Problem:1

You commission a professional appraisal (valuation) of your property. The appraiser informs you that your property (land and building) is worth $5 million as-is today. 

At its new HBU (a brand new locally sourced organic grocery cooperative) your parcel would be worth $7.2 million.  Moreover, the appraiser warns you that the gap between the two values is only likely to widen as time goes on. 

Question 1. The cost of redeveloping the site today is $2.8 million. Should you redevelop it now?  Explain your reasoning with the relevant calculations.

Question 2. Assuming the proposed redevelopment necessitated demolishing your building and starting from scratch (a cost already included in the redevelopment cost), what is the current value of your office building?  Show your work.