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Flexibility in Real Estate

Project Development
Prof. Richard de Neufville
Michel-Alexandre Cardin
Engineering Systems Division
MIT

Cover Story
Case investigates two general questions in
real estate development strategy:
Is it worth investing upfront to acquire particular
infrastructures (e.g. a park, utilities, etc.)?
Is flexibility in expansion timing worthwhile?

Particular instance studied:


Development of apartment units around a park

2 May 2007

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Apartment Development Project


Development of apartment units around a
park
Five phases, 24 months each, start in 2007
All units 1000 SF each
Market value represents NPV (at 9% discount
rate) of all revenues once phase is completed
Phase
I
II
III
IV
V
Total

Type
APT
APT
APT
APT
APT

2 May 2007

SF
50,000
80,000
90,000
110,000
100,000
430,000

Units Net Acreage


50
1.15
80
1.84
90
2.07
110
2.53
100
2.30
430
9.87

Start
1/07
1/08
1/09
1/10
1/11

Completion
1/09
1/10
1/11
1/12
1/13

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Static Case
Key Assumptions
Deterministic forecast for market value of built property
currently evaluated at $350/SF -- increases at 2.5% per
year
Deterministic forecast for development costs currently
evaluated at $220/SF -- increase with inflation at 2.5%
per year
Development of all phases in a row benefits from cost
reductions of 2.5% due to economies of scale
Discount rate for market value of built apartment property
(rV) is 9%, and for construction costs (rC) is 6%, close to
currently prevailing risk-free rate

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Static Case
Market value of built property and
development cost models
$620
$570
$520
$470
$420
$370
$320
$270
$220
$170
2007

2012

2017

2022

2027

Year
Value per Square Foot

2 May 2007

Dev't Cost per Square Foot

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Static Case
Assumptions:
Park area is about 50,000 SF (1 acre) and costs
$1M to develop along with the five development
phases.
Cost is distributed to each phase as $200,000
each.
Land acquisition costs $15M, paid when phase I
begins
Infrastructure development, which includes site
grading, paving, utilities, and landscaping is
estimated at $29/SF
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Static Case
Pro Forma Discounted Cash Flow (DCF)
model
Year
Period
Built property value per SF ($)
Dev't cost per SF ($)
Phase I value
Phase I dev't cost
Phase II value
Phase II dev't cost
Phase III value
Phase III dev't cost
Phase IV value
Phase IV dev't cost
Phase V value
Phase V dev't cost
Acquisition cost
Infrastructure cost
Park development cost
Value of built property
Total cost
Net value
PV of built property
PV total cost
NPV
Return over initial cost (incl.
discount rate)

2007
0
$350
$220
$0
$10,725,000
$0
$0
$0
$0
$0
$0
$0
$0
$15,000,000
$1,426,911
$195,000
$0
$27,346,911
-$27,346,911
$115,903,253
$112,740,379
$3,162,873

2 May 2007

2008
1
$359
$226
$0
$0
$0
$17,589,000
$0
$0
$0
$0
$0
$0
$0
$2,340,134
$199,875
$0
$20,129,009
-$20,129,009

2009
2
$368
$231
$18,385,938
$0
$0
$0
$0
$20,282,316
$0
$0
$0
$0
$0
$2,698,467
$204,872
$18,385,938
$23,185,655
-$4,799,717

2010
3
$377
$237
$0
$0
$30,152,938
$0
$0
$0
$0
$25,409,234
$0
$0
$0
$3,380,580
$209,994
$30,152,938
$28,999,808
$1,153,130

2011
4
$386
$243
$0
$0
$0
$0
$34,770,106
$0
$0
$0
$0
$23,676,787
$0
$3,150,086
$215,244
$34,770,106
$27,042,116
$7,727,990

2012
5
$396
$249
$0
$0
$0
$0
$0
$0
$43,559,216
$0
$0
$0
$0
$0
$0
$43,559,216
$0
$43,559,216

2013
6
$406
$255
$0
$0
$0
$0
$0
$0
$0
$0
$40,589,270
$0
$0
$0
$0
$40,589,270
$0
$40,589,270

