Element Ewing Princeton - IC Package (06.2016) - FINAL (Team DJST)

$4.38 Million Rockbridge Equity Investment

Element – Ewing Township, NJ

TABLE OF CONTENTSExecutive Summary Section I

Hotel Photos 3Regional Map 5Demand Map 6Aerial Overview 7Investment Request & Returns 8Asset Overview 9Summary Economics 10Transaction Strengths 12Investment Risks & Mitigants 16

Hotel Information Section IIHotel Description 18Brand Background 19Renovation Scope 20Financial Terms 21Historical Performance 22Financial Pro Forma 23Revenue & Expense Assumptions 24Hotel Management Agreement 25Borrower / Hotel Management Information 26

Market Information Section IIICompetitive Set Overview 27Competitive Set Map 28Competitive Set Penetration 29

Appendices Section IVComparable Transactions 31New Supply Pipeline 32Competitive Set Photos 33XIRR Calculations 35Exit Analysis 36Sensitivity Analyses 37Returns Under Various Scenarios Considered 38

EXECUTIVE SUMMARYHOTEL PHOTOS

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EXECUTIVE SUMMARYHOTEL PHOTOS

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EXECUTIVE SUMMARYREGIONAL MAP

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100 Miles

EWING TOWNSHIP DEMAND GENERATORS

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARYAERIAL OVERVIEW

HotelElement (127-Rooms)Courtyard (130-Rooms)

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EXECUTIVE SUMMARYINVESTMENT REQUEST & RETURNS

Page 8

Investment Request

Investment Returns

Rockbridge Capital, LLC (“Rockbridge” or “RB”) requests Investment Committee approval of an investment from Rockbridge Hospitality Fund VI L.P. (“Fund VI”) for the acquisition and refresh of the 127-room Element hotel (“Element” or “Hotel”) in Ewing Township, NJ

$9,043,925 first mortgage loan (“First Mortgage”) $4,382,825 equity investment (the “Investment”) from Rockbridge representing 90% of the total equity $486,981 equity investment from Gulph Creek Hotels (“GCH”) representing 10% of the total equity

The Investment is projected to produce unlevered returns of 11.9% XIRR / 1.6x EM and levered returns of 19.5% XIRR / 2.1x EM over a 5-year hold

The anticipated capitalization of the Investment will be as follows:

Sources UsesInterest % of Projected

Type Investor Name Rate Total Per Room Total | CLTC IRR | EM Total Per Room % NoteA Tranche Wells Fargo 4.42% $9,043,925 $71,212 65% | 65% 4.6% | 1.2x Acquisition $12,500,000 $98,425 90% Cap rate: 3.7%

Total Debt 4.42% 9,043,925 71,212 65% | 65% 4.6% | 1.2x Building Construction 1,270,000 10,000 9%Closing Costs 93,731 738 1%

Equity Rockbridge 4,382,825 109,557 32% | 100% 19.5% | 2.1x Working Capital 50,000 394 0%Equity (Unknown) 486,981 109,557 4% | 100% 37.3% | 4.1x

Total Equity 4,869,806 109,557 35% | 100% 21.9% | 2.3x

Total $13,913,731 $109,557 100% | 100% 11.9% | 1.6x Total $13,913,731 $109,557 100% Cap rate: 3.3%

ASSET OVERVIEW

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Element by Westin: 127-Rooms Address: 1000 Sam Weinroth Rd, Ewing Township, NJ 08628 Ownership: Fee Simple Year Opened: 2010 Stories: 4 Acres: +/- 4.83 Food and Beverage: Complimentary hot breakfast and evening service Amenities:

All suites with kitchens Fitness Center Business Center Pool and Spa

Parking: 135 on site

Meeting Space: 2,100 square feet of flexible meeting space Management and Debt: Unencumbered Room Size: 320 sq. ft. Standard Room

540 sq. ft. Executive Suite

Room Type Number % of TotalExecutive Suite 2 2%One-Bedroom Suite 25 20%Studio King 47 37%Studio Queen 30 24%Standard King 13 10%ADA Executive Suite 1 1%ADA One-Bedroom Suite 2 2%ADA Studio King 3 2%ADA Studio Queen 2 2%ADA Standard King 2 2%Total 127 100%

