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Appendix G - Market Study and Tax Assessment
HVSMARKETSTUDYRESULTS–SELECTEDTABLES ProposedBoutiqueHotel&Spa 56655MAINROAD SOUTHOLD,NEWYORK July-2015 July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 1 Thisanalysispertainstoaproposedluxury-caliberboutiquehoteltobelocatedat 56655MainRoad,inSouthold,NewYork,ontheNorthForkofEasternLong Island.Itstudiestheproject’seconomicpotentialsubjecttotwoseparate developmentscenarios: ScenarioOne–assuming20rooms,a45-seatrestaurant,anda3,000-square- footspawithatleastfivetreatmentrooms,and ScenarioTwo–assuming40rooms,a90-seatrestaurant,andthesamespa facilitiesassumedinScenarioOne. Thefollowingtablessummarizekeydemographicstatisticsthatrelatetothe proposedsubjecthotel’seconomicpotential,includingpopulation,education, householdincome,andowned-homevalues,forthreeseparateradialareasof study:1)zeroto50miles;2)zeroto100miles;and3)zeroto150miles.The majorityofthesubjectproperty’sdemandisexpectedtooriginatefromthe geographicareaextendingover100to150milesfromthesubjectproperty. Subjectofthe FeasibilityStudy DemographicSummary July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 2 FIGURE1DEMOGRAPHICSUMMARY 0-to50-MileRadius 0-to100-MileRadius 0-to150-MileRadius Total %ofTotal Total %ofTotal Total %ofTotal 2014Est.Pop.Age25+byEdu.Attainment 2,302,744 15,989,595 23,674,288 Lessthan9thgrade 107,321 4.7%1,194,809 7.5%1,500,160 6.3% SomeHighSchool,nodiploma 152,258 6.6 1,246,877 7.8 1,674,379 7.1 HighSchoolGraduate(orGED)687,085 29.8 4,263,132 26.7 6,383,016 27.0 SomeCollege,nodegree 420,673 18.3 2,595,558 16.2 3,909,151 16.5 AssociateDegree 183,906 8.0 1,103,444 6.9 1,680,314 7.1 Bachelor'sDegree 419,473 18.2 3,266,708 20.4 4,974,176 21.0 Master'sDegree 244,121 10.6 1,637,951 10.2 2,511,306 10.6 ProfessionalSchoolDegree 55,723 2.4 460,330 2.9 659,912 2.8 DoctorateDegree 32,183 1.4 220,786 1.4 381,875 1.6 Total 100.0%100.0%100.0% Households Total Total Total 2019Projection 1,259,578 8,917,554 13,281,699 2014Estimate 1,248,391 8,707,529 12,972,828 2010Census 1,239,711 8,529,140 12,717,629 2000Census 1,173,298 8,233,399 12,188,454 Growth2014-2019 0.90%2.41%2.38% Growth2010-2014 0.70%2.09%2.01% Growth2000-2010 5.66%3.59%4.34% Total %ofTotal Total %ofTotal Total %ofTotal 2014Est.HHsbyHHIncome 1,248,391 8,707,529 12,972,828 CYHHs,Inc<$15,000 $115,541 9.3%$1,109,652 12.7%$1,522,304 11.7% CYHHs,Inc$15,000-$24,999 103,667 8.3 829,524 9.5 1,180,896 9.1 CYHHs,Inc$25,000-$34,999 97,435 7.8 737,430 8.5 1,066,216 8.2 CYHHs,Inc$35,000-$49,999 138,495 11.1 982,399 11.3 1,455,787 11.2 CYHHs,Inc$50,000-$74,999 209,735 16.8 1,395,170 16.0 2,108,827 16.3 CYHHs,Inc$75,000-$99,999 168,222 13.5 1,041,332 12.0 1,608,048 12.4 CYHHs,Inc$100,000-$124,999 131,151 10.5 777,369 8.9 1,214,466 9.4 CYHHs,Inc$125,000-$149,999 88,557 7.1 520,279 6.0 816,410 6.3 CYHHs,Inc$150,000-$199,999 101,445 8.1 606,819 7.0 939,056 7.2 CYHHs,Inc$200,000-$249,999 34,698 2.8 219,007 2.5 336,620 2.6 CYHHs,Inc$250,000-$499,999 43,412 3.5 320,336 3.7 486,526 3.8 CYHHs,Inc$500,000+16,034 1.3 168,211 1.9 237,674 1.8 Total 100.0%100.0%100.0% ©2015TheNielsenCompany.Allrightsreserved. July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 3 FIGURE2DEMOGRAPHICSUMMARY(CONTINUED) 0-to50-MileRadius 0-to100-MileRadius 0-to150-MileRadius Total %ofTotal Total %ofTotal Total %ofTotal 2014Est.AllOwner-OccupiedHousingValues 869,384 4,548,280 7,425,372 ValueLessthan$20,000 5,573 