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MARKET STUDY

Proposed Hotel 10530 RED ARROW HIGHWAY BRIDGMAN, MICHIGAN

SUBMITTED TO:PR OPOSED

Ms. Calli Berg Greater Bridgman Chamber & Growth Alliance (CGA) Post Office Box 871 Bridgman, Michigan, 49106 +1 (269) 465-4413

PREPARED BY:

HVS Consulting & Valuation Division of TS Worldwide, LLC 205 West Randolph Street, Suite 1650 Chicago, Illinois, 60606 +1 (419) 367-3879

March-2017

March 9, 2017 Ms. Calli Berg Greater Bridgman Chamber & Growth Alliance (CGA) Post Office Box 871 Bridgman, Michigan, 49106

Re: Proposed Hotel Bridgman, Michigan HVS Reference: 2016021997

Dear Ms. Berg: 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 Bridgman, Michigan 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 [email protected], +1 (419) 367-3879 State Appraiser License (MI) 1201074337

Meghan B. Bean, Senior Project Manager [email protected], +1(734)649-7221

HVS CHICAGO

205 West Randolph Street, Suite 1650 Chicago, Illinois, 60606 +1 (419) 367-3879 +1 (516) 742-3059 FAX

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Table of Contents

SECTION TITLE PAGE

1. Executive Summary 1 2. Description of the Site and Neighborhood 11 3. Market Area Analysis 21 4. Supply and Demand Analysis 36 5. Description of the Proposed Project 65 6. Projection of Occupancy and Average Rate 72 7. Projection of Income and Expense 80 8. Statement of Assumptions and Limiting Conditions 101 9. Certification 104

Addenda

Qualifications

March-2017 Executive Summary Proposed Hotel – Bridgman, Michigan 1

1. Executive Summary

The subject of the market study is a proposed Limited-Service lodging facility. We note that for purposes of this report we have used a parcel located along Red Arrow Highway, just southwest of the intersection formed by Red Arrow Highway and Interstate 94. However, we note that development on other parcels in similar locations proximate to Interstate 94 along Red Arrow Highway may also be viable for hotel development as long as the parcels have similar location, visibility, and accessibility attributes. The brand affiliation of the proposed hotel has not yet been selected at the time of this report; we recommend a hotel in the midscale, limited-service chainscale segment. This segment of brands include the Comfort Inn, Comfort Inn & Suites, Best Western, Baymont Inn, Microtel Inn & Suites, and Tru by Hilton. Additionally, we recommend the size of the hotel to be somewhere in the range of 65-85 rooms. For purposes of this report, we have assumed a 65-room Comfort Inn & Suites. We found that full-service development was not supported at this time The property, which is expected to open on January 1, 2019, will feature approximately 65 rooms, a breakfast dining area, an indoor pool, a fitness room, a lobby workstation, a sundries counter, a guest laundry room, and vending areas. The hotel will also contain the appropriate parking capacity and all necessary back-of-the-house space. The proposed hotel would be the first hotel in the city of Bridgman. The assumed site is proximate to the Weko Beach Park, and city officials noted the potential to construct a walkway from the hotel to the park, allowing hotel guests direct access to the beach. The subject site’s location is 10530 Red Arrow Highway, Bridgman, Michigan, 49106. As noted previously, other parcels in similar locations proximate to Interstate 94 along Red Arrow Highway may also be viable for hotel development as long as the parcels have similar location, visibility, and accessibility attributes. The effective date of the report is March 9, 2017. The subject site was inspected by Meghan Bean on January 10, 2017. 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.

Subject of the Market Study

Pertinent Dates


Given the preliminary stages of this hotel development, there is not a developer currently in place. The subject site is currently listed for sale for a reported price of $1,490,000. Sale history for this parcel was unavailable at the time of this study. 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. We recommend that the proposed subject hotel operate as a midscale, limited-service hotel. While we have placed heavy consideration on the Comfort Inn & Suites brand, which is affiliated with Choice Hotels International, Inc., a specific franchise affiliation and/or brand has yet to be finalized. Other brands in this segment include Comfort Inn, Best Western, Country Inn & Suites, Baymont Inn & Suites, and La Quinta. Based on our review of the agreement’s terms or expected terms, the Comfort Inn & Suites franchise is reflected in our forecasts with a royalty fee of 6% of rooms revenue, and a marketing assessment of 3.5% of rooms revenue. Both occupancy and average rate first peaked for this selected set of competitive hotels in 2008, resulting in a RevPAR of nearly $58, before declining to a low point of roughly $54 by year-end 2009 because of the recession. A rapid recovery began in 2010 that extended through 2012, at which time the prior RevPAR peak was exceeded. RevPAR continued to rise from 2013 through 2015, with growth driven largely by average rate. The entrance of new supply in 2009 and 2010 contributed to decreases in occupancy from 2009 through 2011; however, given the new upper-midscale property types, hoteliers were able to increase average rates market-wide. However, we note that the Hilton Garden Inn, which opened in 2011, was largely absorbed within the first year of operation. Primary factors contributing to these trends included increased commercial demand from expansions at Whirlpool and the Cook Nuclear Power Plant shutdowns every twelve months, bringing approximately 1,000 out-of-town workers several weeks. Year-to-date 2016 data illustrate relatively flat occupancy growth and a roughly $4.39 gain in average rate. RevPAR reached its high point in the summer of 2016, which was largely influenced by the biannual PGA tournament, which bolstered average rates. This event is anticipated to be held every other year through year 2024. The near-term outlook is generally positive given the strong demand generators in the area, despite the recent opening of the SpringHill Suites by Marriott and the planned Fairfield Inn & Suites by Marriott and Staybridge Suites. The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by STR.

Ownership, Franchise, and Management Assumptions

Summary of Hotel Market Trends


FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR)

YearAverage Daily Room Count

Available Room Nights Change

Occupied Room Nights Change Occupancy

Average Rate Change RevPAR Change

2004 659 240,450 — 120,612 — 50.2 % $80.11 — $40.18 — 2005 691 252,215 4.9 % 120,761 0.1 % 47.9 82.22 2.6 % 39.37 (2.0) %2006 691 252,215 0.0 155,136 28.5 61.5 82.13 (0.1) 50.52 28.32007 691 252,215 0.0 152,823 (1.5) 60.6 89.35 8.8 54.14 7.22008 691 252,215 0.0 153,609 0.5 60.9 94.94 6.3 57.83 6.82009 779 284,345 12.7 163,557 6.5 57.5 93.29 (1.7) 53.66 (7.2)2010 816 297,731 4.7 168,638 3.1 56.6 98.36 5.4 55.71 3.82011 843 307,695 3.3 170,411 1.1 55.4 102.60 4.3 56.82 2.02012 842 307,330 (0.1) 177,605 4.2 57.8 106.94 4.2 61.80 8.82013 842 307,330 0.0 178,066 0.3 57.9 108.24 1.2 62.71 1.52014 948 346,088 12.6 198,040 11.2 57.2 112.83 4.2 64.56 3.02015 1,040 379,600 9.7 222,250 12.2 58.5 118.97 5.4 69.65 7.9

Year-to-Date Through November2015 1,040 347,360 — 210,052 — 60.5 % $120.66 — $72.96 — 2016 1,048 350,120 0.8 % 212,600 1.2 % 60.7 125.05 3.6 % 75.93 4.1 %

2006 - 2009 4.1 1.8 4.3 2.02009 - 2015 4.9 5.2 4.1 4.4

Hotels Included in Sample

Silver Beach Hotel Secondary 150 May 2006 Mar 1969Best Western Benton Harbor St Joseph Secondary 98 Jan 2016 Aug 1988Hampton Inn St Joseph I 94 Primary 75 Oct 1995 Oct 1995Holiday Inn Express & Suites Benton Harbor Secondary 78 Jan 1999 Jan 1999Holiday Inn Express & Suites New Buffalo Secondary 80 May 2000 May 2000Holiday Inn Express & Suites St Joseph Primary 82 Jun 2000 Jun 2000Comfort Suites Benton Harbor St Joseph Secondary 62 Jul 2002 Jul 2002Comfort Suites Stevensville St Joseph Primary 65 Jul 2004 Jul 2004Fairfield Inn & Suites New Buffalo Secondary 105 Mar 2009 Mar 2009Comfort Inn New Buffalo Secondary 47 Aug 2010 Aug 2010The Inn at Harbor Shores Secondary 92 May 2014 May 2014Hilton Garden Inn Benton Harbor St Joseph Secondary 106 Aug 2014 Aug 2014Springhill Suites Benton Harbor St Joseph Secondary 92 Nov 2016 Nov 2016

Total 1,132

Source: STR

Competitive Status

YearOpened

Number Yearof Rooms Affiliated

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.


FIGURE 1-2 PRIMARY COMPETITORS – OPERATING PERFORMANCE

Est. Segmentation Estimated 2015 Estimated 2016

Com

mer

cial

Leisu

re

Grou

p

Weighted Annual Room Count

Weighted Annual Room CountProperty Occ. RevPAR RevPAR

Occupancy Penetration

Yield Penetration

Holiday Inn Express Hotel & Suites Saint Joseph 82 60 % 30 % 10 % 82 60 - 65 % $120 - $125 $75 - $80 82 65 - 70 % $125 - $130 $80 - $85 100 - 110 % 110 - 120 %

Hampton Inn Saint Joseph Interstate 94

75 60 30 10 75 60 - 65 115 - 120 70 - 75 75 60 - 65 125 - 130 80 - 85 100 - 110 100 - 110

Comfort Suites Stevensville 65 55 35 10 65 55 - 60 105 - 110 60 - 65 65 60 - 65 110 - 115 65 - 70 95 - 100 85 - 90

Sub-Totals/Averages 222 59 % 31 % 10 % 222 60.9 % $116.74 $71.05 222 64.2 % $123.42 $79.23 104.5 % 103.4 %

Secondary Competitors 910 52 % 38 % 10 % 409 58.0 % $119.65 $69.36 417 59.9 % $125.55 $75.25 97.6 % 98.2 %

Totals/Averages 1,132 54 % 36 % 10 % 631 59.0 % $118.60 $69.95 639 61.4 % $124.78 $76.63 100.0 % 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.

Average RateCom

mer

cial

Leisu

re

Grou

p


Number of Rooms Average Rate Occ.



FIGURE 1-3 SECONDARY COMPETITORS – OPERATING PERFORMANCE


Grou

p

Com

mer

cial

Leisu

re

Total Competitive

Level



PropertyNumber of

Rooms Occ. Average Rate RevPAR Occ. Average Rate RevPAR

Silver Beach Hotel 150 35 % 55 % 10 % 50 % 75 40 - 45 % $110 - $115 $50 - $55 75 45 - 50 % $115 - $120 $55 - $60

Inn at Harbor Shores 92 35 55 10 50 46 50 - 55 160 - 170 80 - 85 46 55 - 60 170 - 180 95 - 100

Holiday Inn Express Benton Harbor

78 45 50 5 50 39 70 - 75 110 - 115 80 - 85 39 70 - 75 120 - 125 85 - 90

Springhill Suites by Marriott Benton Harbor St Joseph

92 60 30 10 50 0 — — — 8 30 - 35 125 - 130 45 - 50

Hilton Garden Inn Benton Harbor Saint Joseph

106 55 35 10 50 53 70 - 75 130 - 140 90 - 95 53 70 - 75 130 - 140 95 - 100

Comfort Suites Benton Harbor 62 55 30 15 50 31 55 - 60 90 - 95 50 - 55 31 55 - 60 95 - 100 55 - 60

Best Western Benton Harbor St. Joseph

98 65 25 10 50 49 55 - 60 100 - 105 55 - 60 49 55 - 60 105 - 110 60 - 65

Fairfield Inn & Suites by Marriott New Buffalo

105 65 25 10 50 53 55 - 60 120 - 125 65 - 70 53 60 - 65 125 - 130 75 - 80

Holiday Inn Express Hotel & Suites New Buffalo

80 60 30 10 50 40 55 - 60 125 - 130 75 - 80 40 60 - 65 130 - 140 80 - 85

Comfort Inn Plaza 47 55 35 10 50 24 55 - 60 110 - 115 60 - 65 24 55 - 60 120 - 125 70 - 75

Totals/Averages 910 52 % 38 % 10 % 50 % 409 58.0 % $119.65 $69.36 417 59.9 % $125.55 $75.25


Grou

p

Com

mer

cial

Leisu

re

Total Competitive

Level




Based on our analysis presented in the Projection of Occupancy and Average Rate chapter, we have chosen to use a stabilized occupancy level of 62% and a base-year rate position of $115.00 for the proposed subject hotel. 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

Year

Base Year 61.4 % — $124.78 — — $115.00 92.2 %2017 56.9 2.0 % 127.28 — 2.0 % 117.30 92.22018 60.7 2.5 130.46 — 2.5 120.23 92.22019 59.4 3.0 134.37 58.0 % 3.0 123.84 92.22020 60.3 3.0 138.40 61.0 3.0 127.55 92.22021 60.3 3.0 142.55 62.0 3.0 131.38 92.22022 60.3 3.0 146.83 62.0 3.0 135.32 92.2

Area-wide Market (Calendar Year) Subject Property (Calendar Year)

OccupancyAverage Rate

GrowthAverage

Rate OccupancyAverage Rate

GrowthAverage

RateAverage Rate Penetration

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

2019 58 % $123.84 $123.842020 61 127.55 127.552021 62 131.38 131.382022 62 135.32 135.32


Before DiscountAverage Rate After Discount

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.

Summary of Forecast Occupancy and Average Rate

Summary of Forecast Income and Expense Statement


FIGURE 1-6 DETAILED FORECAST OF INCOME AND EXPENSE

2019 (Calendar Year) 2020 Stabilized 2022 2023

Number of Rooms: 65 65 65 65 65Occupancy: 58% 61% 62% 62% 62%Average Rate: $123.84 $127.55 $131.38 $135.32 $139.38RevPAR: $71.83 $77.81 $81.46 $83.90 $86.42Days Open: 365 365 365 365 365Occupied Rooms: 13,761 %Gross PAR POR 14,472 %Gross PAR POR 14,710 %Gross PAR POR 14,710 %Gross PAR POR 14,710 %Gross PAR POR OPERATING REVENUERooms $1,704 98.5 % $26,215 $123.83 $1,846 98.5 % $28,400 $127.55 $1,933 98.5 % $29,738 $131.41 $1,991 98.5 % $30,631 $135.35 $2,050 98.5 % $31,538 $139.37Other Operated Departments 23 1.3 358 1.69 24 1.3 375 1.68 25 1.3 388 1.71 26 1.3 399 1.77 27 1.3 411 1.82Miscellaneous Income 3 0.2 48 0.23 3 0.2 50 0.22 3 0.2 52 0.23 3 0.2 53 0.24 4 0.2 55 0.24 Total Operating Revenues 1,730 100.0 26,622 125.75 1,874 100.0 28,825 129.46 1,962 100.0 30,178 133.35 2,020 100.0 31,083 137.36 2,080 100.0 32,005 141.43DEPARTMENTAL EXPENSES *Rooms 417 24.5 6,416 30.31 438 23.7 6,740 30.27 454 23.5 6,987 30.87 468 23.5 7,197 31.80 482 23.5 7,412 32.75Other Operated Departments 9 40.6 145 0.69 10 40.1 150 0.68 10 40.0 155 0.69 10 40.0 160 0.71 11 40.0 165 0.73 Total Expenses 426 24.6 6,561 30.99 448 23.9 6,890 30.95 464 23.7 7,142 31.56 478 23.7 7,356 32.51 493 23.7 7,577 33.48DEPARTMENTAL INCOME 1,304 75.4 20,060 94.76 1,426 76.1 21,935 98.52 1,497 76.3 23,036 101.79 1,542 76.3 23,727 104.85 1,588 76.3 24,428 107.94UNDISTRIBUTED OPERATING EXPENSESAdministrative & General 145 8.4 2,225 10.51 151 8.0 2,320 10.42 156 8.0 2,399 10.60 161 8.0 2,471 10.92 165 8.0 2,545 11.25Info & Telecom Systems 18 1.1 280 1.32 19 1.0 292 1.31 20 1.0 302 1.33 20 1.0 311 1.37 21 1.0 320 1.41Marketing 86 5.0 1,325 6.26 90 4.8 1,381 6.20 93 4.7 1,428 6.31 96 4.7 1,471 6.50 98 4.7 1,515 6.69Franchise Fee 162 9.4 2,490 11.76 175 9.4 2,698 12.12 184 9.4 2,825 12.48 189 9.4 2,910 12.86 195 9.4 2,996 13.24Prop. Operations & Maint. 68 3.9 1,049 4.96 75 4.0 1,154 5.19 82 4.2 1,257 5.55 84 4.2 1,294 5.72 87 4.2 1,333 5.89Utilities 69 4.0 1,060 5.01 72 3.8 1,105 4.96 74 3.8 1,143 5.05 76 3.8 1,177 5.20 79 3.8 1,212 5.36 Total Expenses 548 31.8 8,429 39.82 582 31.0 8,950 40.20 608 31.1 9,354 41.33 626 31.1 9,634 42.57 645 31.1 9,922 43.84GROSS HOUSE PROFIT 756 43.6 11,631 54.94 844 45.1 12,985 58.32 889 45.2 13,682 60.46 916 45.2 14,093 62.28 943 45.2 14,506 64.10Management Fee 52 3.0 799 3.77 56 3.0 865 3.88 59 3.0 905 4.00 61 3.0 933 4.12 62 3.0 960 4.24INCOME BEFORE NON-OPR. INC. & EXP. 704 40.6 10,833 51.17 788 42.1 12,120 54.44 831 42.2 12,777 56.46 855 42.2 13,160 58.15 880 42.2 13,546 59.86NON-OPERATING INCOME & EXPENSEProperty Taxes 44 2.5 678 3.20 45 2.4 698 3.14 47 2.4 719 3.18 48 2.4 741 3.27 50 2.4 763 3.37Insurance 28 1.6 431 2.03 29 1.5 444 1.99 30 1.5 457 2.02 31 1.5 471 2.08 32 1.5 485 2.14Reserve for Replacement 35 2.0 532 2.52 56 3.0 865 3.88 78 4.0 1,207 5.33 81 4.0 1,243 5.49 83 4.0 1,280 5.66 Total Expenses 107 6.1 1,641 7.75 130 6.9 2,006 9.01 155 7.9 2,383 10.53 160 7.9 2,455 10.85 164 7.9 2,528 11.17EBITDA LESS RESERVE $597 34.5 % $9,192 $43.42 $657 35.2 % $10,114 $45.42 $676 34.3 % $10,394 $45.93 $696 34.3 % $10,706 $47.31 $716 34.3 % $11,018 $48.69

*Departmental expenses are expressed as a percentage of departmental revenues.


