Palm Springs City Council
February 9, 2023

January 3, 2023
toward more modernist styles. Lastly, it exemplifies the cultural shift from the pedestrian­ oriented commerce and activity of a traditional downtown toward the growing convenience and popularity of doing business from the comfort of one's own car. For these reasons, the HSPB finds the site qualifies as a historic resource under Criterion iii. (Criterion iv) The resource embodies the distinctive characteristics of a type, period or method of construction;
The historic resource report asserts that the steel frame construction of the Security First National Bank building is characteristic of the mid-century modern period, however the HSPB asserts that steel frame construction technology existed since the latter part of the 19th century and is not historically significant to the mid-twentieth century period. A such, Staff finds the building's type, period and method of construction method are not distinctive and thus the building does not qualify under Criterion iv. (Criterion v) The resource presents the work of a master builder, designer, artist, or architect whose individual genius influenced his age, or that possesses high artistic value;
As noted in the reports, Joseph Bing Wong, was a competent architect of the mid­ twentieth century period whose work included both revivalist styles as well as modernist architecture. His projects often featured a strong integration of the building with its site.

This can be seen in the subject site in which Wong carefully brings the rugged rocks and desert plant palette onto the site. The PSPF report asserts the site is historically significant because of its association with Wong. Wong's design of Security First National Bank demonstrates his creativity as an architect and ability to work in the Modernist style, however, to be eligible under this criterion it must be found that the architect was a master in his profession and that his work influenced his age (i.e. his peers, successors or the profession in general). The PSPF report does not make a compelling case that Wong's talent and commissions are significant enough to label him a master, nor that his designs influenced others. Thus, the HSPB finds that the site is not historically significant because of its association with Joseph Wong.

Lawrence Tenney Stevens is the artist who created the terra cotta bas-relief panels specifically commissioned to portray the local history of Palm Springs. These panels are a key element in the design of the building. They were installed at the northwest corner of the building to draw pedestrian-oriented patrons to the building from the walkable central business district. As noted in the reports Stevens was significant as an artist whose work captured and promoted the romantic notion of the American Southwest. His work was recognized internationally in the Art world. The panels he created possess a high level of artistic value and purpose. Considering these factors, the HSPB finds the site qualifies as a historic site under Criterion v because of its association with Stevens. (Criterion vi) The resource represents a significant and distinguishable entity whose components may lack individual distinction, as used in evaluating applications for designation of historic districts, for parcels on which more than one entity exists; or
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Resolution No. HSPB #137 -The Security First National Bank

January 3, 2023
No information has been provided that the resource qualifies under Criterion vi. (Criterion vii) The resource has yielded or may be likely to yield information important to national, state or local history or prehistory.

No information has been provided on any pre-historic significance of the site.

SECTION 2: PART "B" ANALYSIS OF HISTORIC INTEGRITY.

Analysis of Integrity. (PSMC 8.05.070 (C, 1,b). The site, structure, building or object retains one or more of the following aspects of integrity, as established in the Secretary of the Interior's Standards: integrity of design, materials, workmanship, location, setting, feeling, or association.

The Security First National Bank is evaluated in terms of its historic integrity as follows:

Location.

The Security First National Bank remains in its original location of construction, therefore, retains its integrity of location.

Design.

The original asymmetrical massing and veneers of native stone and precast masonry panels and glass curtainwalls remain in place, although some of the glass curtainwall was modified in the 1980's and a mesh screen to conceal roof-mounted mechanical equipment was added. Elements of the landscape at the northwest corner of the site has also been slightly altered to accommodate an accessible ramp, however the lush quality of the landscape remails sufficiently intact and the building in general retains good integrity of design.

Setting.

The building is located at the southern end of the downtown commercial core along two of the City's major thoroughfares in an area that developed with a number of financial institutions in the S0's and 60's. Its setting is decidedly urban. This area of town was already well developed at the time the building was constructed. Although many of the nearby banks and savings and loans have been repurposed with other uses, the area retains its setting as the City's primary urban commercial core.

Materials.
)"he original massing of the building, the glass curtainwall around the entry, the precast masonry veneer panels, and the native rock wall all remain. The canopy over the original drive-through, although slightly altered, remains in place and the landscape design has a strong presence on site. The alterations that have occurred have minimal impact and appear to be easily reversible. The integrity of materials is intact.

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Resolution No. HSPB #137 -The Security First National Bank

January 3, 2023
Non-contributing elements:
• Projecting utility room on the southeast corner from 1964. • Extended portion of the canopy from 1986.
• Rooftop screening for mechanical equipment installed in1972. • Exterior A TM installed in 1981.

SECTION 4: ENVIRONMENTAL ASSESSMENT
The proposed historic resource designation is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical changes to the environment, directly or indirectly.

SECTION 5: CONDITIONS THAT APPLY TO CLASS 1 HISTORIC SITES.

According to Section 8.05 of the Municipal Code, the following shall apply to a Class 1 Historic Resource:

1. It shall meet the definition of a Class 1 historic site as outlined in Municipal Code Section 8.05.020.

2. An archival file on the property shall be maintained by the City.

3. It may be qualified as 'historic' at the federal, state, and/or county level.

4. The structure/site may not be modified nor objects removed without following the procedures outlined in Municipal Code Section 8.05.110 "Demolition or Alteration of Class 1 and Class 2 Historic Resources -Certificate of Appropriateness".

5. A marker explaining the historic nature of the site may be installed at the site in a location viewable from the public way.

6. Compliance with all rules and regulations for Historic Sites and Historic Districts under Chapter 8.05 of the Municipal Code shall be required.

7. The site shall not be further subdivided.

8. The City Clerk shall submit the Council Resolution to the County recorder for recordation within 90 days of the effective date of the Council's resolution.

Based upon the foregoing, the Historic Site Preservation Board recommends that the City Council designate "The Security First National Bank" located at 500 South Indian Canyon Drive, a Class 1 Historic Resource (HSPB #137).
the rugged landscape areas around the building featuring lrge boulder and rocks and native plants contributes to its historic significance because the architect conceived it as a way of associating the site with the surrounding desert and mountains.

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Resolution No. HSPB #137 -The Security First National Bank

January 3, 2023
ADOPTED THIS THIRD DAY OF JANUARY, 2023.

AYES:

NOES:

ABSENT:

ABSTAIN:

ATTEST:

Miller, Hansen, Nelson.

None.

Hough.

Rosenow.

Christopher Hadwin
Director of Planning Services

CITY OF PALM SPRINGS, CALIFORNIA

HISTORIC SITE PRESERVATION BOARD

STAFF REPORT

DATE: January 3, 2023 PUBLIC HEARING

SUBJECT: AN APPLICATION BY THE CITY OF PALM SPRINGS FOR HISTORIC DESIGNATION OF “THE SECURITY FIRST NATIONAL BANK” LOCATED AT 500 SOUTH INDIAN CANYON DRIVE , CASE HSPB #1 37. ( SY/KL). (APN: 508-121-001)

FROM: Department of Planning Services

SUMMARY

The Palm Springs Preservation Foundation (“PSPF”) approached the City of Palm Springs with a request to initiate a historic site designation for the “Security First National Bank” and on June 1, 2021 the HSPB voted unanimously to add the site to its annual work plan as a City-initiated application. The proposed period of significance is 1959 when the project was completed.

The current owners do not support the proposed historic designation.

If designated as a historic resource, the property would be subject to the regulations outlined in Section 8.05 of the Palm Springs Municipal Code.

RECOMMENDATION:

1. Open the public hearing and receive public testimony.

2. Close the public hearing and adopt Resolution HSPB #137, “A RESOLUTION OF

THE HISTORIC SITE PRESERVATION BOARD OF THE CITY OF PALM

SPRINGS, CALIFORNIA, RECOMMENDING THAT THE CITY COUNCIL DESIGNATE “THE SECUIRTY FIRST NATIONAL BANK” LOCATED 500 SOUTH INDIAN CANYON DRIVE, AS A CLASS 1 (LANDMARK) HISTORIC RESOURCE HSPB #137, SUBJECT TO CONDITIONS (APN 508-121-001).”

BACKGROUND AND SETTING:

A historic resources report dated June 3, 2022, prepared for the City of Palm Springs by North Wind Resource Consulting (“the report”) is the basis of this staff report. The historic resources nomination report prepared by the Palm Springs Preservation Foundation dated June, 2021 is provided as supplemental information.

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

Related Relevant City Actions by HSPB, Planning, Fire, Building, etc… June, 2021 HSPB voted to amend its annual work plan to include the Security First National Bank as a City-initiated nomination.

November, 2022 Site inspection by members of the HSPB and City Staff.

Ownership Status
November, 2019 Purchase by the current owner.

BELOW AN AERIAL VIEW OF THE SECURITY FIRST NATIONAL BANK SITE.

The Security First National Bank is a one-story commercial building designed by architect Joseph Bing Wong and completed in 1959. It is located at the southeast corner of South Indian Canyon Drive and Ramon Road. Completed in the “post -World War II” context (1945-1969), Palm Springs experienced a major growth in seasonal visitors and wealthy residents moving to the area at that time. This change brought vitality to the commercial core and a small financial district began to emerge as a concentration of banking institutions developed in the southern part of downtown. Designed to respond to the needs of the bank’s clients, the First Security National Bank building embodies the modernization of financial institutions at that time.

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I
Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

ANALYSIS:

The staff analysis of the project is based on the two Historic Resources Reports and a site visit with the HSPB members. The property currently functions as a bank serving the local community. The steel frame structure is clad in precast concrete masonry panels on the north, south and east elevations and a glass curtainwall at the main entrance on the east side. Upon closer observation, the unique massing of the building is revealed. The main entry is located on the east side of the building oriented toward the parking lot and a second pedestrian entry located at the northwest corner of the building provided direct access to the building for pedestrians coming to the site from the walkable downtown.

The design combines the strength and fortress -like character of traditional bank design with the contemporary desire to be more open, visible and community-minded as well as to recognize the growing emphasis of the car-oriented culture with provision of an ample- sized parking lot and integration of the relatively new concept of a drive- through teller window.

The Security First building also has some interesting design similarities to another downtown commercial building: The Bullocks Department stor e (1947 Wurdeman and Becket). In that building designed roughly a decade earlier, we see similar use of deep cantilevered eaves set at irregular angles and a similar “stepped” detail of “solid / void” in the storefront detail to that at the bas -relief panels and glass entry door at the northeast corner of the bank building.

BELOW THE STEPPED “SOLID/VOID” AND CANTILEVERED EAVE OF THE BULLOCKS BUILDING

AND BELOW THE SOLID/VOID STEPPED DETAIL AT THE BANK BUILDING

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

THE BULDING’S STRONG, SOLID MASONRY BOX-LIKE APPEARANCE ON THE WEST IS LITERALLY “CARVED AWAY” ON THE EAST ELEVATION REVEALING ANGLES, EAVES, WALLS OF GLASS AND HAND-

LAID ROCK

Historic Preservation activities in Palm Springs are regulated under Municipal Code Section 8.05 (“ Historic Preservation” ). The purpose of the Historic Preservation Ordinance is:

“…to stabilize and improve buildings, structures or areas which are considered to be of historical, architectural, archaeological or ecological value, to foster civic beauty, to strengthen the local economy and to promote the use of historic resources for the education and welfare of the citizens.”

Conditions that apply to Class 1 historic sites or resources:

1. It shall meet the definition of a historic site as outlined in Municipal Code Section

8.05.020.

2. An archival file shall be maintained on the property by the City.

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

3. It may be qualified as ‘historic’ at the federal, state, and/or county level.

4. A marker explaining the historic nature of the site may be installed in a location viewable from the public way.

5. Compliance with all rules and regulations for Historic Resources and Historic Districts under Chapter 8.05 of the Municipal Code.

6. If designated, the findings in support of designation shall be stated in a resolution of the City Council that shall be recorded with the County Recorders’ office within 90 days of the effective date of the Council’s resolution.

Evaluation of the Application. Pursuant to Municipal Code Section 8.05.070 (C,1,a), the HSPB shall evaluate the application and make findings in conformance with the following criteria:

Criteria for the Designation of Class 1 Historic Resources. A site, structure, building or object may be designated as a Class 1 historic resource, provided both of the following findings (“a” and “b”) are met:

a. The site, structure, building or object exhibits exceptional historic significance and meets one or more of the criteria listed below:

The Security First National Bank exhibits exceptional historic significance because it embodies modernist design principles prevalent in the mid- twentieth century of simple geometric planes and volumes. It demonstrates a responsiveness to the desert climate with the generous eaves and overhangs that became characteristic of the “Desert Modern” architecture in Palm Springs, and it is a noteworthy example of the evolution in banking in the mid- twentieth century in which architecture of financial institutions abandoned the old classical architectural forms for a more open, glassy and community- oriented design. It also reflects a trend that began as early as the 30’s when public art , specifically murals and wall sculpture was specifically commissioned and incorporated into the design of commercial buildings.

(Criterion i) The resource is associated with events that have made a meaningful contribution to the nation, state or community;

The reports do not list any events associated with the resource that contributed to the nation, state or community. Thus, it does not qualify under Criterion i.

(Criterion ii) The resource is associated with the lives of persons who made a meaningful contribution to national, state or local history;

This resource was commissioned by the Security First National Bank in response to the local influx of wealthy tourists and residents in Palm Springs. The report identifies Herbert Samson as the first branch manager who was involved with the design and functionality of the bank. While his contributions to the construction and management of this site were instrumental, his involvement does not rise to the level of being a meaningful contribution Item 2A - Page 163
Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

to local, state or national history. The report also asserts that Lawrence Tenney Stevens, the artist of the bas-relief panels on the building was significant internationally as an artist whose w ork focused on depicting the romantic character of the American Southwest.

Stevens made a meaningful contribution to the overall genre of American art and therefore staff concurs that the property qualifies as a historic site under Criterion ii.

(Criterion iii) The resource reflects or exemplifies a particular period of national, state or local history;

The Security First National Bank exemplifies the post-World War II period in local history when both commercial and residential building designs in Palm Springs were embracing the tenets of Modernism and shifting away from traditional “revival” forms of architecture popular in the pre-World War II period. It is also a noteworthy example of the evolution in bank design in the post-war period, again, moving away from neo-classical styles and toward more modernist styles. Lastly, it exemplifies the cultural shift from the pedestrian- oriented commer ce and activity of a traditional downtown toward the growing convenience and popularity of doing business from the comfort of one’s own car. For these reasons, staff finds the site qualifies as a historic resource under Criterion iii.

(Criterion iv) The resource embodies the distinctive characteristics of a type, period or method of construction;

The historic resource report asserts that the steel frame construction of the Security First National Bank building is characteristic of the mid -century modern period, however staff asserts that steel frame construction technology existed since the latter part of the 19 th
century and is not historically significant to the mid- twentieth century period . As such, Staff finds the building’s type, period and method of construction method are not distinctive and thus the building does not qualify under Criterion iv.

(Criterion v) The resource presents the work of a master builder, designer, artist, or architect whose individual genius influenced his age, or that possesses high artistic value;

As noted in the reports, Joseph Bing Wong, was a competent architect of the mid - twentieth century period whose work included both revivalist styles as well as modernist architecture. His projects often featured a strong integration of the building with its si te.

This can be seen in the subject site in which Wong carefully brings the rugged rocks and desert plant palette onto the site. The PSPF report asserts the site is historically significant because of its association with Wong. Wong’s design of Security First National Bank demonstrates his creativity as an architect and ability to work in the Modernist style, however, to be eligible under this criterion it must be found that the architect was a master in his profession and that his work influenced his age ( i.e. his peers, successors or the profession in general). The PSPF report does not make a compelling case that Wong’s talent and commissions are significant enough to label him a master, nor that his designs influenced others. Thus, staff asserts that the site is not historically significant because Item 2A - Page 164
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Resolution No. HSPB #137 -The Security First National Bank

January 3, 2023
Workmanship.

Although the Security First National Bank generally exhibits a level of workmanship typical of a commercial building, it integrates locally quarried, hand-laid stone on portions of the fa<;ade which give it a higher level of quality of workmanship that most other commercial buildings. The bas-relief panels located on the northwest corner of the building also convey a level of hand-crafted workmanship not often found on commercial buildings.

Feeling.

The building retains its feeling as a mid-century modern commercial building through its form, site orientation and use of materials.

Association.

The resource retains its integrity of association with the mid-century modern period of design through its simple use of materials and architectural detailing including the generous use of cantilevered eaves a·nd the abstract angularity of the east facade.

SECTION 3: DEFINING HISTORIC CHARACTERISTICS
In considering a recommendation for historic resource designation it is important to distinguish those physical elements that are original or from the period of significance that contribute to the resource's historic significance from alterations, additions or features that were added at a later time that may be sympathetic to the original character, but which may create a false sense of historicity. Distinguishing original character-defining features from non-original elements aids the HSPB when it is tasked with evaluating future alterations to the historic resource.

Character-defining features of the resource are as follows:
• Flat roof and cantilevered canopies.
• Asymmetrical fa<;ade projections/recessions.
• Geometric form and massing with no extraneous ornamentation .1 • Irregular plan and site placement.
• Exterior veneers of native stone and exposed aggregate concrete panels. • Large expanse of glass at the main entrance facing the parking lot. • Automobile centric design with the drive-through.2
• Terra cotta bas-relief panels depicting historic milestones of Palm Springs. • The rugged landscape design.3
1 The report characterizes the geometry of the building as "simple", however the HSPB asserts that there is a complexity and sophistication juxtaposition in the blending of the orthogonal box-like quality of the west fa9ade with the irregular, free-form floor plan and projecting eaves and angles of the east fa9ade. 2 The original drive-through function is no longer in use and modifications were made to the original canopy in the 1980s, however, the feature is still visible and continues to tell the story of the automobile and its integration into the overall design of the site.
3 The HSPB asserts that the presence of the rugged landscape and indigenous plant palette effectively relates the building to the natural desert areas around Palm Springs. The HSPB therefore does not recommend identifying specific existing trees or other plants as "character-defining", per se, but rather that Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

of its association with Joseph Wong.

Lawrence Tenney Stevens is the artist wh o created the terra cotta bas -relief panels specifically commissioned to portray the local history of Palm Springs. These panels are a key element in the design of the building. They were installed at the northwest corner of the building to draw pedestrian- oriented patrons to the building from the walkable central business district . As noted in the reports Stevens was significant as an artist whose work captured and promoted the romantic notion of the American Southwest. His work was recognized internationally in the Art world. The panels he created possess a high level of artistic value and purpose. Considering these factors , staff finds the site qualifies as a historic site under Criterion v because of its association with Stevens.

(Criterion vi) The resource represents a significant and distinguishable entity whose components may lack individual distinction, as used in evaluating applications for designation of historic districts, for parcels on which more than one entity exists; or

No information has been provided that the resource qualifies under Criterion vi.

(Criterion vii) The resource has yielded or may be likely to yield information important to national, state or local history or prehistory.

No information has been provided on any pre-historic significance of the site.

Analysis of Integrity. (PSMC 8.05.070 (C,1,b). The site, structure, building or object retains one or more of the following aspects of integrity, as established in the Secretary of the Interior’s Standards: integrity of design, materials, workmanship, location, setting, feeling, or association.

The Security First National Bank is evaluated in terms of its historic integrity as follows:

Location.

The Security First National Bank remains in its original location of construction, therefore, retains its integrity of location.

Design.

The original asymmetrical massing and veneers of native stone and precast masonry panels and glass curtainwalls remain in place, although some of the glass curtainwall was modified in the 1980’s and a mesh screen to conceal roof -mounted mechanical equipment was added. Elements of the landscape at the northwest corner of the site has also been slightly altered to accommodate an accessible ramp, however the lush quality of the landscape remails sufficiently intact and the building in general retains good integrity of design.

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

Setting.

The building is located at the southern end of the downtown commercial core along two of the City’s major thoroughfares in an area that developed with a number of financial institutions in the 50’s and 60’s. Its setting is decidedly urban. This area of town was already well developed at the time the building was constructed. Although many of the nearby banks and savings and loans have been repurposed with other uses, the area retains its setting as the City’s primary urban commercial core.

Materials.

The original massing of the building, the glass curtainwall around the entr y, the precast masonry veneer panels, and the native rock wall all remain. The canopy over the original drive-through, although slightly altered, remains in place and the landscape design has a strong presence on site. The alterations that have occurred have minimal impact and appear to be easily reversible. The integrity of materials is intact.

Workmanship.

Although the Security First National Bank generally exhibits a level of workmanship typical of a commercial building, it integrates locally quarried, hand-laid stone on portions of the façade which give it a higher level of quality of workmanship that most other commercial buildings. T he bas-relief panels located on the northwest corner of the building also convey a level of hand-crafted workmanship not often found on commercial buildings.

Feeling.

The building retains its feeling as a mid- century modern commercial building through its form, site orientation and use of materials.

Association.

The resource retains its integrity of association with the mid- century modern period of design through its simple use of materials and architectural detailing including the generous use of cantilevered eaves and the abstract angularity of the east facade.

In summary, staff finds the site retains sufficient integrity to qualify as a Class 1 (“Landmark”) historic resource.

DEFINING HISTORIC CHARACTERISTICS

In considering a recommendation for historic resource designation it is important to distinguish those physical elements that are original or from the period of significance that contribute to the resource’s historic significance from alterations, additions or features that were added at a later time that may be sympathetic to the original character, but which may create a false sense of historicity. Distinguishing original character -defining features from non- original elements aids the HSPB when it is tas ked with evaluating future alterations to the historic resource.

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

On page 31, the report identifies the physical character -defining historic features of this site as follows:

Character-defining features of the resource are as follows:

• Flat roof and cantilevered canopies.
• Asymmetrical façade projections/recessions.
• G eometric form and massing with no extraneous ornamentation.1 • Irregular plan and site placement.
• Exterior veneers of native stone and exposed aggregate concrete panels. • Large expanse of glass at the main entrance facing the parking lot. • Automobile centric design with the drive-through.2
• T erra cotta bas-relief panels depicting historic milestones of Palm Springs. • The lush landscape design.3

Non-contributing elements:

• Projecting utility room on the southeast corner from 1964. • Extended portion of the canopy from 1986.
• Rooftop screening for mechanical equipment installed in1972. • Exterior ATM installed in1981.

ENVIRONMENTAL ASSESSMENT

The proposed historic resource designation is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the ac tivity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical changes to the environment, directly or indirectly.

1 The report characterizes the geometry of the building as “simple”, however Staff asserts that there is a complexity and sophistication juxtaposition in the blending of the orthogonal box-like quality of the west façade with the irregular, free-form floor plan and projecting eaves and angles of the east façade. 2 The original drive-through function is no longer in use and modifications were made to the original canopy in the 1980s, however, the feature is still visible and continues to tell the story of the automobile and its integration into the overall design of the site.
3 Staff asserts that the presence of the rugged landscape and indigenous plant palette effectively relates the building to the natural desert areas around Palm Springs. Staff , therefore, does not recommend identifying specific existing trees or other plants as “character -defining”, per se, but rather that the rugged landscape areas around the building featuring large boulder and rocks and native plants contributes to its historic significance because the architect conceived it as a way of associating the site with the surrounding desert and mountains.

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Historic Site Preservation Board Staff Report: January 3, 2023 HSPB-137 – The Security First National Bank

NOTIFICATION

Pursuant to section 8.05.140 of the Municipal Code of Palm Springs, all residents within five hundred (500) feet of the subject property have been notified and notice was published in a newspaper of general circulation.

CONCLUSION:

The Security First National Bank meets th e definition of a historic resource based on Criterion 2, 3, and 5 of the Palm Springs Historic Preservation Ordinance. The property possesses sufficient historic integrity to qualify as a Class 1 (“Landmark”) site.

PREPARED BY: Sarah Yoon, Associate Planner/Historic Preservation Officer REVIEWED BY: Ken Lyons, Principal Planner
REVIEWED BY: Christopher Hadwin, Director of Planning Services

Attachments:

A. Vicinity Map
B. Draft Resolution
C. A pplication prepared by North Wind, related background materials, photos.

D. Historic Resources Report by PSPF – Supplemental Material

Item 2A - Page 169

EXCERPTS OF MINUTES

At the Historic Site Preservation Board meeting of the City of Palm Springs, held January 3, 2023, the Historic Site Preservation Board took the following action:

2.A. AN APPLICATION BY THE CITY OF PALM SPRINGS FOR HISTORIC DESIGNATION OF “THE SECURITY FIRST NATIONAL BANK” LOCATED AT 500 SOUTH INDIAN CANYON DRIVE, HSPB #137, SUBJECT TO
CONDITIONS (SY/KL).

HSPB member Rosenow recused from the item due to his association with the Palm Springs Preservation Foundation (PSPF).

Staff member Yoon summarized the staff report.

Seeing no questions of staff, Vice Chair Nelson opened the public hearing.

Brad Chelf and Jeff Pieper, co-owners of the property, spoke in opposition of the designation.

David Gray spoke in support of the project.

Chris Jares spoke about his concern for the neighborhood if the current tenants were to leave and the building became vacant.

Seeing no other speakers, Vice Chair Nelson closed the public hearing.

Board members Nelson, Miller and Hansen commented positively on the completeness of the report.

Motion by Miller, seconded by Hansen, to adopt the findings in the staff report and recommended Class 1 historic site designation by the City Council.

I, JOANNE BRUGGEMANS, Administrative Secretary for the City of Palm Springs, hereby certify that the above action was taken by Historic Site Preservation Board of the City of Palm Springs on the third day of January, 2023, by the following vote:

AYES: Nelson, Miller, Hansen.

NOES: None.

ABSTAIN: Rosenow.

ABSENT: Hough.

_______________________________
Joanne Bruggemans
Administrative Secretary
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CITY COUNCIL STAFF REPORT
02/09/2023
SUBJECT:

ADOPT A RESOLUTION AMENDING THE CITY’S COMPREHENSIVE FEE

SCHEDULE TO INCORPORATE THE PROPOSED VACATION RENTAL JUNIOR PERMIT FEE, TO BECOME EFFECTIVE APRIL 10, 2023
RECOMMENDATION:

Staff recommends City Council adopt a resolution amending the City’s Comprehensive Fee Schedule to incorporate the proposed fee, for the Vacation Rental Junior Permit.

Attachments
Item 2B

CITY COUNCIL STAFF REPORT

DATE: FEBRUARY 9, 2023 PUBLIC HEARING

SUBJECT: ADOPT A RESOLUTION AMENDING THE CITY’S COMPREHENSIVE

FEE SCHEDULE TO INCORPORATE THE PROPOSED VACATION
RENTAL JUNIOR PERMIT FEE , TO BECOME EFFECTIVE APRIL 10, 2023

FROM: Teresa Gallavan, Interim City Manager

BY: Department of Special Program Compliance

SUMMARY:

This is a request to adopt a fee for the Vacation Rental Junior Permit. On November 28, 2022, City Council adopted Ordinance 2075, amending Chapter 5.25, Vacation Rentals, of the Palm Springs Municipal Code. Adopting a Vacation Rental Junior Permit fee is the next step required to implement the City’s vacation rental policies.

The City Council must hold a public hearing before the City Council can establish the new fee for processing and administering the Vacation Rental Junior Permit.

RECOMMENDATION:

Staff recommends City Council adopt a resolution amending the City’s Comprehensive Fee Schedule to incorporate the proposed fee, for the Vacation Rental Junior Permit.

PUBLIC HEARING

The public hearing was noticed January 30 , 2023, ten (10) days prior to today’s public hearing.

BACKGROUND:

The Comprehensive Fee Schedule reflects fees charged by all City departments. It is amended annually so that fees reflect current, estimated reasonable cost s to provide services, to bring fees closer to full cost recovery targets, to add new fees when applicable for new City services, and/or to eliminate fees for discontinued services.

Item 2B - Page 1
On May 12, 2022, City Council conducted a public hearing on the Comprehensive F ee Schedule; the fees became effective July 11, 2022. On November 28, 2022, the City Council adopted Ordinance 2075, amending Chapter 5.25, Vacation Rentals, of the Palm Springs Municipal Code. Included in the amendments is the creation of the V acation Rental Junior Permit. The Junior Permit is not subject to the Neighborhood Percentage Cap; however, it is restricted to a total of six (6) rental contracts per year.

The City imposes different categories of fees with different requirements regarding how fees are set or changed. Special Program Compliance fees are typically permitting and enforcement fees for the City’s robust vacation rental industry.

STAFF ANALYSIS:

The recommended fee change for Special Program Compliance is the new administrative permit fee for Vacation Rental Junior Permits.

Permit fees reflect the estimated reasonable cost of meeting the anticipated workload required to effectively administer the Vacation Rental Junior Permit, to enforce regulations in the permitted industry and to maintain a healthy regulated industry

1. If adopted, the
fees will take effect immediately.

New Fee: Vacation Rental Junior Permit

Staff is proposing a fee of $642 for new Vacation Rental Junior P ermit and an annual renewal fee of $ 642. While this is a new fee , the administrative tasks to complete the permitting process are identical to the tasks to process a vacation rental permit. Staff believes that the proposed fees represent a close approximation to providing for full cost recovery, with sensitivity towards ensuring the fee does not deter someone from obtaining a permit, thereby fostering compliance with City permitting policies. The fee for the regular Vacation Rental Permit is $1,009. As staff processes Junior Permit requests, staff will monitor the amount of time spent to determine whether adjustments to the fees would be warranted in the future.

The following table reflects the calculation of City staff time for administrative processing and code compliance enforcement. The calculation follows percentage of time associated with Vacation Rental administration and compliance by position. With the exception of one Account Clerk position, the amount of hours required for administration and code compliance was reduced by 50% since the Junior Permit only allows six rentals a year .

The total labor dollars are divided by the estimated number of 1,306 annual permits, half of the current number of registered permits of 2,613, to generate the recommended cost of service to administer the Junior Permit.

1 The City of Palm Springs contracted with Capital Accounting Partners, LLC to conduct a Vacation Rental Cost of Service Study. The staff salaries calculated at that time were updated to calculate the Junior Permit Fee.

Item 2B - Page 2

ENVIRONMENTAL ASSESSMENT:

Amending the City’s Comprehensive Fee Schedule is categorically exempt under the California Environmental Quality Act Guidelines.

FISCAL IMPACT
:

The proposed fees are expected to generate sufficient revenue to cover the reasonably estimated cost of administering the permitting and regulatory systems for each vacation rental junior permittee.

Position Hours Rate Total
Admin % (time)
Director 520 $ 126.20 $ 65,624.00 0.25
Program Admin 988 $ 93.14 $ 92,022.32 0.475
Senior Acct tech 988 $ 81.82 $ 80,838.16 0.475 Acct Clerk II 2080 $ 71.17 $ 148,033.60 1
Acct Clerk II 208 $ 71.17 $ 14,803.36 0.1
Admin Secretary 208 $ 74.01 $ 15,394.08 0.1
TOTAL $ 416,715.52

Code Compliance Support
Code 4160 $ 59.32 $ 246,769.81 2
Code Supervisor 832 $ 88.14 $ 73,332.48 0.4
Code Secretary 52 $ 51.53 $ 2,679.76 0.025
Police 104 $ 59.39 $ 6,176.71 0.05
TOTAL $ 328,958.36

Finance
Accountant (monthly reports) $ 66.00
Account Supervisor (48%) $ 36,750.00
Account Specialist (100%) $ 56,650.00
TOTAL $ 93,466.00

Total Labor Dollars $ 839,139.88
(Estimated permits (1,306)
Cost of Service per permit $ 642.53
Item 2B - Page 3
REVIEWED BY:

Department Director: Veronica Goedhart
Interim City Manager: Teresa Gallavan

ATTACHMENTS:

A. Draft Resolution Vacation Rental Junior Permit
B. Notice of Public Hearing

Item 2B - Page 4
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

PALM SPRINGS, CALIFORNIA, ESTABLISHING THE FEE

FOR THE VAVATION RENTAL JUNIOR PERMIT

WHEREAS, the City Council of the City of Palm Springs approved and adopted Ordinance 2075, codified in Palm Springs Municipal Code (PSMC) 5.25; and

WHEREAS, pursuant to PSMC Section 5.25, the City Council, by resolution, may establish various fees relating to the application process, selection process, and ongoing regulation of vacation rentals; and

WHEREAS, on February 9, 2023, at a duly noticed public meeting, the City Council considered establishment of the fee relating to Vacat ion Rental Junior P ermit application; and

WHEREAS, after giving the public an opportunity to be heard and considering all information before it, the City Council approved the adoption of said fee , attached hereto as Exhibit “A”; and

WHEREAS, the fee established herein is based upon the reasonable cost of providing the services and regulatory activity for administering the V acation Rental Junior Permit application process and permit system.

THE CITY COUNCIL OF THE CITY OF PALM SPRINGS , CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS:

The fees established in Exhibit “A”, attached hereto, are hereby adopted and shall be paid in accordance with the provisions set forth in Palm Springs Municipal Code Chapter 5.25.

ADOPTED THIS ___TH DAY OF ________________, _________
.

TERESA GALLAVAN

INTERIM CITY MANAGER

ATTEST:

BRENDA PREE,

CITY CLERK
Item 2B - Page 5

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE , City Clerk of the City of Palm Springs, h ereby certify that Resolution No. ____ is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on _______________________, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

IN WITNESS WHEREOF , I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.

Brenda Pree, City Clerk
City of Palm Springs, California
Item 2B - Page 6
EXHIBIT “A”

The following fee is established for and applicable to Vacation Rental Junior Permits, as described in Chapters 5.25 of the Palm Springs Municipal Code:

• Application and administrative fee is set at $586

OTHER FEES:

In addition to the fees set forth above:

• A business tax certificate application fee of $25 (one-time fee, which fee must be renewed annually), will be required.

NOTE: Transient Occupancy taxes are also applicable.

Item 2B - Page 7
Item 2B - Page 8

CITY OF PALM SPRINGS

NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN thatthe City Council of the City of Palm Springs, Califomiawill hold a public hearing at its meeting of February 9, 2023. The City Council meeting begins at 5:30 p.m., in the Council Chamber at City Hall, 3200 East Tahquitz Canyon Way, Palm Springs.

The purpose of this meeting is relative to a resolution establishing fees relating to commercial cannabis activity. The resolution establishes the following fee: Cannabis Related Business and Activities Permit Fee.

REVIEW OF INFORMATION: The staff report and other supporting documents regarding this are available for public review at City Hall between the hours of 8:00 a.m. to 11 :00 a.m. and 2:00 p.m. to 6:00 p.m., Monday through Thursday. Please contact the Office of the City Clerk at (760) 323-8204 if you would like to schedule an appointment to review these documents.

COMMENTS: Response to this notice may be made verbally at the Public Hearing and/or in writing before the meeting. Written comments may be made to the City Council by letter (for mail or hand delivery) to:

Brenda Pree, City Clerk
3200 E. Tahquitz Canyon Way
Palm Springs, California 92262
Any challenge of the proposed project in court may be limited to raising only those issues raised at the public hearing described in this notice, or in written correspondence delivered to the City Clerk at, or prior, to the public hearing. (Government Code Section 65009 (b) (2)). An opportunity will be given at said hearing for all interested persons to be heard. Questions regarding this may be directed to Jeff Ballinger, City Attorney, at (760) 323-8205. Pu rsuantto California Government Code Section 66016 and 66018, this Notice shall be published twice, at least fourteen days prior to the public hearing.
---
City Clerk

CITY COUNCIL STAFF REPORT
02/09/2023
SUBJECT:

AN APPLICATION BY THE VILLA ROMA HOMEOWNERS’ ASSOCIATION FOR HISTORIC DISTRICT DESIGNATION OF “THE VILLA ROMA GARDEN HOMES” LOCATED AT 2500 SOUTH SIERRA MADRE DRIVE (MASTER APN
#512-120-070), CASE HSPB #140
This item will be requested to be continued on a date certain of February 21, 2023.

Attachments
Item 2C

CITY COUNCIL STAFF REPORT
D
ATE: FEBRUARY 9, 2023 PUBLIC HEARING
SU
BJECT: AN APPLICATION BY THE VILLA ROMA HOMEOWNERS’
ASSOCIATION, FOR HISTORIC DISTRICT DESIGNATION OF “THE
VILLA ROMA GARDEN HOMES” LOCATED AT 2500 SOUTH SIERRA
MADRE DRIVE, (MASTER APN #512-120-070), CASE HSPB #140.

F
ROM: Teresa Gallavan, Interim City Manager
BY: D
epartment of Planning Services
This item will be requested to be continued on a date certain of February 21, 2023.

Item 2C - 1

CITY COUNCIL STAFF REPORT
02/09/2023
SUBJECT:

APPROPRIATE $3,000,000 FOR THE PALM SPRINGS NAVIGATION CENTER;

APPROVE A RESOLUTION ADOPTING A NONDISCRIMINATION POLICY FOR HOMEKEY FUNDED PROJECTS; AND RECEIVE AN UPDATE ON THE

NAVIGATION CENTER PROJECT
RECOMMENDATION:

Appropriate and budget funds in the amount of $3,000,000 for the Navigation Center project located at 3589 McCarthy Road.

1. Approve a Resolution entitled, “A RESOLUTION OF THE CITY COUNCIL OF

THE CITY OF PALM SPRINGS, CALIFORNIA, ADOPTING A

NONDISCRIMINATION POLICY FOR ANY PROGRAM OR ACTIVITY FUNDED IN WHOLE OR IN PART WITH HOMEKEY FUNDS.”

2. Attachments
Item 3A

CITY COUNCIL STAFF REPORT

DATE: FEBRUARY 9, 2023 BUSINESS & LEGISLATIVE

SUBJECT: APPROPRIATE $3,000,000 FOR THE PALM SPRINGS NAVIGATION CENTER; APPROVE A RESOLUTION ADOPTING A NONDISCRIMINATION POLICY FOR HOMEKEY FUNDED PROJECTS; AND RECEIVE AN UPDATE

ON THE NAVIGATION CENTER PROJECT

FROM: Teresa Gallavan, Interim City Manager

BY: Community & Economic Development Department

SUMMARY:

This is a request to allocate $3,000,000 from the City’s homeless services budget to the Navigation Center (Project) located at 3589 McCarthy Road (Site). The City Council is also being requested to approve a nondiscrimination policy for any program or activity funded in whole or in part with HomeKey funds. The Navigation Center will provide 80 temporary housing units to house individuals and families while providing on- site supportive programming.

