Feasibility & Trajectory Study For: The Galena Territory Association Shenandoah Riding Center. Prepared For: Prepared By:

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1 Feasibility & Trajectory Study For: The Galena Territory Association Shenandoah Riding Center Prepared For: The Galena Territory Association Board of Directors Prepared By: HorsePower, Inc E 10 th Ave., Suite #3 Denver, CO (303) Brad@HPowerInc.com July, 2015

2 June 23, 2015 Mr. Joe Mattingley CEO The Galena Territory Association 2000 Territory Drive Galena, Illinois Dear Mr Mattingley: We have completed our engagement to prepare a market-based, equestrian sporting venue feasibility study for the Shenandoah Riding Center, on behalf of the client team, The Galena Territory Association. The data included in this report has been extracted from information supplied to us during discussions with project representatives and various other primary and secondary sources. We have utilized sources that are deemed to be reliable but cannot guarantee their accuracy. Moreover, estimates and analyses regarding the project are based on trends and assumptions and, therefore, there will usually be differences between the projected and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. We have enjoyed working on this project and our relationship with the client project team. If you have any questions, please do not hesitate to contact Brad Ettleman, President and CEO of HorsePower, Inc, by phone at (303) or by at Brad@HPowerInc.com. Respectfully submitted, Brad Ettleman HorsePower, Inc.

3 EXECUTIVE SUMMARY HorsePower, Inc., based on its extensive industry experience, unparalleled knowledge of the field and recent evaluation visit, has compiled the following report where marketbased and equestrian venue feasibility has been taken into consideration. Analysis included the Shenandoah Riding Center, together with its home within The Galena Territory community and the larger tri-state area as well as some national and international considerations. The following summarized the key conclusions and recommendations. In summary, we feel very strongly that, with the appropriate master planning, long-range goals and appropriate operational oversight, the Shenandoah Riding Center is very highly likely to succeed as a regional, national or even international equestrian center. Here is how we ve come to this conclusion: Shenandoah Riding Center at the Galena Territory HIGHLIGHTS The existing Shenandoah Riding Center, together with the brand recognition and regional awareness of The Galena Territory (GTA) is very well positioned for intelligent master planning. The GTA, together with their managing tenants in the riding center have done an outstanding job of securing their place in the region s awareness and have accomplished premier status regionally. The timing for consideration of expansion or improvement is also quite excellent, as it seems the market has a demand, the region will be supportive and the need for an enhanced presence is obvious in the regional market. Not only have The GTA and its existing tenants worked hard to maximize the potential of the Shenandoah Riding Center through creative events, progressive approach and hard work, our research shows that the community has embraced the riding center as a part of the area s identity and regard the riding center with esteem. It s only a matter of time before the market demands more of the Shenandoah Riding Center, and as such, the timing of this master planning, feasibility and trajectory study could not be better. Major components of the currently existing business plan include: - Riding Center services to the Galena Territory community by way of boarding, riding space, riding lessons, trail rides and trails for residents. - Shenandoah 4 th of July Rodeo - Alternative events within the space (craft shows, flea markets, etc.) However, we calculate that there is likely a high level of dissatisfaction among potential new events considering the riding center for development of regional or national events in the market. This dissatisfaction is expected due to the following known factors: - Limited space in the covered arena - No cover of the outdoor arena - Limited number of stalls, and lack of tent pads for tenant expansion

