Assume an apartment has a floor area of 2,200 SF. The existing rent per month is $3,100. The market level rent is $20,000 per month. Assume that the tenant is willing to enter into a voluntary vacate agreement to be bought out of his lease and the buy out price is $800,000. The apartment requires an additional $200,000 in renovation to get it up to market standards. If a prevailing cap rate for this apartment is 5.0%, what is the incremental value created by the landlord for this unit after the unit is leased at the market level rent, and net of the cost of the lease buy out and renovations?

1. $3,056,000
2. $2,350,000
3. $1,000,000
4. $3,100,000