Guest Room Mix

EXECUTIVE SUMMARY

EXECUTIVE SUMMARYSUMMARY ECONOMICS

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Historical & Financial Pro Forma 2014 0 0 0 0 Rockbridge Projections CAGRPeak T12 Feb '16

RevPAR 2012 2013 2014 T12 Feb 2016 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 vs. Year 5

Occupancy 75% 71% 71% 75% 64% 67% 69% 72% 73% 73% 73% 2.6%ADR $122 $105 $119 $122 $121 $120 $127 $131 $135 $139 $143 2.5%RevPAR $92 $75 $85 $92 $77 $80 $88 $94 $98 $101 $104 5.1%

% Growth (18.4%) 13.3% 8.1% (16.0%) 9.0% 7.5% 4.4% 3.0% 3.0%

Total Revenue $4,531,000 $3,721,000 $4,168,000 $4,531,000 $3,765,000 $3,967,196 $4,314,533 $4,633,596 $4,850,712 $4,982,790 $5,132,273 5.2%Net Operating Income $1,229,830 $640,530 $1,282,240 $1,229,830 $458,450 $981,149 $1,176,968 $1,326,504 $1,413,449 $1,447,937 $1,491,375 23.3%

% Margin 27% 17% 31% 27% 12% 25% 27% 29% 29% 29% 29%

Debt ServiceWhole Loan 598,311 598,311 598,311 598,311 598,311 -

Debt MetricsWhole Loan Debt Yield 12.3% 13.5% 15.6% 17.1% 18.0% - Whole Loan DSCR 1.6x 2.0x 2.2x 2.4x 2.4x -

Cash Flow After Debt Service $382,838 $578,656 $728,192 $815,138 $849,625 $1,491,375

Rockbridge InvestmentTotal Capitalization Invested Balance $12,847,691 $13,577,631 $13,365,224 $13,143,648 $12,911,877 - Rockbridge Average Invested Balance $4,381,360 $4,382,825 $4,382,825 $4,382,825 $4,382,825 - Unlevered Cash-on-Cash Returns 8.8% 4.6% 9.2% 8.8% 3.3% 7.6% 8.7% 9.9% 10.8% 11.2% - 9.6%Rockbridge Cash-on-Cash Returns 7.8% 11.9% 14.9% 16.7% 18.5% - 14.0%

Strong Return Metrics: Investment produces an unlevered 11.9% XIRR / 1.6x EM return and a levered 19.5% XIRR / 2.1x EM return

Healthy Debt Coverage: Debt coverage ratio of 2.1x upon stabilization 15.3% average debt yield

Favorable Cash Flow: 63% of returns from cash flow; 14% average cash on cash returns

Exit SummaryExit Date Aug 2021Exit Value $16,088,188

Per Room $126,679Cap Rate 9.00%

EXECUTIVE SUMMARYSUMMARY ECONOMICS

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Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total

Occupancy 67% 69% 72% 73% 73%ADR $120 $127 $131 $135 $139 RevPAR $80 $88 $94 $98 $101

Rooms Revenue $3,726,942 $4,062,089 $4,365,862 $4,571,785 $4,696,073 - $21,422,751 F&B Revenue 163,054 172,959 185,893 194,661 199,953 - 916,519 Other Revenue 77,200 79,486 81,841 84,266 86,764 - 409,556 Total Revenue $3,967,196 $4,314,533 $4,633,596 $4,850,712 $4,982,790 - $22,748,826

NOI $981,149 $1,176,968 $1,326,504 $1,413,449 $1,447,937 - $6,346,007 Margin 25% 27% 29% 29% 29% -

Less: Debt ServiceA Tranche (598,311) (598,311) (598,311) (598,311) (598,311) - (2,991,557)

Cash Flow After Debt Service $382,838 $578,656 $728,192 $815,138 $849,625 - $3,354,450

Exit NOI 1,447,937 1,447,937 Exit Value 9.00% 16,088,188 16,088,188

per Room 126,679

Less: Transaction Costs 2.00% (321,764) (321,764) Less: Debt Repayment (7,913,075) (7,913,075)

Net Exit Proceeds to Equity - - - - $7,853,349 - $7,853,349

Total Distributable Cash to Waterfall $382,838 $578,656 $728,192 $815,138 $8,702,974 - $11,207,799

