List of Appendices A-1

Transcription

1 List of Appendices A. Letter of Engagement B. 30 Yr. Historical Rates of Change (Hotel) C. Hotel 15 Year Cash Flow Pro Forma (Realistic Scenario) D. Hotel 15 Year Cash Flow Pro Forma (Optimistic Scenario) E. Hotel 15 Year Cash Flow Pro Forma (Pessimistic Scenario) F. Occupancies & ADRs All MA Hotels '05 - '07 G. Hotel Sensitivity Analysis: ADRs/ Development Costs (Realistic Scenario) H. Hotel Sensitivity Analysis: ADRs/ Development Costs (Optimistic Scenario) I. Hotel Sensitivity Analysis: ADRs/ Development Costs (Pessimistic Scenario) J. Financial Assumptions Made by HII (Hotel) K. HVS Hotel Development Cost Forecasted Per-Room Averages (2007) L. HVS Hotel Development Cost Actual Per-Room Cost Ranges ( ) M. Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Realistic Scenario) N. Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Optimistic Scenario) O. Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Pessimistic Scenario) P. Hotel Break-Even (Realistic Scenario) Q. Hotel Break-Even (Optimistic Scenario) R. Hotel Break-Even (Pessimistic Scenario) S. Hotel Development Costs at Various Grade Levels T. HII Hotel 10-Year Cash Flow Pro Forma U. HII Hotel Cash Flow, Supportable Debt/Equity Projections V. HII Hotel Capital Costs / Financial Summary W. LIFESTYLE MARKET ANALYST W-1 LMA All Target DMAs W-2 LMA Boston (Manchester, NH) DMA W-3 LMA Hartford & New Haven, CT DMA W-4 LMA Providence, RI-New Bedford, MA DMA W-5 LMA Springfield-Holyoke, MA DMA W-6 LMA New York, NY DMA (Fairfield County, CT Subset) X. MOTT / Strategic Market Research Findings Y. Vacation Spa Locations & Area Resorts Z. Pioneer Valley Real Estate Properties AA. Former MA State School Property Redevelopments BB. Alternative Development Suggestions CC. Potential Development Partners DD. BSS SWOT EE. Expert Interview Notes FF. Bibliography A-1

2 University of Massachusetts Isenberg School of Management Appendix A Letter of Engagement Letter of Engagement February 21, 2008 William Terry Belchertown Economic Development Industrial Corporation P.O. Box 670 Belchertown, MA Dear Mr. Terry: The purpose of this letter is to verify that we intend to pursue the Isenberg School of Management Practicum Project that we discussed with you on our recent visit. We also want to reiterate our understanding of the project we are to undertake and the major tasks related to successful completion of this assignment. Finally, we would like to outline the initial information and material that we expect will be needed to complete the project assignment. We would also like to bring to your attention the following statement concerning the nature of the student consulting project that we are undertaking. This consulting project is possible through an agreement with your company and the Isenberg School of Management at the University of Massachusetts at Amherst. The final presentation and report that will be presented to you in no way reflects the views or opinions of any faculty member affiliated with the Isenberg school of Management. Rather, it will contain the analysis, observations, research, and recommendations of the student team fro the Isenberg School of Management MBA program that has been assigned to your company. Our faculty advisor s role is that of an administrator and grader of our work and is not a member of the consulting team. 1. Below is the project as the Isenberg MBA team understands it: The team will review the existing development plan for a mixed-use complex on the former Belchertown State School Property and provide an analysis of its general feasibility. This may result in one of three recommendations: a. The plan as is, after minor changes and updates, should be considered a go and the process of pursuing a master developer should resume shortly. b. The plan should be considered a go, but only after significant changes to the plan. This may entail a phased implementation approach, a revised combination of building elements, or some other alternative. A-2

3 c. The plan as is should be considered a no go and alternative uses for the land should be explored. The team will offer supporting evidence for whichever of the recommendations it ultimately provides. It will strongly consider the plan s feasibility in the eyes of master developers and investors. 2. Based on our discussions with you on February 11, 2008 and February 20, 2008, we intend to accomplish the following tasks while completing the consulting assignment: a. Review the existing feasibility study prepared by Hunter Interests to identify areas of potential infeasibility, as judged by the team. Explore these sections of the study in greater detail and draw conclusions as to whether they affect the feasibility of the overall plan. b. Grow aware of significant changes (i.e. new hotel development) and likely impending changes (i.e. casino) to the surrounding area and determine if they significantly affect the feasibility of the existing plan. c. Engage relevant experts and stakeholders to judge overall concept feasibility. Experts and stakeholders may include any of: developers, investors, architects, hotel and spa owners or staff, state agencies, UMass educators with relevant knowledge, EDIC board members, outspoken critics of the existing plan and other parties with useful insight. In performing each of these tasks, the University of Massachusetts Isenberg MBA team will consider each of the three possible recommendations identified in the project objective. If areas of infeasibility are identified, the team will seek to determine alternative solutions, as time permits. We expect to generate useful recommendations as a result of completing the above tasks. Most importantly we hope that you find these recommendations to be actionable and to contribute to the continued performance of the Belchertown Economic Development Industrial Corporation (EDIC). Our goal is to provide you with a final written report by May 8, 2008, and to have a formal presentation of these results and recommendations by May 16, Finally, thank you for providing us with this experience. We look forward to working with you on the successful completion of this assignment. Sincerely, William Terry Katherine Bloor Pianpian Huang Kevin Price Ielyzaveta Zhuravska A-3

4 Appendix B 30 Yr. Historical Rates of Change (Hotel) Historical Rates of Change, Source: Smith Travel Research; Bureau of Labor Statistics Source: A-4

