Agenda packet — Palm Springs City Council, July 10, 2023 (part 2 of 2)

Item 1D - Page 125

7. Owners/Investors with a 5% beneficial interest in the Applicant Entity or a related entity

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

HD Supply, Inc. 99.0% HD Supply Facilities Maintenance, LP [name of owner/investor] [percentage of beneficial interest in entity
and name of entity)
B.

HD Supply Holdings, Inc. 100% of HD Supply, Inc.
[name of owner/investor] [percentage of beneficial interest in entity
and name of entitvl
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 entity]

I DECLARE UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE STATE OF CALIFORNIA THAT THE FOREGOING IS TRUE AND CORRECT.
(Revised 09 13 18)
Date
June 8, 2023

CITY OF PALM SPRINGS-PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

Page 2 of 2 ends

CITY COUNCIL STAFF REPORT
07/10/2023
SUBJECT:

SECOND READING AND ADOPTION OF ORDINANCE NO. 2077 OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM SPRINGS

MUNICIPAL CODE RELATING TO SIDEWALK VENDING AND AMENDING CHAPTER 5.48 RELATIVE TO COMMERCIAL SOLICITATION
RECOMMENDATION:

Waive the second reading of text in its entirety, read by title only, and adopt Ordinance No. 2077, “AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM SPRINGS

MUNICIPAL CODE, ESTABLISHING REGULATIONS ON SIDEWALK VENDING IN COMPLIANCE WITH SENATE BILL 946; AND AN AMENDMENT TO CHAPTER 5.48 RELATIVE TO COMMERCIAL SOLICITATION.”
Attachments
Item 1E

CITY COUNCIL STAFF REPORT

DATE: JULY 10, 2023 CONSENT CALENDAR

SUBJECT: SECOND READING AND ADOPTION OF ORDINANCE NO. 2077 OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO

THE PALM SPRINGS MUNICIPAL CODE RELATING TO SIDEWALK
VENDING AND AMENDING CHAPTER 5.48 RELATIVE TO

COMMERCIAL SOLICITATION

FROM: Scott C. Stiles, City Manager

BY: Flinn Fagg, Deputy City Manager

SUMMARY:

This is the second reading of an ordinance to add Chapter 5.89 to the Palm Springs municipal code relating to sidewalk vending and amending Chapter 5.48 relating to commercial solicitation. The City Council approved the proposed ordinance at first reading on June 5, 2023, with minor revisions.

RECOMMENDATION:

Waive the second reading of text in its entirety, read by title only, and adopt Ordinance No. 2077, “ AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM SPRINGS

MUNICIPAL CODE, ESTABLISHING REGULATIONS ON SIDEWALK VENDING IN COMPLIANCE WITH SENATE BILL 946; AND AN AMENDMENT TO CHAPTER 5.48 RELATIVE TO COMMERCIAL SOLICITATION.”

STAFF ANALYSIS:

On June 5, 2023, Ordinance No. 2077 was introduced for first reading as noted below:

ACTION: Waive reading of the text in its entirety, read by title only and introduce for first reading Ordinance No. 2077, “AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO

THE PALM SPRINGS MUNICIPAL CODE, ESTABLISHING REGULATIONS ON SIDEWALK VENDING IN COMPLIANCE WITH SENATE BILL 946; AND AN AMENDMENT TO CHAPTER 5.48 RELATIVE TO COMMERCIAL
SOLICITATION.”
Item 1E - Page 1
City Council Staff Report
July 10, 2023 -- Page 2
Sidewalk Vending Ordinance

AYES: Councilmembers Holstege, Mayor Pro Tem Bernstein, Mayor Garner NOES: Councilmembers deHarte and Middleton
ABSENT: None

The City Council voted to introduce Ordinance No. 2077, subject to the following minor revisions:

• Sections 5.89.030(A)(7), 5.89.050(B)(2), and 5.89.060(B)(3) w ere amended to clarify that a 48-inch unobstructed accessible route is required. • Sections 5.89.050(B)(22) and 5.89.070(A)(11) w ere amended to limit the prohibition of sidewalk vending in defined areas of Palm Canyon Drive and Arenas Road from Friday through Sunday between the hours of 4:00pm to 11:00pm during the months of October to April.
• Sections 5.89.050(B)(18), 5.89.060(B)(15) and 5.89.070(A)(9) w ere amended to establish a 200-foot separation distance from farmers markets, swap meets, and temporary special events.
• Section 5.89. 110 was amended to decrease fines by 50% for violations of the ordinance, and to decrease the fine for first -time violations of operating without a business license.
• Sections 5.89.050(B)(8), 5.89.060(B)(8), and 5.89.070(A)(5) were amended to clarify that a 10’ separation distance is required from building entrances , building windows, private driveways, or parking spaces.
• Section 5.89.060(B)(3) was amended to vendors to be in grassed areas of public parks, but not on athletic field areas.
• Minor corrections have been made to references to Department of Environmental Health regulations.
• Language in the ordinance has been amended to eliminate gender -specific references.

The attached ordinance has been amended to include these revisions as directed by the City Council.

Staff is in the process of producing educational materials for vendors with application instructions and operational standards . T he Code Compliance Division will hold workshops for vendors to explain the regulations and permitting process , as well as providing assistance in obtaining the necessary permits and licenses.

Staff will come forward at a later date with recommendations for the creation of sidewalk vending zones.

This report provides for the City Council to waive further reading and adopt the ordinance.

The ordinance shall be effective 30 days from adoption, or as may be otherwise implemented by direction of the City Council. Upon adoption at second reading, staff will provide letters to noncompliant vendors advising of the effective date of the ordinance and offering assistance in obtaining the necessary permits for operation. Vendors will have until the effective date of the ordinance (30 days) to become compliant.

Item 1E - Page 2
City Council Staff Report
July 10, 2023 -- Page 3
Sidewalk Vending Ordinance

REVIEWED BY:

Deputy City Manager: Flinn Fagg
City Attorney: Jeffrey S. Ballinger
City Manager: Scott Stiles

ATTACHMENTS:

A. Ordinance No. 2077 (redline version)
B. Ordinance No. 2077 (clean)
Item 1E - Page 3

ATTACHMENT A

Item 1E - Page 4
ORDINANCE NO. 2077

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89

TO THE PALM SPRINGS MUNICIPAL CODE,

ESTABLISHING REGULATIONS ON SIDEWALK VENDING
IN COMPLIANCE WITH SENATE BILL 946; AND AN
AMENDMENT TO CHAPTER 5.48 RELATIVE TO
COMMERCIAL SOLICITATION.

City Attorney’s Summary
The proposed ordinance adopts licensing and operational standards for sidewalk vendors pursuant to Senate Bill 946.

In addition, amendments to the City’s Mobile Food Vending Vehicle (food truck) ordinance are proposed to provide parity with the sidewalk vending regulations and encourage food truck businesses.

A. The City of Palm Springs, California (“City”) is a municipal corporation, duly organized under the California Constitution and laws of the State of California; and

B. Pursuant to the police powers delegated to it by the California Constitution, the City has the authority to enact laws which promote the public health, safety, and general welfare of its citizens, including sidewalk vending, as long as these are consistent with SB 946; and

C. In 2018, the California Legislature passed SB 946 which prohibits cities from regulating sidewalk vendors, except in accordance with the provisions of SB 946; and

D. SB 946 states that it applies to both charter and general law cities; and

E. SB 946 authorizes the implementation of regulations that are directly related to objective health, safety, or welfare concerns, and that do not restrict sidewalk vendors to operate only in a designated neighborhood or area, except as specified; and

F. The permit requirements proposed are consistent with SB 946, as they are reasonable, related to objective health, safety, and welfare concerns, and are based upon compliance with other generally applicable laws including the Americans with Disabilities Act; and

G. The standards imposed on stationary sidewalk vendors requiring a minimum path of accessible travel are necessary to comply with the Americans with Disabilities Act and maintain minimum safe access along public sidewalks; and

H. Standards for maintaining access to building entrances, and not blocking driveways, fire hydrants, parking areas and building storefront windows are necessary to Item 1E - Page 5
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guard the health and safety of patrons, drivers, vendors and existing business owners and promote fire suppression and law enforcement practices that allow the City’s safety personnel to observe activities within buildings and maintain access; and

I. The City Council finds and determines that the installation, repair, maintenance, and removal of encroachments in the public way must be regulated in order to protect the public health, safety, and welfare and to provide for the orderly administration and maintenance of the public access ways for the benefit of the community, while at the same time allowing reasonable accommodation and cooperative flexibility for providing necessary utility and other convenience services to the community; and

J. The City Council finds that public and private persons who maintain and/or install encroachments in the public way bear a responsibility to help preserve the public way and to contribute to the administrative and liability costs incurred by the community and caused by such encroachments; and

K. The City Council finds that, unless properly regulated, sidewalk vending poses a unique risk to the health, safety, and welfare of the public, including, but not limited to, impacts to traffic, pedestrian safety, mobility, unsanitary conditions involving food preparation, and consumer protection; and

L. The inherent nature of sidewalk vending and the ability of such vendors to be located on private property and public streets and move quickly from place to place in the community warrants imposing certain regulatory measures to protect the health, safety, and welfare of the community; and

M. SB 946 continues to authorize cities to prohibit sidewalk vendors in areas located within the immediate vicinity of a permitted certified farmer’s market and a permitted swap meet, as specified, and to restrict or prohibit sidewalk vendors within the immediate vicinity of an area designated for a temporary special permit issued by a city; and

N. The City Council finds that, unless properly regulated, sidewalk vending in public parks may infringe on the use and enjoyment of the park, and regulations are necessary to prevent an undue concentration of commercial activity that interferes with the scenic and natural character of the park; and

O. Fraud or misrepresentation in the course of vending constitutes an objective harm to the health, safety, and welfare of the City’s residents; and

P. Fraud or misrepresentation in the application for the permit constitutes an objective harm to health, safety, and welfare of the City’s residents; and

Q. Vending in a manner that creates a public nuisance or constitutes a danger Item 1E - Page 6
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to the public constitutes an objective harm to the health, safety, and welfare of the City’s residents; and

R. The City Council finds it necessary to prohibit sidewalk vendors during designated times of day on certain portions of Palm Canyon and Arenas when there is heavy pedestrian traffic such that it poses health and safety risks to pedestrians as it can block sidewalks, can force some pedestrians to walk on the street, and can block views of drivers of vehicles turning onto or from those streets; and

S. The permit requirements for sidewalk vendors are compliant with Senate Bill 972, which became effective January 1, 2023, which exempts certain kinds of sidewalk vendors from needing a county permit before selling prepackaged non- potentially hazardous food.

T. The City Council desires to regulate sidewalk vending in a way that encourages entrepreneurship and the creation and operation of small businesses.

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

SECTION 1
. That the findings and determinations reflected above are true and correct and are incorporated by this reference herein as the cause and foundation for the action taken by the and through this Ordinance.

SECTION 2. Chapter 5.89 is hereby added to the Palm Springs Municipal Code to read as follows:

“Chapter 5.89 SIDEWALK VENDING.

Section 5.89.010 Purpose.

The City finds that the vending of prepared or pre- packaged foods, goods, and/or wares at semi -permanent locations on public sidewalks and rights -of-way may pose unsafe conditions and special dangers to the public health, safety, and welfare of residents a nd visitors. The purpose of this Chapter is to implement regulations on both roaming and stationary sidewalk vending that protect the public health, safety, and welfare of the community while complying with the requirements of general state law, as amended from time to time, to promote safe vending practices, prevent safety, traffic, and health hazards, and preserve the public peace, safety, and welfare of the community.

Section 5.89.020 Definitions.

For purposes of this Chapter, the following definitions apply:

A. “Certified Farmers Market” means a location operated in accordance with Chapter Item 1E - Page 7
Ordinance No. 2077

Page 4 ends

10.5 (commencing with Section 47000) of Division 17 of the Food and Agricultural Code and any regulations adopted pursuant to that chapter.

B. “City” means the City of Palm Springs.

C. “Park” means a public park owned by the City.

D. “Roaming sidewalk vendor or vending” means a sidewalk vendor who moves from place to place and stops only to complete a transaction.

E. “Sidewalk vendor or vending” means a person who sells, offers to sell, operates, engages in, or carries on a food or merchandise vending business from a pushcart, stand, display, pedal -driven cart, wagon, showcase, rack, or other nonmotorized conveyance, or from one’s person, upon a public sidewalk or other public pedestrian path. “Sidewalk vendor or vending” does not mean a “solicitor,” as that term is defined in PSMC Section 5.48.010. “Sidewalk vendor or vending” does not include a vendor on private property; such vendors are regulated by Palm Springs Zoning Code Section 94.02.01, which requires a land use permit for such use.

F. “Stationary sidewalk vendor or vending” means a sidewalk vendor who vends from a fixed location.

G. “Swap meet” means a location operated in accordance with Article 6 (commencing with Section 21660) of Chapter 9 of Division 8 of the Business and Professions Code, and any regulations adopted pursuant to that article.

H. “Temporary Special Event” means an event that is permitted pursuant to Palm Springs Zoning Code Section 94.02.01, or as otherwise permitted and authorized by the City.

Section 5.89.030 Permits Required.

A. Each sidewalk vendors shall obtain a business license from the City prior to engaging in any sidewalk vending activities. Each sidewalk vendor shall obtain a separate business license for each location within the City where the vendor will be vending. The following information shall be required:

1. Name, current mailing address, and phone number of the vendor.

2. If the vendor is an agent of an individual, company, partnership, or corporation, the name and business address of the principal.

3. A description of the merchandise/goods to be offered for sale or exchange, and the days/hours of sales.

Item 1E - Page 8
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Page 5 ends

4. A copy of the California seller’s permit with the sales tax number issued by the California Department of Tax and Fee Administration to the vendor.

5. A copy of the valid California Driver’s license issued to the vendor, a copy of the individual taxpayer identification number issued to the vendor or a municipal identification number. Any such identification number(s) or license(s) collected shall not be available to the public for inspection and shall remain confidential and not be disclosed except as required to administer the permit or licensure program or comply with a state law or state or federal court order.

6. If preparing or selling food, a copy of the County Health Department permit issued to the vendor, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non- potentially hazardous food and whole uncooked uncut
produce will be sold. If potentially hazardous food or cooked cut produce will be sold or the food or the display area is greater than twenty -five (25) square feet, the vendor must provide a copy of the County Health Department permit issued to the vendor.

7. If the vendor proposes to be a sidewalk vendor, a description or site plan map of the proposed location(s) where vending will take place, showing that the sidewalk location maintains a minimum of forty-eight inches (48”) of unobstructed
accessible route area, in compliance with the Americans with Disabilities Act.

8. A copy of general liability policy naming the City as additional insured in the amount of $1,000,000 per occurrence and $2,000,000 combined.

9. A certification by the vendor that to his or her knowledge and belief, the information contained in the application is true.

B. At the time the application or renewal application is filed, the application shall pay the permit processing fee established, and amended from time to time, by separate resolution of the City Council.

Section 5.89.040 Review of Permit Application; Decision.

A. Upon acceptance of a properly completed and filed sidewalk vendor permit application, the City Manager or designee shall conduct a preliminary investigation to determine compliance with this Chapter and shall make such determination within no more than thirty (30) days of acceptance to approve or deny the application. The City Manager or designee shall provide the applicant with written notice of his or her their
decision to the address indicated in the application.

Item 1E - Page 9
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Page 6 ends

B. The City Manager or designee may deny an application for a permit if he or she they make any of the following findings:

1. The applicant has failed to pay the application permit fee.

2. The applicant has made one or more material misstatements in the application for a permit.

3. The applicant does not have a valid California Driver’s license; or valid individual taxpayer identification number; or a municipal identification number.

4. The applicant's vending operation, as described in the application, is inconsistent with the standards, conditions, and requirements of this Chapter.

5. It is determined that the applicant does not possess all federal, state, and local permits and licenses necessary to engage in the activity in which he
or she they seek to engage.

C. If the application is denied, the reasons for disapproval shall be noted on the application, and the applicant shall be notified that his or her their application is
denied and that no permit will be issued. Notice shall be mailed to the applicant at the address shown on the application form.

D. If the City Manager or designee approves the applicant's permit, he or she they shall endorse his or her their approval on the application and shall, upon payment of the prescribed fee, deliver the permit to the applicant.

E. Exemptions. A sidewalk vending permit shall not be required for the following activities:

1. The sale of agriculture products on the site where the product is grown.

2. Catering for private parties held exclusively on private property and not open to the general public.

3. Events permitted pursuant to a lawfully issued temporary event permit including but not limited to a Certified Farmers Market, Swap Meet, street fairs, outdoor concerts, sport league opening day, and business sidewalk sales.

4. First Amendment protected vending.

F. Term of permit. A business license issued pursuant to this Chapter shall Item 1E - Page 10
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Page 7 ends

automatically expire one (1) year from the date issued, unless an earlier expiration date is noted on the permit.

G. Transferability. A sidewalk vending permit shall not be transferable to any other entity or person and is valid only as to the original applicant for the term stated.

Section 5.89.050 Stationary Sidewalk Vending Locations and Standards.

A. Stationary sidewalk vendors shall be prohibited from operating or establishing in any residential zone of the City, including the G -R-5, R-1, R-G-A, R-2, R-3, R-4, R-4-VP, and R-MHP zones.

B. Stationary sidewalk vendors may operate in non- residential zones of the City, including mixed use zones, provided they meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. The sidewalk vendor can set up their vending operation while still leaving a minimum of forty-eight inches (48”) of unobstructed
accessible path of
travel, without obstruction, along the public sidewalk or public pathway; and

3. If the sidewalk vendor is selling food, the sidewalk vendor shall display a valid Health Permit issued by the County in a conspicuous location, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncooked uncut
produce will be sold. If potentially
hazardous food or cooked cut produce will be sold or the food display area is greater than twenty-five (25) square feet, the vendor must display a valid Health Permit issued by the County in a visible location; and

4. Any sidewalk vendor food cart shall possess a current County decal sticker posted on the food cart, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non- potentially hazardous food and whole
uncooked uncut
produce will be sold. If potentially hazardous food or cooked cut produce will be sold or the food display area is greater than twenty -five (25) square feet, the vendor must post on the food cart a current decal sticker; and

5. If the sidewalk vendor is selling food, all employees shall possess a current food handler’s card, issued by the County; and

6. Sidewalk vending hours shall be conducted only between the hours of one- half hour before sunrise and 3:00 AM of every day; and

Item 1E - Page 11
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7. The sidewalk vendor must maintain the vending area in a clean, orderly, and sanitary condition, including upon departure of the vending area after its use; and

8. The sidewalk vendor location does not block entrances to private buildings, private driveways, parking spaces or building windows by being located within the immediate vicinity of such places No vending shall occur within ten (10) feet of any entrance or exit of any building, or any driveway, parking space or building window; and

9. No vending shall occur within ten (10) feet of a fire hydrant, fire escape, bus stop, loading zone, handicapped parking space or access ramp, bike rack, public bench, fire station driveway, or police station driveway; and

10. No dining tables, chairs, fences, or other site furniture shall be permitted in conjunction with the vendors vending activities. Sidewalk vendors may have one umbrella or tent structure, not to exceed one hundred (100) square feet in area; the umbrella or tent structure shall not encroach into the accessible path of travel or onto private property; and

11. During operations, no food shall be stored, displayed, or served from any place other than the approved food cart. The use of side units, coolers, benches, or tables for food preparation, storage or display is prohibited; and

12. Vendors selling food potentially hazardous food products shall provide a refuse container for customers within twenty (20) feet of the food cart; and

13. The vendor may have a maximum of one (1) sign not to exceed eight (8) square feet in area, or two (2) signs not to exceed four (4) square feet in area each. The signage must be affixed to the cart, showcase, rack, umbrella, or tent structure, and shall not be freestanding; and

14. The vendor shall not attach or use any water lines, electrical or telecommunication lines, or gas lines during vending operations; and

15. Any lighting associated with the vending operation shall be downward directed and shall comply with the outdoor lighting requirements listed in Section Palm Springs Zoning Code Section 93.21.00; and

16. Exterior storage or display of refuse, equipment, materials, goods, wares, or merchandise associated with the vendor is prohibited; and

17. Vendors utilizing sound amplifying devices or musical instruments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and
Item 1E - Page 12
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Page 9 ends

18. No vending shall occur within five hundred (500) two hundred (200) feet of a Certified Farmers Market, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

19. The sidewalk vendor shall not discharge any liquid (e.g., water, grease, oil, etc.) onto or into the City streets, storm drains, catch basins, or sewer facilities. Any discharge shall be contained and properly disposed of by the sidewalk vendor; and

20. Due to issues of traffic visibility, no vending shall occur within a corner cutoff area. A corner cutoff area is that area at all intersecting and intercepting streets or highways. The cutoff line shall be in a horizontal plane, making an angle of forty-five (45) degrees with the side, front, or rear property line, as the case may be. It shall pass through the points located on both sides and front or rear property lines at a distance of thirty (30) feet from the intersection of such lines at the corner of a street or highway; and

21. Sidewalk vendors shall comply with all applicable fire code requirements in the use of an open flame or charcoal in the preparation of food products.

