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Crittenden

Vol. 22, No. 23

Crittenden Research, Inc. P.O. Box 1150 Novato, CA 94948 (800) 421-3483

Hotel/Lodging NewsTM

September 21, 2009

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REITS SELL OFF UNWANTED HOTELS Disposing of non-core assets gives hotel REITs added cash and flexibility during the turbulent economic cycle. Host Hotels & Resorts sells four hotels for a combined $84M. Hersha Hospitality Trust also rids itself of four non-core properties. Supertel Hospitality Inc. discards two more hotels from its limited-service portfolio. Meanwhile, Strategic Hotels & Resorts hopes its portfolio of luxury properties will eventually land a couple of buyers. With times tough, REITs hope to remove some of the weaker properties from their portfolio as a way to increase capital and better position themselves for distressed acquisition opportunities next year. Host spiced up a pretty dull transaction arena with its latest deals and now has its balance sheet in a good place to be on the buying side in 2010 when it will be able to purchase full-service hotels at even larger discounts. Hersha has had a busy second half of the year as it continues to unload non-core assets and has refinanced all of its 2009 debt maturities in order to strengthen its balance sheet. Supertel will likely achieve its goal of selling eight properties this year as the company does its best to improve its portfolio in a slow operating environment. As the debt market begins to thaw, Strategic looks to sell some of its properties in hopes of generating additional liquidity to the company. Host finds itself as one of the best positioned REITs after selling the 353-room Hanover Marriott in New Jersey, the 253-room Washington Dulles Marriott Suites, the 448-room Sheraton Stamford in East Hartford, Conn., and the 430-room Boston Marriott Newton in Newton, Mass., for a total of $84M ($56.6K/key) and with cap rates in the mid-7% range. Montreal-based Rosdev Group bought the Stamford Sheraton but the rest of the buyers have not been identified. President and CEO W. Edward Walter doesn't foresee any additional dispositions this year after netting proceeds of around $200M from asset sales in 2009. Walter notices the majority of potential buyers look to purchase properties all cash or somewhat close to all cash for the first couple years of the investment with hopes of refinancing once the market improves. He also believes more assets will migrate back to lenders, which could create a slight increase in the number of deals. Watch for Host to switch over to the buying side and selectively look to acquire hotels once the economy begins to recover. The company will likely follow a model similar to what it did from 2003 to 2005 where it looked to fund the bulk of acquisition activity through additional equity issuance. Host's Q2 RevPAR decreased 24.9% as a result of a 14.6% decline in average rates and 9.1% decline in occupancy. Hersha disposes of a 88-room Hilton Garden Inn in Gettysburg, Pa., a 72-room Mainstay Suites in Frederick, Md., a 73-room Comfort Inn also in Frederick, and its 55% interest in the 180-room our Points in Revere, Mass., for a combined total of $20.55M ($49.8M/key) and at cap rates ranging from 6.5% to 7%. CEO Jay Shah feels the ability to sell the properties at attractive prices is a direct result of the strength of the markets in which the company operates and the strong cash flows provided by its select-service assets. Expect the company to sell between two and four select- and limited-service hotels in the Northeast by the end of the year in order to create greater financial flexibility. Hersha saw its RevPAR drop to $92.48 in Q2 from $111.96 a year earlier as ADR dropped by 12% and occupancy fell by 4.8%. Supertel sheds the 38-room Super 8 Motel in Anamosa, Iowa, from its portfolio for $850K ($22.4K/key) and a room revenue multiplier around 2x, as well as the 120-room Masters Inn-International Drive in Orlando, Fla., for $3.6M ($30K/key) and a room revenue multiplier just over 4x. The deal pushes the company past the halfway point of its goal at the start of the year to sell eight of its hotels. The other properties sold were the 116-room Masters Inn Orlando/Kissimmee Main Gate in Kissimmee, Fla., for $1.6M ($13.8K/key), a Super 8 located in Charles City, Iowa, for $1.1M and a Holiday Inn Express in Gettysburg, Pa., for $2.6M.

