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FEASIBILITY STUDY – PRELIMINARY ANALYSIS

SUBJECT PROPERTY

Proposed Hotel

Hartselle, AL

CLIENT

City of Hartselle

200 Sparkman Street NW

Hartselle, AL 35640

EFFECTIVE DATES

Hypothetical Market Value “At Stabilization” March 31, 2015

2

April 28, 2015

Mayor Don Hall

City of Hartselle

200 Sparkman Street NW

Hartselle, AL 35640

Re: Proposed Hotel – Hartselle, AL

Mayor Hall:

I have provided my preliminary conclusions for the development of a hotel in Hartselle,

which are presented in the following pages.

This study is limited in reporting, intended only to provide my preliminary conclusions

on the project. Additional support for the reported conclusions is retained in my work

file.

This study works under the assumption that the most likely hotel development would be a

60-rooom Hampton Inn or Holiday Inn Express. For simplicity in presentation, I

considered how the subject property would perform if open and stabilized today.

Although market conditions will likely continue to improve over the next few years, the

development costs will increase at an equal or faster rate.

This report was prepared in conformance with the requirements of Financial Institutions

Reform, Recovery, and Enforcement Act (FIRREA); the Interagency Appraisal and

Evaluation Guidelines; the Uniform Standards of Professional Appraisal Practice

(USPAP); client requirements; and the Alabama Appraiser Licensing and Certification

Board.

3

This report was completed under the following extraordinary assumptions. If any of

these assumptions are proved to be false, it may impact the conclusions shown in

this report.

The property would be built according to the brand prototype plans and in the time frame referenced.

No unknown issues would exist that would impact the development cost. The owner would qualify for and be issued the appropriate franchise license. The hotel would be operated by competent management.

Based on the conclusions shown in the report, development of a hotel in Hartselle, AL

does not appear to be financially feasible at this time. Outside of a significant monetary

incentive to a developer to subsidize the cost, there are no changes that I am aware of that

could make this project feasible right now. Major factors impacting feasibility are

legality of alcohol (which restricts restaurant development) and the lack of corporate

demand generators in Hartselle. Note that both factors appear subject to change in the

forseeable future, which could impact financial feasibility.

Thank you for the opportunity to be of service. If you have any questions concerning the

report, please do not hesitate to contact me at 205-382-0616 or

[email protected].

Sincerely,

Adam Cowart, MAI

Certified General Real Property Appraiser

Alabama Certificate # G00940

Expires: September 30, 2015

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CERTIFICATION I certify that to the best of my knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limited conditions and are my personal, impartial, and unbiased

professional analyses, opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this

report, and no personal interest or bias with respect to the parties involved.

4. I have no bias with respect to the property that is the subject of this report or to

the parties involved with this assignment.

5. My engagement in this assignment was not contingent upon developing or

reporting predetermined results.

6. This assignment was not based on a requested minimum valuation, a specific

valuation, or the approval of a loan.

7. My compensation for completing this assignment is not contingent upon the

development 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.

8. My analyses, opinion, and conclusions were developed, and this report has been

prepared, in conformity with the requirements of the Uniform Standards of

Professional Appraisal Practice.

9. I made a personal inspection of the property that is the subject of this report on

March 31, 2015.

10. John Ritger provided significant real property appraisal assistance to the persons

signing this certification.

11. This assignment was made subject to regulations of the Tennessee Appraiser

Licensing and Certification Board. The undersigned state licensed real estate

appraisers have met the requirements that allow this report to be regarded as

“certified.”

12. I certify that, to the best of my knowledge and belief, the reported analyses,

opinions, and conclusions were developed, and this report has been prepared, in

conformity with the requirements of the Code of Professional Ethics and the

Standards of Professional Appraisal Practice of the Appraisal Institute. The use

of this report is subject to the requirements of the Appraisal Institute relating to

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review by its duly authorized representatives.

13. My state registration or certification has not been revoked, suspended, canceled,

or restricted.

14. I have not provided services of any type related to the subject property within the

past three years.

