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HomeMy WebLinkAboutPinnacle Advisory Group West, Inc. - 2013-01-14 SO INSURANCE AND INDEMNIFICATION WAIVER �. MODIFICATION REQUEST 1. Requested by: Bob Hall City Administration 2. Date: 2/6/13 3. Name of contractor/permittee: Pinnacle Advisory Group West, Inc, 4. Description of work to be performed: Render opinion as to ground lease rate adjustment 5. Value and length of contract: $ 000; one year 6. Waiver/modification request: Waiver of requirement for Professional Liability Insurance 7. Reason for request and why it should be granted: Consultant is unable to provide professional liability coverage 8. Identify the risks to the City in approving this waiver/modification: Minimal risk to City of exposure. /3 Departrriqnt Head Signature ate: APPROVALS Approvals must be obtained in the order listed on this form. Two approvals are required for a request to be granted. Approval from the City Administrator's Office is only required if Risk Management and the City Attorney's Office disagree. 1. Risk Management ❑ Approved ❑ Denied Signature Date 2. City orney's Office Approved ❑ Denied (NL"" Sjqnattlre !)ate 3. Ci Manager's Office Approved ❑ Denied Signature D to If approved, the completed waiver/modification request is to be submitted to the City Attorney's Office along with the contract for approval. Once the contract has been approved, this form is to be filed with the Risk Management Division of Human Resources Pnnacle Waiver 2/6/2013 11:51:00 AM Engagement Letter for Consulting Services January 14, 2013 Karen L. Johnson, CRE, ISHC, MAI President Pinnacle Advisory Group West, Inc. 567 San Nicolas, suite 100 Newport Beach, CA 92660 Re: Consulting Engagement to Render Opinion Regarding Ground Lease Rate Adjustment Hilton Waterfront Beach Resort hotel, Huntington Beach, California Introduction The City of Huntington Beach acting as the Successor Agency to the Redevelopment Agency of the City of Huntington Beach ("Lessor") and Waterfront Hotel, LLC ("Lessee") are parties to that certain ground lease (hereinafter the "Lease") originally dated as of April 28th, 1989 by and between the Redevelopment Agency of the City of Huntington Beach, predecessor to Lessor and Waterfront Construction No. 1, predecessor to Lessee, for the site consisting of the ground beneath the existing Hilton Waterfront Beach Resort hotel at 21100 Pacific Coast Highway in Huntington Beach, California. Lessor and Lessee are also referred to as the "Parties" in this engagement letter. Other capitalized terms used in this engagement letter shall have the same meaning as such terms are set forth in the Lease. Section 2.2(b) of the Lease sets forth a procedure and definitions for a Market Value Rent Adjustment (hereinafter, "Rent Adjustment") to the Annual Rent payable under the Lease. The Rent Adjustment that is the subject of this engagement is to occur on the first Revaluation Date per the Lease, which is January 1, 2014. Section 2.2(b) requires that not less than six months prior to the Revaluation Date, the Parties shall meet and endeavor to agree upon the Rent Adjustment. Failing such agreement, a process is set forth whereby each party is to separately hire appraisers to opine to the Rent Adjustment, and if the two separate appraisers are not able to reach agreement, a third appraiser is to be selected that will select one of the opinions of the first two appraisers. The Parties recognize that such a process is time consuming, expensive and burdensome. Therefore it is appropriate that the Parties commence mutual efforts to reach an agreement at this time in order to either preclude the need to hire multiple appraisers, or to be able to have sufficient time to hire such appraisers and complete the process set forth in the Lease. Therefore, the Parties have elected to first engage Consultant to act independently for both Parties to render an impartial opinion regarding the Rent Adjustment in an attempt to reach mutual agreement. Engagement Letter Engagement of Consultant Consultant is hereby engaged to consult to the Parties and render an opinion regarding the potential Rent Adjustment. Consultant shall perform its work and render its opinion in compliance with the provisions of this engagement letter, pursuant to Consultant's fees per the proposal attached as Attachment No. 3 to this engagement letter and pursuant to Consultant's normal statement of assumptions and limiting conditions contained therein. Overview of the Rent Adjustment Process The basic process set forth in the Lease is that a determination is to be made of(1) the Market Value of the Fee which is the value of the fee interest in the land according to specific facts, requirements and definitions unique to the Lease and (2) a Market Rental Value which is a percentage rate also according to specific facts, requirements and definitions unique to the Lease. The product of the Market Value of the Fee and the Market Rental Value is to be calculated to determine a new adjusted Annual Rent. The Lease does not require that the adjusted Annual Rent be greater than the existing Annual Rent; however, the new Annual Rent cannot be less than the existing Annual Rent. Salient Lease Terms that Affect the Consultant's Opinion 1. Determining the Market Value of the Fee per the Lease The Market Value of the Fee as set forth in Section 2.2(b) of the Lease is a defined term subject to specific facts and requirements which directly impact the resulting value and the valuation methodology which may be used to determine it. The Consultant is to render its opinion regarding the Market Value of the Fee in strict compliance with such terms as contained in the Lease and described in Attachment No.l to this engagement letter, using the acceptable valuation methods as described in Attachment No. 2 to this engagement letter, which attachments are incorporated herein by this reference and the Parties have mutually agreed shall be controlling upon the Consultant. 2. Determining the Market Rental Value per the Lease The Market Rental Value as set forth in Section 2.2(b) of the Lease is also a defined term subject to specific facts and requirements which directly impact the resulting value. The Consultant is to render its opinion regarding the Market Rental Value in strict compliance with such terms as contained in the Lease and described in Attachment No.l to this engagement letter, which attachment the Parties have mutually agreed shall be controlling upon the Consultant. 3. Calculatingthe he Adjusted Rent per the Lease The Adjusted Rent is equal to the Market Value of the Fee multiplied times the Market Rental Value. The Lease does not require that the adjusted Annual Rent be greater than the existing Annual Rent; however, the new Annual Rent cannot be less than the existing Annual Rent. See paragraph 3 of Attachment No. 1 to this engagement letter for a further discussion of factors to consider when rendering an opinion regarding the Adjusted Rent. -2- Engagement Letter Consultant's Preliminary Findings and Final Opinions 4. Preliminary Findings Prior to the preparation of a final written report, Consultant shall meet with the Parties to provide an oral report of Consultant's preliminary findings and conclusions. As a part of such oral report, Consultant shall endeavor to confer with and assist the Parties in reaching a mutually acceptable agreement regarding the Rent Adjustment. The Parties may submit additional comments or questions to Consultant during the week following the preliminary report and Consultant shall answer such comments and questions as reasonably requested. 5. Final Written Opinion Upon the prior authorization of both Parties, Consultant shall produce a final written report detailing its opinion of the Market Value of the Fee, the Market Value Rate and the adjusted Annual Rent. If either Party objects to the preparation of a final written report, the Consultant shall not prepare such a report and its services per this engagement shall be deemed concluded. For the purpose of the written report, this engagement shall be considered a consulting assignment as that term is described in Standard 5 of the Uniform Standards of Professional Appraisal Practice. Additional Requirements to Engagement 6. Relationship This engagement letter is entered into for the purpose of providing Consultant's advice and opinion to both Parties on an equal, unbiased basis. Consultant agrees that it has no special relationship, responsibility or allegiance to either Party. To the extent that any consultant performing similar consulting services to any one party owes a fiduciary duty of fairness, good faith, honesty and loyalty to such party under accepted standards of professional conduct and/or law, Consultant agrees that it owes such a fiduciary duty to each of the Parties equally and shall at all times perform its services hereunder accordingly. 7. Additional Information Copies of the Lease and other documents referenced in this engagement letter and the attachments hereto will be separately provided to the Consultant upon commencement of this engagement. Additionally, either Party may submit additional information to Consultant that it deems relevant during the course of this engagement so long as such additional information is concurrently provided to the opposite Party. Further, such opposite Party shall be afforded a reasonable period of time in which to review and provide comment to Consultant and the originating Party regarding such additional information. 8. Communication The primary contact person for all communication with Consultant hereunder for each Party shall be as follows: -3- Engagement Letter Lessor: Mr. Bob Hall Deputy City Manager/ Economic Development Director City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 (714) 536-5236 Lessee: Mr. Shawn K. Millbern Senior Vice President The Robert Mayer Corporation 8951 Research Drive Irvine, CA 92618-4237 949-759-8091 ext 251 In the event that Consultant seeks clarification regarding interpretation of the Lease, the acceptable methods of valuation, or any other aspect of its engagement hereunder which may bear upon Consultant's opinion, the interpretation or direction given to the Consultant must be agreed between the Parties. In the event that Consultant receives conflicting directives from the Parties, Consultant shall notify each Party of the conflict and shall cease work until such conflict has been resolved. All communications between either Party and the Consultant which may bear upon Consultant's opinion, whether written or oral, shall be shared between the Parties. If any such communication occurs unilaterally with Consultant, Consultant shall promptly notify the other Party and forward a copy of any written materials and/or provide a summary of any such oral communication to the other Party. 9. No Waiver of Rights Under the Lease It is the intent of the Parties to reach mutual agreement regarding the Rent Adjustment with the assistance and counsel of the Consultant hereunder. Notwithstanding, the Parties agree between themselves that the Consultant's role hereunder is advisory to the Parties only, and neither Party shall be bound by the opinions of the Consultant. Neither Party shall have been deemed to have waived any of its rights under the Lease by engaging Consultant hereunder. 