CORPORATE VALUATIONS - Private Companies

ALEXANDRIA HOTEL PROPERTY

Equity Analysis (DCF)

Transaction Sources & Uses

Expected EBITDA
Sources: Amount % Capital Return WACC Multiple
10 Bank Loan 60,000,000 57.6% 5.00% 2.88% 3.06x
11 Mezzanine Second Lien Loan 24,000,000 23.0% 9.00% 2.07% 1.22x
12 Equity 20,250,000 19.4% 26.00% 5.05% 1.03x
13 Total Sources 104,250,000 100.0% 10.00% 5.32x
14
15 Uses:
16 Purcahse Price of Property 90,000,000
17 Renovation 9,000,000 Approx. 10.0%
18 Refinance Debt 4,000,000
19 Fees 1,250,000 7 years amort
20 Total Uses 104,250,000
21
22
23
24 Hotel & REIT Sector Beta Calculation Cost of Equity Calculation
25 Company Beta Equity Risk Premiums (1926-2007)
26 Choice Hotels International 1.00x Decile Mkt Cap $MM Risk Prem. Cost of Equity Calculation
27 Felcor Lodging LP 3.84x 1 524,351 7.03% Alpha (Riskless Rate) 1.97%
28 Gaylord Entertainment 3.07x 2 10,344 8.05% Beta (Volatility) 2.18x 24.03%
29 Host Hotels & Resorts 2.80x 3 4,144 8.47% Equity Premium 11.05%
30 Intercontinental Hotels Group 1.69x 4 2,177 8.75% Cost of Equity 26.00%
31 LaSalle Hotel Properties 1.13x 5 1,328 9.03%
32 Marcus Corporation 1.79x 6 840 9.18%
33 Marriott International 1.66x 7 538 9.58%
34 Orient Express Hotels Ltd 1.31x 8 333 9.91%
35 Red Lion Resort 1.78x 9 193 10.43% Cost of Eq = Alpha + (Beta * Premium)
36 Starwood Hotels & Resorts 2.57x 10 85 11.05%
37 Strategic Hotels & Resorts 2.80x
38 Vail Resorts 1.77x
39 Wyndham International 3.24x
40 Average 2.18x
41
42

43 Present Value Tables

44 Years 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28%
45 1 0.9259 0.9091 0.8929 0.8772 0.8621 0.8475 0.8333 0.8197 0.8065 0.7937 0.7813
46 2 0.8573 0.8264 0.7972 0.7695 0.7432 0.7182 0.6944 0.6719 0.6504 0.6299 0.6104
47 3 0.7938 0.7513 0.7118 0.6750 0.6407 0.6086 0.5787 0.5507 0.5245 0.4999 0.4768
48 4 0.7350 0.6830 0.6355 0.5921 0.5523 0.5158 0.4823 0.4514 0.4230 0.3968 0.3725
49 5 0.6806 0.6209 0.5674 0.5194 0.4761 0.4371 0.4019 0.3700 0.3411 0.3149 0.2910
50 6 0.6302 0.5645 0.5066 0.4556 0.4104 0.3704 0.3349 0.3033 0.2751 0.2499 0.2274
51
52

Page 1
 CORPORATE VALUATIONS - Private Companies

ALEXANDRIA HOTEL PROPERTY

Equity Analysis (DCF)

