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,~: December 21, 2009

'0: Dan Curry, Interim Director of Housing and Community Development

From: John Shoffner, Economic Development Program Manager

Subject: Viability of Ole Asheboro Hotel Project

Based on a review of the G1'eensborohotel market as discussed in the HVS Global Hospitality Services report
and the Interim Hospitality Consultants feasibility study, it appears that the average daily rate at which a
prudent hotel operator could successfully market upscale hotel rooms ranges between $116 and $152 a night.
The current average daily rate for a basket of comparable hotels to include the Marriott Downtown Greensboro,
Doublett'ee G1'eensboro,Hyatt Place Greensboro, 0' Henry Hotel, Proximity Hote]} Wyndham Garden Hotel
Greensboro, Hilton Garden Inn Greensboro, Marriott Greensboro Hotel, and the Embassy Suites Greensboro
Airport is $116.11 a night with an oceupancy r-ateof ~52A%:T~ HVS report also included data an another
similar sized Westin Hotel as a comparable that is operating in a larger market. This hotel generatedan average
daily rate of $152 a night with a 60% occupancy rate.

Based on the data we have been presented, there is material risk that the new downtown hotel project would
have difficulty meeting its debt service obligation with the current proposed capital structure. Debt service
requirements are based on the developer being able to issue a $30 Million bond with a 20 year aInortization at a
rate of 4.25%, inclusive of the letter of credit tee.

It is recommended that the developer review the projected market supply and demand data that the City has
been presented with in the HVS repoli and initiate a full feasibility study at their expense to better determine the
appropriate price point and demand at which a new downtown hotel could be a viable going concern for the

long-term.
We have made a few edits to the data as presented in the Interim Hospitality Consultants feasibility study to
include: (1) making an adjustment for the $536,280 in management fees that were not subtl'acted from gross
operating profit, and (2) showing the projected full City and County tax revenue of $356,246 a year vs. the
$800,000 that was previously shown by the consultant. We used the same % of revenue for the expense line
items that were quoted in the Interim Hospitality Consultants feasibility study.

Other open items to be resolved

Commitment letter needed by a financial institution to issue an irrevocable non-conditionalletter

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of credit to support the $30 Million of Recovery Zone Facility Bonds.

Commitment for the New Market Tax Credits as referenced in the proposed capital structure of
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the project.
Review of projected expense line items. We used the same % of revenue projections in our
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analysis as were used in the Interim Hospitality Analysis. It is likely that some expense items
would not be directly proportional to revenue.

How was the total cost of the project detennined'?1~heHVS report referenced development costs,
0 excluding land of $217,360 to $272,055 per room. At a projected development cost of