Q1.

You are an appraiser and have been assigned to determine the land value of a site, as vacant. The relevant information is as follows:

Property Type NOI Cap Rate Construction Cost

Office $10,000,000 8% $100,000,000

Apartment $5,000,000 6% $60,000,000

Retail $4,500,000 9% $40,000,000

Warehouse $3,000,000 6% $25,000,000

The site is zoned for Apartment and Retail use. What is the Highest and Best use of the site and what is the residual value of the land? Is it worth the effort to attempt to have the land re-zoned for office use?