A second research questions was: what methods do those who specialize in purchasing contaminated land use in deciding the price they pay? Davis and Margolis (1997a, 1997b) Fishman and Amjad (2002) and those in the brownfield redevelopment business such as Arnold (2004), Hashem (2004), Hernandez (2004b) and Miner (2004) answer the question by stating that the brownfield valuation problem is a feasibility problem and that the price they pay for brownfields is predicated on solving two problems: Redeveloper Problem 1-the value of the property subsequent to remediation and Redevelopment Problem 2-the risk to equity capital that will be required to remediate the contamination. (Table 1)
| Problem 2 | Problem 1 | ||||||||
| Site Specific Risk Rate | Survey: 18% Risk Rate | $5,000,000 | Annual Net Income | ||||||
| # | IRR | Price/Value | Remediate | Remediate | Redevelop | Redevelop | Value | Cap Rate | Sales/SF |
| A | 18% | $4,700,000 | ($1,000,000) | ($1,000,000) | ($14,000,000) | ($14,000,000) | $50,000,000 | 10.00% | $300-$400 |
| B | 18% | $8,000,000 | ($1,000,000) | ($1,000,000) | ($14,000,000) | ($14,000,000) | $58,139,535 | 8.60% | $400-$500 |
| C | 18% | $12,000,000 | ($1,000,000) | ($1,000,000) | ($14,000,000) | ($14,000,000) | $66,666,667 | 7.50% | >$500 |
| Year | 2003 | 2004 | 2005 | 2006 | 2007 | ||||
Table 1 A model of the redevelopment process based on Federal Regulation R-41c