10. Other Use of Consultant's Opinion and Work Product The Consultants written work product hereunder shall be prepared solely for the purpose of assisting the Parties in reaching an agreement regarding the Rent Adjustment and shall not be used, reproduced or distributed for any other purpose. In the event that the Parties are unable to reach agreement and resort to the employment of separate appraisers as set forth in Section 2.2(b) of the Lease, neither Parry's separate appraiser, nor a third arbitrating appraiser if required, shall be given a copy of any of Consultant's opinion or work product, nor shall they reference or incorporate any of Consultant's opinion or work product into their separate opinions. -4- Engagement Letter 11. Invoicing Consultant shall submit invoices for payment monthly based upon its progress on this assignment and Consultant's fees per the schedule attached as Attachment No. 3 to this engagement letter. The cost of Consultant's work under this engagement shall be borne equally between the Parties. Consultant shall invoice each Party separately in an amount equal to 50% of the total amount owed. 12. Schedule The approximate schedule of the work to be performed by Consultant hereunder is as follows: Week 1: Review of Lease terms and other documents referenced in attachments to engagement letter Week 2—3: Preparation of preliminary opinion regarding Market Value of the Fee, Market Value Rate and Adjusted Rent Week 4: Meet and confer with the Parties to present preliminary opinion Week 5: Response to comments or questions of the Parties Week 6: Submission of final written opinion regarding Market Value of the Fee, Market Value Rate and Adjusted Rent We look forward to your efforts in this engagement. This engagement per the terms of this letter is effective upon the date at which all three parties have indicated their agreement and acceptance by signing below. Lessor: City of Huntington Beach acting as the Successor Agency to the Redevelopment Agency of the City of Huntington Beach By: c Vou Mr. Bob Hall Da Deputy City Manager/ AP ®�� 01 FC RIM Economic Development Director Z IFER City Attorney iike V'gli Deputy City Aft ney Lessee: Waterfront Hotel, LLC, a limited liability company By Waterfront Development, Inc., a California corporation, its manager By:� r 5 /Z"d1 R e ayer, Jr., CEO Date Signatures continued on following page -5- Engagement Letter Consultant: Pinnacle Advisory Group West, Inc. By: " �' ILI Karen Johnson Date President -6- Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment 1. Factors to be Considered When Determining the Market Value of the Fee Section 2.2(b) of the Lease provides specific requirements that are applicable to the determination of the Market Value of the Fee. The salient verbiage of said Section is excerpted and explained as follows. See pages 8 through 17 of this Attachment No. 1 where the actual text from the Lease is copied and annotated with letters representing each of the below sub-paragraphs. a. The valuation shall be as of the Revaluation Date of January 1, 2014 [see page 8] The Parties agree that, subject to all the other limitations and requirements of the Lease, the Consultant may use its reasonable judgment to advance its present day opinion of value to January 1, 2014. For instance, the use of an estimated increase in the Consumer Price Index or other reasonable index to advance a current opinion of value to January 1, 2014 is acceptable. b. The Market Value of the Fee shall be the market value of the fee interest in the land constituting the Premises [see page 9] The Premises consists of lot 1 of tract 13045 plus a small sliver of land at the corner of Huntington Street and Pacific View Avenue. The Premises does not include the land, improvements or uses existing on the adjacent property to the southeast with surface parking, a wedding lawn and gazebo, tennis courts and pavilion tent ("Parcel C"). The Premises also does not include a separate beach concession building on the City beach which is operated by the hotel. The Consultant is not to impute a contributory value to the Premises arising from the use of Parcel C or the beach concession by the hotel. C. The Market Value of the Fee shall be the market value of the fee interest in the land and not the rental value therefore [see page 10] The phrase."and not the rental value therefore" prohibits determining the Market Value of the Fee based on an actual or imputed ground rent payment. The purpose of this prohibition is fundamental—to avoid a flawed, circular calculation that would occur if the amount of the adjusted Annual Rent is the result of an initial assumption or opinion of what the rental value of the land (the Annual Rent) ought to be. Rather, the Lease requires that the land value be established first (based on factors other than the prospective rental value of the land) because that land value is then used to determine the rental value (Annual Rent) of the land. The Parties originally included the phrase "and not the rental value therefore" into the Lease for the purpose of avoiding a flawed, circular calculation that might otherwise be unwittingly undertaken in determining the adjusted Annual Rent. Therefore, the Parties have agreed that the Consultant shall not undertake to calculate the Market Value of the Fee by imputing a ground rental payment attributable to the land for the purposes of capitalizing such payment or Page 1 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affectinii the Rent Adiustment any other similar method or purpose (the income capitalization techniques). See the discussion in paragraph 4 of Attachment No. 2. d. The Market Value of the Fee shall be the market value of the fee interest in the land under the facts and circumstances existing as of the Revaluation Date [see page 11] The Consultant shall not assume future facts or circumstances which are not in existence at this time, except that the Parties agree that the Consultant may assume that (i) current facts and circumstances shall continue to exist as of the Revaluation Date, and (ii) current economic and hotel industry market conditions that exist today shall exist as of the Revaluation Date, including reasonable changes thereto as are projected by industry-accepted experts such as Moody's Investor Services or STR Global. e. The Market Value of the Fee shall be determined in accordance with the then- current and actual uses being made of the Premises as permitted or required by the Lease and without assuming any hange of use for which anv private or governmental permission would be required or anv change in use whether or not permitted by terms of the Lease [see page 12] This language is intended to emphasize the fact that, regardless of what an appraiser might view as the highest and best use of the Premises, for purposes of determining the Market Value of the Fee the actual use of the Premises must be assumed.1 The use of the Premises as permitted and required under the Lease is set forth in Section 7.1 of the Lease, which provides in relevant part that the Premises "shall be operated as a "first-class hotel" in a manner at least comparable to the standards of quality for "first class" hotels operated and maintained from time to time by any of the following hotel companies: Hilton, Sheraton, Marriott, Radisson, Hyatt, Guest Quarters, Ramada, or any subsidiaries thereof, in the Southern California area." £ The Market Value of the Fee shall be determined without anv regard to anv residual value for any future uses [see page 13] This provision is self-explanatory and consistent with the Lease term summarized in sub-paragraph Le. above. ' The Parties did provide in the Lease that upon the Rent Adjustment in the 64`''year of the Lease,the Market Value of the Fee shall be determined in accordance with the then-existing highest and best use of the property, with certain additional conditions. This clarification is made to underscore the fact that as to the present Rent Adjustment,the highest and best use concept does not apply. Page 2 a Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment g. The Market Value of the Fee shall be determined in accordance with the existing actual improvements on the Premises, which shall be assumed to be in the physical condition and operated in the manner required in Section 9.1(a) of the Lease [see page 14] Just as described in sub-paragraph Le. above, this language is intended to emphasize the fact that, regardless of what an appraiser might view as the highest and best use of the Premises, for purposes of determining the Market Value of the Fee the actual improvements on the Premises must be assumed. The existing Hilton Waterfront Beach Resort is a full-service, first-class resort hotel consisting of 290 guestrooms in one twelve-story tower, plus additional low- rise building area providing an entry lobby and registration area, approximately 13,250 net sq. ft. of meeting space including a multi-divisible ballroom of approximately 5,800 sq. ft., one full-service restaurant, one deli-style casual dining/coffee outlet plus gift shop, and other miscellaneous amenities, back-of- house support facilities, and two subterranean levels of parking. There is a pool and jacuzzi located on an ocean-view outdoor terrace providing recreation and outdoor-dining opportunities. The building is all Type I construction (fire- resistive, reinforced concrete and structural steel) supported on a concrete piling foundation system. The building is fully sprinklered. There is approximately 239,070 sq. ft. of occupiable space consisting of approximately 162,700 sq. ft. attributable to guestrooms and approximately 76,370 sq. ft. attributable to public area and back-of house use. Additionally, there is approximately 110,060 sq. ft. of subterranean parking, for a total building area of approximately 349,130 sq. ft. The existing improvements are maintained in excellent condition consistent with the requirements of the Lease, general first-class hotel standards and the requirements of Hilton Hotels. The property has undergone numerous upgrades and renovations. The property has received a Four-Diamond rating from the American Automobile Association(AAA) for each year of its operation. ' Additional information regarding the hotel including its financial operating history and architectural drawings will be made available at the Consultant's request. h. The Market Value of the Fee shall be determined in accordance with the existing actual improvements on the Premises bu nQt thevalue thereof[see page 15] It is typical practice in the commercial real estate industry to value the land as if vacant when evaluating ground lease adjustments. This is because (just as was the case here) such leases are normally entered into before the land in question is developed. Thus the future rental adjustment should only compensate the lessor for any increase in the value of the land as if vacant, and not be inflated by the Page 3 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment contributory value of the improvements which were added by