Hotel Capital Markets Hodges Ward Elliott Mark W. Elliott Senior Managing Director Hodges Ward...

Hotel Capital MarketsHotel Capital Markets

Hodges Ward Elliott

Mark W. ElliottSenior Managing Director

Hodges Ward Elliott

Mark W. ElliottSenior Managing Director

Presented toHotel Asset Managers Association

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Current EBITDA Multiples

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Current Multiples of Public Lodging REITS

Source: Hodges Ward Elliott; Bloomberg

Company (as of 10/4/10) 2010E EBITDA X 2011E EBITDA X

Host Hotels & Resorts 18.3x 16.4x

Sunstone Hotel Investors 14.6x 13.5x

LaSalle Hotel Properties 17.0x 14.1x

Strategic Hotels & Resorts 20.5x 18.8x

DiamondRock Hospitality 15.8x 13.0x

Hersha Hospitality 14.2x 12.6x

FelCor Lodging Trust 12.0x 10.5x

Ashford Hospitality Trust 15.3x 12.8x

Lodging REITS 15.2x 13.4x

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Current Transactions

Current Transactions

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Asset Rooms Price Price Per Room

Westin Philadelphia 294 $145,000,000 $493,197

Royal Palm 409 $117,000,000 $286,063

Sir Francis Drake 416 $90,000,000 $216,346

Tampa Embassy Suites 360 $77,000,000 $213,889

Source: Hodges Ward Elliott

Cap Rates range from 1.88% to 6.48% and EBITDA Multiples range from 13.99 to 38.99 X.

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Rationale

Demand vs. GDP

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1988 – 2010E

Source: Bureau of Economic Analysis; Smith Travel Research; Hodges Ward Elliott; Bloomberg Contributor Composite

Demand vs. GDP

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October 2009 – July 2010

Source: Smith Travel Research; Bloomberg

US Market RevPAR

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RevPAR (1988 – 2010E)

Source: Smith Travel Research, Hodges Ward Elliott

US Market Supply

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Supply (1988 – 2010E)

Source: Smith Travel Research, Hodges Ward Elliott

23-Year Average, 1987-2009, 2.1%

Review of Past Cycles

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Trough-to-Peak RevPAR/NOI:

The sample below contains statistics for full-service hotels

from 2003 – 2007:Years CAGR in RevPAR CAGR in NOI

2003 – 2007 7.4% 17.9%

Source: Hodges Ward Elliott

Impact of EBITDA Growth

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Assumptions/Scenarios:

• 2010E EBITDA grows at 17.9% over the next 5 years.

• Corresponding EBITDA multiple if the growth rate is 17.9% and the stock price remains constant.

• Value of stock if balance sheet remains the same and company is valued at 10.7 X EBITDA.

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Impact of EBITDA Growth

Source: Hodges Ward Elliott; Bloomberg

Company

Stock Price – 10/4/1

0

2010E EBITDA

2010E EBITDA X

2015E EBITDA

(Growing at 17.9% annually)

EBITDA X with same stock price

(EV)

Stock price % change if

balance sheet remains the

same & company is

valued at 10.7 X EBITDA

Host Hotels & Resorts $14.64 $769 18.3 X $1,752 8.1 X 24.20%Sunstone Hotel

Investors $9.47 $153 14.6 X $348 6.4 X 107.69%

LaSalle Hotel Properties

$23.15 $156 17.0 X $355 7.5 X 71.37%

Strategic Hotels & Resorts

$4.25 $119 20.5 X $270 9.1 X 44.76%

DiamondRock Hospitality

$9.70 $133 15.8 X $302 6.9 X 52.99%

Hersha Hospitality $5.10 $112 14.2 X $256 6.3 X 159.31%FelCor Lodging Trust $4.55  185 12.0 X $421 5.3 X 385.82%

Ashford Hospitality Trust

$9.29 219 15.3 X $498 6.7 X 357.23%

Sources of Capital

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• Public Issuance

• Private Equity

• Debt Markets

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Lodging Stock Issuance1995 – Year-to-Date 2010

Source: Bloomberg

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Global CMBS Issuance for Hotels1995 – Year-to-Date 2010

Source: Bloomberg

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Identified Hotel Private Equity Availability

Source: Hodges Ward Elliott

Capital

EquityEquity

AllocationTotal Buying

Raised % Allocated for Hotels Power

Company (in Billions) to Hotels (in Billions) (in Billions)

RLJ Development $1.1 100% $1.10 $2.20

Rockpoint $2.3 35% $0.81 $1.61

Westbrook $2.2 35% $0.77 $1.54

Northwood $1.2 60% $0.72 $1.44

HEI $0.5 100% $0.50 $1.00

Lubert-Adler $1.3 35% $0.46 $0.91

Walton Street Capital $1.3 35% $0.46 $0.91

MSREF (US) $1.2 35% $0.42 $0.84

Paulson & Company $1.0 35% $0.35 $0.70

Rockwood $1.0 35% $0.35 $0.70

Starwood Capital $1.0 100% $1.00 $2.00

Cornerstone $0.5 100% $0.50 $1.00

Total $14.6 $7.4 $14.9

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Estimated Impaired Hotel Debt (Billions)

Source: MBA; Hodges Ward Elliott

Capital

CMBS Bank Life Co Other Total

2005 $17.9 $7.0 $4.6 $9.8 $39.3

2006 $22.4 $10.2 $5.8 $10.2 $48.7

2007 $30.0 $16.4 $7.9 $22.9 $77.1

2008 $0.2 $3.8 $1.7 $5.0 $10.8

Total

$70.5 $37.5 $20.0 $47.9 $175.9

Available Equity $14.9Potential Capital Gap Amount $160.8

Hodges Ward Elliott, IncMark W. Elliott

Senior Managing Directormelliott@hwehotels.com

Sovereign Building, 25th Floor3344 Peachtree Road NE

Atlanta GA 30326(404) 233-6000

www.hwehotels.com

Hodges Ward Elliott, IncMark W. Elliott

Senior Managing Directormelliott@hwehotels.com

Sovereign Building, 25th Floor3344 Peachtree Road NE

Atlanta GA 30326(404) 233-6000

www.hwehotels.com

Hotel Asset Managers AssociationHotel Asset Managers Association