wellington_hotel__newtown__f by xuyuzhu

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									   HVS International                                                                            Wellington Hotel, Main Square, Newtown, UK




                                                                           Date

                                         Name
                                         Title
                                  Valuation Report
                                         Co Name
                                         Address 1
                                  Wellington Hotel, Main Square
                                         Address 2
                                         City
                                         Postcode
                                  Newtown, UK
                                         Dear
14 Hallam Street                                                           Re:
London, W1W 6JG
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                 Text of letter …




Stephen Mendell
Chairman
                                                                           Yours sincerely
                                                                           HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                          Name
Investment Services                                                        Title

Directors:
   Prepared by:
Simon Hudspeth
Dominique Bourdais
   HVS International
Bernard Forster
   7-10 Chandos Street
   Cavendish Square
London        Singapore
              New 9DQ
   London W1G Delhi
New York
   UK
San Francisco Vancouver
Miami         Toronto
   Tel:       São 7878
Denver +44 (20) Paulo 7700
   Fax:
Dallas +44 (20) 7878 7799
              Buenos Aires
Madrid

   Submitted to:
                                                                                  This sample report was created for
Specialists in Hotel Consulting
  Mr Adam Hades
& Valuation Worldwide           Encl [if appropriate]                             illustrative purposes only. None of
   Joint Venture Capital Trust Group Ltd                                          the information represents actual
   1 Persephone Way                                                               data and any correlation or
   London W1Z 3US                                                                 similarity with an existing hotel or
   UK                                                                             location is purely coincidental.

   1 January 2006                                                                 We hope you enjoy reading this
                                                                                  sample report.
   HVS No: 2006050000
                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
                                                                       1 January 2006


                                     Mr Adam Hades
                                     Joint Venture Capital Trust Group Ltd
                                     1 Persephone Way
                                     London W1Z 3US
                                     UK

                                     Dear Mr Hades

                                                                       Re: Wellington Hotel, Main Square,
7-10 Chandos Street
                                                                           Newtown, UK
Cavendish Square
London, W1G 9DQ                      In accordance with your request, we herewith submit our Valuation
020 7878 7700
020 7878 7799 FAX                    Report pertaining to the above property. We have inspected the site and
www.hvsinternational.com             facilities and analysed the hotel market conditions in the Newtown area.
                                     HVS International has valued the property acting as an independent
                                     valuer and our report has been prepared in accordance with the Royal
                                     Institution of Chartered Surveyors’ (RICS) Appraisal and Valuation
Stephen Mendell
Chairman                             Standards, May 2003.

                                     Based on the available data, together with our analysis and experience in
Russell Kett
Managing Director                    the hotel industry, it is our opinion that the market value of the freehold
                                     interest in the property described in this report, as at 1 January 2006, is:
Directors:
Dominique Bourdais                                                           £24,100,000
Bernard Forster
Karen Smith                            TWENTY-FOUR MILLION ONE HUNDRED THOUSAND POUNDS
Elie Younes
                                                            STERLING

Charles Human
Rudy Reudelhuber
                                     This value equates to £96,000 per room.
Managing Directors
HVSHWE                               We hereby certify that we have no undisclosed interest in the property,
                                     and our employment and compensation are not contingent upon our
London          Madrid               findings and valuation.
New York        San Francisco
Boulder         Vancouver
Toronto         Miami
Dallas          Denver
Washington      Chicago
Phoenix         Connecticut
New Jersey      Boston
New Delhi       Singapore
Sydney          Hong Kong
Buenos Aires    São Paulo


Specialists in Hotel Consulting
& Valuation Worldwide




                                          HVS International is the trading name of SG&R Valuation Services Company,
                    A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
           the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                       The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
                                                                            Date

                                          Name
                                          This opinion of value and the entire report are subject to the comments
                                          Title
                                          made throughout and to all assumptions and limiting conditions set
                                          Co Name
                                          forth herein.
                                          Address 1
                                          Address 2                Yours sincerely
                                          City                     HVS INTERNATIONAL
                                          Postcode


                                          Dear
                                                                            Consultant & Valuation Analyst
14 Hallam Street                                                            Re:
London, W1W 6JG
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  Text of letter …                  Director

                                          PH:DB:ph

Stephen Mendell                           HVS No: 2006050000
Chairman
                                                                            Yours sincerely
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                      Table of Contents




                                                                            Date

                                          Name

   Table of Contents                      Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

                                     1.   Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
                                          Dear
                                     2.   Nature of the Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
14 Hallam Street
London, W1W 6JG
                                     3.   Market Area Analysis. . . Re:. . . . . . . . . . . . . . . . . . . . . . . . . . 6
                                                                    . .
020 7878 7700                        4.   Description of the Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . .             12
020 7436 3386 FAX
www.hvsinternational.com             5.   Text of for Transient Accommodation . . . . . . . . . . . . . . . . . . .
                                          Market letter …                                                                              17
                                     6.   Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            21
                                     7.   Projection of Hotel Demand, Occupancy and Average Rate . . . . . .                           28
                                     8.   Projection of Income and Expense. . . . . . . . . . . . . . . . . . . . . .                  40
Stephen Mendell
Chairman                             9.   Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          48
                                                                        Yours sincerely
                                                                        HVS INTERNATIONAL
Russell Kett
Managing Director
                                          Addenda

Charles Human                                  Addendum 1 – Statement of Assumptions and Limiting Conditions
Managing Director                                                 Name
Investment Services                                               Title
                                               Addendum 2 – Photographs of the Wellington Hotel, Newtown, UK

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                    Executive Summary 1




                                                                                 Date

                                          Name

   1. Executive Summary                   Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

                                          Property:                                             Wellington Hotel
                                          Dear
                                          Address:                                              Main Square,
14 Hallam Street                                                                                Newtown
                                                                                 Re:
London, W1W 6JG                                                                                 TG1 9JB
020 7878 7700
020 7436 3386 FAX
                                          Date of Inspection:                                   1 December 2005
www.hvsinternational.com                  Text of Valued:
                                          Interestletter …                                      Freehold
                                          Date of Value:                                        1 January 2006

                                          Property Description
                                          Site Area:                          Approximately 10,200 m²
Stephen Mendell
Chairman                                  Age:                                Opened January 1994
                                          Property Type:           Yours sincerely
                                                                              Commercial
                                          Guest Rooms:             HVS INTERNATIONAL
                                                                              250
Russell Kett
Managing Director                         Number of Storeys:                  11
                                          Food and Beverage Facilities:       Two restaurants and one bar
Charles Human                             Meeting Facilities:                 Five meeting rooms, 890 m² total
Managing Director                                                  Name        space
Investment Services
                                          Car Parking:             Title       Approximately 150 spaces

Directors: 1-1
   Table                Summary Operating Data
Simon Hudspeth
Dominique Bourdais
Bernard Forster                                                  Actual                                 Forecast
                                                          2004            2005          2006        2007       2008         2009

London Occupancy
               Singapore                                    75 %           74 %           71 %        71 %      73 %          74 %
               New Delhi
New York Average Rate (£)                                   73             74             76          78        80            82
San Francisco Vancouver
Miami          Toronto
          Rooms Revenue (£ 000s)                         4,989        5,000             4,951      5,085      5,356       5,564
               São Paulo
Denver Total Revenue (£ 000s)                            9,431        9,475             9,336      9,579     10,055      10,428
Dallas         Buenos Aires
Madrid GOP ¹ (£ 000s)                                    3,685        3,580             3,310      3,402      3,670        3,856
          Net Operating Income (£ 000s)                  2,551        2,455             2,215      2,279      2,487        2,627
Specialists in Hotel Consulting
           GOP as a % of Total Revenue                  39.1 %
                                          Encl [if appropriate]           37.8 %         35.5 %     35.5 %     36.5 %       37.0 %
& Valuation Worldwide
          Net Operating Income as a % of Total Revenue    27.0 %          25.9 %         23.7 %     23.8 %     24.7 %       25.2 %

          ¹ Gross operating profit




                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                  Executive Summary 2




                                                                            Date

                                          Name
                                          Summary of Valuation Parameters
                                          Title
                                          Number of Years to Stabilise:                    Four
                                          Co Name
                                          Stabilised Year:                                 2009
                                          Address 1
                                          Stabilised Inflation Rate:                       2.5%
                                          Address 2
                                          Mortgage Interest Rate:                          7.5%
                                          City
                                          Holding Period:                                  10 years
                                          Postcode
                                          Amortisation Period:                             15 years
                                          Debt Service Constant:                           0.113287
                                          Loan to Value Ratio:                             65%
                                          Dear
                                          Equity Yield Rate:                               17.0%
14 Hallam Street                          Terminal Capitalisation Rate:
                                                                     Re:                   9.0%
London, W1W 6JG                           Brokerage and Legal Fees:                        1.5%
020 7878 7700
020 7436 3386 FAX                         Unleveraged Internal Rate of Return:             12.3%
www.hvsinternational.com                  Text of letter …
                                          Estimates of Value
                                          Income Capitalisation Approach:                  £24,100,000
                                          Cost Approach:                                   £23,000,000
Stephen Mendell
                                          Sales Comparison Approach:                       £19,500,000 to £44,300,000
Chairman
                                                                  Yours sincerely
                                          Market Value Conclusion
                                                                  HVS INTERNATIONAL
Russell Kett                              as at 1 January 2006:              £24,100,000
Managing Director
                                          Market Value Conclusion
Charles Human                             per Room:                                        £96,000
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                             Nature of the Assignment 3




                                                                            Date

                                          Name

   2. Nature of the Assignment            Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

   Subject of the                         The subject of the Valuation Report is the freehold interest in the
   Valuation Report                       Dear
                                          Wellington Hotel located at Main Square, Newtown, UK (‘the Hotel’).
14 Hallam Street                          The Hotel has 250 guest rooms and opened in 1994. In addition to guest
                                                                    Re:
London, W1W 6JG                           rooms, the Hotel contains a 125-seat café restaurant, an 80-seat speciality
020 7878 7700
020 7436 3386 FAX
                                          restaurant, a 50-seat bar, 890 m2 of meeting and banqueting space, a
www.hvsinternational.com                  Text of letter and
                                          fitness centre… other facilities typically found in a commercial hotel.

   Purpose of the                         The objective of the Valuation Report is to estimate the market value of
   Valuation Report                       the freehold interest in the Hotel.
Stephen Mendell
Chairman
                                          Market value is defined as:
                                                                    Yours sincerely
                                                                    HVS which an asset should exchange on the
                                             ‘The estimated amount for INTERNATIONAL
Russell Kett
Managing Director
                                             date of valuation between a willing buyer and a willing seller in an
                                             arm’s length transaction after proper marketing wherein the parties
                                             had each acted knowledgeably, prudently and without compulsion.’1
Charles Human
Managing Director                                                   Name
   Property Rights
Investment Services     Valued            The property rights valued are the freehold interest in the land and
                                                                    Title
                                          premises, including the furniture, fixtures and equipment (FF&E).
Directors:
Simon Hudspeth                            The Hotel has been valued assuming that, as at the date of value, it
Dominique Bourdais                        would be available free and clear of any specific management or operating
Bernard Forster
                                          leases. For the purpose of this valuation, we have assumed that a
                                          competent international or national operator will manage the Hotel.
London           Singapore
New York         New Delhi
   Planning
San Francisco    Vancouver
                                          We have visited the offices of Newtown Planning Authority and have
Miami            Toronto                  been informed that planning consent for use of the premises as a 250-
Denver           São Paulo                bedroom hotel was granted on 1 January 1992. We note from the consent
Dallas           Buenos Aires
Madrid                                    that there are no onerous conditions. We have been informed that the
                                          use of the premises complies with current planning law so far as the local
                                          planning authority is aware.
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]
   Other Statutory                        We have assumed that the Hotel has a valid fire certificate, complies with
   Consents                               environmental health legislation and holds all other necessary licences
                                          for the purpose of its operation. Furthermore we have assumed that
                                          there are no outstanding issues in respect of such consents and licences.



                                          1
                                            Royal Institution of Chartered Surveyors’ (2003) Appraisal and Valuation
                                          Standards
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                             Nature of the Assignment 4




                                                                            Date

                                          Name
                                          We have not inspected any of the licences, approvals, consents, permits
                                          Title
                                          or certificates relating to the property and we recommend that your
                                          Co Name
                                          lawyers verify their existence.
                                          Address 1
   Marketing and                          The marketing and exposure period, referring to the amount of time
                                          Address 2
   Exposure Period                        necessary for the Hotel to have been exposed retrospectively, prior to
                                          City
                                          our date of value, is estimated to be less than or equal to 12 months.
                                          Postcode

   Pertinent Dates                        The effective date of value is 1 January 2006. All projections are expressed
                                          Dear
                                          in inflated pounds sterling, and the value estimate represents 2006
                                          pounds sterling. The Hotel was inspected by our consultant and director
14 Hallam Street                                                     Re:
London, W1W 6JG                           on 1 December 2005, and our analysis was performed shortly thereafter.
020 7878 7700
020Use of the Valuation
    7436 3386 FAX                         This Valuation Report has been prepared for Joint Venture Capital Trust
www.hvsinternational.com
   Report                                 Text of Ltd. …
                                          Group letter The information presented in this report should not be
                                          disseminated to the public or third parties without the express written
                                          consent of HVS International.

   Scope of the
Stephen Mendell        Valuation          All information was collected and analysed by the staff of HVS
   Report
Chairman                                  International. Information suchsincerely
                                                                    Yours as historical operating statements, site
                                                                     forth was supplied by
                                          plans, floor plans, and soHVS INTERNATIONAL Joint Venture Capital
Russell Kett                              Trust Group Ltd. We have assumed that this information is accurate and
Managing Director
                                          we have therefore relied upon it without undertaking any independent
                                          verification. We have investigated comparable sales in the market area
Charles Human                             and have spoken with buyers, sellers, brokers, property developers and
                                                                    Name
Managing Director
Investment Services                                                  otherwise noted, we have inspected the
                                          public officials. Unless Title
                                          competitive hotels mentioned in Section 6, Competition, and analysed the
                                          hotel sales summarised in Section 9, Valuation. Our value conclusion has
Directors:
Simon Hudspeth                            been based on this investigation and analysis.
Dominique Bourdais
Bernard Forster Study
   Method of                              The methodology used to develop this Valuation Report has been based
                                          on the market research and valuation techniques set forth in the
London           Singapore                textbooks written by HVS International for the American Institute of
New York         New Delhi
San Francisco    Vancouver
                                          Real Estate Appraisers and the Appraisal Institute, and entitled The
Miami            Toronto                  Valuation of Hotels and Motels,2 Hotels, Motels and Restaurants: Valuations
Denver           São Paulo                and Market Studies,3 The Computerized Income Approach to Hotel/Motel
Dallas           Buenos Aires
Madrid
                                          Market Studies and Valuations,4 Hotels and Motels: A Guide to Market


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]

                                          2
                                            Stephen Rushmore (1978) The Valuation of Hotels and Motels, American Institute
                                          of Real Estate Appraisers, Chicago.
                                          3
                                            Stephen Rushmore (1983) Hotels, Motels and Restaurants: Valuations and Market
                                          Studies, American Institute of Real Estate Appraisers, Chicago.
                                          4
                                             Stephen Rushmore (1990) The Computerized Income Approach to Hotel/Motel
                                          Market Studies and Valuations, American Institute of Real Estate Appraisers,
                                          Chicago.
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                              Nature of the Assignment 5




                                                                            Date

                                          Name
                                          Analysis, Investment Analysis, and Valuations,5 and Hotels & Motels:
                                          Title
                                          Valuations and Market Studies.6
                                          Co Name
                                          Our approach was as follows.
                                          Address 1
                                          Address 2
                                              1.
                                          City The subject site has been evaluated from the viewpoint of its
                                          Postcodephysical utility for the operation of a hotel, as well as access,
                                                  visibility and other relevant location factors.
                                             2. The Hotel’s existing premises have been inspected for their
                                          Dear
                                                quality of construction, design, layout efficiency and items of
14 Hallam Street                                physical deterioration and functional obsolescence.
                                                                   Re:
London, W1W 6JG
020 7878 7700                                3. The surrounding economic environment, on both an area and a
020 7436 3386 FAX                                 neighbourhood level, has been reviewed to identify specific
www.hvsinternational.com                          letter …
                                          Text of hotel-related economic and demographic trends that may have
                                                  an impact on future demand for hotels.
                                               4. Division of the market for transient accommodation into
Stephen Mendell
                                                  individual segments has defined specific market characteristics
Chairman                                          for the types of traveller expected to utilise the area’s hotels. The
                                                                       Yours sincerely
                                                  factors investigated include purpose of visit, average length of
                                                                       HVS INTERNATIONAL
Russell Kett                                      stay, facilities and amenities required, seasonality, daily demand
Managing Director                                 fluctuations and price sensitivity.
                                               5. An analysis of existing and proposed competition has provided
Charles Human                                     an indication of the current accommodated demand, along with
Managing Director                                                    Name
Investment Services                               market penetration and the degree of competitiveness.
                                                                     Title
                                               6. Documentation for an occupancy and average rate projection has
Directors:                                        been derived from an analysis of marketwide supply and
Simon Hudspeth
Dominique Bourdais
                                                  demand combined with a penetration analysis to derive the
Bernard Forster                                   Hotel’s projected occupancy.
                                               7. A projection of income and expense has been made in accordance
London           Singapore                        with the Uniform System of Accounts for Hotels. This projection
New York         New Delhi
San Francisco    Vancouver
                                                  sets forth the anticipated economic benefits of the Hotel and
Miami            Toronto                          provides the basis for the income capitalisation approach.
Denver           São Paulo
Dallas           Buenos Aires                8. The report considers three approaches to value: income
Madrid                                             capitalisation, cost and sales comparison. Because hotels are
                                                   income-producing properties that are normally bought and sold
Specialists in Hotel Consulting                    on the basis of the capitalisation of their anticipated stabilised
& Valuation Worldwide                     Encl [if appropriate]
                                                   earning power, the greatest weight has been given to the value
                                                   indicated by the income capitalisation approach. We find that
                                                   most hotel investors employ a similar procedure in formulating
                                                   their purchase decisions, and thus the income capitalisation
                                                   approach most closely reflects the rationale of typical buyers.


                                          5
                                              Stephen Rushmore (1992) Hotels and Motels: A Guide to Market Analysis,
                                            Investment Analysis, and Valuations, Appraisal Institute, Chicago.
                                            6 HVS International is the trading name of SG&R Valuation Services Company,
                                              Stephen Rushmore and Erich Baum (2001) Hotels & Motels: Valuations and
                                            America Studies, Appraisal Institute, Chicago
                         A United States of Market partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                 Market Area Analysis 6




                                                                            Date

                                          Name

   3. Market Area Analysis                Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

                                          The macroeconomic climate in which a hotel operates is an important
                                          Dear
                                          consideration in forecasting hotel demand and income potential.
14 Hallam Street                          Economic and demographic trends that reflect the amount of visitation
                                                                   Re:
London, W1W 6JG                           provide a basis from which the demand for hotel accommodation can be
020 7878 7700
020 7436 3386 FAX
                                          projected.
www.hvsinternational.com                  Text of letter …
                                          The market area for a hotel encompasses not only its immediate
                                          surroundings, but also the geographic regions from which demand for
                                          hotel accommodation originates. In respect of the Hotel, we have
                                          considered the greater Newtown area, and also the national UK
Stephen Mendell
Chairman                                  economy, as some of the Hotel’s demand emanates from outside the
                                          immediate Newtown area.    Yours sincerely
                                                                     HVS INTERNATIONAL
Russell Kett
Managing Director                         The Hotel’s market area is defined by Newtown city centre and its
                                          suburbs. The purpose of the market area analysis is to review available
                                          economic and demographic data to determine whether the defined
Charles Human
Managing Director                         market area will undergo economic growth, stability or decline. In
                                                                     Name
Investment Services                                                  of the
                                          addition to a prediction Title direction of the economy, the rate of
                                          change must be quantified. These trends are then correlated based on
Directors:                                their propensity to reflect variations in hotel demand with the objective
Simon Hudspeth                            of forecasting the amount of growth or decline in transient visitation by
Dominique Bourdais
Bernard Forster                           individual market segment.

   National Economic                      The overall economic condition of an area is reflected by the propensity
London           Singapore
   Overview
New York         New Delhi                of individuals to travel there. Key indicators of future hotel demand are
San Francisco    Vancouver                those trends that reflect the relative health of the economy and the
Miami            Toronto                  spending power of individuals. This section of the report presents a
Denver           São Paulo
Dallas           Buenos Aires             discussion of the primary domestic economic factors that are likely to
Madrid                                    have the greatest influence on hotel demand in UK. Table 3-1 contains a
                                          summary of these economic indicators.
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                Market Area Analysis 7




                                                                              Date

                                            Name
   Table 3-1           Key Economic Indicators – UK
                                            Title
                                            Co Name        Actual                                       Forecast
                                            Address 1
                                                   2002 2003   2004 2005                2006     2007      2008    2009   2010
                                            Address 2
             Real GDP growth (%)                      1.9  2.2     3.2  1.7               1.8     2.4       2.2     2.1     2.0
             Consumer price inflation (av %)
                                            City      1.3  1.4     1.5  2.1               1.8     1.9       2.0     2.1     2.0
             Budget balance (% of GDP)      Postcode-1.3  -3.2    -2.9 -3.1              -3.3    -2.9      -2.5    -2.2    -2.0
             Current-account balance (% of GDP)        -0.9     -1.9   -2.4    -1.5      -1.1    -1.1      -0.8    -1.0    -1.0
             Short-term interest rate (av %)            4.1      3.7    4.7     4.8       4.3     4.2       4.7     4.6     4.5
             Exchange rate US$:£ (av)        Dear      1.50     1.63   1.85    1.82      1.79    1.87      1.89    1.82    1.80
             Exchange rate £:€ (av)                    0.63     0.69   0.67    0.68      0.70    0.71      0.68    0.69    0.69
14 Hallam Street                                                              Re:
London, W1W 6JG
            Source: Economist Intelligence Unit, January 2006
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                                …
                                               Text of letter
                                           The Economist Intelligence Unit’s (EIU) UK Country Forecast (January
                                           2006) has forecast national GDP growth for the UK of 1.8% in 2006, 2.4%
                                           in 2007 and 2.2% in 2008. We have used these national estimates as the
Stephen Mendell
                                           starting point for our evaluation of the potential growth in demand for
Chairman                                   hotel accommodation by market segment in the market area, although
                                                                     Yours sincerely
                                           we have specifically taken into account the state of, and prospects for,
                                                                     HVS INTERNATIONAL
Russell Kett                               the immediate local area economy.
Managing Director
                                           The EIU has forecast consumer price inflation for the UK of 1.8% in 2006,
Charles Human                              1.9% in 2007 and approximately 2.0% thereafter. We have used these
Managing Director                                                     Name
                                           estimates as the starting point for our evaluation of the potential growth
Investment Services                                                   Title
                                           in achievable average room rate by market segment in the market area,
                                           and to determine the likely change in operating costs over time,
Directors:                                 although we have specifically taken into account local hotel market
Simon Hudspeth
Dominique Bourdais
                                           conditions.
Bernard Forster
                                           Our assumptions and projections relating to hotel demand growth and
London        Singapore
                                           average room rate growth are explained in Section 5, Market for Transient
New York      New Delhi                    Accommodation, and Section 7, Projection of Hotel Demand, Occupancy and
San Francisco Vancouver                    Average Rate.
Miami         Toronto
Denver        São Paulo
   MARKET AREA Aires
Dallas        Buenos                       The market area of a hotel encompasses the geographic regions from
   DEFINITION
Madrid                                     which demand for hotel accommodation originates. In certain countries,
                                           demand is generated almost exclusively from the domestic market,
Specialists in Hotel Consulting            which implies that the relevant market area would be the country itself.
& Valuation Worldwide                      Encl [if appropriate]
                                           However, in cases where a significant proportion of the total hotel
                                           demand emanates from international countries, economic factors that
                                           influence travellers from these source countries must also be evaluated.

