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Section 1: DEFM14A (DEFM14A)


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

CAREY WATERMARK INVESTORS INCORPORATED

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 



LOGO

 


LOGO

YOUR VOTE IS VERY IMPORTANT

Dear CWI 1 Stockholders and CWI 2 Stockholders:

          On October 22, 2019, Carey Watermark Investors Incorporated ("CWI 1") and Carey Watermark Investors 2 Incorporated ("CWI 2") agreed to merge in an all-stock transaction (the "merger"). The surviving company in the proposed merger (the "combined company") will own an approximately $4.6 billion portfolio of high-quality lodging assets in the United States and will be renamed "Watermark Lodging Trust Incorporated." In addition, the combined company will become internally managed as a result of a series of transactions, which will occur immediately upon the consummation of the merger (the "internalization," and together with the merger, the "proposed transaction").

          The boards of directors of CWI 1 and CWI 2, upon the unanimous recommendations of independent special committees of the respective boards of directors, have each approved the proposed transaction.

Summary of Strategic Benefits

          The proposed transaction is expected to have a number of strategic benefits, including the following:

          Each share of CWI 1 common stock will be exchanged for 0.9106 shares of CWI 2 Class A common stock in the merger, which is equivalent to $10.39 per share based on CWI 2's last estimated net asset value of $11.41 per share as of December 31, 2018. CWI 2 Class A and Class T stockholders will continue to own their existing CWI 2 shares. Immediately following the consummation of the merger, it is estimated that former CWI 1 stockholders will hold in the aggregate approximately 58%, and that continuing CWI 2 stockholders will hold in the aggregate approximately 42%, of the issued and outstanding shares of common stock of the combined company.

          CWI 2 is an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (as amended, the "JOBS Act").

Stockholder Meetings

          Each of CWI 1 and CWI 2 has scheduled a special meeting of its stockholders to vote on the merger and other proposals described in this Joint Proxy Statement/Prospectus.

FOR CWI 1 STOCKHOLDERS:
March 26, 2020, 2:00 p.m., Eastern Time
at the offices of Clifford Chance US LLP
31 West 52nd Street, 4th Floor
New York, New York 10019
  FOR CWI 2 STOCKHOLDERS:
March 26, 2020, 3:00 p.m., Eastern Time
at the offices of Clifford Chance US LLP
31 West 52nd Street, 4th Floor
New York, New York 10019

          AFTER CAREFUL CONSIDERATION, THE CWI 1 BOARD OF DIRECTORS, FOLLOWING THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, RECOMMENDS THAT CWI 1'S STOCKHOLDERS VOTE "FOR" EACH OF THE PROPOSALS TO BE CONSIDERED AT THE CWI 1 SPECIAL MEETING.

          AFTER CAREFUL CONSIDERATION, THE CWI 2 BOARD OF DIRECTORS, FOLLOWING THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, RECOMMENDS THAT CWI 2'S STOCKHOLDERS VOTE "FOR" EACH OF THE PROPOSALS TO BE CONSIDERED AT THE CWI 2 SPECIAL MEETING.

          Your vote on these matters is very important, regardless of the number of shares you hold. Whether or not you plan to attend your respective special meeting in person, please promptly vote or authorize a proxy to vote your shares, so that your shares may be represented and voted at the special meeting.

          The accompanying Joint Proxy Statement/Prospectus provides you with important information about the special meetings, the proposed transaction, and each of the proposals. We encourage you to carefully read this entire document, including in particular the matters discussed in the section titled "Risk Factors" beginning on page 32.

          Sincerely,

/s/ ROBERT E. PARSONS, JR.

  /s/ CHARLES S. HENRY  
Robert E. Parsons, Jr.
Director and Chairman of the Special
Committee of the Board of Directors

Carey Watermark Investors 2 Incorporated
  Charles S. Henry
Director and Chairman of the Special
Committee of the Board of Directors

Carey Watermark Investors Incorporated

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the CWI 2 securities to be issued under this Joint Proxy Statement/Prospectus or determined if this Joint Proxy Statement/Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

   

          This Joint Proxy Statement/Prospectus is dated January 13, 2020, and is first being mailed to the CWI 1 stockholders and the CWI 2 stockholders on or about January 16, 2020.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 26, 2020

Dear CWI 1 Stockholders:

        Carey Watermark Investors Incorporated ("CWI 1") will hold a special meeting of its stockholders (the "CWI 1 special meeting") on March 26, 2020, beginning at 2:00 p.m., Eastern Time, at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019. This CWI 1 special meeting will be held for the purpose of considering and voting on the following proposals:

        The accompanying Joint Proxy Statement/Prospectus contains more detailed information about each of the proposals and attaches copies of the merger agreement as Annex A and the amendment of CWI 1's charter as Annex B, among other annexes. You should read the entire document carefully before you vote or authorize a proxy to vote. CWI 1 will transact no other business at the CWI 1 special meeting except as may properly come before the CWI 1 special meeting or any adjournment or postponement thereof.

        Only holders of record of CWI 1 common stock as of the close of business on January 7, 2020, are entitled to notice of and to vote at the CWI 1 special meeting and any adjournment or postponement thereof.

        Your vote on these matters is very important, regardless of the number of shares of CWI 1 common stock you hold. Approval of the CWI 1 charter amendment proposal is a condition of the merger. If the CWI 1 charter amendment proposal is not approved, the merger will not be consummated.

        Approval of each of the CWI 1 merger proposal and the CWI 1 charter amendment proposal requires the affirmative vote of a majority of all of the votes entitled to be cast on the proposal; abstentions and broker non-votes by CWI 1 stockholders (other than, in the case of the CWI 1 merger proposal, CWI 1's directors, Carey Lodging Advisors, LLC, and any of their respective affiliates) will have the same effect as a vote against such proposals. Approval of the CWI 1 adjournment proposal


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requires the affirmative vote of a majority of all of the votes cast on the proposal; abstentions and broker non-votes will have no impact on the vote on such proposal.

        Whether or not you plan to attend the CWI 1 special meeting in person, we urge you to please promptly vote or authorize a proxy to vote your shares by: (1) using the website shown on your proxy card and following the instructions to vote online; (2) calling the toll-free telephone number shown on your proxy card and following the instructions to vote by telephone; or (3) marking, signing, and returning the enclosed proxy card in the postage-paid envelope. If you sign and return your proxy card without specifying your choices, it will be understood that you wish to have your shares voted in accordance with the recommendations of CWI 1's board of directors. You may revoke your proxy, in the manner described in the accompanying Joint Proxy Statement/Prospectus, at any time before it is voted at the CWI 1 special meeting.

        If you have questions about any of the proposals, please contact the Investor Relations department at (800) 972-2739.

        If you have questions about how to vote or direct a vote in respect of your shares of CWI 1 common stock, or if would like additional copies of the Joint Proxy Statement/Prospectus, please contact Broadridge Financial Solutions, Inc. at (877) 777-2338.

  By Order of the Board of Directors,

 

/S/ SUSAN C. HYDE


Susan C. Hyde
Corporate Secretary
Carey Watermark Investors Incorporated

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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 26, 2020

Dear CWI 2 Stockholders:

        Carey Watermark Investors 2 Incorporated ("CWI 2") will hold a special meeting of its stockholders (the "CWI 2 special meeting") on March 26, 2020, beginning at 3:00 p.m., Eastern Time, at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019. The CWI 2 special meeting will be held for the purpose of considering and voting on the following proposals:

        The accompanying Joint Proxy Statement/Prospectus contains more detailed information about each of the proposals and attaches copies of the merger agreement as Annex A, the CWI 2 charter amendment as Annex C, and the CWI 2 listing charter restatement as Annex D, among other annexes. You should read the entire document carefully before you vote or authorize a proxy to vote. CWI 2 will transact no other business at the CWI 2 special meeting except as may properly come before the CWI 2 special meeting or any adjournment or postponement thereof.


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        Only holders of record of CWI 2 common stock as of the close of business on January 7, 2020, are entitled to notice of and to vote at the CWI 2 special meeting and any adjournment or postponement thereof.

        Your vote on these matters is very important, regardless of the number of shares of CWI 2 common stock you hold. Approval of each of the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal is a condition of the merger. If either of such proposals is not approved, the merger will not be consummated.

        Approval of the CWI 2 merger proposal requires the affirmative vote of a majority of all of the votes cast on such proposal; abstentions and broker non-votes will have no impact on the vote on the proposal. Approval of each of the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal; abstentions and broker non-votes will have the same effect as a vote against such proposals. Approval of the CWI 2 adjournment proposal requires the affirmative vote of a majority of all of the votes cast on such proposal; abstentions and broker non-votes will have no impact on the vote on the proposal.

        Whether or not you plan to attend the CWI 2 special meeting in person, we urge you to please promptly vote or authorize a proxy to vote your shares by: (1) using the website shown on your proxy card and following the instructions to vote online; (2) calling the toll-free telephone number shown on your proxy card and following the instructions to vote by telephone; or (3) marking, signing, and returning the enclosed proxy card in the postage-paid envelope. If you sign and return your proxy card without specifying your choices, it will be understood that you wish to have your shares voted in accordance with the recommendations of CWI 2's board of directors. You may revoke your proxy, in the manner described in the accompanying Joint Proxy Statement/Prospectus, at any time before it is voted at the CWI 2 special meeting.

        If you have questions about any of the proposals, please contact the Investor Relations department at (800) 972-2739.

        If you have questions about how to vote or direct a vote in respect of your shares of CWI 2 common stock, or if would like additional copies of the Joint Proxy Statement/Prospectus, please contact Broadridge Financial Solutions, Inc. at (877) 777-2338.

  By Order of the Board of Directors,

 

/S/ SUSAN C. HYDE


Susan C. Hyde
Corporate Secretary
Carey Watermark Investors 2 Incorporated

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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

        This document, which forms part of a registration statement on Form S-4 (Registration No. 333-235428) filed with the Securities and Exchange Commission by Carey Watermark Investors 2 Incorporated, constitutes a prospectus of CWI 2 under the Securities Act of 1933, as amended, with respect to the CWI 2 Class A common stock to be issued to Carey Watermark Investors Incorporated stockholders pursuant to the Agreement and Plan of Merger, dated as of October 22, 2019, as may be amended from time to time, by and among CWI 1, CWI 2, and Apex Merger Sub LLC, a wholly owned subsidiary of CWI 2. This document also constitutes a Joint Proxy Statement of CWI 1 and CWI 2 under the Securities Exchange Act of 1934, as amended. Additionally, it constitutes a notice of meeting with respect to the CWI 1 special meeting and a notice of meeting with respect to the CWI 2 special meeting.

        CWI 1 has supplied all information contained in this Joint Proxy Statement/Prospectus regarding CWI 1, and CWI 2 has supplied all information contained in this Joint Proxy Statement/Prospectus regarding CWI 2.

        When deciding how to vote, you should rely only on the information contained in this Joint Proxy Statement/Prospectus. Neither CWI 1 nor CWI 2 has authorized anyone to provide you with information that is different from the information contained in this Joint Proxy Statement/Prospectus.

        This Joint Proxy Statement/Prospectus is dated January 13, 2020, and you should not assume that the information contained in this Joint Proxy Statement/Prospectus is accurate as of any date other than such date, unless otherwise specifically provided herein. Neither the mailing of the Joint Proxy Statement/Prospectus to CWI 1 stockholders or CWI 2 stockholders nor the issuance of CWI 2 securities in the proposed transaction will create any implication to the contrary.

        This Joint Proxy Statement/Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or a solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. If you are in a jurisdiction where it is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this Joint Proxy Statement/Prospectus does not extend to you.

        Unless stated otherwise, all references in this Joint Proxy Statement/Prospectus to:

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  Page  

QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTION AND THE SPECIAL MEETINGS

    1  

SUMMARY

   
12
 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

   
31
 

RISK FACTORS

   
32
 

THE COMPANIES

   
54
 

THE CWI 1 SPECIAL MEETING

   
86
 

THE CWI 2 SPECIAL MEETING

   
90
 

PROPOSALS SUBMITTED TO CWI 1 STOCKHOLDERS

   
94
 

PROPOSALS SUBMITTED TO CWI 2 STOCKHOLDERS

   
97
 

THE MERGER

   
100
 

OPINION OF FINANCIAL ADVISOR TO THE CWI 1 SPECIAL COMMITTEE

   
125
 

OPINION OF FINANCIAL ADVISORS TO THE CWI 2 SPECIAL COMMITTEE

   
133
 

PROSPECTIVE FINANCIAL INFORMATION

   
149
 

THE MERGER AGREEMENT

   
151
 

THE INTERNALIZATION AND THE INTERNALIZATION AGREEMENT

   
163
 

THE CWI 2 LISTING CHARTER RESTATEMENT

   
171
 

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

   
178
 

CERTAIN MATERIAL PROVISIONS OF MARYLAND LAW AND OF CWI 2'S CHARTER AND BYLAWS

   
206
 

DESCRIPTION OF CWI 2 SHARES

   
212
 

COMPARISON OF RIGHTS OF CWI 1 STOCKHOLDERS AND CWI 2 STOCKHOLDERS

   
223
 

LEGAL MATTERS

   
236
 

EXPERTS

   
236
 

SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS

   
236
 

OTHER MATTERS

   
238
 

WHERE YOU CAN FIND MORE INFORMATION

   
238
 

INDEX TO FINANCIAL INFORMATION

   
F-1
 

 

 
   
ANNEX A   Merger Agreement

ANNEX B

 

CWI 1 Charter Amendment

ANNEX C

 

CWI 2 Charter Amendment

ANNEX D

 

CWI 2 Listing Charter Restatement

ANNEX E

 

Opinion of Barclays Capital Inc.

ANNEX F

 

Opinion of Morgan Stanley & Co. LLC

ANNEX G

 

Opinion of Duff and Phelps, LLC

ANNEX H

 

CWI 1 Management's Discussion and Analysis of Financial Condition and Results of Operations

ANNEX I

 

CWI 2 Management's Discussion and Analysis of Financial Condition and Results of Operations

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QUESTIONS AND ANSWERS
ABOUT THE PROPOSED TRANSACTION AND THE SPECIAL MEETINGS

        The following addresses some questions that CWI 1 stockholders and CWI 2 stockholders may have regarding the proposed transaction and each company's special meeting of stockholders. We urge you to carefully read this entire Joint Proxy Statement/Prospectus, including the annexes, as the information in this section does not provide all the information that may be important to you.

Q:
What are CWI 1 and CWI 2 planning to do? What is the proposed transaction?

A:
CWI 1 and CWI 2 propose to combine the companies in an all-stock transaction. Additionally, CWI 1 and CWI 2 propose that the combined company become internally managed as a result of a series of transactions to occur immediately upon the consummation of the merger.

Q:
Why are CWI 1 and CWI 2 proposing the proposed transaction?

A:
The proposed transaction is expected to have a number of strategic benefits, including the following:

Attractive and Sizable Portfolio:  combines two highly complementary portfolios with strong brand affiliations. The combined company's approximately $4.6 billion portfolio of lodging assets is geographically diversified, with a majority of assets in demand-driven urban areas and attractive resort markets.

Increased Scale and Operating Efficiencies:  eliminates separate interests in certain joint ventures and provides the combined company with flexibility to optimize the portfolio by selling non-core assets and reducing leverage. In addition, the ability to reduce expenses, primarily due to the elimination of advisory fees and related distributions, and to spread future expenses across a larger asset base should enhance the combined company's operational efficiency.

Highly Experienced, Internal Management:  provides continuity of a management team that has a track record of creating value for each company's stockholders. The internalization of management will insure the focus of the management team on executing the combined company's strategy.

Positions the Combined Company for Liquidity:  creates an internally managed real estate investment trust ("REIT") of significant scale, which is an important step towards a full-cycle liquidity event for stockholders, including a possible initial public offering or stock exchange listing.
Q:
Why am I receiving this Joint Proxy Statement/Prospectus?

A:
The CWI 1 board and the CWI 2 board are using this document as a Joint Proxy Statement to solicit proxies from CWI 1 stockholders and CWI 2 stockholders, respectively, in connection with the merger and other proposals relating to the proposed transaction. The CWI 2 board is also using this document as a prospectus for CWI 1 stockholders because CWI 2 is offering shares of CWI 2 Class A common stock to be issued in the merger in exchange for shares of CWI 1 common stock.

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Q:
What will CWI 1 stockholders and CWI 2 stockholders receive in the merger?

A:
CWI 1 stockholders.    At the effective time of the merger, each issued and outstanding share of CWI 1 common stock, or fraction thereof, will be converted automatically into the right to receive 0.9106 shares of CWI 2 Class A common stock (the "exchange ratio").

        The combined company will be renamed "Watermark Lodging Trust Incorporated."

Q:
What is the internalization?

A:
Currently neither CWI 1 nor CWI 2 has any employees, and each is externally advised and managed by the Advisor. In addition, CWI 1 Subadvisor and CWI 2 Subadvisor provide services to the Advisor.
Q:
Will CWI 1 and CWI 2 continue to pay distributions or dividends prior to the closing of the proposed transaction?

A:
Yes.

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Q:
Will the combined company pay distributions or dividends after the closing of the proposed transaction?

A:
Yes.
Q:
Will CWI 1 stockholders who participated in CWI 1's distribution reinvestment plan immediately prior to the merger, and who desire to participate in CWI 2's distribution reinvestment plan following the consummation of the merger, automatically be able to participate in such plan?

A:
We expect that each CWI 1 stockholder who was a participant in CWI 1's distribution reinvestment plan ("DRIP") immediately prior to the merger will be automatically enrolled in the combined company's DRIP. Any CWI 1 stockholder who was not a participant in CWI 1's DRIP prior to the merger but who desires to take part in the combined company's DRIP following the consummation of the merger will need to enroll in the plan. Such stockholders should contact the Investor Relations department by calling (800) 972-2739. All CWI 2 stockholders who were participants in CWI 2's DRIP immediately prior to the merger will remain enrolled in that plan, which will become the combined company's DRIP upon the consummation of the merger.

Q:
Will my rights as a CWI 1 stockholder or as a CWI 2 stockholder change as a result of the merger?

A:
CWI 1 stockholders.    The rights of CWI 1 stockholders will remain substantially the same immediately following the consummation of the proposed transaction because there are only limited differences between CWI 1's and CWI 2's governing documents. See the section titled "Comparison of Rights of CWI 1 Stockholders and CWI 2 Stockholders" beginning on page 223.

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Q:
Will stockholders have to pay U.S. federal income taxes as a result of the merger?

A:
The merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the merger is conditioned on, among other things, the receipt by each of CWI 1 and CWI 2 of an opinion from its respective counsel to the effect that the merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.
Q:
What are the differences between the CWI 2 Class A common stock and the CWI 2 Class T common stock?

A:
Currently, CWI 2 has two different classes of common stock: Class A common stock and Class T common stock. Shares of Class A common stock are not subject to ongoing fees. Shares of Class T common stock are subject to ongoing distribution and shareholder service fees.
Q:
What compensation will WPC and Watermark receive in connection with the merger and the internalization?

A:
No fees will be paid to WPC or Watermark or their affiliates in their capacities as Advisor, CWI 1 Subadvisor, and CWI 2 Subadvisor, in connection with the merger. WPC and Watermark waived any disposition fee and incentive distributions that would otherwise have been payable upon the consummation of the merger under the applicable advisory agreements, subadvisory agreements, and operating partnership agreements of CWI 1 and of CWI 2.

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Q:
Do any of CWI 1's or CWI 2's executive officers or directors have interests in the proposed transaction that may differ from those of CWI 1's or CWI 2's stockholders, respectively, in addition to the internalization consideration?

A:
As of the close of business on the CWI 1 record date, Michael G. Medzigian (Chief Executive Officer and President and a director of CWI 1), whose shares are held by the Michael G. Medzigian Revocable Trust, Charles S. Henry (independent director of CWI 1), Michael D. Johnson (independent director of CWI 1), Robert E. Parsons, Jr. (independent director of CWI 2), William H. Reynolds, Jr. (independent director of CWI 2), and Simon M. Turner (independent director of CWI 1) beneficially owned, respectively, 91,870; 31,956; 31,956; 32,808; 26,181; and 8,656 shares of CWI 1 common stock. Upon the consummation of the merger, each of them will receive a number of shares of CWI 2 Class A common stock consistent with the exchange ratio.
Q:
When is the merger expected to be completed?

A:
CWI 1 and CWI 2 expect to complete the merger as soon as reasonably practicable following satisfaction of all the required conditions set forth in the merger agreement. If CWI 1's

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Q:
If I am a CWI 1 stockholder and the merger is consummated, how will my receipt of CWI 2 Class A common stock in exchange for my CWI 1 common stock be recorded? Will I have to take any action in connection with the recording of such ownership of CWI 2 Class A common stock? Will such shares of CWI 2 Class A common stock be certificated or in book-entry form?

A:
Pursuant to the merger agreement, as soon as practicable following the effective time of the merger, CWI 2 will cause DST Systems, Inc. ("DST"), the transfer agent in connection with the merger, to record the issuance on the stock records of CWI 2 of the amount of CWI 2 Class A common stock equal to the merger consideration that is issuable to each holder of CWI 1 common stock (including any fraction thereof). If the merger is consummated, you will not have to take any action in connection with the recording of your ownership of CWI 2 Class A common stock. Shares of CWI 2 Class A common stock issued as merger consideration to you will not be certificated and will be in book-entry form and recorded in the books and records of the combined company (which will be renamed "Watermark Lodging Trust Incorporated").

Q:
Why is CWI 1 proposing to amend its charter? What is the effect of the CWI 1 charter amendment?

A:
The CWI 1 charter amendment would remove the limitations on roll-up transactions, which provisions could make it impossible or impractical to consummate the merger. If the merger is not completed, the CWI 1 charter amendment will not become effective.
Q:
Why is CWI 2 proposing to amend its charter? What is the effect of the CWI 2 charter amendment?

A:
The CWI 2 charter amendment would permit the issuance of Series A preferred stock to WPC in connection with the internalization. If the merger is not completed, the CWI 2 charter amendment will not become effective.
Q:
Why is CWI 2 proposing to conditionally amend and restate its charter subject to a future initial public offering or listing? What would be the effect of the amendment and restatement of CWI 2's charter if the condition were met?

A:
The amendment and restatement of CWI 2's charter would remove certain limitations required by the North American Securities Administrators Association, Inc. and would bring CWI 2's charter more in line with those of publicly listed companies in connection with a possible future initial public offering or stock exchange listing of the combined company. Such amendment and restatement will be effective only upon CWI 2 stockholder approval of the merger and an initial public offering or stock exchange listing of the combined company.

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Q:
When and where are the special meetings of CWI 1's stockholders and CWI 2's stockholders?

A:
CWI 1.    The CWI 1 special meeting will be held on March 26, 2020, at 2:00 p.m., Eastern Time, at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019.
Q:
Who can vote at the special meetings?

A:
CWI 1.    All holders of CWI 1 common stock of record as of the close of business on January 7, 2020, the record date for determining stockholders entitled to notice of and to vote at the CWI 1 special meeting (the "CWI 1 record date"), are entitled to receive notice of and to vote at the CWI 1 special meeting. As of the close of business on the CWI 1 record date, there were 142,855,112.405 shares of CWI 1 common stock outstanding, held by approximately 31,408 holders of record. Each share of CWI 1 common stock is entitled to one vote on each proposal presented at the CWI 1 special meeting (other than the CWI 1 merger proposal, on which CWI 1 directors, the Advisor, and their respective affiliates are not entitled to vote).
Q:
How can I vote?

A:
After you carefully read and consider the information provided in this Joint Proxy Statement/Prospectus, including the annexes, please vote in one of the following ways, so that your shares will be represented and voted at the CWI 1 special meeting or the CWI 2 special meeting (as applicable):

authorize a proxy by internet as promptly as possible: visit www.proxyvote.com and follow the instructions shown on your proxy card;

authorize a proxy by telephone as promptly as possible: call (800) 690-6903 (toll free) and follow the instructions shown on your proxy card;

authorize a proxy by mail as promptly as possible: mark, sign, and date your proxy card (or voting instruction form, if applicable) and return it in the enclosed postage-paid, pre-addressed envelope; or

vote in person at the applicable scheduled special meeting: attend the special meeting in person and mark and submit the written ballots that will be passed out at the special meeting.

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Q:
What am I being asked to consider and vote on at the special meetings?

A:
CWI 1.    At the CWI 1 special meeting, CWI 1's stockholders will be asked to consider and vote on the following proposals:

CWI 1 merger proposal—to approve the merger and the other transactions contemplated by the merger agreement;

CWI 1 charter amendment proposal—to approve the amendment of CWI 1's charter to eliminate the procedural and substantive requirements of CWI 1's charter applicable to "roll-up transactions"; and

CWI 1 adjournment proposal—to approve any adjournment of the CWI 1 special meeting, including without limitation, to solicit additional proxies if there are insufficient votes at the time of the CWI 1 special meeting.
Q:
How does the CWI 1 board recommend that CWI 1's stockholders vote, and how does the CWI 2 board recommend that CWI 2's stockholders vote?

A:
CWI 1.    The CWI 1 board, following the unanimous recommendation of a special committee of independent directors, recommends that CWI 1's stockholders vote "FOR" each of the proposals to be considered at the CWI 1 special meeting.

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Q:
What happens if I do not vote?

A:
The proposed transaction cannot be completed without the approval of the proposals relating to the merger, the CWI 1 charter amendment, the CWI 2 charter amendment, or the CWI 2 listing charter restatement. In particular:
Q:
If my shares are held in accounts controlled by a broker, financial advisor, bank, or other nominee, will they vote my shares for me?

A:
If your shares of CWI 1 common stock or CWI 2 common stock are held in accounts controlled by a broker, financial advisor, bank, or other nominee, you should receive a separate voting instruction form with this Joint Proxy Statement/Prospectus.

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Q:
Can I revoke my proxy or change my vote after I have delivered my proxy?

A:
Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the CWI 1 special meeting or the CWI 2 special meeting, as applicable.

Q:
What does it mean if I receive more than one set of voting materials for the CWI 1 special meeting or the CWI 2 special meeting?

A:
You may receive more than one set of voting materials for the CWI 1 special meeting and/or the CWI 2 special meeting, as applicable, including multiple copies of this Joint Proxy Statement/Prospectus and multiple proxy cards or voting instruction forms. For example, if you hold your shares of CWI 1 common stock or CWI 2 common stock in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold your shares. If you are a holder of record and your shares of CWI 1 common stock or CWI 2 common stock are registered in more than one name, you may receive more than one proxy card. Please mark, sign, and date your proxy card (or voting instruction form, if applicable), or if available please submit your proxy over the internet or by telephone.

Q:
If I plan to attend the CWI 1 or CWI 2 special meeting in person, should I notify anyone?

A:
You are not required to notify anyone in order to attend the CWI 1 or CWI 2 special meeting in person. However, if you do plan to attend either special meeting, CWI 1 and CWI 2 would appreciate if you would mark the appropriate box in the applicable enclosed proxy card, so that the companies can know how many stockholders will attend the meeting and prepare a suitable meeting room for the attendees.

Q:
Do I need identification to attend the CWI 1 or CWI 2 special meeting in person?

A:
Yes. Please bring proper identification, together with proof that you are a record owner of shares of CWI 1 common stock or shares of CWI 2 common stock, as applicable. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of CWI 1 common stock or shares of CWI 2 common stock, as applicable, on the applicable record date.

Q:
Will a proxy solicitor be used?

A:
Yes.
Q:
What happens if I am a stockholder of both CWI 1 and CWI 2?

A:
You will receive separate proxy cards for each company and must complete, sign and date each proxy card and return each proxy card in the appropriate pre-addressed postage-paid envelope or,

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Q:
Who can answer my questions?

A:
If you have any questions about the transactions or how to submit your proxy, or if you need additional copies of this Joint Proxy Statement/Prospectus or the enclosed proxy card (or voting instruction form, if applicable), you should contact:
If you are a CWI 1 stockholder:   If you are a CWI 2 stockholder:

Carey Watermark Investors Incorporated
50 Rockefeller Plaza
New York, New York 10020
Attention: Investor Relations
(800) 972-2739

 

Carey Watermark Investors 2 Incorporated
50 Rockefeller Plaza
New York, New York 10020
Attention: Investor Relations
(800) 972-2739

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SUMMARY

        The following summary highlights some of the information contained in this Joint Proxy Statement/Prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger, the merger agreement, the internalization, the internalization agreement, and the other transactions contemplated by the merger agreement and the internalization agreement, CWI 1 and CWI 2 encourage you to carefully read this entire Joint Proxy Statement/Prospectus, including the attached annexes and appendices. See also the section titled "Where You Can Find More Information" beginning on page 238.

The Companies

Carey Watermark Investors Incorporated

        CWI 1 is a public non-traded REIT that invests in, manages, and seeks to enhance the value of, interests in lodging and lodging-related properties in the United States. CWI 1 was formed in March 2008 as a Maryland corporation and qualified as a REIT beginning with its taxable year ended December 31, 2011. CWI 1 conducts substantially all of its activities and holds all of its assets through the CWI 1 Operating Partnership. At September 30, 2019, CWI 1 held ownership interests in 26 hotels containing approximately 7,396 rooms.

        CWI 1 has no employees and is externally advised and managed by the Advisor pursuant to the CWI 1 advisory agreement. In addition, CWA, LLC, a subsidiary of Watermark, provides services to the Advisor pursuant to the CWI 1 subadvisory agreement.

        CWI 1's principal executive offices are located at 50 Rockefeller Plaza, New York, NY 10020, and CWI 1's phone number is (212) 492-1100. CWI 1's website is www.careywatermark.com. The information in CWI 1's website is not included or incorporated by reference in this Joint Proxy Statement/Prospectus, and the website is included only as an inactive textual reference.

Carey Watermark Investors 2 Incorporated and Merger Sub

        CWI 2 is a public non-traded REIT that invests in, manages, and seeks to enhance the value of, interests in lodging and lodging-related properties in the United States. CWI 2 was formed in May 2014 as a Maryland corporation and qualified as a REIT beginning with its taxable year ended December 31, 2015. CWI 2 conducts substantially all of its activities and owns all of its assets through the CWI 2 Operating Partnership. At September 30, 2019, CWI 2 held ownership interests in 12 hotels containing approximately 4,421 rooms.

        CWI 2 has no employees and is externally advised and managed by the Advisor, pursuant to the CWI 2 advisory agreement. In addition, CWA 2, LLC, a subsidiary of Watermark, provides services to the Advisor pursuant the CWI 2 subadvisory agreement.

        CWI 2's principal executive offices are located at 50 Rockefeller Plaza, New York, NY 10020, and CWI 2's phone number is (212) 492-1100. CWI 2's website is www.careywatermark2.com. The information in CWI 2's website is not included or incorporated by reference in this Joint Proxy Statement/Prospectus, and the website is included only as an inactive textual reference.

        The merger sub is a Maryland limited liability company and a direct, wholly owned subsidiary of CWI 2 that was formed in September 2019 for the purpose of entering into the merger agreement and completing the merger.

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The Combined Company

        References to the "combined company" throughout this Joint Proxy Statement/Prospectus refer to CWI 2 after the merger and the internalization have been consummated. The combined company will be renamed "Watermark Lodging Trust Incorporated."

        The combined company is expected to have a pro forma combined enterprise value of approximately $4.6 billion.

        The following table sets forth certain pro forma information, giving effect to the merger, regarding the combined company's portfolio as of and for the 12 months ended September 30, 2019:

 
  Combined Company Metrics  
 
  CWI 1   CWI 2   Combined
Company(1)
 

Gross Real Estate Value(2) ($, in millions) (pro rata)

  $ 2,653   $ 1,952   $ 4,604  

Hotels & Resorts(3)

    24     12     33  

Rooms (pro rata)

  5,986   3,674   9,658  

ADR(4)

  $ 243   $ 267   $ 252  

Occupancy

  73.2 % 76.8 % 74.6 %

RevPAR(4)

  $ 178   $ 205   $ 188  

(1)
Combined company amounts are adjusted for three hotel sales that closed after September 30, 2019.

(2)
Based on independent third-party appraisals as of December 31, 2018.

(3)
Reflects pro rata shares for three properties held in joint ventures in both CWI 1's and CWI 2's standalone portfolios.

(4)
"ADR" refers to average daily rate of a hotel room. "RevPAR" refers to revenue per available room.

        Additional information about the combined company's portfolio can be found in the section titled "The Companies—The Combined Company" beginning on page 75.

The Merger and the Merger Agreement

        CWI 1 and CWI 2 have entered into the merger agreement attached as Annex A to this Joint Proxy Statement/Prospectus. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, merger sub will merge with and into CWI 1, with CWI 1 surviving the merger as a direct, wholly owned subsidiary of CWI 2.

        As of the effective time of the merger, each share of CWI 1 common stock issued and outstanding immediately prior to the effective time (other than any shares held by CWI 2, CWI 1 Operating Partnership, CWI 2 Operating Partnership, or any wholly owned subsidiary of CWI 1, CWI 2, CWI 1 Operating Partnership, or CWI 2 Operating Partnership (collectively, the "Excluded Entities")) will be converted into the right to receive 0.9106 shares of CWI 2 Class A common stock (the "per share merger consideration").

        As of the date of this Joint Proxy Statement/Prospectus, CWI 2 expects to issue approximately 131,374,238 shares of CWI 2 Class A common stock to CWI 1's stockholders in the merger. Immediately following the consummation of the merger, it is estimated that former CWI 1 stockholders will hold in the aggregate approximately 58%, and that continuing CWI 2 stockholders will hold in the

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aggregate approximately 42%, of the issued and outstanding shares of common stock of the combined company.

The Internalization

        Immediately following the effective time of the merger, CWI 1, CWI 2, WPC, Watermark, and certain of WPC's and Watermark's respective affiliates will complete the internalization pursuant to the internalization agreement, dated October 22, 2019. As a result of the internalization, the CWI 1 and CWI 2 advisory agreements will be terminated, the special general partnership interests in the CWI 1 Operating Partnership and the CWI 2 Operating Partnership held by WPC and Watermark will be redeemed, and the combined company will internalize certain management personnel and management functions, as further described under the section titled "The Internalization and the Internalization Agreement" beginning on page 163. CWI 2 and CWI 2 Operating Partnership will issue equity interests having an aggregate value of $125.0 million, based on CWI 2's estimated net asset value per share as of December 31, 2018, in the internalization comprised of: (i) 2,840,549 shares of CWI 2 Class A common stock to be issued to WPC, (ii) 1,300,000 shares of Series A preferred stock with an aggregate liquidation preference of $65.0 million to be issued to WPC, and (iii) 2,417,996 limited partnership units in the CWI 2 Operating Partnership to be issued to Watermark.

Reasons for the Proposed Transaction (see section beginning on page 118)

        In evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement, including the internalization, the CWI 1 board considered the recommendation of the CWI 1 special committee, which was comprised solely of independent directors. The CWI 1 special committee, prior to making its unanimous recommendation, consulted with its independent legal and financial advisors. In reaching their respective determinations, the CWI 1 special committee and the CWI 1 board considered a number of factors, including various factors that the CWI 1 special committee and the CWI 1 board viewed as supporting their respective determinations, as well as certain risks and potentially negative factors. A fulsome discussion of certain factors considered by the CWI 1 special committee and the CWI 1 board in reaching their respective determinations can be found in the section titled "The Merger—CWI 1's Reasons for the Merger and the Internalization" beginning on page 118.

        The CWI 1 special committee also considered whether to solicit proposals from third parties prior to executing the merger agreement. After considering the likelihood that a third party would emerge with a competitive proposal, the right of CWI 1 to actively solicit alternative acquisition proposals during a 30-day "go-shop" period after the signing of the merger agreement and the provisions of the draft merger agreement permitting CWI 1 to terminate the merger agreement to enter into an agreement for a superior proposal (as defined in "The Merger Agreement—Solicitation of Transactions"), the CWI 1 special committee determined to move forward with the proposed transaction without soliciting other proposals before execution of the definitive merger agreement.

        In evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement, including the internalization, the CWI 2 board considered the recommendation of the CWI 2 special committee, which was comprised solely of independent directors of CWI 2. The CWI 2 special committee, prior to making its unanimous recommendation, consulted with its independent legal and financial advisors. In reaching their respective determinations, the CWI 2 special committee and the CWI 2 board considered a number of factors, including various factors that the CWI 2 special committee and the CWI 2 board viewed as supporting their respective determinations, as well as certain risks and potentially negative factors. A fulsome discussion of certain factors considered by the CWI 2 special committee and the CWI 2 board in reaching their respective determinations can be found in the section titled "The Merger—CWI 2's Reasons for the Merger and the Internalization" beginning on page 122.

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Recommendation of the CWI 1 Board of Directors (see section beginning on page 86)

        On October 21, 2019, after careful consideration, the CWI 1 board of directors, based on the unanimous recommendation of the CWI 1 special committee, (i) determined the terms of the merger agreement, the per share merger consideration, the merger, and the other transactions contemplated by the merger agreement and the internalization agreement to be advisable and in the best interests of CWI 1 and its stockholders, and the merger to be fair and reasonable to CWI 1 and on terms and conditions no less favorable to CWI 1 than those available from unaffiliated third parties; (ii) authorized and approved the merger and each of the other transactions contemplated by the merger agreement and the internalization agreement, including the CWI 1 charter amendment; and (iii) authorized and approved the merger agreement, the internalization agreement, and the CWI 1 charter amendment.

        The CWI 1 board of directors, (i) based on the unanimous recommendation of the CWI 1 special committee, recommends that CWI 1 stockholders vote "FOR" the CWI 1 merger proposal and "FOR" the CWI 1 charter amendment proposal, and (ii) based upon its independent consideration, recommends that CWI 1 stockholders vote "FOR" the CWI 1 adjournment proposal.

Recommendation of the CWI 2 Board of Directors (see section beginning on page 90)

        On October 22, 2019, after careful consideration, the CWI 2 board of directors, based on the unanimous recommendation of the CWI 2 special committee, (i) determined the transactions contemplated by the merger agreement and the internalization agreement to be advisable and in the best interests of CWI 2 and its stockholders, fair and reasonable to CWI 2 and its stockholders, and on terms and conditions at least as favorable as those available from unaffiliated third parties; (ii) authorized and approved the transactions contemplated by the merger agreement and internalization agreement, including the CWI 2 charter amendment and the CWI 2 listing charter restatement; and (iii) authorized and approved the merger agreement, the internalization agreement, the CWI 2 charter amendment, and the CWI 2 listing charter restatement.

        The CWI 2 board of directors, (i) based on the unanimous recommendation of the CWI 2 special committee, recommends that CWI 2 stockholders vote "FOR" the CWI 2 merger proposal, "FOR" the CWI 2 charter amendment proposal, and "FOR" the CWI 2 listing charter restatement proposal, and (ii) based upon its independent consideration, recommends that CWI 2 stockholders vote "FOR" the CWI 2 adjournment proposal.

Summary of Risk Factors Related to the Proposed Transaction

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The CWI 1 Special Meeting (see section beginning on page 86)

        The special meeting of the CWI 1 stockholders will be held at the offices of Clifford Chance US LLP, located at 31 West 52nd Street, 4th Floor, New York, New York 10019, on March 26, 2020, commencing at 2:00 p.m., Eastern Time, for the following purposes:

        This Joint Proxy Statement/Prospectus also contains information regarding the CWI 2 special meeting, including the items of business for that special meeting. CWI 1 stockholders are not voting on the proposals to be voted on at the CWI 2 special meeting.

        As of the close of business on the CWI 1 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, were generally entitled to vote 5,856,326 shares of CWI 1 common stock in the aggregate, or approximately 4.1% of the shares of CWI 1 common stock issued and outstanding on that date. This includes 5,632,896 shares of CWI 1 common stock held by WPC and its affiliates. CWI 1 currently expects that all of CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, will vote their shares of CWI 1 common stock in favor of all the proposals to be considered and voted on at the CWI 1 special meeting (other than the CWI 1 merger proposal, on which they are not entitled to vote).

        Your vote as a CWI 1 stockholder is very important. Approval of the CWI 1 charter amendment proposal is a condition of the merger. If the CWI 1 charter amendment proposal is not approved, the merger will not be consummated. Please sign and return the enclosed proxy card, or submit your proxy over the internet or telephone, whether or not you plan to attend the CWI 1 special meeting in person.

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The CWI 2 Special Meeting (see section beginning on page 90)

        The special meeting of the CWI 2 stockholders will be held at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019, on March 26, 2020, commencing at 3:00 p.m., Eastern Time, for the following purposes:

        This Joint Proxy Statement/Prospectus also contains information regarding the CWI 1 special meeting, including the items of business for that special meeting. CWI 2 stockholders are not voting on the proposals to be voted on at the CWI 1 special meeting.

        As of the close of business on the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, were generally entitled to vote 3,733,296 shares of CWI 2 common stock in the aggregate, or approximately 4.0% of the shares of CWI 2 common stock issued and outstanding on that date. This includes 3,506,799 shares of CWI 2 common stock held by WPC and its affiliates. CWI 2 currently expects that all of CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, will vote their shares of CWI 2 common stock in favor of all the proposals to be considered and voted on at the CWI 2 special meeting (other than the CWI 2 merger proposal, on which they are not entitled to vote).

        Your vote as a CWI 2 stockholder is very important. Approval of each of the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal is a condition of the merger. If either of such proposals is not approved, the merger will not be consummated. Please sign and

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return the enclosed proxy card, or submit your proxy over the internet or telephone, whether or not you plan to attend the CWI 2 special meeting in person.