4 - Limited number of camper sites for Recreational Vehicles affiliated with events of 100 horses or greater The existing facilities would be viewed as aging by the industry at large. Unfortunately, the equestrian sporting industry would additionally view the existing facilities as technically obsolete. These perceptions, along with the poor site logistics restrict the level of utilization for possible new (revenue-generating) events. Given the site s ideal location in the region, with new and adaptively reused facilities, organized in a more functional master plan, increased utilization and facility impact can be realized. With the goal of re-establishing the Shenandoah Riding Center for the next 100 years, and to serve as a primary anchor for the region, the Galena Territory Association are strongly encouraged to consider these preliminary recommendations. The recommendations in this report are generally consistent with the expansion goals as we understand them as set forth by representatives of the Galena Territory Association. Because of the use and function of the existing site, a sweeping overhaul approach to improving the site and the facilities would be difficult if not impossible to implement, not to mention overwhelming in cost. Rather, a piece-meal approach over a decade or two, including updated site infrastructure and new and adaptively reused buildings is needed to put into place a long-term solution. The opportunity to master plan the site and rebuild the facilities over time with a single end-goal in mind provides the opportunity to create one of the best, uniquely developed, multi-purpose sporting complexes in the world for a wide variety of events, educational purposes, and research activities. Accomplishing this rebuild of the site accomplishes four shared partner goals: 1. Enables the Shenandoah Riding Center to assume its place as a top equestrian sporting venue in the region for many decades to come. 2. Provides the community with a significant sports and entertainment complex connected to the Territory and Galena, which can open up new event opportunities for northwest Illinois. 3. Positions the Territory as a top destination for large national horse and livestock events bringing with them a constant flow of affluent and outdoor-loving patrons. 4. Provides a strong anchor to the region, and assists in the revitalization of the surrounding communities. For the most part, this report is designed to meet the needs of the Shenandoah Riding Center for year-round event use. However, the additional goal to compete for the nation s largest equestrian events, is above and beyond. If successful, it is easy to project that the draw of these types of national and international equestrian events can generate rental and ancillary revenue for the GTA estimated to be $1-$2 million annually. Assuming the GTA and its partners wish to make a strategic choice to pursue the nation s largest horse shows, the region is well positioned to compete at this top level and the equestrian complex at the site would be occupied much of the

5 year. To compete in this business segment, the GTA should also be prepared to make incremental investments over time to maintain the proposed facilities and remain competitive. New or Enhanced Local Partnerships It is strongly recommended, in addition to the technical facility recommendations found in this report, that the GTA establish specific relationship (if you have not done so already) that are focused on the development of the Shenandoah Riding Center with partners who come together to jointly explore the transformation of the existing footprint into a year-round destination, blending education, entertainment & tourism, economic development and a celebration of the region s heritage (both past and present) into one comprehensive, master planning effort. Given the scope and scale of this proposed redevelopment initiative, this type of emerging partnership will be essential in the overall long-term success of the venture. Facility Overview Generally, in the first ten years (as outlined in the recommended timeline below), the facility program represents a recreation of much of the square footage and facility spaces that the current footprint offers, but in new, modern, technologically improved facilities. Just as important to this project as the buildings themselves, access to the site and interior circulation must be improved, and the site should be master planned to create front-of-house and back-of-house areas in order to maximize efficiency and create a logical interconnectedness among the facilities, all of which are lacking at the existing footprint. Taking into account the strategic opportunity to be a national competitor for large horse shows, the recommended facilities include: Immediate Recommended Goals The following items are recommended for immediate action in order to position the Shenandoah Riding Center to continue to thrive with its existing business plan and draw additional events of the regional size, thereby bringing revenue that will prompt future steps: 1) Identify and install concrete pads that serve two purposes: a) can act as tent pads for any event that may be considering the Center for events, and is willing to go to the expense of installing temporary structures for the housing of competing horses. b) supply a foundation for the future construction of additional permanent stalls, either by way of wind-row independent structures with outward-facing rows of stalls or (more ideally) fully enclosed and temperature-controlled stable facilities. 2) Establish a more recognized front-of-house and connectivity among all structures:

6 From the competitor s perspective, the flow of the existing facilities can be perceived as awkward. While there is a front door that seems to be pointed to the parking lot that the competitor would not use. The buildings located to the west of the indoor seem like an unconnected collection of afterthoughts. A simple connective cover between buildings and establishing a common collecting point under this cover, like a Ferrier s and Veterinarian s station, would accomplish this goal and bring the proposed additional stalls outlined in item one (1) above closer in connectivity to the areas of action. 3) Develop the existing suite of offices upstairs (above gift shop) into a functioning horse show entry office or secretariat. This can easily be accomplished by building and dividing wall for security as well as desks and service counter for show organizers to use as a central command office and interface office with competitors. 4) Establish an outdoor but covered warm-up space located directly between the indoor and outdoor facilities. This covered warm-up will allow for weather-retreat for any events held in the outdoor arena (unless also covered) as well as a warm-up arena for the indoor arena, which is greatly needed. Additionally, it allows for covered working space for the stock contractors during the existing Shenandoah rodeo and weatherresistant working space for Shenandoah Riding Center staff year-round. It also allows for a protected zone for shipping and receiving on move-in and move-out dates and also expands the footprint for non-agricultural events like trade shows. 5) Develop and build a fully functional AAA-rated campground. Not only in an effort to support equestrian and livestock events that are your future anchor clients, but also to bring additional business and revenue to the GTA as a whole. The campground is an excellent way to catch additional business for the golfing enthusiast, trail riders, attendees to the events at the Riding Center and those who happen to be just passing through as well. It is recommended that two distinct campground areas be developed: a) VIP Camper spaces directly adjacent to the stables with a minimum of 50 amps of service, plus clean and grey water accommodations and built to accommodate today s recreation vehicles which include slide-out components and haul-behind vehicles. These spaces are more specifically built for the high-end equestrian because of their location next to the stables, but can be sold at a premium at events, or packaged into event sponsorship programs. Recommended Qty: Not less than 20 units. b) Campground located in close contact, but perhaps not as close as the VIP camper spaces identified above, the regular campground can be much larger in the number of spaces, can be a mix of 50 amps and 30 amps to accommodate different types of customers. Largely consumed by attendees to equestrian events at the Shenandoah Riding Center, the campground can also stand on its own as a revenue source for the GTA on a year-round basis. HorsePower, Inc. recommends the valley located just below the existing main road into the Shenandoah Riding Center and the adjacent Pumpkin Patch and Old Quarry areas as prime locations for possible

