That is correct. The resulting number will leave you with the contributory value for the existing improvements, via the Sales Comparison Approach. Now if you are doing a thorough job, which we should all do every time, one should also look at the Cost & Income Approaches. Cost could be a little tricky when trying to calculate the various forms of depreciation, as you have to be careful that you are using market based depreciation and not personal opinion. Income would interesting also. Based on the OP's comments I think you would have to consider the income potential "as is" and also if you were to split it up into smaller units and then factor in your conversion costs. Also I would generally assume an older building would have higher maintenance, repair, reserve, etc. requirements versus a new building. Not sure how much support would be provided by Cost & Income Approaches, but I would think they should at least be considered even if just some rough numbers written down to check validity.The way I'm reading this is the value of the existing improvements is the total current value PLUS the cost to remove the improvements minus the site value?
Myself, based on what little we know about the actual assignment, I would run thru the Sales Comparison scenario to see what sort of values I can support. I would then talk with the client and say this is what I am finding do you have any additional information you should be sharing with me. Sometimes I find clients will spoon feed information in an effort to influence the outcome. Many times the information that is not provided is more proprietary and not readily available thru traditional research methods.