Total Cash Flow by InvestorNOI + Exit Proceeds $981,149 $1,176,968 $1,326,504 $1,413,449 $17,536,125 $- $22,434,195

Less: Misc. Fees, WC Holdback, Transaction Costs (838) 344 (192) (138) (270,939) - (271,764) Available to Distribute to Debt & Equity 980,311 1,177,311 1,326,311 1,413,311 17,265,185 - 22,162,431

Wells Fargo 598,311 598,311 598,311 598,311 8,511,387 - 10,904,632 Rockbridge 343,800 521,100 655,200 733,500 6,985,761 - 9,239,361 (Unknown) 38,200 57,900 72,800 81,500 1,768,037 - 2,018,437 Total $980,311 $1,177,311 $1,326,311 $1,413,311 $17,265,185 $- $22,162,431 Rockbridge Cash-on-Cash 8% 12% 15% 17% 159% -

EXECUTIVE SUMMARYTRANSACTION STRENGTHS

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JV / Operator Analysis

Reliable and Sophisticated JV / Operator Gulph Creek Hotels holds a strong regional focus and specializes in underperforming assets Excellent prior relationship with Homewood Suites – Eatontown, NJ deal

Since entrance in May 2015, 28% NOI growth

Homewood Suites - Eatontown, NJ TTM Comparative ReportTTM 04/30/16 TTM 04/30/15 Variance

Amount Amount Amount %Rooms 131 131 - -Available Rooms Nights 47,946 47,815 131 0%Occupied Rooms Nights 29,290 32,544 -3254 -10%Occupancy 61.1% 68.1% -7.0% -10%ADR $123.30 $116.06 7.24 6%RevPAR $75.32 $79.00 (3.67) -5%

Homewood Suites - Eatontown, NJ TTM Comparative ReportTTM 04/30/16 Actual TTM 04/30/15 Actual Variance

Amount Ratio PAR POR Amount Ratio PAR POR Amount %Total Revenues $3,661,919 100% $27,954 $125.02 $3,837,919 100% $29,297 $117.93 ($176,000) -5%Total Departmental Expenses 938,535 26% 7,164 $32.04 1,035,953 27% 7,908 $31.83 (97,418) -9%Gross Operating Income 2,723,385 74% 20,789 $92.98 2,801,966 73% 21,389 $86.10 (78,581) -3%Total Undistributed Expenses 1,212,458 33% 9,255 $41.39 1,488,010 39% 11,359 $45.72 (275,552) -19%Gross Operating Profit 1,510,927 41% 11,534 $51.58 1,313,956 34% 10,030 $40.37 196,971 15%Total Fixed Charges 293,081 8% 2,237 $10.01 285,085 7% 2,176 $8.76 7,996 3%Net Operating Income 1,071,369 29% 8,178 $36.58 838,475 22% 6,401 $25.76 232,894 28%


Attractive Risk-Adjusted Returns

Debt-Like Security, Equity-Like Returns Most probable investment scenario produces unlevered returns of 11.9% XIRR / 1.6x EM and levered returns of 19.5%

XIRR / 2.1x EM Preferred return to Rockbridge of 14.0% XIRR Average cash-on-cash returns of 14.0%

Exceptional Returns for Gulph Creek Most probable investment scenario produces levered returns of 37.3% XIRR / 4.1x EM to GCH

Favorable Structure Protects Downside and Incentivizes JV on Back End Preferred return secures pari passu distributions until Rockbridge receives a 14.0% XIRR After Rockbridge hits hurdle, residual cash flows are split 60:40 Rockbridge to Gulph Creek Large participation on back end of returns incentivizes Gulph Creek to drive cash flows 63% of total return occurs through cash flow distributions, leaving less reliance on the exit cap

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Strong Operational Upside

Managerial Issues Inhibited Growth Turnover of two GMs in 2015 No sales manager during February through June 2015 in advance of high demand summer season Asset comes unencumbered by debt and management TTM February 2016 NOI is $458,450, compared to peak NOI performance achieved in 2014 of $1,282,240 As of TTM February 2016, NOI margins were 12.1%, compared to the projected 29.1% NOI margin at exit