RECOMMENDATION:

1) Appropriate and budget funds in the amount of $3,000,000 for the Navigation Center project located at 3589 McCarthy Road.

2) Approve Resolution No. _____, “A RESOLUTION OF THE CITY COUNCIL OF THE

CITY OF PALM SPRINGS, CALIFORNIA , ADOPTING A NONDISCRIMINATION

POLICY FOR ANY PROGR AM OR ACTIVITY FUNDED IN WHOLE OR IN PART WITH HOMEKEY FUNDS.”

BACKGROUND:

In June of 2022, t he City and County were awarded HomeKey funds in the amount of $19,059,202 to be used towards the Project. As proposed, the Project will include 80 prefabricated residential units and includes the rehabilitation of two buildings on the Site (Buildings 8 and 24). The residential units will include kitchenettes and restroom facilities .

Five of the units are designed for families and 10 units will be reserved for transitional age youth. The Project also includes a child ren’s p lay area; g eneral parking; g reen space; hardscape and landscape; a building for daytime services and administration (Building 8); Item 3A - Page 1
City Council Staff Report
February 9, 2023 -- Page 2
Navigation Center - Various Implementation Actions

and a building for operational services (Building 24). The layout of the site includes a walkway which provides access to the residential units. The parking lot is completely secure, and cl ients must check- in with security to access their cars . The site plan showing the building locations, landscaping, internal circulation details (pedestrian, parking, truck loading), fencing, and other amenities (kid area, and dog run) is shown in Image 1.

Image 1
Current Site Plan

Building 8 is intended to house daytime services and program administration and will be accessible Monday through Friday for eight hours per day. Features of this building include the following:

• This building is located further away from the residents by design. • People entering the building must check in with the receptionist. • New residents first go to the intake room, then to case management , and then are taken to an available unit.
• This building has employment services.
• A multi-purpose room can be used for a variety of functions and can be locked and secured; service providers may also use this space to provide additional supportive services for residents.

Item 3A - Page 2
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12 City Council Staff Report
February 9, 2023 -- Page 3
Navigation Center - Various Implementation Actions

The floor plan for Building 8 is provided in Image 2.

Image 2
Building 8 Floor Plan

Building 24 is intended to house 24- hour operational services and will operate 24 hours a day. Features of this building are as follows:
• A large portion of this building is taken up by the commercial kitchen which includes dry and cold storage.
• Food is served through the countertop space between the kitchen and the community dining / multi-purpose room.
• The Community Corridor is designed to also serve as a multipurpose space. • A mail room and laundry facility will be provided for residents. • Recuperative care spaces are for individuals who are released from the hospital to continue their recovery with access to showers and nursing station. • Security office.
• Loading docks are attached to this building where food and other supplies will be delivered.

Item 3A - Page 3
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LARGE

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MANAGER
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INTAKE
FILE

STORAGE

RECEPTION
City Council Staff Report
February 9, 2023 -- Page 4
Navigation Center - Various Implementation Actions

The floor plan for Building 24 is provided in Image 3.

Image 3
Building 24 Floor Plan

The Project will also provide services to help individuals transition into permanent housing.

This includes transitional housing, case management, and job training. The services may be provided onsite or on a referral basis for Navigation Center clients. The third existing building on the site is being reserved for future service functions.

Item 3A - Page 4
I

OUTDOOR

SEATING AREA
TT

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OFFICE
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OFFICE
recuperative
women

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men
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WELLNESS
MAIL
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CORRIDOR

COMMUNITY DINING

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b U dishwoshing

LOADING DOCK
D
MAIN
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,,...-
City Council Staff Report
February 9, 2023 -- Page 5
Navigation Center - Various Implementation Actions

STAFF ANALYSIS:

The Standard Agreement (Agreement) for the HomeKey funds with the California Department of Housing and Community Development was executed on January 1 8, 2023.

Under the Agreement, the City is allocated a total of $19,059,202 for the Navigation Center.

Of this amount, $3,024,000 is reserved for operating expenses and is not available to be used for construction of the Project. The remaining HomeKey funds available for Project construction is $16,035,202.

The County of Riverside contributed $7,000,000 for the Project using Federal funds it received from the American Rescue Plan Act (ARPA). The County of Riverside also allocated $5,500,000 of funds it received through its partnership with Inland Empire Health Plan (IEHP) and Molina Healthcare from the California Advancing and Innovating Medi-Cal (CalAIM) program through the California Department of Health Care Services (DHCS).

The funds available to construct the Project currently total $28,695,202. These are summarized below:

Project Sources Amount
Percent of Total

HomeKey (City and County) $ 16,035,202 56%
ARPA (County) 7,000,000 24%
IEHP / Molina (County) 5,500,000 19%
City 160,000 1%
Total $ 28,695,202

Please note that Project costs have increased since the original estimate due to additions to the project scope and increases in the costs of construction materials . Preliminary Project cost estimates were prepared in December 2021. The Project architect, John Friedman Alice Kimm (JFAK) , began designing the Project in Summer 2022 and the Resident Advisory Working Group (RAWG) began providing input on design and operations in September 2022. As the design was refined , Tilden -Coil Constructors, the Project Construction Manager at Risk (CMAR) began collecting price information for materials and other Project costs. The revised Project budget revealed a $2,505,961 gap between Project resources and Project costs. As noted, a significant portion of these increases can be attributed to increased construction costs. In May of 2022 , the National Association of Home Builders reported building materials have risen 35.6% since the start of the Corona Virus pandemic.

Additionally, the California Department of General Services’ Construction Cost Index indicates construction costs increased by 13.4% in 2021 and by 9.3% in 2022.

Item 3A - Page 5
City Council Staff Report
February 9, 2023 -- Page 6
Navigation Center - Various Implementation Actions

Estimated construction costs for various Project components as shown above is as follows:

Project Component Amount Percent of Total

Building 8 $ 3,912,490 13%
Building 24 6,521,360 21%
Modular Units 7,353,130 24%
Site Improvements 3,461,622 11%
Land 5,900,000 19%
Soft Costs (Design, 4,052,561 13%
Studies, Contingency)
Total $ 31,201,163

As designed, the Project incorporates a number of recommendations submitted during community outreach meetings, stakeholder meetings, and Resident Advisory Working Group (RAWG) meetings. The RAWG has met three times since it was organized in August of 2022 and has provided recommendations on the preliminary design which included creating quiet zones, taking wind into consideration, incorporating solar panels, shade structures, and increasing the landscaping buffer along north side of the Site.

The team of City Staff, County Staff, architect, engineer, service provider, and development consultants reviewed several iterations of the Project design to reduce, and value engineer the Project to reduce costs. The project team considered reducing contingencies, eliminating Building 8 entirely, and reducing the size of the kitchen. It should be noted that buildout of a new kitchen and rehabilitation of the existing building s is a requirement of the HomeKey grant.

Given the Project’s purpose as a centralized location that provides a variety of services and makes them easily accessible to people experiencing homelessness , the decentralized nature of homeless services in the Coachella Valley, and the increasing need for shelter and supportive services, it is recommended that the Project proceed as currently designed and that the City allocate $3,000,000 to fund the deficit of $2,505,962. The difference between $3,000,000 and $2,505,962 is $494,038. This additional amount is being requested to cover potential unanticipated costs and expenses that may arise in the future.

It should also be noted, $3,024,000 of the HomeKey funds is reserved for operating expenses and the City is also allocating $5,300,000 of funds from the Homeless, Housing, Assistance and Prevention (HHAP) grant for operating expenses , for a total of $8,324,000 for initial operating expenses.

Item 3A - Page 6
City Council Staff Report
February 9, 2023 -- Page 7
Navigation Center - Various Implementation Actions

Nondiscrimination Policy for HomeKey Funded Activities

The Agreement also requires the City to adopt a specific written nondiscrimination policy. A resolution to adopt the required nondiscrimination policy is included as Attachment A. The required policy language is as follows:

“No person shall, on the grounds of race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, age, medical condition, genetic information, citizenship, primary language, immigration status (except where explicitly prohibited by federal law), arbitrary characteristics, and all other classes of individuals protected from discrimination under federal or state housing laws, individuals perceived to be a member of any of the preceding classes, or any individual or person associated with any of the preceding classes, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any program or activity funded in whole or in part with HomeKey funds.”

According to the terms of the Agreement, the nondiscrimination policy must be submitted to the California Housing and Community Development Department by March 21, 2023.

ALIGNMENT WITH STRATEGIC PLANNING:

The first major task in the Strategic Plan for Quality of Life (1A) with the key objective to improve homelessness is to build a Navigation Center. Navigation Centers serve as interim housing and connect individuals to permanent housing, making one of the most difficult steps more manageable. Navigation Centers are created to ensure that people can easily get access to housing, and they have staff that are trained in housing navigation and housing preparedness. Navigation Center staff focus on achieving the permanent housing goal while simultaneously addressing immediate needs – like shelter, short-term housing, employment, healthcare, or substance use disorder services. Navigation Centers act as a “hub” – a centralized location that provides many services that are easily accessible to people experiencing homelessness.

FISCAL IMPACT
:

Funds for Homeless Services were included in the FY23 Budget and are available in Account 1001060- 40105. These funds were budgeted for various potential projects, programs, and services to address homelessness including the Navigation Center. At this time, staff is requesting utilization of $3,000,000 of these funds to supplement construction costs for the Navigation Center. If approved, this action would appropriate the funds set aside for homelessness and add them to the fiscal year 2023 budget (a ccount 1002305- 40105) for the Navigation Center.

Item 3A - Page 7
City Council Staff Report
February 9, 2023 -- Page 8
Navigation Center - Various Implementation Actions

REVIEWED BY:

Department Director: Jay Virata
Deputy City Manager: Flinn Fagg
Interim City Manager: Teresa Gallavan

ATTACHMENTS:

1) Resolution
Item 3A - Page 8

ATTACHMENT A

Item 3A - Page 9
RESOLUTION NO. _______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

PALM SPRINGS, CALIFORNIA, ADOPTING A

NONDISCRIMINATION POLICY FOR ANY PROGRAM OR

ACTIVITY FUNDED IN WHOLE OR IN PART WITH

HOMEKEY FUNDS PROVIDED BY THE CALIFORNIA

DEPARTMENT OF HOUSING AND COMMUNITY

DEVELOPMENT

WHEREAS, the California Department of Housing and Community Development released a Notice of Funding Availability on September 9, 2021, amended on January 14, 2022 and on May 5, 2022, to make funding available to local public entities to develop a broad range of housing types by converting including, but not limited to, hotels, motels, hostels, single-family homes and multifamily apartments, adult residential facilities, manufactured housing, commercial properties and other existing buildings to permanent or interim housing.

WHEREAS, the City of Palm Springs and the County of Riverside submitted a joint application for HomeKey 2 funds on January 28, 2022, for the development of an adaptive-reuse and new construction interim housing project that aims to quickly house formally homeless individuals and families and transitional age youth while also providing on-site supportive programming;

WHEREAS, the California Department of Housing and Community Development awarded the City of Palm Springs and the County of Riverside a HomeKey 2 funding award in the amount of $19,059,202;

WHEREAS, a Standard Agreement between the California Department of Housing and Community Development, and the City of Palm Springs and County of Riverside was fully executed on January 18, 2023;

WHEREAS, as a condition of the Standard Agreement and receipt of HomeKey grant funds, the City of Palm Springs and the County of Riverside are required to have In place a formal nondiscrimination policy for any program or activity funded in whole or in part with HomeKey funds;

WHEREAS, the City of Palm Springs wishes to adopt a nondiscrimination policy in accordance with HomeKey funding requirements for any program or activity funded in whole or in part with HomeKey funds;

NOW THEREFORE BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1.

The Recitals set forth above are true and correct and incorporated herein by reference.

Item 3A - Page 10
SECTION 2. The Nondiscrimination Policy for any program or activity funded in whole or in part with HomeKey funds as stated below is hereby adopted.

“Nondiscrimination Policy For Any Program Or Activity Funded In Whole Or In Part With HomeKey Funds:

No person shall, on the grounds of race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, age, medical condition, genetic information, citizenship, primary language, immigration status (except where explicitly prohibited by federal law), arbitrary characteristics, and all other classes of individuals protected from discrimination under federal or state housing laws, individuals perceived to be a member of any of the preceding classes, or any individual or person associated with any of the preceding classes, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any program or activity funded in whole or in part with Homekey funds.”

SECTION 3.

The City Manager or designee is authorized to take all actions necessary to implement this Resolution.

PASSED, APPROVED, AND ADOPTED BY THE PALM SPRINGS CITY
COUNCIL THIS 9
TH DAY OF FEBRUARY 2023.

_____________________________

TERESA GALLAVAN

INTERIM CITY MANAGER

ATTEST:

_________________________

BRENDA PREE

CITY CLERK

Item 3A - Page 11

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE, City Clerk of the City of Palm Springs, hereby certify that Resolution No. ____ is a full, true, and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on _______________________, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.

Brenda Pree, City Clerk
City of Palm Springs, California

Item 3A - Page 12

CITY COUNCIL STAFF REPORT
02/09/2023
SUBJECT:

ADOPT A RESOLUTION DETERMINING AND RECOGNIZING AREAS IN THE CITY

NOT LOCATED IN A CITY-RECOGNIZED NEIGHBORHOOD FOR THE PURPOSE OF PALM SPRINGS MUNICIPAL CODE CHAPTER 5.25 – VACATION RENTALS RECOMMENDATION:

Staff recommends City Council adopt a resolution to recognize, for the purpose of Palm Springs Municipal Code Chapter 5.25 – Vacation Rentals, areas not otherwise located in a City-recognized Neighborhood.

Attachments
Item 3B

CITY COUNCIL STAFF REPORT

DATE: FEBRUARY 9, 2023 BUSINESS & LEGISLATIVE

SUBJECT: ADOPT A RESOLUTION DETERMINING AND RECOGNIZING AREAS IN

THE CITY NOT LOCATED IN A CITY -RECOGNIZED NEIGHBORHOOD FOR PURPOSE OF PALM SPRINGS MUNICIPAL CODE CHAPTER 5.25 – VACATION RENTALS

FROM: Teresa Gallavan, Interim City Manager

BY: Department of Special Program Compliance

SUMMARY:

This is a request to determine and recognize areas in the City that are not located in any City-recognized Neighborhoods, for the purpose of the Palm Springs Municipal Code Chapter 5.25 – Vacation Rentals. That Chapter, as recently amended, establishes Vacation Rental Neighborhood Percentage Caps, based on Neighborhoods, whether currently existing or (as proposed here) as determined by City Council resolution.

RECOMMENDATION:

Staff recommends City Council adopt a resolution to recognize, for purpose of Palm Springs Municipal Code Chapter 5.25 – Vacation Rentals, areas not otherwise located in a City-recognized Neighborhood.

BACKGROUND:

On November 28, 2022, the City Council adopted Ordinance 2075, amending Chapter

5.25, Vacation Rentals, of the Palm Springs Municipal Code. Included in the amendments is the establishment of a cap on the number of Vacation Rental Registration Certificates that can be issued, based on the percentage of those certificates that are issued in a particular Neighborhood in relation to the number of total dwelling units within that Neighborhood. The cap is set, by Council ordinance, at twenty percent (20%).

Under the ordinance, “Neighborhood” is defined as one of the City’s officially recognized Neighborhoods. For those areas within the City that are not currently located within an officially recognized Neighborhood, the ordinance permits the City Council to determine, by resolution, how these areas will be identified to determine the 20% cap.

Item 3B - 1
City Council Staff Report
February 9, 2023 -- Page 2
Vacation Rental Neighborhood Map Adoption

STAFF ANALYSIS:

Currently, the D epartment of Special Program Compliance is administering Vacation Rental Certificates pursuant to the directive in the ordinance for C ity-recognized Neighborhoods. There are 52 organized neighborhoods in the City. Staff has identified 14 Residential Areas (“RA’s”) not included in an organized neighborhood (Attachment A). They are the grey areas on the attached map labeled RA1 – RA14.

Within the 14 RA’s there are presently 51 registered Vacation Rentals of the total 3, 470 residential units. Staff has three options for Council consideration in determining how the neighborhood cap will be applied.

1. Option #1 would identify the 14 RA’s individually with their own respective Vacation Rental Neighborhood Percentage (Attachment B-1). Below is a chart that shows the number of registered vacation rentals, applications in process, total residential units and current and projected (with applications in process) neighborhood vacation rental percentages.

Vacation Rental Information Neighborhood Percentages Organized
Neighborhood
Registered
Vacation
Rentals -

1.26.23 Applications
Processing -

1.26.23 Total
Residential
Units
Current
Neighborhood
Percentage
Projected
Neighborhood
Percentage
RA #1 8 4 661 1.21% 1.81%
RA #2 0 0 112 0.00% 0.00%
RA #3 0 0 142 0.00% 0.00%
RA #4 0 0 102 0.00% 0.00%
RA #5 9 0 230 3.91% 3.91%
RA #6 0 0 347 0.00% 0.00%
RA #7 0 0 254 0.00% 0.00%
RA #8 0 0 21 0.00% 0.00%
RA #9 0 0 213 0.00% 0.00%
RA #10 10 1 131 7.63 8.39%
RA #11 0 0 200 0.00% 0.00%
RA #12 22 0 427 5.15% 5.15%
RA #13 2 0 503 0.39% 0.39%
RA #14 0 0 127 0.00% 0.00%
Total 51 5 3,470 1.46% 1.61%

2. Option #2 would combine all 14 areas into one area as its own “Neighborhood” .

This one area/Neighborhood, if adopted today, would have a Vacation Rental Item 3B - 2
City Council Staff Report
February 9, 2023 -- Page 3
Vacation Rental Neighborhood Map Adoption

percentage of 1.46% (Attachment B-2), with 51 registered Vacation Rentals and a total of 3,470 residential units.

3. Option #3 would annex the identified RA areas to one or more a djoining Neighborhood(s). Resulting percentages would vary depending on which adjoining neighborhood(s) Council selects ( Attachment B -3). Should Council select this option, the change would only impact the geographic boundaries as it relates to the Vacation Rental Ordinance. The definition of the organized neighborhoods would not be impacted.

Adoption of a resolution identifying the areas not included in organized N eighborhoods and creating a respective neighborhood(s) for purpose for Vacation Rentals regulations only will allow staff to administer the Vacation Rental regulation on neighborhood caps appropriately in these areas.

ENVIRONMENTAL ASSESSMENT
:

This Ordinance is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.

ALIGNMENT WITH STRATEGIC PLANNING:

This action is in alignment with the City Council’s adopted Strategic Plan, Item 1E – Neighborhood Issues, which calls for a review of the City’s vacation program. This action item is a follow up to the City Council’s recent amendment to the City’s Vacation Rental program ordinance.

FISCAL IMPACT:

None.

REVIEWED B
Y:

Department Director: Veronica Goedhart
Interim City Manager: Teresa Gallavan

ATTACHMENTS:

A. Neighborhood map and Vacation Rental Table
B. Proposed Resolutions

Item 3B - 3

ATTACHMENT A

Item 3B - 4
City of Palm Springs
Neighborhood Ov
erview
N
Ind ian Ca
ny on
D
r
111
Ch
ino Cr e
ek
Ta c hev ah Creek
A lta Rdg
W Tr am view Rd
W Las V egas Rd
W V ia O liv er a
W R ac que t Club Rd
N
Ros e
A v e
W V ia E sc uelaTr a mway
Rd
N
Via M on
te
Vis
W Chin o Ca ny on Rd
W S tev ens Rd
N Ind
ian
Ca
ny o
n D
r
N P a
lm C
any o
n Dr
W S an R afael Rd
111
111
Tahq
ui
tz
Cr ee
k
Ta c hev ah Cr eek
S
Cah
uill
a Rd
W Ram on Rd
S
Ca
lle E
nc
ili
a
S B e
lardo
Rd
S
B e
lar do R d
S
P a
lm
Cany
on D
r
N P
alm C
any on D
r
N Indian Cany on Dr
O'Donnell
Golf Club
S P alm
C
any o
n Dr S
Sie
rr a M
adr
e
An dre a s Cr eek
V arner Rd
Ga rnet Ave
S a
lvia
Rd
Mihalyo Rd
P alm Dr
N
G
ene
A u
tr y
Trl
10 SALVIA
N A v enida Caballer os
E V er ona Rd
N
S ta
r r
Rd
E V ia E s c ue la
N A ur or a Dr
N
Via M
irales te
E Tac hev ah Dr
E Rac quet C lub Rd
E P aseo E l M ir ador
E E l A lam eda
E Tam ar is k Rd
E Fr anc is Dr
N V oltur no Rd
E J oy ce Dr
N S unr
is e Wa y
N S unr is
e W
ay
E S a n R afae l Rd
N G
ene A utr y T
r l
E V is ta Ch ino
111
111
E A nd reas Rd
E Cam ino P ar oc ela
E Twi n P alm s
Dr
E G r anvia Valm onte
N S uns et Way
S Cer r
itos D r
E S unny Dun es Rd E S unny Dunes Rd
E M e squite A v e
E S o nor a R d
S Fa
rr ell Dr
E S an Lor enz o Rd
N
Av en
ida
Ca
balle r os
N Cer r
itos Dr
Des e
r t L ak es D r
N H
er m
os
a Dr
N F
ar r ell D
r
N Riv er s ide Dr
E Bar is to Rd
E A r en as Rd
S R iv er side Dr
S Calle Ro
lph
E S an Lu c as Rd
S S unr is e Way E M e
s qu
ite Ave
E Palm Cany on Dr
N S unr is e Way
S E
lC
ielo
R
d
E Tahquitz Cany on Way
E Ram on Rd
111
Demuth Park
Mesquite
Golf and
Country
Club
Seven
Lakes
Country
Club
Tahquitz
Creek
Golf
Resort
Palm Springs
International
Airport
Palm Springs
High School
PALM

SPRINGS
P a
lm
Cany
on
Cr eek
E S ier r a Wa y
S Cam
ino
Rea
l
S Toledo A v e
S
P a
lm
Cany onDr
E as t
Rd S
Ar a
by D
r
S Calien
te
Rd
Rim
Rd
E Palm Cany on Dr
Indian
Canyons
Golf
Resort -
South
Course
Indian
Canyons
Golf
Resort -
North
Course
M u
rray Cr eek
Cir
cle
B
Dr
21 s t Av e
Moon Ranc h R d
Varner R d
M
ou
ntai
n
Vie
w
R
d
10 W
hitew
ater Riv
er
Av en
ida La P az
V en
tur a
D
r
Landau B lv d
P eineta Rd
Es pada Rd
Avenida M
aravilla
Ontin a Rd
A v
enida
Qu
inta
na
Tortuga Rd
Tac hev ah Dr
Ov ante Rd
Los
Gato
s Rd
Rango Rd M adr id Rd
Clubhou
s e
V i
ew
Dr
V er ona Rd
Pelador
a Rd
Pasada Rd
Conc epc ion R d
E ncin itas R dEmpa lmo Rd
E P
orta
les
Dr
Es tio Rd
M edano Rd
B ann
ing-Indi
o Rd
V is ta C hino
10 Desert
Princess
Country
Club
Whitewater Riv e
r
Wh
ite
wa
ter R
iv
er
Landa
u
B lv d
30th A v e
M c Callu m W ay
Bar is t o Rd
33r d A v e
S a
n
A n
ton io
D
r
Or tega R d
A v e
nida M
ar a v
ill
a
Sk y
Blu
e
W
ate
rTr l
S h
ifting S ands T
r l
V ega Rd
S
Vella R
d
Na
v a
jo
Tr l
S an J
oaqu
in
D
r
Mis sion Dr
34 th A v e
V er ano Rd
Whis
per in
g P a
lm
s
Tr l
A lc ita Rd
Durang o Rd
P er lita Rd
Cor t a Rd
P u
eb
lo T
r l
Go
lf Club
Dr
Dinah S hor e Dr
Dina h S hor e Dr
E Ram on Rd
S G
en
e
A utr y Tr l
111
111
Cimarron
Golf
Resort
Escena
Golf Club
Whitewa
ter Riv e
r
Chu
perosa
Ln
BelAir Dr
P
ar a
dis e Wa y
Vis ta
D
r
P erez Rd
Bankside
Dr
M
elros e
Dr
Ter rac e Rd
Palo
Verde
Dr
E lna Wa
y
E Wav er
ly Dr Golf Club Dr
Highway 111
Hig hway 11 1
111
Cathedral
Canyon
Golf Club

CATHEDRAL
CITY
RA #1
RA #2
RA #3
RA #4
RA #5 RA #6
RA #7
RA #8
RA #9
RA #10
RA #11
RA #12
Mountain Gate
Desert
Highland /
Gateway
Little Tuscany
Racquet
Club West
Old Las
Palmas
Vista Las
Palmas
Historic
Tennis Club
Parkview
South
Belardo
The Mesa
Canyon
Corridor
Four Seasons
Racquet Club
Estates
Desert Park
Estates
Vista Norte Ranch Club
Estates
Movie
Colony
East
The Movie
Colony
El Mirador
Rogers
Ranch
El Rancho
Vista
Estates
Baristo
Sunmor
Warm Sands
Tahquitz
River
Estates
Deepwell
Estates
Twin Palms
Sonora Sunrise
Demuth Park
Los Compadres
Indian Canyons
Araby Commons
Araby Cove
Andreas Hills
Sunrise Park
Midtown
Gene Autry
Little
Beverly
Hills
Melody Ranch
Lawrence Crossley
Escena
Tahquitz
Creek Golf
Oasis del Sol
Upper
West Side
Whitewater Club
Gateway
Rimrock WestGatePS
Palm Springs
Villas II
Canyon
Palms
El Dorado
Palms
Palm Canyon
Sunrise
Rafael
Loma Linda University, UC Riverside, Agua Caliente Band of Indians, County of Riverside, California State Parks, Esri, HERE, Garmin, SafeGraph, GeoTechnologies, Inc, METI/NASA, USGS, Bureau of Land Management, EP
A, NPS, US Census Bureau, USDA
µ
Legend
City Limits
The City of Palm Springs makes every reasonable effort to create, update, and share accurate GIS data and maps. Because the City derives GIS data from various sources, the City of Palm Springs cannot guarantee the accuracy of such data, and such data should be used for general information purposes only.

The Ci
ty will not be liable for any damages arising from the provision of GIS data provided by the City of Palm Springs. All GIS data should be verified with the original data source before relying on such data.

Item 3B - 5
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ATTACHMENT B-1

Item 3B - 6
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

PALM SPRINGS, CALIFORNIA, DETERMINING AND

RECOGNIZING AREAS IN THE CITY THAT ARE NOT

LOCATED IN A CITY -RECOGNIZED NEIGHBORHOODS

FOR PURPOSE OF PALM SPRINGS MUNICIPAL CODE
CHAPTER 5.25 – VACATION RENTALS

WHEREAS, On November 28, 2022, the City Council adopted Ordinance 2075, amending Chapter 5.25, Vacation Rentals, of the Palm Springs Municipal Code.

WHEREAS, Ordinance 2075, amend ed Chapter 5.25, Vacation Rentals, to included the establishment of a cap on the number of Vacation Rental Registration Certificates that can be issued, in a City-recognized neighborhood.

WHEREAS, “Neighborhood” means a City-recognized neighborhood, as set forth in Palm Springs Municipal Code Chapter 2.55 (Office of Neighborhoods).

WHEREAS, The City has identi fied 13 areas in the City that are not loca ted in a City-recognized neighborhood.

WHEREAS, Recognizing the areas in the City that are not located in a City - Recognized neighborhood as new neighborhoods for purpose of Chapter 5.25, Vacation Rentals only , will establish a cap on the nu mber of Vacation Rental Registration Certificates that can be issued in these neighborhoods.

THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. T hat the foregoing Recitals are true and correct and are incorporated herein by this reference.

SECTION 2. The 13 areas identified by the City t hat are no t located in a City - recognized neighborhood as shown by the City referenced map, are to be identified as Residential Areas “RA1-RA13”.

SECTION 3. The 13 areas identified by the City to be identified as Residential Areas “RA1-RA13” is for purpose of Ordinance 2075 only.

Item 3B - 7
Resolution No. _____

SECTION 4. This Resolution s hall take effect immediately upon its adoption by City Council.

ADOPTED THIS ___TH DAY OF ________________, _________.

TERESA GALLAVAN

INTERIM CITY MANAGER

ATTEST:

BRENDA PREE

CITY CLERK

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE , City Clerk of the City of Palm Springs, h ereby certify that Resolution No. ____ is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on _______________________, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

IN WITNESS WHEREOF , I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.

Brenda Pree, City Clerk
City of Palm Springs, California
Item 3B - 8

ATTACHMENT B-2

Item 3B - 9
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

PALM SPRINGS, CALIFORNIA, DETERMINING AND

RECOGNIZING AREAS IN THE CITY THAT ARE NOT

LOCATED IN A CITY -RECOGNIZED NEIGHBORHOODS

FOR PURPOSE OF PALM SPRINGS MUNICIPAL CODE
CHAPTER 5.25 – VACATION RENTALS

WHEREAS, On November 28, 2022, the City Council adopted Ordinance 2075, amending Chapter 5.25, Vacation Rentals, of the Palm Springs Municipal Code.

WHEREAS, Ordinance 2075, amend ed Chapter 5.25, Vacation Rentals, to included the establishment of a cap on the number of Vacation Rental Registration Certificates that can be issued, in a City-recognized neighborhood.

WHEREAS, “Neighborhood” means a City-recognized neighborhood, as set forth in Palm Springs Municipal Code Chapter 2.55 (Office of Neighborhoods).

WHEREAS, The City has identi fied 13 residential areas “RA” in the City that are not located in a City-recognized neighborhood.

WHEREAS, Recognizing the residential areas in the City that are not located in a City-Recognized neighborhood as one new neighborhood for purpose of Chapter 5.25, Vacation Rentals only , will establish a cap on the nu mber of Vacation Re ntal Registration Certificates that can be issued in this neighborhood.

THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. T hat the foregoing Recitals are true and correct and are incorporated herein by this reference.

SECTION 2. The 13 residential areas identified by the City that are not located in a City -recognized neighborhood as shown by the City refere nced map, are to be combined into one residential area identified as “RA – Non Organized”.

SECTION 3. The one residential area identified by the City identified as “RA – Non Organized” is for purpose of Ordinance 2075 only.

Item 3B - 10
Resolution No. _____

SECTION 4. This Resolution s hall take effect immediately upon its adoption by City Council.

ADOPTED THIS ___TH DAY OF ________________, _________.

TERESA GALLAVAN

INTERIM CITY MANAGER

ATTEST:

BRENDA PREE

CITY CLERK

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE , City Clerk of the City of Palm Springs, h ereby certify that Resolution No. ____ is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on _______________________, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

IN WITNESS WHEREOF , I have hereunto set my hand and aff ixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.

Brenda Pree, City Clerk
City of Palm Springs, California
Item 3B - 11

ATTACHMENT B-3

Item 3B - 12
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

PALM SPRINGS, CALIFORNIA, DETERMINING AND

RECOGNIZING AREAS IN THE CITY THAT ARE NOT

LOCATED IN A CITY -RECOGNIZED NEIGHBORHOODS

FOR PURPOSE OF PALM SPRINGS MUNICIPAL CODE
CHAPTER 5.25 – VACATION RENTALS

WHEREAS, On November 28, 2022, the City Council adopted Ordinance 2075, amending Chapter 5.25, Vacation Rentals, of the Palm Springs Municipal Code.

WHEREAS, Ordinance 2075, amend ed Chapter 5.25, Vacation Rentals, to included the establishment of a cap on the number of Vacation Rental Registration Certificates that can be issued, in a City-recognized neighborhood.

WHEREAS, “Neighborhood” means a City-recognized neighborhood, as set forth in Palm Springs Municipal Code Chapter 2.55 (Office of Neighborhoods).

WHEREAS, The City has identi fied 13 residential areas “RA” in the City that are not located in a City-recognized neighborhood.

WHEREAS, Recognizing the residential areas in the City that are not located in a City-Recognized neighborhood and combinin g them into adjacent City -recognized neighborhoods for purpose of Chapter 5.25, Vacation Rental s only, will establish a cap on the nu mber of Vacation Rental Registration Certificates that can be issued in these neighborhoods.

THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. T hat the foregoing Recitals are true and correct and are incorporated herein by this reference.

SECTION 2. The 13 residential areas identified by the City that are not located in a City -recognized neighborhood as shown by the City refere nced map, are to be combined into adjacent City-recognized neighborhoods.

SECTION 3. The 13 residential areas identified by the City identified and combined into adjacent City -recognized neighborhoods is for purpose of Ordinance 2075 only.

Item 3B - 13
Resolution No. _____

SECTION 4. This Resolution s hall take effect immediately upon its adoption by City Council.

ADOPTED THIS ___TH DAY OF ________________, _________.

TERESA GALLAVAN

INTERIM CITY MANAGER

ATTEST:

BRENDA PREE

CITY CLERK

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE , City Clerk of the City of Palm S prings, hereby certify that Resolution No. ____ is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on _______________________, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

IN WITNESS WHEREOF , I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.

Brenda Pree, City Clerk
City of Palm Springs, California
Item 3B - 14

CITY COUNCIL STAFF REPORT
02/09/2023
SUBJECT:

DISCUSSION OF PROPOSED AMENDMENTS TO THE OPERATIONS

COVENANT, TRANSIENT OCCUPANCY TAX SHARE, AND SITE PLAN
REVISIONS FOR THE ORCHID TREE HOTEL DEVELOPMENT LOCATED AT 222 S. CAHUILLA ROAD
RECOMMENDATION:

Discuss the proposed revisions to the Amended and Restated Operations Covenant and provide direction to staff.

Attachments
Item 3C

CITY COUNCIL STAFF REPORT
DAT
E: FEBRUARY 9, 2023 BUSINESS & LEGISLATIVE
SUBJECT: DISCUSSION OF PROPOSED AMENDMENTS TO THE OPERATIONS

COVENANT, TRANSIENT OCCUPANCY TAX SHARE, AND SITE PLAN

REVISIONS FOR THE ORCHID TREE HOTEL DEVELOPMENT
LOCATED AT 222 S. CAHUILLA ROAD
FROM: Teresa Gallavan, Interim City Manager
BY: Jeffrey Ballinger, City Attorney
Flinn Fagg, Deputy City Manager
Jay Virata, Community and Economic Development Director SUMMARY:

The ow
ner of the Orchid Tree hotel development, located at 222 S. Cahuilla Road, has requested City Council consideration of amendments to the adopted operations covenant (“Amended and Restated Operations Covenant, Agreement 8449”) due to increased construction costs and difficulties in financing the project. The requested revisions include the following:
• Revisions to the milestone schedule for construction and opening of the project, with the owner to provide a $1,000,000 security amount to the City if construction does not commence by the scheduled date;
• Revision to the Transient Occupancy Tax (TOT) share from 75% to 100% for the first 10 years of operation;
• Revisions to the approved site plan to reduce construction costs; • Deferral of payment of City permit and entitlement fees to Year 3 of the hotel operations and assistance with the costs associated with the undergrounding of utilities; and
• Other minor amendments to effectuate construction of the project.

Staff is seeking input and direction from the City Council relative to the revisions requested by the project owner.

RECOMMENDATION:

Di
scuss the proposed revisions to the Amended and Restated Operations Covenant and provide direction to staff.

Item 3C - Page 1
City Council Staff Report
February 9, 2023 -- Page 2
Orchid Tree Development

BUSINESS PRINCIPAL DISCLOSURE:

The Community Church property (284 W. Baristo Road) is owned by Cahuilla Church, LLC, a Nevada limited liability company. All other project parcels are owned by New Church II, LLC, a Nevada limited liability company. Both entities are managed by Richard E. Weintraub and Weintraub Descendants Trust of 2009; a trust that is also managed by Richard E. Weintraub and benefits his immediate family. The additional parcels to be incorporated as part of the development are owned by Arenas Belardo PS, LLC, a Nevada limited liability compan y; the entity is also managed by Richard E. Weintraub. The completed Public Integrity Disclosure Form, as required by Section 2.60.050 of the Municipal Code, is included as Attachment B to this report.

BACKGROUND:

Richard Weintraub, representing New Church II, LLC, Cahuilla Church, LLC, and Arenas Belardo PS, LLC (collectively, the “Owner”) has proposed to develop a luxury hotel project at the northwest corner of Baristo Road and Belardo Road, addressed as 222 S. Cahuilla Road (the “Project”). The history of the Project dates back to 2014, with the first set of entitlements granted in 2016.

In April of 2019, the City Council approved a Hotel Operating Covenant for the Project.

Under the Covenant, the City would provide the Project with seventy -five percent (75%) of the adjusted transient occupancy tax (TOT) rate, payable for thirty (30) years, or until the operator had been paid fifty million dollars ($50,000,000).

After the April 2019 approval, the Project incorporated additional properties, located on the South side of Arenas Road, between Cahuilla and Belardo Roads. As a result of the addition of those properties, in November of 2019, the Owner and City entered into an Amended and Restated Hotel Operations Covenant. That Covenant contained milestones for the development of the Project, including a date for the submittal of building permit applications, a date for the commencement of construction, and a date for the opening of the hotel to the public.

The Project received its most recent land use entitlements from the City in May of 2020.

As a result, under the milestone schedule, the Owner was required to submit construction documents and an application for a building permit by January 7, 2021, obtain the building permit by May 7, 2021, and commence construction of the hotel by August 7, 2021. Under the milestones, the hotel project was to be substantially complete by November 7 of 2022 and open in January of 2023.