                                           The market area activity is affected by the general level of economic
                                           activity in the immediate and surrounding area. We have taken into
                                           consideration both general national economic indicators (such as GDP
                                           growth) and specific local activity, including that actual and planned.

                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                Market Area Analysis 8




                                                                               Date

                                             Name
                                             The Wellington Hotel is located in Newtown city centre at Main Square,
                                             Title
                                             adjacent to Gateway train station.
                                             Co Name
                                             Address 1
                                             Newtown is ideally situated next to the intersection of the M4 and the
                                             Address 2
                                             M5 motorways, which run west to east and north to south. The M4 links
                                             City
                                             Newtown city centre to the M4, which gives easy access to all parts of the
                                             Postcode
                                             country. Journey times from Newtown to London and Birmingham are
                                             approximately two hours and one hour 25 minutes, respectively.

   Tourism and Visitation                    Dear
                                             Airport passenger counts are important indicators of transient hotel
14 Hallam Street
                                             demand. A sizeable percentage of arriving passengers may need hotel
                                                                      Re:
London, W1W 6JG                              accommodation, depending upon the type and location of a particular
020 7878 7700                                airport. Trends showing changes in passenger counts also reflect local
020 7436 3386 FAX
www.hvsinternational.com                     business activity and the overall economic health of an area. Table 3-2
                                             Text of letter …
                                             summarises the volume of passenger traffic for the past nine years. Total
                                             passenger movements include the sum of arrivals, departures and
                                             transient movements.
Stephen Mendell
   Table
Chairman 3-2           Airport Passenger Movements for Newtown 1997-05
                                                                               Yours sincerely
                                               %                       %       HVS INTERNATIONAL
                                                                                          %    Domestic            Overseas
Russell Kett      Year            Total      Change       Domestic   Change   Overseas    Change    % Share        % Share
Managing Director
                   1997       1,142,734        —          344,551       —      798,183      —         30.2 %          69.8 %
                   1998       1,250,703        9.4 %      312,760     (9.2) % 937,943     17.5 %      25.0            75.0
Charles Human
Managing Director  1999       1,373,165        9.8        264,291    (15.5)    Name
                                                                              1,108,874   18.2        19.2            80.8
Investment Services2000       1,615,761       17.7        279,557      5.8    1,336,204
                                                                               Title      20.5        17.3            82.7
                   2001       1,884,116       16.6        344,730     23.3    1,539,386   15.2        18.3            81.7
                   2002       1,823,029       (3.2)       390,916     13.4    1,432,113   (7.0)       21.4            78.6
Directors:
                   2003       1,881,322        3.2        359,428     (8.1)   1,521,894    6.3        19.1            80.9
Simon Hudspeth
Dominique Bourdais 2004       2,139,900       13.7        378,336      5.3    1,761,564   15.7        17.7            82.3
Bernard Forster 2005          2,288,173        6.9        390,752      3.3    1,897,421    7.7        17.1            82.9

              Compound Annual
London          Singapore
             Growth Rate 1997-05                  9.1 %               1.6 %               11.4 %
New York        New Delhi
San Francisco Vancouver
Miami        Source: Airports Council International
                Toronto
Denver          São Paulo
Dallas          Buenos Aires
Madrid
                                             As illustrated in the above table, Newtown International Airport has
                                             experienced tremendous growth over the past eight years. The number
Specialists in Hotel Consulting              of passengers handled at the airport has increased by a little over 9% per
& Valuation Worldwide                        Encl [if appropriate]
                                             year on average since 1997, with a larger gain recorded in the
                                             international passenger segment, at over 11%.

                                             Newtown International Airport is located some seven miles southwest of
                                             the city centre and can be reached from the Hotel in 20 to 30 minutes by
                                             road. Newtown International Airport is the fastest-growing major
                                             regional airport in the UK, providing direct flights to all major UK
                                             destinations, plus several in Europe and some in North America,
                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                 Market Area Analysis 9




                                                                              Date

                                          Name
                                          including New York, Washington and Boston. A new £42 million
                                          Title
                                          terminal building has just opened, providing greater capacity and
                                          Co Name
                                          increasing the number of destinations provided, especially for business
                                          Address 1
                                          customers.
                                          Address 2
                                          City
                                          The major commercial demand generators are located in or around
                                          Postcode
                                          Newtown city centre, and in the office and business parks such as
                                          Newtown West Business Park to the northwest of the city. Generally,
                                          industrial activity has been high in the Newtown market in recent years.
                                          Dear
                                          Key manufacturing industries in the region include aerospace and
14 Hallam Street                          defence, paper, printing and publishing, electronics and electrical
                                                                     Re:
London, W1W 6JG                           engineering. There are over 500 manufacturing companies in the region,
020 7878 7700
020 7436 3386 FAX
                                          employing approximately 25,000 people.
www.hvsinternational.com                  Text of letter …
                                          Among the major organisations located in Newtown city centre and
                                          north of the city centre are Somerfield, Sony, Axa Sun Life, the RAC and
                                          HSBC (a very short distance from the subject Hotel). Hi-tech industry,
                                          supported by university research facilities, continues to grow. Many hi-
Stephen Mendell
Chairman                                  tech businesses have invested in the Newtown area in recent years,
                                                                      Yours sincerely
                                          including Orange, Hewlett Packard, and Toshiba. Prospects for the
                                                                      HVS INTERNATIONAL
                                          region’s future activity are good. Newtown has become known as one of
Russell Kett
Managing Director                         England’s largest financial services centres outside London. The
                                          structure of the workforce in Newtown is detailed in Table 3-3.
Charles Human
Managing Director                         Table 3-3                     Name
                                                         Employment by Sector in Newtown 2005
Investment Services                                                           Title
                                                                                             Approximate
Directors:                                    Sector                                      Number of Employees   % Share    UK Average
Simon Hudspeth
Dominique Bourdais                            Manufacturing Industries                             24,900        11.4 %       11.0 %
Bernard Forster                               Construction/Utilities/Agriculture                    8,400         3.8          3.5
                                              Distribution/Hotels & Restaurants                    42,300        19.4         18.0
                                              Transport & Communications                           11,600         5.3          4.5
London           Singapore                    Banking, Finance & Insurance                         70,900        32.5         38.0
New York         New Delhi
                                              Public Administration, Education & Health            51,600        23.6         22.0
San Francisco    Vancouver
Miami            Toronto                      Other Services                                        8,700         4.0          3.0
Denver           São Paulo
Dallas           Buenos Aires                 Total                                              218,400        100.0 %      100.0 %
Madrid
                                              Source: Newtown Economic Development Department, June 2005
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]
                                          There is only a moderate level of tourist visitation to Newtown city
                                          centre at this time, and the number of overnight stays from leisure
                                          visitors is relatively low. There are only a few major attractions in the city
                                          centre, including Newtown Museum of Archaeology, the Tudor House
                                          Museum, the Newtown Zoological Gardens and a number of art
                                          galleries. In addition, Sunnyside Theme Park and Rockland Park, two
                                          major tourist attractions situated within easy reach of Newtown,

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                    Market Area Analysis 10




                                                                             Date

                                          Name
                                          generate some weekend and general holiday period visitation for the
                                          Title
                                          area.
                                          Co Name
                                          Address 1
                                          Located to the north of Newtown near Tower Hill is the Valley shopping
                                          Address 2
                                          centre, considered to be one of the largest regional shopping centres in
                                          City
                                          the UK. The Tower Hill retail area also includes a multiplex cinema and
                                          Postcode
                                          the Venue leisure centre.

                                          An attraction that is expected to generate both commercial and tourism-
                                          Dear
                                          related visitation is the major regeneration of the Newtown Harbourside.
14 Hallam Street
                                          The £90 million, 15-acre Newtown Park project will bring science, nature,
                                                                      Re:
London, W1W 6JG                           and art together in innovative new ways. The scheme includes Explore
020 7878 7700                             Zone, a science world theme park, and Wildscreen Zone, a virtual reality
020 7436 3386 FAX
www.hvsinternational.com                  theme letter …
                                          Text of park with an IMAX cinema and botanical garden, as well as new
                                          residential and commercial office space. Newtown Park is expected to
                                          attract 450,000 visitors in its first year. The project opened at the
                                          beginning of July 2005.
Stephen Mendell
Chairman
                                          Another major development project that is currently under construction
                                          in Newtown is the city Yours sincerely
                                                                     centre regeneration project at Main Square
                                                                   HVS INTERNATIONAL
                                          adjacent to Gateway train station. The development will provide a
Russell Kett
Managing Director
                                          mixed-use environment of 23 acres combining office accommodation
                                          with a full range of retail and leisure facilities. HSBC is relocating its
                                          headquarters to Main Square and Tesco will occupy its new regional
Charles Human
Managing Director                         headquarters in Newtown in 2006. Other companies moving to Main
                                                                   Name
Investment Services                       Square include BT plc and Barclays Bank. The Wellington Hotel is
                                                                   Title
                                          located near this development. Other office and business park
Directors:                                developments planned in the Newtown region are summarised in Table
Simon Hudspeth                            3-4.
Dominique Bourdais
Bernard Forster
                                          Table 3-4      Proposed Office and Business Park Developments in Newtown as at
                                                         September 2005
London           Singapore
New York         New Delhi
San Francisco    Vancouver                   Location                         Description                                        Size (m²)
Miami            Toronto
Denver           São Paulo                   North Newtown
Dallas           Buenos Aires                Parkway North                    Office park                                         130,000
Madrid                                       Newtown Business Park            Office campus                                       150,000
                                             The Quadrant                     Offices and light assembly                           50,000
                                             Westerliegh, Tate                Business park                                       190,000
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]
                                             East Newtown
                                             Somerdale                        Offices and industrial use                          150,000

                                             South Newtown
                                             South Newtown Business Park      Offices and industrial use                           80,000
                                             Wills Factory                    Manufacturing and light industrial/warehousing      260,000
                                             Grove Park                       Regeneration area                                 1,010,000

                                             Source: Newtown Economic Development Department, September 2005


                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                Market Area Analysis 11




                                                                            Date

                                          Name
                                          We highlight below the aspects of Newtown which we consider to have
                                          Title
                                          a specific bearing upon historical, current and potential future hotel
                                          Co Name
                                          demand.
                                          Address 1
                                          Address 2
                                          • The regeneration project at Main Square;
                                          City
                                          • The continuing redevelopment of Newtown city centre; for example,
                                          Postcode
                                             the Harbourside and North Shore developments and the growth of
                                             new businesses will increase future commercial hotel demand;
                                          Dear recently opened, £42 million terminal building at Newtown
                                          • The
14 Hallam Street                              International Airport will further enhance commercial and leisure
                                                                     Re:
London, W1W 6JG                               visitation in the Newtown area;
020 7878 7700
020 7436 3386 FAX                         • The new Newtown Park development at the Harbourside;
www.hvsinternational.com                  Text of letter …
                                          • The potential development of an Eco-Park/Zoo in Canons Marsh,
                                            located in north Newtown some 15 minutes’ drive from the
                                            Wellington Hotel, is likely to enhance leisure demand further in the
                                            area. Development of the park is expected to start in 2006;
Stephen Mendell
Chairman                                  • The ongoing expansion of sincerely business and industrial parks
                                                                  Yours existing
                                            located in or near Newtown; for example, the Newtown West
                                                                  HVS INTERNATIONAL
Russell Kett                                Business Park located in northwest Newtown is likely to create
Managing Director
                                            further commercial hotel demand.

   CONCLUSION
Charles Human                             Our review of various national, regional and local economic data
Managing Director                                                   Name
                                          indicates that Newtown benefits from strong levels of commercial room
Investment Services                                                 Title
                                          night demand generated from local businesses, supported by modest
                                          numbers of leisure visitors, although Newtown Park and the proposed
Directors:
Simon Hudspeth                            Eco-Park could have some impact on leisure visitation. Specific local
Dominique Bourdais                        economic activity appears to be increasing beyond general national
Bernard Forster                           levels due to a combination of factors. These include the ongoing
                                          development of good-quality offices and business parks, including Main
London           Singapore                Square, as well as the Newtown Harbourside redevelopment.
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                             Description of the Hotel 12




                                                                           Date

                                         Name

   4. Description of the Hotel           Title
                                         Co Name
                                         Address 1
                                         Address 2
                                         City
                                         Postcode

   LOCATION                              A hotel’s site and its location within a specific neighbourhood can have a
                                         Dear
                                         direct impact upon the hotel’s performance relative to a competitive
14 Hallam Street                         market. The following paragraphs describe the location of the Hotel in
                                                                      Re:
London, W1W 6JG                          relation to its immediate surroundings and its market area, as described
020 7878 7700
020 7436 3386 FAX
                                         in Section 3. Following this site and location analysis, the Hotel’s physical
www.hvsinternational.com                 facilities are described in detail.
                                         Text of letter …

                                         The Hotel is located near the Main Square development adjacent to
                                         Gateway train station. We consider that the Hotel occupies a prime
                                         location in Newtown city centre.
Stephen Mendell
Chairman
   Size and Topography of                                        Yours sincerely
                                         According to Joint Venture Capital Trust Group Ltd, the subject parcel
   the Site                              measures approximately HVS INTERNATIONAL
                                                                 10,200 m². The site is roughly rectangular in
Russell Kett
Managing Director                        shape and the topography of the site is generally flat.

                                         The Wellington Hotel is adjacent to the Main Square office development.
Charles Human
Managing Director
                                         The Hotel is located on the east side of the development and is currently
                                                                    Name
Investment Services                                                  Harbour on the east and by Gateway train
                                         bordered by the FloatingTitle
                                         station on the south. To the north of the Hotel is the HSBC Building,
Directors:                               which is currently almost complete. In the centre of the Main Square
Simon Hudspeth                           development are the headquarters of Tesco and located on the west side
Dominique Bourdais
Bernard Forster
                                         of the Main Square development are the new offices of Barclays Bank;
                                         both of these buildings are currently being built.
London        Singapore
   Environmental Delhi
New York      New
                   Issues                We have inspected the property and made appropriate enquiries.
San Francisco Vancouver                  However, we have not discovered any contamination affecting either the
Miami         Toronto                    property or any of the neighbouring properties. We have not been
Denver        São Paulo
Dallas        Buenos Aires
                                         advised by the client that there is any contamination at the property nor
Madrid                                   are we aware of any reports that have been undertaken.

Specialists in Hotel Consulting
                                         We have not been instructed to undertake an environmental audit or
& Valuation Worldwide                    Encl [if appropriate]
                                         any formal investigation, nor are we qualified to establish whether there
                                         is any contamination either of the Hotel or of neighbouring properties.

                                         For the purpose of our report and valuation we have assumed that no
                                         contamination exists. However, should this be proved otherwise it may
                                         have a material impact upon our opinion of value.

   Access                                The Hotel benefits from excellent access to and from Castle Way and
                                         Castle Gate. The roundabout immediately west of the site links it
                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                              Description of the Hotel 13




                                                                            Date

                                          Name
                                          through Piccadilly Street to the beginning of the M34, and further to the
                                          Title
                                          M8 and the M35. Heading to the south gives access to the A5, the A40 to
                                          Co Name
                                          Newtown International Airport and south to the M35 and the A37.
                                          Address
                                          Gateway1train station is situated adjacent to the site, approximately two
                                          Address
                                          minutes’2walk south of the Hotel. Newtown International Airport is
                                          City
                                          located some seven miles to the southwest via the A40, some 15 to 20
                                          Postcode
                                          minutes’ drive from the site.

   Visibility                             The visibility of the Hotel is very good from all approaches to the site,
                                          Dear
                                          including Castle Way, Castle Gate and Regent Street.
14 Hallam Street                                                    Re:
London, W1W 6JG Demand
   Proximity to                           Ease of access to primary generators of demand is vital for the successful
020Generators
    7878 7700                             operation of a hotel. One of the primary factors when choosing a hotel
020 7436 3386 FAX
www.hvsinternational.com                  Text competitive facilities is its location relative to local demand
                                          over of letter …
                                          generators, whether these are commercial businesses or tourist
                                          attractions. The Hotel enjoys a good location in relation to the following
                                          demand generators.
Stephen Mendell
Chairman
                                          • Newtown city centre;
                                                                 Yours sincerely
                                          • M34 motorway;        HVS INTERNATIONAL
Russell Kett
Managing Director
                                          • The Main Square development;
                                          • Gateway train station;
Charles Human
Managing Director                         • Companies located in Newtown city centre;
                                                                 Name
Investment Services
                                          • Newtown Park.        Title

   Conclusion – Location
Directors:                                The Wellington Hotel enjoys an excellent location. It is centrally located
Simon Hudspeth
Dominique Bourdais                        within Newtown city centre and easily reached by several modes of
Bernard Forster                           transport. The Hotel also benefits from its proximity to all the major
                                          demand generators in Newtown.
London        Singapore
New York FACILITIES
   HOTEL      New Delhi                   The quality of a hotel’s physical facilities has a direct influence on its
San Francisco Vancouver                   marketability and attainable occupancy and average rate. The design and
Miami         Toronto
Denver        São Paulo                   functionality of the structure can also affect operating efficiency and
Dallas        Buenos Aires                overall profitability. The following paragraphs describe the Hotel’s
Madrid
                                          physical premises and facilities in an effort to determine how they
                                          contribute to its total value.
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]
   Property Overview                      The Hotel is a commercial property with 250 guest rooms which opened
                                          in 1994. In addition to the guest rooms, the Hotel contains a 125-seat café
                                          restaurant, an 80-seat speciality restaurant, a 50-seat bar, 890 m2 of
                                          meeting and banqueting space, a fitness centre and other facilities
                                          typically found in a four-star, city centre business Hotel.

                                          During the course of our inspection we inspected the public areas, the
                                          conference and banqueting rooms, back-of-the-house areas, the fitness
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                              Description of the Hotel 14




                                                                            Date

                                          Name
                                          centre, and a representative sample of bedrooms and suites. The exterior
                                          Title
                                          elevations and the roof were viewed from street level only.
                                          Co Name
                                          Address 1
                                          Photographs of the Hotel and of some of the facilities are attached in
                                          Address 2
                                          Addendum 2.
                                          City
   History of Development                 The Wellington Hotel was originally owned by the local Wellington
                                          Postcode
                                          family, but upon John Wellington’s death in 1804 the estate passed to his
                                          partner John Calverley. In 1850 the property was damaged by fire,
                                          Dear
                                          resulting in a major remodelling of the building. During the Great War of
14 Hallam Street
                                          1914 to 1918, the building was used as a hospital and convalescent home.
                                                                     Re:
London, W1W 6JG                           In 1925 the Calverley family sold the property to the city council, which
020 7878 7700                             used the property as a mental hospital until 1971. Between 1974 and 1986
020 7436 3386 FAX
www.hvsinternational.com                  Text of letter fell
                                          the property … into an advanced state of disrepair under the ownership
                                          of Newtown Police. In 1986, the ownership was transferred back to the
                                          council. However, the Wellington Hotel remained in poor condition
                                          until 1991 when Venture Capital Trust acquired the property and
                                          invested £10 million in restoring and extending the Hotel.
Stephen Mendell
Chairman
                                          The development of the Yours sincerely
                                                                     Hotel was completed in December 1993, in
                                                                    HVS INTERNATIONAL
                                          keeping with the style and history of the building, but with added
Russell Kett
Managing Director
                                          facilities for the bedrooms and leisure centre. Many of the public areas
                                          such as the reception, lounge areas, restaurants, bar, bedroom suites and
                                          conference rooms are located within the original building.
Charles Human
Managing Director                                                   Name
   Summary of
Investment Services   the                 From our inspection and based on information provided by the
                                                                    Title
   Facilities                             management of the Wellington Hotel, Table 4-1 summarises the facilities
Directors:                                available at the Hotel.
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                  Description of the Hotel 15




                                                                              Date

                                         Name
                                         Table 4-1    Facilities Summary – Wellington Hotel
                                         Title
                                         Co Name
                                          Address:                   Main Square                      Opening Date: January 1994
                                         Address 1                   Newtown
                                         Address 2
                                          Tenure:                    Freehold
                                         City
                                         Postcode History:
                                          Refurbishment              2002 – 80 Bedrooms, lobby, meeting rooms, IT and exterior
                                                                              2003 – 70 Bedrooms, lobby, meeting rooms, kitchen, exterior
                                                                              2004 – 100 Bedrooms, bar/restaurant, and exterior
                                         Dear
                                          Guest Rooms                          Approximate Area/m²                Number
14 Hallam Street                          Single                                       25                           85
                                                                              Re:
London, W1W 6JG                           Double                                       28                           90
020 7878 7700                             Executive                                    35                           60
020 7436 3386 FAX                         Suite                                        40                           15
www.hvsinternational.com                 Text of letter …
                                          Total                                                                    250

                                                                                                                Maximum Capacity/Persons
                                          Meeting Rooms                        Approximate Area/m²                   Theatre-Style
                                          Ballroom                                     500                               400
Stephen Mendell
Chairman
                                          Pre-Function Room                            185                                —
                                          Board Room                          Yours sincerely
                                                                                        40                                20
                                          Meeting Room 1                      HVS INTERNATIONAL
                                                                                       150                               120
Russell Kett                              Meeting Room 2                                15                               120
Managing Director                         Total                                        890                               660

Charles Human                             Food and Beverage Facilities          Approximate Area/m²            Approximate Number of Seats
Managing Director                         Café Restaurant – Bon Marche        Name 200                                     125
Investment Services                       Speciality Restaurant – Oh! Cajun   Title 120                                     80
                                          Bar/Lounge                                      70                                50
                                          Total                                          390                               255
Directors:
Simon Hudspeth
Dominique Bourdais                        Car Parking:               Approximately 150 spaces
Bernard Forster                           Leisure Facilities:        Fitness centre with sauna, solarium and whirlpool spa

                                          Source: Hotel Management
London        Singapore
New York      New Delhi
San Francisco Vancouver
   Condition of the
Miami         Toronto                    The Hotel opened at the beginning of 1994 and since that time has been
Denver        São Paulo
   Building and Facilities
Dallas        Buenos Aires               well maintained. We have been provided with information on historical
Madrid                                   capital expenditure at the Hotel.

Specialists in Hotel Consulting          During our visit we paid particular attention to the condition of the
& Valuation Worldwide                    Encl [if of the building, including the windows, the public areas, the
                                         exteriorappropriate]
                                         guest rooms and corridors, as well as the back-of-the-house areas
                                         including the kitchen, storage rooms, boiler rooms, and so forth. We
                                         have not noticed any items requiring particular attention.

                                         From our inspection of the Hotel, it appears that the Hotel is in very
                                         good working order and no immediate material capital expenditure
                                         requirement has been identified.

                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                              Description of the Hotel 16




                                                                            Date

   Capital Expenditure                    Name
                                          For the purposes of this report, we have assumed that the Hotel will be
                                          Title
                                          maintained in a competitive condition over its remaining economic life.
                                          Co Name
                                          Furthermore we have assumed that the related, necessary capital
                                          Address 1
                                          expenditure will be funded by a reserve for replacement. An amount
                                          Address
                                          equal to2 3.0% of annual gross revenues will be deducted from our
                                          City
                                          forecast of income and expense in recognition of the ongoing cost of
                                          Postcode
                                          maintaining the facilities.