Adam Cowart, MAI

Certified General Real Property Appraiser

Alabama Certificate # G00940

Expires: September 30, 2015

6

Property Assumptions This market supports hotel demand in the economy and midscale segments. Relevant hotel

supply is located in Hartselle (two hotels) and Priceville (four hotels; 5 miles north of

subject). Hotel supply is classified by segment (i.e. economy or midscale) and within the

segment (lower, middle or upper tier).

Room supply is now concentrated in the economy segment. Based on the existing supply

composition, developers would only consider building a hotel in the midscale segment. The

upper-midscale segment is currently the most popular with developers. Within that segment,

the most popular brands are Hampton Inn and Holiday Inn Express. These are the only

brands most developers would consider for this location. These brands are interchangeable in

this type of market in terms of appeal to developers and performance.

Each brand has their respective prototype design standards,

which are for specific sizes and are intended to act as a

starting point. Instead of relying on the prototype size for

each brand, I considered what currently exists in the

market. To the right is a summary of the room size for a

collective group of hotels that opened in the last seven

years.

Based on the available information and the demand and size of a market like Hartselle, I

reconciled a size near the bottom of the range. Although a property could physically be built

smaller, the brands would most likely prevent it. There is also a certain size that is feasible to

operate due to the highly fixed cost components and this represents that level.

Therefore, I am proceeding under the assumption that a developer would only consider

building a 60-room Hampton Inn or Holiday Inn Express. Both are limited-service (no food

and beverage) hotels operating in the upper-tier of the midscale segment. The hotel would be

located at exit 328, adjacent to the Cracker Barrel restaurant.

Sample Size 578

Age <7 years old

Low Room Ct 58

High Room Ct 218

Avg. Room Ct 93

Reconciled Size 60

Hampton Inn/Holiday Inn Express

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Demand Analysis

We used all available data sources to analyze local and regional hotel demand, as

summarized in the following sections. We also conducted extensive interviews with

many market participants, then attempted to quantify potential demand for a hotel in

Hartselle. Market data is summarized as follows:

1. Hartselle Hotels.

Hotel supply in Hartselle consists of the 33-room Express Inn and 40-room Americas

Best Value Inn. Based on lodging tax collections, I analyzed performance over the

last 5 year period. Occupancy is estimated based on a fixed $50 ADR.

These hotels operate in the economy segment and therefore provide a poor indication of

potential performance for the subject. Takeaways:

Weak performance relative to other economy segment hotels. These hotels are

operating at 35% occupancy (assuming an ADR of $45)

Increasing revenue trends. During the last 4.5 years, revenues increased 16%, or

a 3.6% annual growth rate

25.0%

30.0%

35.0%

40.0%

$350,000

$370,000

$390,000

$410,000

$430,000

$450,000

Sep‐10

Dec‐10

Mar‐11

Jun‐11

Sep‐11

Dec‐11

Mar‐12

Jun‐12

Sep‐12

Dec‐12

Mar‐13

Jun‐13

Sep‐13

Dec‐13

Mar‐14

Jun‐14

Sep‐14

Dec‐14

Hartselle, AL: Room Revenue & Occupancy Trends

TTM Revenue TTM Occ @ $45 ADR

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2. Regional Competitive Set of Midscale Hotels

We purchased a Smith Travel Research (STR) Trend Report that shows detailed

occupancy and ADR (average daily rate) data for a sample of hotels we selected in the

region. The sample includes hotels franchised as Hampton Inn, Holiday Inn Express,

Fairfield Inn and Comfort Inn in Athens, Decatur and Cullman. This data is not directly

relevant to the subject’s potential performance, but provides good data on how similar

hotels are performing in nearby markets. The data is most useful in providing a general

indication of trends in demand and ADR. Using data obtained from confidential sources,

we were able to estimate performance (occupancy, ADR, RevPAR) for each individual

hotel in the competitive set. These are summarized in the table below, along with

estimates of demand segmentation.

