Summary of Development Assumptions - 7/24/2012 LAND AND BUILDING CHARACTERISTICS Property Hotel Type Full Service Hotel Space Use Parking Struture Hotel Structure & Lot Room Support 0 SF Structured Parking 100 Spaces Lot Square Footage 25,000 SF Retail 7,381 SF GSF per Space 350 SF Lot FAR 8.0 FAR Office/Retail 0 SF Structured Parking GSF 35,000 SF Gross Square Footage 245,830 SF Food & Beverage 0 SF Surface Parking 0 Spaces Gross Room Square Footage 238,449 SF Function 0 SF Surface Parking GSF 0 SF Efficiency Factor 85% Spa 0 SF Residual Room GSF 202,682 SF Admin/Mechanical 0 SF Area Without Parking 245,830 SF Total Rooms/Keys 278 Keys Public Area 0 SF Above-Grade GSF excl. Pkg. 245,830 SF Rentable Hotel Room SF 729 SF Total Non-Room GSF 7,381 SF Total Building Gross SF 280,830 SF PROJECT TIMING VARIABLES Analysis Start Date Month 1 4/1/2012 Number of Months of Construction 22 Months Date of Land Contract Execution 3/1/2013 Construction Start Date Month 22 1/1/2014 Land Closing Date 3/1/2013 First Retail C of O Received Month 40 8/1/2015 Months of Pre-Construction after Land Closing 21 Months Construction End Date/ Final C of O Month 44 11/1/2015 Year 4 Total Development Period Duration 44 Months DEVELOPMENT USES OF FUNDS Per Key Per GSF % Total Total Land Purchase Cost 0.00% Deposit $53,957 $61 16.43% $15,000,000 Parking Space Acquisition Costs $30,000/Space $3,000,000 Hard Costs $58,210,715 Vertical Construction $200,000/Key $55,600,000 Retail Tenant Improvements $110,715 $110,715 Structured Parking Cost $25,000/Space $2,500,000 Surface Parking Cost $25,000/Space $0 Other Construction (Non-GC) $0 Hard Costs with Contingency $219,861 $249 66.93% $61,121,251 Hard Costs Contingency 5.00% $2,910,536 Soft Costs 10% $22,107 $25 6.73% $6,145,750 Soft Costs Contingency 3.00% $184,373 Developer Fee 2.00% $1,164,214 Marketing and Project Contingency 1.00% $61,458 Retail Tenant Broker Fees & Leasing Commisions $51,667 FF&E $5,000/Key $6 1.52% $1,390,000 Financing Costs Incl. Cash and Capitalized Int./Fees 3.51% $3,201,622 Total Development Cost (Uses of Funds) $328,490 $371 95.11% $91,320,334 Operating Deficit $19,732 Total Development Cost Including Operating Deficit $91,340,066 DEVELOPMENT SOURCES OF FUNDS Per Key % of Total Equity Initial Amount Share of Any % of Cost w/deficits Deficits Developer/Sponsor Equity $7,194 9.09% $2,000,000 $73,230 2.27% $2,073,230 Third Party Investor Equity $71,942 90.91% $20,000,000 $732,302 22.70% $20,732,302 Equity Total 100.00% $22,000,000 $805,532 24.97% $22,805,532 Land Loan Closing Date 3/1/2013 Loan Fees 0.75% Total Loan Proceeds $0 Annual Interest Rate 6.00% Broker Fee 0.00% Loan-to-Cost Ratio 0% Repayment Source: Senior Loan Mortgage Recording Tax 0.00% Senior Construction Loan Closing Date 6/1/2014 Loan Fees - Front End 0.50% Total Loan Proceeds $68,534,534 Annual Interest Rate 6.00% Broker Fee 0.00% Loan-to-Cost Ratio 75.03% Loan Fees at Draw 1.00% Mortgage Recording Tax 0.50% Repayment Source: Debt Total (excludes any Land Loan) $68,534,534 Property Cash Flow $0 Total Sources of Funds (excludes any Land Loan) $91,340,066
Summary of Operating and Sale Assumptions - 7/24/2012 INCOME AND OCCUPANCY VARIABLES INTERIM LOAN TO REPLACE SENIOR LOAN Income Average Daily Rate (ADR) $200.00 Parking Per Car $20.00 Funding Date 10/1/2015 Annual NOI at Point of Refinancing $16,156,205 ADR Nominal Growth 2.00% Parking Revenue Net Margin 80% Amortization Period 20 Years Maximum Loan Amount $141,366,797 Expense Inflation Rate 1.00% Telecommunications POR $50.00 Duration 15 months Amount to Refinance: Remaining Balance on Loan(s) Other Income Inflation Rate 3.00% Rentals & Other Income POR $20.00 Duration 1.25 Years Loan Principal Borrowed $68,534,534 Interest Rate 5.00% Food And Beverage