   Conclusion – Hotel                     We have analysed the building, facilities and amenities offered by the
   Facilities                             Dear
                                          Hotel and note the following advantages and disadvantages. In general,
14 Hallam Street                          the Hotel’s premises appear to be very well-suited for hotel use. The
                                                                    Re:
London, W1W 6JG                           building is straightforward in design and configuration, permitting
020 7878 7700
020 7436 3386 FAX
                                          efficiency of operation and convenient guest and staff flow. The exterior
www.hvsinternational.com                  Text of of the
                                          design letter …building is both modern and inviting and the interior
                                          finishes are of a high quality. The guest rooms are excellent in terms of
                                          size and decoration and the Hotel’s ancillary facilities are appropriate for
                                          the operation of a four-star commercial, city centre hotel in the UK,
                                          outside London.
Stephen Mendell
Chairman
                                                                            Yours sincerely
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                  Market for Transient Accommodation 17




                                                                            Date

                                          Name

   5. Market for Transient Accommodation  Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

                                          The analysis of demand by the use of individual market segments is
                                          Dear
                                          important because each market segment often exhibits unique
14 Hallam Street                          characteristics relating to factors such as growth potential, seasonality of
                                                                      Re:
London, W1W 6JG                           demand, average length of stay, double occupancy, facility requirements,
020 7878 7700
020 7436 3386 FAX
                                          price sensitivity, and so forth. By quantifying the overall room night
www.hvsinternational.com                  demand by market segment and defining the individual characteristics
                                          Text of letter …
                                          of each segment, the future potential for each market segment can be
                                          projected.

   Accommodated Room                      Demand for transient accommodation in the defined market area is
Stephen Mendell
   Night
Chairman Demand                           generated primarily by the following five market segments.
                                                                     Yours sincerely
                                                         Segment 1 HVS INTERNATIONAL
                                                                         Commercial
Russell Kett
Managing Director                                        Segment 2       MICE
                                                         Segment 3       Individual Leisure
                                                         Segment 4       Group Leisure
Charles Human
Managing Director                                        Segment 5 Name  Airline
Investment Services                                                  Title
                                          Based on our field work, area analysis and knowledge of the local hotel
Directors:                                market, we estimate that, in 2005, the distribution of accommodated
Simon Hudspeth                            hotel room night demand for those hotels that we consider to be
Dominique Bourdais
Bernard Forster                           competitive with the Hotel is as shown in Table 5-1. Further details of
                                          these hotels are given in Section 6, Competition.
London           Singapore
New York         New Delhi                Table 5-1      Accommodated Room Night Demand – Competitive Market and
San Francisco    Vancouver                               Wellington Hotel 2005
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
                                                                              Marketwide                     Wellington Hotel
Madrid                                                                 Accommodated Percentage          Accommodated Percentage
                                               Market Segment             Demand        of Total           Demand        of Total

Specialists in Hotel Consulting                Commercial                   229,455          55 %           37,139            55 %
& Valuation Worldwide                     Encl [if appropriate]
                                             MICE                            57,552          14             10,129            15
                                               Individual Leisure            77,990          19             13,505            20
                                               Group Leisure                 25,783           6              3,376             5
                                               Airline                       24,239           6              3,376             5

                                               Total                        415,018         100 %           67,525          100 %



                                          This aggregate market mix, with business demand accounting for 75%
                                          and leisure demand accounting for 25% of the total areawide demand,
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                  Market for Transient Accommodation 18




                                                                            Date

                                          Name
                                          reflects the area as primarily a business destination. As a result,
                                          Title
                                          historically, hotel occupancies in the area have been stronger during
                                          Co Name
                                          weekdays and commercial periods and weaker during weekends and
                                          Address 1
                                          holiday periods.
                                          Address 2
   Commercial Segment                     City
                                          Commercial demand is strongest on Monday to Thursday nights,
                                          Postcode
                                          declines significantly on Fridays and Saturdays and increases somewhat
                                          on Sundays. This demand in the market area is relatively constant
                                          throughout the year, with some drop off noticeable in the period from
                                          Dear
                                          November to February and in August when travellers, especially
14 Hallam Street                          business and conference visitors, take holidays to other destinations.
                                                                     Re:
London, W1W 6JG
020 7878 7700                             Future demand in this segment is tied primarily to the business and
020 7436 3386 FAX
www.hvsinternational.com                  economic health of the UK and its main source markets. As the main
                                          Text of letter …
                                          source markets show improved economic stability and growth, business
                                          travel should increase accordingly. With the continued development of
                                          Newtown city centre and business parks in and around Newtown, such
                                          as the Newtown West Business Park, we expect a continued growth in
Stephen Mendell
Chairman                                  the commercial sector which is likely to show increased activity in the
                                          next two to three years. Yours sincerely
                                                                    HVS INTERNATIONAL
Russell Kett
Managing Director
                                          In light of the potential for further developments in and around
                                          Newtown and the Hotel’s immediate neighbourhood, we consider that
                                          demand for this segment is likely to grow at a rate slightly above
Charles Human
Managing Director                         national GDP for the next few years. We have selected growth rates of
                                                                    Name
Investment Services                                                  2007
                                          2.5% in 2006 and 3.0% inTitle and 2008. From 2009 onwards we have
                                          assumed a stabilised growth rate of 2.5%.
Directors:
   MICE Segment
Simon Hudspeth                            The MICE segment in the market area mostly comprises demand from
Dominique Bourdais
Bernard Forster
                                          local companies. They typically require meeting venues which are
                                          conveniently located and which offer suitable space and facilities. For the
                                          purpose of analysing hotel demand, we have considered conference
London           Singapore
New York         New Delhi
                                          demand to be only those hotel guests attending meetings and
San Francisco    Vancouver                conferences in the hotel at which they are staying. Those attending ‘city’
Miami            Toronto                  events in non-residential venues are considered to be part of commercial
Denver           São Paulo
Dallas           Buenos Aires             demand.
Madrid
                                          Peak conference demand typically occurs in the spring and autumn;
Specialists in Hotel Consulting           summer represents the slowest period and winter demand can be
& Valuation Worldwide                     Encl [if appropriate]
                                          variable. The average length of stay for typical conference groups ranges
                                          from two to four nights. Most commercial groups require
                                          accommodation from Monday to Thursday, but associations and social
                                          groups will sometimes utilise the weekends.

                                          Future demand potential in the MICE segment is closely related to the
                                          growth trend expected for the Commercial segment. Because most
                                          meetings have either a direct or an indirect business purpose, the
                                          economic considerations that have an impact on business travel also
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                  Market for Transient Accommodation 19




                                                                            Date

                                          Name
                                          affect MICE demand. For the purpose of our analysis, we have chosen to
                                          Title
                                          apply the same growth rates to meeting and conference demand as for
                                          Co Name
                                          commercial demand.
                                          Address 1
   Individual Leisure                     Address 2
                                          The Individual Leisure segment comprises those people travelling in
   Segment                                City
                                          groups and those travelling individually for tourism and leisure
                                          Postcode
                                          purposes. These sectors comprise the majority of weekend demand in
                                          the market area, but are also responsible for some weekday demand
                                          during the summer and other holiday periods.
                                          Dear
14 Hallam Street
                                          As stated previously, there are a limited number of tourist attractions in
                                                                    Re:
London, W1W 6JG                           the immediate area of Newtown. Generally, these attractions generate a
020 7878 7700                             high level of day visitation but the demand for overnight hotel
020 7436 3386 FAX
www.hvsinternational.com                  accommodation is limited. However, it is important to note that the
                                          Text of letter …
                                          recently opened Newtown Park development on the Harbourside
                                          should start to attract additional leisure demand to Newtown and this
                                          should contribute to an increase in demand for hotel accommodation at
                                          weekends.
Stephen Mendell
Chairman
                                                                     Yours we have
                                          For the purpose of this analysis,sincerely chosen to apply a growth rate
                                                                     HVS INTERNATIONAL
                                          of 2.5% in 2006 and 4.0% in 2007. From 2008 onwards we have assumed a
Russell Kett
Managing Director
                                          stabilised growth rate of 2.5%.

   Group Leisure Segment                  The Group Leisure segment generally comprises visitors who have
Charles Human
Managing Director
                                          purchased package holidays that include the cost of travel, hotel
                                                                     Name
Investment Services                       accommodation and some provision for meals, or what is termed an
                                                                     Title
                                          ‘inclusive tour’. Tour operator rates are generally contracted annually at
Directors:                                rather low levels, but are used to help fill lower occupancy periods.
Simon Hudspeth                            Because of the low rate of this segment, this demand will be replaced by
Dominique Bourdais
Bernard Forster
                                          higher-yielding demand as market occupancy increases, when demand
                                          timing permits.
London           Singapore
                                          Group leisure demand in the Newtown area is derived from several
New York         New Delhi
San Francisco    Vancouver                sources including coach tours travelling to the continent or elsewhere in
Miami            Toronto                  Britain and shoppers. For the purpose of our analysis, we have chosen to
Denver           São Paulo
Dallas           Buenos Aires
                                          apply the same growth rates for the group leisure demand as for the
Madrid                                    individual leisure demand.

   Airline Segment
Specialists in Hotel Consulting
                                          This segment mostly comprises airline crew contracts, which generally
& Valuation Worldwide                     Encl [if significant
                                          achieveappropriate] discounts compared to commercial segments. We
                                          have applied a growth rate of 2.5% from 2006 onwards.

   Conclusion                             The purpose of segmenting hotel demand is to define each major type of
                                          demand, identify customer characteristics and estimate future growth
                                          trends. Starting with an analysis of the local area, five segments were
                                          defined as being representative of the Hotel’s market. Various types of
                                          economic and demographic data were then evaluated to determine their
                                          propensity to reflect future changes in hotel demand. Based on this
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                    Market for Transient Accommodation 20




                                                                               Date

                                          Name
                                          procedure we have made the following forecast of market segment
                                          Title
                                          growth rates. These growth rates will be utilised in subsequent sections
                                          Co Name
                                          of this study to forecast changes in hotel demand.
                                          Address 1
                                          Address
                                          Table 5-2 2 Forecast Annual Growth Rates – Competitive Market 2006-09
                                          City
                                          Postcode                                  Annual Growth Rate
                                                          Market Segment               2006    2007       2008      2009

                                                          Commercial                   2.5 %    3.0 %      3.0 %     2.5 %
                                          Dear
                                                          MICE                         2.5      3.0        3.0       2.5
14 Hallam Street                                          Individual Leisure           2.5      4.0        2.5       2.5
                                                          Group Leisure
                                                                               Re:     2.5      4.0        2.5       2.5
London, W1W 6JG
020 7878 7700                                             Airline                      2.5      2.5        2.5       2.5
020 7436 3386 FAX
www.hvsinternational.com                  Text of letterBase Demand Growth
                                                         …                             2.5 %    3.2 %      2.8 %     2.5 %




Stephen Mendell
Chairman
                                                                               Yours sincerely
                                                                               HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                              Name
Investment Services                                                            Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                        Competition 21




                                                                            Date

                                          Name

   6. Competition                         Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

   The Competitive                        An integral component of a market area’s supply and demand
   Market                                 Dear
                                          relationship that has a direct impact on performance is the current and
14 Hallam Street                          anticipated supply of competitive hotel facilities. To evaluate an area’s
                                                                    Re:
London, W1W 6JG                           competitive environment, the following steps should be taken.
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  • Identify the area’s hotel facilities and determine which are directly
                                          Text of letter …
                                            and indirectly competitive with the Hotel;
                                          • Determine whether additional hotel rooms (net of attrition) will enter
                                            the market in the foreseeable future;
Stephen Mendell
Chairman                                  • Quantify the number of existing and proposed hotel rooms available
                                            in the market;         Yours sincerely
                                                                   HVS INTERNATIONAL
Russell Kett                              • Review the rate structure, occupancy, market orientation, facilities
Managing Director
                                            and amenities of each competitor.

Charles Human                             From an evaluation of the occupancy, rate structure, market orientation,
Managing Director                                                     Name
                                          chain affiliation, location, facilities, amenities, reputation and quality of
Investment Services                                                   Title
                                          the area’s hotels, as well as the comments of management
                                          representatives, we have identified two properties that are considered to
Directors:
Simon Hudspeth
                                          be primary competitors of the Wellington Hotel. Including the Hotel,
Dominique Bourdais                        these primary competitors total 781 rooms.
Bernard Forster
                                          An additional 12 hotels are judged to be secondary competitors.
London           Singapore                Although the facilities, rate structures or market orientations of these
New York         New Delhi                hotels prevent their inclusion among the supply of primary competitors,
San Francisco    Vancouver
Miami            Toronto                  they do compete with the Hotel to some extent. The room count of each
Denver           São Paulo                secondary competitor has been weighted to reflect the degree to which it
Dallas           Buenos Aires             competes with the Wellington Hotel. The aggregate weighted room
Madrid
                                          count of the secondary competitors is 740.

Specialists in Hotel Consulting           Tables 6-1, 6-2 and 6-3 summarise the important operating characteristics
& Valuation Worldwide                     Encl [if appropriate]
                                          of the primary and secondary competitors. This information was
                                          compiled from personal interviews, inspections, hotel directories and our
                                          in-house library of operating data.

                                          Table 6-1 sets out each competitive hotel’s market segmentation,
                                          occupancy, average room rate and rooms revenue per available room
                                          (RevPAR). RevPAR is calculated by multiplying a hotel’s occupancy by
                                          its average rate. This calculation serves to gauge how well a hotel is
                                          maximising its rooms revenue.
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                        Competition 22




                                                                            Date

                                          Name
                                          Table 6-2 details each property’s penetration factor. Penetration is the
                                          Title
                                          ratio of a specific hotel’s operating results to the corresponding data for
                                          Co market.
                                          the Name If the penetration factor is greater than 100%, the property is
                                          Address 1
                                          performing better than the market as a whole; conversely, if the
                                          Address 2
                                          penetration is less than 100%, the hotel is performing at a level below the
                                          City
                                          marketwide average.
                                          Postcode
                                          Table 6-3 sets out the key physical characteristics of each of the main
                                          competitive hotels and includes information about each hotel’s
                                          Dear
                                          published rates and brand affiliation. The location of each primary and
14 Hallam Street                          secondary competitor is shown in the Competition Map, which follows
                                                                       Re:
London, W1W 6JG                           Table 6-3. The Competition Map also shows the location of the Hotel in
020 7878 7700
020 7436 3386 FAX
                                          relation to those proposed hotels that we consider relevant (see below).
www.hvsinternational.com                  Text of letter …
   Proposed Competition                   As well as analysing the existing supply of competitive hotel facilities, it
                                          is important to consider any new hotel projects that may have an impact
                                          on the Hotel’s operating performance. During our field work in the
                                          market and from our discussions with local hotel operators, developers
Stephen Mendell
Chairman                                  and government officials, we discovered a number of additions to room
                                                                    Yours sincerely
                                          supply in the Newtown area. Our field work involved discussions with
                                                                    HVS INTERNATIONAL
                                          the planning authorities and the Economic Development Agency. In our
Russell Kett
Managing Director                         analysis we have included four developments which we consider will
                                          also become competitive with the Wellington Hotel.
Charles Human
Managing Director                         • A 128-room Marriott Hotel is due to open at the beginning of 2007 on
                                                                 Name
Investment Services                         Manor Road in Newtown city centre. We consider this hotel to be
                                                                 Title
                                            100% competitive with the Wellington Hotel;
Directors:
Simon Hudspeth
                                          • A 220-room Premier Travel Inn Wellesley Highbush is due to open at
Dominique Bourdais                          the beginning of 2006 at Exchange House in Newtown city centre. We
Bernard Forster                             have considered this hotel to be 25% competitive with the Wellington
                                            Hotel as it will be positioned significantly below it. We have therefore
London           Singapore                  added 55 competitive rooms to the market from February 2006;
New York         New Delhi
San Francisco    Vancouver                • A 123-room Travelodge is due to open at the beginning of 2006 on
Miami            Toronto
Denver           São Paulo
                                            John Street in Newtown city centre. We have also considered this
Dallas           Buenos Aires               hotel to be 25% competitive with the Wellington Hotel for the same
Madrid                                      reason. We have added 31 competitive rooms to the market from
                                            January 2006;
Specialists in Hotel Consulting
& Valuation Worldwide                     • A 110-room Premier Travel Inn Harbour View is due to open in
                                          Encl [if appropriate]
                                            January 2006 on Queen Street in Newtown city centre. We have also
                                            considered this hotel to be 25% competitive with the Wellington
                                            Hotel for the same reason. We have added 28 competitive rooms to
                                            the market from January 2006.

                                          There are currently unconfirmed proposals for the two following hotel
                                          developments in Newtown. However, we have not taken these into

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                        Competition 23




                                                                            Date

                                          Name
                                          consideration in our analysis as there was sufficient doubt still
                                          Title
                                          surrounding these projects at the time of our study.
                                          Co Name
                                          Address 1
                                          • A 100-room Express by Holiday Inn at Grange Hill, near Newtown
                                          Address 2 Hill train station. The hotel has been linked with Stannifer
                                              Grange
                                          CityHotels, an existing Express franchisee;
                                          Postcode
                                          • A 150-room Quality Hotel, near Junction 17 of the M8 at Tower Hill
                                              (A4018).
                                          Dear
                                          It is our opinion that, even if these hotels are developed, they will be
14 Hallam Street                          targeted at lower rate paying business and leisure travellers, and due to
                                                                     Re:
London, W1W 6JG
020 7878 7700                             their distance from the city centre they are unlikely to be significantly
020 7436 3386 FAX                         competitive with the Hotel.
www.hvsinternational.com                  Text of letter …




Stephen Mendell
Chairman
                                                                            Yours sincerely
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
                                                                 Name
HVS International                                                                                                                                                                                 Competition 24
                                                                 Title
                                                                 Co Name
                                                                 Address 1
                                                                 Address 2
Table 6-1      Operating Profiles of the Primary and Secondary Competitors 2003-05 (£)
                                                                 City
                                                                 Postcode
                                                           Estimated Segmentation                                               Estimated 2003              Estimated 2004              Estimated 2005
                                                                                                               2005




                                                       l
                                                 ercia
                                                                                                   Total     Weighted




                                                                          ual
                                                                            Dear




                                                                         re



                                                                                     re
                               Number of                                                           Comp     Annual Room           Average                     Average                     Average




                                                                                 Group
                                                                  Individ
                                                                   Leisu




                                                                                            e
                                               Comm




                                                                                Leisu


                                                                                          Airlin
                                                           MICE
 Primary Competitors            Rooms                                                              Level       Count      Occ      Rate   RevPAR      Occ      Rate   RevPAR      Occ      Rate   RevPAR
                               14 Hallam Street                                                             Re:
                               London, W1W 6JG
 Wellington Hotel                 250           55 %   15 %         20 %   5%       5%              100 %         250     76 %       72          55   75 %       73          55   74 %       74          55
                               020 7878 7700
 Holiday Inn                      242
                               020 7436 3386 FAX60     10           20     5        5               100           242     73         70          51   74         72          53   73         73          53
 Hilton                           289           60
                               www.hvsinternational.com10                           5
                                                                    20 Text5of letter …             100           289     75         57          43   79         62          49   75         62          47

 Subtotals/Averages              781           58 %        12 %     20 %          5%        5%      100 %         781     75 %       66          49   76 %       68          52   74 %       69          51

                                                           Estimated Segmentation                                         Estimated 2003                    Estimated 2004              Estimated 2005
                                                                                                            2005
                               Stephen Mendell
                                                       l
                                                 ercia




                                                                                                   Total  Weighted

                                                                          ual
                               Chairman


                                                                         re
                                                                                                         Annual sincerely Average
                                                                                                   Comp Yours Room




                                                                                     re
                               Number of                                                                                                                      Average                     Average



                                                                                 Group
                                                                  Individ
                                                                   Leisu




                                                                                            e
                                               Comm




                                                                                Leisu


                                                                                          Airlin
                                                           MICE



 Secondary Competitors          Rooms                                                              Level HVS INTERNATIONAL RevPAR
                                                                                                            Count     Occ     Rate                    Occ      Rate   RevPAR      Occ      Rate   RevPAR
                               Russell Kett
 Corus Hotel                     187           55
                               Managing Director %         15 %     15 %          7%       8%       75 %        140       82 %       45          37   85 %       46          39   81 %       51          41
 Berkeley Hotel                    40           55          8       30            0        7        75           30       71         54          38   69         55          38   70         56          39
 Holiday Inn Newtown Airport      182           55         15       20            5        5        75          137       69         59          41   70         60          42   70         53          37
                               Charles Human
 Jarvis International             201           50         20       10           10       10        75      Name151       82         50          41   79         50          40   76         53          40
                               Managing Director
 City Hotel                        40           60
                               Investment Services          5       20           10        5        50      Title 2       —          —           —    —          —           —    80         57          46
 Swallow                          128           55         15       20            5        5        50           64       71         57          40   66         60          40   72         72          52
 Moat House                       142           40         25       25            5        5        50           71       72         55          40   79         56          44   76         58          44
 Novotel                       Directors:
                                  200           55         15       20            5        5        25           50       76         50          38   68         53          36   77         56          43
                               Simon Hudspeth
 Express by Holiday Inn            68           50         10       25           10        5        25           17       72         44          32   70         46          32   77         58          45
                               Dominique Bourdais
 The Piccadilly Hotel             167 Forster 55
                               Bernard                     15       15           10        5        25           27       —          —           —    —          —           —    75         35          26
 Thistle Hotel                     94           55          0       15           25        5        25           24       —          —           —    —          —           —    87         39          34
 The Grand Hotel                  112           45         20       20           10        5        25           28       71         35          25   71         46          33   71         45          32
                               London          Singapore
 Subtotals/Averages             1,561
                               New York        52 %Delhi %
                                               New     16           18 %          7%        7%      50 %          740     76 %       51          39   75 %       53          40   75 %       54          40
                               San Francisco   Vancouver
 Totals/Averages                2,342
                               Miami           55 %
                                               Toronto 14 %         19 %          6%        6%      65 %      1,521       75 %       59          44   76 %       61          46   75 %       62          46
                               Denver          São Paulo
                               Dallas          Buenos Aires
                               Madrid


                               Specialists in Hotel Consulting
                               & Valuation Worldwide                        Encl [if appropriate]
                                                               Name
HVS International                                                                                                                                                                                 Competition 25
                                                               Title
                                                               Co Name
                                                               Address 1
                                                               Address 2
Table 6-2      Operating Performance Analysis – Primary and Secondary Competitors 2003-05 (£)
                                                               City
                                                               Postcode
                                                                                       Estimated 2003                              Estimated 2004                                Estimated 2005
                                             Total       2005 Weighted
                              Number of    Competitive    Annual Room     Fair    Occ      Average Rate RevPAR        Fair      Occ      Average Rate RevPAR        Fair      Occ      Average Rate RevPAR
Property                       Rooms         Level           Count           Dear
                                                                         Share Penetration Penetration Penetration   Share   Penetration Penetration Penetration   Share   Penetration Penetration Penetration