Any smoke or odors produced through the preparation of food products shall be subject to the regulations contained in Palm Springs Municipal Code Section 6.08.020; and

22. Due to increased pedestrian and vehicular traffic during these times, no vending shall occur from Friday through Sunday
during the hours of 4:00
PM to 11:00 PM from October 1 st through April 30 th on Palm Canyon between Baristo Road to the south and Alejo Road to the north or on Arenas between Indian Canyon Drive to the west and Calle Encilia to the east; and

23. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations; and

24. This Chapter shall not be construed to prevent sidewalk vendors from entering into partnerships or other arrangements with restaurants to use those restaurants’ kitchens or restroom facilities, or both, so long as suc h restaurant facilities remain compliant with applicable laws and regulations, including, but not limited to, Riverside County Environmental Health laws and regulations.

25. Sidewalk vendors shall use Reusable Food Service Ware and Reusable Food Service Ware Accessories in accordance with Palm Springs Municipal Code Chapter 5.87.

Section 5.89.060 Sidewalk Vending in Parks, Certified Farmers Markets.

Item 1E - Page 13
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A. Sidewalk vending of food or merchandise by stationary vendors shall be prohibited in any City Park with a concession stand operated by a vendor under exclusive contract with the City selling similar food or merchandise or in an area occupied by a Certified Farmers Market.

B. Sidewalk vendors may operate in City Parks provided they meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. Sidewalk vending shall not be permitted within any public park that is less than two (2) acres in area unless otherwise permitted by the City Council; and

3. For stationary sidewalk vending, the sidewalk vendor can set up their vending operation while still leaving a minimum of forty-eight inches (48”) of unobstructed
accessible path of travel, without obstruction, along the public sidewalk or public pathway. Stationary sidewalk vendors may also set up their vending operation in the grassed areas of public parks provided such area is not utilized as an athletic field; and

4. The sidewalk vendor shall cease operations one (1) hour prior to the close of the park
but may still be present in the park until the time of park closure in order to pack up their things and/or enjoy the park; and

5. The sidewalk vendor maintains the vending area in a clean, orderly, and sanitary condition
, including upon departure of the vending area after its use; and

6. If the sidewalk vendor is selling food, the sidewalk vendor shall display a valid Health Permit issued by the County in a conspicuous location, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncooked uncut
produce will be sold. If potentially
hazardous food or cooked cut produce will be sold or the food or the display area is greater than twenty-five (25) square feet, the vendor must display a valid Health Permit issued by the County in a conspicuous location; and

7. Any sidewalk vendor food cart shall possess a current County decal sticker posted on the food cart, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non- potentially hazardous food and whole
uncooked uncut
produce will be sold. If potentially hazardous food or cooked cut produce will be sold or the food display area is greater than twenty -five (25) square Item 1E - Page 14
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feet, the vendor must post on the food cart a current decal sticker; and

9. No dining tables, chairs, fences, or other site furniture shall be permitted in conjunction with the vendors vending activities. Sidewalk vendors may have one umbrella or tent structure, not to exceed one hundred (100) square feet in area; the umbrella or shade structure shall not encroach into the accessible path of travel; and

10. During operations, no food shall be stored, displayed, or served from any place other than the approved food cart. The use of side units, coolers, benches, or tables for food preparation, storage or display is prohibited; and

11. Vendors selling food potentially hazardous food products shall provide a refuse container for customers within twenty (20) feet of the food cart; and

12. Vendors utilizing sound amplifying devices or musical instr uments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and

14. Any lighting associated with the vending operation shall be downward directed and shall comply with the outdoor lighting requirements listed in Palm Springs Zoning Code Section 93.21.00.

15. No vending shall occur within the five-hundred feet (500’) two hundred feet
(200’) of an event held pursuant to a Temporary Event Permit, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

16. The sidewalk vendor shall not discharge any liquid (e.g., water, grease, oil, etc.) onto or into City streets, storm drains, catch basins, or sewer facilities.

All discharges shall be contained and properly disposed of by the sidewalk vendor; and

17. Due to issues of traffic visibility, no vending shall occur within a corner cutoff area. A corner cutoff area is that area at all intersecting and intercepting Item 1E - Page 15
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Page 12 ends

streets or highways. The cutoff line shall be in a horizontal plane, m aking an angle of forty-five (45) degrees with the side, front, or rear property line, as the case may be. It shall pass through the points located on both sides and front or rear property lines at a distance of thirty (30) feet from the intersection of such lines at the corner of a street or highway.

18. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations.

19. Sidewalk vendors shall use Reusable Food Service Ware and Reusable Food Service Ware Accessories in accordance with Palm Springs Municipal Code Chapter 5.87.

Section 5.89.070 Roaming Sidewalk Vending.

A. Roaming sidewalk vendors shall meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. Sidewalk vending hours for residential zones shall be conducted between the hours of one -half hour before sunrise and one- half hour after sunset; and

3. Sidewalk vending hours for non- residential zones shall be conducted only between the hours of one-half hour before sunrise and 3:00 AM of every day; and

4. The sidewalk vendor maintains their temporary vending area in a clean, orderly, and sanitary condition
, including upon departure of the vending
area after its use; and

5. The sidewalk vendor location does not block entrances to private buildings, private driveways, parking spaces or building windows by being located within the immediate vicinity of such places No vending shall occur within ten (10) feet of any entrance or exit of any building, or any driveway, parking space or building window; and

6. 7. The vendor may have a maximum of one (1) sign not to exceed eight (8) square feet in area; and

8. Vendors utilizing sound amplifying devices or musical instruments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and
Item 1E - Page 16
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9. No vending shall occur within five hundred (500) feet two hundred (200) feet of a Certified Farmers Market, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

10. Due to issues of traffic visibility, no vending shall occur within a corner cutoff area. A corner cutoff area is that area at all intersecting and intercepting streets or highways. The cutoff line shall be in a horizontal plane, making an angle of forty-five (45) degrees with the side, front, or rear property line, as the case may be. It shall pass through the points located on both sides and front or rear property lines at a distance of thirty (30) feet from the intersection of such lines at the corner of a street or highway; and

11. Due to increased pedestrian and vehicular traffic during these times, no vending shall occur from Friday through Sunday
during the hours of 4:00
PM to 11:00 PM from October 1 st through April 30 th on Palm Canyon between Baristo Road to the south and Alejo Road to the north or on Arenas between Indian Canyon Drive to the west and Calle Encilia to the east; and

12. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations.

Section 5.89.080 Sidewalk Vending Zones.

The City Council may establish sidewalk vending zones by resolution to encourage sidewalk vending activity in areas where impacts to public health, safety and welfare are minimized. In establishing sidewalk vending zones, the City Council may waive certain operational standards of this Chapter, including hours of operation, shade structure limitations, site furniture limitatio ns, and other similar standards provided such waivers are identified in the adopting resolution.

Section 5.89.090 Suspension; Rescission.

A. A sidewalk vendor permit issued under this Chapter may be suspended or rescinded by the City Manager or designee after two or more violations of this Chapter in accordance with Section 5.89.100 of this Chapter, at their discretion, for any of the following causes:

1. Fraud or misrepresentation in the course of vending;

2. Fraud or misrepresentation in the application for the permit;

3. Vending in a manner that creates a public nuisance or constitutes a danger to the public.

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B. Notice of the suspension or rescission of a sidewalk vendor permit issued under this Chapter shall be mailed, postage prepaid, to the holder of the sidewalk vendor permit at his or her last known address.

C. No person whose street vending permit has been revoked pursuant to this chapter shall be issued a street vending permit for a period of two (2) years from the date revocation becomes final.

Section 5.89.100 Appeals.

In the event that any applicant or permittee desires to appeal from any order, rescission, or other ruling of the City Manager or designee made under the provisions of this Chapter, such applicant or any other person aggrieved shall have the right to appeal such action or decision pursuant to PSMC Section 3.68.010.

Section 5.89.110 Penalties.

A. It is unlawful for any person to violate any provision or fail to comply with any requirements of this Chapter. A violation of this Chapter shall by punished by:

1. An administrative fine not exceeding $100 $50
for a first violation.

2. An administrative fine not exceeding $200 $100 for a second violation within one (1) year of the first violation.

3. An administrative fine not exceeding $500 $250 for each additional violation within one (1) year of the first violation.

B. A violation of vending without a sidewalk vending permit, may, in lieu of the penalties set forth in subsection (A), set forth above, be punished by:

1. An administrative fine not exceeding two hundred fifty ($250) one-hundred
twenty five ($125) dollars for a first violation.

2. An administrative fine not exceeding five hundred dollars ($500) for a second violation within one (1) year of the first violation.

3. An administrative fine not exceeding one thousand dollars ($1,000) for each additional violation within one (1) year of the first violation.

C. If an individual is subject to subsection (B), set forth above, for vending without a sidewalk vending permit, upon the individual providing proof of a valid permit issued by the City, the administrative fines set forth in this Chapter shall be reduced to the administrative fines set forth in subsection (A), respectively.

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D. The proceeds of any administrative fines assessed pursuant to this Chapter shall be deposited in the treasury of the City.

E. Failure to pay an administrative fine assessed under this Chapter shall not be punishable as an infraction or misdemeanor. Additional fines, fees, assessments, or any other financial conditions beyond those authorized in this Chapter shall not be assessed.

F. Any violation of this Chapter shall not be punishable as an infraction or misdemeanor, and any person alleged to have violated any provisions of this Chapter shall not be subject to arrest except when otherwise permitted under law.

G. When assessing an administrative fine pursuant to this Chapter, the adjudicator shall take into consideration the person’s ability to pay the fine. The City shall provide the person with notice of his or her right to request an ability -to-pay determination and shall make available instructions or other materials for requesting an ability-to-pay determination. The person may request an ability -to- pay determination at adjudication or while the judgment remains unpaid, including when a case is delinquent or has been referred to a comprehensive collection program.

1. If the person meets the criteria described in subdivision (a) or (b) of Government Code section 68632, the City shall accept, in full satisfaction, twenty (20) percent of the administrative fine imposed pursuant to this Chapter.

2. The City may allow the person to complete community service in lieu of paying the total administrative fine, may waive the administrative fine, or may offer an alternative disposition.

H. A person who is currently serving, or who completed, a sentence, or who is subject to a fine, for a conviction of a misdemeanor or infraction for sidewalk vending, whether by trial or by open or negotiated plea, who would not have been guilty of that offense under SB 946 had SB 946 been in effect at the time of the offense, may petition for dismissal of the sentence, fine, or conviction before the trial court that entered the judgment of conviction in his or her case.

I. Nothing contained in this Chapter shall be construed to impede the City’s or County’s ability to enforce County Health Department codes and regulations. In addition, nothing contained in this Chapter shall be construed as limiting the application of any other federal, state or local laws, including, without limitation, laws regulating the display or sale of “harmful matter” pursuant to California Penal Code sections 313 et seq., or the sale of counterfeit goods pursuant to Calif ornia Penal Code 350.”
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SECTION 3. Section 5.48.010 of the Palm Springs Municipal Code is hereby amended to rescind and replace the definition of “Solicitor” as follows:

““Solicitor” means any person, whether a resident of the city or not, engaged in solicitation. The term “solicitor” does not include any person carrying, conveying, delivering, or transporting dairy products, newspapers or other goods to regular customers on established routes or to the premises of any person who had previously ordered such products or goods and is entitled to receive the same, nor does it include a “sidewalk vendor or vending,” as that term is defined in PSMC Section 5.89.020.”

SECTION 4
. Severability. If any section, sentence, clause or phrase of this Ordinance or the application thereof to any entity, person or circumstance is held for any reason to be invalid or unconstitutional, such invalidity or unconstitutionality shall not affect other provisions or applications of this Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable. The City Council of the City of Palm Springs hereby declares that it would have adopted this Ordinance and each section, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

SECTION 5
. This Ordinance is exempt from the requirements of the California Environmental Quality Act (“CEQA”) pursuant to State CEQA Guidelines, as it is not a “project” and has no potential to result in a direct or reasonably foreseeable indirect physical change to the environment [14 Cal. Code Regs. § 15378(a)]. Further, this Ordinance is exempt from CEQA as there is no possibility that this Ordinance or its implementation would have a significant negative effect on the environment [14 Cal. Code Regs. § 15061(b)(3)].

SECTION 6
. Effective Date. This Ordinance shall become effective thirty (30) days following its adoption.

PASSED, APPROVED, AND ADOPTED BY THE PALM SPRINGS CITY
COUNCIL THIS _____ DAY OF ______________, _________.

GRACE ELENA GARNER
MAYOR

ATTEST:

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BRENDA PREE, MMC

CITY CLERK

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CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE, City Clerk of the City of Palm Springs, California, do hereby certify that Ordinance No. ____ is a full, true, and correct copy, and was introduced at a regular meeting of the Palm Springs City Council on _________ and adopted at a regular meeting of the City Council held 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, MMC

CITY CLERK

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Summary report:

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ATTACHMENT B

Item 1E - Page 24
ORDINANCE NO. 2077

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89

TO THE PALM SPRINGS MUNICIPAL CODE,

ESTABLISHING REGULATIONS ON SIDEWALK VENDING
IN COMPLIANCE WITH SENATE BILL 946; AND AN
AMENDMENT TO CHAPTER 5.48 RELATIVE TO
COMMERCIAL SOLICITATION.

City Attorney’s Summary
The proposed ordinance adopts licensing and operational standards for sidewalk vendors pursuant to Senate Bill 946.

In addition, amendments to the City’s Mobile Food Vending Vehicle (food truck) ordinance are proposed to provide parity with the sidewalk vending regulations and encourage food truck businesses.

A. The City of Palm Springs, California (“City”) is a municipal corporation, duly organized under the California Constitution and laws of the State of California; and

C. In 2018, the California Legislature passed SB 946 which prohibits cities from regulating sidewalk vendors, except in accordance with the provisions of SB 946; and

D. SB 946 states that it applies to both charter and general law cities; and

Page 2 ends

O. Fraud or misrepresentation in the course of vending constitutes an objective harm to the health, safety, and welfare of the City’s residents; and

P. Fraud or misrepresentation in the application for the permit constitutes an objective harm to health, safety, and welfare of the City’s residents; and

Q. Vending in a manner that creates a public nuisance or constitutes a danger Item 1E - Page 26
Ordinance No. 2077

Page 3 ends

to the public constitutes an objective harm to the health, safety, and welfare of the City’s residents; and

T. The City Council desires to regulate sidewalk vending in a way that encourages entrepreneurship and the creation and operation of small businesses.

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

SECTION 1.

That the findings and determinations reflected above are true and correct and are incorporated by this reference herein as the cause and foundation for the action taken by the and through this Ordinance.

SECTION 2. Chapter 5.89 is hereby added to the Palm Springs Municipal Code to read as follows:

“Chapter 5.89 SIDEWALK VENDING.

Section 5.89.010 Purpose.

The City finds that the vending of prepared or pre- packaged foods, goods, and/or wares at semi -permanent locations on public sidewalks and rights -of-way may pose unsafe conditions and special dangers to the public health, safety, and welfare of residents and visitors. The purpose of this Chapter is to implement regulations on both roaming and stationary sidewalk vending that protect the public health, safety, and welfare of the community while complying with the requirements of general state law, as amended from time to tim e, to promote safe vending practices, prevent safety, traffic, and health hazards, and preserve the public peace, safety, and welfare of the community.

Section 5.89.020 Definitions.

For purposes of this Chapter, the following definitions apply:

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A. “Certified Farmers Market” means a location operated in accordance with Chapter

10.5 (commencing with Section 47000) of Division 17 of the Food and Agricultural Code and any regulations adopted pursuant to that chapter.

B. “City” means the City of Palm Springs.

C. “Park” means a public park owned by the City.

D. “Roaming sidewalk vendor or vending” means a sidewalk vendor who moves from place to place and stops only to complete a transaction.

F. “Stationary sidewalk vendor or vending” means a sidewalk vendor who vends from a fixed location.

H. “Temporary Special Event” means an event that is permitted pursuant to Palm Springs Zoning Code Section 94.02.01, or as otherwise permitted and authorized by the City.

Section 5.89.030 Permits Required.

1. Name, current mailing address, and phone number of the vendor.

2. If the vendor is an agent of an individual, company, partnership, or corporation, the name and business address of the principal.

3. A description of the merchandise/goods to be offered for sale or exchange, and the days/hours of sales.

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4. A copy of the California seller’s permit with the sales tax number issued by the California Department of Tax and Fee Administration to the vendor.

6. If preparing or selling food, a copy of the County Health Department permit issued to the vendor, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncut produce will be sold. If potentially hazardous food or cut produce will be sold or the food or the display area is greater than twenty -five (25) square feet, the vendor must provide a copy of the County Health Department permit issued to the vendor.

7. If the vendor proposes to be a sidewalk vendor, a description or site plan map of the proposed location(s) where vending will take place, showing that the sidewalk location maintains a minimum of forty -eight inches (48”) of unobstructed accessible route area, in compliance with the Americans with Disabilities Act.

8. A copy of general liability policy naming the City as additional insured in the amount of $1,000,000 per occurrence and $2,000,000 combined.

9. A certification by the vendor that to his or her knowledge and belief, the information contained in the application is true.

Section 5.89.040 Review of Permit Application; Decision.

A. Upon acceptance of a properly completed and filed sidewalk vendor permit application, the City Manager or designee shall conduct a preliminary investigation to determine compliance with this Chapter and shall mak e such determination within no more than thirty (30) days of acceptance to approve or deny the application. The City Manager or designee shall provide the applicant with written notice of their decision to the address indicated in the application.

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B. The City Manager or designee may deny an application for a permit if they make any of the following findings:

1. The applicant has failed to pay the application permit fee.

2. The applicant has made one or more material misstatements in the application for a permit.

3. The applicant does not have a valid California Driver’s license; or valid individual taxpayer identification number; or a municipal identification number.

4. The applicant's vending operation, as described in the application, is inconsistent with the standards, conditions, and requirements of this Chapter.

5. It is determined that the applicant does not possess all federal, state, and local permits and licenses necessary to engage in the activity in which they seek to engage.

C. If the application is denied, the reasons for disapproval shall be noted on the application, and the applicant shall be notified that their application is denied and that no permit will be issued. Notice shall be mailed to the applicant at the address shown on the application form.

D. If the City Manager or designee approves the applicant's permit, they shall endorse their approval on the application and shall, upon payment of the prescribed fee, deliver the permit to the applicant.