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Hyatt PlacePrinceton

Courtyard EwingHopewell

Residence InnPrinceton @

Carnegie Center

HomewoodSuites Princeton

Residence InnPhiladelphiaLanghorne

HomewoodSuites Newtown

Langhorne

element EwingPrinceton

Year

s

Age of Hotels in Competitive Set

Best Property in Market within Asset Class New product that can be purchased

below replacement cost Bristol-Meyers Squibb building a 650,000

sq. ft. office space 6.5 miles away In two months, the property will hold the

brand recognition of a Marriott product The Element brand embraces current

consumer trends, which avoids the traditional Residence Inn and drift more toward uniqueness

Renovations of $10,000/Key to improve FF&E

One of the newest properties in the market

A synergy of the aforementioned characteristics assert this property as the best in its market

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Balanced Occupancy Will Generate Steady RevPAR

Consistent Seven Day Occupancy Diverse demand generators create a consistent seven-day occupancy Corporate park generates weekday results Data shows that Sesame Park and Mercer County Park generate strong weekend occupancy for non-winter months Uncommon for extended stay property to generate this level of weekend demand

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Weekday/Weekend Analysis TTM 02/2016Occupancy ADR RevPAR

Weekday 63.7% $123.29 $78.59Weekend 63.1% $115.58 $72.92Variance (Weekday - Weekend) 0.6% $7.71 $5.67

EXECUTIVE SUMMARYINVESTMENT RISKS & MITIGANTS

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Secondary Market Risk: The Element is located in a secondary market and has underperformed its comp set

Mitigants to Risk: Corporate demand will grow as new companies move in.

Bristol-Meyers Squibb building a 650,000 sq. ft. corporate campus 6.5 miles away to be completed by 12/2016 KVK Tech moving into 460,000 sq. ft. space 7.5 miles away and building an additional $40MM plant 11.5 miles away

A robust corporate demand already exists Thriving healthcare, pharmaceutical, and education sectors, which tend to be counter-cyclical Among the lowest vacancy rates in the state

The Princeton submarket holds a class-A vacancy rate of 9.6%

Poor operating has driven the property downward more so than demand Gulph Creek is an extremely reliable operator, specializing in distressed hotels

At Rockbridge’s Homewood Suites in Eatontown, NJ, Gulph Creek grew NOI 28% within one year of purchase

ADR Growth Risk: The property’s ADR penetration is at 88%, suggesting little room for ADR growth

Mitigants to Risk: Strong upside potential on RevPAR exists

Penetration on RevPAR currently stands at 74.5% Through increased marketing and greater corporate demand arising, occupancy figures will grow Despite limited ADR growth, occupancy growth and consequently, RevPAR growth will occur

Element Ewing Township Competitive Set TTM 02/2016Occupancy ADR RevPAR

Subject 63.6% $121.11 $76.98Comp Set 75.7% $136.57 $103.36Penetration 84.0% 88.7% 74.5%

EXECUTIVE SUMMARYINVESTMENT RISKS & MITIGANTS

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Product Risk: The relatively new and unknown Element brand will not fit into this market, and may be susceptible to forces such as Airbnb

Mitigants to Risk: Starwood/Marriott acquisition will be favorable for Hotel

With the conversion of Element to the Marriott family in two months, Hotel will have the brand recognition of a Marriott while retaining the uniqueness of a best-in-class Element (newest construction in the competitive set)

Demand from millennials Hotel is specifically suited to target features millennials desire, while simultaneously applying sustainable and green

principles in building and Hotel management

Strategic refresh $10,000/Key refresh will defend Hotel’s position as the top and newest asset within its competitive set

Airbnb will not compete with Hotel Greater than 70% of Hotel’s business comes from Transient guests. With many corporate demand generators and

significant corporate pipeline such as Bristol-Myers Squibb planning to move offices to the area, combined with lower-than-market office vacancy rates, Airbnb will not be competing for the same guests as Hotel. Once refresh is completed, Hotel’s position as top asset within its class in the market will provide offerings that Airbnb will be unable to provide, such as fitness center, business center, hot tub, pool, breakfast, and complimentary shuttle service, features that are highly desired by Hotel’s segmentation

HOTEL DESCRIPTION

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Location Area Attractions Major Local Employers