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REITS SELL OFF UNWANTED HOTELS...

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Supertel will dispose of another Masters Inn near Orlando that should be sold by the end of the year. Shree HR Corp. utilized an SBA 504 loan facilitated by a local bank for the acquisition of the Super 8 in Anamosa. Sun Vista Hotels LLC purchased the Masters Inn and will convert it to a Best Western. Supertel's RevPAR was down 12.2% in Q2 as ADR dipped 3.5% and occupancy dropped by 9.1%.

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Strategic has seen a significant increase in the number of inquiries since the beginning of the summer. The company's assets have attracted interest from a bevy of distressed buyers, including unusual buyers, private buyers, families and foreign buyers. President and CEO Laurence Geller finds the foreign buyers to be very serious, very well qualified and very professional. Strategic has a number of its assets listed with brokers that are targeting qualified buyers. The company has also been publicly marketing the Fairmont Chicago, Millennium Park for months. HOME2 SUITES SEES SPIKE IN DEVELOPMENT Hilton loads its pipeline with contracts from developers looking to build a midscale extended-stay hotel at a discounted cost of construction, after announcing its newest brand, Home2 Suites, in January. Baywood Hotels plans call for five Home2 projects, the first two of which will commence in the next six months. XE Hospitality Management LLC expects to break ground on three Home2 properties in Texas by the second half of next year. Global Management & Investment shoots for two hotels in the Southeast, while Griffin Stafford LLC looks to build its Home2 property in Mooresville, N.C. Queen Hotels hopes to land financing in time to begin construction on his Bordentown, N.J., by the end of next summer. In less than nine months after unveiling its latest brand, Hilton has received 60 applications from developers looking to add Home2 to their portfolio. And of those applications, 40 are already signed. A handful of Home2 properties will be under construction by the end of the year and the brand's first hotel is estimated to open summer 2010 in Indianapolis. Development cost for Home2 is priced at approximately $76K/key to $80K/key, excluding land, giving developers the opportunity to build a Hilton-branded extended-stay property at a much lower cost than the approximately $105K/key it takes to develop a Homewood Suites. Competing midscale extended-stay brands TownePlace Suites and Candlewood Suites typically ramp up at between $60K/key and $80K/key. Global Head, Homewood Suites and Home2 Suites Brands Bill Duncan believes the lower development cost has helped Home2 gain momentum because it fits into the price point that developers need during these uncertain financial times and, since the brand is backed by the Hilton name, it offers them reassurance and support. Despite the uncertainty, Duncan has seen the brand's developers have great success obtaining loans from lenders. Hilton targets rates from $90 to $95 per night in North America, keeping Home2 priced competitively with TownePlace and Candlewood. Anticipate Hilton opening 100 Home2 properties by year-end 2012. Baywood Hotels aims for groundbreakings on a 104-key Home2 in White Marsh, Md., and a 116-key Home2 near Northern Virginia's Dulles Airport by the end of Q1 with hopes of opening the properties a year later. SVP Vik Patel thinks he'll be able to finance the projects locally if the company puts down between 30% and 35%. Once the first two properties are under construction Baywood plans to break ground on two Home2 hotels in San Antonio and another in Baltimore. Patel anticipates all five hotels will ramp up at around $90K/key, excluding land. Baywood believes having Hilton's backing will be key to the new brand's success. The company has mainly Hilton and Marriott-branded hotels in its portfolio. XE Hospitality will be active with plans to begin construction on three Home2 projects during Q2 2010 that includes a 100-room property near Bush Intercontinental Airport in Houston, a 108-room property in Houston's Energy Corridor and a 118-room hotel in Austin, Texas. Principal Amir Zindani expects to break ground on the airport site first and open the hotel a year later. He projects the average cost-per-key for all three properties will wind up around $65K/key, excluding land. The company plans to put down 35% to 40% equity and has received verbal approval from local community banks to finance the remainder of the three projects. Zindani finds Home2 to be the most cost-effective Hilton brand and believes it is the perfect product for the new generation of travelers, specifically women. XE Hospitality's portfolio consists of a Hampton Inn & Suites in Houston and the company has another Houston Hampton in its pipeline, as Continued on Next Page well as a Hilton Garden Inn in San Antonio.

