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					OMAR BENJAMIN
Executive Director
                             PORT OF OAKLAND                                ANTHONY A. BATARSE, JR.
                                                                                           President
                             BOARD OF PORT COMMISSIONERS                               MARK McCLURE
DOUGLAS WARING               530 Water Street • Oakland, California 94607              i s` Vice President
Deputy Executive Director
                                                                            DARLENE AYERS-JOHNSON
JOE WONG                        Telephone: (510) 627-1100                            2nd Vice President
Deputy Executive Director
                                 Facsimile: (510) 451-5914                        MARGARET GORDON
                                                                                        Commissioner
DAVID L. ALEXANDER                  TDD: (510) 763-5703
Port Attorney                                                                    KENNETH S. KATZOFF
                                                                                        Commissioner
JOHN T. BETTERTON
                              e-Mail: boardportoakland.com
                                                                                  PATRICIA A. SCATES
Secretary of the Board        Website: www.portofoakland.com                             Commissioner
                                                                                          VICTOR UNO

                                         AGENDA                                           Commissioner




                         Regular Meeting of the Aviation Committee
                            Monday, January 7, 2008 - 4:30 p.m.
                                       Board Room

ROLL CALL

           Second Vice-President Ayers-Johnson, Chair
           Commissioner Gordon
           First Vice-President McClure

CLOSED SESSION

   .     Conference With Legal Counsel – Anticipated Litigation.
         Significant exposure to litigation pursuant to subdivision (b) of Section 54956.9:
         (2 Matters)

ITEMS FOR DISCUSSION AND POSSIBLE ACTION

   2.    On-Airport Hotel Feasibility Study - Findings and Staff Recommendations

January 15th Board Items

   3.    Approval of a License and concession Agreement with Federal Express
         Corporation for Two Aircraft Parking Spaces at the Oakland Maintenance Center at
         a Rate of $11,016 per Month (1100 Airport Drive – South Airport).

   4.    Approval of License and Concession Agreement with Windjammers Air Charter
         Screening, LLC for Skycap, Wheelchair and Baggage Handling Services, Aircraft
         Cabin Cleaning Services and Private Security Screening Services for a One-Year
         Term With a Monthly Rental of $250 or 10% of Gross Revenues, Whichever is
         Greater (#1 Airport Drive, South Airport).
                                                                                   January 7, 2008

        First Reading of an Ordinance Approving and Authorizing Execution of a
        Space/Use Permit with Verified Identity Pass, Inc. aka Clear to Provide
        Registered Traveler Services at the Airport for a Minimum Annual Guaranteed
        Payment of $250,000 (#1 Airport Drive, South Airport).

  6.    Approval to Waive Formal Request-for-Proposal Process for one Wirtgen W5ODC
        Four Wheeled Cold Pavement Milling Machine and Service Agreement for a total
        cost of $214,999.74

  7.    Ratification of $15,000 and Approval to spend $90,000 to Kelly's Truck Repair for
        Performing Vehicle Maintenance on the Port's Fleet of 13 Compressed Natural Gas
        (CNG) "Cut-away" Parking Shuttles Operating at Oakland International Airport.

  8.    Ratification of Addendum, Approval of Bid Protest Hearing Officer's
        Recommendation, and Award of Contract for Expansion and Rehabilitation of
        Closed Circuit Television (CCTV) System, South Field, 01A, AIP 3 06 0170-36, in
        the Amount of $694,293.61.

OPEN FORUM

        The Committee will receive public comment on non-agenda items during this time.
        Please fill out a speaker card and present it to the Committee Secretary.

ADJOURNMENT

        The next regular meeting will be held on Monday, February 4, 2008, at 4:30 p.m.



                                       Public Participation

 This meeting is wheelchair accessible. To request materials in alternative formats, or to request
 an ASL interpreter or assistive listening device, please call the Board Secretary, John Betterton,
 at 510-627-1696 or TDD 510-763-5703 at least three working days before the meeting. Please
 refrain from wearing scented products to this meeting so attendees who experience chemical
 sensitivities may attend.

 You may speak on any item appearing on the Agenda. Please fill out a Speaker's Card and give
 it to the Board Secretary before the start of the meeting. All speakers will be allotted a minimum
 of two minutes.

 Should you have questions or concerns regarding this agenda, or wish to review any of the
 Agenda Related Materials, please contact the Board Secretary, John Betterton, at 510-627-1696,
 or visit our web page at www.portofoakland.com.

 To receive Port Agendas and Agenda Related Materials by email, please email your request to
 board@portoakland. corn


                                            -2-
S91.6 Visa




             Z W311
                       PORT OF OAKLAND                                           STEVEN J. GROSSMAN
                                                                                      Director of Aviation

January 7, 2008
                                                                                      Phone (510) 627-1133
                                                                                     Fax (510) 835-0178
AVIATION COMMITTEE                                                             E-mail: sgrossma portoakland.com

BOARD OF PORT COMMISSIONERS
OF THE CITY OF OAKLAND

      Second Vice President Darlene Ayers-Johnson, Chair
      First Vice President Mark McClure
      Commissioner Margaret Gordon

RE: On-Airport Hotel Study – Findings and Recommendations

Dear Committee Members:

The Port Board authorized staff to execute an agreement with Jones Lang LaSalle (JLL) to
conduct an On-Airport Hotel Feasibility Study in March 2007. The consultant commenced
work in May and recently delivered a Project Definition Report to staff. This letter summarizes
the study approach and key findings, and staffs recommendation.

The goal of the study was to explore a potential new source of non-airline revenue, by
determining the feasibility of developing a hotel facility near the passenger terminals. Lodging
and meeting facilities built close to the terminals would also provide a significant customer
service enhancement. Market, site and financial analyses were prepared to determine project
feasibility, as described below.

Market Analysis

The hotel inventory that currently serves the Airport includes 1,172 rooms in seven facilities
that range from mid-scale limited service to upscale select service. Little new inventory has
been added since 2002, but a 147-room Holiday Inn is under construction next to the Airport
Hilton and will open this March.

While overall room occupancy and revenue per available room (RevPAR) grew 5.0% and
6.5%, respectively since 2003, the average daily rate (ADR) has grown just 1.6%, despite little
growth in supply. Hence, increased demand and stagnant supply have not translated into
higher ADR and profitability. This may be due to the nature of OAK as an origin or
destination, but not an (overnight) transfer point.

To determine the market's ability to support an on-Airport facility the consultant considered the
standard hotel performance indicators plus terminal proximity, absorption risk, and passenger
growth trends; and performance of other on-Airport hotels in the U.S.




 530 Water Street m Jack London Square la P.O. Box 2064      Oakland, California 94604 -2064
 Telephone: (510) 627-1100 • Facsimile: (510) 627-1826 • Web Page: www.portofoakland.com
Aviation Committee                                                             January 7, 2008
On-Airport Hotel Feasibility Study                                                      Page 2

The analysis showed that there is sufficient demand to support a new on-Airport hotel.
However, project feasibility depends upon development cost and the Port's flexibility in
establishing a deal structure.

Site Analysis

Seven sites were evaluated including four in the terminal complex. The sites were ranked
using several criteria including size, location/visibility, access, cost, constructability and
environmental impact. Initial site screening narrowed the list to four sites that warranted
further investigation: Site #3 – Neil Armstrong (Employee) Parking Lot, Site #4 – Northfield
(Hegenberger at Airport Drive), Site #5 – Doolittle/Swan Parking Lot and Site #6 – Parking
Bowl. Only Site #6 – Parking Bowl, located behind the proposed future parking garage, is
within walking distance of the terminals. Other terminal area sites were eliminated from
consideration due to construction issues and cost.

Development and Financial Analysis

A financial assessment for each of the four sites noted above was prepared and included a
five-year cash flow statement. Development characteristics/costs differ sharply between the
Neil Armstrong Lot and Parking Bowl sites in the South Airport, vs. the Hegenberger and
Doolittle/Swan sites in the North Airport. The South Airport sites are on bay mud flats and
would require expensive deep pile foundation construction; whereas the North Airport sites
could be built on less expensive, traditional footings. Moreover, the Parking Bowl site would
require expensive steel and concrete construction while the other sites could employ wood
frame construction.

Financial modeling and further assessment identified two sites that best met the Port's
financial criteria and key market / investor considerations: Site #6 – Parking Bowl and Site #4
– Hegenberger at Airport Drive. Site #3 – Neil Armstrong Parking Lot was not short listed due
to the high development cost, shuttle expense, lengthy pedestrian access to terminals,
parking displacement and limited ability to command an ADR premium. Site #5 –
Doolittle/Swan was not short listed due mostly to poor visibility combined with shuttle expense.

Relative, estimated project values for each site – from a developer's financial perspective -
were estimated using an IRR Model reflecting estimated development and financing cost,
room rates and occupancy rates. The results indicate that no site candidate yields a positive
IRR, whereas developers typically require a minimum 18% to 22% IRR.

To make a project viable to the development community (i.e. 15%+ IRR) on either of the two
recommended sites:
   • Stabilized ADR for Site #4 – Hegenberger/Airport Drive would have to be $243 which is
       31 % higher than the $185 rate that the market would bear. Alternatively, the Port could
       provide a $29 million development subsidy to achieve a developer's desired IRR.
       Additionally, this site has the added cost of replacing office space for approximately 25
       Port employees who currently work in an office building on the site.
Aviation Committee                                                                January 7, 2008
On-Airport Hotel Feasibility Study                                                        Page 3

   • Stabilized ADR for Site #6 – Parking Bowl would have to be $276 which is 23% higher
       than the $223 rate that the market would bear. Alternatively, the Port could provide a
       $20 million development subsidy to achieve a developer's desired IRR.

Conclusions and Recommendations

Sites 4 and 6 have merit in terms of complementing anticipated Airport growth and improving
customer service, but neither yields a positive IRR with current assumptions of market
conditions and construction cost. No site candidate achieves a sufficient financial return
without Port support because the local market does not command sufficient ADR/positive
cash flow to offset high construction cost. Without a significant change in the market, lower
construction cost or some form of Port contribution, the developer / investor market would not
likely show much interest in an RFP process at this time. Additionally, it is prudent to wait until
actions related to the Airport Hilton and the potential Jack London Square hotel are more
defined before proceeding with an on-airport hotel site. As such, the Port should wait at least
6-9 months to reassess the market and/or exploring other options.

We therefore recommend that the Port not pursue an RFP for either short-listed site at this
time. However we will entertain un-solicited proposals should any transpire. Staff will present
these findings at the January 7, 2008 Committee meeting.

If you have any questions, please call me at (510) 627-1133.

Sincerely,




Steven Grossman
Director of Aviation



cc: Commissioner Kenneth S. Katzoff
     Commissioner Patricia A. Scates
     Commissioner Anthony A. Batarse
     Commissioner Victor Una
     Omar Benjamin
     Joe Wong
     Stephen Gordon
     Marcel Conrad
 A Presentation to

 The Port of Oakland
 Project Definition Report for Proposed
 On-Airport Hotel Development
 December 2007




Attention:      Stephen Gordon
                Port of Oakland,
                Aviation Division
Email:          sgordon©portoakland.com

Prepared by:


             JONES
             LA




Contact:
Kurt Little
Tel: +1 312 228 2632
Fax: +1 312 228 0553
Email: Kurt.Little@am.j11.com

Jones Lang LaSalle Americas, Inc.
200 East Randolph Drive, 46th Floor
Chicago, IL 60601
Table of Contents

I.        Executive Summary


II.       Market Analysis


III.      Airport Site Analysis


IV.       Hotel Development and Financial
          Analysis


V.        Conclusions and Recommendations


          Appendix A: Site Analysis
          Parcel Fact Sheets

          Appendix B: Site Exhibits

          Appendix C: Site Selection
          Matrix




© 2007 All rights reserved The information contained in this
document is proprietary to Jones Lang LaSalle and shall be used
solely for the purposes of evaluating this proposal. All such
documentation and information remains the property of Jones Lang
LaSalle and shall be kept confidential. Reproduction of any part of
this document is authorized only to the extent necessary for its
evaluation. It is not to be shown to any third party without the prior
written authorization of Jones Lang LaSalle. All information
contained herein is from sources deemed reliable; however, no
representation or warranty is made as to the accuracy thereof
Port of Oakland - Project Definition Report	                 Section I - I




                                                             Section I.
                                                             Executive Summary


Introduction
In response to a projected growth in passenger volume, Oakland International Airport is planning for
the development of a new terminal and parking facilities. The Port of Oakland (the "Port"), as owner
and operator of the Airport, has engaged Jones Lang LaSalle to examine the feasibility of on-Airport
hotel development in context of the anticipated airport growth.

Summarized below and discussed in detail in the balance of this report, is an assessment of hotel
supply and demand metrics, the identification and assessment of potential hotel sites, and lastly, a
financial assessment of top ranked sites to deteimine their economic viability in supporting new hotel
development.



Market Analysis
The hotel inventory that currently serves the Airport consists of seven facilities containing an
aggregate of 1,172 rooms. These facilities range from mid-scale limited service to upscale select
service and are consistent with the general market composition for demand type. There has not been
new hotel inventory added in the competitive market since 2002 (with the exception of the 26-room
expansion of the Holiday Inn Express in late 2006). However, the development of a new hotel is
currently underway adjacent to the Hilton Oakland Airport Hotel (a 147-room Holiday Inn,
scheduled to open by March 2008).

Over the past four years, performance metrics within the competitive set have trended positively.
Occupancy and revenue per available room (RevPAR) average annual growth was 5.0% and 6.5%,
respectively, from 2003 through 2006. However, growth in average daily rate (ADR) across the
competitive set has been sluggish over the same time frame (1.6% compounded annually on average)
in spite of a nearly complete lack of new supply. These trends are indicative of a localized market
not able to fully capitalize on the opportunity afforded by a steady increase in passenger traffic,
and the nature of OAK as a destination or an origin, not an overnight transfer point.
To ascertain the ability of the market to support the Port's development goals, factors such as
absorption risk, passenger growth trends and airside versus landside penetration metrics were
considered in addition to standard hotel performance indicators. In particular Jones Lang LaSalle
assessed the various market metrics of "on-Airport" (as defined as within walking distance) to "off-
Airport" (as defined by requirement for a shuttle bus) to establish whether or not there is a sufficient
market to support a new aviation-based hotel.




Jones Lang LaSalle
Port of Oakland — Project Definition Report 	                Section I — 2




In-Terminal vs. Off-Terminal Hotel Development Opportunities
A survey of primary airport markets with in-telininal hotels shows that the proximity to an airport's
core facilities is correlated to a performance premium relative to their off-terminal competitors.
According to data compiled from our own proprietary research and Smith Travel Research, the
average ADR premiums are 21% and revenue per available room (RevPAR) premiums are 28% for
in-teoninal domestic airport hotel markets. These figures are significant to the potential development
opportunity at the Airport as they indicate that, even in a marketplace with moderate demand for new
hotel development, there may exist opportunities to capitalize on the premiums afforded by terminal
proximity to enhance pro forma return characteristics.

In summary, our analysis concludes that there is sufficient demand within the Airport's marketplace
to support new hotel development. However, supply-side characteristics do not necessarily warrant
action without a keen assessment of the foreseeable cost implications. That being said, historical
trends, current market conditions, anticipated demand growth and the relative success of on-airport
hotel development in the northern California marketplace are all supporters of feasible development
alternatives assuming flexibility in deal structure on the part of the Airport.



Site Analysis
Based upon discussions with the Port and associated Airport property site tours, seven (7) sites
were identified, as illustrated below, as initially meeting key site selection criteria including
size, location/visibility, access, etc. (Detailed selection criteria are summarized in Section II
and Appendix C of this report). Secondly, our team analyzed specific locations for on-Airport
property as potential development alternatives and ranked them according to their inherent
strength to support hotel development in context of the projected increase in Airport passenger
growth.

Based upon the initial site assessment and screening process (performed in concert with Port
staff), it was determined that of the seven sites, four were preferred alternatives based upon the
site selection metrics. These included sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, 5 –
Doolittle Parking Lot and 6 – Parking Bowl. All are on Airport or Port property but Sites 3 –
Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle Parking Lot are located outside
of the tel ininal complex, i.e. not within walking distance of the airline terminals. Site 6 –
Parking Bowl is within walking distance of the terminals. Detailed site maps of each site are
provided in Appendix B of this report.



Development and Financial Analysis
Based on our understanding of the development climate from both a macro and a micro
economic perspective, a financial assessment for each of the four finalist sites (as noted above)
was conducted. For each, we completed a five-year cash flow statement representing a typical
investor hold period. The sites are best described as follows, which are exhibited in the site
matrix that follows:




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                 Section I - 3




         Site 3 – Neil Armstrong Parking Lot: 250 rooms hotel to be situated east of the existing
         catering kitchen on the existing Neil Armstrong employee parking lot.

         Site 4 – Northfield: 250-room hotel situated at the corner of Hegenberger Road and
         Doolittle Drive.

         Site 5 – Doolittle Parking Lot: 250-room hotel situated on an un-used parking facility on the
         corner of Doolittle Drive and Swan Way. This site is adjacent to but not within the Airport
         boundary, but is owned by the Port of Oakland.

         Site 6 – Parking Bowl:On-Airport, 200-room hotel situated within the parking "bowl" of
         Oakland International Airport. A proposed hotel location would be contiguous to proposed
         parking structure(s).

Development characteristics/costs differ sharply between sites 3 – Neil Armstrong Parking Lot and
6 – Parking Bowl verses 4 – Northfield and 5 – Doolittle Parking Lot. Namely, the sites 3 – Neil
Armstrong Parking Lot and 6 – Parking Bowl are located on bay mud flats and would require deep
pilings based upon preliminary site investigations, whereas sites 4 – Northfield and 5 – Doolittle



Jones Lang LaSalle
Port of Oakland — Project Definition Report	                 Section I — 4



Parking Lot could likely be built on traditional footings that would be considerably less expensive.
Further we assumed a traditional wood-frame structure on sites 3 – Neil Armstrong Parking Lot,
4 – Northfield, and 5 – Doolittle Parking Lot verses steel and concrete construction on Site 6 –
Parking Bowl. Based upon preliminary financial modeling and further assessment of the inherent
attributes and challenges of each of the four sites, two sites were identified as best meeting the
criteria as set out by the Airport, and in meeting likely market / investor receptivity based upon
market characteristics and hotel location preferences.

The two sites selected represent both an on-Airport property (Site 6 – Parking Bowl) and off-Airport
property (Site 4 – Northfield). As such, we were able to assess in greater financial detail the relative
merits and development feasibility of a site with direct connectivity to the airport terminals (Site 6 –
Parking Bowl) and one that would have high visibility at the airport entrance (Site 4 – Northfield)
but would require shuttle bus service to the terminals. Site 3 – Neil Armstrong Parking Lot was not
short listed due to the extraordinary development cost and parking displacement (while not
qualifying as a terminal area site capable of commanding ADR premiums), while Site 5 – Doolittle
Parking Lot was not short listed primarily due to lack of visibility and also because of potential
interim parking needs for future airport development staging.

Utilizing market driven construction costs, room rates, occupancy assumptions and discount rates,
the prospective value of each subject hotel property was determined as of January 1, 2010 –
assuming that each property could be delivered to the market by that time. For Site 6 – Parking
Bowl, we recognize that may be a particularly aggressive assumption as development of a hotel at
that site would be closely linked to the completion of a potential garage facility. The cash flow
forecasts, projected reversion value of the hotel, and estimated construction costs (based on relevant
comparable data provided at the end of this report) for each property were calculated into an internal
rate of return (IRR) model to determine the most relatively acceptable and profitable site from a
developer's / investor's perspective.

Our results, detailed in Section IV, indicate that none of the sites yield a positive IRR. In contrast,
developers will require a minimum of IRR in the 18%-22% range. To put the development
economics in perspective, Jones Lang LaSalle performed some financial modeling "sensitivities" to
answer the question: "What would it take to get the site to pencil out to a 15% IRR"? The following
summarizes our findings and begins to provide an order of magnitude of the size of the gap:

    ■ For Site 4 – Northfield, keeping everything constant, the stabilized ADR would have to
       equate to $243 – 31% higher than our original stabilized ADR of $185. If we keep the
       original ADR of $185, the "gap" is approximately $29 million (e.g. required Port subsidy).

    ■   For Site 6 – Parking Bowl, keeping everything constant, the stabilized ADR would have to
        equate to $276 – 23% higher than or original stabilized ADR of $223. If we keep the original
        ADR of $223, the "gap" is approximately $20 million (e.g. required subsidy).



Conclusions and Recommendations
Based upon the analysis summarized above, sites 4 and 6 possess relative merit in terms of servicing
the future growth of the Airport market, but neither yields a positive IRR given the current market



Jones Lang LaSalle
Port of Oakland — Project Definition Report	                  Section I — 5



based assumptions and associated construction costs. Investors generally seek levered returns within
the range of 15% to 20% for a project of this scope. In this case, construction costs are proving that
the project is not presently feasible without significant support from the Port, as the Oakland
market does not presently command the necessary ADR/positive cash flow to outweigh the high
costs of construction for an airport hotel.

In conclusion, without dramatic change in the market, modifications in construction costs, or some
font of Port contribution, Jones Lang LaSalle does not believe that the developer / investor market
would embrace participation in an RFP process at this time. As such, Jones Lang LaSalle suggests
waiting for at least 6-9 months to reassess the market and/or exploring other options as noted below.

Public Private Partnership / Asset Privatization Considerations

Given the state of the current hotel market coupled with the high cost of construction and turbulent
capital markets, "non-traditional" financing alternatives are discussed herein for consideration. Such
financing alternatives may range from the Port providing funds via tax exempt bond financing or
other low cost capital (compared to private/taxable debt and equity) to a scenario wherein the hotel is
"packaged" with income producing assets, such as parking, and privatized. Given the inherent risk of
the project and the Port's financial requests for various critical development projects, we have
assumed at this juncture that the Port would not develop a hotel project on their own account.

However, in light of the Airports development plans and need to provide additional parking adjacent
to the terminal, Site 6 – Parking Bowl represents a unique "bundling" opportunity for a developer /
investor. In this scenario the Port would grant exclusive development rights (via a long term ground
lease) to develop Site 6 – Parking Bowl for a mixed use project that would include a Hotel, Parking
and any ancillary income producing opportunities (e.g. retail, restaurants, etc.). In return for funding,
building, and managing the project, the developer would be the beneficiary of all operating income.
In this scenario, the net income generated from parking would need to be sufficient to subsidize the
hotel.
The viability of this bundling concept would depend upon a number of factors including: the Port's
Master Indenture, the City of Oakland's Charter (the charter could restrict the developer's ability to
maximize parking rates), FAA grant assurances, and the Project Labor Agreement. We anticipate
that the 'bundled' project would be of interest to, but also heavily scrutinized by, the various
"infrastructure funds" established for such investment and developmental opportunities. Further,
without detailed due diligence, we anticipate that the "risk" associated with a project of this size and
complexity would out weigh investors' interest in participation. Lastly, we anticipate that investors
would wish to privatize the parking at or near the "parking bowl" such that they might gain
additional revenue (existing) to offset significant construction costs as well as provide economies of
scale to operations and management.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	           Section II - 1




                                                               Section II.
                                                               Market Analysis

         Introduction
        The Jones Lang LaSalle team conducted a thorough market analysis that included a detailed
        inventory and assessment of the local and regional geographies as well as benchmarking metrics at
        comparable domestic airports. Inclusive to this effort was an analysis of critical performance metrics
        of the impacting micro and macro economic marketplaces and their affect on the favorability of the
        Oakland market to support new hotel development. In order to accurately ascertain the strength of
        the local market to support the Port's development goals, issues such as absorption risk, passenger
        growth trends and airside versus landside penetration metrics were considered in addition to standard
        performance indicators.

        Overall, our analysis concludes that there are sufficient demand characteristics within the Airport's
        marketplace to support new hotel development. However, supply-side characteristics do not
        necessarily warrant action without a keen assessment of the foreseeable cost implications. That being
        said, historical trends, current market conditions, anticipated demand growth and the relative
        perfoimance success of on-airport hotel development in the northern California marketplace are all
        supporters of feasible development alternatives assuming flexibility in deal structure on part of the
        Airport.



         Market Overview
        The Airport's local hotel inventory is modest and reflective of the fact that Oakland is not a
        "primary" market for air passenger traffic in the Bay Area. According to the U.S. Department of
        Transportation, Oakland International Airport (OAK) currently ranks 31 5` in the nation with respect
        to domestic enplanements and is best classified as a "secondary" aviation facility due to the fact that
        it services a market adjacent to the larger San Francisco International Airport (SFO). It should be
        noted that out of the top 35 U.S. airports with respect to domestic enplanement volume, none
        carrying a "secondary" classification currently has an in-terminal hotel facility. In spite of this fact,
        there are market instances where we feel demand exists for in-terminal hotel facilities in "secondary"
        airports, albeit not at a luxury service level.

        The hotel inventory that currently serves the Airport consists of seven facilities containing an
        aggregate of 1,172 rooms. In general, these facilities range from mid-scale, limited service to
        upscale, select service and are consistent with the general market composition for demand type.
        There has not been new hotel inventory added to supply in the competitive market since 2002 (with
        the exception of the 26-room expansion of the Holiday Inn Express in late 2006); however, new hotel
        product construction is currently underway adjacent to the Hilton Hotel near the Airport (a 147-room
        Holiday Inn, scheduled to open by March 2008).




Jones Lang LaSalle
                                                      	
        Port of Oakland - Project Definition Report                 Section H - 2



                                            Competitive Hotel Inventory

                                         Competitive Set	                  Year Open	   # Rooms
                      Hilton Garden Inn San Leandro                           2002        117
                      Holiday Inn Express Hotel & Suites Oakland Airport      1999        95
                      Courtyard Oakland Airport                               2001        156
                      Fairfield Inn Oakland Airport                           1999        104
                      Park Plaza Hotel                                        1970        189
                      Hilton Oakland Airport                                  1970        363
                      La Quinta Oakland Airport Coliseum                      1986        148
                      Total                                                              1,172

                     Source: Smith Travel Research




        Historical Performance Metrics
        Over the past four to five years, performance metrics within the aforementioned competitive set have
        trended positively. With respect to percentage occupancy and revenue per available room (RevPAR),
        average annual growth was 5.0% and 6.5%, respectively, from 2003 through 2006. However, growth
        in average daily rate (ADR) across the competitive set has been sluggish over the same time frame
        (1.6% compounded annually on average) in spite of a nearly complete lack of new supply locally.
        This is indicative of a localized market that has not been able to fully capitalize on the opportunity
        afforded by a steady increase in passenger traffic, and primarily due to the nature of OAK as a
        destination or an origin, not an overnight transfer point. That is, while the airport serves a heavy
        commuter population that has fewer overnight stay needs, there appears to be an adequate local
        supply of quality facilities with no convenient in-terminal option.

        The following table illustrates the recent performance with respect to percentage occupancy, ADR,
        and RevPAR of the Airport's competitive set.




Jones Lang LaSalle
                                                       	
         Port of Oakland - Project Definition Report                  Section II - 3




                                   Historical and YTD Major Market Indicators
                                   Oakland Airport Hotel Historical Market Performance

                                                                    Ma
                                                                    Market             Average Daily
Year                    Annual Supply       Occupied Rooms                                             RevPAR*   % Chg
                                                                  Occupancy                Rate
                                        1                    L-
2003                       418,290             255,714              61.1%                 $104.62       $63.95   -

2004                       418,290             269,463              64.4%                 $104.47       $67.30   5.2%

2005                       418,290             299,385              71.6%                 $104.90       $75.08   11.6%

2006                       422,268             326,210              77.3%                 $113.51       $87.69   16.8%

CAAG                        0.2%                 5.0%                                      1.6%                   6.5°/0

2006 (YTD thru April)      137,520              100,997             73.4%                 $112.06       $82.30   -

2007 (YTD thru April)      140,640              101,230             72.0%                 $121.37       $87.36   6.2%

Source: Smith Travel Research, *Revenue per available room (RevPAR) equates to occupancy multiplied by average daily
rate (ADR)



         Passenger and Service Profile
         According to the U.S. Department of Transportation's O&D Survey, 65% of the Airport's total
         departing passengers in 2006 originated in Oakland. In addition, the most recent MTC Passenger
         Survey indicates that 91% of all enplaned passengers at the Airport in FY 2005-06 were passengers
         beginning or ending their trips at the Airport ("origin-destination passengers"); and 43% of the
         Airport's passengers begin their trips in Bay Area counties. It is our assessment that roughly 50% of
         the Airport's passengers are Bay Area residents. Consequently, OAK is generally perceived as the
         region's "secondary" airport specializing in "short-haul" trips where a high percentage of travelers
         are less likely to have a need for overnight stay. According to Jones Lang LaSalle research, over
         90% of U.S. outbound flights service domestic locations from perceived "commuter" airports. The
         following table illustrates the total domestic enplanements for a sample of California "commuter"
         airports. In addition, the far right column illustrates this figure as a percent of total enplanements.
         As highlighted, the difference as a percent of total is significant between the California "commuter"
         and the "non-commuter" airports in the San Francisco Bay Area, indicative of the different type of
         daily traveler moving in and out of these facilities.




 Jones Lang LaSalle
                                                         	
        Port of Oakland — Project Definition Report                            Section II — 4



                       Regional Commuter Airports – Percent Outbound Domestic Travel
                                          Airport             Enplanements         % of Total

                                      San Francisco               12,180,712          73.9%

                                      Oakland                     6,961,000           96.5%

                                      San Jose                    5,138,150           94.3%

                                      Sacramento                  5,210,014           97.2%

                                      Orange County               4,772,949           99.3%

                                      Ontario                     3,321,474           94.2%

                                      Burbank                     2,831,718           99.5%

                                    Source: U.S. Department of Transportation

        Although the Airport's passenger composition is predominantly commuter – and will likely remain
        so - projected future volume is expected to grow steadily. At the conclusion of the Airport's current
        expansion project, 29 gates will serve approximately 18 million passengers annually by 2013
        (assuming no additional gates or runways are constructed by then). Further significant growth in
        passenger traffic will depend upon development of additional airline terminal/gate capacity.


                          OAK Passenger Enplanements: Historical Statistics and Future Projections

                  10,000,000

                     9,000,000

                     8,000,000

                     7,000,000

                     6,000,000

                     5,000,000

                     4,000,000
             w
                     3,000,000

                     2,000,000

                     1,000,000

                             0

                                     (R)o'`ci°
                                                                                                                 f<
                                         .%         `1       (1         rt
                                                                                                c§5   ■■\ 0 1\

          Source: Port of Oakland




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	           Section II - 5




        Supply and Demand Metrics
        Using data compiled from proprietary Jones Lang LaSalle research and Smith Travel Research
        (STR), we projected supply and occupancy metrics for the aforementioned competitive set over
        the next five years. This analysis was based on known developments in the supply pipeline, in
        conjunction with historic performance trends and the existing momentum in the marketplace.
        As previously noted, there is a current demand trend for room nights that has been increasing
        steadily around the Airport for the past several years. However, in spite of increasing
        occupancies, ADR has not grown in tandem at noticeable levels, with the exception of the most
        recent historical calendar year. This is largely due to the dependency of Airport hoteliers on
        third-party Internet distribution channels (i.e. Expedia, Orbitz, etc.) after the industry's notable
        downturn during the period between 2001 and 2003. Nevertheless, after the economic health of
        the region began to rebound in 2004 and 2005, this reliance has largely been displaced with
        improved reservation booking methods, which indirectly has led to the improved lodging
        fundamentals indicated in the year-to-date period ending April 2007.

