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` V. REUSE VALUATION The purpose of this analysis is to prepare a reuse valuation assessing a fair consideration to • be paid by the Developer to the Agency for air rights to the Block 1 parcels being conveyed to the Developer. If this DDA is approved by the Agency, it will author¢e development of a first ciass, state-of-the-art mixed-use retaiUcinema project. The valuation of real estate is derived principally through three approaches to market value: the cost approach, the market data comparison approach, and the income approach. From the indications of these separate analyses and the weight accorded each, an opinion of value is reached, based on the quantity and quality of the factual data considered, tempered by the judgment and experience of the analyst who is utilizing commonly accepted methods and techniques within the framework of the valuation process. The cost approach is not applicable due to the fact that this valuation is a valuation of a site where the existing improvements will be demolished and a new project will be built. The market data comparison approach to value is based upon the principle of substitution; that is, when a property is replaceable in the market, fts value fends to be set at the cost of acquiring an equally desirable substitute property, assuming no costly delay in making the substitution. The typical valuation technique used to estimate value through substitution involves the collection and analysis of sales and listings data on various properties having as many similar characteristics as the property being valued. There are no land sales involving retail and theater uses within the Redwood City market area. This proposed Project represents a unique retail-entertainment project in Redwood City. Therefore, no truly comparable land sales can be found in the area that adequately reflects the unique aspects of the proposed development. Furthermore, in order to use land sales for freestanding single use buildings as a value indicatorfor the subject parcels, substantial judgment adjustments must be made to reflect the economic impacts of the unique features incorporated into the proposed Project. This reduces the usefulness of land sales as an indication of value. Consequently, primary reiiance in this analysis has been placed on the income approach to value. The income approach is based on the income and cost oharacteristics of the proposed Project. For the purpose of determining the reuse value, the reuse value is defined as the difference between the total private investment supported based on the projected net operating income and the anticipated development cost of the Project, excluding the cost of the Site. The reuse valuation is determined on the basis of the costs and revenues generated by the Project. This section of the report presents the estimates of the development costs and revenues for each of the uses and the assumptions made to determine these estimates. Keyser Marston Assoa � ;es, Inc. 18610.001\017•023.doc P � Q 8