E. Exemptions. A sidewalk vending permit shall not be required for the following activities:

1. The sale of agriculture products on the site where the product is grown.

2. Catering for private parties held exclusively on private property and not open to the general public.

4. First Amendment protected vending.

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F. Term of permit. A business license issued pursuant to this Chapter shall automatically expire one (1) year from the date issued, unless an earlier expiration date is noted on the permit.

G. Transferability. A sidewalk vending permit shall not be transferable to any other entity or person and is valid only as to the original applicant for the term stated.

Section 5.89.050 Stationary Sidewalk Vending Locations and Standards.

A. Stationary sidewalk vendors shall be prohibited from operating or establishing in any residential zone of the City, including the G -R-5, R-1, R-G-A, R-2, R-3, R-4, R-4-VP, and R-MHP zones.

B. Stationary sidewalk vendors may operate in non- residential zones of the City, including mixed use zones, provided they meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. The sidewalk vendor can set up their vending operation while still leaving a minimum of forty-eight inches (48”) of unobstructed accessible path of travel, without obstruction, along the public sidewalk or public pathway; and

3. If the sidewalk vendor is selling food, the sidewalk vendor shall display a valid Health Permit issued by the County in a conspicuous location, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncut produce will be sold. If potentially hazardous food or cut produce will be sold or the food display area is greater than twenty-five (25) square feet, the vendor must display a valid Health Permit issued by the County in a visible location; and

4. Any sidewalk vendor food cart shall possess a current County decal sticker posted on the food cart, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncut produce will be sold. If potentially hazardous food or cut produce will be sold or the food display area is greater than twenty -five (25) square feet, the vendor must post on the food cart a current decal sticker; and

5. If the sidewalk vendor is selling food, all employees shall possess a current food handler’s card, issued by the County; and

6. Sidewalk vending hours shall be conducted only between the hours of one- half hour before sunrise and 3:00 AM of every day; and
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7. The sidewalk vendor must maintain the vending area in a clean, orderly, and sanitary condition, including upon departure of the vending area after its use; and

8. No vending shall occur within ten (10) feet of any entrance or exit of any building, or any driveway, parking space or building window; and

12. Vendors selling food potentially hazardous food products shall provide a refuse container for customers within twenty (20) feet of the food cart; and

14. The vendor shall not attach or use any water lines, electrical or telecommunication lines, or gas lines during vending operations; and

16. Exterior storage or display of refuse, equipment, materials, goods, wares, or merchandise associated with the vendor is prohibited; and

17. Vendors utilizing sound amplifying devices or musical instruments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and

18. No vending shall occur within two hundred (200) feet of a Certified Farmers Item 1E - Page 32
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Market, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

21. Sidewalk vendors shall comply with all applicable fire code requirements in the use of an open flame or charcoal in the preparation of food products.

Any smoke or odors produced through the preparation of food products shall be subject to the regulations contained in Palm Springs Municipal Code Section 6.08.020; and

22. Due to increased pedestrian and vehicular traffic during these times, no vending shall occur from Friday through Sunday during the hours of 4:00 PM to 11:00 PM from October 1
st through April 30 th on Palm Canyon
between Baristo Road to the south and Alejo Road to the north or on Arenas between Indian Canyon Drive to the west and Calle Encilia to the east; and

23. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations; and

24. This Chapter shall not be construed to prevent sidewalk vendors from entering into partnerships or other arrangements with restaurants to use those restaurants’ kitchens or restroom facilities, or both, so long as such restaurant facilities remain compliant with applicable laws and regulations, including, but not limited to, Riverside County Environmental Health laws and regulations.

25. Sidewalk vendors shall use Reusable Food Service Ware and Reusable Food Service Ware Accessories in accordance with Palm Springs Municipal Code Chapter 5.87.

Section 5.89.060 Sidewalk Vending in Parks, Certified Farmers Markets.

A. Sidewalk vending of food or merchandise by stationary vendors shall be prohibited Item 1E - Page 33
Ordinance No. 2077

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in any City Park with a concession stand operated by a vendor under exclusive contract with the City selling similar food or merchandise or in an area occupied by a Certified Farmers Market.

B. Sidewalk vendors may operate in City Parks provided they meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. For stationary sidewalk vending, the sidewalk vendor can set up their vending operation while still leaving a minimum of forty-eight inches (48”) of unobstructed accessible path of travel, without obstruction, along the public sidewalk or public pathway. Stationary sidewalk vendors may also set up their vending operation in the grassed areas of public parks provided such area is not utilized as an athletic field; and

3. The sidewalk vendor shall cease operations one (1) hour prior to the close of the park but may still be present in the park until the time of park closure in order to pack up their things and/or enjoy the park; and

4. The sidewalk vendor maintains the vending area in a clean, orderly, and sanitary condition, including upon departure of the vending area after its use; and

5. If the sidewalk vendor is selling food, the sidewalk vendor shall display a valid Health Permit issued by the County in a conspicuous location, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncut produce will be sold. If potentially hazardous food or cut produce will be sold or the food or the display area is greater than twenty-five (25) square feet, the vendor must display a valid Health Permit issued by the County in a conspicuous location; and

6. Any sidewalk vendor food cart shall possess a current County decal sticker posted on the food cart, except when the sidewalk vendor consists solely of twenty-five (25) square feet or less of display area from which only prepackaged non-potentially hazardous food and whole uncut produce will be sold. If potentially hazardous food or cut produce will be sold or the food display area is greater than twenty -five (25) square feet, the vendor must post on the food cart a current decal sticker; and

7. No vending shall occur within ten (10) feet of any entrance or exit of any building, or any driveway, parking space or building window; and

8. No dining tables, chairs, fences, or other site furniture shall be permitted in Item 1E - Page 34
Ordinance No. 2077

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conjunction with the vendors vending activities. Sidewalk vendors may have one umbrella or tent structure, not to exceed one hundred (100) square feet in area; the umbrella or shade structure shall not encroach into the accessible path of travel; and

9. During operations, no food shall be stored, displayed, or served from any place other than the approved food cart. The use of side units, coolers, benches, or tables for food preparation, storage or display is prohibited; and

10. Vendors selling food potentially hazardous food products shall provide a refuse container for customers within twenty (20) feet of the food cart; and

11. Vendors utilizing sound amplifying devices or musical instruments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and

12. The vendor may have a maximum of one (1) sign not to exceed eight (8) square feet in area, or two (2) signs not to exceed four (4) square feet in area each. The signage must be affixed to the cart, showcase, rack, umbrella, or tent structure, and shall not be freestanding; and

13. Any lighting associated with the vending operation shall be downward directed and shall comply with the outdoor lighting requirements listed in Palm Springs Zoning Code Section 93.21.00.

14. No vending shall occur within the two hundred feet (200’) of an event held pursuant to a Temporary Event Permit, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

15. The sidewalk vendor shall not discharge any liquid (e.g., water, grease, oil, etc.) onto or into City streets, storm drains, catch basins, or sewer facilities.

All discharges shall be contained and properly disposed of by the sidewalk vendor; and

16. Due to issues of traffic visibility, no vending shall occur within a corner cutoff area. A corner cutoff area is that area at all intersecting and intercepting streets or highways. The cutoff line shall be in a horizontal plane, making an angle of forty-five (45) degrees with the side, front, or rear property line, as the case may be. It shall pass through the points located on both sides and front or rear property lines at a distance of thirty (30) feet from the intersection of such lines at the corner of a street or highway.

17. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations.

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18. Sidewalk vendors shall use Reusable Food Service Ware and Reusable Food Service Ware Accessories in accordance with Palm Springs Municipal Code Chapter 5.87.

Section 5.89.070 Roaming Sidewalk Vending.

A. Roaming sidewalk vendors shall meet the following:

1. The sidewalk vendor is duly licensed and meets all requirements of section

5.89.030; and

2. Sidewalk vending hours for residential zones shall be conducted between the hours of one- half hour before sunrise and one- half hour after sunset; and

3. Sidewalk vending hours for non- residential zones shall be conducted only between the hours of one- half hour before sunrise and 3:00 AM of every day; and

4. The sidewalk vendor maintains their temporary vending area in a clean, orderly, an d sanitary condition, including upon departure of the vending area after its use; and

5. No vending shall occur within ten (10) feet of any entrance or exit of any building, or any driveway, parking space or building window; and

6. The vendor may have a maximum of one (1) sign not to exceed eight (8) square feet in area; and

7. Vendors utilizing sound amplifying devices or musical instruments shall be subject to the requirements of Section 11.74.043(f) of the Palm Springs Municipal Code; and

8. No vending shall occur within two hundred (200) feet of a Certified Farmers Market, a Swap Meet, or an event held pursuant to a Temporary Event Permit; and

9. Due to issues of traffic visibility, no vending shall occur within a corner cutoff area. A corner cutoff area is that area at all intersecting and intercepting streets or highways. The cutoff line shall be in a horizontal plane, making an angle of forty-five (45) degrees with the side, front, or rear property line, as the case may be. It shall pass through the points located on both sides and front or rear property lines at a distance of thirty (30) feet from the intersection of such lines at the corner of a street or highway; and

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10. Due to increased pedestrian and vehicular traffic during these times, no vending shall occur from Friday through Sunday during the hours of 4:00 PM to 11:00 PM from October 1
st through April 30 th on Palm Canyon
between Baristo Road to the south and Alejo Road to the north or on Arenas between Indian Canyon Drive to the west and Calle Encilia to the east; and

11. Sidewalk vendors and any employees and agents must comply with all applicable federal and state labor laws and regulations.

Section 5.89.080 Sidewalk Vending Zones.

The City Council may establish sidewalk vending zones by resolution to encourage sidewalk vending activity in areas where impacts to public health, safety and welfare are minimized. In establishing sidewalk vending zones, the City Council may waive certain operational standards of this Chapter, including hours of operation, shade structure limitations, site furniture limitations, and other similar standards provided such waivers are identified in the adopting resolution.

Section 5.89.090 Suspension; Rescission.

1. Fraud or misrepresentation in the course of vending;

2. Fraud or misrepresentation in the application for the permit;

3. Vending in a manner that creates a public nuisance or constitutes a danger to the public.

C. No person whose street vending permit has been revoked pursuant to this chapter shall be issued a street vending permit for a period of two (2) years from the date revocation becomes final.

Section 5.89.100 Appeals.

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such applicant or any other person aggrieved shall have the right to appeal such action or decision pursuant to PSMC Section 3.68.010.

Section 5.89.110 Penalties.

A. It is unlawful for any person to violate any provision or fail to comply with any requirements of this Chapter. A violation of this Chapter shall by punished by:

1. An administrative fine not exceeding $50 for a first violation.

2. An administrative fine not exceeding $100 for a second violation within one (1) year of the first violation.

3. An administrative fine not exceeding $250 for each additional violation within one (1) year of the first violation.

B. A violation of vending without a sidewalk vending permit, may, in lieu of the penalties set forth in subsection (A), set forth above, be punished by:

1. An administrative fine not exceeding one-hundred twenty five ($125) dollars for a first violation.

2. An administrative fine not exceeding five hundred dollars ($500) for a second violation within one (1) year of the first violation.

3. An administrative fine not exceeding one thousand dollars ($1,000) for each additional violation within one (1) year of the first violation.

D. The proceeds of any administrative fines assessed pursuant to this Chapter shall be deposited in the treasury of the City.

F. Any violation of this Ch apter shall not be punishable as an infraction or misdemeanor, and any person alleged to have violated any provisions of this Chapter shall not be subject to arrest except when otherwise permitted under law.

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2. The City may allow the person to complete community service in lieu of paying the total administrative fine, may waive the administrative fine, or may offer an alternative disposition.

SECTION 3. Section 5.48.010 of the Palm Springs Municipal Code is hereby amended to rescind and replace the definition of “Solicitor” as follows:

““Solicitor” means any person, whether a resident of the city or not, engaged in solicitation. The term “solicito r” does not include any person carrying, conveying, delivering, or transporting dairy products, newspapers or other goods to regular customers on established routes or to the premises of any person who had previously ordered such products or goods and is entitled to receive the same, nor does it include a “sidewalk vendor or vending,” as that term is defined in PSMC Section 5.89.020.”

SECTION 4. Severability. If any section, sentence, clause or phrase of this Item 1E - Page 39
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Ordinance or the application thereof to any entity, person or circumstance is held for any reason to be invalid or unconstitutional, such invalidity or unconstitutionality shall not affect other provisions or applications of this Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable. The City Council of the City of Palm Springs hereby declares that it would have adopted this Ordinance and each section, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

SECTION 5. This Ordinance is exempt from the requirements of the California Environmental Quality Act (“CEQA”) pursuant to State CEQA Guidelines, as it is not a “project” and has no potential to result in a direct or reasonably foreseeable indirect physical change to the environment [14 Cal. Code Regs. § 15378(a)]. Further, this Ordinance is exempt from CEQA as there is no possibility that this Ordinance or its implementation would have a significant negative effect on the environment [14 Cal. Code Regs. § 15061(b)(3)].

SECTION 6. Effective Date. This Ordinance shall become effective thirty (30) days following its adoption.

PASSED, APPROVED, AND ADOPTED BY THE PALM SPRINGS CITY
COUNCIL THIS _____ DAY OF ______________, _________.

GRACE ELENA GARNER
MAYOR

ATTEST:

BRENDA PREE, MMC

CITY CLERK

Item 1E - Page 40
Ordinance No. 2077

Page 17 ends

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

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, MMC

CITY CLERK

Item 1E - Page 41

Summary report:

Item 1E - Page 42

CITY COUNCIL STAFF REPORT
07/10/2023 CONSENT CALENDAR
SUBJECT:

ORDINANCE AMENDING CITY MUNICIPAL CODE TO ESTABLISH PERMANENT

LIMITATIONS ON THIRD-PARTY FOOD DELIVERY FEES
RECOMMENDATION:

Read by title and introduce Ordinance No. 2084, entitled “AN ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM

SPRING MUNICIPAL CODE, REGARDING LIMITATIONS ON THIRD-PARTY FOOD DELIVERY FEES.”
Attachments
Item 1F

CITY COUNCIL STAFF REPORT

DATE: JULY 10, 2023 CONSENT CALENDAR

SUBJECT: ORDINANCE AMENDING CITY MUNICIPAL CODE TO ESTABLISH

PERMANENT LIMITATIONS ON THIRD-PARTY FOOD DELIVERY FEES

FROM: Scott C. Stiles, City Manager

BY: Jeff Ballinger, City Attorney

SUMMARY:

The City Council will consider adopting an ordinance that creates and adds Chapter 5.89 to Title 5 of the Palm Springs Municipal Code, permanently extending limitations on the amount that a third-party food delivery service may impose as a fee. This draft ordinance is based on Urgency O rdinance No. 2033, which was passed and enacted by the City Council on October 8, 2020.

The proposed ordinance (Attachment 1) will continue to make it unlawful for a third-party food delivery service to charge a retail food service establishment a delivery fee that is more than 15 percent of the cost of the purchase price of an online order. The ordinance will also make it unlawful fo r a third -party food delivery service to charge a retail food service establishment more than 5 percent of the cost of the purchase price of an online food order for the total of all other fees charged. Lastly , the ordinance will continue to require a third-party food delivery service to disclose to the customer each fee that it charged a retail food service establishment and mandates that the drivers receive the entire gratuity paid by the customer.

A violation of th e proposed ordinance can be enforced through a private right of action after a third- party food delivery service has been given a period of 15 days to cure the violation. Enforcement of this ordinance, as with the previous temporary ordinance, is intended be solely through a private caus e of action. The City is not intended to be the primary enforcement party for this ordinance.

The City Council conducted a first reading (introduction) of this ordinance at its April 27, 2023 Council meeting. The ordinance, as introduced at that meeting, is back before the City Council for possible second reading (adoption). If adopted, the ordinance would take effect 30 days following the adoption.

Item 1F - Page 1
City Council Staff Report
July 10, 2023 – Page 2
Third-Party Food Delivery Fee Limitation Ordinance

RECOMMENDATION:

Read by title and introduce Ordinance No. _____, entitled “AN ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM

SPRING MUNICIPAL CODE, REGARDING LIMITATIONS ON THIRD -PARTY FOOD DELIVERY FEES.”

BACKGROUND:

On March 14, 2020, the City Manager acting as Director of Emergency Services issued a Proclamation of Local Emergency in response to the ongoing COVID-19 pandemic that was ratified by the City Council on March 19, 2020. Under the initial stay at home orders issued by the State in March of 2020, restaurants were prohibited from providing in- person dining, and were limited to drive through, pick-up or delivery. Although restaurants were subsequently authorized to provide in- person, indoor dining on May 12, 2020, that option was again removed by the State on July 1. After that date, restaurants within Palm Springs were only able to provide in-person dining outdoors. As a result of the limitations placed on restaurants being able to provide in-person dining, there had been a significant increase in the use of third-party food delivery services, and reports of high delivery fees, which had the effect of discouraging the use of third-party delivery services.

In response to this increase in demand of third- party food delivery services, on October 8, 2020, the City Council enacted Urgency Ordinance No. 2033, which temporarily placed a limit on the charges imposed by third- party delivery services on retail food establishments in an effort to promote the use of these delivery services and protect both City residents and local businesses from excessively high fees. At the time Urgency Ordinance No. 2033 was enacted, it was set to automatically sunset 90 days following the end of the locally declared emergency, unless extended by the City Council or Emergency Services Director.

During its regular meeting on February 21, 2023, the City Council declared an end to the locally declared emergency in response to the COVID -19 pandemic, effective February 28, 2023. Consequently, Urgency Ordinance No. 2033 is set to automatically sunset and expire on May 28, 2023.

At its February 21, 2023 City Council meeting, the City Council considered several items regarding the then-pending termination of the State of Emergency, including whether or not to extend the temporary regulation of third- party food delivery fees. At that time, the City Council directed staff to bring back an ordinance permanently regulating these food delivery fees.

Permanently extending and codifying the limits on the charges imposed by third- party delivery services on retail food establishments in the City Municipal Code would continue to be beneficial to City residents, visitors, food delivery workers, and local businesses by protecting against the economic impacts associated with the imposition of excessive fees, while at the same time promoting the use of these third-party delivery services.

Item 1F - Page 2
City Council Staff Report
July 10, 2023 – Page 3
Third-Party Food Delivery Fee Limitation Ordinance

STAFF ANALYSIS:

Restaurants are vital to the character and community fabric of Palm Springs. They reflect and nurture the cultural diversity of the City, while offering access to food, an essential foundation of human health and basis for social connection. R estaurants are also important engines of the local economy, providing jobs and serving as commercial anchors in neighborhoods across the City.

The central place of restaurants in the City’s commercial districts is evident from City real estate statistics. Restaurants occupy a substantial percentage of ground floor space along the City’s commercial corridors.

In recent years, many restaurants within the City have struggled economically.

Restaurants have historically operated on thin margins. Increases in costs such as labor and raw goods have heightened this concern. The economic struggles o f brick -and- mortar restaurants in the City over the past five years coincides with the rapid rise of third- party food delivery services, businesses that process food delivery and pickup orders through mobile apps and websites. According to one consumer market outlook publication, revenue in the U.S. “platform -to-consumer delivery” market was $8.7 billion in 2019, a nearly 10% increase over the same segment’s valuation in 2018. Market research data from the first quarter of 2020 shows approximately 15.9% of all U.S. residents utilized third-party food delivery services at least once in the past year, many on a regular basis, and industry experts expect that percentage to continue to increase.

As of November 2019, just four third-party food delivery services controlled approximately 98% of the entire market.

The increasing market dominance of a small number of third-party food delivery services companies has resulted in increasingly difficult economic conditions for restaurants within the City, which must contract with these companies if they wish to access the growing share of customers who rely on delivery platforms to obtain meals.