However, shortly after the November 2019 Amended and Restated Agreement was finalized and signed in January of 2020, the COVID-19 pandemic hit. On March 20, 2020, Owner’s counsel emailed the City Attorney and advised that the Owner may need to invoke the Owner ’s rights under the force majeure (Act of God) provisions of the Covenant. The City Attorney responded to the Owner’s counsel, and stated that, despite Item 3C - Page 2
City Council Staff Report
February 9, 2023 -- Page 3
Orchid Tree Development

the pandemic, the City was continuing to process development applications, that design work necessary to entitle the Project could be performed remotely, and that construction workers/construction projects were listed as “essential” under the Governor’s stay at home order.

The Project subsequently obtained the required land use approvals in May of 2020. In November of 2020, the Owner informed the City that the Owner believed that the COVID- 19 pandemic qualified as a force majeure, entitling the Owner to delay performance of its obligations under the Covenant. While the Owner ’s November 2020 notification addressed the lending market for new hotel construction, no justification was given as to why the construction documents, which were due to be completed in January of 2021, could not be completed.

In March of 2021, the City notified the Owner of the City’s intent to seek judicial relief if the development was not re-commenced or the nuisances otherwise abated. The City also notified the Owner of the City’s intent to terminate the Amended/Restated Agreement, as a result of the City’s assertion that Owner had defaulted under that agreement.

Following the City’s March 2021 notifications to Owner, the Owner notified the City of the Owner’s belief that the City had breached the Amended/Restated Agreement. The Owner also appealed the City’s code enforcement notic e/order and submitted an extensive Public Records Act Request. The City and Owner continued to engage in discussions aimed at getting the Project back on track, while at the same time, providing the City with additional protection and assurances; this resulted in the approval of Amendment No. 1 to the Amended and Restated Operations Covenant by the City Council on November 18, 2021.

With the delays to the Project, the Owner submitted an Extension of Time application in February 2022 and requested to extend the entitlement timeframe by 24 months. The Planning Commission reviewed the application at their meeting of July 13, 2022, finding that the criteria for approval of the extension had not been met. The Owner appealed the decision to the City Council, and on September 1, 2022, the City Council approved the Extension of Time application through May 7, 2023.

STAFF ANALYSIS – OWNER’S REQUESTED REVISIONS TO THE OPERATIONS COVENANT:

As previously noted, the Owner of this project entered into a TOT Covenant Agreement with the City in 2019. Under that agreement, as amended in 2021, the O wner was contractually required to obtain City approval of its construction documents by October 15, 2022, obtain project financing by December 15, 2022, obtain all building permits, and commence construction of the hotel by January 15, 2023, substantially complete the hotel by February 15, 2025, and open the hotel by June 15, 2025.

Item 3C - Page 3
City Council Staff Report
February 9, 2023 -- Page 4
Orchid Tree Development

On July 13, 2022, the Planning Commission heard the owner’s application for extension of its land use entitlements, as contemplated by the amended TOT Agreement. At that meeting, the Planning Commission denied the Owner’s application. The Owner appealed that decision to the City Council. On September 1, 2022, as part of the O wner’s appeal of the Planning Commission’s denial of its land use entitlements, the City Council also approved a 45-day extension of the agreement’s milestones.

Thereafter, on October 24, 2022, the project’s owner invoked a force majeure (French for “Act of God”) provision in the TOT Agreement. As part of that, the Owner provided a feasibility report, prepared by CBRE (included as Attachment H), which concludes that market conditions preclude the project owner from obtaining project financing, despite the Owner’s best efforts. As such, the Owner sought a one (1) year extension of the various milestones. Shortly thereafter, the City Attorney pointed out to the O wner that, even assuming a force majeure exists, the milestones that qualify under the TOT Agreement for an exte nsion based on a feasibility report are Milestones #11 (construction loan approval/construction contract) and #12 (commencement of construction). Milestone #10 (obtain City approval of construction documents) was not extended by reason of a feasibility report and had not been completed.

Thereafter, City staff and the Owner, and their respected legal teams, discussed a possible resolution of this impasse. As part of those discussions, the Owner stated that, if it is not able to move forward with the entitled hotel project, it may consider moving forward with an affordable, multi -family housing development project at the site. The Owner also proposed a revised deal for the City’s consideration, which would take the place of the existing TOT Agreement. This revised deal, offered as a “package deal”, includes the following proposed deal points:

• The luxury hotel project must commence construction by March 1, 2024. Owner to provide the City a $1,000,000 security amount – not subject to any further force majeure extensions (other than delays caused by the City itself). This sum would compensate the City in the event the hotel project did not begin construction by March 1, 2024. This would be the new Milestone #12 date under the one-year force majeure time extension invoked by Owner.
• Council to approve the revised conceptual plan, dated October 27, 2022, subject to later review by the Architectural Review Board for aesthetic purposes and the Historical Site Preservation Board for consistency with historical guidelines. 1 • City to allocate to Owner, through a Development Agreement 2, the retained 25% share of TOT for 10 years. That is, the Owner would receive 100%, rather than

1 Although the City Council cannot legally agree, in an agreement, to approve a land use entitlement, the City Council can agree, on behalf of the City, to process the application and to review it in accordance with applicable laws.
2 Because the City’s Hotel Operation Incentive Program ordinance (PSMC Chapter 5.26) caps the amount of the TOT rebate at seventy-five percent (75%) of the adjusted tax rate, a different legal document —a statutory development agreement – has been proposed by the owner. Under state and local law, such a

Item 3C - Page 4

City Council Staff Report
February 9, 2023 -- Page 5
Orchid Tree Development

75% of the adjusted tax rate for the first 1 0 years of hotel operation. The project owner has estimated that the additional 25% TOT requested by Owner would equate to approximately $239,000 per year (based on roughly $500 per occupied room x 74 rooms x 365 days x 65% occupancy x 10.9% tax rate x 25% = $239,207.31). The project owner’s jus tification is that the City will still receive a very significant amount of money annually from sales tax and other revenue streams, along with having the most exclusive hotel in the Coachella Valley. • City to defer its development fees until year three of operation. The Owner is also seeking City assistance with utility undergrounding to be discussed, perhaps in the form of fee credits.
• City to cooperate in processing a condo plan and documents, in order to allow Owner to sell some of the suites as condominiums.
• Owner’s project will remain subject to the highest quality Luxury Hotel standards, as defined in the proposed agreement. The project owner has secured a letter from Auberge Resorts Collection, expressing that brand’s continued interest in the project.
• Owner will rehabilitate the historic church and bungalows. • The Owner would remove the existing foundations on the portions of the site not occupied by the historic bungalows & church. This would be accomplished as soon as possible after the “package deal” is agreed upon.

Therefore, the City Council is being asked to consider whether it wishes to engage the project Owner in memorializing a deal along these proposed deal points. Any such agreement would then come before the Planning Commission for a recom mendation to the City Council, and then ultimately to the City Council. These agenda items would be noticed public hearings. The Owner has indicated that it may seek a joint meeting with the City Council and Planning Commission, as authorized by the City’s Zoning Ordinance.

STAFF ANALYSIS – TRANSIENT OCCUPANCY TAX (TOT) SHARE:

As noted above, the Owner is proposing to increase their share of TOT from 75% to 100% for the first 1 0 years of the 30- year Operating Covenant. The maximum amount the Owner may receive will remain $50,000,000. The table in Figure 1 below ( and included as Attachment C) shows how the allocations of TOT to the City and Owner would change based on the Owner proposal. The table also shows other City revenues such as property tax, sales tax, and utility taxes, expected to be generated by the Project. These however are not impacted by the change in TOT allocations.

development agreement would need to be reviewed by the Planning Commission and ultimately approved by the City Council in order to be effective.

Item 3C - Page 5
City Council Staff Report
February 9, 2023 -- Page 6
Orchid Tree Development

Figure 1: TOT Allocation Analysis

It is important to note that the City’s Hotel Transient Occupancy Tax is 11.5% of the rent charged by the hotel. However, the Hotel Operations Incentive Program imposes an Adjusted Tax Rate which is 10.9% of the rent charged by the hotel. While the City assesses 11.5% of TOT, the calculation for the Hotel Operations Incentive Program is based on 10.9%. The City retains the 0.6% difference in TOT.

In the case of the Orchid Tree Project, the total Adjusted TOT is expected to be $32,990,812. This is based on a 74-room project with initial room rates of $500 per room and 60% occupancy rate. The room rate increases are estimated to be 1.5% annually. Based on the terms of the current Operating Covenant , the City share of Adjusted TOT would be $8,247,703. The Owner share of Adjusted TOT would be $24,743,109. Factoring in the unadjusted TOT (.6%) the City receives an additional $1,816,008 over the course of the 30- year Operating Covenant. The net allocation of all TOT revenue under the current agreement is 71% to the Owner and 29% to the Item 3C - Page 6
Orchid Tree Hotel
Developer Share 100% for 10 Yrs
Developer Share 75% 100% first 10 Yrs vs
Revenue Scenario Comparison for 30 Yrs 75% remaining 20 Yrs 75% for 30 Yrs Trans ient Occupan cy Tax {TOT 11 .5%) 34,806,820 34,806,820 Adjusted TOT (10.9 %) 32,990,812 32,990,812
Unadjusted TOT 1,8 16,008 1,8 16,008
Developer Share of "Adjusted" TOT 24,743,109 27,065,300 2,322,191 City Share (of Adjusted TOT) 8,247,703 5,925,513 (2,322 ,191) Unadjusted TOT (to City .6%) 1,8 16,008 1,816 ,008
Total New City TOT 10,063,711 7,741,521 (2,322 ,191)
Deve loper Percentage of Effective TOT 71% 78% 7%
City Share Percentage of Effective TOT 29% 22% -7%
City Revenue
City Share of Effective TOT 10,063,711 7,7 41,521
Property Tax 3,453,298 3,453,298
Sales Tax 7,022,111 7,022,111
Utility Tax 621,065 621,065
Total New Revenue to City 21,160,185 18,837,995 (2,322 ,191) Total New Revenue to Deve loper 24,743,109 27,065,300 2,322,191 Total 45,903, 294 45,903,294
Deve loper Share of Tota l 54 % 59% 5%
City Share ofTotal 46% 4 1% -5%
City Council Staff Report
February 9, 2023 -- Page 7
Orchid Tree Development

City. Factoring in additional City revenue such as property tax, sales tax, and utility tax the net allocation of Project Revenues is 46% to the City and 54% to the Owner. Under the Owner’s proposal, the City share of the TOT would be reduced by $2, 322,191 and the Owner share would increase by the same amount. The net allocation of all TOT revenue would reduce the City share by 7% from 29% to 22%.

STAFF ANALYSIS – REVISIONS TO SITE PLAN:

Upon receiving approval of the Extension of Time application for the project entitlements from the City Council in September 2022, the Owner proceeded to obtain cost estimates for the construction of the Project. The construction cost estimate obtained by the Owner in November 2022 revealed that the project could not be financed as approved and designed. The Owner then proceeded to evaluate revisions to the Project that would result in a similar level of quality while significantly reducing the Project costs. The Owner has produced a revised schematic site plan which has been used to evaluate a more cost-effective approach to developing the Project.

The revised site plan is included as Attachment D to this report. Some of the key features of the revised site plan include the following:
• The revised site plan does not modify the number of proposed hotel units, and the room count will remain at 74 units. The number of parking spaces will also remain unchanged.
• The existing multifamily apartment buildings on the north end of the site (identified as Buildings F, H, I, J, K, and L) will be retained, with a minor addition proposed to Building F. T hese buildings would have been demolished under the existing approved plan and replaced with new hotel buildings.
• An addition was proposed to the historic church building under the existing approved plan; this addition w ould be eliminated under the revised proposal, thereby reducing the impacts to the historic structure. In addition, it is proposed that the church sanctuary roof w ould remain open to the elements (the sanctuary roof was destroyed in an earlier fire), with the sanctuary to be used as an open-air restaurant.
• The historic bungalow court at the southeast corner of the site (identified as Buildings B1- B8) will be retained in its current configuration, as is the existing approved plan. A new poolside cabana (Building B9) will be located at the south end of the bungalow court.
• The overall number of new buildings has been reduced , with most of the new structures located at the center of the site. These include Building A, which is a two-story building that will house a banquet facility and a gym/spa facility; Building N, which is a three-story building that will house hotel units; and Building Q, a one- story building with a café for poolside food service.
• Hotel amenities for the Project will generally remain unchanged. The amenities include a large central pool area, a pool area in the bungalow court area, spa facilities, restaurant and banquet facilities, and an event lawn.

Item 3C - Page 7
City Council Staff Report
February 9, 2023 -- Page 8
Orchid Tree Development

The revised site plan (Figure 2) and the existing approved site plan (Figure 3) are shown together below for comparison purposes.

Figure 2: Site Plan – Proposed Revisions

Figure 3: Site Plan – Existing Approved

Item 3C - Page 8
I ~
I I
I
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I
L
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City Council Staff Report
February 9, 2023 -- Page 9
Orchid Tree Development

The revisions to the site plan significantly reduce the number of new structures on the site, simplify the grading requirements, reduce the amount of necessary new infrastructure, and provide additional open/garden space at the center of the site. These revisions would significantly reduce the cost to build the Project, making it more feasible for the Owner to obtain financing. The owner has provided a letter, included as Attachment A, describing the revisions to the site plan and the associated construction challenges.

The revised site plan has been reviewed by the proposed operator, Auberge Resorts Collection. Richard Arnold, Chief Development Officer of Auberge Resorts, has provided a letter in support of the revised site plan; the letter is included as Attachment E to this staff report.

The revisions to the approved site plan are s ubstantive enough to require evaluation by the Historic Site Preservation Board, Planning Commission, and the Architectural Review Committee. A Development Agreement, if pursued by the Owner, would require a review by the Planning Commission and approval by the City Council. To shorten the timeframe for approval of these entitlements, the Owner has suggested that the City could schedule joint hearings of the various bodies.

ENVIRONMENTAL ASSESSMENT
:

The City’s Planning Commission has previously determined that the Project was exempt from consideration under the California Environmental Quality Act on a number of grounds. Discussion of modifications to the Operations Covenant and associated agreements is not considered a “project” for purposes of the California Environmental Quality Act (CEQA), as that term is defined by CEQA Guidelines section 15378. The Project has been previously reviewed under CEQA and any proposed modifications to agreements cannot reasonably be expected to result in any effect on the environment .

Any revisions to the approved site plan will be evaluated under CEQA at a future date.

FISCAL IMPACT
:

The proposed amendments to the TOT share would decrease the City’s share of the adjusted TOT from 29% ($10,063,711) under the existing agreement to 22% ($7,741,521) with the requested revisions.

The City will also receive non- TOT revenues once the Project is in operation which are estimated to be $11,096,474. Sales tax estimates of approximately $7,022,111 are based on an average expenditure of $500 per room and occupancy rate of 60%. The City receives 1% of taxable sales for the General Fund, 1% of taxable sales for Measure J, and .5% of taxable sales for Measure D. The property tax rate is estimated to be half of the property tax rate due to Mills Act property tax abatement. Property tax is estimated to be 1.1%, of which approximately 27.5% is allocated to the City. Utility taxes are estimates Item 3C - Page 9
City Council Staff Report
February 9, 2023 -- Page 10
Orchid Tree Development

provided by the Owner. Non-TOT revenues are not expected to decrease as the number of rooms, guests, and utility use is the same in both scenarios.

Other fiscal impacts to the City would include the costs of deferring entitlement application fees and building permit fees to Year 3 of the hotel operations. While the City would eventually recoup these fees, there are carrying costs related to the fee deferral.

In addition, the Owner has requested assistance with the costs of undergrounding utilities; no estimate has been provided for these costs or the City’s requested participation in completing the work.

REVIEWED BY:

Department Director: Jay Virata
Deputy City Manager: Flinn Fagg
City Attorney: Jeffrey S. Ballinger
Interim City Manager: Teresa Gallavan

ATTACHMENTS:

A. Letter from Applicant
B. Public Integrity Disclosure Form
C. TOT Analysis
D. Revised Site Plan
E. Auberge Resorts Collection Letter
F. Public Comment Letters
G. Existing Amended and Restated Operations Covenant (Agreement No. 8449) H. CBRE Hotel Feasibility Report
Item 3C - Page 10

ATTACHMENT A

Item 3C - Page 11

NEW CHURCH II, LLC
Post Office Box 6528
Malibu, CA 90264
PHONE (310) 456-2600

February 2, 2023
Teresa Gallavan
City of Palm Springs
3200 E Tahquitz Canyon Way
PO Box 2743
Palm Springs, CA 92262

By redesigning the layout of the existing Auberge Palm Springs Resort & Spa it not only results in a design that is operationally superior but also more cost-effective from a construction standpoint. While there are numerous items that factor into the construction savings, a few major impacts are the consolidating of the center bungalows into one structure, eliminating the new roof in the historic church and overall better efficiency from a building and purchasing standpoint.

Under the previous scheme we had 10 bungalow style buildings scattered throughout the center portion of the property which each required their own foundation, roof, electrical/plumbing runs, etc. By consolidating these into one building along Belardo it results in a significant savings by creating vertical plumbing/electrical runs, repetitive framing patterns and also the elimination of multiple foundations, roofs, etc. Beyond that it also creates for a much more efficient purchasing program as we can bulk order sinks, showers, FF&E, etc. now that we have a more repetitive layout pattern for these units.

Additionally, the restoration of the church roof was a major cost driver due to the structural impacts that it had on the building. By eliminating this feature and keeping it as an open air space we are able to drastically reduce the building costs while also creating an improved dining experience where one can sit underneath an olive grove for dinner while still being inside of a temperature controlled area at the same time.

Throughout this redesign process we worked extremely closely with our contractor placing a heavy emphasis on construction efficiency. Additional examples of this can be seen in the revision to now renovate the buildings along Arenas as well as taking the spa and event space out of the church. Given the historical status of the church it was becoming quite costly and difficult to work within the odd L- shaped layouts that the space offered so moving these uses into a new and more traditional rectangular shaped structure lends itself to a more efficient build and also better floor plan design.

In regards to the financial asks that were referenced within Josh Gottheim’s email dated November 22, 2022, these will not only help potential lenders gain comfort with the proposed development but also greatly assist with stabilization during the early years while operations are ramping up which are often the most difficult for a seasonal hotel. With that said the only adjustments to that letter would be that the request of additional TOT is no longer for 20 years but now only for 10 and also that both City and Developer work together to create new achievable milestone schedule given that it’s been more than 60 days since this email was sent.

Item 3C - Page 12
1 Flinn Fagg
From: JOSHUA GOTTHEIM <[email protected]>
Sent: Monday, November 28, 2022 11:19 AM
To: Jeff Ballinger; Flinn Fagg; Jay Virata
Cc: [email protected]; Jake Jesson
Subject: Orchid Tree Hotel - Settlement Discussions
CAUTION - EXTERNAL SENDER.

SETTLEMENT DISCUSSION – NOT ADMISSIBLE PER CAL. EVIDENCE CODE SEC. 1152

Hello Jeff (cc: Flinn and Jay),

Following up on our discussion this morning, I wanted to give you the following supplemental information that you may incorporate into your communications with Council tonight:

 As part of a “package deal” addressing the other points we have been discussi ng, Richard would be willing to remove the existing foundations on the portions of the site not occupied by the historic bungalows & church.  This would be accomplished as soon as possible after the “package deal” is agreed upon.  Per your request for an esti mate,  Richard indicated the additional 25% TOT requested by Owner could equate to $225,000 per year (based on roughly $500 per occupied room x 70 rooms x 365 days x 65% occupancy x 10.9% tax rate x 25% = $226,277.18).

Let me know if you need anything further.

‐‐Josh

Joshua C. Go
ttheim
CANZONERI GOTTHEIM LAW LLP
Strategic Solutions for Business and Government
(626) 224‐6128
Privilege and Confidentiality Statement   This email and any files transmitted with it may contain privileged, confidential and/or trade secret information. It is intended solely for the use of the intended addressee. If you are not the intended addressee, or a person responsible for delivering it to that person, you are hereby notified that any disclosure, cop ying,  dissemination, distribution, or use of any of the information contained in or attached to this transmission is STRICTLY PROHIBITED. If you are not the intended addressee, please notify the sender by replying to this message and then delete it from your system. Thank you.

From: JOSHUA GOTTHEIM
Sent: Tuesday, November 22, 2022 5:15 PM
To: Jeff Ballinger <[email protected]>; Flinn Fagg <[email protected]> Cc: [email protected]; Jake Jesson <[email protected]> Subject: Orchid Tree Hotel ‐ Settlement Discussions

SETTLEMENT DISCUSSION – NOT ADMISSIBLE PER CAL. EVIDENCE CODE SEC. 1152

Hello Jeff/Flinn –

Item 3C - Page 13
2 This will follow up on the video call we had last week where you indicated it could be productive to bring an updated proposal back to City Council at the upcoming 11/28 closed session if Owner was willing to offer a very significant ($1,000,000) sum – not subject to any force majeur e  extension (other than, obviously, delays caused by the City itself).  This sum would compensate the City in the event the hotel project did not begin construction by March 1, 2024 which is the new Milestone #12 date under the one‐year additional time extension invoked by Owner in my letter da ted October 24, 2022.  Also attached is a copy of the letter Richard offered to obtain from Auberge Resorts, reiterating their commitment to the hotel project with the modifications sent to you on 10/27/22.

As we discussed, the new $1,000,000 security would be part of a “package deal” to be worked out over th e next 60 days and approved as a formal written agreement.  We contemplate including the following terms:

A. Council to approve the revised conceptual plan I sent you on 10/27/22, subject to later review by the Architectural Review Board for aesthetic purposes and the Historical Site Preservation Board for consistency with historica
l guidelines.

B. City to allocate to Owner through a Development Agreement the retained 25% share of TOT for 20 years – in other words, Owner would receive 100% rather than 75% of the adjusted tax rate for the first 20 years of hotel operation.  The City will still re ceive a very significant amount of money annually from sales tax and other revenue streams, along with having the most exclusive hotel in the Coachella Valley.

C. City to defer its development fees until year three of operation.  City assistance with utility undergrounding to be discussed.

D. City to cooperate in proces sing a condo plan and documents to allow Owner to sell some of the suites as condominiums.

E. Owner’s project will remain subject to the highest quality Luxury Hotel standards.

F. Owner will rehabilitate the historic church and bungalows.

G. Owner will pay the City the $1,000,000 termina tion  fee if there are further delays, as described above.  The agreement would define the minimum “luxury hotel project” that would need to be underway by 3/1/24 to avoid triggering this payment.

Because these details may take a few weeks to iron out, and then some additional time for necessary approvals, we propose the City agree to at least a 60‐day portion of the one‐yea r milestone extension we invoked, to allow for further
discussions.

If the City cannot agree to at least 60 days of extension, then I am afraid we are back into an adversarial situation where we beli eve  we have validly invoked an extension for all milestones, but the City refuses to agree to the extension.  Owner will then be forced into a position of asserting legal claims against the City for the hotel project and/or pursuing an apartment development for the site which will not generate signifi cant  revenue utilizing the various state housing law provisions to maximize density.

I understand Jeff you are traveling and won’t be back in SoCal until tonight.  Let me know if a quick call tomorrow or Monday morning ahead of the next Council meeting would be helpful.

Sincerely,

Josh

Joshua C. Go
ttheim
CANZONERI GOTTHEIM LAW LLP
Strategic Solutions for Business and Government
(626) 224‐6128
Privilege and Confidentiality Statement   This email and any files transmitted with it may contain privileged, confidential and/or trade secret information. It is intended solely for the use of the intended addressee. If you are not the intended addressee, or a person responsible for delivering it to that person, you are hereby Item 3C - Page 14
3 notified that any disclosure, copying, dissemination, distribution, or use of any of the information contained in or attached to this transmission is STRICTLY PROHIBITED. If you are not the intended addressee, please notify the sender by replying to this message and then delete it from your system. Thank you.

Item 3C - Page 15

ATTACHMENT B

Item 3C - Page 16
Item 3C - Page 17

1. 2.

3. 4.

5. Name of Entity

PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM
Ne-w (1 ~11 r ch 11 .. L L-C.

Address of Entity (Principle Place of Business)
J~LDD3 ?~C:.e, (' nnsf-l-hvt.\... "4±tw\, tlletld >u
Local or California Address (if different than-#2)
('_Jt qt>Q{p s-
State where Entity is Registered with Secretary of State Nev ~do..

If other than California, is the Entity also registered in California? ~ Yes D No Type of Entity
D Corporation .L!l Limited Liability Company D Partnership D Trust D Other (please specify)

6. Officers, Directors, Members, Managers, Trustees, Other Fiduciaries (please specify) Note: If any response is not a natural person, please identify all officers, directors, members, managers and other fiduciaries for the member, manager, trust or other entity ~ec- A tt-Q. r)t)ecl 1=-fh\ bi-\- A D Officer D Director D Member D Manager [name]
D General Partner D Limited Partner
Other
D Officer D Director D Member D Manager
[name]
D General Partner D Limited Partner
Other
D Officer D Director D Member D Manager
[name]
D General Partner D Limited Partner
Other

CITY OF PALM SPRINGS - PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

(Revised 05/16/19)
Item 3C - Page 18

7. Owners/Investors with a 5% beneficial interest in the Aoolicant Entitv or a related entitv

EXAMPLE
JANE DOE 50%, ABC COMPANY, Inc.
[name of owner/investor] [percentage of beneficial interest in entity _ and name of entitvl
A.

A ~-e-e A-/+l'l--C--r-i e. d £::i-.. h ,-bi .J..-
[name of owner/investor] [percentage of beneficial interest in entity and name of entitv]
B.
[name of owner/investor] [percentage of beneficial interest in entity and name of entity]
C.
[name of owner/investor] [percentage of beneficial interest in entity and name of entity]
D.
[name of owner/investor] [percentage of beneficial interest in entity and name of entitvl
E.
[name of owner/investor] [percentage of beneficial interest in entity and name of entitvl

I DECLARE UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE STATE OF CALIFORNIA THAT THE FOREGOING TRUE AND CORRECT.

PENALTIES
Falsification of information or failure to report information required to be reported may subject you to administrative action by the City.
(Revised 05/16/19)

CITY OF PALM SPRINGS - PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

Item 3C - Page 19
EXHIBIT "A"
TO

PUBLIC INTEGRITY DISCLOSURE -APPLICANT DISCLOSURE FORM
The applicant entity is owned 62.5% by AVCO I, LLC and 37.5% by the Weintraub Descendant's Trust of 2009.

The Trustee of the Weintraub Descendant's Trust of 2009 is Richard Weintraub.

The owner of AVCO I, LLC is LVC One Thousand, LLC, as to 50% and Coleava I, LLC, as to 50%.

The owner of LVC One Thousand, LLC is the REW I Trust of which Asia Trust, Ltd. is the sole trustee.

The owner of Coleava I, LLC is the LCMWI Trust of which Asia Trust, Ltd. is the sole trustee.

The managing member of AVCO I, LLC, is LRAC 1000, LLC of which the ONYD Trust is the sole managing member of which Richard Weintraub and Marc Jacobs are co-trustees.

The managing member of LVC One Thousand, LLC is Richard Weintraub and the managing member of Coleava I, LLC is Liane Weintraub.

ATTACHMENT C

Item 3C - Page 20
Orchid Tree Hotel
Revenue Scenario Comparison
Developer Share 75%
for 30 Yrs
Developer Share
100% first 10 Yrs
75% remaining 20 Yrs
100% for 10 Yrs
vs
75% for 30 Yrs
Transient Occupancy Tax (T0T 11.5%) 34,806,820                   34,806,820 Adjusted TOT (10.9%) 32,990,812                  32,990,812 Unadjusted TOT  1,816,008                    1,816,008
Developer Share of "Adjusted" TOT  24,743,109                  27,065,300                    2,322,191 City Share (of Adjusted TOT ) 8,247,703                    5,925,513                       (2,322,191) Unadjusted TOT (to City .6%) 1,816,008                    1,816,008                       ‐ Total New City TOT 10,063,711                  7,741,521                       (2,322,191) Developer Percentage of Effective TOT 71% 78% 7%
City Share Percentage of Effective TOT 29% 22% ‐7%
City Revenue
City Share of Effective TOT 10,063,711                   7,741,521 Property Tax 3,453,298                      3,453,298
Sales Tax 7,022,111                      7,022,111
Utility Tax 621,065                         621,065
Total New Revenue to City 21,160,185                  18,837,995                    (2,322,191) Total New Revenue to Developer 24,743,109                 27,065,300                    2,322,191 Total  45,903,294                  45,903,294
Developer Share of Total 54% 59% 5%
City Share of Total 46% 41% ‐5%
Figure 1: TOT Allocation Analysis
Item 3C - Page 21

ATTACHMENT D

Item 3C - Page 22
CO
MPACT

COMPACT COMPACT COMPACT COMPACTCOMPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
CO
MPACT
(E) PARKING - 23
EV EV
VAN

CHURCH EVENT
LAWN
POOL
(E) POOL
(E) POOL

EXISTING HISTORICAL WALL
GARDEN
A
Q
B1 B2 B3 B4
B5 B6 B7 B8
F
H
J
I
K
L
N
B9 POOL

OPEN AIR

RESTAURANT
LOUNGE
POOL

EQUIPMENT

UTILITY

LOADING
TRASH

EXISTING

BUILDING
NEW

BUILDING
LEGEND

HISTORICAL ARCH

UTILITY

BELARDO ROAD

BARRISTO ROAD

ARENAS ROAD

CAHUILLA ROAD

SETBACK
20' - 0"

SETBACK
20' - 0"

SETBACK
25' - 0"

AUBERGE PALM SPRINGS HOTEL
284 S. CAHUILLA ROAD,
PALM SPRINGS, CA 92262
Item 3C - Page 23
i
I
- -
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Building Use Height Storie s # Guestrooms Area S.F. Buildi ng Use Height Stori es # Gu estrooms Hote l & Ad m in 7,596 Hote l & Admin
Church Rest aurant 311 - 911 2 D 6,489 Church Restaurant 31' - 911 2 4 Banquet 4,334 Lounge
Buil ding A Hote l 271 _ 4n 2 6 5,618 Open Air Restaur ant (Removed from Area Cale) Bunga low Bl Hote l 131 - 611 1 1 674 Bunga low Bl Hot el 131 - 611 1 1 Bunga low B2 Hot el 131 - 611 1 1 760 Bunga low B2 Hot el 131 - 611 1 1 Bunga low B3 Hote l 131 - 61"1 1 1 760 Bunga low B3 Hot el 131 - 611 1 1 '
Bunga low B4 Hote l 131 - 611 1 1 760 Bunga low B4 Hot el 131 - 611 1 1 Bunga low B5 Hot el 131 - 611 1 1 746 Bunga low B5 Hot el 131 - 611 1 1 '
Bunga low Bo Hote l 131 - 61"1 1 1 760 Bunga low B6 Hote l 131 - 611 1 1 Bunga low B7 Hote l 131 - 611 1 1 761 Bunga low B7 Hot el 131 - 611 1 1 '
Bunga low B8 Hot el 131 - 611 1 1 758 Bunga low B8 Hot el 131 - 611 1 1 Cabana B9 Hote l 141 _ 4n 1 D 529 Cabana B9 Hot el 141 -411 1 0 Buil ding C Hot el 151 - g11 1 3 1,708 New Banque t Hall A Banquet 34' - 10'' 2 0 Buil ding D Hot el 15' - g11 1 4 1,832 Gym & Spa
'
Buil ding E Hote l 15' - gn 1 3 1,621 Exist ing Buil ding F Hot el (Existing) No Change 1 7 Buil ding F Hot el 15' - g11 2 8 3,777 Hot el (Add iti on ) Buil ding G Hot el 15' - g11 1 3 1,273
Buil ding H Hote l 15' - gn 1 2 988 Existing Buil ding H Hot el No Change 1 2 '
Buil ding I Hote l 15'- g11 1 2 957 Existing Buil ding I Hot el No Change 1 1 Buil ding J Hot el 15' - g11 1 1 1,959 Exist ing Buil ding J Hot el No Change 1 3 Buil ding K Hote l 15' - gn 1 1 519 Exist ing Buil ding K Hot el No Change 1 1 Buil ding L Hote l 27' -4.5 11 2 13 7,785 Exist ing Buil ding L Hot el No Change 2 8 Buil ding M Hot el 15' - g11 1 6 2,878
Buil ding N Hote l 27' - 411
6 4,387 New Guestroom Buil ding N Hot el 34' - 1011 3 40 2 Hot el BOH D 2,513
Buil ding P Hot el 27' - 4.5 11
3,727 2 8
Gym 1, 118
Cafe o Hote l Poo l Cafe
Beer Cooler
17' - O" 1 D 610 New Cafe Q Hot el Pool Cafe
Beer Cooler
19' - 8" 1 0
Parking Stall s 94 Parking Stall s
Totals : 14 68,197 Totals : 14
Total Open Space 106,S&!! Total Open Space I I
'
L
Area S.F.
6,100
6,489
3,188
{1,812)
738
760
760
760
746
760
761
758
529
4,000
4,000
2,881
245
971
526
1,859
491
7,752
28,350
610
94 72,222
118,201
i
___f"7___
L I
7 i
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II '
Ii I

ATTACHMENT E

Item 3C - Page 24

1060 Redwood Highway Frontage Road Mill Valley, California 94941 T 415.380.3460 F 415.380.3461 aubergeresorts.com

November 22, 2022

Mr. Richard E. Weintraub
President & CEO
Weintraub Real Estate Group
P.O. Box 6528
Malibu, CA 90264

Re: Orchid Tree Development, Palm Springs, CA

Dear Richard:

It was good to speak with you yesterday.

I’m writing this letter to confirm that Auberge remains fully committed to this incredible project. Last month, when we visited the site together along with Erin Green and Steven Garber from our team to review your vision and revised conceptual plan, we were impressed by the improvements you have made to the project. While we will not be in a position to provide our detailed comments on the design until we have had the opportunity to review a complete set of drawings, we can confirm it is vast improved and more “of the setting” than the prior plan. We look forward to working with you to complete the detailed drawings in due course.

Of course, if anyone from the City of Palm Springs would like to discuss this matter further, I would be happy to make myself available.

Thanks,

Richard Arnold
Chief Development Officer
Item 3C - Page 25
Auberge Resorts Collection

ATTACHMENT F

Item 3C - Page 26
Item 3C - Page 27
St. Baristo Condominium Owners Association
December 15, 2022
The Honorable Lisa Middleton, Mayo,
M,. !=Ion r:agg, Director or Planning Scrvi«s
City of Palm Springs
3200 E Tahquitz Canyon Way
PO Box 2743
Palm Springs, CA 92262
Dear Mayor Middleton and Director Fagg:

I am writing you in my capacity as preside nt of the St. Baris to Condomi nium Owne rs Association boa rd of directors . The St. Baristo condo miniums are located d irectly acros$ the street from th e site of the New Churc.h II, llC. hotel project, sometimes referre<:I to as the New Church/Orchid Tree project.

We met with New Church II, l LC ownership Richard Weintraub, and Project Manager Jake Jesson. to review recent proposed changes to the ho tel proj ect.., timing of the project, and potentia l alternatives sh ould the hotel proje ct not proceed, Based on the In formatio n provided by the developer, including the proposed changes to the blocking plan, we continu e to fu lty support the project (wh ich we und erstand will be opera ted by Auberge Resorts Collection once completed).

We are o f course frust rated by thc- ti me it has taken to reach this point in the development . Nonetheless, we feel the project, once comple ted, will align with t he interests of our homeowner s and othe r residents of the Histori c;: Tennis Club Neighborhood . We were shown renderings o f a residential apartment building that would be a posslbk- alternative for the site should the hotel proj ect not proceed , Given the size and height of the building and other conside rations., our associatio n would be opposed to an alternative project o f lhat nature .

We u nderstand the developer has made a proposa l to the c::ity that involves additiona l TOT and other finane:ial concessions, and has agreed in concep t to fina ncial penalties should construction benchma rks fail to be met. Our request to the city would be for it to work w ith the developer to get this project o ff the ground as soon as humanly possible.
we appreciate your consideration of this matter. Please feel free to contact me anytime should you have any questio ns or comments .

Item 3C - Page 28
The Honor.1ble Lisa Midd leton
Mr. Finn Fagg
December IS. 2022
Page Two
Yours truly,
-;-) ' ( ,.,,--;
/ ,-_ ~~
Brian J. Hurd, President
356 w. Baristo Rd
P•lm Springs. CA 92262
(612) 226-4873
SL,baristP@t:.mail.com
cc: Mr. J. Terry Call, SL Sadsto COA Director
Mr. Paul Magel'$, St. Baristo COA Director
Item 3C - Page 29
Historic Tennis Club Neighborhood Organization, Inc.

Via Email
January 6, 2023
Lisa Middleton, Councilmember
Palm Springs City Council
Dear Councilmember Middleton:

As a member ofthe Board of Directors ofthe Historic Tennis Club Neighborhood Organization, Inc. ("HTCNO Board"), I am writing to you regarding the recent changes proposed by Richard Weintraub and New Church II to the New Church/Orchid Tree project located in our neighborhood.

The HTCNO Board met with Richard and his project manager, Jake Jesson, on December 12, 2022. They shared with us, in concept, their recent changes to the Auberge luxury resort proposal, including their plan to request an additional TOT tax rebate. They also described for us, and provided us with a drawing of, a potential alternative to the luxury hotel: a multi-story residential apartment building .

While we do not have the final details, we believe that the revised hotel project is consistent with the character of the neighborhood. We also believe that the multi-story apartment building would significantly change the character and not be in the best interest of the Historic Tennis Club Neighborhood.

We urge the City to work with the developer to enable them to complete the hotel project as quickly as possible.

Thank you very much for your consideration of this matter. Please do not hesitate to contact me if you have any questions or if I can be of any assistance.

