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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)
(Amendment No. 1)
TAJ MAHAL HOLDING CORP.
---------------------------------
(Name of the Issuer)
TRUMP HOTELS & CASINO RESORTS, INC.
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TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
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DONALD J. TRUMP
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TM/GP CORPORATION
-----------------
THCR MERGER CORP.
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TRUMP PLAZA HOLDING ASSOCIATES
------------------------------
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)
COPIES TO:
DANIEL D. RUBINO, ESQ. EMANUEL S. CHERNEY, ESQ.
WILLKIE FARR & GALLAGHER ANDREWS & KURTH, L.L.P.
ONE CITICORP CENTER 425 LEXINGTON AVENUE
153 EAST 53RD STREET NEW YORK, NY 10017
NEW YORK, NY 10022 (212) 850-2800
(212) 821-8000
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: [ ].
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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.: 333-153
Filing Party: Trump Hotels & Casino Resorts, Inc.
Date Filed: January 11, 1996
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INTRODUCTION
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This Amendment No. 1 to the Rule 13e-3 Transaction Statement (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"), Trump Plaza Holding Associates, a New
Jersey general partnership ("AC Holdings") and Taj Mahal Holding Corp., a
Delaware corporation ("Taj Holding"), and amends and restates in its entirety
the Rule 13E-3 Transaction Statement, together with all exhibits thereto, filed
by such parties (except for AC Holdings) with the Securities and Exchange
Commission on January 12, 1996, 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, as amended on January 31, 1996 (the
"Merger Agreement"), among THCR, Taj Holding and Merger Sub. THCR, THCR
Holdings, Trump, TM/GP, AC Holdings 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 the Statement in the Joint
Proxy Statement-Prospectus of THCR and Taj Holding (the "Proxy Statement-
Prospectus") which forms a part of Amendment No. 1 to 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 filed as Exhibit (17)(d)(ii) to this
Statement, 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.
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CROSS REFERENCE SHEET
---------------------
Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus
- ---------------------- -------------------------------------
Item 1(a) Cover Page; SUMMARY - Corporate
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; SPECIAL FACTORS - Purpose and
Structure of the Merger Transaction; SPECIAL
FACTORS - Related Merger Transactions; SPECIAL
FACTORS - Sources and Uses of Funds in the
Merger Transaction; SPECIAL FACTORS - Certain
Effects
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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) SUMMARY - Related Merger Transactions;
SPECIAL FACTORS - Related Merger
Transactions; SPECIAL FACTORS - Sources and
Uses of Funds in the Merger Transaction
Item 6(b) SPECIAL FACTORS - Estimated Fees and
Expenses; THE TAJ HOLDING SPECIAL MEETING -
Solicitation of Proxies; THE MERGER
AGREEMENT - Fees and Expenses
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;
<PAGE>
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
<PAGE>
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; SPECIAL
FACTORS - AGI Appraisals
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
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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 Associates; UNAUDITED PRO FORMA
FINANCIAL INFORMATION; SELECTED HISTORICAL
FINANCIAL INFORMATION OF TAJ ASSOCIATES;
CONSOLIDATED FINANCIAL STATEMENTS OF TRUMP
TAJ MAHAL ASSOCIATES AND SUBSIDIARY AND TAJ
MAHAL HOLDING CORP. AND SUBSIDIARY AND NOTES
THERETO
Item 14(b) SUMMARY - Summary Financial Information of
Taj Associates; 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 -
AGI Appraisals; 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 among Trump Plaza
Holding Associates and THCR Atlantic City
Funding, Inc., as issuers, Trump Plaza
Associates, as guarantor and First Bank
National Association, as Trustee, in
connection with the issuance of
$1,180,000,000 aggregate principal amount of
Mortgage Notes, due 2006
Item 17(b)(1)(i) **Opinion of Rothschild, Inc., dated January
8, 1996
Item 17(b)(1)(ii) Opinion of Rothschild, Inc., dated January
31, 1996 (incorporated herein by reference
to Annex C to the Proxy Statement-Prospectus
included in Exhibit 17(d)(ii) hereto)
Item 17(b)(2)(i) **Report by Rothschild, Inc. to the
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* To be filed by amendment.
** Previously filed.
<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement-Prospectus
- ---------------------- -------------------------------------
Board of Directors of Taj Mahal
Holding Corp., dated January 8, 1996
Item 17(b)(2)(ii) Report by Rothschild, Inc. to the Board of
Directors of Taj Mahal Holding Corp.,
dated January 26, 1996
Item 17(b)(3)(i) **Opinion of Donaldson, Lufkin & Jenrette
Securities Corporation, dated January 8,
1996
Item 17(b)(3)(ii) Opinion of Donaldson, Lufkin & Jenrette
Securities Corporation, dated January 31,
1996 (incorporated herein by reference to
Annex B to the Proxy Statement-Prospectus
included in Exhibit 17(d)(ii) hereto)
Item 17(b)(4)(i) **Report by Donaldson, Lufkin & Jenrette
Securities Corporation to the Special
Committee of the Board of Directors of Trump
Hotels & Casino Resorts, Inc., dated January
4, 1996
Item 17(b)(4)(ii) Report by Donaldson, Lufkin & Jenrette
Securities Corporation to the Special
Committee of the Board of Directors of Trump
Hotels & Casino Resorts, Inc., dated January
31, 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., as amended on January 31,
1996 (incorporated herein by reference to
Annex A to the Proxy Statement-Prospectus
included in Exhibit 17(d)(ii) 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)(i) **Joint Proxy Statement - Prospectus of
Trump Hotels & Casino Resorts,
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** Previously filed.
<PAGE>
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(d)(ii) Joint Proxy Statement-Prospectus of Trump
Hotels & Casino Resorts, Inc. and Taj Mahal
Holding Corp., Subject to Completion, dated
February 1, 1996 (included in the
Registration Statement on Form S-4, filed by
Trump Hotels & Casino Resorts, Inc. with the
Securities and Exchange Commission on
February 1, 1996 which is hereby
incorporated herein by reference)
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)(i)
hereto)
Item 17(f) Not Applicable
- ---------------
** Previously filed.
<PAGE>
ITEM 1. Issuer and Class of Security Subject to the Transaction.
- -----------------------------------------------------------------------
(a) The information set forth in "Cover Page," and "SUMMARY -
Corporate 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, Trump Plaza Holding, Inc.
(a general partner of AC Holdings) or Taj Holding or, to the best
of their knowledge, no executive officer, director or controlling
person of THCR, Merger Sub, TM/GP, Trump Plaza Holding, Inc. (a
general partner of AC Holdings) 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
<PAGE>
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," "SPECIAL FACTORS -
Purpose and Structure of the Merger Transaction," "SPECIAL
FACTORS - Related Merger Transactions," "SPECIAL FACTORS -
Sources and Uses of Funds in the Merger Transaction," "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.
<PAGE>
ITEM 6. Source and Amounts of Funds or Other Consideration.
- ------------------------------------------------------------------
(a) The information set forth in "SUMMARY - Related Merger
Transactions," "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 "SPECIAL FACTORS - Estimated Fees
and Expenses," "THE TAJ HOLDING SPECIAL MEETING - Solicitation
of Proxies" and "THE MERGER AGREEMENT - Fees and Expenses" 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,"
<PAGE>
"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
<PAGE>
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," "SPECIAL FACTORS - Opinions of the
Financial Advisors" and "SPECIAL FACTORS - AGI Appraisals" 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.
- -------------------------------------------------------------
<PAGE>
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.
<PAGE>
ITEM 14. Financial Information.
- -------------------------------------
(a) The information set forth in "SUMMARY - Summary Financial
Information of Taj Associates," "UNAUDITED PRO FORMA FINANCIAL
INFORMATION," "SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ
ASSOCIATES" and "CONSOLIDATED FINANCIAL STATEMENTS OF TRUMP TAJ
MAHAL ASSOCIATES AND SUBSIDIARY AND TAJ MAHAL HOLDING CORP. AND
SUBSIDIARY 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 Associates," "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 - AGI Appraisals," "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 among Trump Plaza Holding Associates and
THCR Atlantic City Funding, Inc., as issuers, Trump Plaza
Associates, as guarantor and First Bank National Association,
as Trustee, in connection with the issuance of $1,180,000,000
aggregate principal amount of Mortgage Notes, due 2006.
(b)(1)(i) **Opinion of Rothschild, Inc., dated January 8, 1996.
(b)(1)(ii) Opinion of Rothschild, Inc., dated January 31, 1996 (incorporated
herein by reference to Annex C to the Proxy Statement-Prospectus
included in Exhibit 17(d)(ii) hereto).
- ---------------
*To be filed by amendment.
**Previously filed.
<PAGE>
(b)(2)(i) **Report by Rothschild, Inc. to the Board of Directors of
Taj Mahal Holding Corp., dated January 8, 1996.
(b)(2)(ii) Report by Rothschild, Inc. to the Board of Directors of
Taj Mahal Holding Corp., dated January 26, 1996.
(b)(3)(i) **Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
dated January 8, 1996.
(b)(3)(ii) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
dated January 31, 1996 (incorporated herein by reference to Annex
B to the Proxy Statement-Prospectus included in Exhibit 17(d)(ii)
hereto).
(b)(4)(i) **Report by Donaldson, Lufkin & Jenrette Securities Corporation
to the Special Committee of the Board of Directors of Trump
Hotels & Casino Resorts, Inc., dated January 4, 1996.
(b)(4)(ii) Report by Donaldson, Lufkin & Jenrette Securities Corporation
to the Special Committee of the Board of Directors of Trump
Hotels & Casino Resorts, Inc., dated January 31, 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., as amended on January 31, 1996 (incorporated
herein by reference to Annex A to the Proxy Statement-Prospectus
included in Exhibit 17(d)(ii) 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)(i) **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).
- -----------------
**Previously filed.
<PAGE>
(d)(ii) Joint Proxy Statement - Prospectus of Trump Hotels & Casino
Resorts, Inc. and Taj Mahal Holding Corp., Subject to Completion,
dated February 1, 1996 (included in the Registration Statement on
Form S-4, filed by Trump Hotels & Casino Resorts, Inc. with the
Securities and Exchange Commission on February 1, 1996 which is
hereby incorporated herein by reference).
(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)(i) hereto).
(f) Not Applicable.
- ------------
** Previously filed.
<PAGE>
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: February 1, 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
TRUMP PLAZA HOLDING ASSOCIATES
By: Trump Plaza Holding, Inc.
its managing general partner
By: /s/ Nicholas L. Ribis
------------------------------------------------
Name: Nicholas L. Ribis
Title: Vice President
TAJ MAHAL HOLDING CORP.
By: /s/ Nicholas F. Moles
------------------------------------------------
Name: Nicholas F. Moles
Title: Secretary
<PAGE>
Exhibit Index
Exhibit 17(b)(2)(ii) Report by Rothschild, Inc. to the
Board of Directors of Taj Mahal
Holding Corp., dated January 26, 1996
Exhibit 17(b)(4)(ii) Report by Donaldson, Lufkin & Jenrette
Securities Corporation to the Special Committee
of the Board of Directors of Trump Hotels &
Casino Resorts, Inc., dated January 31,
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
<PAGE>
EXHIBIT 99.17(B)(2)(ii)
[LOGO]
[LOGO OF ROTHSCHILD INC.] TRUMP
TAJ MAHAL
CASINO . RESORT (TM)
- --------------------------------------------------------------------------------
DISCUSSION MATERIALS UPDATE
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 Resorts, Inc., and Taj Mahal
Holding Corp. and is intended exclusively for discussion purposes. Neither
Rothschild Inc. nor any of its officers, directors, employees, affiliates or
agents makes any representation or warranty as to the accuracy or completeness
of any materials contained herein.
January 26, 1996
- --------------------------------------------------------------------------------
ROTHSCHILD INC.
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Table of Contents
- --------------------------------------------------------------------------------
Section 1 Transaction Summary
Section 2 Transaction Considerations
Section 3 Proforma Merger Analysis
<PAGE>
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 $20.75 THCR share price (1/25/96 market close), exchange ratio of
1.45 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 an Equity Offering up to $140.0 (at an assumed price of $20.75
per share) and a Debt Offering up to $1,200.0, and assuming the
exercise of the warrant, proforma ownership approximately 35%.
-1-
<PAGE>
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.
. Gem's NatWest Debt redeemed for a maximum of $36.0 in cash ($44.9 face
amount).
. Tender or defease Trump Plaza's 10-7/8% Mortgage Bonds in cash ($330.0 face
amount).
. Issuance up to $1,200.0 of New First Mortgage Notes secured by Gem and Trump
Plaza.
. 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.
. Exercise Trump Plaza East purchase option at an exercise price of $28.0 in
cash.
. Consent solicitation from holders of THCR Holdings/THCR Funding's 15-1/2%
Senior Secured Notes.
-2-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Sources and Uses Summary
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sources Uses
- ------- ----
<S> <C> <C> <C>
Excess Cash $59.6 Payment to First Fidelity $50.0
New AC Mtg Notes 1,200.0 Payment to Bankers Trust 10.0
New Common 231.0 (1) Redeem Gem's Mtg Bonds 793.7
Redeem NatWest Loan 36.0
Redeem/Defease Plaza Mtg Bonds 378.6 (2)
Exercise Trump Plaza East Option 28.0
Purchase/Exchange A & C shares 81.0
Purchase B shares 0.4
THCR Equity to First Fidelity 10.0
Accrued Interest 37.9
Transaction Expenses 65.0
------- -------
1,490.6 1,490.6
======= =======
</TABLE>
(1) Assumes $140.0 million of new equity is sold to the public.
(2) Estimate based on current market conditions; subject to change based on
conditions at time of defeasance and amount of bonds redeemed in connection
with debt tender offer.
-3-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Transaction Value Analysis
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Equity(1)
Purchase of Class A, B, C Shares $83.7
Redemption of Debt and Other Obligation $889.7
Assumption of Debt 0.6
THCR Equity to First Fidelity 10.0
Transaction Expenses 40.0 (2)
Less: Excess Cash (59.6)
Total Transaction Value $964.4
======
<CAPTION>
Transaction Value as a multiple of:
-----------------------------------
<S> <C> <C>
1995E Proforma EBITDA 141.3 (3) 6.83 x
1996F Proforma EBITDA 161.4 (3) 5.98
1995E Proforma EBIT $97.4 (3) 9.90 x
1996F Proforma EBIT $107.1 (3) 9.00
</TABLE>
(1) Includes warrant issued to DJT valued at low end of Rothschild valuation
range.
(2) Amount allocated to Gem acquisition.
-4-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Valuation Matrix
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
------- ------- ------- ----- ----------- ------ ------ ------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25.000 $0.500 $25.000 $70.2 $950.9 6.48 x 6.73 x 5.89 x 9.76 x 1.71 x
25.500 0.500 25.500 $71.5 952.3 6.49 6.74 5.90 9.78 1.71
26.000 0.500 26.000 $72.9 953.6 6.50 6.75 5.91 9.79 1.72
26.500 0.500 26.500 $74.2 955.0 6.51 6.76 5.92 9.80 1.72
27.000 0.500 27.000 $75.6 956.3 6.52 6.77 5.93 9.82 1.72
27.500 0.500 27.500 $76.9 957.7 6.53 6.78 5.93 9.83 1.72
28.000 0.500 28.000 $78.3 959.0 6.54 6.79 5.94 9.84 1.73
28.500 0.500 28.500 $79.6 960.4 6.55 6.80 5.95 9.86 1.73
29.000 0.500 29.000 $81.0 961.7 6.56 6.81 5.96 9.87 1.73
29.500 0.500 29.500 $82.3 963.1 6.56 6.82 5.97 9.89 1.73
30.000 0.500 30.000 $83.7 964.4 6.57 6.83 5.98 9.90 1.73
30.500 0.500 30.500 $85.0 965.8 6.58 6.83 5.98 9.91 1.74
31.000 0.500 31.000 $86.4 967.1 6.59 6.84 5.99 9.93 1.74
31.500 0.500 31.500 $87.7 968.5 6.60 6.85 6.00 9.94 1.74
32.000 0.500 32.000 $89.1 969.8 6.61 6.86 6.01 9.96 1.74
32.500 0.500 32.500 $90.4 971.2 6.62 6.87 6.02 9.97 1.75
33.000 0.500 33.000 $91.8 972.5 6.63 6.88 6.03 9.98 1.75
33.500 0.500 33.500 $93.1 973.9 6.64 6.89 6.03 10.00 1.75
34.000 0.500 34.000 $94.5 975.2 6.65 6.90 6.04 10.01 1.75
34.500 0.500 34.500 $95.8 976.6 6.66 6.91 6.05 10.03 1.76
35.000 0.500 35.000 $97.2 977.9 6.67 6.92 6.06 10.04 1.76
Gem's Proforma Results $146.7 $141.3 $161.4 $97.4 $555.9
</TABLE>
(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.
-5-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Capitalization Summary
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of March 31, 1996
-----------------------------------------------------
Proforma Proforma % of
THCR Gem Adjust. As Adjust. Capital.