The Element Hotel is located in the suburban area of Ewing Township

Surrounded by a large corporate park Diverse demand generators including

education, corporations, and entertainment

Sesame Place College of New Jersey Trenton-Mercer Airport Mercer County Park

Bank of America Bristol-Myers Squibb Cenlar FSB KVK Tech Educational Testing Services Janssen Pharmaceutical

Property Basics Rooms Amenities & Services

4.83 Acres 127 room extended stay built in 2010 135 on-site parking spaces Electric car charging station

Spacious and ecofriendly bathrooms withspa-inspired shower

320 square feet for the standard rooms 540 square feet for the executive suites Workspace with desk chair

Business Center Complimentary shuttle service Fitness Center Indoor swimming pool 2,100 Square feet of meeting space Complimentary breakfast

HOTEL INFORMATION

HOTEL INFORMATION

The Element brand hotels are affiliates of Starwood Hotels, that are inspired by the Westin

Benefits from the Starwood Preferred Guest program (SPG), which has over 17 million members

Element hotels are eco-friendly, upscale extended stay brands

There are roughly 20 Element hotels in the U.S., but many are still in the development phase

The Element hotels’ objective is to stimulate the senses of all their guests

Designed to accommodate millennial travel preferences

BRAND BACKGROUND

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HOTEL INFORMATIONRENOVATION SCOPE

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(1) All terms subject to final negotiation and documentation

$10,000/Key refresh will position asset as the best property of its type in the market

Renovation will focus on maintaining and improving aesthetics, as well as modernizing FF&E GCH, with review by RBHD, will manage the renovation

Northstar Construction Management will likely be the general contractor

First Mortgage and Financial Terms with GCH (1)

Amount $9,043,925.

LTC 65%

First Mortgage Collateral First mortgage lien on the Borrower's fee simple interest in the Hotel, a perfected first priority security interest in and assignment of all leases, rents, and all other assets of the Borrower.

Term 5 years.

Interest Rate 5 Year Treasury plus 3.20% Spread; Currently Estimated at 4.42%.

Loan Fee 1.0% (at Closing)

Amortization 25 Year Amortization Schedule.

Cash Flow Participation with GCH Pari Passu.

Exit Waterfall with GCH1st Tier: Return of capital (pari passu). 2nd Tier: IRR of 14.0% to Rockbridge (pari passu).Thereafter: 60% to Rockbridge / 40% to GCH.

HOTEL INFORMATIONFIRST MORTGAGE AND FINANCIAL TERMS

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HOTEL INFORMATIONHISTORICAL PERFORMANCE

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HOTEL INFORMATIONFINANCIAL PROFORMA

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HOTEL INFORMATIONREVENUE AND EXPENSE ASSUMPTIONS

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Revenue & Expense Assumptions

Occupancy

Year 1: 67% Year 2: 69% Years 1 and 2 based on historical experience to competitive set Year 3: 72% Year 4: 73% thereafter Years 3, 4, and 5 are benchmarked to Staybridge (Homewood Suites) by GCH

ADR

Year 1: $120.00 Year 2: $127.00 Years 1 and 2 based on historical experience to competitive set Year 3: $130.81 Year 4: $134.73 Year 5: $138.78 Years 3, 4, and 5 are benchmarked to Staybridge (Homewood Suites) by GCH

Communications Revenue Per Sponsor’s provided data

Rental and Other Income PAR results based on historical experience

Rooms Expense $28 POR in Year 1 based on Staybridge (Homewood Suites) benchmark

Food & Beverage Expense Benchmarked to proforma for Staybridge (Homewood Suites) based on similar asset, market, and manager

Communications Expense Based on 2014 stabilized experience

Rental and Other Income Expense 55% ratio based on historical stabilized experience

Management Fees 3% of total revenues

A&G, S&M, O&M Benchmarked to proforma for Staybridge (Homewood Suites) based on similar asset, market, and manager

Utilities $6.40 POR benchmarked to Staybridge (Homewood Suites) based on similar asset, market, and manager

Franchise Fee 5.5% royalty to Element

RE Taxes Based on 3% inflationary projections using March 2016 tax bill of $400,000

Insurance and Other Benchmarked to sponsor’s projections

FF&E Reserves 4.0%

Exit Year 5

HOTEL INFORMATIONHOTEL MANAGEMENT & FRANCHISE AGREEMENT TERMS

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Hotel Management Agreement(1)

Operator Gulph Creek Hotels.