0.6%29,456 0.6%52,832 0.7% Value$20,000-$39,999 8,686 1.0 41,638 0.9 74,085 1.0 Value$40,000-$59,999 5,777 0.7 31,569 0.7 55,248 0.7 Value$60,000-$79,999 7,342 0.8 31,468 0.7 62,103 0.8 Value$80,000-$99,999 11,521 1.3 43,655 1.0 87,147 1.2 Value$100,000-$149,999 51,663 5.9 194,970 4.3 348,092 4.7 Value$150,000-$199,999 103,653 11.9 379,814 8.4 667,387 9.0 Value$200,000-$299,999 237,306 27.3 927,327 20.4 1,659,317 22.3 Value$300,000-$399,999 194,382 22.4 938,018 20.6 1,577,275 21.2 Value$400,000-$499,999 106,495 12.2 657,418 14.5 1,009,686 13.6 Value$500,000-$749,999 88,440 10.2 765,588 16.8 1,125,397 15.2 Value$750,000-$999,999 25,020 2.9 251,138 5.5 360,357 4.9 Value$1,000,000ormore 23,527 2.7 256,222 5.6 346,447 4.7 Total 100.0%100.0%100.0% 2014Est.MedianAllOwner-OccupiedHousing Value $301,632 $363,351 $344,791 ©2015TheNielsenCompany.Allrightsreserved. Keypointsassociatedwiththedatafromtheprecedingsurveyfollow. Thereare23.7millionpeoplewhoareaged25andhigherwithin150milesof thesubjectsite,andoverone-third(36.0%)oftheseindividualshavea bachelor’sdegreeorhigher. Asof2014,therewereapproximately13.0millionhouseholdswithin150 milesofthesubjectsite.Ofthistotal,nearly500,000ofthehouseholdshad incomelevelsbetween$250,000and$499,000,andanother238,000 householdswithincomelevelsinexcessof$500,000. Asof2014,therewereapproximately7.4millionowner-occupiedhomes.Of thistotal,over1.8millionofthehomes(or24.7%ofthetotal)hadvaluesin excessof$500,000.Nearly350,000ofthehomevaluesexceeded$1.0million. Theprecedingdataillustratesthehighlevelofpopulationwithinareasonable driveofthesubjectsite,aswellasthehighratesofincome,education,andwealth associatedwiththispopulation. July-2015 Thefollowingmapidentifiesthesubjectsite’slocationrelativetothatofthe lodgingfacilitiesitismostlikelyto facilitiesandpricingstructuresarethenreviewedonthesubsequenttables. COMPETITIONMAP CompetitiveMarket Analysis FeasibilityStudy – ProposedBoutiqueHotel&Spa–Southold,NewYork Thefollowingmapidentifiesthesubjectsite’slocationrelativetothatofthe lodgingfacilitiesitismostlikelyto comparetoand competewith. facilitiesandpricingstructuresarethenreviewedonthesubsequenttables. –SummaryResults Southold,NewYork 4 Thefollowingmapidentifiesthesubjectsite’slocationrelativetothatofthe competewith.Theproperties’ facilitiesandpricingstructuresarethenreviewedonthesubsequenttables. July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 5 FIGURE3COMPETITORSURVEY No.of Year RackRates Comp HotelName Rooms Opened Location Seasonal Restaurant Spa Peak Shoulder Off Facilities A TheGreenporterHotel In-town, 326FrontStreet Near Greenport,NY 30 2001 waterfront No Yes No $199-$379 $169-$359 $99-$179 B HarborfrontInnatGreenport In-town, 209FrontStreet Coastal, Greenport,NY 35 2004 Nobeach No No No $309-$469 $249-$339 $209-$269 C TheChequit 23GrandAvenue ShelterIsland,NY 36 2015 Inland No Yes No $395-$595 $345-$628 $245-$495 D ShelterIslandHouse 11StearnsPointRoad ShelterIsland,NY 11 1800s Inland No Yes No $275-$425 $175-$305 $175-$305 E SunsetBeach Renovated Coastal, 35ShoreRoad Vintage Private ShelterIsland,NY 20 Motel beach Yes Yes No $530 $318-$340 N/Av F Pridwin Coastal, 35ShoreRoad Private ShelterIsland,NY 40 Historic beach Yes Yes No $329-$379 $239-$339 N/Av G Baron'sCoveInn Neartown, 31WestWaterStreet Coastal, SagHarbor,NY 67 1960s Nobeach Yes Yes No $434-$529 $247-$289 $158-$194 On10acres,privatebeach,swimmingpool, twodocks,three-mealrestaurantandbar, mixofroomsandcottages