---- --- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Excess Cash $8.5 $82.9 ($59.6) $31.8 -
Restricted Cash 5.5 25.0 30.5 -
------ ------ ------- -------
Total $14.0 $107.9 ($59.6) $62.3
====== ====== ======= =======
Debt
----
THCR 10.875% Mtg Bonds $330.0 ($330.0) $0.0 0.0%
THCR 15.500% Snr Sec Nts 155.0 155.0 9.6%
THCR Cap Lease & Other 45.2 45.2 2.8%
Gem 11.350% Mtg Bonds 793.7 (793.7) 0.0 0.0%
Gem NatWest Loan 45.5 (44.9) 0.6 0.0%
AC New Mtg Notes 0.0 1,200.0 1,200.0 74.7%
------ ------ ------- ------- -----
Total $530.2 $839.2 $31.4 $1,400.8 87.2%
====== ====== ======= ======= =====
Shareholders' Equity $47.0 $29.0 $130.2 $206.2 12.8%
------ ------ ------- ------- -----
Total Capitalization $577.2 $868.2 $161.6 $1,607.0 100.0%
====== ====== ======= ======= =====
</TABLE>
-6-
<PAGE>
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/ No Gem Expansion
THCR
Standalone FY 1996 FY 1997
---------- ------- -------
Adjusted EPS $1.87 $2.90
<TABLE>
<CAPTION>
1996 1997
---- ----
THCR Price per Share THCR Price per Share
-------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro Forma EPS (1)
Offer
Value $20.750 $22.500 $25.000 $27.500 $30.000 $20.750 $22.500 $25.000 $27.500 $30.000
----- ------------------------------------------------------------------------------------------------
$25.000 $1.19 $1.22 $1.27 $1.31 $1.35 $2.46 $2.53 $2.63 $2.71 $2.79
$30.000 $1.15 $1.19 $1.24 $1.28 $1.31 $2.39 $2.47 $2.57 $2.65 $2.73
$35.000 $1.12 $1.16 $1.20 $1.24 $1.28 $2.33 $2.41 $2.51 $2.59 $2.67
<CAPTION>
$ Accretion / (Dilution)
Offer
Value
-----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25.000 ($0.68) ($0.64) ($0.60) ($0.56) ($0.52) ($0.44) ($0.37) ($0.27) ($0.19) ($0.11)
$30.000 (0.71) (0.68) (0.63) (0.59) (0.55) ($0.51) ($0.43) ($0.33) ($0.25) ($0.17)
$35.000 (0.75) (0.71) (0.66) (0.62) (0.59) ($0.57) ($0.49) ($0.39) ($0.31) ($0.23)
<CAPTION>
% Accretion / (Dilution)
Offer
Value
-----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25.000 -36.43% -34.47% -31.98% -29.81% -27.88% -15.31% -12.70% -9.39% -6.49% -3.93%
$30.000 -38.29% -36.32% -33.81% -31.60% -29.65% -17.53% -14.89% -11.53% -8.58% -5.97%
$35.000 -40.07% -38.09% -35.56% -33.33% -31.35% -19.64% -16.98% -13.58% -10.59% -7.94%
</TABLE>
(1) Excludes the exercise of the THCR warrant and any potential operating
synergies.
-7-
<PAGE>
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.
. Coupon on New First Mortgage Notes should be more favorable relative to the
previously proposed debt offering.
. Blocks of 300,000 and 90,000 shares of Gem's Class A common stock were
recently traded at $22.00 and $22.50 per share (net of transaction costs),
respectively. Currently, shares are being offered at $26.00 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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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.
. Exercise of Trump Plaza East Purchase Option.
. Elimination of $3.1 million annual lease payment.
. Termination Right - THCR Common Stock.
. THCR: market value of the THCR Common Stock shall be $20.00 or more.
-11-
<PAGE>
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.
. Gem's NatWest Loan redeemed at a significant discount to face.
. Obtain potential operational synergies between properties and possible cross-
marketing benefits. Management has identified approximately $18.0-$20.0 in
potential cost savings that may be realized on an annual basis commencing in
the second year following the Merger Transaction.
-12-
<PAGE>
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%
====== =====
<TABLE>
<CAPTION>
Equity Offering Price
- ---------------------
Class A Class B Class C Fst Fidelity
-------------------------------------------
<S> <C> <C> <C> <C>
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 1.45 0.00 1.45 -
Assumed THCR price per share $20.750
</TABLE>
THCR Shareholder Profile
<TABLE>
<CAPTION>
Pre-Transaction Post-Transaction
--------------- -----------------
shares % shares %
------ --- ------ ---
<S> <C> <C> <C> <C>
Gem Class A - - 1.95 7.0%
Gem Class B - - 0.00 0.0%
Gem Class C - - 1.95 7.0%
First Fidelity - - 0.48 1.7%
Current THCR holders
DJT 6.67 39.7% 6.67 23.9%
Public 10.14 60.3% 10.14 36.3%
New THCR to the Public - - 6.75 24.2%
----- ----- ----- -----
Total (1) 16.80 100.0% 27.94 100.0%
===== ===== ===== =====
</TABLE>
(1) Excludes the warrant issued to DJT.
Scenario: Class A Share Purchase
- --------------------------------------------------------------------------------
Sources and Uses Summary
- --------------------------------------------------------------------------------
<TABLE>
<C> <C> <S> <C>
Sources Uses
Excess Cash $59.6 Payment to First Fidelity $50.0
New AC Mtg Notes 1,200.0 Payment to Bankers Trust 10.0
New Common 231.0 (1) Redeem Gem's Mtg Bonds 793.7
Redeem NatWest Loan 36.0
Redeem/Defease Plaza Mtg Bonds 378.6 (2)
Exercise Trump Plaza East Option 28.0
Purchase/Exchange A & C shares 81.0
Purchase B shares 0.4
THCR Equity to First Fidelity 10.0
Accrued Interest 37.9
Transaction Expenses 65.0
-------- --------
Total $1,490.6 $1,490.6
======== ========
</TABLE>
(1) Assumes $140.0 million of new equity is sold to the public.
(2) Estimate based on current market conditions, subject to change.
- --------------------------------------------------------------------------------
Capitalization Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of March 31, 1996 Proforma Proforma % of
THCR Gem Adjust. As Adjust. Capital.
<S> <C> <C> <C> <C> <C>
Excess Cash $8.5 $82.9 ($59.6) $31.8
Restricted Cash 5.5 25.0 30.5
------ ------ ------- --------
Total $14.0 $107.9 ($59.6) $62.3
====== ====== ======= ========
Debt
THCR 10.875% Mtg Bonds $330.0 ($330.0) $0.0 0.0%
THCR 15.500% Snr Sec Nts 155.0 155.0 9.6%
THCR Cap Lease & Other 45.2 45.2 2.8%
Gem 11.350% Mtg Bonds 793.7 (793.7) 0.0 0.0%
Gem NatWest Loan & Other 45.5 (44.9) 0.6 0.0%
New AC Mtg Notes 1,200.0 1,200.0 74.7%
Gem New Expand. Nts 0.0 0.0 0.0%
Gem New Other 0.0 0.0 0.0%
------ ------ ------- -------- -----
Total $530.2 $839.2 $31.4 $1,400.8 87.2%
====== ====== ======= ======== =====
Shareholders' Equity $47.0 $29.0 $130.2 $206.2 12.8%
------ ------ ------- -------- -----
Total Capitalization $577.2 $868.2 $161.6 $1,607.0 100.0%
====== ====== ======= ======== =====
</TABLE>
- --------------------------------------------------------------------------------
Assumptions
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Gem Expansion? No Transaction Fees and Expenses
AC New Mtg Notes 11.500% Expensed $21.7
Gem Credit Facility 11.500% Capitalized 43.3
Gem New Other Debt 10.000% Total $65.0
Redeem NatWest Debt Yes Amortization per year (10 years) $4.3
</TABLE>
-13-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Proforma Income Statement
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
Scenario: Class A Share Purchase / No Gem Expansion
<TABLE>
<CAPTION>
Management Projections 1995 1996
-------------------------------------------- --------------------------------------------
(a) (a) Proforma (a) (a) Proforma
Gem THCR Adjust. As Adjust. Gem THCR Adjust. As Adjust.
------ ------ ------- ---------- ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $557.7 $333.2 $890.9 $579.6 $620.4 $1,200.0
EBITDA $136.7 (b) $75.4 $7.7 (d) $219.9 $156.5 (b) $148.7 $8.0 (d) $313.2
Depreciation/Amortization $43.9 $24.8 $6.4 $75.1 $48.2 $26.4 $6.4 $81.0
CRDA amortization $3.1 3.1 $3.2 3.2
Write-off of Preopening Expenses 0.0 9.0 9.0
Amortization of Capitalized Costs 0.7 4.3 5.0 0.7 4.3 5.0
EBIT $89.7 $49.9 ($2.9) $136.7 $105.1 $112.6 ($2.6) $215.0
Interest Expense
THCR 10.875% Mtg Bonds - $35.9 ($35.9) $0.0 - $35.9 ($35.9) $0.0
THCR 15.500% Snr Sec Nts - 24.0 (c) 24.0 - 24.0 (c) 24.0
THCR Other - 5.8 (c) 5.8 - 9.0 (c) 9.0
Gem 11.350% Mtg Bonds 72.6 - (72.6) 0.0 - - 0.0 0.0
Gem NatWest Loan & Other 4.3 - (4.2) 0.1 - - 0.1 0.1
AC Mtg Notes - - 138.0 (c) 138.0 - - 138.0 (c) 138.0
Gem Credit Facility - - 0.0 0.0 - - 0.0 0.0
----- ----- ------ ------ ------ ----- ------- ------
Total $76.9 $65.7 $25.3 $167.9 - $68.9 $102.2 $171.0
Interest Income (3.7) (2.2) - (5.9) (1.1) (1.1) (2.3)
Partner Note - (0.2) - (0.2) - (0.3) (0.3)
Pretax Income $16.5 ($13.5) ($28.2) ($25.2) $106.2 $45.1 ($104.8) $46.5
Tax Provision 4.20% $6.9 ($5.7) ($11.8) (10.6) $44.6 $18.9 ($44.0) 19.5
----- ----- ------ ------ ------ ----- ------- ------
Net Income $9.6 ($7.8) ($16.4) ($14.6) $61.6 $26.2 ($60.8) $27.0
===== ===== ====== ====== ====== ===== ======= ======
Adjustment
Preopening Expenses (A-T) - - - 0.0 - 5.2 - 5.2
----- ----- ------ ------ ------ ----- ------- ------
Adjusted Net Income $9.6 ($7.8) ($16.4) ($14.6) $61.6 $31.4 ($60.8) $32.2
===== ===== ====== ====== ====== ===== ======= ======
EPS - ($0.46) - ($0.52) - $1.56 - $0.97
Adjust EPS - ($0.46) - ($0.52) - $1.87 - $1.15
Shares Outstanding - 16.8 11.1 27.9 - 16.8 11.1 27.9
Proforma Credit Statistics:
EBITDA / Cash Interest - - - 1.3 x - - - 1.8 x
EBITDA-Capex / Cash Interest - - - 1.0 - - - 1.5
Debt/EBITDA - - - 5.5 - - - 4.5
</TABLE>
(a) Management estimate.
(b) Post Mgmt fees and Realty rent.
(c) Proforma for full year results.
(d) Represents the addback of Realty Rent, Gem Services Agreement Fee and Trump
Plaza East Lease, but excludes potential operating synergies.
-14-
<PAGE>
Rothschild Inc.
Confidential
PROJECT WONDER
Proforma Income Statement
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
Scenario: Class A Share Purchase / No Gem Expansion
<TABLE>
<CAPTION>
Management Projections 1997 1998
(a) (a) Proforma (a) (d) Proforma
Gem THCR Adjust. As Adjust. Gem THCR Adjust. As Adjust.
--- ---- ------- ---------- ---- ---- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $608.5 $724.5 $1,333.0 $642.0 $760.7 $0.0 $1,402.7
EBITDA $171.6 (b) $179.8 $8.3 (c) $359.7 $190.8 (b) $194.2 $8.6 (c) $393.5
Depreciation/Amortization $35.3 $27.4 $6.4 $69.1 $33.5 $29.6 $6.4 $69.5
CRDA amortization $3.4 3.4 $3.6 3.6
Write-off of Preopening Expenses 0.0 0.0 0.0 0.0
Amortization of Capitalized Costs 0.7 4.3 5.0 0.7 4.3 5.0
EBIT $132.9 $151.7 ($2.4) $282.2 $153.7 $163.9 ($2.1) $315.4
Interest Expense
THCR 10.875% Mtg Bonds - $35.9 ($35.9) $0.0 - $35.9 ($35.9) $0.0
THCR 15.500% Snr Sec Nts - 24.0 24.0 - 24.0 24.0
THCR Other - 8.0 8.0 - 3.9 3.9
Gem 11.350% Mtg Bonds - - 0.0 0.0 - - 0.0 0.0
Gem NatWest Loan & Other - - 0.1 0.1 - - 0.1 0.1
AC Mtg Notes - - 138.0 138.0 - - 138.0 138.0
Gem Credit Facility - - 0.0 0.0 - - 0.0 0.0
Total - $67.9 $102.2 $170.1 - $63.8 $102.2 $166.0
------ ----- ------ ------ ------ ------ ------ ------
Interest Income (2.9) - (2.9) (4.6) - (4.6)
Partner Note - (0.3) (0.3) - (0.3) (0.3)
Pretax Income $135.8 $84.0 ($104.6) $115.2 $158.2 $100.4 ($104.3) $154.3
Tax Provision 42.0% $57.0 $35.3 ($43.9) 48.4 $66.5 $42.2 ($43.8) 64.8
------ ----- ------ ------ ------ ------ ------ ------
Net Income $78.8 $48.7 ($60.7) $66.8 $91.8 $58.2 ($60.5) $89.5
====== ===== ====== ====== ====== ====== ====== ======
Adjustment
Preopening Expenses (A-T) - 0.0 - 0.0 - 0.0 - 0.0
------ ----- ------ ------ ------ ------ ------ ------
Adjusted Net Income $78.8 $48.7 ($60.7) $66.8 $91.8 $58.2 ($60.5) $89.5
====== ===== ====== ====== ====== ====== ====== ======
EPS - $2.90 - $2.39 - $3.47 - $3.20
Adjust EPS - $2.90 - $2.39 - $3.47 - $3.20
Shares Outstanding - 16.8 11.1 27.9 - 16.8 11.1 27.9
Proforma Credit Statistics:
EBITDA / Cash Interest - - - 2.1 x - - - 2.4 x
EBITDA-Capex / Cash Interest - - - 1.8 - - - 2.1
Debt/EBITDA - - - 3.9 - - - 3.6
</TABLE>
(a) Management estimates.
(b) Post Mgmt fees and Realty rent.
(c) Represents the addback of Realty Rent, Gem Services Agreement Fee and Trump
Plaza East Lease, but excludes potential operating synergies.
(d) Estimate.
-15-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Estimated Proforma Balance Sheets
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of March 31, 1996
----------------------------------------------
THCR GEM Adjustments Proforma
------ ------ ----------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Excess Cash $8.5 $82.9 ($59.6) $31.8
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 ($59.6) $125.6
PROPERTY & EQUIPMENT, NET 533.2 688.4 247.0 1,468.7
OTHER 28.4 14.1 43.3 85.9
------ ------ ----------- --------
TOTAL ASSETS $611.7 $837.7 $230.8 $1,680.1
====== ====== =========== ========
CURRENT LIABILITIES
Credit Facility $0.0 $0.0 $0.0 $0.0
Payables and Accruals 27.7 69.7 (37.9) 59.4
------ ------ ----------- --------
Total Current Liabilties $27.7 $69.7 ($37.9) $59.4
LONG TERM LIABILITIES
DJT 10.875% Mtg Bonds $330.0 ($330.0) $0.0
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 (44.9) 0.6
AC New Mtg Notes 0.0 1,200.0 1,200.0
Gem Other 34.3 (27.4) 6.9
------ ------ ----------- --------
Total $535.3 $739.0 $138.4 $1,412.8
MINORITY INTEREST 1.7 1.7
CAPITAL 47.0 29.0 130.2 206.2
Total Liabilties and Capital $611.7 $837.7 $230.8 $1,680.1
====== ====== =========== ========
</TABLE>
-16-
<PAGE>
Rothschild Inc.
Confidential
PROJECT WONDER
Merger Transaction Summary
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Purchase Price Summary
----------------------
Common shares %
------ ------ -
<S> <C> <C> <C>
Gem Class A 1.35 38.8%
Class B 0.78 22.4%
Class C 1.35 38.8%
---- -----
Total 3.48 100.0%
==== =====
<CAPTION>
Equity Offering Price
---------------------
Class A Class B Class C Fst Fidelity
------- ------- ------- ------------
<S> <C> <C> <C> <C>
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 1.45 0.00 1.45 -
Assumed THCR price per share $20.750
<CAPTION>
THCR Shareholder Profile
Pre-Transaction Post-Transaction
--------------- ----------------
shares % shares %
------ - ------ -
<S> <C> <C> <C> <C>
Gem Class A - - 1.95 7.0%
Gem Class B - - 0.00 0.0%
Gem Class C - - 1.95 7.0%
First Fidelity - - 0.48 1.7%
Current THCR holders
DJT 6.67 39.7% 6.67 23.9%
Public 10.14 60.3% 10.14 36.3%
New THCR to the Public - - 6.75 24.2%
------- ----- ----- -----
Total (1) 16.80 100.0% 27.94 100.0%
======= ===== ===== =====
</TABLE>
(1) Excludes the warrant issued to DJT.
