You are asked to evaluate a 4-star hotel which was built 8 years ago.
The gross area of the building is 10,000m² and the total outdoor area is 6,000m².
The expected lifetime of the improvement is 70 years. The land size is 12,000m².

You find that building with the same functionality would have following construction costs.

Direct construction costs:

Building: $3,500 per m2

Outdoor area: $600 per m2

Indirect costs:

Planning fees and site preparation costs: $160,000

Professional fees: 7% of direct construction costs

Finance costs: 6% of direct construction costs

You have identified the following information from three recent vacant land sales similar to the site of the subject property.

Comparable property (#)	Size of land (m2)	Sale price ($)	Date of sale	Similarity (%)
1	12,000	14,000,000	5 months ago	30
2	10,000	9,905,000	6 months ago	35
3	9,500	10,200,000	2 months ago	35

It is reported that the land prices show an increase of 6% per year in this area.

You also collected the following financial information for the hotel based on Good Average Management.

Revenue

Accommodation $ 7,550,000

Food and beverages $ 560,000

Telecommunications $ 17,000

Other services $ 560,000

Government subsidy (One-off) $ 20,000

Cost of Goods Sold

Purchases for hotel rooms $ 451,000

Purchase of food and beverages $ 200,000

Other cost of purchases $ 95,000

Expenses

Wages and staff benefits $ 1,200,000

Stationary and postages $ 5,000

Telephone and faxes $ 45,000

Promotional expenses $ 12,500

Building maintenance and repairs $ 45,000

Other working expenses $ 34,450

Depreciation/Amortization $ 60,000

Directors fees $ 180,000

Bank interests $ 34,920

Fine for breaking the environmental rule (One-off.) $ 10,000

Rentalisation rate 50%

Land Tax $ 15,000

Capitalization rate 7.5%

Use two (2) valuation methods to evaluate the above property based on the information given.