5 Appendix C Hotel 15 Year Cash Flow Pro Forma (Realistic Scenario) Hotel 15 Year Cash Flow Pro Forma Realistic Scenario Net Operating Income Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 Revenues: Number of Rooms Average Occupancy Annual Occupied Room Nights 21,900 24,638 27,375 30,113 30,113 30,113 30,113 30,113 30,113 30,113 30,113 30,113 30,113 30,113 30,113 Average Room Rate $155 $163 $171 $179 $188 $197 $207 $217 $227 $238 $250 $262 $275 $289 $ % Average Room Revenue $3,394,500 $4,005,934 $4,669,139 $5,387,719 $5,651,718 $5,928,652 $6,219,156 $6,523,894 $6,843,565 $7,178,900 $7,530,666 $7,899,669 $8,286,753 $8,692,803 $9,118,751 Other Revenue: Food & Beverage $2,420,266 $2,856,217 $3,329,079 $3,841,425 $4,029,654 $4,227,107 $4,434,236 $4,651,513 $4,879,437 $5,118,530 $5,369,338 $5,632,435 $5,908,425 $6,197,937 $6,501, % Telephone & Other $312,490 $368,777 $429,830 $495,981 $520,284 $545,778 $572,522 $600,575 $630,003 $660,873 $693,256 $727,226 $762,860 $800,240 $839, % Total Gross Revenue $6,127,256 $7,230,928 $8,428,049 $9,725,125 $10,201,657 $10,701,538 $11,225,913 $11,775,983 $12,353,006 $12,958,303 $13,593,260 $14,259,330 $14,958,037 $15,690,981 $16,459,839 Annual Expenses Departmental Expenses: Rooms $1,145,797 $1,352,184 $1,576,045 $1,818,598 $1,907,710 $2,001,188 $2,099,246 $2,202,109 $2,310,012 $2,423,203 $2,541,940 $2,666,495 $2,797,153 $2,934,213 $3,077, % Food & Beverage $1,415,396 $1,670,344 $1,946,879 $2,246,504 $2,356,583 $2,472,055 $2,593,186 $2,720,252 $2,853,544 $2,993,368 $3,140,043 $3,293,905 $3,455,307 $3,624,617 $3,802, % Telephone & Other $238,963 $282,006 $328,694 $379,280 $397,865 $417,360 $437,811 $459,263 $481,767 $505,374 $530,137 $556,114 $583,363 $611,948 $641, % Total Dept. Expenses $2,800,156 $3,304,534 $3,851,618 $4,444,382 $4,662,157 $4,890,603 $5,130,242 $5,381,624 $5,645,324 $5,921,945 $6,212,120 $6,516,514 $6,835,823 $7,170,778 $7,522, % Other Expenses: General & Admin. $533,071 $608,362 $733,240 $846,086 $887,544 $931,034 $976,654 $1,024,511 $1,074,712 $1,127,372 $1,182,614 $1,240,562 $1,301,349 $1,365,115 $1,432, % Sales & Marketing $471,799 $556,781 $648,960 $748,835 $785,528 $824,018 $864,395 $906,751 $951,181 $997,789 $1,046,681 $1,097,968 $1,151,769 $1,208,206 $1,267, % Repairs & Maintenance $453,417 $535,089 $623,676 $719,659 $754,923 $791,914 $830,718 $871,423 $914,122 $958,914 $1,005,901 $1,055,190 $1,106,895 $1,161,133 $1,218, % Utilities $349,254 $412,163 $480,399 $554,332 $581,494 $609,988 $639,877 $671,231 $704,121 $738,623 $774,816 $812,782 $852,608 $894,386 $938, % Fees & Services $214,454 $253,082 $294,982 $340,379 $357,058 $374,554 $392,907 $412,159 $432,355 $453,541 $475,764 $499,077 $523,531 $549,184 $576, % Insurance $85,782 $101,233 $117,993 $136,152 $142,823 $149,822 $157,163 $164,864 $172,942 $181,416 $190,306 $199,631 $209,413 $219,674 $230, % Total Other Expenses $2,107,776 $2,466,710 $2,899,249 $3,345,443 $3,509,370 $3,681,329 $3,861,714 $4,050,938 $4,249,434 $4,457,656 $4,676,081 $4,905,209 $5,145,565 $5,397,697 $5,662, % Replacement Reserve $- $- $- $- $- $- $- $- $- $- $- $- $- $- $- Real Estate/ Property Tax $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424, % Total Expenses $5,332,901 $6,196,213 $7,175,836 $8,214,794 $8,596,496 $8,996,900 $9,416,925 $9,857,531 $10,319,727 $10,804,570 $11,313,170 $11,846,692 $12,406,356 $12,993,444 $13,609,300 Net Operating Income Total Annual Revenues $6,127,256 $7,230,928 $8,428,049 $9,725,125 $10,201,657 $10,701,538 $11,225,913 $11,775,983 $12,353,006 $12,958,303 $13,593,260 $14,259,330 $14,958,037 $15,690,981 $16,459,839 Total Annual Expenses $5,332,901 $6,196,213 $7,175,836 $8,214,794 $8,596,496 $8,996,900 $9,416,925 $9,857,531 $10,319,727 $10,804,570 $11,313,170 $11,846,692 $12,406,356 $12,993,444 $13,609,300 Net Operating Income $794,355 $1,034,715 $1,252,213 $1,510,331 $1,605,161 $1,704,637 $1,808,988 $1,918,452 $2,033,279 $2,153,734 $2,280,090 $2,412,638 $2,551,681 $2,697,536 $2,850,539 * Other expenses are treated as 50% variable and 50% fixed (fixed costs taken from Year 4, first year of stabilized occupancy). ** Inflation was disregarded in this pro forma as most of the projected numbers are linked to gross revenue, which incorporates ADR growth at 4.9% CAGR A-5

6 Appendix C (continued) Hotel 15 Year Cash Flow Pro Forma (Realistic Scenario) Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 $28,125,000 Net Operating Income $794,355 $1,034,715 $1,252,213 $1,510,331 $1,605,161 $1,704,637 $1,808,988 $1,918,452 $2,033,279 $2,153,734 $2,280,090 $2,412,638 $2,551,681 $2,697,536 $2,850,539 Annual Debt Service $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Taxable Income $(2,197,211) $(1,956,851) $(1,739,353) $(1,481,235) $(1,386,406) $(1,286,929) $(1,182,578) $(1,073,115) $(958,287) $(837,833) $(711,476) $(578,929) $(439,886) $(294,030) $(141,027) Net Income After Taxes $(2,197,211) $(1,956,851) $(1,739,353) $(1,481,235) $(1,386,406) $(1,286,929) $(1,182,578) $(1,073,115) $(958,287) $(837,833) $(711,476) $(578,929) $(439,886) $(294,030) $(141,027) Profit Margin % % % % % % % -9.11% -7.76% -6.47% -5.23% -4.06% -2.94% -1.87% -0.86% Net Income After Taxes $(2,197,211) $(1,956,851) $(1,739,353) $(1,481,235) $(1,386,406) $(1,286,929) $(1,182,578) $(1,073,115) $(958,287) $(837,833) $(711,476) $(578,929) $(439,886) $(294,030) $(141,027) Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Annual Cash Flow $(1,259,711) $(1,019,351) $(801,853) $(543,735) $(448,906) $(349,429) $(245,078) $(135,615) $(20,787) $99,667 $226,024 $358,571 $497,614 $643,470 $796,473 * Depreciation is calculated as 30 year straight-line. ** Income tax was ignored in this model as it is unknown what type of an entity will own and manage the hotel and what tax bracket would be applicable. Income tax can also be ignored because of negative net income through the analyzed period. A-6