        The following table illustrates the methodology used to forecast market occupancy rates over
        the next five years. The projected hotel supply and demand figures show an occupancy trend
        that stabilizes near 70.0% as inventory expands to accommodate the market demand for more
        hotel stock. This increase in demand should occur alongside planned expansion activity at the
        Airport. Note that the subject hotel development is included within this analysis and therefore
        affects the occupancy projections




Jones Lang LaSalle
                                                      	
        Port of Oakland - Project Definition Report                        Section II - 6



                                      2012 Supply and Occupancy Projections
                           Year                      2007         2008         2009          2010      2011      2012

           Total Demand Growth

           Base Demand                              336,284      363,881     379,705        411,417   421,025   428,855

           Induced Demand                                  0      9.895       21,054        39,974    40,981    40,981

           Total Accumulated Demand                 336,284      373,775     400,759        451,390   462,006   469,836

           Overall Room Night Demand Growth               1.8%   11.1%         7.2%         12.6%      2.4%      1.7%

           Existing Hotel Supply                     1,172        1,172        1,172         1,172     1,172     1,172

           Proposed Hotels (New Supply)

           OAK Airport Hotel (Subject)                                                        200      200        200

           Hampton Inn & Suites                                                 81            81        81        81

           Westin Jack London Square*                                           163           163       163       163

           Holiday Inn                                             123          147           147       147       147

           Expansion to Existing Hotels

           Holiday Inn Express                            26       26           26            26        26        26

           Available Rooms Per Night (Annual)       437,270      517,027     579,730        652,730   652,730   652,730

           Total Supply Projection                   1,198        1,417       1,588          1,788     1,788     1,788

           Room Supply Growth ('',)                  2.2%         18.2%       12.1',         12.6      0.0%      0 0'0

           Market-wide Occupancy Projection          77.0%       72.0%        69.0%         69.0%     71.0%     72.0%

          Source: Jones Lang LaSalle Hotels, *Westin Jack London assumed to be 65% competitive (250 rooms)

        It should be noted that the existing supply referenced in the above chart only includes the comparable
        set under the previously discussed table titled "Competitive Hotel Inventory" (Section 11-2), which
        does not include hotel properties located in downtown Oakland. While it may appear "inconsistent"
        to include the Westin Jack London Square as a secondary competitor, it is anticipated that roughly
        65% of the Westin's available room nights will be competitive to the proposed subject due to its new
        construction and anticipated quality level, as well as available amenities and facilities, the majority of
        which would be available in a "full-service light" product offering. More specifically, the Westin is
        anticipated to compete for the higher-rated downtown meeting and group demand that is also
        projected to be somewhat accommodated by the proposed Subject, and is to a moderate extent
        currently being captured by the Hilton Oakland Airport.

        When compared to domestic "commuter" airports, OAK appears to be relatively underserved.
        Despite having capacity constraints which currently limit passenger volume growth, the amount of



Jones Lang LaSalle
        Port of Oakland — Project Definition Report 	            Section II — 7




        hotel-rooms-per-passenger remains quite low relative to comparable facilities. It should be noted
        that, out of this sample, only Sacramento Airport is currently served by an "in-teiminal" hotel. The
        Sacramento facility, which is an inferior product by market standards, achieved an approximately
        90.0% occupancy at an ADR between $120 and $125 in 2006 in a market with significantly less
        passenger volume. However, there is not much localized competition.

        The following table illustrates the relative level of service for comparable "commuter" airports in
        greater detail.

                                      Commuter Airport Hotel Capacity per Passenger

                                           # Hotel      # Passengers in '06       Hotel Rooms Per Passenger
                Airport
                                           Rooms            (millions)                       (/o)

     Midway (Chicago, IL)                   2,222              18.87                      0.0118%

     Sacramento, CA                         1,516              10.54                      0.0144%

     Oakland                                2,093              14.43                      0.0145%

     Hobby (Houston, TX)                    2,622              8.55                       0.0307%

     Burbank (Los Angeles
                                            2,230              5.69                       0.0392%
     County)

     Love Field (Dallas, TX)                3,048              6.87                       0.0443%

     Ontario (Southern California)          4,319              7.05                       0.0613%

     Average                                                                              0.0309%

    Source: U.S. Department of Transportation




        Of note is that the table above indicates all available inventory within a five-mile radius of each
        respective commuter airport facility, with the exception of Sacramento Airport, which was surveyed
        within an eight-mile radius due to the higher number of hotels outside the typical five-mile radius
        claiming to serve the airport. Sacramento Airport, while considered a secondary facility, ranks #38 in
        the nation (seven spots behind OAK). Albeit it's secondary status, this facility greatly benefits from
        an on-terminal hotel facility due to the general lack of supply in the immediate area. As mentioned
        previously, this facility is sub par to the majority of the surrounding hotels, but because of its
        location, commands higher than 100% of its market share.

        It should be noted that based on information provided by Smith Travel Research, there are 2,093
        available rooms within the Oakland Airport market. Of the 2,093 rooms available, we determined
        that roundly 1,172 ("Competitive Hotel Inventory," Section 11-2) would be directly competitive with
        the proposed Subject based on location, quality of facilities, and brand.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	           Section II - 8




        Market Activity Impacting Supply and Demand Characteristics
        In order to determine whether or not Oakland International Airport should seek the development of a
        new hotel property within its boundaries, it is important to first analyze the overall health of the local
        market (which is explored moderately in this section), as there exists a direct link between consumer
        income, business profits, and air travel. As income rises, so does air travel demand. Therefore, a
        healthy local economy will typically result in higher traffic volumes at the airport that serves it. We
        discuss the health of the local economy as follows.

        Recent Performance

        Oakland's economy is expanding but its rate of growth has slowed in recent months. Its slowdown
        came late, however, and its rate of growth, as measured by employment, is no worse than the U.S. In
        many ways Oakland's current economic performance is a mirror of the U.S., with house prices
        falling moderately and credit quality deteriorating sharply within an environment of mixed labor
        market performance. Nevertheless, Oakland still maintains a higher per capita income level than the
        U.S. overall by over $10,800.

        Labor market

        The housing downturn caused a recent cut in construction payrolls, and financial services have been
        falling for nearly two years. Rising local government employment is not expected to be long lasting
        as local and state government revenues are at risk. However, private education and healthcare are
        expanding rapidly as numerous Bay Area institutions create new services and extend branches
        intended to serve the long-term population growth of the Oakland area. Further, manufacturing,
        business and professional services, and information services are driven upward by the area's
        expanding tech-producing industries.

        Biotech

        Among these industries, biotech R&D and alternative energy research hold great potential for
        increased investment and local employment. It will be supported by Lawrence Berkeley National
        Laboratory's new Joint BioEnergy Institute that will be funded by the U.S. Department of Energy
        through at least 2013. It is intended to accelerate basic research of cellulosic ethanol and other
        biofuels. The nearby Lawrence Livermore Lab also will participate and it will collaborate with UC
        Berkeley's newly established BP Energy Biosciences Institute.

        Office markets

        Oakland is returning to an advantageous position over San Francisco as the cost of office space
        increases across the Bay. In 2004, office rents were roughly equal at both ends of the Bay Bridge.
        Now, despite moderately rising rents in Oakland, they average 24% less than in the city of San
        Francisco according to the National Real Estate Index. Evidence of a positive effect on the Oakland
        economy is the planned move of the 1,000-worker headquarters of the regional AAA office out of
        San Francisco, due to rising rents and inconvenient commutes, to the East Bay's Walnut Creek area
        by 2010.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	          Section II - 9




        Housing

        Metropolitan Oakland's housing market is weaker than in the nearby Peninsula and South Bay
        markets. Prices have fallen in all price tiers, with the peak occurring at the end of 2005. The Oakland
        region is more highly exposed to sub prime first-time homebuyers due to its lower price points in its
        farther-out locations. Further, parts of the Oakland market remain overbuilt as it has had fewer
        constraints on land availability than other densely developed counties in the Bay Area.

        Very high construction costs will also be impacting the housing market, as well as the commercial
        real estate sector.

        The most solid component is the renter market where occupancy rates are high and rents are rising by
        as much as the high single digits, depending upon location. A tight rental market, combined with
        falling house prices, means that equilibrium in the market likely will be reached some time before the
        end of 2008, possibly sooner.

        Credit quality

        Like its housing market, Oakland's household credit quality looks much more like the rest of the
        state and nation than in San Francisco or San Jose. Whereas Oakland's mortgage delinquency rate
        was consistently about 50 basis points above San Francisco's through 2005, it is now 150 basis
        points higher at just under 3%, roughly equal to the U.S. average. With house prices already falling
        and a higher share of homeowners under financial stress, there is a much greater probability of
        further weakening of East Bay house prices and some spillover into consumer spending.

        All variables considered, Oakland's near-term outlook has considerable downside risk due to the
        economy's exposure to the housing downturn and impacts from the mortgage meltdown directly on
        finance employment and indirectly on housing and consumer spending. Once through this cycle,
        however, prospects are good based on tech-producing industries, trade and travel, and financial and
        business services.

        The general consensus indicates that these downward trends may impact the Oakland area through
        the 2nd quarter of 2008. These trends and forecasts are likely to negatively affect the prospects of on-
        Airport hotel development within the next two to three years, especially with regards to the Subject
        market area, as the current credit crunch situation has led to the "repricing of risk" and a fair amount
        of uncertainty pertaining to new hotel development deals taking place within secondary and tertiary
        markets. The possibility of the lack of available capital and stricter borrowing regulations, combined
        with the attributes of the proposed project (i.e. non-entitled land that may/may not be subject to a
        ground lease and Port involvement) may not be enticing for developers to want to undertake the
        project in a tighter timeframe.




Jones Lang LaSalle
         Port of Oakland - Project Definition Report              Section II - 10



         In-Terminal vs. Off-Terminal Hotel Development Opportunities
         A survey of primary airport markets with in-terminal hotels shows that their proximity to an airport's
         core facilities is directly correlated to a performance premium relative to their off-terminal
         competitors. According to data compiled from our own proprietary research and STR, the average
         ADR premiums are 21% and revenue per available room (RevPAR) premiums are 28% for being in-
         terminal across domestic airport hotel markets.

         These figures are significant to the potential development opportunity at the Airport because they
         indicate that, even in a marketplace with moderate demand for new hotel development as indicated
         by traditional financial performance indicators, there may exist opportunities to capitalize on the
         premiums afforded by terminal proximity to enhance pro forma return characteristics.

         For the table below, we provide the following definitions:

             •      Average Daily Rate (ADR) Penetration: Equal to market wide ADR divided by the analyzed
                    hotel ADR. If a hotel's penetration is over 100%, then that hotel over penetrates the market
                    (has achieved over its fair market share); thus, if a hotel has a 120% ADR penetration, then
                    that hotel has achieved an ADR 20% higher than the market wide average.

             •      Yield Penetration: Equal to market wide RevPAR divided by the analyzed hotel RevPAR. If
                    a hotel's penetration is over 100%, then that hotel over penetrates the market (has achieved
                    over its fair market share); thus, if a hotel as a 125% yield penetration, then that hotel has
                    achieved a RevPAR 25% higher than the market wide average.


                                      2006 In-Terminal Penetration Analysis
                            #                      Occupancy                   ADR                    Yield
   In-Terminal Hotel                Occupancy                     ADR                     RevPAR
                          Rooms                    Penetration              Penetration             Penetration
   Marriott Tampa
                            295       75.5%            103.3%    $166.00       124.0%     $125.33     128.1%
   Airport
   Renaissance
   Concourse Hotel,         387       80.5%            106.9%    $118.00       106.5%     $94.99      113.9%
   Atlanta

   Miami International
                            359       79.6%            104.1%    $104.00        84.4%     $82.78      87.9%
   Airport Hotel

   Hilton Chicago
                            858       76.9%            103.5%    $168.44       120.5%     $129.53     124.8%
   O'Hare

   Hyatt Grand DFW
                            298       70.7%            108.8%    $181.62       134.7%     $128.41     146.5%
   Airport Hotel

   Hyatt Regency
                            811       69.8%            107.4%    $115.83        85.9%     $80.85      92.2%
   DFW Airport Hotel

 Source: Jones Lang LaSalle Hotels, Smith Travel Research



Jones Lang LaSalle
        Port of Oakland — Project Definition Report                           Section II — 11



        The above hotels are situated within airport facilities that rank within the top 28 busiest in the nation.
        Miami, ranked #28, largely serves as a connecting airport to Caribbean and South American
        locations; as such, it is heavily utilized as an overnight transfer point for many passengers.

        SFO greatly serves as the Bay Area's overnight transfer point, as SFO provides the most
        connections/flights to international and other far away destinations. For this reason, Oakland is
        perceived as a secondary airport to SFO, as 97.0% of OAK outbound flights are to domestic U.S.
        destinations — most of which are along the West Coast. As such, while our research indicates that in-
        tenninal airport hotels generally outperform the competitive market, this may not be the case for a
        secondary airport location that does not service a considerable amount of internationaUlong-haul
        flights.

        It should also be noted that Oakland has capacity constraints that would prohibit growth in the long
        run.

        In projecting the average daily rate (ADR) for the subject property (both for the in-terminal and off-
        terminal scenarios), we applied a benchmarking and premium analysis. In deriving the ADR for the
        Subject, we first analyzed the performance of existing hotels in the OAK marketplace, summarized
        in the chart below:



                                           OAK Competitive Set ADRs - 2006

    $200

    $180 -

    $160 -

    $140                                                                                                                   $128
                                                                                                          $118
    $120 -                                                             $113
                                                    $107
                                    97
    $100

     $80

     $60

     $40 -

     $20
                         	
              La Quinta      Park Plaza Hotel Hilton Garden Inn	    Fairfield Inn	   Holiday Inn	      Courtyard	      Hilton Oakland
                        	
              Coliseum                           San Leandro	      Oakland Airport Express &Suites Oakland Airport 	        Airport


 Source: Jones Lang LaSalle Hotels and Property Management




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	            Section II - 12



        As highlighted above, the Hilton Oakland Airport, which is the largest hotel in the competitive set
        with 363 rooms and one of the closest to OAK, achieved an ADR of approximately $128 in 2006.
        The leasehold Hilton is projected to achieve an ADR of close to $132 by year-end 2007.

        The 156-room Courtyard by Marriott achieved an ADR close to $118 in 2006, compared to the 104-
        room Fairfield Inn's 2006 ADR of approximately $113, while the Holiday Inn Express & Suites
        reported an ADR of $115. In 2007, the competitive set is projected to achieve an increase of
        approximately 8.0%, but with a slowdown expected in 2008 and 2009 due to economic uncertainties.

        For the off-terminal complex, 250-room subject hotel, which we assumed to be a full-service-
        oriented property, we have estimated a stabilized ADR of $160 in 2007 value dollars, which is 30.0%
        above the competitive market's projected 2007 ADR of $123, and close to 20.0% above the Hilton's
        current ADR positioning. This variance is supported by the proposed hotel's newer construction and
        upscale amenity offerings, as well as the fact that the proposed Subject will offer a "full-service
        light" product in a competitive market that is comprised mostly of limited- and select-service hotel
        chains (i.e. Holiday Inn Express, Fairfield, Courtyard by Marriott, Hilton Garden Inn, La Quinta).

        As indicated earlier, in-terminal complex hotels typically attain a premium of roundly 21.0% over
        off-terminal complex properties (table in Section III, page 10). As such, for the in-terminal, 200-
        room, full-service-oriented Subject we estimated a stabilized ADR of $192 in 2007 value dollars.
        This ADR accounts for a premium for in-terminal airport hotels versus off-airport/aviation-market
        properties of 20.0% (i.e. $160 vs. $192).

        While it may be questionable that in-teiminal hotel properties could command a significantly greater
        average rate than off-terminal hotel properties, our research (Section III, page 10) indicates that
        airport guests are willing to pay a noteworthy +20% premium for the convenience factor of being
        able to walk from their respective airport terminals to their designated place of overnight stay. To the
        majority, the ADR premiums offered by in-terminal hotel properties offset aggravation caused by
        delayed traffic flow in and out of the airport, as well as the cost of renting a car or traveling via taxi
        to an outside-terminal complex. As such, not all land sites are treated equal for the purpose of this
        analysis, with reference to an in-terminal vs. off-terminal site.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	       Section III - 1




                                                           Section III.
                                                           Airport Site Analysis

        Introduction
        Seven potential development sites were identified for analysis based on evaluation criteria ranging
        from construction feasibility and environmental issues to compatibility with other proposed Airport
        projects. The Jones Lang LaSalle team worked closely with the Airport Master Plan to identify sites
        that were consistent with the development goals of the Port of Oakland. From our preliminary
        assessment of seven potential development sites, four Parcels were chosen for further consideration
        and detailed financial assessment based on their inherent development potential. The following
        aerial depicts the locations of the seven sites originally selected for physical analysis.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	         Section III - 2




        From the seven potential development sites, four sites were chosen for more detailed investigation
        and consideration. These four sites and the supporting selection criteria are elaborated upon
        throughout this section. They include, in order of rank:

                 ■ Site 6 — Parking Bowl

                 ■ Site 4 — Northfield (Doolittle at Hegenberger)

                 ■ Site 5 — Doolittle Parking Lot (Doolittle at Swan Way Parking Lot)

                 ■ Site 3 — Neil Armstrong Parking Lot



        Site Analysis Methodology
        The seven potential development parcels included in the site analysis were chosen based upon:
        discussions with the Port of Oakland, site visits to each location, close examination of the Airport's
        master plan, geotechnical information, noise contours, Jones Lang LaSalle's institutional knowledge
        of the local and national hotel markets and other relevant sources. The general methodology used to
        initially rank and then "short list" more highly qualified parcels for further analysis is as follows:

                 ■ Jones Lang LaSalle created a fact sheet for each site detailing the key attributes,
                   advantages and disadvantages associated with constructing a hotel at each location.

                 ■ The parcels were then ranked within each category with 10 being the most desirable and 1
                   being the least desirable.

                 ■ The rankings were compiled into a Site Selection Matrix and considered holistically as to
                   which site provided the most advantageous location for development.

                 ■ Further, the Jones Lang LaSalle team applied a "relative importance" factor for each
                   criterion that resulted in a "weighted rating" for each of the candidate sites.

                 ■ Utilizing this methodology, we were able to narrow the potential sites down to four.

        Note: The Site Selection Matrix that depicts the ranking methodology is included in the Appendix of
        this document.
        Ranking the sum product weights of criterion used to evaluate the subject properties develops an
        order of preference for the potential development sites. The criteria used were uniform among the
        selected sites and scored on a one (1) to ten (10) scale, with ten (10) being the most advantageous for
        potential hotel development. The most heavily weighted criteria were: terminal access, construction
        considerations, the relative cost to build on site, the anticipated market appetite for the proposed
        development and the speed to market. Other criteria used to evaluate the chosen sites were:
        consistency with the 2006 Airport Master Plan, access to Public Transportation, environmental
        considerations, and vehicular access to the site, noise considerations from airport activity, the
        maximum allowable height of development, geotechnical considerations and the required approvals
        needed by governing bodies to realize a hotel development. The following table illustrates the top




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section HI -- 3



        four potential development sites as determined by applying the aforementioned site analysis
        methodology.



                                      Site                 Sum Product of Criteria Weights   Rank

                     Site 6 – Parking Bowl                              6.44%                 1

                     Site 4 – Northfield                                6.34%                 2

                     Site 5 – Doolittle Parking Lot                     6.14%                 3

                     Site 3 – Neil Armstrong Parking Lot                5.65%                 4




      Preferred Site Analysis
      The following segment contains a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
      for the Oakland Airport hotel market, as well as for sites selected by Jones Lang LaSalle as candidates
      for potential hotel development. To perform a more comprehensive investigation the SWOT analysis
      begins with a macro level examination of the Oakland hotel market and then proceeds to analyze each
      selected site on a micro level. It is assumed that the Oakland International Airport hotel market
      analysis encompasses the characteristics shared by every site selected.



      Hotel Market at Oakland International Airport
       Strengths
                       Strong historical growth in Oakland market, with RevPAR up over 6% through April
                       2007 over last year

      Weaknesses

                 ■     Unionization of hotel labor

                 ■     Recent crunch in capital markets could affect project 1RR

                 ■     The need to obtain zoning approval for hotel construction because the Airport is zoned
                       "General Industrial" which does not include a hotel use

                 ■     Amendments to the General and Master Plan would be required for all sites

      Opportunities

                 ■     Potential to capture market share from downtown Oakland, given the proposed Subject's
                       "full-service light" product offering. The "full-service light" concept will apply to each
                       site; therefore, there is no differentiation between on-terminal and off-terminal sites.




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section III — 4



        Threats
                  ■ The continued rise in construction costs

                  ■ Construction could result in public works issues, should a privately funded development
                    overlap with a public works project site and the projects are governed by different labor
                    agreements.



        Site 3 - Neil Armstrong Parking Lot

        The Neil Armstrong Parking Lot is a 4.61 acre site, located adjacent to the flight kitchen. Site 3 -
        Neil Ainistrong Parking Lot is reserved for "Passenger Facilities" based on the long-term land use
        map contained in the Airport Master Plan. The long-term land use map shows a future roadway that
        runs roughly perpendicular to Neil Armstrong Way, bisecting the site.

        Strengths
                  ■   Due to its location adjacent to the traffic loop, speed to market is predicted to be high
                      relative to the other six sites investigated

                  ■   Proximity to Terminal 2 (0.3 miles) is better than other off-terminal complex sites

                  ■   Vehicular access between this site and the teiminals was recently improved. Edward
                      White Way directly connects the site and Terminal 2 for shuttle and pedestrian access.

         Weaknesses
                  ■   More costly deep foundations may need to be constructed to support development.

                      Would require the relocation of a heavily used employee parking lot. Shuttle service to
                      serve a satellite location would be considerably more costly than current service.

        Opportunities
                  ■   Due to its proximity to the terminals, this site is in the best location for an off – terminal
                      hotel

                      The size of the site would pei	 mit a variety of hotel designs/concepts

        Threats
                      ■ The site is surrounded by industrial uses (fuel farms) which might be unsightly for
                         visitors




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	          Section III - 5



        Site 4 - Northfield

        The Northfield Site, an off terminal site, contains 2.52 acres and is located at the corner of
        Hegenberger Rd and Doolittle Dr. Parcel 4 is reserved for "General Aviation" based on the long-
        term land use map contained in the Airport Master Plan.

        Strengths

                  ■ Highly visible site to most motorists approaching the Airport, right at Airport entrance.

                  ■ Excellent customer and service/vendor access via Airport Drive/Hegenberger Road, from
                    the north, west and south.

                  ■ Lower construction cost associated with projects built outside of airport terminal complex
                    area; on a site with soil conditions that may support less expensive construction methods
                    than required for a project in the terminal complex

                  ■ Potential synergy with Hilton if developer builds a Hilton Garden Inn or Doubletree

        Weaknesses

                  ■ Site size and location could limit construction of additional amenities

                  ■ Location outside of terminal complex lacks distinct competitive advantage

                  ■ Poorer access to airline terminals and public transportation than in-Terminal Complex
                    sites. Site needs to improve access through modifications to the existing driveway and
                    public transit services.

        Opportunities

                  ■ 15,000 SF of meeting space would offer the largest amount of meeting space per
                    guestroom in the OAK competitive market, at 60 SF per guestroom (the market wide
                    average is 16.4 square feet of meeting space per available guestroom). The Hilton
                    Oakland currently offers 41 square feet of space per guestroom.

        Threats

                  ■ New supply coming in 2008 and 2009 (Hampton Inn, Holiday Inn Select, Westin Jack
                    London Square)



        Site 5 - Doolittle Parking Lot

        The Doolittle Parking Lot is a 6.49 acre parking facility on the corner of Doolittle Dr. and Swan
        Way. Site 5 - Doolittle Parking Lot was not addressed in the Airport Master Plan and while not
        technically on Airport property, it is owned by the Port of Oakland.

        Strengths

                  ■ Better service access with direct access to and from Doolittle Drive and Swan Way




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	          Section III — 6




                  ■ Lower construction costs associated with projects built outside of airport terminal
                    complex due to reduced disruption of ongoing operations; and presence of subsurface soil
                    conditions that may facilitate less-expensive construction methods than in the terminal
                    complex area

                  ■ Large site, provides opportunities for future expansion (6.49 acres)

        Weaknesses

                  ■ Location outside of terminal would lose distinct competitive advantage

                  ■ Location provides virtually no drive-by visibility to motorists along key airport approach
                    routes which may complicate site marketing and familiarity within local market

                  ■ Site size and location could warrant construction or provision of additional costly
                    amenities (i.e. airport shuttle service)

                  ■ Access to airport terminal and public transportation would require dedicated shuttle
                    service

        Opportunities

                  ■ 15,000 SF of meeting space would offer the largest amount of meeting space per
                    guestroom in the OAK competitive market

                  ■ Could capture market share from downtown Oakland properties

        Threats

                  ■ New supply coming in 2008 and 2009 (Hampton Inn, Holiday Inn Select, Westin Jack
                    London Square) could directly compete with a project on this site



        Site 6 - Parking Bowl

        The Parking Bowl site consists of 3.24 acres within the current Daily Parking lot. Parcel 6 is
        reserved for "Passenger Facilities" based on the long-term land use map contained in the Airport
        Master Plan. A hotel would generally be consistent with this land use designation since it supports
        airline passengers, however a general plan amendment may be required. Depending upon the final
        design and location of proposed new terminal and parking facilities, it may be necessary to relocate
        the surface public parking depicted on the February 2007 Terminal A site plan to accommodate a
        hotel at this location. This site was used as a proxy for a variety of alternative sites within the
        parking bowl, with the most attractive alternative likely being tucked in the inside corner of the "L"
        shaped parking structure, allowing the hotel to be a totally independent structure but linked to the
        pedestrian and vehicular circulation in the parking facility.




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section III -- 7




        Strengths

                   ■ In-terminal access (direct access to terminal ticketing, baggage claim, and gates)

                   ■ Roughly equidistant to, and within walking distance of Teiniinals 1 and 2, and the
                     proposed site of Terminal A.

                   ■ Proposed BART connector would provide exceptional public transportation to the site

                   ■ Anticipated market appetite for hotel on site is relatively high

                   ■ Excellent vehicular access to site. The site's position on the airport loop could mitigate the
                     effect of traffic delay in front of Terminal 1 and proposed Terminal A.

         Weaknesses

                   ■ Construction cost would be high

                   ■ Construction would have a severe impact on parking revenue and operations, both during
                     construction and thereafter

                   ■ May require replacement of high revenue-generating parking capacity lost for site
                     construction

                   ■ Site may have security-related access restrictions in high security alert scenarios

                   ■ Normal access restrictions could increase facility operating expense

                   ■ No opportunities for significant physical expansion (3.24 acres)

        Opportunities

                   ■ Largest in-terminal complex hotel site (3.24 acres)

                   ■ Lower construction costs relative to other site options evaluated within the terminal
                     complex

         Threats

                   ■ Construction could result in potential conflict with public works contractor on adjacent
                     site, should projects occur concurrently and/or overlap.




Jones Lang LaSalle
Port of Oakland - Project Definition Report 	                 Section IV - I



                                                             Section IV.
                                                             Hotel Development and
                                                             Financial Analysis


Introduction
Building upon our site analysis conclusions, Jones Lang LaSalle has prepared an in-depth financial
analyses pertaining to the feasibility of constructing a full-service oriented hotel on each of the four
highest ranked sites. Through extensive market research, competitor interviews, and discussions with
local hotel developers, we have projected five-year cash flows for each of the four Subject hotel sites,
incorporating these figures into an IRR analysis that takes into account the inherent construction
costs relevant to each site. Our results indicate that for a project of this scope and size, construction
costs will "make or break" the deal. Overall, while an in-terminal hotel would command higher ADR
premiums and generate healthier operating margins, not all in-terminal site scenarios yielded greater
returns than off-telininal sites. This is due to the fact that construction costs associated with in-
terminal hotel locations are significantly higher than costs for off-te►minal hotels due to impact of
constrained project sites and varying soil conditions. This will directly impact investors' overall
return and hence, bid proposals.

The following discusses the programming and spatial layouts for each hotel site, followed by our
feasibility analysis and conclusions.



Subject Hotel Programming
Space Allocations

Based on the aforementioned market and site analyses, the Jones Lang LaSalle team executed a
thorough pro forma financial analysis of the three in-terminal and one off-terminal site alternatives
determined to be most supportive for near-telin hotel development, specifically Site 6 – Parking
Bowl (in-terminal) and Sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle
Parking Lot (off-terminal). Of note is that for the three in-terminal sites, programming is slightly
different since we did not include the ballroom and its necessary break-out space. We also added 50
rooms to Sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle Parking Lot to
generate additional revenue to make up for lower average daily rates achieved at off-terminal hotels
(discussed previously). While the off-terminal sites would readily permit the construction of more
than 50 added hotel rooms to the base of 200, we determined that the proposed off-terminal site
would achieve maximum operating potential at 250 rooms at the greatest, based on market wide
supply and demand dynamics.

It should also be noted that while a 250-room, off-terminal hotel would be anticipated to draw fewer
occupied room nights than a 200-room, on-terminal hotel in the same competitive market, the added
ballroom capacity at the off-terminal locations is anticipated to mitigate this effect.




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                      Section IV — 2




 Supply and demand characteristics, physical site attributes and growth drivers affecting foreseeable
absorption risk were all critical factors in the determination of an appropriately sized hotel subject
property (the "Subject") to be used throughout this analysis.

Based on previous in-terminal hotel development, it is Jones Lang LaSalle's opinion that the most
appropriate programming for the proposed hotels to be as follows: the in-terminal sites will support
a 5-6-story design with a room capacity of 200, and the off-terminal sites will support a three story
configuration with a room capacity of 250. Taller construction is more appropriate for in-terminal
hotels as to reduce the site area required for construction and capitalize on a higher FAR. Off-
terminal properties would benefit from a three-story configuration, as space is more plentiful when
off-terminal. Relative to nationally accepted hotel development standards, the Jones Lang LaSalle
team proposes the following programming for the Airport's Subject development project:

200 Rooms
(Site 6 — Parking Bowl)
        Subject Hotel Space Requirements                     Subject Hotel Room Type Allocations

            Area             Square Footage    per Room                                      %       SF    Total
                                                                 Type           Units
                                                                                         Inventory          SF
Guestrooms                       72,255          361
                                                          King                  140        70%       361   50,575
Corridors                        7,226            36
                                                          Double-                                    340   17,000
Restaurants                                                                        50      25%
                                                          Double
              Three Meal         1,920            10      Handicapped              6        3%       420   2,520
                   Lounge        1,200            6                                4        2%       540   2,160
                                                          Suite
                   Storage        915             5                             200        100%            72,255
                                                          Total
             Main Kitchen        1,830            9
                                                                      Subject Hotel Meeting Space
Lobby                            5,000            25
                                                                         Proposed Meeting Space Use          SF
Gym                              3,500            18
                                                                        Ballroom
Meeting Space                    6,250            31                                                       111111
                                                                        Ballroom Foyer
Meeting Space Support            2,250            11                                                       IIII
                                                                        Junior Ballroo                      1,750
Back of the House                34,100          171
                                                                        Junior Ballroom Foyer               450
Total                           136,446          682
                                                                        Banquet Rooms                       1,350
                                                                        Meeting Rooms                       2,400
                                                                        Boardroom                           300
                                                                        Total                               6,250



Jones Lang LaSalle
Port of Oakland – Project Definition Report 	                      Section IV – 3




250 Rooms
(Sites: 3 — Neil Armstrong Parking Lot, 4 — Northfield, and 5 — Doolittle Parking Lot)



  Subject Hotel Room Type Allocations                              Subject Hotel Space Requirements

            Area             Square Footage     per Room          Type           Units   % Inventory   SF    Total SF

Guestrooms                       90,319           361      King                   175       70%        361    63,219

Corridors                        9,032             36      Double - Double        63        25%        340    21,250

Restaurants                                                Handicapped             7         3%        420    3,150

              Three Meal         1,920             8       Suite                   5         2%        540    2,700

                   Lounge        1,200             5       Total                  250       100%              90,319

                   Storage        915              4
                                                                          Subject Hotel Meeting Space
             Main Kitchen        1,830             7

Lobby                            5,000             20                    Proposed Meeting Space Use              SF
Gym                              3,500             14                    Ballroom                             7,000

Meeting Space                    15,000            60                    Ballroom Foyer                       1,750
Meeting Space Support            3,000             12                                                         1,750
                                                                         Junior Ballroom
Back of the House                43,900           176
                                                                         Junior Ballroom Foyer                  450
Total                           175,616           702
                                                                         Banquet Rooms                        1,350
                                                                         Meeting Rooms                        2,400
                                                                         Boardroom                              300
                                                                         Total                               15,000




Jones Lang LaSalle
Port of Oakland - Project Definition Report	                  Section IV - 4




Based on the data in the table above, Jones Lang LaSalle anticipates that the proposed Subject hotel
would garner a three-star+ quality rating, which would appeal to guests and passengers who desire
higher quality amenities and would provide a more competitive product than currently available
within the Airport's competitive set. Hotel brands that typically rank in the three-star quality ranking
include, but are not specifically limited to the following:

        Full-Service:

                     ■    Marriott

                     ■    Crowne Plaza

                          Hilton

                     ■    Sheraton

                     ■    Doubletree

        Select-Service:

                          Courtyard by Marriott

                          Hilton Garden Inn

                          Indigo

                          Hyatt Place

                          SpringHill Suites



Parking Requirements

According to hotel design and development standards, hotels typically require 0.6 to 1.0 spaces per
guestroom 1 . For comparative purposes, we extrapolated this relationship to apply to this project,
which would contain 200 to 250 guestrooms. That would provide for a general parking need of
between 120 and 200 spaces. The Jones Lang LaSalle team created and stressed a series of parking
utility models for the Subject property and determined that, during peak hours, there is a need for
approximately 151 spaces for the on-terminal sites and 229 spaces for the off-teiininal sites.
However, on average, the Subject property will require 125 (on-teiminal) or 177 (off-terminal)
spaces to meet forecasted parking demand. The results of this parking utility analysis for both the
200-room and 250-room scenarios are summarized in the following tables and represent general
parking needs for the Subject property at stabilization.




