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MARKET STUDY

Proposed Hotel and Conference Center Tyler, Texas

17-484HO-0060

Mr. Edward A. Broussard City Manager City of Tyler 212 North Bonner Avenue Tyler, Texas 75702

Randy McCaslin, CRE Managing Director CBRE Hotels, Consulting

C O M ME R C I A L R E A L E S T A T E S E R V I C E S

CBRE, Inc. 2800 Post Oak, Suite 2300 Houston, TX 77056 +1 713 621 5252 Office +1 512 422 2434 Mobile [email protected] www.cbrehotels.com

December 20, 2017 Mr. Edward A. Broussard City Manager City of Tyler 212 North Bonner Avenue Tyler, Texas 75702 Dear Mr. Broussard: In accordance with our engagement letter dated October 24, 2017, we have completed a market study update with financial projections for a proposed Hotel and Conference Center in Tyler, Texas. The original market study was completed by PKF Consulting USA (now CBRE Hotels Consulting) in March 2012. The conclusions reached are based upon our present knowledge of the competitive market resulting from our fieldwork completed December 13, 2017. As in all studies of this type, the estimated results are based upon competent and efficient management and presume no significant change in the competitive market from that set forth in this report. The terms of our engagement are such that we have no obligation to revise this report to reflect events or conditions that occur subsequent to the date of completion of our fieldwork. However, we are available to discuss the necessity for revision in view of changes in the economy or market factors affecting the proposed project. This report is subject to the Terms and Conditions presented in the Addenda. Although they have been conscientiously prepared using information obtained during the course of this study and our experience in the industry, the future performance of the proposed Hotel and Conference Center are based on estimates and assumptions, which are subject to uncertainty and variation, and we do not represent them as results that will actually be achieved. We would be pleased to hear from you if we can be of further assistance in the interpretation of our findings. We appreciate the cooperation extended to us by you and your associates during the course of this assignment. Respectfully submitted, CBRE Hotels Consulting

G. Randle McCaslin, CRE Managing Director

http://www.cbrehotels.com/

MARKET STUDY WITH PROSPECTIVE FINANCIAL ANALYSIS

PROPOSED HOTEL & CONFERENCE CENTER IN TYLER, TEXAS

TABLE OF CONTENTS

I – EXECUTIVE SUMMARY Page Scope and Methodology .............................................................................................I-1 Conclusions ................................................................................................................I-2 II - AREA OVERVIEW Introduction ............................................................................................................... II-1 Economic and Demographic Indicators ...................................................................... II-1 Tyler Overview ........................................................................................................... II-5 Employment .............................................................................................................. II-6 Transportation ........................................................................................................... II-8 Office Market .......................................................................................................... II-10 Retail ....................................................................................................................... II-11 Healthcare .............................................................................................................. II-12 Education ................................................................................................................ II-14 Additional Tyler Economic Development ................................................................... II-16 Tourism Activity ........................................................................................................ II-17 Convention Activity .................................................................................................. II-19 Existing Meeting Facilities ......................................................................................... II-22 Conclusion .............................................................................................................. II-27 III – PROPERTY DESCRIPTION Location ................................................................................................................... III-1 Rose Complex Master Plan ........................................................................................ III-1 Site Description ......................................................................................................... III-2 Recommended Facilities ............................................................................................ III-2 Conclusion ............................................................................................................... III-4 IV – HOTEL MARKET ANALYSIS Market Research ...................................................................................................... IV-1 Competitive Set ....................................................................................................... IV-1 Historical Market Performance ................................................................................. IV-1 Future Additions to Supply ........................................................................................ IV-2 Market Demand ...................................................................................................... IV-3

V – ESTIMATED HOTEL PERFORMANCE Methodology ............................................................................................................ V-1 Expected Competitive Position ................................................................................... V-1 Estimated Subject Performance .................................................................................. V-1 Mix of Demand ......................................................................................................... V-3 Estimated Average Daily Rate .................................................................................... V-3

MARKET STUDY WITH PROSPECTIVE FINANCIAL ANALYSIS

PROPOSED HOTEL & CONFERENCE CENTER IN TYLER, TEXAS

TABLE OF CONTENTS - CONTINUED

VI - FINANCIAL ANALYSIS Bases of Estimations................................................................................................. VI-1 Departmental Revenues ........................................................................................... VI-1 Departmental Expenses ............................................................................................ VI-2 Undistributed Operating Expenses ............................................................................ VI-2 Fixed Expenses ........................................................................................................ VI-3 Reserve for Replacement .......................................................................................... VI-3 Schedule of Prospective Cash Flow Before Debt Service ............................................. VI-3

ADDENDA

A. Photographs of Site B. Market Response C. Photographs of Competitive Supply D. Map of Competitive Supply E. Terms and Conditions F. Certification

SECTION I

EXECUTIVE SUMMARY

Executive Summary

Proposed Hotel and Conference Center – Tyler, Texas CBRE Hotels Consulting

I-1

SCOPE AND METHODOLOGY In preparing this study, we completed the research and analysis listed below:

• Conducted an inspection of the site and its surrounding area to determine its impact on the performance of the proposed Hotel and Conference Center.

• Assembled, reviewed and analyzed economic, demographic and real estate

market data pertaining to the Tyler market area to evaluate the present economic climate and to estimate future growth potential, particularly as it relates to lodging and meeting demand.

• Interviewed representatives of the City of Tyler, Visit Tyler, Tyler Area Chamber of Commerce/Economic Development Council, University of Texas Tyler, Tyler Junior College, UT Health Northeast, East Texas Medical Center and Christus Trinity Mother of Francis Medical Center to discuss the strength of the local economy, future economic development projects, existing lodging and meeting facilities, and the type of meeting facilities that would complement the existing supply.

• Interviewed representatives of Tyler competitive hotels regarding their properties and historic, current and expected future market conditions.

• Prepared a summary of historical market performance for the Tyler hotel market,

including available rooms, occupied rooms, market occupancy, market segmentation, and average daily room rate for the period 2012 to 2016 and year-to-date October 2017 compared to the same period in 2016.

• Identified other proposed hotels to assess their probability of completion and the

degree to which they will compete with the Subject project.

• Recommended the size and type of facilities and amenities appropriate for the market for the proposed Hotel and Conference Center.

• Estimated future competitive position and market performance of the proposed Tyler Hotel and Conference Center for the period 2021 to 2023, the stabilized year.

• Based on the estimated future competitive position of the proposed Hotel and

Conference Center, prepared a schedule of prospective cash flow before debt service and income taxes for the period 2021 to 2030.

Executive Summary


I-2

CONCLUSIONS A summary of the conclusions of this report follows:

• Tyler serves as the hub market for East Texas, providing medical, educational, retail and tourism amenities to the surrounding communities. With four major medical campuses, three premier colleges/universities, millions of square feet of retail space and dozens of tourist attractions, the Tyler community serves a population much larger than its current citizenship. As a destination for the East Texas market area, the City of Tyler has the infrastructure and service amenities to support the proposed Hotel and Conference Center.

• The proposed Hotel and Conference Center would be located in Tyler, Texas, which is in Smith County. Tyler is the largest community in East Texas with an estimated population of 104,800 in 2016. The Smith County/Tyler MSA population is estimated to be 225,300 in 2016. Tyler is considered the advanced manufacturing, healthcare, educational and retail center of East Texas. Its central location 90 miles east of Dallas and 90 miles west of Shreveport, Louisiana makes Tyler the hub of activity for this growing area of Texas. Texas officials estimate that as many as 440,000 people visit Tyler at least one time per week and 820,000 people visit Tyler at least once a month to work, seek medical services, visit tourist attractions or shop.

• The potential site for the proposed Hotel and Conference Center is the current site for the Rose Complex. The Complex is located on West Front Street just west of Downtown Tyler and east of Loop 323. The Rose Complex is the site of multiple community facilities including the Harvey Convention Center, Tyler Rose Garden Center, Mayfair Theatre, Rogers Children’s Theatre, Tyler Civic Theatre, East Texas State Fairgrounds, TISD Rose Football Stadium and Mike Carter Baseball Field. The site is centrally located in the heart of Tyler and its location is well known and frequently used by the majority of the Tyler community. It is easily accessed from I-20 both via SH 69 to Loop 323 to Front Street and via Loop 49 to SH 31/Chandler Highway/Front Street. From within the Tyler community, Loop 323 is the most efficient roadway to the site.

• Tyler is an attractive location for meetings and events. As the hub of East Texas, it is conveniently located to attract groups from Dallas to the west, Shreveport to the east, Oklahoma and Arkansas to the north and areas north of Houston to the south. Its natural beauty during the spring flower and rose seasons add to the attractiveness of the area. The four major medical centers and three colleges and universities offer opportunities for medical and educational meetings, trainings and conferences. And the abundance of retail space, numerous tourist attractions and large inventory of hotels provide the support amenities to accommodate convention activity.

Executive Summary


I-3

The proposed Hotel and Conference Center is considered to be a critically needed facility to host banquets, galas, meetings, trainings and consumer shows from within the Tyler community, as well as conferences and conventions from throughout East Texas. While other meeting facilities exist within the area, most are either outdated or undersized, or have private restrictions which limit their use by the public. The proposed Hotel and Conference Center is considered to be a missing component within the Tyler market compared to similar facilities which typically exist in other comparable markets.

• The following table presents the recommended facilities for the proposed Hotel

and Conference Center in Tyler, Texas.

The proposed Hotel and Conference Center has been designed to satisfy the needs of corporate, group and leisure visitors that were identified in the market study. The Hotel will be a high-quality, full-service, nationally branded property with excellent meeting space that is currently missing in Tyler.

Type of Hotel Full-Service

Number of Guestrooms 200

With Harvey Without HarveyExhibit Hall Exhibit Hall

Conference Center Components (sq ft) (sq ft)Ballroom (divisible by 4 to 6) 12,000 15,000Junior Ballroom (divisible by 2 to 3) 4,000 4,000Meeting Rooms (various sizes) 4,000 3,000

Total 20,000 22,000

Food & Beverage Three Meal RestaurantLoungeCoffee Shop/Market

Potential Brands DoubleTreeSheraton

Source: CBRE Hotels Consulting

Proposed Tyler Hotel & Conference CenterRecommended Facilities

Executive Summary


I-4

Meeting space will vary depending on whether the 18,000-square foot Harvey Exhibit Hall is maintained and incorporated into the project. The Harvey Exhibit Hall could be dressed up and used for the largest banquet events, allowing the proposed Hotel and Conference Center to have a smaller ballroom (12,000 square feet) that would seat 800 people. However, if the Harvey Exhibit Hall is torn down, the ballroom would need to be larger (15,000 square feet) to accommodate up to 1,000 people for a banquet. With the revision of the Master Plan and improved integration of the various Rose Complex facilities, the proposed Hotel and Conference Center could utilize the meeting rooms at the Rose Garden Center, the Tyler Civic Theatre and the Mayfair Theatre for additional meeting space for large conventions.

• The primary competitive set for the proposed Tyler Hotel and Conference Center is

comprised of 10 hotels with 1,081 rooms. The competitive set is comprised of higher-rated limited, select and full-service hotels. The competitive set would be directly competitive with the proposed Hotel and Conference Center due to their rate structure and extent of facilities and amenities.

• Tyler serves as the hub market for East Texas, providing medical, educational, retail and tourism amenities to the surrounding communities. It also has a strong oil and gas and business and manufacturing presence. The Tyler competitive lodging market reached a peak in 2014 at 71.8% occupancy. In 2015, occupancy declined to 65.4% in response to the decline in the oil and gas industry, the loss of patent related demand and an increase in new supply. This downward trend continued with a slight decrease to 64.2% in 2016, as the oil and gas industry reached the bottom of its decline. Occupancy has begun to rebound in 2017 with expansions in healthcare, education and leisure activity and the return of the oil and gas industry. Occupied rooms increased 0.4% through October 2017 to 67.1%.

ADR peaked in 2015 at almost $108. Rates have declined in both 2016 and year-to-date through October 2017 due to the decline in the oil and gas industry, the loss of patent related demand and an increase in new supply.

• The following table summarizes the competitive market’s mix of demand in 2016.

Executive Summary


I-5

The majority (52%) of the market lodging demand is business related, which has been separated into medical, oil and gas, education and other business. The remaining demand is fairly evenly distributed between Group demand (28%) and Leisure demand (20%).

• The following hotel projects have been added to the competitive set for analysis

purposes.

- The former Country Inn and Suites is being converted into a La Quinta Del Sol concept just off South Broadway. The 69-room La Quinta Del Sol is scheduled to open in January 2018.

- An 89-room Fairfield Inn and Suites is under construction just west of South Broadway across from the Residence Inn. This property is scheduled to open by mid-2018.

- The 200-room subject Hotel and Conference Center is included as an addition

in January 2021.

• The market is projected to increase from 64% occupancy in 2016 to 65% in 2017. Occupancy will decrease to 62% in 2018 with the opening of the two new hotels. Then, occupancy is expected to increase to 64% in 2019 and 67% in 2020 with no new additions. With the opening of the proposed Hotel and Conference Center in 2021, market occupancies are estimated to decrease to 63% and then increase to 67% in 2022 and stabilize at 70% in 2023. We expect the market to stabilize at an occupancy that is higher than the historical pattern due to the large amount of new demand that will be generated by the proposed Hotel and Conference Center.

Competitive Market 2016 Mix of Demand

Market Segment Room Nights Ratio

Medical 35,000 15%

Oil & Gas 11,700 5%

Education 18,700 8%

Other Business 56,100 24%

Group 65,400 28%

Leisure 46,700 20%

Total 234,000 100%Source: CBRE Hotels

Executive Summary


I-6

• The following table shows the proposed Hotel and Conference Center’s mix of demand in the year of stabilization.

The subject Hotel and Conference Center is expected to achieve a strong competitive position within the local hotel market. The proposed Hotel and Conference Center is projected to receive more than its fair share of demand from the Other Business and Group demand segments due its upscale, full-service orientation and its focus on Group meetings and conventions. The property is projected to receive less than its fair share of demand from the Medical, Oil and Gas, Education and Leisure demand segments due to the subject’s full-service nature and higher average daily rates than other competitive hotels.

• The following table shows the estimated operating performance for the proposed

Tyler Hotel and Conference Center, stated in inflated dollars.

Tyler Hotel & Conference Center2023 Mix of Demand & Market Penetration

Market Segment Room Nights Ratio Penetration

Medical 5,400 10% 75%

Oil & Gas 1,600 3% 80%

Education 3,300 6% 70%

Other Business 11,800 22% 102%

Group 23,600 44% 142%

Leisure 8,000 15% 85%

Total 53,700 100% 104%

Source: CBRE Hotels

Annual Average Net OperatingYear Occupancy Daily Rate* Income

2021** 64% $158 $2,978,0002022 70% $162 $3,591,0002023 74% $167 $4,075,0002024 74% $172 $4,196,0002025 74% $177 $4,314,000

* Based on an ADR of $140 in 2017 dollars. **The subject hotel is estimated to open in January 2021.