7 Appendix D Hotel 15 Year Cash Flow Pro Forma (Optimistic Scenario) Hotel 15 Year Cash Flow Pro Forma Optimistic Scenario Net Operating Income Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 Revenues: Number of Rooms Average Occupancy Annual Occupied Room Nights 27,375 30,113 32,850 35,588 35,588 35,588 35,588 35,588 35,588 35,588 35,588 35,588 35,588 35,588 35,588 Average Room Rate $155 $163 $171 $179 $188 $197 $207 $217 $227 $238 $250 $262 $275 $289 $ % Average Room Revenue $4,243,125 $4,896,142 $5,602,967 $6,367,305 $6,679,303 $7,006,589 $7,349,911 $7,710,057 $8,087,850 $8,484,155 $8,899,878 $9,335,972 $9,793,435 $10,273,313 $10,776,705 Other Revenue: Food & Beverage $3,025,333 $3,490,932 $3,994,895 $4,539,865 $4,762,319 $4,995,672 $5,240,460 $5,497,243 $5,766,608 $6,049,172 $6,345,581 $6,656,514 $6,982,684 $7,324,835 $7,683, % Telephone & Other $390,613 $450,728 $515,797 $586,160 $614,882 $645,011 $676,616 $709,771 $744,549 $781,032 $819,303 $859,449 $901,562 $945,738 $992, % Total Gross Revenue $7,659,070 $8,837,801 $10,113,658 $11,493,330 $12,056,503 $12,647,272 $13,266,988 $13,917,071 $14,599,007 $15,314,358 $16,064,762 $16,851,935 $17,677,680 $18,543,886 $19,452,537 Annual Expenses Departmental Expenses: Rooms $1,432,246 $1,652,669 $1,891,254 $2,149,253 $2,254,566 $2,365,040 $2,480,927 $2,602,492 $2,730,014 $2,863,785 $3,004,110 $3,151,312 $3,305,726 $3,467,707 $3,637, % Food & Beverage $1,769,245 $2,041,532 $2,336,255 $2,654,959 $2,785,052 $2,921,520 $3,064,674 $3,214,843 $3,372,371 $3,537,617 $3,710,960 $3,892,797 $4,083,544 $4,283,638 $4,493, % Telephone & Other $298,704 $344,674 $394,433 $448,240 $470,204 $493,244 $517,413 $542,766 $569,361 $597,260 $626,526 $657,225 $689,430 $723,212 $758, % Total Dept. Expenses $3,500,195 $4,038,875 $4,621,942 $5,252,452 $5,509,822 $5,779,803 $6,063,014 $6,360,101 $6,671,746 $6,998,662 $7,341,596 $7,701,334 $8,078,700 $8,474,556 $8,889, % Other Expenses: General & Admin. $666,339 $744,391 $879,888 $999,920 $1,048,916 $1,100,313 $1,154,228 $1,210,785 $1,270,114 $1,332,349 $1,397,634 $1,466,118 $1,537,958 $1,613,318 $1,692, % Sales & Marketing $589,748 $680,511 $778,752 $884,986 $928,351 $973,840 $1,021,558 $1,071,614 $1,124,124 $1,179,206 $1,236,987 $1,297,599 $1,361,181 $1,427,879 $1,497, % Repairs & Maintenance $566,771 $653,997 $748,411 $850,506 $892,181 $935,898 $981,757 $1,029,863 $1,080,327 $1,133,263 $1,188,792 $1,247,043 $1,308,148 $1,372,248 $1,439, % Utilities $436,567 $503,755 $576,479 $655,120 $687,221 $720,894 $756,218 $793,273 $832,143 $872,918 $915,691 $960,560 $1,007,628 $1,057,002 $1,108, % Fees & Services $268,067 $309,323 $353,978 $402,267 $421,978 $442,655 $464,345 $487,097 $510,965 $536,003 $562,267 $589,818 $618,719 $649,036 $680, % Insurance $107,227 $123,729 $141,591 $160,907 $168,791 $177,062 $185,738 $194,839 $204,386 $214,401 $224,907 $235,927 $247,488 $259,614 $272, % Total Other Expenses $2,634,720 $3,015,706 $3,479,099 $3,953,706 $4,147,437 $4,350,662 $4,563,844 $4,787,472 $5,022,058 $5,268,139 $5,526,278 $5,797,066 $6,081,122 $6,379,097 $6,691, % Replacement Reserve $- $- $- $- $- $- $- $- $- $- $- $- $- $- $- Real Estate/ Property Tax $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424, % Total Expenses $6,559,884 $7,479,550 $8,526,009 $9,631,126 $10,082,228 $10,555,434 $11,051,826 $11,572,542 $12,118,773 $12,691,770 $13,292,843 $13,923,369 $14,584,791 $15,278,622 $16,006,451 Net Operating Income Total Annual Revenues $7,659,070 $8,837,801 $10,113,658 $11,493,330 $12,056,503 $12,647,272 $13,266,988 $13,917,071 $14,599,007 $15,314,358 $16,064,762 $16,851,935 $17,677,680 $18,543,886 $19,452,537 Total Annual Expenses $6,559,884 $7,479,550 $8,526,009 $9,631,126 $10,082,228 $10,555,434 $11,051,826 $11,572,542 $12,118,773 $12,691,770 $13,292,843 $13,923,369 $14,584,791 $15,278,622 $16,006,451 Net Operating Income $1,099,186 $1,358,252 $1,587,649 $1,862,204 $1,974,275 $2,091,838 $2,215,162 $2,344,528 $2,480,234 $2,622,589 $2,771,919 $2,928,566 $3,092,890 $3,265,265 $3,446,086 * Other expenses are treated as 50% variable and 50% fixed (fixed costs taken from Year 4, first year of stabilized occupancy). ** Inflation was disregarded in this pro forma as most of the projected numbers are linked to gross revenue, which incorporates ADR growth at 4.9% CAGR. A-7

8 Appendix D (continued) Hotel 15 Year Cash Flow Pro Forma (Optimistic Scenario) Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 $28,125,000 Net Operating Income $1,099,186 $1,358,252 $1,587,649 $1,862,204 $1,974,275 $2,091,838 $2,215,162 $2,344,528 $2,480,234 $2,622,589 $2,771,919 $2,928,566 $3,092,890 $3,265,265 $3,446,086 Annual Debt Service $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Taxable Income $(1,892,380) $(1,633,315) $(1,403,917) $(1,129,363) $(1,017,291) $(899,728) $(776,405) $(647,038) $(511,333) $(368,978) $(219,648) $(63,000) $101,323 $273,698 $454,520 Net Income After Taxes $(1,892,380) $(1,633,315) $(1,403,917) $(1,129,363) $(1,017,291) $(899,728) $(776,405) $(647,038) $(511,333) $(368,978) $(219,648) $(63,000) $101,323 $273,698 $454,520 Profit Margin % % % -9.83% -8.44% -7.11% -5.85% -4.65% -3.50% -2.41% -1.37% -0.37% 0.57% 1.48% 2.34% Net Income After Taxes $(1,892,380) $(1,633,315) $(1,403,917) $(1,129,363) $(1,017,291) $(899,728) $(776,405) $(647,038) $(511,333) $(368,978) $(219,648) $(63,000) $101,323 $273,698 $454,520 Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Annual Cash Flow $(954,880) $(695,815) $(466,417) $(191,863) $(79,791) $37,772 $161,095 $290,462 $426,167 $568,522 $717,852 $874,500 $1,038,823 $1,211,198 $1,392,020 * Depreciation is calculated as 30 year straight-line. ** Income tax was ignored in this model as it is unknown what type of an entity will own and manage the hotel and what tax bracket would be applicable. Income tax can also be ignored because of negative net income through most of the analyzed period. A-8