Sincerely,
Irene D. Gilbert
Cc: Grace Garner, Mayor
Jeffrey Bernstein, Councilmember
Ron deHarte, Councilmember
Christy Holstege, Councilmember
Christopher Hadwin, Director of Planning Services

ATTACHMENT G

Item 3C - Page 30
Item 3C - Page 31
1/
FREE

RECORDING

REQUESTED
BY
AND
WHEN

RECORDED
MAIL
TO:

THE
CITY
OF
PALM

SPRINGS
3200
E.

Tahquitz
Canyon
Way
Palm
Springs,
CA
92262
Attention:

City
Clerk
2021-0725755 12/09/2021
09:12
AM
Fee:$

0.00 Page
1 of
12 Recorded
in
Official
Records
County
of
Riverside
Peter
Aldana
Assessor-County
Clerk-Recorder
llll
~B~~1~1,~t'l~lf
11111
cf
{Space
Above
This
Line
for
Recorder's
Office
Use
Only)

AMENDMENT
NO.1
TO

AMENDED
AND

RESTATED

OPERATIONS

COVENANT

AGREEMENT
NO.
8449
THIS

AMENDMENT
NO.
1 TO

AMENDED
AND

RESTATED

OPERATIONS

COVENANT

AGREEMENT
NO.
8449
("Amendment")
is
made
and
entered
into
this
l ~,
·. t>ecc~4.
--
day
of
~~81..«oR=leer,
L021,
by
and
between
on
the
one
hand,
NEW
CHURCH
11,
LLC,
a
Nevada
limited
liability
company,
and

CAHUILLA

CHURCH,
LLC,
a
Nevada
limited
liability
company,
(collectively,
"Owner");
and,
on
the
other
hand,
the
CITY
OF
PALM

SPRINGS,
a
California
municipal
corporation
and
charter
city
("City").

RECITALS:

A.

WHEREAS,
Owner
and
City
previously
entered
into
that
certain
Amended
and
Restated
Operations
Covenant
Agreement
No.
8449
dated
as
of
January
13,
2020
("Agreement")
pursuant
to
which City
agreed
to
provide
certain
financial
incentives
to
Owner's
proposed
hotel
development,
provided
that
Owner
meets
specified
conditions
including
meeting
milestone
dates
relating
to
predevelopment
and
development
of
the
hotel
as
set
forth
in
Exhibit
"C"
to
the
Agreement
("Schedule
of
Performance");
B.

WHEREAS,
the
worldwide
Covid-19
pandemic
and
governmental
and
private
sector
responses
thereto
have
negatively
impacted
the
hospitality
industry,
hotel
development
and
the
hotel
lending
market;
C.

WHEREAS,
based
on
the
circumstances
described
in
Recital
B
above,
Owner
has
made
a
claim
for
force
majeure
extensions
of
the
Schedule
of
Performance.

However,
the
City
has
disputed
some
aspects
of
the
Owner's
claim
and
has
raised
concerns
concerning
the
condition
of
Owner's
hotel
site,
which
has
remained
vacant
for
several
years
pending
commencement
of
construction;
D.

AND

WHEREAS,
City
and
Owner
desire
to
resolve
their
dispute
and
provide
for
adjusted
milestones
for
the
development
of
the
Project,
on
the
terms
and
conditions
set
forth
in
this
Amendment;
NOW,

THEREFORE,
for
good
and
valuable
consideration,
the
receipt
and
sufficiency
of
which
are
hereby
acknowledged,
City
and
Owner
hereby
agree
and
amend
the
Agreement
as
set
forth
below.
1 55575.10035
\34474404.5
Item 3C - Page 32

1. Defined Terms. Unless otherwise defined herein, defined terms used in this Amendment shall have the meanings assigned to them in the Agreement.

2. Amended Schedule of Performance. Exhibit "C" to the Agreement is hereby replaced with the revised Exhibit "C", attached to this Amendment and incorporated herein by this reference.
a. With respect to Milestone# 5 (Demolition of non-historic structures), Owner shall not lose any non-conforming rights that Owner has in the property with regard to floor area ratio, lot coverage, or unit count, as a result of the demolition called for by this Agreement. The provisions of this subparagraph will survive the termination of this Agreement. b. With respect to Milestone # 7 (Submission of Application to Extend Entitlements), in connection with the Palm Springs Zoning Code's requirement for extensions of time for entitlements, City agrees that Owner's strict compliance with the milestones in this Agreement shall constitute evidence of good faith efforts toward the exercise of Owner's entitlements, which Owner may submit to the Planning Commission, and, if appealed, to the City Council.

3. Modifications to Force Maieure. Provisions of the Agreement pertaining to Force Majeure and Excusable Delay shall remain as set forth in the Agreement, except as follows:
a. Notwithstanding any other provision of the Agreement or this Amendment, Owner shall not be entitled to any further extension of Milestones #1 though #10, inclusive (as set forth in Exhibit "C") because of any direct or indirect impact of the Covid-19 pandemic, including, but not limited to, the following direct or indirect impacts such of the Covid-19 pandemic: (i) reduction in business and leisure travel; (ii) reduced profitability of hotels; (iii) constriction of the lending market for new hotels; or (iv) unavailability of construction financing for the Revised Luxury Hotel Project. b. No later than the date set forth as Milestone #8 (feasibility report), Owner shall, at Owner's sole cost and expense, commission a written report by a nationally recognized firm that is mutually agreed upon by Owner and City in order to assess whether or not market conditions would reasonably preclude proceeding with the financing and construction of the Project despite Owner's best efforts, given all of the various factors existing at that time, including, without limitation, the forecast for relevant hospitality market demand, the hotel lending market, and Owner's financial condition and borrowing capacity. In the event the feasibility report determines that it is not economically feasible to construct and operate the Project despite Owner's best efforts, Owner may (but shall not be required to) provide City with the report in order to rely on such report as prima facie evidence of a Force Majeure event, as set forth in Section 7 .16 of the Agreement, with 2 55575. l 0035\34474404.5
Item 3C - Page 33
respect to Milestone #11 ( construction loan approval/ construction contract) or #12 (commencement of construction). In the event that Owner chooses to invoke Owner's Force Majeure with respect to Milestone #11 or #12, or both, and such Force Majeure extends one or more mile date(s) by 365 days, then either Party shall have the right, but not the obligation, to terminate the Agreement, without any liability of any kind.

4. Maintenance of Vacant Site Prior to Construction. Owner shall use reasonably diligent efforts to maintain the vacant site (prior to start of construction) in a clean and attractive condition. Without limiting the nature of the foregoing, Owner shall implement the practices set forth in Exhibit "D", attached hereto and incorporated by reference herein as part of the Agreement.

5. Typographical Correction. To correct a typographical error in the Agreement, the phrase "reasonably require more than sixty days to cure" which appears in Sections 7.10, 7.10.1 and 7.11 of the Agreement is changed to state "reasonably require more than thirty (30) days to cure".

6. Mutual Withdrawal of Notices of Default: Estoppel and Good Standing. The Parties hereby rescind and cancel any notices of default they may have issued pursuant to the Agreement prior to the date of this Amendment. The Parties hereby represent and warrant to each other and to Owner's current and prospective lenders, partners, investors and hotel operator (collectively, "Hotel Participants") that: (i) the Amended Agreement is in full force and effect and has not been modified other than by the terms of the Amendment; and (ii) each of the Parties is in good standing under the Amended Agreement and there is neither any default under the Amended Agreement ("Existing Default") nor any act or omission occurring prior to the date of this Amendment that would be a default if properly asserted in a notice of default and not cured within the cure period applicable under the Amended Agreement ("Pending Default").

7. Withdrawal by City of Code Violation Notice. City hereby rescinds and cancels its Notice of Violation dated July 15, 2021 concerning Owner's hotel site, and Owner hereby rescinds and cancels its appeal therefrom dated July 19, 2021.

8. Withdrawal by Owner of Public Records Request. Owner hereby rescinds and cancels its Public Records Act request to the City dated July 19, 2021.

9. Mutual Release. Each of the Parties hereby fully releases and forever discharges the other Parties from any and all claims, defaults (including but not limited to Existing Defaults and Pending Defaults), code violations existing as of the execution of this Amendment, demands, actions and causes of action (collectively, "Claims") which any Party may have against another Party, arising out of, or in any way related to the Agreement or the hotel development site described therein. This 3 55575.10035\34474404.5
Item 3C - Page 34
section shall operate as a full and final settlement, compromise, and resolution of any and all such past or present Claims. Accordingly, except as provided herein:
(A) Each Party specifically waives the provision of section 1542 of the Civil Code of the State of California which provides: "A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."
(B) Each Party represents and warrants that it understands the effect of this waiver of section 1542 and has had the opportunity to discuss the effect of this waiver with counsel of its choice.

10. No Other Amendment. Except for the changes set forth above in this Amendment, the Agreement remains unmodified and in full force and effect.

IN WITNESS WHEREOF, the City and Owner have executed this Amendment by duly authorized representatives on the date first written hereinabove. [SIGNATURES ON FOLLOWING PAGE]
4 55575.10035\34474404.5
Item 3C - Page 35

SIGNATURE PAGE
TO
AMENDMENT NO. 1 TO AMENDED AND RESTATED OPERATIONS COVENANT AGREEMENT NO. 8449
"CITY"

THE CITY OF PALM SPRINGS,
a California municipal corporation,
and charter city
APPROVED AS TO FORM:
~~~t~ey
"OWNER"
~~~v;~~~
Title: 11\t\s)-e,-e. \ O'tJ'f P T\1-lc,\-p._5:,
\f\.\ ()...(\flSl < o~ L\Q..~c \OW) L-LL
I..\--S tv\, <t.v\Cl S,{ r
55575.10035\34474404.5
5 CAHUILLA CHUR~~;it:Z
a Nevada limited_~?-~ c_/a/
///·//
By: ~-
/ 7
Name: ~,rJr)a rd \t,Lei n:\:rlULb
Title: &cu s\-et\ DN':\ ~T;,-u <)-) Cl>
Ma._ np__ <:~~t r of Lfe_A-C... lDOO) L-L C J
\ \ s \v\a._v-,cts-e r
Item 3C - Page 36
REVISED EXHIBIT "C"

PERFORMANCE SCHEDULE

MILESTONE DATE
#1
#2
#3
#4
#5
#6
Within 2 days following full
execution of this Amendment
No. 1
Within 2 days following full
execution of this Amendment
No. 1
December 1, 2021
December 1, 2021
90 days following issuance of
demolition permit
February 1, 2022
1 See Section 2(a) of the Agreement, above.
55575.10035\34474404.5

ACTIVITY
Owner to provide City with evidence
of its architects resuming work on
construction plans following the
Covid-19 hiatus. This evidence will
include a copy of the signed
authorization to proceed with
completion of the plans consistent
with the submittal date below.

Owner's architect(s) shall certify to
the City that the construction plans
are at least 30% complete, as
measured consistent with industry
standards.

Owner to submit a plaQ to the
Development Services Director to
protect and preserve the historic
buildings and structures (including but
not limited to buildings 8-1 through 8-
8, R, and historic arch structure
adjacent to building A, as depicted on
drawing A-0.1, dated April 9, 2020) in
order to accomplish Milestone #5,
below (demolition of non-historic
structures)
Owner to install fencing/screening, in
a manner acceptable to the
Develooment Services Director.

Owner to demolish buildings A, 8-9
through 8-11, C, D, E, G, H, I, J, K, M,
and 0, as depicted on drawing A-0.1,
date April 9, 2020.1 Owner will apply
for the demolition permit by January
5, 2022.

Owner to demonstrate substantial
progress made on construction plans
subsequent to the date of this
Amendment. "Substantial progress"
means certification by the architect to
Item 3C - Page 37
#7 March 1, 2022
#8
April 15, 2022
#9
June 15, 2022
#10 October 15, 2022
#11 December 15, 2022
#12 January 15, 2023
#13 February 15, 2025
#14 June 15, 2025
2 See Section 2(b) of the Agreement, above.
55575.10035\34474404.5
the City that the construction plans
are at least 60% complete, as
measured consistent with industry
standards.

Submit application to extend
entitlements. 2
Owner shall commission a feasibility
report by a nationally recognized firm,
mutually agreed to by City and Owner
Submit substantially complete
construction documents and
application for building permit. For
purposes of this Milestone,
"substantially complete" shall mean
certification by the architect that the
primary aspects of the construction
plans (i.e., structural, mechanical) are
at least 80% compete, as measured
consistent with industry standards ..

Obtain City approval of construction
documents. City shall process the
plans diliQently and in good faith.

Obtain approval for a construction
loan to finance construction of the
Project, and enter into a construction
contract to develop the Project
Pay for and obtain all required
building permits, and commence
construction of the Revised Luxury
Hotel Project
Substantially complete construction
of the Revised Luxury Hotel Project
Open the Revised Luxury Hotel
Project
Item 3C - Page 38
REVISED EXHIBIT "D"
M~NTENANCEPROGRAM
Remove all dead vegetation, including dead trees and bushes Provide daily on-site, in-person security 7:00 p.m. through 7:00 a.m., plus daily maintenance check and trash collection. Such security shall be licensed in accordance with the Private Security Services Act (Bus. & Prof. Code, 7580 et seq.) The property shall be secured with perimeter fencing/screening as approved by the City's Development Services Director. Such fencing/screening must be maintained in a clean and presentable fashion, and graffiti shall be removed within 48 hours of notification to Owner. If the fencing/screening becomes faded, Owner shall replace or re-surface the fencing/screening, so as to not be faded.

Keep the site clear of trash, debris, and branches/palm fronds, whether on the ground or on rooftops of buildings.

Post "No trespassing" signage at intervals no more than 150' apart. The signage must reference Penal Code Section 602(1). The property shall also contain signage that indicates the property is under video surveillance. Each side of the property shall also display a sign, which provides management contact information. The property shall be posted with the name and 24-hour contact phone number of the local property management company and security company. The posting shall be no less than 18" X 24", shall be of a font that is legible from a distance of forty-five (45) feet, and shall contain the following verbiage: "THIS PROPERTY MANAGED BY ____ " and "TO REPORT PROBLEMS OR CONCERNS CALL (name and phone number)".

There shall be at least two designated entry points on the Cahuilla and Belardo sides of the property and at least one on the Baristo side. Designated entry points to the property shall be locked. Access keys/codes shall be made available to law enforcement and fire personnel by means of Knox Box security containers keyed to match the keys utilized by Palm Springs Fire and Palm Springs Police personnel. The security boxes shall be marked with reflective tape.

All structures on said property shall be secure from access by trespassers. Any breach or attempted breach to a structure and/or perimeter fence shall be repaired to the City's satisfaction within two (2) business days.

Install lighting at pedestrian access points. Lighting activated by motion sensors shall be installed along walkways of the property and other areas designated by the Chief of Police or his designee. All lighting shall comply with section 93.21.00 of the Palm Springs Zoning Code (PSZC).
55575.10035\34474404.5
Item 3C - Page 39
Install and maintain a video surveillance system as approved by the Chief of Police or the Chief's designee. Use of the surveillance system shall provide twenty-four (24) hour coverage of the property in the form of video and/or still images triggered by motion. Any data captured on the remote cameras shall be evaluated weekly by Owner. In the event there is evidence of a trespass or damage caused by an unknown party, the surveillance footage will be evaluated. This system shall, at a minimum, monitor any points of ingress or egress through the property as well as any large open space areas, the back sides of buildings and the narrow alleys and spaces between the buildings. Images captured by this surveillance system shall be maintained for a period of no less than thirty (30) d.

Copies of footage shall be made available to the Chief of Police or his designee no later than two (2) business days after a request for the footage is made.

The property landscape shall be maintained in compliance with PSZC section 93.19.00, subsection 1, and with PSMC section 11. 72.170(b )( 1 ), both of which read as follows -All properties, including vacant properties, shall be kept free of trash, building materials or the storage of other goods which are visible from the street or adjacent properties.

Properties shall also be kept free of excessive vegetative undergrowth.

At such time as the property is sold or otherwise changes, management and the person named below is no longer responsible for the property, they shall notify the City immediately.
55575.10035\34474404.5
Item 3C - Page 40

ACKNOWLEDGMENT
A
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Item 3C - Page 41

ACKNOWLEDGMENT
A
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verifies
only
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identity
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individual
who
signed
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Item 3C - Page 42
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STATE
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55575.
10035\34474404.5

ATTACHMENT H

Item 3C - Page 43

MARKET REPORT

PROPOSED AUBERGE PALM SPRINGS
284 South Belardo Road
Palm Springs, California 92262
CBRE, Inc. File No. CB22US090837

Mr. Joshua Gottheim
Canzoneri Gottheim Law, LLP
4348 Hayman Avenue
La Canada Flintridge, CA 91011

www.cbrehotels.com
Item 3C - Page 44

CBRE HOTELS
The World's leading Hotel Experts.

CBRE
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www.cbrehote ls.com

CO MMERCIAL R EAL ESTATE SERVICES
Jeff Lugosi , MAI, CRE, FRIC S, ISHC
Executive Vice President
CBR E Hotels Advisory

www. cb
rehotels .com
October 19, 2022
Mr. Joshua Gottheim
Canzoneri Gottheim Law, LLP
4348 Hayman Avenue
La Canada Flintridge, CA 91011
Dear Mr. Gottheim:

In accordance with our agreement, we have completed our analysis of the current feasibility of developing the Auberge Palm Springs Resort, a proposed luxury boutique hotel (the “Hotel” or “Subject” or “P roject”) to be locate d at 284 South Belardo Road (the “S ite”) in Palm Springs , California.

Pursuant to our engagement, we have prepared this report sum marizing our findings. The report is intended to “…assess whether or not market conditions would reasonably preclude proceeding with the financing and construction of the P roject despite O wner’s best efforts, given all of the various factors existing at that time, including, without limitation, the forecast for relevant hospitality market demand, the hotel lending market, and Owner’s financial condition and bo
rrowing capacity.”
The conclusions reached are based on our knowledge of the respective lodging and financial markets as of the completion of our evaluation in October 2022. The following report summarizes our findings and reflects the conclusion of our analysis. This report is subject to the Terms and Conditions presented in the Addenda.

We appreciate your cooperation extended to us during the course of our engagement and would be pleased to hear from you if we could be of further ass istance in the interpretation of our findings.

Sincerely,
Jeff Lugosi, MAI, CRE, FRICS, ISHC
Executive Vice President
CBRE Hotels Advisory
Item 3C - Page 45
CBRE
Page | 1

EXECUTIVE SUMMARY
Based on our research and analysis it is our professional opinion that market conditions do not currently exist to reasonably allow proceeding with the financing and construction of the project.

Despite significant efforts on behalf of the qualified borrower, using a well- respected mortgage broker there were simply no reasonable sources or available terms to finance the construction of the Project. Skyrocketing construction costs, unpredictable and rapidly rising interest rates which are expected to continue, the COVID pandemic which negatively impact hotel demand as well as creating supply chain issues, have led to a severe decline, if not an outright pause in new construction lending for luxury hotel developments in most markets, including the Coachella Valley.

However, because of the strength of the project’s location within Palm Springs, the highly designed and the amenities and services offered planned at the hotel, the internationally recognized Auberge management company, and experienced development team, we believe that the project has the ability to be the most luxurious resort in the Coachella Valley in high demand and successful financially at a future point in time. That will occur when supply chain constraints ease and interest rates stabilize
The Project was fully entitled by the City of Palm Springs Planning Com mission in March 2016 and since that time, New Church II, LLC (“D eveloper”) has worked diligently to ad vance the project forward and bring it to fruition. Although, it should be noted that the development process actually began much earlier, s tarting with the assemblage of the six land parcels that comprise the full city block beginning in 2010.

Today the project stands “shovel -ready” subject to final city plan check approval of construction drawings for a 74- room, 5 -Star, full- service l uxury resort. The project has an agreement with world class operator Auberge Resorts to manage the Hotel. However, not withstanding the Developer’s best efforts to obtain financing for the development of the Project in retaining Sonnenblick-Eichner, a premier real estate investment banking firm (see Addendum E) — unforeseeable developments on a national and internation al scale over the past two -plus years have rendered what were previously typical and reasonable financing terms all but nonexistent today.

The most prominent of these was of course the outbreak of the Novel Coronavirus (COVID -19), declared by the World Health Organization as a Global Pandemic on March 11, 2020. The Pandemic negatively impacted numerous i ndustries and businesses around the globe but inarguably it had a drastic effect on hospitality and tourism. The need for social distancing and the overall contraction in economic activity spurred by the Pandemic caused dramatic declines in hotel demand and operating performance nationwide.

Hotel performance declined a staggering 50.3% from 2020 to 2021, nearly 80% of hotels were temporarily closed, and 70% of hotel employees were laid off or furloughed. In positive news, the hotel industry is well into recovery mode, although the trajectory of a return to pre- pandemic levels varies by local market, as international and group travel have not returned in earnest.

Further, a confluence of events—inflation, pandemic-related restrictions, supply chain disruptions, labor shortages and the war in Ukraine—are spurring rising costs and uncertainty across the Item 3C - Page 46
Page | 2
construction industry . CBRE’s new Construction Cost Index forecasts a 14. 1% year-over-year increase in construction costs by year-end 2022 as labor and material costs continue to rise.

Escalation should abate in 2023 and 2024, on par with hist orical averages, although given the large number of construction inputs—many of which are often subject to geopolitical risks such as tariffs and sanctions—costs for some materials may remain volatile. Given the luxury and highly specialized nature of the P roject these increa ses have been even more acu te, with current construction costs projected to be more than two times greater than they were prior to the Pandemic.

Lastly, note that the combination of global inflationary pressures (leading to highe r interest rates) and the recent geopolitical events in Ukraine, in addition to the on- going effects of the glob al Covid-19 pandemic in some markets, has heightened the potential for greater volatility in property markets over the short -to-medium term. Ex perience has shown that consumer and investor behavior can quickly change during periods of such heightened volatility and any lending or investment decisions are reflective of this heightened level of volatility.

Borrowing costs have increased and there is some uncertainty as to the timing and magnitude of additional future interest rate increases. CBRE expects the federal funds rate to increase through 2022 and peak in 2023 at 3.75% . Tightening credit markets will continue to drive adju stment in the comm ercial real estate investment markets in the near term with potential impacts on capitalization rates and investment demand. Rapidly increasing interest rates and subdued economic growth will weigh on commercial real estate fundamentals and investment volumes this year and next.

As a result of the abovementioned increase in borrowing costs, the capital markets quickly turned decidedly negative in June 2022 and that sentiment has continued to trend downward throughout the remainder of summer. However, lodging m arket demand fundamentals are decidedly positive and forecast to remain so for the foreseeable future. Nonetheless, hotel investment of nearly all types, but especially ground- up construction has come to a temporary halt until the decoupling of sentiment and performance can be better evaluated and understood.

On a positive note, we can loo k to past history and t he push and pull of this dynamic is nothing new in the investment hotel community and happens frequently, most notably in the summer of 2011. Thro ughout that summer capital market sentiment deteriorated despite the fact that lodging fundamentals were wildly positive. And the market conditions were remarkably similar to the situation today. In this example, once the uncertainty abate d, investors returned from the sidelines with increased confidence and the hotel industry achieved a decade of increasingly positive performance.

Thus, while there is currently no likelihood of any developer securing financing for the construction of a new luxury hot el in a seasonal m arket similar to t hat of the Subject, it is important to not only opine that the myriad of current challenges will alleviate but also to reiterate that the highly desirable and unique nature of the proposed Hotel, which features many strengths that are favorable to a future successful financing, should eventually outweigh and real or perceived challenges.

As noted herein, Coachella Valley communities are subject to fluctuating patterns o f demand, due to a high degree of seasonality. While it is not necessarily as im pactful on levels of demand Item 3C - Page 47
Page | 3
to a 74-room luxury report as it is to a 500-room group resort, it does impact rates that can be charged during the low season. Additionally, while the popularity and of stature of Palm Springs continues to grow, it does not currently have the same level of hotel stock and cachet of ultra luxurious destinations such Napa Valley, where certain hotels can achieve rates well over $1,000 and luxury hotels routinely sell at a rate of more than $1 million per available hotel room. While not unsurmountable, t aken together these factors lessen the chances of financing in an already uncertain marketplace.

However as proposed, and assuming more normalized lending conditions, the Hotel represents a rare opportunity to further elevate the luxury visitor experience in the local community. The Project is anticipated to be the premier lodging destination in the Coachella Valley offering best -in-class facilities a nd amenities , situated on an irreplacea ble site t hat prov ides for low density and ultimate privacy . Further, the Hotel will be managed by internationally renowned Auberge Resorts, a world class operator of Forbes Travel Guide 5-Star destination resorts and Michelin Star restaurants. Therefore, there is clear justification for the city to extend the timeline of the development agreement in order for uncertainty to abate and the financial markets to return to more normalized levels of lending activity.

Item 3C - Page 48

Page | 4

PROJECT DESCRIPTION
Scope of Facilities and Overall Quality Level
The Project is planned to be 74-room, 5- star, luxury full- service resort that will include the renovation of rooms on the existing Orchid Tree Inn and Community Church The existing hotel rooms and bungalows of the Orchid Tree Hotel, along with the adjacent apartment buildings and homes, will be renovated and transformed into 74 oversized luxury guestrooms. The Palm Springs Community Church will become the resort’s main reception area, housing the resort’s lobby, meeting and banquet facilities, as well as the resort’s indoor/outdoor restaurant, bar and lounge area.

All guestrooms will a large private entry courtyard and a rear patio area and offer finely appointed finishes commensurate with a 5 -Star luxury resort, including five and six fixture bathrooms. In addition, the Subject will offer a signature three-meal restaurant, a bar and lounge are, a high- end, distinctive full- service spa with a unique wellness pro gram, several outdoor pools and extensive outdoor space. The entire property will be attractively landscaped, offering a tasteful European elegance with an exclusive sense of privacy.

Based on the existing facilities within the market, and the estimated luxury positioning, the Subject is anticipated to be the highest-end property in the local market and be well positioned to attra ct higher rated demand. Additionally, the Subject will be professional managed by Auberge Resorts, a world class operator of Forbes Travel Guide 5- Star destination resorts and Michelin Star restaurants.

AUBERGE RESORTS
The subject will be managed by Auberge Reso rts which is a luxury hotel operator based in Mill Valley, California. The company currently operates 17 luxury boutique resorts in the United States and seven outside the United States in Latin America, Asia and Europe. There are currently three Auberge operated hotels in California located in the Napa Valley region. In addition , there are four Auberge hotels in the p ipeline including one in Los Olivos i n Santa Barbara Coun ty which after nearly a decade in planning, is anticipated to open in February 2023. Auberge properties offer luxury travelers world-class wineries and destination restaurants in Napa Valley, year-round adventures in Colorado, golden sand beaches in Hawaii, and escapes to New England’s timeless hideaways among others.

Facility Conclusions
The abovementioned facilities and am enities will optimize the market position and performance of a luxury boutique hotel at the S ubject site. The proposed Hotel will offer boutique facilities in the established leisure destination of Palm Springs, a market underserved by luxury hotel accommodations. Located in the historic T ennis Club neig hborhood of Pal m Springs, the proposed Hotel will be positioned adjacent to downtown Palm Springs, with excellent views of the San Jacinto Mountains. From a regional sta ndpoint, the S ubject will be located within drivi ng distance for the more than 20 million residents of the greater Los Angeles area. With its proximity to Pal m Springs shopping, entertainment, and dining the Subj ect will be well positioned in relation to regional demand generators and given its luxury positioning is anticipated to induce a portion of its own demand.

Item 3C - Page 49

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HOTEL MARKET ANALYSIS
Understanding the rela tionship between supp ly and demand is a critical com ponent of any analysis, particularly w ith respect to hote ls. Unlike oth er property types, hotels essentially lease their rooms on a daily basis. Wh ile this charact eristic a llows for an immedia te response to changes in market c onditions, it also requires a hi gh level of management intensity. There is an inverse relationship be tween occupancy and average dai ly rate (ADR) and rais ing or lowering rates typically has an immediate impact on room-nights sold.

NATIONAL HOTEL MARKET OVER VIEW
The following overview was derived from CBRE Hotels Research Hotels Horizons National Hotel Forecast (Second Quarter 2022).

Nation al Economic Su mmary
The U.S. economy shrank for the firs t time since the pandemic started in Q1 2022, when adjusted for inflation. Real Q1 2022 GDP decreased sharply at an annualized rate of 1.4% from the preceding quarter, down from a 6. 9% increase in Q4 2021. This was followed by a 0.9% decrease in GDP in Q2 2022. T he drop was largely driven by decreases in consumer spending on good and in business and residential investment. Although a second cons ecutive quarter of negative growth in GDP in Q2 2022 could be an indicator of a recession, CBRE does not believe the U.S. economy is currently in one . However, we expect that a recess ion could take hold late this year and early next year. CBRE expects that more challenging economic conditions later this year and next will weigh on real estate market fundamentals and investment volumes.

National Hotel Market Summary
The follow ing is a tab le illustrating the historic and pr ojected occupancy, ADR an d Re vPAR (revenue per available room) figures for all U.S. hotels.

Despite a contraction in Q2 GDP, and the highest inflation seen in mo re than 40 years, U.S. hotel industry performance was stronger than expected in Q2 2022. Strength in the quarter was the result of continued improvements in gro up business, inbound international travel, and w hat may have been a peak in leisure travel this cycle. As indicated above, CBRE Hote ls Research Item 3C - Page 50
Annua Performance - Five Year History and Forecast -A I US Hotef,s Yoar Oec ll Oec ADR a ADR RovPAR l!. RovPAR
2017 66.8% 0.6% $1i26.22 1.6% $84.29 2.3,%
2018 00.5% -0,3"% $12&69 2.0% $8!i64 1.6%
2019 66.8% 0.4% $1i2.9.69 OJI% $86.62 1.1%
2020 42.7% -36.0% $100-8'.3 -22.3% $4!109 -50.3,%
2021 57.5% 34.6% $1i2l 58 20..6% $69.90 62.2%
2022F 62-9% 9 .. % $143.28 117:9% $90.15 29.0%
202-3F 64.2% 2.0% $148.22 3.4% $95.12 5..5%
2024F 65..9% 2.7% $152.08 2.6% $100.27 5.4%
20Q:5F 66.8% 11,3% $155.54 2.3% $1:03:92 3.6%
2026F 66.9% OJ% $15&84 2.1% $106.1,9 2.2%
Source: CBRE f-loteJs Research, Ka 'bri Labs, 02.2022.

Page | 6
current forecasts call for a full recovery in ADR, RevPAR, and demand in 2022 and 2023, respectively.

While some markets have already recovered, others will underperform in 2023 resulting in an uneven geograp hical recovery. Drive-to res ort markets are p erforming very w ell, with som e markets experiencing reco rd operating levels. Moreover, household savings is at a rec ord high, and consumer spending is projected to continue shifting from goods to services.

COACHELLA VALLEY HOTEL MARKET OVER VIEW
The follow ing is data provided by CBRE Ho tels Research for the upper priced hotels in the Coachella Valley hotel market. The historical data (2017 through 2021) is provi ded by Kalibri Labs, while the projections were developed by CB RE Hotels Research. The following t able presents the five-year historical performance and forecast of upper priced hotels in the Coachella Valley hotel market.

Year Occupancy
Percent
Change ADR
Percent
Change RevPAR
Percent
Change
2017 63.1% - $191.97 - $121.19 -
2018 62.1% -1.7% $201.15 4.8% $124.87 3.0%
2019 61.7% -0.6% $211.29 5.0% $130.32 4.4%
2020 28.3% -54.1% $210.49 -0.4% $59.63 -54.2%
2021 44.2% 55.8% $239.44 13.8% $105.71 77.3%
2022 60.9% 37.9% $272.38 13.8% $165.77 56.8%
2023 62.2% 2.2% $279.76 2.7% $173.95 4.9%
2024 62.6% 0.7% $285.22 2.0% $178.55 2.6%
2025 62.9% 0.4% $291.80 2.3% $183.48 2.8%
2026 62.8% -0.1% $298.25 2.2% $187.24 2.1%

HOTEL HORIZONS - FIVE YEAR HISTORY & FORECAST

COACHELLA VALLEY (UPPER PRICED HOTELS)
Source: CBRE Hotels Americas Research, Hotel Horizons 2Q 2022 As indicated abo ve, looking toward year -end 2022, the Coachella Valley RevPAR for upper priced hotels is expected to experience a RevPAR increase of 56.8% reaching $165.77 for the year. This RevPAR is well above 2019 RevPAR. Upper priced hotel occupancy is anticipated to stabilize around approximately 63.0% over the forecast period. The drive-to leisure nature of t he Coachella Valley has resulted in a strong recovery outpacing many more urban hotel markets in California and the West Coast in general.

We have included a copy of the current edition of Coachella Valley Hotel Horizons as Addendum B of this report.

Seasonality
The Coachella Valley exhibits a high degree of seasonality in demand. The length of each season is a function of weather and the timing of holidays. The high season occurs between January and April, when the weat her is m ost desirable, and the hotels exhibit the highest occupancies and rates. There is more travel by individuals rat her than groups during this period. During the high season, the number of special events and festivals t hat occur i n the Coachella Valley ty pically results in occupancy levels in the 80% range and hotels often sell out during weekends given the large influx of we ekend visitors from Southern California. Events such as the Coachella and Stagecoach Music Festivals and BNP Paribas Open tennis tournament att ract hundreds of thousands of visitors to the Coachella Valley.

Item 3C - Page 51

Page | 7
The shoulder seasons occur from May through June and from October through December. Since there are fewer individual travelers during this period, the hotels foc us on att racting a higher proportion of group business. The low season occurs in the summer months of July , August, and September due to the increase in temperature. Individual travel during the low season outnumbers groups, which are reluctant to commit to room blocks during potentially intense heat periods, whereas individual travelers can opportunistically capitaliz e on low seasonal summer rates when fluctuations in the normally high season temperatures permit.

The following tables present the monthly occupancy and average daily rate (ADR) for a collection of twelve upper upscale and luxury hotels located in the Coachella Valley. The total room count represented by these hotels is 4,148 rooms.

Month 2017 2018 2019 3-Year
Average
January 68% 65% 61% 64%
February 75% 76% 71% 74%
March 84% 85% 85% 85%
April 78% 76% 76% 76%
May 58% 60% 64% 61%
June 57% 54% 56% 56%
July 55% 50% 52% 52%
August 45% 39% 45% 43%
September 55% 54% 50% 53%
October 58% 57% 62% 59%
November 65% 64% 65% 65%
December 60% 54% 57% 57%
Average 63% 61% 62% 62%
Source: STR, Inc.

MARKET SEASONALITY OCCUPANCY

COACHELLA VALLEY UPPER UPSCALE/LUXURY HOTELS

As indicated above, occupancy in the Coachella Valley m arket exhibits strong monthly seasonal patterns with the strongest months being winter/spring (February through April) when occupancy rates reach as high as the mid-80’s. The low season is the summer months when occupancy rates plunge to the 40 and 50% range. T he low season occurs in the summer months due to the increase in temperature.

Month 2017 2018 2019 3-Year
Average
January $236 $254 $256 $249
February $271 $291 $281 $281
March $325 $345 $343 $338
April $368 $382 $382 $377
May $246 $249 $257 $251
June $177 $180 $188 $182
July $161 $163 $175 $166
August $161 $169 $177 $169
September $182 $191 $199 $191
October $230 $239 $233 $234
November $243 $257 $253 $251
December $236 $250 $239 $242
Average $236 $248 $249 $244
Source: STR

COACHELLA VALLEY UPPER UPSCALE/LUXURY HOTELS

MARKET SEASONALITY ADR

As indicated in the preceding table, the ADR in the Coachella Valley typically peaks in March and April and reaches the low point in the summer months when rates decrease by more than 50% off the high season peak. The low season occurs in the summer months due to the increase in Item 3C - Page 52

Page | 8
temperature. Individual travel during the low season outnumbers groups, which are reluctant to commit to room blocks during potentially intense heat perio ds, whereas individual travelers can opportunistically capitalize on low seasonal summer rates when fluctuations in the normally high season temperatures permit.

Projecte d Subject Perf ormance
Given the Subject’s unique attributes and positioning as one of, if not the premier lodging destination in the Coachella Valley, we are of the opinion that it will compete on a regional basis with other comparable lodging establishments located in well-known luxury destinations such as Santa Barbara, Big Sur and Napa Valley in California and Paradise Valley and Sedona in Arizona.

As compared to the historical data presented previously on pg. 5, the regional luxury competitive market achieved occupancy and ADR levels that were greater or significantly greater than the average of the aggregate of Coachella Valley’s upper priced hotels. Based on eight years of historical data from 2013 to 2020, and year to date estimates through July 2021, we projected that the regional competitive market would achieve an occupancy of approximately 53% and an ADR of nearly $900.

In estimating the Subject ’s projected performance, we also considered the impact of the Coachella Valley’s seasonality in t erms of achievable rates and occupancy levels . Generally, larger, group -oriented hotels are the most impacted during the summer months due to the difficulty in securing groups during the warmest months and increased competition from other regional hotels in mor e temperate climates. Similarly for that reason , group business that is secured is heavily discounted as an enticement, while allowing a property to generate revenues in other areas of the hotel such as its restaurants, bars and meeting rooms.

To som e deg ree, th e Hotel’ s smaller room count and its luxury positioning as a destination Auberge resort will alleviate some of the impact, however it would be illogical to assume that it wouldn’t be impacted by the seasonality patterns of the Coachella Valley , no m atter the desirability of the product offering. The Hotel will likely be les s impacted by seasonality given its count of only 74 rooms and its business mix of primarily transient guests. Therefore, based on the preceding we estimated that if the Subject was open and operating at a stabilized level of operations today, it would achieve an occupancy of 69% and an ADR of $795. Paradoxically, the Subject’s projected ADR is yet another potential hurdle in obtaining financing, given that is well above rates being achieved on an annual basis today.

