October 7, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we herewith submit our self-contained appraisal report
pertaining to the above-captioned property. We have inspected the site and
analyzed the Las Vegas gaming market. Based on the available data, and our
analysis and experience in the hotel industry, it is our opinion that the
"prospective" market value of the fee simple interest in the proposed Aladdin
Hotel and Casino, as of the date the project is complete and operational,
assumed to be on or about January 1, 2000, will be:
$825,000,000
EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of the total +/- 34.31-acre
subject site, as vacant and including the development rights and entitlements,
as of August 7, 1997, is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
In addition, it is our opinion that the market value of the +/- 18.16 acres of
land allocated to the Aladdin Hotel and Casino portion of the development, as
vacant and including the development rights and entitlements, as of August 7,
1997, is:
$135,000,000
ONE HUNDRED THIRTY-FIVE MILLION DOLLARS
Our report is made in conformance with, and subject to, the requirements of the
Uniform Standards of Appraisal Practice (USPAP), as provided by the Appraisal
Foundation, as well as the requirements of the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA). We do hereby certify that we have no
undisclosed interest in the property, and our employment and compensation are
not contingent upon our findings and valuation.
The valuation is expressly made subject to all normal and specific assumptions
and limiting conditions, a copy of which is included in the attached appraisal
report.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA
President
MDC/ALJ/SXR/nkw
HVS International, Mineola, New York Quality Assurance
Quality Assurance
The HVS International division of Hotel Consulting, Inc., strives to
achieve the highest standards of quality during all phases of the
appraisal process. It is our goal to provide clients with the finest
appraisal report available. The following staff members acknowledge
their contribution to this report.
Natalie K. Wysong - Editing and Report Production
Editor (SF Office 415-896-0868, Extension 306)
Mark D. Capasso - Fieldwork, Analysis, and Text
Senior Associate (SF Office 415-896-0868, Extension 204)
Anne R. Lloyd-Jones, CRE - Fieldwork, Analysis, and Review
Senior Vice President (NY Office 516-248-8828, Extension 208)
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA - Analysis, and Review President (NY Office
516-248-8828, Extension 204)
We are available to answer any questions and are pleased to have
provided you with the finest quality product available. Wendy
Millward (NY Office 516-248-8828, extension 233) is available to
answer any billing questions. We look forward to serving you again
in the future.
HVS International, Mineola, New York Summary of Salient Data and Conclusions 1
- --------------------------------------------------------------------------------
1. Summary of Salient Data and Conclusions
Property: Proposed Aladdin Hotel and Casino
Location: 3667 Las Vegas Boulevard, Las Vegas,
Nevada 89109
Dates of Inspection: August 7, 1997
Date of Value (Aladdin Hotel and Casino): January 1, 2000
Date of Value (Total Subject Land): August 7, 1997
Date of Value (Hotel and Casino Land): August 7, 1997
Stabilized Year: 2002
Interest Appraised: Fee simple
Property Description
Land
Total Area: +/- 34.31 acres, or +/- 1,494,544
square feet
Hotel and Casino Portion: +/- 18.16 acres, or +/- 791, 051
square feet
Zoning: H1 - Limited Resort and Apartment
District
Flood Zone: A - Within the 100-year flood plain
Proposed Improvements
Hotel 2,600 rooms
Meeting Space: 71,500 square feet
Scheherazade Show Room: 1,400 seats
Theater for the Performing Arts: 7,000 seats
Casino 110,000 square feet
Table Games: 117
Gaming Devices: 2,900
Sports Book: 5,000 square feet
Keno Lounge: 1,200 square feet
Food and Beverage Facilities
Buffet and Food Plaza: 1,000 seats
24-Hour Coffee Shop: 575 seats
High Energy Restaurant: 225 seats
Italian Restaurant: 200 seats
Themed Restaurant: 150 seats
Steakhouse: 150 seats
Sushi/Chinese Noodle Bar: 50 seats
Casual Dining Coffee Bar: 50 seats
Salle Prive Exclusive Restaurant: 100 seats
HVS International, Mineola, New York Summary of Salient Data and Conclusions 2
- --------------------------------------------------------------------------------
Summary of Value Parameters
Highest and Best Use (as if vacant): Land-based casino hotel facility
Highest and Best Use (as improved): Land-based casino hotel facility
Effective Date of the Appraisal (Hotel
and Casino): January 1, 2000
Effective Date of the Appraisal
(H&C Site): August 7, 1997
Marketing Period: Up to 6 months
Stabilized Year: January 1, 2002 - December 31, 2002
Valuation Parameters
Discount Rate: 19.1%
Interest Rate: 9.0%
Equity Yield: 31.0%
Terminal Capitalization Rate: 18.0%
Loan-to-Value Ratio: 60%
Estimates of Value (Hotel and Casino)
Income Capitalization Approach: $824,100,000
Sales Comparison Approach: Not applicable
Cost Approach: $760,000,000
Prospective Market Value Conclusion: $825,000,000
Estimate of Value (Land Components)
Total Site: $180,000,000
Hotel and Casino Site: $135,000,000
HVS International, Mineola, New York Market Area Analysis 1
4. Market Area Analysis
The economic vitality of the market surrounding the
subject property is an important consideration in
forecasting gaming and lodging demand and income
potential. Economic and demographic trends that
reflect the amount of visitation provide a basis from
which to project future demand for gaming and lodging
facilities. The purpose of the market area analysis is
to review available economic and demographic data to
determine whether the local market will undergo
economic growth, stabilize, or decline.
Market Area Overview The subject site is situated in the Las Vegas, Nevada
Metropolitan Statistical Area (MSA). The Las Vegas MSA
includes Clark and Nye Counties and the incorporated
Cities of Las Vegas, North Las Vegas, Henderson,
Boulder City, and Mesquite. The subject site is
situated at the northern tip of the City of Las Vegas.
Las Vegas is an urban area encompassing approximately
84.272 square miles. The city was first founded in
1905 and incorporated on March 16, 1911. By virtue of
its proximity to the Los Angeles metropolitan area and
its destination resort appeal, Las Vegas has become
known as the "Entertainment Capital of the World."
Clark County covers 7,910 square miles and is bounded
by California to the south and west and the Colorado
River and Arizona to the east. Vacant land occupies
approximately 84% of Clark County.
Las Vegas, and southern Nevada in general, are
expanding regional economic centers characterized
primarily by tourism and related service sectors. In
addition to tourism, Las Vegas's economic base
continues to diversify into areas such as
manufacturing, distribution, wholesale trade, and
construction. In 1996, roughly 34 new companies came
to the Las Vegas area, employing almost 3,000 people.
These new employees were estimated to have a
$136-million impact on the local economy. While the
service sector is currently expanding at the most
rapid rate (and contributes the largest share of total
employment), higher value-added jobs continue to be
created in the manufacturing and distribution sectors.
These two areas make up the major employment
classifications of firms relocating to the area.
Nevada's tax structure is favorable for individuals
and corporations and has provided the impetus for
rapid corporate in-migration. While these sectors have
emerged within Las Vegas, the area's driving force is,
and will continue to be, gaming-related tourism.
Between 1992 and 1996, Las Vegas experienced an
expansion in room inventory of approximately 29.5% or
almost 23,000 rooms. According to Las Vegas
Perspective, 1996, published by the Las Vegas Review
Journal, this expansion in rooms inventory is
estimated to have created more than 30,000 new jobs.
The total indirect economic impact was estimated to
affect as many as 60,000
HVS International, Mineola, New York Market Area Analysis 2
individuals. This "boom" favorably impacted the
commercial construction sub-segment of the local
economy, which continues to fuel economic growth.
Similarly, another round of room construction is
underway, with approximately 10,000 to 15,000 more
rooms expected to enter the market. This wave of
construction is expected to create roughly 15,000 more
new jobs. This type of growth creates a chain reaction
impacting existing businesses, creating the demand for
new business, increasing the number of housing
permits, and ultimately growing the county's tax base.
This results in an expanded and improved
infrastructure. This expansion is anticipated to
benefit the entire Las Vegas community.
Demographic Review Based on fieldwork conducted in the area and our
in-house sources, we have evaluated various economic
and demographic statistics to determine trends in
lodging demand. A primary source of economic and
demographic statistics used in this analysis is the
Complete Economic and Demographic Data Source
published by Woods & Poole Economics, Inc., a
well-regarded forecasting service based in Washington,
DC. Using a data base containing more than 300
variables for each county in the nation, Woods & Poole
employs a sophisticated regional model to forecast
economic and demographic trends. Historical statistics
are based on census data and information published by
the Bureau of Economic Analysis. Projections are
formulated by Woods and Poole.
Population Historical and projected population trends often
reflect the economic climate of a locale, and thus
have an impact on the demand for hotels, office space,
retail outlets, and recreational facilities. The
catalysts for population growth in the Las Vegas area
were the completion of the Hoover Dam and the
legalization of gambling in 1931. The dam project
provided affordable water and power and set the stage
for the evolution of the gaming industry as the
primary local industry. A major government presence
was established with the creation of what is now
Nellis Air Force Base (12 miles northeast of Las
Vegas) and the Nevada Nuclear Test Site (20 miles to
the north).
Historically, population growth in Clark County and
the Las Vegas MSA has exceeded national averages.
Between 1980 and 1990, the population of Clark County
increased at an average annual compounded rate of
4.9%, and the Las Vegas MSA registered a comparable
growth rate of 5.0%. The state maintained a slightly
lower increase of 4.2% annually, but all of these
figures were significantly higher than the national
rate of 0.9% per year during the same period.
According to the Convention and Visitors Authority,
between 4,000 and 6,000 people move into Clark County
each month. Between 1990 and 1996, the county
population rose by 5.3% annually, which was slightly
higher than the 5.2% growth rate in the Las Vegas MSA.
Nevada as a whole maintained an average annual
compounded population increase of 4.3% during this
period. The national gain was
HVS International, Mineola, New York Market Area Analysis 3
far lower, at approximately 1.0% annually. It is
estimated that approximately 65% of Nevada's
population growth during the past five years has
resulted from migration from other states.
Projections indicate that population growth in the
region will continue to outpace national averages.
Between 1996 and 2000, Clark County is expected to
undergo a population increase of 3.1% per year, which
is similar to the anticipated MSA gain of 3.1%. The
population of the state is projected to increase at an
average annual compounded rate of 2.6% through the end
of the decade, far outpacing the 0.9% annual growth
rate in the nation as a whole.
Retail Sales Trends in retail sales reflect changes in population
and propensity of area residents to spend money on
goods. Like population trends, retail sales tend to
reflect the economic health and vitality of the
market.
Although retail sales in the United States increased
at an average annual compounded rate of only 1.6%
between 1980 and 1990 (following adjustments for
inflation), far higher rates were apparent in Clark
County (at 4.4%), the Las Vegas MSA (at 4.5%), and the
State of Nevada (at 3.4%). Growth in retail sales
surged between 1990 and 1996 for the county, MSA, and
the state recording annual average growth of 6.2%,
6.2%, and 5.2%, respectively, continuing to outpace
annual average growth in the nation (at 1.8%). Several
retail centers and one regional shopping mall opened
between 1993 and 1995, adding approximately 2,000,000
square feet of additional retail space to the area. As
of December 1996, the inventory of gross leasable
retail space in the city was estimated at roundly
22,000,000 square feet, and the overall vacancy rate
was roughly 5.4%.
There are several major developments that should boost
the area's retail sector during the next several
years. These include Phase III of the Forum Shops at
Caesars Palace (450,000 square feet), a
500,000-square-foot shopping mall at the proposed
Venetian Resort on the Strip, and the
450,000-square-foot Desert Passage Shopping Bazaar at
the subject property.
While several new retail centers are in the planning
stages, projections indicate retail sales growth
should moderate through 2000. Specifically, average
annual compounded growth is anticipated at rates of
3.3% in Clark County, 3.3% in the Las Vegas MSA, and
2.8% in the State of Nevada. A more moderate increase
of 1.1% annually is projected for the nation.
Personal Income As with population and retail sales, Clark County and
the Las Vegas MSA have far surpassed the nation in
terms of historical personal income growth. Between
1980 and 1990, the county and the MSA maintained an
average annual compounded growth rate of 6.0% and
6.1%, respectively. Nevada trailed somewhat, but still
HVS International, Mineola, New York Market Area Analysis 4
maintained a significant growth rate of 5.2% annually
after adjustment for inflation. Personal income in the
United States increased at a substantially lower rate
of 2.6% annually between 1980 and 1990. Similar trends
were apparent during the shorter period of 1990
through 1996, when personal income growth rates
equated to 6.6% in Clark County, 6.5% in the Las Vegas
MSA, 5.6% in Nevada, and 2.1% in the United States.
More moderate gains in personal income are anticipated
in the subject property's area between 1996 and 2000.
The county and Las Vegas MSA are projected to achieve
an average annual compounded increase of 4.4% during
this period, and the State of Nevada 3.8%. On a
nationwide basis, personal income is expected to
increase by 2.1% annually through the end of the
decade.
Employment With the exception of farming and the federal military
government, virtually all employment sectors in Clark
County exhibited significant growth between 1980 and
1996. The strongest gain was in the relatively small
agricultural services sector, which exhibited an
average annual compounded increase of 8.8%. Wholesale
and retail trade employment rose at rates of 6.9% and
5.1%, respectively, yielding an overall 5.4% annual
increase in the trade sector. Substantial gains of
7.7% and 5.9% were apparent in construction and
service employment, and there was moderate growth in
government, manufacturing, TCPU (transportation,
communications, and public utilities), and FIRE
(finance, insurance, and real estate) sectors. Total
employment in Clark County increased at an average
annual compounded rate of 5.5% between 1980 and 1996.
Employment increases were more moderate during the
short-term historical period. The agricultural
services sector maintained the highest average annual
compounded increase (at 6.0%) between 1990 and 1996.
Slightly lower increases were registered in the
manufacturing and services categories (at 5.9% and
5.7%, respectively). In addition, total trade at 5.1%
and construction at 4.8% showed strong annual growth.
There were also robust gains in the TCPU and FIRE
categories. Overall employment growth in the county
averaged 5.2% annually between 1990 and 1996.
Employment growth in the county is expected to
continue, albeit at rates lower than those achieved
historically. Overall, employment growth is expected
to average 2.9% per year throughout Clark County
through 2000.
Unemployment Statistics The following table presents historical average
unemployment rates for Clark County, versus those of
the state of Nevada and the nation, from 1987 to 1996.
HVS International, Mineola, New York Market Area Analysis 5
Unemployment Statistics
Clark State of United
Year County Nevada States
---------------------------------------------
1987 6.5% 6.3% 6.2%
1988 5.4 5.2 5.5
1989 5.0 5.0 5.3
1990 6.0 4.9 5.5
1991 6.6 5.6 5.7
1992 7.6 6.7 7.4
1993 6.0 7.3 6.8
1994 4.7 6.2 6.0
1995 4.4 5.4 5.6
1996 5.0 5.4 5.4
Source: Nevada Department of Employment Security
-------------------------------------------------
In the above chart, historical unemployment rates for
the Clark County MSA are compared to those of the
state and the nation. For the nation as a whole,
unemployment rates continued to increase through 1992.
A slight decrease was shown in 1993, indicating a
sluggish economy and slow recovery from the early
1990s' recession. A modest increase in unemployment
was recorded through 1993 in the state of Nevada;
however, in 1994 and 1995 unemployment dropped
noticeably in the county and state, mirroring a trend
in the national unemployment level. According to state
officials, the early 1990s' increase in unemployment
was a function of job growth not keeping pace with
rapid population growth. The continued expansion of
the resort industry through the mid 1990s kept
unemployment to a minimum. However, in 1996 county
unemployment surged to 5.0% from 4.4%. This is related
to a lack of resort industry growth in 1996. As
several new resorts are currently in the planning
stages, unemployment is expected to again decrease in
the near future.
Government Clark County operates as an independent political
entity, and is administered by a County Manager who
is, in turn, supervised by a seven-person Board of
Commissioners. The various city administrations in the
area consist of Mayors, five-person City Councils,
City Managers, and support departments.
Education The Clark County School District is undergoing rapid
growth. Enrollment increased from 86,927 students in
1980 to 176,106 in 1996 and an anticipated 233,000 by
2000. The county is currently ranked as the tenth
largest school district in the United States. The area
is served by 194 schools with 11 new facilities
planned to open in 1997.
HVS International, Mineola, New York Market Area Analysis 6
Higher education is available at Clark County
Community College, a multi-campus institution serving
four counties in southern Nevada. Enrollment is
estimated at 25,000. The University of Nevada at Las
Vegas has a 335-acre campus located on Maryland
Parkway, between Tropicana Avenue and Flamingo Road
approximately two miles east of the proposed subject
property. This school has a faculty of more than 600,
73% of whom hold doctorates. Current enrollment is
roundly 20,000 students participating in more than 137
undergraduate, graduate, and doctoral degree programs.
Water Water is supplied to the Las Vegas metropolitan area
from two primary sources. Underground wells contribute
approximately 25% of the water supply, and the
remainder is provided by the Colorado River. Nevada is
limited to 309,000 acre-feet of water from the
Colorado River. The Las Vegas Valley Water District
redistributes the supply to Clark County and the City
of Las Vegas. North Las Vegas, Henderson, and Boulder
City have their own water distribution systems. Water
rates in the area are relatively low compared to those
in other western cities.
In the early spring of 1991, the Las Vegas Valley
Water District stopped issuing will-serve letters for
water service to land not yet planned for development;
the moratorium lasted six months. Currently,
will-serve letters and conditional commitment
agreements are granted on a first-come, first-serve
basis. If the developer does not build and exercise
the water rights within a specified period, the
agreement expires. It is too soon to evaluate this
plan's impact on construction in the Las Vegas market,
but it may have a negative impact on vacant land
parcels by requiring developers to build within a
specified time period.
Officials of the Las Vegas Valley Water District are
exploring ways to reduce consumption and increase
supply, because additional water resources are
necessary to sustain the area's growth. In 1991, the
Southern Nevada Water Authority was established to
address regional water issues, and it has acquired
rights from Southern California Edison and is
negotiating with Basic Management, Inc., for a portion
of their Colorado River rights. Additional
appropriations are being sought for the Virgin River.
In 1993, 320,000,000 gallons of water were delivered
from Lake Mead to the Las Vegas Valley each day. In
1994, the volume of river water available to Las Vegas
was increased by 80,000,000 gallons per day, and the
delivery system is scheduled for completion by the end
of 1997. The Southern Nevada Water Authority has also
established a committee to study water issues related
to resources, conservation, and facilities. Given the
extensive growth that is underway in the Las Vegas
Valley, water availability is expected to become the
most critical development constraint.
Transportation Ease of transportation has a significant impact on a
hotel and casino's level of visitation. As noted
earlier, Las Vegas is easily accessible from a variety
of
HVS International, Mineola, New York Market Area Analysis 7
highways and McCarran International Airport. The
following table summarizes the modes of transportation
used by visitors arriving in Las Vegas, as compiled by
the Las Vegas Convention and Visitors Authority.
Modes of Transportation Used by Las Vegas Visitors
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------
Airlines 38.5% 40.9% 45.2% 43.7% 42.3% 41.7% 42.4% 42.3% 44.1% 44.3% 44.7% 45.7%
Automobiles 49.0% 47.0% 44.7% 45.2% 47.2% 46.8% 46.9% 46.9% 45.1% 46.9% 47.0% 47.0%
Bus 12.4% 12.1% 10.0% 11.0% 10.1% 11.2% 10.4% 10.4% 10.5% 8.5% 8.0% 7.0%
Train 0.1% 0.1% 0.1% 0.1% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3%
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------------------------------------
As shown, the percentage of visitors arriving in Las
Vegas by airplane increased from 38.5% in 1985 to
45.7% in 1996, while the percentage of visitors
relying on automobile transportation declined from
49.0% to 47.0%. Bus travel also decreased from 12.4%
to 7.0%, and the number of visitors arriving by train
rose slightly, from 0.1% in 1985 to 0.3% in 1996.
Tourism and Visitation Tourism plays a crucial role in lodging demand. This
is especially true in Las Vegas due to its status as
the "Gaming Capital of the World." The following chart
offers statistics highlighting the growth in tourism
in Las Vegas.
HVS International, Mineola, New York Market Area Analysis 8
Tourism Statistics - Las Vegas, Nevada
Visitor Volume McCarran Airport Convention Visitation
---------------------------------- --------------------------------------- --------------------------------
Annual Annual Annual
% Compound % Compound % Total % Compound %
Year Total Visitors Change % Change Total Passengers Change Change Attendance Change Change
- ------------------------------------------------------------------------------------------------------------------------
1983 12,348,270 --- --- 10,312,842 --- --- 943,611 --- ---
1984 12,843,433 4.0% 4.0% 10,141,809 (1.7)% (1.7)% 1,050,916 11.4% 11.4%
1985 14,194,189 10.5 7.2 10,924,047 7.7 2.9 1,072,629 2.1 6.6
1986 15,196,284 7.1 7.2 12,428,748 13.8 6.4 1,519,421 41.7 17.2
1987 16,216,102 6.7 7.0 15,582,302 25.4 10.9 1,677,716 10.4 15.5
1988 17,199,808 6.1 6.9 16,231,199 4.2 9.5 1,702,158 1.5 12.5
1989 18,129,684 5.4 6.6 17,106,948 5.4 8.8 1,508,842 (11.4) 8.1
1990 20,954,420 15.6 7.8 19,089,684 11.6 9.2 1,742,194 15.5 9.2
1991 21,315,116 1.7 7.1 20,171,557 5.7 8.7 1,794,444 3.0 8.4
1992 21,886,865 2.7 6.6 20,912,585 3.7 8.2 1,969,435 9.8 8.5
1993 23,522,593 7.5 6.7 22,492,156 7.6 8.1 2,439,734 23.9 10.0
1994 28,214,362 19.9 7.8 26,850,486 19.4 9.1 2,684,171 10.0 10.0
1995 29,002,122 2.8 7.4 28,027,239 4.4 8.7 2,924,879 9.0 9.9
1996 29,636,361 2.2 7.0 30,459,965 8.7 8.7 3,305,507 13.0 10.1
YTD 5/96 12,229,504 12,686,658 1,617,891
YTD 5/97 12,871,828 5.3% 12,808,522 1.0% 1,701,168 5.1%
Interstate 15 Traffic
-------------------------------------
Annual
Compound
Year Total Vehicles % Change % Change
- ----------------------------------------------
1983 2,465,848 --- ---
1984 2,518,718 2.1% 2.1%
1985 2,596,633 3.1 2.6
1986 2,679,180 3.2 2.8
1987 2,908,674 8.6 4.2
1988 3,003,247 3.3 4.0
1989 3,444,577 14.7 5.7
1990 3,751,181 8.9 6.2
1991 3,757,233 0.2 5.4
1992 3,824,286 1.8 5.0
1993 3,943,857 3.1 4.8
1994 4,201,310 6.5 5.0
1995 4,276,658 1.8 4.7
1996 4,552,183 6.4 4.8
YTD 5/96 1,781,112
YTD 5/97 1,913,381 7.4%
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 9
Las Vegas Tourism Statistics
[The following table was depicted as a bar chart in the printed material.]
Year Total Visitors Total Passengers Total Attendance Total Vehicles
- ---- -------------- ---------------- ---------------- --------------
1983 12,348,270 10,312,842 943,611 2,465,848
1984 12,843,433 10,141,809 1,050,916 2,518,718
1985 14,194,189 10,924,047 1,072,629 2,596,633
1986 15,196,284 12,428,748 1,519,421 2,679,180
1987 16,216,102 15,582,302 1,677,716 2,908,674
1988 17,199,808 16,231,199 1,702,158 3,003,247
1989 18,129,684 17,106,948 1,508,842 3,444,577
1990 20,954,420 19,089,684 1,742,194 3,751,181
1991 21,315,116 20,171,557 1,794,444 3,757,233
1992 21,886,865 20,912,585 1,969,435 3,824,286
1993 23,522,593 22,492,156 2,439,734 3,943,857
1994 28,214,362 26,850,486 2,684,171 4,201,310
1995 29,002,122 28,027,239 2,924,879 4,276,658
1996 29,636,361 30,459,965 3,305,507 4,552,183
HVS International, Mineola, New York Market Area Analysis 10
As the preceding chart indicates, visitor volume in
Las Vegas has been rising for the past decade. While
1990 showed a notable increase in the amount of people
visiting Las Vegas, visitor volume growth in 1991 and
1992 slowed dramatically. The 1990 increase is
attributable to two new mega-resorts (the Excalibur
and Mirage) opening during this year. The subsequent
slowing of growth is attributable to the nationwide
economic recession, as well as the Persian Gulf War,
both of which caused considerable declines in travel
throughout the nation. In 1993, visitor volume began
to increase sharply once again, with 7.5% growth over
the 1992 level. In addition, 1994 statistics show a
dramatic increase (of 19.9%) over 1993 levels due to
low-cost air travel (brought about by price wars) as
well as another round of mega-resort openings in late
1993 and 1994 (Treasure Island, Luxor, MGM Grand). In
1995 and 1996, growth in visitor volume again slowed,
but posted positive overall growth rates of 2.8% and
2.2%, respectively. Through May 1997, total visitor
counts have increased 5.3% over the same period in
1996, owing to the addition of yet another
mega-resort, New York - New York, to Las Vegas. In the
future, visitors are expected to flock to Las Vegas in
the wake of another round of new mega-resort
development.
Airport volume statistics are also important
indicators of lodging demand. Depending on the type of
service provided by a particular airfield, a sizable
percentage of arriving passengers may require hotel
accommodations. Passenger count trends also reflect
local business activity and the overall economic
health of the area. As the previous chart indicates,
passenger counts at McCarran International Airport,
much like visitor volume, grew rapidly in 1990, then
receded in 1991 and 1992 due to the Persian Gulf War.
While 1991 and 1992 figures grew at a slower pace,
1993 figures grew significantly and 1994 figures show
a dramatic 19.4% increase over 1993. Statistics for
1995 showed a slowing of the strong growth witnessed
in 1994. However, passenger counts increased markedly
in 1996 by 8.7%. According to McCarran International
Airport's Planning Division, the increase in 1996
passenger levels is directly attributable to a
multi-million dollar expansion of the airport. A
tunnel connecting the airport with I-15 (to the south
of the airport) opened in late 1995, providing easier
access to and from the airport. In addition, a
nine-story parking structure with a capacity for 8,000
vehicles opened in 1996. Furthermore, construction is
underway for a new terminal building. According to
McCarran officials, the airport expects to service
approximately 35 million passengers annually by 2000.
Convention visitation is also an important statistic
in analyzing tourism and lodging demand. The Las Vegas
Convention Center is a state-of-the-art facility which
underwent a $45-million expansion and renovation in
1992. The convention center features 1.3 million
square feet of exhibit and meeting space and is
located roughly three miles from the subject property.
Convention trade publications consistently
HVS International, Mineola, New York Market Area Analysis 11
rank Las Vegas among the nation's top convention and
meeting destinations. Delegate attendance, as depicted
in the previous chart, increased rapidly in 1990, at a
15.5% rate; growth slowed in 1991 to a 3.0% rate. In
1992, attendance increased at a favorable rate of
9.8%, while 1993 figures indicate phenomenal 23.9%
growth. While in 1994 and 1995 growth in convention
attendance slowed to 10.0% and 9.0% respectively,
these rates were still robust. In addition, convention
attendance surged in 1996 by 13.0% and has increased
by 5.1% through May 1997 as compared to the same
period.
In response to the tremendous growth witnessed in
convention visitation, there are plans to expand the
Las Vegas Convention Center. According to center
officials, the plans call for approximately double the
existing meeting and exhibit space. No time table has
been set for the completion of the project, but it is
expected by 2000.
In addition, the Las Vegas Convention center is well
pre-booked in the next few years. The following chart
shows pre-booking statistics for the Las Vegas
Convention Center for the next two years.
HVS International, Mineola, New York Market Area Analysis 12
Major Conventions, Las Vegas Convention Center, 1998-1999
Expected
Dates Convention Attendance
- --------------------------------------------------------------------------------
1998 Jan. 8 - Jan. 11 Consumer Electronics Show 100,000
Jan. 18 - Jan 21 Souvenier Super Show 50,000
Jan. 27 - Feb. 30 Shooting and Hunting Outdoor Convention 35,000
Feb. 17 - Feb. 20 MAGIC - Men's Apparel Guild 70,000
Feb. 22 - Feb. 26 Associated Surplus Dealers 50,000
May 4 - May 8 NETWORLD+ INTEROP 60,000
May 19 - May 21 Intl. Council of Shopping Centers 30,000
Aug. 31 - Sept. 1 MAGIC - Men's Apparel Guild 90,000
Nov. 3 - Nov. 6 Specialty Equipment Marketing Assoc. 60,000
Nov. 16 - Nov. 19 COMDEX 210,000
1999 Jan. 7 - Jan. 10 Consumer Electronics Show 100,000
Jan. 19 - Jan. 22 World of Concrete Exposition 30,000
Mar. 24 - Mar. 28 CONEXPO - CON/AGG 130,000
Aug. 15 - Aug 19 Associated Surplus Dealers 32,000
Nov. 15 - Nov. 19 COMDEX 190,000
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As approximately 40% of visitors to Las Vegas arrive
by car, the volume of traffic passing through the
market can have a direct impact on gaming and lodging
demand. As mentioned, access to Las Vegas from its
primary feeder market of California is provided via
I-15. Traffic counts along this freeway at the Nevada
State Line have increased steadily over the past few
years. Specifically, traffic counts increased by 3.1%
in 1993, 6.5% in 1994, 1.8% in 1995, and 6.4% in 1996.
In addition, through May 1997, traffic counts have
surged 7.4% as compared to the same period in 1996.
Overall, the increase in traffic along I-15 bodes well
for the subject's market area.
In light of the recent resurgence in visitor volume,
McCarran International airport's expansion plans, the
planned expansion and strong pre-bookings at the Las
Vegas Convention Center, the significant increase in
convention attendance over the past few years, and
increasing traffic counts, Las Vegas appears poised to
continue its success in attracting tourists.
Conclusion Economic conditions in the subject market area tend to
vary with tourism and visitation to the area. During
the 1980s Las Vegas experienced substantial growth in
tourism and the economy expanded. The growth slowed in
the early 1990s but has resurged late, with the
opening of several mega-resorts between 1993 and 1997.
In addition, several new mega-resorts are slated to
open before 2000. As such, Las Vegas is experiencing
continued growth in tourism and additional growth is
HVS International, Mineola, New York Market Area Analysis 13
expected. The following tables summarize the economic
and demographic trends discussed throughout this
section. All figures that reflect dollar amounts have
been adjusted for inflation, and thus the growth rates
reflect real change.
HVS International, Mineola, New York Market Area Analysis 14
Economic and Demographic Data for the Subject Property's Market Area
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
Long-Term Historical Population
Clark County 1980-1996 469.2 1,026.0 5.0%
Las Vegas, NV-AZ MSA 1980-1996 535.1 1,177.2 5.1
State of Nevada 1980-1996 810.2 1,573.3 4.2
United States 1980-1996 227,225.6 265,225.5 1.0
Short-Term Historical Population
Clark County 1990-1996 754.6 1,026.0 5.3
Las Vegas, NV-AZ MSA 1990-1996 867.8 1,177.2 5.2
State of Nevada 1990-1996 1,218.6 1,573.3 4.3
United States 1990-1996 249,403.0 265,225.5 1.0
Projected Population
Clark County 1996-2000 1,026.0 1,157.1 3.1
Las Vegas, NV-AZ MSA 1996-2000 1,177.2 1,327.8 3.1
State of Nevada 1996-2000 1,573.3 1,741.6 2.6
United States 1996-2000 265,225.5 274,581.0 0.9
Long-Term Historical Retail Sales
Clark County 1980-1996 4,443.3 9,806.1 5.1
Las Vegas, NV-AZ MSA 1980-1996 4,943.0 11,069.0 5.2
State of Nevada 1980-1996 7,811.2 14,813.0 4.1
United States 1980-1996 1,636,425.6 2,143,737.6 1.7
Short-Term Historical Retail Sales
Clark County 1990-1996 6,832.5 9,806.1 6.2
Las Vegas, NV-AZ MSA 1990-1996 7,706.2 11,069.0 6.2
State of Nevada 1990-1996 10,936.8 14,813.0 5.2
United States 1990-1996 1,926,189.3 2,143,737.6 1.8
Projected Retail Sales
Clark County 1996-2000 9,806.1 11,175.6 3.3
Las Vegas, NV-AZ MSA 1996-2000 11,069.0 12,615.2 3.3
State of Nevada 1996-2000 14,813.0 16,535.0 2.8
United States 1996-2000 2,143,737.6 2,239,888.5 1.1
Long-Term Historical Retail Sales Per Capita
Clark County 1980-1996 9,470.0 9,557.6 0.1
Las Vegas, NV-AZ MSA 1980-1996 9,237.2 9,403.1 0.1
State of Nevada 1980-1996 9,640.8 9,415.1 (0.1)
United States 1980-1996 7,201.8 8,082.7 0.7
Short-Term Historical Retail Sales Per Capita
Clark County 1990-1996 9,054.9 9,557.6 0.9
Las Vegas, NV-AZ MSA 1990-1996 8,880.1 9,403.1 1.0
State of Nevada 1990-1996 8,974.6 9,415.1 0.8
United States 1990-1996 7,723.2 8,082.7 0.8
- --------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 15
Economic and Demographic Data for the Subject Property's Market Area
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
Projected Personal Retail Sales Per Capita
Clark County 1996-2000 9,557.6 9,658.3 0.3
Las Vegas, NV-AZ MSA 1996-2000 9,403.1 9,500.8 0.3
State of Nevada 1996-2000 9,415.1 9,494.4 0.2
United States 1996-2000 8,082.7 8,157.5 0.2
Long-Term Historical Eating and Drinking Place Sales
Clark County 1980-1996 475.0 1,097.3 5.4
Las Vegas, NV-AZ MSA 1980-1996 519.5 1,210.5 5.4
State of Nevada 1980-1996 784.3 1,549.8 4.3
United States 1980-1996 153,945.2 225,235.6 2.4
Short-Term Historical Eating and Drinking Place Sales
Clark County 1990-1996 777.6 1,097.3 5.9
Las Vegas, NV-AZ MSA 1990-1996 854.8 1,210.5 6.0
State of Nevada 1990-1996 1,147.0 1,549.8 5.1
United States 1990-1996 199,371.1 225,235.6 2.1
Projected Eating and Drinking Place Sales
Clark County 1996-2000 1,097.3 1,295.6 4.2
Las Vegas, NV-AZ MSA 1996-2000 1,210.5 1,429.6 4.2
State of Nevada 1996-2000 1,549.8 1,798.6 3.8
United States 1996-2000 225,235.6 244,351.7 2.1
Long-Term Historical Eating and Drinking Place Sales Per Capita
Clark County 1980-1996 1,012.3 1,069.5 0.3
Las Vegas, NV-AZ MSA 1980-1996 970.7 1,028.3 0.4
State of Nevada 1980-1996 968.0 985.1 0.1
United States 1980-1996 677.5 849.2 1.4
Short-Term Historical Eating and Drinking Place Sales Per Capita
Clark County 1990-1996 1,030.5 1,069.5 0.6
Las Vegas, NV-AZ MSA 1990-1996 985.0 1,028.3 0.7
State of Nevada 1990-1996 941.2 985.1 0.8
United States 1990-1996 799.4 849.2 1.0
Projected Eating and Drinking Place Sales Per Capita
Clark County 1996-2000 1,069.5 1,119.7 1.2
Las Vegas, NV-AZ MSA 1996-2000 1,028.3 1,076.7 1.2
State of Nevada 1996-2000 985.1 1,032.7 1.2
United States 1996-2000 849.2 889.9 1.2
Long-Term Historical Personal Income
Clark County 1980-1996 8,873.4 23,417.1 6.3
Las Vegas, NV-AZ MSA 1980-1996 9,809.9 25,815.0 6.2
State of Nevada 1980-1996 16,003.1 36,775.7 5.3
United States 1980-1996 3,861,548.9 5,687,220.1 2.4
- -------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 16
Economic and Demographic Data for the Subject Property's Market Area
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Historical Personal Income
Clark County 1990-1996 15,944.8 23,417.1 6.6
Las Vegas, NV-AZ MSA 1990-1996 17,688.9 25,815.0 6.5
State of Nevada 1990-1996 26,568.5 36,775.7 5.6
United States 1990-1996 5,011,216.3 5,687,220.1 2.1
Projected Personal Income
Clark County 1996-2000 23,417.1 27,826.0 4.4
Las Vegas, NV-AZ MSA 1996-2000 25,815.0 30,667.9 4.4
State of Nevada 1996-2000 36,775.7 42,764.1 3.8
United States 1996-2000 5,687,220.1 6,172,122.3 2.1
Long-Term Personal Income per Capita
Clark County 1980-1996 18,912.0 22,824.0 1.2
Las Vegas, NV-AZ MSA 1980-1996 18,332.0 21,930.0 1.1
State of Nevada 1980-1996 19,751.0 23,375.0 1.1
United States 1980-1996 16,994.0 21,443.0 1.5
Short-Term Historical Personal Income per Capita
Clark County 1990-1996 21,131.0 22,824.0 1.3
Las Vegas, NV-AZ MSA 1990-1996 20,383.0 21,930.0 1.2
State of Nevada 1990-1996 21,802.0 23,375.0 1.2
United States 1990-1996 20,093.0 21,443.0 1.1
Projected Personal Income per Capita
Clark County 1996-2000 22,824.0 24,048.0 1.3
Las Vegas, NV-AZ MSA 1996-2000 21,930.0 23,097.0 1.3
State of Nevada 1996-2000 23,375.0 24,555.0 1.2
United States 1996-2000 21,443.0 22,478.0 1.2
Long-Term Historical Employment - Clark County
Farm 1980-1996 0.4 0.4 (1.0)
Agriculture Services, Other 1980-1996 1.3 5.1 8.8
Mining 1980-1996 0.6 0.9 3.0
Construction 1980-1996 16.3 53.0 7.7
Manufacturing 1980-1996 7.3 16.5 5.3
Trans., Comm. & Public Utils 1980-1996 13.7 28.4 4.6
Total Trade 1980-1996 50.8 117.0 5.4
Wholesale Trade 1980-1996 6.5 18.9 6.9
Retail Trade 1980-1996 44.2 98.0 5.1
Finance, Insurance, & Real Estate 1980-1996 19.9 43.1 4.9
Services 1980-1996 116.9 292.4 5.9
Total Government 1980-1996 37.7 63.1 3.3
Federal Civilian Govt 1980-1996 4.9 8.0 3.1
Federal Military Govt 1980-1996 10.3 9.9 (0.3)
State & Local Govt 1980-1996 22.4 45.3 4.5
TOTAL 1980-1996 264.8 619.9 5.5
HVS International, Mineola, New York Market Area Analysis 17
Economic and Demographic Data for the Subject Property's Market Area
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Historical Employment - Clark County
Farm 1990-1996 0.5 0.4 (3.9)
Agriculture Services, Other 1990-1996 3.6 5.1 6.0
Mining 1990-1996 0.7 0.9 4.0
Construction 1990-1996 40.1 53.0 4.8
Manufacturing 1990-1996 11.7 16.5 5.9
Trans., Comm. & Public Utils 1990-1996 20.9 28.4 5.3
Total Trade 1990-1996 86.7 117.0 5.1
Wholesale Trade 1990-1996 14.3 18.9 4.8
Retail Trade 1990-1996 72.4 98.0 5.2
Finance, Insurance, & Real Estate 1990-1996 32.3 43.1 5.0
Services 1990-1996 209.2 292.4 5.7
Total Government 1990-1996 50.9 63.1 3.7
Federal Civilian Govt. 1990-1996 7.0 8.0 2.2
Federal Military Govt. 1990-1996 11.0 9.9 (1.8)
State & Local Govt. 1990-1996 32.9 45.3 5.5
TOTAL 1990-1996 456.4 619.9 5.2
Projected Employment - Clark County
Farm 1996-2000 0.4 0.4 (0.1)
Agriculture Services, Other 1996-2000 5.1 5.7 3.0
Mining 1996-2000 0.9 1.1 3.0
Construction 1996-2000 53.0 60.2 3.2
Manufacturing 1996-2000 16.5 17.8 1.8
Trans., Comm. & Public Utils 1996-2000 28.4 30.6 2.0
Total Trade 1996-2000 117.0 131.5 3.0
Wholesale Trade 1996-2000 18.9 21.2 2.9
Retail Trade 1996-2000 98.0 110.2 3.0
Finance, Insurance, & Real Estate 1996-2000 43.1 49.7 3.6
Services 1996-2000 292.4 329.5 3.0
Total Government 1996-2000 63.1 67.8 1.8
Federal Civilian Govt 1996-2000 8.0 8.6 1.7
Federal Military Govt 1996-2000 9.9 9.9 0.1
State & Local Govt 1996-2000 45.3 49.4 2.2
TOTAL 1996-2000 619.9 694.3 2.9
HVS International, Mineola, New York Certification 1
16. Certification
We the undersigned appraisers, hereby certify:
A. that the statements and opinions presented in this
restricted appraisal report subject to the limiting
conditions set forth, are correct to the best of our
knowledge and belief;
B. that Mark D. Capasso and Anne R. Lloyd-Jones CRE,
personally inspected the property described in this
report and actively participated in the analysis;
C. that the appraisers have extensive experience in the
valuation of casino hotels and believe that they are
competent to undertake this appraisal;
D. that we have no current or contemplated interests in the
real estate that is the subject of this restricted
appraisal report;
E. that we have no personal interest or bias with respect
to the subject matter of this letter or the parties
involved;
F. that this restricted appraisal report sets forth all of
the limiting conditions (imposed by the terms of this
assignment) affecting the analyses, opinions, and
conclusions presented herein;
G. that the fee paid for the preparation of this study is
not contingent upon the amount of the value estimate;
H. that this restricted appraisal report has been prepared
in accordance with and is subject to the requirements of
the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal
Institute;
I. that the use of this letter is subject to the
requirements of the Appraisal Institute relating to
review by its duly authorized representatives;
J. that this letter has been prepared in accordance with
the Uniform Standards of Professional Appraisal Practice
(as adopted by the Appraisal Foundation);
K. that no one other than the undersigned prepared the
analyses, conclusions, and opinions concerning real
estate that are set forth in this appraisal report;
HVS International, Mineola, New York Certification 2
L. that as of the date of this restricted appraisal report,
Stephen Rushmore, CRE, MAI, CHA has completed the
requirements of the continuing education program of the
Appraisal Institute;
M. that this appraisal is not based on a requested minimum
value, a specific value, or the approval of a loan.
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
Anne R. Lloyd Jones, CRE, as an employee
of Hotel Consulting Services, Inc.
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
November 25, 1997
Mr. Jim Riley
Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098 Phone
(212) 225-5172 Fax
Re: Excess Land for the Proposed Aladdin Hotel and Casino
Mixed-Use Development
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we submit this restricted appraisal report pertaining
to the above-captioned property.
This letter, which complies with the requirements set forth in the Uniform
Standards of Professional Appraisal Practice for a restricted appraisal report,
is a brief recapitulation of the appraisers' data, analyses, and conclusions and
is intended to be read in tandem with the self-contained appraisal of the
Proposed Aladdin Hotel and Casino dated October 7, 1997 that we prepared for
you. This letter does not include full discussion of the data, reasoning, and
analyses that were utilized in the appraisal process to develop the appraisers'
opinion of value. Supporting documentation is retained in the appraisers' file
and in the aforementioned self-contained appraisal of the Proposed Aladdin Hotel
and Casino dated October 7, 1997. The valuation is expressly made subject to all
normal assumptions and limiting conditions, a copy of which is provided along
with the certification.
Subject of the
Appraisal
The subject of this restricted appraisal report are the fee simple interests in
a +/- 4.75-acre parcel of land and a +/- 12.42-acre parcel of land. These
parcels are a part of the +/- 34.31-acre parcel of land currently improved with
the Aladdin Hotel and Casino and Performing Arts Center. The subjects' civic
address is 3667 Las Vegas Boulevard, Las Vegas, Nevada. The +/- 4.75-acre parcel
is to be improved with a roughly 1,000-room hotel and casino with roughly 50,000
square feet of casino space, while the +/- 12.42-acre parcel will be improved
with a +/- 450,000 square foot shopping center and parking garage (the Desert
Passage). These two structures will be part of a larger mixed-use development
consisting of a 2,600-room hotel and a 100,000-square-foot casino (the Aladdin
Hotel and Casino), and the aforementioned smaller hotel casino and shopping
center.
Purpose of
the Assignment
1
The purpose of the assignment is to estimate the market value of the +/- 4.75
acres of land allocated to the 1,000-room hotel and casino and the market value
of the +/- 12.42 acres of land allocated to the Desert Passage Shopping Center.
Market value is defined by the Office of the Comptroller of the Currency (OCC),
12CFR, Part 34 as follows:
The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale as of
a specified date and the passing of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Intended Use
of the Report
The valuation is being prepared for Bank of Nova Scotia, New York Agency for
financing purposes. None of the information presented should be disseminated to
the public or third parties without the express consent of HVS International.
Date of Inspection
The subject property was inspected on August 7, 1997 by Mark D. Capasso and Anne
R. Lloyd Jones, CRE.
Interest Valued
The property rights appraised are the fee simple ownership of the two parcels of
land.
Effective Dates
of Value
The effective date of appraisal for both the +/- 4.75-acre site allocated to the
1,000 room hotel and casino and the +/- 12.45 acres of land allocated to the
Dessert Passage Shopping Center is August 7, 1997.
Scope of
the Appraisal
All information was collected and analyzed by staff of HVS International.
Descriptive data and site plans for the subject property were supplied by the
developers, Aladdin Holdings, LLC. The site has been inspected and the
2
developers and future management have been interviewed. We have gathered
economic data and information on comparable land sales. We have spoken with
buyers, sellers, brokers, developers and public officials. We have analyzed this
information and have considered the sales comparison approach to value.
In the development of the opinion of value, the appraisers performed a complete
appraisal process as defined by the Uniform Standards of Professional Practice.
This means that no departures from Standard 1 were invoked. This restricted
appraisal report presents only the appraisers' conclusions. Supporting
documentation is retained in the appraisers' file and is presented in our
self-contained appraisal dated October 7, 1997. In addition, included as an
addendum to this letter is a land sales adjustment grid detailing the various
adjustments made to the comparable land sales in order to arrive at a land value
conclusion.