Newlyrenovated,heatedsalt-waterpool, tenniscourt,fitness,spaservices,three- mealrestaurant,acrossfromharborcove Outdoorheatedpoolandwhirlpool,comp breakfastduringpeakperiods,Cuvee restaurantfeaturesIndianfusioncuisine Oversizedguestroomsandprivate balconies,twosmallmeetingrooms, outdoorheatedpool,fitnessroom,comp OpenedJul-2015,RedMapleRest.,White HillCafé(bakery),Wampum(retail),comp breakfast,someroomsaresummer-only Outdoorpool,compbreakfast,restaurant andbar,bakery,meetingroom,giftshop, Petanquecourts,beachservices Adaptedfromvintagemotelin1997,Andre Balazs-branded,Petanquecourt,private beach,eachroomwithprivatedeck July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 6 FIGURE4COMPETITORSURVEY(CONTINUED) No.of Year RackRates No.HotelName Rooms Opened Location Seasonal Restaurant Spa Peak Shoulder Off Facilities H SagHarborInn Neartown, 45WestWaterStreet Coastal, SagHarbor,NY 42 1988 Nobeach No No No $389-$589 $229-$269 $114-$164 I InnatWindmillLane 23WindmillLane SagHarbor,NY 10 Historic Inland No No No $635-$2,090 $550-$1,320 $375-$950 J 1770House 143MainStreet EastHampton,NY 7 HistoricInland No Yes No $750-$850 $249-$595 $225-$349 K BakerHouse 181MainStreet EastHampton,NY 7 Historic Inland No No Yes $745-$1,045 $580-$725 $375-$575 L TheMaidstone 207MainStreet EastHampton,NY 19 Historic Inland No Yes No $495-$995 $435-$845 $235-$675 M TheHedgesInn 74JamesLane EastHampton,NY 12 Historic Inland Yes No No $500-$900 $350-$550 N/Av N ToppingRoseHouse 1Bridgehampton-SagHarborTpk Bridgehampton,NY 22 Historic Inland No Yes Yes $1,295 $695 $395 Ultra-luxury,24-hourpersonalservice, gourmetbreakfast,SUVshuttleto attractions,in-roomiPads,fullgym, Eachroomwithbalcony,meetingroom, outdoorpool,acrossfromharborcove Sixroomsandacarriagehouse,intheheart ofEastHampton,personalizedservice, WineSpectatorAwardofExcellence2014 Spaincludesendlessswimmingpool,steam shower,sauna,soakingJacuzzi;comp breakfast;theBakerBar;businesscenter Hotelroomsandcottages,continental Scandinavianbreakfastbuffet,canhost meetingsfor20pplorless Newlyrenovatedguestrooms,gardens, frontporchwithtwopatios,compbreakfast Ultra-luxury,spaservicesprovidedby TownhouseSpa,fitnesscenter,heated outdoorpool,eventspaces July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 7 Eachofthepreceding14propertiesisprivatelyownedandoperated.Wehad limitedsuccessintermsofgatheringusefulindicationsofhistoricaloccupancyand averagerateperformance.Managersofhotelsofthissortarereluctanttodiscuss performance,particularlywithaconsultantperformingresearchrelatedtothe potentialdevelopmentofanewcompetitor. Inaddition,noneofthepreceding14hotelsreporttheirdatatoSTRGlobal,the lodgingindustry’skeysourceofmarket-tailoredoperatingdata.Infact,ofthe75 lodgingfacilitieslocatedontheNorthandSouthforksofEasternLongIsland,only 14reporttheirdatatoSTR.Ofthese14properties,onlyfourareoperatedyear- round.(Aggregateannualdataincludingseasonally-operatedpropertiesisdifficult tointerpret,andisoflimiteduseconsideringthattheproposedsubjecthotelis assumedtobeoperatedyear-round.) Assuch,wehaveorderedatrendreportforthosefouryear-roundproperties,all ofwhicharelocatedontheSouthFork:twoinAmagansett,oneinEastHampton, andoneinMontauk.Thesefourpropertiesareofsubstantiallyinferiorqualityas comparedtotheproposedsubjectpropertyanditscompetitiveset.Eachproperty isrelativeaged,featuresmotel-styleimprovements,andisownedandoperatedby DuneResorts,whichcontrolstenbeachfrontpropertiesontheSouthFork. SEACRESTONTHEBEACH