Opinion of CWI 1 Special Committee's Financial Advisor

        The CWI 1 special committee retained Barclays Capital Inc. ("Barclays") to act as its financial advisor with respect to CWI 1's exploration of strategic alternatives that would achieve or would facilitate the achievement of liquidity for the stockholders of CWI 1, including a business combination with CWI 2, an internalization of CWI 1's external advisor, a sale of CWI 1, an initial public offering of CWI 1 common stock, and/or a direct listing of CWI 1 common stock. Barclays delivered its oral opinion to the CWI 1 special committee that, as of the date of the written fairness opinion and based upon and subject to the factors and assumptions set forth therein, from a financial point of view, after giving effect to the merger, the internalization, and the transactions contemplated by the commitment agreement (collectively, the "reviewed transaction"), the per share merger consideration was fair to the holders of shares of CWI 1 common stock (other than the Excluded Entities).

        The full text of the written opinion of Barclays, dated October 21, 2019, which sets forth assumptions made, procedures followed, matters considered, and limitations on the review undertaken in connection with the opinion, is attached as Annex E to this Joint Proxy Statement/Prospectus and is incorporated herein by reference. You should read the opinion carefully in its entirety. The Barclays opinion was provided to the CWI 1 special committee and addresses only, as of the date of the opinion, based upon and subject to the factors and assumptions set forth therein, from a financial point of view, after giving effect to the reviewed transaction, the fairness of the per share merger consideration to the holders of shares of CWI 1 common stock (other than the Excluded Entities). The Barclays opinion does not constitute a recommendation to any holder of shares of CWI 1 common stock as to how such holder should vote with respect to the reviewed transaction. See the section titled "Opinion of Financial Advisor to the CWI 1 Special Committee" beginning on page 125.

        Barclays provided advisory services and its opinion for the information and assistance of the CWI 1 special committee in connection with its consideration of the reviewed transaction. Pursuant to an engagement letter between CWI 1 and Barclays, CWI 1 has paid Barclays an opinion fee of $500,000 and has agreed to pay Barclays an additional transaction fee, currently estimated at approximately $8,000,000, which will be payable by CWI 1 upon the consummation of the reviewed transaction.

Opinion of CWI 2 Special Committee's Financial Advisor as to the Merger

        The CWI 2 special committee retained Morgan Stanley & Co. LLC ("Morgan Stanley") to act as its financial advisor in connection with CWI 2's exploration of strategic alternatives, including a potential merger with CWI 1. At a meeting of the CWI 2 special committee, Morgan Stanley rendered its oral opinion (confirmed by delivery of a written opinion dated October 21, 2019) to the CWI 2 special committee to the effect that as of the date of the written opinion, and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to CWI 2.

        The full text of the written opinion of Morgan Stanley, dated October 21, 2019, is attached as Annex F to this Joint Proxy Statement/Prospectus and is incorporated herein by reference, and it sets forth, among other things, the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. The summary of Morgan Stanley's opinion in this section is qualified in its entirety by reference to the full text of the opinion. You should read the entire opinion carefully and in its entirety.

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        Morgan Stanley's opinion was directed to the CWI 2 special committee (in its capacity as such) and only addressed, as of the date of the written opinion, the fairness from a financial point of view to CWI 2 of the exchange ratio pursuant to the merger agreement; it did not address any other term, aspect, or implication of the merger agreement, the internalization agreement, or the transactions respectively contemplated thereby, or any other agreement, instrument, arrangement, or understanding entered into in connection therewith. Morgan Stanley expressed no view or opinion with respect to the internalization agreement or the transactions contemplated thereby. Morgan Stanley's opinion, the summary thereof, and the related analyses set forth herein were not intended to, and do not, constitute any opinion, advice, or recommendation as to, or otherwise address, how any security holder of CWI 2 or of CWI 1 should act or vote at the special meetings with respect to any matter relating to the proposed transaction. See the section titled "Opinion of Financial Advisors to the CWI 2 Special Committee" beginning on page 133.

        Pursuant to an engagement letter between CWI 2 and Morgan Stanley, CWI 2 has agreed to pay Morgan Stanley a fixed fee of $5,000,000 for its services, $1,000,000 of which was payable upon entry by CWI 1 and CWI 2 into the merger agreement and the remainder of which is contingent and payable upon the closing of the merger, and an incentive fee of up to $3,000,000 payable in the CWI 2 special committee's sole discretion upon the consummation of the merger.

Opinion of CWI 2 Special Committee's Financial Advisor as to the Internalization

        The CWI 2 special committee engaged Duff & Phelps, LLC ("Duff & Phelps"), to serve as an independent financial advisor to the CWI 2 special committee to provide an opinion as to the fairness from a financial point of view of the consideration to be paid in the internalization. At a meeting of the CWI 2 special committee, Duff & Phelps rendered its oral opinion (confirmed by delivery of a written opinion dated October 22, 2019) to the CWI 2 special committee, as of the date of the opinion, on the fairness from a financial point of view to CWI 2 and to the holders of shares of CWI 2 common stock immediately prior to the merger of the consideration to be paid in the internalization (without giving effect to any impact of the payment of such consideration on any particular stockholder other than in its capacity as a stockholder), based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken.

        The full text of the Duff & Phelps written opinion, dated October 22, 2019, is attached as Annex G to this Joint Proxy Statement/Prospectus and is incorporated herein by reference, and it sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations in rendering such opinion. The summary of the Duff & Phelps opinion in this section is qualified in its entirety by reference to the full text of the opinion. You should read the full text of the Duff & Phelps opinion carefully and in its entirety.

        Duff & Phelps provided the Duff & Phelps opinion solely for the use and benefit of the CWI 2 special committee (solely in their capacity as members of the CWI 2 special committee and of the CWI 2 board) in connection with its consideration of the internalization and was not intended to, and does not, confer any rights or remedies upon any other person, and was not intended to, and may not, be used by any other person or for any other purpose, without Duff & Phelps's express consent. The Duff & Phelps opinion only addressed the fairness, from a financial point of view, to CWI 2 and to the holders of shares of CWI 2 common stock immediately prior to the merger of the consideration to be paid in the internalization transaction. It (i) did not address the merits of the underlying business decision to enter into the merger or the internalization versus any alternative strategy or transaction; (ii) did not address any transaction related to the internalization; (iii) was not a recommendation as to how the CWI 2 special committee or CWI 2 board or any CWI 2 stockholder should vote or act with respect to any matters relating to the merger or the internalization, or whether to proceed with the merger or the internalization or any related transaction; (iv) did not address the fairness of the

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merger or the consideration to be paid or received in the merger by CWI 2, CWI 2's stockholders, CWI 1, CWI 1's stockholders, or any other party; and (v) did not indicate that the consideration paid in the internalization is the best possibly attainable under any circumstances, and Duff & Phelps expressed no view or opinion with respect to the merger agreement or the transactions contemplated thereby. Duff & Phelps's written opinion, the summary thereof, and the related analyses set forth herein were not intended to, and do not, constitute any opinion, advice, or recommendation as to, or otherwise address, how any security holder of CWI 2 or of CWI 1 should act or vote at the special meetings with respect to any matter relating to the proposed transaction. See the section titled "Opinion of Financial Advisors to the CWI 2 Special Committee" beginning on page 133.

        Pursuant to an engagement letter between CWI 2 and Duff & Phelps, CWI 2 has paid Duff & Phelps a fee of $450,000 for its services.

Ownership of CWI 1's Stock by Directors and Executive Officers

        As of the close of business on the CWI 1 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate 5,856,326 shares of CWI 1 common stock, which represents approximately 4.1% of the shares of CWI 1 common stock issued and outstanding on that date.

Ownership of CWI 2's Stock by Directors and Executive Officers

        As of the close of business on the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate 3,733,296 shares of CWI 2 common stock, which represents approximately 4.0% of the shares of CWI 2 common stock issued and outstanding on that date.

The Combined Company's Directors and Executive Officers

        Immediately following the effective time of the merger, the combined company's board of directors will be increased to nine members comprised of the six current independent directors of CWI 1 and CWI 2, Michael G. Medzigian, Jason E. Fox, and John J. Park. Pursuant to the internalization agreement, WPC and certain of its affiliates will have the right to designate up to two members of the combined company's board for so long as WPC holds certain minimum amounts of capital stock of the combined company. See the section titled "The Internalization and the Internalization Agreement" beginning on page 163 for more information.

        Mr. Medzigian will serve as Chief Executive Officer, President, and chairman of the board of directors of the combined company. For a list of the executive officers of the combined company, see the section titled "The Companies—The Combined Company—The Combined Company's Directors and Executive Officers" beginning on page 77.

Potential Conflicts of Interest

        In considering the recommendation of the boards of directors of CWI 1 and CWI 2 to approve the merger proposal and the other proposals described in this Joint Proxy Statement/Prospectus, stockholders of CWI 1 and CWI 2 should be aware that potential conflicts of interest exist because WPC and its affiliates serve as the Advisor for each of CWI 1 and CWI 2, Watermark serves as the subadvisor for both companies, the companies share common management, and the officers and directors of CWI 1 and CWI 2 may have certain interests in the proposed transaction that are different from or in addition to the interests of CWI 1 stockholders and CWI 2 stockholders generally. The boards of directors of CWI 1 and CWI 2 (including the CWI 1 and CWI 2 special committees) knew about these potential conflicts and additional interests, and considered them when they approved the merger and other transactions, including the internalization. Certain of these potential conflicts and interests are set forth below.

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        The closing of the merger is a condition to the closing of the internalization. Pursuant to the internalization agreement, CWI 2 and CWI 2 Operating Partnership will pay aggregate consideration of $125.0 million of their equity securities to WPC and Watermark, valued based on CWI 2's estimated net asset value per share of $11.41 as of December 31, 2018. The breakdown of the consideration is as follows:

        Mr. Medzigian entered into an employment agreement with CWI 2 that will take effect at the closing of the merger. See the section titled "The Internalization and Internalization Agreement—CEO Employment Agreement" beginning on page 169 for a summary of terms of the CEO employment agreement.

        On October 1, 2019, CWI 1, CWI 2, Watermark, and Mr. Medzigian entered into a commitment agreement pursuant to which CWI 1 and CWI 2 agreed to pay Watermark a total of $6.95 million in consideration of the commitments of Watermark and Mr. Medzigian to wind-down and ultimately liquidate a private fund that was formed to raise capital to invest in lodging properties, and to devote their business activities exclusively to the affairs of CWI 1 and CWI 2 and certain other activities set forth in the commitment agreement, with the exception of the wind-down of the private fund and performing asset management services for two hotels owned by WPC. Of the amount payable to Watermark, $5.0 million was paid in October 2019 and the balance is payable in January 2020. See the section titled "The Internalization and the Internalization Agreement—Commitment Agreement" beginning on page 168 for a summary of terms of the commitment agreement. Each of Charles S. Henry, Michael D. Johnson, Robert E. Parsons, Jr., and William H. Reynolds, Jr. had been appointed to the investment and advisory committee of the private fund, and their respective positions terminated on October 3, 2019. As members of the investment and advisory committee, each of them received an annual cash retainer of $15,000.

        Until the closing of the internalization, the Advisor will continue to receive any and all accrued and unpaid fees and distributions pursuant to the CWI 1 advisory agreement, CWI 2 advisory agreement, and limited partnership agreements of CWI 1 Operating Partnership and of CWI 2 Operating Partnership. At September 30, 2019, the Advisor had accrued and unpaid fees of $2.6 million pursuant to the CWI 1 advisory agreement and CWI 1 operating partnership agreement, and $1.8 million pursuant to the CWI 2 advisory agreement and CWI 2 operating partnership agreement, excluding the disposition fees and incentive distributions being waived in connection with the merger and internalization. On a monthly basis, the Advisor earns an aggregate of approximately $2.1 million in asset management fees and $1.1 million in special general partner distributions from CWI 1 and CWI 2. WPC pays Watermark 20% of all fees and distributions it receives in respect of CWI 1 and 25% in respect of CWI 2.

        As of the close of business on the CWI 1 record date and the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate approximately 4.1% and 4.0% of the issued and outstanding shares of CWI 1 common stock and CWI 2 common stock, respectively. See the sections titled "The CWI 1 Special MeetingBeneficial Ownership of CWI 1's Stock by Directors and Executive Officers" and "The CWI 2 Special MeetingBeneficial Ownership of CWI 2's Stock by Directors and Executive Officers" beginning on pages 88 and 92, respectively.

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        Each of the directors of CWI 1 and of CWI 2 will serve as directors of the combined company, and the independent directors will receive compensation for their service as directors.

        See the sections titled "The Companies—The Combined Company—Potential Conflicts of Interest of the Combined Company," "—Carey Watermark Investors 1 Incorporated—Certain Relationships and Related Transactions of CWI 1," and "—Carey Watermark Investors 2 Incorporated—Certain Relationships and Related Transactions of CWI 2" beginning on pages 84, 62, and 72, respectively.

No Stockholders' Appraisal Rights in the Merger

        No dissenters' or appraisal rights will be available to holders of CWI 1 common stock or CWI 2 common stock with respect to the merger or the other transactions contemplated by the merger agreement.

Conditions to Closing of the Merger

        A number of conditions must be satisfied or waived, where legally permissible, before the merger can be consummated. These include among others:

        Neither CWI 1 nor CWI 2 can give any assurance as to when, or if, all of the conditions to closing the merger will be satisfied or waived or that the merger will occur.

Regulatory Approvals in Connection with the Merger

        The merger may implicate certain regulatory requirements of municipal, state and federal, domestic or foreign, governmental agencies and authorities, including those relating to the offer and sale of securities. Neither CWI 1 nor CWI 2 is aware of any regulatory approvals that are expected to prevent the consummation of the merger. Under the merger agreement, CWI 1 and CWI 2 have each agreed to use its reasonable best efforts to take all actions necessary, proper or advisable to complete the merger and the other transactions contemplated by the merger agreement.

CWI 1 Go-shop

        Under the terms of the merger agreement, CWI 1 was permitted to solicit competing bids for a 30-day period beginning on October 23, 2019. CWI 1 was required to notify CWI 2 in writing, no later than two business days after the conclusion of the solicitation period, of the identity of each person who submitted a bona fide competing proposal during the solicitation period that was not withdrawn

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and that the CWI 1 special committee determined in good faith, after consultation with its financial advisors and outside legal counsel, to be a superior proposal.

No Solicitation and Change in Recommendation with Competing Proposal

        Since the expiration of the go-shop solicitation period, CWI 1 has been prohibited from soliciting competing bids. However, prior to CWI 1's receipt of its stockholders' approval of the merger, CWI 1 may negotiate with a third party after receiving an unsolicited written proposal if the CWI 1 special committee determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that the unsolicited proposal constitutes or is reasonably likely to result in a superior proposal. Once a third-party proposal is received, CWI 1 must, among other things, notify CWI 2 within 24 hours following receipt of the proposal, keep CWI 2 informed of the status and material terms of the proposal and associated negotiations and provide CWI 2 with an unredacted copy of the proposal and a written summary of material terms not made in writing.

        The CWI 1 board may fail to recommend or change, qualify, withhold, withdraw, or modify its recommendation to its stockholders with respect to the merger and enter into an agreement to consummate a competing transaction with a third party if the CWI 1 special committee determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that failure to take such action would be inconsistent with its duties as directors under Maryland law, the competing proposal is a superior proposal, and CWI 1 (in connection with terminating the merger agreement) pays a $28,690,000 termination fee to CWI 2 or, if CWI 1 enters into a definitive agreement with an "exempted person" (meaning a person that submitted a qualifying offer for an alternative transaction during the go-shop period), a lower fee of $21,520,000. Prior to any such termination, CWI 1 generally must provide CWI 2 with notice at least five business days prior to such termination and an opportunity to revise the terms of the merger agreement to make the competing proposal no longer a superior proposal.

        Under the terms of the merger agreement, CWI 2 is prohibited from soliciting competing bids. However, prior to CWI 2 receiving its stockholder approval of the merger, CWI 2 may negotiate with a third party after receiving an unsolicited written proposal if the CWI 2 special committee determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that the unsolicited proposal constitutes or is reasonably likely to result in a superior proposal. Once a third-party proposal is received, CWI 2 must, among other things, notify CWI 1 within 24 hours following receipt of the proposal, keep CWI 1 informed of the status and material terms of the proposal and associated negotiations, and provide CWI 1 with an unredacted copy of the proposal and a written summary of material terms not made in writing.

        The CWI 2 board may fail to recommend or change, qualify, withhold, withdraw, or modify its recommendation to its stockholders with respect to the merger and enter into an agreement to consummate a competing transaction with a third party if the CWI 2 special committee determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that failure to take such action would be inconsistent with its duties as directors under Maryland law, the competing proposal is a superior proposal, and CWI 2 (in connection with terminating the merger agreement) pays a $19,669,000 termination fee to CWI 1. Prior to any such termination, CWI 2 generally must provide CWI 1 with notice at least five business days prior to such termination and an opportunity to revise the terms of the merger agreement to make the competing proposal no longer a superior proposal.

        For more information regarding the limitations on the CWI 1 board and the CWI 2 board to consider other proposals, see the section titled "The Merger Agreement—Solicitation of Transactions" beginning on page 156.

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Termination

        CWI 1 and CWI 2 may mutually agree to terminate the merger agreement before completing the merger, even after approval of CWI 1's stockholders and/or CWI 2's stockholders.

        In addition, either CWI 1 or CWI 2 may terminate the merger agreement if:

        CWI 1, with the prior approval of the CWI 1 special committee, may terminate the merger agreement if:

        CWI 2, with the prior approval of the CWI 2 special committee, may terminate the merger agreement if:

        For more information regarding the rights of CWI 1 and CWI 2 to terminate the merger agreement, see the section titled "The Merger Agreement—Termination of the Merger Agreement" beginning on page 160.

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Termination Expenses

        Generally, all fees and expenses incurred in connection with the merger and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses. However, each of CWI 1 and CWI 2 may be obligated to pay the other party an amount up to $5.0 million in expense reimbursement if the merger agreement is terminated under certain circumstances. Additionally, the merger agreement provides for the payment of a termination fee in certain circumstances either by CWI 1 in the amount of $28,690,000 or $21,520,000, as applicable, or by CWI 2 in the amount of $19,669,000.

        For more information regarding the termination fee and the expense reimbursement, see the section titled "The Merger Agreement—Termination Expenses" beginning on page 161.

Material U.S. Federal Income Tax Consequences of the Merger

        The merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the merger is conditioned on, among other things, the receipt by each of CWI 1 and CWI 2 of an opinion from its respective counsel to the effect that the merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.

        Assuming that the merger qualifies as a reorganization, U.S. holders of CWI 1 common stock will not recognize gain or loss for U.S. federal income tax purposes as a result of the exchange of shares of CWI 1 common stock for shares of CWI 2 Class A common stock in the merger.

        Holders of CWI 1 common stock should consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local, or non-U.S. income and other tax laws) of the merger in their particular circumstances.

Accounting Treatment of the Merger

        The merger is expected to be accounted for as a business combination in accordance with current authoritative accounting guidance. We expect to conclude that CWI 1 will be the accounting acquiror in the merger as (a) CWI 1's pre-merger stockholders will have a majority of the voting power in the combined company after the merger and (b) CWI 1 is significantly larger than CWI 2 when considering assets and revenues. As CWI 1 is expected to be the accounting acquiror while CWI 2 will be the legal acquiror, the merger will be accounted for as a reverse acquisition. The fair value of the consideration transferred in the merger will be measured based upon (a) the number of shares of common stock that CWI 1, as the accounting acquiror, would theoretically issue to CWI 2's stockholders to achieve the same ratio of ownership in the combined company upon completion of the merger, and (b) applying the estimated net asset value of CWI 1 as of December 31, 2018 (the "CWI 1 NAV"). The fair value of the consideration transferred in the merger will be allocated to the assets acquired and liabilities assumed as of the completion of the merger. Additionally, it is expected that any goodwill or gain from a bargain purchase will be recognized and measured in accordance with GAAP. The estimated fair value of the assets acquired, liabilities assumed, and consideration transferred may change significantly until the closing of the merger. Because CWI 1 is expected to be the accounting acquiror, its historical financial statements will become the historical financial statements of the combined company upon the closing of the merger. All transaction costs incurred by CWI 1 are expected to be expensed, and the consolidated financial statements of the combined company are expected to reflect the combined operations of CWI 1 and CWI 2 subsequent to the date of the merger.

        See the unaudited pro forma consolidated financial information and accompanying notes included in this Joint Proxy Statement/Prospectus beginning on page F-3.

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Comparison of Rights of CWI 1 Stockholders and CWI 2 Stockholders

        If the merger is consummated, stockholders of CWI 1 will become stockholders of CWI 2. The rights of CWI 1 stockholders are currently governed by and subject to the provisions of the MGCL, and the charter and bylaws of CWI 1. Upon the consummation of the merger, the rights of the former CWI 1 stockholders who receive shares of CWI 2 Class A common stock in the merger will be governed by the MGCL and CWI 2's current charter and bylaws, rather than CWI 1's charter and bylaws. Additionally, as described herein, at the CWI 2 special meeting, CWI 2 stockholders are voting on proposals to approve a charter amendment and, in connection with a future initial public offering or stock exchange listing, an amended and restated charter.

        For a summary of certain differences between the rights of CWI 1 stockholders and CWI 2 stockholders, see the section titled "Comparison of Rights of CWI 1 Stockholders and CWI 2 Stockholders" beginning on page 223.

CWI 1 Charter Amendment

        If the CWI 1 charter amendment proposal is approved, the charter amendment will take effect immediately prior to the closing of the merger. For more information on the proposed CWI 1 charter amendment, see the section titled "Proposals Submitted to CWI 1's Stockholders" beginning on page 94.

CWI 2 Charter Amendment

        If the CWI 2 charter amendment proposal is approved, it will take effect concurrently with the effective time of the merger. For more information on the proposed amendment to CWI 2's charter, see the section titled "Proposals Submitted to CWI 2's Stockholders" beginning on page 97.

CWI 2 Listing Charter Restatement

        If the CWI 2 listing charter restatement proposal is approved, then CWI 2 will be authorized to file the amended and restated charter in the form attached hereto as Annex D to this Joint Proxy Statement/Prospectus, in connection with an initial public offering or stock exchange listing of the combined company. For more information on the proposed amendment and restatement of CWI 2's charter, see the section titled "The CWI 2 Listing Charter Restatement" beginning on page 171.

Selected Historical Financial Information of CWI 1

        The following selected historical financial information for each of the years during the five-year period ended December 31, 2018, have been derived from CWI 1's audited consolidated financial statements contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 15, 2019. The selected historical financial information as of and for the nine months ended September 30, 2019, has been derived from CWI 1's unaudited consolidated financial statements contained in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019, filed with the SEC on November 8, 2019. Interim results for the nine months ended and as of September 30, 2019, are not necessarily indicative of, and are not projections for, the results to be expected for the fiscal year ended December 31, 2019. All information is presented in thousands, unless otherwise specified.

        You should read this selected historical financial information together with the financial statements and accompanying notes, which are included in this Joint Proxy Statement/Prospectus beginning on page F-13, and CWI 1 management's discussion and analysis of financial condition and results of operations, which are attached as Annex H to this Joint Proxy Statement/Prospectus.

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        The following selected financial data is in thousands, except per share amounts and statistical data:

 
  Nine Months Ended
September 30,
  Years Ended December 31,  
 
  2019   2018   2018   2017   2016   2015   2014  

Operating Data

                             

Total hotel revenues

  $ 469,362   $ 457,925   $ 613,887   $ 629,132   $ 651,095   $ 542,103   $ 348,079  

Acquisition-related expenses

          3,727   19,868   25,899  

Net (loss) income

    (10,045 )   19,877     15,744     3,751     (6,976 )   (30,640 )   (33,720 )

(Income) loss attributable to noncontrolling interests

  (6,474 ) (5,180 ) (7,688 ) 1,177   (1,777 ) 4,915   988  

Net (loss) income attributable to CWI stockholders

    (16,519 )   14,697     8,056     4,928     (8,753 )   (25,725 )   (32,732 )

Basic and diluted (loss) income per share:

                             

Net (loss) income attributable to CWI stockholders

    (0.12 )   0.11     0.06     0.04     (0.07 )   (0.20 )   (0.38 )

Distributions declared per share

  0.4275   0.4275   0.5700   0.5700   0.5700   0.5600   0.5500  

Balance Sheet Data

                                           

Total assets

  $ 2,211,465   $ 2,310,202   $ 2,280,144   $ 2,459,921   $ 2,476,944   $ 2,451,759   $ 1,994,570  

Net investments in real estate(a)

    1,911,694     2,035,601     2,022,367     2,181,592     2,225,070     2,173,203     1,522,474  

Non-recourse debt, net, including debt attributable to Assets held for sale

  1,274,847   1,329,838   1,326,014   1,420,913   1,456,152   1,350,835   961,909  

WPC Credit Facility

    35,000     41,637     41,637     68,637              

Senior Credit Facility

          22,785   20,000    

Due to related parties and affiliates

    3,040     4,667     6,258     3,611     2,628     3,104     2,059  

Other Information

                             

Net cash provided by operating activities

  $ 76,040   $ 58,556   $ 82,856   $ 120,002   $ 84,359   $ 60,749   $ 33,054  

Cash distributions paid

  60,089   59,219   79,045   77,716   76,233   69,481   40,973  

Supplemental Financial Measures

                                           

FFO attributable to CWI stockholders

  $ 43,026   $ 46,381   $ 60,881   $ 58,581   $ 73,107   $ 47,624   $ 10,498  

MFFO attributable to CWI stockholders

    50,827     50,818     67,563     68,717     83,400     67,082     39,335  

Consolidated Hotel Operating Statistics(b)

                             

Occupancy

    75.3 %   77.4 %   76.2 %   76.3 %   75.7 %   76.3 %   75.6 %

ADR

  $ 232.12   $ 224.52   $ 227.31   $ 219.68   $ 216.25   $ 204.79   $ 193.91  

RevPAR

    174.89     173.88     173.19     167.71     163.67     156.24     146.53  

(a)
Net investments in real estate consist of net investments in hotels, assets held for sale, and equity investments in real estate.

(b)
Represents statistical data for CWI 1 consolidated hotels during the ownership period.

Selected Historical Financial Information of CWI 2

        The following selected historical financial information for each of the years during the five-year period ended December 31, 2018, have been derived from CWI 2's audited consolidated financial statements contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 15, 2019. The selected historical financial information as of and for the nine months ended September 30, 2019, has been derived from CWI 2's unaudited consolidated financial statements contained in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019, filed with the SEC on November 8, 2019. Interim results for the nine months ended and as of September 30, 2019, are not necessarily indicative of, and are not projections for, the results to be expected for the fiscal year ended December 31, 2019. All information is presented in thousands, unless otherwise specified.

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        You should read this selected historical financial information together with the financial statements and accompanying notes, which are included in this Joint Proxy Statement/Prospectus beginning on page F-87, and CWI 2 management's discussion and analysis of financial condition and results of operations, which are attached as Annex I to this Joint Proxy Statement/Prospectus.

        The following selected financial data is in thousands, except per share amounts and statistical data:

 
  Nine Months Ended
September 30,
   
   
   
   
   
 
 
  Year Ended December 31,   May 22
(Inception) -
Dec. 31,
2014
 
 
  2019   2018   2018   2017   2016   2015  

Operating Data(a)

                             

Total hotel revenues

  $ 279,532   $ 276,456   $ 362,332   $ 340,810   $ 177,600   $ 49,085      

Acquisition-related expenses

      1,177   6,511   26,835   13,133    

Net income (loss)

    5,927     4,504     (349 )   (4,494 )   (17,450 )   (12,063 )   (108 )

(Income) loss attributable to noncontrolling interests

  (6,638 ) (5,521 ) (7,438 ) (991 ) (3,577 ) (471 )  

Net loss attributable to CWI 2 stockholders

    (711 )   (1,017 )   (7,787 )   (5,485 )   (21,027 )   (12,534 )   (108 )

Basic and diluted loss per share:

                             

Net loss attributable to CWI 2 stockholders—Class A common stock

        (0.01 )   (0.08 )   (0.06 )   (0.42 )   (1.71 )   (0.07 )

Net loss attributable to CWI 2 stockholders—Class T common stock

  (0.01 ) (0.01 ) (0.09 ) (0.07 ) (0.43 ) (1.71 )  

Distributions declared per share—Class A common stock(b)

    0. 5247     0.5247     0.6996     0.6955     0.6570     0.3775      

Distributions declared per share—Class T common stock(c)

  0.4475   0.4467   0.5959   0.5919   0.5545   0.3181    

Balance Sheet Data

                                           

Total assets

  $ 1,586,322   $ 1,627,053   $ 1,605,314   $ 1,641,848   $ 1,407,717   $ 478,979   $ 200  

Net investments in real estate(d)

    1,435,033     1,486,670     1,473,205     1,514,680     1,282,124     396,864      

Non-recourse and limited-recourse debt, net

  831,393   833,491   833,836   831,329   571,935   207,888    

Due to related parties and affiliates(e)

    1,790     1,998     1,984     1,726     231,258     4,985     108  

Other Information

                             

Net cash provided by (used in) operating activities

  $ 49,383   $ 49,330   $ 68,956   $ 49,720   $ 24,559   $ (3,553 )    

Cash distributions paid

  33,871   32,910   44,004   36,446   17,633   621    

Supplemental Financial Measures

                                           

FFO attributable to CWI 2 stockholders

  $ 40,462   $ 37,863   $ 44,668   $ 36,919   $ (321 ) $ (8,354 ) N/A  

MFFO attributable to CWI 2 stockholders

    42,139     38,567     46,499     44,811     26,086     4,779     N/A  

Consolidated Hotel Operating Statistics(f)

                             

Occupancy

    78.1 %   80.3 %   78.2 %   78.3 %   76.8 %   71.8 %   N/A  

ADR

  $ 252.67   $ 240.11   $ 239.41   $ 233.72   $ 200.39   $ 181.86   N/A  

RevPAR

    197.23     192.90     187.27     182.98     153.89     130.48     N/A  

(a)
CWI 2 acquired its first hotel in April 2015.

(b)
For the first, second, and third quarters of 2019, $0.0339 of each distribution was payable in shares of CWI 2 Class A common stock. For the first, second, third, and fourth quarters of 2018, $0.0332, $0.0338, $0.0339, and $0.0339, respectively, was payable in shares of CWI 2 Class A common stock. For the first, second, third, and fourth quarters of 2017, $0.0332, $0.0338, $0.0339, and $0.0339, respectively, was payable in shares of CWI 2 Class A common stock. For the first, second, third, and fourth quarters of 2016, $0.0250, $0.0263, $0.0332, and $0.0332, respectively, was payable in shares of CWI 2

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(c)
For the first, second, and third quarters of 2019, $0.0339 of each distribution was payable in shares of CWI 2 Class T common stock. For the first, second, third, and fourth quarters of 2018, $0.0332, $0.0338, $0.0339, and $0.0339, respectively, was payable in shares of CWI 2 Class T common stock. For the first, second, third, and fourth quarters of 2017, $0.0332, $0.0338, $0.0339, and $0.0339, respectively, was payable in shares of CWI 2 Class T common stock. For the first, second, third, and fourth quarters of 2016, $0.0236, $0.0263, $0.0332, and $0.0332, respectively, was payable in shares of CWI 2 Class T common stock. For the second, third, and fourth quarters of 2015, $0.0122, $0.0236, and $0.0236, respectively, was payable in shares of CWI 2 Class T common stock.

(d)
Net investments in real estate consist of net investments in hotels and equity investments in real estate.

(e)
At December 31, 2016, this amount included $210.0 million due to WPC for borrowings used to fund the acquisition of the Ritz-Carlton San Francisco. During the first quarter of 2017, CWI 2 fully repaid the $210.0 million loan. This amount also included an accrual of $11.9 million for the distribution and shareholder servicing fee, which as of December 31, 2016, was paid to Carey Financial, LLC, but is now paid directly to selected dealers or other investment representatives, and is therefore no longer included in "Due to related parties and affiliates" as of December 31, 2017 (see Note 3 in the section titled "Index to Financial Statements—CWI 2 Financial Statements—Notes to Consolidated Financial Statements" beginning on page F-103).

(f)
Represents statistical data for CWI 2 consolidated hotels during the ownership period.

Selected Unaudited Pro Forma Per Share Information

        The following tables set forth, for the year ended December 31, 2018, and for the nine months ended September 30, 2019, selected per share information for CWI 1 common stock and CWI 2 common stock on a historical and pro forma basis, after giving effect to the proposed transaction.

        You should read these tables together with CWI 1's and CWI 2's historical consolidated financial statements and accompanying notes included in this Joint Proxy Statement/Prospectus beginning on page F-13, from which these tables are derived.

        The following selected financial data is in thousands, except share and per share amounts:

 
  Nine Months Ended Sept. 30, 2019   Year Ended Dec. 31, 2018
 
  Historical    
  Historical    
 
  Pro Forma
Consolidated
  Pro Forma
Consolidated
 
  CWI 1   CWI 2   CWI 1   CWI 2

Net (Loss) Income Attributable to Stockholders

  $(16,519)   $(711)   $7,733   $8,056   $(7,787)   $14,332

Net (Loss) Income Per Share

  $(0.12)   —(Class A); $(0.01) (Class T)   $0.04 (Class A); $0.03 (Class T)   $0.06   $(0.08) (Class A); $(0.09) (Class T)   $0.07 (Class A); $0.06 (Class T)

Common Stock Distributions Declared

  $(60,362)   $(34,169)   (102,650)   $(79,302)   $(44,227)   (133,262)

  ($0.4275 per share)   ($0.5247 and $0.4475 per share to Class A and Class T, respectively)   ($0.5247 and $0.4475 per share to Class A and Class T, respectively)   ($0.5700 per share)   ($0.6996 and $0.5959 per share to Class A and Class T, respectively)   ($0.6996 and $0.5959 per share to Class A and Class T, respectively)

Book Value Per Common Share

  $4.58   $7.10 (Class A); $7.00 (Class T)   $7.21 (Class A); $7.10 (Class T)   $5.04   $7.56 (Class A); $7.38 (Class T)   N/A

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Comparative Distribution Information

        The following table sets forth the quarterly distributions declared on CWI 1 common stock and on CWI 2 common stock for the periods indicated:

 
  CWI 1   CWI 2  
 
   
  Class A   Class T  
Quarter Ended
  Distributions
declared per
share (cash)
  Distributions
declared per
share (cash)
  Distributions
declared per
share (stock)
  Distributions
declared per
share (cash)
  Distributions
declared per
share (stock)
 

March 31, 2018

  $ 0.1425   $ 0.1410   $ 0.0339   $ 0.1153   $ 0.0339  

June 30, 2018

    0.1425     0.1410     0.0339     0.1147     0.0339  

September 30, 2018

  0.1425   0.1410   0.0339   0.1150   0.0339  

December 31, 2018

    0.1425     0.1410     0.0339     0.1153     0.0339  

March 31, 2019

  0.1425   0.1410   0.0339   0.1155   0.0339  

June 30, 2019

    0.1425     0.1410     0.0339     0.1150     0.0339  

September 30, 2019

  0.1425   0.1410   0.0339   0.1153   0.0339  

Comparative Market Price Information

        There is no established public trading market for shares of CWI 1 common stock or CWI 2 common stock.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        Certain of the matters discussed in this Joint Proxy Statement/Prospectus constitute forward-looking statements within the meaning of the Securities Act and the Exchange Act, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief, or expectations and can be identified by the use of words such as "may," "will," "should," "would," "will be," "will continue," "will likely result," "assume," "outlook," "seek," "plan," "believe," "project," "expect," "anticipate," "intend," "estimate," "forecast," and other comparable terms. These forward-looking statements include, but are not limited to, statements regarding projections as to the anticipated benefits of the proposed transaction; the ability to close the proposed transaction; the strategic rationale and transaction benefits; the combined company's corporate strategy and capital structure; the ability to execute future liquidity transactions, including a potential public listing or initial public offering; and estimated or future economic performance and results, including the amount and timing of any future cost savings, synergies, dividends, profitability, distribution coverage, reduction of indebtedness, asset sales, and estimated future growth.

        The statements are based on the current expectations, estimates, assumptions, and projections of CWI 1's and CWI 2's management. It is important to note that actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on CWI 1's or CWI 2's business, financial condition, liquidity, results of operations, MFFO, and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect the future results, performance, or achievements of the combined company. Discussions of some of these other important factors and assumptions are contained in the section titled "Risk Factors" beginning on page 32 and CWI 2's filings with the SEC, which are available at the SEC's website at www.sec.gov, including Item 1A. Risk Factors in CWI 2's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 15, 2019. Discussions of some of these other important factors and assumptions are contained in CWI 1's filings with the SEC and are available at the SEC's website at www.sec.gov, including Item 1A. Risk Factors in CWI 1's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 15, 2019. In light of these risks, uncertainties, assumptions, and factors, the forward-looking events discussed in this filing may not occur. Moreover, because CWI 1 and CWI 2 operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this filing, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, CWI 1, and CWI 2 do not undertake any obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

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RISK FACTORS

        In addition to the other information included in this Joint Proxy Statement/Prospectus, including the matters addressed in the section titled "Cautionary Statement Regarding Forward-Looking Statements" beginning on page 31, you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risks associated with each of the businesses of CWI 1 and CWI 2 because these risks will also affect CWI 2 after the merger. Risks in relation to CWI 1 and CWI 2 can be found in CWI 1's and CWI 2's respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2018, and other reports filed by CWI 1 and CWI 2 with the SEC. You should also read and consider the other information in this Joint Proxy Statement/Prospectus. See the section titled "Where You Can Find More Information" beginning on page 238.

Risks Related to the Proposed Transaction

The exchange ratio is fixed and will not be adjusted in the event of any change in the relative values of the shares of CWI 1 common stock or CWI 2 common stock.

        Upon the consummation of the merger, each issued and outstanding share of CWI 1 common stock (or fraction thereof) will be converted into the right to receive 0.9106 shares of CWI 2 Class A common stock. This exchange ratio is fixed pursuant to the merger agreement and will not be adjusted to reflect events or circumstances or other developments of which CWI 1 or CWI 2 become aware or which occur after the date of the merger agreement, or any changes in the relative values of CWI 1 and CWI 2, including:

Completion of the proposed transaction is subject to a number of conditions, and if these conditions are not satisfied or waived, the merger will not be completed, which could result in the requirement that CWI 1 or CWI 2 pay certain termination fees or, in certain circumstances, that CWI 1 or CWI 2 pay expenses to the other party.

        The merger agreement is subject to many conditions which must be satisfied or waived in order to complete the merger. The internalization is conditioned on, among other things, the consummation of the merger. The mutual conditions of the parties under the merger agreement include, among others: (i) the receipt of all necessary consents and approvals; (ii) the approval of the merger by CWI 1's stockholders; (iii) the approval of the merger by CWI 2's stockholders; (iv) the absence of any law, order, or other legal restraint or prohibition that would prohibit, restrain, enjoin, or make illegal the merger or any of the transactions contemplated by the merger agreement; and (v) the effectiveness of the Registration Statement on Form S-4 filed by CWI 2 for purposes of registering the CWI 2 Class A common stock to be issued in connection with the merger. In addition, each party's obligation to consummate the merger is subject to certain other conditions, including among others: (a) the accuracy of the other party's representations and warranties (subject to customary materiality qualifiers and other customary exceptions); (b) the other party's compliance with its covenants and agreements contained in the merger agreement; (c) the absence of any circumstances constituting a material adverse effect on the other party; (d) the receipt of certain legal opinions; and (e) certain matters with

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respect to the internalization documents, including the internalization documents remaining legal, valid, binding obligations of and enforceable against the parties thereto, written confirmation that all of the conditions to closing the internalization have been satisfied or waived, and there being no violation or default under any internalization document. For a more complete summary of the conditions that must be satisfied or waived prior to the consummation of the merger, see the section titled "The Merger Agreement—Conditions to Obligations to Complete the Merger and Other Transactions" beginning on page 157.

        There can be no assurance that the conditions to closing the merger or the internalization will be satisfied or waived or that the merger or the internalization will be completed. Failure to consummate the merger or the internalization may adversely affect CWI 1's or CWI 2's results of operations and business prospects for the following reasons, among others: (i) each of CWI 1 and CWI 2 will incur certain transaction costs, regardless of whether the proposed transaction closes, which could adversely affect each company's respective financial condition, results of operations, and ability to make distributions to its stockholders, and (ii) the proposed transaction will divert the attention of personnel of the Advisor, CWI 1 Subadvisor, and CWI 2 Subadvisor from ongoing business activities, including the pursuit of other opportunities that could be beneficial to CWI 1 or CWI 2, respectively. In addition, CWI 1 or CWI 2 may terminate the merger agreement under certain circumstances, including among other reasons if the merger is not completed by March 31, 2020 and if the merger agreement is terminated under certain circumstances specified in the merger agreement, either CWI 1 or CWI 2 may be required to pay the other party a termination fee. The merger agreement also provides that one party may be required to reimburse the other party's transaction expenses, not to exceed $5 million, if the merger agreement is terminated under certain circumstances. See the section titled "The Merger Agreement—Termination Expenses" beginning on page 161.

The pendency of the proposed transaction could adversely affect the business and operations of CWI 1 and CWI 2.

        Prior to the effective date of the proposed transaction, some vendors of each of CWI 1 and CWI 2 may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows, and expenses of CWI 1 and CWI 2, regardless of whether the merger is completed. Similarly, current and prospective employees of CWI 1 and CWI 2 may experience uncertainty about their future roles with the combined company following the proposed transaction, which may materially adversely affect the ability of such entities to attract and retain key personnel during the pendency of the merger. In addition, due to operating restrictions in the merger agreement, subject to certain exclusions, each of CWI 1 and CWI 2 may be unable, during the pendency of the merger, to pursue liquidity events, undertake significant capital projects, undertake certain significant financing transactions, and otherwise pursue other actions, even if such actions would prove beneficial.