Competitive market occupancy has ranged between 68% and 72% in the last four years

and was 71.7% for the trailing-twelve-month (TTM) February 2015 period. ADR has

grown strongly from $88 in 2011 to $102.50 in TTM 2015, averaging 4.1% annual

growth, with growth of 5.0% in the last year. Excluding the Comfort Inn (required per

STR criteria), these hotels have average occupancy of 75% and average ADR of $105.

1 2 3 4 Total Occ % IndexRooms

per DayShare ADR Index RevPAR Index

Hampton Inn Cul lman 86 1996 18 20% 40% 10% 30% 100% 75% 1.04 65 16% $98 0.96 $74 1.00

Hol iday Inn Express & Suites Cul lman 78 2002 12 20% 40% 10% 30% 100% 70% 0.97 55 14% $98 0.96 $69 0.93

Hampton Inn Decatur 90 1994 20 30% 50% 20% 0% 100% 73% 1.02 66 17% $103 1.00 $75 1.02

Comfort Inn Decatur 58 1999 15 30% 20% 10% 40% 100% 50% 0.70 29 7% $77 0.75 $39 0.52

Fairfield Inn & Sui tes Athens I 65 75 2013 1 15% 35% 10% 40% 100% 70% 0.97 53 13% $107 1.04 $75 1.02

Hampton Inn Sui tes Athens I 65 88 2010 4 15% 35% 10% 40% 100% 76% 1.06 67 17% $114 1.11 $87 1.18

Hol iday Inn Express & Suites Athens Ala 71 2006 8 15% 35% 10% 40% 100% 83% 1.16 59 15% $107 1.04 $89 1.21

Tota ls/Average 546 11 20% 38% 12% 30% 100% 72% 392 100% $103 $74

STR Survey 546 72% 392 $103 $74

Market segmentation and operating performance estimates as of February 28, 2015

Market Segments: 1

2

3

4

Estimated Operating Performance

Built

STR data includes same competitive set for twelve months ending February 28, 2015

Average age of competi tors i s based on a rooms ‐weighted computation.

Property Age

Competitive Market Survey

Estimated Market Segmentation

Rooms

Group/Specia l Event

Leisure ‐ Termina l

Corporate ‐ Terminal

Interstate

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Supply Trends

While demand is currently growing strongly, supply growth is becoming a factor. Under

construction and proposed hotels include:

61-room La Quinta in Cullman; construction beginning soon

83-room Holiday Inn Express in Decatur; construction beginning soon

165-room Doubletree in Decatur; conversion from ex-Holiday Inn; U/C opening

9/1/2015

N/A-room Towneplace Suites Decatur; rumored

STR competitive set takeaways:

Current trends indicate moderate to strong growth rates in both demand and ADR.

Demand growth trends are strong and have accelerated in the last year

Premium branded hotels have strong occupancy, averaging 75%, although ADR is

only $100

Significant supply is under construction or proposed. 248 rooms will open in the

next 6 months in Decatur and another 150 are likely in Decatur/Cullman in the

following year.

The proposed supply is likely to absorb demand currently captured by the

competitive market hotels, which will likely lead to falling occupancy levels and

less potential overflow demand for a hotel in Hartselle.

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Subject’s Marketability

Most of the industry in Morgan County is concentrated to the north in Decatur;

and regionally to the north in Athens and to the south in Cullman. See map below

There is no hospital or university in Hartselle, nor are there any major tourist

attractions.

The illegality of alcohol limits the quality of restaurants, which in turn limits the

area’s appeal to overnight travelers. Many people currently visiting the area will

stay elsewhere due to the better restaurant selection.

While I-65 is a significant factor, the nearby hotel/retail/restaurant clusters of

Athens and Cullman offer would-be guests significantly more appeal and identical

product, as Hampton Inn and Holiday Inn Express are present in both markets.

While there appears to be sufficient demand drivers for weekend demand;

weekday demand drivers are very limited, due to limited corporate terminal

demand in Hartselle.