Variables Monthly Payment ($452,298) Remaining Bal. on Loan(s) $68,534,534 Breakfast 5.00% $10.00 1.00x LTV 32% Grab-n-Go 5.00% $10.00 1 Loan Fees - Front End 1.00% Coffee Bar Sales 5.00% $3.00 $10.00 0.8 Broker Fee 1.00% Cocktail Sales $3.00 $10.00 0.8 Mortgage Recording Tax 1.00% Snack/Lite Fare Sales $3.00 $10.00 0.8 I/O Period (# of Years) 0 Occupancy PERMANENT LOAN 11/2/2015 11/2/2016 11/2/2017 11/2/2018 11/2/2019 Year 1 Year 2 Year 3 Year 4 Year 5 Refinancing to occur? No Annual NOI at Point of Refinancing $17,063,570 60% 62% 69% 70% 70% Year of Refinancing Year 6 Maximum Loan Amount * $144,341,580 11/2/2020 11/2/2021 11/2/2022 11/2/2023 11/2/2024 Date of Refinancing 09/01/2017 Amount to Refinance: Remaining Interim Loan Balance Year 6 Year 7 Year 8 Year 9 Year 10 Amortization Period 20 Years Loan Principal Borrowed $64,518,579 73% 73% 73% 73% 73% Interest Rate 7.75% Monthly Payment ($1,184,970) Remaining Interim Loan Principal $64,518,579 New LTV 68% Fixed Expenses Cost of Sales & Labor Excess Proceeds to Equity $0 Insurance PAR $10.00 Rooms $15.00 Loan/Broker Fees/Closing Costs 1.00% Property Taxes % Total Rev 3.00% Food & Beverage % Cost 2.00% Interest Only Period (# of Years) 0 Capital Reserve % Total Rev Year 1 2.00% Telecommunications % Cost 2.00% * The Lesser of the Two Loan Proceeds Amounts Year 2 2.00% Parking % Cost 1.00% Year 3+ 2.00% Rentals & Other % Cost 1.00% DISPOSITION AND RETURNS Variable Expenses - SG&A Administrative & General PAR $20.00 Royalty Fees % Rms Rev 1.00% Post-Delivery Hold: 30 Months Sell in Project Year #7 6/1/2018 $19,919,238 Per Key Marketing PAR $5.00 Property Maintenance PAR $20.00 Sale Date 5/1/2018 Month 74 Management Fee % Total Rev 2.50% Energy PAR $10.00 Terminal Cap Rate 10.00% Sale Price $199,192,376 $716,519 Selling Costs 2.00% ($3,983,848) Net Sale Proceeds $195,208,528 RETAIL COMPONENT INCOME, TI AND LC ASSUMPTIONS Less Outstanding Mortgage ($63,475,074) NNN Rent TI Allowance TI Start Month TI Schedule Net Sales Proceeds After Debt Repayment $131,733,454 $473,861 per Key $25.00 $15.00 Month 42 2 Months Escalation 3.00% IRR (calculated off of monthly values) 53.93% Net Present Value at 10% $72,234,105 Rent Escalates Prior to Delivery? No Net Cash Flow $138,528,628 Multiple on Equity ** 2.66x OpEx RE Taxes Total Equity Invested * $83,660,024 ** Ignores the time value of money. Leasing Commissions Term /SF/Yr /SF/Yr * Includes funding of any equity operating, financing and funding shortfalls. 4.00% 7 Years $5.00 $3.00
Capital Structure % Equity % TDC Equity % TDC Debt % TDC Amount * Total Equity * Total Debt * Deficits Funded by Equity Equity Investment including Deficit Liabilities % TDC - Actual %s Developer Sponsor Equity + 9.09% 2.27% $2,000,000 $2,073,230 Developer Sponsor Equity + 2.27% Third Party Investor Equity + 90.91% 22.70% 24.97% $20,000,000 $22,000,000 $805,532 $20,732,302 Third Party Investor Equity + 22.70% $22,805,532 Senior Loan ** 75.03% 75.03% $68,534,534 $68,534,534 Senior Loan ** 75.03% Total Sources of Funds (TDC) 100.00% 100.00% $91,340,066 Property Cash Flow as Source of Funds 0.00% 100.00% Sources of Funds From Above $91,340,066 Property Cash Flow As Source of Funds $0 Total Sources of Funds $91,340,066 + While the equity slices are shown stacked vertically, note that this is simply the graphic representation and does not imply that there is any Preferred equity in the transaction. * The Senior Loan Amount on a residual basis after designating the dollar amounts of the other sources of funds. ** Principal Amount includes Funded Interest Reserve and Funded Loan Fees. ^ Equity amounts in this column do not include the pro-rata portion of the Operating and Financing Deficits to be funded by the Equity investors. See Column S for adjusted totals.