The ownership percentage of CWI 2 common stockholders will be diluted by the proposed transaction.

        The merger will dilute the ownership percentage of CWI 2 common stockholders and result in CWI 2 common stockholders having a smaller ownership stake in the combined company as compared to their current stake in CWI 2. Immediately following the consummation of the merger, including the issuance of shares of CWI 2 Class A common stock to CWI 1 stockholders pursuant to the merger agreement, it is estimated that former CWI 1 stockholders will hold in the aggregate approximately 58%, and that continuing CWI 2 common stockholders will hold in the aggregate approximately 42%, of the issued and outstanding shares of common stock of the combined company. Consequently, CWI 2 common stockholders, as a general matter, may have less influence over the management and policies of the combined company after the effective date of the merger than they currently exercise over the management and policies of CWI 2.

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        The stockholders of the combined company will be further diluted by the issuance of the common stock and Series A preferred stock and units in the CWI 2 Operating Partnership in the internalization.

The merger agreement contains provisions that could discourage a potential competing acquiror of either CWI 1 or CWI 2 or could result in any competing proposal being at a lower price than it might otherwise be.

        The merger agreement contains provisions that, subject to certain exceptions, restrict the ability of each of CWI 1 and CWI 2 to solicit, initiate, knowingly encourage, or knowingly facilitate competing third-party proposals to acquire all, or a significant part, of CWI 1 or CWI 2, as applicable. In addition, each of CWI 1 and CWI 2 generally has an opportunity to offer to modify the terms of the proposed merger in response to any competing acquisition proposals that may be made under certain circumstances. Upon termination of the merger agreement in certain circumstances, either CWI 1 or CWI 2 may be required to pay a termination fee to the other party, and in certain other circumstances, one party may be required to pay the other party's transaction expenses. See the sections titled "The Merger Agreement—Solicitation of Transactions" and "The Merger Agreement—Termination Expenses" beginning on pages 156 and 161, respectively.

        These provisions could discourage a potential competing acquiror that might have an interest in acquiring all, or a significant part, of either CWI 1 or CWI 2 from considering or proposing an acquisition, even if the competing acquiror were prepared to pay consideration with a higher per share value than the value proposed to be realized in the merger, or might result in a potential competing acquiror proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

The shares of CWI 2 common stock to be received by CWI 1 stockholders as a result of the merger will have rights different from the shares of CWI 1 common stock.

        Upon the consummation of the merger, the rights of former CWI 1 stockholders who receive CWI 2 common stock in the merger (and so become common stockholders of the combined company) will be governed by the charter and bylaws of the combined company and the MGCL. The rights associated with CWI 1 common stock are different from the rights associated with common stock of the combined company. See the section titled "Comparison of Rights of CWI 1 Stockholders and CWI 2 Stockholders" beginning on page 223 for a discussion of the different rights associated with CWI 2 common stock.

There may be unexpected delays in the consummation of the proposed transaction.

        The proposed transaction is expected to close during the first quarter of 2020, assuming that all of the conditions in the merger agreement are satisfied or waived. The merger agreement provides that either CWI 1 or CWI 2 may terminate the merger agreement if the merger has not occurred by March 31, 2020. Certain events may delay the consummation of the proposed transaction, including difficulties in obtaining the approval of CWI 1's stockholders and CWI 2's stockholders or satisfying the other closing conditions to which the merger is subject.

Some of CWI 1's, CWI 2's, and their affiliates' directors and officers have interests in the proposed transaction that are different from, or in addition to, those of the other CWI 1 stockholders and CWI 2 stockholders.

        Some of the directors and officers of CWI 2 have interests in the proposed transaction that are different from, or in addition to, those of CWI 1's stockholders and of CWI 2's stockholders generally. These interests include, among other things, the following: (i) the receipt by WPC and Watermark of consideration valued at $125.0 million in the aggregate (on the basis of CWI 2's estimated net asset value per share of $11.41 as of December 31, 2018) pursuant to the internalization agreement, of which

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affiliates of WPC will receive consideration valued at $97.4 million in the aggregate value and affiliates of Watermark will receive consideration valued at $27.6 million in the aggregate value; (ii) the CEO employment agreement that will take effect at the closing of the merger; (iii) the payment of $6.95 million to Michael G. Medzigian under the commitment agreement; (iv) the 5,856,326 shares of CWI 1 common stock and 3,733,296 shares of CWI 2 common stock owned by them as of the close of business on the CWI 1 record date and the CWI 2 record date, respectively; (v) the continued service of all of the independent directors of CWI 1 and of CWI 2 on the combined company's board of directors, for which they will receive compensation; and (vi) the other benefits described in the section titled "The Companies—The Combined Company—Potential Conflicts of Interest of the Combined Company" beginning on page 84. These interests, among other things, may influence or may have influenced CWI 2's directors to support or approve the merger.

The proposed transaction will result in changes to the board of directors of the combined company.

        Upon the consummation of the proposed transaction, the composition of the board of directors of the combined company will be different than those of the current CWI 1 board and the CWI 2 board. The board of directors of the combined company will consist of nine directors, and pursuant to the internalization agreement, the parties thereto have agreed that for so long as WPC beneficially owns capital stock of the combined company with a value, determined in accordance with the internalization agreement, (i) equal to or greater than $100 million, WPC shall have the right to designate two directors for election to the board of directors of the combined company, (ii) equal to or greater than $50 million but less than $100 million, WPC shall have the right to designate one director for election to the board, and (iii) less than $50 million, WPC shall have no right to designate any director for election to the board. In addition, Michael G. Medzigian will be chairman of the combined company's board of directors in accordance with the terms of his employment agreement. See the section titled "The Internalization and the Internalization Agreement—CEO Employment Agreement" beginning on page 169. The new composition of the combined company's board of directors may affect the future decisions of the combined company.

If the merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.

        The merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the merger is conditioned on, among other things, the receipt by each of CWI 1 and CWI 2 of an opinion of its respective counsel to the effect that the merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. If the merger were to fail to qualify as a tax-free reorganization, then each CWI 1 stockholder generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the shares of CWI 2 common stock received by the CWI 1 stockholder in the merger and (ii) the CWI 1 stockholder's adjusted tax basis in its CWI 1 common stock.

Risks Related to the Combined Company Following the Proposed Transaction

The combined company may experience adverse consequences as a result of internalization.

        The internalization involves a series of transactions and activities to internalize business operations within the combined company, including among others the termination of the existing advisory arrangements with the Advisor, CWI 1 Subadvisor, CWI 2 Subadvisor, and their respective affiliates, the hiring and onboarding of new employees by the combined company, and the assumption of contractual relationships and integration of services by the combined company. There is no guarantee that the internalization will be successful or achieve the results that are expected. If the merger and internalization are consummated, the combined company will be a self-managed REIT. The combined company will no longer bear the costs of the various fees and expense reimbursements previously paid to the Advisor, CWI 1 Subadvisor, CWI 2 Subadvisor, and their affiliates; however, the combined

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company's expenses will include the compensation and benefits of the combined company's officers, employees, and consultants, as well as overhead expenses. The combined company's employees will provide services historically provided by CWI 1's and CWI 2's external advisor, subadvisors, and their affiliates. The combined company will be subject to potential liabilities that are commonly faced by employers, such as workers' disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and the combined company will bear the cost of the establishment and maintenance of any employee compensation plans. In addition, neither CWI 1 nor CWI 2 has previously operated as a self-managed REIT, and the combined company may encounter unforeseen costs, expenses, and difficulties associated with providing these services on a self-advised basis. If the combined company incurs unexpected expenses as a result of its self-management, its results of operations could be lower than they otherwise would have been.

The combined company's operating results after the proposed transaction may materially differ from the pro forma information presented in this Joint Proxy Statement/Prospectus.

        The combined company's operating results after the proposed transaction may be materially different from those shown in the pro forma information presented in this Joint Proxy Statement/Prospectus, which represents only a combination of CWI 1's and CWI 2's historical results. See the section titled "Prospective Financial Information" beginning on page 149. The costs related to the merger and internalization could be higher or lower than currently estimated, depending on how difficult it is to integrate CWI 1's business with CWI 2's business and how difficult it is for the combined company to make the transition from being externally managed to self-managed.

The combined company will have substantial indebtedness upon the consummation of the merger.

        In connection with the merger, the combined company will assume the indebtedness of CWI 1 and will be subject to risks associated with debt financing, including a risk that the combined company's cash flow could be insufficient to meet required payments on its debt. As of September 30, 2019, CWI 1 had consolidated indebtedness of $1.3 billion and CWI 2 had consolidated indebtedness of $0.8 billion. After giving effect to the merger, the combined company's total pro forma consolidated indebtedness will increase. Taking into account each of CWI 1's and CWI 2's existing indebtedness, and the assumption and consolidation of indebtedness in the merger, the combined company's pro forma consolidated indebtedness as of September 30, 2019, after giving effect to the merger, would be approximately $2.3 billion. In addition, the combined company will issue Series A preferred stock having an aggregate liquidation preference of $65.0 million to WPC in the internalization, and these shares are redeemable at the option of the holder under certain circumstances.

        The combined company's indebtedness could have important consequences to holders of its common stock, including:

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If and when the combined company completes a liquidity event, the market value ascribed to the shares of common stock of the combined company upon the liquidity event may be significantly lower than the estimated net asset values per share of CWI 1 and CWI 2 used to establish the exchange ratio in the merger.

        In approving and recommending the merger, the CWI 1 special committee and the CWI 2 special committee considered the most recent estimated net asset values per share of CWI 1 and CWI 2, which are as of December 31, 2018. The estimated net asset value per share of the combined company will only be determined after the merger. In the event that the combined company completes a liquidity event after the consummation of the merger, such as an initial public offering or listing of its shares on a national securities exchange, the market value of the shares of the combined company upon the completion of such liquidity event may be significantly lower than the estimated net asset values considered by the CWI 1 special committee and CWI 2 special committee and the estimated net asset value per share of the combined company that may be reflected on the account statements of stockholders of the combined company after the consummation of the merger. For example, if the shares of the combined company are listed on a national securities exchange at some point after the consummation of the merger, the trading price of the shares may be significantly lower than the CWI 2 estimated value per share of $11.41 as of December 31, 2018.

Counterparties to certain significant agreements with CWI 1 or CWI 2 may exercise contractual rights under such agreements in connection with the proposed transaction.

        CWI 1 and CWI 2 are each party to certain agreements that give the counterparty certain rights following a "change in control," including in some cases the right to terminate the agreement. Under some such agreements, the proposed transaction may constitute a change in control and therefore the counterparty may exercise certain rights under the agreement upon the closing of the proposed transaction. Any such counterparty may request modifications of its agreements as a condition to granting a waiver or consent under its agreements. There can be no assurances that such counterparties will not exercise their rights under these agreements, including termination rights where available, or that the exercise of any such rights under, or modification of, these agreements will not adversely affect the business or operations of the combined company.

The combined company is subject to the risks of brand concentration.

        Of the combined company's hotels, 28 utilize brands owned by Marriott or Hilton as of September 30, 2019. As a result, the combined company's success is dependent in part on the continued success of their brands. A negative public image or other adverse event that becomes associated with those brands, such as the recent cybersecurity incident affecting Marriott hotels, could adversely affect hotels operated under those brands. If those brands suffer a significant decline in appeal to the traveling public, the revenues and profitability of the combined company's hotels operated under those brands could be adversely affected.

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The combined company cannot assure stockholders that it will be able to continue paying distributions at the rate currently paid by CWI 2 or at all.

        The combined company's common stockholders may not receive distributions equivalent to those currently paid by CWI 2 following the proposed transaction for various reasons, including:

        Stockholders of the combined company will have no contractual or other legal right to distributions that have not been authorized by the combined company's board of directors.

Former CWI 1 stockholders should expect to receive a portion of future dividends from the combined company in shares of CWI 2 Class A common stock for the foreseeable future, with the effect that the amount of cash dividends received by former CWI 1 stockholders should be lower after the merger.

        The combined company currently expects to continue to pay dividends at the same annual rate as the dividend rate paid by CWI 2 before the merger; however, CWI 2 has historically paid a portion of its dividends in cash and a portion in stock, and the combined company expects to continue to do so for the foreseeable future. Assuming the combined company continues to pay dividends after the merger at the same annual rate as paid by CWI 2 before the merger, former CWI 1 stockholders will see an increase in the overall amount of dividends per share relative to the dividends paid by CWI 1, but the amount paid in cash will be less than the cash dividends per share paid by CWI 1.

The combined company may have adverse tax consequences if CWI 1 or CWI 2 has failed or fails to qualify as a REIT for U.S. federal income tax purposes.

        Each of CWI 1 and CWI 2 has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code. Each intends to continue to do so through the time of the proposed transaction, and the combined company intends to continue operating in such a manner following the proposed transaction. Neither CWI 1 nor CWI 2 has requested or plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. In order to qualify as a REIT, each of CWI 1 and CWI 2 must satisfy a number of requirements, including requirements regarding the ownership of its respective stock and the composition of its respective gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.

        If CWI 1 or CWI 2 fails to qualify as a REIT, or is determined to have failed to qualify as a REIT in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:

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        If CWI 1 failed to qualify as a REIT prior to the closing of the merger, the combined company, if it is determined to be a "successor" to CWI 1, would fail to qualify as a REIT and would be prohibited from making a REIT election for any taxable year prior to the fifth taxable year following the year during which CWI 1 was disqualified. In addition, the combined company would inherit any liability with respect to unpaid taxes of CWI 1 for any periods prior to the merger for which CWI 1 did not qualify as a REIT. As a result of all these factors, CWI 1's or CWI 2's failure to qualify as a REIT could impair the combined company's ability to expand its business and raise capital, and would materially adversely affect the value of its stock. In addition, for years in which the combined company does not qualify as a REIT, it will not otherwise be required to make distributions to stockholders.

The combined company depends on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm the combined company's business.

        The future success of the combined company depends in large part on its ability to hire and retain a sufficient number of qualified personnel. The future success of the combined company also depends upon the service of the combined company's executive officers, who have extensive market knowledge and relationships and will exercise substantial influence over the combined company's operational, financing, acquisition, and disposition activity.

        Many of the combined company's other key executive personnel, particularly its senior managers, also have extensive experience. The loss of services of one or more members of the combined company's senior management team, or the combined company's inability to attract and retain highly qualified personnel, could adversely affect the combined company's business, diminish the combined company's investment opportunities, and weaken its relationships with lenders, business partners, and industry personnel, which could materially and adversely affect the combined company.

        Key employees may depart either before or after the merger because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the merger. Accordingly, no assurance can be given that CWI 2 or, following the merger, the combined company will be able to retain key employees to the same extent as in the past.

Risks Related to an Investment in CWI 2 and (After the Proposed Transaction) the Combined Company

The prices of shares being offered through CWI 2's distribution reinvestment plan are determined by its board of directors based upon CWI 2's net asset values from time to time and may not be indicative of the price at which the shares would trade if they were listed on an exchange or actively traded by brokers.

        The prices of the shares being offered through CWI 2's distribution reinvestment plan are determined by the CWI 2 board in the exercise of its business judgment based upon CWI 2's net asset values ("NAVs") from time to time. The valuation methodologies underlying CWI 2's NAVs involve subjective judgments. Valuations of real properties do not necessarily represent the price at which a willing buyer would purchase CWI 2's properties; therefore, there can be no assurance that CWI 2 would realize the values underlying its NAVs if CWI 2 were to sell its assets and distribute the net

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proceeds to CWI 2's stockholders. In addition, the values of CWI 2's assets and debt are likely to fluctuate over time. This price may not be indicative of (i) the price at which shares would trade if they were listed on an exchange or actively traded by brokers, (ii) the proceeds that a stockholder would receive if CWI 2 were liquidated or dissolved, or (iii) the value of CWI 2's portfolio at the time you dispose of your shares.

CWI 2's NAVs, including the December 31, 2018 NAV, were computed by the Advisor relying in part on information that the Advisor provided to a third party. In addition, there is no assurance that stockholders will realize a particular NAV in any future liquidity event.

        CWI 2's past NAVs were computed by the Advisor relying in part upon an annual third-party appraisal of the fair market value of CWI 2's real estate and third-party estimates of the fair market value of CWI 2's debt. Any valuation includes the use of estimates and CWI 2's valuation, including the NAV at December 31, 2018, used to determine the exchange ratio in the merger, may have been influenced by the information provided to the third party by the Advisor.

        Additionally, because NAVs are estimated values and can change as interest rate and real estate markets fluctuate, there is no assurance that a stockholder will realize a particular NAV in connection with any future liquidity event.

CWI 2 could have property losses that are not covered by insurance.

        CWI 2's property insurance policies provide that all of the claims from each of its hotels resulting from a particular insurable event must be combined together for purposes of evaluating whether the aggregate limits and sub-limits contained in CWI 2's policies have been exceeded. Therefore, if an insurable event occurs that affects more than one of CWI 2's hotels, the claims from each affected hotel will be added together to determine whether the aggregate limit or sub-limits, depending on the type of claim, have been reached. If the total value of the loss exceeds the aggregate limits available, each affected hotel may only receive a proportional share of the amount of insurance proceeds provided for under the policy. CWI 2 may incur losses in excess of insured limits, and as a result, may be even less likely to receive sufficient coverage for risks that affect multiple properties, such as earthquakes or catastrophic terrorist acts. In addition, catastrophic losses, such as those from successive or massive hurricanes or wildfires, could make the cost of insuring against such types of losses prohibitively expensive or difficult to obtain. Risks such as war, catastrophic terrorist acts, nuclear, biological, chemical, or radiological attacks, and some environmental hazards may be deemed to fall completely outside the general coverage limits of CWI 2's policies, may be uninsurable, or may be too expensive to justify insuring against.

        CWI 2 has encountered, and will likely continue to encounter, disputes concerning whether an insurance provider will pay a particular claim that CWI 2 believes is covered under its policy. Should a loss in excess of insured limits or an uninsured loss occur, or should CWI 2 be unsuccessful in obtaining coverage from an insurance carrier, CWI 2 could lose all, or a portion of, the capital that it has invested in a property, as well as the anticipated future revenue from the hotel. In such event, CWI 2 may nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.

        CWI 2 obtains terrorism insurance to the extent required by lenders or franchisors as a part of its all-risk property insurance program, as well as its general liability policy. However, CWI 2's all-risk policies have limitations, such as per occurrence limits and sub-limits, which may have to be shared proportionally across participating hotels under certain loss scenarios. Also, all-risk insurers only have to provide terrorism coverage to the extent mandated by the Terrorism Risk Insurance Act for "certified" acts of terrorism—namely, those that are committed on behalf of non-U.S. persons or interests. Furthermore, CWI 2 does not have full replacement coverage at all of CWI 2's hotels for acts

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of terrorism committed on behalf of U.S. persons or interests ("non-certified" events) as CWI 2's coverage for such incidents is subject to sub-limits and/or annual aggregate limits. In addition, property damage related to war and to nuclear, biological, and chemical incidents is excluded under CWI 2's policies. While the Terrorism Risk Insurance Act will reimburse insurers for losses resulting from nuclear, biological, and chemical perils, it does not require insurers to offer coverage for these perils and, to date, insurers are not willing to provide this coverage, even with government reinsurance. Additionally, there is a possibility that Congress will not renew the Terrorism Risk Insurance Act, which would eliminate the federal subsidy for terrorism losses. As a result of the above, there remains uncertainty regarding the extent and adequacy of terrorism coverage that will be available to protect CWI 2's interests in the event of future terrorist attacks that impact its properties.

Compliance with the ADA and the related regulations, rules, and orders may adversely affect CWI 2's financial condition.

        Under the Americans with Disabilities Act (as amended, the "ADA"), all public accommodations, including hotels, are required to meet certain federal requirements for access and use by disabled persons. Various state and local jurisdictions have also adopted requirements relating to the accessibility of buildings to disabled persons. CWI 2 makes every reasonable effort to ensure that CWI 2's hotels substantially comply with the requirements of the ADA and other applicable laws. However, CWI 2 could be liable for both governmental fines and payments to private parties if it were determined that CWI 2's hotels are not in compliance with these laws. If CWI 2 were required to make unanticipated major modifications to CWI 2's hotels to comply with the requirements of the ADA and similar laws, it could materially adversely affect CWI 2's ability to make distributions to its stockholders and to satisfy its other obligations.

CWI 2's participation in joint ventures creates additional risk.

        From time to time, CWI 2 has and may continue to participate in joint ventures to purchase assets. There are additional risks involved in joint venture transactions. As a co-investor in a joint venture, CWI 2 would not be in a position to exercise sole decision-making authority relating to the property, the joint venture, or CWI 2's investment partner. In addition, there is the potential that CWI 2's joint venture partner may become bankrupt or that CWI 2 may have diverging or inconsistent economic or business interests. These diverging interests could, among other things, expose CWI 2 to liabilities in the joint venture investment in excess of CWI 2's proportionate share of those liabilities. The partition rights of each owner in a jointly owned property could reduce the value of each portion of the divided property.

CWI 2 is subject to the risks of real estate ownership.

        CWI 2's performance and asset value are, in part, subject to risks incident to the ownership and operation of real estate, including:

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Changes in how LIBOR is determined, or the potential replacement of LIBOR with an alternative reference rate, may adversely affect CWI 2's interest expense.

        Certain instruments within CWI 2's debt profile are indexed to the London Interbank Offered Rate ("LIBOR"), which is a benchmark rate at which banks offer to lend funds to one another in the international interbank market for short-term loans. Concerns regarding the accuracy and integrity of LIBOR, including the underlying methodology for calculating LIBOR, led the United Kingdom to publish a review of LIBOR in September 2012. The review made a number of recommendations, including the introduction of statutory regulation of LIBOR, the transfer of responsibility for LIBOR from the British Bankers' Association to an independent administrator, changes to the method of compilation of lending rates, and new regulatory oversight and enforcement mechanisms for rate setting. Based on the review, final rules for the regulation and supervision of LIBOR by the Financial Conduct Authority (the "FCA") were published and came into effect on April 2, 2013. On July 27, 2017, the FCA announced its intention to phase out LIBOR rates by the end of 2021.

        CWI 2 cannot predict the impact of these changes, or any other regulatory reforms that may be enacted in other jurisdictions, to LIBOR. In addition, any other legal or regulatory changes made by the FCA or other governance or oversight bodies in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, or changes in the rules or methodologies in LIBOR, all of which may discourage market participants from continuing to administer or to participate in LIBOR's determination and, in certain situations, could result in LIBOR no longer being determined and published. If LIBOR is unavailable after 2021, the interest rates on CWI 2's LIBOR-indexed debt will be determined using various alternative methods, any of which may result in higher interest obligations than under the current form of LIBOR. Further, the same costs and risks that may lead to the discontinuation or unavailability of LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on CWI 2's financing costs. Furthermore, there is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have an adverse effect on CWI 2's business, results of operations, financial condition, and liquidity.

Potential liability for environmental matters could adversely affect CWI 2's financial condition.

        Owners of real estate are subject to numerous federal, state, and local environmental laws and regulations. Under these laws and regulations, a current or former owner of real estate may be liable for costs of remediating hazardous substances found on its property, whether or not they were responsible for its presence. Although CWI 2 subjects its properties to an environmental assessment prior to acquisition, it may not be made aware of all the environmental liabilities associated with a property prior to its purchase, or CWI 2 or a subsequent owner may discover hidden environmental hazards after acquisition. The costs of investigation, remediation, or removal of hazardous substances may be substantial. In addition, the presence of hazardous substances on one of CWI 2's properties, or the failure to properly remediate a contaminated property, could adversely affect CWI 2's ability to sell the property or to borrow using the property as collateral.

        Various federal, state, and local environmental laws impose responsibilities on an owner or operator of real estate and subject those persons to potential joint and several liabilities. Typical provisions of those laws include:

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        Environmental laws may also impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require expenditures.

CWI 2 and its independent hotel operators rely on information technology in CWI 2's operations, and any material failure, inadequacy, interruption, or security failure of that technology could harm CWI 2's business.

        CWI 2 and its independent hotel operators rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, reservations, billing, and operating data. CWI 2 and its independent hotel operators purchase some information technology from third-party vendors and rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential customer information (e.g., personally identifiable information, including information relating to financial accounts). Although CWI 2 and its independent hotel operators have taken steps to protect the security of information systems and the data maintained in those systems, the independent hotel operators have encountered information technology issues in the past, and it is possible that such safety and security measures will not be able to prevent improper system functions, damage, or the improper access or disclosure of personally identifiable information. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers, and similar breaches, can create system disruptions, shutdowns, or unauthorized disclosure of confidential information. Any failure to maintain proper function, security, and availability of information systems could interrupt CWI 2's operations, damage CWI 2's reputation, subject CWI 2 to liability claims or regulatory penalties, and could have a material adverse effect on CWI 2's business, financial condition, and results of operations.

CWI 2 faces risks relating to cybersecurity attacks, loss of confidential information, and other business disruptions.

        CWI 2's business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain unauthorized access to confidential data and other electronic security breaches. Such cyberattacks can range from individual attempts to gain unauthorized access to CWI 2's or its independent hotel operators' information technology systems to more sophisticated security threats. While CWI 2 and its independent hotel operators employ a number of measures to prevent, detect, and mitigate these threats, including password protection, backup servers, and annual penetration testing, there is no guarantee such efforts will be successful in preventing a cyberattack. Cybersecurity incidents could compromise the confidential information of financial transactions and records, personal identifying information, reservations, billing, and operating data and disrupt and affect the efficiency of CWI 2's business operations.

Economic conditions may adversely affect the lodging industry.

        The performance of the lodging industry has historically been closely linked to the performance of the general economy and, specifically, growth in U.S. gross domestic product. It is also sensitive to business and personal discretionary spending levels. Declines in corporate budgets and consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence, or adverse political conditions can lower the revenues and profitability of

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CWI 2's hotel properties, and therefore CWI 2's net operating profits. An economic downturn could lead to a significant decline in demand for products and services provided by the lodging industry, lower occupancy levels, and significantly reduced room rates, which would likely adversely impact CWI 2's revenues and have a negative effect on CWI 2's profitability.

CWI 2 is subject to various operating risks common to the lodging industry, which may adversely affect CWI 2's ability to make distributions to CWI 2's stockholders.

        CWI 2's hotel properties and lodging facilities are subject to various operating risks common to the lodging industry, many of which are beyond its control, including:

        These risks could reduce CWI 2's net operating profits, which in turn could adversely affect CWI 2's ability to make distributions to its stockholders.

Seasonality of certain lodging properties may cause quarterly fluctuations in results of operations of CWI 2's properties.

        Certain lodging properties are seasonal in nature and may lead to quarterly fluctuations in the results of operations of CWI 2's properties. Generally, occupancy rates and revenues are greater in the second and third quarters than in the first and fourth quarters of each year. Quarterly financial results may also be adversely affected by factors outside CWI 2's control, including weather conditions and poor economic factors. As a result, CWI 2 may need to enter into short-term borrowings during certain periods in order to offset these fluctuations in revenues, to fund operations, or to make distributions to CWI 2's stockholders.

The cyclical nature of the lodging industry may cause fluctuations in CWI 2's operating performance.

        The lodging industry is highly cyclical in nature. Fluctuations in operating performance are caused largely by general economic and local market conditions, which affect business and leisure travel levels.

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In addition to general economic conditions, new hotel room supply is an important factor that can affect the lodging industry's performance, and over-building has the potential to further exacerbate the negative impact of an economic recession. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. A decline in lodging demand, a substantial growth in lodging supply, or a deterioration in the improvement of lodging fundamentals as forecast by industry analysts could result in returns that are substantially below expectations, or result in losses, which could have a material adverse effect on CWI 2's business, financial condition, results of operations, and ability to make distributions to its stockholders.

CWI 2 is subject to the risk of increased lodging operating expenses.

        CWI 2 is subject to the risk of increased lodging operating expenses, including the following cost elements: wage and benefit costs, including liabilities related to employment matters; repair and maintenance expenses; energy costs; property taxes; insurance costs; and other operating expenses. Any increases in one or more of these operating expenses could have a significant adverse impact on CWI 2's results of operations, financial position, and cash flows.

CWI 2 is subject to general risks associated with the employment of hotel personnel, particularly with hotels that employ or may employ unionized labor.

        While third-party hotel managers are responsible for hiring and maintaining the labor force at each of CWI 2's hotels, CWI 2 is subject to many of the costs and risks generally associated with the hotel labor force. Increased labor costs due to collective bargaining activity, minimum wage initiatives, and additional taxes or requirements to incur additional employee benefits costs may adversely impact its operating costs. CWI 2 may also incur increased legal costs and indirect labor costs as a result of contract disputes or other events. Hotels where CWI 2's managers have collective bargaining agreements with employees could be affected more significantly by labor force activities and additional hotels or groups of employees may become subject to additional collective bargaining agreements in the future. Increased labor organizational efforts or changes in labor laws could lead to disruptions in CWI 2's operations, increase CWI 2's labor costs, or interfere with the ability of CWI 2's management to focus on executing its business strategies (e.g., by consuming management's time and attention, limiting the ability of hotel managers to reduce workforces during economic downturns, etc.). In addition, from time to time, strikes, lockouts, boycotts, public demonstrations, or other negative actions and publicity may disrupt hotel operations at any of CWI 2's hotels, negatively impact CWI 2's reputation or the reputation of CWI 2's brands, cause CWI 2 to lose guests, or harm relationships with the labor forces at CWI 2's hotels.

CWI 2's results of operations, financial position, cash flows and ability to service debt and to make distributions to stockholders depend on the ability of the independent hotel operators to operate and manage the hotels.

        As a REIT, CWI 2 is allowed to own lodging properties but is prohibited from operating them. Therefore, in order for CWI 2 to satisfy certain REIT qualification rules, CWI 2 enters into leases with the TRS lessees for each of its lodging properties. The TRS lessees in turn contract with independent hotel operators that manage the day-to-day operations of CWI 2's properties. Although CWI 2 consults with the property operators with respect to strategic business plans, CWI 2 may be limited, depending on the terms of the applicable operating agreement and REIT qualification rules, in its ability to direct the actions of the independent hotel operators, particularly with respect to daily operations. Thus, even if CWI 2 believes that its lodging properties are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, RevPAR, ADR, or operating profits, CWI 2 may not have sufficient rights under a particular property operating agreement to force the property operator to change its method of operation. CWI 2 can only seek redress if a property operator violates the terms

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of the applicable property operating agreement with the TRS lessee, and then only to the extent of the remedies provided in the property operating agreement. CWI 2's results of operations, financial position, cash flows, and ability to service debt and to make distributions to stockholders are, therefore, substantially dependent on the ability of the property operators to successfully operate CWI 2's hotels. Some of CWI 2's operating agreements may have lengthy terms, may not be terminable by CWI 2 before the agreement's expiration, and may require the payment of substantial termination fees. In the event that CWI 2 is able to and do replace any of its property operators, it may experience significant disruptions at the affected hotels, which may adversely affect CWI 2's ability to make distributions to its stockholders.

There may be operational limitations associated with management and franchise agreements affecting CWI 2's properties and these limitations may prevent CWI 2 from using these properties to their best advantage for its stockholders.

        The TRS lessees hold some of CWI 2's properties and have entered into franchise or license agreements with nationally recognized lodging brands. These franchise agreements contain specific standards for, and restrictions and limitations on, the operation and maintenance of CWI 2's properties in order to maintain uniformity within the franchise system. The franchisors also periodically inspect CWI 2's properties to ensure that CWI 2 maintains their standards. CWI 2 does not know whether these limitations will restrict the business plans CWI 2 has tailored for each property and/or market.

        The standards are subject to change over time, in some cases at the direction of the franchisor, and may restrict the ability of CWI 2's TRS lessees, as franchisees, to make improvements or modifications to a property. Conversely, as a condition to the maintenance of a franchise license, a franchisor could also require CWI 2 to make capital expenditures, even if it does not believe the improvements are necessary, desirable, or likely to result in an acceptable return on its investment. Action or inaction by CWI 2 or its TRS lessees could result in a breach of those standards or other terms and conditions of the franchise agreements and could result in the loss or termination of a franchise license. In addition, when terminating or changing the franchise affiliation of a property, CWI 2 may be required to incur significant expenses or capital expenditures.

        The loss of a franchise license could have a material adverse effect upon the operations or the underlying value of the property covered by the franchise due to the associated loss of name recognition, marketing support, and centralized reservation systems provided by the franchisor. In addition, the loss of a franchise license for one or more lodging properties could materially and adversely affect CWI 2's results of operations, financial position, and cash flows, including CWI 2's ability to service debt and make distributions to its stockholders.

CWI 2 faces competition in the lodging industry, which may limit CWI 2's profitability and returns to CWI 2's stockholders.

        The lodging industry is highly competitive. This competition could reduce occupancy levels and revenues at CWI 2's properties, which would adversely affect CWI 2's operations. CWI 2 faces competition from many sources, including from (i) other lodging facilities, both in the immediate vicinity and the geographic market where CWI 2's lodging properties are located and (ii) nationally recognized lodging brands that CWI 2 is not associated with. In addition, increases in operating costs due to inflation may not be offset by increased room rates.

        Because CWI 2's properties are operated by independent hotel operators, CWI 2's revenues depend on the ability of such independent hotel operators to compete successfully with other hotels and resorts in their respective markets. Some of CWI 2's competitors may have substantially greater marketing and financial resources than CWI 2. If independent hotel operators are unable to compete successfully or if CWI 2's competitors' marketing strategies are effective, CWI 2's results of operations,

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financial condition, and ability to service debt may be adversely affected and may reduce the cash available for distribution to CWI 2's stockholders.

The lack of an active public trading market for CWI 2's shares could make it difficult for stockholders to sell shares quickly or at all. CWI 2 may amend, suspend, or terminate its redemption plan without giving CWI 2's stockholders advance notice.

        There is no active public trading market for CWI 2's shares and CWI 2 does not expect one to develop. Moreover, CWI 2 is not required to ever and may never undertake or complete a liquidity event, including an initial public offering or public stock exchange listing. CWI 2's stockholders should not rely on its redemption plan as a method to sell shares promptly because it includes numerous restrictions that limit stockholders' ability to sell their shares to CWI 2 and the CWI 2 board may amend, suspend, or terminate the plan without advance notice. In particular, the redemption plan provides that CWI 2 may redeem shares only if CWI 2 has sufficient funds available for redemption and to the extent the total number of shares for which redemption is requested in any quarter, together with the aggregate number of shares redeemed in the preceding three fiscal quarters, does not exceed 5% of the combined shares of Class A and Class T common stock outstanding as of the last day of the immediately preceding fiscal quarter. Given these limitations, it may be difficult for stockholders to sell their shares promptly or at all. In addition, the price received for any shares sold prior to a liquidity event is likely to be less than the applicable NAV at that time. Investor suitability standards imposed by certain states may also make it more difficult for stockholders to sell their shares to someone in those states.

The limit in CWI 2's charter on the number of CWI 2's shares a person may own may discourage a takeover, which might provide CWI 2's stockholders with liquidity or other advantages.

        To assist CWI 2 in meeting the REIT qualification rules, among other things, CWI 2's charter prohibits the ownership by one person or affiliated group of more than 9.8% in value of CWI 2's stock or more than 9.8% in value or number, whichever is more restrictive, of CWI 2's outstanding shares of common stock, unless exempted (prospectively or retroactively) by the CWI 2 board. This ownership limitation may discourage third parties from making a potentially attractive tender offer for CWI 2's stockholders' shares, thereby inhibiting a change of control in CWI 2.

CWI 2's accounting policies and methods are fundamental to how CWI 2 records and reports its financial position and results of operations, and they require management to make estimates, judgments, and assumptions about matters that are inherently uncertain.

        CWI 2's accounting policies and methods are fundamental to how CWI 2 records and reports its financial position and results of operations. CWI 2 has identified several accounting policies as being critical to the presentation of CWI 2's financial position and results of operations because they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be recorded under different conditions or using different assumptions. Due to the inherent uncertainty of the estimates, judgments, and assumptions associated with these critical accounting policies, CWI 2 cannot provide any assurance that it will not make significant subsequent adjustments to its consolidated financial statements. If CWI 2's judgments, assumptions, and allocations prove to be incorrect, or if circumstances change, CWI 2's business, financial condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends, or stock price may be materially adversely affected.

If CWI 2 recognizes substantial impairment charges on its properties, its net income may be reduced.

        CWI 2 may incur substantial impairment charges, which it is required to recognize: (i) whenever CWI 2 determines that the carrying amount of the property is not recoverable and exceeds its

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estimated fair value and (ii) for equity investments, whenever the estimated fair value of the investment's underlying net assets in comparison with the carrying value of CWI 2's interest in the investment has declined on an other-than-temporary basis. By their nature, the timing or extent of impairment charges are not predictable. CWI 2 may incur non-cash impairment charges in the future, which may reduce CWI 2's net income, although they should not affect CWI 2's FFO, which is the metric CWI 2 uses to evaluate its distribution coverage.

Conflicts of interest may arise between holders of CWI 2 common stock and holders of partnership interests in CWI 2 Operating Partnership.

        CWI 2's directors and officers have duties to CWI 2 and its stockholders under Maryland law and CWI 2's charter. At the same time, CWI 2 Operating Partnership was formed in Delaware and CWI 2, as general partner, has duties under Delaware law to CWI 2 Operating Partnership and the limited partners in connection with CWI 2's management of CWI 2 Operating Partnership. CWI 2's duties as general partner of CWI 2 Operating Partnership may come into conflict with the duties of CWI 2's directors and officers to CWI 2 and its stockholders.

        Under Delaware law, a general partner of a Delaware limited partnership owes its limited partners the duties of good faith and fair dealing. Other duties, including fiduciary duties, may be modified or eliminated in the operating partnership agreement. The operating partnership agreement of CWI 2 Operating Partnership provides that, for so long as CWI 2 owns a controlling interest in CWI 2 Operating Partnership, any conflict that cannot be resolved in a manner not adverse to either CWI 2's stockholders or the limited partners will be resolved in favor of CWI 2's stockholders. The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been tested in a court of law, and CWI 2 has not obtained an opinion of counsel covering the provisions set forth in the operating partnership agreement that purport to waive or restrict CWI 2's fiduciary duties.

        In addition, the operating partnership agreement expressly limits CWI 2's liability by providing that CWI 2 and its officers, directors, agents, and employees will not be liable or accountable to CWI 2 Operating Partnership for losses sustained, liabilities incurred, or benefits not derived if CWI 2 or its officers, directors, agents, or employees acted in good faith. Furthermore, CWI 2 Operating Partnership is required to indemnify CWI 2 and its officers, directors, employees, agents, and designees to the extent permitted by applicable law from, and against, any and all claims arising from operations of CWI 2 Operating Partnership, unless it is established that: (i) the act or omission was committed in bad faith, was fraudulent, or was the result of active and deliberate dishonesty; (ii) the indemnified party actually received an improper personal benefit in money, property, or services; or (iii) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. These limitations on liability do not supersede the indemnification provisions of CWI 2's charter.

Maryland law could restrict a change in control, which could have the effect of inhibiting a change in control of CWI 2 even if a change in control were in CWI 2's stockholders' interest.

        Provisions of Maryland law applicable to CWI 2 prohibit business combinations with:

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        These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination must be recommended by the CWI 2 board and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of CWI 2's outstanding voting stock and two-thirds of the votes entitled to be cast by holders of CWI 2's outstanding voting stock (other than voting stock held by the interested stockholder or by an affiliate or associate of the interested stockholder). These requirements could have the effect of inhibiting a change in control of CWI 2 even if a change in control were in CWI 2's stockholders' interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by the CWI 2 board prior to the time that someone becomes an interested stockholder. In addition, a person is not an interested stockholder if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board. Neither CWI 1 nor CWI 2 has taken any action to opt out of these provisions.

CWI 2's charter permits the CWI 2 board to issue stock with terms that may subordinate the rights of the holders of CWI 2's current common stock or discourage a third party from acquiring CWI 2.

        The CWI 2 board may determine that it is in CWI 2's best interests to classify or reclassify any unissued stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms or conditions of redemption of any such stock. Thus, the CWI 2 board could authorize the issuance of such stock with terms and conditions that could subordinate the rights of the holders of CWI 2 common stock or have the effect of delaying, deferring or preventing a change in control of CWI 2, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of CWI 2's assets) that might provide a premium price for holders of CWI 2 common stock. In addition, the CWI 2 board, with the approval of a majority of the entire board and without any action by the stockholders, may amend CWI 2's charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that CWI 2 has authority to issue. If the CWI 2 board determines to take any such action, it will do so in accordance with the duties that the CWI 2 directors owe to CWI 2 and to the holders of CWI 2 common stock.

        The CWI 2 board has approved the issuance of CWI 2's Series A preferred stock to WPC in the internalization. See the section titled "The Internalization and Internalization Agreement—CWI 2 Series A Preferred Stock" beginning on page 164 for more information.

While CWI 2 believes that it is properly organized as a REIT in accordance with applicable law, CWI 2 cannot guarantee that the IRS will find that CWI 2 has qualified as a REIT.

        CWI 2 believes that it has been organized and operated in conformity with the requirements for qualification as a REIT under the Code commencing with CWI 2's taxable year ended December 31, 2015 and that CWI 2's current and anticipated investments and proposed plan of operation will enable CWI 2 to continue to meet the requirements for qualification and taxation as a REIT. Investors should be aware, however, that the IRS or any court could take a position different from CWI 2's own. Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in CWI 2's circumstances, no assurance can be given that CWI 2 has qualified or will qualify as a REIT for any particular year.

