010 as the economy rebounded, a trend that continued through 2015. The most recent comparative period illustrates a slight increase, which can be attributed to the employment fluctuations at The Schwan Food Company. Reportedly, local employment has remained strong within the healthcare and education sectors, including healthy employment levels at major employers such as Avera Health and Southwest Minnesota State University. Major Business and Industry Providing additional context for understanding the nature of the regional economy, the following table presents a list of the major employers in the subject property s market. FIGURE 3-5 MAJOR EMPLOYERS Number of Rank Firm Employees 1 The Schwan Food Company 1,500 2 U.S. Bancorp Business Equipment Finance Group 545 3 Avera Marshall Regional Medical Center 490 4 Turkey Valley Farms 460 5 Southwest Minnesota State University 440 6 Hy-Vee Food Stores 350 7 Marshall Public Schools 350 8 Mid Continent Cabinetry 300 9 Archer Daniels Midland 260 10 Wal-Mart Supercenter 240 Source: Marshall Economic Development Association, 2016 Strengthening economic conditions and development projects throughout the market have been noted over the past several years. The Schwan Food Company, which provides food delivery service nationwide, is the largest major employer in Marshall, where its corporate offices, four food manufacturing facilities, and research and development center are located. Avera Marshall Regional Medical Center opened the Avera Cancer Institute Marshall in February 2015. The center features chemotherapy space, radiation oncology, and an art gallery. Marshall is also the home to Southwest Minnesota State University, with an enrollment of approximately 8,500 students as of the fall of 2016. The University completed Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 31

construction on a new Division I track and field facility in 2015. The University, which anticipates a 10 to 15% growth in enrollment through 2018, added nursing and agriculture programs to its curriculum in 2015. The greater Lyon County also benefits from its rural location and agriculture industry. Conference Activity For purposes of this study, we have assumed a 16,000-square-foot conference center will be built adjacent to the Red Baron arena and the proposed subject property. Regional conference centers such as these generate additional demand for area hotels and serve as a focal point for community activity. Hotels serving as the headquarters regional conference centers benefit from proximity to the center and the ability to charge premium rates for events. However, we note that conference centers of this type often operate with a negative net operating income. In many cases, the local municipality is faced with covering the operating gap through tax incentives, sales tax rebates, or new tax financing. These incentives are off set by the net positive benefit to the community in terms of new job creation, additional tax opportunity, and the offering of a community amenity that would not otherwise be available. Additionally, we have assumed that this conference center will be no larger than 16,000 square feet. Given the rural market area and relatively small employment base in the community, event space for more than 1,000 people is not warranted. There is also a lack of upscale guestrooms in the local vicinity, and the proposed subject hotel will only accommodate a limited number of guests. The relationship between the proposed conference center and proposed hotel is dependent on an appropriate match of guestrooms to meeting space. 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. The Sioux Falls Regional Airport (FSD), also known as Joe Foss Field, serves the tristate region of South Dakota, Minnesota, and Iowa. The airport, which is served by five airlines, experienced substantial growth in 2011 with the addition of Frontier Airlines. An expansion project was completed in 2012, including two additional gates, a larger ticketing wing, new self-service check-in kiosks, and additional parking facilities. Furthermore, ongoing improvements include an extension of the runway to accommodate larger aircraft. In April 2014, the airport authority approved an $8.2-million renovation; the project, which is expected to be completed in late 2016, includes additional security lines and a larger waiting area for passengers in the terminal. Additionally, the 76-room AeroStay hotel, which is connected to the airport, opened in June 2015. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 32

The following table illustrates recent operating statistics for the Sioux Falls Regional Airport, which is the primary airport facility serving the proposed subject hotel s submarket. FIGURE 3-6 AIRPORT STATISTICS - SIOUX FALLS REGIONAL AIRPORT Year Passenger Traffic Percent Change* Percent Change** 2006 723,885 2007 790,910 9.3 % 9.3 % 2008 743,895 (5.9) 1.4 2009 677,164 (9.0) (2.2) 2010 706,447 4.3 (0.6) 2011 860,088 21.7 3.5 2012 905,876 5.3 3.8 2013 963,315 6.3 4.2 2014 975,597 1.3 3.8 2015 971,367 (0.4) 3.3 Year-to-date, Oct 2015 811,675 2016 854,664 5.3 % *Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data Source: Sioux Falls Regional Airport Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 33

FIGURE 3-7 LOCAL PASSENGER TRAFFIC VS. NATIONAL TREND Change in Passenger Activity 25% 20% 15% 10% 5% 0% -5% -10% -15% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Local Passenger Volume National Passenger Volume Source: HVS, Local Airport Authority This facility recorded 971,367 passengers in 2015. The change in passenger traffic between 2014 and 2015 was -0.4%. The average annual change during the period shown was 3.3%. The following table illustrates recent operating statistics for the Minneapolis St. Paul International Airport, which is the secondary airport facility serving the proposed subject property s submarket. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 34

FIGURE 3-8 AIRPORT STATISTICS MINNEAPOLIS ST. PAUL INTERNATIONAL AIRPORT Year Passenger Traffic Percent Change* Percent Change** 2006 35,633,019 2007 35,157,322 (1.3) % (1.3) % 2008 34,056,443 (3.1) (2.2) 2009 32,378,599 (4.9) (3.1) 2010 32,839,441 1.4 (2.0) 2011 33,118,499 0.8 (1.5) 2012 33,170,960 0.2 (1.2) 2013 33,897,335 2.2 (0.7) 2014 35,147,083 3.7 (0.2) 2015 36,582,854 4.1 0.3 Year-to-date, Aug 2015 24,014,474 2016 24,696,557 2.8 % *Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data Source: Minneapolis St. Paul International Airport The Minneapolis-St. Paul International Airport (MSP) is located seven miles southeast of Downtown Minneapolis and about seven miles southwest of Downtown St. Paul. The airport is serviced by major commercial airlines, as well as numerous charter and cargo carriers. A fourth runway opened in 2005, and a 4,300-space parking structure was completed in 2008. In September 2012, Metropolitan Airports Commission (MAC) presented its environmental assessment for the airport's proposed $1.5-billion expansion to support continued passenger growth through 2020. Recent changes include the February 2016 opening of the ten-lane North Security Checkpoint. Approximately $27.5 million has been allocated for the addition of four new gate areas currently being constructed at Terminal 2 to accommodate a projected increase in flights. Furthermore, 50 new retail shops and dining outlets are scheduled to open between mid-year 2016 and the end of 2017, along with additional baggage carousel areas. In the spring of 2016, MAC began site work for the construction of a 5,000-space parking ramp, scheduled to open in 2019. In addition, Graves Hospitality was selected to develop the InterContinental Hotel (connected to Lindbergh Terminal), which is scheduled to open in 2018. Delta Air Lines, which previously flew to four overseas destinations, began flying to Rome in May 2016. Air traffic registered 36,582,854 passengers in 2015. The change in passenger traffic between 2014 and 2015 was 4.1%. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 35

Tourist Attractions Given the rural and somewhat remote location of the subject market, leisure demand generated by tourist attractions does not exist. Limited weekend demand is generated by Southwest Minnesota State University and the Red Baron Arena, and this type of demand should remain in place in the near future. We note that the Red Baron Arena, which opened in 2016, features two ice rinks and approximately 1,500 square feet of meeting space. One of the arenas can be converted to expo space for large meetings and events. RED BARON ARENA Conclusion This section discussed a wide variety of economic indicators for the pertinent market area. Marshall is experiencing a period of economic strength and expansion, primarily led by the manufacturing industry and healthcare and education sectors. Our market interviews and research revealed that Marshall continues to establish itself as the southwestern Minnesota hub for business. The outlook for the market area is positive. Our analysis of the outlook for this specific market also considers the broader context of the national economy. The U.S. economy expanded during the last nine quarters, with the most recent peak being the 2.6% growth realized in the second quarter of 2015. During the following three quarters, the pace of growth slowed, falling to 0.8% during the first quarter of 2016. The economy then expanded by 1.2% in the second quarter of 2016. In recent months, increases in personal Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 36

consumption expenditures (PCE) and exports were the primary factors in the net gain. PCE was up 4.2%, and durable goods spending increased 8.4%. FIGURE 3-9 UNITED STATES GDP GROWTH RATE 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0 1.6 3.9 2.8 2.8 3.2 0.8 4.6 2.3 2.5 1.6 0.1 1.9 1.1-1.3-1.2 2010 2011 2012 2013 2014 2015 2016 3.1 4.0 4.0 5.0 2.3 2.0 2.6 2.0 0.9 0.8 1.2 Source: tradingeconomics.com, Bureau of Economic Analysis U.S. economic growth continues to support expansion of lodging demand; however, as economic growth has slowed in recent quarters, demand growth has not been as robust in 2016 as in the last several years. As will be reflected in the following chapter, nationwide supply growth has now surpassed demand growth, and year-to-date occupancy through August fell 0.1 of a point. Nevertheless, the stability in the U.S. economy is maintaining strong interest in hotel investments by a diverse array of market participants. Market Area Analysis Proposed Courtyard by Marriott Marshall, Minnesota 37

4. Supply and Demand Analysis In the lodging industry, price varies directly, but not proportionately, with demand and inversely, but not proportionately, with supply. 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 toward 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 to set forth a basis for the projection of future supply and demand growth. Definition of Subject Hotel Market National Trends Overview The subject site is located in the greater Southwest Minnesota lodging market. Within this greater market, the proposed subject hotel will compete with a smaller set of hotels based on various factors, such as location and brand affiliation. The subject property s local lodging market is most directly affected by the supply and demand trends within the immediate area. However, individual markets are also influenced by conditions in the national lodging market. We have reviewed national lodging trends to provide a context for the forecast of the supply and demand for the proposed subject hotel s competitive set. STR is an independent research firm that compiles and publishes data on the lodging industry, and this information is routinely used by typical hotel buyers. The following STR diagram presents annual hotel occupancy and average rate data since 1987. The next two tables contain information that is more recent; the data are categorized by geographical region, price point, type of location, and chain scale, and the statistics include 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. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 38

FIGURE 4-1 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS $120 70.0% $100 65.0% $80 $60 $40 $20 60.0% 55.0% 50.0% $0 45.0% 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 RevPAR Average Rate Occupancy Source: STR Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 39

FIGURE 4-2 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS YEAR-TO-DATE DATA Occupancy - Thru August Average Rate - Thru August RevPAR - Thru August 2015 2016 % Change 2015 2016 % Change 2015 2016 % Change United States 67.0 % 66.9 % (0.2) % $120.45 $124.18 3.1 % $80.74 $83.10 2.9 % Region New England 65.3 % 64.8 % (0.8) % $146.21 $150.45 2.9 % $95.48 $97.43 2.0 % Middle Atlantic 67.9 67.6 (0.4) 155.42 156.65 0.8 105.55 105.97 0.4 South Atlantic 68.8 68.9 0.3 118.82 122.22 2.9 81.69 84.24 3.1 East North Central 62.5 62.4 (0.2) 104.95 107.28 2.2 65.60 66.93 2.0 East South Central 62.1 62.9 1.2 90.56 94.74 4.6 56.28 59.56 5.8 West North Central 61.0 60.2 (1.4) 93.47 96.09 2.8 57.02 57.81 1.4 West South Central 64.9 63.0 (2.8) 99.01 99.18 0.2 64.25 62.52 (2.7) Mountain 66.7 67.3 0.9 109.95 114.95 4.6 73.33 77.36 5.5 Pacific 74.8 75.5 0.9 152.30 160.20 5.2 113.96 120.93 6.1 Class Luxury 72.0 % 72.2 % 0.3 % $276.43 $279.75 1.2 % $199.02 $202.07 1.5 % Upper Upscale 74.2 74.1 (0.1) 173.58 177.58 2.3 128.82 131.61 2.2 Upscale 73.9 73.8 (0.2) 135.88 139.79 2.9 100.40 103.13 2.7 Upper Midscale 68.8 68.6 (0.2) 111.61 114.60 2.7 76.79 78.66 2.4 Midscale 61.7 61.3 (0.6) 90.94 93.44 2.8 56.08 57.25 2.1 Economy 60.1 59.8 (0.5) 67.86 70.53 3.9 40.81 42.20 3.4 Location Urban 74.1 % 74.1 % 0.0 % $169.77 $172.99 1.9 % $125.82 $128.20 1.9 % Suburban 68.3 68.3 0.0 102.34 106.37 3.9 69.89 72.66 4.0 Airport 75.4 75.1 (0.4) 110.29 114.49 3.8 83.15 85.94 3.4 Interstate 58.8 57.7 (1.8) 81.73 83.43 2.1 48.06 48.17 0.2 Resort 70.3 70.8 0.7 168.38 172.65 2.5 118.42 122.27 3.3 Small Metro/Town 58.5 58.2 (0.5) 97.84 100.64 2.9 57.23 58.60 2.4 Chain Scale Luxury 76.3 % 75.8 % (0.7) % $313.59 $318.65 1.6 % $239.23 $241.39 0.9 % Upper Upscale 75.8 75.6 (0.2) 174.65 178.68 2.3 132.35 135.07 2.1 Upscale 76.0 75.5 (0.6) 135.03 138.92 2.9 102.61 104.92 2.3 Upper Midscale 69.2 69.0 (0.3) 109.42 112.26 2.6 75.75 77.47 2.3 Midscale 61.2 60.7 (0.8) 84.20 86.33 2.5 51.55 52.42 1.7 Economy 59.7 59.1 (1.0) 59.28 61.36 3.5 35.37 36.24 2.5 Independents 63.5 63.8 0.5 119.32 123.59 3.6 75.73 78.80 4.1 Source: STR - August 2016 Lodging Review Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 40