the lessee after the lease was executed. Consistent with this typical industry practice, the phrase "but not the value thereof' in the Lease prohibits determining the Market Value of the Fee based on the value of the existing improvements. Moreover, this prohibition in the Lease was specifically agreed between the Parties in recognition of the extraordinary size, quality and value of the improvements that the Lessee planned to construct on the Premises, which were understood by the Parties to be well in excess of the highest and best use of the site at the time. Further, at the inception of the Lease, the Parties determined that the then value of the land and Annual Rent was at fair market value. As a result, it was not the intention of the Parties to provide that the Lessee would be penalized at the Revaluation Date by allowing the Market Value of the Fee to be enhanced by the extraordinary improvements constructed by the Lessee. Therefore, the Parties have agreed that the Consultant shall not undertake to calculate the Market Value of the Fee by estimating the value of the existing improvements and allocating a percentage of that value to the Market Value of the Fee (the allocation approach). See the discussion in paragraph 3 of Attachment No. 2. i. The Market Value of the Fee shall be determined in accordance with all encumbrances affecting the Premises, including but not limited to, the DDA and all then-existing taxes, assessments, covenants, conditions, restrictions, rights-of- way, liens, and easements [see page 16] The DDA (Disposition and Development Agreement dated August 15, 1988) provided that the Premises would be improved with an approximately 300 room first-class hotel as well as various street and site improvements allocable to the Premises, see"Scope of Development" (Attachment No. 3)to the DDA. Further, numerous entitlement conditions and zoning restrictions are applicable to the Premises, including but not limited to: (i) Development Agreement dated August 15, 1988 which provided that the Premises was to be developed with a first-class hotel with a maximum of 300 guestrooms, and other street, site and public improvements. (ii) Conditional Use Permit 87-19 and Coastal Development Permit 87-17 ("CUP/CDP") which permits the development of the Premises with up to 296 guestrooms and other ancillary facilities, subject to numerous conditions of approval. (iii) Commercial Master Site Plan for The Waterfront Project approved by the City pursuant to the requirements of the Downtown Specific Page 4 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment Plan ("Commercial Master Site Plan"). The Commercial Master Site Plan requires that the Premises be improved with a first-class hotel of approximately 300 guestrooms with ancillary uses including a restaurant, meeting and ballroom facilities, and a pool, spa and outdoor plaza; and further that the development conform to the building bulk, location and heights as indicated on the plan. (iv) The Huntington Beach Downtown Specific Plan which limits the use of the site to certain recreational and commercial visitor- serving uses (hotels, restaurants and recreational facilities) with restrictions including a maximum building coverage ratio of 35%, a minimum requirement for public open space of 25% of the Premises, and a maximum allowance of 15% of the site for the purpose of streets, driveways and parking (effectively requiring subterranean parking at the site). Therefore, when considering the Market Value of the Fee, it is appropriate to assume that any third party, who would theoretically purchase the Premises vacant for development purposes, would be required to develop the Premises with an approximately 300 room, first-class hotel with appropriate ancillary uses consistent with the conditions and restrictions contained in the DA, the CUP/CDP, the approved Commercial Master Site Plan, and the applicable provisions of the Downtown Specific Plan. Any such development would necessarily result in a development of very similar size, height, intensity, quality and construction type as exists today. j. The Market Value of the Fee shall be determined in accordance with the encumbrance of the Premises by the Lease and all covenants, conditions, limitations, and restrictions contained therein [see page 17] This provision clarifies that the Market Value of the Fee must be determined with the assumption that the fee interest is so encumbered with Lease, including the requirement that the property be improved, maintained and operated with an approximately 300 room, first-class hotel with appropriate ancillary uses. (See Article VI of the Lease which requires that improvements be constructed in accordance with the "Scope of Development" (Attachment No. 3) to the DDA, Article VII which requires the use of the premises as a "first class hotel" and Article XIII requiring the maintenance of the improvements as a "first class hotel".) Therefore, as described in sub-paragraph Li. above, when considering the Market Value of the Fee, it is appropriate to assume that any third party, who would theoretically purchase the Premises vacant for development purposes, would be required to develop the Premises with an approximately 300 room, first- class hotel with appropriate ancillary uses that is of very similar size, height, intensity, quality and construction type as exists today. Page 5 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Lastly, it must be noted that this provision could be interpreted on its face to mean that the Market Value of the Fee shall be determined to be the value of the landlord's leased fee interest, i.e., the present value of the payment stream of the Annual Rent payable to the landlord. However, the Parties agree that this shall not be the interpretation of this provision; as such interpretation would result in the same type of flawed circular logic that is rejected in the discussion of sub- paragraph 2.c. above—i.e., the adjusted Annual Rent cannot be determined based on a land value that is itself the present value of the existing Annual Rent. 2. Factors to be Considered When Determining_the Market Rental Value of the Premises Section 2.2(b) of the Lease also provides specific requirements that are applicable to the determination of the Market Rental Value of the Premises. The salient verbiage of said Section is excerpted and explained as follows. See pages 18 through 20 of this Attachment No. 1 where the actual text from the Lease is annotated with letters representing each of the below sub-paragraphs. a. The Market Rental Value of the Premises as of the Revaluation Date shall be equal to the then-current average annual percentage return obtained by owners of land for land similar to the Premises [see page 18] The phrase "average annual percentage return" refers to the current annual rental payment received by an owner of land, excluding consideration of the present value of future payments or increases therein, or consideration of a future reversionary use. Additionally, the phrase "for land similar to the premises" clarifies that the determination of the Market Rental Value must be based on land leased on a long-term basis for first-class hotel purposes of comparable size, quality, location characteristics, high-quality/low-risk class (i.e., a high certainty and reliability of the ground rental payment) and other relevant criteria, including the criteria described in sub-paragraph 2.c. below. The Parties agree that the Consultant may base its opinion regarding the Market Rental Value on accepted real estate industry databases such as investor surveys from RealtyRates.com or similar sources, subject to Consultant selecting and adjusting such data as deemed reasonable by Consultant to reflect a sample of land leases that are comparable in the criteria described in the prior paragraph. b. The Market Value of the Premises as of the Revaluation Date shall in no event be less than six percent(6%)nor more than fifteen percent (15%) [see page 19] This provision is self-explanatory. Page 6 Attachment No. 1 to Engagement Letter Salient'Perms of the Lease Affecting the Rent Adjustment C. The determination of the Market Rental Value of the Premises shall also take into consideration all of the factors required to be taken into consideration in determining the Market Value of the Fee of the Premises [see page 20] Those factors are discussed in detail in section 1 of this Attachment No. 1 and support the statements made in sub-paragraph 2.a. above. Additionally, this provision clarifies that land leases used for comparative purposes in determining the Market Rental Value should be based on (i) properties whose actual and current use is for a first-class hotel similar to the subject and not be based on some other use (see sub-paragraph Le. above), (ii) properties subject to a long-term lease without a significant residual value based on a future use (see sub-paragraph l.f. above), and (iii) properties where the improvements are maintained and operated in a first-class condition(see sub-paragraph 1.g. above). 3. Factors to be Considered When Calculatingthe he Adjusted Rent Section 2.2(b) of the Lease also provides specific requirements that should be considered when calculating the Adjusted Rent. See pages 21 and 22 of this Attachment No. 1 where the actual text from the Lease is annotated with letters representing each of the below sub-paragraphs. a. Adjusted Annual Rent Shall Not be Less than Existing Annual Rent [see page 21] The existing Annual Rent is the rent for the year 2013. The Lease does not require that the adjusted Annual Rent be greater than the existing Annual Rent; however, the new Annual Rent cannot be less than the existing Annual Rent. b. No Cost of Living Adjustment Required in Year of Rent Adjustment [see page 22] Section 2.2(a) of the Lease provides for annual adjustments to the Annual Rent based on changes to the Consumer Price Index for all Lease years except those Lease years in which there is a Rent Adjustment pursuant to Section 2.2(b) so that such adjustments are not duplicative. It is presumed that a cost of living increase is implicit in a Rent Adjustment pursuant to Section 2.2(b). Page 7 Attachment No. 1 to Engagement Letter Salient Terms of the Lease AffectinE the Rent Adiustment Lessee shall agree to substitute any official index published by the Bureau of Labor Statistics, or successor or similar governmental agency, as may then be in existence and which is most nearly equivalent to the Index. Should Lessor and Lessee be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this paragraph, determination of the proper substitute index shall be by arbitration in accordance with Article XXVII. (b) Market Value Rent Adjustments. The Annual Rent payable pursuant 'to Sections 2.1(b) and 2.2 (a) shall ,be adjusted on the January Ist following the and of the 24th, 0 z 44tb, 64th, and, If applicable, the 84th full Lease Year *0 a during the Term (the "Revaluation Dates') to an amount equal 0 E to the then-current "Fair Rental Value' of the Premises, as determined in accordance with this Section 2.2 (b) . O . The "Fair Rental Value" of the Premises as of any 6 11Z Revaluation Date shall be equal to the