FIGURE 1-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Number of Rooms: 65 65 65 65 65 65 65 65 65 65Occupied Rooms: 13,761 14,472 14,710 14,710 14,710 14,710 14,710 14,710 14,710 14,710Occupancy: 58% 61% 62% 62% 62% 62% 62% 62% 62% 62%Average Rate: $123.84 % of $127.55 % of $131.38 % of $135.32 % of $139.38 % of $143.56 % of $147.87 % of $152.31 % of $156.88 % of $161.58RevPAR: $71.83 Gross $77.81 Gross $81.46 Gross $83.90 Gross $86.42 Gross $89.01 Gross $91.68 Gross $94.43 Gross $97.26 Gross $100.18OPERATING REVENUERooms $1,704 98.5 % $1,846 98.5 % $1,933 98.5 % $1,991 98.5 % $2,050 98.5 % $2,112 98.5 % $2,175 98.5 % $2,240 98.5 % $2,308 98.5 % $2,377 98.5 %Other Operated Departments 23 1.3 24 1.3 25 1.3 26 1.3 27 1.3 28 1.3 28 1.3 29 1.3 30 1.3 31 1.3Miscellaneous Income 3 0.2 3 0.2 3 0.2 3 0.2 4 0.2 4 0.2 4 0.2 4 0.2 4 0.2 4 0.2 Total Operating Revenues 1,730 100.0 1,874 100.0 1,962 100.0 2,020 100.0 2,080 100.0 2,143 100.0 2,207 100.0 2,273 100.0 2,342 100.0 2,412 100.0DEPARTMENTAL EXPENSES *Rooms 417 24.5 438 23.7 454 23.5 468 23.5 482 23.5 496 23.5 511 23.5 526 23.5 542 23.5 559 23.5Other Operated Departments 9 40.6 10 40.1 10 40.0 10 40.0 11 40.0 11 40.0 11 40.0 12 40.0 12 40.0 12 40.0 Total Expenses 426 24.6 448 23.9 464 23.7 478 23.7 493 23.7 507 23.7 522 23.7 538 23.7 554 23.7 571 23.7DEPARTMENTAL INCOME 1,304 75.4 1,426 76.1 1,497 76.3 1,542 76.3 1,588 76.3 1,636 76.3 1,685 76.3 1,735 76.3 1,788 76.3 1,841 76.3UNDISTRIBUTED OPERATING EXPENSESAdministrative & General 145 8.4 151 8.0 156 8.0 161 8.0 165 8.0 170 8.0 176 8.0 181 8.0 186 8.0 192 8.0Info & Telecom Systems 18 1.1 19 1.0 20 1.0 20 1.0 21 1.0 21 1.0 22 1.0 23 1.0 23 1.0 24 1.0Marketing 86 5.0 90 4.8 93 4.7 96 4.7 98 4.7 101 4.7 104 4.7 108 4.7 111 4.7 114 4.7Franchise Fee 162 9.4 175 9.4 184 9.4 189 9.4 195 9.4 201 9.4 207 9.4 213 9.4 219 9.4 226 9.4Prop. Operations & Maint. 68 3.9 75 4.0 82 4.2 84 4.2 87 4.2 89 4.2 92 4.2 95 4.2 98 4.2 100 4.2Utilities 69 4.0 72 3.8 74 3.8 76 3.8 79 3.8 81 3.8 84 3.8 86 3.8 89 3.8 91 3.8 Total Expenses 548 31.8 582 31.0 608 31.1 626 31.1 645 31.1 664 31.1 684 31.1 705 31.1 726 31.1 748 31.1GROSS HOUSE PROFIT 756 43.6 844 45.1 889 45.2 916 45.2 943 45.2 972 45.2 1,000 45.2 1,030 45.2 1,062 45.2 1,093 45.2Management Fee 52 3.0 56 3.0 59 3.0 61 3.0 62 3.0 64 3.0 66 3.0 68 3.0 70 3.0 72 3.0INCOME BEFORE NON-OPR. INC. & EXP. 704 40.6 788 42.1 831 42.2 855 42.2 880 42.2 907 42.2 934 42.2 962 42.2 992 42.2 1,021 42.2NON-OPERATING INCOME & EXPENSEProperty Taxes 44 2.5 45 2.4 47 2.4 48 2.4 50 2.4 51 2.4 53 2.4 54 2.4 56 2.4 57 2.4Insurance 28 1.6 29 1.5 30 1.5 31 1.5 32 1.5 32 1.5 33 1.5 34 1.5 35 1.5 37 1.5Reserve for Replacement 35 2.0 56 3.0 78 4.0 81 4.0 83 4.0 86 4.0 88 4.0 91 4.0 94 4.0 96 4.0 Total Expenses 107 6.1 130 6.9 155 7.9 160 7.9 164 7.9 169 7.9 174 7.9 180 7.9 185 7.9 190 7.9EBITDA LESS RESERVE $597 34.5 % $657 35.2 % $676 34.3 % $696 34.3 % $716 34.3 % $738 34.3 % $760 34.3 % $783 34.3 % $807 34.3 % $831 34.3 %

1 1 1 1 1 1 1 1 1 1*Departmental expenses are expressed as a percentage of departmental revenues.

% ofGross


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. 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).

Scope of Work


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.

March-2017 Description of the Site and Neighborhood Proposed Hotel – Bridgman, Michigan 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 subject site is located southwest of Downtown Bridgman, in the southwest quadrant of the intersection formed by Red Arrow Highway and Interstate 94. This site is in the city of Bridgman, Michigan. The subject site measures approximately 13.20 acres, or 574,992 square feet. The parcel's adjacent uses are set forth in the following table. FIGURE 2-1 SUBJECT PARCEL'S ADJACENT USES

Direction

North Residential South Vacant LandEast Red Arrow HighwayWest Vacant Land

Adjacent Use

For purposes of this market study, we have assumed the 13.2-acre parcel located just south of Interstate 94 along Red Arrow Highway is the subject site. We note that other parcels in similar locations proximate to Interstate 94 along Red Arrow Highway may also be viable for hotel development as long as the parcels have similar location, visibility, and accessibility attributes.

Physical Characteristics


VIEW OF SUBJECT SITE

The topography of the site is generally flat, and the shape should 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.

Topography and Site Utility


AERIAL PHOTOGRAPH

VIEW FROM SITE TO THE NORTH

VIEW FROM SITE TO THE SOUTH


VIEW FROM SITE TO THE EAST

VIEW FROM SITE TO THE WEST

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.

Access and Visibility


MAP OF REGIONAL ACCESS ROUTES

Regional access to/from the city of Bridgman and the subject site, in particular, is considered very good. The subject market is served by a variety of additional local highways, which are illustrated on the map. Vehicular access to the subject site should be provided by Red Arrow Highway. The subject site is located near a busy intersection and is relatively simple to locate from Interstate 94, 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 very good accessibility, and the proposed hotel is expected to enjoy very good visibility from within its local neighborhood. The proposed subject hotel will be served by the South Bend International Airport, which is located approximately 20 miles to the south of the subject site.

Airport Access


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 Lake Street to the north, California Road to the east, Snow Road to the south, and Lake Michigan to the west. The neighborhood is characterized by restaurants, gas stations, and residential areas along the primary thoroughfares, with additional residential areas located along the secondary roadways. Some specific businesses and restaurants in the area include McDonald's, a BP gas station, and Quiznos. In general, this neighborhood is in the stable stage of its life cycle. 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.

MAP OF NEIGHBORHOOD

Neighborhood


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 subject site. Overall, the subject site is well situated with respect to demand generators.

ACCESS TO DEMAND GENERATORS AND ATTRACTIONS

Proximity to Local Demand Generators and Attractions


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.

Utilities

Soil and Subsoil Conditions

Nuisances and Hazards

Flood Zone


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.


Given the rural location of the proposed subject site, the parcel is not subject to zoning codes. Additional details pertaining to the proposed subject property’s zoning regulations are summarized in the following table. ZONING

Municipality Governing Zoning Berrien CountyCurrent Zoning NoneCurrent Use Vacant LandIs Current Use Permitted Not ApplicableIs Change in Zoning Likely Not ApplicablePermitted Uses Not ApplicableHotel Allowed YesLegally Non-Conforming Not Applicable

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 subject site is favorably located near the interstate and a major interchange. In general, the site should be well suited for future hotel use, with acceptable access, visibility, and topography for an effective operation.

Zoning

Easements and Encroachments

Conclusion

March-2017 Market Area Analysis Proposed Hotel – Bridgman, Michigan 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). 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 Bridgman, the county of Berrien, and the state of Michigan. Bridgman is a part of the greater Niles-Benton Harbor Metropolitan Statistical Area, which includes a majority of Berrien County. Situated along the banks of Lake Michigan between Chicago and Detroit, the cities of Bridgman, Stevensville, Benton Harbor, and St. Joseph benefit from a diverse economic base. Like much of the region, the community is deeply rooted in the manufacturing industry, although the healthcare and tourism sectors have gained vital importance within recent years. Additionally, the two nuclear power plants facilities in the region continue to draw professionals to the area during the bi-annual shutdown periods when the facilities are cleaned and retooled.

Market Area Definition


BRIDGMAN

The proposed subject property’s market area can be defined by its Combined Statistical Area (CSA): South Bend-Elkhart-Mishawaka, IN-MI. The CSA represents adjacent metropolitan and micropolitan statistical areas that have a moderate degree of employment interchange. Micropolitan statistical areas represent urban areas in the United States based around a core city or town with a population of 10,000 to 49,999; the MSA requires the presence of a core city of at least 50,000 people and a total population of at least 100,000. The following exhibit illustrates the market area.


MAP OF MARKET AREA

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.

Economic and Demographic Review


FIGURE 3-1 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY

Average AnnualCompounded Change

2000 2010 2016 2020 2000-10 2010-16 2016-20

Resident Population (Thousands)Berrien County 162.5 156.8 155.3 155.7 (0.4) % (0.2) % 0.1 %Niles-Benton Harbor, MI MSA 162.5 156.8 155.3 155.7 (0.4) (0.2) 0.1South Bend-Elkhart-Mishawaka, IN-MI CSA 708.1 720.2 727.9 737.6 0.2 0.2 0.3State of Michigan 9,952.5 9,876.5 9,959.6 10,075.4 (0.1) 0.1 0.3United States 282,162.4 309,347.1 324,506.9 336,690.4 0.9 0.8 0.9

Per-Capita Personal Income*Berrien County $32,154 $35,061 $38,014 $40,330 0.9 1.4 1.5Niles-Benton Harbor, MI MSA 32,154 35,061 38,014 40,330 0.9 1.4 1.5South Bend-Elkhart-Mishawaka, IN-MI CSA 32,515 33,111 37,017 39,424 0.2 1.9 1.6State of Michigan 36,115 34,627 38,672 41,289 (0.4) 1.9 1.7United States 36,812 39,622 43,613 46,375 0.7 1.6 1.5

W&P Wealth IndexBerrien County 86.7 86.8 85.6 85.4 0.0 (0.2) (0.1)Niles-Benton Harbor, MI MSA 86.7 86.8 85.6 85.4 0.0 (0.2) (0.1)South Bend-Elkhart-Mishawaka, IN-MI CSA 89.5 83.9 84.8 84.9 (0.6) 0.2 0.0State of Michigan 97.4 86.4 87.9 88.2 (1.2) 0.3 0.1United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0

Food and Beverage Sales (Millions)*Berrien County $193 $180 $218 $225 (0.7) 3.2 0.9Niles-Benton Harbor, MI MSA 193 180 218 225 (0.7) 3.2 0.9South Bend-Elkhart-Mishawaka, IN-MI CSA 867 856 1,025 1,072 (0.1) 3.1 1.1State of Michigan 12,122 11,851 14,542 15,165 (0.2) 3.5 1.1United States 368,829 447,728 562,999 602,635 2.0 3.9 1.7

Total Retail Sales (Millions)*Berrien County $1,852 $1,671 $1,850 $1,908 (1.0) 1.7 0.8Niles-Benton Harbor, MI MSA 1,852 1,671 1,850 1,908 (1.0) 1.7 0.8South Bend-Elkhart-Mishawaka, IN-MI CSA 9,662 8,591 9,668 10,085 (1.2) 2.0 1.1State of Michigan 141,704 114,955 132,630 138,227 (2.1) 2.4 1.0United States 3,902,830 4,130,414 4,846,834 5,181,433 0.6 2.7 1.7

* Inflation AdjustedSource: Woods & Poole Economics, Inc.


The U.S. population has grown at an average annual compounded rate of 0.8% from 2010 through 2016. The county’s population has declined slightly when compared to the nation’s population; the average annual growth rate of -0.2% between 2010 and 2016 reflects a relatively stable area. Following this population trend, per-capita personal income increased slowly, at 1.4% on average annually for the county between 2010 and 2016. Local wealth indexes have remained stable in recent years, registering a relatively modest 85.6 level for the county in 2016. Food and beverage sales totaled $218 million in the county in 2016, versus $180 million in 2010. This reflects a 3.2% average annual change, which is stronger than the -0.7% pace recorded in the prior decade, the latter years of which were adversely affected by the recession. Over the long term, the pace of growth is forecast to moderate to a more sustainable level of 0.9%, which is forecast through 2020. The retail sales sector demonstrated an annual decline of -1.0% registered in the decade 2000 to 2010, followed by an increase of 1.7% in the period 2010 to 2016. An increase of 0.8% average annual change is expected in county retail sales through 2020. 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; 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 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 2016, as well as a forecast for 2020.

Workforce Characteristics


FIGURE 3-2 HISTORICAL AND PROJECTED EMPLOYMENT

Average AnnualCompounded Change

Percent Percent Percent PercentIndustry 2000 of Total 2010 of Total 2016 of Total 2020 of Total

Farm 2.1 2.3 % 1.8 2.2 % 1.8 2.2 % 1.8 2.1 % (1.6) % 0.4 % 0.1 %Forestry, Fishing, Related Activities And Other 0.2 0.2 0.3 0.4 0.4 0.5 0.4 0.5 4.1 4.9 1.2Mining 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.3 2.1 2.6 0.5Utilities 0.7 0.8 0.5 0.7 0.5 0.6 0.5 0.5 (2.3) (2.5) 0.3Construction 4.2 4.7 3.5 4.4 3.8 4.5 4.1 4.8 (1.8) 1.4 2.1Manufacturing 19.6 21.7 11.9 14.8 13.3 15.8 12.9 15.0 (4.8) 1.8 (0.7)Total Trade 13.1 14.5 10.4 12.9 10.7 12.8 10.9 12.6 (2.3) 0.6 0.3 Wholesale Trade 2.4 2.6 2.0 2.5 2.3 2.7 2.3 2.7 (1.7) 2.1 0.6 Retail Trade 10.8 11.9 8.4 10.4 8.5 10.1 8.6 9.9 (2.4) 0.2 0.2Transportation And Warehousing 2.5 2.8 2.2 2.7 2.2 2.6 2.2 2.5 (1.3) (0.0) (0.2)Information 1.1 1.3 0.8 1.0 0.7 0.9 0.7 0.9 (3.5) (1.2) 0.4Finance And Insurance 2.5 2.7 2.6 3.3 2.9 3.5 3.2 3.7 0.6 1.9 2.0Real Estate And Rental And Lease 2.5 2.7 3.0 3.7 3.1 3.6 3.3 3.8 2.1 0.3 1.9Total Services 32.2 35.7 33.4 41.5 34.5 41.0 35.7 41.4 0.4 0.5 0.8

Professional And Technical Services 3.2 3.6 3.1 3.8 3.2 3.8 3.2 3.7 (0.4) 0.3 0.4Management Of Companies And Enterprises 0.2 0.2 0.4 0.5 0.2 0.2 0.2 0.2 7.2 (13.4) 1.3Administrative And Waste Services 5.6 6.2 6.4 7.9 6.5 7.7 6.8 7.9 1.3 0.3 1.1Educational Services 2.0 2.2 2.3 2.9 2.7 3.2 2.9 3.3 1.6 2.2 1.9Health Care And Social Assistance 8.7 9.7 9.2 11.4 8.8 10.5 8.9 10.3 0.6 (0.8) 0.3Arts, Entertainment, And Recreation 1.4 1.6 1.4 1.7 1.6 1.9 1.7 2.0 (0.1) 2.1 1.9Accommodation And Food Services 5.9 6.5 5.8 7.2 6.8 8.1 7.1 8.2 (0.2) 2.7 1.1Other Services, Except Public Administration 5.1 5.7 4.8 6.0 4.8 5.7 4.9 5.7 (0.6) 0.0 0.4

Total Government 9.4 10.4 9.9 12.3 9.9 11.7 10.2 11.8 0.5 (0.0) 0.7 Federal Civilian Government 0.5 0.6 0.4 0.5 0.3 0.4 0.3 0.3 (2.4) (4.4) (1.6) Federal Military 0.3 0.4 0.3 0.4 0.3 0.3 0.3 0.3 (0.6) (2.1) 0.1 State And Local Government 8.5 9.5 9.2 11.4 9.3 11.1 9.6 11.1 0.7 0.2 0.8

TOTAL 90.2 100.0 % 80.6 100.0 % 84.1 100.0 % 86.1 100.0 % (1.1) % 0.7 % 0.6 %

MSA 90.2 — 80.6 — 84.1 — 86.1 — (1.1) % 0.7 % 0.6 %U.S. 165,370.9 — 173,034.7 — 191,870.8 — 203,418.4 — 0.9 1.7 1.5

Source: Woods & Poole Economics, Inc.

2000-2010 2010-2016 2016-2020


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 -1.1%. This trend was on par with the growth rate recorded by the MSA and also lagged the national average. More recently, the pace of total employment growth in the county accelerated to 0.7% on an annual average from 2010 to 2016, reflecting the initial years of the recovery. Of the primary employment sectors, Manufacturing recorded the highest increase in number of employees during the period from 2010 to 2016, increasing by 1,368 people, or 11.5%, and rising from 14.8% to 15.8% 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 Total Services sector, as well as the Total Trade sector, which expanded by 8.4% and 8.4%, respectively, in the period 2010 to 2016. Forecasts developed by Woods & Poole Economics, Inc. anticipate that total employment in the county will change by 0.6% on average annually through 2020. The trend is below the forecast rate of change for the U.S. as a whole during the same period. The following table reflects radial demographic trends for our market area measured by three points of distance from the subject site.

Radial Demographic Snapshot


FIGURE 3-3 DEMOGRAPHICS BY RADIUS

Population2022 Projection 1,510 5,024 9,2882017 Estimate 1,534 5,103 9,4462010 Census 1,583 5,270 9,7962000 Census 1,678 5,670 10,515

Growth 2017 - 2022 -1.6% -1.6% -1.7%Growth 2010 - 2017 -3.1% -3.2% -3.6%Growth 2000 - 2010 -5.6% -7.1% -6.8%

Households2022 Projection 636 2,122 3,9362017 Estimate 643 2,144 3,9852010 Census 658 2,189 4,0922000 Census 640 2,211 4,200

Growth 2017 - 2022 -1.2% -1.0% -1.2%Growth 2010 - 2017 -2.2% -2.0% -2.6%Growth 2000 - 2010 2.8% -1.0% -2.6%

Income2017 Est. Average Household Income $67,618 $72,138 $72,6852017 Est. Median Household Income 47,175 49,421 50,409

2017 Est. Civ. Employed Pop 16+ by Occupation 690 2,275 4,294Architect/Engineer 20 71 129Arts/Entertainment/Sports 15 35 58Building Grounds Maintenance 13 51 151Business/Financial Operations 36 94 152Community/Social Services 5 32 66Computer/Mathematical 14 91 128Construction/Extraction 15 72 172Education/Training/Library 31 121 245Farming/Fishing/Forestry 0 5 44Food Prep/Serving 60 195 333Health Practitioner/Technician 30 100 175Healthcare Support 14 51 97Maintenance Repair 12 48 103Legal 4 9 11Life/Physical/Social Science 0 3 13Management 119 335 546Office/Admin. Support 113 323 555Production 66 213 405Protective Services 12 39 86Sales/Related 72 213 435Personal Care/Service 5 68 141Transportation/Moving 35 105 251

0.00 - 1.00 miles 0.00 - 3.00 miles 0.00 - 5.00 miles

Source: The Nielsen Company


This source reports a population of 9,446 within a five-mile radius of the subject site, and 3,985 households within this same radius. Average household income within a five-mile radius of the subject site is currently reported at $72,685, while the median is $50,409. The following table presents historical unemployment rates for the proposed subject hotel’s market area. FIGURE 3-4 UNEMPLOYMENT STATISTICS

Year

2006 7.3 % 7.0 % 4.6 %2007 6.9 7.0 4.62008 7.8 8.0 5.82009 12.7 13.7 9.32010 12.0 12.6 9.62011 10.2 10.4 8.92012 9.1 9.1 8.12013 8.7 8.8 7.42014 6.8 7.3 6.22015 5.0 5.4 5.3

Recent Month - Dec2015 4.0 % 4.5 % 5.0 %2016 4.6 4.4 4.7

U.S.StateMSA

* 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

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 135,000, 204,000, and 156,000 jobs in October, November, and December 2016, respectively. The strongest gains in December were recorded in the healthcare sector and the social assistance sector. The national unemployment rate remains low, at 4.9% in October, 4.6% in November, and 4.7% in December; 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.