The market dominance of a few third-party food delivery services companies gives these companies disproportionate leverage in contract negotiations with restaurants. These companies use this leverage to extract high fees from restaurants – typically totaling 30% of an order total – and thereby diminish restaurants’ already-narrow profit margins. Food delivery services companies also often impose contract terms that prohibit restaurants from charging a higher price for delivery orders than dine- in orders, eliminating a means by which restaurants could recoup the fees charged by delivery services.

Sample contracts used by leading third- party food delivery services companies reflect that these companies commonly charge restaurants a 10% per -order fee for “delivery services,” the most logistically demanding and resource-intensive service they provide to restaurants. These companies often impose additional fees totaling as much as 20% of the order cost for what are described as “marketing” or “logistics” services.

Item 1F - Page 3
City Council Staff Report
July 10, 2023 – Page 4
Third-Party Food Delivery Fee Limitation Ordinance

While money spent by consumers at local restaurants circulates within communities and bolsters the vitality of commerci al areas, third -party food delivery services companies have amassed concentrated wealth without providing similar community benefits. And increasingly, these companies are using their market leverage to extract unfairly high payments from restaurants, hastening the closure of City restaurants and the resulting decline of City commercial areas.

The COVID-19 emergency has worsened the economic picture for restaurants within the City. Due to the bans on dine-in restaurant service caused by a concern with the spread of COVID-19, third-party food delivery services have enjoyed unprecedented revenue, while many restaurants have become dependent on delivery and takeout orders, and increasingly vulnerable to unfair contract terms demanded by delivery services companies.

Capping the fees third-party food delivery services companies can charge restaurants is an important step to ensure that restaurants can thrive in Palm Spring and continue to nurture vibrant, distinctive commercial districts. The fact that leading t hird-party food delivery services companies currently charge a 10% per-order fee for the most resource- intensive aspect of their business – delivery services – and that these companies report high profit margins from all aspects of their business operations, indicates that a 15% fee cap on per-order fees charged to restaurants is a reasonable step to protect restaurants from financial collapse without unduly constraining third- party food delivery services’ businesses.

This proposed ordinance is based on the Urgency Ordinance No. 2033, originally adopted in October 2020. Specifically, this ordinance will impose the following regulations on third- party food delivery charges:

• Makes it unlawful for a third- party food delivery service to charge a retail food establishment a delivery fee that is more than fifteen (15) percent of the cost of the purchase price of an online order.
• Makes it unlawful for a third- party food delivery service to charge a retail food establishment any amount des ignated as a “delivery fee” for an online order that does not involve the delivery of food or beverages.
• Makes it unlawful for a third- party delivery service to charge a retail food establishment more than five (5) percent of the cost of the purchase pri ce of an online food order for the total of all other fees charged. • Makes it unlawful for a third- party food delivery service to charge a retail food establishment any fee, commission, or cost, other than as permitted in the three bullet points, above.
• Makes it unlawful for a third- party food delivery service to charge a customer a purchase price that is higher than the price set by the retail food establishment on its menu.
• Requires that the food delivery drivers (not their delivery company) receive the entire gratuity paid by the customer.

Item 1F - Page 4
City Council Staff Report
July 10, 2023 – Page 5
Third-Party Food Delivery Fee Limitation Ordinance

• Requires a third-party delivery service to disclose to the customer each fee that it charged a retail food service establishment , as well as any tip that will be paid to the person delivering the food.

As with Urgency O rdinance No. 2033 , a violation of the proposed ordinance may be enforced through a private right of action after a third- party delivery service is provided with a period of 15 days to cure the violation. In order to enable such private enforcement, the ordinance provides that a prevailing plaintiff is entitled to be awarded their attorneys’ fees and costs.

DoorDash Proposal (San Francisco Approach)

The City’s existing COVID- based ordinance, as well as the proposed permanent ordinance, both cap the amount that a food delivery company can charge to restaurants at 15% of the cost of the food purchase. In April of 2023, representatives of DoorDash met with the City, and explained a business model that has been introduced to the food delivery sector since the original COVID-based ordinance went into effect in 2020.

Namely, in 2021, DoorDash introduced a new plan whereby participating restaurants can choose from a smorgasbord of service options provided by DoorDash. Restaurants can choose a basic food delivery service plan for a commission equal to 15% of the purchase price. Or, restaurants can choose to sign up for enhanced services provided by DoorDash, designed to boost the restaurants’ sales. In exchange for these enhanced services, restaurants are charged higher commission rates rate of 25% or 30%.

Apparently, another major food delivery company, Grubhub , also provides a multiple commission rate structure to its participating restaurants. The enhanced services offered by companies such as DoorDash include marketing, order processing, customer support and technology and product development. According to DoorDash, the vast majority of restaurants who have opted into a plan have chosen a plan that includes these enhanced services, and therefore exceed the 15% cap. As such, representatives of DoorDash have requested that the City consider an exemption to this one aspect of the ordinance, for those restaurants that have chosen to sign up for the enhanced services.

Accompanying this report, as Attachment 2, is language that would accomplish what has been suggested by DoorDash, should the City Council wish to consider such a modification.

Notably, other protections of the proposed ordinance would remain intact. For instance, the ordinance would still contain the following regulations:

• Makes it unlawful for a third- party food delivery service to charge a customer a purchase price that is higher than the price set by the retail food establishment on its menu.
• Requires that the food delivery drivers (not their delivery company) receive the entire gratuity paid by the customer.

Item 1F - Page 5
City Council Staff Report
July 10, 2023 – Page 6
Third-Party Food Delivery Fee Limitation Ordinance

• Requires a third-party delivery service to disclose to the customer each fee that it charged a retail food service establishment, as well as any tip that will be paid to the person delivering the food.

The City of San Francisco, which enacted a permanent delivery cap in 2021, has amended its ordinance along the lines recently suggested by DoorDash, following the resolution of a lawsuit that DoorDash and Grubhub filed against that City. 1 Attached, as
Attachment 3, is the language adopted by the City of San Francisco in 2022, providing for an exemption for restaurants that sign up for enhanced services.

Therefore, should the City Council wish to incorporate this sort of exemption, City staff and the City Attorney would recommend including language similar to that in the attached ordinances.

ENVIRONMENTAL ASSESSMENT:

The proposed ordinance is not anticipated to have any environmental impact. Therefore, no further environmental review is required under the California Environmental Quality Act (CEQA).

ALIGNMENT WITH STRATEGIC PLANNING:

This agenda item aligns with the City’s Strategic Plan’s principle of focusing on issues that most impact quality of life as well as social equity, but protecting the economic well - being of customers, restaurants and food deliver workers.

FISCAL IMPACT
:

Enforcement of t he ordinance, as proposed, will not have any fiscal impact on the City since it is drafted to be enforced through private causes of action; not by City code enforcement. Should the City Council include a provision that provides for enforcement by the City, there would be additional costs of investigation and enforcement, the amount of which is unknown at this time.

By protecting local restaurants from unreasonably high service delivery fees, the proposed ordinance is expected to protect against restaurant closures, which would otherwise negatively affect the City’s revenues. Therefore, it is anticipated that the proposed ordinance would have a positive fiscal impact on the City.

1 DoorDash and Grubhub v. City and County of San Francisco, Case No. 3:21-CV-05502-EMC. This case was dismissed in September of 2022, following a settlement mutually agreed to by those parties. That settlement followed a motion to dismiss, filed by San Francisco, which was partially granted and partially denied by the trial court. According to DoorDash, a similar lawsuit has been filed against the City of New York, following that City’s adoption of a permanent ban.

Item 1F - Page 6
City Council Staff Report
July 10, 2023 – Page 7
Third-Party Food Delivery Fee Limitation Ordinance

REVIEWED BY:

City Attorney: Jeffrey S. Ballinger
City Manager: Scott Stiles

ATTACHMENTS:

1. ORDINANCE NO. _____, “AN ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM SPRING MUNICIPAL

CODE, REGARDING LIMITATIONS ON THIRD -PARTY FOOD DELIVERY FEES.”

2. (REVISED) ORDINANCE NO. _____, “AN ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM SPRING

MUNICIPAL CODE, REGARDING LIMITATIONS ON THIRD -PARTY FOOD DELIVERY FEES.”

3. S an Francisco Ordinance Exemption

Item 1F - Page 7

ATTACHMENT 1

Item 1F - Page 8
55575.18100\41444932.1

ORDINANCE NO. ____

AN ORDINANCE OF THE CITY OF PALM SPRINGS,
CALIFORNIA, ADDING CHAPTER 5.89 TO THE PALM

SPRING MUNICIPAL CODE, REGARDING LIMITATIONS

ON THIRD-PARTY FOOD DELIVERY FEES

City Attorney Summary
An ordinance adding Chapter 5.89 to Title 5 of the Palm Springs Municipal Code, which permanently extends the limit on the charges imposed by third- party delivery service s on retail food establishments . The Council finds that these provisions will continue to promote the use of third -party delivery services by maki ng them more affordable to City residents, and protect City residents , visitors, third party delivery workers and local businesses from the imposition of excessive fees.

WHEREAS, the City of Palm Springs is a charter city organized pursuant to Article XI, Section 5 of the California Constitution and pursuant to the authority so granted, the City has the power to make and enforce within its limits all ordinances and regulations with respect to municipal affairs not in conflict with its own charter.

WHEREAS, w ith that purpose and intent, on March 14, 2020, the City Manager acting as Director of Emergency Services issued a Proclamation of Local Emergency in response to the ongoing COVID-19 pandemic that was ratified by the City Council on March 19, 2020.

WHEREAS, under the initial stay at home orders issued by the State in March of 2020, restaurants were prohibited from providing in- person dining, and were limited to drive through, pick -up or delivery. Although restaurants were subsequently authorized to provide in-person, indoor dining on May 12, 2020, that option was again removed by the State on July 1. After that date, restaurants within Palm Springs were only able to provide in- person dining outdoors. As a result of the limitations placed on restaurants being able to provide in -person dining, there had been a significant increase in the use of third-party food delivery services, and reports of high delivery fees, which had the effect of discouraging the use of third party delivery services.

WHEREAS, in response to this increase in demand of third- party food delivery services, o n October 8, 2020, the City Council enacted Urgency Ordinance No. 2033, which temporarily placed a limit on the charges imposed by third-party delivery services on retail food establishments in an effort to promote the use of these delivery services and protect both City residents and local businesses from excessively high fees.

WHEREAS, when Urgency Ordinance No. 2033 was enacted, it was set to automatically sunset 90 days following the end of the locally declared emergency, unless extended by the City Council or Emergency Services Director.

Item 1F - Page 9
55575.18100\41444932.1

Ordinance No. _____

Page 2 ends

WHEREAS, during its regular meeting on February 21, 2023, the City Council declared an end to the locally declared emergency in response to the COVID-19 pandemic, effective February 28, 2023.

WHEREAS, as a result o f the City Council ending the locally declared emergency, Urgency Ordinance No. 2033 is set to automatically sunset and expire on May 28, 2023.

WHEREAS, upon further review and consideration, the City Council has determined that permanently extending the limit on the charges imposed by third- party delivery services on retail food establishments would continue to be beneficial to both City residents , visitors , third party delivery workers and local businesses by protecting against the negative economic impacts associated with the imposition of excessive service delivery fees, as well as protecting the ability of those providing service deliveries to receive tips, while at the same time promoting the use of these third-party delivery services.

WHEREAS, these new regulations shall be codified in Chapter 5.89 and added to Title 5 of the Palm Springs Municipal Code.

THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES ORDAIN AS FOLLOWS:

SECTION 1
. Incorporation of Recitals. That the findings and
determinations reflected above are true and correct, and are incorporated by this reference herein as the cause and foundation for the action taken by and through this Ordinance. The City Council hereby finds that this Ordinance is necessary for the continued protection of City residents and local businesses from the economic impacts associated with the imposing of excessive fees by third-party food delivery services.

SECTION 2. Regulation of Third Party Food Delivery Service Fees.

The Palm Springs Municipal Code shall be amended to add a new Chapter 5.89, to read as follows:

“Chapter 5.89 Regulation of Third Party Food Delivery
Charges

5.89.010 Definitions

5.89.020 Regulations.

5.89.030 Disclosures.

5.89.040 Enforcement.

5.89.010 Definitions.

Item 1F - Page 10
55575.18100\41444932.1

Ordinance No. _____

Page 3 ends

For purposes of this ordinance, the following definitions apply.

A. "City" means the City of Palm Springs.

B. "Delivery Fee" means a fee charged by a Third- party Food Delivery Service for providing a Retail Food Establishment with a service that delivers food and beverages from such establishment to customers. The term does not include any other fee or cost that may be charged by a Third-party Food Delivery Service to a Retail Food Establishment, such as fees for listing or advertising the Retail Food Establishment on the Third- party Food Delivery Service platform or fees related to processing the online order, including, but not limited to, service fees, fees for facilitating Online Orders for pick -up, and credit card processing fees.

C. "Online Order" means an order placed by a customer
through or with the assistance of a platform provided by a Third-Party Food Delivery Service, including a telephone order, for delivery or pick-up within the City.

D. "Purchase Price" means the price, as listed on the menu, for the items contained in an Online Order, minus any applicable coupon or promotional discount provided to the customer by the Retail Food Establishment through the Third- Party Food Delivery Service. This definition does not include taxes, gratuities, and any other fees or costs that may make up the total amount charged to the customer of an Online Order

E. “Retail Food Establishment" means a restaurant,
delicatessen bakery, coffee shop, or other eat-in or carry-out service of processed or prepared and ready-to-eat food or beverages.

F. "Third-party Food Delivery Service" means any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick-up of food and beverages from, no fewer than 20 Retail Food Establishments located in the City that are each owned and operated by different persons.

5.89.020 Regulations.

A. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment a Delivery Fee that totals more than fifteen (15) percent of the Purchase Price of each Online Order.

Item 1F - Page 11
55575.18100\41444932.1

Ordinance No. _____

Page 4 ends

B. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishme nt any amount designated as a Delivery Fee for an Online Order that does not involve the delivery of food or beverages, or both.

D. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any fee, commission, or cost that is to be paid to the Third-party Food Delivery Service, other than as permitted in Subsections A through C, above.

E. It shall be unlawful for a Third-party Food Delivery Service to charge a customer any Purchase Price for a food or beverage item that is higher than the price set by the Retail Food Establishment on the Third- Party Food Delivery Service or, if no price is set by the Retail Food Establishment on the Third-Party Food Delivery Service, the price listed on the Retail Food Establishment's own menu.

F. It shall be unlawful for a Third- party Food Delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third- party Delivery Service, in its entirety, to the person delivering the food or beverages.

G. As an example, if a customer orders a meal that is advertised for $10.00 on the Third-party Food Delivery Service’s app., the Third- party Food Delivery Service cannot charge the customer more than $10.00 for the meal. Nor can the Third-party Food Delivery Service charge the restaurant more than $1.50 as a Delivery Fee. Nor can the Third- party Food Delivery Service charge the restaurant more than 50¢ as a fee or commission for the restaurant’s placement on the Third-party Food Delivery Service’s app. Finally, if the customer agrees to provide the delivery person a $2.00 tip, that tip must go to the delivery person; not the Third- party Food Delivery Service company.

5.89.030 Disclosures.

The Third-party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to the following:

Item 1F - Page 12
55575.18100\41444932.1

Ordinance No. _____

Page 5 ends

(a) the Purchase Price of the food and beverages at the cost listed on the Retail Food Establishment's menu;
(b) the Delivery Fee charged to the Retail Food
Establishment;
(c) each fee, commission, or cost, other than a Delivery Fee, charged to the Retail Food Establishment;
(d) each fee, commission, or cost, other than the Delivery Fee or the Purchase Price of the food, charged to the
customer by the Third- party Food Delivery Service;
and
(e) any tip or gratuity that will be paid to the person delivering the food or beverages.

5.89.040 Enforcement.

A violation of this ordinance shall subject the violator to the following:

A. A civil action in the Superior Court of the State of California to recover all actual damages resulting from a violation of this ordinance.

B. Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a Third- party Food Delivery Service. If plaintiff fails to prevail against a Third-party Food Delivery Service, a court may award reasonable attorneys' fees and costs to the Third-party Food Delivery Service upon a determination by the court that the plaintiff's action was frivolous.

C. A civil action alleging a violation of any provision of this ordinance shall commence only after the following requirements have been met:

1. Written notice is provided to the Third- party Food
Delivery Service of the provisions of the ordinance alleged to have been violated and the facts to support the alleged violation; and

2. The Third-party Food Delivery Service is provided 15 days from the date of the written notice to cure any alleged violation.

Item 1F - Page 13
55575.18100\41444932.1

Ordinance No. _____

Page 6 ends

D. Notwithstanding any provision of this Code, or any other ordinance to the contrary, no criminal penalties shall attach for violation of this ordinance, nor shall it be enforced as a violation of a City ordinance. Enforcement of this ordinance shall be solely through a private cause of action. Neither the City nor its staff is responsible for enforcement of this ordinance.

SECTION 3. Severability. If any section or provision of this Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance shall remain valid. The City Council hereby declares that it would have adopted this Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation.

SECTION 4
. CEQA. The City Council determines that the adoption of this Urgency Ordinance is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to the following provisions of the CEQA Guidelines, 14 California C ode of Regulations, Chapter 3: th is Urgency Ordinance is exempt under CEQA Guidelines Section 15378(b)(5) in that it is not a “project” under CEQA, and will not result in direct or indirect physical changes in the environment.

SECTION 5. Adoption, Certification, and Publication. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same, or the summary thereof, to be published and posted pursuant to the provisions of law and this Ordi nance shall take effect thirty (30) days after passage.

PASSED, APPROVED, AND ADOPTED BY THE PALM SPRINGS CITY
COUNCIL this _____ day of ______________, 2023.

GRACE ELENA GARNER
MAYOR
ATTEST:

BRENDA PREE, MMC

CITY CLERK

Item 1F - Page 14
55575.18100\41444932.1

Ordinance No. _____

Page 7 ends

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.

CITY OF PALM SPRINGS )

I, BRENDA PREE, City Clerk of the City of Palm Springs, California, do hereby certify that Ordinance No. ____ is a full, true, and correct copy, and was adopted without introduction at a regular meeting of the City Council held on _________________, 2023 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 _________, 2023.

BRENDA PREE, MMC

CITY CLERK

Item 1F - Page 15

ATTACHMENT 2

Item 1F - Page 16

5.89.010 Definitions.

For purposes of this ordinance, the following definitions apply.

A. "City" means the City of Palm Springs.

B. “Core delivery service” means a service that (1) lists a Retail Food Establishment, and makes the Retail Food Establishment discoverable, on all modalities or platforms offered by a Third-party Food Delivery Service, including but not limited to any website, mobile application, or other internet service where a Third-party Food Delivery Service lists Retail Food Establishments, and (2) facilitates and/or performs the delivery (through employees or independent contractors of the Third-party Food Delivery Service and/or such establishments) of food and/or beverages from Retail Food Establishments to customers. Core delivery service does not include any other service that may be provided by a Third-party Food Delivery Service to a Retail Food Establishment, including but not limited to advertising services, search engine optimization, business consulting, or credit card processing.

C.B. "Delivery Fee" means a fee charged by a Third- party Food Delivery Service for providing a Retail Food Establishment with a service that delivers food and beverages from such establishment to customers. The term does not include any other fee or cost that may be charged by a Third -party Food Delivery Service to a Retail Food Establishment, such as fees for listing or advertising the Retail Food Establishment on the Third- party Food Delivery Service platform or fees related to processing the online order, including, but not limited to, service fees, fees for facilitating Online Orders for pick -up, and credit card processing fees.