        Furthermore, CWI 2's qualification and taxation as a REIT will depend on CWI 2's satisfaction of certain asset, income, organizational, distribution, stockholder ownership, and other requirements on a continuing basis. CWI 2's ability to satisfy the quarterly asset tests under applicable Code provisions and Treasury Regulations will depend in part upon the CWI 2 board's good faith analysis of the fair

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market values of CWI 2's assets, some of which are not susceptible to a precise determination. CWI 2's compliance with the REIT income and quarterly asset requirements also depends upon CWI 2's ability to successfully manage the composition of its income and assets on an ongoing basis. While CWI 2 believes that it has satisfied and will continue to satisfy these tests, CWI 2 cannot guarantee that this will be the case on a continuing basis.

If CWI 2 fails to remain qualified as a REIT, CWI 2 would be subject to U.S. federal income tax at corporate income tax rates and would not be able to deduct distributions to stockholders when computing CWI 2's taxable income.

        If, in any taxable year, CWI 2 fails to qualify for taxation as a REIT and is not entitled to relief under the Code, CWI 2 will:

        Any such corporate tax liability could be substantial and would reduce the amount of cash available for distributions to CWI 2's stockholders, which in turn could have an adverse impact on the value of CWI 2 common stock. This adverse impact could last for five or more years because, unless CWI 2 is entitled to relief under certain statutory provisions of the Code, CWI 2 will be taxed as a corporation beginning the year in which the failure occurs and for the following four years.

        If CWI 2 fails to qualify for taxation as a REIT, CWI 2 may need to borrow funds or liquidate some investments to pay the additional tax liability. Were this to occur, funds available for investment would be reduced. REIT qualification involves the application of highly technical and complex provisions of the Code to CWI 2's operations, as well as various factual determinations concerning matters and circumstances not entirely within CWI 2's control. There are limited judicial or administrative interpretations of these provisions. Although CWI 2 plans to continue to operate in a manner consistent with the REIT qualification rules, CWI 2 cannot assure you that it will qualify in a given year or remain so qualified.

If any of CWI 2's leases with its TRSs (including leases acquired from CWI 1 pursuant to the merger) are not respected as true leases for U.S. federal income tax purposes, CWI 2 could fail to qualify to be taxed as a REIT.

        To qualify to be taxed as a REIT, CWI 2 will be required to satisfy two gross income tests, pursuant to which specified percentages of CWI 2's gross income must be passive income, such as rent from real property. For rent paid pursuant to the leases between CWI 2 or a subsidiary thereof, as lessor, and one of its TRSs or a subsidiary thereof, as lessee, which constitutes, and is expected to continue to constitute, substantially all of CWI 2's gross income, to qualify for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and must not be treated as service contracts, joint ventures, or some other type of arrangement. CWI 2 believes its leases will be respected as true leases for U.S. federal income tax purposes. There can be no assurance, however, that the IRS will agree with this characterization. If any of the leases were not respected as a true lease for U.S. federal income tax purposes, CWI 2 may not be able to satisfy either of the two gross income tests applicable to REITs, and CWI 2 may cease to qualify as a REIT.

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CWI 2's current hotel management companies, or any other hotel management companies that CWI 2 may engage in the future, may not qualify as "eligible independent contractors," or CWI 2's hotels may not be considered "qualified lodging facilities."

        Rent paid by a lessee that is a "related party tenant" of CWI 2 will not be qualifying income for purposes of the two gross income tests applicable to REITs. An exception is provided, however, for leases of "qualified lodging facilities" to a TRS so long as the hotels are managed by an "eligible independent contractor" and certain other requirements are satisfied. CWI 2 leases all of its hotels to one of its TRS lessees. All of CWI 2's hotels are operated pursuant to hotel management agreements with Marriott, Hilton, and other hotel management companies, each of which CWI 2 believes qualifies as an "eligible independent contractor." Among other requirements, to qualify as an eligible independent contractor, the hotel manager must not own, directly or through its stockholders, more than 35% of CWI 2's outstanding shares, and no person or group of persons can own more than 35% of CWI 2's outstanding shares and the shares (or ownership interest) of the hotel manager, taking into account certain ownership attribution rules. The ownership attribution rules that apply for purposes of these 35% thresholds are complex, and monitoring actual and constructive ownership of CWI 2's shares by its hotel managers and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.

        In addition, for a hotel management company to qualify as an eligible independent contractor, such company or a related person must be actively engaged in the trade or business of operating "qualified lodging facilities" (as defined below) for one or more persons not related to CWI 2 or its TRS lessee at each time that such company enters into a hotel management contract with a TRS lessee. As of the date hereof, CWI 2 believes that each of its hotel management companies operates qualified lodging facilities for certain persons who are not related to CWI 2 or its TRSs. However, no assurance can be provided that the hotel management companies or any other hotel managers that CWI 2 may engage in the future will in fact comply with this requirement. Failure to comply with this requirement would require CWI 2 to find other managers for future contracts, and if CWI 2 hired a management company without knowledge of the failure, CWI 2's qualification as a REIT could be jeopardized.

        Finally, each property with respect to which CWI 2's TRS lessees pay rent must be a "qualified lodging facility." A "qualified lodging facility" is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. As of the date hereof, CWI 2 believes that the properties that are leased to its TRS lessees are qualified lodging facilities. Although CWI 2 has monitored and intends to continue to monitor future acquisitions, improvements of properties, and customary amenities provided at its properties, the REIT provisions of the Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied. If any of CWI 2's properties are not deemed to be a "qualified lodging facility," CWI 2 may fail to qualify as a REIT.

CWI 2's ownership of its TRSs is subject to limitations and CWI 2's transactions with its TRSs could cause CWI 2 to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm's-length terms.

        Overall, no more than 20% (25% for taxable years beginning prior to January 1, 2018) of the value of a REIT's assets may consist of stock or securities of one or more TRSs. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to provide assurance that the TRS is subject to an appropriate level of corporate taxation. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm's-length

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basis. The 100% tax would apply, for example, to the extent that CWI 2 were found to have charged its TRS lessees rent in excess of an arm's-length rent. CWI 2 monitors the value of its investment in its TRSs for the purpose of ensuring compliance with TRS ownership limitations and structures CWI 2's transactions with its TRSs on terms that CWI 2 believes are arm's-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that CWI 2 will be able to comply with the 20% (25% for taxable years beginning prior to January 1, 2018) TRS limitations or to avoid application of the 100% excise tax.

If CWI 2's request for an extension of time under Treasury Regulation Section 301.9100-3 to timely make TRS elections with respect to three of CWI 2's subsidiaries is not granted, CWI 2 would either fail to qualify as a REIT or, assuming certain relief provisions applied, would be required to pay a significant penalty tax.

        CWI 2 has three subsidiaries, two of which are owned in joint venture with CWI 1, that lease qualified lodging facilities from CWI 2 Operating Partnership or such joint ventures with CWI 1. CWI 2 intended but inadvertently failed to make TRS elections with respect to those three subsidiaries. CWI 2 has requested an extension of time from the IRS, pursuant to Treasury Regulation Section 301.9100-3, to timely make a TRS election together with each such subsidiary. CWI 2 believes that it meets the requirements to be granted such extensions and that therefore CWI 2 will be able to continue to properly treat these subsidiaries as TRSs leasing qualified lodging facilities from CWI 2. Nonetheless the IRS may disagree with CWI 2's position and determine not to grant the extension of time, and therefore no assurance can be given that CWI 2 will in fact be able to make such elections to ensure that CWI 2 has qualified and will continue to qualify as a REIT.

        If the IRS does not grant the extension of time to file such TRS elections, then the rents CWI 2 received from such subsidiaries would constitute nonqualifying related party rental income for purposes of the 95% and 75% gross income tests and CWI 2's investment in such subsidiaries would constitute nonqualifying assets for purposes of the 10% asset tests. Under such circumstances, CWI 2 would either fail to qualify as a REIT or, if CWI 2 were able to establish that it acted with reasonable cause and not willful neglect, CWI 2 could maintain its REIT qualification but would be required to pay a penalty tax with respect to such failures in an amount which may be material.

If CWI 2 fails to make required distributions, it may be subject to U.S. federal corporate income tax.

        CWI 2 intends to declare regular quarterly distributions, the amount of which will be determined, and is subject to adjustment, by the CWI 2 board. However, CWI 2's existing debt instruments include, and CWI 2's future debt instruments may include, covenants that limit CWI 2's ability to make required REIT distributions. To continue to qualify and be taxed as a REIT, CWI 2 will generally be required to distribute at least 90% of its REIT taxable income (determined without regard to the dividends-paid deduction and excluding net capital gain) each year to its stockholders. Generally, CWI 2 expects to distribute all, or substantially all, of its REIT taxable income. If CWI 2's cash available for distribution falls short of CWI 2's estimates, CWI 2 may be unable to maintain the proposed quarterly distributions that approximate its taxable income and CWI 2 may fail to qualify for taxation as a REIT. In addition, CWI 2's cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes or the effect of non-deductible expenditures (e.g., capital expenditures, the creation of reserves, or required debt service or amortization payments). To the extent CWI 2 satisfies the 90% distribution requirement, but distributes less than 100% of its REIT taxable income, CWI 2 will be subject to U.S. federal corporate income tax on its undistributed taxable income. CWI 2 will also be subject to a 4% non-deductible excise tax if the actual amount that CWI 2 pays out to its stockholders for a calendar year is less than a minimum amount specified under the Code. In addition, in order to continue to qualify as a REIT, any

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C-corporation earnings and profits to which CWI 2 succeeds must be distributed as of the close of the taxable year in which CWI 2 accumulates or acquires such C-corporation's earnings and profits.

Because CWI 2 is required to satisfy numerous requirements imposed upon REITs, CWI 2 may be required to borrow funds, sell assets, or raise equity on terms that are not favorable to CWI 2.

        In order to meet the REIT distribution requirements and maintain CWI 2's qualification and taxation as a REIT, CWI 2 may need to borrow funds, sell assets, or raise equity, even if then-prevailing market conditions are not favorable for such transactions. If CWI 2's cash flows are not sufficient to cover its REIT distribution requirements, it could adversely impact CWI 2's ability to raise short- and long-term debt, sell assets, or offer equity securities in order to fund the distributions required to maintain CWI 2's qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing CWI 2 needs to fund capital expenditures, future growth, and expansion initiatives, which would increase CWI 2's total leverage.

        In addition, if CWI 2 fails to comply with certain asset ownership tests at the end of any calendar quarter, CWI 2 must generally correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing CWI 2's REIT qualification. As a result, CWI 2 may be required to liquidate otherwise attractive investments. These actions may reduce CWI 2's income and amounts available for distribution to CWI 2's stockholders.

Because the REIT rules limit CWI 2's ability to receive distributions from TRSs, CWI 2's ability to fund distribution payments using cash generated through CWI 2's TRSs may be limited.

        CWI 2's ability to receive distributions from its TRSs is limited by the rules CWI 2 must comply with in order to maintain its REIT status. In particular, at least 75% of CWI 2's gross income for each taxable year as a REIT must be derived from real estate-related sources, which principally includes gross income from the leasing of CWI 2's properties. Consequently, no more than 25% of CWI 2's gross income may consist of dividend income from CWI 2's TRSs and other non-qualifying income types. Thus, CWI 2's ability to receive distributions from its TRSs is limited and may impact CWI 2's ability to fund distributions to its stockholders using cash flows from CWI 2's TRSs. Specifically, if CWI 2's TRSs become highly profitable, CWI 2 might be limited in its ability to receive net income from CWI 2's TRSs in an amount required to fund distributions to CWI 2's stockholders commensurate with that profitability.

Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from C corporations, which could cause investors to perceive investments in REITs to be relatively less attractive.

        The maximum U.S. federal income tax rate for certain qualified dividends payable by C corporations to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced qualified dividend rate. However, for taxable years beginning after December 31, 2017, and before January 1, 2026, under the Tax Cuts and Jobs Act of 2017, non-corporate taxpayers may deduct up to 20% of certain qualified business income, including "qualified REIT dividends" (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although the reduced U.S. federal income tax rate applicable to qualified dividends from C corporations does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends, together with the recently reduced corporate tax rate (21%), could cause investors who are individuals, trusts, and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends.

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THE COMPANIES

Carey Watermark Investors 1 Incorporated

        CWI 1 is a publicly owned, non-traded REIT that, together with its consolidated subsidiaries, invests in, manages and seeks to enhance the value of, interests in lodging and lodging-related properties, in the United States. CWI 1 conducts substantially all of its investment activities and owns all of its assets through the CWI 1 Operating Partnership. CWI 1 is a general partner and a limited partner of, and owns a 99.985% capital interest in, the CWI 1 Operating Partnership. An affiliate of WPC and Watermark holds a special general partner interest of 0.015% in the CWI 1 Operating Partnership. In order to qualify as a REIT, CWI 1 cannot operate hotels directly; therefore, CWI 1 leases its hotels to its TRS lessees. At September 30, 2019, CWI 1 held ownership interests in 26 hotels, with a total of 7,396 rooms.

        CWI 1 raised $575.8 million through its initial public offering, which ran from September 15, 2010 through September 15, 2013, and $577.4 million through its follow-on offering, which ran from December 20, 2013 through December 31, 2014. In addition, from inception through September 30, 2019, $246.0 million of distributions were reinvested in CWI 1 common stock through its distribution reinvestment plan (CWI 1's "DRIP"). CWI 1 has fully invested the proceeds from both its initial public offering and follow-on offering.

        In April 2019, CWI 1 announced that its Advisor had determined its estimated NAV per share as of December 31, 2018, to be $10.39.

        CWI 1 has no employees.

CWI 1's Business Objectives and Strategy

        CWI 1 is a non-traded REIT that strives to create value in the lodging industry. CWI 1's primary investment objectives are to provide stockholders with current income in the form of quarterly distributions and to increase the value of CWI 1's portfolio in order to generate long-term capital appreciation.

        CWI 1's core strategy for achieving these objectives is to build and enhance the value of a portfolio of interests in lodging and lodging-related investments. CWI 1 employs value-added strategies, such as rebranding, renovating, expanding, or changing hotel operators, when CWI 1 believes such strategies will increase the operating results and values of the hotels CWI 1 acquires. CWI 1 regularly reviews the hotels in its portfolio to ensure that they continue to meet its investment criteria. If CWI 1 were to conclude that a hotel's value has been maximized, or that it no longer fits within its financial or strategic criteria, CWI 1 may seek to sell the hotel and use the net proceeds for investments in its existing or new hotels, or to reduce its overall leverage. While CWI 1 does not operate the hotel properties, both its asset management team and its executive management team monitor and work cooperatively with the hotel operators in all aspects of the hotels' operations, including advising and making recommendations regarding property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience, and overall strategic direction. CWI 1 believes that it can add significant value to its portfolio through intensive asset management strategies. CWI 1 executive and asset management teams have significant experience in hotels, as well as in creating and implementing innovative asset management initiatives.

        CWI 1 will adjust its investment focus from time to time based upon market conditions and views on relative value as market conditions change.

        The lodging properties CWI 1 has acquired include full-service branded hotels located in urban settings, resort properties, and select-service hotels. Full-service hotels generally provide a full

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complement of guest amenities, including food and beverage services, meeting and conference facilities, concierge and room service, and valet parking, among others. Select-service hotels typically have limited food and beverage outlets and do not offer comprehensive business or banquet facilities. Resort properties may include smaller boutique hotels and large-scale integrated resorts. All of CWI 1's investments to date have been in the United States.

Holding Period

        CWI 1 generally intends to hold its investments in real property for an extended period depending on the type of investment. The determination of whether a particular asset should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing economic conditions, with a view to achieving maximum capital appreciation for its stockholders while avoiding increases in risk. No assurance can be given that this objective will be realized.

Financing Strategies

        At September 30, 2019, CWI 1's hotel portfolio, including both the hotels that it consolidates in its financial statements ("Consolidated Hotels") and the hotels that it records as equity investments in its financial statements ("Unconsolidated Hotels"), was 61% leveraged. CWI 1's organizational documents permit it to incur leverage of up to 75% of the total costs of its investments or 300% of its net assets (whichever is less), or a higher amount with the approval of a majority of its independent directors.

Transactions With Affiliates of CWI 1

        CWI 1 may borrow funds or purchase properties from, or enter into joint ventures with, affiliates, if it believes that doing so is consistent with its investment objectives and CWI 1 complies with its investment policies and procedures, and it has done so in the past. A majority of its directors (including the independent directors) must approve any significant investment in which CWI 1 invests jointly with an affiliate.

Competition

        The hotel industry is highly competitive. Hotels that CWI 1 acquires compete with other hotels for guests. Competitive factors include location, convenience, brand affiliation, room rates, range, and the quality of services, facilities, and guest amenities or accommodations offered. Competition includes competition from existing, newly renovated and newly developed hotels in the relevant segments. Competition can adversely affect the occupancy, average daily rates ("ADR"), and revenue per available room ("RevPAR") of CWI 1's hotels, and thus its financial results, and may require CWI 1 to provide additional amenities, incur additional costs, or make capital improvements that it otherwise might not choose to make, which may adversely affect CWI 1's profitability.

Seasonality

        Certain lodging properties are seasonal in nature. Generally, occupancy rates and revenues are greater in the second and third quarters than in the first and fourth quarters. As a result of the seasonality of certain lodging properties, there may be quarterly fluctuations in results of operations of CWI 1's properties. Quarterly financial results may be adversely affected by factors outside its control, including weather conditions and poor economic factors. As a result, CWI 1 may need to enter into short-term borrowings in certain periods in order to offset these fluctuations in revenues, to fund operations, or to make distributions to its stockholders.

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Certain Environmental and Regulatory Matters

        CWI 1's hotel properties are subject to various U.S. federal, state, and local environmental laws and regulations. In connection with its current or prior ownership or operation of hotels, CWI 1 may potentially be liable for various environmental costs or liabilities (including investigation, clean-up, and disposal of hazardous materials released at, on, under, in, or from the property). Environmental laws and regulations typically impose responsibility without regard to whether the owner or operator knew of or was responsible for the presence of hazardous materials or contamination, and liability is often joint and several. As part of its efforts to mitigate these risks, CWI 1 typically engages third parties to perform assessments of potential environmental risks when evaluating new acquisitions or if required to do so by a lender. Such environmental surveys are limited in scope, however, and CWI 1 remains exposed to contaminant (e.g., such as asbestos and mold) and hazardous or regulated substances used during the routine operations of the hotels (e.g., swimming pool or dry cleaning chemicals). CWI 1's hotel properties incur costs to comply with environmental and health and safety laws and regulations and could be subject to fines and penalties for non-compliance.

        CWI 1 has not received written notice from any governmental authority of any material noncompliance, liability, or claim relating to hazardous or toxic substances or other environmental matters in connection with any of its properties. And although CWI 1 is not currently aware of any material environmental or health and safety claims pending or threatened against CWI 1, a claim may be asserted against us in the future that could have a material adverse effect on CWI 1.

        CWI 1 properties must comply with Title III of the Americans with Disabilities Act of 1990 (the "ADA") to the extent that such properties are "public accommodations" as defined by the ADA. CWI 1 believes that its properties are substantially in compliance with the ADA, however, the obligation to make readily achievable accommodations is an ongoing one and CWI 1 will continue to assess its properties and make alterations as appropriate.

Properties

        CWI 1's principal corporate offices are located in the offices of the Advisor at 50 Rockefeller Plaza, New York, NY 10020.

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CWI 1's Hotels

        The following table sets forth certain information for each of CWI 1's Consolidated Hotels and Unconsolidated Hotels at September 30, 2019:

Hotels
  State   Number of
Rooms
  Percentage
Owned
  Acquisition
Date
  Hotel Type

Consolidated Hotels

                   

2012 Acquisitions

                       

Hilton Garden Inn New Orleans French Quarter/CBD(a)

  LA   155   88 % 6/8/2012   Select-service

Lake Arrowhead Resort and Spa

  CA     173     97 % 7/9/2012   Resort

2013 Acquisitions

                   

Courtyard Pittsburgh Shadyside

  PA     132     100 % 3/12/2013   Select-service

Hutton Hotel Nashville

  TN   250   100 % 5/29/2013   Full-service

Holiday Inn Manhattan 6th Avenue Chelsea

  NY     226     100 % 6/6/2013   Full-service

Fairmont Sonoma Mission Inn & Spa

  CA   226   100 % 7/10/2013   Resort

Marriott Raleigh City Center

  NC     401     100 % 8/13/2013   Full-service

Hawks Cay Resort(b)

  FL   425   100 % 10/23/2013   Resort

Renaissance Chicago Downtown

  IL     560     100 % 12/20/2013   Full-service

2014 Acquisitions

                   

Hyatt Place Austin Downtown

  TX     296     100 % 4/1/2014   Select-service

Courtyard Times Square West

  NY   224   100 % 5/27/2014   Select-service

Sheraton Austin Hotel at the Capitol

  TX     367     80 % 5/28/2014   Full-service

Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center(c)

  CO   302   100 % 6/25/2014   Select-service

Sanderling Resort

  NC     128     100 % 10/28/2014   Resort

Marriott Kansas City Country Club Plaza

  MO   295   100 % 11/18/2014   Full-service

2015 Acquisitions

                       

Westin Minneapolis

  MN   214   100 % 2/12/2015   Full-service

Westin Pasadena

  CA     350     100 % 3/19/2015   Full-service

Hilton Garden Inn/Homewood Suites Atlanta Midtown

  GA   228   100 % 4/29/2015   Select-service

Ritz-Carlton Key Biscayne(d)

  FL     444     47 % 5/29/2015   Resort

Ritz-Carlton Fort Lauderdale(e)

  FL   198   70 % 6/30/2015   Resort

Le Méridien Dallas, The Stoneleigh

  TX     176     100 % 11/20/2015   Full-service

2016 Acquisition

                   

Equinox, a Luxury Collection Golf Resort & Spa

  VT     199     100 % 2/17/2016   Resort

    5,969      

Unconsolidated Hotels

                       

Hyatt Centric New Orleans French Quarter

  LA   254   80 % 9/6/2011   Full-service

Marriott Sawgrass Golf Resort & Spa(f)

  FL     514     50 % 4/1/2015   Resort

Ritz-Carlton Philadelphia

  PA   301   60 % 5/15/2015   Full-service

Ritz-Carlton Bacara, Santa Barbara(g)

  CA     358     40 % 9/28/2017   Resort

    1,427      

(a)
On October 9, 2019, the venture, in which CWI 1 had an 88% controlling ownership interest, sold the hotel.

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(b)
Includes 248 privately owned villas that participated in the villa/condo rental program at September 30, 2019, of which only 240 were available for rent as a result of damage caused by Hurricane Irma.

(c)
On November 21, 2019, CWI 1 sold its 100% ownership interest in the hotel.

(d)
CWI 2 owns an interest of approximately 19.3% in this venture. Also, the number of rooms presented includes 142 condo-hotel units that participated in the villa/condo rental program at September 30, 2019.

(e)
Includes 32 condo-hotel units that participated in the villa/condo rental program at September 30, 2019.

(f)
The remaining 50.0% interest in this venture is owned by CWI 2.

(g)
This investment represents a tenancy-in-common interest; the remaining 60.0% interest is owned by CWI 2.

CWI 1's Hotel Management and Franchise Agreements

Hotel Management Agreements

        All of CWI 1's hotels are managed by independent hotel operators pursuant to management or operating agreements, with many also subject to separate license agreements addressing matters pertaining to operation under the designated brand. As of September 30, 2019, CWI 1 had management or operating agreements with 12 different management companies related to CWI 1's Consolidated Hotels. Under these agreements, the managers generally have sole responsibility and exclusive authority for all activities necessary for the day-to-day operation of the hotels, including establishing room rates; securing and processing reservations; procuring inventories, supplies, and services; providing periodic inspection and consultation visits to the hotels by the managers' technical and operational experts; and promoting and publicizing the hotels. The managers provide all managerial and other employees for the hotels; review the operation and maintenance of the hotels; prepare reports, budgets, and projections; and provide other administrative and accounting support services to the hotels. These support services include planning and policy services, divisional financial services, product planning and development, employee staffing and training, corporate executive management, and certain in-house legal services. CWI 1 has certain approval rights over budgets, capital expenditures, significant leases, and contractual commitments, and various other matters.

        The initial terms of CWI 1's management and operating agreements, including those that have been assumed at the time of the hotel acquisition, typically range from five to 30 years, with one or more renewal terms at the option of the manager. The management agreements condition the manager's right to exercise options for specified renewal terms upon the satisfaction of specified economic performance criteria, or allow us to terminate at will with 30 to 60 days' notice. For hotels operated with separate franchise agreements, the manager typically receives compensation in the form of a base management fee, which is calculated as a percentage (generally ranging from 1.5% to 3.5%) of annual gross revenues, and an incentive management fee, which is typically calculated as a percentage of operating profit, either (i) in excess of projections with a cap or (ii) after the owner has received a priority return on its investment in the hotel.

        The management agreements relating to four of CWI 1's Consolidated Hotels contain the right and license to operate the hotels under specified brands; no separate franchise agreements exist and no separate franchise fee is required for these hotels. These management agreements incur a base management fee ranging from 3.0% to 3.5% of hotel revenues. Three of these hotels are managed by subsidiaries of Marriott, under the Ritz-Carlton and Renaissance brands, and one is managed by Fairmont, under the Fairmont brand.

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Franchise Agreements

        Of CWI 1's Consolidated Hotels, 15 operate under franchise or license agreements with national brands that are separate from its management agreements. As of September 30, 2019, CWI 1 has 10 franchise agreements with Marriott owned brands, three with Hilton owned brands, one with InterContinental Hotels—owned brands, and one with a Hyatt-owned brand. Three of CWI 1's hotels are not operated with a hotel brand, so the hotels do not have franchise agreements.

        CWI 1's franchise agreements grant it the right to the use of the brand name, systems, and marks with respect to specified hotels and establish various management, operational, recordkeeping, accounting, reporting, and marketing standards and procedures that the licensed hotel must comply with. In addition, the franchisor establishes requirements for the quality and condition of the hotel and its furniture, fixtures and equipment, and CWI 1 is obligated to expend such funds as may be required to maintain the hotel in compliance with those requirements. Typically, CWI 1's franchise agreements provide for a license fee, or royalty, of 3.0% to 6.0% of room revenues and, if applicable, 2.0% to 3.0% of food and beverage revenue. In addition, CWI 1 generally pays 1.0% to 4.5% of room revenues as marketing and reservation system contributions for the system-wide benefit of brand hotels.

        CWI 1's typical franchise agreement provides for a term of 15 to 25 years. The agreements provide no renewal or extension rights and are not assignable. If CWI 1 breaches one of these agreements, in addition to losing the right to use the brand name for the applicable hotel, it may be liable, under certain circumstances, for liquidated damages equal to the fees paid to the franchisor with respect to that hotel during the three immediately preceding years.

CWI 1 Legal Proceedings

        At September 30, 2019, CWI 1 was not involved in any material litigation.

        Various claims and lawsuits arising in the normal course of business are pending against CWI 1. The results of these proceedings are not expected to have a material adverse effect on CWI 1's consolidated financial position, results of operations, or cash flows.

Market for CWI 1's Common Equity and Related Stockholder Matters

Unlisted Shares

        There is no active public trading market for our shares. At September 30, 2019, there were 31,371 holders of record of shares of CWI 1 common stock.

CWI 1 Equity Compensation Plan Information

        The following table presents information regarding CWI 1's equity compensation plans as of September 30, 2019:

Plan Category
  Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
  Weighted Average
Exercise Price of
Outstanding
Options Warrants
and Rights
  Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
 

Equity compensation plans approved by security holders

  118,375 (1) 0 (2) 3,681,440 (3)

Equity compensation plans not approved by security holders

    0     0     0  

  118,375 (1) 0 (2) 3,681,440 (3)

(1)
Reflects unvested restricted stock units granted under the CWI 1 Incentive Plan.

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(2)
All restricted stock units are settled in shares of CWI 1 common stock on a one-for-one basis and accordingly do not have a weighted-average exercise price.

(3)
Awards under the CWI 1 Incentive Plan and the CWI 1 Directors' Incentive Plan are limited in amount (on a combined basis) to 4% of the issued and outstanding shares of CWI 1 common stock (on a fully diluted basis, including those issued and outstanding under the two stock incentive plans) at the time of award of the restricted stock units, subject to a ceiling of 4,000,000 shares.

Compensation of CWI 1 Directors and Executive Officers

        CWI 1 has no employees. Day-to-day management functions are performed by the Advisor. The Advisor has appointed CWA, LLC, an affiliate of Watermark, as the CWI 1 Subadvisor. The CWI 1 Subadvisor provides services to the Advisor primarily relating to acquiring, managing, financing, and disposing of CWI 1's assets and overseeing the independent property operators that manage the day-to-day operations of CWI 1's properties. In addition, CWI 1 Subadvisor provides CWI 1 with the services of Michael G. Medzigian, CWI 1's Chief Executive Officer, subject to the approval of CWI 1's independent directors. Prior to the proposed transaction, CWI 1 had not paid any compensation to CWI 1's executive officers. While CWI 1 has not reimbursed the Advisor for compensation or benefits paid to any of CWI 1's other executive officers, CWI 1 does reimburse the Advisor for the services of personnel other than CWI 1's executive officers. CWI 1 also reimburses CWI 1 Subadvisor (through the Advisor) for $200,000 of Mr. Medzigian's compensation in relation to the services he provided to CWI 1 in 2018. See the section titled "—Certain Relationships and Related Transactions of CWI 1" beginning on page 62 for a description of the contractual arrangements between us and the Advisor and its affiliates, and between the Advisor and CWI 1 Subadvisor.

        In addition, CWI 1 has adopted two stock incentive plans: the CWI 2010 Equity Incentive Plan (as may be amended from time to time, the "CWI 1 Incentive Plan") and the CWI Directors' Incentive Plan—2010 Equity Incentive Plan (as may be amended from time to time, the "CWI 1 Directors' Incentive Plan"). The purpose of the two stock incentive plans is to attract and retain the services of experienced and qualified individuals in a way that aligns their interests with those of CWI 1's stockholders. Awards under the two stock incentive plans are in the form of restricted stock units ("RSUs") that are valued based upon the most recently published estimated NAV per share. Awards under the plans are limited, on a combined basis, to 4% of the issued and outstanding shares of CWI 1 common stock (on a fully diluted basis, including those issued and outstanding under the two stock incentive plans) at the time the RSUs are awarded, subject to a ceiling of 4,000,000 shares. The stock incentive plans are administered by CWI 1's independent directors (in such capacity, the "CWI 1 Plan Administrator)." When making decisions regarding awards under the CWI 1 Incentive Plan, the CWI 1 Plan Administrator considers various factors, including the incentive compensation payable to the Advisor under the CWI 1 advisory agreement. The CWI 1 Plan Administrator may impose conditions on the transfer of RSUs received under the two stock incentive plans, and may impose other restrictions and requirements as it may deem appropriate. The CWI 1 Plan Administrator will also establish, as to each RSU issued under the two stock incentive plans, the terms and conditions upon which the restrictions on those shares shall lapse.

        Pursuant to the CWI 1 Incentive Plan, awards may be granted to CWI 1's officers and to employees of CWI 1 Subadvisor who perform services on CWI 1's behalf, and to non-director members of CWI 1's investment committee, if any. The CWI 1 Directors' Incentive Plan is for members of the board of directors who are not CWI 1's employees or employees of WPC or Watermark. In 2018, 61,178 RSUs, which vest over three years, are awarded under the CWI 1 Incentive Plan and 17,292 RSUs, which fully vested upon grant, are awarded under the CWI 1 Directors' Incentive Plan.

        In 2018, each non-employee director was paid an annual cash retainer of $35,000 and an annual grant of $45,000 of RSUs. In addition, during 2018, the chairman of the CWI 1 board's audit committee received an additional cash retainer of $10,000.

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        The following table sets forth the amount of compensation received by CWI 1's directors in 2018. Jason E. Fox, chairman of the CWI 1 board, and Mr. Medzigian, CWI 1's Chief Executive Officer, did not receive compensation for serving as directors.

Director
  Fees Earned or Paid
in Cash
  Stock
Awards(1)
  All Other
Compensation(2)
  Total  

Charles S. Henry

  $ 35,000   $ 45,000   $ 1,232   $ 81,232  

Michael D. Johnson

    35,000     45,000     1,232     81,232  

Robert E. Parsons, Jr.(3)

  45,000   45,000   1,240   91,240  

William H. Reynolds, Jr.(3)

    35,000     45,000     1,232     81,232  

Simon M. Turner

  0   0   0   0  

  $ 150,000   $ 180,000   $ 4,936   $ 334,936  

(1)
Reflects grant date fair value.

(2)
Reflects dividends paid on RSUs.

(3)
Messrs. Parsons and Reynolds resigned from the CWI 1 board effective as of December 6, 2018.

        Each of CWI 1's independent directors is entitled to reimbursement for up to $5,000 per annum of lodging, meals, parking, and certain other expenses at all of CWI 1's hotels. The purpose of this policy is to encourage CWI 1's independent directors to visit CWI 1's hotels in order to maintain and enhance their knowledge of CWI 1's portfolio. If a director does not use the annual allowance, the amount is forfeited. The aggregate amount reimbursed for the year ended December 31, 2018, was $1,384.

        During the quarter ended December 31, 2018, the CWI 1 board requested that its independent compensation consultant, Frederic W. Cook & Co., Inc. ("FW Cook"), conduct a review of the compensation paid to directors as part of the CWI 1 board's periodic review of such practices. Based on the results of that review and the advice of FW Cook, effective January 1, 2019, the CWI 1 board approved increasing the annual cash retainer to $45,000 and the annual grant of CWI 1 RSUs to $60,000. There was no change to the annual cash retainer payable to the chairman of the CWI 1 board's audit committee. In December 2018, the CWI 1 board formed the CWI 1 special committee, for which each committee member is paid an annual cash retainer of $60,000, except for the chairman of the CWI 1 special committee, Mr. Henry, who receives an annual cash retainer of $75,000. On September 17, 2019, in consideration of the significant amount of time spent and expected to be spent in the future by Mr. Henry on his responsibilities, the CWI 1 board determined to pay Mr. Henry an additional $50,000. The members of the CWI 1 special committee will also be reimbursed for any reasonable out-of-pocket expenses incurred by them in connection with their service as members of the special committee.

CWI 1 Board Report on Executive Compensation

        SEC regulations require the disclosure of the compensation policies applicable to executive officers in the form of a report by the compensation committee of the CWI 1 board of directors (or a report of the full board of directors in the absence of a compensation committee). As noted above, CWI 1 has no employees, paid no direct compensation, and the CWI 1 board made no executive compensation decisions during 2018. As a result, CWI 1 has no compensation committee and the CWI 1 board has not considered a compensation policy for employees.

CWI 1 Compensation Committee Interlocks and Insider Participation

        As noted above, the CWI 1 board has not appointed a compensation committee. None of the members of the CWI 1 board are involved in a relationship requiring disclosure as an interlocking

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executive officer/director, under Item 404 of Regulation S-K, or as a former officer or employee of CWI 1.

Securities Ownership of Certain CWI 1 Beneficial Owners and Management

        "Beneficial Ownership" as used herein has been determined in accordance with the rules and regulations of the SEC and is not to be construed as a representation that any of such shares are in fact beneficially owned by any person. CWI 1 knows of no stockholder who beneficially owned more than 5% of the outstanding shares of CWI 1's stock.

        The following table shows how many shares of CWI 1 common stock were owned, as of September 30, 2019, by CWI 1's directors and named executive officers, which under SEC regulations consists of CWI 1's Chief Executive Officer and Chief Financial Officer. Directors and named executive officers who owned no shares are not listed in the table. The business address of the directors and named executive officers listed below is the address of CWI 1's principal executive offices, 50 Rockefeller Plaza, New York, NY 10020.

Name of Beneficial Owner
  Amount and Nature
of Beneficial
Ownership(1)
  Percentage of Class

Michael G. Medzigian(2)

  91,870   *

Charles S. Henry

    31,956   *

Michael D. Johnson

  31,956   *

Simon M. Turner

    8,656   *

All directors and executive officers as a group (6 individuals)

  164,439   *

*
Less than 1%

(1)
Share amounts may not sum to total due to rounding of fractional shares.

(2)
Shares are held by the Michael G. Medzigian Revocable Trust.

Certain Relationships and Related Transactions of CWI 1

        On January 1, 2018, Jason E. Fox joined the CWI 1 board as chairman. On that same date, he also became Chief Executive Officer and a member of the board of directors of WPC, an affiliate of the Advisor. During 2018 and 2019, CWI 1 retained the Advisor, pursuant to the CWI 1 advisory agreement, to provide advisory services in connection with managing CWI 1's overall portfolio, including providing oversight and strategic guidance to the independent property operators that manage CWI 1's properties.

        For services provided to CWI 1, the Advisor earns an annual asset management fee equal to 0.50% of the aggregate average market value of CWI 1's investments. Asset management fees are payable in cash or shares of CWI 1's stock, or a combination of both, at the option of the Advisor. For 2018, CWI 1 incurred asset management fees due to the Advisor totaling approximately $14.1 million, which were settled in shares of CWI 1's stock. For the nine months ended September 30, 2019, CWI 1 incurred asset management fees due to the Advisor totaling approximately $10.7 million, which were settled in shares of CWI 1's stock. Carey Watermark Holdings, LLC ("Carey Watermark Holdings"), an affiliate of WPC and Watermark, also receives 10% of the available cash distributions of CWI 1 Operating Partnership and a subordinated interest of 15% of the net proceeds from the sale, exchange, or other disposition of operating partnership assets. Carey Watermark Holdings received aggregate distributions of approximately $5.1 million during 2018 and $4.9 million during the nine months ended September 30, 2019.

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        In addition, in return for performing services related to CWI 1's investment acquisitions, the Advisor is paid acquisition fees of 2.5% of the total investment cost of the properties acquired and loans originated by CWI 1 (not to exceed 6% of the aggregate contract purchase price of all investments and loans). CWI 1 did not incur any acquisition fees in 2018 or during the nine months ended September 30, 2019. The Advisor also receives disposition fees of up to 1.5% of the contract sales price of a property. CWI 1 incurred $0.3 million of disposition fees during 2018 and none during the nine months ended September 30, 2019. CWI 1 also pays the Advisor a loan refinancing fee of up to 1% of a refinanced loan, if certain conditions are met. In 2018, CWI 1 paid the Advisor approximately $0.7 million in refinancing fees. During the nine months ended September 30, 2019, CWI 1 paid the Advisor approximately $0.5 million in refinancing fees.

        Pursuant to the CWI 1 advisory agreement, CWI 1 reimburses the Advisor for the actual cost of personnel allocable to their time devoted to providing administrative services to CWI 1, as well as overhead expenses, including rent expense, which totaled approximately $6.4 million for the year ended December 31, 2018, and $4.9 million during the nine months ended September 30, 2019 (a portion of which is reimbursed to the CWI 1 Subadvisor, as discussed below). The CWI 1 advisory agreement provides that, for the 12-month period ending on the last day of any fiscal quarter (with quoted variables as defined in the advisory agreement), "operating expenses" may not exceed the greater of 2% of CWI 1's "average invested assets" or 25% of CWI 1's "adjusted net income." For the year ended December 31, 2018, and for the nine months ended September 30, 2019, CWI 1's operating expenses were below this 2%/25% threshold.

        The CWI 1 Subadvisor provides services to the Advisor, primarily relating to acquiring, managing, financing, and disposing of CWI 1's assets and overseeing the independent property operators that manage the day-to-day operations of CWI 1's properties. The CWI 1 Subadvisor is an affiliate of Watermark. Pursuant to the CWI 1 subadvisory agreement, the Advisor pays 20% of the aforementioned fees earned under the CWI 1 advisory agreement to the CWI 1 Subadvisor. During 2018, the Advisor passed on approximately $2.5 million of personnel and overhead reimbursements to the CWI 1 Subadvisor, including approximately $0.2 million with respect to Mr. Medzigian. During the nine months ended September 30, 2019, the Advisor passed on approximately $2.1 million of personnel and overhead reimbursements to the CWI 1 Subadvisor, including approximately $0.2 million with respect to Mr. Medzigian. In addition, the CWI 1 Subadvisor owns a 20% interest in Carey Watermark Holdings.

        At December 31, 2018, and September 30, 2019, CWI 1 owned interests in three ventures with CWI 2: the Ritz-Carlton Key Biscayne, the Marriott Sawgrass Golf Resort & Spa, and the Ritz-Carlton Bacara, Santa Barbara. A third party also owns an interest in the Ritz-Carlton Key Biscayne.

        On September 26, 2017, CWI 1 entered into a secured credit facility (the "CWI 1 Credit Facility") with CWI 1 Operating Partnership as borrower and WPC as lender. The CWI 1 Credit Facility consists of (i) a bridge term loan of $75.0 million (the "CWI 1 Bridge Loan") for the purpose of acquiring an interest in the Ritz-Carlton Bacara, Santa Barbara Venture, and (ii) a $25.0 million revolving working capital facility (the "CWI 1 Working Capital Facility") to be used for CWI 1's working capital needs.

        The CWI 1 Bridge Loan was scheduled to mature on September 30, 2019; however, effective as of September 26, 2019, the CWI 1 Bridge Loan was extended on its existing terms to December 31, 2019, with the option to extend the maturity date to March 31, 2020 at CWI 1's election. The CWI 1 Working Capital Facility, which is scheduled to mature on December 31, 2019, also has the option to be extended to March 31, 2020 at CWI 1's election. Upon exercise of the three-month extension, the interest rate for each loan would increase to LIBOR plus 3.0%, from the current interest rate of LIBOR plus 1.0%. Upon the termination or expiration of the CWI 1 advisory agreement, each of the CWI 1 Bridge Loan and the CWI 1 Working Capital Facility would mature at that time.