product derived by multiplying the "Karket Value of the Peep' of the Premises as co of the applicable Revaluation Date -times the "Harket Rental Value"' of the Premises as of such data. As used herein,, the "Market Value of the Fee" of the Premises on any Revaluation Date shall - be the then- current Market Value of the Fee Interest in the land constituting the Premises (and not the rental value therefor) under the actual facto and circumstances existing as of the Page 8 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment Lessee shall agree to substitute any official index published by `L:he Bureau of Labor Statistics, or successor or similar governmental agency, as ruay then be in existence and which is most nearly equivalent to the Index. Should Lessor and Lessee be unable to mutually agree as to any such substitute index prior to the date such agreeinent is required in order to properly and timely comply with this paragraph, determination of the proper substitute index shall be by arbitration in accordance with Article VII. (b) Market Value Rent__Ajjj�� . The Annua) Rent payable pursuant 'to Sections 2.1(b) and 2.2 (a) shall be adjusted on the January Ist following the end of the 24th, V_ 6 44th, 64th, and, if applicable, the 84th full. Lease Year 2; during the Term (the "Revaluation Dates") to an amount equal CD E 0 to the then-current "Fair Rental Value" of the Premises, as determined in accordance with this Section 2.2 (b) . O . The "Fair Rental Valuer of the Premises as of any V; Revaluation Date shall be equal to the product derived by .CL multiplying the "Karket Value of the Feel' of the Premises as 1! Im I'M. of the applicable Revaluation Date times the llkla",et Rental M CL Value" of the Premises as o2 such data. CD tY As, used herein,, the "Market Value of the Fee" of the Premises on any Revaluation Date shall be the then- current Market Value of the Fee Interest in the land constituting the Premises (and not the rental value therefor) under the actual facto and, circunstances existing as of the Page 9 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment Lessee shall agree to substitute any official index published by the Bureau of Labor Statistics, or successor or similar governmental agency, as may then be in existence and which is most nearly equivalent to the Index. Should Lesso-- and Lessee be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this paragraph, deternination of the proper substitute index shall be by arbitration in accordance with Article XXVII. (b) Market Value Rent Adjustments. The Annual Rent payable pursuant to Sections 2. 1(b) and 2.2 (a) shall be adjusted on the January Ist following the end of the 24th, 6 44th, 64th, and, if applicable, the 84th full Lease Year z W C during the Term (the "Revaluation Dates") to. an amount equal 4)E to the then-current "Fair Rental Value" of the Premises as determined in accordance with this Section 2.2 (b) . O . The "Fair Rental Value" of the Premises as of any ti Revaluation Date shall be equal to the product derived by CL multiplying the "Market Value of the Feel' of the Premises as W CD of the applicable Revaluation Date -times the �'Narket Rental CL Value" of the Premises as of such date. ci As used herein, the RMarket Value of the Fee" of the Premises on any Revaluation -Date shall be the then- current Market Value of the Fee Interest in the land constituting the Premises (and not the rental value therefor) under the actual facts and circumstances existing as of the Page 10 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment Lessee shall agree to substitute any official index published by the Bureau of Labor Statistics, or successor or similar governmental agency, as may then be in existence and which is most nearly equivalent to the Index. Should Lessor and Lessee be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this paragraph, determination of the proper substitute index shall be by arbitration in accordance with Article XXV11. (b) Market Value Rent Adjustments. The Annual Rent payable pursuant -to Sections 2.1(b) and 2.2 (a) shall be adj fisted on the January '-st following the end of the 24th, 0 44th, 64th, and, if applicable, the 84th full Lease Year z during the Term (the "Vevalua-t-ion Dates") to an amount equal E to the then-current "Fair Rental Value" of the Premises, as detarp,ined in accordance with this Section 2.2 (b) . O . The e'Fair Rental Value" of the Premises as of any Revaluation Date shall be equal to the product derived by multiplying the nNarket Value of the Feel' of the Premises as ev of the applicable Revaluation Date �Unee the "Karket Rental cc Value" of the Premises as of such date. As used herein, the "Market Value of the Feel' of the Premises on any Revaluation Date shall be the then- current Market Value of the Fee Interest in the land constituting the Premises (and not the rental value therefor) under the actual facts and circumstances existing as of the Revaluation Date. Page 11 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Revaluation Vat Or, the Revaluation Date occurring at the end of the 24th and 4th® and, if applicable, the 64th full loase Years, the "Market Value of the Fee" of the Premises shall be determined in -accordance witht the then-current and actual use being made of. the Premises as permitted or required by this Lease and without assuming any change of I use for which any private or governmental permission would be required or any change in use whether or not permitted by the 6 z terms of this Lease and without regard to any residual value for any future uses- the existing actual improvements on the E Premises (but not the valiie thereof) , except that the Improvements shall be assumed to be in the physical condition and operated in the manner required in Section 9 . 1(a) below; ai all encumbrances affecting, the Premises, in-cluding but not CL 2 limited to, the DDA and all then-exiqting taxes, assessments, a covenants, conditions, restrictions, rigbts-of-way, liens, and easements; and the encumbrance of the Premises by this Lease and all covenants, condition , limitations, and restrictions contained herein. The "Market Value of the reel, of the Premises as of the Revaluation Date occurring at the end of the 64th full Lease Year shzzll be determined ill accordance with the thon-existing highest and best use of t, e Premises, consistent kw.ith principles of imminent., doinain, and other-Wise i r, accordance with the preceding sentence, '0170'1/ided, however, that if Lessee has e,,qanded in e,,xcess of fifty percent-I (50"*-) of the then-current full replacement -13- Page 12 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Revaluation Date. On the Revaluation Date occurring at the end of the 24th and 44th, and, if applicable, the 84th full Lease Years, the "Market. Value of the Fee" of the Premises shall be determined in accordance with: the then-current and actual use being made of the Premises as permitted or reVired by this Lease and without assuming any change of use for which any private or governmental permission would be required or any change in use whether or not permitted by the terms of this Lease and without regard to any residual value for any future uses, the existing actual Improvements on the H Premises (but not the value thereof) , except that the 6 Improvements shall be assumed to be in the physical condition z and operated in the manner required in Section 9.1(a) below; CD E all encumbrances affecting the Premises, including but not 0 M limited to, the DDA and all then-existing taxes, assessments, 0 covenants, conditions, restrictions, rights-of-way, liens, and easements; and the encumbrance of t-he Premises by this CL Lease and all covenants, conditions, limitations, and T Im 2 restrictions contained herein. The "Market Value of the Feel' M of the Premises as of ache Revaluation Date occurring at the 4) end of the 64th full Lease Year shall be detenained in accordance with the then-existing' highest and best use of the Premises, consistent with principles of eminent domain, and otheri,Ase in accordance id I th the preceding sentence; provided, however, that if Lessee has expended In excess of fifty percent (50%) of the then-current full replacement -13- Page 13 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Revaluation Date. On the Revaluation Date occurring at the end of the 24th and 44th, and, if applicable, the 84th full Lease Years, the "Market Value of the Fee" of the Premises shall be determined in 'accordance with: the then-current and actual use being made of the Premises as permitted or required by this Lease and without assuming any change of use for which any private or governmental permission would be required or any change in use whether or not permitted by the terns of this Lease and without regard to any residual value for any future uses; the existing actual Improvements on. the Premises (but not the value thereof) o except that the Improvements shall be assumed to be in the physical condition and operated in the manner required in Section 9.1(a) below, all encumbrances affecting the Premises, including but not limited to, the DDA and all then-existing taxes, assessments, covenants, conditions, restrictions, rights-of-way, liens, 0 z and easements, and the encumbrance of the Premises by this CD E Lease and all covenants, - conditions, limitations, and eo restrictions contained herein. The "Market Value of the Feeo of the Premises as of the Revaluation Date occurring at the 0 end of the 64th full Lease Year shall be determined in accordance with the than-existin4 highest and best use of the 0 L. C0 Premises, consistent with principles of eminent domain, and otherwise in accordance with the preceding sentence,- CD provided, however, that if Lessee has expended in excess of 1z fifty percent (50) of the then current full replacement Page 14 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Revaluation Date. On the Revaluation Date occurring at the end of the 24th and 44th, and, if applicable, the 84th full Laase Years, the IOMarket Value of the Fee" of the Premises. shall be determined in Accordance with: the then-current and actual use being made of the Promises as permitted or required by this Lease and without assuming any change of use for which any private or governmental permission would be required or any change in use whether or not permitted by the terms of this Lease and without regard to any residual value for any future uses; the existing actual Improvements on the Premises (but not the value thereof) , except that the Improvements shall be assumed to be in the physical condition T_ and operated in the manner required in Section 9.1(a) below, 6 z all encuiribra noes affecting the Premises, including but not limited to, the DDA and all then-existing taxes, assessments, E covenants, conditions, restrictions, rights-of-way, liens and easements; and the encumbrance of the Premises by this 0 Lease and all covenants, - conditions, limitations, and .c restrictions contained herein. The "Market. Value of the Feed CL of the Premises as of the Revaluation Data occurring at the end of the 64th full Lease Year shall be determined in accordance with the then-existin9* highest and