HVS International | 2006 Manhattan Hotel Market Overview

Overview of Sales Transactions in Manhattan

The table on the following pages sets forth an overview of Manhattan hotel sales from June 2000 through March of 2006.

Property	Date of Sale	Address	No. of Rooms	Seller	Buyer	Price��	Price per Room
Drake Hotel	Pending	440 Park Avenue	495	Host Marriott Corporation	Macklowe Properties	$440,000,000	$889,000
To be demolished for the development of a mixed-use residential condominium
Hilton Times Square *	Mar-06	234 West 42nd Street	444	Forest City Ratner Co. JV Hilton Hotels Corp.	Sunstone Hotel Investors	242,500,000	546,000
				Additional $15 million to convert property to a franchise
The Mark Hotel *	Jan-06	25 East 77th Street	176	Mandarin Oriental Hotels	Izak Senbahar and Simon Elias	150,000,000	852,000
Sold for Condo Conversion
Marriott East Side	Nov-05	525 Lexingtion Avenue	646	Strategic Hotel Capital, Inc.	Prime Property Fund (Morgan Stanley)	287,000,000	444,000
Westin Essex House	Sep-05	160 Central Park South	605	Strategic Hotel Capital, Inc.	Dubai Investment Group	400,000,000	661,000
Assuming Partial Condo Conversion				(as renovated, assuming a $50-million infusion)		450,000,000	744,000
Portland Square	Sep-05	128-134 W 47th Street	140	David & Lina Putchall	47th Hotel Associates LLC	19,300,000	138,000
Howard Johnson Express	Sep-05	135 East Houston Street	45	Houston Lodging, LLC	Gemini Real Estate	13,750,000	306,000
Algonquin Hotel	Sep-05	59 West 44th Street	174	Miller Global	HEI Hospitality	74,100,000	426,000
				(as renovated, assuming a $3.5-million infusion)		77,600,000	446,000
Avalon Hotel	Aug-05	16 East 32nd Street	100	Hotel Stanford LLC	Ferrado US LLC	35,700,000	357,000
Holiday Inn SoHo	Aug-05	138 Lafayette Street	227	Great Canal Plaza Inc.	Highgate Holdings	42,500,000	187,000
				(as renovated, assuming a $4.5-million infusion)		47,000,000	207,000
Clarion Park Avenue	May-05	429 Park Avenue South	60	Palace International Properties, Ltd.	Park Avenue Hotels New York LLC	11,350,000	189,000
Crowne Plaza UN (35 years remaining)*	May-05	304 East 42nd Street	300	InterContinental Hotels Group	Highgate Holdings	34,000,000	113,000
				(as renovated, assuming a $10-million PIP)		44,000,000	147,000
The Sutton	Apr-05	330 East 56th Street	85	Glenwood Management	Alchemy Properties	52,400,000	616,000
Rihga Royal*	Mar-05	151 West 54th Street	506	Lehman Brothers	Blackstone Real Estate Group	193,000,000	381,000
Best Western Convention Center	Feb-05	522-524 W 38th Street	83	Unigroup Hotel LLC	522 W 38th St NY LLC	15,785,000	190,000
Manhattan Seaport Suites	Jan-05	129-31 Front Street	57	Target Two Associates	129 Front Realty LLC/Heng Sang Realty�	11,750,000	206,000
The Stanhope Park Hyatt*	Jan-05	995 Fifth Avenue	169	Hyatt Hotels	Intell Management	70,000,000	414,000
Sold for Condo Conversion
Sheraton Russell	Dec-04	45 Park Avenue at 37th St.	146	Starwood Hotels & Resorts	SJP Residential Properties	40,250,000	276,000
Sold for Condo Conversion
Clarion Fifth Avenue*	Dec-04	3-5 East 40th Street	189	ING Realty Partners	DiamondRock Hospitality	34,375,000	182,000
Park Central	Dec-04	870 Seventh Avenue	935	H. Park Central, LLC	Highgate Hotels	215,000,000	230,000
Courtyard Midtown East	Dec-04	866 Third Avenue	307	866 3rd Next Generation Hotel L.L.C.	DiamondRock Hospitality	75,000,000	244,000
The Plaza�	Oct-04	768 Fifth Avenue	805	Plaza Operating Partners, Ltd.	Elad Properties	675,000,000	839,000
Sold for Condo Conversion (except for 150 rooms)
Days Hotel	Aug-04	790 8th Avenue	368	Hampshire Hotels & Resorts	Highgate Hotels	$58,000,000	$158,000
Howard Johnson Plaza	Aug-04	851 8th Avenue	300	Hampshire Hotels & Resorts	Highgate Hotels	47,200,000	157,000
Paramount Hotel	Jun-04	235 West 46th Street	593	Ian Schrager Hotels	Becker Ventures, LLC	126,500,000	213,000
				(as renovated, assuming a $50-million infusion)		176,500,000	298,000
Quality Inn Times Square	May-04	157 West 47th Street	160	Hampshire Hotels & Resorts	Cushlin Limited	20,200,000	126,000
Mayflower Hotel	May-04	15 Central Park West	365	Goulandris Family	William Lie Zeckendrof JV Whitehall RE Fund	401,000,000	1,099,000
To be demolished for the development of a mixed-use residential condominium
The Mansfield*	May-04	12 West 44th Street	127	Credit Suisse First Boston	Ark Investment Partners, LP	12,500,000	98,000
InterContinental Central Park South*	Apr-04	112 Central Park S.	211	InterContinental Hotels Group	Anbau Enterprises	63,500,000	301,000
Sold for Condo Conversion
The Shoreham*	Jan-04	33 West 55th Street	177	Credit Suisse First Boston	Ark Investment Partners, LP	14,500,000	82,000
Empire Hotel	Dec-03	44 West 63rd Street	381	Ian Schrager Hotels/NorthStar Capital	Joseph and Jack Chetrit	$80,000,000	$210,000
Sold for Condo Conversion
Helmsley Hotel Windsor	Sep-03	100 West 58th Street	244	Leona Helmsley	Joseph and Jack Chetrit	55,000,000	225,000
Sold for Condo Conversion
Gorham Hotel	Sep-03	136 West 55th Street	117	Private Investors	Richard Born and Ira Krukier	23,100,000	197,000
Roger Williams*	Sep-03	131 Madison Avenue	187	PTG Madison 31 Trust	JRK New York Hotel Partners	26,500,000	142,000
Hampton Inn Chelsea	Aug-03	108 West 24th Street	144	Chelsea Grand East, LLC	CNL Hospitality/Hersha Hospitality	28,000,000	194,000
Loews Metropolitan	Jul-03	Lexington Ave at 51st St.	722	Loews Hotels	Whitehall Street Real Estate Fund	110,250,000	153,000
				(as renovated, assuming a $20-million infusion)		130,250,000	180,000
Doral Park Avenue (now Kimpton Hotel)	Jul-03	70 Park Avenue	188	Hayman Company	Kennedy Associates	38,240,000	203,000
			205	(as renovated and expanded, assuming a $19-million infusion)		57,240,000	279,000
Hotel Wales	Nov-02	1295 Madison Ave.	87	PTG Wales Trust	DLJ Real Estate Capital Partners II LP	24,000,000	276,000
Fitzpatrick Hotel	Aug-02	127 East 55th Street	130	British Airways	Hotel Properties Ltd, Singapore	30,690,000	236,000
Algonquin Hotel	Jun-02	59 West 44th St.	174	Camberley Hotel Co./Olympus RE	Miller Global Properties	41,400,000	238,000
Delmonico Hotel	Nov-01	502 Park Avenue	152	N/A	Donald Trump	115,000,000	757,000
Sold for Condo Conversion
The Barbizon	May-01	140E 63rd St.	300	Ian Schrager Hotels	Berwind Property Group	96,000,000	320,000
Rihga Royal*	Feb-01	151 W 54th St.	500	Royal Hotels Ltd.	Thayer Lodging Group, Inc.	193,000,000	386,000
The Carlyle	Jan-01	35 E 76th St�	194	Mr. Norman Peck (et al)	Maritz Wolff & Co	127,500,000	657,000
Downtown Athletic Club Hotel	Oct-00	19 West St.	116	CBA Real Estate Partners 19 West Hotel (LLC)	Upper West St LLC	20,000,000	172,000
The Sutton	Jun-00	330 East 56th St.	84	Hong Kong & Shanghai Hotels	Glenwood Management	35,000,000	417,000

