Land fair value

Five Quarters has purchased 100% of the ordinary shares of Three
Halves and is trying to determine the fair value of the net assets at the
acquisition date.
Three Halves owns land that is currently developed for industrial use. The
fair value of the land if used in a manufacturing operation is $5 million.
Many nearby plots of land have been developed for residential use (as
high-rise apartment buildings). The land owned by Three Halves does not
have planning permission for residential use, although permission has
been granted for similar plots of land. The fair value of Three Halves’ land
as a vacant site for residential development is $6 million. However,
transformation costs of $0.3 million would need to be incurred to get the
land into this condition.
How should the fair value of the land be determined?