Highest
and Best Use
Highest and best use is defined as "the reasonably probable and legal use of
vacant land or an improved property, which is physically possible, appropriately
supported, financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility, physical
possibility, financial feasibility, and maximum profitability."(1) Using these
criteria, it is our opinion that the highest and best use of the subject land is
to be improved with a hotel and casino and a shopping mall.
Summary of Analysis and Valuation
- ----------
(1) Appraisal Institute. The Dictionary of Real Estate Appraisal. 3rd ed.
Chicago: Author, 1993, p. 171.
3
As mentioned in our self-contained appraisal of the proposed Aladdin Hotel and
Casino, the market value of the entire mixed-use site was estimated to be
$180,000,000. In addition, the market value of the roundly 16 acres allocated to
the Aladdin Hotel and Casino was estimated to be $135,000,000. Based on the
available data, our analysis, and experience in the hotel and casino industries,
it is our opinion that the market value of the +/- 4.75 acres of land allocated
to the 1,000-room hotel and casino portion of the development, as vacant and
including the development rights and entitlements, as of August 7, 1997, is:
$15,100,000
FIFTEEN MILLION ONE HUNDRED THOUSAND DOLLARS
In addition, by subtracting the $135,000,000 value of the Aladdin Hotel and
Casino portion of the site and the $15,100,000 value of the 1,000-room hotel and
casino portion of the site from the $180,000,000 value of the entire site, we
are of the opinion that the +/- 12.42 acres of land allocated to the Desert
Passage Shopping Center portion of the development, as vacant and including the
development rights and entitlements, as of August 7, 1997, is:
$29,900,000
TWENTY-NINE MILLION NINE HUNDRED THOUSAND DOLLARS
Exposure and
Marketing Periods
Based upon current market conditions, we believe the properties could transact
at this price with exposure and marketing periods of up to six months.
4
We hereby certify that we have no undisclosed interest in the property, and our
employment and compensation are not contingent upon our valuation. This
restricted appraisal report is for internal use only and, as previously noted,
does not include full discussion of the data, reasoning, and analyses that were
utilized in the appraisal process. The valuation is expressly made subject to
all normal and specific assumptions and limiting conditions, a copy of which is
included in this restricted appraisal report.
Very truly yours,
HVS International
A Division of Hotel Consulting Services, Inc.
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
Stephen Rushmore, CRE, MAI, CHA
President
5
Statement of Assumptions
and Limiting Conditions
This restricted appraisal report complies with the requirements set forth under
Standards Rule 2-2(c) of the Uniform Standards of Professional Appraisal
Practice for a restricted appraisal report. As such, it does not include
discussions of the data, reasoning, and analyses that were used in the appraisal
process to develop the appraisers' opinion of value. Supporting documentation
concerning the data, reasoning, and analyses is retained in the appraisers'
file. The information contained in this letter is specific to the need of the
client and for the intended use stated in this letter. The appraisers are not
responsible for unauthorized use of this report.
This restricted appraisal report is to be used in whole and not in part.
No responsibility is assumed for matters of a legal nature, nor do we render any
opinion as to title, which is assumed to be marketable and free of any deed
restrictions and easements. The property is valued as though free and clear
unless otherwise stated.
There are no hidden or unapparent conditions of the property, sub-soil or
structures, such as underground storage tanks, that would render it more or less
valuable. No responsibility is assumed for these conditions or any engineering
that may be required to discover them.
We have not considered the existence of potentially hazardous materials used in
the construction or maintenance of the building, such as asbestos, urea
formaldehyde foam insulation, or PCBs, nor have we considered the presence of
any form of toxic waste. Furthermore, we have also not considered
polychlorinated biphengyls, pesticides, and lead-based paints. The appraisers
are not qualified to detect any hazardous substances and urge the client to
retain an expert in this field if desired.
We have made no survey of the property, and assume no responsibility in
connection with such matters. Any sketches, photographs, maps, and other
exhibits are included only to assist the reader in visualizing the property. It
is assumed that the use of the land and improvements is within the boundaries of
the property described, and that there is no encroachment or trespass unless
noted.
All information, financial operating statements, estimates, and opinions
obtained from parties not employed by HVS International are assumed to be true
and correct. We can assume no liability resulting from misinformation.
Unless noted, we assume that there are no encroachments, zoning violations, or
building violations encumbering the subject property.
The property is assumed to be in full compliance with all applicable federal,
state, local, and private codes, laws, consents, licenses, and regulations
(including a liquor license where appropriate), and that all licenses, permits,
certificates, franchises, and so forth can be freely renewed or transferred to a
purchaser.
All mortgages, liens, encumbrances, leases, and servitude's have been
disregarded unless specified otherwise.
No portions of this restricted appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the public
through advertising, public relations, news, sales, or other media.
We are not required to give testimony or attendance in court by reason of this
analysis without previous arrangements, and only when our standard per-diem fees
and travel costs are paid prior to the appearance.
6
If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this restricted appraisal
report, it is recommended that the reader contact us.
We take no responsibility for any events or circumstances that take place
subsequent to either the date of value or the date of our field inspection,
whichever occurs first.
The quality of a casino hotel facility's on-site management has a direct effect
on a property's economic viability and value. The financial forecasts presented
in this analysis assume responsible ownership and competent management. Any
variance from this assumption may have a significant impact on the projected
operating results and value estimate.
The value estimate developed for this restricted appraisal report is based on an
evaluation of the overall economy, and neither takes into account, nor makes
provision for, the effect of any sharp rise or decline in local or national
economic conditions. To the extent that wages and other operating expenses may
advance during the economic life of the property, we expect that the prices of
rooms, food, beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but they have
been prepared on the basis of information obtained during the course of this
study and are intended to reflect the expectations of typical investors.
This analysis assumes continuation of all Internal Revenue Service tax code
provisions as stated or interpreted on either the date of value or the date of
our field inspection, whichever occurs first.
Many of the figures developed for this restricted appraisal report were
generated using sophisticated computer models that make calculations based on
numbers carried out to three or more decimal places. In the interest of
simplicity, most numbers have been rounded to the nearest tenth of a percent.
Thus, these figures may be subject to small rounding errors.
It is agreed that our liability to the client is limited to the amount of the
fee paid as liquidated damages. Our responsibility is limited to the client, and
use of this restricted appraisal report by third parties shall be solely at the
risk of the client and/or third parties.
Although this analysis employs various mathematical calculations to provide
value indications, the final estimate is subjective and may be influenced by our
experience and other factors not specifically set forth is this letter.
Any distribution of the total value between the land and improvements or between
partial ownership interests applies only under the stated use. Moreover,
separate allocations between components are not valid if this restricted
appraisal report is used in conjunction with any other analysis.
The Americans with Disabilities Act (ADA) became effective on January 26, 1992.
We have conducted no specific compliance survey to determine whether the subject
property is in conformity with the various detailed requirements of the ADA. It
is possible that the property does not comply with the requirements of the act,
and this could have an unfavorable effect on the property value. Because we have
no direct evidence regarding this issue, our estimate of value does not consider
possible noncompliance with the ADA.
This study was prepared by HVS International, a division of Hotel Consulting
Services, Inc. All opinions, recommendations and conclusions expressed during
this assignment have been rendered by the staff of Hotel Consulting Services,
Inc. acting solely as employees and not as individuals.
7
CERTIFICATION
We the undersigned appraisers, hereby certify:
that the statements and opinions presented in this restricted appraisal report
subject to the limiting conditions set forth, are correct to the best of our
knowledge and belief;
that Mark D. Capasso and Anne R. Lloyd-Jones CRE, personally inspected the
property described in this report and actively participated in the analysis;
that the appraisers have extensive experience in the valuation of casino hotels
and believe that they are competent to undertake this appraisal;
that we have no current or contemplated interests in the real estate that is the
subject of this restricted appraisal report;
that we have no personal interest or bias with respect to the subject matter of
this letter or the parties involved;
that this restricted appraisal report sets forth all of the limiting conditions
(imposed by the terms of this assignment) affecting the analyses, opinions, and
conclusions presented herein; that the fee paid for the preparation of this
study is not contingent upon the amount of the value estimate;
that this restricted appraisal report has been prepared in accordance with and
is subject to the requirements of the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute;
that the use of this letter is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives;
that this letter has been prepared in accordance with the Uniform Standards of
Professional Appraisal Practice (as adopted by the Appraisal Foundation);
that no one other than the undersigned prepared the analyses, conclusions, and
opinions concerning real estate that are set forth in this appraisal report;
that as of the date of this restricted appraisal report, Stephen Rushmore, CRE,
MAI, CHA has completed the requirements of the continuing education program of
the Appraisal Institute; that this appraisal is not based on a requested minimum
value, a specific value, or the approval of a loan.
/s/ Mark D. Capasso
-----------------------------------------
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
/s/ Anne R. Lloyd
-----------------------------------------
Anne R. Lloyd Jones, CRE, as an
employee of Hotel Consulting Services, Inc.
8
-----------------------------------------
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
Land Sales Adjustment Grid
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ----------------------------------------------------------------------------------------------------------------------------------
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 206,910 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ----------------------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -50.0% 30.0% 20.0% -50.0% 30.0% -50.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -60.0%
Size smaller similar larger smaller smaller larger
Adjustment -35.0% 0.0% 60.0% -35.0% -35.0% 50.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -55.0% 80.0% 80.0% -55.0% 15.0% -60.0%
Net Adjusted Price $76.16 $66.83 $71.59 $69.87 $79.76 $79.62
=========== ========== =========== ========== ========== ===========
* Monthly adjustment factor of 2.50%
** Includes topography, configuration, offsite availability, and
capacity
9
October 29, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find ten final copies of the self-contained appraisal report
pertaining to the above-captioned property. It has been a pleasure performing
this assignment for you, and we look forward to working with you in the future.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
November 3, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza, 26th Floor
New York, New York 10006
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find one unbound final copy of the self-contained appraisal
report pertaining to the above-captioned property. Federal Express is currently
tracking our shipment of ten final copies. We regret the inconvenience this may
have caused.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
November 12, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza, 26th Floor
New York, New York 10006
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find ten final copies of the self-contained appraisal report
pertaining to the above-captioned property. It has been a pleasure performing
this assignment for you, and we look forward to working with you in the future.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
Land Sales Adjustment Grid
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ----------------------------------------------------------------------------------------------------------------------------------
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 207,346 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ----------------------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -50.0% 30.0% 20.0% -50.0% 30.0% -50.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -60.0%
Size smaller similar larger smaller smaller larger
Adjustment -35.0% 0.0% 60.0% -35.0% -35.0% 50.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -55.0% 80.0% 80.0% -55.0% 15.0% -60.0%
Net Adjusted Price $76.16 $66.83 $71.59 $69.87 $79.76 $79.62
=========== ========== =========== ========== ========== ===========
* Monthly adjustment factor of 2.50%
** Includes topography, configuration, offsite availability, and
capacity
HVS International, Mineola, New York Table of Contents
================================================================================
Table of Contents
1. Summary of Salient Data and Conclusions 1
2. Nature of the Assignment 3
3. Property Description 9
4. Market Area Analysis 28
5. U.S. Gaming Overview 46
6. Gaming Supply and Demand Analysis 58
7. Forecast of Gaming Revenue 74
8. Lodging Supply and Demand Analysis 87
9. Highest and Best Use 105
10. Approaches to Value 107
HVS International, Mineola, New York Table of Contents
11. Income Capitalization Approach 110
12. Cost Approach 147
13. Sales Comparison Approach 167
14. Reconciliation of Value Indications 173
15. Statement of Assumptions and Limiting Conditions 176
16. Certification 180
Addenda
Engagement Letter
Synopsis of LCI Agreement
Photographs of the Subject Property
Photographs of the Competitive Properties
Qualifications
Mark D. Capasso
Anne R. Lloyd-Jones, CRE
Stephen Rushmore, CRE, MAI, CHA
HVS International, Mineola, New York Property Description 1
- --------------------------------------------------------------------------------
3. Property Description The suitability of the site for the operation of a
casino hotel is an important consideration affecting
the property's economic viability. Factors such as
size, topography, access, visibility, and the
availability of utilities directly impact the
desirability of a particular site. In addition, the
quality of a facility's physical improvements
directly influences marketability, visitation, gaming
volume, occupancy, average rate, and gaming win. The
design and functionality of the structure can also
affect operating efficiency and overall
profitability. This section investigates the land
components of the subject property as well as the
proposed physical improvements and personal property
to determine how they contribute to the economic
viability of the overall development.
Description of the Site The subject site comprises two parcels, both owned in
fee simple interest. According to the Clark County
Assessor's Office, the two parcels total
approximately +/- 34.83 acres, or +/- 1,517,195
square feet. However, according to officials with the
Clark County Department of Planning, approximately
0.52 acres, or 22,651 square feet, will be deducted
from this area for the widening of Harmon Street. As
such, the total site area for purposes of this
appraisal equates to +/- 34.31 acres, or +/-
1,494,544 square feet. As mentioned, the proposed
Aladdin Hotel and Casino will use approximately 18.16
acres of the western portion of the site. The hotel
and casino parcel will have frontage along Harmon
Avenue and Las Vegas Boulevard. The remainder of the
site, situated to the east of the hotel and casino
parcel, will have frontage along Harmon Avenue and
Audrie Street. This area will be developed with other
components of the mixed-use development, including a
parking garage, a second hotel with 1,000 rooms, a
central utility plant, and a +/- 450,000-square-foot
shopping bazaar called the Desert Passage. As
mentioned, we have been asked to value only the hotel
and casino portion of the mixed-use development.
HVS International, Mineola, New York Property Description 2
- --------------------------------------------------------------------------------
INSERT ASSESSOR'S PARCEL MAP
HVS International, Mineola, New York Property Description 3
- --------------------------------------------------------------------------------
The site's topography is flat; the shape of the site
is slightly irregular, owing to an approximately
2.93-acre notch cut out of the southwestern corner of
the site. This land is not owned by the subject
site's owners and is currently improved with a small
structure advertising the Rio Hotel and Casino. The
reader is directed to the assessor's parcel map
located on the preceding following page for an
illustration of the site's irregular shape. Despite
its irregular shape, the +/- 34.31-acre site offers
ample space for a casino hotel development. An
additional asset is the site's frontage along Las
Vegas Boulevard, also known as "The Strip." According
to the assessor's parcel map, the site's western
boundary enjoys approximately 800 linear feet of
frontage along Las Vegas Boulevard.
The site is located at the northwestern corner of Las
Vegas Boulevard and Harmon Avenue. The subject site's
civic address is 3667 Las Vegas Boulevard, in the
city of Las Vegas, county of Clark, and state of
Nevada. The following map delineates the subject
site's boundaries.
Accessibility
Access to Las Vegas is chiefly provided via
Interstate 15 (I-15) and two U.S. Highways, U.S.
Highway 95 (U.S. 95), and U.S. Highway 93 (U.S. 93).
I-15 is a north-south route that originates in San
Diego, California, and continues through Riverside to
Las Vegas before proceeding north to the Canadian
border. I-15 serves as the major connector between
Las Vegas and its largest feeder market, Los Angeles;
U.S. 95, also a north-south route, connects Las Vegas
with a variety of small towns located in eastern
California and northern Nevada. The major highway
connecting Las Vegas with Arizona is U.S. 93, which
connects Las Vegas to the Phoenix metropolitan area.
Approximately 25 miles southeast of Las Vegas,
proximate to the Arizona-Nevada border, U.S. 93 and
95 converge in Boulder City. I-15 bisects Las Vegas
into eastern and western sections, serving as the
major north-south thoroughfare.
The subject property's main entrance will be accessed
via Harmon Avenue, a major east-west arterial
traversing the eastern section of Las Vegas.
Currently, Harmon Avenue terminates at Las Vegas
Boulevard; however, construction is underway to
extend Harmon Avenue to I-15 and points west via a
highway overpass bridge. In addition, there are plans
to add a highway exit at Harmon Avenue and I-15. This
exit would greatly alleviate traffic concerns along
Flamingo Road and Tropicana Avenue, currently the two
most traveled east-west thoroughfares in Las Vegas.
In addition, the exit would provide motorists direct
access from I-15 to the proposed subject property. As
mentioned, Harmon Avenue will be widened from four
lanes to six over an approximate two-block stretch at
the subject site's southern border. While this street
widening is expected to take away a portion of the
subject site's developable area, we believe the
widening of Harmon Avenue will provide a long-term
benefit to the proposed subject property by
alleviating traffic congestion.
HVS International, Mineola, New York Property Description 4
- --------------------------------------------------------------------------------
The subject site's main entrance will be along Harmon
Avenue and will consist of a large circular driveway.
The driveway will provide direct access to the hotel
and casino's lobby area, as well as to all portions
of the mixed-use development. It is planned that
Harmon Avenue will be improved with traffic lights
and a dedicated left turn lane at the subject
property's entrance, providing guests excellent
access. In addition to the site's primary entrance
along Harmon Avenue, several curb cuts will be
located along Las Vegas Boulevard, providing
secondary points of ingress and egress. These
secondary access points will be unique in that
pedestrian traffic will be diverted via arched
walkways over the curb cuts, further adding to the
site's access. No other casino located along the
strip can boast this unique feature.
The subject's access will also be benefited by a
fixed rail system that is expected to stretch from
the McCarran International Airport to the Strip.
According to the Regional Transportation Commission,
a terminal for the fixed rail system has been planned
for the intersection of Audrie Road and Harmon
Avenue, at the southern border of the subject site.
Visibility
Given the Proposed Aladdin Hotel and Casino's planned
35-story main tower and ample signage, the site will
be highly visible from Las Vegas Boulevard and the
surrounding area. In addition, exterior lighting of
the main tower and two secondary 17-story towers will
enhance the site's visibility along the Las Vegas
skyline.
Utilities
The subject property will be served by all necessary
utilities, supplied by the following entities.
Natural Gas: Southwest Gas
Sewage: Clark County Sanitation
Telephone: U.S. West Communications
Electricity and hot and chilled water will be
provided to the subject property and other components
of the mixed-use facility by the central utility
plant, discussed previously in this narrative.
Soil and Subsoil Conditions
Based on our visual inspection, the bearing qualities
of the level soils area appear adequate. No
extraordinary conditions were apparent. However, the
appraisers are not qualified to evaluate soils
conditions other than by a visual inspection of
surface conditions.
HVS International, Mineola, New York Property Description 5
- --------------------------------------------------------------------------------
Nuisances and Hazards
With the exception of some asbestos in the subject's
existing improvements, the appraisers have not been
informed of any other site-specific nuisances or
hazards. According to the property's developers, the
asbestos in the existing improvements will be removed
prior to demolition.
Flood Zone
According to the Federal Emergency Management Agency
(FEMA), panel #3200 3 2556 D, effective August 16,
1995, the subject site is located within flood zone
A. Flood zone A is defined as "areas inside the
100-year flood plain as determined in a Flood
Insurance Study."
Legal Description
A copy of the subject property's legal description,
as provided by Aladdin Holdings LLC, is contained in
the addenda to this report.
Conclusion
The subject site's size, shape, topography, access,
visibility, potential hazards, and availability of
utilities have been examined and evaluated, with the
following advantages and a disadvantage noted.
Advantages:
o Entitlement of the site for mixed-use
development;
o Frontage along Las Vegas Boulevard, "The
Strip";
o Frontage along Harmon Avenue;
o Excellent accessibility from I-15 and Las
Vegas Boulevard, Las Vegas's primary
north-south thoroughfares;
o Excellent accessibility from Harmon Avenue and
Audrie Road, primary east-west thoroughfares;
o Excellent visibility from Las Vegas Boulevard
and the surrounding area;
o Unique access features; and
o Proximity to other casino hotels and tourist
attractions.
Disadvantage:
HVS International, Mineola, New York Property Description 6
- --------------------------------------------------------------------------------
o Irregular shape of the site.
The physical advantages of the site are considered to
significantly outweigh the drawback. We conclude that
the subject site is physically appropriate for
improvement with a hotel and casino facility.
Zoning According to the Clark County planning department,
the subject property is zoned:
H1 - Limited Resort and Apartment District
In Clark County, H-1 zoning is devoted to the
creation of a gaming enterprise district. To that
end, commercial development specific to the
hospitality and lodging markets is permitted. This
zoning district also permits the development of
multiple dwellings, dwelling groups, apartment
houses, and time-share units.
In the H-1 district, one parking space is required
per guestroom, plus additional spaces in proportion
to public and meeting space. According to the
subject's developers, parking for roughly 6,000 cars
will be available within the mixed-use development.
According to discussions with Clark County Planning
officials this will meet zoning requirements. In
addition, the proposed subject property is expected
to conform to the city's height and setback
requirements.
We assume that all necessary permits and approvals
are in place, and that the proposed subject property
will be in conformance with the local zoning
ordinances, building codes, and all other applicable
regulations. We further assume that all applicable
licenses, including gaming and liquor, will be
obtainable by the owners of the site.
HVS International, Mineola, New York Property Description 7
- --------------------------------------------------------------------------------
Description of the The size, layout, and quality of the facility are
Improvements integral to its market orientation, penetration, and
win-per-unit levels. The quality and design of the
hotel and casino and support facilities have a direct
influence on the ability to attract and retain gaming
customers. In addition, a property's design can have
a significant effect on operating efficiencies and
overall profitability. The proposed mixed-use
development for the subject site is expected to
consist of a 2,600-room hotel and a
110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to
include approximately 71,500 square feet of meeting
space, a 1,400-seat show room, a 7,000-seat
performing arts center, nine separate food and
beverage outlets, and an expansive array of
back-of-the-house facilities typical of a large hotel
and casino. The remaining components of the mixed-use
development will include a 450,000-square-foot
shopping bazaar, a parking garage, and a central
utility plant. As mentioned, a reciprocal easement
agreement will provide for the free flow of
pedestrian traffic between all components of the
project. For purposes of this analysis, we have been
asked to value only the 2,600-room casino hotel
portion of the mixed-use development.
Proposed Property Overview
The Proposed Aladdin Hotel and Casino will contain
one 35-story guestroom towers and two 17-story
guestroom towers. In addition, the property will
contain a vast amount of public and casino space
located on three floors, one of which will be located
below street grade. Access to the subject property
will be provided via a circular driveway off either
Harmon Avenue or Las Vegas Boulevard. The driveway
will encircle the existing Theater for Performing
Arts, the only remaining portion of the property's
existing improvements. According to the property's
developers, approximately $8,000,000 will be spent on
upgrading and renovating the theater. This renovation
is expected to address all cosmetic and building
system issues. Note that a detailed renovation budget
for the theater was not provided to the appraisers.
The hotel and casino's main entrance will be one
level below grade. Guest valet service will be
provided at the main entrance, with approximately 500
valet parking stalls located on a subterranean level.
The subject property's lobby area, front desk,
concierge area, and bell stand will be located inside
the main entrance. Another registration area, used
exclusively for premium casino-invited guests, will
also be located off the main lobby. In addition to
these registration areas, the property's buffet food
and beverage outlet and back-of-the-house areas will
be located on this level. Two escalators at either
side of the lobby will provide access to the ground
floor of the structure. Two elevator banks, at the
northern and southern ends of the lobby, will
transport guests to the property's guestrooms. In
addition, the southern elevator bank will provide two
cars to transport VIP guests from the dedicated
check-in area.
HVS International, Mineola, New York Property Description 8
- --------------------------------------------------------------------------------
The property's main floor will contain the primary
casino area, measuring approximately 95,000 square
feet, the subject's 24-hour coffee shop, a
high-energy specialty restaurant, and access to the
shopping bazaar portion of the mixed-use development,
as well as the Theater for the Performing Arts. In
addition to the aforementioned escalators from the
property's registration area, access to the
property's casino level will be provided via two
entrances on Las Vegas Boulevard at the northern and
southern ends of the building. In order to maximize
the capture of pedestrians along Las Vegas Boulevard,
these entrances will be eye-catching, consistent with
the theme of the casino. The subject's specialty
restaurant will be located between the two Las Vegas
Boulevard entrances, at the eastern edge of the
structure. This restaurant will offer patio seating
with views of the Strip and will provide additional
exposure of the property to pedestrians walking along
Las Vegas Boulevard.
From the main floor of the property, guests can use
any number of escalators or elevators to access the
property's third floor. The third floor of the
property will be open in the middle, providing a view
of the main casino floor. The third floor will house
the subject's production show theater in the
northeastern portion of the building, two
restaurants, and the property's meeting space in the
northwestern portion of the structure. The subject's
pool and full-service spa will be located in the
southwestern portion of the third floor, while the
property's high-end, 15,000-square-foot Salle Prive
casino will be located in the southeastern portion of
the third floor. The Salle Prive casino will cater to
the property's premium players and offer its own food
and beverage outlet exclusively for Salle Prive
customers.
Overall, the proposed Aladdin Hotel and Casino will
be an attractive and efficiently laid-out building,
designed to maximize guest access, as well as
pedestrian flow and walk-in traffic. The site plans
located on the following pages, provided by the
property's developers, will provide further insight
into the proposed subject's layout. In addition, each
component of the proposed subject property will be
discussed in greater detail in the following
narrative.
HVS International, Mineola, New York Property Description 9
- --------------------------------------------------------------------------------
INSERT FLOOR PLAN #1
HVS International, Mineola, New York Property Description 10
- --------------------------------------------------------------------------------
INSERT FLOOR PLAN #2
HVS International, Mineola, New York Property Description 11
- --------------------------------------------------------------------------------
INSERT FLOOR PLAN #3
HVS International, Mineola, New York Property Description 12
- --------------------------------------------------------------------------------
Casino Component
The subject property's primary 95,000-square-foot
casino will be located on the main floor of the
property. The primary casino will contain 2,800
gaming devices and 87 table games, located throughout
the casino floor. A sports book and keno lounge will
provide additional gaming opportunities for
customers. The property will offer the Salle Prive, a
high-end gaming area for premium players. This gaming
area will be located on the third floor of the
facility and will offer 30 gaming tables including
baccarat, double and single zero roulette, and
high-end blackjack. One hundred high-denomination
gaming devices will also be located in the Salle
Prive gaming area. Access to the Salle Prive area
will not be restricted but non-premium players are
not expected to frequent this area due to its high
limits and resultant atmosphere, as is the custom for
high-end gaming areas.
The subject's casino areas are designed in a logical
manner, funneling both hotel guests and patrons of
ancillary outlets through the casino floor. The
following table presents a summary of the casino
facilities.
HVS International, Mineola, New York Property Description 13
- --------------------------------------------------------------------------------
Summary of Casino Facilities
Casino
-----------------------------------------------------
Square Feet 100,000
Table Game Inventory (Main Casino) Units
Twenty-one 50
Craps 12
Roulette 7
Wheel 2
Baccarat 2
Mini Baccarat 2
Caribbean Stud 4
Let it Ride 2
Pai Gow 6
-------
Subtotal 87
Table Game Inventory (Salle Prive)
Twenty-one 12
Craps 2
Roulette 6
Baccarat 4
Caribbean Stud 2
Pai Gow 2
Let it Ride 2
-------
Subtotal 30
Total Table Games 117
Gaming Device Inventory (Main Casino)
5 Cent 284
25 Cent 1,224
50 Cent 292
$1 Dollar 826
$5 Dollar 152
$25 Dollar 16
$100 Dollar 6
-------
Subtotal 2,800
Gaming Device Inventory (Salle Prive)
$1 Dollar 74
$5 Dollar 16
$25 Dollar 6
$100 Dollar 4
-------
Subtotal 100
Total Gaming Devices 2,900
Sports Book
Race Book
Keno Lounge
Poker Room
----------------------------------------------------------
HVS International, Mineola, New York Property Description 14
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Hotel Component
The subject property's hotel component will consist
of a 35-story main tower flanked by two secondary
17-story towers. The secondary towers will extend
east-west from the main tower. The Aladdin Hotel and
Casino will offer 2,600 guestrooms of various sizes
and configurations. According to information provided
by the project's developers, there will be
approximately 2,000 standard rooms of +/- 450 square
feet, 425 king parlor rooms of +/- 620 square feet,
and 175 suites ranging in size from +/- 600 square
feet to +/- 3,500 square feet. In addition,
approximately 25 suites will be dedicated to premium
casino-invited guests. These suites will be located
on the top five floors of the main tower and will
have dedicated vertical access, as well as private
guestroom access.
The subject property's guestrooms will be appointed
with high-quality furniture, fixtures, and equipment
and cater to the upper-middle tier traveler. Typical
guestroom appointments and fixtures will be as
follows:
Bedroom
o One king or two queen beds with night stands
and wall-mounted lamps and color-coordinated
sheets and bedspreads;
o Color-coordinated vinyl wallcovering and
wall-to-wall carpeting;
o Activity table with cushioned chairs;
o Armoire with remote-controlled, color
television and in-room movie system;
o Walk-in closet;
o Push-button telephone; and
o Framed artwork.
Bathroom
o Distinctive four- or five-fixture bathroom
amenities, including separate tub and shower
stalls, flush ceramic commode, one or two
sinks, and lighted vanity area;
o Fully tiled tub and shower walls;
o Tiled floor;
o Hair Dryers; and
o telephones.
HVS International, Mineola, New York Property Description 15
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Due to the proposed high-quality appointments and
fixtures, the property is expected to successfully
penetrate the upper-middle tier of travelers. The
following table presents a summary of the hotel
facilities.
Summary of Hotel Facilities
Hotel Number of Units
--------------------------------------------------
Standard Rooms 2,000
King Parlor Rooms 425
Standard Suites 150
Salle Prive Suites 25
-----
Total 2,600
-----------------------------------------------------
Food and Beverage Component
The Aladdin Hotel and Casino will offer nine food and
beverage outlets to guests. Food and beverage choices
will cover a wide variety of tastes and styles, from
a buffet and food court to an exclusive high-end
restaurant. Like the property's guestrooms, the food
and beverage outlets will be appointed with
high-quality furniture, fixtures, and equipment and
provide patrons with a unique and pleasant dining
experience. The following table presents a summary of
the Aladdin's proposed food and beverage facilities.
Summary of Food and Beverage Facilities
Estimated Seating
Food and Beverage Facilities Capacity
-----------------------------------------------------
Restaurants
Buffet and Food Plaza 1,000
24-hour Coffee Shop 575
High-Energy Restaurant 225
Italian Restaurant 200
Themed Restaurant 150
Steakhouse 150
Sushi/Chinese Noodle Bar 50
Casual Dining Coffee Bar 50
Salle Prive Exclusive Restaurant 100
-----
Total 2,500
-----------------------------------------------------
The aforementioned restaurants will be located
throughout the Aladdin Hotel and Casino.
Specifically, the Buffet and Food Plaza will be
located on the subterranean level of the property.
The coffee shop and high-energy restaurant will be
located on the ground floor of the property. The
steakhouse, themed restaurant, noodle shop, coffee
bar, and Salle Prive restaurant will be located on
the third floor of the property. In addition to the
aforementioned restaurants, several bars and lounges
HVS International, Mineola, New York Property Description 16
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will be located throughout the Aladdin Hotel and
Casino; however, the appraisers were not provided
with detailed information concerning the number,
style, or location of the bars and lounges.
Meeting Space
The Proposed Aladdin Hotel and Casino will contain a
flexible supply of meeting and banquet space used to
accommodate in-house groups and local functions. The
conference center will be located in the northeastern
section of the property's third floor and will
include a main ballroom, prefunction space, and 16
breakout rooms. Similar to the other components of
the subject property, the conference center will
feature high-quality appointments and fixtures and
have an efficient, functional design. The following
table presents a summary of the proposed meeting and
banquet space.
Summary of Meeting Facilities
Estimated Square
Conference Facilities Footage
-----------------------------------------------
Main Ballroom 28,500
Prefunction Space 25,600
Breakout Rooms (16) 17,400
------
Total 71,500
-----------------------------------------------------
Retail Outlets
The Proposed Aladdin Hotel and Casino will contain a
small retail component separate from the
450,000-square-foot shopping bazaar. This retail
component is expected to consist primarily of gift
shops and sundry outlets. These outlets will be
located throughout the property.
Theater for Performing Arts
As mentioned, the Theater for Performing Arts will be
the only structure remaining of the subject
property's existing improvements. The theater has
seating for approximately 7,000 and boasts
exceptional sight lines and acoustics. The center is
expected to host major concerts, Broadway shows, and
award shows. According to the developers of the
Aladdin Hotel and Casino, approximately $8,000,000
will be spent on renovating and refurbishing the
entire theater. This capital expenditure is expected
to be sufficient.
Production Show Theater
HVS International, Mineola, New York Property Description 17
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In addition to the Theater for Performing Arts, the
subject property will offer a 1,400-seat production
show theater. The production show is currently
planned with a Scheherazade/1,001 Arabian Nights
theme and will offer nightly performances.
Spa and Health Club
The proposed subject property will also feature a
20,000-square-foot spa and health club. The spa will
offer a steam room, sauna, massage services, and
other pampering amenities typically found in a
full-service spa facility. The spa will be located
adjacent to the subject property's pool area in the
southeastern section of the third floor.
Back-of-the-House Facilities
The back-of-the-house facilities at the Proposed
Aladdin Hotel and Casino will be expansive,
consisting of several kitchens and preparation areas,
the shipping and receiving dock, the mechanical and
electrical equipment areas, the employee dining area,
the executive, administrative and sales offices, and
the security/surveillance area. Based on the site
plans provided by the property's developers, the
kitchen and preparation areas, offices, and employee
areas are of sufficient size to handle the property's
needs.
The subject property will offer approximately 500 to
600 valet parking spaces, located on a subterranean
level of the property. While this parking allotment
will be inadequate to service the needs of the entire
hotel and casino, a 6,000-stall parking garage will
be part of the shopping bazaar portion of the entire
mixed-use development. Access to this parking garage
will be covered by the reciprocal easement agreement
discussed earlier in this report. While we have not
included the shopping bazaar and parking garage in
our estimate of the prospective market value of the
hotel and casino, it is assumed parking issues will
not affect the subject property.
The proposed subject property's HVAC and air exchange
system will be a state-of-the-art, four-pipe system
with individual guestroom controls. A breakdown of
the equipment was not provided to the appraisers, but
it is assumed the system will be sufficient to handle
the needs of the subject property.
An integral part of every casino operation is video
surveillance. The subject property will have a
state-of-the-art video surveillance room consisting
of several videocassette recorders, a bank of video
monitors, and a control panel which can manipulate
any one of the video cameras located on the casino
floor, in the casino cage, or in the
back-of-the-house areas.
Conclusion
HVS International, Mineola, New York Property Description 18
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We have evaluated the Aladdin Hotel and Casino's
proposed improvements. Based on this evaluation, we
believe the Aladdin Hotel and Casino will be an
efficient, high-quality facility with appropriate
casino, hotel, and ancillary spaces. Overall, the
subject's proposed improvements are expected to make
it a highly competitive and attractive hotel and
casino facility.
Neighborhood The neighborhood surrounding a casino hotel often has
Analysis an impact on a property's status, image, class, style
of operation, and sometimes its ability to attract
and properly serve a particular market segment. The
subject property's neighborhood can affect its casino
win-per-unit and penetration levels, occupancy,
average rate, food and beverage revenues, and overall
profitability.
As discussed, the subject site is located on Las
Vegas Boulevard, also known as "the Strip." The
neighborhood is characterized by the surrounding
casino hotels such as MGM Grand, Bally's, Monte
Carlo, New York - New York, Excalibur, Luxor, and the
soon-to-open Paris and Bellagio. Ancillary
development in the surrounding area consists of
tourism-related retail development, other gaming
venues, and themed restaurants such as the Country
Star, Harley Davidson Cafe, and All Star Cafe. The
immediate neighborhood is defined as the Las Vegas
Boulevard Corridor, bounded to the north by Sahara
Avenue and to the south by Russell. This stretch of
Las Vegas Boulevard measures approximately three
miles, with the subject site at the mid-point. This
section of the Las Vegas Strip has become a
high-demand area in recent years due to the opening
of several mega-resorts (such as MGM and New York New
York). As such, pedestrian traffic within the
subject's neighborhood is excellent and visitation to
the area from other resorts is also excellent. The
area represents the highest quality hotel and casino
properties and is the most favorable area for the
development of a new hotel and casino in the world.
In addition, the subject's Las Vegas Strip location
places it proximate to most of Las Vegas' demand
generators. These demand generators include McCarran
International Airport (two miles southeast),
University of Nevada, Las Vegas, the Thomas and Mack
Center (two miles due east), and the Las Vegas
Convention Center (three miles northeast).
Overall, the subject neighborhood is considered to be
appropriate and highly attractive for the subject
property's use and target market. The subject
neighborhood encompasses several key leisure demand
generators and also offers a setting that can be
perceived as very accessible and supportive of
gaming.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 1
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6. Gaming Supply and Demand Analysis
The initial step in analyzing supply and demand
trends within a given gaming market is to quantify
the existing level of gaming inventory, segmented by
table games and gaming devices. To quantify gaming
supply levels, a detailed review of all competitive
gaming facilities is performed. Once the market's
supply level and gaming mix are known, an analysis of
the demand for gaming facilities is performed.
Unlike traditional economic models of supply and
demand, the price variable associated with gaming is
largely determined by the consumer. Gaming is an
intangible product: the consumer is purchasing the
"experience" and "excitement" casino gaming offers.
The price that the consumer is willing to pay for
this experience is known as the "win," and is
quantified on a per-unit basis known as the "win per
unit per day" (WPUPD). Research indicates that the
WPUPD, or the price a market can bear for gaming
activity, is highly correlated to the level of
available gaming inventory. The actual WPUPD attained
by a market, say $250 per gaming device, provides an
indication of the marketwide demand for gaming
devices. As will be further discussed, these demand
levels within a market can be estimated through an
analysis of the actual WPUPD attained by the market.
Historical fluctuations in the marketwide WPUPD at
various levels of supply can provide insight into the
future demand for gaming. Further impacting the
demand for gaming facilities in the market are
current and projected trends in economic and
demographic factors such as population base,
employment, disposable income levels, and visitation
statistics. In addition, seasonal fluctuations must
be taken into consideration when analyzing demand
trends.
Once the various demand trends have been identified,
a variety of analytical methodologies may be employed
to forecast gaming revenue for an overall market or
an individual property. The employment of a specific
methodology must take into consideration the
reliability and availability of the data to be
utilized.
For the purposes of this analysis, the proposed
Aladdin Hotel and Casino has been classified as a
part of the Las Vegas Strip ($72 million and over)
gaming market. The following procedures are employed
in our analysis of gaming supply and demand trends.
Analysis of Supply:
o Identify all local and regional gaming
facilities;
o Determine whether additional gaming facilities
will enter the market in the foreseeable
future; and
HVS International, Mineola, New York Gaming Supply and Demand Analysis 2
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o Quantify the number of existing and proposed
gaming facilities by gaming units (i.e., table
games and gaming devices) available in the
market area.
Analysis of Demand:
o Review the area and neighborhood economic and
demographic data to determine the market's
overall health and ability to support existing
and proposed levels of gaming supply;
o Examine the local and regional demand sources
by market segment to determine potential market
mix, demand levels, player gaming habits, and
the populace's propensity to gamble; and
o Review historical trends in WPUPD levels to
determine the potential for growth,
stabilization, or saturation.
Existing Supply As of December 1996, there were 19 casinos operating
within the Las Vegas Strip ($72 million and over)
market; the 19 casinos contained an aggregate of
1,495 table games and 37,197 gaming devices. The Las
Vegas Strip ($72 million and over) market is the
largest gaming market in the world including such
famous properties as the Mirage, the MGM Grand,
Caesars Palace, and Circus Circus. The following
table presents the Las Vegas Strip ($72 million and
over) gaming inventory level as of December 1996.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 3
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Existing Gaming Supply - Las Vegas Strip ($72 million and over)
Casino
Square Casino SF Table Gaming
Market/Casino Owner Rooms Footage per Room Games Devices
- -----------------------------------------------------------------------------------------------------------------------------
Aladdin Casino Hotel Jack Sommer 1,100 34,452 31.3 26 1,005
Bally's Casino Resort Bally's Entertainment Corp. 2,814 54,603 19.4 86 1,860
Caesars Palace ITT Corp. 1,519 118,000 77.7 123 2,011
Circus Circus Circus Circus Enterprises 2,793 111,069 39.8 74 2,825
Excalibur Circus Circus Enterprises 4,032 123,944 30.7 80 2,600
Flamingo Hilton Hilton Corp. 3,642 80,334 22.1 86 1,800
Harrah's Las Vegas Harrah's Entertainment 1,711 73,754 43.1 78 1,777
Imperial Palace Imperial Palace, Inc. 2,636 47,625 18.1 43 1,900
Las Vegas Hilton Hilton Corp. 3,174 76,500 24.1 72 1,119
Luxor Circus Circus Enterprises 2,526 100,000 39.6 96 2,495
MGM Grand MGM Grand 5,005 171,500 34.3 170 3,720
The Mirage Mirage Resorts 3,049 95,300 31.3 120 2,225
Riviera Riviera Holding Corp. 2,109 102,300 48.5 43 1,389
Sahara Casino Hotel Gordon Gaming 2,045 26,956 13.2 41 1,550
Monte Carlo Circus & Mirage 715 36,438 51.0 95 2,312
Sheraton Desert Inn ITT Corp. 821 18,900 23.0 61 500
Stardust Resort and Casino Boyd Gaming Corp. 2,341 65,538 28.0 65 1,995
Treasure Island Mirage Resorts 2,900 75,294 26.0 86 2,320
Tropicana Resort and Casino Aztar Corp. 1,910 45,194 23.7 50 1,794
Totals 46,842 1,457,701 31.1 1,495 37,197
- -----------------------------------------------------------------------------------------------------------------------------
The overall competitive environment of the Las Vegas
Strip is intense. The result of this intensity has
been the evolution of the Las Vegas Strip into a
group of diverse gaming properties each seeking to
induce and capture a specific niche. Property types
range from the $1.0-billion MGM Grand
Hotel/Casino/Theme Park, to the aged Sahara Casino
Hotel. Properties such as the Mirage, the Las Vegas
Hilton, the MGM Grand, and Caesars Palace cater to
the upper-middle and upper-income markets and high
rollers, while Circus Circus and the Excalibur have
successfully captured the lower-income "grind"
players. While the lower-income markets may not be as
glamorous, they do provide a steady stream of gaming
win. Conversely, high rollers, or "whales," can
impact an entire quarter's worth of gaming win in one
evening. The recent expansion of the Las Vegas Strip
has been designed to induce alternative demographic
groups by offering alternatives to gaming such as
theme parks, thrill rides, and high-tech
entertainment options. The MGM Grand, Circus Circus,
and the Luxor all have had varying degrees of success
capturing these new types of visitors.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 4
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The older properties located along the Strip have
been challenged by the new mega-resorts and the shift
in demand to the southern end of Las Vegas Boulevard.
Functional obsolescence and the lack of necessary
capital expenditures have severely impacted the
competitiveness of properties such as the Riviera,
the Sands, the Sahara, the Frontier, and the
Tropicana. These properties cannot offer the new
amenities that today's Las Vegas visitors crave and
must survive by accommodating the older Las Vegas
visitor demographic whose primary purpose is gaming.
It should be noted however, that all of the Las Vegas
Strip properties have benefited from the overall
increase in tourist visitation created by the new
mega-resorts. As will be further discussed, evidence
suggests that the Las Vegas Strip gaming market is
largely supply driven.
The proposed subject property will primarily be
marketed to the upper-middle income tier of Las Vegas
visitors. In addition, the added amenities and
high-quality product the subject will offer should
allow it to capture the new demographic groups. Also,
as mentioned, the subject property will joint venture
with London Clubs International (LCI). LCI will
greatly enhance the property's marketing to
international clientele, especially in Europe and the
Middle East.
Overall, the existing gaming inventory of the Las
Vegas Strip ($72 million and over) market ranges from
high-end mega-resorts to aged casino hotels.
Reflecting the migration of demand in the Las Vegas
Strip ($72 million and over) market to the southern
end of the Strip, as well as the desire of current
Las Vegas visitors for amenities other than gaming,
it is our opinion that the subject property will be
ideally located and outfitted to maximize the capture
of customers and subsequent revenue.
Proposed Additions to Based on conversations with local officials and
Supply knowledgeable parties, seven large additions to
supply, including the subject property, are projected
to enter the Las Vegas Strip ($72 million and over)
market within the next three years. As MGM Grand's
New York - New York opened in January 1997, its
inventory and revenue levels were not included in the
1996 data used as our basis for forecasting. As such,
for purposes of this analysis, it is considered an
addition to supply. In addition, other smaller
additions and expansions are expected to increase the
market's gaming supply. The following chart lists the
expected additions to supply in the Las Vegas Strip
($72 million and over) market. Note that the 1,000
room casino hotel proposed as part of the subject's
mixed-use development has not been included in the
following chart. Due to this property's size and
location (removed from Las Vegas Boulevard) it is not
expected to be included in the Las Vegas Strip ($72
million and over) category.
Additions to Supply - Las Vegas Strip ($72 million and over)
HVS International, Mineola, New York Gaming Supply and Demand Analysis 5
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Estimated Opening # Days Into Table Gaming
Casino Operator Date Projection Games Devices Guestrooms
- ------------------------------------------------------------------------------------------------------------------
Bellagio Mirage Resorts 04/01/98 455 173 2,746 3,005
Project Paradise Circus Circus 10/01/98 638 110 2,400 3,800
Paris Hilton 04/01/99 820 75 3,000 3,000
Venetian Phase I Sheldon Adelson 06/01/99 881 100 3,000 3,000
Venetian Phase II Sheldon Adelson 01/01/2000 1095 50 1,000 3,000
Aladdin Aladdin Gaming, LLC 01/01/2000 1095 117 2,900 2,600
New York New York MGM 01/01/97 0 73 2,425 2,035
Other * N/A 01/01/97 0 104 976 0
* Represents expansions and additions to current properties
- ------------------------------------------------------------------------------------------------------------------
Note that the "other casino" category in the above
chart represents expansions and additions to current
properties within the Las Vegas Strip ($72 million
and over) category. These numbers have been utilized
to bring the year-end 1996 gaming unit levels up to
date with the year-to-date gaming unit levels.
Bellagio is a $1.3-billion resort being developed by
Mirage Resorts at the corner of Flamingo Road and Las
Vegas Boulevard, which is the site of the old Dunes
Hotel Casino just across Las Vegas Boulevard from the
proposed subject site. Given its high cost per room,
Bellagio will be marketed to the highest end of the
gaming spectrum. Reportedly, rack rates will be in
excess of $200 per night. We believe that Bellagio
will not compete directly with the subject property;
however, given its "must-see" appeal, it will bring
pedestrian traffic and demand to the subject
property's immediate area.
