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<br />City of San Leandro Marina Lodging Development
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<br />Page 12
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<br />Based on analysis of the foregoing information, we are of the opinion that a new,
<br />themed restaurant developed in accordance with the indicated criteria would achieve
<br />a gross sales volume of $5,000,000 to $6,000,000 annually.
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<br />While we have not prepared a detailed revenue and expense statement for the
<br />restaurant, as was done for the proposed conference center hotel, based on this
<br />estimated sales volume, new construction of a facility on leased land would ,be
<br />economically viable, as will be discussed in a later section of this report.
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<br />F. ESTlMA TED CONSTRUCTION COSTS
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<br />1. Conference Center Hotel
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<br />After developing a cash flow forecast for the conference center hotel, our next step in
<br />analyzing the feasibility of the project was to prepare an estimate of the cost to
<br />develop the recommended facility. We have performed this analysis exclusive of the
<br />land cost. We have assumed that the conference center hotel would be of steel-
<br />reinforced, concrete frame construction, and that parking would be offered on an
<br />adjacent, paved, open parking lot. Our preliminary estimate of the likely construction
<br />cost for the conference center hotel is estimated at $200,000 per room, or
<br />approximately $40,000,000 stated in 2002 value dollars. The gross square footage
<br />of the recommended facility is estimated at 180,000 square feet.
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<br />Given that the actual construction of the conference center hotel would likely not
<br />begin until 2004, there may be some additional costs related to expected escalation
<br />in construction expenses due to inflation. Therefore, we have estimated an inflation
<br />factor of 3.0 percent annually from 2002 to 2006, and conclude to a projected
<br />development cost of roundly $44,000,000, or approximately $220,000 per room as
<br />stated in 2006 value dollars.
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<br />2. Restaurant
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<br />We have estimated the development cost of the recommended restaurant based on a
<br />225-seat facility comprising 8,000 gross square feet. The building structure and
<br />related expenses are estimated at approximately $1,600,000, 'with an additional
<br />$1,000,000 allocated for the kitchen equipment and furniture, fixtures, and equipment
<br />of the facility.
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<br />The typical profitability of a full-service restaurant generating income of $5,000,000 to
<br />$6,000,000 annually would be a net operating income of approximately 10 percent,
<br />or $500,000 to $600,000 annually.
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<br />As stated, the estimated total development cost for the project would be $2,600,000.
<br />At a loan to value ratio of 60 percent, a loan of approximately $1,600,000 could be
<br />obtained, indicating annual debt service obligations of approximately $150,000
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