1. Market and Financial Analysis
Andaz by Hyatt
5075 Wayzata Blvd
St. Louis Park, MN 55416
Prepared for
Ms. Concerned Client
First National Bank of Boca Raton
One Blue Skies Ave
Boca Raton, FL
October 17, 2013

2. October 17, 2013
Ms. Concerned Client
First National Bank of Boca Raton
One Blue Skies Ave.
Boca Raton, FL
Subject: Proposed Andaz by Hyatt
St. Louis Park, MN
Dear Ms. Client:
In consideration of your request, I have concluded my research and projections for the feasibility
of this hotel project. I have included everything in this report from site and area analysis to
projected financial performance.
The projections here are simply that, projections. There are no guarantees with these numbers.
They are only a guide to help you make the decision on whether or not to finance this project.
This report was prepared specifically for you and has and will not be shared with anyone else.
I thank you for your business and putting your trust in me to help you make the right decision for
you and First National Bank of Boca Raton.
Carl Miller

3. Area Overview
Overview
The city of St. Louis Park, Minnesota, is located only a few miles to the west of Minneapolis. It
is a growing city with a good mix of residential and business properties. It is conveniently
located just outside the big city with easy access in and out via multiple highways.
Hennepin County encompasses the city of Minneapolis and includes all of the southern, western,
and northern suburbs of Minneapolis. The city of St. Paul I located just east of the county border.
The city of St. Paul may be the capital but Minneapolis is the major business center in the state
of Minnesota. Hennepin County benefits greatly from having it within its borders.
Population
The populations of Minnesota, Hennepin County, and St. Louis Park have all shown favorable
recent trends, illustrated in the following chart.
2010 Population 2012 Population Percent Change
St. Louis Park 45,250 46,392 2.52%
Hennepin County 1,152,425 1,184,576 2.79%
Minnesota 5,303,925 5,379,139 1.42%
St. Louis Park and Hennepin County are experiencing greater rates of growth than the state and
the state itself is growing as well. This means more people are moving to St. Louis Park and
Hennepin County and more current residents are starting families.
St. Louis Park residents are in a prime position to keep this trend growing. The largest age group
in the city is the 25-34 year old segment. They account for 22.8 percent of the population in the
city. Many of these people will start families and continue to make the community grow. This
group of people also brings a lot of energy to the community and will draw more people to move
here as a result.
Hennepin County is growing at a rate that is almost double the state’s growth. This is likely due
to Minneapolis being one of the region’s largest centers of business and entertainment.
Employment
Here is a chart listing employment statistics for the area provided by the United States Census
Bureau for 2012.

4. Unemployment Percent
St. Louis Park 4.9%
Hennepin County 7.5%
Minnesota 6.9%
St. Louis Park is doing very well compared to the county and state in which it is located. Almost
fifty percent (49.4%) of the population is comprised of working age people from 25-54 years of
age. The unemployment number and the age breakdown indicate St. Louis Park is prospering.
The national unemployment rate in the U.S. at the end of 2012 was 7.8%. This indicates that the
city, county, and state are all doing well in this area even though the chart makes it seem like the
county is struggling.
Wealth/Money
Hennepin County is a hub of wealth in the state of Minnesota. In 2011, residents of Hennepin
County combined to spend a total of 31.2% of all retail spending in the state of Minnesota.
Supporting this spending is the even larger percentage of the state’s families with $200,000 or
more of annual income. Thirty-eight percent of Minnesota families who earn $200,000 of more
of annual income reside in Hennepin County. Eleven percent of families in the county are part of
this income bracket.
The population of the county and state went up in 2012 so it is possible these percentages are
even greater today.
Conclusion – Impact on Hotel Demand
St. Louis Park makes for a great location for a hotel. The location of the city is ideal for guests
who want to come to Minneapolis but not stay in the downtown area. It is a growing, vibrant
community with lots of working citizens. The low unemployment rate of the state, county, and
especially city, indicate business is good in the area and the need for corporate lodging will be
strong.
The growing populations of the city and county relative to the state also should drive demand for
a hotel. More businesses and leisure activities will spring up to keep up with the growing
population and resulting demand for jobs and entertainment.