FIGURE 4-3 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS CALENDAR YEAR DATA Occupancy Average Rate RevPAR 2014 2015 % Change 2014 2015 % Change 2014 2015 % Change United States 64.4 % 65.6 % 1.7 % $114.92 $120.01 4.4 % $74.04 $78.67 6.3 % Region New England 63.5 64.8 % 2.0 % $139.15 $145.84 4.8 % $88.37 $94.48 6.9 % Middle Atlantic 66.9 67.6 1.1 160.87 162.13 0.8 107.58 109.61 1.9 South Atlantic 64.9 66.6 2.6 110.77 116.36 5.0 71.91 77.49 7.8 East North Central 60.5 61.5 1.6 99.68 104.72 5.1 60.34 64.37 6.7 East South Central 59.2 61.1 3.1 85.96 90.62 5.4 50.92 55.34 8.7 West North Central 59.6 59.7 0.2 89.96 93.06 3.4 53.63 55.56 3.6 West South Central 63.9 63.1 (1.3) 96.05 98.21 2.2 61.36 61.94 0.9 Mountain 63.1 65.0 3.0 103.07 108.69 5.5 65.05 70.66 8.6 Pacific 71.4 73.3 2.7 141.90 150.79 6.3 101.32 110.54 9.1 Price Luxury 69.7 % 70.9 % 1.8 % $270.22 $279.21 3.3 % $188.27 $198.01 5.2 % Upper upscale 72.0 72.6 1.0 166.79 173.45 4.0 120.01 125.99 5.0 Upscale 71.5 72.4 1.3 128.61 134.69 4.7 91.92 97.51 6.1 Upper midscale 65.8 67.0 1.9 105.86 110.41 4.3 69.61 73.99 6.3 Midscale 59.0 60.2 2.1 86.44 90.21 4.4 50.97 54.29 6.5 Economy 57.5 58.6 1.9 62.57 65.69 5.0 36.00 38.50 7.0 Location Urban 72.3 % 73.1 % 1.0 % $168.19 $173.95 3.4 % $121.67 $127.13 4.5 % Suburban 65.5 66.8 2.0 96.70 101.77 5.2 63.29 67.96 7.4 Airport 72.4 73.7 1.7 102.69 109.36 6.5 74.40 80.61 8.3 Interstate 56.8 57.4 1.0 78.67 81.11 3.1 44.66 46.52 4.2 Resort 66.1 68.2 3.2 156.21 163.49 4.7 103.32 111.57 8.0 Small Metro/Town 56.4 57.1 1.2 92.65 95.91 3.5 52.27 54.77 4.8 Chain Scale Luxury 75.0 % 75.3 % 0.5 % $304.72 $317.43 4.2 % $228.44 $239.11 4.7 % Upper Upscale 73.6 74.2 0.7 168.45 175.24 4.0 124.04 129.99 4.8 Upscale 73.8 74.3 0.7 127.55 133.79 4.9 94.15 99.46 5.6 Mid-scale w/ F&B 66.4 67.6 1.9 104.45 108.93 4.3 69.32 73.66 6.3 Mid-scale w/o F&B 58.3 59.5 2.1 79.84 83.18 4.2 46.55 49.50 6.3 Economy 57.5 58.3 1.4 56.14 58.97 5.0 32.26 34.37 6.5 Independents 60.7 62.2 2.5 113.21 118.25 4.4 68.70 73.55 7.1 Source: STR - December 2015 Lodging Review Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 41

Following the significant RevPAR decline experienced during the last recession, demand growth resumed in 2010, led by select markets that had recorded growth trends in the fourth quarter of 2009. A return of business travel and some group activity contributed to these positive trends. The resurgence in demand was partly fueled by the significant price discounts that were widely available in the first half of 2010. These discounting policies were largely phased out in the latter half of the year, balancing much of the early rate loss. Demand growth remained strong, but decelerated from 2011 through 2013, increasing at rates of 4.7%, 2.8%, and 2.0%, respectively. Demand growth then surged to 4.0% in 2014, driven by a strong economy, a robust oil and gas sector, and limited new supply, among other factors. By 2014, occupancy had surpassed the 64% mark. Average rate rebounded similarly during this time, bracketing 4.0% annual gains from 2011 through 2014. In 2015, demand growth continued to outpace supply growth, a relationship that has been in place since 2010. With a 2.9% increase in room-nights, the nation's occupancy level reached a record high 65.6% in 2015. Supply growth intensified, but remained at 1.1%, following annual supply growth levels of 0.7% and 0.9% of 2013 and 2014, respectively. Average rate posted another strong year of growth, at 4.4% in 2015, in pace with the annual growth of the last four years. Robust job growth, intensified group and leisure travel, and waning price-sensitivity all contributed to the gains. For year-to-date August 2016, occupancy decreased 0.1 of a point to 66.9%, reflecting that demand growth has not quite kept pace with supply growth. Average rate increased 3.1% year-to-date through August 2016. The net change in RevPAR through August 2016 was 2.9%, reflecting a healthy lodging market overall. Historical Supply and Demand Data As previously noted, STR is an independent research firm that compiles and publishes data on the lodging industry, routinely used by typical hotel buyers. HVS has ordered and analyzed an STR Trend Report of historical supply and demand data for a group of hotels considered applicable to this analysis for the proposed subject hotel. 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. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 42

FIGURE 4-4 HISTORICAL SUPPLY AND DEMAND TRENDS Year Average Daily Room Count Available Room Nights Change Occupied Room Nights Change Occupancy Average Rate Change RevPAR Change 2005 397 144,905 87,314 60.3 % $66.08 $39.82 2006 397 144,905 0.0 % 89,949 3.0 % 62.1 68.93 4.3 % 42.78 7.4 % 2007 397 144,905 0.0 95,545 6.2 65.9 74.66 8.3 49.23 15.1 2008 397 144,905 0.0 91,237 (4.5) 63.0 79.35 6.3 49.96 1.5 2009 477 173,963 20.1 92,618 1.5 53.2 82.22 3.6 43.77 (12.4) 2010 484 176,660 1.6 101,519 9.6 57.5 82.00 (0.3) 47.12 7.7 2011 484 176,660 0.0 110,157 8.5 62.4 86.60 5.6 54.00 14.6 2012 484 176,660 0.0 99,005 (10.1) 56.0 90.04 4.0 50.46 (6.6) 2013 484 176,660 0.0 101,989 3.0 57.7 92.71 3.0 53.52 6.1 2014 534 195,020 10.4 115,216 13.0 59.1 93.60 1.0 55.30 3.3 2015 544 198,560 1.8 114,355 (0.7) 57.6 94.40 0.9 54.37 (1.7) Year-to-Date Through September 2015 544 148,512 90,410 60.9 % $94.39 $57.46 2016 544 148,512 0.0 % 84,361 (6.7) % 56.8 95.86 1.6 % 54.45 (5.2) % Average Annual Compounded Change: 2004-2015 3.2 % 2.7 % 3.6 % 3.2 % 2005-2007 0.0 4.6 6.3 11.2 2007-2010 6.8 % 2.0 % 3.2 % (1.4) % 2010-2015 2.4 2.4 2.9 2.9 Hotels Included in Sample Number of Rooms Ramada Marshall 100 Feb 2010 Jun 1973 Super 8 Marshall 47 Oct 1977 Oct 1977 Quality Inn Marshall 50 Apr 2016 Mar 1990 Fairfield Inn & Suites Brookings 76 Oct 1994 Oct 1994 AmericInn Marshall 62 Nov 1998 Nov 1998 Holiday Inn Express & Suites Brookings 62 Apr 2004 Apr 2004 Hampton Inn Suites Brookings 87 Feb 2009 Feb 2009 Sleep Inn & Suites Marshall 60 Mar 2014 Mar 2014 Total 544 Source: STR Year Affiliated Year Opened Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 43

It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample; furthermore, 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, and 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. The STR data for the competitive set reflect a market-wide occupancy level of 57.6% in 2015, which compares to 59.1% for 2014. The overall average occupancy level for the calendar years presented equates to 58.4%. The STR data for the competitive set reflect a market-wide average rate level of $94.40 in 2015, which compares to $93.60 for 2014. The average across all calendar years presented for average rate equates to $90.02. These occupancy and average rate trends resulted in a RevPAR level of $54.37 in 2015. Average rate first peaked for this selected set of competitive hotels in 2008, resulting in a RevPAR of nearly $60.00, before declining to a low point of roughly $29.00 by year-end 2009 because of the recession. A rapid recovery began in 2010 that extended through 2011, at which time the prior RevPAR peak was exceeded. We note that occupancy levels during 2011 were bolstered following the effects of a destructive tornado, which displaced many local residents and caused a record RevPAR given the high hotel occupancies. Occupancy and RevPAR decreased in 2012 as the demand from the tornado dissipated. Average rate realized continuous growth from 2011 through 2015, while occupancy realized growth from 2013 through 2014; however, the entrance of the new Sleep Inn & Suites in 2014 prompted the occupancy decline in 2015. Year-to-date data illustrate a softening in occupancy, as the new supply becomes absorbed, and a roughly $1.50 gain in average rate, which can be attributed to the higher rates commanded by the Sleep Inn & Suites. RevPAR reached its most recent high point in the summer of 2015. The entrance of new, higher-rated supply and the overall strong economy contributed to the latest trend for 2016. The outlook for the remaining months of 2016 is cautionary given that the new supply is still being absorbed by the market. Seasonality Monthly occupancy and average rate trends are presented in the following tables. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 44

FIGURE 4-5 MONTHLY OCCUPANCY TRENDS Month 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 January 44.1 % 44.9 % 52.5 % 54.4 % 50.4 % 39.6 % 52.0 % 41.6 % 40.4 % 54.6 % 50.3 % 43.7 % February 54.4 55.7 55.8 61.3 46.6 41.7 55.6 54.2 49.5 65.0 57.7 48.6 March 53.1 57.5 60.7 54.0 49.3 50.4 60.3 51.4 49.8 53.8 47.3 44.0 April 58.5 58.5 61.6 67.6 59.2 54.2 58.6 57.7 56.1 56.1 51.3 57.3 May 56.8 59.8 68.6 65.1 54.7 58.4 57.0 58.5 64.5 57.5 63.8 55.1 June 73.1 74.4 79.4 66.6 60.9 64.6 71.0 64.8 70.0 68.3 71.4 61.1 July 70.6 71.9 75.8 72.3 60.2 67.3 81.9 63.6 68.2 70.0 72.0 67.5 August 74.0 72.9 75.8 69.4 59.6 69.2 78.5 65.7 64.3 62.1 64.5 67.1 September 66.5 68.2 72.6 70.1 57.0 64.0 71.9 58.2 64.4 60.7 69.7 66.5 October 68.1 74.3 72.9 74.5 57.8 72.7 68.1 60.6 66.0 63.9 58.3 November 56.0 57.8 63.8 55.4 45.2 60.6 51.9 52.6 57.2 51.1 44.3 December 47.7 48.5 51.3 45.0 37.1 45.9 41.0 43.6 42.1 46.3 40.8 Annual Occupancy 60.3 % 62.1 % 65.9 % 63.0 % 53.2 % 57.5 % 62.4 % 56.0 % 57.7 % 59.1 % 57.6 % Year-to-Date 61.3 % 62.7 % 67.1 % 64.5 % 55.5 % 56.7 % 65.3 % 57.3 % 58.6 % 60.9 % 60.9 % 56.8 % Source: STR FIGURE 4-6 MONTHLY AVERAGE RATE TRENDS Month 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 January $61.87 $65.54 $69.34 $74.88 $80.69 $79.01 $81.15 $87.90 $86.74 $90.43 $91.22 $94.08 February 63.16 66.12 70.58 77.88 80.42 79.22 82.33 88.89 88.99 89.41 90.83 94.97 March 63.48 67.27 70.59 76.04 81.22 81.98 83.07 89.36 93.63 90.88 96.22 91.09 April 66.20 67.02 72.75 76.58 81.15 79.49 84.25 89.14 90.46 93.01 96.58 94.53 May 66.25 68.89 74.46 79.52 83.41 83.07 86.86 89.82 91.50 93.46 93.02 95.45 June 68.09 71.12 76.73 79.31 82.76 83.43 86.80 89.73 91.78 95.03 93.61 96.38 July 69.52 71.75 76.95 82.35 84.45 85.77 90.20 94.62 96.22 95.33 97.72 97.13 August 68.15 70.03 76.68 81.70 81.50 81.70 88.19 91.07 96.22 95.72 95.09 96.99 September 66.08 70.82 76.59 80.50 82.80 81.62 88.92 91.27 94.75 96.47 94.48 99.45 October 66.87 70.16 75.98 80.44 84.33 83.00 90.01 90.86 93.77 95.54 96.50 November 63.87 67.43 75.26 80.65 82.03 81.61 86.94 89.53 92.40 93.04 93.52 December 65.69 67.34 76.78 80.87 79.91 80.81 86.33 85.73 92.27 92.44 92.47 Annual Average Rate $66.08 $68.93 $74.66 $79.35 $82.22 $82.00 $86.60 $90.04 $92.71 $93.60 $94.40 Year-to-Date $66.24 $69.05 $74.26 $78.97 $82.16 $82.01 $86.19 $90.37 $92.64 $93.51 $94.39 $95.86 Source: STR Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 45

The illustrated monthly occupancy and average rates patterns reflect important seasonal characteristics. We have reviewed these trends in developing our forthcoming forecast of market-wide demand and average rate. The competitive market is characterized by a moderate degree of seasonality, which is evident in the monthly occupancy statistics. The strongest occupancy levels are recorded in the summer months, when demand from leisure travelers supplements the commercial segment that is the principal source of demand in this submarket. Average rate levels reflect a similar pattern. Patterns of Demand A review of the trends in occupancy and average rate by day of the week provides some insight into the impact that the current economic conditions have had on the competitive lodging market. The data, as provided by STR, are illustrated in the following table(s). Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 46