9 Appendix E Hotel 15 Year Cash Flow Pro Forma (Pessimistic Scenario) Hotel 15 Year Cash Flow Pro Forma Pessimistic Scenario Net Operating Income Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 Revenues: Number of Rooms Average Occupancy Annual Occupied Room Nights 16,425 19,163 21,900 24,638 24,638 24,638 24,638 24,638 24,638 24,638 24,638 24,638 24,638 24,638 24,638 Average Room Rate $155 $163 $171 $179 $188 $197 $207 $217 $227 $238 $250 $262 $275 $289 $ % Average Room Revenue $2,545,875 $3,115,727 $3,735,311 $4,408,134 $4,624,133 $4,850,715 $5,088,400 $5,337,732 $5,599,281 $5,873,645 $6,161,454 $6,463,365 $6,780,070 $7,112,294 $7,460,796 Other Revenue: Food & Beverage $1,815,200 $2,221,502 $2,663,263 $3,142,984 $3,296,990 $3,458,542 $3,628,011 $3,805,784 $3,992,267 $4,187,888 $4,393,095 $4,608,356 $4,834,166 $5,071,040 $5,319, % Telephone & Other $234,368 $286,827 $343,864 $405,803 $425,687 $446,546 $468,427 $491,380 $515,457 $540,715 $567,210 $595,003 $624,158 $654,742 $686, % Total Gross Revenue $4,595,442 $5,624,055 $6,742,439 $7,956,921 $8,346,810 $8,755,804 $9,184,838 $9,634,895 $10,107,005 $10,602,248 $11,121,758 $11,666,724 $12,238,394 $12,838,075 $13,467,141 Annual Expenses Departmental Expenses: Rooms $859,348 $1,051,698 $1,260,836 $1,487,944 $1,560,853 $1,637,335 $1,717,565 $1,801,725 $1,890,010 $1,982,620 $2,079,769 $2,181,677 $2,288,580 $2,400,720 $2,518, % Food & Beverage $1,061,547 $1,299,157 $1,557,503 $1,838,049 $1,928,113 $2,022,591 $2,121,698 $2,225,661 $2,334,718 $2,449,119 $2,569,126 $2,695,013 $2,827,069 $2,965,595 $3,110, % Telephone & Other $179,222 $219,338 $262,955 $310,320 $325,526 $341,476 $358,209 $375,761 $394,173 $413,488 $433,749 $455,002 $477,297 $500,685 $525, % Total Dept. Expenses $2,100,117 $2,570,193 $3,081,295 $3,636,313 $3,814,492 $4,001,402 $4,197,471 $4,403,147 $4,618,901 $4,845,227 $5,082,644 $5,331,693 $5,592,946 $5,867,000 $6,154, % Other Expenses: General & Admin. $399,803 $472,333 $586,592 $692,252 $726,172 $761,755 $799,081 $838,236 $879,309 $922,396 $967,593 $1,015,005 $1,064,740 $1,116,913 $1,171, % Sales & Marketing $353,849 $433,052 $519,168 $612,683 $642,704 $674,197 $707,233 $741,887 $778,239 $816,373 $856,375 $898,338 $942,356 $988,532 $1,036, % Repairs & Maintenance $340,063 $416,180 $498,940 $588,812 $617,664 $647,929 $679,678 $712,982 $747,918 $784,566 $823,010 $863,338 $905,641 $950,018 $996, % Utilities $261,940 $320,571 $384,319 $453,544 $475,768 $499,081 $523,536 $549,189 $576,099 $604,328 $633,940 $665,003 $697,588 $731,770 $767, % Fees & Services $160,840 $196,842 $235,985 $278,492 $292,138 $306,453 $321,469 $337,221 $353,745 $371,079 $389,262 $408,335 $428,344 $449,333 $471, % Insurance $64,336 $78,737 $94,394 $111,397 $116,855 $122,581 $128,588 $134,889 $141,498 $148,431 $155,705 $163,334 $171,338 $179,733 $188, % Total Other Expenses $1,580,832 $1,917,715 $2,319,399 $2,737,181 $2,871,303 $3,011,996 $3,159,584 $3,314,404 $3,476,810 $3,647,173 $3,825,885 $4,013,353 $4,210,008 $4,416,298 $4,632, % Replacement Reserve $- $- $- $- $- $- $- $- $- $- $- $- $- $- $- Real Estate/ Property Tax $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424,969 $424, % Total Expenses $4,105,918 $4,912,877 $5,825,662 $6,798,462 $7,110,763 $7,438,367 $7,782,024 $8,142,520 $8,520,680 $8,917,370 $9,333,497 $9,770,015 $10,227,922 $10,708,267 $11,212,149 Net Operating Income Total Annual Revenues $4,595,442 $5,624,055 $6,742,439 $7,956,921 $8,346,810 $8,755,804 $9,184,838 $9,634,895 $10,107,005 $10,602,248 $11,121,758 $11,666,724 $12,238,394 $12,838,075 $13,467,141 Total Annual Expenses $4,105,918 $4,912,877 $5,825,662 $6,798,462 $7,110,763 $7,438,367 $7,782,024 $8,142,520 $8,520,680 $8,917,370 $9,333,497 $9,770,015 $10,227,922 $10,708,267 $11,212,149 Net Operating Income $489,524 $711,178 $916,777 $1,158,458 $1,236,046 $1,317,436 $1,402,814 $1,492,375 $1,586,325 $1,684,879 $1,788,261 $1,896,709 $2,010,472 $2,129,808 $2,254,992 * Other expenses are treated as 50% variable and 50% fixed (fixed costs taken from Year 4, first year of stabilized occupancy). ** Inflation was disregarded in this pro forma as most of the projected numbers are linked to gross revenue, which incorporates ADR growth at 4.9% CAGR. A-9

10 Appendix E (Continued) Hotel 15 Year Cash Flow Pro Forma (Pessimistic Scenario) Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 $28,125,000 Net Operating Income $489,524 $711,178 $916,777 $1,158,458 $1,236,046 $1,317,436 $1,402,814 $1,492,375 $1,586,325 $1,684,879 $1,788,261 $1,896,709 $2,010,472 $2,129,808 $2,254,992 Annual Debt Service $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 $2,054,066 Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Taxable Income $(2,502,042) $(2,280,388) $(2,074,790) $(1,833,108) $(1,755,520) $(1,674,130) $(1,588,752) $(1,499,191) $(1,405,241) $(1,306,688) $(1,203,305) $(1,094,857) $(981,095) $(861,758) $(736,574) Net Income After Taxes $(2,502,042) $(2,280,388) $(2,074,790) $(1,833,108) $(1,755,520) $(1,674,130) $(1,588,752) $(1,499,191) $(1,405,241) $(1,306,688) $(1,203,305) $(1,094,857) $(981,095) $(861,758) $(736,574) Profit Margin % % % % % % % % % % % -9.38% -8.02% -6.71% -5.47% Net Income After Taxes $(2,502,042) $(2,280,388) $(2,074,790) $(1,833,108) $(1,755,520) $(1,674,130) $(1,588,752) $(1,499,191) $(1,405,241) $(1,306,688) $(1,203,305) $(1,094,857) $(981,095) $(861,758) $(736,574) Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 Annual Cash Flow $(1,564,542) $(1,342,888) $(1,137,290) $(895,608) $(818,020) $(736,630) $(651,252) $(561,691) $(467,741) $(369,188) $(265,805) $(157,357) $(43,595) $75,742 $200,926 * Depreciation is calculated as 30 year straight-line. ** Income tax was ignored in this model as it is unknown what type of an entity will own and manage the hotel and what tax bracket would be applicable. Income tax can also be ignored because of negative net income through the analyzed period. A-10

11 Jan 05 Feb 05 Mar 05 Apr 05 May 05 Jun 05 Jul 05 Aug 05 Sep 05 Oct 05 Nov 05 Dec 05 Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Average Daily Rate Occupancy Rate (in %) Appendix F Occupancies & ADRs All MA Hotels '05 - '07 Occupancies & Daily Rates All MA Hotels '05 - '07 $ $ % 72.9% $ % $ $ $ $ $ $ $ $ $ $ % 43.9% Af 42.3% 44.1% 40 $ $ $ $ ADR OCC A-11