 Rutes, Walter A., Penner, Richard H., and Adams, Lawrence. Hotel Design, Planning, and Development. June,
2001.




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                        Section IV - 5



                  Hourly Parking Requirements for Stabilized Year - 200 Rooms (Site 6
               User	       Midnight-4AM   4AM-8AM       8AM-Noon     Noon-4PM       4PM-8PM   8PM-Midnight

    Hotel Guests               106                69       32            69           85          101

    Bar and Restaurant          0                 27       5              5           11           11

    Meeting Attendees           0                 27       32             5            3           0

    Health Club/Spa             0                  0       0              0            0           0

    Visitors                    0                 27       48            32           37           5

    Employees                   2                  2       2              2            2           2

    Total Needed               109                151     119            114          138         119

    Average                                                                                       125


          Hourly Parking Requirements for Stabilized Year - 250 Rooms (Sites 3, 4 & 5)
               User	       Midnight-4AM   4AM-8AM       8AM-Noon     Noon-4PM       4PM-8PM   8PM-Midnight

    Hotel Guests               133                86       40            86           106         126

    Bar and Restaurant          0                 33       7              7            13          13

    Meeting Attendees           0                 67       80            13            7           0

    Health Club/Spa             0                  0       0              0            0           0

    Visitors                    0                 40       73            47           53           13

    Employees                   3                  3       3              3            3           3

    Total Needed               136                229     202            156          182         156

    Average                                                                                        177



Note that for the purposes of this analysis, we have considered the extensive parking facilities that
Oakland International Airport offers and have assumed that guests/meeting attendees in need of
parking at the in-terminal hotel sites would be accommodated with the adjacent airport parking
garage, while hotel employees would be provided with parking off-site.

It should be noted that these parking needs are consistent with those of standalone hotel facilities of
comparable size and composition to the Subject. Because the in-terminal Subject will operate within
airport grounds, selection of an in-terminal development site will alter the parking demand
characteristics and will warrant additional study to more accurately ascertain true parking facility
needs. For the in-teiminal alternatives, the development budgets assume most of the parking demand
will be met by the general airport parking facilities with nominal levels of short-term and service



Jones Lang LaSalle
Port of Oakland — Project Definition Report                        Section IV — 6




parking provided in the development budget for the hotel. However, because we assume parking
demands will be met by the airport facilities, we have not projected parking revenues or expenses
within each hotel sites' five-year pro-fol

According to the Oakland chapter of the Institute of Transportation Engineers, the community
threshold for a 200-room lodging facility is nine trips per guestroom per day, or 1,800 total trips per
day. The threshold would be much lower for an in-terminal airport hotel, which represents a smaller
"community" with a typically greater amount of pedestrian flow. A traffic impact analysis should be
completed prior to any development solicitations by trip generation/traffic experts to better
understand the implications of the proposed development on localized circulation and parking
requirements.


                Average Daily Trip Generation for Stabilized Year– Site 6 (200 rms)
          Breakdown of Trips by Segment            # Individuals   Estimated # Trips per Day °A of Total
       Employees (from Staffing Model)                  78                     62               13.6%
       Guests (per Day @ 77% Occupancy)
                     Guest per Room Factor = 1.4
                                                       152                     91               20.0%
                 % Arriving by Car Factor = 60%

       Visitors (from Parking Model)                   149                    298               65.1%
       Service Vendors (10% of Employee Trips)                                 6                 1.4%
       Total                                                                  458               100%

           Average Daily Trip Generation for Stabilized Year – Sites 3, 4 & 5 (250 rms)

          Breakdown of Trips by Segment            # Individuals   Estimated # Trips per Day % of Total

       Employees (from Staffing Model)                  89                    136               19.2%
       Guests (per Day @ 72% Occupancy)
                     Guest per Room Factor = 1.4
                                                        178                   107               15.1%
                 % Arriving by Car Factor = 60%

       Visitors (from Parking Model)                   226                    452               63.8%
       Service Vendors (10% of Employee Trips)                                 14                1.9%

       Total                                                                  709               100%
                                                                                            i




Jones Lang LaSalle
Port of Oakland — Project Definition Report	               Section IV — 7




Note that these are estimates of project-generated trips and do not reflect how these trips would be
made to the Airport (e.g. via private auto, rented auto, transit, taxi, drop-off, etc.)



Construction Cost Benchmarking
California Regional Market

For the purposes of gaining an accurate understanding of foreseeable construction costs for the
Subject property, the Jones Lang LaSalle team analyzed a sample of recent hotel developments in the
state of California that included both select, and full-service product types. Of this sample of 15
recent hotel developments, total room counts range from 84 in San Luis Obispo to the 1,090-room
Hilton at San Diego's Convention Center. Our survey shows that the total development costs per
room upon completion ranges from a minimum of approximately $119,000 for the Hilton Garden Inn
in Palmdale to a maximum of almost $230,000 for the Residence Inn in Burbank for select-service
product. Intuitively, construction costs escalated within our sample as the service level increases.
Full-service hotel development costs (in 2007 dollars) range from $125,000 per room for the Holiday
Inn Oakland (currently under construction), to $383,000 per room for the Hilton San Diego
Convention Center. On average, we determined the regional market norm for all-in construction costs
within our sample for full-service product (steel and concrete) to be at least $302,000 per room in
2007 dollars. Note that this per-key cost average is skewed by data for higher priced locations along
the coastal areas of California; however, with regards to the proposed Subject, higher averages would
be comparable to in-terminal locations, especially given the fact that hotel construction costs have
been escalating considerably since 2004.




Jones Lang LaSalle
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 A Presentation to

 The Port of Oakland
 Project Definition Report for Proposed
 On-Airport Hotel Development
 December 2007




Attention:       Stephen Gordon
                 Port of Oakland,
                 Aviation Division
Email:           sgordon@portoakland.com

Prepared by:


             JONES LANG
             LASALLE'




Contact:
Kurt Little
Tel: +1 312 228 2632
Fax: +1 312 228 0553
Email: Kurt.Little@am.j11.com

Jones Lang LaSalle Americas, Inc.
200 East Randolph Drive, 46 th Floor
Chicago, IL 60601
Table of Contents

I.        Executive Summary


II.       Market Analysis


III.      Airport Site Analysis


IV.       Hotel Development and Financial
          Analysis


V.        Conclusions and Recommendations


          Appendix A: Site Analysis
          Parcel Fact Sheets

          Appendix B: Site Exhibits

          Appendix C: Site Selection
          Matrix




C52007 All rights reserved. The information contained in this
document is proprietary to Jones Lang LaSalle and shall be used
solely for the purposes of evaluating this proposal. All such
documentation and information remains the property of Jones Lang
LaSalle and shall be kept confidential. Reproduction of any part of
this document is authorized only to the extent necessary for its
evaluation. It is not to be shown to any third party without the prior
written authorization of Jones Lang LaSalle. All information
contained herein is from sources deemed reliable; however, no
representation or warranty is made as to the accuracy thereof
Port of Oakland — Project Definition Report	                 Section I — 1




                                                            Section I.
                                                            Executive Summary



Introduction
In response to a projected growth in passenger volume, Oakland International Airport is planning for
the development of a new terminal and parking facilities. The Port of Oakland (the "Port"), as owner
and operator of the Airport, has engaged Jones Lang LaSalle to examine the feasibility of on-Airport
hotel development in context of the anticipated airport growth.

Summarized below and discussed in detail in the balance of this report, is an assessment of hotel
supply and demand metrics, the identification and assessment of potential hotel sites, and lastly, a
financial assessment of top ranked sites to determine their economic viability in supporting new hotel
development.



Market Analysis
The hotel inventory that currently serves the Airport consists of seven facilities containing an
aggregate of 1,172 rooms. These facilities range from mid-scale limited service to upscale select
service and are consistent with the general market composition for demand type. There has not been
new hotel inventory added in the competitive market since 2002 (with the exception of the 26-room
expansion of the Holiday Inn Express in late 2006). However, the development of a new hotel is
currently underway adjacent to the Hilton Oakland Airport Hotel (a 147-room Holiday Inn,
scheduled to open by March 2008).

Over the past four years, performance metrics within the competitive set have trended positively.
Occupancy and revenue per available room (RevPAR) average annual growth was 5.0% and 6.5%,
respectively, from 2003 through 2006. However, growth in average daily rate (ADR) across the
competitive set has been sluggish over the same time frame (1.6% compounded annually on average)
in spite of a nearly complete lack of new supply. These trends are indicative of a localized market
not able to fully capitalize on the opportunity afforded by a steady increase in passenger traffic,
and the nature of OAK as a destination or an origin, not an overnight transfer point.

To ascertain the ability of the market to support the Port's development goals, factors such as
absorption risk, passenger growth trends and airside versus landside penetration metrics were
considered in addition to standard hotel performance indicators. In particular Jones Lang LaSalle
assessed the various market metrics of "on-Airport" (as defined as within walking distance) to "off-
Airport" (as defined by requirement for a shuttle bus) to establish whether or not there is a sufficient
market to support a new aviation-based hotel.




Jones Lang LaSalle
Port of Oakland - Project Definition Report                  Section I - 2



In-Terminal vs. Off-Terminal Hotel Development Opportunities
A survey of primary airport markets with in-terminal hotels shows that the proximity to an airport's
core facilities is correlated to a perfonnance premium relative to their off-tenninal competitors.
According to data compiled from our own proprietary research and Smith Travel Research, the
average ADR premiums are 21% and revenue per available room (RevPAR) premiums are 28% for
in-terminal domestic airport hotel markets. These figures are significant to the potential development
opportunity at the Airport as they indicate that, even in a marketplace with moderate demand for new
hotel development, there may exist opportunities to capitalize on the premiums afforded by terminal
proximity to enhance pro forma return characteristics.

In summary, our analysis concludes that there is sufficient demand within the Airport's marketplace
to support new hotel development. However, supply-side characteristics do not necessarily warrant
action without a keen assessment of the foreseeable cost implications. That being said, historical
trends, current market conditions, anticipated demand growth and the relative success of on-airport
hotel development in the northern California marketplace are all supporters of feasible development
alternatives assuming flexibility in deal structure on the part of the Airport.



Site Analysis
Based upon discussions with the Port and associated Airport property site tours, seven (7) sites
were identified, as illustrated below, as initially meeting key site selection criteria including
size, location/visibility, access, etc. (Detailed selection criteria are summarized in Section II
and Appendix C of this report). Secondly, our team analyzed specific locations for on-Airport
property as potential development alternatives and ranked them according to their inherent
strength to support hotel development in context of the projected increase in Airport passenger
growth.

Based upon the initial site assessment and screening process (performed in concert with Port
staff), it was determined that of the seven sites, four were preferred alternatives based upon the
site selection metrics. These included sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, 5 –
Doolittle Parking Lot and 6 – Parking Bowl. All are on Airport or Port property but Sites 3 –
Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle Parking Lot are located outside
of the terminal complex, i.e. not within walking distance of the airline terminals. Site 6 –
Parking Bowl is within walking distance of the tenninals. Detailed site maps of each site are
provided in Appendix B of this report.



Development and Financial Analysis
Based on our understanding of the development climate from both a macro and a micro
economic perspective, a financial assessment for each of the four finalist sites (as noted above)
was conducted. For each, we completed a five-year cash flow statement representing a typical
investor hold period. The sites are best described as follows, which are exhibited in the site
matrix that follows:




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                 Section I - 3




         Site 3 – Neil Armstrong Parking Lot: 250 rooms hotel to be situated east of the existing
         catering kitchen on the existing Neil Armstrong employee parking lot.

         Site 4 – Northfield: 250-room hotel situated at the corner of Hegenberger Road and
         Doolittle Drive.

         Site 5 – Doolittle Parking Lot: 250-room hotel situated on an un-used parking facility on the
         corner of Doolittle Drive and Swan Way. This site is adjacent to but not within the Airport
         boundary, but is owned by the Port of Oakland.

         Site 6 – Parking Bowl:On-Airport, 200-room hotel situated within the parking "bowl" of
         Oakland International Airport. A proposed hotel location would be contiguous to proposed
         parking structure(s).

Development characteristics/costs differ sharply between sites 3 – Neil Armstrong Parking Lot and
6 – Parking Bowl verses 4 – Northfield and 5 – Doolittle Parking Lot. Namely, the sites 3 – Neil
Armstrong Parking Lot and 6 – Parking Bowl are located on bay mud flats and would require deep
pilings based upon preliminary site investigations, whereas sites 4 – Northfield and 5 – Doolittle



Jones Lang LaSalle
Port of Oakland - Project Definition Report 	                Section I - 4



Parking Lot could likely be built on traditional footings that would be considerably less expensive.
Further we assumed a traditional wood-frame structure on sites 3 – Neil Armstrong Parking Lot,
4 – Northfield, and 5 – Doolittle Parking Lot verses steel and concrete construction on Site 6 –
Parking Bowl. Based upon preliminary financial modeling and further assessment of the inherent
attributes and challenges of each of the four sites, two sites were identified as best meeting the
criteria as set out by the Airport, and in meeting likely market / investor receptivity based upon
market characteristics and hotel location preferences.

The two sites selected represent both an on-Airport property (Site 6 – Parking Bowl) and off-Airport
property (Site 4 – Northfield). As such, we were able to assess in greater financial detail the relative
merits and development feasibility of a site with direct connectivity to the airport terminals (Site 6 –
Parking Bowl) and one that would have high visibility at the airport entrance (Site 4 – Northfield)
but would require shuttle bus service to the terminals. Site 3 – Neil Armstrong Parking Lot was not
short listed due to the extraordinary development cost and parking displacement (while not
qualifying as a terminal area site capable of commanding ADR premiums), while Site 5 – Doolittle
Parking Lot was not short listed primarily due to lack of visibility and also because of potential
interim parking needs for future airport development staging.

Utilizing market driven construction costs, room rates, occupancy assumptions and discount rates,
the prospective value of each subject hotel property was determined as of January 1, 2010 –
assuming that each property could be delivered to the market by that time. For Site 6 – Parking
Bowl, we recognize that may be a particularly aggressive assumption as development of a hotel at
that site would be closely linked to the completion of a potential garage facility. The cash flow
forecasts, projected reversion value of the hotel, and estimated construction costs (based on relevant
comparable data provided at the end of this report) for each property were calculated into an internal
rate of return (IRR) model to determine the most relatively acceptable and profitable site from a
developer's / investor's perspective.

Our results, detailed in Section IV, indicate that none of the sites yield a positive IRR. In contrast,
developers will require a minimum of IRR in the 18%-22% range. To put the development
economics in perspective, Jones Lang LaSalle performed some financial modeling "sensitivities" to
answer the question: "What would it take to get the site to pencil out to a 15% IRR"? The following
summarizes our findings and begins to provide an order of magnitude of the size of the gap:

    ■ For Site 4 – Northfield, keeping everything constant, the stabilized ADR would have to
       equate to $243 – 31% higher than our original stabilized ADR of $185. If we keep the
       original ADR of $185, the "gap" is approximately $29 million (e.g. required Port subsidy).

    ■ For Site 6 – Parking Bowl, keeping everything constant, the stabilized ADR would have to
       equate to $276 – 23% higher than or original stabilized ADR of $223. If we keep the original
       ADR of $223, the "gap" is approximately $20 million (e.g. required subsidy).



Conclusions and Recommendations
Based upon the analysis summarized above, sites 4 and 6 possess relative merit in WI ns of servicing
                                                                                    	
the future growth of the Airport market, but neither yields a positive IRR given the current market



Jones Lang LaSalle
Port of Oakland — Project Definition Report	                  Section I — 5



based assumptions and associated construction costs. Investors generally seek levered returns within
the range of 15% to 20% for a project of this scope. In this case, construction costs are proving that
the project is not presently feasible without significant support from the Port, as the Oakland
market does not presently command the necessary ADR/positive cash flow to outweigh the high
costs of construction for an airport hotel.

In conclusion, without dramatic change in the market, modifications in construction costs, or some
form of Port contribution, Jones Lang LaSalle does not believe that the developer / investor market
would embrace participation in an RFP process at this time. As such, Jones Lang LaSalle suggests
waiting for at least 6-9 months to reassess the market and/or exploring other options as noted below.

Public Private Partnership Asset Privatization Considerations
Given the state of the current hotel market coupled with the high cost of construction and turbulent
capital markets, "non-traditional" financing alternatives are discussed herein for consideration. Such
financing alternatives may range from the Port providing funds via tax exempt bond financing or
other low cost capital (compared to private/taxable debt and equity) to a scenario wherein the hotel is
"packaged" with income producing assets, such as parking, and privatized. Given the inherent risk of
the project and the Port's financial requests for various critical development projects, we have
assumed at this juncture that the Port would not develop a hotel project on their own account.

However, in light of the Airports development plans and need to provide additional parking adjacent
to the terminal, Site 6 – Parking Bowl represents a unique "bundling" opportunity for a developer /
investor. In this scenario the Port would grant exclusive development rights (via a long term ground
lease) to develop Site 6 – Parking Bowl for a mixed use project that would include a Hotel, Parking
and any ancillary income producing opportunities (e.g. retail, restaurants, etc.). In return for funding,
building, and managing the project, the developer would be the beneficiary of all operating income.
In this scenario, the net income generated from parking would need to be sufficient to subsidize the
hotel.

The viability of this bundling concept would depend upon a number of factors including: the Port's
Master Indenture, the City of Oakland's Charter (the charter could restrict the developer's ability to
maximize parking rates), FAA grant assurances, and the Project Labor Agreement. We anticipate
that the 'bundled' project would be of interest to, but also heavily scrutinized by, the various
"infrastructure funds" established for such investment and developmental opportunities. Further,
without detailed due diligence, we anticipate that the "risk" associated with a project of this size and
complexity would out weigh investors' interest in participation. Lastly, we anticipate that investors
would wish to privatize the parking at or near the "parking bowl" such that they might gain
additional revenue (existing) to offset significant construction costs as well as provide economies of
scale to operations and management.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	           Section II - 1




                                                               Section II.
                                                               Market Analysis


        Introduction
        The Jones Lang LaSalle team conducted a thorough market analysis that included a detailed
        inventory and assessment of the local and regional geographies as well as benchmarking metrics at
        comparable domestic airports. Inclusive to this effort was an analysis of critical performance metrics
        of the impacting micro and macro economic marketplaces and their affect on the favorability of the
        Oakland market to support new hotel development. In order to accurately ascertain the strength of
        the local market to support the Port's development goals, issues such as absorption risk, passenger
        growth trends and airside versus landside penetration metrics were considered in addition to standard
        performance indicators.

        Overall, our analysis concludes that there are sufficient demand characteristics within the Airport's
        marketplace to support new hotel development. However, supply-side characteristics do not
        necessarily warrant action without a keen assessment of the foreseeable cost implications. That being
        said, historical trends, current market conditions, anticipated demand growth and the relative
        performance success of on-airport hotel development in the northern California marketplace are all
        supporters of feasible development alternatives assuming flexibility in deal structure on part of the
        Airport.



        Market Overview
        The Airport's local hotel inventory is modest and reflective of the fact that Oakland is not a
        "primary" market for air passenger traffic in the Bay Area. According to the U.S. Department of
        Transportation, Oakland International Airport (OAK) currently ranks 31 st in the nation with respect
        to domestic enplanements and is best classified as a "secondary" aviation facility due to the fact that
        it services a market adjacent to the larger San Francisco International Airport (SFO). It should be
        noted that out of the top 35 U.S. airports with respect to domestic enplanement volume, none
        carrying a "secondary" classification currently has an in-terminal hotel facility. In spite of this fact,
        there are market instances where we feel demand exists for in-terminal hotel facilities in "secondary"
        airports, albeit not at a luxury service level.

        The hotel inventory that currently serves the Airport consists of seven facilities containing an
        aggregate of 1,172 rooms. In general, these facilities range from mid-scale, limited service to
        upscale, select service and are consistent with the general market composition for demand type.
        There has not been new hotel inventory added to supply in the competitive market since 2002 (with
        the exception of the 26-room expansion of the Holiday Inn Express in late 2006); however, new hotel
        product construction is currently underway adjacent to the Hilton Hotel near the Airport (a 147-room
        Holiday Inn, scheduled to open by March 2008).




Jones Lang LaSalle
                                                      	
        Port of Oakland – Project Definition Report                 Section II – 2



                                            Competitive Hotel Inventory
                                         Competitive Set	                  Year Open	   # Rooms
                      Hilton Garden Inn San Leandro                           2002        117

                      Holiday Inn Express Hotel & Suites Oakland Airport       1999       95

                      Courtyard Oakland Airport                               2001        156

                      Fairfield Inn Oakland Airport                            1999       104

                      Park Plaza Hotel                                         1970       189

                      Hilton Oakland Airport                                   1970       363

                      La Quinta Oakland Airport Coliseum                       1986       148

                      Total                                                              1,172

                     Source: Smith Travel Research




        Historical Performance Metrics
        Over the past four to five years, performance metrics within the aforementioned competitive set have
        trended positively. With respect to percentage occupancy and revenue per available room (RevPAR),
        average annual growth was 5.0% and 6.5%, respectively, from 2003 through 2006. However, growth
        in average daily rate (ADR) across the competitive set has been sluggish over the same time frame
        (1.6% compounded annually on average) in spite of a nearly complete lack of new supply locally.
        This is indicative of a localized market that has not been able to fully capitalize on the opportunity
        afforded by a steady increase in passenger traffic, and primarily due to the nature of OAK as a
        destination or an origin, not an overnight transfer point. That is, while the airport serves a heavy
        commuter population that has fewer overnight stay needs, there appears to be an adequate local
        supply of quality facilities with no convenient in-terminal option.

        The following table illustrates the recent performance with respect to percentage occupancy, ADR,
        and RevPAR of the Airport's competitive set.




Jones Lang LaSalle
                                                       	
         Port of Oakland - Project Definition Report                Section II - 3



                                   Historical and YTD Major Market Indicators
                                   Oakland Airport Hotel Historical Market Performance

                                                                 Market              Average Daily
Year                    Annual Supply    Occupied Rooms                                              RevPAR'   % Chg
                                                                Occupancy                Rate

2003                       418,290            255,714             61. %                $104.62        $63.95   -

2004                       418,290            269,463             64.4%                 $104.47       $67.30   5.2%

2005                       418,290            299,385             71.6%                 $104.90       $75.08   11.6%

2006                       422,268            326,210             77.3%                 $113.51       $87.69   16.8%

CAAG                        0.2%               5.0%                                      1.6%                   6.5%

2006 (YTD thru April)      137,520            100,997             73.4%                 $112.06       $82.30   -

2007 (YTD thru April)      140,640            101,230             72.0%                 $121.37       $87.36   6.2%

Source: Smith Travel Research, *Revenue per available room (RevPAR) equates to occupancy multiplied by average daily
rate (ADR)



         Passenger and Service Profile
         According to the U.S. Department of Transportation's O&D Survey, 65% of the Airport's total
         departing passengers in 2006 originated in Oakland. In addition, the most recent MTC Passenger
         Survey indicates that 91% of all enplaned passengers at the Airport in FY 2005-06 were passengers
         beginning or ending their trips at the Airport ("origin-destination passengers"); and 43% of the
         Airport's passengers begin their trips in Bay Area counties. It is our assessment that roughly 50% of
         the Airport's passengers are Bay Area residents. Consequently, OAK is generally perceived as the
         region's "secondary" airport specializing in "short-haul" trips where a high percentage of travelers
         are less likely to have a need for overnight stay. According to Jones Lang LaSalle research, over
         90% of U.S. outbound flights service domestic locations from perceived "commuter" airports. The
         following table illustrates the total domestic enplanements for a sample of California "commuter"
         airports. In addition, the far right column illustrates this figure as a percent of total enplanements.
         As highlighted, the difference as a percent of total is significant between the California "commuter"
         and the "non-commuter" airports in the San Francisco Bay Area, indicative of the different type of
         daily traveler moving in and out of these facilities.




Jones Lang LaSalle
                                                      	
        Port of Oakland - Project Definition Report                         Section II - 4



                       Regional Commuter Airports – Percent Outbound Domestic Travel
                                         Airport          Enplanements          % of Total

                                      San Francisco            12,180,712          73.9%

                                      Oakland                  6,961,000           96.5%

                                      San Jose                 5,138,150           94.3%

                                      Sacramento               5,210,014           97.2%

                                      Orange County            4,772,949           99.3%

                                      Ontario                  3,321,474           94.2%

                                      Burbank                  2,831,718           99.5%

                                    Source: U.S. Department of Transportation

        Although the Airport's passenger composition is predominantly commuter – and will likely remain
        so - projected future volume is expected to grow steadily. At the conclusion of the Airport's current
        expansion project, 29 gates will serve approximately 18 million passengers annually by 2013
        (assuming no additional gates or runways are constructed by then). Further significant growth in
        passenger traffic will depend upon development of additional airline terminal/gate capacity.


                          OAK Passenger Enplanements: Historical Statistics and Future Projections

                   10,000,000

                     9,000,000

                     8,000,000

                     7,000,000

                     6,000,000

                     5,000,000
              9
              tc
                     4,000,000
             w
                     3,000,000

                     2,000,000

                     1,000,000

                             0
                             45\ e 05 0 (§) 0\ 0 0
                                  `b 0 0        1 n)	                 03      0°        ,\<< « «            4\
                                                                                                         Logo b<<
                                                          9'                          o',
                                                                                     `Lo      (1
                                                                                              e    (10   1,\

          Source: Port of Oakland




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section II — 5



        Supply and Demand Metrics
        Using data compiled from proprietary Jones Lang LaSalle research and Smith Travel Research
        (STR), we projected supply and occupancy metrics for the aforementioned competitive set over
        the next five years. This analysis was based on known developments in the supply pipeline, in
        conjunction with historic performance trends and the existing momentum in the marketplace.
        As previously noted, there is a current demand trend for room nights that has been increasing
        steadily around the Airport for the past several years. However, in spite of increasing
        occupancies, ADR has not grown in tandem at noticeable levels, with the exception of the most
        recent historical calendar year. This is largely due to the dependency of Airport hoteliers on
        third-party Internet distribution channels (i.e. Expedia, Orbitz, etc.) after the industry's notable
        downturn during the period between 2001 and 2003. Nevertheless, after the economic health of
        the region began to rebound in 2004 and 2005, this reliance has largely been displaced with
        improved reservation booking methods, which indirectly has led to the improved lodging
        fundamentals indicated in the year-to-date period ending April 2007.

        The following table illustrates the methodology used to forecast market occupancy rates over
        the next five years. The projected hotel supply and demand figures show an occupancy trend
        that stabilizes near 70.0% as inventory expands to accommodate the market demand for more
        hotel stock. This increase in demand should occur alongside planned expansion activity at the
        Airport. Note that the subject hotel development is included within this analysis and therefore
        affects the occupancy projections




Jones Lang LaSalle
                                                      	
        Port of Oakland - Project Definition Report                        Section II - 6




                                      2012 Supply and Occupancy Projections
                           Year                       2007        2008         2009          2010      2011      2012

           Total Demand Growth

           Base Demand                              336,284      363,881     379,705        411,417   421,025   428,855

           Induced Demand                                  0      9,895       21,054        39,974    40,981    40,981

           Total Accumulated Demand                 336,284      373,775     400,759        451,390   462,006   469,836

           Overall Room Night Demand Growth               1.8%   11.1%         7.2%         12.6%      2.4%      1.7%

           Existing Hotel Supply                      1,172       1,172        1,172         1,172     1,172     1,172

           Proposed Hotels (New Supply)

           OAK Airport Hotel (Subject)                     -                                  200       200       200

           Hampton Inn & Suites                                                 81            81        81        81

           Westin Jack London Square*                                           163           163       163       163

           Holiday Inn                                     -       123          147           147       147       147

           Expansion to Existing Hotels

           Holiday Inn Express                            26       26           26            26        26        26

           Available Rooms Per Night (Annual)       437,270      517,027     579,730        652,730   652,730   652,730

           Total Supply Projection                    1,198       1,417        1,588         1,788     1,788     1,788

           Room   Supply Growth (%)                   2.2%        18.2%       12.1%          12.6%     0.0%      0.0%

           Market-wide Occupancy Projection          77.0%       72.0%        69.0% T 69.0%            71.0%     72.0%

          Source: Jones Lang LaSalle Hotels, *Westin Jack London assumed to be 65% competitive (250 rooms)

        It should be noted that the existing supply referenced in the above chart only includes the comparable
        set under the previously discussed table titled "Competitive Hotel Inventory" (Section 11-2), which
        does not include hotel properties located in downtown Oakland. While it may appear "inconsistent"
        to include the Westin Jack London Square as a secondary competitor, it is anticipated that roughly
        65% of the Westin's available room nights will be competitive to the proposed subject due to its new
        construction and anticipated quality level, as well as available amenities and facilities, the majority of
        which would be available in a "full-service light" product offering. More specifically, the Westin is
        anticipated to compete for the higher-rated downtown meeting and group demand that is also
        projected to be somewhat accommodated by the proposed Subject, and is to a moderate extent
        currently being captured by the Hilton Oakland Airport.

        When compared to domestic "commuter" airports, OAK appears to be relatively underserved.
        Despite having capacity constraints which currently limit passenger volume growth, the amount of



Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section II — 7



        hotel-rooms-per-passenger remains quite low relative to comparable facilities. It should be noted
        that, out of this sample, only Sacramento Airport is currently served by an "in-terminal" hotel. The
        Sacramento facility, which is an inferior product by market standards, achieved an approximately
        90.0% occupancy at an ADR between $120 and $125 in 2006 in a market with significantly less
        passenger volume. However, there is not much localized competition.