FIGURE 4-7 OCCUPANCY BY DAY OF WEEK (TRAILING 12 MONTHS) Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Oct - 15 25.9 % 61.2 % 72.7 % 67.2 % 51.8 % 62.3 % 65.8 % 58.3 % Nov - 15 20.6 48.5 47.9 48.4 43.4 53.4 52.4 44.3 Dec - 15 20.5 41.0 45.4 42.6 36.2 49.3 50.5 40.8 Jan - 16 17.2 46.2 57.6 54.9 40.7 48.2 46.3 43.7 Feb - 16 25.3 43.8 58.6 54.3 46.8 56.4 56.3 48.6 Mar - 16 18.6 49.9 53.2 52.2 40.8 42.3 47.4 44.0 Apr - 16 34.1 65.0 64.5 63.2 57.8 55.4 60.9 57.3 May - 16 27.5 54.0 66.4 68.5 50.6 61.2 62.0 55.1 Jun - 16 40.7 68.1 73.5 64.5 51.2 58.1 73.1 61.1 Jul - 16 42.2 68.1 76.1 77.6 57.2 71.4 81.4 67.5 Aug - 16 38.4 70.3 76.6 77.5 63.9 61.6 75.4 67.1 Sep - 16 30.9 59.7 75.3 74.0 65.7 75.5 82.2 66.5 Average 28.4 % 56.2 % 63.7 % 61.9 % 50.4 % 58.4 % 62.9 % 54.5 % Source: STR FIGURE 4-8 AVERAGE RATE BY DAY OF WEEK (TRAILING 12 MONTHS) Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Oct - 15 $89.42 $91.97 $92.00 $92.45 $92.63 $101.42 $107.79 $96.50 Nov - 15 90.28 89.63 93.55 93.42 90.76 97.32 98.08 93.52 Dec - 15 88.29 89.46 90.66 87.19 89.07 97.81 102.07 92.47 Jan - 16 89.62 89.70 92.04 92.36 92.54 98.24 99.63 94.08 Feb - 16 89.80 92.57 91.96 94.38 95.32 98.75 99.22 94.97 Mar - 16 86.44 88.48 89.09 90.30 87.82 97.93 96.97 91.09 Apr - 16 100.88 94.39 90.30 89.18 92.62 98.15 97.95 94.53 May - 16 91.65 91.73 91.89 91.02 91.45 105.81 104.29 95.45 Jun - 16 93.37 93.83 95.69 94.88 93.98 99.27 102.57 96.38 Jul - 16 91.09 91.85 91.47 91.77 92.70 105.69 107.11 97.13 Aug - 16 94.36 95.00 94.31 95.02 96.35 101.60 103.34 96.99 Sep - 16 93.89 92.97 95.74 95.85 96.80 105.40 108.70 99.45 Average $92.14 $92.10 $92.51 $92.52 $92.99 $101.16 $102.97 $95.54 Source: STR Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 47

FIGURE 4-9 OCCUPANCY, AVERAGE RATE, AND REVPAR BY DAY OF WEEK (MULTIPLE YEARS) Occupancy (%) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year Oct 13 - Sep 14 33.2 % 61.9 % 69.8 % 66.3 % 55.0 % 62.9 % 67.3 % 59.5 % Oct 14 - Sep 15 33.0 60.4 68.1 64.8 55.5 62.4 69.3 59.1 Oct 15 - Sep 16 28.4 56.2 63.7 61.9 50.4 58.4 62.9 54.5 Change (Occupancy Points) FY 14 - FY 15-0.2-1.5-1.8-1.4 0.4-0.5 2.0-0.4 FY 15 - FY 16-4.6-4.2-4.3-3.0-5.1-4.0-6.4-4.6 ADR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year Oct 13 - Sep 14 $88.29 $89.77 $90.15 $89.93 $90.30 $100.33 $102.09 $93.39 Oct 14 - Sep 15 88.02 89.67 90.75 90.51 90.53 102.23 104.13 94.27 Oct 15 - Sep 16 92.14 92.10 92.51 92.52 92.99 101.16 102.97 95.54 Change (Dollars) FY 14 - FY 15 -$0.26 -$0.10 $0.60 $0.58 $0.23 $1.90 $2.04 $0.88 FY 15 - FY 16 4.12 2.42 1.76 2.02 2.47-1.06-1.16 1.27 Change (Percent) FY 14 - FY 15-0.3 % -0.1 % 0.7 % 0.6 % 0.3 % 1.9 % 2.0 % 0.9 % FY 15 - FY 16 4.7 2.7 1.9 2.2 2.7-1.0-1.1 1.4 RevPAR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year Oct 13 - Sep 14 $29.35 $55.59 $62.96 $59.60 $49.70 $63.14 $68.73 $55.60 Oct 14 - Sep 15 29.07 54.18 61.77 58.69 50.22 63.78 72.20 55.71 Oct 15 - Sep 16 26.15 51.75 58.95 57.26 46.85 59.05 64.77 52.12 Change (Dollars) FY 14 - FY 15 -$0.28 -$1.41 -$1.19 -$0.91 $0.53 $0.63 $3.47 $0.11 FY 15 - FY 16-2.92-2.44-2.82-1.42-3.37-4.73-7.43-3.59 Change (Percent) FY 14 - FY 15-1.0 % -2.5 % -1.9 % -1.5 % 1.1 % 1.0 % 5.1 % 0.2 % FY 15 - FY 16-10.1-4.5-4.6-2.4-6.7-7.4-10.3-6.5 Source: STR In most markets, business travel, including individual commercial travelers and corporate groups, is the predominant source of demand on Monday through Thursday nights. Leisure travelers and non-business-related groups generate a majority of demand on Friday and Saturday nights. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 48

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 hotel. If applicable, additional lodging facilities may be judged only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primary competitive supply, they are expected to compete with the proposed subject hotel 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, online resources, and our in-house database of operating and hotel facility data. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 49

FIGURE 4-10 PRIMARY COMPETITORS OPERATING PERFORMANCE Est. Segmentation Estimated 2014 Estimated 2015 Property Number of Rooms Weighted Annual Room Count Occ. Average Rate RevPAR Weighted Annual Room Count Occ. Average Rate RevPAR Commercial Leisure Group Occupancy Penetration Yield Penetration Sleep Inn & Suites Marshall 60 75 % 15 % 10 % 50 55-60 % $95 - $100 $50 - $55 60 55-60 % $100 - $105 $60 - $65 100-110 % 110-120 % AmericInn Marshall 62 60 20 20 62 55-60 85-90 50-55 62 55-60 90-95 50-55 100-110 100-110 Ramada Marshall 100 50 25 25 100 50-55 75-80 35-40 100 45-50 70-75 30-35 80-85 65-70 Quality Inn Marshall 50 60 25 15 50 55-60 85-90 50-55 50 55-60 80-85 45-50 95-100 90-95 Super 8 Marshall 47 60 30 10 47 50-55 65-70 35-40 47 50-55 60-65 30-35 85-90 60-65 Sub-Totals/Averages 319 60 % 23 % 17 % 309 55.7 % $82.09 $45.72 319 53.4 % $82.22 $43.90 94.9 % 86.6 % Secondary Competitors 225 64 % 23 % 13 % 113 63.9 % $107.44 $68.70 113 64.3 % $108.84 $70.01 114.4 % 138.1 % Totals/Averages 544 61 % 23 % 16 % 422 57.9 % $89.56 $51.85 432 56.2 % $90.16 $50.70 100.0 % 100.0 % * Specific occupancy and average rate data was utilized in our analysis, but is presented in ranges in the above table for the purposes of confidentiality. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 50

The following map illustrates the locations of the subject property and its future competitors. 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. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 51

PRIMARY COMPETITOR #1 - SLEEP INN & SUITES MARSHALL Sleep Inn & Suites Marshall 1300 Nwakama Street Marshall, MA FIGURE 4-11 ESTIMATED HISTORICAL OPERATING STATISTICS Year Wtd. Annual Room Count Occupancy Average Rate RevPAR Occupancy Penetration Yield Penetration Est. 2014 50 55-60 95-100 50-55 95-100 100-110 Est. 2015 60 55-60 100-105 60-65 100-110 110-120 The Sleep Inn & Suites Marshall is owned by Sleep Inn Marshall LLC and is operated by Lighthouse Hospitality Group. Facilities and amenities include a breakfast dining area (offering a complimentary breakfast), an indoor pool and whirlpool, a fitness room, a guest laundry room, and approximately 400 square feet of meeting space. The hotel has not undergone any renovations since its opening in 2014. This hotel benefits from being the newest hotel in the market. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Courtyard by Marriott. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 52

PRIMARY COMPETITOR #2 - AMERICINN MARSHALL AmericInn Marshall 1406 East Lyon Street Marshall, MN FIGURE 4-12 ESTIMATED HISTORICAL OPERATING STATISTICS Year Wtd. Annual Room Count Occupancy Average Rate RevPAR Occupancy Penetration Yield Penetration Est. 2013 62 55-60 % $85 - $90 $45 - $50 100-110 % 95-100 % Est. 2014 62 55-60 85-90 50-55 100-110 100-110 Est. 2015 62 55-60 90-95 50-55 100-110 100-110 The AmericInn Marshall is owned and operated by Lyon Hotel LLC. Facilities and amenities include a breakfast dining area (offering a complimentary breakfast), an indoor pool and whirlpool, a fitness room, a business center, a guest laundry room, and 1,512 square feet of meeting space. The hotel, which opened in 1998, has reportedly not undergone any recent renovations. This hotel is somewhat disadvantaged by its dated guestroom product. Overall, the property appeared to be in good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Courtyard by Marriott. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 53

PRIMARY COMPETITOR #3 - RAMADA MARSHALL Ramada Marshall 1500 East College Drive Marshall, MN FIGURE 4-13 ESTIMATED HISTORICAL OPERATING STATISTICS Year Wtd. Annual Room Count Occupancy Average Rate RevPAR Occupancy Penetration Yield Penetration Est. 2013 100 45-50 % $75 - $80 $35 - $40 85-90 % 75-80 % Est. 2014 100 50-55 75-80 35-40 85-90 70-75 Est. 2015 100 45-50 70-75 30-35 80-85 65-70 The Ramada Marshall is owned and operated by Bingo LLC. Facilities and amenities include Shay's (restaurant and lounge), a breakfast dining area (offering a complimentary breakfast), an indoor pool, a fitness room, a business center, a guest laundry room, and approximately 3,000 square feet of meeting space. The hotel, which opened in 1973, was reportedly updated with new guestroom softgoods in 2016. This hotel is somewhat disadvantaged by its dated appearance and lack of major renovations. Overall, the property appeared to be in fair condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Courtyard by Marriott. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 54

PRIMARY COMPETITOR #4 - QUALITY INN MARSHALL Quality Inn Marshall 1511 East College Drive Marshall, MN FIGURE 4-14 ESTIMATED HISTORICAL OPERATING STATISTICS Year Wtd. Annual Room Count Occupancy Average Rate RevPAR Occupancy Penetration Yield Penetration Est. 2013 50 55-60 % $85 - $90 $50 - $55 100-110 % 100-110 % Est. 2014 50 55-60 85-90 50-55 100-110 100-110 Est. 2015 50 55-60 80-85 45-50 95-100 90-95 The Quality Inn Marshall is owned and operated by Shei Gayatel LLC. Facilities and amenities include a breakfast dining area (offering a complimentary breakfast), an indoor pool and whirlpool, and a business center. The hotel, which opened in 1990, was renovated in 2016 during the hotel's conversion from the Comfort Inn brand affiliation to the Quality Inn; upgrades included new carpeting, light fixtures, and select softgoods. This hotel benefits from the recent updates; however, it is somewhat disadvantaged by its limited offering of amenities. Overall, the property appeared to be in good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Courtyard by Marriott. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 55

PRIMARY COMPETITOR #5 - SUPER 8 MARSHALL Super 8 Marshall 1106 East Main Street Marshall, MN FIGURE 4-15 ESTIMATED HISTORICAL OPERATING STATISTICS Year Wtd. Annual Room Count Occupancy Average Rate RevPAR Occupancy Penetration Yield Penetration Est. 2013 47 50-55 % $65 - $70 $35 - $40 90-95 % 70-75 % Est. 2014 47 50-55 65-70 35-40 90-95 65-70 Est. 2015 47 50-55 60-65 30-35 85-90 60-65 The Super 8 Marshall is owned and operated by Rahi Hotel Management LLC. Aside from the guestrooms, the hotel provides a breakfast dining area (offering a complimentary breakfast). The hotel, which opened in 1977, has reportedly not undergone any recent renovations. This hotel is somewhat disadvantaged by its limited amenities and its dated facilities and exterior. Overall, the property appeared to be in fair condition. Its accessibility is similar to the accessibility attributes of the subject site, while its visibility is similar to the expected visibility of the Proposed Courtyard by Marriott. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 56

Secondary Competitors We have also reviewed other area lodging facilities to determine whether any may compete with the proposed subject hotel 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 hotel. By assigning degrees of competitiveness, we can assess how the proposed subject hotel and its future 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 competitors. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 57

FIGURE 4-16 SECONDARY COMPETITOR(S) OPERATING PERFORMANCE Est. Segmentation Estimated 2014 Estimated 2015 Property Hampton Inn & Suites Brookings Fairfield Inn by Marriott Brookings Holiday Inn Express & Suites Brookings Number of Rooms Total Competitive Level Weighted Annual Room Count Occ. Average Rate RevPAR Weighted Annual Room Count Occ. Average Rate RevPAR Commercial Leisure Group 87 65 % 20 % 15 % 50 % 44 60-65 % $105 - $110 $65 - $70 44 60-65 % $110 - $115 $70 - $75 76 65 25 10 50 38 60-65 105-110 65-70 38 60-65 105-110 65-70 62 60 25 15 50 31 60-65 105-110 65-70 31 60-65 105-110 70-75 Totals/Averages 225 64 % 23 % 13 % 50 % 113 63.9 % $107.44 $68.70 113 64.3 % $108.84 $70.01 * Specific occupancy and average rate data was utilized in our analysis, but is presented in ranges in the above table for the purposes of confidentiality. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 58

We have included three additional hotels in our competitive set. The Fairfield Inn & Suites by Marriott, Holiday Inn Express Hotel & Suites, and Hampton by Hilton offer strong brand affiliations and upscale facilities and amenities. However, these hotels are located approximately 45 miles southwest of Marshall in Brookings, South Dakota. These hotels do not compete for demand within the Marshall area but were included in the trend in order to show similar, regional comps. These hotels provide a basis for other higher-end hotels in the region. Supply Changes It is important to consider any new hotels that may have an impact on the proposed subject hotel s operating performance. According to the economic development officials, no new supply (other than the proposed subject property) is anticipated at this time. 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 of the proposed subject hotel may be 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 DEMAND We have identified various properties that are expected to be competitive to some degree with the proposed subject hotel. We have also investigated potential increases in competitive supply in this Marshall submarket. The Proposed Courtyard by Marriott 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. 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. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 59

FIGURE 4-17 HISTORICAL MARKET TRENDS Year Accommodated Room Nights % Change Room Nights Available % Change Market Occupancy Market ADR % Change Market RevPAR % Change Est. 2013 76,544 135,598 56.4 % $88.30 $49.85 Est. 2014 89,126 16.4 % 153,958 13.5 % 57.9 89.56 1.4 % 51.85 4.0 % Est. 2015 88,576 (0.6) 157,498 2.3 56.2 90.16 0.7 50.70 (2.2) Avg. Annual Compounded Chg., Est. 2013-Est. 2015: 7.6 % 7.8 % 1.0 % 0.9 % Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 2015 distribution of accommodated-room-night demand as follows. FIGURE 4-18 ACCOMMODATED ROOM-NIGHT DEMAND Market Segment Marketwide Accommodated Demand Percentage of Total Commercial 54,354 61 % Leisure 20,107 23 Group 14,116 16 Total 88,576 100 % The market s demand mix comprises commercial demand, with this segment representing roughly 61% of the accommodated room nights in this Marshall submarket. The remaining portion comprises leisure at 23%, with the final portion group 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 Commercial demand consists mainly of individual businesspeople passing through the subject market or visiting area businesses, in addition to high-volume corporate accounts generated by local firms. Brand loyalty (particularly frequenttraveler programs), as well as location and convenience with respect to businesses and amenities, influence lodging choices in this segment. Companies typically Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 60

designate hotels as preferred accommodations in return for more favorable rates, which are discounted in proportion to the number of room nights produced by a commercial client. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday night. It is relatively constant throughout the year, with marginal declines in late December and during other holiday periods. Primary commercial demand generators for this market include major corporate offices in the area, such as The Schwan Food Company, Runnings, and U.S. Bank Corp.Primary commercial demand generators for this market include major corporate offices in the area, such as The Schwan Food Company, Runnings, and U.S. Bank Corp. Leisure Segment Group Segment Leisure demand consists of individuals and families spending time in an area or passing through en route to other destinations. Travel purposes include sightseeing, recreation, or visiting friends and relatives. Leisure demand also includes room nights booked through Internet sites such as Expedia, Hotels.com, and Priceline; however, leisure may not be the purpose of the stay. This demand may also include business travelers and group and convention attendees who use these channels to take advantage of any discounts that may be available on these sites. Leisure demand is strongest Friday and Saturday nights, and all week during holiday periods and the summer months. These peak periods represent the inverse of commercial visitation trends, underscoring the stabilizing effect of capturing weekend and summer tourist travel. 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 correlate strongly with leisure travel levels. Leisure demand for this rural market is primarily generated by travelers visiting Southwest Minnesota State University, pheasant hunters during hunting season, and by those visiting friends and family in the area.leisure demand for this rural market is primarily generated by travelers visiting Southwest Minnesota State University, pheasant hunters during hunting season, and by those visiting friends and family in the area. In the limited-service sector, group demand is most commonly generated by groups that require ten or more room nights, but need little to no meeting space within the hotel. Examples of these groups include family reunions, sports teams, and bus tours. In some markets, limited-service hotels may also accommodate demand from groups or individuals attending events at the local convention center or at one of the larger convention hotels in the area. Training groups from nearby companies, such as The Schwan Food Company and U.S. Bank Corp., generate group demand for local hotels; furthermore, social groups, sports teams, and groups from Southwest Minnesota State University represent primary sources of demand during weekend and holiday periods.training groups from nearby companies, such as The Schwan Food Company and U.S. Bank Corp., generate Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 61

group demand for local hotels; furthermore, social groups, sports teams, and groups from Southwest Minnesota State University represent primary sources of demand during weekend and holiday periods. Base Demand Growth Rates 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 property s 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. FIGURE 4-19 AVERAGE ANNUAL COMPOUNDED MARKET SEGMENT GROWTH RATES Market Segment Annual Growth Rate 2016 2017 2018 2019 2020 2021 Commercial -5.0 % 2.5 % 5.0 % 5.0 % 2.0 % 0.0 % Leisure -3.0 2.0 3.0 3.0 1.5 0.0 Group -3.0 1.5 2.5 3.0 1.0 0.0 Base Demand Growth -4.2 % 2.2 % 4.1 % 4.2 % 1.7 % 0.0 % Latent Demand Unaccommodated Demand A table presented earlier in this section illustrated the accommodated-room-night demand in the subject property s 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, further classified as either unaccommodated demand or induced demand. Unaccommodated demand refers to individuals who are unable to secure 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 may sell out certain Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 62

FIGURE 4-20 OCCUPANCY BY NIGHT OF THE WEEK nights during the year. To evaluate the incidence of unaccommodated demand in the market, we have reviewed the average occupancy by the night of the week for the past twelve months for the competitive set, as reflected in the STR data. This is set forth in the following table. Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Oct - 15 25.9 % 61.2 % 72.7 % 67.2 % 51.8 % 62.3 % 65.8 % 58.3 % Nov - 15 20.6 48.5 47.9 48.4 43.4 53.4 52.4 44.3 Dec - 15 20.5 41.0 45.4 42.6 36.2 49.3 50.5 40.8 Jan - 16 17.2 46.2 57.6 54.9 40.7 48.2 46.3 43.7 Feb - 16 25.3 43.8 58.6 54.3 46.8 56.4 56.3 48.6 Mar - 16 18.6 49.9 53.2 52.2 40.8 42.3 47.4 44.0 Apr - 16 34.1 65.0 64.5 63.2 57.8 55.4 60.9 57.3 May - 16 27.5 54.0 66.4 68.5 50.6 61.2 62.0 55.1 Jun - 16 40.7 68.1 73.5 64.5 51.2 58.1 73.1 61.1 Jul - 16 42.2 68.1 76.1 77.6 57.2 71.4 81.4 67.5 Aug - 16 38.4 70.3 76.6 77.5 63.9 61.6 75.4 67.1 Sep - 16 30.9 59.7 75.3 74.0 65.7 75.5 82.2 66.5 Average 28.4 % 56.2 % 63.7 % 61.9 % 50.4 % 58.4 % 62.9 % 54.5 % Source: STR The following table presents our estimate of unaccommodated demand in the subject market. FIGURE 4-21 UNACCOMMODATED DEMAND ESTIMATE Market Segment Accommodated Room Night Demand Unaccommodated Demand Percentage Unaccommodated Room Night Demand Commercial 54,354 0.3 % 166 Leisure 20,107 0.1 21 Group 14,116 0.1 15 Total 88,576 0.2 % 202 Accordingly, we have forecast unaccommodated demand equivalent to 0.2% of the base-year demand, resulting from our analysis of monthly and weekly peak demand and sell-out trends. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 63

Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can result in induced demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. For the purposes of this market study, we have assumed that the proposed 16,000-square-foot conference center will create induced demand to the proposed hotel, as well as the market. We note that this study is reliant on the opening of this conference center in order for the proposed subject property to achieve the projections in this report. FIGURE 4-22 INDUCED DEMAND CALCULATION The following table summarizes our estimate of induced demand. Market Segment Induced Room Nights 2016 2017 2018 2019 2020 2021 Commercial 0 0 1,200 3,000 3,000 3,000 Leisure 0 0 300 960 1,200 1,200 Group 0 0 840 2,688 3,360 3,360 Total 0 0 2,340 6,648 7,560 7,560 Accordingly, we have incorporated 8,000 room nights (rounded) into our analysis, phased in over an appropriate ramp-up period. Accommodated Demand and Marketwide Occupancy Based upon a review of the market dynamics in the subject property s competitive environment, we have forecast growth rates for each market 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, including the total number of occupied room nights and any residual unaccommodated demand in the market. Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 64

FIGURE 4-23 FORECAST OF MARKET OCCUPANCY 2016 2017 2018 2019 2020 2021 Commercial Base Demand 51,637 52,927 55,574 58,353 59,520 59,520 Unaccommodated Demand 158 161 170 178 182 182 Induced Demand 0 0 1,200 3,000 3,000 3,000 Total Demand 51,794 53,089 56,943 61,531 62,701 62,701 Growth Rate (4.7) % 2.5 % 7.3 % 8.1 % 1.9 % 0.0 % Leisure Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Group Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate 19,503 19,893 20,490 21,105 21,422 21,422 21 21 22 22 23 23 0 0 300 960 1,200 1,200 19,524 19,915 20,812 22,087 22,644 22,644 (2.9) % 2.0 % 4.5 % 6.1 % 2.5 % 0.0 % 13,692 13,897 14,245 14,672 14,819 14,819 15 15 15 16 16 16 0 0 840 2,688 3,360 3,360 13,707 13,912 15,100 17,376 18,195 18,195 (2.9) % 1.5 % 8.5 % 15.1 % 4.7 % 0.0 % Totals Base Demand 84,832 86,718 90,309 94,130 95,760 95,760 Unaccommodated Demand 193 197 206 216 220 220 Induced Demand 0 0 2,340 6,648 7,560 7,560 Total Demand 85,025 86,916 92,855 100,994 103,540 103,540 less: Residual Demand 193 197 102 0 0 0 Total Accommodated Demand 84,832 86,718 92,753 100,994 103,540 103,540 Overall Demand Growth (4.2) % 2.2 % 7.0 % 8.9 % 2.5 % 0.0 % Market Mix Commercial Leisure Group Existing Hotel Supply Proposed Hotels 60.9 % 61.1 % 61.3 % 60.9 % 60.6 % 60.6 % 23.0 22.9 22.4 21.9 21.9 21.9 16.1 16.0 16.3 17.2 17.6 17.6 432 432 432 432 432 432 Proposed Courtyard by Marriott ¹ 52 104 104 104 Available Room Nights per Year 157,498 157,498 176,634 195,458 195,458 195,458 Nights per Year 365 365 365 365 365 365 Total Supply 432 432 484 536 536 536 Rooms Supply Growth 0.0 % 0.0 % 12.2 % 10.7 % 0.0 % 0.0 % Marketwide Occupancy 53.9 % 55.1 % 52.5 % 51.7 % 53.0 % 53.0 % ¹ Opening in July 2018 of the 100% competitive, 104-room Proposed Courtyard by Marriott Supply and Demand Analysis Proposed Courtyard by Marriott Marshall, Minnesota 65

5. Description of the Proposed Improvements 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 investigates 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 Courtyard by Marriott is anticipated to be a select-service lodging facility containing 104 rentable units. The Four-story property is anticipated to open on July 1, 2018. The proposed hotel is anticipated to be developed as a part of a larger development, encompassing the recently constructed Red Baron Arena and a proposed conference center. The proposed conference center is expected to feature approximately 16,000 square feet of meeting space and should be marketed with the Red Baron Arena, allowing conventions to use the arena as additional expo space. We have assumed that the Red Baron Arena operator would also operate the conference center. The proposed subject hotel is also anticipated to feature a minimal amount of meeting space per the brand requirements. The Courtyard by Marriott concept was developed by Marriott in 1985 to target business travelers. Courtyard by Marriott is a mid-rate, select-service product, commonly considered to be one of the strongest mid-rate products in the lodging industry. Each Courtyard by Marriott contains a restaurant/lounge (for either grab-and-go snacks or sit-down meals), a business center, a market pantry, a fitness room, a swimming pool, and meeting space. Main competitors of the Courtyard by Marriott brand include Hilton Garden Inn, Starwood's Four Points by Sheraton, Wingate by Wyndham, Hampton Inn & Suites, La Quinta Inn & Suites, and Hyatt Place, among others. As of year-end 2015, there were 891 Courtyard by Marriott properties (124,630 rooms) in operation across North America. In 2015, the brand's North American hotels achieved an average occupancy level of 73.1%, an average daily rate of $136.58, and an average RevPAR of $99.88. Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 66

TYPICAL COURTYARD BY MARRIOTT EXTERIOR Summary of the Facilities Based on information provided by the proposed subject hotel s development representatives, the following table summarizes the facilities that are expected to be available at the proposed subject hotel. We note that given the select-service product type of the Courtyard by Marriott, the facilities and amenities of the proposed subject property are anticipated to be superior to the current hotels located in Marshall. Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 67

FIGURE 5-1 PROPOSED FACILITIES SUMMARY Guestroom Configuration Guestrooms Number of Units TBD Food & Beverage Facilities The Bistro Indoor Meeting & Banquet Facilities Meeting Space Seating Capacity TBD Square Footage TBD Amenities & Services Indoor Swimming Pool Fitness Room Lobby Workstation Market Pantry Guest Laundry Area Infrastructure Parking Spaces Elevators Life-Safety Systems Construction Details TBD TBD Sprinklers, Smoke Detectors TBD Site Improvements and Hotel Structure Planned Facilities The proposed hotel is anticipated to comprise one three-story building. Surface parking should be located around the building. Other site improvements are anticipated to include freestanding signage, located at the main entrance to the site, as well as landscaping and sidewalks. Additional signage is expected to be placed on the exterior of the building. The hotel's main entrance should lead directly into the lobby, and the first (ground) floor should house the public areas and the back-of-the-house space. Guestrooms should located on the first through third floors. The site and building components are expected to be normal for a hotel of this type and should meet the standards for this rural market. The Bistro should be located opposite the front desk in the lobby. Its size and layout should be appropriate for the hotel. The furnishings of the space are expected to be of a similar style and finish as lobby and guestroom furnishings. The hotel is anticipated to offer one meeting room, which should be located on the first floor. This meeting space should be adequate and appropriate for a hotel of this type. The hotel should offer an indoor pool and a fitness room as recreational facilities. Other amenities are likely to include a two-computer lobby workstation, a market pantry, and a guest laundry facility. Overall, the supporting facilities Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 68

should be appropriate for a hotel of this type, and we assume that they will meet brand standards. TYPICAL COURTYARD BY MARRIOTT DINING AREA Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 69

TYPICAL COURTYARD BY MARRIOTT FITNESS ROOM Guestrooms The hotel is expected to feature standard and suite-style room configurations, with guestrooms present on all levels of the property's proposed single building. The standard guestrooms should offer typical amenities for this product type, while the suites are expected to feature a larger living area and additional amenities such as a microwave and small refrigerator. The guestroom bathrooms are anticipated to be of a standard size, with a shower-in-tub, commode, and single sink with vanity area, featuring a stone countertop. The floors are expected to be finished with tile, and the walls will likely be finished with knockdown texture (consistent with brand standards). Overall, the guestrooms should offer a superior product for this rural neighborhood. Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 70

TYPICAL COURTYARD BY MARRIOTT GUESTROOM TYPICAL COURTYARD BY MARRIOTT GUESTROOM LIVING Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 71

Back-of-the-House, ADA, and Environmental The hotel is anticipated to be served by the necessary back-of-the-house space, including an in-house laundry facility, administrative offices, and a kitchen to service the needs of The Bistro. 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 should 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 Conclusion 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 and to remain compliant with brand standards. 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. Overall, the proposed subject hotel 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 stipulated 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 premarketing efforts will have introduced the product to major local accounts at least six months in advance of the opening date. Description of the Proposed Improvements Proposed Courtyard by Marriott Marshall, Minnesota 72

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, other operated departments, and rentals and other income) are driven by the number of guests, and many expense levels 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 Analysis Historical Penetration Rates by Market Segment The subject property's forecasted market share and occupancy levels are 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. In the following table, the penetration rates attained by the primary competitors and the aggregate secondary competitors are set forth for each segment for the base year. FIGURE 6-1 HISTORICAL PENETRATION RATES Property Commercial Leisure Group Overall Sleep Inn & Suites Marshall 130 % 70 % 67 % 107 % AmericInn Marshall 99 89 127 101 Ramada Marshall 68 92 131 84 Quality Inn Marshall 97 110 94 100 Super 8 Marshall 89 120 57 91 Secondary Competition 119 116 96 114 Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 73

The Sleep Inn & Suites Marshall achieved the highest penetration rate within the commercial segment. The highest penetration rate in the leisure segment was achieved by the Super 8 Marshall, while the Ramada Marshall led the market with the highest group penetration rate. Forecast of Subject Property s Occupancy Because the supply and demand balance for the competitive market is dynamic, there is a circular relationship between the penetration factors of 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 hotel s penetration factor is calculated as its achieved market share of demand divided by its fair share of demand. Thus, if one hotel s 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. The proposed subject hotel's occupancy forecast is set forth as follows, with the adjusted projected penetration rates used as a basis for calculating the amount of captured market demand. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 74

FIGURE 6-2 FORECAST OF SUBJECT PROPERTY'S OCCUPANCY Market Segment 2018 2019 2020 2021 Commercial Demand 56,859 61,531 62,701 62,701 Market Share 13.0 % 23.8 % 24.5 % 24.5 % Capture 7,385 14,667 15,380 15,380 Penetration 120 % 123 % 126 % 126 % Leisure Demand 20,801 22,087 22,644 22,644 Market Share 8.8 % 19.4 % 20.1 % 20.1 % Capture 1,837 4,278 4,561 4,561 Penetration 82 % 100 % 104 % 104 % Group Demand 15,093 17,376 18,195 18,195 Market Share 15.4 % 29.0 % 29.6 % 29.6 % Capture 2,320 5,038 5,384 5,384 Penetration 142 % 149 % 152 % 152 % Total Room Nights Captured 11,542 23,982 25,325 25,325 Available Room Nights 19,136 37,960 37,960 37,960 Subject Occupancy 60 % 63 % 67 % 67 % Marketwide Available Room Nights 176,634 195,458 195,458 195,458 Fair Share 11 % 19 % 19 % 19 % Marketwide Occupied Room Nights 92,753 100,994 103,540 103,540 Market Share 12 % 24 % 24 % 24 % Marketwide Occupancy 53 % 52 % 53 % 53 % Total Penetration 115 % 122 % 126 % 126 % Within the commercial segment, the proposed subject hotel s occupancy penetration is positioned above the market-average level, supported by the proposed hotel's upscale amenities and select-service product. Within the leisure segment, the proposed subject hotel's occupancy penetration is positioned appropriately within the range of existing competitors, largely attributed to the hotel's proposed location adjacent to the Red Baron Arena. The proposed subject hotel's occupancy penetration in the group segment is positioned above the market-average level given the proposed hotel's proximity to the proposed conference center, to be located near the Red Baron Arena. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 75

These positioned segment penetration rates result in the following market segmentation forecast. FIGURE 6-3 MARKET SEGMENTATION FORECAST SUBJECT PROPERTY 2018 2019 2020 2021 Commercial 64 % 61 % 61 % 61 % Leisure 16 18 18 18 Group 20 21 21 21 Total 100 % 100 % 100 % 100 % Based on our analysis of the proposed subject hotel and market area, we have selected 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 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 and temporary economic downturns to force the occupancy below this selected point of stability. Average Rate Analysis Competitive Position 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. 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 subject property s future primary competitors. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 76

FIGURE 6-4 BASE-YEAR AVERAGE RATE AND REVPAR OF THE COMPETITORS Property Estimated 2015 Average Room Rate Average Room Rate Penetration Rooms Revenue Per Available Room (RevPAR) RevPAR Penetration Sleep Inn & Suites Marshall $100 - $105 110-120 % $60 - $65 110-120 % AmericInn Marshall 90-95 95-100 50-55 100-110 Ramada Marshall 70-75 75-80 30-35 65-70 Quality Inn Marshall 80-85 90-95 45-50 90-95 Super 8 Marshall 60-65 65-70 30-35 60-65 Average - Primary Competitors $82.22 91.2 % $43.90 86.6 % Average - Secondary Competitors 108.84 120.7 70.01 138.1 Overall Average $90.16 $50.70 The defined primarily competitive market realized an overall average rate of $82.22 in the 2015 base year, improving from the 2014 level of $82.09. We have selected the rate position of $116.00, in base-year dollars, for the proposed subject. Based on these considerations, the following table illustrates the projected average rate and the growth rates assumed. As a context for the average rate growth factors, note that we have applied underlying inflation rates of 2.0%, 2.5%, and 3.0% thereafter for each respective year following the base year of 2015. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 77

FIGURE 6-5 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST Area-wide Market (Calendar Year) Subject Property (Calendar Year) Year Occupancy Average Rate Growth Average Rate Occupancy Average Rate Growth Average Rate Average Rate Penetration Base Year 56.2 % $90.16 $116.00 128.7 % 2016 53.9 1.5 % 91.51 1.5 % 117.74 128.7 2017 55.1 2.5 93.80 2.5 120.68 128.7 2018 52.5 3.0 96.61 60.0 % 3.0 124.30 128.7 2019 51.7 3.0 99.51 63.0 3.0 128.03 128.7 2020 53.0 3.0 102.50 67.0 3.0 131.87 128.7 2021 53.0 3.0 105.57 67.0 3.0 135.83 128.7 As illustrated above, a 1.5% rate of change is expected for the proposed subject hotel's positioned 2015 room rate in 2016. This is followed by growth rates of 2.5% and 3.0% in 2017 and 2018, respectively. The Marshall market should experience rate growth through the near term. The proposed subject hotel's rate position should reflect growth superior to market trends because of the proposed hotel's new facility, strong brand affiliation, and select-service product. The proposed subject hotel s penetration rate is forecast to reach 128.7% by the stabilized period. The following table provides a comparison of the historical performance and forecasts for the competitive set, as well as the forecasts for the proposed subject property. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 78

FIGURE 6-6 COMPARISON OF HISTORICAL AND PROJECTED OCCUPANCY, AVERAGE RATE, AND REVPAR PROPOSED SUBJECT PROPERTY AND MARKET Projected 2013 2014 2015 2016 2017 2018 2019 2020 2021 Proposed Courtyard by Marriott Occupancy 60.3 % 63.2 % 66.7 % 66.7 % Change in Points 2.9 3.5 0.0 Occupancy Penetration 114.9 % 122.3 % 125.9 % 125.9 % Average Rate $116.00 $117.74 $120.68 $124.30 $128.03 $131.87 $135.83 Change 2.5 % 3.0 % 3.0 % 3.0 % 3.0 % Average Rate Penetration 128.7 % 128.7 % 128.7 % 128.7 % 128.7 % 128.7 % RevPAR $74.97 $80.89 $87.98 $90.62 Change 7.9 % 8.8 % 3.0 % RevPAR Penetration 147.8 % 157.3 % 162.0 % 162.0 % Historical (Estimated) Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021 Marshall Submarket Occupancy 56.4 % 57.9 % 56.2 % 53.9 % 55.1 % 52.5 % 51.7 % 53.0 % 53.0 % Change in Points 1.4 (1.7) (2.4) 1.2 (2.5) (0.8) 1.3 0.0 Average Rate $88.30 $89.56 $90.16 $91.51 $93.80 $96.61 $99.51 $102.50 $105.57 Change 1.4 % 0.7 % 1.5 % 2.5 % 3.0 % 3.0 % 3.0 % 3.0 % RevPAR $49.85 $51.85 $50.70 $49.29 $51.65 $50.73 $51.42 $54.30 $55.92 Change 4.0 % (2.2) % (2.8) % 4.8 % (1.8) % 1.4 % 5.6 % 3.0 % * The forecast for the proposed subject property does not include rate discounts that are expected to occur during the initial year(s) of operation. Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 79

A new property must establish its reputation and a client base in the market during its ramp-up period; as such, the proposed subject hotel s average rates in the initial operating period have been discounted to reflect this likelihood. We forecast 0.5% and 0.5% discounts to the proposed subject hotel s forecast room rates in the first two operating years, which would be typical for a new operation of this type. The following occupancies and average rates will be used to project the subject property's rooms revenue. This forecast reflects years beginning on July 1, 2018 and corresponds with our financial projections. FIGURE 6-7 FORECAST OF OCCUPANCY, AVERAGE RATE, AND REVPAR Year Occupancy Average Rate Before Discount Discount Average Rate After Discount RevPAR 2018/19 62 % $126.15 0.5 % $125.52 $77.82 2019/20 65 129.94 0.5 129.29 84.04 2020/21 67 133.84 0.0 133.84 89.67 Projection of Occupancy and Average Rate Proposed Courtyard by Marriott Marshall, Minnesota 80

7. Projection of Income and Expense In this chapter of our report, we have compiled a forecast of income and expense for the proposed subject hotel. This forecast is based on the facilities program set forth previously, as well as the occupancy and average rate forecast 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 tenyear period reflects the typical holding period of large real estate assets such as hotels. In addition, the ten-year period 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 Statements In order to project future income and expense for the proposed subject hotel, we have included a sample of individual comparable operating statements from our database of hotel statistics. All financial data are 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). These historical income and expense statements will be used as benchmarks in our forthcoming forecast of income and expense. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 81

FIGURE 7-1 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2015/16 2015/16 2015/16 2015/16 2014/15 2015 Edition: 11 11 11 1011 1011 Number of Rooms: 100 to 140 130 to 170 130 to 170 130 to 170 170 to 220 104 Days Open: 365 365 365 365 365 365 Occupancy: 69% 65% 68% 63% 63% 67% Average Rate: $112 $110 $117 $118 $122 $115 RevPAR: $77 $72 $80 $75 $77 $77 REVENUE Rooms 91.6 % 90.3 % 87.9 % 89.8 % 95.3 % 89.4 % Food & Beverage 7.1 8.3 10.5 8.6 3.7 9.3 Other Operated Departments 0.9 1.1 1.5 1.6 1.0 1.2 Rentals & Other Income 0.4 0.3 0.1 0.0 0.0 0.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 DEPARTMENTAL EXPENSES* Rooms 21.0 22.6 22.9 22.7 21.7 21.5 Food & Beverage 92.6 59.5 58.2 62.0 126.0 75.0 Other Operated Departments 77.7 65.7 42.3 60.6 54.4 40.0 Total 26.5 26.1 26.9 26.7 25.8 26.6 DEPARTMENTAL INCOME 73.5 73.9 73.1 73.3 74.2 73.4 OPERATING EXPENSES Administrative & General 9.6 11.6 11.3 12.6 7.3 7.6 Info. and Telecom. Systems 1.9 0.0 0.0 0.0 0.0 0.8 Marketing 5.2 8.6 7.3 7.9 6.3 5.7 Franchise Fee 6.9 0.0 0.0 0.0 7.3 7.1 Property Operations & Maintenance 4.3 5.4 4.2 4.6 4.4 3.2 Utilities 3.6 4.2 4.4 3.1 4.4 3.5 Total 31.4 29.8 27.1 28.1 29.8 27.8 HOUSE PROFIT 42.1 44.1 46.0 45.2 44.4 45.5 Management Fee 2.9 6.0 6.0 6.0 0.0 3.0 INCOME BEFORE FIXED CHARGES 39.2 38.0 40.0 39.2 44.4 42.5 * Departmental expense ratios are expressed as a percentage of departmental revenues Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 82

FIGURE 7-2 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2015/16 2015/16 2015/16 2015/16 2014/15 2015 Edition: 11 11 11 1011 1011 Number of Rooms: 100 to 140 130 to 170 130 to 170 130 to 170 170 to 220 104 Days Open: 365 365 365 365 365 365 Occupancy: 69% 65% 68% 63% 63% 67% Average Rate: $112 $110 $117 $118 $122 $115 RevPAR: $77 $72 $80 $75 $77 $77 REVENUE Rooms $28,274 $26,267 $29,294 $27,255 $28,285 $28,233 Food & Beverage 2,202 2,412 3,487 2,608 1,090 2,935 Other Operated Departments 263 329 512 474 300 367 Rentals & Other Income 119 83 29 (2) 0 61 Total 30,857 29,091 33,322 30,335 29,675 31,596 DEPARTMENTAL EXPENSES Rooms 5,931 5,949 6,722 6,187 6,132 6,070 Food & Beverage 2,038 1,434 2,031 1,618 1,374 2,201 Other Operated Departments 204 216 217 287 163 147 Total 8,173 7,600 8,970 8,092 7,668 8,418 DEPARTMENTAL INCOME 22,684 21,491 24,352 22,243 22,007 23,178 OPERATING EXPENSES Administrative & General 2,976 3,383 3,761 3,816 2,176 2,400 Info. and Telecom. Systems 574 0 0 0 0 237 Marketing 1,591 2,513 2,426 2,392 1,884 1,800 Franchise Fee 2,125 0 0 0 2,180 2,259 Property Operations & Maintenance 1,314 1,559 1,383 1,391 1,291 1,000 Utilities 1,106 1,228 1,459 930 1,309 1,100 Total 9,686 8,683 9,029 8,529 8,840 8,797 HOUSE PROFIT 12,998 12,808 15,323 13,714 13,167 14,381 Management Fee 894 1,745 1,999 1,820 0 948 INCOME BEFORE FIXED CHARGES 12,104 11,063 13,325 11,894 13,167 13,433 Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 83

FIGURE 7-3 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Stabilized $ Year: 2015/16 2015/16 2015/16 2015/16 2014/15 2015 Number of Rooms: 100 to 140 130 to 170 130 to 170 130 to 170 170 to 220 104 Days Open: 365 365 365 365 365 365 Occupancy: 69% 65% 68% 63% 63% 67% Average Rate: $112 $110 $117 $118 $122 $115 RevPAR: $77 $72 $80 $75 $77 $77 REVENUE Rooms $111.64 $109.94 $117.42 $118.05 $122.27 $115.45 Food & Beverage 8.69 10.10 13.98 11.30 4.71 12.00 Other Operated Departments 1.04 1.38 2.05 2.05 1.30 1.50 Rentals & Other Income 0.47 0.35 0.12 (0.01) 0.00 0.25 Total 121.84 121.77 133.57 131.39 128.28 129.20 DEPARTMENTAL EXPENSES Rooms 23.42 24.90 26.94 26.80 26.51 24.82 Food & Beverage 8.05 6.00 8.14 7.01 5.94 9.00 Other Operated Departments 0.80 0.91 0.87 1.24 0.70 0.60 Total 32.27 31.81 35.95 35.05 33.15 34.42 DEPARTMENTAL INCOME 89.57 89.96 97.61 96.34 95.13 94.78 OPERATING EXPENSES Administrative & General 11.75 14.16 15.07 16.53 9.41 9.82 Info. and Telecom. Systems 2.27 0.00 0.00 0.00 0.00 0.97 Marketing 6.28 10.52 9.72 10.36 8.14 7.36 Franchise Fee 8.39 0.00 0.00 0.00 9.42 9.24 Property Operations & Maintenance 5.19 6.53 5.54 6.02 5.58 4.09 Utilities 4.37 5.14 5.85 4.03 5.66 4.50 Total 38.25 36.34 36.19 36.94 38.21 35.97 HOUSE PROFIT 51.32 53.61 61.42 59.40 56.92 58.81 Management Fee 3.53 7.31 8.01 7.88 0.00 3.88 INCOME BEFORE FIXED CHARGES 47.79 46.31 53.41 51.52 56.92 54.93 The comparables departmental income ranged from 73.1% to 74.2% of total revenue. The comparable properties achieved a house profit ranging from 42.1% to 46.0% of total revenue. We will refer to the comparable operating data in our discussion of each line item, which follows later in this section of the report. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 84

Fixed and Variable Component Analysis HVS uses a fixed and variable component model to project a lodging facility's 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 actual forecast is derived by adjusting each year s 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 year s occupancy to the base-year occupancy (in the case of departmental revenue and expense) or the ratio of the projection year s revenue to the base year s revenue (in the case of undistributed operating expenses). Fixed expenses 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 systematic 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. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 85

FIGURE 7-4 INFLATION ESTIMATES Name (Sample from Survey) Firm Lewis Alexander Nomura Securities International 1.1 % 1.9 % 2.3 % 2.0 % Paul Ashworth Capital Economics 1.2 2.0 3.0 3.0 3.0 % Daniel Bachman Deloitte LP 1.1 1.7 2.4 2.6 2.5 Bernard Baumohl Economic Outlook Group 1.6 1.8 1.9 2.2 2.4 Nariman Behravesh IHS Global Insight 1.0 2.0 2.6 2.5 2.1 David Berson Nationwide Insurance 1.5 2.3 2.4 2.5 2.7 Brian Bethune Tufts University 1.2 1.4 1.8 2.1 2.2 Ram Bhagavatula Combinatorics Capital 1.8 2.5 2.4 2.4 2.4 Steven Blitz M Science 0.8 1.5 1.0 0.8 0.5 Beth Ann Bovino Standard and Poor's 1.0 1.7 2.5 2.2 2.1 Michael Carey Credit Agricole CIB 1.0 1.9 2.2 2.3 Joseph Carson AllianceBernstein 1.4 2.0 2.5 2.5 2.8 Mike Cosgrove Econoclast 1.5 2.0 2.3 2.3 2.2 Lou Crandall Wrightson ICAP 1.1 2.3 2.9 2.7 2.6 Amy Crews Cutts Equifax 0.7 0.7 1.2 1.3 1.7 David Crowe National Association of Home Builders 1.9 2.0 2.1 2.2 2.3 J. Dewey Daane Vanderbilt University 1.0 1.0 1.0 1.0 1.0 Greg Daco Oxford Economics 1.3 2.0 2.2 2.3 2.0 Rajeev Dhawan Georgia State University 0.6 1.0 2.4 2.8 2.8 Douglas Duncan Fannie Mae 1.1 1.7 2.2 2.1 2.1 Robert Dye Comerica Bank 1.6 2.3 2.2 2.0 2.0 Maria Fiorini Ramirez/Joshua Shapiro MFR, Inc. 1.1 1.6 2.0 1.7 Mike Fratantoni Mortgage Bankers Association 1.4 1.9 2.0 2.1 2.3 Michael Gapen Barclays Capital 1.2 2.4 2.5 2.5 Michael Gregory BMO Capital 1.2 2.1 2.4 2.3 2.2 Ethan Harris Bank of America Securities- Merrill Lynch 1.1 2.2 2.5 2.2 Jan Hatzius Goldman, Sachs & Co. 1.1 2.1 2.8 2.3 2.2 Derek Holt Scotiabank 1.1 2.0 2.3 2.3 2.0 Constance Hunter KPMG 2.1 1.5 2.9 2.1 1.8 Nathaniel Karp BBVA Compass 1.0 1.8 2.1 2.2 2.2 Jack Kleinhenz National Retail Federation 1.0 1.7 2.1 2.2 Joseph LaVorgna Deutsche Bank Securities, Inc. 1.1 1.6 2.0 1.8 2.0 Edward Leamer/David Shulman UCLA Anderson Forecast 1.1 1.8 2.8 3.0 3.0 Kevin Logan HSBC Securities 1.1 1.5 1.9 2.0 John Lonski Moody's Investors Service 1.0 1.8 2.0 1.6 1.4 Aneta Markowska Societe Generale 1.1 1.8 2.2 2.7 2.8 Jim Meil ACT Research 1.0 1.9 1.9 2.1 2.2 Robert Mellman JP Morgan Chase & Co. 1.1 2.4 2.4 2.4 2.5 Michael Moran Daiwa Capital 1.1 1.7 2.2 2.3 2.4 Chad Moutray National Association of Manufacturers 1.2 1.9 2.7 2.7 2.7 Millan Mulraine TD Securities 1.1 1.8 2.0 2.0 2.4 Joel Naroff Naroff Economic Advisors 1.2 2.0 2.8 3.0 2.6 Mark Nielson MacroEcon Global Advisors 1.3 1.5 1.9 2.1 2.1 Frank Nothaft Corelogic 1.0 1.5 2.3 2.3 2.5 Jim O'Sullivan High Frequency Economics 1.2 1.7 2.5 2.7 Dr. Joel Prakken/ Chris Varvares Macroeconomic Advisers 1.1 1.9 2.1 2.1 2.0 Russell Price Ameriprise Financial 1.1 1.9 2.2 2.2 2.2 Arun Raha Eaton Corp. 1.5 1.8 2.0 2.1 2.2 Lynn Reaser Point Loma Nazarene University 1.1 1.6 2.0 2.1 2.2 Martin Regalia Chamber of Commerce 0.8 1.2 1.9 1.8 Ian Shepherdson Pantheon Macroeconomics 1.0 1.8 2.1 2.5 2.5 John Silvia Wells Fargo & Co. 1.1 2.0 2.3 2.4 Allen Sinai Decision Economics, Inc. 1.1 1.8 2.1 2.3 2.4 James F. Smith Parsec Financial Management 1.3 1.6 1.7 1.8 1.8 Sean M. Snaith University of Central Florida 1.1 1.4 2.1 2.2 2.4 Sung Won Sohn California State University 1.2 1.7 1.8 1.8 1.6 Stephen Stanley Pierpont Securities 1.1 2.3 3.1 3.3 3.4 Susan M. Sterne Economic Analysis Associates Inc. 1.7 2.1 1.8 2.0 2.2 James Sweeney CSFB 1.0 1.5 1.7 2.3 Kevin Swift American Chemisty Council 1.3 2.0 2.5 2.3 2.3 Diane Swonk Diane Swonk & Associates LLC 1.4 1.9 2.3 2.3 2.4 Carl Tannenbaum The Northern Trust 1.1 1.9 2.1 2.1 2.1 US Economics Team BNP Paribas 0.8 2.0 2.0 2.1 Bart van Ark The Conference Board 1.1 2.0 2.4 2.4 Brian S. Wesbury/ Robert Stein First Trust Advisors, L.P. 1.1 2.0 2.7 2.8 2.9 Lawrence Yun National Association of Realtors 1.3 2.5 3.0 3.3 2.8 Source: Wall Street Journal Economic Forecasting Survey, June 2016 Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) June 2016 Dec 2016 June 2017 Dec 2017 June 2018 Averages: 1.2 % 1.8 % 2.2 % 2.2 % 2.3 % Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 86

As the preceding table indicates, the financial analysts who were surveyed in June 2016 anticipated inflation rates ranging from 0.7% to 2.5% (on an annualized basis) for December 2016; the average of these data points was 1.8%. The same group expects annualized inflation rates of 2.2% for both June 2017 and December 2017, slightly lower than the 2.3% average inflation rate forecast for June 2018. 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. FIGURE 7-5 NATIONAL CONSUMER PRICE INDEX (ALL URBAN CONSUMERS) National Consumer Percent Change Year Price Index from Previous Year 2005 195.3 2006 201.6 3.2 % 2007 207.3 2.8 2008 215.3 3.8 2009 214.5-0.4 2010 218.1 1.6 2011 224.9 3.1 2012 229.6 2.1 2013 233.0 1.5 2014 234.8 0.8 2015 236.5 0.7 Average Annual Compounded Change 2005-2015: 1.9 % 2010-2015: 1.6 Source: Bureau of Labor Statistics Between 2005 and 2015, the national CPI increased at an average annual compounded rate of 1.9%; from 2010 to 2015, the CPI rose by a slightly lower average annual compounded rate of 1.6%. In 2015, the CPI rose by 0.7%, a decrease from the level of 0.8% recorded in 2014. In consideration of the most recent trends, the projections set forth previously, and our assessment of probable property appreciation levels, we have applied underlying inflation rates of 2.0%, 2.5%, and 3.0% thereafter for each respective year following the base year of 2015. This stabilized 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 Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 87

the assumed underlying inflation rate are discussed in our write-up of individual income and expense items. Summary of Projections Based on an analysis that will be detailed throughout this section, we have formulated a forecast of income and expense. The following table presents a detailed forecast through the fifth projection year, including amounts per available room and per occupied room. The second table illustrates our ten-year forecast of income and expense, presented with a lesser degree of detail. The forecasts pertain to years that begin on July 1, 2018, expressed in inflated dollars for each year. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 88

FIGURE 7-6 DETAILED FORECAST OF INCOME AND EXPENSE 2018/19 Begins July 2019/20 Stabilized 2021/22 2022/23 Number of Rooms: 104 104 104 104 104 Occupancy: 62% 65% 67% 67% 67% Average Rate: $125.52 $129.29 $133.84 $137.85 $141.99 RevPAR: $77.82 $84.04 $89.67 $92.36 $95.13 Days Open: 365 365 365 365 365 Occupied Rooms: 23,535 %Gross PAR POR 24,674 %Gross PAR POR 25,433 %Gross PAR POR 25,433 %Gross PAR POR 25,433 %Gross PAR POR OPERATING REVENUE Rooms $2,954 89.1 % $28,404 $125.51 $3,190 89.2 % $30,673 $129.29 $3,404 89.4 % $32,731 $133.84 $3,506 89.4 % $33,712 $137.85 $3,611 89.4 % $34,721 $141.98 Food & Beverage 315 9.5 3,028 13.38 336 9.4 3,229 13.61 354 9.3 3,403 13.91 364 9.3 3,505 14.33 375 9.3 3,610 14.76 Other Operated Departments 41 1.2 392 1.73 43 1.2 409 1.72 44 1.2 425 1.74 46 1.2 438 1.79 47 1.2 451 1.85 Miscellaneous Income 7 0.2 65 0.29 7 0.2 68 0.29 7 0.2 71 0.29 8 0.2 73 0.30 8 0.2 75 0.31 Total Operating Revenues 3,316 100.0 31,889 140.91 3,576 100.0 34,380 144.91 3,809 100.0 36,630 149.78 3,924 100.0 37,727 154.27 4,041 100.0 38,857 158.89 DEPARTMENTAL EXPENSES * Rooms 669 22.7 6,435 28.44 702 22.0 6,750 28.45 732 21.5 7,037 28.77 754 21.5 7,248 29.64 776 21.5 7,465 30.53 Food & Beverage 244 77.4 2,345 10.36 255 75.9 2,453 10.34 265 75.0 2,552 10.44 273 75.0 2,628 10.75 282 75.0 2,707 11.07 Other Operated Departments 17 40.6 159 0.70 17 40.3 165 0.69 18 40.0 170 0.70 18 40.0 175 0.72 19 40.0 180 0.74 Total 930 28.0 8,939 39.50 974 27.2 9,368 39.48 1,015 26.6 9,759 39.91 1,045 26.6 10,052 41.10 1,077 26.6 10,353 42.34 DEPARTMENTAL INCOME 2,387 72.0 22,950 101.41 2,601 72.8 25,012 105.43 2,795 73.4 26,871 109.88 2,878 73.4 27,676 113.17 2,964 73.4 28,504 116.56 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 268 8.1 2,573 11.37 279 7.8 2,679 11.29 289 7.6 2,783 11.38 298 7.6 2,866 11.72 307 7.6 2,952 12.07 Info. & Telecom. Systems 26 0.8 254 1.12 28 0.8 264 1.11 29 0.7 275 1.12 29 0.7 283 1.16 30 0.8 291 1.19 Marketing 201 6.1 1,930 8.53 209 5.8 2,009 8.47 217 5.7 2,087 8.53 224 5.7 2,150 8.79 230 5.7 2,214 9.05 Franchise Fee 236 7.1 2,272 10.04 255 7.1 2,454 10.34 272 7.1 2,618 10.71 280 7.1 2,697 11.03 289 7.1 2,778 11.36 Prop. Operations & Maint. 100 3.0 965 4.26 110 3.1 1,061 4.47 121 3.2 1,159 4.74 124 3.2 1,194 4.88 128 3.2 1,230 5.03 Utilities 123 3.7 1,179 5.21 128 3.6 1,228 5.18 133 3.5 1,275 5.22 137 3.5 1,314 5.37 141 3.5 1,353 5.53 Total 954 28.8 9,173 40.53 1,008 28.2 9,695 40.87 1,061 27.8 10,198 41.70 1,092 27.8 10,504 42.95 1,125 27.9 10,818 44.24 GROSS HOUSE PROFIT 1,433 43.2 13,777 60.88 1,593 44.6 15,317 64.56 1,734 45.6 16,673 68.18 1,786 45.6 17,172 70.22 1,839 45.5 17,686 72.32 Management Fee 99 3.0 957 4.23 107 3.0 1,031 4.35 114 3.0 1,099 4.49 118 3.0 1,132 4.63 121 3.0 1,166 4.77 INCOME BEFORE NON-OPER. INC. & EXP. 1,333 40.2 12,820 56.65 1,486 41.6 14,285 60.21 1,620 42.6 15,574 63.68 1,668 42.6 16,040 65.59 1,718 42.5 16,520 67.55 NON-OPERATING INCOME AND EXPENSE Property Taxes 114 3.4 1,098 4.85 117 3.3 1,125 4.74 121 3.2 1,159 4.74 124 3.2 1,194 4.88 128 3.2 1,230 5.03 Insurance 34 1.0 328 1.45 35 1.0 338 1.42 36 0.9 348 1.42 37 0.9 358 1.47 38 0.9 369 1.51 Reserve for Replacement 66 2.0 638 2.82 107 3.0 1,031 4.35 152 4.0 1,465 5.99 157 4.0 1,509 6.17 162 4.0 1,554 6.36 Total 215 6.4 2,063 9.12 259 7.3 2,494 10.51 309 8.1 2,972 12.15 318 8.1 3,061 12.52 328 8.1 3,153 12.89 EBITDA LESS RESERVE $1,119 33.8 % $10,757 $47.53 $1,226 34.3 % $11,791 $49.70 $1,311 34.5 % $12,602 $51.53 $1,350 34.5 % $12,979 $53.07 $1,390 34.4 % $13,367 $54.66 *Departmental expenses are expressed as a percentage of departmental revenues. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 89

FIGURE 7-7 TWENTY-YEAR FORECAST OF INCOME AND EXPENSE 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 Number of Rooms: 104 104 104 104 104 104 104 104 104 104 Occupied Rooms: 23,535 24,674 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 Occupancy: 62% 65% 67% 67% 67% 67% 67% 67% 67% 67% Average Rate: $125.52 % of $129.29 % of $133.84 % of $137.85 % of $141.99 % of $146.25 % of $150.63 % of $155.15 % of $159.81 % of $164.60 RevPAR: $77.82 Gross $84.04 Gross $89.67 Gross $92.36 Gross $95.13 Gross $97.98 Gross $100.92 Gross $103.95 Gross $107.07 Gross $110.28 OPERATING REVENUE Rooms $2,954 89.1 % $3,190 89.2 % $3,404 89.4 % $3,506 89.4 % $3,611 89.4 % $3,720 89.4 % $3,831 89.4 % $3,946 89.4 % $4,064 89.4 % $4,186 89.4 % Food & Beverage 315 9.5 336 9.4 354 9.3 364 9.3 375 9.3 387 9.3 398 9.3 410 9.3 423 9.3 435 9.3 Other Operated Departments 41 1.2 43 1.2 44 1.2 46 1.2 47 1.2 48 1.2 50 1.2 51 1.2 53 1.2 54 1.2 Miscellaneous Income 7 0.2 7 0.2 7 0.2 8 0.2 8 0.2 8 0.2 8 0.2 9 0.2 9 0.2 9 0.2 Total Operating Revenue 3,316 100.0 3,576 100.0 3,809 100.0 3,924 100.0 4,041 100.0 4,163 100.0 4,287 100.0 4,416 100.0 4,548 100.0 4,685 100.0 DEPARTMENTAL EXPENSES* Rooms 669 22.7 702 22.0 732 21.5 754 21.5 776 21.5 800 21.5 824 21.5 848 21.5 874 21.5 900 21.5 Food & Beverage 244 77.4 255 75.9 265 75.0 273 75.0 282 75.0 290 75.0 299 75.0 308 75.0 317 75.0 326 75.0 Other Operated Departments 17 40.6 17 40.3 18 40.0 18 40.0 19 40.0 19 40.0 20 40.0 21 40.0 21 40.0 22 40.0 Total 930 28.0 974 27.2 1,015 26.6 1,045 26.6 1,077 26.6 1,109 26.6 1,142 26.6 1,177 26.6 1,212 26.6 1,248 26.6 DEPARTMENTAL INCOME 2,387 72.0 2,601 72.8 2,795 73.4 2,878 73.4 2,964 73.4 3,054 73.4 3,145 73.4 3,239 73.4 3,336 73.4 3,436 73.4 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 268 8.1 279 7.8 289 7.6 298 7.6 307 7.6 316 7.6 326 7.6 335 7.6 346 7.6 356 7.6 Info. & Telecom. Systems 26 0.8 28 0.8 29 0.7 29 0.7 30 0.8 31 0.7 32 0.8 33 0.8 34 0.8 35 0.8 Marketing 201 6.1 209 5.8 217 5.7 224 5.7 230 5.7 237 5.7 244 5.7 252 5.7 259 5.7 267 5.7 Franchise Fee 236 7.1 255 7.1 272 7.1 280 7.1 289 7.1 298 7.1 306 7.1 316 7.1 325 7.1 335 7.1 Prop. Operations & Maint. 100 3.0 110 3.1 121 3.2 124 3.2 128 3.2 132 3.2 136 3.2 140 3.2 144 3.2 148 3.2 Utilities 123 3.7 128 3.6 133 3.5 137 3.5 141 3.5 145 3.5 149 3.5 154 3.5 158 3.5 163 3.5 Total 954 28.8 1,008 28.2 1,061 27.8 1,092 27.8 1,125 27.9 1,159 27.8 1,194 27.9 1,229 27.9 1,266 27.9 1,304 27.9 GROSS HOUSE PROFIT 1,433 43.2 1,593 44.6 1,734 45.6 1,786 45.6 1,839 45.5 1,895 45.6 1,951 45.5 2,010 45.5 2,070 45.5 2,132 45.5 Management Fee 99 3.0 107 3.0 114 3.0 118 3.0 121 3.0 125 3.0 129 3.0 132 3.0 136 3.0 141 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 1,333 40.2 1,486 41.6 1,620 42.6 1,668 42.6 1,718 42.5 1,770 42.6 1,823 42.5 1,878 42.5 1,934 42.5 1,992 42.5 NON-OPERATING INCOME AND EXPENSE Property Taxes 114 3.4 117 3.3 121 3.2 124 3.2 128 3.2 132 3.2 136 3.2 140 3.2 144 3.2 148 3.2 Insurance 34 1.0 35 1.0 36 0.9 37 0.9 38 0.9 40 0.9 41 0.9 42 0.9 43 0.9 44 0.9 Reserve for Replacement 66 2.0 107 3.0 152 4.0 157 4.0 162 4.0 167 4.0 171 4.0 177 4.0 182 4.0 187 4.0 Total 215 6.4 259 7.3 309 8.1 318 8.1 328 8.1 338 8.1 348 8.1 358 8.1 369 8.1 380 8.1 EBITDA LESS RESERVE $1,119 33.8 % $1,226 34.3 % $1,311 34.5 % $1,350 34.5 % $1,390 34.4 % $1,432 34.5 % $1,475 34.4 % $1,519 34.4 % $1,564 34.4 % $1,611 34.4 % 1 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues. % of Gross Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 90

FIGURE 7-8 TWENTY-YEAR FORECAST OF INCOME AND EXPENSE 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 2034/35 2035/36 2036/37 2037/38 Number of Rooms: 104 104 104 104 104 104 104 104 104 104 Occupied Rooms: 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 25,433 Occupancy: 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% Average Rate: $169.54 % of $174.63 % of $179.86 % of $185.26 % of $190.82 % of $196.54 % of $202.44 % of $208.51 % of $214.77 % of $221.21 RevPAR: $113.59 Gross $117.00 Gross $120.51 Gross $124.12 Gross $127.85 Gross $131.68 Gross $135.63 Gross $139.70 Gross $143.89 Gross $148.21 OPERATING REVENUE Rooms $4,312 89.3 % $4,441 89.3 % $4,574 89.3 % $4,711 89.3 % $4,853 89.3 % $4,998 89.3 % $5,148 89.3 % $5,303 89.3 % $5,462 89.3 % $5,626 89.3 % Food & Beverage 448 9.4 462 9.4 476 9.4 490 9.4 505 9.4 520 9.4 535 9.4 551 9.4 568 9.4 585 9.4 Other Operated Departments 56 1.2 58 1.2 59 1.2 61 1.2 63 1.2 65 1.2 67 1.2 69 1.2 71 1.2 73 1.2 Miscellaneous Income 9 0.2 10 0.2 10 0.2 10 0.2 11 0.2 11 0.2 11 0.2 11 0.2 12 0.2 12 0.2 Total Operating Revenue 4,825 100.0 4,970 100.0 5,119 100.0 5,273 100.0 5,431 100.0 5,594 100.0 5,762 100.0 5,934 100.0 6,112 100.0 6,296 100.0 DEPARTMENTAL EXPENSES* Rooms 927 21.0 955 21.0 984 21.0 1,013 21.0 1,043 21.0 1,075 21.0 1,107 21.0 1,140 21.0 1,174 21.0 1,210 21.0 Food & Beverage 336 75.0 346 75.0 357 75.0 367 75.0 378 75.0 390 75.0 401 75.0 413 75.0 426 75.0 439 75.0 Other Operated Departments 22 40.0 23 40.0 24 40.0 24 40.0 25 40.0 26 40.0 27 40.0 28 40.0 28 40.0 29 40.0 Total 1,286 26.2 1,324 26.2 1,364 26.2 1,405 26.2 1,447 26.2 1,490 26.2 1,535 26.2 1,581 26.2 1,629 26.2 1,678 26.2 DEPARTMENTAL INCOME 3,540 73.8 3,646 73.8 3,755 73.8 3,868 73.8 3,984 73.8 4,103 73.8 4,226 73.8 4,353 73.8 4,484 73.8 4,618 73.8 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 367 7.7 378 7.7 389 7.7 401 7.7 413 7.7 425 7.7 438 7.7 451 7.7 464 7.7 478 7.7 Info. & Telecom. Systems 36 0.8 37 0.8 38 0.8 40 0.8 41 0.8 42 0.8 43 0.8 45 0.8 46 0.8 47 0.8 Marketing 275 5.7 283 5.7 292 5.7 300 5.7 309 5.7 319 5.7 328 5.7 338 5.7 348 5.7 359 5.7 Franchise Fee 345 7.1 355 7.1 366 7.1 377 7.1 388 7.1 400 7.1 412 7.1 424 7.1 437 7.1 450 7.1 Prop. Operations & Maint. 153 3.2 157 3.2 162 3.2 167 3.2 172 3.2 177 3.2 182 3.2 188 3.2 193 3.2 199 3.2 Utilities 168 3.5 173 3.5 178 3.5 184 3.5 189 3.5 195 3.5 201 3.5 207 3.5 213 3.5 219 3.5 Total 1,343 28.0 1,384 28.0 1,425 28.0 1,468 28.0 1,512 28.0 1,557 28.0 1,604 28.0 1,652 28.0 1,702 28.0 1,753 28.0 GROSS HOUSE PROFIT 2,196 45.8 2,262 45.8 2,330 45.8 2,400 45.8 2,472 45.8 2,546 45.8 2,622 45.8 2,701 45.8 2,782 45.8 2,865 45.8 Management Fee 145 3.0 149 3.0 154 3.0 158 3.0 163 3.0 168 3.0 173 3.0 178 3.0 183 3.0 189 3.0 INCOME BEFORE NON-OPER. INC. & EXP. 2,051 42.8 2,113 42.8 2,176 42.8 2,242 42.8 2,309 42.8 2,378 42.8 2,449 42.8 2,523 42.8 2,599 42.8 2,677 42.8 NON-OPERATING INCOME AND EXPENSE Property Taxes 153 3.2 157 3.2 162 3.2 167 3.2 172 3.2 177 3.2 182 3.2 188 3.2 193 3.2 199 3.2 Insurance 46 1.0 47 1.0 49 1.0 50 1.0 52 1.0 53 1.0 55 1.0 56 1.0 58 1.0 60 1.0 Reserve for Replacement 193 4.0 199 4.0 205 4.0 211 4.0 217 4.0 224 4.0 230 4.0 237 4.0 244 4.0 252 4.0 Total 392 8.2 403 8.2 415 8.2 428 8.2 441 8.2 454 8.2 467 8.2 482 8.2 496 8.2 511 8.2 EBITDA LESS RESERVE $1,660 34.6 % $1,710 34.6 % $1,761 34.6 % $1,814 34.6 % $1,868 34.6 % $1,924 34.6 % $1,982 34.6 % $2,041 34.6 % $2,103 34.6 % $2,166 34.6 % *Departmental expenses are expressed as a percentage of departmental revenues. % of Gross Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 91

Forecast of Income and Expense The following description sets forth the basis for the forecast of income and 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 proposed subject hotel s operating budget and comparable income and expense statements. The forecast is based upon fiscal years beginning July 1, 2018, expressed in inflated dollars for each year. Revenues associated with the proposed subject hotel's food and beverage department, other operated departments, and miscellaneous income category have been forecast to reflect the hotel's planned facilities and amenities, including The Bistro restaurant. Expense levels fall within a range of reasonableness given the provided comparable operating statements; furthermore, franchise and management fees are set forth in accordance with our assumptions provided in the Nature of the Assignment chapter. Rooms Revenue Food and Beverage 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. The proposed subject hotel is expected to stabilize at an occupancy level of 67% with an average rate of $133.84 in 2020/21. Following the stabilized year, the subject property s average rate is projected to increase along with the underlying rate of inflation. Food and beverage revenue is generated by a hotel's restaurants, lounges, 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 Courtyard by Marriott, the food and beverage department will include The Bistro; moreover, limited meeting space will also generate minimal revenue. 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 food and beverage revenue between 3.9% and 11.9% of rooms revenue, or $4.71 and $13.98 per occupied room. Revenues associated with the proposed subject hotel's food and beverage department, other operated departments, and miscellaneous income category have been forecast to reflect the hotel's planned facilities and amenities, including The Bistro restaurant. Expense levels fall within a range of reasonableness given the provided comparable operating statements; furthermore, franchise and management fees are set forth in accordance with our assumptions provided in the Nature of the Assignment chapter. We project food and beverage revenue to be Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 92

$13.38 in the first projection year, or respectively 9.5% of rooms revenue. These per-occupied-room amounts increase to $13.91 for the food and beverage revenue categories by the stabilized year, 9.3% of rooms revenue. Other Operated Departments Revenue According to the Uniform System of Accounts, other operated departments include any major or minor operated department other than rooms and food and beverage. The comparable operating statements illustrate other operated departments revenue ranging from 0.9% to 1.7% of rooms revenue and $1.04 to $2.05 per occupied room. We forecast the proposed subject hotel s other operated departments revenue to stabilize at 1.3% of rooms revenue or $1.74 per occupied room by the stabilized year, 2020/21. Miscellaneous Income Rooms Expense The miscellaneous income sources comprise those other than guestrooms, food and beverage, and the other operated departments. Miscellaneous revenue for the comparables ranged 0.0% to 0.4% of rooms revenue or $-0.01 to $0.47 on a peroccupied-room basis. Changes in this revenue item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy. We forecast the proposed subject hotel s miscellaneous income to stabilize at $0.29 per occupied room by the stabilized year, 2020/21. 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 21.0% and 22.9% of rooms revenue; on a per-occupied-room basis, the range was between $23.42 and $26.94. We have projected rooms expense for the proposed subject hotel at 22.7% in the first year (or $28.44 per occupied room), stabilizing at 21.5% in 2020/21 (or $28.77 per occupied room). Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 93

Food and Beverage Expense Food expenses consist of items necessary for the primary operation of a 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, linens, 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 hotel s lounge and bar areas. The costs associated with beverage sales and payroll are moderately to highly correlated to beverage revenues. The comparables illustrate food and beverage expense ranging between 58.2% and 126.0% of food and beverage revenue. We have projected a stabilized expense ratio of 75.0% in 2020/21. Other Operated Departments Expense Administrative and General Expense Other operated departments expense includes all expenses reflected in the summary statements for the divisions associated in these categories. This was previously discussed in this chapter. The comparables illustrated other operated departments expense ranging between $0.70 and $1.24 per occupied room. We have projected a stabilized expense ratio of 40.0% in 2020/21. Administrative and general expense includes the salaries and wages of all 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. As a percentage of total revenue, the comparable operations indicate an administrative and general expense range from 7.3% to 12.6%, or $2,176 to $3,816 per available room. In the first projection year, we have projected administrative and general expense for the proposed subject hotel to be $2,573 per available room, or 8.1% of total revenue. By the 2020/21 stabilized year, these amounts change to $2,783 per available room and 7.6% of total revenue. Information and Telecommunications Systems Expense Information and telecommunications systems expense consists of all costs associated with a hotel s technology infrastructure. This includes the costs of cell phones, administrative call and Internet services, and complimentary call and Internet services. Expenses in this category are typically organized by type of technology, or the area benefitting from the technology solution. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 94

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. As a percentage of total revenue, the comparable operations indicate a marketing expense range from 5.2% to 8.6%, or $1,591 to $2,513 per available room. In the first projection year, we have projected marketing expense for the proposed subject hotel to be $1,930 per available room, or 6.1% of total revenue. By the 2020/21 stabilized year, these amounts change to $2,087 per available room and 5.7% of total revenue. Franchise Fee Property Operations and Maintenance As previously discussed, the proposed subject property is expected to be franchised under the Courtyard by Marriott brand. Costs associated with this franchise are summarized in the introductory chapter in this report. Property operations and maintenance expense is another expense category 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 Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 95

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. As a percentage of total revenue, the comparable operations indicate a property operations and maintenance expense range from 4.2% to 5.4%, or $1,291 to $1,559 per available room. 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, we have projected property operations and maintenance expense for the proposed subject hotel to be $965 per available room, or 3.0% of total revenue. By the 2020/21 stabilized year, these amounts change to $1,159 per available room and 3.2% 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. As a percentage of total revenue, the comparable operations indicate a utilities expense range from 3.1% to 4.4%, or $930 to $1,459 per available room. 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, we have projected utilities expense for the proposed subject hotel to be $1,179 per available room, or 3.7% of total revenue. By the 2020/21 stabilized year, these amounts change to $1,275 per available room and 3.5% 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 brandname affiliation (first-tier management company), while others provide management services alone (second-tier management company). Some management contracts 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 Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 96

percentage of defined profit). Basic hotel management fees are often 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 dealspecific 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 proposed subject hotel have been forecast at 3.0% of total revenue. 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 assessments of comparable hotel properties in the local municipality. FIGURE 7-9 COUNTY-ASSESSED VALUE OF COMPARABLE HOTELS Hotel Year Open Total Sleep Inn & Suites Marshall 2014 $2,913,400 Americ Inn Marshall 1998 2,551,100 Ramada Marshall 1973 313,500 Quality Inn Marshall 1990 1,504,800 Super 8 Marshall 1977 1,039,840 Assessments per Room # of Rms Sleep Inn & Suites Marshall 60 $48,557 Americ Inn Marshall 62 41,147 Ramada Marshall 100 3,135 Quality Inn Marshall 49 30,710 Super 8 Marshall 50 20,797 Positioned Subject - Per Room 104 $50,000 Positioned Subject - Total $5,200,000 Source: Lyon County Property Assessor Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 97

We have positioned the future assessment levels of the subject site and proposed improvements, as well as the planned personal property, based upon the illustrated comparable data. We have positioned these assessments closest to the Sleep Inn & Suites because of the similarities, including the average rates that are commanded at that property and its newer construction; overall, the positioned assessments are well supported by the market data. We note that the tax burden is calculated several different ways in Lyon county. Below we have shown the steps to which the tax burden of the Sleep Inn was calculated. We have positioned the tax burden for the proposed subject property just above the Sleep Inn given the proposed hotel s upscale amenities and new construction. FIGURE 7-10 PROPERTY TAX COMPARABLE Sleep Inn Market Value 2,913,400 Tax Capacity 150,000 Tax before TC 2,250 Tax after TC 55,268 Total Value: 57,518 Local Tax Rate: 1.1244 Local Taxes Due: $64,673 Tax Assesment $64,673 State Tax Rate 0.48614 State Taxes Due: $27,962 Market Value 2,913,400 School Referendum Rate 0.00149150 School Taxes Due $4,345 Total Taxes Due: 89,825 Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 98

FIGURE 7-11 PROJECTED PROPERTY TAX EXPENSE - REAL PROPERTY Year Total Tax Burden (Positioned Prior to Increase) Real Property Base Rate of Tax Burden Increase % Positioned Tax Burden Taxes Payable Positioned $109,200 $109,200 2018/19 $109,200 4.5 % 100 % $114,169 2019/20 114,169 2.5 100 117,023 2020/21 117,023 3.0 100 120,533 2021/22 120,533 3.0 100 124,150 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. Based on comparable data and the structural attributes of the proposed project, we have forecast the proposed subject hotel's insurance expense at $348 per available room by the stabilized year (positioned at $300 on a per-available-room basis in base-year dollars). This forecast equates to 0.9% of total revenue on a stabilized basis. In subsequent years, this amount is assumed to increase in tandem with inflation. Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging 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 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 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) oversees a major industry-sponsored study of the capital expenditure requirements for fullservice/luxury, select-service, and extended-stay hotels. The most recent study Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 99

was published in 2014. 6 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 ages 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 our analysis and on our review of the proposed subject asset and comparable lodging facilities, as well as on 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 has been ramped up during the initial projection period. Conclusion In conclusion, our analysis reflects a profitable operation, with net income expected to total 34.4% 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 sources. On the cost side, departmental expenses total 26.6% of revenue by the stabilized year, while undistributed operating expenses total 27.9% 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 8.1% of total revenues in fixed expenses, a net income ratio of 34.4% is forecast by the stabilized year. 6 The International Society of Hotel Consultants, CapEx 2014, A Study of Capital Expenditure in the U.S. Hotel Industry. Projection of Income and Expense Proposed Courtyard by Marriott Marshall, Minnesota 100

8. Statement of Assumptions and Limiting Conditions 1. This report is set forth as a market study of the proposed subject hotel; 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 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 subsoil or structures, such as underground storage tanks, that would affect the property s 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. We are not qualified to detect hazardous substances and 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 are assumed 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 the appropriate liquor license if applicable), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. Statement of Assumptions and Limiting Conditions Proposed Courtyard by Marriott Marshall, Minnesota 101

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 because of this analysis without previous arrangements, and shall do so only when our standard per-diem fees and travel costs have been 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 onsite 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 financial analysis presented in this report is based upon assumptions, estimates, and evaluations of the market conditions in the local and national economy, which may be subject to sharp rises and declines. Over the projection period considered in our analysis, wages and other operating expenses may increase or decrease because of market volatility and economic forces outside the control of the hotel s management. We assume that the price of hotel rooms, food, beverages, and other sources of revenue to the hotel will be adjusted to offset any increases or decreases in related costs. We do not warrant that our estimates will be attained, but they have been developed based upon information obtained during the course of our market research and are intended to reflect the expectations of a typical hotel investor as of the stated date of the report. 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. Statement of Assumptions and Limiting Conditions Proposed Courtyard by Marriott Marshall, Minnesota 102

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. Statement of Assumptions and Limiting Conditions Proposed Courtyard by Marriott Marshall, Minnesota 103

9. 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 present or prospective interest in the property that is the subject of this report and no 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. Meghan Bean personally inspected the property described in this report; Stacey E. Nadolny, MAI participated in the analysis and reviewed the findings, but did not personally inspect the property; 9. Meghan Bean provided significant assistance to Stacey E. Nadolny, 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; Stacey E. Nadolny, MAI has not performed services, as an appraiser or in any other capacity, on the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment; 10. the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code Certification Proposed Courtyard by Marriott Marshall, Minnesota 104

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, Stacey E. Nadolny, MAI has completed the continuing education program for Designated Members of the Appraisal Institute. Stacey E. Nadolny, MAI Managing Director, Senior Partner TS Worldwide, LLC Certification Proposed Courtyard by Marriott Marshall, Minnesota 105