Wellington Hotel                250Hallam Street %
                                 14          100         250              17 %      101 %        122 %    124 %     17 %    99 % 120 %                  118 %       16 %       99 %       120 %       119 %
Holiday Inn                     242          100         242              16         97          119        Re:
                                                                                                          115       16      98   118                    115         16         98         119         116
                                 London, W1W 6JG
Hilton                          289 7878 7700
                                 020         100         289              20        100           97       97       20     104   102                    106         19        100         101         101
Corus Hotel                     187 7436 3386 FAX
                                 020          75         140              10        109           76       83       10     112    75                     84          9        108          83          90
Berkeley Hotel                   40           75
                                 www.hvsinternational.com 30               2 Text   of letter
                                                                                     94         …92        87        2      91    90                     82          2         94          91          85
Holiday Inn Newtown Airport     182           75         137               9         92          100       92        9      92    98                     91          9         94          86          81
Jarvis International            201           75         151              10        109           85       93       10     104    82                     85         10        102          86          88
City Hotel                       40           50           2              —          —            —        —        —       —     —                      —           0        107          93          99
Swallow                         128           50          64               4         94           97       91        4      87    98                     86          4         96         117         113
Moat House                      142           50          71               5         96           93       89        5     104    92                     96          5        102          94          96
                                 Stephen Mendell
Novotel                         200           25          50               3        101           85       86        3      90    87                     78          3        103          91          94
                                 Chairman
Express by Holiday Inn           68           25          17               1         96           75        Yours sincerely 92
                                                                                                           72        1            75                     70          1        103          94          97
The Piccadilly Hotel            167           25          27              —          —            —        —        —       —     —                      —           2        100          57          57
                                                                                                            HVS INTERNATIONAL
Thistle Hotel                    94
                                 Russell Kett 25          24              —          —            —        —        —       —     —                      —           2        116          63          74
The Grand Hotel                 112           25
                                 Managing Director        28               2         94           59       56        2      94    75                     71          2         95          73          69
Primary Competitors             781           100 %          781          53 %       99 %        112 %    111 %       53 %      100 %       112 %       113 %       51 %       99 %       112 %       111 %
Secondary Competitors             Charles Human %
                               1,561            47           740          47 %      101 %         87 %     87 %       47 %       99 %        86 %        86 %       49 %      101 %        87 %         88 %
Totals/Averages                   Managing Director
                               2,342            65 %       1,521         100 %      100 %        100 %
                                                                                                             Name
                                                                                                          100 %      100 %      100 %       100 %       100 %      100 %      100 %       100 %       100 %
                                  Investment Services                                                        Title

                                 Directors:
                                 Simon Hudspeth
                                 Dominique Bourdais
                                 Bernard Forster


                                 London           Singapore
                                 New York         New Delhi
                                 San Francisco    Vancouver
                                 Miami            Toronto
                                 Denver           São Paulo
                                 Dallas           Buenos Aires
                                 Madrid


                                 Specialists in Hotel Consulting
                                 & Valuation Worldwide                      Encl [if appropriate]
                                                                 Name
HVS International                                                                                                                                                             Competition 26
                                                                 Title
                                                                 Co Name
                                                                 Address 1
                                                                 Address 2
Table 6-3      Facilities of the Primary and Secondary Competitors
                                                                 City
                                                                 Postcode
                                                       Number   Year     2005 Published                              Meeting     Meeting Space
                     Property                         of Rooms Opened        Rates      Facilities and Amenities    Space (m²)     per Room    Management Company

                     Wellington Hotel                  250        1994   Dear
                                                                            70-127      Two restaurants and a bar         890         3.6     Independent
                     Holiday Inn                       242        1974      74-104      Two restaurants and a bar         745         3.1     InterContinental Hotels Group
                     Hilton     14 Hallam Street       289        1991      88-140                       Re:
                                                                                        Two restaurants and two bars      824         2.9     Hilton International
                                London, W1W 6JG
                     Corus Hotel                       187        1994       69-95      One restaurant and two bars       770         4.1     Corus Hotels
                                020 7878 7700
                     Berkeley Hotel7436 3386 FAX
                                020                     40        1990       78-80      One restaurant and one bar         —           —      Independent
                     Holiday Inn Newtown Airport       182
                                www.hvsinternational.com          1874       45-110     One restaurant and two bars
                                                                         Text of letter …                                1205         6.6     InterContinental Hotels Group
                     Jarvis International              201        1980      43-110      One restaurant and one bar        760         3.8     Jarvis Hotels
                     City Hotel                         40        2005        150       One restaurant and one bar         50         1.3     Independent
                     Swallow                           128        1991      78-134      One restaurant and one bar        602         4.7     Whitbread
                     Moat House                        142        1987      68-139      One restaurant and two bars       915         6.4     Queens Moat House
                     Novotel Stephen Mendell           200        1985       94-99      One restaurant and one bar        769         3.8     Accor
                     Express by Holiday Inn
                                Chairman                68        1995      90-119      One restaurant and one bar        600         8.8     InterContinental Hotels Group
                                                                                                         Yours sincerely
                     The Piccadilly Hotel              167        2005       45-52      One restaurant and one bar         40         0.2     Independent
                     Thistle Hotel                      94        2005       45-55      One bar          HVS INTERNATIONAL —           —      Thistle Hotels
                                Russell Kett
                                 Hotel
                     The GrandManaging Director        112        1950       39-95      One restaurant and one bar         75         0.7     Independent

                     Totals/Averages                   2,342                                                         8,245            3.5
                                Charles Human
                                Managing Director                                                        Name
                                Investment Services                                                      Title

                                Directors:
                                Simon Hudspeth
                                Dominique Bourdais
                                Bernard Forster


                                London           Singapore
                                New York         New Delhi
                                San Francisco    Vancouver
                                Miami            Toronto
                                Denver           São Paulo
                                Dallas           Buenos Aires
                                Madrid


                                Specialists in Hotel Consulting
                                & Valuation Worldwide                    Encl [if appropriate]
                                                COMPETITION MAP
                                                                                                           Key


                                                                                                           Primary Competitors

                                                                                                               Wellington Hotel
                                                                                                               Holiday Inn
                                                                                                               Hilton

                                                                                                           Secondary Competitors

                                                                                                               Corus Hotel
                                                                                                               Berkeley Hotel
                                                                                                               Holiday Inn Newtown
                                                                                                               Airport
                                                                                                               Jarvis International
7-10 Chandos Street                                                                                            City Hotel
Cavendish Square                                                                                               Swallow
London, W1G 9DQ                                                                                                Moat House
020 7878 7700                                                                                                  Novotel
020 7878 7799 FAX
                                                                                                               Express by Holiday Inn
www.hvsinternational.com
                                                                                                               The Piccadilly Hotel
                                                                                                               Thistle Hotel
                                                                                                               The Grand Hotel
Stephen Mendell
Chairman                                                                                                   Proposed Competitors

                                                                                                               Marriott Hotel
Russell Kett                                                                                                   Premier Travel Inn
Managing Director
                                                                                                               Wellesley Highbush
                                                                                                               Travelodge
Directors:                                                                                                     Premier Travel Inn
Dominique Bourdais                                                                                             Harbour View
Bernard Forster
Karen Smith
Elie Younes


Charles Human
Rudy Reudelhuber
Managing Directors
HVSHWE


London          Madrid
New York        San Francisco
Boulder         Vancouver
Toronto         Miami
Dallas          Denver
Washington      Chicago
Phoenix         Connecticut
New Jersey      Boston
New Delhi       Singapore
Sydney          Hong Kong
Buenos Aires    São Paulo


Specialists in Hotel Consulting
& Valuation Worldwide




                                          HVS International is the trading name of SG&R Valuation Services Company,
                    A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
           the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                       The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                 Projection of Hotel Demand, Occupancy and Average Rate 28




                                                                           Date

                                         Name

   7. Projection of Hotel Demand, Occupancy and
                                         Title
                                         Co Name

      Average Rate                       Address 1
                                         Address 2
                                         City
                                         Postcode


                                         Dear
   CALCULATION OF
14 Hallam Street                         From our field work and in-house library of market data, we have
                                                                   Re:
   HISTORICALLY
London, W1W 6JG                          estimated the year-end 2005 occupancy of the Hotel’s competitors and
020 7878 7700
   ACCOMMODATED
020 7436 3386 FAX                        thereby the total number of occupied rooms in the competitive market.
   DEMAND
www.hvsinternational.com                 Text of letter …
                                         A weighted average of the market mix of each competitive property has
                                         then been calculated to determine the overall market segmentation of
                                         the hotels within the subject Hotel’s market. The 2005 areawide estimate
                                         of room night demand, by market segment, forms the historical base
Stephen Mendell
Chairman                                 demand. The result of these calculations for the Hotel’s competitive
                                                                   Yours sincerely
                                         market area is shown in Table 7-1.
                                                                   HVS INTERNATIONAL
Russell Kett
Managing Director                        Table 7-1      Accommodated Room Night Demand – Competitive Market and
                                                        Wellington Hotel 2005
Charles Human
Managing Director                                                         Name
                                                                             Marketwide                       Wellington Hotel
Investment Services                                                   Accommodated Percentage
                                                                          Title                          Accommodated Percentage
                                              Market Segment             Demand        of Total             Demand        of Total

Directors:                                    Commercial                   229,455            55 %            37,139            55 %
Simon Hudspeth                                MICE                          57,552            14              10,129            15
Dominique Bourdais
                                              Individual Leisure            77,990            19              13,505            20
Bernard Forster
                                              Group Leisure                 25,783             6               3,376             5
                                              Airline                       24,239             6               3,376             5
London        Singapore
New York      New Delhi                       Total                        415,018          100 %             67,525           100 %
San Francisco Vancouver
Miami         Toronto
Denver        São Paulo
   Base Demand Growth
Dallas        Buenos Aires               In Section 5, Market for Transient Accommodation, we set out our
Madrid                                   assumptions regarding the prospects for demand growth, by market
                                         segment, for the competitive market. These demand growth rates (as
Specialists in Hotel Consulting          summarised in Table 5-2 in Section 5, Market for Transient Accommodation)
& Valuation Worldwide                    Encl [if appropriate]
                                         are applied in our analysis to the base level of accommodated demand,
                                         which has been estimated in Table 7-1. Thus marketwide base demand is
                                         forecast to grow as illustrated in Table 7-2.




                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                Projection of Hotel Demand, Occupancy and Average Rate 29




                                                                            Date

                                          Name
                                          Table 7-2    Projection of Marketwide Base Demand 2005-09
                                          Title
                                          Co Name                   Base Year
                                          Address 1                      2005      2006     2007      2008                       2009
                                          Address 2
                                            Commercial                229,455   235,191  242,247   249,514                    255,752
                                          City
                                            MICE                       57,552    58,991   60,760    62,583                     64,148
                                          PostcodeLeisure
                                            Individual                 77,990    79,940   83,137    85,216                     87,346
                                             Group Leisure                25,783      26,427       27,484        28,171        28,876
                                             Airline                      24,239      24,845       25,466        26,103        26,755
                                          Dear
                                             Total                       415,018     425,393    439,095    451,587    462,877
14 Hallam Street                             Demand Growth                                2.5 %      3.2 %      2.8 %     2.5 %
                                                                            Re:
London, W1W 6JG
020 7878 7700
020 7436 3386 FAX
   Latent Demand
www.hvsinternational.com                  Table 7-2 illustrates the accommodated room night demand in the
                                          Text of letter …
                                          Hotel’s competitive market. Because this estimate is based on hotel
                                          occupancies, it considers only those hotel rooms utilised by guests.
                                          Latent demand accounts for guests who could not be accommodated by
                                          the existing competitive supply for a variety of reasons. Latent demand
Stephen Mendell
Chairman                                  can be divided into Unaccommodated Demand and Induced Demand.
                                                                    Yours sincerely
   Unaccommodated                                                   HVS INTERNATIONAL
                                          Unaccommodated demand refers to individuals who are unable to
Russell Kett
  Demand
Managing Director                         secure accommodation in the market because all of the competitive
                                          hotels are full. These visitors must defer their trips, settle for less
Charles Human
                                          desirable accommodation, or stay in hotels located outside the market
Managing Director                                                    Name
                                          area. Because this demand did not yield occupied room nights within
Investment Services                       the competitive set, it is Title included in the historical accommodated
                                                                     not
                                          room night demand estimate.
Directors:
Simon Hudspeth                            Unaccommodated demand is often a form of excess demand resulting
Dominique Bourdais
Bernard Forster                           from the cyclical nature of the hotel business. For example, in
                                          commercial markets where demand is not equally spaced throughout
                                          the week, hotels often exhibit peaks and troughs in their daily
London           Singapore
New York         New Delhi                occupancies. In general, commercial hotels enjoy strong occupancies
San Francisco    Vancouver                from Monday to Thursday, when business travel is most frequent, and
Miami            Toronto
Denver           São Paulo
                                          lower occupancies on Friday and Saturday. When hotels operating
Dallas           Buenos Aires             under these market conditions realise occupancies greater than 70% to
Madrid                                    75%, or when weekly demand patterns fill area hotels to capacity on one
                                          or more nights per week, it can generally be assumed that excess
Specialists in Hotel Consulting           weekday demand exists and a certain amount of patronage must be
& Valuation Worldwide                     Encl [if appropriate]
                                          turned away. If it is expected that additional hotels will be entering the
                                          market, it is reasonable to assume that this unaccommodated demand
                                          will be accommodated and thus an estimate of the amount of
                                          unaccommodated demand should be made. Unaccommodated demand
                                          is generally estimated as a percentage of accommodated demand.

                                          Because the competitive hotels achieve an aggregate occupancy of 75%,
                                          it is likely that there will be days when all of the primary hotels will be
                                          full and unaccommodated demand will exist. From our field work and
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                Projection of Hotel Demand, Occupancy and Average Rate 30




                                                                            Date

                                          Name
                                          market analysis, we estimate that, in 2005, unaccommodated demand in
                                          Title
                                          the competitive market was likely to have amounted to approximately
                                          Co Name
                                          1.6% of accommodated demand. This equates to approximately 7,020
                                          Address 1
                                          room nights per year for the 1,521-room competitive market, or
                                          Address 2
                                          approximately 80 rooms turned away on 90 days of the year.
                                          City
                                          Postcode
                                          This level of unaccommodated demand has been allowed to increase in
                                          our projections year by year in line with the base demand growth rates
                                          explained above. Table 7-3 shows our projection of unaccommodated
                                          Dear
                                          demand for the defined competitive market from 2005 to 2009.
14 Hallam Street                                                            Re:
London, W1W 6JG                           Table 7-3      Projection of Marketwide Unaccommodated Demand 2005-09
020 7878 7700
020 7436 3386 FAX
                                                                        Base Year
www.hvsinternational.com                  Text of letter …
                                                                            2005         2006         2007         2008         2009

                                             Commercial                     4,589      3,528         4,845        4,990         5,115
                                             MICE                           1,151        885         1,215        1,252         1,283
                                             Individual Leisure               780        600           831          852           873
Stephen Mendell
                                             Group Leisure                    258        198           275          282           289
Chairman
                                             Airline                        Yours
                                                                              242   sincerely
                                                                                         186           255          261           268
                                                                            HVS INTERNATIONAL
Russell Kett                                 Total                          7,020       5,397        7,421        7,637         7,828
Managing Director                            Demand Growth                              -23.1 %       37.5 %        2.9 %         2.5 %


Charles Human
Managing Director                         It should be noted that because of the seasonality of demand described
                                                                    Name
Investment Services                       earlier, a proportion of this unaccommodated demand could remain
                                                                    Title
                                          unaccommodated during the projection years. In our analysis, we have
Directors:                                termed this Residual Unaccommodated Demand. In practice, the amount of
Simon Hudspeth                            unaccommodated demand which becomes accommodated (that is, that
Dominique Bourdais
Bernard Forster                           which is no longer residual) is dependent upon marketwide occupancy
                                          and seasonality, and the introduction of new supply.
London           Singapore
   Induced
New York
                Demand
                 New Delhi
                                          Induced demand represents the additional room nights that will be
San Francisco    Vancouver                attracted to a market area as a result of the introduction of a new
Miami            Toronto                  demand generator. Situations where induced demand can be created
Denver           São Paulo
Dallas           Buenos Aires             include the opening of a new business park, the expansion of a
Madrid                                    convention centre or the addition of a new hotel bringing a different
                                          chain affiliation or unique facilities.
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]
                                          The opening of new hotels is expected to induce some additional room
                                          nights in the competitive market. In our projections we have included
                                          induced demand equal to around 8,500 room nights per year, allocated
                                          between the Commercial, MICE, and Leisure segments. This figure
                                          equates to 9% of occupancy for the new competitive rooms we have
                                          brought into the market between 2006 and 2007.



                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                   Projection of Hotel Demand, Occupancy and Average Rate 31




                                                                               Date

                                          Name
                                          We consider that this demand should be induced in a phased-in manner
                                          Title
                                          to reflect the anticipated opening dates. We have chosen to induce 50%
                                          Co Name
                                          of this demand in 2006 and 100% from 2007 onwards.
                                          Address 1
                                          Address 2
                                          Table 7-4 shows the total amount of induced demand that we have
                                          City
                                          estimated will be available in the competitive market between 2006 and
                                          Postcode
                                          2009. The demand induced by new hotels is considered to continue, and
                                          is included in demand computations for future years. Induced demand
                                          does not grow in line with the rates of base demand growth explained
                                          Dear
                                          earlier.
14 Hallam Street                                                               Re:
London, W1W 6JG                           Table 7-4      Projection of Marketwide Induced Demand 2006-09
020 7878 7700
020 7436 3386 FAX
                                                                                            2006      2007     2008      2009
www.hvsinternational.com                  Text of letter …
                                                          Commercial                        2,696    5,184     5,184     5,184
                                                          MICE                                630    1,212     1,212     1,212
                                                          Individual Leisure                  824    1,584     1,584     1,584
                                                          Group Leisure                       568    1,092     1,092     1,092
Stephen Mendell
                                                          Airline                               0        0         0         0
Chairman
                                                                               Yours sincerely
                                                          Total                        4,717   9,072 9,072               9,072
                                                                               HVS INTERNATIONAL
Russell Kett
Managing Director
   Total Potential Demand                 Total potential demand is the sum of base demand, unaccommodated
Charles Human                             demand and induced demand for the competitive market. As previously
Managing Director                                                   Name
                                          discussed, base demand and unaccommodated demand are assumed to
Investment Services                                                 Title
                                          grow in line with the growth rates explained in Section 5. Table 7-5
                                          shows the total potential demand for the competitive market as
Directors:                                projected from 2006 to 2009.
Simon Hudspeth
Dominique Bourdais
Bernard Forster                           Table 7-5      Projection of Marketwide Potential Demand 2006-09

London           Singapore                                                           2006           2007       2008         2009
New York         New Delhi
San Francisco    Vancouver                          Commercial                  241,415         252,276      259,688     266,051
Miami            Toronto                            MICE                         60,506          63,188       65,047      66,643
Denver           São Paulo                          Individual Leisure           81,363          85,553       87,652      89,803
Dallas           Buenos Aires                       Group Leisure                27,193          28,851       29,545      30,256
Madrid                                              Airline                      25,031          25,721       26,364      27,023

                                                   Total                        435,508 455,588   468,296   479,776
Specialists in Hotel Consulting
                                                   Demand Growth
                                          Encl [if appropriate]                      —%     4.6 %     2.8 %     2.5 %
& Valuation Worldwide



                                          As already discussed, some of the potential demand will continue to be
                                          unaccommodated during certain years as a result of marketwide and
                                          individual hotel seasonality, and supply constraints. A certain amount of
                                          residual unaccommodated demand will result. Table 7-6 summarises the
                                          residual demand computed in the course of our analysis and projections.

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                Projection of Hotel Demand, Occupancy and Average Rate 32




                                                                            Date

                                          Name
                                          The residual demand presented for 2005, the base year, is equal to the
                                          Title
                                          base amount of unaccommodated demand in Table 7-3.
                                          Co Name
                                          Address
                                          Table 7-6 1 Estimate of Marketwide Residual Unaccommodated Demand 2006-09
                                          Address 2
                                          City                        Base Year
                                          Postcode                        2005     2006     2007    2008    2009

                                                 Commercial                    4,589       1,176           0           0           0
                                                 MICE                          1,151         295           0           0           0
                                          Dear   Individual Leisure              780         200           0           0           0
14 Hallam Street
                                                 Group Leisure                   258          66           0           0           0
                                                 Airline                    Re: 242           62           0           0           0
London, W1W 6JG
020 7878 7700
020 7436 3386 FAX                                Total                          7,020      1,799           0           0           0
www.hvsinternational.com                  Text of letter …

                                          Because of the expected increase in new supply in the competitive
                                          market in 2006 and 2007 and the relatively low demand growth expected
Stephen Mendell
                                          in 2006 and 2007, there is no residual demand included in our
Chairman                                  projections from 2007 onwards.
                                                                   Yours sincerely
  Total Usable Room                                                HVS INTERNATIONAL
                                          Total usable room night demand is the combined total of accommodated
Russell Kett
 Night Director
Managing Demand                           room night demand and usable latent demand (that is, that latent
                                          demand that can be absorbed is based on the number of additional hotel
Charles Human
                                          rooms expected to enter the market). Table 7-7 summarises our
Managing Director                                                   Name
                                          projections of total usable demand, or occupied room nights, for the
Investment Services                                                 Title
                                          competitive market from 2005 to 2009. The amount of residual demand is
                                          also shown, as is the growth per annum of occupied room nights.
Directors:
Simon Hudspeth                            By applying the total projected occupied room nights to our estimates of
Dominique Bourdais
Bernard Forster                           total rooms supply for the competitive market, we can estimate
                                          marketwide occupancy for each year. We have used the 2005
                                          accommodated and unaccommodated room night demand as a base and
London           Singapore
New York         New Delhi                projected levels of demand into the future using the growth rates
San Francisco    Vancouver                selected for each market segment. Table 7-7 sets out our forecast of
Miami            Toronto
Denver           São Paulo
                                          annual hotel demand.
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                Projection of Hotel Demand, Occupancy and Average Rate 33




                                                                            Date

                                       Name
   Table 7-7           Total Usable Room Night Demand – Competitive Market 2005-09
                                       Title
                                       Co Name                2005          2006          2007          2008            2009
                                       Address 1
                Commercial
                                       Address 2
                Occupied Room Nights                        229,455       241,415       252,276        259,688        266,051
                Residual Demand
                                       City                   4,589         1,176             0              0              0
                                       Postcode
                Accommodated Demand Growth                       —            5.2 %         4.5 %          2.9 %          2.5 %
              MICE
              Occupied Room Nights                            57,552        60,506       63,188         65,047         66,643
                                     Dear
              Residual Demand                                  1,151           295            0              0              0
              Accommodated Demand Growth
14 Hallam Street                                                  —            5.1 %        4.4 %          2.9 %          2.5 %
                                                                            Re:
London, W1W 6JG
              Individual Leisure
020 7878 7700
              Occupied Room Nights
020 7436 3386 FAX
                                                            77,990          81,363       85,553         87,652         89,803
              Residual Demand
www.hvsinternational.com                  Text of letter   … 780               200            0              0              0
                Accommodated Demand Growth                      —              4.3 %        5.1 %          2.5 %          2.5 %
            Group Leisure
            Occupied Room Nights                              25,783        27,193       28,851         29,545         30,256
            Residual Demand                                      258            66            0              0              0
Stephen Mendell
            Accommodated Demand Growth                            —            5.5 %        6.1 %          2.4 %          2.4 %
Chairman
             Airline                                                        Yours sincerely
             Occupied Room Nights                             24,239        HVS
                                                                            25,031 INTERNATIONAL
                                                                                       25,721 26,364                   27,023
Russell Kett
             Residual Demand                                     242            62             0              0             0
Managing Director
             Accommodated Demand Growth                           —            3.3 %         2.8 %          2.5 %         2.5 %

Charles Human Totals
Managing Director
              Occupied Room Nights                          415,018        Name
                                                                          435,508       455,588        468,296        479,776
Investment Services
              Residual Demand                                 7,020        Title
                                                                            1,799             0              0              0
                Accommodated Demand Growth                       —            4.9 %         4.6 %          2.8 %          2.5 %
Directors:   Available Room Nights per Year                  555,220      611,860       660,285        660,285        660,285
Simon Hudspeth
             Available Room Night Growth                                     10.2 %         7.9 %          0.0 %           0.0 %
Dominique Bourdais
             Marketwide Occupancy
Bernard Forster                                                   75 %          71 %          69 %           71 %           73 %


London            Singapore
New York          New Delhi               We consider that the stabilised marketwide occupancy for this market in
San Francisco     Vancouver               Newtown is approximately 73%, and, based on the projected market
Miami             Toronto
Denver            São Paulo               fluctuations in supply and demand, we expect that the market will reach
Dallas            Buenos Aires            this level of occupancy in 2009. This stabilised occupancy is intended to
Madrid
                                          reflect the anticipated results of the market excluding from consideration
                                          any abnormal relationship between supply and demand and non-
Specialists in Hotel Consulting           recurring conditions that may result in unusually high or low
& Valuation Worldwide                     Encl [if appropriate]
                                          occupancies. Although the marketwide occupancy may rise above this
                                          stabilised level, we consider it equally possible for new competition and
                                          temporary economic downturns to force occupancy below this selected
                                          point of stability.

