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' IIApX11Y1ALLY PRODUCTIVE USE (continued) The following table summarizes the findings for each scenario. The Value column represents the estimated market value of the scenario as determined by the Income Capital'~zation Approach. The Cost column represents the cost to construct the improvements for each scenario. The Difference column represents the difference between the scenario value and its cost. On a financial feasibility basis, the maximally productive use is represented by the highest number in the Difference column and denotes the residual value to the land and site improvements in place. 1 12,000 SF Retail - 1 st Floor Only $1,850.000 $1.260,000 ~590,000 000 510 2 28,000 SF Office - 1 st 8~ 2nd Floo~s $3,830,000 ~3.320.000 000 0 , $ 000 010 $1 3 12.000 SF Retail - 1 st Floor 28,000 SF O~ce - 2nd 8~ 3rd Floors , $5.540.000 $4.53 000 450 , . 000) ($40 4 12.000 SF Retail - 1 st Floor 28 A artment Units - 2nd & 3rd Floors . $3.410,000 $3. 40 000 2 . ~88~ ~ 5 12,000 SF Retail - 1 st Floor ~Q e-,n-tmPnt units - 2nd Floor Only , ' $3. ~ 20•00~ ~2, , As presented in the table, Scenario 3(ground floor retail with second and third floor office spacej has the highest positive difference between its estimated market value and its cost to consfivct. This suggests that it is the maximally productive use of the s~bject. However, as detailed in the Market Analysis section, market conditions do not support a speculative office project in the Salem CBD. Unless a developer has a major anchor tenant in place, this scenario ~s unlikely. Given current mc~rket conditions, as well as feasibility considerations, it appears that the best use for the site is Scenario 5, however this does not retum the highest value. In addition, it must be noted that residential development in the Salem CBD is minimal, despite attempts in recent years by several local developers. Thus, an addifional element of risk is associated with this scenario. wth these factors in mind, holding the properfy until market conditions improve is a viable altemative. Thus, the interim partcing use is the most likely scenario. Th~s use as well as the five scenarios above are analyzed based on their annual cash flow to the subject's owners. Th~ ~nn'll allow for direct comparison of the interim use with all five development scenarios based on an estimate of annual income producing ability. pa~.M~, GROn~ & PiEncn, INC. 39 P99239