        The following table illustrates the relative level of service for comparable "commuter" airports in
        greater detail.

                                      Commuter Airport Hotel Capacity per Passenger

                                           # Hotel     # Passengers in '06       Hotel Rooms Per Passenger
                Airport                                                                     (%)
                                           Rooms            (millions)

     Midway (Chicago, IL)                   2,222             18.87                      0.0118%

     Sacramento, CA                         1,516             10.54                      0.0144%

     Oakland                                2,093             14.43                      0.0145%

     Hobby (Houston, TX)                    2,622             8.55                       0.0307%

     Burbank (Los Angeles
                                            2,230             5.69                       0.0392%
     County)

     Love Field (Dallas, TX)                3,048             6.87                       0.0443%

     Ontario (Southern California)          4,319             7.05                       0.0613%

     Average                                                                             0.0309%

    Source: U.S. Department of Transportation




        Of note is that the table above indicates all available inventory within a five-mile radius of each
        respective commuter airport facility, with the exception of Sacramento Airport, which was surveyed
        within an eight-mile radius due to the higher number of hotels outside the typical five-mile radius
        claiming to serve the airport. Sacramento Airport, while considered a secondary facility, ranks #38 in
        the nation (seven spots behind OAK). Albeit it's secondary status, this facility greatly benefits from
        an on-terminal hotel facility due to the general lack of supply in the immediate area. As mentioned
        previously, this facility is sub par to the majority of the surrounding hotels, but because of its
        location, commands higher than 100% of its market share.

        It should be noted that based on information provided by Smith Travel Research, there are 2,093
        available rooms within the Oakland Airport market. Of the 2,093 rooms available, we deteintined
        that roundly 1,172 ("Competitive Hotel Inventory," Section 11-2) would be directly competitive with
        the proposed Subject based on location, quality of facilities, and brand.




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	            Section II — 8




         Market Activity Impacting Supply and Demand Characteristics
        In order to determine whether or not Oakland International Airport should seek the development of a
        new hotel property within its boundaries, it is important to first analyze the overall health of the local
        market (which is explored moderately in this section), as there exists a direct link between consumer
        income, business profits, and air travel. As income rises, so does air travel demand. Therefore, a
        healthy local economy will typically result in higher traffic volumes at the airport that serves it. We
        discuss the health of the local economy as follows.

        Recent Performance

        Oakland's economy is expanding but its rate of growth has slowed in recent months. Its slowdown
        came late, however, and its rate of growth, as measured by employment, is no worse than the U.S. In
        many ways Oakland's current economic performance is a minor of the U.S., with house prices
        falling moderately and credit quality deteriorating sharply within an environment of mixed labor
        market performance. Nevertheless, Oakland still maintains a higher per capita income level than the
        U.S. overall by over $10,800.

        Labor market

        The housing downturn caused a recent cut in construction payrolls, and financial services have been
        falling for nearly two years. Rising local government employment is not expected to be long lasting
        as local and state government revenues are at risk. However, private education and healthcare are
        expanding rapidly as numerous Bay Area institutions create new services and extend branches
        intended to serve the long-term population growth of the Oakland area. Further, manufacturing,
        business and professional services, and information services are driven upward by the area's
        expanding tech-producing industries.

        Biotech

        Among these industries, biotech R&D and alternative energy research hold great potential for
        increased investment and local employment. It will be supported by Lawrence Berkeley National
        Laboratory's new Joint BioEnergy Institute that will be funded by the U.S. Department of Energy
        through at least 2013. It is intended to accelerate basic research of cellulosic ethanol and other
        biofuels. The nearby Lawrence Livermore Lab also will participate and it will collaborate with UC
        Berkeley's newly established BP Energy Biosciences Institute.

        Office markets

        Oakland is returning to an advantageous position over San Francisco as the cost of office space
        increases across the Bay. In 2004, office rents were roughly equal at both ends of the Bay Bridge.
        Now, despite moderately rising rents in Oakland, they average 24% less than in the city of San
        Francisco according to the National Real Estate Index. Evidence of a positive effect on the Oakland
        economy is the planned move of the 1,000-worker headquarters of the regional AAA office out of
        San Francisco, due to rising rents and inconvenient commutes, to the East Bay's Walnut Creek area
        by 2010.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	           Section II - 9




        Housing

        Metropolitan Oakland's housing market is weaker than in the nearby Peninsula and South Bay
        markets. Prices have fallen in all price tiers, with the peak occurring at the end of 2005. The Oakland
        region is more highly exposed to sub prime first-time homebuyers due to its lower price points in its
        farther-out locations. Further, parts of the Oakland market remain overbuilt as it has had fewer
        constraints on land availability than other densely developed counties in the Bay Area.

        Very high construction costs will also be impacting the housing market, as well as the commercial
        real estate sector.

        The most solid component is the renter market where occupancy rates are high and rents are rising by
        as much as the high single digits, depending upon location. A tight rental market, combined with
        falling house prices, means that equilibrium in the market likely will be reached some time before the
        end of 2008, possibly sooner.

        Credit quality

        Like its housing market, Oakland's household credit quality looks much more like the rest of the
        state and nation than in San Francisco or San Jose. Whereas Oakland's mortgage delinquency rate
        was consistently about 50 basis points above San Francisco's through 2005, it is now 150 basis
        points higher at just under 3%, roughly equal to the U.S. average. With house prices already falling
        and a higher share of homeowners under financial stress, there is a much greater probability of
        further weakening of East Bay house prices and some spillover into consumer spending.

        All variables considered, Oakland's near-term outlook has considerable downside risk due to the
        economy's exposure to the housing downturn and impacts from the mortgage meltdown directly on
        finance employment and indirectly on housing and consumer spending. Once through this cycle,
        however, prospects are good based on tech-producing industries, trade and travel, and financial and
        business services.

        The general consensus indicates that these downward trends may impact the Oakland area through
        the 2nd quarter of 2008. These trends and forecasts are likely to negatively affect the prospects of on-
        Airport hotel development within the next two to three years, especially with regards to the Subject
        market area, as the current credit crunch situation has led to the "repricing of risk" and a fair amount
        of uncertainty pertaining to new hotel development deals taking place within secondary and tertiary
        markets. The possibility of the lack of available capital and stricter borrowing regulations, combined
        with the attributes of the proposed project (i.e. non-entitled land that may/may not be subject to a
        ground lease and Port involvement) may not be enticing for developers to want to undertake the
        project in a tighter timeframe.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	              Section II - 10



        In-Terminal vs. Off-Terminal Hotel Development Opportunities
        A survey of primary airport markets with in-terminal hotels shows that their proximity to an airport's
        core facilities is directly correlated to a performance premium relative to their off-terminal
        competitors. According to data compiled from our own proprietary research and STR, the average
        ADR premiums are 21% and revenue per available room (RevPAR) premiums are 28% for being in-
        terminal across domestic airport hotel markets.

        These figures are significant to the potential development opportunity at the Airport because they
        indicate that, even in a marketplace with moderate demand for new hotel development as indicated
        by traditional financial performance indicators, there may exist opportunities to capitalize on the
        premiums afforded by terminal proximity to enhance pro foinia return characteristics.

        For the table below, we provide the following definitions:

             •      Average Daily Rate (ADR) Penetration: Equal to market wide ADR divided by the analyzed
                    hotel ADR. If a hotel's penetration is over 100%, then that hotel over penetrates the market
                    (has achieved over its fair market share); thus, if a hotel has a 120% ADR penetration, then
                    that hotel has achieved an ADR 20% higher than the market wide average.

             •      Yield Penetration: Equal to market wide RevPAR divided by the analyzed hotel RevPAR. If
                    a hotel's penetration is over 100%, then that hotel over penetrates the market (has achieved
                    over its fair market share); thus, if a hotel as a 125% yield penetration, then that hotel has
                    achieved a RevPAR 25% higher than the market wide average.


                                      2006 In-Terminal Penetration Analysis
                            #                      Occupancy                   ADR                    Yield
   In-Terminal Hotel                Occupancy                     ADR                     RevPAR
                          Rooms                    Penetration              Penetration             Penetration

   Marriott Tampa
                            295       75.5%            103.3%    $166.00       124.0%     $125.33     128.1%
   Airport

   Renaissance
   Concourse Hotel,         387       80.5%            106.9%    $118.00       106.5%     $94.99      113.9%
   Atlanta
   Miami International
                            359       79.6%            104.1%    $104.00        84.4%     $82.78      87.9%
   Airport Hotel
   Hilton Chicago
                            858       76.9%            103.5%    $168.44       120.5%     $129.53     124.8%
   O'Hare
   Hyatt Grand DFW
                            298       70.7%            108.8%    $181.62       134.7%     $128.41     146.5%
   Airport Hotel
   Hyatt Regency
                            811       69.8%            107.4%    $115.83        85.9%     $80.85      92.2%
   DFW Airport Hotel

 Source: Jones Lang LaSalle Hotels, Smith Travel Research



Jones Lang LaSalle
         Port of Oakland - Project Definition Report 	                    Section II - 11



         The above hotels are situated within airport facilities that rank within the top 28 busiest in the nation.
         Miami, ranked #28, largely serves as a connecting airport to Caribbean and South American
         locations; as such, it is heavily utilized as an overnight transfer point for many passengers.

         SFO greatly serves as the Bay Area's overnight transfer point, as SFO provides the most
         connections/flights to international and other far away destinations. For this reason, Oakland is
         perceived as a secondary airport to SFO, as 97.0% of OAK outbound flights are to domestic U.S.
         destinations — most of which are along the West Coast. As such, while our research indicates that in-
         terminal airport hotels generally outperform the competitive market, this may not be the case for a
         secondary airport location that does not service a considerable amount of international/long-haul
         flights.

         It should also be noted that Oakland has capacity constraints that would prohibit growth in the long
         run.

         In projecting the average daily rate (ADR) for the subject property (both for the in-terminal and off-
         terminal scenarios), we applied a benchmarking and premium analysis. In deriving the ADR for the
         Subject, we first analyzed the performance of existing hotels in the OAK marketplace, summarized
         in the chart below:



                                          OAK Competitive Set ADRs - 2006

    $200

    $180 -

    $160 1

    $140                                                                                                               $ 28
                                                                                      $115              118
    $120 -1
                                  $97
    $100
      $80 -

      $60 -!

      $40

      $20 	
               La Quetta    Park Plaza Hotel Hilton Garden Inn    Fairfield Inn    Holiday Inn      Courtyard      Hilton Oakland
               Coliseum                         San Leandro      Oakland Airport Express &Suites Oakland Airport        Airport


  Source: Jones Lang LaSalle Hotels and Property Management




Jones Lang LaSalle
        Port of Oakland – Project Definition Report	            Section II - 12




        As highlighted above, the Hilton Oakland Airport, which is the largest hotel in the competitive set
        with 363 rooms and one of the closest to OAK, achieved an ADR of approximately $128 in 2006.
        The leasehold Hilton is projected to achieve an ADR of close to $132 by year-end 2007.

        The 156-room Courtyard by Marriott achieved an ADR close to $118 in 2006, compared to the 104-
        room Fairfield Inn's 2006 ADR of approximately $113, while the Holiday Inn Express & Suites
        reported an ADR of $115. In 2007, the competitive set is projected to achieve an increase of
        approximately 8.0%, but with a slowdown expected in 2008 and 2009 due to economic uncertainties.

        For the off-terminal complex, 250-room subject hotel, which we assumed to be a full-service-
        oriented property, we have estimated a stabilized ADR of $160 in 2007 value dollars, which is 30.0%
        above the competitive market's projected 2007 ADR of $123, and close to 20.0% above the Hilton's
        current ADR positioning. This variance is supported by the proposed hotel's newer construction and
        upscale amenity offerings, as well as the fact that the proposed Subject will offer a "full-service
        light" product in a competitive market that is comprised mostly of limited- and select-service hotel
        chains (i.e. Holiday Inn Express, Fairfield, Courtyard by Marriott, Hilton Garden Inn, La Quinta).

        As indicated earlier, in-terminal complex hotels typically attain a premium of roundly 21.0% over
        off-terminal complex properties (table in Section III, page 10). As such, for the in-terminal, 200-
        room, full-service-oriented Subject we estimated a stabilized ADR of $192 in 2007 value dollars.
        This ADR accounts for a premium for in-terminal airport hotels versus off-airport/aviation-market
        properties of 20.0% (i.e. $160 vs. $192).

        While it may be questionable that in-terminal hotel properties could command a significantly greater
        average rate than off-terminal hotel properties, our research (Section III, page 10) indicates that
        airport guests are willing to pay a noteworthy +20% premium for the convenience factor of being
        able to walk from their respective airport tetininals to their designated place of overnight stay. To the
        majority, the ADR premiums offered by in-terminal hotel properties offset aggravation caused by
        delayed traffic flow in and out of the airport, as well as the cost of renting a car or traveling via taxi
        to an outside-terminal complex. As such, not all land sites are treated equal for the purpose of this
        analysis, with reference to an in-tettninal vs. off-terminal site.




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	       Section III — I




                                                           Section III.
                                                           Airport Site Analysis

        Introduction
        Seven potential development sites were identified for analysis based on evaluation criteria ranging
        from construction feasibility and environmental issues to compatibility with other proposed Airport
        projects. The Jones Lang LaSalle team worked closely with the Airport Master Plan to identify sites
        that were consistent with the development goals of the Port of Oakland. From our preliminary
        assessment of seven potential development sites, four Parcels were chosen for further consideration
        and detailed financial assessment based on their inherent development potential. The following
        aerial depicts the locations of the seven sites originally selected for physical analysis.




Jones Lang LaSalle
        Port of Oakland — Project Definition Report	         Section III -- 2



        From the seven potential development sites, four sites were chosen for more detailed investigation
        and consideration. These four sites and the supporting selection criteria are elaborated upon
        throughout this section. They include, in order of rank:

                 ■ Site 6 — Parking Bowl

                 ■ Site 4 — Northfield (Doolittle at Hegenberger)

                 ■ Site 5 — Doolittle Parking Lot (Doolittle at Swan Way Parking Lot)

                 ■ Site 3 — Neil Armstrong Parking Lot



        Site Analysis Methodology
        The seven potential development parcels included in the site analysis were chosen based upon:
        discussions with the Port of Oakland, site visits to each location, close examination of the Airport's
        master plan, geotechnical information, noise contours, Jones Lang LaSalle's institutional knowledge
        of the local and national hotel markets and other relevant sources. The general methodology used to
        initially rank and then "short list" more highly qualified parcels for further analysis is as follows:

                 ■ Jones Lang LaSalle created a fact sheet for each site detailing the key attributes,
                   advantages and disadvantages associated with constructing a hotel at each location.

                 ■ The parcels were then ranked within each category with 10 being the most desirable and 1
                   being the least desirable.

                 ■ The rankings were compiled into a Site Selection Matrix and considered holistically as to
                   which site provided the most advantageous location for development.

                 ■ Further, the Jones Lang LaSalle team applied a "relative importance" factor for each
                   criterion that resulted in a "weighted rating" for each of the candidate sites.

                 ■ Utilizing this methodology, we were able to narrow the potential sites down to four.

        Note: The Site Selection Matrix that depicts the ranking methodology is included in the Appendix of
        this document.
        Ranking the sum product weights of criterion used to evaluate the subject properties develops an
        order of preference for the potential development sites. The criteria used were uniform among the
        selected sites and scored on a one (1) to ten (10) scale, with ten (10) being the most advantageous for
        potential hotel development. The most heavily weighted criteria were: terminal access, construction
        considerations, the relative cost to build on site, the anticipated market appetite for the proposed
        development and the speed to market. Other criteria used to evaluate the chosen sites were:
        consistency with the 2006 Airport Master Plan, access to Public Transportation, environmental
        considerations, and vehicular access to the site, noise considerations from airport activity, the
        maximum allowable height of development, geotechnical considerations and the required approvals
        needed by governing bodies to realize a hotel development. The following table illustrates the top




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	            Section III - 3




        four potential development sites as determined by applying the aforementioned site analysis
        methodology.



                                      Site                 Sum Product of Criteria Weights   Rank

                     Site 6 – Parking Bowl                              6.44%                 1

                     Site 4 – Northfield                                6.34%                 2

                     Site 5 – Doolittle Parking Lot                     6.14%                 3

                     Site 3 – Neil Armstrong Parking Lot                5.65%                 4




      Preferred Site Analysis
      The following segment contains a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
      for the Oakland Airport hotel market, as well as for sites selected by Jones Lang LaSalle as candidates
      for potential hotel development. To perfoi in a more comprehensive investigation the SWOT analysis
      begins with a macro level examination of the Oakland hotel market and then proceeds to analyze each
      selected site on a micro level. It is assumed that the Oakland International Airport hotel market
      analysis encompasses the characteristics shared by every site selected.



      Hotel Market at Oakland International Airport
       Strengths
                 ■     Strong historical growth in Oakland market, with RevPAR up over 6% through April
                       2007 over last year

      Weaknesses
                 ■     Unionization of hotel labor

                 ■     Recent crunch in capital markets could affect project IRR

                 ■ The need to obtain zoning approval for hotel construction because the Airport is zoned
                    "General Industrial" which does not include a hotel use

                 ■     Amendments to the General and Master Plan would be required for all sites

      Opportunities
                 ■     Potential to capture market share from downtown Oakland, given the proposed Subject's
                       "full-service light" product offering. The "full-service light" concept will apply to each
                       site; therefore, there is no differentiation between on-terminal and off-terminal sites.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report 	                  Section III - 4



        Threats
                  ■ The continued rise in construction costs

                  ■ Construction could result in public works issues, should a privately funded development
                    overlap with a public works project site and the projects are governed by different labor
                    agreements.



        Site 3 - Neil Armstrong Parking Lot

        The Neil Armstrong Parking Lot is a 4.61 acre site, located adjacent to the flight kitchen. Site 3 -
        Neil Armstrong Parking Lot is reserved for "Passenger Facilities" based on the long-term land use
        map contained in the Airport Master Plan. The long-term land use map shows a future roadway that
        runs roughly perpendicular to Neil Armstrong Way, bisecting the site.

        Strengths
                  ■   Due to its location adjacent to the traffic loop, speed to market is predicted to be high
                      relative to the other six sites investigated

                  ■   Proximity to Terminal 2 (0.3 miles) is better than other off-teii tinal complex sites

                  ■   Vehicular access between this site and the terminals was recently improved. Edward
                      White Way directly connects the site and Teiminal 2 for shuttle and pedestrian access.

        Weaknesses
                  ■   More costly deep foundations may need to be constructed to support development.

                  ■ Would require the relocation of a heavily used employee parking lot. Shuttle service to
                     serve a satellite location would be considerably more costly than current service.

        Opportunities
                  ■   Due to its proximity to the       WI   ninals, this site is in the best location for an off – terminal
                      hotel

                  •   The size of the site would permit a variety of hotel designs/concepts

        Threats
                      ■ The site is surrounded by industrial uses (fuel farms) which might be unsightly for
                         visitors




Jones Lang LaSalle
        Port of Oakland – Project Definition Report             Section III – 5




        Site 4 - Northfield

        The Northfield Site, an off teiminal site, contains 2.52 acres and is located at the corner of
        Hegenberger Rd and Doolittle Dr. Parcel 4 is reserved for "General Aviation" based on the long-
        term land use map contained in the Airport Master Plan.

        Strengths
                   ■ Highly visible site to most motorists approaching the Airport, right at Airport entrance.

                   ■ Excellent customer and service/vendor access via Airport Drive/Hegenberger Road, from
                     the north, west and south.

                   ■ Lower construction cost associated with projects built outside of airport terminal complex
                     area; on a site with soil conditions that may support less expensive construction methods
                     than required for a project in the terminal complex

                   ■ Potential synergy with Hilton if developer builds a Hilton Garden Inn or Doubletree

         Weaknesses
                   ■ Site size and location could limit construction of additional amenities

                   ■ Location outside of terminal complex lacks distinct competitive advantage

                   ■ Poorer access to airline terminals and public transportation than in-Terminal Complex
                     sites. Site needs to improve access through modifications to the existing driveway and
                     public transit services.

        Opportunities
                   ■ 15,000 SF of meeting space would offer the largest amount of meeting space per
                     guestroom in the OAK competitive market, at 60 SF per guestroom (the market wide
                     average is 16.4 square feet of meeting space per available guestroom). The Hilton
                     Oakland currently offers 41 square feet of space per guestroom.

         Threats
                   ■ New supply coming in 2008 and 2009 (Hampton Inn, Holiday Inn Select, Westin Jack
                     London Square)



        Site 5 - Doolittle Parking Lot

        The Doolittle Parking Lot is a 6.49 acre parking facility on the corner of Doolittle Dr. and Swan
        Way. Site 5 - Doolittle Parking Lot was not addressed in the Airport Master Plan and while not
        technically on Airport property, it is owned by the Port of Oakland.

        Strengths
                   ■ Better service access with direct access to and from Doolittle Drive and Swan Way




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	           Section III - 6




                   ■ Lower construction costs associated with projects built outside of airport terminal
                     complex due to reduced disruption of ongoing operations; and presence of subsurface soil
                     conditions that may facilitate less-expensive construction methods than in the terminal
                     complex area

                   ■ Large site, provides opportunities for future expansion (6.49 acres)

         Weaknesses

                   ■ Location outside of tetininal would lose distinct competitive advantage

                   ■ Location provides virtually no drive-by visibility to motorists along key airport approach
                     routes which may complicate site marketing and familiarity within local market

                   ■ Site size and location could warrant construction or provision of additional costly
                     amenities (i.e. airport shuttle service)

                   ■ Access to airport terminal and public transportation would require dedicated shuttle
                     service

        Opportunities

                   ■ 15,000 SF of meeting space would offer the largest amount of meeting space per
                     guestroom in the OAK competitive market

                   ■ Could capture market share from downtown Oakland properties

         Threats

                   ■ New supply coming in 2008 and 2009 (Hampton	            Holiday Inn Select, Westin Jack
                     London Square) could directly compete with a project on this site



        Site 6 - Parking Bowl

        The Parking Bowl site consists of 3.24 acres within the current Daily Parking lot. Parcel 6 is
        reserved for "Passenger Facilities" based on the long-term land use map contained in the Airport
        Master Plan. A hotel would generally be consistent with this land use designation since it supports
        airline passengers, however a general plan amendment may be required. Depending upon the final
        design and location of proposed new terminal and parking facilities, it may be necessary to relocate
        the surface public parking depicted on the February 2007 Terminal A site plan to accommodate a
        hotel at this location. This site was used as a proxy for a variety of alternative sites within the
        parking bowl, with the most attractive alternative likely being tucked in the inside corner of the "L"
        shaped parking structure, allowing the hotel to be a totally independent structure but linked to the
        pedestrian and vehicular circulation in the parking facility.




Jones Lang LaSalle
        Port of Oakland - Project Definition Report	           Section III - 7




        Strengths

                  ■ In-terminal access (direct access to terminal ticketing, baggage claim, and gates)

                  ■ Roughly equidistant to, and within walking distance of Terminals 1 and 2, and the
                    proposed site of Terminal A.

                  ■ Proposed BART connector would provide exceptional public transportation to the site

                  ■ Anticipated market appetite for hotel on site is relatively high

                  ■ Excellent vehicular access to site. The site's position on the airport loop could mitigate the
                    effect of traffic delay in front of Terminal 1 and proposed Tetminal A.

        Weaknesses

                  ■ Construction cost would be high

                  ■ Construction would have a severe impact on parking revenue and operations, both during
                    construction and thereafter

                  ■ May require replacement of high revenue-generating parking capacity lost for site
                    construction

                  ■ Site may have security-related access restrictions in high security alert scenarios

                  ■ Nounal access restrictions could increase facility operating expense

                  ■ No opportunities for significant physical expansion (3.24 acres)

        Opportunities

                  ■ Largest in-terminal complex hotel site (3.24 acres)

                  ■ Lower construction costs relative to other site options evaluated within the terminal
                    complex

        Threats

                  ■ Construction could result in potential conflict with public works contractor on adjacent
                    site, should projects occur concurrently and/or overlap.




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                  Section IV — 1




                                                             Section IV.
                                                             Hotel Development and
                                                             Financial Analysis

Introduction
Building upon our site analysis conclusions, Jones Lang LaSalle has prepared an in-depth financial
analyses pertaining to the feasibility of constructing a full-service oriented hotel on each of the four
highest ranked sites. Through extensive market research, competitor interviews, and discussions with
local hotel developers, we have projected five-year cash flows for each of the four Subject hotel sites,
incorporating these figures into an IRR analysis that takes into account the inherent construction
costs relevant to each site. Our results indicate that for a project of this scope and size, construction
costs will "make or break" the deal. Overall, while an in-terminal hotel would command higher ADR
premiums and generate healthier operating margins, not all in-terminal site scenarios yielded greater
returns than off-terminal sites. This is due to the fact that construction costs associated with in-
terminal hotel locations are significantly higher than costs for off-terminal hotels due to impact of
constrained project sites and varying soil conditions. This will directly impact investors' overall
return and hence, bid proposals.

The following discusses the programming and spatial layouts for each hotel site, followed by our
feasibility analysis and conclusions.



Subject Hotel Programming
Space Allocations

Based on the aforementioned market and site analyses, the Jones Lang LaSalle team executed a
thorough pro forma financial analysis of the three in-terminal and one off-terminal site alternatives
determined to be most supportive for near-term hotel development, specifically Site 6 – Parking
Bowl (in-terniinal) and Sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle
Parking Lot (off-terminal). Of note is that for the three in-tenninal sites, programming is slightly
different since we did not include the ballroom and its necessary break-out space. We also added 50
rooms to Sites 3 – Neil Armstrong Parking Lot, 4 – Northfield, and 5 – Doolittle Parking Lot to
generate additional revenue to make up for lower average daily rates achieved at off-terminal hotels
(discussed previously). While the off-terminal sites would readily pennit the construction of more
than 50 added hotel rooms to the base of 200, we determined that the proposed off-terminal site
would achieve maximum operating potential at 250 rooms at the greatest, based on market wide
supply and demand dynamics.

It should also be noted that while a 250-room, off-terminal hotel would be anticipated to draw fewer
occupied room nights than a 200-room, on-terminal hotel in the same competitive market, the added
ballroom capacity at the off-terminal locations is anticipated to mitigate this effect.




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                      Section IV - 2




 Supply and demand characteristics, physical site attributes and growth drivers affecting foreseeable
absorption risk were all critical factors in the determination of an appropriately sized hotel subject
property (the "Subject") to be used throughout this analysis.

Based on previous in-terminal hotel development, it is Jones Lang LaSalle's opinion that the most
appropriate programming for the proposed hotels to be as follows: the in-terminal sites will support
a 5-6-story design with a room capacity of 200, and the off-terminal sites will support a three story
configuration with a room capacity of 250. Taller construction is more appropriate for in-teiniinal
hotels as to reduce the site area required for construction and capitalize on a higher FAR. Off-
terminal properties would benefit from a three-story configuration, as space is more plentiful when
off-teiminal. Relative to nationally accepted hotel development standards, the Jones Lang LaSalle
team proposes the following programming for the Airport's Subject development project:

200 Rooms
(Site 6 – Parking Bowl)
        Subject Hotel Space Requirements                     Subject Hotel Room Type Allocations

            Area             Square Footage    per Room                                     %       SF    Total
                                                                 Type           Units
                                                                                        Inventory          SF
Guestrooms                       72,255          361
                                                          King                  140       70%       361   50,575
Corridors                        7,226            36
                                                          Double-                                   340   17,000
Restaurants                                                                        50     25%
                                                          Double
              Three Meal         1,920            10                               6       3%       420   2,520
                                                          Handicapped
                   Lounge        1,200            6                                4       2%       540   2,160
                                                          Suite
                   Storage        915             5
                                                                                200       100%            72,255
                                                          Total
             Main Kitchen        1,830            9
                                                                      Subject Hotel Meeting Space
Lobby

Gym
                                 5,000

                                 3,500
                                                  25

                                                  18
                                                                         Proposed Meeting Space Use        SF
Meeting Space                    6,250            31
                                                                        Ballroom
                                                                                                          Ell
Meeting Space Support            2,250            11
                                                                        Ballroom Foyer

                                                                        Junior Ballroom
                                                                                                          1111
                                                                                                           1,750
Back of the House                34,100          171
                                                                        Junior Ballroom Foyer              450
Total                           136,446          682
                                                                        Banquet Rooms                      1,350

                                                                        Meeting Rooms                     2,400

                                                                        Boardroom                          300

                                                                        Total                              6,250




Jones Lang LaSalle
Port of Oakland – Project Definition Report	                          Section IV – 3




250 Rooms
(Sites: 3 — Neil Armstrong Parking Lot, 4 — Northfield, and 5 — Doolittle Parking Lot)


   Subject Hotel Room Type Allocations                                Subject Hotel Space Requirements

            Area             Square Footage    per Room              Type           Units   % Inventory   SF        Total SF

Guestrooms                       90,319          361          King                   175       70%        361        63,219

Corridors                        9,032            36          Double-Double          63        25%        340        21,250

Restaurants                                                   Handicapped             7         3%        420        3,150

              Three Meal         1,920            8           Suite                   5         2%        540        2,700

                                                              Total                 250        100%             1    90,319
                   Lounge        1,200            5
                   Storage        915             4
                                                                             Subject Hotel Meeting Space
             Main Kitchen        1,830            7
Lobby                            5,000            20                        Proposed Meeting Space Use                 SF

Gym                              3,500            14                        Ballroom                                 7,000
Meeting Space                    15,000           60                        Ballroom Foyer                           1,750
Meeting Space Support            3,000            12                        Junior Ballroom                          1,750
Back of the House               43,900           176
                                                                            Junior Ballroom Foyer                      450
Total                           175,616          702
                                                          J                 Banquet Rooms                            1,350
                                                                            Meeting Rooms                            2,400
                                                                            Boardroom                                  300
                                                                            Total                                   15,000




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                  Section IV — 4




Based on the data in the table above, Jones Lang LaSalle anticipates that the proposed Subject hotel
would gamer a three-star+ quality rating, which would appeal to guests and passengers who desire
higher quality amenities and would provide a more competitive product than currently available
within the Airport's competitive set. Hotel brands that typically rank in the three-star quality ranking
include, but are not specifically limited to the following:
        Full-Service:
                          Marriott
                          Crowne Plaza
                          Hilton
                          Sheraton
                          Doubletree
        Select-Service:
                     ■    Courtyard by Marriott
                          Hilton Garden Inn
                     ■    Indigo
                     ■    Hyatt Place
                     ■    SpringHill Suites


Parking Requirements
According to hotel design and development standards, hotels typically require 0.6 to 1.0 spaces per
guestroom 1 . For comparative purposes, we extrapolated this relationship to apply to this project,
which would contain 200 to 250 guestrooms. That would provide for a general parking need of
between 120 and 200 spaces. The Jones Lang LaSalle team created and stressed a series of parking
utility models for the Subject property and determined that, during peak hours, there is a need for
approximately 151 spaces for the on-terminal sites and 229 spaces for the off-terminal sites.
However, on average, the Subject property will require 125 (on-terminal) or 177 (off-terminal)
spaces to meet forecasted parking demand. The results of this parking utility analysis for both the
200-room and 250-room scenarios are summarized in the following tables and represent general
parking needs for the Subject property at stabilization.