The most important factors impacting the feasibility of a hotel in Hartselle are the lack of

significant demand generators, especially corporate, and the dry alcohol law. Nearby

fully developed hotel markets in Athens, Cullman and Decatur offer travelers a much

better selection of restaurants, lodging options, and a closer location to major demand

drivers in the regional market. Leisure travelers and sports teams are more rate sensitive

than corporate travelers, and a proposed hotel would need to offer discounts to attract

their business away from those markets. These factors support a below average ADR.

Hartselle: only

strong in 1 of 5

categories (wood

products)

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Hotel Demand Survey & Projections Demand Survey

I attempted to quantify potential demand for a proposed hotel in Hartselle by estimating

potential demand from each source. The primary source of information was interviews

with local market participants. We conducted interviews with representatives of all

major employers in Hartselle, reaching someone at all companies except Busche

Alabama. We also spoke with representatives from the Morgan County Economic

Development Association; the Decatur Morgan County Convention & Visitors Bureau;

Hartselle Schools; Hartselle Parks & Recreation and Celebration Arena.

Demand Projections Rationale

I developed a pessimistic (low), likely and optimistic (high) estimate of potential room

nights for the subject. I then reconciled that information into a pessimistic, likely and

optimistic potential occupancy for the hotel, which was used to develop a pro forma

financial statement.

Much of the variance is attributed to the alcohol status, as potential performance would

significantly increase with legalization, because that would drive additional restaurant

development. Nearly all market participants noted the dry factor during market

interviews, especially representatives of local corporations. Several noted that they

would continue to patronize hotels in Decatur or Cullman because they have better

restaurants and alcohol.

Demand Projections Development Other Hotels

I estimated the total room nights sold for the Express Inn and Americas Best Value Inn in

Hartselle last year, using the lodging tax reported and an estimated ADR of $45-$50. I

believe that if the subject property opened, it would steal between 10% and 30% of the

total business from these hotels. The two existing hotels operate at a much lower price

point than the subject would, so it is unlikely to displace a significant amount of demand

from them.

Local Business

As part of my due diligence, we called and spoke with someone from every local

company to estimate their lodging needs. We were able to get in touch with most

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that Busche would be one of the corporations with the highest amount of hotel demand,

which was considered in estimating its room nights. We also made a miscellaneous

allotment for companies we spoke with that had less than 100 room nights annually. Of

these estimates, I believe the subject will capture between 50% and 75% of the room

nights. Many would also opt for a cheaper room, or continue to travel to other markets

due to their superior restaurants and other amenities.

I-65 Travelers

I-65 has average annually daily traffic counts of about 34,000. A proposed hotel in

Hartselle is likely to derive some demand from this category; however, the location is

close to mature, far more developed interstate exit markets in Cullman and Athens.

Those markets have identical brand product to what would be proposed in Hartselle (both

have Hampton Inn and Holiday Inn Express, as well as other brands) and far more

restaurants – that serve alcohol. As such, most people would stop at those exits before

stopping in Hartselle. Still, some demand is likely, and the amount was based on

discussions with owners of similar properties.

Social Events

The primary source in estimating this demand was the list of events and projected

attendance provided by the city of Hartselle. Most of the demand is related to sports

tournament, the growth of which was noted by market participants. Many tournaments

generate little demand as competitors live in the region and drive-in for the day.

Travelling sports teams are typically very rate sensitive and would many would be at a

price point below what a Hampton Inn or Holiday Inn Express could offer. Demand from

this category is concentrated on weekends, mostly Friday and Saturday.

Miscellaneous Other Room Nights

This segment is captured from unquantified sources, either from people coming to the

area to visit family and friends or just passing through. This is considered as a percent of

population in Hartselle, with estimates ranging from 20% to 30%. This ratio takes into

account nearby other cities that could use the hotel.

Conclusion

Based on all of these demand sources, I estimate that there is a potential demand for

between 9,600 and 17,700 room nights. Occupancy is estimated to be 55% to 70%. See

the chart on the following page.