Project Paradise, the proposed $1-billion casino
hotel development by Circus Circus, recently began
construction on a site adjacent to the Luxor hotel
and casino. The project is expected to open in
October 1998. The massive Project Paradise is
expected to have as many as four different casinos
and a high-end Four Seasons Hotel as the primary
anchors. The first phase of development is expected
to consist of a 3,800-room casino, catering to the
upper income traveler. Average rates are expected to
exceed $200. Due to its high end orientation, this
property is expected to compete more with the
Bellagio than the subject property.
Paris, the proposed $420-million casino hotel
development by Bally's Entertainment (now part of
Hilton Hotels), recently began construction on a site
adjacent to the subject. According to published
reports, the project will open by the first quarter
of 1998. Similar to the New York-New York theme,
Paris will feature well-known attractions and
replicas of Parisian origin. Proposed is a 540-foot
facsimile of the Eiffel Tower, the Arc de Triomphe,
and the Paris Opera House. The property will be
marketed to the upper-middle tier of the Las Vegas
gaming market and be priced
HVS International, Mineola, New York Gaming Supply and Demand Analysis 6
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above Bally's Hotel Casino. As such, it is expected
to compete primarily with the subject property.
The largest proposed addition to the Las Vegas gaming
market is the planned Venetian Resort on the site of
the old Sands Hotel and Casino. This development is
expected to include roughly 6,000 guestrooms, 500,000
square feet of retail space, an expansion of the
existing Sands Expo Center, and almost 200,000 square
feet of gaming space. The project's estimated cost is
$1.8 billion and it is expected to open in two
phases, by mid-1999 and by 2000. The Venetian will be
located at the northern end of the Strip and is
expected to help invigorate this area by competing
with the recent construction along the southern end
of the Strip. This property is expected to compete
directly with the subject property due to its
intended market orientation, as well as its large
retail component, similar to that of the subject.
The final proposed addition to supply is the proposed
subject property. As discussed, the subject is
expected to open by January 2000 and consist of a
450,000-square-foot retail facility, 110,000 square
feet of gaming space, and 2,600 guestrooms. The
subject will be marketed to the upper-middle tier of
Las Vegas visitors and is expected to compete to a
high degree with similar existing and proposed hotel
casinos located along the Las Vegas Strip.
As mentioned, New York-New York opened in January
1997 and is located at the northwest corner of the
Las Vegas Boulevard and Tropicana Avenue
intersection. This intersection, which is also home
to the Tropicana, the MGM Grand, and the Excalibur,
is known as the "New Four Corners." The cost of the
joint-venture between MGM Grand and Primadonna
Resorts, Inc., was estimated at $400 million. The New
York-New York is currently being marketed to the
"upper" mid-priced segment, with average room rates
between $100 and $150 per night. As such, we believe
the subject property will compete primarily with the
New York-New York.
We have also included the addition of 104 table games
and 976 gaming devices to account for the expansion
of several existing facilities of gaming inventory
within the proposed subject's market area.
In addition to the aforementioned additions to
supply, we have considered the demolition of the
existing Aladdin Hotel and Casino. As discussed, the
current Aladdin will be demolished in order for the
new property to be constructed. As such, we have
subtracted the gaming inventory of the current
Aladdin (26 table games and 1,005 gaming devices)
from our analysis beginning in January 1998, the
anticipated construction start date for the subject
property.
Supply Conclusion Summarizing the preceding discussion of existing and
proposed gaming supply, we believe that the Proposed
Aladdin Hotel and Casino will compete to varying
degrees
HVS International, Mineola, New York Gaming Supply and Demand Analysis 7
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with the existing casinos located within the Las
Vegas Strip ($72 million and over) market. As of
December 1996, the Las Vegas Strip ($72 million and
over) market includes approximately 1,495 table games
and 37,197 gaming devices. Upon stabilization of the
Las Vegas Strip ($72 million and over) market in
2001, table game and gaming device inventory levels
are projected to be 2,388 and 57,539, respectively.
The following map shows the gaming supply located
within the Las Vegas Strip ($72 million and over)
market.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 8
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INSERT COMP MAP
HVS International, Mineola, New York Gaming Supply and Demand Analysis 9
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Demand Analysis The proliferation of gaming throughout the United
States and the tremendous expansion of gaming in
southern Nevada have elevated gaming to a nationwide
industry. The development of multiple markets across
the nation has been spurred by state and local
governments' desire to increase the tax base. As a
result, aggregate gaming demand has been dispersed
across the nation. Prior to the development of Native
American reservation and riverboat gaming, the
primary gaming markets were southern Nevada and
Atlantic City, New Jersey; as such, aggregate gaming
demand could be reasonably estimated via an analysis
of these two markets. However, in today's prolific
gaming environment, demand is now a function of
available supply and the various economic and
demographic characteristics impacting a given region.
As such, the market as a whole is not as simple to
analyze. With each emerging market competing for and
capturing a portion of overall gaming demand, a
regional analysis is necessary to determine a
market's existing demand level and growth potential,
as well as its propensity to attract demand from
other regional and national gaming markets.
Economic and As described previously in the "Market Area Analysis"
Demographic Review section, the subject market appears well suited to
support a gaming inventory based on the capturable
adult population, the amount of discretionary income,
the populace's propensity to spend discretionary
income on entertainment and goods and services, and
the expansive tourism industry. With an estimated
local population of nearly 1.0 million people and
almost 30 million tourists visiting the metropolitan
Las Vegas area annually, the amount of existing and
potential gaming activity is significant. Given its
critical mass and billions of dollars in invested
capital, no other destination will be able to
duplicate the Las Vegas experience. As such, we
believe that the Las Vegas market will continue to be
the preeminent domestic and international gaming
destination.
Demand Sources Demand for gaming can be classified into four primary
sources: the leisure segment, the local residents,
tour and travel groups, and conventions. Each of
these gaming demand segments has distinct
characteristics which affect the market's potential
capacity utilization levels and subsequent gaming
revenues; these characteristics include gaming
frequency, duration of play, gaming budgets, game
preferences, and preferred facilities. With the
exception of local residents, the demand generally
originates from outside the subject property's
primary market. As mentioned, the primary feeder
market for the Las Vegas gaming market is Southern
California.
Leisure Demand
As previously discussed, leisure visitation to Las
Vegas is enormous, with visitors taking advantage of
the year-round favorable climate and multitude of
attractions. The leisure segment utilizes both table
games and gaming devices and has a higher propensity
to play table games than the other demand segments.
Gaming propensity
HVS International, Mineola, New York Gaming Supply and Demand Analysis 10
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and frequency within the leisure segment vary
significantly, from novices, or "grind" players, to
rated players." Further, the gaming budgets of
leisure patrons vary considerably, as do their
average wagers. While the primary goal in attracting
the leisure traveler is gaming activity, food and
beverage outlets can also be priced to break even.
According to the Las Vegas Convention and Visitors
Authority, over 60% of visitors to Las Vegas were on
vacation. Of those polled, 87% of visitors said they
had gambled while in Las Vegas. The casino games most
often played were the slot machines, at approximately
53%, twenty-one was a distant second at 16%, followed
by video poker at 14%.
Local Demand
In emerging riverboat, dockside, and Native American
gaming markets, local residents constitute a
significant portion of the overall gaming demand. The
majority of patronage, an estimated 65% to 75%,
originates within a 50-mile radius. In markets such
as Las Vegas and Atlantic City, which possess a
critical mass of gaming, lodging, and entertainment
facilities, local demand plays a secondary role to
demand from the tour and travel, leisure, and
convention segments. However, local patronage is
necessary to provide a base level of annual demand,
offsetting the effects of seasonality on revenues. In
competitive markets, local patrons possess a high
degree of loyalty, based on personal service and
incentives. Such incentives include complimentary
food and beverage service, bonus winnings,
complimentary room nights, complimentary travel, and
gift items. Gaming frequency among local patrons
depends on a number of factors, including the
convenience of the casinos, the average age of the
populace, and disposable income levels. Typically,
local residents can be expected to allot a higher
percentage of discretionary income to gaming
activities than other demand segments. However, due
to higher frequency levels and longer play duration,
local residents tend to make lower average wagers.
Locals often possess superior gaming skills and seek
tables and devices which offer the highest payouts
and best odds. In certain markets, locals tend to be
seasonal in an attempt to circumvent the crowds
associated with peak demand periods of tourist and
leisure visitation.
The total contribution to Las Vegas' gaming revenue
by the local demand segment has been estimated at
$900 million per year. However, the local segment's
impact on the Las Vegas Strip ($72 million and over)
market is only moderate. According to the Las Vegas
Convention and Visitors Authority, only 23% of locals
gambled on the Strip, with the majority, 61%,
gambling neither on the Strip or downtown. Of the
locals polled, 20% gambled at least once a week and
33% gambled at least once a month.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 11
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Tour and Travel Demand
The seasonality of tour and travel demand varies,
depending on the type and mode of transportation.
Demand generated by the tour and travel segment is
primarily a function of an individual property's
marketing efforts, or their relationship with a
wholesaler. Tours organized by outside wholesalers
and recreational groups tend to be more seasonal,
while motor-coach tours, gaming junkets, and
all-inclusive vacations marketed by the individual
properties are booked in the shoulder and off seasons
to offset declining leisure visitation. The costs of
marketing to this segment are high, and in some
instances negate the potential gain in revenue. The
primary goal in attracting tour and travel groups is
gaming activity; rooms and food and beverage outlets
tend to be loss leaders. Gaming frequency among tour
and travel patrons is high, due to the purpose of the
trip and the limited length of stay. Traditionally,
tour and travel patrons favor gaming devices as
opposed to table games. Depending on the type of
group and predetermined gaming levels, tour and
travel patrons allocate a considerable portion of
their total travel budget for gaming activities and
tend to make median-sized wagers per hand, or pull.
The bus segment makes up a small portion of overall
demand within the Las Vegas market compared to a
market like Atlantic City, which is dependent on bus
tours running from the major population centers. The
wholesale market, which utilizes air transportation,
is the major component of the Las Vegas tour and
travel market.
Convention Demand
Convention demand within the Las Vegas market is
significant. In 1996, Las Vegas hosted over 3.3
million conventioneers, a 13.0% increase over 1995.
However, conventioneers tend to spend less time in
the casino than other market segments. As such,
casino hotels seeking to maximize occupied rooms in
terms of casino win, are less likely to accommodate
the convention segment.
Demand Conclusion
The Las Vegas market has evolved into a multi-faceted
gaming and entertainment destination. As evidenced,
new supply and "must-see" attractions have provided
an impetus for new demand. In our opinion the Las
Vegas market will continue to grow as new supply
enters the area, albeit at slightly lower rates. The
success of the proposed subject property is dependent
on several factors, including, but not limited to,
the following:
o The continued growth in overall visitation to
the Las Vegas area and Las Vegas's status as
the eminent gaming destination;
HVS International, Mineola, New York Gaming Supply and Demand Analysis 12
- --------------------------------------------------------------------------------
o The property's ability to attract and retain
visitors with its high-quality product, high
levels of customer service, and a diverse mix
of gaming and other entertainment options; and
o The region and nation's continued economic
growth.
WPUPD Analysis The win per unit per day (WPUPD) statistic provides
the basis for the analysis and projection of table
game and gaming device revenues. WPUPD is calculated
by dividing total gaming revenues generated by a
particular type of gaming unit by the number of
gaming units available. Gaming statistics published
in a majority of the gaming markets include the
number of gaming units and total win figures by
either table games and gaming devices or by
individual games and devices (i.e., twenty-one
tables, crap tables, five-cent devices,
twenty-five-cent devices, etc.). As will be shown,
the WPUPD figure provides insight into the efficiency
of a market, demand levels, and saturation levels. In
the forecast of gaming revenues, a WPUPD estimate is
applied to the projected level of supply to arrive at
an overall gaming win figure.
Analysis of the Las The following WPUPD levels provide the basis for our
Vegas Strip ($72 marketwide gaming revenue projections, as presented
million and over market) in the subsequent section entitled "Forecast of
Gaming Revenue." As mentioned, a detailed analysis
has been performed on the Las Vegas Strip ($72
million and over) gaming market. The data utilized in
our analysis have been derived from the Gaming
Revenue Report, published by the State of Nevada
Gaming Control Board. We have reviewed all the
available data for the market and believe the figures
presented in the following analysis to be accurate.
The following table presents a yearly analysis of the
Las Vegas Strip ($72 million and over) gaming market
segmented into table games and gaming devices. The
three primary statistics comprising the analysis are
total win, the number of units, and WPUPD.
HVS International, Mineola, New York Gaming Supply and Demand Analysis 13
- --------------------------------------------------------------------------------
Analysis of Las Vegas Strip ($72 million and over) Market
Table Games Gaming Devices
--------------------------------------------------------- ------------------------------------------------------
Year Win % Change Units % Change WPUPD % Change Win % Change Units % Change WPUPD % Change
- ------------------------------------------------------------------------------------------------------------------------------------
1992 $ 974,174 --- 1,101 --- $2,424 --- $1,021,805 --- 26,525 --- $106 ---
1993 1,085,276 11.4% 1,116 1.4% 2,664 9.9% 1,078,632 5.6% 26,997 1.8% 109 3.7%
1994 1,441,155 32.8 1,476 32.3 2,675 0.4 1,428,500 32.4 37,245 38.0 105 (4.0)
1995 1,591,184 10.4 1,451 (1.7) 3,004 12.3 1,369,914 (4.1) 36,191 (2.8) 104 (1.3)
1996 1,515,105 (4.8) 1,495 3.0 2,777 (7.6) 1,442,373 5.3 37,197 2.8 106 2.4
Annual % Chg. 11.7% 7.9% 3.5% 9.0% 8.8% 0.2%
YTD 6/96 $ 755,625 --- 1,468 --- 1,410 --- $ 729,654 --- 36,896 --- 54 ---
YTD 6/97 827,644 9.5% 1,672 13.9% 1,356 (3.8)% 746,015 2.2% 40,598 10.0% 50 (7.1)%
LTM through 7/96 $1,727,721 --- 1,560 --- $3,034 $1,467,537 --- 37,483 --- $107
LTM through 7/97 1,724,658 (0.2)% 1,779 14.0% 2,656 (12.5)% 1,535,213 4.6% 42,104 12.3% 100 (6.9)%
- ------------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Gaming Supply and Demand Analysis 14
- --------------------------------------------------------------------------------
Overall, the Las Vegas Strip ($72 million and over)
market for gaming devices has exhibited high levels
of demand and absorption, as evidenced by relatively
flat WPUPD levels during periods of increasing
inventory. Specifically, WPUPD levels showed an
average annual compounded percent change of only 0.2%
from 1992 to 1996, while supply increased by 8.8%
over the same period. In addition, total win
increased at an average annual rate of 9.0% from 1992
to 1996, only slightly more than supply.
Table game WPUPD levels appear to be more volatile
and subject to external forces. The major factor
influencing table game WPUPD volatility is the market
mix of individual casinos and the subsequent amount
of table game bets. While casinos catering to the
lower income level player do not witness large table
game volatility, the casinos that aggressively market
to higher income players and high rollers often
experience vast fluctuations in table game WPUPD
levels. This fact is most evident in baccarat play.
Typically baccarat players are high rollers, wagering
up to $200,000 per hand. In one night, such players
can win or lose $10,000,000. As such, table game
play, especially in the Las Vegas Strip ($72 million
and over) market can show vast WPUPD fluctuations. As
mentioned throughout this report, the subject
property is expected to cater to the upper-middle
tier Las Vegas visitor and not the extreme high
rollers. As such, the subject's table game revenues
are not expected to be as volatile as those of the
casinos that cater to higher end players.
In addition, increases in total gaming win have
mirrored the increase in available supply, an
excellent sign of the market's health and growth
potential. Given the area's favorable demographics
and healthy tourism industry, the Las Vegas Strip
($72 million and over) market has the potential for
further expansion. As evidenced, new supply has
historically provided the impetus for large increases
in demand. The next wave of new supply, including the
subject property, the Venetian, and Bellagio, is
anticipated to expand the overall market.
Conclusion Our forecast of marketwide gaming win, presented in
the following section of this report, factors in the
historical WPUPD levels attained by the market, and
the incremental change in WPUPD rates as inventory
levels either increase or decrease. Additional
factors impacting WPUPD levels are inflation,
population growth, economic expansion, lodging
supply, and tourism trends. In the following section
of this report, growth rates are applied to the
historical WPUPD levels in order to estimate future
market WPUPD levels. The WPUPD estimates are then
multiplied by the existing and proposed table game
and gaming device inventory levels presented earlier
in this section to arrive at a projection of
marketwide gaming win. In addition, the estimated
penetration rates attainable by the proposed Aladdin
Hotel and Casino will be applied to the marketwide
gaming win estimates in order to
HVS International, Mineola, New York Gaming Supply and Demand Analysis 15
- --------------------------------------------------------------------------------
calculate the amount of gaming win projected to be
captured by the proposed subject property.
HVS International, Mineola, New York Forecast of Gaming Revenue 1
7.
Forecast of Gaming Revenue
Once the subject market has been defined, and the supply and
demand factors analyzed and quantified, the anticipated amount
of gaming revenue generated by a specific casino operating
within this market can be determined. The compilation of
supply and demand data combined with research into the various
external factors impacting an individual property's market
share has led to the development of a market penetration
model. Utilizing the market derived data in the penetration
model results in a forecasting tool that can be applied with a
high degree of confidence. The market penetration model
utilizes the following four steps in deriving a forecast of
gaming revenue for the subject property.
1. The marketwide existing and proposed level of supply
is quantified by table games and gaming devices
throughout the projection period. The subject
property's proposed level of supply is quantified by
table games and gaming devices throughout the
projection period. The subject property's fair share
of marketwide gaming supply by table games and gaming
devices is then calculated.
2. A forecast of marketwide gaming revenue is developed
based on the WPUPD and supply trends presented in the
section of this narrative entitled "Gaming Supply and
Demand Analysis." Subjective factors such as latent
demand levels, induced demand, and shifting demand
patterns have been considered and included in the
forecast of WPUPD levels and the resultant projection
of marketwide gaming revenue.
3. Market penetration rates attainable by the subject
property are projected for table games and gaming
devices. The market penetration rates are then
multiplied by the subject property's calculated fair
share percentages to determine the subject's capture
rate. The subject property's capture rate is then
multiplied by the forecasted amount of marketwide
gaming revenue, equating to the gaming revenue
projected to be generated by the subject property.
4. The forecasted gaming win captured by the subject
property is reconciled with a WPUPD analysis to check
the reasonableness of the revenue projections.
Combining the table game and gaming device win
equates to an estimate of total gaming revenue.
Step One The subject property's fair share is calculated by dividing
the subject's gaming inventory by the marketwide gaming
inventory. For example, if the subject property
HVS International, Mineola, New York Forecast of Gaming Revenue 2
has 100 table games and the total number of table games in the
market, including the subject property, is 1,000, the subject
property's fair share is equal to 10% (100 / 1,000 = 10%). The
level of existing and proposed supply by property, segmented
by table games and gaming devices, was presented in the
previous section entitled "Gaming Supply and Demand Analysis."
For the purpose of this analysis, gaming revenues will be
forecast on a calendar-year basis, commencing January 1, 2000.
As such, all additions to supply have been adjusted to reflect
the calendar year.
The following table presents the historical and projected
inventory levels of the Las Vegas Strip ($72 million and over)
market and the Proposed Aladdin Hotel and Casino segmented by
table games and gaming devices, as well as the subject
property's calculated fair share percentages.
HVS International, Mineola, New York Forecast of Gaming Revenue 3
Projected Gaming Inventory and Calculated Fair Share
1997 1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Table Games
Supply - LV Strip $72 Million & Over
Existing Table Games 1,495 1,646 1,804 2,045 2,388 2,388 2,388 2,388
Additions to Supply - Table Games 177 158 241 343 0 0 0 0
----- ----- ----- ----- ----- ----- ----- -----
Total Table Games 1,672 1,804 2,045 2,388 2,388 2,388 2,388 2,388
% Change 11.8% 7.9% 13.4% 16.8% 0.0% 0.0% 0.0% 0.0%
Aladdin Casino Hotel
Existing Table Games N/A N/A N/A 0 117 117 117 117
Additions to Supply - Table Games N/A N/A N/A 117 0 0 0 0
---- ---- ---- ---- ----
Total Table Games N/A N/A N/A 117 117 117 117 117
Calculated Fair Share - Table Games N/A N/A N/A 4.9% 4.9% 4.9% 4.9% 4.9%
Gaming Devices
Supply - LV Strip $72 Million & Over
Existing Gaming Devices 37,197 39,593 42,267 48,758 57,539 57,539 57,539 57,539
Additions to Supply - Gaming Devices 3,401 2,674 6,491 8,781 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total Gaming Devices 40,598 42,267 48,758 57,539 57,539 57,539 57,539 57,539
% Change 9.1% 4.1% 15.4% 18.0% 0.0% 0.0% 0.0% 0.0%
Aladdin Casino Hotel
Existing Gaming Devices N/A N/A N/A 0 2,900 2,900 2,900 2,900
Additions to Supply - Gaming Devices N/A N/A N/A 2,900 0 0 0 0
------ ----- ----- ----- -----
Total Gaming Devices N/A N/A N/A 2,900 2,900 2,900 2,900 2,900
Calculated Fair Share - Gaming Devices N/A N/A N/A 5.0% 5.0% 5.0% 5.0% 5.0%
Overall Fair Share N/A N/A N/A 5.0% 5.0% 5.0% 5.0% 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
2005 2006
- --------------------------------------------------------------------------------
Table Games
Supply - LV Strip $72 Million & Over
Existing Table Games 2,388 2,388
Additions to Supply - Table Games 0 0
------ ------
Total Table Games 2,388 2,388
% Change 0.0% 0.0%
Aladdin Casino Hotel
Existing Table Games 117 117
Additions to Supply - Table Games 0 0
------ ------
Total Table Games 117 117
Calculated Fair Share - Table Games 4.9% 4.9%
Gaming Devices
Supply - LV Strip $72 Million & Over
Existing Gaming Devices 57,539 57,539
Additions to Supply - Gaming Devices 0 0
------ ------
Total Gaming Devices 57,539 57,539
% Change 0.0% 0.0%
Aladdin Casino Hotel
Existing Gaming Devices 2,900 2,900
Additions to Supply - Gaming Devices 0 0
------ ------
Total Gaming Devices 2,900 2,900
Calculated Fair Share - Gaming Devices 5.0% 5.0%
Overall Fair Share 5.0% 5.0%
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Forecast of Gaming Revenue 4
As evidenced,marketwide supply levels are expected to increase
significantly in coming years as several new properties come
on line. The proposed subject property is expected to open in
January 2000 with 117 table games and 2,900 devices. The
subject property's proposed inventory levels equate to a fair
share percentage of 4.9% for table games and 5.0% for gaming
devices.
For the purposes of this analysis, marketwide table game and
gaming device inventory levels are projected to stabilize in
2000 with the opening of the subject property and phase II of
the Venetian.
Step Two As discussed, step two involves the forecasting of marketwide
gaming revenue in each year of the projection period. The
annual revenue figures were divided by the average marketwide
table game and gaming device inventory levels as of December
31, 1996. The base year table game WPUPD estimate is
calculated as follows:
Table Game Win / Average Units / 365 = WPUPD
$1,515,105,000 / 1,495 / 365 = $2,776.57
Say $2,777
The calculated annual average WPUPD figure is used to derive a
base-year figure from which to project future WPUPD amounts.
Growth rates are applied to the base year figure to calculate
marketwide gaming revenues.
Based on the historical WPUPD trend of the market, the
incremental changes in gaming supply, and the anticipated
impact of the new supply on the demand trends within the
market, capacity growth rates in WPUPD levels are estimated.
The WPUPD figure is multiplied by the projected level of table
game or gaming device inventory to arrive at a forecast of
marketwide gaming revenue. The following table presents the
10-year forecast of Las Vegas Strip ($72 million and over)
gaming revenues.
HVS International, Mineola, New York Forecast of Gaming Revenue 5
Forecast of Marketwide Gaming Revenue - Las Vegas Strip ($72 million and over)
Market
Historical Historical
1994 1995 BASE YEAR 1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------------------------------
Table Games
Estimated Growth Rate -2.0% 3.0% -5.0% -6.0%
Estimated WPUPD $ 2,675 3,004 $ 2,777 $ 2,721 $ 2,803 $ 2,663 $ 2,503
Units 1,476 1,451 1,495 1,672 1,804 2,045 2,388
Win (000s) $1,441,155 $1,591,184 $1,515,228 $1,660,730 $1,845,596 $1,987,545 $2,181,654
Growth Rate 10.4% 9.6% 11.1% 7.7% 9.8%
Gaming Devices
Estimated Growth Rate -3.0% 1.0% -2.0% -2.0%
Estimated WPUPD $ 105 $ 104 $ 106 $ 103 $ 104 $ 102 $ 100
Units 37,245 36,191 37,197 40,598 42,267 48,758 57,539
Win (000s) $1,428,500 $1,369,914 $1,442,566 $1,527,229 $1,605,914 $1,815,486 $2,099,594
Growth Rate -4.1% 5.9% 5.2% 13.1% 15.6%
Total Gaming Win (000s) $2,869,655 $2,961,098 $2,957,794 $3,187,959 $3,451,510 $3,803,031 $4,281,248
Growth Rate 3.2% 7.8% 8.3% 10.2% 12.6%
Revenue Mix
Table Games 50.2% 53.7% 51.2% 52.1% 53.5% 52.3% 51.0%
Gaming Devices 49.8% 46.3% 48.8% 47.9% 46.5% 47.7% 49.0%
2001 2002 2003 2004 2005 2006
- -------------------------------------------------------------------------------------------------------
Table Games
Estimated Growth Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Estimated WPUPD $ 2,578 $ 2,655 $ 2,735 $ 2,817 $ 2,902 $ 2,989
Units 2,388 2,388 2,388 2,388 2,388 2,388
Win (000s) $2,247,103 $2,314,516 $2,383,952 $2,455,470 $2,529,134 $2,605,008
Growth Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Gaming Devices
Estimated Growth Rate 2.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Estimated WPUPD $ 102 $ 105 $ 108 $ 111 $ 115 $ 118
Units 57,539 57,539 57,539 57,539 57,539 57,539
Win (000s) $2,141,586 $2,205,833 $2,272,008 $2,340,169 $2,410,374 $2,482,685
Growth Rate 2.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Total Gaming Win (000s) $4,388,689 $4,520,349 $4,655,960 $4,795,639 $4,939,508 $5,087,693
Growth Rate 2.5% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Mix
Table Games 51.2% 51.2% 51.2% 51.2% 51.2% 51.2%
Gaming Devices 48.8% 48.8% 48.8% 48.8% 48.8% 48.8%
HVS International, Mineola, New York Forecast of Gaming Revenue 6
As shown, table game WPUPD levels are forecast to decrease by
2.0% in 1997 reflecting the increase in supply brought about
by the opening of New York -New York in January. This decrease
in the WPUPD level is consistent with the year-to-date table
game WPUPD trend shown previously in this section of the
report. In 1998, the additional table game supply is expected
to be absorbed by the market and WPUPD levels are forecast to
increase by 3.0%, the underlying rate of inflation. Table game
WPUPD levels are then forecast to decrease by 5.0% and 6.0% in
1999 and 2000, respectively, due to the large increases in
supply forecast to enter the market in those years. These
decreases are consistent with the market's historical reaction
to supply increases of this magnitude. WPUPD levels are
forecast to rebound in 2001, increasing 3.0% before
stabilizing at 3.0% growth per year in 2002 and thereafter.
Overall, table game WPUPD levels are forecast to stabilize at
$2,578 in 2001.
Given the historic stability of gaming device WPUPD levels
discussed previously, they are not expected to fluctuate as
drastically as table game WPUPD levels. Specifically, gaming
device WPUPD levels are forecast to decrease by 3.0% in 1997,
increase by 1.0% in 1998, decrease by 2.0% in 1999 and 2000,
and increase by 2.0% in 2001 before stabilizing at 3.0% growth
per year in 2002 and thereafter. The decreases in gaming
device WPUPD levels in 1997, 1999, and 2000 are attributable
to the forecasted increases in supply. However, as in the
past, the Las Vegas Strip ($72 million and over) market is
expected to quickly absorb the supply increases. Overall, the
marketwide gaming device WPUPD is expected to reach a low of
$100 in 2000 and to stabilize at $105 in 2002.
Step Three Step three of the analysis includes projections of the subject
property's market penetration rates. A penetration rate is
defined as the percentage of marketwide gaming revenue the
subject property will capture in relation to its fair share.
For example, if the subject property's fair share of the
marketwide gaming device inventory was 10%, and the property
penetrates the gaming device segment at 110%, the subject
would capture approximately 11% of marketwide gaming device
revenue (1.10 x 0.10 = 0.11). The capture rate is then applied
to the aggregate amount of marketwide gaming revenue to derive
the subject property's gaming revenue forecast. The following
chart shows the estimated 1996 penetration rates of hotel
casinos located within the Las Vegas Strip ($72 million and
over) market deemed most similar to the proposed subject
property.
HVS International, Mineola, New York Forecast of Gaming Revenue 7
1996 Estimated Penetration Rates for Selected Hotel Casinos - Las Vegas Strip
($72 million and over)
Market Mirage Treasure Island Caesars
---------------------------- ------------------------- ---------------------- -----------------------
Tables Devices Tables Devices Tables Devices Tables Devices
---------------------------------------------------------------------------------------------------------
Revenue 1,545,405 1,442,373 179,300 120,000 58,900 86,600 144,000 97,000
Units 1,495 37,197 122 2,225 97 2,220 125 1,980
Fair Share 8.2% 6.0% 6.5% 6.0% 8.4% 5.3%
Penetration 142.2% 139.1% 58.7% 100.6% 111.4% 126.3%
Market Mix Tables 5% 4% 6%
Market Mix Devices 95% 96% 94%
Total Penetration 139% 99% 125%
Source: Individual Company Forms 10K and 10Q, Nevada Gaming Control Board, HVS International
MGM Luxor
------------------------ ----------------------
Tables Devices Tables Devices
------------------------------------------------
Revenue 340,000 145,000 71,100 47,400
Units 178 3,720 106 2,400
Fair Share 11.9% 10.0% 7.1% 6.5%
Penetration 184.8% 100.5% 64.9% 50.9%
Market Mix Tables 5% 4%
Market Mix Devices 95% 96%
Total Penetration 104% 52%
Source: Individual Company Forms 10K and 10Q, Nevada Gaming Control Board, HVS International
HVS International, Mineola, New York Forecast of Gaming Revenue 8
As shown, the Mirage and Caesars Palace enjoy the highest
penetration rates within the market, followed by the MGM,
Treasure Island, and the Luxor. The Luxor's low overall
penetration rate compared to the other selected properties is
attributable to the historically low room count at the
property. Based on published reports, the Luxor did not have a
sufficient number of rooms to support its casino size.
Consequently, Circus Circus Corporation recently completed an
expansion of the property totaling 1,900 guestrooms. In the
future, the Luxor is expected to benefit from this rooms
expansion and increase its penetration of the market.
As mentioned throughout this report, the proposed subject
property will primarily target the upper-middle tier of the
Las Vegas gaming market. As such, its market mix is expected
to be most like that of the Treasure Island Casino. However,
the proposed subject's high-quality product and superior
amenities package are expected to enable it to penetrate the
market at a higher level than Treasure Island. In addition,
the subject property's penetration levels are expected to be
higher than the Treasure Island due to the subject's joint
venture with LCI and subsequent marketing efforts to
international clientele. Specifically, the proposed subject is
expected to penetrate the Las Vegas Strip ($72 million and
over) market at a level equivalent to Caesars Palace but lower
than the Mirage.
Our forecast of the market penetration rates attainable by the
Proposed Aladdin Hotel and Casino takes into consideration its
proposed improvements, target market, LCI partnership, and the
impact of new competitive facilities. We have forecast the
proposed subject property to penetrate the table game segment
at a stabilized level of 125% and the gaming device segment at
a stabilized level of 130%. This equates to an overall
stabilized penetration level of 129.8%.
The following table presents the subject property's projected
penetration rates and captured gaming revenue by table games
and gaming devices.
International, Mineola, New York Forecast of Gaming Revenue 9
Projected Penetration Rates and Captured Gaming Revenue - Proposed Aladdin Hotel
and Casino
1997 1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------
Marketwide Gaming Win
Table Games $1,660,730 $1,845,596 $1,987,545 $2,181,654 $2,247,103 $2,314,516 $2,383,952
Gaming Devices $1,527,229 $1,605,914 $1,815,486 $2,099,594 $2,141,586 $2,205,833 $2,272,008
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Gaming Win (000s) $3,187,959 $3,451,510 $3,803,031 $4,281,248 $4,388,689 $4,520,349 $4,655,960
Estimated Penetration Factors
Table Games N/A N/A N/A 125.0% 125.0% 125.0% 125.0%
Gaming Devices N/A N/A N/A 130.0% 130.0% 130.0% 130.0%
------- ------- ------- -------
Overall N/A N/A N/A 129.8% 129.8% 129.8% 129.8%
Captured Gaming Win
Table Games N/A N/A N/A $133,610 $137,620 $141,750 $146,000
Gaming Devices N/A N/A N/A $137,570 $140,320 $144,530 $148,860
-------- -------- -------- --------
Total N/A N/A N/A $271,180 $277,940 $286,280 $294,860
Growth Rate
Table Games N/A N/A N/A 3.0% 3.0% 3.0%
Gaming Devices N/A N/A N/A 2.0% 3.0% 3.0%
----- ----- -----
Total N/A N/A N/A 2.5% 3.0% 3.0%
Revenue Mix
Table Games N/A N/A N/A 49.3% 49.5% 49.5% 49.5%
Gaming Devices N/A N/A N/A 50.7% 50.5% 50.5% 50.5%
------- ------ ------ ------
Total N/A N/A N/A 100.0% 100.0% 100.0% 100.0%
2004 2005 2006
- --------------------------------------------------------------------------------
Marketwide Gaming Win
Table Games $2,455,470 $2,529,134 $2,605,008
Gaming Devices $2,340,169 $2,410,374 $2,482,685
---------- ---------- ----------
Total Gaming Win (000s) $4,795,639 $4,939,508 $5,087,693
Estimated Penetration Factors
Table Games 125.0% 125.0% 125.0%
Gaming Devices 130.0% 130.0% 130.0%
------ ------ ------
Overall 129.8% 129.8% 129.8%
Captured Gaming Win
Table Games $150,380 $154,890 $159,540
Gaming Devices $153,330 $157,930 $162,670
-------- -------- --------
Total $303,710 $312,820 $322,210
Growth Rate
Table Games 3.0% 3.0% 3.0%
Gaming Devices 3.0% 3.0% 3.0%
----- ----- -----
Total 3.0% 3.0% 3.0%
Revenue Mix
Table Games 49.5% 49.5% 49.5%
Gaming Devices 50.5% 50.5% 50.5%
------ ------ ------
Total 100.0% 100.0% 100.0%
HVS International, Mineola, New York Forecast of Gaming Revenue 10
As market conditions stabilize in 2002, total gaming revenue
is projected to increase at an average annual compounded rate
of 3.0% throughout the projection period. Reflecting the
assumed market mix of the Proposed Aladdin Hotel and Casino,
revenues generated by gaming devices are projected to account
for 50.5% of total gaming revenue throughout the projection
period, while revenue generated by table games is expected to
generate 49.5% of total gaming revenue.
Step Four In step four, the projection of gaming revenue derived via the
market penetration analysis is reconciled with a WPUPD
analysis. In addition, other gaming win derived from the race
and sports book, poker, and keno lounge has been forecast
based on the historical market operations of these ancillary
outlets, as well as the proposed subject's intended market
orientation. The following table presents a historical
analysis of other gaming win as a percentage of table game and
gaming device win for the Las Vegas Strip ($72 million and
over) market.
Analysis of Other Gaming Win
1993/94 1995/96 1995/96
- ------------------------------------------------------------------------------------------------------------
Table and Device Win $2,518,296 $2,956,165 $3,028,819
Keno 38,157 36,706 34,530
% of Table/Device Win 1.5% 1.2% 1.1%
Poker 109,260 32,880 30,944
% of Table/Device Win 4.3% 1.1% 1.0%
Race Book 53,409 48,760 50,799
% of Table/Device Win 2.1% 1.6% 1.7%
Sports Book 41,295 48,290 49,436
% of Table/Device Win 1.6% 1.6% 1.6%
Total Other Win 42,121 166,635 165,708
% of Table/Device Win 9.6% 5.6% 5.5%
- ------------------------------------------------------------------------------------------------------------
Overall, the market's other gaming win has been relatively
stable over the past two years ranging from 5.6% of table and
device win in 1994/95 to 5.5% in 1995/96. Based on recent
trends and the subject's intended market orientation and the
limited nature of its other gaming outlets, we have projected
other gaming win equal to 4.0% of table game and gaming device
win throughout the projection period.
The following table presents our estimated WPUPD projections
for the subject property throughout the 10-year projection
period.
HVS International, Mineola, New York Forecast of Gaming Revenue 11
Projected Capacity Utilization Levels, WPUPD, and Total Gaming Win - Proposed
Aladdin Hotel and Casino
2000 2001 2002 2003
------------------------------------------------------------------------------------------------
Table Games
WPUPD $3,129 $3,223 $3,319 $3,419
Units 117 117 117 117
Win $133,610 $137,620 $141,750 $146,000
Gaming Devices
WPUPD $130 $133 $137 $141
Units 2,900 2,900 2,900 2,900
Win $137,570 $140,320 $144,530 $148,860
Table and Device Win $271,180 $277,940 $286,280 $294,860
Other Gaming Revenues @ 4.0% $10,850 $11,120 $11,450 $11,790
-------- -------- -------- --------
Total Gaming Win $282,030 $289,060 $297,730 $306,650
======== ======== ======== ========
Growth Rate -- 2.5% 3.0% 3.0%
2004 2005 2006
------------------------------------------------------------------------------
Table Games
WPUPD $3,521 $3,627 $3,736
Units 117 117 117
Win $150,380 $154,890 $159,540
Gaming Devices
WPUPD $145 $149 $154
Units 2,900 2,900 2,900
Win $153,330 $157,930 $162,670
Table and Device Win $303,710 $312,820 $322,210
Other Gaming Revenues @ 4.0% $12,150 $12,510 $12,890
-------- -------- --------
Total Gaming Win $315,860 $325,330 $335,100
======== ======== ========
Growth Rate 3.0% 3.0% 3.0%
HVS International, Mineola, New York Forecast of Gaming Revenue 12
The projection of gaming revenues presented will be utilized
in the "Income Capitalization Approach" section of the
narrative to derive the market value of the Proposed Aladdin
Hotel and Casino.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 1
8.
Lodging Supply and Demand Analysis
This section presents an overview of the Las Vegas lodging
market through an analysis of annual and monthly inventory and
occupancy levels. Market segmentation, competitive casino
hotels, and additions to supply will be discussed and
evaluated as they relate to the Proposed Aladdin Hotel and
Casino.
Historically, the Las Vegas lodging market has attained
occupancy levels well above the national average. As presented
in the following table, available inventory and occupied rooms
have increased at average annual rates of 4.2% and 5.8%,
respectively. As a result, occupancy has risen from the
low-70% range to the low-90% range over the 13-year period.
Growth in demand has historically been a function of new
supply, as evidenced by the 17.4% increase in occupied rooms
in 1993 and the 13.0% increase in 1996. In 1993, supply
increased by 12.5%, or roundly 9,500 rooms, while in 1996,
supply increased by 10.0% or roundly 9,000 rooms. The
following table presents an analysis of the Las Vegas lodging
market over the past 13 years. The subsequent charts
illustrate the growth in the Las Vegas market on an annual and
monthly basis.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 2
Analysis of Las Vegas Lodging Statistics
Hotel Motel
Year Inventory % Change Occupancy % Change Occupancy % Change
- ------------------------------------------------------------------------------------------------------------
1983 52,529 --- 77.4% --- 63.3% ---
1984 54,129 3.0% 78.1 0.9% 61.7 (2.5%)
1985 53,067 (2.0) 84.7 8.5 70.1 13.6
1986 56,494 6.5 86.3 1.9 70.9 1.1
1987 58,474 3.5 87.0 0.8 74.0 4.4
1988 61,394 5.0 89.3 2.6 73.7 (0.4)
1989 67,391 9.8 89.9 0.7 72.5 (1.6)
1990 73,730 9.4 89.1 (0.9) 69.8 (3.7)
1991 76,879 4.3 85.2 (4.4) 62.6 (10.3)
1992 76,523 (0.5) 88.8 4.2 66.1 5.6
1993 86,053 12.5 92.6 4.3 69.7 5.4
1994 88,560 2.9 92.6 0.0 73.2 5.0
1995 90,046 1.7 91.4 (1.3) 72.4 (1.1)
1996 99,072 10.0 93.4 2.2 75.7 4.6
YTD 5/96 91,720 --- 95.1 --- 79.2 ---
YTD 5/97 102,536 11.8 92.6% (2.6) 74.5% (5.9)
Average Annual % Change 4.2% 1.3% 1.0%
Total Total
Year Occupancy % Change Rooms Occupied % Change
- ------------------------------------------------------------------------------
1983 72.6% --- 13,919,660 ---
1984 72.5 (0.1%) 14,323,887 2.9%
1985 79.8 10.1 15,456,825 7.9
1986 81.4 2.0 16,784,932 8.6
1987 83.4 2.5 17,800,070 6.0
1988 85.1 2.0 19,069,897 7.1
1989 85.2 0.1 20,957,253 9.9
1990 84.7 (0.6) 22,793,998 8.8
1991 80.3 (5.2) 22,532,851 (1.1)
1992 83.9 4.5 23,434,021 4.0
1993 87.6 4.4 27,514,586 17.4
1994 89.0 1.6 28,768,716 4.6
1995 88.0 (1.1) 28,922,775 0.5
1996 90.4 2.7 32,689,797 13.0
YTD 5/96 92.3 --- 12,688,051 ---
YTD 5/97 89.4% (3.1) 13,723,378 8.2
1.5% 5.%
Source: Las Vegas Convention and Visitors Authority
HVS International, Mineola, New York Lodging Supply and Demand Analysis 3
Las Vegas Annual Lodging Trend
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH/BAR CHART IN THE PRINTED
MATERIAL.]
Room Motel Hotel
Inventory Occupancy Occupancy
- -----------------------------------------------------------
1983 52,529 63.3% 77.4%
1984 54,129 61.7 78.1
1985 53,067 70.1 84.7
1986 56,494 70.9 86.3
1987 58,474 74.0 87.0
1988 61,394 73.7 89.3
1989 67,391 72.5 89.9
1990 73,730 69.8 89.1
1991 76,879 62.6 85.2
1992 76,523 66.1 88.8
1993 86,053 69.7 92.6
1994 88,560 73.2 92.6
1995 90,046 72.4 91.4
1996 99,072 75.7 93.4
YTD 5/96 91,720 79.2 95.1
YTD 5/97 102,536 74.5% 92.6%
HVS International, Mineola, New York Lodging Supply and Demand Analysis 4
Las Vegas Room Inventory and Occupancy Percentage
by Month
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Occupancy % Room Inventory
- -----------------------------------------------
Jan 93 76.2% 75,475
Feb 88.8% 75,475
Mar 88.6% 75,475
Apr 90.5% 75,475
May 86.5% 75,475
Jun 86.9% 75,846
Jul 91.0% 75,846
Aug 94.0% 75,846
Sep 89.9% 76,145
Oct 92.3% 81,670
Nov 87.5% 86,053
Dec 79.2% 86,053
Jan 94 80.0% 86,053
Feb 90.6% 86,053
Mar 94.4% 86,053
Apr 93.3% 86,053
May 91.3% 86,603
Jun 89.7% 86,603
Jul 91.3% 86,759
Aug 91.0% 87,677
Sep 90.3% 87,845
Oct 91.6% 87,845
Nov 89.0% 87,845
Dec 83.0% 88,560
Jan 95 82.6% 88,737
Feb 88.9% 88,055
Mar 94.1% 88,720
Apr 91.8% 89,065
May 86.7% 89,065
Jun 88.9% 89,594
Jul 87.8% 89,723
Aug 90.5% 89,723
Sep 88.9% 89,723
Oct 91.4% 89,723
Nov 84.7% 89,723
Dec 79.9% 90,046
Jan 96 87.3% 90,046
Feb 92.4% 90,046
Mar 95.8% 90,266
Apr 94.8% 90,161
May 91.1% 91,720
Jun 90.1% 93,997
Jul 89.7% 94,056
Aug 93.2% 94,289
Sep 90.3% 95,092
Oct 92.9% 95,336
Nov 88.1% 94,776
Dec 78.7% 99,072
HVS International, Mineola, New York Lodging Supply and Demand Analysis 5
The following table presents the most recent market trends for
the Las Vegas Strip ($72 million and over) market.
Las Vegas Strip ($72 million and over) - Lodging Statistics
Fiscal Year Occupancy % Change Average Rule % Change REVPAR % Change
- ---------------------------------------------------------------------------------------------------------
1990 90.6% --- $62.74 --- $56.81 ---
1991 89.0 (1.7)% 58.83 (6.2)% 52.35 (7.9)%
1992 89.9 1.0 57.32 (2.6) 51.51 (1.6)
1993 92.8 3.2 61.63 7.5 57.16 11.0
1994 95.5 3.0 66.20 7.4 63.25 10.6
1995 94.1 (1.6) 74.61 12.7 70.17 10.9
1996 94.8 0.8 79.19 6.1 75.05 7.0
Average Annual % Change 0.8% 3.5% 4.3%
- ---------------------------------------------------------------------------------------------------------
As evidenced, occupancy within this segment has only grown at
an annual average rate of 0.8%. However, the market has
experienced the largest increase in supply during this period.
Overall, occupancy levels are strong despite a moderate
decline in 1995. Average rates have grown at an average annual
rate of 3.5% since 1990, with the largest increase in 1995 at
12.7%. Revenue per available room (RevPAR) has increased at an
average annual rate of 4.3%, reflecting gains in both
occupancy and average rate. In addition, RevPAR has grown
significantly since 1993, when the new mega-resorts began to
open.
Demand
Segmentation Similar to our analysis of gaming demand, lodging demand
within the Las Vegas market is generally classified into four
major segments: leisure, casino, convention, and wholesale.