 Rutes, Walter A., Penner, Richard H., and Adams, Lawrence. Hotel Design, Planning, and Development. June,
2001.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                        Section IV - 5



                 Hourly Parking Requirements for Stabilized Year - 200 Rooms (Site 6
               User       Midnight-4AM        4AM-8AM   8AM-Noon     Noon-4PM       4PM-8PM   8PM-Midnight

    Hotel Guests               106                69       32            69           85          101

    Bar and Restaurant          0                 27       5              5           11           11

    Meeting Attendees           0                 27       32             5            3           0

    Health Club/Spa             0                  0       0              0            0           0

    Visitors                    0                 27       48            32           37           5

    Employees                   2                  2       2              2            2           2

    Total Needed               109                151     119            114          138         119

    Average                                                                                       125


          Hourly Parking Requirements for Stabilized Year - 250 Rooms (Sites 3, 4 & 5)
               User       Midnight-4AM        4AM-8AM   8AM-Noon     Noon-4PM       4PM-8PM   8PM-Midnight

    Hotel Guests               133                86       40            86           106         126

    Bar and Restaurant          0                 33       7              7           13           13

    Meeting Attendees           0                 67       80            13            7           0

    Health Club/Spa             0                  0       0              0            0           0

    Visitors                    0                 40       73            47           53           13

    Employees                   3                  3       3              3            3           3

    Total Needed               136                229     202            156          182         156

    Average                                                                                       177



Note that for the purposes of this analysis, we have considered the extensive parking facilities that
Oakland International Airport offers and have assumed that guests/meeting attendees in need of
parking at the in-terminal hotel sites would be accommodated with the adjacent airport parking
garage, while hotel employees would be provided with parking off-site.

It should be noted that these parking needs are consistent with those of standalone hotel facilities of
comparable size and composition to the Subject. Because the in-terminal Subject will operate within
airport grounds, selection of an in-terminal development site will alter the parking demand
characteristics and will warrant additional study to more accurately ascertain true parking facility
needs. For the in-terminal alternatives, the development budgets assume most of the parking demand
will be met by the general airport parking facilities with nominal levels of short-term and service



Jones Lang LaSalle
Port of Oakland – Project Definition Report	                       Section IV - 6




parking provided in the development budget for the hotel. However, because we assume parking
demands will be met by the airport facilities, we have not projected parking revenues or expenses
within each hotel sites' five-year pro-forma.

According to the Oakland chapter of the Institute of Transportation Engineers, the community
threshold for a 200-room lodging facility is nine trips per guestroom per day, or 1,800 total trips per
day. The threshold would be much lower for an in-terminal airport hotel, which represents a smaller
"community" with a typically greater amount of pedestrian flow. A traffic impact analysis should be
completed prior to any development solicitations by trip generation/traffic experts to better
understand the implications of the proposed development on localized circulation and parking
requirements.


                Average Daily Trip Generation for Stabilized Year– Site 6 (200 rms)
           Breakdown of Trips by Segment           # Individuals   Estimated # Trips per Day   % of Total

       Employees (from Staffing Model)                  78                     62                13.6%

       Guests (per Day @ 77% Occupancy)
                     Guest per Room Factor = 1.4
                                                        152                    91                20.0%
                 % Arriving by Car Factor = 60%

       Visitors (from Parking Model)                    149                   298                65.1%
       Service Vendors (10% of Employee Trips)                                  6                1.4%

       Total                                                                  458                100%

           Average Daily Trip Generation for Stabilized Year – Sites 3, 4 & 5 (250 rms)

           Breakdown of Trips by Segment           # Individuals   Estimated # Trips per Day   % of Total

       Employees (from Staffing Model)                  89                    136                19.2%
       Guests (per Day @ 72% Occupancy)
                     Guest per Room Factor = 1.4
                                                        178                    107               15.1%
                 % Arriving by Car Factor = 60%

       Visitors (from Parking Model)                   226                    452                63.8%
       Service Vendors (10% of Employee Trips)                                 14                1.9%

       Total                                                                  709                100%




Jones Lang LaSalle
Port of Oakland — Project Definition Report	               Section IV — 7




Note that these are estimates of project-generated trips and do not reflect how these trips would be
made to the Airport (e.g. via private auto, rented auto, transit, taxi, drop-off, etc.)



Construction Cost Benchmarking
California Regional Market

For the purposes of gaining an accurate understanding of foreseeable construction costs for the
Subject property, the Jones Lang LaSalle team analyzed a sample of recent hotel developments in the
state of California that included both select, and full-service product types. Of this sample of 15
recent hotel developments, total room counts range from 84 in San Luis Obispo to the 1,090-room
Hilton at San Diego's Convention Center. Our survey shows that the total development costs per
room upon completion ranges from a minimum of approximately $119,000 for the Hilton Garden Inn
in Palmdale to a maximum of almost $230,000 for the Residence Inn in Burbank for select-service
product. Intuitively, construction costs escalated within our sample as the service level increases.
Full-service hotel development costs (in 2007 dollars) range from $125,000 per room for the Holiday
Inn Oakland (currently under construction), to $383,000 per room for the Hilton San Diego
Convention Center. On average, we determined the regional market norm for all-in construction costs
within our sample for full-service product (steel and concrete) to be at least $302,000 per room in
2007 dollars. Note that this per-key cost average is skewed by data for higher priced locations along
the coastal areas of California; however, with regards to the proposed Subject, higher averages would
be comparable to in-terminal locations, especially given the fact that hotel construction costs have
been escalating considerably since 2004.




Jones Lang LaSalle
                                                        	
          Port of Oakland – Project Definition Report                               Section IV — 8




                                         Regional Market Construction Cost Benchmarks
                                                 #     Opening       Improvement       Total Development Cost (per   Total Development Cost Inflated
          Property              Location
                                               Rooms         Date        Cost                    room)                   to 2007 $'s (per room)*


Select-Service


Residence Inn Burbank          Burbank, CA      166          n/a     $32,300,000                $228,916                            -


Residence Inn Oceanside      Oceanside, CA      125          n/a     $20,400,000                $192,000                            -


Larkspur Landing Hotel         Larkspur, CA     100         9/2007   $16,244,873                $198,000                            -


                            San Luis Obispo,
Hampton Inn & Suite                             84          1/2008   $10,919,500                $138,506                            -
                                    CA


Hilton Garden Inn            Santa Rosa, CA     92          1/2007   $10,021,824                $132,846                            -


Residence Inn Irvine            Irvine, CA      173          n/a     $18,700,000                $127,168                            -


Sheraton Hotel              Garden Grove, CA    288         1/2008   $30,130,867                $123,979                            -


Hilton Garden Inn              Palmdale, CA     107         7/2007   $11,087,731                $119,269                            -


Hampton Inn & Suites         Seal Beach, CA     110         8/2007   $11,337,358                $131,249                            -


Full-Service


Holiday Inn San Diego Com
                             San Diego, CA     1,090        8/2008   $418,000,000               $383,486             -
Ctr.


Holiday Inn                    Oakland, CA      147         3/2008       n/a                    $125,000                            -


Westin Palo Alto               Palo Alto, CA    184         2000     $40,500,000                $220,109                        $353,446


Hilton Santa Clara          Santa Clara, CA     280         2001     $33,000,000                $117,857                        $176,872


Mariott/Downtown San Jose      San Jose, CA     506         2003     $105,000,000               $207,510                        $272,003


Average                                                                                         $213,012                        $302,342




          In-Terminal

          In addition to our market survey analysis efforts, the Jones Lang LaSalle team looked to recent in-
          teiininal hotel development benchmarks at domestic airports. In-terminal hotels, in addition to the
          fact that their supply and demand characteristics vary from their standalone and off-airport
          counterparts within their respective markets, often have construction-cost drivers that differ from
          typical, privately-funded hotel developments. This effect is attributable to a number of factors that
          include ground lease versus sales metrics, preferred contractor and supplier programs, tax and
          development incentive variance, and the often enhanced role of public sector oversight and/or
          partnership in the development process.



          Jones Lang LaSalle
Port of Oakland – Project Definition Report	                          Section IV – 9



Within North America, the Jones Lang LaSalle team found three in-terminal hotel development
projects within the last eight years of comparable composition to the proposed Subject property. Of
these developments, the average total development cost per key was found to be approximately
$330,000 in 2007 dollars, largely driven by the Fairmont Vancouver Airport construction costs,
which are estimated at roundly $442,000 per key in current U.S. dollars. Taking out the Failmont's
construction costs yields an average of roundly $271,000 per key. Applying a standard California
                          ,3
cost premium of 25.0%2 driven by the very high cost of doing business locally, this figure results in
an average construction cost of $340,000 per key. When identifying cost benchmarks for
development feasibility analysis, the Jones Lang LaSalle team carefully considered these figures
while constructing pro-forma model inputs. The following table summarizes the construction cost
figures for those in-teiminal comparables analyzed.


                                  In-Terminal Construction Cost Benchmarks
                                                                                 Total           Total Development
                                    #       Opening        Improvement
     Property       Location                                                 Development         Cost 2007 $'s (per
                                  Rooms      Date              Cost
                                                                            Cost (per room)            room)*

Fairmont
                   Vancouver,
Vancouver                           392      10/1999       $100,750,000        $257,015               $441,600
                      BC
Airport

Westin Detroit
                    Detroit, MI    400       12/2002       $85,100,000         $212,750               $298,393
Airport

Grand Hyatt
                    Dallas, TX      298      6/2005        $61,000,000         $204,698               $234,359
DFW Airport

Average                                                l                       $226,468               $332,388

*Source: Jones Lang LaSalle Hotels,

 *Costs were inflated at 7.0% annually to reflect the above-inflationary increases experienced in construction costs

Local Market Validation

Beyond the general market costs, we reviewed construction costs in the Bay Area, and the specific
cost impacts related to the congested site conditions, challenging foundation requirements and
constraints of working under contracting conditions inherent in construction on the airport site. Our
cost data was reviewed in detail with a local contractor who had recently completed a hotel with
comparable site constraints. Based on this information our construction costs were validated for the
two in-terminal site (6 – Parking Bowl) which would be most directly influenced by these factors.


2
    U.S. Bureau of Labor Statistics, May 2006 – California, Arizona, Nevada region.

3 Marshall & Swift Construction Cost Multiplier of 1.35 for Class A construction in Alameda County, CA (July
2007 edition)




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                     Section IV — 10




The off-terminal sites (3 – Neil Armstrong Parking Lot, 4 – Northfield and 5 – Doolittle Parking
Lot), anticipated to be more conventional "stick-built" (assembled on the building site) product with
less direct impact from the congested activities at the airport, remained more comparable to the
general market cost data.

The results of this analysis are represented in the Financial Site Analysis table in the following
section, with the outcome that the total development costs for the close-in, terminal complex sites are
approximately 56.0% higher than the costs of the more conventional product at the off-airport sites
(on a construction-cost-per-room-basis).



Financial Analyses of Development Alternatives
We have performed a complete financial analysis pertaining to each of the four Subject sites selected
for review, taking into account the following variables:

                      •   Location factors;

                      •   Hotel programming and space requirements;

                      •   Relevant construction cost data; and

                      •   The current capital markets situation.

As indicated in the financial site analysis matrix below, none of the sites yield an IRR that would be
appealing to a developer, even in a scenario where the land would hypothetically be donated, or
given a ground lease grace period, by the Port of Oakland.

As it stands, Site 5 – Doolittle Parking Lot (Doolittle at Swan) appears to be, in relative metric terms,
the "best" option of the four, yielding a positive IRR of 7.7%, but assuming that the in-terminal land
would either be granted a ground lease grace period longer than the five-year holding period, or that
the land would be "contributed" by the Port of Oakland as part of a private-public partnership (PPP).

Relative to typical investor standards, a negative IRR is not acceptable, and indicates the inherent
problem of the deal structure at hand. In this case, construction costs are proving that the project is
not feasible, as Oakland does not command the necessary ADR/positive cash flow to outweigh the
high going-in costs of construction for an airport hotel. For a project of this scope, investors
generally seek levered returns within the range of 18.0% to 22.0%.

The following summarizes our relevant assumptions applied in our financial analysis which are not
detailed in the site matrix that follows:

    •   Because each of the hotel site candidates would not be built atop any proposed new structures
        under consideration, all of the sites are assumed to have similar speeds to market, with a
        proposed opening date of January 1, 2010.

    •   In-terminal complex hotel sites are projected to achieve ADR premiums of 20.0% over off-
        terminal sites, supported by our penetration analysis in Section II of this report. As a result,
        an in-terminal hotel site (6 – Parking Bowl) is forecast to achieve Net Operating Income




Jones Lang LaSalle
Port of Oakland - Project Definition Report	              Section IV - 11




        margins of close to six percentage-points higher than the off-terminal sites (3 — Neil
        Armstrong Parking Lot, 4 — Northfield and 5 — Doolittle Parking Lot).

    •   The off-terminal Sites 3 — Neil Armstrong Parking Lot, 4 — Northfield, and 5 — Doolittle
        Parking Lot, which are programmed with additional ballroom/meeting space capacities
        relative to the in-terminal Site 6 — Parking Bowl, are forecast to achieve higher food and
        beverage revenues as a result.

    •   The IRR analysis assumes a debt cost at 7.0% (170 basis points above LIBOR of 5.3%), with
        a loan-to-value ratio of 65.0%.




Jones Lang LaSalle
                                                             	
Port of Oakland – Project Definition Report                                                Section IV — 12

                                                                 Development Analysis

                                        In-Terminal Hotel Site                                Outside-Terminal Hotel Sites

                                             Site 6                         Site 4            Site 5 Doolittle     Site 3 Armstrong
                                          Parking Bowl                    Northfield           Parking Lot            Parking Lot

Room Count                                            200                     250                   250                      250
Overall Rank                                           1                       2                     3                        4
Building Area
                                                   136,000                  176,000               176,000               176,000
Improvements (SF)
Date of Opening                                    Jan-10                   Jan-10                 Jan-10               Jan-10
Stabilized Year                                      2012                    2012                   2012                  2012
Stabilized Occupancy                                77.0%                   74.0%                  74.0%                 74.0%
Stabilized ADR                                     $223.00                 $185.00                $185.00               $185.00
Stabilized ADR (2007 $'s)                          $192.00                 $160.00                $160.00               $160.00
Stabilized N01 %                                    26.0%                   19.3%                  19.3%                 19.3%
Present Value Stabilized
                                                 $3,234,000               $2,710,000            $2,710,000             $2,710,000
NOI
 PV Stabilized NOI per
                                                   $16,170                 $10,840                $10,840               $10,840
Room
Terminal Cap Rate                                   9.0%                     9.0%                  9.0%                  9.0%
Discount Rate                                       11.5%                   11.5%                  11.5%                 11.5%
                                                                          $32, 200 ,00
Value Conclusion                                $38,700,000                                     $32,200,000           $32,200,000

   Value per Room                                 $194,000                 $129,000              $129,000               $129,000
                                                                          $72, 4 0 0, 00
Construction Cost I                             $69,700,000                                     $55,100,000           $60,500,000
                                                                                0
  Construction Cost per
                                                  $348,500                 $289,600              $220,400               $242,000
Room
  Construction Costs per
                                                  $318,900                 $265,000              $201,700               $221,500
Room - 2007 $'s
  Construction Cost per SF                           $511                    $412                  $313                  $344
  Construction Costs PSF -
                                                     $468                    $377                  $287                  $315
2007 $'s
Levered IRR 2                                            N/A*                 N/A*                -18.0%                     N/A*
Levered IRR - 5-Yr Ground
                                                        -7.5%                 N/A*                 -0.4%                 -7.2%
Lease    Grace Period
1 Construction costs are inflated to opening year dollars.
2 Projections incorporate a ground lease with terms similar to the 363-
room Hilton Oakland Airport hotel.
* The N/A classification in Levered IRR for Sites 6, 4, and 3 indicate that an internal rate of return ("IRR") was
unable to be calculated. This calculation was unable to be performed due to the fact that IRR is unable to be found
when only positive or negative cash flows are analyzed. In the case of the selected sites, the net cash flows for
Levered IRR with and without a ground lease grace period resulted in exclusively negative net cash flows for Sites
3, 4, and 6, therefore receiving the classification of N/A within the table.




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                 Section V — 1



                                                             Section V.
                                                             Conclusions and
                                                             Recommendations


Conclusions
Based upon the information summarized above, and preliminary discussions with hotel
developers/operators, Jones Lang LaSalle provides the following conclusions:
    ■ Preliminary discussions with hotel developers resulted in a generally lukewarm response.
      The principal questions that were raised centered on the uncertainty of OAK's long-term
      positioning as either a destination/origin airport or an overnight transfer point.
    ■ The recent increase in construction costs coupled with the projection of "moderate" ADRs,
       result in the current hotel development economics being below investor requirements.
    ■ Sites 3 – Neil Armstrong Parking Lot, 4 – Northfield and 5 – Doolittle Parking Lot represent
       off-terminal alternatives to consider. However they do not offer the appeal, or the market
       positioning, to be differentiated from an on-airport hotel (within walking distance to the
       terminals) such as Site 6 – Parking Bowl. In order to render the hotel development
       alternatives at OAK more attractive to developers, and to improve the underlying economics
       of the deal, the Port of Oakland would need to contribute the land, or "subsidize" the
       construction costs (i.e. through bonds or passenger fees) in the form of a long-term public-
       private partnership (PPP).
    ■ The current turbulent capital markets have dampened investor appetite in most commercial
      sectors, including hotel development.
    ■ Hotel developers/investors will continue to investigate "on-airport" hotel development with
      greater interest (and less stringent underwriting requirements) than off-airport sites, given the
      inherent value proposition afforded to airport activities (e.g. long-term stability and
      expansion)

Recommendations I Next Steps:
All variables considered, it is our opinion that it would be prudent to wait at least six to nine months
prior to initiating an RFP until the following takes place:
    ■ The turbulent capital markets settle in light of the recent/ongoing credit crunch;
    ■ The overall development plans for OAK are more clearly outlined and defined, and the
       elements of developer ambiguity decrease;
    ■ The "in-bowl" (Site 6 – Parking . Bowl) parking plans at OAK are more clearly outlined and
       defined;




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                   Section V — 2




        We are better able to define the "offering" whereby we will need to:
             o   Delineate specific site boundaries and site ingress/egress;
             o   Quantification of any shared parking opportunities and cost savings;
             o   Prepare schematic site plan to confirm site utilization; and
             o   Better define development timing for airport facilities that impact hotel occupancy.




Jones Lang LaSalle
Port of Oakland — Project Definition Report	                       Appendix A —




                                                                   Appendix A. Site
                                                                   Analysis Parcel Fact
                                                                   Sheets

Parcel 1— Baggage Claim

Location/Description                      Above future Terminal A baggage claim

Size                                      2.66 acres

Consistency 11 ith 2006 Airport           Parcel 1 is reserved for "Passenger Facilities" based on the long-term
Master Plan                               land use map contained in the Airport Master Plan.	 A hotel would
                                          generally be consistent with this land use designation since it supports
                                          airline passengers.	 It may be necessary to relocate the employee
                                          parking/commercial vehicle staging area depicted on the February 2007
                                          Terminal A site plan to accommodate a hotel at this location.

Environmental Considerations              Based on a review of existing environmental documentation including
(known hazards, required studies, etc)    the Final Environmental Impact Report - Proposed Airport Development
                                          Program (December 1997) and Final Environmental Assessment
                                          Proposed Airport Development Program (December 2000) there are no
                                          known environmental constraints that would impact hotel development
                                          on Parcel 1. Parcel 1 has been used for motor vehicle parking for many
                                          years hence there may be some level of soil/ground contamination.

Vehicular Access (Ingress/Egress)         Access is available through the planned traffic network with good
                                          opportunities to segregate guest arrival and service functions due to the
                                          central location with the roadway system.

Access to Public Transportation           Excellent access to public transportation as it is developed to serve the
                                          new terminal. AirBART shuttle bus provides service to and from the
                                          Coliseum/Oakland Airport	 BART	 Station	 to	 Terminals	 1	 and	 2.
                                          Additionally AC Transit, via the 50 and 805 lines, provide bus service
                                          between the Coliseum/Oakland Airport BART Station to Terminals 1
                                          and 2.

Access to Terminal                        Excellent access to the new Terminal A, but significant walking distance
                                          to existing terminals.

Noise Considerations                      Parcel 1 is exposed to cumulative aircraft noise levels lower than 60
                                          decibels (dB) based on the 2010 community noise equivalent level
                                          (CNEL) contours contained in the Airport Master Plan.	 See Site
                                          Exhibit 9. Parcel 1 is also exposed to motor vehicle traffic noise since it
                                          is adjacent to Airport Drive. 	 Federal and State of California guidelines




Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                        Appendix A – 2



                                          suggest that hotel/motels are compatible with cumulative noise levels
                                          less than 60 dB.

Maximum allowable height (based on       Based on an analysis of civil airport imaginary surfaces, as described in
FAR Part 77 or TFRPS)                    Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                         Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces
                                         described in FAA Order 8260.3B, United States Standard for Terminal
                                         Instrument Procedures, (TERPS surfaces), the estimated height at which
                                         a building on this parcel would penetrate one or more Part 77 or TERPS
                                         surfaces is between 150 and 160 feet above mean sea level (MSL). See
                                         Site Exhibit 11.

Utilities (Infrastructure quality and     Water: New 12" line to be completed with adjacent parking structure in
capacity, proximity to mains, etc)       western bowl.
                                         Gas: Existing 4" line available on northern side of Airport Dr
                                         Sewer: Lift station to be relocated in order to accommodate future
                                         parking structure. New 12" line to be available on western edge of parcel
                                         with new parking structure.
                                         Electricity: 4-5" conduits in future on southern parcel boundary. 4-5"
                                         conduits exist on eastern corner of parcel.


Ownership Status and Title (existing     City of Oakland.
leases, encumbrances, easements, etc)

Geotechnical Considerations              Subsurface conditions generally consist of about 10 feet of medium
                                         dense and dense silty sand fill over about 7 to 10 feet of soft Bay Mud.
                                         Below the Bay Mud are layers of stiff, silty clay and dense sand. 	 Free
                                         groundwater is expected at a depth of about 6.5 feet below the ground
                                         surface.

                                         There is a moderate to high potential for soil liquefaction of the sand fill
                                         at the site, which might require mitigation or deep foundation systems.

                                         Foundation Scheme – Depending on the building design and structural
                                         loads, we expect that the foundation scheme would either consist of
                                         reinforced mat slab foundations or deep pile foundations.

                                         Foundation cost would likely be much higher than conventional shallow
                                         spread footings.

Construction Considerations              Very complex, fully integrated with both the road network and the new
                                         baggage claim facility.	 Will require costly structural solutions, most
                                         hotel functions will be placed above baggage claim functions and
                                         transfer of utilities and structural loads at the vertical interface between
                                         the facilities will be required. 	 Construction contracting will need to
                                         address the shared structural and infrastructure functions and separation




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                         Appendix A – 3



                                          of responsibilities will be difficult to structure and manage.

Relative Cost to Build                    Very High (375,000+ per key if full-service hotel) – without land.

                                          To reduce noise, the Hotel on this site would need the use of triple-
                                          glazed	 windows,	 resilient	 wall-mounting	 clips,	 vibration-isolation
                                          springs, and amplified sound-cancellation systems.

                                          To create an ambiance of expansive space and air, an atrium could be
                                          incorporated into the design.

                                          Moving sidewalks would facilitate access to the parking and rental car
                                          center.

Anticipated market appetite for hotel     High
at site

Required Approvals (FAA, BCDC,            The parcel is zoned "M-40 – Heavy Industrial" and designated as
etc)                                      "General Industrial/Transportation" in the City of Oakland General Plan.
                                          Hotels/motels are not an allowable land use per these classifications. A
                                          General Plan amendment would be required to allow construction of a
                                          hotel on this parcel and the parcel would need to be rezoned.

                                          A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                          environmental documentation (most likely a documented categorical
                                          exclusion) would be required.	 An initial study (IS) would likely be
                                          required for the hotel project to ensure compliance with the California
                                          Environmental Quality Act (CEQA).

Speed to Market                          This site creates a very long development horizon with hotel design and
                                         development not feasible until terminal planning, design and construction
                                         is well under way.	 The hotel facility will not be functional until the
                                         terminal construction is virtually complete.

Other Considerations                     Its location is directly accessible to the future Terminal A ticketing area,
                                         without conflicting with passenger circulation patterns.	 Immediate
                                         proximity to baggage claim is a big plus.

                                          Site doesn't provide expansion possibilities in the future.

                                         Site	 size	 and	 shape	 allow	 for	 a	 variety	 of	 hotel	 construction
                                         models/conce its.




Jones Lang LaSalle
    Port of Oakland – Project Definition Report                         Appendix A — 4




    Parcel la — Rental Car Facility

    Location/Description                     Above future consolidated rental car facility/new parking garage

    Size                                     3.09 acres

    Consistency with 2006 Airport            Parcel la is reserved for "Passenger Facilities" based on the long-term land
    Master Plan                              use map contained in the Airport Master Plan.	 A hotel would generally
                                             be consistent with this land use designation since it supports airline
                                             passengers. The sitting of the hotel would need to be coordinated with the
                                             proposed BART connector.

    Environmental Considerations             Based on a review of existing environmental documentation including the
    (known hazards, required studies, etc)   Final Environmental Impact Report - Proposed Airport Development
                                             Program (December	 1997) and Final Environmental Assessment
                                             Proposed Airport Development Program (December 2000) there are no
                                             known environmental constraints that would impact hotel development on
                                             Parcel la.	 Parcel la has been used for motor vehicle parking for many
                                             years hence there may be some level of soil/ground contamination.

    Vehicular Access (Ingress/Egress)        Access for private vehicles would be good as the facility is integrated with
                                             the parking structure and at the perimeter of the private circulation loop.
                                             However, service access would be more difficult and would need to be
                                             integrated carefully with the traffic system.

    Access to Public Transportation          Access to public transportation is excellent, as it is in immediate proximity
                                             of the anticipated BART station and in close proximity to the taxi and
                                             shuttle bus locations. AirBART shuttle bus provides service to and from
                                             the Coliseum/Oakland Airport BART Station to Terminals	 1 and 2.
                                             Additionally AC Transit, via the 50 and 805 lines, provide bus service
                                             between the Coliseum/Oakland Airport BART Station to Terminals 1 and
                                             2. The site is conveniently positioned to take advantage of the Terminal 1
                                             pick up and drop off locations.

    Access to Terminal                       Good pedestrian access to the terminals. Balanced access to all terminals.

    Noise Considerations                     Parcel la is exposed to cumulative aircraft noise levels lower than 60
                                             decibels (dB) based on the 2010 community noise equivalent level (CNEL)
                                             metric contours contained in the Airport Master Plan. See Site Exhibit 9.
                                             Parcel la is also exposed to motor vehicle traffic noise since it is adjacent
                                             to Airport Drive.	 Federal and State of California guidelines suggest that
                                             hotel/motels are compatible with cumulative noise levels less than 60 dB.
1
    Maximum allowable height (based          Based on an analysis of civil airport imaginary surfaces, as described in
    on FAR Pair 77 or TERPS)                 Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                             Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces
                                             described in FAA Order 8260.3B, United States Standard for Terminal
                                             Instrument Procedures, (TERPS surfaces), the estimated height at which a




    Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                         Appendix A – 5



                                         building on this parcel would penetrate one or more Part 77 or TERPS
                                         surfaces is between 150 and 160 feet above mean sea level (MSL). 	 See
                                         Site Exhibit 11.

Utilities (in frastructure quality and   Water: New 12" line to be completed with parking structure in parcel
capacity, proximity to mains, etc)       footprint.
                                         Gas: Tie in required to existing main. New 6" line to become available on
                                         southern side of Airport Dr with tie in to parcel boundary.
                                         Sewer: Lift station to be relocated in order to accommodate future parking
                                         structure. New 12" line to be available on eastern edge of parcel with new
                                         parking structure.
                                         Electricity: 4-5" conduits (12KV) due in future within parcel boundary.


Ownership Status and Title               City of Oakland
(existing leases, encumbrances,
easements, etc)

Ceotechnical Considerations              Complex, but the parking and rental car facility will already require deep
                                         foundations, and there is opportunity to reduce costs by sharing foundation
                                         solutions.

Construction Considerations              Complex, fully integrated with the new rental car facility, but adjacent to
                                         the road infrastructure. Will require costly structural solutions, most hotel
                                         functions will be placed above parking and rental car functions and transfer
                                         of utilities	 and structural loads at the vertical 	 interface between the
                                         facilities will be required, but solving this integration between structured
                                         parking and hotel functions is more common than integrating with a
                                         baggage claim or terminal facility. 	 Construction contracting will need to
                                         address the shared structural and infrastructure functions and separation of
                                         responsibilities will need to be structured and managed.

Relative Cost to Build                   High ($350,000+ per key if full-service hotel) – without land.

                                         High construction costs will be associated with the construction of a hotel
                                         fully integrated with the new rental car facility and adjacent to the road
                                         infrastructure.

                                         To reduce noise, the Hotel on this site would need the use of triple-glazed
                                         windows, resilient wall-mounting clips, vibration-isolation springs, and
                                         amplified sound-cancellation systems.

                                         To create an ambiance of expansive space and air, an atrium could be
                                         incorporated into the design.

Anticipated market appetite for          High
hotel at site




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                         Appendix A - 6



Required Approvals (FAA, BCDC,          The parcel is zoned "M-40 - Heavy Industrial" and designated as "General
etc)                                    Industrial/Transportation" 	 in	 the	 City	 of	 Oakland	 General	 Plan.
                                        Hotels/motels are not an allowable land use per these classifications. A
                                        General Plan amendment would be required to allow construction of a
                                        hotel on this parcel and the parcel would need to be rezoned by the City of
                                        Oakland.

                                        A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                        environmental	 documentation	 (most likely	 a documented categorical
                                        exclusion) would be required.	 An initial study (IS) would likely be
                                        required for the hotel project to ensure compliance with the California
                                        Environmental Quality Act (CEQA).

Speed to Market                         This site creates a long development horizon with hotel design and
                                        development not feasible until rental car facility planning and design is
                                        well under way, but this horizon could be much shorter than solutions
                                        integrated with terminal functions.	 The hotel facility could be functional
                                        prior to terminal construction, and could even precede the parking structure
                                        if properly planned.

Other Considerations                    Site doesn't provide expansion possibilities in the future, but has sufficient
                                        acreage. Site size and shape allow for a variety of hotel construction
                                        models/concepts.




Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                           Appendix A — 7




Parcel 2 — North Terminal 1

Location/Description                     North of and adjacent to Terminal 1

Size                                      1.54 acres

Consistency with 2006 Airport            Parcel 2 is reserved for "Passenger Facilities" based on the long-term
Master Plan                              land use map contained in the Airport Master Plan.	 A hotel would
                                         generally be consistent with this land use designation since it supports
                                         airline passengers.	 It may be necessary to relocate the employee
                                         parking/valet park area depicted on the February 2007 Terminal A site
                                         plan to accommodate a hotel at this location. Parcel 2 is adjacent to the
                                         Central Plant which the Port of Oakland intends to expand in the future.

Environmental Considerations             Parcel 2 is located near the United Parcel Service facility which is a
(known hazards. required studies, etc)   documented hazardous	 materials	 release/spill	 site.	  It	 is	 uncertain
                                         whether	 special	 studies/testing	 would	 be	 required	 prior	 to	 hotel
                                         construction.

Vehicular Access (Ingress/Egress)        Vehicular access is marginal. While adjacent to the traffic circulation, it
                                         is on the outside of the loop requiring service traffic to use the private
                                         vehicle loop and pass through the new terminal facility. 	 The location
                                         also cuts off current service access to the existing terminal and the
                                         central plant, and the solution would need to accommodate that traffic.
                                         The site is isolated from the parking structure and there would need to be
                                         some connectivity, but some short term parking may need to be
                                         integrated into the hotel.

Access to Public Transportation          Acceptable, but not as attractive as solutions inside the traffic circulation
                                         loop.

Access to Terminal                       Excellent, with direct access to both the new and existing terminals
                                         without conflicting with the vehicular traffic patterns.

