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HomeMy WebLinkAboutCBRE, Inc. 2016-08-31COU No. 1617096 AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES This Agreement, made and entered into this 31st day of August, 2016 ("Effective Date"), by and between CITY OF UKIAH, CALIFORNIA, hereinafter referred to as "City" and CBRE, Inc., DBA CBRE Hotels, a corporation, organized and in good standing under the laws of the state of Delaware, hereinafter referred to as "Consultant". RECITALS This Agreement is predicated on the following facts: a. City requires consulting services related to conducting a market feasibility study for a proposed hotel to be located in downtown Ukiah, California. b. Consultant represents that it has the qualifications, skills, experience and properly licensed to provide these services, and is willing to provide them according to the terms of this Agreement. C. City and Consultant agree upon the Scope -of -Work and Work Schedule attached hereto as Attachment "A", describing contract provisions for the project and setting forth the completion dates for the various services to be provided pursuant to this Agreement. TERMS OF AGREEMENT 1.0 DESCRIPTION OF PROJECT 1.1 The Project is described in detail in the attached Scope -of -Work (Attachment "A"). 2.0 SCOPE OF SERVICES 2.1 As set forth in Attachment "A". The Report required by Section C.10 in Attachment A shall be furnished to the City and not to any other person or entity without the City's prior written consent. The Report shall contain a disclaimer on the page following the title page approved by City in substantially the following form: This Report was prepared by CBRE, Inc. as a consultant to the City of Ukiah. While the City of Ukiah and CBRE believe that the information contained in this Report has been obtained from reliable sources, neither the City of Ukiah nor CBRE is responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this Report is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Nothing in this Report shall to any extent substitute for the independent investigations and the sound technical and business judgment of the reader. In no event will the City of Ukiah, CBRE or any of their partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Report or for any consequential, special or similar damages, even if the City or CBRE has been advised of the possibility of such damages. Std — ProtSvesAgreement- November 20, 2008 PAGE I OF 7 COU No. 1617096 2.2. Additional Services. Additional services, if any, shall only proceed upon written agreement between City and Consultant. The written Agreement shall be in the form of an Amendment to this Agreement. 3.0 CONDUCT OF WORK 3.1 Time of Completion. Consultant shall commence performance of services as required by the Scope -of -Work upon receipt of a Notice to Proceed from City and shall complete such services within eight (8) weeks from receipt of the Notice to Proceed. Consultant shall complete the work to the City's reasonable satisfaction, even if contract disputes arise or Consultant contends it is entitled to further compensation. 4.0 COMPENSATION FOR SERVICES 4.1 Basis for Compensation. For the performance of the professional services of this Agreement, Consultant shall be compensated on a time and expense basis riot to exceed a guaranteed maximum dollar amount of $25,000. Labor charges shall be based upon hourly billing rates for the various classifications of personnel employed by Consultant to perform the Scope of Work as set forth in the attached Attachment A, which shall include all indirect costs and expenses of every kind or nature, except direct expenses. The direct expenses and the fees to be charged for same shall be as set forth in Attachment A. Consultant shall complete the Scope of Work for the not -to - exceed guaranteed maximum, even if actual time and expenses exceed that amount. 4.2 Changes. Should changes in compensation be required because of changes to the Scope -of -Work of this Agreement, the parties shall agree in writing to any changes in compensation. "Changes to the Scope -of -Work" means different activities than those described in Attachment "A" and not additional time to complete those activities than the parties anticipated on the date they entered this Agreement. 4.3 Sub -contractor Payment. The use of sub -consultants or other services to perform a portion of the work of this Agreement shall be approved by City prior to commencement of work. The cost of sub -consultants shall be included within guaranteed not -to -exceed amount set forth in Section 4.1. 4.4 Terms of Payment. Payment to Consultant for services rendered in accordance with this contract shall be based upon submission of monthly invoices for the work satisfactorily performed prior to the date of the invoice less any amount already paid to Consultant, which amounts shall be due and payable thirty (30) days after receipt by City. The invoices shall provide a description of each item of work performed, the time expended to perform each task, the fees charged for that task, and the direct expenses incurred and billed for. Invoices shall be accompanied by documentation sufficient to enable City to determine progress made and to support the expenses claimed. 