US Lodging Industry at a Glance

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1 Scott F. Biethan of CB Richard Ellis Speaker 4: 1 CB RICHARD ELLIS BUYING AND SELLING HOTELS Successfully navigating the landscape of hotel deals Presented by Scott F. Biethan, MAI CRE FRICS Sr. Managing Director CB Richard Ellis Hotels August 18, 2008 US Lodging Industry at a Glance Source: Smith Travel Research Page 2 Hotels

2 Performance Year to Date June 2008 June 2007 Occ % ADR ($) RevPAR ($) Percent Change from YTD June 2007 Room Rooms Rooms Occ ADR RevPAR Rev Avail Sold Seattle, WA San Francisco Los Angeles Washington State Source: Smith Travel Research s Lodging Review Page 3 Economic Investment Overview of the U.S. Lodging Industry Where are we Today? Conflicting opinions on Main Street & Wall Street Bear Stearns debacle near failure to $2 per share, then back to $10 per share (400% weekly change) Volatile stock markets Profits still being generated at household name firms General Electric, Lehman, JP Morgan, Goldman Sachs, Viacom Some industry experts predict business will pick up after 2008; others predict 2010 Page 4

3 Buy or Sell? Just Ask the Smart Money Savvy and sophisticated long term investors believe NOW is a buying opportunity Value Decline or Perception Decline? Crisis localized in the Debt Capital Markets Plenty of Available Equity evidenced by available funds: KSL - $1.6 billion equity fund Kimpton - closed $246 million fund w/buying power of $800 million RLJ - the RLJ Real Estate Fund III, L.P. - $1.2 Billion Rockbridge Rockbridge Hospitality Fund IV with $160 million possible total to exceed $200 million Blackstone closes with $10.9B in Q Page Interest Rates Prime Rate July, % SOURCE: Wall Street Journal Page 6

4 1986 Tax Reform Act Page Resolution Trust Corporation (RTC) Page 8

5 1991 Gulf War Desert Storm Dow Jones Industrial Average April 17, ,004 May 1, ,010 Page 9 Today About one year has gone by since we experienced a downturn in the economy. It looks like the current climate is not going away any time soon With this being said, hotel fundamentals remain strong Page 10

6 Mid-Year 2008 Sales Activity Mid-Year 2008 Mid-Year 2007 Transactions Average Hotel Size Average Room $185,000 $265,000 Price Transactions over 3 7 $1.0 Million Page 11 Investors in the current market are considering Lodging historically lags overall US Economy Hotel expense structure presents challenges US lodging inventory is relatively favorable with respect to supply and demand Hotel lenders are are looking more to sponsorship quality Page 12

7 What Should One Do If I want to buy a property? Look over the menu. Hire professionals with the best information. Don t be shy. Intercept the bottom. Be creative. Every part of a cycle offers value enhancement opportunities. Page 13 What Should One Do If I need to refinance my property? With interest rates as low as they are, it s wrong not to borrow, if you can. Be creative. Seller financing 1031 Exchange Club Deals Page 14

8 BUYING AND SELLING HOTELS Successfully navigating the landscape of hotel deals Scott F. Biethan, MAI CRE FRICS Sr. Managing Director CB Richard Ellis Hotels th Ave, Suite 440, Seattle, WA T (206) F (206) Scott.Biethan@cbre.com Hotels

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