Annual Summary - Sources and Uses of Funds Data Series 2012 2013 2014 2015 2016 2017 USES OF FUNDS Total Profile Land and Acquisition Costs $18,000,000 0 15,000,000 1,290,000 1,710,000 0 0 Total Hard Costs incl. Retail TIs $61,121,251 0 0 26,232,150 34,889,101 0 0 Total Soft Costs incl. Contingency $7,607,461 70,588 94,118 4,031,503 3,411,253 0 0 FF&E $1,390,000 0 0 758,182 631,818 0 0 Subtotal Development Costs $88,118,712 $70,588 $15,094,118 $32,311,834 $40,642,171 $0 $0 Land Loan Interest $0 0 0 0 0 0 0 Senior Loan Interest $2,804,227 0 0 296,519 2,507,708 0 0 Total Financing Costs $3,201,622 0 0 660,422 2,541,200 0 0 Total Development Costs before Operating Deficit $91,320,334 $70,588 $15,094,118 $32,972,256 $43,183,371 $0 $0 Operating Deficit ($19,732) 0 0 0 (19,732) 0 0 Total Development Costs and Operating Deficit $91,340,066 $70,588 $15,094,118 $32,972,256 $43,203,103 $0 $0 SOURCES OF FUNDS Developer Sponsor Equity Invests First Direct Project Costs Draw $2,000,000 70,588 1,929,412 0 0 0 0 Operating Deficit and Financing-related Deficits Draw $73,230 0 0 0 73,230 0 0 Total Funding $2,073,230 70,588 1,929,412 0 73,230 0 0 Third Party Investor Equity Invests after Partner invests fully Direct Project Costs Draw $20,000,000 0 13,164,706 6,835,294 0 0 0 Operating Deficit and Financing-related Deficits Draw $732,302 0 0 0 732,302 0 0 Total Funding $20,732,302 0 13,164,706 6,835,294 732,302 0 0 Land Loan Draw $0 0 0 0 0 0 0 Cash Interest Payments $0 0 0 0 0 0 0 Loan Repayment $0 0 0 0 0 0 0 Senior Loan Direct Project Costs Draw $65,666,415 0 0 25,476,541 40,189,874 0 0 Loan Fees - Front End $342,673 0 0 342,673 0 0 0 Loan Fees - At Loan Draws $54,722 0 0 21,230 33,492 0 0 Funded Interest Reserve $2,470,724 0 0 296,519 2,174,206 0 0 Cash Interest Payments $333,503 0 0 0 333,503 0 0 Repayment from Interim Loan ($68,534,534) 0 0 0 (68,534,534) 0 0 Repayment from Permanent Loan $0 0 0 0 0 0 0
Annual Summary - Cash Flow Data Series Sales Total Profile 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Rooms $51,876,979 0 0 0 2,153,616 13,188,741 14,085,162 15,730,284 6,719,176 0 0 0 Food & Beverage $125,972 0 0 0 5,218 31,640 34,115 38,399 16,600 0 0 0 Retail NOI $406,485 0 0 0 31,677 192,912 181,896 0 0 0 0 0 Total Sales and Retail NOI $73,741,287 $0 $0 $0 $3,073,587 $18,768,242 $20,075,621 $22,276,464 $9,547,373 $0 $0 $0 Rooms $3,678,518 0 0 0 152,205 923,022 995,680 1,122,515 485,096 0 0 0 Food & Beverage $2,519 0 0 0 104 633 682 768 332 0 0 0 Telecommunications $245,235 0 0 0 10,147 61,535 66,379 74,834 32,340 0 0 0 Parking $39,238 0 0 0 1,624 9,846 10,621 11,973 5,174 0 0 0 Rentals & Other Income $49,047 0 0 0 2,029 12,307 13,276 14,967 6,468 0 0 0 Total Cost of Sales $4,014,556 $0 $0 $0 $166,109 $1,007,342 $1,086,637 $1,225,058 $529,410 $0 $0 $0 Adminstative & General $20,729 0 0 0 927 5,588 5,755 5,928 2,531 0 0 0 Sales & Marketing $5,182 0 0 0 232 1,397 1,439 1,482 633 0 0 0 Management Fee (Market Rate) $1,843,532 0 0 0 76,840 469,206 501,891 556,912 238,684 0 0 0 Royalty Fees $518,770 0 0 0 21,536 131,887 140,852 157,303 67,192 0 0 0 Property Repairs & Maintenance $20,729 0 0 0 927 5,588 5,755 5,928 2,531 0 0 0 Energy $10,365 0 0 0 463 2,794 2,878 2,964 1,266 0 0 0 Total SG&A Expenses $2,431,640 $0 $0 $0 $113,257 $616,460 $658,570 $730,517 $312,838 $0 $0 $0 Total Fixed Expenses $3,704,829 0 