best use of the Premises, consistent frith principles of eminent domain, and othertuise in accordance with the preceding sentence 0- provided, however, that if Lessee has expended in excess of f *ty i fry (50!" ) of the then-current full replaQement ­13- Page 15 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment Revaluation Date. - On the Revaluation Date occurring at the end of the 24th and 44th, and, if applicable, the 84th full Lease Years, the "Market Value of the Fee" of the Premises shall be determined in accordance with:, the then-current and h actual use being made of the Premises as permitted or V_ 6 required by this Lease and without assur.4ing any change of use z for which any private or governnental permission would be E required or any change in use whether or not permitted by the ;0 terms of this Lease and without regard to any residual value for any future uses; the existing actual Improvements on the Premises (but not the value thereof) , except that the improvements shall be assumed to be in the physical condition and operated in the manner required in Section 9.1(a) below: CL all encumbrances affecting the Premises, including but not limited to, the FDA and all then-existing taxes, assessments, covenants, conditions, restrictions, rights-of-way, liens, and easements; and the. encumbrance of the Premises by this Lease and all covenants, - conditions, limitations, and restrictions contained herein. The "Market Value of the Fee" of the Premises as of the Revaluation Date occurring at the end of the 64th full tease Year shall be determined in accordance with the then-existin4 highest and best use of the Premises, consistent i­iith principles of, eminent domain, and othert-Ase in accordance with the preceding sentence,- provided, however, that if Lessee has ea.,Pended in excess of fifty percent (50%) of the then current full replacement Page 16 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adiustment Revaluation Date. On the Revaluation Date occurring at the end of the 24th and 44th, and, if applicable, the s4th full 1p-ase Years, the "Market Value of the Fee" of the Premises shall be determined in accordance with: the then-currant and- actual use being made of the Premises as per-witted or required by this Lease and without assuming any change of use z .4" for which any private or governmental permission would be C required or any change in use whether or not permitted by the E terms of this Lease and without regard to any residmal value for any future uses; the existing actual Improvements on the 0 Premises (but not the value thereof) , except that the Improvements shall be assumed to be in the physical. condition G. eo and operated in the manner required in Section 9.1 (a) below of all encumbrances affecting the Premises, including but not CL limited to, the DDA and all then-existing taxes, assessments, W covenants, conditions, restrictions, rights-of-way, liens, and easementsf, and the encumbrance of the Premises by this Lease and all covenants, conditions, limitations,, and restrictions contained herein. The "Market Value of the Feel' of the Premises as of the Revaluation Date occurring at the end of the 64t1h full Lease Year shall be determined in accordance wlt:h the then-existing' highest and best use of the Premises, consistent with principles of eminent domain, and otherwise in accordance with. the preceding sentence; provided, however, that if Lessee has e-,rpendad, In excess of fifty percent (50�) o:�, the then-current full replacement Page 17 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment ,value of the Improvements on the Premises (anclusive of furnishings, fixture, and equipiDent) at any time between the end of the 20th full Lease Year and said Revaluation Date, the., I'Market Valiue of the Fee0l of the Previse s shall be deter-mined in accordance with the preced.Ing sentence and not with reference to the highest and best use of the Premises. As used herein, the,- "Market Rental Value" of the Premises as of any Revaluation Date shall be equal to the then-current average annual percentage return obtained by owners of land for land similar to the Premises, which shall in no event be less than six percent, (6t) nor tore than fifteen porcent (15%) . The determination of the *'Market Z *.a Re `ltal `,Ialtiell of the Premises shall also take into W. consideration all of the factors required to be taken into E consideration ir, deternining the "Mari-et Value of the Fee"' of the ' Prenjise-s as of the applicable Reval=nation Date, in accordance with the preceding paragraph. N. Not any other provision in this section CL 2 2 .2(b) to the contrary, the Annual Rent derives under this tM IM- Section 2.2(b) shall not result in a rent less than the rent M Payable ixmedllatelly prior to the applicable Revaluation, rite (excapt that if the rant has bs'en only temporarily abated, deferred, o,,- reduced, in or in part, as a, result oic danags, de- striiction, or condemnation, such ad.'ust n 0 ,mc, It t the Annual Rent shall not result in a rent less than the rent PaYable ircm.ediately prior to the tempo-rary abatemenit, Page 18 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment value of the Improvements on the Premises (exclusive of furnishings, fixture, and eVipment') at any time between the and of the 30th full Lease Year and said Revaluation Date, the "Market Value of the Feel' of the Premises shall be determined in accordance with the preceding sentence and not with reference to the highest and best use of the Premises. ,As used herein, the "Market Rental Value" of the Premises as of any Revaluation Date shall be equal to the then-current average annual percentage return obtained by owners of land for land similar to the Premises, which shall. in no event be less than six percent (6%) nor more than fifteen. percent (15%) . The determination of the "Harket Rental ValueO of the Premises shall also take into consideration all of the factors required to be taken into z consideration in determining the "Market Value, of the Feel' of 4.0 E the Premises as of the applicable Revaluation Date, in accordance with the preceding paragraph. Notwithstanding any other provision in this Section 0 2.2(b) to the contrary, the Annual Rent derived under this Section 2.2 (b) shall not result in a rent less than the rent payable immediately prior to the applicable Revaluation Date CD cc cc (except that, if the rent -has be"an only temporarily abated, deferred, or reduced, in whole or in part, as a result of damage, destruction, or condemnation, such adjustmen.t to the Annual Rent shall not result in a rent less than the rent payable immediately prior to the temporary abatement,, Page 19 Attachment No. 1 to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment value of the Improvements', on the Premises (enclusive of furnishings, fixture, and equipment) at any time between the end of the 30th full Lease Year and said Revaluation Date, the I'Market Value of the !Peen of the Premises shall he determined in accordance with the preceding sentence and not with reference to the highest and best use of the Premises. As used herein, the OMaxlet Rental Value" of the Promises as of any Revaluation Date shall be equal to the then-current average annual percentage return obtained. by owners of, land for land similar to the pramises, which shall in no event be less than six percent (6%) not rare than fifteen percent 1151) . This determination of the "Market Rental Value" of the Premises shall also take into consideration all of the factors required to be taken into consideration in, determining the "Market Value of the Fee" of the Premises as of the applicable Revaluation Date', in, accordance with the preceding paragraph., 6 z Notwithstanding any other provision in this Sec-,tjon C 2 .2 (b) to the contrary, the Annual Rent derived under this Station 2,2 (b) shall not result in a rent less than the rent payable immediately prior to the applicahle Revaluation Date 0 (except that if the rent has been only te-Inporarily abated, (S deferred, or reduced, in whole or in part, as a result of CL damage, destruction, or condemnation, such adjiistmen�t to tine Annual Rent shall not result A a rent less than the rent payable immediately prior to the temporary ab ate nent, Page 20 Attachment No. I to Engagement Letter Salient Terms of the Lease Affectinp,the Rent Adiustment value of the Improvenents on the Premises (exclusive of furnishings, fixture, and equipment) at any time between the and of the, 30th full Lease Year and said Revaluation Date, the "Market Value of the Feel' of the Premises shall be determined in accordance with the preceding sentence and not with reference to the highest and best use of the Premises. As used herein, the 711-larket Rental Value" of the Premises as of any Revaluation Date shall be equal to the 6 then-current average annual percentage return obtained by z owners of land for land similar to the Premises, which shall E in no event be less than six percent (6�) nor more than to, 4.0 4.0 fifteen percent (15%) . The determination of the "Market 4 Rental Value" of the Premises shall also take into 0 Cd consideration all of the factors required to he taken into Q. consideration in determining the "Miarket Value of the Peep of ea the Premises as of the applicable Revaluation Date, in accordance with the preceding paragraph. tr Notwithstanding any other provision in this sectior, 2.2 (b) to the contrary, the Annual Rent derived under this Section 2.2(b) shall not result in a rent less than the rent payable immediately prior to the applicable Revaluation Date (except that if the rent has be*e' n only temporarily abated, deferred, or reduced, in whole, or in part, as a result of damage, destruction, or condemnation, such adjustment to the, Annual Rent shall not result In a rent, less than the rent payable immediately prior to the temporary abatement, Page 21 Attachment No. I to Engagement Letter Salient Terms of the Lease Affecting the Rent Adjustment of Io_it_JI,aIRen4- . The initial rent shall, be adjusted to an amount equal to Eighty—Nine, Thousand 4 V_ Seven Hundred Twenty 'Three Dollars ($89,723 . 