5.0 ASSURANCES OF CONSULTANT 5.1 Independent Contractor. Consultant is an independent contractor and is solely responsible for its acts or omissions. Consultant (including its agents, servants, and employees) is not the City's agent, employee, or representative for any purpose. It is the express intention of the parties hereto that Consultant is an independent contractor and not an employee, joint venturer, or partner of City for any purpose whatsoever. City shall have no right to, and shall not control the manner or prescribe the Std — ProfSvcsAgreement- November 20, 2008 PAGE 2 OF 7 COU No. 1617096 method of accomplishing those services contracted to and performed by Consultant under this Agreement, and the general public and all governmental agencies regulating such activity shall be so informed. Those provisions of this Agreement that reserve ultimate authority in City have been inserted solely to achieve compliance with federal and state laws, rules, regulations, and interpretations thereof. No such provisions and no other provisions of this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Consultant and City. Consultant shall pay all estimated and actual federal and state income and self- employment taxes that are due the state and federal government and shall furnish and pay worker's compensation insurance, unemployment insurance and any other benefits required by law for himself and his employees, if any. Consultant agrees to indemnify and hold City and its officers, agents and employees harmless from and against any claims or demands by federal, state or local government agencies for any such taxes or benefits due but not paid by Consultant, including the legal costs associated with defending against any audit, claim, demand or law suit. Consultant warrants and represents that it is a properly licensed professional or professional organization with a substantial investment in its business and that it maintains its own offices and staff which it will use in performing under this Agreement. 5.2 Conflict of Interest. Consultant understands that its professional responsibility hereunder is solely to City. The employees of Consultant performing the services hereunder have no interest and will not acquire any direct or indirect interest that would conflict with its performance of the Agreement. If the City Manager determines that the Consultant has a disclosure obligation under the City's local conflict of interest code, the Consultant shall file the required disclosure form with the City Clerk within 10 days of being notified of the City Manager's determination. 6.0 INDEMNIFICATION 6.1 Insurance Liability. Without limiting Consultant's obligations arising under Paragraph 6.2 Consultant shall not begin work under this Agreement until it procures and maintains for the full period of time allowed by law, surviving the termination of this Agreement insurance against claims for injuries to persons or damages to property, which may arise from or in connection with its performance under this Agreement. A. Minimum Scope of Insurance Coverage shall be at least as broad as: Insurance Services Office ("ISO) Commercial General Liability Coverage Form No. CG 20 10 10 01 and Commercial General Liability Coverage — Completed Operations Form No. CG 20 37 10 01. ISO Form No. CA 0001 (Ed. 1/87) covering Automobile Liability, Code 1 "any auto" or Code 8, 9 if no owned autos and endorsement CA 0025. 3. Worker's Compensation Insurance as required by the Labor Code of the State of California and Employers Liability Insurance. Std — ProiSvesAgreement- November 20, 2008 PAGE 3 OF 7 COU No. 1617096 4. Errors and Omissions liability insurance appropriate to the consultant's profession. B. Minimum Limits of Insurance Consultant shall maintain limits no less than: General Liability: $1,000,000 combined single limit per occurrence for bodily injury, personal injury and property damage including operations, products and completed operations. If Commercial General Liability Insurance or other form with a general aggregate limit is used, the general aggregate limit shall apply separately to the work performed under this Agreement, or the aggregate limit shall be twice the prescribed per occurrence limit. 2. Automobile Liability: $1,000,000 combined single limit per accident for bodily injury and property damage. 3. Worker's Compensation and Employers Liability: Worker's compensation limits as required by the Labor Code of the State of California and Employers Liability limits of $1,000,000 per accident. 