WINDWARDSHORES Despitetheselimitations,theactualresultsofthesefourpropertiesarethemost usefulsourceofconfirmedhistoricaldata,andcanserveasaroughmeasureofthe typicaloccupancyandaveragerateresultsinthebroadermarketarea. Unfortunately,becauseofSTR’sconfidentialityrequirements,wewereobligedto includeadditionalhotelsinthesurveyrequest.Assuch,weincludedthefour July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 8 brandedhotelslocatedinRiverheadinoursurveyrequest.Riverheadcontains LongIsland’seasternmostnodeofhoteldevelopment.Itsdemandpatternsbear someresemblancetothepatternsaffectingthesubject’slodgingmarket.The followingtabledetailsthehistoricalaggregatedataforthefourRiverheadhotels combinedwiththefournon-RiverheadmotelpropertiesontheSouthFork.(Note thatRevPARisrevenueperavailableroom,theproductofoccupancyandaverage rate.) FIGURE5HISTORICALSUPPLYANDDEMANDTRENDS(STR) AverageDaily AvailableRoomNights OccupiedRoomNights AverageRate RevPAR Year RoomCount Total Change Total Change Occupancy Total Change Total Change 2003 283 103,295 —48,151 —46.6 %$147.57 —$68.79 — 2004 283 103,295 0.0 %46,065 (4.3)%44.6 156.10 5.8 %69.61 1.2 % 2005 298 108,724 5.3 47,864 3.9 44.0 159.51 2.2 70.22 0.9 2006 372 135,780 24.9 60,530 26.5 44.6 164.38 3.1 73.28 4.4 2007 360 131,400 (3.2)65,631 8.4 49.9 166.15 1.1 82.99 13.2 2008 417 152,376 16.0 70,854 8.0 46.5 163.53 (1.6)76.04 (8.4) 2009 474 173,010 13.5 89,484 26.3 51.7 139.28 (14.8)72.04 (5.3) 2010 416 151,810 (12.3)87,925 (1.7)57.9 144.31 3.6 83.58 16.0 2011 524 191,410 26.1 107,832 22.6 56.3 145.47 0.8 81.95 (2.0) 2012 592 215,976 12.8 127,368 18.1 59.0 153.67 5.6 90.62 10.6 2013 566 206,668 (4.3)128,017 0.5 61.9 160.14 4.2 99.20 9.5 2014 586 213,890 3.5 124,872 (2.5)58.4 172.74 7.9 100.85 1.7 6.8 %9.0 %1.4 %3.5 % Year-to-DateThroughJune 2014 586 106,066 —53,974 —50.9%$139.68 —$71.08 — 2015 586 106,066 0.0%55,582 3.0%52.4 146.77 5.1%76.91 8.2% Year HotelName Location Opened HyattPlaceEastEnd Riverhead,NY 100 Jul-2011 HolidayInnExpress&Suites Riverhead,NY 89 Nov-2005 HiltonGardenInn Riverhead,NY 114 Jul-2008 HotelIndigoEastEnd Riverhead,NY 100 1975 renovatedandre-brandedAug-2010 WindwardShores Amagansett,NY 45 1983 SeaCrestOnTheOcean Amagansett,NY 62 1984 EastHamptonHouseResort EastHampton,NY 52 1963 BornFreeSuitesByTheSea Montauk,NY 24 N/Av Total 586 Source:STRGlobal AverageAnnualCompoundedChange: 2003-2014 Number ofRooms July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 9 WewereabletoisolatethehistoricalaggregateperformanceoftheRiverhead hotels,andthereforewecouldback-outatrustworthymeasureoftheactual resultsofthefournon-Riverheadproperties.Basedonthisprocess,weestimate thatthefourSouthForkmotelswillfinish2015withanoccupancyrateof approximately40%-45%andanaveragerateof$240-$250.Bycomparison,the followingtablesummarizesthe“rackrate”schedulesforthefourproperties. FIGURE6RACKRATESCHEDULES–FOURSOUTHFORKMOTELS RackRates-2015 Hotel Peak Shoulder Off WindwardShores $470-$840 $160-$295 $100-$200 SeaCrestOnTheOcean $580-$665 $135-$195 $135-$165 EastHamptonHouseResort $350-$425 $180-$200 $110-$115 BornFreeSuitesByTheSea $255-$275 $105-$135 $95-$110 Usingthe“backed-out”estimateoftheseproperties’averagerate($240-$250)asa kindofkey,wecaninterpretthepublishedrackratesofthe14hotelsinthe subjectproperty’scompetitiveset,andassumethat,generallyspeaking,an individualproperty’saverageratethroughoutatypicalyearwillequatetoafigure