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Other Hotels (used Fiscal 2014 figures) Room Nights Pessimistic Likely Optimistic

Express Inn & Americas Best Value 9,000

Total 9,000

Estimated Share (%) 10% 20% 30%

Estimated Share (#) 900 1,800 2,700

Local Businesses Room Nights Pessimistic Likely Optimistic

Ilpea (Holm) Industries 2,000

Busche 500

Sonoco‐Baker 150

Profab Machine 150

Hartselle Board of Education 165

Valley Rubber 120

Cerro Wire & Cable 100

Miscellanous (less than 100/each) 750

Total 3,935

Estimated Share (%) 50% 62.5% 75%

Estimated Share (#) 1,968 2,459 2,951

I‐65 Travelers Pessimistic Likely Optimistic

Average Annual Daily Traffic 34,000

Estimated Daily Room Nights 5 7.5 10

Annual Room Nights 1,825 2,738 3,650

Social Events Pessimistic Likely Optimistic

Estimated based on Hartselle Events

Calendar: includes tournaments,

festivals, graduations, events

Estimated Share (#) 2,000 3,000 4,000

Miscellaneous Other Room Nights Room Nights Pessimistic Likely Optimistic

Population 14,500

% of room nights 20% 25% 30%

Random room nights 2,900 3,625 4,350

Pessimistic Likely Optimistic

Total Available Supply (Room Nights) 21,900 21,900 21,900

Total Potential Demand (Room Nights) 9,593 13,622 17,651

Rounded 9,600 13,600 17,700

Implied Occupancy 43.8% 62.1% 80.8%

Reconciled Occupancy 55.0% 65.0% 72.5%

Reconciled ADR $92.00 $92.00 $92.00

RevPAR $50.60 $59.80 $66.70

Notes:

Implied Occupancy = total potential room nights ÷ total available room nights

Reconciled Occupancy = Our estimated occupancy based on demand analysis

Estimated Market Demand Sources

14

Reconstructed Operating Statement

Using this estimate of projected demand, I reconciled an income statement for the

pessimistic, likely and optimistic occupancy levels.

ADR was estimated based on the Index Method, in which the subject’s potential is

indexed against the competitive market average ADR. Location characteristics, including

the quantity/quality of restaurants and proximity to demand generators, support a below

average ADR Index. I derived the ADR based an ADR Index of 90% to the market’s

performance.

Fiscal Year Market ADR Subject ADR Index Subject ADR Rounded

2015 $102.54 0.90 $92.29 $92.00

Base Year ADR ‐ Stabilized ADR Index in 2015 $ ‐ Subject Property ‐ 60‐room Hampton Inn

This rate is supported by the performance of other similar hotels in markets with similar

characteristics. The $92 ADR assumes the hotel was open today and also considers

current market performance. This ADR is used in all projected demand scenarios.

The reconstructed operating statement is shown on the following page.

# Rooms 68 60 60 60

# Days open 365 365 365 365

# Rooms available 24,638 21,900 21,900 21,900

# Occupied Rooms 16,300 12,045 14,235 15,878

Occupancy % 66.2% 55.0% 65.0% 72.5%

Average Room Rate (ADR) $85.53 $92.00 $92.00 $92.00

RevPAR $56.59 $50.60 $59.80 $66.70

REVENUE $ % $PAR $POR $ % $PAR $POR $ % $PAR $POR $ % $PAR $POR

Rooms 1,394,125$ 98.0% 20,654$ 85.53$ 1,108,140$ 99.3% 18,469$ 92.00$ 1,309,620$ 99.2% 21,827$ 92.00$ 1,460,730$ 99.2% 24,346$ 92.00$

Other Operated Departments 1,206$ 0.1% 18$ 0.07$ ‐$ 0.0% ‐$ ‐$ ‐$ 0.0% ‐$ ‐$ ‐$ 0.0% ‐$ ‐$