We also prepared estimates of future operating results for the Subject. The estimates of revenues, costs and expenses ar e based on the proposed facilities and services and the operational characteristics thereof. The basis for these estimates was comparable data from five luxury hotels with similar average daily rate, occupanc y, size, facilities, and market positioning from CBRE Hotel’s Trends in the Hotel Industry survey. Based on a detailed analysis of individual revenue and expense line items, we estimated that in a stabilized year of operation the Subject would achieve a Gross O perating Profit margin of 39.4%, which w as within the range of the five comparable luxury hotels surveyed and analyzed.

Item 3C - Page 53

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NEW HOTEL DEVELOPMENT & CONSTRUCTION COST ANALYSIS
Luxury Hotel Development Complexity
As highlighted in the E xecutive Summary, since the onset of the Pandemic costs to construct all types of buildings have skyrocketed and no property types has been more impacted than the lodging industry and in particular, luxury boutique hotels. In the simplest term s, apartment buildings are less complicated and thus faster and less ex pensive to construct that highly unique small, high-end boutique hotels. In fact, the differences are apparent through nearly all stages of the development and construction process. While residential complexes typically adhere to a fairly ubiquitous design, luxury hotels are pai nstakingly designed and sometimes rede signed to maximize guest satisfaction, operational efficiencies, and profitability of the intended use.

Additionally, the permitting and approval process for hotels is often more time consuming and arduous than residential uses given the complexity of a hotel use and, in some cases, community opposition to a perceived future increase in traffic, no ise, etc. During the actual construction phase these differences exponentially increase. While apartment complexes are typ ically built according to preexisting plans and therefore can be constructed relatively expeditiously , luxury boutique hotels such as the Subject are almost hand -crafted through the use of bespoke architectural design and unique character, reflecting the heritage of its location, in order to capitalize on luxury travelers growing demand for localization.

Further, boutique hotels such as the Subject also feature extensive public facilities and back- of- house areas that are nearly nonexistent in apartment co mplexes, including multiple dining outlets, meeting and event space, state-of-the-art spa and fitness facility, and multiple pools with cabanas offering food and beverage service . Lastly, in the case of the Subject, it will feature a vast amount of open space featuring landscaped partitions, creative designed elements and extensive landscaping throughout the four-acre site.

Construction Cost Trends
Given that hotels constitute only a small fraction of all commercial property types developed in any given y ear, and more importantly , that new hotel construction, and virtually all new starts came to a halt during the Pa ndemic, the preceding discussion is vitally important in understanding that the U.S. Construction Cost Trends report included as Addendum C , and summarized and excerpted in the following paragraphs, is primarily intended to exhibit trends on a general basis. At best it would be a highly conservative estimate of the catastrophic increases in the cost of developing luxury hotels in the current environment, given the previously described complexities in luxury hotel construct as it relates to the commercial real estate ind ustry as a whole.

Introduction
The construction cost industry thrives on predictability , and period s of uncertainty and volatility makes estimating and managing costs more difficult. Not only was the Pandemic an unforeseen black swan events, but the resulting market impacts over the past two years have altered many of the typical approaches used to control costs. The result : unprecedented spikes in construction costs.

Item 3C - Page 54

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Pandemic I mpacts
Pandemic precipitated shortages, delays and cost increases that continue to reverberate through the global economy in 2022. The construction industry has been among the most affected, g iven the on-site nature of the work, the large quantities and wide variety of both materials and la bor required, and the vulnerability of several key inputs to tariffs, quotas and geopolitical tensions.

Additionally, pent-up demand for construction projects in the aftermath of the initial pandemic lockdowns drove up an uptick in construction activity. S kyrocketing global shipping costs, combined with a backlog of domestic freight operations, are causing a shortage of goods and materials, inflating cost s. The global supply chain remains fragile, adding complexity and uncertainty to construction projects. Supply chains are being exacerbated by steep rises in energy costs, which impact logistics dynamics, and increasing construction activity, which drives up competition for scar ce materials. However, the construction industry, like manufacturing , distribution and other sectors, was understaffed amid Pandemic- related layoffs, quits, illnesses and deaths.

Import prices are rising much faster than export prices for building materials, with such materials more than twice as expensive as exported materials in la te 2021. While the direct impact of the war in Ukraine is still emerging, its effect on shipping costs and petroleum-based products will most likely continue to be felt in coming months. While federal, state and local governments have lifted most of the Pandemic restrictions that hindered construction and supply chains, the industry continues to grapple with ongoing policies, particularly outside the U.S., and the possibility of disruptive new variants and spikes. The U.S. Chamber of Commerce survey showed t hat tw o- thirds of contractors are experiencing Pandemic- related project delays, most notably due to impacts on the supply chain and worker shortages.

Projected Cost Increases
The CBRE Construction Cost Index (based primarily on three primary factors: la bor costs, materials costs and contractor margins ) increased 11.5% in 2021, markedly above the two to four percent historical trend. Although improvement is expected in supply disruptions and broader inflation in late 2022, the significant price increases already seen year- to-date are unlikely to reverse, and further cost pressures will remain. As a result, construction costs are expected to rise by 14.1% by year-end 2022 before stabilizing to around 4% in 2023 and around 3% in 2024. It is important to note that t hese projections assume that margins account for a significant share of total construction costs and that construction demand will remain robust through 2024. If weaker -than-expected economic growth causes construction activity to slow significantly, cost increases would be expected to decline quickly in 2023 and into 2024.

Subject ’s Projected Cost Increases
Prior to the Pandemic, the Project’s Developer obtained an Opinion of Probable Cost (“Opinion”) from KPRS Construction Services, Inc., which on January 21, 2020, indicated the construction cost (exclusive of soft costs) would be approximately $28.9 million. A s ubsequent Opinion was received less than two and half years later f rom the same firm, indicating that the costs ha d skyrocketed to approximately $66.4 million. Considering all costs to develop the Project, the true cost is estimated at more than $1 million per hotel room and based on this metric would make it the most expensive hotel ever constructed in the Coachella Valley.

We have included a copy of the KPRS Opinion as Addendum D of this report.

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MONETARY POLICY & HOTEL LENDING
During the course of this engagement, we reviewed recent actions taken by the Federal Reserve and commentary made by its Chair, Mr. Powell and consulted with internal and external sources, including representatives of Sonnenblick -Eichner CBRE’s Debt & Structured finance group, in order to best understand and summarize the current state of lending market, both in general and specifically for the construction of new luxury hotels.

In short, the increase in the Secured Overnight Financing Rate, which represents the most prominent interest rate index for the cost of the construction financing of any new construction, has increased dramatically over the last five months in response to the Federal Reserve increasing their target Federal Funds Rate from 0.0% to 2.5%. This increase in index rate, combined with broad based credit spread widening and a limited amount of current liquidity from large financial institutions in response to general economic concerns, has resulted in lack of available financing for the majority of new ground -up developments, and especially the construction of new luxury hotels.

A combination of g lobal inflationary pressures (leading to higher interest r ates) and the recent geopolitical events in Ukraine, in addition to the on- going effects of the global Covid -19 Pandemic in some markets, has heightened the potential for greater volatility in property markets over the short-to-medium term. Borrowing costs have increased and there is some uncertainty as to the timing and magnitude of additional future interest rate increases. CBRE expects the federal funds rate to increase through 2022 and may peak in 2023 at 3.75%. Tightening credit markets will continue to drive adjustment in the commercial real estate investment markets in the near term with potential impacts on capitalization rates and investment demand. Rapidly increasing interest rates and subdued economic growth will weigh on commercial real estate fundamentals and investment volumes this year and likely into next year.

While the current constrains on hotel lending are highly apparent, history shows that they are cyclical. Thus, it would seem to be unfair to unduly penalize the Developer due condi tions upon which no control can be ex erted. Further, extending the period of the development agreement to allow for the identification of efficient financing would allow the Project to commence construction without burdensome reserves and excessive loan structure. Additionally, it would also improve the likelihood of the financial success of the Project by limiting the interest cost burden of the financing over the course of construction and initial operation period

The proposed Project would be a highly significant development for the City of Palm Springs and would only heighten its visibility on a regional and national basis as a premier Coachella Valley community. Lastly, the significant time and financial resources have been invested in the Project and the Developer has acquired, entitled, developed and/or redeveloped properties worth in excess of $1 billion For further reference, we direct the reader to the Weintraub Real Estate Group website, https://www.weintraubre.com/ . Additionally, we have included a le tter prepared by investment banking firm Sonnenblick-Eichner as Addendum E of this report, outlining their efforts in seeking financing for the proposed Project.

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CONCLUSION
Based on our research and analysis it is our professional opinion that market conditions do not currently exist to reasonably allow proceeding with the financing and construction of the project.

Despite significant efforts on behalf of the qualified borrower, using a well- respected mortgage broker there were simply no reasonable sources or available terms to finance the construction of the Project. Skyrocketing construction costs, unpredictable and rapidly rising interest rates which are expected to continue, the COVID pandemic which negatively impact hotel demand as well as creating supply chain issues, have led to a severe decline, if not an outright pause in new construction lending for luxury hotel developments in most markets, including the Coachella Valley.

However, because of the strength of the project’s location within Palm Springs, the highly designed and the amenities and services offered planned at the hotel, the internationally recognized Auberge management company, and experienced development team, we believe that the project has the ability to be the most luxurious resort in the Coachella Valley in high demand and successful financially at a future point in time. That will occur when supply chain constraints ease and interest rates stabilize
Item 3C - Page 57

Addenda
A. TERMS AND CONDITIONS

B. CBRE HOTEL HORIZONS – COACHELLA VALLEY Q2 2022

C. 2022 U.S. CONSTRUCTION COST TRENDS REPORT

D. KPRS OPINION OF PROBABLE COST

E. S ONNENBLICK-EICHNER LETTER
Item 3C - Page 58

Addendum A
Terms and Conditions
Item 3C - Page 59

TERMS AND CONDITIONS

1. The Terms and Conditions herein are part of an agreement for consulting services (the “Agreemen t”) between CBRE, Inc. (the “Consultant”) and the client signing this Agreement, and for whom the consulting services will be performed (the “Client”), and shall be deemed a part of such Agreement as though set forth in full therein. The Agreement shall be governed by the l aws of the state where the offi ce is located for the Consultant executing this Agreement.

2. Client shall be responsible for the payment of all f ees stipulated in the Agreement. Payment of the consulting fee and preparation of a consulting r eport (the “Consulting Report, or the “report”) are not c ontingent upon any predetermined value o r on an action or event resulting from the analyses, opinions, conclusions, or use of the Consulting Report. Final payment is due as provided in the Proposal Specifications Section of this Agreement. If a draft report is requested, the fee is considered ea rned upon delivery of the draft report. It is understood that t he Client may cancel this assignment in writing at any time prior to delivery of the completed r eport. In such ev ent, the Client is obligated on ly for t he pro rated share of the fee based upon the work completed and expenses incurred (including travel expenses to and from the job site), with a minimum charge of $500. Additional copie s of the Consulting Reports are available at a cost of $250 per original color copy and $100 per photocopy (black and white), plus shipping fees of $30 per report.

3. If Consultant is subpoenaed or ordered to give testimony, produce documents or information, or otherwise required or requested by Client or a third party to particip ate in meetings, phone calls, conferences, litigation or other legal proceedings (including preparation for such proceedings) because of, connected with or in any way pertaining to this engagement, the Consulting Report, the Consultant’s expertise, or the Property, Client shall pay Consultant’s a dditional costs and expenses, including but not limited to Consultant’s attorneys’ fees, and additional time incurred by Consultant based on Consultant’s then -prevailing hourly rates and related fees. Such charges i nclude and pertain to, but are not limite d to, time spent in preparing for and p roviding co urt room testimony, depositions, travel time, mileage and related travel expenses, waiting time, document re view and production, and preparation time (exclud ing prep aration of the Consulting Report), meetin g participation, and Consultant’s other related commitment of time and expertise. Hourly charges and other fees for such participation will b e provided upon r equest. In the event Client requests additional s ervices beyond the scope and purpose stated in the Agreement, Client agrees to pay addit ional fees for such services and to reimburse related expenses, whether or not the completed report has been delivered to Client at the time of such request.

4. Consultant shall h ave t he right to terminate this Agreement at any time for cause effective immed iately upon written notice to Client on the occurrence of fraud or the willful misconduct of Client, its employees or a gents, or without cause upon 30 days written notice.

5. In the ev ent Client fails to make payments w hen due then, from the date due until p aid, the amount due and payable shall bear interest at the maximum rate permitted in the state where t he office is locat ed for the Consultant executing the Agreement. In the ev ent either party institutes legal action against the other to enforce its rights under this Agreement, the prevailing party shall be entitled to recover its reasonable attorney’s fee s and expenses. Each party waives the right to a trial by jury in any action arising under this Agreement.

6. Consultant assumes there are no major or sign ificant items or issues affecting the Property that would require the expertise of a professional buil ding contractor, engineer, or environmental consultant for Consult ant to prepare a valid report. Client acknowledge s that such additional expertise is not covered in the Consulting fee and agrees that, if such additional expertise is required, it shall be provided by other s at the discretio n and direction of the Client, and solely at Client’s additional cost and expense.

7. In the event of any dispute between Client and Consultant relating to this Agreement, or Consultant's or Client's performance hereunder, Consultant and Cl ient agree that such dispute shall be resolved by means of binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered by an arbitrator may be entered in any court of competent jurisdi ction.

Depositions may be taken and other discovery obtained during such arbitration proceedings to the same extent as authorized in civil judicial proceedings in the state where the office of the Consultant executing this Agreement is located. The arbitrator shall be limited to awardin g compensatory damages and shall have no authority to award punitive, exemplary or similar damages. The prevailing party in the arbitration proceeding shall be entitled to recover its expenses from the losin g party, including costs of the arbitration proceeding, and reasonable attorney's fees. Client ack nowledges that Consultant is being reta ined hereunder as an independent contractor to perform the services described herein and nothing in this Agreement shal l be deemed to create any other relationship between Clie nt and Consultant. This engagement shall be deemed concluded and the services hereunder completed upon delivery to Client of the Consulting Report discussed herein.

Item 3C - Page 60
Terms and Conditions
(continued)

8. All statements of fact in the rep ort which are used as the basis of the Consultant 's analy ses, o pinions, and conclusions will be tr ue and correct to Consultant's actual knowledge and belief. Consultant does not make any representation or warranty, express or implied, as t o the accuracy or completeness of t he information or the condition of the Property furnished to Consultant by Clien t or others. The conclusions and any pe rmitted reliance on and use of the Consulting Report shall be subject to the assumptions, limitations, and qualifying s tatements contained in the report.

9. Consultant shall have no responsibility for legal matters, including zoning, or questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a s urvey of the Property analyzed.

10. Client shall provide Consultant with such materials with respect to the assignment as are requested by Consultant and in the possession or under the control of Client. Client shall provide Consultant with sufficient access to the Property to be analyzed, and hereby grants permission for entry unless discussed in advance to the contrary.

11. The data gathered i n the course of the assignment (except data furnished by Client) and the report prepared pursuant to t he Agreement are, and will remain, the property of Co nsultant. With respec t to data provided by Client, Cons ultant shall not violate the confidential natu re of the Consultant- Client relationship by improperly disclosing any proprietary information furnishe d to Consultant. N otwithstanding th e foregoing, Consu ltant is authorized by Client to disclose all or any po rtion of the report and related data as may be required by statute, government regulation, legal process, or judicial.

12. Unless specifically noted, in preparing the C onsulting Report t he Consultant will not be considering t he possible existence of asbestos, PCB tr ansformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (collectively, “Hazardous Material) on or affecting the Pro perty, or the cost of encapsulation or removal th ereof. F urther, Client represents that the re is n o major or significant deferred maintenance of the Property that would require the expertise of a professional cost estimator or contractor. If such repairs are needed, the est imates are to be p repared by ot hers, at Client’s discretion and direction, and a re not covered as part of the Consulting fee.

13. In the event Client intends to use the Consulting Report in connection with a tax matter, Clie nt acknowledges that Consultant pro vides no warranty, representation or pr ediction as to the outcome of such tax matter. Client understands and acknowledg es that any relevant taxing authority (whether the Internal Revenue Service or any other federal, stat e or local taxing authority) may di sagree with or reject the Consu lting Re port o r otherwise disagree with Client’s tax position, and further understands a nd acknowledges that the taxing authority may seek to collect additional taxes, interest, penalties or fees from Client beyond what may be suggested by the Consulting Report. Client agrees that Consultant shall have no responsibility or liability to Client or any other party for any such taxes, interest, penalties or fees and that Client will not seek damages or other comp ensation from Consultant relating to any such taxes, interest, penalties or fees imposed on Client, or for any attorneys’ fees, costs or other expenses relating to Client’s tax matters.

14. Consultant shall have no liability with respect to a ny loss, damage, c laim or expense incurred by or asserted against Client a rising out of, based upon or resul ting fr om Client’s failure to provide accurate or comp lete information or documentation pertaining to an assignment ordered under or in connection w ith this Agreemen t, including Client’s failure, or the failure of any of C lient’s agents, to provide a compl ete copy of the Consulting Report to any third party.

15. LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT ARISING FROM SECTION 16 BELOW, OR SECTION 17 IF

APPLICABLE, IN N O EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIAT E, OFFIC ERS, D IRECTORS,

EMPLOYEES, AGENTS, OR CONTRACTORS BE LIABLE TO THE OTHER, WHETHE R BASED IN CONTRACT,

WARRANTY, INDEMNITY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT OR OTHERWISE, FOR ANY SPECIAL,

CONSEQUENTIAL, PUNITI VE, INCIDENTAL OR INDIRECT DAMA GES, AND AGGREGATE DAMAGES IN

CONNECTION WITH THIS AGREEMENT FOR EITHER PARTY (EXCLUDING THE OBLIGATION TO PAY THE FEES

REQUIRED HEREUNDER) SHALL NOT EXCEED THE GREATER OF THE TOTAL FEES PAY ABLE TO CONSULTAN T UNDER THIS AGREEMENT OR TEN THOUSAND DOLLARS ($10,000). THIS LIABILITY LIMITATION SHALL N OT

APPLY IN THE EVENT OF A FINAL FINDING BY AN ARBITRATOR OR A COURT OF COMPETENT JURISDICTION THAT SUCH LIABILITY IS THE RESULT OF A PARTY’S FRAUD OR WILLFUL MISCONDUCT.

16. Client shal l not disseminate, distribute, make ava ilable or otherwise provide any Co nsulting Report prepared hereunder to any thir d party (including without limitation, incorporating or referencing the Consulting Report , in whole or in part, in any offering or other material intended for review by other parties) except to (i) any third p arty Item 3C - Page 61
Terms and Conditions
(continued)

expressly acknowledged in a signed writin g by Consultant as an “Intended User” of the Consulting Report provided that either Consultant has rec eived an acceptab le release from su ch third party with respect to such Consulting Report or Client provides accepta ble indemnity protections to Consultant against any claims resulting from the distribution of the Consulting Report to such third party, (ii) any third party s ervice provider (including rating agencies and C lient’s auditors) using the Consulting Rep ort in the course of providing services for th e sole benefit of Client, or (iii) as required by statute, government regulation, legal process, or ju dicial decree. In the event Consultant consents, in writing, to Cl ient incorporating or referencing the Cons ulting Report in any offering or other materia ls intended for review by other parties, Client shall not distribute, file, or otherwise make such materials available t o any such parties unless and until Client has p rovided Consultant with complete copies of such m aterials and Consultant has approved al l such materials in writing. Client shall not modify any such materials once approved by Consultant. I n the absence of satisfying the conditions of this paragraph with respect to a party who is not designated as an Intended User, in no event shall the receipt of an Consulting Report by such party extend any right to the party to use and rely on such report , and Consultant s hall have no liab ility for such unauthorized use and rel iance on any Consulting Report. In the event Client breaches the provisions of t his paragraph, Client shall indemnify, defend and hold Consultant, and its affiliates and their office rs, directors, employees, contractors, agents and other representatives (C onsultant and each of the foregoin g an “Indemnified Party” and collectively the “Indemnified Parties”), fully harmless from and against all losses, liabilities, damages and expenses (collectively, “Damages”) claimed against, sustained or incurred by any Indemnified Party arising out of or in conn ection with such breach, regardless of any negligence on the part of any Indemnified Party in preparing the Consulting Report.

17. In the event Client incorporat es or references t he Consulting Report, in whole or in pa rt, in any offering or other material intended for review by other parties, Client shall indemnify, defend and hold each of the Indemnified Parties harmless from and against any Dama ges in connection with ( i) any transaction contemplated by this Agreement or in connection with the engageme nt of o r performance of services by any Indemn ified Party hereunder, (ii) any actual or alleged untrue statement of a material fact, or the actual o r alleged failure to state a material fact necessary to make a statement n ot misleading in light of the circumstances under which it was made with respect to all information furnished to any Indemnified Party or made available to a prospective party to a transaction, or (i ii) an actual or a lleged violation of applicable law by C lient (including, without limitation, securities laws) or the negligent or intentional acts or omissions of Client (including the failure to perform any duty imposed by law); and wil l reimburse each I ndemnified Party for all reasonable fees and exp enses (including fees and expenses of coun sel) (c ollectively, “Expenses”) as incurred in connection with investigating, preparing, pursuing or defending any threatened or pending claim, action, proceeding or investigation (co llectively, “Proceedings”) aris ing ther efrom, and regardless of whether such Ind emnified Party is a formal party to such Proceeding. Client agrees not to enter into any waiver, release or settlement of any Proceeding (whether or not any Indemnified Party i s a formal party to such Procee ding) wi thout the prior written consent of Consultant (which consent will not be unreaso nably withheld or delayed) unless such waiver, release or settlement includes an unconditional release of each Indemnified Party from all liability arising out of such Proceeding.

18. Time Period for Legal Action . Unless the time period is shorter under appl icable law, except in connection with paragraphs 16 and 17 above, Consultant and Client agree that any legal action or l awsuit by one party against the other party or its affiliates, officers, directors, employees, contractors, agents, or other representatives, whether based in contract, warranty, indemnity, negligence, strict liability or other tort or otherwise, relating to (a) this Agreement or the Consulting Report, (b) any s ervices under this Agreement or ( c) any acts or conduct relating to such services, shall be filed within two (2) years from the date of delivery to Client of the Consulting Report t o which the claims or causes of action in the legal action or lawsuit relate. The time period stated in this section shall not be extended by any incapaci ty of a party or any delay in the discovery or accrual of the underlying claims, causes of action or damages.

Item 3C - Page 62

Addendum B
CBRE Hotel Horizons – Coachella Valley Q2 2022
Item 3C - Page 63
Coachella Valley, CA
Hotel Horizons®

CBRE HOTELS RESEARCH
AUGUST, 2022Q2 2022 Edition
Item 3C - Page 64
CBRE
Source: Kalibri Labs, Q2 2022
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR
2017 64.7% 0.5% $152.31 -3.1% $98.58 -2.6%
2018 64.2% -0.9% $158.51 4.1% $101.71 3.2%
2019 64.7% 0.8% $166.88 5.3% $107.89 6.1%
2020 36.6% -43.4% $149.02 -10.7% $54.51 -49.5%
2021 54.1% 47.9% $168.12 12.8% $90.93 66.8%
2022F 63.4% 17.3% $211.62 25.9% $134.25 47.6%
2023F 65.1% 2.6% $217.00 2.5% $141.19 5.2%
2024F 65.7% 0.9% $221.10 1.9% $145.22 2.9%
2025F 65.9% 0.3% $225.98 2.2% $148.87 2.5%
2026F 65.7% -0.2% $230.54 2.0% $151.54 1.8%
Source: Kalibri Labs, Q2 2022
Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
Hotel Market SummaryRegional Economic Summary
Coachella Valley, CA: Next Four Quarters
The arrows show the forecast direction of change over the next 4 quarters vs. the previous 4 quarters. Purple indicates the change will be above the long run average, tan indicates it will be the same, and orange indicates it will be below.

Long Run Averages 2000 to 2021
Occupancy: 58.9%, ADR Change: 1.5%, RevPAR Change: 2.6% Occupancy
Average Daily Rate
Revenue Per Available Room
Supply (orange indicates above long-term average)
Demand

95.4%
112.4%

81.0%

50.7%
0%
20%
40%
60%
80%
100%
120%
All Hotels Upper-Priced Mid-Priced Lower-Priced
2022 Year-to-Date 2Q Change in RevPAR
Annual Performance - Five Year History and Forecast
Q2 2022 EditionCoachella Valley, CA
“Economic activity in the Twelfth District expanded modestly during the mid-May through June reporting period. Overall labor market conditions remained tight, accompanied by wage increases that lagged the pace of price inflation. Inflation remained elevated, driven chiefly by food and energy price increases. Retail sales were strong but moderated further, while conditions in the consumer and business services sectors deteriorated slightly. In general, District contacts communicated a somewhat worsening outlook for the year.

Contacts from the travel and hospitality industries reported sustained increases in airfares and hotel rates amid high demand for leisure travel. Contacts generally expected cost pressures to persist, and in some cases worsen, over the next few months. Contacts noted that high inflation led both consumers and businesses to reconsider spending on discretionary services, while labor shortages made it difficult to properly train new hires. Conversely, demand for domestic and international travel, as well as hospitality services, continued to grow strongly, partly due to consumers' pent-up demand for vacationing. "
Federal Reserve Bank Beige Book, July 2022
By year-end 2022, Coachella Valley hotels are forecast to see a RevPAR increase of 47.6%. This is the result of an estimated increase in occupancy of 17.3% and a 25.9% gain in average daily room rates (ADR). The 47.6% boost in Coachella Valley RevPAR is better than the national projection of a 29.0% increase. Year-end Coachella Valley RevPAR will be 24.4% greater than the 2019 year-end RevPAR level of $107.89.

Leading the way in 2022 RevPAR growth is the upper-priced segment of Coachella Valley. Upper-priced properties are forecast to achieve a

13.8% gain in ADR and see a 37.9% increase in occupancy, resulting in a 56.8% RevPAR increase. Lower-priced hotels are projected to experience an ADR growth rate of 25.5%, along with a 0.3% loss in occupancy, resulting in a 25.1% RevPAR increase.

Looking towards 2023, Coachella Valley RevPAR is expected to grow

5.2%. This is slower than the forecasted rate of growth for 2022.

Unlike 2022, prospects for RevPAR growth in the lower-priced segment (positive 5.4%) are better than in the middle-priced segment (positive 4.5%). Coachella Valley market occupancy levels are expected to range from 63.4% to 65.9% during the 5-year forecast period.

Occupancy will increase to 64.8%, better than the previous 4 quarters' rate of 62.2%, and above the long run average of

58.9%
ADR growth expectations are weakening, 2.8% vs. the past 4 quarters' rate of 42.8%, but are above the long run
average of 1.5%
RevPAR growth projections are falling to 7.0% as compared to the past 4 quarters' rate of 105.1%, but are greater than the long run average of 2.6%
Supply growth is climbing, 2.7% vs. the past 4 quarters' rate of 1.9%, and greater than the long run average of 0.5%
Forecast demand growth is falling, 7.0% vs. the past 4
quarters' rate of 46.3%, but is greater than the long run average of 1.0%

Item 3C - Page 65
Coachella Valley, CA Economic Summary
*See Appendix for exhibit descriptions
Below are a select number of variables that drive the CBRE Hotels Research econometric forecasts contained in this report. Inco me and employment are important barometers of economic health and are used in every Hotel Horizons ® forecast model. The lodging market is part of the larger economy, and the forces that affect us nationally also affect lodging, but in different magnitudes and time periods (see Exhibits 3 and 4 below). Exhibits 1 - 5 provide an overview of current economic hi story and forecasts, and provide explanations of what to expec t in the future, and how that affects the lodging industry.

2.7%

2.2%

2.0%

3.6%

2.0%

3.8%

2.1%

0.1%
0%
1%
2%
3%
4%
Change in Total Employment Change in Consumer Price Index Cha nge in Gross Domestic Product Change in Real Personal Income Coachella Valley 2000 to 2021 Coachella Valley 2022 to 2026 -20%
-10%
0%
10%
20%
30%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Real Personal Income
-12%
-8%
-4%
0%
4%
8%
12%
16%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Total Payroll Employment
Employment (Left) Demand (Right)
Source: CBRE EA, Oxford Economics, Q2 2022
Source: CBRE EA, Q2 2022 Source: CBRE EA, Q2 2022
Income (Left) RevPAR (Right)
Source: CBRE EA, CBRE Hotels, Kalibri Labs, Q2 2022 Source: CBRE EA, CBRE Hotels, Kalibri Labs, Q2 2022 Exhibit 2*: Employment ChangeExhibit 1*: Income Change Exhibit 3*: Quarterly Real Personal Income vs. RevPAR Change Exhibit 4*: Quarterly Employment vs. Demand Change Exhibit 5*: Average Annual Growth Rates
See graph below See graph below
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 66
30% 600% 20% 350%
20%
500% 300%
250% 400%
10% 200% 10% 300%
150%
0% 200%
100%
100% 0%
50% -10%
0% 0%
-20% -100% -10% -50%
(I/" (I/'} (I/'> (1/\x c0,," cO-'} c0,,'> ~ (I/" (I/'} (I/'> (1/\x c0,," cO-'} c0,,'> f\,\x c6) c6) '),c::, c6) '),c::, c6) c6) '),c::, '),c::, '),c::, '),c::, '),c::, '),c::, '),c::, '),c::, c::,'l, '1)
 
Coachella Valley, CA Hotel Summary
The graphs on the left illustrate the magnitude of change in performance during the historical and forecasted period 2017 to 20 26. Used as a relative benchmark, each market segment is plotted against a common index value of 2017 = 100. This method provides clear insig ht of how each market segment performed and is expected to perform in relation to others in the specified period. The charts on the right comp are near-term historical compound annual growth rates (C AGR) to the CAGRs for the forecast period. 90 100
110
120
130
140
150
160
Upper-Priced Hotels Mid-Priced Hotels
Lower-Priced Hotels All Hotels
40 60
80 100
120
140
160
Upper-Priced Hotels Mid-Priced Hotels
Lower-Priced Hotels All Hotels
40 50
60 70
80 90
100
110
Upper-Priced Hotels Mid-Priced Hotels
Lower-Priced Hotels All Hotels

3.7%

2.1%

1.8%

2.9%

0.9% 0.8%

1.0% 0.9%

0.0%

2.0%

4.0%
Upper-Priced Mid-Priced Lower-Priced All Hotels
Past 5 Years
Next 5 Years
Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
-3.4%
-0.6%

0.2%
-2.0%

3.1% 3.0% 3.2% 3.1%
-10%
0%
10%
Upper-Priced Mid-Priced Lower-Priced All Hotels
Past 5 Years
Next 5 Years
-5.1%

1.3% 1.5%
-1.7%

1.6% 1.7% 2.1% 1.8%
-10%
0%
10%
Upper-Priced Mid-Priced Lower-Priced All Hotels
Past 5 Years
Next 5 Years
Exhibit 7*: ADR Change
Exhibit 9*: Compound Average Annual Supply Change
Exhibit 10*: Compound Average Annual Demand Change
Exhibit 8*: RevPAR Change Exhibit 11*: Compound Average Annual RevPAR Change Exhibit 6*: Occupancy Change
Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
Source: CBRE Hotels Research, Kalibri Labs, Q2 2022 Source: CBRE Hotels Research, Kalibri Labs, Q2 2022 Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 67
 
 
 
Coachella Valley, CA Forecast - All Hotels
Year Period Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand 2017 Annual 64.7% 0.5% $152.31 -3.1% $98.58 -2.6% 1.7% 2.2% 2018 Annual 64.2% -0.9% $158.51 4.1% $101.71 3.2% 4.7% 3.8% 2019 1 75.3% -0.9% $196.82 3.6% $148.12 2.6% 5.3% 4.3%
2019 2 66.5% 4.3% $183.06 4.3% $121.73 8.7% 3.0% 7.4%
2019 3 53.8% -1.3% $122.41 9.0% $65.91 7.6% 1.0% -0.3%
2019 4 63.2% 0.3% $153.01 4.6% $96.77 5.0% 0.6% 0.9%
2019 Annual 64.7% 0.8% $166.88 5.3% $107.89 6.1% 2.4% 3.2% 2020 1 61.0% -18.9% $187.94 -4.5% $114.71 -22.6% 1.1% -18.0% 2020 2 15.3% -77.0% $100.50 -45.1% $15.36 -87.4% 1.7% -76.6% 2020 3 33.1% -38.6% $113.65 -7.2% $37.58 -43.0% 2.7% -36.9% 2020 4 37.1% -41.4% $137.80 -9.9% $51.08 -47.2% 3.9% -39.1% 2020 Annual 36.6% -43.4% $149.02 -10.7% $54.51 -49.5% 2.4% -42.1% 2021 1 45.8% -25.0% $147.33 -21.6% $67.43 -41.2% 3.4% -22.5% 2021 2 57.5% 276.1% $171.44 70.6% $98.56 541.6% 2.7% 286.1% 2021 3 50.1% 51.4% $143.69 26.4% $71.96 91.5% 1.3% 53.5% 2021 4 62.9% 69.6% $199.31 44.6% $125.29 145.3% 0.5% 70.4% 2021 Annual 54.1% 47.9% $168.12 12.8% $90.93 66.8% 1.9% 50.7% 2022 1 71.1% 55.4% $240.50 63.2% $171.01 153.6% 2.0% 58.4% 2022 2 64.8% 12.8% $236.52 38.0% $153.36 55.6% 3.7% 17.0% 2022F 3 53.9% 7.7% $154.56 7.6% $83.38 15.9% 4.0% 12.0% 2022F 4 64.2% 2.0% $203.83 2.3% $130.76 4.4% 3.8% 5.9%
2022F Annual 63.4% 17.3% $211.62 25.9% $134.25 47.6% 3.4% 21.2% 2023F Annual 65.1% 2.6% $217.00 2.5% $141.19 5.2% 1.1% 3.7% 2024F Annual 65.7% 0.9% $221.10 1.9% $145.22 2.9% 0.5% 1.5% 2025F Annual 65.9% 0.3% $225.98 2.2% $148.87 2.5% 0.9% 1.2% 2026F Annual 65.7% -0.2% $230.54 2.0% $151.54 1.8% 1.0% 0.8% 2021 2Q Year to Date 51.6% 35.4% $160.73 -5.7% $82.97 27.8% 3.0% 39.5% 2022 2Q Year to Date 68.0% 31.6% $238.59 48.4% $162.12 95.4% 2.9% 35.4% 2022 2Q Trailing 4 Qtrs 62.2% 43.6% $209.80 42.8% $130.59 105.1% 1.9% 46.3% Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
Guest-Paid ADR*
Year PERIOD Value Change Value Change Value Change Value Change 2017 Annual $156.56 $197.17 $134.37 $99.81
2018 Annual $162.66 3.9% $206.30 4.6% $139.55 3.9% $100.49 0.7% 2019 Annual $171.47 5.4% $216.57 5.0% $140.42 0.6% $109.14 8.6% 2020 Annual $152.87 -10.8% $215.69 -0.4% $127.62 -9.1% $94.37 -13.5% 2021 Annual $173.18 13.3% $246.73 14.4% $135.11 5.9% $101.86 7.9% 2021 2Q Year to Date $165.56 -5.1% $247.79 4.1% $126.51 -13.8% $96.34 -8.9% 2022 2Q Year to Date $245.24 48.1% $311.59 25.7% $200.90 58.8% $145.65 51.2% 2022 2Q Trailing 4 Qtrs $215.82 42.7% $283.87 26.5% $174.53 45.7% $126.50 39.3% *Based on the total room revenue paid by guests, inclusiv e of all transaction-specific direct reservation costs. Source: Kalibri Labs, Q2 2022 Length of Stay In Nights
Year Period All Hotels Upper Mid Lower
2020 Annual 1.90 1.94 1.94 1.83
2021 Annual 1.82 1.83 1.81 1.81
2021 Q2 Year to Date 1.80 1.76 1.82 1.84
2022 Q2 Year to Date 1.95 2.01 1.90 1.90
All Hotels Upper-Price Mid-Price Lower-Price
For a glossary of Kalibri Labs terminolog y, please see page 19, or visit https://pip.cbrehotels.com/about-us/kalibri-faqs Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 68
Coachella Valley, CA Forecast - Upper-Priced Hotels
Year Period Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand 2017 Annual 63.1% 0.1% $191.97 -2.0% $121.20 -1.8% 0.1% 0.3% 2018 Annual 62.1% -1.7% $201.16 4.8% $124.88 3.0% 4.5% 2.8% 2019 1 72.6% -2.7% $244.73 2.9% $177.75 0.2% 11.7% 8.7% 2019 2 64.8% 2.9% $230.57 4.4% $149.43 7.4% 9.9% 13.0%
2019 3 50.9% -1.1% $155.16 10.0% $79.04 8.8% 9.7% 8.6%
2019 4 58.7% -1.8% $198.55 5.3% $116.46 3.4% 9.7% 7.7%
2019 Annual 61.7% -0.6% $211.29 5.0% $130.34 4.4% 10.2% 9.5% 2020 1 58.6% -19.3% $241.74 -1.2% $141.62 -20.3% -1.2% -20.3% 2020 2 5.2% -92.0% $137.96 -40.2% $7.14 -95.2% -1.1% -92.1% 2020 3 22.0% -56.8% $157.29 1.4% $34.64 -56.2% 0.0% -56.8% 2020 4 27.7% -52.7% $201.71 1.6% $55.95 -52.0% 2.2% -51.7% 2020 Annual 28.3% -54.1% $210.50 -0.4% $59.65 -54.2% 0.0% -54.1% 2021 1 33.2% -43.3% $222.26 -8.1% $73.77 -47.9% 1.9% -42.3% 2021 2 45.6% 781.1% $252.86 83.3% $115.32 1514.8% 1.9% 797.5% 2021 3 40.5% 84.0% $198.04 25.9% $80.26 131.7% 0.6% 85.0% 2021 4 57.1% 105.7% $267.98 32.9% $152.91 173.3% -2.0% 101.5% 2021 Annual 44.2% 55.8% $239.45 13.8% $105.73 77.3% 0.5% 56.7% 2022 1 67.0% 101.9% $314.44 41.5% $210.68 185.6% 1.8% 105.5% 2022 2 65.3% 43.1% $292.91 15.8% $191.20 65.8% 4.5% 49.5% 2022F 3 51.5% 27.0% $198.64 0.3% $102.22 27.4% 4.6% 32.8% 2022F 4 60.1% 5.3% $268.80 0.3% $161.49 5.6% 5.0% 10.5% 2022F Annual 60.9% 37.9% $272.38 13.8% $165.80 56.8% 4.0% 43.3% 2023F Annual 62.2% 2.2% $279.77 2.7% $173.97 4.9% 2.1% 4.3% 2024F Annual 62.6% 0.7% $285.22 2.0% $178.57 2.6% 0.3% 1.0% 2025F Annual 62.9% 0.4% $291.81 2.3% $183.50 2.8% 0.5% 0.9% 2026F Annual 62.8% -0.1% $298.26 2.2% $187.27 2.1% 0.6% 0.4% 2021 2Q Year to Date 39.4% 23.6% $239.97 2.9% $94.55 27.1% 1.9% 25.9% 2022 2Q Year to Date 66.1% 67.8% $303.67 26.5% $200.81 112.4% 3.1% 73.1% 2022 2Q Trailing 4 Qtrs 57.5% 79.3% $276.40 27.1% $159.00 127.9% 1.2% 81.4% Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
For a more comparable and detailed financial comparison, we recommend a Benchmarker SM report.