4. Errors and Omissions liability: $1,000,000 per occurrence. Any deductibles or self-insured retentions must be declared to the City. D. Other Insurance Provisions The policies are to contain, or be endorsed to contain, the following provisions: General Liability and Automobile Liability Coverages a. The City, it officers, officials, employees and volunteers are to be covered as additional insureds as respects the Consultants indemnity obligations in this agreement;, products and completed operations of the Consultant, premises owned, occupied or used by the Consultant, or automobiles owned, hired or borrowed by the Consultant for the full period of time allowed by law, surviving the termination of this Agreement. The coverage shall contain no special limitations on the scope -of -protection afforded to the City, its officers, officials, employees or volunteers. b. The Consultant's insurance coverage shall be primary insurance as respects to the City, its officers, officials, employees and volunteers for Consultants indemnity obligations in this agreement. Any insurance or self-insurance maintained by the City, its officers, officials, employees or volunteers shall be in excess of the Consultant's insurance and shall not contribute with it. C. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the City, its officers, officials, employees or volunteers. Std - ProfSvcsAgnreement- November 20, 2008 PAGE 4 OF 7 COU No. 1617096 The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 2. Worker's Compensation and Employers Liability Coverage The insurer shall agree to waive all rights of subrogation against the City, its officers, officials, employees and volunteers for losses arising from Consultant's performance of the work, pursuant to this Agreement. 3. Professional Liability Coverage If written on a claims -made basis, the retroactivity date shall be the effective date of this Agreement. The policy period shall extend one year from final completion of services. 4. All Coverages Each Insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days prior written notice to the City. Notification by Consultant in lieu of the insurer will satisfy this requirement E. Acceptability of Insurers Insurance is to be placed with admitted California insurers with an A.M. Best's rating of no less than A- for financial strength. F. Verification of Coverage Consultant shall furnish the City with Certificates of Insurance and with Endorsements effecting coverage required by this Agreement. The Certificates and Endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. . Where by statute, the City's Workers' Compensation - related forms cannot be used, equivalent forms approved by the Insurance Commissioner are to be substituted. All Certificates and Endorsements are to be received and approved by the City before Consultant begins the work of this Agreement. Consultant shall provide City with a complete copy of an insurance policy, if the City tenders the defense or indemnification of a claim and the insurer denies coverage or provides coverage subject to a reservation of rights. If Consultant fails to provide the coverages required herein, the City shall have the right, but not the obligation, to purchase any or all of them. In that event, the cost of insurance becomes part of the compensation due the contractor after notice to Consultant that City has paid the premium. 6.2 Indemnification. Notwithstanding the foregoing insurance requirements, and in addition thereto, Consultant agrees, for the full period of time allowed by law, surviving the termination of this Agreement, to indemnify the City for any claim, cost or liability for Std — ProfSvcsAgreement- November 20, 2008 PAGE 5 OF 7 COU No. 1617096 death or bodily injury to persons, or injury to property that arises out of, or pertains to, or relates to any negligent act or omission or the willful misconduct of Consultant in the performance of services under this contract by Consultant, but this indemnity does not apply to liability for damages for death or bodily injury to persons, injury to property, or other loss, arising from the sole negligence, willful misconduct or defects in design by the City, or arising from the active negligence of the City. "Indemnify," as used herein includes the expenses of defending against a claim and the payment of any settlement or judgment arising out of the claim. Defense costs include all costs associated with defending the claim, including, but not limited to, the fees of attorneys, investigators, consultants, experts and expert witnesses, and litigation expenses. References in this paragraph to City or Consultant, include their officers, employees, agents, and subcontractors. 