Estimated Operating PerformanceProposed Tyler Hotel and Conference Center


SECTION II

AREA OVERVIEW

Area Overview


II-1

INTRODUCTION It is generally recognized that the relative success of a hotel and conference center are influenced by factors that can be broadly categorized as economic, governmental and environmental. Therefore, it is necessary to evaluate the dynamics of these factors within a market to understand their effect on the projected utilization levels of real estate property. The proposed Hotel and Conference Center would be located in Tyler, Texas, which is in Smith County. Tyler is the largest community in East Texas with an estimated population of 104,800 in 2016. The Smith County/Tyler MSA population is estimated to be 225,300 in 2016. Tyler is considered the advanced manufacturing, healthcare, educational and retail center of East Texas. Its central location 90 miles east of Dallas and 90 miles west of Shreveport, Louisiana makes Tyler the hub of activity for this growing area of Texas. ECONOMIC AND DEMOGRAPHIC INDICATORS Note: Economy.com provided the following demographic and economic data. Information relating to other topics has been obtained through a variety of media, including websites, publications, interviews or other sources considered reliable. CBRE Hotels Consulting has reviewed and analyzed the Economy.com data. The following pages present an economic snapshot of Tyler.

Area Overview


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Area Overview


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Area Overview


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Area Overview


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TYLER OVERVIEW According to the Tyler Economic Development Council, Tyler is “a regional destination for the best in business, education, healthcare, culture and recreation”. Tyler serves as the hub market for East Texas, providing medical, educational, retail and tourism amenities to the surrounding communities. With four major medical campuses, three premier colleges/universities, millions of square feet of retail space and dozens of tourist attractions, the Tyler community serves a population much larger than its current citizenship. Despite having a population of slightly more than 100,000 people, Texas officials estimate that as many as 440,000 people visit Tyler at least one time per week and 820,000 people visit Tyler at least once a month to work, seek medical services, visit tourist attractions or shop. The population of Tyler has more than doubled over the past 56 years, while the MSA has almost tripled during the same period, as indicated by the following table.

The Tyler area population has experienced steady growth from 1960 to 2016, averaging 1.3% per year for Tyler and 1.7% per year for the MSA.

Compound CompoundAnnual Annual

Year Population Change Population Change

1960 51,230 --- 86,350 ---

1970 57,000 1.1% 97,096 1.2%

1980 70,508 2.1% 128,366 2.8%

1990 75,450 0.7% 151,309 1.7%

2000 83,650 1.0% 174,706 1.4%

2010 96,900 1.5% 210,000 1.9%

2016 est. 104,800 1.3% 225,300 1.2%

1960 to 2016 --- 1.3% --- 1.7%

City of Tyler Smith County/Tyler MSA

Historical Population Trends

Source: US Census Bureau

Area Overview


II-6

The Tyler MSA is expected to continue to grow economically over the next five years, as indicated on the table below.

The Tyler MSA is forecast to grow in line with Texas growth and well above the U.S. growth over the next five years. Particularly, strong growth is expected for the Tyler services segment, reflecting the large base of health, education and related business. Other notable sources of growth are expected to include wholesale and retail trade, manufacturing and information. EMPLOYMENT Largest Employers The following table illustrates the variety of major employers that are located in Tyler. The majority of the largest employers are in healthcare, education, retail, manufacturing, distribution, telecommunications and government. Six of the top employers have their headquarters in Tyler.

Tyler MSA Texas United States

Gross Domestic Product (GDP) 4.5% 4.1% 3.0%

Population 1.4% 1.6% 0.7%

Employment 2.2% 2.2% 1.6%

Real Personal Income 4.5% 4.6% 2.6%

Key Economic Indicators

Compound Annual Growth2016 through 2021

Source: The Perryman Group

Area Overview


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Unemployment The Tyler unemployment rate has remained in line with the Texas rates and below the U.S. rates for the past five years.

Number ofCompany Industry Employees

East Texas Medical Center* Healthcare 3,380Christus Trinity Mother Frances Medical Center* Healthcare 3,366Brookshire Grocery Company* Grocery Distribution 2,456Tyler Independent School District Education 2,360The Trane Company* Air Conditioning Mfg 1,744Suddenlink* Cable, Internet, Phone 1,500UT Health Northeast Healthcare/Research 1,414Wal-Mart Retail 1,396University of Texas at Tyler Education 968Tyler Junior College Education 947City of Tyler Government 813John Soules Foods USDA Meat Processing 650Smith County Government 600Target Distribution Center Retail Distribution 600Southside Bank* Banking Services 399Tyler Pipe Cast Iron Pipe, Iron Fittings 355Delek Oil Refining 332Centene Medical Claims 292Fresenius Medical Care Medical Claims 200CB&I Engineering Contracting 148* Company has headquarters in Tyler.

Largest Tyler Employers

Source: Tyler Economic Development Council

Area Overview


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According to the Moody Analytics July 2017 forecast, the Smith County/Tyler MSA unemployment rate is forecast to remain between 3.9% and 4.5% from 2017 through 2022. TRANSPORTATION Highways Highway transportation systems and ease of access can significantly affect demand for lodging and meeting accommodations. The City of Tyler is located just south of Interstate Highway 20 (I-20), which spans the southern U.S. from Columbia, South Carolina to El Paso, Texas, passing through Atlanta, Birmingham, Jackson and Shreveport to the east and Dallas, Abilene and Midland-Odessa to the west. State Highway 69 (SH 69) is the main north-south thoroughfare through Tyler. Several smaller highways intersect SH 69 in Tyler, including 64, 31, 155, and 271. Tyler has developed a well-maintained loop system to accommodate the local and outside traffic. Loop 323 is a four to six lane major arterial that surrounds the City. This loop provides easy access to all parts of the City. Toll Loop 49, being built in stages, is today 25.4 miles in length and currently connects from I-20 west of Tyler to State Highway 110 southeast of Tyler. Initial segments were built to the south and west of Tyler, as two-lane limited-access roadways. However, additional passing lanes are under construction and will be completed in 2018. Right-of-ways are designed for an eventual four-lane highway expansion. Loop 49 is currently being extended 7.5 miles north through Lindale to the SH 69 interchange. This extension will be completed in 2018. Eventually, Loop 49 will provide an outer access loop around the Tyler MSA.

Smith County/Year City of Tyler Tyler MSA Texas United States

2012 6.9% 7.0% 6.7% 8.1%

2013 6.3% 6.5% 6.2% 7.4%

2014 5.1% 5.2% 5.1% 6.2%

2015 4.2% 4.5% 4.5% 5.3%

2016 4.3% 4.5% 4.6% 4.9%

Source: Texas Workforce Commission

Unemployment Comparison

Area Overview


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Air Transportation Tyler Pounds Regional Airport is located on SH 64 approximately four miles west of Loop 323 and about 10 miles west of downtown Tyler. The airport opened a new, modern terminal building in 2002. American Eagle offers five daily flights to the Dallas / Fort Worth International Airport. United Express has temporarily shut down its service from Houston’s Bush Intercontinental Airport during the recent oil industry decline. However, the oil industry is expected to recover over the next few years and United Express is expected to resume flights as oil activity increases. There are currently three other airlines that are considering flights into Tyler. The airport consists of three 150-foot wide runways with an asphalt surface. The longest runway length is 7,200 feet and is planned to be strengthened and extended to 9,000 feet in 2018 in order to support larger aircrafts. The other two runways are 5,200 and 4,849 feet in length The following table presents passenger activity statistics for the airport for the period 2006 through 2016.

Passenger activity declined in 2015 as airlines reduced flight capacity due to the oil industry decline. The passenger activity further declined in 2016 when United cancelled its four flights per day from Houston due to the lack of oil industry travel.

Passenger Percent Year Activity* Change

2006 153,472 --2007 152,070 -0.9%2008 149,614 -1.6%2009 145,270 -2.9%2010 146,091 0.6%2011 142,698 -2.3%2012 144,762 1.4%2013 167,468 15.7%2014 168,645 0.7%2015 142,014 -15.8%2016 104,057 -26.7%

CAAG** -3.8%* Passenger Activity includes total enplaned and deplaned.

** CAAG = Compound Average Annual Growth

Tyler Pounds Regional AirportPassenger Activity

Source: City of Tyler, Tyler Pounds Regional Airport

Area Overview


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The Tyler Pounds Regional Airport also has two fixed based operators offering a variety of services for private/corporate planes, including fuel, aircraft parking, hangars, charter services and passenger lounges. The airport is also home to the Historic Aviation Memorial Museum. OFFICE MARKET The Tyler office market, like other commercial sectors, is growing to the south. Based on the 2017 Tyler Office Market Survey conducted by Burns Commercial Properties, there was a total inventory of 57 buildings with 2,301,914 square feet of office space in Tyler, of which 1.5 million are located in South Tyler. As of September 2017, the overall average occupancy was 79.8%, while average rental rates were $14.42 per square foot. In South Tyler, the occupancy rate was 81.9% and rental rates were $15.79. The following table summarizes the office market for Tyler.

According to Burns Commercial Properties, the downtown Tyler office market experienced a slight drop in occupancy from 78.3% to 77.7%, while the suburban market occupancy declined significantly from 89.1% to 81.9%. Class B & Class C buildings enjoyed a slight uptick in occupancy rates, while Class A buildings declined from 87.1% in 2016 to 83.4% in 2017.

Sep-17

Rentable Area 1,000,190Occupancy Rate 83.3%Rental Rate $19.03


Rentable Area 228,840Occupancy Rate 76.7%Rental Rate $12.00


Total Office Market (57 Buildings)

Source: Burns Commercial Properties

Office Market Tyler, Texas

Class A (15 Buildings)

Class B (31 Buildings)

Class C (11 Buildings)

Area Overview


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Tyler has experienced a trend in which a number of office tenants have purchased land and constructed their own office buildings as the current low interest rate environment makes ownership more attractive than it has been in the past. This trend has resulted in fewer tenants leasing space. RETAIL Tyler is the retail hub of East Texas drawing shoppers from as far away as Shreveport. Due to the larger outside market draw and the strong diversified local economy, retail activity continues to expand in Tyler, providing its residents and visitors with a growing choice of quality of life amenities. The Broadway Square Mall is one of several concentrated retail centers in Tyler. The mall contains 144 stores with over 800,000 square feet of retail space. Current mall anchors are Dillard’s, Sears and JC Penney. According to Burns Commercial Properties, there are 74 concentrated retail centers in Tyler with almost 3.4 million square feet of space in addition to the mall. The Tyler retail market continues to improve. According to the 2017 Retail Market Survey conducted by Burns Commercial Properties, the 74 retail centers that were surveyed had an occupancy of 87% in 2017. The average rental rate being quoted by landlords for vacant space has risen from $16.83 per square foot in 2016 to $17.88 in 2017. The absorption of over 66,000 square feet of retail space while rates are increasing shows that the demand for retail locations has been very strong in the Tyler market over the past year. More than one half (40) of the 74 properties surveyed are enjoying occupancy rates of 90% or higher. Only 11 centers have occupancy rates below 70%.

Village at Cumberland Park The Village at Cumberland Park is a vibrant pedestrian-friendly outdoor shopping center which boasts national, regional and local retail brands, restaurants, services, and family oriented entertainment. The center is conveniently located at the northeast quadrant of South Broadway Avenue and Loop 49.

The total project will be 78 acres and over 750,000 square feet in a contemporary, pedestrian-friendly outdoor setting. The first phase opened in the summer of 2015. The project is currently two-thirds complete. Businesses currently open include Abuelo’s, Bed Bath & Beyond, OshKosh B'gosh, Carter's, Famous Footwear, Versona, Lane Bryant, Gordmans, Dress Barn, TJMaxx, Maurices, Jo-Ann Fabric and Craft Stores, DSW, Old Navy, Studio Movie Grill, Kirkland's and The AT&T Store. The site also includes a Hampton Inn and Suites which opened in 2015.

Many tenants will be new to Tyler but the Village at Cumberland Park will also include some relocations of current stores and second locations for others. It is estimated that the Village will create 2,000 new jobs in the Tyler area and could infuse up to $5 million per year in taxes in city, county and local school district budgets.

Area Overview


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HEALTHCARE Healthcare is one of the fastest growing and most significant industries in Tyler. With four primary medical centers and a vast number of clinics, practices and specialty hospitals, Tyler has become the regional medical hub of East Texas. According to a report by the Texas Comptroller of Public Accounts, Tyler’s healthcare service area includes 22 counties and healthcare employment makes up almost 30% of the total workforce in Tyler. The four primary medical centers are, as follows:

• East Texas Medical Center Regional Healthcare System – a Level I Trauma Center with 451 beds and numerous specialties.

• Christus Trinity Mother Frances Hospital and Clinics – a Level II Trauma Center with 449 beds and numerous specialties.

• The University of Texas Northeast – a Healthcare and Research Center with

130 beds. • Texas Spine and Joint Hospital – partnership with Baylor Scott & White system,

which built a new hospital and provides cutting-edge technology in orthopedics and sports medicine.

The City of Tyler has renamed the medical area as the Midtown district and focused on an increased relationship between the East Texas Medical Center, Christus Trinity Mother Frances Hospital and Tyler Junior College, as well as the surrounding neighborhoods and commercial areas. The master plan includes greater pedestrian accessibility and walkable areas, protection of historic areas from commercial and institutional encroachment while still encouraging mixed-use developments, district branding and increased aesthetics through streetscape improvements. The Tyler workforce employs 30,000 people in the healthcare industry. All of the primary medical centers in Tyler have recently expanded their facilities. Recent and proposed healthcare projects in Tyler include:

• Centene Corporation – Centene is the nation’s fourth-largest Medicaid manager and claims processor, providing programs and related services to the rising number of underinsured and uninsured individuals. The Missouri-based corporation announced in May 2012 that it would open its third U.S. processing center in Tyler. In return for a $15 million investment from Centene, to include the land, building and furniture, the City Council agreed to join the Tyler Reinvestment Zone Committee in offering a five-year tax abatement as a gesture of support for the company. Centene Corporation employees moved in to their new 50,000-square foot facility at 3258 Earl Campbell Parkway in late 2013.

Area Overview


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Centene currently employs 200 workers with plans to expand to 300 employees at its current facility. However, Centene hopes to add a second building in 12 to 18 months that could employ 300 to 400 more workers.

• Fresenius – This provider of medical products and services is one of the largest

companies in Germany. Fresenius opened its offices in Tyler at the northeast corner of Earl Campbell Parkway and Loop 323 in 2016. The Tyler Business Support Center services all of its clinics west of the Mississippi. Fresenius currently employs 200 people and plans to grow to 500.

