1

Hotel Valuations and Development Feasibility ULI Fall Conference

October 26, 2011

Steve Haggerty – Global Head R.E. & DevelopmentHyatt Hotels & Resorts

Michael Barnello – President & CEOLaSalle Hotel Properties

Mathew Sparks – SVP Luxury LodgingHilton Worldwide

Karim Alibhai – Founder & PrincipalThe Gencom Group

Greg Hartmann, MAI, CHA – Moderator

2

Hotel 101 – The Basics Occupancy, ADR & RevPAR

Source: Smith Travel Research

Occupancy and RevPAR % change in 4-week moving avg.

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

9/28

/200

2

3/28

/200

3

9/28

/200

3

3/28

/200

4

9/28

/200

4

3/28

/200

5

9/28

/200

5

3/28

/200

6

9/28

/200

6

3/28

/200

7

9/28

/200

7

3/28

/200

8

9/28

/200

8

3/28

/200

9

9/28

/200

9

3/28

/201

0

9/28

/201

0

3/28

/201

1

RevPAR 4-week moving average chg. Occupancy 4-week moving average chg.

3

U.S. hotel transaction volume to increase to $16B in 2011

Source: Jones Lang LaSalle Hotels. Note: Transactions $10M and above. Excludes land site and casino deals

Buy

Sell

Buy

Sell

Significant Sales in 2011

4

Property name Location Closing

date Price ($M) Rooms

Price per key ($)

Buyer Seller

Hyatt Lodgeworks 20 Hotels Aug-11 660.0 2,928 225,410 Hyatt Hotels LodgeWorks Corp.Rosewood Portfolio 5 Hotels Jul-11 570.0 678 840,708 Cheng-Yu Tung Maritz Wolf & RosewoodHyatt Manchester Grand San Diego, CA Mar-11 570.0 1,625 350,769 Host Hotels & Resorts, Inc. Manchester Financial GroupHilton San Diego Bayfront (75%) San Diego, CA Mar-11 356.0 1,190 398,880 Sunstone Hotel Investors Hilton Worldwide

Radisson Lexington New York, NY Jun-11 335.0 712 470,506 DiamondRock Hospitality Highgate Holdings, Inc. New York Helmsley New York, NY Mar-11 315.5 775 407,097 Host Hotels & Resorts, Inc. Estate of Leona HelmsleyYotel New York New York, NY Jun-11 315.0 669 470,852 IFA Hotels JV Kuwait R.E. Related CompaniesParamount Hotel New York, NY Oct-11 254.0 597 425,461 RFR Holding LLC Walton Street Capital, L.L.C.

Balboa Bay Club Newport Beach, CA Sep-11 170.0 160 1,062,500 Seven-One Capital Business International Bay Club Inc.

InterContinental Chicago (49%) Chicago, IL Jun-11 141.3 807 357,333 Strategic Hotels & Resorts GIC Real EstateMondrian Los Angeles Los Angeles, CA May-11 137.0 237 578,059 Pebblebrook Hotel Trust Morgans Hotel GroupRoyal Palm Miami Miami, FL Apr-11 130.0 409 317,848 KSL Capital Partners, LLC Sunstone Hotel InvestorsW Chicago City Center Chicago, IL May-11 128.8 368 350,000 Chesapeake Lodging Trust Starwood HotelsMarriott Denver City Center Denver, CO Sep-11 119.0 613 194,127 Chesapeake Lodging Trust Walton Street CapitalInterContinental Montelucia Scottsdale, AZ May-11 115.0 293 392,491 KSL Capital Partners Eurohypo AGFour Points Midtown New York, NY Jun-11 112.0 243 460,905 The Gehr Group The Lam GroupWestin Gaslamp San Diego, CA Apr-11 110.0 450 244,444 Pebblebrook Hotel Trust Starwood HotelsCheeca Lodge & Spa Islamorada, FL Jul-11 101.3 214 473,131 Northwood Investors Ocean Front Development St. Regis Washington, D.C. May-11 100.0 182 549,451 Westbrook Partners Claret CapitalSt. Regis Buckhead Atlanta, GA Feb-11 100.0 151 662,252 Tavistock Capital Group Ken Levenson & Paul

Freeman JW Marriott San Francsico, CA Feb-11 96.0 338 284,024 Thayer Lodging Group Ashford Hospitality TrustJW Marriott New Orleans, LA Feb-11 93.8 494 189,879 Sunstone Hotel Investors Clearview Hotel Capital, LLCMadison Hotel Washington, D.C. Feb-11 92.4 353 261,644 Jamestown Bentall KennedyWestin Pasadena Pasedena, CA May-11 92.0 350 262,857 HEI Hotels & Resorts MPG Office TrustSheraton Universal Los Angeles, CA Jan-11 90.0 451 199,557 Shenzhen New World Prudential Asset ResourcesViceroy Santa Monica Santa Monica, CA Mar-11 80.1 162 494,444 La Salle Lubert-AdlerVilla Florence San Francsico, CA Oct-11 67.2 243 276,543 La Salle Larkspur & Farallon CapitalRitz Carlton Cocunut Grove Miami, FL Jun-11 10.2 115 88,696 Gencom & Continental Co's Grove Ocean Condo

6

U.S. market RevPAR and supplyRevPAR performs best during periods of low annual supply increases

Source: Smith Travel Research, Jones Lang LaSalle Hotels

U.S. RevPAR and supply % change 1998 - 2014F

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%19

88

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

F

2014

F

Annu

al %

cha

nge

RevPAR Supply

7

Lodging REIT Cap Rates – Reflect or Set the Market?