7 development. Continuity to the leisure bridal trail system as well as connectivity to the arenas at the Shenandoah Riding Center are key for the success of the campground, in addition to the many other considerations like drainage of run-off, WiFi connectivity, and other modern camper amenities. Recommended Qty: Approximately 100 plus a club house/campground office with on-site service. 6) Purchase of land directly adjacent and across the road from the existing Shenandoah Riding Center with the intention of expansion in future years. See Exhibit A Five-Year Goals: In addition to the above recommendations for immediate consideration and development, HorsePower, Inc. also recommends the following for near-term development (within five years): 1) Cover the existing outdoor arena The covering of the existing outdoor arena, connecting to the above proposed cover of the space between arenas and extending the full length of the current outdoor is an obvious next-step. This will not only allow the GTA (or its managing tenants of the Shenandoah Riding Center) to draw major regional events like: Breed shows like APHA and AQHA, livestock shows like Junior Livestock events, English and Western discipline equestrian sporting events like Dressage and Reining and rodeo events like barrel racing and junior or high school rodeo. The above recommendation is further requested to be built as scalable, so that in future phases, the sides may be enclosed and the arena converted easily from covered to indoor. 2) Purchase of a Kiser Arena Dragmaster allowing the footing to be specifically prepared for any event that wishes to lease the buildings. The existing Four-In-One Reveal implement is a very good tool, but can limit preparations for events that you hope to draw in the near future. Together with consistent evaluation and maintenance of the venue s footing, the Shenandoah Riding Center will be well position for an influx of hosted events. 3) Develop outdoor-type stadium seating - using the existing uphill grade next to the outdoor arena, a set of outdoor (but still covered) seating systems will complete the usability of the outdoor arena for major regional events. 4) Develop operations center tower - specific to the (current) outdoor arena and assuming it is covered as recommended above, a tower that event producers can use to successfully execute events will be necessary. This is not only used as office space, but also for announcers and operational staff. A crow s nest of activity for the newly renovated and highly-functional covered arena, your clients will be drawn to the venue with this aspect. It is recommended that the tower be constructed to be temperature controlled, and positioned near the corner closest to the established in- and out-gate for the new covered (old outdoor) arena.

8 5) Development of a paved and reliable parking facility (lot) that is adjacent to the existing and now improved structures. The current pasture to the east of the outdoor is identified as an excellent site for this parking facility. 6) Install fully functional LED scoreboard in the newly covered arena (item 1 above) Ten-Year Goals: Once the above have been accomplished, a set of recommended ten-year goals include: 1) Expansion of stalling/stabling 2) Renovation of Cross-Country course for Endurance, Eventing and Driving sports 3) Identification of additional outdoor riding spaces and competition arenas, especially if considering the purchase of neighboring lands in the previous term of goals 4) Redevelopment of entry-points, interconnectivity and structure relationships (pending interstate construction) 5) Waste Removal Systems 6) Future-thinking parking lot identification 7) Facility management and operations staff offices and maintenance center 15-Year Goals: With a goal of drawing the top events from all disciplines and an eye on the 20-year plan, the following recommendations are made on a 15-year trajectory: 1) Identify and develop a new outdoor stadium with large-scale seating capability to complement the existing indoor competition venues, which are recommended within expansion properties 2) Develop a trade show hall or outdoor pavilion for vendor village at large-scale events 3) Develop a set of very flat pitch-type outdoor grass areas (polo, combined driving, endurance, horse games, community soccer fields, outdoor public festivals, etc.) 4) Being to develop infrastructure roads, alleys and operational success areas 20-Year Goals: With a goal of attracting major international and multi-discipline equestrian events, the following final recommendations are made to that end: 1) Complete concrete pads around the new outdoor stadium arena (where permanent seating does not already exist) for the opportunity of event-specific doubling of seating capacity or VIP tents and temporary structures. 2) Expansion, revisions or enhancements to the existing (now fully indoor) arena at the original Shenandoah Riding Center site. 3) Development of Security protocols and heli-pad for emergency services. 4) Finalization of infrastructure project to handle large-scale crowds (roads, sewage, physical plant) 5) Expansion of stabling to be secured, quietly away from the public eye and state-ofthe-art for horse health and safety. 6) Connectivity to local communities for accommodation, traffic flow and impact of event support.

