Highest and Best Use (HABU) Analysis--Key Steps

The following pages represent a highest and best use analysis for potential property conversions.  The highest and best use analysis is modeled after CCIM institute standards.

To properly analyze highest and best use, two determinations must be made:

  1. The highest and best use of the site is made as though it were vacant and available for use.
  2. The highest and best use of the improved property is analyzed and estimated

Due to the historic nature of the property, step #1 was not used as part of the HABU Analysis

The highest and best use of land as if  both vacant and improved property must meet four criteria:
  1. Physically possible--This criterion identifies uses for which the subject site is physically suited.  For improved properties, physical characteristics such as size, design and condition of the improvements also must be analyzed.
  2. Legally permissible--This criterion concerns uses that are physically possible and are permitted on the site.  Legal permissibility depends on public and private restrictions, zoning, building codes, environmental regulations and other governmental regulations that pertain to the property.
  3. Financially Feasible--Alternative uses that are physically possible and legally permissible are then analyzed to determine which will produce an income or return equal to or greater than the amount needed to satisfy operating expenses, financial obligations, and capital amortization. All alternative uses anticipated to produce a positive return are regarded as financially feasible.
  4. Maximally productive--Among financial feasible uses, the use that produces the highest price, or value, consistent with the rate of return warranted by the market is maximally productive use.

Based on the preceding pages, a residential or lodging use are the most likely to meet the four standards as set out above.