somewherebetweenthehighendoftheshoulder-seasonrackrateandthelow endofthepeak-seasonrackrate. Amongthe14hotelsinthesubjectproperty’scompetitiveset,weconsiderthe pricingstructuresofthefollowingpropertiestobethemostrelevantcontextual sources: TheGreenporterHotel hasinferiorquality,butsimilarlocationandroom count,andincludesarestaurant.Thesubject’spricingshouldbesubstantially higher.Thishotel’saveragerateislikelyintherangeof$200. July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 10 GREENPORTERHOTEL GREENPORTERHOTEL TheChequit hasnospaorpool,butthisjust-openedproductismodernand high-quality,withtworestaurants.Thepropertyisnotonthewater,butit’son ShelterIsland.Theroomcountissimilar.Thepricingstructureshouldresult inanaveragerateofabout$400. THECHEQUIT THECHEQUIT Baron’sCoveInn hastheadvantageofbeingonSagHarbor,butthere’sno spa.Itcontainsthelargestroomcountinsurvey.Thepricingstructureshould resultinanaveragerateofabout$400. July-2015 BARON’SCOVEINN BakerHouse tooffer onlysevenrooms. about$400. BAKERHOUSE-SPA TheMaidstone roomsinamixofhotelandcottagestructures.Thereisarestaurant.The pricingstructurelikelyresultsinanavera throughouttheyear. FeasibilityStudy – ProposedBoutiqueHotel&Spa–Southold,NewYork BARON’SCOVEINN BakerHouse isoneofonlytwohotelsinthesubjectproperty’scompetitiveset tooffer spa services.However,thepropertylacksarestaurantanditcontains nlysevenrooms.Thepricingstructureshouldresultinanaveragerateof about$400. BAKERHOUSE–GUESTROOM TheMaidstone featuresahigh-qualityScandinaviandesignandfeatures19 roomsinamixofhotelandcottagestructures.Thereisarestaurant.The pricingstructurelikelyresultsinanaveragerateofapproximately$500 throughouttheyear. –SummaryResults Southold,NewYork 11 isoneofonlytwohotelsinthesubjectproperty’scompetitiveset services.However,thepropertylacksarestaurantanditcontains Thepricingstructureshouldresultinanaveragerateof GUESTROOM qualityScandinaviandesignandfeatures19 roomsinamixofhotelandcottagestructures.Thereisarestaurant.The gerateofapproximately$500-$600 July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 12 THEMAIDSTONE THEMAIDSTONE TheToppingRoseHouse featuresahighest-qualityfacilitiesinthesurvey, withultra-luxuryamenitiesandservices,includingspaservicesanda restaurant.Thepricingstructurelikelyresultsinanaveragerateinexcessof $700throughouttheyear. THETOPPINGROSEHOUSE THETOPPINGROSEHOUSE Basedontheprecedingdataandinconsiderationofa)thesubjectproperty’s locationandb)thelevelofimprovementplannedbytheprojectdeveloper(in termsofbothproductqualityandscope),wehavedevelopedthefollowing averagerateforecast,asexpressedincurrent(2015)dollars: ScenarioOne,20rooms,45-seatrestaurant,3,000-sfspa:$400 ScenarioTwo,40rooms,90-seatrestaurant,3,000-sfspa::$350 AverageRate Forecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 13 ThedownwardadjustmenttotheScenarioTwoaverageratereflectsthe incrementalchallengeofmaximizingroomsrevenuethroughtheshoulderandoff seasonperiodswithtwicetheinventorytofill. Asforoccupancyrates,the40%-45%occupancyrateindicatedbythefourSouth Forkmotelsismostlikelyanatypicallylowindicationoftheoccupancyrates historicallyachievedbythehotelsinthesubjectproperty’scompetitiveset.These SouthForkmotelpropertiesaresubjecttoaparticularlyhighdegreeofseasonality duetotheirbeachfrontlocations,aswellasthefactthattheylackotheramenities andservicesthatcanactasimportantdemandgeneratorsintheshoulderandoff seasons,suchashigh-endrestaurants,meetingspace,andspaservices.Assuch, weconcludethatyear-roundoccupancyratesforthehotelsinthesubject