Evaluation Corner: Imperial Hotel 21017

* As I was preparing to publish this article, Ed Mack announced the Brickpicker sponsored fundraiser in benefit of the St. Paul School of Burlington, NJ. I truly encourage you all to visit the following link and make a donation; besides supporting a great cause you will be entered for a chance to win some really cool, retired sets worth thousands of dollars (and appreciating as we speak!).

I truly wish the St. Paul School the best,

FCBarcelona101*

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As of this writing, the LEGO Imperial Hotel (Architecture) stock continues to decline. All signs seem to point out the set is up for retirement very soon, with LEGO Shop at Home discounting it since Black Friday and a new line of larger Architecture sets in the horizon. I felt that analyzing the Imperial Hotel would be a good idea for an article; maybe we can help bring the stock levels down to 0!

The Architecture theme as we know it today was introduced in 2008, even though LEGO had already released some sets under the same name back in 1962. That first line, however, had absolutely nothing to do with what we currently see in stores. Let’s begin with a high level analysis of the theme as a whole.

Theme Analysis

The Architecture theme consistently receives praise in the forums as a result of its perceived positive performance, but how does its average CAGR compare to the average LEGO set and some of the other popular themes?

As you can see, the Architecture theme underperforms both the Star Wars and Advanced Models theme, as well as the entire LEGO set average of 11.54%. While this does not seem to support the theory that Architecture is a great performer, we have to remember that CAGR is somewhat skewed by the length of time sets have been retired, as well as the fact that currently available sets have really low CAGRs (as they are still available at retail).

If we were to only take into consideration the CAGR of retired sets, the picture would be significantly different.

Of course, we would have through the whole process of removing currently available set from the rest of the data series in order to have an apples to apples comparison. However, that is extremely time consuming for the larger themes like Star Wars, and I believe that for the purpose of this article focusing on the Architecture line alone clarifies the point. With an average CAGR of over 24% for retired sets, we can conclude that the line is actually quite successful.

One other argument for the Imperial Hotel is that it belongs to the Frank Lloyd Wright “collection”; an unofficial sub-theme that has been attributed with superior performance by some forum members. But, are FLW buildings really that different from the average Architecture set? Let’s take a look.

Above we have a graph of the growth over retail for each of the currently retired sets in the Architecture theme, with the FLW buildings grouped for the ease of comparison. It is pretty clear that when taking into consideration all of the retired sets, the average growth over retail is significantly higher for the rest of the theme (222% vs. 112%); That takes into account 2 data points that could be considered outliers, however. The JHC was the first set to be introduced, so we can expect that collectors will want to have it as part of their collection more than some of the rest, while Sungnyemun  was available for purchase at LEGO Shop at Home for less than a year according to Brickset data (around 237 days).

If we were to take those 2 sets out of the average calculation, the rest of the theme would show an average of 113% growth over retail, pretty much in line with the 112% of the Frank Lloyd Wright collection. In light of this, I am not sure I can buy the argument that these FLW designs perform significantly better than the rest.

Set Analysis

The Imperial Hotel is one of the largest Architecture sets released to date, and has been available for close to 3 years at the time of this writing. With over 1,000 pieces, the detail LEGO designers were able to capture in the model is nothing short of impressive; they really were able to capture the essence of the real structure and at the same time create a model that can be easily displayed on an office desk.

Another factor that I believe will help the performance of the set is the appeal to Asian buyers, especially in Japan. The performance of Sungnyemun makes me think that buyers from countries where this structures are located and the relatively higher LEGO prices in those markets push demand toward US sellers that are able to ship internationally.

Finally, and this is just my perception of this, the Imperial Hotel set seems to have been somewhat overlooked by some Brickpickers. I just have not seen as much discussion about this set before LEGO discounted it for Black Friday. In these times of increased competition and hoarding, it is sets like this that could continue to provide returns more in line with what LEGO investing produced in the past.

Future Performance

With the set seemingly going into retirement within the next few months, I wanted to try and forecast its future price appreciation over the next couple of years. While the data we have is very limited and the market is changing dramatically, it is always fun to speculate and share opinions about future set value!

First of all, let’s take a look at the performance of the “closest” set of the theme, the Robie House. As on previous articles, remember that the values that are outside of Brickpicker’s data set are estimated AND the 2015 value is as of November.

I think we can all agree that the fast appreciation this set has experienced should start to slow down in the coming months; eventually, we can expect marginal growth as the set plateaus.

As mentioned before, I expect the Imperial Hotel to perform slightly better (percentage wise). The graph below shows the projected performance of the Imperial Hotel. The graph assumes retirement in January of 2016.

The result is a growth over retail of around 145% by the end of 2020, with a Compound Annual Growth Rate of close to 12% over the period 2013 to 2020.

Final Thoughts

I am a believer in the Architecture line, and having had the time to go over the performance of previously retired sets has only strengthen this belief. I truly think that, for whatever reason, they are somewhat under the radar and have the potential to produce some of the most consistent returns in the LEGO investment universe.