Answer:
Office
Explanation:
Calculation to determine Which would be the highest and best use of this site
The analysis for the Baker Tract is as follows: OFFICE RETAIL
Rent 2,400,000 2,400,000
(100,000*$24=2,400,000)
Less Expenses (960,000) (1,200,000)
(2,400,000*40%=960,000)
(2,400,000*50%=1,200,000)
Cash Flow 1,440,000 1,200,000
(2,400,000-960,000=$1,440,000)
(2,400,000-$1,200,000=$1,200,000)
Cap Rate 0.10 0.11
(13%-3%=0.10)
(14%-3%=0.11)
Property Value 14,400,000 10,909,090
(1,440,000/0.10=14,400,000)
(1,200,000/0.11=10,909,090)
Construction Cost (10,000,000) ( 8,000,000)
(100,000*100=10,000,000)
(80,000*100=8,000,000)
Residual 4,400,000 2,909,090
(14,400,000-10,000,000=4,400,000)
( 10,909,090-8,000,000=2,909,090)
Therefore Based on the above calculation OFFICE would be the highest and best use of this site reason been that OFFICE has the HIGHEST amount of $4,400,000 compare to retail which has $2,909,090.