Noise Considerations                     Parcel 2 is exposed to cumulative aircraft noise levels lower than 60
                                         decibels (dB) based on the 2010 community noise equivalent level
                                         (CNEL) contours contained in the Airport Master Plan.	 See Site
                                         Exhibit 9. Parcel 2 is also exposed to motor vehicle traffic noise since it
                                         is adjacent to Airport Drive.	 Federal and State of California guidelines
                                         suggest that hotel/motels are compatible with cumulative noise levels
                                         less than 60 dB.	 Parcel 2 is located in close proximity to aircraft apron
                                         areas and, as a result, may be exposed to high single-event noise levels
                                         associated with aircraft taxiing and engine run-up operations. 	 Hotel
                                         development is generally compatible with the anticipated noise levels at
                                         Parcel 2 — North Terminal One.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                        Appendix A - 8




Maximum allowable height (based on       Building height less than 82 feet for ATCT line of sight.
FAR Part 77 or TERPS)

Utilities (Infrastructure quality and    Water: Existing line serving Terminal 1 (8"-12" line) runs through parcel
capacity, proximity to mains, etc)       boundary.
                                         Gas: Existing 4" line runs through on northern tip of parcel.
                                         Sewer: Existing 4" line runs through on northern tip of parcel.
                                         Electricity: Two new circuit breakers are located on northern side of
                                         parcel for potential tie in.


Ownership Status and Title (existing     City of Oakland
leases, encumbrances, easements, etc)

Geotechnical Considerations              Subsurface conditions generally consist of about 10 to 12 feet of medium
                                         dense silty sand fill over about 10 feet of soft Bay Mud. Below the Bay
                                         Mud is stiff and very stiff, silty and sandy clay with interbedded sand and
                                         gravel layers.	 Free groundwater is expected at a depth of about 6 to 8
                                         feet below the ground surface.

                                         There is a high potential for soil liquefaction of the sand fill at the site,
                                         which would require mitigation or deep foundation systems.

                                         Foundation Scheme – Depending on the building design and structural
                                         loads, we expect that the foundation scheme would likely consist of deep
                                         pile foundations.

                                         Foundation cost would likely be much higher than conventional shallow
                                         spread footings.

Construction Considerations              The constrained site will require a high-rise solution similar to other
                                         close-in sites, but the substantial isolation of the facility from other
                                         buildings will avoid costs and inefficiencies associated with integrating
                                         different functions and contracting strategies. 	 The site will require the
                                         most intensive acoustical mitigations, but those will be less costly than
                                         integration of facilities.

Relative Cost to Build                   High ($328,000+ per key if full-service hotel) – without land.

                                         To reduce noise, and given its location closest to planes, the Hotel on this
                                         site would also need the use of triple-glazed windows, resilient wall-
                                         mounting	 clips,	 vibration-isolation	 springs,	 and	 amplified	 sound-
                                         cancellation systems.

                                         To create an ambiance of expansive space and air, an atrium could be
                                         incorporated into the design.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                       Appendix A– 9




Anticipated market appetite for hotel    High
at site



Required Approvals (FAA. BCDC,           The parcel is zoned "M-40 – Heavy Industrial" and designated as
etc)                                     "General Industrial/Transportation" in the City of Oakland General Plan.
                                         Hotels/motels are not an allowable land use per these classifications. A
                                         General Plan amendment would be required to allow construction of a
                                         hotel on this parcel and the parcel would need to be rezoned by the City
                                         of Oakland.

                                         A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                         environmental documentation (most likely a documented categorical
                                         exclusion) would be required.	 An initial study (IS) would likely be
                                         required for the hotel project to ensure compliance with the California
                                         Environmental Quality Act (CEQA).

Speed to Market                          Average to Long, planning will need to be integrated with parking
                                         facilities and service access issues will need to be resolved. There will
                                         need to be planning for parking and access during the construction of the
                                         other facilities to ensure the ability to utilize the hotel during those
                                         extended.

Other Considerations                     Its location is directly accessible to the future consolidated rental car
                                         facility/new parking garage, but a high percentage of the Hotel's guests
                                         may not need to rent cars (i.e. they would use the Hotel for at-airport
                                         meetings at the conference center and fly out after an average length of
                                         stay of 1 or 2 nights).
                                         Location above employee parking is not an advantage.

                                         Site is small at 1.54 acres; doesn't provide expansion possibilities in the
                                         future. Also, irregular shape of site would not easily permit a number of
                                         hotel construction prototypes.




Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                         Appendix A - 10



Parcel 3 — Neil Armstrong Parking Lot

Location/Description                      Adjacent to the current flight kitchen

Size                                      4.61 acres

Consistency with 2006 Airport             Parcel 3 is reserved for "Passenger Facilities" based on the long-term
Master Plan                               land use map contained in the Airport Master Plan.	 A hotel would
                                          generally be consistent with this land use designation since it supports
                                          airline passengers. Currently the site is being used for motor vehicle
                                          parking. The long-term land use map shows a future roadway that runs
                                          roughly perpendicular to Neil Armstrong Way that would bisect Parcel 3.

Environmental Considerations              Parcel 3 is located relatively close to the South airport tank farm (Jet fuel
(known hazards, required studies, etc)    storage) where two known incidents of releases have been documented.
                                          Non tidal wetlands are located southwest of Parcel 3 on the other side of
                                          Neil Armstrong Way and directly east to Parcel 3. 	 There are also two
                                          known burrow sites for the Burrowing Owl, a California species of
                                          concern, near the intersection of Airport Drive and Neil Armstrong Way
                                          (just north of the catering building).

Vehicular Access (Ingress/Egress)         Located outside the traffic loop, service traffic would presumably be
                                          accommodated through the service roads accessing the other facilities in
                                          this area, but the guest traffic would likely be routed through the airport
                                          traffic loop accessing the site upon exiting the airport. There is a direct
                                          roadway (Edward White Way) linking the site and Terminal 2, perfect
                                          for shuttle service.	 There is good vehicle access between the site and
                                          both terminals.	 It is located within walking distance to Terminal 2 (0.3
                                          miles).

Access to Public Transportation           Access to public transportation is limited. Although AirBART and AC
                                          Transit serve the terminals, the location is not convenient for travelers to
                                          access current routes.
                                                                                .
Access to Termina                         Though not as good as other terminal sites, access and proximity is
                                          actually better than any other non-terminal site.

Noise Considerations                      Parcel 3 is exposed to cumulative aircraft noise levels lower than 60
                                          decibels (dB) based on the 2010 community noise equivalent level
                                          (CNEL) contours contained in the Airport Master Plan.	 See Site
                                          Exhibit 9. Parcel 3 is also exposed to motor vehicle traffic noise since it
                                          is adjacent to Neil Armstrong Way. 	 Federal and State of California
                                          guidelines suggest that hotel/motels are compatible with cumulative
                                          noise levels less than 60 dB.

Maximum allowable height (based on        Based on an analysis of civil airport imaginary surfaces, as described in
FAR Part 77 or TERPS)                     Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                          Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces




Jones Lang LaSalle
Port of Oakland – Project Definition Report                        Appendix A – 11



                                         described in FAA Order 8260.3B, United States Standard for Terminal
                                         Instrument Procedures, (TERPS surfaces), the estimated height at which
                                         a building on this parcel would penetrate one or more Part 77 or TERPS
                                         surfaces is between 115 and 135 feet above mean sea level (MSL). See
                                         Site Exhibit 11.

Utilities (Infrastructure quality and    Water: Existing 16" line adjacent to the northern side of Airport Dr. 8"
capacity,	 proximity to mains, etc)      line currently serving structure north of parcel.
                                         Gas: Existing 2" line runs through the parcel, with 6" PG&E line across
                                         Airport Dr.
                                         Sewer: Existing line runs through parcel along Neil Armstrong Way.
                                         Electricity: Existing 4-5" conduits along Neil Armstrong Way with
                                         additional loop feed system to be built in the future.
Ownership Status and Title (existing     City of Oakland
leases, encumbrances, easements, etc)

Geotechnical Considerations              Subsurface conditions generally consist of about 5 feet of medium dense
                                         silty sand and gravel, and 3 feet of firm silty clay fill over about 12.5 feet
                                         of soft Bay Mud. Below the Bay Mud is stiff, silty and sandy clay with
                                         interbedded	 medium	 dense	 clayey	 and	 silty	 sand	 layers.	            Free
                                         groundwater is expected at a depth of about 11 feet below the ground
                                         surface.

                                         There is a moderate to high potential for soil liquefaction of the sand fill
                                         at the site, which might require mitigation or deep foundation systems.

                                         Foundation Scheme – Depending on the building design and structural
                                         loads, we expect that the foundation scheme would likely consist of deep
                                         pile foundations.

                                         Foundation cost would likely be much higher than conventional shallow
                                         spread footings.

Construction Considerations              Like other sites remote from the terminal, the area could accommodate
                                         lower structures and lighter construction costs, but wetland conditions
                                         may still drive deep foundations. Integration with the road infrastructure
                                         will provide some level of complexity, but it could potentially be a stand-
                                         alone facility.

Relative Cost to Build                   L ow Cost ($222,000+ per key if full-service hotel	    without land).
                                         Development in the wetland area would significantly impact the cost of
                                         the project.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                       Appendix A -- 12




Anticipated market appetite for hotel    Average
at site

Required Approvals (FAA, 13CDC,          The parcel is zoned "M-40 – Heavy Industrial" and designated as
etc)                                     "General Industrial/Transportation" in the City of Oakland General Plan.
                                         Hotels/motels are not an allowable land use per these classifications. A
                                         General Plan amendment would be required to allow construction of a
                                         hotel on this parcel and the parcel would need to be rezoned by the City
                                         of Oakland.

                                         A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                         environmental documentation (most likely a documented categorical
                                         exclusion) would be required.	 An initial study (IS) would likely be
                                         required for the hotel project to ensure compliance with the California
                                         Environmental Quality Act (CEQA).

Speed to Market                          Average, the remote site allows a development schedule substantially
                                         independent of other activities, but wetlands and traffic infrastructure
                                         impacts will add some planning time.

Other Considerations                     Site has very industrial surroundings. The site has sufficient acreage and
                                         provides expansion possibilities in the future. Shape of site would permit
                                         a variety of hotel construction models/concepts.




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                       Appendix A - 13



Parcel 4 - Northfield

I .ocation/Description                   Northfield Site at corner of Hegenberger Rd and Doolittle Dr.

Size                                     2.52 acres

Consistency with 2006 Airport            Parcel 4 is reserved for "General Aviation" based on the long-term land
Master Plan                              use map contained in the Airport Master Plan. A hotel is generally not
                                         consistent with this land use designation.

Environmental Considerations             Based on a review of existing environmental documentation including
(known hazards, required studies, etc)   the Final Environmental Impact Report - Proposed Airport Development
                                         Program (December 1997) and Final Environmental Assessment -
                                         Proposed Airport Development Program (December 2000) there are no
                                         known environmental constraints that would impact hotel development
                                         on Parcel 4.	 Parcel 4 has been used for general aviation activities for
                                         many years hence there may be some level of soil/ground contamination.
                                         In February 1980, the Oakland City Council passed Resolution 1979-8
                                         and Ordinance 9872, which designated the entire north field/North
                                         Airport and Earhart Road as landmarks in the City of Oakland. 	 The
                                         impact that this landmark status has on the ability to develop Parcel 4 is
                                         uncertain/unknown.

Vehicular Access ( Ingress/Egress)       Good access from Hegenberger and Doolittle but close to intersection.
                                         The remote location provides simple access similar to other off-site
                                         hotels.

Access to Public Transportation          Very poor, remote from convenient public transportation at the terminal,
                                         with minimal benefit compared to other off-site solutions. AC Transit
                                         provides bus service to and from Terminals 1 and 2 via route 50 and
                                         805). There is a nearby bus stop on Hegenberger Rd, across from the
                                         Hilton Airport Hotel.

Access to Terminal                       Very poor, with no on-airport transportation system, it will rely on
                                         shuttle bus connections just like the competitive products across the
                                         street.

Noise Considerations                     Parcel 4 is exposed to cumulative aircraft noise levels lower between 60
                                         and 65 decibels (dB) based on the 2010 community noise equivalent
                                         level (CNEL) contours contained in the Airport Master Plan.	 See Site
                                         Exhibit 10. Parcel 4 is also exposed to motor vehicle traffic noise since it
                                         is adjacent to Airport Drive and Doolittle Drive. 	 Federal and State of
                                         California guidelines suggest that hotel/motels are compatible with
                                         cumulative noise levels between 60 and 65 dB.	 Parcel 4 is located in
                                         close proximity to the general aviation aircraft apron and, as a result,
                                         may be exposed to high single-event noise levels associated with aircraft
                                         taxiing and engine run-up operations.




Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                        Appendix A – 14



Maximum allowable height (based on       Based on an analysis of civil airport imaginary surfaces, as described in
FAR Part 77 or TERPS)                    Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                         Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces
                                         described in FAA Order 8260.3B, United States Standard for Terminal
                                         Instrument Procedures, (TERPS surfaces), the estimated height at which
                                         a building on this parcel would penetrate one or more Part 77 or TERPS
                                         surfaces is between 20 and 75 feet above mean sea level (MSL). 	 See
                                         Site Exhibit 12.

Utilities (Infrastructure quality and    Additional information needed. Site not included in 2005 Utility Master
capacity, proximity to mains, etc)       Plan.

Ownership Status and Title (existing     City of Oakland
leases, encumbrances, easements, etc)

Geotechnical Considerations              Subsurface conditions generally consist of about 2 to 5 feet of sandy clay
                                         fill over about 5 to 8 feet of soft Bay Mud. 	 Below the Bay Mud are
                                         layers of firm and stiff, silty and sandy clay. 	 Free groundwater is
                                         expected to be within 5 feet below the ground surface.

                                         Liquefaction potential at the site is considered low.

                                         Foundation Scheme -- Depending on the building design and structural
                                         loads, we expect that the foundation scheme would either consist of
                                         reinforced mat slab foundations or spread footings on 15 feet long
                                         aggregate Geopiers installed at 12-foot grid.

                                         Foundation cost would likely be higher than conventional shallow spread
                                         footings, but should be less than deep foundations.

Construction Considerations              The remote location suggests construction similar to the competitive
                                         products off-airport with 3-4 stories of wood framing, surface parking
                                         and very economical construction.

Relative Cost to Build                   Low Cost ($265,000 + per key if full-service hotel – without land).

Anticipated market appetite for hotel    Average
at site




Jones Lang LaSalle
Port of Oakland - Project Definition Report                       Appendix A - 15




Required Approvals (FAA, RCDC,           The parcel is zoned "M-40 - Heavy Industrial" and designated as
etc)                                     "General Industrial/Transportation" in the City of Oakland General Plan.
                                         Hotels/motels are not an allowable land use per these classifications. A
                                         General Plan amendment would be required to allow construction of a
                                         hotel on this parcel and the parcel would need to be rezoned by the City
                                         of Oakland.

                                         A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                         environmental documentation (most likely a documented categorical
                                         exclusion) would be required.	 An initial study (IS) would likely be
                                         required for the hotel project to ensure compliance with the California
                                         Environmental Quality Act (CEQA).

Speed to Market                          Requires relocation of some facilities, but can be pursued with minimal
                                         interface with other master planned facilities.

Other Considerations                     The parcel size would permit on-site parking and provides for expansion
                                         possibilities in the future. Shape of site would permit a variety of hotel
                                         construction models/concepts.




Jones Lang LaSalle
                                              	
Port of Oakland — Project Definition Report                          Appendix A — 16



Parcel 5 — Doolittle Parking Lot

Location/Description                     Parking facility on the corner of Doolittle Dr. and Swan Way

Size                                     6.49 acres

Consistency with 2006 Airport            This parcel was not addressed in the Airport Master Plan and while owned
Master Plan                              by the Port of Oakland is generally "off' Airport.

Environmental Considerations             Based on a review of existing environmental documentation including the
(known hazards, required studies, etc)   Final Environmental Impact Report - Proposed Airport Development
                                         Program (December	 1997) and Final Environmental Assessment
                                         Proposed Airport Development Program (December 2000) there are no
                                         known environmental constraints that would impact hotel development on
                                         Parcel 5. Parcel 5 is currently being used for motor vehicle parking hence
                                         there may be some level of soil/ground contamination. 	 There is a
                                         documented burrow site for the Burrowing Owl, a California species of
                                         concern, in the vacant lot east of Parcel 5 and adjacent to the Hilton
                                         Oakland Airport hotel.

Vehicular Access (Ingress/Egress)        Optimal access to the site from side streets, but off the primary traffic
                                         routes entering the airport. No visibility to motorists

Access to Public Transportation          Very poor, remote from public transportation at the terminal, no benefit
                                         compared to other off-site solutions.

Access to Terminal                       Very poor, with no on-airport transportation system, it will rely on shuttle
                                         bus connections just like the competitive products across the street.

Noise Considerations                     Parcel 5 is exposed to cumulative aircraft noise levels lower than 60
                                         decibels (dB) based on the 2010 community noise equivalent level (CNEL)
                                         contours contained in the Airport Master Plan.	 See Site Exhibit 10.
                                         Parcel 5 is also exposed to motor vehicle traffic noise since it is adjacent to
                                         Dolittle Drive and Swan Way. Federal and State of California guidelines
                                         suggest that hotel/motels are compatible with cumulative noise levels less
                                         than 60 dB.

Maximum allowable height (based          Based on an analysis of civil airport imaginary surfaces, as described in
on FAR Part 77 or TERPS)                 Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                         Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces
                                         described in FAA Order 8260.3B, United States Standard for Terminal
                                         Instrument Procedures, (TERPS surfaces), the estimated height at which a
                                         building on this parcel would penetrate one or more Part 77 or TERPS
                                         surfaces is between 130 and 160 feet above mean sea level (MSL).	 See
                                         Site Exhibit 12.

Utilities (Infrastructure quality and    Additional information needed. Site not included in 2005 Utility Master
capacity,	 proximity to maths, etc)      Plan.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                         Appendix A – 17



Ownership Status and Title              City of Oakland
(existing leases, encumbrances,
easements, etc)

Geotechnical Considerations             Subsurface conditions generally consist of about 7 feet of stiff sandy clay
                                        and dense clayey sand fill over about 10 to 15 feet of soft Bay Mud.
                                        Below the Bay Mud are layers of stiff, silty clay and dense clayey and silty
                                        sand. Free groundwater is expected at depths of between 6 to 8 feet below
                                        the ground surface.

                                        Liquefaction potential at the site is considered low.

                                        Foundation Scheme – Depending on the building design and structural
                                        loads, we expect that the foundation scheme would either consist of
                                        reinforced mat slab foundations or spread footings on engineered fill.

                                        Foundation cost would likely be slightly higher than conventional shallow
                                        spread footings.

Construction Considerations            The	 remote	 location	 and	 large	 site	 suggests	 the	 most	 economical
                                       construction similar to the competitive products off-airport with 3-4 stories
                                       of wood framing and surface parking.

Relative Cost to Build                  Lowest Cost ($202,000+ per key if full-service hotel – without land).

Anticipated market appetite for        Low, the remote site makes for low cost, but the lack of visibility from the
hotel at site                          primary traffic routes make the site difficult to compete with the other off-
                                       airport products.

Required Approvals (FAA, BCDC,         The parcel is zoned "M-40 – Heavy Industrial"; however, it is noted that
etc)                                   the designation for this parcel in the City of Oakland General Plan is
                                       "Business Mix". While the parcel would need to be rezoned by the City of
                                       Oakland to allow the construction of a hotel a General Plan amendment
                                       would not be required.

                                       Revisions to the Airport Layout Plan (ALP) are probably unnecessary
                                       since Parcel 5 does not appear on the ALP. 	 An initial study (IS) would
                                       likely be required for the hotel project to ensure compliance with the
                                       California Environmental Quality Act (CEQA).

Speed to Market                        Optimal, as it has the least interaction with master planned facilities and
                                       would likely require minimal effort for rezoning.

Other Considerations                   Large site, but farthest from the Terminal area and would need guest
                                       shuttling to and from airport. The parcel could have generous on-site
                                       parking	 and	 has	 more	 than	 sufficient acreage	 providing	 expansion
                                       possibilities in the future. Shape of site would permit a variety of hotel
                                       construction models/concepts.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                         Appendix A – 18




Parcel 6 — Parking Bowl

Location/Description                     Parcel 6: Other parking bowl site across from terminal.

Size                                     3.20 acres

Consistency with 2006 Airport            Parcel 6 is reserved for "Passenger Facilities" based on the long-term land
Master Plan                              use map contained in the Airport Master Plan.	 A hotel would generally
                                         be consistent with this land use designation since it supports airline
                                         passengers, however a general plan amendment may be required. It may be
                                         necessary to relocate the long-term parking/meter greeter area depicted on
                                         the February 2007 Terminal A site plan to accommodate a hotel at this
                                         location. Based on preliminary review discussions, this site was used as a
                                         proxy for a number of potential sites in the parking bowl, with the most
                                         attractive location likely being in the inside corner of the L-shaped parking
                                         structure in close proximity to all terminals, the public transportation
                                         facility and the pedestrian and vehicular circulation systems in the parking
                                         facility.

Environmental Considerations             Based on a review of existing environmental documentation including the
(known hazards, required studies. etc)   Final Environmental Impact Report - Proposed Airport Development
                                         Program (December	 1997) and Final Environmental Assessment
                                         Proposed Airport Development Program (December 2000) there are no
                                         known environmental constraints that would impact hotel development on
                                         Parcel 6. Parcel 6 has been used for motor vehicle parking for many years
                                         hence there may be some level of soil/ground contamination.

Vehicular Access (Ingress/Egress)        Good access from the traffic loops with enough isolation from the main
                                         parking and terminal activities for reasonable separation of guest and
                                         service functions.

Access to Public Transportation          AirBART shuttle bus provides service to and from the Coliseum/Oakland
                                         Airport BART Station to Terminals 1 and 2. Additionally AC Transit, via
                                         the 50 and 805 lines, provide bus service between the Coliseum/Oakland
                                         Airport BART Station to Terminals 1 and 2. The site is conveniently
                                         positioned to take advantage of the Terminal 2 pick up and drop off
                                         locations.

Access to Terminal                       Good access to existing terminal but somewhat remote from the new
                                         Terminal A.	 Would rely on circulation within the terminal and parking
                                         facilities to access the terminals.	 Long walks but they are tolerable.	 The
                                         QTA Option 1 site has better proximity to Terminal A but worse to
                                         existing terminals, and the QTA Option 2 site is remote from all terminals
                                         and would likely require a shuttle bus. 	 Revised location provides good
                                         access to all terminals.




Jones Lang LaSalle
                                              	
Port of Oakland - Project Definition Report                        Appendix A - 19




Noise Considerations                    Parcel 6 is exposed to cumulative aircraft noise levels lower than 60
                                        decibels (dB) based on the 2010 community noise equivalent level (CNEL)
                                        contours contained in the Airport Master Plan. Federal and State of
                                        California	 guidelines	 suggest	 that	 hotel/motels	 are	 compatible	 with
                                        cumulative noise levels less than 60 dB.

Maximum allowable height (based         Based on an analysis of civil airport imaginary surfaces, as described in
on FAR Part 77 or TERPS)                Part 77 of the Code of Federal Regulations, Title 14, Objects Affecting
                                        Navigable Airspace (Part 77 surfaces) and obstacle clearance surfaces
                                        described in FAA Order 8260.3B, United States Standard for Terminal
                                        Instrument Procedures, (TERPS surfaces), the estimated height at which a
                                        building on this parcel would penetrate one or more Part 77 or TERPS
                                        surfaces is between 150 and 160 feet above mean sea level (MSL). See
                                        Exhibit 11.

Utilities (Infrastructure quality and   Water: New 12" and 16" line scheduled for completion with construction
capacity, proximity to mains, etc)      of new parking structure. Existing 12" transit line available on western
                                        edge of parcel.
                                        Gas: Limited existing lines. New 6" lines planned to serve area.
                                        Sewer: Existing 10" line runs through parcel.
                                        Electricity: Potential tie in through Terminal 2

Ownership Status and Title              City of Oakland
(existing leases, encumbrances,
easements, etc)

Geotechnical Considerations             Subsurface conditions generally consist of about 12 feet of medium dense
                                        and dense silty sand fill over about 9 to 10 feet of soft Bay Mud. 	 Below
                                        the Bay Mud is stiff and very stiff, silty clay with interbedded medium
                                        dense silty sand and sandy silt. Free groundwater is expected at a depth of
                                        about 8 feet below the ground surface.

                                        There is a high potential for soil liquefaction of the sand fill at the site,
                                        which would require mitigation or deep foundation systems.

                                        Foundation Scheme - Depending on the building design and structural
                                        loads, we expect that the foundation scheme would likely consist of deep
                                        pile foundations.

                                        Foundation cost would likely be much higher than conventional shallow
                                        spread footings.




Jones Lang LaSalle
                                              	
Port of Oakland – Project Definition Report                        Appendix A —20




Construction Considerations            The close-in site will require a high-rise solution similar to other close-in
                                       sites, but the substantial isolation of the facility from other buildings will
                                       avoid	 costs	 and	 inefficiencies	 associated	 with	 integrating	 different
                                       functions and contracting strategies.	 The site will require acoustical
                                       mitigations, but less than those required of Site 2 – North Terminal 1.

Relative Cost to Build                 Moderate/High ($319,000+ per key if full-service hotel – without land).
                                       Moreover, this project would have severe financial impacts to ongoing
                                       parking operations. Foregone revenue during and after construction would
                                       cost several millions. This would have to be factored into the project cost.

Anticipated market appetite for        High
hotel at site

Required Approvals (FAA, BCDC,         The parcel is zoned "M-40 – Heavy Industrial" and designated as "General
etc)                                   Industrial/Transportation"	 in	 the	 City	 of	 Oakland	 General	 Plan.
                                       Hotels/motels are not an allowable land use per these classifications. A
                                       General Plan amendment would be required to allow construction of a
                                       hotel on this parcel and the parcel would need to be rezoned by the City of
                                       Oakland.

                                       A revision to the Airport Layout Plan (ALP) and associated federal/FAA
                                       environmental	 documentation (most likely a documented categorical
                                       exclusion) would be required.	 An initial study (IS) would likely be
                                       required for the hotel project to ensure compliance with the California
                                       Environmental Quality Act (CEQA).

Speed to Market                        Would require coordination with airport parking plans and construction
                                       timing.	 Average/High, need to integrate with planning of other facilities
                                       but can proceed on an independent development track.

Other Considerations                   Proximity	 to	 4-level	 garage,	 long-term parking	 and Terminal	 2	 is
                                       advantageous. Shape of site would permit a variety of hotel construction
                                       models/concepts.




Jones Lang LaSalle
Port of Oakland - Project Definition Report	   Appendix B- 1




                                               Appendix B.
                                               Site Exhibits




Jones Lang LaSalle
                                                                 Oakland International Airport




     *      Potential hotel site




Source:      Aerial photograph: Port of Oakland, 2002
Prepared by: Ricondo & Associates, Inc., December 2007                             Exhibit 1

0           3,000 feet                                           Potential Hotel Sites
imenamenisommimi       north                             Oakland International Airport
On Airport Hotel Study                                                        December 2007
Site Suitability Analysis
                                                                                                       Oakland International Airport




               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, July 2007; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 2

0                300 feet Alr                                                                         Potential Hotel Site 1
                            north                                                              Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
                                                                                                       Oakland International Airport




               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, July 2007; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 3

0                300 feet    lin 	                                                                   Potential Hotel Site 1 a
..eim60%.■                  north                                                              Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
                                                                                                       Oakland International Airport




               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, July 2007; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 4

0                300 feet 1                                                                           Potential Hotel Site 2
■P"imedi■                   north                                                              Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
                                                                                                       Oakland International Airport




               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, July 2007; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 5

0                300 feet lr 	                                                                        Potential Hotel Site 3
                        north                                                                  Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
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                                                                                                       Oakland International Airport




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               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, 2002; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 7

0                300 feet 1r
                                                                                                      Potential Hotel Site 5
                            north                                                              Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
                                                                                                       Oakland International Airport




               Potential hotel parcel




Sources:     Aerial photograph: Port of Oakland, July 2007; Parcel boundaries: Jones Lang LaSalle
Prepared by: Ricondo & Associates, Inc., December 2007                                                                   Exhibit 8

0                300 feet
                                                                                                      Potential Hotel Site 6
                                    	
                            north                                                              Oakland International Airport
On Airport Hotel Study                                                                                               December 2007
Site Suitability Analysis
                                                                                                                                                                                                   Oakland International Airport




                                                                                                                                                                          Potential hotel parcel

                                                                                                                                                                          60 dB CNEL noise exposure contour
                                                                                                                                                                          65 dB CNEL noise exposure contour

                                                                                                                                                                          70 dB CNEL noise exposure contour

                                                                                                                                                                Notes:
                                                                                                                                                                CNEL = Community Noise Equivalent Level
                                                                                                                                                                dB = Decibel




Sources:                                                          bounoanes: Jones Lang LaSalle; 2010 noise contours: Oakland International ',Igo
               Aena: photograpn, Port of Oakland, Jury 2007; Parcel                                                                                 2006
Prepared by: Ricondo & Associates,    Inc., December 2007                                                                                                                                                             Exhibit 9
                                                                                                                                                           Community Noise Equivalent Level Contours 2010
                    300 feet   t                                                                                                                                                             Terminal Area
sirst"triiii.%ssiosotsrs

On Airport Hotel Study                                                                                                                                                                                            December 2007
Site Suitability Analysis
                                                                                                                                                                                                            Oakland International Airport




                                                                                                                                                                        Legend

                                                                                                                                                                                   Potential hotel parcel


                                                                                                                                                                        Estimated height (in feet above MSL) at which building
                                                                                                                                                                        would penetrate one or more TERPS or FAR Part 77 surfaces

                                                                                                                                                                                  50 - 60

                                                                                                                                                                                   60.1 - 70

                                                                                                                                                                                   70.1 - 80

                                                                                                                                                                                   90.1 - 90

                                                                                                                                                                                   90.1 - 100

                                                                                                                                                                                   100.1 - 110

                                                                                                                                                                                    10.1 - 120

                                                                                                                                                                                   120.1 - 130

                                                                                                                                                                                   130.1 - 140

                                                                                                                                                                                   140.1 - 150

                                                                                                                                                                                   150.1 - 160

                                                                                                                                                                        Notes:
                                                                                                                                                                        MSL = Mean seal level
                                                                                                                                                                        TERPS = Terminal Instrument Procedures

                                                                                                                                                                        Location map




Sources:                                                                                                                  Ricondo & Associates, Inc. ano o
         Aenal pnotograpn: Von or ualeand, July zuur; rercei ooundanes: Jones Lang LaSalle; FAR Part 77 and TERPS surfaces:                                no, 2005
Prepared by: Ricondo & Associates, Inc., December 2007                                                                                                                                                                       Exhibit 11
                                                                                                                                                                      Estimated Maximum Allowable Building Height
                 300 feet
                                                                                                                                                                                                   Terminal Area
On Airport Hotel Study                                                                                                                                                                                                    December 2007
Site Suitability Analysis
                                                                                                                                                                                           Oakland International Airport




                                                                                                                                                                  Potential hotel parcel


                                                                                                                                                        Estimated height (in feet above MSL( at which building
                                                                                                                                                        would penetrate one or more TERPS or FAR Part 77 surfaces