7.0 CONTRACT PROVISIONS 7.1 Ownership of Work. All documents furnished to Consultant by City and all documents or reports and supportive data prepared by Consultant under this Agreement are owned and become the property of the City upon their creation and shall be given to City immediately upon demand and at the completion of Consultant's services at no additional cost to City. Deliverables are identified in the Scope -of -Work, Attachment "A". All documents produced by Consultant shall be furnished to City in digital format and hardcopy. Consultant shall produce the digital format, using software and rnedia approved by City. 7.2 Governing Law. Consultant shall comply with the laws and regulations of the United States, the State of California, and all local governments having jurisdiction over this Agreement. The interpretation and enforcement of this Agreement shall be governed by California law and any action arising under or in connection with this Agreement must be filed in a Court of competent jurisdiction in Mendocino County. 7.3 Entire Agreement. This Agreement plus its Attachment(s) and executed Amendments set forth the entire understanding between the parties. 7.4 Severability. If any term of this Agreement is held invalid by a court of competent jurisdiction, the remainder of this Agreement shall remain in effect. 7.5 Modification. No modification of this Agreement is valid unless made with the agreement of both parties in writing. 7.6 Assignment. Consultant's services are considered unique and personal. Consultant shall not assign, transfer, or sub -contract its interest or obligation under all or any portion of this Agreement without City's prior written consent. 7.7 Waiver. No waiver of a breach of any covenant, term, or condition of this Agreement shall be a waiver of any other or subsequent breach of the same or any other covenant, term or condition or a waiver of the covenant, term or condition itself. 7.8 Termination. This Agreement may only be terminated by either party: 1) for breach of the Agreement; 2) because funds are no longer available to pay Consultant for services provided under this Agreement; or 3) City has abandoned and does not wish to complete Std - Prof5vcsAgreement- November 20, 2008 PAGE 6 OF 7 COU No. 1617096 the project for which Consultant was retained. A party shall notify the other party of any alleged breach of the Agreement and of the action required to cure the breach. If the breaching party fails to cure the breach within the time specified in the notice, the contract shall be terminated as of that time. If terminated for lack of funds or abandonment of the project, the contract shall terminate on the date notice of termination is given to Consultant. City shall pay the Consultant only for services performed and expenses incurred as of the effective termination date. In such event, as a condition to payment, Consultant shall provide to City all finished or unfinished documents, data, studies, surveys, drawings, maps, models, photographs and reports prepared by the Consultant under this Agreement. Consultant shall be entitled to receive just and equitable compensation for any work satisfactorily completed hereunder, subject to off -set for any direct or consequential damages City may incur as a result of Consultant's breach of contract. 7.9 Execution of Agreement. This Agreement may be executed in duplicate originals, each bearing the original signature of the parties. Alternatively, this Agreement may be executed and delivered by facsimile or other electronic transmission, and in more than one counterpart, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. When executed using either alternative, the executed agreement shall be deemed an original admissible as evidence in any administrative or judicial proceeding to prove the terms and content of this Agreement. 8.0 NOTICES Any notice given under this Agreement shall be in writing and deemed given when personally delivered or deposited in the mail (certified or registered) addressed to the parties as follows: CITY OF UKIAH CBRE Inc., dba CBRE Hotels PURCHASING DEPARTMENT MR. MIKY KUO 300 SEMINARY AVENUE 101 CALIFORNIA STREET, 44TH FLOOR UKIAH, CALIFORNIA 95482-5400 SAN FRANCISCO, CA 94111 9.0 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT ARISING FROM SECTION 6.0, 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. Std — ProfSwsAgreement- November 20, 2008 PAGE 7 OF 7 COU No. 1617096 11.0 SIGNATURES IN WITNESS WHEREOF, the parties have executed this Agreement the Effective Date: CBRE INP., DBA CBRE HOTELS 13Y: 08/31/16 Date PRINT NAME: Christopher Kraus 95-2743174 IRS IDN Number CITY OF UKIAH BY: E ACOMO Date r MA GER ATTEST Law q& Jjy KtRISTINE LAWLER Date CITY CLERK Std — ProfSwsAgreement- November 20, 2008 PAGE 8 OF 7 Market Demand Proposed Downtown Hotel — RFP Response And Economic Analysis Ukiah, California Prepared for: Ms. Mary Horger Purchasing Supervisor City of Ukiah 300 Seminary Avenue Ukiah, California 95482 Prepared By: CBRE Hotels 101 California Street, 44" Floor San Francisco, California 94010 Date of the Proposal: June 7, 2016 CBRE COMMERCIAL REAL ESTATE SERVICES Chris Kraus Managing Director CBRE Hotels Sent via email to: mhorgerPcityofukiah.com June 7, 2016 Ms. Mary Horger Purchasing Supervisor City of Ukiah 300 Seminary Avenue Ukiah, California 95482 CBRE, Inc. Valuation & Advisory Services 101 California Street, 44"' Floor San