The leisure segment is characterized by individuals and
families drawn to the Las Vegas area for purposes of gaming,
tourism, and recreation. In that leisure segment guests are
price sensitive, this demand is often attracted by promotional
activities that feature a high price-value relationship. This
demand peaks on weekends, in the summer, and during holiday
periods.
The casino segment generally consists of those patrons
classified as "casino-invited guests." A casino-invited guest
can range from a rated slot player to a "high roller."
Casino-invited guests are targeted by marketing campaigns and
usually "comped" (given complimentary rooms, food, and/or
beverages) in return for specific levels of casino play. The
casino segment usually accounts for 25% to 50% of a casino
hotel's total accommodated room nights.
The convention segment includes citywide conventions,
meetings, and trade association shows. Given the size and high
price-value of the Las Vegas Convention
HVS International, Mineola, New York Lodging Supply and Demand Analysis 6
Center, Las Vegas is home to some of the largest conventions
and trade shows in the nation. The average length of stay for
a typical convention ranges from three to five days.
Room night demand generated by the wholesale market typically
consist of a block of rooms sold by the casino hotel to an
outside wholesaler at a lower rate ensuring a base occupancy
level. The wholesaler packages the room with other amenities
and charges a premium, profiting on the spread. Room blocks
allocated to wholesalers will vary depending on the season and
the day of the week.
Competition An integral component of the supply and demand relationship
that has a direct impact on the availability of lodging demand
is the current and anticipated supply of competitive lodging
facilities.
Based on our evaluation of the market orientation, location,
facilities, and amenities of the area's casino hotels, we have
identified five properties that will compete most directly
with the Proposed Aladdin Hotel and Casino. However, given the
highly competitive nature of the Las Vegas market, the subject
property competes indirectly with all casino hotels to some
degree.
The following chart describes the characteristics pertinent to
the subject property and each of its competitors, including
number of rooms, casino square footage, meeting space, and
estimates of their 1996 market segmentation, occupancy,
average rate.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 7
Competitive Review
Estimated 1996 Segmentation
---------------------------------------------------------
Casino
Number Square Meeting
Property of Rooms Footage Space S.F. Leisure Casino Convention Wholesale
- ------------------------------------------------------------------------------------------------------------------------
Mirage 3,044 95,900 71,000 30.0% 40.0% 20.0% 10.0%
Caesars 1,400 118,000 100,000 20.0 40.0 30.0 10.0
MGM 5,005 171,500 50,000 20.0 40.0 20.0 20.0
Luxor 4,425 120,000 20,000 20.0 30.0 20.0 30.0
Treasure Island 2,891 82,000 16,000 30.0 40.0 20.0 10.0
----- ------ ------ ---- ---- ---- ----
Total/Avg 16,765 587,400 257,000 24.0% 38.0% 22.0% 16.0%
Estimated 1996
---------------------------------------------------------------------------------------
Occupancy Average Rate Yield
Property Occupancy Average Rate RevPAR Penetration Penetration Penetration
- ---------------------------------------------------------------------------------------------------------
Mirage 97.0% $130.00 $126.10 104.1% 115.0% 119.7%
Caesars 91.0 130.00 118.30 97.6 115.0 112.3
MGM 92.0 110.00 101.20 98.7 97.3 96.1
Luxor 92.0 95.00 87.40 98.7 84.1 83.0
Treasure Island 94.0 100.00 94.00 100.9 88.5 89.3$
---- ------ ----- ----- ---- -----
Total/Avg 93.2% $113.00 $105.32 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Lodging Supply and Demand Analysis 8
These properties compete for the mid-to upper-priced segment
of the leisure, casino, convention, and wholesale demand
segments. Overall, these properties attained an occupancy of
93.2% and an average rate of $113 in 1996. The occupancy and
average rate leader was the Mirage (97% and $130), with
Caesars Palace obtaining a similar average rate at a lower
occupancy (91%). All of the properties listed obtained
occupancies above the 90% level and an average rate above
$100, with the exception of the Luxor with an average rate of
$95. The Luxor's average rate was below those of the other
competitors primarily due to the owners' (Circus Circus),
philosophy of selling rooms at a steep discount to maximize
casino traffic.
Additions to Similar to the additions to supply discussed in the "Gaming
Supply Supply and Demand Analysis" section of this report, we believe
the proposed mega-resorts slated for opening over the next
several years will compete for lodging demand with the subject
property. The following is a list of these properties.
Additions to Supply - Las Vegas Strip ($72 million and over) market
Estimated
Cost Opening
Name/Location (millions) Operator Date Rooms
- --------------------------------------------------------------------
Bellagio 1,350.0 Mirage Resorts 4/1/98 3,005
Project Paradise 1,000.0 Circus Circus 10/1/98 3,800
Paris 750.0 Hilton 4/1/99 3,000
Venetian Phase I 1,800.0 Sheldon Adelson 6/1/99 3,000
Venetian Phase II -- Sheldon Adelson 1/1/00 3,000
New York - New York 460.0 MGM Grand 1/1/97 2,035
-------- ------
Total $5,360.0 17,840
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As with gaming, the subject property is not expected to
compete directly with the Bellagio and Project Paradise for
lodging demand, due to these properties' high-end
orientations. However, Hilton's Paris project and the Venetian
project are expected to compete primarily with the proposed
Aladdin Hotel and Casino.
Lodging As mentioned throughout this study, Las Vegas is a one of the
Seasonality top leisure destination markets in the world. In addition, Las
Analysis Vegas is a leading convention market, hosting several of the
nation's largest conventions and trade shows each year at the
Las Vegas Convention Center. Reflecting the market's leisure
orientation and large-scale conventions, demand and pricing
levels fluctuate materially depending on the season, the level
of convention activity, and between weekend and mid-week
periods. Further, demand peaks during holiday periods and
throughout the year over the course of various special events
such as high-profile boxing matches, rodeos, and other
sporting events.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 9
Our fieldwork and research indicate that the subject
property's attainable occupancy level is a function of
management's ability to attract and accommodate demand already
present in the market, as well as capture demand induced by
the new mega-resorts opening in the next few years. Successful
penetration into the market is dependent on several factors
including:
The overall quality of the subject's physical improvements,
including the exterior, interior design and layout, and room
design and layout;
The appeal and acceptance of the property's theme;
Access to the property, including egress and ingress from Las
Vegas Boulevard, and available parking;
Promotional programs and public relations exposure;
Targeted marketing programs; and
Appropriate segmented pricing strategy.
A seasonality model forecasts the overall occupancy of a
lodging property based on attainable occupancy levels during
specific periods of demand prevalent over the course of a
typical year. Weekend and mid-week days are categorized as
belonging to one of the four periods: peak, non-peak,
city-wide convention, and special-event. Once demand levels
are assessed, the subject's market mix is projected, resulting
in a forecast of accommodated room nights by market segment.
The subject property's average rate is then forecast based on
a segmented pricing strategy.
To derive a forecast of occupancy for the subject property, a
seasonality analysis is performed. The first step in
performing a seasonality analysis is to define the different
periods of demand prevalent within the market. For the purpose
of this analysis we have divided the year into the following
three seasons: peak, shoulder, and off. Further, we have
segmented the three seasons by weekend and mid-week,
reflecting the weekly fluctuations in demand. The
corresponding occupancy level for each demand period is then
multiplied by the subject property's total number of available
rooms to derive the number of occupied room nights during each
demand period.
Occupied Room Nights: Peak Weekend = (2,600 x 99.0% =
2,574)
The number of days within each demand period by month is
estimated and then multiplied by the calculated number of
occupied room nights for the corresponding demand period.
Occupied Room Nights: Peak Weekends in January = (3 x
2,574 = 7,722)
This calculation is performed for each demand period, and the
results are totaled. The total number of occupied room nights
is then divided by the total number of available room nights
to arrive at the monthly weighted average occupancy level.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 10
The monthly totals are then summed to arrive at an annual
estimate of occupied room nights, which is divided by the
annual number of available rooms equating to the subject
property's annual occupancy figure.
The total occupied room nights by month are then multiplied by
the corresponding market mix percentages, and summed together,
to arrive at the annual market mix for the property.
Occupancy by The first process in deriving annual occupancy is to estimate
Season the occupancy level the subject property is likely to achieve
on weekend and mid-week days during the peak and non-peak
seasons and throughout special event and convention demand
periods.
In order to gauge demand fluctuations between the peak and
non-peak seasons, a review of monthly operating statistics was
performed. The following table presents monthly marketwide
occupancy levels by total properties, hotels, motels,
mid-week, and weekend for 1995 and 1996, as published by the
Las Vegas Convention and Visitors Authority.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 11
Marketwide Occupancy by Month - Las Vegas, NV
1995 1996
------------------------------------------ ------------------------------------------
Month Total Hotel Motel Mid-week Weekend Total Hotel Motel Mid-week Weekend
- --------------------------------------------------------------------------------------------------------
January 82.6% 86.1% 66.7% 78.0% 92.1% 87.3% 90.8% 71.0% 84.8% 93.5%
February 88.9 91.9 75.5 85.8 95.6 92.4 94.7 81.7 90.3 97.1
March 94.1 96.0 85.4 92.9 97.1 95.8 97.8 86.6 94.7 98.2
April 91.8 95.1 76.6 90.0 95.9 94.8 97.4 82.7 93.8 97.5
May 86.7 90.2 70.6 83.3 94.9 91.1 94.7 74.1 88.8 96.1
June 88.9 92.7 71.7 86.9 93.8 90.1 93.8 72.1 88.2 94.5
July 87.8 91.5 70.5 86.5 91.1 89.7 92.9 73.9 88.3 92.6
August 90.5 93.8 74.9 89.1 94.6 93.2 96.1 79.1 92.6 94.5
September 88.9 92.3 73.0 86.4 93.4 90.3 93.2 76.1 88.3 94.8
October 91.4 94.3 77.8 89.4 97.2 92.9 95.7 79.4 91.1 98.0
November 84.7 88.6 65.9 81.6 91.9 88.1 91.0 74.2 86.5 90.9
December 79.9 84.1 60.5 77.4 84.0 78.7 83.1 57.6 76.5 85.0
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average 88.0% 91.4% 72.4% 85.6% 93.5% 90.4% 93.4% 75.7% 88.7% 94.4%
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As noted, occupancy levels generally peak in March, April,
May, August, and October before dropping in November,
December, and January. The difference between the high and low
monthly occupancies, which was 17 percentage points in 1996,
is low compared to other leisure destinations. Occupancy
levels in Las Vegas are higher during the weekend periods,
which is defined as Friday night and Saturday. As evidenced,
the spread between weekend and mid-week occupancy was 5.7
percentage points in 1996. The fluctuations in marketwide
demand on a weekly and seasonal basis mirror the anticipated
results of the subject property. The following table presents
our projections of the subject property's attainable occupancy
level in each demand period.
Projection of Seasonal Occupancy Levels
2000 2001
Estimated Estimated
Demand Period Occupancy % Occupancy %
-------------------------------------------------------------
Peak Weekend 99.0% 99.0%
Peak Mid-week 94.0 94.0
Non-Peak Weekend 89.0 89.0
Non-Peak Mid-week 82.0 82.0
Convention 94.0 94.0
Special Event 99.0 99.0
-------------------------------------------------------------
Peak demand within the subject's market area occurs primarily
during the months of March, April, May, August, and October.
Peak weekend and mid-week occupancy
HVS International, Mineola, New York Lodging Supply and Demand Analysis 12
rates of 99% and 94%, respectively, have been deemed
attainable, given existing levels of unaccommodated and
accommodated demand in the market. In addition, the subject
property, through public relations and advertising, will
induce a significant portion of demand. Fluctuations in the
non-peak season are commensurate with weather conditions and
demand softens through September, November, December, January,
and February. During this period, demand is estimated to vary
between weekend and mid-week by approximately 10%, with an
attainable weekend occupancy estimated to be 89%, and an
attainable mid-week occupancy of 82%. We have estimated the
subject property to attain an average occupancy of 94% during
citywide conventions and 98% during special events. For the
purpose of this analysis we have included the top three
citywide conventions, COMDEX, the Consumer Electronics Show,
and National Association of Broadcasters, as special events.
Estimated Demand The second process involves identifying each demand period by
Periods day over the course of a year. For the purpose of this
analysis we have utilized convention booking and special event
reports published by the Las Vegas Convention and Visitors
Authority to estimate the number of citywide convention days
and special events. Peak and non-peak days have been estimated
based on monthly trends and our conversations with local
operators.
Market The following projected market segmentation has been estimated
Segmentation based on the current trends prevalent in the local area and
our estimates of demand which the property will induce. The
objective of a traditional hotel casino is to obtain an
optimal demand mix throughout the year that will increase the
overall utilization of the casino. As such, we have utilized a
stabilized demand mix throughout the year. The following chart
sets forth an estimate of the market segmentation by month for
the proposed Aladdin Hotel and Casino.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 13
Estimated Market Segmentation by Month - Proposed Aladdin Hotel and Casino
2000 Market Segmentation
--------------------------------------
FIT Casino Wholesale Group
--------------------------------------------------
January 30.0% 30.0% 20.0% 20.0%
February 30.0 30.0 20.0 20.0
March 30.0 30.0 20.0 20.0
April 30.0 30.0 20.0 20.0
May 30.0 30.0 20.0 20.0
June 30.0 30.0 20.0 20.0
July 30.0 30.0 20.0 20.0
August 30.0 30.0 20.0 20.0
September 30.0 30.0 20.0 20.0
October 30.0 30.0 20.0 20.0
November 30.0 30.0 20.0 20.0
December 30.0 30.0 20.0 20.0
---- ---- ---- ----
Average 30.0% 30.0% 20.0% 20.0%
--------------------------------------------------------------
As shown the subject property is expected to receive a
majority of its lodging demand from the FIT and casino invited
guest segments. This is typical of a hotel casino offering the
high quality product and amenities package of the subject. The
following table shows the forecast of the subject property's
occupancy based on the preceding analysis.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 14
Occupancy Forecast - Proposed Aladdin Hotel and Casino
2000 Estimated Days of Each Type
-------------------------------------------------------------
Peak Peak Non-Peak Non-Peak Special Nights Room
Month Weekend Mid-week Weekend Mid-week Convention Event Available Nights Occupancy
- ----------------------------------------------------------------------------------------------------------
January 3 0 3 11 6 8 80,600 73,372 91.0%
February 2 7 2 3 10 4 72,800 68,016 93.4
March 4 17 0 0 5 5 80,600 76,934 95.5
April 4 13 0 1 4 8 78,000 74,568 95.6
May 6 12 0 0 6 7 80,600 77,454 96.1
June 8 19 0 0 3 0 78,000 74,360 95.3
July 8 9 0 11 0 3 80,600 73,762 91.5
August 8 15 0 0 8 0 80,600 76,804 95.3
September 2 6 4 7 7 4 78,000 71,396 91.5
October 10 13 0 4 4 0 80,600 75,816 94.1
November 0 0 6 16 0 8 78,000 68,588 87.9
December 0 0 6 16 0 9 80,000 71,162 88.3
- - - -- - - ------ ------ ----
Totals 55 111 21 69 53 56 949,000 832,232 93.0%
2000 Market Segmentation Segmented Room Nights
------------------------------------ ------------------------------------
Month Leisure Casino Wholesale Group Leisure Casino Wholesale Group
- ----------------------------------------------------------------------------------------
January 30.0% 30.0% 20.0% 20.0% 22,012 22,012 14,674 14,674
February 30.0 30.0 20.0 20.0 20,405 20,405 13,603 13,603
March 30.0 30.0 20.0 20.0 23,080 23,080 15,387 15,387
April 30.0 30.0 20.0 20.0 22,370 22,370 14,914 14,914
May 30.0 30.0 20.0 20.0 23,236 23,236 15,491 15,491
June 30.0 30.0 20.0 20.0 22,308 22,308 14,872 14,872
July 30.0 30.0 20.0 20.0 22,129 22,129 14,752 14,752
August 30.0 30.0 20.0 20.0 23,041 23,041 15,361 15,361
September 30.0 30.0 20.0 20.0 21,419 21,419 14,279 14,279
October 30.0 30.0 20.0 20.0 22,475 22,475 15,163 15,163
November 30.0 30.0 20.0 20.0 20,576 20,576 13,718 13,718
December 30.0 30.0 20.0 20.0 21,349 21,349 14,232 14,232
---- ---- ---- ---- ------ ------ ------ ------
Totals 30.0% 30.0% 20.0% 20.0% 264,670 264,670 176,446 176,446
HVS International, Mineola, New York Lodging Supply and Demand Analysis 15
We have forecast a stabilized occupancy level of
93% in 2000. The stabilized occupancy is intended
to reflect the anticipated results of the property
over its remaining economic life, given any and
all changes in the life cycle of the property.
Thus, the stabilized occupancy excludes from
consideration any abnormal relationships between
supply and demand, as well as any nonrecurring
conditions that may result in unusually high or
low occupancies. Although the subject property may
operate at occupancies above this stabilized
level, we believe it equally possible for new
competition and temporary economic downturns to
force the occupancy below this selected point of
stability.
Average Rate Forecast Average rate is more formally defined as the
average rate per occupied room, and is calculated
by dividing the total rooms revenue achieved
during a specified period by the number of rooms
sold during the same period. Where occupancy is a
measure of rooms volume, average rate is a measure
of price, and the two together equate to total
rooms revenue. Although the average rate analysis
presented here follows the occupancy analysis,
these two statistics are highly correlated; in
reality, occupancy cannot be projected without
specific assumptions being made about average
rate.
Our forecast of average rate is based upon the
most probable rate attainment for the subject
property (segmented by demand period) and
projected growth rates applied to this indicator.
The following table presents the subject
property's estimated average rate levels by market
segment and demand period for the first projection
year, 2000. The segmented rate projections have
been deflated to year-end 1996 in order to compare
our forecast to the actual operating results of
the competitive properties.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 16
Estimated Average Rate by Segment and Period
Base Year Segmented Rate Assumptions
-------------------------------------------
Annual Deflated
Demand Period FIT Casino Wholesale Group Average ADR (1996)
- -------------------------------------------------------------------------------------------
Peak Weekend $175.00 $150.00 $125.00 $140.00 $150.00 $133.72
Peak Mid-week 140.00 125.00 100.00 110.00 121.50 107.95
Non-Peak Weekend 110.00 100.00 85.00 90.00 98.00 87.07
Non-Peak Mid-week 95.00 85.00 80.00 85.00 87.00 77.30
Convention 200.00 150.00 120.00 160.00 161.00 143.05
Special Event 250.00 200.00 180.00 185.00 208.00 184.81
------- ------- ------- -------
Annual Average $160.63 $134.90 $114.30 $127.41
Deflated ADR (1996) $142.72 $119.86 $101.56 $113.20
Total Average Rate $137.00
Deflated ADR (1996) $121.73
- --------------------------------------------------------------------------------
In positioning the average rate of the subject
property in 1996 dollars, we assume that the hotel
will be constructed in a first-class manner and
that the property will achieve an occupancy level
slightly below that of the current competitive
market. Based on this premise, and considering the
benefits of the subject property's theme and
amenities package, we have conservatively
positioned the average rate of the subject
property at $137.00, or $121.73 in 1996 dollars.
This represents an average rate above that of the
competitive market ($113) but below that of the
Mirage and Caesars Palace ($130). Although the
subject property may attain a higher average rate,
it is also possible that increased capacity in the
market may result in a lower level.
As indicated in the table, the FIT segment is
projected to command the highest average rates
throughout the entire year. The wholesale segment
is projected to achieve the lowest average rate.
As discussed, the degree to which a casino will
discount and its complimentary policy are
commensurate with the competitiveness of the
market and the target market. The group and casino
segments have been priced according to the type
and amount of group and casino demand that will
likely be pursued. Citywide conventions and
special event periods are priced to maximize rate
without gouging the consumer.
HVS International, Mineola, New York Lodging Supply and Demand Analysis 17
Average Rate Growth
Because average rates are affected by market
conditions such as the relationship between supply
and demand, increases do not necessarily mirror
the underlying monetary inflation rate. A hotel's
ability to raise room rates is affected by a
number of factors, including the following.
Supply and Demand Relationships - The relationship between supply and demand is
one of the factors that determine hotel occupancies and average rates. Strong
markets where lodging demand is increasing faster than supply are often
characterized by rate growth that exceeds inflation. Markets that are overbuilt
or suffering from declining demand are unlikely to exhibit any significant
increases in average rates.
Inflationary Pressures - Price increases caused by inflation affect hotel room
rates by eroding profit margins and encouraging operators to raise prices. This
strategy is effective only in markets that are characterized by a healthy supply
and demand relationship.
Improving the Competitive Standard - When a new facility enters a mature market,
its rates may be set higher than the marketwide average in an effort to justify
the development costs. This may allow other competitors to achieve corresponding
gains by effectively raising the amount the market will bear. However, if the
addition to supply has a severe impact on the occupancy levels of other hotels,
price competition may ensue.
Property-Specific Improvements - Changes that make a hotel more or less
attractive to guests can have an impact on average rate. An expansion,
renovation, upgrading, or the introduction of additional facilities and
amenities may enable greater-than-inflationary room rate increases. Likewise,
deferred maintenance may make a property less competitive, engendering a decline
in room rates.
In determining average rate projections, changes
that occur prior to occupancy stabilization are
generally attributable to factors that are
specific to the property and the market. After a
hotel achieves a stabilized occupancy, room rates
are generally expected to continue to increase at
the underlying inflation rate throughout the
remainder of the projection period.
Based on the topics discussed previously, as well
as the historical performance of the Las Vegas
hotel market, we believe average rate growth for
the subject will mirror the rate of inflation
throughout the projection period. As such, average
rates have been forecast to increase by 3.0% per
year for all segments.
Projection of The following chart summarizes our forecast of
Occupancy and occupancy and average rate for the proposed
Average Rate Aladdin Hotel and Casino.
Forecast of Occupancy and Average Rate
HVS International, Mineola, New York Lodging Supply and Demand Analysis 18
2000
--------------------------------------------
Calendar Year Occupancy 93.0%
Calendar Year Average Rate $137.00
--------------------------------------------------
We have chosen a stabilized occupancy and average
rate level of 93.0% and $137, respectively, in
2000. The subject property's anticipated
stabilized occupancy and average rate reflect the
following key benefits and risks.
The outlook for the Las Vegas lodging market is strong, and the health of the
regional economy is likely to support further increases in demand as allowed by
increases in supply.
The subject site is located in a prime location of the Las Vegas Strip.
The risks of future supply-side expansion are significant. Were the barriers to
entry greater, a higher stabilized occupancy and average rate could reasonably
be supported.
xxxxx
HVS International, Mineola, New York Income Capitalization Approach 1
11. Income Capitalization Approach
The income capitalization approach is based on the
principle that the value of a property is indicated by the
net return to the going concern or what is also known as
the present worth of future benefits. The future benefits
from income-producing properties, such as casinos, casino
hotels, hotels, and motels, are the net income before debt
service and depreciation, derived from a forecast of
income and expense. These future benefits can then be
converted into an indication of market value through a
mortgage equity capitalization process and a traditional
discounted cash flow analysis.
Using the income capitalization approach, we have
estimated the subject property's market value. Based on an
analysis of the Las Vegas Strip ($72 million and over)
gaming market's existing and proposed gaming supply,
followed by an examination of regional and local demand
trends, we have developed a forecast of income and expense
that reflects current and future anticipated income
trends, as well as area cost components, up through a
stabilized year of operation.
The forecast of income and expense is expressed in current
dollars as of the date of each forecasted year. The last
forecasted year, or what is referred to as the stabilized
year, is intended to reflect the anticipated operating
results of the property over its remaining economic life,
given any and all applicable stages of build-up, plateau,
and decline in the life cycle of the gaming property.
Therefore, such income and expense estimates from the
stabilized year forward exclude from consideration any
abnormal relation of supply and demand, and also any
transitory or nonrecurring conditions which may result in
unusual revenue or expenses of the property.
As stated in the textbook entitled Hotels and Motels: A
Guide to Market Analysis, Investment Analysis, and
Valuations, published by the Appraisal Institute, "of the
three valuation approaches available to the appraiser, the
income capitalization approach generally provides the most
persuasive and supportable conclusions when valuing a
lodging facility." This text notes that using a 10-year
forecast and an equity yield rate "most accurately
reflects the actions of typical hotel buyers, who purchase
properties based on their leveraged discounted cash flow."
The simpler procedure of using a 10-year forecast and a
discount rate is "less reliable because the derivation of
the discount rate has little support. Moreover, it is
difficult to adjust the discount rate for changes in the
cost of capital."(8) These same principles apply to the
valuation of gaming properties due to the labor-intense
nature of the entities.
------------
(8) Hotels and Motels: A Guide to Market Analysis,
Investment Analysis, and Valuations, Stephen
Rushmore, Appraisal Institute, Chicago, IL, 1992,
p. 236.
HVS International, Mineola, New York Income Capitalization Approach 2
The subject property has been valued using both a
traditional 10-year discounted cash flow analysis and a
10-year discounted cash flow analysis in which the cash
flow to equity and the equity reversion are discounted to
the present value at the equity yield rate and the income
to the mortgagee is discounted at a mortgage interest
rate. The sum of the equity and mortgage values is the
total property value.
To convert the forecasted income stream into an estimate
of value, the anticipated net income (before debt service
and depreciation) is allocated to the mortgage and equity
components based on market rates of return and
loan-to-value ratios. The total of the mortgage component
and the equity component equals the value of the property.
The process of estimating the value of the mortgage and
equity components is described as follows.
1. The terms of typical gaming property investors
financing are set forth, including interest rate,
amortization term, and loan-to-value ratio.
2. An equity yield rate of return is established.
Many gaming property investors base their equity
investments on a 10-year equity yield rate
projection that takes into account ownership
benefits such as periodic cash flow distributions,
residual sale or refinancing distributions that
return any property appreciation and mortgage
amortization, income tax benefits, and various
non-financial considerations such as status and
prestige. The equity yield rate is also known as
the internal rate of return on equity.
3. The value of the equity component is calculated by
first deducting the annual debt service from the
projected net income before debt service, leaving
the net income to equity for each projection year.
The net income as of the 11th year is capitalized
into a reversionary value. After deducting the
mortgage balance at the end of the 10th year and
the typical brokerage and legal costs, the equity
residual is discounted back to the date of value
at the equity yield rate. The net income to equity
for each of the 10 projection years is also
discounted to the present value. The sum of these
discounted values equates to the value of the
equity component. Adding the equity component to
the initial mortgage balance yields the overall
property value.
Because the mortgage and the debt service amounts
are unknown but the loan-to-value ratio was
determined in step #1, the preceding calculation
can be solved through an iterative process or by
use of a linear algebraic equation that computes
the total property value. The algebraic equation
that solves for the total property value using a
ten-year mortgage/equity technique was developed
by Suzanne R. Mellen, CRE, MAI, managing director
of the San Francisco office of HVS International.
A complete
HVS International, Mineola, New York Income Capitalization Approach 3
discussion of the technique is presented in her
article entitled, "Simultaneous Valuation: A New
Technique."(9)
4. The value is proven by allocating the total
property value between the mortgage and equity
components and verifying that the rates of return
set forth in steps #1 and #2 can be met from the
forecasted net income.
Comparable In the forecast of income and expense, presented later in
Income and this section, the composite statements will be utilized as
Expense Statements a basis of comparison to ascertain the reasonableness of
our forecast where applicable.
We have presented a composite statement of casino hotels
located within the Las Vegas Strip ($72 million & over)
market as compiled by the Nevada Gaming Control Board and
published in the Nevada Gaming Abstract, 1995 and 1996.
Historical Statements of Income and Expense - Proposed Aladdin Hotel and Casino
----------
(9) Suzanne R. Mellen. "Simultaneous Valuation: A New
Technique," Appraisal Journal, April, 1983.
HVS International, Mineola, New York Income Capitalization Approach 4
Fiscal Year 1996 1995
Location Las Vegas Strip Las Vegas Strip
Number of Locations 19 19
Number of Rooms 45,291 44,490
Occupancy 94.8% 94.1%
Average Rate $79.19 $74.61
Occupied Rooms 15,666,731 15,272,638
(000s) % Gross PAR(1) POR(2) (000s) % Gross PAR(1) POR(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues
Gaming $3,194,527 52.6% $70,533 $203.91 $3,086,131 53.6% $69,367 $202.07
Rooms 1,240,619 20.4 27,392 79.19 1,139,558 19.8 25,614 74.61
Food 656,570 10.8 14,497 41.91 632,475 11.0 14,216 41.41
Beverage 277,885 4.6 6,136 17.74 273,743 4.8 6,153 17.92
Other Income 700,428 11.5 15,465 44.71 621,797 10.8 13,976 40.71
---------- ---- ------- ------ ---------- ---- ------- ------
Total Revenues 6,070,029 100.0 134,022 387.45 5,753,705 100.0 129,326 376.73
Departmental Expense *
Casino 1,826,188 57.2 40,321 116.56 1,768,141 57.3 39,742 115.77
Rooms 451,921 36.4 9,978 28.85 430,029 37.7 9,666 28.16
Food 678,850 103.4 14,989 43.33 669,096 105.8 15,039 43.81
Beverage 183,764 66.1 4,057 11.73 182,125 66.5 4,094 11.92
Other Income 427,180 61.0 9,432 27.27 422,055 67.9 9,487 27.63
---------- ---- ------- ------ ---------- ---- ------- ------
Total Departmental Exp 3,567,904 58.8 78,777 227.74 3,471,445 60.3 78,028 227.30
Departmental Income 2,502,125 41.2 55,245 159.71 2,282,260 39.7 51,298 149.43
Undistributed Operating Expenses
Administrative and General 663,174 10.9 14,642 42.33 640,544 11.1 14,397 41.94
Marketing 90,967 1.5 2,008 5.81 89,770 1.6 2,018 5.88
Energy 88,971 1.5 1,964 5.68 89,844 1.6 2,019 5.88
Complimentary/Promotions 40,152 0.7 887 2.56 35,979 0.6 809 2.36
Entertainment 63,314 1.0 1,398 4.04 55,473 1.0 1,247 3.63
---------- ---- ------- ------ ---------- ---- ------- ------
Total 946,577 15.6 20,900 60.42 911,611 15.8 20,490 59.69
House Profit 1,555,549 25.6 34,345 99.29 1,370,649 23.8 30,808 89.75
Fixed Charges
Property Tax 46,350 0.8 1,023 2.96 45,238 0.8 1,017 2.96
Rent of Premises 18,157 0.3 401 1.16 17,638 0.3 396 1.15
Equipment Lease 3,162 0.1 70 0.20 7,811 0.1 176 0.51
---------- ---- ------- ------ ---------- ---- ------- ------
Total 67,670 1.1 1,494 4.32 70,687 1.2 1,589 4.63
Net Income $1,487,879 24.5% $32,851 $94.97 $1,299,962 22.6% $29,219 $85.12
========== ==== ======= ====== ========== ==== ======= ======
Food as a % of Gaming Revenue 20.6% 20.5%
Beverage as a % of Gaming Revenue 8.7 8.9
Other Income as a % of Gaming Revenue 21.9 20.1
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
Sources: Nevada Gaming Abstract, State Gaming Control Board HVS Gaming Services
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 5
As shown, the Las Vegas Strip ($72 million and over)
market has shown increasing profitability over the past
two years. Specifically house profit equated to 25.6% of
total revenue in 1996, up from 23.8% of total revenue in
1995. Similarly, net income increased from 22.6% of total
revenue in 1995 to 24.5% of total revenue in 1996. The
increased profitability of the Las Vegas Strip ($72
million and over) market is attributable to overall
revenue increases as well as decreases in departmental and
undistributed operating expenses. Revenue increases from
1995 to 1996 were spurred by a 3.5% increase in gaming
revenue and a 8.9% increase in rooms revenue. The rooms
revenue increase was achieved through a 6.1% increase in
average rate and a minimal increase in occupancy.
Departmental expenses ratios were pared from 60.3% of
departmental income in 1995 to 58.8% in 1996, while
undistributed operating expenses decreased minimally from
15.8% of total revenue to 15.6% of total revenue.
In addition, we have investigated the performance of
several of the larger casino companies operating within
the Las Vegas Strip ($72 million and over) market. The
following chart details operating expense ratios for these
selected companies.
Casino Department Expenses, Selected Properties Las Vegas Strip ($72 million and
over)
Casino Expenses Rooms Expenses Food & Beverage Expenses
----------------- ---------------- ------------------------
1996 1995 1996 1995 1996 1995
----------------- ---------------- ------------------------
Mirage 51.% 49.5% 29.2% 30.% 63.% 50.%
Circus Circus 46.1 41.5 39.6 39.6 95.4 93.7
Hilton 54.4 50.6 N/A N/A N/A N/A
Caesars 57.4 51.4 35.7 35.7 89.9 114.3
Source: Individual Company 10K Reports
- --------------------------------------------------------------------------------
These ratios will also be used as a basis for forecasting
the subject property's expense levels.
Inflation Analysis To forecast income and expense levels, we must establish a
general rate of inflation. The following table shows how
the consumer price index for the urban consumer, all
items, has changed in the Western United States between
1990 and 1996 (data specific to Las Vegas were not
available).
HVS International, Mineola, New York Income Capitalization Approach 6
Consumer Price Index - Western United States Area
Consumer Percentage
Year Price Index Change
- -------------------------------------------------------------------------
1990 131.5 ---
1991 137.3 4.4%
1992 142.0 3.4
1993 146.2 3.0
1994 149.6 2.3
1995 153.5 2.6
1996 157.6 2.7
Average Annual % Change 1990-96: 3.1%
Source: Bureau of Labor Statistics
- --------------------------------------------------------------------------------
In consideration of these data and the trends of the last
three years, our assessment of probable property
appreciation levels, and the subject property's ability to
control costs, we have applied an underlying inflation
rate of 3.0% to all appropriate revenue and expense items.
This stabilized inflation rate takes into account normal,
recurring inflation cycles. Inflation is likely to
fluctuate above and below this level during the projection
period.
Fixed and In forecasting revenues and expenses for a gaming
Variable Component property, HVS International uses a fixed and variable
Analysis component model. The logic behind this model is based on
the premise that gaming property revenue and expenses have
a component that is fixed and another component that
varies directly with gaming volume and facility use.
Therefore, a projection can be made by taking a known
level of revenue or expense and calculating the fixed
component, as well as the variable portion. The fixed
component is then held at a constant level, while the
variable component is adjusted for the percentage change
in either the projected gaming/lodging volume or facility
use, which produces the known level of revenue or expense.
The following table illustrates the revenue and expense
categories that can be projected using this fixed and
variable component model. These percentages show the
portion of each category that is typically fixed and
variable. The last column describes the basis for
calculating the percentage of variability.
HVS International, Mineola, New York Income Capitalization Approach 7
Range of Fixed and Variable Ratios
Revenue and Expense Category Percent Fixed Percent Variable Index of Variability
- ---------------------------------------------------------------------------------------------------------
Revenues
Food 0 - 30 % 70 - 100 % Gaming/Occ.
Beverage 0 - 30 70 - 100 Gaming/Food Rev.
Retail 10 - 40 60 - 90 Gaming/Occ.
Other Income 30 - 60 40 - 70 Gaming/Occ.
Departmental Expenses
Casino 60 - 90 10 - 40 Gaming
Rooms 50 - 70 30 - 50 Occupancy
Food and Beverage 35 - 60 40 - 65 Food & Bev. Rev.
Other Income 30 - 60 40 - 70 Other Income
Undistributed Operating Expenses
Administrative & General 65 - 85 15 - 35 Total Revenue
Marketing 65 - 85 15 - 35 Total Revenue
Property Operation & Maintenance 65 - 85 15 - 35 Total Revenue
Energy 65 - 85 15 - 35 Total Revenue
Complimentary/Promo 65 - 85 15 - 35 Total Revenue
Entertainment 60 - 80 20 - 40 Total Revenue
Management Fees 0 - 40 60 - 100 Gam./Total Revenue
Incentive Management Fees 0 100 EBITA
Fixed Expenses
Property Taxes 100 0 N/A
Insurance 100 0 N/A
Reserve for Replacement 0 100 Total Revenue
- ----------------------------------------------------------------------------------------------------------
The forecast of revenue and expense is accomplished
through a step-by-step approach. Each category of revenue
and expense is estimated separately and combined at the
end in the final statement of income and expense.
Forecast of Income The following description sets forth the basis for the
and Expense forecast of income and expense for the subject property.
We anticipate that it will take three years for the
subject property to reach a stabilized level of operation.
The following text refers directly to the subsequent chart
where the forecast of income and expense is shown through
the 10-year holding period.
Revenues Gaming Revenue
As delineated in the "Forecast of Gaming Revenue" section
of the narrative, gaming revenue has been forecast through
the 10-year projection period based on a market
penetration model and reconciled with a WPUPD analysis.
Our forecast of gaming revenue reflects the historical
performance of the Las Vegas Strip ($72 million and over)
market and the anticipated performance and penetration of
the subject
HVS International, Mineola, New York Income Capitalization Approach 8
property. Gaming revenues are anticipated to stabilize in
2002, and WPUPD rates are anticipated to increase at a
rate of 3.0% per year thereafter.
Rooms Revenue
Rooms revenue is determined by two variables: occupancy
and average room rate. In the section entitled "Lodging
Supply and Demand Analysis," we projected occupancy and
average rate for the subject property. The Proposed
Aladdin Hotel and Casino is expected to stabilize in the
first projection year at an occupancy of 93% and an
average daily rate of $137.00. From the stabilized year
forward, the average rate is forecast to increase at an
inflationary rate of 3.0% per year.
Food and Beverage Revenue
The subject property's food and beverage revenue will be
captured by eight food and beverage outlets, the various
beverage service areas located throughout the main casino
floor, and the property's roughly 75,000 square feet of
meeting space where banquet and catering charges will be
generated. Food revenue is anticipated to mirror changes
in gaming volume. Due to the subject property's Strip
location, the food and beverage outlets are anticipated to
draw only a moderate amount of patronage from the local
community. The ratio of food revenue to gaming win for the
Las Vegas Strip ($72 million and over) market equated to
20.6% in 1996, up from 20.5% in 1995. Based on these
results, as well as the proposed subject's high-quality
food and beverage outlets and amount of meeting space,
food revenue has been projected at 21.7% of gaming revenue
per year throughout the projection period. As mentioned,
food revenue is projected to remain commensurate with
gaming volume throughout the projection period.
Beverage revenue has been forecast at 9.1% of gaming win
per year throughout the projection period. This ratio
compares to the historical performance of the Las Vegas
Strip ($72 million and over) market, which recorded
beverage revenue at 8.7% of gaming win in 1996. Based on
the projected WPUPD rates, casino patrons' propensity to
consume beverages, and the complimentary service granted
to gamblers, these projections appear reasonable.
HVS International, Mineola, New York Income Capitalization Approach 9
Telephone Income
Telephone revenue is not individually tracked by the State
Gaming Control Board; however, according to interviews
with area managers, as well as our experience in the
gaming and hotel industries, we have forecast telephone
revenue for the subject property at 1.3% of gaming win, or
2.9% of rooms revenue throughout the projection period.
Entertainment Income
The subject property will derive entertainment income from
the operation of its production show theater and the
Center for Performing Arts. The subject property's
production show is expected to have a 1,001 Arabian
Nights/Scheherazade theme, while the Center for Performing
Arts will continue to host Broadway Shows and mainstream
concerts. Based on the proposed quality of the subject
property's entertainment offerings, as well as interviews
conducted with area managers, we have forecast
entertainment income to equal 13.7% of gaming revenue per
year throughout the projection period.
Spa Income
As mentioned previously in this report, the subject
property will offer a +/-20,000-square-foot spa. The spa
will include massage service, a sauna, steam rooms, and
other pampering amenities. Based on our experience in the
gaming and hotel industries, we have forecast spa revenue
at 5.4% of gaming revenue per year throughout the
projection period.
Miscellaneous Income
Miscellaneous income at the subject property is expected
to be derived from card and dice sales, vending machines,
various gift shops and retail outlets, and ATMs. Based on
this, we have forecast miscellaneous income equal to
approximately 5.5% of gaming revenue per year throughout
the projection period. Note that in the composite
statement of casinos in the Las Vegas Strip ($72 million
and over) market, other income equated to 20.1% of gaming
revenue in 1995 and 21.9% in 1996. While this ratio is
higher than the ratio we have forecast for the subject
property, other income in the composite statement includes
telephone revenue, entertainment revenue, and other
ancillary revenues which we have forecast separately.
HVS International, Mineola, New York Income Capitalization Approach 10
Departmental Expenses Casino Expense
Casino expense consists of items relating to the operation
and general upkeep of the casino areas, including the
table games and gaming devices. Salaries, wages, and
employee benefits account for a substantial portion of
this category. The wages paid to dealers and personnel
tend to be variable; however, they are offset by the
relatively fixed payroll for pit and slot supervisors, pit
and slot managers, the casino manager, casino cage
personnel, change personnel, and the casino host. Overall,
salaries, wages, and employee benefits are somewhat
dependent on management's scheduling and forecasting
abilities. Other casino expenses include gaming equipment
maintenance, gaming supplies, uniforms, and other
miscellaneous departmental operating expenses for the
casino and cage.
Casino expenses as a ratio to casino revenue for the Las
Vegas Strip ($72 million and over) market equated to 57.3%
of gaming revenue in 1995 and 57.2% of gaming revenue in
1996. In addition, the selected casino companies presented
previously reported casino expenses ranging from a low of
46.1% to a high of 57.4% in 1996.
Based on these results as well as the forecasted gaming
revenue levels for the subject property, we have forecast
casino expenses to equate to 50.7% of casino revenue per
year throughout the projection period.
Rooms Expense
Rooms expense consists of items relating to the sale and
upkeep of guestrooms and public space. Salaries, wages,
and employee benefits account for a substantial portion of
this category. Although the wages paid to maids and
housemen tend to be highly occupancy sensitive, they are
somewhat offset by the relatively fixed payroll for front
desk personnel, public area cleaners, the housekeeper, and
the assistant manager. The overall result is that
salaries, wages, and employee benefits are only moderately
occupancy sensitive. Commissions and reservation expenses
are usually based on room sales and are, therefore, highly
occupancy and rate sensitive. Linen, operating supplies,
other operating expenses, and uniforms are only slightly
affected by changes in volume and are classified as very
slightly occupancy sensitive.
The Las Vegas Strip ($72 million and over) composite rooms
expense ratio equated to 37.7% in 1995, decreasing to
36.4% in 1996. In addition, the selected casino companies
reported a range of rooms expenses of 29.2% to 39.6% in
1996. Given the forecasted level of rooms revenue at the
subject property and the comparable information, we have
forecast the proposed subject's rooms expenses at 33.0% of
rooms revenue per year throughout the projection period.
Food and Beverage Expenses
HVS International, Mineola, New York Income Capitalization Approach 11
Food expense for the Las Vegas Strip ($72 million and
over) market has historically been quite high.
Specifically, food expenses equated to 105.8% and 103.4%
of food revenue in 1995 and 1996, respectively. Beverage
expenses within the market equated to 66.1% of beverage
revenue in 1996, down from 66.5% in 1995. Overall, food
and beverage expenses equated to 93.9% of food and
beverage revenue in 1995, decreasing to 92.3% in 1996. The
selected casino companies reported food and beverage
expense of between 63.5% of food and beverage revenues to
95.4% in 1996. Based on the aforementioned information, we
have forecast food expenses at 97.0% of food revenue and
beverage expenses at 64.0% of beverage revenue throughout
the projection period. This equates to an overall food and
beverage expense ratio of 87.2% per year, within the
comparable range.
Telephone Expense
Telephone expense has had been forecast to stabilize at
40.0% of telephone revenue and increase at an inflationary
rate of 3.0% per annum thereafter.
Entertainment Expense
As mentioned, the subject will generate entertainment
revenue from the production show and the Center for
Performing Arts. Given the high cost of producing shows in
Las Vegas and attracting Broadway shows and concert
headliners to the Center for Performing Arts, as well as
the labor-intensive nature of operating theaters, we have
forecast entertainment expenses at 90% of entertainment
revenues throughout the projection period.
Spa Expense
Similar to the theaters, spas are labor-intensive
operations which require staffing even during down-times.
As such, we have forecast spa expenses at 75% of spa
revenues throughout the projection period.
HVS International, Mineola, New York Income Capitalization Approach 12
Miscellaneous Expense
Miscellaneous expense is made up of labor costs and the
costs of goods sold associated with the various retail
outlets. We have forecast miscellaneous expense at 75.0%
of miscellaneous revenue throughout the projection period.
Undistributed Administrative and General
Operating Expenses
Administrative and general expenses include items related
to the management and operation of the property such as
management salaries and wages, human resources, data
processing, collections, legal and consulting fees,
equipment leases, and other service fees. Most
administrative and general expenses are relatively fixed.
The exceptions are cash overages and shortages;
commissions on credit card charges; and credit and
collection charges, which are moderately affected by the
quantity of transactions or total revenue. Another
significant expense incurred by casino hotels is the cost
associated with surveillance.
Administrative and general expenses for the Las Vegas
Strip ($72 million and over) market equated to 11.1% of
total revenue in 1995, decreasing to 10.9% of total
revenue in 1996. We have projected administrative and
general expense to be approximately 10.5% of total revenue
per year throughout the projection period.
Marketing
The marketing category is unique in that all of the
expense items, with the exception of commissions, are
entirely controlled by management. Most gaming properties
establish an annual marketing budget which sets forth all
planned expenditures. If the budget is followed throughout
the period, total marketing expenses can be accurately
forecast. Although there is a lag period before results
are realized, marketing expenditures are unusual because
the benefits are often extended over a long period.
Depending on the type and scope of the advertising program
implemented, the lag time can be as short as a few weeks
or as long as several years. However, the positive results
of an effective marketing campaign tend to linger, and a
property often enjoys the benefits of a concentrated sales
effort for many months.
The comparable statement of income and expense presented
earlier shows marketing expenses equating to 1.5% of total
revenues in 1996, down from 1.6% of total revenues in
1995. We have forecast marketing expenses for the subject
property at 1.7% of total revenues in the first projection
year, stabilizing at 1.5% of total revenue per year
thereafter. The higher expense ratio in the first
projection year is due to the increased marketing costs
associated with opening a new hotel casino property.
HVS International, Mineola, New York Income Capitalization Approach 13
Property Operations and Maintenance
Property operations and maintenance (PO&M) is another
expense category that is largely controlled by management.