   Penetration Factor                     The Hotel’s forecast market share and occupancy have been based on its
   Analysis                               anticipated competitive position within the market, as quantified by its
                                          penetration factor.
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                  Projection of Hotel Demand, Occupancy and Average Rate 34




                                                                            Date

                                          Name
                                          The forecast market share of the Hotel is based upon a penetration factor
                                          Title
                                          analysis. The penetration factor is the ratio of a property’s market share
                                          Co Name
                                          to its fair share. If a property with a fair share of 5% is capturing 5% of
                                          Address 1
                                          the market in a given year, then its occupancy will equal the marketwide
                                          Address 2
                                          occupancy, and its penetration factor will equal 100% (5%/5% = 100%). If
                                          City
                                          the same property achieves a market share in excess of its fair share, then
                                          Postcode
                                          its occupancy will be greater than the marketwide occupancy, and its
                                          penetration factor will be greater than 100%. Penetration factors can be
                                          calculated for each market segment of a property, and for the property as
                                          Dear
                                          a whole.
14 Hallam Street                                                       Re:
London, W1W 6JG                           Table 7-8 shows the specific penetration factors that we have assumed
020 7878 7700
020 7436 3386 FAX
                                          for the Hotel from the date of value until it reaches a stabilised level of
www.hvsinternational.com                  Text of letter relative to its competitive market. Penetration factors have
                                          performance …
                                          been estimated for each market segment for each calendar year and
                                          reflect our view of how the subject Hotel is likely to perform relative to
                                          its fair share, or the aggregate of its competitive market.
Stephen Mendell
Chairman                                  Because of the new supply entering the competitive market over the
                                                                  Yours sincerely
                                          next couple of years – particularly the Marriott Hotel which is due to
                                                                  HVS INTERNATIONAL
                                          open at the beginning of 2007, thus affecting the penetration of the
Russell Kett
Managing Director                         Wellington Hotel – we have increased the Wellington Hotel’s
                                          penetration in the Commercial and Individual Leisure segments.
Charles Human
Managing Director                         Table 7-8                      Name
                                                         Market Penetration Input by Segment – Wellington Hotel 2005-09
Investment Services                                                         Title
                                                  Market Segment             2005         2006        2007        2008        2009
Directors:
                                                  Commercial                 98.5 %     109.0 %     115.0 %     115.0 %     115.0 %
Simon Hudspeth
Dominique Bourdais
                                                  MICE                      107.1        70.0        70.0        70.0        70.0
Bernard Forster                                   Individual Leisure        105.4       100.0       103.0       105.0       105.0
                                                  Group Leisure              79.7        90.0        90.0        90.0        90.0
                                                  Airline                    84.8        84.8        84.8        84.8        84.8
London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto                  Because the supply and demand balance for the competitive market is
Denver           São Paulo
                                          dynamic, particularly in relation to proposed new hotel supply entering
Dallas           Buenos Aires
Madrid                                    the competitive market, there is a circular relationship between the
                                          penetration factors of each hotel in the market. The performance of
Specialists in Hotel Consulting
                                          individual new hotels has a direct effect upon the aggregate
& Valuation Worldwide                     Encl [if appropriate]
                                          performance of the market, and, consequently, upon the calculated
                                          penetration factor for each hotel in each market segment. The same is
                                          true when the performance of existing hotels changes, either positively
                                          (following a refurbishment, for example) or negatively (when an
                                          undermaintained or poorly marketed hotel loses market share).

                                          A hotel’s penetration factor is calculated as its achieved market share of
                                          demand divided by its fair share of demand. Thus, if one hotel’s
                                          penetration performance increases, thereby increasing its achieved
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                  Projection of Hotel Demand, Occupancy and Average Rate 35




                                                                            Date

                                          Name
                                          market share, this leaves less demand available in the market for the
                                          Title
                                          other hotels to capture and the penetration performance of one or more
                                          Co Name
                                          of those other hotels consequently declines (other things remaining
                                          Address 1
                                          equal). This type of market share adjustment takes place every time there
                                          Address 2
                                          is a change in supply, or a change in the relative penetration
                                          City
                                          performance of one or more hotels in the competitive market.
                                          Postcode
                                          Our projections of penetration, demand capture and occupancy
                                          performance for the subject Hotel take into account these types of
                                          Dear
                                          adjustment to market share within the defined competitive market.
14 Hallam Street                          Consequently, the actual penetration factors applicable to the subject
                                                                    Re:
London, W1W 6JG                           Hotel for each market segment in each projection year (the output
020 7878 7700
020 7436 3386 FAX
                                          penetration factors) vary somewhat from the input penetration factors
www.hvsinternational.com                  set out in Table 7-8.
                                          Text of letter …

                                          Table 7-9 shows the output penetration factors applicable to the subject
                                          Hotel, after the effect of market share adjustment has been taken into
                                          account.
Stephen Mendell
Chairman
                                          Table 7-9                      Yours sincerely
                                                         Market Penetration Output by Segment – Wellington Hotel 2005-09
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director                                 Market Segment             2005         2006        2007        2008        2009

                                                  Commercial                 98.5 %     107.8 %     113.0 %     112.3 %     111.9 %
Charles Human                                     MICE                      107.1        74.0        73.7        73.2        72.9
Managing Director                                 Individual Leisure        Name
                                                                            105.4       101.6       104.6       105.6       105.2
Investment Services                               Group Leisure             Title
                                                                             79.7        88.1        88.3        88.3        88.3
                                                  Airline                    84.8        84.9        85.3        84.7        84.4
Directors:                                        Overall Penetration        99.0 %      99.4 %     102.8 %     102.5 %     102.2 %
Simon Hudspeth
Dominique Bourdais
Bernard Forster
                                          It is these output penetration factors which drive our estimates of
London           Singapore
                                          demand capture and occupancy for the subject Hotel, as can be seen in
New York         New Delhi                Table 7-10. This table sets out the result of these market share adjusted
San Francisco    Vancouver                (output) penetration factors by segment upon the subject Hotel’s future
Miami            Toronto
Denver           São Paulo                demand capture and occupancy performance, the annual marketwide
Dallas           Buenos Aires             occupancy and the resultant market mix, or total captured demand
Madrid
                                          analysed by market segment. These projections are in calendar years
                                          from 2006 to 2009, by which time we consider that the Hotel will have
Specialists in Hotel Consulting           reached a stabilised level of performance in terms of market penetration
& Valuation Worldwide                     Encl [if appropriate]
                                          and occupancy.




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                               Projection of Hotel Demand, Occupancy and Average Rate 36




                                                                            Date

                                         Name
   Table 7-10          Projected Penetration, Demand Capture and Occupancy – Wellington Hotel 2005-09
                                         Title
             Market Segment              Co Name 2005                2006            2007             2008             2009
                                         Address 1
             Commercial
                                         Address 2
             Demand                             229,455           241,415          252,276         259,688          266,051
             Market Share                City      16.2 %            16.1 %           15.6 %          15.5 %           15.5 %
             Capture                     Postcode37,139            38,814           39,399          40,293           41,138
             Penetration                                98 %          108 %            113 %           112 %            112 %

             MICE
                                         Dear
             Demand                                 57,552         60,506           63,188          65,047           66,643
             Market Share
14 Hallam Street                                      17.6 %         11.0 %           10.2 %          10.1 %           10.1 %
             Capture                                10,129          6,674
                                                                         Re:         6,438           6,581            6,718
London, W1W 6JG
020 7878 7700Penetration                               107 %           74 %             74 %            73 %             73 %
020 7436 3386 FAX
             Individual Leisure
www.hvsinternational.com                 Text of letter …
             Demand                                 77,990         81,363           85,553          87,652           89,803
             Market Share                             17.3 %         15.2 %           14.5 %          14.6 %           14.5 %
             Capture                                13,505         12,332           12,363          12,790           13,057
             Penetration                               105 %          102 %            105 %           106 %            105 %
Stephen Mendell
           Group Leisure
Chairman
             Demand                                 25,783         27,193Yours sincerely
                                                                                28,851   29,545                      30,256
             Market Share                             13.1 %         13.1HVS INTERNATIONAL %
                                                                          %       12.2 %   12.2                        12.2 %
Russell Kett Capture                                 3,376          3,574        3,519    3,604                       3,690
Managing Director
             Penetration                                80 %           88 %         88 %     88 %                        88 %

             Airline
Charles Human Demand                                24,239         25,031
Managing Director                                                        Name 25,721                26,364           27,023
              Market Share                            13.9 %         12.7 %     11.8 %                11.7 %           11.7 %
Investment Services
             Capture                                 3,376          3,170
                                                                         Title 3,031                 3,086            3,152
             Penetration                                85 %           85 %       85 %                  85 %             84 %
Directors:
            Total Room Nights Captured
Simon Hudspeth
                                                    67,525         64,564           64,749          66,354           67,756
            Available
Dominique Bourdais Room Nights                      91,250         91,250           91,250          91,250           91,250
Bernard Forster
             Subject Occupancy                          74 %           71 %             71 %             73 %             74 %
             Marketwide Available Room Nights     555,220         611,860          660,285         660,285          660,285
London         Singapore
New York Fair Share
               New Delhi                                16 %           15 %             14 %             14 %             14 %
San FranciscoMarketwide Occupied Room Nights
               Vancouver                          415,018         435,508          455,588         468,296          479,776
Miami          Toronto
Denver
             Market Paulo
               São
                    Share                               16 %           15 %             14 %             14 %             14 %
Dallas       Marketwide Occupancy
               Buenos Aires                             75 %           71 %             69 %             71 %             73 %
Madrid
             Total Penetration                          99 %           99 %           103 %            103 %            102 %

Specialists in Hotel Consulting
& Valuation Worldwide                    Encl [if appropriate]
                                         Table 7-11 sets out the resultant market mix, or total captured demand
                                         analysed by market segment.




                                             HVS International is the trading name of SG&R Valuation Services Company,
                       A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
              the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                          The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                  Projection of Hotel Demand, Occupancy and Average Rate 37




                                                                              Date

                                          Name
                                          Table 7-11 Projected Market Mix – Wellington Hotel 2005-09
                                          Title
                                          Co Name                              2005      2006      2007      2008      2009
                                          Address 1
                                                         Commercial             55 %      60 %      61 %      61 %      61 %
                                          Address 2
                                                         MICE                   15        10        10        10        10
                                          City           Individual Leisure     20        19        19        19        19
                                          Postcode       Group Leisure           5         6         5         5         5
                                                         Airline                 5         5         5         5         5

                                          Dear           Total                 100 %     100 %     100 %     100 %     100 %

14 Hallam Street                                                    Re:
London, W1W 6JG
   Conclusion – Overall                   We expect the Hotel to reach a stabilised level of penetration (occupancy
020 7878 7700
020Occupancy
    7436 3386 FAX                         performance relative to its competitive market) in 2009. By this time we
www.hvsinternational.com                  expect the Hotel to achieve an overall penetration of 102%. The stabilised
                                          Text of letter …
                                          occupancy is intended to reflect the anticipated results of the property
                                          over its remaining economic life given any and all changes in the life
                                          cycle of the Hotel.
Stephen Mendell
   FORECAST OF
Chairman                                  The average rate forecast for the Hotel has been based upon the
                                                                     Yours sincerely
   AVERAGE RATE                           consideration of projected market mix changes and rate increase
                                                                     HVS INTERNATIONAL
Russell Kett                              projections relating to each demand segment.
Managing Director
                                          In forecasting average rate growth, we have anticipated a base
Charles Human                             underlying inflation rate of 2.5%. As stated in Section 3, Market Area
Managing Director                                                    Name
                                          Analysis, we have relied upon inflation estimates supplied by the
Investment Services                                                  Title
                                          Economist Intelligence Unit (EIU). We have applied various market-
                                          specific and hotel-specific growth factors to the average rate of the
Directors:                                respective demand segments. Table 7-12 illustrates the estimated
Simon Hudspeth
Dominique Bourdais
                                          increases in average rate for each market segment.
Bernard Forster
                                          Hotel room rate inflation is not necessarily the same as the general
London           Singapore
                                          economic rate of inflation experienced in the local community. It is
New York         New Delhi                impacted more by market conditions such as the relationship between
San Francisco    Vancouver                supply and demand. When hotel room rate inflation is projected into the
Miami            Toronto
Denver           São Paulo                future, the movement in average rate up to the point where the hotel
Dallas           Buenos Aires             achieves its stabilised occupancy is generally attributed to property-
Madrid
                                          specific and market-specific factors. After a hotel achieves occupancy
                                          stabilisation, most forecasts assume that room rates will continue to
Specialists in Hotel Consulting           increase at the anticipated general economic rate of inflation expected for
& Valuation Worldwide                     Encl [if appropriate]
                                          the local market area.




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                Projection of Hotel Demand, Occupancy and Average Rate 38




                                                                            Date

                                          Name
                                          Table 7-12 Projected Average Rate Growth by Market Segment – Wellington Hotel
                                          Title      2006-09 (£)
                                          Co Name
                                          Address 1                                               Projected Growth Rate
                                          Address 2                      2005 Average
                                          City                            Room Rate      2006        2007      2008       2009
                                          Postcode
                                                 Commercial                   85          2.5 %      2.5 %      2.5 %      2.5 %
                                                    MICE                      75          2.5        2.5        2.5        2.5
                                                    Individual Leisure        55          2.5        2.5        2.5        2.5
                                          Dear      Group Leisure             45          2.5        2.5        2.5        2.5
                                                    Airline                   55          2.5        2.5        2.5        2.5
14 Hallam Street                                                            Re:
London, W1W 6JG                                     Total                    74           3.3 %      2.7 %      2.4 %      2.5 %
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  Text of letter …
                                          Although we have applied growth rates of 2.5% in 2006 to each
                                          segment’s rate, the overall change in 2006 was 3.3%; this is because of the
                                          slight change in the Hotel’s market mix towards the higher-paying
                                          Commercial segment.
Stephen Mendell
Chairman
                                                                     projected changes in average rate by segment,
                                          Table 7-13 shows how theYours sincerely
                                                                     HVS of demand by segment, affect overall
                                          in conjunction with forecasts INTERNATIONAL
Russell Kett                              average rate for the period 2006-09.
Managing Director


Charles Human
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                               Projection of Hotel Demand, Occupancy and Average Rate 39




                                                                           Date

                                         Name
   Table 7-13          Average Rate Forecast by Market Segment – Wellington Hotel (£)
                                         Title
                                         Co Name 2005               2006           2007           2008            2009
                                         Address 1
                    Commercial
                                         Address 2
                    Average Rate Growth                —                2.5 %       2.5 %       2.5 %       2.5 %
                    Captured Room Nights
                                         City      37,139            38,814      39,399      40,293      41,138
                    Rooms Revenue        Postcode
                                                3,156,794         3,381,648   3,518,471   3,688,271   3,859,772
                    Average Rate                        85.00         87.13       89.30       91.54       93.82
                 MICE
                 Average Rate Growth       Dear            —           2.5 %          2.5 %         2.5 %           2.5 %
                 Captured Room Nights                  10,129        6,674          6,438         6,581           6,718
14 Hallam Street                                                         Re:
London, W1W 6JG Rooms Revenue                         759,656      513,038        507,270       531,548         556,146
020 7878 7700    Average Rate                           75.00        76.88          78.80         80.77           82.79
020 7436 3386 FAX Individual Leisure
www.hvsinternational.com
                    Average Rate Growth    Text of letter …
                                                          —            2.5 %          2.5 %         2.5 %           2.5 %
                    Captured Room Nights               13,505       12,332         12,363        12,790          13,057
                    Rooms Revenue                     742,775      695,234        714,367       757,513         792,691
                    Average Rate                        55.00        56.38          57.78         59.23           60.71

Stephen Mendell Group Leisure
Chairman        Average Rate Growth                        —           2.5 %      2.5 %     2.5 %                   2.5 %
                    Captured Room Nights                3,376            Yours sincerely 3,604
                                                                     3,574      3,519                             3,690
                    Rooms Revenue                     151,931            HVS INTERNATIONAL
                                                                   164,836    166,359   174,627                 183,302
Russell Kett
                    Average Rate                        45.00        46.13      47.28     48.46                   49.67
Managing Director
                    Airline
                    Average Rate Growth                    —           2.5 %       2.5 %            2.5 %           2.5 %
Charles Human Captured Room Nights                      3,376        3,170       3,031            3,086           3,152
Managing Director                                                        Name
                    Rooms Revenue                     185,694      178,724     175,136          182,785         191,362
Investment Services                                                      Title
                    Average Rate                        55.00        56.38       57.78            59.23           60.71
                    Total
Directors:
                Average Rate Growth                         —           3.3 %       2.7 %       2.4 %       2.5 %
Simon Hudspeth
                Captured Room Nights
Dominique Bourdais                                      67,525       64,564      64,749      66,354      67,756
Bernard Forster Rooms Revenue                        4,996,850    4,933,480   5,081,602   5,334,744   5,583,272
                    Average Rate (Before Discount)       74.00        76.41       78.48       80.40       82.40

London        Singapore
New York      New Delhi
   CONCLUSION –
San Francisco Vancouver                    Based on the preceding analysis, the Hotel’s occupancy and average rate
Miami         Toronto
   OCCUPANCY AND                           have been estimated as follows.
Denver        São Paulo
   AVERAGE RATE Aires
Dallas        Buenos
Madrid                                     Table 7-14 Forecast Occupancy and Average Rate – Wellington Hotel (£)

Specialists in Hotel Consulting                                                                            Average Rate in
& Valuation Worldwide                      Encl [if appropriate] Occupancy Average Rate RevPAR
                                                         Year                                                2005 Prices

                                                           2006       71 %           76             54           75
                                                           2007       71             78             56           75
                                                           2008       73             80             59           75
                                                           2009       74             82             61           75




                                             HVS International is the trading name of SG&R Valuation Services Company,
                       A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
              the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                          The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                      Projection of Income and Expense 40




                                                                            Date

                                          Name

   8. Projection of Income and Expense    Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

                                          Based on our preceding projection of occupancy and average rate, and
                                          Dear
                                          on our knowledge of comparable hotels’ financial operating profiles, we
14 Hallam Street                          have developed a ten-year forecast of income and expense commencing
                                                                   Re:
London, W1W 6JG                           on 1 January 2006. We have selected an annual inflation rate of 2.5%.
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  Text forecast of
                                          The of letter … income and expense is expressed in inflated pounds
                                          sterling as of the date of each projection year. The stabilised year is
                                          intended to reflect the anticipated operating results of the Hotel over its
                                          remaining economic life, given any or all applicable stages of build-up,
                                          plateau and decline in the life cycle of the Hotel. Thus, income and
Stephen Mendell
Chairman                                  expense estimates from the stabilised year forward exclude from
                                                                      Yours sincerely
                                          consideration any abnormal relationship between supply and demand,
                                                                      HVS conditions that may result in unusual
                                          as well as any non-recurring INTERNATIONAL
Russell Kett
Managing Director                         revenues or expenses. For the purposes of determining the Hotel’s
                                          market value, it is assumed that the Hotel is sold as at the date of value;
Charles Human
                                          the projection of income and expense therefore reflects the achievements
Managing Director                                                     Name
                                          of a typical anticipated new owner.
Investment Services                                                   Title
   Review of the                          Because the Hotel is an existing hotel with an established operating
   Operating History
Directors:                                performance, its historical income and expense experience can serve as a
Simon Hudspeth                            basis for projections. The following income and expense statements were
Dominique Bourdais
Bernard Forster                           provided by Hotel management and are unaudited. Where applicable,
                                          we have reorganised the statements in accordance with the Uniform
                                          System of Accounts for Hotels.
London           Singapore
New York         New Delhi
San Francisco    Vancouver                These historical statements of income and expense show an efficiently
Miami            Toronto                  operated hotel facility. The revenues reflect a leadership position in the
Denver           São Paulo
Dallas           Buenos Aires             market and the operating expense ratios generally indicate strong
Madrid                                    control and competent management. Our review of the subject Hotel’s
                                          financial operating history did not reveal any abnormalities that could
Specialists in Hotel Consulting           have an impact on the future operating performance of this property.
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                              Projection of Income and Expense 41




                                                                                     Date

                                                Name
   Table 8-1             Historical Operating Performance – Wellington Hotel (£ 000s)
                                                Title
                                                Co Name
                                                 2005                                              2004
    Number of Rooms:                            Address 1
                                                    250                                              250
    Occupied Rooms:                             Address 2
                                                67,525                                            68,438
    Days Open:                                      365                                              365
                                                City
    Occupancy:                                   74.0%Amount per                     Amount per   75.0%             Amount per         Amount per
    Average Rate:                               Postcode
                                                       Available
                                                  74.05 Percentage                    Occupied     72.90 Percentage Available           Occupied
    RevPAR:                          54.79 of Revenue   Room                           Room        54.67 of Revenue   Room               Room
    REVENUE
      Rooms                         Dear 52.8 %
                                     5,000              20,000                         74.05       4,989 52.9 %           19,956          72.90
      Food & Beverage                3,900 41.2         15,600                         57.76       3,880 41.1             15,520          56.69
14 Hallam Street
      Telephone                        175 1.8             700                       Re: 2.59        172 1.8                 688           2.51
London, W1W 6JG
      Other Income                     400 4.2           1,600                           5.92        390 4.1               1,560           5.70
020 7878 7700
         Total                       9,475 100.0        37,900                        140.32       9,431 100.0            37,724         137.80
020 7436 3386 FAX
     DEPARTMENTAL EXPENSES*
www.hvsinternational.com
      Rooms                          1,230 letter
                                    Text of 24.6 … 4,920                                18.22      1,200   24.1            4,800          17.53
      Food & Beverage                2,714 69.6         10,856                          40.19      2,648   68.2           10,592          38.69
      Telephone                        112 64.0            448                           1.66        109   63.4              436           1.59
      Other Expenses                   200 50.0            800                           2.96        190   48.7              760           2.78
         Total                       4,256 44.9         17,024                          63.03      4,147   44.0           16,588          60.59
Stephen Mendell INCOME
    DEPARTMENTAL                     5,219 55.1         20,876                          77.29      5,284   56.0           21,136          77.21
Chairman
    UNDISTRIBUTED OPERATING EXPENSES                                                 Yours sincerely
      Administrative & General         777 8.2           3,108                         11.51       758 8.0                 3,032          11.08
                                                                                     HVS INTERNATIONAL
      Marketing
Russell Kett                           265 2.8           1,060                           3.92        259 2.7               1,036           3.78
      Prop. Operations & Maint.
Managing Director                      360 3.8           1,440                           5.33        351 3.7               1,404           5.13
      Utilities                        237 2.5             948                           3.51        231 2.4                 924           3.38
         Total                       1,639 17.3          6,556                          24.27      1,599 17.0              6,396          23.36
Charles Human
    GROSS OPERATING PROFIT (GOP)     3,580 37.8         14,320                          53.02      3,685 39.0             14,740          53.85
Managing Director
    Management Fee                     284 3.0           1,136
                                                                                     Name4.21        290 3.1               1,160           4.24
Investment Services
    GOP AFTER MANAGEMENT FEES        3,296 34.8         13,184                       Title
                                                                                        48.81      3,395 36.0             13,580          49.61
    FIXED EXPENSES
      Property Taxes
Directors:                             199 2.1             796                           2.95        194 2.1                 776           2.83
      Insurance
Simon Hudspeth                          28 0.3             112                           0.41         28 0.3                 112           0.41
      Incentive Management Fee
Dominique Bourdais                     330 3.5           1,320                           4.89        339 3.6               1,356           4.95
Bernard Forster Replacement
      Reserve for                      284 3.0           1,136                           4.21        283 3.0               1,132           4.14
        Total                          841 8.9           3,364                          12.45        844 9.0               3,376          12.33
    Net Operating Income             2,455 25.9 %        9,820                          36.36      2,551 27.0 %           10,204          37.28
London            Singapore
New York          New Delhi
   * Departmental expenses are expressed as a percentage of departmental revenues.
San Francisco Vancouver
Miami             Toronto
Denver            São Paulo
Dallas            Buenos Aires
   Forecast of Income                           Based on the market for hotel accommodation in the Newtown area, as
Madrid
   and Expense                                  well as the Hotel’s anticipated future market position, we have
                                                developed a forecast of income and expense. The forecast starts on 1
Specialists in Hotel Consulting
& Valuation Worldwide                           Encl [if 2006 and
                                                Januaryappropriate] represents our opinion of how a competent
                                                management company would operate the Hotel.