5. Site Analysis
Subject Site
The subject site is located it 5075 Wayzata Blvd, St. Louis Park, MN 55416. The site is currently
a very large unused parking lot. The site is located at the southwest quadrant of the intersection
of highways 394 and 100. The property is located just a few miles west of downtown
Minneapolis with direct highway access via 394 into downtown. The drive from the hotel to
downtown is less than ten minutes during non-rush hour and about fifteen minutes during rush
hour.
The site is located on Wayzata Blvd which acts as a frontage road for highway 394. The site is
easily visible from both 394 and 100. It is accessible from both highways but easier to get to and
from via 394 at the Xenia/Park Place exit. The site is not close to MSP International Airport
however, one only needs to take two highways to get from the airport to the hotel (or vice versa)
making it easy to get to despite the distance.
The current state of the property is a barren eyesore and building a Hyatt Andaz hotel would
improve the property a great deal.
Surroundings
The property is located behind a new entertainment complex called the West End. The West End
features trendy shops, excellent restaurants, and a sixteen screen movie theatre. The West End is
within a couple blocks walking distance from the proposed site of the hotel. The West End
complex has been newly constructed in the last five years. There is also an Olive Garden
restaurant which would act as the hotel’s next door neighbor just to the west of the property.
In addition to the West End, there are numerous office buildings in the area as well as a building
for one of the local universities (Hamline University). There are also other restaurant and lodging
establishments in the area.
Downtown Minneapolis lies just a few minutes to the east and offers a multitude of business and
entertainment features. Lake Minnetonka is about a twenty minute drive to the west of the site
which features year round activities as well.
Summary
The proposed site is a highly visible, vacant location. It is very accessible by car. It is surrounded
by many demand drivers of both the business and leisure variety. The potential of a good mix of
guests is likely to provide the hotel with consistent business.

7. Lodging Market Analysis
Introduction
St. Louis Park, Minnesota, is a growing community for people and businesses. There is a wide
variety of lodging establishments in the city to accommodate the needs of various kinds of
travelers. This analysis will take a detailed look at the current supply of rooms, current and future
demand for rooms, and project the impact the Hyatt Andaz would have on this market.
Supply Analysis
The competitive set for the proposed Hyatt Andaz in this market is comprised of six hotels –
Holiday Inn Express, DoubleTree by Hilton, Hampton Inn, SpringHill Suites, Sheraton
Minneapolis West, and Marriott Minneapolis West. These hotels provide a good variety of
options and combine for a total supply of 1,074 rooms. There are a couple of other all suite
hotels in the area but only one was chosen for the competitive set. The purpose of that was the
Hyatt Andaz is not a suite hotel but the advisor wanted to include one to compare its market
presence with the others.
Holiday Inn Express. The Holiday Inn Express has 107 rooms and was renovated in 2012. They
offer a 24-hour business center and have 840 square feet of meeting space (1 room). They serve
complimentary breakfast every morning but there is no restaurant onsite. They offer
complimentary onsite parking and internet service to all guests. On Sunday-Thursday nights 90
percent of guests are corporate travelers and 10 percent are leisure travelers. On Friday and
Saturday nights, guests are split evenly between leisure and group travelers. In 2012, occupancy
was 62.5 percent and average daily rate (ADR) was $105.77. The hotel is located off the same
highway exit as the proposed site but is on the other side of highway 394.
DoubleTree by Hilton. The DoubleTree by Hilton Park Place is located three blocks west of the
proposed site. It has 297 guest rooms. They can accommodate many group meetings and events
as they have 26,000 square feet of meeting space. The Dover restaurant and bar is located in the
first floor of the hotel and offers meals and drinks from 6:00 AM to 11:00 PM daily. Extra
complimentary amenities include parking, fitness center, pool, spa, business center, internet, and
shuttle service. In 2012 occupancy was 67.54 percent and ADR was $112.11. The mix of
customers was 40 percent corporate, 25 percent group, and 35 percent leisure.
Hampton Inn. The Hampton Inn is located a couple miles west of the site on 394. They have 127
guest rooms and three meeting areas which can accommodate between 12-75 people. They also
have free business and fitness centers, as well as internet, for all guests. There is no onsite
restaurant but they do provide free breakfast every morning. In 2012 occupancy was 72.4 percent
and ADR was $108.25. Their market mix for that year was 67 percent corporate, 20 percent
group, and 13 percent leisure.
SpringHill Suites. SpringHill Suites is located about a mile west of the site on the frontage road
for 394. They are an all suite hotel with 126 rooms. They have four meeting rooms which total