Except for repairs that are necessary to keep the facility
open and to prevent damage (e.g., plumbing, heating, and
electrical), most maintenance items can be deferred for
varying lengths of time. All expense items in this
category are relatively fixed. Maintenance is an
accumulating expense. If management elects to postpone
performing a required procedure, they have not eliminated
or saved the expenditure, they have only deferred payment
until a later date. We have forecast property operations
and maintenance expenses at 1.8% of total revenues, or
$3,867 per available room in the first projection year.
These expenses are forecast to increase to a stabilized
level of 2.1% of total revenues or $4,821 per available
room in the third projection year, increasing in line with
the underlying rate of inflation of 3.0% per year
thereafter. The lower property operations and maintenance
expenses forecast in the initial years are due to the
relative newness of the facility. Typically, new
properties incur lower maintenance expenses in the first
years of operation and are still covered by several
manufacturers' warranties.
Energy
As the casino is open 24 hours, the public areas are
continually lighted and heated or air conditioned. The
design and layout of a casino facility have a notable
impact on the level of energy expense it incurs.
Considering the subject's layout, design, and age, as well
as the cost of energy in the Las Vegas area, we have
forecast energy expense at 1.5% of total revenue or $3,247
per available room in the first projection year, with
inflationary gains anticipated thereafter. This forecast
is in line with the Las Vegas Strip ($72 million and over)
comparables presented earlier.
Complimentary and Promotion
We have projected the promotions expense at 0.6% of total
revenue, or roundly $3.6 million dollars in the first
projection year. Promotions expense is projected to
increase at an inflationary rate throughout the projection
period. The level of promotions expense reflects the
highly competitive market and the importance of promotions
for maintaining market share.
LCI Fee
As mentioned previously in this report, the subject
property will be jointly owned by Aladdin Holdings, LLC,
and London Clubs International (LCI). LCI is one of the
world's leading casino operators with seven casinos in
London, one in France, three in Egypt, and one in Lebanon.
In addition, they operate casinos on board three
HVS International, Mineola, New York Income Capitalization Approach 14
cruise liners. According to the property's developers,
Aladdin Gaming, LLC, will employ LCI professionals to
operate the property's Salle Prive high-end casino. In
return for LCI's operations expertise, Aladdin will pay
LCI an incentive marketing and consulting fee. This fee is
based on the EBITDA generated by the Salle Prive. The
following chart dictates the terms of the agreement as
provided by the property's developers.
LCI Incentive Marketing and Consulting Fee
EBITDA Percentage Entitlement
-----------------------------------------------------------------
$0-$15M 10%
$15M-$17M 12.5
$17M-$20M 25
> $20M 50
- --------------------------------------------------------------------------------
The chart on the following page shows our estimation of
the Salle Prive EBITDA for the 10-year holding period.
HVS International, Mineola, New York Income Capitalization Approach 15
Forecast of LCI Fees
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
---------------------------------------------------------------------------------------------------
Salle Prive Revenues* $73,157 $75,166 $77,421 $79,742 $82,135 $84,599 $87,138 $89,752 $92,445 $95,218
Salle Prive Expenses** 62,183 63,891 65,808 67,780 69,815 71,909 74,067 76,289 78,578 80,935
EBITDA 10,974 11,275 11,613 11,961 12,320 12,690 13,071 13,463 13,867 14,283
Terms
- ----------------------
10% up to 15M 1,097 1,127 1,161 1,196 1,232 1,269 1,307 1,346 1,387 1,428
12.5% 15M - 17M 0 0 0 0 0 0 0 0 0 0
25% 17M - 20M 0 0 0 0 0 0 0 0 0 0
50% 20M + 0 0 0 0 0 0 0 0 0 0
Total $ 1,097 $ 1,127 $ 1,161 $ 1,196 $ 1,232 $ 1,269 $ 1,307 $ 1,346 $ 1,387 $ 1,428
* Based on 13% of total gaming revenue
** Based on 85% of Salle Prive revenue
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 16
As shown, LCI Revenue has been forecast based on 13% of
total revenue. According to the property's developers, the
LCI fee is based on all gaming and non-gaming revenue
generated by the Salle Prive, including the operation of
the Salle Prive exclusive restaurant. Salle Prive expenses
were forecast at 85% of revenues. This expense ratio
includes the increased marketing and complimentary costs
associated with operating a high-end casino. Overall, the
Salle Prive EBITDA is not forecasted to a reach a level
where higher incentive payments than the base 10% are due.
As such, LCI fees have been forecast at 10% of the Salle
Prive EBITDA per year, throughout the projection period.
Fixed Charges Property Taxes
According to the Clark County Assessor's Office, the
assessed value of the Proposed Aladdin Hotel and Casino
will be determined via the cost approach based on Marshall
& Swift cost estimates. According to the property's
developers, the construction cost of the subject property
excluding land costs is estimated at roundly $630,000,000.
In addition, we have estimated the land value of the
proposed subject property at $7.4 million per acre, or
roundly $134,400,000 for the +/-18.16 acre site. As such,
the total budgeted development cost for the subject
property equates to roundly $765,400,000. In addition,
Clark County assesses property at 35% of market value for
taxing purposes. As such, the forecasted taxable value of
the proposed Aladdin Hotel and Casino equates to roundly
$268,000,000. We have utilized a millage rate of 2.6% in
our analysis for the first period. Property taxes are
projected to increase at inflationary rates throughout the
projection period. The following table presents the
estimated first-year property tax burden of the subject
property.
Estimated Property Tax Burden - First Projection Year
Cost (000,000)
----------------------------------------------
Project Development $ 462.2
Financial and Other 168.8
Land Value 135.0
------------
Total $ 766.0
@ 35% assessment $ 268.1
Tax Rate 2.61%
------------
Taxes $ 6.99759
Say 7
- --------------------------------------------------------------------------------
Insurance Expense
HVS International, Mineola, New York Income Capitalization Approach 17
The insurance expense category includes the cost of
insuring the building and its contents against damage or
destruction from fire, weather, sprinkler leakage, boiler
explosion, plate glass breakage, and so forth. Insurance
rates are based on many factors, including building design
and construction, fire detection and extinguishing
equipment, fire district, distance from fire house, and
the area's fire experience. Based on our experience in the
casino and hotel industries, we have forecast insurance
expense at a total of $1,188,000 in the first projection
year, or $457 per available room, with inflationary gains
projected thereafter.
EBITDA Margin As evidenced in the following income and expense
statements, we project that earnings before interest,
taxes, depreciation, and amortization (EBITDA) will equate
to 25.8% of total revenues in the first projection year,
decreasing to 25.7% of total revenues in the third
projection year. The following table presents estimated
EBITDA margins of Las Vegas and riverboat properties for
1996, as estimated by Donaldson, Lufkin, and Jennette.
Comparable EBITDA Ratios
MYSTERY TABLE MISSING
- --------------------------------------------------------------------------------
As evidenced, the subject property's estimated stabilized
EBITDA ratio of 25.7% is within the actual range of
comparable EBITDA ratios.
Capital Reserves Furniture, fixtures, and equipment are essential to the
operation of a casino hotel, and their quality often
influences the class of a property. Included in this
category are all non-real estate items that are normally
capitalized, not expensed. Furniture,
HVS International, Mineola, New York Income Capitalization Approach 18
fixtures, and equipment are exposed to heavy use and must
be replaced at regular intervals. The useful life of these
items is determined by their quality and durability and
the amount of guest traffic and use. Periodic replacement
of furniture, fixtures, and equipment is essential to
maintain the quality, image, and income of a casino hotel.
Items specific to the casino operation include table game
felts, upholstered chairs, surveillance equipment, and
change carts. The replacement of these items generally
depends on the volume of business and quality of the
materials, while replacing the most important item in the
casino, the gaming devices, is more uncertain. Gaming
devices, like other computer equipment, generally have an
economic life of five to ten years. However, with the
advances in computerized gaming technology, devices may
become obsolete within a few years. The replacement of
technologically obsolete devices should reflect the
competitive set, player preferences, and demand trends.
Since capitalized expenditures are not included in the
operating statement, but nevertheless affect an owner's
cash flow, an appraisal should reflect these expenses in
the form of an appropriate reserve for replacement. The
annual deduction of a reserve for replacement from the
projected income stream effectively provides for a return
of furniture, fixtures, and equipment in both the casino
and the hotel components.
Reserves for replacement specific to the gaming industry
are typically deducted at between 0.5% and 2.5% of total
revenue. This deduction includes an allowance for both the
hotel and the casino components. An annual capital reserve
equal to 1.0% of total revenues has been deemed reasonable
for the subject property, as it will be a high-quality new
build product.
Free Cash Flow We project the Aladdin Hotel and Casino will generate
approximately $139,338,000 in free cash flow in the first
projection year. In the second projection year, free cash
flow is projected to increase to $143,143,000, or 24.8% of
total revenue. As mentioned, the subject is anticipated to
stabilize in the third year of the projection period and
generate roundly $146,185,000 in free cash flow, or 24.5%
of total revenue.
HVS International, Mineola, New York Income Capitalization Approach 19
Forecast of Income Based on the preceding analyses, the forecast of income
and Expense and expense has been formulated. The following chart
presents a detailed forecast of income and expenses
through the stabilized year of operation. Following the
detailed income and expense statement, the 10-year
forecast of income and expense is presented. The forecast
pertains to fiscal operating years beginning January 1,
2000 and is expressed in inflated dollars for each year.
Detailed Income and Expense Statement - Proposed Aladdin Hotel and Casino
Calendar Years Ending: 2000 2001
Number of Rooms: 2,600 2,600
Occupancy: 93.0% 93.0%
Average Rate: $137.00 $141.11
Occupied Rooms: 882,570 882,570
$(000s) %Gross PAR(1) POR(2) $(000) %Gross PAR(1)
- ---------------------------------------------------------------------------------------------------------------------------
REVENUE
Gaming $ 282,030 50.1% $ 108,473 $ 320.00 $ 289,060 50.0% $ 111,177
Rooms 120,912 21.5 46,505 137.00 124,539 21.5 47,900
Food 61,222 10.9 23,547 69.37 63,058 10.9 24,253
Beverage 25,777 4.6 9,914 29.21 26,551 4.6 10,212
Telephone 3,529 0.6 1,357 4.00 3,635 0.6 1,398
Entertainment 38,666 6.9 14,872 43.81 39,826 6.9 15,318
Spa 15,144 2.7 5,825 17.16 15,599 2.7 6,000
Miscellaneous 15,466 2.7 5,948 17.52 15,930 2.8 6,127
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 562,746 100.0 216,441 637.62 578,198 100.0 222,384
---------- ---------- ---------- ---------- ---------- ---------- ----------
DEPARTMENTAL EXPENSES *
Casino 142,881 50.7 54,954 161.89 146,525 50.7 56,356
Rooms 39,923 33.0 15,355 45.23 41,121 33.0 15,816
Food 59,385 97.0 22,840 67.29 61,166 97.0 23,525
Beverage 16,497 64.0 6,345 18.69 16,993 64.0 6,536
Telephone 1,412 40.0 543 1.60 1,454 40.0 559
Entertainment 34,800 90.0 13,385 39.43 35,844 90.0 13,786
Spa 11,358 75.0 4,368 12.87 11,699 75.0 4,500
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Dept. Expenses 317,856 56.5 122,252 360.15 326,750 56.5 125,673
---------- ---------- ---------- ---------- ---------- ---------- ----------
DEPARTMENTAL INCOME 244,890 43.5 94,188 277.47 251,448 43.5 96,711
---------- ---------- ---------- ---------- ---------- ---------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 59,146 10.5 22,748 67.02 60,848 10.5 23,403
Marketing 9,380 1.7 3,608 10.63 8,764 1.5 3,371
Property Maintenance 10,055 1.8 3,867 11.39 10,953 1.9 4,213
Energy 8,441 1.5 3,247 9.56 8,673 1.5 3,336
Complimentary/Promo 3,618 0.6 1,392 4.10 3,724 0.6 1,432
LCI Fee 1,097 0.2 422 1.24 1,127 0.2 434
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses 91,737 16.3 35,283 103.94 94,089 16.2 36,188
---------- ---------- ---------- ---------- ---------- ---------- ----------
HOUSE PROFIT 153,153 27.2 58,905 173.53 157,359 27.3 60,523
---------- ---------- ---------- ---------- ---------- ---------- ----------
FIXED EXPENSES
Property Taxes 7,000 1.2 2,692 7.93 7,210 1.2 2,773
Insurance 1,188 0.2 457 1.3 1,224 0.2 471
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 8,188 1.5 3,149 9.28 8,434 1.5 3,244
EBITDA $ 144,965 25.7% $ 55,756 $ 164.25 $ 148,925 25.8% $ 57,279
Reserve for Replacement 5,627 1.0 2,164 6.38 5,782 1.0 2,224
Free Cash Flow $ 139,338 24.8% $ 53,591 $ 157.88 $ 143,143 24.8% $ 55,055
========== ========== ========== ========== ========== ========== ==========
Food as a % of Gaming Rev 21.7% 21.8%
Beverage as a % of Gaming Rev 9.1 9.2
Beverage as a % of Food Rev 42.1 42.1
Telephone as a % of Gaming Rev 1.3 1.3
Telephone as a % of Rooms Rev 2.9 2.9
Entertainment as a % of Gaming Rev 13.7 13.8
Entertainment as a % of Rooms Rev 32.0 32.0
Calendar Years Ending: 2002
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $145.34
Occupied Rooms: 882,570
POR(2) $(000) %Gross PAR(1) POR(2)
- --------------------------------------------------------------------------------------------------
REVENUE
Gaming $ 327.52 $ 297,730 50.0% $ 114,512 $ 337.34
Rooms 141.11 128,276 21.5 49,337 145.34
Food 71.45 64,950 10.9 24,981 73.59
Beverage 30.08 27,347 4.6 10,518 30.99
Telephone 4.12 3,744 0.6 1,440 4.24
Entertainment 45.13 41,021 6.9 15,777 46.48
Spa 17.67 16,067 2.7 6,180 18.20
Miscellaneous 18.05 16,408 2.8 6,311 18.59
---------- ---------- ---------- ---------- ----------
Total Revenues 655.13 595,543 100.0 229,055 674.78
---------- ---------- ---------- ---------- ----------
DEPARTMENTAL EXPENSES *
Casino 166.02 150,920 50.7 58,046 171.00
Rooms 46.59 42,354 33.0 16,290 47.99
Food 69.30 63,001 97.0 24,231 71.38
Beverage 19.25 17,502 64.0 6,732 19.83
Telephone 1.65 1,498 40.0 576 1.70
Entertainment 40.61 36,919 90.0 14,200 41.83
Spa 13.26 12,050 75.0 4,635 13.65
---------- ---------- ---------- ---------- ----------
Total Dept. Expenses 370.23 336,550 56.5 129,442 381.33
---------- ---------- ---------- ---------- ----------
DEPARTMENTAL INCOME 284.90 258,993 43.5 99,613 293.45
---------- ---------- ---------- ---------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 68.94 62,674 10.5 24,105 71.01
Marketing 9.93 9,027 1.5 3,472 10.23
Property Maintenance 12.41 12,535 2.1 4,821 14.20
Energy 9.83 8,933 1.5 3,436 10.12
Complimentary/Promo 4.22 3,835 0.6 1,475 4.35
LCI Fee 1.28 1,161 0.2 447 1.32
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 106.61 98,165 16.4 37,756 111.23
---------- ---------- ---------- ---------- ----------
HOUSE PROFIT 178.30 160,828 27.1 61,857 182.23
---------- ---------- ---------- ---------- ----------
FIXED EXPENSES
Property Taxes 8.17 7,426 1.2 2,856 8.41
Insurance 1.4 1,261 0.2 485 1.43
---------- ---------- ---------- ---------- ----------
Total 9.56 8,687 1.5 3,341 9.84
EBITDA $ 168.74 $ 152,140 25.6% $ 58,516 $ 172.38
Reserve for Replacement 6.55 5,955 1.0 2,291 6.75
Free Cash Flow $ 162.19 $ 146,185 24.5% $ 56,225 $ 165.64
========== ========== ========== ========== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
- --------------------------------------------------------------------------------
10-Year Forecast of Income and Expense - Proposed Aladdin Hotel and Casino, Las
Vegas, Nevada
Calendar Years Ending: 2000 2001 2002 2003 2004
------------------- ------------------- ------------------- ------------------ -----------
Number of Rooms: 2600 2600 2600 2600 2600
Occupied Rooms: 882,570 882,570 882,570 882,570 882,570
Occupancy: 93.0% 93.0% 93.0% 93.0% 93.0%
Average Rate: $137.00 $141.11 $145.34 $149.70 $154.19
% of % of % of % of
$(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s)
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE
Gaming $282,030 50.1% $289,060 50.0% $297,730 50.0% $306,660 50.0% $315,860
Rooms 120,912 21.5 124,539 21.5 128,276 21.5 132,124 21.5 136,088
Food 61,222 10.9 63,058 10.9 64,950 10.9 66,898 10.9 68,905
Beverage 25,777 4.6 26,551 4.6 27,347 4.6 28,168 4.6 29,013
Telephone 3,529 0.6 3,635 0.6 3,744 0.6 3,856 0.6 3,972
Entertainment 38,666 6.9 39,826 6.9 41,021 6.9 42,252 6.9 43,519
Spa 15,144 2.7 15,599 2.7 16,067 2.7 16,549 2.7 17,045
Miscellaneous 15,466 2.7 15,930 2.8 16,408 2.8 16,901 2.8 17,408
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 562,746 100.0 578,198 100.0 595,543 100.0 613,398 100.0 631,810
DEPT. EXPENSES*
Casino 142,881 50.7 146,525 50.7 150,920 50.7 155,442 50.7 160,110
Rooms 39,923 33.0 41,121 33.0 42,354 33.0 43,625 33.0 44,934
Food 59,385 97.0 61,166 97.0 63,001 97.0 64,891 97.0 66,838
Beverage 16,497 64.0 16,993 64.0 17,502 64.0 18,027 64.0 18,568
Telephone 1,412 40.0 1,454 40.0 1,498 40.0 1,542 40.0 1,589
Entertainment 34,800 90.0 35,844 90.0 36,919 90.0 38,027 90.0 39,167
Spa 11,358 75.0 11,699 75.0 12,050 75.0 12,412 75.0 12,784
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 317,856 56.5 326,750 56.5 336,550 56.5 346,642 56.5 357,046
DEPT. INCOME 244,890 43.5 251,448 43.5 258,993 43.5 266,756 43.5 274,764
OPER. EXPENSES
Administrative and General 59,146 10.5 60,848 10.5 62,674 10.5 64,553 10.5 66,491
Marketing 9,380 1.7 8,764 1.5 9,027 1.5 9,297 1.5 9,576
Property Maintenance 10,055 1.8 10,953 1.9 12,535 2.1 12,911 2.1 13,298
Energy 8,441 1.5 8,673 1.5 8,933 1.5 9,201 1.5 9,477
Complimentary/Promo 3,618 0.6 3,724 0.6 3,835 0.6 3,950 0.6 4,069
LCI Fee 1,097 0.2 1,127 0.2 1,161 0.2 1,196 0.2 1,232
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 91,737 16.3 94,089 16.2 98,165 16.4 101,108 16.4 104,143
HOUSE PROFIT 153,153 27.2 157,359 27.3 160,828 27.1 165,648 27.1 170,621
FIXED EXPENSES
Property Taxes 7,000 1.2 7,210 1.2 7,426 1.2 7,649 1.2 7,879
Insurance 1188 0.2 1,224 0.2 1,261 0.2 1,298 0.2 1,337
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 8,188 1.4 8,434 1.4 8,687 1.4 8,947 1.4 9,216
EBITDA 144,965 25.8 148,925 25.9 152,140 25.7 156,701 25.7 161,405
Reserve for Repl 5,627 1.0 5,782 1.0 5,955 1.0 6,134 1.0 6,318
-------- -------- -------- -------- -------- -------- -------- -------- --------
Free Cash Flow $139,338 24.8% $143,143 24.9% $146,185 24.7% $150,567 24.7% $155,087
======== ==== ======== ==== ======== ==== ======== ==== ========
Calendar Years Ending: 2004 2005 2006 2007 2008
--------- ------------------- ------------------- -------------------- ----------
Number of Rooms: 2600 2600 2600 2600
Occupied Rooms: 882,570 882,570 882,570 882,570
Occupancy: 93.0% 93.0% 93.0% 93.0%
Average Rate: $158.82 $163.59 $168.49 $173.55
% of % of % of % of
Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s)
- -------------------------------------------------------------------------------------------------------------------------
REVENUE
Gaming 50.0% $325,330 50.0% $335,100 50.0% $345,153 50.0% $355,508
Rooms 21.5 140,170 21.5 144,375 21.5 148,707 21.5 153,168
Food 10.9 70,973 10.9 73,102 10.9 75,295 10.9 77,554
Beverage 4.6 29,883 4.6 30,780 4.6 31,703 4.6 32,654
Telephone 0.6 4,091 0.6 4,214 0.6 4,340 0.6 4,471
Entertainment 6.9 44,825 6.9 46,170 6.9 47,555 6.9 48,981
Spa 2.7 17,556 2.7 18,083 2.7 18,626 2.7 19,184
Miscellaneous 2.8 17,930 2.8 18,468 2.8 19,022 2.8 19,592
-------- -------- -------- -------- -------- -------- -------- --------
Total 100.0 650,758 100.0 670,292 100.0 690,401 100.0 711,112
DEPT. EXPENSES*
Casino 50.7 164,910 50.7 169,862 50.7 174,958 50.7 180,207
Rooms 33.0 46,282 33.0 47,670 33.0 49,100 33.0 50,573
Food 97.0 68,844 97.0 70,909 97.0 73,036 97.0 75,227
Beverage 64.0 19,125 64.0 19,699 64.0 20,290 64.0 20,899
Telephone 40.0 1,636 40.0 1,686 40.0 1,736 40.0 1,788
Entertainment 90.0 40,342 90.0 41,553 90.0 42,799 90.0 44,083
Spa 75.0 13,167 75.0 13,562 75.0 13,969 75.0 14,388
-------- -------- -------- -------- -------- -------- -------- --------
Total 56.5 367,753 56.5 378,792 56.5 390,154 56.5 401,859
DEPT. INCOME 43.5 283,005 43.5 291,500 43.5 300,247 43.5 309,253
OPER. EXPENSES
Administrative and General 10.5 68,485 10.5 70,540 10.5 72,656 10.5 74,836
Marketing 1.5 9,864 1.5 10,160 1.5 10,465 1.5 10,778
Property Maintenance 2.1 13,697 2.1 14,108 2.1 14,531 2.1 14,967
Energy 1.5 9,761 1.5 10,054 1.5 10,356 1.5 10,667
Complimentary/Promo 0.6 4,191 0.6 4,317 0.6 4,446 0.6 4,580
LCI Fee 0.2 1,269 0.2 1,307 0.2 1,346 0.2 1,387
-------- -------- -------- -------- -------- -------- -------- --------
Total 16.4 107,267 16.4 110,486 16.4 113,800 16.4 117,215
HOUSE PROFIT 27.1 175,738 27.1 181,014 27.1 186,447 27.1 192,038
FIXED EXPENSES
Property Taxes 1.2 8,115 1.2 8,358 1.2 8,609 1.2 8,867
Insurance 0.2 1,377 0.2 1,419 0.2 1,461 0.2 1,505
-------- -------- -------- -------- -------- -------- -------- --------
Total 1.4 9,492 1.4 9,777 1.4 10,070 1.4 10,372
EBITDA 25.7 166,246 25.7 171,237 25.7 176,377 25.7 181,666
Reserve for Repl 1.0 6,508 1.0 6,703 1.0 6,904 1.0 7,111
-------- -------- -------- -------- -------- -------- -------- --------
Free Cash Flow 24.7% $159,739 24.7% $164,534 24.7% $169,473 24.7% $174,554
==== ======== ==== ======== ==== ======== ==== ========
Calendar Years Ending: 2008 2009
--------- ------------------
Number of Rooms: 2600
Occupied Rooms: 882,570
Occupancy: 93.0%
Average Rate: $178.75
% of % of
Gross $(000s) Gross
- ----------------------------------------------------------------
REVENUE
Gaming 50.0% $366,173 50.0%
Rooms 21.5 157,763 21.5
Food 10.9 79,880 10.9
Beverage 4.6 33,634 4.6
Telephone 0.6 4,605 0.6
Entertainment 6.9 50,451 6.9
Spa 2.7 19,760 2.7
Miscellaneous 2.8 20,180 2.8
-------- -------- --------
Total 100.0 732,446 100.0
DEPT. EXPENSES*
Casino 50.7 185,613 50.7
Rooms 33.0 52,090 33.0
Food 97.0 77,484 97.0
Beverage 64.0 21,526 64.0
Telephone 40.0 1,842 40.0
Entertainment 90.0 45,406 90.0
Spa 75.0 14,820 75.0
-------- -------- --------
Total 56.5 413,916 56.5
DEPT. INCOME 43.5 318,530 43.5
OPER. EXPENSES
Administrative and General 10.5 77,081 10.5
Marketing 1.5 11,102 1.5
Property Maintenance 2.1 15,416 2.1
Energy 1.5 10,987 1.5
Complimentary/Promo 0.6 4,717 0.6
LCI Fee 0.2 1,428 0.2
-------- -------- --------
Total 16.4 120,731 16.4
HOUSE PROFIT 27.1 197,799 27.1
FIXED EXPENSES
Property Taxes 1.2 9,133 1.2
Insurance 0.2 1,550 0.2
-------- -------- --------
Total 1.4 10,683 1.4
EBITDA 25.7 187,115 25.7
Reserve for Repl 1.0 7,324 1.0
-------- -------- --------
Free Cash Flow 24.7% $179,791 24.7
==== ======== ====
* Departmental expenses expressed as a percentage of departmental revenues.
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 22
Capitalization of The conversion of a property's forecasted net income into
Net Income Into an estimate of value is based on the premise that
Market Value investors typically purchase real estate with a small
Estimate amount of equity cash (25% to 50%) and a large amount of
mortgage financing (50% to 75%). The amounts and terms of
available mortgage financing and the rates of return that
are required to attract sufficient equity capital form the
basis for allocating the net income between the mortgage
and equity components and deriving a value estimate.
Other investment parameters used by the appraisers in the
income capitalization approach include an overall
capitalization rate and total property yield. An overall
terminal capitalization rate is utilized to calculate the
property's reversionary sales proceeds at the end of the
assumed 10-year holding period in the discounted cash flow
analysis. Once the value of the property is estimated via
the mortgage-equity capitalization technique, the
appraisers perform analyses to cross-check the
appropriateness of the value estimate based upon other
market derived parameters. The overall capitalization rate
equating the subject's first-year net income to the
estimated market value is compared with overall rates
derived from comparable sales and investor surveys. The
total property yield, which is the discount rate equating
the property's forecasted net income before debt service
to the estimated market value, is also compared with total
property yields derived from comparable sales and investor
surveys.
Mortgage Component The appraisers have used financing data specific to the
gaming industry in formulating an applicable interest
rate, term, amortization period, and debt service constant
for the valuation of the Proposed Aladdin Hotel and
Casino. Our interviews with representatives from lending
institutions indicate that financing is available to those
companies with a proven track record of successful
operations.
We have found that investors view casinos and casino
hotels as hybrid investments. Such an investment combines
the attributes of traditional real estate with the
business value inherent in a gaming enterprise. Therefore,
investment collateral to secure the loan is largely
constituted of the business and real estate value of the
property as a going concern. Therefore, financed gaming
investments typically have loan-to-value ratios, terms,
amortization periods, and interest rates commensurate with
the amount of risk inherent in the enterprise as a going
concern. According to Loan Syndications and Trading, over
80% of gaming companies are rated as speculative grade
credit.
The following chart summarizes the borrower, loan purpose,
facility type, facility size, risk premium, and term for a
variety of gaming transactions in 1996.
HVS International, Mineola, New York Income Capitalization Approach 23
1996 Gaming Transactions
Facility Basis
Rating at Size Points
Company Close Deal Purpose Facility Type (mm) (LIBOR plus)
- -----------------------------------------------------------------------------------------------------------------
Boyd Gaming Corporation BB+ Debt Repay. Revolver/Line >=1 Yr. $ 500.0 175.0
Circus Circus - Eldorado Joint Venture NR Debt Repay. Revolver/Line >=1 Yr. 220.0 112.5
Circus Circus Enterprises BBB+ Debt Repay. Revolver/Line >=1 Yr. 1500.0 75.0
Dover Downs Entertainment NR Working Capital Revolver/Line >=1 Yr. 8.0 NA
Dover Downs Entertainment NR Working Capital Revolver/Line >=1 Yr. 2.0 NA
Dover Downs Entertainment NR Working Capital Standby Letter of Credit 0.1 NA
Gem Gaming NR Corp. Purposes Revolver/Line < 1 Yr. 25.0 NA
Grand Casinos Inc. NR Proj. Finance Term Loan 120.0 250.0
Harrah's Entertainment, Inc. NR Corp. Purposes Revolver/Line >=1 Yr. 150.0 75.0
Harrah's Entertainment, Inc. NR Corp. Purposes Revolver/Line >=1 Yr. 950.0 50.0
Hemmeter Enterprises, Inc. NR Debtor-in-poss. Revolver/Line < 1 Yr. 13.0 NA
MGM Grand BB Debt Repay. Bridge Loan 125.0 150.0
MGM Grand BB Debt Repay. Revolver/Line >=1 Yr. 500.0 200.0
Nev Star Gaming Corp. NR Proj. Finance Term Loan 50.0 NA
Nev Star Gaming Corp. NR Proj. Finance Term Loan 1.0 NA
Penn National Gaming NR Corp. Purposes Revolver/Line >=1 Yr. 5.0 300.0
Penn National Gaming NR Corp. Purposes Term Loan 47.0 300.0
Penn National Gaming NR Corp. Purposes Term Loan 23.0 300.0
Rio Properties NR Working Capital Revolver/Line >=1 Yr. 200.0 NA
Seven Feathers Gaming Corp. NR Corp. Purposes Revolver/Line >=1 Yr. 24.0 270.0
Sodak Gaming NR Working Capital Revolver/Line >=1 Yr. 20.0 200.0
Sodak Gaming NR Corp. Purposes Revolver/Line >=1 Yr. 30.0 200.0
Stanley Leisure NR Corp. Purposes Revolver/Line < 1 Yr. 108.0 NA
Station Casinos BB Debt Repay. Revolver/Line >=1 Yr. 400.0 NA
Station Casinos BB Proj. Finance Term Loan 110.0 375.0
Stratosphere NR Equip. Lease Other 37.5 NA
Stuart Entertainment NR Corp. Purposes Revolver/Line < 1 Yr. 30.0 150.0
Sun International Bahamas Ltd. NR Proj. Finance Term Loan 200.0 250.0
Sun International Bahamas Ltd. NR Debt Repay. Term Loan 250.0 225.0
Sunset Station NR Corp. Purposes Revolver/Line < 1 Yr. 110.0 NA
Sunset Station NR Corp. Purposes Revolver/Line < 1 Yr. 40.0 NA
Average 203.2
Source: BancAmerica Securities, Inc. and Loan Pricing Corporation
- --------------------------------------------------------------------------------
As indicated, the risk premiums range between 50 and 375
basis points over the London Interbank Offered Rate
(LIBOR), with an average of 203 basis points. The majority
of the loan facilities closed in 1996 were revolving
credit lines with terms greater than one year. Of the 31
transactions in 1996, eight were term loans with risk
premiums ranging between 225 and 375 basis points over
LIBOR. The average length of a term loan transacted in
1996 is 57 months, or roundly five years. The following
presents a range of calculated interest rates based on the
current LIBOR as
HVS International, Mineola, New York Income Capitalization Approach 24
published in the Wall Street Journal as of September 29,
1997, and a range of risk premiums.
Risk Premium Range Calculated Range of
LIBOR (Basis Points) Interest Rates
----- -------------- --------------
6.0% plus 50 to 375 = 6.50% to 9.75%
Based on the preceding analysis and adjusting for specific
risk factors, we believe that a mortgage lender financing
the Proposed Aladdin Hotel and Casino would require a risk
premium of approximately 300 basis points over LIBOR. The
risk premium is intended to reflect the creditworthiness
of the borrower as well as the loan collateral. This
spread equates to a 9.0% interest rate; applying a 20-year
amortization and a ten-year term, the mortgage constant
equates to 0.107967. We believe that a mortgage lender
will lend up to 60% of the subject's market value, as
determined by this appraisal.
Equity Component The remaining capital required for investment generally
comes from the equity investor. The rate of return that an
equity investor expects over a 10-year holding period is
known as the equity yield. Unlike the equity dividend,
which is a short-term rate of return, an equity yield
specifically considers a long-term holding period
(generally 10 years), annual inflation-adjusted cash
flows, property appreciation, mortgage amortization, and
proceeds from a sale at the end of the holding period. The
following table presents equity yield and discount rates
derived from three major investor surveys that pertain
specifically to the lodging industry.
HVS International, Mineola, New York Income Capitalization Approach 25
Hotel Investor Surveys
MISSING TABLE
- --------------------------------------------------------------------------------
In Landauer Hospitality Services' Hotel Investment Outlook
for 1997, leveraged yield rates ranged from 15.0% to
25.0%, with a survey average of 18.7%. The Korpacz Real
Estate Investor Survey for the first quarter of 1997
indicates that leveraged equity internal rates of return
(IRRs), assuming 50.0% to 60.0% debt, average between
20.0% and 26.0%. The Korpacz survey also provides a range
of "free and clear" equity IRRs for full-service hotels,
which is essentially a measure of appropriate discount
rates, or overall property yields. The Korpacz survey
cites a range from 11.0% to 16.0% for this indicator, with
a survey average of 13.4%. Landauer's survey also provides
a range of free and clear yield rates from 12.0% to 16.0%,
with a survey average of 13.5%. CB Commercial's National
Investor Survey for the first quarter of 1997 does not
provide a range of equity yield rates, but provides a
range of overall discount rates from 12.0% to 13.5%, with
a survey average of 12.7%.
It is difficult to quantify the rate of return required by
equity investors who are seeking to purchase casino and
casino hotel properties. To establish an appropriate
equity yield rate, we have compared the rates of return as
indicated in the investor surveys for hotel investments to
the rates of return specific to the gaming community. From
this information we extrapolated an equity yield rate for
the subject property utilizing an iterative calculation
via the Simultaneous Valuation Formula. Based on this
analysis we have derived an equity yield of 31.0% for use
in the valuation of the subject property. This equity
yield rate reflects the assumed debt parameters and the
risk inherent in achieving the projected income stream
given the uncertainty regarding additional competition and
economic growth over the holding period.
HVS International, Mineola, New York Income Capitalization Approach 26
To check the reasonableness of our equity yield rate
assumption, we have compared the derived overall "free and
clear" discount rate of 19.1%, which is based on the
estimated debt and equity rates of 9.0% and 31.0%,
respectively, to the calculated discount rates based on
investor surveys. According to a survey of gaming
companies and lenders conducted by HVS Gaming Services,
going-in capitalization rates range from 15% to 25%
depending on the risk inherent in the location, market,
and historical operation of the property. However, it
should be noted that these rates do not reflect a
deduction in cash flows for capital expenditures.
Converting this range of going-in capitalization rates to
discount rates can be accomplished by adding an inflation
assumption. For the purposes of this analysis, a 3.0%
inflation rate was added to the going-in rates. Combining
the going-in rates with our inflation assumption results
in a range of discount rates from 18.0% to 28.0%, compared
to our derived discount rate of 19.1%. Both the applied
equity yield rate and the discount rate are considered to
be supported by the preceding data. As evidenced, our
discount rate is at the low end of the acceptable range.
However, adjusting for the reserve for replacement expense
of 1.0% of total revenues, our discount rate equates to
20.1%. In addition, our discount rate reflects the
stability of operating within the Las Vegas Strip ($72
million and over) gaming market. As will be discussed
later in this section, the cash-on-cash rates of return
and the debt coverage ratios provide further support for
our yield conclusions.
Terminal Capitalization Rate
Inherent in this valuation process is the assumption of a
sale at the end of the 10-year holding period. The
estimated reversionary sales price as of this date is
calculated by capitalizing the 11th year's net income by
an overall terminal capitalization rate. An allocation for
the seller's brokerage and legal fees is deducted from
this sales price, and the net proceeds to the equity
interest (also known as the equity residual) are
calculated by deducting the outstanding mortgage balance
from the reversion. Based on the risk associated with the
uncertainty regarding sustaining the projected cash flow
beyond the 10-year holding period, we have applied a
terminal capitalization rate of 18.0%.
Valuation of The terms and loan-to-value ratio of current financing
Mortgage and applicable to the subject property have been selected.
Equity Components However, the annual debt service and resultant net income
to equity cannot be calculated without knowing the
property's total value, the very unknown which we are
attempting to calculate. In essence, the property's value
must be determined by forecasting net income available for
debt service, and by calculating, through an iterative
process, the amount of the mortgage which the net income
is capable of supporting at the assumed interest rate and
a specified loan-to-value ratio.
HVS International, Mineola, New York Income Capitalization Approach 27
The property's value may also be calculated directly
through what is termed the Simultaneous Valuation Formula.
Given the known variables of equity investor yield
requirements, two equations may be set up to
simultaneously solve for the unknown value.
To illustrate the Simultaneous Valuation Formula, the
following symbols are used:
NI = Net income available for debt service
V = Value
M = Loan-to-value ratio
f = Annual debt service constant
n = Number of years in the projection period
de = Annual cash available to equity
dr = Residual equity value
b = Brokerage and legal cost percentage
P = Fraction of the loan paid off during the projection period
fp = Annual constant required to amortize the entire loan during
the projection period
HVS International, Mineola, New York Income Capitalization Approach 27
Rr = Overall terminal capitalization rate applied to the net income
to calculate the total property reversion (sales price at the
end of the projection period)
1/Sn= Current worth of a $1 factor (discount factor) at the equity
yield rate
*P = (f-i)/(fp-i) where i=interest rate of mortgage
**S = 1+i where i=equity yield rate
Equation #1 Calculation of annual cash flow to equity (equity dividend
and reversion):
NI1 - (f x M x V) = de1
NI2 - (f x M x V) = de2...
... NI10 - (f x M x V) = de10
(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr
Equation #2 Calculation of equity as sum of discounted cash flows:
(de1 x 1/S1) + (de2 x 1/S2) +... + (de10 x 1/S10) + (dr x 1/S10) = (1 - M) V
Simultaneous Valuation Formula
Combination of Equations #1 and #2:
((NI1 - (f x M x V)) 1/S1) + ((NI2 - (f x M x V)) 1/S2) + . . .
((NI10 - (f x M x V)) 1/S10) +
(((NI11/Rr) - (b (NI11/Rr)) - ((1 - P) x M x V)) 1/S10) = (1 -M) V
The following values are assigned to the variable
components for the purposes of this valuation.
HVS International, Mineola, New York Income Capitalization Approach 29
Loan-To-Value Ratio M 60.0%
Debt Service Constant f 0.107967
Equity Yield 1/Sn 31.0%
Brokerage and Legal Fees b 5.0%
Interest Rate i 9.0%
Annual Constant Required to
Amortize the Loan in Ten Years fp 0.152011
Terminal Capitalization Rate Rr 18.0%
HVS International, Mineola, New York Income Capitalization Approach 30
Forecast of Net Income
Period Net Operating Income
- -----------------------------------------------------
1 = $139,338,000
2 = 143,143,000
3 = 146,185,000
4 = 150,567,000
5 = 155,087,000
6 = 159,739,000
7 = 164,534,000
8 = 169,473,000
9 = 174,554,000
10 = 179,791,000
11 = 185,186,000
- --------------------------------------------------------------------------------
The Simultaneous Valuation Formula is applied to the
subject property's forecasted net income as follows.
Intermediary calculations:
(f x M x V)= 0.107967 x 0.60 x V = 0.064780 V
P = (0.107967 - 0.090) / (0.152011 - 0.090) = 0.289741
Expressing formula in terms of V:
( 139,338,000 - 0.064780 V ) x 0.763359 +
( 143,143,000 - 0.064780 V ) x 0.582717 +
( 146,185,000 - 0.064780 V ) x 0.444822 +
( 150,567,000 - 0.064780 V ) x 0.339559 +
( 155,087,000 - 0.064780 V ) x 0.259205 +
( 159,739,000 - 0.064780 V ) x 0.197866 +
( 164,534,000 - 0.064780 V ) x 0.151043 +
( 169,473,000 - 0.064780 V ) x 0.115300 +
( 174,554,000 - 0.064780 V ) x 0.088015 +
( 179,791,000 - 0.064780 V ) x 0.067187 +
((( 185,186,000 / 0.180 ) - ( 0.05 x ( 185,186,000 / 0.180 )) -
HVS International, Mineola, New York Income Capitalization Approach 31
(( 1 - 0.289741 ) x 0.60 x V)) x 0.067187 )= ( 1 - 0.60 )V
Like terms are combined and the equation is solved for
"V":
$515,237,579 - 0.223561 = V (1 - 0.60)V
$515,237,579 = 0.62356 V
V = $515,237,579 / 0.62356
V = $826,282,831
Market Value
via the Simultaneous Valuation Formula
on or about January 1, 2000 (Say) = $826,300,000
Based on the previous analysis, we estimate the market
value of the subject property, as of January 1, 2000, to
be: $825,000,000.
The estimated market value, as determined by the
Simultaneous Valuation Formula, may be mathematically
proven by discounting the net income to equity at the
equity yield rate. Annual deductions for debt service are
derived based on the mortgage terms.
Mortgage Component (60%) $495,770,000
Equity Component (40%) 330,513,000
------------
Total $826,283,000
Mortgage Component $495,770,000
Mortgage Constant 0.107967
------------
Annual Debt Service $ 53,526,856
The 11-year forecast of net income and 10-year forecast of
net income to equity are presented in the following table.
HVS International, Mineola, New York Income Capitalization Approach 32
11-Year Forecast of Net Income and 10-Year Forecast of Net Income to Equity
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
==================================================================================================================================
Occupancy 93% 93% 93% 93% 93% 93% 93% 93% 93% 93% 93%
Average Rate $137.00 $141.11 $145.34 $149.70 $154.19 $158.82 $163.59 $168.49 $173.55 $178.75 $184.12
Net Income Before
Debt Service $139,338 $143,143 $146,185 $150,567 $155,087 $159,739 $164,534 $169,473 $174,554 $179,791 $185,186
Less: Debt Service 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income to Equity $85,811 $89,616 $92,658 $97,040 $101,560 $106,212 $111,007 $115,946 $121,027 $126,264
Debt Coverage Ratio 2.60 2.67 2.73 2.81 2.90 2.98 3.07 3.17 3.26 3.36
Cash-on-Cash Return 26.0% 27.1% 28.0% 29.4% 30.7% 32.1% 33.6% 35.1% 36.6% 38.2%
- ----------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 33
As evidenced, the subject property's first year debt
coverage ratio is projected at 2.60, increasing to 2.73 by
the third projection year. Similarly, cash-on-cash returns
are forecast to increase from 26.0% in the first year to
28.0% by the third projection year. Both the debt coverage
ratio and cash-on-cash return in the third year are
commensurate with comparable industry averages.
The net proceeds to equity upon sale of the property are
determined by deducting sales expenses (brokerage and
legal fees) and the outstanding mortgage balance. The
equity residual at the end of the 10th year is calculated
by deducting brokerage and legal fees and the mortgage
balance from the reversionary value. The reversionary
value is calculated as the 11th year's net income
capitalized by the terminal capitalization rate. The
calculation is shown as follows.
Reversionary Value ($185,186,000 /0.1800) $1,028,811,000
Less:
Brokerage and Legal Fees 51,441,000
Mortgage Balance 352,125,000
--------------
Net Sale Proceeds to Equity $625,245,000
The overall property yield (before debt service), the
yield to the lender, and the yield to the equity position
have been calculated by computer with the following
results.
Overall Property Yields
Projected Yield
(Internal Rate of Return)
Position Value Over 10-Year Holding Period
=========================================================================
Total Property $826,283,000 19.1%
Mortgage 495,770,000 8.9*
Equity 330,513,000 31.0
* Whereas the mortgage constant and value are calculated on the basis of
monthly mortgage payments, the yield in this proof assumes single annual
payments. As a result, the proof's derived yeild is slightly less than
that actually input.
- -------------------------------------------------------------------------
We believe that these internal rates of return, while at
the low end of acceptable ranges, reasonably reflect the
level of risk inherent in attaining the projected cash
flows over the 10-year holding period. The discounted cash
flow procedure substantiating the yield to each position
is presented as follows.
Total Property Yield
HVS International, Mineola, New York Income Capitalization Approach 34
Net Income before Present Worth of $1 Discounted
Year Debt Service Factor @ 19.1% Cash Flow
===================================================================================
2000 $ 139,338,000 x 0.839329 = $116,950,000
2001 143,143,000 x 0.704473 = 100,840,000
2002 146,185,000 x 0.591284 = 86,437,000
2003 150,567,000 x 0.496282 = 74,724,000
2004 155,087,000 x 0.416544 = 64,600,000
2005 159,739,000 x 0.349617 = 55,847,000
2006 164,534,000 x 0.293444 = 48,281,000
2007 169,473,000 x 0.246296 = 41,740,000
2008 174,554,000 x 0.206723 = 36,084,000
2009 1,157,162,000* x 0.173509 = 200,777,000
------------
Total Property Value $826,280,000
*10th year net income of $179,791,000 plus sales proceeds of $977,371,000
- -----------------------------------------------------------------------------------
Mortgage Component Yield
Total Annual Present Worth of $1 Discounted
Year Debt Service Factor @ 8.9% Cash Flow
===================================================================================
2000 $ 53,527,000 x 0.918455 = $ 49,162,000
2001 53,527,000 x 0.843559 = 45,153,000
2002 53,527,000 x 0.774770 = 41,471,000
2003 53,527,000 x 0.711591 = 38,089,000
2004 53,527,000 x 0.653564 = 34,983,000
2005 53,527,000 x 0.600269 = 32,131,000
2006 53,527,000 x 0.551320 = 29,511,000
2007 53,527,000 x 0.506362 = 27,104,000
2008 53,527,000 x 0.465071 = 24,894,000
2009 53,527,000 x 0.427146 = 22,864,000
------------
Value Of Mortgage Component $345,362,000
- -----------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 35
Equity Component Yield
Net Income Present Worth of $1 Discounted
Year to Equity Factor @ 31.0% Cash Flow
===================================================================================
2000 $ 85,811,000 x 0.763359 = $65,505,000
2001 89,616,000 x 0.582717 = 52,221,000
2002 92,658,000 x 0.444822 = 41,216,000
2003 97,040,000 x 0.339559 = 32,951,000
2004 101,560,000 x 0.259205 = 26,325,000
2005 106,212,000 x 0.197866 = 21,016,000
2006 111,007,000 x 0.151043 = 16,767,000
2007 115,946,000 x 0.115300 = 13,369,000
2008 121,027,000 x 0.088015 = 10,652,000
2009 751,510,000* x 0.067187 = 50,492,000
------------
Value of Equity Component $330,514,000
*10th year net income to equity of $126,264,000 plus sales proceeds of $625,246,000
- -----------------------------------------------------------------------------------
Discounted Cash Flow In addition to using the Simultaneous Valuation Formula,
Analysis the appraisers have performed a discounted cash flow
analysis based on the financing parameters discussed
earlier in this section. We conclude that a 19.1% discount
rate is appropriate to apply to the forecasted income
stream and reversionary proceeds for the subject property.
While the discount rate falls at the low end of the range
determined by our survey, we believe that it is
commensurate with the level of risk inherent in the
subject property and the Las Vegas Strip ($72 million and
over) gaming market; additionally, it reflects a 1.0%
reserve for replacement which, when adjusted out of our
forecast, increases the discount rate some 100 basis
points. Further, a terminal capitalization rate of 18.0%
has been applied to the 11th year's net income to arrive
at the reversionary proceeds figure, reflecting the
speculation inherent in forecasting additional competition
and economic growth over the 10-year holding period. The
following table presents our discounted cash flow
analysis.
HVS International, Mineola, New York Income Capitalization Approach 36
Discounted Cash Flow Analysis - Proposed Aladdin Hotel and Casino (000s)
Discount Rate: 19.1%
Holding Period: 10 years
Terminal Capitalization Rate: 18.0%
Broker and Legal Fees: 5.0%
Calendar Years Ending: 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Forecasted Net Income $139,338 $143,143 $146,185 $150,567 $155,087 $159,739 $164,534 $169,473 $174,554 $179,791
Net Revisionary Proceeds $977,371
--------
10th Year Net Income plus
Reversionary Proceeds $1,157,162
Discount Factor @ 19.1% 0.83933 0.70447 0.59128 0.49628 0.41654 0.34962 0.29344 0.24630 0.20672 0.17351
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Discounted Net Income $116,950 $100,840 $86,437 $74,724 $64,600 $55,847 $48,281 $41,740 $36,084 $200,777
Cummulative Total $116,950 $217,791 $304,228 $378,951 $443,552 $499,399 $547,681 $589,421 $625,505 $826,283
Reversion Analysis: Indicated Value via Discounted Cash Flow Analysis $826,283
- ----------------------------------------------------
(Say) $826,300
11th Year Net Income $185,186 ========
Terminal Capitalization Rate 18.0%
----
Total Sale Proceeds $1,028,811
Less: Broker and Legal Fees @ 5.0% $51,441
Net Reversionary Proceeds $977,371
- ---------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 37
Conclusion - Market We have valued the subject property via the income
Value capitalization approach utilizing two different valuation
methodologies with the following results.
Estimated Value via Simultaneous Valuation Formula $826,300,000
Estimated Value via Discounted Cash Flow Analysis $826,300,000
We conclude that the market value of the Proposed Aladdin
Hotel and Casino, as of January 1, 2000, will be:
$825,000,000
Business Value The Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA) stipulates that ". . . any
business interest or other intangible item should be
valued separately within the appraisal."(10) As mentioned,
casinos have both business and real estate components;
without the business expertise necessary to operate the
facility, a casino would have little real estate value.
The business value component of a gaming property reflects
a number of intangibles including competitive positioning,
marketing strategy, management expertise, cost control,
and ultimately profitability. In the case of a highly
profitable gaming property, the value of the property via
the income capitalization approach will generally exceed
its development cost. The value attributable to the
business component is quantified via a residual technique
in which the appraiser first estimates the market value
"as is" of the going concern, then deducts the allocations
to the real estate and the furniture, fixtures, and
equipment. The residual value represents the business
value component of the subject property.
For the purpose of estimating the business value component
of the subject property, we have utilized the
aforementioned residual technique. Based on our
prospective market value estimate via the income
capitalization approach of $825,000,000, and the
prospective market value estimate via the cost approach of
$760,000,000, we conclude the total business value
component is equal to roundly $65,000,000.
----------
(10) Federal Register, Vol. 55, No. 143, July 25, 1990, p.
30205.
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 1
15. Statement of Assumptions and Limiting Conditions
A. This self-contained appraisal report is to be used in whole and not
in part.
B. No responsibility is assumed for matters of a legal nature, nor do
we render any opinion as to title, which is assumed to be marketable
and free of any deed restrictions and easements. The property is
valued as though free and clear unless otherwise stated.
C. There are no hidden or unapparent conditions of the property,
sub-soil or structures, such as underground storage tanks, that
would render it more or less valuable. No responsibility is assumed
for these conditions or any engineering that may be required to
discover them.
D. We have not considered the existence of potentially hazardous
materials used in the construction or maintenance of the building,
such as asbestos, urea formaldehyde foam insulation, or PCBs, nor
have we considered the presence of any form of toxic waste.
Furthermore, we have also not considered polychlorinated biphengyls,
pesticides, and lead-based paints. The appraisers are not qualified
to detect any hazardous substances and urge the client to retain an
expert in this field if desired.
E. We have made no survey of the property, and assume no responsibility
in connection with such matters. Any sketches, photographs, maps,
and other exhibits are included only to assist the reader in
visualizing the property. It is assumed that the use of the land and
improvements is within the boundaries of the property described, and
that there is no encroachment or trespass unless noted.
F. All information, financial operating statements, estimates, and
opinions obtained from parties not employed by HVS International are
assumed to be true and correct. We can assume no liability resulting
from misinformation.
G. Unless noted, we assume that there are no encroachments, zoning
violations, or building violations encumbering the subject property.
H. The property is assumed to be in full compliance with all applicable
federal, state, local, and private codes, laws, consents, licenses,
and regulations (including a liquor license where appropriate), and
that all licenses, permits, certificates, franchises, and so forth
can be freely renewed or transferred to a purchaser.
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 2
I. All mortgages, liens, encumbrances, leases, and servitude's have
been disregarded unless specified otherwise.
J. No portions of this appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the
public through advertising, public relations, news, sales, or other
media.
K. We are not required to give testimony or attendance in court by
reason of this analysis without previous arrangements, and only when
our standard per-diem fees and travel costs are paid prior to the
appearance.
L. If the reader is making a fiduciary or individual investment
decision and has any questions concerning the material presented in
this restricted appraisal report, it is recommended that the reader
contact us.
M. We take no responsibility for any events or circumstances that take
place subsequent to either the date of value or the date of our
field inspection, whichever occurs first.
N. The quality of a casino hotel facility's on-site management has a
direct effect on a property's economic viability and value. The
financial forecasts presented in this analysis assume responsible
ownership and competent management. Any variance from this
assumption may have a significant impact on the projected operating
results and value estimate.
O. The value estimate developed for this appraisal report is based on
an evaluation of the overall economy, and neither takes into
account, nor makes provision for, the effect of any sharp rise or
decline in local or national economic conditions. To the extent that
wages and other operating expenses may advance during the economic
life of the property, we expect that the prices of rooms, food,
beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but
they have been prepared on the basis of information obtained during
the course of this study and are intended to reflect the
expectations of typical investors.
P. This analysis assumes continuation of all Internal Revenue Service
tax code provisions as stated or interpreted on either the date of
value or the date of our field inspection, whichever occurs first.
Q. Many of the figures developed for this restricted appraisal report
were generated using sophisticated computer models that make
calculations based on numbers carried out to three or more decimal
places. In the
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 3
interest of simplicity, most numbers have been rounded to the
nearest tenth of a percent. Thus, these figures may be subject to
small rounding errors.
R. Although this analysis employs various mathematical calculations to
provide value indications, the final estimate is subjective and may
be influenced by our experience and other factors not specifically
set forth is this letter.
S. Any distribution of the total value between the land and
improvements or between partial ownership interests applies only
under the stated use. Moreover, separate allocations between
components are not valid if this restricted appraisal report is used
in conjunction with any other analysis.
T. The Americans with Disabilities Act (ADA) became effective on
January 26, 1992. We have conducted no specific compliance survey to
determine whether the subject property is in conformity with the
various detailed requirements of the ADA. It is possible that the
property does not comply with the requirements of the act, and this
could have an unfavorable effect on the property value. Because we
have no direct evidence regarding this issue, our estimate of value
does not consider possible noncompliance with the ADA.
U. This study was prepared by HVS International, a division of Hotel
Consulting Services, Inc. All opinions, recommendations and
conclusions expressed during this assignment have been rendered by
the staff of Hotel Consulting Services, Inc. acting solely as
employees and not as individuals.
V. This appraisal assumes the existence of a reciprocal easement
agreement allowing the free flow of pedestrian traffic between all
portions of the Proposed Aladdin Hotel and Casino Mixed-Use
Development.
HVS International, Mineola, New York Addenda
Addenda
Engagement Letter
Synopsis of LCI Agreement
Photographs of the Subject Property
Photographs of the Competitive Properties
HVS International, Mineola, New York Qualifications
Qualifications
Mark D. Capasso
Anne R. Lloyd-Jones, CRE
Stephen Rushmore, CRE, MAI, CHA
Sunrise Casino Hotel
Calendar Years Ending: 2000 2001
Number of Rooms: 2,600 2,600
Occupancy: 93.0% 93.0%
Average Rate: $137.00 $141.11
Occupied Rooms: 882,570 882,570
$ (000s) %Gross PAR(1) POR(2) $ (000s) %Gross PAR(1) POR(2)
- --------------------------------------------------------------------------------------------------------------------------------
REVENUE
Gaming $282,030 50.1% $108,473 $ 320 $289,060 50.0% $111,177 $327.52
Rooms 120,912 21.5 46,505 137.00 124,539 21.5 47,900 141.11
Food 61,222 10.9 23,547 69.37 63,058 10.9 24,253 71.45
Beverage 25,777 4.6 9,914 29.21 26,551 4.6 10,212 30.08
Telephone 3,529 0.6 1,357 4.00 3,635 0.6 1,398 4.12
Entertainment 38,666 6.9 14,872 43.81 39,826 6.9 15,318 45.13
Spa 15,144 2.7 5,825 17.16 15,599 2.7 6,000 17.67
Miscellaneous 15,466 2.7 5,948 17.52 15,930 2.8 6,127 18.05
-------- ------- -------- ------- -------- ------- -------- -------
Total Revenues 562,746 100.0 216,441 637.62 578,198 100.0 222,384 655.13
-------- ------- -------- ------- -------- ------- -------- -------
DEPARTMENTAL EXPENSES *
Casino 142,881 50.7 54,954 161.89 146,525 50.7 56,356 166.02
Rooms 39,923 33.0 15,355 45.23 41,121 33.0 15,816 46.59
Food 59,385 97.0 22,840 67.29 61,166 97.0 23,525 69.30
Beverage 16,497 64.0 6,345 18.69 16,993 64.0 6,536 19.25
Telephone 1,412 40.0 543 1.60 1,454 40.0 559 1.65
Entertainment 34,800 90.0 13,385 39.43 35,844 90.0 13,786 40.61
Spa 11,358 75.0 4,368 12.87 11,699 75.0 4,500 13.26
-------- ------- -------- ------- -------- ------- -------- -------
Total Dept. Expenses 317,856 56.5 122,252 360.15 326,750 56.5 125,673 370.23
-------- ------- -------- ------- -------- ------- -------- -------
DEPARTMENTAL INCOME 244,890 43.5 94,188 277.47 251,448 43.5 96,711 284.90
-------- ------- -------- ------- -------- ------- -------- -------
UNDISTRIBUTED EXPENSES
Administrative and General 59,146 10.5 22,748 67.02 60,848 10.5 23,403 68.94
Marketing 9,380 1.7 3,608 10.63 8,764 1.5 3,371 9.93
Property Maintenance 10,055 1.8 3,867 11.39 10,953 1.9 4,213 12.41
Energy 8,441 1.5 3,247 9.56 8,673 1.5 3,336 9.83
Complimentary/Promo 3,618 0.6 1,392 4.10 3,724 0.6 1,432 4.22
LCI Fee 1,097 0.2 422 1.24 1,127 0.2 434 1.28
-------- ------- -------- ------- -------- ------- -------- -------
Total Operating Expenses 91,737 16.3 35,283 103.94 94,089 16.2 36,188 106.61
-------- ------- -------- ------- -------- ------- -------- -------
HOUSE PROFIT 153,153 27.2 58,905 173.53 157,359 27.3 60,523 178.30
-------- ------- -------- ------- -------- ------- -------- -------
FIXED EXPENSES
Property Taxes 7,000 1.2 2,692 7.93 7,210 1.2 2,773 8.17
Insurance 1,188 0.2 457 1.3 1,224 0.2 471 1.4
-------- ------- -------- ------- -------- ------- -------- -------
Total 8,188 1.5 3,149 9.28 8,434 1.5 3,244 9.56
EBITDA $144,965 25.7 $ 55,756 $164.25 $148,925 25.8 $ 57,279 $168.74
Reserve for Replacement 5,627 1.0 2,164 6.38 5,782 1.0 2,224 6.55
Free Cash Flow $139,338 24.8% $ 53,591 $157.88 $143,143 24.8% $ 55,055 $162.19
======== ======= ======== ======= ======== ======= ======== =======
Food as a % of Gaming Rev 21.7% 21.8%
Beverage as a % of Gaming Rev 9.1 9.2
Beverage as a % of Food Rev 42.1 42.1
Telephone as a % of Gaming Rev 1.3 1.3
Telephone as a % of Rooms Rev 2.9 2.9
Entertainment as a % of Gaming Rev 13.7 13.8
Entertainment as a % of Rooms Rev 32.0 32.0
Calendar Years Ending: 2002
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $145.34
Occupied Rooms: 882,570
$ (000s) %Gross PAR(1) POR(2)
- ----------------------------------------------------------------------------------------------------
REVENUE
Gaming $297,730 50.0% $114,512 $ 337.34
Rooms 128,276 21.5 49,337 145.34
Food 64,950 10.9 24,981 73.59
Beverage 27,347 4.6 10,518 30.99
Telephone 3,744 0.6 1,440 4.24
Entertainment 41,021 6.9 15,777 46.48
Spa 16,067 2.7 6,180 18.20
Miscellaneous 16,408 2.8 6,311 18.59
-------- ------- -------- ----------
Total Revenues 595,543 100.0 229,055 674.78
-------- ------- -------- ----------
DEPARTMENTAL EXPENSES *
Casino 150,920 50.7 58,046 171.00
Rooms 42,354 33.0 16,290 47.99
Food 63,001 97.0 24,231 71.38
Beverage 17,502 64.0 6,732 19.83
Telephone 1,498 40.0 576 1.70
Entertainment 36,919 90.0 14,200 41.83
Spa 12,050 75.0 4,635 13.65
-------- ------- -------- ----------
Total Dept. Expenses 336,550 56.5 129,442 381.33
-------- ------- -------- ----------
DEPARTMENTAL INCOME 258,993 43.5 99,613 293.45
-------- ------- -------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 62,674 10.5 24,105 71.01
Marketing 9,027 1.5 3,472 10.23
Property Maintenance 12,535 2.1 4,821 14.20
Energy 8,933 1.5 3,436 10.12
Complimentary/Promo 3,835 0.6 1,475 4.35
LCI Fee 1,161 0.2 447 1.32
-------- ------- -------- ----------
Total Operating Expenses 98,165 16.4 37,756 111.23
-------- ------- -------- ----------
HOUSE PROFIT 160,828 27.1 61,857 182.23
-------- ------- -------- ----------
FIXED EXPENSES
Property Taxes 7,426 1.2 2,856 8.41
Insurance 1,261 0.2 485 1.43
-------- ------- -------- ----------
Total 8,687 1.5 3,341 9.84
EBITDA $152,140 25.6 $ 58,516 $ 172.38
Reserve for Replacement 5,955 1.0 2,291 6.75
Free Cash Flow $146,185 24.5% $ 56,225 $ 165.64
======== ======= ======== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
Calendar Years Ending: 2003
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $149.70
Occupied Rooms: 882,570
$ (000s) %Gross PAR(1) POR(2)
- ----------------------------------------------------------------------------------------------------
REVENUE
Gaming $306,650 50.0 $117,942 $ 347.45
Rooms 132,124 21.5 50,817 149.70
Food 66,898 10.9 25,730 75.80
Beverage 28,168 4.6 10,834 31.92
Telephone 3,856 0.6 1,483 4.37
Entertainment 42,252 6.9 16,251 47.87
Spa 16,549 2.7 6,365 18.75
Miscellaneous 16,901 2.8 6,500 19.15
-------- ------- -------- ----------
Total Revenues 613,398 100.0 235,922 695.01
-------- ------- -------- ----------
DEPARTMENTAL EXPENSES *
Casino 155,442 50.7 59,785 176.12
Rooms 43,625 33.0 16,779 49.43
Food 64,891 97.0 24,958 73.53
Beverage 18,027 64.0 6,933 20.43
Telephone 1,542 40.0 593 1.75
Entertainment 38,027 90.0 14,626 43.09
Spa 12,412 75.0 4,774 14.06
-------- ------- -------- ----------
Total Dept. Expenses 346,642 56.5 133,324 392.76
-------- ------- -------- ----------
DEPARTMENTAL INCOME 266,756 43.5 102,598 302.25
-------- ------- -------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 64,553 10.5 24,828 73.14
Marketing 9,297 1.5 3,576 10.53
Property Maintenance 12,911 2.1 4,966 14.63
Energy 9,201 1.5 3,539 10.43
Complimentary/Promo 3,950 0.6 1,519 4.48
LCI Fee 1,196 0.2 460 1.36
-------- ------- -------- ----------
Total Operating Expenses 101,108 16.4 38,888 114.56
-------- ------- -------- ----------
HOUSE PROFIT 165,648 27.1 63,711 187.69
-------- ------- -------- ----------
FIXED EXPENSES
Property Taxes 7,649 1.2 2,942 8.67
Insurance 1,298 0.2 499 1.47
-------- ------- -------- ----------
Total 8,947 1.5 3,441 10.14
EBITDA $156,701 25.6 $ 60,270 $ 177.55
Reserve for Replacement 6,134 1.0 2,359 6.95
Free Cash Flow $150,567 24.5% $ 57,910 $ 170.60
======== ======= ======== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
HVS International, Mineola, New York Nature of the Assignment 1
2. Nature of the Assignment
Subject of the
Appraisal The subject of the appraisal is the fee simple interest
in a +/- 34.31-acre parcel of land currently improved
with the Aladdin Hotel and Casino and Performing Arts
Center. The subject's civic address is 3667 Las Vegas
Boulevard, Las Vegas, Nevada. While the site is
currently improved, this appraisal assumes the
demolition of all of the current improvements, with the
exception of the Performing Arts Center. A new
mixed-use development is currently proposed for the
subject site consisting of a 2,600-room hotel and a
110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to
include approximately 71,500 square feet of meeting
space, a 1,400-seat show room, a 7,000-seat performing
arts center, nine separate food and beverage outlets,
and an expansive array of back-of-the-house facilities
typical of a large hotel and casino. The remaining
components of the mixed-use development will include a
450,000-square-foot shopping mall, a parking garage, a
second hotel with 1,000 rooms, and a central utility
plant. According to the developers, a reciprocal
easement agreement will be signed between all parties
involved with the mixed-use development. As such, a
free flow of pedestrian traffic will be allowed between
all components of the development. A draft copy of the
reciprocal easement agreement, as provided by the
developers of the project, is contained in the
appraisers' workfile.
Based on a site plan provided by the project's
developers, the hotel and casino portion of the
development will encompass +/- 18.16 acres of the
+/- 34.31-acre site. For purposes of this appraisal, we
have been asked to render an opinion as to the
prospective market value of the land and improvements
for the Aladdin Hotel and Casino portion of the
development, the market value of the entire +/- 34.31
acres of land as if vacant and ready for development,
and the market value of the +/- 18.16 acres of land
allocated to the redeveloped Aladdin Hotel and Casino
as if vacant and ready for development. As mentioned,
the subject site is located on Las Vegas Boulevard (The
Strip) in Las Vegas, Nevada.
HVS International, Mineola, New York Nature of the Assignment 2
INSERT STATE MAP
HVS International, Mineola, New York Nature of the Assignment 3
Objective of the The purpose of the assignment is to estimate the
Appraisal prospective market value of the Aladdin Hotel and Casino
when construction has been completed and the improvements
are operational; the market value of the underlying
+/- 34.31 acres of land of the entire site; and the
market value of the +/- 18.16 acres of land allocated to
the Aladdin Hotel and Casino portion of the development.
Market value is defined by the Office of the Comptroller
of the Currency (OCC), 12CFR, Part 34 as follows:
The most probable price which a property should bring
in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a
specified date and the passing of title from seller
to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised,
and acting in what they consider their own best
interests;
3. a reasonable time is allowed for exposure in the
open market;
4. payment is made in terms of cash in United States
dollars or in terms of financial arrangements
comparable thereto; and
5. the price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted by
anyone associated with the sale.(1)
"Prospective" market value is the forecast of the value
expected at a specified future date.
Marketing and We estimate the marketing period for valuation purposes
Exposure Periods of the subject property to be up to six months, assuming
that it is ultimately transacted at or near the concluded
market value. Historically, the market for gaming
investments has comprised a limited number of licensed
individuals, partnerships, and corporations with
extensive gaming experience. In addition, the significant
barriers to entry have substantially limited the pool of
qualified buyers. However, of the limited pool of buyers,
many would be eager to purchase a hotel and casino of the
size, scope, and location of the proposed subject
property. The exposure period, referring to the amount of
time necessary for the real estate to have been exposed
retrospectively, prior to our date of value, is also
estimated to be less than or equal to six months.
- ----------
(1) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL, 1993, pp. 222-223.
HVS International, Mineola, New York Nature of the Assignment 4
Use of the Appraisal This appraisal is being prepared for use by The Bank of
Nova Scotia, New York Agency, in connection with
financing sought by Aladdin Gaming, LLC.
Property Rights The property right appraised is the fee simple interest
Appraised in the land and improvements, including furniture,
fixtures, and equipment. Fee simple interest is defined
as "absolute ownership unencumbered by any other interest
or estate, subject only to the limitations imposed by the
governmental powers of taxation, eminent domain, police
power, and escheat."(2) The subject property is being
appraised as a going concern (i.e., an open and operating
facility).
Method of Study The methodology used to develop this appraisal is based
on the market research and valuation techniques set forth
in the textbooks we authored for the American Institute
of Real Estate Appraisers and the Appraisal Institute,
entitled The Valuation of Hotels and Motels,(3) Hotels,
Motels and Restaurants: Valuations and Market Studies,(4)
The Computerized Income Approach to Hotel/Motel Market
Studies and Valuations,(5) and Hotels and Motels: A Guide
to Market Analysis, Investment Analysis, and
Valuations.(6) In addition, forecasting models developed
by HVS Gaming Services have been utilized in the analysis
of the regional market and the subject property. The
specific steps incorporated in our analysis are outlined
as follows:
1. The subject site has been evaluated from the
viewpoint of its physical utility for the
operation of a casino hotel, as well as access,
visibility, and other relevant locational factors.
2. The surrounding economic environment, on both an
area and neighborhood level, have been reviewed to
identify specific gaming- and lodging-related
economic and demographic trends that may have an
impact on the demand for gaming and lodging
facilities.
3. An overview of the U.S. gaming industry has been
presented to provide an expanded vision of the
industry.
- ----------
(2) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL, 1993, p. 140.
(3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute
of Real Estate Appraisers, Chicago, IL, 1978.
(4) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen
Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983.
(5) The Computerized Income Approach to Hotel/Motel Market Studies and
Valuations, Stephen Rushmore, American Institute of Real Estate
Appraisers, Chicago, IL, 1990.
(6) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and
Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992.
HVS International, Mineola, New York Nature of the Assignment 5
4. An analysis of the market's and the subject
property's table game and gaming device supply and
demand was performed via a win per unit per day
(WPUPD) model. The WPUPD model is based on the
actual WPUPD attained by the market. The resultant
statistic provides insight into demand at given
supply levels.
5. The projected marketwide table game and gaming
device WPUPD figures were then multiplied by the
proposed gaming inventory levels to arrive at an
estimate of total gaming win.
6. The subject property's gaming revenue, or win, was
projected based on a market penetration model.
Market penetration levels were based on the
historical performance of the subject property and
the quality and quantity of current and proposed
competition.
7. Documentation for an occupancy and average rate
projection was derived from an analysis based on
marketwide lodging activity and trends.
8. A detailed projection of income and expense shows
the anticipated economic benefits of the subject
property and provides the basis for the income
capitalization approach.
9. The appraisal considered the three approaches to
value: cost, sales comparison, and income
capitalization. Because casino hotel facilities
are income-producing properties that are normally
bought and sold on the basis of capitalization of
their anticipated stabilized earning power, the
greatest weight is given to the value indicated by
the income capitalization approach. We find that
most investors employ a similar procedure in
formulating their purchase decisions, and thus the
income capitalization approach most closely
reflects the rationale of typical buyers.
Scope of the All information was collected and analyzed by staff of
Assignment HVS International. Descriptive data and site plans for
the proposed subject property were supplied by the
developers, Aladdin Holdings, LLC. The site has been
inspected and the developers and future management have
been interviewed. We have gathered economic data and
information on improved sales, areawide and competitive
casino revenues, occupancies and average rates, operating
expenses, construction costs, and capitalization and
equity yield rates. We have spoken with buyers, sellers,
brokers, developers and public officials. We have
analyzed this information and have considered the sales
comparison, cost, and income approaches to value. Based
on our findings, we have prepared a forecast of income
and expense representing a
HVS International, Mineola, New York Nature of the Assignment 6
stabilized year and capitalized the net income based on
current required debt and equity returns. The value
conclusion is based upon this investigation and analysis
and is conveyed herein.
Ownership and The subject property is being developed by Aladdin Gaming
Management LLC and will be owned jointly by Aladdin Gaming, LLC,
London Clubs International, and Preferred Shareholders.
This appraisal is predicated upon professional management
of the subject property by Aladdin Gaming, LLC, or an
alternative professional gaming company with a proven,
successful record of managing facilities of this nature.
Pertinent Dates The subject site was inspected by Mark D. Capasso and
Anne R. Lloyd-Jones, CRE, on August 7, 1997. Stephen
Rushmore, CRE, MAI, CHA did not physically inspect the
subject site but actively participated in the analysis.
The effective date of the prospective market value for
the Aladdin Hotel and Casino is January 1, 2000, the
anticipated date of opening. The effective date of value
for both the entire +/- 34.31-acre site and the +/- 18.16
acres of land allocated to the hotel and casino portion
of the development is August 7, 1997. All projections are
expressed in inflated dollars. The prospective market
value estimate of the Aladdin Hotel and Casino represents
2000 dollars, while the value estimates for the entire
subject site and the hotel and casino portion of the site
represent 1997 dollars.
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
HVS International, Mineola, New York Highest and Best Use 1
9. Highest and Best Use
The Appraisal Institute recognizes the concept of highest
and best use as a fundamental element in the
determination of value of real property, either as if
vacant or as improved. Highest and best use is defined as
follows:
The reasonably probable and legal use of vacant land or
an improved property, which is physically possible,
appropriately supported, financially feasible, and that
results in the highest value. The four criteria the
highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum
profitability.(7)
As if Vacant An analysis as to the highest and best use of the land
should be made first and may be influenced by many
factors. In estimating highest and best use, there are
four stages of analysis:
1. Physically possible use. What uses of the site are
physically possible?
Despite the site's slightly irregular layout, the
size of the subject site (+/- 34.31 acres) and its
location and frontage along the Las Vegas Strip,
are considered to be highly conducive to a
large-scale mixed-use development with a hotel and
casino and various other developments. All
utilities are available to the site. In general,
the site is appropriate for a mixed-use
development including a hotel and casino.
2. Legally permissible use. What uses are permitted
by zoning and deed restrictions?
As detailed in the "Property Description" section
of this report, the site is zoned H1 - Limited
Resort and Apartment District. This ordinance
allows for a variety of uses, including lodging
and casino gaming.
3. Financially feasible use. Which possible and
permissible uses will produce a net return to the
owner of the site?
Despite several new hotel and casino developments
currently proposed for the Las Vegas Strip, the
market continues to support an efficiently
operated and marketed hotel and casino. In
addition, other forms of commercial development,
such as retail, appear to be in demand. As such,
some form of
HVS International, Mineola, New York Highest and Best Use 2
mixed-use development consisting of a hotel and
casino and retail represents the highest possible
return to the owner of the site.
4. Maximally productive use. Among the feasible uses,
which use will produce the highest net return or
the highest present worth?
In consideration of the foregoing factors
influencing development in the subject's immediate
area, it is the appraisers' opinion that the
highest and best use of the subject site as if
vacant is as a mixed-use development consisting of
a hotel and casino, retail component, and various
other facilities.
- --------
(7) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL., 1992, p. 149
HVS International, Mineola, New York Cost Approach 1
12.
Cost Approach Market value is determined via the cost approach by first
estimating the market value of the subject land as if
vacant and available for its highest and best use, and
then adding the cost to construct the proposed subject
improvements.
We have found that knowledgeable buyers of gaming
facilities generally base their purchase decisions on
economic factors such as forecasted net income and return
on investment. In addition, gaming facilities are a
hybrid real estate and business investment. The gaming
portion of the investment, which generates the majority
of the income (and value) of a casino or a casino hotel,
is a management-intensive business which requires special
licensing and intangible expertise to operate profitably.
As gaming revenue and profit bear no relationship to the
rental of space, as is normally the case in real estate
investments, the net income and value of a casino also
bear no relationship to the replacement cost new of such
a facility. Successful casinos often generate income to
support values well in excess of the replacement cost new
of the physical plant which houses the business. In such
cases, the amount by which the value of the casino
exceeds the replacement cost new of the physical land and
improvements is considered to be the value attributable
to the business, not the real and personal property
components of the investment.
In the valuation of successful casinos, the cost approach
is relevant to distinguish the value of the real and
personal property components from that of the business
component. However, not all casinos are highly successful
and, in fact, many generate levels of net income which
are insufficient to cover the cost of capital for new
development. Such properties generally suffer from a
combination of depreciation due to physical deterioration
and incurable functional obsolescence. The reliability of
the cost approach in estimating market value is further
diminished by the quantification of incurable functional
obsolescence, which is based on numerous subjective
adjustments.
In the case of a proposed hotel and casino, the
comparison of the development cost budget with the market
value estimate based on the project's economic return
forms the basis for the feasibility conclusion.
Land Value The sales comparison approach is typically the most
appropriate technique for valuing land. This technique
compares the sales data to the subject site and adjusts
for discrepancies in the real property rights conveyed,
financing terms, conditions of sale, date of sale, and
physical attributes such as size, topography,
configuration, location, existing entitlement,
accessibility, availability of off-site improvements, and
removal of non-contributory existing improvements.
HVS International, Mineola, New York Cost Approach 2
In an attempt to locate comparable land sales for the
subject property, we have used several sources, including
real estate brokers, local appraisers, and county
officials. The following data pertain to the most
comparable vacant land sales that have occurred in the
subject's area in recent years. Based on discussions with
local real estate brokers and appraisers, the following
land sales offer the most current indication of land
value. Note that the entire subject site consists of
approximately 34.31 acres of land or +/- 1,494,544 square
feet. In addition, the portion of the subject site to
contain the hotel and casino equates to +/- 18.16 acres,
or +/- 791,050 square feet.
HVS International, Mineola, New York Cost Approach 3
The six comparable land transactions are described as follows:
Land Sale #1:
- -------------
Location: 3782 Las Vegas Boulevard, North of Tropicana
Avenue
Las Vegas, Nevada
Grantor: New York-New York (MGM Grand)
Grantee: La Quinta Inns
Size: +/- 2.06 acres, or +/- 89,734 square feet
Zoning: H1, Clark County
Date of Sale: March 1, 1997
Consideration: $13,500,000
Terms: All cash
Price per Acre: $6,553,998
Price per Square Foot: $150.45
Frontage on Las Vegas Blvd. 200 feet
Proposed Use: Currently improved with a La Quinta motel and
Carrows Restaurant. Purchased for future
expansion of the New York-New York Hotel and
Casino.
HVS International, Mineola, New York Cost Approach 4
Land Sale #2:
- -------------
Location: 4375 Las Vegas Boulevard, South of Diablo Street
Las Vegas, Nevada
Grantor: Starfield Golf
Grantee: Cheung S. Kheng
Size: +/- 4.32 acres, or +/- 188,179 square feet
Zoning: H1, Clark County
Date of Sale: January 16, 1996
Consideration: $4,750,000
Terms: All cash
Price per Acre: $1,099,537
Price per Square Foot: $25.24
Frontage on Las Vegas Blvd. 324 feet
Proposed Use: Currently improved with a 144-unit motel in poor
condition. Future uses are unknown.
HVS International, Mineola, New York Cost Approach 5
Land Sale #3:
- -------------
Location: 2616 E. Russel Road, SEC of Russel Road and Las
Vegas Boulevard
Las Vegas, Nevada
Grantor: Russell/I-15 Ltd.
Grantee: Circus Circus Enterprises
Size: +/- 73.74 acres, or +/- 3,212,114 square feet
Zoning: H1, Clark County
Date of Sale: March 3, 1995
Consideration: $73,000,000
Terms: All cash
Price per Acre: $989,965
Price per Square Foot: $22.73
Frontage on Las Vegas Blvd.: 1,600 feet
Proposed Use: Currently vacant land, it will be the future
site of Project Paradise.
HVS International, Mineola, New York Cost Approach 6
Land Sale #4:
- -------------
Location: 3786 Las Vegas Boulevard, North of Tropicana
Las Vegas, Nevada
Grantor: Patricia L. Goldman
Grantee: New York-New York (MGM Grand)
Size: +/- 2.07 acres, or +/- 90,169 square feet
Zoning: H1, Clark County
Date of Sale: February 17, 1995
Consideration: $8,000,000
Terms: All cash
Price per Acre: $3,864,734
Price per Square Foot: $88.72
Frontage on Las Vegas Blvd.: 152 feet
Proposed Use: Improved with a 72-unit motel at the time of
sale. The site was purchased in order to
construct the New York-New York Hotel and
Casino.
HVS International, Mineola, New York Cost Approach 7
Land Sale #5:
- -------------
Location: Las Vegas Boulevard, NEC of Las Vegas Boulevard
and Diablo Street
Las Vegas, Nevada
Grantor: Benjamin Schlomi
Grantee: Chetak Development
Size: +/- 2.51 acres, or +/- 109,336 square feet
Zoning: H1, Clark County
Date of Sale: March 7, 1994
Consideration: $3,700,000
Terms: All cash
Price per Acre: $1,474,104
Price per Square Foot: $33.84
Frontage on Las Vegas Blvd.: 260 feet
Proposed Use: Currently vacant land. The site is being held
for future development.
HVS International, Mineola, New York Cost Approach 8
Land Sale #6:
-------------
Location: Las Vegas Boulevard, NWC of
Las Vegas Boulevard and
Tropicana Avenue
Las Vegas, Nevada
Grantor: Universal Resorts
Grantee: Tracinda Corporation (New
York-New York, MGM Grand)
Size: +/- 17.619 acres,
or +/- 767,482 square feet
Zoning: H1, Clark County
Date of Sale: December 15, 1992
Consideration: $31,500,000
Terms: All cash
Price per Acre: $1,787,843
Price per Square Foot: $41.04
Frontage on Las Vegas Blvd.: 692 feet
Proposed Use: The site was the main
parcel of the New York-New
York Hotel and Casino.
In addition to the previous land sales, we have
investigated one listing for an +/- 11-acre site located
across Las Vegas Boulevard from the subject property.
This site is currently vacant with the exception of a
heliport and tour company which conducts Grand Canyon
sightseeing tours. According to the site's broker, the
owner of the property turned down an offer of
$72,000,000, or roundly $6,500,000 per acre for the site.
This offer was made roughly one and a half years ago by
Steve Wynn, the owner of Mirage Resorts. In addition, the
owner of the vacant site turned down an offer by Harvey's
Casino Corporation roughly two months ago for
$90,000,000, or roundly $8,200,000 per acre. The owner's
asking price is reportedly $10,000,000 per acre. While
this information does not constitute specific evidence of
market values, it does reflect the value perceptions of
two professional casino developers for land within the
immediate vicinity of the subject property.
Land Valuation - Hotel and Casino Site
As mentioned in the "Nature of the Assignment" section of
this report, we have been instructed by our client to
value the entire +/- 34.31-acre subject site and the
+/- 18.16 acres of land dedicated to the construction of
the Proposed Aladdin Hotel and Casino. In order to derive
an estimate of value for the portion of the site
dedicated to the Proposed Aladdin Hotel and Casino from
the preceding sales data, we have created the following
land sales adjustment grid. The six sales range from
December 1992 to March 1997. We have made linear
adjustments at 30% per year to account
HVS International, Mineola, New York Cost Approach 9
for the passage of time for these sales. While this
adjustment for time appears high, the current development
environment has created a significant upward pressure on
land values. This is evidenced by the difference in sales
prices for sale four and sale one. Sale four represents
the transaction of a roughly two-acre parcel used for the
New York-New York hotel and casino. Sale one was also a
roughly two-acre parcel used for the New York-New York
Hotel and Casino. These two sales took place
approximately two years apart and the difference in price
equated to $5,500,000. This equates to roughly a 30%
per-year increase, or 2.5% per month.
We have also interviewed various real estate brokers in
the Las Vegas area who indicated land values, especially
on the Strip, have averaged increases of between 25% and
50% per year since 1995. The tremendous increases in land
values on the Strip are attributable to the success of
the new, large, mega-resorts that have been developed
over the past few years. As investors realized the
strength and depth of the Las Vegas Strip gaming market,
it became clear that higher and higher land costs were
justified. As the major Strip mega-resort development
took place between 1994 and 1995, we have added an
additional upward adjustment to sale six for time. Sale
six transacted in December 1992 before the first
mega-resorts opened and investors realized the value of a
Strip location.
Cumulative adjustments necessary to account for
differences in location and size have also been applied.
The following grid details the various adjustments made
to the aforementioned land sales.
HVS International, Mineola, New York Cost Approach 10
Land Sales Adjustment Grid
- --------------------------------------------------------------------------------------------------------------------
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- --------------------------------------------------------------------------------------------------------------------
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 791,050 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- --------------------------------------------------------------------------------------- ---------------------------
- --------------------------------------------------------------------------------------- ------------- ------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- --------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- --------------------------------------------------------------------------------------------------------------------
Location similar inferior inferior similar inferior similar
Adjustment 0.0% 100.0% 70.0% 0.0% 100.0% 0.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 100.0% 0.0% 30.0% 90.0% -10.0%
Size smaller smaller larger smaller smaller similar
Adjustment -30.0% -30.0% 85.0% -30.0% -30.0% 0.0%
------ ------ ------ ------ ------ ------
Total Cumulative Adjustment 0.0% 170.0% 155.0% 0.0% 160.0% -10.0%
Net Adjusted Price $169.25 $100.24 $101.42 $155.26 $180.32 $179.15
========= ========= ========= ========= ========= =========
* Monthly adjustment 2.50%
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Cost Approach 11
INSERT LAND SALE MAP
HVS International, Mineola, New York Cost Approach 12
Location
Sales one, four, and six were deemed to have locations
similar to the subject property, as these transactions
represent land used for the development of the New
York-New York Hotel and Casino, located at the corner of
Tropicana Avenue and Las Vegas Boulevard approximately
one block south of the subject site. Sales two and five
were adjusted upward by 100% for their inferior location
compared to that of the subject. These sites are located
at the intersection of Las Vegas Boulevard and Diablo
street approximately one mile south of the subject site.
This area is beyond the primary development of Las Vegas
Boulevard and does not benefit from pedestrian traffic as
the subject site does. Sale three was adjusted upward by
70% for its inferior location as compared to the subject
site. Like sales two and five, sale three is located
south of the primary development of Las Vegas Boulevard.
However, it is located on the western side of Las Vegas
Boulevard and represents the future site of Project
Paradise. This project will be linked to the Luxor and
Excalibur Hotel Casinos located north of the Project
Paradise site, enhancing its location.
Functional Utility
The functional utility of land encompasses several
factors including offsite availability, topography,
configuration, and capacity. Sales one, two, four, and
five were adjusted upward by 30%, 100%, 30%, and 90%,
respectively, for their inferior functional utility as
compared to the subject property. As mentioned, sales one
and four were assemblage parcel used to construct the New
York-New York Hotel and Casino. These parcels were very
irregular in shape and lack the density needed to
construct sufficiently sized hotel casinos. Similarly,
sites two and five are irregular parcels that, while they
have frontage along Las Vegas Boulevard, do not contain
the depth needed to construct a large-scale hotel and
casino. In addition, these sites abut the McCarran
International Airport. Due to zoning restrictions, the
height of any development on these parcels is limited.
Sale three, the Project Paradise site, is considered to
have similar functional utility to the subject site and
was not adjusted. Sale six, the primary parcel used for
the construction of the New York-New York Hotel and
Casino occupies a corner parcel. As such, it was adjusted
downward by 10% for its superior functional utility as
compared to the subject site.
HVS International, Mineola, New York Cost Approach 13
Size
Sales one, two, four, and five were significantly smaller
than the subject site, necessitating a 30% downward
adjustment. Sale three was roughly four times as large as
the subject site, necessitating an upward adjustment of
85%. Sale six represents the transaction of a site
similar in size to the subject. As such, sale six was not
adjusted for size.
After adjustment, the sales prices ranged from roundly
$100 to $180 per square foot, or roundly $4,400,000 to
$7,900,000 per acre. The sales that are most similar to
the subject site in terms of location establish a
narrower range of roundly $155 to $179 per square foot,
or $6,750,000 to $7,800,000 per acre. The most recent
sale reflects an adjusted price of $169.25 per square
foot, or $7,375,000 per acre. Based on this analysis, we
conclude a land value for the hotel and casino portion of
the subject site at $170 per square foot, or $7,400,000
per acre. Multiplying our per-square-foot value
conclusion by the 791,050 square feet of the subject site
results in an estimate of land value for the hotel and
casino portion of the subject site of roundly
$135,000,000.
Land Valuation - Entire Site
In order to value the entire +/- 34.31-acre subject site,
we have valued the +/- 16.15 acres of the site not being
used for the hotel and casino portion of the development
and added this value to our estimate of land value for
the hotel and casino portion of the site. The same sales
data used for our previous valuation of the hotel and
casino portion of the site was used for the non-hotel and
casino land.
As with our previous land valuation, each of the sales
was adjusted upward by 30% per year in order to account
for the passage of time. In addition, sale six received
an additional upward adjustment as it was transacted in
December 1992, before the surge in mega-resort
development. The following grid details the various
adjustments made to the comparable land sales.
HVS International, Mineola, New York Cost Approach 14
Land Sales Adjustment Grid - Non-Hotel and Casino Land
- ------------------------------------------------------------------------------------------------------------------
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ------------------------------------------------------------------------------------------------------------------
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 703,494 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- -------------------------------------------------------------------------------------- --------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -60.0% 20.0% 10.0% -60.0% 20.0% -60.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -10.0%
Size smaller smaller larger smaller smaller similar
Adjustment -30.0% -30.0% 85.0% -30.0% -30.0% 0.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -60.0% 40.0% 95.0% -60.0% 10.0% -70.0%
Net Adjusted Price $67.70 $51.98 $77.55 $62.11 $76.29 $59.72
=========== ========== =========== ========== ========== ===========
* Monthly adjustment 2.50%
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Cost Approach 15
Location
The portion of the subject site not used for the
development of the Proposed Aladdin Hotel and Casino will
not have any frontage along Las Vegas Boulevard. As such,
sales one, four, and six are considered superior to this
portion of the subject site and were adjusted downward by
60%. Note that sales one, four, and six represent the
three parcels used to develop the New York-New York Hotel
and Casino. Sales two, three, and five were deemed
inferior to the subject site and adjusted upward by 20%,
10%, and 20%, respectively. While these sites offer
frontage along Las Vegas Boulevard it is at its extreme
southern end. As mentioned, pedestrian traffic is limited
along this area of the Strip.
Functional Utility
Sales one, two, four, and five were considered to be
inferior to the non-hotel casino portion of the subject
site. Specifically, sales one and four were adjusted
upward by 30% as these parcels are irregular in shape and
do not contain the density of the subject site. Sale two
was adjusted upward by 50% as it is also irregular in
shape and is extremely limited in its development
potential by its location adjacent to McCarran
International Airport. Similarly, sale five is irregular
in shape and abuts McCarran International Airport;
however, the density of the site is superior to that of
sale two. As such, this sale was adjusted upward by 20%.
Sale six's corner location necessitates a 10% downward
adjustment for superior functional utility. Sale three's
functional utility was deemed similar to that of the
subject and was not adjusted.
Size
Sales one, two, four, and five were adjusted downward 30%
for their smaller size as compared to the non-hotel and
casino portion of the subject site. Sale three was
adjusted upward by 85% as it is significantly larger than
the subject. Sale six is similar in size to the subject
site and was not adjusted.
After adjustment, the sales prices ranged from roundly
$52 to $78 per square foot or roundly $2,300,000 to
$6,900,000 per acre. Based on this analysis, we conclude
a land value for the non-hotel and casino portion of the
subject site at $65 per square foot, or $2,800,000 per
acre. Multiplying our per-square-foot value conclusion by
the 703,494 square feet of the subject site results in an
estimate of land value for the hotel and casino portion
of the subject site of roundly $45,730,000.
Adding the estimated market value of the casino portion
of the site to the estimated market value of the
non-hotel casino portion of the site equates to roundly
HVS International, Mineola, New York Cost Approach 16
$180,000,000 or $5,250,000 per acre for the +/-
34.31-acre site, or $121 per square foot for the
1,494,544-square-foot site.
Development Budget The following chart details the construction cost budget
for the proposed subject property, as prepared by the
hotel's developers.
HVS International, Mineola, New York Cost Approach 17
Development Budget
Use of Funds Cost (000,000)
- ------------------------------------------------------------------------------
Project Development Costs
Direct Construction Costs $250.0
Contractor Fees and Expenses 12.3
Direct Soft Costs/Professional Fees 4.2
FF&E Soft Costs/Professional Fees 4.2
Permits and Offsite Improvements 8
Insurance Wrap Around 9.2
Model Rooms 0.4
General FF&E 58.5
Gaming Equipment 26.5
Other Owner Furnished FF&E 28.9
Theming 35
Project Contingency - Direct 12.5
Project Contingency - FF&E 12.5
-----------
Subtotal $462.2
Financial and Other Costs
Construction Interest Expense $40.8
Fees and Other Expenses 30.92
Retire Existing Debt 68.5
Repay Existing Partner Debt 5
Credit for Expenses Prepaid by Holdings -5
Credit for Sitework Contribution from Bazaar -1.4
Pre-opening Expenses 15
Working Capital 15
-----------
Subtotal $168.8
Land $135.0
-----------
Total $766.0
===========
Source: Aladdin Gaming, LLC
- --------------------------------------------------------------------------------
As shown, the total development cost estimate, excluding
land, totals roughly $631,000,000. When the appraisers'
estimate of land value is added, the total development
cost estimate for the subject property equates to roundly
$766,000,000. As a check on the reasonableness of the
development budget by the property's developers, we have
calculated the development cost of the proposed subject
property utilizing the Marshall & Swift Cost Estimator
Program.
HVS International, Mineola, New York Cost Approach 18
Development Cost One of the nationally recognized authorities on
replacement cost information is Marshall & Swift. HVS
International uses the Commercial Estimator computer
program produced by Marshall & Swift. The computer cost
program employs the square-foot method in cost
estimating, which approximates the replacement cost of
the building's major components in terms of dollars per
unit of area or volume, based on known costs of similar
structures adjusted for time and physical differences.
The estimate of replacement cost by this method includes
all direct costs plus a portion of indirect costs, such
as construction financing, temporary utilities, and
general conditions.
For the purpose of developing a cost estimate using the
Marshall & Swift Commercial Estimator program, the
subject property has been classified as a hotel under
Section 41 of the Marshall Valuation Service cost guide,
with an average cost range rating for a Class A building.
According to the developers, the proposed building area
is approximately +/- 2,000,000 square feet.
Based on these considerations, as well as locational and
time adjustment factors and other criteria related to
building systems, the replacement cost of the building as
if new has been estimated through the Commercial
Estimator program. The replacement cost of the subject
hotel is estimated to be $251,360,000, or say,
$251,000,000.
Besides approximating the replacement cost of the
buildings, we have estimated the cost of the additional
site improvements. The estimated cost of the outdoor
swimming pools needs to be added to the replacement cost
of the building. The following table summarizes the cost
estimates of the site improvements. Also, indirect costs
have been derived based upon the appraisers' estimate of
financing fees, real estate taxes, and brokerage fees
associated with the subject's development. Indirect costs
have been calculated for this analysis as being equal to
5.0% of the replacement cost of the total improvements.
HVS International, Mineola, New York Cost Approach 19
Development Cost
Item Total
- -----------------------------------------------------------------------------
Replacement Cost New from M&S $251,360,000
Surface Parking 568,000
Swimming Pool 243,000
------------
Subtotal 252,171,000
Indirect Costs @ 5.0% (Real Estate Taxes and Loan Fees) 12,609,000
------------
Total Improvement Replacement Cost $264,780,000
- --------------------------------------------------------------------------------
Opening Costs In addition to the replacement cost of the improvements,
opening costs must be considered. Opening costs include
the preopening marketing and administrative expenditures
of the casino, hotel, and a working capital reserve to
maintain adequate cash flow until the operation achieves
a break-even point. The following table presents the
estimated opening costs for the subject property.
Estimate of Opening Costs
Cost Per No. of
Expenses Room Rooms Total Cost
- -------------------------------------------------------------------------------
Preopening Expenses $10,000 2,600 $26,000,000
Working Capital 5,000 2,600 13,000,000
-----------
Total Opening Costs $39,000,000
- --------------------------------------------------------------------------------
Adding this component to the replacement cost of the
improvements, the total replacement cost of the property
is estimated to be roundly $304,000,000.
Personal Property Our estimate of the cost of furniture, fixtures, and
equipment is based on our knowledge and expertise in the
hotel and gaming industries, as well as on the developers
estimates of FF&E costs. As such, we have estimated the
cost of the proposed subject property's furniture,
fixtures, and equipment to be equal to roughly $65,000
per room, or a total of roundly $169,000,000
Allocation of The appraisers have considered a 25% entrepreneurial
Developer's Profit profit to be necessary and appropriate to reflect the
financial incentive required for new hotel casino
development. Developer's profit is applied to the
buildings; the furniture, fixtures, and equipment; and
the land as follows.
Allocation of Developer's Profit
HVS International, Mineola, New York Cost Approach 20
Profit
Component Cost Ratio Profit
- --------------------------------------------------------------------------------
Building Improvements $303,780,000 25.0% $75,945,000
Furniture, Fixtures, and Equipment 169,000,000 25.0 42,250,000
Land 135,000,000 25.0 33,750,000
------------
Total Developer's Profit $151,945,000
- --------------------------------------------------------------------------------
Conclusion In the estimation of value according to the cost
approach, the values of several components of the total
property were quantified. The market value of the land
was determined via the sales comparison approach. The
estimated construction cost of the building improvements
was calculated according to the square-foot cost method
using a computer program developed by Marshall & Swift.
Incurable physical deterioration and external and
incurable functional obsolescence deductions were deemed
inapplicable considering the subject property's new
construction. The following table presents the various
components used to arrive at the prospective market value
via the cost approach
Summary of Value via the Cost Approach
Replacement Cost of Improvements $303,780,000
Replacement Cost of Furniture, Fixtures, and Equipment 169,000,000
Land Value 135,000,000
Developer's Profit 151,945,000
------------
Total Replacement Cost New $759,725,000
Estimated Value via the Cost Approach (Say) (Say) $760,000,000
- --------------------------------------------------------------------------------
HVS International, Mineola, New York Reconciliation of Value Indications 1
- --------------------------------------------------------------------------------
================================================================================
14. Reconciliation of Value Indications
The reconciliation, which is the last step in the
appraisal process, involves summarizing and correlating
the data and procedures employed throughout the analysis.
The final conclusion of value is arrived at after
reviewing the estimates indicated by the cost, sales
comparison, and income capitalization approaches. The
relative significance, applicability, and defensibility
of each indicated value are considered, and the greatest
weight is given to that approach deemed most appropriate
for the property being appraised. The purpose of this
report is to estimate the market value of the fee simple
interest in the subject property. Our appraisal involves
a careful analysis of the property itself and the
economic, demographic, political, physical, and
environmental factors that influence real estate values.
Based on the data set forth in this report, the following
value indications were developed for theproposed hotel
and casino.
Prospective Market Value:
Approach Valuation Indication
Cost $760,000,000
Sales Comparison Not applicable
Income Capitalization $826,300,000
We generally give the cost approach limited weight in
arriving at a final value estimate because knowledgeable
buyers of gaming facilities generally base their purchase
decisions on economic factors such as forecasted net
income and return on investment rather than a property's
replacement cost. As discussed in the "Cost Approach"
section of the narrative, the principle of substitution,
upon which the cost approach is based, is highly
constrained given the circumstances of gaming in the
greater Las Vegas area. However, the appraisers have
arrived at a value estimate utilizing the cost approach.
Sales Comparison The sales comparison approach uses actual sales of
Approach similar properties to provide an indication of the
subject property's value. The strength of this approach
is that it measures value based on the investment
decisions made by actual buyers and sellers. Although we
have investigated a number of sales in an attempt to
develop a range of value indications, the lack of
comparable sales transactions and the nature of the
HVS International, Mineola, New York Reconciliation of Value Indications 2
- --------------------------------------------------------------------------------
subject property's operation preclude the use of the
sales comparison approach to arrive at an estimate of
value.
Income Capitalization To estimate the subject property's value via the income
Approach capitalization approach, we analyzed the local and
regional gaming and lodging markets, examined the
competitive environment, projected penetration and WPUPD
levels, and developed a forecast of income and expense
that reflects anticipated income trends and cost
components through a stabilized year of operation. The
subject property's forecasted net income before debt
service was allocated to the mortgage and equity
components based on market rates of return and
loan-to-value ratios. Through a discounted cash flow and
income capitalization procedure, the value of each
component was calculated; the total of the mortgage and
equity components equates to the value of the property.
Our nationwide experience indicates that the procedures
used in estimating market value by the income
capitalization approach are comparable to those employed
by the investors who constitute the marketplace. For this
reason, we believe that the income capitalization
approach produces the most supportable value estimate,
and it is given the greatest weight in our final estimate
of the subject property's market value.
Value Conclusion Careful consideration has been given to the strengths and
weaknesses of the three approaches to value discussed
above. In recognition of the purpose of this appraisal,
we have given primary weight to the value indicated by
the income capitalization approach.
Based on our analysis, it is our opinion that the
prospective market value of the fee simple interest in
the Proposed Aladdin Hotel and Casino, as of January 1,
2000, is:
$825,000,000
EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of
the total +/- 34.31-acre subject site, as vacant and
including the development rights and entitlements, as of
August 7, 1997, is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
In addition, it is our opinion that the market value of
the +/- 18.16 acres of land allocated to the Aladdin
Hotel and Casino portion of the development, as vacant
and including the development rights and entitlements, as
of August 7, 1997, is:
HVS International, Mineola, New York Reconciliation of Value Indications 3
- --------------------------------------------------------------------------------
$135,000,000
ONE HUNDRED THIRTY-FIVE MILLION DOLLARS
GLOBAL REFERENCES
CLIENT
Client: Mr. Jim Riley
Title:
Department:
Firm: The Bank of Nova Scotia, New York Agency
Address1:
Address2: One Liberty Plaza
City: New York, New York 10005
Phone: (212) 225-5098
Salut: Mr. Riley
Office
Firm: HVS International
Office: Mineola, New York
Header Middle
Job Number: 9710413
Property Description
The proposed mixed-use development for the subject site is expected to consist
of a 2,600-room hotel and a 110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to include approximately 71,500
square feet of meeting space, a 1,400-seat show room, a 7,000-seat performing
arts center, nine separate food and beverage outlets, and an expansive array of
back-of-the-house facilities typical of a large hotel and casino. The remaining
components of the mixed-use development will include a 450,000-square-foot
shopping bazaar, a parking garage, and a central utility plant.
GLOBAL VARIABLES
Property Name Proposed Aladdin Hotel and Casino
Prop Address 3667 Las Vegas Boulevard
Prop City Las Vegas
Prop Gov Other
Prop State Nevada
Prop County Clark
Prop Zip 89109
Owner Aladdin Holdings LLC
MSA Las Vegas Strip ($72 million and over)
Date Of Value January 1, 2000
Fiscal/Calendar Calendar
Date of Inspection August 7, 1997
Report Type Appraisal
Value Type prospective market value
Interest Appraised fee simple
Site Area (Acres) +/- 34.31
Site Area (SF) +/- 1,494,544
Hotel Units 2,600
Date Built
Building Stories
Block and Lot
Zoning H1 - Limited Resort and Apartment District
Historical (Base) Year
Stabilized Year 2002
Years to Stabilize: three
Value Text EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
Value Number $825,000,000
Value per Room
Income Value $824,100,000
Sales Value Not applicable
Cost Value $760,000,000
INCOME VARIABLES
Inflation Rate 3%
Loan To Value 60%
Interest Rate 9.0%
Amortization 20
Mortgage Constant 0.107967
Equity Yield 31.0%
Terminal Cap Rate 18.0%
Broker & Legal Commission: 2.0%
SECTION NUMBERS SECTION NAME
SExec 1 Summary of Salient Data and Conclusions
SNat 2 Nature of the Assignment
SLand 3 Property Description
SArea 4 Market Area Analysis
SOver 5 U.S. Gaming Overview
SLouis Nevada Gaming Overview
SComp 6 Gaming Supply and Demand Analysis
SGame 7 Forecast of Gaming Revenue
SLodg 8 Lodging Supply and Demand Analysis
SHBU 9 Highest and Best Use
SApps 10 Approaches to Value
SInc 11 Income Capitalization Approach
SCost 12 Cost Approach
SSales 13 Sales Comparison Approach
SRec 14 Reconciliation of Value Indications
SAssu 15 Statement of Assumptions and Limiting Conditions
SCert 16 Certification
1. Summary of Salient Data and Conclusions ............................... 1
2. Nature of the Assignment .............................................. 3
3. Property Description .................................................. 9
4. Market Area Analysis .................................................. 28
5. U.S. Gaming Overview .................................................. 46
6. Gaming Supply and Demand Analysis ..................................... 58
7. Forecast of Gaming Revenue ............................................ 74
8. Lodging Supply and Demand Analysis .................................... 87
9. Highest and Best Use .................................................. 105
10. Approaches to Value .................................................. 107
11. Income Capitalization Approach ....................................... 110
12. Cost Approach ........................................................ 147
13. Sales Comparison Approach ............................................ 167
14. Reconciliation of Value Indications .................................. 173
15. Statement of Assumptions and Limiting Conditions ..................... 176
16. Certification ........................................................ 180
Base Year Segmented Rate Assumptions
------------------------------------
Demand Period FIT Casino Wholesale Group Annual Average Deflated ADR(1996)
- ---------------------------------------------------------------------------------------------
Peak Weekend $175.00 $150.00 $125.00 $140.00 $150.50 $133.72
Peak Mid-week 140.00 125.00 100.00 110.00 121.50 107.95
Non-Peak Weekend 110.00 100.00 85.00 90.00 98.00 87.07
Non-Peak Mid-week 95.00 85.00 80.00 85.00 87.00 77.30
Convention 200.00 150.00 120.00 160.00 161.00 143.05
Special Event 250.00 200.00 180.00 185.00 208.00 184.81
------- ------- ------- -------
Annual Average $160.63 $134.90 $114.30 $127.41
Deflated ADR (1996) $142.72 $119.86 $101.56 $113.20
HVS International, San Francisco, California Qualifications of Mark D. Capasso
================================================================================
Mark D. Capasso
Employment
1994 to present HVS GAMING SERVICES
San Francisco, California
(Casino Valuations, Market Studies, Feasibility
Reports, and Gaming Analysis)
1994 to present
HOSPITALITY VALUATION SERVICES
San Francisco, California
(Hotel/Motel Valuations, Market Studies, Feasibility
Reports, and Investment Counseling)
1993 to 1994
LAS VEGAS HILTON
Las Vegas, Nevada
1992
1993 to 1994
CALIFORNIA CASINO HOTEL
Las Vegas, Nevada
1990 to 1993
QUALITY INN SUNRISE SUITES HOTEL
Las Vegas, Nevada
1988 to 1990
BRISTOL SUITES HOTEL
Dallas, Texas
Education
BS - School of Hotel Administration, University of
Nevada, Las Vegas
Scuola Administratione di Aziendale; Turin, Italy,
European Economic Community Studies
Courses: 310 Income Capitalization; SPPA; SPPB -
Appraisal Institute
Teaching and Lecture
Assignments University of Nevada, Las Vegas: Hotel Feasibility
Analysis - Guest Lecturer
Published Articles and HVS Gaming Services Industry Profile. "The
Chapters Metamorphosis of Glitter Gulch," July, 1996
HVS International, San Francisco, California Qualifications of Mark D. Capasso
Casino Executive Magazine. "Managing the
Casino/Hotel," Bi-Monthly Column
Corporate and Bank of San Francisco
Institutional Clients Bank of the West
Served Banker's Trust
Boyd Gaming Corporation
CIBC Wood Gundy
CS First Boston
Caesar's World Gaming
Canadian Imperial Bank of
Commerce
Citicorp Real Estate, Inc.
Colorado Casino Resorts, Inc.
Coopers & Lybrand
Credit Lyonnais
Cupertino National Bank & Trust
Dai-Ichi Kangyo Bank, Ltd.
Evergreen Associates
First Security Commercial Mortgage
Glendale Redevelopment Agency
Hospitality Franchise System
(Ramada)
Host Marriott
IMPAC Hotels
International Bank of California
K & S Enterprises (USA) Corporation
Legacy Hospitality
Lehman Brothers
M & M Development
Manor Care
Marriott International
N & S Development
Nations Credit Commercial Corporation
Nomura Asset Capital Corporation
Northwest Lodging, Inc.
Park Lane Hotels
Patriot American Hospitality
Piccadilly Inn Hotels
The Prudential Real Estate Group
Red Lion Hotels and Inns
Redwood Bank
San Jose National Bank
The Shaner Hotel Group
Starwood Lodging
Summerfield Suites Hotel Corporation
Teacher's Insurance & Annuity Association
U.S. Bancorp
Union Bank of California
Wells Fargo Bank
West L.B.
Windsor Capital
Yasuda Trust
October 7, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re:
Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find one draft copy of the self-contained appraisal report
pertaining to the above-captioned property. We will proceed with the production
of the final reports upon your authorization. Please do not hesitate to call
with your questions or comments.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
============================
Land Sale Map
-------------
* SUBJECT
1 La Mansion del Rio
2 Havana River Walk Inn
============================
================================================================================
Variables
===============================================================
Room Count 2,600
Building SF: 2,000,000
Overall Cost Rank (low=1; high=4) 4
Construction Class (A=1, B=2, C=3, D=4) 1
================================================================================
================================================================================
Marshall Valuation Data
===============================================================
Replacement Cost $251,360,000
================================================================================
================================================================================
Multipliers
===============================================================
Current Cost Multiplier 1.00
Local Multiplier 1.00
================================================================================
================================================================================
Property Improvements
===============================================================
Signs $0
Parking Spaces (0 if included in M&S) 500
Landscaped Area 0
Swimming Pool (small=1, big=4) 4
================================================================================
================================================================================
Capital Expenditure
===============================================================
Curable Building Items $0
Curable FF&E Items 0
Total Capital Expenditures $0
================================================================================
================================================================================
Age of Improvements
===============================================================
Chronological Age 0 average
Effective Age 0
================================================================================
================================================================================
FF&E
===============================================================
Per Room $
-------- -----------------
FF&E Replacement Cost 65,000 $169,000,000
Effective Age of FF&E 0
FF&E Depreciation ERR
================================================================================
================================================================================
Improvement Replacement Cost
===============================================================
Item Total Cost
--------------------------------------------------------
Building $251,360,000
Signs 0
Surface Parking 568,000
Landscaping 0
Swimming Pool 243,000
----------------
Subtotal 252,171,000
Indirect Costs @ 5.0% (Real Estate
Taxes and Loan Fees) 12,609,000
----------------
$264,780,000
Total Improvement Replacement Cost
================================================================================
================================================================================
Land Value - Ground Lease Method
===============================================================
------------------------------------
Stabilized Total Revenue (current $) $0 xxxxx -----> Stabilized Total Revenue $0
Ground Lease % 0.0% Projection Year 0
-------------
Economic Ground Rent 0 Inflation Rate 4.0%
-------------
Deflated Rooms Revenue $0
Land Capitalization Rate 0.000
====================================
Land Value ERR
Say ERR
================================================================================
================================================================================
Land Value - Sales Comparison Method
===============================================================
Land Value per Sq. Ft. $170
Site Size 791,051
-------------
Land Value $134,478,670
Say $135,000,000
================================================================================
================================================================================
Opening Costs
===============================================================
No. of
Cost Rooms $
---- ----- -
Pre-opening Expenses $10,000 2,600 $26,000,000
Working Capital $5,000 2,600 13,000,000
Total Opening Costs $39,000,000
Total Replacement Cost New $303,780,000
================================================================================
================================================================================
Developer's Profit
===============================================================
Profit
Cost Ratio $
---- ----- -
Building Improvements $303,780,000 25% $75,945,000
Furniture, Fixtures,
and Equipment 169,000,000 25% 42,250,000
Land 135,000,000 25% 33,750,000
------------
Total Developer's Profit $151,945,000
================================================================================
================================================================================
Total Replacement Cost
===============================================================
Hotel Cost Total Cost Per Room
--------------------------------------------------------
Building Improvements $303,780,000 $116,838
Furniture, Fixtures
and Equipment 169,000,000 65,000
Land Value 135,000,000 51,923
Developer's Profit 151,945,000 58,440
----------- ------
Total $759,725,000 $292,202
================================================================================
================================================================================
Physical Deterioration - Improvements
===============================================================
Physical Curable - Improvements
Replacement Cost of Improvements $379,725,000
Curable Physical Deterioration 0
---------
Depreciated Replacement Cost of
Improvements $379,725,000
Physical Incurable - Improvements
Chronological Age 0
Effective age 0
Typical Economic Life 60
Remaining Economic Life 60
--------------
Percent Depreciated 0.0%
Depreciated Replacement Cost of
Improvements $379,725,000
Percent Depreciated 0.0%
--------------
Incurable Physical Deterioration $0
================================================================================
================================================================================
Personal Property Deterioration and Values
===============================================================
Physical Incurable - FF&E
Replacement Cost of FF&E $211,250,000
Less: Curable FF&E Deterioration 0
--------------
Depreciated Replacement Cost of FF&E $211,250,000
Percent Depreciated ERR
Incurable Physical Deterioration ERR
Market Value of FF&E ERR
Value in Use - FF&E
Market Value of Subject via Income Approach $0
Personal Property Ratio 0.0%
--------------
Value in Use of Personal Property $0
================================================================================
================================================================================
Economic Obsolescence
===============================================================
Subject Comparable
------- ----------
Value
Stabilized (Deflated) ADR $0.00 $0.00 $760,000,000
Number of days Open 365 365
Number of Rooms 2,600 2600
Stabilized Occupancy 0.0% 0.0%
------- -----------
Rooms Revenue $0 $0
Loss in Revenue Due to External Factors $0
Incremental Net Operating Ratio 60.0%
------------
Incremental Net Income $0
Capitalization Rate 10.0%
------------
Gross Economic Obsolescence $0
Adjust for Land Component
Land Value $135,000,000
Income Approach Value 0
------------
Land to Value Ratio ERR
Percentage Attributable to
Incurable Obsolescence ERR
Net Economic Obsolescence ERR
================================================================================
================================================================================
Conclusion
===============================================================
Replacement Cost of Improvements $303,780,000
Replacement Cost of Furniture, Fixtures, and Equipment $169,000,000
Land Value $135,000,000
Developer's Profit $151,945,000
--------------
Total Replacement Cost New $759,725,000
Less: Curable Physical Deterioration-Building 0
Less: Incurable Physical Deterioriation-Building 0
Less: Curable Physical Deterioration-FF&E 0
Less: Incurable Physical Deterioriation-FF&E 0
Less: Economic Obsolecence 0
---------
Total Depreciation 0
Estimated Value by Cost Approach $759,725,000
(Say) $760,000,000
================================================================================
Lookup Tables
1 2 3 4
Pre-opening Expense 1,200 2,700 4,200 5,700
Working Capital 1,200 2,000 2,800 3,500
Landscaping $2.20 $2.90 $3.85 $4.00
Swimming Pool $58,875 $111,000 $178,150 $243,250
Surface Parking $620 $760 $925 $1,135
Economic Life 1 2 3 4
Good to Exlt. 60 60 55 50
Economic Life 1 2 3 4
Low to Average 55 55 50 45
Multipliers 1.00 1.00 1.00 1.00
FF&E Depreciation:
1 40.0%
2 60.0%
3 70.0%
4 75.0%
5 80.0%
6 85.0%
7 89.0%
8 92.0%
9 95.0%
0 98.0%
Parking Cost Per Space $1,135
Landscaping Cost Per Sq. Ft. $4.00
========================================================
COST ANALYSIS MODEL VERSION: WIN 1.0
Developed for: April 14, 1994
HOSPITALITY VALUATION SERVICES
Developed by: Modified by:
Dexter Wood and Frank Dougherty Jin Y. Lee
========================================================
05/27/1998 Market Analysis
Table Games Gaming Devices
------------------------------------------------------- --------------------------------------------------------
Year Win % Change Units % Change WPUPD % Change Win % Change Units % Change WPUPD % Change
- -------------------------------------------------------------------------- --------------------------------------------------------
1992 $974,174 -- 1,101 -- $2,424 -- $1,021,805 -- 26,525 -- $106 --
1993 1,085,276 11.4% 1,116 1.4% 2,664 9.9% 1,078,632 5.6% 26,997 1.8% 109 3.7%
1994 1,441,155 32.8 1,476 32.3 2,675 0.4 1,428,500 32.4 37,245 38.0 105 (4.0)
1995 1,591,184 10.4 1,451 (1.7) 3,004 12.3 1,369,914 (4.1) 36,191 (2.8) 104 (1.3)
1996 1,515,105 (4.8) 1,495 3.0 2,777 (7.6) 1,442,373 5.3 37,197 2.8 106 2.4
Annual% Chg 11.7% 7.9% 3.5% 9.0% 8.8% 0.2%
YTD 6/96 $755,625 -- 1,468 -- 1,410 -- $729,654 -- 36,896 -- 54 --
YTD 6/97 827,644 9.5% 1,672 13.9% 1,356 (3.8)% 746,015 2.2% 40,598 10.0% 50 (7.1)%
LTM through 7/96 $1,727,721 -- 1,560 -- $3,034 -- $1,467,537 -- 37,483 -- $107
LTM through 7/97 1,724,658 (0.2)% 1,779 14.0% 2,656 (12.5)% 1,535,213 4.6% 42,104 12.3% 100 (6.9)%
Sunrise Casino Hotel
Interactive Value Calculation and Proof - Market Value
Value $824,143,111
Loan-to-value 60.00%
Debt Service Constant 0.158581
Term 10
Amortization 10
Interest Rate 10.00%
Terminal Cap 18.00%
Equity Yield: 30.00%
Period Total Value Debt Equity
- ------ ------------ ------------ ------------
($824,143,111) ($494,485,866) ($329,657,244)
Year1 136,148,000 78,416,006 59,729,994
Year2 142,522,000 78,416,006 64,105,994
Year3 145,559,000 78,416,006 67,142,994
Year4 149,925,000 78,416,006 71,508,994
Year5 154,424,000 78,416,006 76,007,994
Year6 159,057,000 78,416,006 80,640,994
Year7 163,827,000 78,416,006 85,410,994
Year8 168,745,000 78,416,006 90,328,994
Year9 173,806,000 78,416,006 95,389,994
Year10 1,182,921,111 78,416,006 1,104,505,105
Total Property IRR Debt IRR Equity IRR
19.2% 9.4% 27.1%
Available Percent Occupied Percent Vacancy
Year Space Change Space Change Rate
- -----------------------------------------------------------------------
1991 2,149,403 -- 1,794,752 -- 16.5%
1992 2,266,181 5.4% 1,919,455 6.9% 15.3
1993 2,441,514 7.7 2,150,974 12.1 11.9
1994 2,630,558 7.7 2,446,419 13.7 7.0
1995 2,681,046 1.9 2,581,847 5.5 3.7
Avg. Annual Comp. Change,1991-95
Available Space 5.7%
Occupied Space 9.5%
Source: Metropolitan Las Vegas Office Market Conditions
Fiscal Year 1996
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 45,291
Occupancy 94.8%
Average Rate $79.19
Occupied Rooms 15,666,731
(000s) % Gross PAR(1) POR(2)
- -------------------------------------------------------------------------------------------------------------
Revenues
Gaming $3,194,527 52.6 % $70,533 $203.91
Rooms 1,240,619 20.4 27,392 79.19
Food 656,570 10.8 14,497 41.91
Beverage 277,885 4.6 6,136 17.74
Other Income 700,428 11.5 15,465 44.71
------- ---- ------ -----
Total Revenues 6,070,029 100.0 134,022 387.45
Departmental Expense *
Casino 1,826,188 57.2 40,321 116.56
Rooms 451,921 36.4 9,978 28.85
Food 678,850 103.4 14,989 43.33
Beverage 183,764 66.1 4,057 11.73
Other Income 427,180 61.0 9,432 27.27
------- ---- ----- -----
Total Departmental Exp 3,567,904 58.8 78,777 227.74
Departmental Income 2,502,125 41.2 55,245 159.71
Undistributed Operating Expenses
Administrative and General 663,174 10.9 14,642 42.33
Marketing 90,967 1.5 2,008 5.81
Energy 88,971 1.5 1,964 5.68
Complimentary/Promotions 40,152 0.7 887 2.56
Entertainment 63,314 1.0 1,398 4.04
------ --- ----- ----
Total 946,577 15.6 20,900 60.42
House Profit 1,555,549 25.6 34,345 99.29
Fixed Charges
Property Tax 46,350 0.8 1,023 2.96
Rent of Premises 18,157 0.3 401 1.16
Equipment Lease 3,162 0.1 70 0.20
----- --- -- ----
Total 67,670 1.1 1,494 4.32
Net Income $1,487,879 24.5 % $32,851 $94.97
========== ==== ======= ======
Food as a % of Gaming Revenue 20.6 %
Beverage as a % of Gaming Revenue 8.7
Other Income as a % of Gaming Revenue 21.9
Fiscal Year 1995
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 44,490
Occupancy 94.1%
Average Rate $74.61
Occupied Rooms 15,272,638
(000s) % Gross PAR(1) POR(2)
- -------------------------------------------------------------------------------------------------------------
Revenues
Gaming $3,086,131 53.6 % $69,367 $202.07
Rooms 1,139,558 19.8 25,614 74.61
Food 632,475 11.0 14,216 41.41
Beverage 273,743 4.8 6,153 17.92
Other Income 621,797 10.8 13,976 40.71
------- ---- ------ -----
Total Revenues 5,753,705 100.0 129,326 376.73
Departmental Expense *
Casino 1,768,141 57.3 39,742 115.77
Rooms 430,029 37.7 9,666 28.16
Food 669,096 105.8 15,039 43.81
Beverage 182,125 66.5 4,094 11.92
Other Income 422,055 67.9 9,487 27.63
------- ---- ----- -----
Total Departmental Exp 3,471,445 60.3 78,028 227.30
Departmental Income 2,282,260 39.7 51,298 149.43
Undistributed Operating Expenses
Administrative and General 640,544 11.1 14,397 41.94
Marketing 89,770 1.6 2,018 5.88
Energy 89,844 1.6 2,019 5.88
Complimentary/Promotions 35,979 0.6 809 2.36
Entertainment 55,473 1.0 1,247 3.63
------ --- ----- ----
Total 911,611 15.8 20,490 59.69
House Profit 1,370,649 23.8 30,808 89.75
Fixed Charges
Property Tax 45,238 0.8 1,017 2.96
Rent of Premises 17,638 0.3 396 1.15
Equipment Lease 7,811 0.1 176 0.51
----- --- --- ----
Total 70,687 1.2 1,589 4.63
Net Income $1,299,962 22.6 % $29,219 $85.12
========== ==== ======= ======
Food as a % of Gaming Revenue 20.5 %
Beverage as a % of Gaming Revenue 8.9
Other Income as a % of Gaming Revenue 20.1
Fiscal Year 1994
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 39,880
Occupancy 95.5%
Average Rate $66.20
Occupied Rooms 13,906,906
(000s) % Gross PAR POR
- -----------------------------------------------------------------------------------------------------------
Revenues
Gaming $2,761,356 54.9 % $69,242 $198.56
Rooms 920,694 18.3 23,087 66.20
Food 566,971 11.3 14,217 40.77
Beverage 249,803 5.0 6,264 17.96
Other Income 528,005 10.5 13,240 37.97
------- ---- ------ -----
Total Revenues 5,026,830 100.0 126,050 361.46
Departmental Expense *
Casino 1,500,719 54.3 37,631 107.91
Rooms 382,610 41.6 9,594 27.51
Food 608,813 107.4 15,266 43.78
Beverage 170,017 68.1 4,263 12.23
Other Income 326,165 61.8 8,179 23.45
------- ---- ----- -----
Total Departmental Exp 2,988,324 59.4 74,933 214.88
Departmental Income 2,038,505 40.6 51,116 146.58
Undistributed Operating Expenses
Administrative and General 635,787 12.6 15,943 45.72
Marketing 85,595 1.7 2,146 6.15
Energy 76,265 1.5 1,912 5.48
Complimentary/Promotions 37,542 0.7 941 2.70
Entertainment 59,114 1.2 1,482 4.25
------ --- ----- ----
Total 894,302 17.8 22,425 64.31
House Profit 1,144,203 22.8 28,691 82.28
Fixed Charges
Property Tax 33,152 0.7 831 2.38
Rent of Premises 14,538 0.3 365 1.05
Equipment Lease 4,246 0.1 106 0.31
----- --- --- ----
Total 51,936 1.0 1,302 3.73
Net Income $1,092,267 21.7 % $27,389 $78.54
========== ==== ======= ======
Food as a % of Gaming Revenue 20.5 %
Beverage as a % of Gaming Revenue 9.0
Other Income as a % of Gaming Revenue 19.1
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
Sources: Nevada Gaming Abstract, State Gaming Control Board
HVS Gaming Services
September 12, 1997
Mr. Jim Riley
Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098 Phone
(212) 225-5172 Fax
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we submit this restricted appraisal
report pertaining to the above-captioned property. We have
inspected the site and facilities and analyzed the casino
hotel market conditions in the Las Vegas market area.
This letter, which complies with the requirements set forth in
the Uniform Standards of Professional Appraisal Practice for a
restricted appraisal report, is a brief recapitulation of the
appraisers' data, analyses, and conclusions. It does not
include full discussion of the data, reasoning, and analyses
that were utilized in the appraisal process to develop the
appraisers' opinion of value. Supporting documentation is
retained in the appraisers' file and will be presented in the
self-contained appraisal we are in the process of preparing,
and which should be delivered to you in approximately three
weeks. The valuation is expressly made subject to all normal
assumptions and limiting conditions, a copy of which is
provided along with the certification.
Subject of the
Appraisal The subject of the appraisal is the fee simple interest in a
+/- 34.31-acre parcel of land currently improved with the
Aladdin Hotel and Casino and Performing Arts Center. The
subject's civic address is 3667 Las Vegas Boulevard, Las
Vegas, Nevada. While the site is currently improved, this
appraisal assumes the demolition of all of the current
improvements, with the exception of the Performing Arts
Center. A new mixed-use development is currently proposed for
the subject site consisting of a 2,600-room hotel and a
100,000 square foot casino (the Aladdin Hotel and Casino), a
450,000-square-foot shopping mall, a parking garage, and a
co-generation plant. Based on a site plan provided by the
project's developers, the hotel and casino portion of the
development will encompass +/- 18.16 acres of the
+/- 34.31-acre site. For purposes of this appraisal, we have
been asked to render an opinion as to the prospective market
value of the land and improvements for the Aladdin Hotel and
Casino portion of the development, the market value of the
entire +/- 34.31 acres of land as if vacant and ready for
development, and the market value of the +/- 18.16 acres of
land allocated to the redeveloped Aladdin Hotel and Casino as
if vacant and ready for development. As
mentioned, the subject site is located on Las Vegas Boulevard
(The Strip) in Las Vegas, Nevada.
Purpose of
the Assignment The purpose of the assignment is to estimate the prospective
market value of the Aladdin Hotel and Casino when construction
has been completed and the improvements are operational; the
market value of the underlying +/- 34.31 of land of the entire
site; and the market value of the +/- 18.16 acres of land
allocated to the Aladdin Hotel and Casino portion of the
development. Market value is defined by the Office of the
Comptroller of the Currency (OCC), 12 CFR, Part 34 as follows:
The most probable price which a property should bring in a
competitive and open market under all conditions requisite to
a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised,
and acting in what they consider their own best
interests;
3. a reasonable time is allowed for exposure in the
open market;
4. payment is made in terms of cash in U.S. dollars
or in terms of financial arrangements comparable
thereto; and
5. the price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted by
anyone associated with the sale.
"Prospective" market value is the forecast of the value
expected at a specified future date.
2
Intended Use The valuation is being prepared for Bank of Nova Scotia, New
of the Report York Agency for financing purposes. None of the information
presented should be disseminated to the public or third
parties without the express consent of HVS International.
Date of The subject property was inspected on August 7, 1997 by Mark
Inspection D. Capasso and Anne R. Lloyd Jones, CRE.
Interest Valued The property rights appraised are the fee simple ownership of
the land and improvements including furniture, fixtures, and
equipment.
Effective Dates The effective date of the prospective market value for the
of Value Aladdin Hotel and Casino is January 1, 2000, the anticipated
date of opening. The effective date of value for both the
entire +/- 34.31-acre site and the +/- 18.16 acres of land
allocated to the hotel and casino portion of the development
is August 7, 1997.
Scope of
the Appraisal All information was collected and analyzed by staff of HVS
International. Descriptive data and site plans for the
proposed subject property were supplied by the developers,
Aladdin Holdings, LLC. The site has been inspected and the
developers and future management have been interviewed. We
have gathered economic data and information on improved sales,
areawide and competitive casino revenues, occupancies and
average rates, operating expenses, construction costs, and
capitalization and equity yield rates. We have spoken with
buyers, sellers, brokers, developers and public officials. We
have analyzed this information and have considered the sales
comparison, cost, and income approaches to value. Based on our
findings, we have prepared a forecast of income and expense
representing a stabilized year and capitalized the net income
based on current required debt and equity returns. The value
conclusion is based upon this investigation and analysis and
is conveyed herein.
In the development of the opinion of value, the appraisers
performed a complete appraisal process as defined by the
Uniform Standards of Professional Practice. This means that no
departures from Standard 1 were invoked. This restricted
appraisal report presents only the appraisers' conclusions.
Supporting documentation is retained in the appraisers' file
and will be presented in our narrative self-contained report,
which we are in the process of preparing.
3
Highest Highest and best use is defined as "the reasonably probable
and Best Use and legal use of vacant land or an improved property, which is
physically possible, appropriately supported, financially
feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility,
and maximum profitability." (1) Using these criteria, it is
our opinion that the highest and best use of the subject land
is to be improved with a mixed use development consisting of a
hotel and casino, shopping mall, and various other facilities.
Summary of
Analysis and The final conclusion of value is arrived at after reviewing
Valuation the estimates indicated by the income capitalization, sales
comparison, and cost approaches. The relative significance,
applicability, and defensibility of each value is considered,
and the greatest weight is given to that approach deemed most
appropriate for the property being appraised. In recognition
of the purpose of this appraisal, we have given primary weight
to the value indicated by the income capitalization approach
and made some subjective adjustments based on the sales
comparison and cost approaches, in developing an estimate of
the prospective value of the proposed property. In developing
an estimate of value of the subject sites, as vacant, we have
relied primarily on the sales comparison approach.
Based on the available data, our analysis and experience in
the hotel industry, it is our opinion that the "prospective"
market value of the fee simple interest in the proposed
Aladdin Hotel and Casino (as previously described), as of the
date the project is complete and operational, assumed to be on
or about January 1, 2000, will be:
$825,000,000
EIGHT HUNDRED TWENTY FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of the
total, +/- 34.31-acre subject site, as vacant and including
the development rights and entitlements, as of August 7, 1997,
is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
--------
(1) Appraisal Institute. The Dictionary of Real Estate
Appraisal. 3rd ed. Chicago: Author, 1993, p. 171.
4
In addition, it is our opinion that the market value of the
+/- 18.16 acres of land allocated to the Aladdin Hotel and
Casino portion of the development, as vacant and including the
development rights and entitlements, as of August 7, 1997, is:
$135,000,000
ONE HUNDRED THIRTY FIVE MILLION DOLLARS
Exposure and
Marketing
Periods Based upon current market conditions, we believe the property
could transact at this price with exposure and marketing
periods of up to six months.
We hereby certify that we have no undisclosed interest in the
property, and our employment and compensation are not
contingent upon our valuation. This restricted appraisal
report is for internal use only and, as previously noted, does
not include full discussion of the data, reasoning, and
analyses that were utilized in the appraisal process. The
valuation is expressly made subject to all normal and specific
assumptions and limiting conditions, a copy of which is
included in this restricted appraisal report.
Very truly yours,
HVS International
A Division of Hotel Consulting
Services, Inc.
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
Stephen Rushmore, CRE, MAI, CHA
President
5
Statement of Assumptions and Limiting Conditions
This restricted appraisal report complies with the requirements set forth under
Standards Rule 2-2(c) of the Uniform Standards of Professional Appraisal
Practice for a restricted appraisal report. As such, it does not include
discussions of the data, reasoning, and analyses that were used in the appraisal
process to develop the appraisers' opinion of value. Supporting documentation
concerning the data, reasoning, and analyses is retained in the appraisers'
file. The information contained in this letter is specific to the need of the
client and for the intended use stated in this letter. The appraisers are not
responsible for unauthorized use of this report. This restricted appraisal
report is to be used in whole and not in part.
No responsibility is assumed for matters of a legal nature, nor do we render any
opinion as to title, which is assumed to be marketable and free of any deed
restrictions and easements. The property is valued as though free and clear
unless otherwise stated.
There are no hidden or unapparent conditions of the property, sub-soil or
structures, such as underground storage tanks, that would render it more or less
valuable. No responsibility is assumed for these conditions or any engineering
that may be required to discover them.
We have not considered the existence of potentially hazardous materials used in
the construction or maintenance of the building, such as asbestos, urea
formaldehyde foam insulation, or PCBs, nor have we considered the presence of
any form of toxic waste. Furthermore, we have also not considered
polychlorinated biphengyls, pesticides, and lead-based paints. The appraisers
are not qualified to detect any hazardous substances and urge the client to
retain an expert in this field if desired.
We have made no survey of the property, and assume no responsibility in
connection with such matters. Any sketches, photographs, maps, and other
exhibits are included only to assist the reader in visualizing the property. It
is assumed that the use of the land and improvements is within the boundaries of
the property described, and that there is no encroachment or trespass unless
noted.
All information, financial operating statements, estimates, and opinions
obtained from parties not employed by HVS International are assumed to be true
and correct. We can assume no liability resulting from misinformation.
Unless noted, we assume that there are no encroachments, zoning violations, or
building violations encumbering the subject property.
The property is assumed to be in full compliance with all applicable federal,
state, local, and private codes, laws, consents, licenses, and regulations
(including a liquor license where appropriate), and that all licenses, permits,
certificates, franchises, and so forth can be freely renewed or transferred to a
purchaser.
All mortgages, liens, encumbrances, leases, and servitude's have been
disregarded unless specified otherwise.
No portions of this restricted appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the public
through advertising, public relations, news, sales, or other media.
We are not required to give testimony or attendance in court by reason of this
analysis without previous arrangements, and only when our standard per-diem fees
and travel costs are paid prior to the appearance.
6
If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this restricted appraisal
report, it is recommended that the reader contact us.
We take no responsibility for any events or circumstances that take place
subsequent to either the date of value or the date of our field inspection,
whichever occurs first.
The quality of a casino hotel facility's on-site management has a direct effect
on a property's economic viability and value. The financial forecasts presented
in this analysis assume responsible ownership and competent management. Any
variance from this assumption may have a significant impact on the projected
operating results and value estimate.
The value estimate developed for this restricted appraisal report is based on an
evaluation of the overall economy, and neither takes into account, nor makes
provision for, the effect of any sharp rise or decline in local or national
economic conditions. To the extent that wages and other operating expenses may
advance during the economic life of the property, we expect that the prices of
rooms, food, beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but they have
been prepared on the basis of information obtained during the course of this
study and are intended to reflect the expectations of typical investors.
This analysis assumes continuation of all Internal Revenue Service tax code
provisions as stated or interpreted on either the date of value or the date of
our field inspection, whichever occurs first.
Many of the figures developed for this restricted appraisal report were
generated using sophisticated computer models that make calculations based on
numbers carried out to three or more decimal places. In the interest of
simplicity, most numbers have been rounded to the nearest tenth of a percent.
Thus, these figures may be subject to small rounding errors.
It is agreed that our liability to the client is limited to the amount of the
fee paid as liquidated damages. Our responsibility is limited to the client, and
use of this restricted appraisal report by third parties shall be solely at the
risk of the client and/or third parties.
Although this analysis employs various mathematical calculations to provide
value indications, the final estimate is subjective and may be influenced by our
experience and other factors not specifically set forth is this letter.
Any distribution of the total value between the land and improvements or between
partial ownership interests applies only under the stated use. Moreover,
separate allocations between components are not valid if this restricted
appraisal report is used in conjunction with any other analysis.
The Americans with Disabilities Act (ADA) became effective on January 26, 1992.
We have conducted no specific compliance survey to determine whether the subject
property is in conformity with the various detailed requirements of the ADA. It
is possible that the property does not comply with the requirements of the act,
and this could have an unfavorable effect on the property value. Because we have
no direct evidence regarding this issue, our estimate of value does not consider
possible noncompliance with the ADA.
7
This study was prepared by HVS International, a division of Hotel Consulting
Services, Inc. All opinions, recommendations and conclusions expressed during
this assignment have been rendered by the staff of Hotel Consulting Services,
Inc. acting solely as employees and not as individuals.
CERTIFICATION
We the undersigned appraisers, hereby certify:
that the statements and opinions presented in this restricted appraisal report
subject to the limiting conditions set forth, are correct to the best of our
knowledge and belief;
that Mark D. Capasso and Anne R. Lloyd-Jones CRE, personally inspected the
property described in this report and actively participated in the analysis;
that the appraisers have extensive experience in the valuation of casino hotels
and believe that they are competent to undertake this appraisal;
that we have no current or contemplated interests in the real estate that is the
subject of this restricted appraisal report;
that we have no personal interest or bias with respect to the subject matter of
this letter or the parties involved;
that this restricted appraisal report sets forth all of the limiting conditions
(imposed by the terms of this assignment) affecting the analyses, opinions, and
conclusions presented herein;
that the fee paid for the preparation of this study is not contingent upon the
amount of the value estimate;
that this restricted appraisal report has been prepared in accordance with and
is subject to the requirements of the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute;
that the use of this letter is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives;
that this letter has been prepared in accordance with the Uniform Standards of
Professional Appraisal Practice (as adopted by the Appraisal Foundation);
that no one other than the undersigned prepared the analyses, conclusions, and
opinions concerning real estate that are set forth in this appraisal report;
that as of the date of this restricted appraisal report, Stephen Rushmore, CRE,
MAI, CHA has completed the requirements of the continuing education program of
the Appraisal Institute;
that this appraisal is not based on a requested minimum value, a specific value,
or the approval of a loan.
/s/ Mark D. Capasso
-----------------------------------------
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
8
/s/ Anne R. Lloyd
-----------------------------------------
Anne R. Lloyd Jones, CRE, as an
employee of Hotel Consulting Services,
Inc.