9 Ideal Specific Details of the Final Finished Product In order to sustain and grow, the entire site should be strategically master planned, and a new multi-purpose arena developed to replace the combination of indoor/outdoor arenas. Based upon extensive market research of the industry and the following points are recommended facilities to generate year-round use: Ultimately, and based on our experience, here is what the Shenandoah Riding Center would need to thrive as a business plan on a 20-year scale: A new, multi-purpose 10,000 fixed-seat Outdoor Stadium Arena with up to 40 enclosed sponsor/vip suites built within the expansion property. A new multi-purpose, 5,000 seat (2,500 fixed seats and 2,500 pullout seats), Indoor Coliseum (replacing current footprint). Creation of (rodeo) livestock pens with new modern and flexible panels that allows year-round use of the space for other events/activities (i.e. parking, additional space, etc). A new Exposition Hall with 350,000 leasable SF that could house a multipurpose sports training and competitions area; 20,000 to 25,000 SF in swing space for food functions and special events; 3-4 breakout meeting rooms divisible up to 10 smaller rooms. Campground, stabling, infrastructure and transport and connectivity systems to support all of the above plus cross-country and outdoor venues in simultaneous use. This approach will: Enable the Shenandoah Riding Center to maintain its place as a regional hub of competitive equestrian activity and expand to an internationally renowned center in the country/world for many decades to come. Provide the community with a significant sports and entertainment complex connected to the thriving tourism marketing in nearby Galena, IL, which can open up new event opportunities for northwest Illinois and east-central Iowa to attract new visitors. Position the GTA and Shenandoah Riding Center as a top destination for large national horse and livestock events as well as the occasional large-scale international event. Provide a strong anchor to the northwest Illinois and east-central Iowa annual development plan for tourism, growth and awareness as well as the re-vitalization of the surrounding communities and exemplify the dynamic opportunities of the region. General Observations: While the above is a far-reaching and 20-year set of best case scenario suggestions, it s important to recognize the reasons we feel the above are achievable. The Galena Territory has been a very strong performer in terms of destination status achievement, sporting and recreational location status, awareness among residents of

10 the 500-mile diameter market and awareness of horse events (rodeo) in the tri-state area. However, we cannot rest on its past success(es). The equestrian and livestock sporting industry is evolving due to new dynamics and is highly competitive. If the GTA wishes to invest in design and operational advancements, related to destination events and other types of gatherings, there is a high likelihood it will gain immeasurable competitive position. If combined with tourism efforts from the Town of Galena, a unique destination experience is guaranteed and will result in success of the business plan. Additional Considerations: 1. Technology The GTA should create a plan and allocate the appropriate budget to be a class-leading facility from a technology perspective. The main areas of focus should include offering sufficient bandwidth to accommodate the needs of the attendees and exhibitors, providing the infrastructure to accommodate event online video streaming, and supporting leading edge crowd sourcing technology. 2. Hotel Package/Development - The local hotel package is the single most important destination selection criteria once an event knows it can be accommodated in the competition spaces. Our research indicates that planners tolerance for distance of a headquarter hotel from a competition center is a) most preferred = on-site and b) secondarily, within five miles at a maximum. Considering that the GTA has a fair number of on-site accommodations, we feel the first of these criteria is accomplished. However, it is recommended that the GTA consider and seek input and foster the type of hotel development as close to the Shenandoah Riding Center as possible, which would help sell event space when the resort rental rooms are booked. 3. One Galena - A One-Galena concept should be developed that will make it as easy to book in the town of Galena as it will be to book at the resort. This will entail creating a hotel package that can be sold and executed as one product to the event planner. The Cost of Doing Nothing: In a competitive industry, it stands to reason that if the GTA did not implement the recommendations contained in this report, it would reduce its competitive position. The amount of investment that is being made by competitive destinations would suggest that new and improved event & competition space and nearby hotels will continue to develop in the coming years. The exact amount of reduced business activity is difficult to quantify, however the importance of staying competitive cannot be understated. As an example, a 30% loss of event business in the Kentucky Horse Park (for sake of comparison) would equate to more than $2 million a year.