Term 10 years.

Base Fee 3.0% of Total Revenues of which 1% is subordinated to debt service.Performance Incentive Fee None.

Lender Termination Rights

1. Event of Default under the First Mortgage.2. Event of Default under the Hotel Management Agreement.3. Foreclosure or deed-in-lieu of foreclosure.

Gulph Creek Hotels - Portfolio Under ManagementBrand City State RoomsHomewood Suites Hamilton NJ 110Homewood Suites Newtown PA 104Hilton Garden Inn Hamilton NJ 105Hampton Inn Voorhees NJ 120Hampton Inn & Suites Robbinsvil le NJ 104Hampton Inn & Suites Bensalem PA 101Residence Inn (1) Great Valley PA 120Fairfield Inn & Suites Millvil le NJ 111Staybridge Suites Royersford PA 105Best Western Plus King of Prussia PA 168Hotel BPM Brooklyn NY 70Blue Bay Inn Atlantic Highlands NJ 27Wyndham Garden York PA 177Crowne Plaza Hotel Philadelphia PA 337Total 1,759(1) Hotel is in development.

HOTEL INFORMATIONBORROWER / HOTEL MANAGEMENT COMPANY

Homewood Suites – Newtown, PA

Homewood Suites – Hamilton, NJ

Hotel Management Company

Founded in 1995, Gulph Creek Hotels is a privately-owned, fully-integrated hotel company, whose portfolio is focused inPennsylvania, New Jersey, Maryland and Delaware

GCH has developed 10 hotels since 1998 and overseen millionsof dollars of renovations in the Mid-Atlantic region

Rockbridge and GCH have an existing relationship, but havenever transacted on a project together

Rockbridge has underwritten GCH as a hotel manager based onP&L data from comparable GCH-managed properties



Borrower

The Borrower is GCP Monmouth LP, a single-purposeentity whose sole asset is the Hotel. GCP Monmouth LPwill be majority-owned by Gulph Creek Hotels

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MARKET INFORMATIONCOMPETITIVE SET OVERVIEW

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Competitor Rooms Unique Features Location Comments

Hyatt Place-Princeton 122

Complimentary breakfast Self service check-in check-

out 1,100 square feet of

meeting space

10.5 miles away from the hotel Located in the heart of Princeton

Built in 1997 Last renovated in 2003 Rooms are equipped with

Hyatt Grand Bed

Courtyard Ewing Hopewell 130

Sundry shop Bistro restaurant & bar Complimentary on-site

parking

0.2 miles away from the hotel Convenient location in Princeton

Opened in 2003 Lobby creates an inviting

atmosphere Many services offered

duplicates The Element

Residence Inn-Princeton 120

Pet friendly AD accessible rooms Business services

10 miles away from the property Great location in suburban

Princeton

Built in 2005 New Lobby

Residence Inn-Philadelphia 100

Valet parking $51.45 3 meeting rooms Grocery shopping service

12.6 miles away from The Element

Located in the heart of the Center City

Built in 2007 Hotel has won TripAdvisor

Award of Excellence

Homewood Suites-Princeton

142 Business center Baby cribs On-site Convenience store

13.8 mile from the property Opened in 2006

Homewood Suites Newtown Langhorne

104 Business center Baggage storage Laundry & Valet service

8.5 miles away from the hotel Opened in 2010

MARKET INFORMATIONCOMPETITIVE SET MAP

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MARKET INFORMATIONCOMPETITIVE SET PENETRATION

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Penetration AnalysisT12 Feb YTD Feb YTD Feb

Occupancy 2010 2011 2012 2013 2014 2015 2016 2015 2016 Year 1 Year 2 Year 3 Year 4 Year 5Subject - - 71.3% 71.5% 75.3% 65.6% 63.5% 57.7% 45.2% 67.0% 69.0% 72.0% 73.0% 73.0%

Growth - - 0.3% 5.4% (12.9%) (3.1%) (21.6%) 5.4% 3.0% 4.3% 1.4% -

Total STR Performance - - 75.5% 73.5% 76.6% 75.5% 75.7% 62.4% 63.7% 75.7% 75.7% 75.7% 75.7% 75.7%Growth - - (2.6%) 4.2% (1.4%) 0.2% 2.1% - - - - -