property’scompetitivesetmostlikelyrangebetween50%and60%.Otherwise, recentmonthlyoccupancy,averagerate,andRevPARresultsfortheeighthotelsin theSTRsurveyispresentedbelow. FIGURE7MONTHLYOCCUPANCY,ADR,ANDREVPAR–STRCOMPETITIVESET 2013 2014 2015 Month OCC ADR RevPAR OCC ADR RevPAR OCC ADR RevPAR January 50.8 %$109.82 $55.76 38.2 %$104.31 $39.80 34.3 %$108.51 $37.23 February 51.3 108.11 55.48 38.0 109.73 41.68 39.3 112.66 44.22 March 53.5 112.80 60.35 43.3 111.92 48.47 42.4 114.59 48.58 April 50.9 121.64 61.88 50.1 120.11 60.16 58.9 124.64 73.47 May 59.6 151.83 90.56 60.8 164.54 100.07 65.4 173.21 113.27 June 77.8 175.54 136.51 74.5 181.55 135.18 73.7 194.68 143.56 July 86.3 216.44 186.69 88.2 238.98 210.67 ——— August 90.3 242.37 218.84 93.6 269.09 251.81 ——— September 69.3 169.08 117.14 70.3 179.77 126.38 ——— October 60.9 146.47 89.14 59.8 152.48 91.14 ——— November 49.1 119.09 58.51 46.9 126.96 59.53 ——— December 39.8 106.36 42.33 35.4 109.92 38.88 ——— AnnualAverages 61.9 %$160.14 $99.20 58.4 %$172.74 $100.85 ——— YTDJune 57.6%$134.95 $77.68 50.9%$139.68 $71.08 52.4%$146.77 $76.91 Fortheproposedsubjectproperty,wehaveusedtheactualmonthlyresults realizedbytheSTRcompetitivesetthroughcalendar-year2014asthebasisfor ourforecast,withvariouspenetrationfactorsappliedtoeachmonth. OccupancyRate Forecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 14 FIGURE8SUBJECTPROPERTYOCCUPANCYFORECAST–STABILIZEDBASIS OccupancyForecast-ScenarioOne OccupancyForecast-ScenarioTwo Subject Subject Subject Subject STR Penetration Occupancy STR Penetration Occupancy Month CompSet Factor Rate CompSet Factor Rate January 38.2%90.0%34.3%38.2%80.0%30.5% February 38.0 90.0 34.2 38.0 80.0 30.4 March 43.3 95.0 41.1 43.3 85.0 36.8 April 50.1 95.0 47.6 50.1 85.0 42.6 May 60.8 95.0 57.8 60.8 85.0 51.7 June 74.5 95.0 70.7 74.5 85.0 63.3 July 88.2 105.0 92.6 88.2 100.0 88.2 August 93.6 105.0 98.3 93.6 100.0 93.6 September 70.3 105.0 73.8 70.3 100.0 70.3 October 59.8 95.0 56.8 59.8 85.0 50.8 November 46.9 95.0 44.5 46.9 85.0 39.9 December 35.4 90.0 31.8 35.4 80.0 28.3 Total 58.4%97.8%57.1%58.4%89.7%52.3% Rounded 57.0 %52.0 % TheSTRcompetitivesetdataisdominatedbythefourRiverheadhotels,which havethebenefitofalargercomponentofyear-roundcommercialdemand. AlthoughthereisahighdegreeofseasonalityofdemandintheSTRcompetitive set,thesubjectproperty’sseasonalityisexpectedtobemorepronounced,dueto itslocationandgreaterlevelofdependenceuponleisuredemand.Assuch,the subjectpropertyisexpectedtorealizeitsstrongestpenetrationfactorsinthepeak season,andlowerpenetrationfactorsintheshoulderandoffseasons. Basedontheprecedingdata,thefollowingtablesummarizestheoccupancyand averagerateforecasts,andresultingroomsrevenuelevels,forthetwoscenarios, eachexpressedinbase-year2015dollars. FIGURE9ROOMSREVENUEFORECAST No.of Rooms Property Rooms Occupancy ADR RevPAR Revenue ScenarioOne 20 57 %$400.00 $228.00 $1,664,000 ScenarioOne 40 52 %$350.00 $182.00 $2,657,000 RoomsRevenue Forecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 15 Thefollowingtableidentifiesthedatawereferencedinordertoforecastrevenue andexpenseforthesubjectproperty’sfoodandbeveragedepartment.Thedatais derivedfromcomparableresortsthroughoutthebroaderregion.Mostofthe propertiesaresubstantiallylargerthanthesubjectresort.Convertingtherevenue levelstoametricbasedonoccupiedroomshastheeffectofadjustingforthesize differential. FIGURE10FOOD&BEVERAGEDEPARTMENTFORECAST