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Fecha
2020-12-08
Derechos de acceso
info:eu-repo/semantics/openAccess
Título de la revista
ISSN de la revista
Título del volumen
Editorial
Business Perspectives
Citas
Resumen
Traditional methods used for real estate project valuation, such as the static Net Present Value, have some limitations, as these methods do not consider the possibility of a change in the initial conditions of the project or during its development. On the other hand, the real options approach allows for flexibility in evaluating a real estate project, improving the decision-making process as it helps identify the optimal strategy and timing for the construction phases. The paper deals with evaluating an actual real estate project in La Rioja (Spain) using different options to estimate its final Net Present Value. The results show that the real estate project would be profitable under several scenarios, although the valuations can vary significantly among the different types of options. This is because some options add more value to the project than others, depending on their cost and the uncertainty they eliminate. In contrast, the results obtained using the traditional static method would have led a real estate developer to discard the project completely, as its Net Present Value would have been negative. This confirms that the introduction of flexibility in real estate developments creates additional value by allowing developers and investors to dynamically react to changes in the market, thus making better investment decisions and finding real estate investment opportunities that otherwise would not be considered at all.
Descripción
The registered version of this article, first published in “Investment Management and Financial Innovations, 17(4), 271-284", is available online at the publisher's website: http://dx.doi.org/10.21511/imfi.17(4).2020.24
La versión registrada de este artículo, publicado por primera vez en “Investment Management and Financial Innovations, 17(4), 271-284", está disponible en línea en el sitio web del editor: http://dx.doi.org/10.21511/imfi.17(4).2020.24
La versión registrada de este artículo, publicado por primera vez en “Investment Management and Financial Innovations, 17(4), 271-284", está disponible en línea en el sitio web del editor: http://dx.doi.org/10.21511/imfi.17(4).2020.24
Categorías UNESCO
Palabras clave
real estate, investment evaluation, real options
Citación
Alberto Munoz Cabanes, Alfonso Herrero de Egana and Arturo Romero (2020). Real option analysis. The viability of real estate projects. Investment Management and Financial Innovations, 17(4), 271-284. doi:10.21511/imfi.17(4).2020.24
Centro
Facultad de Ciencias Económicas y Empresariales
Departamento
Economía Aplicada y Estadística