Subject Index - - 94.4% 97.2% 98.3% 86.9% 84.0% 92.4% 71.0% 88.5% 91.2% 95.1% 96.5% 96.5%ADR

Subject $- $- $105.00 $118.67 $121.76 $121.14 $121.17 $116.64 $115.82 $120.00 $127.00 $130.81 $134.73 $138.78 Growth - - 13.0% 2.6% (0.5%) 0.0% (0.7%) (1.0%) 5.8% 3.0% 3.0% 3.0%

Total STR Performance $- $- $127.11 $132.59 $135.13 $137.09 $136.54 $131.01 $127.28 $136.54 $136.54 $136.54 $136.54 $136.54 Growth - - 4.3% 1.9% 1.5% (0.4%) (2.8%) - - - - -

Subject Index - - 82.6% 89.5% 90.1% 88.4% 88.7% 89.0% 91.0% 87.9% 93.0% 95.8% 98.7% 101.6%RevPAR

Subject $- $- $74.82 $84.80 $91.71 $79.47 $77.00 $67.26 $52.36 $80.40 $87.63 $94.18 $98.36 $101.31 Growth - - 13.3% 8.1% (13.3%) (3.1%) (22.2%) 4.4% 9.0% 7.5% 4.4% 3.0%

Total STR Performance $- $- $95.97 $97.45 $103.51 $103.50 $103.33 $81.75 $81.08 $103.33 $103.33 $103.33 $103.33 $103.33 Growth - - 1.5% 6.2% (0.0%) (0.2%) (0.8%) - - - - -

Subject Index - - 78.0% 87.0% 88.6% 76.8% 74.5% 82.3% 64.6% 77.8% 84.8% 91.1% 95.2% 98.0%

APPENDIX

COMPARABLE TRANSACTIONS

Source: RB Sales Comps Database, 6/11/16.

Comparable transaction analysis indicates favorable per key transaction price, especially for an asset that can be bought below replacement cost and for one that will be at the top of the extended stay market once $10,000/Key refresh is completed

The comparable transactions presented below are believed to represent the best benchmarks available similar in market and asset scope to the Investment

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APPENDIX

Asset Sale Date Sale Price Keys Price/Key NotesHomewood Suites

Princeton, NJNov-14 $22,500,000 142 $157,746

Homewood Suites Eatontown, NJ

May-15 $10,500,000 131 $80,152 Included Capex of $40,000/Key

NEW SUPPLY PIPELINE

Favorable Supply Outlook:

As far as we are aware, no new supply is projected to enter the market that will be competitive with Hotel

STR indicates that 7 properties representing 939 rooms are under construction in Central New Jersey, and 25 properties representing 3,127 room are in the planning stages

Our research indicates that such supply will not be competitive with our Investment

Source: Element Ewing Princeton – STR Report (2/2016)

Central New Jersey PipelineProperties Rooms

Under Construction 7 939Planning 25 3127

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APPENDIX

COMPETITIVE SET PHOTOS

Courtyard Ewing Princeton

Residence Inn Princeton

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Hyatt Place Princeton

APPENDIX

COMPETITIVE SET PHOTOS

Residence Inn Philadelphia Langhorne

Homewood Suites Princeton

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Homewood Suites Newtown Langhorne

APPENDIX

APPENDIXXIRR CALCULATIONS

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APPENDIXEXIT ANALYSIS

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Exit Year NOI $1,447,937 Cap Rate 9.00%Exit Value 16,088,188 Less: Estimated Closing Costs 2.00% (321,764) Net Capital Proceeds 15,766,424

Less: Outstanding DebtWells Fargo Balance (7,913,075) Remaining to Distribute 7,853,349

Tier 1 (Return of Capital)Wells Fargo 0.00% - Rockbridge Pari Passu (4,382,825) (Unknown) Pari Passu (486,981)

Remaining to Distribute 2,983,543

Tier 2 (14.0% IRR to Rockbridge)Wells Fargo 0.00% - Rockbridge 90.00% (7,216) (Unknown) 10.00% (802)