Francisco. CA 941 1 1 +1 406 582 8189 Direct +1 415 652 4483 Mobile chris.krous@cbre.com www.cbrehotels.com Re: Market Demand and Economic Analysis — Proposed Downtown Hotel Ukiah, California Dear Ms. Horger: In response to your formal Request for Proposal ("RFP"), we are pleased to submit this proposal to conduct a market feasibility study for a proposed hotel (the "Hotel") to be located in downtown Ukiah, California. A Introduction As we understand it, the City of Ukiah wishes to promote the development of a hotel within historic downtown Ukiah. Although a specific site has not been selected, there are several potential sites within the downtown core of Ukiah that may provide an opportunity for lodging development. The goal of the City of Ukiah is to determine if a hotel is feasible by the private sector. If a hotel is not fully feasible by the private sector, the City of Ukiah would like to determine the financial gap that might exist, along with recommendations of the most appropriate public subsidies and/or incentives that may be used to potentially fill any identified financial gap. The City of Ukiah therefore requires a firm such as CBRE Hotels to assist in determining if the development of a hotel in downtown Ukiah is feasible by a private developer. In order to assist the City of Ukiah, we propose to perform a study that would encompass the following per your specific request outlined in the RFP: June 7, 2016 Proposed Downtown Hotel - Ukiah, CA City of Ukiah Page 2 • Meet with representatives of the City of Ukiah to fully understand your goals and objectives for the study; • Conduct primary market research in the area, consisting of, but not limited to, interviews with key demand generators, inspection and evaluation of competition, and discussions with people familiar with development patterns and the local hotel market. • Analyze the current and future market demand for hotel rooms in the local market area; • Evaluate the appropriateness of the available sites in the City of Ukiah for the development of a hotel; • Provide key planning criteria as to the sizing, concept, brand affiliation (if appropriate), amenities to be provided, and timing of the potential hotel development; • Develop a forecast of the market share and likely occupancy levels and average daily room rates ("ADR") the proposed Hotel could reasonably achieve over its first five years of operation; • Develop a statement of estimated annual operating results for the proposed Hotel for its first ten years of operation. This statement would reflect all potential revenues and expenses associated with ongoing operations and would be the basis for analyzing the future economic feasibility of the development; • Develop an estimate of the total development cost of the proposed Hotel. Based on this cost estimate, together with our cash flow forecasts, we will be able to evaluate the financial feasibility of the proposed Hotel; • If based on our analysis a hotel development is not fully feasible, determine the financial gap that could be filled by public subsidies/incentives, along with recommendations of the most appropriate public subsidies/incentives to fill any identified financial gap; • Codify our findings of the analysis in a draft report outlying our initial conclusions and opinions concerning market and economic feasibility of the proposed Hotel. Upon review of the report by representatives of the City of Ukiah, we shall address any comments and issue a final report; and, • At the appropriate time, present our findings to representatives of the City of Ukiah. The work program for the study will be concerned with the determination of current and potential future demand for hotel rooms, assessment of the existing and potential future competitive hotel supply, and the share of the market that could reasonably be attained by the proposed Hotel. June 7, 2016 Proposed Downtown Hotel — Ukiah, CA City of Ukiah Page 3 Our work plan for such a study will be conducted in two primary phases, as detailed later in this proposal. B CBRE Hotels As a point of background, we would like to provide you with a brief overview of our Firm. CBRE Hotels is a division of the CBRE Group, Inc. (NYSE:CBG), the largest full service, real estate and investment organization in the World with more than 70,000 employees located in more than 400 offices worldwide. CBRE Hotels operates as an existing specialized advisory group within CBRE and provides hospitality and real estate industry professionals with a global practice and one-stop shop of unparalleled, global and fully integrated real estate services and products. CBRE Hotels is comprised of over 375 dedicated hospitality professionals located in more than 60 offices across the globe, including San Francisco, Boston, New York, Philadelphia, Atlanta, Jacksonville, Washington, D.C., Houston, Indianapolis, Los Angeles, Seattle, and Bozeman in the U.S. CBRE Hotels is a specialized advisory group within CBRE and consists of three