8. 1,500 square feet of meeting space. They offer complimentary internet, business center, fitness
center, pool, and parking. There is no restaurant on site. Their occupancy and ADR for 2012
were 60.25 percent and $127.50. Their guests were 74 percent corporate, 21 percent group, and 5
percent leisure.
Marriott Minneapolis West. The Marriott Minneapolis West is located just east of the Hampton
Inn. They have 159 rooms and 36 suites. They have seven meeting areas which total 12,718
square feet of space. They offer complimentary parking, internet, business center, fitness center,
and pool. They have a full service restaurant (Kip’s Irish Pub) and a Starbucks located on the
first floor. In 2012 occupancy and ADR were 65.67 percent and $110.48. Their mix of customers
was 62 percent corporate, 20 percent group, and 18 percent leisure.
Sheraton Minneapolis West. The Sheraton Minneapolis West is the western-most hotel in the
competitive set. It is located just off 394 about 5 miles west of the site. There are 10 meeting
spaces with the largest being 5,700 square feet. The Atrium Bistro serves meals all day and The
Reserve Lounge serves cocktails in the evenings. They offer parking, internet, business center,
fitness center, pool, spa, and limited shuttle service to all guests. In 2012 their occupancy and
ADR were 63.85 percent and $111.90.
There is a good supply of hotel rooms in this market but none of the hotels really match what the
Andaz could offer. The DoubleTree has similar features but has way more rooms and meeting
space. Some of the other hotels have a similar number of rooms but no restaurant. Based on this,
the Andaz looks to be a good match for this market.

9. Demand Analysis
In order to get a better feel for the market demand, this analysis will break down demand by
each market segment – corporate, group, and leisure.
Historical Performance.
Corporate Demand
Year RoomNights PercentChange
2007 110,261
2008 115,731 4.96%
2009 97,920 -15.39%
2010 109,336 11.66%
2011 108,562 -0.71%
2012 150,208 38.36%
CAGR 6.38%
These numbers show a very volatile demand for corporate travel. However, overall growth from
2007-2012 showed a strong compound annual growth rate of 6.38 percent. This means that over
the long run the demand for corporate rooms has grown at a strong percent even though the year
to year demand levels experienced wild swings, both positive and negative.
Group Demand
Year Room Nights PercentChange
2007 69,393
2008 70,062 0.96%
2009 63,368 -9.55%
2010 71,475 12.79%
2011 69,448 -2.84%
2012 47,420 -31.72%
CAGR -7.33%
Group demand in this market did not enjoy the same growth as corporate demand. This has a
devastating effect on the market because group bookings typically have the longest booking
window. This means that hotels secure the bookings farther in advance of corporate or leisure
bookings. Group bookings are good for hotels because they mean the hotel has predictable,
dependable revenue coming in.

10. Leisure Demand
Year RoomNights PercentChange
2007 83,707
2008 78,328 -6.43%
2009 78,269 -0.08%
2010 82,551 5.47%
2011 86,650 4.97%
2012 59,927 -30.84%
CAGR -6.47%
Recent demand for leisure rooms in this market has also experienced significant diminishing
percentages. Though the decline has not been as steep (percentage-wise) as group demand, it
still has taken a toll on the market nonetheless. However, the difference between leisure and
group is leisure demand took one big hit in 2012 after experiencing successful gains in 2010 and
2011 while group demand decreased in three of the five years.
Future Projections.
Despite huge falls in group and leisure demand in 2012, the future for this market looks very
promising. New shops, restaurants, and a condo building have been opening in the West End
entertainment center or next to it, with more on the way. However, the big event this market will
prosper from is the 2014 Major League Baseball All-Star Game at Target Field in July 2014. All
of these hotels are between four and ten miles from Target Field and all are a straight shot down
394 from the stadium. This market provides an ideal place for players, media, and fans to stay if
they do not want to stay in downtown Minneapolis. Demand should also improve in 2015 as
more businesses and people continue to move into the area. Demand after that is too difficult to
predict so very moderate growth has been predicted for 2016-2020 in all three market segments.

11. This chart illustrates future demand for the area. Corporate and group demand are the same from
2015-2020, causing an overlap of the lines which has hidden the corporate line from view.
The target opening date of January 1, 2014, would be perfect for the Andaz. Demand in all
segments is predicted to increase greatly this year so the hotel could hit the ground running when
it opens. Though historical demand has been suffering, the Andaz would be in a position to
establish immediate market presence and benefit from great leaps in demand in its inaugural
year.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2013 2014 2015 2016 2017 2018 2019 2020
Corporate
Group
Leisure