Please contact Robert Mandelbaum at +1 404 812 5187 for more information.

Year-Over-Year Change – YTD June 2022 vs YTD June 2021
Dollars Per Available Room (%)
US Upper-Priced Hotels - Operating Performance

0.0%
-9.5%
220.0%
114.8%

48.2%
110.9%

94.5%
104.1%
160.3%

94.6%

29.4%

50.4%
-50% 0% 50% 100% 150% 200% 250%
EBITDA
Non-Operating Income and Expenses
Income Before Non-Operating
Management Fees
Gross Operating Profit
Undistributed Expenses
Departmental Profit
Departmental Expenses
Total Operating Revenue
F&B Revenue
Rooms Revenue
ADR
Occupancy
Q2 2022 EditionCoachella Valley, CA
Source: CBRE Hotels, From total sample of 2,450 U.S. hotels submitting monthly P&L information.

Item 3C - Page 69
p-
l
I
-I
Coachella Valley Forecast - Mid-Priced Hotels
Year Period Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand 2017 Annual 67.2% -1.5% $130.52 -4.7% $87.67 -6.2% 5.1% 3.5% 2018 Annual 67.8% 0.9% $135.91 4.1% $92.15 5.1% 9.3% 10.3% 2019 1 80.9% 1.3% $166.72 1.0% $134.88 2.3% -15.1% -14.0% 2019 2 70.4% 5.7% $148.17 -0.5% $104.38 5.1% -18.7% -14.1% 2019 3 59.3% 1.1% $99.98 0.6% $59.24 1.7% -24.3% -23.5% 2019 4 70.0% 3.7% $122.36 -2.7% $85.62 0.9% -23.3% -20.5% 2019 Annual 70.1% 3.4% $136.61 0.5% $95.75 3.9% -20.6% -17.9% 2020 1 65.2% -19.5% $157.95 -5.3% $102.91 -23.7% 9.3% -12.0% 2020 2 23.8% -66.2% $102.92 -30.5% $24.54 -76.5% 11.2% -62.4% 2020 3 41.6% -29.7% $102.80 2.8% $42.80 -27.8% 14.3% -19.7% 2020 4 46.2% -33.9% $109.48 -10.5% $50.62 -40.9% 12.9% -25.4% 2020 Annual 44.1% -37.0% $124.29 -9.0% $54.85 -42.7% 11.9% -29.5% 2021 1 58.4% -10.4% $115.55 -26.8% $67.43 -34.5% 14.8% 2.8% 2021 2 69.7% 192.1% $129.21 25.5% $90.00 266.7% 12.9% 229.8% 2021 3 61.1% 46.9% $115.61 12.5% $70.69 65.2% 9.8% 61.3% 2021 4 71.0% 53.4% $159.25 45.5% $112.99 123.2% 10.2% 69.0% 2021 Annual 65.1% 47.4% $131.31 5.7% $85.44 55.8% 11.9% 65.0% 2022 1 79.8% 36.7% $193.41 67.4% $154.27 128.8% 10.1% 50.5% 2022 2 65.9% -5.3% $198.14 53.3% $130.64 45.2% 10.1% 4.2% 2022F 3 56.2% -8.1% $122.17 5.7% $68.66 -2.9% 10.1% 1.2% 2022F 4 69.2% -2.5% $161.41 1.4% $111.71 -1.1% 8.9% 6.2% 2022F Annual 67.7% 4.1% $171.41 30.5% $116.07 35.9% 9.8% 14.3% 2023F Annual 69.5% 2.6% $174.67 1.9% $121.33 4.5% 0.0% 2.6% 2024F Annual 70.2% 1.1% $177.81 1.8% $124.91 3.0% 0.6% 1.8% 2025F Annual 70.5% 0.3% $181.78 2.2% $128.12 2.6% 1.3% 1.6% 2026F Annual 70.3% -0.3% $185.74 2.2% $130.57 1.9% 1.2% 1.0% 2021 2Q Year to Date 64.0% 44.4% $122.99 -14.0% $78.72 24.2% 13.8% 64.4% 2022 2Q Year to Date 72.8% 13.8% $195.55 59.0% $142.46 81.0% 10.1% 25.3% 2022 2Q Trailing 4 Qtrs 69.6% 28.0% $169.78 45.7% $118.11 86.5% 10.0% 40.8% Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
For a more comparable and detailed financial comparison, we recommend a Benchmarker SM report.

Please contact Robert Mandelbaum at +1 404 812 5187 for more information.

Year-Over-Year Change – YTD June 2022 vs YTD June 2021
Dollars Per Available Room (%)
US Middle-Priced Hotels - Operating Performance
154.4%

11.3%

86.5%

61.0%

84.3%

36.6%

59.8%

59.8%

59.8%
126.9%

57.4%

31.3%

19.9%
0% 50% 100% 150% 200%
EBITDA
Non-Operating Income and Expenses
Income Before Non-Operating
Management Fees
Gross Operating Profit
Undistributed Expenses
Departmental Profit
Departmental Expenses
Total Operating Revenue
F&B Revenue
Rooms Revenue
ADR
Occupancy
Q2 2022 EditionCoachella Valley, CA
Source: CBRE Hotels, From total sample of 2,450 U.S. hotels submitting monthly P&L information.

Item 3C - Page 70
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-
Coachella Valley Forecast - Lower-Priced Hotels
Year Period Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand 2017 Annual 65.5% 3.2% $96.98 -1.9% $63.55 1.3% 1.7% 5.0% 2018 Annual 64.7% -1.3% $97.78 0.8% $63.23 -0.5% 0.6% -0.7% 2019 1 76.4% 2.0% $126.67 7.9% $96.81 10.1% 12.2% 14.5% 2019 2 67.0% 7.3% $115.19 6.0% $77.20 13.8% 11.3% 19.5% 2019 3 55.8% -1.3% $78.16 8.8% $43.62 7.5% 10.9% 9.5%
2019 4 67.7% 4.2% $93.75 6.4% $63.51 10.8% 8.0% 12.5%
2019 Annual 66.7% 3.2% $105.24 7.6% $70.21 11.0% 10.6% 14.1% 2020 1 62.6% -18.0% $110.53 -12.7% $69.24 -28.5% -0.4% -18.4% 2020 2 28.8% -57.0% $85.01 -26.2% $24.50 -68.3% 0.4% -56.8% 2020 3 48.7% -12.7% $80.49 3.0% $39.20 -10.1% -0.3% -13.0% 2020 4 49.2% -27.3% $83.00 -11.5% $40.85 -35.7% 0.3% -27.1% 2020 Annual 47.3% -29.0% $91.77 -12.8% $43.45 -38.1% 0.0% -29.0% 2021 1 60.5% -3.4% $88.86 -19.6% $53.79 -22.3% -2.9% -6.2% 2021 2 71.4% 147.6% $98.69 16.1% $70.44 187.5% -4.4% 136.8% 2021 3 60.0% 23.2% $91.62 13.8% $54.97 40.3% -4.4% 17.8% 2021 4 67.4% 37.0% $114.32 37.7% $77.09 88.7% -2.7% 33.3% 2021 Annual 64.8% 36.9% $98.84 7.7% $64.08 47.5% -3.6% 32.0% 2022 1 70.7% 16.9% $138.46 55.8% $97.95 82.1% -5.6% 10.3% 2022 2 62.5% -12.4% $142.47 44.4% $89.11 26.5% -4.2% -16.1% 2022F 3 57.3% -4.6% $96.47 5.3% $55.25 0.5% -3.5% -7.9% 2022F 4 68.1% 1.0% $115.78 1.3% $78.88 2.3% -3.9% -2.9% 2022F Annual 64.6% -0.3% $124.03 25.5% $80.18 25.1% -4.3% -4.6% 2023F Annual 67.0% 3.7% $126.10 1.7% $84.52 5.4% 0.0% 3.7% 2024F Annual 67.9% 1.3% $129.86 3.0% $88.15 4.3% 1.0% 2.3% 2025F Annual 67.8% -0.1% $132.75 2.2% $89.98 2.1% 1.5% 1.3% 2026F Annual 67.5% -0.4% $134.93 1.6% $91.09 1.2% 1.6% 1.2% 2021 2Q Year to Date 65.9% 44.1% $94.14 -8.1% $62.05 32.4% -3.7% 38.9% 2022 2Q Year to Date 66.6% 1.1% $140.34 49.1% $93.53 50.7% -4.9% -3.9% 2022 2Q Trailing 4 Qtrs 65.1% 13.7% $121.91 37.4% $79.41 56.2% -4.2% 8.9% Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
For a more comparable and detailed financial comparison, we recommend a Benchmarker SM report.

Please contact Robert Mandelbaum at +1 404 812 5187 for more information.

Year-Over-Year Change – YTD June 2022 vs YTD June 2021
Dollars Per Available Room (%)
US Lower-Priced Hotels - Operating Performance

44.3%

20.8%

36.8%

30.7%

36.2%

22.9%

29.7%

36.3%

31.4%

47.5%

31.1%

21.1%

8.3%
0% 10% 20% 30% 40% 50%
EBITDA
Non-Operating Income and Expenses
Income Before Non-Operating
Management Fees
Gross Operating Profit
Undistributed Expenses
Departmental Profit
Departmental Expenses
Total Operating Revenue
F&B Revenue
Rooms Revenue
ADR
Occupancy
Q2 2022 EditionCoachella Valley, CA
Source: CBRE Hotels, From total sample of 2,450 U.S. hotels submitting monthly P&L information.

Item 3C - Page 71
Room Nights and ADR by Source of Business - Coachella Valley, CA All Hotels Room Nights by Source of Business ADR by Source of Business Source 2021 YTD 2022 YTD 2021 YTD 2022 YTD
Brand.com 23.1% 20.4% $202.94 $292.47
Property Direct 33.3% 24.4% $130.91 $198.07
Voice 6.7% 5.1% $226.16 $308.51
Internal Discounts 6.4% 5.8% $115.55 $135.94
GDS 2.7% 4.8% $178.56 $269.52
FIT Wholesale 0.8% 0.9% $162.49 $239.29
OTA 21.4% 18.9% $153.52 $216.93
Group 5.6% 19.7% $155.56 $258.02
Upper-Priced Hotels Room Nights by Source of Business ADR by Source of Business Source 2021 YTD 2022 YTD 2021 YTD 2022 YTD
Brand.com 28.9% 20.0% $283.92 $380.40
Property Direct 16.9% 12.1% $219.61 $304.21
Voice 9.5% 5.5% $318.36 $422.82
Internal Discounts 11.0% 7.3% $140.82 $159.63
GDS 3.5% 6.4% $233.14 $305.13
FIT Wholesale 1.2% 1.2% $214.21 $286.14
OTA 20.6% 15.3% $234.35 $295.64
Group 8.4% 32.1% $191.15 $272.33
Mid-Priced Hotels Room Nights by Source of Business ADR by Source of Business Source 2021 YTD 2022 YTD 2021 YTD 2022 YTD
Brand.com 24.4% 26.8% $140.35 $226.98
Property Direct 32.9% 28.6% $126.33 $195.24
Voice 3.8% 3.2% $134.44 $214.74
Internal Discounts 6.3% 6.9% $62.76 $95.14
GDS 3.7% 4.8% $121.10 $198.95
FIT Wholesale 0.9% 0.8% $108.38 $162.72
OTA 22.8% 18.9% $118.23 $183.75
Group 5.2% 9.9% $109.26 $199.16
Lower-Priced Hotels Room Nights by Source of Business ADR by Source of Business Source 2021 YTD 2022 YTD 2021 YTD 2022 YTD
Brand.com 14.4% 13.6% $93.95 $151.65
Property Direct 54.7% 48.1% $97.93 $137.87
Voice 5.9% 6.3% $89.50 $134.51
Internal Discounts 0.5% 0.6% $31.62 $48.42
GDS 0.6% 1.1% $106.89 $171.86
FIT Wholesale 0.3% 0.4% $61.24 $105.97
OTA 21.1% 27.0% $87.45 $141.62
Group 2.5% 2.9% $93.14 $140.43
For a glossary of Kalibri Labs terminology, see page 19 , or visit https://pip.cbrehotels.com/about-us/kalibri-faqs Brand.com: Transient bookings sold
via property or brand's website
Property Direct: Transient bookings
sold directly by property
Voice: Transient bookings sold via call
centers
Internal Discounts: Complimentary,
barter, employee, friends & family,
loyalty program, house use, permanent
rooms , etc.

GDS: Transient bookings sold via global
distribution systems
FIT/Wholesale: Transient bookings sold
via wholesalers
OTA: Transient bookings sold by an
online travel agent
Group: Bookings of multiple guests
rooms under the same booking, with a
group rate
Brand.com,

20.4%
Property Direct,

24.4%
Voice, 5.1%
Int. Discounts, 5.8%
GDS, 4.8%
FIT Wholesale, 0.9%
OTA, 18.9%
Group, 19.7%
Other
Room Nights 2022 YTD
Q2 2022 EditionCoachella Valley, CA
Brand.com,

20.0%
Property Direct,

12.1%
Voice, 5.5%
Int. Discounts, 7.3%
GDS, 6.4%
FIT Wholesale, 1.2%
OTA, 15.3%
Group, 32.1%
Other
Room Nights 2022 YTD
Brand.com, 26.8%
Property Direct,

28.6%
Voice, 3.2%
Int. Discounts, 6.9%
GDS, 4.8%
FIT Wholesale, 0.8%
OTA, 18.9%
Group, 9.9%
Other
Room Nights 2022 YTD
Brand.com,

13.6%
Property Direct,

48.1%
Voice, 6.3%
Int. Discounts, 0.6%GDS, 1.1%FIT Wholesale, 0.4%
OTA, 27.0%
Group, 2.9%
Other
Room Nights 2022 YTD
Item 3C - Page 72
Coachella Valley Short-Term Rental Summary
Fig. 1: Short-Term Rental Performance
July 2021 – June 2022
Metric 2022 YoY Change
Occupancy 54.5% -9.9%
ADR $553.09 10.7%
RevPAR $301.67 -0.2%
Available Supply 1,758,438 10.4%
Units Sold 957,872 -0.6%
Total Revenue $529,473,600 9.9%
Source: AirDNA, CBRE Hotels Research, Q2 2022
Fig. 3: July 2021 – June 2022 Active/Available Units by Month Fig. 4: July 2021 – June 2022 ADRs by Unit Type
Below is an overview of short-term rentals in this market. The estimates of short-term rental performance come from AirDNA, a f irm that provides data and analytics for 4 million+ short-term rental listings worldwide. Figure 1 shows the total number of units available, sol d and revenue generated during July 2021 – June 2022 along with the calculated Occupancy, Average Daily Rate (ADR), RevPAR, and year-over-yea r growth rates.

Figure 2 shows the percent of units and revenue by unit type. Figure 3 shows the average daily number of active short-term rent al units by month.

Figure 4 lists the ADRs broken down by unit types over the past 12 months. More detailed data on short-term rentals in your mar ket can be purchased directly from AirDNA at airdna.co.

Fig. 2: Percent of Active Units and Revenue by Listing Type Detailed data on short-term rentals in yo ur market can be purchased at airdna.co.

96.1%

3.7%0.2%
2022 Trailing 12 Active Units

99.2%

0.8%

0.0%
2022 Trailing 12 Revenue
-30%
-20%
-10%
0%
10%
20%
30%
40%
0 1,000
2,000
3,000
4,000
5,000
6,000
JUL 2021 AUG 2021 SEP 2021 OCT 2021 NOV 2021 DEC 2021 JAN 2022 FEB 2022 MAR 2022 APR 2022 MAY 2022 JUN 2022 Active Units
Active Units Y-o-Y Change
$517.10
$113.10
$151.00
Entire
home/apt
Private room
Shared room
Average Daily Rate ($)
Glossary
Active Units - A unit is considered active if it had at least one night sold during the month.

Available Units - Total number of listings available for booking on short-term rentals in that month.

Average Daily Rate (ADR) - The revenue collected divided by the units sold.

Unit Types:

Entire Home - The guest has complete and sole access to the entire unit during the stay.

Private Room - The guest has their own sleeping area, but shares access to the unit common areas with others.

Shared Room - The guest rents a common area, like an
airbed in a living room.

Entire Home/Apt Private Room Shared Room
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 73
• • •
- -
National Horizon Profile
2 Albany 1 Dayton 3 Minneapolis 2 Saint Petersburg
1 Albuquerque 2 Denver 2 Nashville 2 Salt Lake City
2 Anaheim 2 Detroit 3 New Orleans 1 San Antonio
3 Atlanta 2 Fort Lauderdale 3 New York 1 San Bernardino 2 Austin 3 Fort Worth 3 Newark 2 San Diego
2 Baltimore 2 Hartford 3 Oakland 3 San Francisco
1 Birmingham 2 Hawaii 1 Oklahoma City 3 San Jose
3 Boston 3 Houston 1 Omaha 1 Savannah
2 Charleston 1 Indianapolis 2 Orlando 3 Seattle
3 Charlotte 1 Jacksonville 3 Philadelphia 1 Tampa
3 Chicago 2 Kansas City 2 Phoenix 3 Tucson
2 Cincinnati 1 Long Island 3 Pittsburgh 2 Virginia Beach 2 Cleveland 2 Los Angeles 2 Portland 3 Washington D C
1 Coachella Valley 1 Louisville 1 Raleigh 3 West Palm Beach 1 Columbia 1 Memphis 1 Richmond
2 Columbus 1 Miami 2 Sacramento
2 Dallas 3 Milwaukee 3 Saint Louis
Greater than 9% Between 9% and 6% Less than 6%

Source: CBRE Hotels Research, Kalibri Labs, Q2 2022
This page showcases the CBRE Hotels Research Hotel Horizons® 65- city forecasting univ erse.The map below presents CBRE’s forecast annual 2023 change in RevPAR year over year from 2022. This provides a glimpse of the pace of market recoveries across the nation. Quarter ly Hotel Horizons® reports are available for the nation and all the markets shown below.

Forecast Market RevPAR Growth for 2023
https://pip.cbrehotels.com
Coachella Valley, CA Q2 2022 Edition
Item 3C - Page 74
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Coachella Valley, CA Market Profile Total Room Supply:

Upper-Priced Properties Rooms % Mkt Mid-Priced Properties Rooms % Mkt Lower-Priced Properties Rooms % Mkt Marriott 3 1,389 7.0% Holiday Inn Express 5 488 2.5% Motel 6 7 777 3.9% Westin 3 1,268 6.4% Best Western Plus 3 334 1.7% WorldMark 3 557 2.8% Renaissance 2 970 4.9% Courtyard 2 300 1.5% Travelodge 3 236 1.2% JW Marriott 1 884 4.5% Doubletree 1 289 1.5% Best Western 2 188 1.0% Curio Collection 1 785 4.0% Homewood Suites 2 257 1.3% Days Inn 2 169 0.9% Source: Kalibri Labs, Q2 2022
Project Phase Properties Rooms % Mkt Properties Rooms % Mkt Properties Rooms % Mkt Properties Rooms % Mkt Planning 2 609 3.1% 4 460 2.3% 0 0 0.0% 17 1,825 9.3%
Final Planning/Bidding 1 334 1.7% 0 0 0.0% 0 0 0.0% 0 0 0.0% Underway 1 164 0.8% 0 0 0.0% 0 0 0.0% 1 30 0.2%
Total 4 1,107 5.6% 4 460 2.3% 0 0 0.0% 18 1,855 9.4%
Source: Dodge, CBRE Hotels Research, Q2 2022
Source: Dodge, Q2 2022
19,704
Upper-Priced Mid-Priced Lower-Priced Unclassified / Independent Coachella Valley, CA Top Brands
Supply Pipeline
Pipeline Status Definitions
Planning Projects reported at the planning stage have an architect associated with them who is starting to draw the schematic plans for the building.

Projects in this stage are closer to ground breaking but still have a fairly low probability of starting.

Final Planning At this stage, plans for a project have been or are about to be finalized. The project is moving towards final approvals. Once ap r o j e c t h a s reached the final planning stage, there is a high probability that the construction contract will be awarded within the next sixm o n t h s .

Bidding Once the plans for the project have been finalized, the project is put out to bid by general contractors. At this stage in the planning cycle, projects are very close to being awarded and have a very high probability of coming to market.

Underway Projects that are under construction.

Project Phase Definition
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 75
Coachella Valley, CA Submarket Map Total Room Supply:

Coachella Valley, CA Submarket Summary
Properties Rooms % Mkt Properties Rooms % Mkt Properties Rooms % Mkt Properties Rooms % Mkt Palm Springs 45 3,098 15.7% 45 2,385 12.1% 31 2,222 11.3% 121 7,705 39.1% Palm Desert / La Quinta 19 6,018 30.5% 10 1,524 7.7% 4 347 1.8% 33 7,889 40.0% Indio / Coachella 4 1,261 6.4% 10 1,065 5.4% 16 1,784 9.1% 30 4,110 20.9% Total 68 10,377 52.7% 65 4,974 25.2% 51 4,353 22.1% 184 19,704 100.0% Source: Kalibri Labs, Q2 2022
19,704
Upper-Priced Mid-PricedSubmarket Lower-Priced Totals
Source: Kalibri Labs, Q2 2022
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 76
Submarkets
 Indio/Coache ll a
 Palm Desert/ La Quin t a
 Palm Spri ngs
Submarket Profile - Palm Springs Submarket Room Supply:

Submarket Performance Submarket Penetration vs. Market Total Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Year Occ ADR RevPAR 2017 64.0% - $139.13 - $89.04 - 2017 98.9% 91.3% 90.3%
2018 64.4% 0.6% $147.57 6.1% $95.02 6.7% 2018 100.4% 93.1% 93.4% 2019 65.9% 2.4% $149.97 1.6% $98.88 4.1% 2019 102.0% 89.9% 91.6% 2020 39.0% -40.8% $135.13 -9.9% $52.73 -46.7% 2020 106.7% 90.7% 96.7% 2021 57.9% 48.4% $146.73 8.6% $84.99 61.2% 2021 107.1% 87.3% 93.5% 2Q21 YTD 55.9% 41.3% $139.81 -8.9% $78.16 28.7% 2Q21 YTD 108.3% 87.0% 94.2% 2Q22 YTD 68.2% 22.0% $216.06 54.5% $147.36 88.5% 2Q22 YTD 100.4% 90.6% 90.9% Source: Kalibri Labs, Q2 2022 Source: Kalibri Labs, Q2 2022 Upper-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Upper-Priced Penetration of Market Top Brands 2017 63.6% - $177.62 - $113.02 - Renaissance (410 rms)
2018 63.9% 0.4% $190.06 7.0% $121.36 7.4% Hilton (257 rms) 2019 64.4% 0.8% $194.70 2.4% $125.36 3.3% Hyatt (197 rms) 2020 33.1% -48.6% $192.69 -1.0% $63.81 -49.1% Ace Hotels (176 rms) 2021 50.0% 50.9% $214.01 11.1% $106.94 67.6% Kimpton (153 rms) 2Q21 YTD 44.8% 26.3% $214.48 0.7% $96.15 27.2% Andaz (150 rms) 2Q22 YTD 68.4% 52.5% $289.12 34.8% $197.72 105.6%
Source: Kalibri Labs, Q2 2022
Mid-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Mid-Priced Penetration of Market Top Brands 2017 62.9% - $134.47 - $84.60 - Diamond Resorts (293 rms) 2018 65.0% 3.3% $143.62 6.8% $93.33 10.3% Doubletree (289 rms) 2019 68.4% 5.2% $142.49 -0.8% $97.43 4.4% Homewood Suites (197 rms) 2020 38.8% -43.3% $134.39 -5.7% $52.11 -46.5% Best Western Plus (182 rms) 2021 62.7% 61.8% $132.98 -1.0% $83.42 60.1% Courtyard (149 rms) 2Q21 YTD 62.1% 56.0% $124.25 -19.7% $77.22 25.3% Holiday Inn Express (94 rms) 2Q22 YTD 70.8% 14.0% $196.96 58.5% $139.50 80.7%
Source: Kalibri Labs, Q2 2022
Lower-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Lower-Priced Penetration of Market Top Brands 2017 65.1% - $98.59 - $64.14 - Motel 6 (370 rms)
2018 64.7% -0.6% $100.16 1.6% $64.77 1.0% Travelodge (186 rms) 2019 66.0% 2.1% $105.85 5.7% $69.91 7.9% Quality Inn (129 rms) 2020 45.6% -31.0% $90.64 -14.4% $41.31 -40.9% Vagabond Inn (117 rms) 2021 63.3% 38.9% $94.59 4.4% $59.88 45.0% Days Inn (107 rms) 2Q21 YTD 63.7% 46.0% $90.32 -11.3% $57.56 29.6% Extended Stay America (104 rms) 2Q22 YTD 65.1% 2.2% $131.40 45.5% $85.59 48.7%
Source: Kalibri Labs, Q2 2022
Palm Springs Construction Pipeline
Project Phase Props Rms %SubMkt Props Rms %SubMkt Props Rms %SubMkt Rms %SubMkt Planning 1 209 2.7% 1 149 1.9% 0 0 0.0% 373 4.8%
Final Planning/Bidding 0 0 0.0% 0 0 0.0% 0 0 0.0% 0 0.0% Underway 1 164 2.1% 0 0 0.0% 0 0 0.0% 30 0.4%
Total 2 373 4.8% 1 149 1.9% 0 0 0.0% 403 5.2%
Source: Dodge, CBRE Hotels Research, Q2 2022
7,705
6 0
1 7
Props
Trailing 4 Quarters
Upper-Priced Mid-Priced Lower-Priced Unclassified/Independent Submarket Rank* RevPAR Penetration
2 out of 3
*Based on RevPAR change over
the last 4 quarters.
92%
85 135
185
2018 2019 2020 2021 2022
Market ADROcc RevPAR
85 90
95 100
105
2018 2019 2020 2021 2022
70 80
90 100
110
2018 2019 2020 2021 2022
Upper-Priced, 40%
Mid-Priced, 31%
Lower-Priced, 29%
Market ADROcc RevPAR
Market ADROcc RevPAR
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 77
Submarket Profile - Palm Desert / La Quinta Submarket Room Supply:

Submarket Performance Submarket Penetration vs. Market Total Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Year Occ ADR RevPAR 2017 64.3% - $183.81 - $118.15 - 2017 99.3% 120.7% 119.9% 2018 62.6% -2.6% $190.80 3.8% $119.49 1.1% 2018 97.6% 120.4% 117.5% 2019 61.9% -1.1% $206.16 8.1% $127.63 6.8% 2019 95.8% 123.5% 118.3% 2020 28.8% -53.5% $196.92 -4.5% $56.65 -55.6% 2020 78.6% 132.1% 103.9% 2021 43.7% 52.0% $233.29 18.5% $102.02 80.1% 2021 80.8% 138.8% 112.2% 2Q21 YTD 39.3% 22.2% $232.04 4.9% $91.15 28.3% 2Q21 YTD 76.1% 144.4% 109.9% 2Q22 YTD 65.9% 67.8% $290.33 25.1% $191.32 109.9% 2Q22 YTD 97.0% 121.7% 118.0% Source: Kalibri Labs, Q2 2022 Source: Kalibri Labs, Q2 2022 Upper-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Upper-Priced Penetration of Market Top Brands 2017 62.9% - $199.44 - $125.39 - Westin (1268 rms)
2018 61.1% -2.8% $207.20 3.9% $126.68 1.0% JW Marriott (884 rms) 2019 60.4% -1.2% $226.56 9.3% $136.86 8.0% Curio Collection (785 rms) 2020 25.1% -58.5% $233.17 2.9% $58.52 -57.2% Renaissance (560 rms) 2021 37.7% 50.3% $288.62 23.8% $108.89 86.1% Hyatt Regency (530 rms) 2Q21 YTD 32.6% 9.9% $297.19 17.5% $96.86 29.2% Omni (444 rms) 2Q22 YTD 64.0% 96.4% $327.80 10.3% $209.82 116.6%
Source: Kalibri Labs, Q2 2022
Mid-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Mid-Priced Penetration of Market Top Brands 2017 71.9% - $128.52 - $92.37 - Holiday Inn Express (209 rms) 2018 70.5% -1.9% $135.04 5.1% $95.20 3.1% Best Western Plus (150 rms) 2019 69.2% -1.9% $133.57 -1.1% $92.37 -3.0% Homewood Suites (129 rms) 2020 44.3% -35.9% $118.24 -11.5% $52.43 -43.2% Hilton Garden Inn (120 rms) 2021 63.0% 42.1% $134.12 13.4% $84.49 61.1% Residence Inn (108 rms) 2Q21 YTD 60.5% 37.8% $125.68 -7.7% $76.06 27.2% Springhill Suites (107 rms) 2Q22 YTD 74.4% 23.0% $198.96 58.3% $148.08 94.7%
Source: Kalibri Labs, Q2 2022
Lower-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Lower-Priced Penetration of Market Top Brands 2017 66.6% - $93.13 - $62.03 - Motel 6 (102 rms)
2018 66.1% -0.7% $97.28 4.5% $64.33 3.7%
2019 67.4% 2.0% $97.76 0.5% $65.93 2.5%
2020 46.5% -31.1% $72.60 -25.7% $33.74 -48.8%
2021 67.7% 45.7% $78.76 8.5% $53.32 58.0%
2Q21 YTD 68.0% 69.9% $76.31 -5.0% $51.89 61.4%
2Q22 YTD 60.5% -11.1% $111.46 46.1% $67.40 29.9%
Source: Kalibri Labs, Q2 2022
Palm Desert / La Quinta Construction Pipeline
Project Phase Props Rms %SubMkt Props Rms %SubMkt Props Rms %SubMkt Rms %SubMkt Planning 0 0 0.0% 1 125 1.6% 0 0 0.0% 685 8.7%
Final Planning/Bidding 1 334 4.2% 0 0 0.0% 0 0 0.0% 0 0.0% Underway 0 0 0.0% 0 0 0.0% 0 0 0.0% 0 0.0%
Total 1 334 4.2% 1 125 1.6% 0 0 0.0% 685 8.7%
Source: Dodge, CBRE Hotels Research, Q2 2022
6 0
0 6
Trailing 4 Quarters
Upper-Priced Mid-Priced Lower-Priced Unclassified/Independent Props
7,889
Submarket Rank* RevPAR Penetration
1 out of 3
*Based on RevPAR change over
the last 4 quarters.
117%
25 75
125
2018 2019 2020 2021 2022
Market ADROcc RevPAR
55 75
95 2018 2019 2020 2021 2022
85 90
95 100
105
110
2018 2019 2020 2021 2022
Upper-Priced, 76%
Mid-Priced, 19%
Lower-Priced, 4%
Market ADROcc RevPAR
Market ADROcc RevPAR
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 78
Submarket Profile - Indio / Coachella Submarket Room Supply:

Submarket Performance Submarket Penetration vs. Market Total Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Year Occ ADR RevPAR 2017 67.4% - $113.68 - $76.59 - 2017 104.1% 74.6% 77.7% 2018 67.0% -0.6% $116.56 2.5% $78.07 1.9% 2018 104.4% 73.5% 76.8% 2019 69.9% 4.4% $113.94 -2.2% $79.64 2.0% 2019 108.1% 68.3% 73.8% 2020 52.1% -25.5% $102.73 -9.8% $53.50 -32.8% 2020 142.4% 68.9% 98.2% 2021 68.8% 32.2% $114.22 11.2% $78.63 47.0% 2021 127.3% 67.9% 86.5% 2Q21 YTD 70.2% 36.2% $107.62 -6.1% $75.59 27.8% 2Q21 YTD 136.1% 67.0% 91.1% 2Q22 YTD 71.7% 2.1% $168.20 56.3% $120.66 59.6% 2Q22 YTD 105.6% 70.5% 74.4% Source: Kalibri Labs, Q2 2022 Source: Kalibri Labs, Q2 2022 Upper-Priced Hotels Performance (Data Not Available)
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Upper-Priced Penetration of Market Top Brands 2017 #N/A - #N/A - #N/A - Marriott (987 rms)
2018 #N/A #N/A #N/A #N/A #N/A #N/A Hotel Indigo (244 rms) 2019 #N/A #N/A #N/A #N/A #N/A #N/A
2020 #N/A #N/A #N/A #N/A #N/A #N/A
2021 #N/A #N/A #N/A #N/A #N/A #N/A
2Q21 YTD #N/A #N/A #N/A #N/A #N/A #N/A
2Q22 YTD #N/A #N/A #N/A #N/A #N/A #N/A
Source: Kalibri Labs, Q2 2022
Mid-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Mid-Priced Penetration of Market Top Brands 2017 68.3% - $128.47 - $87.79 - Fairfield Inn (218 rms) 2018 68.7% 0.6% $130.66 1.7% $89.79 2.3% Holiday Inn Express (185 rms) 2019 74.6% 8.5% $128.80 -1.4% $96.05 7.0% Hampton Inn Suites (181 rms) 2020 55.9% -25.0% $114.12 -11.4% $63.81 -33.6% Courtyard (151 rms) 2021 73.2% 30.9% $124.69 9.3% $91.26 43.0% Residence Inn (130 rms) 2Q21 YTD 73.2% 32.5% $117.38 -9.7% $85.89 19.6% Homewood Suites (128 rms) 2Q22 YTD 75.1% 2.7% $187.76 60.0% $141.03 64.2%
Source: Kalibri Labs, Q2 2022
Lower-Priced Hotels Performance
Year Occ Δ Occ ADR Δ ADR RevPAR Δ RevPAR Lower-Priced Penetration of Market Top Brands 2017 66.2% - $94.84 - $62.77 - WorldMark (453 rms)
2018 64.3% -2.9% $93.08 -1.9% $59.82 -4.7% Motel 6 (305 rms) 2019 67.6% 5.1% $105.76 13.6% $71.45 19.4% Quality Inn Suites (125 rms) 2020 50.1% -25.8% $96.18 -9.1% $48.19 -32.6% Best Western (118 rms) 2021 66.5% 32.6% $107.89 12.2% $71.71 48.8% Royal Inns & Suites (99 rms) 2Q21 YTD 68.6% 37.9% $101.97 -4.1% $70.00 32.3% Super 8 (92 rms) 2Q22 YTD 69.7% 1.6% $155.62 52.6% $108.51 55.0%
Source: Kalibri Labs, Q2 2022
Indio / Coachella Construction Pipeline
Project Phase Props Rms %SubMkt Props Rms %SubMkt Props Rms %SubMkt Rms %SubMkt Planning 1 400 9.7% 2 186 4.5% 0 0 0.0% 767 18.7%
Final Planning/Bidding 0 0 0.0% 0 0 0.0% 0 0 0.0% 0 0.0% Underway 0 0 0.0% 0 0 0.0% 0 0 0.0% 0 0.0%
Total 1 400 9.7% 2 186 4.5% 0 0 0.0% 767 18.7%
Source: Dodge, CBRE Hotels Research, Q2 2022
5 0
0 5
Trailing 4 Quarters
Upper-Priced Mid-Priced Lower-Priced Unclassified/Independent Props
4,110
Submarket Rank* RevPAR Penetration
3 out of 3
*Based on RevPAR change over
the last 4 quarters.
78%
-1
-1
-1
0 0
0 2018 2019 2020 2021 2022
Market ADROcc RevPAR
90 100
110
120
130
2018 2019 2020 2021 2022
Insufficient Upper-Priced Data
90 110
130
150
2018 2019 2020 2021 2022
Upper-Priced, 31%
Mid-Priced, 26%
Lower-Priced, 43%
Market ADROcc RevPAR
Market ADROcc RevPAR
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 79
Market Segments - Representative Brands
Upper-Priced Brands Mid-Priced Brands Lower-Priced Brands Ritz-Carlton Embassy Suites Courtyard by Marriott Best Western Plus Best Western Extended Stay America InterContinental Hilton Crowne Plaza Comfort Inn Candlewood Suites Motel 6 Loews Hyatt Hyatt Place Hampton Inn Baymont Days Inn
Fairmont Marriott Hilton Garden Inn Holiday Inn Sleep Inn Red Roof Inn Grand Hyatt Westin Residence Inn La Quinta Inn & Suites Quality Inn InTown Suites Exhibits 1 - 4
Exhibit 5
Exhibits 6 - 8
Exhibits 9 - 11
Year-over-year change in Income, Employment, RevPAR and Demand, displayed as annual (Exhibits 1 and 2) and quarterly (Exhibits 3 and 4).