integrated hospitality -focused divisions including valuation and advisory services, brokerage and capital markets, and research, as discussed below. Valuation and Advisory Services Our valuation and advisory services group provides consulting services and industry expertise to help our clients in planning, developing, managing, financing, problem -solving, improving operations, and valuing hotels and other hospitality assets. Our engagements range from hotel market and financial feasibility studies to investment structuring, and from hotel appraisals to asset management. Our valuation and advisory services group is constantly providing clients both large and small with the most constructive and valuable advice in the industry, performing feasibility and market studies, acquisition due diligence and valuations involving hotels, resorts, restaurants, golf courses, and a variety of mixed-use developments and other hospitality products. We have the distinct advantage of being the only hospitality valuation and advisory firm with its own, proprietary database of U.S. hotel financial statistics. 2 Brokerage and Capital Markets CBRE Hotels' brokerage group serves the investment market primarily as exclusive agents for owners/sellers managing the sale and disposition process. The team members of CBRE have extensive backgrounds in hotel and resort transactions as well backgrounds in hotel consulting and operations. CBRE's presentation of prospective hotel investments reflects a thorough June 7, 2016 Proposed Downtown Hotel — Ukiah, CA City of Ukiah Page 4 understanding of hotels, their branding/affiliations, management issues, operating margins, market dynamics, and capitalization. Our hotel brokerage team has been retained for other services that include specific buyer - representation assignments, RFPs (Request for Proposals) for management organizations, executing ground leases, development financing, joint venture partnerships, and land sales. The scope of our business includes all tiers of the lodging industry including hotels and resorts, vacation -ownership, residential/hotel mixed-use, conference centers, and recreational facilities. Our hotel -centric debt and structured finance group provides comprehensive financial solutions for the world's leading hotel owners, investors, and developers capitalizing on CBRE's long- established relationships with more than 200 of the industry's premier international lenders, including banks, pension funds, life insurance and credit companies, conduits/CMBS entities, government sponsored entities, and offshore investors. Because of its close working relationship with the valuation and advisory services group, our dedicated lodging brokerage and capital markets platform offers clients an unparalleled level of market knowledge with a proven track record of sales and marketing and structured debt and equity successes. 3 Research CBRE Hotels' Americas Research ("CBRE Research") owns the database for Trends® in the Hotel Industry, the statistical review of U.S. hotel operations which first appeared in 1935 and has been published every year since. CBRE Research professionals use the Trends® database to assist their clients in making informed decisions. In addition, the Trends® data is used to produce custom financial reports for clients that enable them to benchmark hotel revenues, expenses, and profits. Beginning in 2007, CBRE Research unveiled its powerful Hotel Horizons®, an economics - based hotel forecasting model that projects five years of supply, demand, occupancy, ADR, and RevPAR for the U.S. lodging industry. Hotel Horizons' reports are published on a quarterly basis for 59 markets and six national chain -scales. With a long-standing tradition of tracking and forecasting the lodging industry, our Research Group has the technical capacity to conduct custom research, the analytical skills to interpret the data, and the access necessary to gather confidential performance information from the industry. 4 CBRE Hotels' Valuation and Advisory Services • Asset Management and Management Company Selection • Real Estate Appraisals and Business Valuation 0 Market and Financial Feasibility Studies June 7, 2016 Proposed Downtown Hotel — Ukiah, CA City of Ukiah Page 5 • Litigation Support and Expert Testimony • Acquisition Due Diligence • Operational Studies • Tourism and Recreational Studies • Resort and Recreation Services • Conference, Convention, and Public Assembly Facilities • Financial Benchmarking • Econometric Forecasting • Custom Research • Transaction (brokerage) Advisory Services • Development Financing • Property Tax Appeals 5 Local Market Knowledge In addition to our long-standing expertise in the hotel industry, we would bring to you in this engagement substantial familiarity with the Northern California. Given the historical role of CBRE Hotels in the hospitality and real estate industries, and our knowledge of the local market, we are of the opinion that there is no firm that can provide the services available through us. More background and information on our Firm can be obtained from our web site at www.cbrehotels.com. C Market Demand and Economic Analysis 1 Introductory Meeting The first phase of our engagement will involve meeting with you and your associates for the purpose of understanding your goals and objectives for this project. 