“Hotel 71” – A Case Study Jason Hockman Vice – President Business Development Falor Companies

1. “Hotel 71” – A Case Study Jason Hockman Vice – President Business Development Falor Companies

2. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 2

3. Condo-Hotels in a Nutshell: Managing expectations • Hotel Condo Developers • Condo Developers learning the Hotel game • Hotel Developers learning the Condo game • Hotel Condo Models • Developer Involvement • Developer Exit • Expectations • Win/Win/Win for Developers, Lenders, and Owners • Five Success Factors • Must perform as hotel • Hotel credibility with a brand or boutique story • It’s a lifestyle purchase!! • Liquidity for resale market • Plan, Plan, and Plan again 3

4. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 4

5. Hotel 71: Converted to Solis Hotel Condominium Acquired in March 2005 Renovations began in August 2005 Filed Condo Documents in Sept. 2005 First Units Delivered May 2005 All Units Delivered Late Fall 2005 437 Condo Hotel Units 5

6. Just the Facts: Hotel 71 will be the first Hotel-Condo delivered in Chicago • Hotel Component • 454 keys converted to 437 keys with avg. room sizes of 530 sq. feet • Property will contain restaurant, spa and meeting/banquet space • Property will undergo a $20M renovation to guest rooms and common areas • Flagged as a Solis Hotel the new luxury brand by founder of Ritz Carlton Horst Schulze • Condo Component • Average sales price per unit of $430K • Sunshine Group/Coldwell Banker are exclusive listing agent • Condo Declaration will cover the entire building • First units will close in early summer 2006 6

7. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 7

8. The Decision: Four step approval process • Internal Hotel Condo Checklist • Hotel = Room size, A++ location, hotel operator • Condo = Market competition, priced correctly • Condo Feasibility Study • Pricing = $775 psf • Absorption = 200 to 250 units per year • Competition = Four other projects at the time of the report • Hotel Feasibility Study • Market Segment Analysis = Four star category had room demand • ADR and OCC trends in Chicago = All trending up • Financial Underwriting • Hotel Assumptions = 73% and $189 stabilizing at 74% and $225 • Condo Assumptions = 24 Months at $426K per unit • Hotel Operators – Guaranteed Inventory, Incentive Fees, etc. • Gut Check? 8

9. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 9

10. The Plumbing: Project Management is your key to survival • Construction/Design • Finalize design and get hotel operator approval • Manage construction timeline against sales and lender timelines • Hotel Operations • Prepare hotel opening with operator • Transition/ramp-up • Condominium Structure • Plan, plan and keep planning • Determine commercial condo configuration • Budgets: Condo Association, Shared Facilities, Fixed Hotel Expense • Rental Program • Survey competition • Provide choices for various buyers • Option A: 14 nights of use and 60% of the room revenue • Option B: 45 nights of use and 40% of the room revenue • Sales and Marketing • Focus, Evaluate, Re-act, and then do it again… 10

11. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 11

12. It is for Life: Condominium structure is the most important part of your project • Condominium Regime • 100% hotel condo • Mix-Use between hotel condo and hotel • REA Agreements between areas of project • Budgets – Expectations • Budgets communicated in the sales process must be reality • Different from a traditional condo and needs to be explained 12

13. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 13

14. The Pitch: Selling reality is the key to happy owners • Lifestyle Purchase • You want Buyers/Owners that will use the product • Stay away from the flippers/speculators • Managing expectations begins at before the buy • SEC No-Action Letter • Sell within the constraints of the letter • Rental program rep is key to your sales program • Church and State (Real Estate Agent and Rental Program Rep) 14

15. Condo-Hotels in a Nutshell • Hotel 71 – Just the Facts • Hotel 71 – The Decision • Hotel 71 – The Plumbing • Hotel 71 – It is for Life….. • Hotel 71 – The Pitch • Hotel 71 – Now the Hard Part 15

16. Now the Hard Part : 437 Owners that have different expectations and preferences • Owner Base • You now have 437 owners • Each owner has a consistent questions; “What was my ADR and Occupancy last month?” • Owner Statements can be complex and it is critical to have a liaison manage the relationship between accounting and the owners • Our Goal as a Hotel Condo • Be fair and equitable to all of our end buyers, they are our lifeblood and the lifeblood of our future projects • Condominium structure is for life, so we put significant energy and financial resources to developing the structure • Most importantly, our focus and efforts are making this project work as a hotel first 16

17. Questions? 17