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HOME2 SEES SUITES SPIKE IN DEVELOPMENT... Global Management & Investment expects to break ground on an 81-room Home2 in Warner Robbins, Ga., during the first quarter of next year, followed by a groundbreaking of a 100-room Home2 in Huntsville, Ala., in late Q2 or early Q3. Both properties should open nine to 12 months after construction launches. President Sam Patel estimates the projects will wrap up at between $68K/key and $75K/key. Patel plans to use local lenders for a USDA loan in Warner Robbins and a conventional loan in Huntsville. Chances are he will toss in close to 30% in equity. Patel believes the brand's strong design will allow it to compete in the market segment and envisions high performance will come from its location in the Southeast. Global Management has built a number of limited-service hotels in the Gulf Coast and holds a 120-room Hyatt Place in Mobile, Ala., and a 104-room Hyatt Summerfield Suites in its pipeline. Griffin Stafford anticipates breaking ground on its 99-key Home2 in Morrisville in mid- to late 2010 with an opening slated for a year later. Principal Doug Stafford expects to finance the project through a local or regional bank and hopes lenders will be more willing to help finance hotel projects when they are ready to start construction. It's likely between 30% and 35% in equity will be thrown down. The company likes working with Hilton and previously built a Hilton Garden Inn and has another under construction in Concord, N.C. Stafford envisions the Home2 design attracting younger business and leisure travelers due to its larger than average public areas that include an indoor pool and fitness center. Don't be surprised if the company's next project ends up being another Hilton property in Charleston, S.C. Queen Hotels plans to break ground on its 126-room Home2 in Bordentown within the next year as long as the company can obtain financing from a local bank. Although it's still in the early development stages, the cost will likely ramp up at around $10M, excluding land. Principal Bob Bhagat believes Home2 will perform favorably compared to other midscale brands such as Candlewood and Holiday Inn due to its affiliation with the Hilton family of brands. The company previously has developed a Hampton Inn, Candlewood Suites and Holiday Inn that are all located in the Northeast. Expect the property to open around a year after ground is broken. MIDWESTERN WATERFRONT PROJECTS DRIP WITH OPTIMISM Hotel Development Services LLC, Hammes Co. and Globe Duluth Enterprises work with local banks in hopes of obtaining financing for their waterfront hotels. Hotel Development Services looks to build a Holiday Inn Express property on the Water Street Marina in Port Huron, Mich. After receiving a $16M in TIF, Hammes Co. looks to finance the rest of its $109M project on Lake Mendota near Madison, Wis., through a combination of local banks. Globe Duluth Enterprises plans to use its relationship with a local bank to get its property in the Park Point marina section of Duluth, Minn., off the ground. Waterfront hotel developers hope local lenders will help them get their projects launched in the tight lending environment. With the debt markets virtually frozen and RevPAR down around 15% year-to-date in the Midwest, Hotel Development Services, Hammes and Globe Duluth Enterprises are working hard to convince local lenders their projects are solid enough to generate financing. All three developers have received support from the city, which could go a long way in helping them obtain financing as long as they are willing to put down at least 30% of their own equity. Once financing is achieved and the hotels get going the developers should benefit from building their properties in prime locations that will be able to benefit from the nearby mixed-use components. Hotel Development Services hopes to land financing for its 98-room Holiday Inn Express before mid-October. Doing so would ensure a roof can be built in time to prevent the property from being delayed due to inclement weather. However, obtaining a loan for the $8M project through a local bank will have to get done for the company to reach its goal of opening the property 10 months later. The hotel will replace an existing Holiday Inn Express in the city that will come out of the system at the end of the year. Business Operations Administrator Pam Lindley expects the new property to see a gain in occupancy and rate due to its location, improved highway access and because it's a new product. The project includes 26 acres of land with about half being within the waterway of the Black River, including a 374-slip marina and Continued on Next Page possibly a restaurant.