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        CWI 1 serves as guarantor of the CWI 1 Credit Facility and has pledged CWI 1's unencumbered equity interests in certain properties as collateral, as further described in the pledge and security agreement entered into between the borrower and lender. At December 31, 2018, the outstanding balances under the CWI 1 Bridge Loan and CWI 1 Working Capital Facility were $40.8 million and $0.8 million, respectively, with $24.2 million available to be drawn on the CWI 1 Working Capital Facility. At September 30, 2019, the outstanding balances under the CWI 1 Bridge Loan was $35.0 million, and no balance was outstanding under the CWI 1 Working Capital Facility, with $25.0 million available to be drawn on the CWI 1 Working Capital Facility at that date. During 2018, CWI 1 incurred interest expense of $1.4 million. During the nine months ended September 30, 2019, CWI 1 incurred interest expense of $1.1 million.

        The closing of the merger is a condition to the closing of the internalization. Pursuant to the internalization agreement, CWI 2 and CWI 2 Operating Partnership will pay an aggregate of $125.0 million of their equity securities to WPC and Watermark, valued on the basis of CWI 2's estimated net asset value per share of $11.41 as of December 31, 2018. The breakdown of the consideration is as follows:

        Mr. Medzigian, CWI 1's Chief Executive Officer, entered into an employment agreement with CWI 2 that will take effect at the closing of the merger, pursuant to which he will be entitled to receive, among other things, an annual base salary of $775,000, an annual cash bonus opportunity equal to 150% of his annual base salary based on performance goals, and an award of restricted stock units of CWI 2 common stock equal to $6 million. See the section titled "The Internalization and the Internalization Agreement—CEO Employment Agreement" beginning on page 169 for a summary of terms of the CEO employment agreement.

        CWI 1, CWI 2, Watermark, and Mr. Medzigian entered into a commitment agreement pursuant to which CWI 1 and CWI 2 agreed to pay Watermark a total of $6.95 million in consideration of the commitments of Watermark and Mr. Medzigian to winddown and ultimately liquidate a private fund that was formed to raise capital to invest in lodging properties, and to devote their business activities exclusively to the affairs of CWI 1 and CWI 2 and certain other activities set forth in the commitment agreement, with the exception of the wind-down of the private fund and performing asset management services for two hotels owned by WPC. Of the amount payable to Watermark, $5.0 million was paid in October 2019 and the balance is payable in January 2020. See the section titled "The Internalization and the Internalization Agreement—Commitment Agreement" beginning on page 168 for a summary of terms of the commitment agreement.

        As of the close of business on the CWI 1 record date and the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate approximately 4.1% and 4.0% of the issued and outstanding shares of CWI 1 common stock and CWI 2 common stock, respectively. See the section titled "The CWI 1 Special MeetingBeneficial Ownership of CWI 1's Stock by Directors and Executive Officers" beginning on page 88.

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Carey Watermark Investors 2 Incorporated

        CWI 2 is a publicly owned, non-traded REIT that, together with its consolidated subsidiaries, invests in, manages and seeks to enhance the value of, interests in lodging and lodging-related properties in the United States. CWI 2 conducts substantially all of its investment activities and owns all of its assets through the CWI 2 Operating Partnership. CWI 2 is a general partner and a limited partner of, and own a 99.985% capital interest in, the CWI 2 Operating Partnership. An affiliate of WPC and Watermark holds a special general partner interest of 0.015% in the CWI 2 Operating Partnership. In order to qualify as a REIT, CWI 2 cannot operate hotels directly; therefore, CWI 2 leases its hotels to its TRS lessees. At September 30, 2019, CWI 2 held ownership interests in 12 hotels, with a total of 4,421 rooms.

        CWI 2 raised offering proceeds in its initial public offering of $280.3 million from its Class A common stock and $571.0 million from its Class T common stock, for an aggregate of $851.3 million. The offering commenced in May 2014 and closed in July 2017. In addition, from inception through September 30, 2019, $26.9 million and $53.7 million of distributions were reinvested in its Class A and Class T common stock, respectively, through CWI 2's distribution reinvestment plan (CWI 2's "DRIP"). CWI 2 has fully invested the proceeds from our offering.

        In April 2019, CWI 2 announced that the Advisor had determined its estimated NAV per share as of December 31, 2018, to be $11.11 for both its Class A and Class T common stock.

        CWI 2 has no employees.

CWI 2's Business Objectives and Strategy

        CWI 2 strives to create value in the lodging industry. CWI 2's primary investment objectives are to provide stockholders with current income in the form of quarterly distributions and to increase the value of its portfolio in order to generate long-term capital appreciation.

        CWI 2's core strategy for achieving these objectives is to build and enhance the value of a portfolio of interests in lodging and lodging-related investments. CWI 2 employs value-added strategies, such as rebranding, renovating, expanding, or changing hotel operators, when CWI 2 believes such strategies will increase the operating results and values of the hotels that CWI 2 acquires. CWI 2 regularly reviews the hotels in its portfolio to ensure that they continue to meet its investment criteria. If CWI 2 were to conclude that a hotel's value has been maximized, or that it no longer fits within its financial or strategic criteria, CWI 2 may seek to sell the hotel and use the net proceeds for investments in its existing or new hotels, or to reduce its overall leverage. While CWI 2 does not operate its hotel properties, both its asset management team and its executive management team monitor and work cooperatively with the hotel operators in all aspects of the hotels' operations, including advising and making recommendations regarding property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience, and overall strategic direction. CWI 2 believes that it can add significant value to its portfolio through intensive asset management strategies. CWI 2's executive and asset management teams have significant experience in hotels, as well as in creating and implementing innovative asset management initiatives.

        The lodging properties that CWI 2 has acquired include full-service branded hotels located in urban settings, resort properties, and select-service hotels. Full-service hotels generally provide a full complement of guest amenities, including food and beverage services, meeting and conference facilities, concierge and room service, and valet parking, among others. Select-service hotels typically have limited food and beverage outlets and do not offer comprehensive business or banquet facilities. Resort properties may include smaller boutique hotels and large-scale integrated resorts. All of its investments

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to date have been in the United States, however, CWI 2 may consider, and are not prohibited under its organizational documents from making, investments outside the United States.

Holding Period

        CWI 2 generally intends to hold its investments in real property for an extended period depending on the type of investment. The determination of whether a particular asset should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing economic conditions, with a view to achieving maximum capital appreciation for its stockholders while avoiding increases in risk. No assurance can be given that this objective will be realized.

Financing Strategies

        At September 30, 2019, CWI 2's hotel portfolio, including both the Consolidated Hotels and the Unconsolidated Hotels, was 58% leveraged. CWI 2's organizational documents permit it to incur leverage of up to 75% of the total costs of its investments or 300% of its net assets (whichever is less), or a higher amount with the approval of a majority of CWI 2's independent directors.

Transactions With Affiliates of CWI 2

        CWI 2 may borrow funds or purchase properties from, or enter into joint ventures with, the Advisor, the CWI 2 Subadvisor, or CWI 2's or their respective affiliates, if CWI 2 believes that doing so is consistent with its investment objectives and CWI 2 complies with its investment policies and procedures, and it has done so in the past. A majority of CWI 2's directors (including the independent directors) must approve any investment in which CWI 2 invests jointly with an affiliate.

Competition

        The hotel industry is highly competitive. CWI 2's hotels compete with other hotels for guests in its markets. Competitive factors include location, convenience, brand affiliation, room rates, range, and the quality of services, facilities, and guest amenities or accommodations offered. Competition includes competition from existing, newly renovated, and newly developed hotels in the relevant segments. Competition can adversely affect the occupancy, ADR, and RevPAR of CWI 2's hotels, and thus its financial results, and may require CWI 2 to provide additional amenities, incur additional costs, or make capital improvements that CWI 2 otherwise might not choose to make, which may adversely affect CWI 2's profitability.

Seasonality

        Certain lodging properties are seasonal in nature. Generally, occupancy rates and revenues are greater in the second and third quarters than in the first and fourth quarters. As a result of the seasonality of certain lodging properties, there may be quarterly fluctuations in results of operations of CWI 2's properties. Quarterly financial results may be adversely affected by factors outside its control, including weather conditions and poor economic factors. As a result, CWI 2 may need to enter into short-term borrowings in certain periods in order to offset these fluctuations in revenues, to fund operations or to make distributions to its stockholders.

Certain Environmental and Regulatory Matters

        CWI 2's hotel properties are subject to various federal, state, and local environmental laws and regulations. In connection with CWI 2's current or prior ownership or operation of hotels, CWI 2 may potentially be liable for various environmental costs or liabilities (including investigation, clean-up and disposal of hazardous materials released at, on, under, in or from the property). Environmental laws and regulations typically impose responsibility without regard to whether the owner or operator knew

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of or was responsible for the presence of hazardous materials or contamination, and liability is often joint and several. As part of CWI 2's efforts to mitigate these risks, CWI 2 typically engage third parties to perform assessments of potential environmental risks when evaluating new acquisitions or if required to do so by a lender. Such environmental surveys are limited in scope, however, and CWI 2 remains exposed to contaminant (e.g., such as asbestos and mold) and hazardous or regulated substances used during the routine operations of CWI 2's hotels (e.g., swimming pool or dry cleaning chemicals). CWI 2's hotel properties incur costs to comply with environmental and health and safety laws and regulations and could be subject to fines and penalties for noncompliance.

        CWI 2 has not received written notice from any governmental authority of any material noncompliance, liability, or claim relating to hazardous or toxic substances or other environmental matters in connection with any of its properties. And although CWI 2 is not currently aware of any material environmental or health and safety claims pending or threatened against CWI 2, a claim may be asserted against it in the future that could have a material adverse effect on CWI 2.

        CWI 2's properties must comply with the ADA to the extent that such properties are "public accommodations" as defined by the ADA. CWI 2 believes that its properties are substantially in compliance with the ADA; however, the obligation to make readily achievable accommodations is an ongoing one and CWI 2 will continue to assess its properties and make alterations as appropriate.

Properties

        CWI 2's principal corporate offices are located in the offices of the Advisor at 50 Rockefeller Plaza, New York, NY 10020.

CWI 2's Hotels

        The following table sets forth certain information for each of CWI 2's Consolidated Hotels and its Unconsolidated Hotels at September 30, 2019:

Hotels
  State   Number of
Rooms
  Percentage
Owned
  Acquisition
Date
  Hotel Type

Consolidated Hotels

                   

Marriott Sawgrass Golf Resort & Spa(a)

  FL     514     50 % 4/1/2015   Resort

Courtyard Nashville Downtown

  TN   192   100 % 5/1/2015   Select-Service

Embassy Suites by Hilton Denver—Downtown/Convention Center

  CO     403     100 % 11/4/2015   Full-Service

Seattle Marriott Bellevue(b)

  WA   384   95.4 % 1/22/2016   Full-Service

Le Méridien Arlington

  VA     154     100 % 6/28/2016   Full-Service

San Jose Marriott

  CA   510   100 % 7/13/2016   Full-Service

San Diego Marriott La Jolla

  CA     376     100 % 7/21/2016   Full-Service

Renaissance Atlanta Midtown Hotel

  GA   304   100 % 8/30/2016   Full-Service

Ritz-Carlton San Francisco

  CA     336     100 % 12/30/2016   Full-Service

Charlotte Marriott City Center

  NC   446   100 % 6/1/2017   Full-Service

        3,619              

Unconsolidated Hotels

                   

Ritz-Carlton Key Biscayne(c)

  FL     444     19.3 % 5/29/2015   Resort

Ritz-Carlton Bacara, Santa Barbara(d)

  CA   358   60 % 9/28/2017   Resort

        802              

(a)
The remaining 50% interest in this venture is owned by CWI 1.

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(b)
On October 16, 2019, CWI 2 purchased the membership interest in the Seattle Marriott Bellevue venture from an unaffiliated third party for $0.3 million, which increased CWI 2's ownership interest from 95.4% to 100%.

(c)
A 47.4% interest in this venture is owned by CWI 1. The remaining 33.3% interest is retained by the original owner. The number of rooms presented includes 142 condo-hotel units that participate in the condo rental program.

(d)
This investment represents a tenancy-in-common interest; the remaining 40% interest is owned by CWI 1.

CWI 2's Hotel Management and Franchise Agreements

Hotel Management Agreements

        All of CWI 2's hotels are managed by independent hotel operators pursuant to management or operating agreements, with many also subject to separate license agreements addressing matters pertaining to operation under the designated brand. As of September 30, 2019, CWI 2 had management or operating agreements with three different management companies related to its Consolidated Hotels. Under these agreements, the managers generally have sole responsibility and exclusive authority for all activities necessary for the day-to-day operation of the hotels, including establishing room rates; securing and processing reservations; procuring inventories, supplies and services; providing periodic inspection and consultation visits to the hotels by the managers' technical and operational experts; and promoting and publicizing the hotels. The managers provide all managerial and other employees for the hotels; review the operation and maintenance of the hotels; prepare reports, budgets, and projections; and provide other administrative and accounting support services to the hotels. These support services include planning and policy services, divisional financial services, product planning and development, employee staffing and training, corporate executive management, and certain in-house legal services. CWI 2 has certain approval rights over budgets, capital expenditures, significant leases and contractual commitments, and various other matters.

        The initial terms of CWI 2's management and operating agreements, including those that have been assumed at the time of the hotel acquisition, typically range from five to 40 years, with one or more renewal terms at the option of the manager. The management agreements condition the manager's right to exercise options for specified renewal terms upon the satisfaction of specified economic performance criteria, or allow us to terminate at will with 30 to 60 days' notice. For hotels operated with separate franchise agreements, the manager typically receives compensation in the form of a base management fee, which is calculated as a percentage (generally ranging from 2.5% to 3.0%) of annual gross revenues, and an incentive management fee, which is typically calculated as a percentage of operating profit, either (i) in excess of projections with a cap or (ii) after the owner has received a priority return on its investment in the hotel.

        The management agreements relating to six of CWI 2's Consolidated Hotels contain the right and license to operate the hotels under specified brands. No separate franchise agreements exist and no separate franchise fee is required for these hotels. These management agreements incur a base management fee generally ranging from 3.0% to 7.0% of hotel revenues. These hotels are all managed by subsidiaries of Marriott.

Franchise Agreements

        Four of CWI 2's Consolidated Hotels operate under franchise or license agreements with national brands that are separate from CWI 2's management agreements. As of September 30, 2019, CWI 2 has three franchise agreements with Marriott-owned brands and one with a Hilton-owned brand.

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        Typically, franchise agreements grant CWI 2 the right to the use of the brand name, systems, and marks with respect to specified hotels and establish various management, operational, recordkeeping, accounting, reporting, and marketing standards and procedures with which the licensed hotel must comply. In addition, the franchisor establishes requirements for the quality and condition of the hotel and its furniture, fixtures and equipment, and CWI 2 is obligated to expend such funds as may be required to maintain the hotel in compliance with those requirements. Typically, CWI 2's franchise agreements provide for a license fee, or royalty, of 3.0% to 6.0% of room revenues and, if applicable, 3.0% of food and beverage revenue. In addition, CWI 2 generally pays 1.0% to 4.0% of room revenues as marketing and reservation system contributions for the system-wide benefit of brand hotels.

        CWI 2's typical franchise agreement provides for a term of 20 to 25 years. The agreements provide no renewal or extension rights and are not assignable. If CWI 2 breaches one of these agreements, in addition to losing the right to use the brand name for the applicable hotel, CWI 2 may be liable, under certain circumstances, for liquidated damages equal to the fees paid to the franchisor with respect to that hotel during the three immediately preceding years.

CWI 2 Legal Proceedings

        At September 30, 2019, CWI 2 was not involved in any material litigation.

        Various claims and lawsuits arising in the normal course of business are pending against CWI 2. The results of these proceedings are not expected to have a material adverse effect on CWI 2's consolidated financial position, results of operations, or cash flows.

Market for CWI 2's Common Equity and Related Stockholder Matters

Unlisted Shares

        There is no active public trading market for CWI 2's shares. At September 30, 2019, there were 20,413 holders of record of shares of CWI 2 common stock.

CWI 2 Equity Compensation Plan Information

        The following table presents information regarding CWI 2's equity compensation plans as of September 30, 2019:

Plan Category
  Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
  Weighted Average
Exercise Price of
Outstanding Options
Warrants and Rights
  Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
 

Equity compensation plans approved by security holders

  74,074 (1) 0 (2) 1,838,894 (3)

Equity compensation plans not approved by security holders

    0     0     0  

  74,074 (1) 0 (2) 1,838,894 (3)

(1)
Reflects unvested restricted stock units granted under the equity incentive plan.

(2)
All restricted stock units are settled in shares of CWI 2 Class A common stock on a one-for-one basis and accordingly do not have a weighted-average exercise price.

(3)
Awards under the CWI 2 Incentive Plan in the aggregate may not exceed 2% of the shares of CWI 2 Class A common stock and Class T common stock outstanding (on a combined and fully diluted basis), up to a maximum amount of 2,000,000 shares.

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Compensation of CWI 2 Directors and Executive Officers

        CWI 2 has no employees. Day-to-day management functions are performed by the Advisor. The Advisor has appointed CWA 2, LLC, as the CWI 2 Subadvisor. The CWI 2 Subadvisor provides services to the Advisor primarily relating to acquiring, managing, financing, and disposing of CWI 2's assets and overseeing the independent property operators that manage the day-to-day operations of CWI 2's properties. In addition, CWI 2 Subadvisor provides CWI 2 with the services of Mr. Medzigian, CWI 2's Chief Executive Officer, subject to the approval of CWI 2's independent directors. CWI 2 has not paid, and does not intend to pay, any compensation to CWI 2's executive officers. While CWI 2 does not reimburse the Advisor for compensation or benefits paid to any of CWI 2's other executive officers, CWI 2 does reimburse the Advisor for the services of personnel other than CWI 2's executive officers. CWI 2 also reimbursed CWI 2 Subadvisor (through the Advisor) for $200,000 of Mr. Medzigian's compensation in relation to the services he provided to CWI 2 in 2018. See the section titled "—Certain Relationships and Related Transactions of CWI 2" beginning on page 72 for a description of the contractual arrangements between CWI 2 and the Advisor and its affiliates, and between the Advisor and CWI 2 Subadvisor.

        In addition, CWI 2 has adopted an equity incentive plan: the 2015 Equity Incentive Plan (as may be amended from time to time, the "CWI 2 Incentive Plan"), which authorizes the issuance of shares of CWI 2 common stock to CWI 2's officers and officers and employees of CWI 2 Subadvisor, who perform services on CWI 2's behalf, and to non-director members of the investment committee, if any, through stock-based awards. The purpose of the CWI 2 Incentive Plan is to attract and retain the services of experienced and qualified individuals who are acting on CWI 2's behalf, in a way that aligns their interests with those of CWI 2's stockholders. Awards under the CWI 2 Incentive Plan are in the form of RSUs and dividend equivalent rights, and in the aggregate, may not exceed 2% of the shares of CWI 2 Class A common stock and Class T common stock outstanding (on a combined and fully diluted basis) up to a maximum amount of 2,000,000 shares. The CWI 2 Incentive Plan is administered by CWI 2's independent directors (in such capacity, the "CWI 2 Plan Administrator"). When making decisions regarding awards under the CWI 2 Incentive Plan, the CWI 2 Plan Administrator considers various factors, including the incentive compensation payable to the Advisor under the CWI 2 advisory agreement. The CWI 2 Plan Administrator may impose conditions on the transfer of RSUs received under the CWI 2 Incentive Plan, and may impose other restrictions and requirements as it may deem appropriate. The CWI 2 Plan Administrator will also establish, as to each RSU issued under the CWI 2 Incentive Plan, the terms and conditions upon which the restrictions on those shares shall lapse. In 2018, CWI 2 issued 34,295 RSUs, which vest over three years, to employees of CWI 2 Subadvisor (subject to continued employment).

        In 2018, CWI 2 paid to each of its non-employee directors an annual cash retainer of $25,000, an annual $10,000 cash retainer for service on the investment committee, as well as an annual grant of 3,846 shares of CWI 2 Class A common stock following the annual meeting of stockholders. In addition, during 2018, the chairman of the CWI 2 board's audit committee received an additional cash retainer of $10,000.

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        The following table sets forth the amount of compensation received by CWI 2's directors in 2018. Mr. Fox, chairman of the CWI 2 board, and Mr. Medzigian, CWI 2's Chief Executive Officer, did not receive compensation for serving as directors.

Director
  Fees Earned or
Paid in Cash
  Stock
Awards(1)
  All Other
Compensation(2)
  Total  

Charles S. Henry(3)

  $ 35,000   $ 42,729   $ 1,347   $ 79,076  

Michael D. Johnson(3)

    35,000     42,729     1,347     79,076  

Katherine G. Lugar(3)

  0   0   0   0  

Robert E. Parsons, Jr.

    45,000     42,729     1,356     89,085  

William H. Reynolds, Jr.

  35,000   42,729   1,347   79,076  

  $ 150,000   $ 170,916   $ 5,397   $ 326,313  

(1)
Reflects grant date fair value of awards of shares of CWI 2 Class A common stock granted for 2018, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, related to the annual grant of 15,384 shares of CWI 2 Class A common stock on June 21, 2018. The grant date fair values of awards were calculated by multiplying the number of shares granted by $11.11, CWI 2's NAV at the time of the grant date.

(2)
Reflects dividends paid during 2018 on the stock awards set forth in the table. The dividends for the quarter ended December 31, 2018, were paid in January 2019.

(3)
Messrs. Henry and Johnson resigned from the CWI 2 board effective as of December 6, 2018. Ms. Lugar became a director on December 14, 2018, but did not receive compensation for her service on the CWI 2 board in 2018.

        Each of CWI 2's independent directors is entitled to reimbursement for up to $5,000 per annum of lodging, meals, parking, and certain other expenses at all of CWI 2's hotels. The purpose of this policy is to encourage CWI 2's independent directors to visit CWI 2's hotels in order to maintain and enhance their knowledge of CWI 2's portfolio. If a director does not use the annual allowance, the amount is forfeited. There were no reimbursements for the year ended December 31, 2018.

        During the quarter ended December 31, 2018, the CWI 2 board requested that its independent compensation consultant, FW Cook, conduct a review of the compensation paid to directors as part of the CWI 2 board's periodic review of such practices. Based on the results of that review and the advice of FW Cook, effective January 1, 2019, the CWI 2 board approved increasing the annual cash retainer to $45,000 and the annual grant of CWI 2 Class A common stock to $60,000. There was no change to the annual cash retainer payable to the chairman of the CWI 2 board's audit committee. In December 2018, the CWI 2 board formed the CWI 2 special committee to begin the process of evaluating possible liquidity alternatives for CWI 2's stockholders, for which each independent director was paid an annual cash retainer in January 2019 of $60,000, except for the chairman of the CWI 2 special committee, Mr. Parsons, who received an annual cash retainer of $75,000. On September 17, 2019, in consideration of the significant amount of time spent and expected to be spent in the future by Mr. Parsons on his responsibilities, the CWI 2 board determined to pay Mr. Parsons an additional $50,000. The members of the CWI 2 special committee will also be reimbursed for any reasonable out-of-pocket expenses incurred by them in connection with their service as members of the special committee. In addition, should the authorization of the CWI 2 special committee continue after December 31, 2019, CWI 2 will pay to each member of the CWI 2 special committee an annual retainer of $60,000, to be paid in quarterly installments of $15,000, and will pay to the chairman of the CWI 2 special committee an annual retainer of $75,000, to be paid in advance in quarterly installments of $18,750.

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CWI 2 Board Report on Executive Compensation

        SEC regulations require the disclosure of the compensation policies applicable to executive officers in the form of a report by the compensation committee of the board (or a report of the full board of directors in the absence of a compensation committee). As noted above, CWI 2 has no employees, paid no direct compensation, and the CWI 2 board made no executive compensation decisions during 2018. As a result, CWI 2 has no compensation committee and the CWI 2 board has not considered a compensation policy for employees and has not included a report with this Joint Proxy Statement/Prospectus. See the section titled "—Certain Relationships and Related Transactions of CWI 2" beginning on page 72 for details regarding reimbursements to WPC, Watermark, and their respective affiliates of personnel expenses pursuant to the CWI 2 advisory and subadvisory agreements.

CWI 2 Compensation Committee Interlocks and Insider Participation

        As noted above, the CWI 2 board has not appointed a compensation committee. None of the members of the CWI 2 board are involved in a relationship requiring disclosure as an interlocking executive officer/director, under Item 404 of Regulation S-K, or as a former officer or employee of CWI 2.

Securities Ownership of Certain CWI 2 Beneficial Owners and Management

        "Beneficial ownership" as used herein has been determined in accordance with the rules and regulations of the SEC and is not to be construed as a representation that any of such shares are in fact beneficially owned by any person. CWI 2 knows of no stockholder who beneficially owned more than 5% of the outstanding shares of CWI 2's stock.

        The following table shows how many shares of CWI 2 Class A common stock were owned, as of September 30, 2019, by CWI 2's directors and named executive officers, which under SEC regulations consists of CWI 2's Chief Executive Officer and Chief Financial Officer. Directors and named executive officers who owned no shares are not listed in the table. The business address of the directors and named executive officers listed below is the address of CWI 2's principal executive offices, 50 Rockefeller Plaza, New York, NY 10020.

Name of Beneficial Owner
  Amount and
Nature of Beneficial
Ownership(1)
  Percentage
of Class
 

Michael G. Medzigian(2)

  153,013   *  

Katherine G. Lugar

    7,990     *  

Robert E. Parsons, Jr.

  20,108   *  

William H. Reynolds, Jr.

    18,337     *  

All directors and executive officers as a group (six individuals)

  199,450   *  

*
Less than 1% of CWI 2 Class A common stock.

(1)
Share amounts may not sum to total due to rounding of fractional shares.

(2)
Shares are held by the Michael G. Medzigian Revocable Trust.

Certain Relationships and Related Transactions of CWI 2

        On January 1, 2018, Mr. Fox joined the CWI 2 board as chairman. On that same date, he also became Chief Executive Officer and a member of the board of directors of WPC, an affiliate of the Advisor. During 2018 and 2019, CWI 2 retained the Advisor, pursuant to the CWI 2 advisory agreement, to provide advisory services in connection with managing CWI 2's overall portfolio,

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including providing oversight and strategic guidance to the independent property operators that manage CWI 2's properties.

        For services provided to CWI 2, the Advisor earns an annual asset management fee equal to 0.55% of the aggregate average market value of CWI 2's investments. Asset management fees are payable in cash or shares of CWI 2 Class A common stock, or a combination of both, at the option of the Advisor.

        For 2018, CWI 2 incurred asset management fees due to the Advisor totaling approximately $10.4 million, all of which were settled in shares of CWI 2 Class A common stock, and for the nine months ended September 30, 2019, approximately $8.1 million, which were settled in shares of CWI 2 Class A common stock. Carey Watermark Holdings 2, LLC ("Carey Watermark Holdings 2"), an affiliate of the Advisor and Watermark, also receives 10% of the available cash distributions of CWI 2 Operating Partnership and a subordinated interest of 15% of the net proceeds from the sale, exchange, or other disposition of operating partnership assets. Carey Watermark Holdings 2 received aggregate distributions of approximately $5.5 million during 2018, and $4.5 million during the nine months ended September 30, 2019.

        In addition, in return for performing services related to CWI 2's investment acquisitions, the Advisor is paid acquisition fees of 2.5% of the total investment cost of the properties acquired and loans originated by CWI 2 (not to exceed 6% of the aggregate contract purchase price of all investments and loans). CWI 2 did not incur any acquisition fees in 2018, or during the nine months ended September 30, 2019. The Advisor also receives disposition fees of up to 1.5% of the contract sales price of a property. No disposition fees were incurred during 2018, or during the nine months ended September 30, 2019. CWI 2 also pays the Advisor a loan refinancing fee of up to 1% of a refinanced loan, if certain conditions are met. CWI 2 incurred approximately $0.2 million in loan refinancing fees payable to the Advisor during 2018, and it did not incur any such loan refinancing fees during the nine months ended September 30, 2019.

        Pursuant to the CWI 2 advisory agreement, CWI 2 reimburses the Advisor for the actual cost of personnel allocable to their time devoted to providing administrative services to CWI 2, as well as overhead expenses, including rent expense, which totaled approximately $4.1 million for the year ended December 31, 2018, and $3.1 million during the nine months ended September 30, 2019 (a portion of which is reimbursed to the CWI 2 Subadvisor, as discussed below). The CWI 2 advisory agreement provides that for the 12-month period ending on the last day of any fiscal quarter (with quoted variables as defined in the advisory agreement), "operating expenses" may not exceed the greater of 2% of CWI 2's "average invested assets" or 25% of CWI 2's "adjusted net income." For the year ended December 31, 2018, and for the nine months ended September 30, 2019, CWI 2's operating expenses were below this 2%/25% threshold.

        The CWI 2 Subadvisor provides services to the Advisor, primarily relating to acquiring, managing, financing, and disposing of CWI 2's assets and overseeing the independent property operators that manage the day-to-day operations of CWI 2's properties. The CWI 2 Subadvisor is an Illinois limited liability company and wholly owned subsidiary of Watermark. Pursuant to the CWI 2 subadvisory agreement, the Advisor pays 25% of the aforementioned fees earned under the CWI 2 advisory agreement and 30% of the subordinated incentive distributions to CWI 2 Subadvisor. During 2018, the Advisor passed on approximately $1.6 million of personnel and overhead reimbursements to CWI 2 Subadvisor, including approximately $0.2 million with respect to Mr. Medzigian; and during the nine months ended September 30, 2019, the Advisor passed on approximately $1.4 million of personnel and overhead reimbursements to CWI 2 Subadvisor, including approximately $0.2 million with respect to Mr. Medzigian. In addition, CWI 2 Subadvisor owns a carried interest in Carey Watermark Holdings 2.

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        At December 31, 2018, and September 30, 2019, CWI 2 owned interests in three ventures with CWI 1: the Marriott Sawgrass Golf Resort & Spa, the Ritz-Carlton Key Biscayne, and the Ritz-Carlton Bacara, Santa Barbara. A third party also owns an interest in the Ritz-Carlton Key Biscayne.

        On October 19, 2017, CWI 2 Operating Partnership entered into a $25.0 million secured credit facility with WPC to fund CWI 2's working capital needs (the "CWI 2 Working Capital Facility"). Pursuant to the related credit agreement, as amended, the Working Capital Facility is currently scheduled to mature on December 31, 2019; and effective as of September 26, 2019, the CWI 2 entered into an agreement that provides CWI 2 with the option to extend the maturity date to March 31, 2020 at CWI 2's election. The CWI 2 Working Capital Facility bears interest at LIBOR plus 1.0%, provided; however, that upon the occurrence of certain events of default (as described in the loan agreement), all outstanding amounts will be subject to a 2.0% annual interest rate increase. Upon extension, the interest rate would increase to LIBOR plus 3.0%. Upon the termination or expiration of the CWI 2 advisory agreement, the CWI 2 Working Capital Facility would mature at that time.

        CWI 2 serves as guarantor of the CWI 2 Working Capital Facility and has pledged CWI 2's unencumbered equity interest in certain properties as collateral, as further described in the related pledge and security agreement. At both December 31, 2018, and September 30, 2019, no amounts were outstanding under the CWI 2 Working Capital Facility.

        The closing of the merger is a condition to the closing of the internalization. Pursuant to the internalization agreement, CWI 2 and CWI 2 Operating Partnership will pay an aggregate of $125.0 million of their equity securities to WPC and Watermark, valued on the basis of CWI 2's estimated net asset value per share of $11.41 as of December 31, 2018. The breakdown of the consideration is as follows:

        Mr. Medzigian, CWI 2's Chief Executive Officer, entered into an employment agreement with CWI 2 that will take effect at the closing of the merger, pursuant to which Mr. Medzigian will be entitled to receive, among other things, an annual base salary of $775,000, an annual cash bonus opportunity equal to 150% of his annual base salary based on performance goals, and an award of restricted stock units of CWI 2 common stock equal to $6 million. See the section titled "The Internalization and the Internalization Agreement—CEO Employment Agreement" beginning on page 169 for a summary of terms of the CEO employment agreement.

        CWI 1, CWI 2, Watermark, and Mr. Medzigian entered into a commitment agreement pursuant to which CWI 1 and CWI 2 agreed to pay Watermark a total of $6.95 million in consideration of the commitments of Watermark and Mr. Medzigian to winddown and ultimately liquidate a private fund that was formed to raise capital to invest in lodging properties, and to devote their business activities exclusively to the affairs of CWI 1 and CWI 2 and certain other activities set forth in the commitment agreement, with the exception of the wind-down of the private fund and performing asset management services for two hotels owned by WPC. Of the amount payable to Watermark, $5.0 million was paid in October 2019 and the balance is payable in January 2020. See the section titled "The Internalization and the Internalization Agreement—Commitment Agreement" beginning on page 168 for a summary of terms of the commitment agreement.

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        As of the close of business on the CWI 1 record date and the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate approximately 4.1% and 4.0% of the issued and outstanding shares of CWI 1 common stock and CWI 2 common stock, respectively. See the section titled "The CWI 2 Special MeetingBeneficial Ownership of CWI 2's Stock by Directors and Executive Officers" beginning on page 92.

The Combined Company

        The combined company is expected to have a pro forma combined enterprise value of approximately $4.6 billion. It will own a diversified portfolio of high-quality lodging assets in the United States consisting of interests in 33 hotels with a total of approximately 9,660 rooms located in 16 states. As a result of the internalization, which will occur immediately upon the consummation of the merger, the combined company will become internally managed. The combined company's principal corporate offices will be located at 150 North Riverside Plaza, Suite 4200, Chicago, IL 60606.

The Combined Company's Hotels

        The following table sets forth certain pro forma information, giving effect to the merger, regarding the combined company's portfolio as of and for the 12 months ended September 30, 2019:

Combined Company Metrics  
 
  CWI 1   CWI 2   Combined Company(1)  

Gross Real Estate Value(2) ($, in millions) (pro rata)

  $ 2,653   $ 1,952   $ 4,604  

Hotels & Resorts(3)

    24     12     33  

Rooms (pro rata)

  5,986   3,674   9,658  

ADR(4)

  $ 243   $ 267   $ 252  

Occupancy

  73.2 % 76.8 % 74.6 %

RevPAR(4)

  $ 178   $ 205   $ 188  

(1)
Combined company amounts are adjusted for three hotel sales that closed after September 30, 2019.

(2)
Based on independent third-party appraisals as of December 31, 2018.

(3)
Reflects pro rata shares for three properties held in joint ventures in both CWI 1's and CWI 2's standalone portfolios.

(4)
"ADR" refers to average daily rate. "RevPAR" refers to revenue per available room.

        The combined company's portfolio of lodging assets will be geographically diversified, with a majority located in demand-driven urban areas and attractive resort markets. The following shows the locations of the combined company's hotels as of September 30, 2019, and the percentage of the

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combined company's pro forma EBITDA represented by the named regions or cities for the 12 months ended September 30, 2019:

GRAPHIC


(1)
Combined company pro forma EBITDA is adjusted for three hotel sales that closed after September 30, 2019.

        The combined company's portfolio will also be diversified in terms of the type of hotels, including full-service, select-service, and resort hotels. The combined company's EBITDA will be derived primarily from full-service and resort assets, as shown below:

GRAPHIC


(1)
Reflects percentage of pro forma EBITDA derived from each hotel type for the 12 months ended September 30, 2019, for each of CWI 1, CWI 2, and the combined company. Combined company pro forma EBITDA is adjusted for three hotel sales that closed after September 30, 2019.

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        Additionally, the combined company's portfolio will have strong brand affiliations, as shown below:

GRAPHIC


(1)
Reflects percentage of pro forma EBITDA derived from each of the named hotel brands for the 12 months ended September 30, 2019, for each of CWI 1, CWI 2, and the combined company. Combined company pro forma EBITDA is adjusted for three hotel sales that closed after September 30, 2019.

The Combined Company's Directors and Executive Officers

        Immediately following the effective time of the merger, the board of CWI 2 will be increased to nine members, with the five current directors of the CWI 2 board (Jason E. Fox, Katherine G. Lugar, Michael G. Medzigian, Robert E. Parsons, Jr., and William H. Reynolds, Jr.) continuing on, the three independent directors of the CWI 1 board (Charles S. Henry, Michael D. Johnson, and Simon M. Turner) joining, and one additional director designated by WPC (John J. Park) joining, the combined company's board of directors, in each case to serve until the next annual meeting of the stockholders of the combined company (and until their successors qualify and are duly elected).

        CWI 2 agreed in the internalization agreement that for so long as WPC beneficially owns capital stock of the combined company with a value (as determined in accordance with the internalization agreement) (i) equal to or greater than $100 million, WPC shall have the right to designate two directors for election to the combined company's board, (ii) equal to or greater than $50 million but less than $100 million, WPC shall have the right to designate one director for election to the combined company's board, and (iii) less than $50 million, WPC shall have no right to designate any director for election to the combined company's board. WPC has designated Mr. Fox and Mr. Park to serve as directors of the combined company following the effective time of the merger. In addition, pursuant to Mr. Medzigian's employment agreement, the combined company has agreed to nominate Mr. Medzigian as a director each year during the term of the agreement and has agreed that he will serve as chairman during the first 12 months of the term of the agreement and thereafter until replaced by the board.

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        Set forth below is a list of the directors of the combined company:

Name
  Age   Position(s)
Jason E. Fox   46   Director
Charles S. Henry   66   Independent Director
Michael D. Johnson   63   Independent Director
Katherine G. Lugar   49   Independent Director
Michael G. Medzigian   59   Chairman of the Board of Directors, Chief Executive Officer, and President
John J. Park   55   Director
Robert E. Parsons, Jr.   64   Independent Director
William H. Reynolds, Jr.   70   Independent Director
Simon M. Turner   58   Independent Director

Michael G. Medzigian

Age 59. Director since 2015.

        Mr. Medzigian has served as Chief Executive Officer of CWI 2 since May 2014, and as President and a director since February 2015. He has also served as Chief Executive Officer and President of CWI 1 since March 2008 and as a director since September 2010. Mr. Medzigian has been Chairman and Managing Partner of Watermark since its formation in May 2002. Watermark is a private real estate investment firm focused on hotels and resorts, golf, resort residential, fractional and club programs, and new-urbanism and mixed-use projects. Mr. Medzigian is also the Chief Executive Officer of Watermark Lodging Investors Manager, LLC, which is an affiliate of Watermark and the sole manager of Watermark Lodging Investors, LLC, a private lodging fund sponsored by Watermark, which fund will be wound down and ultimately liquidated pursuant to the commitment agreement. Through 2001, Mr. Medzigian was President and Chief Executive Officer of Lazard Freres Real Estate Investors and a managing director of Lazard, where he was recruited to oversee the repositioning of Lazard's real estate private equity fund operations, one of the largest real estate repositioning in history. From 1994 to 1999, Mr. Medzigian was a founding partner of Olympus Real Estate Corporation, the real estate fund management affiliate of Hicks, Muse, Tate and Furst Incorporated. At Olympus he acquired and oversaw an extensive portfolio of lodging assets and companies. Earlier in his career, Mr. Medzigian was President of Cohen Realty Services, a Chicago-based real estate investment services firm, he founded and was national director of the Hospitality Consulting Practice at Deloitte & Touche, and he held various management positions with Marriott Corporation. Mr. Medzigian currently serves as a director of the American Hotel & Lodging Association, the Industry Real Estate Finance Council of the American Hotel & Lodging Association, Chairman of the Hospitality Investment Roundtable of the American Hotel & Lodging Association, and has previously served as Chairman and a director of Atria, Inc., Chairman and a director of Kapson Senior Quarters Corp., President, Chief Executive Officer and a director of Park Plaza International, President, Chief Executive Officer and a director of RockResorts, and as a director of American Apartment Communities, the American Seniors Housing Association, Arnold Palmer Golf Management, the Assisted Living Federation of America, Dermody Properties, iStar Financial (including serving on its audit and compensation committees), Kemayan Hotels and Leisure (Australian ASX), and the Rubenstein Company. Mr. Medzigian also currently serves on the Marriott Owner Advisory Council and Marriott's Starwood U.S. Integration Advisory Board, and is a member of the Cornell Hotel Society and the Cornell University Council. He has also been a member of the Dean's Advisory Board of the Cornell University School of Hotel Administration, the Cornell Center for Real Estate Finance Industry Fellows, the Advisory Committee of the Cornell Innovation Network, the Cornell Real Estate Council, the Pension Real Estate Association, the Urban Land Institute (Chairman, Hotel Development Council), and the Young Presidents' Organization (Executive Committee Member). Mr. Medzigian received a Bachelor of

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Science from Cornell University. Mr. Medzigian's extensive experience in a broad range of investing activities in lodging assets, his executive experience with Watermark and his involvement in various companies, associations, and councils in the hospitality industry led us to conclude that he should serve as a member of the combined company's board of directors. As Chief Executive Officer and President, Mr. Medzigian will make information and insight about the combined company's business directly available to the directors in their deliberations.

Jason E. Fox

Age 46. Director since 2018.