Source: Thompson, EDGAR Online, Morningstar, RW Baird, Morgan Stanley, Jones Lang LaSalle Hotels

March 2 June 2 Oct. 6 July 18 Oct. 242009 (A) 2009 (B) 2009 (C) 2011 2011

HOST HOTELS & RESORTS 15.4% 11.5% 6.8% 3.8% 5.7%HOSPITALITY PROPERTIES TRUST 13.7% 12.2% 9.8% 9.8% 8.9%SUNSTONE HOTEL INVESTORS 11.9% 10.9% 8.6% 4.8% 7.5%LASALLE HOTEL PROPS 13.4% 10.7% 7.2% 5.5% 8.0%STRATEGIC HOTELS 9.6% 7.9% 5.7% 3.0% 5.5%FELCOR LODGING TRUST 13.2% 11.8% 6.1% 4.9% 7.8%DIAMONDROCK HOSPITALITY 12.8% 9.1% 6.8% 6.8% 6.1%CHESAPEAKE LODGING TRUST 2.7% 6.3%PEBBLEBROOK HOTEL TRUST N/A 6.8%

CHATHAM LODGING TRUST 1.4% 4.5% AVERAGES 12.9% 10.6% 7.3% 4.7% 6.7%

------------------------------------PRE-Filing-------------------------------------

8

"REIT Cap Rates Likely to Decline in 2009" - April, 09 Hotel News Now (A)

"...I believe cap rates based on TTM income are at their high points (in 3/09)"

"So whether you are lowering your income on a TTM basis or forecasting 2009, you can safely anticipate most of those cap rates to trend downward through 2010"

"Cap Rates Continue Trend Downward in Q-2" - June, 09 HVS Global Report (B)

Annual EBITDA will have likely declined year over year by 25% to 30% on average. This would result in another 200-basis-point decline in cap rates from June to December (2009).

"Bid/Ask Chasm Created by Buyers and Sellers" - November, 09 Hotel Business (C)

“private equity firms will have to either get comfortable with an 8% or lower cap rate in the short term if they want to buy now or we will likely see the public REITS starting to use their lower cost of capital to buy up those assets …. (long-term) we should see average cap rates remain in the 7 to 8% range.

Recognizing Capital Trends - “On the Record ” Back in 2009

9

Capital trends: buyer and seller compositionREITs dominate acquisitions of institutional grade assets

Source: Jones Lang LaSalle Hotels

U.S. hotel transactions by buyer and seller volume YTD August 2011

44%

7%

33%

24%

10%

37%

6%

11%

4%

6%

10%

5%1%

0%

20%

40%

60%

80%

100%

% of buyer volume % of seller volume

% o

f tot

al d

eal v

olum

e

REIT Investment fund/Private equity Hotel owner/operator HNWI Institutional investor Developer Other

10

Capital trendsLodging stock issuance

Capital trends - lodging stock issuance 1998 - YTD 2011

-

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD2011

$Mill

ions

Source: Morgan Stanley

11

Capital trendsU.S. hotel CMBS issuance

Source: Commercial Mortgage Alert

Capital trends - U.S. hotel CMBS issuance 1998 - YTD 2011

-

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

40,000.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD2011

$Mill

ions

12

U.S. hotel CMBS loans

Source: Morningstar, Jones Lang LaSalle Hotels

Hypothetical three-year loan extensions

Hypothetical three-year hotel CMBS loan extensions

$-

$5

$10

$15

$20

$25

2011 2012 2013 2014 2015 2016 2017 2018 2019+

Cur

rent

unp

aid

bala

nce

($B

)

Extended loans Loan maturities

13

Current market attitudesFlight to quality to primary markets and best-in-class, top tier branded hotels in major secondary markets

High

High

Low

LowPricing

Prob

abili

ty

Primary market

Full service

Urban select service

Best-in-class

Top tier brand

Secondary market

Full service

Select service

Best-in-class

Top tier brand

Secondary market

Full service

Select service

Non-strategic asset

Secondary brand

Tertiary market

Full service

Select service

Non-strategic asset

Top tier and secondary brands

14

Leveraged IRR requirements generally contract

Source: Jones Lang LaSalle Hotels’ Hotel Investor Sentiment Survey (April 2011)

U.S. average cap rate (initial yield) for new acquisition U.S. average leveraged IRR for new acquisition

Cap rates remain lowest in international gateway markets

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

New

Yor

k

Was

hing

ton

D.C

.

Bost

on

San

Fran

cisco

Haw

aii

Los

Ange

les

Pacif

ic N

orth

wes

t

Chi

cago

San

Die

go

Mia

mi

Den

ver

Phila

delp

hia

Tam

pa

Hou

ston

Orla

ndo

Dal

las

Atla

nta

Phoe

nix

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

New

Yor

k

Was

hing

ton

D.C

.

Bost

on

San

Fran

cisco

Pacif

ic N

orth

wes

t

Los

Ange

les

San

Die

go

Haw

aii

Chi

cago

Phila

delp

hia

Den

ver

Tam

pa

Hou

ston

Mia

mi

Atla

nta

Dal

las

Orla

ndo

Phoe

nix

U.S. average: 7.7%U.S. average: 18.4%

16

Capital trendsHotel DPP sales

Capital trends - hotel DPP sales 1998 - YTD 2011

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD2011

$Mill

ions

Source: A. Stanger & Co., Inc., Jones Lang LaSalle Hotels