Scenario: Class A Share Purchase
<TABLE>
<CAPTION>
Sources and Uses Summary
Sources Uses
------- ----
<S> <C> <C> <C>
Excess Cash $59.6 Payment to First Fidelity $50.0
New AC Mtg Notes 1,200.0 Payment to Bankers Trust 10.0
New Common 231.0 (1) Redeem Gem's Mtg Bonds 793.7
Redeem NatWest Loan 36.0
Redeem/Defease Plaza Mtg Bonds 378.6 (2)
Exercise Trump Plaza East Option 28.0
Purchase/Exchange A & C shares 81.0
Purchase B shares 0.4
THCR Equity to First Fidelity 10.0
Accrued Interest 37.9
Transaction Expenses 65.0
-------- --------
Total $1,490.6 $1,490.6
======== ========
</TABLE>
(1) Assumes $140.0 million of new equity is sold to the public.
(2) Estimate based on current market conditions, subject to change.
<TABLE>
<CAPTION>
Capitalization Summary
As of March 31, 1996 Proforma Proforma % of
THCR Gem Adjust. As Adjust. Capital.
<S> <C> <C> <C> <C> <C>
Excess Cash $8.5 $82.9 ($59.6) $31.8
Restricted Cash 5.5 25.0 30.5
------ ------ ------- --------
Total $14.0 $107.9 ($59.6) $62.3
====== ====== ======= ========
Debt
THCR 10.875% Mtg Bonds $330.0 ($330.0) $0.0 0.0%
THCR 15.500% Snr Sec Nts 155.0 155.0 9.6%
THCR Cap Lease & Other 45.2 45.2 2.8%
Gem 11.350% Mtg Bonds 793.7 (793.7) 0.0 0.0%
Gem NatWest Loan & Other 45.5 (44.9) 0.6 0.0%
New AC Mtg Notes 1,200.0 1,200.0 74.7%
Gem New Expand. Nts 0.0 0.0 0.0%
Gem New Other 0.0 0.0 0.0%
------ ------ ------ -------- -----
Total $530.2 $839.2 $31.4 $1,400.8 87.2%
====== ====== ====== ======== =====
Shareholders' Equity $47.0 $29.0 $130.2 $206.2 12.8%
------ ------ ------ -------- -----
Total Capitalization $577.2 $868.2 $161.6 $1,607.0 100.0%
====== ====== ====== ======== =====
<CAPTION>
Assumptions
Gem Expansion? Yes Transaction Fees and Expenses
<S> <C> <C> <C> <C>
AC New Mtg Notes 11.500% Expensed $21.7
Gem Credit Facility 11.500% Capitalized 43.3
-----
Gem New Other Debt 10.000% Total $65.0
=====
Redeem NatWest Debt Yes Amortization per year (10 years) $4.3
</TABLE>
-17-
<PAGE>
Rothschild Inc. Confidential
PROJECT WONDER
Proforma Income Statement
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
Scenario: Class A Share Purchase / Gem Expansion
<TABLE>
<CAPTION>
Management Projections 1995
------------------------------------------------
(a) (a) Proforma
Gem THCR Adjust. As Adjust.
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Net Revenues $557.7 $333.2 $890.9
EBITDA $136.7 (b) $75.4 $7.7 (d) $219.9
Depreciation/Amortization $43.9 $24.8 $6.4 $75.1
CRDA amortization $3.1 3.1
Write-off of Preopening Expenses 0.0
Amortization of Capitalized Costs 0.7 4.3 5.0
EBIT $89.7 $49.9 ($2.9) $136.7
Interest Expense
THCR 10.875% Mtg Bonds - $35.9 ($35.9) $0.0
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 & Other 4.3 - (4.2) 0.1
AC Mtg Notes - - 138.0 (c) 138.0
Gem Credit Facility - - 0.0 0.0
------ ------ ------ -------
Total $76.9 $65.7 $25.3 $167.9
Interest Income (3.7) (2.2) - (5.9)
Partner Note - (0.2) - (0.2)
Pretax Income $16.5 ($13.5) ($28.2) ($25.2)
Tax Provision 42.0% $6.9 ($5.7) ($11.8) (10.6)
------ ------ ------ -------
Net Income $9.6 ($7.8) ($16.4) ($14.6)
====== ====== ====== =======
Adjustment
Preopening Expenses (A-T) - - - 0.0
------ ------ ------ -------
Adjusted Net Income $9.6 ($7.8) ($16.4) ($14.6)
====== ====== ====== =======
EPS - ($0.46) - ($0.52)
Adjust EPS - ($0.46) - ($0.52)
Shares Outstanding - 16.8 11.1 27.9
Proforma Credit Statistics:
EBITDA / Cash Interest - - - 1.3 x
EBITDA-Capex / Cash Interest - - - 1.0
Debt/EBITDA - - - 5.5
</TABLE>
<TABLE>
<CAPTION>
Management Projections 1996
------------------------------------------------
(a) (a) Proforma
Gem THCR Adjust. As Adjust.
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Net Revenues $579.6 $620.4 $1,200.0
EBITDA $156.5 (b) $148.7 $8.0 (d) $313.2
Depreciation/Amortization $48.4 $26.4 $6.4 $81.2
CRDA amortization $3.2 3.2
Write-off of Preopening Expenses 9.0 9.0
Amortization of Capitalized Costs 0.7 4.3 5.0
EBIT $104.9 $112.6 ($2.6) $214.8
Interest Expense
THCR 10.875% Mtg Bonds - $35.9 ($35.9) $0.0
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 & Other - - 0.1 0.1
AC Mtg Notes - - 138.0 (c) 138.0
Gem Credit Facility - - 1.7 1.7
------ ------ ------ -------
Total - $68.9 $103.9 $172.8
Interest Income (0.5) (1.1) (1.6)
Partner Note - (0.3) (0.3)
Pretax Income $105.3 $45.1 ($106.6) $43.9
Tax Provision 42.0% $44.2 $18.9 ($44.8) 18.4
------ ------ ------ -------
Net Income $61.1 $26.2 ($61.8) $25.4
====== ====== ====== =======
Adjustment
Preopening Expenses (A-T) - 5.2 - 5.2
------ ------ ------ -------
Adjusted Net Income $61.1 $31.4 ($61.8) $30.7
====== ====== ====== =======
EPS - $1.56 - $0.91
Adjust EPS - $1.87 - $1.10
Shares Outstanding - 16.8 11.1 27.9
Proforma Credit Statistics:
EBITDA / Cash Interest - - - 1.8 x
EBITDA-Capex / Cash Interest - - - 1.1
Debt/EBITDA - - - 5.0
</TABLE>
- --------------------------------------
(a) Management estimate.
(b) Post Mgmt fees and Realty rent.
(c) Proforma for full year results.
(d) Represents the addback of Realty Rent, Gem Services Agreement Fee and Trump
Plaza East Lease, but excludes potential operating synergies.
-18-
<PAGE>
Rothschild Inc.
Confidential
PROJECT WONDER
Proforma Income Statement
(dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------
Scenario: Class A Share Purchase / Gem Expansion
<TABLE>
<CAPTION>
Management Projections 1997 1998
(a) (a) Proforma (a) (d) Proforma
Gem THCR Adjust. As Adjust. Gem THCR Adjust. As Adjust.
------ ------ ------- ---------- ------ ------ ------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $678.8 $724.5 $1,403.2 $773.6 $760.7 $0.0 $1,534.3
EBITDA $204.9 (b) $179.8 $8.5 (c) $393.3 $251.0 (b) $194.2 $9.1 (c) $454.3
Depreciation/Amortization $41.9 $27.4 $6.4 $75.7 $45.4 $29.6 $6.4 $81.4
CRDA amortization $3.8 3.8 $4.3 4.3
Write-off of Preopening Expenses 0.0 0.0 0.0 0.0
Amortization of Capitalized Costs 0.7 4.3 5.0 0.7 4.3 5.0
EBIT $159.2 $151.7 ($2.1) $308.7 $201.3 $163.9 ($1.6) $363.6
Interest Expense
THCR 10.875% Mtg Bonds - $35.9 ($35.9) $0.0 - $35.9 ($35.9) $0.0
THCR 15.500% Snr Sec Nts - 24.0 24.0 - 24.0 24.0
THCR Other - 8.0 8.0 - 3.9 3.9
Gem 11.350% Mtg Bonds - - 0.0 0.0 - - 0.0 0.0
Gem NatWest Loan & Other - - 0.1 0.1 - - 0.1 0.1
AC Mtg Notes - - 138.0 138.0 - - 138.0 138.0
Gem Credit Facility - - 6.4 6.4 - - 7.2 7.2
------ ----- ------ ------ ------ ------ ------- ------
Total - $67.9 $108.6 $176.5 - $63.8 $109.4 $173.2
Interest Income 0.0 - 0.0 0.0 - 0.0
Partner Note - (0.3) (0.3) - (0.3) (0.3)
Pretax Income $159.2 $84.0 $110.7) $132.5 $201.3 $100.4 ($111.0) $190.7
Tax Provision 42.0% $66.9 $35.3 ($46.5) 55.7 $84.5 $42.2 ($46.6) 80.1
------ ----- ------ ------ ------ ------ ------- ------
Net Income $92.3 $48.7 ($64.2) $76.9 $116.7 $58.2 ($64.4) $110.6
====== ===== ====== ====== ====== ====== ======= ======
Adjustment
Preopening Expenses (A-T) - 0.0 - 0.0 - 0.0 - 0.0
------ ----- ------ ------ ------ ------ ------- ------
Adjusted Net Income $92.3 $48.7 ($64.2) $76.9 $116.7 $58.2 ($64.4) $110.6
====== ===== ====== ====== ====== ====== ======= ======
EPS - $2.90 - $2.75 - $3.47 - $3.96
Adjust EPS - $2.90 - $2.75 - $3.47 - $3.96
Shares Outstanding - 16.8 11.1 27.9 - 16.8 11.1 27.9
Proforma Credit Statistics:
EBITDA / Cash Interest - - - 2.1 x - - - 2.6 x
EBITDA-Capex / Cash Interest - - - 1.4 - - - 2.1
Debt/EBITDA - - - 4.0 - - - 3.4
</TABLE>
(a) Management estimates.
(b) Post Mgmt fees and Realty rent.
(c) Represents the addback of Realty Rent, Gem Services Agreement Fee and Trump
Plaza East Lease, but excludes potential operating synergies.
(d) Estimate.
-19-
<PAGE>
EXHIBIT 99.17(B)(4)(ii)
- --------------------------------------------------------------------------------
PRESENTATION TO
THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS
OF
WONDER
JANUARY 31, 1996
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
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)
. Pay $10 million cash to BT on behalf of Trump for consent and releases
by BT
. Redeem Tom First Mortgage Bonds at par
. Refinance NatWest loan at a discount
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-1-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TRANSACTION OVERVIEW (CONT'D.)
. Tender or Defease Plaza First Mortgage Bonds
. Issue approximately $1.2 billion of New First Mortgage Notes secured by
Tom and Plaza
. Raise $140 million in Wonder public equity offering
. 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
. Trump management fee at Tom eliminated
. Amend covenants of the 15.5% Senior Secured Notes
. Exercise Trump Plaza East option at exercise price of $28 million
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-2-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
NEW FINANCING STRUCTURE
. Issue approximately $1.2 billion of New First Mortgage Notes secured by
Tom and Plaza
. Advantages over old Tom standalone refinancing structure:
- Extend maturity of long-term debt at Tom and Plaza
- Eliminate refinancing event at Plaza in 2001
- Use excess cash flow of Plaza for Tom expansion
- Greater covenant flexibility than current Plaza Bonds
- Increases likehood that financing consummated on acceptable terms
- Eliminates conflict of interest concerns between bondholders
- Resolves allocation issue with respect to potential synergies
from merger
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-3-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
SOURCES AND USES
($ in thousands)
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ---------------------------------------------------- --------------------------------------------------------
Cash Sources Cash Uses
- ------------ ---------
<S> <C> <C> <C>
Excess Cash(/1/) $ 46,947 Payment to First Fidelity $ 50,000
New First Mortgage Notes 1,180,000 Payment to BT 10,000
Additional Equity Issued to Public 140,000 Retire Tom First Mortgage Bonds(/2/) 793,767
---------- Satisfy Tom Natwest Loan 36,500
Retire Plaza First Mortgage Notes(/3/) 377,790
Exercise Trump Plaza East Option 28,000
Purchase Class B Shares 390
Transaction Exp. and Working Capital(/4/) 70,500
----------
Total Cash Sources 1,366,947 Total Cash Uses 1,366,947
Non-Cash Sources Non-Cash Uses
- ---------------- -------------
Equity Issued to Taj Class A(/5/) 40,500 Purchase Class A and C Shares 81,000
Equity Issued to Taj Class C 40,500 Equity to First Fidelity(/6/) 10,000
Equity to First Fidelity(6) 10,000 ----------
---------- Total Uses $1,457,947
Total Sources $1,457,947 ==========
==========
</TABLE>
- ------------------------
(1) Although Tom will have $55.0 million of excess cash, only $47 million will
be used in the Acquisition in order to provide a working capital cushion.
(2) Includes Additional Amount through the redemption date.
(3) Assumes 90% of Mortgage Bonds tendered at Treasurys + 100 b.p. and 10% are
defeased.
(4) Includes $5 million consent fee for Senior Secured Noteholders and $6
million if 100% of Plaza Mortgage Bonds are defeased.
(5) Assumes Class A shareholders will receive Wonder stock in the Acquisition.
(6) Assumes $20.00 Wonder stock price.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-4-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
OWNERSHIP SUMMARY(/1/)
<TABLE>
<CAPTION>
POST
ACQUISITION(2)
POST & EQUITY
PRE-ACQUISITION ACQUISITION(2) OFFERING &
---------------------- POST & EQUITY TRUMP
WONDER TOM ACQUISITION(/2/) OFFERING WARRANTS
-------- ------ ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Trump........................ 39.7% 50.0% 40.7% 30.7% 34.8%
Class A...................... - 50.0% 9.5% 7.1% 6.7%
Public....................... 60.3% - 47.5% 60.4% 56.8%
First Fidelity............... - - 2.3% 1.8% 1.7%
----- ----- ----- ----- -----
Total...................... 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
- ------------------------
(1) Assumes $20.00 Wonder stock price and $140mm primary equity offering.
(2) Assumes Tom's Class A shareholders receive Wonder stock.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-5-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
CAPITALIZATION SUMMARY
($ in millions)
<TABLE>
<CAPTION>
ESTIMATED AT 12/31/95 PRO
------------------------- FORMA % OF TOTAL
WONDER TOM COMBINED CAPITALIZATION
---------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Excess Cash................................... $ 15.1 $ 55.0 $ 28.7 --
Cage/Restricted Cash.......................... 12.0 25.0 37.0 --
---------- ----------- -------- -----
Total Cash.................................... $ 27.2 $ 80.0 $ 65.7 --
========== =========== ======== =====
Long-Term Debt:
Tom NatWest Loan............................ $ 0.0 $ 44.9 $ 0.0 0.0%
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 0.0 0.0
Wonder 15.50% Senior Secured Notes.......... 155.0 0.0 155.0 10.4
New First Mortgage Notes.................... 0.0 0.0 1,180.0 79.1
Other Debt.................................. 13.9 1.2 15.1 1.0
---------- ----------- -------- -----
Total Long-Term Debt........................ 499.0 839.9 1,350.1 90.5
Equity........................................ 49.2 (84.6)(2) 141.9 9.5
---------- ----------- -------- -----
Total Capitalization.......................... $ 548.2 $ 755.3 $1,492.0 100.0%
========== =========== ======== =====
Contingent Liabilities
First Fidelity.............................. $ 0.0 $ 30.0 (3) $ 0.0 --
</TABLE>
- ------------------------
(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 $17 million which represents
the present value of the obligation.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-6-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
PURCHASE PRICE SUMMARY
($ in millions)
<TABLE>
<CAPTION>
EXCLUDING INCLUDING
FEES FEES
--------- ---------
<S> <C> <C>
Purchase Equity.............................................. $ 81.4 $ 81.4
Assumed Value of Warrants to Trump(/1/)...................... 6.5 6.5
-------- --------
Equity Purchase Price...................................... 87.9 87.9
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
Satisfy NatWest Loan......................................... 36.5 36.5
Transaction Fees and Expenses................................ 0.0 70.5
Less: Excess Cash on Hand................................... (55.0) (55.0)
-------- --------
Enterprise Value........................................... $ 933.2 $1,003.7
======== ========
</TABLE>
- ------------------------
(1) Black-Scholes analysis used to value Trump warrants. Assumed volatility
of 35%.
(2) Assumes $20.00 Wonder stock price.
(3) Includes accrued PIK interest through March 31, 1996.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-7-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
SUMMARY PURCHASES PRICE MULTIPLES
($ in millions)
<TABLE>
<CAPTION>
PURCHASE PRICE MULTIPLES PURCHASE PRICE MULTIPLES
TOM FINANCIAL RESULTS INCLUDING FEES EXCLUDING FEES
-------------------------- ----------------------------- -----------------------------
EXCLUDING INCLUDING EXCLUDING INCLUDING EXCLUDING INCLUDING
SYNERGIES SYNERGIES(1) SYNERGIES SYNERGIES(1) SYNERGIES SYNERGIES(1)
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995 ESTIMATED
- --------------
Revenues................. $554.0 $ 554.0 1.8x 1.8x 1.7x 1.7x
EBITDA................... 138.1 156.4 7.3 6.4 6.8 6.0
EBIT..................... 94.3 112.6 10.6 8.9 9.9 8.3
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 6.2 5.6 5.8 5.2
EBIT..................... 112.8 131.1 8.9 7.7 8.3 7.1
Book Value............... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Assumes $18.3 million in synergies expected to be achieved in FY 1997.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-8-
<PAGE>
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
. $20.6 million in expected annual cost savings in FY 1998
. Provides critical mass necessary to compete effectively for new gaming
licenses
. Extends maturity of Tom long-term debt to allow for expansion plan
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-9-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
VALUATION ANALYSES
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
VALUATION RELATIVE TO PROPOSAL
. Methodologies
- Comparable companies analysis
- Comparable M&A transactions analysis
- Discounted cash flow analysis
- Contribution analysis
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-1-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
PUBLIC COMPANY COMPARABLE ANALYSIS
($ in millions)
<TABLE>
<CAPTION>
IMPLIED TOM MULTIPLES IMPLIED TOM MULTIPLES
INCLUDING FEES EXCLUDING FEES COMPARABLE COMPANY
TOM ------------------------ ------------------------ MULTIPLES(1)
FINANCIAL EXCLUDING INCLUDING EXCLUDING INCLUDING ----------------------
RESULTS(2) SYNERGIES SYNERGIES(3) SYNERGIES SYNERGIES(3) LOW AVERAGE HIGH BALLY ENT.
---------- --------- ------------ --------- ------------ ----- ------- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ENTERPRISE VALUE/
LTM Revenues............. $554.0 1.8x 1.8x 1.7x 1.7x 0.9x 1.8x 2.9x 1.8x
LTM EBITDA............... 138.1 7.3 6.4 6.8 6.0 4.5 7.9 13.5 6.9
LTM EBIT................. 94.3 10.6 8.9 9.9 8.3 6.1 11.5 20.9 9.8
1996P EBITDA............. 161.0 6.2 5.6 5.8 5.2 4.1 6.6 9.5 5.8
PRICE/
1995P Net Income......... NM NM NM NM NM 10.4x 20.5x 38.1x 21.7x
1996P Net Income......... NM NM NM NM NM 7.2 15.4 23.0 16.7
Book Value............... 40.3 2.2 -- 2.2 -- 0.9 2.5 4.4 1.3
</TABLE>
- ------------------------
(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 $18.3 million in synergies expected to be achieved in FY 1997.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-2-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
COMPARABLE MERGER AND ACQUISITIONS VALUATION ANALYSIS
($ in millions)
<TABLE>
<CAPTION>
IMPLIED TOM MULTIPLES IMPLIED TOM MULTIPLES
INCLUDING FEES EXCLUDING FEES AVERAGE AVERAGE
TOM ----------------------- ----------------------- CASINO SINGLE ITT-
FINANCIAL EXCLUDING INCLUDING EXCLUDING INCLUDING RESORT PROPERTY CAESARS
RESULTS(1) SYNERGIES SYNERGIES(2) SYNERGIES SYNERGIES(2) MULTIPLES(3) MULTIPLES(3) MULTIPLE
---------- --------- ------------ --------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ENTERPRISE VALUE/
LTM Revenues.................. $554.0 1.8x 1.8x 1.7x 1.7x 1.6x 1.4x 1.8x
LTM EBITDA.................... 138.1 7.3 6.4 6.8 6.0 8.7 8.4 9.1
LTM EBIT...................... 94.3 10.6 8.9 9.9 8.3 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
</TABLE>
- ------------------------
(1) Tom LTM results represent estimated FY 1995, excluding synergies.
(2) Assumes $18.3 million in synergies expected to be achieved in FY 1997.
(3) Average excludes high and low.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-3-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW VALUATION
($ in millions)
ENTERPRISE VALUES WITH TOM EXPANSION
- ------------------------------------
<TABLE>
<CAPTION>
WEIGHTED AVERAGE COST OF CAPITAL
-------------------------------------------------------------------
8.0% 9.0% 10.0% 11.0% 12.0% 13.0%
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
5.0X $1,417.0 $1,357.5 $1,301.0 $1,247.5 $1,196.8 $1,148.6
TERMINAL 6.0 1,636.0 1,566.6 1,500.9 1,438.5 1,379.4 1,323.3
EBITDA 7.0 1,855.1 1,775.8 1,700.7 1,629.5 1,562.0 1,497.9
MULTIPLE 8.0 2,074.1 1,985.0 1,900.5 1,820.5 1,744.6 1,672.6
9.0 2,293.1 2,194.1 2,100.4 2,011.5 1,927.2 1,847.3
10.0 2,512.2 2,403.3 2,300.2 2,202.5 2,109.9 2,022.0
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-4-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW VALUATION (CONT'D)
($ in millions)
ENTERPRISE VALUES WITHOUT TOM EXPANSION
- ---------------------------------------
<TABLE>
<CAPTION>
WEIGHTED AVERAGE COST OF CAPITAL
-------------------------------------------------------------------
8.0% 9.0% 10.0% 11.0% 12.0% 13.0%
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-5-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
CONTRIBUTION ANALYSIS
RELATIVE ENTERPRISE VALUATION CONTRIBUTION(1):
INCLUDING FEES EXCLUDING FEES
- ------------------------------------ -----------------------------------
Wonder....................... 45.4% Wonder...................... 47.2%
Tom.......................... 54.6% Tom......................... 52.8%
<TABLE>
<CAPTION>
PROJECTED
-----------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Wonder........................ 37.6% 51.5% 54.2%
Tom........................... 62.4% 48.5% 45.8%
EBITDA:
Wonder........................ 34.6% 47.2% 49.4%
Tom........................... 65.4% 52.8% 50.6%
EBIT:
Wonder........................ 37.7% 51.1% 50.7%
Tom........................... 62.3% 48.9% 49.3%
NET INCOME:
Wonder........................ NM NM NM
Tom........................... NM NM NM
BOOK VALUE:
Wonder........................ 45.0% -- --
Tom........................... 55.0% -- --
</TABLE>
- ------------------------
(1) Assumes $20.00 Wonder stock price.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-6-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED
-----------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Wonder........................ 37.6% 51.5% 54.2%
Tom........................... 62.4% 48.5% 45.8%
EBITDA:
Wonder........................ 34.6% 47.2% 49.4%
Tom........................... 65.4% 52.8% 50.6%
EBIT:
Wonder........................ 37.7% 51.1% 50.7%
Tom........................... 62.3% 48.9% 49.3%
NET INCOME:
Wonder........................ NM NM NM
Tom........................... NM NM NM
BOOK VALUE:
Wonder........................ 45.0% -- --
Tom........................... 55.0% -- --
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-7-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
PROFILE OF TOM
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TOM CORPORATE PROFILE
. Largest casino hotel facility in Atlantic City
. Since commencing operations in 1990:
- #1 in total gaming revenue
- #1 in table revenues
- #1 in slot revenues
. Top performer in the Atlantic City market in terms of Revenues and EBITDA
. First class hotel and entertainment facilities
. Expansion plan provides upside significant potential
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-1-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TOM SUMMARY HISTORICAL FINANCIAL INFORMATION
($ in millions)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------
1992 1993 1994(1) 1995
------ ------ -------- -------
<S> <C> <C> <C> <C>
Net Revenues................................... $469.8 $498.9 $ 517.2 $ 554.0
Growth....................................... 7.2% 6.2% 3.7% 6.7%
EBITDA(2)...................................... 107.0 124.1 120.0 133.5
Margin....................................... 22.8% 24.9% 23.2% 24.9%
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............ -- -- -- 856.1
</TABLE>
- ------------------------
(1) Excludes non-recurring charges.
(2) EBITDA figures are after Trump Realty lease payments and Trump management
fee.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-2-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TOM STAND-ALONE PROJECTED FINANCIAL SUMMARY
($ in millions)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
-------------------------------------------------------
1995PF(1) 1996 1997 1998 1999 2000
--------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Current Property $554.0 $583.4 $612.5 $646.2 $672.1 $702.3
Expansion 0.0 0.0 74.6 99.8 161.8 231.5
------ ------ ------ ------ ------ ------
Total 554.0 583.4 687.1 746.0 833.9 933.8
Growth Rate 6.7% 4.2% 17.8% 8.6% 11.8% 12.0%
EBITDA
Current Property 138.1 161.0 175.4 194.9 205.0 220.0
Expansion 0.0 0.0 33.0 46.3 72.6 101.8
------ ------ ------ ------ ------ ------
Total 138.1 161.0 208.4 241.2 277.6 321.8
Margin 24.9% 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 18.0% 19.3% 24.1% 26.5% 27.5% 28.5%
Capital Expenditures
Maintenance 28.5 28.6 25.0 25.0 25.0 35.0
Expansion 0.0 26.2 83.6 75.6 53.1 10.9
------ ------ ------ ------ ------ ------
Total $ 28.5 $ 54.8 $108.6 $100.6 $ 78.1 $ 45.9
</TABLE>
- ------------------------
(1) Includes Add-back of Trump Realty lease expense and Trump management fee.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-3-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
TOM EXPANSION PLAN
($ in millions)
<TABLE>
<CAPTION>
ESTIMATED
COST
---------
<C> <S> <C>
Phase I (1996-1997) Conversion of entertainment arena into 60,000
sq. ft. of casino space $ 53
New entertainment area built on steel pier 8
Phase II (1997-1998) 2,200 car parking garage 26
Phase III (1998-1999) Two 640 room hotel towers 160
----
Total cost $247
====
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-4-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
PROFILE OF THE COMBINED COMPANY
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
SUMMARY OF CONSOLIDATED SYNERGIES
($ in millions)
<TABLE>
<CAPTION>
FYE DECEMBER 31,
---------------------------
1996 1997 1998
------ ----- -----
<S> <C> <C> <C>
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 $20.6
====== ===== =====
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-1-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
PRO FORMA COMBINED FINANCIAL SUMMARY(1)
($ in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------
PROJECTED
ESTIMATED ---------------------
PF 1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
TOM(2)
- -----
Revenues........................................ $ 554.0 $ 583.4 $ 612.5
EBITDA.......................................... 138.1 161.0 175.4
EBIT............................................ 94.3 112.8 140.1
WONDER(3) (4)
- ------
Revenues........................................ $ 333.2 $ 620.4 $ 724.5
EBITDA.......................................... 73.0 140.8 168.2
EBIT............................................ 57.1 114.8 141.2
Net Income...................................... (13.9) 28.9 43.7
EPS(5).......................................... (0.83) 1.72 2.60
PRO FORMA COMBINED (EXCLUDES SYNERGIES
AND TOM EXPANSION)(6)
- ----------------------------------------
Revenues........................................ $ 887.2 $ 1,203.8 $1,337.0
EBITDA.......................................... 211.1 304.9 346.7
EBIT............................................ 146.6 225.9 279.7
Net Income...................................... (34.0) 29.8 60.7
EPS(3).......................................... (1.20) 1.05 2.14
</TABLE>
- ------------------------
(1) Assumes $20.00 Wonder stock price.
(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 and assumes $2.3 million of corporate overhead.
(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.
(6) $3.1 million penthouse lease expense is added back since Trump Plaza
East option assumed to be exercised.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-2-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------
PROJECTED
ESTIMATED ---------------------
PF 1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
TOM(2)
- -----
Revenues........................................ $ 554.0 $ 583.4 $ 612.5
EBITDA.......................................... 138.1 161.0 175.4
EBIT............................................ 94.3 112.8 140.1
WONDER(3) (4)
- ------
Revenues........................................ $ 333.2 $ 620.4 $ 724.5
EBITDA.......................................... 73.0 140.8 168.2
EBIT............................................ 57.1 114.8 141.2
Net Income...................................... (13.9) 28.9 43.7
EPS(5).......................................... (0.83) 1.72 2.60
PRO FORMA COMBINED (EXCLUDES SYNERGIES
AND TOM EXPANSION)(6)
- ----------------------------------------
Revenues........................................ $ 887.2 $ 1,203.8 $1,337.0
EBITDA.......................................... 211.1 304.9 346.7
EBIT............................................ 146.6 225.9 279.7
Net Income...................................... (34.0) 29.8 60.7
EPS(3).......................................... (1.20) 1.05 2.14
</TABLE>
- ------------------------
(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 and assumes $2.3 million of corporate overhead.
(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.
(6) $3.1 million penthouse lease expense is added back since Trump Plaza
East option assumed to be exercised.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-3-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
ACCRETION/DILUTION ANALYSIS(1)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------
PROJECTED
ESTIMATED --------------------
PF 1995 1996 1997
--------- ------ --------
<S> <C> <C> <C>
EARNINGS PER SHARE:
- ------------------
Wonder Stand-Alone EPS(2) (3)...................... ($0.83) $1.72 $ 2.60
Pro Forma Combined EPS:
Unadjusted....................................... ($1.20) $1.05 $ 2.14
Accretion (Dilution)............................. (45.3)% (38.8)% (17.7)%
Adjusted For Synergies(4)........................ ($0.88) $1.24 $ 2.52
Accretion (Dilution)............................. (6.8)% (28.1)% (3.2)%
Adjusted For Tom Expansion....................... NM NM $ 2.62
Accretion (Dilution)............................. NM NM 0.6%
Adj. For Synergies(4) and Tom Expansion.......... NM NM $ 3.00
Accretion (Dilution)............................. NM NM 15.1%
</TABLE>
- ------------------------
(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 and assumes $2.3 million of corporate overhead.
(3) Excludes pre-opening expenses.
(4) Assumes $9.0 million of synergies for FY 1995 and FY 1996 and $18.3
million for FY 1997.
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-4-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
COMPARATIVE ACCRETION/DILUTION ANALYSIS
($ in millions, except per share data)
<TABLE>
<CAPTION>
OLD STRUCTURE NEW STRUCTURE
-------------------- --------------------
1996 1997 1996 1997
-------- ------- ------- --------
<S> <C> <C> <C> <C>
ASSUMES EXPANSION AND SYNERGIES
- -------------------------------
Standalone EPS $ 1.72 $ 2.60 $ 1.72 $ 2.60
Combined Net Income $ 40.6 $ 90.5 $ 35.0 $ 85.0
Pro Forma Shares Outstanding 26.35 26.35 28.35 28.35
------- ------- ------- --------
Combined EPS $ 1.54 $ 3.43 $ 1.24 $ 3.00
Accretion (Dilution) (10.4)% 31.9% (28.1)% 15.1%
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-5-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
EPS ACCRETION/DILUTION - SENSITIVITY ANALYSIS(1)
<TABLE>
<CAPTION>
PROJECTED
------------------
1996 1997
------- -------
<S> <C> <C>
10% EPS REDUCTION:
- -----------------
Wonder Stand-Alone EPS.............................. $ 1.55 $ 2.34
Pro Forma Combined EPS:
Unadjusted........................................ $ 0.95 $ 1.99
Accretion (Dilution).............................. (38.6)% (15.2)%
Adjusted For Synergies(2)......................... $ 1.13 $ 2.36
Accretion (Dilution).............................. (26.7)% 0.9%
Adjusted For Tom Expansion........................ NM $ 2.46
Accretion (Dilution).............................. NM 5.1%
Adj. For Synergies(2) and Tom Expansion........... NM $ 2.84
Accretion (Dilution).............................. NM 21.3%
</TABLE>
<TABLE>
<CAPTION>
25% EPS REDUCTION:
- -----------------
<S> <C> <C>
Wonder Stand-Alone EPS.............................. $ 1.29 $ 1.95
Pro Forma Combined EPS:
Unadjusted........................................ $ 0.80 $ 1.75
Accretion (Dilution).............................. (38.2)% (10.3)%
Adjusted For Synergies(2)......................... $ 0.98 $ 2.13
Accretion (Dilution).............................. (23.9)% 9.1%
Adjusted For Tom Expansion........................ NM $ 2.23
Accretion (Dilution).............................. NM 14.2%
Adj. For Synergies(2) and Tom Expansion........... NM $ 2.61
Accretion (Dilution).............................. NM 33.5%
</TABLE>
- ------------------------
(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.
- ---------------------------------------------------------------------------D L J
DONALDSON, LUFKIN & JENRETTE
6
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
25% EPS REDUCTION:
- -----------------
<S> <C> <C>
Wonder Stand-Alone EPS.............................. $ 1.29 $ 1.95
Pro Forma Combined EPS:
Unadjusted........................................ $ 0.80 $ 1.75
Accretion (Dilution).............................. (38.2)% (10.3)%
Adjusted For Synergies(2)......................... $ 0.98 $ 2.13
Accretion (Dilution).............................. (23.9)% 9.1%
Adjusted For Tom Expansion........................ NM $ 2.23
Accretion (Dilution).............................. NM 14.2%
Adj. For Synergies(2) and Tom Expansion........... NM $ 2.61
Accretion (Dilution).............................. NM 33.5%
</TABLE>
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-7-
<PAGE>
PROJECT WONDER
- --------------------------------------------------------------------------------
CONSIDERATIONS
. Size of equity offering
. Class A Option: stock vs. cash
. Lock-ups
. Absence of definitive agreements
- -------------------------------------------------------------------------- D L J
DONALDSON, LUFKIN & JENRETTE
-8-
<PAGE>
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
<PAGE>
[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.
<PAGE>
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
IJS/AMV:rml
<PAGE>
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
<PAGE>
INTRODUCTION
APPRAISAL GROUP International
<PAGE>
[Insert graphical material here. This photograph
depicts the outside of the Taj Mahal Casino Resort.]