D.C. "Online Order" means an order placed by a customer through or with the assistance of a platform provided by a Third- Party Food Delivery Service, including a telephone order, for delivery or pick-up within the City.

E.D. "Purchase Price" means the price, as listed on the menu, for the items contained in an Online Order, minus any applicable coupon or promotional discount provided to the customer by the Retail Food Establishment through the Third- Party Food Delivery Service. This definition does not include taxes, gratuities, and any other fees or costs that may make up the total amount charged to the customer of an Online Order
F.E. “Retail Food Establishment" means a restaurant,
delicatessen bakery, coffee shop, or other eat-in or carry-out service of processed or prepared and ready-to-eat food or beverages.

G.F. "Third-party Food Delivery Service" means any website, Item 1F - Page 17
mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick- up of food and beverages from, no fewer than 20 Retail Food Establishments located in the City that are each owned and operated by different persons.

5.89.020 Regulations.

A. It shall be unlawful for a Third- party Food Delivery Service to charge a Retail Food Establishment a Delivery Fee that totals more than fifteen (15) percent of the Purchase Price of each Online Order.

B. It shall be unlawful for a Third- party Food Delivery Service to charge a Retail Food Establishment any amount designate d as a Delivery Fee for an Online Order that does not involve the delivery of food or beverages, or both.

C. It shall be unlawful for a Third- party Food Delivery Service to charge a Retail Food Establishment any combination of fees, commissions, or costs for the Retail Food Establishment's use of the Third-party Food Delivery Service that is greater than five (5) percent of the Purchase Price of each Online Order. Fees, commissi ons, or costs do not include Delivery Fee
D. It shall be unlawful for a Third- party Food Delivery Service to charge a Retail Food Establishment any fee, commission, or cost that is to be paid to the Third-party Food Delivery Service, other than as permitted in Subsections A through C, above.

E. It shall be unlawful for a Third- party Food Delivery Service to charge a customer any Purchase Price for a food or beverage item that is higher than the price set by the Retail Food Establishment on the Third- Party Food Delivery Service or, if no price is set by the Retail Food Establishment on the Third-Party Food Delivery Service, the price listed on the Retail Food Establishment's own menu.

F. It shall be unlawful for a Third-party Food Delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third- party Delivery Service, in its entirety, to the person delivering the food or beverages.

G. As an example, except as provided for in Subsection H. of this Section 5.89.020, if a customer orders a meal that is advertised for $10.00 on the Third- party Food Delivery Service’s app., the Third party Food Delivery Service cannot charge the customer more than $10.00 for the meal. Nor can the Third- party Food Delivery Service charge the restaurant more than $1.50 as a Delivery Fee. Nor can the Third- party Food Delivery Service charge the restaurant more than 50¢ as a fee or commission for the restaurant’s placement on the Third-party Food Delivery Service’s app. Finally, if the customer agrees to provide the delivery person a $2.00 tip, that tip must go to the delivery person; not the Third- party Food Delivery Service company.

Item 1F - Page 18
H. Beginning on August 1, 2023, the fee limits in Subsections A through D of this Section 5.89.020 shall not apply to a Third- party Food Delivery Service that does both of the following:
(1) offers all Retail Food Establishments the option to obtain Core Delivery Service for a total fee, commission, or charge not to exceed 15% of the Purchase Price of the Online Order, without requiring the purchase of additional services; and (2) no later than June 1, 2023, notifies all Retail Food Establishments that have an existing contract with the Third- party Food Delivery Service of the option described in
subsection (H)(1).

5.89.030 Disclosures.

The Third-party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to the following:
(a) the Purchase Price of the food and beverages at the cost listed on the Retail Food Establishment's menu;
(b) a notice, if applicable, that the Third-party Food Delivery Service charges a fee, commission, or cost to the Retail Food
Establishment, unless the Retail Food Establishment directs that the Third-party Food Delivery Service disclose to customers the delivery fee charged to the Third-party Food Delivery Service and each fee, commission, or cost charged to the Third-party Food Delivery Service.
the Delivery Fee charged to the Retail Food Establishment; (c) each fee, commission, or cost, other than a Delivery Fee, charged to the Retail Food Establishment;
(c)(d) each fee, commission, or cost, other than the Delivery Fee or the Purchase Price of the food, charged to the customer by the Third-party Food Delivery Service; and
(d(e) any tip or gratuity that will be paid to the person delivering the food or beverages.

5.89.040 Enforcement.

A violation of this ordinance shall subject the violator to the following:

A. A civil action in the Superior Court of the State of California to recover all actual damages resulting from a violation of this ordinance.

Item 1F - Page 19
B. Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a Third-party Food Delivery Service. If plaintiff fails to prevail against a Third-party Food Delivery Service, a court may award reasonable attorneys' fees and costs to the Third-party Food Delivery Service upon a determination by the court that the plaintiff's action was frivolous.

C. A civil action alleging a violation of any provision of this ordinance shall commence only after the following requirements have been met:

1. Written notice is provided to the Third-party Food
Delivery Service of the provisions of the ordinance alleged to have been violated and the facts to support the alleged violation; and

2. The Third-party Food Delivery Service is provided 15 days from the date of the written notice to cure any alleged violation.
55575.18100\41080882.1
Item 3C - Page 10
Ordinance No. _____

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SECTION 3
. Severability. If any section or provision of this Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance shall remain valid. The City Council hereby declares that it would have adopted this Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation.

SECTION 4. CEQA. The City Council determines that the adoption of thi s Urgency Ordinance is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to the following provisions of the CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Urgency Ordinance is exempt under CEQA Guidelines Section 15378(b)(5) in that it is not a “project” under CEQA and will not result in direct or indirect physical changes in the environment.

SECTION 5. Adoption, Certification, and Publication. The Mayor shall sign, and the City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same, or the summary thereof, to be published and posted Item 1F - Page 20
pursuant to the provisions of law and this Ordinance shall take effect thirty (30) days after passage.

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ATTACHMENT 3

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25 FILE NO. 211131

SUBSTITUTED
06/28/2022 ORDINANCE NO. 164-22
[Police Code - Third-Party Food Delivery Services]
Ordinance amending the Police Code to define core delivery service to mean a service that both lists a covered establishment on all of a third-party food delivery service's platforms, including websites and mobile applications, and facilitates and/or performs delivery of food and/or beverages from the establishment; to exempt from the 15% cap on per-order fees, starting January 31, 2023, third-party food delivery services that offer restaurants the option to obtain only core delivery service at a cost of no more than 15% of the purchase price of an on line order without requiring the purchase of additional services, and that notify all covered establishments with which the third party food delivery services have an existing contract of this option no later than December 1, 2022; and to require that contracts between a third-party food delivery service and a covered establishment clearly define the fees, commissions, or charges associated with contracted services.

NOTE: Unchanged Code text and uncodified text are in plain Arial font.

Additions to Codes are in single-underline italics Times New Roman font.

Deletions to Codes are in strike#wough #alies Times 1Vew Rem.an .fent.

Board amendment additions are in double-underlined Arial font.

Board amendment deletions are in strikethrough ,'\rial font.

Asterisks (* * * *) indicate the omission of unchanged Code subsections or parts of tables.

Be it ordained by the People of the City and County of San Francisco :

Section 1. The Police Code is hereby amended by revising Sections 5301 (adding a defined term to be placed in alphabetical sequence with other defined terms) and 5302, to read as follows :

Supervisors Peskin; Chan, Mandelman, Safai, Preston, Mar, Walton BOARD OF SUPERVISORS Page 1
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25 SEC. 5301. DEFINITIONS.
* * * *
"Core deliverv service" means a service that 0) lists a covered establis hment , and makes the covered estab lishment discoverable, on all moda lities or platforms offered by a third -party food delivery service. including but not limited to anv website, mobile application. or other intern et service where a third-party food deliv erv serv ice lists covered establishm ents, and (2) facilitates and/or performs the delive ,y (through employees or independent contractors o[the third-pa rtv food deliver v service and/or such establishments) offood and/or beverages from covere d establishments to customers. Core deliverv service does not include any other service that mav be provi ded bv a third partv food delivery service to a covered establis hment. including but not limited to advertising services. sea rch engine optim izatio n. business consulting. or credit card processing. * * * *
SEC. 5302. CAP ON PER-ORDER FEES; CLEA R DEFINI TION OF FEES REQUIRED.
(a) No third-party food delivery service may charge a cove red establishment a fee , commission, or charge per online order that totals more than 15% of the purchase price of the online order.
(b) No third-party food delivery service may charge a covered establishment a fee , commission, or charge that exceeds 15% of the purchase price of online orders to that covered establishment processed through the third-party food delivery service during the time period covered by the fee , commission , or charge.
(c) Beginning on Januarv 31. 2023 , the fee limits in subsections (a) and (b) o[Lhis Section 5302 shall not applv to a third -party food delivery service that does both of the follow ing:

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25 (1) offers all covered establishments the option to obtain core deliven 1 service for a total fee. commission. or charge not to exceed 15% o[the purchase price o(the online order. without requiri ng the purchase of additional services: and
(2) no later than December 1. 2022, notifies all covered establishments that have an existing contract with the third-partv delive,y service of the option described in subsection (c)(J ). (d) Contracts between a third-party food deliven 1 service and a covered establishment shall clearly define the fees, commissions , or charges associated with contracted services. For examp le, i(a covered establis hment enters into a contract with a third-partv food delivery service for core delive,y service onlv. that contract shall clearlv state a fee. comm ission. or charge of ] 5% o[the purchase price for core deliverv service.

Section 2. Effective Date . This ordinance shall become effective 30 days after enactment. Enactment occurs when the Mayor signs the ordinance, the Mayor returns the ordinance unsigned or does not sign the ordinance within ten days of receiving it, or the Board of Supervisors overrides the Mayor's veto of the ordinance.

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25 Section 3. Scope of Ordinance. In enacting this ordinance, the Board of Supervisors intends to amend only those words, phrases, paragraphs, subsections, sections, articles, numbers, punctuation marks, charts, diagrams, or any other constituent parts of the Municipal Code that are explicitly shown in this ordinance as additions, deletions, Board amendment additions, and Board amendment deletions in accordance with the "Note" that appears under the official title of the ordinance.

APPROVED AS TO FORM:

DAVID CHIU, City Attorney
By: ISi Sarah Crowley

SARAH CROWLEY
Deputy City Attorney
n:\legana\as2022\2000108\01610103.docx
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City and County of San Francisco
Tails
Ordinance
City Hall
I Dr. Carlton B. Goodlett Place
San Francisco, CA 94102-4689
File Number: 211131 Date Passed: July 26, 2022
Ordinance amending the Police Code to define core delivery service to mean a service that both lists a covered establishment on all of a third-party food delivery service's platforms, including websites and mobile applications, and facilitates and/or performs delivery of food and/or beverages from the establishment; to exempt from the 15% cap on per-order fees, starting January 31, 2023, third-party food delivery services that offer restaurants the option to obtain only core delivery service at a cost of no more than 15% of the purchase price of an online order without requiring the purchase of additional services, and that notify all covered establishments with which the third-party food delivery services have an existing contract of this option no later than December 1, 2022; and to require that contracts between a third-party food delivery service and a covered establishment clearly define the fees, commissions, or charges associated with contracted services.

July 11, 2022 Rules Committee - RECOMMENDED
July 19, 2022 Board of Supervisors - PASSED ON FIRST READING Ayes: 11 - Chan, Dorsey, Mandelman, Mar, Melgar, Peskin, Preston, Ronen, Safai, Stefani and Walton
July 26, 2022 Board of Supervisors - FINALLY PASSED
Ayes: 11 - Chan, Dorsey, Mandelman, Mar, Melgar, Peskin, Preston, Ronen, Safai , Stefani and Walton
File No. 211131
London N. Breed
Mayor
City and County of San Francisco Pagel
I hereby certify that the foregoing
Ordinance was FINALLY PASSED on
7/26/2022 by the Board of Supervisors of
the City and County of San Francisco.

Angela Calvillo
Clerk of the Board
Date Approved
Printed at 8:37 am <>n 7127122

CITY COUNCIL STAFF REPORT
07/10/2023
SUBJECT:

APPROVE AN AGREEMENT WITH ONLINE COMPUTER LIBRARY CENTER, INC.

FOR FIVE YEARS OF CATALOGING, METADATA, AND INTERLIBRARY LOAN

SERVICES
RECOMMENDATION:

Approve a five-year agreement with Online Computer Library Center, Inc. in the amount of $159,673 for cataloging, metadata, and interlibrary loan services.

1. Authorize the City Manager to execute all necessary documents.2.

Attachments
Item 1G

CITY COUNCIL STAFF REPORT

DATE: JULY 10, 2023 CONSENT CALENDAR

SUBJECT: APPROVE AN AGREEMENT WITH ONLINE COMPUTER LIBRARY CENTER, INC. FOR FIVE YEARS OF CATALOGING, METADATA, AND

INTERLIBRARY LOAN SERVICES

FROM: Scott C. Stiles, City Manager

BY: Information Technology Department

SUMMARY:

This action will approve a five -year annual subscription with Online Computer Library Center, Inc. for cataloging, metadata, and interlibrary loan services.

RECOMMENDATION:

1) Approve a five-year agreement with Online Computer Library Center, Inc. in the amount of $159,673 (Attachment A) for cataloging, metadata, and interlibrary loan services.

2) Authorize the City Manager to execute all necessary documents.

BUSINESS PRINCIPAL DISCLOSURE:

Online Computer Library Center, Inc. (OCLC) is a nonprofit cooperative, funded by members’ use of shared services and programs. Founded in 1967, OCLC, Inc. provides shared technology services to over 10,300 member libraries in 124 countries (Attachment B).

The OCLC cooperative is not owned by anyone. A nonprofit library cooperative, OCLC is a membership organization whose public purposes are to further access to the world's information and reduce the rise of library costs. Librarians guide the OCLC cooperative and help shape its services and direction.

The cooperative is governed by a 14-member Board of Trustees, more than half of whom are librarians. A 48-delegate Global Council, all of whom are elected by member libraries, meet at least once a year in person to articulate the interests and concerns of OCLC member libraries. G lobal Council delegates elect six Board members and ratify Item 1G - Page 1
City Council Staff Report
July 10, 2023 - Page 2
Subscription Renewal – OCLC

amendments to the OCLC Code of Regulations and Articles of Incorporation.

BACKGROUND:

Palm Springs Public Library has utilized the services of the nonprofit cooperative, OCLC, Inc. since 1980. OCLC has proprietary cataloging records for most books and media that are added to the collection at the Palm Springs Public Library . As new books are published, book distribution vendors or library members in the cooperative create new cataloging records, which libraries use to download and share from a Group Catalog. This is how items are cataloged, organized online, and how customers find library items through various search terms in the library catalog.

The Library relies on the expertise of OCLC to provide full cataloging records for the items in the library collection. OCLC is the backbone of the library catalog system.

STAFF ANALYSIS:

OCLC provides a worldwide Interlibrary Loan (ILL) network and access to a database of bibliographic records, which libraries use to catalog their holdings. OCLC holds the trademark and copyrights associated with the Dewey Decimal System and maintains the classification system on which we depend. The Library would not function without OCLC services.

OCLC cataloging and metadata subscription gives us access to WorldCat, more than 415 million cataloging records. T his allows the Library to use records already created and registers our collection in WorldCat to support services such as Interlibrary Loan.

Membership also allows the Library to receive enhanced cataloging records when improvements are made to WorldCat records for items we hold. This allows patrons to search our catalog to find the items they need. The Library’s online catalog replaced the physical card catalog system decades ago through a subscription to OCLC’s database of cataloging records.

The subscription to WorldShare Interlibrary Loan gives access to the collections of over 10,300 libraries through the world’s largest library resource sharing network. The Library can request titles we do not own for our patrons through this service.

OCLC is a sole source provider of these services which is allowed by Title 7 Section

7.05.020 of the Municipal Code. Therefore, St aff recommends approving a five -year agreement with OCLC, Inc. in the amount of $159,673 for cataloging, metadata, and interlibrary loan services.

ENVIRONMENTAL ASSESSMENT
:

The requested City Council action is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the Item 1G - Page 2
City Council Staff Report
July 10, 2023 - Page 3
Subscription Renewal – OCLC

whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. The requested action is to approve contracts for t he above- mentioned services, and is exempt from CEQA pursuant to Section 15378(b), in that a “Project” does not include: (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.

ALIGNMENT WITH STRATEGIC PLANNING:

The requested action aligns with the City Counci l principle of Forward-Thinking Governance.

FISCAL IMPACT
:

Sufficient funds are budgeted and available in the current fiscal year in Information Technology Department Account 1001025 50034 and will be budgeted in future fiscal years.

REVIEWED BY:

Department Director: Larry Klingaman
Procurement & Contracting Manager: Kim Baker
Deputy City Manager: Jeremy Hammond
City Manager: Scott Stiles

ATTACHMENTS:

A. Agreement
B. Public Integrity Disclosure Form

Item 1G - Page 3

ATTACHMENT A

Item 1G - Page 4
Loc-US,EN-US, August 2022 Page 1 of 10 OCLC Framework Agreement Framework Agreement
INSTITUTION NAME ("Institution") Palm Springs Public Library LIBRARY NAME (if different from Institution)
OCLC SYMBOL (if any) CPG
STREET ADDRESS 300 S Sunrise Way
CITY, STATE, ZIP/POSTAL CODE, COUNTRY Palm Springs, CA 92262, USA CONTACT PERSON, JOB TITLE Jeannie Kays, Library Director

TELEPHONE NUMBER, FAX, E-MAIL ADDRESS

BILLING ADDRESS (IF DIFFERENT FROM ABOVE)

STREET ADDRESS

CITY, STATE, ZIP/POSTAL CODE, COUNTRY

CONTACT PERSON, JOB TITLE

TELEPHONE NUMBER, FAX, E-MAIL ADDRESS
Is Institution considered exempt from tax in the country in which it is located? Yes No Signatures follow on next page
Item 1G - Page 5
OCLc ·

Loc-US,EN-US, August 2022 Page 2 of 10 OCLC Framework Agreement

SIGNATURES

By signing below, Institution: (1) acknowledges that Institution has read and agrees that the terms of this Agreement, as defined herein, shall become effective upon full execution of the Agreement (“Effective Date”); (2) warrants that it has made no unilateral changes to the terms of the A greement since last received from OCLC; (3) orders access to the Products and Services as specified in this Agreement; and (4) warrants that it has the authority to enter into this Agreement.

Notice Address for Institution Notice Address for OCLC:

Name: Name: OCLC, Inc.

Email: Email: [email protected]
Institution OCLC, Inc.

Signature:

Name: Name:

Title Title:

Date: Effective Date:

Item 1G - Page 6
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Loc-US,EN-US, August 2022 Page 3 of 10 OCLC Framework Agreement

Institution hereby subscribes to the Products and Services associated with the schedules attached hereto. Those schedules attached hereto are hereby incorporated into this Agreement (the “Schedule” or “Schedules”).

Section 2 Scope & Construction
This “Agreement”, including the Framework Agreement and the Schedule(s) attached hereto, establishes the general terms and conditions for the provision of Products and Services. In case of a conflict in terms between the Framework Agreement and any applicable Schedule, the terms and conditions of the Schedule shall prevail. If Institution accepts or executes multiple agreements with OCLC for the same Products and/or Services, the order of precedence for the control of terms shall be (1) a negotiated Framework Agreement representing unique terms between OCLC and Institution, if one exists; (2) the most recently executed or accepted agreement.

Section 3 Definitions
In this Framework Agreement, except as otherwise provided, the following words and express ions shall have the meanings defined below:

3.1 Bibliographic Data means all the bibliographic data (including subject data, such as local key words and subject headings), descriptive metadata, relationship metadata and other metadata of the type stored in WorldCat.

