Prior to starting Agrippa and Augustus, I was the CIO of a Las Vegas-based commercial real estate developer. I am not a certified appraiser, but my job was, and still is, focused on understanding “value.” A property’s value will differ based on the use case, which could be for tax purposes, loan sizing, or estimating a theoretical sale. Let’s focus on the latter.

I’ve reviewed billions of dollars in deals, and I can assure you, determining value is far more subjective than it seems, especially in the case of a complicated property like the Trump Hotel. The Trump Hotel combines elements of a non-gaming hotel with condominiums and timeshares. The operational strategy is significantly different than that of a traditional hotel; not to mention, the ownership structure is complex, it includes Trump and many other stakeholders.

In order to simplify this exercise, let’s make a few assumptions. First, let’s assume the theoretical value only considers the real estate itself, not the brand associated with it. Second, let’s assume a theoretical buyer would acquire full ownership of the property from all stakeholders, which would be extremely difficult to do, perhaps even impossible. Third, let’s assume the publicly available data points may or may not be entirely accurate.

With those clarifications out of the way, there are three main approaches to estimate “value” in real estate: income capitalization, sales comparison, and replacement cost.

Let’s start with the income capitalization approach, which determines the present value by applying a discount rate to future cash flows. Due to the lack of necessary data and the complexity of the current operational strategy, I can’t suggest an honest estimate for this approach. If some form of income related theoretical value must be calculated, let’s use the ~$521 average price per square foot of the condo units sold over the last year (1) and the ~$655 average price per square foot of the units currently on the market (2). For simplicity’s sake and knowing the property is 1,999,990 square feet (3), let’s assume an average of ~$588 per square foot to arrive at a theoretical value of ~$1.18B. However, this calculation is not fully accurate for a multitude of reasons, primarily because the Trump Hotel is not entirely composed of condos. Not to mention, if a theoretical buyer is acquiring full ownership, they could implement a different operational strategy, which would change how this approach is calculated. As a result, determining a theoretical value using the income capitalization approach is impossible to know without sufficient data.

The sales comparison approach utilizes recent sales of similar properties. The most relevant recent transaction is the Bellagio. In August of 2023, Realty Income invested $951.40m for a ~22% indirect interest in Blackstone’s 95% ownership (4). The transaction was more complicated than it seems; as such, backing into a value isn’t as simple as dividing the invested amount by the indirect interest percentage. According to various news outlets, the deal supposedly valued the 3,933-room Bellagio at ~$5.10B (5), or ~$1.30m per room. At 1,282 rooms, this puts the Trump Hotel at a theoretical pre-adjusted value of ~$1.66B. However, the Bellagio is an apples to oranges comparison. The Trump Hotel is a non-gaming property, which means there are fewer revenue sources, but significantly less operating expenses and volatility. Bellagio has greater amenities, but the Trump Hotel is also ~10 years newer. Bellagio has over 3x as many rooms, but, while I don’t have the exact figures, I would imagine the Trump Hotel’s room sizes are larger on average. Economic conditions between August of 2023 and today are also different. With all of that being said, I do not have sufficient data to determine an exact adjustment, it could be 20%, 30%, or even more. Let’s assume a 30% adjustment for a theoretical value of ~$1.16B using the sales comparison approach.

The replacement cost approach contemplates what it would take to rebuild the property under present conditions. It must account for land cost, hard costs, soft costs, financing costs, entrepreneurial incentive, which typically ranges from 10% to 25% depending on the project's complexity, and depreciation. As for the land cost, MGM purchased ~1.62 acres of land between the Bellagio and Cosmopolitan at ~$33.33m per acre in May of 2023 (6). The Trump Hotel sits on ~3.46 acres, so let’s assume a pre-adjusted land cost of ~$115.33m. Hard, soft, and financing costs are extremely volatile and have risen significantly since construction began on the Trump Hotel in 2005. I do not have access to Marshall & Swift, which is typically utilized to estimate hard costs, so let’s use alternative data points. For simplicity’s sake, let’s assume these alternative data points include hard, soft, and financing costs. The Doumani-led 720-room Majestic, a planned non-gaming hotel near the Convention Center, is reportedly set to cost ~$1.00B to build (7), or ~$1.39m per room. The recently completed 533,000-square-foot Durango Hotel and Casino reportedly cost ~$780.00m to build (8), or ~$1,463 per square foot. At 1,282 rooms and 1,999,990 square feet, let’s assume the Trump Hotel’s pre-adjusted hard, soft, and financing costs, under present conditions, are somewhere between ~$1.78B and ~$2.93B. Let’s use a pre-adjusted average of ~$2.35B, add 17.5% for entrepreneurial incentive, and add ~$115.33m for the pre-adjusted land cost to arrive at a theoretical pre-adjusted value of ~$2.88B. However, the Trump Hotel has a significantly different amenity offering and depreciation must be considered in the form of physical age-related deterioration, functional obsolescence, and economic obsolescence. Again, I do not have sufficient data to determine an exact adjustment, it could be 30%, 40%, or even more. Let’s assume a 40% adjustment for a theoretical value of ~$1.73B using the replacement cost approach.

It’s evident the Trump Hotel’s “value” could fall within an extraordinarily wide range. To reiterate, this exercise focuses on the real estate itself, not the brand associated with it, and assumes the publicly available data points may or may not be entirely accurate. Without sufficient data, the lower bound of value is unknown. The upper bound of value, on the other hand, could be up to ~$1.73B using the replacement cost approach.

In a theoretical sale, assuming full ownership is acquired from all stakeholders, which, again, would be extremely challenging, the ultimate determinant of value is simply what a theoretical buyer is willing to pay. A theoretical buyer would need to consider: How bullish are they on the Las Vegas market? Will they keep the current operational strategy in place? What kind of debt terms can they secure? How many offers are on the table? Will global market conditions continue to fluctuate? Et cetera.

I am a proud Las Vegas native with a family history in the hotel industry, and I strongly believe in this city's growth potential. From the viewpoint of Augustus, a theoretical sale would be intriguing as the Trump Hotel could be extraordinarily valuable. However, this comes with an important caveat: a significant amount of data would be needed to accurately determine its true value.

Nonetheless, a chance to own any property, whether in whole or in part, within walking distance of the Las Vegas Strip is a once-in-a-lifetime opportunity.