<PAGE>
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
-1-
APPRAISAL GROUP International
<PAGE>
INTRODUCTION EXECUTIVE SUMMARY
================================================================================
Highest and
Best Use: As Vacant - The highest and best use of the subject
---------
site, as vacant, is the development of casino/hotel
facility.
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
United Jersey Bank
-11-
APPRAISAL GROUP International
<PAGE>
INTRODUCTION QUALIFICATION OF IRWIN J. STEINBERG
================================================================================
INSTITUTIONAL (CONTINUED)-
- --------------------------
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
<PAGE>
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
<PAGE>
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 (#1A1/8-1)
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
<PAGE>
INTRODUCTION QUALIFICATIONS OF AVI M. VARDI
===============================================================================
Page 2
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
United Jersey Bank
W.P. Carey & Company
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INTRODUCTION QUALIFICATIONS OF AVI M. VARDI
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Page 3
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
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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.
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INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS
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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 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.
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INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS
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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.
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.
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INTRODUCTION ASSUMPTIONS & LIMITING CONDITIONS
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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 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.
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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.
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<PAGE>
[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.]
<PAGE>
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.
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BACKGROUND DATA & ANALYSIS AREA DATA
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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).
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BACKGROUND DATA & ANALYSIS AREA DATA
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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.
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BACKGROUND DATA & ANALYSIS AREA DATA
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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
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BACKGROUND DATA & ANALYSIS AREA DATA
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for the majority of the 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
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BACKGROUND DATA & ANALYSIS AREA DATA
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hundred million 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
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BACKGROUND DATA & ANALYSIS AREA DATA
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of the current recession in July 1990, was responsible for the cyclical upturn
in joblessness through 1991.
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.
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BACKGROUND DATA & ANALYSIS AREA DATA
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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.
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
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BACKGROUND DATA & ANALYSIS AREA DATA
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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 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.
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BACKGROUND DATA & ANALYSIS AREA DATA
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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 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).
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BACKGROUND DATA & ANALYSIS AREA DATA
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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
------------------------------------------------
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<PAGE>
[Graphic material omitted. The graphic is a map depicting the major roads in
Southeastern New Jersey. The map highlights the location of Atlantic City.]
<PAGE>
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. The CRDA (Casino Reinvestment Development Authority) was
established to counteract the
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BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA
================================================================================
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 anticipated changes are expected to expand
Atlantic City's casino market and spur growth in the region.
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BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA
================================================================================
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.
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.
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BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA
================================================================================
$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. 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.
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BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA
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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 positive impact of the gaming industry on
employment in Atlantic City, the casino
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BACKGROUND DATA & ANALYSIS ATLANTIC CITY DATA
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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.
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APPRAISAL GROUP International
<PAGE>
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
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APPRAISAL GROUP International
<PAGE>
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
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BACKGROUND DATA & ANALYSIS NEIGHBORHOOD DATA
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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.
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<PAGE>
[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.]
<PAGE>
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
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BACKGROUND DATA & ANALYSIS SITE DESCRIPTION
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portion of Virginia Avenue, that has not been vacated,
serves a 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
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APPRAISAL GROUP International
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BACKGROUND DATA & ANALYSIS SITE DESCRIPTION
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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 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.
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APPRAISAL GROUP International
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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.]
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APPRAISAL GROUP International
<PAGE>
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).
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BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
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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 other slot machines. There are a total of 3,158 slot
machines, including 155 nickel machines, 1,982
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APPRAISAL GROUP International
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BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
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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.
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APPRAISAL GROUP International
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BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
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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, 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,
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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
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.
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BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
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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.
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
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BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
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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.
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.
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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.
CONSTRUCTION DETAILS
- --------------------
The following pages refer to the complex's vital statistics and electrical,
heating and safety features.
<TABLE>
<S> <C>
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
</TABLE>
-56-
APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
<TABLE>
<C> <S>
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.
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.
</TABLE>
<TABLE>
<S> <C>
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
</TABLE>
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
<TABLE>
<S> <C> <C>
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
138,000 Ft. - CCTV cable
2,000 - Speakers
150,000 Ft. - Audio cable
</TABLE>
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.
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
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,
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.
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
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 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.
-62-
APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS DESCRIPTION OF IMPROVEMENTS
================================================================================
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 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.
-63-
APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS ZONING DATA
================================================================================
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. Some of the bulk regulations of this district are as
follows:
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APPRAISAL GROUP International
<PAGE>
BACKGROUND DATA & ANALYSIS ZONING DATA
================================================================================
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.
-65-
APPRAISAL GROUP International
<PAGE>
[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.]
<PAGE>
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:
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
-67-
APPRAISAL GROUP International
<PAGE>
[Graphic material omitted. This graphic depicts a floor plan of the Taj Mahal
Casino Resort.]
<PAGE>
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.
4. The use must return the greatest profit for the longest period,
considering all alternatives.
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APPRAISAL GROUP International
<PAGE>
Background Data & Analysis Highest & Best Use Analysis
================================================================================
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:
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APPRAISAL GROUP International
<PAGE>
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.
-71-
APPRAISAL GROUP International
<PAGE>
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.
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
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APPRAISAL GROUP International
<PAGE>
Background Data & Analysis Highest & Best Use Analysis
================================================================================
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 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
-73-
APPRAISAL GROUP International
<PAGE>
Background Data & Analysis Highest & Best Use Analysis
================================================================================
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.
-74-
APPRAISAL GROUP International
<PAGE>
VALUATION AND CONCLUSIONS
APPRAISAL GROUP International
<PAGE>
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.
-75-
APPRAISAL GROUP International
<PAGE>
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 cured, but the cost, in
relation to its contribution to value, is the measure of whether it is curable.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Valuation Method
================================================================================
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. 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
-77-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Valuation Method
===============================================================================
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.
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<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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
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:
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
===============================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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 Hotel and Casino. In April 1990, the
Taj Mahal opened its 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 -- -- -- 60,000 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 Mahal -- -- -- -- -- -- -- -- 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%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
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.
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.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
===============================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
===============================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
===============================================================================
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.
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.
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APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
===============================================================================
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 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.
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<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
<TABLE>
<CAPTION>
1982 CASINO FAIR MARKET MARKET 1985 CASINO FAIR MARKET MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
AREA 427,087 AREA 578,467
================================================================ ===============================================================
<CAPTION>
1983 CASINO FAIR MARKET MARKET 1986 CASINO FAIR MARKET MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
================================================================ ===============================================================
<CAPTION>
1984 CASINO FAIR MARKET MARKET 1987 CASINO FAIR MARKET MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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% 94.83% 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
================================================================ ===============================================================
</TABLE>
-87-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
<TABLE>
<CAPTION>
1988 CASINO FAIR ACTUAL MARKET 1991 CASINO FAIR ACTUAL MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 Plaza 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
================================================================ ===============================================================
<CAPTION>
1989 CASINO FAIR ACTUAL MARKET 1992 CASINO FAIR ACTUAL MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Resorts 227,144,000 60,000 8.58% 8.10% 94.41% Resorts 236,181,000 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% 133.60%
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
================================================================ ===============================================================
<CAPTION>
1990 CASINO FAIR ACTUAL MARKET 1993 CASINO FAIR ACTUAL MARKET
PROPERTY CASINO WIN AREA SHARE SHARE SHARE PROPERTY CASINO WIN AREA SHARE SHARE SHARE
- -------- ---------- ------ ----- ------ ------ -------- ---------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 Grand 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 Castle 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
================================================================ ===============================================================
</TABLE>
-88-
APPRAISAL GROUP International
<PAGE>
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.
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%
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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.
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.
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Valuation & Conclusions Capitalization of Income Approach
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*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:
Historical Casino Revenue Growth
- --------------------------------
The table on the following page illustrates historical growth rates for the
casino industry from 1978 through 1992;
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Valuation & Conclusions Capitalization of Income Approach
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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:
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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% $5,067,078,375
Future Casino Supply
- ----------------------
The next consideration in estimating market share for the subject property is
the likelihood of other casinos coming on line in the future. This factor will
have a negative impact on casino revenues for the subject property as additional
casino floor area dilutes market share for the entire industry. Based upon the
current economic conditions, the current problems in the banking system and
financial markets, we do not anticipate any additional casino properties to be
built over the next 11 years. Our market share estimation for the property
follows.
REVENUES:
- --------
Casino
- ------
Market Share Estimation
- -----------------------
Casino revenue will be estimated based upon fair share of industry-wide casino
win. However, to further refine the analysis and to provide a more realistic
approach to estimating revenue for the subject property, we assessed the
subject's competitive position in the market.
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Such a comparison considers the subject property's inherent advantages and
disadvantages in relation to the competition. These factors influence the
market penetration (market share) that a property could achieve above or below
100% of its fair share. The subject's historical market share is listed below.
<TABLE>
<CAPTION>
($ In Thousands) 1990 1991 1992 1993
<S> <C> <C> <C> <C>
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%
</TABLE>
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.
<TABLE>
<CAPTION>
TOTAL FAIR PENE- MARKET ESTIMATED
PROJECTED TOTAL INDUSTRY CASINO SHARE TRATION SHARE GROSS ESTIMATED GROSS
PERIOD YEAR GROWTH WIN SPACE % % % INCOME INCOME / SQ. FT.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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================================================================================
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.
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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 $ 40,294 $ 19,489 $ 40,767
-------- -------- -------- --------
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
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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:
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.
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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.
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
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Valuation & Conclusions Capitalization of Income Approach
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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.
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:
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APPRAISAL GROUP International
<PAGE>
VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 1 % Year 2 %
- -------- ---------- ---- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF REV. REVENUE REVENUE
- --------------------- --------- --------- ------- -------
Casino 44.41% $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 96.59% $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) -------- ------ -------- ------ -------- ------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $97.00 $100.88
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
<PAGE>
VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 3 % Year 4 %
- -------- ---------- ---- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF REV. REVENUE REVENUE
- --------------------- --------- --------- ------- -------
Casino 44.41% $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 96.59% $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
AVERAGE ROOM RATE $96.57 $104.92 $109.11
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
<PAGE>
VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH
==============================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 5 % Year 6 %
- -------- ---------- ---- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF 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) -------- ------ -------- ------- -------- -------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $113.48 $118.02
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
<PAGE>
VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 7 % Year 8 %
- -------- ---------- ---- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
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% $681,678 91.28%
------ -------- ------
% of % of
TOTAL TOTAL
DEPARTMENTAL EXPENSES % OF REV. % OF 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) -------- ------ -------- ------- -------- -------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $122.74 $127.65
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
<PAGE>
VALUATIONS & CONCLUSIONS CAPITALIZATION OF INCOME APPROACH
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /---------------------------Projected--------------------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 9 % Year 10 % Year 11 %
- -------- ---------- ---- ------ ------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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. % OF 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% $225,914 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) -------- ------ -------- ------- -------- ------- -------- -------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $132.75 $138.06 $143.58
% INCREASE IN ADR - 4.00% 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750 419,750
</TABLE>
-101-
APPRAISAL GROUP INTERNATIONAL
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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.
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.
-101-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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 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.
-102-
APPRAISAL GROUP International
<PAGE>
Valuations & Conclusions Capitalization of Income Approach
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 1 % Year 2 %
- -------- ---------- ---- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF REV. REVENUE REVENUE
- --------------------- --------- --------- ------- -------
Casino 44.41% $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 96.59% $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) -------- ------ -------- ------ -------- ------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $97.00 $100.88
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
Valuations & Conclusions Capitalization of Income Approach
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 3 % Year 4 %
- -------- ---------- ---- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF REV. REVENUE REVENUE
- --------------------- --------- --------- ------- -------
Casino 44.41% $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 96.59% $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
AVERAGE ROOM RATE $96.57 $104.92 $109.11
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
(continued on next page)
Valuations & Conclusions Capitalization of Income Approach
================================================================================
Prepared by: TRUMP TAJ MAHAL CASINO RESORTS
APPRAISAL GROUP International CASH FLOW PROJECTION
($000) ------------------------------
<TABLE>
<CAPTION>
/--Actual---\ /--------------Projected--------------\
- -------\
1993 Growth
REVENUES (Unaudited) Rate Year 5 % Year 6 %
- -------- ---------- ---- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
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. % OF 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) -------- ------ -------- ------- -------- -------
OCCUPANCY (%) - 1993 ACTUAL 92.30% 92.00% 92.00%
AVERAGE ROOM RATE $96.57 $113.48 $118.02
% INCREASE IN ADR - 4.00% 4.00%
NUMBER OF ROOMS 1,250 1,250 1,250
TOTAL ROOMS OCCUPIED 421,268 419,750 419,750
</TABLE>
-103-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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.
-104-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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 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
-105-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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.
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.
-106-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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
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
-107-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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 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.
-108-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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 tracking 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.
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
-109-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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
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.
-110-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
A recent survey indicates that investors active in the market employ terminal
rates from 8.00% to 11.00%.
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
-112-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
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
- Reversion value as projected
At a 15.00% rate of return, our discounted cash flow calculations appear on the
following page.