Average annual Employment, Consumer Price Index, Gross Domestic Product, and Real Personal Income change for the market.

Index based change charts with base year 2017 = 100, illustrating the magnitude of change.

Compound average annual RevPAR, Demand and Supply change for Upper Priced, Mid-Priced, Lower Priced, and combined (All) hotels within the market.

Financial Benchmarks
The financial benchmarks presented in this report are based on data from CBRE Hotels Research’s monthly analysis of hotel opera ting statements from 2,450 properties located across the nation.

How We Forecast
CBRE Hotels Research prepares hotel market forecasts based on accepted econometric procedures and sound judgment. The product n ame for the CBRE Hotels' forecasts is Hotel Horizons®. The two-stage process for producing the forecasts firstly involves econometric estimation of future hotel market activity and financial performance based on historical relationships between economic and hotel market variables; and secondly, a judgmental review of modeled outputs by experienced hotel market analysts. Our hotel industry expertise dates back to the 1930s. CBRE Hotels and others believe that errors in forecasting are minimized by relying on both data analytics and judgment.

Econometric Model
Econometric forecasting represents one of the most sophisticated approaches to gaining insight into future economic activity. U nlike some forecasting methods used in business practice, the models that underlie econometric forecasts contain variables based in econom ic theory. The forecasts come from historical relationships, similar to statistical correlations, among hotel market measures and economic var iables. The measures for the variables come from actual market transactions involving individuals and firms interacting in the economy.

Positive Features of Econometric Models:
• The variables included in the models follow from economic theory. • The relationships between variables are estimated with advanced statistical methods. • The forecasts developed with econometric models are objectively determined, unlike forecasts based only on judgmental approaches.

Gaining insight into the futures of complicated economic environments requires the introduction of multi-level forecasting mode ls. Several equations often need to be identified and estimated to model complex economic conditions such as the national economy. Multi-eq uation models have considerable appeal for economic forecasting because they explicitly recognize the interdependence of relationships common ly encountered in markets. Perhaps the best example of this type of model is one that involves both the demand side and the supply side of mar kets, in which prices of goods are set by the interaction of buyers and sellers. Thus, price appears as a variable in both the demand and supp ly equations.

Q2 2022 EditionCoachella Valley, CA
Exhibit Descriptions
Item 3C - Page 80
Economic Data from Aug 2022 Hotel Data from June 2022
DEMAND: Demand for hotel rooms is primarily driven by the general level of economic activity in the nation or city, as measured by real personal income (RPI) and total employment (EMP). The demand model accordingly recognizes the fundamental relationship between room purchasing behavior and either growth or decline in the relevant economy. The RPI and EMP are highly correlated with, and subsume, most other measures of economic activity.

The data show that room demand does not completely adjust to changes in the economy during a single quarter. Some effects from changes in the economy during the current period will reverberate over subsequent quarters, suggesting that a given quarter’s current levels of room demand correlate with prior-quarter demand levels. Consequently, lodging demand is modeled as a function of past demand levels. Lagged RADR levels capture the price effects. Finally, the demand equation includes quarterly dummy indicators (Q) to capture the considerable fluctuations of lodging demand during different seasons.

SUPPLY: In historical lodging data, a strong relationship exists between growth in the supply of new hotel rooms and prior-period lodging market conditions. As with lodging demand, historical movements in seasonally-adjusted supply growth suggest that the lodging supply’s adjustment s
in response to economic shocks do not occur instantaneously, but over several quarters. As a result of this slow adjustment process, current growth in supply is correlated with the previous quarter’s movements in supply. New hotel room growth is modeled as a function of past levels of new room growth, past RADR, and past occupancy levels.

For all markets, we use published and locally derived information about hotel project completion schedules to manually overwrite model estimates of room completions for the first six quarters of the forecast period. Hotel pipeline information is sourced from the Kalibri Labs and Dodge Data and Analytics pipeline reports, as well as from on-the-ground knowledge from our many consultants and analysts in each market.

ADR: Historical RADR movements also suggest non-instantaneous adjustments and a strong correlation with room scarcity in the market. Equation (3), which estimates RADR, therefore defines RADR as a function of past real room rates and contemporaneous occupancy levels. Th e
RADR equation also includes quarterly dummy indicators to control for seasonal variation in rates.

Judgmental Intervention
A committee of hotel experts from CBRE Hotels performs a thorough review of each model prediction. These assessments are made by locally-based hotel experts working in the various offices around the U.S. The quarterly forecasts for the current and forecast period years are subject to review. The committee modifies the model’s market prediction when there is compelling evidence that factors have come into play that the model could not possibly foresee. A Super Bowl-type event, as an extreme example, would cause the committee’s forecast to differ noticeably from the model's prediction—not only in the city in which the event will occur, but also competing cities within the region. In most instances, however, the committee either defers to the model prediction or makes modest adjustments.

The Equations
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 81
Kalibri Labs Terminology
Full list of definitions available at: https://pip.cbrehotels.com/about-us/kalibri-faqs Guest-Paid ADR Average daily rate based on the total room revenue paid by guests, inclusive of all transaction-specific direct reservation costs. Guest-paid ADR is higher than traditional hotel-reported ADR because it’s calculated using the room revenue paid by customers to hotels and intermediaries, inclusive of the wholesale commissions for intermediated stays, not listed in P&L statements.

Guest-Paid RevPAR Revenue per available room based on the total room revenue paid by guests, inclusive of all transaction-specific direct reservation costs. Guest-paid RevPAR is higher than traditional hotel-reported RevPAR because it’s calculated using the room revenue paid by customers to hotels and intermediaries, inclusive of the wholesale commissions for intermediated stays that are not listed in a P&L statement.

Hotel-Collected ADR Average daily rate based on the total room revenue reported by hotels. It includes all booking costs, and it excludes all the wholesale commissions for intermediated stays, not listed in P&L statements.

Hotel-Collected RevPAR Revenue per available room based on the total room revenue reported by hotels, inclusive of all transaction-specific direct reservation costs, except wholesale commissions for intermediated stays that not listed in P&L statements.

Reservations A stay at a hotel by a guest equivalent to number of check-ins. Each reservation can span multiple nights based on a guest’s length of stay. Demand divided by reservations equals length-of-stay.

Length of Stay Average number of actualized room nights per booking.

Source of Business Segmentation of hotel demand that associates each stay with a specific source, depending on how the stay was booked. Kalibri Labs differentiates sources of business from the primary booking channels (“Brand.com,” “Voice,” “Property Direct,” “OTA,” and “GDS”) by adding categories for “Group,” “FIT/Wholesale” and “Internal Discounts” in order to provide more clarity into those business types.

Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 82
Brand.com Transient bookings sold via property or brand's website. Some of the costs associated with brand.com bookings include channel fees, metasearch/referral commissions, and loyalty fees.

Property Direct Transient bookings sold directly by property.

Voice Transient bookings sold via call centers. Some of the costs associated with voice bookings are channel/transaction fees and loyalty fees.

Internal Discounts Complimentary, barter, employee/owner rates, friends & family, house use, loyalty program redemption, and permanent rooms. Kalibri Labs separates these rate categories out to exclude artificially low revenue business for a more accurate picture of regular bookings performance in the other sources of business.

GDS Transient bookings sold via global distribution systems. It excludes OTA bookings powered by a GDS. Some of the costs associated with GDS bookings include retail commissions, pass- through fees, and loyalty fees.

FIT/Wholesale Transient bookings sold via wholesalers. Some of the costs associated with FIT/Wholesale bookings include channel fees and wholesale commissions.

OTA Transient bookings sold by an online travel agent, inclusive of all agency models (net/merchant, retail, and opaque). This includes all OTA bookings, regardless of the channel they come from (direct connect or GDS). Some of the costs associated with OTA bookings include retail commissions, wholesale commissions, and transaction fees.

Group Room nights associated with multiple guests and guestrooms under the same booking, and have a group specified rate. Most of the costs associated with Group bookings are retail commissions and channel fees. Group commissions are estimated for markets and brands where it is not provided.

Kalibri Labs Terminology - Source of Business
Q2 2022 EditionCoachella Valley, CA
Item 3C - Page 83
GDP, % 2.9 2.3 (3.4) 5.7 2.0 0.1 2.6
Employment, % 3.2 3.8 (5.0) 6.1 4.1 0.4 0.8
CPI, % 2.2 2.0 1.2 6.7 6.8 2.9 2.7
10-yr Treasury, % 3.0 1.8 0.9 1.5 3.4 2.5 2.7
Note: GDP is annual average growth rate, Employoment and CPI are Q4 y-o-y growth numbers, and 10-year Treasury is the Q4 reading for each year.

Source: BEA, BLS, Federal Reserve, CBRE Econometric Advisors, Q2 2022.

CBRE EA BASELINE FORECAST
2018 2019 2020 2021 2022 2023 2024
Forecasting and Budgeting Considerations
Q2 2022 EditionCoachella Valley, CA
Like all forecasting methodologies, CBRE Hotels Research's forecasts of future hotel performance are based on historical data and CBRE's expectations for economic growth.

CBRE EA's current macroeconomic baseline assumptions are as follows, and a complete set of CBRE EA's scenarios can be found here: https://pip.cbrehotels.com/about-us/news/2022/05/13/q1-2022-u.s.-macro-outlook

1. The dislocation in historical hotel performance given COVID-19, international travel restrictions, changes to the structure of traditional working patterns, and the heightened geopolitical and economic uncertainty, make scenario analyses more important than ever.

2. In addition to our Baseline scenario, CBRE Hotels Research provides upside case, downside case, and severe downside case scenarios.

3. CBRE does not probability weigh the scenario analyses, and instead allows each client to probability weigh the scenarios based on their own in-house geopolitical and macro-economic outlook.

4. The complete set of scenarios and 10-year projections can be found by using the scenario dropdown on the forecast dashboard, found here: https://pip.cbrehotels.com/property-analytics/hotel-horizons/marketdata. CBRE Hotels Research suggests you stress test your assumptions, forecasts and underwriting under all four scenarios to understand a more complete range of outcomes.

Other considerations:

Specific portfolios can perform differently than the broader market based on asset type (resort, extended stay, convention, etc.), price point, age, quality (freshness), GRI score, brand, location type (interstate, airport, downtown, suburban, small town, etc.), and the quality of the operator or asset management team.

CBRE's forecasts represent just one set of estimates in the marketplace and should be considered within a broader context and checked for outliers.

We offer custom forecasting for a tailored or custom set of forecasts for a particular set of macroeconomic expectations, asset types, location types, or chain scale mix. Contact our client services team at [email protected] to learn more.

Item 3C - Page 84
For more reports visit our store at
For more information about this market please contact:

Brandon Feighner at [email protected]
Glossary of Terms
ADR Average Daily Rate - rooms revenue divided by paid rooms occupied.

Occupancy Paid rooms occupied divided by available rooms.

RevPAR Revenue per Available Room - rooms revenue divided by available rooms.

Supply Average daily room nights available per quarter, represented as a change over previous year, same quarter except where noted annually.

Demand (Accommodated Demand) Average daily room nights occupied per quarter, represented as a change over previous year, same quarter except where noted annually.

LRA Long Run Average - Annual average from 2000 to last complete year end.

Penetration Market area (or sub-market area) measurement as a percent of national (or market area) measurement. © Copyright 2022. All rights reserved. This report has been prepared in good faith, based on CBRE’s current anecdotal and evidence based views of the co mmercial real estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencies, man y of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opi nions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change.

Hotel Horizons® is compiled and produced by CBRE Hotels Research. Readers are advised CBRE Hotels Research does not represent the data herein to be definitive, neither should the contents be construed as a recommendation on policies or actions. Quotation, reproduction or transmittal (in any form or by any means, whether electronic, photocopying, recording or otherwise) is not permitted without consent from CBRE Hotels Research. Please address inquiries to Hotel Horizons®, 3550 Lenox Rd NE, Suite 2300, Atlanta, GA 30326. Phone: (855) 223-1200. Copyright © 2022 CBRE Hotels Research. All rights reserved. https://pip.cbrehotels.com
Q2 2022 EditionCoachella Valley, CA
CBRE Hotels Leadership
Kevin Mallory
CBRE Hotels Global Head
[email protected]
CBRE Hotels Research
Rachael Rothman, CFA
Head of Hotels Research &
Data Analytics
[email protected]
Michael Nhu
Economist, Global Hotels Forecast
[email protected]
CBRE Hotels Advisory
Tommy Crozier, MAI, CRE, CCIM
National Practice Leader
[email protected]
CBRE Hotels Advisory Divisional Leadership
Jeff Lugosi, MAI, CRE, FRICS, ISHC
West Division
Practice Leader
[email protected]
Brandon J. Feighner
West Division
Advisory Leader
[email protected]
Alan M. Jutte
West Division
Appraisal Leader
[email protected]
Tim Dick,
MAI, CRE, PhD
Southeast Division & Asset
Management
Practice Leader
[email protected]
Kevin M. Donahue,
MAI
South Central Division
Appraisal Leader
[email protected]
Kannan Sankaran
Mid-Atlantic Division
Advisory Team
[email protected]
Fernando Garcia-Chacon
South Florida, Caribbean & Latin America
Division Practice Leader
[email protected]
Daniel C. Hanrahan II,

MAI, CRE
Americas Marketing Leader
Northeast Division
[email protected]
Andrew Hartley
Northeast Division
Advisory Team
[email protected]
Edward R. Eschmann, MAI
Northeast Division
Appraisal Leader
[email protected]
Mark E. Letscher, MAI, SGA
Midwest Division
Appraisal Leader
[email protected]
Item 3C - Page 85

Addendum C
2022 U.S. Construction Cost Trends Report
Item 3C - Page 86
2022 U.S.

Construction Cost
Trends
Rising prices for
labor and materials
pressuring
construction costs

CBRE RESEARCH
JULY 2022
Intelligent Investment
REPORT
Item 3C - Page 87
2 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends A confluence of events—
including soaring
construction demand,
inflation, pandemic-related
restrictions, supply chain
disruptions, labor shortages
and the war in Ukraine— are
spurring rising costs and
uncertainty across the
construction industry.

Executive Summary
CBRE’s new Construction
Cost Index forecasts a 14.1%
year-over-year increase in
construction costs by year-
end 2022 as labor and
material costs continue to
rise. Escalation should
stabilize to the 2%-4% range
in 2023 and 2024, on par with
historical averages.

Overall cost inflation for
materials is expected to begin
cooling by the end of 2022
and largely return to typical
levels by mid-2023. However,
given the large number of
construction inputs— many of
which are often subject to
geopolitical risks such as
tariffs and sanctions— costs
for some materials may
remain volatile.

Supply chain-related
disruptions should begin to
ease, but ongoing global
labor and component
shortages will hamper
production and logistics
capacity. As a result, long
lead times and material
shortages will likely continue
in the short term.

Item 3C - Page 88
3 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The construction industry
faces numerous labor
challenges, including a
smaller talent pool in the
aftermath of the Great
Recession, an aging
workforce— one in five
workers is currently older
than 55— and strong
competition from other
industries like logistics.

Executive Summary (cont.)
Labor shortages are
expected to persist for the
near term, increasing wage
pressure. Because
construction wage growth
has lagged the national
average through the
pandemic, construction labor
escalation is likely to be
higher in 2022.

As demand for new
construction projects
increases, contractors may be
able to pass along higher
input costs. The extent to
which this happens will
depend on how many
builders delay or cancel
projects due to concerns over
input prices, rising interest
rates and economic
uncertainty.

Despite headwinds, construction
demand is expected to remain
strong for the near term.

Although the possibility of an
economic downturn should be
taken seriously, considerable
pent-up demand for new
construction— including a
nationwide housing shortage—
and government infrastructure
projects should largely sustain
activity. As contractor backlogs
grow, margins should increase,
pushing up total construction
costs.

Item 3C - Page 89
4 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends 01 Introduction
02 Construction Activity
03 Supply Chain Disruption
04 Labor Market Trends
05 Impact on Materials Costs
06 Implications for Construction Costs
05 10
21 33
47 53
Contents
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Introduction
01 Item 3C - Page 91
6 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Midway through 2022, the U.S. construction industry
continues to grapple with numerous challenges, including labor shortages, supply chain disruptions and higher
materials costs— all exacerbated by the Russia-Ukraine
war, shifting trade policy, rising interest rates and
pandemic-related restrictions.

The construction industry thrives on predictability, and periods of uncertainty and volatility make estimating and managing costs more difficult. Not only was COVID-19 an unforeseeable black swan event, but the resulting market impacts over the past two years have altered many of the typical approaches used to control costs. The result:
unprecedented spikes in construction costs.

This report dissects the underlying components of total construction costs— labor, materials and margins— and
identifies the factors driving higher costs. The analysis delves into construction activity trends, supply chain disruptions, labor shortages and cost escalations in materials. We discuss these trends in the context of major third-party cost indices and present a new proprietary CBRE Construction Cost Index that forecasts costs through 2024. The primary takeaway:
2022 is likely to see more abnormally high increases in average construction costs, with the CBRE Construction Cost Index rising 14.1% year-over-year by the end of 2022, but increases thereafter should moderate.

By better understanding the levers moving construction
costs, we hope industry participants will be better positioned to navigate this challenging environment.

Estimating
construction costs
amid uncertainty
Item 3C - Page 92
7 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends COVID-19 precipitated shortages, delays and cost increases that continue to reverberate through the global economy in 2022.

The construction industry has been among the most affected, given the on-site nature of the work (public health restrictions or waves of illness across crews can hamper productivity), the large quantities and wide variety of both materials and labor required, and the vulnerability of several key inputs to tariffs, quotas and geopolitical tensions.

Pent-up demand for construction projects in the aftermath of the initial pandemic lockdowns— particularly residential, as many people spent more time at home— drove an uptick in construction activity. However, the construction industry, like manufacturing, distribution and other sectors, was understaffed amid COVID-related layoffs, quits, illnesses and deaths.

The result: a perfect storm of interconnected factors that pressured costs. Figure 1 illustrates the interconnected set of challenges impacting the industry, how each challenge effects certain costs and how those impacts indirectly drive up costs for other factors.

Pandemic impacts
ripple through
construction cost
chain
FIGURE 1: Pandemic impacts on interconnected cost drivers Source: CBRE Strategic Investment Consulting, April 2022.

RISING DEMAND
Contractors taking on more
jobs, boosting profit margins

EXTENDING SCHEDULE
Extra days of labor, equipment,
overhead and other costs; higher
bids to price in uncertainty

LABOR SHORTAGES
Higher wages to attract
and retain enough talent,
overtime pay

MATERIALS

SHORTAGE
Panic buying and hoarding,
substituting with more
expensive products

TRANSPORT DELAYS
Disruptions along logistics
chain, high energy and
equipment prices

SPIKING INPUT
COSTS
Overbuying of materials,
attempts to limit labor costs
Item 3C - Page 93
8 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends This report examines the key trends
impacting the primary drivers of total
construction costs: materials, labor and
margins.

Shifts in prices for any one component do not
translate one-to-one into the final cost.

Materials generally represent the largest share
of total cost, followed by labor and margins,
but the weight of each component can vary
significantly based on a project’s location,
property type, timeline and other factors.

Construction costs
are the sum of three
main components
FIGURE 2: Construction cost drivers and outlook
Source: CBRE Strategic Investment Consulting, April 2022.

Materials
Labor
Margins
• Concrete, steel, lumber, energy and equipment are some of the key materials driving costs.
• Building size and type are major factors, since the super structure determines the type and amount of primary materials used. • Supply chains, tariffs and other logistical factors play a major role in the cost of materials, especially when demand is high.
• Supply chain disruptions will abate, but global labor and component shortages, inflationary pressures and
pandemic-related restrictions will weigh on production and logistics capacity.
• Long lead times and material shortages will continue in the short term.
• Materials escalation will remain well above average in 2022. • Labor costs are the wages and benefits paid to workers turning materials into finished products.
• Labor shortages pressure labor costs, either via increased wages to attract more workers or overtime to complete jobs when short staffed. • Labor shortages will likely persist in the near term, deepening wage pressure.
• Construction wage growth lags the national average, likely leading to higher construction labor costs in 2022, assuming steady construction demand.
• Margins represent the difference between the cost of materials and labor for a project, and the bid price received for it (i.e., profit). • Margins fluctuate heavily based on market demand. Contractors and subcontractors operate with higher margins when construction jobs are plentiful.
• Despite headwinds, construction demand is expected to increase as inflation eases, supported by pent-up demand and government initiatives.
• As contractor backlogs grow, margins should increase more significantly in 2022, pushing up costs.

Cost drivers
Outlook
Item 3C - Page 94
9 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends This index incorporates the three key cost components to provide a comprehensive view of construction costs that can also be statistically modeled to estimate future
escalation.

The index increased 11.5% in 2021, markedly above the 2%-4% historical trend. Although we expect improvement in supply disruptions and broader inflation in late 2022, the significant price increases already seen year-to-date are unlikely to reverse, and further cost pressures will remain. As a result, construction costs are expected to rise 14.1% by year-end 2022 before stabilizing to around 4% in 2023 and around 3% in 2024.

These projections assume that margins account for a
significant share of total construction costs and that
construction demand will remain robust through 2024. If weaker-than-expected economic growth causes construction activity to slow significantly, we would expect cost increases in 2022 to be roughly on par with 2021 and then fall quickly to the mid-2% range in 2023 and the mid-1% range in 2024.

Section 06 provides more detail on the CBRE Index’s historical performance and presents our projections within the context of other industry benchmarks.

New CBRE index
indicates that cost
escalation will
increase in 2022,
moderate in 2023
and 2024
Source: CBRE Econometric Advisors, CBRE Strategic Investment Consulting, April 2022.

FIGURE 3: CBRE Construction Cost Index, recent trend and forecast scenarios

2.8%

1.9%

11.5%

14.1%

4.3%

2.9%

12.5%

2.4%

1.2%
2019 2020 2021 2022 2023 2024
Year-over-year change Baseline forecast
Decreased demand forecast
Item 3C - Page 95
••• .. ·· -· .. ······ . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . ·. ·. . . . . . . . . . . . . . ••• 111 ····-•••••••
Construction Activity
02 Item 3C - Page 96
11 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Spending rebounded quickly after the pandemic-induced
slump of 2020.

By late summer 2020, spending volume began rising as
developers resumed projects that had been on hold and
tentatively started new ones. Growth in total construction spending accelerated in 2021 as COVID-19 restrictions were gradually lifted and developers boosted activity in response to both a backlog of delayed projects and new demand from households and firms that had accrued extra capital during the pandemic.

Commercial construction activity has grown at a slower rate than residential construction, as lingering economic
uncertainty has slowed the recovery, particularly for office. As of March 2022, commercial construction spending had not yet reached the pre-pandemic peak.

The increase in total spending is, in part, driven by inflating input prices (i.e., materials, labor) but, even when adjusted for inflation, spending is up 4.4% since January 2020.

Construction
spending surging
Item 3C - Page 97
12 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Note: Latest data as of March 2022, seasonally adjusted. Residential includes multifamily. Other nonresidential includes primarily education, civic and infrastructure-related spending.

Source: U.S. Census Bureau, CBRE Strategic Investment Consulting, April 2022.

FIGURE 4: U.S. historical construction spending by sector

1.5 1.7
$1.3
$1.4
$1.5
$1.6
$1.7
$1.8

J F M A M J J A S O N D J F M A M J J A S O N D J F M
2020 2021 2022
Trillions
16% increase
FIGURE 5: U.S. total construction spending since pandemic onset Note: Latest data as of March 2022, seasonally adjusted. Residential includes multifamily. Other nonresidential includes primarily education, civic and infrastructure-related spending.

Source: U.S. Census Bureau, CBRE Strategic Investment Consulting, April 2022. $0.0
$0.2
$0.4
$0.5
$0.7
$0.9
$1.1
$1.3
$1.4
$1.6
$1.8
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Trillions
Commercial Ot her non-r esidential Residential Total spendingnonresidential Item 3C - Page 98
~ -----------==---.-:::;;_---------- ---==-I - -
- --- - --- -- -- - -
- - -
13 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Significant upticks in housing starts and residential permits should lead to more construction demand in 2022 and 2023.

Completions of new residential units, both single-family and multifamily, trended downward from Q1 2021 to Q1 2022 due to a slowdown in starts during the depths of the pandemic.

However, the marked rise in starts over the past three quarters will translate into a boost in completions by late 2022 and into 2023.

The increase in residential construction will continue to push demand for materials and labor, intensifying competition and cost pressures across the construction industry in the near term. However, rising mortgage rates may take some of the heat out of single-family residential demand, potentially causing new home starts to slow in 2023.

Residential
projects driving
construction
volume
Item 3C - Page 99
14 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 7: U.S. residential construction by phase since pandemic onset Note: Latest data as of March 2022, seasonally adjusted. Residential includes multifamily.

Source: U.S. Census Bureau, CBRE Strategic Investment Consulting, April 2022.

FIGURE 6: U.S. historical residential construction by phase

0. 0

0. 5

1.0 1.5

2. 0

2. 5
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Completions Starts New permits
A major shift in starts tends
to generate a resulting
change in completions
about two years later
Millions

3.8 4.0

4.4 5.2

4.3 5.6

3.0 3.5

4.0 4.5

5.0 5.5

6.0 Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Completions Starts New permits
Millions
Note: Latest data as of March 2022, seasonally adjusted. Residential includes multifamily.

Source: U.S. Census Bureau, CBRE Strategic Investment Consulting, April 2022.

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15 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends In square footage terms, total commercial completions
across the four major property types slowed modestly in 2021, but will likely reach new highs in 2022.

Trends vary across the property types, however. Industrial construction activity is expected to remain elevated for the next three years, which may place continued pressure on demand for materials like concrete and steel.

Multifamily construction will also remain a major driver of construction demand, pressuring lumber prices. Though
completions will likely be somewhat more frontloaded in 2022, they are expected to exceed 2021 levels in each of the next three years.

Though office completions picked up in 2021 and should rise further in 2022 as projects underway come online, activity is expected to cool significantly thereafter as developers wait for more clarity on how corporate hybrid work plans impact
demand.

Commercial
construction
expected to
strengthen in
2022 before
easing
Item 3C - Page 101
16 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 8: Commercial construction completions by property type Source: CBRE Econometric Advisors, CBRE Strategic Investment Consulting, June 2022.

Office (sq. ft., millions) Industrial (sq. ft., millions) Retail (sq. ft., millions) Multifamily (units, thousands) 0 10
20 30
40 50
60 70
80 90
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Forecast
0 50
100
150
200
250
300
350
400
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Forecast
0 10
20 30
40 50
60 70
80 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Forecast
0 100
200
300
400
500
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Forecast
Item 3C - Page 102
17 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends

5.4%

4.4%

0.8%

9.4%

7.5%
-0.4%

6.1% 6.0%

3.6%

8.4%

4.9%

13.5%
To tal non-
residential
Insti tutional Office Industrial Re tail & other
comm ercial
Ho tel
2022 forecast 2023 forecast
Construction spending is expected to accelerate
significantly in the next two years amid increased
construction volumes and input prices.

While projected completions in square footage terms measures construction momentum by the approximate number and size of projects, projected spending reflects expectations for the cost of those projects.

The latest projections from the American Institute of Architects (AIA) Consensus Construction Forecast panel (survey
conducted in January 2022), which aggregates views from eight leading economic and industry forecasters, indicate significant growth for most nonresidential construction categories through 2023.

AIA expects spending growth in 2023 will generally outpace 2022’s level— in contrast to the opposite trend forecasted for sq. ft. construction completions— largely due to higher costs, as more spending is required to complete the same amount of space.

Strong commercial
spending growth
projected through
2023
FIGURE 9: AIA Consensus Construction Forecast, annual spending growth by sector
Source: American Institute of Architects, CBRE Strategic Investment Consulting, April 2022.

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18 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends AIA’s work-on-the-boards data through March 2022
indicates that architectural billings are increasing in the South and Midwest but decreasing in the West and
Northeast.

In recent months, growth has been strongest in the South, a change from 2021 when the Midwest led growth for all but one month of the year. As of March, the two regions moved back within one month of each other, as billings have softened year- to-date for the South and ramped up in the Midwest.

In the West and Northeast, growth had been trending slower since mid-year 2021, but both regions saw billings jump in March. In the West, billings returned to positive territory, but for the Northeast, the improvement meant only a smaller pace of decrease, with March marking the sixth consecutive month of fewer billings.

Building activity
not increasing
evenly across
regions
FIGURE 10: AIA Architectural Billings Index by region since pandemic onset Note: Data is a three-month moving average.

Source: American Institute of Architects, CBRE Cost Consultancy, April 2022. 20 25
30 35
40 45
50 55
60 65
Q4 '19 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Northeast South Midwest West
Increasing
Decreasing
Dec. 2019
Mar. 2020
Jun. 2020
Sep. 2020
Dec. 2020
Mar. 2021
Jun. 2021
Sep. 2021
Dec. 2021
Mar. 2022
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19 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Associated Builders and Contractors (ABC) reported that its Construction Backlog Indicator for the U.S. was up slightly at 8.3 months in March 2022, up 0.5 months from March
2021.

Because the backlog identifies the amount of construction activity currently in the pipeline, higher backlogs generally indicate greater construction demand.

However, only in the South was the backlog up notably from March 2021 (1.4 months). Backlogs for the West were down 1.1 months, while the Northeast and Midwest were up modestly (0.5 and 0.2, respectively).

Nationwide, the current backlog is down slightly from pre- pandemic levels, largely due to lack of available labor and materials, but has been largely stable over the past year.

Survey respondents also expect growth in profit margins in the coming months, indicating that contractors feel construction demand is strong enough to offset rising costs.

Stable backlogs
indicate healthy
construction
demand despite
rising costs
FIGURE 11: ABC Construction Backlog by region since pandemic onset Note: Data is three-month moving average.

Source: American Institute of Architects, CBRE Cost Consultancy, April 2022.. 5 6
7 8
9 10
11 12
Dec. 2019
Mar. 2020
Jun. 2020
Sep. 2020
Dec. 2020
Mar. 2021
Jun. 2021
Sep. 2021
Dec. 2021
Mar. 2022
Midwest Northeast South West
Months
Item 3C - Page 105
20 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Key industry sentiment indicators show construction
conditions have significantly improved from 2020 lows and are up by an average of 12% from pre-pandemic norms.

Engineering News-Record’s Construction Confidence Index, which tracks the sentiment of executives at major construction companies on market conditions through the next 18 months, fell in both Q3 and Q4 2021, but ticked up one point in Q1 2022.

The Dodge Momentum Index measures the initial report for nonresidential projects in planning and is a leading indicator of construction spending. As of March 2022, the index was down slightly from highs in 2021 but well above pre-pandemic averages.

The AIA’sArchitecture Billings Index is an economic indicator for nonresidential construction activity, with a lead time of approximately 9-12 months. As of March, the index had
returned to roughly match the rapid growth pace in mid-2021 with most architectural firms reporting steady growth in both billed projects and new contracts.

Leading indices
indicate
construction
market growth
FIGURE 12: Summary of major industry leading indicators Source: Engineering News-Record, Dodge Data and Analytics, American Institute of Architects, CBRE Cost Consultancy, CBRE Strategic Investment Consulting, April 2022. (Rating above 50 is
considered a growing
market)
Q4 2019
52 Q2 2020
Pandemic-era low
38 Q1 2022
61 (Index 2000=100)
Dec. 2019
156.2
June 2020
Pandemic-era low
120.5 Mar. 2022
166.9
(Ratings above 50
indicate an increase
in billings/contracts)
Dec. 2019

52.5/53.4
June 2020
Pandemic-era low

29.5/27.6 Mar. 2022
58/60.5
Engineering News-
Record Construction
Industry Confidence
Index
Dodge Data &
Analytics Momentum
Index
AIA Architecture
Billings Index
Billings/design contracts
Item 3C - Page 106
Supply Chain Disruption
03 Item 3C - Page 107
22 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Skyrocketing global shipping costs, combined with a
backlog of domestic freight operations, are causing a
shortage of goods and materials, inflating costs.

Labor shortages in rail yards, manufacturing plants, warehouses and trucking companies are exacerbating delays at U.S.
seaports. The American Trucking Association reported in October 2021 that the industry is short about 80,000 drivers and they expect that to increase to 160,000 by 2030.

To attract more drivers, the sector has boosted wages, but the recent increase in demand for transportation services has spurred the need for even more drivers. Barriers to entry for new drivers, like licensing, are making it more difficult for the industry to respond quickly to demand.

Logistics issues
causing major
delays across the
supply chain
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23 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 14: Global market rate for 40-foot containers
Source: U.S. Bureau of Labor Statistics, Producer Price Index, U.S. Department of Transportation, CBRE Strategic Investment Consulting, April 2022.

FIGURE 13: General freight trucking, cost vs. tonnage changes Source: Freightos Baltic Index (FBX), Global Container Freight Index, CBRE Strategic Investment Consulting, April 2022. 90 100
110
120
130
140
150
160
2020 2021 2022
General Freight Trucking Price Index Truck Tonnage Index Freight trucking costs have jumped significantly
since recovering from the pandemic, but the
amount of tonnage transported is still below the
pre-recession peak
Index (Dec. 2019=100)
$1.5
$4.4
$9.4
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
April 2020 April 2021 April 2022
Thousands
Item 3C - Page 109
24 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The global supply chain remains fragile, adding complexity and uncertainty to construction projects.

Supply chain issues are being exacerbated by steep rises in energy costs, which impact logistics dynamics, and increasing construction activity, which drives up competition for scarce materials.

Lead times may vary on a regional and project basis, but Figure 15 provides a snapshot of typical conditions for several key construction materials currently facing availability issues. These estimates represent aggregations from multiple active general contractor firms as of April-May 2022.

Sky-high lead
times for many
critical materials
Item 3C - Page 110
25 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 15: Typical lead times for key materials
Note: Lead times reflect aggregated information from multiple major general contracting firms and are current as of April -May 2022.

Source: CBRE Econometric Advisors, CBRE Strategic Investment Consulting, April 2022.

Material Current lead time Two-year change
Paint 2-3 weeks +200%
Steel beams & decking 10-14 weeks +75%
Drywall & metal studs 14-16 weeks +600%
Lighting & controls 14-20 weeks +100%
Wood doors & frames 18-20 weeks +233%
Open web joists 18-30 weeks +125%
Aluminum storefront glazing 16-32 weeks +300%
Appliances 20-30 weeks +400%
Electrical panels 30-40 weeks +433%
Roofing membranes 35-45 weeks +800%
HVAC equipment 36-50 weeks +250%
Roofing insulation 40-50 weeks +667%
+40 weeks
Roofing insulation
Lead times for roofing insulation (along with
other roofing materials), are currently among
the longest in the entire construction industry.

Lockdowns in China have significantly reduced
manufacturing output for HVAC equipment,
while hot weather continues to boost demand.

Semiconductor shortages are also contributing
to delays.

Shutdowns and strained labor pools in
manufacturing and shipping have lead to a major
backlog in the supply of wood doors, as well as
hardware and hollow metal door frames.
+36 weeks
HVAC equipment
+18 weeks
Wood doors & frames
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26 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Import prices are rising much faster than export prices for building materials, with imported building materials more than twice as expensive as exported materials in late 2021.

Import costs will be also be affected by recent U.S. tariffs on Canadian softwood lumber. These administrative changes, alongside continued growth in residential construction volume, could cause contractors to face higher prices.

Tariffs, supply
chain issues put
additional pressure
on imported
materials prices
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27 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 17: Spread between import and export price indices, select building materials Note: Selected building materials include lumber and wood, construction glass materials, and non -wood or glass materials such as stone. Iron and steel PPI export data unavailable prior to December 2020.

Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

FIGURE 16: Producer Price Index growth through March 2022, key construction commodities

76.1%

42.7%

66.1%

67.9%

98.5%
0% 20% 40% 60% 80% 100% 120%
Export
Import
Export
Import
Export
Import
Iron and steel Lumber and w ood
Selected building
materials
Two-year change On e-year change
Tariffs and shipping costs have
driven import prices up relative to
export prices for lumber and wood
0 10
20 30
40 50
60 70
80 2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
The import price index for building
materials exceeded the export
index by more than 70% for several
months in the summer of 2021
Note: Data is trailing 12-month average. Latest data as of March 2022. Spread calculated as the import PPI value minus the export PPI value for the “select building materials” commodity grouping.

Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

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28 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Tariffs on Canadian and
EU imports and exports
The U.S. Commerce Department increased
tariffs on Canadian softwood lumber from

8.99% to 17.99% in November 2021, but
temporarily dropped them to about 12% in
early February 2022 as negotiations continue.

The U.S. government removed previously
implemented tariffs on aluminum and steel
imported from the EU in late 2021 to help
alleviate material spikes seen earlier in the
pandemic.

In February 2022, the U.S. and Japan changed
the 25% tariff on steel to a tariff-rate quota,
which means higher duties will be paid on steel
after imports reach a specified threshold. The
deal will make up to 1.25 million metric tons of
steel duty-free.

A U.S. Chamber of Commerce survey of
construction contractors in Q4 2021 revealed
that nearly half of contractors foresee steel
and aluminum tariffs, as well as any new
material and equipment tariffs, having a high to
very high impact on their business in the next
three years.

Global events
compounding
supply chain
disruption
War in
Ukraine
While the direct impact of the war in Ukraine is
still emerging, its effect on shipping costs and
petroleum-based products will most likely
continue to be felt in the coming months.

Sanctions on Russia have disrupted markets
for several key commodities. Nickel prices were
four times higher in March 2022 than they
were at the beginning of the year, as Russia
produces 17% of the global high-purity nickel
supply. This is also impacting stainless steel
products, as more than two-thirds of global
nickel production is used to produce stainless
steel.