12. Projected Financial Performance
Introduction
This section of the report will go over, in detail, all of the projected finances for this hotel over
its first five years of operation (2014 – 2018). It will show the projected numbers and explain
how the assessor arrived at the numbers listed.
Data Sources
There were three sources of data used to compile the financial numbers in this report.
The first was the historical performances of the competitive set for the years 2007 – 2012. These
numbers were used to forecast average daily rate and occupancy levels.
The other sources of data were a comparable financials report and a HOST report provided by
Smith Travel Research. The comparable financials report is the 2010 performance of five
comparable anonymous hotels. It provides all the details of each hotel’s revenues and expenses.
The HOST report shows detailed 2010 average performance results of hotels in different
categories such as, all full service hotels and chain affiliated full service hotels. These reports
were used to project all the revenues and expenses of the proposed Andaz hotel in St. Louis Park,
MN.
Inflation Growth
All of the dollar figures in this report are in 2013 dollars. However, dollar values fluctuate year
to year thanks to inflation. The following inflation rates were used to project the dollar values for
the future years.
2013 2014 2015 2016 2017 2018
Rooms Base 5% 4% 3% 3% 3%
Other Base 3% 3% 3% 3% 3%
Room rates tend to be more affected by inflation than everything else so higher rates of inflation
were applied to 2014 and 2015. The inflation rate applied to everything else was three percent.
The continued recovery from the Great Recession (2008 – 2010) is the cause for the consistent
increases in these rates.
Revenues
A full projected income statement is attached as an attachment to the report. All revenues and
expenses will be shown in their entirety there. These sections will describe how each line item
was calculated.

13. Room Revenue
The target average daily rate for the hotel is $125. However, after comparing the ADR’s of the
competitive set, that number seemed to be a bit high. That has been scaled down to $120.53. This
number was derived from an equation using the weighted projected occupancies and room rates
of each market segment for the Andaz. This ADR is slightly more than the competition but the
assessor believes it is appropriate due to the Andaz being a brand new building.
Food and Beverage Revenue
Food and beverage revenues were calculated by multiplying a per occupied room amount by the
amount of occupied rooms for each year. Food sales were determined to be $18 per occupied
room and beverage sales were $8 per occupied room. The Smith Travel Reports were used to
find these numbers. Food and beverage revenue was combined in the comparable financials
report. The total average listed was $32.61 per occupied room. In the HOST report, average food
sales were $42.37 and beverage revenue was $12.15. That creates a total of $54.52. This report
gives very conservative projections for food and beverages sales at the Andaz. This was done
because of all the restaurants and bars at the West End entertainment complex near the Andaz
site. These other options will draw business away from the Andaz. There could be some
seasonality shifts in food and beverage revenue. The West End is only a couple block walk from
the Andaz site. Many guests will choose to walk there when the weather is nice but will likely
stay at home base in the Andaz during the cold winter months.
Other Operated Departments
This line item is a catch all for other streams of revenue in operations. Typically this includes
lease payments from restaurants or stores using extra space in the hotel, valet parking sales, and
sales from a sundry inside the hotel. This is also calculated on a per occupied room basis. There
are no leases in the proposed Andaz so this amount is projected at a very modest $3 per occupied
room. The average numbers in the comparable financials and HOST reports were $3.44 and
$11.97, respectively.
Rental and Other Income
This line item covers rentals of banquet rooms and meeting space and acts as a catch all for other
streams of income such as interest earned from money in the bank. This line item is calculated on
an amount per available room basis. This report forecasts a revenue stream of $500 per available
room. The HOST report average was $1,142 per available room. This is not a very reliable
source of income so the assessor felt it is best to project a very conservative number compared to
the HOST average.
Expenses
All of the expenses listed here will also appear in numerical form on the projected future income
statement in the appendix of this report.