Unemployment Statistics


Locally, the unemployment rate was % in 2015; for this same area in 2016, the most recent month’s unemployment rate was registered at %, versus % for the same month in 2015. After showing year-over-year improvement, unemployment began to rise in 2008 as the region entered an economic slowdown, and this trend continued in 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 in unemployment, which can be attributed to the reported restructuring at Whirlpool Corporation. However, our interviews with economic development officials reflect a positive outlook, primarily attributed to healthy employment levels at local entities such as Lakeland Health. 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 - BRIDGMAN

Number ofRank Firm Employees

1 DC Cook Plant 9002 Westwood 1013 Bridgman School District 1004 Eagle Technologies 805 Woodland Terrace 656 Harding's Friendly Market 617 Pratt Industries 608 Great Lakes Metal Stamping 549 Siemens Ford 5010 Kruger Plastic Products 45

Source: The Greater Bridgman Area Chamber and Growth Alliance, 2016

Major Business and Industry


FIGURE 3-6 MAJOR EMPLOYERS - BERRIEN COUNTY

Number ofRank Firm Employees1 Whirlpool Corporation 4,0002 Lakeland Regional Health System 3,8263 Andrew's University 2,1044 Four Winds Casino 1,8005 Indiana Michigan Power/Cook Nuclear Plant 1,2006 Leco Corporation 6507 Berrien County Government 6358 Lake Michigan College 4729 Modineer Company 45510 Benton Harbor Area Schools 375

Source: Berrien County, 2016

Berrien County benefits from a diverse economy, with manufacturing, higher education, and health care serving as the primary economic anchors for the market, as evidenced by the city's top employers: Lakeland Regional Health System, the Whirlpool Corporation, and Andrews University. In 2016, Lakeland Medical Center announced plans for a $160-million expansion, which will include adding a new five-floor medical building and renovating 80,000 square feet of existing space. Whirlpool Corporation has invested approximately $155 million over the past several years, including a Refrigeration and Technology Center, as well as a newly revamped Headquarters Building along the St. Joseph River. The region is also home to two large nuclear power facilities, Cook Nuclear Power Plant and Palisades Power Plant. In 2016, Eagle Technologies invested approximately $6 million to open a new 150,000-square-foot plant, creating an additional 100 jobs. Furthermore, the tourism industry in Berrien County is growing, as the Harbor Shores Golf Club in Benton Harbor has been chosen to host the PGA Senior Championship every other year from 2016 through 2024. Moreover, the addition of this upscale golfing community has attracted an influx of middle- and upper-class residents from around the region to establish second homes. Within Bridgman, The Haymarket Brewing Company opened a new brew house and production brewery in the former Michigan State Police Department building in early 2017. The diversity of economic anchors in Berrien County should bolster the local economy in the near term. 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

Airport Traffic


in passenger counts also reflect local business activity and the overall economic health of the area. South Bend International Airport, located three miles northwest of South Bend, is Indiana's second-busiest airport in terms of commercial traffic and the third busiest in terms of cargo. The airport is one of only a few transportation facilities in America that provides air, interstate bus, and interstate rail service from one multi-modal terminal. Commercial air service is provided by several airlines, which offer nonstop service to various major cities across the United States. A 45,000-square-foot concourse expansion was completed in February 2012, featuring nine additional gates and modern passenger amenities. In April 2014, airport officials announced the name change from South Bend Regional Airport to South Bend International Airport. The airport is currently undergoing a $9-million addition, which will include new international facilities and a new general aviation facility; the project is scheduled for completion by the spring of 2017. The following table illustrates recent operating statistics for the South Bend International Airport, which is the primary airport facility serving the proposed subject hotel’s submarket. FIGURE 3-7 AIRPORT STATISTICS - SOUTH BEND INTERNATIONAL AIRPORT

Year

2006 729,619 — — 2007 779,356 6.8 % 6.8 %2008 704,418 (9.6) (1.7)2009 625,077 (11.3) (5.0)2010 626,597 0.2 (3.7)2011 599,127 (4.4) (3.9)2012 589,030 (1.7) (3.5)2013 629,287 6.8 (2.1)2014 602,255 (4.3) (2.4)2015 623,903 3.6 (1.7)

Year-to-date, Nov2015 574,700 — — 2016 607,145 5.6 % —

*Annual average compounded percentage change from the previous year**Annual average compounded percentage change from first year of data

Source: South Bend International Airport

PassengerChange*TrafficPercent Percent

Change**


FIGURE 3-8 LOCAL PASSENGER TRAFFIC VS. NATIONAL TREND

-14%-12%-10%

-8%-6%-4%-2%0%2%4%6%8%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Chan

ge in

Pas

seng

er A

ctivi

ty

Source: HVS, Local Airport Authority

Local Passenger Volume National Passenger Volume

This facility recorded 623,903 passengers in 2015. The change in passenger traffic between 2014 and 2015 was 3.6%. The average annual change during the period shown was -1.5%. The subject market benefits from a variety of tourism and leisure attractions in the area. Leisure demand generators include Weko Beach, Warren Dunes State Park, the Golf Club at Harbor Shores, and many local breweries and wineries in the area. We note that Weko Beach attracts approximately 300,000 visitors in 2016, while Warren Dunes State Park attracted over 1.7 million annual visitors in 2016. Special events also play a role during key weekends, such as the Lake Michigan Shore Wine Fest, Weko Beach Brewer's Festival, Maytag Presents IRONMAN Steelhead 70.3 Triathlon, the PGA Senior Championship, and the Blossomtime Festival. No major changes related to these attributes of the market are expected in the near future.

Tourist Attractions


WEKO BEACH PARK

This section discussed a wide variety of economic indicators for the pertinent market area. Berrien County is experiencing a period of economic strength and expansion, primarily led by the manufacturing industry and the healthcare sector. Additionally, the leisure segment continues to grow throughout the county. Our market interviews and research revealed that Bridgman should benefit from new food and beverage outlets going forward. 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 ten quarters, with a relative low point in growth occurring during the fourth quarter of 2015 and the first quarter of 2016. During the following three quarters, the pace of growth slowed, falling to 1.8% during the first quarter of 2016. The economy then expanded by 1.4% and 2.9% in the third quarter of 2016. In recent months, increases in personal consumption expenditures, exports, private inventory investment, federal government spending, and nonresidential fixed investment were the primary factors in the net gain.

Conclusion


FIGURE 3-9 UNITED STATES GDP GROWTH RATE

1.6

3.9

2.8 2.8

-1.3

3.2

0.8

4.6

2.31.6

2.5

0.1

1.91.1

3.14.0

-1.2

4.05.0

2.3 2.02.6

2.0

0.9 0.81.4

2.9

-2.0-1.00.01.02.03.04.05.06.0

2010 2011 2012 2013 2014 2015 2016Source: tradingeconomics.com, Bureau of Economic Analysis

U.S. economic growth continues to support expansion of lodging demand; however, 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. Nevertheless, the stability in the U.S. economy is maintaining strong interest in hotel investments by a diverse array of market participants.

March-2017 Supply and Demand Analysis Proposed Hotel – Bridgman, Michigan 36

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. The subject site is located in the greater Southwestern Michigan lodging market, which includes cities such as Saint Joseph, Benton Harbor, Stevensville, and New Buffalo. This greater lodging market spans nearly 65 open and operating lodging facilities totaling roughly 4,520 guestrooms. Within this greater market, the direct submarket that will encompass the proposed subject hotel is known as Stevensville and Saint Joseph. The proposed subject hotel is expected to compete with three hotels on a primary level based on location and brand affiliation. We have considered an additional ten hotels as future secondary competitors given differences in location and hotel product. 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.

Definition of Subject Hotel Market

National Trends Overview


FIGURE 4-1 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

$0

$20

$40

$60

$80

$100

$120

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

Source: STR

RevPAR Average Rate Occupancy


FIGURE 4-2 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – YEAR-TO-DATE DATA

United States 65.4 % 65.5 % 0.1 % $120.30 $123.97 3.1 % $78.68 $81.19 3.2 %

RegionNew England 64.5 % 64.3 % (0.4) % $146.41 $150.70 2.9 % $94.49 $96.89 2.5 %Middle Atlantic 67.3 67.3 0.0 162.29 163.41 0.7 109.22 109.99 0.7South Atlantic 66.5 67.2 1.1 116.65 119.77 2.7 77.53 80.44 3.8East North Central 61.3 61.2 (0.2) 105.20 108.09 2.7 64.45 66.10 2.6East South Central 61.0 61.4 0.7 90.91 94.87 4.4 55.43 58.26 5.1West North Central 59.6 59.1 (0.8) 93.28 95.91 2.8 55.58 56.68 2.0West South Central 62.9 61.5 (2.3) 98.43 98.66 0.2 61.93 60.63 (2.1)Mountain 65.0 65.5 0.7 108.77 114.24 5.0 70.68 74.79 5.8Pacific 73.2 73.9 0.9 151.10 158.44 4.9 110.57 117.04 5.8

ClassLuxury 70.8 % 71.0 % 0.3 % $278.39 $283.05 1.7 % $196.98 $200.95 2.0 %Upper Upscale 72.7 72.6 (0.1) 173.53 177.77 2.4 126.08 129.07 2.4Upscale 72.0 72.0 0.1 135.70 139.47 2.8 97.72 100.49 2.8Upper Midscale 67.1 67.1 0.0 110.95 113.84 2.6 74.48 76.38 2.6Midscale 59.9 59.9 0.1 90.13 92.61 2.7 53.96 55.50 2.9Economy 58.6 58.6 0.0 67.60 70.17 3.8 39.63 41.13 3.8

LocationUrban 73.0 % 73.1 % 0.1 % $173.99 $177.37 1.9 % $127.04 $129.69 2.1 %Suburban 66.7 66.8 0.2 101.91 105.70 3.7 67.97 70.63 3.9Airport 73.6 73.4 (0.2) 109.78 113.56 3.4 80.78 83.40 3.3Interstate 57.2 56.6 (1.1) 81.35 83.04 2.1 46.53 46.97 0.9Resort 67.9 68.6 0.9 164.10 168.76 2.8 111.51 115.76 3.8Small Metro/Town 56.9 56.9 0.1 96.63 99.45 2.9 54.95 56.64 3.1

Chain ScaleLuxury 75.2 % 74.9 % (0.3) % $317.58 $322.84 1.7 % $238.70 $241.82 1.3 %Upper Upscale 74.3 74.2 (0.2) 174.98 178.82 2.2 130.08 132.63 2.0Upscale 74.3 73.8 (0.6) 134.82 138.50 2.7 100.13 102.27 2.1Upper Midscale 67.5 67.4 (0.2) 108.75 111.43 2.5 73.46 75.14 2.3Midscale 59.4 59.4 (0.1) 83.32 85.43 2.5 49.52 50.74 2.5Economy 58.1 57.9 (0.4) 58.82 60.84 3.4 34.16 35.20 3.1Independents 61.8 62.3 0.8 118.73 123.22 3.8 73.36 76.75 4.6

2015 2016 % Change

Occupancy - Thru December Average Rate - Thru December RevPAR - Thru December

Source: STR - December 2016 Lodging Review

2015 % Change2015 20162016 % Change


FIGURE 4-3 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – CALENDAR YEAR DATA

United States 64.4 % 65.6 % 1.7 % $114.92 $120.01 4.4 % $74.04 $78.67 6.3 %

RegionNew 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 1.9South Atlantic 64.9 66.6 2.6 110.77 116.36 5.0 71.91 77.49 7.8East North Central 60.5 61.5 1.6 99.68 104.72 5.1 60.34 64.37 6.7East South Central 59.2 61.1 3.1 85.96 90.62 5.4 50.92 55.34 8.7West North Central 59.6 59.7 0.2 89.96 93.06 3.4 53.63 55.56 3.6West South Central 63.9 63.1 (1.3) 96.05 98.21 2.2 61.36 61.94 0.9Mountain 63.1 65.0 3.0 103.07 108.69 5.5 65.05 70.66 8.6Pacific 71.4 73.3 2.7 141.90 150.79 6.3 101.32 110.54 9.1

PriceLuxury 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 5.0Upscale 71.5 72.4 1.3 128.61 134.69 4.7 91.92 97.51 6.1Upper midscale 65.8 67.0 1.9 105.86 110.41 4.3 69.61 73.99 6.3Midscale 59.0 60.2 2.1 86.44 90.21 4.4 50.97 54.29 6.5Economy 57.5 58.6 1.9 62.57 65.69 5.0 36.00 38.50 7.0

LocationUrban 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 7.4Airport 72.4 73.7 1.7 102.69 109.36 6.5 74.40 80.61 8.3Interstate 56.8 57.4 1.0 78.67 81.11 3.1 44.66 46.52 4.2Resort 66.1 68.2 3.2 156.21 163.49 4.7 103.32 111.57 8.0Small Metro/Town 56.4 57.1 1.2 92.65 95.91 3.5 52.27 54.77 4.8

Chain ScaleLuxury 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 4.8Upscale 73.8 74.3 0.7 127.55 133.79 4.9 94.15 99.46 5.6Mid-scale w/ F&B 66.4 67.6 1.9 104.45 108.93 4.3 69.32 73.66 6.3Mid-scale w/o F&B 58.3 59.5 2.1 79.84 83.18 4.2 46.55 49.50 6.3Economy 57.5 58.3 1.4 56.14 58.97 5.0 32.26 34.37 6.5Independents 60.7 62.2 2.5 113.21 118.25 4.4 68.70 73.55 7.1

2015% Change % Change

Occupancy Average Rate RevPAR

2014 2015 2015 % Change2014 2014

Source: STR - December 2015 Lodging Review


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 65.4% 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. In 2016, occupancy moved slightly higher (by 0.1 percentage point) to 65.5% in 2016, as demand growth slightly exceeded supply growth. Average rate increased 3.1% for the year, and the net change in RevPAR was 3.2%, reflecting a healthy lodging market overall. 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.

Historical Supply and Demand Data


FIGURE 4-4 HISTORICAL SUPPLY AND DEMAND TRENDS

YearAverage Daily Room Count

Available Room Nights Change

Occupied Room Nights Change Occupancy

Average Rate Change RevPAR Change

2004 659 240,450 — 120,612 — 50.2 % $80.11 — $40.18 — 2005 691 252,215 4.9 % 120,761 0.1 % 47.9 82.22 2.6 % 39.37 (2.0) %2006 691 252,215 0.0 155,136 28.5 61.5 82.13 (0.1) 50.52 28.32007 691 252,215 0.0 152,823 (1.5) 60.6 89.35 8.8 54.14 7.22008 691 252,215 0.0 153,609 0.5 60.9 94.94 6.3 57.83 6.82009 779 284,345 12.7 163,557 6.5 57.5 93.29 (1.7) 53.66 (7.2)2010 816 297,731 4.7 168,638 3.1 56.6 98.36 5.4 55.71 3.82011 843 307,695 3.3 170,411 1.1 55.4 102.60 4.3 56.82 2.02012 842 307,330 (0.1) 177,605 4.2 57.8 106.94 4.2 61.80 8.82013 842 307,330 0.0 178,066 0.3 57.9 108.24 1.2 62.71 1.52014 948 346,088 12.6 198,040 11.2 57.2 112.83 4.2 64.56 3.02015 1,040 379,600 9.7 222,250 12.2 58.5 118.97 5.4 69.65 7.9

Year-to-Date Through November2015 1,040 347,360 — 210,052 — 60.5 % $120.66 — $72.96 — 2016 1,048 350,120 0.8 % 212,600 1.2 % 60.7 125.05 3.6 % 75.93 4.1 %

2006 - 2009 4.1 1.8 4.3 2.02009 - 2015 4.9 5.2 4.1 4.4

Hotels Included in Sample

Silver Beach Hotel Secondary 150 May 2006 Mar 1969Best Western Benton Harbor St Joseph Secondary 98 Jan 2016 Aug 1988Hampton Inn St Joseph I 94 Primary 75 Oct 1995 Oct 1995Holiday Inn Express & Suites Benton Harbor Secondary 78 Jan 1999 Jan 1999Holiday Inn Express & Suites New Buffalo Secondary 80 May 2000 May 2000Holiday Inn Express & Suites St Joseph Primary 82 Jun 2000 Jun 2000Comfort Suites Benton Harbor St Joseph Secondary 62 Jul 2002 Jul 2002Comfort Suites Stevensville St Joseph Primary 65 Jul 2004 Jul 2004Fairfield Inn & Suites New Buffalo Secondary 105 Mar 2009 Mar 2009Comfort Inn New Buffalo Secondary 47 Aug 2010 Aug 2010The Inn at Harbor Shores Secondary 92 May 2014 May 2014Hilton Garden Inn Benton Harbor St Joseph Secondary 106 Aug 2014 Aug 2014Springhill Suites Benton Harbor St Joseph Secondary 92 Nov 2016 Nov 2016

Total 1,132

Source: STR

Competitive Status

YearOpened

Number Yearof Rooms Affiliated


The following map illustrates the locations of the subject property and its future competitors.