3.2 Holdings Data means all the ownership and license data in relation to Institution’s collection (including electronic resources).

3.3 Hosted Services means the hosted services made available by OCLC which Institution may access pursuant to th is Agreement. The Hosted Services are described in detail in the applicable Product Descriptions but do not include services (including API’s and the like) provided by third parties.

3.4 Institution Data means (i) the Holdings Data in relation to Institution’s collection; (ii) all the data that forms part of the library process or the internal operations of the Institution, such as circulation, patron, and acquisition data; and (iii) all other data and content that is produced, sent or reproduced through th e Services by the Institution or made available to OCLC in connection with the Services.

3.5 Internal Data means Institution Data intended exclusively for internal use by the Institution, subject to the rights granted to OCLC herein

3.6 Product Descriptions means the descriptions of the Products and Hosted Services as made available at www.oclc.org and as updated from time to time by OCLC.

3.7 Products mean the OCLC software, hardware, and other products licensed to Institution pursuant to this Agreement. The Products are described in detail in the applicable Product Descriptions but do not include products provided by third parties.

3.8 Professional Services means the services that OCLC provides to Institution under this Agreement in connection with the Products or Hosted Services, such as data migration, configuration, consultancy, support, and training.

3.9 Services mean the Hosted Services and Professional Services.

3.10 Shared Data means the Institution Data made available by Institution to the public or to third parties selected by the Institution (such as other participants or users) or that by its nature is intended for use outside the Institution’s organization, such as Bibliographic Data, Holdings Data, and other data not considered Internal Data.

3.11 Systems mean the facilities, server(s), equipment, operating software, and connectivity used to provide the Services.

3.12 WorldCat means the databases of Bibliographic Data, Holdings Data, and related files maintained by OCLC.

Section 4 Products and Services

4.1 General. OCLC will provide Institution those Products and Services to which it subscribes, in accordance with this Agreement and as described in the version of each Product or Service’s respective Product Description active on the Effective Date. Further information can be found at https://www.oclc.org/en/services.html. Institution shall provide OCLC with the assistance and information OCLC reasonably needs to perform the Services properly or where OCLC otherwise reasonably requests. OCLC shall not be liable for any failure to perform its obligations arising from Institution’s failure to provide such assistance or information.

4.2 Modifications. OCLC may change or modify a Product or Service from time to time in its discretion. OCLC shall notify Institution in writing should there be any material changes to the respective Product or Service . Any new Product or Service functionality made available by OCLC shall be subject to this Agreement.

4.3 Support. Support services will be provided in accordance with the support service description set forth in the relevant Schedule. Further information is available at http://www.oclc.org/support/home.en.html.

4.4 Limitations. Institution shall only use the Products and Services in accordance with the terms of this Agreement and for the purposes specified in the Product Descriptions.

Section 1 Schedules Incorporated
Item 1G - Page 7
Loc-US,EN-US, August 2022 Page 4 of 10 OCLC Framework Agreement

Section 5 Ownership and Licenses

5.1 Ownership
a) OCLC Intellectual Property. OCLC and/or its licensors or suppliers are the exclusive owners of and retain all right, title, and interest (including all copyrights, trademarks, patents, and any other proprietary rights) to the Products, Services, WorldCat, and all other materials produced or provided by OCLC. All rights not expressly granted by OCLC are reserved. b) Institution Data. Institution, and/or its suppliers and affiliates, retains all right, title and interest (including, without limitation, all proprietary rights) to Institution Data, except for rights granted to OCLC and its affiliates under this Agreement. Institution is solely responsible for the accuracy, completeness, and legality of Institution Data. Institution is responsible for obtaining all permission and other rights necessary to provide Institution Data to OCLC. Institution will not provide OCLC with Institution Data that Institution does not have the right to provide for use in connection with the Products or Services.

5.2 Licenses.
a) Products and Services. Subject to the terms of this Agreement and the applicable Schedule(s), Institution’s license to use the Products and Services identified in the executed Schedules may be pursuant to a hosted license (for Hosted Services) or a non-hosted license (for Products). For Products paid for by Institution, OCLC grants Institution a nonexclusive, nontransferable license to install and use the Product solely for the noncommercial purposes described in the Product Description and the applicable Schedule. For Hosted Services subscribed to by Institution, OCLC will provide access to the Hosted Service, and if applicable a license to install and use any local software components of the Hosted Service, all solely for the noncommercial purposes described in the Product Description and the applicable Schedule. b) Institution Data. Institution grants OCLC a global, non-exclusive, royalty-free, transferable and sub-licensable right to use the Internal Data to the extent necessary for the provision of the Products and Services. Institution grants OCLC, OCLC participants, non-participant users, and OCLC designees a global, perpetual, non-exclusive, royalty-free, transferable, and sub-licensable right to host, reproduce, transmit, store, publish, distribute, modify, create derivative works from, and otherwise use Shared Data. Institution Data shall be supplied to OCLC in a format compatible for use with the Products and Services.

Section 6 Term and Termination

6.1 Term. This Agreement shall commence on the Effective Date and shall remain in full force and effect for the initial term specified in the pricing document attached hereto as Exhibit A and incorporated into this Agreement (the "Term"), subject to the earlier termination of this Agreement pursuant to Section 6.2 below. Upon the expiration of this Agreement, Institution and OCLC may renew and extend the Agreement for one or more additional terms, upon mutual written agreement.

6.2 Termination. This Agreement or individual Schedules may be terminated in one of the following ways:
a) By either party, effective at the end of the initial subscription period, which shall be as set forth in the agreed upon pricing document attached hereto as Exhibit A, or any renewal period, as which shall be as set forth in any renewal notice issued pursuant to Section 7.2, by providing the other party with at least 30 days’ prior written notice of its desire to not renew a Product or Service;
b) By either party if the other party becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for all or a substantial part of its property, is subject to any proceeding under any bankruptcy or insolvency law, or has wound up or liquidated, voluntarily or otherwise; c) By the non-breaching party if a party commits a mat erial breach of its obligations under this Agreement and has not cured such breach or failure within 30 days of receiving written notice from the non -breaching party. OCLC reserves the right, however, to immediately suspend Institution’s access to the OCLC Services in the event of Institution’s material breach until such time as the material breach is cured; or d) As otherwise explicitly provided in this Agreement.

6.3 Effect of Termination. Termination of this Agreement shall terminate all Schedules. Termination of a Schedule however, will not terminate the Agreement or any other Schedule. Upon termination of this Agreement or any Schedule, the rights granted by the parties in the applicable Schedule or Agreement are terminated unless otherwise provided in such Schedule.

After termination and upon request, OCLC will promptly return or destroy all applicable Institution Data.. OCLC will provide Institution access to Institution Data for 90 days after the effective date of termination, after which, OCLC shall have no obligation to maintain any Institution Data.

Section 7 Fees and Payment Terms

7.1 Fees. Institution shall pay the applicable charges based on their agreed upon pricing document. In the absence of an agreed upon pricing document, (i) OCLC’s prevailing price for the Products and Services shall govern; and (ii) payments shall be made to OCLC annually; such annual payments will be billed upon the beginning of the applicable subscription period and Item 1G - Page 8
Loc-US,EN-US, August 2022 Page 5 of 10 OCLC Framework Agreement

shall be paid according to the terms stated on the invoice. Fees are exclusive of any taxes and shall be paid in the currency and to the address stated on the invoice. Institution shall pay such tax to OCLC or other entity, as appropriate. Institutions exempt from taxation shall supply a valid exemption certificate upon request. Institution's failure to fully pay any fees or taxes within 60 days after the applicable due date will be deemed a material breach of this Agreement, justifying OCLC’s suspension of Products and Services.

7.2 Price Changes. OCLC reserves the right to change any price/fee, provided that OCLC provides Institution written notice of the change at least 60 days prior to the date the change is to become effective. Notwithstanding the foregoing, OCLC will not change any prices/fees contained in an agreed to price quote or renewal notice prior to the expiration of the quote or renewal notice.

7.3 Non-refundable. Institution will not be entitled to a refund of any implementation or pre -paid fees under this Agreement unless (i) OCLC terminates the Agreement or a Sch edule pursuant to Section 6.2 (a), or (ii) Institution terminates the Agreement or a Schedule pursuant to Section 6.2 (c); in which event, OCLC will refund that portion of fees pre-paid by Institution corresponding to the period after termination.

7.4 Proprietary Information. Institution agrees that OCLC’s pricing information is proprietary to OCLC, and agrees to maintain confidentiality of such proprietary information, as well as any other information which OCLC communicates in writing to be proprietary or confidential, for 3 years from receipt by Institution. It shall not be a violation of this section to disclose information as required by applicable law (including public records acts), valid court order, or legal process.

Section 8 Disclaimer
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PRODUCTS AND SERVICES ARE PROVIDED "AS IS”

AND OCLC AND ITS THIRD PARTY SUPPLIERS DO NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY

KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE PERFORMANCE OF THE PRO DUCTS OR SERVICES,

INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A

PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY IMPLIED WARRANTY ARISING BY USAGE OF TRADE, COURSE OF DEALING OR COURSE OF PERFORMANCE. OCLC MAKES NO REPRESENTATIONS OR WARRANTIES

THAT THE PRODUCTS AND SERVICES WILL ALWAYS BE ACCESSIBLE, FREE OF HARMFUL COMPONENTS, ACCURATE OR ERROR-FREE. INSTITUTION MAY INTEGRATE OCLC’S PRODUCTS AND SERVICES WITH THIRD PARTY PRODUCTS AND SERVICES. HOWEVER, IN NO EVENT WILL OCLC BE LIABLE FOR ANY LOSS ARISING OUT OF FAILURE OF SUCH THIRD -PARTY PRODUCTS OR SERVICES OR OTHER EVENTS OUTSIDE OF OCLC’S REASONABLE CONTROL. ADDITIONALLY, UNDER NO CIRCUMSTANCES SHALL OCLC BE LIABLE FOR ANY LOSS ARISING OUT OF A DATA OR A SECURITY BREACH ORIGINATING FROM SUCH THIRD PARTY SOFTWARE. THIS

SECTION WILL NOT APPLY TO DAMAGES THAT CANNOT BE EXCLUDED BY LAW (IN WHICH EVENT THE LIABILITY SHALL BE LIMITED TO THE FULLEST EXTENT PERMITTED).

Section 9 Privacy and Security

9.1 Data Security. OCLC has implemented and shall maintain commercially appropriate, reasonable and customary controls to ensure the security, confidentiality, and protection against unauthorized access to, use, or disclosure of Internal Data.

Institution shall obtain and maintain all necessary consents from all users for OCLC to provide the Products and Services and for Institution’s and users’ access, monitoring, use, disclosure, and transfer of Internal Data.

9.2 Audit. OCLC will (i) implement administrative, physical, and techni cal safeguards in accordance with accepted industry practices including conducting audits in accordance with the ISO/IEC 27001 standard (or subsequent comparable standard) and (ii) as reasonably requested by Institution, provide Institution with a copy of the certificate of registration for such standard.

9.3 Nondisclosure of Internal Data. OCLC shall hold all Internal Data in strict confidence and with the same standard of care it uses to protect its own information of a similar nature and shall not use Internal Data for any purpose other than to provide the Service or as may be authorized in writing by Institution. OCLC shall not disclose Internal Data to any other party except: (a) to OCLC employees, agents, subcontractors and service providers, to whom Internal Data needs to be disclosed for the purpose of providing the Service; (b) as required by law, or to respond to duly authorized information requests of police and governmental authorities or to comply with any facially valid subpoena or court order; (c) to protect the rights or property of OCLC or OCLC customers, including the enforcement of OCLC agreements or policies governing Institution’s use of the Service; (d) to involve and cooperate with law enforcement or the appropriate legal authorities in investigations, and to protect Systems and OCLC's customers, or (e) as authorized by Institution in writing.

9.4 Prohibitions. Institution expressly warrants that it will not enter, submit, transfer, or store in the Service any of the following types of information: Social Security Numbers (or other national identification numbers), financial account numbers, credit card or debit card numbers.

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9.5 Unauthorized Disclosures. OCLC will promptly notify Institution in the event of a verified breach of non-public personal data. In the event that Institution determines that a breach requires breach notification, OCLC agrees that it will reasonably cooperate with Institution in regards to Institution’s breach notification obligations as specified in the applicable law, including Institution’s investigation, enforcement, monitoring, document preparation, breach notification requirements, and reporting. Institution shall be solely responsible for notifying all individuals, regulators, or other organizations subject to breach notification, however OCLC reserves the right to first review all notifications before they are sent.

9.6 Data Processing Agreement. To the extent Personal Data from the European Economic Area (EEA), the United Kingdom and Switzerland are processed by OCLC and/or its affiliates, the following shall apply: The terms of the Data Processing Agreement (“DPA”) at https://policies.oclc.org/en/privacy/data-privacy-agreements.html are hereby incorporated by reference and shall apply if and to the extent that Institution Data includes Personal Data, as defined in the DPA. To the extent Personal Data from the European Economic Area (EEA), the United Kingdom and Switzerland are processed by OCLC and/or its affiliates, the Standard Contractual Clauses shall apply, as further set forth in and defined by the DPA. For the purposes of the Standard Contractual Clauses, Institution and its applicable Affiliates, as defined by the DPA, are each the data exporter, and Institution’s acceptance of this Agreement shall be treated as its execution of the Standard Contractual Clauses and Appendices.

Section 10 Limitation of Liability

OCLC WILL HAVE NO LIABILITY FOR ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL,

OR PUNITIVE DAMAGES FOR ANY MATTER ARISING FROM OR RELATING TO THIS AGREEMENT OR THE

PRODUCTS AND SERVICES, INCLUDING BUT NOT LIMITED TO ANY UNAUTHORIZED ACCESS TO, OR

ALTERATION, THEFT, LOSS, INACCURACY, OR DESTRUCTION OF INFORMATION OR DATA COLLECTED, STORED, DISTRIBUTED, OR MADE AVAILABLE VIA THE PRODUCTS AND SERVICES, INSTITUTION’S USE OR

INABILITY TO USE THE PRODUCTS AND SERVICES, ANY CHANGES TO OR INACCESSIBILITY OF THE PRODUCTS

AND SERVICES, ANY DELAY OR FAILURE OF THE SERVICES, OR FOR LOST PROFITS, OR COSTS OF

PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, EVEN IF OCLC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL OCLC’S LIABILITY TO INSTITUTION FOR ANY REASON AND UPON

ANY CAUSE OF ACTION EXCEED THE AMOUNT INSTITUTION ACTUALLY PAID OCLC FOR THE INDIVIDUAL IMPLICATED OCLC PRODUCTS OR SERVICES COVERED UNDER THIS AGREEMENT OVER THE 12 MONTHS PRIOR TO WHICH SUCH CLAIM AROSE. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE

AGGREGATE, INCLUDING, BUT NOT LIMITED TO, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS. FEES UNDER THIS AGREEMENT ARE BASED UPON THIS ALLOCATION OF RISK. THIS SECTION WILL NOT APPLY TO DAMAGES THAT CANNOT

BE LIMITED OR EXCLUDED BY LAW (IN WHICH EVENT THE LIABILITY SHALL BE LIMITED TO THE FULLEST EXTENT PERMITTED).

Section 11 Use of Products and Services

11.1 General. Institution agrees not to use, and not to allow third parties including users to use the Products or Services: (a) to distribute viruses, worms, Trojan horses, corrupted files, or other items of a destructive or deceptive nature; (b) to engage in or promote any unlawful, invasive, infringing, defamatory, or fraudulent activity; (c) to violate, or encourage the violation of, the legal rights of others; (d) to interfere with the use of a Product or Service, or the equipment used to provide Products or Services; (e) to use the Products or Services, or any part thereof, in a manner that violates the terms of service of any other Products or Services; (f) to generate, distribute, publish or facilitate unsolicited mass email, promotions, advertisings or other solicitations (“spam”); (g) to alter, reverse-engineer, interfere with, circumvent, copy, or create a derivative work of, any aspect of the Product or Service (except with the express, written consent of OCLC or applicable law specifically prohibits this restriction); (h) to omit, obscure or hide from any user any notice of a limitation of warranty, disclaimer, copyright, patent, trademark, trade secret or usage limitation or any splash screen or any other terms or conditions intended to be displayed to a user by OCLC or OCLC supplier; or (i) to post, send, or make available software or technical information in violation of applicable export controls laws. Institution agrees that OCLC is authorized to monitor communications into and out of the System to prevent the introduction of viruses or other hostile code, to prevent intrusions, provide support, and to otherwise enforce the terms of this Agreement. Notwithstanding the foregoing and to the extent permitted by law and law enforcement, OCLC will make reasonable efforts to notify Institution when a disclosure of Institution Data has or is to be made.

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11.2 Credentials. Institution shall exercise all commercially reasonable efforts to prevent unauthorized use of the Products and Services and is solely responsible for any and all use, including unauthorized use, of the Products and Services initiated using Institution’s API keys and/or credentials. Institution shall immediately notify OCLC of a suspected or actual loss, theft or disclosure of any credentials and of any unauthorized use of a Product or Service. Should OCLC become aware of unauthorized use of Institution’s API keys or credentials or unauthorized access to a Product or Service, OCLC may notify Institution and deactivate affected credentials. OCLC will provide Institution with administrative credentials to access and use the applicable Product or Service. Institution is responsible for authorizing user access to the Products or Services, assigning privileges, and creating, maintaining, and terminating accounts.

11.3 Enforcement by OCLC. OCLC reserves the right to: (i) investigate any violation of this Section or misuse of Products or Services; (ii) enforce this Section; and (iii) remove or disable access, screen, or edit any Institution Data that violates these provisions. Without limitation, OCLC also reserves the right to report any activity (including the disclosure of appropriate Institution Data) that it suspects violates any law or regulation to appropriate law enforcement, regulators, or other appropriate third parties. OCLC may cooperate with appropriate law enforcement by providing network and systems information related to allegedly illegal or harmful content. VIOLATION OF THIS SECTION MAY RESULT IN THE SUSPENSION OF OCLC SERVICES AND SUCH OTHER ACTION AS OCLC REASONABLY DEEMS APPROPRIATE. REPEATED OR WILLFUL VIOLATION OF THIS SECTION MAY, IN OCLC’S SOLE DISCRETION RESULT IN THE TERMINATION OF THE AGREEMENT, ANY SCHEDULE, OR OCLC SERVICE.

Section 12 Warranties
OCLC warrants that any Professional Services will be performed in a professional and workman-like manner and that, when operated in accordance with the Product Description, the Products and Hosted Services will be capable of performing substantially in accordance with the functional specifications set forth in such Product Description. If any Products or Services fail to comply with the warranty set forth above, OCLC will make reasonable efforts to correct the noncompliance provided that OCLC is given notice of the noncompliance within 30 days and OCLC is able to reproduce the noncompliance. If OCLC is unable to correct the noncompliance, Institution may terminate the Schedule for the relevant Product or Hosted Service in accordance with Section 6.2(c) and, as its sole remedy, will be entitled to a refund of an equitable portion of fees paid for the relevant Product or Hosted Service after such noncompliance was reported. OCLC and Institution each warrant that its entry into this Agreement does not violate any other agreement to which it is a party, and that its performance under this Agreement will be in conformance with all applicable laws and government rules and regulations. Institution warrants that it possesses all rights necessary to enter into this Agreement and grants the rights described in this Agreement such that OCLC will not infringe upon or otherwise violate any intellectual property rights or other rights of a third party or violate any laws by exercising the rights and licenses granted under this Agreement. To the extent permitted by law, Institution hereby indemnifies OCLC from any such claims in this respect.