/s/ Stephen Rushmore
-----------------------------------------
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
9
Passenger Percent Percent Total Percent Percent
Year Enplanements Change(1) Change(2) Passengers Change(1) Change(2)
- --------------------------------------------------------------------------------
1985 123,064 -- -- 246,098 -- --
1986 164,072 33.3% 33.3% 326,946 32.9% 32.9%
1987 176,503 7.6 19.8 354,028 8.3 19.9
1988 145,541 (17.5) 5.8 294,783 (16.7) 6.2
1989 144,094 (1.0) 4.0 288,665 (2.1) 4.1
1990 140,814 (2.3) 2.7 283,550 (1.8) 2.9
1991 139,357 (1.0) 2.1 279,495 (1.4) 2.1
1992 156,529 12.3 3.5 314,312 12.5 3.6
1993 153,344 (2.0) 2.8 307,621 (2.1) 2.8
1994 168,000 -- --
1995 183,000 8.9% 8.9%
1996 198,000 8.2 8.6
(1) Annual average compounded percentage change from the previous year
(2) Annual average compounded percentage change from 1985 for historicals;
from 1994 for forecasts
Source: Medford-Jackson County Airport; FAA Terminal Forecasts
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
================================================================================
Anne R. Lloyd-Jones, CRE
Employment
1982 to present
HOSPITALITY VALUATION SERVICES
(Division of Hotel Appraisals, Inc.)
Mineola, New York
(Hotel/Motel Valuations, Market Studies,
Feasibility Reports and Investment Counseling)
1981
FAIRMONT HOTEL
Dallas, Texas
1979 - 1980
SAGA FOOD SERVICE
SWARTHMORE COLLEGE
Swarthmore, Pennsylvania
1977 - 1980
DARANNE CATERERS
Swarthmore, Pennsylvania
Professional
Affiliations
American Society of Real Estate Counselors -
Member (CRE)
Appraisal Institute - Candidate for Membership
Cornell Society of Hotelmen
Education
MPS - School of Hotel Administration, Cornell University
BA - Swarthmore College
Appraisal Institute
Course 1A1 - Real Estate Appraisal Principles
Course 1A2 - Basic Valuation Procedures
Course 1BA - Capitalization Theory and Techniques,
Part A
Course 1BB - Capitalization Theory and Techniques,
Part B
Course 2-1 - Case Studies in Real Estate Valuation
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Course 2-3 - Standards of Professional Practice
Course 3-1 - Report Writing
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Corporate
and Institutional Clients Chase Manhattan Bank, N. A.
Served Chemical
Citibank
Doubletree Hotels
Federal Home Loan Bank Board
Great Western Bank
Holiday Inns, Inc.
Interstate Hotels
Metropolitan Life
MassMutual
Marriott Corporation
Morgan Guaranty Trust
North Carolina National Bank
Paine Inc.
Salomon Inc
Sheraton Hotels
Union Bank U.
S. Economic Development Authority
Winegardner & Hammons
Wyndham Hotel Company
Hotel Chains and
Management Doubletree Hotels
Companies Appraised or Compri Hotels
Evaluated Interstate Hotels
Fairmont Hotels
Guest Quarters
Hilton Hotels Corporation
Omni International Hotels
Ramada Hotel Corp.
Servico Hotel Corp.
Winegardner & Hammons
Appearance as an
Expert Witness
Federal Bankruptcy Court, San Diego, California
Federal Bankruptcy Court, Jefferson City, Missouri
Federal Bankruptcy Court, Columbia, South Carolina
Federal Bankruptcy Court, Houston, Texas
Federal Bankruptcy Court, New York, New York
Federal Bankruptcy Court, San Bernardino,
California
Federal Bankruptcy Court, Los Angeles, California
Federal Bankruptcy Court, Charlotte, North
Carolina
Federal Bankruptcy Court, Miami, Florida
Federal District Court, Central Division, Salt
Lake City, Utah
Iowa District Court, Story County, Iowa
Texas District Court, Harris County, Texas
Federal Bankruptcy Court, Tampa, Florida
Utah District Court, Salt Lake County, Utah
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Arizona
- Wyndham Garden Hotel, Chandler
- Wyndham Garden Hotel
- Airport, Phoenix
- Wyndham Garden Hotel
- Union Hills, Phoenix
- Canyon Ranch Spa & Fitness Resort, Tucson
Alabama
- Holiday Inn, Birmingham
- Proposed Sheraton, Gulf Shores
- Proposed Inn, Mobile
- Holiday Inn, Sheffield
California
- Industry Hills Sheraton Hotel, City of Industry
- Piccadilly Inn, Fresno
- Proposed Inn at Foss Creek, Healdsburg
- Sunset Towers Hotel, Hollywood
- Proposed La Quinta, Irvine
- Wyndham Garden Hotel, La Jolla
- Days Inn, La Palma
- Proposed Marriott Courtyard, Palm Springs
- Proposed Club Hilton Hotel, Pleasanton
- Center Pointe Development, San Diego
- Holiday Inn-Embarcadero, San Diego
- Holiday Inn-Harbor View, San Diego
- Seven Seas Lodge, San Diego
- Proposed Fountaingrove Inn, Santa Rosa
- Sheraton Round Barn Inn, Santa Rosa
- Wyndham Garden Hotel, Sunnyvale
- Westlake Plaza Hotel, Thousand Oaks
- Proposed Marriott Courtyard, Torrance
Colorado
- Proposed Hotel, Keystone
Connecticut
- Holiday Inn, Milford
- Holiday Inn, New Britain
District of Columbia
- Grand Hotel, Washington
- Wyndham Bristol Hotel, Washington
Florida
- Kon Tiki Village, Kissimmee
- Sheraton Lakeside, Kissimmee
- Holiday Inn, 22nd Street, Miami Beach
- Holiday Inn, 87th Street, Miami Beach
- Holiday Inn, 180th Street, Miami Beach
- Sheraton Resort & Marina, St. Petersburg
- Hilton Hotel, Singer Island
- Royce Hotel, West Palm Beach
Georgia
- Marriott Hotel, Atlanta
- Wyndham Garden Hotel, Atlanta
- Holiday Inn, Brunswick
- Holiday Inn, Jekyll Island
- Mullberry Inn, Savannah
- Royal Savannah Inn, Savannah
Hawaii
- Hobron in Waikiki, Honolulu
Idaho
- Holiday Inn, Boise
- Red Lion Inn, Boise
- Super 8, Boise
Illinois
- Ramada Inn, Bloomington
- Proposed Marriott Courtyard, Glenview
- Wyndham Garden Hotel, Naperville
Indiana
- Holiday Inn, Bloomington
- Inn at the Four Winds, Bloomington
- Ramada Inn, Bloomington
- Hilton Hotel, Fort Wayne
- Airport Hilton Inn, Indianapolis
- Hilton at the Circle, Indianapolis
Iowa
- Holiday Inn, Ames
- Proposed Fairfield Inn, Des Moines
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Kentucky
(cont'd) - Proposed Super 8, London
- Proposed Super 8, Radcliff
Louisiana
- Sheraton Inn, Kenner
- Hotel Meridien, New Orleans
Maine
- Proposed Hotel, Old Orchard Beach
Maryland
- Brookshire Hotel, Baltimore
- Lord Baltimore Hotel, Baltimore
- Hyatt Regency, Bethesda
Massachusetts
- Proposed Marriott Courtyard, Andover
- Hyatt Regency, Cambridge
- Proposed Hotel, Franklin
- Sheraton Inn, Hyannis
- Marriott Hotel, Worcester
Michigan
- Bay Valley Inn, Bay City
- Hilton Airport, Detroit
- Westin Renaissance Center, Detroit
- Hotel Pontchartrain, Detroit
- Proposed Embassy Suites, Lansing
- Hilton Inn, Northfield
- Holiday Inn, Saginaw
Minnesota
- Wyndham Garden Hotel, Bloomington
- Marriott Hotel, Minnetonka
Missouri
- Inn at Grand Glaize, Osage Beach
- Bel Air Hilton, St. Louis
- Holiday Inn Riverfront, St. Louis
Nebraska
- Holiday Inn - Airport, Lincoln
- Holiday Inn - Northeast, Lincoln
- Marriott Hotel, Omaha
Nebraska(cont'd)
- Ramada Inn, Omaha
- Red Lion Inn, Omaha
Nevada
- Proposed Super 8, Las Vegas
New Jersey
- Ramada Inn, Edison
- Marriott Hotel, Hanover
- Headquarters Plaza, Morristown
- Hyatt Regency, New Brunswick
- Holiday Inn, North Brunswick
New York
- Hilton Hotel, Albany
- Proposed Embassy Suites, Amherst
- Holiday Inn - Arena, Binghamton
- Holiday Inn - SUNY, Binghamton
- Proposed Hotel, Binghamton
- Proposed Hilton, Brooklyn
- Marriott Hotel, Dewitt
- Metropole Hotel, Flushing
- Midway Hotel, Flushing
- Ramada Inn, Kingston
- Royce Hotel, La Guardia
- Holiday Inn, Latham
- Proposed Crowne Plaza, Manhattan
- Proposed Prince Street Hotel, Manhattan
- Proposed Roslyn Inn, Roslyn
- Proposed Le Richmonde, Rye Brook
- Hilton Hotel, Syracuse
- Hotel Syracuse, Syracuse
- Proposed Hotel, Watertown
North Carolina
- Proposed Inn, Chapel Hill
- Proposed Indep. Center Marriott Hotel,Charlotte
- Royce Hotel, Charlotte
- Howard Johnson's - North, Charlotte
- Holiday Inn - West, Durham
- Sheraton University Inn, Durham
- Holiday Inn, Fayetteville
- Holiday Inn - Downtown, Raleigh
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Ohio
(cont'd) - Proposed Hyatt Hotel, Cleveland
- Proposed Marriott Hotel, Cleveland
Oregon
- Holiday Inn - Airport, Portland
- Holiday Inn - South, Portland
Pennsylvania
- Quality Inn, Allentown
- Holiday Inn, Bensalem
- Proposed Marriott Courtyard, Devon
- Proposed Lafayette Inn, Easton
- Ramada Inn, Erie
- Holiday Inn, Harrisburg
- Marriott Hotel, Harrisburg
- Proposed Super 8, Harrisburg
- Proposed Super 8, Lancaster
- Holiday Inn - West, Monroeville
- Days Inn Philadelphia
- Franklin Plaza Hotel, Philadelphia
- Franklin Towne EconoLodge, Philadelphia
- Guest Quarters Hotel, Philadelphia
- Hilton Inn, Northeast, Philadelphia
- Marriott Airport Hotel, Philadelphia
- Holiday Inn - Greentree, Pittsburgh
- Holiday Inn - Parkway East, Pittsburgh
- Holiday Inn - North, Pittsburgh
- Holiday Inn - Parkway West, Pittsburgh
- Proposed Hotel, Pittsburgh
- Royce Hotel, Pittsburgh
- Westin William Penn Hotel, Pittsburgh
- Hilton Hotel, Scranton
- Proposed Marriott Courtyard, Valley Forge
- Holiday Inn - Meadowlands, Washington
- Ramada Inn, York
- Proposed Super 8, York
Rhode Island
- Proposed Hotel, Providence
- Omni Biltmore Hotel, Providence
South Carolina
- Proposed Charleston Center Hotel, Charleston
- Proposed Cooper River Inn, Charleston
South Carolina (cont'd)
- Howard Johnson's, Spartanburg
- Proposed Middleton Inn and
Conference Center, Charleston
- Best Western, North Charleston
- Proposed Marriott Courtyard, Columbia
- Fairfield Inn, Florence
- Holiday Inn, Florence
- Fairfield Inn, Greenville
- Proposed Marriott Courtyard, Greenville
- Fairfield Inn, Hilton Head
- Holiday Inn, Hilton Head
Tennessee
- Hampton Inn, Brentwood
- Proposed Marriott Courtyard, Brentwood
- Howard Johnson's, Chattanooga
- Sheraton Hotel, Chattanooga
- Howard Johnson's, Knoxville
- Proposed Capital Mall Convention Center Hotel,
Nashville
- Clarion Maxwell House, Nashville
- Holiday Inn - Briley Parkway, Nashville
- Proposed Marriott Courtyard, Nashville
- Sheraton Music City, Nashville
- Stouffer's Nashville Hotel, Nashville
- Proposed Super 8, Nashville
- Union Station Hotel, Nashville
- Wyndham Garden Hotel, Nashville
- Proposed Super 8, Union City
Texas
- Proposed Marriott Courtyard, Addison
- Proposed Marriott Courtyard, Arlington
- La Mansion, Austin
- Proposed Marriott Courtyard, Bedford
- Airport Hilton, El Paso
- Hotel Meridien, Houston
- Sheraton Hotel, Houston
- Proposed Marriott Courtyard, Las Colinas
- Proposed Marriott Courtyard, North Dallas
- La Mansion Del Norte, San Antonio
- La Mansion Del Rio, San Antonio
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Texas (cont'd)
(cont'd) - Proposed Marriott Courtyard, San Antonio
- Proposed Marriott Courtyard - Medical Center,
San Antonio
Utah
- Deer Valley Resort, Park City
- Hilton Inn, Salt Lake City
- Holiday Inn, Salt Lake City
- Sheraton Hotel, Salt Lake City
Virginia
- Mountain Lake Hotel, Blacksburg
- Howard Johnson's, Bristol
- Boars Head Inn, Charlottesville
- Proposed Fairfield Inn, Hampton
- Proposed Embassy Suites, Herndon
- Ramada Renaissance, Herndon
- Proposed Marriott Courtyard, Manassas
- Omni Hotel, Norfolk
- Proposed Marriott, Norfolk
- Howard Johnson's, Richmond
- Howard Johnson's, Roanoke
- Howard Johnson's, Roanoke Rapids
- Wyndham Hotel, Williamsburg
Washington
- Wyndham Garden Hotel, Bothell
- Redmond Hotel, Redmond
- Wyndham Garden Hotel, SeaTac
West Virginia
Proposed Budget Motel, Princeton
Wisconsin
- Proposed Granada Royale, Green Bay
- Holiday Inn-Downtown, Green Bay
Canada
- Inn on the Park, Toronto
Puerto Rico
- Carib Inn, San Juan
Virgin Islands
- Virgin Grand Beach Hotel, St. Thomas
Jamaica
- Holiday Inn, Montego Bay
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Stephen Rushmore, CRE, MAI, CHA
Employment
1980 to present
HOSPITALITY VALUATION SERVICES
(Division of Hotel Appraisals, Inc.)
Mineola, New York
(Hotel/Motel Valuations, Market Studies,
Feasibility Reports, and Investment Counseling)
1977 - 1980
1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC.
New York, New York
(Real Estate)
1974 - 1977
JAMES E. GIBBONS ASSOCIATES
Garden City, New York
(Mortgage Banking, Appraisals, Hotel Operations)
Affiliated
Ownership Interests HOSPITALITY VALUATION SERVICES (SAN FRANCISCO,
CALIFORNIA)
West coast office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES (MIAMI, FLORIDA)
Southeast office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES (BOULDER, COLORADO)
Midwest office for hotel/motel appraisals and counseling
HOSPITALITY VALUATION SERVICES - CANADA (VANCOUVER,
CANADA)
Canadian office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES INTERNATIONAL
(LONDON, ENGLAND)
European office for hotel/motel appraisals and
counseling
HVS - FINANCIAL SERVICES
Investment banking for the hotel industry
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
HVS - EXECUTIVE SEARCH
Hotel/motel executive search and human resource
consulting
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Affiliated
Ownership Interests HVS - ECO SERVICES
(continued) Environmental consulting for hotels and motels;
administrator of the ECOTEL designation
HOSPITALITY EQUITY INVESTORS, INC.
Hotel and motel investment and management company
TRUMBULL MARRIOTT HOTEL
General partner of a 324-room hotel and conference
center
PRINCETON HOTEL ASSOCIATES
General partner of a 128-unit Residence Inn in
Princeton, New Jersey
SEAVIEW GOLF RESORT ASSOCIATES
General partner of a 298-unit, 424-acre Marriott resort
in Absecon, New Jersey
SHELTON HOTEL ASSOCIATES
General partner of a 96-unit Residence Inn in Shelton,
Connecticut
DANBURY HOTEL ASSOCIATES
General partner of a 243-unit Hilton Hotel in Danbury,
Connecticut
PRUDENTIAL - HEI JOINT VENTURE
Joint venture partner with Prudential Insurance Company
of America on a 234-unit Embassy Suites in Atlanta,
Georgia
WESTPORT NORFOLK ASSOCIATES
General partner of a 425-unit Omni Hotel in Norfolk,
Virginia
WESTPORT BWI, LLC
General partner of a 310-unit Marriott Hotel in
Baltimore, Maryland
WESTPORT RARITAN, LLC
General partner of a 274-unit Crowne Plaza Hotel in
Raritan, New Jersey
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Affiliated
Ownership Interests WESTPORT NOVI BWI, LLC
(continued) General partner of a 193-unit Hilton Hotel in Novi,
Michigan
HOSPITALITY VALUATION SOFTWARE, INC.
Founder of software company that develops and
distributes hotel financial analysis software
Hotels Managed
Sheraton Hotel, Smithtown, New York
Marriott Hotel, Baltimore Airport, Maryland
Hilton Hotel, Danbury, Connecticut
Residence Inn, Princeton, New Jersey
Embassy Suites, Atlanta Airport, Georgia
Omni Hotel, Norfolk, Virginia
Crowne Plaza, Raritan, New Jersey
Hilton Hotel, Novi, Michigan
Hilton Hotel, Wilmington, Delaware
Professional
Affiliations
American Society of Real Estate Counselors - Member
(CRE) - Board of Governors
Appraisal Institute - Member (MAI) (SREA)
- Developer and Instructor, Hotel Investment and
Valuation Seminar
- Developer and Instructor, Hotel Computer Valuation
Seminar
American Hotel and Motel Association
- Certified Hotel Administrator (CHA)
- Industry Real Estate Financing Advisory Council
(IREFAC)
International Society of Hospitality Consultants -
Member (ISHC)
Foodservice Consultants Society International -
Professional Member (FCSI)
New York University - Adjunct Assistant Professor
Michigan State University - Honorary Faculty, Honorary
Alumnus
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Professional
Affiliations
(continued) Certified General Appraiser - Arizona, Colorado,
Connecticut, Delaware, District of Columbia, Georgia,
Illinois, Iowa, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Nebraska, New
Hampshire, New Jersey, New York, Oregon, Pennsylvania,
South Carolina, Tennessee, Utah, Virginia, West
Virginia, Wyoming
Licensed Real Estate Broker - New York, Pennsylvania
Board of Advisers
- Real Estate Finance Journal
- Real Estate Workouts & Asset Management
American Arbitration Association - National Real Estate
Valuation Council
Cornell Society of Hotelmen
NY University Masters in Hospitality Management -
Advisory Board
Hospitality Investment Conference - Board of Advisors
Beta Gamma Sigma - National Honor Society in Business
and Management
Endowment
Hospitality Valuation Services Professor of Hotel
Finance and Real Estate
- School of Hotel Administration, Cornell University
(currently held by Professor James J. Eyster)
BS - School of Hotel Administration, Cornell University
Education
MBA - Graduate School of Business Administration
(Finance), University of Buffalo
Candidate for PhD - School of Education, Department of
Food Service Management, New York University
List of Teaching and
Lecture Assignments Cornell University - Computer Valuation Techniques
Michigan State University - Hotel Management Contracts
University of North Carolina - Hotel Market Studies
University of Virginia - Assessing Hotels
American Arbitration Association - Real Estate
Arbitration
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
List of Teaching and
Lecture Assignments
(continued) American Hotel and Motel Association - Hotel
Obsolescence
Appraisal Institute - Hotel Valuation
International Association of Assessing Officers - Hotel
Valuation
Montreal Appraisal Society - Total Project Analysis
Society of Real Estate Appraisers - Lease Seminar
Published Books
and Seminars
Textbooks
The Valuation of Hotels and Motels,
Appraisal Institute, Chicago, Illinois, 1978
Hotels, Motels and Restaurants: Valuations and Market
Studies,
Appraisal Institute, Chicago, Illinois, 1983
How to Perform an Economic Feasibility Study of a
Proposed Hotel/Motel,
American Society of Real Estate Counselors, Chicago,
Illinois, 1986
Hotel Investments: A Guide for Owners and Lenders,
Warren, Gorham and Lamont, Inc., New York, New York,
1990
The Computerized Income Approach to Hotel Market Studies
and Valuations,
Appraisal Institute, Chicago, Illinois, 1990
Hotel Investments: A Guide for Owners and Lenders, 1992
Supplement,
Warren, Gorham and Lamont, Inc., New York, New York,
1992
Hotel Investments: A Guide for Owners and Lenders, 1993
Supplement,
Warren, Gorham and Lamont, Inc., New York, New York,
1992
Hotels and Motels: A Guide to Market Analysis,
Investment Analysis, and Valuations, Appraisal
Institute, Chicago, Illinois, 1992
Student Manuals
The Valuation of Lease Interests,
Society of Real Estate Appraisers, Chicago, Illinois,
1976
Hotel-Motel Valuation Seminar,
Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
The Computerized Approach to Hotel Market Studies and
Valuations Seminar,
Appraisal Institute, Chicago, Illinois, 1991
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Published Books
and Seminars (continued)
Demonstration
Appraisal Demonstration Appraisal of a Proposed Hotel, Spring
Valley, New York, Hospitality
Valuation Services, Mineola, New York, 1983, 1990
Chapters
The Real Estate Handbook-Second Edition, Dow
Jones-Irwin, 1989, "Hotels and Motels"
Arbitration of Real Estate Valuation Principles,
American Arbitration Association, 1987, "Arbitration in
the Hospitality Industry"
Ethics in Hospitality Management: A Book of Readings,
Educational Institute of the American Hotel and Motel
Association, 1992, "Ethics in Hotel Appraising"
The Lodging and Food Service Industry, Educational
Institute of the American Hotel and Motel Association,
1993, "Insider's Insights"
Published Articles
The Appraisal Journal
"Using Total Project Analysis to Compete for Investment
Capital," October, 1975
"The Appraisal of Food Service Facilities," July, 1980
"Publish and Prosper," October, 1980
"Valuation of Hotels and Motels for Assessment
Purposes," April, 1984
"Adjusting Comparable Sales for Hotel Assessment
Appeals," July, 1986
"Hotel Business Value and Working Capital: A
Clarification," January, 1987
"Ethics in Hotel Appraising," July, 1993
The Appraiser
"Hotel-Motel Appraisal Misconceptions Set Straight,"
January, 1979
"No Conventional Financing Available for Hotels:
Rushmore," December, 1979
"Estimating Hotel Land Values Using Comparable Ground
Leases," April, 1980
Bulletin of the Cornell
Society of Hotelmen
"Employment Philosophy for a Consulting Practice," July,
1984
The Canadian Appraiser
"Hotel/Motel Market Sales Update," Summer, 1987
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Published Articles
(continued)
Capital Sources
for Real Estate
"Stephen Rushmore Discusses the Future of the Lodging
Industry," December, 1994
Cayuga Advisor
"Secrets to Success in Consulting," October, 1992
Chapter News and Notes
"Quantifying a Hotel's Business Value," November, 1979
Cornell Hotel &
Restaurant
Administration
Quarterly "A Preliminary Market Study," November, 1974
"How Much is Your Place Worth Today? A Case Study in
Hotel Motel Valuation," May, 1975
"What Can Be Done About Your Hotel's Real Estate Taxes?"
May, 1977
"The Appraisal of Lodging Facilities," August, 1978
"The Appraisal of Food Service Facilities," February,
1979
"The Appraisal of Lodging Facilities - Update,"
November, 1984
"Hotel Sales Prices Down More Than 12%," May, 1991
"Seven Current Hotel Valuation Techniques," August, 1992
"The Valuation of Distressed Hotels," October, 1992
FCI Spec Sheet
"Employment Philosophy for a Consulting Practice,"
September, 1984
Hotel and Motel
Management "Average Rate vs. Project Cost," May 1, 1974
"How to Increase the Marketability of Your Motel,"
April, 1981
"Tougher Lending, Lower Room Rate Hikes On Way?" June,
1981
"What is That Mortgage Loan Going to Cost You?" August,
1981
"How to Perform a Study of Your Property's Market,"
October, 1981
"How do High Interest Rates Affect Your Motel's Value?"
December, 1981
"How to Buy a Feasibility Study That Works for You,"
February, 1982
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
"Settling Lease Conflicts Quickly Through Arbitration,"
April, 1982
"Are Casino Hotels Really Worth $500,000 Per Room?"
June, 1982
"Discount Rates and Internal Rate of Return," August,
1982
"Determining a Property's Extended Life Cycle,"
November, 1982
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Published Articles
(continued) "Using Microcomputers for Forecasting," December, 1982
"Update on Hotel Development Costs," January, 1983
Hotel and Motel "Estimating a Site's Worth by Finding Its Profit Value,"
Management June, 1983
(continued) "Hotel Construction May Be Slowing Down a Little Bit,"
April, 1983
"The Investor's Risk Sways to Prevailing Economic
Winds," August, 1983
"Is Your Property Tax at as Low a Level as it Should
Be?" October, 1983
"The Ultimate Guest Room: Could it Ever Exist Anywhere?"
December, 1983
Hotel-Motor Inn
Journal A Preventive Maintenance System for Motels," March, 1975
Hotel Valuation
Journal
"Hotel Valuation Index Peaks During 1989," Fall, 1990
"Hotel Development Costs," Winter, 1991
"Hotel Valuation Index for 1990," Spring, 1991
"Bad Year for Hotel Sales Prices Confirmed," Spring,
1992
"Hotel Sales Prices on the Rise," Fall, 1994
Institutions/
Volume Feeding
"Greater Risk/Greater Profit Potential: Hotel Management
Contract," May, 1973
Lodging Hospitality
"How to Finance Renovation Projects," January, 1974
"Controlling Your Real Estate Taxes," July, 1978
"Putting Together a Sound Financial Package," December,
1978
"Favorable Outlook for Lodging Values," December, 1983
"Are Your Property Taxes Too High? (Part I and II)," May
and June, 1984
"Hotel Development Costs," July, 1984
"The Right Management Contract for You," September, 1984
"Selecting the Firm to Prepare Your Feasibility Study,"
October, 1984
"A Quick How-To In Hotel Valuation," November, 1984
"Updating Lodging Interest Rates," December, 1984
"Is Your Guest Experience Up to Par?" January, 1985
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Published Articles
(continued)
Lodging Hospitality
(continued)
"How to Perform a Breakeven Analysis," May, 1985
"Evaluating Operating Performance," June, 1985
"Hotel Lenders Toughen Underwriting Requirements," July,
1985
"Don't Forget the Pre-Opening Agreement," August, 1985
"Management Companies Should Participate in Financing,"
October, 1985
"Current Techniques for Valuing Hotel Land," November,
1985
"Hotel Development Costs," December, 1985
"Sourcing Debt Into the 1990's," January, 1986
"Hotel Valuation Thumb Rule," February, 1986
"Value in Use Versus Value in Exchange," March, 1986
"Stretching Feasibility," April, 1986
"The Management Question," May, 1986
"How to Commission a Feasibility Study," June, 1986
"Macro Trends Affecting Property Values," July, 1986
"Hotel-Motel Market Sales Update," August, 1986
"Financing Alternatives: Zero Coupon Mortgages,"
September, 1986
"Forecasting Lodging Energy Costs," October, 1986
"Portfolio Financing a Better Way," November, 1986
"Profit by Looking at History," December, 1986
"Why New York Isn't Overbuilt," February, 1987
"How to Discourage Hotel Overbuilding: A Case Study,"
April, 1987
"Structuring an Incentive Management Fee," June, 1987
"Franchising Questions and Answers," July, 1987
"Comparing Hotel Development Costs," August, 1987
"Understanding Economic Life," September, 1987
"Prices Rise for Lodging Properties," October, 1987
"Management Companies Are Key to Success," November,
1987
"Evaluating a Management Contract Fee Structure,"
December, 1987
"Check Profits Before Selecting Hotel Operator,"
January, 1988
"It's a Good Time to Review Your Taxes," February, 1988
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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================================================================================
Published Articles "How to Use a Management Company Rating System," March,
(continued) 1988
"Make Sure Management Contracts Contain These Terms,"
Lodging Hospitality April, 1988
(continued) "Hotel Access and Visibility," May, 1988
"Chain Sale Strategies," July, 1988
"Evaluating a Hotel Franchise," August, 1988
"Evaluating Franchise Fees," September, 1988
"Opportunities in Economy Lodging," October, 1988
"How to Obtain a Hotel Mortgage," November, 1988
"Arbitration in the Hospitality Industry," December,
1988
"Lodging Development Cost Update," January, 1989
"Amenities as Profit Builders," February, 1989
"Hotel Values Mirror the Times," March, 1989
"Forecasting Revenue and Expenses," April, 1989
"Real Estate Jargon Made Simple," May, 1989
"Pricing a Management Contract," June, 1989
"Trends in Valuation," July, 1989
"Rescuing the Distressed Hotel," August, 1989
"Shielding Against Incompetence," September, 1989
"Hotel Valuation Revisited," October, 1989
"New Breed of Hard Budgets," November, 1989
"Figuring Cap Rates," December, 1989
"A Glance Backward," January, 1990
"Costs Creeping Up," February, 1990
"Valuing Distressed Properties," March, 1990
"Cap and Discount Rates," April, 1990
"An Open Letter," May, 1990
"Misconceptions About Appraisals," June, 1990
"Hotel Values Still Growing," July, 1990
"Hotel Renovation is Key to `90s," August, 1990
"Time Right for Hotel Leases," September, 1990
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles "Getting a Fix on Rates," October, 1990
(continued) "The Wrinkles of Class," November, 1990
"A Glance Backward," December, 1990
Lodging Hospitality "The Price Dropoff," January, 1991
(continued) "The Cost Washout," February, 1991
"Survival of the Fittest," March, 1991
"Looking Out and Up," April, 1991
"The Bottom is in Sight," May, 1991
"The Pitfalls of Liquidation," June, 1991
"Extra! Extra! Hospitality News," July, 1991
"The Art of Hotel Renovation," August, 1991
"No Better Time for a Tax Review," September, 1991
"No Time for Passivity," October, 1991
"What a Franchise Really Costs," November, 1991
"In Case You Hadn't Heard," January, 1992
"Negotiation - The Name of the Game," February, 1992
"Now Could be the Time to Build," March, 1992
"The Well May Stay Dry," April, 1992
"Hotel Life Expectancy," May, 1992
"Hotel Values - What a Downer," June, 1992
"How to Make Money Now," July, 1992
"Hotel Chain Class Survey," August, 1992
"Budget Dining with Rushmore," September, 1992
"Bookings Up, Rates Will Follow," October, 1992
"Hospitality Master's Good Preparation," November, 1992
"What's New on the Job Front?" January, 1993
"Where Have All the Hotels Gone?" February, 1993
"Hotel Building Costs Continue to Fall," March, 1993
"Hotel Values Head Upward," April, 1993
"The Rise and Fall of Trophy Hotels," May, 1993
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles "Hotel Sales and Prices Rebound," June, 1993
(continued) "Third Parties Loosening Purse Strings," July, 1993
"Beyond Recycling: The Ecotel," August, 1993
Lodging Hospitality "Time to Reduce Property Taxes," September, 1993
(continued) "Lodging: The Way I See It," October, 1993
"Choosing an Appraiser," November, 1993
"Who Needs an Asset Manager?" January, 1994
"Investing by the Numbers," February, 1994
"Fire Your Staff and Lease Them Back," March, 1994
"Published Rates Hint at Recovery," April, 1994
"Now is the Time to Start Building," May, 1994
"Hotel Values Heading Up," June, 1994
"Farewell, Friend," July, 1994
"Sales Prices Creeping Up," August, 1994
"Selecting Green Hotel Supplies," September, 1994
"Don't Write Off Full-Service Hotels," October, 1994
"Lodging REITS Are on the Rise," November, 1994
Michigan Lodging
"Hotel Development Costs," January, 1988
The Mortgage and
Real Estate
Executives Report
"Atlantic City Building Game Involves High Stakes,"
August, 1979
"How Interest Rates Affect Real Estate Values," June,
1982
"Update on Hotel Development Costs," May 1, 1983
Motel-Hotel Insider
"The $100,000 Plus Hotel Room Has Become a Reality,"
November 19, 1979
"Update on Hotel Development Costs," April 4, 1983
NAIFA - The
Appraisal Review
"Hotel Valuation Techniques," Vol. 44, 1991
Real Estate Digest
"Why Should the Management Team be Important to Hotel
Lenders," Fall, 1988
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles
(continued)
Real Estate
Finance Journal "What is a Typical Fee for a Hotel Management Contract?"
Fall, 1988
"Hotel Franchise Fees," Winter 1989
"Why the Management Team Should be Important to Hotel
Lenders," Spring, 1989
"Hotel Values and Costs," Summer, 1989
"Structuring a Hotel Investment," Fall, 1989
"A Guide for Lenders Holding Distressed Hotel Loans,"
Winter, 1990
"Estimating Current Interest Rates for Hotel Financing,"
Spring, 1990
"Hotel Valuation Techniques," Summer, 1990
"Now is the Time to Review Your Hotel's Property Taxes,"
Fall, 1990
"Property Tax Assessments for Hotels and Motels,"
Winter, 1991
"Putting Together Hotel Management Agreements - Part I,"
Spring 1991
"Putting Together Hotel Management Agreements - Part
II," Summer, 1991
"The 1980s - The Decade of Change," Fall, 1991
"An Overview of the Hotel Industry: Past, Present, and
Future," Spring, 1994
Real Estate Forum "Casino Hotels Raise Valuation Questions," November,
1981
Real Estate
Investment Ideas "How Fuel and Energy Shortages Should Affect Investment
Decisions in the Hospitality Industry," March,
1974
"Upward Trend Continues for Sales Price of Hotel-Motel
Properties," May, 1988
"High Prices Paid for Hotel-Motel Properties," February,
1990
Real Estate Issues
"Employee Compensation for a Consulting Practice,"
Fall/Winter, 1985
"Hotel/Motel Market Sales Update," Spring/Summer, 1987
Real Estate
Newsletter
"Computers in Hotel Appraising," May 15, 1989
Real Estate
Investment Ideas
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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"Hotel-Sales Update," Winter 1986
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles
(continued)
Real Estate Review
"Valuing Motels and Hotel in the Current Market," Fall,
1972
"Dealing With Distressed Hostelry Loans," Fall, 1975
"The Mortgage Underwriting Consultant Comes of Age,"
Fall, 1977
"Real Estate Compensation," Winter 1977
Real Estate Workouts
and Asset Management
"Stephen Rushmore on Directions in the Hospitality
Industry," September, 1992
Real Values
"Hotel Construction Cost Update," April, 1986
Restaurant and "How Much Should the Renovation Be?" March, 1986
Hotel Design "14 Notable Hotel Development Firms," December, 1987
Rushmore on
Hotel Valuation "Mortgage - Equity," Winter, 1979
"Atlantic City - From Bust to Boom," Winter, 1979
"Mortgage - Equity," Spring, 1979
"Developing Mortgage Data," Spring 1979
"Gasoline and Market Values, " Spring, 1979
"Mortgage - Equity," Fall, 1979
"Quantifying a Hotel's Business Value," Fall, 1979
"What Has Happened to Typical Hotel-Motel Development
Costs?," Fall, 1979
"Mortgage-Equity," Winter, 1980
"Extending Hotel Economic Life Through Renovation,"
Winter, 1980
"Estimating Hotel Land Values Using Comparable Ground
Leases," Winter, 1980
"Quantifying the Value of Personal Property to a Going
Hotel," Spring, 1980
"Recent Changes in New York City's Hotel Market,"
Spring, 1980
"Hotel-Motel Economic Lives," Fall, 1980
"Mortgage - Equity," Fall, 1980
"Mortgage - Equity," Winter, 1981
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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"Developing Mortgage Data," Winter, 1981
"Statistical Support for Food and Beverage Projections,"
Winter, 1981
"Mortgage - Equity," Spring/Summer, 1981
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles
(continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981
"A Five-Year Overview of Typical Hotel-Motel Development
Rushmore on Hotel Costs," Spring/Summer, 1981
Valuation (continued) "Mortgage - Equity," Winter/Spring, 1982
"Update on Hotel Capitalization Rates," Winter/Spring,
1982
"Mortgage - Equity," Summer/Fall, 1982
"Are Casino Hotels Really Worth $500,000 Per Room?"
Summer/Fall, 1982
"The Hotel-Motel Life Cycle, Summer/Fall, 1982
"Mortgage - Equity," Winter/Spring, 1983
"Update on Hotel Development Costs," Winter/Spring, 1983
"The Valuation of Hotels and Motels for Assessment
Purposes," Winter, 1984
"Hotel Capitalization Rates," Summer, 1984
"Hotel Development Cost Survey," Summer, 1984
"Selecting a Hotel Management Company," Fall, 1984
"Hotel Capitalization Rates," Spring, 1985
"How to Perform a Breakeven Analysis," Spring, 1985
"Hotel Capitalization Rates," Winter, 1986
"Hotel Development Costs," Winter, 1986
"Hotel Valuation Survey," Winter, 1987
"Impact of New Tax Laws on Hotel Values," Winter, 1987
"Hotel-Motel Market Sales Update," Winter, 1987
"Structuring an Incentive Management Fee," Fall, 1987
"Understanding Your Hotel's Economic Life," Fall, 1987
"Hotel Development Costs," Fall, 1987
"Hotel, Motel Market Sales Update," Winter, 1988
"Amenity Creep," Winter, 1989
"Hotel Franchise Fees," Winter, 1989
"Hotel Valuation Index," Fall, 1989
"Latest Trends in Hotel Values," Fall, 1989
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Published Articles
(continued)
U.S. Real Estate Week
"All-Suites Market Entering Second Phase," May 4, 1987
Valuation
"Hotel-Motel Market Sales Update," February, 1987
Quarterly Newsletter
Hotel Valuation Journal
Professional newsletter with a circulation of 10,000
Real Estate Column
Lodging Hospitality
Real estate editor for a major monthly hospitality
periodical
Hospitality Column
Real Estate Finance
Journal
Contributing hospitality editor
Computer Software
Hospitality Valuation
Software Hotel financial software for room night analyses, income
and expense forecasts, and valuation calculations -
developed and distributed for the Appraisal Institute
Hotel-Motel Market Data
Hospitality Market Data
Exchange Software
National clearinghouse for information pertaining to
hotel and motel transactions
Hotel Valuation Index
National index of hotel value trends for 24 individual
market areas
Hospitality
Seminar Series
Intensive short courses for hotel and restaurant
professionals
Hospitality
Bibliography
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Comprehensive literature index of hotel and restaurant
books and articles
Awards
Robert H. Armstrong
Award For the most significant contribution to The Appraisal
Journal in 1975
Activities
Commercial pilot, instrument, multi-engine; sailing;
skiing
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Corporate and Aetna Life Insurance
Institutional Clients AIG Real Estate Investment
Served Aldrich Eastman and Waltch
Allstate
American Airlines
America's Best Inns
Arthur Anderson & Company
Bankers Trust Company
Bank of America
Bank of Boston
Bank of Montreal
Bank of New York
Bank of Nova Scotia
Bank of Tokyo
Bank One-Columbus
Banque Indosuez
Barclay's Bank
Baybank Boston
The Beacon Companies
Bear, Stearns & Company, Inc.
Best Inns
Best Western International
Boykin Management Co.
Bradbury Suites
C. Itoh
Caesar's World
California Dept. of Transportation
Chase Lincoln First Bank, N.A.
Chase Manhattan Bank
Chemical Bank
Chrysler Capital Corporation
CIGNA
Citibank
Citicorp Real Estate
City of Boston
City of Detroit
City of Grand Rapids
City of Kalamazoo
City of Orlando
City of Philadelphia
City of Santa Monica
City of Toronto
Columbia Sussex Corporation
Continental Illinois National Bank
Copley Real Estate Advisors
Corporex Development
CRI, Inc.
Cushman and Wakefield
Days Inns
Edward J. DeBartolo Corp.
Deer Valley Ski Corporation
Doubletree Hotels
Drury Inns
Econo Lodge
Economic Development Admin.
EIE Regent International
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Corporate and
Institutional Clients Embassy Suites
Served (continued) Equitable Life Assurance
Equitable Real Estate Investment
European American Bank
Fairmont Hotels
Federal Deposit Insurance Corp.
First Boston
First California Savings
First Interstate Bank
First National Bank of Chicago
Four Seasons Hotels
Goldman, Sachs
Greater Orlando Aviation Authority
Great Western Bank
Great Western Savings
Guest Quarters
Hampton Inns
Hilton Hotels, Corp.
Hilton International
Holiday Corporation
Holiday Inns
Home Savings of America
Howard Johnson's
Hudson Hotels Corporation
Hyatt Hotels
Industrial Bank of Japan
Interstate Hotels
The Irvine Company
ITT Commercial Finance Corp.
Japan Airlines
JDC (America) Corporation
John Q. Hammons
John Hancock Life Insurance
Johnson & Wales College
Kenneth Leventhal & Assoc.
Kidder Peabody & Company, Inc.
La Quinta
Larken, Inc.
Lexington Companies
Loews Hotels
Harry Macklowe Real Estate
Marine Midland Bank, N.A.
Marriott Corporation
MA Bay Transit Authority
Massachusetts Mutual Life
Mellon Bank
Meridien Hotels
Merrill Lynch
Merrill Lynch Capital Markets
Metropolitan Life Insurance
Microtel
Midlantic Bank
Mitsubishi
Morgan Guaranty Bank & Trust Co.
J.P. Morgan Investment Management
Morgan Stanley
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Corporate and
Institutional Clients Motel 6, Inc.
Served (continued) Mutual Benefit Co.
National Westminster Bank
New York Life Insurance
Nippon Credit Bank
Nomura Securities Int'l
North American Taisei Corporation
Northwestern Mutual Life
Omni Hotels
Parabas Bank
Prime Motor Inns
Property Capital Trust
Prudential Life Insurance
Radisson Hotels
Ramada Inns
Red Lion Inns
Regent International
Registry Hotels
Residence Inns
Resolution Trust Corporation
Rhode Island Hospital Trust
Ritz-Carlton Hotels
Rodeway Inns
Rose Associates
Salomon Brothers
San Antonio Hotel/Motel Assoc.
Sanwa Bank
Security Pacific Bank
Servico Management Corp.
Sheraton Hotels
Sonesta Hotels
Sonnenblick-Goldman
Steamboat Ski Corporation
Stouffer Hotels
Stratton Corporation
Sumitomo Bank
Summerfield Hotel Corporation
Super 8 Hotels
Swiss Bank Corporation
Taisei
Texas Commerce Bancshares, Inc.
Tishman Realty Corporation
Trans World Airlines
Travelers Insurance
TraveLodge
Trusthouse Forte
UBS Securities
Union Labor Life
United Bank of Switzerland
United Inns, Inc.
United States Steel
Universal Hotels
U.S. Air Force
U.S. Department of Justice
U.S. Department of the Army
U.S. Department of the Interior
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Corporate and
Institutional Clients U.S. Economic Development Authority
Served (continued) U.S. Trust Company
Walt Disney Productions
Westin Hotels
Williams Hospitality Corporation
Winegardner & Hammons
Winthrop Financial Associates
Wyndham Hotels
Zeckendorf Company
Appearance as
an Expert Witness Administrative Law Court - SEC, Washington, DC
Appellate Tax Board, Boston, Massachusetts
Assessment Appeals Board, Los Angeles County, Los
Angeles, California
Board of Equalization and Review, Washington, District
of Columbia (2)
Board of Taxation, Atlantic City, New Jersey
Bureau de Revision Evaluation Fonciere du Quebec,
Montreal, Canada
Circuit Court, Orange County, Orlando, Florida
Condemnation Review Board, Minneapolis, Minnesota
Corporation Committee, Rhode Island State Senate
Court of Common Pleas, Allegheny County, Pennsylvania
Court of Common Pleas, Franklin County, Ohio
Court of Common Pleas, Montgomery, Pennsylvania
Court of Common Pleas, Pittsburgh, Pennsylvania
Court of Common Pleas, Philadelphia, Pennsylvania
Court of Queen's Bench of Alberta, Canada
District Court, Arapahoe County, Colorado
District Court, Dallas County, Texas
District Court, Harris County, Texas
District Court, Hennepin County, Minneapolis, Minnesota
District Court, Knoxville, Tennessee
Federal Bankruptcy Court, Oakland, California
Federal Bankruptcy Court, Los Angeles, California
Federal Bankruptcy Court, San Diego, California
Federal Bankruptcy Court, Denver, Colorado
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Appearance as
an Expert Witness Federal Bankruptcy Court, District of Columbia
(continued) Federal Bankruptcy Court, Miami, Florida (2)
Federal Bankruptcy Court, Chicago, Illinois
Federal Bankruptcy Court, New Orleans, Louisiana
Federal Bankruptcy Court, Greenbelt, Maryland
Federal Bankruptcy Court, Baltimore, Maryland
Federal Bankruptcy Court, Rockville, Maryland
Federal Bankruptcy Court, Boston, Massachusetts
Federal Bankruptcy Court, Grand Rapids, Michigan
Federal Bankruptcy Court, Las Vegas, Nevada
Federal Bankruptcy Court, Newark, New Jersey (2)
Federal Bankruptcy Court, Manhattan, New York (2)
Federal Bankruptcy Court, Westbury, New York
Federal Bankruptcy Court, Philadelphia, Pennsylvania
Federal Bankruptcy Court, Reading, Pennsylvania
Federal Bankruptcy Court, Salt Lake City, Utah
Federal Bankruptcy Court, Madison, Wisconsin (2)
Federal District Court, Rochester, New York
Federal District Court, Philadelphia, Pennsylvania
Judicial Arbitration and Mediation Services, Dallas,
Texas
Michigan Tax Tribunal, Detroit, Michigan
New Jersey Tax Court, Newark, New Jersey
Superior Court, District of Columbia
Superior Court, Clayton County, Georgia (2)
Superior Court of North Carolina
Supreme Court, New York State, Buffalo, New York
Supreme Court, New York State, Manhattan, New York
Supreme Court, New York State, Riverhead, New York
Tax Review Board, San Joaquin County, Stockton,
California
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
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Appearance as Tax Review Board, Bangor, Maine
an Expert Witness Tax Review Board, Schenectady, New York
(continued) Tax Review Board, Yorktown, New York
Tax Review Board, North Carolina
Tax Review Board, Philadelphia, Pennsylvania (2)
U.S. District Court, Wilmington, Delaware
U.S. District Court, Madison, Wisconsin