Total No.of Revenue Expense Comparables Period Revenue Occ'dRms POR Ratio 1 2013/14 $3,739,000 18,893 $198 72.2% 2 2012/13 3,064,000 13,376 229 81.2 3 2012/13 2,396,000 15,941 150 75.2 4 2012/13 3,233,000 13,307 243 87.9 5 2012 830,000 4,944 168 89.3 6 2012 1,137,000 8,976 127 65.0 7 2014 3,224,000 14,835 217 69.5 8 2012 1,331,000 4,565 292 82.0 9 2010 2,011,000 4,179 481 78.0 HVS-SelectedParameters ScenarioOne $1,040,000 4,161 $250 72.0 % ScenarioTwo 1,708,000 7,592 225 68.0 Thefollowingtableidentifiesthedatawereferencedinordertoforecastrevenue andexpenseforthesubjectproperty’sspadepartment.Thedataisderivedfrom comparableresortsthroughoutthebroaderregion.Thekeymetricisrevenue- per-square-foot. Food&Beverage DepartmentForecast SpaDepartment Forecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 16 FIGURE11SPADEPARTMENTFORECAST SpaRevenue SpaDept Comparables Space(sf)Total PerSF ExpenseRatio 1 6,000 $1,508,000 $251 65.0 % 2 3,000 527,000 176 81.1 3 4,000 897,000 224 61.6 4 5,000 893,000 179 80.6 5 8,500 1,469,000 173 56.3 6 8,000 1,819,000 227 89.2 7 8,000 2,262,000 283 63.8 8 5,700 920,000 161 65.2 9 3,000 860,000 287 61.0 10 4,500 1,884,000 419 68.0 11 10,000 1,603,000 160 86.8 HVS-SelectedParameters ScenarioOne 3,000 $600,000 $200 73.0 % ScenarioTwo 3,000 750,000 250 67.0 Thefollowingtableidentifiesthedatawereferencedinordertoforecastrevenue andexpenseforthesubjectproperty’sotheroperateddepartments’revenueand expense.Thedataisderivedfromcomparableresortsthroughoutthebroader region.Thekeymetricisrevenue-per-occupied-room. FIGURE12OTHEROPERATEDDEPARTMENTSFORECAST Total Occupied Revenue Expense Comparables Period Revenue Rooms POR Ratio 1 2014 $200,000 14,835 $13 45.0% 2 2012 91,000 8,976 10 22.7 3 2012/13 583,000 13,307 44 64.7 4 2012 210,000 4,944 42 52.9 5 2010 243,000 4,179 58 34.2 HVS-SelectedParameters ScenarioOne $166,000 4,161 $40 57.5 % ScenarioTwo 273,000 7,592 36 50.0 OtherOperated DepartmentsForecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 17 Thefollowingtablesidentifiesthedatawereferencedinordertoforecastthe variousoperatingexpenses.(Notethatthedepartmentalexpenseratiosforthe foodandbeverage,spa,andotheroperateddepartmentforecastswereincluded above,aspartoftherevenueforecast). FIGURE13ROOMSDEPARTMENTEXPENSE %ofDept. Comparables Period #Rooms Actual Revenue POR 1 2014 67 $1,598,000 22.0%$108 2 2012 95 371,000 13.6 41 3 2012/13 57 1,840,000 51.5 138 4 2012 33 724,000 33.5 147 5 2010 18 462,000 46.4 111 HVS-SelectedParameters ScenarioOne 20 $499,000 30.0 %$120 ScenarioTwo 40 $717,000 27.0 %$95 FIGURE14ADMINISTRATIVE&GENERALEXPENSE %ofTtl Comparables Period #Rooms Actual Revenue PAR 1 2014 67 $962,000 9.0%$14,358 2 2012 95 454,000 11.5 4,779 3 2012/13 57 1,470,000 10.6 25,789 4 2012 33 287,000 9.0 8,697 5 2010 18 221,000 6.8 12,278 HVS-SelectedParameters ScenarioOne 20 $330,000 9.5 %$16,488 ScenarioTwo 40 $485,000 9.0 %$12,125 OperatingExpenses July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 18 FIGURE15MARKETINGEXPENSE %ofTtl Comparables Period #Rooms Actual Revenue PAR 1 2014 67 $566,000 5.3%$8,448 2 2012 95 141,000 3.6 1,484 3 2012/13 57 840,000 6.1 14,737 4 2012 33 217,000 6.8 6,576 5 2010 18 68,000 2.1 3,778 HVS-SelectedParameters ScenarioOne 20 $174,000 5.0 %$8,678 ScenarioTwo 40 $232,000 4.3 %$5,793 FIGURE16PROPERTYOPERATIONS&MAINTENANCEEXPENSE %ofTtl Comparables Period #Rooms Actual Revenue PAR 1 2014 67 $406,000 3.8%$6,060 2 2012 95 337,000 8.5 3,547 3 2012/13 57 591,000 4.3 10,368 4 2012 33 182,000 5.7 5,515 5 2010 18 166,000 5.1 9,222 HVS-SelectedParameters ScenarioOne 20 $174,000 5.0 %$8,678 ScenarioTwo 40 $232,000 4.3 %$5,793 FIGURE17UTILITIESEXPENSE %ofTtl Comparables Period #Rooms Actual Revenue PAR 1 2014 67 $481,000 4.5%$7,179 2 2012 95 115,000 2.9 1,211 3 2012/13 57 572,000 4.1 10,035 4 2012 33 162,000 5.1 4,909 5 2010 18 133,000 4.4 7,389 HVS-SelectedParameters ScenarioOne 20 $139,000 4.0 %$6,942 ScenarioTwo 40 $178,000 3.3 %$4,446 July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 19 FIGURE18PROPERTYTAXES No.of AssessedValue TaxExpense HotelName Rooms Value PerRoom TaxRate Total PerRoom TheGreenporterHotel 30 $2,227,273 $74,242 368.277 $82,025 $2,734 HarborfrontInnatGreenport 35 $4,681,818 $133,766 368.277 $172,421 $4,926 SubjectProperty ScenarioOne 20 $150,000 $7,500 ScenarioTwo 40 220,000 $5,500 FIGURE19INSURANCEEXPENSE %ofTtl Comparables Period #Rooms Actual Revenue PAR 1 2014 67 $85,000 0.8%$1,269 2 2012 95 218,000 5.5 2,295 3 2012/13 57 139,000 1.0 2,439 4 2012 33 79,000 2.5 2,394 5 2010 18 79,000 2.4 4,389 HVS-SelectedParameters ScenarioOne 20 $59,000 1.7 %$2,950 ScenarioTwo 40 $81,000 1.5 %$2,025 Thefollowingtabledetailstheforecastofincomeandexpenseforthetwo scenarios. Income &Expense Forecast July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 20 FIGURE20FORECASTOFINCOME&EXPENSE–TWOSCENARIOS ScenarioOne ScenarioTwo NumberofRooms:20 40 Occupancy:57%52% AverageRate:$400.00 $350.00 RevPAR:$228 $182 DaysOpen:365 365 OccupiedRooms:4,161 7,592 Total(000s)PAR POR Total(000s)PAR POR REVENUE Rooms $1,664 48.0%$83,220 $400.00 $2,657 49.3%$66,430 $350.00 Food&Beverage 1,040 30.0 52,013 250.00 1,708 31.7 42,705 225.00 Spa 600 17.3 30,000 144.20 750 13.9 18,750 98.79 OtherOperatedDepts 166 4.8 8,322 40.00 273 5.1 6,833 36.00 TotalRevenues 3,471 100.0 173,555 834.20 5,389 100.0 134,718 709.79 DEPARTMENTALEXPENSES* Rooms 499 30.0 24,966 120.00 717 27.0 17,936 94.50 Food&Beverage 749 72.0 37,449 180.00 1,162 68.0 29,039 153.00 Spa 438 73.0 21,900 105.26 503 67.0 12,563 66.19 OtherOperatedDepts 96 57.5 4,785 23.00 137 50.0 3,416 18.00 TotalDeptExpenses 1,782 51.3 89,100 428.26 2,518 46.7 62,954 331.69 DEPARTMENTALINCOME 1,689 48.7 84,454 405.93 2,871 53.3 71,763 378.10 UNDISTRIBUTEDOPERATINGEXPENSES Administrative&General 330 9.5 16,488 79.25 485 9.0 12,125 63.88 Marketing 174 5.0 8,678 41.71 232 4.3 5,793 30.52 Prop.Operations&Maint.174 5.0 8,678 41.71 232 4.3 5,793 30.52 Utilities 139 4.0 6,942 33.37 178 3.3 4,446 23.42 TotalUDOE 816 23.5 40,785 196.04 1,126 20.9 28,156 148.35 HOUSEPROFIT 873 25.2 43,669 209.90 1,744 32.4 43,607 229.75 ManagementFee 104 3.0 5,207 25.03 162 3.0 4,042 21.29 INCOMEBEFOREFIXEDCHGS 769 22.2 38,462 184.87 1,583 29.4 39,566 208.46 FIXEDEXPENSES PropertyTaxes 150 4.3 7,500 36.05 220 4.1 5,500 28.98 Insurance 59 1.7 2,950 14.18 81 1.5 2,021 10.65 ReserveforReplacement 139 4.0 6,942 33.37 216 4.0 5,389 28.39 TotalFixedCharges 348 10.0 17,393 83.60 516 9.6 12,909 68.02 NETINCOME $421 12.1%$21,070 $101.27 $1,066 19.8%$26,656 140.44 *Departmentalexpensesareexpressedasapercentageofdepartmentalrevenues %Gross %Gross July-2015 FeasibilityStudy–SummaryResults ProposedBoutiqueHotel&Spa–Southold,NewYork 21 FIGURE21ECONOMICALLY-SUPPORTEDCONSTRUCTIONCOSTS ScenarioOne ScenarioTwo NetIncome $421,000 $1,066,000 CapitalizationRate 6.0%6.0% Economically-SupportedConstructionCost $7,000,000 $17,800,000 PerRoom $350,000 $445,000