MAP OF COMPETITION

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 2015 in 58.5%, which compares to 57.2% for 2014. The overall average occupancy level for the calendar years presented equates to 57.3%. The STR data for the competitive set reflect a market-wide average rate level of $118.97 in 2015, which compares to $112.83 For 2014. The average across all calendar years presented for average rate equates to $108.63. These occupancy and average rate trends resulted in a RevPAR level of $69.65 in 2015. Both occupancy and average rate first peaked for this selected set of competitive hotels in 2008, resulting in a RevPAR of nearly $58, before declining to a low point of roughly $54 by year-end 2009 because of the recession. A rapid recovery began in 2010 that extended through 2012, at which time the prior RevPAR peak was exceeded. RevPAR continued to rise from 2013 through 2015, with growth driven largely by average rate. The entrance of new supply in 2009 and 2010 contributed to decreases in occupancy from 2009 through 2011; however, given the new upper-midscale property types, hoteliers were able to increase average rates market-wide. However, we note that the Hilton Garden Inn, which opened in 2011, was largely absorbed within the first year of operation. Primary factors contributing to these trends included increased commercial demand from expansions at Whirlpool and the Cook Nuclear Power Plant shutdowns every eighteen months, bringing approximately 1,000 out-of-town workers several weeks. Year-to-date 2016 data illustrate relatively flat occupancy growth and a roughly $4.39 gain in average rate. RevPAR reached its high point in the summer of 2016, which was largely influenced by the biannual PGA tournament, which bolstered average rates. This event is anticipated to be held every other year through year 2024. The near-term outlook is generally positive given the strong demand generators in the area, despite the recent opening of the SpringHill Suites by Marriott and the planned Fairfield Inn & Suites by Marriott and Staybridge Suites. Monthly occupancy and average rate trends are presented in the following tables. Seasonality


FIGURE 4-5 MONTHLY OCCUPANCY TRENDS

Month 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

January 29.1 % 28.1 % 32.9 % 41.1 % 42.4 % 40.6 % 29.5 % 31.9 % 31.4 % 33.3 % 39.5 % 31.9 %February 38.3 32.6 39.6 44.9 49.6 49.0 44.2 40.7 43.1 41.1 51.4 44.2March 40.3 38.5 53.7 47.8 52.6 50.4 49.0 44.9 54.2 50.5 49.1 51.9April 45.3 45.8 63.1 50.9 64.0 57.2 48.5 46.2 59.4 61.7 50.9 53.8May 54.5 43.8 64.9 58.6 61.3 56.1 54.2 56.7 66.1 60.1 64.9 57.3June 58.7 60.0 70.8 72.0 70.2 67.0 68.1 68.4 75.6 73.7 67.1 71.8July 70.6 77.3 82.1 82.1 84.5 79.6 86.8 86.6 86.6 85.4 85.1 86.7August 65.7 70.2 81.8 84.5 83.5 76.5 81.0 84.8 80.2 81.3 79.9 81.4September 61.3 52.1 78.0 79.9 67.5 64.4 65.7 69.3 63.0 65.1 63.2 71.0October 64.0 50.1 72.3 71.9 66.5 62.2 68.8 61.7 58.7 63.3 59.4 64.9November 40.1 43.1 57.2 52.1 48.4 49.9 50.2 43.0 42.8 46.6 41.8 48.8December 29.8 31.8 40.2 40.1 39.5 33.6 31.9 29.2 31.3 32.1 31.2 37.8

Annual Occupancy 50.2 % 47.9 % 61.5 % 60.6 % 60.9 % 57.5 % 56.6 % 55.4 % 57.8 % 57.9 % 57.2 % 58.5 %

Source: STR

FIGURE 4-6 MONTHLY AVERAGE RATE TRENDS

Month 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

January $70.15 $74.51 $75.20 $76.38 $83.38 $83.63 $82.95 $84.91 $85.55 $87.89 $87.14 $90.67February 70.70 75.55 75.29 78.69 84.98 84.15 81.54 84.87 85.69 86.80 89.16 92.56March 71.74 72.20 69.81 78.22 84.21 86.12 81.65 85.58 86.05 86.08 88.11 89.64April 70.81 71.33 68.40 78.96 84.47 84.67 83.60 87.74 89.08 89.74 89.66 91.77May 78.34 76.99 75.03 81.27 91.61 89.68 92.17 93.90 108.22 101.03 111.07 115.33June 85.05 85.33 86.48 93.38 98.19 95.88 101.59 105.71 114.83 119.00 124.02 132.04July 96.60 98.73 94.37 103.50 109.37 107.27 123.77 127.15 131.96 136.81 141.66 153.52August 90.33 90.95 92.73 102.48 111.88 107.58 116.18 121.99 133.63 138.01 145.72 153.92September 82.86 83.93 89.53 92.22 99.66 97.61 104.23 108.71 114.21 114.07 115.82 131.19October 72.96 79.86 84.05 91.54 94.41 90.12 93.17 99.67 98.48 101.22 107.34 115.24November 73.03 76.85 79.65 86.21 87.77 83.82 86.49 89.22 91.39 91.60 91.70 94.72December 73.42 72.69 74.88 82.07 83.91 85.61 87.14 85.06 87.19 87.37 88.30 89.85

Annual Average Rate $80.11 $82.22 $82.13 $89.35 $94.94 $93.29 $98.36 $102.60 $106.94 $108.24 $112.83 $118.97

Source: STR


FIGURE 4-7 SEASONALITY

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

High Season - July, August Occupancy 68.1 % 73.8 % 81.9 % 83.3 % 84.0 % 78.0 % 83.8 % 85.7 % 83.4 % 83.4 % 82.3 % 84.1 %Average Rate $93.58 $95.03 $93.55 $102.99 $110.61 $107.42 $120.00 $124.60 $132.76 $137.39 $143.74 $153.71RevPAR 63.76 70.09 76.64 85.82 92.92 83.82 100.58 106.75 110.75 114.54 118.36 129.24

Shoulder Season - April, May, June, September, October Occupancy 57.1 % 50.3 % 69.8 % 66.6 % 65.9 % 61.4 % 61.2 % 60.4 % 64.5 % 64.7 % 61.3 % 63.7 %Average Rate $78.23 $79.94 $81.24 $88.36 $93.83 $91.83 $95.76 $100.16 $105.62 $105.57 $110.96 $118.59RevPAR 44.63 40.21 56.72 58.88 61.81 56.34 58.59 60.54 68.15 68.33 68.03 75.57

Low Season - January, February, March, November, December Occupancy 35.4 % 34.8 % 44.8 % 45.2 % 46.4 % 44.6 % 40.9 % 37.9 % 40.5 % 40.7 % 41.9 % 42.9 %Average Rate $71.90 $74.40 $74.96 $80.50 $84.89 $84.70 $83.95 $86.06 $87.20 $87.98 $88.99 $91.54RevPAR 25.46 25.90 33.56 36.36 39.41 37.75 34.30 32.58 35.30 35.79 37.29 39.23

Source: Smith Travel Research


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. Conversely, occupancy and average rate drop by nearly half in the winter as compared to the peak demand months. 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).

Patterns of Demand


FIGURE 4-8 OCCUPANCY BY DAY OF WEEK (TRAILING 12 MONTHS)

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month

Dec - 15 25.5 % 42.3 % 45.0 % 39.4 % 37.4 % 33.9 % 39.4 % 37.8 %Jan - 16 21.5 34.7 38.0 38.4 28.3 26.2 34.9 31.3Feb - 16 24.0 41.4 46.6 47.3 35.2 37.8 50.7 40.5Mar - 16 35.1 53.1 57.5 54.5 46.8 51.4 57.5 51.0Apr - 16 38.7 59.0 61.9 62.9 56.1 59.5 72.0 59.1May - 16 50.0 55.0 61.4 63.4 58.2 65.7 77.9 61.1Jun - 16 52.3 74.8 80.4 75.1 71.4 76.9 88.0 74.1Jul - 16 75.8 83.2 88.0 88.5 86.1 88.2 96.8 86.7Aug - 16 64.4 78.4 78.8 75.4 76.6 80.1 90.0 77.7Sep - 16 57.2 54.8 67.8 67.4 58.9 73.3 87.3 66.6Oct - 16 54.2 67.0 73.6 71.9 67.7 74.8 85.3 70.5Nov - 16 28.4 44.3 50.3 51.3 51.2 56.0 58.7 48.7

Average 44.4 % 57.5 % 62.0 % 61.0 % 56.0 % 60.5 % 70.0 % 58.8 %

Source: STR

FIGURE 4-9 AVERAGE RATE BY DAY OF WEEK (TRAILING 12 MONTHS)


Dec - 15 $83.83 $87.95 $89.16 $88.98 $102.69 $85.80 $86.13 $89.85Jan - 16 87.96 90.88 92.27 91.65 88.40 86.30 90.31 89.89Feb - 16 89.45 93.14 95.96 93.75 91.07 89.79 99.04 93.72Mar - 16 86.61 90.12 93.27 91.93 90.24 90.89 95.10 91.53Apr - 16 91.09 96.03 96.32 96.52 92.29 96.95 104.05 97.02May - 16 125.58 113.79 114.93 117.23 117.80 137.33 150.41 125.78Jun - 16 118.83 118.52 119.96 117.18 119.68 166.92 183.17 135.66Jul - 16 154.40 134.96 132.15 132.98 136.00 195.69 211.18 160.90Aug - 16 144.12 137.33 136.26 135.18 137.01 206.64 217.82 158.76Sep - 16 137.69 108.97 110.92 112.95 115.16 170.01 194.48 140.10Oct - 16 105.68 105.27 107.75 106.29 105.57 134.64 148.34 118.25Nov - 16 90.54 94.26 96.90 97.09 93.68 96.65 102.47 96.52

Average $119.05 $110.16 $110.23 $110.01 $111.44 $142.44 $152.43 $123.14

Source: STR


FIGURE 4-10 OCCUPANCY, AVERAGE RATE, AND REVPAR BY DAY OF WEEK (MULTIPLE YEARS)

Occupancy (%)

Dec 13 - Nov 14 41.5 % 55.9 % 61.3 % 60.4 % 55.2 % 61.7 % 68.8 % 57.8 %Dec 14 - Nov 15 42.6 55.4 60.5 61.3 55.0 61.4 69.5 58.0Dec 15 - Nov 16 44.4 57.5 62.0 61.0 56.0 60.5 70.0 58.8

Change (Occupancy Points)FY 14 - FY 15 1.1 (0.4) (0.8) 0.9 (0.1) (0.2) 0.8 0.2FY 15 - FY 16 1.8 2.1 1.5 (0.3) 0.9 (1.0) 0.5 0.8

ADR ($)

Dec 13 - Nov 14 $107.80 $102.65 $104.24 $104.12 $105.09 $125.98 $134.81 $113.00Dec 14 - Nov 15 112.04 105.85 106.45 106.72 108.27 139.34 147.30 119.18Dec 15 - Nov 16 119.05 110.16 110.23 110.01 111.44 142.44 152.43 123.14

Change (Dollars)FY 14 - FY 15 $4.24 $3.20 $2.21 $2.60 $3.18 $13.35 $12.49 $6.18FY 15 - FY 16 7.02 4.32 3.78 3.30 3.17 3.10 5.14 3.96

Change (Percent)FY 14 - FY 15 3.9 % 3.1 % 2.1 % 2.5 % 3.0 % 10.6 % 9.3 % 5.5 %FY 15 - FY 16 6.3 4.1 3.5 3.1 2.9 2.2 3.5 3.3

RevPAR ($)

Dec 13 - Nov 14 $44.74 $57.33 $63.92 $62.85 $58.00 $77.69 $92.68 $65.27Dec 14 - Nov 15 47.74 58.68 64.44 65.42 59.60 85.62 102.41 69.10Dec 15 - Nov 16 52.84 63.38 68.36 67.16 62.38 86.11 106.74 72.40

Change (Dollars)FY 14 - FY 15 $3.00 $1.35 $0.53 $2.58 $1.60 $7.94 $9.73 $3.83FY 15 - FY 16 5.10 4.70 3.92 1.73 2.78 0.48 4.33 3.29

Change (Percent)FY 14 - FY 15 6.7 % 2.4 % 0.8 % 4.1 % 2.8 % 10.2 % 10.5 % 5.9 %FY 15 - FY 16 10.7 8.0 6.1 2.6 4.7 0.6 4.2 4.8

Source: STR

Total Year

Sunday Monday Tuesday Total Year

Wednesday Saturday

Wednesday Thursday Friday Saturday

Total YearSaturday

Friday

Thursday FridayWednesday

Sunday Monday Tuesday Thursday

Sunday Monday Tuesday

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.


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


FIGURE 4-11 PRIMARY COMPETITORS – OPERATING PERFORMANCE


Com

mer

cial

Leisu

re

Grou

p


Weighted Annual Room CountProperty Occ. RevPAR RevPAR


Yield Penetration

Holiday Inn Express Hotel & Suites Saint Joseph

82 60 % 30 % 10 % 82 60 - 65 % $120 - $125 $75 - $80 82 65 - 70 % $125 - $130 $80 - $85 100 - 110 % 110 - 120 %

Hampton Inn Saint Joseph Interstate 94

75 60 30 10 75 60 - 65 115 - 120 70 - 75 75 60 - 65 125 - 130 80 - 85 100 - 110 100 - 110

Comfort Suites Stevensville 65 55 35 10 65 55 - 60 105 - 110 60 - 65 65 60 - 65 110 - 115 65 - 70 95 - 100 85 - 90

Sub-Totals/Averages 222 59 % 31 % 10 % 222 60.9 % $116.74 $71.05 222 64.2 % $123.42 $79.23 104.5 % 103.4 %

Secondary Competitors 910 52 % 38 % 10 % 409 58.0 % $119.65 $69.36 417 59.9 % $125.55 $75.25 97.6 % 98.2 %

Totals/Averages 1,132 54 % 36 % 10 % 631 59.0 % $118.60 $69.95 639 61.4 % $124.78 $76.63 100.0 % 100.0 %


Average RateCom

mer

cial

Leisu

re

Grou

p


Number of Rooms Average Rate Occ.



FIGURE 4-12 PRIMARY COMPETITORS – FACILITY PROFILES

PropertyNumber of

RoomsYear

OpenedLast Major

Renovation(s)

Approx. Miles To Subject Property Food and Beverage Outlets

Indoor Meeting

Space (SF)Meeting Space

per Room

Holiday Inn Express Hotel & Suites Saint Joseph 82 2000 2016 11.3 2,000 24.4 3019 Lakeshore Drive

Hampton Inn Saint Joseph Interstate 94 75 1995 2015 7.4 None — 5050 Red Arrow Highway

Comfort Suites Stevensville 65 2004 2016 7.7 1,000 15.4 2633 West Marquette Woods Road

Breakfast dining area




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.


PRIMARY COMPETITOR #1 - HOLIDAY INN EXPRESS HOTEL & SUITES SAINT JOSEPH

FIGURE 4-13 ESTIMATED HISTORICAL OPERATING STATISTICS

YearWtd. Annual Room Count Occupancy RevPAR


Yield Penetration

Est. 2014 82 55 - 60 % $115 - $120 $70 - $75 100 - 110 % 100 - 110 %Est. 2015 82 60 - 65 120 - 125 75 - 80 100 - 110 100 - 110Est. 2016 82 65 - 70 125 - 130 80 - 85 100 - 110 110 - 120

Average Rate

This hotel benefits from its location proximate to Lake Michigan, which attracts a large amount of tourism demand. Overall, the property appeared to be in good condition. Its accessibility is inferior to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Hotel Bridgman MI.

Holiday Inn Express Hotel & Suites Saint Joseph 3019 Lakeshore Drive Saint Joseph, MI


PRIMARY COMPETITOR #2 - HAMPTON INN SAINT JOSEPH INTERSTATE 94




Yield Penetration

Est. 2014 75 60 - 65 % $110 - $115 $70 - $75 100 - 110 % 110 - 120 %Est. 2015 75 60 - 65 115 - 120 70 - 75 100 - 110 100 - 110Est. 2016 75 60 - 65 125 - 130 80 - 85 100 - 110 100 - 110

Average Rate

This hotel benefits from its strong brand affiliation and relatively recent renovations, which were completed in 2015. 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 Hotel Bridgman MI.

Hampton Inn Saint Joseph Interstate 94 5050 Red Arrow Highway Stevensville, MI


PRIMARY COMPETITOR #3 - COMFORT SUITES STEVENSVILLE




Yield Penetration

Est. 2014 65 60 - 65 % $105 - $110 $65 - $70 100 - 110 % 100 - 110 %Est. 2015 65 55 - 60 105 - 110 60 - 65 95 - 100 85 - 90Est. 2016 65 60 - 65 110 - 115 65 - 70 95 - 100 85 - 90

Average Rate

This hotel benefits from its well-known brand affiliation and a clearly visible location just off the nearby highway exit. 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 Hotel Bridgman MI.

Comfort Suites Stevensville 2633 West Marquette Woods Road Stevensville, MI


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.

Secondary Competitors


FIGURE 4-16 SECONDARY COMPETITOR(S) – OPERATING PERFORMANCE


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Total Competitive

Level



PropertyNumber of

Rooms Occ. Average Rate RevPAR Occ. Average Rate RevPAR

Silver Beach Hotel 150 35 % 55 % 10 % 50 % 75 40 - 45 % $110 - $115 $50 - $55 75 45 - 50 % $115 - $120 $55 - $60

Inn at Harbor Shores 92 35 55 10 50 46 50 - 55 160 - 170 80 - 85 46 55 - 60 170 - 180 95 - 100

Holiday Inn Express Benton Harbor

78 45 50 5 50 39 70 - 75 110 - 115 80 - 85 39 70 - 75 120 - 125 85 - 90

Springhill Suites by Marriott Benton Harbor St Joseph

92 60 30 10 50 0 — — — 8 30 - 35 125 - 130 45 - 50

Hilton Garden Inn Benton Harbor Saint Joseph 106 55 35 10 50 53 70 - 75 130 - 140 90 - 95 53 70 - 75 130 - 140 95 - 100

Comfort Suites Benton Harbor 62 55 30 15 50 31 55 - 60 90 - 95 50 - 55 31 55 - 60 95 - 100 55 - 60

Best Western Benton Harbor St. Joseph 98 65 25 10 50 49 55 - 60 100 - 105 55 - 60 49 55 - 60 105 - 110 60 - 65

Fairfield Inn & Suites by Marriott New Buffalo

105 65 25 10 50 53 55 - 60 120 - 125 65 - 70 53 60 - 65 125 - 130 75 - 80

Holiday Inn Express Hotel & Suites New Buffalo

80 60 30 10 50 40 55 - 60 125 - 130 75 - 80 40 60 - 65 130 - 140 80 - 85

Comfort Inn Plaza 47 55 35 10 50 24 55 - 60 110 - 115 60 - 65 24 55 - 60 120 - 125 70 - 75

Totals/Averages 910 52 % 38 % 10 % 50 % 409 58.0 % $119.65 $69.36 417 59.9 % $125.55 $75.25


Grou

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Total Competitive

Level




We have identified ten hotels that are expected to compete with the proposed subject hotel on a secondary level. The Silver Beach Hotel and Silver Shores Hotel are anticipated to be competitive based on similar leisure demand and proximity to Lake Michigan attractions; however, these hotels are located in Saint Joseph and are independent of a franchise affiliation. The Hilton Garden Inn is competitive based on similar corporate transient demand; however, this hotel is located in Benton Harbor and offers a select-service product. Similarly, the Holiday Inn Express, Comfort Suites Benton Harbor, Best Western, and SpringHill Suites by Marriott are competitive based on similar corporate transient demand and similar limited-service product types; however, these hotels are located in Benton Harbor, which is approximately 13 miles northwest of the subject site. The Fairfield Inn & Suites by Marriott, Comfort Inn, and Holiday Inn Express New Buffalo offer limited-service product types and locations proximate to Lake Michigan; however, these hotels are located in New Buffalo, approximately 13 miles to the southwest of the subject site. It is important to consider any new hotels that may have an impact on the proposed subject hotel’s operating performance. The following chart sets forth the hotels that have recently opened, are under construction, or are in the stages of early development in the Berrien County area. We have identified the following new supply that is expected to have some degree of competitive interaction with the proposed subject hotel, based on location, anticipated market orientation and price point, and/or operating profile.