00) vwr Lease 6 z Veers on the �a{3rliest of the following date ,- EI (i) June 30, 1999, or (ii) The date on Which, the city of Funtington Beach issues its Cortifioate of Ocoupancy for 0 the business(es) to be conducted on the Premises, or (,Li ) The date whi.ch is three (3) years a-fter CL the Rent Conmencement Date, 2.2 Rent .increases. CL ai (a), Inflation Adjustment. The Annual Rent required QG -pursuant to Section 2.1(b) above and , Section 2.2(b) below shall be adjusted upward on January 1, 1994 , and on each subsequent January Ist through the balance of the, Term of this Lease (the "Adjustment Dates",) , excluding only the years in which the market value rent adjustments are made as P provided in Section 2,2(b) , all as provided herein, The adlust.ment shall be calculatad apon the basis of the United States Department of Labor, Bukeau of Labor Statistics Consumer Price Index of Urban Wage earners and cle�:ical Worker ,, Los hngeles-loang Beach-Anaheim, Average, all, itel'a's, f1967 = 100) (the "Index") . Thp Index published and in Page 22 Attachment No. 2 to Engagement better Methods for Determining the Market Value of the Fee There are four potential methods for determining land value, (1) the sales comparison approach, (2) the market extraction/land residual approach, (3) the allocation approach, and (4) the income capitalization techniques'. A discussion of each of the potential land valuation methods and their applicability under the terms of the Lease is provided as follows: 1. Sales Comparison Approach The sales comparison approach is the most common technique for valuing land, and it is the preferred method when adequate comparable sales are available. Unfortunately, contemporary sales of land available for hotel development that are potentially comparable in size, location and other relevant features to the Premises are extremely rare or non-existent due to the significant recession in the hotel development industry over the past many years. Moreover, as discussed previously, the Lease requires that the value be determined in accordance with a number of detailed conditions and assumptions such that any existing land sale for purposes of comparison must also be a sale for the purpose of developing a similar, first-class quality, high-rise hotel with subterranean parking and similar ancillary uses. As a result, unless the Consultant is able to produce adequate comparable land sales consistent with the requirements of the Lease, the Parties have agreed that there is insufficient comparable land sales data available for the reliable use of this valuation approach. 2. Market Extraction/Land Residual Approach The Market Extraction/Land Residual Approach is a commonly used approach to valuing vacant land, or land that is assumed to be vacant, when adequate comparable sales are not available. It is prevalent practice to assume that the land is vacant when valuing land subject to a lease in the context of a lease adjustment. Further, considering that the approach assumes the then-current and actual use of the Premises by estimating the cost to reproduce the then-existing improvements, the approach is consistent with the Lease (see sub-paragraphs Le. and l.g. of Attachment No. 1). Additionally, this approach avoids the flawed, circular logic that is inherent in the income capitalization techniques when applied in the context of the Lease (see sub-paragraph l.c. of Attachment No. 1) and is therefore more appropriate in the given circumstances. Therefore, the Parties have agreed that the Market Extraction/Land Residual Approach is the preferred valuation approach under the Lease, and it shall be the method to be used by the Consultant in rendering its opinion regarding the Rent Adjustment. This approach requires the Consultant to estimate the value of the existing hotel as of January 1, 2014, and to extract from it the projected total cost of constructing the improvements upon the Premises as of such date, to arrive at the residual land value as of ' The Appraisal of Real Estate, Thirteen Edition, Appraisal Institute, Chapter 16-Land and Site Valuation, Table 16.1-Applicability and Limitations of Land Valuation Techniques. Page 1 Attachment No. 2 to Engagement Letter Methods for Determining the Market Value of the Fee January 1, 2014. The valuation of the hotel shall be undertaken by the Consultant using an industry-standard income capitalization technique such as a discounted cash-flow analysis assuming a ten year holding period and appropriate discount rates, or other industry-standard income capitalization technique, as the Consultant deems appropriate. The income capitalization technique shall be based on the existing stabilized hotel operation as projected by the Consultant for January 1, 2014, and shall not assume a ramp-up of revenue that would exist for a theoretical new hotel that would commence operation on or about that date. Current and historical hotel operating financial statements will be provided by the Lessee for such purposes. Additionally, consideration of comparable sales of other hotels for comparison purposes may be undertaken as the Consultant deems appropriate. The value of the hotel is to be projected by the Consultant to be as of January 1, 2014. Additionally, Consultant shall prepare an estimate of the cost of constructing the existing improvements at the Premises as of January 1, 2014 using industry standard construction data sources such as Marshall & Swift, RSMeans and/or third party expert cost estimates. The construction cost estimate shall include all direct and indirect costs to construct a hotel on the Premises equal to the existing hotel, including design, permits, impact fees, excavation, grading, foundations, onsite and allocable offsite improvements, general contractor's overhead and profit, and entrepreneurial-developer's profit.3 The cost estimate shall assume a date of completion of January 1, 2014. 3. Allocation Approach In order to support a credible value opinion, the allocation approach requires ample sales data of both unimproved and improved properties for comparison purposes, and therefore is rarely used as the primary method of site valuation for commercial properties.4 As discussed previously in paragraph 1 above, an ample supply of contemporaneous vacant land sales comparable to the Property does not exist. Further, although a number of improved hotels sales have occurred in recent years, verifiable data regarding the actual cost to construct such hotels is generally not available. Additionally, adjustments to such data to bring construction cost and sales price data into current cost and dollars would be required, which adds additional difficulty and unreliability to the approach. Moreover, this approach is not well-suited to the valuation of hotels because first-class hotel development is often subsidized by government support in various ways including low interest bond financing, property tax rebates and transient occupancy tax rebates that are not reported in the construction cost data for hotels. These subsidies serve to lower the actual development cost and artificially inflate the land value estimate for comparable properties, an effect that is not properly adjusted for in the allocation approach. 2 Such information is the proprietary and confidential property of the Lessee, and Consultant shall not be released such information to'any other Party. 3 National Council of Real Estate Investment Fiduciaries, Land Valuation Guidelines for the Determination of Value of Undeveloped Land Parcels. 4 Appraisal Institute, The Appraisal of Real Estate, Thirteenth Edition, Chapter 16-Land and Site Valuation- Allocation. Page 2 Attachment No. 2 to Engagement fetter Methods for Determining the Market Value of the Fee Additionally, the allocation approach is generally only applicable when valuing one-unit residential lots where ample sales of both lots and improved homes are available for comparison purposes, tends to be less accurate for commercial properties (especially when the number of vacant land sales is inadequate), and is rarely used as the primary land valuation technique for properties other than residential subdivision lots.5 Further, the allocation method has been determined by California courts to be flawed and inadmissible as evidence in litigation. The courts have determined that the approach is speculative, that it violates express provisions of the California Evidence Code, and that it involves a comparison of properties (improved properties for the purpose of valuing unimproved land) that are "non-comparable" as a matter of law.6 Finally and most importantly, as explained in sub-paragraph l.h. of Attachment No. 1, the Lease specifically prohibits the allocation approach. Therefore, the Parties have agreed that the Consultant shall not use the allocation approach to determine the Market Value of the Fee under the Lease. 4. Income Capitalization Techniques The income capitalization techniques (direct capitalization-land residual technique and direct capitalization-ground rent capitalization technique) rely on, among other things, the appraiser assuming a prospective rental payment attributable to the land, assuming building capitalization rates and assuming land capitalization rates. However, this method is only useful "when the comparable rents, rates, and factors can be developed from an analysis of sales of leased land',7. As discussed previously in paragraph 1 above, there has been very little comparable hotel development in many years, and therefore it is difficult to ascertain reliable rents, rates and factors that are based on sales of leased land for hotel development that are relevant and comparable in present times. And although lease rates for many hotel land leases that were originally entered into many years ago (often decades ago) are readily available, such information cannot be the basis of a valuation today unless significant adjustments for comparison purpose are made to the data to account for dissimilarities between such properties and the Premises. Adjustments may include factors such as location, access to convention facilities, mass transit, airports and other similar major public infrastructure, public subsidies that supported the original development, lease structure (e.g., percentage rent vs. fixed payment, escalation clauses, term, etc.), and probably most importantly—the economic 5 Appraisal Institute, The Appraisal of Real Estate, Thirteenth Edition, Chapter 16-Land and Site Valuation, Table 16.1 Applicability and Limitations of Land Value Techniques. 6 See Emeryville Redevelopment Agency v. Harcros Pigments, Inc. (2002) 101 Cal.App.4th 1083, 1100-1102; Redevelopment Agency v. First Christian Church (1983) 140 Ca1.App.3d 690, 699-700; People ex Rel. State Park Commission v. Johnson (1962) 203 Ca1.App.2d 712; County of Los Angeles v. Union Distributing Company (1968) 260 Ca1.App.2d 125; County of Los Angeles v. Bean (1959) 176 Cal.App.2d 521; and Pacific Gas & Electric Co. v. Zuckerman(1987) 189 Ca1.App.3d 113. Appraisal Institute, The Appraisal of Real Estate, Thirteenth Edition, Chapter 16-Land and Site Valuation, Table 16.1 Applicability and Limitations of Land Value Techniques. Page 3 Attachment No. 2 to Engagement Letter Methods for Determining the Market Value of the Fee and financial conditions that existed at the inception of the lease vs. the economic and financial conditions that exist today. Such adjustments are difficult at best for fee transactions, but become markedly speculative when applied to lease data. Therefore, the income capitalization techniques as applied to land rely on information that is often difficult for an appraiser to obtain and are generally not used as primary valuation techniques; further, small variations in any of the variables used can result in a dramatic change in the land value estimate.8 Additionally, depending on the variation of the income capitalization technique used, this approach requires that a portion of prospective net operating income of the hotel be allocated between the building and the land. As described in paragraph 3. above, California courts have rejected the concept of allocation in appraisals, finding the process speculative, in violation of applicable law, and inadmissible as