53 Exit Year
54 Bank Loan Information Terms 2012 2013 2014 2015 2016 2017 2018
55 Amount 60,000,000
56 Interest Rate 5.00%
57 Maturity 2011
58 Term (Years) 7
59
60 Amount Outstanding 60,000,000 60,000,000 56,000,000 52,000,000 47,000,000 40,000,000 32,000,000 -
61 Schedule Payments - 4,000,000 4,000,000 5,000,000 7,000,000 8,000,000 32,000,000
62 Interest Payment 3,000,000 3,000,000 2,800,000 2,600,000 2,350,000 2,000,000 1,600,000
63 Total Financing Payment 3,000,000 7,000,000 6,800,000 7,600,000 9,350,000 10,000,000 33,600,000
64
65 Mezzanine Second Lien Loan
66 Amount 24,000,000
67 Interest Rate 9.00%
68 Maturity 2014
69 Term (Years) 10
70
71 Amount Outstanding 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000
72 Schedule Payments - - - - - - -
73 Interest rate 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000
74 Total Financing Payment 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000 2,160,000
75
76 Total Financing 5,160,000 9,160,000 8,960,000 9,760,000 11,510,000 12,160,000 35,760,000
77 Total Debt Outstanding 84,000,000 80,000,000 76,000,000 71,000,000 64,000,000 56,000,000 24,000,000
78

Page 2
 CORPORATE VALUATIONS - Private Companies

ALEXANDRIA HOTEL PROPERTY

Equity Analysis (DCF)

79
80 HISTORICAL PERFORMANCE PROJECTIONS
81 Year -2 Year -1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Exit Year Year 7
82 2009 2010 2011 Average 2012 2013 2014 2015 2016 2017 2018
83
84 Revenue Assumptions
85 Average Daily Rate (ADR) $ 300.00 $ 310.00 $ 331.70 $ 348.29 $ 365.70 $ 383.98 $ 403.18 $ 423.34 $ 444.51 $ 466.74
86 Available Rooms 300 300 300 300 300 300 300 300 300 300
87 Assumed Occupancy Rate (OR) 67.0% 77.0% 83.0% 75.7% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0%
88
89 Price Increase 3.3% 7.0% 5.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
90
91 Available Rooms per Year 109,500 109,500 109,500 109,500 109,500 109,500 109,500 109,500 109,500 109,500
92
93 REVPAR (OR*ADR) $ 201.00 $ 238.70 $ 275.31 $ 261.21 $ 274.27 $ 287.99 $ 302.39 $ 317.51 $ 333.38 $ 350.05
94
95 Total Rooms Revenues 22,009,500 26,137,650 30,146,555 28,602,906 30,033,051 31,534,703 33,111,439 34,767,011 36,505,361 38,330,629
96 Room Revenue Growth 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
97
98 Cost of Room Assumptions
99 % as of Revenue 28% 24% 23% 25.0% 25% 25% 25% 25% 25% 25% 25%
100 Cost of Room 5,062,185 7,057,166 7,536,639 7,150,726 7,508,263 7,883,676 8,277,860 8,691,753 9,126,340 9,582,657
101
102 Operating Expense Assumptions
103 % as of Revenue 9% 11% 10% 10.0% 10% 10% 10% 10% 10% 10% 10%
104 Operating Expenses 2,641,140 2,875,142 3,014,655 2,860,291 3,003,305 3,153,470 3,311,144 3,476,701 3,650,536 3,833,063
105
106 EBITDA 14,306,175 16,205,343 19,595,260 18,591,889 19,521,483 20,497,557 21,522,435 22,598,557 23,728,485 24,914,909
107 Less Depreciation 1,100,475 1,306,883 1,507,328 (1,430,145) (1,501,653) (1,576,735) (1,655,572) (1,738,351) (1,825,268) (1,916,531)
108 5% 5% 5% 5.0%
109 Less Amortization of Fees (178,571) (178,571) (178,571) (178,571) (178,571) (178,571) (178,571)
110 EBIT 13,205,700 14,898,461 18,087,933 16,983,172 17,841,259 18,742,251 19,688,292 20,681,635 21,724,645 22,819,806
111
112 Less Taxes (Adjusted for Depreciation) 40% (6,793,269) (7,136,504) (7,496,900) (7,875,317) (8,272,654) (8,689,858) (9,127,922)
113 Plus Depreciation & Amort 1,608,717 1,680,224 1,755,307 1,834,143 1,916,922 2,003,839 2,095,103
114 Less Working Capital - - - - - - - - -
115 Less Capital Expenditures 1,320,570 1,045,506 1,205,862 (1,334,802) (1,401,542) (1,471,619) (1,545,200) (1,622,460) (1,703,584) (1,788,763)
116 6.00% 4.00% 4.00% 4.67%
117 Free Cash Flow before financing 10,463,818 10,983,437 11,529,037 12,101,918 12,703,442 13,335,043 13,998,224
118
119 Financing Expenses
120 Interest 5,160,000 5,160,000 4,960,000 4,760,000 4,510,000 4,160,000
121 Principal Payments - 4,000,000 4,000,000 5,000,000 7,000,000 8,000,000
122 5,160,000 9,160,000 8,960,000 9,760,000 11,510,000 12,160,000
123
124 Net Cash Flow 5,303,818 1,823,437 2,569,037 2,341,918 1,193,442 1,175,043
125
126