        Mr. Fox has served as chairman and a member of the CWI 2 board since January 1, 2018. Since that same date, he has also served as chairman and a director of CWI 1; as Chief Executive Officer and a director of WPC; and Chief Executive Officer, President, and a director of Corporate Property Associates 18—Global Incorporated, which is a publicly owned, non-listed REIT focused on net-leased commercial properties that is sponsored by WPC. Mr. Fox also served as Chief Executive Officer, President, and a director of Corporate Property Associates 17—Global Incorporated from January 2018 until its merger with WPC on October 31, 2018. Mr. Fox brings to the board over 17 years of business and investment experience, having been responsible, most recently as Head of Global Investments for WPC, for sourcing, negotiating, and structuring acquisitions on behalf of WPC and the various programs it managed since joining WPC in 2002. Mr. Fox received his B.S. in Civil Engineering and Environmental Science from the University of Notre Dame and his M.B.A. from Harvard Business School. Mr. Fox's extensive knowledge of investment and asset management, and his experience as WPC's Chief Executive Officer, led us to conclude that he should serve as a member of the combined company's board of directors.

Katherine G. Lugar

Age 49. Independent director since 2018.

        Ms. Lugar has served as an independent director and a member of the audit committee of the CWI 2 board since December 2018. She has served as the Chief Executive Officer of the American Beverage Association since January 2019, having previously served as the President and Chief Executive Officer of the American Hotel & Lodging Association ("AH&LA"), the largest trade association representing the U.S. lodging industry, from April 2013 to December 2018. In that role, she was responsible for setting the strategic vision for AH&LA and all of its affiliates, while championing the industry's voice on Capitol Hill, within the Administration and beyond Washington, D.C. Working directly with the officers and board of directors, Ms. Lugar transformed AH&LA, growing the 25,000-strong group to its highest point in the organization's history and focusing its core mission on effective advocacy and offensive communications. Ms. Lugar has nearly 25 years of experience in private sector public affairs, working on Capitol Hill and previously served as executive vice president, public affairs, with the Retail Industry Leaders Association ("RILA"), a leading public policy advocate for the retail industry. Before her time at RILA, she was vice president of government relations for Travelers Insurance, serving as the company's chief representative before Congress and the administration. Prior to that, she served as vice president of legislative and political affairs at the National Retail Federation. Ms. Lugar's career in Washington, D.C. began on the staff of Indiana Congressman Tim Roemer. She currently sits on numerous non-profit boards, including the Bipartisan Policy Center, U.S. Travel Association and the Bryce Harlow Foundation, and was named incoming Chair of the Board of the St. Baldrick's Foundation, the largest private sector funder of pediatric cancer research. Ms. Lugar received her B.A. from The University of Colorado—Boulder. Ms. Lugar's experience in the hotel and lodging industry, as well as her extensive experience in public affairs, led us to conclude that she should serve as a member of the combined company's board of directors.

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Robert E. Parsons, Jr.

Age 64. Independent director since 2015.

        Mr. Parsons has served as lead independent director of the CWI 2 board since April 2016, having served as an independent director and chairman of the audit committee since February 2015. He also served as lead independent director of the CWI 1 board from April 2016 to December 6, 2018, having served as an independent director and chairman of the audit committee since September 2010. Mr. Parsons has been the Executive Vice President and Chief Financial Officer of Exclusive Resorts, LLC, the preeminent destination club, since 2004, shortly after its founding. Mr. Parsons has also served as a director and a member of the audit committee of Nuveen Global Cities REIT, Inc. since January 2018. He also served as a director, member of the audit committee and chairman of the compensation committee of Excel Trust, Inc. from April 2010 to August 2015, when the company was sold. Since 2002, Mr. Parsons has been a Managing Director of Wasatch Investments, a privately held consulting and investment firm. He was the chief financial officer of Host Marriott Corporation from 1995 to 2002. He began his career with Marriott Corporation in 1981 and continued to work in various strategic planning and treasury capacities at the company until it split into Marriott International and Host Marriott Corporation in 1993. After the split, Mr. Parsons served as treasurer of Host Marriott Corporation, a company with over $9 billion in total lodging assets, before being promoted to chief financial officer. Mr. Parsons served as an independent director of CNL Hotels & Resorts, Inc. from 2003 to April 2007, where he was the lead independent director and chaired the audit committee. He also served as chairman of the Hotel Development Council of the Urban Land Institute and as a member and chairman of the National Advisory Counsel of the Graduate School of Management at Brigham Young University. Mr. Parsons received his M.B.A from Brigham Young University and earned his bachelor's degree from the same alma mater in Accounting. Mr. Parsons's extensive senior executive and director experience at several preeminent hospitality companies led us to conclude that he should serve as a member of the combined company's board of directors.

William H. Reynolds, Jr.

Age 70. Independent director since 2015.

        Mr. Reynolds has served as an independent director and as a member of the audit committee of the CWI 2 board since February 2015. He also served in the same capacities for CWI 1 from September 2010 to December 6, 2018. Mr. Reynolds has served as the Senior Managing director of MCS Capital, LLC, an affiliate of the Marcus Corporation, since 2011. He was elected Secretary of the College Emeritus by the Board of Trustees of Trinity College, having previously served as the Secretary of the College and the special assistant to its president from November 2008 through May 2012. Mr. Reynolds served as director/Senior Advisor to Thayer Lodging Group of Annapolis, Maryland ("Thayer"), from November 2008 to August 2010, prior to which he served as Thayer's Chief Investment Officer and Managing director from November 2006. Thayer is a private equity fund that invests in hospitality real estate, such as hotels and resorts. At Thayer, Mr. Reynolds directed the selection, underwriting, acquisition and disposition of hotel properties. After graduating from Trinity College in 1971 with a B.A. in English, Mr. Reynolds began his career by earning an M.P.A. from the University of New Haven and working in the town planning and zoning offices in Cheshire, Woodbury, and Southbury. In 1977, Mr. Reynolds joined Portfolio Management, Inc., a commercial real estate developer in Texas and Connecticut, and spent several years acquiring, building, and renovating apartments and condominiums. In 1981, he partnered with an architectural firm and founded City Associates, which developed office properties in Houston. In 1985, Mr. Reynolds joined Metro Hotels, a privately held hotel development and management company in Dallas, where he oversaw development and construction, asset management, and project financing for 12 years. Mr. Reynolds then joined CapStar Hotel Company ("CapStar") as Senior Vice President Development in 1996 and managed the company's acquisition of Metro Hotels in 1998. He held the same position at successors

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of CapStar, MeriStar Hotels & Resorts, and Interstate Hotels. He then became Chief Investment Officer and Executive Vice President of a public REIT, MeriStar Hospitality Corp., in April 2004 and served until October 2005 when he entered into an agreement with USAA Real Estate Co. ("USAA") to be Managing director of a hotel fund USAA planned to form. Subsequently USAA elected not to form the fund and executed a sale of existing investments, at which point Mr. Reynolds joined Thayer Lodging Group. Mr. Reynolds is a member of the ULI Hotel Development Council and the steering committee for America's Lodging Investment Summit, and formerly was on the advisory committee of Meet the Money, the advisory committee for the Hunter Hotel Investment Conference, and was a Trustee of the American Resort Development Association. He is a frequent panelist and moderator at hospitality industry investment conferences. Mr. Reynolds served as a member of the Trinity College Board of Trustees from 1998 to 2007, and as a member of Trinity's Cornerstone Capital Campaign Executive Committee from its inception in 2006 until the campaign concluded in 2012. In 1996, he was awarded an Alumni Medal for Excellence by Trinity in recognition of his significant contributions to his profession, his community and to the college. Mr. Reynolds' nearly 40 years of experience in real estate development, investments, and strategic planning, involving many facets of hotel development and investment, led us to conclude that he should serve as a member of the combined company's board of directors.

Charles S. Henry

Age 66. Independent director nominee.

        Mr. Henry has served as lead independent director and chairman of the audit committee of the CWI 1 board since December 6, 2018, having served as an independent director and a member of the audit committee since September 2010. He also served as an independent director and a member of the audit committee of the CWI 2 board from February 2015 to December 6, 2018. Mr. Henry has served as the President of Hotel Capital Advisers, Inc. ("HCA") since he founded HCA in 1994. Until June 2015, HCA managed a portfolio of hotel real estate and operating company investments with an equity value in excess of $2 billion. HCA's portfolio of assets included the Plaza in New York, the Savoy Hotel in London, and the Four Seasons George V in Paris, as well as hotel company investments that included stakes in Four Seasons Hotels, Fairmont Raffles Hotels International, and Moevenpick Hotels. Mr. Henry also served as a director of Four Seasons Hotels Inc. until the company was taken private in May 2007. Prior to founding HCA, Mr. Henry spent nine years in investment banking at CS First Boston and Salomon Brothers, where he was responsible for capital raising, property sales, and merger and financial advisory assignments in the hotel industry, including the sales of Regent International, Ramada, Holiday Inns, and Motel 6. Earlier in his career, Mr. Henry spent two years on the financial management faculty of the Cornell School of Hotel Administration. Additionally, he worked at Prudential Insurance in hotel asset management and at Hilton International in operations analysis. Mr. Henry received a B.S. in Hotel Administration and an M.B.A. in finance from Cornell University. Mr. Henry's executive experience with HCA, as well as his extensive experience in the investing and management of hotel assets, led us to conclude that he should serve as a member of the combined company's board of directors.

Michael D. Johnson

Age 63. Independent director nominee.

        Mr. Johnson has served as an independent director and as a member of the audit committee of the CWI 1 board since September 2010. He also served in the same capacities for CWI 2 from February 2015 to December 6, 2018. Mr. Johnson has served as the President of John Carroll University since June 2018. He served as the Provost of Babson College from July 2016 to April 2018, and was previously Dean of Cornell University's School of Hotel Administration from June 2006 to June 2016. During his time at Cornell, he oversaw programs including the Cornell Program in Real

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Estate and the university-wide undergraduate minor in real estate. Prior to joining Cornell University in 2006, Mr. Johnson was the D. Maynard Phelps Collegiate Professor of Business Administration from 1998 and a Professor of Marketing from 1995 at the University of Michigan's Ross School of Business. At Michigan, he served as the director of the Center for Customer-Focused Management in Executive Education at the University of Michigan's Ross School of Business from 2004 to May 2006. Mr. Johnson also served as a member of the Executive Committee of the University of Michigan's Ross School of Business from 1996 to 1998. During his career, Mr. Johnson has consulted for a diverse range of companies and public agencies focusing on, among other things, marketing strategy, service management, customer portfolio management and customer satisfaction measurement, and relationship management. Mr. Johnson is a founding member of the University of Michigan's National Quality Research Center where he was instrumental in the development of the American Customer Satisfaction Index. He has authored over 100 academic articles and industry reports over his career and his five books have been published in six different languages. His books include Competing in a Service Economy: How to Create a Competitive Advantage through Service Development and Innovation (Jossey-Bass, 2003) and the award-winning Improving Customer Satisfaction, Loyalty and Profit: An Integrated Measurement and Management System (Jossey-Bass, 2000). Mr. Johnson has served as associate editor of the Journal of Consumer Research and on multiple editorial boards. Mr. Johnson holds a Ph.D. and M.B.A. from the University of Chicago and a Bachelor of Science degree with honors from the University of Wisconsin. Mr. Johnson's distinguished academic career, his expertise in marketing and customer relationship management, his leadership of the leading institution for hospitality industry education and research and his consulting experience in the hospitality industry led us to conclude that he should serve as a member of the combined company's board of directors.

John J. Park

Age 55. Director nominee.

        Mr. Park has served as a managing director of CWI 2 since February 2015 and as a managing director of CWI 1 since July 2013. He has also served as a managing director of CPA:18—Global Incorporated since April 2013 and had served as a managing director of CPA:17—Global Incorporated from March 2013 until its merger with WPC on October 31, 2018. Mr. Park became President of WPC in January 2018, having served as a managing director since 2013, and most recently has served as director of Strategy and Capital Markets since March 2016, after serving in various capacities since joining WPC as an investment analyst in 1987. During his tenure, he has spearheaded the transactions that have transformed WPC, including consolidation and listing of CPA:1-9 as Carey Diversified LLC in 1998, its merger with W. P. Carey & Co. Inc. in 2000, liquidity transactions of Corporate Property Associates ("CPA"):10, Carey Institutional Properties, CPA:12, and CPA:14, WPC's merger with CPA:15 and REIT conversion in 2012, WPC's merger with CPA:16—Global Incorporated in 2014, and WPC's merger with CPA:17—Global Incorporated in October 2018. The WPC board of directors designated him as an executive officer in March 2016. Mr. Park received a B.S. in Chemistry from the Massachusetts Institute of Technology and an M.B.A. in Finance from Stern School of Business at New York University. He also serves as a trustee of the W. P. Carey Foundation. Mr. Park's track record of leadership and service in senior executive roles at the Advisor, and the knowledge that he has gained in the industry, led us to conclude that he should serve as a member of the combined company's board of directors.

Simon M. Turner

Age 58. Independent director nominee.

        Mr. Turner has served as an independent director and a member of the audit committee of the CWI 1 board since December 2018. He formed Alpha Lodging Partners in 2017 to make selective investments and to provide strategic and transactional advisory services to hospitality sector companies

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and investors. Mr. Turner served as an independent director of ClubCorp Holdings, Inc., a membership-based leisure company, including service on its audit, compensation, and nominating and corporate governance committees, from May 2017 until its acquisition in September 2017. He served as President, Global Development of Starwood Hotels & Resorts Worldwide from May 2008 to October 2016, where he was responsible for global development activities, including hotel and resort development, property acquisitions and dispositions, franchise and management pipeline expansion, and real estate investment management. Prior to Starwood, he served as a Principal of Hotel Capital Advisers, Inc., a hotel investment advisory firm overseeing both hotel brands (Four Seasons and Fairmont) and property investments in North America and Europe, from June 1996 to April 2008. In that position, he led a number of high-profile hotel projects, including the acquisition, financing, and repositioning of the Hotel George V in Paris and the Copley Plaza Hotel in Boston. His board service has included Fairmont Raffles Hotels International, The Four Seasons Resort and Club, and Four Seasons Hotels, Inc. Prior to 1996, he served as a director of Investment Banking at Salomon Brothers Inc., where he was responsible for the structuring and execution of a broad range of hotel sector strategies, and in management positions at various other international hospitality firms. He is currently an adjunct lecturer at NYU's Hospitality and Tourism program and has also lectured frequently at Cornell University's School of Hotel Administration, as well as the university's executive education program, and at Columbia University's real estate graduate program. He is also a Trustee of the Urban Land Institute. He holds a B.S. in Hotel Administration from Cornell University. Mr. Turner's diverse leadership roles over 35 years in the hospitality sector, including as a senior executive and board member with oversight of public and private enterprises, and experience in numerous facets of business operations, strategy, and complex transactions, led us to conclude that he should serve as a member of the combined company's board of directors.

        Set forth below is a list of the executive officers of the combined company:

Name
  Age   Position(s)
Michael G. Medzigian   59   Chairman of the Board of Directors, Chief Executive Officer, and President
Mallika Sinha   41   Chief Financial Officer
Gilbert Murillo   43   Chief Investment Officer

Mallika Sinha

Age 41. Chief Financial Officer since 2017.

        Ms. Sinha has served as Chief Financial Officer of CWI 2 since March 2017. Since that same date, she has also served as a Managing director of WPC and as Chief Financial Officer of CPA:17—Global Incorporated (until its merger with WPC on October 31, 2018), CPA:18—Global Incorporated and CWI 1. From February 2015 to March 2017, as Senior Vice President Corporate Finance and then Executive Director, Ms. Sinha oversaw the corporate finance activities of CWI 1, CWI 2, WPC, CPA:17—Global Incorporated, and CPA:18—Global Incorporated. She joined WPC in June 2011 as Senior Vice President and head of Accounting Policy and oversaw the establishment of company-wide accounting policies and reviewed complex accounting transactions. Before joining WPC, Ms. Sinha started her career in 1999 with PricewaterhouseCoopers LLP and worked in its Mumbai and New York offices until 2011. At PwC, she worked in a variety of roles, last serving as director of Transaction Services, where she advised clients on financing transactions, divestitures, and mergers and acquisitions. She is a chartered accountant from India and received her Bachelor of Commerce degree from the University of Mumbai, India.

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Gilbert Murillo

Age 43. Chief Investment Officer (effective upon the closing of the merger).

        Mr. Murillo is Executive Vice President and Chief Investment Officer of Watermark. Mr. Murillo joined Watermark in September 2008 and has been involved in all of CWI 1's and CWI 2's investments. Immediately prior to joining Watermark, from to 2005 to 2007, Mr. Murillo was an Associate in Citigroup's gaming & lodging equity research group, where he performed fundamental equity analysis of gaming and lodging companies. Prior to that, from 2001 to 2004, Mr. Murillo was an Analyst at Fieldstone, a boutique investment bank, where his activities were focused primarily on mergers and acquisitions advisory services. Mr. Murillo received a B.S. in Business Administration with a concentration in finance from Fordham University and Master of Science in Real Estate from Columbia University.

Potential Conflicts of Interest of the Combined Company

        In considering the recommendation of the respective special committees and boards of directors of CWI 1 and CWI 2 to approve the proposals contained in this Joint Proxy Statement/Prospectus, CWI 1's stockholders and CWI 2's stockholders should be aware that potential conflicts of interest exist because WPC and its affiliates serve as the advisor for each of CWI 1 and CWI 2, Watermark serves as the subadvisor for each company, the companies share common management, and the officers and directors of CWI 1 and CWI 2 may have certain interests in the proposed transaction that are different from or in addition to the interests of CWI 1 stockholders and CWI 2 stockholders generally. The boards of directors of CWI 1 and CWI 2 (including the CWI 1 and CWI 2 special committees) knew about these potential conflicts and additional interests, and considered them when they approved the merger and other transactions, including the internalization. These potential conflicts and interests are set forth below.

        The closing of the merger is a condition to the closing of the internalization. Pursuant to the internalization agreement, CWI 2 and CWI 2 Operating Partnership will pay aggregate consideration of $125.0 million of their equity securities to WPC and Watermark, valued based on CWI 2's estimated net asset value per share of $11.41 as of December 31, 2018. The breakdown of the consideration is as follows:

        Mr. Medzigian entered into an employment agreement with CWI 2 that will take effect at the closing of the merger. See the section titled "The Internalization and Internalization Agreement—CEO Employment Agreement" beginning on page 169 for a summary of the terms of the CEO employment agreement. Ms. Sinha executed an offer letter from, and Mr. Murillo agreed with, CWI 2 on the principal terms of their respective compensation as executive officers of the combined company, which will take effect at the closing of the merger. See the section titled "The Internalization and Internalization Agreement—Other Executive Employment Agreements" beginning on page 170 for more information.

        On October 1, 2019, CWI 1, CWI 2, Watermark, and Mr. Medzigian entered into a commitment agreement pursuant to which CWI 1 and CWI 2 agreed to pay Watermark a total of $6.95 million in consideration of the commitments of Watermark and Mr. Medzigian to winddown and ultimately

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liquidate a private fund that was formed to raise capital to invest in lodging properties and to devote their business activities exclusively to the affairs of CWI 1 and CWI 2, with the exception of the winddown of the private fund and performing asset management services for two hotels owned by WPC. Of the amount payable to Watermark, $5.0 million was paid in October 2019 and the balance is payable in January 2020. See the section titled "The Internalization and the Internalization Agreement—Commitment Agreement" beginning on page 168 for a summary of terms of the commitment agreement. Each of Messrs. Henry, Johnson, Parsons, and Reynolds had been appointed to the investment and advisory committee of the private fund, and their respective positions terminated on October 3, 2019. As members of the investment and advisory committee, each of them received an annual cash retainer of $15,000.

        Until the closing of the internalization, the Advisor will continue to receive any and all accrued and unpaid fees and distributions pursuant to the CWI 1 advisory agreement, CWI 2 advisory agreement, and limited partnership agreements of CWI 1 Operating Partnership and of CWI 2 Operating Partnership. At September 30, 2019, the Advisor had accrued and unpaid fees of $2.6 million pursuant to the CWI 1 advisory agreement and CWI 1 operating partnership agreement, and $1.8 million pursuant to the CWI 2 advisory agreement and CWI 2 operating partnership agreement, excluding the disposition fees and incentive distributions being waived in connection with the merger and internalization. On a monthly basis, the Advisor earns an aggregate of approximately $2.1 million in asset management fees and $1.1 million in special general partner distributions from CWI 1 and CWI 2. WPC pays Watermark 20% of all fees and distributions it receives in respect of CWI 1 and 25% in respect of CWI 2.

        As of the close of business on the CWI 1 record date and the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, held in the aggregate approximately 4.1% and 4.0% of the issued and outstanding shares of CWI 1 common stock and CWI 2 common stock, respectively. See the sections titled "The CWI 1 Special MeetingBeneficial Ownership of CWI 1's Stock by Directors and Executive Officers" and "The CWI 2 Special MeetingBeneficial Ownership of CWI 2's Stock by Directors and Executive Officers" beginning on pages 88 and 92, respectively.

        Messrs. Parsons and Reynolds each previously served as directors of CWI 1, and Messrs. Henry and Johnson each previously served as directors of the CWI 2 board. In connection with separating the independent directors between the CWI 1 board and CWI 2 board, they resigned from the applicable board, each effective as of December 6, 2018.

        Each of the directors of CWI 1 and of CWI 2 will serve as directors of the combined company, and the independent directors will receive compensation for their service as directors.

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THE CWI 1 SPECIAL MEETING

Date, Time, and Place

        The CWI 1 special meeting will be held at 2:00 p.m., Eastern Time, on March 26, 2020, at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019.

Purpose

        The CWI 1 special meeting will be held for the purpose of considering and voting on the following proposals:

Recommendation of the CWI 1 Board of Directors

        At a meeting on October 21, 2019, the CWI 1 board (with the unanimous vote of the independent directors), after careful consideration and based on the unanimous recommendation of the CWI 1 special committee, adopted resolutions declaring each of the merger, the internalization, and the CWI 1 charter amendment to be advisable and in the best interests of CWI 1 and CWI 1 stockholders, and the merger to be fair and reasonable to CWI 1 and on terms and conditions no less favorable to CWI 1 than those available from unaffiliated third parties, and directing the CWI 1 merger proposal and the CWI 1 charter amendment proposal to be submitted for consideration at the CWI 1 special meeting. The CWI 1 board recommends a vote "FOR" approval of the CWI 1 merger proposal, "FOR" approval of the CWI 1 charter amendment proposal, and "FOR" approval of the CWI 1 adjournment proposal.

Record Date, Outstanding Shares, and Voting Rights

        The CWI 1 board has fixed the close of business on January 7, 2020, as the CWI 1 record date for the CWI 1 special meeting. Accordingly, only holders of record of shares of CWI 1 common stock on the CWI 1 record date are entitled to notice of, and to vote at, the CWI 1 special meeting. As of the CWI 1 record date, there were 142,855,112.405 outstanding shares of CWI 1 common stock, held by 31,408 holders of record. At the CWI 1 special meeting, each outstanding share of CWI 1 common stock entitles its holder to one vote on each proposal submitted to CWI 1 stockholders for consideration and to which such holder is entitled to vote.

Quorum

        The representation, in person or by proxy, of CWI 1 stockholders entitled to cast at least a majority of all the votes entitled to be cast at the CWI 1 special meeting on any matter is necessary to constitute a quorum at the CWI 1 special meeting. For the purpose of determining the presence of a quorum, abstentions, and "broker non-votes" (i.e., shares represented in person or by proxy at the meeting held by brokers, as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which the broker does not have discretionary voting power to vote such shares) will be counted as present and entitled to vote at the CWI 1 special meeting.

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Vote Required

        Approval of each of the CWI 1 merger proposal and the CWI 1 charter amendment proposal requires the affirmative vote of a majority of all the votes entitled to be cast on the matter at the CWI 1 special meeting. Shares of CWI 1 common stock held by CWI 1's directors, the Advisor, or any of their respective affiliates are not entitled to vote on the CWI 1 merger proposal. Abstentions and broker non-votes by CWI 1 stockholders (other than, in the case of the CWI 1 merger proposal, CWI 1's directors, the Advisor, and any of their respective affiliates) will have the same effect as votes against approval of the CWI 1 merger proposal and the CWI 1 charter amendment.

        The closing of the merger is conditioned upon approval of the proposal relating to the CWI 1 charter amendment; therefore, if CWI 1 stockholders do not approve the CWI 1 charter amendment, the merger cannot be completed even if the CWI 1 merger proposal is approved. Similarly, the CWI 1 charter amendment will not come into effect unless the CWI 1 merger proposal is approved.

        Approval of the CWI 1 adjournment proposal requires the affirmative vote of a majority of all of the votes cast on such proposal. Abstentions and broker non-votes will have no impact on the vote on this proposal.

Voting of Proxies

        If you are a holder of shares of CWI 1 common stock on the CWI 1 record date, you may authorize a proxy by completing, signing, and promptly returning the proxy card in the self-addressed stamped envelope provided. You may also authorize a proxy to vote your shares by telephone or over the internet as described in your proxy card. Authorizing a proxy to vote your shares by telephone or over the internet will not limit your right to attend the CWI 1 special meeting and vote your shares in person. Those stockholders of record who choose to authorize a proxy by telephone or over the internet must do so no later than 11:59 p.m., Eastern Time, on March 25, 2020. All shares of CWI 1's common stock represented by properly executed proxy cards received before or at the CWI 1 special meeting and all proxies properly submitted by telephone or over the internet will, unless the proxies are revoked, be voted in accordance with the instructions indicated on those proxy cards, telephone or internet submissions. If no instructions are indicated on a properly executed proxy card, the shares will be voted "FOR" each of the proposals. You are urged to indicate how you vote your shares whether you authorize a proxy by proxy card, by telephone or over the internet.

        If a properly executed proxy card is returned or properly submitted by telephone or over the internet and the stockholder has abstained from voting on one or more of the proposals, the shares of CWI 1 common stock represented by the proxy will be considered present at the special meeting for purposes of determining a quorum but will not be considered to have been voted on the abstained proposals. For each of the CWI 1 merger proposal and the CWI 1 charter amendment proposal, abstentions will have the same effect as a vote against approval of the merger and the CWI 1 charter amendment. For the CWI 1 adjournment proposal, abstentions (which are not considered votes cast) will have no impact on the vote on such proposal.

        If your shares are held in an account controlled by a broker, financial advisor, bank, or other nominee, you must instruct them on how to vote your shares. If an executed proxy card is returned by a broker, bank, or other nominee holding shares that indicates that they do not have discretionary authority to vote on the proposals, the shares will be considered present at the meeting for purposes of determining the presence of a quorum but will not be considered to have been voted on the proposals. Under applicable rules and regulations, a broker, financial advisor, bank, or other nominee has the discretion to vote on routine matters but does not have the discretion to vote on non-routine matters. Each of the CWI 1 merger proposal and the CWI 1 charter amendment proposal is a non-routine matter. Accordingly, your broker, financial advisor, bank, or other nominee will vote your shares only if you provide instructions on how to vote by following the information provided to you by them. If you

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do not provide voting instructions, your shares will be considered "broker non-votes" because the broker, financial advisor, bank, or other nominee will not have discretionary authority to vote your shares. Therefore, your failure to provide voting instructions to them will have the same effect as a vote against the CWI 1 merger proposal and the CWI 1 charter amendment proposal. Your failure to provide voting instructions will have no effect on the vote on the CWI 1 adjournment proposal.

Adjournment

        Although it is not currently expected, the CWI 1 special meeting may be adjourned to solicit additional proxies if there are not sufficient votes to approve the CWI 1 merger proposal or the CWI 1 charter amendment proposal. In that event, CWI 1 may ask its stockholders to vote upon the proposal to consider the adjournment of the CWI 1 special meeting to solicit additional proxies but not upon the CWI 1 merger proposal or the CWI 1 charter amendment proposal. If CWI 1 stockholders approve the CWI 1 adjournment proposal, CWI 1 could adjourn the CWI 1 special meeting and use the time to solicit additional proxies. If no direction on the CWI 1 adjournment proposal is given, any shares of CWI 1 common stock that were voted against approval of the CWI 1 merger proposal or the CWI 1 charter amendment proposal will not be voted in favor of the adjournment of the CWI 1 special meeting in order to solicit additional proxies.

Revocation of Proxies

        Any proxy given pursuant to this solicitation may be revoked, and the vote changed, by the person giving it at any time before it is voted. Proxies may be revoked by:

Proxies authorized by telephone or via the internet may only be revoked in writing in accordance with the above instructions.

        Any written notice of revocation or subsequent proxy should be sent to CWI 1, 50 Rockefeller Plaza, New York, NY 10020, Attention: Corporate Secretary, so as to be received prior to the CWI 1 special meeting, or hand-delivered to the Corporate Secretary of CWI 1 at or before the taking of the vote at the CWI 1 special meeting.

Beneficial Ownership of CWI 1's Stock by Directors and Executive Officers

        As of the close of business on the CWI 1 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, were generally entitled to vote 5,856,326 shares of CWI 1 common stock in the aggregate, or approximately 4.1% of the shares of CWI 1 common stock issued and outstanding on that date. This includes 5,632,896 shares of CWI 1 common stock held by WPC and its affiliates. CWI 1 currently expects that all of CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, will vote their shares of CWI 1 common stock in favor of all the proposals to be considered and voted on at the CWI 1 special meeting (other than the CWI 1 merger proposal, on which they are not entitled to vote).

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Solicitation of Proxies; Expenses

        All expenses of CWI 1's solicitation of proxies from its stockholders, including the cost of mailing this Joint Proxy Statement/Prospectus to CWI 1 stockholders, will be paid by CWI 1. CWI 1 may utilize some of the officers and employees of WPC or Watermark (who will receive no compensation in addition to their regular salaries) to solicit proxies personally and by telephone. In addition, CWI 1 has engaged BFS to assist in the solicitation of proxies for the CWI 1 special meeting and estimates that it will pay BFS a fee of approximately $70,000. CWI 1 has also agreed to reimburse BFS for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify BFS against certain losses, costs, and expenses. No portion of the amount that CWI 1 is required to pay BFS is contingent upon the closing of the merger. The agreement between CWI 1 and BFS may be terminated by either party for any reason upon 60 days' prior written notice. The agreement between CWI 1 and BFS also limits any damages to one year of fees due and payable to BFS. CWI 1 may request banks, brokers, and other custodians, nominees, and fiduciaries to forward copies of the proxy materials to their principals and to request authority for the execution of proxies and will reimburse such persons for their expenses in so doing.

        Under CWI 1's charter and Subtitle 2 of Title 3 of the MGCL, CWI 1 stockholders are not entitled to dissenting stockholders' appraisal rights, rights of objecting stockholders, or other similar rights in connection with the merger or the CWI 1 charter amendment.

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THE CWI 2 SPECIAL MEETING

Date, Time, and Place

        The CWI 2 special meeting will be held at 3:00 p.m., Eastern Time, on March 26, 2020, at the offices of Clifford Chance US LLP, 31 West 52nd Street, 4th Floor, New York, New York 10019.

Purpose

        The CWI 2 special meeting will be held for the purpose of considering and voting on the following proposals:

Recommendation of the CWI 2 Board of Directors

        The CWI 2 board, after careful consideration, at a meeting on October 22, 2019, adopted resolutions declaring each of the merger, the internalization, the CWI 2 charter amendment, and the CWI 2 listing charter restatement to be advisable and in the best interests of CWI 2 and CWI 2's stockholders, and the merger and the internalization to be fair and reasonable to CWI 2 and CWI 2's stockholders and on terms and conditions at least as favorable as those available from unaffiliated third parties, and directing the CWI 2 merger proposal, the CWI 2 charter amendment proposal, and the CWI 2 listing charter restatement proposal to be submitted for consideration at the CWI 2 special meeting. The CWI 2 board recommends a vote "FOR" approval of the CWI 2 merger proposal, "FOR" approval of the CWI 2 charter amendment proposal, "FOR" approval of the CWI 2 listing charter restatement proposal, and "FOR" approval of the CWI 2 adjournment proposal.

Record Date, Outstanding Shares, and Voting Rights

        The CWI 2 board has fixed the close of business on January 7, 2020, as the CWI 2 record date for the CWI 2 special meeting. Accordingly, only holders of record of shares of CWI 2 common stock on the CWI 2 record date are entitled to notice of, and to vote at the CWI 2 special meeting. As of the CWI 2 record date, there were 32,762,004.876 Class A and 60,623,093.179 Class T outstanding shares of CWI 2 common stock, held by approximately 6,266 and 14,153 holders of record, respectively. At the CWI 2 special meeting, each outstanding share of CWI 2 common stock entitles its holder to one vote on each proposal submitted to CWI 2 stockholders for consideration and to which such holder is entitled to vote.

Quorum

        The representation, in person or by proxy, of CWI 2 stockholders entitled to cast at least 50% of all the votes entitled to be cast at the CWI 2 special meeting is necessary to constitute a quorum at the CWI 2 special meeting. For the purposes of determining the presence of a quorum, abstentions, and "broker non-votes" will be counted as present and entitled to vote at the CWI 2 special meeting.

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Vote Required

        Approval of the CWI 2 merger proposal requires the affirmative vote of a majority of the votes cast on the matter at the CWI 2 special meeting. Shares of CWI 2 common stock held by CWI 2's directors, the Advisor, or any of their respective affiliates are not entitled to vote on the CWI 2 merger proposal. Abstentions and broker non-votes will have no impact on the vote on such proposal.

        Approval of each of the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal requires the affirmative vote a majority of all the votes entitled to be cast on the matter. Abstentions and broker non-votes will have the same effect as votes against such proposals since each of the proposals requires the affirmative vote of stockholders entitled to cast a majority of all the votes entitled to be cast on the matter.

        The closing of the merger is conditioned upon approval of the proposal relating to the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal; therefore, if CWI 2 stockholders do not approve either proposal, the merger cannot be completed even if the merger proposal is approved. Similarly, the CWI 2 charter amendment and the CWI 2 listing charter restatement will only come into effect if the merger proposal is approved and, in the case of the CWI 2 listing charter restatement, an initial public offering, or public stock exchange listing of the combined company occurs.

        Approval of the CWI 2 adjournment proposal requires the affirmative vote of a majority of all of the votes cast on such proposal. Abstentions and broker non-votes will have no impact on the vote on such proposal.

Voting of Proxies

        If you are a holder of shares of CWI 2 common stock on the CWI 2 record date, you may authorize a proxy by completing, signing, and promptly returning the proxy card in the self-addressed stamped envelope provided. You may also authorize a proxy to vote your shares by telephone or over the internet as described in your proxy card. Authorizing a proxy to vote your shares by telephone or over the internet will not limit your right to attend the special meeting and vote your shares in person. Those stockholders of record who choose to authorize a proxy by telephone or over the internet must do so no later than 11:59 p.m., Eastern Time, on March 25, 2020. All shares of CWI 2 common stock represented by properly executed proxy cards received before or at the CWI 2 special meeting and all proxies properly submitted by telephone or over the internet will, unless the proxies are revoked, be voted in accordance with the instructions indicated on those proxy cards, telephone, or internet submissions. If no instructions are indicated on a properly executed proxy card, the shares will be voted "FOR" each of the proposals. You are urged to indicate how you vote your shares whether you authorize a proxy by proxy card, by telephone, or over the internet.

        If a properly executed proxy card is returned or properly submitted by telephone or over the internet and the stockholder has abstained from voting on one or more of the proposals, the shares of CWI 2 common stock represented by the proxy will be considered present at the special meeting for purposes of determining a quorum but will not be considered to have been voted on the abstained proposals. For the CWI 2 merger proposal, abstentions (which are not considered votes cast under Maryland law) will have no impact on the vote on such proposal. For each of the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal, abstentions will have the same effect as a vote against such proposals. For the proposal to CWI 2 adjournment proposal, abstentions (which are not considered votes cast) will have no impact on the vote on such proposal.

        If your shares are held in an account controlled by a broker, financial advisor, bank, or other nominee, you must instruct them on how to vote your shares. If an executed proxy card is returned by a broker, bank, or other nominee holding shares that indicates that they do not have discretionary

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authority to vote on the proposals, the shares will be considered present at the meeting for purposes of determining the presence of a quorum but will not be considered to have been voted on the proposals. Under applicable rules and regulations, a broker, financial advisor, bank, or other nominee has the discretion to vote on routine matters but does not have the discretion to vote on non-routine matters. Each of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, and the CWI 2 listing charter restatement proposal is a non-routine matter. Accordingly, your broker, financial advisor, bank, or other nominee will vote your shares only if you provide instructions on how to vote by following the information provided to you by them. If you do not provide voting instructions, your shares will be considered "broker non-votes" because the broker, financial advisor, bank, or other nominee will not have discretionary authority to vote your shares. Therefore, your failure to provide voting instructions to them will have the same effect as a vote against the CWI 2 charter amendment proposal and the CWI 2 listing charter restatement proposal. However, your failure to provide voting instructions will have no effect on the vote on the CWI 2 merger proposal or on the vote on the CWI 2 adjournment proposal.

Adjournment

        Although it is not currently expected, the CWI 2 special meeting may be adjourned to solicit additional proxies if there are not sufficient votes to approve the CWI 2 merger proposal, the CWI 2 charter amendment proposal, or the CWI 2 listing charter restatement proposal. In that event, CWI 2 may ask its stockholders to vote upon the proposal to consider the adjournment of the CWI 2 special meeting to solicit additional proxies but not upon the CWI 2 merger proposal, the CWI 2 charter amendment proposal, or the CWI 2 listing charter restatement proposal. If CWI 2 stockholders approve the CWI 2 adjournment proposal, CWI 2 could adjourn the CWI 2 special meeting and use the time to solicit additional proxies. If no direction on the CWI 2 adjournment proposal is given, any shares of CWI 2 common stock that were voted against approval of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, or the CWI 2 listing charter restatement proposal will not be voted in favor of the adjournment of the CWI 2 special meeting in order to solicit additional proxies.

Revocation of Proxies

        Any proxy given pursuant to this solicitation may be revoked, and the vote changed, by the person giving it at any time before it is voted. Proxies may be revoked by:

Proxies authorized by telephone or via the internet may only be revoked in writing in accordance with the above instructions.

        Any written notice of revocation or subsequent proxy should be sent to CWI 2, 50 Rockefeller Plaza, New York, NY 10020, Attention: Corporate Secretary, so as to be received prior to the CWI 2 special meeting, or hand-delivered to the Corporate Secretary of CWI 2 at or before the taking of the vote at the CWI 2 special meeting.

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Beneficial Ownership of CWI 2's Stock by Directors and Executive Officers

        As of the close of business on the CWI 2 record date, CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, were generally entitled to vote 3,733,296 shares of CWI 2 common stock in the aggregate, or approximately 4.0% of the shares of CWI 2 common stock issued and outstanding on that date. This includes 3,506,799 shares of CWI 2 common stock held by WPC and its affiliates. CWI 2 currently expects that all of CWI 1's and CWI 2's directors and executive officers, and WPC and its affiliates, will vote their shares of CWI 2 common stock in favor of all the proposals to be considered and voted on at the CWI 2 special meeting (other than the CWI 2 merger proposal, on which they are not entitled to vote).

Solicitation of Proxies; Expenses

        All expenses of CWI 2's solicitation of proxies from its stockholders, including the cost of mailing this Joint Proxy Statement/Prospectus to CWI 2 stockholders, will be paid by CWI 2. CWI 2 may utilize some of the officers and employees of WPC or Watermark (who will receive no compensation in addition to their regular salaries) to solicit proxies personally and by telephone. In addition, CWI 2 has engaged BFS to assist in the solicitation of proxies for the CWI 2 special meeting and estimates that it will pay BFS a fee of approximately $140,000. CWI 2 has also agreed to reimburse BFS for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify BFS against certain losses, costs, and expenses. No portion of the amount that CWI 2 is required to pay BFS is contingent upon the closing of the merger. The agreement between CWI 2 and BFS may be terminated by either party for any reason upon 60 days' prior written notice. The agreement between CWI 2 and BFS also limits any damages to one year of fees due and payable to BFS. CWI 2 may request banks, brokers, and other custodians, nominees, and fiduciaries to forward copies of the proxy materials to their principals and to request authority for the execution of proxies and will reimburse such persons for their expenses in so doing.

        Under CWI 2's charter and Subtitle 2 of Title 3 of the MGCL, CWI 2 stockholders are not entitled to dissenting stockholders' appraisal rights, rights of objecting stockholders, or other similar rights in connection with the merger, the CWI 2 charter amendment, or the CWI 2 listing charter restatement.

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PROPOSALS SUBMITTED TO CWI 1 STOCKHOLDERS

CWI 1 Merger Proposal

(Proposal 1 on the CWI 1 Proxy Card)

        CWI 1 stockholders are asked to approve the merger and the other transactions contemplated by the merger agreement. For a summary and detailed information regarding this proposal, see the information about the merger and the merger agreement throughout this Joint Proxy Statement/Prospectus, including the information set forth in the sections titled "The Merger" and "The Merger Agreement" beginning on pages 100 and 151, respectively. A copy of the merger agreement is attached as Annex A to this Joint Proxy Statement/Prospectus.

        Pursuant to the merger agreement, approval of this proposal is a condition to the consummation of the merger. If this proposal is not approved, the merger will not be completed.

        CWI 1 is requesting that CWI 1 stockholders approve the merger and the other transactions contemplated by the merger agreement. Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal.

Recommendation of the CWI 1 Board of Directors

        The CWI 1 board recommends that CWI 1's stockholders vote "FOR" the proposal to approve the merger and the other transactions contemplated by the merger agreement.

