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
Performance Year to Date June 2008 June 2007 Occ % ADR ($) RevPAR ($) Percent Change from YTD June 2007 Room Rooms Rooms 2008 2007 2008 2007 2008 2007 Occ ADR RevPAR Rev Avail Sold Seattle, WA 67.3 69.0 124.22 118.55 83.65 81.75-2.3 4.8 2.3 4.1 1.8-0.6 San Francisco 73.2 71.5 155.00 143.10 113.47 102.30 2.4 8.3 10.9 12.7 1.6 4.0 Los Angeles 73.4 75.3 129.22 122.39 94.85 92.21-2.6 5.6 2.9 3.7 0.8-1.8 Washington State 62.3 63.5 103.17 98.20 64.24 62.35-1.9 5.1 3.0 5.7 2.6 0.6 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
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 Q2 2008 Page 5 1981 Interest Rates Prime Rate July, 1981 20.5% SOURCE: Wall Street Journal Page 6
1986 Tax Reform Act Page 7 1989 Resolution Trust Corporation (RTC) Page 8
1991 Gulf War Desert Storm Dow Jones Industrial Average April 17, 1991 3,004 May 1, 2008 13,010 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
Mid-Year 2008 Sales Activity Mid-Year 2008 Mid-Year 2007 Transactions 40 52 Average Hotel 240 370 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
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
BUYING AND SELLING HOTELS Successfully navigating the landscape of hotel deals Scott F. Biethan, MAI CRE FRICS Sr. Managing Director CB Richard Ellis Hotels 1420 5 th Ave, Suite 440, Seattle, WA 98101 T (206) 292-6198 F (206) 292-1601 Scott.Biethan@cbre.com Hotels