• Christus Trinity Mother of Frances Hospital – The merger of Christus Health with Trinity Mother of Frances has led to an $800 million plan to be implemented over the next three to five years. The plan includes its new South Tyler Hospital that opened in January 2017. As the only heart hospital in northeast Texas, it has seen a large increase in patient referrals, requiring the opening of the 6th floor of the hospital. Christus Trinity Mother Frances is currently adding a new $90 million parking garage with 300 additional spaces, which will open in April 2018. Once the old garage is torn down, a new emergency room, ICU and pediatric center will be built and opened in 2020.

• East Texas Medical Center – A letter of intent has been signed for Ardent Health Services and the UT Health System to purchase the East Texas Medical Center, which will create a new system that will include 10 clinics throughout the Tyler area. The merger is anticipated to lead to additional expansions at the East Texas Medical Center campus.

• UT Health Northeast – In October 2017, UT Health Northeast began a new partnership with MD Anderson that will provide cutting edge cancer treatments in Tyler. Dedication and renaming of the treatment center is scheduled for January 2018. UT Health Northeast is currently under construction on the new School of Community and Rural Health Building, which will train general practitioner doctors for northeast Texas and provide Bio-Science education programs. The School is scheduled to open in 2019.

• UT College of Pharmacy – The 60,000-square foot, $26.5 million W.T. Brookshire Hall for the Ben and Maytee Fisch College of Pharmacy was completed in 2015. In response to a shortage of qualified pharmacists in the region, UT Tyler started classes in Fall 2015 for the new pharmacy college.

Area Overview


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The program is a four-year professional degree program. The first three years are spent on campus in didactic classrooms. During that time, the students go into the community in an introductory pharmacy practice experience for four hours a week. For the last year, pharmacy students go off-site to pharmacies in the community or hospitals eight hours a day, five days a week, practicing under the direct supervision of pharmacists.

• Tyler Junior College in conjunction with the East Texas Medical Center – This $50

million student medical training center, which opened in 2015, expanded the Nursing School and provides technical medical training. The new Robert M. Rogers Nursing & Health Sciences Center has more than quadrupled the classroom and laboratory space of its current programs and added approximately 150,000 square feet of academic space in a multi-story, state-of-the-art facility. The new school allows the college to expand its 11 nursing and health sciences programs to produce 50% more graduates from 600 in 2011 to 900 by 2017. Features include state-of-the-art simulation laboratories, as well as technology-enhanced classrooms that allow students to receive training on new equipment and have access to “universal” digital medical records and information.

Healthcare permeates the Tyler economy with a strong interconnection with the local colleges and universities, which have strong medical-related programs. The strong healthcare service, research and educational presence in Tyler will enable the proposed Hotel and Conference Center to attract medical-related meetings, trainings and conferences. EDUCATION Somewhat unusual for its size, Tyler is home to three colleges and universities, which provides a large, highly educated workforce. The presence of these institutions of higher education has enabled Tyler to attract companies in the technology, energy and medical fields for both the available workforce and continuing education opportunities. Tyler Junior College Tyler Junior College (TJC) is a two-year college with approximately 11,000 students. The college is accredited to award the associate in arts degree, the associate in applied science degree and certificates of proficiency. These programs provide a solid basic education for freshman and sophomore students who plan to transfer to upper-level universities, along with technical degrees and certificate programs. The main campus is located proximate to the East Texas Medical Center and the Trinity Mother Frances Hospital, providing opportunities for healthcare-related training and education. Current projects include finishing the football field to have games on campus, adding a baseball field, revitalizing the theater/auditorium to increase the number of events on campus and adding a north Tyler campus.

Area Overview


II-15

The Tyler Junior College West Campus, located on Loop 323 West, provides corporate and continuing education training to a wide range of both companies and individuals throughout the East Texas region. The college just celebrated the grand opening of the Energy Center, a $7.5 million, three-story addition to the Skills Training Center on the TJC West Campus. The 51,000-square foot addition features labs for heating, ventilation and air conditioning training, power plant technology and computers. A large assembly room and nine classrooms for alternative energy programs are also located there. University of Texas at Tyler The University of Texas at Tyler is a four-year university with approximately 10,500 students. The university offers 90 undergraduate and graduate degrees in four colleges. On its campus, the Bill Ratliff Engineering and Science Complex offers a state-of-the-art facility for high quality undergraduate and graduate engineering and science programs for the rapidly changing technology field. Programs include civil, electrical and mechanical engineering, as well as chemistry, physics, mathematics, computer science and computer information systems. The UT Tyler campus is also home to the R. Don Cowan Fine and Performing Arts Center. The UT College of Pharmacy opened its W.T. Brookshire Hall for the Ben and Maytee Fisch College of Pharmacy (described above) in 2015. The UT Tyler campus also recently opened the new Alumni House at the entrance to the campus. However, the newest project is the $56 million, 140,000-square foot College of Business and Technology which is currently under construction. This state-of-the-art facility is scheduled to open in June 2018. Texas College Founded in 1894, Texas College offers 16 undergraduate degree programs within four divisions. Texas College is a small college with about 800 students. University of Texas Health Northeast As the only university-based health science center in East Texas, the University of Texas Health Northeast is home to 30 medical specialties, a hospital and a 24/7 emergency room, as well as laboratory and clinical research facilities. Medical education programming includes two medical residency programs in Family Medicine and Occupational Health, collaborative degree programs in Environmental Medicine and Biotechnology, clinical rotations for nurses and other allied health providers, and continuing education for physicians and other healthcare specialists. Its new School of Community and Rural Health Building, which will train general practitioner doctors for northeast Texas and provide Bio-Science education programs, is scheduled to open in 2019.

Area Overview


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Tyler ISD Career & Technology Center The state-of-the-art Tyler ISD Career and Technology Center (CTC) opened in the Fall of 2015. The center is located at the intersection of Earl Campbell Parkway and Bennett Avenue. The proposed site provides a central location to the local high schools in Tyler.

The goal of the CTC is to provide students with as many options and opportunities as possible as they prepare for college, technical school or the workforce. The CTC houses up to 800 students from each high school during part of the school day. Career paths include animation, architecture, audio/visual production, auto collision repair, construction technology, cosmetology, culinary arts, education, engineering, marketing, graphic design, health sciences, information technology, law enforcement, veterinary technician assistant, sports management and welding technology.

In our interviews with and surveys of the Tyler colleges and universities, PKF identified a significant need for a quality hotel and conference center to accommodate their need for educational seminars, meetings, trainings and conferences. ADDITIONAL TYLER ECONOMIC DEVELOPMENT Sanderson Farms Poultry Processing Plant In March 2017, Sanderson Farms announced it fourth project in Texas will be located just north of Tyler on I-20 at FM 2015. The $20 million Poultry Processing Plant, which is currently under construction, will provide 1,700 jobs to the northeast Texas economy. The plant is scheduled to open in 2019. In addition, corporate offices and a hatchery will be located on I-20 near Lindale. Trane / Ingersoll Rand In October 2017, Trane/Ingersoll Rand announced that it will rebuild its Regional Headquarters in Tyler and make it the Flagship air-conditioner manufacturing facility for the company. It will become the show place for National Distributors with training programs, tours and regional sales meetings. The plant currently employs 1,500 employees and will add at least 50 more employees upon completion of the $6.5 million, Phase 1expansion when it opens in mid-2019. Additional phases will be completed over the next five years. Oil and Gas Industry The following expansions in the oil and gas industry indicates the beginning of the industry recovery following the oil price decline that began in 2015.

• VME Processing is adding production and separation equipment for the International market, which will add 100 employees.

• Crest Processing Systems is building a 25,000-square foot building for creating high-end equipment for the energy sector, which will employ 25 to 30 employees.

• KP Engineers is building a new office to design energy equipment. • CBNI is maintaining staff levels to service the oil and gas industry.

Area Overview


II-17

TOURISM ACTIVITY Tyler is also the tourism hub of East Texas with numerous museums, area attractions, entertainment, performing arts, scenic lakes and parks, outdoor and sporting activities, and annual events. Area attractions include the following:

• 1859 Goodman Legrand House and Museum • Adrenaline Rush Zip Line Tour LLC • American Freedom Museum • Blueberry Hill Farms • Brookshire’s World of Wildlife • Caldwell Zoo • Camp Ford Civil War Historical Site • Carnegie History Museum • Center for Earth Space Science Education • Cherokee Trace Drive-Thru Safari Park • Cottonbelt Railroad Depot Museum • Cowan Fine & Performing Arts Center • Dewberry Plantation • Discovery Science Place • Downtown Hit the Bricks, 2nd Saturday • East Texas Symphony Orchestra • ETX Brewing Company • Gallery Mainstreet • Half Mile of History • Fairhaven Vineyards • Harrold’s Model Train Museum • Historic Aviation Memorial Museum • Historic Homes Tours • Hudnall Planetarium/Vaughn Conservatory • Kiepersol Estates Winery • Legrand Rose Garden • Liberty Hall • Mclendon House • New York Texas Zip Line Adventures • Numerous Farmers Markets • Parrot Park Museum • Pelle Legna Vineyards • Roseland Plantation • Smith County Historical Museum • Splash Kingdom Family Water Park • Texas State Railroad • Tiger Creek Wildlife Refuge • True Vine Brewing Company • Tyler Civic Theatre

Area Overview


II-18

• Tyler Museum of Art • Tyler Paddle • Tyler Rose Garden & Museum • Tyler State Park

Tyler’s mild climate creates the ideal environment for azaleas, dogwoods and spring flowers to flourish, which is celebrated by the annual Azalea and Spring Flower Trails in March and April. After the azaleas peak, the roses begin to blossom bearing proof that Tyler is “The Rose Capital of America”. This honor is celebrated at the month-long Texas Rose Festival that occurs in October, a tradition since 1933 that brings people from all over the world. Two-third of all roses shipped in the United States come from Tyler. Annual events that occur in Tyler are listed on the following table.

Annual Event Month

TABA Home Products Show FebruaryAzalea & Spring Flower Trail MarchTaste of Tyler MarchFresh 15 MarchArt in the Park at The Goodman AprilAzalea 10K Fun Run AprilRose City Artisans & Flower Market AprilCinco de Mayo MayTyler Komen Race for the Cure MayDowntown Wine Swirl June6x6 @ 110 JuneCattle Baron's Gala JuneJuneteenth Celebration JuneTABA Parade of Homes June4th of July Celebration JulyUT Tyler Patriot Golf Classic AugustEast Texas State Fair SeptemberDowntown Tyler Film Festival SeptemberTyler Area Chamber Golf Tournament SeptemberRose Season OctoberTyer Rose Festival OctoberMistletoe & Magic NovemberChristmas Parade & Tree Lighting Ceremony DecemberDowntown Tyler Museum Alliance Holiday DecemberHoliday in the Park DecemberHit the Bricks, 2nd Saturday Monthly

City of Tyler Annual Events

Source: Tyler Chamber of Commerce

Area Overview


II-19

The multitude of visitor attractions and events provide support activities for visiting groups and conferences. This is an important element that groups assess when choosing a destination for their events. CONVENTION ACTIVITY Tyler is an attractive location for meetings and events. As the hub of East Texas, it is conveniently located to attract groups from Dallas to the west, Shreveport to the east, Oklahoma and Arkansas to the north and areas north of Houston to the south. Its natural beauty during the spring flower and rose seasons add to the attractiveness of the area. The four major medical centers and three colleges and universities offer opportunities for medical and educational meetings, trainings and conferences. And the abundance of retail space, numerous tourist attractions and large inventory of hotels provide the support amenities to accommodate convention activity. The following table presents the historical convention activity in Tyler from 2000 through 2017 and the future bookings for 2018 through 2020.

Area Overview


II-20

Visit Tyler indicated that Tyler has reached its capacity for the number and size of groups that can be attracted to Tyler without the addition of the proposed Hotel and Conference Center. While the number of events, attendees and room nights fluctuate from year to year, there is no room to grow with the current meeting facilities that are available in Tyler. While these facilities are adequate for many types of events, their age, size, quality, location and/or restrictions prevent Tyler from reaching its group meetings and convention potential that would be achieved with the new Hotel and Conference Center.

NumberYear of Groups Attendance Room Nights

Historical2000 85 20,364 12,1632001 78 25,996 12,0242002 102 28,921 15,9212003 86 29,354 18,8552004 67 23,918 16,1572005 71 20,083 11,1762006 102 22,846 15,8672007 84 16,565 14,6992008 82 20,652 12,1242009 106 26,013 15,1972010 89 30,286 17,7442011 110 23,184 12,6242012 80 25,087 21,8762013 105 28,067 19,4182014 95 26,658 21,0002015 120 25,008 20,1002016 118 24,000 20,009

2017 est. 110 23,940 19,989

Annual Avg 94 24,497 16,497

Future Bookings*2018 120(140) 23,000 25,0002019 20(145) 6,000 9,0002020 10(150) 900 800

* Numbers in parenthesis are the estimated total number of events per year.

Convention Activity

Source: Visit Tyler & SPORTyler

City of Tyler

Area Overview


II-21

The following table shows the amount of convention business that Tyler has lost from 2000 through 2017 due to the lack of adequate meeting facilities.

The data in the table represents the groups that have contacted the Tyler Convention and Visitors Bureau with the desire to hold their meetings, trainings and conventions in Tyler but were unable to be accommodated at the existing meeting facilities. As many as 44 groups with more than 25,000 attendees and more than 26,000 room nights have been lost on an annual basis due to the lack of a competitive conference center. This translates into an economic loss of revenues from potential hotel, restaurant, retail, tourist attractions, airfares, rental cars and other local sales, as well as the tax revenues generated by these activities. These lost opportunities provide support for the need for the proposed Hotel and Conference Center.

Number of Total Total Year Events Attendance Room Nights

2000 9 6,725 5,0912001 12 7,600 7,0912002 16 10,159 8,3512003 19 10,885 9,8342004 21 11,335 10,7292005 22 11,635 11,2792006 33 16,210 18,8242007 28 14,835 15,4642008 43 21,135 26,5962009 34 17,510 22,3212010 41 20,235 26,2712011 35 17,576 21,7712012 33 17,376 21,4112013 35 19,500 20,1152014 40 20,002 20,2522015 42 25,031 22,1062016 43 25,300 23,0002017 44 25,700 23,600

City of TylerLost Convention Business

Due to Lack of Adequate Meeting Facilities

Source: Visit Tyler & SPORTyler

Area Overview


II-22

EXISTING MEETING FACILITIES Tyler has several existing meeting facilities for various types of events. Meetings, trainings, conferences, consumer trade shows, galas, banquets and other events are currently being held at these facilities, as well as at hotels, country clubs, restaurants and other venues. The following is a description of each of these meeting facilities. Harvey Convention Center The Harvey Convention Center is the primary facility that is used by the community for meetings, trainings, trade shows, banquets, social events and conventions. The Center is located on West Front Street just west of Downtown Tyler. It is located adjacent to the Tyler Municipal Rose Garden Center, Mayfair Theatre, Rogers Children’s Theatre, Tyler Civic Theatre, East Texas State Fairgrounds, TISD Rose Football Stadium and Mike Carter Baseball Field. Harvey Convention Center currently offers three meeting rooms. The largest room, which includes a stage, has 17,632 square feet of space and is divisible into two rooms. The second largest room is 8,395 square feet and is divisible into five smaller rooms. The smallest room is approximately 1,600 square feet in size. All of the rooms have concrete walls and floors, which can be dressed up for galas and other social events. The Center is equipped with a full catering kitchen. The Convention Center lends itself to large community events. City representatives estimate that they turn away approximately 50 to 60 events per month with 75% of those events being turned away due to the requested dates being unavailable and 25% due to the size of the group. The Center is approximately 99% occupied on weekends and 70% on weekdays. Although the facility is limited on the number of breakout rooms available for groups, the Harvey Convention Center often teams with the Rose Garden to accommodate groups that need multiple rooms. The following table presents the recent Event Activity for the Harvey Convention Center.

