Refer to the highest and best-use analysis in the table below. Use (a) Year 1 NOI (b)
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Question:
Refer to the highest and best-use analysis in the table below.
| Use | (a) Year 1 NOI | (b) (r−g) | (c) R | (a÷c = d) Implied Property Value (PV) | (e) Construction Cost of Building | (d) − (e) Implied Land Value(Residual) |
|---|---|---|---|---|---|---|
| Office | $ 528,000 | 0.13−0.03 | 0.10 | $ 5,280,000 | $ 4,000,000 | 1,280,000 |
| Retail | $ 628,000 | 0.12−0.04 | 0.08 | 7,850,000 | $ 6,750,000 | 1,100,000 |
| Apartment | $ 433,000 | 0.12−0.03 | 0.09 | 4,811,111 | $ 3,000,000 | 1,811,111 |
| Warehouse | $ 428,000 | 0.10−0.02 | 0.08 | 5,350,000 | $ 4,000,000 | 1,350,000 |
Required:
Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent.
a. Does this change the highest and best use of the site?
b. What is the new implied land value? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)
Expert Answer:
a Does this change the highest and best use of the site No the change in the growth rate of the ware... View the full answer
Related Book For 
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
Posted Date:
