03a. Abatement hearing- Travelodge

Market Analysis 24 STALLED RECOVERY Towards the end of Q2 2020, a concentration of COVID-19 cases emerged, particularly across the Sunbelt states. This led to a loss of momentum for the nation’s economic recovery. Some of these new disruptions are heavily aggregated in some of the more populous states of California, Texas, Florida, and Arizona. The surge in cases has forced businesses within each afflicted state to retract its reopening progress. As such, a prolonged recovery is to be expected; with it, there is potential for delayed economic recovery relative to more optimistic forecasts in recent months. KEY TAKEAWAYS & OBSERVATIONS The following points summarize key points from CBRE-EA and CBRE’s Americas Research:  The brunt of the impact from COVID-19 has continued to persist. Initial macroeconomic projections for stabilization in Q3 2020 and recovery in Q4 has likely been prolonged due to the rise in cases following initial reopening efforts in Q2 2020.  Though the labor market remains under significant strain, unemployment across the nation has continued to improve from its April highs. Unemployment is expected to progress its downward trend but may take 24-36 months to fall back to pre-crisis levels.  The early signs of recovery are noted; as of early July 2020, a reported 4.8 million jobs were added to the US economy in June 2020. This was the second month of strong gains behind May. Further improvement is anticipated with nearly three-quarters of unemployed workers indicating their job loss is classified as “temporary.”  The Fed’s role in stabilizing the U.S. economy has been immense, including purchases of corporate debt at levels not seen in the Great Financial Crisis. The Fed’s balance sheet has jumped to $6 trillion from $4 trillion in three months.  Real estate typically lags macroeconomic indicators and could see a “swoosh-shape” recovery. COVID-19 will impact various industries differently. CBRE-EA is currently anticipating a phased recovery with impacts varying by property type with industrial projected to have the quickest recovery followed by office and then retail.  Capital values are viewed to be broadly resilient over a 24-36 month horizon, with significant variation based on sector, location and profile.  Pent-up demand and stimulation policy are expected to aid a rapid recovery.  Commercial real estate debt markets have been evolving rapidly and dramatically since the COVID crisis. Initially, 10-year Treasury and LIBOR indexes fell to sub-1% levels, followed by massive spikes in loan spreads that largely followed the broader credit markets. Following recent policy interventions, loan spreads narrowed by about 50 to 100 basis points. Commercial mortgage rates range from 3.5% to more than 4% for most conservatively underwritten deals; value-add and riskier deals are seeing widened