Section 13 G eneral

13.1 OCLC Membership. As a subscriber to OCLC’s Services and Products as described in this Agreement, Institution – and each library owned or operated by Institution – may be eligible for membership in the OCLC cooperative. Membership qualifications for the OCLC cooperative can be found
at https://www.oclc.org/content/dam/oclc/membership/Membership-Criteria-FY21.pdf. If Institution’s subscription qualifies it as a member, Institution permits OCLC Member Relations to contact its library staff directly in separate communications, to provide new member information regarding voting and u pdates, Member groups, councils, and events, for OCLC Global and Regional Councils specific to Institution’s region. As a member, Institution agrees to abide by the requirements and policies applicable to OCLC members.

13.2 No Assignment. Institution may not assign, without the prior written consent of OCLC, any rights, duties, or obligations under this Agreement to any person or entity, in whole or in part.

13.3 Independent Contractors . The relationship of the parties is that of independen t contractors, and no agency, employment, partnership, joint venture, or any other relationship is created by this Agreement.

13.4 Force Majeure . Neither party shall be responsible for losses or damages to the other occasioned by delays in the performance or the non-performance of any of said party's obligations (other than the obligation to make payments when due) when caused by acts of God, acts of the other party or any other cause beyond the control of said party and without its fault or negligence.

13.5 Non-Waiver. A failure or delay in enforcing an obligation under this Agreement does not prevent enforcement of the provision at a later date. A waiver of a breach of one obligation does not amount to a waiver of any other obligation, and it will not prevent a party from subsequently requiring compliance with that obligation.

13.6 Severability. If any provisions of this Agreement shall be found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity or unenforceability of such provision shall not affect the other provisions of this Agreement.

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13.7 Entire Agreement. This Agreement and any Schedules constitute the complete agreement between the parties and supersedes and replaces all prior agreements, oral and written, between the parties relating to the subject matter of this Agreement. If Institution’s accounting representatives require the use of a purchase order to facilitate payment for Products and Services contemplated in this Agreement, Institution agrees any and all terms and conditions contained in such purchase order are null and void, and do not apply to this Agreement. OCLC will provide invoices in response to purchase orders solely to facilitate payment and for the convenience of Institution; in no case, however, will OCLC’s issuance of an invoice constitute an acceptance of terms contained in a purchase order. OCLC provides Services and Products to Institution solely pursuant to this Agreement; OCLC shall never provide Services or Products pursuant to, or as a result of, a purchase order. Except as otherwise provided herein, this Agreement may not be amended or supplemented except in a writing duly executed by both parties.

13.8 Notice. Except as stated elsewhere in the Agreement all notices shall be in writing or by such other means as has been agreed by the parties in writing.

13.9 Counterparts and Signatures. This Agreement may be executed in counterparts and/or via facsimile transmission or electronic copy, any one or form of which will be deemed to constitute an original, but all of which will constitute one instrument. Any signature (including any electronic signature, symbol or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record) hereto or to any other contract, record, certificate, or other document related to this Agreement, and any contract formation or record- keeping through electronic means shall have the same legal validity and enforceability as a manually executed signature or use of a paper-based recordkeeping system.

13.10 Venue. This Agreement shall be interpreted in accordance with and subject to the laws of the State of California, with Venue located in Riverside County, California.

Section 14 Special Terms for Group Orders Only
Where a lead institution in a consortium (the “Group Administrator”) is ordering on behalf of itself and other consortium members, this Section applies:

14.1 Ordering. Group Administrator may order the Service on behalf of consortium members by completing the relevant portions of the agreed upon pricing or order document and agreeing to this Agreement. Group Administrator also orders and allocates authorizations and passwords for the Service on behalf of consortium members listed on the agreed upon pricing or order document. Group Administrator is not a buyer of the Service for resale. Any material change in group membership or group participation may result in commensurate changes in the fees for the applicable Service.

14.2 Consortium Member's Agreement. Group Administrator warrants, as the consortium agent, that it is authorized to and hereby binds consortium members to this Agreement and shall indemnify OCLC from all loss, expense and damage arising from a breach of such warranty. Group Administrator shall provide each consortium member with a copy of this Agreement prior to Product and Service activation. Each order for consortium members shall constitute a binding contract between OCLC and the consortium member.

14.3 Payment by Group Administrator. Group Administrator shall be liable for paying to OCLC all charges and applicable taxes for consortium members for the Products and Services in accordance with the terms of this Agreement.

14.4 Non-exclusivity. Nothing herein shall limit OCLC's right to distribute any Products or Services independent of Group Administrator.

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SCHEDULE 2
WorldShare® Metadata/OCLC Cataloging
Section 1 Description
OCLC's cataloging and metadata services give Institution the tools needed to effectively manage the metadata for Institution’s collection.

Section 2 Definitions

2.1 “Guidelines” means the “Guidelines for Contributions to WorldCat” as modified from time to time. A current copy of the Guidelines is available at: http://www.oclc.org/worldcat/community/guidelines.en.html

2.2 “Policy” means the “WorldCat Rights and Responsibilities for the OCLC Cooperative” as modified from time to time as a result of the policy review process described therein. A current copy of the Policy is available at:
http://www.oclc.org/en/worldcat/cooperative-quality/policy.html.

2.3 “Principles” means the WorldCat Principles of Cooperation as modified fro m time to time. A current copy of the Principles is available at: http://www.oclc.org/worldcat/community/principles.en.html

2.4 “WorldCat® Data” is defined as set forth in the Policy.

2.5 All capitalized terms not defined herein shall have the same meaning ascribed to them in the Master Services Agreement.

SECTION 3 Responsibilities of Institution

3.1 Institution shall create bibliographic records and related data for entering information into WorldCat consistent with the Guidelines maintained by OCLC and its advisory groups.

3.2 Institution using the Systems for cataloging agrees to abide by the Principles and the Guidelines.

3.3 Institution agrees that the use and transfer by the Institution of WorldCat Data is subject to the Policy.

3.4 If, during the term hereof, an Institution informs OCLC that bibliographic records it furnishes to OCLC for addition to WorldCat will be subject to usage or transfer restrictions beyond or in addition to those applicable under this Schedule, and if OCLC nevertheless elects to accept such records for addition to WorldCat, OCLC will so notify Institution, after which Institution’s rights to access, use and transfer such records will be subject to said usage and transfer restrictions.

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SCHEDULE 10
WorldShare® Interlibrary Loan Services (ILL)
Section 1 Description
WorldShare Interlibrary Loan is a resource sharing network to lend and borrow resources which allows users to quickly obtain global library content located in Institution’s collections and the collections of other ILL libraries around the world. WorldShare Interlibrary Loan simplifies tasks such as sharing of e-resources, automating request and entry processes, managing ILL fees, analyzing borrowing and lending patterns, and delivering documents easily and securely through Article Exchange.

Section 2 Definitions
All capitalized terms not defined herein shall have the same meaning ascribed to them in the Framework Agreement.

Section 3 Terms of Use
Subject to this Schedule and the FA, OCLC shall provide Institution with the Products and Services as specified in the agreed upon pricing document.

Section 4 Service Level Agreement

4.1 Scope. This Service Level Agreement sets forth the service level and performance objectives of OCLC in providing the Hosted Services (as listed in Section 2 of this SLA) to Institution (the “Systems”). OCLC will use commercially reasonable efforts to meet the following service level and performance objectives to support the operation of the Systems.

4.2 Uptime Commitment.
a) Availability. OCLC will use commercially reasonable efforts to ensure that the Systems are available 99.5% of the time (the "Uptime Commitment"). Availability will be measured as follows:
(1) Availability = (T-D)/(T) * 100%; where
(2) T = the total number of minutes in the respective month, and (3) D = the total number of minutes of downtime in the month excluding planned outages for scheduled maintenance, telecommunications or power disruptions caused by third parties, any other causes beyond OCLC’s reasonable control, and excluding other times described herein.
b) Notice Required. OCLC will notify Institution promptly of any factor, occurrence, or event coming to its attention likely to affect OCLC's ability to meet the Uptime Commitment, or that is likely to cause any material interruption or disruption in the Systems.
c) Scheduled Maintenance. Scheduled maintenance may occur any Sunday during a 4 -hour window and may occasionally be extended. Notice of scheduled maintenance shall occur 3 days prior to scheduled downtime. In the event planned emergency maintenance is required, OCLC will make commercially reasonable efforts to notify Institution in advance.

4.3 Systems Management
a) Monitoring. OCLC will monitor and maintain the Systems in working order each day (24 x 7). OCLC will proactively manage and monitor all application server hardware devices and software to ensure optimal performance and reliability as well as to detect abnormal events or exceeded utilization or performance thresholds. b) Maintenance. OCLC will operate, monitor, and administer all servers, applications, and networks supporting the Systems. In order to provide such coverage, OCLC may utilize a mixture of on -site and on-call support staff, automated server monitoring, and automated paging technology. c) Change Control. OCLC will install new equipment, software, releases, upgrades, fixes, patches, and other items necessary to maintain the Systems to industry standards. OCLC will proactively gather information from appropriate server, peripheral, operating system, or database vendors regarding upgrades, defect patches, or fixes.

Item 1G - Page 14
Proposal
OCLC Symbol
CPG
Currency
USD Quote # 1000043279
Customer ID
37464
Expires
7/08/2023 4/26/2023
1of1
OCLC • 6565 Kilgour Pl Dublin OH 43017-3315 United States • +1-800-848-5878 ● +1-614-764-6000 www.oclc.org Palm Springs Public Library
Jeannie Kays
Library Director
300 S Sunrise Way
Palm Springs CA 92262
United States
Item Code Item Amount
3000030 Cataloging and Metadata Subscription $28,697.90 3000065 WorldShare ILL $703.10
Total $29,401.00
Notes
The pricing listed above is FY24 pricing. For FY25-FY26, the guaranteed price increases are as follows:

FY25 Cataloging and Metadata 7/1/2024 renewal: $29,774.08 FY26 Cataloging and Metadata 7/1/2025 renewal: $30,890.60 FY27 Cataloging and Metadata 7/1/2026 renewal: $32,435.13 FY28 Cataloging and Metadata 7/1/2027 renewal: $34,056.89 FY25 WorldShare ILL 7/1/2024 renewal: $729.47
FY26 WorldShare ILL 7/1/2025 renewal: $756.82
FY27 WorldShare ILL 7/1/2026 renewal: $794.67
FY28 WorldShare ILL 7/1/2027 renewal: $834.40
This pricing is only valid if the Library commits to the full ﬁve-year subscription period, pursuant to Section 6.1 of the Framework Agreement. For avoidance of doubt, by accepting this proposal, the Library will not have the ability to terminate for convenience prior to the end of the full ﬁve-year subscription period, and may only terminate pursuant to Section 6.2 of the Framework Agreement.
____________________________________________
Signature
____________________________________________
Printed Name
_______________________
Date
For questions, please contact OCLC representative: Carol Schlatter at [email protected].

This transaction is subject to the relevant OCLC Framework Agreement (“FA”) and the Schedules related to each product listed on this notice, found at: http://oc.lc/service-agreements, unless a signed agreement governing the transaction has been entered into by the parties.

Exhibit A
Item 1G - Page 15
(e ocLc·

ATTACHMENT B

Item 1G - Page 16
CITY OF PALM SPRINGS – PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

Page 1 of 2 ends

(Revised 09 13 18)

PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

1. Name of Entity

OCLC, Inc.

2. Address of Entity (Principle Place of Business)

6565 Kilgour Place, Dublin, OH 43018

3. Local or California Address (if different than #2)

4. State where Entity is Registered with Secretary of State

Ohio
If other than California, is the Entity also registered in California? F Yes F No

5. Type of Entity – Non-Profit Corporation

F Corporation F Limited Liability Company F Partnership F Trust F 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

Bruce Crocco, Vice President F Officer F Director F Member F Manager [name]
F General Partner F Limited Partner

F Other

Julie Presas, Vice President F Officer F Director F Member F Manager [name]
F General Partner F Limited Partner

F Other

Bill Rozek, Vice President F Officer F Director F Member F Manager [name]
F General Partner F Limited Partner

F Other
Item 1G - Page 17
-
-
-
-
CITY OF PALM SPRINGS – PUBLIC INTEGRITY DISCLOSURE

APPLICANT DISCLOSURE FORM

Page 2 of 2 ends

(Revised 09 13 18)

7. Owners/Investors with a 5% beneficial interest in the Applicant Entity or a related entity

EXAMPLE

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

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

Signature of Disclosing Party, Printed Name, Title Date Bruce Crocco, Vice President - OCLC, Inc. 2023 June 21 Item 1G - Page 18

CITY COUNCIL STAFF REPORT
07/10/2023
SUBJECT:

PROPOSED AMENDMENT 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:

Consider adoption of Amendment No. 2 to Amended and Restated Operations Covenant Agreement No. 8449.

Attachments
Item 3A

CITY COUNCIL STAFF REPORT

DATE: JULY 10, 2023 BUSINESS & LEGISLATIVE

SUBJECT: PROPOSED AMENDMENT 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: Scott C. Stiles, City Manager

BY: Jeffrey Ballinger, City Attorney
Flinn Fagg, Deputy City Manager
Jay Virata, Community and Economic Development Director

SUMMARY:

The owner of the Orchid Tree hotel development, located at 222 S. Cahuilla Road, has requested that the City Council consid er an amendment to the adopted operations covenant (“ TOT Covenant Agreement ”) due to increased construction costs and difficulties in financing the previously approved hotel project. At the February 9, 2023 City Council meeting, the City Council considered specific deal points that the owner proposed, and the Council provided direction to City staff and the City Attorney to negotiate a possible further amendment to the TOT Covenant Agreement . That amendment is before the City Council for consideration and includes the following:

• Updated revisions to the milestone schedule for construction and opening of the hotel project;
• Revisions to the hotel site plan, to reduce construction costs; • Deferral of payment of City permit and entitlement fees until year three (3) of the hotel operations , with interest paid on that deferral at the City’s municipal borrowing rate;
• Additional language, enhancing the City’s remedies, in the event of a default by the owner; and
• Revisions to the provisions governing the definition of the “luxury hotel” requirement.

RECOMMENDATION:

Consider adoption of Amendment No. 2 to Amended and Restated Operations Covenant Agreement No. 8449.

City Council Staff Report
July 10, 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 N ew 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 parcel s to be incorporated as part of the development are owned by Arenas Belardo PS, LLC, a Nevada limited liability company; 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 A 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 w ould 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 Projec t 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 Operati ons 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 maje ure (Act of God) provisions of the Covenant. The City Attorney responded to the Owner’s counsel, and stated that, despite City Council Staff Report
July 10, 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 st ay 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 notice/ 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.

Under that Amendment No. 1, the Owner 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. Amendment No. 1 contained a specific force majeure provision that required the Owner to commission a feasibility report, written by a nationally recognized firm that is mutually agreed to by the City and the Owner. The feasibility report was to assess whether or not market conditions would reasonably preclude the Owner proceeding with financing and constructing the Project, notwithstanding the Owner’s best efforts, given all of the various factors existing at the time, including factors such as the forecast for the relevant hospitality market demand, the hotel lending market, and the Owner’s financial condition and borrowing capacity. If such a conclusion were found to exist, then the Owner would be provided an additional year to meet Milestones #11 (construction loan/construction contract) and #12 (commencement of construction).

As contemplated by the Amendment No. 1, the Owner then submitted an E xtension of Time application for its land use entitlements , as permitted by the City’s Zoning City Council Staff Report
July 10, 2023 -- Page 4
Orchid Tree Development

Ordinance, in February 2022. The Planning Commission reviewed the application at its July 13, 2022 meeting and concluded that the Zoning Ordinance’s 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. Also, as part of the Owner’s appeal, the City Council also approved a 45-day extension of the Amendment No. 1’s development milestones.

Thereafter, on October 24, 2022, the Owner invoked the Amendment No. 1’s force majeure. In support of the Owner’s force majeure claim, the Owner provided a feasibility report, prepared by CBRE (included as Attachment B), which concludes that market conditions preclude the project O wner 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 extension based on a feasibility report are Milestones #11 (construction loan approval/construction contract) and #12 (commencement of construction). Milestone #10 (obtain City approval of cons truction documents) was not extended by reason of a feasibility report and had not been completed by Owner.

Thereafter, City staff and the Owner and their respective 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 pr oject 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 by the Owner as a “package deal”, included 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 Cit y 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 The
updated hotel concept plan, dated January 31, 2023 is Attachment C. • City to allo cate to Owner, through a Development Agreement, the retained 25% share of TOT for 10 years. That is, the Owner would receive 100%, rather than 75% of the adjusted tax rate for the first 10 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

1 Although the City Council cannot legally commit to approving 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.

City Council Staff Report
July 10, 2023 -- Page 5
Orchid Tree Development

room x 74 rooms x 365 days x 65% occupancy x 10.9% tax rate x 25% = $239,207.31). The project owner’s justification 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.

At the February 9, 2023 City Council meeting, the Council considered the Owner’s proposal. At that meeting, the City Council also reviewed and considered the Owner’s proposed revisions to the hotel project, which are more fully described in the February 9, 2023 staff report. Generally, the City Council expressed support for the concepts presented at the February 9 Council meeting. With regard to the other proposed deal points, the Council directed City staff to continue working with the Owner, to see if a proposal can be brought back for Council consideration. In particular, the City Council expressed a desire to not set a precedent for this proposed project with deal points that have not been agreed to by the City of other development projects.

STAFF ANALYSIS:

As a result of those further conversations between the City and the Owner, the following proposal is before the City Council for consideration:

• An updated set of development milestones, including the following:
• Within ninety (90) days after Council approval of the proposed amendment, Owner will submit substantially complete schematic plans for revised hotel project suitable for review & approval by City’s Historic Site Preservation Board, Architectural Review Committee & Planning Commission. • Within seven (7) months after City approval of revised entitlements, Owner will submit 80% complete construction drawings and commence plan check.
• Owner will close its construction loan, pull permits and start construction within 90 days following completion of plan check.
• Within fifteen (15) months after City entitlement approval, Owner would City Council Staff Report
July 10, 2023 -- Page 6
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commence construction of the project.
• Substantial completion of the hotel would be required within forty (40) months after construction start.
• Hotel opening to occur four ( 4) months after substanti al completion (44 months following City entitlement approval).
• City permit and entitlement fees would be deferred to Year three ( 3) of hotel operations. Owner would make the City whole by paying, along with the deferred fees, interest thereon at the City’s applicable municipal borrowing rate for the period of deferral.
• As set forth in footnote 1, above, the City would cooperate in processing a condominium subdivision for the Project, to allow some of the hotel units to be sold separately as residential condominiums. Up to five such units would be exempt from City transient occupancy tax.
• The definition of “luxury hotel” would be revi sed to provide three (3) additional brands (in addition to the Auberge Resorts
2 brand) by which the proposed hotel
could quality as a “luxury” hotel, namely either a 1 Hotel3 brand, a Leading Hotels of the World4 brand, or a Relais & Chateaux5 brand. In addition, Owner proposes that the Owner’s compliance with this “luxury hotel” brand be determined primarily by the City, rather than through a consultant that, as provided in the existing agreement, would be retained by the City and paid for by the Owner.

Finally, and consistent with the Owner’s previous statements regarding the possibility of an affordable multi-family housing project at the site, on or about May 23, 2023, the Owner filed documents with the City proposing a seven (7) story, 308-unit development project, which propose to deed- restrict sixty- two (62) units as affordable for lower income households. A conceptual schematic of that proposed project is attached hereto as Attachment D. City staff and the City Attorneys’ Office are reviewing that filing, in order to review it and respond to the Owner, in accordance with State housing laws.

City staff and the City Attorney’s Office have reviewed the Owner’s proposal and believe that it is generally consistent with the direction provided by the City Council at the February 9, 2023 City Council meeting. While the City likely has legal arguments under the existing TOT Covenant Agreement that the Ow ner is in default, moving forward with a revised agreement will avoid the costs and delays to the project associated with proving that default in court.