Page 3
 CORPORATE VALUATIONS - Private Companies

ALEXANDRIA HOTEL PROPERTY

Equity Analysis (DCF)

127 Discout Cash Flow Valuation Analysis

128 Entry Year Year 1 Year 2 Year 3 Year 4 Year 5 Exit Year Year 7
129 Revenues 28,602,906 30,033,051 31,534,703 33,111,439 34,767,011 36,505,361 38,330,629
130 Cost of Rooms (7,150,726) (7,508,263) (7,883,676) (8,277,860) (8,691,753) (9,126,340) (9,582,657)
131 Operating Costs (2,860,291) (3,003,305) (3,153,470) (3,311,144) (3,476,701) (3,650,536) (3,833,063)
132 EBITDA 18,591,889 19,521,483 20,497,557 21,522,435 22,598,557 23,728,485 24,914,909
133 Less Taxes (6,793,269) (7,136,504) (7,496,900) (7,875,317) (8,272,654) (8,689,858) (9,127,922)
134 Less Capex (1,334,802) (1,401,542) (1,471,619) (1,545,200) (1,622,460) (1,703,584) (1,788,763)
135 Cash Flow 10,463,818 10,983,437 11,529,037 12,101,918 12,703,442 13,335,043 13,998,224
136
137 Less Financing 5,160,000 9,160,000 8,960,000 9,760,000 11,510,000 12,160,000
138 Equity Cash Flows 5,303,818 1,823,437 2,569,037 2,341,918 1,193,442 1,175,043
139
140 Terminal Value
141 EBITDA Multiple Method 5.320x Growth EBITDA Multiple x Exit Yr's EBITDA = 126,239,431
142 Perpetuity Method (using WACC) 10.0% 5.0% Next Yr's CF / (WACC - Growth) = 279,923,696
143 Average 203,081,564
144 Debt Outstanding 84,000,000 56,000,000
145 Equity Value (TV - Debt) 147,081,564
146
147 Equity Cash Flows (20,250,000) 5,303,818 1,823,437 2,569,037 2,341,918 1,193,442 148,256,607
148 x x x x x x
149 PV Table= 26.00% 0.7936 0.6298 0.4999 0.3967 0.3148 0.2499
150 = = = = = =
151
152 PV (1) = $4,209,254
153 PV (2) = $1,148,481
154 PV (3) = $1,284,163
155 PV (4) = $929,047
156 PV (5) = $375,737
157 PV (6) = $37,043,604
158 PV= $44,990,286
159 Initial Investment (20,250,000)
160 NPV= $24,740,286 positive
161
162 IRR= 47.6%
163 NPV= ($0.00) at IRR
164 NPV= $19,634,563 at Expected Equity Return
165
166 Enteprise Value = PV of Equity + PV of Debt
167 PV of Equity = $44,990,286
168 + PV of Debt = 84,000,000
169 - PV of Cash -
170 EV = $128,990,286

Page 4