evidence in litigation. California courts would likely find the income capitalization techniques as applied to land in this instance to be similarly unacceptable. Finally and most importantly, as explained in detail in sub-paragraph l.c. of Attachment No. 1, the Lease specifically prohibits the income capitalization techniques because they result in a flawed, circular analysis that is inconsistent with the calculation method specified in the Lease. Therefore, the Parties have agreed that the Consultant shall not use the income capitalization techniques to determine the Market Value of the Fee under the Lease. a Appraisal Institute, The Appraisal of Real Estate, Thirteen Edition, Chapter 16-Land and Site Valuation, Income Capitalization Procedures. Page 4 k+ Attachment No. 3 to Engagement Letter Consultant Proposal Proposal for Appraisal Services for The City of Huntington Beach and Waterfront Development, Inc. on behalf of Waterfront Hotel, LLC January 8,2013 Submitted by: Pinnacle Advisory Group West,Inc. 567 San Nicolas,suite 100 Newport Beach, CA 92660 949.734.6455 Pinnacle Advisory Group Pinnacle Attachment No. 3 to Engagement Letter Advisory Consultant Proposal Group West, Inc. Hospitality Consulting Karen L. Johnson, MAI, ISHC Asset Management Principal Litigation Support Real Estate Appraisal January 8,2013 Mr. Bob Hall Deputy City Manager City of Huntington Beach 2000 Main Street Huntington Beach,CA 92648 And Mr.Shawn Millbern Waterfront Development, Inc., on behalf of Waterfront Hotel, LLC 8951 Research Drive Irvine,CA 92618 Re:Ground Rent Re-valuation—21100 Pacific Coast Highway, Huntington Beach,CA Dear Mr. Hall and Mr. Millbern: Pursuant to your request, Pinnacle Advisory Group West, Inc. is pleased to submit this proposal outlining the scope of services, our relevant experience, and a fee quote for consulting/appraisal services pertaining to the a determination of Fair Rental Value for the site located at 21100 Pacific Coast Highway that was developed with the Hilton Waterfront Beach Resort in Huntington Beach, CA. We were provided a copy of the ground lease, executed in April 1989, together with a draft letter of instruction from the lessor and lessee, jointly. We understand that the site excludes certain outdoor areas that are contiguous to the subject site, as well as the value of a beach concession. As we understand it, the lease requires periodic re-valuations to set the new rent amount. You desire an impartial, third-party consultant to opine on the "Fair Rental Value" or "Adjusted Rent" in accordance with the terms of the lease. The date of the re-valuation is January 1, 2014, approximately one year from now. In appraisal terminology, this will be a prospective,future date of value. In order to avoid disputes similar to that involving the Drake Hotel in Chicago, in which the ground beneath a 12-story, historically-designated hotel was valued using comparable sales of skyscraper office sites,the lease requires that, for this revaluation date, the land is to be valued assuming upscale hotel use, at its entitled density, in accordance with the DDA and the Coastal Commission Permits. Estimating the Fair Rental Value ("Adjusted Rent")will require preparing an estimate of: 567 San Nicolas, Suite 100, Newport Beach, CA • phone (949) 734 6455 fax (949) 419-0688 Mr. Bob Hall Attachment No. 3 to Engagement Letter Mr.Shawn Millbern January 8, 2013 Consultant Proposal Page 2 • The value of the underlying land, as if fee, but encumbered by the DDA and Coastal entitlements, referred to in the lease as"the Market Value Of The Fee" ■ The appropriate "Market Rental Value," which is a estimate of the market's percentage rate of return to ground lessors of similar sites,for similar uses The Adjusted Rent (Fair Rental Value) is equal to the Market Value Of The Fee, multiplied by the Market Rental Value. The lease is very specific in avoiding any methodologies that involve circular logic, in which the dollar amounts of historical rent payments would be used to determine the Market Value Of The Fee. However, this assignment will be difficult, as there are very few, current hotel land sales and even fewer current ground leases for hotel development from which to extract meaningful data. The parties to the lease have stipulated that the revaluation process may necessitate a land residual analysis. OUR QUALIFICATIONS Karen L. Johnson, who is based in Newport Beach, and will lead the Pinnacle team, has over 30 years of experience as a hospitality consultant. Ms. Johnson has been an MAI since 1996 in Southern California, specializing in hotels. She has and has conducted numerous appraisals of hotel leased fee estates and hotel leasehold estates. Ms. Johnson is very familiar with Huntington Beach in that she resides in the nearby community of Long Beach. With a staff of 14 full-time professionals, Pinnacle Advisory Group, Inc. is small enough to offer personalized service,yet large enough to appeal to leading banks, insurance companies, pension funds and publicly traded corporations. Pinnacle differentiates itself from its competitors by maintaining a very high level of principal involvement. Karen Johnson will inspect the asset and will perform most of the valuation. A copy of her resume is attached as Appendix B. SCOPE OF WORK We will inspect the subject property, re-read the lease and review the DDA. Then we will survey Southern California for appropriately zoned land sales transactions, paying special attention to any sales in coastal zones. To facilitate comparisons,we will analyze any pricing based on the price per hotel key that was built/entitled, or per-square-foot of Building Area, which is normally referred to as price "per square foot of FAR." Because there are so few hotel land sales currently,we will gather data on construction costs of hotels,in order to prepare a residual analysis that models costs for a similarly sized hotel with market-appropriate amenities. We will gather information on the coastal hotel market, focusing on Huntington Beach as well as on hotels in nearby coastal communities that compete for the same groups. We will rely on the hotel's management to suggest an appropriate field on competitive properties. We will gather information on typical operating costs, in order to determine "typical" net operating income levels for a hotel of the size and style envisioned in the DDA. We will review the subject's historical operating statements, but will attempt to exclude the net income from Pinnacle Advisory Group Boston Newport Beach New York South Florida Mr. Bob Hall Mr.Shawn Millbern Attachment No. 3 to Engagement Letter January 8, 2013 Consultant Proposal Page 3 the off-site operations. Our over-arching goal will be to prepare an interim-step"income approach to value"for our residual analysis that does not provide what is effectively a "subsidy" to an inefficient operator with less profitable margins, nor "penalize" an operator with superlative profit margins. (The rent should be the same regardless of who is operating the property.) Such a distinction is the difference between market value, and value to a specific investor. Information on the current cost of debt for hotels and investor returns will be obtained in order to estimate a value "as if complete and stabilized" from which the generic construction costs and a market level of entrepreneurial profit will be deducted to produce the residual land value. We will also canvass Southern California for recent land leases to determine what return landlords may require. Because of the slow-down in development in 2008, we are reconciled to the idea that it may be necessary to extrapolate a Market Rental Value from ground leases that may be up to a decade old, and more current indications of low-risk real estate returns. In the event that we require clarification regarding interpretation of the Lease or acceptable methods of valuation,we will notify both Parties simultaneously. If we receive conflicting directives, we will notify each Party and their consultants, and will suspend work until the conflict is resolved. When we have completed our analysis, we will meet and confer with the Parties and their consultants to communicate our preliminary findings We will then propose to prepare a summary format report with our final written opinion. All work will be done in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Institute. DELIVERABLES We will first provide an oral report with the most relevant exhibits, and our preliminary estimate of the Adjusted Rent (Fair Rental Value). This presentation will be made to both Parties and their consultants. Both sides will be allowed time to review the factual information for accuracy and also to provide any new information that might affect our conclusions. We will then prepare a summary appraisal report with our final opinion on the Adjusted Rent (Fair Rental Value). This format eschews much of the economic and demographic information that account for the length of a typical appraisal report. We envision that the summary report will be approximately 35 to 40 pages long. PROFESSIONAL FEES Our professional fees to complete the report will be$12,000. In addition to our professional fees, we will be reimbursed for reasonable out-of-pocket expenses including mileage to inspect comparable sales, meals in the field, and other travel-related expenses; comparable sales data;other statistical data; and overnight mail. As is customary in assignments of this nature, we require a retainer of $6,000 prior to commencing the assignment. Invoices for each Party are attached to this proposal. Please make checks payable to Pinnacle Advisory Group West, Inc. and mail or wire funds as instructed in the attached invoice provided as Appendix C. Payment for all remaining fees and expenses will be invoiced at the time we submit the draft report. Pinnacle Advisory Group Boston Newport Beach New York South Florida Mr. Bob Hall Mr.Shawn ll i l l b e rn Attachment No. 3 to Engagement Letter January 8,2013 Consultant Proposal Page 4 Should the engagement be canceled at any time during the course of our work, we expect to be reimbursed for our time at our regular per diem rates, plus all out-of-pocket expenses. TIMING We can commence this assignment on the later of February 1, 2013, or within one week of your authorization to proceed. We will adhere to the following schedule: Week 1 Review of Lease terms Weeks 2&3 Preparation of Preliminary Opinion Week 4 Meet and confer with Parties Week 5 Response to comments or questions Week 6 Submission of final written Opinion CONFIDENTIALITY Pinnacle agrees to maintain strict confidentiality with respect to records, documents, findings, or recommendations associated with the engagement. If you wish us to execute your form of confidentiality agreement, please provide us with the same. LIMITATIONS OF THE STUDY Our report will be subject to the following limitations: • It is expressly understood that the scope of our study and report thereon will not include the possible impact of environmental regulations, licensing requirements or other such restrictions concerning the project except where such matters have been brought to our attention and are disclosed in