                                                In forecasting revenues and expenses for a hotel, we use a fixed and
                                                variable component model. This model is based on the premise that
                                                hotel revenues and expenses have one component that is fixed and
                                                another that varies directly with occupancy or facility usage. A projection
                                                can be made by taking a known level of revenue or expense and
                                                calculating the fixed and variable components. The fixed component is
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                      Projection of Income and Expense 42




                                                                            Date

                                          Name
                                          adjusted only for inflation, while the variable component is also adjusted
                                          Title
                                          for the percentage change between the projected occupancy and facility
                                          Co Name
                                          usage that produced the known level of revenue or expense.
                                          Address 1
   Rooms Revenue                          Address 2
                                          Rooms revenue is determined by two variables, occupancy and average
                                          City
                                          rate, as discussed in Section 7, Projection of Hotel Demand, Occupancy and
                                          Postcode
                                          Average Rate.

   Food Revenue                           The Uniform System of Accounts for Hotels defines food revenue as
                                          Dear
                                          revenue derived from the sale of food, including coffee, milk, tea and
14 Hallam Street
                                          soft drinks. Food sales do not include staff meals. Food revenue also
                                                                     Re:
London, W1W 6JG                           includes meeting room rental, cover charges, service charges and
020 7878 7700                             miscellaneous banquet revenue. Our forecast of food revenue is based
020 7436 3386 FAX
www.hvsinternational.com                  Text of Hotel’s
                                          on the letter … historical performance, and is in line with comparable
                                          hotels. Food revenue has been projected at approximately £48 per
                                          occupied room (POR) in 2005 prices.

   Beverage Revenue                       Beverage revenue is generated from the sale of alcoholic beverages in
Stephen Mendell
Chairman
                                          restaurants and banquet rooms and the sale of alcoholic and non-
                                                                     Yours sincerely
                                          alcoholic beverages in a hotel’s bars and lounges. The Hotel is expected
                                                                     HVS INTERNATIONAL
                                          to continue to draw additional local patronage to that of in-house
Russell Kett
Managing Director
                                          residents. Our forecast of beverage revenue is based on the Hotel’s
                                          historical beverage to food revenue ratio. Beverage revenue has therefore
                                          been projected at approximately 30% of food revenue.
Charles Human
Managing Director                                                    Name
   Telephone Revenue
Investment Services                                                   directly with changes in occupancy, although
                                          Telephone revenue variesTitle
                                          a small portion of this category is fixed. This fixed component consists of
Directors:                                public telephone revenue generated by non-resident patrons using the
Simon Hudspeth                            Hotel’s food, beverage and meeting outlets.
Dominique Bourdais
Bernard Forster
                                          In recent years, the hotel industry has experienced diverging trends with
                                          respect to telephone revenue. Prices per call have increased, in some
London           Singapore
                                          cases dramatically, resulting in departmental profits as high as 50-55%.
New York         New Delhi
San Francisco    Vancouver                However, the number of long-distance calls billed POR has declined as a
Miami            Toronto                  result of the extensive use of long-distance carrier services and mobile
Denver           São Paulo
Dallas           Buenos Aires
                                          telephones. More recently, however, consumption has started to increase
Madrid                                    as guests use the telephone service to access the Internet and email
                                          facilities. Based on the Hotel’s historical performance we have projected
Specialists in Hotel Consulting           telephone revenue at £2.50 POR in 2005 prices.
& Valuation Worldwide                     Encl [if appropriate]
   Other Income                           The content of other income varies considerably between hotels, making
                                          a comparison of this department with other hotels invalid. Other
                                          income, in the case of the Hotel, is composed primarily of shop rentals,
                                          laundry, dry-cleaning and interest income. We have based our forecast
                                          of £5.00 POR on the Hotel’s historical performance.



                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                     Projection of Income and Expense 43




                                                                           Date

   Rooms Expense                         Name
                                         Rooms expense consists of items relating to the sale and upkeep of guest
                                         Title
                                         rooms and public space. Salaries, wages and employee benefits account
                                         Co a substantial portion of this category. Although payroll varies
                                         for Name
                                         Address 1
                                         somewhat with occupancy, because managers can schedule room-
                                         Address
                                         cleaning 2staff, porterage personnel and house cleaners to work when
                                         City
                                         occupancy requires, much of a hotel’s payroll is fixed.
                                         Postcode
                                         Other rooms department expenses include the cost of cleaning materials,
                                         commissions payable to travel agents and reservations costs. The
                                         Dear
                                         historical rooms expense for the Hotel appears to be in line with other
14 Hallam Street                         hotels of this type. We have forecast rooms expenses at approximately
                                                                    Re:
London, W1W 6JG                          £18.00 POR in 2005 prices in line with the historical performance of the
020 7878 7700
020 7436 3386 FAX
                                         Hotel.
www.hvsinternational.com                 Text of letter …
   Food and Beverage                     Food and beverage expense consists of items necessary for the operation
   Expense                               of a hotel’s food, beverage and banquet facilities. Our forecast of food
                                         and beverage expenses is based on the Hotel’s historical ratio of food and
                                         beverage expenses to food and beverage revenues. Food and beverage
Stephen Mendell
Chairman                                 expenses have therefore been projected at approximately 70% of food
                                         and beverage revenue. Yours sincerely
                                                                   HVS INTERNATIONAL
Russell Kett
  Telephone Expense
Managing Director
                                         Telephone expense consists of all costs associated with the operation of
                                         the telephone department. The bulk of the telephone expense consists of
                                         the cost of local and long-distance calls billed by the telephone
Charles Human
Managing Director                        companies that provide this service. Unless a particular hotel department
                                                                   Name
Investment Services                      incurs high expenses, hotel employees’ use of telephone services is
                                                                   Title
                                         generally charged to this account. The remaining costs, which include
Directors:                               salaries, wages, equipment rental and other expenses, are moderately
Simon Hudspeth                           fixed.
Dominique Bourdais
Bernard Forster
                                         Based on the historical performance of the Hotel, we have projected
                                         telephone expense at 60% of telephone revenue. This figure is in line
London        Singapore
New York      New Delhi
                                         with the operating history and with industry norms.
San Francisco Vancouver
   Other Expense
Miami         Toronto                    Other expense consists of the costs associated with the generation of
Denver        São Paulo
Dallas        Buenos Aires
                                         other income, and is dependent on the nature of the revenue. We have
Madrid                                   forecast other income expense based on the historical departmental ratio.
                                         Based on the historical performance of the Hotel, we have projected
Specialists in Hotel Consulting          other income expenses at 50% of other income revenue.
& Valuation Worldwide                    Encl [if appropriate]
   Administrative and                    Administrative and general expense includes the salaries of all
   General Expense                       administrative personnel and those not directly associated with a
                                         particular department. Expense items related to the management and
                                         operation of the property are also allocated to this category. Most
                                         administrative and general expenses are fixed. The exceptions are cash
                                         surpluses and shortages, commissions on credit card charges and
                                         provisions for bad debts.

                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                      Projection of Income and Expense 44




                                                                            Date

                                          Name
                                          In recent years, several new items, such as human resources
                                          Title
                                          administration costs and security expenses, have been added to the
                                          Co Name
                                          administrative and general expense category. Also included in this
                                          Address category is general insurance, including premiums for public
                                          expense 1
                                          Address theft and business interruption insurance. Fire and extended
                                          liability, 2
                                          City
                                          coverage insurance on the building and contents is a separate insurance
                                          Postcode
                                          expense category included under Fixed Expenses.

                                          Based on the historical performance of the Hotel, and with reference to
                                          Dear
                                          the performance of comparable hotels, we have projected administration
14 Hallam Street                          and general expenses at approximately £3,000 per available room (PAR)
                                                                    Re:
London, W1W 6JG                           in 2005 prices.
020 7878 7700
020 7436 3386 FAX
   Marketing Expense
www.hvsinternational.com                  Marketing expense consists of all costs associated with advertising, sales
                                          Text of letter …
                                          and promotion; these activities are intended to attract new customers
                                          and retain existing ones. Marketing can be used to create an image,
                                          develop customer awareness and stimulate patronage of a property’s
                                          various facilities.
Stephen Mendell
Chairman
                                                                      Yours sincerely
                                          The marketing category is unique in that all expense items, with the
                                          exception of fees and HVS INTERNATIONAL
                                                                        commissions, are totally controllable by
Russell Kett
Managing Director
                                          management. Most hotel operators establish an annual marketing
                                          budget that sets forth all planned expenditures. If the budget is followed,
                                          total marketing expenses can be forecast accurately.
Charles Human
Managing Director                                                     Name
Investment Services                       Based on the historical performance of the Hotel, and with reference to
                                                                      Title
                                          the performance of comparable hotels, we have projected marketing
Directors:                                expenses at approximately £1,000 PAR in 2005 prices.
Simon Hudspeth
Dominique Bourdais
   Property Operations                    Property operations and maintenance expense is another expense
Bernard Forster
   and Maintenance                        category that is largely controllable by management. Except for repairs
   Expense                                necessary to keep the facility open and prevent damage (to plumbing,
London           Singapore
                                          heating and electrical systems, and so forth), most maintenance items
New York         New Delhi
San Francisco    Vancouver                can be deferred for varying lengths of time.
Miami            Toronto
Denver           São Paulo                Maintenance is an accumulating expense. If management elects to
Dallas           Buenos Aires
Madrid                                    postpone a required repair, they have not eliminated or saved the
                                          expenditure, but merely deferred payment until a later date. A hotel that
Specialists in Hotel Consulting
                                          has operated with a lower than normal maintenance budget is likely to
& Valuation Worldwide                     Encl accumulated a
                                          have[if appropriate] considerable amount of deferred maintenance.

                                          The age of a hotel greatly influences the required level of maintenance. A
                                          new or thoroughly renovated property is protected for several years by
                                          modern equipment and manufacturers’ warranties. However, as a hotel
                                          grows older, maintenance expenses escalate. A well-organised
                                          preventive maintenance system often helps to delay deterioration, but
                                          most facilities face higher property operations and maintenance costs
                                          each year, regardless of what the occupancy trend may be.
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                      Projection of Income and Expense 45




                                                                            Date

                                          Name
                                          Property operations and maintenance is considered to be an operating
                                          Title
                                          expense; as such, it contains only those components that can be
                                          Co Name
                                          expensed, rather than capitalised. Valuers account for the capital
                                          Address 1
                                          replacement of items such as furniture, fixtures and equipment (FF&E) in
                                          Address 2
                                          the reserve for replacement account, which is discussed later in this
                                          City
                                          section.
                                          Postcode
                                          Based on the historical performance of the Hotel, and with reference to
                                          the performance of comparable hotels, we have projected property
                                          Dear
                                          operations and maintenance expenses at approximately £1,500 PAR in
14 Hallam Street                          2005 prices.
                                                                    Re:
London, W1W 6JG
    7878 7700
020Utilities Expense                      A large portion of a hotel’s utility consumption is relatively fixed and
020 7436 3386 FAX
www.hvsinternational.com                  varies little with changes in occupancy. Other than bedrooms and
                                          Text of letter …
                                          meeting space, most areas of a hotel must be continually lit and heated
                                          or air conditioned, regardless of occupancy. The marginal utility cost of
                                          an additional occupied room is minimal.
Stephen Mendell
Chairman
                                          Based on the historical performance of the Hotel, and with reference to
                                                                    Yours sincerely
                                          the performance of comparable hotels, we have projected utilities
                                                                    HVS INTERNATIONAL
                                          expenses at approximately £1,000 PAR in 2005 prices.
Russell Kett
Managing Director
   Management Fee                         Management fee expense consists of the basic fee paid to the hotel
   Expense                                management company that it is anticipated will be operating the Hotel.
Charles Human
Managing Director
                                          Some companies provide Name management services alone, while others offer
Investment Services                       both management services and a brand name affiliation. When a
                                                                     Title
                                          management company has no brand identification, the property owner
Directors:                                can often acquire a franchise that provides the necessary image and
Simon Hudspeth                            recognition. Although most hotel management companies employ a fee
Dominique Bourdais
Bernard Forster
                                          schedule that includes a basic fee (usually a percentage of total revenue)
                                          and an incentive fee (usually a percentage of defined profit), the
                                          incentive portion is often subordinated to debt service and does not
London           Singapore
New York         New Delhi
                                          appear in a forecast of net operating income before debt service.
San Francisco    Vancouver                Although in such circumstances the incentive fee does not decrease the
Miami            Toronto                  cash flow available for debt service, it does reduce the potential cash flow
Denver           São Paulo
Dallas           Buenos Aires             to equity, and must be accounted for in the valuation process. Generally,
Madrid                                    the most appropriate procedure for handling the impact of the incentive
                                          fee is to adjust the equity dividend or yield rate upward to reflect this
Specialists in Hotel Consulting           added management cost. The adjusted equity dividend and yield rates
& Valuation Worldwide                     Encl [if appropriate]
                                          are described in Section 9, Valuation.

                                          We have assumed that a potential purchaser would employ an
                                          independent and competent management company. Based on the
                                          historical performance of the Hotel, and with reference to the
                                          performance of comparable hotels, we have projected the management
                                          fee at approximately 3.0% of total revenue and the incentive
                                          management fee at 10.0% of gross operating profit after management
                                          fees.
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                     Projection of Income and Expense 46




                                                                           Date

   Property Taxes                        Name
                                         Property taxes in the UK are based on an annual rateable value for the
                                         Title
                                         property which is multiplied by the prevailing uniform business rate to
                                         Co Name
                                         produce the annual property tax liability.
                                         Address 1
   Insurance Expense                     Address 2
                                         The insurance expense category consists of the cost of insuring the Hotel
                                         City
                                         and its contents against damage or destruction by fire, weather, sprinkler
                                         Postcode
                                         leakage, boiler explosion, plate glass breakage, and so forth. It does not
                                         include liability coverage, which is a component of administrative and
                                         general expense. Insurance expense is compared per available room and
                                         Dear
                                         appears to be in line with that of similar properties.
14 Hallam Street                                                  Re:
London, W1W 6JG                          Based on the historical performance of the Hotel, we have projected
020 7878 7700                            insurance expenses at approximately £125 PAR in 2005 prices.
020 7436 3386 FAX
www.hvsinternational.com                 Text of letter …
   Reserve for                           FF&E are essential to the operation of a hotel, and their quality often
   Replacement Expense                   influences the standard or grading of a property. Included in this
                                         category are all non-real-estate items that are typically capitalised rather
                                         than expensed. The FF&E of a hotel are often exposed to heavy use and
Stephen Mendell
Chairman
                                         must be replaced at regular intervals.
                                                                    Yours sincerely
                                                                    HVS INTERNATIONAL
                                         Periodic replacement of FF&E is essential to maintain the quality, image
Russell Kett
                                         and income potential of a hotel. Because capitalised expenditures are not
Managing Director
                                         included in the operating statement, but nevertheless affect an owner’s
                                         cash flow, a valuation should reflect these expenses by deducting an
Charles Human
Managing Director
                                         appropriate reserve for replacement.
                                                                    Name
Investment Services                                                 Title
                                         Our industry experience indicates that a reserve for replacement of 3-4%
Directors:
                                         of total revenue generally is sufficient to provide for the timely
Simon Hudspeth                           replacement of FF&E. Based on an analysis of comparable hotels, we
Dominique Bourdais                       consider that a reserve of 3% of total revenue is sufficient to provide for
Bernard Forster
                                         the periodic replacement of the Hotel’s FF&E and provide funds for
                                         additional equipment necessary to maintain the Hotel’s competitive
London           Singapore
                                         position.
New York         New Delhi
San Francisco    Vancouver
   Ten-Year
Miami           Projection
                 Toronto                 The following projection of income and expense is intended to reflect
Denver           São Paulo               our judgement of how a typical buyer would project the Hotel’s
Dallas           Buenos Aires
Madrid                                   operating results.

Specialists in Hotel Consulting
& Valuation Worldwide                    Encl [if appropriate]




                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
                                                                Name
HVS International                                                                                                                                                                                   Projection of Income and Expense 47
                                                                Title
                                                                Co Name
                                                                Address 1
                                                                Address 2
Table 8-2       Ten-Year Forecast of Income and Expense – Wellington Hotel 2006-15 (£ 000s)
                                                                City
                                                                Postcode
                                          2006                  2007                    2008               2009               2010               2011               2012              2013              2014               2015

Number of Rooms:                   250               250                             250                250                250                250                250                250               250                250
Occupied Rooms:                 64,788            64,788                             Dear
                                                                                  66,613             67,525             67,525             67,525             67,525             67,525            67,525             67,525
Occupancy:                        71%               71%                             73%                74%                74%                74%                74%                74%               74%                74%
Average Rate:                14 Hallam Street
                                 76.41 % of        78.48 % of                      80.40 % of         82.40     % of     Re:
                                                                                                                         84.46     % of     86.57     % of     88.74     % of     90.96   % of      93.23   % of       95.56   % of
RevPAR:                      London, W1W 6JG
                                 54.25 Gross       55.72 Gross                     58.69 Gross        60.98     Gross    62.50     Gross    64.07     Gross    65.67     Gross    67.31   Gross     68.99   Gross      70.72   Gross
                             020 7878 7700
REVENUE
                             020 7436 3386 FAX
  Rooms                          4,951 53.0 %      5,085
                             www.hvsinternational.com 53.1 %                       5,356 53.3 %
                                                                                     Text of letter5,564 53.4 %
                                                                                                    …                    5,703 53.4 %       5,846 53.4 %       5,992 53.4 %       6,142 53.4 %      6,295 53.4 %       6,453 53.4 %
  Food & Beverage                3,876 41.5        3,973 41.5                      4,158 41.3      4,305 41.3            4,413 41.3         4,523 41.3         4,636 41.3         4,752 41.3        4,871 41.3         4,993 41.3
  Telephone                        167 1.8           171 1.8                         180 1.8         186 1.8               191 1.8            196 1.8            201 1.8            206 1.8           211 1.8            216 1.8
  Other Income                     342 3.7           350 3.7                         362 3.6         373 3.6               382 3.6            392 3.6            401 3.6            411 3.6           422 3.6            432 3.6
     Total                       9,336 100.0       9,579 100.0                    10,055 100.0    10,428 100.0          10,689 100.0       10,956 100.0       11,230 100.0       11,511 100.0      11,798 100.0       12,094 100.0
 DEPARTMENTAL EXPENSES*      Stephen Mendell
  Rooms                          1,226
                             Chairman 24.8         1,256 24.7                      1,302     24.3     1,342     24.1     1,375 24.1   1,410 24.1               1,445     24.1     1,481   24.1      1,518   24.1       1,556   24.1
  Food & Beverage                2,721 70.2        2,789 70.2                      2,885     69.4     2,971     69.0
                                                                                                                         Yours sincerely 69.0
                                                                                                                         3,045 69.0   3,121                    3,199     69.0     3,279   69.0      3,361   69.0       3,445   69.0
  Telephone                        102 61.4          105 61.4                        109     60.4       112     60.0     HVS 60.0
                                                                                                                           115 INTERNATIONAL
                                                                                                                                        117 60.0                 120     60.0       123   60.0        126   60.0         130   60.0
                             Russell Kett
  Other Expenses                   172 50.4          177 50.4                        182     50.1       186     50.0       191 50.0     196 50.0                 201     50.0       206   50.0        211   50.0         216   50.0
                             Managing Director
     Total                       4,221 45.2        4,327 45.2                      4,477     44.5     4,610     44.2     4,726 44.2   4,844 44.2               4,965     44.2     5,089   44.2      5,216   44.2       5,347   44.2
DEPARTMENTAL INCOME              5,115 54.8        5,253 54.8                      5,578     55.5     5,818     55.8     5,963 55.8   6,113 55.8               6,265     55.8     6,422   55.8      6,582   55.8       6,747   55.8
UNDISTRIBUTED OPERATING EXPENSES
                             Charles Human
  Administrative & General   Managing Director
                                   763 8.2           782 8.2                         806 8.0            829 7.9          Name7.9
                                                                                                                          849                 871 7.9            892 7.9            915 7.9           938 7.9            961 7.9
  Marketing                  Investment Services
                                   407 4.4           417 4.4                         430 4.3            442 4.2          Title 4.2
                                                                                                                          453                 464 4.2            476 4.2            488 4.2           500 4.2            513 4.2
  Prop. Operations & Maint.        381 4.1           391 4.1                         403 4.0            414 4.0            425 4.0            435 4.0            446 4.0            457 4.0           469 4.0            481 4.0
  Utilities                        254
                             Directors: 2.7          261 2.7                         269 2.7            276 2.6            283 2.6            290 2.6            297 2.6            305 2.6           313 2.6            320 2.6
     Total                       1,805 19.4
                             Simon Hudspeth        1,851 19.4                      1,908 19.0         1,961 18.7         2,010 18.7         2,061 18.7         2,112 18.7         2,165 18.7        2,219 18.7         2,275 18.7
                                 3,310 Bourdais 3,402 35.4
GROSS OPERATING PROFIT (GOP) Dominique35.4                                         3,670 36.5         3,856 37.1         3,953 37.1         4,052 37.1         4,153 37.1         4,257 37.1        4,363 37.1         4,473 37.1
Management Fee               Bernard Forster
                                   280 3.0           287 3.0                         302 3.0            313 3.0            321 3.0            329 3.0            337 3.0            345 3.0           354 3.0            363 3.0
GOP AFTER MANAGEMENT FEES        3,030 32.4        3,115 32.4                      3,369 33.5         3,544 34.1         3,632 34.1         3,723 34.1         3,816 34.1         3,912 34.1        4,009 34.1         4,110 34.1
FIXED EXPENSES               London           Singapore
  Property Taxes                   202
                             New York 2.2 New Delhi  208 2.2                           213     2.1        218     2.1        223     2.1        229     2.1        235     2.1      241      2.1      247      2.1       253      2.1
  Insurance                         29 0.3
                             San Francisco Vancouver  30 0.3                            30     0.3         31     0.3         32     0.3         33     0.3         34     0.3       34      0.3       35      0.3        36      0.3
  Incentive Management Fee   Miami 303 3.2 Toronto311 3.3                              337     3.4        354     3.4        363     3.4        372     3.4        382     3.4      391      3.4      401      3.4       411      3.4
  Reserve for Replacement    Denver280 3.0 São Paulo 287 3.0                           302     3.0        313     3.0        321     3.0        329     3.0        337     3.0      345      3.0      354      3.0       363      3.0
                             Dallas           Buenos Aires
    Total                          814 8.7           836 8.8                           882     8.8        916     8.8        939     8.8        963     8.8        987     8.8    1,012      8.8    1,037      8.8     1,063      8.8
                             Madrid
Net Operating Income             2,215 23.7 %      2,279 23.6 %                    2,487 24.7 %       2,627 25.3 %       2,693 25.3 %       2,760 25.3 %       2,829 25.3 %       2,900 25.3 %      2,972 25.3 %       3,047 25.3 %
                                        1                    1                     1                  1                  1                  1                  1                  1                 1                  1
                                   Specialists in Hotel Consulting
* Departmental expenses are expressed as a percentage of departmental revenues.
                                   & Valuation Worldwide                               Encl [if appropriate]
   HVS International                                                                                                          Valuation 48




                                                                            Date

                                          Name

   9. Valuation                           Title
                                          Co Name
                                          Address 1
                                          Address 2
                                          City
                                          Postcode

   APPROACHES TO                          In evaluating property to assess its market value, the professional valuer
   VALUE                                  Dear
                                          has three approaches from which to select: the income capitalisation, cost
14 Hallam Street                          and sales comparison approaches. The most relevant of these three is the
                                                                     Re:
London, W1W 6JG                           income capitalisation approach. However, the prudent valuer would also
020 7878 7700
020 7436 3386 FAX
                                          consider and have regard to the cost approach and the sales comparison
www.hvsinternational.com                  approach. The former, in certain circumstances, indicates what the ‘cost
                                          Text of letter …
                                          of entry’ into the market would be, whilst the latter typically provides a
                                          range of values per room. Both approaches have some influence on
                                          operators’ or investors’ judgements.
Stephen Mendell
Chairman                                  The Income Capitalisation Approach takes a property’s forecast net
                                                                   Yours sincerely
                                          operating income and allocates these future benefits to the mortgage and
                                                                   HVS INTERNATIONAL
                                          equity components, based on market rates of return and loan to value
Russell Kett
Managing Director                         ratios. Through a discounted cash flow and income capitalisation
                                          procedure, the value of each component is calculated. The total of the
Charles Human
                                          mortgage component and the equity component equals the value of the
Managing Director                         property. This approach Name
                                                                    is often selected as the preferred valuation
Investment Services                                                Title properties, because it most closely reflects
                                          method for income-producing
                                          the investment thinking of knowledgeable buyers.
Directors:
Simon Hudspeth                            Our international experience with numerous hotel buyers and sellers
Dominique Bourdais
Bernard Forster                           indicates that the procedures used in estimating the value by the income
                                          capitalisation approach are comparable to those employed by the hotel
                                          investors who actually constitute the marketplace. For this reason, the
London           Singapore
New York         New Delhi                income capitalisation approach produces the most supportable value
San Francisco    Vancouver                estimate and it is generally given the greatest weight in the hotel
Miami            Toronto
Denver           São Paulo
                                          valuation process.
Dallas           Buenos Aires
Madrid                                    The Cost Approach estimates the value by computing the current cost of
                                          replacing a property and subtracting any depreciation resulting from one
Specialists in Hotel Consulting           or more of the following factors: physical deterioration, functional
& Valuation Worldwide                     Encl [if appropriate]
                                          obsolescence and external (or economic) obsolescence. The value of the
                                          land, as though it were vacant and available, is then added to the
                                          depreciated value of the premises in order to produce a total value
                                          estimate.

