Details

Autor(en) / Beteiligte

• De Neufville, Richard,

Titel

Flexibility and real estate valuation under uncertainty : a practical guide for developers

Auflage

First edition

Ort / Verlag

Hoboken, New Jersey : Wiley Blackwell,

Erscheinungsjahr

2018

Beschreibungen/Notizen

• Date of publication from resource description page.
• Includes bibliographical references and index.
• Intro -- Title Page -- Copyright Page -- Contents -- Foreword -- Authors' Preface -- Acknowledgments -- About the Companion Website -- Chapter 1 Discounted Cash Flow Valuation: The Basic Procedures and Concepts Underlying Spreadsheet Valuation Constitute the Springboard to our Approach of Analyzing Flexibility Under Uncertainty -- 1.1 Why the Focus on the Discounted Cash Flow Model? -- 1.2 Structure of a Discounted Cash Flow Spreadsheet -- 1.3 The Cash Flow Projection -- 1.4 Discount Rate -- 1.5 Market Value and Forward-Looking (Ex-Ante) Analysis -- 1.6 Backward-Looking (Ex-Post) Analysis -- 1.7 Conclusion -- Chapter 2 Economics of the Discounted Cash Flow Valuation Model: Understanding the Discount Rate is Critical -- 2.1 Choice of Discount Rate -- 2.2 Differences between Discount Rate, Opportunity Cost of Capital, and Internal Rate of Return -- 2.3 Net Present Value -- 2.4 Relationship between Discount Rate, Growth Rate, and Income Yield -- 2.5 Relationship between Discount Rate and Risk -- 2.6 Conclusion -- Chapter 3 Future Scenarios Matter: We Need to Recognize that Future Projections are Uncertain -- 3.1 The Standard Discounted Cash Flow Model Appears to be Deterministic -- 3.2 We Live in a World of Uncertainty -- 3.3 Discounted Cash Flow Pro Forma Cash Flows Are Expectations -- 3.4 Flexibility and Options -- 3.5 Conclusion -- Chapter 4 Scenario Analysis: Future Scenarios can Significantly and Surprisingly Affect the Present Value -- 4.1 Discounted Cash Flow Scenario Analysis -- 4.2 Scenarios Affect Value -- 4.3 Flexibility Has Value -- 4.4 Conclusion -- Chapter 5 Future Outcomes Cover a Range of Possibilities: We Can Describe Uncertainties in Real Estate Using Probability Distributions of Possible Future Outcomes -- 5.1 Distribution of Future Outcomes -- 5.2 Quantifying Input Distributions.
• 5.3 Distributions of Outcomes Differ from Distributions of Inputs -- 5.4 Flaw of Averages -- 5.5 Conclusion -- Chapter 6 Simulation of Outcomes: Simulation is a Practical, Efficient Way to Explore Uncertainty and to choose between Alternative Strategies for Managing it -- 6.1 Generating Scenarios -- 6.2 Real Estate Simulation in a Nutshell -- 6.3 Simulation Is an Efficient Process -- 6.4 Number of Trials -- 6.5 Conclusion -- Chapter 7 Modeling Price Dynamics: Using Pricing Factors to Model the Dynamics of Real Estate Markets -- 7.1 Pricing Factors -- 7.2 Random Walks -- 7.3 Real Estate Pricing Factor Dynamics -- 7.4 Conclusion -- Chapter 8 Interpreting Simulation Results: Target Curves and Scatterplots can be used to Graph the Distribution of the Sample Output -- 8.1 Target Curves -- 8.2 Comparing Target Curves -- 8.3 Value at Risk -- 8.4 Scatterplots -- 8.5 Conclusion -- Chapter 9 Resale Timing Decision: Analysis: Let's See what happens when we apply the Tools of Flexibility Analysis to a Classical Investment Decision: when to sell the Property -- 9.1 The Resale Timing Problem -- 9.2 Extending the Time Horizon of the Discounted Cash Flow Model -- 9.3 IF Statements -- 9.4 Trigger Value for Stop-Gain Rule -- 9.5 Value of Example Stop-Gain Rule -- 9.6 Conclusion -- Chapter 10 Resale Timing Decision: Discussion: Let's think about Additional Insights we can get from Simulation -- 10.1 Sensitivity Analysis -- 10.2 When to Use the Stop-Gain Rule -- 10.3 Implications of Flexibility for Property Valuation -- 10.4 Conclusion -- Chapter 11 Development Project Valuation: This Chapter Looks at Valuation of Development Projects From an Investment Perspective, Considering Uncertainty, Flexibility, and Time-to-Build -- 11.1 Time-to-Build Difference between Development Projects and Existing Assets -- 11.2 Lower Opportunity Cost of Capital for Construction Costs.
• 11.3 Illustrative Example -- 11.4 Residual Value of Development Land -- 11.5 Investment Risk in Development Project -- 11.6 Conclusion -- Chapter 12 Basic Flexibility in Development Projects: The Most Basic Flexibility in Real Estate Development is the Option to Choose whether and when to Build -- 12.1 Review of Call (and Put) Options -- 12.2 Land as a Call Option on Development -- 12.3 Drivers of Option Value -- 12.4 A Practical Example of a Call (and Put) Option -- 12.5 Flexibility and Scenario Analysis for Development Projects -- 12.6 Conclusion -- Chapter 13 Option Dichotomies: We Introduce a Typology of Flexibility in Development Projects -- 13.1 Three Dichotomies for Thinking Generally about Development Options -- 13.2 Defensive versus Offensive Options -- 13.3 Options "On" and "In" Projects -- 13.4 Timing Options versus Product Options -- 13.5 Conclusion -- Chapter 14 Product Options in Development: We Discuss Three types of Product Options -- 14.1 Concept of Base Plan -- 14.2 Product Expansion Flexibility -- 14.3 Product Mix Flexibility -- 14.4 Conclusion -- Chapter 15 Timing Options in Development: Now we Turn to the Types of Timing Options -- 15.1 Project Start-Timing Flexibility (The Delay Option) -- 15.2 Project Production Timing Flexibility -- 15.3 Modular Production Timing Flexibility -- 15.4 Phasing Timing Flexibility -- 15.5 Types of Phasing -- 15.6 Recognizing Defensive and Offensive Options in Simulation Results -- 15.7 Conclusion -- Chapter 16 Garden City: An Example Multi-Asset Development Project: We Present the Traditional DCF Valuation Spreadsheet Model for the Example Development Project We use in the Rest of Book -- 16.1 Overview of Multi‐Asset Development Project -- 16.2 Structure of a Realistic Multi-Asset Spreadsheet Pro Forma -- 16.3 Cash Flows for the Example Pro Forma -- 16.4 Temporal Profile for Base Case.
• 16.5 Expected Economics of the Garden City Project -- 16.6 Conclusion -- Chapter 17 Effect of Uncertainty without Flexibility in Development Project Evaluation: We Re-analyze the Garden City Project by Reflecting Uncertainty Without Flexibility -- 17.1 Modeling Uncertainty for the Multi-Asset Development Project -- 17.2 Generating Random Future Scenarios -- 17.3 Outcomes Reflecting Uncertainty for the Multi-Asset Development -- 17.4 Effect of Different Probability Inputs Assumptions -- 17.5 Conclusion -- Chapter 18 Project Start-Delay Flexibility: We Model the Value of the Most Basic and Widely Available Development Project Option -- 18.1 Project Start-Delay Option -- 18.2 Option Exercise Decision Rule -- 18.3 Defining "Profit" in the Decision Model -- 18.4 Value of Start-Delay Flexibility in the Garden City Project -- 18.5 Conclusion -- Chapter 19 Decision Rules and Value Implications: We Further Explore the Option to Delay the Project Start -- 19.1 Simple Myopic Delay Rule -- 19.2 Trigger Values -- 19.3 Value Implications of the Decision Rules -- 19.4 Effect of Trigger Values (Start or Delay Bias) -- 19.5 Review the Meaning of Flexibility Value -- 19.6 Conclusion -- Chapter 20 Modular Production Timing Flexibility: We Explore the Timing Option to Pause and Restart the Project Any Time After its Commencement -- 20.1 Modular Production Timing Flexibility -- 20.2 Modeling the Modular Production Option -- 20.3 Value of Modular Production Timing Flexibility -- 20.4 Effect of Trigger Values (Bias toward Pause or Continue) -- 20.5 Effect of Combining Start-Delay and Modular Production Delay Flexibility -- 20.6 Conclusion -- Chapter 21 Product Mix Flexibility: This Chapter Presents the Option to Change Product Mix, and Examines the Effect of Volatility on Option Value -- 21.1 Product Mix Flexibility -- 21.2 Modeling the Product Mix Option.
• 21.3 Value of Product Mix Flexibility -- 21.4 Effect of Combining Product Mix Flexibility and Timing Options -- 21.5 Effect of Correlation in the Product Markets on the Value of Product Mix Flexibility -- 21.6 Effect of Volatility on the Value of Flexibility -- 21.7 Conclusion -- Chapter 22 Project Phasing Flexibility: We Show How to Model and Evaluate the Delay Flexibility Inherent in Project Phasing -- 22.1 Modeling the Sequential Phase Delay Option -- 22.2 Modifying the Garden City Project Plan -- 22.3 Project Economics -- 22.4 The Delay Decision Model -- 22.5 Exploring the Value of Project Phasing Flexibility -- 22.6 Conclusion -- Chapter 23 Optimal Phasing: We Now look at Adding Phases, Delineating Phases, and Distinguishing them from Expansion Options -- 23.1 Effect of Increasing the Number of Phases -- 23.2 Principles for Optimal Phasing -- 23.3 What Is the Difference between a Phase and an Expansion Option? -- 23.4 Conclusion -- Chapter 24 Overall Summary: We summarize the Main Takeaway Points from this Book -- Appendix: Quantifying Real Estate Uncertainty: Let's Think about the Inputs for Real Estate Simulation Models -- A.1 The Real Estate System -- A.2 Sources of Uncertainty and Some Practical Advice for Simulation -- A.3 The Nature of Real Estate Price Dynamics and Uncertainty -- A.4 PuttingIt All Together -- Glossary -- Acronyms and Symbols -- Index -- EULA.
• Provides a revolutionary conceptual framework and practical tools to quantify uncertainty and recognize the value of flexibility in real estate development This book takes a practical "engineering" approach to the valuation of options and flexibility in real estate. It presents simple simulation models built in universal spreadsheet software such as Microsoft Excel®. These realistically reflect the varying and erratic sources of uncertainty and price dynamics that uniquely characterize real estate. The text covers new analytic procedures that are valuable for existing properties and enable a new, more profitable perspective on the planning, design, operation, and evaluation of large-scale, multi-phase development projects. The book thereby aims to significantly improve valuation and investment decision making. Flexibility and Real Estate Valuation under Uncertainty: A Practical Guide for Developers is presented at 3 levels. First, it introduces and explains the concepts underlying the approach at a basic level accessible to non-technical and non-specialized readers. Its introductory and concluding chapters present the important “big picture” implications of the analysis for economics and valuation and for project design and investment decision making. At a second level, the book presents a framework, a roadmap for the prospective analyst. It describes the practical tools in detail, taking care to go through the elements of the approach step-by-step for clarity and easy reference. The third level includes more technical details and specific models. An Appendix discusses the technical details of real estate price dynamics. Associated web pages provide electronic spreadsheet templates for the models used as examples in the book. Some features of the book include: •    Concepts and tools that are simple and accessible to a broad audience of practitioners; •    An approach relevant for all development projects; •    Complementarity with the author's Commercial Real Estate Analysis & Investments—the most-cited real estate investments textbook on the market. Flexibility and Real Estate Valuation under Uncertainty: A Practical Guide for Developers is for everyone studying or concerned with the implementation of large-scale or multi-phase real estate development projects, as well as property investment and valuation more generally.