Estimating the Value
Before committing capital to a project, banks and investors usually like to know that it will be solvent. Before they could build the Xanadu, its planners needed to secure mortgage financing. To this end, they tapped real estate appraiser Gary Kent to undertake a detailed look at the Xanadu's chances.
Kent examined many aspects of the planned casino, from the effects
of air travel on the profitability of gaming operations to the
correct ratio of convention space to room quantity. His
report neatly captured the fiscal realities of the Las Vegas
Strip in the mid1970s. Though his efforts could not save
the Xanadu, they provide a valuable resource for historians
and the curious.
These charts and explanations elaborate on how Mr. Kent arrived at his valuation for the Xanadu.
Income Approach to Value
Cost Approach to Value
Textual explanation and chart
Correlations and Conclusions
Two approaches to value
were utilized in estimating the market value of the subject
property. The Market Approach was utilized in estimating the
land value only. However, income estimates and the capitalization
rate are shown on the preceding pages and are based upon market
The values indicated by
the two approaches to value are as follows:
Cost Approach ..........................
Normally, the sale of a
hotel/casino on a going concern basis is based upon the income
flow generated by that casino. For this reason the Income Approach
to value is considered to be by far the superior valuation indicator in the case of the subject.
The Cost Approach to
value substantiates the valuation indicated by the Income Approach
In addition to acting as
value indicators, the two approaches to value prove the feasibility
of the project. With a valuation indicated by the Income Approach
of $144,000,000.00 and an estimated cost of construction being
substantially less than this, not including cash for bonds and
operation, the feasibility of the project is proven.
Considering data analyzed,
described and set out in this report,
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Last modified Wednesday, 02-Dec-2009 19:19:54 UTC