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JMBM Meet the Money 2008

The California Hotel Market:
A Transactional View of Hotel Values

Presented By

Tim L. Edgar
Atlas Hospitality Group
Copyright 2008 © Atlas Hospitality Group
Review of Last Year's
Forecast
 Prediction: 2007 is on pace to surpass the record number of hotels sold in
2006.
 Result: Sales declined 12%, while sales volume was down 32%.

 Prediction: Expect to see strong price appreciation in Northern California,
especially the Bay Area.
 Result: Median price per room in San Francisco County was up 50%
($154,000 vs. $102,000).
Review (continued)
 Prediction: The number of new hotels under construction and in planning will
have a dampening effect on 2008 volume.
 Result: Sales were down over 40% in the first quarter of 2008; there was a
24% increase in the number of hotel rooms under construction and a 74%
increase in the number of rooms opened.

 Prediction: The number of hotels for sale will increase.
 Result: Mid-year 2007 saw a 10% increase in the number of hotels available
for sale; this had increased to 15% by the end of the year.
California Sales Overview
2003 2004 2005 2006 2007
Transactions 267 320 367 390 343
$ Volume $1.8B $2.2B $4.5B $5.1B $3.5B

Median/Room $50,772 $60,000 $71,631 $77,273 $91,507
% Increase 18% 19% 8% 18%

Sales > $5M 77 119 141 179 175
% Total 29% 37% 38% 46% 51%
Development Summary

2003 2004 2005 2006 2007
Hotels Opened 57 45 36 29 52
# Rooms 8,236 5,725 3,839 3,265 5,668
Summary of 2007 Sales
Survey
• After reaching unprecedented heights in 2005 and 2006, 2007 saw the
California market level off. The state’s sales volume was $3.5 billion, a
32% decrease from 2006’s record-breaking $5.1 billion. Individual
transactions were down 12%.

• There were some bright spots in 2007, including the 18% increase in
the median price per room sold in California. The average price per
room also rose, up 9%.

• Individual transactions in Southern California were down 19%, but the
median price per room increased 17%. Northern California had a 4%
drop in transactions, but a 26% increase in the median price per room.
Southern
California
Los Angeles County

Los Angeles County saw a 27% decrease in the number of individual hotel
sales from 2006 to 2007.

The total dollar volume of reported sales dropped 34% to $735 million.

The county’s median price per room increased slightly, up 2%.

The largest sale in Los Angeles County, based on the number of rooms,
was the 582-room Radisson Hotel at Los Angeles Airport (LAX). The highest
reported sale was the $122 million paid for the 436-room Sheraton Universal
Hotel in Universal City.

The county had a 3.5% sales turnover.

Radisson at
LAX
San Diego County

San Diego County had a 42% drop in individual transactions in 2007.

Total dollar volume decreased 79% to $171 million.

San Diego County’s median price per room increased a slight 1%.

The largest hotel sold was the 394-room Hilton La Jolla Torrey Pines, part of
a $2.4 billion, 51-property portfolio. The highest reported price was the $42
million paid for the 177-room Hampton Inn San Diego Downtown.

The county had a 3.3% sales turnover.

Hilton La Jolla Torrey
Pines
Orange County

Individual transactions in Orange County decreased 21% in 2007.

Total sales volume also dropped, down 29% to $539 million.

The median price per room rose 2%.

The largest and most expensive hotel sold in Orange County was
the $200 million sale of the 1,572-room Hilton Anaheim. Dana
Point’s 376-room Laguna Cliffs Marriott Resort & Spa was close
behind at $194 million.

The county had a 4.1% sales turnover.

Hilton Anaheim
Riverside County
• Riverside County experienced a 17% increase in transactions.
• Total dollar volume rose 154% to $329 million.
• The median price per room was up almost 30%.
• The largest and most expensive sale came from the $137 million paid for
the 560-room Renaissance Esmeralda Resort and Spa in Indian Wells.
• The county had a 7.7% sales turnover.

Renaissance Esmeralda
Resort
San Bernardino County
• San Bernardino County had a small 5% drop in transactions.
• Total dollar volume dropped 50% to $92 million.
• The median price per room stayed about the same.
• The largest and most expensive sale in San Bernardino County
was the $16.8 million paid for the 104-room Hampton Inn & Suites
in Chino Hills.
• The county had a 5.2% sales turnover.

Hampton Inn & Suites Chino
Hills
Northern
California
San Francisco County

San Francisco County had a 37% drop in individual transactions in 2007.

Total dollar volume decreased 63% to $470 million.

The county’s median price per room rose 50%.

The largest and most expensive sale was the 803-room Hyatt Regency San
Francisco at $210 million.

The county had a 3.9% sales turnover.

Hyatt Regency San
Francisco
Alameda County

Alameda County had an 80% increase in transactions.

Total dollar volume went up 620% to $169 million.

The median price per room stayed about the same.

The largest and most expensive sale came from the 484-room Oakland
Marriott City Center at $49.5 million. The runner-up was the $25 million paid
for the 357-room Fremont Marriott Silicon Valley.

The county had a 8.0% sales turnover.

Oakland Marriott City
Center
Sacramento County
 Sacramento County had a 125% increase in transactions.
 The county’s total dollar volume went up 155% to $132 million.
 There was no significant change in the median price per room.
 Sacramento County’s largest and most expensive sale was the $52 million
paid for the 331-room Hilton Sacramento Arden West.
 The county had a 10.8% sales turnover.

Hilton Sacramento Arden
West
Santa Clara County

Transactions in Santa Clara County remained flat in 2007.

Total dollar volume dropped 6% to $115 million.

The median price per room increased 5%.

The largest sale was the 257-room Embassy Suites in Santa Clara, part of
the same portfolio as the Hilton La Jolla Torrey Pines in San Diego County.
The most expensive sale was the 224-room Cypress Hotel in Cupertino at
$54 million.

The county had a 6.1% sales turnover.

Cypress
Hotel
San Mateo County

San Mateo County had a 27% decrease in transactions.

Total dollar volume dropped 30% to $38 million.

The county’s median price per room stayed about the same.

The largest sale was the 309-room Crowne Plaza Hotel San Francisco
International Airport (SFO) in Burlingame. The highest reported sale was the
former 110-room Quality Inn in San Mateo at $8.9 million.

The county had a 5.8% sales turnover.

Crowne Plaza
SFO
Forecast

We predict that the total number of 2008 transactions will be down by over
30% from 2007. This equates to about 250 individual sales, one of the
lowest figures seen in over 10 years of reporting.

We expect total dollar volume to decline by over 30%, which would put 2008
at around $2.5 billion, almost 50% below the peak in 2006.

A number of factors will continue to negatively impact sales activity,
including difficulty in obtaining financing at favorable rates and terms; Rev
PAR growth slowing and, in some areas, declining and; disconnect between
buyers and sellers on price expectations.

We feel that sales will continue to be slow through 2008 and at least through
mid-2009.