                                          The cost approach may provide a reliable estimate of value for newly
                                          constructed properties; however, as buildings and other forms of
                                          premises increase in age and begin to deteriorate, the resultant loss in
                                          value becomes increasingly difficult to quantify accurately. We find that
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                         Valuation 49




                                                                           Date

                                         Name
                                         knowledgeable buyers of hotels generally base their purchase decisions
                                         Title
                                         upon economic factors such as forecast net operating income and return
                                         Co investment. Because the cost approach does not reflect any of these
                                         on Name
                                         Address 1
                                         income-related considerations, this approach is given minimal weight in
                                         Address 2
                                         the hotel valuation process. This approach does, however, provide an
                                         City
                                         estimate of the cost to enter the marketplace.
                                         Postcode
                                         The Sales Comparison Approach estimates the value of a property by
                                         comparing it to similar properties recently sold on the open market. To
                                         Dear
                                         obtain a supportable estimate of value, the sales price of a comparable
14 Hallam Street                         property should be adjusted to reflect any dissimilarity between the
                                                                    Re:
London, W1W 6JG                          comparable property and the Hotel.
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                 The sales comparison approach may provide a useful value estimate for
                                         Text of letter …
                                         simple forms of property, such as vacant land and single-family homes,
                                         where the properties are homogeneous and the adjustments are few in
                                         number and relatively simple to compute. However, in the case of more
                                         complex investments, such as shopping centres, office buildings,
Stephen Mendell
Chairman                                 restaurants and hotels, where the adjustments are numerous and more
                                                                    sales sincerely
                                         difficult to quantify, the Yourscomparison approach loses much of its
                                         reliability.               HVS INTERNATIONAL
Russell Kett
Managing Director
                                         Hotel investors typically do not rely upon the sales comparison approach
                                         in reaching their final purchase decisions. Various factors, such as the
Charles Human
Managing Director                                                    hotel
                                         lack of timely comparableName sales data, the numerous unsupportable
Investment Services                      adjustments that are necessary and the general inability to determine the
                                                                    Title
                                         true financial terms and human motivations of comparable transactions,
Directors:                               often make the results of the sales comparison approach questionable.
Simon Hudspeth                           Nevertheless, the sales comparison approach may provide a range of
Dominique Bourdais
Bernard Forster                          values to bracket and support the final estimate of value, and we use it to
                                         support any adjustments in our valuation conclusions.
London        Singapore
   INCOME New Delhi
New York
                                         The income capitalisation approach is based on the principle that the
   CAPITALISATION
San Francisco Vancouver                  value of a property is indicated by the net return to the property, or
   APPROACH
Miami         Toronto                    what is also known as the present worth of future benefits. The future
Denver        São Paulo
Dallas        Buenos Aires               benefits of income-producing properties, such as hotels, are net
Madrid                                   operating income, derived by a forecast of income and expense, and any
                                         expected reversionary proceeds from a sale. These future benefits can be
Specialists in Hotel Consulting          converted into an indication of value through a capitalisation process
& Valuation Worldwide                    Encl [if appropriate]
                                         and discounted cash flow analysis.

   Mortgage and Equity                   The conversion of a property’s forecast net operating income into an
   Components                            estimate of value is based on the premise that investors typically
                                         purchase real estate with equity cash (30% to 50%) and mortgage
                                         financing (50% to 70%). The amounts and terms of available mortgage
                                         financing and the rates of return that are required to attract sufficient
                                         equity capital form the basis for allocating the net operating income

                                              HVS International is the trading name of SG&R Valuation Services Company,
                        A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
               the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                           The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 50




                                                                            Date

                                          Name
                                          between the mortgage and equity components and deriving a value
                                          Title
                                          estimate.
                                          Co Name
                                          Address the
                                          Data for 1 Mortgage Component are developed from an analysis of the
                                          Address 2
                                          prevailing interest rates offered in the marketplace coupled with
                                          City
                                          interviews with hotel investors, banks and other investment institutions.
                                          Postcode
                                          To reflect the appropriate rates and investment yields required by
                                          international banks, we have reviewed the ten-year swap rate for
                                          Dear
                                          pounds sterling, which is currently around 6.5%. A typical premium of
14 Hallam Street
                                          100 to 150 basis points is usually added to the yield for the risks
                                                                     Re:
London, W1W 6JG                           associated with a project of this nature.
020 7878 7700
020 7436 3386 FAX
                                          Based on this information and the perceived risk of the Hotel’s location,
www.hvsinternational.com                  Text of letter …
                                          it is our opinion that a 15-year term mortgage is appropriate for the
                                          Hotel. Furthermore, we consider that an international mortgage provider
                                          will lend up to 65% of the Hotel’s value as determined by this valuation.

Stephen Mendell                           In order to estimate the value of the Hotel’s Equity Component, we have
Chairman
                                                                    Yours sincerely
                                          assumed a loan to value ratio and taken into account the risk inherent in
                                          achieving the projectedHVS INTERNATIONAL age, condition and
                                                                      income stream, the
Russell Kett
                                          anticipated market position of the Hotel, the freehold nature of the site,
Managing Director
                                          and the opportunities for competition to enter the market. It is our
                                          opinion that an equity investor is likely to require an equity yield rate of
Charles Human
Managing Director
                                          17.0% for a hotel investment such as this.
                                                                    Name
Investment Services                                                 Title
   Purchase Costs                         The income capitalisation value has been adjusted to allow for
Directors:
                                          deductions for stamp duty (4% of value) and legal fees (0.5% of value),
Simon Hudspeth                            which we have treated as purchaser’s costs in arriving at the price which
Dominique Bourdais                        would be paid for the Hotel.
Bernard Forster

   Terminal Capitalisation                Inherent in this valuation process is the assumption of a sale at the end
   Rate
London           Singapore                of an assumed ten-year holding period. The estimated reversionary sale
New York         New Delhi
San Francisco    Vancouver                price as of this date is calculated by capitalising the projected 11th year’s
Miami            Toronto                  net operating income by an overall terminal capitalisation rate. From this
Denver           São Paulo                sale price, a percentage is deducted for the seller’s transaction costs and
Dallas           Buenos Aires
Madrid                                    legal fees. The net proceeds to the equity interest are calculated by
                                          deducting the outstanding mortgage balance from the reversion.
Specialists in Hotel Consulting
& Valuation Worldwide                     We [if appropriate]
                                          Enclhave used a terminal capitalisation rate of 9.0% and assumed that the
                                          seller’s brokerage and legal fees would be 1.5% of the sale price.

   Summary of Valuation                   Table 9-1 summarises the key valuation parameters utilised in the
   Parameters                             derivation of the value of the Hotel by the income capitalisation
                                          approach.




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 51




                                                                            Date

                                          Name
                                          Table 9-1 Summary of Valuation Parameters
                                          Title
                                          Co Name            Stabilised Year:                       2009
                                          Address 1          Inflation:                              2.5    %
                                          Address 2          Loan to Value:                           65    %
                                          City               Amortisation:                            15    years
                                          Postcode           Term:                                    10    years
                                                                    Interest Rate:                   7.5    %
                                                                    Terminal Capitalisation Rate:    9.0    %
                                                                    Transaction Costs:                1.5   %
                                          Dear                      Equity Yield:                   17.0    %
14 Hallam Street                                                            Re:
London, W1W 6JG
020Mortgage-Equity
    7878 7700                             To estimate the value of the Hotel, we have used a discounted cash flow
020 7436 3386 FAX
   Discounted Cash Flow                   analysis. The cash flow to equity and the equity reversion are discounted
www.hvsinternational.com                  Text of letter …
   Analysis                               to the present value at the equity yield rate, and the income to the
                                          mortgagee is discounted at the mortgage interest rate. The sum of the
                                          equity and mortgage values is the total property value. The process of
                                          estimating the value of the mortgage and equity components is as
Stephen Mendell
Chairman
                                          follows.
                                                                     Yours sincerely
                                                                     HVS INTERNATIONAL
                                              1. The terms of typical hotel financing are established, including
Russell Kett
Managing Director
                                                  interest rate, amortisation period and loan to value ratio.
                                             2. An equity yield rate of return is established. Numerous hotel
Charles Human                                      buyers base their investments on an equity yield rate projection
Managing Director                                                      Name
                                                   that takes into account income growth and perceived risk.
Investment Services                                                    Title
                                             3. The value of the equity component is calculated by first
Directors:                                         deducting the annual debt service from the forecast net operating
Simon Hudspeth                                     income, leaving the net operating income to equity for each
Dominique Bourdais                                 projection year. The net operating income of the eleventh year is
Bernard Forster
                                                   capitalised into a reversionary value. After deducting the
                                                   mortgage balance at the end of the tenth year and the typical
London           Singapore
New York         New Delhi
                                                   brokerage and legal costs, the equity residual is discounted back
San Francisco    Vancouver                         to the date of value at the equity yield rate. The net operating
Miami            Toronto                           income to equity for each of the projection years is also
Denver           São Paulo
Dallas           Buenos Aires                      discounted to the present value. The sum of these discounted
Madrid                                             values equates to the value of the equity component. Adding the
                                                   equity component to the initial mortgage balance yields the
Specialists in Hotel Consulting                    overall property value.
& Valuation Worldwide                     Encl [if appropriate]
                                             4. Because the mortgage and the debt service amounts are
                                                   unknown but the loan to value ratio was determined in Step 1,
                                                   the preceding calculation can be solved through an iterative
                                                   process or by the use of a linear algebraic equation known as the
                                                   Simultaneous Valuation Formula, which computes the total
                                                   property value.



                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 52




                                                                            Date

                                          Name
                                          The value is proven by allocating the total property value between the
                                          Title
                                          mortgage and the equity components and verifying that the rates of
                                          Co Name
                                          return set forth in Steps 1 and 2 can be met from the forecast net
                                          Address 1
                                          operating income.
                                          Address 2
                                          City
                                          Using a simultaneous valuation formula to perform the necessary
                                          Postcode
                                          algebraic calculations results in the following estimate of value.

                                                          Total Property Value as Indicated by
                                          Dear             the Income Capitalisation
14 Hallam Street                                           Approach (Say)
                                                                        Re:             = £25,200,000
London, W1W 6JG
020 7878 7700
   Proof of Value
020 7436 3386 FAX
                                          The value is proven by calculating the yields to the mortgage and equity
www.hvsinternational.com                  components over the projection period. If the mortgage achieves its yield
                                          Text of letter …
                                          and the equity yield is 17.0%, then £25,200,000 prior to any capital
                                          deduction is the correct value by the income capitalisation approach.

                                          Using the assumed financial structure set forth previously, the value can
Stephen Mendell
Chairman                                  be allocated between the debt and the equity components as follows.
                                                                    Yours sincerely
                                                                    HVS INTERNATIONAL
                                                         Mortgage Component (65%)        £16,403,000
Russell Kett
Managing Director                                            Equity Component (35%)                      £8,832,000
                                                                 Total                                  £25,235,000
Charles Human
Managing Director                         The annual debt serviceName
                                                                  is calculated by multiplying the mortgage
Investment Services                                              Title
                                          component by the mortgage constant.

Directors:                                                       Mortgage Component                 £16,403,000
Simon Hudspeth
Dominique Bourdais                                               Mortgage Constant                     0.113287
Bernard Forster
                                                                  Annual Debt Service                £1,858,251

London           Singapore                The cash flow to equity is calculated by deducting the debt service from
New York         New Delhi
San Francisco    Vancouver                the projected net operating income before debt service.
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 53




                                                                            Date

                                          Name
                                          Table 9-2  Forecast of Net Operating Income to Equity (£)
                                          Title
                                          Co Name          Net Operating Income                                      Net Operating
                                          Address 1             Available for      Total Annual                         Income
                                          Address 2Year        Debt Service        Debt Service                        to Equity
                                          City
                                                   2006           2,215,000     -    1,858,000      =                      357,000
                                          Postcode 2007           2,279,000     -    1,858,000      =                      421,000
                                                      2008              2,487,000      -      1,858,000      =             629,000
                                                      2009              2,627,000      -      1,858,000      =             769,000
                                          Dear        2010              2,693,000      -      1,858,000      =             835,000
                                                      2011              2,760,000      -      1,858,000      =             902,000
14 Hallam Street                                      2012                  Re:
                                                                        2,829,000      -      1,858,000      =             971,000
London, W1W 6JG
                                                      2013              2,900,000      -      1,858,000      =           1,042,000
020 7878 7700
020 7436 3386 FAX                                     2014              2,972,000      -      1,858,000      =           1,114,000
www.hvsinternational.com                  Text of     2015
                                                    letter …            3,047,000      -      1,858,000      =           1,189,000



                                          The equity residual value at the end of the tenth year is calculated as
                                          follows.
Stephen Mendell
Chairman
                                                                     Yours sincerely
                                                 Reversionary Value (£3,123,000/0.090)          £34,700,000
                                                 Less:               HVS INTERNATIONAL
Russell Kett
Managing Director                                   Brokerage and Legal Fees                       £521,000
                                                    Mortgage Balance                             £7,518,000
Charles Human                                          Net Sale Proceeds to Equity              £26,661,000
Managing Director                                                    Name
Investment Services                                                  Title
                                          The overall property yield (before debt service), the yield to the lender
                                          and the yield to the equity position have been computed as follows.
Directors:
Simon Hudspeth
Dominique Bourdais                        Table 9-3     Overall Property Yields (£)
Bernard Forster
                                                                                                       Projected Yield
London           Singapore                                                                        (Internal Rate of Return)
New York         New Delhi                             Position                Value            Over 10-Year Holding Period
San Francisco    Vancouver
Miami            Toronto                               Total Property         25,235,000                  12.3 %
Denver           São Paulo                             Mortgage               16,403,000                   7.5
Dallas           Buenos Aires                          Equity                  8,832,000                  17.0
Madrid


Specialists in Hotel Consulting           Tables 9-4 and 9-5 demonstrate that the property receives its anticipated
& Valuation Worldwide                     Encl [if appropriate]
                                          yield, proving that the £25,200,000 value is correct based on the
                                          assumptions utilised in this report.




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                                          Valuation 54




                                                                                Date

                                          Name
                                          Table 9-4  Mortgage Component Yield (£)
                                          Title
                                          Co Name              Total Annual   Present Worth of £1                                 Discounted
                                          Address 1Year       Debt Service      Factor at 7.5%                                    Cash Flow
                                          Address 2
                                                   2006           1,858,000 x       0.930246      =                                   1,728,000
                                          City
                                                   2007           1,858,000 x       0.865357      =                                   1,608,000
                                          Postcode 2008           1,858,000 x       0.804995      =                                   1,496,000
                                                      2009                 1,858,000        x         0.748843         =              1,391,000
                                                      2010                 1,858,000        x         0.696608         =              1,294,000
                                          Dear        2011                 1,858,000        x         0.648016         =              1,204,000
                                                      2012                 1,858,000        x         0.602814         =              1,120,000
14 Hallam Street                                      2013                     Re:
                                                                           1,858,000        x         0.560765         =              1,042,000
London, W1W 6JG
                                                      2014                 1,858,000        x         0.521649         =                969,000
020 7878 7700
020 7436 3386 FAX                                     2015                 9,377,000 *      x         0.485262         =              4,550,000
www.hvsinternational.com                  Text of letter …                                Value of Mortgage Component                16,402,000

                                                      *10th year debt service of £1,858,000 plus outstanding mortgage balance of £7,518,000


Stephen Mendell
Chairman                                  Table 9-5      Equity Component Yield (£)
                                                                        Yours sincerely
                                                                                HVS INTERNATIONAL
Russell Kett                                                           Net Operating
Managing Director                                                         Income                Present Worth of £1               Discounted
                                                       Year              to Equity                Factor at 17.0%                 Cash Flow
Charles Human                                         2006                   357,000        x         0.854689         =                305,000
Managing Director                                                              Name
                                                      2007                   421,000        x         0.730493         =                308,000
Investment Services
                                                      2008                     Title
                                                                             629,000        x         0.624344         =                393,000
                                                      2009                   769,000        x         0.533620         =                410,000
Directors:                                            2010                   835,000        x         0.456079         =                381,000
Simon Hudspeth                                        2011                   902,000        x         0.389805         =                352,000
Dominique Bourdais                                    2012                   971,000        x         0.333162         =                324,000
Bernard Forster
                                                      2013                 1,042,000        x         0.284750         =                297,000
                                                      2014                 1,114,000        x         0.243373         =                271,000
London           Singapore                            2015                27,850,000 *      x         0.208008         =              5,793,000
New York         New Delhi
San Francisco    Vancouver                                                                Value of Equity Component                   8,834,000
Miami            Toronto
Denver           São Paulo                          *10th year net operating income to equity of £1,189,000 plus sales proceeds of £26,661,000
Dallas           Buenos Aires
Madrid

   Return Components                      In evaluating the risk associated with an investment, it is useful to
Specialists in Hotel Consulting
& Valuation Worldwide
                                          determine the portions of a property’s value that are attributable to
                                          Encl [if appropriate]
                                          annual cash flow and reversionary proceeds upon sale. The larger the
                                          percentage of value attributable to reversionary proceeds, the greater the
                                          risk, because a property’s sale price and resultant appreciation are
                                          uncertain.

                                          Based on the previous discounted cash flow analysis, 57.4% of the
                                          Hotel’s estimated value is attributable to cash flow and 42.6% is
                                          attributable to property appreciation. These percentages, which fall
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                                        Valuation 55




                                                                                Date

                                          Name
                                          within the typical range of 55% to 65% for cash flow and 35% to 45% for
                                          Title
                                          appreciation, are considered reasonable for a hotel of this type.
                                          Co Name
   Debt Coverage Ratio                    Address 1
                                          The projected net operating income, expressed as a percentage of debt
                                          Address 2
                                          service, provides for a debt coverage ratio that ranges from 1.19 in the
                                          City
                                          first year of the forecast to 1.41 in the stabilised year of operation.
                                          Postcode
                                          Lenders active in hotel financing generally require debt coverage ratios
                                          from 1.25 to 1.40 in the stabilised year of operation. Although the debt
                                          coverage ratio fluctuates as a result of varying levels of net operating
                                          Dear
                                          income, the Hotel’s projected debt coverage ratio is above the required
14 Hallam Street                          levels and provides a sufficient margin of cash flow to cover annual debt
                                                                    Re:
London, W1W 6JG                           service.
020 7878 7700
020 7436 3386 FAX
   Discounted Cash Flow
www.hvsinternational.com                  Using the total property yield of 12.3% results in the same value as that
                                          Text of letter …
   Analysis                               derived from the mortgage-equity discounted cash flow capitalisation
                                          technique, as presented in the proof of value. Following is the
                                          discounted cash flow analysis.
Stephen Mendell
Chairman                                  Table 9-6     Discounted Cash Flow Analysis: Total Unleveraged Property Yield (£)
                                                                              Yours sincerely
                                                                              HVS INTERNATIONAL Discounted
                                                                          Net Operating  Discount Factor
Russell Kett
                                                           Year               Income                 @ 12.3%              Cash Flow
Managing Director
                                                           2006                2,215,000              0.89070                1,972,908
Charles Human
                                                           2007                2,279,000              0.79335                1,808,050
Managing Director                                          2008                Name
                                                                               2,487,000              0.70664                1,757,417
Investment Services                                        2009                2,627,000
                                                                               Title                  0.62941                1,653,454
                                                           2010                2,693,000              0.56062                1,509,737
                                                           2011                2,760,000              0.49934                1,378,184
Directors:
                                                           2012                2,829,000              0.44477                1,258,242
Simon Hudspeth
Dominique Bourdais                                         2013                2,900,000              0.39615                1,148,847
Bernard Forster                                            2014                2,972,000              0.35286                1,048,687
                                                           2015               37,227,000 *            0.31429               11,699,904

London           Singapore                                                                 Estimated Maket Value            25,235,428
New York         New Delhi                                                                                 (SAY)            25,200,000
San Francisco    Vancouver
Miami            Toronto                                 Reversion Analysis
Denver           São Paulo                                        11th Year's Net Operating Income                           3,123,000
Dallas           Buenos Aires                                     Capitalisation Rate                                             9.0%
Madrid
                                                                    Total Sales Proceeds                                    34,700,000
                                                                      Less: Transaction Costs @ 1.5%                           520,500
Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate] Sales Proceeds
                                                             Net                                                            34,179,500

                                                         *10th year net operating income of £3,047,000 plus sales proceeds of £34,180,000




   Deductions for                         Deductions have been made from the Hotel’s value for stamp duty (4%)
   Purchase Costs                         and legal fees (0.5%), as these costs are typically borne by a purchaser
                                          and result in a lower net transaction price. Thus the value determined by

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 56




                                                                            Date

                                          Name
                                          the income capitalisation approach is £24,100,000. This value equates to
                                          Title
                                          approximately £96,000 per room for the 250-room Hotel.
                                          Co Name
  COST APPROACH                           Address
                                          The cost1approach is founded on the principle of substitution, which
                                          Address 2
                                          implies that no prudent investor will pay more for a property than the
                                          City
                                          amount for which a site can be acquired and a building of equal
                                          Postcode
                                          desirability and utility constructed without undue delay. The cost
                                          approach estimates the value by first calculating the current cost of
                                          replacing the premises. Appropriate deductions are made for
                                          Dear
                                          depreciation resulting from physical deterioration and functional and/or
14 Hallam Street                          economic obsolescence. The value of the land is then added to the
                                                                    Re:
London, W1W 6JG                           depreciated replacement cost in order to provide an estimate of value.
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  Text of letter Cost is the cost of construction at current prices of a
                                          Replacement …
                                          building of the same utility as the structure being valued, but built with
                                          modern materials and according to current construction standards and
                                          design.
Stephen Mendell
Chairman
                                          We have estimated the Hotel’s replacement cost based on figures
                                                                   Yours sincerely
                                          derived through our research and provided by Joint Venture Capital
                                          Trust Group Ltd. We haveHVS INTERNATIONAL
                                                                    assumed that this construction cost estimate is
Russell Kett
Managing Director
                                          accurate and we have therefore not undertaken any verification. Where
                                          we have made our own estimates in respect of any additional costs of
                                          development not contained within the provided estimate, we have
Charles Human
Managing Director                         highlighted this below. Name
Investment Services                                                Title
                                          HVS International maintains constant contact with developers, lenders
Directors:                                and investors and has been able to compile a substantial list of
Simon Hudspeth                            construction cost budgets for numerous types of hotel throughout
Dominique Bourdais
Bernard Forster
                                          Europe, the Middle East, Africa and the USA.