CWI 1 Charter Amendment Proposal

(Proposal 2 on the CWI 1 Proxy Card)

        CWI 1 stockholders are asked to consider and vote on a proposal to approve the CWI 1 charter amendment in connection with, and subject to, approval of the merger. If adopted, the CWI 1 charter amendment would delete Article XV related to roll-up transactions (and the associated definitions) from the CWI 1 charter. This section imposes substantive and procedural requirements relating to roll-up transactions, all of which will not be applicable if the CWI 1 charter amendment is approved. Pursuant to the merger agreement, approval of this proposal is a condition to completing the merger, and if the CWI 1 charter amendment is not approved, the merger will not be completed even if the merger is approved. Likewise, the effectiveness of the CWI 1 charter amendment is conditioned on approval of the merger and the satisfaction of all the conditions to closing the merger (other than the filing of articles of merger, which will be filed and made effective promptly after the filing and effectiveness of the CWI 1 charter amendment). If CWI 1 stockholders do not approve the merger, the approval of the CWI 1 charter amendment will not become effective.

        The CWI 1 charter defines a roll-up transaction as a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of CWI 1 and the issuance of securities of a roll-up entity that is created or would survive after the successful completion of the roll-up transaction. This definition does not include (1) a transaction involving securities of CWI 1 that have been listed on a national securities exchange for at least 12 months or (2) a transaction involving CWI 1's conversion to corporate, trust, or association form if, as a consequence of the transaction, there will be no significant adverse change in stockholder voting rights, the term of CWI 1's existence, compensation to the Advisor, its sponsor, or CWI 1's investment objectives. The merger and the issuance of securities of CWI 2 may be considered a roll-up transaction.

        In connection with any roll-up transaction involving the issuance of securities of a roll-up entity, the CWI 1 charter requires CWI 1 to obtain an appraisal of its assets from a competent independent appraiser. In addition, in connection with a proposed roll-up transaction, the CWI 1 charter requires the person sponsoring the roll-up transaction to offer to CWI 1 stockholders who vote against the

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proposed roll-up transaction the choice of: (i) accepting the securities of the roll-up entity offered in the proposed roll-up transaction or (ii) one of the following: (a) remaining as holders of CWI 1 common stock and preserving their interests therein on the same terms and conditions as existed previously or (b) receiving cash in an amount equal to the stockholder's pro rata share of the appraised value of CWI 1's net assets. Under the CWI 1 charter, CWI 1 is prohibited from participating in any roll-up transaction: (1) that would result in the common stockholders having voting rights in a roll-up entity that are less than those provided in the CWI 1 charter; (2) that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the roll-up entity, except to the minimum extent necessary to preserve the tax status of the roll-up entity, or which would limit the ability of an investor to exercise the voting rights of its securities of the roll-up entity on the basis of the number of shares held by that investor; (3) in which investor's rights to access of records of the roll-up entity will be less than those provided in the CWI 1 charter; or (4) in which any of the costs of the roll-up transaction would be borne by CWI 1 if the roll-up transaction is rejected by CWI 1's stockholders.

        CWI 1 believes that it would not be practical to complete the merger if it were required to comply with these provisions and the merger is specifically conditioned on, among other things, the CWI 1 charter amendment.

        The CWI 1 board declared the CWI 1 charter amendment to be advisable on October 22, 2019. The full text of the CWI 1 charter amendment is set forth in the form of Articles of Amendment attached as Annex B to this Joint Proxy Statement/Prospectus.

        CWI 1 is requesting that CWI 1 stockholders approve the proposal to approve the CWI 1 charter amendment in connection with the merger. Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal. Even if the CWI 1 charter amendment is approved, it will not become effective unless the merger is also approved and all the conditions to closing the merger have been satisfied.

Recommendation of the CWI 1 Board of Directors

        The CWI 1 board recommends that CWI 1's stockholders vote "FOR" the proposal to approve the CWI 1 charter amendment in connection with the merger.

CWI 1 Adjournment Proposal

(Proposal 3 on the CWI 1 Proxy Card)

        The CWI 1 stockholders are being asked to approve a proposal that will give the chairman of the CWI 1 special meeting the authority to adjourn the CWI 1 special meeting one or more times to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 1 special meeting, to permit, among other things, further solicitation of proxies, if necessary or appropriate, in favor of the CWI 1 merger proposal and the CWI 1 charter amendment proposal if there are insufficient votes at the time of the CWI 1 special meeting to approve either such proposal.

        If, at the CWI 1 special meeting, the number of shares of CWI 1 common stock present or represented by proxy and voting for the approval of such proposals is insufficient to approve either such proposal, CWI 1 intends to move to adjourn the CWI 1 special meeting to another place, date, or time in order to enable the CWI 1 board to solicit additional proxies for approval of the proposals.

        CWI 1 is asking CWI 1 stockholders to approve one or more adjournments of the CWI 1 special meeting to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 1 special meeting, to solicit additional proxies in favor of the CWI 1 merger proposal and the CWI 1 charter amendment proposal. Approval of this proposal requires the affirmative vote of at least a majority of all votes cast on such proposal.

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Recommendation of the CWI 1 Board of Directors

        The CWI 1 board recommends that CWI 1's stockholders vote "FOR" the proposal to approve one or more adjournments of the CWI 1 special meeting to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 1 special meeting, to solicit additional proxies in favor of the CWI 1 merger proposal and the CWI 1 charter amendment proposal.

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PROPOSALS SUBMITTED TO CWI 2 STOCKHOLDERS

CWI 2 Merger Proposal

(Proposal 1 on the CWI 2 Proxy Card)

        CWI 2 stockholders are asked to approve the merger pursuant to the merger agreement. For a summary and detailed information regarding this proposal, see the information about the merger and the merger agreement throughout this Joint Proxy Statement/Prospectus, including the information set forth in the sections titled "The Merger" and "The Merger Agreement" beginning on pages 100 and 151, respectively. A copy of the merger agreement is attached as Annex A to this Joint Proxy Statement/Prospectus.

        Pursuant to the merger agreement, approval of this proposal is a condition to the consummation of the merger. If this proposal is not approved, the merger will not be completed.

        CWI 2 is requesting that CWI 2 stockholders approve the merger pursuant to the merger agreement. Approval of this proposal requires the affirmative vote of a majority of the votes cast on such proposal.

Recommendation of the CWI 2 Board of Directors

        The CWI 2 board recommends that CWI 2's stockholders vote "FOR" the proposal to approve the merger pursuant to the merger agreement.

CWI 2 Charter Amendment Proposal

(Proposal 2 on the CWI 2 Proxy Card)

        CWI 2 stockholders are asked to consider and vote on a proposal to approve the CWI 2 charter amendment in connection with, and subject to, approval of the merger. If adopted, the CWI 2 charter amendment would delete the restriction on issuing redeemable securities in clause (A) of Section 9.3(f) of the CWI 2 charter. The Series A preferred stock that CWI 2 will issue to WPC in the internalization contains redemption provisions. A description of those redemption provisions is contained in the section titled "The Internalization and the Internalization Agreement—CWI 2 Series A Preferred Stock—Optional Redemption" beginning on page 167. The redemption provisions were agreed upon by CWI 2 and WPC after extensive negotiations, and the requirement for CWI 2 to issue the Series A preferred stock is part of the internalization agreement. Pursuant to the merger agreement, approval of this proposal is a condition to completing the merger, and if the CWI 2 charter amendment is not approved, the merger will not be completed even if the merger is approved and, accordingly, CWI 2 will be unable to complete the internalization. Likewise, the effectiveness of the CWI 2 charter amendment is conditioned on approval of the merger and the closing of the merger. If CWI 2 stockholders do not approve the merger, the approval of the CWI 2 charter amendment will not become effective.

        The CWI 2 board declared the CWI 2 charter amendment and the internalization to be advisable on October 22, 2019. The full text of the CWI 2 charter amendment is set forth in the form of Articles of Amendment attached as Annex C to this Joint Proxy Statement/Prospectus.

        CWI 2 is requesting that CWI 2 stockholders approve the proposal to approve the CWI 2 charter amendment, which is required in order for CWI 2 to be able to complete the internalization. No separate stockholder vote is being taken on the internalization. Approval of the CWI 2 charter amendment proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal. If the merger is not completed, the CWI 2 charter amendment will not become effective.

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Recommendation of the CWI 2 Board of Directors

        The CWI 2 board recommends that CWI 2's stockholders vote "FOR" the proposal to approve the CWI 2 charter amendment in connection with the proposed transaction.

CWI 2 Listing Charter Restatement Proposal

(Proposal 3 on the CWI 2 Proxy Card)

        CWI 2's stockholders are asked to consider and vote on a proposal to approve the amendment and restatement of the CWI 2 charter in connection with, and subject to, approval of the merger. If this proposal is adopted, CWI 2 will be authorized to file the amended and restated charter of CWI 2 only in connection with a future initial public offering or public stock exchange listing by CWI 2. The amended and restated charter would (i) remove certain limitations required by the North American Securities Administrators Association, Inc. to apply to non-traded REITs, but not to listed REITs, and make other conforming and ministerial changes, and (ii) make other revisions in order to bring CWI 2's charter more in line with those of publicly listed companies. As described in "The Merger—CWI 2's Reasons for the Merger and the Internalization," the CWI 2 special committee and board believe that one of the primary reasons for the proposed transaction is to better position the combined company for a future liquidity event, including an initial public offering or stock exchange listing. The CWI 2 special committee and board believe that the CWI 2 listing charter restatement will facilitate a future initial public offering or stock exchange listing by making the charter similar to those of other listed REITs and more consistent with charters that investors in listed REITs have found to be acceptable in the public REIT market. A description of the CWI 2 listing charter restatement is contained in the section titled "The CWI 2 Listing Charter Restatement" beginning on page 171. Pursuant to the merger agreement, approval of this proposal is a condition to completing the merger and if the CWI 2 listing charter restatement is not approved, the merger will not be completed even if the merger is approved. Likewise, the effectiveness of the CWI 2 listing charter restatement is conditioned on approval of the merger and the closing of the merger. If CWI 2 stockholders do not approve the merger and the merger does not close, the approval of the CWI 2 listing charter restatement will not become effective.

        The CWI 2 board declared the CWI 2 listing charter restatement to be advisable on October 22, 2019. The full text of the CWI 2 listing charter restatement is set forth in the form of Articles of Amendment and Restatement attached as Annex D to this Joint Proxy Statement/Prospectus.

        CWI 2 is requesting that CWI 2 stockholders approve the proposal to approve the CWI 2 listing charter restatement in connection with the merger. Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal. If the merger is not completed, the CWI 2 listing charter restatement will not be effected.

Recommendation of the CWI 2 Board of Directors

        The CWI 2 board recommends that CWI 2's stockholders vote "FOR" the proposal to approve the CWI 2 listing charter restatement in connection with the proposed transaction.

CWI 2 Adjournment Proposal

(Proposal 4 on the CWI 2 Proxy Card)

        The CWI 2 stockholders are being asked to approve a proposal that will give the chairman of the CWI 2 special meeting the authority to adjourn the CWI 2 special meeting one or more times to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 2 special meeting, to permit, among other things, further solicitation of proxies, in favor of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, or the CWI 2 listing charter restatement

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proposal described in this Joint Proxy Statement/Prospectus if there are insufficient votes at the time of the CWI 2 special meeting to approve any such proposal.

        If, at the CWI 2 special meeting, the number of shares of CWI 2 common stock present or represented by proxy and voting for the approval of such proposals is insufficient to approve any such proposal, CWI 2 intends to move to adjourn the CWI 2 special meeting to another place, date, or time in order to enable the CWI 2 board to solicit additional proxies for approval of the proposal.

        CWI 2 is asking CWI 2 stockholders to approve one or more adjournments of the CWI 2 special meeting to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 2 special meeting, to solicit additional proxies in favor of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, and the CWI 2 listing charter restatement proposal described in this Joint Proxy Statement/Prospectus. Approval of this proposal requires the affirmative vote of at least a majority of all votes cast on such proposal.

Recommendation of the CWI 2 Board of Directors

        The CWI 2 board recommends that CWI 2's stockholders vote "FOR" the proposal to approve one or more adjournments of the CWI 2 special meeting to another date, time, or place, if necessary or appropriate, as determined by the chairman of the CWI 2 special meeting, to solicit additional proxies in favor of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, and the CWI 2 listing charter restatement proposal described in this Joint Proxy Statement/Prospectus.

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THE MERGER

        This Joint Proxy Statement/Prospectus constitutes a prospectus of CWI 2 that forms a part of the Registration Statement on Form S-4 filed by CWI 2 with the SEC under the Securities Act, in order to register the shares of CWI 2 Class A common stock to be issued to holders of CWI 1 common stock in connection with the merger. It also constitutes a proxy statement of (i) CWI 1 in connection with the solicitation of the approval by CWI 1's stockholders of the CWI 1 merger proposal and the CWI 1 charter amendment proposal and (ii) CWI 2 in connection with the solicitation of the approval by CWI 2's stockholders of the CWI 2 merger proposal, the CWI 2 charter amendment proposal, and the CWI 2 listing charter restatement proposal.

Per Share Merger Consideration

        Upon the terms and subject to the conditions set forth in the merger agreement, merger sub will merge with and into CWI 1, with CWI 1 surviving the merger as a wholly owned subsidiary of CWI 2. As of the effective time of the merger, each share of CWI 1 common stock issued and outstanding immediately prior to the effective time (other than any shares of CWI 1 common stock held by the Excluded Entities) will be exchanged for 0.9106 shares of CWI 2 Class A common stock.

        As of the date of this Joint Proxy Statement/Prospectus, CWI 2 expects to issue approximately 131,374,238 shares of CWI 2 Class A common stock to CWI 1's stockholders in the merger. Immediately following the consummation of the merger, it is estimated that former CWI 1 stockholders will hold in the aggregate approximately 58%, and that continuing CWI 2 stockholders will hold in the aggregate approximately 42%, of the issued and outstanding shares of common stock of the combined company.

Background of the Merger and Internalization

        CWI 1 is a public, non-traded REIT that commenced its initial public offering in September 2010. CWI 1 committed to considering alternatives for providing liquidity for its stockholders beginning not later than six years following the termination of its initial public offering, which terminated in September 2013. CWI 1 owns a diversified lodging portfolio, including full-service, select-service, and resort hotels. CWI 1 has focused on acquiring a high-quality portfolio of lodging assets and generating distributions and capital appreciation for its stockholders. As of September 30, 2019, CWI 1's portfolio consists of interests in 26 hotels, including three joint ventures with CWI 2.

        CWI 2 is a public, non-traded REIT that commenced its initial public offering in February 2015. CWI 2 owns a diversified lodging portfolio, including full-service, select-service, and resort hotels. Since completing its initial public offering in July 2017, CWI 2 has focused on acquiring a high-quality portfolio of lodging assets and generating distributions and capital appreciation for its stockholders. As of September 30, 2019, CWI 2's portfolio consists of interests in 12 hotels, including three joint ventures with CWI 1.

        At the request of the CWI 1 board and the CWI 2 board, representatives of WPC (in its capacity as the external advisor to each company) and of Watermark (in its capacity as the subadvisor to each company) made a presentation in June 2018 to the CWI 1 board and the CWI 2 board at a regularly scheduled joint meeting. The presentation discussed the market conditions for lodging REIT valuations and asset sales, potential liquidity alternatives, including an initial public offering, and the likelihood that expected future improvements in each company's financial performance after 2019 could enhance the outcome of a liquidity transaction for stockholders. The CWI 1 board and the CWI 2 board each determined to consider the matter further, and neither took formal action at the meeting.

        The CWI 1 board and the CWI 2 board held a subsequent joint meeting with representatives of WPC and Watermark in July 2018. A representative of Clifford Chance US LLP ("Clifford Chance"),

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outside counsel to CWI 1 and CWI 2, attended the meeting as did representatives from an investment banking firm. Among other matters, the attendees at the meeting discussed market conditions for public lodging REITs and recent initial public offerings by REITs generally. They also discussed the timeline and process for considering liquidity alternatives. Neither the CWI 1 board nor the CWI 2 board made a decision at the meeting to commence such a process.

        The CWI 1 board and the CWI 2 board held a joint meeting in October 2018 to continue their strategic planning discussions. Representatives from WPC, Watermark, and Clifford Chance attended the meeting. At the request of the CWI 1 board and the CWI 2 board, each company's management had prepared a presentation that reviewed the possibility of a liquidation of each company through asset sales or a merger of the companies followed by an initial public offering or public listing of the surviving entity. No formal action was taken at the meeting. Each company's board instructed management to prepare further analyses of possible liquidity transactions.

        In mid-November 2018, the CWI 1 board and the CWI 2 board held a joint meeting with representatives from WPC, Watermark, and Clifford Chance. During the meeting, Michael G. Medzigian, Chief Executive Officer of CWI 1, CWI 2, and Watermark, discussed a broad range of liquidity alternatives and as part of that discussion reviewed a presentation prepared by each company's management discussing the process and timing of a potential business combination of CWI 1 and CWI 2 and how such a transaction could impact the business plans (including leverage and asset dispositions) of each company. The directors of each of CWI 1 and CWI 2 discussed the process for considering potential liquidity alternatives, including the need for special committees and independent legal and financial advisors for each special committee, and agreed to consider and discuss the composition of the special committees and the process for retaining independent advisors at a future meeting.

        At a regular quarterly joint meeting on December 6, 2018, the CWI 1 board and the CWI 2 board discussed forming special committees to evaluate possible liquidity alternatives, including a potential business combination of CWI 1 and CWI 2. They each approved adding a new independent director to each board and separating the independent directors between the CWI 1 board and the CWI 2 board to allow independent decision-making and facilitate the formation of separate special committees. They also discussed the need for each special committee to retain independent legal and financial advisors and discussed potential candidates for those roles. In connection with separating the independent directors between the CWI 1 board and the CWI 2 board, Charles S. Henry and Michael D. Johnson resigned from the CWI 2 board, and Robert E. Parsons, Jr. and William H. Reynolds, Jr. resigned from the CWI 1 board, each effective as of December 6, 2018.

        On December 14, 2018, the CWI 1 board formed a special committee of independent directors of CWI 1 and delegated to it the authority to review possible strategic alternatives, with the detail of such delegation to be set forth in resolutions that would be prepared by the legal advisor to the CWI 1 special committee. The CWI 1 board appointed all of its independent directors at the time to the CWI 1 special committee, namely, Messrs. Henry and Johnson, and a newly appointed independent director, Simon M. Turner.

        The CWI 1 special committee held a telephonic meeting on December 14, 2018, together with representatives from Hogan Lovells US LLP ("Hogan Lovells"). The CWI 1 special committee reviewed its mandate and its ability to engage its own legal counsel to assist the CWI 1 special committee in evaluating a strategic transaction. The CWI 1 special committee, after finding that Hogan Lovells met all of the criteria of the CWI 1 special committee for qualifications and independence, authorized the retention of Hogan Lovells as legal counsel to the CWI 1 special committee, and authorized Mr. Henry to negotiate and execute a customary engagement letter with the firm. Representatives of Hogan Lovells reviewed for the CWI 1 special committee its duties under Maryland law with respect to fulfilling its mandate. The CWI 1 special committee discussed the desirability of

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engaging an independent financial advisor to assist the CWI 1 special committee in its evaluation of strategic alternatives for CWI 1. The CWI 1 special committee agreed to discuss candidates for financial advisors at its next meeting.

        Also on December 14, 2018, the CWI 2 board formed a special committee of independent directors of CWI 2 and delegated to it the authority to review possible strategic alternatives. The CWI 2 special committee was delegated the sole authority, in respect of potential strategic alternatives, to oversee the due diligence process, negotiate the terms and conditions of a transaction, direct the preparation of all agreements and other documents, and to make a recommendation to the full CWI 2 board, which could include a recommendation to not pursue any potential strategic alternative. The CWI 2 special committee was authorized to retain, at CWI 2's expense, its own legal, financial, and other advisors. The CWI 2 board appointed all of its independent directors at the time to the CWI 2 special committee, namely, Katherine G. Lugar and Messrs. Parsons and Reynolds, with Mr. Parsons appointed as chairman. The CWI 2 board determined to pay each member of the CWI 2 special committee a retainer of $60,000, to be paid in advance, and to pay the CWI 2 special committee's chairman a retainer of $80,000, to be paid in advance. On September 17, 2019, in consideration of the significant amount of time spent and expected to be spent in the future by Mr. Parsons on his responsibilities, the CWI 2 board determined to pay Mr. Parsons an additional $50,000. In addition, the CWI 2 board determined, should the authorization of the CWI 2 special committee continue after December 31, 2019, to pay each member of the CWI 2 special committee an annual retainer of $60,000, to be paid in quarterly installments of $15,000, and to pay the CWI 2 special committee's chairman an annual retainer of $75,000, to be paid in advance in quarterly installments of $18,750.

        The CWI 2 special committee held a telephonic meeting on December 14, 2018, together with representatives from Clifford Chance and Pepper Hamilton LLP ("Pepper Hamilton"). The CWI 2 special committee reviewed its mandate and the applicable duties of a special committee under Maryland law and CWI 2's organizational documents. The CWI 2 special committee, after finding that Pepper Hamilton met all of the CWI 2 special committee's criteria for qualifications and independence, authorized the retention of Pepper Hamilton as legal advisor to the CWI 2 special committee, subject to entering into an engagement letter with the firm, and discussed the desirability of engaging an independent investment banker to assist the CWI 2 special committee in its evaluation of strategic alternatives for CWI 2. Representatives from Clifford Chance and Pepper Hamilton discussed potential candidates for that engagement, and the CWI 2 special committee authorized Mr. Parsons to invite potential candidates to present proposals for engagement by the CWI 2 special committee.

        On December 20, 2018, the CWI 1 special committee held a telephonic meeting with representatives of Hogan Lovells to discuss the engagement of potential financial advisors for the CWI 1 special committee. The CWI 1 special committee agreed that three potential financial advisors met the qualifications and independence criteria of the CWI 1 special committee and agreed to interview such candidates. The CWI 1 special committee authorized Mr. Henry and Hogan Lovells to contact such potential financial advisors to schedule interviews.

        On December 21, 2018, the CWI 1 board, acting by written consent, adopted more detailed resolutions setting forth the authority delegated to the CWI 1 special committee to conduct a strategic review of available options to achieve a liquidity event. Pursuant to these resolutions, the CWI 1 board delegated the exclusive authority to the CWI 1 special committee to, among other things, review, evaluate and negotiate the terms and conditions of any strategic transaction, to determine whether any strategic transaction is advisable and in the best interests of CWI 1 and the holders of CWI 1's stock, to recommend to the full board of CWI 1 what action, if any, should be taken with respect to any strategic transaction, and to recommend the rejection of any strategic transaction. The CWI 1 special committee was authorized to retain, at CWI 1's expense, its own legal, financial and other advisors. The CWI 1 board appointed Mr. Henry as chairman of the CWI 1 special committee. The CWI 1 board determined to pay each member of the CWI 1 special committee a retainer of $60,000 and to pay the

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CWI 1 special committee's chairman a retainer of $75,000. On September 17, 2019, in consideration of the significant amount of time spent and expected to be spent in the future by Mr. Henry on his responsibilities, the CWI 1 board determined to pay Mr. Henry an additional $50,000.

        On December 28, 2018, the CWI 2 special committee held a meeting at the offices of Pepper Hamilton, together with representatives from Clifford Chance and Pepper Hamilton. Substantive written presentations were made, either in person or by conference telephone call, by representatives of several investment banking firms, and the CWI 2 special committee discussed with each of the investment bankers their qualifications, independence, and potential conflicts of interest, and their proposed compensation, together with estimated timelines for completion of work and the firms' willingness to dedicate key personnel to the engagement.

        On December 31, 2018, the CWI 2 special committee held a telephonic meeting, together with representatives from Clifford Chance and Pepper Hamilton, to review the financial advisor candidates. The CWI 2 special committee determined to seek to engage Morgan Stanley & Co. LLC ("Morgan Stanley") to act as its financial advisor in connection with CWI 2's exploration of strategic alternatives, including a potential merger of CWI 1 and CWI 2.

        On December 28, 2018, January 3, 2019, and January 7, 2019, the CWI 1 special committee held telephonic meetings with representatives of Hogan Lovells and certain investment banks to discuss the qualifications, independence, and potential conflicts of interest of such investment banks to serve as financial advisor to the CWI 1 special committee.

        On January 4, 2019, the CWI 2 special committee and Morgan Stanley entered into an engagement letter to retain Morgan Stanley as the financial advisor to the CWI 2 special committee.

        On January 7, 2019, and January 11, 2019, the CWI 1 special committee held telephonic meetings, together with representatives from Hogan Lovells, to review the financial advisor candidates.

        On January 8, 2019, the CWI 1 special committee determined to engage Barclays Capital Inc. ("Barclays") as the CWI 1 special committee's financial advisor, subject to negotiation of an acceptable engagement letter.

        On January 22, 2019, CWI 1 and CWI 2 entered into a mutual non-disclosure agreement.

        On February 1, 2019, the CWI 1 special committee and Barclays entered into an engagement letter to retain Barclays as the financial advisor to the CWI 1 special committee.

        Also on February 1, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Morgan Stanley provided a status report of its analyses of strategic alternatives, including a potential transaction with CWI 1, and reported on recent meetings with CWI 2's management.

        On February 13, 2019, Barclays conducted an in-person diligence session with members of WPC's and Watermark's management teams at the Watermark offices in Chicago. Additional telephonic diligence sessions with members of such management teams were held on July 23, August 20, September 10, and September 12, 2019.

        On February 14, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives from Hogan Lovells and Barclays. Barclays provided a status report of its analyses of strategic alternatives, including a potential transaction with CWI 2, and reported on recent meetings with CWI 1's management.

        On February 21, 2019, the CWI 2 special committee held a meeting at the offices of Pepper Hamilton, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. The Morgan Stanley representatives provided an update on their work and reviewed preliminary valuation analyses regarding CWI 2. They also reviewed potential strategic alternatives available to

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CWI 2, including a merger with CWI 1. After discussion, the CWI 2 special committee requested that Morgan Stanley refine its analyses and undertake for such purpose a diligence review of CWI 1. The CWI 2 special committee noted that CWI 2 was under no current imperative to undertake a strategic alternative and that the then-status quo was a viable path.

        On March 4, 2019, the CWI 1 special committee held a meeting at the offices of Barclays, together with representatives from Hogan Lovells and Barclays. The Barclays representatives made a presentation on various liquidity options, including a public listing or a sale, a merger with CWI 2, and/or an internalization of management. The CWI 1 special committee considered, together with its legal and financial advisors, the relative benefits of a public listing as a standalone company, as compared to a public listing as a much larger company following a merger with CWI 2, and the significant potential cost benefits (including the elimination of the sharing of cash distributions with affiliates of the Advisor) from an internalization of management. After discussion of the various alternatives with its legal and financial advisors, including taking into account the relatively poor public market valuations of hotel REITs and the significant capital expenditure projects ongoing at CWI 1 that would likely not receive favorable valuations in a listing at that time, the CWI 1 special committee requested that Barclays refine its analyses and undertake a diligence review of CWI 2 and determined to commence discussions with the Advisor regarding an internalization.

        On March 11, 2019, Barclays and members of WPC's and Watermark's management teams held a meeting at the offices of WPC. The meeting was held to diligence the various management functions provided by WPC and Watermark to CWI 1 and CWI 2 and to discuss the potential cost savings that could result from an internalization of management. There was also some discussion of potential transaction structures for effecting the internalization.

        On March 20, 2019, Mr. Parsons met in person with all of the members of the CWI 1 special committee and representatives of Barclays and Morgan Stanley to discuss a possible merger between CWI 1 and CWI 2. During the meeting, Mr. Henry confirmed CWI 1's interest in pursuing a possible merger with CWI 2 and also conveyed CWI 1's interest in internalizing management.

        Also on March 20, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons provided a summary of a meeting held earlier that day with the CWI 1 special committee and representatives of Barclays and Morgan Stanley. Mr. Parsons noted the discussions were preliminary in nature. The representatives from Morgan Stanley reviewed their discussion materials which included a summary of CWI 1's and CWI 2's existing advisory agreements and related special general partner provisions. After discussion, the CWI 2 special committee confirmed that the possible merger between CWI 1 and CWI 2 should be further considered, along with other strategic alternatives which may be available to CWI 2, and that representatives of the CWI 2 special committee should participate along with CWI 1 in discussions with WPC and Watermark with respect to a possible internalization transaction. The CWI 2 special committee also authorized Clifford Chance and Pepper Hamilton to retain Maryland legal counsel on behalf of the CWI 2 special committee to provide advice on Maryland law as needed.

        On March 24, 2019, and March 25, 2019, Messrs. Henry and Parsons and representatives from WPC and Watermark held meetings in which they discussed issues related to a possible merger and internalization transaction. WPC committed to develop a proposal on internalization. Messrs. Henry and Parsons also separately discussed CWI 1's interest in a merger with CWI 2. Mr. Henry reaffirmed the CWI 1 special committee's desire to explore a merger with CWI 2 and to continue to explore the possibility of internalizing management.

        On March 25, 2019, CWI 2 engaged Venable LLP ("Venable") as Maryland counsel to CWI 2 with respect to potential strategic alternatives that could be undertaken by CWI 1 and CWI 2 waived any potential conflict related thereto.

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        On March 28, 2019, the CWI 2 special committee held a telephonic meeting, together with representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported on his recent discussions with Mr. Henry and WPC, noting that CWI 1 had expressed interest in a possible merger with CWI 2 and internalization of management. The CWI 2 special committee members and the advisors discussed the possible merger and internalization transaction, after which the CWI 2 special committee directed Morgan Stanley to meet with WPC to obtain its perspectives on the matters discussed and to undertake for purposes of its analyses a due diligence review of CWI 1's real estate portfolio and financial and operating information.

        On April 2, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Barclays and Hogan Lovells to discuss a potential internalization transaction. Barclays reviewed with the CWI 1 special committee a summary of CWI 1's and CWI 2's existing advisory agreements and related special general partner provisions. Barclays also reviewed with the CWI 1 special committee financial analyses of a possible internalization of the external advisor.

        In early April 2019, CWI 2 published an estimated NAV per share of its common stock of $11.41 as of December 31, 2018, an increase from the prior year's estimated NAV per share of $11.11. Also in early April 2019, CWI 1 published an estimated NAV per share of its common stock of $10.39 at December 31, 2018, a slight decrease from the prior year's estimated NAV per share of $10.41.

        On April 4, 2019, WPC provided Messrs. Henry and Parsons with a summary outline of key considerations in negotiating an internalization of the external advisor, including a valuation methodology showing implied values based on various EBITDA multiples that were applied in comparable third-party transactions. On April 4, 2019, and again on April 6, 2019, Mr. Henry had telephonic discussions with representatives of WPC regarding the framework proposed by WPC for an internalization transaction.

        On April 8, 2019, and again on April 16, 2019, representatives of WPC and Watermark held telephonic meetings with Messrs. Parsons and Henry to discuss the framework proposed by WPC and Watermark for internalizing management, including a timeline and initial proposal of transition services to be provided.

        On April 16, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Barclays and Hogan Lovells to discuss a potential merger with CWI 2 and internalization of the external advisor. Barclays presented updated analyses on the merger, including reflecting the recently announced updated NAV's per share for each of CWI 1 and CWI 2, and its analysis of the framework for internalizing management. The participants discussed the appropriate strategy for negotiating both transactions.

        On April 16, 2019, Messrs. Henry and Parsons held a telephonic meeting with representatives of WPC during which WPC presented an updated proposal regarding an internalization transaction.

        On April 23, 2019, representatives of WPC and of Watermark sent to the CWI 1 special committee and the CWI 2 special committee an updated proposal regarding the key steps and indicative timetable for an internalization transaction. The proposal contemplated that CWI 1 and CWI 2 would pay aggregate consideration of $200.0 million in the form of preferred and common stock of a combined CWI 1 and CWI 2 to WPC and Watermark.

        Also on April 24, 2019, Mr. Henry conferred with the other members of the CWI 1 special committee regarding the proposal by WPC and Watermark. The members of the CWI 1 special committee agreed that Mr. Henry and Barclays should communicate that $200.0 million was an unacceptable price and, subject to further discussions with Barclays, determined that a counteroffer between $90.0 million and $125.0 million would be appropriate and that all consideration should be in common stock rather than preferred stock.

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        On April 24, 2019, Messrs. Henry and Parsons held a telephonic meeting with representatives of WPC and of Watermark to discuss the proposal received from WPC and Watermark regarding an internalization transaction. Messrs. Henry and Parsons advised WPC and Watermark that they would discuss the proposal with the respective special committees but that they believed, based on the work done by each special committee to date with their respective financial advisors, that the special committees would not approve a $200.0 million transaction value. Messrs. Henry and Parsons directed their respective financial advisors to meet to discuss and evaluate the internalization proposal.

        On April 26, 2019, representatives of Barclays and Morgan Stanley met in person, together with Mr. Henry, to discuss the framework proposed by WPC and Watermark for internalizing management.

        On April 29, 2019, at the direction of Mr. Henry, Barclays held a meeting with representatives of WPC to discuss the differences in how the parties were analyzing the appropriate value that should be paid in an internalization transaction and the form of consideration. Barclays advised, at the direction of the CWI 1 special committee, that the CWI 1 special committee believed that internalization consideration of $90.0 million was the appropriate amount and that all consideration should be in common stock rather than preferred stock. During these discussions, representatives of WPC indicated that they could agree to internalization consideration of $160.0 million but that all such consideration should be in preferred stock.

        On May 1, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Barclays and Hogan Lovells, to discuss the status of the internalization discussions. The CWI 1 special committee, noting the continuing significant gap in the view of the Advisor and the respective special committees on the consideration that would be appropriate in an internalization transaction, discussed alternative options, including proceeding with a merger of CWI 1 with CWI 2 and then revisiting the potential internalization transaction following the closing of such merger. After discussion, the CWI 1 special committee advised Hogan Lovells to engage with counsel for CWI 2 to reach a consensus on the costs that would be paid to the Advisor and its affiliates in connection with various transactions, including a merger with an unaffiliated third party or a termination of the advisory agreements.

        On May 2, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, Venable, and Morgan Stanley. Mr. Parsons reported on the recent meetings and conversations regarding the potential internalization transaction and the proposal made by WPC and Watermark. The Morgan Stanley representatives provided an update on their review and preliminary analysis of a potential merger with CWI 1 and their diligence undertaken to date. The CWI 2 special committee expressed its view that the initial proposed internalization consideration of $200.0 million proposed by WPC and Watermark was too high. In addition, the Venable representatives provided a review of Maryland law regarding the duties of members of the board of directors of a Maryland corporation and committees thereof in connection with transactions such as a merger or an internalization.

        On May 9, 2019, Messrs. Parsons and Henry met with representatives of WPC to discuss the proposed internalization of the external advisor. Messrs. Parsons and Henry told WPC and Watermark that their proposal of internalization consideration of $160.0 million, with a majority of such consideration paid in preferred stock, would not be acceptable to either special committee. Messrs. Parsons and Henry advised that a payment of $125.0 million of common stock for an internalization would be a valuation that each chairman would be comfortable with presenting to his respective special committee. After further discussion between the parties, including with respect to the amount of such consideration that would be paid in preferred stock and the coupon on such preferred stock, each of Messrs. Parsons and Henry agreed to present to his respective special committee a proposal of total aggregate internalization consideration of $125.0 million, paid to Watermark and WPC in a combination of common stock and preferred stock, with a coupon on the preferred stock of 5% in

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the first two years, increasing to 7% in the third year and 8% in the fourth year. The parties agreed to continue discussing whether the preferred stock would comprise $60.0 million or $65.0 million of the aggregate internalization consideration.

        Also on May 9, 2019, the CWI 2 special committee sent to the CWI 1 special committee a summary of proposed material terms and conditions with respect to a potential merger between CWI 1 and CWI 2, including the structure of the merger, consideration to be received based on a fixed exchange ratio, concurrent internalization of management, composition of the combined company's board of directors, stockholder approvals to be obtained, and other customary terms.

        On May 10, 2019, the CWI 1 special committee held a telephonic meeting, attended by representatives of Hogan Lovells and Barclays. Mr. Henry reported on his May 9, 2019 discussions with Mr. Parsons and representatives of WPC regarding a possible internalization transaction and the revised internalization proposal, pursuant to which CWI 1 and CWI 2 would pay WPC and Watermark a combined payment of $125.0 million, consisting of $65.0 million of preferred stock and $60.0 million of common stock of the combined company. Barclays then reviewed a valuation analysis based on the proposed terms. After discussion, the CWI 1 special committee concluded on a preliminary basis that if CWI 1 and CWI 2 were to combine, then internalization consideration of $125.0 million, payable in common stock and preferred stock of the combined company, may be in the best interests of CWI 1, but directed Mr. Henry to advise WPC and Watermark that all consideration be received by Watermark must consist of common stock. The CWI 1 special committee directed Hogan Lovells to engage with the legal advisors of CWI 2, WPC, and Watermark on drafting a formal term sheet with respect to the internalization transaction.

        Also on May 10, 2019, the CWI 2 special committee held a telephonic meeting, together with representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported on his recent discussions with Mr. Henry and representatives of WPC and Watermark and the revised internalization proposal. Morgan Stanley then reviewed various valuation analyses with the CWI 2 special committee. The CWI 2 special committee then concluded, on a preliminary basis, that if CWI 1 and CWI 2 were to combine, then internalization consideration of $125.0 million, payable in common stock and preferred stock of the combined company, may be in the best interests of CWI 2.

        On May 10, 2019, the CWI 2 board delegated to the CWI 2 special committee the authority to consider a potential internalization of management as a potential strategic transaction for CWI 2.

        Over the following weeks, representatives of WPC, Watermark, the CWI 1 special committee, the CWI 2 special committee, and their respective financial and legal advisors engaged in discussions regarding and negotiations of a term sheet for the potential internalization transaction, including the terms of the preferred stock.

        On May 29, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives from Hogan Lovells and Barclays. After discussion, the CWI 1 special committee determined to formally propose merger terms to the CWI 2 special committee in the form of a non-binding letter of intent (the "May Letter of Intent"). The May Letter of Intent proposed, among other things, an exchange ratio based on each company's estimated NAV per share as of December 31, 2018, and the composition of the board of directors of the combined company, and contemplated that management of the combined company would be internalized. The CWI 1 special committee authorized Mr. Henry to send the CWI 2 special committee the May Letter of Intent. Mr. Henry also updated the CWI 1 special committee on the status of negotiations regarding an internalization transaction with WPC and Watermark.

        On May 30, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported on a series of conversations between him and Mr. Henry and on discussions among them and

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representatives of WPC and of Watermark regarding the possible internalization transaction involving consideration of $125.0 million, payable in common stock and preferred stock of the combined company. The CWI 2 special committee discussed Mr. Parsons's report and Morgan Stanley summarized Morgan Stanley's conversations and interactions with Barclays with respect to a potential merger between CWI 1 and CWI 2.

        On May 31, 2019, the CWI 1 special committee sent the May Letter of Intent to the CWI 2 special committee.

        On June 7, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley to review the terms of the May Letter of Intent. Morgan Stanley reviewed the financial aspects of the transaction outlined in the May Letter of Intent, including preliminary valuation analyses of each of CWI 1 and CWI 2 as they related to the exchange ratio proposed in the May Letter of Intent. The CWI 2 special committee, with input from its advisors, concluded that the May Letter of Intent was in a generally acceptable form.

        On June 11, 2019, the CWI 2 special committee sent to the CWI 1 special committee an exclusivity agreement proposing a 45-day exclusivity period to negotiate the business combination described in the May Letter of Intent.

        On June 12, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Representatives of Barclays reviewed a summary of then-current proposed terms of the merger and internalization transaction and presented its updated financial analyses, based on the proposed terms, of the financial impact of a merger and internalization transaction on CWI 1 and the combined company. The CWI 1 special committee evaluated, together with its legal and financial advisors, valuation prospects for CWI 1 in connection with a current public listing or sale, and determined that in light of no material changes to its valuation prospects, continuing to explore a merger with CWI 2 and internalization of management continued to be in the best interests of CWI 1 and its stockholders. The CWI 1 special committee discussed the exclusivity agreement proposed by the CWI 2 special committee and agreed that the proposed terms were acceptable. Members of the CWI 1 special committee then discussed certain timing and documentation matters related to a potential merger and internalization transaction, as well as the need to engage a compensation consultant to assist with internalization components of such a transaction.

        Also on June 12, 2019, CWI 1 and CWI 2 entered into an exclusivity agreement with respect to discussion regarding and negotiation of the May Letter of Intent, effective until July 26, 2019.

        On June 14, 2019, CWI 1 and CWI 2 signed the May Letter of Intent.

        On June 23, 2019, Hogan Lovells sent Clifford Chance a draft merger agreement.

        On June 25, 2019, the CWI 2 special committee held a meeting at the offices of CWI 2, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported on discussions he had with members of the CWI 1 special committee and Mr. Medzigian with respect to the potential merger between CWI 1 and CWI 2 and the possible internalization transaction. Representatives from Morgan Stanley reviewed their discussion materials, which included a summary of the preliminary financial terms of the proposed transaction and an illustrative timeline and key deliverables. They also provided an update of Morgan Stanley's previous reviews to the CWI 2 special committee with respect to other capital markets and strategic alternatives for CWI 2, both independently and in combination with CWI 1 if the two companies were to combine. Morgan Stanley indicated that the alternatives would likely be enhanced for the combined company, as opposed to each company on a standalone basis. After discussion of the alternatives, and of the potential benefits of a combination with CWI 1, the consensus of the CWI 2 special committee was that a merger with CWI 1 and the related internalization would present the most attractive current opportunity for CWI 2 if the terms could be structured and negotiated in a satisfactory manner and could enhance the execution of future liquidity opportunities. Among other discussions, the CWI 2 special committee also discussed retaining a compensation consultant jointly with CWI 1 to develop compensation plans for the management of the combined company if the merger were completed.

