The client's goals are 14.5% IRR as well as at least a $2,900,000 value enhancement. Review the financial test results in the matrix below.

Test	Alternative 1 (as-is)	Alternative 2	Alternative 3
Cash-on-cash rate of return ($/$%)	8.50%	5.75%	6%
Value enhancement	$750,000	$4,102,000	$2,500,000
NPV	($844,780)	$327,400	($777,252)
IRR	11.25%	15%	13.50%

If the owner plans on a longer-term hold, which alternative should a real estate manager recommend to the owner?