Remaining to Distribute 2,975,525

Tier 3 (Thereafter)Wells Fargo 0.00% - Rockbridge 60.00% (1,785,315) (Unknown) 40.00% (1,190,210)

APPENDIXSENSITIVITY ANALYSIS

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Unlevered XIRR Levered XIRR Levered EM Exit Value Per Key8.00% 14.1% 22.6% 2.4x $18,099,211 $142,5138.25% 13.5% 21.8% 2.3x $17,550,750 $138,1958.50% 12.9% 21.0% 2.2x $17,034,552 $134,1308.75% 12.4% 20.3% 2.2x $16,547,850 $130,2989.00% 11.9% 19.5% 2.1x $16,088,188 $126,6799.25% 11.4% 18.8% 2.1x $15,653,372 $123,2559.50% 10.9% 18.1% 2.0x $15,241,441 $120,0119.75% 10.5% 17.4% 1.9x $14,850,635 $116,934

10.00% 10.0% 16.7% 1.9x $14,479,369 $114,011

Exit

Cap

Rate

CAP RATE SENSITIVITY

Unlevered XIRR Levered XIRR Levered EM Exit Value Per Key69% 9.6% 16.1% 1.8x $14,295,273 $112,56170% 10.2% 17.0% 1.9x $14,743,502 $116,09171% 10.8% 17.8% 2.0x $15,191,731 $119,62072% 11.3% 18.7% 2.0x $15,639,959 $123,14973% 11.9% 19.5% 2.1x $16,088,188 $126,67974% 12.4% 20.3% 2.2x $16,536,417 $130,20875% 13.0% 21.1% 2.2x $16,984,645 $133,73776% 13.5% 21.9% 2.3x $17,432,874 $137,26777% 14.0% 22.7% 2.4x $17,881,102 $140,796

OCCUPANCY SENSITIVITY

Exit

Occ

upan

cy

126.78 8.6% 14.9% 7.5% 12.3% 6.5% 9.8% 5.6% 7.2% 4.7% 4.6%129.78 10.0% 17.3% 9.0% 15.2% 8.0% 13.4% 7.0% 10.9% 6.1% 8.6%132.78 11.4% 19.4% 10.4% 17.4% 9.4% 15.7% 8.4% 14.1% 7.5% 12.0%135.78 12.7% 21.4% 11.7% 19.5% 10.7% 17.7% 9.7% 16.1% 8.8% 14.7%138.78 14.0% 23.3% 12.9% 21.4% 11.9% 19.5% 10.9% 18.0% 10.0% 16.5%141.78 15.2% 25.1% 14.1% 23.1% 13.1% 21.3% 12.1% 19.7% 11.2% 18.2%144.78 16.3% 26.7% 15.3% 24.8% 14.2% 23.0% 13.2% 21.3% 12.3% 19.9%147.78 17.5% 28.3% 16.3% 26.4% 15.3% 24.6% 14.3% 22.9% 13.3% 21.4%150.78 18.5% 29.8% 17.4% 27.9% 11.9% 19.5% 15.3% 24.4% 14.4% 22.9%

11,500,000

PURCHASE PRICE / RETURNS SENSITIVITY

Year

5 A

DR

13,500,00013,000,00012,500,00012,000,000

APPENDIXRETURNS UNDER VARIOUS SCENARIOS CONSIDERED

Upside CaseYear 5 ADR $143.22

Year 5 Occupancy 74%12% Lower Taxes

Downside CaseYear 5 ADR $138.78

Year 5 Occupancy 72%25% Higher TaxesHigher Expenses

Base Case$13,500,000 Purchase Price

$500,000 Capex

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Total Rockbridge All Equity Gulph EquityReturns Summary Unlevered Levered Levered Levered

IRR 8.3% 13.8% 13.8% 13.8%Equity Multiple 1.4x 1.7x 1.7x 1.7x

% Total ReturnCurrent Income 98% 71% 71% 71%Gain at Exit 2% 29% 29% 29%











APPENDIXRETURNS UNDER A DIFFERENT PREFERENCE STRUCTURE

Structure Pari Passu Until Capital is Returned Preferred Return of 9% to Rockbridge Then 80:20 RB:GCH $500,000 Capex $13,500,000 Purchase Price

Page 39






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Element Ewing Princeton - IC Package (06.2016) - FINAL (Team DJST)

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