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Recent Sale Property: Inn Place Brunswick, GA

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Type of property: Limited-service. 126 rooms. Built in 1974. Buyer: Ramesh Patel Seller: RBS Greenwich Capital Broker: Teague Hunter of Hunter Realty Associates

Price: $3M

Per Room price: $23,810 Cap Rate: N/A Foreclosure Loan: 70% LTV Lender: Ameris Bank

Notes: The property is running at 45.1% occupancy with a $57.41 ADR and $25.87 RevPAR. Patel owns the Comfort Inn next door and plans to renovate and reflag the Inn Place as a Clarion immediately. The hotel is performing in-line with the rest of the market and Hunter believes the property will improve with a new flag in place. The trailing-12 month NOI is $322,573. Hunter listed the hotel for 105 days.

MIDWESTERN WATERFRONT PROJECTS DRIP WITH OPTIMISM... Hammes Co. attempts to finance the remainder of its 228-room Edgewater Hotel mixed-use development through an assortment of local banks. The company was recently granted $16M in TIF from the city, with $8M coming next year and another $8M coming in 2011. Hammes President and Managing Partner Robert Dunn expects to have rest of the financing lined up in time to have the property open in January 2012. The development will also include a limited number of residential units, upscale restaurants that overlook the lake, and 12,000 s.f. to 15,000 s.f. of banquet facilities. Globe Duluth Enterprises looks to finance its 116-room limited-service hotel on the Duluth Harbor through local banks. The company received approval from the Duluth Planning Commission to build the hotel earlier this month and Principal Terry Anderson expects to start construction in early 2010 as long as the company can obtain the financing needed to build the approximately $3.5M property. The remainder of the financing will be done privately. Anderson believes the waterfront needs a hotel in order to compliment the marina and bring in additional guests to the area. The hotel will have a water theme and feature a swimming pool. Don't be surprised if the company considers branding the property under a major flag before it breaks ground. FIRMS SCRAMBLE FOR DISTRESSED CONTRACTS Management companies need to be alert and aggressive as the swarms of distressed and foreclosed properties emerge with a need for operators. The distressed landscape is constantly changing as lenders require fast short- and longer-term solutions as they begin to find themselves as accidental owners. Rim Hospitality, Destination Hotels and Resorts, Crescent Hotels & Resorts, Tecton Hospitality and Alliance Hospitality all scramble to pick up management contracts in the hotels shifting backdrop. Don't be surprised to see lenders avoiding a fire sale, while many plan to hold quality branded assets for two to three years until an adequate price can be determined. A lot of private equity firms are looking for deep discounts but receivers and special services holding solid properties aren't going to cave anytime soon. Due to the extremely high prices in 2005 to 2007 when most buyers leveraging at about 80% LTV along with values down around 30%, hotel owners owe more than it's worth. As more and more lenders and special servicers take keys back from owners they will need top notch management to help turn the property around. These five companies are some of the top players in the industry and possess the experience and expertise to help revive struggling hotels. Rim Hospitality creates an offshoot called Independent Hotels LLC (IHL) to take on distressed non-branded properties. Rim recognizes that distressed assets have different issues and didn't want to dilute management from its core portfolio, so the new leg was born. Thus far, IHL has five hotels under contract with hopes to double that number to 10 in the next 12 months. The latest addition is the full-service 300-room Mission Plaza Hotel and Suites in San Diego. IHL's first initiative at the property was to instantly get it listed on Internet sites so that rooms would start selling.

