Real options and application to Australian proeprty development: A conceptual analysis

Mintah, K 2016, 'Real options and application to Australian proeprty development: A conceptual analysis', in Proceedings of the 22nd Annual Pacific-Rim Real Estate Society Conference (PRRES 2016), Sunshine Coast, Australia, 17-20 January 2016, pp. 1-14.


Document type: Conference Paper
Collection: Conference Papers

Title Real options and application to Australian proeprty development: A conceptual analysis
Author(s) Mintah, K
Year 2016
Conference name PRRES 2016
Conference location Sunshine Coast, Australia
Conference dates 17-20 January 2016
Proceedings title Proceedings of the 22nd Annual Pacific-Rim Real Estate Society Conference (PRRES 2016)
Publisher Pacific Rim Real Estate Society
Place of publication Adelaide, Australia
Start page 1
End page 14
Total pages 14
Abstract Problem/Purpose - The paper thoroughly reviews the major dissimilarities in the suppositions underlying the DCF and the real options approach, and develops a conceptual framework of real options for the entire real estate development process. Design/methodology/approach - Extensive literature review of journal publications on DCF valuation and real options valuation with critical analysis to result in the development of the conceptual framework for real options. Findings - The findings provide the evidence needed to support the practical appeal of the method to practitioners in the industry. This will enable property practitioners to capture the upside potentials and limit downside losses for investment projects. Research limitations/implications - In Australia according to KPMG (2013), property practitioners and stakeholders are applying discounted cash flow to evaluate the viability of development projects. Standard property development appraisal centred on DCF method discards the potential upside gains and fails to limit the possible downside losses of an investment from managerial flexibility. Achieving practical usability of the real options method would enhance risk assessments in property developments in Australia. Originality/value - The flexibility afforded to property developers to alter future decisions based upon the arrival of new information can be valuable due to the cyclical nature of property markets. Adoption of the real options method in practice has been very slow. This paper expands the theory of real options to enhance the practical usability of the method via a conceptual framework.
Subjects Building not elsewhere classified
Keyword(s) Real options
property development
discounted cash flow
managerial flexibility
uncertainty
Copyright notice © 2016 All authors retain the copyright in their individual papers.
Versions
Version Filter Type
Access Statistics: 18 Abstract Views  -  Detailed Statistics
Created: Thu, 31 Jan 2019, 11:26:00 EST by Catalyst Administrator
© 2014 RMIT Research Repository • Powered by Fez SoftwareContact us