The construction lender funded the remedial cost as part of the redevelopment of the land in Case Study 1 of Weber (2005). This lender commissioned repeated appraisals from different appraisers, voicing a concern about the feasibility of the project-especially after it was found that the initial remedial cost estimate was wrong due to inadequate methodology.
None of the appraisals received by this lender contained the items shown in Table 2. The property subsequently became an asset of the lender, which was taken over shortly afterwards by the FDIC, a banking regulator. The FDIC offered it for sale after ordering two more appraisals. There were no offers to buy the property anywhere near its appraised value, as-is, post-remediation, after two years of very intensive marketing. Stigma resulted in a $45 million loss. Both the property owner and the lender reportedly went bankrupt relying on a series of useless appraisals that relied upon heuristic conjecture rather than scientific methods.
Table 1 demonstrates a summary of the cost-financing calculation that is used to quantify the feasibility of remediating and redeveloping the brownfield. The sales/sq. ft. column to the far right was commensurate with the capitalization rates to their left when data by March was available. Retail sales/sq. ft. also dictate feasible rent and the cap rate in each row, leading to the "R-41c" value in the third column from the right. This value and costs shown in red, when discounted at the appropriate risk rate (second column from the left), result in the feasible prices that can be paid for the brownfield prior to its redevelopment.
The basic model shown in Table 1 can incorporate the probability distributions of the variables having the greatest effect on value by expanding this model into Table 7 in the full conference paper of Weber et al (2006b)*. It enables one to analyze the feasibility of redevelopment by providing the cost calculations called for by the NAS in Section 2.5.4, per Davis, Fishman et al, and the financing calculations called for by Simons in Section 2.6.
Presented June, 2006 at the ERES conference in Weimar, Germany (http://www.eres.org/)