                                                                                                                                                                  10 - 20         MI        110.1 - 120

                                                                                                                                                                  20.1 - 30       IN        120.1 - 130

                                                                                                                                                                  30.1 - 40       IN        130.1 - 140

                                                                                                                                                                  40.1 - 50                 140.1 - 150

                                                                                                                                                                  50.1 - 60                 150.1 - 160

                                                                                                                                                                   60.1 - 70

                                                                                                                                                                  70.1 - 80

                                                                                                                                                                    0.1 - 90

                                                                                                                                                                   90.1 - 100

                                                                                                                                                                   100.1 - 110



                                                                                                                                                        Notes:
                                                                                                                                                        MSL -a Mean sea! level
                                                                                                                                                        TERPS = Terminal Instrument Procedures

                                                                                                                                                        Location map




Sources .Aenal photograph: Port of Oakland, 2002; Parcel boundanes: Jones Lang LaSalle; FAR Pan t and TERPS surfaces: Ricondo a Ass°came
                                                                                        '                                                  c., 2005
Prepared by, Ricondo & Associates, Inc., December 2007                                                                                                                                                      Exhibit 12
                                                                                                                                                      Estimated Maximum Allowable Building Height
                                                                                                                                                                                 North Field Area

On Airport Hotel Study                                                                                                                                                                                    December 2007
Site Suitability Analysis
Port of Oakland — Project Definition Report 	   Appendix C— 1




                                                Appendix C. Site
                                                Selection Matrix




Jones Lang LaSalle
Port of Oakland – Project Definition Report                                                                           Appendix C-2




            Criteria              Weighting       Parcel 1                      Parcel 1a                      Parcel 2                       Parcel 3                       Parcel 4                     Parcel 5                     Parcel 6
                                               Baggage Claim               Rental Car Facility          North Terminal One              Neil Armstrong Lot                   Northfield                  Doolittle Lot               Parking Bowl

                                                                           Above future                                                                               Northfield Site at              Parking facility
                                              Above future                 consolidated                 North of an                    Neil Armstrong                                                                             Parking Bowl
                                                                                                                                                                      corner of                       on the corner of
                                                                                                                                                                                                                             NA   Site, elbow of         NA
Location/Description                          Terminal A             NA    rental car              NA   adjacent to               NA   Parking Lot / Fuel        NA                             NA
                                                                                                                                                                      Hegenberger Rd &                Doolittle Dr. &
                                                                                                                                                                                                                                  Garage
                                              baggage claim                facility/new                 Terminal 1                     Farm Site
                                                                                                                                                                                                      Swan Way
                                                                                                                                                                      Doolittle Dr.
                                                                           parking garage

Size                                          2.66 acres             NA    109 acres               NA   1.54 acres                NA   4.61 acres                NA   2.52 acres                NA    6.49 acres             NA   3.20 acres             NA


Consistency with 2006 Airport                                                                      6    Good                      6    Good                      5    Good                      6     Good                   6    Good                   6
                                       5%     Good                   6     Good
Master Plan


                                                                                                        Potential                      Potential mitigation           Potential                                                                          5
Environmental Considerations           3%     No known issues        5     No known issues         5                              4                              3                              4     No known issues        5    No known issues
                                                                                                        environmental issues           issue                          environmental issues



                                                                                                        Marginal, integrated           Adjacent to Airport                                            Good but not visible        Easy identity for
                                              Very good, well              Good for public,                                                                           Good, close to                                              traffic in and out-    9
Vehicular Access                       5%                            8                             6    with loop & other              drive loop mad,           6                              8.5   along approach
                                              positioned on loop           difficult for service                                                                      intersection
                                                                                                        services                       access via Armstrong                                           routes                      bound


                                                                                                                                                                                                                                  Excellent, optimal,
                                                                                                                                       Reuires transit route          Requires transit route          Requires transit                                   10
Access to Public Transportation        5%     Excellent              9     Excellent, optimal      10   Acceptable                8                              5                               5                           5    adjacent to BART
                                                                                                                                       adjustment                     adjustment                      route adjustment
                                                                                                                                                                                                                                  facility in garage



                                              Excellent to A,                                           Excellent - adjacent to        Adjacent to Airport                                                                        Central to all
                                                                           Very good to all                                                                           Requires shuttle bus                                        terminals, access      8
Access to Terminal                     15%    acceptable to          7.5                           8    Terminals 1 & A;          10   Drive loop; best of the   5                               4    Most distant option    2
                                                                           terminals                                                                                  but is close-in
                                              Terminal 1                                                longer to Terminal 2           Off-Terminal sites                                                                         through garage




                                              Hotel development            Hotel development            Hotel development              Hotel development              Hotel development               Hotel development           Hotel development
                                              compatible with              compatible with              generally compatible      4    compatible with                generally compatible            compatible with             compatible with
Noise Considerations                   5%                             5                            5                                                             5                                                           5                           5
                                              anticipated noise            anticipated noise            with anticipated noise         anticipated noise              with anticipated noise          anticipated noise           anticipated noise
                                              levels                       levels                       levels.                        levels                         levels.                         levels                      levels




                                              Between 150 and              Between 150 and                                                                                                            Between 130 and             Between 150 and
                                                                                                                                       Between 115 and 135            Between 20 and 75                                           160 feet above
                                              160 feet above               160 feet above                                                                                                             160 feet above
                                                                                                        Building height less           feet above mean sea            feet above mean sea                                         mean sea level
                                              mean sea level               mean sea level                                                                                                             mean sea level                                      8
Maximum Allowable Height               2%                             8                             8   than 82 feet for ATCT      8   level (MSL) depending      7   level (MSL)                                             7
                                              (MSL) depending              (MSL) depending on                                                                                                         (MSL) depending             (MSL) depending
                                                                                                        line of sight.                 on the siting of the           depending on the                                            on the siting of the
                                              on the siting of the         the siting of the                                                                                                          on the siting of the
                                                                                                                                       building.                      siting of the building.                                     building.
                                              building.                    building.                                                                                                                  building.




Jones Lang LaSalle
Port of Oakland—Project Definition Report                                                                               Appendix C-3


            Criteria              Weighting          Parcel 1                  Parcel 1a                        Parcel 2                      Parcel 3                     Parcel 4                      Parcel 5                     Parcel 6
                                                Baggage Claim              Rental Car Facility           North Terminal One              Neil Armstrong Lot               Northfield                   Doolittle Lot                 Parking Bowl
                                                                             Above future
                                                                                                                                                                      Northfield Site at            Parking facility
                                                 Above future                consolidated                   North of and                Neil Armstrong
                                                                                                                                                                         corner of                  on the corner of          Parking Bowl Site,
Location/Description                              Terminal A         NA        rental car          NA       adjacent to           NA     Parking Lot /         NA                             NA                        NA                             NA
                                                                                                                                                                     Hegenberger Rd &                Doolittle Dr. &           elbow of Garage
                                                baggage claim                 facility/new                   Terminal 1                 Fuel Farm Site
                                                                                                                                                                        Doolittle Dr.                  Swan Way
                                                                            parking garage
Utilities                           NA%               TBD            TBD           TBD             TBD            TBD            TBD           TBD             TBD              TBD           TBD          TBD          TBD             TBD            TBD


                                              Very complex,                                                                             Next to, though not
                                                                           Complex, combine         5    Substantive, deep
Geotechn cal Considerations          3%       combine unique          3                                                           5     on wetlands; may        4    Minimal                   8    Minimal              8    Moderate                  5
                                                                           structures                    fdns
                                              structures                                                                                require deep fdns




                                                                                                                                        May require deep
                                                                                                                                                                                                                              High Rise but
                                              Very complex,                Complex, integrating          Constrained site,              pile-supported
                                                                                                                                                                     Minimal constraints or         Least constraints         independent facility;
Construction Considerations         15%       integrates different    1    structures but with      2    highrise solution,       3     foundation; but         7                              8                         9                              5
                                                                                                                                                                     complexity                     of any site               will impact parking
                                              functions and teams          common challenges             independent facility           less constrained
                                                                                                                                                                                                                              operations, revenue
                                                                                                                                        than terminal sites




                                                                                                                                        Low Cost, although                                                                    Moderate to high; will
                                                                                                         High, acoustical
                                                                           High, integrated                                             with the possibility                                                                  impact parking
Relative Cost to Build              15%       Very high               2                             3    issues; may require      3                             8    Low cost                  7    Lowest cost                                         5
                                                                           facility                                                     of deep pile-fndns,                                                              '    revenue or increase
                                                                                                         platform construction
                                                                                                                                        possible mitigaton                                                                    garage cost



                                                                                                                                        Average; best of             Average, slight                Low, competitive
Anticipated Market Appetite for                                                                                                         off-terminal           5.5   competitive               5    disadvantage re      3    High                      8
                                     10%      High                    8    High                     8    High                     8.5
Hotel at Site                                                                                                                           complex sites                advantage                      visibility


Required Approvals                   2%       Multiple approvals      5    Multiple approvals       5    Multiple approvals        5    Multiple approvals      5    Multiple approvals        5    Limited approvals    8    Multiple approvals        5


                                              Extremely long,              Long, integrated with                                                                     High, minimal                                       8    Average to high           6
Speed to Market                      15%                              2                             3         g
                                                                                                         Average to long           4    Average to high         6                              7    Highest
                                              prohibitive                  rental facility                                                                           interfaces



Sum Product of Weightings                                   4.58                         5.11                           5.53                         5.95                             6.19                       6.14                         6.46



OVERALL RANK
                                    100%                     7                            6                                5                           4                               2                          3                             1
(1=Most Desirable)




Janes Lang LaSalle
S91.6 VISO




             1/113JLI
                                                            BOARD MTG. DATE: 1/15/08



                                 AGENDA REPORT
TITLE: Approval of a License and Concession Agreement with Federal Express
       Corporation for Two Aircraft Parking Spaces at the Oakland Maintenance
       Center at a Rate of $11,016 per Month (1100 Airport Drive — South Airport)

AMOUNT:            $11,016 per Month

PARTIES INVOLVED:

      Corporate Name                                                      Location
      Federal Express Corporation                                         Memphis, TN
       Frederick W. Smith, Chairman, President and CEO                    Memphis, TN
       Teri M. Kerichenko, Regional Properties Manager                    Memphis, TN
       Frank H. Adams, Regional Airport Operations Manager                Memphis, TN
       Robin Van Gelder, Managing Director                                Oakland, CA



                                                                         sa
TYPE OF ACTION:                 Resolution

SUBMITTED BY:                   Steven Grossman, Director of Aviation

COMMITTEE ASSIGNED: Aviation

HEARD BY COMMITTEE: January 7, 2008

APPROVED BY:                    Omar Benjamin, Executive Director

This action would approve the terms and conditions, and authorize the Director of Aviation to
execute, a License and Concession Agreement with Federal Express Corporation, for two
aircraft parking spaces located at the Oakland Maintenance Center. Rental would be $11,016
per month.

FACTUAL BACKGROUND

Federal Express Corporation (FedEx) is the largest cargo airline at Oakland International
Airport currently operating an average of 50 flights per day from its sorting facility located on
73.67± acres at the South Airport (the Oakland "Hub"), pursuant to a Lease dating from June
2000. From this Hub, FedEx handles domestic and international shipments for its proprietary
FedEx Express business plus mail for the United States Postal Service.

As its flight activity increased, it no longer had room at the Hub to park all its aircraft on an
overnight basis. In late 1999, FedEx entered into an agreement with the Port covering
48,000± square feet of apron and paved land identified as Taxiway B2 on the opposite (east)
side of Taxiway Bravo from the main Oakland Hub facility (the "B2 Spot"). FedEx has
exclusive rights to this premises for aircraft parking (one widebody aircraft is the most that can


                                                1
                                                           BOARD MTG. DATE: 1/15/08


fit on this site) and pays rental currently at the rate of $7,353.78 per month (approximately
$0.153 per square foot). The B2 Spot is not part of the Oakland Hub leasehold.

Ordinance No. 3979, adopted by the Board at its February 20, 2007 meeting and documented
by a First Supplemental Agreement to the Lease, authorized the addition of 11.2± acres to the
Hub leasehold and authorized FedEx to commence construction on four widebody aircraft
gates, extend the fuel hydrant system, construct a new employee parking lot, and rehabilitate
portions of the existing concrete apron. During these construction activities, FedEx will
temporarily lose at least one aircraft parking position on its Hub leasehold.

To most efficiently accommodate FedEx's aircraft parking needs and maintain space flexibility:
(i) the current agreement with FedEx covering its exclusive use of the B2 Spot would be
terminated and (ii) FedEx would have non-exclusive access to two wide-body aircraft parking
positions at the Oakland Maintenance Center (the "OMC"). If the Port does not enter into a
new agreement for the OMC space, FedEx would be short one aircraft parking space each day
for the next several months during its construction project. That means that the Port's Airport
Operations staff will need to locate a vacant parking space everyday and FedEx would have
an inefficient operation since its extra aircraft could be parked anywhere on the airfield.

ANALYSIS

FedEx and the Port have negotiated a new License and Concession Agreement (L&C) based
on the following terms and conditions:

       Premises:          Non-exclusive use of 88,000± square feet of heavy concrete apron
                          space on the north side of the OMC (Port Building M110) located at
                          1100 Airport Drive at the South Airport. The Premises is adequate
                          for FedEx to park two widebody aircraft (Boeing DC10, MD11,
                          and/or Airbus A300). Further, the L&C provides the Port with the
                          flexibility to use the Premises when FedEx aircraft are not parked on
                          it and to relocate the specific Premises to a comparable nearby
                          location should the Port need to use the specific Premises for other
                          reasons.

       Term:              One year, subject to thirty-day termination by either party.

       Rental: $11,016 per month based on the Port's current monthly parking fee
                       of $5,508 for wide-body aircraft established pursuant to Port
                       Ordinance No. 3634; this equates to approximately $0.125 per
                       square foot. This rate is less than the current B2 Spot rental rate;
                       however, consideration must be given that FedEx has exclusive
                       rights to the B2 Spot, whereas the OMC premises is non-exclusive.
                       In addition, if during the Term the Port increases its monthly aircraft
                       parking fees, Rental would be adjusted upon the effective date of
                       the ordinance increasing such rates.



                                               2
                                                             BOARD MTG. DATE: 1/15/08


       Deposit: During the Term, FedEx shall maintain a Performance Deposit in the
                        amount of $33,048 which is equal to three-times the monthly Rental.
                        Port Finance has reviewed FedEx's credit and concurs with this
                        amount.

       Additional Terms: All other terms and conditions will be the Port standard form.

BUDGET & FINANCIAL IMPACT

The FY2007-2008 Budget anticipates annual FedEx aircraft parking revenue of $89,351
associated with the B2 Spot. Entering into the proposed L&C at mid-year, should result in
additional, unbudgeted revenue of $20,869.

STAFFING IMPACT

There will be no change in Port staffing as a result of entering into this L&C.

SUSTAINABILITY

There are no obvious environmental opportunities involved with entering into this L&C.

ENVIRONMENTAL

This project has been determined to be categorically exempt from requirements of the
California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15301.
CEQA does not apply to the operation and leasing of existing public or private structures,
facilities, mechanical equipment, or topographical features, involving negligible or expansion of
use beyond that existing at the time of the lead agency's determination.

This project is also exempt under CEQA Guidelines pursuant to Class I of Port Guidelines
Section 15301(p) which exempts the execution of leases or license and concession
agreements where the premises or licensed activity was previously leased or licensed to the
same or another person, and involving negligible or no expansion beyond that previously
existing

MARITIME AND AVIATION PROJECT LABOR AGREEMENT (MAPLA)

The matters contained in this Agenda Report do not fall within the scope of the Port of Oakland
MAPLA and the provisions of the MAPLA do not apply. However, if the tenant performs
construction type work that requires a Port permit and if the MAPLA is in effect for tenants
when Port Permits are requested, the MAPLA can apply to those activities.

OWNER CONTROLLED INSURANCE PROGRAM (OCIP)

Owner Controlled Insurance Program does not apply to this L&C.



                                                 3
                                                                          BOARD MTG. DATE: 1/15/08


GENERAL PLAN

Pursuant to Section 727 of the City of Oakland Charter, this project has been determined to
conform to the policies for the transportation designation of the Oakland General Plan.

LIVING WAGE

Based upon a review of the terms of the L&C and information provided by the tenant, it
appears that the living wage requirements set forth in Section 728 of the Charter of the City of
Oakland apply to this L&C because the contract is for a value greater than $50,000, as
calculated under Section 728, and the tenant employs more than 20 employees working on
Port-related work. Port Ordinance No. 3666, as amended, does not apply (tenancy
agreements are not subject to Port Ordinance No. 3666).

OPTIONS

1. Approve the proposed License and Concession Agreement with Federal Express
   Corporation as outlined above for rental of $11,016 per month, which would (i) satisfy
   FedEx's temporary aircraft parking shortfall, (ii) result in additional annual revenue to the
   Port by renting vacant aircraft apron space at the Oakland Maintenance Center, and
   (iii) increase the Port's space/use flexibility by terminating FedEx's exclusive use of the B2
   Spot and by replacing it with a non-exclusive aircraft parking spot at the OMC.

2. Reject the proposed License and Concession Agreement as outlined above, which would
    (i) complicate aircraft parking at the Airport, (ii) decrease the efficiency of FedEx's
    operations, (iii) provide no new guaranteed additional revenue to the Port, and
    (iv) potentially leave apron space vacant at the Oakland Maintenance Center.

3. Reject the proposed License and Concession Agreement, but recommend different terms
    and conditions.

RECOMMENDATION

It is recommended that the Board pass a resolution approving the above-described License
and Concession Agreement with Federal Express Corporation subject to the Port Attorney's
review and approval as to form of the License and Concession Agreement.


D:\bmark\My Documents\Fed Ex\OMC-RON\FedEx-3030-S-OMC-RON-Agenda Report.01 (01-15-08).doc
                                                   BOARD MTG. DATE: 1/15/08




      Board of               Approval of a License and Concession Agreement with
                             Federal Express Corporation for Two Aircraft Parking
Port Commissioners           Spaces at the Oakland Maintenance Center at a Rate of
   Calendar Item             $11,016 per Month (1100 Airport Drive — South Airport)



                  PROPOSED OMC
                 AIRCRAFT PARKING
                    Two SPOTS




                                    TAX roinY B2
                                     AIRCRAFT
                                      PARKING
                                       SPOT




   Airport Properties
                                              Oakland! :,
                                                 South Airport
                                                    Map Not to Scale


                                       5
'991-6 IAISC1




                1A1311
                                                              BOARD MTG. DATE: 1/15/08



                                    AGENDA REPORT
TITLE: Approval of License and Concession Agreement with Windjammers Air
              Charter Screening, LLC for Skycap, Wheelchair and Baggage Handling
              Services, Aircraft Cabin Cleaning Services and Private Security
              Screening Services for a One-Year Term With a Monthly Rental of $250
              or 10% of Gross Revenues, Whichever is Greater (#1 Airport Drive,
              South Airport)

AMOUNT:                  $250 Per Month or 10% of Gross Revenues, Whichever is Greater

PARTIES INVOLVED:

                         Corporate Name/Principal                     Location
                         Windjammers Air Charter Screening, LLC       Oakland, CA
                          Marian M. Howard, Partner
                          Willie N. Howard, Partner

TYPE OF ACTION:                            Resolution
SUBMITTED BY:                              Steven Grossman, Director of Aviation

COMMITTEE ASSIGNED:                       Aviation

SCHEDULED FOR COMMITTEE: January 7, 2008

APPROVED BY:                              Omar Benjamin, Executive Director

This action would approve the terms and conditions, and authorize the Director of
Aviation's execution, of a one-year License and Concession Agreement (L&C) with
Windjammers Air Charter Screening, LLC (Windjammers) for skycap, wheelchair and
baggage handling services, aircraft cabin cleaning services and private security screening
services.

FACTUAL BACKGROUND
Windjammers was granted access to the South Airport under a Right-of-Entry and
Indemnity Agreement dated April 10, 2007 to provide private security screening services.
No premises are occupied by Windjammers under the ROE. The monthly rent is $250 or
10% of gross revenues, whichever is greater. During the period of April 10, 2007 through
October 31, 2007, the Port received an average of $300 per month as a percentage of
gross revenues.

ANALYSIS
The proposed L&C would have a one-year term with a mutual 30-day termination provision
(either party may terminate on 30 days' notice) and authorize continued access to the
South Airport to provide private security screening services. In addition, Windjammers
would be authorized to provide skycap, wheelchair and baggage handling services, and

Windjammers 011508.doc                           1
                                                            BOARD MTG. DATE: 1/15/08


aircraft cabin cleaning services. No premises would be occupied by Windjammers under
the L&C. The monthly rent would remain $250 or 10% of gross revenues, whichever is
greater.

BUDGET & FINANCIAL IMPACT
This represents revenue to the Port of an average of $300 per month which is not included
in the FY08 Budget. Port Finance has completed a credit screening of Windjammers and
concurs with a performance deposit of $3,000.

STAFFING IMPACT
There will be no change in Port staffing as a result of entering into the L&C.

SUSTAINABILITY
There are no obvious environmental opportunities involved in entering into the L&C.

ENVIRONMENTAL
This project has been determined to be categorically exempt from requirements of the
California Environmental Quality Act (CEQA) Guidelines pursuant to CEQA Guidelines,
Article 19, Section 15300.4 and Class I of Port CEQA Guidelines Section 15301(p) which
exempts the renewals, extensions or amendments to leases or license and concession
agreements where the premises or licensed activity was previously leased or licensed to
the same or another person, and involving negligible or no expansion of use beyond that
previously existing.

MARITIME AND AVIATION PROJECT LABOR AGREEMENT (MAPLA)
The matters contained in this Agenda Sheet do not fall within the scope of the Port of
Oakland Maritime and Aviation Project Labor Agreement (MAPLA) and the provisions of
the MAPLA do not apply.

OWNER CONTROLLED INSURANCE PROGRAM (OCIP)
Owner Controlled Insurance Program does not apply to this L&C.

GENERAL PLAN
This action does not meet the definition of "project" under the City of Oakland General
Plan, and no conformity determination is required.

LIVING WAGE
Based upon a review of the terms of the agreement and information provided by the tenant,
it appears that the living wage requirements set forth in Section 728 of the Charter of the
City of Oakland do not apply because the agreement is for a value less than $50,000, as
calculated under Section 728, and the tenant employs fewer than 21 employees working on
Port-related work (less than the threshold for coverage under Section 728 of the Charter;
tenancy agreements are not subject to Port Ordinance No. 3666). However, the tenant will
be required to certify that should living wage obligations become applicable, the tenant
shall comply with all of its obligations.


                                               2
Windjammers 011508.doc
                                                          BOARD MTG. DATE: 1/15/08


OPTIONS
1. Approve the terms and conditions and authorize the execution of the License and
    Concession Agreement as outlined above, thereby permitting Windjammers to provide
    skycap, wheelchair and baggage handling services, aircraft cabin cleaning services
    and private security screening services upon expiration of the ROE on the same terms
    and conditions as other operators at the South Airport.
2.  Reject the proposed License and Concession Agreement, which would (i) result in the
    termination of Windjammers' operating privileges at the South Airport, (ii) increase the
    airlines' staffing needs as its employees would need to provide the services, and (iii)
    result in a loss of $300 monthly revenue.
3.  Reject the proposed License and Concession Agreement, but recommend different
    terms and conditions.

RECOMMENDATION
It is recommended that the Board pass a resolution approving the execution of the above-
described License and Concession Agreement with Windjammers Air Charter Screening,
LLC, subject to the Port Attorney's review and approval as to form and legality.




                                             3
Windjammers 011508.doc
'69 1.6 IAIS4




                5 W311
                                                                       BOARD MTG. DATE: 1/15/08



                                          AGENDA REPORT
TITLE: First Reading of an Ordinance Approving and Authorizing Execution of a
                Space/Use Permit with Verified Identity Pass, Inc. dba Clear Registered
                Traveler ("Clear") to Provide Registered Traveler Services at the Airport
                for a Minimum Annual Guaranteed Payment of $250,000
                (#1 Airport Drive, South Airport)

AMOUNT:                  $250,000 Per Annum – Minimum Guarantee

PARTIES INVOLVED:

            Corporate Name/Principal                                          Location
            Verified Identity Pass, Inc.                                      New York, New York
             Steven Brill, Founder, Chairman and CEO
                                                                        4.•

             Larry Zmuda, COO
             Timothy Larrison, CFO
             Etoy Brown, Regional Operations Manager

TYPE OF ACTION:                                     Ordinance

SUBMITTED BY:                                       Steven Grossman, Director of Aviation Cij.,,

COMMITTEE ASSIGNED:                                 Aviation

SCHEDULED FOR COMMITTEE: January 7, 2008

APPROVED BY:                                        Omar Benjamin, Executive Director

This action would approve the terms and conditions, and authorize execution by the
Executive Director, of a new three-year Space/Use Permit with Verified Identity Pass, Inc.,
dba Clear Registered Traveler ("Clear") to provide passenger screening services at
Terminals 1 and 2 at the Airport (the SUP). The minimum annual fee for providing these
services would be $250,000. At the Port's option, the term may be extended for two one-
year periods. In addition, and subject to the terms and conditions of the SUP, this action
would authorize the Director of Aviation to enter into a First Amendment to the SUP to
document the defined space to be occupied by Clear (currently not identified) once those
areas have been determined in collaboration between Clear and Port staff.

FACTUAL BACKGROUND

On 28 September 2007, the Aviation Division issued a Request for Proposals (REP) for
selecting a private sector service provider to establish, operate and maintain a Registered
Traveler (RT) Program in Terminals 1 and 2 at the Airport. RT is a program approved by
the Transportation Security Administration (TSA) for the private sector to develop
passenger security screening services that are interchangeable among multiple RT service
providers (SP) and airports with the intent that RT Participants would be expedited through
VIP-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 1
                                                                  BOARD MTG. DATE: 1/15/08


the screening lines and process. Currently, there are five TSA-approved RT SPs; although
at this time, only two SPs have operational systems at airports. For all SPs, the RT
process is divided into multiple stages:

Enrollment can take be initiated online, at the airport, at off-site locations, or in mobile
centers.

     $ During initial enrollment, RT Participants submit biographic information required by
       the TSA, set-up individual accounts, arrange for payment of fees and acknowledge
       privacy and data security policies.

     $ Following the initial enrollment steps, RT Participants complete the in-person
       process (or by appearing in person if the initial steps were taken online) by
       presenting approved identification documents and allowing biometric (digital
       photograph, fingerprinting and iris scanning) capture. All biographic and biometric
       information is transmitted electronically to the TSA's clearing-house where the RT
       Participant is screened for security threats.

     $ If approved, the RT Participant will receive an identification card with stored personal
       information; this card is inter-operable between all SPs at all airports with RT
       programs.

Verification takes place when the RT Participant arrives at the passenger security
checkpoint and is directed by signage to the RT area.

     $ The SP installs verification stations (similar to a bank ATM) that verify the RT
       Participant's identity by comparing biometric information captured by the station
       against the biometric templates stored on the card. SPs staff the stations with
       attendants who assist the RT Participant through the process.

     $ The RT Participant inserts the card into the station and submits to biometric
       scanning (fingerprints and/or iris).

     $ Provided that the RT Participant's card and account can be validated and that there
        is a biometric match, a TSA-approved receipt will be printed by the station
        confirming the match; the receipt includes a digital photo of the RT Participant.

     $ The attendant then escorts the RT Participant to the TSA screening area. Initially,
       RT Participants will use the same TSA security lanes as all other passengers;
       however RT Participants will be advanced to the head of the line.

     $ When enough passengers have signed up to become RT Participants, it is
       anticipated that security lane(s) will be dedicated for exclusive RT use.

Two out of the five TSA-approved SPs responded to the Port's RFP; Verified Identity
Pass, Inc. (dba Clear) and Flo Corporation. Both applicants were determined to have met
all criteria specified in the RFP, including providing technologies and services that are
VIP-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 2
                                                                     BOARD MTG. DATE: 1/15/08


"designated" and "certified" under the U.S. SAFETY Act, which provides added liability
coverage for the Port. A selection panel (including airline, alternate airport and Port staff)
was convened, and upon review, determined that Clear's proposal is superior. The
proposers were evaluated on the following criteria:
                                           EVALUATION CRITERIA                                Points

        1.   Business, Operations and Management Plan                                           30
             The completeness, depth, quality, efficiency, reasonableness and feasibility
             of Proposer's Plan
        2. Proposed Equipment                                                                   10
             The quality and benefits to customer service of the equipment proposed
        3. Experience and Qualifications of Proposer and Personnel                              30
             The background, qualifications, reputation, depth of management and
             experience of Proposer and experience and qualifications of senior
             management and key personnel
        4. Capital Investment and Financial Ability to Perform                                  15
             The financial capability information provided and the reasonableness of its
             profit and loss projections, and the level of capital investment and source of
             funds
        5. Financial Offer                                                                      15
             Proposed Minimum Monthly Payment and Percentage Fee(s)
             Total Points                                                                      100

  JALYSIS

The RFP incorporated the Port's standard form concessions Space/Use Permit customized
for the RT Program; the proposed terms and conditions are as follows:

     Perm dee:                 Verified Identity Pass, Inc., a Delaware corporation, dba Clear
                               Registered Traveler ("Clear").

     Uses:                     Establish, operate and maintain a Registered Traveler Program at
                               Oakland International Airport.

    Assigned Space: Clear will construct and operate Enrollment Centers and Verification
                      Stations/Lanes in both Terminals 1 and 2. In addition, Clear may
                      need back-office space and one or more break rooms. At the time
                      this Agenda Report is to be presented to the Board, Clear has not
                      determined the exact locations of the Enrollment Centers or the
                      Verification Stations/Lanes, nor has it determined if it will need office
                      and/or break room space. Clear and Port staff will work together to
                      most efficiently plan these spaces. The definition of Assigned
                      Space will be clarified in the proposed First Amendment.



VIP-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 3
                                                                   BOARD MTG. DATE: 1/15/08


                                The Enrollment Centers, and the office and break room spaces are
                                exclusive use. As mentioned above, the Verification Station/Lane
                                areas are preferential use; i.e., shared by non-RT passengers.

     Consideration:             Clear will pay the Port a combination of fees, some of which are
                                combined to be the Monthly Rent:

        • MAG:                  The minimum annual guaranteed fee (MAG) will be $250,000;
                                payable at the rate of $20,833 per month.

        • Percentage:           Subject to the MAG, Clear will pay the Port a fee of 10.5% of "local"
                                gross revenues. Local is defined as those revenues derived from
                                on-site enrollments at the Airport and from off-site enrollment
                                locations in Alameda and Contra Costa Counties. The Port will also
                                receive this 10.5% when those local RT Participants renew their
                                memberships.

        • Space Rent:           Office and Break Room Space(s): Clear has not determined if it will
                                need office and/or break room space in the Terminals. There is
                                extremely little vacant space at the Airport; however, the Port will
                                commit to providing several hundred square feet of such space.
                                Rental will be based on the Type II Rate as specified in the Rates
                                and Charges Ordinance (FY2007-08 rates is $14.110 per square
                                foot per month).

                                Enrollment Centers and Verification Stations/Lanes: No Space Rent
                                will be charged for these spaces; consideration for the use of these
                                spaces is incorporated within the MAG/Percentage of Gross
                                Proceeds.

        • Initial Fee:          Clear will be required to pay a one-time administrative fee of $5,000
                                to reimburse the Port for a portion of the administrative costs
                                incurred in connection with entering into the SUP.

     Deposit:                  Clear will be required to maintain a Performance Deposit equal to at
                               least three times the Monthly Rent. Since all space needs have not
                               been determined, the final amount of the Performance Deposit will
                               be established pursuant to the First Amendment. However, in no
                               event will it be less than $62,500 (3 x $20,833 per month MAG).

     Term/Options:             The initial Term will be three (3) years from the Commencement
                               Date of the SUP (anticipated to be sometime in the first quarter of
                               2008). The Port shall have the unilateral option to extend the Term
                               for two (2) additional one (1) year periods.