2 Site Analysis Since the location of a hotel development within its market is of major importance to the success of a project, we will analyze and evaluate the following factors regarding the subject's location and possible advantages/disadvantages in comparison with potential competitors: • Accessibility of the transportation network and demand generators 0 Visibility from various access points June 7, 2016 Proposed Downtown Hotel — Ukiah, CA City of Ukiah Page 6 • Ambiance of the area as it might impact demand • Relationship to demand sources and attractions • Climate and seasonality which may impact demand 3 Area Review We will gather and analyze relevant statistical data regarding the local and regional market area to determine whether the economic environment appears suitable for the project. We will examine possible correlation between key economic factors and the demand for hotel rooms and will use available forecasts of these indicators in our evaluation of potential future demand. 4 Primary Research We will perform primary market research within the local market. This will include interviews with key demand generators, inspection and evaluation of competitive and comparable facilities and discussions with executives knowledgeable about the area's lodging market. Among those whom we may conduct such interviews are: • Owners and managers of potentially competitive hotels • Appropriate city and county officials • Major employers in the market area • Management of local tourist attractions • Officials in tourism, development, and transportation • Bankers, editors, and development -organization representatives • Convention Bureau authorities • Redevelopment Agency officials • Local Real Estate professionals 5 Supply and Demand Estimates On the basis of the foregoing analysis, we will estimate potential growth in both the demand for, and the supply of lodging facilities in the competitive market area. We will then evaluate each of the principal segments of demand and describe their characteristics in this particular market and their historical performance. Then we will estimate growth rates in demand for each of these market segments and project the anticipated future demand. The next step is an estimate of the competitive supply, including historical growth trends and potential additions to the supply. We will evaluate the competitive potential of proposed or June 7, 2016 Proposed Downtown Hotel - Ukiah, CA City of Ukiah Page 7 rumored projects with respect to your development, and estimate expected performance of the competitive supply over the projection period for the subject property. 6 Facilities Recommendations We will review plans you may have for the project and prepare recommendations for facilities that, in our opinion, will best meet demonstrated market demand, including: • Concept and quality level of the property; • Number, size and mix of hotel rooms; • Appropriate franchise ("brand") affiliations (if appropriate); • Sizing of restaurant and banquet and meeting space (if appropriate); and, • Related services and amenities to be provided, including parking, recreation and other facilities. These recommendations can provide you with background for a design program and will serve as the basis for our estimate of operating results. 7 Market Share Estimates As a starting point for our estimate of the proposed Hotel's operating performance, we will relate the property's size to the competitive supply, both existing and potential. This ratio, called fair share, is then related to projected competitive demand and adjusted to reflect the share of the market which we would reasonably expect the property to capture in its first five years of operation based on identifiable attributes demanded in the market such as: location, price, quality, and amenities. Based on this analysis, we will develop our projection of the potential occupancy and average room rate the proposed Hotel could achieve over its first five years of operation. 