The appropriate building capitalization rate

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Reference no: EM131878471

An appriaser has determined that a specific tract of land has three possible alternative uses. The alternative uses, cost to construct the improvements, and net operating incomes for each of these three uses is as follows:

Apartment Complex--- Cost to construct improvements $6,000,000

NOI $940,000

Office Building---- Cost to construct improvements $8,000,000

NOI $1,220,000

Retail Space------ Cost to construct improvements $7,000,000

NOI $1,100,000

If the appropriate building capitalization rate is 14% and the land capitalization rate is 10%, the the highest and best use of the site is

a. apartment complex

b. office building

c. retail space

d. either apartment complex or office space

(please elaborate on why the answer is what it is)

Reference no: EM131878471

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