-113-
APPRAISAL GROUP International
<PAGE>
Valuation & Conclusions Capitalization of Income Approach
================================================================================
<TABLE>
<CAPTION>
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
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
====================
</TABLE>
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
-114-
APPRAISAL GROUP International
<PAGE>
ADDENDA
APPRAISAL GROUP International
<PAGE>
APPENDIX I
Subject Property Photographs
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
HOSPITALITY SUITE #1417
[PHOTO]
LANAI SUITE #1443
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
LANAI SUITE #1444 - CORNER UNIT
[PHOTO]
TYPICAL ROOM #4602
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
RAJA SUITE #4617
[PHOTO]
RAJA SUITE #4617
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
RAJA SUITE #4617
[PHOTO]
KING ROOM #4621
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
SUITE #4812
[PHOTO]
SUITE #4812
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
VICEROY SUITE #4623
[PHOTO]
46TH FLOOR ELEVATOR BANK
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
46TH FLOOR LOBBY
[PHOTO]
SULTAN SUITE #4811
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
SULTAN SUITE #4811
[PHOTO]
SULTAN SUITE #4811
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
51ST FLOOR ELEVATOR BANK
[PHOTO]
51ST FLOOR HALLWAY
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
MICHELANGELO SUITE
[PHOTO]
MICHELANGELO SUITE
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
MICHELANGELO SUITE
[PHOTO]
MICHELANGELO SUITE
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
ALEXANDER THE GREAT SUITE - GUEST BEDROOM
[PHOTO]
ALEXANDER THE GREAT SUITE - DINING ROOM
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
ALEXANDER THE GREAT SUITE - GENERAL VIEW
[PHOTO]
ALEXANDER THE GREAT SUITE - BATHROOM
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
ALEXANDER THE GREAT SUITE - LIVING ROOM
[PHOTO]
ALEXANDER THE GREAT SUITE - JACUZZI
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
ALEXANDER THE GREAT SUITE - BATHROOM AND EXERCISE ROOM
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
VIEW FROM PACIFIC AVENUE
[PHOTO]
PARKING GARAGE
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
VIEW OF THE SUBJECT FROM THE BOARDWALK
[PHOTO]
STEEL PIER
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
CLOSE-UP VIEW OF THE TOWER
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
VIEW ALONG THE BOARDWALK
[PHOTO]
VIEW ALONG THE BOARDWALK
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
MAIN ENTRANCE AND PORTE COCHERE
[PHOTO]
HOTEL LOBBY AND FRONT DESK
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
2ND LEVEL PROMENADE TOWARDS THE BOARDWALK
[PHOTO]
ESCALATORS TO 2ND LEVEL
APPRAISAL GROUP Interanational
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
RETAIL SHOPS ON 2ND LEVEL
[PHOTO]
RETAIL SHOPS ON 2ND LEVEL
APPRAISAL GROUP International
<PAGE>
Addenda Subject Property Photographs
================================================================================
[PHOTO]
THE SPA AT THE TAJ
[PHOTO]
MARK G. ETESS ARENA
APPRAISAL GROUP International
<PAGE>
APPENDIX II
Floor Plans
APPRAISAL GROUP International
<PAGE>
[FLOOR PLAN]
FIRST LEVEL PLAN OF TAJ MAHAL CASINO RESORT
<PAGE>
[FLOOR PLAN]
FIRST LEVEL MEZZANINE OF TAJ MAHAL CASINO RESORT
<PAGE>
[FLOOR PLAN]
SECOND LEVEL PLAN OF TAJ MAHAL CASINO RESORT
<PAGE>
[FLOOR PLAN]
SECOND LEVEL MEZZANINE OF TAJ MAHAL CASINO RESORT
<PAGE>
[FLOOR PLAN]
5TH LEVEL OF TAJ MAHAL CASINO RESORT
<PAGE>
TRUMP TAJ MAHAL CASINO* RESORT
OPERATING REVIEW PACKAGE
DECEMBER 1993
<PAGE>
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
<PAGE>
TAJ MAHAL CASINO AND RESORT
MARKET SHARE ANALYSIS
OPERATING REVIEW
FOR THE MONTH ENDED DECEMBER 1993
<TABLE>
<CAPTION>
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
- -------- ----- ------- -------------- ---- -------------- ---- ------- ------- ------------ ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
1993 1992
TABLE TABLE
WIN WIN 1993 1992
MKT MKT HOLD HOLD
PROPERTY RANK SHARE % SHARE % % %
- -------- ---- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
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% 15.5% 14.9%
% change from last year
</TABLE>
<TABLE>
<CAPTION>
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
- -------- ----- ------- -------------- ---- -------------- ---- ------- ------- ------------ ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
1993 1992
SLOT SLOT
WIN WIN 1993 1992
MKT MKT HOLD HOLD
PROPERTY RANK SHARE % SHARE % % %
- -------- ---- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
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
</TABLE>
1
<PAGE>
TAJ MAHAL CASINO AND RESORT
MARKET SHARE ANALYSIS
OPERATING REVIEW
YEAR TO DATE DECEMBER 1993
<TABLE>
<CAPTION>
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
- ---------- ----- ----- --------------- ---- -------------- ---- ------- ------- -------------- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
1993 1992
TABLE TABLE
WIN WIN 1993 1992
MKT MKT HOLD HOLD
PROPERTY RANK SHARE % SHARE % % %
- ---------- ---- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
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
- -------- ----- ------- --------------- ---- --------------- ---- ------- ------- -------------- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
1993 1992
SLOT SLOT
WIN WIN 1993 1992
MKT MKT HOLD HOLD
PROPERTY RANK SHARE % SHARE % % %
- -------- ---- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
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
</TABLE>
2
<PAGE>
TAJ MAHAL CASINO AND RESORT
MARKET SHARE ANALYSIS
OPERATING REVIEW
FOR THE MONTH ENDED DECEMBER 1993
<TABLE>
<CAPTION>
TOTAL GROWTH TABLE GROWTH SLOT GROWTH
1993 1992 OVER LAST YEAR OVER LAST YEAR OVER LAST YEAR
PROPERTY TOTAL WIN RANK TOTAL WIN RANK $ % $ % $ %
- -------- ------------ ---- ------------ ---- ----------- ---- ---------- ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
TAJ MAHAL CASINO AND RESORT
MARKET SHARE ANALYSIS
OPERATING REVIEW
<TABLE>
<CAPTION>
TOTAL GROWTH TABLE GROWTH SLOT GROWTH
1993 1992 OVER LAST YEAR OVER LAST YEAR OVER LAST YEAR
PROPERTY TOTAL WIN RANK TOTAL WIN RANK $ % $ % $ %
- -------- -------------- ---- -------------- ---- ----------- ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
3
<PAGE>
TAJ MAHAL CASINO AND RESORT
OPERATING REVIEW - POKER & SIMULCASTING
FOR THE MONTH ENDED DECEMBER 1993
<TABLE>
<CAPTION>
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
- -------- ----- -------- ----- ---- ------- --------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
<CAPTION>
1993 1993 1993 1993 1993 1993 Y-T-D
SIMULCAST MKT SIMULCAST MKT HOLD SIMULCAST
PROPERTY HANDLE RANK SHARE % REVENUE RANK SHARE % % REVENUE RANK
- -------- --------- ---- ------- --------- ---- ------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TRUMP TAJ MAHAL ASSOCIATES
(UNAUDITED)
STATEMENT OF OPERATIONS
DECEMBER 1993
CURRENT PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
THIS YEAR VS BUDGET THIS YR VS LAST YR
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL BUDGET VAR $ VAR % LAST VAR $ VAR % DESCRIPTION
YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <S>
15,032,138 13,290,807 1,741,531 13.1 11,953,332 3,078,806 25.0 TABLE GAMES
18,037,015 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 10.9 3,785,508 839,146 22.2 FOOD & BEVERAGE
433,907 239,000 194,907 8.81 409,620 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 10.1 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) (17.0) COST OF GOODS SOLD
3,070,063 2,993,204 (76,059) (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 (147,363) (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) (24.3) WRITE-DOWN ON PURCHASE OF__
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 EBITDA
3,159,736 3,825,159 (134,277) (4.4) 3,089,597 (70,139) (2.3) DEPRECIATION &
AMORTIZATION
10,509,754 9,257,300 (1,252,454) (13.5) 9,425,517 __________ (11.5) INTEREST
(7,148,941) (7,953,650) 804,709 10.1 (7,330,706) 101,846 2.5 INC (LOSS)--EXTRA ITEMS
(7,148,941) (7,953,650) 804,709 10.1 (7,330,706) 181,846 2.5 NET INCOME (LOSS)
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
STATEMENT OF OPERATIONS
DECEMBER 1993
CURRENT PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
THIS YEAR VS BUDGET THIS YR VS LAST YR
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACTUAL BUDGET VAR $ VAR % LAST VAR $ VAR %
YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TABLE GAMES 173,432,274 167,291,439 5,140,835 3.7 169,112,174 4,328,101 2.0
SLOTS 260,284,093 248,838,866 12,245,227 4.9 244,933,258 15,358,835 6.0
POKER 7,519,644 0 7,519,644 .0 0 7,519,644 .0
SIMULCASTING 828,259 0 828,259 .0 0 828,259 .0
TOTAL GAMING REVENUE 142,064,270 415,330,305 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 (361,687) (.9)
FOOD & BEVERAGE 55,953,248 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 (1,025,583) (21.0)
OTHER 14,247,134 11,562,828 2,684,386 23.2 12,564,114 1,683,019 13.0
TOTAL OTHER 114,673,159 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 24,812,161 4.0
PROMOTIONAL ALLOWANCE 556,444,174 (60,921,993) 4,477,819 7.4 (61,249,526) 4,885,352 7.0
NET REVENUE 500,293,255 468,053,110 31,440,145 6.7 470,675,742 29,617,513 6.0
EXPENSES
PAYROLL & BENEFITS 162,001,025 160,901,461 (1,179,564) (.7) 155,959,017 (6,122,008) (3.9)
COST OF GOODS SOLD 22,051,847 23,478,979 627,132 2.7 23,425,233 573,885 2.5
COIN/TABLE COUPONS 39,759,990 38,778,818 (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) (20._)
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 13.9 17,137,777 749,783 4._
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 PURCHASE OF__ 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
EBIDTA 122,697,428 92,541,144 38,156,284 32.6 105,338,097 17,354,323
DEPRECIATION & 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)
INC (LOSS)--EXTRA ITEMS (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
</TABLE>
5
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
PROPERTY OPERATING STATEMENT OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER
1993
<TABLE>
<CAPTION>
PRIOR YEAR--
CURRENT YEAR--CURRENT MONTH CURRENT MONTH
- -------------------------------------- ------------------ ---------------------------------
ACTUAL PLAN ACTUAL DESCRIPTION
- ------------------ ------------------ ------------------ ---------------------------------
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE PRIOR-YEAR-TO-DATE
- --------------------------------- --------------------------------------------------------------
DESCRIPTION ACTUAL PLAN ACTUAL
- --------------------------------- ------------------- -------------------- --------------------
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
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)
</TABLE>
6
<PAGE>
TRUMP TAJ MAHAL CASINO RESORT
OPERATING REVIEW
KEY STATISTICS
DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT MONTH LAST YEAR CURRENT MONTH
ACT vs PLAN THIS YEAR vs LAST
YEAR
VAR VAR VAR VAR
ACTUAL PLAN $ % ACTUAL $ %
<S> <C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
YEAR-TO-DATE PRIOR YEAR-TO-DATE
ACT vs PLAN
VAR VAR VAR VAR
ACTUAL PLAN $ % ACTUAL $ %
<S> <C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
7
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
GAMING SUMMARY
OPERATING REVIEW
FOR THE PERIOD ENDEDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MTH
ACTUAL PLAN ACTUAL DESCRIPTION
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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
53,449 .2 63,490 .2 40,767 .1 THE CLUB
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
<CAPTION>
YEAR-TO-DATE PRIOR-YEAR-TO-DATE
DESCRIPTION ACTUAL PLAN ACTUAL
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
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 19?,488 .0 176,427 .4 112,705 .0
ALL OTHER OPEATING EXPENSES 4,54?,370 1.0 2,947,860 .7 4,900,016 1.2
SUBTOTAL 65,840,041 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 194,625,582 44.9 165,995,670 40.0 173,406,527 41.9
</TABLE>
8
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
TABLE SUMMARY OPERATING REVIEW FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
PRIOR YEAR--
CURRENT YEAR--CURRENT MONTH CURRENT MONTH
--------------------------- ------------- ------------------------------
ACTUAL PLAN ACTUAL DESCRIPTION
------ ---- -------------- ------------------------------
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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 T&E 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
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE PRIOR-YEAR-TO-DATE
- ------------------------------ ----------------- ------------------ ------------------
DESCRIPTION ACTUAL PLAN ACTUAL
- ------------------------------ ----------------- ------------------ ------------------
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
9
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
GAMING SUMMARY FOR TAJ MAHAL
FOR DECEMBER 1993
<TABLE>
<CAPTION>
Current Period Description Year-To-Date
Current Year Prior Year % Change Current Year Prior Year % Change
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
REPORT NUMBER TABLE
RUM DATE 01/13/94
10
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
SLOT SUMMARY
OPERATING REVIEW
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
Current Year-Current Month Prior Yr-Current Mth
Actual Plan Actual Description
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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
498,056 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 3.4 251,038 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 T&E 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/Shorts & 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
<CAPTION>
Year-To-Date Prior-Year-To-Date
Actual Plan Actual
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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 32,082,367 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 T&E 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/Shorts & 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
</TABLE>
11
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
SLOT SUMMARY FOR TAJ MAHAL
FOR DECEMBER 1993
<TABLE>
<CAPTION>
Current Period Year-To-Date
Current Year Prior Year % Change Description Current Year Prior Year % Change
<S> <C> <C> <C> <C> <C> <C>
$ .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
8,137 7,682 Win/Unit 9,411 9,648
$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
</TABLE>
NOTE THAT THE YTD NUMBERS FOR 1990 REFLECT TOTALS AS OF APRIL 2, 1990.
12
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
FOOD SUMMARY
OPERATING REVIEW
FOR THE PERIOD ENDING DECEMBER 1993
<TABLE>
<CAPTION>
Current Year-Current Month Prior Yr-Current Mth
Actual Plan Actual Description
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
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 60,127 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/Stem 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
</TABLE>
<TABLE>
<CAPTION>
Year-To-Date Prior-Year-To-Date
Description Actual Plan Actual
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <C>
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/Stem 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,?79) (1.2)
</TABLE>
13
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
FOOD COVERS BY OUTLET
OPERATING REVIEW
FOR THE PERIOD ENDING DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MONTH
ACTUAL PLAN VARIANCE ACTUAL VARIANCE DESCRIPTION
$ % $ %
<C> <C> <C> <C> <C> <C> <C> <S>
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 3,880 (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 4,880 (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
</TABLE>
<TABLE>
<CAPTION>
Year-To-Date Prior-Year-To-Date
DESCRIPTION Actual Plan Variance Actual Variance
$ % $ %
OUTLET
<S> <C> <C> <C> <C> <C> <C> <C>
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 3,043,855 4,391,435 (547,580) (12.47) 4,289,039 (445,184) 10.?
</TABLE>
14
<PAGE>
REPORT NUMBER 15225 TRUMP TAJ MAHAL ASSOCIATES
RUN DATE 01/13/94 AVERAGE CHECK BY OUTLET
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH PRIOR YEAR-CURRENT MONTH
ACTUAL PLAN VARIANCE ACTUAL VARIANCE DESCRIPTION
$ % $ %
<C> <C> <C> <C> <C> <C> <C> <S>
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 CAFE
$ 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
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE PRIOR YEAR-TO-DATE
ACTUAL PLAN VARIANCE ACTUAL VARIANCE
$ % $ %
<C> <C> <C> <C> <C> <C> <C>
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 CAFE $ 10.06 $ 18.24 $ (.19) (1.86) $ 18.26 $ (.21) (2.05)
SUB AVERAGE VOLUME $ 8.15 $ 8.08 $ .08 .99 $ 8.16 $ (.81) (.12)
MARCO POLO $ 30.31 $ 28.04 $ 2.27 8.18 $ 28.37 $ 1.94 6.84
SINBAD'S $ 31.16 $ 31.46 $ (.38) (.95) $ 31.88 $ (.73) (2.29)
DYNASTY $ 35.00 $ 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 $ 33.00 $ 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 $ 10.42 $ .40 3.84 $ 18.68 $ .22 2.88
</TABLE>
15
<PAGE>
REPORT NUMBER 15300
RUN DATE 01/13/94
TRUMP TAJ MAHAL ASSOCIATES
BEVERAGE SUMMARY
OPERATES REVIEW
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MTH YEAR-TO-DATE PRIOR-YEAR-TO-DATE
ACTUAL PLAN ACTUAL DESCRIPTION ACTUAL PLAN ACTUAL
$ % $ % $ % $ % $ % $ %
<C> <C> <C> <C> <C> <C> <S> <C> <C> <C> <C> <C> <C>
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
0 .0 0 .0 0 .0 OTHER REVENUE 0 .0 0 .0 0 .0
1,855 .1 0 .0 631 .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
0 .0 1,875 .1 0 .0 COMPS 0 .0 12,980 .1 10,057 .1
6,962 .6 6,308 .7 7,909 .0 GLASSWARE 69,587 .4 79,700 .6 88,577 .4
24,162 2.0 16,225 1.7 0 .0 RESTAURANT SUPPLIES 259,664 1.9 200,700 1.5 19,642 .1
8 .0 15,001 1.6 0 .0 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
</TABLE>
16
<PAGE>
REPORT NUMBER 15400 TRUMP TAJ MAHAL ASSOCIATES
RUN DATE 01/13/94 LODGING SUMMARY
OPERATING REVIEW
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH PRIOR YR-CURRENT MONTH
ACTUAL PLAN ACTUAL DESCRIPTION
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE PRIOR YEAR-TO-DATE
ACTUAL PLAN ACTUAL DESCRIPTION
$ % $ % $ %
<C> <C> <C> <C> <C> <C> <S>
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
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
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%
<S> <C> <C> <C> <C> <C> <C> <C>
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% 14.5 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%
========== ========== ========== ========== ========
</TABLE>
<TABLE>
CASINO BLOCK ANALYSIS
<S> <C>
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%
</TABLE>
<TABLE>
<CAPTION>
BLOCK % OF
OCCUPIED OCCUP.
RMS % ROOMS
-------------------
<S> <C> <C> <C>
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%
===========================
</TABLE>
18
<PAGE>
13-Jan-94 TRUMP TAJ MAHAL CASINO* RESORT
ROOM OCCUPANCY ANALYSIS
FOR THE YEAR ENDED DECEMBER 1993
<TABLE>
<CAPTION>
ACTUAL PLAN VARIANCE VAR% PRIOR YEAR VARIANCE VAR%
<S> <C> <C> <C> <C> <C> <C> <C>
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% 68.94 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 ($361,694) -0.9%
=========== =========== ========= =========== =========
</TABLE>
<TABLE>
CASINO BLOCK ANALYSIS
<S> <C>
TOTAL ROOMS AVAILABLE 456,250
TOTAL OCCUPIED ROOMS 421,268
CASINO BLOCK 201,492
ROOM COMPS:
CASINO COMPS 164,974
ADMINISTRATIVE COMPS 10,976
OTHER COMPS 1,312
-------
TOTAL ROOM COMPS 177,262
=======
% BLOCK OCCUPIED 81.9%
% BLOCK/TOTAL ROOMS AVAILABLE 44.2%
% BLOCK/TOTAL OCCUPIED ROOMS 47.8%
% BLOCK OCCUPIED/OCCUPIED ROOMS 39.2%
% BLOCK OCCUPIED/ROOMS AVAILABLE 36.2%
</TABLE>
<TABLE>
<CAPTION>
BLOCK % OF
OCCUPIED OCCUP.
RMS % ROOMS
------------------
<S> <C> <C> <C>
ROOM 84,990 90.4% 41.2%
RLFB 19,525 20.8% 9.5%
RFB 59,656 63.4% 28.9%
RFBI 803 0.9% 0.4%
- --------------------------
TOTAL 164,974 175.4% 80.0%
==========================
</TABLE>
19
<PAGE>
Report Number 15670
RUN DATE 01/13/94
TRUMP TAJ MAHAL ASSOCIATES
FACILITY OPERATIONS SUMMARY
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH
DESCRIPTION
ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR
<C> <C> <C> <C> <C> <C> <C> <S>
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
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION YEAR-TO-DATE PRIOR-YEAR-TO-DATE
ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR%
<C> <C> <C> <C> <C> <C> <C>
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) ??
</TABLE>
20
<PAGE>
Report Number 15675
RUN DATE 01/13/94
TRUMP TAJ MAHAL ASSOCIATES
FIXED EXPENSES SUMMARY
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH
ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR DESCRIPTION
<C> <C> <C> <C> <C> <C> <C> <S>
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
<CAPTION>
YEAR-TO-DATE PRIOR-YEAR-TO-DATE
DESCRIPTION ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR%
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
21
<PAGE>
Report Number 15400
RUN DATE 01/13/94
TRUMP TAJ MAHAL ASSOCIATES
GENERAL & ADMINISTRATIVE SUMMARY
FOR THE PERIOD ENDED DECEMBER 1993
<TABLE>
<CAPTION>
CURRENT YEAR-CURRENT MONTH LAST YEAR-CURRENT MONTH
ACTUAL PLAN VAR$ VAR% ACTUAL THIS YR VS LAST YR DESCRIPTION
<C> <C> <C> <C> <C> <C> <C> <S>
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
<CAPTION>
YEAR-TO-DATE PRIOR-YEAR-TO-DATE
DESCRIPTION ACTUAL PLAN VAR$ VAR% ACTUAL VAR$ VAR%
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
22
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
OPERATING REVIEW
MONTHLY LABOR COMPARISON
<TABLE>
<CAPTION>
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
'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 4,806 182,793 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)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVG WKLY
GROSS
MONTH WKS REVENUE
================================================
<S> <C> <C> <C>
'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
Variance - '93 vs '92 -
Current Month 1,490,618
Favorable/(Unfavorable) ---
- -------------------------------------------------
</TABLE>
* = 1 Holiday
Prepared By: Pam McGroggan
23
<PAGE>
APPENDIX IV
Property Real Estate Tax Assessment
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
1994 REAL ESTATE ASSESSMENT
<TABLE>
<CAPTION>
ADDRESS BLOCK LOT LAND IMPROVEMENTS 1993 TOTAL LAND IMPROVEMENTS 1994 TOTAL CHANGE
ASSESSED ASSESSED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)
</TABLE>
- --------------
(1) Demo of Soc. Sec. Bldg.