12%

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No Pre-Investment in Park
Value At Risk and Gain curve (VARG curve)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
$3.10

$3.12

$3.14

$3.16

$3.18

$3.20
Millions

NPV ($)
Static NPV

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With Pre-Investment in Park


Value At Risk and Gain curve (VARG curve)

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Case Recognizing Uncertainty


Recognize reality of uncertainty
Only around market value of built property
Initial value within 50% of projection
Annual growth factor also 50% of projection
15% volatility around each annual growth value
Otherwise same DCF model

Use Monte Carlo: 2000 simulations each


Easy, routine - no special program
2 May 2007

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Case Recognizing Uncertainty


Example of Uncertain Market Value Pattern
$620
$520
$420
$320
$220
$120
$20
2007

2012

2017

2022

2027

Year
Projected Value per Square Foot
Realized Value per Square Foot

2 May 2007

Projected Dev't Cost per Square Foot

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Case Recognizing Uncertainty


NPV distribution for 2000 simulations
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
$86.1

$80.1

$74.1

$68.1

$62.1

$56.1

$50.1

$44.1

$38.1

$32.1

$26.1

$20.1

$14.1

$8.2

$2.2

-$3.8

-$9.8

-$15.8

-$21.8

-$27.8

-$33.8

-$39.8

-$45.8

-$51.8

-$57.8

0.0%

NPV (MILLIONS $)

2 May 2007

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Case Recognizing Uncertainty


Observations
Expected NPV is $3.17M, compared to $3.16M
for static case
Relatively similar due to unconstrained nature of
problem
Situation different from parking garage

Now deal with a distribution of outcomes rather


than single value
Expected NPV (ENPV) rather than NPV

2 May 2007

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Case Recognizing Uncertainty


Value At Risk and Gain curve (VARG curve)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-$80.0

-$60.0

-$40.0

-$20.0

0%
$0.0

$20.0

$40.0

$60.0

$80.0 $100.0
Millions

NPV ($)
VARG

2 May 2007

ENPV

Static NPV

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Flexible Case
Sources of flexibility
Develop park upfront all at once for $1M
Increases market value of built property by 10% ONLY
when market value was increasing in previous year

Expand at strategic times


When market value of built property is 50% higher
than development cost

Abandon
At year 20, when phase is undeveloped

2 May 2007

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Flexible Case
If recognize uncertainty, what are possible
outcomes from managerial perspective?
$620

$620

$520

$520

$420

$420

$320

$320

VS.

$220
$120

$220
$120

$20
2007

2012

2017

2022

2027

$20
2007

2012

Year
Projected Value per Square Foot
Realized Value per Square Foot

2 May 2007

2022

2027

Year

Projected Dev't Cost per Square Foot

Value > Cost all time

2017

Projected Value per Square Foot


Realized Value per Square Foot

Projected Dev't Cost per Square Foot

Value < Cost most times

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

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Flexible Case
Positive NPV Scenario
Year
Develop? Abandon? Wait?
Dev't value criteria
Phase I value
Phase I abandonment value
Phase I dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase II value
Phase II abandonment value
Phase II dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase III value
Phase III abandonment value
Phase III dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase IV value
Phase IV abandonment value
Phase IV dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase V value
Phase V abandonment value
Phase V dev't cost
Phase(s) completed
Project abandoned?
Acquisition cost
Infrastructure cost
Park development cost
Value of built property
Total cost
Net value
PV of built property
PV total cost
NPV
Return over initial cost (incl. discount
rate)

2 May 2007

2007
Develop
$7,200,000
$0
$0
$11,000,000

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

2008

2009

2010

2011

2012

2013

2014

$0
$0
$0
$0

$0
$23,276,250
$0
$0
Develop
$18,751,000
$0
$0
$18,491,000
Wait
$21,094,875
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$38,233,990
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$44,531,643
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

Wait
$8,602,270
$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0
Phase I

$15,000,000
$1,463,499
$1,000,000
$0
$28,463,499
-$28,463,499
$139,603,060
$112,442,848
$27,160,211

$0
$0
$0
$0
$0
$0

Develop
$17,481,349
$0
$0
$21,322,434
Wait
$21,366,093
$0
$0
$0

$0
$2,460,141
$0
$23,276,250
$20,951,141
$2,325,109

$0
$0
$0
Phase I
$0
$2,836,850
$0
$0
$24,159,285
-$24,159,285

Develop
$25,859,464
$0
$0
$26,712,272
Wait
$23,508,604
$0
$0
$0
Phase II

$0
$0
$0
$0

$0
$59,004,637
$0
$0

$0
$0
$0
$0

Develop
$24,588,622
$0
$0
$24,890,981
Phase III

$0
$0
$0
$0
Phase IV

$0
$52,649,235
$0
$0
Phase V

$0
$3,553,943
$0
$38,233,990
$30,266,215
$7,967,775

$0
$3,311,629
$0
$44,531,643
$28,202,609
$16,329,033

$0
$0
$0
$59,004,637
$0
$59,004,637

$0
$0
$0
$52,649,235
$0
$52,649,235

95%

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

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Flexible Case
Positive NPV Scenario
Year
2007
Develop? Abandon? Wait?
Develop
Dev't value criteria
$7,200,000
Phase I value
$0
Phase I abandonment value
$0
Phase I dev't cost
$11,000,000
Develop? Abandon? Wait?
Dev't value criteria
Phase II value
$0
Phase II abandonment value
$0
Phase II dev't cost
$0
Develop? Abandon? Wait?
Dev't value criteria
Phase III value
$0
Phase III abandonment value
$0
Phase III dev't cost
$0
Develop? Abandon? Wait?
Dev't value criteria
Phase IV value
$0
Phase IV abandonment value
$0
Phase IV dev't cost
$0
$920
Develop? Abandon? Wait?
$820
Dev't value criteria
Phase V value
$0
$720
Phase V abandonment value
$0
$620
Phase V dev't cost
$0
Phase(s) completed
$520
Project abandoned?
$420
Acquisition cost
$15,000,000
Infrastructure cost
$1,463,499
$320
Park development cost
$1,000,000
$220
Value of built property
$0
$120
Total cost
$28,463,499
Net value
-$28,463,499
$20
PV of2012
built property 2017
$139,603,060
2007
2022
2027
PV total cost
$112,442,848
Year
NPV
$27,160,211
Projected Value
per Square
Projected
Dev't Cost per Square Foot
Return
overFoot
initial cost (incl.
discount
95%
Realized Value
per Square Foot
rate)

2 May 2007

2008

2009

2010

2011

2012

2013

2014

$0
$0
$0
$0

$0
$23,276,250
$0
$0
Develop
$18,751,000
$0
$0
$18,491,000
Wait
$21,094,875
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$38,233,990
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$44,531,643
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

Wait
$8,602,270
$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0
Phase I

$0
$0
$0
$0
$0
$0

Develop
$17,481,349
$0
$0
$21,322,434
Wait
$21,366,093
$0
$0
$0

$0
$2,460,141
$0
$23,276,250
$20,951,141
$2,325,109

$0
$0
$0
Phase I
$0
$2,836,850
$0
$0
$24,159,285
-$24,159,285

Develop
$25,859,464
$0
$0
$26,712,272
Wait
$23,508,604
$0
$0
$0
Phase II

$0
$0
$0
$0

$0
$59,004,637
$0
$0

$0
$0
$0
$0

Develop
$24,588,622
$0
$0
$24,890,981
Phase III

$0
$0
$0
$0
Phase IV

$0
$52,649,235
$0
$0
Phase V

$0
$3,553,943
$0
$38,233,990
$30,266,215
$7,967,775

$0
$3,311,629
$0
$44,531,643
$28,202,609
$16,329,033

$0
$0
$0
$59,004,637
$0
$59,004,637

$0
$0
$0
$52,649,235
$0
$52,649,235

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

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Flexible Case
Negative NPV Scenario
Year
Develop? Abandon? Wait?
Dev't value criteria
Phase I value
Phase I abandonment value
Phase I dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase II value
Phase II abandonment value
Phase II dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase III value
Phase III abandonment value
Phase III dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase IV value
Phase IV abandonment value
Phase IV dev't cost
Develop? Abandon? Wait?
Dev't value criteria
Phase V value
Phase V abandonment value
Phase V dev't cost
Phase(s) completed
Project abandoned?
Acquisition cost
Infrastructure cost
Park development cost
Value of built property
Total cost
Net value
PV of built property
PV total cost
NPV

2 May 2007

2007
Wait
$2,500,000
$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

2021
Develop
$7,817,520
$0
$0
$15,542,712
Wait
$12,508,032
$0
$0
$0
Wait
$14,071,536
$0
$0
$0
Wait
$17,198,544
$0
$0
$0
Wait
$15,635,040
$0
$0
$0

$0 $21,194,607
$0
$2,067,885
$0
$1,412,974
$0
$0
$0 $40,218,178
$0 -$40,218,178
$6,413,958
$17,788,539
-$11,374,581

2022

2023

2024

2025

2026

2027

$0
$0
$0
$0

$0
$23,695,280
$0
$0
Wait
$11,785,149
$0
$0
$0
Wait
$13,258,292
$0
$0
$0
Wait
$16,204,579
$0
$0
$0
Wait
$14,731,436
$0
$0
$0
Phase I

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

Wait
$6,601,009
$0
$0
$0
Wait
$7,426,135
$0
$0
$0
Wait
$9,076,387
$0
$0
$0
Wait
$8,251,261
$0
$0
$0
Phase I

Wait
$5,958,301
$0
$0
$0
Wait
$6,703,088
$0
$0
$0
Wait
$8,192,663
$0
$0
$0
Wait
$7,447,876
$0
$0
$0
Phase I

Wait
$12,838,556
$0
$0
$0
Wait
$14,443,376
$0
$0
$0
Wait
$17,653,015
$0
$0
$0
Wait
$16,048,195
$0
$0
$0
Phase I

$0
$0
$0
$23,695,280
$0
$23,695,280

$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0

Abandon
$5,854,494
$0
$2,498,636
$0
Abandon
$6,586,305
$0
$0
$0
Abandon
$8,049,929
$0
$0
$0
Abandon
$7,318,117
$0
$0
$0
Phase I
Abandoned
$0
$0
$0
$2,498,636
$0
$2,498,636

Wait
$11,698,569
$0
$0
$0
Wait
$13,160,890
$0
$0
$0
Wait
$16,085,532
$0
$0
$0
Wait
$14,623,211
$0
$0
$0

$0
$0
$0
$0
$0
$0

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

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Flexible Case
Negative NPV Scenario
Year
2007
2021
Develop? Abandon? Wait?
Wait
Develop
Dev't value criteria
$2,500,000
$7,817,520
Phase I value
$0
$0
Phase I abandonment value
$0
$0
Phase I dev't cost
$0 $15,542,712
Develop? Abandon? Wait?
Wait
Dev't value criteria
$12,508,032
Phase II value
$0
$0
Phase II abandonment value
$0
$0
Phase II dev't cost
$0
$0
Develop? Abandon? Wait?
Wait
Dev't value criteria
$14,071,536
Phase III value
$0
$0
Phase III abandonment value
$0
$0
Phase III dev't cost
$0
$0
Develop? Abandon? Wait?
Wait
Dev't value criteria
$17,198,544
$620
Phase IV value
$0
$0
Phase IV abandonment value
$0
$0
$520
Phase IV dev't cost
$0
$0
Develop? Abandon? Wait?
Wait
$420
Dev't value criteria
$15,635,040
Phase V value
$0
$0
Phase V abandonment value
$0
$0
$320
Phase V dev't cost
$0
$0
Phase(s) completed
$220
Project abandoned?
Acquisition cost
$0 $21,194,607
$120
Infrastructure cost
$0
$2,067,885
Park development cost
$0
$1,412,974
Value of built property
$0
$0
$20
Total 2012
cost
$40,218,178
2007
2017
2022$0
2027
Net value
$0 -$40,218,178
Year
PV of built property
$6,413,958
Projected Value
Square
Projected$17,788,539
Dev't Cost per Square Foot
PV per
total
cost Foot
Realized Value
per Square Foot
NPV
-$11,374,581