14. Rooms Expenses
The rooms expense is calculated on a per occupied room basis since this is what it costs to keep a
up and running and only rooms which are occupied require such a cost. The number in this report
is $28 for years 2014 – 2016 and 2018 and $31 for 2017. It costs less to keep rooms up to par
when there are more rooms filled because the cleaning staff is already there so the labor cost per
room goes down when there are more rooms. 2017 has a drop off in projected occupancy so that
explains the higher number. The $28 per occupied room cost is 23.2 percent of room revenue and
$31 per occupied room rate is 25.7 percent of room revenue. The average percentages of room
revenue for this cost on the comparable financial and HOST reports were 18.8 percent and 26
percent, respectively. The projections for the Andaz fall comfortably in between the two and
represent a very plausible expectation of this cost.
Food and Beverage Expenses
The food and beverage expenses were calculated as a percentage of food and beverage sales. The
projected food and beverage expenses are 69 percent of food and beverage sales. This number is
right in line with the 68.2 percent average from the comparable financials report and 73 percent
average from the HOST report.
Other Operated Department Expenses
This expense is also calculated as a percentage of sales for this line item. This report projects an
80 percent cost of other department sales for this expense. The percentages on the comparable
financial report were all over the map. They ranged from 22.2 to 109.3 percent. The assessor
feels 80 percent is a good projection level for the Andaz based on that range.
Administrative and General Expenses
This cost covers the salaries of the manager(s) and front office staff of the hotel. This is
calculated as a per available room amount. This report projects a cost of $4,000 per available
room for the proposed Andaz. The averages of the comparable financial and HOST reports were
$3,208 and $4,645, respectively. This number falls safely between those averages. This can also
be calculated as a percentage of total revenue and the $4,000 projection of the Andaz comes in a
7.9 percent of total revenue. The average percentage of this cost of total revenue on the
comparable financial report was 8.8 percent of total revenue. The lower number is better for the
Andaz because all of the hotels in the comparable financials report have a larger room count and
thus need more people on staff than the Andaz will.
Sales and Marketing Expenses
Sales and marketing expenses pay for the sales staff and all of the marketing campaigns adopted
by the hotel. This figure is calculated on a per available room basis. The Andaz projects to have
sales and marketing costs of $5,000 in the first two years, $4,500 in years 3 and 4, and $4,000 in
year 5. The costs descend over time because the Andaz brand is not very well known and more
marketing efforts will be needed right away. After it becomes an established property over time,

15. the need for this will go down. The average numbers from the comparable financial and HOST
reports were $4,403 and $3,599, respectively. This also shows the starting point of $5,000 per
available room is good for the Andaz since the other hotels in these reports are generally not
brand new as the Andaz will be.
Property Operations and Maintenance
This expense accounts for what it costs to keep the hotel up and running. This report has
calculated a rate of $11 per occupied room. This can also be calculated on a per available room
basis but the assessor felt it more appropriate to use per occupied room since the more people
who use the hotel, the more upkeep can be expected. The comparable financial and HOST
reports reported averages of $7.23 and $11.84, respectively. This projection calls for this amount
to start at $7 per occupied room in the inaugural year and go up $1 per occupied room every year
after for the first five years of operation. This is due to the hotel starting off brand new and not
needing as much attention to maintenance as it will as it ages.
Utilities
Utilities expenses have been calculated at a rate of $11 per occupied room for the Andaz. The
averages on the comparable financial and HOST reports were $10.95 and $10.77, respectively.
The assessor feels $11 is a conservative projection and could be decreased over time as the staff
becomes more aware of ways to save on water and energy. Also, the projected occupancy rates
of the Andaz is higher than the occupancy numbers provided in the Smith Travel Reports. More
people staying in the hotel means more utilities will be used, increasing costs.
Management Fee
Top Notch Management Company will be in charge of operating the Andaz. Their base fee is 3
percent of total revenue. They have a good track record of hotel business operations and this is a
fair price for ownership to pay for their services.
Property Taxes
Property taxes are projected to be $1,400 per available room. This is consistent with research
findings for the St. Louis Park area.
Insurance
The Andaz hotel will need insurance for the building and for interruption of business. Both
ownership and management need this for protection of the investment. The projected cost of this
is $1,500 per available room. The averages of the comparable financial and HOST reports were
$1,642 and $670, respectively. The projection for the Andaz is very conservative but insurance is
a fickle aspect of running a business so the assessor thought it best to project towards the higher
side of that spectrum in order to avoid unpleasant surprises.

16. Reserve for Replacement
The reserve for replacement expense exists to store money away for replacing furniture, carpet,
and other similar items when their useful life is over. This is very important because both
ownership and management benefit from the hotel being in good condition. An industry standard
rate of 5 percent of total revenue will suffice for the Andaz. It might seem unnecessary for a
hotel to start this when it is brand new but it is very important to always stash funds away for
replacement.
Cash Flow Projections
The projected net operating income, loan payment, and debt service coverage ratios are provided
in the table below for the first five years of operations of the Andaz.
2014 2015 2016 2017 2018
Net income $
1,624,343
$
1,867,319
$
2,115,904
$
2,044,682
$
2,544,052
Loan payment $
1,013,555
$
1,013,555
$
1,013,555
$
1,013,555
$
1,013,555
Debt cov ratio 1.6 1.8 2.1 2.0 2.5
Net operating income has been calculated by subtracting all expenses from the total revenue. As
the table shows, the projected net income is more than enough for the hotel to be able to cover its
loan payment and make a profit.
The loan payment was calculated based on a loan of $5,760,000 with an interest amount of 6
percent over a period of seven years.
Based on these projections, the Andaz hotel project is worth the investment for the borrower and
the lender.