Finance question???

Large corporate finance question?

• I need some help about corporate finance. In 2007 American Casino & Entertainment Properties in Las Vegas is a company that owns four aging budget casinos and 17 acres of unimproved land. Three of the casinos are in Vegas and were built between 1988 and 1996. One is in Laughlin and was built roughly 1989. The assets of the company were listed in the SEC in the 2007 end of the year report as $432 million (with the following breakout) ===================== Land and improvements =$75,100 Building and improvements=$339,607 Furniture, fixtures and equipment=$186,112 Construction in progress=$2,655 SUBTOTAL=$603,474 Less accumulated depreciation and amortization=$171,504 TOTAL =$431,970 ===================== In 2008 the company was purchased for $1.2 billion dollars and a new appropriate breakout was provided. ===================== Land and improvements =$723,797 Building and improvements=$374,406 Furniture, fixtures and equipment=$100,884 Construction in progress=$3,001 SUBTOTAL=$1,202,088 Less accumulated depreciation and amortization=$29,398 TOTAL =$1,172,690 ===================== In particular the land was now assessed at $724 million dollars (up by a factor of almost 10). The new corporation intended to build a new complex on the unimproved land. ===================== Simple question is that the land was still available for improvement in 2007, even if the previous owner did not go through with the project. How could the assessed value of the land go up by a factor of 10, just because the new owner's "intentions" had changed? I have a much more complex question. If you know something about corporate finance and are willing to help me could you send me a message and I will write out the entire question.

• Answer:

  Illiquid assets are always difficult to value. Many times the assessment matches the price someone is paying. This is questionable; however, what someone is willing to pay is in essence its value at that time. I think it would be extremely difficult to sell the property and contents at that high of a valuation any time soon. Someone most likely overpaid for it, and depending on the leverage utilized in the purchase of the property and contents it may be on the market again soon for a much lower price.