8 Projected Operating Results Using our market research as a basis, we would develop a detailed cash flow forecast for the first ten years of operation of the proposed Hotel. This forecast would include all revenues and expenses and result in a "bottom line" of income before depreciation, amortization, interest, and taxes on income ("EBITDA"). Since the estimated operating results will be based on estimates and assumptions, which are subject to uncertainty and variation, we will not represent them as results that will actually be achieved. The estimated operating results will be used to evaluate the overall feasibility of the project. June 7, 2016 Proposed Downtown Hotel — Ukiah, CA City of Ukiah Page 8 9 Analysis of Economic Feasibility After we have developed the above cash flow forecast, we will then develop an analysis of the economic viability of the proposed Hotel. We will develop an estimate of the total development cost of the proposed project, as well as a recommended financing plan. We will then calculate the project's total return on invested capital as well as the return on an assumed equity investment. Should we determine that the return on investment does not meet current market requirements necessary to attract private investors, we will highlight the level of difference and discuss with you ways in which it may be mitigated via public incentives/subsidies. 10 Report At the conclusion of our analysis we will prepare a detailed report which will summarize our conclusions and recommendations concerning the market and economic feasibility of the proposed Hotel. The report will include an overview of the potential sites, proposed improvements, local area, projected market and financial performance of the project (occupancy, ADR, and NOI) and an evaluation of the economic feasibility of the development. Though the exact format of the report will evolve as the engagement progresses, the following probable section headings provide an outline of the expected final report. • Introduction (Project Concept and Study Methodology) • Summary of Conclusions and Recommendations • Area Economic/Demographic Review • Site Location Evaluation • Competitive Supply and Demand • Recommended Facilities • Market Position -Subject Property • Statement of Estimated Annual Operating Results • Economic Feasibility Analysis The comprehensive report will first be issued in draft for the City of Ukiah to review. Based on review comments from representatives of the City of Ukiah, we will revise the report as necessary and prepared a final report for the City's internal use and for distribution in support of hotel development and financing purposes. This report would be suitable for presentation to potential hotel developers, debt and equity partners, negotiation of a lease, management or franchise agreement, as well as for presentation to representatives of local government agencies. June 7, 2016 Proposed Downtown Hotel - Ukiah, CA City of Ukiah Page 9 At the appropriate time, we will meet with representatives of the City of Ukiah to present our findings, conclusions, and recommendations. E Staffing Given the importance of this engagement, we will be utilizing a team of senior, seasoned individuals. While it is not yet possible to specify all the personnel included in our team, the project manager for this assignment will be Mr. Chris Kraus, MAI, Managing Director, in charge of our San Francisco, California office. Mr. Kraus has worked with CBRE Hotels (previously doing business as PKF Consulting USA) for the past 19 years and has worked closely with numerous public agencies. A copy of Mr. Kraus's qualifications is presented in Addendum B. F Anticipated Delivery Date Based on our present scheduling and your timely acceptance, we can commit to commence the engagement within approximately two to three weeks of receiving your authorization to proceed. Barring unforeseen circumstances, we envision completing our study within approximately four to five weeks. G Professional Fees Our fees are commensurate with services rendered and are based on time expended by our professionals, charged at our normal billing rates as indicated below, and are not in any way contingent upon the results of our work. Our normal hourly billing rates at this time are as follows. Executive and Senior Vice Presidents $450-$800 Vice Presidents $300-$425 Associates $200- $275 Consultants $150- $175 Based on our understanding of the scope of this assignment, we estimate our professional fee for the engagement to be $25,000. This fee estimate assumes travel to Ukiah for our initial meeting as well as a second meeting to present our formal findings and conclusions. As it is customary in assignments with public agencies, our professional fees will be billed to you at the end of the study. Payment of these invoices is due within 30 days of receipt. The final copies of the report will be released after the receipt of payments. H Limitations of the Study Our report will be subject to the attached Terms and Conditions. June 7, 2016 Proposed Downtown Hotel - Ukiah, CA City of Ukiah Page 10 Approval and Acceptance If this letter correctly states the nature of the work to be undertaken and the arrangements are satisfactory, please sign the enclosed copy of this letter and return it to us as our authorization to commence the assignment. We appreciate the opportunity to submit this proposal and we look forward to working with you on this very interesting assignment. Yours sincerely, CBRE Hotels Chris Kraus Managing Director chris.kraus@cbre.com 1 415.652.4483 Approved and Accepted: By: Title: Date: