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EVALUATING DEVELOPMENT PROJECTS

EVALUATING DEVELOPMENT PROJECTS A development project is characterised by many periods of negative cash flows followed by a relatively smaller number of cash surplus periods. Thus, because of the time value of money, a major risk in real estate development arises from events which extend the periods between the negative and positive cash flows. This paper reviews the traditional methods of evaluating development projects in this context and suggests that more detailed cash flow techniques should be adopted to allow greater flexibility in appraisals, thus accounting for changes in circumstances through sensitivity and scenario analysis. However, even where such techniques are used, developments should not be viewed in isolation and consideration must also be given to the feasibility of a scheme in a corporate framework. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Valuation Emerald Publishing

EVALUATING DEVELOPMENT PROJECTS

Journal of Valuation , Volume 6 (3): 34 – Mar 1, 1988

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0263-7480
DOI
10.1108/eb008029
Publisher site
See Article on Publisher Site

Abstract

A development project is characterised by many periods of negative cash flows followed by a relatively smaller number of cash surplus periods. Thus, because of the time value of money, a major risk in real estate development arises from events which extend the periods between the negative and positive cash flows. This paper reviews the traditional methods of evaluating development projects in this context and suggests that more detailed cash flow techniques should be adopted to allow greater flexibility in appraisals, thus accounting for changes in circumstances through sensitivity and scenario analysis. However, even where such techniques are used, developments should not be viewed in isolation and consideration must also be given to the feasibility of a scheme in a corporate framework.

Journal

Journal of ValuationEmerald Publishing

Published: Mar 1, 1988

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