     Relocation:               The Port is constructing and will continue to plan, design and
                               potentially construct its on-going Airport Development Project (ADP),
VIP Clear-Registered Traveler- Agenda Report.01 (01-15-08).doc 4
                                                                   BOARD MTG. DATE: 1/15/08


                               which may include reconstruction in areas where the Assigned
                               Space is located. The SUP specifically states that, if so needed,
                               Clear will be required to relocate all or a portion of its operations to
                               accommodate the ADP. The costs of such ADP-related relocations
                               will be borne solely by Clear (i.e., at no cost to the Port). The Port
                               and Clear will work together cooperatively to identify suitable
                               replacement space within the Terminals and the change in space,
                               and any adjustments to the Monthly Rent and Performance Deposit
                               will be documented in a future supplemental agreement.

     First Amendment: Until Clear has the opportunity to fully analyze the Airport's layout,
                      passenger flow, ADP, customer base, etc., it cannot properly design
                      its improvements nor determine its specific space needs. The RFP
                      anticipated that the successful proposer would have the opportunity
                      to evaluate the Airport after its selection and certain details could be
                      refined after execution of the SUP and those refinements would be
                      reflected in a First Amendment. Except for space needs and the
                      resulting adjustment in the amounts for Monthly Rent and the
                      Performance Deposit, the First Amendment will not amend any other
                      terms or conditions of the SUP.

     Investment:               Clear has committed to a minimum capital investment of $1,560,500
                               in its installation of the RT Program at the Airport.

BUDGET & FINANCIAL IMPACT

The RT Program is new to the Airport and no revenue was budgeted for FY2007-08.
Assuming the Board approves the SUP and it commences in the first quarter of 2008, the
Port will realize additional revenue of $20,833 per month for the balance of FY2007-08 and
in future fiscal years.

STAFFING IMPACT

There will be no change in Port staffing as a result of entering into the SUP.

SUSTAINABILITY

There are no obvious environmental opportunities involved in entering into the SUP.

ENVIRONMENTAL

This project has been determined to be categorically exempt from requirements of the
California Environmental Quality Act and the Port CEQA Guidelines pursuant to CEQA
Guidelines, Article 19, Section 15300.4, which directs public agencies, in the course of
establishing their own procedures, to list specific activities that fall within each of the exempt
classes categorized under Article 19 (Categorical Exemptions) and Class I of Port CEQA
Guidelines Section 15301(p) which exempts the execution of leases or license and
VIP-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 5
                                                                  BOARD MTG. DATE: 1/15/08


concession agreements where the premises or licensed activity was previously leased or
licensed to the same or another person, and involving negligible or no expansion of use
beyond that previously existing. Any proposed tenant improvements or construction work
will require a Port permit; at such time additional review will be conducted to ensure that
Clear's project complies with CEQA.

MARITIME AND AVIATION PROJECT LABOR AGREEMENT (MAPLA)

Construction type work that is within the scope of the Port of Oakland Maritime and Aviation
Project Labor Agreement (MAPLA) may be performed by Clear during the term of the SUP.
If the MAPLA remains in effect for tenant work and if such work exceeds the thresholds
required for coverage of tenant work under the MAPLA, the provisions of MAPLA will apply
only to that work.

OWNER CONTROLLED INSURANCE PROGRAM (OCIP)

The work performed under this SUP is not within the scope of the Port of Oakland's Owner
Controlled Insurance Program.

GENERAL PLAN

Pursuant to Section 727 of the City of Oakland Charter, entering into this SUP has been
determined to conform to the policies for the transportation designation of the Oakland
General Plan.

LIVING WAGE

Based upon a review of the terms of the agreement and information provided by the tenant,
it appears that the living wage requirements set forth in Section 728 of the Charter of the
City of Oakland apply to this agreement because the contract is for a value greater than
$50,000, as calculated under Section 728, and the tenant employs more than 20
employees working on Port-related work. Port Ordinance No. 3666, as amended, does not
apply (tenancy agreements are not subject to Port Ordinance No. 3666).

OPTIONS

         Approve the terms and conditions of the Space/Use Permit with Verified Identity
         Pass, Inc. dba Clear as described above and authorize its execution by the
         Executive Director. In addition, when Clear and the Port have completed the space
         plan and design, authorize the Director of Aviation to execute a First Amendment to
         define the Assigned Space and establish Space Rent. This action will allow the
         Airport to provide an innovative customer service to the flying public at no cost to the
         Port, but which will generate a minimum of $250,000 per year in new revenue.

    2. Reject the terms and conditions of the Space/Use Permit with Verified Identity Pass,
        Inc. dba Clear as described above, which means that Oakland will be the only Bay

V1P-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 6
                                                                  BOARD MTG. DATE: 1/15/08


         Area airport not to offer the Registered Traveler service to the flying public and the
         Port will not receive a minimum of $250,000 per year in new revenue.

     3. Reject the terms and conditions of the Space/Use Permit with Verified Identity Pass,
         Inc. dba Clear as described above, but recommend different terms and conditions.

RECOMMENDATION

It is recommended that the Board give first reading to an ordinance (i) approving the terms
and conditions of the proposed Space/Use Permit with Verified Identity Pass, Inc. dba
Clear as described above, (ii) authorizing execution of the Space/Use Permit by the
Executive Director, and (iii) authorizing the Director of Aviation to execute a First
Amendment to the Space/Use Permit which will define the Assigned Space, Space Rent
and Performance Deposit; subject to the Port Attorney's review and approval as to form of
the Space/Use Permit and the First Amendment.




VIP-Clear-Registered Traveler-Agenda Report.01 (01-15-08).doc 7
'991,6 tAISCI




                9 Wall
                                                           BOARD MTG. DATE: 1/15/08


                               AGENDA REPORT
TITLE:            Approval to Waive Formal Request-for-Proposal Process for one Wirtgen
                  W5ODC Four Wheeled Cold Pavement Milling Machine and Service
                  Agreement for a total cost of $214,999.74
AMOUNT:           $214,999/4
PARTIES INVOLVED:
                   Corporate Name/Principal           Location
                   Nixon Egli Equipment Co            Tracy, CA


TYPE OF ACTION:                       Resolution
SUBMITTED BY:                         Steven Grossman Sg,
COMMITTEE ASSIGNED:                   Aviation Committee
SCHEDULED FOR COMMITTEE: January 7, 2008
APPROVED BY:                          Omar Benjamin, Executive Director

FACTUAL BACKGROUND

The Harbor Facilities Department is responsible for managing the Port's Fleet which
includes approximately 625 vehicles, trucks and various types of construction and
maintenance equipment. Every effort is normally made to purchase vehicles and
equipment through open market procurement by solicitation of competitive quotations and
through utilization of existing competed Municipal and State of California contracts.
In this case, the Purchasing Department utilized informal competitive bidding to solicit
quotes because, (1) the subject equipment is not available through existing Municipal or
State of California contracts and, (2) to meet time, operational necessity and Airport
maintenance requirements.
For this reason, it is recommended that the Board waive the requirement for employing a
formal Request-for-Proposal Process (RFP), accept the informal competitive bid from the
above dealer and authorize the Executive Director to direct staff to procure the equipment
along with a subject service agreement as further delineated below.
                                                           BOARD MTG. DATE: 1/15/08



ANALYSIS

The subject Cold Pavement Milling Machine is designed to grind out worn sections of
existing pavement generally in preparation for re-surfacing or overlaying. The subject
machine is a new piece of equipment that will expand the fleet (i.e. the maintenance of the
unit was never part of staffs responsibilities). Currently this type of equipment is not
offered under the California Multiple Award Schedule contract (CMAS) nor is it listed on any
known municipal or state master agreements. If purchased, the Pavement Milling Machine
would be unique to the Port's Fleet. Even though the unit has a full one-year parts and
labor warranty, it is complicated and would require special off-site training to learn how to
service and repair it. While simple maintenance such as greasing and checking fluid levels
may still be performed in-house, it is proposed that the more complicated maintenance and
repair components be performed by the vendor. This would allow garage staff to stay
focused on normal preventive maintenance and service-order work instead of being
burdened with maintaining a complicated machine requiring special training. It also
provides relief in the event the machine is damaged - which could happen if it strikes a
buried metal object such as a paved-over manhole cover. The cost of the service
agreement is approximately $7,000 per year and for reasons of economy and performance,
staff is recommending a 5 year service agreement for an aggregate amount of $35,000.
Because it is fleet expanding, the maintenance and major repair costs should eventually be
charged to the user Division starting the next budget cycle.

Option 4 below provides a leasing alternative. Note that the Port prepared a Purchase vs
Lease analysis (see attached) that computes the present value (PV) lease payments and
compares it to the purchase price assumed at $179,999.74. The analysis is based on an
interest rate of 4.75% computed over both a 3 and 5 year term. This would be a capital
lease as the Port would own the equipment at the end of the lease term. The conclusion
reached in the analysis is that the Port would be better off purchasing the equipment if it
can borrow money at a rate below 5.32%. Note that it is likely that the Port can currently
borrow money at approximately 3.5%.


BUDGET & FINANCIAL IMPACT

The quoted price to procure the subject Cold Milling Machine including tax, license fees etc.
is $179.999.74 plus incidental fees/costs and escalation if any. The funds to purchase
this equipment are included in the FY 2007-08 capital budget under Capital Equipment Item
No. A07.10. The funds for maintaining the equipment this fiscal year will come out of
Harbor Facilities' 07/08 operating budget. The average burdened hourly straight-time rate
which includes Port overhead for a Port equipment mechanic is approximately $151/hr as
opposed to the quoted straight time off-site hourly rate for the vendor's mechanics of
$100/hr which includes the vendor's overhead and profit (straight time hourly rates at the
vendor's place of business is $90/hr). The total cost of the equipment plus the service
agreement is estimated at $214,999.74.



                                              2
                                                           BOARD MTG. DATE: 1/15/08


STAFFING IMPACT

No loss of employment or salary by any person having permanent status in the competitive
service will occur as a result of the subject service contract.


SUSTAINABILITY

At this time no alternative powered or Hybrid equipment is available in this class of
equipment. However, the diesel engine is expected to be compliant with the latest CARB,
regulations through 2010.


ENVIRONMENTAL

The California Environmental Quality Act (CEQA) Guidelines, Section 15061(b)(3) ("the
general rule") states that CEQA applies only to projects that have the potential for causing
a significant effect on the environment. It can be seen with certainty that waiving RFP
requirements and authorizing the purchase of equipment to be used in the Port's Fleet will
not have a significant effect on the environment, and therefore is not a project under CEQA,
and no environmental review is required.


— ARITIME AND AVIATION PROJECT LABOR AGREEMENT (MAPLA)

The matters contained in this Agenda Report do not fall within the scope of the Port of
Oakland Maritime and Aviation Project Labor Agreement (MAPLA) and the provisions of
the MAPLA do not apply.


OWNER CONTROLLED INSURANCE PROGRAM (OCIP)

The Owner Controlled Insurance Program (OCIP) does not apply to this action.


GENERAL PLAN

The procurement of vehicles and equipment does not meet the definition of "project" under
the City of Oakland General Plan, and therefore no conformity determination is required.


LIVING WAGE

Based upon a review of the terms of the agreement and information provided by the
contractor, it appears that the living wage requirements set forth in Section 728 of the
Charter of the City of Oakland and Port Ordinance Number 3666, as amended, do not
apply because the vendor employs fewer than the 21 employees working on Port-related
                                              3
                                                            BOARD MTG. DATE: 1/15/08


work required for coverage and because the "service" contract is for a value of $50,000 or
less, as calculated under Section 728, less than the amount required for coverage.



OPTIONS

   1.     Authorize the purchase of (1) Wirtgen W5ODC Four-Wheel Cold Pavement
          Grinder with a service agreement.

   2.     Authorize the purchase of (1) Wirtgen W5ODC Four-Wheel Cold Pavement
          Grinder without a service agreement, but pay more for in-house service which
          must include training and hiring of an additional Port mechanic.

   3.     Postpone the procurement of this equipment and continue utilizing lower
          productivity and less efficient equipment or methods.

   4.     Lease the equipment (see Analysis Section above).



RECOMMENDATION

It is recommended that the Board find and determine that it is in the best interest of the Port
to waive the requirement for a formal Request-for-Proposal process and to authorize the
Executive Director to direct staff to purchase and not lease one (1) Wirtgen W5ODC Four
Wheeled Cold Pavement Milling Machine under purchase order contract in the amount of
approximately $179,999.74 plus incidental costs, if any, to Nixon Egli Equipment Co. of
Tracy CA and, (2) include in the purchase order contract an as-needed service agreement
in an amount not to exceed $35,000 over a period of 5 years to provide specialized
maintenance service and major repairs.




                                              4
S91,6 IAISCl




               L Wall
                                                                BOARD MTG. DATE: 1/15/08



                                     AGENDA REPORT
TITLE: Ratification of $15,000 and Approval to spend $90,000 to Kelly's Truck
       Repair for Performing Vehicle Maintenance on the Port's Fleet of 13
       Compressed Natural Gas (CNG) "Cut-away" Parking Shuttles Operating
       at Oakland International Airport.

AMOUNT:                   $105,000

PARTIES INVOLVED:

                          Corporate Name/Principal             Location
                          Kelly's Truck Repair/Kelly Green     San Leandro CA
                          - President


TYPE OF ACTION:                              Resolution

SUBMITTED BY:                                Steven Grossman, Director of Aviation

COMMITTEE ASSIGNED:                         Aviation

SCHEDULED FOR COMMITTEE: January 7, 2008

APPROVED BY:                                Omar Benjamin, Executive Director

FACTUAL BACKGROUND

Kelly's Truck Repair performs the maintenance on the Port's fleet of thirteen Compressed
Natural Gas (CNG) "Cut-away Shuttles" and is paid through a progressive Purchase Order
agreement with a $50,000 limit. The charges recently exceeded the allowable limit of
$50,000. This Purchase Order was established to cover the maintenance of the CNG
shuttles until an RFP process for a Vehicle Maintenance Agreement has been completed
which would include all of the currently owned Port Shuttle Buses operating at the Airport.
The Port has steadily increased its shuttle service in the parking lots in effort to improve its
customer service and increase Airport parking revenue. Due to increased operating hours
and an aging fleet, maintenance costs for these 13 shuttles has increased over initial
estimates.

ANALYSIS

Vehicle maintenance expense for FY 2007-08 have exceeded the $50,000 Purchase Order
limit by approximately $15,000. Additionally, anticipated costs for the remainder of this
fiscal year are $90,000. Port Aviation and Engineering staff is developing a new Bus
Maintenance RFP, anticipate soliciting proposals by June 2008.



Agenda Titles011508.doc                             1
                                                           BOARD MTG. DATE: 1/15/08


BUDGET & FINANCIAL IMPACT

FY 2007-08 bus maintenance expense exceeded the $50,000 Purchase Order limit by
$15,000. Additionally, anticipated cost for the remainder of the fiscal year is $90,000.
Hence, anticipated full funding required for the reminder of the fiscal year is approximately
$105,000.

STAFFING IMPACT

There will be no change in Port staffing as a result of entering into this contractual
agreement.

SUSTAINABILITY

There are no obvious environmental opportunities involved in entering into this Contractual
Agreement.

ENVIRONMENTAL

The California Environmental Quality Act (CEQA) Guidelines, Section 15061(b)(3) ("the
general rule") states that CEQA applies only to projects that have the potential for causing
a significant effect on the environment. The action before the Board of Port Commissioners
is to request ratification of a $15,000 payment and approve an increase in the allowable
spending limit under the Purchase Order agreement for vehicle maintenance services. The
Vehicle Maintenance Agreement will not result in a physical change in the environment;
therefore, the proposed action is not a "project" under CEQA. This action is not subject to
CEQA pursuant to the "General Rule", CEQA Guidelines Section 15061(b)(3). It is seen
with certainty that the above-described action will not result in a significant effect on the
environment.

MARITIME AND AVIATION PROJECT LABOR AGREEMENT (MAPLA)

The matters contained in this Agenda Report do not fall within the scope of the Port of
Oakland Maritime and Aviation Project Labor Agreement (MAPLA) and the provisions of
the MAPLA do not apply.

OWNER CONTROLLED INSURANCE PROGRAM (OCIP)

The Owner Controlled Insurance Program (OCIP), coverage does not apply to this
agreement.

GENERAL PLAN

This project is for professional services and will not directly include any alteration of
property. Development projects that result from these professional services will be subject
to separate findings of conformity with the City of Oakland General Plan in accordance with
Section 727 of the Charter.

Agenda Titles011508.doc
                                                           BOARD MTG. DATE: 1/15/08


LIVING WAGE

Based upon a review of the terms of the agreement and information provided by the
contractor, it appears that the living wage requirements set forth in Section 728 of the
Charter of the City of Oakland and Port Ordinance Number 3666, as amended, apply to this
agreement (the contract is for a value greater than $50,000, as calculated under Section
728 and Port Ordinance Number 3666, as amended, and the contractor employs more than
20 employees working on Port-related work).

OPTIONS

         Ratify the $15,000 payment to Kelly's Truck Repair for exceeding the $50,000
         Purchase Order limit, and approve spending of up to $90,000 to Kelly's Truck Repair
         for the remainder of FY 2007-08 while preparation is underway for an RFP Vehicle
         Maintenance Agreement.

    2. Do not ratify the $15,000 and approve up to $90,000 in payments to Kelly's Truck
       Repair. This would leave the Port with no funded maintenance agreement for the
       repair of vehicles used to provide Airport parking shuttle service.

RECOMMENDATION

It is recommended that the Board ratify the $15,000 payment to Kelly's Truck Repair for
exceeding the $50,000 Purchase Order limit, and approve spending of up to $90,000 to
Kelly's Truck Repair for future vehicle maintenance services.




Agenda Titles011508.doc
9966 AISCI




             8 IN311
                                                           BOARD MTG. DATE: 1/15/08



                                 AGENDA REPORT
TITLE:            Ratification of Addendum, Approval of Bid Protest Hearing Officer's
                  Recommendation, and Award of Contract for Expansion and
                  Rehabilitation of Closed Circuit Television (CCTV)    , South Field,
                  OIA, Al P 3-06-0170-36, in the Amount of $694,293

AMOUNT:           $694,293.61

PARTIES INVOLVED:


                     Adesta Limited Partnership             an Leandro, CA
                       Bob Sommerfeld, President

TYPE OF ACTION:                        Resolution

SUBMITTED BY:                          Jerry Serventi, D       f Engineering

COMMITTEE ASSIGNED:                    Aviation

SCHEDULED FOR COMMITTEE:               January , 008

APPROVED BY:                             m Be ja 'n, Executive Director


FACTUAL BACKGROU

The CCTV system                    proposed, wil provide improved visual surveillance and
enhance recordin                       d around Terminal 1 and the Passenger Boarding
Bridges.    Acc                                Project Manual for the Expansion and
Rehabilitation o                 ircu, evision (CCTV) System, South Field, OIA,
AIP 3-06-0170-36, were            d and approved for bidding.

The foll          ree (3) bids        oject were received and opened on October 24, 2007:

             BIDDERS                          LOCATION              TOTAL BID PRICE

   • -s a•mited Pa ne ship                 San Leandro, CA              $694,293.61

 BECI E    t 'c                              Oakland, CA                $800,000.00

 Johnson Contr•, Inc.                        Hayward, CA                $860,017.00




                                                                                      CCTV System
                                                                               12/27/2007/10:26 AM
                                                                                      167640.v1
                                                             BOARD MTG. DATE: 1/15/08


Accordingly, because this project contains federal funds, the Maritime and Aviation Project
Labor Agreement (MAPLA) will not apply.

OWNER CONTROLLED INSURANCE PROGRAM (OCIP)

As this project and scope is funded under the CIP, the app                      Owner Controlled
Insurance Program (OCIP) coverage and provisions apply.

GENERAL PLAN

Pursuant to Section 727 of the City Charter, this project has been determi                    onform
to the transportation designation for the sites in the Oa  d General Plan.

LIVING WAGE

Based upon a review of the terms of the agr                     nformation provided by the
contractor, it appears that neither the Port's Liv              Ordinance (Port Ordinance
No. 3666) nor the living wage requirements set forth             n 728 of the Charter of the
City of Oakland apply to this agreement because the co               a construction contract
covered by a local, state or federal p vailing wage statute a      s not a "service contract"
as defined by Port Ordinance No. 3              arter Section 728. However, the contractor
will be required to certify that sh                    obligations become applicable, the
contractor shall comply with all of its o

OPTIONS

            Do not award               ct until the      ing wage complaint against Adesta has
            been thoroug                ed. This opt    may result in loss of Federal grant funds
            since the p                  n of August 2008 may not be met.

2.          Award the                                his project has been competitively bid and the
            low bid is withi         oject budget. Consequently, staff believes that the award of
            the contract to             west responsible responsive bidder, Adesta Limited
            Partnership, is in the           est of the Port. This is the recommended option.



                              val by the FAA, it is recommended that the Board find and
                               best interest of the Port to:
                              dum and award the contract to Adesta Limited Partnership for the
                            d:
2.          Approve • e Bid Protest Hearing Officer's Recommendation; and,
3.          Reject the other bids and return the bid securities to the respective bidders.


                                                    5
                                                                                            CCTV System
                                                                                     12/27/2007/10:26 AM
167640.v1
                                                    January 15, 2008
                                                    Page 6




     PORT OF OAKLAND
T: \ ENG \ CURRENT \ BOARDLETTERIMP \ 107097BLdwg
                                                             EXPANSION AND REHABILITATION OF CLOSED CIRCUIT TELEVISION (CCTV) SYSTEM
                                                                          SOUTH FIELD, OAKLAND INTERNATIONAL AIRPORT
                                                                                         A1P 3-06-0170-36
 ID            Task Name                                          Duration            Start            Finish          Janu          Febru     arch        . tl                  June                      Au s               Se
                                                                                                                      2/3 IBEIMIENEIBEEIFEIMMEMESIMIETIMIREIVEIMIKINBIZIMINSINEMEMI 6 8 3111/BIEWEIMMINCIES 8 :110 a l7 124 1
               Masterplan                                          96 days?         Thu 1/18/07       Thu 5131/07
  2                Survey                                          34 days?         Thu 1/18107        Tue 3/6/07
  7                Conduct Site Visit                                6 days?         Tue 3/20/07      Tue 3/27/07

  8                Report                                          44 days?          Mon 4/2107       Thu 5/31/07
  16

 17            CCTV Upgrade                                       406 days?         Thu 1/18/07        Thu 8/7/08

 18                Programming                                     87 days?         Thu 1/18/07        Fri 5/18/07

 32                Construction Docs                               72 days?           Tue 5/1/07      Wed 8/8/07
 47                Port of Oakland Board Approval Process          22 days?          Mon 8/6/07        Tue 9/4/07
 48                    To Agenda                                      1 day?          Thu 8/9/07       Thu 8/9/07 :

 49                    Administration Committee Mtg                   1 day?         Tue 8/28/07      Tue 8/28/07 :
 50      73            Aviation to Agenda                             1 day?         Mon 8/6/07        Mon 8/6/07
 5       li
          :             Aviation Committee Mtg                        1 day?        Mon 8/27/07       Mon 8/27/07
 52                     Board Letter due by 12:00 Noon                 1 day?    Wed 8/15/07         Wed 8/15/07 :
 53                    Agenda Review                                  1 day?        Mon 8/20/07       Mon 8/20/07

 54                     Board Meeting                                 1 day?          Tue 9/4/07       Tue 9/4/07 :
     5             Bid Phase & Award                              110 days?          Wed 9/5/07        Tue 215/08 01111191111111111111111111111111111111,
 56                     Bid Period                                   35 days         Wed 9/5/07      Tue 10/23107 :
 57                    Open Bid                                       1 day?    Wed 10/24/07        Wed 10/24/07
 58      73             Board Award Contract                        51 days?         Tue 11/6/07      Tue 1/15/08

 59                     Contract Prep 8 Execution                    15 days     Wed 1/16/08           Tue 2/5/08

 60                Construction                                   132 days?          Wed 2/6/08        Thu 8/7/08

                        Pre-construction Meeting                      1 day?         Wed 2/6/08       Wed 2/6/08                                       4
 62                     NTP                                           1 day?          Thu 2/7/08       Thu 2/7/08

 63                     Substantial Completion                     100 days?           Fri 2/8/08     Thu 6/26/08 :

 64                     Final Completion                            30 day            Fri 6/27/08      Thu 8/7/0 8

                                        Task             L               Progress              1111111111111111MBEHRO       Summary                         External Tasks       Deadline
Project: 01A CCTV SCHED 20070208
Date: Wed 12/26(07                      Split                            Milestone                                          Project Summary           .„    External Milestone

CCTV Schedule Revised.mpp                                                                                                                      Page                                                                    Wed 12/26/07
PORT OF OAKLAND                                    MEMO
TO:         Omar Benjamin, Executive Director

FROM: Steven Grossman, Director of Aviation

DATE: December 24, 2007

CC:         T. LaBasco
RE:         EXPANSION AND REHABILITATION OF CLOSED-CIRCUIT TELEVISION
            (CCTV) SYSTEM, SOUTH FIELD, OAKLAND INTERNATIONAL AIRPORT,
            AIP 3-06-0170-36, CONTRACT NO. 2007-09-Al, HEARING OFFICER
            DECISION ON BID PROTEST


     This report contains my conclusions and recommendations regarding
award of the public works contract for the above-referenced project.

                               EXECUTIVE SUMMARY


     The project is intended to provide improved visual surveillance
and enhanced recording capabilities at Terminal 1 and the Passenger
Boarding Bridges consistent with the guidelines set forth in the 2007
Airport CCTV Master Plan. Two issues raised by the protest, are that
the listed subcontractor, Lightspeed Services, does not have a C10
electrical license, and, the lack of a Statement of Qualifications
(SOQ) for Lightspeed Services and for qualified personnel to install
conduits. As explained below, I find the protest to be without merit.

                                  BACKGROUND

      On September 18, 2007, the Board passed Resolution No. 07243 in
which authorized the advertisement of the contract for expansion and
rehabilitation of closed circuit television in Terminal One and the
Passenger Boarding Bridges. The scope of work includes furnishing and
installing additional and replacement surveillance cameras, upgrading
to an all fiber optic infrastructure, and furnishing and installing
network digital video recorders (NDVR). The NDVR system will provide
remote playback capabilities and an enhanced archival system for alarm
events and incident reports.




167452.v1
Omar Benjamin
RE: Hearing Officer Decision on Bid Protest; Expansion of Rehabilitation of
CCTV
December 24, 2007
Page - 2 -




      On October 24, 2007, the Port opened three sealed bids for the
contract.   Adesta Limited Partnership of San Leandro submitted the
lowest bid of $694,293.61.   Beci Electric, Inc., of Oakland submitted
the second lowest bid of $800,000. In a letter dated October 30,
2007, Rebecca Anderson, President of Beci Electric, formally protested
on the grounds that Adesta's subcontractor does not have a C10
license, that no SOQ was submitted for the subcontractor, and Adesta
did not reference qualified personnel to install conduits. (Exhibit
1.) In a letter dated October 31, 2007, the Northern California
Electrical Construction Industry Trust ("Trust") raised additional
objections which it described as an "official letter of protest on
behalf of Beci Electric." (Exhibit 2.)

      On November 5, 2007, the Port sent Adesta Limited Partnership a
letter with Beci Electric's protest attached, requesting that Adesta
provide a response to each of Beci Electric's issues. (Exhibit 3.)
Adesta Limited Partnership responded with two letters dated November
12, 2007.   (Exhibit 4.)

                                BID PROTEST

      Pursuant to Section 22(b)(7) of Port Ordinance No. 1606, I have
determined that the adjudication of the issues presented would not
benefit from the presentation of oral testimony. Therefore, no
hearing is necessary.

1.   Subcontractor Qualification

     The Invitation for Bids stated that this project requires a
California C-10 contractor's license. Adesta Limited Partnership has
a C-10 Electrical Contractor's License. The work of this project
consists of installing closed-circuit cameras and equipment, which
could be accomplished by a C7 licensed contractor.            Installing
conduits can be accomplished by either a C-10 or a C7 licensed
contractor. Conduits are one of three types for this project:
galvanized rigid steel conduit; electrical metallic tubing; or
flexible metallic conduit. There is no voltage involved in laying out
the conduits. However, if wiring does involve more than low voltage,
Adesta, as the prime contractor, is licensed to perform the work.


     Additionally, Adesta Limited Partnership's listed subcontractor,
Lightspeed Services, has a C7 - Low Voltage systems Contractor
license. A C7 licensed contractor installs, services and maintains
all types of communication and low voltage systems which are energy
limited and do not exceed 91 volts.    These systems include, but are
Omar Benjamin
RE: Hearing Officer Decision on Bid Protest; Expansion of Rehabilitation of
CCTV
December 24, 2007
Page - 3 -




not limited to telephone systems, sound systems, cable television
systems, closed-circuit video systems, satellite dish antennas,
instrumentation and temperature controls, and low voltage landscaping
lighting.  (OCR Division 8, Title 16, Article 3.)


2.    Statement of Qualifications

      Beci Electric is correct that there was no SOQ submitted
specifically for Lightspeed Services. Document 00450 of the Project
Manual required qualifications for the work to be performed, not a
specific SOQ from each subcontractor. The SOQ was reviewed and it
appears that Adesta Limited Partnership is qualified to perform the
work.

3.    Northern California Electrical Construction Industry Trust

      The Trust set forth its objections to awarding the contract to
Adesta in its letter of October 31, 2007. The Trust contended that
Adesta is a non-responsible bidder under California Public Contract
Code section 1103 because it has violated various prevailing wage
laws.

      The Trust's October 31, 2007, letter does not constitute a bid
protest under Port Ordinance No. 1606. Section 22 provides that, "any
party that has timely submitted a responsive bid or proposal may file
a bid protest in accordance with the provisions set forth below." The
Trust submitted no bid for the contract and is not a licensed
contractor.   Therefore, the Trust lacked standing to pursue a bid
protest. Notwithstanding, the Port's Social Responsibility Division
investigated the allegations presented by the Trust and was unable to
identify any violations occurring on Port projects that rose to the
level of "non-responsibility."

                                 CONCLUSION

     The prime bidder, Adesta Limited Partnership, has a C10
Electrical Contractors License. Adesta's subcontractor, Lightspeed
Services, has a 07 Low Voltage Contractors License. Any low or high
voltage work can be performed by Adesta within their C10 electrical
contractors license. Adesta's SOQ has been reviewed by staff, and it
appears that Adesta is qualified to perform the work.

     Accordingly, I recommend that the Board reject the bid protest of
Beci Electric, and award the subject contract to Adesta Limited
Omar Benjamin
RE: Rearing Officer Decision on Bid Protest; Expansion of Rehabilitation of
CCTV
December 24, 2007
Page - 4 -




Partnership.   This recommendation will not be a final decision until
ratified by the Board of Port Commissioners.

Attachment(s)

1.    Letter dated October 30, 2007, from Rebecca Anderson, President,
      Beci Electric, to Chief Engineer, protesting Adesta's bid.

2.   Letter dated October 31, 2007, from the Northern California
     Electrical Construction Industry Labor-Management Cooperative
     Trust, protesting Adesta's bid.

3.   Letter dated November 5, 2007, from Thomas R. LaBasco, Chief
     Engineer, to Adesta Limited Partnership, requesting responses to
     Beci Electric's bid protest.

4.   Letter dated November 12, 2007, from Thomas G. Gillette, Vice-
     President, Adesta Limited Partnership, to Chief Engineer,
     responding to the bid protest.

5.   Response Package "B" dated October 29, 2007, containing Adesta
     Limited Partnership's Statement of Qualifications.

6.   Document 00450 from the Project Manual requiring the Statement of
     Qualifications.

				
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