11 The recommendations above represent an opportunity to position Shenandoah Riding Center as an ongoing market leader in the Agricultural Competitive Events industry. Financial Considerations Investment A cost estimate for the overall project is not determined at the finalization of this report. The GTA, in collaboration with its partners, are encouraged to engage a certified master planning team and spend the time to focus on developing the master plan and preliminary project budget. This study will serve as a key data point in helping direct the GTA (and subsequent master planning team) in the pending planning process. Investing partners should be sought out, including but not limited to: state universities with agricultural programs and a need for research facilities, and state and regional institutions like extension outreach and horse organizations. Furthermore, HorsePower, Inc. stands ready to serve as the equestrian industry-specific partner in this future endeavor. We would eagerly engage any additional contracts to help the project achieve its fullest of potentials. Economic Impact Shenandoah Riding Center The implementation of the recommendations for the Shenandoah Riding Center, including the new arenas, is estimated to position the GTA as a very competitive facility for a wide variety of entertainment, trade/consumer show and livestock events. Importantly, the recommendations are designed to allow the Shenandoah Riding Center to flourish for many decades and aid in the re-emergence of adjoining communities. In principle, and based on our experience as both consultants and event organizers ourselves, HorsePower, Inc. predicts a minimum economic impact of $86M annually if there are 1000 stalls built in the end-result project. The following algorithm is used in this calculation, and assumes that of those 1000 stalls, 600 are occupied (for the sake of conservative estimates) and considering half occupancy on 52 weekends (again to be conservative): Total Horse Entries 600 Competitors and Associates (Based on 4 per entry) 2400 Hotel Room Nights (Based on 6.5 room nights per person) Direct Revenue to Hotels (Based on $89 per night) $1,388, State and City Taxes from Hotel Revenue $204, Restaurant Expenditures ($34.59 per person per day) $539, Sales Tax on Restaurant Purchases $43, Other Direct Expenditures (At $66 per person per day) $1,029, Sales Tax on Other Purchases $82,368.00

12 Direct Expenditures $3,287, weekends X $3.3M = $85.8 Million total annual economic impact While the spending in the community from activities at the Shenandoah Riding Center is significant for the region, it is directly correlated to the Center s ability to draw events that bring the spending power to support the above estimates. Culture of Success Sport Connectivity Maintaining one or more GTA representatives embedded within the leadership of equestrian sport is so important that we cannot stress this point enough. Having influence on governance, important decisions and to be a known and respected team within the industry is an incredibly wise investment. An outstanding example of this is Joe Mattingley s role in USEF governance. This representation at the national and international level positions the GTA and the Shenandoah Riding Center into the global conversation. Existing GTA Master Plan Connectivity A specifically outlined part of your Strategic Plan for the Galena Territory Association, Inc., development of a master plan for the Shenandoah Riding Center is not only smart growth management, but also an ideal way to: 1) Preserve amenity value within the territory by developing increased high-end recreational opportunities, 2) Foster excellence in operations, and 3) Protect and promote your unique lifestyle. Lastly, but perhaps most importantly, the development and enhancement of a worldclass equestrian center will not only add value to existing property owner s assets within the Territory, it will draw new and affluent property owners as a result of the enhancement. Those who are already community members will enjoy state-of-the-art facilities at their finger tips. And one need only look to communities like Wellington, Florida, Southern Pines, North Carolina or Lexington, Kentucky to see this in real-life application. Community developments with connectivity to affluent sports, including Equestrian Sporting venues of an international scale are very highly successful. Conclusion Thank you for allowing HorsePower, Inc. to lend its experience to this exciting project. To repeat what was stated in the start of this report, we feel very strongly that the Shenandoah Riding Center is well position for successful growth all the way to the

13 international level. We hope that you find the work we did and the recommendations we ve compiled in this report highly useful. Should you have any questions, concerns or need for additional service, please don t hesitate to engage HorsePower, Inc. once again. Exhibit A (three pages total) Outline of Ideal Property Expansion, as related to the 15 and 20-year plan of development:

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