                                          By analysing both historical construction cost figures and current market
London           Singapore
                                          conditions, and by making adjustments for the specific characteristics
New York         New Delhi
San Francisco    Vancouver                attributed to the Hotel such as location, size, facilities, class, and so forth,
Miami            Toronto                  we are able to derive an appropriate construction cost estimate.
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 57




                                                                            Date

                                          Name
                                          Table 9-7      Total Redevelopment Cost (£)
                                          Title
                                          Co Name of Rooms
                                               Number                                    250
                                               Total 1
                                          AddressConstructed Area                     10,200 m²
                                          Address 2
                                          City                                     Total Cost Per Room           Per m²   % Total
                                          Postcode
                                               Site Purchase Cost                  2,500,000    10,000              245       11 %
                                             Building Cost                            11,500,000     46,000       1,127       51
                                             Furniture, Fixtures & Equipment           3,125,000     12,500         306       14
                                          Dear
                                             Professional Fees (Say 12%)               1,380,000      5,520         135        6
                                             Contingency (Say 4%)                        460,000      1,840          45        2
14 Hallam Street                             Interest During Construction Re:          1,330,350      5,321         130        6
London, W1W 6JG
                                             Pre-Opening Cost                            500,000      2,000          49        2
020 7878 7700
020 7436 3386 FAX                            Developer's Profit (Say 10%)              1,850,500      7,402         181        8
www.hvsinternational.com                       of letter …
                                          TextEstimated Development Cost              22,645,850     90,583       2,220      100 %

                                               Say                                    23,000,000     91,000       2,000

                                               Source: HVS Estimates
Stephen Mendell
Chairman
                                                                    Yours sincerely
                                          It should be noted that the preceding estimate of value using the cost
                                                                    HVS INTERNATIONAL
Russell Kett                              approach is one of the recognised valuation approaches used to arrive at
Managing Director
                                          an overall estimate of value. Although the data used to compile this
                                          estimate are generally reliable, they provide only a rough indication of
Charles Human                             what the redevelopment cost may be. Individuals who require an
Managing Director                                                   Name
Investment Services                       accurate cost estimate should retain the services of an experienced
                                                                    Title
                                          quantity surveyor.
Directors:
   SALES COMPARISON
Simon Hudspeth                            The sales comparison approach estimates the value of a property by
   APPROACH
Dominique Bourdais                        comparing it to similar properties recently sold on the open market.
Bernard Forster
                                          Through an analysis of the comparable sales data, the valuer can develop
                                          an indication of value based upon the per room sales price paid for
London           Singapore                similar hotels. This approach in valuing hotels is used primarily as a
New York         New Delhi
San Francisco    Vancouver
                                          check against the values indicated by the income capitalisation and cost
Miami            Toronto                  approaches.
Denver           São Paulo
Dallas           Buenos Aires
Madrid
                                          Based upon our market research and information provided to us by
                                          other hotel brokerage firms, Table 9-8 details all the recent hotel
                                          transactions in the four-star or five-star segment which exhibit some
Specialists in Hotel Consulting
& Valuation Worldwide                     measure of comparability with the Hotel.
                                          Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                            Valuation 58




                                                                            Date

                                            Name
   Table 9-8           Comparable Hotel Transactions (£)
                                            Title
                                            Co Name                                Number of                        Price Per
                 Property                   Address 1 Country
                                          Location                   Sale Date      Rooms       Estimated Price      Room
                                            Address 2
                Rathbone                  London      UK           February 2005      72            8,900,000        124,000
                St George's Hotel
                                            City
                                          London      UK           January 2005        86          12,000,000        140,000
                Mickleover Court            Postcode UK
                                          Derby                   November 2004        81          10,700,000        132,000
                Palms Hotel           Hornchurch       UK           August 2004       137          10,750,000         78,000
                Charles Dickens Hotel London           UK            July 2003        188          21,500,000        114,000
                Bonnington Hotel        Dear
                                      London           UK            June 2003        215          20,000,000         93,000
                Grand Hotel           Eastbourne       UK            April 2002       164          14,500,000         88,000
14 Hallam StreetPark International    London           UK                    Re:
                                                                     April 2002       117          12,000,000        103,000
London, W1W 6JG
                Four Seasons          Manchester       UK          February 2002      148          17,600,000        119,000
020 7878 7700
                Slaley Hall
020 7436 3386 FAX
                                      Newcastle        UK            May 2001         140          16,300,000        116,000

                                          UKText of letter …
www.hvsinternational.com
                 Stakis Hotels                          UK           July 2002       8,465      1,500,000,000        177,000
                 Swallow Hotels           UK            UK           July 2002       5,000        578,000,000        116,000

                                                                                                   Minimum:           78,000
                                                                                                   Maximum:          177,000
Stephen Mendell
Chairman      Source: HVS International                                     Yours sincerely
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director –
  Conclusion   Sales                        The sales comparison approach has some limited use in providing a
   Comparison Approach                      range of values. Differences in location, facilities, property rights
Charles Human                               transferred and many other variables make a precise comparison
Managing Director                                                      Name
                                            between the comparable sales and the Hotel difficult. Subjective
Investment Services                                                    Title
                                            adjustments used to lessen these differences are highly speculative.
                                            Moreover, there is no accurate way of determining whether the sales
Directors:
Simon Hudspeth
                                            prices actually paid represent market values, because it is difficult to
Dominique Bourdais                          determine the exact motivations of the buyers and sellers, or what
Bernard Forster                             special conditions may have influenced the sale. We are of the opinion
                                            that although the sales comparison approach is generally unsuitable for
London           Singapore                  indicating a specific final estimate of value, it may serve to establish a
New York         New Delhi                  range that can test the reasonableness of the values indicated by the
San Francisco    Vancouver
Miami            Toronto                    income capitalisation and cost approaches.
Denver           São Paulo
Dallas           Buenos Aires               Our analysis of comparable sales indicates a wide range of £78,000 to
Madrid
                                            £177,000 per room, or £19,500,000 to £44,300,000 for the 250-room Hotel.

  RECONCILIATION OF
Specialists in Hotel Consulting             Reconciliation is the last step in the valuation process in which the final
                                            Encl [if appropriate]
& Valuation Worldwide
   VALUE INDICATIONS                        value is estimated from the various indications developed by the income
                                            capitalisation, cost and sales comparison approaches. The relative
                                            significance, applicability and defensibility of each indicated value is
                                            analysed, with the greatest weight given to that approach deemed most
                                            appropriate for the property being valued. Based on the preceding data
                                            and analysis set forth in this report, the following value indications were
                                            developed.

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 59




                                                                            Date

                                          NameApproach                              Value Indication
                                          Title
                                              Income
                                          Co Name Capitalisation                       £24,100,000
                                              Cost
                                          Address 1                                    £23,000,000
                                                   Comparison
                                              Sales2
                                          Address                               £19,500,000 to £44,300,000
                                          City
   Income Capitalisation                  The income capitalisation approach took the Hotel’s forecast net
                                          Postcode
   Approach                               operating income and allocated this future benefit to the mortgage and
                                          equity components based on market rates of return and loan to value
                                          ratios.
                                          Dear Through a discounted cash flow and income capitalisation
                                          procedure the value of each component was calculated. The total of the
14 Hallam Street                          mortgage and equity components equates to the value of the property.
                                                                   Re:
London, W1W 6JG
020 7878 7700
020Cost3386 FAX
    7436 Approach                         We give the cost approach limited weight in arriving at a final estimate
www.hvsinternational.com                  because knowledgeable buyers of hotel facilities generally base their
                                          Text of letter …
                                          purchase decisions on economic factors such as forecast net operating
                                          income and return on investment. However, had the value indicated by
                                          the cost approach been substantially lower than that indicated by the
Stephen Mendell                           income capitalisation approach, a downward adjustment of the income
Chairman                                  capitalisation approach value may have been necessary to reflect the
                                                                     Yours sincerely
                                          theory of substitution. No downward adjustment was considered to be
                                                                     HVS INTERNATIONAL
Russell Kett                              necessary in the case of the Hotel.
Managing Director
  Sales Comparison                        The sales comparison approach was considered and several sales were
  Approach
Charles Human                             evaluated in an attempt to develop a range of value indications. Because
Managing Director                                                  Name
                                          these sales are only somewhat comparable to the Hotel, they require
Investment Services                                                Title
                                          several adjustments and the reliability of any specific value estimate is,
                                          therefore, diminished. Furthermore, typical buyers and sellers of hotels
Directors:                                generally employ a sales comparison procedure to establish broad value
Simon Hudspeth
Dominique Bourdais                        parameters only.
Bernard Forster
   Conclusion                             Our international experience with numerous hotel buyers and sellers
London           Singapore                indicates that the procedures used in estimating the value by the income
New York         New Delhi                capitalisation approach are comparable to those employed by the hotel
San Francisco    Vancouver
                                          investors who constitute the marketplace. For this reason, we consider
Miami            Toronto
Denver           São Paulo                that the income capitalisation approach produces the most supportable
Dallas           Buenos Aires             value estimate, and it is given the greatest weight in our final estimate of
Madrid
                                          the Hotel’s market value.

Specialists in Hotel Consulting           Based on the preceding analysis and our specialist experience in valuing
& Valuation Worldwide                     Encl [if appropriate]
                                          hotels, we have given primary weight to the income capitalisation
                                          approach. It is our opinion that the market value of the freehold interest
                                          in the Hotel described in this report, as at 1 January 2006, is:

                                                                                   £24,100,000

                                            TWENTY-FOUR MILLION ONE HUNDRED THOUSAND POUNDS
                                                                 STERLING

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                                                                          Valuation 60




                                                                            Date

                                          Name
                                          This value equates to approximately £96,000 per room for the 250-room
                                          Title
                                          Hotel.
                                          Co Name
   Valuation Certainty                    Address 1
                                          An opinion of value will always involve a degree of subjectivity and
                                          Address 2
                                          uncertainty that will affect the probability that the opinion of market
                                          City
                                          value would be the same as the price achieved by an actual sale at the
                                          Postcode
                                          valuation date. As such, we are required by the RICS to comment upon
                                          our level of confidence in the opinion of value reported herein.

                                          Dear
                                          The methodology employed in valuing a hotel is dependent upon the
14 Hallam Street
                                          accuracy of the historical trading results for the subject Hotel as well as
                                                                     Re:
London, W1W 6JG                           the level and accuracy of information available in the marketplace in
020 7878 7700                             order to determine the current marketwide trading conditions, and to
020 7436 3386 FAX
www.hvsinternational.com                  estimate the future trading potential of the subject Hotel.
                                          Text of letter …
                                          We consider our projections of future income and expense to be
                                          appropriate when compared alongside those of similar hotel properties,
                                          and therefore we consider the level of uncertainty attached to our
Stephen Mendell
Chairman
                                          opinion of value to be low.
                                                                     Yours sincerely
   Suitability of the                     We consider the freehold HVS INTERNATIONAL Hotel to be suitable
                                                                      interest in the Wellington
Russell Kett for
  Property       Loan                     for loan security purposes. We have assumed that throughout the
Managing Director
   Security Purposes                      proposed term of 15 years the property will be maintained in a good
                                          state of repair and condition commensurate with a commercial hotel.
Charles Human
Managing Director                                                    Name
Investment Services                       We consider that the operation of the business is sustainable for the
                                                                     Title
                                          foreseeable future, but we recommend that the bank monitor its trading
Directors:
                                          performance as any change may have a material impact upon the values
Simon Hudspeth                            reported herein.
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                          Addendum 1 – Statement of Assumptions and Limiting Conditions 1




                                                                            Date

                                          Name

   Addendum 1 – Statement of Assumptions and
                                          Title
                                          Co Name

                Limiting Conditions       Address 1
                                          Address 2
                                          City
                                          Postcode


                                          Dear
14 Hallam Street                                                      used
                                               1. This report is to beRe: in whole and not in part.
London, W1W 6JG
020 7878 7700                                2. No responsibility is assumed for matters of a legal nature, nor do
020 7436 3386 FAX                                 we render any opinion as to title, which is assumed to be
www.hvsinternational.com                  Text of letter …
                                                  marketable and free of any deed restrictions and easements. The
                                                  property is valued as though free and clear unless otherwise
                                                  stated.
                                               3. There are no hidden or unapparent conditions of the property,
Stephen Mendell
Chairman                                          subsoil or structures that would render it more or less valuable.
                                                  No responsibility Yours sincerely for these conditions or any
                                                                       is assumed
                                                                     HVS INTERNATIONAL
                                                  engineering that may be required to discover them.
Russell Kett
Managing Director
                                               4. We have not considered the existence of potentially hazardous
                                                  materials used in the construction or maintenance of the
Charles Human                                                          asbestos, urea formaldehyde foam insulation,
                                                  buildings, such as Name
Managing Director
Investment Services                               or PCBs. We are thus unable to report that the property is free
                                                                      Title
                                                  from risk in this respect and have assumed that any investigation
                                                  would not reveal the presence of hazardous materials. The
Directors:
Simon Hudspeth                                    valuers are not qualified to detect these substances and urge the
Dominique Bourdais                                client to retain an expert in this field if desired. We have not
Bernard Forster
                                                  investigated whether the site is or has been in the past
                                                  contaminated and are therefore unable to warrant that the
London           Singapore                        property is free from any defect or risk in this respect. Our report
New York         New Delhi
San Francisco    Vancouver                        is therefore based on the assumption that the land is not
Miami            Toronto                          contaminated and any specialist investigation would not disclose
Denver           São Paulo
Dallas           Buenos Aires
                                                  the presence of any adverse conditions on the site or within the
Madrid                                            building.
                                             5. No survey of the property has been made by the valuers and no
Specialists in Hotel Consulting                    responsibility is assumed in connection with such matters.
& Valuation Worldwide                     Encl [if appropriate]
                                                   Sketches, pictures, maps and other exhibits are included to assist
                                                   the reader in visualising the property. It is assumed that the use
                                                   of the land and premises is within the boundaries of the property
                                                   described and that there is no encroachment or trespass unless
                                                   noted.
                                               6. This Valuation Report is not a structural survey and we therefore
                                                  value on the assumption that the property is of sound design and
                                                  construction, and free from any inherent defect. No detailed
                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                          Addendum 1 – Statement of Assumptions and Limiting Conditions 2




                                                                            Date

                                          Name inspection or tests have been carried out by us on any of the
                                          Title services or items of equipment, therefore no warranty can be
                                          Co Namegiven with regard to their serviceability, efficiency, safety or
                                          Address 1
                                                 adequacy for their purpose. We express no opinion or advice
                                          Address 2
                                                 upon the condition of uninspected parts and our report should
                                          City not be read as making any implied representation or statement
                                          Postcode
                                                 about such parts. We have assumed that the property is in a good
                                                    state of repair and condition and that there are no outstanding
                                                    items of expenditure required.
                                          Dear
                                             7. All information (including financial operating statements,
14 Hallam Street                                                    Re:
London, W1W 6JG
                                                  estimates, and opinions) obtained from parties not employed by
020 7878 7700                                     HVS International is assumed to be true and correct. No liability
020 7436 3386 FAX                                 resulting from misinformation can be assumed by the valuers.
www.hvsinternational.com                  Text of letter …
                                             8. Unless noted, it is assumed that there are no encroachments or
                                                  planning and building violations encumbering the Hotel.
                                               9. It is assumed that the property is in full compliance with all
Stephen Mendell                                   applicable city, local and private codes, laws, consents, licences
Chairman                                          and regulations (including an alcohol licence where appropriate)
                                                                      Yours sincerely
                                                  and that all licences, permits, certificates, franchises and so forth
                                                                      HVS INTERNATIONAL
Russell Kett                                      can be freely renewed and/or transferred to a purchaser.
Managing Director
                                               10. All mortgages, liens, encumbrances, leases and servitudes have
Charles Human
                                                   been disregarded unless specified otherwise.
Managing Director                                                     Name
                                               11. This report may not be reproduced in whole or in part without
Investment Services                                                   Title
                                                   the permission of the valuers, nor shall the report be distributed
                                                   to the public through advertising, public relations, news, sales, or
Directors:
Simon Hudspeth                                     other media without the prior written consent of the valuers.
Dominique Bourdais
Bernard Forster                                12. We are not required to give testimony or attendance in court by
                                                   reason of this valuation without previous arrangements and only
                                                   when our standard per diem fees and travel costs are paid prior
London           Singapore
New York         New Delhi                         to the appearance.
San Francisco    Vancouver
Miami            Toronto                       13. If the reader is making a fiduciary or individual investment
Denver           São Paulo                         decision and has any questions concerning the material
Dallas           Buenos Aires
Madrid
                                                   contained in this report it is recommended that the reader
                                                   contact the valuers.
Specialists in Hotel Consulting              14. The valuers take no responsibility for any events, conditions or
& Valuation Worldwide                              appropriate]
                                          Encl [if circumstances affecting the property’s market value that take
                                                    place subsequent to either the date of value contained in this
                                                    report or the date of our field inspection, whichever occurs first.
                                               15. The quality of a hotel facility’s on-site management has a direct
                                                   effect on a property’s economic viability and market value. The
                                                   financial forecasts presented in this valuation assume both
                                                   responsible ownership and competent management. Any

                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                          Addendum 1 – Statement of Assumptions and Limiting Conditions 3




                                                                            Date

                                          Name variance from this assumption may have a significant impact on
                                          Title the forecast operating results and value estimate.
                                          Co Name
                                              16. The
                                          Address 1 estimated operating results presented in this report are based
                                                  on
                                          Address 2 an evaluation of the current overall economy of the area and
                                          City neither take into account nor make provision for the effect of any
                                          Postcodesharp rise or decline in local or economic conditions. To the
                                                  extent that wages and other operating expenses may advance
                                                  during the economic life of the property, it is expected that the
                                          Dear prices of rooms, food, beverages and services will be adjusted to
                                                  at least offset these advances. We do not warrant that the
14 Hallam Street                                                       Re:
London, W1W 6JG
                                                  estimates will be attained, but they have been prepared on the
020 7878 7700                                     basis of information obtained during the course of this study and
020 7436 3386 FAX                                 are intended to reflect the expectations of typical investors.
www.hvsinternational.com                  Text of letter …
                                              17. Many of the figures presented in this report were generated
                                                  using sophisticated computer models that make calculations
                                                  based upon numbers carried out to three or more decimal places.
                                                  In the interest of simplicity most numbers presented in this
Stephen Mendell
Chairman                                          report have been rounded to the nearest tenth. Thus, these
                                                                       Yours small rounding errors in some cases.
                                                  figures may be subject to sincerely
                                                                       HVS INTERNATIONAL
Russell Kett                                  18. Valuing real estate is both a science and an art. Although this
Managing Director
                                                  valuation employs various mathematical calculations to provide
                                                  value indications, the final estimate of value is subjective and
Charles Human                                     may be influenced by the valuers’ experience and other factors
                                                                       Name
Managing Director
Investment Services                                                    forth
                                                  not specifically set Title in this report.
                                               19. The freehold title to the Hotel would be readily marketable
Directors:                                         without any undue restrictions, covenants or conditions except
Simon Hudspeth
                                                   where otherwise noted.
Dominique Bourdais
Bernard Forster                                20. The relationship between pounds sterling and other major world
                                                   currencies remains constant as of the date of our field work.
London           Singapore
New York         New Delhi                     21. While the information contained herein is believed to be correct it
San Francisco    Vancouver                         is subject to change. Nothing contained herein is to be construed
Miami            Toronto
Denver           São Paulo
                                                   as a representation or warranty of any kind.
Dallas           Buenos Aires
Madrid
                                               22. We have specifically excluded the value of any antiques or items
                                                   of fine art.
Specialists in Hotel Consulting              23. We have made no allowance for the repayment of any grants,
& Valuation Worldwide                              appropriate]
                                          Encl [if which might arise in the event of development or disposal,
                                                   deemed or otherwise.
                                               24. Throughout this report, ‘HVS International’ refers to the trading
                                                   name of SG&R Valuation Services Company, a United States of
                                                   America partnership formed under the laws of the State of
                                                   Connecticut as a general partnership.


                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.
   HVS International                                                          Addendum 2 – Photographs of the Wellington Hotel, Newtown, UK 1




                                                                            Date

                                          Name

   Addendum 2 – Photographs of the Wellington
                                          Title
                                          Co Name

                Hotel, Newtown, UK        Address 1
                                          Address 2
                                          City
                                          Postcode


                                          Dear
14 Hallam Street                                                            Re:
London, W1W 6JG
020 7878 7700
020 7436 3386 FAX
www.hvsinternational.com                  Text of letter …




Stephen Mendell
Chairman
                                                                            Yours sincerely
                                                                            HVS INTERNATIONAL
Russell Kett
Managing Director


Charles Human
Managing Director                                                           Name
Investment Services                                                         Title

Directors:
Simon Hudspeth
Dominique Bourdais
Bernard Forster


London           Singapore
New York         New Delhi
San Francisco    Vancouver
Miami            Toronto
Denver           São Paulo
Dallas           Buenos Aires
Madrid


Specialists in Hotel Consulting
& Valuation Worldwide                     Encl [if appropriate]




                                               HVS International is the trading name of SG&R Valuation Services Company,
                         A United States of America partnership formed under the laws of the State of Connecticut as a general partnership,
                the partners of which are S R London Corporation and HEI International Inc (both United States of America Delaware Corporations).
                            The operations of SG&R Valuation Services Company in the UK are managed by HEI International Inc.

								
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