FIGURE 4-17 NEW SUPPLY

Total

Proposed PropertyNumber

of Rooms Competitive

LevelEstimated Opening

Date Developer Development Stage

Proposed Subject Property 65 100 % 65 January 1, 2019 TBD Early DevelopmentFairfield Inn & Suites by Marriott 87 75 65 February 1, 2017 SSC Construction Co Under ConstructionStaybridge Suites 95 50 48 March 1, 2017 Harbor Hospitality Under Construction

Totals/Averages 247 178

Weighted Room Count

Given the eight-mile distance, the proposed Fairfield Inn & Suites by Marriott has been weighted secondarily competitive in our analysis. Furthermore, we note that a Staybridge Suites is proposed for a location approximately twelve miles from the subject site; however, this hotel is anticipated to target a different customer base given its extended-stay product type. Therefore, this hotel has also been weighted secondarily competitive in our analysis.

Supply Changes


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. 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 Bridgman submarket. The Proposed Hotel Bridgman MI 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.

FIGURE 4-18 HISTORICAL MARKET TRENDS

Year

Est. 2014 124,373 — 213,559 — 58.2 % $112.78 — $65.68 — Est. 2015 135,851 9.2 % 230,315 7.8 % 59.0 118.60 5.2 % 69.95 6.5 %Est. 2016 143,172 5.4 233,121 1.2 61.4 124.78 5.2 76.63 9.5

Avg. Annual Compounded Chg., Est. 2014-Est. 2016: 7.3 % 4.5 % 5.2 % 8.0 %

% ChangeMarket

Occupancy Market ADR% ChangeRoom Nights

Available % Change % ChangeMarket RevPAR

Accommodated Room Nights

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 2016 distribution of accommodated-room-night demand as follows.

Supply Conclusion

DEMAND

Demand Analysis Using Market Segmentation


FIGURE 4-19 ACCOMMODATED ROOM-NIGHT DEMAND

Marketwide

Market Segment

Commercial 77,769 54 %Leisure 51,278 36Group 14,124 10

Total 143,172 100 %

Accommodated Demand

Percentage of Total

The market’s demand mix comprises commercial demand, with this segment representing roughly 54% of the accommodated room nights in this Bridgman submarket. The remaining portion comprises leisure at 36%, with the final portion group in nature, reflecting 10%. 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 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 frequent-traveler programs), as well as location and convenience with respect to businesses and amenities, influence lodging choices in this segment. Companies typically 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 Whirlpool Corporation, Eagle Technologies, and DC Cook Plant. 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

Commercial Segment

Leisure Segment


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 highway-adjacent market is primarily generated by motorists on Interstate 94 seeking a convenient stopover en route to other destinations, as well as by those visiting friends and family in the area. Additionally, leisure demand is also generated from several state parks, such as Weko Beach and Warren Dunes, which have beaches along Lake Michigan. Furthermore, overflow demand on peak days from Notre Dame University also contributes to the leisure demand in this market. 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 Eagle Technologies, Lakeland Health, BLS, and Whirlpool Corporation, generate meeting demand for local hotels; furthermore, social groups represent primary sources of demand during weekend and holiday periods. 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 4-20 AVERAGE ANNUAL COMPOUNDED MARKET SEGMENT GROWTH RATES

Annual Growth RateMarket Segment

Commercial 12.0 % 8.0 % 6.0 % 1.5 % 0.0 % 0.0 %Leisure 10.0 10.0 5.0 1.5 0.0 0.0Group 10.0 5.0 2.0 0.5 0.0 0.0

Base Demand Growth 11.1 % 8.4 % 5.3 % 1.4 % 0.0 % 0.0 %

2017 2018 2019 2020 2021 2022

Group Segment

Base Demand Growth Rates


Figure 4-19, which was 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 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.

FIGURE 4-21 OCCUPANCY BY NIGHT OF THE WEEK


Dec - 15 25.5 % 42.3 % 45.0 % 39.4 % 37.4 % 33.9 % 39.4 % 37.8 %Jan - 16 21.5 34.7 38.0 38.4 28.3 26.2 34.9 31.3Feb - 16 24.0 41.4 46.6 47.3 35.2 37.8 50.7 40.5Mar - 16 35.1 53.1 57.5 54.5 46.8 51.4 57.5 51.0Apr - 16 38.7 59.0 61.9 62.9 56.1 59.5 72.0 59.1May - 16 50.0 55.0 61.4 63.4 58.2 65.7 77.9 61.1Jun - 16 52.3 74.8 80.4 75.1 71.4 76.9 88.0 74.1Jul - 16 75.8 83.2 88.0 88.5 86.1 88.2 96.8 86.7Aug - 16 64.4 78.4 78.8 75.4 76.6 80.1 90.0 77.7Sep - 16 57.2 54.8 67.8 67.4 58.9 73.3 87.3 66.6Oct - 16 54.2 67.0 73.6 71.9 67.7 74.8 85.3 70.5Nov - 16 28.4 44.3 50.3 51.3 51.2 56.0 58.7 48.7

Average 44.4 % 57.5 % 62.0 % 61.0 % 56.0 % 60.5 % 70.0 % 58.8 %

Source: STR

Latent Demand

Unaccommodated Demand


The following table presents our estimate of unaccommodated demand in the subject market. FIGURE 4-22 UNACCOMMODATED DEMAND ESTIMATE

Market Segment

Commercial 77,769 1.1 % 864Leisure 51,278 4.3 2,200Group 14,124 0.4 52

Total 143,172 2.2 % 3,116

Unaccommodated Demand Percentage

Unaccommodated Room Night Demand

Accommodated Room Night Demand

Accordingly, we have forecast unaccommodated demand equivalent to 2.2% of the base-year demand, resulting from our analysis of monthly and weekly peak demand and sell-out trends. 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. Although increases in demand are expected in the local market, we have accounted for this growth in the determination of market-segment growth rates rather than induced demand. 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.

Induced Demand

Accommodated Demand and Market-wide Occupancy


FIGURE 4-23 FORECAST OF MARKET OCCUPANCY

77,769 87,101 94,069 99,714 101,209 101,209 101,209Unaccommodated Demand 968 1,045 1,108 1,124 1,124 1,124

88,069 95,114 100,821 102,334 102,334 102,334Growth Rate 13.2 % 8.0 % 6.0 % 1.5 % 0.0 % 0.0 %

51,278 56,406 62,047 65,149 66,126 66,126 66,1262,420 2,662 2,795 2,836 2,836 2,836

58,826 64,708 67,944 68,963 68,963 68,96314.7 % 10.0 % 5.0 % 1.5 % 0.0 % 0.0 %

14,124 15,537 16,314 16,640 16,723 16,723 16,72357 60 62 62 62 62

15,594 16,374 16,701 16,785 16,785 16,78510.4 % 5.0 % 2.0 % 0.5 % 0.0 % 0.0 %

Base Demand 143,172 159,044 172,430 181,502 184,058 184,058 184,058Unaccommodated Demand 3,445 3,767 3,964 4,023 4,023 4,023Total Demand 162,489 176,196 185,466 188,081 188,081 188,081less: Residual Demand 1,295 1,192 0 0 0 0Total Accommodated Demand 161,193 175,004 185,466 188,081 188,081 188,081Overall Demand Growth 12.6 % 8.6 % 6.0 % 1.4 % 0.0 % 0.0 %Market Mix

54.3 % 54.2 % 54.0 % 54.4 % 54.4 % 54.4 % 54.4 %35.8 36.2 36.7 36.6 36.7 36.7 36.7

9.9 9.6 9.3 9.0 8.9 8.9 8.9639 677 677 677 677 677 677

Proposed Subject Property ¹ 65 65 65 65Fairfield Inn & Suites by Marriott ² 60 65 65 65 65 65Staybridge Suites ³ 40 48 48 48 48 48

Available Room Nights per Year 233,121 283,434 288,259 311,984 311,984 311,984 311,984Nights per Year 365 365 365 365 365 365 365Total Supply 639 777 790 855 855 855 855Rooms Supply Growth — 21.6 % 1.7 % 8.2 % 0.0 % 0.0 % 0.0 %

Marketwide Occupancy 61.4 % 56.9 % 60.7 % 59.4 % 60.3 % 60.3 % 60.3 %

¹ Opening in January 2019 of the 100% competitive, 65-room Proposed Subject Property² Opening in February 2017 of the 75% competitive, 87-room Fairfield Inn & Suites by Marriott³ Opening in March 2017 of the 50% competitive, 95-room Staybridge Suites

GroupExisting Hotel SupplyProposed Hotels

Totals

CommercialLeisure

Total DemandGrowth Rate

GroupBase DemandUnaccommodated DemandTotal DemandGrowth Rate

Unaccommodated Demand

2022

Base Demand

Total Demand

LeisureBase Demand

Commercial

2016 2017 2018 2019 2020 2021

March-2017 Description of the Proposed Improvements Proposed Hotel – Bridgman, Michigan 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. The Proposed Hotel will be a Limited-Service lodging facility containing 65 rentable units. The three-story property will open on January 1, 2019. The proposed hotel would be the first hotel in the city of Bridgman. The assumed site is proximate to the Weko Beach Park, and city officials noted the potential to construct a walkway from the hotel to the park, allowing hotel guests direct access to the beach. TYPICAL LIMITED-SERVICE HOTEL EXTERIOR

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.

Project Overview

Summary of the Facilities


FIGURE 5-1 PROPOSED FACILITIES SUMMARY

Guestroom Configuration

Standard and Suite-Style Guestrooms 65

Food & Beverage Facilities

Breakfast Dining Area TBD

Indoor Meeting & Banquet Facilities

Meeting Space TBD

Amenities & Services

Indoor Swimming Pool Guest Laundry AreaFitness Room Sundries CounterLobby Workstation Vending Area(s)

Infrastructure

Parking Spaces TBDElevatorsLife-Safety SystemsConstruction Details

TBDSprinklers, Smoke Detectors

Wood Construction

Square Footage

Number of Units

Seating Capacity

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 will house the public areas and the back-of-the-house space. Guestrooms are planned to be 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 hotel’s breakfast dining area 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 is anticipated to offer an indoor pool and a fitness room as recreational facilities. Other amenities are likely to include a lobby workstation, a sundries counter integrated into the front desk, a guest laundry facility, and vending areas on select guestroom floors. Overall, the supporting

Site Improvements and Hotel Structure

Planned Facilities


facilities should be appropriate for a hotel of this type, and we assume that they will meet brand standards. TYPICAL LIMITED-SERVICE HOTEL LOBBY

TYPICAL LIMITED-SERVICE HOTEL DINING AREA


TYPICAL LIMITED-SERVICE HOTEL PUBLIC SPACE

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 competitive product for this rural neighborhood.

Guestrooms


TYPICAL LIMITED-SERVICE HOTEL GUESTROOM


TYPICAL LIMITED-SERVICE HOTEL GUESTROOM LIVING AREA

The hotel is expected to be served by the necessary back-of-the-house space, including an in-house laundry facility, administrative offices, and a prep kitchen to service the needs of the breakfast dining area. 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 will 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. 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.

Back-of-the-House, ADA, and Environmental

Capital Expenditures


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 pre-marketing efforts will have introduced the product to major local accounts at least six months in advance of the opening date.

Conclusion

March-2017 Projection of Occupancy and Average Rate Proposed Hotel – Bridgman, Michigan 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. 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

Holiday Inn Express Hotel & Suites Saint Joseph 119 % 90 % 109 % 107 %Hampton Inn Saint Joseph Interstate 94 117 89 107 106Comfort Suites Stevensville 101 97 101 99Secondary Competition 93 104 97 98

Overa

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Grou

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The Holiday Inn Express Hotel & Suites Saint Joseph achieved the highest penetration rate within the commercial segment. The highest penetration rate in the leisure segment was achieved by the secondary competition, while the Holiday Inn Express Hotel & Suites Saint Joseph led the market with the highest group penetration rate.

Penetration Rate Analysis

Historical Penetration Rates by Market Segment


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.

Forecast of Subject Property’s Occupancy


FIGURE 6-2 FORECAST OF SUBJECT PROPERTY'S OCCUPANCY

Market Segment

CommercialDemand 100,821 102,334 102,334 102,334Market Share 6.8 % 7.5 % 7.7 % 7.7 %Capture 6,895 7,717 7,931 7,931Penetration 90 % 99 % 102 % 102 %

LeisureDemand 67,944 68,963 68,963 68,963Market Share 9.1 % 8.8 % 8.8 % 8.8 %Capture 6,188 6,042 6,042 6,042Penetration 120 % 115 % 115 % 115 %

GroupDemand 16,701 16,785 16,785 16,785Market Share 4.3 % 4.7 % 4.8 % 4.8 %Capture 721 788 813 813Penetration 57 % 62 % 64 % 64 %

Total Room Nights Captured 13,804 14,547 14,786 14,786Available Room Nights 23,725 23,725 23,725 23,725

Subject Occupancy 58 % 61 % 62 % 62 %Marketwide Available Room Nights 311,984 311,984 311,984 311,984Fair Share 8 % 8 % 8 % 8 %Marketwide Occupied Room Nights 185,466 188,081 188,081 188,081Market Share 7 % 8 % 8 % 8 %Marketwide Occupancy 59 % 60 % 60 % 60 %Total Penetration 98 % 102 % 103 % 103 %

2019 2020 2021 2022

Within the commercial segment, the proposed subject hotel’s occupancy penetration is positioned appropriately within the range of existing competitors given the proposed hotel's new guestroom product and location in Bridgman. The proposed subject hotel's occupancy penetration in the leisure segment is positioned above the market-average level given the proposed hotel's proximity to the beach and the interstate. Within the group segment, the proposed subject hotel's occupancy penetration is positioned below the range of existing competitors, largely attributed to the brand's lack of required meeting space and the lack of large corporations proximate to the subject site.


These positioned segment penetration rates result in the following market segmentation forecast. FIGURE 6-3 MARKET SEGMENTATION FORECAST – SUBJECT PROPERTY

Commercial 50 % 53 % 54 % 54 %Leisure 45 42 41 41Group 5 5 5 5

Total 100 % 100 % 100 % 100 %

2019 2020 2021 2022

Based on our analysis of the proposed subject hotel and market area, we have selected a stabilized occupancy level of 62%. 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. 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.

Average Rate Analysis

Competitive Position


FIGURE 6-4 BASE-YEAR AVERAGE RATE AND REVPAR OF THE COMPETITORS

Property

Holiday Inn Express Hotel & Suites Saint Joseph $125 - $130 100 - 110 % $80 - $85 110 - 120 %

Hampton Inn Saint Joseph Interstate 94 125 - 130 100 - 110 80 - 85 100 - 110

Comfort Suites Stevensville 110 - 115 90 - 95 65 - 70 85 - 90

Average - Primary Competitors $123.42 98.9 % $79.23 103.4 %

Average - Secondary Competitors 125.55 100.6 75.25 98.2

Overall Average $124.78 $76.63

Estimated 2016 Average Room

RateAverage Room

Rate Penetration

Rooms Revenue Per Available

Room (RevPAR)RevPAR

Penetration

The defined primarily competitive market realized an overall average rate of $123.42 in the 2016 base year, improving from the 2015 level of $116.74. We have selected the rate position of $115.00, 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 2016.


FIGURE 6-5 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST

Year

Base Year 61.4 % — $124.78 — — $115.00 92.2 %2017 56.9 2.0 % 127.28 — 2.0 % 117.30 92.22018 60.7 2.5 130.46 — 2.5 120.23 92.22019 59.4 3.0 134.37 58.0 % 3.0 123.84 92.22020 60.3 3.0 138.40 61.0 3.0 127.55 92.22021 60.3 3.0 142.55 62.0 3.0 131.38 92.22022 60.3 3.0 146.83 62.0 3.0 135.32 92.2

Area-wide Market (Calendar Year) Subject Property (Calendar Year)


GrowthAverage

Rate OccupancyAverage Rate

GrowthAverage

RateAverage Rate Penetration

As illustrated above, a 2.0%% rate of change is expected for the proposed subject hotel's positioned 2016 room rate in 2017. This is followed by growth rates of 2.5%% and 3.0%% in 2018 and 2019, respectively. The Saint Joseph/Benton Harbor market should experience rate growth through the near term. The proposed subject hotel's rate position should reflect growth similar to market trends because of the proposed hotel's new facility, strong brand affiliation, and location adjacent to the interstate and near the beach. The proposed subject hotel’s penetration rate is forecast to reach 92.2% 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.


FIGURE 6-6 COMPARISON OF HISTORICAL AND PROJECTED OCCUPANCY, AVERAGE RATE, AND REVPAR – PROPOSED SUBJECT PROPERTY AND MARKET

2014 2015 2016 2017 2018 2019 2020 2021 2022

Proposed Subject Property

Occupancy — — 58.2 % 61.3 % 62.3 % 62.3 %Change in Points — — — 3.1 1.0 0.0Occupancy Penetration — — 97.9 % 101.7 % 103.4 % 103.4 %

Average Rate $115.00 $117.30 $120.23 $123.84 $127.55 $131.38 $135.32Change — 2.5 % 3.0 % 3.0 % 3.0 % 3.0 %Average Rate Penetration 92.2 % 92.2 % 92.2 % 92.2 % 92.2 % 92.2 %

RevPAR — — $72.06 $78.21 $81.88 $84.34Change — — — 8.5 % 4.7 % 3.0 %RevPAR Penetration — — 90.2 % 93.7 % 95.3 % 95.3 %

2015 2015 2016 2017 2018 2019 2020 2021 2022

Bridgman SubmarketOccupancy 58.2 % 59.0 % 61.4 % 56.9 % 60.7 % 59.4 % 60.3 % 60.3 % 60.3 %Change in Points — 0.7 2.4 (4.5) 3.8 (1.3) 0.8 0.0 0.0

Average Rate $112.78 $118.60 $124.78 $127.28 $130.46 $134.37 $138.40 $142.55 $146.83Change — 5.2 % 5.2 % 2.0 % 2.5 % 3.0 % 3.0 % 3.0 % 3.0 %

RevPAR $65.68 $69.95 $76.63 $72.38 $79.20 $79.88 $83.44 $85.94 $88.52Change — 6.5 % 9.5 % (5.5) % 9.4 % 0.9 % 4.5 % 3.0 % 3.0 %

Projected

Historical (Estimated) Projected


The following occupancies and average rates will be used to project the subject property's rooms revenue. This forecast reflects years beginning on January 1, 2019 and corresponds with our financial projections. FIGURE 6-7 FORECAST OF OCCUPANCY, AVERAGE RATE, AND REVPAR

Year

2019 58 % $123.842020 61 127.552021 62 131.382022 62 135.32


Before Discount

March-2017 Projection of Income and Expense Proposed Hotel – Bridgman, Michigan 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 ten-year 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. 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.

Comparable Operating Statements


FIGURE 7-1 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject

Year: 2015/16 2015 2015/16 2015 2014 2016Edition: 10 11 11 11 10

Number of Rooms: 90 to 120 50 to 70 60 to 90 110 to 150 60 to 90 65Days Open: 365 365 365 365 365 365Occupancy: 64% 62% 64% 59% 62% 62%

Average Rate: $114 $114 $122 $113 $109 $113RevPAR: $74 $71 $78 $67 $67 $70

REVENUE Rooms 98.7 % 100.0 % 97.9 % 98.5 % 99.5 % 98.5 % Other Operated Departments 1.1 0.0 1.4 1.4 0.5 1.29 Rentals & Other Income 0.2 0.0 0.6 0.1 0.0 0.17 Total 100.0 100.0 100.0 100.0 100.0 23.5 DEPARTMENTAL EXPENSES* Rooms 23.7 22.4 27.4 22.6 26.6 23.5 Other Operated Departments 136.5 0.0 33.6 14.4 192.6 40.0 Total 24.9 22.4 27.3 22.4 27.4 23.7DEPARTMENTAL INCOME 75.1 77.6 72.7 77.6 72.6 76.3OPERATING EXPENSES Administrative & General 9.7 10.0 8.2 10.7 6.0 8.0 Info. and Telecom. Systems 0.0 1.2 2.3 1.0 0.0 1.0 Marketing 4.5 5.8 2.4 5.3 4.9 4.7 Franchise Fee 7.1 9.0 6.9 8.7 7.0 9.4 Property Operations & Maintenance 3.5 4.8 4.0 7.2 5.7 4.2 Utilities 4.9 3.8 3.3 3.0 5.4 3.8 Total 29.6 34.5 27.1 35.9 28.9 31.0HOUSE PROFIT 45.5 43.1 45.6 41.7 43.7 45.3Management Fee 2.9 0.0 4.3 3.4 3.0 3.0INCOME BEFORE FIXED CHARGES 42.7 43.1 41.3 38.2 40.7 42.3

* Departmental expense ratios are expressed as a percentage of departmental revenues

Stabilized $


FIGURE 7-2 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM


Year: 2015/16 2015 2015/16 2015 2014 2016Edition: 10 11 11 11 10



REVENUE Rooms $26,870 $26,032 $28,396 $24,435 $24,503 25,646.7 Other Operated Departments 292 3 420 347 129 334.5 Rentals & Other Income 55 0 178 22 0 44.6 Total 27,217 26,035 28,993 24,804 24,632 23.5 DEPARTMENTAL EXPENSES Rooms 6,373 5,820 7,770 5,516 6,510 6,027.0 Other Operated Departments 398 0 141 50 248 133.8 Total 6,771 5,820 7,911 5,566 6,759 6,160.8DEPARTMENTAL INCOME 20,445 20,215 21,083 19,238 17,873 19,865.1OPERATING EXPENSES Administrative & General 2,635 2,597 2,385 2,661 1,472 2,069.6 Info. and Telecom. Systems 0 315 668 239 0 260.3 Marketing 1,217 1,518 707 1,317 1,207 1,231.9 Franchise Fee 1,924 2,337 1,988 2,153 1,715 2,437.0 Property Operations & Maintenance 941 1,241 1,158 1,788 1,405 1,084.1 Utilities 1,338 987 963 753 1,318 985.5 Total 8,055 8,995 7,868 8,911 7,117 8,068.5HOUSE PROFIT 12,390 11,220 13,215 10,327 10,756 11,796.6Management Fee 778 0 1,245 842 739 781.0INCOME BEFORE FIXED CHARGES 11,613 11,220 11,969 9,484 10,016 11,015.6

Stabilized $


FIGURE 7-3 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM


Year: 2015/16 2015 2015/16 2015 2014 2016



REVENUE Rooms $114.30 $114.48 $121.91 $113.47 $108.58 113.3 Other Operated Departments 1.24 0.01 1.80 1.61 0.57 1.5 Rentals & Other Income 0.23 0.00 0.76 0.10 0.00 0.2 Total 115.77 114.50 124.47 115.18 109.15 26.6 DEPARTMENTAL EXPENSES Rooms 27.11 25.60 33.36 25.61 28.85 26.6 Other Operated Departments 1.69 0.00 0.61 0.23 1.10 0.6 Total 28.80 25.60 33.96 25.85 29.95 27.2DEPARTMENTAL INCOME 86.97 88.90 90.51 89.34 79.20 87.8OPERATING EXPENSES Administrative & General 11.21 11.42 10.24 12.36 6.52 9.1 Info. and Telecom. Systems 0.00 1.38 2.87 1.11 0.00 1.2 Marketing 5.18 6.67 3.04 6.11 5.35 5.4 Franchise Fee 8.18 10.28 8.53 10.00 7.60 10.8 Property Operations & Maintenance 4.00 5.46 4.97 8.31 6.23 4.8 Utilities 5.69 4.34 4.13 3.50 5.84 4.4 Total 34.26 39.56 33.78 41.38 31.54 35.7HOUSE PROFIT 52.71 49.35 56.73 47.95 47.66 52.1Management Fee 3.31 0.00 5.35 3.91 3.27 3.5INCOME BEFORE FIXED CHARGES 49.40 49.34 51.38 44.04 44.39 48.7

Stabilized $

The comparables’ departmental income ranged from 72.6% to 77.6% of total revenue. The comparable properties achieved a house profit ranging from 41.7% to 45.6% 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. 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

Fixed and Variable Component Analysis


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. 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.

Inflation Assumption


FIGURE 7-4 INFLATION ESTIMATES

Name (Sample from Survey) Firm

Lewis Alexander Nomura Securities International 2.6 % 2.4 % 2.1 % 2.2 % 2.2 %Paul Ashworth Capital Economics 2.8 3.0 3.2 3.3 3.3Daniel Bachman Deloitte LP 2.1 1.8 2.2 2.4 2.4Bernard Baumohl Economic Outlook Group 2.1 2.3 2.3 2.5 2.5Nariman Behravesh IHS Global Insight 2.5 2.2 2.4 2.4 2.4David Berson Nationwide Insurance 2.6 2.5 2.7 2.8 2.8Brian Bethune Tufts University 1.9 2.1 2.3 2.3 2.3Steven Blitz Pangea Market Advisory 2.2 1.9 2.5 3.0 3.0Beth Ann Bovino Standard and Poor's 2.5 2.1 2.2 2.3 2.3Michael Carey Credit Agricole CIB 2.3 2.2 2.4 2.6 2.6Joseph Carson AllianceBernstein 2.4 3.0 3.0 3.0 3.0Mike Cosgrove Econoclast 2.5 2.5 2.2 2.0 2.0Lou Crandall Wrightson ICAP 2.5 2.7 2.7 2.6 2.6Amy Crews Cutts Equifax 1.7 2.0 2.3 2.5 2.5J. Dewey Daane Vanderbilt University 1.8 2.0 2.3 2.5 2.5Greg Daco Oxford Economics 2.3 2.2 2.3 2.2 2.2Rajeev Dhawan Georgia State University 2.3 2.0 2.1 2.0 2.0Robert Dietz National Association of Home Builders 2.0 2.1 2.1 2.1 2.1Douglas Duncan Fannie Mae 2.5 2.3 2.2 2.1 2.1Robert Dye Comerica Bank 2.5 2.4 2.3 2.2 2.2Maria Fiorini Ramirez/Joshua Shapiro MFR, Inc. 2.4 2.2 0.0 — — Mike Fratantoni Mortgage Bankers Association 2.6 2.3 2.4 2.6 2.6Michael Gregory BMO Capital 2.2 2.3 2.3 2.3 2.3Jan Hatzius Goldman, Sachs & Co. 2.4 2.6 2.1 2.2 2.2Stuart Hoffman PNC Financial Services Group 2.3 2.3 2.4 2.4 2.4Derek Holt Scotiabank 2.0 2.3 2.3 2.3 2.3Constance Hunter KPMG 2.2 2.4 2.1 2.1 2.1

Nathaniel Karp BBVA Compass 2.2 2.4 2.6 2.8 2.8Jack Kleinhenz National Retail Federation 2.4 2.5 2.6 2.5 2.5Joseph LaVorgna Deutsche Bank Securities, Inc. 1.8 2.1 2.2 2.3 2.3Edward Leamer/David Shulman UCLA Anderson Forecast 2.3 2.5 2.8 2.7 2.7John Lonski Moody's Investors Service 1.9 1.6 1.5 1.6 1.6Aneta Markowska Societe Generale 2.5 2.8 2.3 2.2 2.2Jim Meil ACT Research 1.8 2.7 3.0 2.5 2.5Michael Moran Daiwa Capital 2.4 2.3 2.4 2.5 2.5Chad Moutray National Association of Manufacturers 2.3 2.8 2.7 2.6 2.6Joel Naroff Naroff Economic Advisors 2.6 2.8 3.0 2.8 2.8Mark Nielson MacroEcon Global Advisors 1.9 2.2 2.5 2.7 2.7Frank Nothaft Corelogic 2.3 2.4 2.5 2.5 2.5Jim O'Sullivan High Frequency Economics 2.2 2.7 2.8 2.9 2.9Lindsey Piegza Stifel, Nicoulas and Company, Incorporated (formerly Sterne Agee)1.8 1.3 1.2 — — Dr. Joel Prakken/ Chris Varvares Macroeconomic Advisers 2.5 2.3 2.0 2.1 2.1Russell Price Ameriprise Financial 2.3 2.2 2.2 2.2 2.2Lynn Reaser Point Loma Nazarene University 1.8 2.0 2.1 2.2 2.2Martin Regalia Chamber of Commerce 1.8 1.8 — — — Ian Shepherdson Pantheon Macroeconomics 2.7 3.0 2.7 2.5 2.5John Silvia Wells Fargo & Co. 2.4 2.5 2.7 2.5 2.5Allen Sinai Decision Economics, Inc. 2.4 2.5 2.4 2.3 2.3James F. Smith Parsec Financial Management 1.6 1.6 1.7 1.8 1.8Sean M. Snaith University of Central Florida 3.1 3.3 3.4 3.3 3.3Sung Won Sohn California State University 2.3 2.3 2.3 2.4 2.4Stephen Stanley Pierpont Securities 2.9 3.3 3.4 3.3 3.3Susan M. Sterne Economic Analysis Associates Inc. 2.5 2.2 2.3 2.5 2.5James Sweeney CSFB 2.0 2.1 0.0 — — Kevin Swift American Chemisty Council 2.3 2.5 2.5 2.3 2.3Diane Swonk Diane Swonk & Associates LLC 2.7 2.4 2.4 2.5 2.5Carl Tannenbaum The Northern Trust 2.0 2.0 2.0 2.0 2.0US Economics Team BNP Paribas 2.2 2.3 2.5 2.6 2.6Bart van Ark The Conference Board 2.2 2.4 0.0 — — Brian S. Wesbury/ Robert Stein First Trust Advisors, L.P. 2.7 2.8 2.9 3.0 3.0Lawrence Yun National Association of Realtors 3.0 3.1 3.0 2.8 2.8

Averages: 2.3 % 2.4 % 1.8 % 2.5 % 2.5 %

Source: Wall Street Journal Economic Forecasting Survey, December 2016

Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier)

June 2017

Dec 2017

June 2018

Dec 2018

Dec 2016


As the preceding table indicates, the financial analysts who were surveyed in December 2016 anticipated inflation rates ranging from 1.6% to 3.1% (on an annualized basis) for June 2017; the average of these data points was 2.3%. The same group expects annualized inflation rates of 2.4% for both December 2017 and June 2018, slightly lower than the 2.5% average inflation rate forecast for December 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 ChangeYear Price Index from Previous Year

2006 201.6 — 2007 207.3 2.8 %2008 215.3 3.82009 214.5 -0.42010 218.1 1.62011 224.9 3.12012 229.6 2.12013 233.0 1.52014 234.8 0.82015 236.5 0.72016 241.5 2.1

Average Annual Compounded Change2006 - 2016: 1.8 %2011 - 2016: 1.4

Source: Bureau of Labor Statistics

Between 2006 and 2016, the national CPI increased at an average annual compounded rate of 1.8%; from 2011 to 2016, the CPI rose by a slightly lower average annual compounded rate of 1.4%. In 2016, the CPI rose by 2.1%, an increase from the level of 0.7% recorded in 2015. 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 2016. 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 the assumed underlying inflation rate are discussed in our write-up of individual income and expense items. 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 January 1, 2019, expressed in inflated dollars for each year.

Summary of Projections


FIGURE 7-6 DETAILED FORECAST OF INCOME AND EXPENSE

2019 (Calendar Year) 2020 Stabilized 2022 2023

Number of Rooms: 65 65 65 65 65Occupancy: 58% 61% 62% 62% 62%Average Rate: $123.84 $127.55 $131.38 $135.32 $139.38RevPAR: $71.83 $77.81 $81.46 $83.90 $86.42Days Open: 365 365 365 365 365Occupied Rooms: 13,761 %Gross PAR POR 14,472 %Gross PAR POR 14,710 %Gross PAR POR 14,710 %Gross PAR POR 14,710 %Gross PAR POR OPERATING REVENUERooms $1,704 98.5 % $26,215 $123.83 $1,846 98.5 % $28,400 $127.55 $1,933 98.5 % $29,738 $131.41 $1,991 98.5 % $30,631 $135.35 $2,050 98.5 % $31,538 $139.37Other Operated Departments 23 1.3 358 1.69 24 1.3 375 1.68 25 1.3 388 1.71 26 1.3 399 1.77 27 1.3 411 1.82Miscellaneous Income 3 0.2 48 0.23 3 0.2 50 0.22 3 0.2 52 0.23 3 0.2 53 0.24 4 0.2 55 0.24 Total Operating Revenues 1,730 100.0 26,622 125.75 1,874 100.0 28,825 129.46 1,962 100.0 30,178 133.35 2,020 100.0 31,083 137.36 2,080 100.0 32,005 141.43DEPARTMENTAL EXPENSES *Rooms 417 24.5 6,416 30.31 438 23.7 6,740 30.27 454 23.5 6,987 30.87 468 23.5 7,197 31.80 482 23.5 7,412 32.75Other Operated Departments 9 40.6 145 0.69 10 40.1 150 0.68 10 40.0 155 0.69 10 40.0 160 0.71 11 40.0 165 0.73 Total Expenses 426 24.6 6,561 30.99 448 23.9 6,890 30.95 464 23.7 7,142 31.56 478 23.7 7,356 32.51 493 23.7 7,577 33.48DEPARTMENTAL INCOME 1,304 75.4 20,060 94.76 1,426 76.1 21,935 98.52 1,497 76.3 23,036 101.79 1,542 76.3 23,727 104.85 1,588 76.3 24,428 107.94UNDISTRIBUTED OPERATING EXPENSESAdministrative & General 145 8.4 2,225 10.51 151 8.0 2,320 10.42 156 8.0 2,399 10.60 161 8.0 2,471 10.92 165 8.0 2,545 11.25Info & Telecom Systems 18 1.1 280 1.32 19 1.0 292 1.31 20 1.0 302 1.33 20 1.0 311 1.37 21 1.0 320 1.41Marketing 86 5.0 1,325 6.26 90 4.8 1,381 6.20 93 4.7 1,428 6.31 96 4.7 1,471 6.50 98 4.7 1,515 6.69Franchise Fee 162 9.4 2,490 11.76 175 9.4 2,698 12.12 184 9.4 2,825 12.48 189 9.4 2,910 12.86 195 9.4 2,996 13.24Prop. Operations & Maint. 68 3.9 1,049 4.96 75 4.0 1,154 5.19 82 4.2 1,257 5.55 84 4.2 1,294 5.72 87 4.2 1,333 5.89Utilities 69 4.0 1,060 5.01 72 3.8 1,105 4.96 74 3.8 1,143 5.05 76 3.8 1,177 5.20 79 3.8 1,212 5.36 Total Expenses 548 31.8 8,429 39.82 582 31.0 8,950 40.20 608 31.1 9,354 41.33 626 31.1 9,634 42.57 645 31.1 9,922 43.84GROSS HOUSE PROFIT 756 43.6 11,631 54.94 844 45.1 12,985 58.32 889 45.2 13,682 60.46 916 45.2 14,093 62.28 943 45.2 14,506 64.10Management Fee 52 3.0 799 3.77 56 3.0 865 3.88 59 3.0 905 4.00 61 3.0 933 4.12 62 3.0 960 4.24INCOME BEFORE NON-OPR. INC. & EXP. 704 40.6 10,833 51.17 788 42.1 12,120 54.44 831 42.2 12,777 56.46 855 42.2 13,160 58.15 880 42.2 13,546 59.86NON-OPERATING INCOME & EXPENSEProperty Taxes 44 2.5 678 3.20 45 2.4 698 3.14 47 2.4 719 3.18 48 2.4 741 3.27 50 2.4 763 3.37Insurance 28 1.6 431 2.03 29 1.5 444 1.99 30 1.5 457 2.02 31 1.5 471 2.08 32 1.5 485 2.14Reserve for Replacement 35 2.0 532 2.52 56 3.0 865 3.88 78 4.0 1,207 5.33 81 4.0 1,243 5.49 83 4.0 1,280 5.66 Total Expenses 107 6.1 1,641 7.75 130 6.9 2,006 9.01 155 7.9 2,383 10.53 160 7.9 2,455 10.85 164 7.9 2,528 11.17EBITDA LESS RESERVE $597 34.5 % $9,192 $43.42 $657 35.2 % $10,114 $45.42 $676 34.3 % $10,394 $45.93 $696 34.3 % $10,706 $47.31 $716 34.3 % $11,018 $48.69

*Departmental expenses are expressed as a percentage of departmental revenues.


FIGURE 7-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Number of Rooms: 65 65 65 65 65 65 65 65 65 65Occupied Rooms: 13,761 14,472 14,710 14,710 14,710 14,710 14,710 14,710 14,710 14,710Occupancy: 58% 61% 62% 62% 62% 62% 62% 62% 62% 62%Average Rate: $123.84 % of $127.55 % of $131.38 % of $135.32 % of $139.38 % of $143.56 % of $147.87 % of $152.31 % of $156.88 % of $161.58RevPAR: $71.83 Gross $77.81 Gross $81.46 Gross $83.90 Gross $86.42 Gross $89.01 Gross $91.68 Gross $94.43 Gross $97.26 Gross $100.18OPERATING REVENUERooms $1,704 98.5 % $1,846 98.5 % $1,933 98.5 % $1,991 98.5 % $2,050 98.5 % $2,112 98.5 % $2,175 98.5 % $2,240 98.5 % $2,308 98.5 % $2,377 98.5 %Other Operated Departments 23 1.3 24 1.3 25 1.3 26 1.3 27 1.3 28 1.3 28 1.3 29 1.3 30 1.3 31 1.3Miscellaneous Income 3 0.2 3 0.2 3 0.2 3 0.2 4 0.2 4 0.2 4 0.2 4 0.2 4 0.2 4 0.2 Total Operating Revenues 1,730 100.0 1,874 100.0 1,962 100.0 2,020 100.0 2,080 100.0 2,143 100.0 2,207 100.0 2,273 100.0 2,342 100.0 2,412 100.0DEPARTMENTAL EXPENSES *Rooms 417 24.5 438 23.7 454 23.5 468 23.5 482 23.5 496 23.5 511 23.5 526 23.5 542 23.5 559 23.5Other Operated Departments 9 40.6 10 40.1 10 40.0 10 40.0 11 40.0 11 40.0 11 40.0 12 40.0 12 40.0 12 40.0 Total Expenses 426 24.6 448 23.9 464 23.7 478 23.7 493 23.7 507 23.7 522 23.7 538 23.7 554 23.7 571 23.7DEPARTMENTAL INCOME 1,304 75.4 1,426 76.1 1,497 76.3 1,542 76.3 1,588 76.3 1,636 76.3 1,685 76.3 1,735 76.3 1,788 76.3 1,841 76.3UNDISTRIBUTED OPERATING EXPENSESAdministrative & General 145 8.4 151 8.0 156 8.0 161 8.0 165 8.0 170 8.0 176 8.0 181 8.0 186 8.0 192 8.0Info & Telecom Systems 18 1.1 19 1.0 20 1.0 20 1.0 21 1.0 21 1.0 22 1.0 23 1.0 23 1.0 24 1.0Marketing 86 5.0 90 4.8 93 4.7 96 4.7 98 4.7 101 4.7 104 4.7 108 4.7 111 4.7 114 4.7Franchise Fee 162 9.4 175 9.4 184 9.4 189 9.4 195 9.4 201 9.4 207 9.4 213 9.4 219 9.4 226 9.4Prop. Operations & Maint. 68 3.9 75 4.0 82 4.2 84 4.2 87 4.2 89 4.2 92 4.2 95 4.2 98 4.2 100 4.2Utilities 69 4.0 72 3.8 74 3.8 76 3.8 79 3.8 81 3.8 84 3.8 86 3.8 89 3.8 91 3.8 Total Expenses 548 31.8 582 31.0 608 31.1 626 31.1 645 31.1 664 31.1 684 31.1 705 31.1 726 31.1 748 31.1GROSS HOUSE PROFIT 756 43.6 844 45.1 889 45.2 916 45.2 943 45.2 972 45.2 1,000 45.2 1,030 45.2 1,062 45.2 1,093 45.2Management Fee 52 3.0 56 3.0 59 3.0 61 3.0 62 3.0 64 3.0 66 3.0 68 3.0 70 3.0 72 3.0INCOME BEFORE NON-OPR. INC. & EXP. 704 40.6 788 42.1 831 42.2 855 42.2 880 42.2 907 42.2 934 42.2 962 42.2 992 42.2 1,021 42.2NON-OPERATING INCOME & EXPENSEProperty Taxes 44 2.5 45 2.4 47 2.4 48 2.4 50 2.4 51 2.4 53 2.4 54 2.4 56 2.4 57 2.4Insurance 28 1.6 29 1.5 30 1.5 31 1.5 32 1.5 32 1.5 33 1.5 34 1.5 35 1.5 37 1.5Reserve for Replacement 35 2.0 56 3.0 78 4.0 81 4.0 83 4.0 86 4.0 88 4.0 91 4.0 94 4.0 96 4.0 Total Expenses 107 6.1 130 6.9 155 7.9 160 7.9 164 7.9 169 7.9 174 7.9 180 7.9 185 7.9 190 7.9EBITDA LESS RESERVE $597 34.5 % $657 35.2 % $676 34.3 % $696 34.3 % $716 34.3 % $738 34.3 % $760 34.3 % $783 34.3 % $807 34.3 % $831 34.3 %

1 1 1 1 1 1 1 1 1 1*Departmental expenses are expressed as a percentage of departmental revenues.