Rentals & Other Income 26,792$ 1.9% 397$ 1.64$ 8,000$ 0.7% 133$ 0.66$ 10,000$ 0.8% 167$ 0.70$ 12,000$ 0.8% 200$ 0.76$

Total Revenue 1,422,124$ 100.0% 21,068$ 87.24$ 1,116,140$ 100.0% 18,602$ 92.66$ 1,319,620$ 100.0% 21,994$ 92.70$ 1,472,730$ 100.0% 24,546$ 92.76$

DEPARTMENTAL EXPENSES

Rooms* 405,582$ 29.1% 6,009$ 24.88$ 350,000$ 31.6% 5,833$ 29.06$ 380,000$ 29.0% 6,333$ 26.69$ 400,000$ 27.4% 6,667$ 25.19$

Other Operated Departments* 15,302$ 57.1% 227$ 0.94$ 8,000$ 100.0% 133$ 0.66$ 9,000$ 90.0% 150$ 0.63$ 10,000$ 83.3% 167$ 0.63$

Total Departmental Expenses 420,884$ 29.6% 6,235$ 25.82$ 358,000$ 32.1% 5,967$ 29.72$ 389,000$ 29.5% 6,483$ 27.33$ 410,000$ 27.8% 6,833$ 25.82$

UNDISTRIBUTED OPERATING EXPENSES

Administrative & General 125,881$ 8.9% 1,865$ 7.72$ 106,033$ 9.5% 1,767$ 8.80$ 118,766$ 9.0% 1,979$ 8.34$ 125,182$ 8.5% 2,086$ 7.88$

Sales & Marketing 146,386$ 10.3% 2,169$ 8.98$ 150,679$ 13.5% 2,511$ 12.51$ 178,149$ 13.5% 2,969$ 12.51$ 198,819$ 13.5% 3,314$ 12.52$

Property Operations & Maintenance 81,134$ 5.7% 1,202$ 4.98$ 65,000$ 5.8% 1,083$ 5.40$ 70,000$ 5.3% 1,167$ 4.92$ 73,000$ 5.0% 1,217$ 4.60$

Utilities 98,375$ 6.9% 1,457$ 6.04$ 65,000$ 5.8% 1,083$ 5.40$ 70,000$ 5.3% 1,167$ 4.92$ 73,000$ 5.0% 1,217$ 4.60$

Total Undistributed Operating Expenses 451,776$ 31.8% 6,693$ 27.72$ 386,712$ 34.6% 6,445$ 32.11$ 436,915$ 33.1% 7,282$ 30.69$ 470,001$ 31.9% 7,833$ 29.60$

INCOME BEFORE FIXED EXPENSES 549,464$ 38.6% 8,140$ 33.71$ 371,428$ 33.3% 6,190$ 30.84$ 493,706$ 37.4% 8,228$ 34.68$ 592,729$ 40.2% 9,879$ 37.33$

FIXED EXPENSES

Management Fees 39,124$ 2.8% 580$ 2.40$ 33,484$ 3.0% 558$ 2.78$ 39,589$ 3.0% 660$ 2.78$ 44,182$ 3.0% 736$ 2.78$

Property Tax 44,632$ 3.1% 661$ 2.74$ 35,000$ 3.1% 583$ 2.91$ 35,000$ 2.7% 583$ 2.46$ 35,000$ 2.4% 583$ 2.20$

Insurance 23,532$ 1.7% 349$ 1.44$ 20,000$ 1.8% 333$ 1.66$ 20,000$ 1.5% 333$ 1.40$ 20,000$ 1.4% 333$ 1.26$

Total Fixed Expenses 107,288$ 7.5% 1,589$ 6.58$ 88,484$ 7.9% 1,475$ 7.35$ 94,589$ 7.2% 1,576$ 6.64$ 99,182$ 6.7% 1,653$ 6.25$

Total Operating Expenses 979,947$ 68.9% 14,518$ 60.12$ 833,196$ 74.6% 13,887$ 69.17$ 920,503$ 69.8% 15,342$ 64.66$ 979,183$ 66.5% 16,320$ 61.67$

Net Operating Income (NOI)** 442,176$ 31.1% 6,551$ 27.13$ 282,944$ 25.4% 4,716$ 23.49$ 399,117$ 30.2% 6,652$ 28.04$ 493,548$ 33.5% 8,226$ 31.08$

* Expense shown as a percentage of departmental revenue.