0 0 161,542 941,206 1,006,659 1,116,787 478,634 0 0 0 NET OPERATING INCOME $44,090,815 $0 $0 $0 $2,632,679 $16,203,234 $17,323,756 $7,931,146 $0 $0 $0 $0 Revenue after Financing Costs $28,587,489 0 0 0 942,283 10,775,663 11,586,718 5,282,824 0 0 0 0 Disposition Property Sale Capitalized Value, Gross $199,192,376 0 0 0 0 0 0 199,192,376 0 0 0 0 Less Selling Costs ($3,983,848) 0 0 0 0 0 0 (3,983,848) 0 0 0 0 Net Sales Proceeds $195,208,528 0 0 0 0 0 0 195,208,528 0 0 0 0 Retail Sales Proceeds $207,685 0 0 0 0 0 207,685 0 0 0 0 0 Financing Cash Flows Developer Sponsor Equity Draw ($2,000,000) (70,588) (1,929,412) 0 0 0 0 0 0 0 0 0 Third Party Investor Equity Draw ($20,000,000) 0 (13,164,706) (6,835,294) 0 0 0 0 0 0 0 0 Developer Sponsor Equity Draw ($73,230) 0 0 0 (73,230) 0 0 0 0 0 0 0 Third Party Investor Equity Draw ($732,302) 0 0 0 (732,302) 0 0 0 0 0 0 0 Senior Loan Repayment ($68,534,534) 0 0 0 (68,534,534) 0 0 0 0 0 0 0 Loan Proceeds - Interim Loan $68,534,534 0 0 0 68,534,534 0 0 0 0 0 0 0 Repayment of Interim Loan ($64,518,579) 0 0 0 0 0 (64,518,579) 0 0 0 0 0 Loan Proceeds - Permanent Loan $64,518,579 0 0 0 0 0 64,518,579 0 0 0 0 0 Repayment of Permanent Loan ($63,475,074) 0 0 0 0 0 0 (63,475,074) 0 0 0 0 LEVERED CASH FLOW $138,528,628 ($70,588) ($15,094,118) ($6,835,294) $942,283 $10,775,663 $11,794,402 $137,016,279 $0 $0 $0 $0
Equity Joint Venture Partnership Structure Total Required Equity (Purchase + Operation) $22,805,532 (Includes any Deficit Funding) Sponsor 9.09% $2,073,230 100.00% Third Party Investor 90.91% $20,732,302 100.00% $22,805,532 Profit Sharing Preferred Return Residual Split 8.00% Partnership Structure % Equity Sponsor Equity 9.09% Profit >> Sponsor Equity 9.09% 50.00% Third Party Investor 90.91% Sharing >> Sponsor Promote 0.00% Total 100.00% Splits >> Investor Equity 90.91% 50.00% 100.00% 100.00% Note: By its nature, the Preferred Return includes the Return of Capital.
Joint Venture Return Detail Sponsor Third Party Total Project Investor Equity Investment $2,073,230 $20,732,302 $22,805,532 Share of Equity Investment 9.09% 90.91% 100.00% Gross Return $68,415,304 $92,918,856 $161,334,160 Net Profit (Return on Equity) $66,342,074 $72,186,554 $138,528,628 Multiple on Equity 33.00x 4.48x 7.07x Internal Rate of Return 99.54% 41.09% 53.93% Time from Equity Investment to Final Return (months) 74 74 74 Profit Sharing Summary - Sponsor and Third Party Investor Profit Sharing Structure - Developer and Third Party Investor Tier Sponsor Cashflow Developer Share Third Party Investor Cashflow Third Party Investor Share Total Cashflow Developer Promote Developer Equity Pro- Rata Share Investor Total (must Profit Share be 100%) ROC and Pref Return $2,722,617 9% $27,226,168 91% $29,948,785 Preferred Return From 0% through 8% 0% 9% 91% 100% Tier 1 $65,692,687 50% $65,692,687 50% $131,385,375 Residual Split Above 8% 41% 9% 50% 100% Total $68,415,304 42% $92,918,856 58% $161,334,160 Less Equity Investment ($2,073,230) 9% ($20,732,302) 91% ($22,805,532) Net Profit (Return on Equity) $66,342,074 48% $72,186,554 52% $138,528,628 IRR Hurdle Ranges Share of Total Equity Investment Sponsor Third Party Investor 9% Share of Total Profit Sponsor Third Party Investor 52% $74,000,000 $72,000,000 $70,000,000 Net Profits Sponsor Third Party Investor $68,000,000 91% 48% $66,000,000 $64,000,000 $62,000,000