Russia is also a major producer of palladium
(40% of the entire market last year), which is
used in semiconductor production. Ukraine
currently supplies the U.S. with 90% of the
semiconductor-grade neon gas it uses in
chipmaking.

Ongoing COVID-19 concerns
and restrictions
While federal, state and local governments
have lifted most of the COVID-19 restrictions
that hindered construction and supply chains,
the industry continues to grapple with ongoing
policies, particularly outside the U.S., and the
possibility of disruptive new variants and
spikes.

The U.S. Chamber of Commerce survey
showed that two-thirds of contractors are
experiencing COVID-19-related project delays,
most notably due to impacts on the supply
chain and worker shortages. This largely
overlapped with the spike in cases from the
omicron variant, which has been spreading
more slowly as of May 2022.

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29 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The rapid inflation year-to-date has been particularly
pronounced for energy commodities.

Prices for refined petroleum and gasoline have increased dramatically in 2022, adding pressure on the supply chain and driving up the cost of moving and producing materials for construction. With these increases, petroleum-based products such as plastics and asphalt will continue to face challenges to maintain current levels.

Additionally, natural gas is up 57% over a two-year period, impacting the bottom line of many operators and builders.

Electric power is up 14% over the past two years and has increased significantly in recent months.

Energy prices
impacting the
building industry
significantly
Item 3C - Page 115
30 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 19: U.S. average regular retail gasoline price since pandemic onset Source: U.S. Bureau of Labor Statistics, Producer Price Index, CBRE Strategic Investment Consulting, April 2022.

FIGURE 18: Producer Price Index growth through March 2022, select energy commodities
14%
45%
86%
144%
146%
0% 50% 100% 150% 200%
Electric power
Utility natural gas
All fuels/energy
Gasoline
Refined petroleum
Two-year change On e-year change
Note: Latest data as of June 13, 2022. For prior years, June data reflects average for the entire month.

Source: U.S. Energy Information Administration, CBRE Strategic Investment Consulting, April 2022. $2.72
$2.08
$3.06
$5.01
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2019 2020 2021 2022
Per gallon
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31 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Manufacturers are having trouble filling orders amid high demand and supply chain challenges, and materials
suppliers are raising prices significantly.

For example, there has been a steep rise in unfilled iron and steel product orders since the onset of the pandemic, with the dollar value of unfilled orders at nearly $19 billion, as of early 2022.

Building material and supplies dealers have also raised prices as they struggle to obtain adequate supply to keep up with demand.

Supply chain
issues impacting
critical service
providers and
material
manufacturers
Item 3C - Page 117
32 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Note: Not seasonally adjusted.

Source: U.S. Census Bureau, CBRE Strategic Investment Consulting, April 2022.

FIGURE 20: Manufacturers' unfilled orders, iron & steel mills Note: Not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022. -30%
-20%
-10%
0%
10%
20%
30%
40%
$11
$12
$13
$14
$15
$16
$17
$18
2020 2021 2022
Year-over-year change (R) Unfilled orders (L)
Billions
FIGURE 21: Producer Price Index: building material and supplies dealers -10%
0%
10%
20%
30%
40%
50%
60%
140
160
180
200
220
24 0
260
280
2020 2021 2022
Year-Over-Year Change (R) PPI Value (L)
PPI value
PPI value (L)Year-over-year change (R)
Item 3C - Page 118
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Labor Market Trends
04 Item 3C - Page 119
34 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Modest residential home building in the
aftermath of the late 2000s housing market
crash prolonged the job recovery for the
construction sector and prompted many
workers to move into other industries.

Construction employment peaked at 7.7 million
in April 2006, but employment levels tanked
when the housing market crashed, reaching a
low of 5.4 million in January 2011.

In contrast, after an initial steep decline in
employment caused by the pandemic,
construction jobs returned quickly, exceeding
the February 2020 pre-pandemic peak by
4,000 jobs in March 2022.

Strong demand for residential construction
should continue to push up construction
employment if employers are able to find
appropriate workers in an extremely tight labor
market, though many have trouble doing so. A
recent U.S. Chamber of Commerce study
revealed 45% of contractors reported turning
down work due to skilled labor shortages.

Construction jobs
still below pre-
global financial
crisis levels
Note: Latest data as of March 2022. In the chart’s dotted line, the private employment growth rate since January 2006 was applied to the construction employment level in January 2006 to show how construction jobs would have grown if the sector mirrored the pace of the overall private sector.

Source: U.S. Bureau of Labor Statistics, CES, CBRE Strategic Investment Consulting, April 2022.

FIGURE 22: U.S. historical construction employment
Millions

7.7 7.6 7.6

5.0 5.5

6.0 6.5

7.0 7.5

8.0 8.5

9.0 2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Pr e-GFC peak Pr e-CO VI D peak
Construction jobs (actual) Adj. construction jobs (at total private rate) Employment is back above
the pre-pandemic peak, but
still below the 2006 peak
If construction kept pace with
private employment, jobs would
have fully recovered in 2014
Item 3C - Page 120
.... ..
- -
.. ... ....
...... . . . .. ..
35 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The unemployment rate for construction workers remains
higher than the overall unemployment rate but has come
down dramatically and is on pace to return to pre-recession levels.

The recent growth of the construction labor force is keeping the unemployment rate elevated since it takes time for job seekers to find the right employer, but labor force growth, combined with declining unemployment, is a healthy sign for a sector that is poised to remain tight in the coming years.

Labor force growth still lags previous periods when the labor market was tightening, and the recent uptick may not be enough to fill construction job openings in 2022.

Construction trade organizations anticipate that wages will continue to grow in 2022 amid a tightening labor market. Bid costs are expected to increase to maintain margins and keep up with wage inflation.

Construction
unemployment
remains elevated,
but people are
returning to the
labor force
Item 3C - Page 121
36 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 24: March construction unemployment rate and labor force sizeFIGURE 23: Historical construction unemployment rate and labor force growth -15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Unemployment rate Labor force growth
A tightening labor market has
historically led to an increase in
the construction labor force

5.2%

6.9%

8.6%

6.0%

9.1 9.2

9.3 9.4

9.5 9.6

9.7 9.8

9.9 10.0

10.1 0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2019 2020 2021 2022
Millions
Unemployment rate (L) Labor force (R)
Note: Latest data as of March 2022, not seasonally adjusted. Construction employment indicators fluctuate month to month due to significant seasonal effects.

Source: Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

Note: Construction employment indicators fluctuate month to month due to significant seasonal effects. Because seasonally adjusted data is unavailable for these indicators, Figure 24 shows only the most recent month for each year historically.

Source: Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

Item 3C - Page 122
•
•
- -
• - -
-
•
-
- -
- -
 •
37 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The labor shortage is impacting most sectors of the
economy, including construction.

The construction job opening rate (monthly openings as a share of employment) jumped nearly two percentage points from March 2020 to March 2022. Though demand for labor
increased, the hiring rate (monthly hires as a share of employment) declined slightly, indicating employers are finding it difficult to fill positions. Construction typically has a high turnover rate, meaning companies need to hire at a higher rate than most private businesses, and typically that number increases when job openings are up.

This trend is pervasive throughout the economy, particularly in the private sector, though hiring has improved slightly. The extremely tight private sector in 2022 will make construction hiring more challenging, especially for positions with low barriers to entry where construction companies compete
fiercely with employers from other private sectors.

As of March 2022, there were 396,000 construction job
openings, an 18% increase from 2021. There were 10.5 million private sector openings, up 37% year-over-year. Openings for both sectors are the highest on record, going back to 2001.

Job openings
accelerating
faster than
companies
can hire
FIGURE 25: Job opening and hiring rates, construction sector vs. total private employment
Note: Job opening and hiring rates are calculated by dividing the number of job openings (or hires) by the sum of employment plus job openings (or hires) then multiplying by 100.

Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS), April 2022.

3.0 5.3

3.9 3.8

4.9 5.2

7.5 4.9
0 1
2 3
4 5
6 7
8 Job openings Hires Job openings Hires
Construction sector Total private sector
Mar-20 Mar-22
Job openings increased
significantly but hiring
isn't keeping up
Trends in the
overall private
sector are
placing added
pressure on firms
hiring workers
whose skills are
more transferable
to other sectors
# of openings/hires per 100 jobs
March 2020 March 2022
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38 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Degrees awarded for construction trades fell significantly in the mid-2010s, but climbed back to a record high in 2020.

This is especially important as the sector’s workforce ages. In 2006, just prior to the Great Recession, workers under the age of 25 made up a larger share of the construction workforce than workers 55 and older. As of 2021, those figures have flipped, with workers 55-and-up now accounting for about one in five construction workers, nearly double the share of those under 25 years old.

Proactive education and recruitment efforts championed by industry groups, alongside the relatively high pay for skilled trade construction jobs, are helping attract younger workers to the degree and certificate programs in the field. This will be critical in relieving some hiring pressure but will need to accelerate to fully offset the large share of the existing workforce nearing retirement age.

In a recent U.S. Chamber of Commerce survey, 91% of
contractors reported moderate to high levels of difficulty finding skilled workers, and almost all expect it to stay the same or get worse in the next six months, underscoring the importance of training skilled professionals.

Talent pipeline
for construction
trades back at
historic highs
Item 3C - Page 124
39 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 27: Share of construction workforce by age group, 2006 vs. 2021 Note: This table presents data collected from Title IV institutions in the United States. Prior to 2009-10, the data include only Title IV primarily postsecondary institutions.

Source: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Completions component final data (2001-02 - 2018-19) and provisional data (2019-20).

FIGURE 26: Degrees and certificates awarded for construction trades 10 12
14 16
18 20
22 24
26 28
2003-04
2004 -05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
Thousands
After a lull in workers seeking credentialing
in skilled construction trades, that figure has
picked up over the last ten years but still
lags the coming demand for skilled labor
Source: U.S Census Bureau, IPUMS, CBRE Strategic Investment Consulting, April 2022. 15%
12%
15%
11%
15%
11%10%
20%
11%
19%
11%
19%
0%
5%
10%
15%
20%
25%
<25 55+ <25 55+ <25 55+
General Specialist Total
2006 2021
The share of workers
age 55+ in construction
has nearly doubled from
2006 to 2021
Item 3C - Page 125
 
40 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The construction sector has historically relied on foreign- born labor, with immigrants accounting for three out of 10 construction workers.

With labor force participation falling across the U.S. even prior to the pandemic, immigration is increasingly critical to fill the labor gap, especially for low barrier-to-entry occupations within construction. However, U.S. net migration began falling in 2017 due to federal policy changes and hit a record low in 2020 due to pandemic conditions.

According to Oxford Economics, immigration is expected to remain well below the levels of the previous 30 years until the latter half of the 2020s. This will put an increasing strain on employers who are already struggling to find enough employees amid a tight and shrinking labor pool.

Slow international
immigration
straining labor pool
Item 3C - Page 126
41 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 29: Share of foreign-born workers by occupation, 2021 Source: Oxford Economics derived from U.S. Census Bureau data, April 2022.

FIGURE 28: Net migration to the U.S.
31% 29%
30% 18%
General construction Specialist construction
All construction All occupations
Source: U.S. Census Bureau, IPUMS, CBRE Strategic Investment Consulting, April 2022. 0 0. 2

0. 4

0. 6

0. 8
1 1.2

1.4 1.6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Actual Est Forecast
Historically low net migration to
the U.S. for nearly a decade will
mean little relief for a shrinking
labor force, especially for the
construction sector which relies
on foreign-born labor.

Millions
Item 3C - Page 127
42 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Construction wage growth is accelerating, which will be important to attract and retain the labor required to fill demand for new construction, but rising inflation is
outpacing wage gains.

During the pandemic construction jobs fell substantially but recovered quickly. The net 1% growth from December 2019 to March 2022 exceeded gains for the overall private sector.

However, construction wage growth has lagged overall wage growth during this period, particularly during the early pandemic months. Moreover, construction wages also grew at a slightly slower pace during the two years prior to the pandemic, despite construction employment increasing at twice the pace of the overall private sector during that time.

As of March 2022, year-over-year construction wage growth was 4.4%, lagging both the private sector (5.2%) and the Consumer Price Index (7.9%), which could create challenges for attracting and retaining construction labor, especially for positions that compete for workers with a broad range of sectors.

While the average hourly wage is the primary driver of labor costs, the number of hours worked, especially overtime hours, is also important. As of March 2022, the average weekly hours for nonresidential construction employees reached 41.1, the highest since the Bureau of Labor Statistics began keeping track in 2006, and 18% higher than the overall private sector.

Construction
employment
mostly recovered,
but wages not
keeping up
FIGURE 30: Construction employment and wage change by period Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting April 2022. 3%
6% 6% 5%
-16%
-13%
6%
2%
19% 17%
6% 6%
0% 1%
12%
9%
-20 %
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
To tal private Construction To tal private Construction Jobs Wages
Pr e-Pandemic
(Dec. '17-Dec. '19)
Early Pandemic
(Dec. '19-Apr. '20)
Re co ve ry
(Apr. '20-Mar. '22)
To tal pandemic
(Dec. '19-Mar. '22)
Wage growth stalled during
the early pandemic but has
accelerated in the recovery
Pre-pandemic Early pandemic
Item 3C - Page 128
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43 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The average hourly wage for a unionized construction
worker was 39% higher than a non-union worker in 2021, but the gap is shrinking and membership is declining.

Union membership fell dramatically from 2001 to 2021, though union membership in the construction sector remained higher than the 6.1% private sector average.

The union wage premium has been shrinking steadily since the mid-1980s, when union wages were 69% higher than non-union wages. Union workers even took a 1.2% pay cut in 2020 while non-union wages grew 8.3%. Non-union workers have been the primary drivers of rising construction labor costs during the pandemic recovery, as union wages are much more likely to have been previously negotiated in a multi-year agreement.

Locations and occupations with greater union coverage will likely see higher labor costs due to the union wage premium, but are also likely to see less wage inflation in the near future, making those costs slightly more predictable.

Union workers
receiving higher
wages, but
membership is
declining
Item 3C - Page 129
44 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 32: Union membership and coverage, construction sector Source: Bureau of Labor Statistics, Union Stats, CBRE Strategic Investment Consulting April 2022.

FIGURE 31: 2021 construction wages by union affiliation $37.45
$26.94

3.6%

9.6%
2%
3%
4%
5%
6%
7%
8%
9%
10%
$0
$5
$10
$15
$20
$25
$30
$35
$40
2021 Average Hourly W age % Growth 2019-2021
During the
pandemic, union
wages grew at about
one-third the pace of
non-union wages.
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
2001 2011 2021
Membership Coverage
Union coverage, which includes
workers covered by a collective
bargaining agreement, is falling less
dramatically than full membership
Union wage Non-union wage
Average hourly wage Two-year wage growth
Source: Bureau of Labor Statistics, Union Stats, CBRE Strategic Investment Consulting April 2022.

Item 3C - Page 130
•
-
-I ~
•
 •  
45 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Wage increases and job growth correlates moderately when comparing major metropolitan areas in the U.S., with growth in both measures most notable in secondary, Sun Belt and Mountain West metro areas.

Large metros like New York were less likely to see a rebound in job growth, likely due to lower demand for residential
construction amid pandemic aftereffects, but some large metros like San Francisco had above average wage growth despite lagging job growth. Metros with strong wage growth but slow job growth could indicate pent up labor demand.

Metros like Austin, Nashville, Boise and Sacramento have seen strong demand for residential construction since the pandemic, which is likely driving both job and wage growth.

Job growth most
dramatic in
metros with
strong wage
increases
Item 3C - Page 131
46 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 34: Change in construction wages, top and bottom 10 metro areas, Q4 2019-Q4 2021
Note: Among top 50 MSAs by number of construction employees as of March 2022.

Source: Bureau of Labor Statistics, Oxford Economics, CBRE Strategic Investment Consulting, April 2022.

FIGURE 33: Change in construction jobs, top and bottom 10 metro areas, March 2020-March 2022
Note: Among top 50 MSAs by number of construction employees as of March 2022.

Source: Bureau of Labor Statistics, Oxford Economics, CBRE Strategic Investment Consulting, April 2022. 13%
12%
12%
11%
9%
8%
8%
7%
4%
3%
0%
-1%
-2%
-4%
-6%
-8%
-9%
-9%
-11%
-11%
-15%
Boise, ID
Salt Lake City, UT
Nashville, TN
Jacksonville, FL
St. Louis, MO
Raleigh, NC
Sacramento, CA
Kansas City, MO
Austin, TX
Columbus, OH
Top 50 average
Las Vegas, NV
San Francisco, CA
Milwaukee, WI
Ne w York , NY
San Antoni o, TX
Pittsburgh, PA
Houston, TX
Baton Rouge, LA
Ok lahoma City, OK
Midland, TX
22%
19%
15%
15%
15%
14%
14%
14%
14%
14%
11%
9%
8%
8%
8%
8%
7%
6%
5%
3%
2%
St. Louis, MO
Nashville, TN
Portland, OR
Sacramento, CA
Boise, ID
Austin, TX
Riverside, CA
Ne w Orleans, LA
Orlando, FL
Miami, FL
Top 50 average
Birmingham, AL
Midland, TX
Ne w York , NY
Houston, TX
Chicago, IL
Richmond, VA
Omaha, NE
Atlanta, GA
Baton Rouge, LA
Cincinnati, OH
Item 3C - Page 132
J I
I
I
I
I I
I I
I
l
~ I
I
•
-
-
Impact on Materials Costs
05 Item 3C - Page 133
48 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Price growth for goods and services used by construction companies has been above 15% year-over-year since early 2021 and is accelerating in 2022.

Input costs— the price paid for all goods and services, excluding labor and capital investment, used by construction firms— for new nonresidential construction were up 42.5% from March 2020 to March 2022, after falling briefly during the early stages of the pandemic. Construction output, the price charged by construction firms for completed projects, has also risen sharply, but has lagged input prices by about 6-9 months as contractors gradually adapt to new conditions and pass on more of their costs.

Given that input prices are sharply rising again in 2022, output prices for construction services are likely to follow
suit and increase throughout the year.

Construction
material prices rose
sharply in early
2021, poised to keep
increasing in 2022
Item 3C - Page 134
49 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends FIGURE 36: Input vs. Output Price Index, new nonresidential construction Note: Latest data as of March 2022.

Source: Bureau of Labor Statistics, Producer Price Index, CBRE Strategic Investment Consulting, April 2022.

FIGURE 35: Producer Price Index: inputs to construction, year-over-year change -5%
0%
5%
10%
15%
20%
25%
30%
2019
2020
2021
2022
90 100
110
120
130
140
150
160
2015
2016
2017
2018
2019
2020
2021
2022
Ou tput Input
Input prices soared in early 2021, which
eventually led to a sharp increase in the final
cost of new construction in late 2021
Note: Latest data as of March 2022, Index benchmarked to 100 in Dec. 2015.

Source: Bureau of Labor Statistics, Producer Price Index, CBRE Strategic Investment Consulting, April 2022.

Item 3C - Page 135
nnnnn _r,M _nnn n ..... - u
50 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Based on the Producer Price Index (PPI) basket of all goods used in construction (excluding energy), prices were up 41% in March 2022 from March 2020.

The cost of steel mill products, some plastic piping, and softwood veneer and plywood have more than doubled since March 2020. Prices for some materials, like ready-mix concrete, which makes up 10% of the overall goods index, have not risen as dramatically and have kept the figure slightly down, as have other non-metallic and non-wood commodities.

Still, inflation has been abnormally high for essentially all construction materials, since the onset of the pandemic and, for most materials, most of the price change has happened in the past year (lumber and softwood are the major exceptions, with steep price hikes in 2020 as well).

Iron and steel prices have inflated dramatically over the past two years, but prices began to soften in late 2021. Since prices peaked in November 2021, the PPI for iron and steel has fallen 8% through March 2022.

Key inputs like
iron, steel and
lumber logging
major increases
FIGURE 37: Price inflation for select construction commodities, March 2020-March 2022
Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting April 2022. 10%
11%
12%
17%
23%
25%
30%
23%
28%
42%
42%
54%
89%
101%
28%
31%
65%
128%
36%
101%
136%
41%
Ready-mix concrete
Glass
Construction sand, gravel and crushed stone
Prec ast concrete produc ts
Insulation materia ls
Asph alt felts and coatings
Gyp su m
Pai nts
Ot her pla stic c onst ruction pr oducts
Thermoplastic resins and plastics ma terials
Sh eet m etal p ro ducts
Fabricated stru ctu ral metal
Iron and steel
Steel mill produ cts
Air conditionin g and refrigeration equipment
Fabricated metal pipe, tube, and fitting
Copper and copper alloy sheet, strip and plate
Pla stics sewer, stormdr ain, and water mai n pipe
Gen eral millwo rk
Lu mber
So ftwo od veneer and plywo od
All goo ds used for con struction (exclu ding energy)
No nmetallic m aterials Ot her Metals
HVAC &
utilities Wood
Two-year change One-year change
Iron, steel and lumber
products are far
outpacing price
inflation of most other
construction materials
Plastics sewer, storm drain and water main pipe
Fabricated metal pipe, tube and fitting
Item 3C - Page 136
 
51 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Lumber and wood
The boom in residential construction and do-it-yourself renovations through the pandemic pressured lumber suppliers struggling to rebuild sawmill capacity amid rising demand.

Coupled with import regulations and tariffs, which remain in flux, as well as transport challenges, this has caused major price spikes and volatility that will likely persist in the near term.

Iron and steel
The U.S. has softened its tariffs on EU steel to help relieve skyrocketing costs and demand. Delayed shipments and global supply chain issues will continue to drag on the supply side of steel products while U.S. steel factories are unable to fully sustain the current demand.

Concrete
Concrete prices tend to be steadier than other construction inputs, but even concrete has seen unusually steep inflation since the start of 2021 as long lead times, strained
manufacturing and labor shortages drive costs upward. With a new infrastructure bill signed and construction beginning this year, cement and concrete commodities are expected to be in even higher demand moving forward.

Labor, public health,
tariffs and demand
swings affecting
commodity pricing
FIGURE 38: Historical price inflation for major construction commodities Note: Latest data as of March 2022.

Source: U.S. Bureau of Labor Statistics, Producer Price Index, CBRE Strategic Investment Consulting, April 2022.
100
150
200
250
300
350
400
450
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Lumber and wood Iron and steel
Concrete products All commodities
The severity of price spikes in 2021-
2022 is unprecedented in in the
roughly 100-year history of the PPI
Item 3C - Page 137
52 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Prices for materials have been extremely volatile since the onset of the pandemic, with largely unprecedented rates of inflation in 2021.

In a Q4 2021 survey from the U.S. Chamber of Commerce,
essentially all (97%) contractors reported that material cost fluctuations have had a moderate to high impact on their business. Respondents had the highest concerns about the prices of steel and wood products.

In general, materials prices will likely continue to rise in the near term. Although the pace of inflation is largely easing (as seen for most of the commodities highlighted in Figure 39) and expected to continue to cool, most prices will not reset to pre- pandemic levels. Impacts will vary by material and depend on several factors. For heavily imported goods, like lumber and iron, prices depend on transportation costs (i.e., fuel) and ongoing tariff negotiations, while other materials like stainless steel could see ongoing impacts from the Russia-Ukraine conflict.

Source: U.S. Bureau of Labor Statistics, Producer Price Index, April 2022.

Costs for most
materials are
inflating rapidly,
but a few are
starting to decline
FIGURE 39: Recent price changes for key construction materials through March 2022
Material Last 6 months Last month
Lumber 57% 4%
General millwork 11% 1%
Fabricated structural metal 11% 0%
Machinery and equipment 8% 1%
Sand, gravel and stone 6% 1%
Gypsum 6% 2%
Ready-mix concrete 4% 0%
Thermoplastic resins and
plastics materials -7% -2%
Iron and steel -4% -1%
Item 3C - Page 138
Implications for Construction Costs
06 Item 3C - Page 139
54 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Industry professionals use a variety of
construction cost indices to track cost
escalation over time, and estimates vary
based on what the index is attempting to
measure.

Major indices can be grouped into two broad
types: those based on bid costs (also referred
to as “whole building” or “selling price” indices)
and those based on input costs (sometimes
referred to as “measures of inflation”).

Both types of indices are useful, depending on
the questions and context. The main
differentiator between the two types is
whether they incorporate some measure of
contractor profit margins. For both types, the
level of detail and weighting of index
components, as well as the number of
geographies represented, varies considerably.

How should
construction costs
be measured?
FIGURE 40: Comparison of construction cost indices
Source: CBRE Strategic Investment Consulting, April 2022.

Tracks the expenses incurred
to complete construction
projects
Labor and/or materials
Most useful for those setting
the prices of construction work
(e.g., contractors)
Do not capture the full cost of
construction
Engineering News-Record (ENR),
RSMeans, Inputs PPI
Tracks the final bid cost of
construction projects (i.e.,
selling prices)
Labor + materials + margins
Most useful for those financing
and selling new construction
(e.g., developers)
May be less accurate or lag during
periods of abnormal volatility in
input prices or demand
Turner Construction, Rider Levett
Bucknall (RLB), Mortenson, Final
Demand PPI
Bid cost indices Input-based indices
Primary
relevance
Components
Measurement
Potential
limitation
Key examples
Item 3C - Page 140
55 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Input-based indices do not fully capture construction
costs and tend to underestimate escalation rates relative to bid cost indices, which provide the most comprehensive view of how builders experience final costs.

During periods of price stability, bid cost and input indices produce similar escalation estimates. However, bid costs usually increase faster than input costs during periods of heightened construction activity as contractors boost
margins (note the wider spreads between averages 2015 and 2019).

Historically, most indices of either type have shown
construction costs rising roughly 2%-4% per year, and the differences between major bid cost indices and input cost indices has been less than one percentage point over the past 10 years.

Input costs lagged
bid costs over the
prior cycle but not
dramatically
FIGURE 41: Average annual construction cost escalation, major indices by type
Sources: BLS, Engineering News-Record, Turner Construction, Rider Levett Bucknall, Mortensons, CBRE Cost Consultancy, CBRE Strategic Investment Consulting, April 2022. 0%
2%
4%
6%
8%
10%
12%
14%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Bid cost indices Input cost indices
Bid cost 10-year average Input cost 10-year average
Input-based indices typically
estimate more gradual escalation
than bid cost-based, except in
periods of significant inflation

3.6%

4.5%
Item 3C - Page 141
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56 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends The spread in escalation rates reported by major indices was wider in 2021 than ever before, owing to significant measurement challenges.

During periods of high inflation or volatility, bid cost indices may lag input-based indices, as contractors react gradually to new market conditions or struggle to make accurate
estimates in the face of market uncertainty. Despite all the indications that conditions are not the same as in recent years, some major bid cost indices, like Turner and Rider Levett Bucknall (RLB), reported 2021 escalation as essentially on par or just modestly above the five-year pre-pandemic average.

Meanwhile, all major input indices show a dramatic departure in 2021 from the pre-pandemic average. Unless contractors are willing to absorb the entirety of these input price hikes, bid cost indices should rise in 2022 as contractors recoup costs and protect themselves against future cost growth.

Bid cost indices
struggled to capture
the realities of 2021
FIGURE 42: Comparison of construction escalation, major industry benchmarks
Sources: BLS, Engineering News-Record, Turner Construction, Rider Levett Bucknall, Mortensons, CBRE Cost Consultancy, CBRE Strategic Investment Consulting, April 2022.

21.5%

16.8%

13.1%

12.2%

9.2%

7.4%

7.4%

5.0%
0% 5% 10% 15% 20% 25%
Mortensons
PPI Non-Res Construction (Inputs)

ENR BCI
PPI Non-Res Construction (Final)
RSMEANS Non-Res Inputs

ENR CCI

RLB NCCI
Turner BCI
Year-end 2021 2014-2019 average
Bid cost index
Input-based index
Item 3C - Page 142
 
57 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends We set out to create a new index that incorporates
construction demand but was also more responsive to input prices. The goal is to capture both the full picture of construction costs and the impact of rapid price changes.

In 2021, the CBRE Construction Cost Index increased by 11.5%.

This increase was in the middle of the range indicated by the major indices in 2021 (see range in Figure 42). The two prior years also show how the index balances swings in costs. In 2019, the index reflected a tempered view of the strong construction demand shown by the major bid cost indices, given the modest labor and material price gains as shown by the input cost indices. Conversely, when input costs began spiking and demand slowed in 2020, the index balanced both trends, landing in the middle of bid and input cost indices.

CBRE index aims
to balance bid and
input costs
FIGURE 43: Average annual construction cost escalation, CBRE vs. major indices

4.4%

1.0%

11.6%

2.0%

3.4%

12.7%

2.8%

1.9%

11.5%
0%
2%
4%
6%
8%
10%
12%
14%
2019 2020 2021
Bid cost indices Input cost indices CBRE Cost Index
Source: BLS, Engineering News-Record, Turner Construction, Rider Levett Bucknall, Mortensons, CBRE Cost Consultancy, CBRE Econometric Advisors, CBRE Strategic Investment Consulting, April 2022.

Item 3C - Page 143
  
58 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Given the significant growth in labor and materials costs that has already occurred year-to-date and the expected pace of construction activity through the end of the year, construction costs are projected to increase by 14.1% in 2022 in our baseline view.

Thereafter, improvement in supply disruptions and moderating inflation are expected to rein in input costs, leading to significant decreases in the escalation rate each quarter of 2023 and stabilization in 2024.

However, demand is the key factor in projecting true
construction costs, and a continued rise in interest rates has the potential to temper expectations for stronger construction activity once inflation cools. The looming threat of slowing or negative economic growth may cause some projects to pause and could make the debt market a major obstacle. In the event that financing does slow construction activity, our decreased demand scenario projects year-over-year cost growth to be an average of 150 basis points lower than in the baseline scenario.

This difference would primarily be felt in late 2023 and 2024, as most projects already in the pipeline are expected to move forward.

However, we do not expect the index to fall at any point in this forecast period in either scenario, though prices for some specific materials could decline. By year-end 2024, the baseline scenario is projected to be nearly 40% higher than Q4 2019, while the decreased demand is expected to be 33% higher.

CBRE Construction
Cost Index points to
elevated cost
growth in 2022
Item 3C - Page 144
59 CBRE RESEARCH © 2022 CBRE, INC.

Intelligent Investment 2022 U.S. Construction Cost Trends Source: CBRE Econometric Advisors, CBRE Strategic Investment Consulting, April 2022.

FIGURE 45: CBRE Construction Cost Index forecast scenarios, year-over-year changeFIGURE 44: Historical CBRE Construction Cost Index performance, baseline scenario 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
60 70
80 90
100
110
120
130
140
150
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Year-over-year change (R) Index (L)
Index (Q4 2019=100)
RecessionForecast
2022 (F)
2023 (F)
2024 (F)
Source: CBRE Econometric Advisors, CBRE Strategic Investment Consulting, April 2022. 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Q4
2023
Q1
2024
Q2
2024
Q3
2024
Q4
2024
Baseline scenario Decreased demand scenario
Item 3C - Page 145
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© Copyright 2022. All rights reserved. This report has been prepared in good faith, based on CBRE’scurrent anecdotal and evidence based views of the commercial real estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencies, many of which are beyond CBRE’scontrol. In addition, many of CBRE’sviews are opinion and/or projections based on CBRE’ssubjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’scurrent views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change.

Nothing in this report should be construed as an indicator of the future performance of CBRE’ssecurities or of the performance of any other company’ssecurities. You should not purchase or sell securities— of CBRE or any other company— based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this report, you waive all claims against CBRE as well as against CBRE’saffiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein.

CBRE Strategic Investment Consulting
Taylor Jacoby
Director
[email protected]
Michael Combs
Associate Director
[email protected]
Contacts
CBRE Project Management
Nicolas McNamara
Director, Cost Consultancy
[email protected]
Dan Richardson
Director, Cost Consultancy
[email protected]
Omar ElSingergy, MSC. MRICS
Director, Cost Consultancy
[email protected]
Claire Ji Lee
Cost Manager, Cost Consultancy
[email protected]
CBRE Econometric Advisors
Nathan Adkins
Senior Economist
[email protected]
Stefan Weiss
Senior Economist
[email protected]
CBRE Americas Research
Richard Barkham, Ph.D.

Global Chief Economist &
Global Head of Research
[email protected]
Toby Jorgensen
Associate Research Director
[email protected]
Item 3C - Page 146

Addendum D
KPRS Opinion of Probable Cost
Item 3C - Page 147
Item 3C - Page 148
Opinion of Probable Cost Printed: 6/13/2022 10:31 AM
5KPRS
Orchid Tree Inn- Prefabricated and Prevailing Wage
Owner Summary
Construction Cost
No. I Description Area UOM I Unit Price I Subtotal 06-07-2022 I Subtotal 01-29-2020 I Remarks 00 Off-Site Area 15,000 sf $14.86 $222,853 $119,976
01 Site Wor k 158,994 sf $108 .85 $17,306,471 $7,844,349 A Building A 3,110 sf $935.56 $2,909,578 $1,056,790
B Bldg B- Bungalows 6,049 sf $937 .75 $5,672,439 $3,723,113 C Building C 1,708 sf $896.45 $1,531,131 $497,931
D Building D 1,838 sf $978 .54 $1,798,550 $630,351
E Building E 1,651 sf $861 .71 $1,422,691 $480,097
F Building F 5,11 1 sf $651.58 $3,330,221 $325,658
G Building G 1,296 sf $1,013 .20 $1,313,113 $475,514
H Building H 988 sf $949.88 $938,479 $321,430
Building I 957 sf $964.12 $922,660 $325,052
Building J 3,153 sf $440.00 $1 ,387,326 $505,089
K Building K 519 sf $1,001.85 $519,958 $170,917
Building L 7,264 sf $875.11 $6,356,790 $2,864,447
M Building M 2,878 sf $904.39 $2,602,829 $940,637
N Building N 6,810 sf $658.85 $4,486,796 $2,555,429
p Building P 5,160 sf $768.58 $3,965,883 $785,623
a Bldg Q- Kitchen 626 sf $654.36 $409,628 $419,984
R Bldg R- Church/Rest. 17,650 sf $249.77 $4,408,381 $3,202,719 R1 Bldg R- Tl allowance 17,650 sf $278.86 $4,921,886 $1 ,644,436 Subtotal Construction Costs 66,768 gsf $994.90 $66,427,662 $28,889 ,542 !Total Project Cost (Base Bid) 66,768 gsf I $994.90 I $66,427,662 ! $28,ss9 ,542 I Solar Panels- 350 kW system, roof 1 Is $517,476 $517,476 $517 476 Costisbeforeanytaxcredits.Wehave 1 been quoled a savings of $206,075 in lax
mounted credits
Subtotal Solar Cost 66,768 gsf $7.75 $517,476 $517,476
Total Construction Cost 66,768 gsf $1,002.65 $66,945,138 $31,434,263 Cost Anal sis
Description Area Unit Price Subtotal I Subtotal I Remarks Residential Building - Cost per 41,538 rsf $1,611 .66 $66,945,138 Rentable Area
Residential Building - Cost per Unit 74 ea $904,664 $66,945,138 Residential Building - Cost per Gross 66,768 gsf $1,002.65 $66,945,138 Area
Orchid Tree Inn- KPRS Budget Update 06072022.xls/O Sum (2) This estimating system is the sole property of KPRS Construction Services, Inc. No part of this estimating system may be reproduced.

Addendum E
Sonnenblick-Eichner Letter
Item 3C - Page 149

David Sonnenblick

PRINCIPAL
[email protected]
License 00971001
September 26, 2022

Jeff Lugosi, Managing Director
CBRE Hotels Advisory
400 S. Hope Street, 25th Floor
Los Angeles, CA 90071

Re: Palm Springs Orchid Tree Hotel

Dear Jeff,

As you may know, Sonnenblick-Eichner Company (“SEC”) has been engaged by New Church II, LLC to secure construction financing for their project located at 222 S. Cahuilla Rd., Palm Springs, otherwise known as the Orchid Tree Resort.

By way of background, SEC was formed over 20 years ago, with the partners of the company currently each having over 40 years of transactional experience in arranging loans for owners of institutional commercial real estate. SEC is recognized as being among the premier re al estate investment bank ing firms to the commercial real estate industry, having closed billions of dollars of transactions on behalf of its clients. Please visit our website at www.sonneich.com
to learn more about our company and transactions
in the hospitality sector that we have completed.

SEC has a dedicated niche in providing capital for the hospitality industry and we are very familiar with the Palm Springs luxury hospitality market. Boutique luxury resorts for which we have completed financings for in Palm Springs include the L’Horizon Resort & Spa , Sparrows Lodge and the Holiday House Palm Springs, which is located across the street from the Orchid Tree Resort on Arenas Road. We also have a long-term working relationship with Richard Weintraub and his team, hav ing financed many transactions for his firm, including the construction loan in June of 2019 for his recently completed 125- room Cambria Suites hotel in Calabasas, CA.

Our marketing efforts in raising financing for the development of the Orchid Tree Resort include contacting all logical capital sources that could provide financing for the development of the project. Due to the recent rise in interest rates, extreme supply chain constraints, spiking inflation and banks becoming more cautious, attracting viable construction financing for this project has been extrao rdinarily difficult. This in no way is a reflection on the project or Richard and his team. This project has generally been very well received in the marketplace, the difficulty is associated with capital looking to invest in new luxury hotel developments in a volatile market. This sentiment is not just limited to Palm Springs and the California market, but we are also seeing this on a nationwide basis.

With this being said, Palm Springs is a market for which a 5- Star luxury resort at this location should be very attractive to its potential clientele. W e are going to continue with our market ing efforts through these challenging times until we have secured a financing structure for Richard that is viable for all parties.

Please feel free to reach out if to me you have any questions, or if I can be of further assistance.

Sincerely,

David Sonnenblick
Item 3C - Page 150
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• Sonnenblick-Eichner Company
Real Estate Investment Bankers
449 S. Beverly Drive Suite 300 Beverly Hills CA 90212 Tel 310 286 7700 Fax 310 286 7710