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        On June 26, 2019, Messrs. Henry and Parsons and representatives from Hogan Lovells, Clifford Chance, Pepper Hamilton, WPC, and Watermark met telephonically to coordinate various workstreams with respect to negotiating and reaching final documentation on the proposed merger and internalization transaction.

        On June 27, 2019, the CWI 1 special committee met telephonically, together with representatives of Hogan Lovells and Barclays. Hogan Lovells reviewed the material terms of the draft merger agreement. The CWI 1 special committee discussed certain material terms of the draft merger agreement, including whether to voluntarily submit the merger to a vote of the CWI 1 stockholders, even if not required by applicable law, and provisions related to termination of the agreement and the ability to solicit alternative transactions after signing. The CWI 1 special committee also reviewed the terms of a draft term sheet for the proposed terms of the internalization transaction (the "internalization term sheet") and discussed items contained in the internalization term sheet that were subject to continuing negotiation, including WPC's rights to seats on the combined company's board of directors, restrictions on resale of securities received as consideration, transition services obligations of WPC and Watermark, and non-solicitation and non-competition provisions.

        Also on June 27, 2019, Hogan Lovells sent a draft of the internalization term sheet to Clifford Chance.

        On June 28, 2019, DLA Piper LLP ("DLA"), outside counsel to WPC, sent Clifford Chance and Hogan Lovells a draft term sheet for proposed terms of the preferred stock to be issued to WPC in the internalization (the "preferred stock term sheet").

        On July 2, 2019, the CWI 2 special committee held a telephonic meeting, attended by Mr. Medzigian and other representatives of Watermark, and representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Medzigian provided a review, in his capacity as CWI 2's Chief Executive Officer, of the opportunities presented to CWI 2 by the potential merger of CWI 1 and CWI 2 and the possible internalization of management. He reviewed the historical background and performance of the two companies, their current combined market presence, and the objectives of CWI 2 and the combined company in the potential transactions, including greater scale and diversification, enhanced balance sheet flexibility, and a permanent capital structure, with the goal of creating a growth vehicle that seeks to provide market-leading returns. Mr. Medzigian emphasized his view that the internalization of management would be a key component to achieving the goals and objectives, and he shared his preliminary views on the post-merger management of the combined company.

        After management exited the meeting, a representative from Pepper Hamilton reviewed the proposed internalization term sheet with the CWI 2 special committee. Representatives from Clifford Chance reviewed a summary of key issues in the draft merger agreement prepared by Hogan Lovells. The CWI 2 special committee discussed a variety of issues with respect to the merger and internalization transaction, including the allocation of consideration between common stock and preferred stock, the terms of the preferred stock to be offered as consideration in connection with the internalization transaction, whether the merger agreement should contain a go-shop provision, and whether the agreement should require the acquiring entity to solicit a vote of its stockholders approving the transaction. At the close of the meeting, the CWI 2 special committee authorized Mr. Parsons, on behalf of CWI 2, to retain a compensation consultant jointly with CWI 1 to advise as to post-merger management compensation matters.

        On July 3, 2019, Hogan Lovells sent a draft of the internalization term sheet to DLA.

        Throughout July 2019, CWI 1, CWI 2, WPC, Watermark, and their respective legal and financial advisors engaged in discussions regarding and negotiations of the merger agreement, the internalization term sheet, and the terms of the Series A preferred stock. With regard to the merger agreement, the

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principal issues discussed were the structure of the merger, the identity of the surviving company in the merger, whether the acquired company would have go-shop rights and the size and scope of termination fees. With regard to the internalization term sheet, the principal issues discussed were WPC's board designation rights, the allocation of certain costs and expenses relating to the internalization of personnel, the cost and term of transition services, restrictions on resale of securities issued in the internalization, the redemption provisions of the Series A preferred stock, and the consent rights of the Series A preferred stock.

        On July 17, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Representatives from Pepper Hamilton reviewed comments received from WPC and Watermark to the internalization term sheet. The CWI 2 special committee gave direction on the issues raised by those comments, including as they relate to transition services, the allocation of consideration, the composition of the board of directors of the combined company, the payment of dividends with respect to the combined company's common and preferred equity, the redemption provisions applicable to the preferred equity and certain consent rights. Representatives from Clifford Chance then led a discussion of the key issues in a revised draft of the merger agreement prepared by Hogan Lovells, with respect to the potential merger between CWI 1 and CWI 2. The CWI 2 special committee discussed and gave direction on key issues, including the identity of the surviving company, the go-shop and related rights that the merger parties should seek, and whether the agreement should be conditioned on, among other things, an affirming vote of CWI 2's stockholders even if CWI 2 were the survivor. The Morgan Stanley representatives informed the CWI 2 special committee that it had received preliminary inquiries from two parties expressing potential interest in CWI 2, and the CWI 2 special committee, with input from its advisors, confirmed its view that the potential merger with CWI 1 and the internalization transaction presented the most attractive current opportunity for CWI 2, if such transactions could be structured and negotiated on satisfactory terms. The CWI 2 special committee also authorized an extension of the exclusivity period under the exclusivity agreement to August 26, 2019.

        Also on July 17, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Representatives of Hogan Lovells reviewed comments received from WPC and Watermark to the internalization term sheet. The CWI 1 special committee gave direction on the issues raised by those comments, including as they relate to transition services, the allocation and type of consideration to be paid to Watermark and WPC, the composition of the board of directors of the combined company, the payment of dividends with respect to the combined company's common stock and preferred stock, the redemption provisions applicable to the preferred stock, and certain consent rights. Representatives of Hogan Lovells then provided an update on the open issues in the draft merger agreement, including the identity of the surviving company and the go-shop rights of the entity that does not survive the merger. The CWI 1 special committee determined that, given certain tax considerations, it would be in the best interests of CWI 1's stockholders for CWI 2 to survive the merger and agreed that CWI 1 should have a go-shop right for a period of 30 days following signing the merger agreement, with a lower termination fee of 1.0% in the event that CWI 1 terminates the merger agreement to accept a proposal from a go-shop bidder. The CWI 1 special committee also authorized an extension of the exclusivity period under the exclusivity agreement to August 26, 2019.

        On July 18, 2019, CWI 1 and CWI 2 extended their mutual exclusivity agreement until August 26, 2019.

        On July 31, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays, to review open business issues on the internalization term sheet and the draft merger agreement. Representatives of Hogan Lovells reviewed comments received from WPC and Watermark to the internalization term sheet. The CWI 1 special committee gave direction on the issues raised by those comments, including as they relate to severance and

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retention payments, the functions to be internalized and the redemption provisions applicable to the preferred stock. Representatives of Hogan Lovells also noted that CWI 2 proposed a 1.5% termination fee in the event that the merger agreement is terminated to accept a proposal from a go-shop bidder. After discussing such proposal, the CWI 1 special committee agreed to accept a 1.5% termination fee.

        On August 15, 2019, DLA sent to Clifford Chance and Hogan Lovells presentations prepared by WPC and Watermark regarding a business plan for the combined company and an overview of the internalization of personnel.

        Also on August 15, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. The CWI 2 special committee and its advisors discussed the business plans for the combined company. Representatives from Pepper Hamilton discussed the internalization term sheet and informed the CWI 2 special committee that the letter had been agreed in principle by the parties to the potential internalization transaction and that, rather than signing the letter, the parties were proceeding to draft definitive agreements. The CWI 2 special committee also discussed obtaining a fairness opinion with respect to the terms of the proposed internalization transaction. Mr. Parsons informed the CWI 2 special committee that WPC had received an unsolicited inquiry generally related to CWI 1 and CWI 2 from a third party and referred such inquiry to Barclays, on behalf of CWI 1, and Morgan Stanley, on behalf of CWI 2. Morgan Stanley confirmed that it had not received any such communication. After discussion with its advisors, the CWI 2 special committee determined that the nature of the inquiry was unclear and to take no further action with respect to the matter at such time. Finally, the CWI 2 special committee approved retaining a compensation consultant and the terms of the consultant's engagement.

        On August 16, 2019, CWI 2 entered into an engagement letter with a compensation consultant.

        On August 20, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Mr. Henry provided an update on the timing of the proposed merger with CWI 2 and a plan for obtaining the approval of the full board of CWI 1 with respect to the proposed merger. The CWI 1 special committee discussed the presentations regarding the proposed business plan for the combined company and the overview of the internalization of personnel that had been prepared by WPC and Watermark. A representative of Hogan Lovells then provided a summary of the internalization timeline. Members of the CWI 1 special committee also asked questions of its legal and financial advisors regarding transaction and termination costs if CWI 1 were to engage in a transaction with a go-shop bidder.

        Also on August 20, 2019, DLA sent Clifford Chance and Hogan Lovells initial drafts of the internalization agreement and a transition services agreement for transition services to be provided by WPC.

        On August 22, 2019, DLA sent Clifford Chance and Hogan Lovells an initial draft of the articles supplementary containing the terms of the Series A preferred stock of the combined company that would be issued in the internalization transaction.

        Also on August 22, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. The CWI 2 special committee discussed a draft summary of the internalization agreement, the draft transition services agreement between CWI 2 and WPC, the business and internalization plans for the combined company, and whether to seek a fairness opinion with respect to the terms of the proposed internalization transaction. The CWI 2 special committee also authorized an extension of the exclusivity period under the exclusivity agreement to September 20, 2019.

        On August 22, 2019, CWI 1 and CWI 2 extended their mutual exclusivity agreement until September 20, 2019.

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        On August 23, 2019, Watermark sent a draft transition services agreement to the CWI 1 special committee and the CWI 2 special committee.

        On August 26, 2019, CWI 1 and CWI 2 entered into a letter agreement pursuant to which the two companies would share the fees and expenses of the compensation consultant in proportion to their stockholders' respective ownership resulting from the proposed merger.

        On August 27, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Representatives of Hogan Lovells provided an update on the status of the negotiation of the internalization agreement, the transition services agreements and the articles supplementary setting forth the terms of the Series A preferred stock of the combined company. The CWI 1 special committee gave direction on the open issues identified by Hogan Lovells, including with respect to employee matters, intellectual property rights, board composition, and restrictions on trading securities of CWI 2. The CWI 1 special committee also discussed Watermark's right under the existing advisory agreements with CWI 1 and CWI 2 to conduct business activities unrelated to CWI 1 and CWI 2, the current scope of those activities, and the risks to the combined company of those activities continuing after the consummation of the merger and internalization. Members of the CWI 1 special committee then discussed the go-shop process with representatives of Barclays.

        On August 29, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Representatives of Clifford Chance provided an update on the status of the negotiation of the internalization agreement, the transition services agreements, and the articles supplementary setting forth the terms of the Series A preferred stock of the combined company. The CWI 2 special committee then considered proposals received from prospective financial advisors to provide a fairness opinion with respect to the internalization consideration, including from Duff & Phelps, LLC ("Duff & Phelps"). After reviewing the proposals and discussion, the CWI 2 special committee authorized and approved retaining Duff & Phelps for such purpose.

        Also on August 29, 2019, CWI 2 entered into an engagement letter to retain Duff & Phelps to render a fairness opinion to the CWI 2 special committee as to the internalization consideration.

        The legal advisors to the special committees, WPC, and Watermark exchanged comments on the internalization agreement, articles supplementary for the preferred stock of the combined company, and transition services agreements over the next several weeks.

        On September 3, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Representatives of Hogan Lovells provided an overview of the status of the negotiation of the merger agreement, internalization agreement, articles supplementary, and transition services agreements, as well as an overview of the material remaining issues relating to each document. Members of the CWI 1 special committee discussed the status of the CWI 2 special committee's employment negotiations with Mr. Medzigian, particularly with respect to the non-competition and exclusivity provisions. The CWI 1 special committee decided that Mr. Henry should communicate to Mr. Parsons its position that Mr. Medzigian should be restricted from engaging in activities unrelated to the combined company following the merger so that his attention was solely focused on the success of the combined company.

        On September 9, 2019, the CWI 2 special committee held a telephonic meeting, together with representatives from Clifford Chance, Pepper Hamilton, Morgan Stanley and the compensation consultant. The compensation consultant presented to the CWI 2 special committee regarding compensation matters for the combined company and recommended a peer group for such entity for compensation planning purposes. Representatives from Clifford Chance provided an update to the CWI 2 special committee on the status of the negotiation of the merger agreement, internalization

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agreement, articles supplementary, and transition services agreements. Representatives of Morgan Stanley advised the CWI 2 special committee as to Morgan Stanley's review of the updated business plan for the combined company.

        On September 10, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives of Hogan Lovells and Barclays. Representatives of Hogan Lovells provided an overview of the status of the transaction documents, including recent discussions between the parties with respect to the proposed employment agreement between CWI 2 and Mr. Medzigian to serve as the chief executive officer of the combined company. The CWI 1 special committee discussed Mr. Medzigian's involvement with Watermark Lodging Investors, LLC (the "WLI fund"), a private lodging investment fund managed by Watermark, that could present potential conflicts of interest with the combined company and prevent Mr. Medzigian from dedicating all his business time to the combined company. The CWI 1 special committee discussed various options for addressing the matter prior to the potential merger, including potentially negotiating with Mr. Medzigian to wind-down the fund in connection with his employment agreement.

        On September 11, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported on the substantive discussions that he had with representatives of CWI 1 and Mr. Medzigian regarding non-competition and non-solicitation covenants that would apply to WPC and Watermark after closing of the merger. Representatives from Clifford Chance provided an update on the progress of Mr. Medzigian's employment agreement, noting the scope of the non-competition provision remained a material outstanding issue. The Morgan Stanley representatives also updated the CWI 2 special committee on the unsolicited inquiry discussed at the CWI 2 special committee's August 15, 2019 meeting, stating that the party had contacted Morgan Stanley expressing interest in purchasing the manager of CWI 1 and CWI 2 but did not indicate that it was interested in a transaction to acquire either CWI 1 or CWI 2.

        On September 13, 2019, Mr. Medzigian sent a proposal to the CWI 1 special committee and the CWI 2 special committee proposing an aggregate payment by CWI 1 and CWI 2 of $10.0 million as consideration to have Watermark wind-down the WLI fund.

        On September 16, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons reported that the parties to the potential transactions had determined to defer final consideration of the proposed merger and internalization transaction pending the finalization of an employment agreement (and related non-competition and exclusivity restrictions) with Mr. Medzigian in respect of his service as the chief executive officer of the combined company. In addition, Mr. Parsons reported that the parties decided to negotiate the wind-down of the WLI fund in order to eliminate potential conflicts of interest with the combined company and distractions for the combined company's management. The CWI 2 special committee also authorized an extension of the exclusivity period under the exclusivity agreement with CWI 1 and to enter into an exclusivity agreement with WPC and Watermark with respect to the potential internalization.

        Also on September 16, 2019, the CWI 1 special committee held a telephonic meeting, attended by representatives from Hogan Lovells and Barclays. Representatives from Hogan Lovells provided an overview of the status of the merger agreement, the internalization agreement, the transition services agreements, and the employment agreement with Mr. Medzigian, including an overview of the open issues with respect to each document. Members of the CWI 1 special committee discussed the open issues and agreed that all matters related to Mr. Medzigian's employment agreement and related non-competition provision must be resolved in advance of signing a merger agreement or internalization agreement. After discussion, the CWI 1 special committee determined that the WLI fund must be wound-down to eliminate competing demands on Mr. Medzigian's business time and

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potential conflicts of interest but also determined that Mr. Medzigian's proposal of a $10.0 million payment was not acceptable and that the CWI 1 special committee would further evaluate the appropriate payment. The CWI 1 special committee authorized Mr. Henry to continue to work with Mr. Parsons to negotiate the terms of a potential wind-down of the WLI fund. The CWI 1 special committee then agreed to enter into a 45-day exclusivity agreement with CWI 1, CWI 2, WPC, and Watermark.

        On September 20, 2019, CWI 1, CWI 2, WPC, and Watermark entered into an exclusivity agreement providing for a 45-day exclusivity period in which the parties would seek to finalize the definitive agreements for the merger and internalization transaction.

        On September 23 and 24, 2019, Messrs. Parsons, Henry, Park, Medzigian, and at times other members of the CWI 1 special committee and of the CWI 2 special committee, held several negotiation sessions regarding the potential wind-down of the WLI fund and the terms thereof. In advance of such discussions, Mr. Medzigian communicated to the CWI 1 special committee and the CWI 2 special committee an amended proposal that reduced the aggregate payment by CWI 1 and CWI 2 to have Watermark wind-down the WLI fund from $10.0 million to $8.0 million.

        On September 25, 2019, Messrs. Parsons and Park discussed the terms of the proposal regarding the potential wind-down of the WLI fund. In addition, Mr. Parsons held further discussions with Messrs. Henry and Medzigian. The parties ultimately reached agreement on an aggregate payment of $6.95 million to Watermark in consideration for the complete wind-down of the WLI fund.

        Also on September 25, 2019, Watermark sent a draft commitment agreement providing for the terms of the wind-down of the WLI fund to Messrs. Henry and Parsons and counsel for CWI 1 and CWI 2. The parties engaged in negotiations and exchanged drafts of the commitment agreement on September 25 and 26, 2019. In particular, the CWI 1 special committee and the CWI 2 special committee communicated to Watermark that the commitment agreement must include satisfactory non-competition provisions.

        On September 27, 2019, each of WPC, Watermark, the CWI 1 special committee, and the CWI 2 special committee agreed on a final form of the commitment agreement. The CWI 2 special committee held a telephonic meeting, attended by representatives from Clifford Chance, Pepper Hamilton, and Morgan Stanley. Mr. Parsons updated the CWI 2 special committee on the negotiations that had taken place with the CWI 1 special committee, Mr. Medzigian, Watermark, WPC, and their advisors regarding the wind-down of the WLI fund and related matters, and Mr. Parsons reported that the commitment agreement was satisfactorily negotiated among the parties. The CWI 2 special committee concluded that securing the services of Mr. Medzigian as the combined company's dedicated chief executive officer after the merger would be in the best interests of CWI 2's stockholders, as would limiting Mr. Medzigian's legacy activities and removing potential conflicts of interest, and that CWI 2 would benefit from the commitment agreement even if the potential merger and internalization transaction were not completed, given Watermark's role as CWI 2's external subadvisor. The CWI 2 special committee determined the commitment agreement to be advisable, fair to, and in the best interests of CWI 2 and its stockholders, and on terms and conditions at least as favorable as those available from unaffiliated third parties. The CWI 2 special committee then unanimously approved the commitment agreement and recommended to the CWI 2 board that it approve the commitment agreement.

        The CWI 1 special committee also held a telephonic meeting on September 27, 2019, together with representatives of Hogan Lovells and Barclays. Mr. Henry provided an update to the CWI 1 special committee on the negotiations with the CWI 2 special committee, Mr. Medzigian, Watermark, WPC, and their advisors regarding the wind-down of the WLI fund and related matters. Representatives of Hogan Lovells provided a summary of the terms and conditions of the commitment agreement produced after such negotiations. Mr. Henry explained to the CWI 1 special committee that the

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$6.95 million payment was the result of extensive negotiations. After discussing the matter with representatives of Barclays and Hogan Lovells, members of the CWI 1 special committee concluded that a cash payment of $6.95 million was a fair price for the wind-down of the WLI fund so that the combined company would secure the services of Mr. Medzigian as dedicated chief executive officer and for Mr. Medzigian agreeing to forgo other opportunities in order to focus all of his efforts on the success of the combined company following the merger. The CWI 1 special committee determined that the terms of the commitment agreement were advisable, fair to, and in the best interests of CWI 1's stockholders and recommended to the CWI 1 board that the CWI 1 board approve the commitment agreement substantially in the form proposed to the CWI 1 special committee.

        On October 1, 2019, the CWI 1 board held a telephonic meeting, together with representatives of WPC, Watermark, and Hogan Lovells. A representative of Hogan Lovells provided a summary of the terms and conditions of the commitment agreement that the CWI 1 special committee had reviewed and recommended for approval by the CWI 1 board. The CWI 1 board approved the commitment agreement, with Mr. Medzigian abstaining from the vote.

        The CWI 2 board also held a telephonic meeting on October 1, 2019, together with representatives of Watermark, WPC, Pepper Hamilton, and Clifford Chance. A representative of Clifford Chance provided a summary of the terms and conditions of the commitment agreement that the CWI 2 special committee had reviewed and recommended for approval by the CWI 2 board. The CWI 2 board approved the commitment agreement, with Mr. Medzigian abstaining from the vote.

        Also on October 1, 2019, CWI 1, CWI 2, Watermark, and Mr. Medzigian executed the commitment agreement.

        Over the following weeks, the CWI 1 special committee, the CWI 2 special committee, WPC, Watermark, and their respective legal and financial advisors worked to finalize all of the transaction documents. They also reviewed a draft press release, investor presentation, and other investor communications.

        On October 17, 2019, the CWI 1 special committee held a meeting, together with representatives from Barclays and Hogan Lovells. Following an update by Mr. Henry, representatives of Hogan Lovells gave an update to the CWI 1 special committee regarding recent discussions on the transaction documents, including the proposed employment agreement between CWI 2 and Mr. Medzigian. Representatives of Hogan Lovells provided an overview of the duties of directors of Maryland corporations and a summary of the terms and conditions of the merger agreement, the internalization agreement, and the other ancillary agreements, and the transactions contemplated thereby, substantially final versions of which had been previously distributed to the CWI 1 special committee. Representatives of Barclays reviewed updated financial analyses of the consideration to be received in the merger, taking into consideration the transactions contemplated by the internalization agreement and the commitment agreement. The CWI 1 special committee, having considered the financial analyses provided by Barclays, concluded that alternative transactions, such as a public listing or sale to an unaffiliated third party, did not offer relatively attractive valuation, and that the proposed merger and internalization transaction would enhance the value of CWI 1 and the combined company in the event of a future public listing as compared to maintaining the status quo. A discussion ensued among the CWI 1 special committee regarding the transaction, and members of the CWI 1 special committee asked questions of its legal and financial advisors regarding their presentations.

        On October 18, 2019, representatives of Clifford Chance distributed substantially final versions of the merger agreement, internalization agreement and ancillary documents, along with draft resolutions approving such documents, the transactions contemplated by such documents and other related matters to the CWI 2 board. Representatives of Morgan Stanley and Duff & Phelps also distributed materials to the CWI 2 special committee containing their respective valuation analyses.

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        On October 21, 2019, the CWI 1 special committee held a telephonic meeting, together with representatives from Barclays and Hogan Lovells. Representatives of Hogan Lovells confirmed that there had been no material changes to the transaction agreements, and representatives of Barclays confirmed that there had been no material changes to the financial analyses, in each case as discussed at the October 17, 2019 CWI 1 special committee meeting. Barclays delivered to the CWI 1 special committee its oral opinion (subsequently confirmed in writing) that, as of October 21, 2019, from a financial point of view, after giving effect to the reviewed transaction, the per share merger consideration was fair to the holders of shares of CWI 1 common stock (other than the Excluded Entities). After discussion, the CWI 1 special committee determined that the merger and the merger agreement, the internalization and the internalization agreement, the CWI 1 charter amendment, the other ancillary agreements, and the transactions contemplated thereby, were advisable, fair to and in the best interests of CWI 1 stockholders, and on terms and conditions at least as favorable as those available from unaffiliated third parties. By unanimous vote, the CWI 1 special committee adopted resolutions recommending to the CWI 1 board that it approve the merger and the internalization and submit to the CWI 1 stockholders for approval the merger and other proposals described in this Joint Proxy Statement/Prospectus and to enter into the merger agreement, the internalization agreement, the CWI 1 charter amendment and other related transaction documents.

        Following the CWI 1 special committee meeting, on October 21, 2019, the CWI 1 board held a telephonic meeting to approve the merger and the merger agreement, the internalization and the internalization agreement, the CWI 1 charter amendment, and the other ancillary agreements. Representatives of Hogan Lovells and Barclays were also present. The representatives from Hogan Lovells described the resolutions that had been adopted by the CWI 1 special committee at the meeting prior to the CWI 1 board meeting and described Barclays' fairness opinion. Following deliberations, the CWI 1 board determined that the merger agreement and the merger, the internalization and the internalization agreement, the CWI 1 charter amendment, the other ancillary agreements, and the other related transactions contemplated thereby, were advisable, fair to, and in the best interests of CWI 1 and its stockholders and on terms and conditions at least as favorable as those available from unaffiliated third parties, and resolved, among other things, to approve the merger and the internalization and submit to the CWI 1 stockholders for approval the merger and other proposals described in this Joint Proxy Statement/Prospectus and to enter into the merger agreement, the internalization agreement, the CWI 1 charter amendment and other related transaction documents. Jason E. Fox, chairman of the CWI 1 board, and Mr. Medzigian, a member of the CWI 1 board, recused themselves from the votes of the CWI 1 board.

        Also on October 21, 2019, representatives of Clifford Chance distributed materials to the CWI 2 special committee containing Morgan Stanley's and Duff & Phelps's respective valuation analyses, which had been previously circulated to the CWI 2 special committee. The CWI 2 special committee held a meeting at Le Méridien Arlington in Arlington, Virginia, together with Messrs. Fox and Medzigian, in their capacities as directors of CWI 2, representatives from Morgan Stanley, Duff & Phelps, Clifford Chance, Pepper Hamilton, and Venable. Morgan Stanley provided an update of its previous presentations to the CWI 2 special committee with respect to capital markets and strategic alternatives for CWI 2, both independently and in combination with CWI 1 if the two companies were to combine. Clifford Chance reviewed the final terms of the proposed merger and internalization transaction and a summary of the material transaction documents. The Duff & Phelps representatives then summarized their final valuation and fairness analysis of the consideration in the proposed internalization transaction. Afterwards, the Morgan Stanley representatives summarized their final valuation analysis of the exchange ratio in the proposed merger. The CWI 2 special committee requested that each of Duff & Phelps and Morgan Stanley deliver their fairness opinions on October 22, 2019.

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        On October 22, 2019, the CWI 2 special committee held a telephonic meeting, attended by representatives from Morgan Stanley, Duff & Phelps, Clifford Chance, and Pepper Hamilton. Duff & Phelps delivered to the CWI 2 special committee its oral opinion (confirmed by delivery of a written opinion dated October 22, 2019) to the CWI 2 special committee that as of the date of the opinion, the consideration to be paid by CWI 2 in the internalization transaction was fair from a financial point of view to CWI 2 and to the holders of shares of CWI 2 common stock immediately prior to the merger, based on and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken. Morgan Stanley then rendered its oral opinion (confirmed by delivery of a written opinion dated October 21, 2019) to the CWI 2 special committee that as of the date of the written opinion and based on and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to CWI 2. The CWI 2 special committee then discussed the various benefits and other considerations with respect to the proposed transaction, including the merger and the internalization, and, after discussion, the CWI 2 special committee determined that the merger and the merger agreement, the internalization and the internalization agreement, the terms of the CWI 2 Series A preferred stock, the CWI 2 charter amendment, the CWI 2 listing charter restatement, the CEO employment agreement, the other ancillary agreements, and the transactions contemplated thereby, were advisable and in the best interests of CWI 2 and its stockholders; and, in the case of the merger and the merger agreement, the internalization and the internalization agreement, the terms of the CWI 2 Series A preferred stock, the CEO employment agreement, the other ancillary agreements, and the transactions contemplated thereby, fair and reasonable to CWI 2 and its stockholders and on terms and conditions at least as favorable as those available from unaffiliated third parties. By unanimous vote, the CWI 2 special committee adopted resolutions recommending to the CWI 2 board that it approve the merger, the internalization, and the terms of the CWI 2 Series A preferred stock and submit to CWI 2's stockholders for approval the merger and other proposals described in this Joint Proxy Statement/Prospectus and to enter into the merger agreement, the internalization agreement, the CWI 2 charter amendment, the CWI 2 listing charter restatement, the CEO employment agreement, and other ancillary documents.

        Following the CWI 2 special committee meeting, on October 22, 2019, the CWI 2 board held a telephonic meeting to approve the merger and the merger agreement, the internalization and the internalization agreement, the terms of the CWI 2 Series A preferred stock, the CWI 2 charter amendment, the CWI 2 listing charter restatement, the CEO employment agreement, and the other ancillary agreements. Representatives of Clifford Chance and Pepper Hamilton were also present. The representatives from Pepper Hamilton described the resolutions that had been adopted by the CWI 2 special committee at the meeting prior to the meeting of the CWI 2 board. The CWI 2 special committee informed the CWI 2 board of the receipt of the respective fairness opinions of Duff & Phelps and Morgan Stanley. Following deliberations, the CWI 2 board determined that the merger and the merger agreement, the internalization and the internalization agreement, the terms of the CWI 2 Series A preferred stock, the CWI 2 charter amendment, the CWI 2 listing charter restatement, the CEO employment agreement, the other ancillary agreements, and the transactions contemplated thereby, were advisable and in the best interests of CWI 2 and its stockholders; and, in the case of the merger and the merger agreement, the internalization and the internalization agreement, the terms of the CWI 2 Series A preferred stock, the CEO employment agreement, the other ancillary agreements, and the transactions contemplated thereby, fair and reasonable to CWI 2 and its stockholders and on terms and conditions at least as favorable as those available from unaffiliated third parties. The CWI 2 board then resolved, among other things, to approve the merger, the internalization, and the terms of the CWI 2 Series A preferred stock and to submit to CWI 2's stockholders for approval the merger and the other proposals described in this Joint Proxy Statement/Prospectus and to enter into the

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merger agreement, the internalization agreement, the CWI 2 charter amendment, the CWI 2 listing charter restatement, the CEO employment agreement, and other transaction documents. Mr. Fox, chairman of the CWI 2 board, and Mr. Medzigian, a member of the CWI 2 board, abstained from voting on certain of the resolutions in which they were not disinterested.

        Also on October 22, 2019, the relevant parties executed and delivered the merger agreement, the internalization agreement, and the ancillary documents. CWI 1 and CWI 2 also issued a press release announcing the proposed transaction.

        After the execution and delivery of the merger agreement, at the direction of the CWI 1 special committee and during the "go-shop" period commencing at 12:01 a.m., Eastern Time, on October 23, 2019, and continuing until 11:59 p.m., Eastern Time, on November 22, 2019, representatives of Barclays contacted 16 potential acquirors, including strategic companies and financial sponsors, and inquired, referencing publicly available information, as to whether such potential acquirors would be interested in making a proposal to acquire CWI 1. CWI 1 entered into non-disclosure agreements with 6 potential acquirors, each of whom received access to non-public information about CWI 1. CWI 1 did not receive any offers from these potential acquirors.

CWI 1's Reasons for the Merger and the Internalization

        On October 21, 2019, after careful consideration, the independent directors of the CWI 1 board, based on the unanimous recommendation of the CWI 1 special committee, unanimously (i) determined the terms of the merger agreement, the per share merger consideration, the merger, and the other transactions contemplated by the merger agreement and the internalization agreement to be advisable and in the best interests of CWI 1 and its stockholders, and the merger to be fair and reasonable to CWI 1 and on terms and conditions no less favorable to CWI 1 than those available from unaffiliated third parties; (ii) authorized and approved the merger and each of the transactions contemplated by the merger agreement and the internalization agreement, including the CWI 1 charter amendment, and (iii) authorized and approved the merger agreement, the internalization agreement, and the CWI 1 charter amendment. In making their determination, the CWI 1 board and the CWI 1 special committee considered a variety of factors, including:

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        The CWI 1 special committee and the CWI 1 board also considered a variety of risks and other potentially negative factors in considering the merger, the merger agreement, the internalization, and the other transactions contemplated by the merger agreement, including the following material factors:

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        The CWI 1 special committee also considered whether to solicit proposals from third parties prior to entering into the merger agreement. After considering the likelihood that a third party would emerge with a competitive proposal, the right of CWI 1 to actively solicit alternative acquisition proposals during the 30-day go-shop period, and the provisions of the draft merger agreement permitting CWI 1 to terminate the merger agreement and to enter into an agreement for a superior proposal, the CWI 1 special committee determined to move forward with the proposed transaction without soliciting other proposals before execution of the definitive merger agreement.

        The foregoing discussion of the factors considered by the CWI 1 board and the CWI 1 special committee is not intended to be exhaustive but rather summarizes the material factors considered by the CWI 1 board and the CWI 1 special committee. In view of the wide variety of factors considered, the CWI 1 board and the CWI 1 special committee did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual directors may have given different weights to different factors. The CWI 1 board and the CWI 1 special committee considered the positive and negative factors relating to the merger, the internalization, the CWI 1 charter amendment, and the other contemplated transactions and believed the negative factors to be materially outweighed by the positive factors.

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CWI 2's Reasons for the Merger and the Internalization

        At meetings on October 22, 2019, the CWI 2 special committee and the CWI 2 board (with the unanimous approval of the independent directors of the CWI 2 board) adopted resolutions declaring the merger, the internalization, the CWI 2 charter amendment, and the CWI 2 listing charter restatement to be advisable and in the best interests of CWI 2 and CWI 2's stockholders, in the case of the merger and the internalization, fair and reasonable to CWI 2 and CWI 2's stockholders, and on terms and conditions at least as favorable as those available from unaffiliated third parties, and directing the merger, the CWI 2 charter amendment, and the CWI 2 listing charter restatement to be submitted for consideration at a special meeting of CWI 2's stockholders. In making their determination, the CWI 2 board and the CWI 2 special committee considered a variety of factors, including among others:

Strategic Benefits

Portfolio Benefits

Size and Scale Benefits

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Internalized Management

Fairness Opinions

Potentially Negative Factors

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        The foregoing discussion of the factors considered by the CWI 2 board and CWI 2 special committee is not intended to be exhaustive but rather summarizes the material factors considered by the CWI 2 board and CWI 2 special committee. In view of the wide variety of factors considered, the CWI 2 board and CWI 2 special committee did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual directors may have given different weights to different factors. The CWI 2 board and CWI 2 special committee considered the positive and negative factors relating to the merger, the internalization, the CWI 2 charter amendment, the CWI 2 listing charter restatement, and the related transactions and believed the negative factors to be materially outweighed by the positive factors.

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OPINION OF FINANCIAL ADVISOR TO THE CWI 1 SPECIAL COMMITTEE

        The CWI 1 special committee engaged Barclays to act as its financial advisor with respect to CWI 1's exploration of strategic alternatives that would achieve or would facilitate the achievement of liquidity for the stockholders of CWI 1, including a business combination with CWI 2, internalization of CWI 1's external advisor, sale of CWI 1, initial public offering of CWI 1's common stock and/or a direct listing of CWI 1's common stock, pursuant to an engagement letter dated February 1, 2019. On October 21, 2019, Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the CWI 1 special committee that, as of such date and based upon and subject to the qualifications, limitations, and assumptions stated in its opinion, from a financial point of view, after giving effect to the merger, the internalization, and the transactions contemplated by the commitment agreement (collectively, the "reviewed transaction"), the per share merger consideration was fair to the holders of shares of CWI 1 common stock (other than the Excluded Entities).

        The full text of Barclays' written opinion, dated as of October 21, 2019, is attached as Annex E to this Joint Proxy Statement/Prospectus. Barclays' written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered, and qualifications and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays' opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

        Barclays' opinion, the issuance of which was approved by Barclays' Fairness Opinion Committee, is addressed to the CWI 1 special committee, addresses only the fairness, from a financial point of view, after giving effect to the reviewed transaction, of the per share merger consideration to the holders of shares of CWI 1 common stock (other than the Excluded Entities) and does not constitute a recommendation to any holder of shares of CWI 1 common stock as to how such holder should vote with respect to the reviewed transaction. The terms of the reviewed transaction were determined through arm's-length negotiations among CWI 1, CWI 2, WPC, and Watermark and were unanimously recommended by the CWI 1 special committee and approved by the CWI 1 board (with the unanimous vote of the independent directors). Barclays did not recommend any specific form of consideration to the CWI 1 special committee or that any specific form of consideration constituted the only appropriate consideration for the reviewed transaction. Barclays was not requested to address, and its opinion does not in any manner address, the underlying business decision to proceed with or effect the reviewed transaction, the likelihood of the consummation of the reviewed transaction, or the relative merits of the reviewed transaction as compared to any other transaction or business strategy in which CWI 1 may engage. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the reviewed transaction, or any class of such persons, relative to the per share merger consideration to the holders of shares of CWI 1 in the reviewed transaction. No limitations were imposed by the CWI 1 special committee upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.

        In arriving at its opinion, Barclays, among other things:

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        In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information (and had not assumed responsibility or liability for any independent verification of such information). Barclays also relied upon the assurances of the management of CWI 1 that it was not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the CWI 1 standalone projections, upon the advice of CWI 1 and with the instruction of the CWI 1 special committee, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of CWI 1 as to CWI 1's future financial performance and that CWI 1 would perform, in the absence of the reviewed transaction, substantially in accordance with such projections. With respect to the CWI 2 standalone projections, upon the advice of CWI 1 and with the instruction of the CWI 1 special committee, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of CWI 2 as to CWI 2's future financial performance and that CWI 2 would perform, in the absence of the reviewed transaction, substantially in accordance with such projections. With respect to the pro forma projections, upon the advice of CWI 1 and with the instruction of the CWI 1 special committee, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and

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judgments of the management of CWI 1 as to the future financial performance of CWI 1 and CWI 2 on a combined basis and that the combined company will perform substantially in accordance with such projections, assuming the internalization is consummated concurrently with the merger and CWI 1 and CWI 2 fund their obligations under the commitment agreement in the amounts and at the times contemplated thereby. In arriving at its opinion, Barclays assumed no responsibility for and expressed no view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of CWI 1 or CWI 2 and did not make or obtain any evaluations or appraisals of the assets or liabilities of CWI 1 or CWI 2. In addition, prior to entering into the merger agreement, CWI 1 did not authorize Barclays to solicit, and Barclays did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of CWI 1's business. Barclays' opinion was necessarily based upon market, economic, and other conditions as they existed on, and could be evaluated as of, October 21, 2019. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after October 21, 2019. Barclays' opinion should not be viewed as providing any assurance that the value of the shares of CWI 1 common stock and CWI 2 common stock to be held by their respective shareholders following the announcement or the consummation of the reviewed transaction will be in excess of the value of CWI 1 common stock and CWI 2 common stock owned by such shareholders at any time prior to the announcement or the consummation of the reviewed transaction.

        Barclays assumed that the executed merger agreement and the executed internalization agreement, in each case, would conform in all material respects to the last draft reviewed by Barclays. Additionally, Barclays assumed the accuracy of the representations and warranties contained in the merger agreement, the internalization agreement and all agreements related thereto. Barclays also assumed, upon the advice of CWI 1, that all material governmental, regulatory and third-party approvals, consents, and releases for the reviewed transaction would be obtained within the constraints contemplated by the merger agreement and the internalization agreement and that the reviewed transaction will be consummated in accordance with the terms of the merger agreement, the internalization agreement, and the commitment agreement without waiver, modification, or amendment of any material term, condition, or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result from the reviewed transaction, nor did Barclays' opinion address any legal, tax, regulatory, or accounting matters, as to which Barclays understood CWI 1 had obtained such advice as it deemed necessary from qualified professionals.

        In connection with rendering its opinion, Barclays performed certain financial, comparative, and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the shares of CWI 1 common stock but rather made its determination as to fairness, from a financial point of view, after giving effect to the reviewed transaction, to the holders of shares of CWI 1 common stock (other than the Excluded Entities) of the per share merger consideration to such holders on the basis of various financial and comparative analyses.

        In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

Summary of Material Financial Analyses

        The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the CWI 1 special committee. The summary of Barclays' analyses and reviews provided

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below is not a complete description of the analyses and reviews underlying Barclays' opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description.

        For the purposes of its analyses and reviews, Barclays made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of CWI 1 or any other parties to the reviewed transaction. No company, business or transaction considered in Barclays' analyses and reviews is identical to CWI 1, CWI 2, or the reviewed transaction, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the reviewed transaction, values of the companies, businesses, or transactions considered in Barclays' analyses and reviews. None of CWI 1, CWI 2, Barclays, or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of companies, businesses, or securities do not purport to be appraisals or reflect the prices at which the companies, businesses, or securities may actually be sold. Accordingly, the estimates used in, and the results derived from, Barclays' analyses and reviews are inherently subject to substantial uncertainty.

        The summary of the financial analyses and reviews summarized below include information presented in tabular format. In order to fully understand the financial analyses and reviews used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Barclays' analyses and reviews. For purposes of these analyses, Barclays assumed that CWI 1 would remain externally managed and that the combined company would be internally managed as a result of the reviewed transaction.

Selected Comparable Company Analysis

        In order to assess how the public market values shares of selected public companies and to provide a range of relative implied equity values per share of CWI 1 common stock and per share of the combined company common stock by reference to those companies, Barclays reviewed and compared specific financial and operating data relating to CWI 1 and the combined company with selected public companies that Barclays, based on its experience in the real estate industry, deemed comparable to CWI 1 and the combined company. The selected comparable companies were:

        Internally managed full-service comparable companies:

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        Internally managed select-service comparable companies:

        Externally managed full-service comparable companies:

        Barclays calculated and compared various financial multiples and ratios of CWI 1, the combined company and the selected comparable companies. As part of its selected comparable company analysis, Barclays calculated and analyzed each company's ratio of its enterprise value to its estimated 2020 EBITDA based on consensus equity research estimates from FactSet and SNL Financial. All of these calculations for the comparable companies were performed, and, in the case of CWI 1 and the combined company were based on the CWI 1 standalone projections and the pro forma projections, and in the case of the selected comparable companies were based on publicly available financial data and closing prices, as of October 18, 2019, the last trading date prior to the date of Barclays' opinion. The results of this selected comparable company analysis are summarized below: