-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LaU8NYev0Sk4fKjMViNF6y0xxKl0sU3V9iKjJcC11w4t/n/XAzCynlFk255/7GHo LI8cvrDaxmM3utBZF139JQ== 0000950130-96-000094.txt : 19960116 0000950130-96-000094.hdr.sgml : 19960116 ACCESSION NUMBER: 0000950130-96-000094 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19960112 SROS: NYSE GROUP MEMBERS: DONALD J. TRUMP GROUP MEMBERS: TAJ MAHAL HOLDING CORP. GROUP MEMBERS: THCR MERGER CORP. GROUP MEMBERS: TM/GP CORPORATION GROUP MEMBERS: TRUMP HOTELS & CASINO RESORTS HOLDING, L.P. GROUP MEMBERS: TRUMP HOTELS & CASINO RESORTS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TAJ MAHAL HOLDING CORP CENTRAL INDEX KEY: 0000871012 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 133598656 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: 1934 Act SEC FILE NUMBER: 005-41783 FILM NUMBER: 96502936 BUSINESS ADDRESS: STREET 1: 1000 THE BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 BUSINESS PHONE: 6094495540 MAIL ADDRESS: STREET 1: 1000 BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TRUMP HOTELS & CASINO RESORTS INC CENTRAL INDEX KEY: 0000943320 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 133818402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: MISSISSIPPI AVE & THE BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 BUSINESS PHONE: 6094416060 MAIL ADDRESS: STREET 1: MISSISSIPPI AVE AND THE BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 SC 13E3 1 SCHEDULE 13E-3 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13E-3 Rule 13e-3 Transaction Statement (Pursuant to Section 13(e) of the Securities Exchange Act of 1934) TAJ MAHAL HOLDING CORP. --------------------------------- (Name of the Issuer) TRUMP HOTELS & CASINO RESORTS, INC. ----------------------------------- TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P. -------------------------------------------- DONALD J. TRUMP --------------- TM/GP CORPORATION ----------------- THCR MERGER CORP. ----------------- TAJ MAHAL HOLDING CORP. ----------------------- (Name of Persons Filing Statement) Class A Common Stock, --------------------- $0.01 par value --------------- (Title of Class of Securities) 874049208 --------- (CUSIP Number of Class of Securities) NICHOLAS L. RIBIS c/o Trump Hotels & Casino Resorts, Inc. Mississippi Avenue and The Boardwalk Atlantic City, NJ 08401 (609) 441-6060 ------------------------------------ (Name, Address and Telephone Number of Person(s) Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) This statement is filed in connection with (check the appropriate box): a. [ ] The filing of solicitation materials or an information statement subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [(S) 240.13e(c)] under the Securities Exchange Act of 1934. b. [X] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [ ]. Calculation of Filing Fee ------------------------- Transaction Valuation: *$40,500,000 Amount of Filing Fee: $ 8,100 * For purposes of calculating filing fee only. This amount assumes the purchase of 1,350,000 shares of Taj Mahal Holding Corp. Class A Common Stock, par value $ .01 per share, at $30 per share. The amount of the filing fee calculated in accordance with Rule 0-11 promulgated under the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the value of shares to be purchased. [X] Check box if any part of the fee is offset as provided by Rule 0- 11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $15,188 Form or Registration No.: S-4 Filing Party: Trump Hotels & Casino Resorts, Inc. Date Filed: January 11, 1996 INTRODUCTION ------------ This Rule 13e-3 Transaction Statement (as it may be amended, the "Statement") is being filed by Trump Hotels & Casino Resorts, Inc., a Delaware corporation ("THCR"), Trump Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR Holdings"), Donald J. Trump, individually ("Trump"), TM/GP Corporation, a New Jersey corporation ("TM/GP"), THCR Merger Corp., a Delaware corporation ("Merger Sub") and Taj Mahal Holding Corp., a Delaware corporation ("Taj Holding"), in connection with the proposed merger (the "Merger") of Merger Sub with and into Taj Holding, pursuant to the Agreement and Plan of Merger, dated as of January 8, 1996 (the "Merger Agreement"), among THCR, Taj Holding and Merger Sub. THCR, THCR Holdings, Trump, TM/GP and Merger Sub are each affiliates of Taj Holding and its affiliated entities. The cross reference sheet below is being supplied pursuant to General Instruction F to Schedule 13E-3 and shows the location of the information required to be included in response to the items of this Statement in the Joint Proxy Statement-Prospectus of THCR and Taj Holding (the "Proxy Statement- Prospectus") which forms a part of the Registration Statement on Form S-4 (the "Registration Statement"), filed concurrently herewith with the Securities and Exchange Commission (the "SEC") in connection with the Merger. The information in the Proxy Statement-Prospectus including all annexes thereto, a copy of which is attached hereto as Exhibit (17)(d), is hereby expressly incorporated herein by reference and the responses to each item are qualified in their entirety by the provisions of the Proxy Statement-Prospectus and such annexes. A copy of the Merger Agreement is included as Annex A to the Proxy Statement-Prospectus. Capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Proxy Statement-Prospectus. CROSS REFERENCE SHEET --------------------- Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- Item 1(a) Cover Page; SUMMARY - Corporate and Financial Structure and Organization Item 1(b) Cover Page; THE TAJ HOLDING SPECIAL MEETING; MARKET PRICE AND DIVIDEND DATA - Taj Holding Item 1(c)-(d) MARKET PRICE AND DIVIDEND DATA - Taj Holding Item 1(e) Not Applicable Item 1(f) Not Applicable Item 2(a)-(d), (g) Cover Page; Available Information; SUMMARY; BUSINESS OF THCR; BUSINESS OF TAJ HOLDING; MANAGEMENT OF THCR; MANAGEMENT OF TAJ HOLDING Item 2(e)-(f) Not Applicable Item 3(a)(1) CERTAIN TRANSACTIONS Item 3(a)(2) SPECIAL FACTORS - Background of the Merger Transaction; THE MERGER AGREEMENT Item 3(b) SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Related Merger Transactions Item 4(a)-(b) SUMMARY; SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Purpose and Structure of the Merger Transaction; SPECIAL FACTORS - Related Merger Transactions; SPECIAL FACTORS - Interests of Certain Persons in the Merger Transaction; THE MERGER AGREEMENT; ANNEX A Item 5(a)-(g) SUMMARY - The Merger Agreement; SPECIAL FACTORS - Certain Effects Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- of the Merger Transaction; Operations of Taj Associates After the Merger Transaction; THE MERGER AGREEMENT; MANAGEMENT OF TAJ HOLDING - General Item 6(a) SPECIAL FACTORS - Related Merger Transactions; SPECIAL FACTORS - Sources and Uses of Funds in the Merger Transaction Item 6(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION; THE TAJ HOLDING SPECIAL MEETING - Solicitation of Proxies Item 6(c) RISK FACTORS - Holding Company Structure; Risk in Refinancing and Repayment of Indebtedness; Need for Additional Financing; SPECIAL FACTORS - Related Merger Transactions Item 6(d) Not Applicable Item 7(a)-(c) SUMMARY - General; SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction; SPECIAL FACTORS - Purpose and Structure of the Merger Transaction Item 7(d) SUMMARY; RISK FACTORS; SPECIAL FACTORS; Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- COMPARISON OF STOCKHOLDER RIGHTS; CERTAIN FEDERAL INCOME TAX CONSIDERATIONS; SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS Item 8(a) SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction Item 8(b) SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction; SPECIAL FACTORS - Opinions of the Financial Advisors; ANNEX C Item 8(c) SUMMARY - The Special Meetings - Votes Required; Record Date; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction; THE TAJ HOLDING SPECIAL MEETING - Required Vote Item 8(d) SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction Item 8(e) SUMMARY - Recommendations of the Boards of Directors; SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- Item 8(f) Not Applicable Item 9(a)-(c) SUMMARY - Opinions of Financial Advisors; SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction; SPECIAL FACTORS - Opinions of the Financial Advisors Item 10(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TAJ HOLDING Item 10(b) Not Applicable Item 11 SUMMARY; SPECIAL FACTORS - Background of the Merger Transaction; SPECIAL FACTORS - Related Merger Transactions; SPECIAL FACTORS - Interests of Certain Persons in the Merger Transaction; THE TAJ HOLDING SPECIAL MEETING - Required Vote; THE MERGER AGREEMENT; BUSINESS OF TAJ HOLDING - Certain Indebtedness; ANNEX A Item 12(a) SUMMARY - The Special Meetings; THE TAJ HOLDING SPECIAL MEETING - Required Vote Item 12(b) SUMMARY - Recommendations of the Boards of Directors; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- Item 13 (a) SUMMARY - Dissenting Stockholders' Rights of Appraisal; DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL Item 13(b) - (c) Not Applicable Item 14(a) SUMMARY - Summary Financial Information of Taj Holding; UNAUDITED PRO FORMA FINANCIAL INFORMATION; SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES; TAJ HOLDING'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO Item 14(b) SUMMARY - Summary Financial Information of Taj Holding; UNAUDITED PRO FORMA FINANCIAL INFORMATION; SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES Item 15(a) - (b) SUMMARY - Recommendations of the Boards of Directors; SUMMARY - Opinions of Financial Advisors; SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction; SPECIAL FACTORS - Opinions of the Financial Advisors; SPECIAL FACTORS - Certain Effects of the Merger Transaction; Operations of Taj Associates After the Merger Transaction; THE THCR SPECIAL MEETING - Solicitation of Proxies; THE TAJ HOLDING SPECIAL MEETING - Solicitation of Proxies Item 16 The information set forth in the Proxy Statement-Prospectus is incorporated herein by reference Item 17(a) *Indenture, by and between Trump Taj Mahal Funding, Inc., as issuer, Trump Taj Mahal Associates, as guarantor and First Bank National Association, as Trustee, in connection with the issuance of $750,000,000 aggregate principal amount of Notes, due 20__ Item 17(b)(1) Opinion of Rothschild, Inc., dated January 8, 1996 (incorporated herein by reference to Annex C to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto) Item 17(b)(2) Report by Rothschild, Inc. to the - --------------- * To be filed by amendment. Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- Board of Directors of Trump Taj Mahal Holding Corp., dated January 8, 1996 Item 17(b)(3) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated January 8, 1996 (incorporated herein by reference to Annex B to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto) Item 17(b)(4) Report by Donaldson, Lufkin & Jenrette Securities Corporation to the Board of Directors of Trump Hotels & Casino Resorts, Inc., dated January 4, 1996 Item 17(b)(5) Appraisal of the Trump Taj Mahal Casino Resort, dated March 18, 1994, by Appraisal Group International Item 17(b)(6) Appraisal of the Specified Parcels, dated December 21, 1995, by Appraisal Group International Item 17(c)(1) Agreement and Plan of Merger, dated as of January 8, 1996, among Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and THCR Merger Corp. (incorporated herein by reference to Annex A to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto) Item 17(c)(2) Agreement, dated October 6, 1995, by and among Hamilton Partners, L.P., Prudential Securities, Inc., Putnam Investment Management, Inc., Grace Brothers Ltd., SC Fundamental Value Fund, L.P. and SC Fundamental Value BVI Ltd. and Trump Taj Mahal Associates, Trump Taj Mahal Funding, Inc. and Trump Taj Mahal Holding Corp. Item 17(c)(3) Letter of Donald J. Trump to Taj Mahal Holding Corp., dated January 8, 1996 Item 17(d) Joint Proxy Statement - Prospectus of Trump Hotels & Casino Resorts, Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus - ---------------------- ------------------------------------- Inc. and Taj Mahal Holding Corp., Subject to Completion, dated January 11, 1996 (included in the Registration Statement on Form S-4, filed by Trump Hotels & Casino Resorts, Inc. with the Securities and Exchange Commission on January 11, 1996) Item 17(e) Section 262 of the Delaware General Corporation Law (incorporated herein by reference to Annex D to the Proxy Statement- Prospectus included in Exhibit 17(d) hereto) Item 17(f) Not Applicable ITEM 1. Issuer and Class of Security Subject to the Transaction. - ----------------------------------------------------------------------- (a) The information set forth in "Cover Page," and "SUMMARY - Corporate and Financial Structure and Organization" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) The information set forth in "Cover Page," "THE TAJ HOLDING SPECIAL MEETING" and "MARKET PRICE AND DIVIDEND DATA - Taj Holding" in the Proxy Statement-Prospectus is incorporated herein by reference. (c) - (d) The information set forth in "MARKET PRICE AND DIVIDEND DATA - Taj Holding" in the Proxy Statement-Prospectus is incorporated herein by reference. (e) Not applicable. (f) Not applicable. ITEM 2. Identity and Background. - --------------------------------------- (a) - (d), (g) The information set forth in "Cover Page," "Available Information," "SUMMARY," "BUSINESS OF THCR," "BUSINESS OF TAJ HOLDING," "MANAGEMENT OF THCR" and "MANAGEMENT OF TAJ HOLDING" in the Proxy Statement-Prospectus is incorporated herein by reference. (e) and (f) None of THCR, Trump, Merger Sub, TM/GP or Taj Holding or, to the best of their knowledge, no executive officer, director or controlling person of THCR, Merger Sub, TM/GP or Taj Holding (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. Past Contacts, Transactions or Negotiations. - ----------------------------------------------------------- (a)(1) The information set forth in "CERTAIN TRANSACTIONS" in the Proxy Statement-Prospectus is incorporated herein by reference. (a)(2) The information set forth in "SPECIAL FACTORS - Background of the Merger Transaction" and "THE MERGER AGREEMENT" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) The information set forth in "SPECIAL FACTORS - Background of the Merger Transaction" and "SPECIAL FACTORS - Related Merger Transactions" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 4. Terms of the Transaction. - ---------------------------------------- (a)-(b) The information set forth in "SUMMARY," "SPECIAL FACTORS - Background of the Merger Transaction," "SPECIAL FACTORS - Purpose and Structure of the Merger Transaction," "SPECIAL FACTORS - Related Merger Transactions," "SPECIAL FACTORS -Interests of Certain Persons in the Merger Transaction," "THE MERGER AGREEMENT," and ANNEX A in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 5. Plans or Proposals of the Issuer or Affiliate. - ------------------------------------------------------------- (a) - (g) The information set forth in "SUMMARY - The Merger Agreement," "SPECIAL FACTORS - Certain Effects of the Merger Transaction; Operations of Taj Associates After the Merger Transaction," "THE MERGER AGREEMENT" and "MANAGEMENT OF TAJ HOLDING - General" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 6. Source and Amounts of Funds or Other Consideration. - ------------------------------------------------------------------ (a) The information set forth in "SPECIAL FACTORS - Related Merger Transactions" and "SPECIAL FACTORS - Sources and Uses of Funds in the Merger Transaction" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) The information set forth in "UNAUDITED PRO FORMA FINANCIAL INFORMATION" and "THE TAJ HOLDING SPECIAL MEETING - Solicitation of Proxies" in the Proxy Statement-Prospectus is incorporated herein by reference. (c) The information set forth in "RISK FACTORS - Holding Company Structure; Risk in Refinancing and Repayment of Indebtedness; Need for Additional Financing" and "SPECIAL FACTORS - Related Merger Transactions" in the Proxy Statement-Prospectus is incorporated herein by reference. (d) Not applicable. ITEM 7. Purpose(s), Alternatives, Reasons and Effects. - ------------------------------------------------------------- (a) - (c) The information set forth in "SUMMARY - General," "SPECIAL FACTORS - Background of the Merger Transaction," "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" and "SPECIAL FACTORS - Purpose and Structure of the Merger Transaction" in the Proxy Statement-Prospectus is incorporated herein by reference. (d) The information set forth in "SUMMARY," "RISK FACTORS," "SPECIAL FACTORS," "COMPARISON OF STOCKHOLDER RIGHTS," "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" and "SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 8. Fairness of the Transaction. - ------------------------------------------- (a) The information set forth in "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" in the Proxy Statement- Prospectus is incorporated herein by reference. (b) The information set forth in "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction," "SPECIAL FACTORS - Opinions of the Financial Advisors" and ANNEX C in the Proxy Statement- Prospectus is incorporated herein by reference. (c) The information set forth in "SUMMARY - The Special Meetings - Votes Required; Record Date," "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" and "THE TAJ HOLDING SPECIAL MEETING - Required Vote" in the Proxy Statement-Prospectus is incorporated herein by reference. (d) The information set forth in "SPECIAL FACTORS - Background of the Merger Transaction" and "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" in the Proxy Statement-Prospectus is incorporated herein by reference. (e) The information set forth in "SUMMARY - Recommendations of the Boards of Directors," "SPECIAL FACTORS - Background of the Merger Transaction" and "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" in the Proxy Statement-Prospectus is incorporated herein by reference. (f) Not Applicable. ITEM 9. Reports, Opinions, Appraisals and Certain Negotiations. - ---------------------------------------------------------------------- (a) - (c) The information set forth in "SUMMARY - Opinions of Financial Advisors," "SPECIAL FACTORS - Background of the Merger Transaction," "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" and "SPECIAL FACTORS - Opinions of the Financial Advisors" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 10. Interest in Securities of the Issuer. - ---------------------------------------------------- (a) The information set forth in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TAJ HOLDING" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) Not applicable. ITEM 11. Contracts, Arrangements or Understandings with Respect to the Issuer's Securities. - ------------------------------------------------------------- The information set forth in "SUMMARY," "SPECIAL FACTORS - Background of the Merger Transaction," "SPECIAL FACTORS - Related Merger Transactions," "SPECIAL FACTORS - Interests of Certain Persons in the Merger Transaction," "THE TAJ HOLDING SPECIAL MEETING - Required Vote," "THE MERGER AGREEMENT," "BUSINESS OF TAJ HOLDING - Certain Indebtedness" and ANNEX A in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 12. Present Intention and Recommendation of Certain Persons with Regard to the Transaction. - -------------------------------------------------------------- (a) The information set forth in "SUMMARY - The Special Meetings" and "THE TAJ HOLDING SPECIAL MEETING - Required Vote" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) The information set forth in "SUMMARY - Recommendations of the Boards of Directors" and "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 13. Other Provisions of the Transaction. - --------------------------------------------------- (a) The information set forth in "SUMMARY - Dissenting Stockholders' Rights of Appraisal" and "DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) - (c) Not applicable. ITEM 14. Financial Information. - ------------------------------------- (a) The information set forth in "SUMMARY - Summary Financial Information of Taj Holding," "UNAUDITED PRO FORMA FINANCIAL INFORMATION," "SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES" and "TAJ HOLDING'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO" in the Proxy Statement-Prospectus is incorporated herein by reference. (b) The information set forth in "SUMMARY - Summary Financial Information of Taj Holding," "UNAUDITED PRO FORMA FINANCIAL INFORMATION" and "SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 15. Persons and Assets Employed, Retained or Utilized. - ----------------------------------------------------------------- (a) - (b) The information set forth in "SUMMARY - Recommendations of the Boards of Directors," "SUMMARY - Opinions of Financial Advisors," "SPECIAL FACTORS - Recommendations of the Board of Directors; Reasons for the Merger Transaction; Fairness of the Merger Transaction," "SPECIAL FACTORS - Opinions of the Financial Advisors," "SPECIAL FACTORS - Certain Effects of the Merger Transaction; Operations of Taj Associates After the Merger Transaction," "THE THCR SPECIAL MEETING - Solicitation of Proxies" and "THE TAJ HOLDING SPECIAL MEETING - Solicitation of Proxies" in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 16. Additional Information. - -------------------------------------- The information set forth in the Proxy Statement-Prospectus is incorporated herein by reference. ITEM 17. Material to be Filed as Exhibits. - ------------------------------------------------ (a) *Indenture, by and between Trump Taj Mahal Funding, Inc., as issuer, Trump Taj Mahal Associates, as guarantor and First Bank National Association, as Trustee, in connection with the issuance of $750,000,000 aggregate principal amount of Notes, due 20__. (b)(1) Opinion of Rothschild, Inc., dated January 8, 1996 (incorporated herein by reference to Annex C to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto). - --------------- *To be filed by amendment. (b)(2) Report by Rothschild, Inc. to the Board of Directors of Trump Taj Mahal Holding Corp., dated January 8, 1996. (b)(3) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated January 8, 1996 (incorporated herein by reference to Annex B to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto). (b)(4) Report by Donaldson, Lufkin & Jenrette Securities Corporation to the Board of Directors of Trump Hotels & Casino Resorts, Inc., dated January 4, 1996. (b)(5) Appraisal of the Trump Taj Mahal Casino Resort, dated March 18, 1994, by Appraisal Group International. (b)(6) Appraisal of the Specified Parcels, dated December 21, 1995, by Appraisal Group International. (c)(1) Agreement and Plan of Merger, dated as of January 8, 1996, among Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and THCR Merger Corp. (incorporated herein by reference to Annex A to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto). (c)(2) Agreement, dated October 6, 1995, by and among Hamilton Partners, L.P., Prudential Securities, Inc., Putnam Investment Management, Inc., Grace Brothers Ltd., SC Fundamental Value Fund, L.P. and SC Fundamental Value BVI Ltd. and Trump Taj Mahal Associates, Trump Taj Mahal Funding, Inc. and Trump Taj Mahal Holding Corp. (c)(3) Letter of Donald J. Trump to Taj Mahal Holding Corp., dated January 8, 1996. (d) Joint Proxy Statement - Prospectus of Trump Hotels & Casino Resorts, Inc. and Taj Mahal Holding Corp., Subject to Completion, dated January 11, 1996 (included in the Registration Statement on Form S-4, filed by Trump Hotels & Casino Resorts, Inc. with the Securities and Exchange Commission on January 11, 1996). (e) Section 262 of the Delaware General Corporation Law (incorporated herein by reference to Annex D to the Proxy Statement-Prospectus included in Exhibit 17(d) hereto). (f) Not Applicable. SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 11, 1996 TRUMP HOTELS & CASINO RESORTS, INC. By: /s/ Nicholas L. Ribis ------------------------------------------------ Name: Nicholas L. Ribis Title: President, Chief Executive Officer and Chief Financial Officer TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P. By: Trump Hotels & Casino Resorts, Inc., its general partner By: /s/ Nicholas L. Ribis ------------------------------------------------ Name: Nicholas L. Ribis Title: President, Chief Executive Officer and Chief Financial Officer THCR MERGER CORP. By: /s/ Nicholas L. Ribis ------------------------------------------------ Name: Nicholas L. Ribis Title: President, Chief Executive Officer and Treasurer /s/ Donald J. Trump ------------------------------------------------ Donald J. Trump, Individually TM/GP CORPORATION By: /s/ Nicholas F. Moles ------------------------------------------------ Name: Nicholas F. Moles Title: Secretary TAJ MAHAL HOLDING CORP. By: /s/ Nicholas F. Moles ------------------------------------------------ Name: Nicholas F. Moles Title: Secretary Exhibit Index Exhibit 17(b)(2) Report by Rothschild, Inc. to the Board of Directors of Trump Taj Mahal Holding Corp., dated January 8, 1996 Exhibit 17(b)(4) Report by Donaldson, Lufkin & Jenrette Securities Corporation to the Board of Directors of Trump Hotels & Casino Resorts, Inc., dated January 4, 1996 Exhibit 17(b)(5) Appraisal of the Trump Taj Mahal Casino Resort, dated March 18, 1994, by Appraisal Group International Exhibit 17(b)(6) Appraisal of the Specified Parcels, dated December 21, 1995, by Appraisal Group International Exhibit 17(c)(2) Agreement, dated October 6, 1995, by and among Hamilton Partners, L.P., Prudential Securities, Inc., Putnam Investment Management, Inc., Grace Brothers Ltd., SC Fundamental Value Fund, L.P. and SC Fundamental Value BVI Ltd. and Trump Taj Mahal Associates, Trump Taj Mahal Funding, Inc. and Trump Taj Mahal Holding Corp. Exhibit 17(c)(3) Letter of Donald J. Trump to Taj Mahal Holding Corp., dated January 8, 1996 Exhibit 17(d) Joint Proxy Statement - Prospectus of Trump Hotels & Casino Resorts, Inc. and Taj Mahal Holding Corp., Subject to Completion, dated January 11, 1996 (included in the Registration Statement on Form S-4, filed by Trump Hotels & Casino Resorts, Inc. with the Securities and Exchange Commission on January 11, 1996) EX-99.17.(B)(2) 2 REPORT BY ROTHSCHILD, INC. EXHIBIT 17(B)(2) [LOGO] [LOGO] TRUMP TAJ MAHAL CASINO - RESORT (TM) - -------------------------------------------------------------------------------- DISCUSSION MATERIALS FOR THE BOARD OF DIRECTORS OF TAJ MAHAL HOLDING CORP. Confidential The information contained herein has been prepared and compiled from publicly available sources, Trump Hotels & Casino Rsorts, Inc., and Taj Mahal Holding Corp. and is intended exclusively for discussion purposes. Neither Rothschild Inc. nor any of its officers, directors, employees, affiates or agents makes any representation or warranty as to the accuracy or completeness of any materials contained herein. January 8, 1996 - -------------------------------------------------------------------------------- ROTHSCHILD INC. Rothschild Inc. Confidential PROJECT WONDER Table of Contents - -------------------------------------------------------------------------------- Section 1 Transaction Summary . Transaction Value . Valuation Matrix . Capitalization Summary . Sources and Uses . Dilution Analysis Section 2 Transaction Considerations Section 3 Market Considerations Section 4 Gem Business Considerations Section 5 Valuation Analysis Rothschild Inc. Confidential PROJECT WONDER Table of Contents - -------------------------------------------------------------------------------- Exhibits -------- A Market Capitalization Analysis B Discounted Cash Flow Analysis C Comparable Transaction Analysis D Estimated Valuation of Realty Corp.'s Specified Parcels and Lease E Valuation of THCR Warrant F Management Financial Projections - Base Case G Management Financial Projections - Expansion Case H Adjusted Management Financial Projections - Base Case I Merger Transaction Summary J Gem Excess Cash Analysis K Market Multiple Analysis I L Market Multiple Analysis II M Analysis of Selected Comparable Acquisitions N Cost of Capital Analysis O Atlantic City Casino Stock Index THCR Price/Volume Run Price/Volume Run of Gem's 11.35% Mortgage Bonds Rothschild Inc. Confidential PROJECT WONDER Transaction Summary (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Merger of Gem into THCR ("Merger Transaction"). . Gem's Class A shareholders receive $30.00 per share in cash or in THCR shares. . At a $21.75 THCR share price (1/5/96 market close), exchange ratio of 1.38 shares per Class A share. . Donald Trump ("DJT") receives: . Restricted shares which when valued at the full trading price of unrestricted stock would equate to $30.00 per share in THCR shares and, . Master warrant to purchase 1.8 million shares in THCR. This warrant will not be transferable and will entitle DJT to purchase 600,000 shares at $30.00 per share for 3 years, another 600,000 shares at $35.00 per share for 4 years, and a third 600,000 shares at $40.00 per share for 5 years. The warrant will be acquired "for investment" and DJT's registration rights will be limited to the underlying shares of the common. - Based on a $100.0 Equity Offering (at an assumed price of $21.75 per share) and a Debt Offering of $750.0, and assuming the exercise of the warrant, proforma ownership approximately 38%. -1- Rothschild Inc. Confidential PROJECT WONDER Transaction Summary (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Gem's Class B shareholders receive $0.50 per share in cash. . Gem's First Mortgage Bonds redeemed at par plus accrued interest. . NatWest Debt assumed by New Gem. . First Fidelity receives $50.0 in cash and $10.0 in THCR shares in consideration for the release of guarantee and the purchase of the Realty Corp.'s specified parcels. . Banker's Trust receives $10.0 in cash in consideration for its consent to the Merger Transaction and release of its liens on (i) DJT's direct and indirect equity investments in TTMA and, (ii) the TTMI note. -2- Rothschild Inc. Confidential PROJECT WONDER Transaction Value Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Equity Purchase of Class A, B, C Shares $81.4 ====== Redemption of Debt and Other Obligations $853.7 Assumption of Debt 45.5 THCR Equity to First Fidelity 10.0 Transaction Expenses 40.0 Less: Excess Cash (71.5) Total Transaction Value $959.1 ====== Transaction Value as a multiple of: ---------------------------------------------------------- 1995E Proforma EBITDA 141.3 (1) 6.79 x 1996F Proforma EBITDA 161.4 (1) 5.94 1995E Proforma EBIT $97.4 (1) 9.85 x 1996F Proforma EBIT $107.1 (1) 8.95 - --------------- (1) Addback of Realty rent, Gem Services Agreement Fee and CRDA write down. -3- Rothschild Inc. Confidential PROJECT WONDER Valuation Matrix (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Transaction Value as a Multiple of: ----------------------------------------------- Class A Class B Class C (a) (b) Stock Stock Stock Offer Transaction LTM 1995E 1996F 1995E 1995E Price Price Price Value Value EBITDA EBITDA EBITDA EBIT Revenues ------- ------- ------- ----- ---------- ------ ------ ------ ----- -------- $25.000 $0.500 $25.000 $67.9 $945.6 6.45 x 6.69 x 5.86 x 9.71 x 1.70 x 25.500 0.500 25.500 69.2 946.9 6.45 6.70 5.87 9.72 1.70 26.000 0.500 26.000 70.6 948.3 6.46 6.71 5.88 9.73 1.71 26.500 0.500 26.500 71.9 949.6 6.47 6.72 5.88 9.75 1.71 27.000 0.500 27.000 73.3 951.0 6.48 6.73 5.89 9.76 1.71 27.500 0.500 27.500 74.6 952.3 6.49 6.74 5.90 9.78 1.71 28.000 0.500 28.000 76.0 953.7 6.50 6.75 5.91 9.79 1.72 28.500 0.500 28.500 77.3 955.0 6.51 6.76 5.92 9.80 1.72 29.000 0.500 29.000 78.7 956.4 6.52 6.77 5.93 9.82 1.72 29.500 0.500 29.500 80.0 957.7 6.53 6.78 5.93 9.83 1.72 30.000 0.500 30.000 81.4 959.1 6.54 6.79 5.94 9.85 1.73 30.500 0.500 30.500 82.7 960.4 6.55 6.80 5.95 9.86 1.73 31.000 0.500 31.000 84.1 961.8 6.56 6.81 5.96 9.87 1.73 31.500 0.500 31.500 85.4 963.1 6.56 6.82 5.97 9.89 1.73 32.000 0.500 32.000 86.8 964.5 6.57 6.83 5.98 9.90 1.74 32.500 0.500 32.500 88.1 965.8 6.58 6.84 5.98 9.92 1.74 33.000 0.500 33.000 89.5 967.2 6.59 6.84 5.99 9.93 1.74 33.500 0.500 33.500 90.8 968.5 6.60 6.85 6.00 9.94 1.74 34.000 0.500 34.000 92.2 969.9 6.61 6.86 6.01 9.96 1.74 34.500 0.500 34.500 93.5 971.2 6.62 6.87 6.02 9.97 1.75 35.000 0.500 35.000 94.9 972.6 6.63 6.88 6.03 9.98 1.75 Gem's Proforma Results $146.7 $141.3 $161.4 $97.4 $555.9
- --------------- (a) After deducting proceeds from the exercise of options and warrants, if applicable. (b) Offer value + Net Debt and Other Consideration; includes estimated transaction expenses. -4- Rothschild Inc. Confidential PROJECT WONDER Capitalization Summary (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Scenario: Class A Share Purchase
As of March 31, 1996 ---------------------------------------------------- Proforma Proforma % of THCR Gem Adjust. As Adjust. Capital. ------ ------ -------- --------- ------- Excess Cash $8.5 $82.9 ($71.5) $19.9 - Restricted Cash 5.5 25.0 30.5 - ------ ------ ------ -------- Total $14.0 $107.9 ($71.5) $50.4 ====== ====== ====== ======== Debt THCR 10.875% Mtg Bonds $330.0 $330.0 21.4% THCR 15.500% Snr Sec Nts 155.0 155.0 10.1% THCR Cap Lease & Other 45.2 45.2 2.9% Gem 11.350% Mtg Bonds 793.7 (793.7) 0.0 0.0% Gem NatWest Loan 45.5 0.0 45.5 3.0% Gem New Mtg Bonds 0.0 750.0 750.0 48.7% ------ ------ ------ -------- ----- Total $530.2 $839.2 ($43.7) $1,325.7 86.0% ====== ====== ====== ======== ===== Shareholders' Equity $47.0 $29.0 $139.1 $215.1 14.0% ------ ------ ------ -------- ----- Total Capitalization $577.2 $868.2 $95.4 $1,540.8 100.0% ====== ====== ====== ======== =====
-5- Rothschild Inc. Confidential PROJECT WONDER Sources and Uses Summary (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Sources Uses ---------------------------------- -------------------------------------------- Cash on hand $71.5 Payment to First Fidelity $50.0 New Mortgage Bonds 750.0 Payment to Bankers Trust 10.0 New Common 191.0 (1) Redeem Mtg Bonds 793.7 Redeem NatWest Loan 0.0 Purchase/Exchange A & C shares 81.0 Purchase B shares 0.4 THCR Equity to First Fidelity 10.0 Accrued Interest 27.4 Transaction Expenses 40.0 ------- ------- 1,012.5 1,012.5 ======= =======
(1) Assumes $100.0 million of new equity is sold to the public. -6- Rothschild Inc. Confidential PROJECT WONDER FY 1996 AND FY 1997 Pro Forma Accretion / (Dilution) Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Scenario: Class A Share Purchase
THCR Standalone FY 1996 FY 1997 ------- ------- Adjusted EPS $1.87 $2.90
1996 1997 ------------------------------------------- ----------------------------------------- Pro Forma EPS (1) THCR Price per Share THCR Price per Share ----------------- Offer ------------------------------------------- ----------------------------------------- Value $21.750 $22.500 $25.000 $27.500 $30.000 $21.750 $22.500 $25.000 $27.500 $30.000 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- $25.000 $1.45 $1.47 $1.52 $1.56 $1.60 $2.84 $2.87 $2.96 $3.04 $3.12 $30.000 1.41 1.43 1.48 1.52 1.56 $2.76 $2.79 $2.89 $2.97 $3.05 $35.000 1.37 1.38 1.44 1.48 1.52 $2.69 $2.72 $2.82 $2.90 $2.98 $ Accretion / (Dilution) Offer ------------------------ Value ------- $25.000 ($0.41) ($0.40) ($0.35) ($0.31) ($0.27) ($0.06) ($0.03) $0.06 $0.14 $0.22 $30.000 (0.46) (0.44) (0.39) (0.35) (0.31) ($0.14) ($0.11) ($0.01) $0.07 $0.15 $35.000 (0.50) (0.48) (0.43) (0.39) (0.35) ($0.21) ($0.18) ($0.08) $0.00 $0.08 % Accretion / (Dilution) Offer ------------------------ Value ------- $25.000 -22.22% -21.36% -18.77% -16.51% -14.53% -2.23% -1.16% 2.11% 4.94% 7.42% $30.000 -24.52% -23.65% -21.00% -18.69% -16.66% -4.87% -3.77% -0.43% 2.48% 5.04% $35.000 -26.72% -25.83% -23.14% -20.78% -18.70% -7.38% -6.26% -2.85% 0.13% 2.76%
- --------------- (1) Excludes the exercise of the THCR warrant. -7- Rothschild Inc. Confidential PROJECT WONDER Transaction Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Creates a multi-property gaming enterprise with a dominant presence in Atlantic City. . Eliminates DJT's potential conflict of interest among two of his largest properties. . Provides Gem's Class A shareholders liquidity through THCR shares or cash. . A block of 300,000 shares of Gem's Class A common stock was recently traded at $22.00 per share (net of transaction costs). . A block of approximately 90,000 shares of Gem's Class A common stock is currently being offered at $23.00 per share. . Payment to Bankers Trust. . "Cleans up" Gem's equity. . THCR will not go forward with proposed transaction if Gem is subject to secured lien on 50% of its equity. . Bankers Trust will not release lien without being compensated as proposed in Merger Transaction. -8- Rothschild Inc. Confidential PROJECT WONDER Transaction Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Termination of Taj Services Agreement. . Elimination of fees which amounted to approximately $1.9 million, $1.4 million, and $1.6 million during the years ended 1995, 1994, and 1993, respectively. . Purchase of Realty Corp.'s parcels. . Enables Gem to implement expansion plans on property essential to the entire operation. . Eliminates $2.7 million annual lease payment. . Repayment of First Fidelity Loan at a significant discount. . Gem gains title free and clear of liens and security interests. . Upon redemption of the NatWest Loan, Realty Corp. would be entitled to supplemental rent equal to $416,666.67 per month plus an amount equal to 16.5% of the remaining EACF Amount. . Removes situation where Realty Corp. gains control of improvements on specified parcels upon expiration of lease. -9- Rothschild Inc. Confidential PROJECT WONDER Transaction Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Purchase of Realty Corp.'s parcels (continued). . According to First Fidelity's First Amendment to Amended and Restated Time Loan Agreement, First Fidelity will release the specified parcels at the following prices: Hutt Parcel: $ 1.0 million Social Security Parcel: 4.6 million Consolidated Parcel: 5.0 million Synagogue Parcel: 3.9 million "3.7 acre" Tract: 18.1 million "210" Strip: 33.8 million Steel Pier: 10.0 million Presbyterian Ave. Parcel: 1.8 million Kramer Warehouse Parcel: 1.8 million ------------- $80.1 million ============= -10- Rothschild Inc. Confidential PROJECT WONDER Transaction Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Purchase of Realty Corp.'s parcels (continued). . Aggregate release value is significantly above the value being proposed to First Fidelity in the Merger Transaction. . Appraisal Group International's March 1994 appraisal indicated current land prices for casino development ranging from $200 to $300 per square foot. - Rothschild estimates the present value of the First Fidelity payment stream and the residual value of Realty Corp.'s land and improvements ranging from approximately $64 million to $85 million. . Termination Right - THCR Common Stock. . THCR: market value of the THCR Common Stock shall be $20.00 or more. -11- Rothschild Inc. Confidential PROJECT WONDER Transaction Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Gem's First Mortgage Bonds taken out at par plus accrued. . Refinancing provides extension of maturity. . Provides flexibility for expansion of Gem, which otherwise would not be allowed under the existing indenture unless a bondholder consent is given. . Elimination of the cash sweep mechanism on the public bonds. . Elimination of future payments in-kind. . Reduce Gem's long-term debt from $839 million to $796 million. . Obtain potential operational synergies between properties and possible cross- marketing benefits. . Administration and legal. . Marketing. . Purchasing. . Entertainment. . Project management. . Warehousing and transportation. . Human resources. -12- Rothschild Inc. Confidential PROJECT WONDER Market Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Atlantic City continues to experience an improved regulatory environment. . For the year ended 1995, Atlantic City casino revenues were $3.7 billion, an increase of approximately 10% compared to the year-ago period. . At the end of 1994, the twelve Atlantic City casinos contained 9,227 guest rooms. Over the next two years, approximately 3,600 rooms, excluding Gem, will be constructed, resulting in approximately 40% increase in capacity. - Expanded hotel accommodations should enhance future revenue growth in the Atlantic City market as well as promote a destination weekend resort atmosphere. . Casino yields from overnight guests are approximately 3.0 to 3.5 times greater than that for a drive-in patron. - Potential Mirage Resorts/Circus Circus project would be the single- largest addition to the market since the opening of Gem and could significantly increase the size of the Atlantic City market. Mirage would effectively dilute existing property's fair share (based on casino sq. ft.) by approximately 16%, assuming all properties will have expanded their operations according to announced proposals. Excluding Gem, six casinos plan to expand their casino space by approximately 160,000 square feet, resulting in an approximately 20% increase in total floor space. -13- Rothschild Inc. Confidential PROJECT WONDER Market Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . The December 7, 1995 research report by Deutsche Morgan Grenfell/C.J. Lawrence advanced the assumption that market revenues would grow approximately 11% in 1995, 4% in 1996, 5% in 1997, 18% in 1998, 13% in 1999, and 12% in 2000. . Atlantic City is a regional market that competes with facilities in the Northeastern and Mid-Atlantic regions and to a lesser extent with gaming enterprises nationwide in addition to facilities operated by Native American tribes. . A proposal to allow casino operations in Bridgeport, Connecticut was recently defeated by that state's senate -14- Rothschild Inc. Confidential PROJECT WONDER Gem Business Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Gem is considered the premier hotel casino in Atlantic City that focuses on first class service and accommodations that has successfully responded to industry trends and patron's preferences. . Gem's estimated gross operating income for the fiscal year 1995 is up approximately 12% compared to the year-ago period. . 1995 fiscal year's estimated gross operating income is the highest in the property's history. . Management continues to expand its table and slots marketing programs to differentiate the property from competing Atlantic City casinos. . Since 1992, Gem has increased its relative market share of table wins. . Gem should experience improved slots performance as a result of its recent investment in new machines and expanded marketing programs. -15- Rothschild Inc. Confidential PROJECT WONDER Gem Business Considerations (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Gem's marketing initiatives : . In 1995, Gem will have replaced 1,250 slot machines and expect to replace an additional 1,050 in 1996. All machines will be equipped with state-of- the-art technology and built-in bill changers. . Recent opening of the "Dragon Room" in response to a growing Asian clientele. . Conversion of the Casbah Lounge into a high-end slot area and club. . Expected opening of Sultan's Place which will provide the most exclusive gaming area in Atlantic City. . Expected additions of The Rain Forest, All Star, and Hard Rock Cafe restaurants will provide additional entertainment opportunities to complement the property's existing operation. -16- Rothschild Inc. Confidential PROJECT WONDER Valuation Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Key Assumptions to Financial Projections: . Management Projections: - 1996 based on Gem business plan. - Gaming and other revenue growth of 5.0% in 1997, 5.5% in 1998, 4.0% in 1999, 4.5% in 2000. - Promotional allowances growth of 5.0% in 1997, 5.5% in 1998, 4.0% in 1999, 4.5% in 2000. - Operating expense growth of approximately 3.25% per year beginning in 1997. - Realty Corp. lease expense of $2.7 million per year. - Taj Services Agreement's fee as a percentage of revenues. - Capital expenditures of $25.0 million per year. - CRDA investment ranging from $7.0 to $8.0 million per year with a write down equal to 50% of investment. - Partnership capital distributions of approximately $1.7 million per year. - Additionally, Rothschild assumed working capital requirements of $1 million per year and assumed a blended tax provision of 42% on pre-tax earnings. . These forecasts do not reflect the expansion program because absent a Transaction or consent by the public bondholders, Gem would be unable to finance such a program. -17- Rothschild Inc. Confidential PROJECT WONDER Valuation Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Key Assumptions to Financial Projections (continued): . Adjusted Management Projections: - For purposes of our preliminary valuation analyses, we felt that it was prudent to be slightly more conservative than management's financial projections. - In developing our financial projections for 1997 and beyond, we made the following assumptions: . Net revenue growth of 4% per year. . Without any incremental competition, Atlantic City revenues should be expected to grow at a pace of 3% to 4% per year, tracking the level of anticipated inflation. Since 1989, market revenues have grown at compounded annual growth rate of approximately 3.5% and over past ten years, Atlantic City has experienced an annualized rate of approximately 5.5%. . All other assumptions were consistent with management's projections. - Operating results are sensitive to small fluctuations in revenues; for instance, a 1% divergence in revenues during the 1997-2000 time period would have a cumulative change in EBITDA of approximately $20 million. -18- Rothschild Inc. Confidential PROJECT WONDER Valuation Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Valuation Analyses: . Rothschild employed three valuation methodologies: (i) Market Capitalization Analysis, (ii) Discounted Cash Flow Analysis, and, (iii) Comparable Transaction Analysis. The range of values per Class A share is unadjusted for the possible dilution from the 14% payment. These analyses do not reflect the expansion program because absent a transaction or consent by public bondholders, Gem would be unable to finance such a program. . Market Capitalization Analysis: - Rothschild's analysis of current valuation multiples were based on the seven publicly traded enterprises that have operations in Atlantic City: Aztar, Bally Entertainment., Hollywood Casino, Harrah's Entertainment, Griffin Gaming & Entertainment, Showboat, and THCR. . These companies are currently trading at 5.5 times estimated 1996 and 6.0 times estimated 1995 EBITDA. Implied range of values are as follows:
Post-First Fidelity Post-First Fidelity Pre-First Fidelity Guarantee (a) Guarantee (b) Guarantee ------------------- ------------------- ------------------ Gem Equity Value per Class A Share ($2.23) - $24.91 $2.41 - $29.56 $8.88 - $36.02
- ---------------- (a) Guarantee valued at face amount. (b) Guarantee valued at a discount to face amount. -19- Rothschild Inc. Confidential PROJECT WONDER Valuation Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Valuation Analyses (continued): . Discounted Cash Flow Analysis: - Based on Management's and Adjusted Management's projections, Rothschild estimated the present value of (i) the future cash flows of Gem that could be expected over a five-year time period without consideration to any benefits from an expansion of the property, and (ii) the year 5 terminal value - determined by multiplying year 5 EBITDA by a range of valuation multiples (4.5 to 5.5) - using discount rates ranging from 12% to 15%. Implied range of values are as follows:
Post-First Fidelity Post-First Fidelity Pre-First Fidelity Guarantee (a) Guarantee (b) Guarantee ------------------- ------------------- ------------------ Gem Equity Value per Class A Share Management Projections 12% $22.11 - $67.40 $ 26.75 - $72.04 $33.22 - $78.51 15% ($11.93) - $27.76 ($7.28) - $32.40 ($0.82) - $38.87 Adjusted Projections 12% ($ 4.42) - $36.73 $ 0.23 - $41.37 $ 6.69 - $47.84 15% ($35.40) - $ 0.65 ($30.76) - $ 5.30 ($24.29) - $11.76
- ---------------- (a) Guarantee valued at face amount. (b) Guarantee valued at a discount to face amount. -20- Rothschild Inc. Confidential PROJECT WONDER Valuation Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- . Valuation Analyses (continued): . Comparable Transaction Analysis: - Rothschild analyzed ten selected acquisitions in the gaming industry over the past five years. Two of the transactions consisted of companies that operated properties in the Atlantic City market. . Total enterprise value as a multiple of latest twelve months EBITDA and EBIT ranged from approximately 4.5 to 9.5 and 5.0 to 13.0, respectively. ITT Corporation acquired Caesar's World, Inc. at a 60% premium over trading levels 30 days prior to the announcement of the transaction. Based on Gem's estimated 1995 and 1996 EBITDA levels, the implied range of values is as follows:
Post-First Fidelity Post-First Fidelity Pre-First Fidelity Guarantee (a) Guarantee (b) Guarantee ------------------- ------------------- ------------------- Gem Equity Value per Class A Share Including Caesar's World $ 12.97 - $58.25 $ 17.61 - $62.89 $ 24.08 - $69.36 Excluding Caesar's World ($28.05) - $11.30 ($23.40) - $15.94 ($16.93) - $22.41
- ---------------- (a) Guarantee valued at face amount. (b) Guarantee valued at a discount to face amount. -21- Rothschild Inc. Confidential PROJECT WONDER Market Capitalization Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Management Projections - ----------------------
Valuation Multiple Market Capitalization ------------------ ------------------------ Low Mid High Low Mid High ---- ---- ---- ------ ------ ------ 1995E EBITDA $136.7 5.75 6.00 6.25 $785.9 $820.1 $854.3 1996E EBITDA $156.5 5.25 5.50 5.75 821.4 860.6 899.7 ------ ------ ------ TEV Range $803.7 $840.3 $877.0 ------ ------ ------ Plus: Excess Cash (a) $55.8 $55.8 $55.8 Less: Debt Outstanding (b) (c) (865.6) (865.6) (865.6) Equity Value ($6.0) $30.6 $67.3 ====== ====== ====== Taj Mahal Holding Distribution 50.00% ($3.0) $15.3 $33.6 Per Class A Share ($2.23) $11.34 $24.91 Memo: ---------------------------------- Unadjusted Book Value per Class A Share (d) $14.92
(a) Represents estimated cash balances (12/31/95) net of reserves for cage cash, working capital, and accrued cash interest on the Mtg. Bonds. (b) Estimated as of December 31, 1995, including accrued interest on the Mtg Bonds payable in kind. (c) Includes $30.0 First Fidelity Guarantee. (d) Book Value is unadjusted to the extent that the 11.35% bonds are net of unamortized discount. Rothschild Inc. Confidential PROJECT WONDER Market Capitalization Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Management Projections
Valuation Multiple Market Capitalization Low Mid High Low Mid High ---- ---- ---- ------ ------ ------ 1995E EBITDA $136.7 5.75 6.00 6.25 $785.9 $820.1 $854.3 1996E EBITDA $156.5 5.25 5.50 5.75 821.4 860.6 899.7 ------ ------ ------ TEV Range $803.7 $840.3 $877.0 ------ ------ ------ Plus: Excess Cash (a) $55.8 $55.8 $55.8 Less: Debt Outstanding (b)(c) (853.0) (853.0) (853.0) Equity Value $6.5 $43.2 $79.8 ------ ------ ------ Taj Mahal Holding Distribution 50.00% $3.3 $21.6 $39.9 Per Class A Share $2.41 $15.98 $29.56 Memo: ----------------------------------------------- Unadjusted Book Value per Class A Share (d) $14.92
(a) Represents estimated cash balances (12/31/95) net of reserves for cage cash, working capital, and accrued cash interest on the Mtg. Bonds (b) Estimated as of December 31, 1995, including accrued interest on the Mtg Bonds payable in kind. (c) Includes First Fidelity Guarantee valued at a discount to face amount. (d) Book Value is unadjusted to the extent that the 11.35% bonds are net of unamortized discount. Rothschild Inc. Confidential PROJECT WONDER Market Capitalization Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Management Projections
Valuation Multiple Market Capitalization Low Mid High Low Mid High ---- ---- ---- ------ ------ ------ 1995E EBITDA $136.7 5.75 6.00 6.25 $785.9 $820.1 $854.3 1996E EBITDA $156.5 5.25 5.50 5.75 821.4 860.6 899.7 ------ ------ ------ TEV Range $803.7 $840.3 $877.0 ------ ------ ------ Plus: Excess Cash (a) $55.8 $55.8 $55.8 Less: Debt Outstanding (b)(c) (835.6) (835.6) (835.6) Equity Value $24.0 $60.6 $97.3 ====== ====== ====== Taj Mahal Holding Distribution 50.00% $12.0 $30.3 $48.6 Per Class A Share $8.88 $22.45 $36.02 ------ ------ ------ Memo: ------------------------------------ Unadjusted Book Value per Class A Share (d) $14.92
(a) Represents estimated cash balances (12/31/95) net of reserves for cage cash, working capital, and accrued cash interest on the Mtg. Bonds. (b) Estimated as of December 31, 1995, including accrued interest on the Mtg Bonds payable in kind. (c) Excludes $30.0 First Fidelity Guarantee. (d) Book Value is unadjusted to the extent that the 11.35% bonds are net of unamortized discount. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Analysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
MANAGEMENT PROJECTIONS - ---------------------- Fiscal Year Ending December 31, ------------------------------- 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $608.5 $642.0 $667.7 $697.7 EBITDA (a) $156.5 $171.6 $190.8 $200.7 $215.5 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------ Operating Income 105.1 132.9 153.7 161.7 174.5 Tax Provision (42%) (44.1) (55.8) (64.5) (67.9) (73.3) ------ ------ ------ ------ ------ Net Income $60.9 $77.1 $89.1 $93.8 $101.2 ====== ====== ====== ====== ====== Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) ------ ------ ------ ------ ------ Estimated After-Tax Free Cash $74.6 $81.3 $91.4 $97.6 $106.7 ====== ====== ====== ====== ====== MAJOR Revenue Growth 4.3% 5.0% 5.5% 4.0% 4.5% ASSUMPTIONs EBITDA Margin 27.0% 28.2% 29.7% 30.1% 30.9% Net Income Margin 10.5% 12.7% 13.9% 14.0% 14.5% Depreciation / Revenues 8.3% 5.8% 5.2% 5.3% 5.3% Chg in Wkg Cap as % of Reve 4.2% 3.5% 3.0% 3.9% 3.3% Capital Expenditures / Reve 4.9% 4.1% 3.9% 3.7% 3.6% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a Equity Value as a Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) Multiple of 2000 EBITDA Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ------- --------- ----- ----- ------ ----- ----- ----- -------- ------ ----- ----- 12.0% $319.1 $550.3 $611.5 $672.6 $869.4 $930.5 $991.7 $809.7 $59.7 $120.8 $182.0 13.0% 310.8 526.4 584.9 643.4 837.2 895.7 954.2 809.7 27.5 86.0 144.5 14.0% 302.9 503.7 559.7 615.7 806.6 862.6 918.6 809.7 (3.1) 52.9 108.9 15.0% 295.3 482.2 535.8 589.3 777.5 831.1 884.7 809.7 (32.2) 21.4 75.0 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of Equity Value Per Class A Multiple of 2000 Discount Enterprise Value (A + B) Multiple of 2000 EBITDA 4.5 x 5.0 x 5.5 x Rates 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x ----- ----- ----- ------- ----- ----- ----- ----- ----- ----- Sales 1.39 x 1.54 x 1.70 x 12.0% 63.3% 65.7% 67.8% $22.11 $44.75 $67.40 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.9% 65.3% 67.4% $10.19 $31.86 $53.52 EBIT 5.56 x 6.17 x 6.79 x 14.0% 62.4% 64.9% 67.0% ($1.14) $19.59 $40.32 Net Incom 9.58 x 10.65 x 11.71 x 15.0% 62.0% 64.5% 66.6% ($11.93) $7.92 $27.76
Valuation as of December 31, 1995 --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Includes $30.0 First Fidelity Guarantee. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Anyalysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
MANAGEMENT PROJECTIONS - ---------------------- Fiscal Year Ending December 31, ------------------------------ 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $608.5 $642.0 $667.7 $697.7 EBITDA (a) $156.5 $171.6 $190.8 $200.7 $215.5 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------- Operating Income 105.1 132.9 153.7 161.7 174.5 Tax Provision (42%) (44.1) (55.8) (64.5) (67.9) (73.3) ------ ------ ------ ------ ------- Net Income $60.9 $77.1 $89.1 $93.8 $101.2 ====== ====== ====== ====== ======= Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) ------ ------ ------ ------ ------- Estimated After-Tax Free Cash Flow $74.6 $81.3 $91.4 $97.6 $106.7 ====== ====== ====== ====== ======= MAJOR REVENUE GROWTH 4.3% 5.0% 5.5% 4.0% 4.5% ASSUMPTIONS EBITDA Margin 27.0% 28.2% 29.7% 30.1% 30.9% Net Income Margin 10.5% 12.7% 13.9% 14.0% 14.5% Depreciation / Revenues 8.3% 5.8% 5.2% 5.3% 5.3% Chg in Wkg Cap as % of Revenues C 4.2% 3.5% 3.0% 3.9% 3.3% Capital Expenditures / Revenues 4.9% 4.1% 3.9% 3.7% 3.6% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a EQUITY VALUE AS A Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) MULTIPLE OF 2000 EBITDA ----------- ----------------------- Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ----- ---------- ----- ----- ----- ----- ----- ----- -------- ----- ----- ----- 12.0% $319.1 $550.3 $611.5 $672.6 $869.4 $930.5 $991.7 $797.2 $72.2 $133.4 $194.5 13.0% 310.8 526.4 584.9 643.4 837.2 895.7 954.2 797.2 40.1 98.5 157.0 14.0% 302.9 503.7 559.7 615.7 806.6 862.6 918.6 797.2 9.5 65.4 121.4 15.0% 295.3 482.2 535.8 589.3 777.5 831.1 884.7 797.2 (19.7) 33.9 87.5 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of EQUITY VALUE PER CLASS A SHARE Multiple of 2000 Discount Enterprise Value (A+B) MULTIPLE OF 2000 EBITDA 4.5x 5.0x 5.5x Rates 4.5x 5.0x 5.5x 4.5x 5.0x 5.5x ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- Sales 1.39 x 1.54 x 1.70 x 12.0% 63.3% 65.7% 67.8% $26.75 $49.40 $72.04 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.9% 65.3% 67.4% $14.84 $36.50 $58.16 EBIT 5.56 x 6.17 x 6.79 x 14.0% 62.4% 64.9% 67.0% $3.50 $24.23 $44.96 Net Incom 9.58 x 10.65 x 11.71 x 15.0% 62.0% 64.5% 66.6% ($7.28) $12.56 $32.40
VALUATION AS OF DECEMBER 31, 1995 - --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Includes First Fidelity Guarantee valued at a discount to face amount. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Analysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
MANAGEMENT PROJECTIONS - ---------------------- Fiscal Year Ending December 31, ------------------------------ 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $608.5 $642.0 $667.7 $697.7 EBITDA (a) $156.5 $171.6 $190.8 $200.7 $215.5 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------- Operating Income 105.1 132.9 153.7 161.7 174.5 Tax Provision (42%) (44.1) (55.8) (64.5) (67.9) (73.3) ------ ------ ------ ------ ------- Net Income $60.9 $77.1 $89.1 $93.8 $101.2 ====== ====== ====== ====== ======= Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) ------ ------ ------ ------ ------- Estimated After-Tax Free Cash Flow $74.6 $81.3 $91.4 $97.6 $106.7 ====== ====== ====== ====== ======= MAJOR Revenue Growth 4.3% 5.0% 5.5% 4.0% 4.5% ASSUMPTIONS EBITDA Margin 27.0% 28.2% 29.7% 30.1% 30.9% Net Income Margin 10.5% 12.7% 13.9% 14.0% 14.5% Depreciation / Revenues 8.3% 5.8% 5.2% 5.3% 5.3% Chg in Wkg Cap as % of Revenues Chg. 4.2% 3.5% 3.0% 3.9% 3.3% Capital Expenditures / Revenues 4.9% 4.1% 3.9% 3.7% 3.6% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a EQUITY VALUE AS A Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) MULTIPLE OF 2000 EBITDA ------------------------------- --------------------------- ----------------------- Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ----- ---------- ----- ----- ----- ----- ----- ----- -------- ----- ----- ----- 12.0% $319.1 $550.3 $611.5 $672.6 $869.4 $930.5 $991.7 $779.7 $89.7 $150.8 $212.0 13.0% 310.8 526.4 584.9 643.4 837.2 895.7 954.2 779.7 57.5 116.0 174.5 14.0% 302.9 503.7 559.7 615.7 806.6 862.6 918.6 779.7 26.9 82.9 138.9 15.0% 295.3 482.2 535.8 589.3 777.5 831.1 884.7 779.7 (2.2) 51.4 105.0 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of EQUITY VALUE PER CLASS A SHARE Multiple of 2000 Enterprise Value (A+B) MULTIPLE OF 2000 EBITDA ---------------------------- Discount --------------------------------- ------------------------------ 4.5x 5.0x 5.5x Rates 4.5x 5.0x 5.5x 4.5x 5.0x 5.5x ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- Sales 1.39 x 1.54 x 1.70 x 12.0% 63.3% 65.7% 67.8% $33.22 $55.86 $78.51 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.2% 65.3% 67.4% $21.30 $42.97 $64.63 EBIT 5.56 x 6.17 x 6.79 x 14.0% 62.4% 64.9% 67.0% $9.97 $30.70 $51.43 Net Incom 9.58 x 10.65 x 11.71 x 15.0% 62.0% 64.5% 66.6% ($0.82) $19.03 $38.87
VALUATION AS OF DECEMBER 31, 1995 - --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Excludes $30.0 First Fidelity Guarantee. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Anyalysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
ADJUSTED MANAGEMENT PROJECTIONS - ------------------------------- Fiscal Year Ending December 31, ------------------------------ 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $602.7 $626.8 $651.9 $678.0 EBITDA (a) $156.5 $165.8 $175.6 $184.9 $195.8 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------- Operating Income 105.1 127.1 138.5 146.0 154.8 Tax Provision (42%) (44.1) (53.4) (58.2) (61.3) (65.0) ------ ------ ------ ------ ------- Net Income $60.9 $73.7 $80.3 $84.7 $89.8 ====== ====== ====== ====== ======= Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) Estimated After-Tax Free Cash Flow $74.6 $77.9 $82.6 $88.5 $95.3 ====== ====== ====== ====== ======= MAJOR REVENUE GROWTH 4.3% 4.0% 4.0% 4.0% 4.0% ASSUMPTIONS EBITDA Margin 27.0% 27.5% 28.0% 28.4% 28.9% Net Income Margin 10.5% 12.2% 12.8% 13.0% 13.2% Depreciation / Revenues 8.3% 5.9% 5.3% 5.4% 5.5% Chg in Wkg Cap as % of Revenues C 4.2% 4.3% 4.1% 4.0% 3.8% Capital Expenditures / Revenues 4.9% 4.1% 4.0% 3.8% 3.7% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a EQUITY VALUE AS A Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) MULTIPLE OF 2000 EBITDA ----------- ----------------------- Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ----- ---------- ----- ----- ----- ----- ----- ----- -------- ----- ----- ----- 12.0% $297.8 $499.9 $555.5 $611.0 $797.8 $853.3 $908.9 $809.7 ($11.9) $43.6 $99.2 13.0% 290.3 478.2 531.3 584.5 768.5 821.6 874.8 809.7 $41.2) 11.9 65.1 14.0% 283.0 457.6 508.4 559.3 740.6 791.5 842.3 809.7 (69.1) (18.2) 32.6 15.0% 276.1 276.1 486.7 535.4 714.1 762.8 811.5 809.7 (95.6) (46.9) 1.8 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of EQUITY VALUE PER CLASS A SHARE Multiple of 2000 Discount Enterprise Value (A + B) MULTIPLE OF 2000 EBITDA 4.5x 5.0x 5.5x Rates 4.5x 5.0x 5.5x 4.5x 5.0x 5.5x ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- Sales 1.30 x 1.44 x 1.59 x 12.0% 62.7% 65.1% 67.2% ($4.42) $16.15 $36.73 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.2% 64.7% 66.8% $15.26 $4.42 $24.10 EBIT 5.69 x 6.32 x 6.96 x 14.0% 61.8% 64.2% 66.4% ($25.58) ($6.75) $12.08 Net Incom 9.81 x 10.90 x 11.99 x 15.0% 61.3% 63.8% 66.0% ($35.40) ($17.37) $0.65
VALUATION AS OF DECEMBER 31, 1995 - --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Includes $30.0 First Fidelity Guarantee. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Anyalysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
ADJUSTED MANAGEMENT PROJECTIONS - ------------------------------- Fiscal Year Ending December 31, ------------------------------ 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $602.7 $626.8 $651.9 $678.0 EBITDA (a) $156.5 $165.8 $175.6 $184.9 $195.8 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------- Operating Income 105.1 127.1 138.5 146.0 154.8 Tax Provision (42%) (44.1) (53.4) (58.2) (61.3) (65.0) ------ ------ ------ ------ ------- Net Income $60.9 $73.7 $80.3 $84.7 $89.8 ====== ====== ====== ====== ======= Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) Estimated After-Tax Free Cash Flow $74.6 $77.9 $82.6 $88.5 $95.3 ====== ====== ====== ====== ======= MAJOR REVENUE GROWTH 4.3% 4.0% 4.0% 4.0% 4.0% ASSUMPTIONS EBITDA Margin 27.0% 27.5% 28.0% 28.4% 28.9% Net Income Margin 10.5% 12.2% 12.8% 13.0% 13.2% Depreciation / Revenues 8.3% 5.9% 5.3% 5.4% 5.5% Chg in Wkg Cap as % of Revenues C 4.2% 4.3% 4.1% 4.0% 3.8% Capital Expenditures / Revenues 4.9% 4.1% 4.0% 3.8% 3.7% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a EQUITY VALUE AS A Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) MULTIPLE OF 2000 EBITDA ----------- ----------------------- Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ----- ---------- ----- ----- ----- ----- ----- ----- -------- ----- ----- ----- 12.0% $297.8 $499.9 $555.5 $611.0 $797.8 $853.3 $908.9 $797.2 $0.6 $56.2 $111.7 13.0% 290.3 478.2 531.3 584.5 768.5 821.6 874.8 797.2 (28.7) 24.5 77.6 14.0% 283.0 457.6 508.4 559.3 740.6 791.5 842.3 797.2 (56.5) (5.7) 45.2 15.0% 276.1 276.1 486.7 535.4 714.1 762.8 811.5 797.2 (83.0) (34.4) 14.3 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of EQUITY VALUE PER CLASS A SHARE Multiple of 2000 Discount Enterprise Value (A + B) MULTIPLE OF 2000 EBITDA 4.5x 5.0x 5.5x Rates 4.5x 5.0x 5.5x 4.5x 5.0x 5.5x ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- Sales 1.30 x 1.44 x 1.59 x 12.0% 62.7% 65.1% 67.2% $0.23 $20.80 $41.37 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.2% 64.7% 66.8% ($10.62) $9.06 $28.74 EBIT 5.69 x 6.32 x 6.96 x 14.0% 61.8% 64.2% 66.4% ($20.94) ($2.10) $16.73 Net Incom 9.81 x 10.90 x 11.99 x 15.0% 61.3% 63.8% 66.0% ($30.76) ($12.73) $5.30
VALUATION AS OF DECEMBER 31, 1995 - --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Includes First Fidelity Guarantee valued at a discount to face amount. Rothschild Inc. Confidential PROJECT WONDER Discounted Cash Flow Anyalysis (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
ADJUSTED MANAGEMENT PROJECTIONS - ------------------------------- Fiscal Year Ending December 31, ------------------------------ 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $579.6 $602.7 $626.8 $651.9 $678.0 EBITDA (a) $156.5 $165.8 $175.6 $184.9 $195.8 Depreciation 48.2 35.3 33.5 35.2 37.1 CRDA Amortization 3.2 3.4 3.6 3.7 3.9 ------ ------ ------ ------ ------- Operating Income 105.1 127.1 138.5 146.0 154.8 Tax Provision (42%) (44.1) (53.4) (58.2) (61.3) (65.0) ------ ------ ------ ------ ------- Net Income $60.9 $73.7 $80.3 $84.7 $89.8 ====== ====== ====== ====== ======= Working Capital Req'd (1.0) (1.0) (1.0) (1.0) (1.0) Capital Expenditures (28.6) (25.0) (25.0) (25.0) (25.0) CRDA Investment (6.4) (6.8) (7.2) (7.5) (7.8) Partnership Distribution (1.7) (1.7) (1.7) (1.7) (1.7) Estimated After-Tax Free Cash Flow $74.6 $77.9 $82.6 $88.5 $95.3 ====== ====== ====== ====== ======= MAJOR REVENUE GROWTH 4.3% 4.0% 4.0% 4.0% 4.0% ASSUMPTIONS EBITDA Margin 27.0% 27.5% 28.0% 28.4% 28.9% Net Income Margin 10.5% 12.2% 12.8% 13.0% 13.2% Depreciation / Revenues 8.3% 5.9% 5.3% 5.4% 5.5% Chg in Wkg Cap as % of Revenues C 4.2% 4.3% 4.1% 4.0% 3.8% Capital Expenditures / Revenues 4.9% 4.1% 4.0% 3.8% 3.7% PRESENT VALUE A + B = C - D = E Discounted Terminal Value as a Multiple of Total Enterprise Value as a EQUITY VALUE AS A Discount Unlevered 2000 EBITDA Multiple of 2000 EBITDA (b) MULTIPLE OF 2000 EBITDA ----------- ----------------------- Rates Cash Flows 4.5 x 5.0 x 5.5 x 4.5 x 5.0 x 5.5 x Net Debt 4.5 x 5.0 x 5.5 x ----- ---------- ----- ----- ----- ----- ----- ----- -------- ----- ----- ----- 12.0% $297.8 $499.9 $555.5 $611.0 $797.8 $853.3 $908.9 $779.7 $18.1 $73.6 $129.2 13.0% 290.3 478.2 531.3 584.5 768.5 821.6 874.8 779.7 (11.2) 41.9 95.1 14.0% 283.0 457.6 508.4 559.3 740.6 791.5 842.3 779.7 (39.1) 11.8 62.6 15.0% 276.1 276.1 486.7 535.4 714.1 762.8 811.5 779.7 (65.6) (16.9) 31.8 ANALYSIS Terminal Value As An Imputed Terminal Value as a Percentage of EQUITY VALUE PER CLASS A SHARE Multiple of 2000 Discount Enterprise Value (A + B) MULTIPLE OF 2000 EBITDA 4.5x 5.0x 5.5x Rates 4.5x 5.0x 5.5x 4.5x 5.0x 5.5x ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- Sales 1.30 x 1.44 x 1.59 x 12.0% 62.7% 65.1% 67.2% $6.69 $27.27 $47.84 EBITDA 4.50 x 5.00 x 5.50 x 13.0% 62.2% 64.7% 66.8% ($4.15) $15.53 $35.21 EBIT 5.69 x 6.32 x 6.96 x 14.0% 61.8% 64.2% 66.4% ($14.47) $4.36 $23.19 Net Incom 9.81 x 10.90 x 11.99 x 15.0% 61.3% 63.8% 66.0% ($24.29) ($6.26) $11.76
VALUATION AS OF DECEMBER 31, 1995 - --------------------------------- (a) Earnings before interest, taxes, depreciation and amortization; post Realty rent and Gem Services Agreement Fee. (b) Excludes $30.0 First Fidelity Guarantee. Confidential PROJECT WONDER Analysis of Selected Comparable Acquisitions (U.S. dollar amounts in millions, except per share data) - -------------------------------------------------------------------------------- VALUATION MATRIX BASED ON ANALYSIS OF SELECTED ACQUISITION COMPARABLES
--MKT. CAP. AS A MULTIPLE OF:-- NET 1995E 1996E 1995E 1996E 1995E 1996E Management Projections DEBT EBIT EBIT EBITDA EBITDA Net Revenues Net Revenues ---------------------- ------ ----- ----- ------ ------ ------------ ------------ GEM 809.7 $89.7 $105.1 $136.7 $156.5 $555.9 $579.6 VALUATION MULTIPLES ------------------- Maximum 13.1 x 13.1 x 9.5 x 9.5 x 2.74 x 2.74 x Mean (including Caesars) 8.4 8.4 6.2 6.2 1.58 1.58 Mean (excluding Caesars) 7.1 7.1 5.4 5.4 1.52 1.52 Median 7.3 7.3 5.5 5.5 1.54 1.54 Minimum 4.7 4.7 4.6 4.6 0.70 0.70 IMPUTED ENTERPRISE VALUE ------------------------ Maximum $1,175.9 $1,377.5 $1,294.9 $1,482.3 $1,522.0 $1,586.7 Mean (including Caesars) $750.6 $879.3 $844.7 $967.0 $879.7 $917.1 Mean (excluding Caesars) $636.8 $746.0 $734.0 $840.2 $845.0 $880.9 Median $654.8 $767.0 $751.8 $860.6 $856.1 $892.5 Minimum $418.7 $490.5 $627.9 $718.8 $386.6 $403.0 IMPUTED EQUITY VALUE (a) (b) ---------------------------- Maximum $366.1 $567.8 $485.2 $672.6 $712.3 $777.0 Mean (including Caesars) ($59.1) $69.6 $35.0 $157.3 $70.0 $107.4 Mean (excluding Caesars) ($172.9) ($63.7) ($75.7) $30.5 $35.3 $71.2 Median ($155.0) ($42.7) ($58.0) $50.8 $46.4 $82.8 Minimum ($391.0) ($319.2) ($181.8) ($90.9) ($423.2) ($406.7) IMPUTED EQUITY VALUE PER CLASS A SHARE (a) (b) ---------------------------------------------- Maximum $135.61 $210.28 $179.70 $249.11 $263.80 $287.79 Mean (including Caesars) ($21.90) $25.76 $12.97 $58.25 $25.91 $39.78 Mean (excluding Caesars) ($64.04) ($23.60) ($28.05) $11.30 $13.06 $26.37 Median ($57.39) ($15.81) ($21.46) $18.83 $17.17 $30.66 Minimum ($144.82) ($118.23) ($67.33) ($33.67) ($156.73) ($150.63)
(a) Imputed Equity Value = Imputed Market Capitalization + Cash & Marketable Securities - Long-Term Debt - Short-Term Debt - Preferred Equity at Liquidation Value - Minority Interest. (b) Includes $30.0 First Fidelity Guarantee. Confidential PROJECT WONDER Analysis of Selected Comparable Acquisitions (U.S. dollar amounts in millions, except per share data) - -------------------------------------------------------------------------------- VALUATION MATRIX BASED ON ANALYSIS OF SELECTED ACQUISITION COMPARABLES
--MKT. CAP. AS A MULTIPLE OF:-- NET 1995E 1996E 1995E 1996E 1995E 1996E Management Projections DEBT EBIT EBIT EBITDA EBITDA Net Revenues Net Revenues ---------------------- ---- ----- ----- ------ ------ ------------ ------------ GEM 797.2 $89.7 $105.1 $136.7 $156.5 $555.9 $579.6 VALUATION MULTIPLES ------------------- Maximum 13.1 x 13.1 x 9.5 x 9.5 x 2.74 x 2.74 x Mean (including Caesars) 8.4 8.4 6.2 6.2 1.58 1.58 Mean (excluding Caesars) 7.1 7.1 5.4 5.4 1.52 1.52 Median 7.3 7.3 5.5 5.5 1.54 1.54 Minimum 4.7 4.7 4.6 4.6 0.70 0.70 IMPUTED ENTERPRISE VALUE ------------------------ Maximum $1,175.9 $1,377.5 $1,294.9 $1,482.3 $1,522.0 $1,586.7 Mean (including Caesars) $750.6 $879.3 $844.7 $967.0 $879.7 $917.1 Mean (excluding Caesars) $636.8 $746.0 $734.0 $840.2 $845.0 $880.9 Median $654.8 $767.0 $751.8 $860.6 $856.1 $892.5 Minimum $418.7 $490.5 $627.9 $718.8 $386.6 $403.0 IMPUTED EQUITY VALUE (a) (b) ---------------------------- Maximum $378.7 $580.3 $497.7 $685.1 $724.8 $789.6 Mean (including Caesars) ($46.6) $82.1 $47.6 $169.8 $82.5 $119.9 Mean (excluding Caesars) ($160.4) ($51.2) ($63.2) $43.0 $47.8 $83.7 Median ($142.4) ($30.2) ($45.4) $63.4 $58.9 $95.3 Minimum ($378.5) ($306.7) ($169.3) ($78.4) ($410.6) ($394.2) IMPUTED EQUITY VALUE PER CLASS A SHARE (a) (b) ---------------------------------------------- Maximum $140.25 $214.93 $184.34 $253.76 $268.45 $292.43 Mean (including Caesars) ($17.26) $30.40 $17.61 $62.89 $30.56 $44.42 Mean (excluding Caesars) ($59.39) ($18.95) ($23.40) $15.94 $17.70 $31.02 Median ($52.75) ($11.17) ($16.82) $23.48 $21.82 $35.31 Minimum ($140.18) ($113.59) ($62.69) ($29.03) ($152.08) ($145.99)
(a) Imputed Equity Value = Imputed Market Capitalization + Cash & Marketable Securities - Long-Term Debt - Short-Term Debt - Preferred Equity at Liquidation Value - Minority Interest. (b) Includes First Fidelity Guarantee valued at a discount to face amount. Confidential PROJECT WONDER Analysis of Selected Comparable Acquisitions (U.S. dollar amounts in millions, except per share data) - -------------------------------------------------------------------------------- VALUATION MATRIX BASED ON ANALYSIS OF SELECTED ACQUISITION COMPARABLES
--MKT. CAP. AS A MULTIPLE OF:-- NET 1995E 1996E 1995E 1996E 1995E 1996E Management Projections DEBT EBIT EBIT EBITDA EBITDA Net Revenues Net Revenues ---------------------- ---- ------ ------ ------- ------- ------------ ------------ GEM 779.7 $89.7 $105.1 $136.7 $156.5 $555.9 $579.6 VALUATION MULTIPLES ------------------- Maximum 13.1 x 13.1 x 9.5 x 9.5 x 2.74 x 2.74 x Mean (including Caesars) 8.4 8.4 6.2 6.2 1.58 1.58 Mean (excluding Caesars) 7.1 7.1 5.4 5.4 1.52 1.52 Median 7.3 7.3 5.5 5.5 1.54 1.54 Minimum 4.7 4.7 4.6 4.6 0.70 0.70 IMPUTED ENTERPRISE VALUE ------------------------ Maximum $1,175.9 $1,377.5 $1,294.9 $1,482.3 $1,522.0 $1,586.7 Mean (including Caesars) $750.6 $879.3 $844.7 $967.0 $879.7 $917.1 Mean (excluding Caesars) $636.8 $746.0 $734.0 $840.2 $845.0 $880.9 Median $654.8 $767.0 $751.8 $860.6 $856.1 $892.5 Minimum $418.7 $490.5 $627.9 $718.8 $386.6 $403.0 IMPUTED EQUITY VALUE (a) (b) ---------------------------- Maximum $396.1 $597.8 $515.2 $702.6 $742.3 $807.0 Mean (including Caesars) ($29.1) $99.6 $65.0 $187.3 $100.0 $137.4 Mean (excluding Caesars) ($142.9) ($33.7) ($45.7) $60.5 $65.3 $101.2 Median ($125.0) ($12.7) ($28.0) $80.8 $76.4 $112.8 Minimum ($361.0) ($289.2) ($151.8) ($60.9) ($393.2) ($376.7) IMPUTED EQUITY VALUE PER CLASS A SHARE (a) (b) ---------------------------------------------- Maximum $146.72 $221.39 $190.81 $260.22 $274.91 $298.90 Mean (including Caesars) ($10.79) $36.87 $24.08 $69.36 $37.02 $50.89 Mean (excluding Caesars) ($52.92) ($12.48) ($16.93) $22.41 $24.17 $37.48 Median ($46.28) ($4.70) ($10.35) $29.94 $28.29 $41.78 Minimum ($133.71) ($107.12) ($56.22) ($22.56) ($145.61) ($139.52)
(a) Imputed Equity Value = Imputed Market Capitalization + Cash & Marketable Securities - Long-Term Debt - Short-Term Debt - Preferred Equity at Liquidation Value - Minority Interest. (b) Excludes $30.0 First Fidelity Guarantee. Rothschild Inc. Confidential PROJECT WONDER Estimated Valuation of Realty Corp.'s Specified Parcels and Lease (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Assumptions ----------- Annual Lease Payments $2.7 Residual Value: Land Residual Value: Improvements Expiration 2023 Land prices (1994) according to Appraisal Gem Associates Group Int'l report: $200 - $300 per sq ft Unadjust. Book Value $31.3 Trump Service Agreement $0.6 Book Value 28.8 Expiration 2023 Specifed Parcels 11.9 acres Steel Pier 3.5 acres Realty Corp. Supplemental Rent (1) $5.0 Unadjust. Book Value $6.6 Steel Pier $300 sq ft Book Value 6.2 Real Rate of Growth 0.0% "210 Tract"/Block 13 250 sq ft Inflation 4.0% All Other 100 sq ft Total ----- Nominal Rate 4.0% Unadjust. Book Value $37.9 Capital improvements $0.3 per yr. Book Value 35.0
- ---------- (1) Assume that NatWest Loan is redeemed in November 1999. Present Value Analysis ---------------------- Assumed Discount Rate --------------------- 11.0% 11.5% 12.0% 12.5% 13.0% ----- ----- ----- ----- ----- Realty Corp Lease Payment $23.4 $22.6 $21.8 $21.0 $20.3 Trump Service Agreement 4.9 4.8 4.6 4.4 4.3 Supplemental Rent ("NatWest") 27.9 26.5 25.1 23.9 22.7 ----- ----- ----- ----- ----- Sub-Total $56.3 $53.8 $51.5 $49.3 $47.3 ===== ===== ===== ===== ===== Residual Value: Land $22.8 $20.1 $17.7 $15.6 $13.8 Improvements 5.5 4.9 4.3 3.8 3.3 Total $84.6 $78.8 $73.5 $68.7 $64.4 ----- ----- ----- ----- ----- Rothschild Inc. Confidential PROJECT WONDER Valuation of THCR Warrant (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Assumptions - -------------------------------------------------------------------------------- Shares Strike Term Treasury (mm) Price (yrs) Yield Total 1.8 Tranche 1 0.6 $30.00 3.0 5.2% Tranche 2 0.6 35.00 4.0 5.3% Tranche 3 0.6 40.00 5.0 5.4% -------------------------------------------------- Current THCR Stock Price $21.75 Trading Discount (1) 25.0% Warrant Haircut (2) 35.0% Volatility 0.37 (3) Proforma Shares Outstanding 26.4 (4) (1) Based on the warrant being exercisable into investment letter stock. (2) Reflects the illiquidity of the warrant. (3) Based on the trading of THCR stock for the past 30 days. (4) Before exercise of warrants. - -------------------------------------------------------------------------------- Warrant Valuation - -------------------------------------------------------------------------------- per share basis Aggregate Scenario Scenario ------------------- ------------------ I II III I II III ----- ----- ----- ---- ---- ---- Tranche 1 $4.08 $1.75 $1.13 $2.4 $1.0 $0.7 Tranche 2 $4.30 $1.95 $1.27 2.6 1.2 0.8 Tranche 3 $4.56 $2.18 $1.42 2.7 1.3 0.9 ---- ---- ---- Total $7.8 $3.5 $2.3 ==== ==== ==== Scenario I: Based on a hypothetical valuation basis assuming the warrants are fully marketable. Scenario II: Based on a discount to THCR's current share price. Scenario III: Reflects a haircut to the values attributable in scenario II. - -------------------------------------------------------------------------------- Implicit Control Premium - -------------------------------------------------------------------------------- Scenario ------------------------------- I II III ----- ---- ---- 19.2% 8.7% 5.7% ===== ==== ==== Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Income Statement ----------------------------- (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Management Projections No Gem Expansion Proforma ----------------------------------------------------------------------------- Forecast Estimate For year end December 31, Est/Act 9-Mos Ended -------------------------------------------------------- 1995 12/31/96 1996 1997 1998 1999 2000 ------- ----------- ------ ------ ------ ------ ------ Net Revenues $557.7 $446.5 $579.6 $608.5 $642.0 $667.7 $697.7 Gross Operating Income $141.3 $129.0 $161.4 $176.8 $196.2 $206.3 $221.3 margin 25.3% 28.9% 27.8% 29.0% 30.6% 30.9% 31.7% Taj Services Agreement Fee $1.9 0.0 0.5 0.0 0.0 0.0 0.0 Realty Rent 2.7 0.0 0.7 0.0 0.0 0.0 0.0 EBITDA $136.7 $129.0 $160.2 $176.8 $196.2 $206.3 $221.3 margin 24.5% 28.9% 27.6% 29.0% 30.6% 30.9% 31.7% CRDA amortization $3.1 $2.5 $3.2 $3.4 $3.6 $3.7 $3.9 Depreciation & Amort. 43.9 42.6 54.3 43.4 41.7 43.4 45.2 EBIT $89.7 $83.9 $102.7 $129.9 $151.0 $159.2 $172.2 Interest Expense 76.9 71.8 102.0 94.2 94.1 94.1 90.0 Interest Income (3.7) (0.7) (0.7) (2.2) (3.8) (4.9) (6.3) ------- ----------- ------ ------ ------ ------ ------ Net Interest Expense $73.2 $71.0 $101.2 $92.0 $90.3 $89.2 $83.7 Pre-Tax Income $16.5 $12.9 $1.5 $37.9 $60.6 $70.0 $88.6 Tax Provision (@ 42%) 6.9 5.4 0.6 15.9 25.5 29.4 37.2 ------- ----------- ------ ------ ------ ------ ------ Net Income $9.6 $7.5 $0.9 $22.0 $35.2 $40.6 $51.4 ======= =========== ====== ====== ====== ====== ====== Credit Statistics: EBITDA / Cash Interest 1.8 1.8 1.6 1.9 2.1 2.2 2.5 EBITDA-Capex / Cash Interest 1.4 1.5 1.3 1.6 1.8 1.9 2.2 Debt/EBITDA - - 5.0 4.5 4.0 3.6 3.4
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Balance Sheets --------------------------- (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Forecast Management Projections For year end December 31, No Gem Expansion Estimate -------------------------------------------------- 3/31/96 Adjust. As Adjust. 1996 1997 1998 1999 2000 -------- ------- ---------- -------- -------- -------- -------- -------- Assets Cash $82.9 ($71.5) $11.4 $38.5 $71.9 $117.3 $126.1 $191.1 Cage Cash 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Other Current Assets 27.3 27.3 28.0 29.0 30.0 31.0 32.0 -------- ------- -------- -------- -------- -------- -------- -------- $135.2 ($71.5) $63.7 $91.5 $125.9 $172.3 $182.1 $248.1 P, P & E, net $688.4 $209.0 $897.4 $875.0 $859.4 $845.4 $829.8 $812.4 Other 14.1 $27.5 $41.6 42.1 42.7 43.6 44.6 45.7 -------- ------- -------- -------- -------- -------- -------- -------- Total Assets $837.7 $165.0 $1,002.7 $1,008.6 $1,028.0 $1,061.3 $1,056.5 $1,106.2 ======== ======= ======== ======== ======== ======== ======== ======== Liabilities & Shareholders Equity Credit Facility $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Payables and accruals 69.7 (27.4) 42.3 42.3 42.3 42.3 42.3 42.3 -------- ------- -------- -------- -------- -------- -------- -------- Total Current Liabilities $69.7 ($27.4) $42.3 $42.3 $42.3 $42.3 $42.3 $42.3 Long-Term Debt Mortgage Bonds $659.3 ($659.3) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 New Mortgage Notes 0.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 NatWest Loan & Other 45.5 45.5 45.3 44.4 44.2 0.5 0.5 Slot Machine Capitalized Lease 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -------- ------- -------- -------- -------- -------- -------- -------- Total Long-Term Debt 704.8 90.7 795.5 795.3 794.4 794.2 750.5 750.5 Other Liabilities $34.3 ($27.4) $6.9 $6.9 $6.9 $6.9 $6.9 $6.9 Total Liabilities $808.7 $35.9 $844.6 $844.4 $843.5 $843.3 $799.6 $799.6 Shareholders Equity 29.0 129.1 158.1 164.2 184.5 218.0 256.9 306.5 -------- ------- -------- -------- -------- -------- -------- -------- Total Liabilties and Capital $837.7 $165.0 $1,002.7 $1,008.6 $1,028.0 $1,061.3 $1,056.5 $1,106.2 ======== ======= ======== ======== ======== ======== ======== ========
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Cash Flow Statement (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Management Projections No Gem Expansion
Estimate Forecast 9-Mos Ended For year end December 31, ----------------------------------------- 12/31/96 1997 1998 1999 2000 ----------- ------- -------- ------- ------- Net Income $7.5 $22.0 $35.2 $40.6 $51.4 Addback: Depreciation & Amortization 45.0 46.8 45.2 47.1 49.1 Working Capital Required (0.8) (1.0) (1.0) (1.0) (1.0) Interest Payable 0.0 0.0 0.0 0.0 0.0 Capital Expenditures (a) (24.5) (33.5) (33.9) (34.2) (34.5) ----------- ------ -------- ------- ------- Free Cash Flow Before Debt Amortization $27.3 $34.4 $45.5 $52.5 $65.0 =========== ====== ======== ======= ======= Debt Amortization (0.2) (0.9) (0.2) (43.7) 0.0 ----------- ------ -------- ------- ------- Free Cash Flow $27.1 $33.5 $45.3 $8.8 $65.0 =========== ====== ======== ======= ======= Beginning Cash Balance 11.4 38.5 71.9 117.3 126.1 Free Cash Flow 27.1 33.5 45.3 8.8 65.0 Credit Facility 0.0 0.0 0.0 0.0 0.0 ----------- ------ -------- ------- ------- Ending Cash Balance $38.5 $71.9 $117.3 $126.1 $191.1
(a) Includes CRDA Investment and Partnership distribution. Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Income Statement ----------------------------- (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Management Projections With Gem Expansion Proforma -------------------------------------------------------------------------- Forecast Estimate For year end December 31, Est/Act 9-Mos Ended -------------------------------------------------------- 1995 12/31/96 1996 1997 1998 1999 2000 -------- ----------- ------ ------ ------ ------ ------ Net Revenues $557.7 $446.5 $579.6 $678.8 $773.6 $843.4 $916.7 Gross Operating Income $141.3 $129.0 $161.4 $210.4 $257.0 $286.9 $321.1 margin 25.3% 28.9% 27.8% 31.0% 33.2% 34.0% 35.0% Taj Services Agreement Fee $1.9 $0.0 $0.5 $0.0 $0.0 $0.0 $0.0 Realty Rent 2.7 0.0 0.7 0.0 0.0 0.0 0.0 EBITDA $136.7 $129.0 $160.2 $210.4 $257.0 $286.9 $321.1 margin 24.5% 28.9% 27.6% 31.0% 33.2% 34.0% 35.0% CRDA amortization $3.1 $2.5 $3.2 $3.8 $4.3 $4.7 $5.1 Depreciation & Amort. 43.9 42.8 54.5 50.0 53.5 57.4 61.4 EBIT $89.7 $83.7 $102.5 $156.5 $199.1 $224.8 $254.6 Interest Expense 76.9 71.8 99.5 110.4 113.0 108.4 96.3 Interest Income (3.7) (0.2) (0.2) 0.0 0.0 0.0 (1.4) -------- ----------- ------ ------ ------ ------ ------ Net Interest Expense $73.2 $71.6 $99.2 $110.4 $113.0 $108.4 $94.9 Pre-Tax Income $16.5 $12.1 $3.2 $46.1 $86.1 $116.4 $159.6 Tax Provision (@ 42%) 6.9 5.1 1.4 19.4 36.2 48.9 67.0 -------- ----------- ------ ------ ------ ------ ------ Net Income $9.6 $7.0 $1.9 $26.7 $50.0 $67.5 $92.6 ======== =========== ====== ====== ====== ====== ====== Credit Statistics: EBITDA / Cash Interest 1.8 1.8 1.6 1.9 2.3 2.6 3.3 EBITDA-Capex / Cash Interest 1.4 0.4 0.6 0.9 1.6 2.1 3.1 Debt/EBITDA - - 5.0 3.8 3.1 2.6 2.3
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Balance Sheets --------------------------- (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Forecast Management Projections For year end December 31, With Gem Expansion Estimate As ---------------------------------------------------- 3/31/96 Adjust. Adjusted 1996 1997 1998 1999 2000 -------- ------- -------- -------- -------- -------- -------- -------- Assets Cash $82.9 ($71.5) $11.4 $0.0 $0.0 $0.0 $0.0 $68.5 Cage Cash 25.0 25.0 25.0 30.0 30.0 30.0 30.0 Other Current Assets 27.3 27.3 28.0 29.0 30.0 31.0 32.0 -------- ------- -------- -------- -------- -------- -------- -------- $135.2 ($71.5) $63.7 $53.0 $59.0 $60.0 $61.0 $130.6 P, P & E, net $688.4 $209.0 $897.4 $956.0 $1,020.1 $1,041.1 $1,046.5 1,012.8 Other 14.1 $27.5 $41.6 43.1 44.2 45.8 47.7 50.0 -------- ------- -------- -------- -------- -------- -------- -------- Total Assets $837.7 $165.0 $1,002.7 $1,052.1 $1,123.3 $1,146.9 $1,155.2 $1,193.4 ======== ======= ======== ======== ======== ======== ======== ======== Liabilities & Shareholders Equity Credit Facility $0.0 $0.0 $43.9 $80.0 $60.5 $51.5 $0.0 Payables and accruals 69.7 (27.4) 42.3 42.3 42.3 42.3 42.3 42.3 -------- ------- -------- -------- -------- -------- -------- -------- Total Current Liabilities $69.7 ($27.4) $42.3 $86.2 $122.3 $102.8 $93.7 $42.3 Long-Term Debt Mortgage Bonds $659.3 ($659.3) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 New Mortgage Notes 0.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 NatWest Loan & Other 45.5 45.5 45.3 44.4 44.2 0.5 0.5 Slot Machine Capitalized Lease 0.0 0.0 0.0 11.0 6.0 1.2 0.0 -------- ------- -------- -------- -------- -------- -------- -------- Total Long-Term Debt 704.8 90.7 795.5 795.3 805.4 800.2 751.7 750.5 Other Liabilities $34.3 ($27.4) $6.9 $6.9 $6.9 $6.9 $6.9 $6.9 Total Liabilities $808.7 $35.9 $844.6 $888.4 $934.5 $909.9 $852.3 $799.6 Shareholders Equity 29.0 129.1 158.1 163.7 188.8 237.0 302.9 393.7 -------- ------- -------- -------- -------- -------- -------- -------- Total Liabilties and Capital $837.7 $165.0 $1,002.7 $1,052.1 $1,123.3 $1,146.9 $1,155.2 $1,193.4 ======== ======= ======== ======== ======== ======== ======== ========
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Cash Flow Statement (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Management Projections With Gem Expansion
Estimate Forecast 9-Mos Ended For year end December 31, ----------------------------------------- 12/31/96 1997 1998 1999 2000 ----------- ------- -------- ------- ------- Net Income $7.0 $26.7 $50.0 $67.5 $92.6 Addback: Depreciation & Amortization 45.3 53.9 57.8 62.1 66.5 Working Capital Required (0.8) (1.0) (1.0) (1.0) (1.0) (Increase)/Decrease in Cage Cash 0.0 (5.0) 0.0 0.0 0.0 Interest Payable 0.0 0.0 0.0 0.0 0.0 Capital Expenditures (a) (106.7) (120.8) (82.1) (71.1) (36.9) ------ ------ ----- ----- ------ Free Cash Flow Before Debt Amortization ($55.1) ($46.2) $24.7 $57.6 $121.2 ====== ====== ===== ===== ====== Debt Amortization New Bonds Issued 0.0 0.0 0.0 0.0 0.0 Natwest & Other (0.2) (0.9) (0.2) (43.7) 0.0 Slot Machines Capitalized Lease 0.0 11.0 (5.0) (4.8) (1.2) ------ ------ ----- ----- ------ TOTAL (0.2) 10.1 (5.2) (48.5) (1.2) ------ ------ ----- ----- ------ Free Cash Flow ($55.3) ($36.1) $19.5 $9.1 $120.0 ====== ====== ===== ===== ====== Beginning Cash Balance 11.4 0.0 0.0 0.0 0.0 Free Cash Flow (55.3) (36.1) 19.5 9.1 120.0 Credit Facility Activity 43.9 36.1 (19.5) (9.1) (51.5) ------ ------ ----- ----- ------ Ending Cash Balance $0.0 $0.0 $0.0 $0.0 $68.5
(a) Includes CRDA Investment and Partnership distribution. Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Income Statement (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Adjusted Management Projections No Gem Expansion
Proforma -------------------------------------------------------------------- Estimate Forecast Est/Act 9-Mos Ended For year end December 31, ------------------------------------------------------- 1995 12/31/96 1996 1997 1998 1999 2000 ------ -------- ------ ------ ------ ------ ------ Net Revenues $557.7 $446.5 $579.6 $602.7 $626.8 $651.9 $678.0 Gross Operating Income $141.3 $129.0 $161.4 $171.0 $181.1 $190.5 $201.6 margin 25.3% 28.9% 27.8% 28.4% 28.9% 29.2% 29.7% Taj Services Agreement Fee $1.9 0.0 0.5 0.0 0.0 0.0 0.0 Realty Rent 2.7 0.0 0.7 0.0 0.0 0.0 0.0 EBITDA $136.7 $129.0 $160.2 $171.0 $181.1 $190.5 $201.6 margin 24.5% 28.9% 27.6% 28.4% 28.9% 29.2% 29.7% CRDA amortization $3.1 $2.5 $3.2 $3.4 $3.6 $3.7 $3.9 Depreciation & Amort. 43.9 42.6 54.3 43.4 41.7 43.4 45.2 EBIT $89.7 $83.9 $102.7 $124.1 $135.8 $143.4 $152.5 Interest Expense 76.9 71.8 102.0 94.2 94.1 94.1 90.0 Interest Income (3.7) (0.7) (0.7) (2.1) (3.5) (4.2) (5.2) ------ ------ ------ ------ ------ ------ ------ Net Interest Expense $73.2 $71.0 $101.2 $92.1 $90.6 $89.9 $84.8 Pre-Tax Income $16.5 $12.9 $1.5 $32.1 $45.2 $53.5 $67.7 Tax Provision (@ 42%) 6.9 5.4 0.6 13.5 19.0 22.5 28.4 ------ ------ ------ ------ ------ ------ ------ Net Income $9.6 $7.5 $0.9 $18.6 $26.2 $31.0 $39.3 ====== ====== ====== ====== ====== ====== ====== Credit Statistics: EBITDA / Cash Interest 1.8 1.8 1.6 1.8 1.9 2.0 2.2 EBITDA-Capex / Cash Interest 1.4 1.5 1.3 1.5 1.7 1.8 2.0 Debt/EBITDA - - 5.0 4.6 4.4 3.9 3.7
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Balance Sheets (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Adjusted Management Projections Forecast No Gem Expansion Estimate For year end December 31, 3/31/96 Adjust. As Adjust. 1996 1997 1998 1999 2000 ------- ------- ---------- ------ ------ ------ ------ ------ Assets Cash $82.9 ($71.5) $11.4 $38.5 $68.5 $104.9 $104.2 $157.1 Cage Cash 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Other Current Assets 27.3 27.3 28.0 29.0 30.0 31.0 32.0 ------ ------ -------- -------- -------- -------- -------- -------- $135.2 ($71.5) $63.7 $91.5 $122.5 $159.9 $160.2 $214.1 P, P & E, net $688.4 $209.0 $897.4 $875.0 $859.4 $845.4 $829.8 $812.4 Other 14.1 $27.5 $41.6 42.1 42.7 43.6 44.6 45.7 ------ ------ -------- -------- -------- -------- -------- -------- Total Assets $837.7 $165.0 $1,002.7 $1,008.6 $1,024.6 $1,048.9 $1,034.6 $1,072.2 ====== ====== ======== ======== ======= ======== ======== ======== Liabilities & Shareholders Equity Credit Facility $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Payables and accruals 69.7 (27.4) 42.3 42.3 42.3 42.3 42.3 42.3 ------ ------ -------- -------- -------- -------- -------- -------- Total Current Liabilities $69.7 ($27.4) $42.3 $42.3 $42.3 $42.3 $42.3 $42.3 Long-Term Debt Mortgage Bonds $659.3 ($659.3) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 New Mortgage Notes 0.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 NatWest Loan & Other 45.5 45.5 45.3 44.4 44.2 0.5 0.5 Slot Machine Capitalized Lease 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ------ ------ -------- -------- -------- -------- -------- -------- Total Long-Term Debt 704.8 90.7 795.5 795.3 794.4 794.2 750.5 750.5 Other Liabilities $34.3 ($27.4) $6.9 $6.9 $6.9 $6.9 $6.9 $6.9 Total Liabilities $808.7 $35.9 $844.6 $844.4 $843.5 $843.3 $799.6 $799.6 Shareholders Equity 29.0 129.1 158.1 164.2 181.1 205.6 234.9 272.5 ------ ------ -------- -------- -------- -------- -------- -------- Total Liabilties and Capital $837.7 $165.0 $1,002.7 $1,008.6 $1,024.6 $1,048.9 $1,034.6 $1,072.2 ====== ====== ======== ======== ======= ======== ======== ========
Rothschild Inc. Confidential PROJECT WONDER Proforma Gem Cash Flow Statement (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Adjusted Management Projections No Gem Expansion
Estimate Forecast 9-Mos Ended For year end December 31, ------------------------------------------- 12/31/96 1997 1998 1999 2000 -------- ----- ----- ----- ----- Net Income $7.5 $18.6 $26.2 $31.0 $39.3 Addback: Depreciation & Amortization 45.0 46.8 45.2 47.1 49.1 Working Capital Required (0.8) (1.0) (1.0) (1.0) (1.0) Interest Payable 0.0 0.0 0.0 0.0 0.0 Capital Expenditures (a) (24.5) (33.5) (33.9) (34.2) (34.5) ----- ----- ------ ------ ------ Free Cash Flow Before Debt Amortizati $27.3 $31.0 $36.6 $43.0 $52.9 ===== ===== ====== ====== ====== Debt Amortization (0.2) (0.9) (0.2) (43.7) 0.0 ----- ----- ------ ------ ------ Free Cash Flow $27.1 $30.1 $36.4 ($0.7) $52.9 ===== ===== ====== ====== ====== Beginning Cash Balance 11.4 38.5 68.5 104.9 104.2 Free Cash Flow 27.1 30.1 36.4 (0.7) 52.9 Credit Facility 0.0 0.0 0.0 0.0 0.0 ----- ----- ------ ------ ------ Ending Cash Balance $38.5 $68.5 $104.9 $104.2 $157.1
(a) Includes CRDA Investment and Partnership distribution. Rothschild Inc. Confidential PROJECT WONDER Merger Transaction Summary -------------------------- (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- PURCHASE PRICE SUMMARY ---------------------- Common shares % ------ ------ ------ Gem Class A 1.35 38.8% Class B 0.78 22.4% Class C 1.35 38.8% ------ ------ Total 3.48 100.0% ====== ====== Equity Offering Price --------------------- Class A Class B Class C Fst Fidelity ------- ------- ------- ------------ Cash $0.00 $0.50 $0.00 Debt 0.00 0.00 0.00 Common 30.00 0.00 30.00 ------ ----- ------ $30.00 $0.50 $30.00 ====== ===== ====== Allocation of Consideration --------------------------- Cash 0.0% 100.0% 0.0% Debt 0.0% 0.0% 0.0% Common 100.0% 0.0% 100.0% Amount of Consideration ----------------------- Cash $0.0 $0.4 $0.0 - Debt 0.0 0.0 0.0 - Common 40.5 0.0 40.5 10.0 ------ ----- ------ ------ Total $40.5 $0.4 $40.5 $10.0 ====== ===== ====== ====== THCR exchange ratio 1.38 0.00 1.38 - Assumed THCR price per share $21.750 THCR Shareholder Profile Pre-Transaction Post-Transaction ----------------- ------------------ shares % shares % -------- ----- -------- ------ Gem Class A - - 1.86 7.3% Gem Class B - - 0.00 0.0% Gem Class C - - 1.86 7.3% First Fidelity - - 0.46 1.8% Current THCR holders DJT 6.67 39.7% 6.67 26.1% Public 10.14 60.3% 10.14 39.6% New THCR to the Public - - 4.60 18.0% -------- ------ ------- ------ Total (1) 16.80 100.0% 25.59 100.0% ======== ====== ======= ====== (1) Excludes the warrant issued to DJT. SCENARIO: CLASS A SHARE PURCHASE SOURCES AND USES SUMMARY ------------------------ Sources Uses ------- ---- Cash on-hand $71.5 Payment to First Fidelity $50.0 New Notes 750.0 Payment to Bankers Trust 10.0 New Common 191.0 (1) Redeem Mtg Bonds 793.7 Redeem NatWest Loan 0.0 Purchase/Exchange A & C share 81.0 Purchase B shares 0.4 THCR Equity to First Fidelity 10.0 Accrued Interest 27.4 Transaction Expenses 40.0 -------- -------- Total $1,012.5 $1,012.5 ======== ======== (1) Assumes $100.0 million of new equity is sold to the public. CAPITALIZATION SUMMARY ---------------------- As of March 31, 1996 Proforma Proforma % of THCR Gem Adjust. As Adjust. Capital. ------ ------ -------- ---------- -------- Excess Cash $8.5 $82.9 ($71.5) $19.9 Restricted Cash 5.5 25.0 30.5 ------ ------ -------- ---------- Total $14.0 $107.9 ($71.5) $50.4 ====== ====== ======== ========== Debt ---- THCR 10.875% Mtg Bonds $330.0 $330.0 21.4% THCR 15.500% Snr Sec Nts 155.0 155.0 10.1% THCR Cap Lease & Other 45.2 45.2 2.9% Gem 11.350% Mtg Bonds 793.7 (793.7) 0.0 0.0% Gem NatWest Loan 45.5 0.0 45.5 3.0% Gem New Mtg Bonds 750.0 750.0 48.7% Gem New Expand. Nts 0.0 0.0 0.0% Gem New Other 0.0 0.0 0.0% ------ ------ -------- -------- ------- Total $530.2 $839.2 ($43.7) $1,325.7 86.0% ====== ====== ======== ======== ======= Shareholders' Equity $47.0 $29.0 $139.1 $215.1 14.0% ------ ------ -------- -------- ------- Total Capitalization $577.2 $868.2 $95.4 $1,540.8 100.0% ====== ====== ======== ======== ======= ASSUMPTIONS ----------- Gem Expansion? No Transaction Fees and Expenses ----------------------------- Gem New Mtg Bonds 12.000% Expensed $12.5 Gem Credit Facility 12.000% Capitalized 27.5 ----- Gem New Other Debt 10.000% Total $40.0 ===== Redeem NatWest Debt No Amortization per year (10 years) $2.8 Rothschild Inc. Confidential PROJECT WONDER Proforma Income Statement ------------------------- (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Scenario: Class A Share Purchase / No Gem Expansion
Management Projections 1995 ------------------------------------------------ (a) (a) Proforma Gem THCR Adjust. As Adjust. ------ ------ ------- ---------- Net Revenues $557.7 $333.2 $890.9 EBITDA $136.7 (b) $75.4 $4.6 (d) $216.7 Depreciation/Amortization $43.9 $24.8 $5.6 $74.3 CRDA amortization $3.1 3.1 Write-off of Preopening Expenses 0.0 Amortization of Capitalized Costs 0.7 2.8 3.5 EBIT $89.7 $49.9 ($3.8) $135.8 Interest Expense THCR 10.875% Mtg Bonds - $35.9 $35.9 THCR 15.500% Snr Sec Nts - 24.0 (c) 24.0 THCR Other - 5.8 (c) 5.8 Gem 11.350% Mtg Bonds 72.6 - (72.6) 0.0 Gem NatWest Loan 4.3 - 0.0 4.3 New Gem Mtg Bonds - - 90.0 (c) 90.0 ------ ------ ------ ------ Total $76.9 $65.7 $17.4 $160.0 Interest Income (3.7) (2.2) - (5.9) Partner Note - (0.2) - (0.2) Pretax Income $16.5 ($13.5) ($21.1) ($18.1) Tax Provision 42.0% $6.9 ($5.7) ($8.9) (7.6) ------ ------ ------ ------ Net Income $9.6 ($7.8) ($12.3) ($10.5) ====== ====== ====== ====== Adjustment Preopening Expenses (A-T) - - - 0.0 ------ ------ ------ ------ Adjusted Net Income $9.6 ($7.8) ($12.3) ($10.5) ====== ====== ====== ====== EPS - ($0.46) - ($0.41) Adjust EPS - ($0.46) - ($0.41) Shares Outstanding - 16.8 8.8 25.6 Proforma Credit Statistics: EBITDA / Cash Interest 1.5 x 1.1 x - 1.4 x EBITDA-Capex / Cash Interest 1.2 1.1 - 1.2 Debt/EBITDA 5.6 7.0 - 6.1 Management Projections 1996 ------------------------------------------------- (a) (a) Proforma Gem THCR Adjust. As Adjust. ------- ------- ------- ---------- Net Revenues $579.6 $620.4 $1,200.0 EBITDA $156.5 (b) $148.7 $4.9 (d) $310.0 Depreciation/Amortization $48.2 $26.4 $5.6 $80.3 CRDA amortization $3.2 3.2 Write-off of Preopening Expenses 9.0 9.0 Amortization of Capitalized Costs 0.7 2.8 3.4 EBIT $105.1 $112.6 ($3.5) $214.2 Interest Expense THCR 10.875% Mtg Bonds - $35.9 $35.9 THCR 15.500% Snr Sec Nts - 24.0 (c) 24.0 THCR Other - 9.0 (c) 9.0 Gem 11.350% Mtg Bonds - - 0.0 0.0 Gem NatWest Loan - - 4.3 4.3 New Gem Mtg Bonds - - 90.0 (c) 90.0 ------ ------ ------- -------- Total - $68.9 $94.3 $163.2 Interest Income (0.7) (1.1) (1.9) Partner Note - (0.3) (0.3) Pretax Income $105.8 $45.1 ($97.7) $53.2 Tax Provision 42.0% $44.4 $18.9 ($41.1) 22.3 ------ ------ ------- -------- Net Income $61.4 $26.2 ($56.7) $30.8 ====== ====== ======= ======== Adjustment Preopening Expenses (A-T) - 5.2 - 5.2 ------ ------ ------- -------- Adjusted Net Income $61.4 $31.4 ($56.7) $36.1 ====== ====== ======= ======== EPS - $1.56 - $1.21 Adjust EPS - $1.87 - $1.41 Shares Outstanding - 16.8 8.8 25.6 Proforma Credit Statistics: EBITDA / Cash Interest 1.7 x 2.2 x - 1.9 x EBITDA-Capex / Cash Interest 1.4 2.2 - 1.7 Debt/EBITDA 4.9 3.6 - 4.3
- ---------- (a) Management estimate. (b) Post Mgmt fees and Realty rent. (c) Proforma for full year results. (d) Represents the addback of Realty Rent and Gem Services Agreement Fee. Rothschild Inc. Confidential PROJECT WONDER Proforma Income Statement (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- Scenario: Class A Share Purchase / No Gem Expansion
Management Projections 1997 ------------------------------------------- (a) (a) Proforma Gem THCR Adjust. As Adjust. ------ ------ ------- ---------- Net Revenues $608.5 $724.5 $1,333.0 EBITDA $171.6 (b) $179.8 $5.1 (c) $356.6 Depreciation/Amortization $35.3 $27.4 $5.6 $68.4 CRDA amortization $3.4 3.4 Write-off of Preopening Expenses 0.0 0.0 Amortization of Capitalized Costs 0.7 2.8 3.4 EBIT $132.9 $151.7 ($3.2) $281.4 Interest Expense THCR 10.875% Mtg Bonds - $35.9 $35.9 THCR 15.500% Snr Sec Nts - 24.0 24.0 THCR Other - 8.0 8.0 Gem 11.350% Mtg Bonds - - 0.0 0.0 Gem NatWest Loan - - 4.2 4.2 New Gem Mtg Bonds - - 90.0 90.0 ------ ------ ------ -------- Total - $67.9 $94.2 $162.1 Interest Income (2.2) - (2.2) Partner Note - (0.3) (0.3) Pretax Income $135.1 $84.0 ($97.4) $121.7 Tax Provision 42.0% $56.8 $35.3 ($40.9) 51.1 ------ ------ ------ -------- Net Income $78.4 $48.7 ($56.5) $70.6 ====== ====== ====== ======== Adjustment Preopening Expenses (A-T) - 0.0 - 0.0 ------ ------ ------ -------- Adjusted Net Income $78.4 $48.7 ($56.5) $70.6 ====== ====== ====== ======== EPS - $2.90 - $2.76 Adjust EPS - $2.90 - $2.76 Shares Outstanding - 16.8 8.8 25.6 Proforma Credit Statistics: EBITDA / Cash Interest 1.9 x 2.6 x - 2.2 x EBITDA-Capex / Cash Interest 1.6 2.6 - 2.0 Debt/EBITDA 4.9 3.6 - 4.3 Management Projections 1998 ------------------------------------------- (a) (d) Proforma Gem THCR Adjust. As Adjust. ------ ------ ------- ---------- Net Revenues $642.0 $760.7 $0.0 $1,402.7 EBITDA $190.8 (b) $194.2 $5.4 (c) $390.4 Depreciation/Amortization $33.5 $29.6 $5.6 $68.8 CRDA amortization $3.6 3.6 Write-off of Preopening Expenses 0.0 0.0 Amortization of Capitalized Costs 0.7 2.8 3.4 EBIT $153.7 $163.9 ($3.0) $314.6 Interest Expense THCR 10.875% Mtg Bonds - $35.9 $35.9 THCR 15.500% Snr Sec Nts - 24.0 24.0 THCR Other - 3.9 3.9 Gem 11.350% Mtg Bonds - - 0.0 0.0 Gem NatWest Loan - - 4.1 4.1 New Gem Mtg Bonds - - 90.0 90.0 ------ ------ ------ -------- Total - $63.8 $94.1 $157.9 Interest Income (3.8) - (3.8) Partner Note - (0.3) (0.3) Pretax Income $157.4 $100.4 ($97.1) $160.8 Tax Provision 42.0% $66.1 $42.2 ($40.8) 67.5 ------ ------ ------ -------- Net Income $91.3 $58.2 ($56.3) $93.3 ====== ====== ====== ======== Adjustment Preopening Expenses (A-T) - 0.0 - 0.0 ------ ------ ------ -------- Adjusted Net Income $91.3 $58.2 ($56.3) $93.3 ====== ====== ====== ======== EPS - $3.47 - $3.64 Adjust EPS - $3.47 - $3.64 Shares Outstanding - 16.8 8.8 25.6 Proforma Credit Statistics: EBITDA / Cash Interest 2.1 x 3.0 x - 2.5 x EBITDA-Capex / Cash Interest 1.8 3.0 - 2.3 Debt/EBITDA 4.0 2.7 - 3.4
- ---------- (a) Management estimates. (b) Post Mgmt fees and Realty rent. (c) Represents the addback of Realty Rent and Gem Services Agreement Fee. (d) Estimate Rothschild Inc. Confidential PROJECT WONDER Estimated Proforma Balance Sheets (dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
As of March 31, 1996 -------------------------------------------- THCR GEM Adjustments Proforma ------ ------ ------------ -------- CURRENT ASSETS: Excess Cash $8.5 $82.9 ($71.5) $19.9 Cage Cash 5.5 25.0 0.0 30.5 Other Current Assets 36.0 27.3 0.0 63.2 ------ ------ ------ -------- Total Current Assets $50.0 $135.2 ($71.5) $113.6 PROPERTY & EQUIPMENT, NET 533.2 688.4 219.0 1,440.7 OTHER 28.4 14.1 27.5 70.1 ------ ------ ------ -------- TOTAL ASSETS $611.6 $837.7 $175.0 $1,624.4 ====== ====== ====== ======== CURRENT LIABILITIES Credit Facility $0.0 $0.0 $0.0 $0.0 Payables and Accruals 27.7 69.7 (27.4) 69.9 ------ ------ ------ -------- Total Current Liabilties $27.7 $69.7 ($27.4) $69.9 LONG TERM LIABILITIES DJT 10.875% Mtg Bonds $330.0 $330.0 DJT 15.500% Snr Sec Notes 155.0 155.0 DJT Cap Lease & Other 50.3 50.3 Gem 11.350% Mtg Bonds 659.3 (659.3) 0.0 Gem Natwest Loan 45.5 45.5 Gem New Mtg Bonds 0.0 750.0 750.0 Gem Other 34.3 (27.4) 6.9 ------ ------ ------ -------- Total $535.3 $739.1 $63.3 $1,337.7 MINORITY INTEREST 1.7 1.7 CAPITAL 47.0 29.0 139.1 215.1 Total Liabilties and Capital $611.7 $837.7 $175.0 $1,624.4 ====== ====== ====== ========
Rothschild Inc. Confidential PROJECT WONDER Gem Excess Cash Analysis (dollar amounts in millions except per share data) - -------------------------------------------------------------------------------- estimate estimate 12/31/95 03/31/96 -------- -------- Cash Balance $90.0 $107.9 Reserves: Cage Cash and Working Capital ($25.0) ($25.0) Excess Cash Balance $65.0 $82.9 ======== ======== Adjustments: Accrued Interest on 11.35s ($9.1) ($27.4) Excess Cash Availability $55.8 $55.5 ======== ======== Rothschild Inc. PROJECT WONDER Analysis of Selected Atlantic City Casinos Comparative Multiples --------------------- (dollar amount in millions except per share data) MARKET MULTIPLE ANALYSIS FOR SELECTED INDUSTRY COMPARABLES - --------------------------------------------------------------------------------
CURRENT PRICE PRICE AS % OF 52 WEEK MARKET MARKET COMPANIES 05-Jan-96 HIGH LOW SHARES VALUE CAP. (a) - ------------------------------------ --------- ------- ------- ------ ------- --------- AZTAR Corp $8.13 77.38% 144.32% 38.3 311.2 715.1 Bally Entertainment Corp $15.00 100.00% 278.81% 47.3 709.5 1,696.9 Hollywood Casino Corp $4.50 43.90% 105.88% 24.7 111.2 491.4 Harrah's Entertainment, Inc. $26.38 79.61% 131.15% 102.6 2,706.1 3,261.6 Griffin Gaming & Entertainment, Inc. $11.75 59.67% 313.33% 7.9 92.8 258.4 Showboat Inc $26.38 89.77% 211.00% 15.5 408.8 568.4 Trump Hotels & Casino $21.75 97.21% 191.12% 16.7 363.2 804.4 Circus Circus Enterprises Inc. $30.38 84.07% 144.64% 102.8 3,121.8 3,715.5 Mirage Resorts, Inc. $38.38 100.00% 196.79% 91.4 3,509.1 3,730.2 MARKET CAP. AS A MULTIPLE OF ------------------------------------------------------- CURRENT NEXT CURRENT NEXT CURRENT NEXT YEAR YEAR YEAR YEAR YEAR YEAR COMPANIES EBITDA EBITDA EBIT EBIT SALES SALES - ---------------------------- ------- ------ ------ ----- ------ ------ AZTAR Corp 6.6 x 5.1 x 10.9 x 7.2 x 1.2 x 1.1 x Bally Entertainment Corp 6.5 6.1 9.1 8.5 1.7 1.5 Hollywood Casino Corp 5.8 5.1 NA NA NA NA Harrah's Entertainment, Inc. 7.5 6.5 8.6 7.7 2.1 2.0 Griffin Gaming & Entertainment, Inc. 4.2 3.9 5.4 5.0 0.9 0.8 Showboat Inc 7.4 6.7 12.9 11.0 1.3 1.2 Trump Hotels & Casino 10.6 * 5.4 17.4 7.7 2.4 2.1 Maximum (b) 7.5 x 6.7 x 17.4 x 11.0 x 2.4 x 2.1 x Mean (b) 6.3 5.5 10.7 7.9 1.6 1.5 Median (b) 6.6 5.4 9.1 7.7 1.3 1.2 Minimum (b) 4.2 3.9 5.4 5.0 0.9 0.8 Circus Circus Enterprises Inc. 8.5 7.3 10.8 9.2 2.9 2.6 Mirage Resorts, Inc. 9.2 8.7 14.4 13.0 2.8 2.7
- ---------- * Not included in summary multiples (a) Market Capitalisation = Market Value + Preferred Equity at Liquidation Value (incl. Redeemable) + Short-Term Debt + Long-Term Debt + Minority Interest - Cash & Marketable Securities. (b) Summary Multiples exclude numbers that are Negative, Not Available, Not Meaningful, and (*) figures. Rothschild Inc. PROJECT WONDER Analysis of Selected Atlantic City Casinos Comparative Multiples (dollar amounts in millions except per share data) MARKET MULTIPLE ANALYSIS FOE SELECTED INDUSTRY COMPARABLESS - --------------------------------------------------------------------------------
MARKET VALUE AS A MULTIPLE OF LTM CURRENT NEXT LTM LFQ PRICE MARKET MARKET NET TO YEAR EPS YEAR EPS CASH COMMON COMPANIES 1/5/96 SHARES VALUE CAP. (a) COMMON EST. (b) EST. (b) FLOW (c) EQUITY --------- ------ ------ ----- -------- ------ -------- -------- -------- ------ AZTAR CORP. $8.13 38.3 $310.8 $715.1 67.7 x 38.7 x 11.3 x 6.8 x 0.8 x BALLY ENTERTAINMENT $15.00 47.3 $709.5 $1,696.9 45.5 25.0 19.0 7.6 1.5 HOLLYWOOD CASINO 'A' $4.50 24.7 $111.2 $491.4 41.2 12.5 6.9 2.0 NM HARRAH'S ENTERTAIN. $26.38 102.6 $2,706.1 $3,261.6 32.9 20.1 15.7 17.4 4.4 GRIFFIN GAMING & ENT $11.75 7.9 $92.8 $258.4 4.4 11.0 9.6 1.9 3.6 SHOWBOAT, INC. $26.38 15.5 $408.8 $568.4 26.4 37.1 17.8 8.7 2.4 TRUMP HOTELS & CASINO $21.75 16.7 $363.2 $804.4 NM 12.1 10.5 NM 6.8 Maximum (d) 67.7 x 38.7 x 19.0 x 17.4 x 6.8 x Mean (d) 36.3 22.4 13.0 7.4 3.2 Adj. Mean (e) 36.5 23.7 14.0 6.3 3.0 Median (d) 32.9 20.1 11.3 6.8 2.4 Minimum (d) 4.4 11.0 6.9 1.9 0.8 CIRCUS CIRCUS ENTERP $30.38 102.7 $3,120.5 $3,715.5 22.5 18.1 16.5 13.9 2.8 MIRAGE RESORTS $38.38 91.4 $3,506.9 $3,730.2 23.8 21.1 19.6 14.7 3.0 MKT. CAP. AS A MULTIPLE OF COMPANIES LTM LTM LTM AZTAR CORP. EBITDA EBIT SALES BALLY ENTERTAINMENT 7.1 x 11.9 x 1.27 x HOLLYWOOD CASINO 'A' 7.2 10.8 1.71 HARRAH'S ENTERTAIN. 4.6 9.1 0.92 GRIFFIN GAMING & ENT 8.4 10.4 2.15 SHOWBOAT, INC. 3.6 6.0 0.85 TRUMP HOTELS & CASINO 7.1 11.6 1.33 11.6 15.6 2.61 Maximum 11.6 x 15.6 x 2.61 x Mean 7.1 10.8 1.55 Adj. Mean 6.9 10.8 1.48 Median 7.1 10.8 1.33 Minimum 3.6 6.0 0.85 CIRCUS CIRCUS ENTERP 12.1 16.7 3.08 MIRAGE RESORTS 10.4 14.0 2.87
- ---------- (a) Market Capitalization = Market Value + Preferred Equity at Liquidation Value (Incl. Redeemable) + Short-Term Debt + Long Term Debt + Minority Interest - Cash & Marketable Securities. (b) Earnings Estimates were obtained from I/B/E/S. (c) Cash Flow = Income Available to Common + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings of Unconsolidated Subsidiaries. (d) Summary Multiples exlcude members that are Negative, Not Available, Not Meaningful, and figures which are considered ouliers(*) (e) Adj. Mean excludes the high, low and negative numbers. PROJECT WONDER Analysis of Selected Atlantic City Casinos Comparative Multiples (dollar amounts in millions except per share data) SUMMARY DATA FOR SELECTED INDUSTRY COMPARABLES - --------------------------------------------------------------------------------
LTM CURRENT NEXT LTM LFQ SHARES --52 Week Range- NET TO YR. EPS YR. EPS CASH COMMON LTM LTM LTM LTM COMPANIES OUT HIGH LOW COMMON EST. (a) EST. (a) FLOW (b) EQUITY EBITDA EBIT SALES ENDED --------- ----- ---- --- ------ ------- ------- ------- ------ ------ ----- ----- ----- AZTAR CORP. 38.3 $10.50 $5.63 $4.6 $0.21 $0.72 $46.0 $371.7 $101.3 $59.9 564.2 9/95 BALLY ENTERTAINMENT 47.3 $12.88 $5.38 $15.6 $0.60 $0.79 $93.3 $479.4 $234.5 $156.8 990.7 9/95 HOLLYWOOD CASINO 'A' 24.7 $10.25 $4.25 $2.7 $0.36 $0.65 $54.4 ($28.4) $105.8 $54.1 533.7 9/95 HARRAH'S ENTERTAIN. 102.6 $33.13 $20.11 $82.3 $1.31 $1.68 $155.7 $609.3 $386.2 $312.8 1,515.2 9/95 GRIFFIN GAMING & ENT 7.9 $19.69 $3.75 $21.3 $1.07 $1.22 $49.8 $25.9 $71.6 $43.1 302.6 9/95 SHOWBOAT, INC. 15.5 $29.38 $12.50 $15.5 $0.71 $1.48 $47.1 $172.7 $80.4 $48.8 427.4 9/95 TRUMP HOTELS & CASINO 16.7 $21.63 $11.38 ($17.2) $1.80 $2.08 ($0.6) $53.7 $69.5 $51.5 308.2 9/95 CIRCUS CIRCUS ENTERP 102.7 $36.13 $21.00 $138.7 $1.68 $1.84 $224.6 $1,134.7 $308.1 $222.1 1,207.2 7/95 MIRAGE RESORTS 91.4 $35.13 $19.50 $147.1 $1.82 $1.96 $238.6 $1,158.2 $358.3 $266.8 1,298.2 9/95
SUMMARY RATIOS FOR SELECTED INDUSTRY COMPARABLES
3 YEAR LTM LTM 1995E 3 YEAR GEARING LTM CAGR EBITDA EBIT EPS CAGR NET DEBT/ DIV. D & A/ COMPANIES SALES MARGIN MARGIN GROWTH EPS BOOK CAP. YIELD SALES --------- ------ ------ ------ ------ ------ --------- ----- ------- AZTAR CORP. 4.0% 18.0% 10.6% 242.9% 103.3% 52.6% 0.0% 7.3% BALLY ENTERTAINMENT -12.6% 23.7% 15.8% 31.7% -61.8% 66.5% 0.0% 7.8% HOLLYWOOD CASINO 'A' NA 19.8% 10.1% 80.6% NA 108.1% 0.0% 9.7% HARRAH'S ENTERTAIN. 9.1% 25.5% 20.6% 28.2% 60.7% 50.7% 0.0% 4.8% GRIFFIN GAMING & ENT -5.5% 23.7% 14.2% 14.0% 13.4% 86.5% 0.0% 9.4% SHOWBOAT, INC. 6.6% 18.8% 11.4% 108.5% 26.0% 60.7% 0.4% 7.4% TRUMP HOTELS & CASINO NA 22.6% 16.7% 15.6% NA 89.1% 0.0% 5.4% Mean 0.3% 21.7% 14.2% 74.5% 28.3% 73.5% 0.1% 7.4% Mean (excluding neg points) 6.6% 21.7% 14.2% 74.5% 50.9% 73.5% 0.1% 7.4% CIRCUS CIRCUS ENTERP 13.2% 25.5% 18.4% 9.5% 8.9% 37.1% 0.0% 7.1% MIRAGE RESORTS 15.1% 27.6% 20.6% 7.7% 18.2% 16.2% 0.0% 7.0% 2 YEAR COMP. AVGE CAPEX/ CAPEX/ RELATIVE COMPANIES CAPEX Deprec. Sales PE --------- ------ ------- ------ -------- AZTAR CORP. $66.1 1.6 11.7% 4.4 BALLY ENTERTAINMENT $96.6 1.2 9.7% 3.0 HOLLYWOOD CASINO 'A' $72.0 1.4 13.5% 2.7 HARRAH'S ENTERTAIN. $227.0 3.1 15.0% 2.1 GRIFFIN GAMING & ENT $17.6 0.6 5.8% 0.3 SHOWBOAT, INC. $66.1 2.1 15.5% 1.7 TRUMP HOTELS & CASINO $16.2 1.0 5.3% NM Mean $90.9 1.7 11.9% 2.4 Mean (excluding neg points) $90.9 1.7 11.9% 2.4 CIRCUS CIRCUS ENTERP $262.3 3.1 21.7% 1.5 MIRAGE RESORTS $250.8 2.7 19.3% 1.5
(a) Earnings Estimates were obtained from I/B/E/S (b) Cash Flow = Income Available to Common + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings of Unconsolidated Subsidiaries. MARKET MULTIPLE ANALYSIS ------------------------ TABLE OF CONTENTS ----------------- Contents Page - -------- ---- Current Trading Multiples 1 Capital Structures 2 Sales Information 3 EBITDA Information 4 Depreciation Information 5 EBIT Information 6 EPS Information 7 Historical Sales & EBITDA Trading Multiples 8 Historical EBIT & Net Income Trading Multiples 9 Historical Shares & Net Income Information 10 Historical Share Prices & Market Values 11 Historical Debt Information 12 Historical Preferred Information 13 Historical Minority Interest Information 14 Historical Cash Information 15 Historical Equity Invest. & Market Capitalizations 16 "IBES, Value Line & S&P 500 PEs" 17 Other & Comments 18 Business Description & SIC Codes 19 Notes 20 This document has been prepared as a medium for discussion. No representations are made or should be inferred as to its accuracy or completeness. Page 1 CURRENT TRADING MULTIPLES
Adjusted Market Capitalization - to - Market Value - to - LTM 1995E LTM 1995E Book LTM 1995E 1996E Book Company EBITDA EBITDA EBIT EBIT Cap Net Inc. Net Inc. Net Inc. Value - ------- ------ ------ ---- ----- ---- -------- ------- ------- ------- AZTAR CORP. 7.1 6.7 11.9 11.0 0.9 67.7 38.7 11.3 0.8 BALLY ENTERTAINMENT 7.2 6.5 10.8 9.1 1.2 45.5 25.0 19.0 1.5 HOLLYWOOD CASINO 'A' 4.6 5.8 9.1 NA 1.4 41.2 12.5 6.9 (3.9) HARRAH'S ENTERTAIN. 8.4 7.5 10.4 8.7 2.6 32.9 20.1 15.7 4.4 GRIFFIN GAMING & ENT 3.6 4.2 6.0 5.4 1.3 4.4 11.0 9.6 3.6 SHOWBOAT, INC. 7.1 7.4 11.6 12.9 1.3 26.4 37.1 17.8 2.4 TRUMP HOTELS & CASINO 11.6 10.6 15.6 17.4 1.6 (21.1) 12.1 10.5 6.8 ADJ. MEAN(a) 6.9 6.8 10.8 10.4 1.4 36.3 24.1 13.4 2.5 CIRCUS CIRCUS ENTERP 12.1 8.4 16.7 10.8 2.1 22.5 18.1 16.5 2.8 MIRAGE RESORTS 10.4 9.2 14.0 14.3 2.7 23.8 21.1 19.6 3.0 Gearing LTM 1995 Value Line Net Debt/ Div. EBITDA Net Inc. Timely Bk Cap Yield Margin Growth Rating -------- ----- ------ -------- --------- AZTAR CORP. 52.6% 0.0% 18.0% 242.9% 4.0 BALLY ENTERTAINMENT 66.5% 0.0% 23.7% 31.7% NA HOLLYWOOD CASINO 'A' 108.1% 0.0% 19.8% 80.6% NA HARRAH'S ENTERTAIN. 50.7% 0.0% 25.5% 28.2% NA GRIFFIN GAMING & ENT 86.5% 0.0% 23.7% 14.0% NA SHOWBOAT, INC. 60.7% 0.4% 18.8% 108.5% 2.0 TRUMP HOTELS & CASINO 89.1% 0.0% 22.6% 15.6% NA ADJ. MEAN(a) 70.8% 0.1% 21.6% 84.3% NA CIRCUS CIRCUS ENTERP 37.1% 0.0% 25.5% 9.5% 4.0 MIRAGE RESORTS 16.2% 0.0% 27.6% 7.7% 2.0
(a) Adjusted Mean excludes the high, low and negative numbers. Page 2 CAPITAL STRUCTURES ------------------
$/share Market Total Pref. Interest Invest Market Book Net Debt/ Company Shares 1/5/96 Value Debt @ Book @ Book Cash @ Book Cap. Value Total Cap - ------- ------ ------- ------ ------- ------ -------- ------ ------ ------- ----- --------- AZTAR CORP. 38.3 $8.13 310.8 455.7 6.1 4.1 (48.9) (12.6) 715.1 371.7 52.6% BALLY ENTERTAINMENT 47.3 $15.00 709.5 1,307.4 0.2 37.2 (357.4) 0.0 1,696.9 479.4 66.5% HOLLYWOOD CASINO 'A' 24.7 $4.50 111.2 429.6 0.0 0.0 (49.4) 0.0 491.4 (28.4) 108.1% HARRAH'S ENTERTAIN. 102.6 $26.38 2,706.1 700.4 0.0 20.6 (72.8) (92.7) 3,261.6 609.3 50.7% GRIFFIN GAMING & ENT 7.9 $11.75 92.8 217.1 0.0 0.0 (51.5) 0.0 258.4 25.9 86.5% SHOWBOAT, INC. 15.5 $26.38 408.8 392.2 0.0 1.8 (125.6) (108.9) 568.4 172.7 60.7% TRUMP HOTELS & CASINO 16.7 $21.75 363.2 488.8 0.0 0.0 (47.6) 0.0 804.4 53.7 89.1% CIRCUS CIRCUS ENTERP 102.7 $30.38 3,120.5 732.5 0.0 0.0 (62.7) (74.8) 3,715.5 1,134.7 37.1% MIRAGE RESORTS 91.4 $38.38 3,506.9 258.3 0.0 0.0 (35.0) 0.0 3,730.2 1,158.2 16.2%
Page 3 SALES INFORMATION -----------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Company Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales - ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AZTAR CORP. 687.0 747.3 476.7 522.3 508.2 481.3 512.0 518.8 541.4 564.2 595.8 635.5 BALLY ENTERTAINMENT 1,639.0 1,730.1 1,940.8 2,069.2 2,082.2 1,412.5 1,297.0 1,320.1 942.3 990.7 1,030.0 1,120.0 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 342.7 463.9 533.7 NA NA HARRAH'S ENTERTAIN. NA 797.7 866.0 944.8 1,004.2 1,031.1 1,113.1 1,251.9 1,339.4 1,515.2 1,553.6 1,624.2 GRIFFIN GAMING & ENT 428.1 455.8 456.0 451.3 423.6 418.2 436.9 439.6 353.0 302.6 282.7 314.1 SHOWBOAT, INC. 50.2 114.3 295.0 342.4 334.3 331.6 355.2 375.7 401.3 427.4 429.7 462.8 TRUMP HOTELS & CASINO NA NA NA NA NA NA 313.3 300.5 295.1 308.2 331.3 381.0 CIRCUS CIRCUS ENTERP 374.0 458.9 512.0 522.4 692.1 806.0 843.0 954.9 1,170.2 1,207.2 1,340.0 1,550.0 MIRAGE RESORTS 381.8 194.2 175.0 299.8 909.0 822.9 833.0 953.3 1,254.2 1,298.2 1,325.0 1,420.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AZTAR CORP. NA 8.8% -36.2% 9.6% -2.7% -5.3% 6.4% 1.3% 4.4% - 10.0% 12.6% BALLY ENTERTAINMENT NA 5.6% 12.2% 6.6% 0.6% -32.2% -8.2% 1.8% -28.6% - 9.3% 13.1% HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA NA 35.3% - NA NA HARRAH'S ENTERTAIN. NA NA 8.6% 9.1% 6.3% 2.7% 7.9% 12.5% 7.0% - 16.0% 7.2% GRIFFIN GAMING & ENT NA 6.5% 0.0% -1.0% -6.1% -1.3% 4.5% 0.6% -19.7% - -19.9% 3.8% SHOWBOAT, INC. NA 128.0% 158.0% 16.1% -2.4% -0.8% 7.1% 5.8% 6.8% - 7.1% 8.3% TRUMP HOTELS & CASINO NA NA NA NA NA NA NA -4.1% -1.8% - NA 23.6% CIRCUS CIRCUS ENTERP NA 22.7% 11.6% 2.0% 32.5% 16.5% 4.6% 13.3% 22.5% - 14.5% 28.4% MIRAGE RESORTS NA -49.1% -9.9% 71.3% 203.2% -9.5% 1.2% 14.4% 31.6% - 5.6% 9.4%
Page 4
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA Company % % % % % % % % % % % % - ------- ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ ------ ------ AZTAR CORP. 15.0% 14.6% 11.4% 0.3% 10.2% 8.7% 12.0% 13.5% 19.7% 18.0% 18.0% 22.4% BALLY ENTERTAINMENT 20.1% 18.9% 19.7% 17.7% 14.3% 13.3% 17.0% 17.1% 24.2% 23.7% 25.3% 25.0% HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 20.4% 18.7% 19.8% NA NA HARRAH'S ENTERTAIN. NA 17.5% 21.0% 21.3% 20.8% 23.4% 25.0% 28.2% 26.5% 25.5% 28.1% 31.0% GRIFFIN GAMING & ENT 6.1% 15.1% 11.1% 6.2% 9.1% 17.2% 12.1% 9.3% 0.0% 23.7% 21.7% 20.9% SHOWBOAT, INC. 26.4% 24.5% 13.2% 15.1% 15.0% 18.5% 19.3% 18.5% 16.8% 18.8% 17.9% 18.3% TRUMP HOTELS & CASINO NA NA NA NA NA NA 19.3% 19.3% 19.3% 22.6% 23.0% 39.2% CIRCUS CIRCUS ENTERP 29.8% 31.5% 33.0% 32.6% 30.4% 30.7% 29.9% 27.1% 28.8% 25.5% 32.9% 32.7% MIRAGE RESORTS 20.3% 22.0% 27.8% 26.4% 27.1% 27.2% 22.7% 24.7% 26.7% 27.6% 30.5% 30.0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Company EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA EBITDA - ------- ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ ------ ------ HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 69.7 86.6 105.8 85.3 95.9 HARRAH'S ENTERTAIN. NA 139.6 181.4 201.6 208.6 241.2 278.6 353.3 355.1 386.2 435.8 503.3 GRIFFIN GAMING & ENT 25.9 68.8 50.5 27.8 38.6 71.8 52.7 40.8 NA 71.6 61.5 65.7 SHOWBOAT, INC. 13.2 28.0 38.9 51.6 50.1 61.2 68.5 69.6 67.4 80.4 77.1 84.7 TRUMP HOTELS & CASINO NA NA NA NA NA NA 56.0 67.2 59.1 69.5 76.2 149.4 CIRCUS CIRCUS ENTERP 111.5 144.6 168.7 170.2 210.7 247.8 252.1 259.2 337.1 308.1 440.5 507.2 MIRAGE RESORTS 77.6 42.8 48.7 79.2 245.9 223.5 188.8 235.7 335.0 358.3 403.9 426.3
DEPRECIATION & AMORITIZATION INFORMATION Page 5 - ----------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Company D&A D&A D&A D&A D&A D&A D&A D&A D&A D&A D&A D&A - ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- AZTAR CORP. (39.2) (44.2) (24.6) (34.2) (27.8) (28.2) (28.7) (32.7) (37.0) (41.4) (41.8) (43.0) BALLY ENTERTAINMENT (142.2) (131.2) (137.1) (153.9) (159.7) (110.5) (108.9) (113.8) (76.0) (77.7) (80.0) (85.0) HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA (27.1) (31.0) (51.7) NA NA HARRAH'S ENTERTAIN. NA (44.1) (44.8) (49.5) (55.5) (63.9) (69.6) (77.6) (70.6) (73.4) (80.0) (85.0) GRIFFIN GAMING & ENT (23.9) (23.6) (23.2) (35.7) (26.3) (23.8) (25.3) (27.9) (17.3) (28.5) (13.5) (14.3) SHOWBOAT, INC." (2.9) (6.7) (18.9) (19.6) (22.4) (25.7) (22.0) (23.3) (28.4) (31.6) (32.0) (33.0) TRUMP HOTELS & CASINO NA NA NA NA NA NA (15.8) (17.6) (15.7) (16.6) (30.0) (45.0) CIRCUS CIRCUS ENTERP (24.7) (29.4) (31.8) (31.2) (41.0) (47.4) (46.6) (58.1) (81.1) (86.0) (95.3) (104.0) MIRAGE RESORTS (27.3) (17.0) (14.9) (21.9) (53.7) (60.0) (63.0) (74.1) (97.2) (91.5) (143.8) (140.0) 1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E D&A / D&A / D&A / D&A / D&A / D&A / D&A / D&A / D&A / D&A / D&A / D&A / Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- AZTAR CORP. 5.7% 5.9% 5.2% 6.5% 5.5% 5.9% 5.6% 6.3% 6.8% 7.3% 7.0% 6.8% BALLY ENTERTAINMENT 8.7% 7.6% 7.1% 7.4% 7.7% 7.8% 8.4% 8.6% 8.1% 7.8% 7.8% 7.6% HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 7.9% 6.7% 9.7% NA NA HARRAH'S ENTERTAIN. NA 5.5% 5.2% 5.2% 5.5% 6.2% 6.3% 6.2% 5.3% 4.8% 5.1% 5.2% GRIFFIN GAMING & ENT 5.6% 5.2% 5.1% 7.9% 6.2% 5.7% 5.8% 6.4% 4.9 9.4% 4.8% 4.6% SHOWBOAT, INC. 5.8% 5.9% 6.4% 5.7% 6.7% 7.7% 6.2% 6.2% 7.% 7.4% 7.4% 7.1% TRUMP HOTELS & CASINO NA NA NA NA NA NA 5.1% 5.8% 53% 5.4% 9.1% 11.8% CIRCUS CIRCUS ENTERP 6.6% 6.4% 6.2% 6.0% 5.9% 5.9% 5.5% 6.1% 6.9 7.1% 7.1% 6.7% MIRAGE RESORTS 7.2% 8.7% 8.5% 7.3% 5.9% 7.3% 7.6% 7.8% 7.7% 7.0% 10.8% 9.9%
Page 6 EBIT INFORMATION ----------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Company EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % EBIT % - ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- AZTAR CORP. 9.3% 8.7% 6.2% -6.3% 4.8% 2.8% 6.4% 7.2% 12.8% 10.6% 11.0% 15.6% BALLY ENTERTAINMENT 11.4% 11.3% 12.6% 10.2% 6.7% 5.5% 8.6% 8.5% 16.2% 15.8% 18.1% 17.7% HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 12.4% 12.0% 10.1% NA NA HARRAH'S ENTERTAIN. NA 12.0% 15.8% 16.1% 15.2% 17.2% 18.8% 22.0% 21.2% 20.6% 24.2% 26.2% GRIFFIN GAMING & ENT 0.5% 9.9% 6.0% -1.7% 2.9% 11.5% 6.3% 2.9% -4.9% 14.2% 16.9% 16.4% SHOWBOAT, INC. 20.6% 18.6% 6.8% 9.3% 8.3% 10.7% 13.1% 12.3% 9.7% 11.4% 10.2% 11.1% TRUMP HOTELS & CASINO NA NA NA NA NA NA 11.2% 16.5% 14.7% 16.7% 13.9% 27.4% CIRCUS CIRCUS ENTERP 23.2 25.1 26.7 26.6% 24.5% 24.9 24.4 21.1 21.9 18.4% 25.8% 26.9% MIRAGE RESORTS 13.2% 13.3% 19.3% 19.1% 21.1% 19.9% 15.1% 16.9% 19.0% 20.6% 19.6% 20.2% 1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E EBIT EBIT EBIT EBIT EBIT EBIT EBIT EBIT EBIT EBIT EBIT EBIT ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- AZTAR CORP. 63.9 64.8 29.7 (32.8) 24.2 13.6 32.6 37.4 69.4 59.9 65.3 9.3 BALLY ENTERTAINMENT 187.2 196.3 245.2 211.5 138.9 77.8 111.2 112.2 152.4 156.8 186.4 198.2 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 42.6 55.7 54.1 NA NA HARRAH'S ENTERTAIN. NA 95.5 136.7 152.2 153.1 177.3 209.0 275.7 284.4 312.8 376.1 425.4 GRIFFIN GAMING & ENT 2.0 45.2 27.3 (7.8) 12.3 48.0 27.4 12.9 (17.3) 43.1 47.9 51.4 SHOWBOAT, INC. 10.3 21.3 20.0 32.0 27.8 35.5 46.5 46.3 39.0 48.8 43.9 51.4 TRUMP HOTELS & CASINO NA NA NA NA NA NA 35.0 49.6 43.4 51.5 46.2 104.4 CIRCUS CIRCUS ENTERP 86.8 115.1 136.9 139.0 169.7 200.4 205.5 201.1 256.0 222.1 345.1 403.3 MIRAGE RESORTS 50.2 25.8 33.8 57.3 192.1 163.5 125.7 161.5 237.8 266.8 260.1 286.9
Page 7 EPS INFORMATION ---------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E Company EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS - ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- AZTAR CORP. $0.27 $0.15 ($0.04) ($1.18) $0.16 $0.05 $0.41 $0.28 $0.42 $0.12 $0.21 $0.72 BALLY ENTERTAINMENT $0.81 $0.26 $1.12 ($0.15) ($10.57) ($1.79) ($0.05) ($0.40) ($0.10) $0.33 $0.60 $0.79 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA $0.02 $0.08 $0.11 $0.36 $0.65 HARRAH'S ENTERTAIN. NA $0.00 $0.00 $0.00 $0.30 $0.33 $0.51 $0.89 $1.37 $0.80 $1.31 $1.68 GRIFFIN GAMING & ENT NM NM NM NM NM ($10.35) ($13.25) ($25.35) ($15.10) $2.70 $1.07 $1.22 SHOWBOAT, INC. $0.58 ($0.18) ($0.37) $0.34 $0.10 $0.51 $1.37 $0.89 $1.02 $1.00 $0.71 $1.48 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA ($1.03) $1.80 $2.08 CIRCUS CIRCUS ENTERP $0.32 $0.55 0.76 0.87 $1.02 $1.23 $1.41 $1.34 $1.59 $1.35 $1.68 $1.84 MIRAGE RESORTS $0.04 $0.07 ($0.03) ($0.65) $0.63 $0.80 $0.53 $0.58 $1.32 $1.61 $1.82 $1.96 1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1995E 1996E EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ AZTAR CORP. NA -44.4% -126.7% 2850.0% -113.6% -68.8% 720.0% -31.7% 50.0% - -25.0% 242.9% BALLY ENTERTAINMENT NA -67.9% 330.8% -113.4% 6946.7% -83.1% -97.2% 700.0% -75.0% - -250.0% 31.7% HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA NA 300.0% - 1700.0% 80.6% HARRAH'S ENTERTAIN. NA NA NA NA NA 10.0% 54.5% 74.5% 53.9% - 47.2% 28.2% GRIFFIN GAMING & ENT NA ERR ERR ERR ERR ERR 28.0% 91.3% -40.4% - -104.2% 14.0% SHOWBOAT, INC. NA -131.0% 105.6% -191.9% -70.6% 410.0% 168.6% -35.0% 14.6% - -20.2% 108.5% TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA - NA 15.6% CIRCUS CIRCUS ENTERP NA 71.9% 38.2% 14.5% 17.2% 20.6% 14.6% -5.0% 18.7% - 25.4% 9.5% MIRAGE RESORTS NA 75.0% -142.9% 2066.7% -196.9% 27.0% -33.8% 9.4% 127.6% - 213.8% 7.7%
Page 8 HISTORICAL SALES & EBITDA TRADING MULTIPLES
LTM 10 yr 86 Adj 87 Adj 88 Adj 89 Adj 90 Adj 91 Adj 92 Adj 93 Adj 94 Adj Adj Median Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Adj Mkt Company 86 Sales 87 Sales 88 Sales 89 Sales 90 Sales 91 Sales 92 Sales 93 Sales 94 Sales LTM Sales Cap/Sales - ------- -------- --------- --------- --------- --------- --------- --------- --------- -------- ---------- --------- AZTAR CORP. 0.6 0.6 0.6 0.6 0.2 0.4 0.5 1.1 1.1 1.3 0.7 BALLY ENTERTAINMENT 1.1 1.0 1.1 1.0 0.6 0.8 1.0 1.2 1.5 1.7 1.1 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 1.6 1.1 0.9 1.2 HARRAH'S ENTERTAIN. NA 0.0 0.0 0.0 1.3 1.5 2.4 4.3 2.8 2.2 1.6 GRIFFIN GAMING & ENT 1.0 1.3 1.4 1.8 0.7 0.9 0.9 1.2 0.5 0.9 1.1 SHOWBOAT, INC. 4.1 2.4 1.0 0.8 0.7 0.8 1.0 1.0 1.0 1.3 1.4 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP 2.2 2.1 2.3 3.8 2.9 3.0 4.2 3.9 2.1 3.1 2.9 MIRAGE RESORTS 1.4 1.2 5.3 4.2 1.3 1.5 2.0 2.8 1.7 2.9 2.4 Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap./ Mkt Cap / Median 86 EBITDA 87 EBITDA 88 EBITDA 89 EBITDA 90 EBITDA 91 EBITDA 92 EBITDA 93 EBITDA 94 EBITDA LTM EBITDA EBITDA --------- --------- --------- --------- --------- --------- --------- --------- -------- ---------- --------- AZTAR CORP. 3.7 4.0 5.2 NM 2.3 5.1 4.4 8.3 5.4 7.1 5.1 BALLY ENTERTAINMENT 5.6 5.3 5.6 5.6 4.4 6.2 5.6 7.2 6.3 7.2 5.9 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 7.8 5.7 4.6 6.0 HARRAH'S ENTERTAIN. NA NA NA NA 6.0 6.4 9.5 15.2 10.4 8.4 9.3 GRIFFIN GAMING & ENT 15.9 8.6 13.1 29.3 7.7 5.2 7.8 12.4 NA 3.6 11.5 "SHOWBOAT, INC." 15.5 9.9 7.5 5.5 4.8 4.5 5.2 5.5 6.2 7.1 7.2 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP 7.3 6.8 6.9 11.7 9.4 9.8 14.1 14.2 7.2 12.1 9.9 MIRAGE RESORTS 7.0 5.3 18.9 15.9 4.8 5.6 8.8 11.3 6.5 10.4 9.5
HISTORICAL EBIT & NET INCOME TRADING MULTIPLES
10 yr 86 Adj 87 Adj 88 Adj 89 Adj 90 Adj 91 Adj 92 Adj 93 Adj 94 Adj LTM Adj Median Mkt Mkt Mkt Mkt Mkt Mkt Mkt Mkt Mkt Mkt Adj Mkt Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Cap./ Company 86 EBIT 87 EBIT 88 EBIT 89 EBIT 90 EBIT 91 EBIT 92 EBIT 93 EBIT 94 EBIT LTM EBIT EBIT - ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- AZTAR CORP. 6.0 6.7 9.5 (10.0) 4.9 15.8 8.3 15.6 8.2 11.9 7.7 BALLY ENTERTAINMENT 9.8 8.9 8.7 9.7 9.4 15.0 11.1 14.4 9.5 10.8 10.7 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 12.7 8.8 9.1 10.2 HARRAH'S ENTERTAIN. NA 0.0 0.0 0.0 8.2 8.7 12.7 19.5 13.0 10.4 8.0 GRIFFIN GAMING & ENT 202.5 13.1 24.2 (103.8) 24.2 7.7 15.0 39.4 (11.0) 6.0 21.7 SHOWBOAT, INC. 19.9 13.0 14.5 8.9 8.6 7.7 7.7 8.2 10.7 11.6 11.1 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA 15.6 15.6 CIRCUS CIRCUS ENTERP 9.3 8.5 8.4 14.3 11.7 12.1 17.4 18.4 9.5 16.7 12.6 MIRAGE RESORTS 10.9 8.7 27.2 22.0 6.2 7.6 13.3 16.5 9.2 14.0 13.6 Val./86 Val./87 Val./88 Val./89 Val./90 Val./91 Val./92 Val./93 Val./94 Val./LTM Median Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. Net Inc. PE -------- -------- ------- -------- ------- ------- ------- ------- ------- -------- ------- AZTAR CORP. NA NA NA (7.0) 17.2 112.5 17.7 23.7 14.3 67.7 35.1 BALLY ENTERTAINMENT 24.4 49.5 19.8 (100.8) (0.2) (2.9) (157.5) (21.3) (61.3) 45.5 (20.5) HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 637.5 71.9 41.2 250.2 HARRAH'S ENTERTAIN. NA NA NA NA 16.7 22.2 35.9 51.4 22.5 32.9 30.3 GRIFFIN GAMING & ENT NA NA NA NA NA (0.7) (0.3) (0.3) (0.3) 4.4 0.5 SHOWBOAT, INC. 16.9 (40.3) (23.6) 27.2 40.0 17.2 12.3 18.1 14.2 26.4 10.8 TRUMP HOTEL & CASINO NA NA NA NA NA NA NA NA NA (21.1) (21.1) Mean 20.7 4.6 (1.9) (26.9) 18.4 29.6 (18.4) 118.2 10.2 36.3 51.1 CIRCUS CIRCUS ENTERP 18.6 14.2 12.8 21.5 17.9 20.3 26.8 27.4 14.5 22.5 19.7 MIRAGE RESORTS 92.5 61.4 (236.7) (16.8) 11.8 13.9 24.7 41.2 15.5 23.8 3.1 Relative PE Calculations: - ------------------------ - ---------------------------------------------------------------------------------------------------------------------------------- S&P 500 PE 16.7 14.1 11.7 15.4 15.5 26.1 22.8 21.3 15.0 15.4 17.4 Comparable Avg. Relative PE 1.2 0.3 (0.2) (1.7) 1.2 1.1 (0.8) 5.5 0.7 2.4 2.9 Intermediate Treasury Yields 7.2% 8.8% 9.2% 7.9% 8.1% 6.7% 6.6% 5.8% 7.8% 6.5% 7.5% - ----------------------------------------------------------------------------------------------------------------------------------
Page 10 SHARES OUTSTANDING & NET INCOME INFORMATION -------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 LTM 1993 1994 Company Shrs Shrs Shrs Shrs Shrs Shrs Shrs Shrs Shrs Shrs CAPEX CAPEX - ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- AZTAR CORP. 39.7 39.7 39.8 40.9 37.7 37.9 37.0 37.4 37.5 38.3 77.8 54.4 BALLY ENTERTAINMENT 31.0 26.8 26.8 28.0 31.0 36.4 46.0 46.8 47.0 47.3 97.3 95.9 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 22.7 24.4 24.7 42.3 101.6 HARRAH'S ENTERTAIN. NA NA NA NA 80.0 101.4 101.9 102.3 102.4 102.6 234.8 219.1 GRIFFIN GAMING & ENT 1.3 1.3 0.2 0.2 4.0 4.0 4.0 4.0 4.0 7.9 25.3 9.9 SHOWBOAT, INC. 10.1 12.3 11.3 11.4 11.4 11.4 14.8 15.0 15.4 15.5 59.7 72.5 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA 16.7 17.2 15.3 CIRCUS CIRCUS ENTERP 113.3 113.7 90.5 85.6 82.5 84.9 87.3 86.1 85.9 102.7 382.0 142.7 MIRAGE RESORTS 86.1 54.8 42.2 41.4 41.7 54.9 74.6 90.6 91.0 91.4 432.4 69.1
1986 1987 1988 1989 1990 1991 Net Income Net Income Net Income Net Income Net Income Net Income ---------- ---------- ---------- ---------- ---------- ---------- AZTAR CORP. 10.7 6.0 (1.6) (48.2) 6.0 1.9 BALLY ENTERTAINMENT 25.1 7.0 30.0 (4.2) (327.8) (65.2) HOLLYWOOD CASINO 'A' N/A N/A N/A N/A N/A N/A HARRAH'S ENTERTAIN. N/A N/A N/A N/A 24.0 33.5 GRIFFIN GAMING & ENT 0.0 0.0 0.0 0.0 0.0 (41.7) SHOWBOAT, INC. 5.8 (2.2) (4.2) 3.9 1.1 5.8 TRUMP HOTELS & CASINO N/A N/A N/A N/A N/A N/A CIRCUS CIRCUS ENTERP 36.2 62.5 68.8 74.5 84.1 104.4 MIRAGE RESORTS 3.4 3.8 (1.3) (26.9) 26.3 43.9
1992 1993 1994 LTM 1995 1996 Net Income Net Income Net Income Net Income Net Income Net Income ---------- ---------- ---------- ---------- ---------- ---------- AZTAR CORP. 15.2 10.5 15.7 4.6 8.0 27.5 BALLY ENTERTAINMENT (2.3) (18.7) (4.7) 15.6 28.4 37.4 HOLLYWOOD CASINO 'A' N/A 0.5 2.0 2.7 8.9 16.1 HARRAH'S ENTERTAIN. 52.0 91.0 140.3 82.3 134.4 172.4 GRIFFIN GAMING & ENT (53.4) (102.2) (60.9) 21.3 8.5 9.6 SHOWBOAT, INC. 20.3 13.3 15.7 15.5 11.0 22.9 TRUMP HOTELS & CASINO N/A N/A N/A (17.2) 30.1 34.7 CIRCUS CIRCUS ENTERP 123.0 115.4 136.5 138.7 172.6 189.0 MIRAGE RESORTS 39.5 52.6 120.1 147.1 166.3 179.1
Page 11 HISTORICAL SHARE PRICE & MARKET VALUE INFORMATION
1986 1987 1988 1989 1990 1991 1992 1993 1994 Company $/shr $/shr $/shr $/shr $/shr $/shr $/shr $/shr $/shr - ------- ----- ----- ----- ----- ----- ----- ----- ----- ----- AZTAR CORP. NA NA NA $8.25 $ 2.75 $ 5.63 $ 7.25 $ 6.63 $ 6.00 BALLY ENTERTAINMENT $19.75 $12.88 $22.13 $15.13 $ 2.13 $ 5.25 $ 7.88 $ 8.50 $ 6.13 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA $12.75 $ 5.75 HARRAH'S ENTERTAIN. NA NA NA NA $ 5.00 $ 7.33 $18.33 $45.75 $30.88 GRIFFIN GAMING & ENT NA NA NA NA $ 3.75 $ 7.50 $ 4.38 $ 8.13 $ 4.38 SHOWBOAT, INC. $ 9.81 $ 7.25 $ 8.75 $9.25 $ 4.00 $ 8.75 $16.88 $16.13 $14.50 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP $5.96 $7.79 $9.71 $18.67 $18.25 $25.00 $37.83 $36.75 $23.13 MIRAGE RESORTS $3.70 $4.30 $7.10 $10.95 $7.45 $11.10 $13.10 $23.88 $20.50 Mkt Mkt Mkt Mkt Mkt Mkt Mkt Mkt Mkt Val Val Val Val Val Val Val Val Val --- --- --- --- --- --- --- --- --- AZTAR CORP. NA NA NA 337.2 103.8 213.0 268.1 247.5 224.8 BALLY ENTERTAINMENT 611.9 345.5 592.6 423.3 65.9 191.4 362.1 397.7 287.8 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 289.7 140.3 HARRAH'S ENTERTAIN. NA NA NA NA 399.8 743.4 1,867.8 4,678.3 3,161.7 GRIFFIN GAMING & ENT NA NA NA NA 15.0 30.2 17.6 32.8 17.6 SHOWBOAT, INC. 98.8 89.5 98.5 105.3 45.4 99.3 249.8 241.6 222.8 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP 674.8 886.1 878.9 1,597.8 1,505.0 2,122.5 3,301.0 3,164.4 1,985.3 MIRAGE RESORTS 318.7 235.7 299.6 453.4 310.9 609.7 977.3 2,163.2 1,865.4
1986 1987 1988 1989 1990 1991 1992 1993 1994 Closing Closing Closing Closing Closing Closing Closing Closing Closing Company Debt Debt Debt Debt Debt Debt Debt Debt Debt - ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AZTAR CORP. 396.8 467.0 304.0 185.4 184.3 182.7 381.6 406.6 430.9 BALLY ENTERTAINMENT 1,311.3 1,411.6 1,673.4 1,769.6 1,455.4 1,138.1 1,021.5 1,494.7 1,266.2 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 345.5 432.1 HARRAH'S ENTERTAIN. NA NA 30.2 27.7 957.0 887.5 881.3 842.0 728.5 GRIFFIN GAMING & ENT 583.1 628.7 800.0 860.2 342.6 394.2 461.5 551.4 212.5 SHOWBOAT, INC. 117.1 231.3 228.1 225.8 231.6 213.0 209.1 280.6 392.0 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP 173.2 170.9 297.8 409.3 497.7 338.6 308.2 567.5 632.8 MIRAGE RESORTS 506.0 213.3 750.2 900.0 1,012.2 826.3 834.5 566.7 363.6
HISTORICAL PREFERRED INFORMATION
1986 1987 1988 1989 1990 1991 1992 1993 1994 Closing Closing Closing Closing Closing Closing Closing Closing Closing Company Preferred Preferred Preferred Preferred Preferred Preferred Preferred Preferred Preferred - ------- --------- --------- --------- --------- --------- --------- --------- --------- --------- AZTAR CORP. 0.0 0.0 0.0 0.0 1.1 2.1 3.0 3.9 4.9 BALLY ENTERTAINMENT 1.3 100.0 100.0 100.0 60.3 37.5 34.7 34.7 34.7 HOLLYWOOD CASINO 'A' 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 HARRAH'S ENTERTAIN. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 GRIFFIN GAMING & ENT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SHOWBOAT, INC. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TRUMP HOTELS & CASINO 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CIRCUS CIRCUS ENTERP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 MIRAGE RESORTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
HISTORICAL MINORITY INTEREST INFORMATION
1986 1987 1988 1989 1990 Closing Closing Closing Closing Closing Company Minority Int Minority Int Minority Int Minority Int Minority Int - ------- ------------ ------------ ------------ ------------ ------------ AZTAR CORP. 12.9 4.5 2.3 3.2 4.1 BALLY ENTERTAINMENT 2.0 0.0 16.0 0.0 0.0 HOLLYWOOD CASINO 'A' 0.0 0.0 0.0 0.0 0.0 HARRAH'S ENTERTAIN. 0.0 0.0 0.0 0.0 0.0 GRIFFIN GAMING & ENT 0.0 0.0 0.0 0.0 0.0 SHOWBOAT, INC. 0.0 0.6 0.6 0.0 0.0 TRUMP HOTELS & CASINO 0.0 0.0 0.0 0.0 0.0 CIRCUS CIRCUS ENTERP 0.0 0.0 0.0 0.0 0.0 MIRAGE RESORTS 0.0 0.0 0.0 0.0 0.0
1991 1992 1993 1994 Closing Closing Closing Closing Company Minority Int Minority Int Minority Int Minority Int - ------- ------------ ------------ ------------ ------------ AZTAR CORP. 0.0 0.0 0.0 0.0 BALLY ENTERTAINMENT 39.4 0.0 42.4 37.4 HOLLYWOOD CASINO 'A' 0.0 0.0 0.0 0.0 HARRAH'S ENTERTAIN. 0.0 0.0 15.0 0.0 GRIFFIN GAMING & ENT 0.0 0.0 0.0 0.0 SHOWBOAT, INC. 0.0 0.0 0.0 0.0 TRUMP HOTELS & CASINO 0.0 0.0 0.0 0.0 CIRCUS CIRCUS ENTERP 0.0 0.0 0.0 0.0 MIRAGE RESORTS 0.0 0.0 0.0 0.0
PAGE 15 HISTORICAL CASH INFORMATION ---------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 Closing Closing Closing Closing Closing Closing Closing Closing Closing Company Cash Cash Cash Cash Cash Cash Cash Cash Cash - ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- AZTAR CORP. (23.8) (38.7) (23.9) (99.0) (74.1) (77.1) (100.4) (39.6) (52.1) BALLY ENTERTAINMENT (57.3) (76.3) (101.6) (74.6) (71.8) (54.1) (36.6) (203.1) (184.5) HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA (88.7) (66.5) HARRAH'S ENTERTAIN. NA NA (68.6) (56.1) (40.3) (34.6) (43.8) (62.0) (85.0) GRIFFIN GAMING & ENT (171.7) (36.9) (139.5) (45.3) (58.9) (53.2) (66.9) (76.8) (40.9) SHOWBOAT, INC. (10.6) (43.4) (36.9) (46.3) (37.6) (38.7) (99.6) (122.8) (90.4) TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP (39.3) (74.3) (20.7) (19.4) (18.1) (34.2) (43.4) (39.1) (53.8) MIRAGE RESORTS (234.8) (175.9) (80.3) (92.6) (133.6) (194.4) (143.0) (57.5) (47.1)
Page 16 HISTORICAL EQUITY INVESTMENTS & ADJUSTED MARKET CAPITALIZATIONS
1986 1987 1988 1989 1990 1991 1992 1993 1994 Equity Equity Equity Equity Equity Equity Equity Equity Equity Company Invest. Invest. Invest. Invest. Invest. Invest. Invest. Invest. Invest. - ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AZTAR CORP. 0.0 0.0 0.0 (98.1) (100.6) (105.7) (281.6) (35.9) (37.6) BALLY ENTERTAINMENT (36.3) (43.5) (138.9) (172.2) (204.1) (182.4) (146.2) (150.0) 0.0 HOLLYWOOD CASINO 'A' 0.0 0.0 0.0 0.0 0.0 0.0 (6.9) (4.5) (13.4) HARRAH'S ENTERTAIN. 0.0 0.0 (76.9) (67.1) (59.4) (53.5) (55.9) (103.8) (120.9) GRIFFIN GAMING & ENT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SHOWBOAT, INC. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (17.8) (108.9) TRUMP HOTELS & CASINO 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CIRCUS CIRCUS ENTERP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (142.9) MIRAGE RESORTS (44.0) (47.4) (47.4) 0.0 0.0 0.0 0.0 0.0 0.0 Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Adj. Mkt Cap. Cap. Cap. Cap. Cap. Cap. Cap. Cap. Cap. -------- -------- -------- -------- -------- -------- -------- ------- -------- AZTAR CORP. 385.9 432.8 282.4 328.8 118.6 215.0 270.7 582.5 570.9 BALLY ENTERTAINMENT 1,832.9 1,737.4 2,141.6 2,046.0 1,305.7 1,169.9 1,235.5 1,616.4 1,441.7 HOLLYWOOD CASINO 'A' NA NA NA NA NA NA NA 542.0 492.5 HARRAH'S ENTERTAIN. NA NA NA NA 1,257.1 1,542.7 2,649.5 5,369.5 3,684.4 GRIFFIN GAMING & ENT 411.4 591.8 660.5 814.9 298.7 371.3 412.3 507.3 189.2 SHOWBOAT, INC. 205.3 277.9 290.3 284.9 239.5 273.6 359.3 381.6 415.6 TRUMP HOTELS & CASINO NA NA NA NA NA NA NA NA NA CIRCUS CIRCUS ENTERP 808.7 982.6 1,156.0 1,987.7 1,984.6 2,426.9 3,565.8 3,692.8 2,421.4 MIRAGE RESORTS 545.9 225.6 922.2 1,260.8 1,189.5 1,241.6 1,668.8 2,672.4 2,181.8
Page 17 IBES, VALUE LINE & S&P 500 PEs ------------------------------
Value Value Value S&P S&P S&P IBES Line IBES Line IBES Line 500 S&P 500 Relative Company LTM 1994 1994 1995 1995 1995 1995 1995 500 1995 1995 - ------- EPS EPS EPS EPS EPS PE PE PE Price Earnings PE --- --- ----- --- ----- ----- ----- ----- ----- -------- --------- AZTAR CORP. $0.12 NA NA $0.20 $0.20 40.6 40.6 17.3 616.3 35.7 2.3 BALLY ENTERTAINMENT $0.33 NA NA $0.61 $0.35 24.6 42.9 17.3 616.3 35.7 2.5 HOLLYWOOD CASINO 'A' $0.11 NA NA $0.41 NA 11.0 NA 17.3 616.3 35.7 NA HARRAH'S ENTERTAIN. $0.80 NA NA $1.30 $1.35 20.3 19.5 17.3 616.3 35.7 1.1 GRIFFIN GAMING & ENT $2.70 NA NA $1.61 NA 7.3 NA 17.3 616.3 35.7 NA SHOWBOAT, INC. $1.00 NA NA $0.91 $0.90 29.0 29.3 17.3 616.3 35.7 1.7 TRUMP HOTELS & CASINO ($1.03) NA NA $1.78 NA 12.2 NA 17.3 616.3 35.7 NA CIRCUS CIRCUS ENTERP $1.35 NA NA $1.70 $1.35 17.9 22.5 17.3 616.3 35.7 1.3 MIRAGE RESORTS $1.61 NA NA $1.69 $1.70 22.7 22.6 17.3 616.3 35.7 1.3
Page 18 OTHER -----
Safety Annual Fiscal Latest Company Beta Rating Div Year End Quarter Comments - ------- ---- ------ ------ -------- ------- -------- AZTAR CORP. 1.2 5.0 $0.00 12/31/94 9/95 BALLY ENTERTAINMENT 1.2 5.0 $0.00 12/31/94 9/95 HOLLYWOOD CASINO 'A' 1.3 NA NA 12/31/94 9/95 HARRAH'S ENTERTAIN. 1.8 4.0 $0.00 12/31/94 9/95 GRIFFIN GAMING & ENT 0.6 NA NA 12/31/94 9/95 SHOWBOAT, INC. 1.3 5.0 $0.10 12/31/94 9/95 TRUMP HOTELS & CASINO NA NA NA NA 9/95 CIRCUS CIRCUS ENTERP 1.5 3.0 $0.00 1/31/95 7/95 MIRAGE RESORTS 1.4 3.0 $0.00 12/31/94 9/95
Page 19 IDENTIFICATION -------------- Ticker Company Industry SIC Business Description - ------ ------- ------------ -------------------- azr+ AZTAR CORP. 7,000 MISC AMUSEMENT & REC SERVICE bly+ BALLY ENTERTAINMENT 7,000 MISC AMUSEMENT & REC SERVICE hwcc+ HOLLYWOOD CASINO 'A' 7,000 MISC AMUSEMENT & REC SERVICE het+ HARRAH'S ENTERTAIN. 7,000 MISC AMUSEMENT & REC SERVICE gge+ GRIFFIN GAMING & ENT 7,000 MISC AMUSEMENT & REC SERVICE sbo+ SHOWBOAT, INC. 7,000 MISC AMUSEMENT & REC SERVICE djt+ TRUMP HOTELS & CASINO N/A MISC AMUSEMENT & REC SERVICE cir+ CIRCUS CIRCUS ENTERP 7,000 MISC AMUSEMENT & REC SERVICE mir+ MIRAGE RESORTS 7,000 MISC AMUSEMENT & REC SERVICE Page 20 NOTES ----- * Most of the information contained in this analysis is from the Value Line Database. Compustat is used to download information which is not provided from Value Line. * Forecasts are Value Line estimates, unless otherwise noted. * EBDIT = Earnings before depreciation, amortization, interest, taxes, other non-operating costs and extraordinary charges; EBIT = Earnings before interest, other non-operating costs, taxes and extraordinary charges; EBT = Earnings before taxes and extraordinary charges. * Market Value = Common shares outstanding * share price. Any adjustments will be noted. * Adjusted Market Capitalization = Market Value + total debt including capitalized leases + redeemable preferred and other preferred + minority interests (all @ book value unless otherwise stated) - cash and cash equivalents - equity investments (@ book unless otherwise stated). Any adjustments will be noted. * The current indicated annual dividend used in determining the current dividend yield is derived by taking the latest quarter's dividend and multiplying it by 4. * Historical market value multiples are derived by taking the year end stock price and multiplying it by the year end number of shares. * Historical adjusted market capitalization multiples are derived by taking the year end market value and adding the year end debt, preferred and minority interest balances and subtracting the year end cash and equity investment balances. Rothschild Inc. Confidential PROJECT WONDER Analysis of Selected Comparable Acquisitions (U.S. dollar amounts in millions except per share data) - --------------------------------------------------------------------------------
Offer Value as a Multiple of: LTM LTM LTM Acquiror Announcement Offer Transaction Net To Cash Common Target Date Value Value Common Flow (a) Equity - ------------------------------------ ------------ ------- ----------- ------ ----------- -------- Grand Casinos Inc. 06-Jul-95 139.2 134.5 12.3 x 11.9 x 2.3 x Gaming Corporation of America ITT Corp. 16-Dec-94 1,695.4 1,765.9 23.0 13.5 2.9 Caesars World Inc. Indemnity Holdings 27-Jan-94 11.5 17.9 NA NA NA Star of Cripple Creek Casino International Gaming Management 15-Jan-94 59.7 59.7 NA NA NA Schilling Casino Corp. International Gaming Management 10-Jan-94 58.0 58.0 NA NA NA Splash Casino and Resort ITT Sheraton 3-Nov-93 160.0 160.0 NA NA NA MGM Grand- Desert Inn Hotel International Gaming Management 1-Nov-93 65.8 65.8 NA NA NA Spectrum Gaming Sahara Resorts 18-Feb-93 53.9 343.3 NM 3.9 4.5 Sahara Casino Partners L.P. Hilton Hotels 16-Jun-92 83.0 89.0 9.4 6.6 1.4 Bally's Grand Inc (Reno Casino) Caesars World Inc. 19-July-90 361.2 377.7 12.1 12.7 1.7 Caesars New Jersey Inc. Transaction Value as a Multiple of: ---------------------------------------- Acquiror LTM LTM LTM Target EBITDA EBIT Sales - ------------------------------------ ------ ------ ------- Grand Casinos Inc. 4.6 x 4.7 x 2.74 x Gaming Corporation of America ITT Corp. 9.5 13.1 1.77 Caesars World Inc. Indemnity Holdings NA NA NA Star of Cripple Creek Casino International Gaming Management NA NA NA Schilling Casino Corp. International Gaming Management NA NA NA Splash Casino and Resort ITT Sheraton NA NA NA MGM Grand- Desert Inn Hotel International Gaming Management NA NA NA Spectrum Gaming Sahara Resorts 6.3 10.8 1.54 Sahara Casino Partners L.P. Hilton Hotels 5.1 6.0 0.70 Bally's Grand Inc (Reno Casino) Caesars World Inc. 5.5 7.3 1.17 Caesars New Jersey Inc. Maximum (b) 9.5 x 13.1 x 2.74 x 23.0 x 13.5 x 4.5 x Mean (including Caesars) (b) 6.2 8.4 1.58 14.2 9.7 2.6 Mean (excluding Caesars) (b) 5.4 7.1 1.52 8.8 8.8 2.5 Median (b) 5.5 7.3 1.54 12.2 11.9 2.3 Minimum (b) 4.6 4.7 0.70 9.4 3.9 1.4
- ---------- (a) Cash Flow = Income Available to Common + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings of Unconsolidated Subsidiaries. (b) Summary Multiples exclude numbers that are Negative, Not Available, Not Meaningful, and figures which are considered outliers (*). Rothschild Inc. Confidential Discount Rate Analysis - ------------------------------------------------------------------------------- (dollar amounts in millions, exceptions noted)
Debt to Levered Unlevered Cost Levered Market Total Market Debt to Unlevered Cost of Cost of of Company Name Beta Value Debt Capitalization Equity Beta Equity Equity Debt WACC - ----------------------- ------- ------ ------ -------------- ------- --------- ------- --------- ---- ----- Established Casinos - ------------------- AZTAR CORP. 1.16 280.5 455.8 61.9% 162.5% 0.59 12.9% 9.5% 11.8% 9.3% BALLY ENTERTAINMENT 1.21 522.8 1,296.0 71.3% 247.9% 0.49 13.2% 8.91% 9.0% 10.2% CIRCUS CIRCUS ENTERP 1.48 2,221.4 709.4 24.2% 31.9% 1.24 14.8% 13.4% 8.3% 13.2% MIRAGE RESORTS 1.53 2,150.0 299.8 12.2% 13.9% 1.41 15.1% 14.4% 1O.0% 14.5% HARRAH'S ENTERTAIN. 1.86 2,626.5 731.804 21.8% 27.9% 1.59 17.1% 15.5% 8.2% 15.2% SHOWBOAT, INC. 1.12 334.3 392.2 54.0% 117.3% 0.66 12.7% 9.9% 10.4% 11.4% ----- ----- ----- ----- ----- 1.00 14.3% 11.9% 9.6% 12.3% Emerging Market Casinos - ----------------------- ARGOSY GAMING 1.26 231.2 123.1 34.8% 53.3% 0.95 13.5% 11.7% 12.0% 13.0% CASINO AMERICA 1.13 121.5 138.9 53.3% 114.3% 0.67 12.7%. 10.0% 10.8% 11.7% CASINO MAGIC CORP. 0.96 146.1 141.4 49.2% 96.8% 0.61 11.7% 9.6% 11.0% 11.3% GRAND CASINOS 1.78 883.6 353.0 28.5% 40.0% 1.44 16.6%. 14.6% 9.3% 14.5% HOLLYWOOD CASINO 'A' 1.36 149.4 429.6 74.2% 287.5% 0.50 14.1% 8.9% 12.0% 12.5% LADY LUCK GAMING'A' 1.24 44.6 181.3 (1) 80.3% 406.6% 0.36 13.4% 8.1% 10.7%. 11.2% PLAYERS INT'L 1.54 303.4 152.8 33.5% 50.4% 1.18 15.2% 13.0% 8.4% 12.9% PRESIDENT CASINOS 0.70 100.0 115.7 53.6% 115.7% 0.41 10.1% 8.4% 12.6% 11.4% ---- ----- ----- ----- ----- 0.77 13.4% 10.5% 10.8% 12.3% Gaming Equipment Mfg. - -------------------- INT'L GAME TECH. 1.44 1,489.8 114.2 7.1% 7.7% 1.38 14.6% 14.2% 8.25 14.1% CASINO DATA SYSTEMS 1.4 98.0 0.0 0.0% O.O% 1.40 14.3% 14.3% NMF 14.3% LOTTERY ENTERPRISES 1.31 8.4 0.9 9.3% 10.2% 1.23 13.8% 13.3% 6.0% 13.1% AUTOTOTE CORP 2.14 112.1 48.8 30.3% 43.6% 1.70 18.8% 16.1% NA NA GTECH HOLDINGS CORP 0.98 1,205.9 348.1 22.4% 28.9% 0.84 11.8% 11.0% 7.9% 10.9% WMS INDUSTRIES 1.2 542.3 88.9 14.1% 16.4% 1.09 13.1% 12.5% 12.0% 13.0% BALLY GAMING INTL 0.28 123.6 75.3 37.9% 60.9% 0.21 7.6% 7.2% 10.4% 8.7% ---- ----- ----- ----- ----- 1.39 14.5% 14.3% 8.2% 14.2% Racetracks - ---------- CALIFORNIA JOCKEY CLUB 0.56 93.3 0.0 0.0% 0.0% 0.56 9.3% 9.3% NMF 9.3% CHURCHILL DOWNS 0.38 141.9 0.0 0.0% 0.0% 0.38 8.2% 8.2% NMF 8.2% INTNL THOROUGHBRED BR. 1.47 43.0 17.2 28.5% 39.9% 1.05 14.8% 12.2% 6.0% 12.3% LADBROKE GROUP PLC 0.89 2,692.3 1,777.6 39.8% 66.0% 0.54 11.3% 9.2% 8.4% 10.1% ---- ----- ----- ----- ----- 0.63 10.9% 9.7% 7.2% 10.0% Maximum 1.59 17.1% 15.5% 12.6% 15.2% Average 0.87 13.3% 11.2% 9.8% 12.0% Minimum 0.36 8.2% 8.1% 6.0% 8.2% Adjusted Mean(3) 0.86 13.4% 11.1% 9.9% 12.1% Cost of Equity (CAPM) Risk-free rate (10 years): 5.9 Risk Premium: 6.0% Beta: 0.86 Cost of Equity 11.1%
Notes: - ------------------------------------------------------- (1) 173.5 millions of mortgage notes payable included. (2) Tax rate is assumed to be: 40.0% (3) Excludes Maximum and Minimum PROJECT WONDER Atlantic City Casino Stock Index Relative to S&P 500 [GRAPH APPEARS HERE] Casino SP50 S&P 500 STOCK INDEX Index CURRENCY: U.S. Dollar Comp Index ----- Avg DATE VOLUME HIGH LOW CLOSE Index ----- ---- ------ ---- 1.00 12/19/94 458.800 456.640 457.910 1.00 1.01 12/20/94 458.450 456.370 457.100 1.00 1.00 12/21/94 461.700 457.100 459.610 1.00 1.00 12/22/94 461.210 459.330 459.670 1.00 1.03 12/23/94 461.320 459.390 459.830 1.00 1.02 12/27/94 462.730 459.830 462.470 1.01 1.01 12/28/94 462.490 459.000 460.860 1.01 0.99 12/29/94 461.810 460.360 461.160 1.01 1.04 12/30/94 462.120 459.240 459.270 1.00 1.04 1/03/95 459.270 457.200 459.110 1.00 1.06 1/04/95 460.720 457.560 460.710 1.01 1.12 1/05/95 461.300 459.750 460.340 1.01 1.15 1/06/95 462.490 459.470 460.680 1.01 1.14 1/09/95 461.770 459.740 460.830 1.01 1.13 1/10/95 464.590 460.830 461.680 1.01 1.11 1/11/95 463.610 458.650 461.660 1.01 1.10 1/12/95 461.930 460.630 461.640 1.01 1.10 1/13/95 466.430 461.640 465.970 1.02 1.12 1/16/95 470.390 465.970 469.380 1.03 1.15 1/17/95 470.150 468.190 470.050 1.03 1.20 1/18/95 470.430 468.030 469.720 1.03 1.20 1/19/95 469.720 466.400 466.950 1.02 1.19 1/20/95 466.990 463.990 464.780 1.02 1.21 1/23/95 466.230 461.140 465.810 1.02 1.19 1/24/95 466.880 465.470 465.860 1.02 1.21 1/25/95 469.510 464.400 467.440 1.02 1.18 1/26/95 468.620 466.900 468.320 1.02 1.16 1/27/95 471.360 468.320 470.390 1.03 1.18 1/30/95 470.520 467.490 468.510 1.02 1.18 1/31/95 471.030 468.180 470.420 1.03 1.19 2/01/95 472.750 469.290 470.400 1.03 1.20 2/02/95 472.790 469.950 472.780 1.03 1.21 2/03/95 479.910 472.780 478.640 1.05 1.23 2/06/95 481.950 478.360 481.140 1.05 1.22 2/07/95 481.320 479.690 480.810 1.05 1.23 2/08/95 482.600 480.400 481.190 1.05 1.29 2/09/95 482.000 479.910 480.190 1.05 1.33 2/10/95 481.960 479.530 481.460 1.05 1.32 2/13/95 482.860 481.070 481.650 1.05 1.35 2/14/95 482.940 480.890 482.550 1.05 1.43 2/15/95 485.540 481.770 484.540 1.06 1.39 2/16/95 485.220 483.050 485.220 1.06 1.35 2/17/95 485.220 481.970 481.970 1.05 1.40 2/21/95 482.720 482.720 482.720 1.05 1.39 2/22/95 486.150 482.450 485.070 1.06 1.38 2/23/95 489.190 485.070 486.910 1.06 1.39 2/24/95 488.220 485.700 488.110 1.07 1.35 2/27/95 488.110 483.180 483.810 1.06 1.38 2/28/95 487.440 483.770 487.390 1.06 1.37 3/01/95 487.830 484.920 485.650 1.06 1.35 3/02/95 485.710 483.190 485.130 1.06 1.34 3/03/95 485.420 483.070 485.420 1.06 1.34 3/06/95 485.700 481.520 485.630 1.06 1.31 3/07/95 485.630 479.700 482.120 1.05 1.35 3/08/95 484.080 481.570 483.140 1.06 1.33 3/09/95 483.740 482.050 483.160 1.06 1.33 3/10/95 490.370 483.160 489.570 1.07 1.32 3/13/95 491.280 489.350 490.050 1.07 1.32 3/14/95 493.690 490.050 492.890 1.08 1.32 3/15/95 492.890 490.830 491.880 1.07 1.34 3/16/95 495.740 491.780 495.410 1.08 1.34 3/17/95 496.670 494.950 495.520 1.08 1.34 3/20/95 496.610 495.270 496.150 1.08 1.38 3/21/95 499.190 494.040 495.070 1.08 1.37 3/22/95 495.670 493.670 495.670 1.08 1.41 3/23/95 496.770 494.190 495.950 1.08 1.46 3/24/95 500.970 495.950 500.970 1.09 1.45 3/27/95 503.200 500.930 503.200 1.10 1.50 3/28/95 503.910 501.830 503.900 1.10 1.51 3/29/95 508.150 500.960 503.120 1.10 1.51 3/30/95 504.660 501.000 502.220 1.10 1.50 3/31/95 502.220 495.700 500.710 1.09 1.55 4/03/95 501.910 500.200 501.850 1.10 1.62 4/04/95 505.260 501.820 505.240 1.10 1.71 4/05/95 505.570 503.170 505.570 1.10 1.81 4/06/95 507.100 505.000 506.080 1.11 1.75 4/07/95 507.190 503.590 506.420 1.11 1.77 4/10/95 507.010 504.610 507.010 1.11 1.76 4/11/95 508.850 505.290 505.530 1.10 1.77 4/12/95 507.170 505.070 507.170 1.11 1.76 4/13/95 509.830 507.170 509.230 1.11 1.73 4/17/95 512.030 505.430 506.130 1.11 1.70 4/18/95 507.650 504.120 505.370 1.10 1.72 4/19/95 505.890 501.190 504.920 1.10 1.70 4/20/95 506.500 503.440 505.290 1.10 1.73 4/21/95 508.490 505.290 508.490 1.11 1.72 4/24/95 513.020 507.440 512.890 1.12 1.73 4/25/95 513.540 511.320 512.100 1.12 1.76 4/26/95 513.040 510.470 512.660 1.12 1.84 4/27/95 513.620 511.630 513.550 1.12 1.94 4/28/95 515.290 510.900 514.710 1.12 1.89 5/01/95 515.600 513.420 514.260 1.12 1.88 5/02/95 515.180 513.030 514.860 1.12 1.84 5/03/95 520.540 514.860 520.480 1.14 1.82 5/04/95 525.400 519.440 520.540 1.14 1.80 5/05/95 522.350 518.280 520.120 1.14 1.88 5/08/95 525.150 519.140 523.960 1.14 1.89 5/09/95 525.990 521.790 523.560 1.14 1.94 5/10/95 524.400 521.530 524.360 1.15 1.90 5/11/95 524.890 522.700 524.370 1.15 1.91 5/12/95 527.050 523.300 525.550 1.15 1.90 5/15/95 527.740 525.000 527.740 1.15 1.91 5/16/95 529.080 526.450 528.190 1.15 1.89 5/17/95 528.420 525.380 527.070 1.15 1.81 5/18/95 527.070 519.580 519.580 1.13 1.80 5/19/95 519.580 517.070 519.190 1.13 1.86 5/22/95 524.340 519.190 523.650 1.14 1.86 5/23/95 528.590 523.650 528.590 1.15 1.86 5/24/95 531.910 525.570 528.610 1.15 1.85 5/25/95 529.040 524.890 528.590 1.15 1.80 5/26/95 528.590 522.510 523.650 1.14 1.78 5/30/95 525.580 521.380 523.580 1.14 1.80 5/31/95 533.410 522.170 533.400 1.16 1.79 6/01/95 534.210 530.050 533.490 1.17 1.76 6/02/95 536.910 529.550 532.510 1.16 1.78 6/05/95 537.730 532.470 535.600 1.17 1.85 6/06/95 537.090 535.140 535.550 1.17 1.84 6/07/95 535.550 531.660 533.130 1.16 1.83 6/08/95 533.560 531.650 532.350 1.16 1.82 6/09/95 532.350 526.000 527.940 1.15 1.88 6/12/95 532.540 527.940 530.880 1.16 1.87 6/13/95 536.230 530.880 536.050 1.17 1.84 6/14/95 536.480 533.830 536.470 1.17 1.87 6/15/95 539.070 535.560 537.120 1.17 1.90 6/16/95 539.980 537.120 539.830 1.18 1.90 6/19/95 545.220 539.830 545.220 1.19 1.94 6/20/95 545.440 543.430 544.980 1.19 1.93 6/21/95 545.930 543.900 543.980 1.19 1.95 6/22/95 551.070 543.980 551.070 1.20 1.97 6/23/95 551.070 548.230 549.710 1.20 1.94 6/26/95 549.790 544.060 544.130 1.19 1.87 6/27/95 547.070 542.190 542.430 1.18 1.86 6/28/95 546.330 540.720 544.730 1.19 1.85 6/29/95 546.250 540.790 543.870 1.19 1.87 6/30/95 546.820 543.510 544.750 1.19 1.80 7/03/95 547.100 544.430 547.090 1.19 1.77 7/05/95 549.980 546.280 547.260 1.20 1.75 7/06/95 553.990 546.590 553.990 1.21 1.78 7/07/95 556.570 553.050 556.370 1.22 1.81 7/10/95 558.480 555.770 557.190 1.22 1.81 7/11/95 557.190 553.800 554.780 1.21 1.82 7/12/95 561.560 554.270 560.890 1.22 1.83 7/13/95 562.000 559.070 561.000 1.23 1.86 7/14/95 561.000 556.410 559.890 1.22 1.89 7/17/95 562.940 559.450 562.720 1.23 1.86 7/18/95 562.720 556.860 558.460 1.22 1.76 7/19/95 558.460 542.510 550.980 1.20 1.79 7/20/95 554.430 549.100 553.540 1.21 1.83 7/21/95 554.730 550.910 553.620 1.21 1.82 7/24/95 557.210 553.620 556.630 1.22 1.85 7/25/95 561.750 556.340 561.100 1.23 1.85 7/26/95 563.780 560.850 561.610 1.23 1.90 7/27/95 565.330 561.610 565.220 1.23 1.90 7/28/95 565.400 562.040 562.930 1.23 1.97 7/31/95 563.490 560.060 562.060 1.23 1.92 8/01/95 562.110 556.670 559.640 1.22 1.92 8/02/95 565.620 557.870 558.800 1.22 1.88 8/03/95 558.800 554.100 558.750 1.22 1.90 8/04/95 559.570 557.910 558.940 1.22 1.91 8/07/95 561.240 558.940 560.030 1.22 1.93 8/08/95 561.530 558.320 560.390 1.22 1.91 8/09/95 561.590 559.290 559.710 1.22 1.91 8/10/95 560.630 556.050 557.450 1.22 1.89 8/11/95 558.500 553.040 555.110 1.21 1.88 8/14/95 559.740 554.760 559.740 1.22 1.87 8/15/95 559.980 555.220 558.570 1.22 1.87 8/16/95 559.980 557.370 559.970 1.22 1.87 8/17/95 559.970 557.420 559.040 1.22 1.89 8/18/95 561.240 558.340 559.210 1.22 1.89 8/21/95 563.340 557.890 558.110 1.22 1.90 8/22/95 559.520 555.870 559.520 1.22 1.90 8/23/95 560.000 557.080 557.140 1.22 1.90 8/24/95 558.630 555.200 557.460 1.22 1.89 8/25/95 561.310 557.460 560.100 1.22 1.91 8/28/95 562.220 557.990 559.050 1.22 1.90 8/29/95 560.010 555.710 560.000 1.22 1.90 8/30/95 561.520 559.490 560.920 1.22 1.91 8/31/95 562.360 560.490 561.880 1.23 1.90 9/01/95 564.620 561.010 563.840 1.23 1.91 9/05/95 569.200 563.840 569.170 1.24 1.91 9/06/95 570.530 569.000 570.170 1.25 1.90 9/07/95 571.110 569.230 570.290 1.25 1.86 9/08/95 572.680 569.270 572.680 1.25 1.81 9/11/95 575.150 572.680 573.910 1.25 1.82 9/12/95 576.510 573.110 576.510 1.26 1.80 9/13/95 579.720 575.470 578.770 1.26 1.79 9/14/95 583.990 578.770 583.610 1.27 1.77 9/15/95 585.070 581.790 583.350 1.27 1.74 9/18/95 583.370 579.360 582.770 1.27 1.72 9/19/95 584.240 580.750 584.200 1.28 1.71 9/20/95 586.770 584.180 586.770 1.28 1.71 9/21/95 586.790 580.910 583.000 1.27 1.71 9/22/95 583.000 578.250 581.730 1.27 1.70 9/25/95 582.140 579.500 581.810 1.27 1.68 9/26/95 584.660 580.650 581.410 1.27 1.65 9/27/95 581.420 574.680 581.040 1.27 1.64 9/28/95 585.880 580.690 585.870 1.28 1.68 9/29/95 587.610 584.000 584.410 1.28 1.64 10/02/95 585.050 580.540 581.720 1.27 1.62 10/03/95 582.340 578.480 582.340 1.27 1.61 10/04/95 582.340 579.910 581.470 1.27 1.57 10/05/95 582.630 579.580 582.630 1.27 1.58 10/06/95 584.540 582.100 582.490 1.27 1.53 10/09/95 582.490 576.350 578.370 1.26 1.55 10/10/95 586.030 571.550 577.520 1.26 1.57 10/11/95 579.520 577.080 579.460 1.27 1.65 10/12/95 583.120 579.460 583.100 1.27 1.66 10/13/95 587.390 583.100 584.500 1.28 1.63 10/16/95 584.860 582.630 583.030 1.27 1.59 10/17/95 586.780 581.900 586.780 1.28 1.62 10/18/95 589.770 586.270 587.440 1.28 1.68 10/19/95 590.660 586.340 590.650 1.29 1.68 10/20/95 590.660 586.780 587.460 1.28 1.67 10/23/95 587.460 583.730 585.060 1.28 1.69 10/24/95 587.310 584.750 586.540 1.28 1.64 10/25/95 587.190 581.410 582.470 1.27 1.59 10/26/95 582.630 572.530 576.720 1.26 1.62 10/27/95 579.700 573.210 579.700 1.27 1.63 10/30/95 583.790 579.700 583.250 1.27 1.63 10/31/95 586.710 581.500 581.500 1.27 1.64 11/01/95 584.240 581.040 584.220 1.28 1.65 11/02/95 589.720 584.220 589.720 1.29 1.67 11/03/95 590.570 588.650 590.570 1.29 1.68 11/06/95 590.640 588.310 588.460 1.29 1.68 11/07/95 588.460 584.240 586.320 1.28 1.69 11/08/95 591.710 586.320 591.710 1.29 1.69 11/09/95 593.900 590.890 593.260 1.30 1.69 11/10/95 593.260 590.390 592.720 1.29 1.66 11/13/95 593.720 590.580 592.300 1.29 1.66 11/14/95 592.300 588.980 589.290 1.29 1.66 11/15/95 593.970 588.360 593.960 1.30 1.66 11/16/95 597.910 593.520 597.340 1.30 1.63 11/17/95 600.140 597.300 600.070 1.31 1.63 11/20/95 600.400 596.170 596.850 1.30 1.63 11/21/95 600.280 595.420 600.240 1.31 1.63 11/22/95 600.710 598.400 598.400 1.31 1.62 11/24/95 600.240 598.400 599.970 1.31 1.62 11/27/95 603.350 599.970 601.320 1.31 1.61 11/28/95 606.450 599.020 606.450 1.32 1.64 11/29/95 607.660 605.470 607.640 1.33 1.65 11/30/95 608.690 605.370 605.370 1.32 1.66 12/01/95 608.110 605.370 606.980 1.33 1.68 12/04/95 613.830 606.850 613.680 1.34 1.71 12/05/95 618.480 613.140 617.680 1.35 1.68 12/06/95 621.110 616.690 620.180 1.35 1.68 12/07/95 620.190 615.210 616.170 1.35 1.68 12/08/95 617.820 614.320 617.480 1.35 1.64 12/11/95 620.900 617.140 619.520 1.35 1.62 12/12/95 619.550 617.680 618.780 1.35 1.63 12/13/95 622.020 618.270 621.690 1.36 1.64 12/14/95 622.880 616.130 616.920 1.35 1.64 12/15/95 617.720 614.460 616.340 1.35 1.61 12/18/95 616.340 606.130 606.810 1.33 1.61 12/19/95 611.940 605.050 611.930 1.34 1.62 12/20/95 614.270 605.930 605.940 1.32 1.59 12/21/95 610.520 605.940 610.490 1.33 1.62 12/22/95 613.500 610.450 611.960 1.34 1.61 12/26/95 614.500 611.960 614.300 1.34 1.58 12/27/95 615.730 613.750 614.530 1.34 1.59 12/28/95 615.500 612.400 614.120 1.34 1.62 12/29/95 615.930 612.360 615.930 1.35 1.67 1/02/96 620.740 613.170 620.730 1.36 1.67 1/03/96 623.250 619.560 621.320 1.36 1.70 1/04/96 624.520 613.960 617.700 1.35 1.70 1/05/96 617.700 612.020 616.710 1.35 -------- ----- Casino index consists of AZR, BLY, GGE, HET, HWCC, and SBO. PROJECT WONDER THCR Price/Volume Run --------------------- [GRAPH APPEARS HERE] CURRENCY: U.S. Dollar DATE VOLUME HIGH LOW CLOSE ------- ------- ------ ------ ------ 6/07/95 1582100 14.250 14.000 14.000 6/08/95 838300 14.125 14.000 14.000 6/09/95 322700 14.125 14.000 14.000 6/12/95 273400 14.125 14.000 14.000 6/13/95 213300 14.125 14.000 14.000 6/14/95 453300 14.125 13.250 13.250 6/15/95 178100 13.250 12.750 12.875 6/16/95 80600 12.875 12.750 12.750 6/19/95 300100 12.750 11.625 11.625 6/20/95 60400 12.250 11.375 12.125 6/21/95 243400 13.250 12.250 12.625 6/22/95 53600 12.875 12.625 12.750 6/23/95 19600 12.875 12.750 12.875 6/26/95 55400 13.000 12.875 13.000 6/27/95 29300 13.125 13.000 13.000 6/28/95 56200 13.250 13.125 13.125 6/29/95 29900 13.375 13.125 13.375 6/30/95 37900 13.500 13.375 13.375 7/03/95 55100 13.375 13.125 13.125 7/05/95 19200 13.250 13.000 13.125 7/06/95 22400 13.250 13.125 13.125 7/07/95 78200 13.125 13.000 13.000 7/10/95 75800 14.000 13.125 13.750 7/11/95 20900 13.750 13.500 13.625 7/12/95 138700 14.375 13.500 14.125 7/13/95 29200 14.000 13.875 13.875 7/14/95 121300 14.375 13.875 14.375 7/17/95 82400 14.375 14.125 14.250 7/18/95 18800 14.125 14.125 14.125 7/19/95 20700 14.125 13.875 13.875 7/20/95 21900 14.125 13.875 14.125 7/21/95 33900 14.250 14.000 14.125 7/24/95 49900 14.250 14.000 14.125 7/25/95 20000 14.250 14.125 14.250 7/26/95 71000 15.125 14.250 15.125 7/27/95 115000 15.500 15.000 15.250 7/28/95 17400 15.250 15.000 15.125 7/31/95 24500 15.125 14.750 15.000 8/01/95 28000 14.875 14.625 14.875 8/02/95 81800 15.750 14.875 15.625 8/03/95 164900 16.250 15.250 16.125 8/04/95 109200 16.625 16.125 16.250 8/07/95 57100 16.375 15.750 15.750 8/08/95 37500 15.875 15.625 15.750 8/09/95 193700 17.000 16.125 16.875 8/10/95 257900 18.000 17.125 17.750 8/11/95 293900 19.250 17.750 19.125 8/14/95 146700 19.750 19.375 19.500 8/15/95 99200 19.750 18.875 19.000 8/16/95 56600 19.125 19.000 19.125 8/17/95 64700 19.750 19.250 19.750 8/18/95 41200 19.750 19.250 19.250 8/21/95 29300 19.625 19.000 19.000 8/22/95 28600 18.875 18.500 18.625 8/23/95 33900 19.125 18.375 19.125 8/24/95 25400 19.125 18.875 19.000 8/25/95 35100 19.000 18.875 19.000 8/28/95 17200 19.125 18.875 19.125 8/29/95 13400 19.125 18.750 18.875 8/30/95 23700 18.875 18.750 18.750 8/31/95 9400 18.875 18.750 18.875 9/01/95 9900 18.750 18.625 18.750 9/05/95 13300 18.750 18.375 18.500 9/06/95 36900 19.000 18.375 19.000 9/07/95 6400 19.000 18.875 19.000 9/08/95 8900 19.000 18.750 18.750 9/11/95 12000 18.750 18.500 18.500 9/12/95 45000 18.625 18.250 18.250 9/13/95 28400 18.250 17.750 17.750 9/14/95 76700 17.625 17.000 17.500 9/15/95 84700 17.375 17.000 17.125 9/18/95 90700 18.500 16.875 18.500 9/19/95 19000 18.500 18.125 18.250 9/20/95 57300 18.625 18.250 18.500 9/21/95 18900 18.500 18.250 18.375 9/22/95 23700 18.500 18.125 18.500 9/25/95 7700 18.500 18.125 18.125 9/26/95 34400 18.125 17.750 17.875 9/27/95 59300 17.750 17.000 17.125 9/28/95 63700 17.125 16.500 16.875 9/29/95 33000 17.125 16.750 17.000 10/02/95 27900 17.875 17.125 17.625 10/03/95 14100 17.750 17.375 17.500 10/04/95 74800 17.500 17.250 17.250 10/05/95 9400 17.250 17.000 17.125 10/06/95 2900 17.250 17.000 17.125 10/09/95 38200 17.125 16.375 16.750 10/10/95 468400 16.625 16.000 16.125 10/11/95 58800 16.500 15.625 16.125 10/12/95 14600 16.625 16.250 16.500 10/13/95 16100 17.000 16.625 17.000 10/16/95 11000 17.125 16.625 16.750 10/17/95 20000 16.750 16.250 16.375 10/18/95 16100 16.375 16.125 16.125 10/19/95 53800 16.500 16.000 16.125 10/20/95 5700 16.500 16.250 16.250 10/23/95 87900 16.500 16.375 16.375 10/24/95 4200 16.375 16.250 16.250 10/25/95 9200 16.125 15.750 15.750 10/26/95 33700 15.750 15.250 15.250 10/27/95 259200 15.000 14.000 14.750 10/30/95 61600 16.500 14.875 16.500 10/31/95 31900 17.250 16.500 17.000 11/01/95 29400 17.125 16.625 16.750 11/02/95 120000 17.750 16.750 17.750 11/03/95 14300 18.000 17.500 17.625 11/06/95 45100 17.875 17.125 17.375 11/07/95 44100 17.625 17.375 17.375 11/08/95 14600 17.750 17.250 17.625 11/09/95 24200 18.500 18.125 18.250 11/10/95 11700 18.125 17.750 17.875 11/13/95 3300 17.750 17.750 17.750 11/14/95 4900 17.750 17.500 17.750 11/15/95 20200 18.375 17.625 18.375 11/16/95 42700 18.250 17.625 17.625 11/17/95 47200 17.625 17.375 17.625 11/20/95 48300 18.750 17.875 18.125 11/21/95 21600 18.125 17.750 17.750 11/22/95 10200 17.750 17.500 17.500 11/24/95 1500 17.625 17.625 17.625 11/27/95 8700 17.625 17.500 17.625 11/28/95 17600 18.000 17.500 17.875 11/29/95 6900 18.125 17.875 18.000 11/30/95 38800 19.250 18.000 19.000 12/01/95 118400 19.500 19.000 19.375 12/04/95 95500 20.000 19.000 19.750 12/05/95 163600 21.000 19.875 21.000 12/06/95 173100 21.125 19.500 20.375 12/07/95 145700 21.125 20.375 20.875 12/08/95 51400 20.875 20.625 20.875 12/11/95 66300 21.625 20.750 21.500 12/12/95 28400 21.500 21.125 21.125 12/13/95 52100 21.625 20.750 21.500 12/14/95 24200 21.625 20.750 20.750 12/15/95 43600 20.625 20.250 20.500 12/18/95 14600 20.250 20.000 20.000 12/19/95 20200 20.500 20.000 20.375 12/20/95 19000 20.375 20.250 20.250 12/21/95 33300 20.500 20.125 20.375 12/22/95 6800 21.000 20.500 21.000 12/26/95 29400 21.500 21.125 21.375 12/27/95 85300 21.500 21.250 21.375 12/28/95 67400 21.500 21.250 21.375 12/29/95 65500 21.500 21.250 21.500 1/02/96 58200 22.375 21.750 21.750 1/03/96 79700 21.750 21.125 21.750 1/04/96 64300 21.625 21.375 21.500 1/05/96 62100 22.000 21.500 21.750 PROJECT WONDER Price/Volume Run of Gem's 11.35% Mortgage Bonds [GRAPH APPEARS HERE] CURRENCY: U.S. Dollar DATE VOLUME HIGH LOW CLOSE ------ ------ ---- --- ------ 12/19/94 125 64.375 63.375 63.500 12/20/94 116 63.500 63.000 63.250 12/21/94 65 64.500 63.750 64.000 12/22/94 65.000 64.000 64.500 12/23/94 20 64.750 64.625 64.750 12/27/94 100 66.500 66.000 66.000 12/28/94 225 67.750 66.125 66.125 12/29/94 97 66.875 66.000 66.875 12/30/94 10 67.000 66.000 67.000 1/03/95 15 67.000 66.000 67.000 1/04/95 255 68.875 68.000 68.000 1/05/95 128 68.750 68.000 68.750 1/06/95 304 68.750 68.125 68.250 1/09/95 206 68.625 68.375 68.625 1/10/95 761 70.000 68.625 68.625 1/11/95 824 69.375 68.750 68.750 1/12/95 435 69.250 68.500 69.250 1/13/95 336 69.375 69.000 69.250 1/16/95 350 70.375 69.250 70.250 1/17/95 136 72.375 70.750 72.375 1/18/95 610 72.750 70.000 70.500 1/19/95 57 70.500 70.250 70.250 1/20/95 864 70.375 69.625 69.625 1/23/95 98 70.250 69.000 70.250 1/24/95 91 69.750 69.500 69.500 1/25/95 90 69.250 69.250 69.250 1/26/95 133 69.500 69.125 69.250 1/27/95 38 69.500 69.000 69.250 1/30/95 53 69.500 68.500 69.500 1/31/95 60 69.375 68.750 69.375 2/01/95 72 69.875 69.375 69.500 2/02/95 452 70.000 68.000 68.000 2/03/95 127 68.750 67.875 68.625 2/06/95 472 69.000 68.375 69.000 2/07/95 90 69.500 69.250 69.500 2/08/95 115 69.500 69.000 69.250 2/09/95 62 69.750 69.000 69.375 2/10/95 223 69.750 69.500 69.750 2/13/95 109 70.250 70.000 70.000 2/14/95 40 70.750 70.000 70.750 2/15/95 101 72.000 71.000 71.875 2/16/95 92 71.750 71.250 71.500 2/17/95 60 71.375 71.250 71.375 2/21/95 152 71.875 71.375 71.375 2/22/95 171 71.500 71.000 71.250 2/23/95 18 71.625 71.500 71.500 2/24/95 30 71.000 71.000 71.000 2/27/95 100 71.000 70.000 71.000 2/28/95 96 71.500 71.000 71.500 3/01/95 406 73.750 72.500 73.250 3/02/95 322 74.000 73.250 73.750 3/03/95 20 73.750 73.750 73.750 3/06/95 206 73.000 72.500 72.500 3/07/95 375 73.000 72.000 72.000 3/08/95 166 72.875 72.250 72.875 3/09/95 110 74.000 73.000 73.750 3/10/95 55 75.000 73.750 73.750 3/13/95 108 74.000 73.500 74.000 3/14/95 70 73.750 73.500 73.750 3/15/95 93 74.000 73.750 74.000 3/16/95 97 75.000 73.750 75.000 3/17/95 196 75.000 74.000 74.250 3/20/95 39 74.250 74.000 74.000 3/21/95 77 74.250 73.750 74.250 3/22/95 123 74.250 73.500 73.500 3/23/95 55 74.500 74.125 74.500 3/24/95 75 75.000 74.500 74.500 3/27/95 101 76.500 75.000 75.500 3/28/95 35 75.500 75.500 75.500 3/29/95 5 75.125 75.125 75.125 3/30/95 143 75.750 75.500 75.500 3/31/95 145 76.000 75.750 76.000 4/03/95 127 75.500 75.500 75.500 4/04/95 85 76.875 76.000 76.500 4/05/95 93 76.250 75.500 76.250 4/06/95 318 77.500 76.000 77.000 4/07/95 55 78.000 77.250 78.000 4/10/95 70 78.000 77.500 78.000 4/11/95 46 77.750 77.500 77.500 4/12/95 49 77.500 77.375 77.375 4/13/95 64 78.000 77.250 78.000 4/17/95 6 77.500 77.500 77.500 4/18/95 78.000 77.000 77.500 4/19/95 7 77.375 77.375 77.375 4/20/95 18 77.500 77.000 77.000 4/21/95 227 77.250 77.000 77.250 4/24/95 103 78.000 77.125 77.875 4/25/95 369 72.250 72.000 72.000 4/26/95 71 72.000 71.625 71.750 4/27/95 262 72.000 71.000 72.000 4/28/95 8 72.000 71.000 72.000 5/01/95 21 71.875 71.000 71.000 5/02/95 11 71.625 71.000 71.625 5/03/95 195 72.000 71.750 72.000 5/04/95 269 74.250 73.000 74.000 5/05/95 130 74.500 74.250 74.500 5/08/95 152 75.000 74.500 75.000 5/09/95 135 76.000 75.000 75.000 5/10/95 57 75.250 74.500 74.500 5/11/95 48 75.000 74.750 75.000 5/12/95 154 76.000 75.000 76.000 5/15/95 93 76.750 74.500 75.000 5/16/95 25 76.000 76.000 76.000 5/17/95 131 77.000 76.000 76.000 5/18/95 707 77.750 76.000 76.000 5/19/95 28 76.000 75.500 76.000 5/22/95 14 76.000 75.500 75.500 5/23/95 35 76.500 76.500 76.500 5/24/95 218 77.000 75.750 76.000 5/25/95 244 76.000 75.750 75.750 5/26/95 46 76.250 75.500 75.500 5/30/95 68 76.000 75.625 75.625 5/31/95 236 76.500 74.500 74.500 6/01/95 367 75.500 74.500 75.500 6/02/95 78 76.000 75.500 76.000 6/05/95 263 78.250 76.500 78.000 6/06/95 163 80.500 79.000 79.375 6/07/95 315 83.000 82.000 82.750 6/08/95 88 82.500 81.000 81.875 6/09/95 18 81.000 79.000 79.000 6/12/95 161 79.625 78.250 79.625 6/13/95 47 80.000 79.000 80.000 6/14/95 5 79.625 79.625 79.625 6/15/95 27 78.500 78.500 78.500 6/16/95 182 77.500 77.000 77.250 6/19/95 114 77.250 76.750 77.250 6/20/95 46 77.000 76.500 76.500 6/21/95 95 77.500 77.250 77.500 6/22/95 89 79.000 78.000 79.000 6/23/95 607 80.000 79.500 80.000 6/26/95 10 79.000 79.000 79.000 6/27/95 231 81.000 79.750 80.500 6/28/95 80.500 80.000 80.250 6/29/95 80.500 79.500 80.000 6/30/95 25 80.500 80.500 80.500 7/03/95 80.000 79.000 79.500 7/05/95 152 81.000 79.000 79.000 7/06/95 57 81.000 80.500 81.000 7/07/95 94 82.000 81.750 82.000 7/10/95 36 82.500 82.000 82.000 7/11/95 41 82.500 82.500 82.500 7/12/95 6 82.500 82.500 82.500 7/13/95 35 83.000 82.000 82.000 7/14/95 82.500 81.000 81.750 7/17/95 10 82.250 82.250 82.250 7/18/95 44 82.500 81.250 81.250 7/19/95 142 82.000 79.500 80.500 7/20/95 131 81.000 80.750 81.000 7/21/95 448 83.000 81.500 82.750 7/24/95 202 83.750 82.750 83.750 7/25/95 75 86.500 83.750 86.500 7/26/95 20 86.000 85.000 85.000 7/27/95 65 85.750 84.000 84.000 7/28/95 85.000 84.500 84.750 7/31/95 23 85.000 85.000 85.000 8/01/95 74 85.750 85.500 85.750 8/02/95 36 87.000 86.500 86.500 8/03/95 68 87.000 86.000 86.500 8/04/95 72 86.750 86.375 86.500 8/07/95 43 86.500 86.500 86.500 8/08/95 20 86.750 86.500 86.750 8/09/95 25 86.750 86.000 86.750 8/10/95 41 86.000 85.000 85.000 8/11/95 17 85.500 85.000 85.000 8/14/95 50 86.000 86.000 86.000 8/15/95 5 86.000 86.000 86.000 8/16/95 38 85.000 84.625 84.625 8/17/95 236 84.625 84.000 84.250 8/18/95 11 84.500 84.000 84.500 8/21/95 15 84.375 84.000 84.375 8/22/95 239 84.500 83.750 84.000 8/23/95 54 83.750 83.625 83.625 8/24/95 43 84.000 83.000 83.625 8/25/95 28 83.750 83.250 83.750 8/28/95 77 84.000 83.500 83.750 8/29/95 100 84.500 84.125 84.125 8/30/95 162 84.250 84.000 84.250 8/31/95 192 84.250 83.750 84.250 9/01/95 84.750 84.000 84.375 9/05/95 118 84.500 84.000 84.500 9/06/95 347 84.500 84.250 84.375 9/07/95 373 84.750 84.125 84.125 9/08/95 85 85.250 85.000 85.000 9/11/95 15 84.500 84.500 84.500 9/12/95 606 87.500 85.500 87.500 9/13/95 444 88.000 87.000 88.000 9/14/95 250 88.500 87.500 87.500 9/15/95 250 88.500 88.000 88.500 9/18/95 58 88.500 87.500 87.750 9/19/95 39 88.250 88.000 88.250 9/20/95 378 89.000 87.500 88.500 9/21/95 658 89.250 88.750 88.750 9/22/95 104 88.750 88.500 88.750 9/25/95 75 88.750 88.625 88.625 9/26/95 242 89.500 89.000 89.500 9/27/95 155 89.500 89.000 89.000 9/28/95 198 89.500 89.000 89.375 9/29/95 190 89.750 89.000 89.750 10/02/95 190 90.000 89.375 89.625 10/03/95 406 89.625 89.000 89.500 10/04/95 143 89.000 87.875 87.875 10/05/95 268 88.750 87.750 88.750 10/06/95 49 88.625 88.500 88.500 10/09/95 88 90.000 88.500 89.500 10/10/95 802 89.500 89.000 89.250 10/11/95 118 89.875 89.000 89.875 10/12/95 178 89.875 89.250 89.375 10/13/95 156 91.000 89.750 90.000 10/16/95 210 90.250 90.250 90.250 10/17/95 101 90.250 90.000 90.250 10/18/95 28 90.250 89.500 89.500 10/19/95 266 90.250 89.750 89.875 10/20/95 116 89.750 89.250 89.625 10/23/95 251 90.000 89.500 89.875 10/24/95 32 89.750 89.000 89.750 10/25/95 216 89.750 89.000 89.250 10/26/95 61 89.500 89.250 89.250 10/27/95 56 90.000 89.250 90.000 10/30/95 344 87.000 85.000 86.000 10/31/95 110 86.125 85.500 85.500 11/01/95 100 86.000 85.500 86.000 11/02/95 831 87.000 85.750 86.500 11/03/95 52 87.000 86.750 86.750 11/06/95 55 87.000 86.750 87.000 11/07/95 44 87.000 86.375 86.875 11/08/95 109 87.500 87.000 87.500 11/09/95 59 87.500 87.500 87.500 11/10/95 58 87.500 87.250 87.500 11/13/95 123 87.375 86.250 87.250 11/14/95 69 87.250 86.500 87.250 11/15/95 147 87.000 86.500 87.000 11/16/95 43 87.000 86.250 86.500 11/17/95 181 87.000 86.250 86.500 11/20/95 188 88.250 87.375 87.500 11/21/95 5 87.750 87.125 87.125 11/22/95 92 87.875 87.000 87.500 11/24/95 88.250 87.000 87.625 11/27/95 41 88.250 88.000 88.000 11/28/95 44 87.750 87.000 87.750 11/29/95 62 87.875 87.125 87.125 11/30/95 15 87.875 87.125 87.125 12/01/95 10 88.000 87.875 88.000 12/04/95 303 88.875 88.000 88.875 12/05/95 6 89.500 89.500 89.500 12/06/95 154 91.500 90.250 91.500 12/07/95 112 90.875 90.625 90.625 12/08/95 484 92.000 91.000 91.500 12/11/95 172 91.000 90.875 90.875 12/12/95 6 91.000 91.000 91.000 12/13/95 681 92.750 91.375 92.500 12/14/95 91 92.625 92.000 92.625 12/15/95 86 93.000 92.500 92.500 12/18/95 656 92.875 92.500 92.500 12/19/95 94 93.000 92.500 92.500 12/20/95 220 93.500 93.000 93.500 12/21/95 145 96.000 94.750 96.000 12/22/95 95.500 94.625 95.063 12/26/95 70 95.500 95.000 95.000 12/27/95 349 95.750 95.500 95.625 12/28/95 395 96.500 95.750 95.750 12/29/95 21 96.250 96.000 96.250 1/02/96 532 97.000 96.125 97.000 1/03/96 309 98.000 97.125 98.000 1/04/96 155 98.000 96.500 96.500 1/05/96 254 98.000 97.500 97.875 EX-99.17.(B)(4) 3 REPORT BY DONALDSON, LUFKIN & JENRETTE EXHIBIT 17(b)(4) - -------------------------------------------------------------------------------- PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF WONDER JANUARY 4, 1996 _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE PROJECT WONDER DRAFT - -------------------------------------------------------------------------------- TABLE OF CONTENTS
EXHIBIT TRANSACTION SUMMARY........................................ 1 VALUATION ANALYSES......................................... 2 PROFILE OF TOM............................................. 3 PROFILE OF THE COMBINED COMPANY............................ 4
Note: All projections and estimates of future events are strictly those of, and the following analyses are based upon financial and other information provided to DLJ by, Wonder, Tom and their respective managements. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE PROJECT WONDER DRAFT - -------------------------------------------------------------------------------- TRANSACTION SUMMARY _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE PROJECT WONDER - -------------------------------------------------------------------------------- TRANSACTION OVERVIEW . Merge Tom with a wholly-owned subsidiary of Wonder . Tom's Class A shareholders receive $30 per share (aggregate consideration of $40.5 million) in Wonder Common Stock or cash, at their option . On account of all of his equity and voting interests in Tom, Trump receives aggregate consideration of $40.5 million in Wonder Common Stock equivalents . Tom's Class B shares are redeemed for $0.50 per share in cash (aggregate consideration of $0.4 million) . Trump receives warrants to purchase 600,000 shares of Wonder Common Stock at a $30.00 strike price (three-year term), 600,000 shares of Wonder Common Stock at a $35.00 strike price (four-year term) and 600,000 shares of Wonder Common Stock at a $40.00 strike price (five-year term) . Purchase land held by Trump Realty and remove First Fidelity contingent liability and receive releases with payment of $50 million in cash and 500,000 shares of Wonder Common Stock . Pay $10 million cash to BT on behalf of Trump for consent and releases by BT . Refinance Tom Mortgage Bonds with $750 million First Mortgage Note offering . Raise $100 million in Wonder public equity offering . Trump management fee at Tom eliminated _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -1- PROJECT WONDER - -------------------------------------------------------------------------------- SOURCES AND USES ($ in millions)
SOURCES OF FUNDS USES OF FUNDS -------------------------------------------- --------------------------------------- Cash Sources Cash Uses ------------ --------- Excess Cash /(1)/ $44.2 Payment to First Fidelity $50.0 New First Mortgage Notes 750.0 Payment to BT 10.0 Additional Equity Issued to Public 100.0 Retire First Mortgage Bonds 793.8 ----- Purchase Class B Shares 0.4 Transaction Fees and Expenses 40.0 ---- Total Cash Sources 894.2 Total Cash Uses 894.2 Non-Cash Sources Non-Cash Uses ---------------- ------------- Equity Issued to Taj Class A /(2)/ 40.5 Purchase Class A and C Shares 81.0 Equity Issued to Taj Class C 40.5 Equity to First Fidelity /(3)/ 10.0 ---- Equity to First Fidelity 10.0 ---- Total Sources $985.2 Total Uses $985.2 ===== =====
________________________________________ (1) Although Tom will have $55.0 million of excess cash, only $44 million will be used in the Acquisition in order to provide a working capital cushion. (2) Assumes Class A shareholders will receive Wonder stock in the Acquisition. (3) Assumes $20.00 Wonder stock price. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -2- PROJECT WONDER - -------------------------------------------------------------------------------- ADDITIONAL POTENTIAL USES . Trump Indiana additional capital expenditures - $25 million required to fund permanent facility /(1)/ . Refinance Natwest loan - $44.9 million aggregate principal amount . Exercise Trump Plaza East option - Current exercise price of $28 million . Fund Tom expansion __________________________________________ (1) Assumes $10 million of gaming equipment financing available. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -3- PROJECT WONDER - -------------------------------------------------------------------------------- OWNERSHIP SUMMARY /(1)/
POST ACQUISITION /(2)/ POST & EQUITY ACQUISITION/(2)/ OFFERING & PRE-ACQUISITION POST & EQUITY TRUMP ------------------------ WONDER TOM ACQUISITION /(2)/ OFFERING WARRANTS ------------ ----------- -------------------- ------------------ ------------------- Trump.......................... 39.8% 50.0% 40.7% 33.0% 37.7% Class A........................ - 50.0% 9.5% 7.7% 7.1% Public......................... 60.2% - 47.5% 57.4% 53.4% First Fidelity................. - - 2.3% 1.9% 1.8% ----- ----- ---- ---- ---- Total.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
________________________________________ (1) Assumes $20.00 Wonder stock price and $100mm primary equity offering. (2) Assumes Tom's Class A shareholders receive Wonder stock. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -4- PROJECT WONDER - -------------------------------------------------------------------------------- CAPITALIZATION SUMMARY ($ in millions)
PRO ESTIMATED AT 12/31/95 FORMA % OF TOTAL --------------------------- WONDER TOM COMBINED CAPITALIZATION ----------- ------------ ---------- ---------------- Excess Cash.................................... $15.1 $55.0 $26.0 -- Cage/Restricted Cash........................... 12.0 25.0 37.0 -- ---- ---- ---- == Total Cash..................................... $27.2 $80.0 $63.0 -- ===== ===== ===== == Long-Term Debt: Tom NatWest Loan.............................. $0.0 $44.9 $44.9 3.1% Tom 11.35% First Mortgage Bonds............... 0.0 793.8/(1)/ 0.0 0.0 Wonder 10.88% First Mortgage Bonds............ 330.0 0.0 330.0 22.8 Wonder 15.50% Senior Secured Notes............ 155.0 0.0 155.0 10.7 New First Mortgage Notes...................... 0.0 0.0 750.0 51.8 Other Debt.................................... 13.9 1.2 15.1 1.1 ----- ----- ------- ----- Total Long-Term Debt....................... 499.0 839.9 1,295.0 89.5 Equity......................................... 49.2 (84.6)/(2)/ 152.7 10.5 ---- ----- ----- ---- Total Capitalization........................... $548.2 $755.3 $1,447.8 100.0% ====== ====== ======== Contingent Liabilities First Fidelity................................ $0.0 $30.0/(3)/ $0.0 --
____________________________ (1) Includes accrued PIK interest through March 31, 1996. (2) Gives effect to loss associated with redemption of First Mortgage Bonds. (3) Currently booked on Tom's balance sheet at $17 million which represents the present value of the obligation. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -5- PROJECT WONDER - -------------------------------------------------------------------------------- PURCHASE PRICE SUMMARY ($ in millions)
EXCLUDING INCLUDING FEES FEES --------- --------- Purchase Equity.............................. $81.4 $81.4 Assumed Value of Warrants to Trump/(1)/ ..... 7.4 7.4 --- --- Equity Purchase Price...................... 88.8 88.8 Payment to First Fidelity: Cash....................................... 50.0 50.0 Equity/(2)/................................ 10.0 10.0 Payment to BT................................ 10.0 10.0 Retire Old First Mortgage Bonds/(3)/......... 793.8 793.8 Assume NatWest Loan.......................... 44.9 44.9 Transaction Fees and Expenses................ 0.0 40.0 Less: Excess Cash on Hand.................... (55.0) (55.0) ------ ------ Enterprise Value.......................... $942.5 $982.5 ===== =====
____________________ (1) Black-Scholes analysis used to value Trump warrants. Assumed volatility of 35%. (2) Assumes $20.00 Wonder stock price. (3) Includes accrued PIK interest through March 31, 1996. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -6- SUMMARY PURCHASES PRICE MULTIPLES ($ in millions)
PURCHASE PRICE PURCHASE PRICE MULTIPLES MULTIPLES TOM FINANCIAL RESULTS INCLUDING FEES EXCLUDING FEES ---------------------------------- -------------------------------- ------------------------------- EXCLUDING INCLUDING EXCLUDING INCLUDING EXCLUDING INCLUDING SYNERGIES SYNERGIES/(1)/ SYNERGIES SYNERGIES/(1)/ SYNERGIES SYNERGIES/(1)/ -------------- ------------------ --------------- ---------------- --------------- --------------- 1995 ESTIMATED - -------------- Revenues................ $559.6 $559.6 1.8x 1.8x 1.7x 1.7x EBITDA.................. 138.2 156.5 7.1 6.3 6.8 6.0 EBIT.................... 94.3 112.6 10.4 8.7 10.0 8.4 Book Value.............. 40.3 -- 2.2 -- 2.2 -- 1996 BUDGET - ----------- Revenues............... $583.4 $583.4 1.7x 1.7x 1.6x 1.6x EBITDA................. 161.0 179.3 6.1 5.5 5.9 5.3 EBIT................... 112.8 131.1 8.7 7.5 8.4 7.2 Book Value............. -- -- -- -- -- --
__________________ (1) Assumes $18.3 million in synergies expected to be achieved in FY 1997. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -7- PROJECT WONDER - -------------------------------------------------------------------------------- STRATEGIC RATIONALE . Creates one of the largest gaming companies in the United States . Significant presence in growing Atlantic City market - Combined company will have approximately one-quarter of Atlantic City's hotel rooms, gaming space, slots and tables . Alleviates Trump conflict-of-interest concerns . $20.6 million in expected annual cost savings in FY 1998 . Provides critical mass necessary to compete effectively for new gaming licenses . Extends maturity of Tom long-term debt to allow for expansion plan _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -8- PROJECT WONDER - -------------------------------------------------------------------------------- VALUATION ANALYSES _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE PROJECT WONDER - -------------------------------------------------------------------------------- VALUATION RELATIVE TO PROPOSAL . Methodologies - Comparable companies analysis - Comparable M&A transactions analysis - Discounted cash flow analysis - Contribution analysis _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -1- PROJECT WONDER - -------------------------------------------------------------------------------- PUBLIC COMPANY COMPARABLE ANALYSIS ($ in millions)
IMPLIED TOM MULTIPLES IMPLIED TOM MULTIPLES TOM INCLUDING FEES EXCLUDING FEES COMPARABLE COMPANY ---------------------------- -------------------------- FINANCIAL EXCLUDING INCLUDING EXCLUDING INCLUDING MULTIPLES/1)/ ----------------------- RESULTS/2)/ SYNERGIES SYNERGIES/(3)/ SYNERGIES SYNERGIES/3)/ LOW AVERAGE HIGH BALLY ENT. ------------- ----------- --------------- ------------------------- ----- -------- ------ ------------ ENTERPRISE VALUE/ LTM Revenues............... $559.6 1.8x 1.8x 1.7x 1.7x 0.8x 1.7x 2.6x 1.9x LTM EBITDA................. 138.2 7.1 6.3 6.8 6.0 4.5 7.4 11.2 7.1 LTM EBIT................... 94.3 10.4 8.7 10.0 8.4 6.0 10.9 17.3 10.1 1996P EBITDA............... 161.0 6.1 5.5 5.9 5.3 4.1 6.3 8.4 6.0 PRICE/ 1995P Net Income........... NM NM NM NM NM 6.8x 21.7x 41.4x 23.3X 1996P Net Income........... NM NM NM NM NM 6.1 14.8 28.6 17.7 Book Value................. 40.3 2.2 -- 2.2 -- 0.8 2.4 4.1 1.4
______________________________ (1) Comparable casino hotel companies includes Harrah's Entertainment, Bally Entertainment, Rio Hotels, Showboat, Aztar, Griffin Gaming, Hollywood Casinos, Mirage, MGM Grand and Stratosphere. (2) Tom LTM results represent estimated FY1995, excluding synergies. (3) Assumes $18.3 million in synergies expected to be achieved in FY 1997. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -2- PROJECT WONDER - -------------------------------------------------------------------------------- COMPARABLE MERGER AND ACQUISITIONS VALUATION ANALYSIS ($ in millions)
IMPLIED TOM MULTIPLES IMPLIED TOM MULTIPLES AVERAGE AVERAGE TOM INCLUDING FEES EXCLUDING FEES CASINO SINGLE ITT- --------------------------- -------------------------- FINANCIAL EXCLUDING INCLUDING EXCLUDING INCLUDING RESORT PROPERTY CAESARS RESULTS/(1)/ SYNERGIES SYNERGIES/(2)/ SYNERGIES SYNERGIES/(2)/ MULTIPLES/(3)/ MULTIPLES/(3)/ MULTIPLE ------------- ---------- --------------- ---------- -------------- -------------- --------------- --------- ENTERPRISE VALUE/ LTM Revenues $559.6 1.8x 1.8x 1.7x 1.7x 1.6x 1.4x 1.8x LTM EBITDA 138.2 7.1 6.3 6.8 6.0 8.7 8.4 9.1 LTM EBIT 94.3 10.4 8.7 10.0 8.4 12.2 11.0 13.5 EQUITY VALUE/ 1995P Net Income NM NM NM NM NM -- -- 23.3x Book Value 40.3 2.2 -- 2.2 -- -- -- 2.9
____________________ (1) Tom LTM results represent estimated FY 1995, excluding synergies. (2) Assumes $18.3 million in synergies expected to be achieved in FY (3) Average excludes high and low. _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -3- PROJECT WONDER - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW VALUATION ($ in millions) ENTERPRISE VALUES WITH TOM EXPANSION - ------------------------------------
WEIGHTED AVERAGE COST OF CAPITAL -------------------------------------------------------------------------------- 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% ------------ ------------ ------------- ------------ ----------- ------------ 5.0X $1,417.0 $1,357.5 $1,301.0 $1,247.5 $1,196.8 $1,148.6 TERMINAL 6.0 1,636.0 1,566.6 1,500.9 1,438.5 1,379.4 1,323.3 EBITDA 7.0 1,855.1 1,775.8 1,700.7 1,629.5 1,562.0 1,497.9 MULTIPLE 8.0 2,074.1 1,985.0 1,900.5 1,820.5 1,744.6 1,672.6 9.0 2,293.1 2,194.1 2,100.4 2,011.5 1,927.2 1,847.3 10.0 2,512.2 2,403.3 2,300.2 2,202.5 2,109.9 2,022.0
_____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -4- PROJECT WONDER - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW VALUATION (CONT'D) ($ in millions) ENTERPRISE VALUES WITHOUT TOM EXPANSION - ---------------------------------------
WEIGHTED AVERAGE COST OF CAPITAL ------------------------------------------------------------------------- 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% ------------ ----------- --------- ---------- ----------- ---------- 5.0X $1,148.5 $1,104.0 $1,061.8 $1,021.6 $983.5 $947.2 TERMINAL 6.0 1,298.3 1,247.0 1,198.4 1,152.2 1,108.4 1,066.7 EBITDA 7.0 1,448.0 1,390.0 1,335.0 1,282.8 1,233.2 1,186.1 MULTIPLE 8.0 1,597.8 1,533.0 1,471.6 1,413.4 1,358.1 1,305.5 9.0 1,747.5 1,676.1 1,608.3 1,544.0 1,482.9 1,424.9 10.0 1,897.3 1,819.1 1,744.9 1,674.5 1,607.8 1,544.4
_____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -5- PROJECT WONDER - -------------------------------------------------------------------------------- CONTRIBUTION ANALYSIS
RELATIVE ENTERPRISE VALUATION CONTRIBUTION: INCLUDING FEES EXCLUDING FEES - ------------------------------------- ---------------------------------------- Wonder...............46.7% Wonder..............47.8% Tom..................53.3% Tom................52.2%
PROJECTED ---------------------------------------------- 1995 1996 1997 ------------- ------------ ----------- REVENUES: Wonder........................ 37.3% 51.5% 54.2% Tom........................... 62.7% 48.5% 45.8% EBITDA: Wonder........................ 34.4% 46.6% 49.0% Tom........................... 65.6% 53.4% 51.0% EBIT: Wonder........................ 37.0% 50.2% 50.0% Tom........................... 63.0% 49.8% 50.0% NET INCOME: Wonder........................ NM NM NM Tom........................... NM NM NM BOOK VALUE: Wonder........................ 45.0% -- -- Tom........................... 55.0% -- --
_____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -6- PROJECT WONDER - -------------------------------------------------------------------------------- PROFILE OF TOM _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE PROJECT WONDER - -------------------------------------------------------------------------------- TOM CORPORATE PROFILE . Largest casino hotel facility in Atlantic City . Since commencing operations in 1990: - #1 in total gaming revenue - #1 in table revenues - #1 in slot revenues . Top performer in the Atlantic City market in terms of Revenues and EBITDA . First class hotel and entertainment facilities . Expansion plan provides upside significant potential _____________________________________________________________________________DLJ DONALDSON, LUFKIN & JENRETTE -1- PROJECT WONDER - -------------------------------------------------------------------------------- TOM SUMMARY HISTORICAL FINANCIAL INFORMATION ($ in millions)
FISCAL YEAR ENDED DECEMBER 31, LTM ----------------------------------------- 1992 1993 1994/(1)/ 10/31/95 ------------ ------------ ------------- ------------- Net Revenues.......................... $469.8 $498.9 $517.2 $555.0 Growth.............................. 7.2% 6.2% 3.7% -- EBITDA /(2)/.......................... 107.0 124.1 120.1 139.7 Margin.............................. 22.8% 24.9% 23.2% 25.2% EBIT.................................. 68.0 84.5 76.6 -- Margin.............................. 14.5% 16.9% 14.8% -- Cash Interest Expense................. -- -- -- 78.3 Total Interest Expense................ -- -- -- 117.3 Capital Expenditures.................. 12.1 16.8 23.0 25.3 Total Debt (Face)..................... -- -- -- 826.1 Total Debt + Contingent Liabilities... -- -- -- 826.1
______________________________ (1) Excludes non-recurring charges. (2) EBITDA figures are after Trump Realty lease payments and Trump management fee. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -2- PROJECT WONDER - -------------------------------------------------------------------------------- TOM STAND-ALONE PROJECTED FINANCIAL SUMMARY/(1)/ ($ in millions)
FISCAL YEAR ENDING DECEMBER 31, ---------------------------------------------------------------------------- 1995PF 1996 1997 1998 1999 2000 ----------- ----------- ----------- ----------- ----------- ----------- Net Revenues: Current Property $559.6 $583.4 $612.5 $646.2 $672.1 $702.3 Expansion 0.0 0.0 74.6 99.8 161.8 231.5 ----- ----- ----- ----- ----- ----- Total 559.6 583.4 687.1 746.0 833.9 933.8 Growth Rate 8.2% 4.2% 17.8% 8.6% 11.8% 12.0% EBITDA Current Property 138.2 161.0 175.4 194.9 205.0 220.0 Expansion 0.0 0.0 33.0 46.3 72.6 101.8 ----- ----- ----- ----- ----- ----- Total 138.2 161.0 208.4 241.2 277.6 321.8 Margin 24.7% 27.6% 30.3% 32.3% 33.3% 34.5% EBIT Current Property 94.3 112.8 140.1 161.3 169.7 182.9 Expansion 0.0 0.0 25.5 36.0 59.3 83.1 ----- ----- ----- ----- ----- ----- Total 94.3 112.8 165.6 197.3 229.0 266.0 Margin 16.9% 19.3% 24.1% 26.5% 27.5% 28.5% Capital Expenditures Maintenance 28.5 31.7 25.0 25.0 25.0 35.0 Expansion 0.0 23.7 83.6 75.6 53.1 10.9 ---- ---- ----- ----- ---- ---- Total $28.5 $54.8 $108.6 $100.6 $78.1 $45.9
___________________________ (1) Includes add-back of Trump Realty lease expense and Trump management fee. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -3- PROJECT WONDER - -------------------------------------------------------------------------------- TOM EXPANSION PLAN ($ in millions)
ESTIMATED COST -------------- Phase I (1996-1997) Conversion of entertainment $53 arena into 60,000 sq. ft. of casino space New entertainment area built 8 on steel pier Phase II (1997-1998) 2,200 car parking garage 26 Phase III (1998-1999) Two 640 room hotel towers 160 --- Total cost $247 ===
____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -4- PROJECT WONDER - -------------------------------------------------------------------------------- PROFILE OF THE COMBINED COMPANY ____________________________________________________________________________ DJL DONALDSON, LUFKIN & JENRETTE PROJECT WONDER - -------------------------------------------------------------------------------- SUMMARY OF CONSOLIDATED SYNERGIES ($ in millions)
FYE DECEMBER 31, ---------------------------------------------- 1996 1997 1998 -------------- -------------- -------------- Position / Department Rationalization: Senior Positions Eliminated....................... $1.3 $1.3 Department Reductions............................. 5.6 5.6 Operational Cost Savings: Purchasing Discounts (4% on $160 million)......... 6.4 6.4 Mail Volume Discounts................................ 1.0 1.0 Combining Laundry Facilities...................... 1.5 1.5 Combining In-House Litigation Services............ 1.0 1.0 Combining Health Insurance Coverage............... 1.0 1.0 Other Operational Savings......................... 0.5 0.5 Combining Reservations Department.................... -- 1.3 Other Efficiencies................................... -- 1.0 ----- ---- TOTAL............................................. $9.0 $18.3 $20.6 === ==== ====
____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -1- PROJECT WONDER - -------------------------------------------------------------------------------- PRO FORMA COMBINED FINANCIAL SUMMARY/(1)/ ($ in millions) ______________________________________ (1) Assumes $20.00 Wonder stock Price. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -2- PROJECT WONDER - --------------------------------------------------------------------------------
FISCAL YEAR ENDING DECEMBER 31, ------------------------------------- ESTIMATED PROJECTED --------------------- PF 1995/(2)/ 1996 1997 --------------- ---------- ---------- TOM - --- Revenues.................................. $559.6 $583.4 $612.5 EBITDA.................................... 138.2 161.0 175.4 EBIT...................................... 94.3 112.8 140.1 WONDER/(3)//(4)/ - ------- Revenues.................................. $333.2 $620.4 $724.5 EBITDA.................................... 72.4 140.8 168.2 EBIT...................................... 55.4 113.7 140.1 Net Income................................ (14.4) 28.9 43.7 EPS/(5)/.................................. (0.86) 1.72 2.60 PRO FORMA COMBINED (EXCLUDES - ---------------------------- SYNERGIES AND TOM EXPANSION) - ---------------------------- Revenues.................................. $892.8 $1,203.8 $1,337.0 EBITDA.................................... 210.6 301.8 343.6 EBIT...................................... 142.7 209.5 273.2 Net Income................................ (24.9) 35.4 66.2 EPS/(3)/.................................. (0.95) 1.34 2.51
_________________________ (2) 1995 pro forma for add-back of the Trump management fee and Trump Realty lease payment. (3) 1995 results pro forma for current capital structure, tax rate and G&A expenses. (4) Excludes pre-opening expenses. (5) Reported 1995 EPS will be approximately ($0.20) per share representing the period from June 7 through December 31, 1995. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -3- PROJECT WONDER - -------------------------------------------------------------------------------- ACCRETION/DILUTION ANALYSIS/(1)/
FISCAL YEAR ENDING DECEMBER 31, --------------------------------- ESTIMATED PROJECTED ---------------------- PF 1995 1996 1997 --------- ---------- ---------- EARNINGS PER SHARE: - ------------------- Wonder Stand-Alone EPS/(2)/ /(3)/....... ($0.86) $1.72 $2.60 Pro Forma Combined EPS: Unadjusted............................ ($0.95) $1.34 $2.51 Accretion (Dilution).................. (10.1)% (21.9)% (3.4)% Adjusted For Synergies/(4)/........... ($0.60) $1.54 $2.92 Accretion (Dilution).................. 29.7% (10.4)% 12.2% Adjusted For Tom Expansion............ NM NM $3.03 Accretion (Dilution).................. NM NM 16.3% Adj. For Synergies/(4)/ and Tom Expansion............................. NM NM $3.43 Accretion (Dilution).................. NM NM 31.9%
______________________________________ (1) Assumes $20.00 Wonder stock price. Excludes effect of Trump warrants. (2) 1995 results pro forma for current capital structure, tax rate and G&A expenses. (3) Excludes pre-opening expenses. (4) Assumes $9.0 million of synergies for FY 1995 and FY 1996 and $18.3 million for FY 1997. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -4- PROJECT WONDER - -------------------------------------------------------------------------------- EPS ACCRETION/DILUTION - SENSITIVITY ANALYSIS/(1)/
PROJECTED ----------------------------- 1996 1997 ------------- ------------- 10% EPS REDUCTION: ----------------- Wonder Stand-Alone EPS .............. $1.55 $2.34 Pro Forma Combined EPS: Unadjusted......................... $1.23 $2.35 Accretion (Dilution)............... (20.3)% 0.1% Adjusted For Synergies/(2)/........ $1.43 $2.75 Accretion (Dilution)............... (7.5)% 17.5% Adjusted For Tom Expansion......... NM $2.86 Accretion (Dilution)............... NM 22.1% Adj. For Synergies/(2)/ and Tom Expansion......................... NM $3.27 Accretion (Dilution)............... NM 39.4%
________________________________________ (1) Assumes $20.00 Wonder stock price. Excludes effect of Trump warrants. (2) Assumes $9.0 million of synergies for FY 1996 and $18.3 million for FY 1997. ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -5- PROJECT WONDER - --------------------------------------------------------------------------------
25% EPS REDUCTION: ----------------- Wonder Stand-Alone EPS....................... $1.29 $1.95 Pro Forma Combined EPS: Unadjusted................................. $1.07 $2.09 Accretion (Dilution)....................... (17.1)% 7.3% Adjusted For Synergies/(2)/................ $1.27 $2.50 Accretion (Dilution)....................... (1.7)% 28.1% Adjusted For Tom Expansion................. NM $2.61 Accretion (Dilution)....................... NM 33.6% Adj. For Synergies/(2)/ and Tom............ NM $3.01 Expansion Accretion (Dilution)....................... NM 54.4%
____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -6- PROJECT WONDER - -------------------------------------------------------------------------------- CONSIDERATIONS . Size of equity offering . Class A Option: stock vs. cash . Lock-ups . Collar . Absence of definitive agreements ____________________________________________________________________________ DLJ DONALDSON, LUFKIN & JENRETTE -7- EX-99.17.(B)(5) 4 APPRAISAL OF THE TRUMP TAJ MAHAL CASINO RESORT EXHIBIT 17(b)(5) APPRAISAL OF TRUMP TAJ MAHAL CASINO RESORT ATLANTIC CITY, NEW JERSEY PREPARED FOR Trump Taj Mahal Associates c/o The Trump Organization 725 Fifth Avenue New York, New York APPRAISAL GROUP International [Letterhead of Appraisal Group International Appears Here] N.J. Office March 18, 1994 Trump Taj Mahal Associates c/o The Trump Organization 725 Fifth Avenue New York, New York 10022 Re: Trump Taj Mahal Casino Resort Atlantic City, New Jersey Our Ref. #94027 ----------------------------- Gentlemen: Pursuant to your authorization, an inspection and appraisal has been made of the above-captioned premises in order to estimate the Going Concern Value, as of March 18, 1994. Going Concern Value is defined within the report, which contains the collective data and analyses upon which our value estimate is concluded. Trump Taj Mahal Casino Resort, which will be known from this point on as the "Subject Property", is located at Virginia Avenue and the Boardwalk in Atlantic City, New Jersey. The property consists of a total of 29.24+ Acres, situated - among various parcel, improved with a multi-story, multi-building, 120,000 square foot casino gaming area and 1,250 room resort hotel. Also included is the ancillary parking garage, steel pier, and storage warehouses in Pleasantville and egg harbor township. The employee parking lot, located on North Carolina Avenue and Huron Avenue is leased from the City of Atlantic City. Consideration has been given to all three recognized methods of valuation. They are the "Cost Approach," the "Sales Comparison Approach" and the "Capitalization of Income Approach." Due to the nature of this property, our value conclusion is based solely on the utilization of the Capitalization of Income Approach. This letter is not the appraisal, but merely serves to transmit the attached appraisal report and to convey the final conclusion of value. The attached report includes Definitions of Going Concern value, and of the property rights appraised as if free and clear of mortgages. The appraisal is subject to the assumptions and limiting conditions set forth in the appraisal report. Trump Taj Mahal Associates -2- March 18, 1994 This report has been prepared in compliance with the Office of Thrift Supervision of the Department of Treasury's Regulation 12 C.F.R. Part 564, the Uniform Standards of Professional Appraisal Practice, and the Office of the Comptroller of Currency (OCC) written appraisal guidelines. Based upon the findings, it is our opinion that the Going Concern Value, subject to the assumptions and limiting conditions as set forth herein, as of the value date, March 18, 1994, is: ONE BILLION ONE HUNDRED MILLION DOLLARS --------------------------------------- ($1,100,000,000,000) This letter and the accompanying report are integral parts of our findings and conclusions. Respectfully submitted, APPRAISAL GROUP International [SEAL APPEARS HERE.] /s/ Irwin J. Steinberg -------------------------------- IRWIN J. STEINBERG, MAI N.J. State Certified Real Estate General Appraisers #RG00347 /s/ Avi M. Vardi -------------------------------- AVI M. VARDI, Senior Appraiser N.J. State Certified Real Estate General Appraisers #RG00641 APPRAISAL GROUP International TABLE OF CONTENTS ----------------- INTRODUCTION EXECUTIVE SUMMARY AND CONCLUSIONS.................... 1 CERTIFICATION........................................ 3 PURPOSE OF APPRAISAL................................. 4 PROPERTY RIGHTS APPRAISED............................ 4 FUNCTION OF THE REPORT............................... 4 PROPERTY HISTORY & OWNERSHIP......................... 4 SCOPE OF THE ASSIGNMENT.............................. 4 DEFINITION OF MARKET VALUE........................... 7 OTHER DEFINITIONS.................................... 8 QUALIFICATIONS OF THE APPRAISERS..................... 9 ASSUMPTIONS AND LIMITING CONDITIONS.................. 17 BACKGROUND DATA AND ANALYSES IDENTIFICATION OF SUBJECT PROPERTY................... 21 AREA DATA............................................ 23 ATLANTIC CITY DATA................................... 35 NEIGHBORHOOD ANALYSIS................................ 41 SITE DESCRIPTION..................................... 45 DESCRIPTION OF THE IMPROVEMENTS...................... 49 ZONING DATA.......................................... 64 REAL ESTATE TAX AND ASSESSMENT DATA.................. 67 HIGHEST AND BEST USE................................. 69 VALUATION AND CONCLUSIONS VALUATION METHOD..................................... 75 CAPITALIZATION OF INCOME APPROACH.................... 79 CORRELATION AND VALUE CONCLUSION.....................115 ADDENDA APPENDIX I - Subject Property Photographs APPENDIX II - Floor Plans APPENDIX III - Trump Taj Mahal Associates Statement of Income APPENDIX IV - Property Real Estate Tax Assessments APPENDIX V - Economic Indicators APPRAISAL GROUP International INTRODUCTION APPRAISAL GROUP International [Insert graphical material here. This photograph depicts the outside of the Taj Mahal Casino Resort.] INTRODUCTION EXECUTIVE SUMMARY ================================================================================ EXECUTIVE SUMMARY - ----------------- Location: Trump Taj Mahal Casino Resort is located at Virginia Avenue and the Boardwalk in Atlantic City, New Jersey. The casino/hotel complex occupies the majority of the land extending from Pacific Avenue to the Boardwalk, and from Pennsylvania Avenue to Maryland Avenue. The employee parking area is located on North Carolina and Huron Avenue and the warehouses are located in Pleasantville and Egg Harbor Township. Block/Lot: Hotel and Casino - 13/116, 118.01, 126, 128.03, 128.04, 128.06, 128.07, 128.08, 129.01, 129.02, 129.06, and 142 14/17, 18, 28, 41, 65, and 67 and various lots in Blocks 119 and 120. Employee Parking - RP017/3.Y (Leased) Warehouse - 190/15 (Pleasantville) 36-A/5 (Egg Harbor Township) Land Area: The subject parcel consists of a main tract of 29.24(PLUS OR MINUS) acres; a separate, but adjacent, lot containing 1,360(PLUS OR MINUS) square feet, or 0.03 acres; and a riparian grant of 9.76 acres. The total area of all three is 39.0 acres. However, 1.96(PLUS OR MINUS) acres of Block 13, Lots 128.06 and 142 and 2.05(PLUS OR MINUS) acres of Block 13, Lots 128.03, 129.06, and 129.02 are land locked service roads and streets for the benefit of the subject and others. Improvements: 1250 rooms within a 51 story hotel/casino complex that contains a total of approximately 4,319,905 sq. ft. of gross building area. The casino gaming area is approximately 120,000 sq. ft. Also included is a multi- level parking garage, containing a total of 1,649,754 square foot of gross building area, with a capacity for approximately 4,538 vehicles. Zoning: RS-C: Resort Commercial District Highest and Best Use: As Vacant - The highest and best use of the subject --------- site, as vacant, is the development of casino/hotel facility. -1- APPRAISAL GROUP INTERNATIONAL INTRODUCTION EXECUTIVE SUMMARY ================================================================================ As Improved - The highest and best use of the site, as ----------- improved, is that of an casino/hotel facility similar to the current improvements. Purpose of Appraisal: To estimate The Going Concern Value Valuation Date: March 18, 1994 Inspection Date: March 18, 1994 Present During Inspection: Mr. William Beyer Project Design Coordinator ESTIMATE OF VALUE ----------------- CAPITALIZATION OF INCOME APPROACH: - ---------------------------------- DISCOUNTED CASH FLOW TECHNIQUE - - -------------------------------- Holding Period: 10 years Discount Rate: 15.00% Terminal Rate: 10.00% 11th Year NOI: $170,448,894 Selling Costs: 3.00% Estimated Stabilized Occupancy Level: 92.00% 1st Year Average Room Rate: $97.00 Growth Rate: 4.00% Year 1 Casino Revenue: $3,749/sq. ft. Casino Area: 120,000 sq. ft. VALUE INDICATED VIA THE CAPITALIZATION OF INCOME APPROACH: (ROUNDED) $1,100,000,000 -2- APPRAISAL GROUP INTERNATIONAL INTRODUCTION CERTIFICATION =============================================================================== CERTIFICATION - ------------- This is to certify that: The subject property was inspected by Irwin J. Steinberg, MAI, and Avi M. Vardi, Senior Appraiser of APPRAISAL GROUP International. To the best of our knowledge and belief the statements of fact contained in this report are true and correct. We have no financial or other interest, direct or indirect, present or prospective, in the subject premises, nor do we have a personal interest or bias with respect to the parties involved. Our employment, and the compensation thereof, is in no way contingent upon the amount of the valuation, nor is it contingent on an action or event resulting from the analyses, opinions or conclusions in, or the use of this report. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. The analyses and conclusions contained within this appraisal report were prepared solely by us, unless specifically noted in sections where significant professional assistance was rendered. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions and conclusions. Our analyses, opinions, and conclusions were developed, and this report was prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation. The use of this report is subject to the requirements of the Appraisal Institute relating to peer review by its duly authorized representatives. /s/ Avi M. Vardi /s/ Irwin J. Steinberg - ---------------------------------- -------------------------------- AVI M. VARDI, Senior Appraiser IRWIN J. STEINBERG, MAI/1/ N.J. State Certified Real Estate N.J. State Certified Real Estate General Appraisers #RG00641 General Appraisers #RG00347 - ------------------------ /1/ Irwin J. Steinberg, MAI is currently certified under the voluntary continuing education program of the Appraisal Institute. -3- APPRAISAL GROUP INTERNATIONAL INTRODUCTION RELATED INFORMATION =============================================================================== PURPOSE OF APPRAISAL -------------------- The purpose of this appraisal is to estimate the Going Concern Value of certain property rights, as delineated below, of the herein described premises, subject to the assumptions and limiting conditions stated, as of March 18, 1994. PROPERTY RIGHTS APPRAISED ------------------------- The property rights being appraised consist of the Partnership's Fee Simple and Leasehold Estates, as if free and clear of all liens and encumbrances, except those which are stated within this report, but subject to the limitations of eminent domain, escheat, police power and taxation. FUNCTION OF THE REPORT ---------------------- It is our understanding that this appraisal report is to be used for financial and administrative purposes. This report has been prepared in compliance with the Office of Thrift Supervision of the Department of Treasury's Regulations 12 CFR Part 564, the Uniform Standards of Professional Appraisal Practice and the Office of the Comptroller (OCC) written appraisal guidelines. PROPERTY HISTORY & OWNERSHIP - ---------------------------- The site was assembled between 1962 and 1986 under various corporations set up by Resorts International, Inc. ("RII"). A large portion of the site was purchased from the Housing Authority and Urban Redevelopment Agency of the City of Atlantic City (the "Housing Authority"). The total purchase price of this acquisition was $1,892,821.20. Of the total acquisition, 368,550 square feet is now part of the subject site. -4- APPRAISAL GROUP INTERNATIONAL INTRODUCTION RELATED INFORMATION ================================================================================ While under construction, the subject property along with other assets were purchased for $230,000,000 plus a liquidated sum of $25,000,000 and adjustments and construction costs after March 31, 1988 as per that certain Asset Purchase Agreement dated May 27, 1988, from RII and certain of its subsidiaries by Trump Taj Mahal Associates Limited Partnership, a New Jersey limited partnership owned by Donald J. Trump. The property opened on April 2, 1990. Property ownership is as follows: Block Lot Owner - ----- --- ----- 13 126 Trump Taj Mahal Assoc. 14 67 Trump Taj Mahal Assoc. 13 128.03, 128.04, 128.06 ,128.07, Trump Taj Mahal Realty 128.08, 129.01, 129.02 ,129.06, Corp. 116, 118.01, 142 14 65, 17, 18, 28, 41 Trump Taj Mahal Realty Corp. 119 6, 22, 39, 58, 68, 85 Trump Taj Mahal Realty Corp. 120 23, 33, 44, 58, 65, 66 Trump Taj Mahal Realty Corp. In addition, there is a 9.76 acre, riparian grant that extends 150' wide and 2,835' deep into the Atlantic Ocean (Block 14, Lot 28) that is partially (3.45 (PLUS OR MINUS) acres) improved with a pier; an easement 60' x 150' permitting a skyway above the Boardwalk; a non-exclusive easement over Pennsylvania Avenue used to connect the Taj Mahal and Resorts that is 40' x 80' (Block 14, Lot 67.02) and two other, unused non-exclusive, easements over Pennsylvania Avenue that are 30' x 80'. There is also a non-exclusive easement for a tunnel at the end of Pennsylvania Avenue. -5- APPRAISAL GROUP INTERNATIONAL INTRODUCTION SCOPE OF THE ASSIGNMENT ================================================================================ ORGANIZATION AND OPERATION - -------------------------- Trump Taj Mahal Associates was formed on June 23, 1988, as a New Jersey limited partnership. The Partnership was converted to a general partnership in December, 1990. As a result of the Plan of Reorganization, the current partners and their respective ownership interests are Trump Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("Trump Corp."), .01%, and TM/GP Corporation ("TMGP"), the managing general partner, and a wholly owned subsidiary of Taj Mahal Holding Corp. ("Holding"), 49.995%. The Partnership was formed for the purpose of acquiring, constructing and operating the Trump Taj Mahal Casino Resort (the "Taj Mahal"), an Atlantic City Hotel, Casino and Convention Center Complex. On April 2, 1990, the Partnership opened the Taj Mahal to the public. Prior to such date, the Partnership was in the development stage and incurred losses amounting to approximately $24,164,000 (unaudited). SCOPE OF THE ASSIGNMENT - ----------------------- Prepare a complete appraisal report, in a narrative format, of the subject property. The report shall include: 1. Identification and description of the specific estate(s) to be appraised and the effective date. 2. A description of the property to be appraised. 3. Its neighborhood and environment, both physical and economic, along with a conclusion as to anticipated future value trends. 4. An analysis of Highest and Best Use. 5. A discussion of the appraisal techniques considered and used in the development of the valuation. 6. A complete presentation of each applicable appraisal approach. 7. A summary and reconciliation of the approaches into a final value estimate as of the value date in question. -6- APPRAISAL GROUP INTERNATIONAL INTRODUCTION DEFINITION OF MARKET VALUE ================================================================================ DEFINITION OF MARKET VALUE/2/ ----------------------------- 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, 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 each acting in what they consider their own best interest; 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 relative financing or sales concessions granted by anyone associated with the sale. - ------------------------ /2/ As currently adopted and required by the Resolution Trust Corporation and agencies acting under Title XI of the Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), and the Office of the Comptroller of Currency (OCC). -7- APPRAISAL GROUP INTERNATIONAL INTRODUCTION OTHER DEFINITIONS ================================================================================ OTHER DEFINITIONS/3/ -------------------- FEE SIMPLE ESTATE - - ----------------- 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. GOING CONCERN VALUE - - ------------------- The value created by a proven property operation; considered a separate entity to be valued with a specific business establishment; also called going value. LEASED FEE ESTATE - - ----------------- An ownership interest, held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. LEASEHOLD ESTATE - - ---------------- The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. MARKET RENT - - ----------- The rental income that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space as of the date of the appraisal. USE VALUE - - --------- The value a specific property has for a specific use. - ------------------------ /3/ THE DICTIONARY OF REAL ESTATE APPRAISAL, THIRD EDITION, APPRAISAL INSTITUTE, PAGES 140, 160, 204, 221, 383. -8- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF IRWIN J. STEINBERG ================================================================================ IRWIN J. STEINBERG MAI A.S.A. SR/WA QUALIFICATIONS -------------- APPRAISAL EDUCATION - - ------------------- American Institute of Real Estate Appraisers Courses: No. 1 Principles - New York University No. 2 Urban Problems - Syracuse University Rutgers University: Real Estate Appraising Courses No. 1 and No. 2 Numerous Seminars & Lectures EXPERIENCE - - ---------- Active in the appraisal, sale and research of real property throughout the United States, Canada and the Caribbean Islands since 1953. Included were all forms of residential, industrial and commercial properties. ENGAGED IN: Appraisals Financial Analysis Brokerage Industrial Development Condominium Conversion and Use Analysis Studies Land Development Condemnation Analysis Market Research Construction Urban Mortgage Finance Renewal Sponsor Property Development Consulting Tax Appeals Corporate Analysis Valuation Studies Feasibility Zoning Investigation AFFILIATIONS - - ------------ Appraisal Institute - MAI* American Society of Appraisers - A.S.A.* American Right-of-Way Association, Senior Member -SR/WA* (Past President Chapter No. 15) (Past International Director) Florida State Certified Real Estate General Appraiser - Certificate No. RZ0001550 New Jersey State Certified Real Estate General Appraiser - Certificate No.RG 00347 New York State Certified Real Estate General Appraiser - Certificate No. 1342 Licensed New Jersey, New York and Florida Real Estate Broker *Indicates Professional Designation -9- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF IRWIN J. STEINBERG =============================================================================== LECTURER - - -------- American Right-of-Way Association Seminars Bureau of National Affairs, Inc. Institute for Professional & Executive Development, Inc. Mortgage Bankers Association National Real Estate Development Center New Jersey Association of Realtors PUBLICATIONS - - ------------ American Right-of-Way Magazine PARTIAL LIST OF CLIENTS SERVED - - ------------------------------ FEDERAL - - ------- Corps of U.S. Army Engineers Department of Housing and Urban Development F.D.I.C. Housing & Homes Finance Agency Internal Revenue Service Public Housing Administration Resolution Trust Corporation U.S. Attorney Veterans Administration INSTITUTIONAL - - ------------- AMOSKEAG Bank (New Hampshire) Bank American Commercial Corp. Bank of Great Neck Bank Leumi Bankers Life Company Bankers Trust Company Banque Nationale de Paris Barclay's American Business Credit Bay Banks of Massachusetts Berkeley Federal Savings & Loan Association Carteret Savings and Loan Association Chemical Bank The CIT Group Citibank Commercial Trust Company of N.J. Crestmont Federal Savings & Loan Association Crossland Savings Bank Dai-Ichi Kangyo Bank, Ltd. Dime Savings of N.Y. -10- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF IRWIN J. STEINBERG ================================================================================ INSTITUTIONAL (CONTINUED)- - -------------------------- East New York Savings Bank East River Savings Bank Eastdil Realty, Inc. Equitable Life Insurance Company of Iowa European American Bank First Chicago First Fidelity Bank, N.A., N.J. First National State Bank of New Jersey First Pennsylvania Bank Goldome Realty Credit Corp. Home Life Insurance Home Savings Bank Howard Savings Bank Israel Discount Bank Lehman Bros. Lincoln First Real Estate Credit Corp. Lincoln Savings Bank (New York) Manhattan Savings Bank Marine Midland Bank Mellon Bank Merrill Lynch Capital Markets Merrill Lynch Hubbard Merrill Lynch White Weld Midlantic National Bank Michigan National Corp. Banks Morgan Stanley and Company, Inc. National Bank of Canada National Westminster Bank New Jersey National Bank New Jersey Sports & Exposition Authority New York & Suburban Federal Savings & Loan Association New York Urban Servicing Company, Inc. Norstar Bank Paine Webber, Inc. Poughkeepsie Savings Bank FSB Peoples Bank, N.A. Provident Savings Bank Reliance Federal Savings & Loan Association Republic Bank Dallas The Controller of the State of New York U.S. Life Real Estate Services Corp. Unity Savings & Loan Association (Northridge, Illinois) Upper Avenue National Bank (Chicago, Illinois) -11- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATION OF IRWIN J. STEINBERG ================================================================================ INSTITUTIONAL (CONTINUED)- - -------------------------- United Jersey Bank Valley National Bank Victoria Bankshares (Texas) W.P. Carey and Company Yasuda Trust and Banking Company, Ltd. COMMERCIAL & INDUSTRIAL - - ----------------------- Addressograph Multigraph International (Varityper) Amterre Management, Inc. Associated Commercial Corporation (A Division of Gulf & Western) Associated Dry Goods British Land of America Brock Motor Inns Corporation Chatwal Hotels Chrysler Corporation Citco Oil Company D.R.G. Financial Corporation Eberhard Faber, Inc. Federal Express Federal Transportation Company Grand Union Harley Hotels Hertz Corporation Korvette's Lefrak Organization, Inc. Mitsubishi Corporation Penske Products Pizza Hut Power Holdings U.S., Inc. Resorts International Sinclair Oil Company Spector Terminals, Inc. The Sudler Companies Titan Group, Inc. Trump Organization United Advertising Company (Eller Advertising) United Air Lines U.S. Homes & Development Verdun Industrial Center (Verdun, Canada) Westinghouse Electric Corporation Wickes Companies, Inc. -12- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF IRWIN J. STEINBERG ================================================================================ MISCELLANEOUS - - ------------- Accountants Condemnation Commissions and Individuals Estates Various Attorneys EDUCATIONAL CERTIFICATION - - ------------------------- The Appraisal Institute conducts a voluntary program of continuing education for its designated members. MAls and RMs, who meet the minimum standards of this program, are awarded periodic educational certification. I am currently certified under the voluntary continuing education program. -13- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF AVI M. VARDI =============================================================================== AVI M. VARDI QUALIFICATIONS -------------- EDUCATION: - --------- Northeastern University, Boston, Massachusetts School of Business Administration American Institute of Real Estate Appraisers Courses: Real Estate Appraisal Principles (#IA1/8-1) Basic Valuation Procedures (#1A2) Capitalization Theory and Techniques - Part A (#lBA) Capitalization Theory and Techniques - Part B (#lBB) Case Studies in Real Estate Valuation (#2-1) Report Writing and Valuation Analysis (#2-2) Standards of Professional Practice (SPP) Numerous Seminars & Lectures PROFESSIONAL AFFILIATIONS: - ------------------------- N.Y. State Certified Real Estate General Appraiser - Certificate No. 0733 N.J. State Certified Real Estate General Appraiser - Certificate No. RG 00641 MAI Candidate - New York Metropolitan District Chapter of the Appraisal Institute National Association of Real Estate Appraisers - CREA (#48831) Member - New York Metropolitan Young Mortgage Bankers Association Senior Appraiser - APPRAISAL GROUP International, West Orange, New Jersey EXPERIENCE: ---------- TYPES OF PROPERTIES APPRAISED: ENGAGED IN: Apartment Buildings Appraisals Casinos Highest and Best Use Analysis Condominium Conversions Discounted Value Approach (R41B/C) Hotels & Resorts Market Research Industrial Buildings Feasibility Studies Office Building Golf Courses Restaurants Retail Properties Shopping Centers Vacant Land Various Special Use Facilities -14- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF AVI M. VARDI =============================================================================== REAL ESTATE VALUATIONS AND EVALUATIONS DONE IN THE FOLLOWING STATES: California Kentucky Oklahoma Colorado Massachusetts Pennsylvania Connecticut Nevada South Carolina District of Columbia New Hampshire Texas Georgia New Jersey Virginia Illinois New York Wyoming Indiana North Carolina PARTIAL LIST OF CLIENTS SERVED: - ------------------------------ INSTITUTIONAL - - ------------- American National Insurance Company American Savings Bank Bank Audi USA Bank Leumi Trust Company of New York Bank of Great Neck Bankers Life Company Big Apple West Brookhill Group Central Federal Savings C.I.T. Group Citibank, N.A. City Federal Savings and Loan Association Crossland Savings Bank Crown Life Insurance Company Eastdil Realty Federal Deposit Insurance Corporation (FDIC) First Chicago First Fidelity Bank FGH Realty Credit Corporation Hanauer Financial Corporation Home Savings Bank Israel Discount Bank Kranzco Group NorthAm Mortgage Company Manhattan Savings Bank Penn Federal Savings Bank Provident Savings Bank Republic National Bank Resolution Trust Corporation (RTC) The Principal Financial Group The Yasuda Trust & Banking Company UMB Bank & Trust Company -15- APPRAISAL GROUP INTERNATIONAL INTRODUCTION QUALIFICATIONS OF AVI M. VARDI =============================================================================== INSTITUTIONAL (CONTINUED)- - -------------------------- United Jersey Bank W.P. Carey & Company COMMERCIAL AND INDUSTRIAL- - -------------------------- Brick Church Quick Chek Pizza Hut British Land of America Residential Financial Corporation Chatwal Hotels Lefrak Organization Sovran Mortgage Corp. The Sudler Companies Newport Management Trump Organization U.S. Power Hertz Corporation VARIOUS - ------- Accountants Estates Pension Funds Attorneys Investors Syndicators Developers -16- APPRAISAL GROUP INTERNATIONAL INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS =============================================================================== ASSUMPTIONS AND LIMITING CONDITIONS - ----------------------------------- This appraisal report has been made with the following general assumptions: 1. Unless otherwise stated, the value appearing in this appraisal represents our opinion of market value or the value defined as of the date specified. Market value of real estate is affected by national and local economic conditions and consequently will vary with future changes in such conditions. 2. No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. 3. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 4. Responsible ownership and competent property management are assumed. 5. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. 6. All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property. 7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 8. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report. 9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in the appraisal report. 10. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 11. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. 12. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate -17- APPRAISAL GROUP INTERNATIONAL INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS =============================================================================== allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 13. Possession of this report, or a copy thereof, does not carry with it the right of publication. 14. The contract for appraisal, consultation, or analytical service is fulfilled and total fee is payable upon completion of the report. The appraisers will not be asked or required to give testimony in court or hearing because of having made the appraisal in full or in part, nor engage in post-appraisal consultation with the client or third parties, except under separate and special arrangement and at additional fee. 15. No environmental or impact study, special market study or analysis, highest and best use analysis or feasibility study has been requested or made unless otherwise specified in an agreement for services or in the report. The appraisers reserve the unlimited right to alter, amend, revise or rescind any of the statements, findings, opinions, values, estimates or conclusions upon any subsequent such study or analysis or previous study or analysis subsequently becoming known to him. 16. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers. 17. The appraisers may not divulge material contents of the report, analytical findings or conclusions or give a copy of the report to anyone other than the client or his designee as specified in writing, except as may be required by the Appraisal Institute as it may request in confidence for ethics enforcement or by a court of law or body with the power of subpoena. 18. This appraisal is to be used only in its entirety and no part is to be used without the whole report. All conclusions and opinions concerning the analyses which are set forth in the report were prepared by the appraisers whose signatures appear on the appraisal report, unless indicated as review appraiser. No change of any items in the report shall be made by anyone other than the appraisers and the appraisers shall have no responsibility if any such unauthorized change is made. 19. The signatories of this appraisal report are members (or candidates) of the Appraisal Institute. The By-laws and Regulations of the Appraisal Institute require each member and candidate to control the use and distribution of each appraisal report signed by such member or candidate. 20. No responsibility is assumed for matters legal in character or nature, nor matters of survey, nor any architectural, structural, mechanical or engineering nature. No opinion is rendered as to the title, which is presumed to be good and merchantable. The property is appraised as if free and clear, unless otherwise stated in particular parts of the report. -18- APPRAISAL GROUP INTERNATIONAL INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS =============================================================================== 21. Comparable data relied upon in this report has been confirmed with one or more parties familiar with the transaction or from affidavit. All are considered appropriate for inclusion to the best of our factual judgement and knowledge. 22. The market value estimated and the cost used are as of the date of the estimate of value. All dollar amounts are based on the purchasing power and price of the dollar as of the date of the value estimate. 23. The identity of the appraisers or firm with which they are connected, or any reference to the Appraisal Institute or to the MAI designation, or to the American Society of Appraisers or to the A.S.A. designation, shall not be divulged without the written consent and approval of the authors. 24. This appraisal expresses our opinion and employment to make this appraisal and was in no way contingent upon reporting a predetermined value or conclusion. The fee for this appraisal or study is for the service rendered and not for time spent on the physical report. 25. The value estimated in this appraisal report is gross without consideration given to any encumbrance, restriction, or question of title unless specifically defined. The estimate of value in the appraisal report is not based in whole or in part upon race, color or national origin of the present owners or occupants of properties in the vicinity of the property appraised. 26. There is no reason to believe that this site has ever been used to process or store any hazardous substance or toxic waste, and the owners have indicated that there are no hazardous substances or wastes on the site. Nevertheless, the appraisers are not engineers or environmental experts, and the appraisal assumption that there are no hazardous substances or toxic wastes on the site should not be construed as an expert conclusion. 27. Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraisers become aware of such during the appraisers' inspection. The appraisers have no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraisers, however, are not qualified to test such substances or conditions. If the presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions may affect the value of the property, the value estimated is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them. 28. Unless otherwise stated in this report, we did not make a survey and analysis of the property to determine whether or not it is in conformity with the various detailed requirements of the -19- APPRAISAL GROUP INTERNATIONAL INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS =============================================================================== Americans with Disabilities Act (ADA). It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible noncompliance with the requirements of the ADA in estimating the value of the property. 29. ACCEPTANCE AND/OR USE OF THIS APPRAISAL REPORT CONSTITUTES ACCEPTANCE OF THE PRECEDING CONDITIONS. -20- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA AND ANALYSES APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS IDENTIFICATION OF SUBJECT PROPERTY ================================================================================ IDENTIFICATION OF SUBJECT PROPERTY - ---------------------------------- Trump Taj Mahal Casino Resort is located at Virginia Avenue and the Boardwalk in Atlantic City, New Jersey. The casino/hotel complex is bounded by the Boardwalk and the Atlantic Ocean to the south, Pacific Avenue to the north, Pennsylvania Avenue to the west, and Maryland Avenue to the east. The property occupies nearly the entire block. On the tax rolls of Atlantic City, the subject property is identified as Block 13, Lots 116, 118.01, 126, 128.03, 128.04, 128.06, 128.07, 128.08, 129.01, 129.02, 129.06, and 142, Block 14, Lots 17, 18, 28, 41, 65, and 67 and various lots in Blocks 119 and 120. The property consists of 29.24 (PLUS OR MINUS) acres of upland improved with 1,250 room within a 51-story hotel/casino complex that containing a total of approximately 4,319,905 square feet of gross building area. Also included is the ancillary parking garage, steel pier, storage warehouses on Delilah Road in Pleasantville and Egg Harbor Township (Block 190, Lot 15 and Block 36-A, Lot 5), and employee parking lot, leased from the City of Atlantic City and is located on North Carolina Avenue and Huron Avenue, known as, Block RP017, Lot 3.4. Maps, a plot plan and photographs on the following pages will visually acquaint the reader with the property appraised, its location, environs, size and shape of the land, plus improvements and other details. [Graphic material omitted. The graphic is a street map depicting The Boardwalk area of Atlantic City. The map shows the locations of the following casinos (from North to South): Showboat, Taj Mahal, Merv Griffin's Resorts, Sands, Claridge, Bally's Park Place, Caesar's Boardwark Regency, Trump Plaza, Trump Regency (Hotel), Trop World and Bally's Grand. The map highlights the location of the appraised property.] -22- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ AREA DATA - --------- ATLANTIC COUNTY- - --------------- Atlantic County is located on New Jersey's southeastern coast and encompasses a total of 611.4 square miles, with a land surface of 567.0 square miles and water and tidal flow areas of 44.4 square miles. The entire county represents 7.5% of the total area of the state and contains 2.9% of New Jersey's population. Atlantic County's major city, Atlantic City, an older urban resort city which has gone through a long period of decline, began its revitalization when its first hotel-casino opened in May 1978. Trump Taj Mahal Casino Resort, the city's latest and 12th hotel-casino opened in April 1990. During 1991 over 30 million tourists flocked to Atlantic City and an average of 44,200 persons were employed in the county's gaming industry. The gaming industry also is indirectly responsible for most of the noncasino employment growth (nearly 30,000 jobs) the county has experienced since 1978. Three principal roads, the Atlantic City Expressway, the White Horse Pike (Rt. 30) and the Black Horse Pike (Rt. 322), link the shore with the Philadelphia- Camden area. The Garden State Parkway is the major access route from northern New Jersey, New York and the New England states. Persons residing as far south as Norfolk and Richmond, Virginia can travel to Atlantic County by way of the Chesapeake Bay Bridge Tunnel and the Cape-May-Lewes Ferry. Population centers in the Baltimore-Washington, D.C. area have routes such as I-95 which tie in with the Delaware Memorial Bridge connecting New Castle County in Delaware to Salem County in New Jersey. Atlantic City is only some 60 miles from the bridge. -23- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ In 1989 passenger rail service was restored between Atlantic City and Philadelphia. This includes daily commuter and express schedules. Up until recently, air traffic from the major carriers has been minimal in Atlantic County. However, the Atlantic City International Airport, located in Pomona, adjacent to the Federal Aviation Administration Technical Center (FAATC) in Egg Harbor Township, has the capabilities for handling large aircraft and has been expanding as the number of hotel-casinos has grown. EMPLOYMENT DEVELOPMENTS (1981-90) - --------------------------------- Prior to casino gambling (pre-1978), the county's employment growth rate tracked that of the state. Since the advent of casino gambling, however, the county's rate has remained well above that of the state. The county's service-producing sector accounted for nearly all of the increase in jobs during the 1981-1990 period. The hotel-casinos, which fall within the services subcategory, accounted for most of the 10-year gain, with appreciable job growth also occurring in the business and health services segments. The wholesale and retail trade industry, which experienced job growth every year from 1981 through 1988, leveled in 1989. Trade employment expanded by 29.9% from 1981 through 1990, a little more than the state's 28.0% growth rate in trade jobs over the same period. Employment in the county's transportation communications/public utilities industry advanced at a slightly faster pace than that of the state during the 1981-1990 period (23.9% vs 22. 1%, respectively). -24- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ In contrast to the other service-producing industries, employment growth in Atlantic County's finance/insurance/real estate industry lagged well behind that of the state during the 1980s. The gain during the 1981-1990 period was a 7.0% advance for the county, well below the state's 46.4%. Atlantic County's goods-producing sectors (manufacturing and construction) recorded an overall decline of 0.6% from 1981 to 1990, compared with a decline of 13.8% for the state during the same period. Of course, the county has a much smaller proportion of manufacturing jobs to total private- sector employment (5.5% in 1990) than the state (19.9% in 1990). In construction, the county and the state have the same share (5.5% in 1990) of employment to total private- sector employment. Construction employment peaked in Atlantic County during the 1987-1989 period and started to drop in 1990 because of the completion of the Taj Mahal Casino Resort and, like the state and nation, because of the onset of the national recession. Atlantic County's factory payrolls declined by 18.5% from 1981 through 1990, with most of the losses occurring since 1989. The county's recent decline primarily can be traced to losses in the apparel, stone/clay/glass, rubber/plastics and transportation equipment industries. Foreign competition tended to be the primary cause behind the long-term declines in the county's apparel and stone/clay/glass industries, as in the state and the nation. -25- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ POPULATION TRENDS (1970-90) - --------------------------- The total civilian population in Atlantic County, according to the 1990 census, was 226,700. This represented an increase of 32,600 or 16.8% from 1980 which was more than three times the state's rate of population growth (5.0%) during the same period. Overall, the county ranked fifth in percentage population growth among New Jersey's 21 counties during the 1980s. The county's most significant numeric gains since 1980 were reported in three principal municipalities: Egg Harbor (5,136), Galloway (11,154) and Hamilton (6,513) townships. Countering some of the growth was a population decline of 2,213 or 5.5% in Atlantic City during the 1980-1990 period. In comparison, Atlantic City's population declined by 7,660 or 16% from 1970 to 1980. Factors which contributed to Atlantic City's population decline over the past two decades included: the demolition of some of the city's aging and deteriorated housing stock; the erosion of the city's resort economy through most of the 1970's, and the national trend of population flight from urban environments. A moderate inland shift in population from 1980 to 1990 did not alter the concentration along the shore areas, considering the proximity to the ocean of Egg Harbor and Galloway townships where the major growth has occurred. HOUSING (1980-91) - ----------------- According to the 1990 census, the total number of dwelling units in Atlantic County was 106,877, up by 17,535 or 19.6% from 1980. The county's housing stock expanded almost twice as fast as the state's (10.9%) during the 1980s. Of the total, about 95,000 units were year-round with the remainder being seasonal units. Single-family, detached homes accounted for the majority of the -26- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ year-round housing stock (56,002). There also were 36,642 multi-family units and 9,069 single-family attached units. The five municipalities which had the largest number of dwelling units authorized since 1981 were Atlantic City, Brigantine and the townships of Egg Harbor, Galloway and Hamilton. Except for Atlantic City, these communities also experienced most of the population growth since 1980. The availability of seasonal housing and its conversion to year-round use in Atlantic City, Ventnor, Margate, and Brigantine have helped meet the demand for primary housing. Earlier in this decade the fastest selling housing development on the county's mainland were often townhouses or condominiums that were purchased as investments for rental purposes. This trend has slowed in recent years and most units are now purchased as primary residences. The demand for single-family detached homes also has been increasing, fueled in part by the desire of homebuyers to move up to this type of housing. Hamilton, Galloway and Egg Harbor townships have a good deal of land available for development and their proximity to Atlantic City is an asset. Most of the new housing development outside of Atlantic City may well be concentrated in these three mainland areas for many years to come. INCOME, 1981-1989 - - ----------------- During the 1981-1989 period (latest data available at the county level), the growth of total personal income was greater in Atlantic County than in the state or nation. This was almost entirely the result of the development of the hotel- casino industry in Atlantic City. The initial investment in these hotel-casinos (construction costs for a single hotel-casino can reach several hundred million -27- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ dollars), their payrolls and their ongoing purchases of other goods and services have all helped spur income growth for persons in the county. Per capita personal income grew by 77.4% in the county during the period, reaching a level of $23,723 in 1989, which ranked Atlantic 10th among New Jersey's 21 counties. In comparison, per capita personal income in the state and nation increased by 83.1% and 60.7%, respectively. Another income indicator is the annual average wage derived using reports submitted by employers (private sector only) covered under state unemployment insurance program. Contrary to per capita income, which is by place of residence, the annual average wage is by work location. Atlantic County's annual average wage of $22,948 ranked the county 16th in the state in 1990. This was lower than the statewide annual average wage of $28,192. Two factors are largely responsible for the county's annual average wage being lower than the state's. The county has a greater percentage of its employment in the service industry (60% for the county vs 31% for the state) where wages tend to be lower on average. Also, the county's diminishing but still relatively prevalent number of seasonal and other part-time jobs help dilute the annual average wage. LABOR FORCE TRENDS (1985-91) - ---------------------------- Although the volume and percent of unemployed persons in Atlantic County was lower in 1985 (the earliest year for which comparable data are available) than in 1991, a recession year, both fell to the lowest levels in 1988, a boom year, when the unemployment rate averaged 4.9%. The slowing of economic growth in both the state and nation, which culminated with the onset of the current recession in July 1990, was responsible for the cyclical upturn in joblessness through 1991. -28- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ With this slowing pace of economic development in Atlantic County and the surrounding area, the average rate of unemployment rose from 5.8% in 1990 to 8.3% in 1991 and continued at high levels into early 1992. The rise was even more pronounced than the statewide increase from 1990 (5.0%) to 1991 (6.6%). This increase in both Atlantic County and the state is the result of the recession that partially resulted from a slowdown in unsustainable high levels of economic activity during the late 1980s in the region, especially in the hotel-casino industry. Although both the nation's and the state's economic boom, together with the local hotel-casino industry growth, had pushed the annual average rate of unemployment below 6.0% in Atlantic County during the 1987-1990 period, the number of unemployed has tended to remain relatively high compared with the state due to several factors. Atlantic County still experiences seasonal variation in employment which keep the number of unemployed higher on average than areas with little seasonal variation. During the peak summer months of July and August, the county's labor force and total employment are 20% -25% above the winter lows. Tourism and agriculture are the two sectors of the county's economy most affected by seasonal factors. TRANSPORTATION - -------------- AIR TRANSPORTATION - - ------------------ The area is served by two airports, Bader Field in Atlantic City and the International Airport in Pomona. Both airports have a master plan in effect. The end result could be regularly scheduled airline flights by all the major carriers by the mid 1990s. The implementation of regularly scheduled airline flights will have a significant positive impact on the area. -29- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ The first phase of the Airport Master Plan has been released and calls for $46 million in new facilities and upgrading at Pomona and $5.5 million for Bader Field. The renovations will allow for scheduled air service to Atlantic City from major airlines. ROADWAY TRANSPORTATION - - ---------------------- Atlantic County is served by a vast network of highways and secondary roadways. The Garden State Parkway is the major north/south roadway through the region, while the Atlantic City Expressway is the major east/west thoroughfare. Other major roadways through the region are Routes 9, 30, 40, and 322. The New Jersey Highway Authority has recently announced plans to widen sections of the Garden State Parkway and to increase the number of toll booths in order to improve traffic flow on the southern end of the highway. The existing four- lane highway is planned to be widened to six lanes and additional improvements will be planned for the highway's intersection with the Atlantic City Expressway. The Atlantic City Expressway has been widened from four to six lanes between Winslow and the Pleasantville Toll Plaza. This $28.3 million project was completed in December 1987. In addition, the Authority is committed to extending the third lane into Atlantic City in conjunction with the development of the Convention/Rail Service Center. Atlantic County has proposed the construction of a beltway from the Garden State Parkway near Smithville southwest to U.S. Route 30, past Pomona Airport and the Atlantic City Expressway -30- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ before rejoining the Parkway. The limited-access highway is expected to relieve congestion in the mainland areas near Atlantic City. Approximately $55 million will be spent under a joint public-private venture for significant improvements on U.S. Route 30 and Route 87 within Atlantic County. Construction of these improvements began in the fall of 1985, and is ongoing at the present time. CONVENTION CENTER - - ----------------- As previously noted, plans to develop the Convention/Rail Terminal at the Atlantic City Expressway are now progressing. Plans call for the convention complex to be located on a 30.5 acre site across from the rail terminal and parking facility and connected by an open atrium. In total, the proposed complex will include 486,600 square feet of contiguous exhibit space, making it comparable to most of the largest convention centers in the United States. The new Convention Center will also include parking facilities for up to 40 buses, a multi-level parking structure for approximately 1,600 cars, restaurant and retail facilities, and direct linkage via an overpass to the Atlantic City Expressway. Groundbreaking for the convention center was on February 24, 1993. It is expected to be completed by February 1996. OUTLOOK - - ------- While the local economy would no doubt benefit from a sustained national rebound in consumer confidence and spending during 1994, Atlantic County is at a unique period in its economic history because little growth is expected in the hotel- casino industry for at least the next several years. The -31- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ casino gaming industry's sometimes painful transition from a rapid early growth phase to a consolidating or maturing phase should continue in 1994 and for the next several years. Over the past 13 years, both the pattern and pace of economic development in Atlantic County has been tied either directly or indirectly to casino gambling. Troubled times for the gaming industry, an industry which now accounts for about one of every three jobs, usually causes similar ripples throughout most sectors of the local economy. Overall, the gaming industry's level of employment should stabilize at current levels or show only marginal gains during 1994. Elsewhere in the local economy, little, if any, employment growth is expected and will depend almost entirely on a rebound in consumer spending, especially for the trade, services and construction industries. Atlantic County's rate of unemployment may begin to gradually fall in 1994, if the economic recovery takes hold at both the national and state levels. Developments that are necessary to the future well-being of the county's tourism, convention and gambling industries include: clean beaches, a new Atlantic City Convention Center and a revitalized Atlantic City Airport (4/93). -32- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS AREA DATA ================================================================================ ATLANTIC COUNTY ------------------------------------------- Population, Effective Buying Income, Retail Sales and Buying Power Index (BPI) ------------------------------------------- Population - (1/91) 226,700 Median Age Male: 32.8 Female: 35.5 % of U.S. .0903 % Change 1980-90 16.8% Population/square mile (Density) 404 1990 EBI ($000) $3,071,238 % of U.S. .0878 1990 retail sales ($000) $2,135,828 % of U.S. .1182 Buying Power Index .0973 ------------------------------------------- 1995 Projections ------------------------------------------- Population 240,500 % Change 1990 - 1995 6.3% Information was obtained from The Survey of Buying Power Demographics USA 1991 ------------------------------------------------ [Graphic material omitted. The graphic is a map depicting the major roads in Southeastern New Jersey. The map highlights the location of Atlantic City.] -33- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ ATLANTIC CITY DATA - ------------------ OVERVIEW - -------- Atlantic City is part of Absecon Island which is located in the southeastern portion of Atlantic County. The total area of Atlantic City is 11.84 square miles. Atlantic City is located approximately 125 miles south of New York City, 60 miles east of Philadelphia, and 175 miles north of Washington D.C. The City was incorporated in 1852, and soon afterward became world renowned as a resort town. In 1870, the first boardwalk was constructed, and in 1929, Atlantic City built the world's largest convention center and became almost fully dependent on tourism. The tourism industry prospered for many years and then gradually started to decline, and by the 1960s the area had become depressed. In 1977, when the Casino Gambling Act legalized gaming in Atlantic City, the stagnant tourist industry began to flourish. The legalization of gaming in Atlantic City has brought unprecedented growth and development to Atlantic City and to Atlantic County. Casino Industry - - ---------------- As of 1991, gaming has added approximately 44,200 casino related employees, a drop from 2,500 from 1990. The dramatic impact that the gaming industry has had on revenues can be illustrated by analyzing the revenue it has generated for the State of New Jersey and for Atlantic City. Since 1979, gaming has generated $211,500,000 in reinvestment obligations for Atlantic City. -34- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ The CRDA (Casino Reinvestment Development Authority) was established to counteract the deteriorated portions of Atlantic City. This department is funded by the casino industry by contributing 1.25% of gross casino revenues minus bad debt. The executive director of the CRDA expects what he called a balanced residential community to emerge in the Inlet which has been the most rundown area of the city. He expects this transformation to occur in 5 to 7 years. Over the next 25 years it is expected that the casino industry will have contributed over 2 billion dollars to Atlantic City. It is expected that the reinvestment obligations that are funded by the casino industry, will improve the city's rundown areas dramatically. Since the first casino opened in 1978 through the end of 1992 the casino revenue tax has generated over $2,600,000,000 in revenues for the State of New Jersey. The operating casinos contributed approximately $106,000,000 in property taxes for Atlantic City and Atlantic County in 1992. This amount represented nearly 30.00% of the total taxes paid in Atlantic City in 1992. Since 1978, the Casino Industry has contributed approximately $4,850,000,000 in total taxes including New Jersey Casino Revenue Tax, Atlantic City and Atlantic County Property Tax, Federal Income Tax, Social Security, State Corporate Tax, Federal and State Unemployment Tax and Regulatory Fees and Reinvestment Obligations. A positive development for Atlantic City's hotel-casino industry occurred in June 1991 when significant changes to the Casino Control Act were signed into law. In the long run, the much -35- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ anticipated changes are expected to expand Atlantic City's casino market and spur growth in the region. The most notable changes allow round-the-clock gambling on weekends, holidays and other special events; permit slot coverage of the casino floor to increase to 45% over the next three years; and allows three new games of chance. Gaming industry officials indicate that surge in gaming revenues during the third quarter of 1991 was at least partially due to these new regulatory changes. Even though the number of visitors to Atlantic City, as calculated by the New Jersey Expressway Authority (NJEA), declined for the fifth year in a row during 1993, an estimated 30.0 million visitors traveled to Atlantic City in 1993. Cars and buses still formed the bulk of the travelers, despite the casinos' efforts to broaden their market beyond those who can arrive within a day's drive. City and tourism officials attributed the 3.2% drop in the number of visitors from 1990 to the recession, and in the first half of 1991, to the Gulf War. However, the decrease in visitors did not affect the gross gaming revenues of the casinos, which was $3.23 billion in 1992, an 8.06% increase over 1991. 1993 gross gaming revenue of the casinos was $3.287 billion, a 1.69% increase over 1992. According to the Atlantic City visitors and convention bureau, the 1993 decline is the result of fewer charter bus passengers, as part of the casino marketing program. -36- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ INFRASTRUCTURE IMPROVEMENTS: - --------------------------- Airport - - ------- While the implementation of the Amtrak and PATCO lines will have a substantial impact on the area, major plans for airport expansion are also underway. $46 million improvements project are underway. Serving all of Southern New Jersey and located just 10 miles outside of Atlantic City, Atlantic City International Airport has regularly scheduled flights by major carriers such as: Continental, US Air, Northwest and Spirit, with service from over 75 major cities. The master plan which is in effect, could eventually lead to regularly scheduled airline flights by most major carriers. Rail Service - - ------------ As noted in the area data section of this report, the Amtrak Express trains are operational, and provide non-stop service between Philadelphia and Atlantic City. Construction of the $15 million rail terminal is the final step in an overall $101 million rail project which is rebuilding the 67 miles of tracks connecting Atlantic City and Philadelphia. The 22,000 square-foot rail terminal will include five tracks and three platforms capable of handling 12-car trains and facilitating an estimated 1,900 passengers per hour during peak operating hours and some 2.2 million travelers a year. Amtrak will operate five daily round-trip express trains between the resort and Philadelphia's 30th Street Station, and six on weekends, plus one daily non-stop to and from New York and Philadelphia which will allow connections to virtually the complete Amtrak nationwide rail system. -37- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ Parking for 250 cars will be offered at the rail terminal, and its 14,000 square-foot concourse will include seating for 200 people, ticket facilities and restaurant and newsstand concessions. Convention Center - - ----------------- Atlantic City's new convention and exposition center, when it opens in 1996, should significantly increase the resort's capabilities in attracting new convention and trade show business. The convention center will contain a total of 510,000 square feet of convention space, including 486,600 square feet of continuous exhibit halls, a 32,000 square foot multipurpose room, 104,200 square feet of meeting rooms and 20,000 square feet of ancillary facilities. The entire Convention Center is expected to be ready by February 1996 and will have a substantial positive impact on Atlantic City. Recent studies by the Atlantic City Convention and Visitors Bureau favorably reflect on both convention industry interest in the new facility and its capability of accommodating major shows currently not considering the resort. The shows which will be utilizing this new facility represent 1.1 million delegates generating a national average of $787.54 apiece over four days, or more than $866 million, including $177 million in hotel room revenue and $11 million on convention center rental fees, with the balance expended on items such as food, shopping and entertainment. Atlantic City's convention and trade show industry is enjoying dramatic growth. Conclusions - - ----------- While gaming has brought Atlantic City back on the path of economic growth and development, there are still major social and economic problems to be overcome. However, after considering the -38- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA ================================================================================ positive impact of the gaming industry on employment in Atlantic City, the casino reinvestment obligations that are beginning to transform the blighted portions of the city, the in-progress improvements to the transportation network, and the emergence of a more broad based local economy, it is our opinion that Atlantic City is on the path to long term economic growth and development. -39- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS NEIGHBORHOOD DATA ================================================================================ NEIGHBORHOOD ANALYSIS - --------------------- A property is an integral part of its surroundings and must not be treated as an entity separate and apart from its environment. The value of a property is not found exclusively in its physical characteristics. Physical, economic, political and sociological forces found in the area interact to give value to a property. In order to determine the degree of influence extended by these forces upon a property, their past and probable future trends must be analyzed in depth. Therefore, in order to determine the value of a property, a careful and thorough analysis must be made of the area in which is found the property under study. This area is commonly referred to as a neighborhood. A neighborhood can be a portion of a city, a community, or an entire town. It is usually considered to be an area which exhibits a certain degree of homogeneity as to use, tenancy and other characteristics. Homogeneity is a state of uniform structure or composition throughout. Therefore, in real estate terminology, a homogeneous neighborhood is one in which the property uses are similar. The subject property is located at the Boardwalk between North Carolina Avenue and Pennsylvania Avenue in Atlantic City. The neighborhood can be delineated by the Boardwalk and the Atlantic Ocean to the south, Pacific Avenue to the north, New York Avenue to the west, and New Jersey Avenue to the east. The subject property fronts on the Boardwalk which was the main tourist attraction in Atlantic City until the introduction of gaming in 1978. The Boardwalk runs the entire length of Atlantic City along the beach from the Absecon Inlet to the western city limit at Ventnor. The -40- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS NEIGHBORHOOD DATA ================================================================================ Boardwalk is now the center casino area in Atlantic City, and is improved with casinos, hotels, restaurants, piers, and various other tourist orientated support facilities. The Atlantic City convention center is also located on the Boardwalk west of the subject property near Trump Plaza. The main east and west roadways running near the beach block of Atlantic City are Atlantic and Pacific Avenues, which run parallel with the Boardwalk. Both roadways are within 2 blocks of the Boardwalk. The advent of gaming in the area has led to rapidly escalating land prices for area zoned for casino use. The casino zoning district is located along the beach block running from Maryland Avenue, west to Albany Avenue. The northern boundary is Pacific Avenue, while the southern boundary is the Boardwalk. Two other small areas zoned for casino use are located by the Absecon Inlet and the Marina Area. A casino site, which requires a minimum of 2 acres area, can now command land prices in the $200-$300 per square foot range. Typical land uses within the area are restaurants, older hotels, condominiums, apartments, and other assorted residential and commercial uses. While there is new and planned development, many of these improvements are in deteriorating condition. Although much of the area is in need of revitalization, the casinos have spurred additional commercial and residential development and will eventually lead to long term economic growth in the neighborhood. Trump Taj Mahal Casino Resort is next to the Showboat and Resorts. The opening of the Taj Mahal benefitted the neighborhood by giving it the two newest casinos (Trump Taj Mahal Casino -41- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS NEIGHBORHOOD DATA ================================================================================ Resort and Showboat). Additionally, there are four piers located within four blocks of the subject property. They include the Garden Pier, the Steel Pier, the Steeplechase Pier, and the Central Pier. To the west of the subject property is currently the main Boardwalk casino area. This area is bounded by Brighton Avenue to the west, and Indiana Avenue to the east. This area spans approximately 15 blocks and includes casinos such as The Sands, The Claridge, Bally's Park Place, Caesars Boardwalk Regency, Trump Plaza, and the Tropicana. Since the opening of the subject property, this area of the Boardwalk become more of a center point of the casino district than it was, due to the large concentration of hotel rooms, convention space, and casino space. The opening of the Taj Mahal have had a significant impact on the casino industry in Atlantic City. In addition to the 120,000 square foot casino, Trump Taj Mahal Casino Resort added approximately 1,250 hotel rooms and 230,000 square feet of convention space to this section of the Boardwalk. The concentration of hotel rooms and convention space added by the Taj Mahal spurred additional development and renovations which have a positive impact on property values and property utilization in the neighborhood. Based upon current, as well as proposed developments in the neighborhood, it is our opinion that area has passed the point of decline and is headed for a period of revitalization. Four great forces influencing value include social, economic, environmental, and governmental forces. We were unable to detect any detrimental factors from any of these forces. Therefore, it is our opinion that the neighborhood will continue to exert a positive influence on property values and continue to remain economically viable into the foreseeable future. [Graphic material omitted. The graphic is a map depicting Ventnor City and Atlantic City. The graphic depicts the locations of (from West to East): Atlantic City Convention Center, Bally's Grand Hotel and Casino, Trop World Casino and Entertainment Resort, Trump Regency Hotel, Trump Plaza Hotel and Casino, Caesar's Atlantic City Hotel and Casino, Bally's Park Place Hotel and Casino, Claridge Hotel and Casino, Sands Hotel and Casino, Merv Griffin's Resorts Hotel and Casino, Taj Mahal Hotel and Casino, Showboat Hotel and Casino, Trump Castle Hotel and Casino and Harrah's Marina Hotel and Casino. The graphic highlights the location of the appraised property.] -42- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS SITE DESCRIPTION ================================================================================ SITE DESCRIPTION - ---------------- LOCATION: Trump Taj Mahal Casino Resort is located at Virginia Avenue and the Boardwalk in Atlantic City, New Jersey. The casino/hotel complex occupies the majority of the land extending from Pacific Avenue to the Boardwalk and from Pennsylvania Avenue to Maryland Avenue. The employee parking area leased from the City of Atlantic City is located on North Carolina Avenue and Huron Avenue and the warehouses are located in Pleasantville and Egg Harbor Township. BLOCK/LOT: Hotel and Casino - 13/116, 118.01, 126, 128.03, 128.04, 128.06, 128.07, 128.08, 129.01, 129.02, 129.06, and 142 14/17, 18, 28, 41, 65, and 67 and various lots in Blocks 119 and 120. Employee Parking - RP017/3.Y (Leased) Warehouse - 190/15 (Pleasantville) 36-A/5 (Egg Harbor Township) AREA: The subject parcel consists of a main tract of 29.24 (PLUS OR MINUS) acres; a separate, but adjacent lot containing 1,360 sq. ft. or 0.03 acres; and a riparian grant of 9.76 acres. The total area of all three parcels is 39.0 acres. However, 1.96 (PLUS OR MINUS) acres of Block 13, Lots 128.06 and 142 and 2.05 (PLUS OR MINUS) acres of Block 13, Lots 128.03, 129.06, and 129.02 are land locked service roads and streets for the benefit of the subject and others. SHAPE: The main parcel is irregular in shape FRONTAGE: The main parcel has a total frontage of 625' on Pacific Avenue (interrupted by Virginia Avenue - 80' wide) and former Presbyterian Avenue (20' wide) both of which proceed into the subject parcel to depths of 558' and 262', respectively. There is also 1,460' of frontage on Pennsylvania Avenue from Pacific Avenue to the Boardwalk and 952.27' along the Boardwalk. A portion of Virginia Avenue, that has not been vacated, serves a -43- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS SITE DESCRIPTION ================================================================================ separate property, the "Best of Life" Apartments (a senior citizen complex - not part of the subject property), which is almost surrounded by the subject. Maryland Avenue vacated in 1983, is now a service road for the benefit of the subject and others. A tunnel, that runs from the end of Pennsylvania Avenue, underneath the subject, to former Maryland Avenue is used for one-way traffic from Pennsylvania Avenue back out to Pacific Avenue. TERRAIN: Predominantly level and at road grade. We have not commissioned nor conducted any soil or subsoil studies. However, based on the existence of the subject, as well as neighboring structures, the soil load bearing qualities appear adequate. UTILITIES: All municipal services, public and private utilities are available to the site including police protection and fire fighting services, electric, storm and sanitary sewers, water, gas telephone, and cable television. ACCESS: The site is accessible from public right-of-ways. Vehicular ingress and egress is available from Pennsylvania Avenue (80 feet wide), Virginia Avenue (80 feet wide) and Maryland Avenue. In addition to the above mentioned streets, pedestrian ingress and egress is available from the Boardwalk. EASEMENTS: Typical utility and public easements run through the site. None of these easements, however, have an adverse impact on value. FLOOD HAZARDS: The site is located in the F.E.M.A. Firm Zone A-8, as designated by the National Flood Insurance Program-Firm Insurance Rate Map for the City of Atlantic City, Atlantic County, New Jersey, Community #345278. REMARKS: An additional small lot is located just past the northeast corner of the main parcel and is almost rectangular in shape with 17' of frontage on Pacific Avenue; sidelines of 80'(PLUS OR MINUS) and a rear line of 17'. It is used as part of a roadway providing public access to the Beach and an exit area for Showboat. LOT 42 IN BLOCK 14 IS A LEASEHOLD. The riparian grant for the Steel Pier is 150' wide and extends 2,835' from the subject, across the Boardwalk, into the Atlantic Ocean to the Pierhead Line Established -44- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS SITE DESCRIPTION ================================================================================ February 20, 1933. However, only 150' x 1,002' (PLUS OR MINUS) can be, and is being used, and the public has certain rights to use the pier and the beach and water below. In addition, there are the following: an easement 60' x 150' permitting a skyway above the Boardwalk; an easement over Pennsylvania Avenue used to connect the Trump Taj Mahal Casino Resort that is 40' x 80' (Block 14, Lot 67.02); two other, unused easements over Pennsylvania Avenue that are each 30' x 80'; and an easement for the tunnel at the end of Pennsylvania Avenue. The subject property's site, including utilities and improvements, is considered typical for the neighborhood area. There were no adverse encroachments, or detrimental off site conditions noted. Routine inspections and questions concerning the subject property did not reveal any hazardous toxic conditions. However, the appraisers are NOT experts in the identification of toxic or hazardous conditions. Therefore, if a definitive evaluation is required, the client or reader is advised to seek the services of an expert. -45- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS SITE DESCRIPTION ================================================================================ [Graphic material omitted. The graphic is a site plan that depicts the area bounded by Pacific Avenue to the North, The Boardwalk to the South, Maryland Avenue to the East and Pennsylvania Avenue to the West. The graphic includes Block 13, Block 14 and the vacated portion of Virginia Avenue.] -46- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ DESCRIPTION OF THE IMPROVEMENTS - ------------------------------- Trump Taj Mahal Casino Resort is improved with a multi-story, multi-building casino/hotel complex that opened April 2, 1990. It consists of a low rise section that houses the casino, restaurants, shops, offices, ballrooms, conference rooms, back of house uses, hotel lobby, lounges, a health spa, an arena, and a theater. The low rise tower is the building base and contains all common facilities. The Casino area is located in the central southeast portion of the building with access from the Boardwalk, the hotel lobby, restaurants and the Steel Pier Area. This area is 120,000 square feet of actual gaming area with an additional 34,162 square feet for casino support. The restaurant section of the complex is primarily located in the southwest corner, however, restaurants and lounges are scattered throughout the complex in strategic locations, where pedestrian traffic is the highest. The restaurant section in the southwest corner contains an Italian restaurant with seating for 300 (Marco Polo), an Oriental restaurant which seats 185 (Dynasty), a Continental restaurant which also seats 185 (Scheherazade), a Steak House with seating for 200 (Safari Steakhouse), and the Food Bazaar, which have seating for 500 (Sultans Feast). In addition, Trump Taj Mahal Casino Resort offers Sinbad's (a seafood restaurant) new Delhi Deli, the Bombay Cafe, Gobi Dessert, Rock 'n Rolls (1950's Themal Super Diner) and Koo Koo Roo (a chicken restaurant). -47- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ There is a hotel tower that contains guest rooms and suites; 2 parking garages; and a pier, located across the Boardwalk, which is improved with a 2 story building (partially completed) attached to the main complex by an enclosed bridge. LOW RISE TOWER CASINO & RESTAURANT - ---------------------------------- The low rise area is 3 to 7 stories and contains most of the casino and hotel facilities except for a majority of the guest rooms, and some offices. Basic construction consists of a fire-proofed steel frame; poured concrete floors; and an insulated, poured concrete roof deck with a rubber membrane surface except that the roof over the ballroom is insulted metal panel. Exterior walls consist of prefabricated panels constructed of heavy gauge metal studs; exterior gypsum board, rigid insulation; and Dryvit plaster. They are decorated with signs, lights, and fiberglass ornamentation. The ground floor contains the casino; hotel lobby; porte cochere; various restaurants and related service areas; shops; back of house uses; and mechanical and storage rooms. The new Oasis Lounge in the hotel lobby is currently under construction. The casino of 120,000 sq. ft. is highly irregular in shape (See diagram). Finishes include carpeted floors; mirrors and various other wall coverings; chandeliers and fixtures with incandescent lights. The ceiling is mirrored, observation windows or decorative acoustic block, and numerous, covered surveillance cameras. According to the Trump Organization, at the end of January 1994 there were 3,158 slot machines and 212 table games divided as follows: 99 blackjack, 20 craps, 4 big six, 21 roulette, 4 baccarat, 4 minibaccarat, and 60 -48- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ other slot machines. There are a total of 3,158 slot machines, including 155 nickel machines, 1,982 quarter machines, 315 fifty-cents machines, 619 dollar machines, 79 five dollar machines, 5, $25 machines and 3, $100 machines. It should be noted that due to the shape of the casino, the required width of the aisles and the location of the exits, the use of stools, and the source and amount of traffic affect the number and placement of machines and tables. In addition, there are change booths, cashier counters, security and Casino Control Commission offices, and the 1,200 seat, The Casbah Lounge. The remaining public areas including hotel lobby, corridors, restaurants, and shops all have high grades of finish including marble and carpeted floors, various types of wall coverings including marble and fabric; and decorative acoustic ceilings with crystal chandeliers and high hat lighting. Adjacent to the casino is the Mark G. Etess Arena, a 63,000 sq. ft. facility (plus a 16,950 sq. ft. prefunction lobby) that is used for conventions, trade shows, concerts, and sporting events. It has a banquet capacity of 5,000 people and a seating capacity of approximately 6,000, depending on layout (4,000 seats are available by 12 movable, motorized folding bleachers). In addition, there is a stage; 8 dressing rooms, 6 VIP/press booths; 15,625 sq. ft. staging area; and 14,000 sq. ft. of storage. Back of house facilities include hard and soft count room; coin and chip storage; miscellaneous offices; a dealers' lounge; and storage areas. Finishes are generally sealed concrete and composition tile floors; painted sheetrock walls and acoustic panel ceilings with recessed fluorescent lighting. The restaurants are serviced by 4 kitchens which have quarry tile floors; stainless steel counters; and acoustic panel ceilings with recessed fluorescent lighting. -49- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ The first level mezzanine contains various offices; storage areas; a surveillance room that is approximately 26' x 32', which has a raised computer floor and halon fire extinguishing system and metal catwalks that cover the casino floor and are used for surveillance through mirrored glass. The second floor is divided into 3 ballrooms; meeting rooms, restaurants; shops; offices; and service area. The ballrooms can be divided by pocket doors into a maximum of 9. In addition, there are 10 separate meeting rooms, divisible into 16 units and 4 restaurants and 1 lounge with finishes of good quality that vary with their theme. These areas are serviced by 4 separate kitchens, a service bar, and a banquet kitchen. Also on this level is 22,771 sq. ft. of retail space, divided into 8 separate upscale shops and a salon; 10,725 sq. ft. of offices including the executive offices with a high grade of finish; and various storage and mechanical rooms. The second floor mezzanine is divided into 3 meeting rooms containing a total of 1,740 sq. ft.; a 916 sq. ft. prefunction room; a restaurant and kitchen; a shop; and various offices. "Level 14" (the numbers between 2M and 14 are not used) has the hospitality suites, Lanai Suites, health spa, day care center, video arcade, offices, and mechanical and storage rooms. The hospitality suites (7) are designed for entertainment and have an oversized parlor, bar, outdoor area, and bathroom. They are roughly 2,100 sq. ft. and sleeping arrangements are available by connecting, adjoining bedrooms. The Lanai suites (50 on two floors) contain 1,000 to 1,500 sq. ft. and have 1 or 2 bedrooms, a living room with dining area, 2 bathrooms, -50- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ and a bar. All of the suites have high grades of finish. The health spa contains 10,184 sq. ft. (plus an 11,484 sq. ft. enclosed pool). The fitness portion is divided into 3 sections for weights, cardiovascular equipment, and aerobics. Finishes include carpeted floors, mirrored and painted walls, and acoustic panel ceilings. Men's and women's locker rooms have lockers, a whirlpool, sauna, steam room, and massage room. There are shower stalls, sinks, and toilets. HOTEL TOWER - ----------- The hotel portion of the structure tower 38 stories on top of the base and four hundred and twenty-nine feet above sea level. This portion of the building is designed for 1,201 rooms of the 1,250 total. Total square footage for the hotel section is 1,002,173. The rooms contain high quality furniture, fixtures and amenities. The room count is as follows: Double 492 King 247 (28 are not in the tower) Upgraded Double 195 Upgraded King 74 Raja Suites 25 Sultan Suites 143 Viceroy Suites 35 Lanai Suites 21 (not in tower) Hospitality Suites 6 Penthouse Suites 12 -51- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ Basic construction of the tower consists of a fire proofed steel frame; precast, prestressed concrete plank floors with a poured concrete top coat; and a heavy steel truss roof with an insulated concrete deck and rubber membrane surface. Exterior walls are prefabricated aluminum panels and insulated, vision and spandrell glass. Floors 14-38 are "standard" floors while levels 39-51 are considered "upgraded", with a higher quality of corridor and room finish. The standard corridors are finished with carpeted floors (the elevator lobby's floor is marble); vinyl covered walls; and painted ceilings with incandescent lights. The rooms have carpeted (marble in the bathrooms) floors; vinyl, covered walls; and stuccoed ceilings. The upgraded floors use better grades of marble and carpet; mirrors and polished metal; and more lights. There are 10 different types of units including 4 of guest rooms and 6 of suites. Guest Rooms - The 4 room types, averaging 465 sq. ft. each, have similar ----------- layouts and have either a king size bed or 2 doubles. There are standard and upgraded styles. Viceroy Suites - "L" shaped mini-suites containing 660 (PLUS OR MINUS) -------------- square feet with sleeping and living/dining are and a 3 fixture bathroom. Sultan Suites - 2 1/2 room suites containing 1,200 (PLUS OR MINUS) square ------------- feet. Each has a parlor and dining area; a master bedroom with a whirlpool bath; a bathroom; and a powder room. Raja Suites - One or two bedrooms suites containing 1,400 (PLUS OR MINUS) ----------- square feet. The units are divided into a living room with dining area; a master bedroom with a whirlpool bath; a master bathroom with a tub, stall shower, sink and toilet; a foyer with a bar; and a powder room. If a second bedroom is required, an adjacent guest room is used. -52- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ Lanai Suites - One and two bedroom suites which range from 1,000 to 1,500 ------------ sq. ft. These contain a living room with dining area; a bar area; master bedroom with a whirlpool bath; a master bathroom; and a second bathroom. Hospitality Suites - These units are designed for entertaining but can be ------------------ used for sleeping by attaching an adjacent guestroom. They are approximately 2,100 sq. ft. and can accommodate 50 people. The rooms contain a bar area, sitting areas, greenhouse enclosure, and a lavatory. Each unit is individually finished with an animal theme. Penthouse Suites - These are large suites named and styled after famous ---------------- historical figures. They have high grades of finish. All, except one, have two bedrooms, one or two bathrooms, a whirlpool, sauna, dining room, bar, and lavatory. TYPICAL GUEST ROOM - KING - ------------------------- Each room is finely appointed with decorative wall coverings, matching bed spread and curtains, rugs, mirrors and paintings. The furniture includes (1) king size bed, (4) lamps, (1) six drawer low dresser, (1) desk and chair, (1) love seat, (1) reading chair, (3) night stands and end tables, telephone and television. TYPICAL GUEST ROOM - DOUBLE - --------------------------- Each room contains (2) double beds, (1) high rise dresser, (2) lamps (2) reading chairs, a small table and all the other amenities mentioned under King. -53- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ SUITES - ------ Each suite is decorated slightly differently, however, most contain several couches, chairs, lamps and tables. They also contain widescreen television, wet bars, pantries and in most cases spas. The master bedrooms have the king sized beds on a riser, a built in canopy over the bed and access to the outside balcony via sliding glass doors. The floors are carpeted and the walls are papered. The trim in the rooms is chrome or brass. On the 49th and 50th floors is the two level Maharajah Club (access by invitation only). It contains 6,500 sq. ft. and serves as a private club. There is a bar on each level and food is available. The entire hotel/casino facility is protected by fire alarms and sprinklers. Heating and cooling is supplied to the complex by a central steam and chilled water system. There are eight, 700 horsepower oil/gas fire, Cleaver Brooks boilers and eight chillers. The water is then distributed to individual HVAC units in each of the guest rooms and 120 air handlers located in other areas of the complex. The guest rooms are all connected to a computer system that allows the reservation desk to individually adjust room temperatures, as needed, prior to patron arrivals. In the low rise there are 6 passenger elevators; 4 service elevators, 4 freight elevators; 3 dumbwaiters; one 500 lb. platform lift; and 21 escalators. The hotel tower has a bank of 12 elevators (serve all levels); an additional passenger elevator; and 5 service cars. -54- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ CONSTRUCTION DETAILS - -------------------- The following pages refer to the complex's vital statistics and electrical, heating and safety features. AGE: 1990 SIZE: 4,319,905 total floor area, 51 stories on approximately 29.24 (PLUS OR MINUS) acres. Hotel Rooms: 1,250 Keys (Guest Rooms) 1,039,773 sq. ft. Valet Parking: 1,608 Parking Spaces 416,550 sq. ft. Pennsylvania Avenue Garage (Self): 1,900 Parking Spaces 817,704 sq. ft. Pennsylvania Avenue Garage Addition (Self): 1,030 Parking Spaces 415,500 sq. ft. BUILDING HEIGHT: 51 stories FOUNDATION: Masonry and steel on cap pilings FRAME: Masonry and steel FLOOR: Reinforced concrete slab EXTERIOR WALLS: HOTEL: Double pane reflective windows and steel panels LOW RISE: Masonry and stucco HVAC SYSTEM: 1) The boiler plant includes eight (8) 700 BHP Boilers using eight (8) pound steam for heating. 2) The chiller plant includes eight (8) 1500 ton chillers and corresponding cooling towers on the roof baded upon a chilled water system for cooling. 3) There are eight air handling systems, of which some are fresh air systems with fan coil units, and other are variable volume systems. There are four (4) large built up systems for the casino. 4) Separate computer A/C systems are provided in the computer spaces.
-55- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ 5) There is a complete smoke removal system which consists of approximately 100 fans. 6) The hotel tower has a fan coil unit system for all the rooms and a large fresh air system which is also used as part of the smoke removal system. 7) There are many fan systems for cooling electrical spaces, for code exhaust, for make up air requirements, and for kitchen exhaust. 8) There is a carbon monoxide sensing and exhaust system.
ELECTRICAL SUMMARY: 12,900 ft. - 23,000 volt cable 2 - Incoming lineups of 23 KV switchgear 4 - 10,000 KVA transformers 2 - Substations 21 - Distribution boards 40 - Motor control centers 70 - Panelboards 1,200 Ft. - Bus duct 6 Generators - 5 @ 140KW; 1 @ 1050 KW 1 - 180 KW - UPS uninterruptable power source 2 - 25 KW - Inverters 130,000 SF - Cellular floor (2,500' of trench header) 4,000 - Fluorescent fixtures with energy saving ballast 15,200 - Incandescent & high pressure sodium fixtures 311 - Site lighting poles 260 - Building flood lights 27 - Dimmer boards 1,000 - Security cameras 400 - Alarmed doors 7,500 - Life safety devices 1,350 - Building management devices 110 - Remanco outlets 130 - SDS/CMS outlets 500 - Wang outlets 4,200 - Phone outlets 1,200,000 Ft. - MC/BX cable 900,00 Ft. - Conduit 400,000 Ft. - Feeder cable 75,000 - Remanco
-56- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ 138,000 Ft. - CCTV cable 2,000 - Speakers 150,000 Ft. - Audio cable SPRINKLER: The hotel tower is comprised of approximately 780 sprinkler heads supplied by two (2) 6" risers that feed the floors from either side. Each floor is protected by a loop provided with a water flow detector, control valve, tamper switch, and drain assembly at each connection. All bathrooms are protected; closets are not protected and meet local and state code requirements. The risers have separate control valves and are provided with fire department valves in cabinets along with 2.5 gallon water fire extinguishers. A separate 6" riser with fire department valves only is located approximately at the center of the building. A roof manifold with a separate control valve is provided on the ocean side of the tower for test and/or fire fighting purposes. FIRE PUMPS: There are three (3) electric fire pumps incorporated into the central plant. The low zone pump is rated at 1500 GPM @ 165 PSI, and the high zone pump is rated at 150 GPM @ 115 PSI. There are two (2) jockey pumps provided. Each is independent of the other and satisfies both the low and high zone system respectively. Five (5) separate controllers are provided for the fire and all are on an emergency generator. The water supply for the pumps is from a combination 10" city supply into the pump room from the 20" main located on Maryland Avenue. Another 12" combination city supply is brought into the pump room. Both piping configurations are combined to provide a multiple supply source. The central plant/garage portion of the building is protected by approximately 3,200 sprinklers and consists of two (2) electrical rooms, a chiller room, a boiler room, eight (8) garage levels, and electrical rooms at the top.
-57- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ Each of the electrical rooms is protected by a pre - action type sprinkler system which will be activated by smoke detectors or manual pull stations. The boiler room and chiller rooms are protected by individual wet pipe sprinkler systems. Each has its own control value, water flow device, and drain. The garage levels of the building are protected by a dry pipe sprinkler system. Located near the elevators is a 4" wet riser rising through each floor of the garage. This wet riser will supply the appropriate number of dry pipes required per floor. Each dry system protecting the garage floors has been designed as a galvanized loop type system. The electrical room at the top elevation of the garage is protected by a single pre - action valve assembly. This is supplied from the 4" wet riser supplying the garage floors. These dry risers supply 2.25" fire hose rack stations, five (5) of each located on every floor of the garage. All areas for which protection is being provided are as per the BOCA codes and/or DCA - Atlantic City requirements. The low rise exhibition hall portion of the subject property is protected by approximately 25,000 sprinkler heads. These two areas consist of an impressive network of horizontal and vertical standpipe runs, wet and dry pipe sprinkler systems, hose valve cabinets, Halon fire protection systems, Pre-Action Sprinkler Systems and Kitchen Hood Quencher Systems. Located around the perimeter of the property are five (5) sets of fire department connections. These are connected into the high pressure and low pressure standpipe systems accordingly, for the use of the fire department to supply additional water to any part of the building in the event of a fire. There are approximately sixteen (16) high value areas protected by Halon Suppression Systems. The areas include the Computer Room, Television-Security,
-58- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ Television Equipment, Tape Storage, Fire Command, Audio-Video Rooms and certain electrical areas. Each area is also provided with a Pre-Action system which allow water to enter into the piping system and be available to suppress a fire in the event the Halon System did not extinguish the fire. The combination of Halon and Pre-Action Suppression Systems exceeds code requirements, however, the added protection is available in the event of a second flare-up. The sprinkler system piping throughout the complex also supplies the water to the Gaylord Quencher Kitchen Hood Suppression Systems. The supply piping to the panels is provided from the combination risers with separate supervised control valves. The flow devices are in the Quencher panels.
OTHER AREAS - ----------- The TERRACE BUILDING is a 30 (PLUS OR MINUS) year old, 11 story structure that has a total floor area of 64,147 sq. ft. It was formerly a hotel, 10 floors of which are used as offices; one has rooms for employees. Basic construction consists of a steel frame with brick veneered exterior walls; concrete floors; and a flat roof deck. It is sprinklered and HVAC is supplied by the main, complex plant. The ground floor has an entrance lobby, offices, and two, 2,000 lb. Otis passenger elevators. The upper floors, in general, have a center corridor with rooms off of each side. Finishes are, generally, carpeted floors; vinyl covered and painted walls; and acoustic panel ceilings with recessed fluorescent lighting on the floors which are used. Overall, this structure is in fair condition and is in need of extensive renovations and reconstruction. -59- BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ The THEATER BUILDING (Xanadu) is a 3 story structure containing a total gross area of 113,429 sq. ft. Construction began in March, 1989 and stopped in November, 1989. The project was then mothballed until February, 1992 when it was then renewed. Basic construction consists of a fireproof frame with dryvit exterior walls; concrete floors; and a flat roof deck. Development plans show the ground level divided into a 3,328 sq. ft. restaurant with a 1,152 sq. ft. kitchen; a 3,367 sq. ft. lounge; offices; stage support areas; dressing rooms; storage; and men's and ladies lavatories. A first floor mezzanine house support areas. The second level contains the 13,488 sq. ft. theater. There is a stage area with seating in front; scaffolding for lighting; and a mezzanine area for control rooms. Also, there is a bar area to serve the showroom. The structures have 1 passenger elevator, 1 service elevator, 1 freight elevator, and 4 escalators. The SELF PARKING GARAGE is a twelve-story parking structure containing 1,233,204 sq. ft. with a capacity of 2,930 cars. Basic construction consists of a concrete frame with precast, prestressed concrete panel floors and partial walls. The ground floor is for an entrance and exit, facility vehicle parking, a 6 bay loading dock, storage, staging areas, and a 1,090 sq. ft. office. The upper levels are used for parking and 32 cooling towers. There are 6 passenger elevators. The VALET PARKING AREA is an eight-story parking garage containing 416,550 sq. ft. with a capacity of 1,608 cars. Basic construction consists of a concrete frame with poured concrete -60- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ floors and concrete partial walls. The ground floor is used for a 5 bay loading dock and service areas. There are 3 passenger elevators. The STEEL PIER is located across the Boardwalk from the hotel/casino complex. It is 150' (PLUS OR MINUS) wide and extends 1,002.60' across the beach and into the Atlantic Ocean or a total surface area of 150,390 (PLUS OR MINUS) sq. ft. Basic construction consists of concrete columns and a flat, tier concrete deck. Ramps connect the different levels. Chain link fencing runs around the perimeter of the entire pier and across each section. A majority of the area is open and has been used for special events. The ocean end has lighting, fencing, and painting for a helipad. In addition, there is a small, movable, modular structure which was used as office space. A blocked off, stub tunnel under the Boardwalk extends out from the vehicular tunnel that goes from Pennsylvania to Maryland Avenues. It was to connect to a ramp to be built east of the present pier for access to the pier. The land over which it was to go has reverted to the City. There is a 2 story building at the end closest to the Boardwalk. Basic construction consists of a fireproofed steel frame; Dryvit exterior walls; concrete floors; and a flat roof deck. An enclosed bridge provides access from the hotel/casino complex, across the Boardwalk, to the second level of the building. The ground floor is entered from the Boardwalk - there are no stairs or elevators between the two stories. The ground floor level contains 2, unfinished, 40' high, areas used for storage and bike rental of 1,830 (PLUS OR MINUS) square feet and 2,700 (PLUS OR MINUS) square feet with a passageway between for access to the remainder of the Pier. The upper level is also; unfinished and was intended for -61- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS ================================================================================ use as a restaurant. However, it has not been needed nor is it intended to be finished as such in the immediate future. The building known as the "SOCIAL SECURITY BUILDING" located at N/E/C of Pacific Avenue and Pennsylvania Avenue (Block 14, Lot 17), has been demolished. It was finished for offices and utilized by the Taj Mahal for personnel offices until its demolition in the spring of 1993. ZONING DATA - ----------- Generally, zoning looks to the future as a result of planning. Its purpose is to promote and maintain a degree of homogeneity in the use of real estate within the confines of a given geographic, political subdivision. The Appraisal Institute in their book, "The Dictionary of Real Estate Appraisal" - - third edition (page 399) have defined zoning as: "The public regulation of the character and extent of real estate use through police power; accomplished by establishing districts or areas with uniform restrictions relating to improvements; structural height, area, and bulk; density of population; and other aspects on the use and development of private property." The casino hotel is located within the RSC-Resort Commercial District of Atlantic City. Portion of the site, (Approx. 17 (PLUS OR MINUS) acres) are in the Urban Renewal Tract. The purpose of this district is to provide for the City's main industry, consisting predominantly of casino and other transient and tourist oriented uses. -62- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS ZONING DATA ================================================================================ Some of the bulk regulations of this district are as follows: Minimum Lot Area 2 Acres --------------------------------------------------------------------------- Minimum Lot Width 150 Feet --------------------------------------------------------------------------- Minimum Lot Depth 150 Feet --------------------------------------------------------------------------- Minimum Front Yard 0 Feet (Along Boardwalk) --------------------------------------------------------------------------- Minimum Front Yard 10 feet (along Public streets) --------------------------------------------------------------------------- Minimum Side Yard 0 Feet --------------------------------------------------------------------------- Minimum Rear Yard 0 Feet --------------------------------------------------------------------------- Maximum Building Height 385 feet above sea level --------------------------------------------------------------------------- Maximum Lot Coverage 80% --------------------------------------------------------------------------- Maximum FAR 8.0 --------------------------------------------------------------------------- Parking Requirements: 1 space/hotel room for first 500 rooms; 1 space/2 rooms beyond 500 rooms plus 12 spaces/1,000 sq. ft. of non-hotel space for first 40,000 sq. ft., and 6 spaces/1,000 sq. ft. for next 60,000 sq. ft., and 3 spaces/1,000 sq. ft., over 100,000 sq. ft. Our analysis of the existing regulations indicate that the subject property represents a conforming use. [Graphic material omitted. This graphic is an Atlantic City Zoning Map promulgated by the Department of Planning and Development. The graphic highlights the location of the appraised property in the Urban Renewal Tract.] -63- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS REAL ESTATE TAX & ASSESSMENT DATA ================================================================================ REAL ESTATE TAX AND ASSESSMENT DATA - ----------------------------------- The real estate tax assessment, synonymous with assessed value, is the official valuation level of property for ad valorem tax purposes. "The Appraisal of Real Estate" 10th edition 1992, Page 24, states: "Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value but it is usually calculated in relation to a market value base." Since the assessment is a dollar amount assigned to taxable property by the assessor for the purpose of taxation, it may not reflect the independent value conclusions found within this report. Breakdown of the 1994 real estate assessments, assembled by the Trump Organization and verified by Appraisal Group International, are presented in the Addenda of this report. 1994 total assessment reflect $657,621,700, which includes the employee parking area, leased from the city of Atlantic City. The 1994 tax rate totals $2.497 per $100.00 of assessed valuation. The subject's current real estate tax liability is as follows: -64- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS REAL ESTATE TAX & ASSESSMENT DATA ================================================================================ 1993-1994 Total Tax Assessment: $657,621,700 1993-1994 Tax Rate: $2.497 per $100 Tax Liability - Hotel & Casino: $ 16,187,462 - Employee Parking Lot: $ 233,352 ------------ Total Tax Liability: $ 16,420,814 1994 Ratio = 89.23% of market value [Graphic material omitted. This graphic depicts a floor plan of the Taj Mahal Casino Resort.] -65- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ HIGHEST AND BEST USE - -------------------- Highest and Best Use is a valuation concept that can be applied to either the land or improvements. It normally is used to mean that use of a parcel of land (without regard to any improvements upon it) that will bring the greatest net return to the land over a given period of time. The concept of highest and best use can also be applied to a property which has some improvements upon it that have a remaining economic life. In this context, highest and best use can refer to that use of the existing improvements which is most profitable to the owner. It is possible to have two different highest and best uses for the same property; one for the land ignoring the improvements; and another that recognizes the presence of the improvements. In cases where the site is improved, the results of the highest and best use analysis (of the land only) may indicate a different use than the existing use. The existing use will continue, however, until such time as the land value less cost of conversion or demolition in its highest and best use exceeds the total value of the property in its existing use. Therefore, as long as the improved property has a higher market value than the land alone as if vacant, the existing use will serve as the highest and best use. This analysis will address the highest and best use as improved. The highest and best use must meet the following criteria: 1. It must be legal in conformity with existing zoning and other building and land use restrictions. 2. The use must not be speculative or conjectural, but probable and reasonable. 3. Sufficient market demand must exist. -66- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ 4. The use must return the greatest profit for the longest period, considering all alternatives. Inherent in reaching any conclusion as to the highest and best use of a property is the consideration of the many principles related to valuation. The Principle of Anticipation is predicated on the foundation that value is created by the anticipation of future benefits. It is not based on historical costs, but on what current market participants believe the future benefits of the purchase will be. In essence, value is the present worth of future benefits. The Principle of Conformity addresses itself to the issue that property achieves its optimum value when the use to which it is put, and the design and layout of any structure situated on the land, blends in well with its environs. The use need not be the same as all surrounding properties, but it need be homogenous with those uses. All of these factors must be considered in arriving at a conclusion as to the highest and best use of a property. Central to the determination of Highest and Best Use, as it pertains to wealth maximization of individual property owners, is the consideration of four critical factors: 1. Physically Possible 2. Legally Permissible 3. Financially Feasible 4. Maximally Productive Usually this study is unbiased; however, in the subject's case a hotel and casino facility has been constructed on the site. Primary consideration will be given to that use. There are four critical factors that will be analyzed in regard to this particular use for the subject property. They are listed on the following pages: -67- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ Physically Possible - ------------------- Refers to the physical adaptability of a site for a proposed use. The subject site was clear land at the time construction commenced. The site is already improved and, as a result, its existence proves it is physically adaptable. This inspection focused particularly on the physical elements or characteristics of the site, which include size, shape, terrain, frontage and depth, topography, soil conditions, and capacity and availability of public utilities. An analysis of all physical elements, both individually and collectively, produces the conclusion that the subject site is well suited for development. The physically possible test determines what is possible on the site. The choices are to renovate, convert, demolish, or leave the improvements as they are. The subject is functional for its existing and intended use. No changes to the physically possible criterion are warranted. The subject passes the test of physically possible. Legally Permissible - ------------------- Refers to the legality or conformance of a given or proposed use to existing zoning and other land use controls. When investigating the legality of a proposed use, factors to consider include private restrictions, zoning, building codes, historic district controls, and environmental regulations. -68- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ The subject is located within the RS-C Resort Commercial district of Atlantic City. The property was constructed in conformance with the regulations of the RS-C zoning district. The subject is a legally permissible use (The legally permissible test would require a more in-depth analysis if the subject were a preexisting nonconforming use). The subject passes the test of legally permissible. Financially Feasible - -------------------- Analysis of the physically possible and legally permissible uses of the subject site has indicated that the development of the site with a hotel and casino facility was both possible and permissible. Additionally, and in conformity with the discussions of the definitions of Highest and Best Use, the improvements blend harmoniously with neighboring and existing uses and complement community development goals. However, in analyzing the financial feasibility of a possible use, the marketplace must be tested in order to determine if a positive rate of return sufficient to attract investment capital to the project is generated by its potential operation. In order to investigate the above-mentioned factors, an "Immediate Market Area Overview" was conducted. This immediate market area was defined as containing hotel and casino facilities in the Atlantic City Market. The result of the analysis may be found in the Capitalization of Income Approach section of this report. -69- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ An analysis of average room rents and casino win, coupled with increasing demand for such facilities, indicates that positive net income from operations is sufficient to attract investment capital. In conclusion, the subject property passes the test of financially feasible. Maximally Productive - -------------------- This refers to the use which will result in the greatest "net return" to the land as the result of the proposed use, as compared to a higher use. With reference to maximally productive, it is doubtful that the subject could be put to a higher use. Once a casino license is granted to a developer, the revenues attributable to the land and improvements far exceed the income that can be generated by any alternate use. Therefore, the highest and best use of the subject property is for continued use as a hotel and casino. CONCLUSION - - ---------- The subject property is well located in a desirable location in the on the Boardwalk in Atlantic City. As mentioned in the Neighborhood Data and General Area Data Section of this report, the area is in a mixed use neighborhood containing commercial, and retail properties. The preceding analysis indicates that the subject sites pass all four tests of the critical factors utilized to determine Highest and Best Use. Thus, it is our opinion that the current utilization -70- APPRAISAL GROUP INTERNATIONAL BACKGROUND DATA & ANALYSIS HIGHEST & BEST USE ANALYSIS ================================================================================ of the subject property as a hotel and casino facility represents the Highest and Best Use of each. Typically, the appraiser first comes to a conclusion as to the highest and best use of the site as if it were vacant and available for development. This helps in the proper valuation of the land in the Cost Approach to value. In the subject's case, this approach is not relevant. Without an extensive analysis, we have concluded that the highest and best use of the site, if vacant, would be for development of a hotel and casino facility. In reference to the employees parking facility on North Carolina Avenue and Huron Avenue, this parcel of land is considered an integral part of the Trump Taj Mahal Casino Resort, because it is a vital component to the daily operation of this facility. Therefore, the employees parking facility is considered an essential part of the subject property. Furthermore, and in reference to the warehouse facilities which are located in the Pleasantville and Township of Egg Harbor, the warehouse facilities are considered an integral part of the Trump Taj Mahal Casino Resort, because it is a vital component to the daily operation of this facility. Therefore, for the purpose of this report, the warehouse facilities are considered part of the casino and hotel facility. The highest and best use of the warehouse buildings is for industrial/warehouse use. However, inasmuch as a casino needs back storage space in a less expensive area, the highest and best use of the warehouse facility is in conjunction with the operation of the casino. -71- APPRAISAL GROUP INTERNATIONAL VALUATION AND CONCLUSIONS -72- VALUATION & CONCLUSIONS VALUATION METHOD =============================================================================== VALUATION METHOD - ---------------- The valuation of real estate is, essentially, the valuation of the rights inherent to the ownership of the property. The valuation approaches are based on sound economic principles, as they relate directly to real estate. The three traditional approaches to the valuation of real estate are as follows: COST APPROACH: In this approach, the improvements are replaced as if new, and - ------------- any applicable depreciation is deducted to arrive at a net improvement value. To this is added the value of the land and any site improvements or allied appurtenances, in order to arrive at a value estimate. SALES COMPARISON APPROACH: A technique of finding sales of similar properties, - ------------------------- extracting units of comparison, and carefully analyzing and comparing them by virtue of their minor differences and major similarities, to arrive at an indication of value for the appraised property. CAPITALIZATION OF INCOME APPROACH: Converts the net operating income - --------------------------------- attributable to the real estate after all expenses, into a valuation estimate. This approach capitalizes the income by an appropriate method and rate as derived from a market study of similar properties and/or competitive investments. The valuation of the subject property will employ the Capitalization of Income Approach to value. This section will be preceded by an explanation of the steps involved in arriving at the independent value estimate. -73- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS VALUATION METHOD =============================================================================== The subject property, as a hotel and casino facility is considered income producing and investment grade real estate. As an investment vehicle, real estate is most often purchased for its ability to generate economic benefits, such as protection of capital, appreciation, tax benefits and an annual return on investment or dividend. Of the three valuation methods, the Capitalization of Income Approach most accurately reflects the aggregate value of these benefits. It traditionally produces the most reliable indication of value for income producing real estate and, thus, will be given primary consideration for the final value estimate. The Cost Approach, in this valuation has not been implemented. In order to reflect a value indication by the Cost Approach, the improvements are replaced as if new, and any accrued depreciation is deducted to arrive at a net improvement value. Depreciation falls into three broad categories: Physical Deterioration, Functional Obsolescence and External Obsolescence. Physical Deterioration may be sub-categorized into Curable and Incurable. Curable physical deterioration is that loss in value which occurs as the short lived components of the structure gradually wear out, but are not yet ready to be replaced or redone. Incurable deterioration refers to the actual physical wear and tear to the major components of the building. Functional Obsolescence refers to the adequacy of the building in relation to the site, and to the utility of the layout and equipment inherent to the building. It is often the measure of an overimprovement or underimprovement. Any functional obsolescence has the ability to be -74- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS VALUATION METHOD ================================================================================ cured, but the cost, in relation to its contribution to value, is the measure of whether it is curable. The third category of depreciation is Economic Obsolescence. Sometimes referred to as Environmental Obsolescence, this form of depreciation is a result of external interference to the property, and is incurable. Due to the characteristics of the subject property, estimates of accrued physical deterioration and functional obsolescence becomes inordinately subjective and extremely difficult to measure with any degree of accuracy. As accrued depreciation is fundamental to a value estimate by the Cost Approach, this approach has been precluded from the subject's valuation. The Cost Approach may provide a reliable estimate of value for newly constructed properties; however, as buildings and other forms of improvements increase in age and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable buyers of similar properties generally base their purchase decisions on economic factors such as forecasted cash flow and return on investment. Because the Cost Approach does not reflect any of these income- related considerations, but does require a number of highly subjective and insubstantial depreciation estimates, this approach is usually given minimal weight in the valuation process. Additionally, in a similar casino facility, we know of no instance where the replacement cost of a building was the basis for a purchase decision. -75- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS VALUATION METHOD =============================================================================== The Sales Comparison Approach has not been utilized. This valuation method provides an accurate value estimate for simple forms of real estate, such as single family dwellings or vacant land, where comparable properties tend to be homogenous and a purchaser's individual goals are similar. However, for income producing real estate such as the subject, there are numerous subjective adjustments to be made which are difficult to quantify accurately. Furthermore, more often than not, income producing real estate (comparable improved sales) is sold subject to numerous conditions of sale including, but not limited to, cash flow guarantees, advantageous management agreements and advantageous seller financing. Any one or all of these conditions, which may affect the negotiated sale price, are almost always impossible to uncover and verify when researching a comparable improved sale, thereby diminishing the reliability of a value indication by the Sales Comparison Approach. Furthermore, the Sales Comparison Approach could not be used for lack of market transactions. Since the market for this type of real estate gives most consideration to a property's economic benefits, the Capitalization of Income Approach will be utilized as a value indicator. CAPITALIZATION OF INCOME APPROACH - --------------------------------- Capitalization, in real estate terminology, is the process by which an income projection is converted into an indication of value. The element that transforms the income projection is a rate that reflects the return necessary to attract investment capital. The process of Income Capitalization generally reflects the principle of anticipation. Defined as the present worth of -76- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ anticipated future benefits, anticipation follows a pattern similar to investor thinking and motivation. We studied the market, in addition to the past operating history of casino hotels similar to the subject, so as to determine the best method or process of Income Capitalization. Factors considered in our decision making included the following: - The age, quality and condition of the improvements. - Occupancy levels in the market. - Projected casino win. - Projected future growth of the market. - Typical investor requirements for a property of this type. We have concluded that annuity capitalization, utilizing the discounted cash flow technique, is the most appropriate method of capitalization. This valuation process utilizes the following five steps: 1. Projection of Investment Holding Period. 2. Projection of Annual Casino Revenue for each year of the holding period. 3. Selection of a Yield Rate. 4. Projection of Reversionary Value. 5. Calculation of Net Present Value based on Steps 1 through 4. -77- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH =============================================================================== STEP 1 - - ------ In this valuation of the subject property, we will utilize a ten (10) year holding period for the investment. Although the subject has a much longer useful life, an investment analysis becomes more manageable and meaningful if limited to a time period considerably less than the real estate's economic life. A ten (10) year holding period for this investment is long enough to model the subject's performance with some degree of accuracy, but short enough to reasonably estimate expected income and expenses of the real estate. It should be mentioned that the eleventh (11th) year cash flow was projected in order to calculate the reversionary interest, which is explained in detail in Step 4. STEP 2: - ------ CASINO REVENUE - -------------- In determining future casino revenue for the subject property we have analyzed historical operating data on the gaming industry in Atlantic City since 1982. 1982 was the first year comprehensive operating data was available on the individual casinos. While we did consider and review statistics of the gaming industries in Las Vegas, Reno, and Laughlin, the information was not considered in this report, due to the vast differences in these gaming markets. The table below lists total inventory of casino space as of December 31 of each year. As can be seen on the following chart, the inventory of casino space increased by 20.54% from 1983 to 1984, 13.4% from 1984 to 1985, 10.00% from 1986 to 1987, and 6.4% from 1987 to 1988. From 1988 to 1989, casino space decreased 6.67% due to the closing of the Atlantis -78- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Hotel and Casino. In April 1990, the Taj Mahal opened it's 120,000 square foot casino, increasing industry casino space by 18.49%. From 1990 to 1992, casino space increased less than 1.00%. The casinos periodically change the casino floor area slightly to accommodate different games and slots. This accounts for the less than 1% increase in casino floor area from 1990 to 1991. 1993 casino floor area remained at 1991 level. Historical increases in casino space are explored on the following table;
property 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 - ---------- Resorts 60,000 59,857 59,857 59,857 59,857 59,857 59,857 60,000 60,000 60,000 60,000 60,000 Caesars 49,061 49,061 59,999 59,296 59,296 59,296 59,617 60,000 60,000 60,000 60,000 60,000 Bally's 60,000 60,000 59,439 59,439 59,439 59,439 59,996 59,996 59,996 61,835 64,410 64,410 Sands 38,336 32,496 49,459 49,459 49,688 49,688 50,090 49,899 49,899 50,123 50,123 50,123 Harrah's 44,090 44,698 44,698 54,291 60,444 60,444 59,718 60,364 60,364 61,278 61,278 61,278 Marina Bally's Grand 40,805 40,717 40,814 40,814 43,162 43,162 45,442 45,442 45,442 45,442 45,442 45,442 Atlantis 54,000 51,085 51,051 50,709 50,544 50,544 50,601 -- -- -- -- -- Claridge 30,000 34,408 33,937 33,752 42,817 42,817 43,054 43,054 43,054 43,579 43,579 43,579 TropWorld 50,795 50,873 50,850 50,850 48,838 48,838 87,562 90,827 90,827 90,774 90,774 90,774 Trump Plaza -- -- 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Trump's Castle -- -- -- 60,00 60,000 60,000 60,000 60,000 60,000 60,000 61,198 61,198 Showboat -- -- -- -- -- 59,388 59,388 59,388 59,388 59,388 59,388 59,388 Trump Taj Maha -- -- -- -- -- -- -- -- 120,000 120,000 120,000 120,000 Total 427,087 423,195 510,104 578,467 594,085 653,473 695,325 648,970 768,970 772,419 776,192 776,192 - ----------------------------------------------------------------------------------------------------------------------------------- % CHANGE - -0.91% 20.54% 13.40% 2.70% 10.00% 6.40% -6.67% 18.49% 0.45% 0.49% 0.00% - -----------------------------------------------------------------------------------------------------------------------------------
-79- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ CASINO WIN 1982 - 1993 - ---------------------- The following data lists total casino win, percentage of increase/decrease in casino win, casino area, and win per square foot per year. The following win analysis is based upon win per square foot of casino floor area per year (Win/SF). In some instances total win and Win/SF/Year will indicate different top performers. For example, in 1982 Resorts International had the largest win, while the Golden Nugget (now, Bally's Grand) had the largest Win/SF/Year. The Golden Nugget is referred to as Bally's Grand throughout the exhibits. 1982 - ---- In 1982 the Golden Nugget was the top performer at $4,526/SF, followed by Harrah's at $3,985/SF. Caesars came in third at $3,958/SF. The worst performers in 1982 were the Atlantis at $2,623/SF, the Tropicana at $2,948/SF, and the Claridge at $2,986/SF. Total industry casino win in 1982 was $1,493,164,092, representing nearly a 36% increase over 1981. 1983 - ---- In 1983 all of the casinos showed revenue increases over 1982. The top performer in 1983 was the Golden Nugget with revenues of $6,455/SF, followed by Sands at $4,814/SF. The worst performers in 1983 were, again, the Atlantis at $2,819/SF and the Claridge at $3,203/SF. -80- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH =============================================================================== 1984 - ---- In 1984, Trump Plaza opened and most of the casinos continued to show revenue increases per square foot, while other casinos earnings/SF declined due in part to the additional supply. In aggregate terms, however, all casinos except the Golden Nugget showed increases in casino revenue in 1984. The top performer in 1984 was the Golden Nugget at $6,151/SF, followed by Harrah's at $4,708/SF. The worst in 1984 were the Atlantis at $2,880, and Sands at $3,225/SF. 1985 - ---- In 1985 Trump's Castle opened and 6 casinos showed decreases in revenue on an aggregate basis, while 4 casinos experienced moderate increases. Top performers in 1985 were the Golden Nugget at $5,893/SF, Caesars at $4,167/SF, and Tropicana at $4,151 /SF. The worst performers in 1985 were the Atlantis at $2,731/SF, and Trump Plaza at $3,390/SF. 1986 - ---- In 1986, no additional casino space came on line. Most casinos showed small increases in revenue, while others showed decreases in revenue. The top performers in 1986 were the Golden Nugget at $5,791/SF, Tropicana at $4,390/SF, and Caesars at $4,379/SF. The worst performers in 1986 were the Atlantis at $2,038/SF, and the Claridge at $2,799/SF. The Atlantis experienced a 25.64% decrease in casino revenue between 1985 and 1986. -81- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH =============================================================================== 1987 - ---- In 1987 the top performer was Bally's Grand, formerly the Golden Nugget, at $5,557/SF and the worst performer was the Atlantis at $1,453/SF. In 1987 the Showboat came on line and added 59,388 additional square feet of casino floor area to Atlantic City. 1988 - ---- In 1988, TropWorld expanded its casino by 27,562 square feet. Since the TropWorld expansion became effective in the fourth quarter of 1988, the win/SF figures are low, as the facility did not benefit from a full year of expanded casino floor area. The top performers in 1988 were Caesars at $5,160/SF, and Trump Plaza at $5,014/SF. The worst performer in 1988 was the Atlantis at $1,663/SF. 1989 - ---- The top performer in 1989 was Trump Plaza at $5,095/SF, followed by Caesars at $5,051/SF. The worst performer in 1989 was the Claridge at $2,988/SF. The Atlantis casino discontinued operations on May 22, 1989. Total casino floor area decreased by 50,601 square feet in 1989. 1990 - ---- The Trump Taj Mahal opened on April 4, 1990 adding 120,000 square feet of casino floor area. While the Taj helped increase total industry win by approximately 5%, it was at the expense of other casinos. With the exception of the Sands and the Claridge, all casinos experienced a drop in casino revenues in 1990. -82- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH =============================================================================== In nine months operation, the Taj won $304,890,000 topping the industry in gross win. With regard to win/square foot, however, the top performer was Caesars at $4,840 followed by Trump Plaza at $4,645. 1991 - ---- The year of 1991 was the first full year the Taj Mahal was open. While showing the lowest win/square foot in the industry ($3,198/sf), the Taj had the highest gross casino revenues ($383,764,374) the industry has ever seen. 1992 - ---- While minimal casino space came on line, Atlantic City casino revenues showed an increase of 8.17%. This is due in part to new legislation allowing 24-hour-a- day, seven days a week gambling. Total casino revenue was $3,232,600,000. The biggest percentage increase from 1991, reported by Trump's Castle (25.48%), while the lowest, 1.67% reported by Harrah's. 1993 - ---- Although 1993 had a 2.28% less visitor trips to Atlantic City, gross gaming revenue of the casinos increased by 1.69% over 1992. The biggest percentage increase from 1992, reported by Bally's Grand (9.02%) while the lowest, 5.38% reported by Caesars. Once again, the Taj Mahal had the highest gross casino revenue ($442,064,270) the Atlantic City market has ever seen. -83- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH =============================================================================== Market Share Analysis - --------------------- In order to estimate future casino revenue we have considered existing casino win, expected trends in the local economy and projected increases in casino supply. The chart on the following pages lists historical market share for all casinos since 1982. This exhibit indicates fair share, actual share, and market share for each casino. Fair share is based upon the ratio of the subject property's casino floor area to the total casino floor area in Atlantic City. For example, in 1986 there was 594,085 square feet of total casino space. Resorts' casino space in 1986 was 59,857 square feet. Thus, the fair share for Resorts in 1986 was 10.08%. This fair share percentage is estimated by dividing Resorts' casino floor area by the total casino floor area in Atlantic City. The actual share for Resorts is calculated by dividing Resorts' casino win by total casino win in Atlantic City. Resorts actual share is greater than its fair share, which indicates a market share greater than 100.00%. The market share is calculated by dividing the actual share by the fair share. The resulting amount is expressed as a percentage. Any given property's fair share percentage will change as new casinos come on line. Assuming that each competitive property (including the subject property) were to receive only its fair share percentage of casino revenue, each property's total income would be its fair share percentage multiplied by total industry revenue. This method assumes that each casino has the -84- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ same characteristics and has no inherent advantages or disadvantages in relation to the competition. The chart on the following pages lists fair share, market share, and market share % for the various casinos from 1982 - 1993. -85- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================
1982 CASINO FAIR MARKET MARKET 1985 CASINO FAIR MARKET MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 215,475,611 60,000 14.05% 14.43% 102.72% Resorts 243,303,550 59,857 10.35% 11.38% 109.94% Caesars 194,203,214 49,061 11.49% 13.01% 113.22% Caesars 247,091,048 59,296 10.25% 11.55% 112.71% Bally's 196,421,938 60,000 14.05% 13.15% 93.64% Bally's 224,266,340 59,439 10.28% 10.49% 102.05% Sands 145,715,465 38,336 8.98% 9.76% 108.72% Sands 179,011,974 49,459 8.55% 8.37% 97.90% Harrah's 175,695,745 44,090 10.32% 11.77% 113.98% Harrah's 215,481,374 54,291 9.39% 10.08% 107.35% Bally's Grand 184,686,846 40,805 9.55% 12.37% 129.46% Bally's Grand 240,507,288 40,814 7.06% 11.25% 159.39% Atlantis 141,651,221 54,000 12.64% 9.49% 75.03% Atlantis 138,497,929 50,709 8.77% 6.48% 73.87% Claridge 89,593,743 30,000 7.02% 6.00% 85.42% Claridge 119,664,800 33,752 5.83% 5.60% 95.90% TropWorld 149,720,309 50,795 11.89% 10.03% 84.31% TropWorld 211,058,414 50,850 8.79% 9.87% 112.27% Trump Plaza Trump Plaza 203,418,232 60,000 10.37% 9.51% 91.70% Trump's Castle Trump's Castle 116,350,887 60,000 10.37% 5.44% 52.45% TOTAL WIN 1,493,164,092 TOTAL WIN 2,138,651,836 TOTAL CASINO TOTAL CASINO 578,467 AREA 427,087 AREA 1983 CASINO FAIR MARKET MARKET 1986 CASINO FAIR MARKET MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 252,471,635 59,857 14.14% 14.26% 100.79% Resorts 234,995,579 59,857 10.08% 10.30% 102.24% Caesars 213,591,342 49,061 11.59% 12.06% 104.04% Caesars 259,631,506 59,296 9.98% 11.38% 114.03% Bally's 230,814,258 60,000 14.18% 13.03% 91.93% Bally's 228,408,470 59,439 10.01% 10.01% 100.07% Sands 156,424,701 32,496 7.68% 8.83% 115.03% Sands 189,935,233 49,688 8.36% 8.33% 99.55% Harrah's 201,479,511 44,698 10.56% 11.38% 107.72% Harrah's 236,511,327 60,444 10.17% 10.37% 101.90% Bally's Grand 262,810,910 40,717 9.62% 14.84% 154.24% Bally's Grand 249,940,146 43,162 7.27% 10.96% 150.81% Atlantis 144,014,321 51,085 12.07% 8.13% 67.37% Atlantis 102,992,704 50,544 8.51% 4.51% 53.07% Claridge 110,205,513 34,408 8.13% 6.22% 74.56% Claridge 119,862,763 42,817 7.21% 5.25% 72.90% TropWorld 199,129,720 50,873 12.02% 11.24% 93.54% TropWorld 214,422,037 48,838 8.22% 9.40% 114.34% Trump Plaza Trump Plaza 218,026,595 60,000 10.10% 9.56% 94.63% Trump's Castle Trump's Castle 226,477,004 60,000 10.10% 9.93% 98.30% TOTAL WIN 1,770,941,911 TOTAL WIN 2,281,203,364 TOTAL CASINO TOTAL CASINO AREA 423,195 AREA 594,085 1984 CASINO FAIR MARKET MARKET 1987 CASINO FAIR MARKET MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 256,215,277 59,857 11.73% 13.13% 111.87% Resorts 239,135,901 59,857 9.16% 9.58% 104.61% Caesars 223,162,980 59,999 11.76% 11.43% 97.21% Caesars 288,253,648 59,296 9.07% 11.55% 127.29% Bally's 237,140,083 59,439 11.65% 12.15% 104.27% Bally's 249,361,212 59,439 9.10% 9.99% 109.85% Sands 159,525,853 49,459 9.70% 8.17% 84.30% Sands 191,065,676 49,688 7.60% 7.66% 100.69% Harrah's 210,431,683 44,698 8.76% 10.78% 123.04% Harrah's 246,489,298 60,444 9.25% 9.88% 106.78% Bally's Grand 251,033,409 40,814 8.00% 12.86% 160.75% Bally's Grand 242,367,645 43,162 6.61% 9.71% 147.03% Atlantis 147,002,452 51,051 10.01% 7.53% 75.26% Atlantis 73,515,680 50,544 7.73% 2.95% 38.08% Claridge 123,139,808 33,937 6.65% 6.31% 94.93% Claridge 124,148,402 42,817 6.55% 4.97% 75.92% TropWorld 218,492,046 50,850 9.97% 11.19% 112.30% TropWorld 211,041,057 48,838 7.47% 8.46% 113.15% Trump Plaza 125,622,971 60,000 11.76% 6.44% 54.72% Trump Plaza 244,427,240 60,000 9.18% 9.79% 106.67% Trump's Castle Trump's Castle 239,431,764 60,000 9.18% 9.59% 104.49% Showboat Showboat 146,422,142 59,388 9.09% 5.87% 64.56% TOTAL WIN 1,951,766,562 TOTAL WIN 2,495,659,665 TOTAL CASINO TOTAL CASINO AREA 510,104 AREA 653,473
-86- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================
1988 CASINO FAIR ACTUAL MARKET 1991 CASINO FAIR ACTUAL MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 242,860,446 59,857 8.61% 8.88% 103.16% Resorts 220,152,119 60,000 7.77% 7.36% 94.74% Caesars 307,600,167 59,617 8.57% 11.25% 131.18% Caesars 309,144,460 60,000 7.77% 10.33% 133.03% Bally's 269,285,686 59,996 8.63% 9.85% 114.12% Bally's 267,153,994 61,835 8.01% 8.93% 111.55% Sands 205,448,397 50,090 7.20% 7.51% 104.28% Sands 242,007,729 50,123 6.49% 8.09% 124.66% Harrah's 281,347,029 59,718 8.59% 10.29% 119.79% Harrah's 283,956,112 61,278 7.93% 9.49% 119.65% Bally's Grand 221,631,026 45,442 6.54% 8.10% 124.01% Bally's Grand 191,504,110 45,442 5.88% 6.40% 108.81% Atlantis 84,164,835 50,601 7.28% 3.08% 42.29% Claridge 135,417,405 43,579 5.64% 4.53% 80.23% Claridge 132,970,882 43,054 6.19% 4.86% 78.53% TropWorld 287,081,460 90,774 11.75% 9.60% 81.66% TropWorld 232,784,867 87,562 12.59% 8.51% 67.59% Trump 235,050,365 60,000 7.77% 7.86% 101.15% Trump Plaza 300,840,812 60,000 8.63% 11.00% 127.48% Trump's Castle 196,518,043 60,000 7.77% 6.57% 84.57% Trump's Castle 246,427,256 60,000 8.63% 9.01% 104.42% Showboat 239,850,377 59,388 7.69% 8.02% 104.28% Showboat 209,413,204 59,388 8.54% 7.66% 89.65% Trump Taj 383,764,374 120,000 15.54% 12.83% 82.57% Mahal TOTAL WIN 2,734,774,607 TOTAL WIN 2,991,600,548 TOTAL CASINO TOTAL CASINO AREA 695,325 AREA 772,419 1989 CASINO FAIR ACTUAL MARKET 1992 CASINO FAIR ACTUAL MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 227,144,000 60,000 8.58% 8.10% 94.41% Resorts 136,181,000 60,000 7.73% 7.31% 94.52% Caesars 303,434,000 60,000 8.58% 10.82% 126.11% Caesars 333,835,000 60,000 7.73% 10.33% 33.60% Bally's 279,690,000 59,996 8.58% 9.97% 116.25% Bally's 277,997,000 64,410 8.30% 8.60% 103.63% Sands 219,668,000 49,899 7.13% 7.83% 109.78% Sands 246,934,000 50,123 6.46% 7.64% 118.29% Harrah's 292,056,000 60,364 8.63% 10.41% 120.65% Harrah's 288,310,000 61,278 7.89% 8.92% 112.97% Bally's Grand 211,082,000 45,442 6.50% 7.52% 115.84% Bally's Grand 199,560,000 45,442 5.85% 6.17% 105.45% Atlantis 30,753,000 50,601 7.23% 1.10% 15.16% Claridge 148,798,000 43,579 5.61% 4.60% 81.99% Claridge 128,722,000 43,054 6.15% 4.59% 74.56% TropWorld 313,959,000 90,774 11.69% 9.71% 83.05% TropWorld 284,019,000 90,827 12.98% 10.12% 77.98% Trump Plaza 268,441,000 60,000 7.73% 8.30% 107.43% Trump Plaza 306,009,000 60,000 8.58% 10.91% 127.19% Trump's Castle 242,008,000 61,198 7.88% 7.49% 94.95% Trump's Castle 264,358,000 60,000 8.58% 9.42% 109.87% Showboat 258,605,000 59,388 7.65% 8.00% 104.56% Showboat 258,357,000 59,388 8.49% 9.21% 108.49% Trump Taj 417,972,000 120,000 15.46% 12.93% 83.63% Mahal TOTAL WIN 2,805,292,000 TOTAL WIN 3,232,600,000 TOTAL CASINO TOTAL CASINO AREA 699,571 AREA 776,192 1990 CASINO FAIR ACTUAL MARKET 1993 CASINO FAIR ACTUAL MARKET PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE - -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------ Resorts 204,968,566 60,000 7.80% 6.94% 89.00% Resorts 241,569,438 60,000 7.73% 7.34% 94.94% Caesars 290,397,809 60,000 7.80% 9.84% 126.09% Caesars 315,879,209 60,000 7.73% 9.60% 124.15% Bally's 267,986,787 59,996 7.80% 9.08% 116.37% Bally's 295,608,838 64,410 8.30% 8.98% 108.23% Sands 230,397,595 49,899 6.49% 7.81% 120.29% Sands 243,567,851 50,123 6.46% 7.40% 114.59% Harrah's 279,744,507 60,364 7.85% 9.48% 120.74% Harrah's 285,102,379 61,278 7.89% 8.66% 109.72% Bally's Grand 199,610,669 45,442 5.91% 6.76% 114.44% Bally's 217,567,749 45,442 5.85% 6.61% 112.91% Claridge 134,685,664 43,054 5.60% 4.56% 81.50% Claridge 154,614,839 43,579 5.61% 4.70% 83.67% TropWorld 278,513,512 90,827 11.81% 9.44% 79.89% TropWorld 309,921,748 90,774 11.69% 9.42% 80.51% Trump Plaza 278,707,647 60,000 7.80% 9.44% 121.02% Trump Plaza 267,185,087 60,000 7.73% 8.12% 105.01% Trump's Castle 233,870,200 60,000 7.80% 7.92% 101.55% Trump's 244,859,084 61,198 7.88% 7.44% 94.35% Showboat 247,809,985 59,388 7.72% 8.40% 108.71% Showboat 273,536,999 59,388 7.65% 8.31% 108.62% Trump Taj Mahal 304,890,000 120,000 15.61% 10.33% 66.19% Trump Taj 442,064,270 120,000 15,46% 13.43% 86.87% Mahal TOTAL WIN 2,951,582,941 TOTAL WIN 3,291,477,491 TOTAL CASINO TOTAL CASINO AREA 768,970 AREA 776,192
-87- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ CASINO INDUSTRY OUTLOOK - ----------------------- The Atlantic City casino industry has reached the stability/maturity stage in its life cycle. Casino revenues growth has slowed from double-digit rates to mid single-digit rates, and now to low single digit rates. The industry is being squeezed by various factors including stagnant industry growth due in part to local/regional factors relating to infrastructure, and national factors, specifically, the current recession. Although the Nevada casinos do not affect the market, constant industry growth from Indian reservations such as Foxwoods in Connecticut and Riverboat casinos in Illinois, Iowa, Colorado, and most recently in Louisiana, will have some effect on the Atlantic City and Nevada casino market in the future. LOCAL FACTORS - ------------- The Atlantic City Casino industry has matured at a time when the United States, and more particularly, the northeast is recovering from the recession. In 1985, for the first time since the inception of gaming, visitor trips to Atlantic City declined from previous levels. Visitor trips to Atlantic City are listed below. -88- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Year Visitor Trips % Change ---- ------------- --------- 1978 7,008,000 - 1979 9,465,000 35.06% 1980 13,822,000 46.03% 1981 19,084,000 38.07% 1982 22,955,000 20.28% 1983 26,361,000 14.84% 1984 28,466,000 7.99% 1985 29,326,000 3.02% 1986 29,932,000 2.07% 1987 31,845,000 6.39% 1988 33,138,000 4.06% 1989 32,133,000 -3.03% 1990 31,841,000 -0.91% 1991 30,800,000 -3.27% 1992 30,700,000 -0.32% 1993 30,000,000 -2.28% As is evident in the foregoing table, visitor trips fell 3% from 1988 to 1989, 1% from 1989 to 1990 and 3.27% from 1990 to 1991, and a slight decline is reflected in 1992. 1993 reflected a further decline of 2.28%. Part of the reason for the decline in visits is due to the reduction in unprofitable casino hotel sponsored bus charters. Another factor is the local economic economy and increasing competition from Foxwoods in Connecticut. Factors limiting future growth in visitors to Atlantic City is the lack of accessibility to the airport and lack of sufficient hotel rooms. A study referred to by the Atlantic County Department of Regional Planning stated that Atlantic City ranks 60 out of 65 North American cities in terms of convenient airline service and 53 out of 65 cities as easy to get to. Accessibility has a severe impact on the convention industry as over 60% of convention delegates arrive by air transportation. The lack of accessibility will have a negative impact on the convention center, currently under construction. -89- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Atlantic City also suffers from a lack of hotel rooms. The supply of rooms is not expected to be met until air transportation is improved and the convention center is built. While these conclusions set a negative outlook, a review of progress made toward these goals changes the picture. In an article in the Newark Star Ledger, Casino Control Commission Chairman Stephen P. Perskie outlined a six point agenda that could restart the resort's redevelopment. The agenda calls for: *Continued movement toward expanding Atlantic City International Airport. *The commencement of construction of a new Atlantic City High School. *Streamlining of casino regulations. *Implementation of a comprehensive demolition program. *Continuation of the redevelopment programs of the Casino Reinvestment Development Authority (CRDA). *Legislative action on financing the proposed convention center. Perskie further stated that the area should build on the airport agreement between Atlantic City's mayor and former Governor James Florio. Legislation has been enacted and signed and the planning and design of the airport are currently underway. Conclusions - ----------- The casino industry has currently reached a temporary stage of maturity. We call it temporary because we expect additional growth in this industry once the convention center is built and once the airport is fully expanded. The result of the expanded airport will be direct daily flights to Atlantic City. This will significantly increase the market area of the industry spurring additional growth and development. With this in mind, historical and future industry growth is detailed as follows: -90- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Historical Casino Revenue Growth - -------------------------------- The table on the following page illustrates historical growth rates for the casino industry from 1978 through 1992; Industry Total Year Growth Win -------- ------ --- 1978 N/A $ 134,083,945 1979 142.74% $ 325,480,531 1980 97.45% $ 642,673,242 1981 71.13% $1,099,787,894 1982 35.77% $1,493,164,092 1983 18.60% $1,770,941,911 1984 10.21% $1,951,766,562 1985 9.58% $2,138,651,836 1986 6.67% $2,281,203,364 1987 9.40% $2,495,659,665 1988 9.58% $2,734,774,607 1989 2.58% $2,805,292,000 1990 5.21% $2,951,582,941 1991 1.36% $2,991,600,548 1992 8.06% $3,232,600,000 1993 1.82% $3,291,477,491 As evident above, industry growth rates have been declining from 1985 to 1991 as the result of a maturing market. The approximate 1.36% growth from 1990 to 1991 was partially due to the national recession. However, in 1992, the 12 Atlantic City casinos reported an increase of 8.06%. 1993 reflects a 1.82% growth among the 12 Atlantic City casinos. Given the current state of the national economy, we anticipate a moderate growth rate in 1994 of 4.00%. By 1995 and forward, we expect the previously mentioned airport expansion and the convention center to increase the market area of the industry. With this in mind, we expect 4% growth throughout the remainder of the projection period. Our future industry casino revenue growth follows: -91- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Projected Total Increase Industry Win ------------------------------------ 1994 4.00% $3,423,136,591 1995 4.00% $3,560,062,054 1996 4.00% $3,702,464,536 1997 4.00% $3,850,563,118 1998 4.00% $4,004,585,643 1999 4.00% $4,164,769,068 2000 4.00% $4,331,359,831 2001 4.00% $4,504,614,224 2002 4.00% $4,684,798,793 2003 4.00% $4,872,190,745 2004 4.00% $5,067,078,375 Future Casino Supply - ---------------------- The next consideration in estimating market share for the subject property is the likelihood of other casinos coming on line in the future. This factor will have a negative impact on casino revenues for the subject property as additional casino floor area dilutes market share for the entire industry. Based upon the current economic conditions, the current problems in the banking system and financial markets, we do not anticipate any additional casino properties to be built over the next 11 years. Our market share estimation for the property follows. REVENUES: - -------- Casino - ------ Market Share Estimation - ----------------------- Casino revenue will be estimated based upon fair share of industry-wide casino win. However, to further refine the analysis and to provide a more realistic approach to estimating revenue for the subject property, we assessed the subject's competitive position in the market. Such a comparison considers the subject property's inherent advantages and disadvantages in relation to the competition. These factors influence the market penetration (market share) that -92- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ a property could achieve above or below 100% of its fair share. The subject's historical market share is listed below.
($ In Thousands) 1990 1991 1992 1993 Industry Casino win $2,951,583 $2,991,601 $3,232,600 $3,291,477 Subject Casino Win $ 304,890 $ 383,764 $ 417,972 $ 442,064 Industry Casino Space 768,970 772,419 776,192 776,192 Subject Casino Space 120,000 120,000 120,000 120,000 Fair Share 15.61% 15.54% 15.46% 15.46% Market Share 10.33% 12.83% 12.93% 13.43% ---------- ---------- ---------- ---------- Market Share Ratio 66.19% 82.57% 83.63% 86.87%
As evident from the table, the Trump Taj Mahal Hotel and Casino market penetration (market share ratio) has been on the increase. In 1991 (first full year of casino operation), the property's market penetration increased to 82.57%. While 1992 market penetration only increased by 1.28% to 83.63%, 1993 reflects a 3.87% increase to 86.87%.. It is our opinion that the subject has reached a stabilized market penetration. Throughout the entire holding period, market penetration has been estimated at 85%, in line with 1993 performance. This is a realistic market penetration estimate for the property. Projected casino revenues are listed below.
TOTAL FAIR PENE- MARKET ESTIMATED PROJECTED TOTAL INDUSTRY CASINO SHARE TRATION SHARE GROSS ESTIMATED GROSS PERIOD YEAR GROWTH WIN SPACE % % % INCOME INCOME / SQ. FT. - -------------------------------------------------------------------------------------------------------------------------- 1 1994 4.00% $3,423,136,591 776,192 15.46% 85.00% 13.14% $449,834,379 $3,749 2 1995 4.00% $3,560,062,054 776,192 15.46% 85.00% 13.14% $467,827,755 $3,899 3 1996 4.00% $3,702,464,536 776,192 15.46% 85.00% 13.14% $486,540,865 $4,055 4 1997 4.00% $3,850,563,118 776,192 15.46% 85.00% 13.14% $506,002,499 $4,217 5 1998 4.00% $4,004,585,643 776,192 15.46% 85.00% 13.14% $526,242,599 $4,385 6 1999 4.00% $4,164,769,068 776,192 15.46% 85.00% 13.14% $547,292,303 $4,561 7 2000 4.00% $4,331,359,831 776,192 15.46% 85.00% 13.14% $569,183,995 $4,743 8 2001 4.00% $4,504,614,224 776,192 15.46% 85.00% 13.14% $591,951,355 $4,933 9 2002 4.00% $4,684,798,793 776,192 15.46% 85.00% 13.14% $615,629,409 $5,130 10 2003 4.00% $4,872,190,745 776,192 15.46% 85.00% 13.14% $640,254,586 $5,335 11 2004 4.00% $5,067,078,375 776,192 15.46% 85.00% 13.14% $665,864,769 $5,549
-93- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ ROOM REVENUE AND OCCUPANCY - --------------------------- The subject property achieved an average room rate of $98.31 in 1992 and $96.57 in 1993. The subject's occupancy rate was 91.3% in 1992 and 92.3% in 1993. Additional statistics regarding average daily room rates and occupancy levels have been included for all the casino/hotels in Atlantic City. This information was obtained from the Atlantic City Casino Association. Listed on the following page are Average Daily Rates (ADR) and occupancy levels for the competitive properties for 1992. ATLANTIC CITY CASINO HOTEL STATISTICS - 1992 ============================================ PROPERTY ADR OCCUPANCY ============================================ Resorts $ 71.13 92.4% Caesars $ 84.98 86.4% Bally's $118.98 79.4% Sands $ 60.42 92.8% Harrah's $ 87.25 87.3% Bally's Grand $121.25 80.4% Claridge $ 70.54 86.5% TropWorld $ 62.73 88.6% Trump Plaza $104.38 86.9% Trump Castle $ 76.45 85.7% Showboat $ 71.26 89.0% Taj Mahal $ 98.31 91.3% ============================================ The average room rate has been estimated at $97.00 in 1994, on par with 1993, and is projected to increase by 4.00% per year. The occupancy level has been stabilized at 92.00% throughout the projection period. -94- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ FOOD AND BEVERAGE INCOME - ------------------------ Food and Beverage income has been estimated as a function of casino revenue. Food and Beverage sales have been projected at 10.00% of casino revenue throughout the holding period. The revenue history is listed below: Food & Beverage Revenue Revenues (000) 1990* 1991 1992 1993 ----- ---- ---- ---- Casino Revenue $304,890 $383,764 $417,972 $442,064 Food & Beverage Revenue $ 59,329 S40,294 $ 19,489 S40,767 -------- -------- -------- -------- Ratio to Casino Revenue 19.46% 10.50% 4.66%` 9.22% -------- -------- -------- -------- *= From 4/2/90 OTHER INCOME - -------------- Other income has been projected as a function of casino revenue. This revenue source has been estimated at 4.00% of casino revenue throughout the projection period. The revenue history is detailed below. Other Revenue Revenues (000) 1990* 1991 1992 1993 ----- ---- ---- ---- Casino Revenue $304,890 $383,764 $417,972 $442,064 Other Revenue $ 11,405 $ 12,090 $ 16,458 17,304 -------- -------- -------- -------- Ratio to Casino Revenue 3.74% 3.15% 3.94% 3.91% -------- -------- -------- -------- *= From 4/2/90 PROMOTIONAL ALLOWANCE - ----------------------- The promotional allowance reflects the aggregate retail value of complimentary services provided to casino guests in order to draw visitors to the casino. This is a standard industry practice provided by all casinos. Some of the complimentary services include hotel rooms, food and beverage, theater and other entertainment, and miscellaneous services. The past expense history for this item is as follows: -95- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Promotional Allowance Revenues (000) 1990* 1991 1992 1993 ----- ---- ---- ---- Casino Revenue $304,890 $383,764 $417,972 $442,064 Promotional Allowance $ 51,443 $ 53,935 $ 61,250 $ 56,444 -------- -------- -------- -------- Ratio to Casino Revenue 16.87% 14.05% 14.65% 12.77% -------- -------- -------- -------- *= From 4/2/90 As evident above, the promotional allowances as a percentage of casino revenue have been decreasing. This is typical for most of the properties in Atlantic City. Based upon the most recent trends, this item has been estimated at 10.00% of casino revenue throughout the projection period. BAD DEBT ALLOWANCE - ------------------ This category is an allowance for doubtful accounts for casino play on a credit basis. Based upon the most recent data, bad debt expenses have been estimated at 1.00% of casino revenue throughout the projection period. EXPENSES - -------- DEPARTMENTAL EXPENSES - --------------------- Departmental expenses are costs directly attributable to the line item revenues. Included within this general category are casino expenses, room department expenses, food and beverage expenses, and other expenses. Our category for other expenses will be costs directly attributable to the other income category. CASINO EXPENSES - --------------- The casino expense represents the largest single expense category, and is substantially attributable to employee salaries and benefits, casino marketing, license and inspections, and other expenses. The other expenses include such items as playing materials, slot machine servicing, supplies and other expenses. -96- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Casino taxes and other fees are also included in this expense category. The tax imposed by the State of New Jersey is the casino revenue tax which is currently 8.00% of casino revenues less bad debt. Another tax is the Casino Redevelopment Authority payments. All casinos are required by the New Jersey Casino Control Commission to make investments in the City of Atlantic City. The money is invested in projects according to the Casino Reinvestment Development Authority. The required payments are 1.25% of casino revenues less bad debt. Casino expenses have remained relatively constant as a function of revenue. Trump Taj Mahal Casino Resort's casino expense has been estimated at $202,425,000 and assumed to remain constant at 45.00% of gross revenue. This expense is based upon the fixed department costs, while the revenue tax and CRDA obligations are a function of revenue as outlined above. ROOM EXPENSES - ------------- The rooms department expense has been stabilized at 35.0% of department revenue throughout the projection period. This ratio is consistent with the prior operating history of the property. FOOD AND BEVERAGE EXPENSES - -------------------------- Food and beverage expenses have been stabilized at a fixed ratio of 90% of departmental income throughout the projection period. This ratio is consistent with prior operating history of the property. OTHER EXPENSES - -------------- This department expense has been stabilized at 75.00% of department revenue. This ratio is consistent with the prior operating history of the property. -97- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ UNDISTRIBUTED OPERATING EXPENSES - -------------------------------- Undistributed operating expenses are costs that are not directly attributable to a specific department. Included within this general category are general and administrative expenses, marketing expenses, and property operations and maintenance, which includes energy costs. Each expense item will be further described as follows: GENERAL AND ADMINISTRATIVE - -------------------------- This category includes such items as employee salaries and benefits, office supplies, security and surveillance and service contracts, as well as other related expenses. This expense has been estimated at $32,945,000 in 1994 and is assumed to increase by 5% per annum. FACILITY OPERATIONS - ------------------- This expense item includes environmental and engineering and utilities expenses. This expense has been estimated at $34,034,000 and is assumed to increase by 5% per annum. ADVERTISING - ----------- This expense item includes direct mail, sales, and advertising. 1993 actual expense was $3,489,859. 1994 expense has been estimated based on 1993 actual, however increased by 5.00%. MANAGEMENT - ---------- Management expenses is estimated at $1,572,000 per annum, as per the current Trump Services Agreement. FIXED CHARGES - ------------- Fixed charges are costs of operations irrespective of revenue or occupancy levels. Included within this category are real estate tax liability, insurance costs, and ground lease payments. -98- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ Real Estate Taxes - ----------------- The indicated tax liability for Trump Taj Mahal Casino Resort is $16,420,814, which includes employee parking lot the city of Atlantic City. The above liability is based on total assessment of $657,621,700. The combined tax liability for the facility is as follows: Tax Liability ------------- Hotel and Casino $16,187,462. Employee Parking Lot Site 233,352. ----------- TOTAL $16,420,814 =========== We have increased real estate taxes at 5.00% per annum, which is in line with previous increases in Atlantic City (see Real Estate Tax section of this report). Insurance - --------- This expense category is estimated at $6,300,000 in Year 1, which is based on the 1993 actual, however increased by 5.00%. Again, we have increased insurance at 5.00% per annum. Trump Realty Rent - ----------------- This expense category reflects the rent payments for all the leased land, such as the employee parking lot, etc. Replacement Reserves - -------------------- This category provides for the gradual replacement of limited life components necessary for the operation of the property. Included in this category are gaming equipment, furniture, fixtures and other equipment, and building components. The replacement reserve category is based upon the sinking fund premise. The expected life, and future replacement cost of each -99- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ================================================================================ item is estimated, and a reserve fund is set up to cover these future expenditures. Consideration is then given to "yield" or "safe" rates currently available in the marketplace in order to establish the required sinking fund amount. While it is beyond the scope of this analysis to estimate replacement reserves based upon the expected life of each limited life component, a stabilized ratio of 1.50% of total revenue is sufficient to cover these future expenditures. This estimate is consistent with prior capital expenditures at the property over the past few years for new gaming equipment, and FF&E etc. The inclusion of replacement reserves is standard appraisal practice. Projection of Income and Expense - -------------------------------- The following projections of income and expenses reflect the subject property's anticipated performance over the next eleven years. The statements are expressed in current dollars for each calendar year. This analysis has been developed from computer software developed by APPRAISAL GROUP International. Our income and expense projections appear on the following pages. -100- APPRAISAL GROUP INTERNATIONAL VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ============================================================================== Prepared by: TRUMP TAJ MAHAL CASINO RESORTS APPRAISAL GROUP International CASH FLOW PROJECTION ($000) ------------------------------
/--Actual---\ /--------------Projected--------------\ - -------\ 1993 Growth REVENUES (Unaudited) Rate Year 1 % Year 2 % - -------- ---------- ---- ------ --- ------ --- Casino 79.40% $442,064 4.00% $449,834 79.27% 467,828 79.27% Guest Rooms 7.31% $40,682 4.00% $40,716 7.17% $42,344 7.17% Food & Beverage 10.05% $55,953 4.00% 58,191 10.25% $60,519 10.25% Other Income 3.24% $18,038 4.00% 18,760 3.31% $19,510 3.31% ------ -------- ------ -------- ------ -------- ------ GROSS POTENTIAL REVENUE 100.00% $556,737 $567,501 100.00% $590,201 100.00% Promotional Allowance -10.14% ($56,444) -10.00% (44,983) -7.93% ($46,783) -7.93% Casino Bad Debt 0.00% $0 -1.00% ($4,498) -0.79% ($4,678) -0.79% ------ -------- ------ -------- ------ -------- ------ EFFECTIVE TOTAL REVENUE 89.86% $500,293 $518,019 91.28% $538,740 91.28% ------ -------- ------ -------- ------ -------- ------ % OF % OF TOTAL TOTAL DEPARTMENTAL EXPENSES % OF REV % 0F REV REVENUE REVENUE - --------------------- -------- -------- ------- Casino 41.41 $196,318 45.00% $202,425 39.08% $210,522 39.08% Rooms 37.21 $15,137 35.00% $14,251 2.75% $14,821 2.75% Food & Beverage 98.59 $54,043 95.00% $55,282 10.67% $57,493 10.67% Other 74.27% $13,397 75.00% $14,070 2.72% $14,632 2.72% ------ -------- ------ -------- ------ -------- ------ Total Dept. Expenses $278,895 $286,027 50.40% $297,469 55.22% ------ -------- ------ -------- ------ -------- ------ TOTAL DEPARTMENTAL PROFIT $221,399 $231,992 49.60% $241,271 44.78% ------ -------- ------ -------- ------ -------- ------ UNDISTRIBUTED OPERATING EXPENSE Growth @ - ----------------------- -------- General & Admin. 6.27% $31,376 5.00% $32,945 6.36% $34,592 6.42% Facility Operations 6.48% $32,414 5.00% $34,034 6.57% $35,736 6.63% Advertising 0.70% $3,490 5.00% $3,664 0.71% $3,848 0.71% Management Fees 0.31% $1,572 4.00% $1,634 0.32% $1,700 0.33% ------ -------- ------ -------- ------ -------- ------ Total Undistrib. Expenses $68,851 $72,278 13.95% $75,876 14.10% ------ -------- ------ -------- ------ -------- ------ GROSS OPERATION PROFIT $152,547 $159,714 35.65% $165,396 30.69% ------ -------- ------ -------- ------ -------- ------ FIXED CHARGES % OF REV -------- Property Taxes & Insurs. 4.28% $24,111 5.00% $25,317 4.89% $26,582 5.13% Trump Realty Rent 0.54% $2,725 0.00% $2,725 0.53% $2,725 0.53% Reserved (FF&E) N/A 1.50% $7,770 1.50% $8,081 1.56% ------ -------- ------ -------- ------ -------- ------ Total Other Deductions $26,836 $35,812 6.91% $37,389 7.22% ------ -------- ------ -------- ------ -------- ------ CASH FLOW 25.13% $125,711 $123,902 28.73% $128,007 23.47% (Before Debt Service) -------- ------ -------- ------ -------- ------ 92.30% 92.00% 92.00% OCCUPANCY (%) - 1993 ACTUAL $96.57 $97.00 $100.88% AVERAGE ROOM RATE - 4.00% 4.00% % INCREASE IN ADR 1,250 1,250 1,250 NUMBER OF ROOMS 421,268 419,750 419,750 TOTAL ROOMS OCCUPIED
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/--Actual---\ /--------------Projected--------------\ - -------\ 1993 Growth REVENUES (Unaudited) Rate Year 3 % Year 4 % - -------- ---------- ---- ------ --- ------ --- Casino 79.40% $442,064 4.00% $486,541 79.27% $506,002 79.27% Guest Rooms 7.31% $40,682 4.00% $44,038 7.17% $45,800 7.17% Food & Beverage 10.05% $55,953 4.00% $62,940 10.25% $65,457 10.25% Other Income 3.24% $18,038 4.00% $20,290 3.31% $21,102 3.31% ------ -------- ------ ------- ----- ------- ----- GROSS POTENTIAL REVENUE 100.00% $556,737 $613,809 100.00% $638,361 100.00% Promotional Allowance -10.14% ($56,444) -10.00% ($48,654) -7.93% ($50,600) -7.93% Casino Bad Debt 0.00% $0 -1.00% ($4,865) -0.79% ($5,060) -0.79% ------ -------- ------ ------- ----- ------- ----- EFFECTIVE TOTAL REVENUE 89.86% $500,293 $560,290 91.28% $582,701 91.28% ------ -------- ------ ------- ----- ------- ----- % OF % OF TOTAL TOTAL DEPARTMENTAL EXPENSES % OF REV % 0F REV REVENUE REVENUE - --------------------- -------- -------- ------- ------- Casino 41.41 $196,318 45.00% $218,943 39.08% $227,701 39.08% Rooms 37.21 $15,137 35.00% $15,413 2.75% $16,030 2.75% Food & Beverage 98.59 $54,043 95.00% $59,793 10.67% $62,185 10.67% Other 74.27% $13,397 75.00% $15,218 2.72% $15,826 2.72% ------ -------- ------ ------- ----- ------- ----- Total Dept. Expenses $278,895 $309,367 55.22% $321,742 55.22% ------ -------- ------ ------- ----- ------- ----- TOTAL DEPARTMENTAL PROFIT $221,399 $250,922 44.78% $260,959 44.78% ------ -------- ------ ------- ----- ------- ----- UNDISTRIBUTED OPERATING EXPENSE Growth @ - ----------------------- -------- General & Admin. 6.27% $31,376 5.00% $36,322 6.48% $38,138 6.55% Facility Operations 6.48% $32,414 5.00% $37,523 6.70% $39,399 6.76% Advertising 0.70% $3,490 5.00% $4,040 0.72% $4,242 0.73% Management Fees 0.31% $1,572 4.00% $1,768 0.34% $1,839 0.35% ------ -------- ------ ------- ----- ------- ----- Total Undistrib. Expenses $68,851 $79,653 14.24% $83,618 14.39% ------ -------- ------ ------- ----- ------- ----- GROSS OPERATION PROFIT $152,547 $171,270 30.54% $177,342 30.40% ------ -------- ------ ------- ----- ------- ----- FIXED CHARGES % OF REV -------- Property Taxes & Insurs. 4.28% $24,111 5.00% $27,912 5.39% $29,307 5.66% Trump Realty Rent 0.54% $2,725 0.00% $2,725 0.53% $2,725 0.53% Reserved (FF&E) N/A 1.50% $8,404 1.62% $8,741 1.69% ------ -------- ------ ------- ----- ------- ----- Total Other Deductions $26,836 $39,041 7.54% $40,773 7.87% ------ -------- ------ ------- ----- ------- ----- CASH FLOW 25.13% $125,711 $132,229 23.01% $136,569 22.52% (Before Debt Service) -------- ------ ------- ----- ------- ----- 92.30% 92.00% 92.00% OCCUPANCY (%) - 1993 ACTUAL $96.57 $104.92 $109.11 AVERAGE ROOM RATE - 4.00% 4.00% % INCREASE IN ADR 1,250 1,250 1,250 NUMBER OF ROOMS 421,268 419,750 419,750 TOTAL ROOMS OCCUPIED
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/--Actual---\ /--------------Projected--------------\ - -------\ 1993 Growth REVENUES (Unaudited) Rate Year 5 % Year 6 % - -------- ---------- ---- ------ ------ ------ ----- Casino 79.40% $442,064 4.00% $526,243 79.27% $547,292 79.27% Guest Rooms 7.31% $40,682 4.00% $47,632 7.17% $49,537 7.17% Food & Beverage 10.05% $55,953 4.00% $68,076 10.25% $70,799 10.25% Other Income 3.24% $18,038 4.00% $21,946 3.31% $22,824 3.31% ------ -------- ------ -------- ------- --------- ------- GROSS POTENTIAL REVENUE 100.00% $556,737 $663,896 100.00% $690,452 100.00% Promotional Allowance -10.14% ($56,444) -10.00% ($52,624) -7.93% ($54,729) -7.93% Casino Bad Debt 0.00% $0 -1.00% ($5,262) -0.79% ($5,473) -0.79% ------ -------- ------ -------- ------- --------- ------- EFFECTIVE TOTAL REVENUE 89.86% $500,293 $606,009 91.28% $630,250 91.28% ------ -------- ------ -------- ------- --------- ------- % of % of TOTAL TOTAL DEPARTMENTAL EXPENSES % OF REV % 0F REV REVENUE REVENUE - --------------------- -------- -------- ------- ------- Casino 41.41 $196,318 45.00% $236,809 39.08% $246,282 39.08% Rooms 37.21 $15,137 35.00% $16,671 2.75% $17,338 2.75% Food & Beverage 98.59 $54,043 95.00% $64,672 10.67% $67,259 10.67% Other 74.27% $13,397 75.00% $16,459 2.72% $17,118 2.72% ------ -------- ------ -------- ------- -------- ------- Total Dept. Expenses $278,895 $334,612 55.22% $347,996 55.22% ------ -------- ------ -------- ------- -------- ------- TOTAL DEPARTMENTAL PROFIT $221,399 $271,398 44.78% $282,254 44.78% ------ -------- ------ -------- ------- -------- ------- UNDISTRIBUTED OPERATING EXPENSE Growth @ - ----------------------- -------- General & Admin. 6.27% $31,376 5.00% $40,045 6.61% $42,047 6.67% Facility Operations 6.48% $32,414 5.00% $41,369 6.83% $43,437 6.89% Advertising 0.70% $3,490 5.00% $4,454 0.73% $4,677 0.74% Management Fees 0.31% $1,572 4.00% $1,912 0.37% $1,989 0.32% ------ -------- ------ -------- ------- -------- ------- Total Undistrib. Expenses $68,851 $87,780 14.54% $92,150 14.62% ------ -------- ------ -------- ------- -------- ------- GROSS OPERATION PROFIT $152,547 $183,618 30.25% $190,104 30.16% ------ -------- ------ -------- ------- -------- ------- FIXED CHARGES % OF REV -------- Property Taxes & Insurs. 4.28% $24,111 5.00% $30,773 5.94% $32,311 6.24% Trump Realty Rent 0.54% $2,725 0.00% $2,725 0.53% $2,725 0.53% Reserved (FF&E) N/A 1.50% $9,090 1.75% $9,454 1.82% ------ -------- ------ -------- ------- -------- ------- Total Other Deductions $26,836 $42,588 8.22% $44,490 8.59% ------ -------- ------ -------- ------- -------- ------- CASH FLOW 25.13% $125,711 $141,030 22.02% $145,614 21.57% (Before Debt Service) -------- ------ -------- ------- -------- ------- 92.30% 92.00% 92.00% OCCUPANCY (%) - 1993 ACTUAL $96.57 $113.48 $118.02 AVERAGE ROOM RATE - 4.00% 4.00% % INCREASE IN ADR 1,250 1,250 1,250 NUMBER OF ROOMS 421,268 419,750 419,750 TOTAL ROOMS OCCUPIED
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/--Actual---\ /--------------Projected--------------\ - -------\ 1993 Growth REVENUES (Unaudited) Rate Year 7 % Year 8 % - -------- ---------- ---- ------ ------ ------ ----- Casino 79.40% $442,064 4.00% $569,184 79.27% $591,951 79.27% Guest Rooms 7.31% $40,682 4.00% $51,518 7.17% $53,579 7.17% Food & Beverage 10.05% $55,953 4.00% $73,631 10.25% $76,576 10.25% Other Income 3.24% $18,038 4.00% $23,737 3.31% $24,686 3.31% ------ -------- ------ -------- ------- --------- ------- GROSS POTENTIAL REVENUE 100.00% $556,737 $718,070 100.00% $746,793 100.00% Promotional Allowance -10.14% ($56,444) -10.00% ($56,918) -7.93% ($59,195) -7.93% Casino Bad Debt 0.00% $0 -1.00% ($5,692) -0.79% ($5,920) -0.79% ------ -------- ------ -------- ------- --------- ------- EFFECTIVE TOTAL REVENUE 89.86% $500,293 $655,460 91.28% $681,687 91.28% ------ -------- ------ % of % of TOTAL TOTAL DEPARTMENTAL EXPENSES % OF REV % 0F REV REVENUE REVENUE - --------------------- -------- -------- ------- ------- Casino 41.41 $196,318 45.00% $256,133 39.08% $266,378 39.08% Rooms 37.21 $15,137 35.00% $18,031 2.75% $18,753 2.75% Food & Beverage 98.59 $54,043 95.00% $69,949 10.67% $72,747 10.67% Other 74.27% $13,397 75.00% $17,803 2.72% $18,515 2.72% ------ -------- ------ -------- ------- -------- ------- Total Dept. Expenses $278,895 $361,916 55.22% $376,393 55.22% ------ -------- ------ -------- ------- -------- ------- TOTAL DEPARTMENTAL PROFIT $221,399 $293,544 44.78% $305,285 44.78% ------ -------- ------ -------- ------- -------- ------- UNDISTRIBUTED OPERATING EXPENSE Growth @ - ----------------------- -------- General & Admin. 6.27% $31,376 5.00% $44,150 6.74% $46,357 6.80% Facility Operations 6.48% $32,414 5.00% $45,609 6.96% $47,890 7.03% Advertising 0.70% $3,490 5.00% $4,911 0.75% $5,156 0.76% Management Fees 0.31% $1,572 4.00% $2,068 0.32% $2,151 0.32% ------ -------- ------ -------- ------- -------- ------- Total Undistrib. Expenses $68,851 $96,737 14.76% $101,554 14.90% ------ -------- ------ -------- ------- -------- ------- GROSS OPERATION PROFIT $152,547 $196,806 30.03% $203,732 29.89% ------ -------- ------ -------- ------- -------- ------- FIXED CHARGES % OF REV -------- Property Taxes & Insurs. 4.28% $24,111 5.00% $33,927 6.55% $35,623 6.88% Trump Realty Rent 0.54% $2,725 0.00% $2,725 0.53% $2,725 0.53% Reserved (FF&E) N/A 1.50% $9,832 1.90% $10,225 1.97% ------ -------- ------ -------- ------- -------- ------- Total Other Deductions $26,836 $46,484 8.97% $48,573 9.38% ------ -------- ------ -------- ------- -------- ------- CASH FLOW 25.13% $125,711 $150,323 21.05% $155,159 20.51% (Before Debt Service) -------- ------ -------- ------- -------- ------- 92.30% 92.00% 92.00% OCCUPANCY (%) - 1993 ACTUAL $96.57 $122.74 $127.65 AVERAGE ROOM RATE - 4.00% 4.00% % INCREASE IN ADR 1,250 1,250 1,250 NUMBER OF ROOMS 421,268 419,750 419,750 TOTAL ROOMS OCCUPIED
(continued on next page) VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH ============================================================================== Prepared by: TRUMP TAJ MAHAL CASINO RESORTS APPRAISAL GROUP International CASH FLOW PROJECTION ($000) ------------------------------
/--Actual---\ /---------------------------Projected--------------------------\ - -------\ 1993 Growth REVENUES (Unaudited) Rate Year 9 % Year 10 % Year 11 % - -------- ---------- ---- ------ ------ ------- ----- ------- ------ Casino 79.40% $442,064 4.00% $615,629 79.27% $640,255 79.27% $665,865 79.27% Guest Rooms 7.31% $40,682 4.00% $55,722 7.17% $57,951 7.17% $60,269 7.17% Food & Beverage 10.05% $55,953 4.00% $79,639 10.25% $82,824 10.25% $86,137 10.25% Other Income 3.24% $18,038 4.00% $25,674 3.31% $26,701 3.31% $27,769 3.31% ------ -------- ------ -------- ------- --------- ------- --------- ------- GROSS POTENTIAL REVENUE 100.00% $556,737 $776,664 100.00% $807,731 100.00% $840,040 100.00% Promotional Allowance -10.14% ($56,444) -10.00% ($61,563) -7.93% ($64,025) -7.93% ($66,586) -7.93% Casino Bad Debt 0.00% $0 -1.00% ($6,156) -0.79% ($6,403) -0.79% $766,795 -0.79% ------ -------- ------ -------- ------- --------- ------- --------- ------- EFFECTIVE TOTAL REVENUE 89.86% $500,293 $708,945 91.28% $737,303 91.28% $766,795 91.28% ------ -------- ------ -------- ------- --------- ------- --------- ------- % of % of % of TOTAL TOTAL TOTAL DEPARTMENTAL EXPENSES % OF REV % 0F REV REVENUE REVENUE REVENUE - --------------------- -------- -------- ------- ------- ------- Casino 41.41 $196,318 45.00% $277,033 39.08% $288,115 39.08% $299,639 39.08% Rooms 37.21 $15,137 35.00% $19,503 2.75% $20,283 2.75% $21,094 2.75% Food & Beverage 98.59 $54,043 95.00% $75,657 10.67% $78,683 10.67% $81,831 10.67% Other 74.27% $13,397 75.00% $19,255 2.72% $20,025 2.72% $20,826 2.72% ------ -------- ------ -------- ------- -------- ------- -------- ------- Total Dept. Expenses $278,895 $391,448 55.22% $407,106 55.22% $423,390 55.22% ------ -------- ------ -------- ------- -------- ------- -------- ------- TOTAL DEPARTMENTAL PROFIT $221,399 $317,497 44.78% $330,197 44.78% $343,405 44.78% ------ -------- ------ -------- ------- -------- ------- -------- ------- UNDISTRIBUTED OPERATING EXPENSE Growth @ - ----------------------- -------- General & Admin. 6.27% $31,376 5.00% $48,675 6.87% $51,109 6.93% $53,664 7.00% Facility Operations 6.48% $32,414 5.00% $50,284 7.09% $52,798 7.16% $55,438 7.23% Advertising 0.70% $3,490 5.00% $5,414 0.76% $5,685 0.77% $5,969 0.78% Management Fees 0.31% $1,572 4.00% $2,237 0.32% $2,326 0.32% $2,419 0.32% ------ -------- ------ -------- ------- -------- ------- -------- ------- Total Undistrib. Expenses $68,851 $106,610 15.04% $111,918 15,18% $117,491 15.32% ------ -------- ------ -------- ------- -------- ------- -------- ------- GROSS OPERATION PROFIT $152,547 $210,887 29.75% $218,279 29.61% $225,924 29.46% ------ -------- ------ -------- ------- -------- ------- -------- ------- FIXED CHARGES % OF REV -------- Property Taxes & Insurs. 4.28% $24,111 5.00% $37,404 7.22% $39,274 7.58% $41,238 7.96% Trump Realty Rent 0.54% $2,725 0.00% $2,725 0.53% $2,725 0.53% $2,725 0.53% Reserved (FF&E) N/A 1.50% $10,634 2.05% $11,060 2.13% $11,502 2.22% ------ -------- ------ -------- ------- -------- ------- -------- ------- Total Other Deductions $26,836 $50,763 9.80% $53,059 10.24% $55,465 10.71% ------ -------- ------ -------- ------- -------- ------- -------- ------- CASH FLOW 25.13% $125,711 $160,124 19.95% $165,220 19.36% $170,449 18.75% (Before Debt Service) -------- ------ -------- ------- -------- ------- -------- ------- 92.30% 92.00% 92.00% 92.00% OCCUPANCY (%) - 1993 ACTUAL $96.57 $132.75 $138.06 $143.58 AVERAGE ROOM RATE - 4.00% 4.00% 4.00% % INCREASE IN ADR 1,250 1,250 1,250 1,250 NUMBER OF ROOMS 421,268 419,750 419,750 419,750 TOTAL ROOMS OCCUPIED
-101- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ STEP 3 - - -------- The selection of a yield rate to discount the projected cash flow and eventual property reversion is based upon our analysis of yield rates anticipated by real estate investors in the marketplace. It is important to note that these rates do not exhibit any particular property's past history, but rather reflect an investor's current yield expectations on future cash flows. A yield rate utilized in annuity capitalization (discounted cash flow) differs from an income rate used in straight capitalization, in that a yield rate specifically addresses the time value of money and income stream patterns. If two identical properties have identical current income levels, except that one property's income will escalate faster than the other, an income rate such as an overall rate would not reflect different values, whereas a yield rate (discounted cash flow) would. The above is not meant to preclude the use of income rates. These rates are appropriate valuation tools when income levels are static and at regular intervals. Furthermore, income rates, such as overall rates, are useful when estimating a property's reversionary value, especially where long term income projections beyond a specified holding period are uncertain and highly subjective. In order to select an appropriate yield rate, we analyzed the motivating factors that potential purchasers of properties similar to the subject would most consider. Among the factors taken into consideration were the following: - Risk - Condition of subject - Current income levels and future projections - Competition - Anticipated growth of the area - Tax benefits - Future Value of the property. The yield, or rate of return, that a real estate investor is willing to accept on a current purchase is not only affected by returns on other real estate transactions. A knowledgeable investor -102- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ compares the expected yield on a real estate investment to yields he expects to earn on competitive investments with similar risk, duration, capital protection, and tax benefits. Some of the non-real estate investments, typically compared to properties such as the subject and their respective yields as of November 1993 (most recent indices published by the Appraisal Institute - see Addenda), are as follows: 1. United States Government 10 year bonds - 5.72% yield rate 2. Corporate Bonds (A) - 7.29% yield rate 3 Municipal Bonds (A) - 5.39% yield rate At this time, it is somewhat difficult to substantiate an appropriate discount rate for casino facilities, such as the subject property, because few meaningful transactions have occurred that clearly illustrate current purchase criteria. However, a key issue that must be addressed is the fact that hotel and casino facilities, have fallen from favor as an investment option for most institutional level buyers. Sluggish economies have affected this attitude, and a turnaround is not expected for several years. An unwillingness to consider hotel and casino facilities as an investment, unless a property is stabilized, suggests that prices have gone down as a result of higher return requirements. But, as mentioned above, the few dated transactions that have occurred, both in Atlantic City and Nevada, do not provide a high degree of tangible support for this theory. The lack of sales illustrates the unwillingness of sellers to take less for their properties based on today's buyer yield requirements. We have found that the differential in returns between buyers and sellers now approximates 200 to 300 basis points. Obviously, the disparity goes far in explaining the paucity of closed transactions. -103- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ Nonetheless, one pattern has been illustrated in purchaser due diligence that provides insight. Today's buyer is making purchase decisions with less emphasis on future returns (sale at reversion) and placing more emphasis on the current income to the property. In some cases, investors are reducing above-market contractual rents to market rates when making their investment decisions. This illustrates the conservative approach investors are taking and the risk now perceived with real estate as an investment vehicle. In essence, purchasers will not pay for speculative upside in today's uncertain market and as a result, sellers are facing lower than desired offering prices when transactions are in negotiation. In order to objectively and rationally select discount rates, we have considered two methods. First, we have analyzed yield rates of new bond issues and key money rates. Second, we have reviewed required rates of return with real estate investors. Recent key bond yields and money rates as of March 14, 1994 are set forth in the following table. ============================================================================== KEY MONEY RATES AS OF 3/14/94 ============================================================================== Prime Rate 6.00% Discount Rate 3.00% 3 Month T-Bills 3.49% Commercial Paper (90 days) 3.83% Treasury Bills (One Year) 3.95% Treasury Notes (Two Year) 4.97% Treasury Notes (Five Year) 5.93% Treasury Notes (Ten Year) 6.51% Treasury Notes (30 Year) 6.93% High Quality Corporate Bonds (Financial) 6.98% Medium Quality Corporate Bonds (Industrial) 7.59% ============================================================================== Source: The Wall Street Journal, March 14, 1994 -104- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ The above rates indicate that a low-risk, long-term investment, such as a 30- Year U.S. Treasury Bond, yields a 6.93 percent return. A yield of 6.98 to 7.59 percent is obtainable through corporate bonds which typically have a lower risk than income-producing real estate, but higher than government issued paper. It should be noted that these rates have been very flat since the beginning of 1992, and the prospect of higher returns is not encouraging. In analyzing real estate as an investment vehicle relative to the financial markets, four factors differentiate real estate from the investment opportunities described in the above chart. These are tax treatment, credibility, liquidity and risk, and are described respectively in the following paragraphs. Potential arguments against utilizing bond yields and money market rates when analyzing real estate often include the vast differences in tax treatment. In the past, real property ownership enjoyed many tax benefits that were not available for bond and money instruments (i.e. interest rate deductions, etc.). However, changes (1986) in the tax laws have influenced required real estate yields upward due to fewer incentives. In addition to the tax laws surrounding real estate investments, two major concerns exist for the real estate industry according to a survey conducted by NCREIF (National Council of Real Estate Investment Fiduciaries): 1) the credibility of real estate as an investment class; and 2) the illiquidity of real estate in the market place. This index is similar to stock market indexes, such as the Dow Jones Industrial Average (DJIA), in that it has followed the performance of several specific real estate investments over a period of time. The credibility of real estate can only be determined through long-term performance. The NCREIF index has been in existence for fourteen years, which is short in comparison to the DJIA and other investment indexes. However, even in accounting for a severe downturn in the industry in the past several years, the index reveals long-term yield rates of 9.7 percent for -105- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ all properties and 12.4 percent for eastern properties. Only time can add to the credibility of real estate as an investment, but the current trends indicate a respectable return. Real estate also suffers from illiquidity, particularly when compared to various financial instruments that may be converted into cash quickly. It is often a long and arduous task to transfer real estate, particularly when the property is very large and has numerous leases requiring much due diligence and legal counsel. This is often a deterring factor when purchasing real estate as an investment, thus requiring higher yields when compared to stocks and bonds. The last significant difference between real estate and the financial markets is the measure of risk. While no marketplace is perfect or any measure of risk absolute, the financial markets are more sensitive to fluctuations relative to the whole market. The trading of financial instruments is similar to the process of gathering comparable sales in the Sales Comparison Approach of the appraisal process. The magnitude of trading within the financial market, analysis of the same instrument by many informed participants and the adjustments made by the market participants provide a sound indication of yields at varying degrees of risk. This sensitivity tends to indicate that the financial markets illustrate a better measurement of risk than does the real estate market, due to the lower volume of transactions in real estate. Therefore, it is very important to analyze the differing levels of risk present in the financial markets at varying yield rates in order to perceive and select an appropriate discount rate applicable to the subject. For the above stated reason, investors of real estate typically require returns several hundred basis points above what can be achieved in the financial markets. In our experience of casino and hotel facilities transactions, return requirements have ranged from 600 to 800 basis points above medium quality Corporate bonds. Therefore, an appropriate discount rate for the subject would be in the range of approximately 13.00 to 16.00 percent. -106- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ Additionally, we have reviewed two separate investor surveys and conducted our own telephone interviews. Respondents to the discount rate survey included national, institutional- grade, investment and pension fund advisors and local players in the market. The answers of the respondents in the retail, office and lodging categories ranged considerably. The Peter F. Korpacz Investor survey for the first quarter of 1994 indicated a discount rate (IRR) range of 9.00 to 20.00 percent, with an average discount rate of 13.93 percent for the National Luxury Hotel Market. The National Full-Service Hotel Market reflects a discount rate in the range of 10.00% to 20.00% with an average of 15.33%. It should be noted that the upper end of this range represents troubled or distressed properties and has not been considered. The CB National Investor Survey (2nd Quarter - 1993) indicated a discount rate (IRR) range of 12.00 to 20.00 percent for hotels with an average of 14.9%. The RCDH report indicates an initial rate (Ro) of 12.00% to 15.00%. Before the real estate market began to discernibly respond to the soft market conditions in most major U.S. Cities, competitive yields had been trending downward. In general, this followed the pattern of rates for all properties and alternative investments. Further, the downward pattern reflected a competitive environment in which supply, that is well-located, higher-profile stabilized facilities, did not match buyer demand. During this period, rates as low as 10.00 to 10.50 percent were not uncommon for top quality holdings in major metro areas. However, in the last eighteen to twenty-four months, we have seen a reversal of this trend, with rates now in the 11.0 to 15.0 percent range, and only trophy properties justifying rates below 10.0 to 11.0 percent. The discount rate is a function of several factors: a property's image, location, and physical characteristics; appreciation potential, competitive appeal, and cash flow stability; and the nature or degree of risk, real or perceived, inherent to the investment. The subject property is a mature hotel and casino facility, located along the Boardwalk in Atlantic City. A higher -107- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ yield rate is necessary for a casino hotel because the investor is usually purchasing an ongoing business along with the real estate. The business or the "going concern" portion of the property is substantially dependent on the competency of the management team. Based on this analysis, considering the higher risk associated with the going concern portion of the investment for similar casino hotel properties and our cash flow projections, we believe the discount rate should fall toward the upper end of the 13.00 to 16.00 percent range. Therefore, we have estimated a discount rate of 15.00 percent. National investors are generally seeking a 7% "Real" rate of return over the growth or increase rate, as measured by the Consumer Price Indexes. Assuming a 4.00% CPI increase (400 basis points), and adding 400 basis points to reflect the added risk attributable to the going concern portion of the investment, a discount rate of 15.00% is further supported. STEP 4 - - ------ Reversionary Value sometimes referred to as Residual Value, may be defined as the remainder which reverts to the fee owner at the end of a lease period, projection period or actual sale of real estate. The reversionary value is estimated by capitalizing the projected eleventh (11th) year cash flow by a terminal rate of 10.00%. A terminal capitalization rate, sometimes called outgoing rate, is the direct relationship between a future projection of Net Operating Income produced by the real estate and its price, or value, in the marketplace at a future certain point of time. Terminal capitalization rates are based upon investors' perceptions of future income value relationship giving consideration to future income levels, supply/demand relationship as it pertains to competition and remaining economic life of the subject. A recent survey indicates that investors active in the market employ terminal rates from 8.00% to 11.00%. -108- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ Giving the nature of the subject property, we have selected a terminal capitalization rate of 10.00%, which reflects the added risk associated with a casino/hotel. Taken from the previously mentioned investor surveys, terminal capitalization rates for hotel facilities range from 8.0 to 11.0 percent, with the variance attributable to many of the same factors mentioned in our discussion of the discount rate. However, other issues influence the terminal capitalization rate and also warrant mention. First, the physical condition and competitive position of a property ten (10) years into the future must be studied. Second, the nature of the building's occupancy and casino wins in the initial years must be analyzed. Finally, the risk inherent to the reversion year's revenue and expense projections must be measured. Furthermore, in considering the terminal rate for the subject property, it is important to analyze all factors which may affect the subject property, such as gaming regulations and legislation. On this basis, we have elected to use a terminal capitalization rate of 10.00%. Value = Income ------ Rate Value = $170,448,894 = $1,704,488,941 ------------ .10 We have deducted 3.0% of the gross reversionary value in order to arrive at a net sale proceeds. Our discounted cash flow reflects the net reversionary value. STEP 5 - - ------ The Net Present Value conclusion is based on the employment of the Discounted Cash Flow method. The process of discounting the cash flows, including the reversion, reflects the present worth of this investment given the information listed below: - A required rate of return - Receiving cash flows as projected -109- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS ================================================================================ - Reversion value as projected At a 15.00% rate of return, our discounted cash flow calculations appear on the following page.
PRESENT WORTH OF INCOME STREAM ============================== TRUMP TAJ MAHAL CASINO RESORTS - ------------------------------ PRESENT PRESENT WORTH OF WORTH OF INCOME CASH PERIOD CASH FLOW REVERSION $1 FACTOR STREAM YIELD - ---------------------------------------------------------------------------------------------------------------------------------- 1 $123,901,692 - 0.8696 $ 107,744,911 11.21% 2 $128,007,155 - 0.7561 $ 96,786,210 11.59% 3 $132,228,858 - 0.6575 $ 86,940,474 11.97% 4 $136,569,049 - 0.5718 $ 78,090,182 12.36% 5 $141,029,950 - 0.4972 $ 70,120,091 12.76% 6 $145,613,743 - 0.4323 $ 62,948,821 13.18% 7 $150,322,568 - 0.3759 $ 56,506,253 13.60% 8 $155,158,510 - 0.3269 $ 50,721,317 14.04% 9 $160,123,592 - 0.2843 $ 45,523,137 14.49% 10 $165,219,764 - 0.2472 $ 40,842,326 14.95% 11 - $1,653,354,273 0.2472 $ 408,709,176 ------------------- $1,104,932,899 - SAY - $1,100,000,000 ====================
DISCOUNT RATE: 15.00% TERMINAL CAPITALIZATION RATE: 10.00% 11TH YEAR NOI: $ 170,448,894 ASSUMED SALE VALUE: $1,704,488,941 ASSUMED SALE COSTS: 3.00% NET SALES PROCEEDS $1,653,354,273 -110- APPRAISAL GROUP INTERNATIONAL VALUATION & CONCLUSIONS CORRELATION & VALUATION CONCLUSION ================================================================================ CORRELATION AND VALUE CONCLUSION -------------------------------- Based upon our research and analysis, we arrived at the following independent value estimate: CAPITALIZATION OF INCOME APPROACH $1,100,000,000 In a typical appraisal assignment, this section of the report would assess the strengths and weaknesses of the various approaches to value utilized. However, since we are valuing the Going Concern Value of the subject property, only the Capitalization of Income Approach is applicable. Giving consideration to the forces that create and affect value, it is our opinion that the Going Concern Value of the subject property, AS OF MARCH 18, 1994, IS: ONE BILLION ONE HUNDRED MILLION DOLLARS --------------------------------------- ($1,100,000,000) -111- APPRAISAL GROUP INTERNATIONAL ADDENDA APPRAISAL GROUP International APPENDIX I Subject Property Photographs APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] HOSPITALITY SUITE #1417 [PHOTO] LANAI SUITE #1443 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] LANAI SUITE #144 - CORNER UNIT [PHOTO] TYPICAL ROOM #4602 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] RAJA SUITE #4617 [PHOTO] RAJA SUITE #4617 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] RAJA SUITE #4617 [PHOTO] KING ROOM #4621 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] SUITE #4812 [PHOTO] SUITE 4812 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] VICEROY SUITE #4623 [PHOTO] 46TH FLOOR ELEVATOR BANK APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] 46TH FLOOR LOBBY [PHOTO] SULTAN SUITE #4811 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] SULTAN SUITE #4811 [PHOTO] SULTAN SUITE #4811 APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] 51ST FLOOR ELEVATOR BANK [PHOTO] 51ST FLOOR HALLWAY APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] MICHELANEGELO SUITE [PHOTO] MICHELANGELO SUITE APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] MICHELANGELO SUITE [PHOTO] MICHELANGELO SUITE APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] ALEXANDER THE GREAT SUITE - GUEST BEDROOM [PHOTO] ALEXANDER THE GREAT SUITE - DINING ROOM APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] ALEXANDER THE GREAT SUITE - GENERAL VIEW [PHOTO] ALEXANDER THE GREAT SUITE - BATHROOM APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] ALEXANDER THE GREAT SUITE - LIVING ROOM [PHOTO] ALEXANDER THE GREAT SUITE - JACUZZI APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] ALEXANDER THE GREAT SUITE - BATHROOM AND EXERCISE ROOM APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] VIEW FROM PACIFIC AVENUE [PHOTO] PARKING GARAGE APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] VIEW OF THE SUBJECT FROM THE BOARDWALK [PHOTO] STEEL PIER APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] CLOSE-UP VIEW OF THE TOWER APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] VIEW ALONG THE BOARDWALK [PHOTO] VIEW ALONG THE BOARDWALK APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] MAIN ENTRANCE AND PORTE CHOCHERE [PHOTO] HOTEL LOBBY AND FRONT DESK APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] 2ND LEVEL PROMENADE TOWARDS THE BOARDWALKD [PHOTO] ESCALATORS TO 2ND LEVEL APPRAISAL GROUP Interanational Addenda Subject Property Photographs ================================================================================ [PHOTO] RETAIL SHOPS ON 2ND LEVEL [PHOTO] RETAIL SHOPS ON 2ND LEVEL APPRAISAL GROUP International Addenda Subject Property Photographs ================================================================================ [PHOTO] THE SPA AT THE TAJ [PHOTO] MARK G. ETESS ARENA APPRAISAL GROUP International APPENDIX II Floor Plans APPRAISAL GROUP International [FLOOR PLAN] FIRST LEVEL PLAN OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] FIRST LEVEL MEZZANINE OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] SECOND LEVEL PLAN OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] SECOND LEVEL MEZZANINE OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] 5TH LEVEL OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] 6TH LEVEL OF TAJ MAHAL CASINO RESORT [FLOOR PLAN] 7TH FLOOR OF TAJ MAHAL CASINO RESORT [DIAGRAM OF TRUMP TAJ MAHAL CASINO] TRUMP TAJ MAHAL CASINO* RESORT OPERATING REVIEW PACKAGE DECEMBER 1993 APPENDIX III Trump Taj Mahal Associates Property Operating Statement APPRAISAL GROUP International TRUMP TAJ MAHAL CASINO* RESORT OPERATING REVIEW PACKAGE DECEMBER, 1993 TABLE OF CONTENTS Market Share Analysis 1-4 Statement of Operations 5 Property Operating Statement 6 Key Statistics 7 Gaming Summary 8 Table Summary 9 Games Drop/Games Win Summary 10 Slot Summary 11 Slot Handle/Slot Win Summary 12 Food Summary 13 Food Covers by Outlet 14 Average Check by Outlet 15 Beverage Summary 16 Lodging Summary 17 Room Occupancy Statistics 18-19 Facility Operations Summary 20 Fixed Expense Summary 21 General & Administrative Summary 22 Monthly Labor Comparison 23 2 14-Jan-94 TAJ MAHAL CASINO AND RESORT MARKET SHARE ANALYSIS OPERATING REVIEW FOR THE MONTH ENDED DECEMBER 1993
1993 1992 UNIT 1993 1992 DROP DROP 1993 1992 # OF MKT PIT PIT MKT MKT TABLE TABLE PROPERTY UNITS SHARE % DROP RANK DROP RANK SHARE % SHARE % WIN RANK WIN - -------- ----- ------- -------------- ---- -------------- ---- ------- ------- ------------ ---- ------------ TAJ 163 14.5% $ 87,689,444 1 $ 78,608,255 1 16.7% 15.3% $ 15,032,138 1 $ 11,953,332 PLAZA 86 7.6% 44,791,209 5 50,140,987 3 8.5% 9.8% 7,187,558 5 6,597,694 RESORTS 81 7.2% 38,670,767 8 38,772,967 5 7.4% 7.6% 4,992,405 9 5,919,872 CAESARS 114 10.1% 58,510,412 2 72,228,158 2 11.1% 14.1% 7,783,536 4 9,154,844 BALLY 95 8.4% 46,293,817 3 37,342,753 7 8.8% 7.3% 8,544,234 2 6,456,570 SANDS 93 8.2% 45,591,542 4 49,528,461 4 8.7% 9.7% 8,346,337 3 7,432,388 HARRAH'S 80 7.1% 29,141,951 11 33,497,933 9 5.5% 6.5% 4,740,664 10 6,037,023 CLARIDGE 67 5.9% 20,063,289 12 18,868,713 12 3.8% 3.7% 2,892,712 12 2,857,434 SHOWBOAT 92 8.2% 32,057,454 10 30,140,774 11 6.1% 5.9% 4,189,909 11 4,409,688 TROP WORLD 89 7.9% 36,344,985 9 37,980,777 6 6.9% 7.4% 5,579,973 7 5,950,677 CASTLE 81 7.2% 41,356,955 7 33,938,422 8 7.9% 6.6% 5,067,970 8 5,160,284 GRAND 87 7.7% 44,765,868 6 31,912,594 10 8.5% 6.2% 7,106,882 6 4,567,694 ----- ------- -------------- -------------- ------- ------- ------------ ------------ TOTAL 1,128 100.0% $ 525,277,693 $ 512,960,794 100.0% 100.0% $ 81,464,318 $ 76,497,500 % change from last year 2.4% 6.5% 1993 1992 TABLE TABLE WIN WIN 1993 1992 MKT MKT HOLD HOLD PROPERTY RANK SHARE % SHARE % % % - -------- ---- ------- ------- ---- ---- TAJ 1 18.5% 15.6% 17.1% 15.2% PLAZA 4 8.8% 8.6% 16.0% 13.2% RESORTS 8 6.1% 7.7% 12.9% 15.3% CAESARS 2 9.6% 12.0% 13.3% 12.7% BALLY 5 10.5% 8.4% 18.5% 17.3% SANDS 3 10.2% 9.7% 18.3% 15.0% HARRAH'S 6 5.8% 7.9% 16.3% 18.0% CLARIDGE 12 3.6% 3.7% 14.4% 15.1% SHOWBOAT 11 5.1% 5.8% 13.1% 14.6% TROP WORLD 7 6.8% 7.8% 15.4% 15.7% CASTLE 9 6.2% 6.7% 12.3% 15.2% GRAND 10 8.7% 6.0% 15.9% 14.3% ------- ------- TOTAL 100.0% 100.0% 15.6% 14.6% % change from last year
1993 1992 UNIT 1993 1992 HANDLE HANDLE 1993 1992 # OF MKT SLOT SLOT MKT MKT SLOT SLOT PROPERTY UNITS SHARE % HANDLE RANK HANDLE RANK SHARE % SHARE % WIN RANK WIN - -------- ----- ------- -------------- ---- -------------- ---- ------- ------- ------------ ---- ------------ TAJ 3,158 12.9% $ 207,766,071 1 $ 171,039,042 2 12.7% 11.8% $ 18,375,878 1 $ 15,967,800 PLAZA 1,834 7.5% 110,035,359 9 118,026,788 7 6.7% 8.2% 10,352,855 8 10,684,649 RESORTS 1,916 7.8% 116,050,255 8 94,522,698 10 7.1% 6.5% 9,894,934 9 9,253,687 CAESARS 2,073 8.4% 135,897,330 6 126,618,152 4 8.3% 8.8% 12,545,820 6 12,503,470 BALLY 2,009 8.2% 143,429,050 5 118,143,927 6 8.7% 8.2% 12,920,125 4 11,456,464 SANDS 1,627 6.6% 106,169,538 10 98,047,110 9 6.5% 6.8% 9,527,164 10 9,225,076 HARRAH'S 1,891 7.7% 199,232,999 2 146,993,437 3 12.2% 10.2% 14,429,441 3 12,857,575 CLARIDGE 1,368 5.6% 66,405,827 12 54,563,325 12 4.1% 3.8% 6,664,203 12 5,962,156 SHOWBOAT 2,379 9.7% 151,968,233 4 124,064,574 5 9.3% 8.6% 12,900,860 5 11,324,695 TROP WORLD 2,731 11.1% 184,468,598 3 203,185,699 1 11.3% 14.1% 14,891,882 2 15,810,843 CASTLE 2,098 8.5% 128,641,744 7 113,918,864 8 7.8% 7.9% 11,522,479 7 10,745,620 GRAND 1,477 6.0% 89,361,828 11 76,373,741 11 5.5% 5.3% 7,777,880 11 7,324,026 ----- ------- -------------- -------------- ------- ------- ------------ ------------ TOTAL 24,561 100.0% $1,639,426,832 $1,445,497,357 100.0% 100.0% $141,803,521 $133,116,061 % change from last year 13.4% 6.5% 1993 1992 SLOT SLOT WIN WIN 1993 1992 MKT MKT HOLD HOLD PROPERTY RANK SHARE % SHARE % % % - -------- ---- ------- ------- ---- ---- TAJ 1 13.0% 12.0% 8.8% 9.3% PLAZA 8 7.3% 8.0% 9.4% 9.1% RESORTS 9 7.0% 7.0% 8.5% 9.8% CAESARS 4 8.8% 9.4% 9.2% 9.9% BALLY 5 9.1% 8.6% 9.0% 9.7% SANDS 10 6.7% 6.9% 9.0% 9.4% HARRAH'S 3 10.2% 9.7% 7.2% 8.7% CLARIDGE 12 4.7% 4.5% 10.0% 10.9% SHOWBOAT 6 9.1% 8.5% 8.5% 9.1% TROP WORLD 2 10.5% 11.9% 8.1% 7.8% CASTLE 7 8.1% 8.1% 9.0% 9.4% GRAND 11 5.5% 5.5% 8.7% 9.6% ------- ------- ---- ---- TOTAL 100.0% 100.0% 8.6% 9.2% % change from last year
1 TAJ MAHAL CASINO AND RESORT MARKET SHARE ANALYSIS OPERATING REVIEW YEAR TO DATE DECEMBER 1993
1993 1992 UNIT 1993 1992 DROP DROP 1993 1992 # OF MKT PIT PIT MKT MKT TABLE TABLE PROPERTY UNITS SHARE % DROP RANK DROP RANK SHARE % SHARE % WIN RANK WIN - ---------- ----- ----- --------------- ---- -------------- ---- ------- ------- -------------- ---- ------------- TAJ 163 14.6% $ 1,062,042,357 1 $ 1,067,595,021 1 15.5% 15.1% $ 173,432,276 1 $ 169,112,175 PLAZA 87 7.8% 626,622,245 3 689,918,629 3 9.2% 9.8% 93,969,830 4 95,863,530 RESORTS 82 7.3% 543,763,629 6 537,581,983 5 7.9% 7.6% 77,432,381 7 80,023,125 CAESARS 97 8.7% 772,797,587 2 891,982,707 2 11.3% 12.6% 125,409,938 2 140,376,736 BALLY 96 8.6% 547,751,407 5 515,591,706 7 8.0% 7.3% 90,292,942 5 87,618,050 SANDS 87 7.8% 610,843,421 4 647,876,441 4 8.9% 9.2% 94,090,263 3 102,588,615 HARRAH'S 90 8.1% 462,489,368 10 504,876,892 8 6.8% 7.2% 72,927,998 8 79,153,564 CLARIDGE 67 6.0% 278,835,873 12 276,036,011 12 4.1% 3.9% 40,958,630 12 40,757,976 SHOWBOAT 83 7.5% 465,736,958 9 444,761,334 11 6.8% 6.3% 70,669,641 11 72,579,779 TROP WORLD 88 7.9% 449,410,501 11 524,159,014 6 6.6% 7.4% 71,945,560 9 82,723,901 CASTLE 87 7.8% 492,119,300 8 504,488,200 9 7.2% 7.2% 71,861,502 10 77,733,952 GRAND 88 7.9% 534,333,290 7 450,116,028 10 7.8% 6.4% 87,144,824 6 73,634,996 ----- ----- --------------- -------------- ------- ------- -------------- ------------- TOTAL 1,113 100.0% $6,846,745,936 $7,054,983,966 100.0% 100.0% $1,070,135,785 $1,102,166,399 % change from last year -3.0% -2.9% 1993 1992 TABLE TABLE WIN WIN 1993 1992 MKT MKT HOLD HOLD PROPERTY RANK SHARE % SHARE % % % - ---------- ---- ------- ------- ---- ---- TAJ 1 16.2% 15.3% 16.3% 15.8% PLAZA 4 8.8% 8.7% 15.0% 13.9% RESORTS 7 7.2% 7.3% 14.2% 14.9% CAESARS 2 11.7% 12.7% 16.2% 15.7% BALLY 5 8.4% 7.9% 16.5% 17.0% SANDS 3 8.8% 9.3% 15.4% 15.8% HARRAH'S 8 6.8% 7.2% 15.8% 15.7% CLARIDGE 12 3.8% 3.7% 14.7% 14.8% SHOWBOAT 11 6.6% 6.6% 15.2% 16.3% TROP WORLD 6 6.7% 7.5% 16.0% 15.8% CASTLE 9 6.7% 7.1% 14.6% 15.4% GRAND 10 8.1% 6.7% 16.3% 16.4% ------- ------- TOTAL 100.0% 100.0% 15.6% 15.6% % change from last year
1993 1992 UNIT 1993 1992 HANDLE HANDLE 1993 1992 # OF MKT SLOT SLOT MKT MKT SLOT SLOT PROPERTY UNITS SHARE % HANDLE RANK HANDLE RANK SHARE % SHARE % WIN RANK WIN - -------- ----- ------- --------------- ---- --------------- ---- ------- ------- -------------- ---- -------------- TAJ 3,121 13.0% $ 2,857,910,382 2 $ 2,510,071,469 2 11.9% 11.4% $ 264,503,544 1 $ 246,947,887 PLAZA 1,812 7.6% 1,834,226,838 8 1,781,849,694 7 7.6% 8.1% 173,215,257 7 168,387,560 RESORTS 1,822 7.6% 1,758,359,886 9 1,584,205,819 9 7.3% 7.2% 164,137,057 9 155,498,842 CAESARS 1,944 8.1% 1,995,809,446 6 1,997,757,557 4 8.3% 9.0% 190,469,271 6 192,118,747 BALLY 1,949 8.1% 2,144,750,082 5 1,929,288,881 6 8.9% 8.7% 205,315,896 4 192,916,463 SANDS 1,607 6.7% 1,630,971,918 10 1,443,560,648 10 6.8% 6.5% 149,477,588 10 142,641,218 HARRAH'S 1,896 7.9% 2,543,551,242 3 2,244,296,664 3 10.5% 10.2% 212,174,381 3 208,341,542 CLARIDGE 1,401 5.9% 1,062,240,262 12 942,573,287 12 4.4% 4.3% 113,656,209 12 105,600,700 SHOWBOAT 2,271 9.5% 2,189,507,169 4 1,965,888,182 5 9.1% 8.9% 202,867,358 5 185,123,158 TROP WORLD 2,660 11.1% 2,866,847,299 1 2,736,780,159 1 11.9% 12.4% 237,976,188 2 227,474,944 CASTLE 1,976 8.3% 1,851,407,983 7 1,682,869,610 8 7.7% 7.6% 172,997,582 8 162,628,339 GRAND 1,465 6.1% 1,376,691,844 11 1,264,068,286 11 5.7% 5.7% 130,422,925 11 126,138,551 ----- ------- --------------- --------------- ------- ------- -------------- -------------- TOTAL 23,923 100.0% $24,112,274,351 $22,083,210,286 100.0% 100.0% $2,217,213,256 $2,113,817,951 % change from last year 9.2% 4.9% 1993 1992 SLOT SLOT WIN WIN 1993 1992 MKT MKT HOLD HOLD PROPERTY RANK SHARE % SHARE % % % - -------- ---- ------- ------- ----- ----- TAJ 1 11.9% 11.7% 9.3% 9.8% PLAZA 7 7.8% 8.0% 9.4% 9.5% RESORTS 9 7.4% 7.4% 9.3% 9.8% CAESARS 5 8.6% 9.1% 9.5% 9.6% BALLY 4 9.3% 9.1% 9.6% 10.0% SANDS 10 6.7% 6.7% 9.2% 9.9% HARRAH'S 3 9.6% 9.9% 8.3% 9.3% CLARIDGE 12 5.1% 5.0% 10.7% 11.2% SHOWBOAT 6 9.1% 8.8% 9.3% 9.4% TROP WORLD 2 10.7% 10.8% 8.3% 8.3% CASTLE 8 7.8% 7.7% 9.3% 9.7% GRAND 11 5.9% 6.0% 9.5% 10.0% ------- ------- TOTAL 100.0% 100.0% 9.2% 9.6% % change from last year
2 TAJ MAHAL CASINO AND RESORT MARKET SHARE ANALYSIS OPERATING REVIEW FOR THE MONTH ENDED DECEMBER 1993
TOTAL GROWTH TABLE GROWTH SLOT GROWTH 1993 1992 OVER LAST YEAR OVER LAST YEAR OVER LAST YEAR PROPERTY TOTAL WIN RANK TOTAL WIN RANK $ % $ % $ % - -------- ------------ ---- ------------ ---- ----------- ---- ---------- ----- ---------- ---- TAJ $ 33,408,016 1 $ 27,921,132 1 $ 5,486,884 19.7% $3,078,806 25.8% $2,408,078 15.1% PLAZA 17,540,413 7 17,282,343 6 258,070 1.5% $589,864 8.9% ($331,794) -3.1% RESORTS 14,887,339 10 15,173,559 10 (286,220) -1.9% ($927,467) -15.7% $641,247 6.9% CAESARS 20,329,356 4 21,658,314 3 (1,328,958) -6.1% ($1,371,308) -15.0% $42,350 0.3% BALLY 21,464,359 2 17,913,034 5 3,551,325 19.8% $2,087,664 32.3% $1,463,661 12.8% SANDS 17,873,501 6 16,657,464 7 1,216,037 7.3% $913,949 12.3% $302,088 3.3% HARRAH'S 19,170,105 5 18,894,598 4 275,507 1.5% ($1,296,359) -21.5% $1,571,866 12.2% CLARIDGE 9,556,915 12 8,819,590 12 737,325 8.4% $35,278 1.2% $702,047 11.8% SHOWBOAT 17,090,769 8 15,734,383 9 1,356,386 8.6% ($219,779) -5.0% $1,576,165 13.9% TROP WORLD 20,471,855 3 21,761,520 2 (1,289,665) -5.9% ($370,704) -6.2% ($918,961) -5.8% CASTLE 16,590,449 9 15,905,904 8 684,545 4.3% ($92,314) -1.8% $776,859 7.2% GRAND 14,884,762 11 11,891,720 11 2,993,042 25.2% $2,539,188 55.6% $453,854 6.2% ------------ ------------ ----------- ---------- ---------- TOTAL $223,267,839 $209,613,561 $13,654,278 6.5% $4,966,818 6.5% $8,687,460 6.5%
TAJ MAHAL CASINO AND RESORT MARKET SHARE ANALYSIS OPERATING REVIEW
TOTAL GROWTH TABLE GROWTH SLOT GROWTH 1993 1992 OVER LAST YEAR OVER LAST YEAR OVER LAST YEAR PROPERTY TOTAL WIN RANK TOTAL WIN RANK $ % $ % $ % - -------- -------------- ---- -------------- ---- ----------- ----- ------------ ----- ------------ ----- TAJ $ 437,935,820 1 $ 416,060,062 1 $21,875,758 5.3% $4,320,101 2.6% $17,555,657 7.1% PLAZA 267,185,087 7 264,251,090 6 $2,933,997 1.1% ($1,893,700) -2.0% $4,827,697 2.9% RESORTS 241,569,438 10 235,521,967 10 $6,047,471 2.6% ($2,590,744) -3.2% $8,638,215 5.6% CAESARS 315,879,209 2 332,495,483 2 ($16,616,274) -5.0% ($14,966,798) -10.7% ($1,649,476) -0.9% BALLY 295,608,838 4 280,534,513 5 $15,074,325 5.4% $2,674,892 3.1% $12,399,433 6.4% SANDS 243,567,851 9 245,229,833 8 ($1,661,982) -0.7% ($8,498,352) -8.3% $6,836,370 4.8% HARRAH'S 285,102,379 5 287,495,106 4 ($2,392,727) -0.8% ($6,225,566) -7.9% $3,832,839 1.8% CLARIDGE 154,614,839 12 146,358,676 12 $8,256,163 5.6% $200,654 0.5% $8,055,509 7.6% SHOWBOAT 273,536,999 6 257,702,937 7 $15,834,062 6.1% ($1,910,138) -2.6% $17,744,200 9.6% TROP WORLD 309,921,748 3 310,198,845 3 ($277,097) -0.1% ($10,778,341) -13.0% $10,501,244 4.6% CASTLE 244,859,084 8 240,362,291 9 $4,496,793 1.9% ($5,872,450) -7.6% $10,369,243 6.4% GRAND 217,567,749 11 199,773,547 11 $17,794,202 8.9% $13,509,828 18.3% $4,284,374 3.4% -------------- -------------- ----------- ------------ ------------ TOTAL $3,287,349,041 $3,215,984,350 $71,364,691 2.2% ($32,030,614) -2.9% $103,395,305 4.9%
3 TAJ MAHAL CASINO AND RESORT OPERATING REVIEW - POKER & SIMULCASTING FOR THE MONTH ENDED DECEMBER 1993
1993 1993 1993 DEC Y-T-D # OF UNIT MKT POKER MKT Y-T-D AVG WIN AVG WIN PROPERTY UNITS SHARE % WIN RANK SHARE % POKER WIN RANK PER UNIT PER UNIT - -------- ----- -------- ----- ---- ------- --------- ---- -------- -------- TAJ 58 36.3% $1,127,513 1 38.8% $ 7,513,044 1 $ 19,440 $129,535 RESORTS 25 15.6% 436,136 2 15.0% 3,733,699 2 17,445 149,348 CAESARS 9 5.6% 235,646 4 8.1% 556,804 6 26,183 61,867 BALLY 20 12.5% 392,893 3 13.5% 2,571,809 3 19,645 128,590 SANDS 20 12.5% 203,780 5 7.0% 1,706,514 4 10,189 85,326 HARRAH'S 9 5.6% 164,490 7 5.7% 164,490 8 18,277 18,277 SHOWBOAT 6 3.8% 146,672 8 5.0% 197,321 7 24,445 32,887 CASTLE 13 8.1% 197,356 6 6.8% 1,180,684 5 15,181 90,822 -- ---- ------- --- --------- ------ ------ TOTAL 160 100.0% $2,904,486 100.0% $17,624,365 $18,153 $110,152 1993 1993 1993 1993 1993 1993 Y-T-D SIMULCAST MKT SIMULCAST MKT HOLD SIMULCAST PROPERTY HANDLE RANK SHARE % REVENUE RANK SHARE % % REVENUE RANK - -------- --------- ---- ------- --------- ---- ------- ---- ---------- ---- TAJ $1,110,307 3 15.1% $101,111 3 15.0% 9.1% $ 830,416 4 RESORTS 1,315,470 2 17.9% 126,012 2 18.7% 9.6% 964,794 3 CAESARS 3,258,359 1 44.4% 296,422 1 44.1% 9.1% 1,209,302 1 SANDS 739,106 5 10.1% 66,013 5 9.8% 8.9% 704,176 5 SHOWBOAT 907,832 4 12.4% 82,851 4 12.3% 9.1% 977,911 2 ---------- ----- -------- ----- ---------- TOTAL $7,331,074 100.0% $672,409 100.0% 9.2% $4,686,600
4 TRUMP TAJ MAHAL ASSOCIATES
(UNAUDITED) STATEMENT OF OPERATIONS DECEMBER 1993 - ------------------------------------------------------------------------------------------------------------------------------------ THIS YEAR VS BUDGET THIS YR VS LAST YR - ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL BUDGET VAR $ VAR LAST VAR $ VAR DESCRIPTION % YEAR % - ------------------------------------------------------------------------------------------------------------------------------------ 5,032,138 13,290,807 1,741,531 13.1 1,953,332 3,078,806 25.0 TABLE GAMES 8,037,015 17,215,351 821,164 4.8 15,760,110 2,276,905 14.4 SLOTS 1,127,313 0 1,127,313 .0 0 1,127,313 .0 POKER 100,187 0 100,187 .0 0 100,187 .0 SIMULCASTING 34,296,653 30,506,458 3,790,195 12.4 27,713,442 6,503,211 23.0 TOTAL GAMING REVENUE 2,699,386 2,471,200 228,186 9.2 2,384,428 314,950 13.2 LODGING 4,624,734 4,170,405 454,329 10.0 3,785,508 839,146 22.2 FOOD & BEVERAGE 433,907 239,000 194,907 8.18 409,620 24,200 5.9 ENTERTAINMENT 1,103,506 909,579 193,927 21.3 1,471,093 (367,506) (25.0) OTHER 8,861,533 7,790,184 1,071,349 13.8 8,050,729 810,806 10.0 TOTAL OTHER 43,158,186 38,296,642 4,861,544 12.7 35,764,171 7,394,017 20.7 GROSS REVENUE (4,715,242) (4,410,641) (304,601) (6.9) (3,847,205) (060,037) (22.6) PROMOTIONAL ALLOWANCE 38,442,944 33,806,001 4,556,943 13.4 31,916,966 6,525,900 20.4 NET REVENUE EXPENSES 14,065,673 13,000,881 (1,064,792) (0.2) 13,090,803 (974,070) (7.4) PAYROLL & BENEFITS 1,808,517 1,650,358 (158,159) (9.6) (1,535,055) (273,462) (7.0) COST OF GOODS SOLD 3,070,063 2,993,204 (76,054) (2.6) 2,437,854 (632,209) (25.9) COIN/TABLE COUPONS 1,435,270 1,131,039 (304,231) (26.9) 1,079,438 (355,832) (33.0) PROMO EXPENSE 424,029 206,638 (157,393) (59.0) 390,752 (33,277) (0.5) ADVERTISING 1,048,590 1,308,620 (539,962) (41.3) 830,868 (1,017,722) (122.5) MARKETING/ENTERTAINMENT 3,304,543 2,964,757 (339,206) (11.5) 2,406,137 (098,___) ____ GAMING TAX & REGULATORY FEES 2,269,193 1,943,173 (316,814) (10.3) 1,057,258 _________ ____ PROPERTY TAX, RENT & INSURANCE 1,178,749 1,183,839 4,590 .4 1,170,871 _________ ____ UTILITIES (171,275) 603,073 775,148 20.4 13,000 _________ ____ ALLOWANCE-DOUBTFUL ACCOUNTS 2,193,211 2,045,848 (147,369) (7.2) 1,526,864 (666,___) (44.0) GENERAL & ADMINISTRATIVE 31,417,363 29,091,742 (2,325,621) (8.0) 26,330,900 (5,070,463) (19.3) TOTAL COST & EXPENSES 7,025,581 4,794,259 2,231,322 46.5 5,578,066 1,447,517 26.0 GROSS OPERATING INCOME 60,997 48,249 (12,748) (26.4) (7,852) (68,849) (876.0) TRUMP SERVICES AGREEMENT 0 0 0 .0 0 0 .0 RESTRUCTURING LITIGATION COSTS 216,952 189,818 (27,134) (14.3) 174,507 (42,445) (24.8) WRITE-DOWN ON 227,083 227,083 0 .0 227,083 0 .0 TRUMP REALTY RENT 6,520,549 4,329,109 2,191,440 50.6 5,184,328 1,336,223 25.0 EBIDA 3,159,736 3,825,159 (134,277) (4.4) 3,089,597 (70,139) (2.3) DEPRECIATED & AMORTIZATION 10,589,754 9,257,800 (1,252,454) (13.5) 9,425,517 INTEREST (7,148,941) (7,953,650) 804,709 10.1 (7,330,706) 101,846 2.5 (7,148,941) (7,953,650) 804,709 10.1 (7,330,706) 181,846 2.5 NET INCOME (LOSS)
(UNAUDITED) STATEMENT OF OPERATIONS DECEMBER 1993 - ------------------------------------------------------------------------------------------------------------------------------------ THIS YEAR VS BUDGET THIS YR VS LAST YR - ------------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION ACTUAL BUDGET VAR $ VAR LAST VAR $ VAR % YEAR % - ------------------------------------------------------------------------------------------------------------------------------------ TABLE GAMES 73,432,274 67,291,439 5,140,835 3.7 169,112,174 4,328,101 2.0 SLOTS 260,284,893 248,838,866 12,245,227 4.0 244,933,258 15,358,835 6.0 POKER 7,519,644 0 7,519,644 .0 0 7,519,644 .0 SIMULCASTING 028,259 0 028,259 .0 0 828,259 .0 TOTAL GAMING REVENUE 42,064,274 415,330,305 26,733,965 6.4 414,845,432 28,818,830 6.0 LODGING 40,681,989 40,315,000 366,909 .9 41,043,596 (301,687) (.9) FOOD & BEVERAGE 55,953,240 59,608,970 (3,655,722) (6.1) 59,455,675 (3,502,427) (5.9) ENTERTAINMENT 3,798,060 2,958,000 832,868 28.2 4,816,451 (1,825,583) (21.0) OTHER 14,247,134 11,562,828 2,684,386 23.2 12,564,114 1,683,019 13.0 TOTAL OTHER 14,673,159 14,444,790 228,361 .2 117,879,036 (3,286,670) (2.2) GROSS REVENUE 556,737,429 529,775,103 26,962,326 5.1 531,925,268 24,812,141 4.0 PROMOTIONAL ALLOWANCE 556,737,420 529,775,103 26,962,326 5.1 531,925,268 24,812,141 4.0 NET REVENUE 500,293,255 468,053,110 31,440,145 6.7 470,675,742 29,617,513 6.0 EXPENSES PAYROLL & BENEFITS 62,081,025 160,901,461 (1,179,564) (.7) 155,959,817 (6,122,008) (3.9) COST OF GOODS SOLD 22,051,847 23,478,979 627,132 2.2 23,425,233 573,885 2.5 COIN/TABLE COUPONS 39,759,990 338,778,818 (981,180) (2.5) 37,603,549 (2,156,449) (5.0) PROMO EXPENSE 15,166,644 13,086,216 (1,360,420) (9.9) 12,615,995 (2,550,650) ADVERTISING 3,409,354 3,293,232 (196,127) (6.0) 5,666,299 2,176,948 38. MARKETING/ENTERTAINMENT 16,307,994 19,037,760 2,649,774 19.9 17,137,777 749,783 GAMING TAX & REGULATORY 40,543,041 59,590,332 (944,749) (2.4) 38,341,078 (2,201,371) ____ FEES PROPERTY TAX, RENT & 24,111,081 23,203,575 (827,506) (3.6) 22,676,385 (1,414,697) ____ INSURANCE UTILITIES 13,100,795 14,178,653 877,950 6.1 13,677,724 276,930 ALLOWANCE-DOUBTFUL 3,472,150 7,596,887 4,124,517 54.3 6,196,078 2,724,220 44.0 ACCOUNTS GENERAL & ADMINISTRATIVE 29,021,635 25,757,840 (3,263,987) (12.2) 25,360,925 (3,660,711) (14._) TOTAL COST & EXPENSES 70,205,569 369,011,349 (474,228) (.1) 350,661,944 (11,623,628) GROSS OPERATING INCOME 30,007,606 99,841,761 38,965,925 31.3 112,813,798 17,993,889 TRUMP SERVICES AGREEMENT 1,571,594 1,185,521 (386,073) (32.6) 1,308,182 (103,412) RESTRUCTURING LITIGATION 250,000 0 (250,000) .0 0 (250,000) ____ COSTS WRITE-DOWN ON 2,763,664 2,590,100 (173,564) (6.7) 2,562,519 (201,145) TRUMP REALTY RENT 2,725,000 2,724,990 (4) .0 2,705,000 0 .0 EBIDA 122,697,428 92,541,144 38,156,284 32.6 105,338,097 17,354,323 DEPRECIATED & 36,057,679 36,054,648 __________ (2.2) 36,387,548 (470,131) ____ AMORTIZATION INTEREST 108,370,770 109,084,000 655,230 .6 104,019,272 (4,329,498) (22,539,021) (52,547,504) 38,008,483 57.1 (35,898,723) 12,559,699 35.1 NET INCOME (LOSS) (22,539,021) (52,547,504) 38,008,483 57.1 (35,098,723) 12,559,699 35.0
5 TRUMP TAJ MAHAL ASSOCIATES PROPERTY OPERATING STATEMENT OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER 1993
PRIOR YEAR-- CURRENT YEAR--CURRENT MONTH CURRENT MONTH - -------------------------------------- ------------------ --------------------------------- ACTUAL PLAN ACTUAL DESCRIPTION - ------------------ ------------------ ------------------ --------------------------------- $ % $ % $ % 34,300,930 89.2 30,506,458 90.8 27,713,442 86.0 Casino 3,420,267 0 3,254,366 9.6 2,876,848 9.0 Food 1,214,564 3.2 952,639 2.0 958,213 3.0 Beverage 2,726,766 7.1 2,494,900 7.4 2,413,588 7.6 Lodging 449,717 1.2 259,800 0 394,954 1.2 Entertainment 1,042,220 2.7 828,479 2.4 1,407,127 4.4 Other 43,162,464 112.3 38,296,642 113.0 35,764,171 112.1 Gross Revenue (4,715,242) (12.3) (4,410,641) (13.0) (3,847,295) (12.1) Promotional Allowances - ---------- ----- ---------- ------ ---------- ------ 38,447,222 100.0 33,986,001 100.0 31,916,966 100.0 Net Revenue - ---------- ----- ---------- ------ ---------- ------ Operating Income 13,667,431 39.9 11,414,147 37.4 10,979,401 39.6 Casino (270,743) (7.9) (288,790) (8.9) (497,749) (17.3) Food 396,094 32.6 280,083 29.4 298,707 31.2 Beverage 1,404,953 51.5 1,396,555 56.0 1,304,275 54.0 Lodging (364,032) (80.9) (436,520) (168.0) (490,516) (124.2) Entertainment 671,820 64.5 495,140 59.0 959,755 68.2 Other - ---------- ----- ---------- ------ ---------- ------ 15,505,523 35.9 12,060,623 33.6 12,553,073 35.1 Gross Operating Income - ---------- ----- ---------- ------ ---------- ------ Fixed, General & Admin 3,031,771 7.9 2,788,974 8.2 2,714,702 0.5 Facility Operations 2,259,993 5.9 1,943,179 5.7 1,857,258 5.8 Fixed Expenses 3,188,176 8.3 3,334,211 9.0 2,403,046 7.5 General - ---------- ----- ---------- ------ ---------- ------ 8,479,940 22.1 8,066,364 23.0 6,975,006 21.9 Total - ---------- ----- ---------- ------ ---------- ------ 7,025,583 10.3 4,794,259 14.1 5,578,067 17.5 Operating Income 68,997 0.2 48,249 0.1 (7,852) 0 Trump Services Agreement 0 0 0 0 0 0 Trump Management Fee 0 0 0 0 0 0 Restructure & Litigation 216,952 0.6 189,810 0.6 174,507 0.5 Write Down on Purchase of Crow 227,083 0.6 227,083 0.7 227,083 0.7 Trump Realty Rent 6,520,551 17.0 4,329,109 12.0 5,104,328 16.2 EBIDTA - ---------- ----- ---------- ------ ---------- ------ 3,159,736 8.2 3,025,459 8.9 3,009,597 9.7 Depreciation and Amortization 10,509,754 27.3 9,257,300 27.3 9,425,517 29.5 Interest 0 0 0 0 0 0 State Income Tax Provision (7,140,940) (10.6) (7,953,650) (23.5) (7,330,785) (23.0) Income Before Extraordinary Items 0 0 0 0 0 0 Extraordinary Items (7,140,940) (10.6) (7,953,650) (23.5) (7,330,785) (23.0) Net Income
YEAR-TO-DATE PRIOR-YEAR-TO-DATE - --------------------------------- -------------------------------------------------------------- DESCRIPTION ACTUAL PLAN ACTUAL - --------------------------------- ------------------- -------------------- -------------------- $ % $ % $ % Casino 442,126,869 0.4 415,330,305 88.6 414,045,432 88.0 Food 42,524,942 8.5 46,647,704 9.9 46,332,106 9.8 Beverage 13,749,879 2.7 13,400,86. 2.9 13,565,079 2.9 Lodging 41,094,600 8.2 48,803,800 8.7 41,494,818 8.8 Entertainment 4,288,846 0.8 3,117,600 0.7 4,989,262 1.1 Other 13,074,813 2.6 10,475,220 2.2 11,497,779 2.4 Gross Revenue 556,294,029 111.3 529,775,105 113.0 531,925,269 13.0 Promotional Allowances (50,414,174) (11.3) (60,921,943) (13.0) (61,249,526) (13.0) ------------ ------- ------------ ------- ------------ ------- Net Revenue 500,339,055 100.00 468,853,110 100.0 470,675,743 100.0 ------------ ------- ------------ ------- ------------ ------- Operating Income Casino 194,675,582 44.0 165,995,078 40.0 173,406,527 41.9 Food (2,491,991) (5.9) 153,779 0.3 (533,679) (1.2) Beverage 4,420,980 32.2 4,729,145 35.3 4,726,637 34.8 Lodging 25,986,492 63.1 26,898,831 65.9 27,650,132 66.6 Entertainment (5,680,928) (133.2) (6,382,826) (204.7) (5,458,252) (109.4) Other 8,600,848 66.4 5,880,073 56.1 7,216,105 62.0 ------------ ------- ------------ ------- ------------ ------- Gross Operating Income 225,514,182 40.5 197,274,080 37.2 207,007,478 38.0 ------------ ------- ------------ ------- ------------ ------- Fixed, General & Admin Facility Operations 32,417,253 6.5 33,629,057 7.2 32,350,663 6.9 Fixed Expenses 24,111,001 4.0 33,008,606 5.0 22,676,005 4.8 General 39,008,163 7.0 41,319,607 8.3 39,966,622 8.5 ------------ ------- ------------ ------- ------------ ------- Total 95,510,497 19.1 98,232,310 21.0 94,993,089 20.2 ------------ ------- ------------ ------- ------------ ------- Operating Income 130,007,685 26.0 99,041,761 21.1 112,013,000 23.0 Trump Services Agreement 1,571,594 0.3 1,185,521 0.3 1,388,182 0.3 Trump Management Fee 0 0 0 0 0 0 Restructure & Litigation 250,000 0.1 0 0 0 0 Write Down on Purchase of Crow 2,763,664 0.6 2,590,100 0.6 2,725,000 0.5 Trump Realty Rent 2,763,000 0.5 2,724,994 0.9 105,338,100 22.4 EBIDTA 122,637,427 24.5 42,541,144 19.2 105,338,100 22.4 ------------ ------- ------------ ------- ------------ ------- Depreciation and Amortization 36,857,679 7.4 36,054,640 7.2 36,387,548 2.2 Interest 100,378,770 21.7 109,034,000 23.9 104,049,222 22.1 State Income Tax Provision 0 0 0 0 0 0 Income Before Extraordinary Items (22,539,022) (4.5) (52,547,504) (11.2) (35,898,720) (7.5) Extraordinary Items 0 0 0 0 0 0 Net Income (22,539,022) (4.5) (52,547,504) (11.2) (35,090,720) (7.5)
6 TRUMP TAJ MAHAL CASINO RESORT OPERATING REVIEW KEY STATISTICS DECEMBER 1993
CURRENT MONTH LAST YEAR CURRENT MONTH ACT vs PLAN THIS YEAR vs LAST YEAR VAR VAR VAR VAR ACTUAL PLAN $ % ACTUAL $ % CASH DROP $ 67,633,744 $ 60,385,000 $ 7,248,744 12.0% $ 60,721,755 $ 6,911,989 11.4% CREDIT DROP $ 19,893,015 $ 23,665,000 ($3,771,985) -15.9% $ 17,886,500 $ 2,006,515 11.2% TOTAL DROP $ 87,526,759 $ 84,050,000 $ 3,476,759 4.1% $ 78,608,255 $ 8,918,504 11.3% WIN $ 16,159,651 $ 13,290,400 $ 2,869,251 21.6% $ 11,953,332 $ 4,206,319 35.2% HOLD% 18.5% 15.8% 15.2% HANDLE $ 207,766,071 $ 172,884,400 $ 34,881,671 20.2% $ 171,039,042 $ 36,727,029 21.5% NET WIN $ 18,037,016 $ 17,215,871 $ 821,145 4.8% $ 15,760,110 $ 2,276,906 14.4% HOLD% 8.7% 10.0% 9.2% RMS AVAIL 38,750 38,750 0 0.0% 38,750 0 0.0% SOLD 34,202 28,600 5,602 19.6% 28,941 5,261 18.2% OCCUP % 88.2% 73.8% 74.7% ADR (NET) $78.92 $86.41 ($7.48) -8.7% $82.39 ($3.46) -4.2% FD COVERS 277,405 326,030 (48,625) -14.9% 258,264 19,141 7.4% AVG CK $12.12 $9.76 $2.37 24.2% $10.79 $1.33 12.4% LINE BUS PX 32,862 74,000 (41,138) -55.6% 38,684 (5,822) -15.1% CHART BUS PX 16,212 18,600 (2,388) -12.8% 12,535 3,677 29.3% TOTAL BUS PX 49,074 92,600 (43,526) -47.0% 51,219 (2,145) -4.2% BUS COIN $ 905,663 $ 1,204,970 ($299,307) -24.8% $636,614 $269,049 42.3% BUS FD COUP $ 30,687 $ 298,642 ($267,955) -89.7% $124,174 ($93,487) -75.3% AVG CST/ PAX $19.08 $16.24 $2.84 17.5% $14.85 $4 28.5% ARENA COVERS 18,714 13,802 4,912 35.6% 27,187 (8,473) -31.2% # OF SHOWS 12 9 3 33.3% 19 (7) -36.8% SEATS AVAIL 38,916 17,252 21,664 125.6% 38,282 634 1.7% OCCUP % 48.1% 80.0% 71.0% GARAGE COUNTS SELF PARK 102,650 114,970 (12,320) -10.7% 136,455 (33,805) -24.8% VALET 31,332 27,684 3,648 13.2% 26,292 5,040 19.2% TTI CARS 133,982 142,654 (8,672) 6.1% 162,747 (28,765) 17.7% VALET % 23.4% 19.4% 16.1% YEAR-TO-DATE PRIOR YEAR-TO-DATE ACT vs PLAN VAR VAR VAR VAR ACTUAL PLAN $ % ACTUAL $ % CASH DROP $ 812,048,385 $ 761,222,000 $ 50,826,385 6.68% $ 790,453,033 $ 21,595,352 2.7% CREDIT DROP $ 249,831,287 $ 297,865,000 ($48,033,713) -16.1% $ 277,141,988 ($27,310,701) 9.9% TOTAL DROP $1,061,879,672 $1,059,087,000 $ 2,792,672 0.3% $1,067,595,021 ($5,715,349) 0.5% WIN $ 180,945,321 $ 167,291,900 $ 13,653,421 8.2% $ 169,112,175 $ 11,833,146 7.0% HOLD% 17.0% 15.8% 15.8% HANDLE $2,857,910,382 $2,487,140,900 $370,769,482 14.9% $2,510,071,469 $347,838,913 13.9% NET WIN $ 260,284,082 $ 248,039,007 $ 12,245,075 4.9% $ 244,922,266 $ 15,361,816 6.3% HOLD% 9.1% 10.0% 9.8% RMS AVAIL 426,250 457,500 (1,250) -0.3% 457,500 (1,250) 0.3% SOLD 421,268 407,900 13,368 3.3% 417,240 4,028 1.0% OCCUP % 92.3% 89.2% 91.2% ADR (NET) $96.57 $98.84 ($2.27) -2.3% $98.32 ($1.75) 1.8% FD COVERS 3,843,855 4,391,435 (547,580) -12.5% 4,289,039 (445,184) 10.4% AVG CK $10.82 $10.42 $0.40 3.9% $10.60 $0.22 2.1% LINE BUS PX 574,034 885,850 (311,816) -35.2% 790,253 (216,219) -27.4% CHART BUS PX 235,981 192,500 43,481 22.6% 360,138 (124,157) -31.5% TOTAL BUS PX 810,015 1,078,350 (268,335) -24.9% 1,150,391 (340,376) -29.6% BUS COIN $12,844,938 $14,107,125 ($1,262,187) -8.9% $15,929,904 ($3,084,966) -19.4% BUS FD COUP $ 1,191,881 $ 3,293,229 ($2,101,348) -63.8% $ 2,066,988 (875,107) -42.3% AVG CST/ PAX $17.33 $16.13 $1.20 7.5% $15.64 $1.68 10.8% ARENA COVERS 222,692 266,265 (43,573) -16.4% 252,820 (30,128) -11.9% # OF SHOWS 125 438 (313) -71.5% 207 (82) -39.6% SEATS AVAIL 441,276 383,653 57,623 15.0% 448,385 (7,109) 1.6% OCCUP % 50.5% 69.4% 56.4% GARAGE COUNTS SELF PARK 1,620,595 1,639,873 (19,278) -1.2% 1,971,532 (350,937) -17.8% VALET 391,649 372,808 18,841 5.1% 375,561 16,088 % TTI CARS 2,012,244 2,012,681 (437) 0.0% 2,317,093 (334,819) % VALET % 19.5% 18.5% 16.0%
7 TRUMP TAJ MAHAL ASSOCIATES GAMING SUMMARY OPERATING REVIEW FOR THE PERIOD ENDEDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MTH ACTUAL PLAN ACTUAL DESCRIPTION $ % $ % $ % 15,032,138 45.5 13,290,607 43.6 11,953,332 43.1 TABLES 1,127,313 3.4 0 .0 0 .0 POKER 100,187 .3 0 .0 0 .0 SIMULCASTING 18,037,015 54.5 17,215,851 56.4 15,760,110 56.9 SLOTS 4,277 .0 0 .0 0 .0 OTHER REVENUE 34,300,930 103.7 30,506,450 100.0 27,713,442 100.0 GAMING REVENUE 5,341,659 16.2 4,615,713 15.1 4,828,921 17.4 SALARIES & WAGES 1,733,199 5.2 1,535,692 5.0 1,532,302 5.5 P/R TAXES & BENEFTS 5,167,337 15.6 4,317,270 14.2 3,948,621 14.2 COMPS (171,275) (.5) 596,373 2.0 0 .0 PROVISION DOUBTFUL CASINO ACCT 2,772,234 8.4 2,429,665 8.0 2,235,247 8.1 GROSS REVENUE TAXES 150,177 .5 148,777 .5 145,070 .5 CASINO LICENSE FEES 14,993,331 45.3 13,643,490 14.7 12,690,161 45.0 SUBTOTAL 53. .2 63,490 .2 40,767 .1 THE CLUB 449 86,294 .3 37,750 .1 29,997 .1 COST OF GOODS SOLD 1,880,988 5.7 2,246,929 7.4 1,604,106 5.8 FOOD, COIN & OTHER COUPONS 1,011,335 3.1 1,315,000 4.3 1,054,600 3.8 DIRECT MAIL 0 .0 0 .0 102,698 .4 TOURNAMENT PRIZES (16,333) .0 30,000 .1 0 .0 SLOT PROMOTIONS 424,128 1.3 78,000 .3 89,085 .3 TRUMP LORD 100,300 .3 167,000 .5 0 .0 CONSUMER BUS PROMOTIONS 62,971 .2 64,964 .2 40,423 .1 CASINO OPERATING SUPPLIES 620,012 1.9 259,600 .9 201,005 .7 SPECIAL EVENTS 462,610 1.4 455,700 1.5 355,974 1.3 CHARTER EXPENSE 70,990 .2 47,000 .2 (317,188) (1.1) ADVERTISING COSTS 670 .0 0 .0 0 .0 PUBLIC RELATIONS-DONATIONS 0 .0 0 .0 1,646 .0 COST OF SALES PROMOTIONS BOOTH 0 .0 (1,000) .0 2,323 .0 INTERCOMPANY ALLOCATIONS 386,397 .9 257,982 .0 308,050 1.4 DOCKET FEES/COMMISSIONS 15,474 .0 17,750 .1 9,448 .0 CREDIT BUREAU CHARGES 154,906 .5 70,000 .2 109,679 .4 OUTSIDE LIMOUSINE 10,209 .0 14,725 .0 12,665 .0 CASH 35,798 .1 20,000 .1 18,093 .1 LEGAL EXPENSES 80,063 .2 41,000 .1 25,095 .1 SUPERBUS EXPENSE 8,247 .0 14,704 .0 8,931 .0 UNIFORMS 255,530 .0 247,310 .0 264,081 1.0 ALL OTHER OPEATING EXPENSES 5,640,167 17.1 5,448,813 17.0 4,043,079 14.4 SUBTOTAL 20,633,499 62.4 19,892,311 62.6 16,734,041 60.4 T O T A L E X P E N S E S 13,662,431 41.3 11,414,147 37.4 10,979,401 39.6 G R O S S O P E R I N C YEAR-TO-DATE PRIOR-YEAR-TO-DATE DESCRIPTION ACTUAL PLAN ACTUAL $ % $ % $ % TABLES 173,482,275 40.0 167,291,439 40.3 169,112,124 40.0 POKER 7,519 1.7 0 .0 0 .0 SIMULCASTING 828,259 .2 0 .0 0 .0 SLOTS 260,284,093 60.0 148,038,866 59.7 244,933,258 59.2 OTHER REVENUE 56,599 .0 0 .0 0 .0 GAMING REVENUE 142,120,869 101.9 415,330,305 100.0 414,045,432 100.0 SALARIES & WAGES 70,921,301 14.0 56,401,632 13.6 56,303,468 13.6 P/R TAXES & BENEFTS 19,682,900 4.5 20,356,371 4.9 17,249,039 4.2 COMPS 60,281,082 13.9 59,008,630 14.2 50,420,371 14.1 PROVISION DOUBTFUL CASINO ACCT 3,469,150 .0 7,506,667 1.8 6,040,870 1.5 GROSS REVENUE TAXES 35,369,527 0.2 33,153,267 8.0 32,953,750 9.0 CASINO LICENSE FEES 1,910,486 .4 1,771,433 .4 1,618,209 .4 SUBTOTAL 101,6?5,246 41.9 178,198,000 42.9 172,666,500 41.7 THE CLUB 470,715 .1 833,276 .2 697,840 .2 COST OF GOODS SOLD 618,993 .1 505,600 .1 134,542 .0 FOOD, COIN & OTHER COUPONS 26,842,471 6.2 27,495,060 6.6 20,098,879 6.0 DIRECT MAIL 13,928,881 3.2 18,477,350 4.4 16,918,222 4.1 TOURNAMENT PRIZES 382,934 .1 150,000 .0 1,625,051 .1 SLOT PROMOTIONS 102,092 .0 360,000 .1 102,425 .0 TRUMP LORD 688,340 .2 1,077,000 .3 851,520 .2 CONSUMER BUS PROMOTIONS 1,184,475 .3 2,182,000 .5 45,312 .2 CASINO OPERATING SUPPLIES 471,366 .2 830,705 .2 557,116 .1 SPECIAL EVENTS 3,167,233 .2 4,639,471 1.1 2,097,540 .5 CHARTER EXPENSE 5,000,063 1.2 5,528,400 1.3 4,586,336 1.1 ADVERTISING COSTS 592,913 .1 626,800 .2 1,648,496 .1 PUBLIC RELATIONS-DONATIONS 670 .0 0 .0 5,000 .0 COST OF SALES PROMOTIONS BOOTH 1,667 .0 0 .0 96,693 .0 INTERCOMPANY ALLOCATIONS 0 .0 (12,000) .0 (9,885) .0 DOCKET FEES/COMMISSIONS 4,521,281 1.0 3,461,470 .0 3,445,034 .0 CREDIT BUREAU CHARGES 195,787 .0 220,000 .1 101,053 .3 OUTSIDE LIMOUSINE 1,471,768 .3 900,000 .2 1,878,554 .1 CASH 305 .0 155,880 .0 271,010 .1 LEGAL EXPENSES 245,976 .1 240,000 .1 201,593 .0 SUPERBUS EXPENSE 7 ,945 .2 342,000 .1 201,593 .0 UNIFORMS 1 ,488 .0 176,427 .4 112,705 .0 ALL OTHER OPEATING EXPENSES 4,5 ,370 1.0 2,947,860 .7 4,900,016 1.2 SUBTOTAL 65,8 ,041 15.2 71,137,227 17.1 67,972,397 16.4 T O T A L E X P E N S E S 247,475,287 57.1 219,335,227 60.4 248,638,985 58.1 G R O S S O P E R I N C 94,625,582 44.9 165,995,670 40.0 173,406,527 41.9
8 TRUMP TAJ MAHAL ASSOCIATES TABLE SUMMARY OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER 1993
PRIOR YEAR-- CURRENT YEAR--CURRENT MONTH CURRENT MONTH --------------------------- ------------- ------------------------------ ACTUAL PLAN ACTUAL DESCRIPTION ------ ---- -------------- ------------------------------ $ % $ % $ % 15,032,138 100.0 13,298,607 100.0 11,953,332 100.0 Tables 1,127,313 7.5 0 0 0 0 Poker 100,187 .7 0 0 0 0 Simulcasting 4,277 0 0 0 0 0 Other Revenue - ---------- ----- ---------- ----- ---------- ----- 16,263,915 108.2 13,290,607 100.0 11,953,332 100.0 Total Gaming Revenue - ---------- ----- ---------- ----- ---------- ----- 3,599,054 23.7 3,065,653 23.1 3,234,913 27.1 Salaries and Wages 1,269,795 0.4 1,068,857 8.0 1,098,362 9.2 Taxes and Benefits - ---------- ----- ---------- ----- ---------- ----- 4,829,649 32.1 4,134,509 31.1 4,333,275 36.3 Total Payroll and Benefits - ---------- ----- ---------- ----- ---------- ----- 1,072,479 7.1 1,231,702 9.3 969,138 8.1 Room Comps 896,616 6.0 802,019 6.0 807,096 7.4 Food Comps 678,724 4.5 591,398 4.5 558,585 4.7 Beverage Comps 56,146 0.4 35,000 0.3 1,556 0 Coupons 93,292 0.6 90,672 0.7 104,040 0 Other Comps - ---------- ----- ---------- ----- ---------- ----- 2,797,257 18.6 2,750,790 20.7 2,520,415 21.1 Total Promotional Allowances - ---------- ----- ---------- ----- ---------- ----- 104,712 0.7 58,600 0.4 89,622 0.8 Outside Entertainment 110,680 0.7 0 0 0 0 Cash Comps 2,000 0 9,900 0.1 21,080 0.2 Gifts 85,404 0.6 105,430 0 101,384 0 Tips, Photo and Other 0 0 0 0 0 0 Travel Reimbursements 280,669 1.9 170,113 1.3 202,560 1.7 Outside Limo 80,394 0.6 263,000 2.0 222,808 1.9 Cage Payouts 162,490 1.1 0 0 0 0 Table Coupons 834,348 5.6 607,043 4.6 637,455 5.3 Total Promotional Expenses - ---------- ----- ---------- ----- ---------- ----- 10,538 0.1 12,500 0.1 12,100 0.1 Employee Licenses 1,306,932 8.7 1,015,539 7.6 956,267 8.0 Gross Revenue Tax 4,622 0 0 0 652 0 Other Licenses & Fees 1,332,092 8.8 1,028,039 7.7 969,018 0.1 Total Licenses, Fees and Taxes - ---------- ----- ---------- ----- ---------- ----- 53,205 0.4 57,600 0.4 39,021 0.3 Maharajah Club 2,136 0 0 0 0 0 Cost of Goods Sold 53,398 0.4 50,909 0.4 40,423 0.3 Table Operating Supplies (171,275) (1.1) 596,373 4.5 0 0 Provision for Doubtful Debt 0 0 0 0 0 0 Collateral 10,765 0.1 2,350 0 5,039 0 Postage Expense 3,632 0 1,600 0 13,985 0.1 Advertising 315,159 2.1 137,600 1.0 179,309 1.5 Promotions and Special Events 214,643 1.6 262,600 2.0 235,203 2.0 Charter Expense 17,760 0.1 0 0 12,500 0.1 Consulting Expense - ---------- ----- ---------- ----- ---------- ----- 58,145 0.4 34,265 0.3 27,161 0.2 Supplies Expense 5,779 0 21,380 0.2 3,261 0 ????? Expense 42,992 0.3 41,127 0.3 45,820 0.4 Telephone and Telegraph 8,297 0.1 12,112 0.1 5,935 0.1 Uniforms 42,996 0.3 2,780 0 24,782 0.2 Other Expenses 954,239 6.3 1,424,876 10.7 921,244 7.7 Total Other Expenses - ---------- ----- ---------- ----- ---------- ----- 10,737,504 71.4 9,945,257 74.8 9,381,406 78.5 Total Expenses - ---------- ----- ---------- ----- ---------- ----- 5,526,331 36.8 3,345,351 25.2 2,571,926 21.5 Gross Operating Income
YEAR-TO-DATE PRIOR-YEAR-TO-DATE - ------------------------------ ----------------- ------------------ ------------------ DESCRIPTION ACTUAL PLAN ACTUAL - ------------------------------ ----------------- ------------------ ------------------ $ % $ % $ % Tables 173,432,274 100.0 167,291,439 100.0 169,112,174 100.0 Poker 7,519,644 4.3 0 0 0 0 Simulcasting 828,259 0.5 0 0 0 0 Other Revenue 56,599 0 0 0 0 0 ----------- ----- ----------- ----- ------------ ------ Total Gaming Revenue 181,834,776 104.0 167,291,439 100.0 169,112,174 100.0 ----------- ----- ----------- ----- ------------ ------ Salaries and Wages 40,818,548 23.5 37,603,295 22.5 38,183,959 22.6 Taxes and Benefits 14,191,548 8.2 14,285,865 8.5 12,485,278 7.4 ----------- ----- ----------- ----- ------------ ------ Total Payroll and Benefits 55,002,096 31.7 51,889,160 31.0 50,669,238 30.0 ----------- ----- ----------- ----- ------------ ------ Room Comps 14,907,118 8.6 16,385,256 9.8 15,171,533 9.0 Food Comps 11,916,099 6.9 12,989,640 7.8 11,595,601 6.9 Beverage Comps 8,181,442 4.7 8,356,868 5.0 7,520,720 4.4 Coupons 325,471 0.2 350,000 0.2 448,439 0.3 Other Comps 1,217,653 0.7 1,055,083 0.8 1,508,205 0.9 ----------- ----- ----------- ----- ------------ ------ Total Promotional Allowances 36,547,783 21.1 39,136,847 23.4 36,324,499 21.5 ----------- ----- ----------- ----- ------------ ------ Outside Entertainment 484,405 0.3 457,200 0.3 510,844 0.3 Cash Comps 673,161 0.4 0 0 0 0 Gifts 100,331 0.1 158,800 0.1 99,313 0.1 Tips, Photo and Other 1,395,189 0.8 1,273,000 0.8 0 0 Travel Reimbursements 0 0 0 0 90 0 Outside Limo 2,708,546 1.6 2,128,860 1.3 2,339,278 1.4 Cage Payouts 2,617,658 1.5 3,313,000 2.0 3,167,182 1.9 Table Coupons 162,490 0.1 0 0 0 0 Total Promotional Expenses 8,214,781 4.2 7,330,868 4.4 7,266,851 4.3 ----------- ----- ----------- ----- ------------ ------ Employee Licenses 245,506 0.1 160,366 0.1 139,374 0.1 Gross Revenue Tax 14,211,627 0.2 12,782,783 7.6 13,047,081 7.7 Other Licenses & Fees 23,290 0 3,100 0 4,297 0 Total Licenses, Fees and Taxes 14,483,424 0.4 2,946,249 7.7 13,190,253 7.0 ----------- ----- ----------- ----- ------------ ------ Maharajah Club 465,968 0.3 753,800 0.5 685,911 0.4 Cost of Goods Sold 47,135 0 0 0 0 0 Table Operating Supplies 555,593 0.3 628,507 0.4 557,116 0.3 Provision for Doubtful Debt 3,469,150 2.0 7,506,667 4.5 6,040,870 3.6 Collateral 0 0 0 0 0 0 Postage Expense 99,956 0.1 27,196 0 78,895 0 Advertising 47,572 0 24,700 0 89,879 0.1 Promotions and Special Events 2,028,383 1.2 2,593,686 1.6 1,402,218 0.8 Charter Expense 2,791,026 1.6 3,211,200 1.9 2,825,510 1.7 Consulting Expense 131,741 0.1 50,000 0 340,362 0 ----------- ----- ----------- ----- ------------ ------ Supplies Expense 60,053 0.3 417,723 0.3 460,937 0 T&E Expense 411,312 0.2 261,545 0.2 367,923 0 Telephone and Telegraph 521,754 0.3 498,118 0.3 552,356 0 Uniforms 119,212 0.1 4,145,315 0.1 82,210 0 Other Expenses 807,119 0.5 (175,414) (0.1) (164,715) (0.1) Total Other Expenses 15,750,028 9.1 18,582,873 11.1 15,927,350 9.1 ----------- ----- ----------- ----- ------------ ------ Total Expenses 129,998,111 75.0 129,885,996 77.6 13,378,891 73.0 ----------- ----- ----------- ----- ------------ ------ Gross Operating Income 51,088,665 29.9 37,405,443 22.4 45,733,483 27.0
9 TRUMP TAJ MAHAL ASSOCIATES GAMING SUMMARY FOR TAJ MAHAL FOR DECEMBER 1993
Current Period Description Year-To-Date Current Year Prior Year % Change Current Year Prior Year % Change Blackjack 37,823,848 34,446,071 9.8 Drop 476,505,689 489,221,509 (2.6) 5,855,709 5,900,895 (.8) Win 71,857,756 71,877,039 .0 15,400 17,100 Hold% 15,000 14,600 102 98 # of Tables 1,251 1,144 57,409 60,213 Win/Unit 57,440 62,830 Craps 24,172,080 19,612,026 23.3 Drop 268,210,830 281,979,246 (4.9) 3,624,119 2,892,904 25.3 Win 37,739,522 42,599,813 (11.4) 14,900 14,700 Hold% 14,000 15,100 17 22 # of Tables 232 309 213,183 131,496 Win/Unit 162,670 137,063 Roulette 6,130,959 5,132,867 19.4 Drop 79,755,951 75,418,847 5.8 1,591,066 1,280,245 24.3 Win 19,503,030 18,683,402 4.4 25,900 24,900 Hold% 24,100 24,700 21 18 # of Tables 213 245 75,765 71,125 Win/Unit 91,564 76,259 Big Six 499,126 387,493 28.8 Drop 6,639,117 7,169,497 (7.4) 242,812 199,027 22.0 Win 3,185,566 3,409,116 (6.6) 48,600 51,300 Hold% 47,900 47,500 4 6 # of Tables 57 72 60,703 33,171 Win/Unit 55,887 47,349 All Other 3,339,249 2,262,890 47.6 Drop 31,334,191 18,422,305 70.1 709,526 473,428 49.9 Win 7,284,370 4,731,361 54.0 21,200 20,900 Hold% 23,200 25,600 10 7 # of Tables 90 65 70,953 67,633 Win/Unit 74,330 72,790 Poker 0 0 .0 Drop 0 0 .0 1,127,513 0 .0 Win 7,513,044 0 .0 .000 .000 Hold% .000 .000 58 0 # of Tables 347 0 19,440 0 Win/Unit 21,651 0 Baccarat 12,650,893 13,939,225 (9.2) Drop 161,103,742 163,138,494 (1.2) 2,386,656 859,645 177.6 Win 27,523,825 23,342,404 17.9 18,800 6,100 Hold% 17,000 14,300 4 5 # of Tables 55 52 596,664 171,929 Win/Unit 500,433 448,894 Minibaccarat 3,065,289 2,827,683 8.4 Drop 38,492,837 32,245,043 19.4 622,250 347,188 79.2 Win 6,330,208 4,468,960 41.8 20,200 12,200 Hold% 16,400 13,000 5 2 # of Tables 45 24 124,450 173,594 Win/Unit 140,849 186,207 Total 87,609,444 70,600,255 11.6 Drop 1,062,042,357 1,067,595,021 (.5) 16,159,651 11,953,332 35.2 Win 180,945,321 169,112,175 7.0 18,400 15,200 Hold% 17,000 15,800 221 158 # of Tables 2,290 1,911 73,121 75,654 Win/Unit 78,740 88,494
REPORT NUMBER TABLE RUM DATE 01/13/94 10 TRUMP TAJ MAHAL ASSOCIATES SLOT SUMMARY OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER 1993
Current Year-Current Month Prior Yr-Current Mth Actual Plan Actual Description $ % $ % $ % 18,375,878 100.0 17,676,580 100.0 15,967,800 100.0 Gross Slot Win 338,862 1.8 460,729 2.6 207,690 1.3 Multi Link/ Progressive Adj 18,037,015 98.2 17,215,851 97.4 15,760,110 98.7 Net Slot Win 1,727,354 9.4 1,525,636 8.6 1,539,828 9.6 Salaries and Wages 517,854 2.8 491,261 2.8 488,121 3.1 Taxes and Benefits 2,245,209 12.2 2,016,896 11.4 2,027,949 12.7 Total Payroll and Benefits 490,056 2.7 466,142 2.6 366,159 2.3 Room Comps 659,775 3.6 362,107 2.0 285,419 1.8 Food Comps 85,015 .5 36,835 .2 47,454 .3 Beverage Comps 36,390 .2 598,725 3.4 251,838 1.6 Coupons 180,634 1.0 45,494 .3 51,137 .3 Other Comps 1,467,870 8.0 1,509,302 8.5 1,002,008 6.3 Total Promotional Allowances 2,871,553 15.6 2,963,204 16.8 2,409,614 15.1 Coin Expense 13,226 .1 7,500 .0 7,617 .0 Outside Entertainment 6,711 .0 850 .0 4,060 .0 Gifts 73,392 .4 40,510 .2 26,769 .2 Tips, Photo and Other 0 .0 0 .0 0 .0 Travel Reimbursements 3,303 .0 0 .0 0 .0 Cage Payouts 2,960,105 16.2 3,012,072 17.0 2,448,060 15.3 Total Promotional Expenses 3,038 .0 3,583 .0 10,200 .1 Employee Licenses 131,583 .7 132,694 .8 121,917 .8 Slot Machine License Fees 1,465,302 8.0 1,414,126 8.0 1,278,981 8.0 Gross Revenue Tax 332 .0 0 .0 202 .0 Other Licenses & Fees 1,600,255 0.7 1,550,403 8.0 1,411,299 8.8 Total Licenses, Fees and Taxes 93,253 .5 43,065 .2 34,578 .2 Presidents Select Club 9,572 .1 14,055 .1 0 .0 Slot Operating Supplies 54,023 .3 0 .0 2,693 .0 Direct Mail Collateral 10,493 .1 44,600 .3 (364,026) (2.3) Direct Mail Production 30,234 .2 100,813 .6 66,349 .1 Postage Expense 427,640 2.3 29,600 .5 30,160 .2 Advertising 83,967 .5 197,000 1.1 112,977 .7 Slot Promotions 312,853 1.7 122,000 .7 100,503 .6 Special Events 220,968 1.2 193,100 1.1 120,771 .8 Charter Expense 100,087 .5 95,741 .5 132,528 .8 Junket Fees/Commissions 9,952 .1 300 .0 0 .0 Consulting Expense 70,220 .4 49,751 .3 54,984 .3 Supplies Expense 569 .0 233 .0 165 .0 ? Expense 10,614 .1 8,679 .0 5,737 .0 Telephone & Telegraph 0 .0 2,666 .0 2,997 .0 Uniforms 9,920 .1 14,100 .1 9,340 .1 Over/? & Counterfeits 161,693 .9 92,681 .5 153,564 1.0 Other Expenses 1,614,058 8.8 1,058,382 6.0 463,319 2.9 Total Other Expenses 9,895,577 53.9 9,147,055 51.7 7,352,635 46.0 Total Expenses 8,141,438 44.3 8,068,797 45.6 8,407,475 52.7 Gross Operating Income Year-To-Date Prior-Year-To-Date Actual Plan Actual $ % $ % $ % 264,503,555 100.0 254,631,059 100.0 246,947,879 100.0 Gross Slot Win 4,219,462 1.6 6,592,193 2.6 2,814,621 .0 Multi Link/ Progressive Adj 260,281,093 98.4 248,038,866 97.4 244,933,258 99.2 Net Slot Win 19,551,632 7.4 18,396,937 7.2 17,716,619 7.2 Salaries and Wages 6,056,473 2.3 6,471,907 2.5 5,247,151 2.1 Taxes and Benefits 25,602,105 9.7 24,868,844 9.8 22,964,070 9.3 Total Payroll and Benefits 6,825,762 2.6 5,907,808 2.3 7,205,548 2.9 Room Comps 6,029,619 2.3 4,791,521 1.9 4,927,893 2.0 Food Comps 833,792 .3 523,595 .2 1,234,646 .5 Beverage Comps 1,877,873 .7 7,643,?00 3.0 7,990,016 3.2 Coupons 1,017,263 .4 636,411 .3 915,905 .4 Other Comps 16,581,310 6.3 19,502,935 7.7 22,274,809 9.0 Total Promotional Allowances 38,981,368 14.7 38,328,818 15.1 32,082,362 15.0 Coin Expense 90,369 .0 102,000 .0 57,875 .0 Outside Entertainment 95,948 .0 85,200 .0 38,074 .0 Gifts 481,108 .2 494,381 .2 394,317 .2 Tips, Photo and Other 0 .0 0 .0 90 .0 Travel Reimbursements 57,567 .0 0 .0 0 .0 Cage Payouts 39,706,360 15.0 39,010,399 15.3 37,572,723 15.2 Total Promotional Expenses 68,631 .0 57,471 .0 54,585 .0 Employee Licenses 1,568,542 .6 1,550,496 .6 1,419,441 .6 Slot Machine License Fees 21,154,899 8.0 20,370,484 8.0 19,906,669 8.1 Gross Revenue Tax 4,452 .0 0 .0 512 .0 Other Licenses & Fees 22,796,524 8.6 21,978,451 8.6 21,381,207 3.7 Total Licenses, Fees and Taxes 588,867 .2 571,270 .2 168,836 .1 Presidents Select Club 117,774 .0 202,203 .1 0 .0 Slot Operating Supplies 178,579 .1 0 .0 210,201 .1 Direct Mail Collateral 2??,927 .1 582,400 .2 1,097,300 .4 Direct Mail Production 9??,776 .4 1,217,650 .5 1,194,190 .5 Postage Expense 747,845 .3 1,096,?00 .4 359,714 .1 Advertising 1,287,367 .5 2,692,000 1.1 2,392,239 1.0 Slot Promotions 1,516,784 .6 2,045,786 .8 1,007,699 .4 Special Events 2,2??,037 .9 2,312,?00 .9 1,761,326 .? Charter Expense 1,503,855 .6 1,331,735 .5 1,242,222 .5 Junket Fees/Commissions 41,901 .0 3,600 .0 86,399 .0 Consulting Expense 5??,061 .2 642,005 .3 726,328 .3 Supplies Expense ??,253 .0 11,?40 .0 6,732 .0 ? Expense 201,748 .1 104,742 .0 110,168 .0 Telephone & Telegraph 74,767 .0 31,988 .0 30,449 .0 Uniforms 1?8,302 .1 155,150 .1 196,208 .1 Over/? & Counterfeits 2,211,595 .? 1,082,635 .4 2,478,404 1.0 Other Expenses 12,007,539 4.8 14,088,603 5.5 13,068,?05 5.? Total Other Expenses 117,496,838 44.4 119,449,231 46.9 117,260,014 47.5 Total Expenses 142,787,255 54.0 128,589,635 50.5 127,673,044 51.7 Gross Operating Income
11 TRUMP TAJ MAHAL ASSOCIATES SLOT SUMMARY FOR TAJ MAHAL FOR DECEMBER 1993
Current Period Year-To-Date Current Year Prior Year % Change Description Current Year Prior Year % Change $ .05 Machines 2,611,411 2,867,544 (8.9) Handle 42,053,329 43,216,980 (2.7) 403,907 441,074 (8.4) Win 6,521,980 6,680,454 (2.4) 15.400 15.300 Hold% 15.500 15.400 155 156 # Of Machines 1,871 1,873 2,606 2,827 Win/Unit 3,486 3,567 $ .25 Machines 94,781,170 79,997,404 18.5 Handle 1,351,948,159 1,250,335,495 8.1 9,501,808 8,335,936 14.0 Win 140,650,502 135,781,935 3.6 10.000 10.400 Hold% 10.400 10.800 1,979 1,811 # Of Machines 23,345 105,448 4,801 4,603 Win/Unit 6,025 1,288 $ .50 Machines 19,697,091 19,185,515 2.7 Handle 298,366,329 308,983,643 (3.4) 1,858,942 1,934,503 (3.9) Win 29,364,395 31,539,593 (6.9) 9.400 10.000 Hold% 9.800 10.200 320 312 # Of Machines 3,865 3,707 5,809 6,200 Win/Unit 7,598 8,508 $1.00 Machines 64,056,689 50,592,764 26.6 Handle 841,608,175 875,740,661 24.5 5,028,472 4,178,937 20.3 Win 69,092,424 58,475,081 18.2 7.800 8.200 Hold% 8.200 8.600 618 544 # Of Machines 7,342 6,061 Win/Unit 9,411 9,648 8,137 7,682 $5.00 Machines 24,413,635 16,693,835 46.2 Handle 288,174,140 203,520,965 41.6 1,361,674 940,925 44.7 Win 17,087,?78 13,013,485 31.3 5.500 5.600 Hold% 5.900 6.300 78 79 # Of Machines 927 892 17,457 11,910 Win/Unit 18,133 14,589 $25.00 Machines 1,630,175 1,222,500 34.0 Handle 22,358,150 17,517,225 27.6 163,875 112,525 45.6 Win 1,255,165 982,839 27.7 10.000 9.200 Hold% 5.600 5.600 5 5 # Of Machines 60 60 32,775 22,505 Win/Unit 20,919 16,381 $100.00 Machines 567,900 479,400 18.5 Handle 13,401,800 10,756,500 24.6 57,200 23,900 139.3 Win 531,700 474,500 12.1 10.000 4.900 Hold% 3.900 4.400 3 3 # Of Machines 36 36 19,067 7,967 Win/Unit 14,769 13,181 Total 207,766,071 171,039,042 21.5 Handle 2,857,910,382 2,510,071,469 13.9 18,375,878 15,967,800 15.1 Win 264,503,544 246,947,887 7.1 8.800 9.300 Hold% 9.200 9.800 3,158 2,910 # Of Machines 37,446 118,077 5,819 5,407 Win/Unit 7,064 2,091
NOTE THAT THE YTD NUMBERS FOR 1990 REFLECT TOTALS AS OF APRIL 2, 1990. 12 TRUMP TAJ MAHAL ASSOCIATES FOOD SUMMARY OPERATING REVIEW FOR THE PERIOD ENDING DECEMBER 1993
Current Year-Current Month Prior Yr-Current Mth Actual Plan Actual Description $ % $ % $ % 1,500,039 43.8 1,378,483 42.4 1,289,176 44.8 Cash Sales 86,005 2.5 633,725 19.5 309,075 10.7 Coupon Sales 1,826,371 53.3 1,204,435 37.0 1,224,961 42.6 Comp Sales 18,097 .5 36,600 1.1 49,473 1.7 Other Revenue 11,743 .3 6,930 .2 7,447 .3 Staff Dining Sales 13,909 .4 5,815 .2 3,283 .1 Allowances 3,428,267 100.0 3,254,366 100.0 2,876,848 100.0 Total Net Food Sales 1,316,656 38.4 1,263,526 38.8 1,149,673 40.8 Cost of Food Sold 1,577,749 46.0 1,441,301 44.3 1,413,444 49.1 Salaries & Wages 584,796 17.1 579,754 17.0 490,854 17.1 Payroll Taxes & Benefits 3,110 .1 3,000 .1 59,656 2.1 Comps 0 .0 27,500 .8 0 .0 Promotions 46,504 1.4 68,750 2.1 68,127 2.1 China/Glass/Silver 10,151 .3 9,825 .3 16,416 .6 Decorations 0 .0 4,350 .1 2,776 .1 Menus 50,199 1.5 59,800 1.0 22,073 .8 Restaurant Supplies 43 .0 6,650 .2 10,240 .4 Uniforms 2,447 .1 8,425 .3 614 .0 Linen 27,195 .8 20,550 .6 59,140 2.1 Laundry 0 .0 0 .0 0 .0 Prep/Ste? Allocations 80,160 2.3 49,725 1.5 88,785 3.1 All Other Expenses 3,699,010 107.9 3,543,156 108.9 3,374,597 117.3 Total Expenses (270,743) (7.9) (288,290) (8.9) (497,749) (17.3) Gross Operating Income
Year-To-Date Prior-Year-To-Date Description Actual Plan Actual $ % $ % $ % Cash Sales 20,501,911 48.2 19,864,533 42.6 28,122,262 43.4 Coupon Sales 2,442,481 5.7 7,993,600 17.1 8,528,078 18.4 Comp Sales 19,197,204 45.1 18,331,434 39.3 17,210,630 37.1 Other Revenue 321,573 .8 439,200 .9 442,311 1.0 Staff Dining Sales 124,902 .3 100,317 .2 102,969 .2 Allowances 65,129 .2 81,300 .2 74,944 .2 Total Net Food Sales 42,521,942 100.0 46,647,784 100.0 46,332,106 100.0 Cost of Food Sold 17,241,777 40.6 18,111,715 38.0 18,320,935 39.5 Salaries & Wages 10,126,570 42.6 17,848,526 38.3 10,678,578 40.3 Payroll Taxes & Benefits 6,712,055 15.8 7,250,089 15.5 6,748,405 14.? Comps 303,205 .7 36,000 .1 158,361 .3 Promotions 0 .0 330,000 .7 0 .0 China/Glass/Silver 709,579 1.7 879,675 1.9 882,337 1.9 Decorations 98,451 .2 143,900 .3 144,858 .3 Menus 28,958 .1 61,300 .1 44,840 .1 Restaurant Supplies 518,667 1.2 750,615 1.6 283,221 .6 Uniforms 69,081 .2 79,900 .2 77,768 .2 Linen 79,179 .2 110,750 .2 120,056 .3 Laundry 219,758 .6 259,950 .6 301,254 .7 Prep/Ste? Allocations 316 .0 0 .0 0 .0 All Other Expenses 874,336 2.1 631,585 1.4 1,105,122 2.4 Total Expenses 45,01?,933 105.9 46,494,005 99.7 46,865,785 101.2 Gross Operating Income (2,491,991) (5.9) 153,779 .3 (533,??9) (1.2)
13 TRUMP TAJ MAHAL ASSOCIATES FOOD COVERS BY OUTLET OPERATING REVIEW FOR THE PERIOD ENDING DECEMBER 1993
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MONTH ACTUAL PLAN VARIANCE ACTUAL VARIANCE DESCRIPTION $ % $ % 93,845 103,400 (9,555) (9.24) 74,041 19,004 21.10 Sultan's Feast 16,526 32,000 (15,474) (40.36) 14,461 2,065 12.50 New Dehli Deli 0 45,000 (45,000) (100.00) 25,025 (25,025) .00 Rock & Rolls 90,008 92,750 5,258 5.67 87,865 10,143 10.35 Bombay Cafe 200,379 273,150 (64,771) (23.71) 201,392 6,907 3.35 Subtotal Volume 6,208 5,070 1,130 22.45 5,885 323 5.20 Marco Polo 2,855 3,800 (1,025) (26.42) 1,322 1,533 53.70 Sinbad's 4,900 3,500 1,400 40.00 4,380 512 10.45 Dynasty 4,676 4,800 (204) (4.18) 3,806 870 18.61 Safari Steak House 259 1,400 (1,141) (81.50) 1,764 (1,505) (581.03) Scheherazade 18,898 10,730 168 .90 17,165 1,733 9.17 Subtotal Gourmet 27,379 22,150 5,229 23.61 24,832 2,547 9.30 Room Service 22,749 12,000 10,749 89.58 14,875 7,874 34.61 Banquets/Conventions 0 0 0 .00 0 0 .00 Pool Snack Bar 50,128 34,150 15,978 46.79 39,707 10,421 20.79 Subtotal Other 277,405 326,030 (48,625) (14.91) 258,264 19,141 6.90 Total Food Covers
Year-To-Date Prior-Year-To-Date DESCRIPTION Actual Plan Variance Actual Variance $ % $ % OUTLET Sultan's Feast 1,277,156 1,379,100 (101,944) (7.39) 1,327,437 (50,281) 3.79 New Dehli Deli 411,079 476,500 (65,421) (13.73) 510,240 (99,161) 19.13 Rock & Rolls 204,117 629,600 (345,483) (54.87) 499,290 (215,173) 43.10 Bombay Cafe 1,066,109 1,156,375 (90,266) (7.81) 1,191,251 (125,142) 10.?1 Subtotal Volume 3,038,461 3,641,575 (603,114) (16.56) 3,520,218 (409,757) 13.?8 Marco Polo 74,997 76,440 (1,443) (1.89) 82,096 (7,099) 8.?5 Sinbad's 43,969 50,710 (6,741) (13.29) 40,779 (4,810) 9.46 Dynasty 56,203 49,700 6,503 13.09 49,035 7,168 14.?2 Safari Steak House 59,347 68,360 (9,013) (13.19) 66,602 (7,335) 11.00 Scheherazade 22,843 21,800 1,043 4.78 22,676 167 .74 Subtotal Gourmet 257,359 267,010 (9,651) (3.61) 269,268 (11,909) 4.?2 Room Service 306,145 206,800 19,345 6.75 299,081 7,064 2.16 Banquets/Conventions s 238,991 186,500 52,491 28.15 182,931 56,060 30.?5 Pool Snack Bar 2,899 9,550 (6,651) (69.64) 9,541 (6,642) 69.?2 Subtotal Other 548,035 482,850 65,185 13.50 491,553 56,482 11.19 Total Food Covers 3,843,855 4,391,435 (547,580) (12.47) 4,289,039 (445,184) 10.?
14 REPORT NUMBER 15225 TRUMP TAJ MAHAL ASSOCIATES RUN DATE 01/13/94 AVERAGE CHECK BY OUTLET FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH PRIOR YEAR-CURRENT MONTH ACTUAL PLAN VARIANCE ACTUAL VARIANCE DESCRIPTION $ % $ % OUTLET $ 7.16 $ 6.65 $ .51 7.67 $ 6.89 $ .27 3.92 SULTAN'S FEAST $ 9.32 $ 8.79 $ .53 6.03 $ 8.63 $ .69 8.00 NEW DEHLI DELI $ .88 $ 5.25 $ (5.25) (100.00) $ 5.38 $ (5.38) (100.00) ROCK & ROLLS $ 10.22 $ 9.66 $ .56 5.80 $ 9.79 $ .43 4.39 BOMBAY CAKE $ 8.77 $ 7.69 $ 1.08 14.04 $ 0.09 $ .68 0.41 SUB AVERAGE VOLUME $ 33.32 $ 25.79 $ 7.53 29.20 $ 30.27 $ 3.05 10.00 MARCO POLO $ 31.12 $ 29.29 $ 1.83 6.25 $ 31.02 $ .10 .32 SINBAD'S $ 37.47 $ 31.75 $ 5.72 10.02 $ 35.55 $ 1.91 5.37 DYNASTY $ 39.56 $ 35.78 $ 3.79 10.59 $ 36.52 $ 3.04 8.32 SAFARI STEAK HOUSE $ 65.39 $ 41.25 $ 24.14 50.52 $ 40.45 $ 24.94 61.66 SCHEHERAZADE $ 36.05 $ 31.39 $ 4.66 14.85 $ 34.11 $ 1.94 5.69 SUB AVERAGE GOURMET $ 12.31 $ 12.75 $ (.44) (3.45) $ 11.49 $ .82 7.14 ROOM SERVICE $ 22.78 $ 17.50 $ 5.20 29.71 $ 19.21 $ 3.49 18.17 BANQUETS/CONVENTIONS $ 17.98 $ 15.48 $ 2.51 16.21 $ 15.42 $ 2.56 16.68 SUB AVERAGE OTHER $ 12.12 $ 9.76 $ 2.36 24.10 $ 18.79 $ 1.33 12.33 TOTAL AVERAGE CHECK
YEAR-TO-DATE PRIOR YEAR-TO-DATE ACTUAL PLAN VARIANCE ACTUAL VARIANCE $ % $ % SULTAN'S FEAST $ 6.94 $ 6.77 $ .17 2.51 $ 6.79 $ .15 2.21 NEW DEHLI DELI $ 9.03 $ 9.58 $ (.47) (4.95) $ 8.96 $ .87 .78 ROCK & ROLLS $ 5.18 $ 5.89 $ (.71) (12.05) $ 5.96 $ (.70) (13.09) BOMBAY CAKE $ 10.06 $ 18.24 $ (.19) (1.86) $ 18.26 $ (.21) (2.05) SUB AVERAGE VOLUME $ 8.15 $ 8.98 $ .08 .99 $ 8.16 $ (.81) (.12) MARCO POLO $ 30.31 $ 28.84 $ 2.27 8.18 $ 28.37 $ 1.94 6.84 SINBAD'S $ 31.16 $ 31.46 $ (.38) (.95) $ 31.88 $ (.73) (2.29) DYNASTY $ 35.08 $ 32.77 $ 2.31 7.05 $ 33.58 $ 1.59 4.75 SAFARI STEAK HOUSE $ 37.24 $ 36.94 $ .30 .81 $ 38.88 $ (.76) (2.88) SCHEHERAZADE $ 40.84 $ 42.16 $ (1.32) (3.13) $ 48.93 $ (.89) (.22) SUB AVERAGE GOURMET $ 34.03 $ 33.88 $ 1.03 3.12 $ 33.38 $ .65 1.95 ROOM SERVICE $ 12.80 $ 13.32 $ (.44) (3.30) $ 13.06 $ (.18) (1.38) BANQUETS/CONVENTIONS $ 17.14 $ 19.67 $ (2.54) (12.91) $ 28.54 $ (3.48) (16.55) SUB AVERAGE OTHER $ 15.88 $ 16.47 $ (.60) (4.13) $ 16.46 $ (.67) (4.87) TOTAL AVERAGE CHECK $ 18.02 $ 18.42 $ .40 3.84 $ 18.68 $ .22 2.88
REPORT NUMBER 15300 RUN DATE 01/13/94 TRUMP TAJ MAHAL ASSOCIATES BEVERAGE SUMMARY OPERATES REVIEW FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MTH YEAR-TO-DATE PRIOR-YEAR-TO-DATE ACTUAL PLAN ACTUAL DESCRIPTION ACTUAL PLAN ACTUAL $ % $ % $ % $ % $ % $ % 375,437 30.9 313,476 32.9 362,762 37.9 CASH SALES 4,670,476 34.0 4,351,649 32.5 4,915,728 36.2 7,796 .6 8 .8 394 .8 COUPON SALES 36,335 .2 0 .0 8,506 .1 833,111 60.6 640,185 67.2 595,616 62.2 COMP SALES 9,804,645 65.9 9,060,989 67.6 8,658,684 63.8 8 .8 8 .8 8 .0 OTHER REVENUE 0 .0 0 .0 0 .0 1,855 .1 8 .8 631 .1 STAFF BUILDING SALES 1,345 .0 0 .0 4,182 .0 2,835 .2 942 .1 1,190 .1 ALLOWANCES 19,923 .1 12,252 .1 13,221 .1 1,214,564 100.0 952,639 100.0 958,213 100.0 TOTAL NET BEVERAGE SALES 13,749,079 100.0 13,400,386 100.0 13,565,879 100.0 296,194 24.4 229,409 24.1 242,539 25.3 COST OF BEVERAGE SOLD 3,389,742 24.7 3,215,896 24.0 3,297,332 24.3 323,556 26.6 271,664 28.5 270,482 28.2 SALARIES & WAGES 3,675,109 26.7 3,359,558 25.1 3,473,870 25.6 154,535 12.7 121,627 12.0 113,610 11.9 PAYROLL TAXES & BENEFITS 1,789,972 12.7 1,487,971 11.1 1,535,112 11.3 8 .0 1,875 .1 8 .8 COMPS 0 .0 12,980 .1 10,057 .1 6,962 .6 6,308 .7 7,909 .8 GLASSWARE 69,587 .4 79,700 .6 88,577 .4 24,162 2.0 16,225 1.7 8 .8 RESTAURANT SUPPLIES 259,664 1.9 200,700 1.5 19,642 .1 8 .0 15,001 1.6 8 .8 UNIFORMS 49,815 .4 180,814 1.3 81,010 .4 13,861 1.1 11,175 1.2 24,966 2.6 ALL OTHER EXPENSES 159,890 1.1 134,508 1.0 342,443 2.5 818,476 67.4 672,556 70.6 659,506 63.3 TOTAL EXPENSES 9,378,899 67.0 8,671,241 64.7 8,839,242 65.2 396,894 32.6 280,083 29.4 298,707 31.2 GROSS OPERATING INCOME 4,474,980 32.2 4,729,145 35.3 4,726,637 34.4
REPORT NUMBER 15400 TRUMP TAJ MAHAL ASSOCIATES RUN DATE 01/13/94 LODGING SUMMARY OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MONTH ACTUAL PLAN ACTUAL DESCRIPTION $ % $ % $ % 1,861,641 30.9 736,200 29.5 1,011,415 41.9 CASH REVENUE 1,631,413 59.8 1,768,000 70.5 1,418,872 58.5 COMP REVENUE (6,332) (.2) 25,000 1.8 37,059 1.6 ALLOWANCES 2,699,386 99.0 2,471,200 99.1 2,304,428 98.0 NET ROOM REVENUE 30,186 1.1 23,000 .9 36,598 1.5 PAY TV RECEPTION 617 .0 1,500 .1 (2,300) (.1) OTHER OPERATING INCOME 1,324 .0 1,800 .1 4,527 .2 ALLOWANCES 29,399 1.1 22,700 .9 29,771 1.2 NET OTHER OPERATING REVENUE (2,019) (.1) 1,000 .0 (612) .0 VALET REVENUE 0 .0 0 .0 0 .0 ALLOWANCES (2,019) (.1) 1,000 .0 (612) .0 NET VALUE 2,726,766 100.0 2,494,900 100.0 2,413,588 100.0 TOTAL HOTEL REVENUE 157,665 5.8 125,955 5.0 133,014 5.5 FRONT OFFICE SALARY/WAGES 450,939 16.5 366,376 14.7 365,591 15.1 HOUSEKEEPING SALARIES & WAGES 34,248 1.3 33,290 1.3 29,403 1.2 RESERVATIONS SALARIES & WAGES 642,853 23.6 525,621 21.1 528,007 21.9 TOTAL SALARIES & WAGES 241,806 0.8 218,993 8.0 200,119 0.3 TOTAL PER TAXES & BENEFITS 883,948 32.4 744,614 29.0 228,126 30.2 TOTAL PAYROLL 31,069 1.2 23,000 .9 32,435 1.3 COST OF SALES--PAY T.V. 0 .0 0 .0 0 .0 COST OF OUTLET SERVICES 31,069 1.2 23,000 .9 32,435 1.3 TOTAL COST OF GOODS 1,162 .0 2,000 .1 2,204 .1 COMPS 2 .0 15,000 .6 19,975 .0 COMMISSIONS 0 .0 0 .0 0 .0 BAG DEBT--HOTEL 15,140 .6 11,970 .5 10,772 .4 TELEPHONE 70,586 2.9 64,064 2.6 98,612 4.1 LINEN 152,194 5.6 111,000 4.4 90,763 3.8 LAUNDRY 58,839 2.1 42,320 1.7 43,488 1.0 GUEST SUPPLIES 10,436 .7 12,012 .5 13,098 .5 CLEANING SUPPLIES 3,164 .1 5,976 .2 16,655 .7 EQUIPMENT EXPENSE 0 .0 0 .0 0 .0 PRINTING & STATIONARY 0 .0 0 .0 0 .0 PAPER SUPPLIES 30,722 1.1 25,244 1.0 8,319 .3 SUPPLIES 6,417 .2 1,827 .1 3,256 .1 UNIFORMS 42,137 1.5 39,310 1.6 41,606 1.7 ALL OTHER EXPENSES 1,321,014 40.5 1,098,345 44.0 1,109,313 46.8 TOTAL EXPENSES 1,404,953 51.5 1,396,555 56.0 1,304,275 54.0 GROSS OPERATING INCOME
YEAR-TO-DATE PRIOR YEAR-TO-DATE ACTUAL PLAN ACTUAL DESCRIPTION $ % $ % $ % 17,088,532 43.5 17,489,800 42.7 17,787,448 42.9 CASH REVENUE 23,070,249 56.1 23,310,500 57.1 23,691,166 57.1 COMP REVENUE 276,872 .7 485,300 1.0 435,818 1.0 ALLOWANCES 48,681,909 99.0 40,315,000 98.8 41,843,596 98.9 NET ROOM REVENUE 423,574 1.0 471,000 1.2 477,289 1.2 PAY TV RECEPTION 23,847 .1 31,000 .1 27,887 .1 OTHER OPERATING INCOME 29,620 .1 25,200 .1 46,546 .1 ALLOWANCES 422,801 1.0 476,800 1.2 457,031 1.1 NET OTHER OPERATING REVENUE (10,030) .0 12,000 .0 (6,617) .0 VALET REVENUE 0 .0 0 .0 0 .0 ALLOWANCES (10,030) .0 12,000 .0 (6,617) .0 NET VALUE 41,091,680 100.0 48,803,800 100.0 41,494,010 100.0 TOTAL HOTEL REVENUE 1,658,912 4.0 1,465,632 3.6 1,838,978 4.4 FRONT OFFICE SALARY/WAGES 5,206,238 12.7 4,551,989 11.2 4,623,152 11.1 HOUSEKEEPING SALARIES & WAGES 385,330 .9 404,108 1.0 269,885 .7 RESERVATIONS SALARIES & WAGES 7,250,471 17.6 6,421,729 15.7 6,724,814 16.2 TOTAL SALARIES & WAGES 2,700,703 6.6 2,712,744 6.6 2,429,225 5.9 TOTAL PER TAXES & BENEFITS 9,951,175 24.2 9,134,473 22.4 9,153,239 22.1 TOTAL PAYROLL 401,824 1.0 402,000 1.2 492,511 1.2 COST OF SALES--PAY T.V. 0 .0 0 .0 0 .1 COST OF OUTLET SERVICES 401,824 1.0 482,000 1.2 492,511 1.2 TOTAL COST OF GOODS 21,337 .1 24,000 .1 57,926 .1 COMPS 240,666 .6 108,000 .4 223,233 .5 COMMISSIONS 0 .0 0 .0 0 .0 BAG DEBT--HOTEL 161,389 .4 144,040 .4 134,068 .3 TELEPHONE 1,044,824 2.5 913,696 2.2 880,136 2.1 LINEN 1,585,036 3.7 1,332,000 3.3 1,308,876 3.2 LAUNDRY 659,889 1.6 683,692 1.5 585,483 1.4 GUEST SUPPLIES 158,574 .4 171,310 .4 184,253 .4 CLEANING SUPPLIES 92,663 .2 79,784 .2 99,848 .2 EQUIPMENT EXPENSE 0 .0 0 .0 0 .0 PRINTING & STATIONARY 0 .0 0 .0 0 .0 PAPER SUPPLIES 344,542 .9 322,491 .8 358,191 .9 SUPPLIES 32,488 .1 21,930 .1 14,196 .0 UNIFORMS 471,669 1.1 495,625 1.2 351,126 .8 ALL OTHER EXPENSES 15,158,189 36.9 13,904,969 34.1 13,844,070 33.4 TOTAL EXPENSES 25,934,492 63.1 26,898,931 65.0 27,650,132 66.8 GROSS OPERATING INCOME
TRUMP TAJ MAHAL CASINO* RESORT 13-Jan-94 ROOM OCCUPANCY ANALYSIS FOR THE MONTH ENDED DECEMBER 1993 ACTUAL PLAN VARIANCE VAR% PRIOR YEAR VARIANCE VAR% NET REVENUE $2,699,386 $2,471,200 $ 228,186 9.2% $2,384,429 $314,957 13.2% ROOMS SOLD 34,202 28,600 5,602 19.6% 28,941 5,261 18.2% ROOMS AVAILABLE 38,750 38,750 0 0.0% 38,750 0 0.0% AVERAGE RATE $ 78.92 $ 86.41 ($7.48) -8.7% $ 82.39 ($3.46) -4.2% OCCUPANCY % 88.3% 73.8% 145 pts 74.7% 13.6 pts ROOMS SOLD COMP 14,117 16,000 (1,883) -11.8% 11,243 2,874 25.6% TRANSIENT 5,634 2,000 3,634 181.7% 6,851 (1,217) -17.8% CONVENTION 3,178 2,700 478 17.7% 2,552 626 24.5% TOUR & TRAVEL 3,262 2,900 362 12.5% 2,945 317 10.8% PACKAGE 1,768 2,000 (232) -11.6% 1,570 198 12.6% DIRECT MARKETING 6,243 3,000 3,243 108.1% 3,780 2,463 65.2% ----- ----- ----- ----- ----- TOTAL 34,202 28,600 5,602 19.6% 28,941 5,261 18.2% AVERAGE RATE COMP $ 115.56 $ 110.00 $ 5.56 5.1% $ 125.49 ($9.93) -7.9% TRANSIENT 74.81 80.00 (5.19) -6.5% 75.59 (0.78) -1.0% CONVENTION 71.50 80.00 (8.50) -10.6% 81.71 (10.21) -12.5% TOUR & TRAVEL 44.00 45.00 (1.00) -2.2% 39.76 4.24 10.7% PACKAGE 44.76 62.00 (17.24) -27.8% 40.18 4.58 11.4% DIRECT MARKETING 32.51 35.00 (2.49) -7.1% 27.71 4.79 17.3% GROSS ADR 79.11 87.26 (8.15) -9.3% 83.69 (4.58) -5.5% ALL W/FORFEITURE (0.19) (0.85) 0.66 -78.2% (1.30) 1.12 -85.8% ----- ----- ---- ----- ---- NET ADR $ 78.92 $ 86.41 ($7.48) -8.7% $ 82.39 ($3.46) -4.2% REVENUE COMP $1,631,413 $1,760,000 ($128,587) -7.3% $1,410,872 $220,541 15.6% TRANSIENT 421,489 160,000 261,489 163.4% 517,886 (96,397) -18.6% CONVENTION 227,211 216,000 11,211 5.2% 208,513 18,698 9.0% TOUR & TRAVEL 143,531 130,500 13,031 10.0% 117,082 26,449 22.6% PACKAGE 79,135 124,000 (44,865) -36.2% 63,083 16,052 25.4% DIRECT MARKETING 202,939 105,000 97,939 93.3% 104,757 98,182 93.7% -------- -------- -------- --------- ------- GROSS REVENUE $2,705,719 $2,495,500 $ 210,219 8.4% $2,422,193 $283,526 11.7% ALLOWANCES (6,332) (25,000) 18,668 74.7% (37,859) 31,526 -83.3% FORFEIT/TAX EXEMPT 0 700 (700) -100.0% 95 (95) -100.0% -------- -------- -------- --------- ------- NET REVENUE $2,699,386 $2,471,200 $ 228,186 9.2% $2,384,429 $314,957 13.2% ========== ========== ========== ========== ========
CASINO BLOCK ANALYSIS TOTAL ROOMS AVAILABLE 38,750 TOTAL OCCUPIED ROOMS 34,202 CASINO BLOCK 13,802 ROOM COMPS: CASINO COMPS 12,785 ADMINISTRATIVE COMPS 0 ALL OTHER COMPS 1,332 ----- TOTAL ROOM COMPS 14,117 ====== % BLOCK OCCUPIED 92.6% % BLOCK/TOTAL ROOMS AVAILABLE 35.6% % BLOCK/TOTAL OCCUPIED ROOMS 40.4% % BLOCK OCCUPIED/OCCUPIED ROOMS 37.4% % BLOCK OCCUPIED/ROOMS AVAILABLE 33.0%
BLOCK % OF OCCUPIED OCCUP. RMS % ROOMS ------------------- ROOM 6,887 40.1% 19.3% RLFB 1,428 8.3% 4.0% RFB 4,424 25.7% 12.4% RFBI 46 0.3% 0.1% --------------------------- TOTAL 12,785 74.4% 35.8% ===========================
18 13-Jan-94 TRUMP TAJ MAHAL CASINO* RESORT ROOM OCCUPANCY ANALYSIS FOR THE YEAR ENDED DECEMBER 1993
ACTUAL PLAN VARIANCE VAR% PRIOR YEAR VARIANCE VAR% NET REVENUE $40,681,904 $40,315,000 $ 366,904 0.9% $41,043,599 ($361,694) -0.9% ROOMS SOLD 421,268 412,150 9,118 2.2% 417,490 3,778 0.9% ROOMS AVAILABLE 456,250 457,500 (1,250) -0.3% 457,500 (1,250) -0.3% AVERAGE RATE $ 96.57 $ 97.82 ($1.25) -1.3% $ 98.31 ($1.74) -1.8% OCCUPANCY % 92.3% 90.1% 2.2 pts 91.3% 1.1 pts ROOMS SOLD COMP 177,262 165,000 12,262 7.4% 186,321 (9,059) -4.9% TRANSIENT 66,889 88,950 (22,061) -24.8% 73,224 (6,335) -8.7% CONVENTION 47,231 46,900 331 0.7% 50,259 (3,028) -6.0% TOUR & TRAVEL 65,724 49,400 16,324 -33.0% 54,067 11,657 21.6% PACKAGE 28,553 36,550 (7,997) -21.9% 31,459 (2,906) -9.2% DIRECT MARKETING 35,609 25,350 10,259 40.5% 22,160 13,449 60.7% ------ ------ ------ ------ ------ TOTAL 421,268 412,150 9,118 2.2% 417,490 3,778 0.9% AVERAGE RATE COMP $ 130.18 $ 141.28 ($11.10) -7.9% $ 127.15 $3.03 2.4% TRANSIENT 93.67 62.11 31.56 50.8% 98.22 (4.55) -4.6% CONVENTION 90.95 106.87 (15.92) -14.9% 97.20 (6.25) -6.4% TOUR & TRAVEL 59.43 62.00 (2.57) -4.1% 53.45 5.98 11.2% PACKAGE 73.51 68.97 4.55 6.6% 68.91 4.57 6.6% DIRECT MARKETING 37.28 50.21 (12.93) -25.8% 29.18 8.10 27.8% GROSS ADR 97.25 98.76 (1.51) -1.5% 99.34 (2.09) -2.1% ALL W/FORFEITURE (0.68) (0.94) 0.26 -27.8% (1.03) 0.35 -33.9% ----- ----- ---- ----- ---- NET ADR $ 96.57 $ 97.82 ($1.25) -1.3% $ 98.31 ($1.74) -1.8% REVENUE COMP 23,075,677 $23,310,500 (234,823) -1.0% $23,691,167 ($615,489) -2.6% TRANSIENT 6,265,317 5,524,700 740,617 13.4% 7,192,038 (926,721) -12.9% CONVENTION 4,295,517 5,012,200 (716,683) -14.3% 4,884,984 (589,467) -12.1% TOUR & TRAVEL 3,906,013 3,062,900 843,113 27.5% 2,890,022 1,015,991 35.2% PACKAGE 2,098,981 2,520,700 (421,719) -16.7% 2,168,850 (69,869) -3.2% DIRECT MARKETING 1,327,384 1,272,700 54,684 4.3% 646,585 680,799 105.3% --------- --------- ------ ------- ------- GROSS REVENUE $40,968,889 $40,703,700 $ 265,189 0.7% $41,473,646 ($504,757) -1.2% ALLOWANCES (289,537) (405,300) 115,763 28.6% (436,989) 147,451 -33.7% FORFEITURES 2,552 16,600 (14,048) -84.6% 6,941 (4,389) -63.2% ----------- ----------- --------- ----------- --------- NET REVENUE $40,681,904 $40,315,000 $ 366,904 0.9% $41,043,599 ($361,694) -0.9% =========== =========== ========= =========== =========
CASINO BLOCK ANALYSIS TOTAL ROOMS AVAILABLE 456,250 TOTAL OCCUPIED ROOMS 421,268 CASINO BLOCK 201,492 ROOM COMPS: CASINO COMPS 164,974 ADMINISTRATIVE COMPS 10,976 OTHER COMPS 1,312 ------- TOTAL ROOM COMPS 177,262 ======= % BLOCK OCCUPIED 81.9% % BLOCK/TOTAL ROOMS AVAILABLE 44.2% % BLOCK/TOTAL OCCUPIED ROOMS 47.8% % BLOCK OCCUPIED/OCCUPIED ROOMS 39.2% % BLOCK OCCUPIED/ROOMS AVAILABLE 36.2%
BLOCK % OF OCCUPIED OCCUP. RMS % ROOMS ------------------ ROOM 84,990 90.4% 41.2% RLFB 19,525 20.8% 9.5% RFB 59,656 63.4% 28.9% RFBI 803 0.9% 0.4% - -------------------------- TOTAL 164,974 175.4% 80.0% ==========================
19 Report Number 15670 RUN DATE 01/13/94 TRUMP TAJ MAHAL ASSOCIATES FACILITY OPERATIONS SUMMARY FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH DESCRIPTION ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR 636,501 945,945 309,444 32.7 931,820 295,319 31.7 SALARY & WAGES 341,257 351,945 10,680 3.0 350,010 8,753 2.5 PAYROLL TAXES & BENEFITS 9 400 391 97.8 2,865 2,856 99.7 COMPS 1,135 2,254 1,119 49.7 3,230 2,095 64.9 UNIFORMS 413 3,000 2,587 86.2 0 (413) .0 CONSULTING 641,105 118,994 (522,111) (438.8) 97,673 (543,432) (556.4) SERVICE CONTRACTS 2,904 49,000 46,096 94.1 17,062 14,159 83.0 CLEANING SUPPLIES & CONTRACTS 1,113 265 (848) (320.1) 751 (362) 48.1 PAPER/GUEST SUPPLIES 1,218 0 (1,218) .0 12,434 11,216 90.2 ELECTRICAL & MECHANICAL EQUIP. 0 0 0 .0 16,937 16,937 100.0 KITCHEN EQUIPMENT 0 7,650 7,650 100.0 12,700 12,780 100.0 EXTERMINATING 0 0 0 .0 11,055 11,055 100.0 LIGHTING SUPPLIES 0 0 0 .0 25,932 25,932 100.0 BUILDING EQUIPMENT 34,269 14,000 (20,269) (144.8) 10,301 (23,968) (232.7) AIR CONDITIONING & REFRIGERATION 14,274 13,400 (874) (6.5) 19,451 5,177 26.6 PLUMBING & HEATING 7,644 6,000 (1,644) (27.4) 17,810 10,167 57.1 GROUNDS & LANDSCAPING 0 0 0 .0 0 0 .0 INTERIOR PLANTS CONTRACT 0 6,700 6,700 100.0 439 439 100.0 GLASS/WINDOWS 0 0 0 .0 4,302 4,302 100.0 FLOOR COVERING SUPPLIES 0 0 0 .0 2,510 2,510 100.0 PAINTING & DECORATING SUPPLIES 276,549 176,056 (100,493) (57.1) 154,820 (121,729) (70.6) ALL OTHER EXPENSES 1,958,391 1,695,609 (262,782) (15.5) 1,692,185 (266,207) (15.7) TOTAL FACILITY & EVS COSTS 662,556 721,100 58,544 8.1 704,759 42,203 6.0 ELECTRIC COSTS 192,881 220,875 27,994 12.7 174,336 (18,544) (10.6) OIL & GAS COSTS 93,520 31,855 (61,665) (193.6) 42,669 (50,851) (119.2) WATER COSTS 78,837 77,385 (1,452) (1.9) 60,254 (18,508) (30.8) WASTE REMOVAL 45,586 42,150 (3,436) (8.2) 40,499 (5,087) (12.6) SEWER COSTS 0 0 0 .0 0 0 .0 TV CABLE SERVICE 1,073,380 1,093,365 19,985 1.8 1,022,518 (50,862) (5.0) TOTAL UTILITY COSTS 3,031,771 2,788,974 (242,797) (8.7) 2,714,702 (317,069) (11.7) TOTAL FACILITY OPERATIONS
DESCRIPTION YEAR-TO-DATE PRIOR-YEAR-TO-DATE ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR% SALARY & WAGES 7,556,044 11,083,184 3,527,060 31.8 10,932,424 3,376,380 30.9 PAYROLL TAXES & BENEFITS 3,332,029 4,499,556 1,167,527 25.9 4,181,287 849,177 20.3 COMPS 5,669 7,200 1,531 21.3 22,364 16,695 74.7 UNIFORMS 20,151 27,835 6,884 25.5 28,412 8,261 29.1 CONSULTING 33,694 40,000 6,306 15.8 45,154 11,461 25.4 SERVICE CONTRACTS 5,850,807 1,427,928 (4,422,874) (309.7) 1,228,877 (4,621,925) 376.1 CLEANING SUPPLIES & 275,188 547,752 272,564 49.8 286,103 10,995 9.0 CONTRACTS PAPER/GUEST SUPPLIES 15,281 3,180 (12,051) (379.0) 12,937 (2,293) 12.7 ELECTRICAL & MECHANICAL 28,649 0 (28,649) .0 179,971 151,928 84.4 EQUIP. KITCHEN EQUIPMENT 11,425 0 (11,425) .0 327,471 316,845 96.5 EXTERMINATING 37,904 91,800 53,896 58.7 70,380 32,476 46.1 LIGHTING SUPPLIES 6,573 0 (6,573) .0 111,013 104,440 94.1 BUILDING EQUIPMENT 43,284 0 (43,234) .0 193,169 149,935 27.6 AIR CONDITIONING & 171,299 170,000 (1,799) (1.1) 150,404 (21,395) 14.2 REFRIGERATION PLUMBING & HEATING 197,755 160,800 (36,955) (23.0) 168,171 (29,583) 12.6 GROUNDS & LANDSCAPING 103,850 80,500 (23,330) (29.0) 97,330 (6,500) 6.7 INTERIOR PLANTS CONTRACT 0 0 0 .0 252,279 252,279 180.0 GLASS/WINDOWS 62,675 80,000 17,325 21.7 69,970 7,296 10.4 FLOOR COVERING SUPPLIES ????? 0 (323) .0 11,800 11,537 92.3 PAINTING & DECORATING 500 0 (508) .0 34,430 33,922 99.5 SUPPLIES ALL OTHER EXPENSES 2,466,939 2,218,822 (248,117) (11.2) 1,790,721 (676,218) ???? TOTAL FACILITY & EVS COSTS 20,220,111 20,437,677 217,263 1.1 20,194,727 (25,687) ??? ELECTRIC COSTS 8,540,197 9,431,200 891,003 9.4 8,651,961 111,764 1.3 OIL & GAS COSTS 1,556,005 1,750,500 202,495 11.5 1,561,279 5,274 ?? WATER COSTS 646,041 562,260 (83,781) (14.9) 565,832 (80,210) 14.2 WASTE REMOVAL 890,227 933,620 43,593 4.6 886,243 (3,984) .5 SEWER COSTS 566,368 505,800 (60,568) (12.0) 498,621 (75,747) 15.4 TV CABLE SERVICE 0 0 0 .0 0 0 .0 TOTAL UTILITY COSTS 12,190,639 13,191,380 992,541 7.5 12,155,996 (42,903) .4 TOTAL FACILITY OPERATIONS 32,119,253 33,629,057 1,209,804 3.6 32,350,663 (68,590) ??
20 Report Number 15675 RUN DATE 01/13/94 TRUMP TAJ MAHAL ASSOCIATES FIXED EXPENSES SUMMARY FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR DESCRIPTION 800,819 377,479 (423,340) (112.1) 164,021 (636,798) (388.2) INSURANCE EXPENSE 10,850 22,500 11,650 51.8 22,878 12,028 52.6 OFFSITE OFFICE RENT 1,000 0 (1,000) .0 6,000 5,000 83.3 BRANCH OFFICE RENT 0 0 0 .0 0 0 .0 PIPPETT RENT EXPENSE 0 0 0 .0 0 0 .0 TRUMP ORGANIZATION 0 0 0 .0 0 0 .0 RENT EXPENSE-OFFSITE SERVICES 0 0 0 .0 0 0 .0 RENT EXPENSE-GUEST PARKING 60,854 80,000 19,146 23.9 79,004 18,150 23.0 RENT EXPENSE-EMPLOYEE PARKING 1,384,731 1,460,000 75,269 5.2 1,582,168 197,437 12.5 REAL PROPERTY TAX 1,738 3,200 1,462 45.7 3,187 1,448 45.5 REAL PROPERTY TAX - LEASED PROP 2,259,993 1,943,179 (316,814) (16.3) 1,857,258 (402,735) (21.7) TOTAL FIXED EXPENSES YEAR-TO-DATE PRIOR-YEAR-TO-DATE DESCRIPTION ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR% INSURANCE EXPENSE 6,151,558 4,495,175 (1,656,383) (36.8) 4,022,936 (2,128,622) 52.9 OFFSITE OFFICE RENT 117,781 270,000 152,219 56.4 368,199 250,418 68.0 BRANCH OFFICE RENT 31,509 0 (31,509) .0 55,227 23,717 42.9 PIPPETT RENT EXPENSE 0 0 0 .0 0 0 .0 TRUMP ORGANIZATION 0 0 0 .0 0 0 .0 RENT EXPENSE-OFFSITE SERVICES 0 0 0 .0 0 0 .0 RENT EXPENSE-GUEST PARKING 0 0 0 .0 0 0 .0 RENT EXPENSE-EMPLOYEE PARKING 731,751 960,000 228,249 23.8 948,051 216,300 22.8 REAL PROPERTY TAX 17,059,072 17,520,000 460,928 2.6 17,233,418 174,346 1.0 REAL PROPERTY TAX - LEASED PROP 19,110 38,400 18,990 49.5 48,554 29,144 60.0 TOTAL FIXED EXPENSES 24,111,081 23,283,575 (827,506) (3.6) 22,676,305 (1,434,697) 6.3
21 Report Number 15400 RUN DATE 01/13/94 TRUMP TAJ MAHAL ASSOCIATES GENERAL & ADMINISTRATIVE SUMMARY FOR THE PERIOD ENDED DECEMBER 1993
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR DESCRIPTION 1,201,961 1,161,013 (40,948) (3.5) 1,111,366 (90,595) (0.2) SALARIES & WAGES 514,530 571,427 56,897 10.0 634,329 119,799 18.9 TAXES & BENEFITS 1,716,491 1,732,440 15,949 .9 1,745,695 29,204 1.7 TOTAL PAYROLL 603,113 129,602 (473,511) (365.4) 186,311 (416,801) (223.7) TOTAL COMPS 0 0 0 .0 0 0 .0 PRINTING & STATIONARY 402 4,400 3,998 90.9 3,932 3,530 39.0 COPYING EXPENSE 73,182 52,518 (20,664) (39.3) 70,707 (2,395) (3.4) SERVICE CONTRACTS 49,439 48,783 (656) (1.3) 50,640 1,201 2.1 SUPPLIES EXPENSE 21,633 21,625 (8) .0 20,284 (1,349) (6.6) TELEPHONE & TELEGRAPH 20,121 10,500 (9,621) (91.6) 25,153 5,032 20.0 POSTAGE EXPENSE 4,059 7,870 3,011 38.3 27,414 22,555 82.3 CONTRACT LABOR 1,739 3,830 2,091 54.6 2,220 481 21.7 TRADE ASSOCIATION SUBSCRIPTION 26,290 60,000 33,710 56.2 75,401 49,111 65.1 UNIFORMS 19,069 1,466 (17,603) (200.8) 4,917 (14,152) (287.8) EQUIPMENT EXPENSE 4,945 3,022 (1,923) (63.6) 3,846 (1,098) (20.6) EQUIPMENT RENTAL 51,104 36,793 (14,311) (38.9) 38,676 (12,428) (32.1) CONSULTING EXPENSE 190,415 173,000 (17,415) (10.1) 119,824 (70,591) (50.9) LEGAL EXPENSES 3,907 4,150 243 5.9 3,432 (475) (13.0) AUTO EXPENSE 45,000 20,000 (25,000) (125.0) 15,600 (29,400) (180.5) AUDIT FEES (107) 0 107 .0 (782) (675) (86.3) CASH OVER SHORT 7,303 2,000 (5,303) (265.1) 8,364 1,061 12.7 RECRUITING 0 0 0 .0 0 0 .0 RELOCATION 21,077 20,000 (1,077) (5.4) (2,301) (23,958) (331.6) EMPLOYEE ACTIVITIES 73,922 12,230 (56,692) (329.0) 29,304 (44,118) (118.0) TRAVEL & ENTERTAINMENT EXPENSE 21,979 24,338 2,359 9.7 21,135 (845) (4.0) MEDICAL STATION CONTRACT 7,809 18,769 10,960 58.4 19,490 11,681 59.0 REPAIR & MAINTENANCE 0 0 0 .0 0 0 .0 LAUNDRY EXPENSE (643,696) 156,356 800,052 511.7 (438,512) 205,185 46.8 OTHER EXPENSES 390 686,650 686,260 99.9 98,745 98,355 99.6 TOTAL EXPENSES 367,143 379,225 12,082 3.2 22,898 (344,245) ( ,503.4) LICENSES, FEES & TAXES 0 0 0 .0 0 0 .0 PROMOTIONS EXPENSE 5,816 6,250 434 6.9 2,259 (3,559) (157.6) SPECIAL EVENTS EXPENSE 437,496 336,769 (100,727) (29.9) 241,607 (195,889) (01.1) ADVERTISING COST 15,183 9,000 (6,183) (68.7) 52,041 36,858 70.0 PR & PUBLICITY COST 42,544 45,000 2,456 5.5 40,926 (1,618) (4.0) MARKETING FEES & COMMISSIONS 0 0 0 .0 0 0 .0 INTERCOMPANY ALLOCATIONS 0 9,275 9,275 100.0 13,365 13,365 100.0 OTHER 868,183 705,519 (82,664) (10.5) 373,095 (495,083) (132.7) TOTAL OTHER 3,188,176 3,334,211 146,035 4.4 2,403,846 (784,330) (32.6) TOTAL YEAR-TO-DATE PRIOR-YEAR-TO-DATE DESCRIPTION ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR% SALARIES & WAGES 14,109,809 13,003,184 (226,125) (1.6) 13,730,150 (379,158) 2.8 TAXES & BENEFITS 7,692,087 7,202,265 (489,772) (6.8) 6,250,799 (1,441,238) 23.1 TOTAL PAYROLL 21,801,316 21,005,449 (715,897) (3.4) 19,980,949 (1,820,396) 9.1 TOTAL COMPS 4,141,996 1,879,079 (2,262,917) (120.4) 2,363,182 (1,778,894) 75.3 PRINTING & STATIONARY 0 0 0 .0 0 0 .0 COPYING EXPENSE 28,311 53,300 24,909 46.9 40,852 12,541 30.9 SERVICE CONTRACTS 632,400 659,864 27,426 4.2 576,792 (55,647) 9.8 SUPPLIES EXPENSE 596,909 646,777 49,868 7.7 608,438 11,529 1.4 TELEPHONE & TELEGRAPH 237,883 259,500 21,617 8.3 248,632 10,748 4.3 POSTAGE EXPENSE 66,221 126,120 59,899 47.5 153,317 87,896 56.8 CONTRACT LABOR 68,978 94,440 27,362 29.0 213,429 146,351 68.5 TRADE ASSOCIATION 18,589 52,890 34,301 64.9 20,435 1,846 9.0 SUBSCRIPTION UNIFORMS 464,994 720,000 255,006 35.4 693,395 228,401 32.9 EQUIPMENT EXPENSE 68,978 24,942 (44,636) (176.8) 101,384 32,406 32.6 EQUIPMENT RENTAL 83,600 36,464 (47,036) (129.0) 57,353 (26,147) 45.6 CONSULTING EXPENSE 450,056 420,520 (29,536) (7.0) 432,045 (18,010) 1.2 LEGAL EXPENSES 2,423,918 2,538,500 114,562 4.5 1,948,321 (475,618) 24.4 AUTO EXPENSE 60,291 49,800 (10,991) (22.1) 53,169 (7,621) 14.8 AUDIT FEES 271,000 150,000 (121,000) (80.7) 179,200 (91,800) 51.2 CASH OVER SHORT (23,323) 0 23,323 .0 1,570 24,893 1,585.6 RECRUITING 68,459 62,000 (6,859) (11.1) 58,269 (10,590) 13.1 RELOCATION 8,115 0 (8,716) .0 5,675 (3,091) 55.6 EMPLOYEE ACTIVITIES 204,400 130,750 (74,216) (56.0) 168,477 (36,498) 21.2 TRAVEL & ENTERTAINMENT 146,100 275,556 (170,954) (62.0) 199,970 (246,520) 121.3 EXPENSE MEDICAL STATION CONTRACT 262,207 292,056 29,849 10.2 260,770 (1,437) .3 REPAIR & MAINTENANCE 161,887 240,976 79,289 32.9 400,522 238,835 59.5 LAUNDRY EXPENSE 18 0 (10) .0 21 3 11.6 OTHER EXPENSES (1,389,821) 1,911,734 3,301,605 172.7 720,333 2,110,155 292.4 TOTAL EXPENSES 5,210,486 8,746,239 3,535,753 40.4 7,142,318 1,931,833 27.6 LICENSES, FEES & TAXES 3,173,883 4,503,177 1,409,524 30.8 3,702,518 528,865 14,9 PROMOTIONS EXPENSE 0 23,750 23,750 100.0 0 0 .0 SPECIAL EVENTS EXPENSE 36,022 67,515 31,430 46.6 36,662 586 1.8 ADVERTISING COST 3,870,405 4,053,828 183,363 4.5 5,575,647 1,705,182 30.8 PR & PUBLICITY COST 109,291 108,000 (1,291) (1.2) 179,125 69,834 39.0 MARKETING FEES & COMMISSIONS 624,702 660,000 35,293 5.3 642,509 17,802 2.5 INTERCOMPANY ALLOCATIONS 0 0 0 .0 0 0 .0 OTHER 40,141 112,650 72,509 64.4 193,709 153,647 44.3 TOTAL OTHER 7,854,335 9,600,920 1,754,505 18.3 18,330,252 2,475,916 24.3 TOTAL 39,008,168 41,319,687 2,311,524 5.6 39,816,622 808,459 2.0
22 TRUMP TAJ MAHAL ASSOCIATES OPERATING REVIEW MONTHLY LABOR COMPARISON
AVG WKLY TOTAL AVG WKLY AVG AVG WKLY AVG WKLY HRS AVG WKLY AVG WKLY AVG WKLY AVERAGE PAID WKLY REGULAR OVERTIME O.T. & REGULAR OVERTIME TOTAL $'S HOURLY MONTH WKS EMPLOYEES FTE'S HOURS HOURS REG EARNINGS EARNINGS O.T. & REG. RATE ==================================================================================================================================== '92 DECEMBER** (5) 5,799 4,727 179,058 10,022 189,080 $1,778,979 $138,195 $1,917,174 $ 10.14 '93 JANUARY* (4) 5,676 4,697 182,241 5,643 187,884 $1,846,114 $ 80,733 $1,926,847 $ 10.26 '93 FEBRUARY (4) 5,757 4,628 181,244 3,853 185,097 $1,887,289 $ 60,491 $1,947,780 $ 10.52 '93 MARCH (4) 5,837 4,734 186,650 4,669 191,319 $1,902,623 $ 72,127 $1,974,750 $ 10.32 '93 APRIL (5) 5,707 4,623 178,001 4,631 182,632 $1,900,531 $ 69,463 $1,969,994 $ 10.79 '93 MAY (4) 5,649 4,666 181,251 5,347 186,598 $1,936,967 $ 83,055 $2,020,022 $ 10.83 '93 JUNE* (4) 5,873 4,831 185,180 8,419 193,599 $1,931,263 $130,835 $2,062,098 $ 10.65 '93 JULY (5) 6,111 4,886 202,427 12,289 214,716 $2,078,698 $171,275 $2,249,973 $ 10.48 '93 AUGUST (4) 6,156 5,292 203,201 8,645 211,846 $2,112,307 $119,242 $2,231,549 $ 10.53 '93 SEPTEMBER* (5) 5,911 4,979 196,425 9,006 206,322 $2,020,242 $130,630 $2,150,872 $ 10.42 '93 OCTOBER (4) 5,795 4,841 188,197 5,618 193,815 $2,025,014 $ 83,556 $2,108,570 $ 10.88 '93 NOVEMBER* (4) 5,775 4,937 187,417 10,537 197,954 $1,986,516 $150,830 $2,137,346 $ 10.80 '93 DECEMBER** (5) 5,787 4,806 128,793 14,220 197,013 $1,911,330 $206,727 $2,118,057 $ 10.75 - ----------------------------------------------------------------------------------------------------------------------------------- Variance - This Month vs (12) 131 5,404 (3,683) 941 75,186 (55,897) 19,289 0.05 Last Month Variance - '93 vs '92 - 12 (79) (3,735) (4,198) (7,933) (132,351) (68,532) (200,883) (0.61) Current Month Favorable/(Unfavorable) - ----------------------------------------------------------------------------------------------------------------------------------- AVG WKLY GROSS MONTH WKS REVENUE ================================================ '92 DECEMBER** (5) $ 8,816,415 '93 JANUARY* (4) $ 9,183,777 '93 FEBRUARY (4) $ 8,620,916 '93 MARCH (4) $ 9,450,668 '93 APRIL (5) $10,574,767 '93 MAY (4) $11,042,163 '93 JUNE* (4) $ 9,715,572 '93 JULY (5) $12,300,049 '93 AUGUST (4) $12,397,894 '93 SEPTEMBER* (5) $11,075,589 '93 OCTOBER (4) $10,540,137 '93 NOVEMBER* (4) $10,554,451 '93 DECEMBER** (5) $10,307,033 - ------------------------------------------------- Variance - This Month vs (247,418) Last Month 1,490,618 Variance - '93 vs '92 - Current Month Favorable/(Unfavorable) --- - -------------------------------------------------
* = 1 Holiday Prepared By: Pam McGroggan 23 APPENDIX IV Property Real Estate Tax Assessment TRUMP TAJ MAHAL ASSOCIATES 1994 REAL ESTATE ASSESSMENT
ADDRESS BLOCK LOT LAND IMPROVEMENTS 1993 TOTAL LAND IMPROVEMENTS 1994 TOTAL CHANGE ASSESSED ASSESSED BOARDWALK 13 126 49,821,000 260,291,100 310,112,100 49,821,000 260,291,100 310,112,100 0 NW BOARDWALK & VIRGINIA 14 67 61,385,100 160,614,900 222,000,000 61,385,100 160,614,900 222,000,000 0 NO. CAR. & HURON(LEASED) RP017 3.Y 8,886,200 459,100 9,345,300 8,886,200 459,100 9,345,300 0 ------------------------------------------------------------------------------------------ TOTAL--ASSOCIATES 120,092,300 421,365,100 541,457,400 120,092,300 421,365,100 541,457,400 0 STREET 13 128.03 4,548,600 31,800 4,580,400 4,548,600 31,800 4,580,400 0 REAR PARKING LOT 13 128.04 7,163,000 50,100 7,213,100 7,163,000 50,100 7,213,100 0 STREET 13 128.06 8,718,000 861,000 9,579,000 8,718,000 861,000 9,579,000 0 1001 BOARDWALK 13 128.07 7,142,200 170,000 7,312,200 7,142,200 170,000 7,312,200 0 1001 BOARDWALK 13 128.08 6,053,200 18,500,000 24,553,200 6,053,200 18,500,000 24,553,200 0 EAST MARYLAND AVE (3.7) 13 129.01 6,787,800 47,500 6,835,300 6,787,800 47,500 6,835,300 0 PACIFIC AVE. 13 129.02 204,000 204,000 204,000 0 204,000 0 LAND LOCKED SERVICE ROAD 13 129.06 2,727,400 19,100 2,746,500 2,727,400 19,100 2,746,500 0 SW PACIFIC & MARYLAND 13 116 4,357,100 215,500 4,572,600 4,357,100 215,500 4,572,600 0 SE VIRGINIA & PACIFIC 13 118.01 14,598,400 14,598,400 14,598,400 0 14,598,400 0 MARYLAND AVE. 13 142 3,554,300 3,554,300 3,554,300 0 3,554,300 0 SW PACIFIC & VIRGINIA 14 65 5,850,000 38,200 5,888,200 5,850,000 38,200 5,888,200 0 SE PENNA & PACIFIC 14 17 1,237,500 112,500 1,350,000 1,237,500 (1) 0 1,237,500 (112,500) 111 S PENNA AVE. 14 18 1,125,000 7,500 1,132,500 1,125,000 7,500 1,132,500 0 SW VIRGINIA & BOARDWALK 14 28 6,000,000 13,990,000 19,990,000 6,000,000 13,990,000 19,990,000 0 113-15 S PENNA AVE. 14 41 1,125,000 7,500 1,132,500 1,125,000 7,500 1,132,500 0 115-17 N VIRGINIA AVE. 119 6 78,800 55,300 134,100 78,800 55,300 134,100 0 116 N MARYLAND AVE. 119 22 43,800 43,800 43,800 0 43,800 0 113 N VIRGINIA AVE. 119 39 42,200 42,200 42,200 0 42,200 0 121 N VIRGINIA AVE. 119 58 24,500 1,300 25,800 24,500 1,300 25,800 0 121-25 N VIRGINIA AVE. 119 68 72,500 3,300 75,800 72,500 3,300 75,800 0 108 WOOTON TERRACE 119 85 56,900 2,000 58,900 56,900 2,000 58,900 0 108 N VIRGINIA AVE. 120 23 49,500 51,200 100,700 49,500 51,200 100,700 0 102 N PRESBYTERIAN AVE. 120 33 26,300 26,300 26,300 0 26,300 0 104-08 N PRESBYTERIAN AVE. 120 44 22,500 51,600 74,100 22,500 51,600 74,100 0 110-16 N. VIRGINIA AVE. 120 58 198,000 153,700 351,700 198,000 153,700 351,700 0 104 N VIRGINIA AVE. 120 65 25,000 25,600 50,600 25,000 25,600 50,600 0 102 N. VIRGINIA AVE. 120 66 25,000 25,600 50,600 25,000 25,600 50,600 0 ------------------------------------------------------------------------------------------ TOTAL--REALTY 81,856,500 34,420,300 116,276,800 81,856,500 34,307,800 116,164,300 (112,500) TOTAL-Atlantic City 201,948,800 455,785,400 657,734,200 201,948,800 455,672,900 657,621,700 (112,500)
- -------------- (1) Demo of Soc. Sec. Bldg. APPENDIX V Economic Indicators APPRAISAL GROUP International - -------------------------------------------------------------------------------- NATIONAL MORTGAGE COMMITMENT SURVEY - --------------------------------------------------------------------------------
Interest Rates Conventional Loans Lender Number of 3-5 7-10 More than Amortization Percent Loan-to- Debt Coverage Less than $5m Sample Commitments Years Years 10 Years Period Constant Value Ratio Ratio - ------------------ ------ ----------- ----- ----- --------- ------------ -------- ----------- ------------- Multifamily 6 29 8.06 8.58 8.31 15-13 11.13% 71.7% 1.29 Retail 6 8 8.13 8.50 8.43 10-30 10.82% 69.0% 1.38 Office 5 8 8.27 8.59 8.92 10-30 11.08% 70.6% 1.31 Industrial 6 6 8.13 8.48 8.71 10-30 11.17% 74.3% 1.30
Source: Appraisal Institute Research Department. Figures are derived from a survey of lenders in various geographic regions conducted during the first business week of December 1993. Data quoted are averages and do not reflect conditions in all markets. Readers are encouraged to contact local lenders for rates and terms applicable in local markets. For further information, contact the Research Department, (312) 335-4466. - -------------------------------------------------------------------------------- NATIONAL MARKET INDICATORS: Fourth Quarter 1993 - --------------------------------------------------------------------------------
REGIONAL MALL OFFICE INDUSTRIAL ---------------------------- ---------------------------- ---------------------------- Current Last Current Last Current Last Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. - -------------------------------------------------------------------------------------------------------------- Free & Clear Equity IRR Range 10.00%-14.00% 10.00%-14.00% 10.00%-15.00% 10.00%-15.00% 11.00%-14.00% 11.00%-14.00% Average 11.65% 11.65% 12.56% 12.45% 11.95% 11.88% Change (b.p.) -- 0 -- +11 -- +7 - -------------------------------------------------------------------------------------------------------------- Free & Clear Equity Cap Rate Range 6.00%-11.00% 6.00%-11.00% 7.50%-12.00% 7.50%-11.00% 7.25%-12.00% 7.25%-12.00% Average 7.70% 7.70% 9.77% 9.67% 9.55% 9.56% Change (b.p.) -- 0 -- +10 -- -1 - -------------------------------------------------------------------------------------------------------------- Residual Cap Rate Range 7.00%-11.50% 7.00%-11.50% 8.00%-12.50% 8.00%-12.00% 8.25%-10.50% 8.25%-10.50% Average 8.34% 8.34% 9.71% 9.58% 9.56% 9.58% Change (b.p.) -- 0 -- +13 -- -2 - -------------------------------------------------------------------------------------------------------------- APARTMENT ---------------------------- Current Last Qtr. Qtr. - ------------------------------------------------ Free & Clear Equity IRR Range 10.00%-15.00% 10.00%-15.00% Average 11.56% 11.43% Change (b.p.) -- +13 - ------------------------------------------------ Free & Clear Equity Cap Rate Range 7.50%-10.00% 7.50%-10.00% Average 9.04% 9.07% Change (b.p.) -- -3 - ------------------------------------------------ Residual Cap Rate Range 8.00%-10.50% 8.00%-11.00% Average 9.30% 9.34% Change (b.p.) -- -4 - ------------------------------------------------
Definitions B.p. Free & clear equity cap rate Residual cap rate Basis points Initial cash-on-cash rate of Overall capitalization return on the equity investment, rate used in calculation unencumbered by financing. of residual price at (all cash overall capitalization conclusion of forecast rate). period. Free and clear equity IRR Internal rate of return on equity, based on annual end-of-year compounding, unencumbered by financing (all cash). Source: Korpacz Real Estate Investor Survey. Personal survey of a cross-section of major institutional equity real estate market participants conducted in October 1993 by Peter F. Korpacz & Associates, Inc. For complete information on Quarterly Survey results, contact Peter F. Korpacz & Associates, Inc.; Route 111, Suite 303; Smithtown, NY 11787-3713. (516) 979-9465. 14 - -------------------------------------------------------------------------------- ECONOMIC INDICATORS - --------------------------------------------------------------------------------
Nov. May Nov. May Nov. Nov. 1993 1993 1992 1992 1991 1990 ---- ---- ---- ---- ---- ---- Market Rates and Bond Yields--% - ------------------------------- Reserve Bank Discount Rate.......... 3.00 3.00 3.00 3.50 4.58 7.00 Prime Rate (monthly average)........ 6.00 6.00 6.00 6.50 7.58 10.00 Federal Funds Rate.................. 3.02 3.00 3.09 3.82 4.81 7.81 3-Month Treasury Bills.............. 3.12 2.96 3.14 3.66 4.60 7.07 6-Month Treasury Bills.............. 3.27 3.07 3.35 3.78 4.66 7.04 3-Month Certificates of Deposit..... 3.35 3.10 3.58 3.82 4.94 8.03 LIBOR 3-mo. Rate (as of 12/15/93)*.. 3.31 3.31 3.62 4.00 4.56 7.81 U.S. 5-Yr. Bonds.................... 5.06 5.20 6.04 6.69 6.62 8.02 U.S. 10-Yr. Bonds................... 5.72 6.04 6.87 7.39 7.42 8.39 U.S. 30-Yr. Bonds................... 6.21 6.92 7.61 7.89 7.92 8.54 Municipal Tax Exempts (Aaa)+........ 5.10 5.47 6.08 6.25 6.24 6.75 Municipal Tax Exempts (A)+.......... 5.39 5.76 6.34 6.53 6.43 7.05 Corporate Bonds (Aaa)+.............. 6.93 7.43 8.10 8.28 8.48 9.30 Corporate Bonds (A)+................ 7.29 7.85 8.58 8.81 9.01 9.88 Corporate Bonds (Baa)+.............. 7.66 8.21 8.96 9.13 9.45 10.62 Stock Dividend Yields--% - ------------------------ (Source: Standard & Poor's) Common Stocks--500.................. 2.72 2.80 2.98 2.99 3.15 3.91 Other Benchmarks - ------------------------------------ Industrial Production Index#........ 113.2 110.4 109.7 108.8 107.8 107.5 (Federal Reserve 1987=100) Unemployment#....................... 6.5% 6.9% 7.3% 7.5% 6.9% 5.9% Monetary Aggregates, daily avg# M1, $-Billions.................... 1,125.9 1,067.1 1,019.0 954.3 890.1 822.6 M2, $-Billions.................... 3,548.3 3,505.7 3,507.2 3,469.2 3,408.1 3,318.4 Member Bank Borrowed Reserves $-Billions........................ 0.089 0.121 0.104 0.155 0.108 0.230 Consumer Price Index................ 145.8 144.2 142.0 139.7 137.8 133.8 Per Capita Personal 3rd Qtr. 1st Qtr. 3rd Qtr. 1st Qtr. 3rd Qtr. Disposable Income++ 1993 1993 1992 1992 1991 -------- -------- -------- -------- -------- Annual Rate in Current $s........................ $ 18,254 $ 17,876 $ 17,577 $ 17,245 $ 16,752 Savings as % of D.P.I............... 3.7 3.9 4.9 5.0 4.4
# Seasonally adjusted * Source: The Wall Street Journal + Source: Moody's Bond Survey ++ Revised figures used when available 15 1994 HOTEL MARKET FORECAST As 1993 brought about improvement for the hospitality industry, 1994 is forecast to show financial gains and increasing hotel values. Hotel investors struggled through another year of economic recovery, and those that survived the credit crunch and industry downturn during the past few years will see improved portfolio yields and growth opportunities. Participants in our hotel market forecast survey cited interest rates, job growth, employment/unemployment, and inflation as the most significant issues affecting the hotel investment market. Other factors the participants noted, in order of significance, include: productivity; federal, state, and local taxes; defense cutbacks; federal, state, and local deficits; corporate and personal debt, and foreign competition. Nearly 60.0% of the respondents view the next 12 months as a buyer's market. They expect the buyers to include Asian and European strategic investors, entrepreneurial (owner-operator) investors, REITs, pension funds, and equity funds. Sellers will be banks, insurance companies, and other institutional holders who are seeking to divest to reduce balance-sheet exposure. Wall Street is viewed as having a significant role in providing sources of capital to the hotel investment market. Debt securitization instruments (for example, public offerings and REMICS), REITs, pension funds, and foreign investors will be the most active capital sources funding growth. Banks are virtually out of the picture, and domestic insurance companies are now dealing with regulatory issues, putting most in a nonlending status. The most significant factors that will affect hotels positively, as ranked by the participants, are absorption of existing rooms, lack of new construction, national economic conditions, credit availability, and operating expense growth. Factors rated as having the greatest negative impact on the industry are increases in the minimum wage rate, continued room rate discounting, and inflation. One of the other factors that should not be overlooked is the need to reinvest capital into aging properties to maintain or obtain the appropriate franchise affiliation. According to Coopers & Lybrand's December 1993 Hospitality Directions, occupancy rates are forecast to improve to 66.1% in 1994, a 2.2% gain compared with 1993. Average daily rates, which have shown marginal improvement (1.52% average growth) over the past two years, are forecast to increase by 2.7% in 1994. The combined effect or RevPAR (revenue per available room) will yield a 6.8% year-end increase over one year ago. This gain will positively affect bottom-line performance, critical to the industry's building a measurable track record with many "side-line" investors are anxious to see. Most participants see the strongest investment opportunities in the full- service and economy/limited-service segments, whereas the luxury and resort segments will continue to lag. A composite of the rankings by product type is shown in Exhibit III. Exhibit III Investment Opportunities LUXURY 3.8 RESORTS 3.8 ECONOMY/LIMITED-SERVICE 2.9 ALL-SUITES 2.8 FULL-SERVICE 2 Scale (1 to 5. 1= best) Washington, D.C., Atlanta, Charlotte, and Chicago were selected as cities offering the best overall conditions for hotel investment in 1994. 18 With the pendulum slowly shifting from what has been a strong buyers' market to a more balanced playing field, increasing competition among buyers for quality product is exerting downward pressure on cap rates and yield expectations. There are exceptions to this, most notably older noninstitutional- grade hotels and hotels located along the West Coast, south of San Francisco, where recessionary conditions still prevail. Survey participants were asked to evaluate seven investment criteria and the percent change anticipated for 1994. The criteria evaluated were free and clear equity IRRs, leverage equity IRRs, free and clear equity cap rates, residual cap rates, average daily rates, occupancy, and operating expenses. In addition, participants were asked to forecast 1994 price and value trends. Results are summarized below. National Full-Service Hotel Market The majority of the participants surveyed indicated that both free and clear and leveraged IRRs are generally expected to decline from prior-year requirements. The rate of change ranges from 0.0% to 5.0%. Free and clear equity cap rates are also expected to show a decline ranging from 0.0% to 10.0%. One participant took exception to this, noting that yields may trend upward by as much as 1.0% to 2.0%. Residual cap rates are also expected to decline as competition increases for quality earnings-producing assets. Average daily rates are projected to show a change rate ranging from 1.5% to 6.0%, with the consensus around 3.0%. By comparison, the WEFA Group (Wharton Econometrics) is projecting inflation at 2.9% for 1994. All participants expect occupancy to improve, particularly in light of limited new construction. Operating expenses are also forecast to increase within a 2.0% to 4.0% range. Finally, according to the participants surveyed, prices and values are forecast to increase from 0.0% to 10.0%. National Economy/Limited-Service Hotel Market The forecast change in free and clear IRRs is within a range of 200 basis points up or down. However, the majority of participants indicated a decline from prior-year requirements. Clearly, there is now more seller resistance to discount pricing for quality product which would lower going-in yields, but by how much is yet to be determined. This also holds true for leveraged yields; however, there could be an ever greater swing in leveraged IRRs depending on the magnitude of changes in interest rates. This will be closely monitored as we track trends. Overall, equity and residual cap rates are forecast to show minimal change, approximately 100 basis points up or down. Average daily rates are forecast to show a change ranging from 2.0% to 6.0%, with occupancy increasing from 1.5 to 3.0 percentage points. Increases in operating expenses are forecast in the range of 1.0% to 4.0%, with the mean of approximately 3.0%. As in the full-service hotel market segment, prices and values are forecast to increase from 0.0% to 10.0%. National Luxury Hotel Market Luxury hotels, which have experienced a significant decline in values and investor appeal, should begin to see some activity, particularly from off-shore investors and entrepreneurial funds. Institutional holders of these hotels have marked down asset values to levels that now make economic sense in some cases. The majority of participants with assets in this market segment forecast declining yields. The forecast change ranges from 0 to minus 450 basis points. Free and clear equity cap rates are expected to show a greater decline than residual cap rates, indicative of the increasingly competitive investment climate. Average daily rates are forecast to show a change rate ranging from 1.5% to 8.0%, with occupancy also increasing at a pace of 1.0 to 4.0 percentage points. Luxury properties will continue, though, to be hampered by increasing consumer price sensitivity and the significant capital required to acquire and maintain them. Operating expenses are forecast to increase at a rate of 3.0% to 4.0%. The participants anticipate that prices and values will increase in some cases by as much as 15.0%; however, this will still be well below original project cost. Portfolio Mix The participants were asked to share their 1993 hotel portfolio mix and what they foresee in 1996. The results are shown in Exhibit IV. Although the percentages are forecast to change slightly by 1996, hotel investors will continue to prefer full-service and economy/limited service hotels over luxury hotels and resorts. Exhibit IV Hotel Portfolio Mix [GRAPH APPEARS HERE] This chart depicts the Hotel Portfolio Mix, highlighting the luxury hotel percentages. In 1993, there were 26.9% luxury hotels compared to 25.6% in 1996. 19 HOTEL VALUATION ISSUES One question appraisers commonly ask is What are typical industry ratios for base and incentive management fees? If this item is not correctly reflected, there can be a material over- or understatement of value. Hotel management has experienced dramatic change over the past six years, with institutional owners and lenders requiring management to perform more like joint owners and take on a greater portion of the financial risk. Institutional owners recognize that a hotel is a management-intensive, going-concern asset, unlike other forms of real estate. Management contracts are now being negotiated with bottom-line performance emphasis and no or low penalty termination provisions. For full-service and luxury properties, conditions are even more demanding, and management often must provide performance guarantees and equity contributions. Is there a typical management fee structure? In an attempt to address this question, we asked the survey participants to provide data on both base and incentive fees by hotel market segment. All participants reported that base management fees are computed as a percentage of gross revenue. The ranges and averages in base management fees for each hotel market segment are as follows:
Type Range Average Full-Service 2.0%-4.0% 3.0% Economy/Limited-Service 2.0%-5.0% 3.6% Luxury 1.5%-4.0% 2.5%
Base fees have declined from historical levels of typically 5.0% of revenue as increasing emphasis is placed on what are referred to as "incentive fees." The long-term, high-cost, base management fees of the 1980s simply do not appear in agreements today. Incentive fees are performance driven and are often, but not always, computed as a percentage of pretax NOI or percentage of increased cash flow. For leveraged investments, pretax NOI often includes debt service. Several of the most common structures for incentive fees are highlighted below: . x% of NOI after FF&E reserve and minimum return to owner; percent can range from 10.0% to 20.0%. . x% over a minimum return to owner. . x% over pre-takeover annual performance. . x% of gross operating profit (GOP). The 1994 Hotel Market Forecast and Hotel Valuation Issues were prepared by Coopers & Lybrand. 19A NATIONAL FULL-SERVICE HOTEL MARKET The future is becoming increasingly brighter for the full-service hotel market segment, as evidenced by the recent "good media" and the overall improvement in market conditions. Our survey participants anticipate that a continued strengthening of the financial performance of hotels will stimulate more interest for investment-grade assets. This interest is being fueled in part by corporate acquisitions with "off-shore dollars" and capital from the domestic public markets and pension and entrepreneurial funds. Although only the top 10.0% of investors seem to have what they believe is sufficient access to capital, the survey participants indicate that institutional lenders, such as credit companies and life insurance companies, will likely reenter the hotel investment market in late 1994. As a result, hotel prices and values will continue to rebound; however, regional disparities will exist. Hotel values are still depressed in California and little change is expected this year. Limited new construction and an increase in room demand from both the commercial and leisure markets are contributing to the increase in occupancy rates. With the improvement of occupancy, average daily rates will also grow. The survey results show a 51-basis-point increase in the average daily rate change rate to 3.29% (see Table 12). This compares favorably with 1994 inflation expectations of 2.9%, as projected by the WEFA Group. These increases will provide greater return to investors. As reported last quarter, many new buyers continue to enter the market, closing the gap between bid and asking prices. As this interest continues and the volume of RTC and institutional REO assets decreases, sellers will hold performing assets until a buyer meets their price. One respondent mentioned that "more capital is pursuing hotel product, with some money being rolled over from successful RTC investments." The average free and clear equity IRR increased 28 basis points to 15.33% this quarter. However, when excluding new survey participants, the equity free and clear IRR decreased 5 basis points. The average free and clear equity cap rate increased 5 basis points to 11.48% this quarter. However, once again when excluding new survey participants, the equity free and clear cap rate decreased 20 basis points. The average residual cap rate decreased 41 basis points to 11.48% from last quarter's 11.89%. While the overall averages would suggest an upward trend in return requirements, many respondents have lowered their required yields for nondistressed product. Hotel investors often seek some form of debt capital to finance investments. This quarter leveraged IRRs were surveyed to determine the premium and/or discount compared with free and clear equity IRRs. For the current quarter, the respondents reported an average leveraged IRR, assuming 50.0% to 60.0% debt, of 23.25%, a 792-basis-point premium over the average free and clear equity IRR. With current low interest rates, investors who can access debt capital can take advantage of the positive spread to boost leveraged equity returns. This is also enabling them to increase the bid on a property when competing with all-equity investors. Common investment criteria cited were positive current cash flow and the potential for stronger cash flow. Investors continue to emphasize cash-on-cash returns and direct capitalization when analyzing deals, with continuing emphasis on exit strategies. Most participants indicate a preference for the Midwest and South and are less interested in hotels in the Northeast. Overall, the hotel investment market is becoming more active with new buyers seeking quality product. Most participants indicate that the first quarter of 1994 will be a good time to buy. However, as competition increases, prices and values will respond by increasing. The National Full-Service Hotel Market report was prepared by Coopers & Lybrand. 20 TABLE 12 National Full-Service Hotel Market FIRST QUARTER 1994
KEY INDICATORS CURRENT QUARTER LAST QUARTER YEAR AGO - -------------------------------------------------------------------------------- Free & Clear Equity IRR - -------------------------------------------------------------------------------- RANGE 10.00%-20.00% 10.00%-20.00% AVERAGE 15.33% 15.05% CHANGE (Basis Points) - +28 - -------------------------------------------------------------------------------- Free & Clear Equity cap Rate - -------------------------------------------------------------------------------- RANGE 8.00%-15.00% 7.50%-14.00% AVERAGE 11.48% 11.43% CHANGE (Basis Points) - +5 - -------------------------------------------------------------------------------- Average Daily Rate Chg. Rate - -------------------------------------------------------------------------------- RANGE 1.00%-6.00% 1.00%-5.00% AVERAGE 3.29% 2.78% CHANGE (Basis Points) - +51 - -------------------------------------------------------------------------------- Operating Expense Chg. Rate - -------------------------------------------------------------------------------- RANGE 1.00%-5.00% 2.00%-4.00% AVERAGE 3.63% 3.44% CHANGE (Basis Points) - +19 - -------------------------------------------------------------------------------- Residual Cap Rate - -------------------------------------------------------------------------------- RANGE 10.00%-15.00% 10.00%-15.00% AVERAGE 11.48% 11.89% CHANGE (Basis Points) - -41
/a./ initial rates of change 20A KORPACZ NATIONAL LUXURY HOTEL MARKET Our survey participants remain less interested in luxury hotels and resorts than in full-service and economy/limited-service properties. The large capital requirements, perceived higher risk, and historically longer period required to realize investment objectives deter many active investor groups from pursuing this type of product. Many of the participants report that an increase in investment capital pursuing quality product is exerting downward pressure on cap rates. Occupancy for this market segment has improved during the past 12 months, and further gains are anticipated this year. Average daily rates are also expected to improve this year, but gains will be limited by corporate and consumer price sensitivity. For the current quarter, survey participants anticipate an average initial year change rate of 3.0%, which compares favorably with the WEFA Group's 1994 inflation projection of 2.9%. Geographic areas for investments vary; some of the preferred locations include the Mid-Atlantic and Sunbelt, San Francisco, New York, Chicago, and Atlanta. Investment interest for luxury product is up, even though there have been significantly fewer transactions than reported in the other segments. Investors continue to look for quality assets at discounted prices as much as 50.0% below original project cost. One participant said, "The next wave of troubled properties to surface will be the worst of the 1980s deals," described as high-priced, long-term management contract deals. Another participant specifically noted that "the greatest dollar impact will be felt in the luxury segment as foreign lenders finally work through problems and sell off bad deals." The average free and clear equity IRR decreased 157 basis points to 13.93% this quarter (see Table 14). The decline is due to increased capital competing for a limited supply of quality assets, according to survey participants. Additionally, there is anticipation of improving market conditions in selected market areas, thereby reducing perceived investor risk. The average free and clear equity cap rate for the current quarter declined 150 basis points to 10.25%. The average residual cap rate decreased 70 basis points to 10.00%. It will be interesting to see whether this is a continuing trend or a new year adjustment in anticipation of increased competition. Investors were asked to provide equity return requirements on leveraged investments, where debt represents 50.0% to 60.0% of the financing. Survey respondents indicated a leveraged equity IRR of 19.83%, a 590-basis-point premium over the average free and clear equity IRR. Overall, investment interest in the luxury hotel market is on the rise although it lags their interest in the other hotel market segments by a considerable margin. This segment continues to be the most difficult to measure in terms of value trends due to a limited number of actual transactions. Investors still continue to search in strong growth markets for properties that have cash flow upside through repositioning and better management. One stimulus that can alter this is how active a role Wall Street takes in marketing these products through equity and/or debt securitization. THE NATIONAL LUXURY HOTEL MARKET REPORT WAS PREPARED BY COOPERS & LYBRAND. 22 Table 14 National Luxury Hotel Market FIRST QUARTER 1994
CURRENT LAST YEAR KEY INDICATORS QUARTER QUARTER AGO Free & Clear Equity IRR RANGE 9.00% - 20.00% 9.00% - 20.00% AVERAGE 13.93% 15.50% CHANGE (Basis Points) - -157 Free & Clear Equity Cap Rate RANGE 8.00% - 13.00% 9.00% - 14.00% AVERAGE 10.25% 11.75% CHANGE (Basis Points) - -150 Average Daily Rate Chg. Rate/a/ RANGE 0.00% - 6.00% 0.00% - 5.00% AVERAGE 3.00% 2.20% CHANGE (Basis Points) - +80 Operating Expense Chg. Rate/a/ RANGE 1.00% - 5.00% 2.00% - 4.00% AVERAGE 3.71% 3.20% CHANGE (Basis Points) - +51 Residual Cap Rate RANGE 9.00% - 12.00% 9.00% - 12.00% AVERAGE 10.00% 10.70% CHANGE (Basis Points) - -70 a. initial rates of change
National Full-Service Hotel Market INVESTOR SURVEY RESPONSES* First Quarter 1994 *Representative sample; due to space constraints, not all responses are included. Source: Personal survey conducted by Coopers & Lybrand during January 1994.