the report. • We will assume no responsibility for matters legal in character, nor do we render any opinion as to title, which is assumed to be marketable. Unless exceptions have been brought to our attention through a current title report,any existing liens,encumbrances and assessments will be disregarded and the property is appraised as though free and clear. ® Responsible ownership and competent management are assumed. • We will not be required to give testimony or attendance in court by reason of this assignment,with reference to the property in question, without additional compensation and unless satisfactory advance arrangements have been made. a No responsibility will be assumed for engineering matters, neither structural nor mechanical. Good structural and mechanical conditions are assumed to exist, and no opinion as to these matters is to be inferred or construed from the appraisal report. • The appraisal report will be signed by at least one member of the Appraisal Institute and will be subject to all its requirements regarding the uniform standards of professional appraisal practice (USPAP)and its peer review process. Pinnacle Advisory Group Boston Newport Beach New York South Florida Mr. Bob Hall Mr.Shawn Millbern Attachment No. 3 to Engagement Letter January 8, 2013 Consultant Proposal Page 5 ® The appraisal report will be prepared solely for the use and benefit of the party(ies) so identified in the letter of transmittal and for the purpose described therein. The report will contain a certification in the form of Appendix A. a The report and the its findings may not be disclosed to,used or relied upon by third parties,without our prior written consent which shall not be unreasonably withheld. No third party may inspect or rely on the report without first receiving, directly from us, an acknowledgment that we have given our written consent. Further, neither all nor part of this appraisal report shall be disseminated to the general public by the use of advertising media, news media, sales media, or other media for public communication. ® Pinnacle Advisory Group West, Inc is an independently owned and operated legal entity, separate from Pinnacle Advisory Group, Inc.. No responsibility will be assumed for unusual soil conditions and no opinion as to these matters is to be inferred or construed from the report.The report will assume satisfactory soil conditions exist. ® Pinnacle Advisory Group West, Inc. cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this engagement. ACCEPTANCE Thank you for the opportunity to present this proposal. if you have any questions regarding the scope, methodology, staffing,timing or fee structure, please contact Karen L.Johnson at(949)734-6455. If this proposal details the nature of the work you wish undertaken at this time and arrangements are satisfactory, please sign below where indicated and return a copy to us,together with the requested retainer, as our authorization to proceed with the assignment. Very truly yours, A 0-"O/A Karen L. Johnson,CRE, ISHC, MAI President Pinnacle Advisory Group West, Inc. California Certified General License No. AGO18739 Approved and Accepted for City of Huntington Beach By: See Engagement Letter Title: City of Huntington Beach Date: Pinnacle Advisory Group Boston Newport Beach New York South Florida Mr. Bob Hall Attachment No. 3 to Engagement Letter Mr.Shawn Millbern January 8, 2013 Consultant Proposal Page 6 Approved and Accepted for Waterfront Hotel,LLC: By: See Engagement Letter Title: Waterfront Hotel Company, LLC by Waterfront Development, Inc. Date: Pinnacle Advisory Group Boston Newport Beach New York South Florida i Mr. Bob Hall Mr.Shawn Millbern Attachment No. 3 to Engagement Letter January 8,2013 Consultant Proposal Page 7 Appendix A Form of Certification I certify that,to the best of my knowledge and belief: ® The use of this appraisal report is to the named Parties and their consultants, and for the purposes of any annual audits. ® The facts and data reported by the appraiser and used in this report are true and correct. ® The analyses, opinions, and conclusions in this report are limited only by the assumptions and limiting conditions stated in this report and are my personal, impartial, and unbiased professional analyses, opinions and conclusions. ® 1 have no present or prospective interest in the property that is the subject of this appraisal and no personal interest with respect to the parties involved. ® 1 have no bias with respect to the property that is the subject of this appraisal or to the parties involved with this assignment. ® My engagement in this assignment was not contingent upon developing or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. ® As of the date of this report, I have completed the continuing education program of the Appraisal Institute. ® My analyses, opinion, and conclusion were developed and this appraisal report was prepared in conformity with the Uniform standards of Professional Appraisal Practice. ® 1 have made a personal inspection of the subject property. ® No one (or name of individual, if applicable) provided significant appraisal, appraisal review, or appraisal consulting assistance to the person signing this certification. ® The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Karen L.Johnson, MAI, CRE, ISHC President California Certified General License No.AGO18739 Pinnacle Advisory Group Boston Newport Beach New York South Florida Mr. Bob Hall Attachment No. 3 to Engagement Letter Mr.Shawn Millbern January 8,2013 Consultant Proposal Page 8 Appendix B - Qualifications Karen Louise Johnson, CRE, ISHC, MAI EXPERIENCE Oct. 2011 to present PINNACLE ADVISORY GROUP WEST, INC. President Newport Beach,CA Founded the West Coast office of a 20-year old, Boston based hospitality consulting firm to conduct appraisals, asset management services, buy-side due diligence, receivership and strategic consulting activities. 2008 to 2011 WARNICK+COMPANY Los Angeles,CA Conducted buy-side due diligence,asset management, receivership and strategic consulting activities. As part of my asset management responsibilities I assisted in replacing a management company and converting to an alternate franchise. Noteworthy consulting assignments include: assisting the receiver of the Ritz-Carlton Lake Tahoe; advising Sunstone on the acquisition of the Royal Palms in South Beach; benchmarking corporate office charge-backs of management companies; and evaluating the marketing and sales efforts of a branded fractional and residential resort in Hawaii. 1999 to 2008 JONES LANG LASALLE HOTELS—AMERICAS Executive Vice President Los Angeles,CA Head of national Strategic Advisory consulting practice. Extensive experience in Highest and Best Use studies, buy-side due diligence, condo-hotel pricing and absorption studies, management contract negotiations, brand expansion advisory, appraisals and feasibility studies. 1996 to 1999 LANDAUER ASSOCIATES Los Angeles,CA Directed the hospitality-related appraisal and consulting services for the Western United States. 1994 to 1996 PKF CONSULTING Los Angeles,CA Supervised and prepared appraisal and feasibility studies of hotels, casinos, casino land,golf course, marinas and spas. Also authored the chapter on management contracts for the Urban Land Institute (ULI) Handbook on Hotel Development. 1991to 1994 G LOODT ASSOCIATES, INC. Chicago, IL Managed the hospitality appraisal and consulting practice. 1988 to 1991 MARRIOTT HOTELS&RESORTS Washington, D.C.&Chicago, IL Supervised the Midwestern "feasibility" department, performing studies for limited- and full-service hotels and expansions. 1981 to 1988 PANNELL KERR FOSTER(PKF) Los Angeles, Newport Beach,&San Diego,CA Pinnacle Advisory Group Boston Newport Beach New York South Florida r Mr. Bob Hall Attachment No. 3 to Engagement Letter ' Mr.Shawn Millbern January 8,2013 Consultant Proposal Page 9 Performed feasibility analyses and operational reviews for hotels, marinas, convention centers and other hospitality related real estate. EDUCATION AND AFFILIATIONS Ms.Johnson graduated Magna Cum Laude from Michigan State University with a Bachelor of Science Degree in Hotel and Restaurant Administration. In addition, she is a member of the International Society for Hospitality Consultants (ISHC), the Appraisal Institute (MAI) and holds appraisal licenses in the states of California and Nevada. ARTICLES PUBLISHED—2000 TO PRESENT "All Eyes on the Luxury Sector" Hotel News Now,June 2,2011 "More Storm than Tsunami" Hotel On-Line,September 2,2009 "Tough Sledding Ahead for the Hotel Industry" Hotel News Now,September 8, 2008 "The Condo-Hotel Debate---Real Estate Assets vs Securities" Jones Lang LaSalle Hotels'Focus On series,April 2006 "Global Hotel Management Agreement Trends" Americas Section,Jones Lang LaSalle Hotels'Focus On series,June 2005 "Focus On Condo-Hotels—Expanding the Options for Lodging Development" Jones Lang LaSalle Hotels'Focus On series,October 2003 "Management Agreement Trends Worldwide" Americas Section,Jones Lang LaSalle Hotel Topics,June 2001 "Hotel Management Contract Terms" Cornell Hotel& Restaurant Administration Quarterly,April 1999 Pinnacle Advisory Group Boston Newport Beach New York South Florida r Mr. Bob Hall Attachment No. 3 to Engagement Letter Mr.Shawn Millbern January 8,2013 Consultant Proposal Page 10 Sandra McCarty-Lien EXPERIENCE Feb 2012 to present PINNACLE ADVISORY GROUP WEST, INC. Vice President Newport Beach,CA Conduct appraisals,asset management services, buy-side due diligence, and strategic consulting activities. 2006 to 2010 JONES LANG LASALLE HOTELS Associate San Francisco and Los Angeles,CA Completed market valuations,feasibility studies, highest and best use analysis,and appraisal reports on multiple types of hotel assets, including condo-hotels,fractional/timeshare projects,and casino-resorts throughout North America,the Caribbean,and Mexico. Noteworthy consulting assignments include: valuation of the Venetian and Palazzo Resort campus on the Las Vegas Strip;valuation of a proposed mega- resort in the Bahamas(including two existing and three proposed full-service/nationally-branded hotels,a 100,000-square-foot destination casino,convention center complex, entertainment/retail village, 18-hole golf course,and multiple timeshare/fractional/residential components); assisting a five-star boutique brand evaluate potential growth and expansion opportunities in North America;and determining the highest and best use of a vacant land site in Steamboat Springs,Colorado. 2004 to 2006 HVS INTERNATIONAL Senior Associate San Francisco,CA Prepared appraisals, market studies, investment counseling, and feasibility reports nation-wide on both existing and proposed hotel and/or resort developments;also managed and facilitated appraisal portfolios, including portfolio valuation analysis. EDUCATION CORNELL UNIVERSITY School of Hotel Administration, Bachelor of Science APPRAISAL INSTITUTE QUALIFYING EDUCATION Basic Appraisal Principles Basic Appraisal Procedures Business Practices&Ethics AFFILIATIONS&DESIGNATIONS Cornell Hotel Society Orange County Chapter Appraisal Institute Trainee,Southern California Chapter Pinnacle Advisory Group Boston Newport Beach New York South Florida