Area Overview


II-23

While the number of events declined in 2015 and 2016, the attendance increased due to the larger size of the conventions in those years. In 2017, the number and size of the conventions decreased significantly. While the Harvey Convention Center does an excellent job of meeting most of the needs of the Tyler community, it is not able to compete for conventions with outside communities that have more modern conference centers. Many of those interviewed and surveyed for this study expressed a desire for a more upscale hotel and conference center for their special events, galas, fundraisers, meetings, trainings and conferences/ conventions. Tyler Rose Garden Center The Tyler Rose Garden Center is home to the Tyler Rose Garden, Tyler Rose Museum and Gift Shop, and four meeting rooms. The Tyler Municipal Rose Garden is a 14-acre park with over 38,000 rose bushes of at least 500 different varieties, making it the largest rose garden in the U.S. The Center hosts the annual Texas Rose Festival each October which attracts thousands of tourists. Additionally, the Rose Garden Center rents its meeting rooms for community events. Meeting rooms include the Azalea Room which seats 25 people, the Rose Room which seats 75 people and the Camellia and Bluebonnet rooms which seat 400 people as one large room or 200 people each when divided. The rooms are well appointed and appealing for meetings and trainings, small consumer shows, wedding receptions and various other types of events.

Number of Number of Year Reservations Reservation Days Attendance

2010 91 208 80,1252011 87 185 73,6352012 116 243 102,0802013 112 252 98,5602014 106 250 95,4002015 99 228 115,2252016 101 316 103,108

2017 est. 86 261 84,501

Harvey Convention CenterEvent Activity

Source: City of Tyler, Parks & Recreation Department

Area Overview


II-24

Rose Garden Center representatives estimate that the meeting facility turns away approximately 15 to 20 events per month due the lack of available dates or the size of the group. The meeting rooms are 98% occupied on the weekends and 75% on weekdays. The following table presents the recent Event Activity for the Tyler Municipal Rose Garden Center.

The Rose Garden Center is an excellent facility for small community events. As a major attraction for tourist activity, the Rose Garden Center’s primary focus is activities related to the Rose industry. Its secondary focus is to provide meeting facilities to the Tyler community. Caldwell Auditorium The Caldwell Auditorium is a 1,792-seat auditorium, which is located in Downtown Tyler. It is currently owned and operated by the Tyler Independent School District (ISD). The ISD utilizes the facility for school programs, musicals, plays, band concerts, orchestra and other school-related events. When it is not being used by the ISD, it is rented for public events. Public events have included religious events, church services, plays, concerts, approved political events and other public events. The facility also has a small meeting room, green room and reception area. These are used for small meetings and receptions but are not highly utilized. An ISD representative estimated that the Caldwell Auditorium has approximately 250 events per year, of which 100 are ISD events and 150 are public events. The auditorium turns away about 30 events in the Spring and 20 events in the Fall due to lack of available dates. Additionally, approximately 15 events are turned away because they are too big for the auditorium.

Number of Number of Year Reservations Reservation Days Attendance

2010 225 371 34,5192011 252 484 28,7272012 184 426 28,1522013 177 388 28,3202014 215 446 34,4002015 213 283 42,7002016 225 325 42,668

2017 est. 255 354 44,169

Source: City of Tyler, Parks & Recreation Department

Tyler Municipal Rose Garden CenterEvent Activity

Area Overview


II-25

Since it is owned and operated by the Tyler ISD, public events must be in line with the school district’s mission and no alcohol can be served at any event. Additionally, the primary utilization by the ISD limits the number of dates that are available to the public. These restrictions prevent the use of the facility by many groups that would be accommodated at the proposed Hotel and Conference Center. R. Don Cowan Fine and Performing Arts Center The Cowan Fine and Performing Arts Center is a magnificent performing arts venue located on the campus of the University of Texas at Tyler. The Center houses a 2,037-seat performing arts hall and a 163-seat Recital Hall. Center representatives estimate that the facility hosts about 125 use days per year, of which UT Tyler utilizes 25 to 30 days. UT Tyler utilizes the Center for its Music Department and for commencement exercises. When it is not being used by the University, it is utilized for public events such as Broadway shows, symphonies, local plays and shows, orchestral events, concerts, Rose Festival events and many other performance activities. Additionally, the lobby and stage area have been utilized for receptions, dinners and galas for 250 to 300 people. Since the Cowan Fine and Performing Arts Center is located on the UT Tyler campus, it is owned by the State of Texas, which prevents the sale of alcohol for public events. The lack of alcohol and the priority booking dates by the University are the only restrictions for this very high-quality venue. Center representatives are very supportive of the proposed Hotel and Conference Center and have offered to block seats or add an extra show for conventions that would be attracted to Tyler. This would be an added attraction as part of the packages offered to outside groups to have their event in Tyler. Crosswalk Conference Center The Green Acres Baptist Church recently completed the Crosswalk Conference Center, which has a 22,225-square foot ballroom that is used by the church for large events. In addition, the Center includes the Galilee Room, which is a 4,800-square foot meeting room. The church also has six breakout rooms that can be utilized for smaller events. These rooms are also rented to the public for certain types of events during non-church event periods. Church representatives estimate that the Center is utilized six to eight times per month for public events. These events have included a small conference, Rose Festival Ladies luncheon, TJC Leadership banquet, ISD Convocations and many banquets. The church provides in-house food service for these events.

Area Overview


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As a religious facility with an active congregation, the church restricts the public use of the Crosswalk Conference Center in a number of ways. The outside group must be a non-profit organization and the event cannot include any alcohol or dancing. Any fundraisers must be approved by the church and not conflict with the mission of the church. The public events must be booked at least 90 days in advance and cannot occur on Sundays or Wednesdays or past 2 PM on Saturday, which would interfere with church activities. While the Conference Center is a high-quality facility, similar to hotel meeting facilities, the large number of restrictions limits its use to very specific groups. This is a great benefit to the Tyler community. However, the restrictions support the need for a new Hotel and Conference Center. KE Bushman’s Winery and Celebration Center The KE Bushman’s Winery and Celebration Center is located in Bullard, Texas approximately 12 miles south of Loop 323 on SH 69. The Winery features an upscale restaurant, five-room bed and breakfast, wine tasting room and tours of the winery. Event facilities include a 40-seat private dining room at the restaurant, the 220-person Barn for less formal events and the 1,000-capacity Celebration Center. Winery representatives indicated that they book four events per week at the private dining room, one per week at the Barn and one per month at the Celebration Center. Events at the Celebration Center include concerts, corporate trainings, fundraisers, banquets, wedding receptions and other events. The Center has a Texas wine store that features virtually all of the Texas wineries and a fully-equipped recording studio. Wines are sold by the glass or by the bottle for the events held at the Center. The KE Bushman’s Winery and Celebration Center would provide one more venue to offer to outside groups and conventions as part of convention packages for the proposed Hotel and Conference Center. The Oil Palace The Oil Palace, which was built by the Manziel family, is located on SH 64 approximately 1.5 miles east of Loop 323. Opened in 1968, the Oil Palace is the largest arena-type facility in the Tyler area with a seating capacity of 6,960 people. Events include concerts, trade shows, private parties, speaking engagements, dance events, family shows, boxing, wrestling and other arena events. The interviews and surveys for this study indicated that the Oil Palace is in need of renovation and updating. While it is the only large concert venue in the Tyler area, it does not provide the ideal environment for arena-type events. Those interviewed agreed that there is a need for a modern arena in Tyler.

Area Overview


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CONCLUSION Tyler serves as the hub market for East Texas, providing medical, educational, retail and tourism amenities to the surrounding communities. With four major medical campuses, three premier colleges/universities, millions of square feet of retail space and dozens of tourist attractions, the Tyler community serves a population much larger than its current citizenship. As a destination for the East Texas market area, the City of Tyler has the infrastructure and service amenities to support the proposed Hotel and Conference Center.

SECTION III

PROPERTY DESCRIPTION

Property Description


III-1

LOCATION The potential site for the proposed Hotel and Conference Center is the current site for the Rose Complex. The Complex is located on West Front Street just west of Downtown Tyler and east of Loop 323. The Rose Complex is the site of multiple community facilities including the Harvey Convention Center, Tyler Rose Garden Center, Mayfair Theatre, Rogers Children’s Theatre, Tyler Civic Theatre, East Texas State Fairgrounds, TISD Rose Football Stadium and Mike Carter Baseball Field. The site is centrally located in the heart of Tyler and its location is well known and frequently used by the majority of the Tyler community. It is easily accessed from I-20 both via SH 69 to Loop 323 to Front Street and via Loop 49 to SH 31/Chandler Highway/Front Street. From within the Tyler community, Loop 323 is the most efficient roadway to the site. The Harvey Convention Center is the primary facility that is used by the community for meetings, trainings, trade shows, banquets, social events and conventions. Harvey Convention Center currently offers three meeting rooms. The largest room, which includes a stage, has 17,632 square feet of space and is divisible into two rooms. The second largest room is 8,395 square feet and is divisible into five smaller rooms. The smallest room is approximately 1,600 square feet in size. The Tyler Rose Garden Center is home to the Tyler Rose Garden, Tyler Rose Museum and Gift Shop, and four meeting rooms. The Tyler Municipal Rose Garden is a 14-acre park with over 38,000 rose bushes of at least 500 different varieties, making it the largest rose garden in the U.S. The Center hosts the annual Texas Rose Festival each October which attracts thousands of tourists. Additionally, the Rose Garden Center rents its meeting rooms for community events. Meeting rooms include the Azalea Room which seats 25 people, the Rose Room which seats 75 people and the Camellia and Bluebonnet rooms which seat 400 people as one large room or 200 people each when divided. Photographs of the site for the proposed Hotel and Conference Center are presented in Addendum A. ROSE COMPLEX MASTER PLAN In June 2017, Halff Associates, Inc. completed a Master Plan for the Rose Complex. As the most visited tourist attraction in the Tyler area, the Tyler Rose Garden Center is an important asset to the community. The purpose of the Master Plan was to increase the aesthetic appeal of the Complex, to upgrade the infrastructure, to improve circulation, to integrate the utilization of the various facilities, and to make it a destination for both the community residents and outside visitors.



III-2

The current Master Plan assumes that the existing Harvey Convention Center would be torn down and a new smaller Harvey Hall would be built to replace it. With the introduction of the new idea of locating the proposed Hotel and Conference Center within the Rose Complex site, the Master Plan would need to be revised to integrate the proposed hotel and meeting facilities. One consideration with the revision of the Master Plan would be to evaluate if the existing, large exhibit hall in the Harvey Convention Center could be kept and incorporated into the proposed Hotel and Conference Center complex. A new Hotel and Conference Center District could be created to the east of the Harvey Convention Center adjacent to and incorporating the Mayfair Theatre. SITE DESCRIPTION Visibility The proposed Hotel and Conference Center will enjoy excellent visibility from Front Street to visitors approaching from both Loop 323 to the west and Downtown to the East. Access Primary access to the site is by automobile. From I-20 for visitors traveling from Dallas to the west and Shreveport to the east, guests would take the SH 69 exit and travel south for five miles to Loop 323. Then, they would turn right on Loop 323 and travel six miles to SH 31/Chandler Highway/Front Street, where they would turn left and travel one mile to the site. An alternate route from I-20 would be to take Loop 49 east to SH 31/Chandler Highway and follow this road to the site where it changes names to Front Street. For outside visitors and community residents traveling from within Tyler, Loop 323 is the most efficient roadway to the site. From Downtown Tyler, visitors would travel west on Front Street approximately one mile to the site. RECOMMENDED FACILITIES The following table presents the recommended facilities for the proposed Hotel and Conference Center in Tyler, Texas.



III-3

Type of Hotel Full-Service

Number of Guestrooms 200

With Harvey Without HarveyExhibit Hall Exhibit Hall

Conference Center Components (sq ft) (sq ft)Ballroom (divisible by 4 to 6) 12,000 15,000Junior Ballroom (divisible by 2 to 3) 4,000 4,000Meeting Rooms (various sizes) 4,000 3,000

Total 20,000 22,000

Food & Beverage Three Meal RestaurantLoungeCoffee Shop/Market

Potential Brands DoubleTreeSheraton


Proposed Tyler Hotel & Conference CenterRecommended Facilities

The proposed Hotel and Conference Center has been designed to satisfy the demand identified in the interviews and surveys conducted for both the previous and current market studies. The Hotel will have 200 guest rooms to meet the needs of most of the local and conference groups, while being small enough to allow overflow from the larger groups to the other hotels in the Tyler market. Meeting space will vary depending on whether the 18,000-square foot Harvey Exhibit Hall is maintained and incorporated into the project. The Harvey Exhibit Hall could be dressed up and used for the largest banquet events, allowing the proposed Hotel and Conference Center to have a smaller ballroom (12,000 square feet) that would seat 800 people. However, if the Harvey Exhibit Hall is torn down, the ballroom would need to be larger (15,000 square feet) to accommodate up to 1,000 people for a banquet. With the revision of the Master Plan and improved integration of the various Rose Complex facilities, the proposed Hotel and Conference Center could utilize the meeting rooms at the Rose Garden Center, the Tyler Civic Theatre and the Mayfair Theatre for additional meeting space for large conventions.



III-4

We would recommend that the proposed Hotel and Conference Center be designed to allow for expansion of both guest rooms and meeting space in the future. It is likely that, as the Center becomes popular, larger groups will be attracted to the Tyler market. To maximize success, it is important that the proposed Hotel and Conference Center have a nationally branded franchise. Brands that have been recommended include DoubleTree and Sheraton. CONCLUSION The site for the proposed Hotel and Conference Center is well located with easy access and visibility to both outside visitors and community residents. The site is centrally located in the heart of Tyler and its location is well known and frequently used by the majority of the Tyler community. The proposed Hotel and Conference Center has been designed to satisfy the needs of medical, education, corporate, group and leisure visitors that were identified in the market study. The Hotel will be a high-quality, full-service, nationally branded property with excellent meeting space that is currently missing in Tyler.

