U.S. Transaction Market PRESENTER Rudy Reudelhuber Managing Director Hodges Ward Elliott 2 Transaction Activity Transaction Volume (In $Billions) $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 2005 2006 2007 2008 2009 Year 3 Source: Real Capital Analytics 2010 2011 2012 2013 Full-Service Single Asset Trades Rooms Price Price Per Room Trailing Cap Rate The Nines Portland 331 $127,000,000 $384,000 7.4% JW Marriott San Francisco 338 $147,200,000 $436,000 ••• Hawks Cay Resort 302 $133,825,000 $446,000 6.4% St. Regis Monarch Beach 400 $316,900,000 $792,000 ••• St. Regis Bal Harbour 209 $213,000,000 $1,109,000 4.2% Novotel New York Times Square 480 $273,600,000 $570,000 ••• Four Seasons Houston 468 $139,000,000 $297,000 7.6% Hyatt Regency Grand Cypress 750 $190,000,000 $253,000 ••• London West Hollywood 200 $195,000,000 $656,000 4.6% Asset 4 Select-Service Portfolio Trades Year Portfolio Hotels Keys Price Price Per Key Trailing Cap Rate Buyer Average Age Management Notes 2014 Equity Inns* 126 12,934 $1,925,000,000 $148,833 ••• ARC 20 Unencumbered Numerous brands, Seller Financed 2014 CBM I 40 5,833 $665,000,000 $114,007 7.0% Confidential 27 Encumbered 2014 Lion ES 47 5,908 $800,000,000 $135,410 8.0% Blackstone ••• 2014 TMI Hospitality 188 13,713 $1,000,000,000 $72,924 9.2% Starwood Capital 17 2014 OTO 15 1,856 $334,080,000 $180,000 7.3% Blackstone ~5 Unencumbered Residence Inn/Homewood Numerous Brands; Corporate/Management Platform Unencumbered included in Sale Hampton/Hyatt Place/SpringHill/Residence Unencumbered Inn/Homewood 2014 Hyatt 10 10 1,560 $312,500,000 $200,321 7.8% RLJ ••• Encumbered 2014 RLJ 11 11 1,205 $85,000,000 $70,539 7.9% Sage/Whitman Peterson ••• Hyatt Place/Hyatt House Courtyard/Fairfield/Hyatt House/SpringHill/Residence Unencumbered Inn/Hampton 2014 Innkeepers 47 5,945 $958,500,000 $161,228 7.6% NorthStar ••• Unencumbered Numerous Brands Courtyard Concord 2014 Hospitality 13 1,650 $240,000,000 $145,455 7.9% ADIA 7 2013 Texas Western 26 3,348 $430,000,000 $128,435 ••• MCR 4 Courtyard/SpringHill/Fairfield/Hilton Encumbered Garden Inn/Hampton Residence Inn/TownePlace/Homewood/SpringHil Unencumbered l 2013 Apple REIT VI 66 7,647 $1,200,000,000 $156,924 6.9% Blackstone 12 Primarily Unencumbered Numerous brands, Seller financed Total/Average 589 61,599 $7,950,080,000 $129,062 5 Lodging Investment Profiles Public REITs (Lodging and General) * RevPAR Arms Race * Focus on Larger Markets Non-Listed REITs * Staggering weight of funds * Greater variety of markets * Greater flexibility to go after yield 15 Private Equity * Complicated/Heavy Lifting * Financial engineering Foreign Investors * Not just trophy assets * Select service in gateway cities * Chinese * Middle East Capital Markets Positive Attractive Debt Markets * Strong Bank Appetite * In 2013, banks originated $31 billion in hotel loans, nearly double 2012 * Low interest rates * Low debt yields * Return of the CMBS Market * 2014 CMBS originations (projected) $105 billion * 2011/2012 CMBS originations $11.6/24.2 billion Strong Equity Capital Markets * Lodging REIT EBITDA multiple average: 14.8x * Bond-buying tapering has had minimal effect so far Potential Cap Rate Compression For Hotels 14 Operating Fundamentals Positive Strong Demand/Pricing Power * RevPAR growing at 5-8% per year from 2010-2014 * Six consecutive years of real revenue per available room (RevPAR) gains * Five consecutive years of real ADR growth - a full recovery in real terms from pre-recession levels * Six consecutive years of real NOI gains – a full recovery from prerecession levels * Fourth year of accommodated demand in excess of the prerecession peak of 11.3 million room nights * Six consecutive years of increasing occupancy, the longest such streak since 1988 Limited New Supply * Annual supply increases not projected to exceed long-term average (1.9%) until 2017 13 US Market RevPAR: 1988 – 2017E 8.5% 7.0% 5.5% 4.0% 2.5% 1.0% -0.5% -2.0% -3.5% -5.0% -6.5% -8.0% Year Source: Smith Travel Research, PKF, HWE 6 2017E 2016E 2015E 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 -11.0% 2014E (16.7%) -9.5% US Market Supply: 1987-2017E 6,000,000 5.0% 4.5% 5,000,000 4.0% 25-Year Average, 1987-2013, 1.9% 3.5% 4,000,000 3.0% 2.5% 3,000,000 2.0% 2,000,000 1.5% 1.0% 1,000,000 0.5% 0 RevPAR CAGR: 4.7% Total Rooms 7 Source: Smith Travel Research, PKF RevPAR CAGR: 7.5% Supply % Change RevPAR CAGR: 6.3% 2017E 2016E 2015E 2014E 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 0.0% US Market Supply Deviation from Average: 1988 – 2017E 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% Year 8 Source: Smith Travel Research, PKF 2017E 2016E 2015E 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 -2.5% 2014E -2.0% U.S. Long-Term Trends: 1987-2013 12 US Market Rankings – Absolute RevPAR 2013 9 Select US Markets: Long-Term RevPAR Growth Rates (1987-2013) 10 Source: Smith Travel Research Long-Term RevPAR CAGRs 11
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