<PAGE>
APPENDIX V
Economic Indicators
APPRAISAL GROUP International
<PAGE>
- --------------------------------------------------------------------------------
NATIONAL MORTGAGE COMMITMENT SURVEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
- ------------------ ------ ----------- ----- ----- --------- ------------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily 6 29 8.06 8.58 8.31 15-30 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
</TABLE>
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REGIONAL MALL OFFICE INDUSTRIAL
---------------------------- ---------------------------- ----------------------------
Current Last Current Last Current Last
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
APARTMENT
----------------------------
Current Last
Qtr. Qtr.
- ------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------
</TABLE>
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.; 50 Route
111, Suite 303; Smithtown, NY 11787-3713. (516) 979-9465.
--------------
APPRAISER NEWS
February 1994
14
<PAGE>
- --------------------------------------------------------------------------------
ECONOMIC INDICATORS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOV. MAY NOV. MAY NOV. NOV.
1993 1993 1992 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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
<CAPTION>
3rd Qtr. 1st Qtr. 3rd Qtr. 1st Qtr. 3rd Qtr.
1993 1993 1992 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Capita Personal Disposable
Income++--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
<CAPTION>
CONVENTIONAL HOME MORTGAGE TERMS
- --------------------------------
(SOURCE: FEDERAL HOUSING FINANCE BOARD) NOV. MAY NOV.
1993 1993 1992
---- ---- ----
<S> <C> <C> <C>
NEW HOUSE LOANS--U.S. AVERAGES
Interest rate (%)................... 6.80 7.37 8.07
Term (years)........................ 26.9 26.9 24.9
Loan ratio (%)...................... 79.1 79.5 75.3
Price (thou. $)..................... 174.4 153.1 165.4
USED HOUSE LOANS--U.S. AVERAGES
Interest rate (%)................... 6.77 7.30 7.77
Term (years)........................ 26.1 24.5 24.9
Loan ratio (%)...................... 76.7 77.8 75.7
Price (thou. $)..................... 141.5 129.8 140.2
<CAPTION>
CONVENTIONAL HOME MORTGAGE RATES
BY METROPOLITAN AREA (%)++ 3RD QTR. 2ND QTR. 3RD QTR.
1993 1993 1992
-------- --------- --------
<S> <C> <C> <C>
Atlanta............................. 7.03 7.26 8.09
Baltimore........................... N/A 7.35 7.92
Boston-Lawrence-Salem-NH............ 7.14 7.40 8.17
Chicago-Gary-Lake County............ 7.08 7.39 8.09
Cleveland-Akron-Lorain.............. 7.00 7.33 8.00
Dallas-Fort Worth................... 7.00 7.12 7.73
Denver-Boulder...................... 6.76 7.52 7.83
Detroit-Ann Arbor................... 7.16 7.52 7.95
Greensboro-Winston-Salem............ 7.04 7.36 7.87
Honolulu............................ 6.41 6.16 6.34
Houston-Galveston-Brazoria.......... 7.11 7.28 8.02
Indianapolis........................ 7.22 7.44 8.00
Kansas City, MO-KS.................. 6.94 7.23 8.11
Los Angeles-Anaheim-Riverside....... 6.47 6.71 7.31
Louisville-IN....................... 7.28 7.46 8.10
Miami-Fort Lauderdale............... 6.87 7.03 7.94
Milwaukee-Racine.................... 7.05 7.54 8.04
Minneapolis-St. Paul-WI............. 7.11 7.24 7.97
New York-Long Island-N. NJ-CT....... 7.12 7.45 8.20
Philadelphia-Wilmington-Trenton..... 7.05 7.34 8.09
Phoenix............................. 7.26 7.32 7.74
Pittsburg-Beaver Valley............. 7.06 7.24 8.07
Portland-Vancouver.................. 7.01 6.99 7.66
St. Louis-IL........................ 7.02 7.36 7.93
San Diego........................... 6.42 6.74 7.19
San Francisco-Oakland-San Jose...... 6.37 6.63 7.39
Seattle-Tacoma...................... 7.02 6.88 7.84
Tampa-St. Petersburg-Clearwater..... 7.12 7.30 8.10
Washington, DC-MD-VA................ 6.94 7.16 7.78
</TABLE>
# Seasonally adjusted
* Source: The Wall Street Journal
+ Source: Moody's Bond Survey
++ Revised figures used when available
--------------
APPRAISER NEWS
February 1994
15
<PAGE>
- -------
KORPACZ
- -------
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 buyers'
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 which 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, DC, Atlanta, Charlotte, and Chicago were selected as cities
offering the best overall conditions for hotel investment in 1994.
<PAGE>
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
18
- ------------------
FIRST QUARTER 1994
- ------------------
<PAGE>
- -------
KORPACZ
- -------
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 even 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.
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:
<TABLE>
<CAPTION>
Type Range Average
<S> <C> <C>
Full-Service 2.0%-4.0% 3.0%
Economy/Limited-Service 2.0%-5.0% 3.6%
Luxury 1.5%-4.0% 2.5%
</TABLE>
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.
19
-----------------------------------
KORPACZ REAL ESTATE INVESTOR SURVEY
-----------------------------------
<PAGE>
- -------
KORPACZ
- -------
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
- ------------------
FIRST QUARTER 1994
- ------------------
<PAGE>
TABLE 12
NATIONAL FULL-SERVICE HOTEL MARKET
FIRST QUARTER 1994
<TABLE>
<CAPTION>
KEY INDICATORS CURRENT QUARTER LAST QUARTER YEAR AGO
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
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 /a/
- --------------------------------------------------------------------------------
RANGE 1.00%-6.00% 1.00%-5.00%
AVERAGE 3.29% 2.78%
CHANGE (Basis Points) - +51
- --------------------------------------------------------------------------------
Operating Expense Chg. Rate /a/
- --------------------------------------------------------------------------------
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
</TABLE>
/a./ initial rates of change
<PAGE>
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
- ------------------
FIRST QUARTER 1994
- ------------------
<PAGE>
Table 14
NATIONAL LUXURY HOTEL MARKET
FIRST QUARTER 1994
<TABLE>
<CAPTION>
CURRENT LAST YEAR
KEY INDICATORS QUARTER QUARTER AGO
- ------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
KORPACZ
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.
<TABLE>
<CAPTION>
EQUITY
EQUITY CAP
CHANGE RATES RESIDUAL IRRs RATES
-------------------------------------------------------------------------------
Average Daily Operating Cap Year Selling Free & Free &
Rate Expenses Rate Capped Expense Clear Clear
<S> <C> <C> <C> <C> <C> <C> <C>
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 to to
Interested in East Coast and Midwest; 3.5% to 4.0% 5.0% 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% 14.00%
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.
</TABLE>
<TABLE>
<CAPTION>
GROSS ROOMS RESERVE FOR
REVENUE MANAGEMENT REPLACEMENT OF MARKETING
MULTIPLIER FEES FIXED ASSETS TIME
----------------------------------------------------------
Percent of
Total
GRRM Base Fee % Revenues Months
<S> <C> <C> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY
EQUITY CAP
CHANGE RATES RESIDUAL IRRs RATES
-------------------------------------------------------------------------------
Average Daily Operating Cap Year Selling Free & Free &
Rate Expenses Rate Capped Expense Clear Clear
<S> <C> <C> <C> <C> <C> <C> <C>
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 to 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% 11.00% 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.
</TABLE>
<TABLE>
<CAPTION>
GROSS ROOMS RESERVE FOR
REVENUE MANAGEMENT REPLACEMENT OF MARKETING
MULTIPLIER FEES FIXED ASSETS TIME
----------------------------------------------------------
Percent of
Total
GRRM Base Fee % Revenues Months
<S> <C> <C> <C> <C>
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.
</TABLE>
32
<PAGE>
KORPACZ
NATIONAL LUXURY HOTEL MARKET
INVESTOR SURVEY RESPONSES
FIRST QUARTER 1994
Source: Personal survey conducted by
Cooper & Lybrand during January 1994.
<TABLE>
<CAPTION>
EQUITY
EQUITY CAP
CHANGE RATES RESIDUAL IRRs RATES
-------------------------------------------------------------------------------
Average Daily Operating Cap Year Selling Free & Free &
Rate Expenses Rate Capped Expense Clear Clear
<S> <C> <C> <C> <C> <C> <C> <C>
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 to to to
Prefers West Coast and Southeast U.S. and parts 3.5% 10.00% 11 14.00% 12.00%
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
preference 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
on 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 to 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.
</TABLE>
<TABLE>
<CAPTION>
GROSS ROOMS RESERVE FOR
REVENUE MANAGEMENT REPLACEMENT OF MARKETING
MULTIPLIER FEES FIXED ASSETS TIME
----------------------------------------------------------
Percent of
Total
GRRM Base Fee % Revenues Months
<S> <C> <C> <C> <C>
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
preference 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY
EQUITY CAP
CHANGE RATES RESIDUAL IRRs RATES
-------------------------------------------------------------------------------
Average Daily Operating Cap Year Selling Free & Free &
Rate Expenses Rate Capped Expense Clear Clear
<S> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
GROSS ROOMS RESERVE FOR
REVENUE MANAGEMENT REPLACEMENT OF MARKETING
MULTIPLIER FEES FIXED ASSETS TIME
----------------------------------------------------------
Percent of
Total
GRRM Base Fee % Revenues Months
<S> <C> <C> <C> <C>
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.
</TABLE>
34
<PAGE>
MarketSource
MarketSource (ISSN 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
statements.
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.
<PAGE>
<TABLE>
<CAPTION>
KEY RATES
- --------------------------------------------------------------------------------------------
Dec. 1992 Sept. 1993 Oct. 1993 Nov. 1993 Dec. 1993
<S> <C> <C> <C> <C> <C>
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
</TABLE>
KEY RATE TRENDS 1990 to 1993
- --------------------------------------------------------------------------------
[GRAPH DEPICTING KEY RATE TRENDS FROM 1990 TO 1993]
Sources: Federal Reserve Statistical Release and Appraisal
Institute Research Department
<TABLE>
<CAPTION>
CONSUMER TRENDS
- --------------------------------------------------------------------------------------------
IIIQ 1989 IIIQ 1990 IIIQ 1991 IIIQ 1992 IIIQ 1993
<S> <C> <C> <C> <C> <C>
Consumer Price
Index 125.0 132.7 137.2 141.3 145.1
Per Capita
Disposable
Personal Income $15,026 $16,242 $16,752 $17,577 $18,254
Savings as
Percent of DPI 4.1 3.9 4.4 4.9 3.7
Inflation Rate 3.8 4.7 3.4 2.5 2.2
Source: Economic Indicators
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
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]
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<PAGE>
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.
3
<PAGE>
MORTGAGE COMMITMENTS
================================================================================
NATIONAL MORTGAGE COMMITMENT SURVEY
Third Quarter 1993--National Ranges
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Source: Appraisal Institute Research Department
AVERAGE INTEREST RATES
- -------------------------------------------------------------------------------
Third Quarter 1993--National Averages
<TABLE>
<CAPTION>
Type and Amt. of Loan 3-5 Year Term 7-10 Year Term 10 Year+ Term
<S> <C> <C> <C>
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 --
</TABLE>
Source: Appraisal Institute Research Department
NOTE: No regional averages appear for third quarter 1993 mortgage rates due to
an insufficient sample size.
13
<PAGE>
MarketSource
================================================================================
TRENDS AND FORECASTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Featured Property Type: HOTELS
1990 1991 1992 1993 Percent Change
1993-1995
<S> <C> <C> <C> <C> <C>
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 --
</TABLE>
<PAGE>
MARKET SOURCE
TRENDS AND FORECASTS
- --------------------------------------------------------------------------------
Featured Property Type: HOTELS
<TABLE>
<CAPTION>
1990 1991 1992 1993 Percent Change
1993-1995
<S> <C> <C> <C> <C> <C>
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 --
</TABLE>
14
<PAGE>
TRENDS AND FORECASTS SUPPLY AND DEMAND
- --------------------------------------------------------------------------------
Featured Property Type: HOTELS
<TABLE>
<CAPTION>
1990 1991 1992 1993 Percent Change
1993-1995
<S> <C> <C> <C> <C> <C>
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
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 --
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 --
</TABLE>
15
<PAGE>
MarketSource
TRENDS AND FORECASTS SUPPLY AND DEMAND
- --------------------------------------------------------------------------------
Featured Property Type: HOTELS
<TABLE>
<CAPTION>
1990 1991 1992 1993 Percent Change
1993-1995
<S> <C> <C> <C> <C> <C>
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 --
</TABLE>
<PAGE>
TRENDS AND FORECASTS
- --------------------------------------------------------------------------------
Featured Property Type: HOTELS
<TABLE>
<CAPTION>
1990 1991 1992 1993 Percent Change
1993-1995
<S> <C> <C> <C> <C> <C>
New Orleans
Completions 50 8 5 16 229.7
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 --
</TABLE>
16
<PAGE>
SUPPLY AND DEMAND
- --------------------------------------------------------------------------------
TRENDS AND FORECASTS
- --------------------------------------------------------------------------------
FEATURED PROPERTY TYPE: HOTELS
PERCENT CHANGE
1990 1991 1992 1993 1993-1995
[S] [C] [C] [C] [C] [C]
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 48.2 545 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
<PAGE>
<TABLE>
<CAPTION>
Second Quarter 1993 National Investor Survey. A CB Commercial Appraisal Publication
Power Shopping Centers
Growth Rate Assumptions (%) Real Rate Typical
Overall Cap Rates (%) Discount ---------------------------------------------------- of Return Marketing
--------------------- Rate (%) Market General Retail (%) Period
Type of Firm Going-in Terminal (IRR) Rent Expenses Inflation Sales (RRR) (Months)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Hotels
<TABLE>
<CAPTION>
Growth Rate Assumptions (%) Real Rate Typical
Overall Cap Rates (%) Discount ----------------------------------- of Return Marketing
--------------------- Rate (%) Market General (%) Period
Type of Firm Going-in Terminal (IRR) Rent Expenses Inflation (RRR) (Months)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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: 9-15 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
</TABLE>
bp: Basis Points
17
<PAGE>
RERC Real Estate Corporation REAL ESTATE REPORT
- --------------------------------------------------------------------------------
VOL. 22, NO. 3 - 1993
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.
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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 has
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 jetmarker'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 respondent's 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
<PAGE>
- --------------------------------------------------------------------------------
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*
<TABLE>
<CAPTION>
------------------ ------------------------------------- -------------------- -------------
INDUSTRIAL RETAIL OFFICE APARTMENT
------------------ ------------------------------------- -------------------- -------------
Regional Neighborhood/
Warehouse R&D Center Power Center Community CBD Suburban Apartment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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*
<TABLE>
<CAPTION>
3Q 1993 2Q 1993 3Q 1992 3Q 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
* 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
<TABLE>
<CAPTION>
3Q 1993 2Q 1993 3Q 1992 3Q 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
*Real estate over other investments.
Source: Real Estate Research Corporation.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Table 4. Current Investment Conditions by Property Type*
<TABLE>
<CAPTION>
3Q 1993 2Q 1993 1Q 1993 3Q 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
* 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*
<TABLE>
<CAPTION>
3Q 1993 1Q 1993 3Q 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
* Rated on a scale of 1 (very bad) to 10 (very good)
Source: Real Estate Research Corporation.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 6. Probability That a Tenant Will Renew
Range Average
- -------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
Source: Real Estate Research Corporation.
- -------------------------------------------------------------------------------
RERC Real Estate Report
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 investment 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
<TABLE>
<CAPTION>
Internal Going-In Residual
Property Types Rate of Capitalization Capitalization
Respondent in Preference Order Return Rate Rate
(%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 9.5 10.5
4. Office - suburban 12.5 10.0 11.0
5. Hotel 13.5 10.5 11.5
</TABLE>
<TABLE>
<CAPTION>
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) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 bottomed. Good
buying opportunities remain.
</TABLE>
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
(continued)
<TABLE>
<CAPTION>
Internal Going-In Residual
Property Types Rate of Capitalization Capitalization
Respondent in Preference Order Return Rate Rate
(%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
<CAPTION>
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) (%)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 shift 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
using a stabilized
growth/inflation
factor.