SECTION IV

HOTEL MARKET ANALYSIS

Hotel Market Analysis


IV-1

MARKET RESEARCH During the original market study which was completed in March 2012, we completed extensive interviews and surveys in the Tyler market. A summary of those interviews and surveys are presented in Addendum B of this report. For this market study, we completed a series of interviews to obtain an update of market conditions and current market data for this report. Market representatives reviewed the summary in Addendum B and indicated that the information was still very valid. COMPETITIVE SET The primary competitive set for the proposed Tyler Hotel and Conference Center is comprised of 10 hotels with 1,081 rooms. Photographs of each hotel and a map identifying their locations are provided in Addendum C and D, respectively. The competitive properties are listed in the following table.

The competitive set is comprised of higher-rated limited, select and full-service hotels. The competitive set would be directly competitive with the proposed Hotel and Conference Center due to their rate structure and extent of facilities and amenities. HISTORICAL MARKET PERFORMANCE The tables below indicate the historical performance of the competitive set hotels for the period 2012 through 2016 and October 2016 compared to October 2017.

Competitive SetNumber of Total SF Largest Total SF/

Property Year Built Rooms Meeting Space* Meeting Room Room RatioHoliday Inn South Broadway 1984 182 10,898 4,860 60Holiday Inn Express South 2000 88 1,300 700 15Holiday Inn Express North 2000 67 600 600 9Hilton Garden Inn 2009 125 3,177 2,100 25Marriott Courtyard 2010 121 4,052 2,345 33Staybridge Suites University 2011 86 2,068 2,068 24Residence Inn 2014 119 1,200 1,200 10La Quinta Inn & Suites University 2014 73 720 720 10Hampton Inn & Suites 2015 107 1,671 1,296 16Homewood Suites 2016 113 1,224 600 11Total/Average 1,081 2,691 1,649 21* Meeting space does not include prefunction space.

Proposed Tyler Hotel and Conference Center




IV-2

Tyler serves as the hub market for East Texas, providing medical, educational, retail and tourism amenities to the surrounding communities. It also has a strong oil and gas and business and manufacturing presence. The Tyler competitive lodging market reached a peak in 2014 at 71.8% occupancy. In 2015, occupancy declined to 65.4% in response to the decline in the oil and gas industry, the loss of patent related demand and an increase in new supply. This downward trend continued with a slight decrease to 64.2% in 2016, as the oil and gas industry reached the bottom of its decline and more patent demand moved to regional courts due to a ruling by the Supreme Court. Occupancy has begun to rebound in 2017 with expansions in healthcare, education and leisure activity and the return of the oil and gas industry. Occupied rooms increased 0.4% through October 2017 to 67.1%. ADR peaked in 2015 at almost $108. Rates have declined in both 2016 and year-to-date through October 2017 due to the decline in the oil and gas industry, the loss of patent related demand and an increase in new supply. FUTURE ADDITIONS TO SUPPLY The following hotel projects have been added to the competitive set for analysis purposes.

• The former Country Inn and Suites is being converted into a La Quinta Del Sol concept just off South Broadway. The 69-room La Quinta Del Sol is scheduled to open in January 2018.

• An 89-room Fairfield Inn and Suites is under construction west of South Broadway across from the Residence Inn. This property is scheduled to open by mid-2018.

• The 200-room subject Hotel and Conference Center is included as an addition in January 2021.

Historical Market Performance of the Competitive SupplyAnnual Percent Occupied Percent Market Average Percent Percent

Year Supply Change Rooms Change Occupancy Daily Rate Change REVPAR Change

2012 244,550 N/A 168,740 N/A 69.0% $101.77 N/A $70.22 N/A

2013 244,550 0.0% 173,141 2.6% 70.8% 106.28 4.4% 75.25 7.2%

2014 254,040 3.9% 182,401 5.3% 71.8% 106.87 0.6% 76.73 2.0%

2015 327,770 29.0% 214,362 17.5% 65.4% 107.72 0.8% 70.45 -8.2%

2016 363,905 11.0% 233,627 9.0% 64.2% 104.36 -3.1% 67.00 -4.9%

CAAG 10.4% 8.5% 0.6% -1.2%

YTD 10/2016 303,315 N/A 202,614 N/A 66.8% $105.01 N/A $70.15 N/A

YTD 10/2017 303,315 0.0% 203,524 0.4% 67.1% 101.26 -3.6% 67.95 -3.1%

Source: CBRE Hotels, STR Global



IV-3

MARKET DEMAND Market Segmentation The following table summarizes the competitive market’s mix of demand in 2016.

The majority (52%) of the market lodging demand is business related, which has been separated into medical, oil and gas, education and other. The remaining demand is fairly evenly distributed between Group demand (28%) and Leisure demand (20%). Medical Demand Tyler is the hub of healthcare for East Texas. Medical demand consists of patients, family members, vendors, visiting physicians and researchers, and other people visiting the four major medical centers located in Tyler. We estimate that Medical demand will increase at 2% in 2017, 3% in 2018, 4% in 2019 and 3% throughout the remainder of the projection period. Medical demand will increase in 2018 with the new partnership between MD Anderson and UT Health Northeast. In 2019, the School of Community and Rural Health at UT Health Northeast opens and the East Texas Medical Center is being purchased by Ardent Health Services and the UT Health System. Medical demand continues to expand with the opening of a new emergency room, ICU and pediatric center at the Christus Trinity Mother Frances medical center which will open in 2020. With the opening of the two new hotels in 2019 and 2020, the market will induce 5,000 room nights of new Medical demand.

Competitive Market 2016 Mix of Demand

Market Segment Room Nights Ratio

Medical 35,000 15%

Oil & Gas 11,700 5%

Education 18,700 8%

Other Business 56,100 24%

Group 65,400 28%

Leisure 46,700 20%

Total 234,000 100%Source: CBRE Hotels



IV-4

Oil and Gas Demand The Texas Oil and Gas Industry is currently adjusting to the recent drop in oil prices. The Tyler area experiences Oil and Gas demand based on the amount of activity in the Haynesville Shale located in East Texas and Northwest Louisiana. With the decline in the industry from 2015 through 2017, we estimate that Oil and Gas demand will increase at 1% in 2017 and then begin to rebound to 2% per year throughout the remainder of the projection period. There has been a recent increase in activity at several Tyler-based oil and gas equipment companies, as described in the Area Overview section. Education Demand Education demand refers to visitors coming to Tyler to conduct business or research with the three local colleges and universities. This sector would include visiting professors, interested students and parents, alumni and a variety of businessmen and vendors. We estimate that Education demand will increase at 2% in 2017, 3% in 2018, 4% in 2019 and 3% throughout the remainder of the projection period. With the recent increase in enrollment, the addition of a new President at UT Tyler and the opening of the UT Business School in mid-2018, Education demand is expected to increase. With the opening of the two new hotels in 2019 and 2020, the market will induce 7,500 room nights of new Education demand. Other Business Demand Other Business demand refers to all other business-related visitors to Tyler, including new companies, expansions of existing businesses, retail vendors, government-related visitors, court-related lawyers and defendents (including the patent-related cases), and any other visitor with business in Tyler. We estimate that Other Business demand will increase at 1% in 2017 with the decline in patent-related demand, 2% in 2018, 4% in 2019 and 3% thereafter. The opening of both the new Sanderson Farms Poultry Processing Plant and the new Trane / Ingersoll Rand headquarters in 2019 will increase Other Business demand significantly. With the opening of the two new hotels in 2019 and 2020 and the proposed Hotel and Conference Center in 2021, the market will induce 10,000 room nights of new Other Business demand. Group Demand Group demand is comprised of meetings, trainings, conferences, conventions and other groups of 10 or more that stay at local Tyler hotels. These groups are currently limited by the lack of quality meeting and event space in Tyler. With the opening of the proposed Hotel and Conference Center, this demand will increase dramatically. We estimate that Group demand will increase at 2% in 2017 and 3% from 2018 through 2020 prior to the opening of the Subject Hotel. Then, Group demand is estimated to increase at 4% in 2021 and 2022 and 3% in 2023 and thereafter with the opening of the proposed Center.



IV-5

Based on the survey results and lost business reports, we have estimated 30,000 room nights of induced Group demand for the period 2021 through 2023. This new demand should benefit all of the existing Tyler hotels. Leisure Demand Leisure demand is driven by the annual festivals and events, large number of visitor attractions, shopping opportunities and other visitors to Tyler. As the hub of East Texas, Tyler draws visitors from a large area for various services and entertainment. Visit Tyler indicated that the visitor counts at all of the area attractions was up significantly in 2017. In addition, the revitalization of the Tyler Rose Garden and Harvey Convention Center site with the proposed Master Plan, as well as the addition of the proposed Hotel and Conference Center at this site, will drive new Leisure demand. We estimate that Leisure demand will increase by 3% from 2017 through 2020. Then, Leisure demand will increase at 4% in 2021 with the completion of the Master Plan and the opening of the proposed Hotel and Conference Center. Leisure demand will then stabilize at 3% in 2022 and thereafter. With the opening of the two new hotels in 2018 and 2019 and the opening of Subject Hotel and Conference Center, we have estimated new induced Leisure demand to be 5,000 room nights. Key Assumptions The key assumptions related to future market growth are, as follows:

• Economic growth and stability continues in the Texas market in general and Tyler area in particular.

• No major terrorist events or wars occur that have a material adverse impact on

local travel volume.

• No natural disasters disrupt the local economy during the projection period.

• There are no new additions to the competitive supply other than noted previously. Future Growth in Lodging Demand Using the historical growth in the market as a base, we have estimated future growth in overall market demand. The following table presents the estimated future growth in the lodging supply and demand of the competitive market from 2016 through 2023.



IV-6

Tyler Hotel & Conference CenterCompetitive Market

Estimated Future Growth in Lodging Supply and Demand2016 - 2023

2016 2017 2018 2019 2020 2021 2022 2023ROOMS SUPPLY 898Additions/(Deletions) to Supply

Tyler Hotel & Conference Center 200Comp Set Additions 99Holiday Inn Express NorthLa Quinta Del Sol 69Fairfield Inn & Suites 44 45

Cumulative Rooms Supply 997 997 1,110 1,155 1,155 1,355 1,355 1,355--------- --------- --------- --------- --------- --------- --------- ---------

Total Annual Rooms Supply 363,905 363,905 405,150 421,575 421,575 494,575 494,575 494,575Growth Over the Prior Year 11.0% 0.0% 11.3% 4.1% 0.0% 17.3% 0.0% 0.0%

DEMONSTRATED DEMAND IN BASE YRMedical 35,044 15%Oil & Gas 11,681 5%Education 18,690 8%Other Business 56,070 24%Group 65,416 28%Leisure 46,725 20%

--------- --------- TOTAL DEMONSTRATED DEMAND 233,627 100%

--------- --------- INDUCED/(UNSATISFIED) DEMAND

Medical 0 0 2,500 2,500 0 0 0Oil & Gas 0 0 0 0 0 0 0Education 0 2,500 2,500 2,500 0 0 0Other Business 0 0 5,000 2,500 2,500 0 0Group 0 0 0 0 15,000 10,000 5,000Leisure 0 2,500 0 0 2,500 0 0

--------- --------- --------- --------- --------- --------- ---------TOTAL INDUCED/(UNSATISFIED) DEMAND 0 5,000 10,000 7,500 20,000 10,000 5,000

--------- --------- --------- --------- --------- --------- ---------GROWTH RATES

Medical 2.0% 3.0% 4.0% 3.0% 3.0% 3.0% 3.0%Oil & Gas 1.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%Education 2.0% 3.0% 4.0% 3.0% 3.0% 3.0% 3.0%Other Business 1.0% 2.0% 4.0% 3.0% 3.0% 3.0% 3.0%Group 2.0% 3.0% 3.0% 3.0% 4.0% 4.0% 3.0%Leisure 3.0% 3.0% 3.0% 3.0% 4.0% 3.0% 3.0%

PROJECTED DEMANDMedical

Total 35,000 35,700 36,800 40,800 44,500 45,800 47,200 48,600Growth Over Prior Year N/A 2.0% 3.1% 10.9% 9.1% 2.9% 3.1% 3.0%

--------- --------- --------- --------- --------- --------- --------- ---------Oil & Gas


--------- --------- --------- --------- --------- --------- --------- ---------Education


--------- --------- --------- --------- --------- --------- --------- ---------Other Business


--------- --------- --------- --------- --------- --------- --------- ---------Group


--------- --------- --------- --------- --------- --------- --------- ---------Leisure


--------- --------- --------- --------- --------- --------- --------- ---------

Total Market Demand 233,600 238,000 249,500 268,100 283,400 313,200 333,300 348,200Growth Over Prior Year N/A 1.9% 4.8% 7.5% 5.7% 10.5% 6.4% 4.5%

Market Occupancy 64% 65% 62% 64% 67% 63% 67% 70%

Source: CBRE Hotels



IV-7

The market is projected to increase from 64% occupancy in 2016 to 65% in 2017. Occupancy will decrease to 62% in 2018 with the opening of the two new hotels. Then, occupancy is expected to increase to 64% in 2019 and 67% in 2020 with no new additions. With the opening of the proposed Hotel and Conference Center in 2021, market occupancies are estimated to decrease to 63% and then increase to 67% in 2022 and stabilize at 70% in 2023. We expect the market to stabilize at an occupancy that is higher than the historical pattern due to the large amount of new demand that will be generated by the proposed Hotel and Conference Center.

SECTION V

SUBJECT HOTEL PERFORMANCE

Estimated Hotel Performance


V-1

METHODOLOGY In formulating our estimates of the subject property’s position in the competitive market, we considered its fair market share and potential ability to penetrate the market. Fair market share is defined as the percentage of demand allocated to a given property based on its ratio of available guestrooms to the total number of rooms in the competitive market. For example, the proposed subject Hotel and Conference Center has 200 of the competitive market’s 1,355 available rooms (including the subject hotel and other additions to supply), equating to a fair market share of 14.8% (200 divided by 1,355) in 2021, the first full year of operations. Market penetration is based on the attributes of a hotel relative to the competitive market. It is defined as the percentage of fair market share demand allocated to a property on the basis of such competitive characteristics as location, appearance, management expertise, physical condition, marketing orientation, rate structure, age, brand affiliation, reputation, size, facilities and amenities. Factors indicating that a property will possess competitive advantages suggest a market penetration in excess of 100% of fair market share, while competitive disadvantages are reflected in penetration rates of less than 100%. EXPECTED COMPETITIVE POSITION Estimated future occupancy rates at the subject Hotel and Conference Center are based upon an evaluation of its expected future advantages and/or disadvantages relative to the competitive hotels within the context of estimated levels of future supply and demand. The proposed Hotel and Conference Center is expected to achieve a strong competitive position in the future competitive lodging market, as follows:

• The proposed Hotel and Conference Center will be centrally-located in Tyler adjacent to the Tyler Rose Garden, proximate to Downtown Tyler and easily accessible from all parts of the Tyler MSA.

• The proposed Hotel and Conference Center will be developed, designed and furnished with upscale, quality facilities and amenities, as described herein.

• The facilities will be competently managed, aggressively marketed and will

maintain high levels of service throughout the Center.

• The Center is assumed to provide the most upscale accommodations and meeting facilities in the market, creating a competitive advantage.

• The quality and amount of meeting space at the proposed Conference Center

will attract new demand to the Tyler area. ESTIMATED SUBJECT PERFORMANCE The estimated subject’s performance is shown in the following table.



V-2

The proposed Hotel and Conference Center will open in January 2021 and is expected to achieve an occupancy of 64% in 2021, grow to 70% in 2022 and stabilize in its third year (2023) of operation at 74%, which is in line with the higher rated hotels in the competitive set. Upon stabilization, the subject is projected to penetrate the market at 104% of its fair share.

Tyler Hotel & Conference CenterMarket Penetration and Projected Occupancy

2021 2022 2023TOTAL ROOMS AVAILABLE

Tyler Hotel & Conference Center 73,000 73,000 73,000Competitive Market 494,575 494,575 494,575

==== ==== ====Fair Share of Supply 14.8% 14.8% 14.8%

==== ==== ====ESTIMATED TOTAL MARKET DEMAND

Medical 45,800 47,200 48,600Oil & Gas 12,800 13,000 13,300Education 29,700 30,500 31,500Other Business 74,100 76,300 78,600Group 90,800 104,500 112,600Leisure 60,000 61,800 63,600

------- ------- -------TOTAL 313,200 333,300 348,200

------- ------- -------FAIR SHARE OF DEMAND


------- ------- -------TOTAL 46,300 49,200 51,400

------- ------- -------SUBJECT PENETRATION

Medical 75% 75% 75%Oil & Gas 80% 80% 80%Education 70% 70% 70%Other Business 98% 100% 102%Group 138% 140% 142%Leisure 90% 88% 85%

------- ------- -------ROOM NIGHTS CAPTURED


------- ------- -------TOTAL CAPTURED DEMAND 46,900 50,800 53,700

==== ==== ====MARKET SHARE CAPTURED 15.0% 15.2% 15.4%OVERALL MARKET PENETRATION 101% 103% 104%

------- ------- -------SUBJECT OCCUPANCY 64% 70% 74%

------- ------- -------

Source: CBRE Hotels



V-3

MIX OF DEMAND The following table shows the proposed Hotel and Conference Center’s mix of demand in the year of stabilization.

The subject Hotel and Conference Center is expected to achieve a strong competitive position within the local hotel market. The proposed Hotel and Conference Center is projected to receive more than its fair share of demand from the Other Business and Group demand segments due its upscale, full-service orientation and its focus on Group meetings and conventions. The property is projected to receive less than its fair share of demand from the Medical, Oil and Gas, Education and Leisure demand segments due to the subject’s full-service nature and higher average daily rates than other competitive hotels. ESTIMATED AVERAGE DAILY RATE Considering the proposed Hotel and Conference Center’s quality product, quality and quantity of meeting space, and location, we believe that it will achieve an ADR at the top end of the competitive set.

Tyler Hotel & Conference Center2023 Mix of Demand & Market Penetration

Market Segment Room Nights Ratio Penetration

Medical 5,400 10% 75%

Oil & Gas 1,600 3% 80%

Education 3,300 6% 70%

Other Business 11,800 22% 102%

Group 23,600 44% 142%

Leisure 8,000 15% 85%

Total 53,700 100% 104%

Source: CBRE Hotels



V-4

The proposed Hotel and Conference Center is projected to achieve an average daily rate of $140 based in 2017 dollars. Rates are projected to increase at 3% throughout the projection period.

Annual Average Revenue PerYear Occupancy Daily Rate* Available Room

2021** 64% $158 $1012022 70% $162 $1132023 74% $167 $1242024 74% $172 $1272025 74% $177 $131


Proposed Tyler Hotel and Conference Center


Estimated Occupancy, ADR & RevPAR

SECTION VI

PROSPECTIVE FINANCIAL ANALYSIS

Financial Analysis


VI-1

BASES OF ESTIMATIONS On the basis of our evaluation of market findings relative to the proposed 200-room Tyler Hotel and Conference Center, we have prepared schedules of estimated operating results, which we believe could be generated by the operation of a facility of the type, size and caliber as described in the preceding sections of the report. The proposed Hotel and Conference Center is estimated to open in January 2021. In estimating the future operating results, we analyzed historical 2016 operating statements of five comparable properties. We have not identified them in order to protect the confidentiality of our sample. These properties ranged in size from 186 to 247 rooms with an average of 208 rooms. Occupancy rates in all the comparable properties ranged from 70% to 79% with an average of 74%. The properties used in the analysis had an ADR range of $130 to $153 with an average of $140. The amount of meeting space at the comparable hotel and conference centers ranged from 10,000 to 20,000 square feet with an average of 16,000 square feet. We estimated revenues and expenses based on the market analysis described herein, the performance of comparable properties, typical industry parameters, and premiums and efficiencies for a full-service hotel. In evaluating comparable, we considered expenses as a percent of revenue, as well as per occupied room (POR) and per available room (PAR). We then incorporated such estimates into the assumptions that we have made, regarding inflation, start-up period and market penetration rates, in order to generate the estimated annual operating results, presented at the end of this section. Our estimates are for the period 2021 through 2030. All dollar financial POR and PAR are expressed in 2017 dollars. The classification of income and expenses in the statements presented in this report generally follows the Uniform System of Accounts for Hotels, recommended by the American Hotel & Lodging Association. DEPARTMENTAL REVENUES Revenue from guestroom rentals is a result of two factors: occupancy level, or occupied room nights, and average daily room rate (ADR). Based on data presented in the Hotel Market Analysis section of this report, estimated occupancy levels, average daily room rates and resulting rooms revenue for the proposed Hotel and Conference Center over the projection period are summarized in the following table.

Financial Analysis


VI-2

Additional sources of revenue include Food and Beverage, Other Operated Departments and Rentals and Other Income. Our stabilized year projections for additional revenue items are summarized below.

DEPARTMENTAL EXPENSES Departmental Expenses are chargeable to a specific revenue-producing department, in this case Rooms, Food and Beverage, and Other Operated Departments.

UNDISTRIBUTED OPERATING EXPENSES

Undistributed operating expenses are necessary to the operation of the property though not directly chargeable to a revenue-producing department and include Administrative and General, Marketing, Property Operations and Maintenance (POM), Utilities and Information and Telecommunications Services.

Annual Average RoomsYear Occupancy Daily Rate* Revenue

2021** 64% $158 $7,382,0002022 70% $162 $8,278,0002023 74% $167 $9,021,0002024 74% $172 $9,291,0002025 74% $177 $9,562,000


Estimated Rooms RevenueProposed Tyler Hotel & Conference Center


Departmental Revenues

Subject HotelComparable Hotels Projections

Items Range Average Median Stabilized Year Food & Beverage $34.96 - $81.31 $53.62 $48.08 $75.00

Other Operated Departments $0.05 - $10.09 $2.86 $1.55 $5.00Rentals and Other Income $0.35 - $6.70 $2.53 $1.71 $2.50

Dollars Per Occupied Room


Departmental Expenses


Items Range Average Median Stabilized YearRoom ($ POR) $26.19 - $35.26 $31.05 $30.23 $30.00

Food & Beverage 59.9% - 78.3% 63.6% 62.1% 62.0%Other Operated Departments 63.7% - 949.1% 80.4% 80.5% 80.0%

Percent of Departmental Revenue


Financial Analysis


VI-3

FIXED EXPENSES Fixed expenses are necessary to maintain the property’s availability to guests and, except for management fees, do not necessarily vary with performance.

RESERVE FOR REPLACEMENT The reserve for replacement provides for the replacement of furniture, fixtures and equipment, as well as certain building finishes and systems. This reserve has been tiered at 2% of total revenues in 2021, 3% in 2022 and 4% in 2023 and thereafter. SCHEDULE OF PROSPECTIVE CASH FLOW BEFORE DEBT SERVICE

The following schedules reflect the estimate of future operating performance of the proposed Hotel and Conference Center. The schedules are presented in stated year (inflated) dollars.

Undistributed Operating Expenses


Items Range Average Median Stabilized YearAdministrative and General $3,842 - $5,450 $4,625 $4,466 $4,700Marketing $5,265 - $7,983 $6,429 $6,214 $6,500POM $1,438 - $2,740 $2,252 $2,132 $2,050Utilities $1,427 - $2,573 $1,834 $1,595 $1,800Information & Telecom Systems $0 - $321 $258 $202 $300

Dollars Per Available Room


Fixed Expenses


Items Range Average Median Stabilized YearManagement Fee (% of Total Rev) 1.3% - 5.0% 3.1% 3.7% 3.0%Property Taxes (*) $1,060 - $1,606 $1,297 $1,225 $1,500Insurance (*) $176 - $241 $203 $192 $200

Dollars Per Available Room


(*) Property taxes and insurance are based on taxes at local area hotels.

Financial Analysis


VI-4

Tyler Hotel & Conference CenterProjected Operating ResultsCalendar Years

2021 2022 2023 2024 2025Number of Units:Number of Annual Rooms Available:Number of Rooms Occupied:Annual Occupancy:Average Daily Rate:Revenue Per Available Room:

Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount RatioRevenues Rooms $7,382,000 63.0% $8,278,000 62.9% $9,021,000 62.9% $9,291,000 62.9% $9,562,000 62.9% Food & Beverage 3,944,000 33.7% 4,443,000 33.7% 4,838,000 33.7% 4,983,000 33.7% 5,132,000 33.7% Other Operated Departments 263,000 2.2% 296,000 2.2% 323,000 2.3% 332,000 2.2% 342,000 2.2% Rentals and Other Income 131,000 1.1% 148,000 1.1% 161,000 1.1% 166,000 1.1% 171,000 1.1% Total Revenues 11,720,000 100.0% 13,165,000 100.0% 14,343,000 100.0% 14,772,000 100.0% 15,207,000 100.0%

Departmental Expenses Rooms 1,701,000 23.0% 1,828,000 22.1% 1,935,000 21.4% 1,993,000 21.5% 2,053,000 21.5% Food & Beverage 2,598,000 65.9% 2,818,000 63.4% 2,999,000 62.0% 3,089,000 62.0% 3,182,000 62.0% Other Operated Departments 210,000 79.8% 237,000 80.1% 258,000 79.9% 266,000 80.1% 274,000 80.1% Total Departmental Expenses 4,509,000 38.5% 4,883,000 37.1% 5,192,000 36.2% 5,348,000 36.2% 5,509,000 36.2%

Departmental Profit 7,211,000 61.5% 8,282,000 62.9% 9,151,000 63.8% 9,424,000 63.8% 9,698,000 63.8%

Undistributed Expenses Administrative & General 984,000 8.4% 1,068,000 8.1% 1,122,000 7.8% 1,156,000 7.8% 1,191,000 7.8% Marketing 1,346,000 11.5% 1,477,000 11.2% 1,552,000 10.8% 1,599,000 10.8% 1,647,000 10.8% Property Operation and Maintenance 461,000 3.9% 475,000 3.6% 490,000 3.4% 504,000 3.4% 519,000 3.4% Utility Costs 405,000 3.5% 417,000 3.2% 430,000 3.0% 443,000 3.0% 456,000 3.0% Information & Telecommunications Systems 68,000 0.6% 70,000 0.5% 72,000 0.5% 74,000 0.5% 76,000 0.5% Total Undistributed Operating Expenses 3,264,000 27.8% 3,507,000 26.6% 3,666,000 25.6% 3,776,000 25.6% 3,889,000 25.6%

Gross Operating Profit 3,947,000 33.7% 4,775,000 36.3% 5,485,000 38.2% 5,648,000 38.2% 5,809,000 38.2%

Base Management Fee 352,000 3.0% 395,000 3.0% 430,000 3.0% 443,000 3.0% 456,000 3.0%

Fixed Expenses Property Taxes 338,000 2.9% 348,000 2.6% 358,000 2.5% 369,000 2.5% 380,000 2.5% Insurance 45,000 0.4% 46,000 0.3% 48,000 0.3% 49,000 0.3% 51,000 0.3% Total Fixed Expenses 383,000 3.3% 394,000 3.0% 406,000 2.8% 418,000 2.8% 431,000 2.8%

Net Operating Income 3,212,000 27.4% 3,986,000 30.3% 4,649,000 32.4% 4,787,000 32.4% 4,922,000 32.4%

FF&E Reserve 234,000 2.0% 395,000 3.0% 574,000 4.0% 591,000 4.0% 608,000 4.0%

Net Operating Income After Reserve $2,978,000 25.4% $3,591,000 27.3% $4,075,000 28.4% $4,196,000 28.4% $4,314,000 28.4%

Source: CBRE Hotels Full Year of Operation

200 200 200 200 20073,000 73,000 73,000 73,000 73,00046,720 51,100 54,020 54,020 54,020

64% 70% 74% 74% 74%$158.00 $162.00 $167.00 $172.00 $177.00$101.12 $113.40 $123.58 $127.28 $130.98

Financial Analysis


VI-5

Tyler Hotel & Conference CenterProjected Operating ResultsCalendar Years

2026 2027 2028 2029 2030Number of Units:Number of Annual Rooms Available:Number of Rooms Occupied:Annual Occupancy:Average Daily Rate:Revenue Per Available Room:

Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount RatioRevenues Rooms $9,886,000 63.0% $10,156,000 62.9% $10,480,000 62.9% $10,804,000 63.0% $11,128,000 63.0% Food & Beverage 5,286,000 33.7% 5,445,000 33.7% 5,608,000 33.7% 5,776,000 33.7% 5,950,000 33.7% Other Operated Departments 352,000 2.2% 363,000 2.2% 374,000 2.2% 385,000 2.2% 397,000 2.2% Rentals and Other Income 176,000 1.1% 181,000 1.1% 187,000 1.1% 193,000 1.1% 198,000 1.1% Total Revenues 15,700,000 100.0% 16,145,000 100.0% 16,649,000 100.0% 17,158,000 100.0% 17,673,000 100.0%

Departmental Expenses Rooms 2,115,000 21.4% 2,178,000 21.4% 2,243,000 21.4% 2,311,000 21.4% 2,380,000 21.4% Food & Beverage 3,277,000 62.0% 3,376,000 62.0% 3,477,000 62.0% 3,581,000 62.0% 3,689,000 62.0% Other Operated Departments 282,000 80.1% 290,000 79.9% 299,000 79.9% 308,000 80.0% 317,000 79.8% Total Departmental Expenses 5,674,000 36.1% 5,844,000 36.2% 6,019,000 36.2% 6,200,000 36.1% 6,386,000 36.1%

Departmental Profit 10,026,000 63.9% 10,301,000 63.8% 10,630,000 63.8% 10,958,000 63.9% 11,287,000 63.9%

Undistributed Expenses Administrative & General 1,226,000 7.8% 1,263,000 7.8% 1,301,000 7.8% 1,340,000 7.8% 1,380,000 7.8% Marketing 1,696,000 10.8% 1,747,000 10.8% 1,800,000 10.8% 1,853,000 10.8% 1,909,000 10.8% Property Operation and Maintenance 535,000 3.4% 551,000 3.4% 568,000 3.4% 585,000 3.4% 602,000 3.4% Utility Costs 470,000 3.0% 484,000 3.0% 498,000 3.0% 513,000 3.0% 529,000 3.0% Information & Telecommunications Systems 78,000 0.5% 81,000 0.5% 83,000 0.5% 86,000 0.5% 88,000 0.5% Total Undistributed Operating Expenses 4,005,000 25.5% 4,126,000 25.6% 4,250,000 25.5% 4,377,000 25.5% 4,508,000 25.5%

Gross Operating Profit 6,021,000 38.4% 6,175,000 38.2% 6,380,000 38.3% 6,581,000 38.4% 6,779,000 38.4%

Base Management Fee 471,000 3.0% 484,000 3.0% 499,000 3.0% 515,000 3.0% 530,000 3.0%

Fixed Expenses Property Taxes 391,000 2.5% 403,000 2.5% 415,000 2.5% 428,000 2.5% 441,000 2.5% Insurance 52,000 0.3% 54,000 0.3% 55,000 0.3% 57,000 0.3% 59,000 0.3% Total Fixed Expenses 443,000 2.8% 457,000 2.8% 470,000 2.8% 485,000 2.8% 500,000 2.8%

Net Operating Income 5,107,000 32.5% 5,234,000 32.4% 5,411,000 32.5% 5,581,000 32.5% 5,749,000 32.5%

FF&E Reserve 628,000 4.0% 646,000 4.0% 666,000 4.0% 686,000 4.0% 707,000 4.0%

Net Operating Income After Reserve $4,479,000 28.5% $4,588,000 28.4% $4,745,000 28.5% $4,895,000 28.5% $5,042,000 28.5%

Source: CBRE Hotels

200 200 200 200 20073,000 73,000 73,000 73,000 73,00054,020 54,020 54,020 54,020 54,020

74% 74% 74% 74% 74%$183.00 $188.00 $194.00 $200.00 $206.00$135.42 $139.12 $143.56 $148.00 $152.44

ADDENDUM A

PHOTOGRAPHS OF SUBJECT SITE

PHOTOGRAPHS OF SITE A-1

Entrance to the Rose Complex Looking East from Front Street with Harvey Convention Center at the Front of the Property

Tyler Rose Garden Looking Across Front Street


Main Entrance to Tyler Rose Garden Center from Within Rose Complex

Main Entrance to Harvey Convention Center


Looking Back Toward the Entrance with Fairground Buildings and Mayfair Theatre on the Left and Harvey Convention Center to the Right

Tyler Civic Theatre with Rogers Children’s Theatre on the Left


Tyler Rose Football Stadium

Mike Carter Baseball Field

ADDENDUM B

MARKET RESPONSE

Market Response


B-1

MARKET INTERVIEWS During the original market study which was completed in March 2012, we completed extensive interviews and surveys in the Tyler market. A summary of those interviews and surveys are presented below. For this market study, we completed a series of interviews to obtain an update of market conditions and current market data for this report. Market representatives indicated that the information was still very valid. City of Tyler / Tyler Community Mayor City Council Members City Manager Tyler Economic Development Council Tyler Area Chamber of Commerce Tyler Convention & Visitors Bureau Tyler Parks & Recreation Healthcare and Education Related East Texas Medical Center Trinity Mother Frances Hospital UT Health Science Center at Tyler Tyler Junior College University of Texas at Tyler Tyler Independent School District Existing Local Meeting Facilities Caldwell Auditorium R. Don Cowan Fine and Performing Arts Center Green Acres Crosswalk Center Harvey Convention Center KE Bushman’s Winery & Celebration Center The Park of East Texas Tyler Municipal Rose Garden Center Tyler Hotel Market Tyler Hotel Association Members Best Western Plus South Park Fairfield Inn Holiday Inn South Broadway Hilton Garden Inn Marriott Courtyard The market interviews indicated strong support for the proposed Hotel and Conference Center. Some of their comments are listed below.

Market Response


B-2

• “This project is 25 years overdue. Tyler needs this project to continue to grow.”

• “We need the conference center because we are losing conferences.” • “Tyler needs a hotel and conference center like the Embassy Suites and

Conference Center in San Marcos to be able to compete with other cities our size.”

• “Tyler can only attract the smaller conferences or events that need a lot of hotel

rooms with a limited number of meetings today.” • “Tyler has a lot to offer convention attendees with the large number of tourist

attractions and shopping options.” • “The conference center needs to have a nicer full-service hotel to attract

medical trainings and conferences. Tyler also lacks the quality meeting space to attract these events.”

• “The conference center would need a large ballroom with lots of breakout

rooms to attract medical conferences…Tyler is missing an upper end corporate hotel.”

• “TJC needs meeting space for more than 300 people. We often have events

that have 600 people for a banquet…Campus facilities are limited and overbooked…We also need a full-service hotel for visiting speakers and faculty and athletic recruiting.”

• “UT would have more conferences if there was a quality meeting facility in

Tyler. We also need a quality, full-service hotel for the caliber of people that visit UT.”

• “The Cowan Center could block seats or schedule a second show for

conferences to attract groups to Tyler.” • “The Harvey Convention Center has to be dressed up for special events. The

proposed conference center would be good for galas and more professional conferences.”

• “The hotel association is concerned about another hotel reducing the occupancies at the existing hotels. The proposed hotel and conference center would need to be built in south Tyler to enable the overflow to benefit the other hotels.”

Market Response


B-3

• “We get calls for conferences with 300 or more people. Tyler needs a hotel and conference center that can accommodate these groups.”

• “A higher-rated, full-service hotel would help pull the rates up at the existing

hotels.”

SURVEYS In order to maximize the input from the community and other potential users, PKF Consulting (now CBRE Hotels Consulting) conducted five email surveys to identify the types, number and size of the potential events, number of breakout rooms, number of hotel rooms and the potential average daily room rate for the proposed Hotel and Conference Center. Response Rate The following table shows the number of surveys sent by survey group and the response rate.

# of Surveys # of Response Type of Survey Sent Respondents Rate

Chamber of Commerce 1,917 251 13.1%

Convention & Visitors Bureau 770 54 7.0%

Tyler Junior College - Faculty & Staff 600 71 11.8%

UT Tyler - Faculty & Staff 1,277 99 7.8%

Total / Percent 4,564 475 10.4%

Tyler Junior College - Alumni 12,100 54 0.4%

City of TylerProposed Hotel and Conference Center

Survey Response Rate

Source: PKF Consulting USA

Market Response


B-4

We surveyed the Chamber of Commerce member list to maximize the input from the community since members include Tyler corporations, business owners, healthcare and educational institutions, non-profit organizations, community organizations, existing meeting facilities, hotels, restaurants, churches, performing arts groups, etc. The Convention and Visitors Bureau survey went to Texas State Associations, area meeting planners, groups that have contacted the CVB in the past and other groups that would have an interest in bringing their events to Tyler. We surveyed the faculty and staff at the two major colleges and universities to determine their on-campus meeting and event needs. A survey was also sent to a large list of TJC alumni with a limited response, as expected. A response rate of between 7% and 10% is considered good. The overall response rate for the four primary email surveys was 10.4% with a low of 7% for the Convention and Visitors Bureau and a high of 13.1% for the Chamber of Commerce survey. We consider this an excellent response. The quality of the responses was also very informative regarding the hotel, meeting and event needs of the Tyler community. Number of Events The following table presents the number of conference center events that were identified by the survey and the number of respondents that indicated that they would relocate their events to the proposed Hotel and Conference Center.

Market Response


B-5

The magnitude of the number of events identified is impressive. The survey identified 1,400 events which are currently held by the companies and organizations that responded to the survey. Of these events, the respondents indicated that 885 events or 63.2% of those events could be relocated to the proposed Hotel and Conference Center. The same respondents identified an additional 574 events that they are aware of that could be held at the proposed Center. Therefore, the number of potential events that could be held at the new Hotel and Conference Center totaled 1,459 events.

Total # of # of Events % of Events Additional Total # EventsEvents Would Use Would Use Events Would Use

Type of Survey Identified Conf Center Conf Center Identified Conf Center

Chamber of Commerce 526 397 75.5% 271 668

Convention & Visitors Bureau 198 83 41.9% -- 83

Tyler Junior College - Faculty & Staff 217 141 65.0% 82 223

UT Tyler - Faculty & Staff 337 183 54.3% 166 349

Tyler Junior College - Alumni 122 81 66.4% 55 136

Total / Percent 1,400 885 63.2% 574 1,459


Survey Results - Potential Number of Events

Source: PKF Consulting, Inc.

Market Response


B-6

Size of Events The following table shows the number of events by the number of attendees at each event.

While a lot of the events (36.6%) have less than 50 attendees, there are a large number of events (48.6%) that have between 50 and 400 attendees. This indicates a need to have a variety of meeting room sizes that can be divided into smaller rooms. Additionally, there are 112 events (7.4%) that have more than 800 attendees, requiring a large ballroom. Hotel Demand The table below provides a breakdown of the number of events by the number of hotel rooms needed for each event.

Less Than 50 to 100 to 200 to 400 to 600 to More ThanType of Survey 50 100 200 400 600 800 800 Total

Chamber of Commerce 185 107 108 68 32 12 28 540

Convention & Visitors Bureau 66 53 40 45 24 17 64 309

Tyler Junior College - Faculty & Staff 135 35 29 26 6 4 7 242

UT Tyler - Faculty & Staff 143 69 59 37 12 4 5 329

Tyler Junior College - Alumni 27 26 23 13 2 0 8 99

Total 556 290 259 189 76 37 112 1,519

Percent of Total 36.6% 19.1% 17.1% 12.4% 5.0% 2.4% 7.4% 100.0%



Conference Center Events By Number of Attendees

Market Response


B-7

The majority of the events (52.8%) do not need hotel rooms. This is to be expected since most of the respondents are local residents. Many of the events are banquets, galas, meetings, training and other events that are attended by local residents. However, 47.2% of the events do need hotel rooms with 33.3% needing 25 to 75 rooms. This will allow the booking of several smaller events at the same time. The survey identified 257 events that need 75 rooms or more, with 110 events needing more than 250 rooms. Most of these events are conferences and conventions that will bring new hotel demand to Tyler. The proposed Hotel has been sized to accommodate the larger groups that require the majority of their attendees be booked into one hotel, while being small enough to allow overflow to the existing Tyler hotels. Hotel Rate Preference The following table presents the hotel rate preference that the respondents indicated their attendees would be willing to pay for an event in Tyler.

Less Than 25 to 75 to 150 to More ThanType of Survey None 25 75 150 250 250 Total

Chamber of Commerce 414 149 49 30 10 25 677

Convention & Visitors Bureau 42 60 43 35 22 76 278

Tyler Junior College - Faculty & Staff 173 48 23 8 6 3 261

UT Tyler - Faculty & Staff 189 115 33 17 8 3 365

Tyler Junior College - Alumni 91 23 14 9 2 3 142

Total 909 395 162 99 48 110 1,723

Percent of Total 52.8% 22.9% 9.4% 5.7% 2.8% 6.4% 100.0%



Conference Center Events By Number of Hotel Rooms Needed

Market Response


B-8

The results show that 41.2% of the respondents are price-sensitive and would only be willing to pay a hotel rate less than $100. This provides strong support for the overflow of hotel rooms to the existing lower-rated limited service hotels in Tyler from the additional demand being attracted to Tyler by the proposed Hotel and Conference Center. An additional 34.6% of the respondents indicated that they would be willing to pay a hotel room rate between $100 and $125. This group of respondents will support the existing higher-rated limited-service and select-service hotels in Tyler. In addition, 24.2% of the respondents indicated that they would be willing to pay a hotel room rate more than $125, providing strong support for a three-diamond, full-service Hotel to be developed adjacent to the proposed Conference Center.

Total Type of Survey Responses Number Percent Number Percent Number Percent Number Percent Number Percent

Chamber of Commerce 457 127 27.8% 175 38.3% 124 27.1% 21 4.6% 10 2.2%

Convention & Visitors Bureau 252 53 21.0% 78 31.0% 66 26.2% 42 16.7% 13 5.2%

Tyler Junior College - Faculty & Staff 182 92 50.5% 65 35.7% 21 11.5% 2 1.1% 2 1.1%

UT Tyler - Faculty & Staff 312 205 65.7% 103 33.0% 4 1.3% 0 0.0% 0 0.0%

Tyler Junior College - Alumni 98 59 60.2% 29 29.6% 10 10.2% 0 0.0% 0 0.0%

Total / Percent 1,301 536 41.2% 450 34.6% 225 17.3% 65 5.0% 25 1.9%


Conference Center Events By Hotel Room Rate Preference


Under $100 $100 to $125 $125 to $150 $150 to $200 Above $200

Market Response


B-9

Lost Business The survey identified the events that are leaving the Tyler market. The Chamber of Commerce survey revealed that 20.2% of the events identified are being held outside of the Tyler area, while the TJC and UT Tyler surveys indicated that 6.3% and 8.4% of their events, respectively, are leaving Tyler. The main reason indicated for leaving Tyler is the lack of adequate meeting facilities. Additionally, lost business reports from the Tyler CVB, which are presented on page II-21 of this report, indicate that Tyler is losing as many as 44 groups with more than 25,000 attendees and almost 26,000 room nights on an annual basis due to the lack of a competitive conference center. This translates into an economic loss of revenues from potential hotel, restaurant, retail, tourist attractions, airfares, rental cars and other local sales, as well as the tax revenues generated by these activities. These lost opportunities provide support for the need for the proposed Hotel and Conference Center. CONCLUSION The market interviews provided strong support for the proposed Hotel and Conference Center. Community representatives identified missed opportunities caused by the lack of adequate meeting facilities. Email surveys were sent to the Chamber of Commerce members, CVB meeting planner list, TJC and UT Tyler faculty and staff, and TJC alumni. The overall response rate exceeded 10% which is considered statistically significant. The surveys identified 1,459 potential events that could be held at the proposed Hotel and Conference Center. There are a large number of events (48.6%) that have between 50 and 400 attendees. Additionally, there are 112 events (7.4%) that have more than 800 attendees, requiring a large ballroom. The survey indicated that 33.3% of the events require 25 to 75 hotel rooms. Additionally, the respondents identified 257 events that need 75 rooms or more, with 110 events needing more than 250 rooms. The results show that 41.2% of the respondents are price-sensitive and would only be willing to pay a hotel rate less than $100. This provides strong support for the overflow of hotel rooms to the existing lower-rated limited service hotels in Tyler from the additional demand being attracted to Tyler by the proposed Hotel and Conference Center. In addition, 24.2% of the respondents indicated that they would be willing to pay a hotel room rate more than $125, providing strong support for a full-service Hotel to be developed adjacent to the proposed Conference Center.

ADDENDUM C

PHOTOGRAPHS OF COMPETITIVE SUPPLY

PHOTOGRAPHS OF COMPETITIVE SUPPLY C-1

HOLIDAY INN SOUTH BROADWAY

HOLIDAY INN EXPRESS SOUTH


HOLIDAY INN EXPRESS NORTH

HILTON GARDEN INN


MARRIOTT COURTYARD

STAYBRIDGE SUITES UNIVERSITY


RESIDENCE INN

LA QUINTA INN & SUITES UNIVERSITY


HAMPTON INN & SUITES

HOMEWOOD SUITES

ADDENDUM D

MAP OF COMPETITIVE SUPPLY

© 2017 CBRE Limited. Data © TeleAtlas, Google, AerialExpress, DigitalGlobe, Landiscor, USGS, i-cubed. The information contained herein (the “Information”) is intended for informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified byeither CBRE Limited or any of its affiliates (CBRE Limited and its affiliates are collectively referred to herein as “CBRE”). CBRE neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information. The recipient of the Information should take suchsteps as the recipient may deem appropriate with respect to using the Information. The Information may change and any property described herein may be withdrawn from the market at any time without notice or obligation of any kind on the part of CBRE. The Information is protected by copyright and shall be fully enforced.

Proposed Tyler Hotel & Conference Center Competitive Set Map

Layout ID:L01 MapId:5055956

ADDENDUM E

TERMS AND CONDITIONS

TERMS AND CONDITIONS 1. The Terms and Conditions herein are part of an agreement for consulting services (the “Agreement” )

between CBRE, Inc. (the “Consultant”) and the client signing this Agreement, and for whom the consulting services will be performed (the “Client”), and shall be deemed a part of such Agreement as though set forth in full therein. The Agreement shall be governed by the laws of the state where the office is located for the Consultant executing this Agreement.

2. Client shall be responsible for the payment of all fees stipulated in the Agreement. Payment of the consulting fee and preparation of a consulting report (the “Consulting Report, or the “report”) are not contingent upon any predetermined value or on an action or event resulting from the analyses, opinions, conclusions, or use of the Consulting Report. Final payment is due as provided in the Proposal Specifications Section of this Agreement. A draft report will be provided by Consultant to Client for review and one round of comments by the Client to be incorporated by Consultant into the report. Client will provide its comments to the draft report within five business days of receipt of the draft report from the Consultant. If no comments are received from Client by Consultant within such five-business day period, the draft report will be deemed the final report. The fee is considered earned upon delivery of the final report. It is understood that the Client may cancel this assignment in writing at any time prior to delivery of the completed report. In such event, the Client is obligated only for the prorated share of the fee based upon the work completed and expenses incurred (including travel expenses to and from the job site), with a minimum charge of $500. The draft and final reports will be provided by Consultant to Client in a searchable portable document file (*.pdf) format. In addition, four bound copies of the final report will be provided. Additional copies of the Final Consulting Report are available at a cost of $250 per original color copy and $100 per photocopy (black and white), plus shipping fees of $30 per report.

3. If Consultant is subpoenaed or ordered to give testimony, produce documents or information, or

otherwise required or requested by Client or a third party to participate in meetings, phone calls, conferences, litigation or other legal proceedings (including preparation for such proceedings) because of, connected with or in any way pertaining to this engagement, the Consulting Report or Client’s involvement with the Property, Client shall pay Consultant’s additional costs and expenses, including but not limited to Consultant’s attorneys’ fees, and additional time incurred by Consultant based on Consultant’s then-prevailing hourly rates and related fees. Such charges include and pertain to, but are not limited to, time spent in preparing for and providing court room testimony, depositions, travel time, mileage and related travel expenses, waiting time, document review and production, and preparation time (excluding preparation of the Consulting Report), meeting participation, and Consultant’s other related commitment of time and expertise. Hourly charges and other fees for such participation will be provided upon request. In the event Client requests additional services beyond the scope and purpose stated in the Agreement, Client agrees to pay additional fees for such services and to reimburse related expenses, whether or not the completed report has been delivered to Client at the time of such request.

4. Client or Consultant shall have the right to terminate this Agreement at any time for cause effective immediately upon written notice to the other on the occurrence of fraud or the willful misconduct of the other, its employees or agents, or without cause upon 30 days written notice.

5. In the event Client fails to make payments when due then, from the date due until paid, the amount due and payable shall bear interest at the maximum rate permitted in the state where the office is located for the Consultant executing the Agreement. In the event either party institutes legal action against the other to enforce its rights under this Agreement, the prevailing party shall be entitled to recover its reasonable attorney’s fees and expenses. Each party waives the right to a trial by jury in any action arising under this Agreement.

6. Consultant assumes there are no major or significant items or issues affecting the Property that would require the expertise of a professional building contractor, engineer, or environmental consultant for Consultant to prepare a valid report. Client acknowledges that such additional expertise is not covered in the Consulting fee and agrees that, if such additional expertise is required, it shall be provided by others at the discretion and direction of the Client, and solely at Client’s additional cost and expense.

7. In the event of any dispute between Client and Consultant relating to this Agreement, or Consultant's or

Client's performance hereunder, Consultant and Client agree that such dispute shall be resolved by means of binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered by an arbitrator may be entered in any court of competent jurisdiction. Depositions may be taken and other discovery obtained during such arbitration proceedings to the same extent as authorized in civil judicial proceedings in the state where the office of the Consultant executing this Agreement is located. The arbitrator shall be limited to awarding compensatory damages and shall have no authority to award punitive, exemplary or similar damages. The prevailing party in the arbitration proceeding shall be entitled to recover its expenses from the losing party, including costs of the arbitration proceeding, and reasonable attorney's fees. Client acknowledges that Consultant is being retained hereunder as an independent contractor to perform the services described herein and nothing in this Agreement shall be deemed to create any other relationship between Client and Consultant. This engagement shall be deemed concluded and the services hereunder completed upon delivery to Client of the Consulting Report discussed herein.

8. All statements of fact in the report which are used as the basis of the Consultant's analyses, opinions, and conclusions will be true and correct to Consultant's actual knowledge and belief. Consultant does not make any representation or warranty, express or implied, as to the accuracy or completeness of the information or the condition of the Property furnished to Consultant by Client or others. TO THE FULLEST EXTENT PERMITTED BY LAW, CONSULTANT DISCLAIMS ANY GUARANTEE OR WARRANTY AS TO THE OPINIONS AND CONCLUSIONS PRESENTED ORALLY OR IN ANY CONSULTING REPORT, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE EVEN IF KNOWN TO CONSULTANT. The conclusions and any permitted reliance on and use of the Consulting Report shall be subject to the assumptions, limitations, and qualifying statements contained in the report.

9. Consultant shall have no responsibility for legal matters, including zoning, or questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the Property analyzed.

10. Client shall provide Consultant with such materials with respect to the assignment as are requested by Consultant and in the possession or under the control of Client. Client shall provide Consultant with sufficient access to the Property to be analyzed, and hereby grants permission for entry unless discussed in advance to the contrary.

11. The data gathered in the course of the assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are, and upon payment will remain, the property of Client. With respect to data provided by Client, Consultant shall not violate the confidential nature of the Consultant-Client relationship by improperly disclosing any proprietary information furnished to Consultant. Notwithstanding the foregoing, Consultant is authorized by Client to disclose all or any portion of the report and related data as may be required by statute, government regulation, legal process, or judicial.

12. Unless specifically noted, in preparing the Consulting Report the Consultant will not be considering the possible existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (collectively, “Hazardous Material) on or affecting the Property, or the cost of encapsulation or removal thereof. Further, Client represents that there is no major or significant deferred maintenance of the Property that would require the expertise of a professional cost estimator or contractor. If such repairs are needed, the estimates are to be prepared by others, at Client’s discretion and direction, and are not covered as part of the Consulting fee.

13. In the event Client intends to use the Consulting Report in connection with a tax matter, Client acknowledges that Consultant provides no warranty, representation or prediction as to the outcome of such tax matter. Client understands and acknowledges that any relevant taxing authority (whether the Internal Revenue Service or any other federal, state or local taxing authority) may disagree with or reject the Consulting Report or otherwise disagree with Client’s tax position, and further understands and acknowledges that the taxing authority may seek to collect additional taxes, interest, penalties or fees from Client beyond what may be suggested by the Consulting Report. Client agrees that Consultant shall have no responsibility or liability to Client or any other party for any such taxes, interest, penalties or fees and that Client will not seek damages or other compensation from Consultant relating to any such taxes, interest, penalties or fees imposed on Client, or for any attorneys’ fees, costs or other expenses relating to Client’s tax matters.

14. Consultant shall have no liability with respect to any loss, damage, claim or expense incurred by or asserted against Client arising out of, based upon or resulting from Client’s failure to provide accurate or complete information or documentation pertaining to an assignment ordered under or in connection with this Agreement, including Client’s failure, or the failure of any of Client’s agents, to provide a complete copy of the Consulting Report to any third party.

15. LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT ARISING FROM SECTION 16 BELOW, OR

SECTION 17 IF APPLICABLE, IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATE, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR CONTRACTORS BE LIABLE TO THE OTHER, WHETHER BASED IN CONTRACT, WARRANTY, INDEMNITY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT OR OTHERWISE, FOR ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, INCIDENTAL OR INDIRECT DAMAGES, AND AGGREGATE DAMAGES IN CONNECTION WITH THIS AGREEMENT FOR EITHER PARTY (EXCLUDING THE OBLIGATION TO PAY THE FEES REQUIRED HEREUNDER) SHALL NOT EXCEED THE GREATER OF THE TOTAL FEES PAYABLE TO CONSULTANT UNDER THIS AGREEMENT OR TEN THOUSAND DOLLARS ($10,000). THIS LIABILITY LIMITATION SHALL NOT APPLY IN THE EVENT OF A FINAL FINDING BY AN ARBITRATOR OR A COURT OF COMPETENT JURISDICTION THAT SUCH LIABILITY IS THE RESULT OF A PARTY’S FRAUD OR WILLFUL MISCONDUCT.

16. Client shall not disseminate, distribute, make available or otherwise provide any Consulting Report prepared hereunder to any third party (including without limitation, incorporating or referencing the Consulting Report , in whole or in part, in any offering or other material intended for review by other parties) except to (i) any third party expressly acknowledged in a signed writing by Consultant as an “Intended User” of the Consulting Report provided that either Consultant has received an acceptable release from such third party with respect to such Consulting Report or Client provides acceptable indemnity protections to Consultant against any claims resulting from the distribution of the Consulting Report to such third party, (ii) any third party service provider (including rating agencies and Client’s auditors) using the Consulting Report in the course of providing services for the sole benefit of Client, or (iii) as required by statute, government regulation, legal process, or judicial decree. In the event Consultant consents, in writing, to Client incorporating or referencing the Consulting Report in any offering or other materials intended for review by other parties, Client shall not distribute, file, or otherwise make such materials available to any such parties unless and until Client has provided Consultant with complete copies of such materials and Consultant has approved all such materials in writing. Client shall not modify any such materials once approved by Consultant. In the absence of satisfying the conditions of this paragraph with respect to a party who is not designated as an Intended User, in no event shall the receipt of an Consulting Report by such party extend any right to the party to use and rely on such report, and Consultant shall have no liability for such unauthorized use and reliance on any Consulting Report. In the event Client breaches the provisions of this paragraph, Client shall indemnify, defend and hold Consultant, and its affiliates and their officers, directors, employees, contractors, agents and other representatives (Consultant and each of the foregoing an “Indemnified Party” and collectively the “Indemnified Parties”), fully harmless from and against all losses, liabilities, damages and expenses (collectively, “Damages”) claimed against, sustained or incurred by any Indemnified Party arising out of or in connection with such breach, regardless of any negligence on the part of any Indemnified Party in preparing the Consulting Report.

17. In the event Client incorporates or references the Consulting Report, in whole or in part, in any offering or other material intended for review by other parties, Client shall indemnify, defend and hold each of the Indemnified Parties harmless from and against any Damages in connection with (i) any transaction contemplated by this Agreement or in connection with the engagement of or performance of services by any Indemnified Party hereunder, (ii) any actual or alleged untrue statement of a material fact, or the actual or alleged failure to state a material fact necessary to make a statement not misleading in light of the circumstances under which it was made with respect to all information furnished to any Indemnified Party or made available to a prospective party to a transaction, or (iii) an actual or alleged violation of applicable law by Client (including, without limitation, securities laws) or the negligent or intentional acts or omissions of Client (including the failure to perform any duty imposed by law); and will reimburse each Indemnified Party for all reasonable fees and expenses (including fees and expenses of counsel) (collectively, “Expenses”) as incurred in connection with investigating, preparing, pursuing or defending any threatened or pending claim, action, proceeding or investigation (collectively, “Proceedings”) arising therefrom, and regardless of whether such Indemnified Party is a formal party to such Proceeding. Client agrees not to enter into any waiver, release or settlement of any Proceeding (whether or not any Indemnified Party is a formal party to such Proceeding) without the prior written consent of Consultant (which consent will not be unreasonably withheld or delayed) unless such waiver, release or settlement includes an unconditional release of each Indemnified Party from all liability arising out of such Proceeding.

18. Time Period for Legal Action. Unless the time period is shorter under applicable law, except in connection with paragraphs 16 and 17 above, Consultant and Client agree that any legal action or lawsuit by one party against the other party or its affiliates, officers, directors, employees, contractors, agents, or other representatives, whether based in contract, warranty, indemnity, negligence, strict liability or other tort or otherwise, relating to (a) this Agreement or the Consulting Report, (b) any services under this Agreement or (c) any acts or conduct relating to such services, shall be filed within two (2) years from the date of delivery to Client of the Consulting Report to which the claims or causes of action in the legal action or lawsuit relate. The time period stated in this section shall not be extended by any incapacity of a party or any delay in the discovery or accrual of the underlying claims, causes of action or damages.

ADDENDUM F

CERTIFICATION

CERTIFICATION We certify that, to the best of our knowledge and belief:

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

• The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and is our personal, unbiased professional analyses, opinions and conclusions.

• We have no present or prospective interest in the project that is the subject of

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

• We have no bias with respect to the property that is the subject of this report

or to the parties involved with this assignment.

• Our engagement in this assignment was not contingent upon the developing or reporting of predetermined results.

• Our compensation is not contingent upon the development or reporting of

predetermined results that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this report.

• We have made a personal inspection of the proposed site that is the subject

of this report.

• No one provided significant professional assistance to the persons signing below except as sourced within the body of this report.

__________________________ G. Randle McCaslin, CRE Managing Director

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