The brownfield Redeveloper Problem No. 2 was described by Fishman and Amjad (2002) who state that providers of remedial capital must be careful to assess the risk of the investment accurately to ensure that they are properly compensated for the risks being taken. They also state that evaluating these risk components is the most challenging part of investing in brownfields. Remedial capital requirements are shown in red in Table 1 for the years 2004 and 2005. Appraisal has no way to quantify this uncertainty. (See NAS Study)
| 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 | ||||