</TABLE>
3
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
(continued)
<TABLE>
<CAPTION>
Growth Rates
-----------------------------
Income: Expense:
Internal Going-In Residual --------- --------
Property Types Rate of Capitalization Capitalization Years 1 to 3/ Years 1 to 3/
Respondent in Preference Order Return Rate Rate Years 4 to 10 Years 4 to 10
(%) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
National investment 1. Office - CBD 14.0 11.0-13.0 11.0-13.0 0-4 4
advisor* 2. Office - suburban 15.0 11.0-13.0 11.0-13.0 4 4
3. Industrial - warehouse 13.0 10.0 10.0
National real estate 1. Apartment 10.5 8.0 8.5-9.0 0-4 3-4
lender 2. Single-family 11.0 NA NA 3-5 3-4
3. Retail - regional mall 11.0 8.0 8.5-9.0
4. Retail - power center 11.5 8.5 9.0-9.5
5. Industrial - R&D 12.0 10.0 10.5-11.0
6. Industrial - warehouse 12.0 10.0 10.5-11.0
7. Office - suburban 12.0 9.5 10.0-10.5
8. Office - CBD 12.0 9.5 10.0-10.5
9. Retail - neighborhood 13.0 10.5 11.0-11.5
10. Hotel 14.0 11.0+ 12.0+
National investment 1. Retail - regional mall 10.75-11.2 8.0-9.0 7.5-8.5 0-5 4.5-5
advisor* 2. Industrial - warehouse 11.0-12.0 10.0-11.5 9.5 5 4.5-5
3. Office - suburban 12.0 9.5-10.5 9.5-10.5
4. Office - CBD 11.5-13.0 8.5-10.0 8.0-8.5
National investment 1. Industrial - warehouse 10.0-11.0 9.0 10.0 0-5 4
advisor 2. Retail - power center 11.0 9.0 10.0 5 4
3. Apartments 10.0-10.5 9.0 10.0
4. Retail - regional mall 10.0 7.5-8.0 8.5-9.0
5. Office - CBD 13.0 10.0 11.0
6. Retail - neighborhood 12.0 10.0 11.0
7. Office - suburban 13.0 10.0 11.0
8. Industrial - R&D 13.0 10.0 11.0
National investment 1. Apartment 11.0 9.0 10.0 0-3 2-4
advisor 2. Retail - power center 11.0 9.0 10.0 2.5-3.5 2-4
3. Office - suburban 12.0 10.0 10.0
4. Retail - neighborhood 12.0 10.0 10.5
5. Industrial - warehouse 11.0 10.0 10.0
6. Office - CBD 13.0 11.0 10.0
7. Industrial - R&D 13.0 10.5 10.0
8. Retail - regional mall 11.0 8.0 9.0
9. Hotel 13.0+ 12.0 12.0
National investment 1. Industrial - warehouse 11.5-12.0 9.0-10.0 9.5-10.5 3 3
advisor 2. Apartment 11.5 8.5-9.5 9.0-10.0 3 3
3. Retail - regional mall 11.0 7.0-8.0 7.5-9.0
<CAPTION>
Anticipated Long-Term
Holding Inflation
Respondent Period Expectation Comments
(years) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
National investment 4-7 4 Believes that the bid-ask spread is now considerably
advisor* narrower and that sellers are more realistic.
National real estate 5-10 4.0 Notes that the bid-ask spread is narrowing and that
lender deals are starting to get done. Prices using a 10-year DCF
plus reversion. Uses the going-in rate as a sanity check.
National investment 10 4.5-5 Continues to focus on regional mall properties in growth
advisor* areas. Is bullish on Washington, D.C. due to the federal
government influence.
National investment 10 3.5 Thinks bid/ask spread has narrowed, mainly as a result
advisor of transfers to lenders.
National investment 7-15 3.5 Models property cash flows using rent spikes, but notes
advisor does not buy on the basis of spikes. Rather, spikes are
seen as "bonuses" yield if they are achieved.
National investment 7-10 3 When pricing property they focus on going-in cash yields
advisor and use 10-year projections as a test of volatility.
</TABLE>
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
(continued)
<TABLE>
<CAPTION>
Internal Going-In Residual
Property Types Rate of Capitalization Capitalization
Respondent in Preference Order Return Rate Rate
(%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National investment 1. Retail - regional mall 11.0 7.0 8.0
advisor* 2. Retail - neighborhood 11.5 9.5 10.0
2. Industrial - warehouse 11.5 9.0 10.0
3. Office - suburban 12.0 10.0 12.0
4. Office - CBD 12.0 10.0 12.0
National lender and 1. Retail - neighborhood 12.0 9.0 10.0
investor 2. Retail - power center 13.0 8.5 9.5
2. Industrial - warehouse 12.0 9.0 10.0
3. Retail - regional mall 11.0 8.0 9.0
3. Industrial - R&D 13.0 10.0 10.0
4. Office - CBD 12.0 9.0 10.0
5. Office - suburban 12.0 10.0 10.0
National lender and 1. Apartment 12.5 9.0 8.5
investor* 2. Retail - neighborhood 12.5 10.5 10.0
3. Industrial - warehouse 12.0 9.25 9.0
4. Retail - power center 12.0 10.0 9.5
5. Office - suburban 14.0 10.5 9.5
6. Industrial - R&D 14.0 11.0 11.0
7. Retail - regional mall 11.0 8.0 7.5
8. Hotel 16.0 13.0 11.0
9. Office - CBD 12.5 9.5 10.0
National investment 1. Apartment 11.75-13.2 8.5-9.25 9.0-9.75
advisor
National lender 1. Apartment 11.0-12.0 9.0 10.0
2. Industrial - warehouse 11.0-12.0 9.0 10.0
3. Retail - regional mall 11.0 9.0 10.0
4. Retail - power center 11.0-12.0 9.0 10.0
5. Retail - neighborhood 11.0-12.0 9.0 10.0
6. Office - suburban 12.0 11.0 10.0
7. Office - CBD 12.0 11.0 10.0
8. Industrial - R&D 12.0 11.0 10.0
9. Hotel 15.0 15.0 15.0
National investment 1. Retail - regional mall 11.0 6.5-7.5 7.5-8.5
advisor 2. Office - CBD 12.0 9.0-10.0 8.0
3. Industrial - warehouse 12.0 9.0-10.0 9.0
4. Office - suburban 13.0 11.0-12.0 9.0
</TABLE>
<TABLE>
<CAPTION>
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
Respondent (%) (%) (years) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
National investment 0-5 5 10 3 Likes retail, particularly South
advisor* 3-5 5 Florida, Seattle, Boston, and the
Northeast in general.
National lender and Varies 4 7-10 4 Notes that a shift to current yield
investor 4 pricing is apparent in the buyers
sector. Potential appreciation may
affect pricing some, however,
current cash flow is the pricing
gauge used.
National lender and 0-4 3-5 5-7 3 Except for the west coast, thinks
investor* 3-4 3-5 that we hit bottom in 1992. Looks
for transaction volume to increase
during 1993.
National investment 4 4 7-10 3 Rates Dallas, Miami, Phoenix,
advisor 4 4 Denver, and Houston as the nation's
top five apartment markets. Prices
property based on current cash flow.
National lender Varies Varies 10 3-4 Looks more for value from cash flows
than from residual. Thinks that the
method of pricing is changing to
reflect the "fixed income" people
are looking for.
National investment 0-4 4 10 4 Thinks there is more capital chasing
advisor 4 4 transactions. Notes that yields for
prime regional malls are under
downward pressure.
</TABLE>
- --------------------------------------------------------------------------------
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
(continued)
<TABLE>
<CAPTION>
Internal Going-In Residual
Property Types Rate of Capitalization Capitalization
Respondent in Preference Order Return Rate Rate
(%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National investment 1. Industrial - warehouse 11.0 9.5 10.0
advisor* 2. Apartment 11.0 9.0 10.0
3. Retail - neighborhood 11.5 10.0 11.0
4. Industrial - R&D 11.5 10.0 10.5
5. Retail - regional mall 10.5 7.5 8.0
6. Retail - power center 12.0 9.0 10.0
7. Office - suburban 12.0 12.5 10.0
8. Office - CBD 11.5 12.0 10.0
National investment 1. Industrial - warehouse 12.0 10.0 10.0
advisor 2. Industrial - R&D 12.5 10.5 10.0
3. Office - suburban 12.5 12.0 10.0
4. Office - CBD 13.0 10.0 10.0
5. Apartment 11.0 9.0 10.0
National investor* 1. Office - CBD 13.0 NA 9.0
2. Office - suburban 13.0 NA 9.5
3. Apartment 12.5 9.5 10.0
4. Retail - regional mall 12.0 NA 7.5
National investment 1. Industrial - warehouse 11.0-12.5 8.25-9.25 8.25-9.25
advisor 2. Apartment 11.5-12.5 9.5 9.5
3. Retail - neighborhood 11.5-12.5 9.5 9.5
4. Office - suburban 13.0-15.0 10+ 10+
</TABLE>
<TABLE>
<CAPTION>
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) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
National investment 0-3 4 6-10 4 Says that the REIT market is
advisor* 3 4 growing, but thinks that the REIT
boom is nearly over.
National investment 0 3-4 10 3-4 Pricing is based on current
advisor 2-3 3-4 cash yields. Favors a low
inflation/low interest rate
environment and thinks that the
market will be hurt if rates rise
in the near term.
National investor* Varies 4 10 4 Does not think the bid/ask
Varies 4 spread has really narrowed, but
transaction volume is picking up
because deal sizes are getting
larger.
National investment 0-5 4 8-10 4 Focuses on cash yields and returns
advisor 2-5 4 generated from market rental rates
vs. rent roll, which today is
typically higher than prevailing
market rates.
</TABLE>
- --------------------------------------------------------------------------------
DEFINITIONS:
YIELD (IRR)
Internal rate of return (IRR) is the rate of interest that discounts the pre-
income tax cash flows received by the equity investor(s) back to a present value
that is exactly equal to the amount of the original equity investment. It is in
effect a time-weighted average return on equity and as used here, is synonomous
with the term "yield."
GOING-IN CAP RATE
First-year NOI divided by present value (or purchase price), unless otherwise
noted.
RESIDUAL CAP RATE
Usually a capitalization rate used to estimate resale or reversion value at the
end of the holding period.
GROWTH RATE
Annual compounded rate of increase in revenue and expenses over current-year
levels. Further expenses are typically forecast on a line-by-line basis.
QUARTERLY SURVEY OF INVESTMENT CRITERIA: THIRD QUARTER 1993
(continued)
<TABLE>
<CAPTION>
Internal Going-In Residual
Property Types Rate of Capitalization Capitalization
Respondent in Preference Order Return Rate Rate
(%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southern investment 1. Retail - neighborhood 12.25 10.0 10.5
advisor 2. Retail - power center 12.0 10.0 10.5
3. Apartment 11.5 9.0 9.5
4. Industrial - warehouse 11.0 10.0 10.5
5. Office - suburban 13.5 11.0 11.0
6. Retail - regional mall 12.0 9.0 9.5
7. Industrial - R&D 13.0 13.0 13.0
8. Office - CBD 15.5 13.0 13.0
East Coast investment 1. Office - CBD 10.0-12.0 8.5-9.5 9.5-10.5
advisor* 2. Retail - regional mall 10.0-12.0 7.0-9.0 8.0-10.0
3. Industrial - warehouse 10.0-13.0 9.0-11.0 10.0-12.0
4. Apartment 10.0-12.0 8.5-9.5 9.5-10.5
National investment 1. Apartment 11.0 8.75-9.0 9.25-9.5
advisor 2. Industrial - warehouse 12.0 9.0 9.75
3. Industrial - R&D 12.5 9.25 9.75
East Coast investor 1. Apartment 11.5 9.0 10.0
and advisor 2. Industrial - warehouse 12.0 9.0 10.0
3. Retail - power center 12.0 9.0 10.0
4. Retail - regional mall 12.0 9.0 10.0
5. Retail - neighborhood 12.0 9.0 10.0
6. Industrial - R&D 12.0 9.5 10.0
7. Office - suburban 12.0 10.0 10.0
8. Office - CBD 12.0 10.0 10.0
9. Hotel 14.0 11.0 10.0
National investor and 1. Apartment 11.0-13.0 8.5-9.5 9.0
lender 2. Retail - neighborhood 12.0-15.0 9.5-10.0 10.0
3. Retail - power center 11.0-13.0 9.0 10.0
4. Retail - regional mall 10.0-12.0 7.0 8.0
5. Industrial - warehouse 12.0-15.0 10.0 10.0
West Coast investment 1. Apartment 12.5 9.0-9.5 9.5-10.0
advisor 2. Industrial - warehouse 12.0 9.0-10.0 9.5-10.0
3. Retail - regional mall 12.0 7.0-8.0 7.5-8.5
4. Retail - neighborhood 12.5 9.0-10.0 9.5-10.5
</TABLE>
<TABLE>
<CAPTION>
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) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Southern investment 0-4.5 4 5-10 4 Notes that there are more
advisor 2.5-4.5 4 apartment buyers in the market,
particularly REITs, which are
pushing cap rates down.
East Coast investment 0-4 4.5 10-15 4-5 Capital availability remains poor.
advisor* 4 4.5 Lenders are the primary sellers,
trying to unload REO properties.
Buyers are mainly entreprenurial
individuals.
National investment 3-4 4 5-10 4 Notes that apartment cap rates are
advisor 3-4 4 falling as REITs buy up property.
Thinks "B" apartments are starting
to look more attractive.
East Coast investor 0-4 4 10 4 Prices property using going-in
and advisor 3-4 cap rate and will continue to do
so as long as inflation remains
low.
National investor and 0.4 4 6-10 4 Considers going-in cap rate, price
lender 4 4 per unit as compared to
replacement cost, and IRR when
pricing properties.
West Coast investment 0.4 3-4 10 3-4 Reports that transaction activity
advisor 4 3-4 has picked up during the first six
months of 1993, and that more money
is available and ready to buy.
</TABLE>
<PAGE>
[LOGO OF APPRAISAL GROUP APPEARS HERE]
EXHIBIT 17 (B) (6)
REPLY TO: N.J. Office
December 21, 1995
Mr. James Wright
CFO - Trump Taj Mahal Casino Resorts
1000 Boardwalk
Atlantic City, New Jersey 08401
Re: Trump Taj Mahal Realty Corp.
Atlantic City, New Jersey
Our Ref. #95029-1
----------------------------
Dear Mr. Wright;
Pursuant to your authorization, an appraisal has been made of the
above-captioned premises in order to estimate the Market Value, as of December
20, 1995. Market Value is defined within the report, which contains the
collective data and analyses upon which our value estimate is concluded.
Trump Taj Mahal Realty Co. consists of various parcels of land (see enclosed)
used in conjunction and operation of the Trump Taj Mahal Casino Resorts in
Atlantic City, New Jersey. The property consists of a total 15.31+ Acres, which
include various parcel situated under the Taj Mahal main structure, the Steel
Pier and the Virginia Avenue warehouse (lots 119 & 120).
Based upon the findings, it is our opinion that the Market Value, subject to the
assumptions and limiting conditions as set forth herein, as the value date,
December 20, 1995, is in the range of $80,180,000 (R) to $95,590,000 (R).
This letter and the collective data and analyses upon which our value estimate
is concluded are integral parts of our findings and conclusions.
Respectfully submitted,
APPRAISAL GROUP International
/s/ Avi M. Vardi, Mai
---------------------------------
AVI M. VARDI, MAI
N.J. State Certified Real Estate
General Appraisers #RG00641
AMV:kk
<PAGE>
TRUMP TAJ MAHAL REALTY CORP.
- ----------------------------
<TABLE>
<CAPTION>
BLOCK LOT AREA - SQ. FT. ACRES
<S> <C> <C> <C> <C> <C>
13 116 36,575 0.840
118.01 55,050 1.264
128.03 16,849 0.387
128.04 47,755 1.096
128.06 59,880 1.375
128.07 47,620 1.093
128.08 40,951 0.940
129.01 44,444 1.020
129.02 1,359 0.031 Estimated Value
129.06 19,750 0.453 $150.00 $175.00
------------ -----------
142 12,300 0.282
TOTAL BLK 13........ 382,533 SQ. FT. 8.78 ACRES $57,379,950 $66,943,275
16 17 16,501 0.379
18 7,501 0.172
41 7,501 0.172
65 38,994 0.895
TOTAL BLK 14........ 70,497 SQ. FT. 1.62 ACRES $10,574,550 $12,336,975
Estimated Value @
$75.00 $100.00
----------- -----------
(STEEL PIER)
14 42 150,300 SQ. FT. 3.450 ACRES $11,272,500 $15,030,000
VIRGINIA AVE. W'HOUSE
119 6 7,876 0.181
22 4,373 0.100
39 4,225 0.097
58 2,448 0.056 Estimated Value @
68 6,750 0.155 $15.00 $20.00
-------- --------
85 5,925 0.136
TOTAL BLK 119 31,597 SQ. FT. 0.73 ACRES $473,955 $631,940
120 23 4,948 0.114
33 2,627 0.060
44 2,252 0.052
58 17,325 0.398
65 2,500 0.057
66 2,500 0.057
TOTAL BLK 120 32,152 SQ. FT. 0.74 ACRES $482,280 $643,040
- ----------------------------------------------------------------------------------------
SUMMARY
- -------
BLOCK 13 382,533 SQ. FT. 8.78 ACRES
BLOCK 14 70,497 1.62
STEEL PIER 150,300 3.45
BLOCK 119 31,597 0.73
BLOCK 120 32,152 0.74 ESTIMATED VALUE RANGE...
--------- ------
TOTAL TRUMP REALTY LAND 667,079 SQ. FT. 15.31 ACRES $80,183,235 -TO- $95,585,230
=========== ===========
</TABLE>
APPRAISAL GROUP INTERNATIONAL
