4. Your client approaches you for advice on the redevelopment of a parcel of commercial land with a dilapidated building erected. The land-use zoning is commercial. The optimal type of redevelopment is a 20-storey (including the ground floor) commercial building with the ground and first floors for shopping arcade and the upper floors for office purpose. The yield of similar development in the market is 5%. Schedule of gross floor areas, saleable ratios and saleable prices are as follows: Use GFA Saleable ratio Floor Gro&ind floor First hoor Upper floors Shop Shop Office 800 m 800 m 500 m/FI 90% 80% 80% Saleable price S/m 200,000 150.000 120.000 - - - - - Demolition cost @ $6.3 million Building cost @ $40,000/m Professional fees @ 5% of the building cost Developer's profit @ 20% on GDV Agent's fee @ 1% of the total sale proceeds - Short-term finance for the development can be obtained at 6% p.a. (assuming that half of the development period carries the interest payment burden) The development would take 2 years to complete. - Prepare the valuation and advise your client the highest price he should offer for the site. You need to show the calculations and the related formulae to support your answers. (25 marks)