% ofGross


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 calendar years beginning January 1, 2019, expressed in inflated dollars for each year. Revenues associated with the proposed subject hotel's other operated departments and miscellaneous income category have been forecast to reflect the hotel's planned facilities and amenities. 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 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 62% with an average rate of $131.38 in 2021. 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 Hotel Bridgman MI, food and beverage department will include a breakfast dining area. According to the Uniform System of Accounts, other operated departments include any major or minor operated department other than rooms and food and beverage.

Forecast of Income and Expense

Rooms Revenue

Food and Beverage Revenue

Other Operated Departments Revenue


FIGURE 7-8 OTHER OPERATED DEPARTMENTS REVENUE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 1.1 % 0.0 % 1.4 % 1.4 % 0.5 % 1.3 % 1.3 %Per Available Room $292 $3 $420 $347 $129 $358 $335Per Occupied Room $1.24 $0.01 $1.80 $1.61 $0.57 $1.69 $1.48

Comparable Operating Statements Proposed Subject Property ForecastDeflated Stabilized

The miscellaneous income sources comprise those other than guestrooms, food and beverage, and the other operated departments. Changes in this revenue item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy.

FIGURE 7-9 MISCELLANEOUS INCOME

#1 #2 #3 #4 #5 2019



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.

Miscellaneous Income

Rooms Expense


FIGURE 7-10 ROOMS EXPENSE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 23.7 % 22.4 % 27.4 % 22.6 % 26.6 % 24.5 % 23.5 %Per Available Room $6,373 $5,820 $7,770 $5,516 $6,510 $6,416 $6,027Per Occupied Room $27.11 $25.60 $33.36 $25.61 $28.85 $30.31 $26.63

Deflated StabilizedComparable Operating Statements Proposed Subject Property Forecast

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.

FIGURE 7-11 OTHER OPERATED DEPARTMENTS EXPENSE

#1 #2 #3 #4 #5 2019



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.

FIGURE 7-12 ADMINISTRATIVE AND GENERAL EXPENSE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 9.7 % 10.0 % 8.2 % 10.7 % 6.0 % 8.4 % 8.0 %Per Available Room $2,635 $2,597 $2,385 $2,661 $1,472 $2,225 $2,070Per Occupied Room $11.21 $11.42 $10.24 $12.36 $6.52 $10.51 $9.15


Other Operated Departments Expense

Administrative and General 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. 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.

FIGURE 7-13 MARKETING EXPENSE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 4.5 % 5.8 % 2.4 % 5.3 % 4.9 % 5.0 % 4.7 %Per Available Room $1,217 $1,518 $707 $1,317 $1,207 $1,325 $1,232Per Occupied Room $5.18 $6.67 $3.04 $6.11 $5.35 $6.26 $5.44


As previously discussed, the proposed subject property is expected to be franchised under the Comfort Inn & Suites 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;

Information and Telecommunications Systems Expense

Marketing Expense

Franchise Fee

Property Operations and Maintenance


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 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. Changes in this expense item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy.

FIGURE 7-14 PROPERTY OPERATIONS AND MAINTENANCE EXPENSE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 3.5 % 4.8 % 4.0 % 7.2 % 5.7 % 3.9 % 4.2 %Per Available Room $941 $1,241 $1,158 $1,788 $1,405 $1,049 $1,084Per Occupied Room $4.00 $5.46 $4.97 $8.31 $6.23 $4.96 $4.79


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. 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.

Utilities Expense


FIGURE 7-15 UTILITIES EXPENSE

#1 #2 #3 #4 #5 2019

Percentage of Revenue 4.9 % 3.8 % 3.3 % 3.0 % 5.4 % 4.0 % 3.8 %Per Available Room $1,338 $987 $963 $753 $1,318 $1,060 $986Per Occupied Room $5.69 $4.34 $4.13 $3.50 $5.84 $5.01 $4.36


Management expense consists of the fees paid to the managing agent contracted to operate the property. Some companies provide management services and a brand-name 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 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 deal specific 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 (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. FIGURE 7-16 HISTORIC SUBJECT PROPERTY TAX BURDEN (BASE YEAR)

Real PropertyYear Total Change

2014 $120,676 — %2015 122,606 1.62016 122,973 0.3

Percent

Source: Berrien County Assessor

Taxable Value

Management Fee

Property Taxes


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 7-17 COUNTY-ASSESSED VALUE OF COMPARABLE HOTELS

YearHotel Open

Subject Property 2019 $122,973 $0 $122,973

Holiday Inn Express Hotel & Suites Saint Joseph 2000 $1,379,200 $165,330 $1,544,530Hampton Inn Saint Joseph Interstate 94 1995 1,135,884 151,760 1,287,644Comfort Suites Stevensville 2004 994,765 0 994,765Holiday Inn Express Benton Harbor 1999 1,245,600 85,700 1,331,300Hilton Garden Inn Benton Harbor Saint Joseph 2014 3,476,300 77,100 3,553,400Assessments per RoomHoliday Inn Express Hotel & Suites Saint Joseph 82 $16,820 $2,016 $16,820Hampton Inn Saint Joseph Interstate 94 75 15,145 2,023 15,145Comfort Suites Stevensville 65 15,304 0 15,304Holiday Inn Express Benton Harbor 79 15,767 1,085 15,767Hilton Garden Inn Benton Harbor Saint Joseph 106 32,795 727 32,795

Positioned Subject - Per Room 65 $20,000 $2,100 $22,100Positioned Subject - Total $1,300,000 $136,500 $1,436,500

# of Rms


Personal TotalReal

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 Holiday Inn Express Hotel & Suites Saint Joseph because of the similarities, including product type; overall, the positioned assessments are well supported by the market data. Tax rates are based on the city and county budgets, which change annually. The most recent tax rate in this jurisdiction was reported at 29.272. The following table shows changes in the tax rate during the last several years.


FIGURE 7-18 COUNTY TAX RATES

Real PropertyYear

2014 29.27200 20.896002015 29.27200 20.896002016 29.27200 20.89600


Millage Rate Millage RatePersonal Property

Based on comparable assessments and the tax rate information, the proposed subject property's projected property tax expense levels are calculated as follows. FIGURE 7-19 PROJECTED PROPERTY TAX BURDEN (BASE YEAR)

PersonalProperty Property

Positioned (Assessed Value) $1,300,000 $136,500Equalization Rate 1.00000Millage Rate 29.27200 20.89600Tax Burden as of Base Year $38,054 $2,852

Real

FIGURE 7-20 PROJECTED PROPERTY TAX EXPENSE - REAL PROPERTY

TaxesYear Payable

Positioned $38,054 — $38,0542019 $38,054 7.7 % 100 % $40,9792020 40,979 3.0 100 42,2082021 42,208 3.0 100 43,4742022 43,474 3.0 100 44,778

Burden IncreaseBase Rate of Tax % Positioned

Tax Burden

Real Property Total Tax Burden

(Positioned Prior to Increase)


FIGURE 7-21 PROJECTED PROPERTY TAX EXPENSE – PERSONAL PROPERTY

TaxesYear Payable

Positioned $2,852 — $2,8522019 $2,852 7.7 % 100 % $3,0722020 3,072 3.0 100 3,1642021 3,164 3.0 100 3,2592022 3,259 3.0 100 3,356

Burden Increase Tax BurdenPersonal Tax Burden (Positioned Prior to

Base Rate of Tax % of PositionedPersonal Property

FIGURE 7-22 PROJECTED PROPERTY TAX EXPENSE – SUMMARY

Year Real Personal

Positioned $38,054 $2,852 $40,9062019 $40,979 $3,072 $44,0502020 42,208 3,164 45,3722021 43,474 3,259 46,7332022 44,778 3,356 48,135

Total Tax Payable

Taxes Payable

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.

Insurance Expense


FIGURE 7-23 INSURANCE EXPENSE

#1 #2 #3 #4 #5 2019


Deflated StabilizedComparable Operating Statements Proposed Subject Property Forecast

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 full-service/luxury, select-service, and extended-stay hotels. The most recent study 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.

6 The International Society of Hotel Consultants, CapEx 2014, A Study of Capital Expenditure in the U.S. Hotel Industry.

Reserve for Replacement


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. Projected total revenue. House profit, and EBITDA less replacement reserves are set forth in the following table.

FIGURE 7-24 FORECAST OF REVENUE AND EXPENSE CONCLUSION

Year Total % Change Total % Change Total % Change

Projected 2019 $1,730,000 — $756,000 — 43.6 % $597,000 — 34.5 %2020 1,874,000 8.3 % 844,000 11.6 % 45.1 657,000 10.1 % 35.22021 1,962,000 4.7 889,000 5.3 45.2 676,000 2.9 34.32022 2,020,000 3.0 916,000 3.0 45.2 696,000 3.0 34.32023 2,080,000 3.0 943,000 2.9 45.2 716,000 2.9 34.3

Total Revenue House Profit House Profit Ratio

EBITDA Less Replacement ReserveAs a % of

Ttl Rev

Forecast of Revenue and Expense Conclusion

March-2017 Statement of Assumptions and Limiting Conditions Proposed Hotel – Bridgman, Michigan 101

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 sub-soil 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.


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.


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.

March-2017 Certification Proposed Hotel – Bridgman, Michigan 104

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

March-2017

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;

12. as of the date of this report, Stacey E. continuing education program for Designated Members of the Appraisal Institute.

Proposed Hotel – Bridgman, Michigan

of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute; the use of this report is subject to the requirements of the Appraisal nstitute relating to review by its duly authorized representatives;

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 PartnerTS Worldwide, LLC State Appraiser License (MI) 1201074337 Meghan B. Bean, Senior Project [email protected], +1(734)649-7221

Certification Bridgman, Michigan 105

of Professional Ethics and the Standards of Professional Appraisal Practice

the use of this report is subject to the requirements of the Appraisal nstitute relating to review by its duly authorized representatives; and

Nadolny, MAI has completed the continuing education program for Designated Members of the Appraisal

Managing Director, Senior Partner State Appraiser License (MI) 1201074337

Meghan B. Bean, Senior Project Manager 7221


HVS, Chicago, Illinois Qualifications of Stacey Nadolny, MAI 1

Stacey Nadolny, MAI

HVS CONSULTING AND VALUATION SERVICES Chicago, Illinois HILLSTONE RESTAURANT GROUP Chicago, Illinois BS – School of Hotel Administration, Cornell University Litigation Professional Development Program, Appraisal Institute

Other Specialized Training Classes Completed: Uniform Standards of Professional Appraisal Practice – 15 hours Basic Appraisal Procedures – 30 hours Basic Appraisal Principles – 30 hours General Appraiser Income Approach (Parts I and II) – 60 hours General Appraiser Market Analysis and HBU – 30 hours General Appraiser Site Valuation and Cost Approach – 30 hours General Appraiser Sales Comparison Approach – 30 hours Statistics, Modeling and Finance – 15 hours General Appraiser Report Writing and Case Studies – 30 hours Advanced Income Capitalization – 40 hours Business Practices and Ethics – 8 hours Report Writing and Valuation Analysis – 26 hours Advanced Concepts & Case Studies – 40 hours Fundamentals of Separating Real Property, Personal Property, and Intangible Business

Assets – 15 hours Comparative Analysis – 7 hours PA Law Class – 2 hours KY Supervisor and Associate Training Course – 7 hours MI Law Class – 2 hours West Virginia Law – 3 hours Land and Site Valuation – 7 hours Mortgage Fraud – 7 hours Appraising Condos, Co-ops, and PUDs – 7 hours Appraisal of Land Subject to Ground Leases – 7 hours Sales Comparison Approach – 7 hours USPAP Updates – 2009, 2011, 2012, 2014, 2016

EMPLOYMENT

2007 to present

2005 – 2006

EDUCATION AND OTHER TRAINING


Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, West Virginia,

Wisconsin Appraisal Institute – Designated Member (MAI) Cornell Center for Real Estate Finance – Board Member Hotel Valuation Seminar – Cornell University, Michigan State University Hunter Hotels Conference Introduction to Hotel Finance – Michigan State University Cobblestone Hotels Conference Hotel Market Connections – Columbus 2012, 2013, 2014; Chicago 2015, 2016 “U.S. Hotel Development Cost Survey 2015/16,” July 2016 “Five Key Takeaways - Hunter Conference 2015,” co-authored with Michael Brophy and

Heidi Nielsen, April 2015 “Market Intelligence Report 2013: Cleveland,” co-authored with Jai Patel, October 2013 “Market Intelligence Report 2013: Cincinnati,” co-authored with Meghan Bean, September

2013 “Market Intelligence Report 2013: Columbus, Ohio,” July 2013 “Detroit Market Intelligence Report,” November 2009 “Hotel Demand Drivers in Cincinnati,” February 2009 “HVS Market Intelligence Report: Cleveland, Ohio,” October 2008 “HVS Market Intelligence Report: Columbus, Ohio,” September 2008

STATE CERTIFICATIONS

PROFESSIONAL AFFILIATIONS

SPEAKING ENGAGEMENTS

PUBLISHED ARTICLES

HVS Journal

HVS Journal

HVS Journal

HVS Journal

HVS Journal

HVS Journal

HVS Journal

HVS Journal

HVS Journal


EXAMPLES OF PROPERTIES APPRAISED OR EVALUATED PORTFOLIO ANALYSIS Portfolio of 8 Great Wolf Lodge

Properties, Various Locations Portfolio of 5 Full-Service Hotels for

CWCapital, Various Locations ALABAMA Land Appraisal, Alabaster Redmont (Curio Conversion),

Birmingham Proposed Boutique Hotel Days Inn, Gadsden Proposed Comfort Suites, Hope Hull Proposed Country Inn & Suites,

Madison Land Appraisal, Prattville Comfort Inn, Scottsboro ARIZONA Clarion, Yuma ARKANSAS Proposed Staybridge Suites, Hot

Springs Holiday Inn, Springdale CALIFORNIA Proposed Residence Inn, Cupertino Residence Inn, Cupertino Proposed Home2 Suites by Hilton and

Land, Woodland COLORADO Hotel Madeline Telluride, Telluride CONNECTICUT La Quinta, New Haven

La Quinta, Stamford DISTRICT OF COLUMBIA Grand Hyatt Proposed SpringHill Suites FLORIDA Sanibel Harbour Resort & Spa, Fort

Myers Hyatt Place Jacksonville Airport,

Jacksonville Microtel Inn, Jacksonville Residence Inn by Marriott Airport,

Jacksonville Value Place, Jacksonville Fairfield Inn, Orlando Suburban Extended Stay, Pensacola SpringHill Suites, Port St. Lucie Hampton Inn, Stuart Hampton Inn, Titusville GEORGIA Country Hearth Inn, Albany Holiday Inn Express (Choice

Conversion), Atlanta Homewood Suites by Hilton, Augusta Proposed Cambria Suites, College Park Courtyard by Marriott, Dalton Proposed Microtel Inn & Suites,

Douglasville Fairfield Inn, Kennesaw SpringHill Suites, Kennesaw Hampton Inn, Lawrenceville Homewood Suites by Hilton, Macon Value Place, Macon Value Place West, Macon La Quinta Inn, Newnan Quality Inn, Oakwood Fairfield Inn & Suites by Marriott,

Valdosta HAWAII DoubleTree Naniloa Hotel, Hilo

Kahala Hotel, Honolulu ILLINOIS Proposed Fairfield Inn & Conference

Center, Alsip Holiday Inn Express, Arlington Heights Proposed Four Points by Sheraton,

Arlington Heights Proposed Four Points and Water Park,

Arlington Heights Staybridge Suites, Aurora Holiday Inn, Bolingbrook Proposed Downtown Hotel, Centralia Microtel Inn, Champaign Chicago Market Data, Chicago Comfort Suites Michigan Avenue,

Chicago Hard Rock Hotel, Chicago Hotel Palomar, Chicago MileNorth Hotel, Chicago Proposed Autograph Collection Hotel,

Chicago Proposed Canopy by Hilton, Chicago Proposed Dual-Branded Hotel, Chicago Proposed Even, Chicago Proposed Hampton/Homewood,

Chicago Proposed Home2 Suites by Hilton

Chicago Midway, Chicago Proposed Hotel, Chicago Proposed Hotel Chinatown, Chicago Proposed Hyatt House, Chicago Proposed Westin Chicago Midway,

Chicago Radisson Blu, Chicago SpringHill Suites by Marriott, Chicago Waldorf Astoria, Chicago Proposed Fairfield by Marriott, Crystal

Lake Proposed Hotel, Des Plaines Hilton Orrington, Evanston Holiday Inn Express, Hillside Westin, Itasca Homewood Suites by Hilton,

Lincolnshire Hyatt Place, Lombard


Proposed Hyatt/Hyatt House, Moline Hampton Inn, Naperville Sheraton, Northbrook Proposed Hampton Inn, Pontiac Hilton Garden Inn, Saint Charles Hyatt Regency Woodfield, Schaumburg Proposed Limited-Service Hotel, South

Elgin Proposed Residence Inn, Wilmette INDIANA Proposed Hotel, Columbus Proposed DoubleTree, Evansville Proposed Hyatt Place, Evansville Comfort Suites, Fort Wayne Hampton Inn, Fort Wayne TownePlace Suites by Marriott, Fort

Wayne Proposed Hampton Inn & Suites,

Hammond Country Inn & Suites, Indianapolis Hampton Inn NE Castleton,

Indianapolis Proposed Cambria Suites, Indianapolis Proposed Extended Suites,

Indianapolis Residence Inn, Indianapolis Fairfield Inn, Jeffersonville TownePlace Suites, Jeffersonville Proposed Hotels (Two Scenarios),

Lafayette Proposed Hampton Inn & Suites,

Lawrenceburg Proposed Hotel & Events Center,

Lawrenceburg Quality Inn & Suites, Lebanon Motel 6, Mishawaka Proposed SpringHill Suites by

Marriott, Munster Cambria Suites Indianapolis Airport,

Plainfield Staybridge Suites, Plainfield Knights Inn, South Bend Fairfield Inn by Marriott, Valparaiso Hampton Inn, Warsaw Hilton Garden Inn, West Lafayette

IOWA Chase Hotel Suites, Clive Proposed Select-Service Hotel, Iowa

City Hampton Inn & Suites, Marshalltown KANSAS Days Inn, Newton KENTUCKY Hampton Inn, Covington Proposed Hotel, Covington Radisson Cincinnati Riverfront,

Covington Courtyard, Florence Hilton Cincinnati Airport, Florence Residence Inn, Lexington Hampton Inn, Louisville Marriott, Louisville Proposed Aloft Hotel, Louisville Proposed Hilton Garden Inn, Louisville Residence Inn, Louisville Fairfield Inn, Mount Sterling Proposed Residence Inn by Marriott,

Newport LOUISIANA Sheraton, Metairie MARYLAND Proposed Residence Inn, Germantown Comfort Suites BWI (Holiday Inn &

Suites Conversion), Linthicum Heights

MASSACHUSETTS Proposed Residence Inn, Chelsea MICHIGAN

Proposed Boutique Hotel, Detroit Proposed Foundation Hotel, Detroit Hampton Inn, East Lansing Hampton Inn & Suites Grand Rapids

Airport, Grand Rapids SpringHill Suites Grand Rapids

Airport, Grand Rapids Residence Inn, Holland Candlewood Suites, Kalamazoo Hampton Inn, Kalamazoo Residence Inn, Kalamazoo TownePlace Suites, Kalamazoo Embassy Suites, Livonia Proposed TownePlace Suites by

Marriott, Monroe Proposed TownePlace Suites/Fairfield

Inn by Marriott, Monroe Proposed Microtel Inn & Suites,

Muskegon Hampton Inn, Port Huron Ramada (Radisson Conversion),

Romulus Embassy Suites, Southfield Holiday Inn (Conversion to Best

Western), Southfield Hampton Inn, Stevensville MINNESOTA Sheraton, Bloomington Proposed Hotel, St. Paul MISSISSIPPI Proposed Avalon, Biloxi Fairfield Inn, Hattiesburg Knights Inn, Hattiesburg La Quinta Inn, Hattiesburg Fairfield Inn, Jackson Proposed Courtyard by Marriott,

Meridian Chuka Inn at Dancing Rabbit,

Philadelphia MISSOURI M Star Hotel, Hayti


Proposed Hampton Inn, Kansas City Proposed Hotel, Kansas City NEVADA Days Inn, Winnemucca NEW HAMPSHIRE EF Lane Hotel, Keene NEW JERSEY Sheraton, Eatontown Proposed Hotel, Hamilton Proposed Hotel, Parsippany Courtyard by Marriott, Princeton NEW YORK Proposed Harbor Center Marriott

Hotel, Buffalo Candlewood Suites, Evans Mills Country Inn & Suites, Ithaca Econo Lodge, Ithaca Proposed Hotel, Ithaca Proposed DoubleTree by Hilton,

Jamestown Motel De Soto, Olean Hyatt Regency, Rochester Proposed Courtyard by Marriott,

Syracuse Proposed Residence Inn by Marriott,

Syracuse NORTH CAROLINA Courtyard by Marriott, Carolina Beach Proposed Hampton Inn & Suites,

Carolina Beach Courtyard by Marriott, Charlotte Comfort Suites, Lexington Country Hearth Inn, Lexington Fairfield Inn & Suites by Marriott,

Smithfield Hampton Inn Fort Bragg, Spring Lake Candlewood Suites, Wake Forest

OHIO Proposed Inn and Conference Facility

– University of Akron, Akron Proposed Hampton Inn, Alliance Days Inn, Ashland Holiday Inn Express, Ashtabula Hampton Inn, Athens Proposed Fairfield Inn by Marriott,

Athens Aurora Inn (Conversion to Ascend),

Aurora Proposed Aurora Inn, Aurora Econo Lodge, Austintown Hilton Cleveland East, Beachwood Residence Inn, Beachwood Proposed SpringHill Suites,

Beavercreek Embassy Suites, Blue Ash Proposed Hotel, Bowling Green Holiday Inn Express, Brookville Proposed Comfort Inn, Brookville Sleep Inn, Brunswick AmeriHost Inn, Cambridge Holiday Inn, Cambridge Proposed Hotel, Canton Proposed Home2 Suites by Hilton,

Centerville Courtyard by Marriott, Cincinnati Howard Johnson, Cincinnati Proposed Fairfield Inn by Marriott,

Cincinnati Proposed Hampton Inn/Homewood

Dual Brand, Cincinnati Proposed Hotel, Cincinnati Proposed Renaissance, Cincinnati Best Western Cleveland Airport,

Cleveland Hilton, Cleveland Holiday Inn Express, Cleveland Proposed Dively Center Hotel,

Cleveland University Inn, Cleveland Best Western Columbus Airport,

Columbus Cambria Suites, Columbus

Candlewood Suites, Columbus Comfort Suites, Columbus Courtyard Columbus Worthington,

Columbus Courtyard Easton, Columbus Days Inn, Columbus DoubleTree Suites Columbus

Downtown, Columbus Econo Lodge, Columbus Fairfield Inn, Columbus Hampton Inn, Columbus Hampton Inn & Suites, Columbus Hilton Easton, Columbus Hometown Inn (Land Appraisal),

Columbus Hyatt on Capitol Square, Columbus Proposed Aloft/Element, Columbus Proposed Cambria Suites, Columbus Proposed Hampton Inn, Columbus Proposed Hollywood Casino Hotel,

Columbus Proposed Holiday Inn, Columbus Proposed Holiday Inn Express,

Columbus Proposed Hyatt Place, Columbus Proposed Joseph Update, Columbus Proposed Le Meridien, Columbus Proposed Select-Service Hotel,

Columbus Residence Inn, Columbus Sheraton at Capitol Square, Columbus University Plaza Hotel Conversion,

Columbus Westin, Columbus Sheraton Suites Conversion, Cuyahoga

Falls Proposed Hampton Inn, Dayton Proposed Home2 Suites by Hilton,

Dayton Proposed Residence Inn by Marriott,

Dayton TownePlace Suites, Dayton Hospitality Inn, Dover Courtyard Columbus Dublin, Dublin Econo Lodge, Eaton Country Inn & Suites, Fairborn


Fairfield Inn & Suites by Marriott, Findlay

Proposed Hilton Garden Inn, Findlay Quality Inn, Franklin Proposed Conference Center Hotel,

Greene Proposed Home2 Suites, Greene Holiday Inn Express, Grove City Proposed Courtyard by Marriott,

Grove City Red Roof Inn, Grove City Quality Inn, Heath Americas Best Value Inn, Huber

Heights Comfort Inn, Huber Heights Embassy Suites Cleveland Rockside,

Independence Residence Inn, Independence Days Inn, Lima Holiday Inn Express, Marion Comfort Inn, Marysville Holiday Inn Express, Marysville Proposed Fairfield Inn by Marriott,

Marysville Proposed Home2 Suites by Hilton,

Maumee Proposed Microtel Inn & Suites,

Maumee Baymont Inn & Suites, Mayfield Best Western, Mentor DoubleTree by Hilton, Miamisburg Proposed Staybridge Suites,

Miamisburg Holiday Inn Express, Newton Falls Proposed Hampton Inn & Suites, North

Olmsted Proposed Hampton Inn, Oregon The Elms Holiday Inn, Oxford Comfort Suites, Perrysburg Best Western, Pickerington Hampton Inn, Pickerington Quality Inn, Piqua Holiday Inn Express, Port Clinton Proposed Hotel Developments,

Rockside Proposed Comfort Suites, Rootstown American Inn, Rossford

Country Inn, Rossford Best Western, Sandusky Comfort Inn, Sandusky Great Wolf Lodge, Sandusky Sleep Inn, Sandusky DoubleTree Guest Suites, Sharonville Econo Lodge, Sidney Hilton Homewood Suites, Solon Proposed Holiday Inn Express,

Springfield Townhouse Motel, Springfield Proposed Staybridge Suites, Stow Econo Lodge, Streetsboro Holiday Inn Express, Sunbury Comfort Inn, Toledo Grand Plaza (Renaissance Conversion),

Toledo Proposed Hotel, Toledo Proposed University of Toledo Hotel,

Toledo Best Western Inn, Troy Hampton Inn & Suites, West Chester Proposed Hotel, Westerville Days Inn, Willoughby Holiday Inn, Youngstown Proposed Wick Pollock Inn,

Youngstown Proposed Youngstown State

University Hotel, Youngstown OKLAHOMA Microtel Inn, Idabel Proposed SpringHill Suites, Oklahoma

City PENNSYLVANIA Courtyard, Altoona Holiday Inn, Beaver Falls Avalon Hotel, Erie Proposed Convention Hotel Update,

Erie Proposed Courtyard Update, Erie Proposed Embassy Suites, Erie Proposed Hotel, Erie Proposed Limited-Service Hotel, Erie

TownePlace Suites, Harrisburg Quality Inn, Hermitage Proposed Homewood Suites,

McCandless Hampton Inn & Suites, Mercer Courtyard by Marriott Shadyside,

Pittsburgh Proposed Embassy Suites, Pittsburgh Wyndham Garden Hotel, Pittsburgh SpringHill Suites by Marriott,

Washington RHODE ISLAND La Quinta, Warwick SOUTH CAROLINA Comfort Suites, Columbia Hampton Inn, Rock Hill Value Place, Simpsonville TENNESSEE Hampton Inn Knoxville Airport, Alcoa Antioch Quarters Inn & Suites, Antioch Comfort Inn, Hixson TEXAS Americas Best Value Inn, Abilene Hawthorn Suites, Wichita Falls VIRGINIA Courtyard by Marriott, Charlottesville Proposed Extended-Stay Hotel,

Hopewell Courtyard by Marriott, Lynchburg Country Inn & Suites, Manassas Fairfield Inn & Suites, Manassas DoubleTree Airport, Richmond Days Inn, Salem Courtyard by Marriott North, Virginia

Beach Courtyard by Marriott South, Virginia

Beach


Quality Inn, Williamsburg Wedmore Place, Williamsburg Proposed Holiday Inn, Wytheville WEST VIRGINIA Hampton Inn, Barboursville Econo Lodge, Martinsburg WISCONSIN Proposed Hotel, Fond du Lac Hampton Inn, Milwaukee Hampton Inn Downtown, Milwaukee Proposed Holiday Inn Express,

Milwaukee Proposed Hotel, Milwaukee Proposed SpringHill Suites by

Marriott, Milwaukee Proposed Hotel, Oak Creek Proposed Fairfield Inn & Suites,

Pleasant Prairie Radisson, Pleasant Prairie Delta by Marriott (Conversion), Racine Proposed Hyatt Place, Verona Proposed Upscale Hotel, Waukegan INTERNATIONAL Mexico Elan Resort & Spa, Cancun

HVS, Chicago, Illinois Qualifications of Meghan Bean 1

Meghan Bean

HVS CONSULTING AND VALUATION SERVICES Chicago, Illinois KELLOGG HOTEL AND CONFERENCE CENTER East Lansing, Michigan THE INN AT BAY HARBOR RENAISSANCE RESORT Petoskey, Michigan MISSION POINT RESORT Mackinac Island, Michigan BS – The School of Hospitality Business, Michigan State University Other Specialized Training Classes Completed: Uniform Standards of Professional Appraisal Practice (USPAP) – 15 hours Basic Appraisal Principles – 30 hours Basic Appraisal Procedures – 30 hours Ohio Fair Housing Class – 3 hours General Appraiser Income Approach (Parts I and II) – 60 hours General Appraiser Market Analysis and HBU – 30 hours General Appraiser Site Valuation and Cost Approach – 30 hours General Appraiser Sales Comparison Approach – 30 hours General Appraiser Report Writing and Case Studies – 30 hours Advanced Income – 35 hours Statistics, Modeling and Finance – 15 hours Supervisor/Trainee Course for Illinois – 4 hours USPAP Update – 2015 “Three Key Takeaways – North America Hotel Investments Conference 2014,” co-authored

with McKenna Luke, December 2014 “Market Intelligence Report 2013: Cincinnati,” June 2013

EMPLOYMENT

February 2013 – present

August 2010 – December 2012

May 2012 – August 2012

May 2010 – August 2010

EDUCATION AND OTHER TRAINING

PUBLISHED ARTICLES

HVS Journal

HVS Journal


EXAMPLES OF PROPERTIES APPRAISED OR EVALUATED ARKANSAS Proposed Hilton Garden Inn, Little

Rock FLORIDA Courtyard by Marriott, Fort Myers Holiday Inn Express & Suites, Tampa GEORGIA Quality Suites Buckhead Central,

Atlanta HAWAII Kahala Hotel, Honolulu ILLINOIS Baymont Inn, Alsip Proposed Fairfield Inn & Conference

Center, Alsip Holiday Inn, Bolingbrook Proposed Residence Inn by Marriott,

Bolingbrook Crowne Plaza, Burr Ridge Crowne Plaza Metro, Chicago DeWit Place, Chicago Hilton Suites, Chicago Hotel Palomar, Chicago InterContinental Chicago Magnificent

Mile, Chicago Kimpton Burnham Hotel, Chicago MileNorth Hotel, Chicago Proposed Hampton Inn/Homewood

Suites by Hilton, Chicago Renaissance Blackstone Chicago Hotel,

Chicago Proposed Hampton Inn Loyola,

Chicago Proposed Holiday Inn, Joliet Sleep Inn, Lake Bluff

Proposed Country Inn & Suites, Lansing

Proposed Kaskaskia Hotel, Lasalle Best Western Plus Lincoln Inn, Lincoln Hilton Lisle Naperville, Lisle Country Inn & Suites by Carlson,

Maneto Proposed Comfort Inn & Suites,

Morton Holiday Inn, Mount Prospect Proposed Holiday Inn Express,

Naperville Proposed Staybridge Suites, Naperville Motel 6, Normal Homewood Suites by Hilton, Orland

Park Econo Lodge, Perkin Super 8, Peru Courtyard by Marriott, St. Charles Hilton Garden Inn, Saint Charles Proposed Limited-Service Hotel, South

Elgin INDIANA Hotel Indigo, Columbus Proposed Hotel, Columbus Quality Inn, Crawfordsville Comfort Suites, Elkhart Days Inn, Kendallville Proposed Hampton Inn & Suites,

Hammond Comfort Suites, Indianapolis Holiday Inn Express, Kokomo Clarion, Michigan City Red Roof Inn, Michigan City Proposed Hampton Inn, Michigan City Proposed SpringHill Suites by

Marriott, Munster Comfort Inn, Nashville Staybridge Suites, Plainfield Dollar Inn, Portage Comfort Inn & Suites, Porter Best Western, Schererville Travelodge Seymour Quality Inn & Suites, Valparaiso

KENTUCKY Hyatt Place, Florence Courtyard by Marriott, Lexington MICHIGAN Holiday Inn Express, Adrian Super 8, Adrian Residence Inn by Marriott Ann Arbor

South, Ann Arbor Sheraton, Ann Arbor Days Inn & Suites, Benton Harbor Country Inn & Suites by Carlson,

Dearborn The Henry Hotel, Dearborn Hilton Garden Inn Detroit Downtown,

Detroit Proposed Foundation Hotel, Detroit Westin Southfield, Detroit Magnuson Hotel & Suites, DeWitt Hampton Inn, East Lansing Super 8, East Lansing Crowne Plaza Grand Rapids Airport,

Grand Rapids Super 8, Imlay City Baymont Inn & Suites, Jackson Colonial Inn, Jackson Super 8, Jackson Quality Inn, Kalamazoo Courtyard by Marriott Grand Rapids

Airport, Kentwood Super 8, Lansing Courtyard by Marriott, Livonia Novi Inn & Suites, Novi Quality Inn, Novi Courtyard by Marriott Kalamazoo,

Portage Courtyard by Marriott, Romulus Rodeway Inn, Romulus Embassy Suites, Southfield Holiday Inn (Conversion to Best

Western), Southfield Hampton Inn, South Haven Embassy Suites, Troy Victory Suites, Warren Super 8, Wyoming


MINNESOTA Proposed Select-Service Hotel at Red

Baron Arena and Expo, Marshall Staybridge Suites, Rochester AmericInn, Rogers MISSISSIPPI Holiday Inn Express Hotel & Suites,

Natchez Holiday Inn Express Hotel & Suites,

Winona NEBRASKA Country Inn & Suites, Norfolk NEW JERSEY Quality Inn, Lyndhurst Fairfield Inn by Marriott, Mahwah NEW YORK Comfort Inn, Brighton Proposed DoubleTree, Jamestown Meadowbrook Motor Lodge, Jericho OHIO Copely Hawthorn Suites by Wyndham,

Akron Proposed Hotel University of Akron,

Akron Value Place, Akron Days Inn, Ashland Value Place, Avon Proposed SpringHill Suites by

Marriott, Beavercreek Holiday Inn Youngstown South,

Boardman Proposed Home2 Suites by Hilton,

Centerville Comfort Suites Cincinnati Airport,

Cincinnati

Proposed Fairfield Inn by Marriott, Cincinnati

Quality Inn & Suites, Cincinnati Red Roof Inn, Cincinnati University Inn, Cleveland Proposed Select-Service Hotel,

Columbus Value Place, Columbus Days Inn, Conneaut Comfort Suites, Dayton Proposed Hampton Inn, Dayton Proposed Home2 Suites, Dayton Embassy Suites, Dublin Hilton Garden Inn, Dublin Wingate by Wyndham, Fairborn Courtyard by Marriott, Holland Proposed Fairfield Inn by Marriott,

Marysville Hyatt Place Cincinnati-Northeast,

Mason Americas Best Value Inn, Mentor Value Place, Mentor Courtyard by Marriott, Miamisburg Proposed Staybridge Suites,

Miamisburg Proposed Hampton Inn, North

Olmsted Comfort Inn, Oxford Knights Inn, Piqua Proposed Comfort Suites, Rootstown Best Western Plus, Sandusky Comfort Inn, Sandusky Maui Sands Resort, Sandusky Hampton Inn, Sunbury Hampton Inn & Suites, Toledo Holiday Inn Express, Wauseon Hampton Inn & Suites, West Chester Quality Inn & Suites, Youngstown PENNSYLVANIA Quality Inn, Meadville Holiday Inn Express, North East Super 8, North East TENNESSEE

Holiday Inn, Chattanooga WISCONSIN Country Inn & Suites, Brookfield Proposed Hotel, Milwaukee

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