In addition, the proposed deal points are consistent with the City Council’s direction that any revised agreement not set a precedent for this proposed project with deal points that have not been agreed to by the City of other development projects. Namely , unlike the proposal presented at the February 9 meeting, this proposed agreement does not modify

2 https://aubergeresorts.com/
3 https://www.1hotels.com/
4 https://www.lhw.com/
5 https://www.relaischateaux.com/us/
City Council Staff Report
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the City’s TOT sharing arrangement, as established in the City’s Hotel Incentive Ordinance.

Nor does the proposed amendment include any City financial contribution to the costs of offsite public improvements, as previously proposed by the Owner. Instead, the only financial commitment that this amendment provides is for a fee deferral, which the City staff understands has been provided for at least one other development project. In addition, the City often will provide fee deferrals to affordable housing projects. It should be noted that, while the fee deferral is referred to as a “3 year” fee deferral, some charges/fees are actually being deferred for longer than 3 years. This is because the 3 - year period begins at the issuance of the certificate of occupancy. The Owner would normally be required to pay the entitlement application charges well in advance of the certificate of occupancy. Likewise, development impact fees are generally paid at the time of building permit issuance, which can occur nearly two years before the certificate of occupancy is issued. That said, the proposed amendment provides that interest will accrue on all of the deferred fees/charges, from the date that they would normally be paid by the Owner (i.e., at entitlement filing for charges, at building permit for development impact fees). In addition, for this Project, the Owner has agreed to pay the City’s “carrying” costs of such fee deferral, in the form of interest based on the City’s municipal borrowing rate.

With regard to the “luxury hotel” definition, this modification was requested by the Owner, in order to provide the Owner with additional flexibility with respect to which specific brand of luxury hotel the project can be operated as. According to the Owner, the previously provided language caused concern to the project lender(s).

In short, this proposed amendment, in large part, puts the City and Owner in a situation, contractually-speaking, where they were before the most recent force majeure claim, with revised development milestones. As such, City staff and the City Attorney would recommend that the City Council consider and approve the accompanying Amendment No. 2 to Amended and Restated Operations Covenant Agreement No. 8449.

ENVIRONMENTAL ASSESSMENT
:

The City’s Planning Commission has previously determined that the Project is exempt from consideration under the California Environmental Quality Act (CEQA ) on a number of grounds. Discussion of modifications to the Operations Covenant is not considered a “project” for purposes of 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 as part of the land use entitlement process.

City Council Staff Report
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ALIGNMENT WITH STRATEGIC PLANNING:

Approval of the proposed a mendment would align with the City Council’s 2023/25 Strategic Plan, specifically the goal of Economic Development —Business development initiatives, by allowing for the development of a luxury hotel within the downtown area.

FISCAL IMPACT
:

Approving this amendment will enable the hotel Project to move forward toward completion, which will result in fiscal benefits to the City, including increased TOT and sales tax.

Because the proposed fee deferral would be accompanied by payment by the Owner of the City’s “carrying” costs, this revised agreement is not expected to have any significant fiscal impact to the City.

REVIEWED BY:

Department Director: Jay Virata
City Attorney: Jeffrey S. Ballinger
City Manager: Scott Stiles

ATTACHMENTS:

A. Public Integrity Disclosure Form
B. CBRE Feasibility Report
C. Proposed Revised Hotel Site Plan
D. 308-Unit Affordable Housing Conceptual Drawing
E. Amendment No. 2 to Amended and Restated Operations Covenant (Agreement No. 8449)

ATTACHMENT A

ATTACHMENT B

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

CBRE HOTELS
The World's leading Hotel Experts.

CBRE
CBR E, Inc.

CBRE Hotel s Advisor y
400 S. Hope Street , Suite 2500
Los A ngeles, CA 9 0071
+1 213 613 337 5 Office
+1 818 406 5007 Mobile
Jeff. [email protected]
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. c
brehotels .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 b
orrowing 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
CBRE
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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 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 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.

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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 includ e 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, distinct ive 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 Subject site. The proposed Hotel will offer boutique facilities in the established leisure destination of Palm Springs, a mark et 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 Subject will be located w ithin drivi ng distance for the more than 20 million residents of the greater Los Angeles area. With its proximity to Pal m Springs shop ping, entertainment, and dining the S ubject 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.

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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 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.

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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

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temperature. Individual travel during the low season outnumbers grou ps, which are reluctant to commit to room blocks during potentially intense hea t periods, 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 a nd 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 impa cted 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 dai ly 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.

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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 tha n 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 i s 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 unf oreseen black swan events, but the resulting market impacts over the past two years have altered many of the t ypical approaches used to control costs. The result : unprecedented spikes in construction costs.

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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 g eopolitical 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 a nd o ther 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 Co st 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 gro wth 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 act ions taken by the Fed eral 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 t he 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 pressu res (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 subdu ed economic growth will weigh on commercial real estate fundamentals and investment volumes this year and likely into next year.

While the current const rains 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 conditions 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 bo rrower, 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.

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. SONNENBLICK-EICHNER LETTER

Addendum A
Terms and Conditions

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.

Terms and Conditions
(continued)

8. All statements o f 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 k nowledge 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, inc luding zoning, or questions of survey o r 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 consi dering the 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.

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14. Consultant shall have no liability with respect to a ny loss, damage, c laim or expense i ncurred 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 EITH ER PARTY OR ANY OF ITS AFFILIAT E, OFFIC ERS, D IRECTORS,

EMPLOYEES, AGENTS, OR CON TRACTORS 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 AGREE MENT 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 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 ev ent 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 representa tives (Consultant 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 tran saction 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 sta tement not 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, acti on, proceeding or investigation (co llectively, “Proceedings”) aris ing ther efrom, and regardless of whether such Ind emnified Party is a formal party to suc h 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 ot herwise, 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.

Addendum B
CBRE Hotel Horizons – Coachella Valley Q2 2022
Coachella Valley, CA
Hotel Horizons®

CBRE HOTELS RESEARCH
AUGUST, 2022Q2 2022 Edition
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%

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
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

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
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. 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%
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. -
-
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.

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
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
• • •
- -
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 Was hington DC
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
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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-Pric ed 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
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
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 ADR Occ 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 ADR Occ RevPAR
Market ADR Occ RevPAR
Q2 2022 EditionCoachella Valley, CA
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 ADR Occ 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 ADR Occ RevPAR
Market ADR Occ RevPAR
Q2 2022 EditionCoachella Valley, CA
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 ADR Occ 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 ADR Occ RevPAR
Market ADR Occ RevPAR
Q2 2022 EditionCoachella Valley, CA
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
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
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
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 tr avel 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 gues ts 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
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.

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]

Addendum C
2022 U.S. Construction Cost Trends Report
2022 U.S.

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

CBRE RESEARCH
JULY 2022
Intelligent Investment
REPORT

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.

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.

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

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.

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

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.

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
.. ••• .. . .. ······ . · . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ·. ·. . . . . . . ·. ·. ·. . ••• 111 ····-•••••••
Construction Activity
02 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.

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 ~ -----------==---.-:::;;_---------- ---==-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

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.

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

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
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.
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
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
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
Supply Chain Disruption
03 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.

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
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

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
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

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.
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.

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

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

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

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)
- -
Labor Market Trends
04 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
·····
- -
... ... ....
...... . . . .. ..
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

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. •
•
- -
• - -
-
•
-
- -
- -
•
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
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

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

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

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.

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
0 0
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

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. •
-
- L
•
•
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

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
J I
I
I
I
I I
l I
I
l
~ I
I I
•
-
-
Impact on Materials Costs
05 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
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. nnnnn -~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

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
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%
Implications for Construction Costs
06 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
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%

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%

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

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.

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

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
- - -

© 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]

Addendum D
KPRS Opinion of Probable Cost
Opinion of Probable Cost Printed: 6/13/2022 10:31 AM
5 KPRS
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 ! $28,889,542 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 Construct ion Services, Inc. No part of this estimating system may be reproduced .

Addendum E
Sonnenblick-Eichner Letter

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
~
• 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

ATTACHMENT C

CO
MPACT

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

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

EXISTING HISTORICAL WALL
GARDEN
A
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EQUIPMENT

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LOADING
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BELARDO ROAD

BARRISTO ROAD

ARENAS ROAD

CAHUILLA ROAD

SETBACK
20' - 0"

SETBACK
25' - 0"

AUBERGE PALM SPRINGS HOTEL
284 S. CAHUILLA ROAD,
PALM SPRINGS, CA 92262
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Building Use Height Storie s # Gu estrooms 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 BS 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 BS 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 341 - 1011 2 0 Buil ding D Hot el 151 - g11 1 4 1,832 Gym & Spa .

Buil ding E Hote l 151 - gn 1 3 1,621 Exist ing Buil ding F Hot el (Existing) No Change 1 7 Buil ding F Hot el 151 - g11 2 8 3,777 Hot el (Add iti on ) Buil ding G Hot el 151 - g11 1 3 1,273
Buil ding H Hote l 151 - gn 1 2 988 Existing Buil ding H Hot el No Change 1 2 .

Buil ding I Hote l 151_ g11 1 2 957 Existing Buil ding I Hot el No Change 1 1 Buil ding J Hot el 151 - g11 1 1 1,959 Exist ing Buil ding J Hot el No Change 1 3 Buil ding K Hote l 151 - gn 1 1 519 Exist ing Buil ding K Hot el No Change 1 1 Buil ding L Hote l 271 _ 4_511 2 13 7,785 Exist ing Buil ding L Hot el No Change 2 8 Buil ding M Hot el 151 - g11 1 6 2,878
Buil ding N Hote l 271 - 411 6 4,387 New Guestroom Buil ding N Hot el 341 - 1011 3 40 2 Hot el BOH D 2,513
Buil ding P Hot el 271 - 4.5 11 3,727 2 8
Gym 1, 118
Cafe o Hote l Poo l Cafe
Beer Coo ler
17' - 011 1 D 610 New Cafe Q Hot el Poo l Cafe
Bee r Coo ler
191 - 811
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
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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
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ATTACHMENT D

Project # 22039 | Date: 12.7.2022
© 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

WEINTRAUB

REAL ESTATE GROUP

ORCHID TREE APARTMENTS

PALM SPRINGS,CA

CONCEPT DESIGN
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2 © 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
0’ 4’ 8’ 16’ 32’ 0’ 40’ 80’ N

BARISTO ROAD
CoNte Xt SI te PLAN

ARENAS ROAD

BELARDO ROAD

CAHUILLA ROAD
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ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
0’ 4’ 8’ 16’ 32’ 0’ 40’ 80’ N

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ORCHID TREE APARTMENTS

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P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt MA SSING VI eW A t B eLARD o AND AR eNA S
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5 © 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt VI eW A t AR eNA S AND CAHUILLA
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ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

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ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt MA SSING VI eW A t B eLARD o AND AR eNA S
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8 © 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt MA SSING VI eW A t AR eNA S AND CAHUILLA
N-\-
9 © 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt MA SSING VI eW A t CAHUILLA
N-\-
10 © 2022 NG+P. ALL RIGHTS RESERVED. THE CONCEPTS AND DRAWINGS ARE PROTECTED UNDER U.S. AND INTERNATIONAL COPYRIGHT AND INTELLECTUAL PROPERTY LAWS AND CANNOT BE USED IN ANY MANNER WITHOUT EXPRESS WRITTEN CONSENT.

ORCHID TREE APARTMENTS

PALM SPRINGS ,CA
P R oje C t #22039 | D Ate: 12.7 .2022

WEINTRAUB REAL ESTATE GROUP
CoNC ePt MA SSING VI eW A t B eLARD o
N-\-

ATTACHMENT E

55575.10035\41445604.1

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

(Space Above This Line for Recorder’s Office Use Only)

AMENDMENT NO. 2 TO AMENDED AND RESTATED OPERATIONS COVENANT AGREEMENT NO. 8449
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED OPERATIONS COVENANT AGREEMENT NO. 8449 (“Amendment”) is made and entered into this ____ day of July, 2023 (“Effective Date”), by and between on the one hand, NEW CHURCH II, 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 , as amended by that certain Amendment No. 1 to Amended and Restated Operations Agreement (collectively, the “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 circumstanc es 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; D. WHEREAS, City and Owner desire to resolve their disagreement and provide for adjusted milestones for the development of the Revised Luxury Hotel Project, on the terms and conditions set forth in this Amendment;

55575.10035\41445604.1

2 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, C ity and Owner hereby agree and amend the Agreement as set forth below.

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.

3. Amendment to Section 7.10. Section 7.10 of the Agreement is hereby amended by adding the following:
“7.10.2 City Remedy. Notwithstanding the provisions contained in Section

7.10, above, in the event of a default of this Agreement by Owner, City shall have the right to recover from Owner those costs incurred by City, such as City staff c osts as well as attorneys’ fees, in negotiating and drafting this Agreement.”

4. Fee(s) Deferral. A new section 1.5 is hereby added to the Agreement to read as follows:
“1.5 Fee(s) Deferral . City shall defer , for a three (3) year period, all application processing charge( s) and City -imposed development impact fees associated with the Revised Luxury Hotel Project. The three (3) year period shall begin on the date that the certificate of occupancy is issued for the Revised Luxury Hotel Project and shall end on the date that is three (3) years following said issuance. Interest shall accrue annually on any unpaid balance of the deferred charges /fees from an after the date that the applicable charge/fee would otherwise be due to the City, until paid. The interest rate shall be equal to the interest rate associated with the most recent tax-exempt borrowing issued by the City. The deferral provided by this Section shall apply only to those charges and fees imposed for the benefit of the City and sh all not apply to any application processing charge(s) or development impact fee(s) imposed by any public agency other than the City (i.e., Palm Springs Unified School District charges/fees, Desert Water Agency charges/fees, etc.). Any unpaid principal or interest shall be deemed a debt by Owner. In the event of any default of this Agreement, any unpaid principal and interest shall immediately become due and owing to the City. In addition to any other remedy that the City may have at law or in equity, t he City shall be entitled to recover any unpaid principal and interest from any TOT rebate that is otherwise owing to Owner.”

5. Revised Luxury Hotel Project – Limited Number of Residential Condominiums. A new section 1.3.1 is hereby added to the Agreement to read as follows:
55575.10035\41445604.1

3 “1.3.1 Limited Number of Residential Condominiums. Notwithstanding the preceding paragraph, the City Council shall reasonably consider the incorporation of up to five (5) residential condominiums into the Revised Luxury Hotel Project. Such residential condominiums shall not be subject to the City’s tran sient occupancy tax (PSMC Ch. 3.24) or time- share occupancy tax (PSMC Ch. 3.28, provided that those units are not occupied as a transient or time-share use, respectively.”

6. “Luxury Hotel ” Definition. “ The term ‘Luxury Hotel’ set forth in Recital I of the Agreement is hereby amended to mean a hotel that provides physical features (i.e., finishes, fixtures, flooring, room sizes and amenities) and operational services (including scope and quality of services) similar to those of a similarly sized hotel operated under one or more of the following brands/flags: Auberge Resorts, 1 Hotel, Leading Hotels of the World, or Relais & Chateaux , as those brands exist and operate as of the Effective Date of this Amendment. In the event that, at any time during the Term of the Agreement, all four (4) of those brands are no longer operated, the Parties shall meet and confer and shall select one or more hotel brands that are the equivalent of those brands, as those brand exist and operate as of the Effective Date of this Amendment. Sections 2.4, 2.5, and 2.6, regarding a Luxury Hotel Report, are hereby deleted. City shall not require the Owner to pay for a hotel consultant to evaluate the luxury standard of the Revised Luxury Hotel Project pursuant to Recital ‘I’, Sections 2.4 through 2.6, or any other provisions of the Agreement. Notwithstanding the prior sentence, City may enforce the Luxury Hotel standard by means of the City’s architectural review process as required by City code prior to plan check submittal, by the City’s plan check process prior to construction, by the City’s right to approve the hotel operator and any replacement operator under Section 7.13 of the Agreement, and by the ongoing requirement that Owner uphold and maintain t he Luxury Hotel standard as a condition to receiving a share of transient occupancy tax revenues pursuant to the Agreement, as provided in Sections 1.2 and 7.13 thereof. In connection therewith, the City may, at any time, and at the City’s sole cost and expense, engage the services of one or more consultant(s) to assist the City in the City’s evaluation of the “Luxury Hotel” standard.”

7. Other Provisions Remain. Except as specifically amended by this Amendment, all other provisions of the Agreement remain.

IN WITNESS WHEREOF, the City and Owner have executed this Amendment by duly authorized representatives as of the date first written hereinabove. [SIGNATURES ON FOLLOWING PAGE]

55575.10035\41445604.1

4 SIGNATURE PAGE
TO
AMENDMENT NO. 2 TO AMENDED AND RESTATED OPERATIONS COVENANT AGREEMENT NO. 8449

“CITY”

THE CITY OF PALM SPRINGS,
a California municipal corporation,
and charter city

By:

Scott Stiles, City Manager

ATTEST:

Brenda Pree, City Clerk

APPROVED AS TO FORM:

Jeff Ballinger, City Attorney

“OWNER”

NEW CHURCH II, LLC,
a Nevada limited liability company

By:_____________________________

Name: __________________________

Title: ___________________________

CAHUILLA CHURCH, LLC,
a Nevada limited liability company

By:____________________________

Name: __________________________

Title: ___________________________

55575.10035\41445604.1

REVISED EXHIBIT “C”

PERFORMANCE SCHEDULE

MILESTONE DATE ACTIVITY

A July 10, 2023
City Council approves amendment to
existing TOT Covenant Agreement
including mutually agreed revised
deal points and this revised schedule.

B
90 days after City satisfies
Milestone A.

Owner to submit revised architectural
renderings, site plans, and other
required application documents and
pay application fees for HSPB, ARC
& P
lanning Commission review and
revised entitlements per concept plan
dated January 31, 2023 (“Revised
Entitlements”)

C
Ten days after City notifies
Owner that all Revised
Entitlements have been
approved (and that all City
appeal periods have expired
without an appeal).

Owner to provide City with evidence
of its architect (s) commencing work
on construction plans consistent with
the Revised Entitlements . This
evidence will include a copy of the
signed authorization to proceed with
completion of
the plans consistent
with the submittal dates below.

D
Five (5) months after City
issues Revised Entitlement
approval notice under
Milestone C above.

Owner’s architect(s) shall certify to
the City that the construction plans
are at least 5 0% complete, as
measured consistent with industry
standards.

E
Seven (7) months after City
issues Revised Entitlement
approval notice under
Milestone C above.

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% compl ete, as measured
consistent with industry standards.

F
Eleven (11) months after City
issues Revised Entitlement
approval notice under
Milestone C above.

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

G Fourteen (14) months after City
issues Revised Entitlement
Obtain approval for a construction
loan to finance construction of the
55575.10035\41445604.1

approval notice under
Milestone C above.
revised Project, and enter into a
construction contract to develop the
revised Project

H
Fifteen (15) months after City
issues Revised Entitlement
approval notice under
Milestone C above.

Pay for and obtain all required
building permits, and commence
construction of the revised Project

I
Forty (40) months after City
issues Revised Entitlement
approval notice under
Milestone C above.

Substantially complete construction
of the revised Project

J
Forty-Four (44) months after
City issues Revised Entitlement
approval notice under
Milestone C above.

Open the revised Project

55575.10035\41445604.1

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA

COUNTY OF
On this ___ day of ______________, 20__ before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature:

(Seal)

55575.10035\41445604.1

STATE OF CALIFORNIA

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature:

(Seal)

55575.10035\41445604.1

STATE OF CALIFORNIA

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature:

(Seal)

Palm Springs City CouncilJuly 10, 2023

Palm Springs City Council
July 10, 2023