12 Development Costs Appendix G Hotel Sensitivity Analysis: ADRs/ Development Costs (Realistic Scenario) 150 # Rooms SENSITIVITY ANALYSIS Realistic Scenario Effect of Change in Yr 1 ADRs & Estimated Development Costs on Projected NPV Year 1 Average Daily Rates $ (18,498,735) Lowest End $9,195,000 $4,410,722 $10,061,783 $15,712,844 $21,363,906 $27,014,967 $32,666,028 $38,317,089 $43,968,151 $49,619,212 $55,270,273 $60,921,335 $66,572,396 $72,223,457 $77,874,518 $83,525,580 $89,176,641 40% Mean $11,430,000 $1,639,161 $7,290,222 $12,941,283 $18,592,345 $24,243,406 $29,894,467 $35,545,529 $41,196,590 $46,847,651 $52,498,712 $58,149,774 $63,800,835 $69,451,896 $75,102,957 $80,754,019 $86,405,080 70% Mean $19,777,500 $(8,712,340) $(3,061,279) $2,589,783 $8,240,844 $13,891,905 $19,542,966 $25,194,028 $30,845,089 $36,496,150 $42,147,211 $47,798,273 $53,449,334 $59,100,395 $64,751,456 $70,402,518 $76,053,579 Median End $24,120,000 $(14,097,353) $(8,446,291) $(2,795,230) $2,855,831 $8,506,892 $14,157,954 $19,809,015 $25,460,076 $31,111,138 $36,762,199 $42,413,260 $48,064,321 $53,715,383 $59,366,444 $65,017,505 $70,668,566 Mean End $28,125,000 $(19,063,841) $(13,412,780) $(7,761,718) $(2,110,657) $3,540,404 $9,191,465 $14,842,527 $20,493,588 $26,144,649 $31,795,710 $37,446,772 $43,097,833 $48,748,894 $54,399,956 $60,051,017 $65,702, % Mean $29,516,250 $(20,789,091) $(15,138,030) $(9,486,969) $(3,835,907) $1,815,154 $7,466,215 $13,117,277 $18,768,338 $24,419,399 $30,070,460 $35,721,522 $41,372,583 $47,023,644 $52,674,705 $58,325,767 $63,976, % Mean $30,907,500 $(22,514,341) $(16,863,280) $(11,212,219) $(5,561,157) $89,904 $5,740,965 $11,392,026 $17,043,088 $22,694,149 $28,345,210 $33,996,271 $39,647,333 $45,298,394 $50,949,455 $56,600,517 $62,251, % Mean $33,690,000 $(25,964,842) $(20,313,780) $(14,662,719) $(9,011,658) $(3,360,596) $2,290,465 $7,941,526 $13,592,587 $19,243,649 $24,894,710 $30,545,771 $36,196,832 $41,847,894 $47,498,955 $53,150,016 $58,801, % Mean $36,472,500 $(29,415,342) $(23,764,281) $(18,113,219) $(12,462,158) $(6,811,097) $(1,160,035) $4,491,026 $10,142,087 $15,793,148 $21,444,210 $27,095,271 $32,746,332 $38,397,393 $44,048,455 $49,699,516 $55,350, % Mean $39,255,000 $(32,865,842) $(27,214,781) $(21,563,720) $(15,912,658) $(10,261,597) $(4,610,536) $1,040,525 $6,691,587 $12,342,648 $17,993,709 $23,644,771 $29,295,832 $34,946,893 $40,597,954 $46,249,016 $51,900, % Mean $42,037,500 $(36,316,342) $(30,665,281) $(25,014,220) $(19,363,159) $(13,712,097) $(8,061,036) $(2,409,975) $3,241,086 $8,892,148 $14,543,209 $20,194,270 $25,845,331 $31,496,393 $37,147,454 $42,798,515 $48,449, % Mean $48,993,750 $(44,942,593) $(39,291,532) $(33,640,471) $(27,989,409) $(22,338,348) $(16,687,287) $(11,036,226) $(5,385,164) $265,897 $5,916,958 $11,568,019 $17,219,081 $22,870,142 $28,521,203 $34,172,265 $39,823, % Mean $55,950,000 $(53,568,844) $(47,917,783) $(42,266,721) $(36,615,660) $(30,964,599) $(25,313,538) $(19,662,476) $(14,011,415) $(8,360,354) $(2,709,293) $2,941,769 $8,592,830 $14,243,891 $19,894,952 $25,546,014 $31,197,075 Highest End $80,895,000 $(84,502,440) $(78,851,378) $(73,200,317) $(67,549,256) $(61,898,195) $(56,247,133) $(50,596,072) $(44,945,011) $(39,293,950) $(33,642,888) $(27,991,827) $(22,340,766) $(16,689,705) $(11,038,643) $(5,387,582) $263,479 A-12

13 Development Costs Appendix H Hotel Sensitivity Analysis: ADRs/ Development Costs (Optimistic Scenario) SENSITIVITY ANALYSIS Optimistic Scenario Effect of Change in Yr 1 ADRs & Estimated Development Costs on Projected NPV 150 # Rooms Year 1 Average Daily Rates $(15,169,972) Lowest End $9,195,000 $7,632,105 $14,356,961 $21,081,817 $27,806,673 $34,531,528 $41,256,384 $47,981,240 $54,706,096 $61,430,951 $68,155,807 $74,880,663 $81,605,519 $88,330,374 $95,055,230 $101,780,086 $108,504,942 40% Mean $11,430,000 $4,860,544 $11,585,400 $18,310,256 $25,035,112 $31,759,967 $38,484,823 $45,209,679 $51,934,535 $58,659,390 $65,384,246 $72,109,102 $78,833,958 $85,558,813 $92,283,669 $99,008,525 $105,733,381 70% Mean $19,777,500 $(5,490,957) $1,233,899 $7,958,755 $14,683,611 $21,408,466 $28,133,322 $34,858,178 $41,583,034 $48,307,889 $55,032,745 $61,757,601 $68,482,457 $75,207,312 $81,932,168 $88,657,024 $95,381,880 Median End $24,120,000 $(10,875,969) $(4,151,113) $2,573,742 $9,298,598 $16,023,454 $22,748,310 $29,473,165 $36,198,021 $42,922,877 $49,647,733 $56,372,588 $63,097,444 $69,822,300 $76,547,156 $83,272,011 $89,996,867 Mean End $28,125,000 $(15,842,457) $(9,117,602) $(2,392,746) $4,332,110 $11,056,966 $17,781,821 $24,506,677 $31,231,533 $37,956,389 $44,681,244 $51,406,100 $58,130,956 $64,855,812 $71,580,667 $78,305,523 $85,030, % Mean $29,516,250 $(17,567,708) $(10,842,852) $(4,117,996) $2,606,860 $9,331,715 $16,056,571 $22,781,427 $29,506,283 $36,231,138 $42,955,994 $49,680,850 $56,405,706 $63,130,561 $69,855,417 $76,580,273 $83,305, % Mean $30,907,500 $(19,292,958) $(12,568,102) $(5,843,246) $881,610 $7,606,465 $14,331,321 $21,056,177 $27,781,033 $34,505,888 $41,230,744 $47,955,600 $54,680,456 $61,405,311 $68,130,167 $74,855,023 $81,579, % Mean $33,690,000 $(22,743,458) $(16,018,602) $(9,293,747) $(2,568,891) $4,155,965 $10,880,821 $17,605,676 $24,330,532 $31,055,388 $37,780,244 $44,505,099 $51,229,955 $57,954,811 $64,679,667 $71,404,522 $78,129, % Mean $36,472,500 $(26,193,958) $(19,469,103) $(12,744,247) $(6,019,391) $705,465 $7,430,320 $14,155,176 $20,880,032 $27,604,888 $34,329,743 $41,054,599 $47,779,455 $54,504,311 $61,229,166 $67,954,022 $74,678, % Mean $39,255,000 $(29,644,459) $(22,919,603) $(16,194,747) $(9,469,891) $(2,745,036) $3,979,820 $10,704,676 $17,429,532 $24,154,387 $30,879,243 $37,604,099 $44,328,955 $51,053,810 $57,778,666 $64,503,522 $71,228, % Mean $42,037,500 $(33,094,959) $(26,370,103) $(19,645,247) $(12,920,392) $(6,195,536) $529,320 $7,254,176 $13,979,031 $20,703,887 $27,428,743 $34,153,599 $40,878,454 $47,603,310 $54,328,166 $61,053,022 $67,777, % Mean $48,993,750 $(41,721,210) $(34,996,354) $(28,271,498) $(21,546,643) $(14,821,787) $(8,096,931) $(1,372,075) $5,352,780 $12,077,636 $18,802,492 $25,527,348 $32,252,204 $38,977,059 $45,701,915 $52,426,771 $59,151, % Mean $55,950,000 $(50,347,461) $(43,622,605) $(36,897,749) $(30,172,893) $(23,448,038) $(16,723,182) $(9,998,326) $(3,273,470) $3,451,385 $10,176,241 $16,901,097 $23,625,953 $30,350,808 $37,075,664 $43,800,520 $50,525,376 Highest End $80,895,000 $(81,281,056) $(74,556,201) $(67,831,345) $(61,106,489) $(54,381,633) $(47,656,778) $(40,931,922) $(34,207,066) $(27,482,210) $(20,757,355) $(14,032,499) $(7,307,643) $(582,787) $6,142,068 $12,866,924 $19,591,780 A-13