*Leasehold Interest
Note: Price for the Rihga Royal includes termination fees paid to Marriott

Michael R. Bloomberg
Mayor of the City of New York

As the "World's Second Home," New York City appeals to business and leisure travelers from every corner of the globe. In fact, 2005 was a banner year for tourism in our City, with a forecasted 41.4 million visitors, up 3.7% from 2004.

Millions of people are discovering the rich diversity of our cosmopolitan city. New York City's accommodations, attractions, dining, entertainment, shopping, sporting events, theater, and performing arts are the best in the world. In 2005, it is projected that more than 22 million hotel room nights were sold; Broadway had its most successful year ever, grossing more than $825 million; and attendance at the Javits Center was the second highest on record.

New York is also seeing significant growth in international travel, including an increase in visitors from Mexico, China, Hong Kong, Brazil, India, and Russia. International visitors in 2006 are likely to exceed seven million, surpassing pre-9/11 records.

There has never been a better time to visit the greatest city on earth. New York remains the safest large city in the United States and the visitation forecast indicates that more than 43 million visitors will come to New York in 2006. Expect those visitor numbers to increase as more people experience the best of the Big Apple!

Following the events of September 11, 2001, hotel transaction activity declined due to the uncertainty regarding hotel operating performance and stricter underwriting by lenders. Well-capitalized owners were generally holding onto their assets until market conditions normalized. Those owners facing debt-service shortfalls modified loan payment terms with their lenders or brought in new equity to the investment. Few owners have been forced to sell their assets.

Since the end of 2001, numerous buyers have raised capital to purchase hotels at levels below replacement cost. Declining hotel performance in 2002, followed by the war in Iraq and the SARS epidemic in the first half of 2003, caused many transactions to stall due to a gap between seller and buyer expectations.

In the last quarter of 2003, hotel investors started to perceive the hotel industry in Manhattan as very attractive, with expectations of increases in occupancy as well as average rate; buyers started to meet seller expectations. We note that all seven sales that occurred in 2003 took place during the second half of the year, as the Manhattan lodging market was starting to turn around.

In 2004, the sales activity intensified as the market rebounded at a tremendous pace, and in total 13 hotels were sold during 2004, the highest number at that point in time.

Fourteen hotels were sold in 2005, exceeding the previous peak in transactions achieved in 2004. Hotel investors continue to have an upbeat perspective of the Manhattan lodging market, as average rate is expected to experience significant growth over the next few years. In addition, financing continued to be readily available in 2005, as lenders also seemed to be optimistic about the Manhattan lodging market.

Two transactions occurred in the first quarter of 2006, while a third sale was pending. Although we expect the Manhattan hotel market to remain active in terms of transactions in 2006, we anticipate the number of hotel sales to decrease gradually over the next few years.