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Crittenden Hotel/Lodging NewsTM CONTACTS Alliance Hospitality Management: 5811 Glenwood Ave., Suite 300, Raleigh, NC 27612. Joseph F Smith, President, (919) 791-1826. [email protected]

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Baywood Hotels: 2875 Towerview Road, Suite 4A, Herndon, VA 20171. Vik Patel, SVP, (571) 323-2900, fax (571) 323-4970. [email protected]

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Crescent Hotels & Resorts: 10304 Eaton Place, Suite 460, Fairfax, VA 22030. Michael George, President/CEO, (703)764-0214. [email protected] Destination Hotels and Resorts: 10333 E. Dry Creek Road, Suite 450, Englewood, CO 80112. Mike Everett, (303) 799-3830. [email protected] Global Management & Investment: 285 Country Club Drive, Suite 200, Stockbridge, GA 30281. Sam Patel, President, (404) 422-8600, fax (404) 392-4647. [email protected] Globe Duluth Enterprises: 5910 Fremont St., Duluth, MN 55807. Terry Anderson, Principal, (218) 348-4571. Griffin Stafford LLC: P.O. Box 35587, Charlotte, NC 28235. Doug Stafford, Principal, (704) 979-5542, fax (704) 979-5541. [email protected] Hammes Co.: 18000 W. Sarah Lane, Suite 250, Brookfield, WI 53045. Robert Dunn, President/Managing Partner; Sarah Carpenter, Director of Community Relations, (608) 274-7436, fax (262) 792-3620. [email protected] Hersha Hospitality Trust: 510 Walnut St., Philadelphia, PA 19106. Naveen Kakarla, EVP; Ashish Parikh, CFO, (215) 717-2164. [email protected] [email protected] Hilton Hotels (Home2 Suites): 9336 Civic Center Drive, Beverly Hills, CA 90210. Bill Duncan, Global Head, Homewood Suites and Home 2 Suites Brands; Chris Silcock, Global Head of Revenue Management, (901) 374-6518. [email protected] [email protected] Host Hotels & Resorts Inc.: 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817. Christopher Nassetta, President/CEO, (240) 744-1000. www.hosthotels.com Hotel Development Services LLC: 125 W. Spring St., Oxford, OH 45056. Pam Lindley, Business Operations Administrator, (513) 524-9500, fax (513) 523-9415. [email protected] Hunter Realty Associates: 300 Galleria Parkway, Suite 620, Atlanta, GA 30339. Teague Hunter, President, (770) 916-0300. [email protected] www.hunterhotels.net JER Partners: 1650 Tysons Blvd., Suite 1600, McLean, VA 22102. Alex Gilbert, Principal, Fund Investment Management, (703) 714-8086. www.jer.com Joie de Vivre Hospitality: 530 Bush St., Suite 501, San Francisco, CA 94108. Greg Weiss, VP of Revenue Management; Ingrid Summerfield, President/COO, (415) 248-0094, fax (415) 835-0317. [email protected] [email protected] Merchant, Shailesh: 2600 Lauren Lane, Northwood, OH 43619. Shailesh Merchant, Principal, (419) 662-1200, fax (419) 662-1208. Queen Hotels: 22 Nostrand Road, Cranberry, NJ 08512. Bob Bhagat, Principal, (609) 760-8600. [email protected] RBS Greenwich Capital: The Peachtree Building, 1170 Peachtree St., Suite 2275, Atlanta GA 30309. (404) 873-7338. www.ci.rbs.com REVPAR GURU: 311 Lincoln Road, Suite 210, Miami Beach, FL 33139. Jean Francois Mourier, CEO/Founder, (786) 478-3510. [email protected] Rim Hospitality: 915 17th St., Modesto, CA 95354. Mark LeBlanc, SVP of Development, (209) 523-8331. [email protected] Siegel Group Nevada Inc., The: 12080 Ventura Place, Suite A, Studio City, CA 91604. Michael Crandall, Director of Business Affairs, (818) 255-3600. [email protected]

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Strategic Hotels & Resorts: 77 W. Wacker Drive, Suite 4600, Chicago, IL 60601. Laurence Geller, President/CEO, (315) 658-5000. [email protected] Supertel Hospitality Inc: 309 N. Fifth St., Norfolk, NE 68702. Connie Scarpello, CFO, (402) 371-2520. [email protected]

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Tecton Hospitality: 601 Brickell Key Drive, Suite 902, Miami, FL 33131. Doug Carrillo, SVP of Sales & Marketing/Partner, (305) 577-8484. www.tectonhospitality.com Vyom Enterprise LLC: 920 Stateline Ave., South Lake Tahoe, CA 96150. Shish Patel, Principal, (530) 544-3340 XE Hospitality Management LLC: 15831 JFK Blvd., Houston, TX 77032. Amir Zindani, Principal, (281) 734-0717. [email protected]

FIRMS SCRAMBLE FOR DISTRESSED CONTRACTS...

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Once initial kinks are worked out, IHL will shop around for probable brands that the independent properties could be converted to. Either the bank will do the upgrades to grab a flag or present the pre-approved flag options to potential buyers. SVP of Development Mark LeBlanc is starting to see some distressed branded hotels needing management as well. Any branded properties that come to the company will fall into the Rim sector since hotels with flags need less work and already have standards in place. Destination Hotels & Resorts will add up to six distressed deals to its portfolio by year's end. The company is in talks with a number of lenders for work-out situations, as well as third-party management. SVP of Hospitality Investments Mike Everett notes that distressed deals are challenging to ink and many happen quickly with Destination assuming operations with as little as two weeks notice. City Group enlisted Destination to take over the distressed Wigwam Golf Resort & Spa in Phoenix as the third-party manager to maximize its position within the market. Also, expect Destination to sign two to three traditional contracts by year's end as well. Most recently Destination picked up the management contract for the 59-room The Hotel Telluride in Colorado. David Jackson, president of Northridge Capital LLC, which owns the hotel, chose Destination because of the firm's strong marketing and sales background in operating world-class ski resorts and experience in the Colorado market. Destination currently manages 34 hotels and resorts. Crescent envisions adding another six to 10 contracts in 2009. So far this year the company has already inked 12 new management deals and has entered Canada and the Caribbean. Distressed and foreclosed hotels are not Crescent's top priority, but since the company has strong relationships with lenders and special servicers, it will be ready to take over distressed assets in some situations when asked. Most recently Crescent picked up two properties in St. Paul, Minn. The two full-service upper-upscale hotels are the Crowne Plaza St. Paul ­ Riverfront and the Hilton Garden Inn St. Paul City Center. Crescent operates 54 hotels and expects the next 24 months to hold great growth opportunities as it sees several proposals each week. Tecton will be opportunistic to grab distressed and underperforming assets this year with hopes to add 10 to 15 contracts for short-term management by December. SVP of Sales & Marketing and Partner Doug Carrillo notices that contracts are coming more slowly than the industry originally anticipated. Six months ago many experts believed the wave of foreclosures would hit like a storm but in reality many lenders are willing work out extensions to avoid having to deal with the ownership of the hotel. As the list of foreclosed lifestyle hotels grows, Tecton hopes to seize some of those contracts under its Desires segment. The company anticipates signing 10 to 20 lifestyle hotel contracts in the next three years adding to its 10-property portfolio. Alliance Hospitality looks to add three more distressed contracts in 2009, adding to the six its picked up in the last 90 days. Most recently the company added the 125-room full-service Hotel St. Regis in Detroit. Other new additions include four properties in Wisconsin, including Holiday Inn Hotel & Suites ­ Green Bay Stadium, Holiday Inn Express Stevens Point, Holiday Inn Stevens Point Convention Center and Holiday Inn and Convention Center in Marshfield. Both full-service Holiday Inns also contain waterparks. Alliance operates 52 hotels.

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ACQUISITION ARENA ON LIFE SUPPORT The ink dries on a few more acquisitions that trickle through the stagnant transaction market as equity pools look for favorable deals with climbing cap rates. The Siegel Group Nevada Inc. adds another troubled asset in Las Vegas to its portfolio with the purchase of the St. Tropez Hotel. JER Partners disposes of a non-strategic limited-service property in Lafayette, Ind., for $2.6M. Shailesh and Mayuri Merchant buy a midscale hotel in Toledo, Ohio, for $1.5M. Vyom Enterprise LLC purchases a small hotel in South Lake Tahoe, Calif., for around the same amount. The hotel transaction volume is off approximately 80% from what it was a year ago, as many would-be buyers sit on the sidelines waiting to see what is going to happen with all of the CMBS loans that are getting ready to mature. The deals that are getting done either have some sort of workout where the lender is driving the process or contain unique objectives that have to be met by the buyer and seller. Normally the limited-service hotel buying pool is filled with smaller buyers looking to add to their portfolio but brokers are now seeing buyers with full-service assets looking at limited-service deals because these hotels are so much easier to finance and cap rates have risen all they way up to 11% in most markets. Most limited-service assets are seeing positive cash flows but has the segment gathered enough steam to make it through what is predicted to be a harsh winter? Since all of the equity that was pooled together to buy hotels at deep discounts is still out there, chances are the big wave of deals will finally begin to occur as lenders take over more properties and more buyers believe the cycle has hit bottom. The Siegel Group purchases the 150-room St. Tropez for $10.5M ($70K/key) with financing provided by the seller that foreclosed on the previous owner a few weeks earlier. Siegel hopes to get the hotel reopened next month after the previous owner closed the property earlier in the summer. The company will pour in around $2M converting the hotel to a boutique resort over the next six to eight months. President and CEO Stephen Siegel believes the property has the bones and character to be a great addition to the company's portfolio. The hotel is located directly across the main entrance of the Hard Rock Hotel & Casino and was sold because the previous owners weren't well represented in the Vegas market. Siegel Group now owns five hotels in Sin City and is aggressively looking to purchase additional distressed hotels and apartments throughout Vegas. The firm also expects to wrap up the renovation of the Gold Spike Hotel & Casino in the next couple months. Gold Spike is located downtown and was purchased early last year for $21M. JER Partners sells the 121-room Signature Inn in Lafayette to Landmark Hospitality for $2.6M ($21.5K/key). The deal had a 10.5% cap rate and a room revenue multiplier of 2.5x. All of the Signature Inn properties were acquired by JER back in 2006 when the firm bought all the outstanding shares of Jameson Inns in a cash merger for $2.97 per share. At the time, the aggregate transaction value was approximately $371M, including $190M in debt. Expect JER to continue unloading its Signature Inn and other limited-service properties over the next few years. Landmark Hospitality is a local owner-operator that plans to keep the Signature Inn flag for the time being and start minor property improvements by the end of the year. The Merchants pick up the 82-room Baymont Inn and Suites in Toledo for $1.5M ($18.3K/key) and a room revenue multiplier of 2.2x and a negative cap rate. A local bank financed the deal for the husband and wife buyers who had a 1031 exchange after recently selling a limited-service hotel in Colorado. Antares Ltd., a local ownership group that built the property in 2002, sold the hotel because they are exiting the business. The hotel is performing well and is still in good shape so the Merchants will likely only spend around $300K upgrading it over the next few months. Expect the Baymont flag to be retained for at least the next three years. The property was listed earlier in the year for $3.3M ($40.2K/key) and at a room revenue multiplier of 3.9x. Vyom Enterprise acquires its first hotel with the purchase of the 39-key Alpine Inn & Spa in South Lake Tahoe for $1.42M ($36.4K/key) and a cap rate of 10.4%. The room revenue multiplier was 4.5x. Newland Enterprises sold the property because it was the last asset the company owned in Tahoe. The hotel sits directly across from Harrah's Resort and Casino and is within close proximity to Heavenly Ski Resort & Village. Chances are Vyom will spend close to $200K renovating the property over the next six to nine months. This deal marks the company's entrance into the hotel industry.

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TREND WATCH: HOTELS TAKE A PAGE FROM AIRLINES Advance purchase, non-refundable rates are on the rise across the hotel industry. It's a win-win situation for both travelers and hoteliers. Joie De Vivre (JDV) and Hilton both notice an increase in this trend and expect it to keep gaining steam.

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Around two-thirds of all hotel reservations are made more than two weeks in advance. With all hotels struggling to boost RevPAR, expect to see more properties really push advance purchase. The hotels benefit from having money in the bank. It takes out the risk of cancellation and gives hotels guaranteed revenue. These rates are targeted at the new and thrifty leisure traveler. Most people looking to book leisure trips visit up to three websites and compare many hotels for several weeks before choosing a hotel. Often times the dates are set in stone and the traveler would rather get a lower non-refundable rate than pay anywhere from 10% to 30% more for refundable rates. JDV drops rates from 20% to 30% for customers that purchase advance non-refundable rooms. In most cases the rates are good up to 14 days prior to arrival but the company keeps that number flexible. Don't be surprised to see more popular destinations requiring a 21-day advance purchase. The advance product is monitored closely and JDV won't offer it on high demand dates. These rates have become a brand initiative after initially testing it last summer and now more than 80% of the company's portfolio offer it. JDV strives to keep rates competitive and also looks to packages with local attractions to drive RevPAR further such as King Tut exhibit tickets with a San Francisco hotel room. JDV also works with software company RevPAR Guru to manage a few of the brand's hotels on travel websites, including Expedia, Orbitz and Travelocity. RevPAR Guru constantly updates rates to make sure that pricing continually changes and it limits the lower rates to insure rates go up when demand rises. Advance purchases at Hilton properties provide rates from a 5% to 10% reduction up to 20% to 30% discounts. Chris Silcock, Hilton's head of revenue management, notices this trend picking up due to the economic state of the industry. He notes that advance rates are the right product for travelers that have flexible needs and want the lowest rate possible. Hilton believes that pricing is key to driving RevPAR and it monitors websites daily to ensure that rates are competitive. The company also points out that the individual brand websites and what customers can do on the sites, coupled with hotel service are also key when looking to drive RevPAR. The Hotel/Lodging News Team

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Hotel/Lodging NewsTM is published by Crittenden Research, Inc., 45 Leveroni Court, Suite 204, Novato, CA 94949. Send address changes to Hotel/Lodging NewsTM, P.O. Box 1150, Novato, CA 94948-1150. Contents copyright © 2009 Crittenden Research, Inc. Sample newsletters may be viewed online at http://www.crittendenonline.com. Crittenden publishes The Crittenden Report on Real Estate FinancingTM, Real Estate BuyersTM, Retail Space NewsTM, Restaurant InsiderTM, Hotel/Lodging NewsTM, The Apartment ReportTM, BuildersReportTM, Real Estate DevelopersTM and Resort ReportTM,. For more information on our publications go to http://www.crittendenonline.com. Hotel/Lodging NewsTM is protected by copyright. It is illegal under federal law to make and distribute copies of this newsletter in any form without permission, including without limitation, photocopies, faxes, e-mails, digital scans and postings on an intranet site. Violators risk criminal penalties and up to $100,000 in damages per offense. Please contact our customer service department at (800) 421-3483 for information regarding site licenses, to request reprints of articles or to inquire about permission to make copies. Crittenden makes every effort to ensure the accuracy of the information published in Hotel/Lodging NewsTM. Crittenden uses only those sources it determines are accurate and reliable, but no guarantee or warranty with regard to the information is made or implied. Information in Hotel/Lodging NewsTM is subject to change. Crittenden does not accept fees nor is it a business partner with any companies or firms mentioned in this publication. Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2009 Crittenden Research, Inc.

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