14 Development Costs Appendix I Hotel Sensitivity Analysis: ADRs/ Development Costs (Pessimistic Scenario) 150 # Rooms SENSITIVITY ANALYSIS Pessimistic Scenario Effect of Change in Yr 1 ADRs & Estimated Development Costs on Projected NPV Year 1 Average Daily Rates $(21,827,498) Lowest End $9,195,000 $1,189,338 $5,766,605 $10,343,872 $14,921,139 $19,498,406 $24,075,672 $28,652,939 $33,230,206 $37,807,473 $42,384,739 $46,962,006 $51,539,273 $56,116,540 $60,693,807 $65,271,073 $69,848,340 40% Mean $11,430,000 $(1,582,222) $2,995,044 $7,572,311 $12,149,578 $16,726,845 $21,304,111 $25,881,378 $30,458,645 $35,035,912 $39,613,179 $44,190,445 $48,767,712 $53,344,979 $57,922,246 $62,499,512 $67,076,779 70% Mean $19,777,500 $(11,933,723) $(7,356,457) $(2,779,190) $1,798,077 $6,375,344 $10,952,610 $15,529,877 $20,107,144 $24,684,411 $29,261,678 $33,838,944 $38,416,211 $42,993,478 $47,570,745 $52,148,011 $56,725,278 Median End $24,120,000 $(17,318,736) $(12,741,469) $(8,164,202) $(3,586,936) $990,331 $5,567,598 $10,144,865 $14,722,131 $19,299,398 $23,876,665 $28,453,932 $33,031,199 $37,608,465 $42,185,732 $46,762,999 $51,340,266 Mean End $28,125,000 $(22,285,224) $(17,707,958) $(13,130,691) $(8,553,424) $(3,976,157) $601,110 $5,178,376 $9,755,643 $14,332,910 $18,910,177 $23,487,443 $28,064,710 $32,641,977 $37,219,244 $41,796,511 $46,373, % Mean $29,516,250 $(24,010,475) $(19,433,208) $(14,855,941) $(10,278,674) $(5,701,407) $(1,124,141) $3,453,126 $8,030,393 $12,607,660 $17,184,927 $21,762,193 $26,339,460 $30,916,727 $35,493,994 $40,071,260 $44,648, % Mean $30,907,500 $(25,735,725) $(21,158,458) $(16,581,191) $(12,003,924) $(7,426,658) $(2,849,391) $1,727,876 $6,305,143 $10,882,410 $15,459,676 $20,036,943 $24,614,210 $29,191,477 $33,768,743 $38,346,010 $42,923, % Mean $33,690,000 $(29,186,225) $(24,608,958) $(20,031,691) $(15,454,425) $(10,877,158) $(6,299,891) $(1,722,624) $2,854,642 $7,431,909 $12,009,176 $16,586,443 $21,163,710 $25,740,976 $30,318,243 $34,895,510 $39,472, % Mean $36,472,500 $(32,636,725) $(28,059,458) $(23,482,192) $(18,904,925) $(14,327,658) $(9,750,391) $(5,173,125) $(595,858) $3,981,409 $8,558,676 $13,135,943 $17,713,209 $22,290,476 $26,867,743 $31,445,010 $36,022, % Mean $39,255,000 $(36,087,226) $(31,509,959) $(26,932,692) $(22,355,425) $(17,778,158) $(13,200,892) $(8,623,625) $(4,046,358) $530,909 $5,108,175 $9,685,442 $14,262,709 $18,839,976 $23,417,243 $27,994,509 $32,571, % Mean $42,037,500 $(39,537,726) $(34,960,459) $(30,383,192) $(25,805,926) $(21,228,659) $(16,651,392) $(12,074,125) $(7,496,858) $(2,919,592) $1,657,675 $6,234,942 $10,812,209 $15,389,475 $19,966,742 $24,544,009 $29,121, % Mean $48,993,750 $(48,163,977) $(43,586,710) $(39,009,443) $(34,432,176) $(29,854,910) $(25,277,643) $(20,700,376) $(16,123,109) $(11,545,842) $(6,968,576) $(2,391,309) $2,185,958 $6,763,225 $11,340,491 $15,917,758 $20,495, % Mean $55,950,000 $(56,790,227) $(52,212,961) $(47,635,694) $(43,058,427) $(38,481,160) $(33,903,894) $(29,326,627) $(24,749,360) $(20,172,093) $(15,594,826) $(11,017,560) $(6,440,293) $(1,863,026) $2,714,241 $7,291,507 $11,868,774 Highest End $80,895,000 $(87,723,823) $(83,146,556) $(78,569,290) $(73,992,023) $(69,414,756) $(64,837,489) $(60,260,223) $(55,682,956) $(51,105,689) $(46,528,422) $(41,951,155) $(37,373,889) $(32,796,622) $(28,219,355) $(23,642,088) $(19,064,822) A-14

15 Appendix J Financial Assumptions Made by HII (Hotel) A-15

16 Appendix K HVS Hotel Development Cost Forecasted Per-Room Averages (2007) A-16

17 Appendix L HVS Hotel Development Cost Actual Per-Room Cost Ranges ( ) A-17

18 Appendix M Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Realistic Scenario) Discounted Cash Flow Analysis (Operating Cash Flow) Realistic Scenario Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Capital Expenditure $(28,125,000) Gross Revenue $6,127,256 $7,230,928 $8,428,049 $9,725,125 $10,201,657 $10,701,538 $11,225,913 $11,775,983 $12,353,006 $12,958,303 $13,593,260 $14,259,330 $14,958,037 $15,690,981 $16,459,839 Costs $(5,332,901) $(6,196,213) $(7,175,836) $(8,214,794) $(8,596,496) $(8,996,900) $(9,416,925) $(9,857,531) $(10,319,727) $(10,804,570) $(11,313,170) $(11,846,692) $(12,406,356) $(12,993,444) $(13,609,300) Depreciation $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) EBIT $(143,145) $97,215 $314,713 $572,831 $667,661 $767,137 $871,488 $980,952 $1,095,779 $1,216,234 $1,342,590 $1,475,138 $1,614,181 $1,760,036 $1,913,039 Property Tax $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 After Tax Cash Flow $369,387 $609,746 $827,244 $1,085,362 $1,180,192 $1,279,669 $1,384,019 $1,493,483 $1,608,311 $1,728,765 $1,855,121 $1,987,669 $2,126,712 $2,272,568 $2,425,570 Working Capital $(1,140,000) Terminal Project Value $2,168,285 Incremental Cash Flow $(27,096,715) $369,387 $609,746 $827,244 $1,085,362 $1,180,192 $1,279,669 $1,384,019 $1,493,483 $1,608,311 $1,728,765 $1,855,121 $1,987,669 $2,126,712 $2,272,568 $2,425,570 PV $(27,096,715) $331,705 $491,689 $599,027 $705,761 $689,139 $670,999 $651,685 $631,490 $610,671 $589,446 $568,003 $546,504 $525,084 $503,857 $482,920 * The model does not include periodic renovation expenses. ** Terminal project value is estimated as incremental cash flow in Year 15 multiplied by 5 and discounted at WACC. A-18

19 Appendix N Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Optimistic Scenario) Discounted Cash Flow Analysis (Operating Cash Flow) Optimistic Scenario Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Capital Expenditure $(28,125,000) Gross Revenue $7,659,070 $8,837,801 $10,113,658 $11,493,330 $12,056,503 $12,647,272 $13,266,988 $13,917,071 $14,599,007 $15,314,358 $16,064,762 $16,851,935 $17,677,680 $18,543,886 $19,452,537 Costs $(6,559,884) $(7,479,550) $(8,526,009) $(9,631,126) $(10,082,228) $(10,555,434) $(11,051,826) $(11,572,542) $(12,118,773) $(12,691,770) $(13,292,843) $(13,923,369) $(14,584,791) $(15,278,622) $(16,006,451) Depreciation $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) EBIT $161,686 $420,752 $650,149 $924,704 $1,036,775 $1,154,338 $1,277,662 $1,407,028 $1,542,734 $1,685,089 $1,834,419 $1,991,066 $2,155,390 $2,327,765 $2,508,586 Property Tax $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 After Tax Cash Flow $674,218 $933,283 $1,162,681 $1,437,235 $1,549,307 $1,666,870 $1,790,193 $1,919,560 $2,055,265 $2,197,620 $2,346,950 $2,503,598 $2,667,921 $2,840,296 $3,021,117 Working Capital $(1,140,000) Terminal Project Value $2,700,661 Incremental Cash Flow $(26,564,339) $674,218 $933,283 $1,162,681 $1,437,235 $1,549,307 $1,666,870 $1,790,193 $1,919,560 $2,055,265 $2,197,620 $2,346,950 $2,503,598 $2,667,921 $2,840,296 $3,021,117 PV $(26,564,339) $605,440 $752,584 $841,924 $934,568 $904,672 $874,030 $842,937 $811,648 $780,378 $749,308 $718,592 $688,357 $658,708 $629,730 $601,491 * The model does not include periodic renovation expenses. ** Terminal project value is estimated as incremental cash flow in Year 15 multiplied by 5 and discounted at WACC. A-19