** Before deduction for interest, income taxes, depreciation, amortization, and replacement reserves.

Operating Statement ‐ Hampton Inn/Holiday Inn Express

Comparable ‐ Averaged Reconstructed ‐ Pessimistic Reconstructed ‐ OptimisticReconstructed ‐ Likely

16

Projected Valuation I used direct capitalization to value the subject property under each of the scenarios

illustrated on the preceding page. This information is shown below.

Therefore, I am projecting a likely value of $4,450,000 and an optimistic value of

$5,500,000 for the proposed 60-room Hampton Inn/Holiday Inn Express.

Development Cost Using comparable data, I estimated the development cost of the subject property. This

information is summarized on the following page.

Net Operating Income (NOI) 282,944$

Overall Capitalization Rate (OAR) 9.00%

Indicated Value As Stabil ized 3,143,818$

Rounded 3,150,000$

Per Room 52,500$




Rounded 4,450,000$

Per Room 74,167$




Rounded 5,500,000$

Per Room 91,667$

Direct Capitalization ‐ Optimistic

Direct Capitalization ‐ Pessimistic

Direct Capitalization ‐ Likely

Subject Property:

Location:

Hotel Room Count:

Hotel building and site improvements: 36,000 SF @ $125.00 /SF = 4,500,000$

4,500,000$

Furniture, Fixtures, and Equipment (FF&E)

FF&E ‐ Hotel: $13,750 /Room = 825,000$

Total F&E: 825,000$

Architectural, engineering, design and supervision: 200,000$

Pre‐opening cost: 150,000$

Administrative costs/operating deficit reserve: 100,000$

60,000$

Construction loan financing cost: 4.5% 130,000$

640,000$

Entrepreneurial Incentive*

Entrepreneurial Incentive: 5.0% 300,000$

Total Cost of the Improvements

6,265,000$

Physical Deterioration: ‐$

Functional Obsolescence: ‐$

External Obsolescence: ‐$

Total Depreciation: ‐$

Market value of the land: 495,000$

6,760,000$

6,750,000$

* Calculated based on the sum of improvements, FF&E, and other soft costs.

COST APPROACH SUMMARYHampton Inn/Holiday Inn Express

Hartselle, AL

60

Improvements

Total Improvements:

Soft costs

Franchise license:

Interest Rate

Total Soft Costs:

Total cost of the improvements:

Depreciation

Land Value

Conclusion

Cost approach indication:

Rounded:

18

Feasibility Conclusion Feasibility is determined by deducting the development cost from the value “at

stabilization,” which must be offset by enough to justify undertaking the risk in

development.

As this chart illustrates, even in my optimistic scenario, the development exceeds the

projected value by $1,250,000. Based on the conclusions shown in the report,

development of a hotel in Hartselle, AL is not financially feasible at this time.

Future Factors Impacting Feasibility

Legalization of alcohol would likely increase the number and general appeal of

restaurants in Hartselle to travelers. This is turn would increase the appeal of a hotel in

Hartselle, both to guests and to developers.

The lack of weekday corporate demand in Hartselle is a major current limiting factor.

Per discussion with the MCEDA, the county is currently marketing a new 135-acre

industrial park site in Hartselle and is focusing on attracting industry there. Growth in

corporations located in Hartselle could significantly increase potential demand and

financial feasibility of a hotel.

Pessimistic Likely OptimisticStabilized Value 3,150,000$ 4,450,000$ 5,500,000$ Development Cost 6,750,000$ 6,750,000$ 6,750,000$ Profit (loss) in Development (3,600,000)$ (2,300,000)$ (1,250,000)$

60-room Hampton Inn/Holiday Inn Express

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