EQUITY EQUITY CAP CHANGE RATES RESIDUAL IRRs RATES ------------------------------------------------------------------------------- Average Daily Operating Cap Year Selling Free & Free & Rate Expenses Rate Capped Expense Clear Clear HOTEL ACQUISITION/MANAGEMENT CO. Forecast 2.0% to 4.0% 3.5% 10.00% 5 2.0% 15.00% 9.00% Period: 5 to 7 years years 1-2; to to Prefers East Coast and east of the 4.0% to 5.0% 13.00% 7 Mississippi; preferences include chain- thereafter affiliated, full-service, and all-suite hotels with revenues in excess of $5 million. Relies heavily on DCF (IRR), will use sales comparables if available for reasonableness, and percent of original cost; cash-on-cash returns in the first three years are particularly critical in attracting capital, with a minimum of 10.0% return in year 1 required. HOTEL ACQUISITION/MANAGEMENT CO. Forecast 3.5% 4.0% -- -- -- 10.00% 10.00% Period: long term years 1-2; to 5.0% to to Interested in East Coast and Midwest; 3.5% to 4.0% 12.00% 12.00% preferences include all-suite, extended thereafter stay, and moderate full-service; primary emphasis on direct capitalization; investment outlook promising, with 6 to 8 acquisitions planned within next 24 months. INVESTMENT ADVISOR Forecast Period: 5 to 7 3.0% to 4.0% 4.0% 10.00% 6 3.0% 13.00% 10.00% years year 1' to to to to Prefers West Coast and Southeast U.S. and 3.5% 12.00% 8 14.00% 12.00% parts of Canada; will invest across all hotel thereafter products; relies on DCF and direct capitalization and expects more interest in hotels, especially from foreign sources (Asian and European) as the economy improves; not currently investing in hotels. PENSION FUND INVESTMENT ADVISOR Forecast 4.0% 4.0% 10.00% 5 Varies 14.00% Varies Period: 5 to 10 years to to Investments are in southern half of U.S.; 15.00% 10 preferences include the 40 largest MSAs with high percentage in the South; relies on DCF, direct capitalization, GRRM, and sales comparison; sees modest improvement within the next 12 months; is looking toward debt investment as opposed to equity investment. LIFE INSURANCE COMPANY Forecast 2.0% 4.0% 12.00% 11 5.0% 13.00% 10.00% Period: 10 years to to to to Prefers Holiday Inns and Marriott brands; 4.0% 13.00% 18.00% 4.00% relies on DCF, direct capitalization, GRRM, and sales comparison; prices continue to be depressed on troubled properties; pricing for performing investment-grade properties becoming stiffer.
GROSS ROOMS RESERVE FOR REVENUE MANAGEMENT REPLACEMENT OF MARKETING MULTIPLIER FEES FIXED ASSETS TIME ---------------------------------------------------------- Percent of Total GRRM Base Fee % Revenues Months HOTEL ACQUISITION/MANAGEMENT CO. Forecast 1.5 3.0% 3.0% 10 Period: 5 to 7 years to to to Prefers East Coast and east of the 2.0 4.0% 12 Mississippi; preferences include chain- affiliated, full-service, and all-suite hotels with revenues in excess of $5 million. Relies heavily on DCF (IRR), will use sales comparables if available for reasonableness, and percent of original cost; cash-on-cash returns in the first three years are particularly critical in attracting capital, with a minimum of 10.0% return in year 1 required. HOTEL ACQUISITION/MANAGEMENT CO. Forecast 3.0% 3.0% 4.0% 3 Period: long term to Interested in East Coast and Midwest; 4.0% preferences include all-suite, extended stay, and moderate full-service; primary emphasis on direct capitalization; investment outlook promising, with 6 to 8 acquisitions planned within next 24 months. INVESTMENT ADVISOR Forecast Period: 5 to 7 2.0 2.0% 3.0% -- years to to to Prefers West Coast and Southeast U.S. and 2.5 3.0% 5.0% parts of Canada; will invest across all hotel products; relies on DCF and direct capitalization and expects more interest in hotels, especially from foreign sources (Asian and European) as the economy improves; not currently investing in hotels. PENSION FUND INVESTMENT ADVISOR Forecast 1.5 2.0% 3.0% 6 Period: 5 to 10 years to to to to Investments are in southern half of U.S.; 2.0 3.0% 5.0% 9 preferences include the 40 largest MSAs with high percentage in the South; relies on DCF, direct capitalization, GRRM, and sales comparison; sees modest improvement within the next 12 months; is looking toward debt investment as opposed to equity investment. LIFE INSURANCE COMPANY Forecast -- 3.0% 3.0% -- Period: 10 years to Prefers Holiday Inns and Marriott brands; 4.0% relies on DCF, direct capitalization, GRRM, and sales comparison; prices continue to be depressed on troubled properties; pricing for performing investment-grade properties becoming stiffer.
32
EQUITY EQUITY CAP CHANGE RATES RESIDUAL IRRs RATES ------------------------------------------------------------------------------- Average Daily Operating Cap Year Selling Free & Free & Rate Expenses Rate Capped Expense Clear Clear LIFE INSURANCE COMPANY Forecast Period: 1.0% 3.5% 10.00% 10 3.0% 16.00% 12.00% 10 years to to Investments are throughout the U.S.; 2.0% 20.00% preferences include top MSAs; relies primarily on direct capitalization; will use DCF to extent that reasons exist to do so. HOTEL ACQUISITION/MANAGEMENT CO. Forecast 3.0% 3.0% 11.00% 5 2.0% 15.00% 13.00% Period: 5 years to to to to Interested in eastern U.S.; preferences include 4.0% 4.0% 12.00% 3.0% upper-end Holiday Inns, Hiltons, Marriotts, and Embassy Suites; uses DCF, direct capitalization, and sales comparison; also looks at cash-on-cash return and exit strategy; values appear to be increasing. HOTEL ACQUISITION/MANAGEMENT CO. Forecast 2.0% 3.0% 12.00% 3 3.0% 15.00% 8.00% Period: 3 to 5 years to to to to to to to Seeking acquisitions in the Southwest, West 3.0% 4.0% 13.00% 5 4.0% 18.00% 15.00% Coast, and Pacific Northwest; prefers all-suite hotels including Embassy Suites, Guest Quarters, and Radisson Suites; uses primarily direct capitalization and analyzes exit strategy and cash-on-cash return; investment outlook is favorable; is looking to be more active in 1994. PENSION FUND ADVISOR Forecast Period: 4.0% to 6.0% 2.0% 10.0% 6 3.0% 20.00% 10.50% 5 to 7 years years 1-2; to or to Prefers major U.S. cities; preferences include 4.0 thereafter 4.0% 8 13.00% full-service and luxury brands such as Radisson, Marriott, Hyatt, Westin, and Embassy Suites; uses direct capitalization and 50% of construction costs; still a buyer's market, but cap rates are coming down; greater competition entering the market. REAL ESTATE INVESTMENT FIRM Forecast Period: 1.0% 1.0% 12.00% 5 1.0% 11.0% 10.00% 3 to 7 years to to to to to to Uses a combination of direct capitalization 5.0% 5.0% 7 3.0% 14.00% 12.00% and sales comparison; seeking cash-on-cash returns of 11.00% to 14.00%; turnaround situations emphasized with definitive exit strategy; purchases hotels below replacement cost; sees a more competitive but still good buyers' market. INVESTMENT ADVISOR Forecast Period: 5 years 3.5% 4.0% 12.00% 6 3.0% 14.00% 11.00% Prefers Northern California, Atlanta, and years 1-2; Florida; feels there is good investment 4.5% activity nationwide; prices are frequently thereafter exceeding expectations with more capital pursuing hotels product; anticipated first increase in prices since 1988.
GROSS ROOMS RESERVE FOR REVENUE MANAGEMENT REPLACEMENT OF MARKETING MULTIPLIER FEES FIXED ASSETS TIME ---------------------------------------------------------- Percent of Total GRRM Base Fee % Revenues Months LIFE INSURANCE COMPANY Forecast Period: -- 3.0% 7.0% 6 10 years to Investments are throughout the U.S.; 18 preferences include top MSAs; relies primarily on direct capitalization; will use DCF to extent that reasons exist to do so. HOTEL ACQUISITION/MANAGEMENT CO. Forecast -- 4.0% 3.0% 6 Period: 5 years Interested in eastern U.S.; preferences include upper-end Holiday Inns, Hiltons, Marriotts, and Embassy Suites; uses DCF, direct capitalization, and sales comparison; also looks at cash-on-cash return and exit strategy; values appear to be increasing. HOTEL ACQUISITION/MANAGEMENT CO. Forecast 2.0 4.0% 2.0% 2 Period: 3 to 5 years to to to Seeking acquisitions in the Southwest, West 3.0 3.0% 4 Coast, and Pacific Northwest; prefers all-suite hotels including Embassy Suites, Guest Quarters, and Radisson Suites; uses primarily direct capitalization and analyzes exit strategy and cash-on-cash return; investment outlook is favorable; is looking to be more active in 1994. PENSION FUND ADVISOR Forecast Period: 2.0 2.0% 4.0% 12 5 to 7 years to to Prefers major U.S. cities; preferences include 2.5 5.0% full-service and luxury brands such as Radisson, Marriott, Hyatt, Westin, and Embassy Suites; uses direct capitalization and 50% of construction costs; still a buyer's market, but cap rates are coming down; greater competition entering the market. REAL ESTATE INVESTMENT FIRM Forecast Period: -- 2.0% 2.0% 6 3 to 7 years to to to Uses a combination of direct capitalization 4.0% 4.0% 9 and sales comparison; seeking cash-on-cash returns of 11.00% to 14.00%; turnaround situations emphasized with definitive exit strategy; purchases hotels below replacement cost; sees a more competitive but still good buyers' market. INVESTMENT ADVISOR Forecast Period: 5 years 2.6 2.5% 4.0% 8 Prefers Northern California, Atlanta, and Florida; feels there is good investment activity nationwide; prices are frequently exceeding expectations with more capital pursuing hotels product; anticipated first increase in prices since 1988.
National Luxury Hotel Market INVESTOR SURVEY RESPONSES First Quarter 1994 Source: Personal survey conducted by Cooper & Lybrand during January 1994.
EQUITY EQUITY CAP CHANGE RATES RESIDUAL IRRs RATES ------------------------------------------------------------------------------- Average Daily Operating Cap Year Selling Free & Free & Rate Expenses Rate Capped Expense Clear Clear HOTEL ACQUISITION/MANAGEMENT CO. Forecast 3.0% 4.0% -- -- -- 9.00% 9.00% Period: long term to Investments are in Southeast; interested in 5.0% East Coast and Midwest; preferences include all-suite, extended-stay, and moderate full- service; primary emphasis on direct capitalization; investment outlook promising with 6 to 8 acquisitions planned within next 24 months. INVESTMENT ADVISOR Forecast Period: 5 to 10 1.0% to 3.0% 4.0% 9.00% 6 3.0% 12.00% 10.00% years years 1-2; to or to to to Prefers West Coast and Southeast U.S. and parts 3.5% 10.00% 11 14.00% 12.00% 3.0% of Canada; will invest across all hotel thereafter products; relies on DCF and direct capitalization and expects more interest in hotels, especially from foreign sources (Asian and European) as the economy improves; not currently investing in hotels. PENSION FUND INVESTMENT ADVISOR Forecast 4.0% 4.0% 9.00% 5 Varies 15.00% Varies Period: 5 to 10 years to to Investments are in southern half of U.S.; 12.00% 10 preferences include the 40 largest MSAs with high percentage in the southern area of the U.S.; relies on DCF, direct capitalization, GRRM, and sales comparison; sees modest improvement within the next 12 months. LIFE INSURANCE COMPANY Forecast Period: 0.0% to 1.0% 3.5% 11.00% 10 3.0% 18.00% 13.00% 10 years years 1-2; to Investments are throughout the U.S.; 1.0% year 3; 20.00% preferences include top MSAs; relies primarily 2.0% thereafter direct capitalization; will use DCF to extent that reasons exist to do so. REAL ESTATE INVESTMENT FIRM Forecast Period: 1.0% 1.0% 10.00% 5 1.0% 11.00% 9.00% 5 to 7 years to to to to to to Investments are in Southwest; no geographic 5.0% 5.0% 7 3.0% 14.00% 12.00% preferences; investing in full-service hotels, some with upper-tier pricing; uses a combination of direct capitalization and sales comparison; seeking cash-on-cash returns of 11.00% to 14.00%; turnaround situations emphasized with definitive exit strategy; purchases hotels below replacement cost; sees a more competitive but still good buyers' market; is looking on a national basis for package deals. PENSION FUND ADVISOR Forecast Period: 5 to 7 4.0% to 6.0% 2.0% 9.00% 6 3.0% 18.00% 9.00% years years 1-2; to or to Investments are in Denver, Chicago, Washington, 4.0% 4.0% 8 11.00% DC, North Carolina, and Arizona; prefers major thereafter U.S. cities; preferences include full-service and luxury brands such as Radisson, Marriott, Hyatt, Westin, and Embassy Suites; uses direct capitalization and 50.0% of construction costs; still a buyers' market; sees greater dollar impact in luxury market.
GROSS ROOMS RESERVE FOR REVENUE MANAGEMENT REPLACEMENT OF MARKETING MULTIPLIER FEES FIXED ASSETS TIME ---------------------------------------------------------- Percent of Total GRRM Base Fee % Revenues Months HOTEL ACQUISITION/MANAGEMENT CO. Forecast 3.0 3.0% 3.0% 3 Period: long term to Investments are in Southeast, interested in 4.0% East Coast and Midwest; preferences include all-suite, extended-stay, and moderate full- service; primary emphasis on direct capitalization; investment outlook promising with 6 to 8 acquisitions planned within next 24 months. INVESTMENT ADVISOR Forecast Period: 5 to 10 -- 2.0% 3.0% -- years to to Prefers West Coast and Southeast U.S. and parts 3.0% 5.0% of Canada; will invest across all hotel products; relies on DCF and direct capitalization and expects more interest in hotels, especially from foreign sources (Asian and European) as the economy improves; not currently investing in hotels. PENSION FUND INVESTMENT ADVISOR Forecast -- 2.0% 4.0% 6 Period: 5 to 10 years to to to Investments are in southern half of U.S.; 3.0% 6.0% 9 preferences include the 40 largest MSAs with high percentage in the southern area of the U.S.; relies on DCF, direct capitalization, GRRM, and sales comparison; sees modest improvement within the next 12 months. LIFE INSURANCE COMPANY Forecast Period: -- 3.0% 6.0% 6 10 years to Investments are throughout the U.S.; 18 preferences include top MSAs; relies primarily direct capitalization; will use DCF to extent that reasons exist to do so. REAL ESTATE INVESTMENT FIRM Forecast Period: -- 2.0% 2.0% 9 5 to 7 years to to to Investments are in Southwest; no geographic 3.0% 4.0% 12 preferences; investing in full-service hotels, some with upper-tier pricing; uses a combination of direct capitalization and sales comparison; seeking cash-on-cash returns of 11.00% to 14.00%; turnaround situations emphasized with definitive exit strategy; purchases hotels below replacement cost; sees a more competitive but still good buyers' market; is looking on a national basis for package deals. PENSION FUND ADVISOR Forecast Period: 5 to 7 2.0 1.5% 4.0% 12 years to to to Investments are in Denver, Chicago, Washington, 2.5 2.0% 6.0% DC, North Carolina, and Arizona; prefers major U.S. cities; preferences include full-service and luxury brands such as Radisson, Marriott, Hyatt, Westin, and Embassy Suites; uses direct capitalization and 50.0% of construction costs; still a buyers' market; sees greater dollar impact in luxury market.
EQUITY EQUITY CAP CHANGE RATES RESIDUAL IRRs RATES ------------------------------------------------------------------------------- Average Daily Operating Cap Year Selling Free & Free & Rate Expenses Rate Capped Expense Clear Clear INVESTMENT ADVISOR Forecast Period: 5 years 3.5% 4.0% 10.00% 11 2.0% 11.00% 8.00% Prefers Northern California, Atlanta, and years 1-2; Florida; feels there is good investment 4.5% activity nationwide, prices frequently exceed thereafter expectations with more capital pursuing hotel product; anticipates first increase in prices since 1988.
GROSS ROOMS RESERVE FOR REVENUE MANAGEMENT REPLACEMENT OF MARKETING MULTIPLIER FEES FIXED ASSETS TIME ---------------------------------------------------------- Percent of Total GRRM Base Fee % Revenues Months INVESTMENT ADVISOR Forecast Period: 5 years 4.0 2.0% 4.0% 11 Prefers Northern California, Atlanta, and Florida; feels there is good investment activity nationwide, prices frequently exceed expectations with more capital pursuing hotel product; anticipates first increase in prices since 1988.
Market Source Market Source (IISN 1055-5579) is published quarterly by the Appraisal Institute, 875 N. Michigan Ave., Chicago, IL 60611-1980, (312) 335-4100. Fax: (312) 335-4400. President Douglas C. Brown, MAI Chair, Research and Information Committee Ronald E. Malmfeldt, MAI Vice President, Research W. Lee Minnerly Manager, Data Services Jon D. Ruesch Managing Editor Joy M. White Manager, Design/Production Julie Beich Subscriptions: Subscription rates are $100 per year for Appraisal Institute members and affiliates, $150 per year for all others. Make checks payable to: Appraisal Institute, 875 N. Michigan Ave., Chicago, IL 60611-1980. Single copies, if available, are $25 each. (C) 1994 by the Appraisal Institute. All rights reserved. The opinions and statements set forth herein do not necessarily reflect the viewpoints of the Appraisal Institute or its individual members, and neither the Institute nor its editors and staff assume responsibility for such expressions of opinion or statement. The Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities without regard to race, color, sex, religion, national origin, or handicap status.
KEY RATES - -------------------------------------------------------------------------------------------- Dec. 1992 Sept. 1993 Oct. 1993 Nov. 1993 Dec. 1993 Federal Funds 2.92 3.09 2.99 3.02 2.96 U.S. Treasuries: 3-Month 3.25 2.96 3.04 3.12 3.08 6-Month 3.39 3.06 3.13 3.27 3.25 1-Year 3.71 3.36 3.39 3.58 3.61 2-Year 4.67 3.85 3.87 4.16 4.21 3-Year 5.21 4.17 4.18 4.50 4.54 5-Year 6.08 4.73 4.71 5.06 5.15 7-Year 6.46 5.08 5.05 5.45 5.48 10-Year 6.77 5.36 5.33 5.72 5.77 30-Year 7.44 6.00 5.94 6.21 6.25 Prime Rate 6.00 6.00 6.00 6.00 6.00 Moody's Corp. Bonds: Aaa 7.98 6.66 6.67 6.93 6.93 A 8.27 6.94 6.91 7.25 7.28 Baa 8.81 7.34 7.31 7.66 7.69
Source: Federal Reserve Statistical Release KEY RATES TRENDS 1990 to 1993 - -------------------------------------------------------------------------------- [GRAPH] Sources: Federal Reserve Statistical Release and Appraisal Institute Research Department
CONSUMER TRENDS - -------------------------------------------------------------------------------------------- IIIQ 1989 IIIQ 1990 IIIQ 1991 IIIQ 1992 IIIQ 1993 Consumer Price 125.0 132.7 137.2 141.3 145.1 Index Per Capita $15,026 $16,242 $16,752 $17,577 $18,254 Disposable Personal Income Savings as 4.1 3.9 4.4 4.9 3.7 Percent of DPI Inflation Rate 3.8 4.7 3.4 2.5 2.2
Source: Economic Indicators
Benchmarks ==================================================================================================================================== TOTAL EMPLOYMENT TRENDS (in thousands) - ------------------------------------------------------------------------------------------------------------------------------------ Percent Change Unemployment Rate Sept. 1992 July 1993 Aug. 1993 Sept. 1993[p] Sept. 1992-Sept. 1993 Sept. 1992 Sept. 1993[p] Atlanta 1,512.2 1,574.7 1,580.3 1,587.5 5.0 6.9 4.5 Baltimore 1,091.7 1,081.0 1,077.7 1,076.3 (1.4) 7.5 7.2 Boston 1,542.7 1,538.1 1,532.8 1,538.9 (0.2) 7.7 6.3 Charlotte 625.7 629.2 633.2 636.7 1.8 5.1 3.7 Chicago 3,097.9 3,144.6 3,145.3 3,152.4 1.8 6.2 7.8 Cincinnati 752.2 759.4 760.3 765.5 1.8 5.2 5.6 Cleveland 923.2 922.4 920.2 923.9 0.1 6.2 6.0 Dallas-Ft. Worth* 2,001.7 2,022.4 2,033.8 2,042.0 2.0 6.9 5.6 Denver 878.1 898.7 899.8 901.8 2.7 4.9 4.7 Detroit 1,883.2 1,885.4 1,897.8 1,910.4 1.4 8.8 6.9 Houston 1,625.4 1,635.9 1,632.6 1,637.8 0.8 7.4 6.9 Indianapolis 682.3 687.8 688.1 691.3 1.3 4.8 3.6 Kansas City 789.3 792.1 789.1 797.1 1.0 5.0 4.9 Las Vegas 400.9 405.3 408.3 412.0 2.8 6.7 7.2 Los Angeles 3,801.1 3,719.9 3,710.5 3,730.7 (1.9) 10.4 9.7 Miami 860.9 871.4 873.8 882.7 2.5 11.8 7.2 Milwaukee 764.1 772.6 774.3 778.2 1.8 4.8 3.9 Minneapolis-St. Paul 1,411.0 1,425.9 1,427.6 1,433.7 1.6 4.5 4.2 Nashville 520.8 528.3 530.1 534.4 2.6 4.9 3.9 Nassau-Suffolk 1,045.1 1,036.0 1,032.2 1,038.4 (0.6) 7.9 6.4 New Orleans 538.2 534.3 532.8 537.3 (0.2) 7.4 6.6 New York 3,754.9 3,730.1 3,728.1 3,728.2 (0.7) 10.6 8.2 Oklahoma City 430.9 429.4 430.5 437.9 1.6 5.5 4.9 Orlando 573.3 586.5 585.6 591.4 3.2 7.3 5.6 Philadelphia 2,085.1 2,074.1 2,064.8 2,067.8 (0.8) 7.3 6.7 Phoenix 997.2 990.3 993.4 1,012.4 1.5 5.9 4.4 Pittsburgh 915.6 912.6 914.1 923.0 0.8 6.2 5.9 Portland 654.0 656.5 658.0 661.0 1.1 6.3 6.0 St. Louis 1,164.8 1,157.1 1,152.8 1,169.3 0.4 5.7 5.8 San Antonio 554.2 562.2 561.4 571.8 3.2 6.6 5.5 San Diego 942.3 929.9 926.0 928.0 (1.5) 7.7 8.4 San Francisco 915.0 910.1 907.0 909.5 (0.6) 6.3 6.4 Seattle 1,134.2 1,130.6 1,124.8 1,137.6 0.3 6.1 6.8 Washington, D.C. 2,193.5 2,221.2 2,189.4 2,205.1 0.5 5.1 4.5 U.S. 108,674.0 110,338.0 110,305.0 110,467.0 1.6 7.5 6.7
Source: Employment and Earnings DATA SOURCES ================================================================================ CB Commercial Office Vacancy Index of the United States. CB Commercial Real Estate Group, Inc., Los Angeles. Quarterly. F.W. Dodge Real Estate Analysis and Planning Service. F.W. Dodge Group, McGraw-Hill, Inc. Lexington, Mass. Quarterly. Economic Indicators. Council of Economic Advisors to the Joint Economic Committee, U.S. Congress, Washington, D.C. Monthly. Employment and Earnings. U.S. Department of Labor, Bureau of Labor Statistics, Washington, D.C. Monthly. Federal Housing Finance Board News. Federal Housing Finance Board, Washington, D.C. Monthly. Federal Reserve Statistical Release. Board of Governors of the Federal Reserve System, Washington, D.C. Weekly. Forecast of Housing Activity. National Association of Home Builders of the United States, Washington, D.C. Monthly. Housing Starts, Current Construction Reports, series C20. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Monthly. Housing Units Authorized by Building Permits, Current Construction Reports, series C40. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Monthly. Housing Vacancies and Homeownership, Current Housing Reports, series H111. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Monthly. Monthly Retail Trade: Sales and Inventories, Current Business Reports, series BR. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Monthly. 3 National Real Estate Index. Liquidity Fund, Emeryville, Calif. Quarterly. New One-Family Houses Sold, Current Construction Reports, series C25. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Monthly. New Residential Construction in Selected Metropolitan Areas, Current Construction Reports, series C21. U.S. Department of Commerce, Bureau of the Census, Washington, D.C. Quarterly. Real Estate Outlook. National Association of Realtors, Washington, D.C. Monthly. U.S. Housing Markets. Lomas Mortgage USA, Detroit. Quarterly. 3A MORTGAGE COMMITMENTS ================================================================================ NATIONAL MORTGAGE COMMITMENT SURVEY Third Quarter 1993--National Ranges - --------------------------------------------------------------------------------
Interest Rates Type and Lender No. of 3-5 Year 7-10 Year 10 Year + Amort. Percent Loan-to- Debt Cov. Amt. of Loan Sample Commits. Term Term Term Period Constant Value Ratio Ratio Less than $5M: Multifamily 11 112 6.88-9.50 7.09-9.25 7.31-9.88 10-30 9.16-13.96 56-85 1.05-1.71 Retail 9 25 7.00-9.25 6.80-10.00 8.00-9.25 10-30 9.55-13.25 52-85 1.04-1.80 Office 7 31 7.00-9.75 7.50-9.75 8.25-9.75 12-25 9.47-13.42 54-85 1.15-1.74 Industrial 11 28 6.38-10.50 7.50-9.25 8.00-9.25 10-30 8.86-13.16 55-85 1.01-1.75 $5M-$9.99M: Office 5 4 7.00-8.25 7.50-8.50 -- 12-30 10.22-13.15 61-80 1.00-1.63 Industrial 6 7 7.00-8.25 7.50-8.93 -- 12-30 10.01-13.42 47-80 1.16-1.73
AVERAGE INTEREST RATES - ------------------------------------------------------------------------------- Third Quarter 1993--National Averages
Type and Amt. of Loan 3-5 Year Term 7-10 Year Term 10 Year+ Term Less than $5M: Multifamily 7.97 8.09 8.59 Retail 8.08 8.41 8.58 Office 8.30 8.50 8.89 Industrial 8.23 8.40 8.62 $5M-$9.99M: Office 7.85 8.10 -- Industrial 7.69 8.28 --
Source: Appraisal Institute Research Department NOTE: No regional averages appear for third quarter 1993 mortgage rates due to an insufficient sample size. 13 MarketSource ================================================================================ TRENDS AND FORECASTS - --------------------------------------------------------------------------------
Featured Property Type: HOTELS 1990 1991 1992 1993 Percent Change 1993-1995 Anaheim Completions 1,027 1,057 134 7 5,928.9 Absorption Rate 684 (447) (210) 133 528.6 Vacancy Rate 34.3 39.8 40.9 38.6 -- Atlanta Completions 1,496 1,473 861 48 734.9 Absorption Rate 581 (75) 505 260 273.8 Vacancy Rate 28.6 32.7 33.2 25.9 -- Baltimore Completions 307 359 137 0 -- Absorption Rate 101 (251) (89) 67 344.2 Vacancy Rate 32.6 37.5 39.0 34.2 -- Boston Completions 553 160 0 252 (4.3) Absorption Rate (425) (327) 86 63 1,129.3 Vacancy Rate 29.0 30.7 29.9 27.6 -- Charlotte Completions 743 655 81 28 121.2 Absorption Rate 398 (110) 228 129 384.9 Vacancy Rate 50.7 56.7 54.8 48.6 -- Chicago Completions 909 442 1,299 9 4,791.3 Absorption Rate 338 (247) 64 (120) 1,536.4 Vacancy Rate 20.8 22.1 24.6 22.7 --
14 TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS
1990 1991 1992 1993 Percent Change 1993-1995 Cincinnati Completions 768 270 26 53 105.2 Absorption Rate 221 13 235 22 939.9 Vacancy Rate 19.8 21.5 19.2 17.7 -- Cleveland Completions 606 613 67 1 7,315.7 Absorption Rate 6 19 (2) (80) 272.5 Vacancy Rate 21.2 26.8 27.0 24.4 -- Columbus Completions 207 210 111 199 15.3 Absorption Rate 273 151 173 38 199.7 Vacancy Rate 16.7 17.1 16.0 15.3 -- Dallas Completions 454 329 74 46 587.9 Absorption Rate 1,078 10 352 162 348.2 Vacancy Rate 27.6 28.5 27.2 23.9 -- Denver Completions 0 1 0 27 225.2 Absorption Rate 508 269 401 106 90.6 Vacancy Rate 22.1 19.6 16.0 10.8 -- Detroit Completions 1,144 343 19 43 46.9 Absorption Rate 119 (670) 333 (54) 897.5 Vacancy Rate 32.3 36.6 34.7 23.6 -- Fort Worth Completions 81 2 6 26 404.3
14A TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS
1990 1991 1992 1993 Percent Change 1993-1995 Absorption Rate 236 242 (151) 34 482.8 Vacancy Rate 10.7 6.8 9.0 5.8 -- Hartford Completions 264 279 0 2 3,838.3 Absorption Rate (10) (194) (105) 9 1,313.3 Vacancy Rate 29.0 37.2 39.4 38.5 -- Honolulu Completions 91 109 1,092 593 (9.1) Absorption Rate 520 678 (263) 282 (120.6) Vacancy Rate 9.5 5.5 14.0 17.2 -- Houston Completions 210 18 29 39 217.2 Absorption Rate 1,366 612 679 137 517.5 Vacancy Rate 19.7 16.9 14.0 13.5 -- Indianapolis Completions 427 440 15 101 (50.9) Absorption Rate 238 382 190 83 514.8 Vacancy Rate 21.4 21.5 19.9 16.7 -- Kansas City Completions 393 274 123 83 103.6 Absorption Rate 362 (6) 120 47 1,106.2 Vacancy Rate 16.4 18.4 18.0 10.8 -- Los Angeles Completions 2,190 2,976 1,847 769 (45.1) Absorption Rate 6 (1,272) (1,863) (252) 737.6 Vacancy Rate 28.8 35.6 41.3 41.0 --
15 TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS
1990 1991 1992 1993 Percent Change 1993-1995 Miami Completions 348 368 519 125 51.0 Absorption Rate (264) (250) 307 (28) 470.8 Vacancy Rate 20.6 22.2 22.2 23.7 -- Milwaukee Completions 413 85 90 15 618.7 Absorption Rate 149 16 91 47 293.0 Vacancy Rate 30.8 31.7 31.2 24.4 -- Minneapolis-St. Paul Completions 151 197 730 4 2,980.5 Absorption Rate 539 385 790 144 382.4 Vacancy Rate 25.5 23.9 23.3 19.5 -- Nashville Completions 314 426 73 192 23.5 Absorption Rate 300 (143) 379 162 228.4 Vacancy Rate 22.5 27.2 24.2 17.9 -- Nassau-Suffolk Completions 36 171 2 0 -- Absorption Rate (6) (119) (74) 17 1,026.3 Vacancy Rate 28.6 33.7 34.9 30.5 -- Newark Completions 0 238 38 53 168.3 Absorption Rate (168) (315) (62) 38 539.6 Vacancy Rate 24.2 29.2 29.9 27.5 --
15A TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS
1990 1991 1992 1993 Percent Change 1993-1995 Absorption Rate 349 537 85 172 274.9 Vacancy Rate 31.8 28.1 27.3 25.6 -- New York Completions 467 1,340 832 16 1,384.5 Absorption Rate (847) (1,724) (731) (82) 1,216.8 Vacancy Rate 22.7 28.9 31.5 30.6 -- Oklahoma City Completions 0 0 0 2 2,066.3 Absorption Rate 130 64 (126) 26 441.7 Vacancy Rate 37.3 35.8 37.6 35.8 -- Orlando Completions 3,142 1,644 1,852 129 320.1 Absorption Rate 948 (395) 386 294 141.4 Vacancy Rate 27.1 32.5 33.5 30.9 -- Philadelphia Completions 1,984 817 0 232 (25.1) Absorption Rate 59 (306) (14) 70 470.5 Vacancy Rate 27.3 31.8 31.6 29.2 -- Phoenix Completions 699 339 113 11 1,917.6 Absorption Rate 593 (140) 81 55 620.2 Vacancy Rate 21.8 23.8 23.6 18.5 -- Pittsburgh Completions 456 362 55 7 494.9 Absorption Rate 301 (159) (98) 192 (71.9) Vacancy Rate 19.0 23.5 24.5 19.7 --
16 Supply and Demand ================================================================================ TRENDS AND FORECASTS - --------------------------------------------------------------------------------
Featured Property Type: HOTELS Percent Change 1990 1991 1992 1993 1993-1995 Portland Completions 301 337 173 30 81.5 Absorption Rate 297 132 187 32 782.0 Vacancy Rate 10.2 12.8 12.2 10.9 - Sacramento Completions 340 174 596 38 189.4 Absorption Rate 304 (37) (10) (9) 4,539.1 Vacancy Rate 16.6 18.5 24.6 23.9 - St. Louis Completions 513 562 205 61 117.2 Absorption Rate 126 45 (94) 59 639.7 Vacancy Rate 18.6 21.5 23.0 17.9 _ Salt Lake City Completions 38 180 521 51 330.8 Absorption Rate 299 351 183 (23) 1,208.7 Vacancy Rate 12.9 10.2 15.1 12.3 _ San Antonio Completions 211 28 218 41 885.9 Absorption Rate 303 (148) 448 100 249.8 Vacancy Rate 23.7 25.1 22.3 20.8 _ San Diego Completions 1,728 1,691 2,120 89 134.9 Absorption Rate 613 (609) (91) 103 722.9 Vacancy Rate 39.8 48.2 54.5 51.9 _ San Francisco Completions 416 360 134 1 23,204.2 Absorption Rate 266 (560) (203) (17) 1,258.4 Vacancy Rate 23.7 26.7 27.8 28.5 _ Seattle Completions 938 1,418 351 145 (12.7) Absorption Rate 354 574 152 (54) 2,216.4 Vacancy Rate 27.2 32.1 32.9 34.2 _ Tampa Completions 354 113 385 10 1,815.4 Absorption Rate 353 (265) 144 112 96.8 Vacancy Rate 18.9 21.5 22.5 20.4 - Washington, D.C. Completions 2,563 2,124 57 77 366.9 Absorption Rate 625 84 1,089 201 427.9 Vacancy Rate 25.0 29.0 26.4 22.7 _
Source: F.W. Dodge Group, McGraw-Hill, Inc. 17 Second Quarter 1993 National Investor Survey ACB Commercial Appraisal Power Shopping Centers
Real Rate Typical Discount Growth Rate Assumptions (%) of Return Marketing ---------------------------------------------------- Overall Cap Rates (%) Rate (%) Market General Retail (%) Period --------------------- Type of Firm Going-in Terminal (IRR) Rent Expenses Inflation Sales (RRR) (Months) - ----------------------------------------------------------------------------------------------------------------------------------- Advisor 9-10 10-10.5 11 4 4 4 -- -- -- Advisor 9.75 10 12.25 3 4 4 -- 8 9 Advisor 10 10 12-13 4 4 4 4 -- -- Advisor 10 10 12.5 2-3 4 4 2-3 -- -- Advisor 9.25 9.5 11.75 5 4.5 4.5 5 7.25 12 Advisor 9.5-10 10 11 4 5 4 -- -- -- Advisor 9 9.5 11.25 0-3 4 4 -- -- -- Advisor 8.5-10 8.5-11 11.5-14 -- 4-5 4-5 3-5 -- -- Advisor 10 10 11 0,0,4.. 4 4 -- 7 -- Advisor 10 10 13 4 4 4 -- -- -- Advisor 9-9.5 9.5-10 14 2-4 4 4 2-3 -- 6-12 Advisor 10 10.5 11-12 0,0,4.. 4 4 -- 7-8 9 Developer 9.5 +100bp 12-15 4 4-5 -- -- 8-10 -- Insurance Co. 10.5 11.5 12 2.5 4 3.5 3.5 -- 12 Insurance Co. 10 25-75bp 11.75 4 5 4 -- -- -- Insurance Co. -- 9.25-9.75 10.75-11.5 -- 3.5-5 3.5-5 -- -- 10 Investor 9.5 +25bp 12+ -- -- -- -- -- -- Lender/Investor 10 10 12 3 4 4 -- -- -- Pension Fund 9-10 9-10 11-11.5 4 4 4 4 5-6 6-12 - ------------------------------------------------------------------------------------------------------------------------------------ Range: 8.5-10.5 8.5-11.5 10.75-15 0-5 3.5-5 3.5-5 2-5 5-10 6-12 Average: 9.7 10.0 12.0 3.4 4.2 4.0 3.6 7.4 10.0 Change from 2nd Qtr. 1992 Survey +30 +30 -20 -30 -30 -50 +10 -20
Hotels
Real Rate Typical Discount Growth Rate Assumptions (%) of Return Marketing ------------------------------------- Overall Cap Rates (%) Rate (%) Market General (%) Period --------------------- Type of Firm Going-in Terminal (IRR) Rent Expenses Inflation (RRR) (Months) - ----------------------------------------------------------------------------------------------------------------------------------- Advisor 10-13 10-13 16-20 2-3 3.5 4 12-16 6 Advisor 13-15 15 17.5 0-2 4 4 13.5 12 Advisor 11 12 15 3 3 3 -- 12 Advisor 10 10 15 0,4.. 4 4 -- -- Developer 9 +100bp 12-15 4 4-5 -- 8-10 -- Insurance Co. 13 14 14 0 4 3.5 -- 24 Insurance Co. 12-15 50-100bp 12-15 4 5.5 4 -- -- Investor 10 -- -- -- 5 5 10 6 Investor 12-13+ +50-75bp 13+ -- -- -- -- -- Lender/Investor 13 12 15 3 4 4 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Range: 9-13 10-15 12-20 0-4 3-5.5 3-5 8-16 6-24 Average: 11.8 12.4 14.9 2.6 4.2 3.9 11.6 12.0 Change from 2nd Qtr. 1992 Survey: -20 +10 +50 -30 -30 -20 +160
bp: Basis Points 17 TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS Emerging Trends in Real Estate: 1994 Real Estate Research Corporation and Equitable Real Estate Investment Management, Inc. In the next two issues of the RERC Real Estate Report we will publish excerpts from this year's Emerging Trends. In this issue, we will reprint Chapter 1, It's Started, which outlines the major findings of this year's report. Forward Every year since our 1985 report, in the midst of an unprecedented development boom, Emerging Trends in Real Estate has warned about and then chronicled the fall of the real estate markets. Victims of a "kill the messenger syndrome," our past cautions were not always welcomed by the industry, no matter their unfortunate accuracy. With this in mind, we cannot be accused of undue optimism in this year's forecast when our evaluation points finally to trends suggesting that markets have bottomed and are beginning what promises to be an extended convalescence. As always, Emerging Trends is based on face-to-face, in-depth interviews and surveys with more than 100 leading real estate investors and experts-executives from pension funds, banks, insurance companies, and advisors as well as investment bankers, developers and well known entrepreneurs. Their consensus views form the backbone of this report, which is supplemented by analysis and research of Real Estate Research Corporation and Equitable Real Estate Investment Management, Inc. For example, the August job figures showed a loss of 39,000 jobs, compared to a gain of 211,000 in July. Many analysts believe that the August numbers will be revised to show an employment gain. Overall, through August, the economy has added 1.2 million jobs in 1993, and this is expected to hit more than 2.0 million by year-end. Emerging Trends The focus of Emerging Trends has changed over the past decade, reflecting the dramatic upheaval in the real estate business. Interviewees use to be dominated by developers and syndicators, the report's primary audience was developers, and its prognostications revolved around where the best development opportunities existed in the country. Now our interviewees are loathe to even reference the "D" word, let alone say it, and the continued absence of any significant commercial construction activity is the primary reason for why markets are starting to turn. Exhibit 1-1 Asset Class Investment Potential [GRAPH APPEARS HERE] Exhibit 1-2 When Will Values Begin to Increase? [GRAPH APPEARS HERE] With development a moot point, we redirected Emerging Trends in recent years, writing the report for real estate investors--providing a broad overview for guiding decision-making, pointing out opportunities as well as the quicksand. Since the 1990 issue, we have also significantly expanded our survey to probe our interviewees for their investment perspectives on land uses, cities, capital sources, values, and pricing. These surveys provide a more quantitative context to the subjective interviewing process. Now in its fifteenth year, Emerging Trends has watched and predicted the movements of almost a complete real estate cycle and the ultimate downsizing of our industry. The report has evolved, changed, and expanded with the ups and downs of what has been the industry's most volatile era. Mostly thanks to the interviewees, our forecasts have been repeatedly on target. With some small measure of optimism at hand, we're actually looking forward to being right again. It's Started: Recovery Moves Forward Slowly For 1994, investors can size up the real estate markets in either of two ways--both accurate: . A sluggish economy, coupled with corporate makeovers and less-than-optional demographic shifts, hobbles the markets and set roadblocks to quick recovery. Office markets may not see real improvement until the end of the century. Development prospects are moribund, and new construction slumps to a 30-year low. Capital sources, aside from much-hyped and expensive Wall Street vehicles, are still in retreat, just-in-time, QVC, laptops, E-Mail, portable phones--the progeny of burgeoning technology--are threats to the real estate landscape as we've known it. . Tight capital is good news. Realism has taken hold, fostering disciplined underwriting and a focus on fundamentals--location, credit tenants, quality. The development bust is just what the industry needed to get back on its feet. Low interest rates continue to be a boon, helping values recover and making real estate yields more attractive. In fact, pension funds actually assess real estate as competitive with stocks and bonds for future investment potential and are ready to reenter the asset class--in a measured fashion. If anything, investors are missing the chance to lock in large yield spreads on very conservatively underwritten mortgages. Significantly, values are stabilizing; 1994 should even see slight upticks for warehouses and malls, as well as gains for apartments on top of good coupon returns. The success of high-quality equity REIT offerings has been a shot in the arm, restoring some confidence in the industry as they bail out prominent owners in need of refinancing. No matter how you call it, the recovery process has begun. Prospects for investment real estate should improve, slowly but steadily, through the end of the decade. Despite the depth of the real estate depression and its continuing, jarring aftershocks, this is the first time since 1984 that Emerging Trends has seen a generally positive directing taking hold--albeit for a smaller, transformed industry. There's no easy money to be made, and the shakeout isn't over by any means. Investors must be highly selective in identifying and analyzing prospective acquisitions or financing candidates. But it's time to start looking at real estate again--with a sober, calculated view. How protracted will the recovery period be? What obstacles still stand in the way? Where are the investment opportunities and the nasty traps? Who will own and finance real estate as we go forward, and what are the prospects for each major market and property category? Based on face-to-face interviews and in-depth surveys with the nation's leading real estate executives, Emerging Trends seeks to answer these and other questions in our annual industry outlook. Last year, Emerging Trends interviewees saw real estate as an impaired investment category, beset by negative returns and still-plunging short-term prospects. They wanted signs that markets were bottoming out and stabilizing before they would commit to the asset class again. Today those signals are coming through. While fixed-income securities and equities have at record highs, real estate is at a postwar low. However, most investors, while viewing real estate much more favorably, are somewhat chary of being first back into the markets. They want further evidence of firming before they move with conviction. They also wonder which specific properties to invest in, given the remaining market uncertainties. But they are ready to move. In 1994, look for marked improvement in investor appetites. In order of preference, multifamily, industrial warehouse, and regional mall properties will be the focus of investors coming back into the market. Apartments, the top choice, are in tight supply and values are actually increasing. Warehouse and retail mall values are stabilizing. Office properties, especially downtown, receive low ratings; but suburban office is strengthening, and with prices well below replacement costs there may be some excellent value plays. Despite improved balance sheets, there's still not much interest in hotels. No one expects a sudden, dramatic turnaround. In fact, for all the talk of improved real estate karma, the Emerging Trends panel is more worried now about an anemic economic delaying recovery than it was a year ago, especially for office markets. Nevertheless, as one interviewee sums it up: "It's going to take longer, but it's started. That's the important thing. We're stabilizing and we're finally looking up." There's little doubt that the real estate recovery will be slow and spotty. We define recovery as the stage in which values begin to increase as a result of improvement in effective rental rates and movement toward market equilibrium. For office properties, real rents won't increase until mid-1996, according to the consensus. Some regional malls may see small value hikes in '94, but others will shut down, unable to compete for the shrinking number of retail tenants. Washington, D.C., and Atlanta rank as the nation's strongest markets for real estate investment. Denver jumps to third, spurred by dramatic strengthening in its residential category. Overall, market assessments are more bullish than they were last year, but the nation's capital ranks as the only city where real estate values can be expected to increase--just barely--in 1994. Los Angeles again brings up the rear, with New York and Philadelphia also lagging. Sunbelt markets in general have stronger near-term prospects, as population growth promises to be the engine for better performance. Almost unanimously, the interviewees peg job growth as the key to pulling real estate out of its pit and triggering substantial improvement. But no one anticipates a wave of positive employment trends this is the biggest reason for tempered outlooks on the industry rebound. Company layoffs and much-ballyhooed reengineerings, the pressures of competing globally, and technological advancements that discourage the need for more space are stymieing white-collar job growth and will restrain office demand over the next decade. Government spending on major initiatives to produce jobs and encourage overall economic expansion is blocked by the federal deficit. Since the end of the 1991-1992 recession, job creation has been in lower-paying work with less security and lower benefits. This is not the type of employment growth that fills office buildings. Meanwhile, dampened consumer confidence, resulting in part from the tepid jobs picture, has been staunching any change for robust sales gains at malls. - ------------------------------------------------------------------------------ Current Quarterly Investment Survey Data Available by fax or on computer disk ------------------------------------------------------------------------ If you would like to receive RERC's Quarterly Investment Survey summary tables via fax as soon as they are compiled, contact Real Estate Research Corporation at (312) 346-5885. As an additional convenience to subscribers, RERC will send the entire Investment Survey (text and tables) on computer diskette to those who request this service. The cost to receive the information on computer diskette is $7.50 per report. The diskette will contain the Quarterly Investment Survey narrative in both WordPerfect 5.1 and ASCII formats, and the Quarterly Survey Investment Criteria in both Lotus 1-2-3 and ASCII formats. - -------------------------------------------------------------------------------- The industry outlook for the overall economy is also underwhelming. On a scale of one to ten (one being very weak and ten very strong), interviewees rate the economy for 1994 at a plodding 4.8, not much better than 1993's 3.8 rating. Again, no one expects the type of economic rebound that will fuel a dramatic recovery in any of the real estate markets. On the other hand, interviewees acknowledge that low interest rates have been a godsend in allowing the recovery to take root. Their outlook is for rates to rise, but only slightly in 1994. Increased capital flows are another necessary ingredient for the market's comeback, and which raises perhaps the most interesting question for this year's Emerging Trends: Who will own and finance real estate after the great debacle? The traditional sources--banks and life insurance companies--have been forced to the sidelines by regulators and ratings agencies. They will return--banks sooner, insurers certainly not in 1994. Pension funds, while again considering new investments, can't be expected to fill the void, although may in the real estate industry would like to think they can. Foreign investors are back home nursing their wounds and will not be players in the foreseeable future. Wall Street activity REITs, commercial loan securitizations, and venture capital plays--are leading the way in returning some liquidity to the markets. But hoopla aside, REITs will remain a niche investment category. Yield greed, not necessarily real estate fundamentals, have been the REITs' great attraction in 1993. However, they have drawn a lot of positive attention to real estate, providing a badly needed boost for the beleaguered asset class. Probably more significant are the mortgage conduits being created to access Wall Street money and filling the temporary-financing gap left by banks and insurers. These sources will supply much-needed capitalization for smaller and midsized owners of multifamily and commercial real estate while REITs provide short-term relief for some of the bigger players. In keeping with the lukewarm turnaround under way, more capital will return to real estate in 1994 but it will still be in relatively short supply. The more traditional transaction volume from private sales should advance modestly in 1994, despite recent market inertia. Activity will pick up as banks shed more of their costly-to-manage REO holdings and insurers expedite portfolio reduction to meet stringent risk-based capital guidelines. Again, apartments, warehouses, and retail will be where the action is, as deal spreads narrow in the wake of improved performance trends. Pension funds will be investing in those categories. Entrepreneurs, less risk-averse, may dabble in picking off quality office buildings. As for development, forget about it! The industry has. And that's probably the most telling evidence of how realistic and purposeful the marketplace has become about what's needed to sustain recovery. Development has almost fallen out of the real estate vocabulary; trying to find a regional mall or office building under construction is like searching for a needle in a haystack. Any new project is basically pie-in-the-sky. To even think about discussing your pipe dreams is risking ridicule. The only possibilities for new construction are apartment developments in markets exhibiting both constrained supply and surging population growth and the occasional office or industrial warehouse build-to-suit. Changes in the tax code have their pluses and minuses, and could be viewed as a wash for the industry. Relief from onerous passive-loss rules is one positive, although owners will not be able to carry forward and deduct old passive losses incurred before January 1, 1994. The "five or 50" rule limiting pension fund investment in REITs was relaxed, but there are still some ownership limitations. A minus in the new laws is the provision that stretches depreciation schedules from 31.5 to 39 years on new properties placed in service. An increasingly important issue commanding the attention of all real estate owners today is property security and tenant safety. It's not a new concern but crime is just so much more pervasive and seemingly more violent. Malls can't afford headlines that suggest they're dangerous places. Corporate tenants make security an important negotiating point. Alarm systems and gatehouses are becoming expected amenities in apartment complexes. Of course, for hotels guest safety is absolutely crucial. It's a bleak commentary, but owners and investors who neglect providing secure environments are courting potentially devastating consequences for their properties. Real estate enters a period of extended convalescence in 1994. The cycle is making its turn upward after a harrowing, debilitating descent. No one wants to relive the joyride from excess to oblivion that made the '80s notorious. In the real estate world of the '90s, less will be viewed as more. Less capital, less development, less popularity, and reduced expectations will ultimately yield a stronger, more stable industry. This attitude adjustment has largely been imposed on the industry by the severity of its collapse and the realities of the economy. But now that heads are screwed on straighter, the real estate markets are finally moving slowly, but forward. - -------------------------------------------------------------------------------- Emerging Trends in Real Estate: 1994 is available for $25 from Real Estate Research Corporation, 2 N. LaSalle Street, Suite 400, Chicago, Illinois 60602. - -------------------------------------------------------------------------------- [graphic material omitted. This is a graph depicting a Comparison of Rates between the four quarters and year of 1984 and the four quarters and year of 1993. Real Estate Yields were highest, at approximately 14% in 1984 and 13% in 1993. Next are Moody's As Utilities, at approximate 14% in 1984 and 8% in 1993. Lowest are 10 year treasuries, at approximately 12% in 1984 and 6% in 1993] Real Estate Investment Survey: Third Quarter 1993 Kenneth P. Riggs, Jr. MAI President Nicholas Buss Ph.D. Director of Investment Research Economic conditions Economic signals remain somewhat mixed as the Clinton Administration wrestles to get the domestic economy firmly on track and at the same time address larger policy issues. The economy has been growing at a faster pace than we thought. Every year at this time, the U.S. Department of Commerce revises its estimates of GDP. This year's update covered data back to 1990. The new figures show that for the past six quarters, the economy has grown at an annual rate of 3%, up from 2.5% based on the old data. Growth during 1992 was revised to 3.9%, up from 3.1%. The year finished strongly, with fourth-quarter 1992 growth revised upwards to 5.7%. The economy has slowed somewhat during the first half of 1993. Revised numbers place first-quarter growth at an anemic annual rate of 0.8%. Second-quarter growth GDP was not much better at 1.8%. The good news is that during this slowdown, job growth accelerated and domestic demand remained strong. This suggests that the economy has enough momentum for a second-half rebound. The employment picture is more encouraging, though the job market continues to move in fits and starts. For example, the August job figures showed a loss of 39,000 jobs, compared to a gain of 211,000 in July. Many analysts believe that the August numbers will be revised to show an employment gain. Overall, through August, the economy has added 1.2 million jobs in 1993, and this is expected to hit more than 2.0 million by year-end. . Not all the job news is good. The manufacturing sector continues to struggle. In August, manufacturing shed a further 42,000 jobs, bringing the year-to-date total to more than 200,000 jobs lost. Large corporations continue to announce cutbacks, including Kodak and Procter and Gamble during the third-quarter. Manufacturing employment is now at its lowest level since 1965 and its share of total employment has slipped from 26% in 1973 to 16% today. These losses are being offset by gains in the service sector which has seen payrolls rise by 1.3 million since January. . Indications are that consumers are beginning to climb to their feet once again. After slipping rapidly during the first-half of 1993, consumer confidence shows signs of strengthening. In September, the TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS Conference Board's index of consumer confidence moved upwards to 62.6 from 59.3 in August. It marked the index's third consecutive monthly increase. Of interest, is the continued split between consumers' upbeat assessment of present conditions (at a 2-1/2 year high), but somewhat downbeat view of the long-term outlook. .Increased consumer confidence is reflected in retail sales. Retail sales continue to remain strong, rising 0.2% in August, and 0.3% in July. After adjusting for prices, retail sales have risen a healthy 5.3% over the past year. .The housing market is also showing more life. Housing starts in August increased nearly 8%, to an annual rate of 1.32 million, the highest level in 3- 1/2 years. Cheap mortgages and better weather fueled the gains and starts rose in all regions, except the Northeast where they fell. Low mortgage rates are now translating into increased sales. The Mortgage Bankers Association reports that by early September, mortgage applications had risen 35% from June. New home sales are critical to lifting the economy, as they translate into increased consumer spending for home-related goods. .Inflation remains under control. Through August, consumer prices were up just 2.8% from the previous year. They are expected to end the year well below 3%, the lowest pace in 21 years. On the producer side, inflationary pressure is virtually non-existent this year. During the past year, producer prices have risen at an annual rate of just 0.6%. [Insert graphic material here. This is The RERC Real Estate Barometer: Third Quarter 1993. The chart uses a scale of 1 to 10, with 1 being "very bad" and 10 being "very good." The question "Is now a good time to buy?" rates a 7.5. The question "Is it a good time to sell?" rates a 4.0. Finally, the question "What is the current availability of capital?" rates a 5.3.] .Continued low inflation should keep interest rates low. Long-term rates, critical to stimulating the economy, continue to be pushed lower. The 30-year Treasury fell below 6% in September. Signs are that these low rates are finally working their way across the economy. The best sign is that bank lending is up after two years of little or no growth, with personal and real estate loans accounting for the lion's share of the rise. Lower rates lift demand for the economy's interest-sensitive sectors, such as homebuilding, durable-goods, and autos. They also free up cash flow for businesses to invest elsewhere. Although economic signals remain somewhat mixed, the general trend is encouraging. It is against this economic back drop that our panel reported third-quarter figures. Investment Overview It's official, the bottom has been reached. This quarter we asked our panel to rate (on a 0 to 10 scale, with 0=falling, 5=bottom, and 10=rising) where we currently are in the real estate cycle. The overall average was 5.1. This rating supports our panel's growing mood of optimism over the past three quarters. Consensus is that the bid-ask spread continues to be squeezed (especially for apartment and warehouse TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS properties), transaction activity has picked up, and capital has returned to the market. A number of respondents noted that the best opportunities may already have been past, though attractive buy opportunities remain. Panelists also commented that many markets have shown signs of stabilizing; concessions are being squeezed out, effective rents have stabilized, and, with no new construction, net absorption is zero or slightly positive. Our respondents remain realists, however, and note that although markets may have bottomed, the lack of new job growth and continued corporate downsizing and restructuring will mean that recovery will be a slow and protracted process. Transaction activity is being spurred by the increasing number of REITs that are coming to market, particularly in the apartment and retail sectors. The ability of REITs to access relatively inexpensive capital has resulted in their ability to bid aggressively for properties. This in turn has pushed capitalization rates downward. This movement is reflected in RERC's Real Estate Barometer. For the Third Quarter Survey, the bid-ask spread narrowed to 3.5, down from 4.2 the previous quarter and the lowest level since RERC started measuring the spread in 1991. Although the buy position continues to be heavily favored, scoring a 7.5 on the scale (10=high), it slipped slightly from last quarter. Conversely, the sell position scored a 4.0, still relatively weak, but up strongly from 3.4 the previous quarter. As reported by our respondents, transaction activity picked up in the prior, or second quarter. Fifteen panelists reported transaction activity for the first six months of 1993, totaling 35 deals, valued at $720 million. The average indicated deal size was $20.5 million. Of the 15 respondents providing data, three had yet to close a deal in 1993. Our panel continues to be bullish on the availability of capital. This quarter they rated capital availability an encouraging 5.3 on a 1 to 10 scale (10=plentiful). This is up from 5.0 last quarter, and an anaemic 3.8 for first- quarter 1993. Again, a prime factor influencing this response has been the continued appetite of Wall Street. However, Wall Street is not the only source of capital. Pension funds and entrepreneurial individuals continue to show increased interest. Even banks, which many had written off for the remainder of the decade, have shown signs that they will once again consider real estate loans. This is not too surprising given returns on alternative investments. Yield requirements Real estate yield expectations moved down or remained unchanged for all property types except neighborhood/community shopping centers. As Table 1 shows, reported yield requirements range from TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS 10.0% to 15.0%, with property averages ranging from 11.3% to 12.8%. The mean required yield for all property types edged down for the second straight quarter, from 12.1% to 12.0%. Changes in yield expectations from the previous quarter were relatively small. The largest decrease was for 30 basis points for R&D properties. Office properties, both CBD and suburban, lead all property types with the highest average yield requirement (12.8%), followed by R&D (12.6%), and neighborhood/community shopping centers (12.2%). Regional malls continue to have the lowest return expectations (11.3%), followed by apartments (11.5%), and warehouse and retail power centers (both at 11.8%). As always, we underline that these rates represent unleveraged yield expectations, not realized returns. Going-in capitalization rates decreased for all property types, with the exception of CBD and suburban office properties. Average going-in rates ranged from 7.7% for regional malls to 10.6% for suburban office properties. The average going-in rate decreased by 20 basis points for warehouse buildings and retail power centers, while it increased 10 basis points for CBD and suburban office properties. Average terminal capitalization rates ranged from 8.4% for regional malls to 10.2% for suburban office properties. Changes in terminal capitalization rates were more mixed than changes in going-in rates. The gap between average going- in rates and average terminal rates ranges from +70 basis for regional malls and retail pow centers to -40 basis points for suburban office properties. As indicated in Table 1, investors are using higher going-in rates than terminal rates for office properties, and in some cases R&D properties. This reflects the continued state of disequilibrium in these markets and the expectation that market conditions will be better at the end of the holding period than they are today. Currently, investors are placing more emphasis on current cash flow than future appreciation when valuing property. This trend will be discussed in more detail later in the report. Table 3 illustrates historic spreads between the average targeted yield for real estate and actual yields for alternative investments. The gap between real estate yields and capital markets continues to increase. The current range in spreads is from 460 basis points on Aa Utilities to a whopping 630 basis points on 10-year Treasuries. The 630 basis points spread over Treasuries is the largest spread since the early 1980s. The continued widening of the gap highlights the relative attractiveness of real estate vis-a-vis other asset classes and the increasing attention real estate is generating from yield hungry institutional investors. Property preference Our respondents were asked to rate the nine property types in terms of their current investment conditions. Table 4 shows the average scores for each property type. This quarter, apartments moved TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS solidly back to the top of the pile after slipping to second place last quarter. Apartments scored an impressive 7.0 on a 1 to 10 scale (10=very good). Apartments continue to top most investor's acquisition lists. But, as we have been saying for the past two quarters, this popularity has its price. Good quality apartment properties are becoming more difficult to find and competition has pushed capitalization rates down and prices up. Demand for apartments is coming from two main sources: pension funds, typically underweighted in this asset class; and REITs, flush with cash for acquisitions. Apartment REITs have flourished over the past year. NAREIT reported that apartment REITs raised over $780 million in the first half of 1993, double 1992's $326 million. By mid-1993, the 10 existing apartment REITs controlled approximately 71,500 units. The success of these REITs has resulted in a flurry of new issues. During third-quarter, no less than eight additional apartment REITs are expected to come to market, controlling an additional 71,000 units. Warehouse properties saw ratings move upwards this quarter, to 6.4 from 6.0. Despite mixed signals from the economy, industrial properties continue to be favored and placed near the top of most investor's acquisition lists. The reasons for this are relatively simple: compared to most other property types, warehouses have performed relatively well over the past three years. Although vacancies have increased and rents and values have slipped slightly, overall, the supply and demand fundamentals of this asset class have remained intact. However investors must be knowledgeable when making new acquisitions, paying attention to big-picture trends in manufacturing and distribution technology. The remaining property types, with the exception of R&D, saw their ratings drop this quarter. CBD office and hotels continue to languish at the bottom of the list. Although they receive low ratings, contrarian investors with courage and strong hearts are taking a serious look at these assets, figuring that the best buys may be just around the corner for these property types. Geographic preference Geographic preferences of our panel are gathered on a semiannual basis. Table 5 shows how investors rate the relative strengths of competing markets as of the third quarter 1993. Overall, the increased optimism of our panel is reflected in their ratings of the 16 major markets, with most cities seeing an increase in their ratings from first quarter 1993. Washington, D.C. and Atlanta continue to top our panelist's list with ratings of 6.9 and 6.6, respectively. Washington, D.C. has held the top spot for the past year. Our respondents feel this will be TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS the first market to recover, buffered by stable government payrolls and a well compensated private sector. While the retail and residential markets are improving, office market remains troubled. Atlanta's affordable middle class lifestyle is a magnet for population migration to this metro area, and it ranks as the nation's leader in job growth. Typical of many sun-belt cities with room to grow and few barriers to entry, it is the suburbs that are expanding while the downtown suffers. Again, it is the residential and retail markets that are prospering, while the office markets are uniformly soft (with over 25% vacancy rate in the CBD). Recent major corporate relations have taken the build-to-suit route. Miami/South Florida recorded the largest increase this quarter, jumping from a rating of 5.1 in first-quarter 1993 to 5.9 this quarter. Miami's strength is its apartment sector which has very low vacancies and may be primed for new construction in 1994. Ironically, Hurricane Andrew has been a boon to Miami's residential and retail markets and stirrings of new activity from Latin America raise optimism on the office side. Recent acts of random violence, which have made national and international headlines, may dampen this area's attractiveness. Denver and Phoenix continue to show a steady increase in ratings. Both markets have seen residential values rise as Southern Californian's bailout of Los Angeles and surrounding areas. In Denver, the apartment market is tight and retailers are expanding. The new airport will open during the next year, which is seen as a positive for industrials. In Phoenix, the industrial sector is poised to benefit from the passage of the North American Free Trade Act (NAFTA). Further, Phoenix rates as one of the nation's hottest retail markets, buoyed by younger babyboomer demographics. One city that has seen its rating decline during the past year is Seattle. Boeing's announcement of widespread job cuts has led to uncertainty surrounding this market. The jetmaker's cutbacks have hurt office and residential over the short term. Seattle's growing high-tech sector, led by Microsoft, remains a plus. Further, the industrial sector remains strong, due largely to its role as a Pacific gateway. The larger cities, particularly New York and Los Angeles, continue to languish at the bottom of the ratings, with near-term prospects not encouraging. Growth rates Although our respondents report more optimism, this has yet to be reflected in their underwriting assumptions which remain firmly conservative. For most asset classes, rent increases are expected to be minimal--0% to 3%--over the next one to three years, increasing 3% to 5% thereafter. A 3% to 4% annual average appears favored by most respondents. Again, the exception to this appears to be apartments TRENDS AND FORECASTS - -------------------------------------------------------------------------------- Featured Property Type: HOTELS and good quality retail, where demand remains relatively strong and growth rates of 3% to 5% can be justified throughout the holding period. Expense growth rates typically mirror inflation expectations, ranging between 3% to 5%, with many respondents betting on continued low inflation, in the 3% to 4% range. The typical holding period remains 10 years. Renewal probability This quarter we asked our respondents to what renewal probabilities they typically use in their own internal analyses. Their responses are shown in Table 6. They range from a low of 51% of tenants renewing for CBD and suburban office, to a high of 62% for regional malls. Overall, the renewal probabilities provided by the panel are conservative and go hand-in-hand with the other underwriting assumptions used. Summary As our respondents head into the year-end push, cautious optimism prevails. Signs are that the bottom has been reached, capital is returning and that sunnier skies are ahead. Transaction activity will be watched closely over the remainder of the year for confirmation of these trends. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Table 1. Real Estate Investment Criteria by Property Type. Third Quarter 1993*
------------------ ------------------------------------- -------------------- ------------- INDUSTRIAL RETAIL OFFICE APARTMENT ------------------ ------------------------------------- -------------------- ------------- Regional Neighborhood/ Warehouse R&D Center Power Center Community CBD Suburban Apartment - ----------------------------------------------------------------------------------------------------------------------------------- Pre-tax yield (IRR) (%) Range** 11.0-12.0 12.0-13.0 10.0-12.0 11.0-13.0 11.0-13.0 11.5-15.0 12.0-15.0 10.5-13.0 Average 11.8 12.6 11.3 11.8 12.2 12.8 12.8 11.5 Going-in cap rate (%) Range** 8.0-10.0 9.5-11.0 7.0-9.0 8.5-10.0 9.0-10.5 8.5-13.0 9.0-12.0 8.0-9.5 Average 9.3 10.0 7.7 9.2 9.6 10.4 10.6 8.8 Terminal cap rate (%) Range** 9.0-11.0 9.5-11.0 7.5-10.0 9.0-11.0 9.5-11.5 9.0-12.0 9.0-12.0 8.5-10.0 Average 9.9 10.0 8.4 9.9 10.1 10.1 10.2 9.4
Note: Income and expense growth rates are addressed in the accompanying text. * The survey was conducted in July and August 1993 and reflects expected returns for third-quarter 1993 investments. ** Ranges and other data reflect the central tendencies of respondents; high and low responses have generally been eliminated. Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Table 2. Real Estate vis-a-vis Capital Market Returns*
3Q 1993 2Q 1993 3Q 1992 3Q 1991 - ------------------------------------------------------------------------------- Real estate yield (%) 12.0 12.1 12.1 12.1 Moody's Aa Utilities (%) 7.4 7.9 8.4 8.9 Moody's Aaa Corporate (%) 7.2 7.6 8.2 8.7 10-Year Treasuries (%) 5.7 6.1 7.4 8.0
* This survey was conducted in July and August 1993 and reflects desired returns for third-quarter 1993 investments. Capital markets rates are for the first week of each quarter. Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Table 3. Intermarket Yield Spreads: Real Estate vis-a-vis Capital Markets
3Q 1993 2Q 1993 3Q 1992 3Q 1991 - ------------------------------------------------------------------------------- Mean real estate yield (%) 12.0 12.1 12.1 12.1 Yield Spread (percentage points)* - --------------------------------- Moody's Aa Utilities (%) 4.6 4.2 3.7 3.2 Moody's Aaa Corporate (%) 4.8 4.5 3.9 3.4 10-Year Treasuries (%) 6.3 6.0 4.7 4.1
*Real estate over other investments. Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Table 4. Current Investment Conditions by Property Type*
3Q 1993 2Q 1993 1Q 1993 3Q 1992 - ------------------------------------------------------------------------------- 1. Apartment 7.0 6.5 6.8 6.8 2. Industrial - warehouse 6.4 6.0 6.7 7.0 3. Retail - regional mall 6.4 6.8 5.5 6.0 4. Retail - power center 6.2 5.5 5.7 5.8 5. Retail - neighborhood 6.0 6.0 5.8 6.1 6. Industrial - R&D 4.6 4.3 3.9 4.4 7. Suburban office 3.7 4.0 3.8 3.3 8. CBD office 3.1 4.1 2.9 2.9 9. Hotel 2.8 4.0 2.6 1.9
* Rated on a scale of 1 (very bad) to 10 (very good) Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Table 5. Current Investment Conditions by Major Markets*
3Q 1993 1Q 1993 3Q 1992 - ------------------------------------------------------------------------------- 1. Washington, D.C. 6.9 6.3 6.0 2. Atlanta 6.6 6.3 5.6 3. Miami/S. Florida 5.9 5.1 5.0 4. Dallas 5.8 5.8 6.0 San Francisco 5.8 6.0 5.0 Denver 5.8 5.7 5.3 7. Phoenix 5.6 5.5 5.0 8. Seattle 5.4 5.9 5.8 9. Houston 5.3 5.2 5.5 10. San Diego 5.1 4.7 4.9 11. Chicago 4.9 5.4 5.4 12. Boston 4.3 4.5 3.5 13. St. Louis 4.0 4.0 3.6 14. Detroit 3.6 3.3 3.3 15. New York 3.5 3.7 3.5 16. Los Angeles 3.3 3.3 4.2
* Rated on a scale of 1 (very bad) to 10 (very good) Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Table 6. Probability That a Tenant Will Renew Range Average - ------------------------------------------------------------------------------- CBD Office (%) 25-80 51 Suburban Office (%) 25-70 51 Industrial - warehouse (%) 50-90 59 Industrial - R&D (%) 40-60 50 Retail - regional-mall (%) 50-85 62 Retail - power center (%) 50-75 58 Retail - neighborhood (%) 50-75 55 Apartments (turnover - %) 50-95 61
Source: Real Estate Research Corporation. - ------------------------------------------------------------------------------- Vol. 22, No. 3 Real Estate Report is published four times a year by Real Estate Research Corporation, 2 North LaSalle Street, Suite 400, Chicago, IL 60602. Copyright 1993 by Real Estate Research Corporation. All rights reserved. No part of this newsletter may be reproduced in any form, by microfilm, xerography, or otherwise, or incorporated into any information retrieval system, without the written permission of the copyright owner. Third-class postage paid at Chicago, IL. Subscriptions are $195 per year, or $357 for two years. Single copies and back issues, if available, are $55 each. POSTMASTER: Send address changes to RERC Real Estate Report, 2 North LaSalle St., Suite 400, Chicago, IL 60602, telephone (312) 346-5885. Publisher: Kenneth P. Riggs, Jr. Managing Editor: Nicholas Buss Layout: Thomas Goebelt Circulation: Linda Panico Investment Survey: Nicholas Buss, Kenneth P. Riggs, Jr. This publication is designed to provide accurate information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal or accounting service. The publisher advises that no statement in this issue is to be construed as a recommendation to make any real estate investments or to buy or sell any security or as investment advice. The examples contained in the publication are intended for use as background on the real estate industry as a whole, not as support for any particular real estate investment or security. Although RERC Real Estate Report uses only sources that it deems reliable and accurate, Real Estate Research Corporation does not warrant the accuracy of the information contained herein. - -------------------------------------------------------------------------------- QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
Internal Going-In Residual Property Types Rate of Capitalization Capitalization Respondent in Preference Order Return Rate Rate (%) (%) (%) - ----------------------------------------------------------------------------------------------------------------------------------- West Coast investment 1. Industrial - warehouse 11.0-12.0 9.0-10.0 10.0 advisor 2. Retail - neighborhood 11.0-12.0 9.0-10.0 10.0 3. Retail - power center 11.0-12.0 9.5-10.5 10.0 4. Office - suburban 13.0-15.0 11.0-12.0 9.0-10.0 5. Office - CBD 13.0-15.0 11.0-12.0 9.0-10.0 National investment 1. Retail - regional mall 11.0 7.0-8.0 7.0-8.0 advisor* 2. Retail - neighborhood 11.0-12.0 9.0-10.0 9.0-10.0 3. Retail - power center 11.5-12.5 9.0-11.0 9.0-11.0 4. Industrial - warehouse 11.0-12.0 10.0 10.0 5. Office - suburban 12.0-13.0 10.0-11.0 9.0-10.0 East Coast pension Not acquiring properties at this time fund 1. Retail - regional mall 7.0-8.0 8.0 2. Apartment 9.0-10.0 10.0 2. Industrial - warehouse 9.0-10.0 10.0 3. Retail - neighborhood 9.0-10.0 10.0 4. Retail - power center 9.0-10.0 10.0 5. Office - CBD 10.0-11.0 11.0 6. Office - suburban 10.0-11.0 11.0 East Coast investment No preference advisor* Retail - regional mall 8.0 Retail - neighborhood 10.0 Retail - power center 10.0 Industrial - warehouse 10.0 Apartment 9.0 Foreign and domestic 1. Retail - regional mall 11.5 7.0 7.5 investment advisor 1. Apartment 11.5 8.75 9.5 2. Industrial - warehouse 11.75 8.75 9.5 3. Retail - power center 12.0 9.5 10.5 4. Office - CBD 12.5 9.5 10.0 4. Retail - neighborhood 12.5 10.0 11.0 4. Office - suburban 12.5 10.0 11.0 5. Hotel 13.5 10.5 11.5
Growth Rates -------------------- Income; Expense; ------ ------- Anticipated Long-Term Years 1 to 3/ Years 1 to 3/ Holding Inflation Years 4 to 10 Years 4 to 10 Period Expectation Comments (%) (%) (years) (%) - ----------------------------------------------------------------------------------------------------------------------------------- West Coast investment 0 4 10 4 Feels there is a flight to higher advisor 4 4 quality and current yields. With the exception of Southern California, thinks the bottom of the cycle has been reached. National investment 0 5 10 5 Thinks that prices for most advisor* 5 5 property types have yet to hit bottom. Favors retail properties in Boston, Washington, D.C., and Atlanta. East Coast pension 0-2 2-3 10 2-3 Has sat out the equity market fund 2-3 2-3 during 1992 and will do the same in 1993. East Coast investment 0 4 10 4 Investments are made based on advisor* 4 4 cash-on-cash returns. Uses IRR simply as an assumption check. Feels that property performance will not improve until supply and demand comes into equilibrium. Foreign and domestic 0-4.5 4 10 4 Says that the narrowing of the investment advisor 3.5-4.5 4 bid-ask spread and modest increase in buyer activity suggest that markets have ballooned. Good buying opportunities remain.
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993 (continued)
Internal Going-In Residual Property Types Rate of Capitalization Capitalization Respondent in Preference Order Return Rate Rate (%) (%) (%) - -------------------------------------------------------------------------------- National real 1. Apartment 11.0-12.0 8.0-9.0 8.5-9.0 estate investor 2. Industrial - and advisor* warehouse 11.0-12.0 8.5-10.0 9.0-9.5 3. Retail - regional mall 11.0-12.0 7.5-8.0 7.5-8.0 4. Retail - neighbor- hood 11.0-12.0 9.0-10.0 9.0-10.0 5. Retail - power center 11.0-12.0 9.0-10.0 9.0-10.0 6. Industrial - R&D 12.0-13.0 9.5-10.5 9.5-10.5 7. Office - CBD 11.0-12.0 9.0-9.5 9.0 8. Office - suburban 12.0-13.0 10.0-11.0 9.5-10.5 National real 1. Retail - regional estate investor mall 11.0-12.0 7.5 7.5 and advisor National 1. Apartment 11.0 8.5-9.0 8.75-9.25 developer and 2. Land 15.0 investment advisor National 1. Retail - regional investment mall 11.0 7.5 7.5 advisor 2. Apartments 12.0 9.0 9.0 3. Industrial - warehouse 12.0 9.0 9.0 4. Hotels 15.0 13.0 12.0 5. Retail - power center 12.0 9.5 9.0 6. Retail - neighborhood 12.5 10.0 9.5 7. Industrial - R&D 13.0 10.0 9.0 8. Office - suburban 14.0 13.0 12.0 9. Office - CBD 14.0 13.0 12.0 National in- 1. Apartments 11.0 8.5 10.0 surer and 2. Industrial - warehouse 11.0 9.0 10.5 investor 3. Office - suburban 12.0 9.5 9.75 4. Retail - regional mall 10.75 7.5 8.0 5. Office - CBD 11.5 9.0 9.25 6. Hotel 13.5 10.0 13.5 National in- 1. Retail - regional mall 11.5 8.0 8.0-8.5 vestment 2. Industrial - warehouse 11.5 9.0-10.0 9.5-10.5 advisor 3. Retail - power center 11.75 9.75-11.0 10.0-11.0 4. Apartment 11.75 8.5-9.5 9.0-10.0 5. Office - suburban 11.75 9.0-10.0 9.5-10.5 6. Office - CBD 12.0 8.5-10.0 9.0-10.5 Growth Rates Income: Expense: ------- -------- Years 1 Years 1 to 3/ to 3/ Anticipated Long-Term Years 4 Years 4 Holding Inflation to 10 to 10 Period Expectation Comments (%) (%) (years) (%) - ------------------------------------------------------------------------------- National real 0.4 4 10 4 Sees more capital estate investor 4 4 waiting in the wings and advisor* in the form of REITs being formed. These REIT's offer the highest price for a particular deal in exchange for a seller waiting for, and taking the risk of, the REIT raising money. National real 2-5 4 10 4 Prices property estate investor based on current and advisor cash yields. Little emphasis on future appreciation due to uncertainty concern- ing future market conditions. National 4-5 4-5 7 4 Likes Atlanta, but developer and 4-5 4-5 thinks that prices investment are escalating advisor rapidly for quality apartments. Also likes Dallas. National 0-4 3.5 3-10 3.5 Notes that despite investment 3-4 3.5 shifts to pricing advisor based on current yield, they still look at appreci- ation. National in- 0-4 4 8-10 3 Bullish on Chicago, surer and 2-4 4 Atlanta, Washington, investor D.C., and Dallas. National in- 0-4 4 6-12 4 When pricing prop- vestment 2-4 4 erty they look for advisor a satisfactory return going in, but also look at price per sq. ft., rents in relation to market, and DCF