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MAx~~Y P~touucrn~ 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 Capitalization 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 2 28,000 SF Office - 1 st 8~ 2nd Floors $3,830,000 $3.320,000 $510,000 3 12,000 SF Retail - 1 st Floor $5,540,000 $4,530,000 $1,010,000 28,000 SF Office - 2nd 8~ 3rd Floors 4 12,000 SF Retail - 1 st Floor $3,410,000 $3,450,000 ($40,000) 28 A artment Units - 2nd & 3rd Floors 5 12,000 SF Retail - 1 st Floor $3,120,000 $2,240,000 $880,000 28 A artment Units - 2nd Floor Onl As presented in the table, Scenario 3(ground floor retail with second and third floor office space) has the highest positive difference between its estimated market value and its cost to consiruct. This suggests that it is the maximally productive use of the subject. 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 is unlikely. Given current market conditions, as well as feasibility considerations, it appears that the best use for the site is Scenario 5, however this does not return 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 additional element of risk is associated with this scenario. With these factors in mind, holding the properfy until market conditions improve is a viable altemative. Th~us, the interim parking use is the most likely scenario. This use as well as the five scenarios above are analyzed based on their annual cash flow to the subject's owners. This will allow for direct comparison of the interim use with all five development scenarios based on an estimate of annual income producing ability. P99239 PALMER, GROrH 8~ Pi~xn, INC. 39