20 Appendix O Hotel Discounted Cash Flow Analysis: Operating Cash Flow (Pessimistic Scenario) Discounted Cash Flow Analysis (Operating Cash Flow) Pessimistic Scenario Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Capital Expenditure $(28,125,000) Gross Revenue $4,595,442 $5,624,055 $6,742,439 $7,956,921 $8,346,810 $8,755,804 $9,184,838 $9,634,895 $10,107,005 $10,602,248 $11,121,758 $11,666,724 $12,238,394 $12,838,075 $13,467,141 Costs $(4,105,918) $(4,912,877) $(5,825,662) $(6,798,462) $(7,110,763) $(7,438,367) $(7,782,024) $(8,142,520) $(8,520,680) $(8,917,370) $(9,333,497) $(9,770,015) $(10,227,922) $(10,708,267) $(11,212,149) Depreciation $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) $(937,500) EBIT $(447,976) $(226,322) $(20,723) $220,958 $298,546 $379,936 $465,314 $554,875 $648,825 $747,379 $850,761 $959,209 $1,072,972 $1,192,308 $1,317,492 Property Tax $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) $(424,969) Depreciation $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 $937,500 After Tax Cash Flow $64,556 $286,210 $491,808 $733,490 $811,078 $892,467 $977,845 $1,067,407 $1,161,356 $1,259,910 $1,363,292 $1,471,741 $1,585,503 $1,704,839 $1,830,024 Working Capital $(1,140,000) Terminal Project Value $1,635,909 Incremental Cash Flow $(27,629,091) $64,556 $286,210 $491,808 $733,490 $811,078 $892,467 $977,845 $1,067,407 $1,161,356 $1,259,910 $1,363,292 $1,471,741 $1,585,503 $1,704,839 $1,830,024 PV $(27,629,091) $57,970 $230,795 $356,129 $476,955 $473,605 $467,969 $460,432 $451,332 $440,963 $429,583 $417,415 $404,651 $391,460 $377,985 $364,350 * The model does not include periodic renovation expenses. ** Terminal project value is estimated as incremental cash flow in Year 15 multiplied by 5 and discounted at WACC. A-20

21 Appendix P Hotel Break-even (Realistic Scenario) Break-even Analysis Year 1 Revenue $6,127,256 Variable Expenses $3,559, Contribution Margin 2,568,199 Fixed Costs $2,097,690 Depreciation $937,500 Fixed Costs and Depreciation $3,035,190 CM Ratio 41.91% Total Revenue Required to Break-even $7,241, Break-even occupancy rate assuming ADR $ % Break-even Analysis Year 5 Revenue $10,201,657 Variable Expenses $6,498, Contribution Margin 3,702,851 Fixed Costs $2,097,690 Depreciation $937,500 Fixed Costs and Depreciation $3,035,190 CM Ratio 36.30% Total Revenue Required to Break-even $8,362, Break-even occupancy rate assuming ADR $ % A-21

22 Appendix Q Hotel Break-even (Optimistic Scenario) Break-even Analysis Optimistic Scenario Year 1 Revenue $7,659,070 Variable Expenses $4,540, Contribution Margin 3,118,280 Fixed Costs $2,401,822 Depreciation $937,500 Fixed Costs and Depreciation $3,339,322 CM Ratio 40.71% Total Revenue Required to Break-even $8,201, Break-even occupancy rate assuming ADR $ % Break-even Analysis Optimistic Scenario Year 5 Revenue $12,056,503 Variable Expenses $7,680, Contribution Margin 4,376,097 Fixed Costs $2,401,822 Depreciation $937,500 Fixed Costs and Depreciation $3,339,322 CM Ratio 36.30% Total Revenue Required to Break-even $9,200, Break-even occupancy rate assuming ADR $ % A-22

23 Appendix R Hotel Break-even (Pessimistic Scenario) Break-even Analysis Pessimistic Scenario Year 1 Revenue $4,595,442 Variable Expenses $2,577, Contribution Margin 2,018,118 Fixed Costs $1,793,559 Depreciation $937,500 Fixed Costs and Depreciation $2,731,059 CM Ratio 43.92% Total Revenue Required to Break-even $6,218, Break-even occupancy rate assuming ADR $ % Break-even Analysis Pessimistic Scenario Year 5 Revenue $8,346,810 Variable Expenses $5,317, Contribution Margin 3,029,606 Fixed Costs $1,793,559 Depreciation $937,500 Fixed Costs and Depreciation $2,731,059 CM Ratio 36.30% Total Revenue Required to Break-even $7,524, Break-even occupancy rate assuming ADR $ % A-23

24 Appendix S Hotel Development Costs at Various Grade Levels Development Costs Budget/Economy Hotels Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $7,500,000 $50,000 $ 83,800 $ 27,300 $ 45,500 Building Soft Costs $690,000 $4,600 $ 13,200 $ 600 $ 2,400 FFE $1,365,000 $9,100 $ 16,900 $ 4,500 $ 9,100 Parking $300,000 Total Development Costs $9,855,000 Development Costs Midscale Hotels w/o F&B Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $11,715,000 $78,100 $ 165,300 $ 47,100 $ 69,000 Building Soft Costs $1,905,000 $12,700 $ 60,400 $ 2,200 $ 9,200 FFE $1,605,000 $10,700 $ 25,000 $ 5,500 $ 10,400 Parking $300,000 Total Development Costs $15,525,000 Development Costs Extended Stay Hotels Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $13,470,000 $89,800 $ 164,800 $ 52,900 $ 78,800 Building Soft Costs $1,995,000 $13,300 $ 87,300 $ 2,200 $ 11,500 FFE $2,190,000 $14,600 $ 23,100 $ 3,500 $ 15,000 Parking $300,000 Total Development Costs $17,955,000 Development Costs Midscale Hotels w/f&b Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $12,705,000 $84,700 $ 142,900 $ 46,900 $ 69,900 Building Soft Costs $2,250,000 $15,000 $ 61,200 $ 3,300 $ 11,800 FFE $2,115,000 $14,100 $ 34,700 $ 6,600 $ 13,300 Parking $300,000 Total Development Costs $17,370,000 Development Costs Full-Service Hotels Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $20,085,000 $133,900 $ 363,400 $ 48,700 $ 121,600 Building Soft Costs $3,945,000 $26,300 $ 122,700 $ 2,300 $ 16,500 FFE $3,795,000 $25,300 $ 51,200 $ 8,300 $ 20,700 Parking $300,000 Total Development Costs $28,125,000 Development Costs Luxury Hotels and Resorts Development Costs (per room) Number of Rooms 150 Mean High Low Median Construction $58,035,000 $386,900 $ 1,369,100 $ 188,700 $ 335,600 Building Soft Costs $18,480,000 $123,200 $ 238,000 $ 26,000 $ 106,000 FFE $9,195,000 $61,300 $ 116,400 $ 33,900 $ 65,400 Parking $300,000 **Based on HVS 2007 estimates** Total Development Costs $86,010,000 A-24

25 Appendix T HII Hotel 10-Year Cash Flow Pro Forma A-25

26 Appendix U HII Hotel Cash Flow, Supportable Debt/Equity Projections A-26

27 Appendix V HII Hotel Capital Costs / Financial Summary A-27

28 Appendix W LIFESTYLE MARKET ANALYST The Lifestyle Market Analyst (LMA) is a consumer market analysis tool that provides a market potential guide at the local, regional and national levels. The inputs for the 2007 LMA edition included a sample of 7.3 million households for national data and 13.9 million households for county data. The LMA is a joint venture of SRDS Media Solutions and Equifax. The LMA provides a score, centered on the number 100, which measures how residents in a given geographic area spend their time and money, as compared to the U.S. population at large. If a given Designated Market Area (DMA) receives a score of 110 in Attend Cultural/ Arts Events, this can be interpreted as the rate of household participation in Attend Cultural Arts/ Events within is 10 percent higher than the U.S. household rate of participation (110/100 = 10 percent). Similar scores are generated to measure demographic trends at the local and regional levels. The U.S. is divided into 210 DMAs, as defined by Nielsen Research. Essentially, four DMAs lie within the two-hour drive radius of the BSS site. 1 The largest of these by far is the Boston, MA (Manchester, NH) DMA. In Appendix W-1, The Team offers results of aggregate data from the four DMAs, as well as Fairfield County, CT. As data in W-1 is weighted by DMA populations, consumer lifestyle habits in the Boston, MA DMA will have a heavy impact on the overall market feasibility analysis. Based on the way the LMA data is structured, the populations defined as within the two-hour radius can not exactly match a two-hour radius as defined in the HII study. Nevertheless, the 1 Fairfield County, CT is included within the New York, NY DMA, is within approximately two hours and is included in The Team s data sample. All other counties included within the New York, NY DMA lie outside the two hour radius. A-28

29 populations are mostly identical, and the differences between the two populations should not meaningfully impact the assigned lifestyle and demographic scores. In performing this analysis, The Team sought to determine if there is an unusually high market potential centered on the BSS site. It tracked the indicators that seemed most relevant to the Cold Spring project as presented. These included Dieting/ Weight Control, Health/ Natural Foods, Improving Your Health, Attend Cultural/ Arts Events and Horseback Riding. Additionally, The Team measured Real Estate Investments as a gauge for how easy it might be to attract investors in the area. 2 The target area measured below-average for every lifestyle indicator excepting Attend Cultural/ Arts events. This strongly damages the assertion that there is unusual demand for health and wellness services in the region. Area residents do have an affinity for culture and the arts, and it may make sense to include such components in a plan. Surprisingly, Horseback riding came up well below-average. The target DMAs include some of the lowest market potential scores for the indicator in the nation. 3 The demographic trends are much more encouraging. There is a plethora of highincome ($75,000-plus), age residents within the two-hour radius. This strongly supports the use of the land towards providing services aimed at those who fit the defined target demographic characteristics. The Team believes that Appendix W-5, which measures lifestyle indicators in the Springfield-Holyoke, MA region, can be particularly useful to the BEDIC. 2 Investment, of course, can stem from anywhere in the world, but The Team believed that if the site or town itself has a unique and compelling draw to it, local investors would recognize this and, perhaps, be more inclined to invest. This may not be critical, but The Team figured it could not hurt to measure real estate investment market potential in the area. 3 The Springfield-Holyoke DMA, where Belchertown is located, ranks 209 th out of 210 overall. A-29

30 Appendix W-1 LMA All Target DMAs Appendix W-1--Lifestyle Market Analyst ALL TARGET DMAs Area Population 9,304,860 Top Area Indicators # Top Ten Finishes Snow Skiing Frequently 5 Own an Apple/Mac PC 2 Wines 5 Own a Blackberry 2 Gourmet Cooking/ Fine Foods 4 Frequent Flyer 2 Boating/ Sailing 4 Wildlife/Environmental 1 Casino Gambling 3 Flower Gardening 1 Foreign Travel 3 Vegetable Gardening 1 Attend Cultural/ Arts Events 3 Use a Wireless Internet 1 Tennis Frequently 3 Cruise Ship Vacations 1 Own a Cat 2 Fashion Clothing 1 Shop by Catalog Mail 2 Own an HDTV 1 Needlework/ Knitting 2 Walking for Health 1 50 Key Indicators Index Nation Avg. Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index Nation Avg , Income $50,000-$74, , Income $75, A-30

31 Appendix W-2 LMA Boston (Manchester, NH) DMA Appendix W-2--Lifestyle Market Analyst DMA: Boston (Manchester, NH) Encompasses Essex, Middlesex, Norfolk, Plymouth, Suffolk, Worcester, Hillsborough, Rockingham & Stafford Counties Area Population 4,791,623 Top 10 Area Indicators Index Snow Skiing Frequently 176 Own an Apple/ Mac PC 136 Foreign Travel 129 Own a Blackberry 124 Frequent Flyer 122 Wines 122 Boating/ Sailing 121 Use a Wireless Internet 120 Attend Cultural/ Arts Events 118 Tennis Frequently 118 Key Indicators Index Rank (of 210) Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index 45-64, Income $50,000-$74, , Income $75, A-31

32 Appendix W-3 LMA Hartford & New Haven, CT DMA Appendix W-3--Lifestyle Market Analyst DMA: Hartford & New Haven, CT Encompasses Hartford, Litchfield, Middlesex, New Haven, New London, Tolland & Windham Counties Area Population 2,018,227 Top 10 Area Indicators Index Snow Skiing Frequently 129 Wines 124 Gourmet Cooking/ Fine Foods 120 Attend Cultural/ Arts Events 115 Tennis Frequently 114 Shop by Catalog/ Mail 113 Casino Gambling 112 Foreign Travel 111 Boating/ Sailing 111 Own a Cat 109 Key Indicators Index Rank (of 210) Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index 45-64, Income $50,000-$74, , Income $75, A-32

33 Appendix W-4 LMA Providence, RI New Bedford, MA DMA Appendix W-4--Lifestyle Market Analyst DMA: Providence, RI - New Bedford, MA Encompasses Bristol, Kent, Newport, Providence & Washington Counties Area Population 1,276,587 Top 10 Area Indicators Index Snow Skiing Frequently 124 Boating/ Sailing 121 Gourmet Cooking/ Fine Foods 118 Casino Gambling 116 Wines 114 Cruise Ship Vacations 113 Fashion Clothing 111 Own an HDTV 110 Needlework/ Knitting 109 Walking for Health 108 Key Indicators Index Rank (of 210) Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index 45-64, Income $50,000-$74, , Income $75, A-33

34 Appendix W-5 LMA Springfield-Holyoke, MA DMA Appendix W-5--Lifestyle Market Analyst DMA: Springfield-Holyoke, MA Encompasses Franklin, Hampden & Hampshire Counties Area Population 539,034 Top 10 Area Indicators Index Snow Skiing Frequently 126 Wildlife/Environmental 116 Own a Cat 114 Gourmet Cooking/ Fine Foods 113 Casino Gambling 110 Shop by Catalog Mail 109 Wines 108 Flower Gardening 107 Needlework/ Knitting 107 Vegetable Gardening 106 Key Indicators Index Rank (of 210) Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index 45-64, Income $50,000-$74, , Income $75, A-34

35 Appendix W-6 LMA New York, NY DMA (Fairfield County, CT Subset) Appendix W-6--Lifestyle Market Analyst Fairfield County, CT Subset of New York, NY DMA Area Population 679,389 Top 10 Area Indicators Index Tennis Frequently 192 Snow Skiing Frequently 186 Own a Blackberry 165 Foreign Travel 156 Frequent Flyer 151 Own an Apple/ Mac PC 146 Wines 144 Attend Cultural/ Arts Events 130 Gourmet Cooking/ Fine Foods 129 Boating/ Sailing 124 Key Indicators Index Rank (of 210) Attend Cultural/ Arts Events Real Estate Investments Dieting/ Weight Control Health/ Natural Foods Improving Your Health Horseback Riding Target Demographic Index 45-64, Income $50,000-$74, , Income $75, A-35

36 Appendix X MOTT / Strategic MA Market Research Findings A-36

37 A-37