Sheraton Hotel Redding At Sundial Bridge - Redding Record ...

Pre-Opening and
Working Capital Costs
Soft Costs
Replacement Cost
Summary
Allocation of
Developer's Profit
Conclusion
comprise the total cost of furniture, fixtures, and equipment. Based on our
understanding of the expected quality of furnishings, we estimate the replacement
cost of the subject property's furniture, fixtures, and equipment (as if new) at
approximately $20,000 per room, or a total of $2,600,000.
Pre-opening costs include expenses such as marketing, staffing, training, and
administrative expenditures. Working capital includes a working capital reserve to
maintain adequate cash flow until the operation reaches a break-even point. We
estimate the pre-opening costs for the subject property to be roughly $6,500 per
room, or a total of $845,000.
Soft costs include items other than labor and material that are necessary for
construction, but are not typically part of the construction contract. Soft costs can
include professional fees, financing costs and the interest paid on construction
loans, taxes and the builder’s or developer’s all-risk insurance during construction,
marketing, sales, and lease-up costs incurred to achieve occupancy or sales. We
estimate the amount of soft costs for the subject property to be approximately
$15,500 per room, or a total of $2,015,000.
Based on the preceding analysis, we estimate the replacement cost of the subject
property as follows.
FIGURE 12-7 REPLACEMENT COST SUMMARY
Item Cost per Room Cost
Building $109,686 $14,259,141
Furniture, Fixtures, & Equipment 20,000 2,600,000
Pre-Opening & Worki ng Ca pi ta l 6,500 845,000
Soft Costs 15,500 2,015,000
Total Replacement Cost $151,686 $19,719,141
Developer's profit represents the entrepreneurial incentive anticipated by hotel
developers to induce the construction of a new hotel project. As a result of
economic conditions in the hotel industry, developer's profit has not always been
in evidence. Hotel developers generate a profit through the hotel’s cash flow and
ultimate sale or refinancing.
In the estimation of development cost for the subject property, the costs of several
components of the total property were quantified. The replacement cost of the
building as if new utilizing the Marshall & Swift Cost Estimator program as well as
our review of the hotel’s construction budget. This replacement cost estimate has
been rounded to $19,700,000. This value estimate compares to the developer’s
February-2011 Cost Approach
Sheraton Hotel Redding At Sundial Bridge – Redding, California 113