2 May 2007

2022

2023

2024

2025

2026

2027

$0
$0
$0
$0

$0
$23,695,280
$0
$0
Wait
$11,785,149
$0
$0
$0
Wait
$13,258,292
$0
$0
$0
Wait
$16,204,579
$0
$0
$0
Wait
$14,731,436
$0
$0
$0
Phase I

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0

Wait
$6,601,009
$0
$0
$0
Wait
$7,426,135
$0
$0
$0
Wait
$9,076,387
$0
$0
$0
Wait
$8,251,261
$0
$0
$0
Phase I

Wait
$5,958,301
$0
$0
$0
Wait
$6,703,088
$0
$0
$0
Wait
$8,192,663
$0
$0
$0
Wait
$7,447,876
$0
$0
$0
Phase I

Wait
$12,838,556
$0
$0
$0
Wait
$14,443,376
$0
$0
$0
Wait
$17,653,015
$0
$0
$0
Wait
$16,048,195
$0
$0
$0
Phase I

$0
$0
$0
$23,695,280
$0
$23,695,280

$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0

Abandon
$5,854,494
$0
$2,498,636
$0
Abandon
$6,586,305
$0
$0
$0
Abandon
$8,049,929
$0
$0
$0
Abandon
$7,318,117
$0
$0
$0
Phase I
Abandoned
$0
$0
$0
$2,498,636
$0
$2,498,636

Wait
$11,698,569
$0
$0
$0
Wait
$13,160,890
$0
$0
$0
Wait
$16,085,532
$0
$0
$0
Wait
$14,623,211
$0
$0
$0

$0
$0
$0
$0
$0
$0

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

20 of 31

Flexible Case
NPV distribution for 2000 simulations
30.0%

No investment
scenarios

25.0%
20.0%
15.0%
10.0%
5.0%

$90.5

$85.1

$79.7

$74.3

$68.9

$63.4

$58.0

$52.6

$47.2

$41.8

$36.4

$31.0

$25.6

$20.2

$14.8

$9.4

$4.0

-$1.5

-$6.9

-$12.3

-$17.7

-$23.1

-$28.5

-$33.9

-$39.3

0.0%

NPV (MILLIONS $)

2 May 2007

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

21 of 31

Flexible Case
Value At Risk and Gain curve (VARG curve)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-$80.0 -$60.0 -$40.0 -$20.0

0%
$0.0

$20.0

$40.0

$60.0

$80.0

$100.0 $120.0
Millions

NPV ($)

VARG Flexible Case


VARG Inflexible Case

2 May 2007

ENPV Flexible Case


ENPV Inflexible Case

Static NPV

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

22 of 31

Flexible Case
Value At Risk and Gain curve (VARG curve)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-$80.0 -$60.0 -$40.0 -$20.0

0%
$0.0

$20.0

$40.0

NPV ($)

VARG Flexible Case


VARG Inflexible Case

2 May 2007

ENPV Flexible Case


ENPV Inflexible Case

$60.0

$100.0 $120.0
Increased
upside
Millions
opportunities

$80.0

Static NPV

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

23 of 31

Results
About distribution
Downside reduced, upside increased

Increased Expected NPV = ENPV


Consequences of recognizing uncertainty
sometimes wait
sometimes do not invest
sometimes abandon after starting the project

Sudden jump near zero NPV


Scenarios where do not invest compared to
scenarios where profit is barely made over initial
costs
2 May 2007

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

24 of 31

Results
Static, certain case: no pre-investment in park
NPV = $3.16M

Inflexible case: no pre-investment in park


ENPV = $3.17M

Flexible case: pre-investment and timing flexibilities


ENPV = $15.67M

Value of flexibility due to combination of strategic


timing and pre-investment in park:
E[VFlexibility] = MAX(0,E[NPVFlex.]-E[NPVInflex.])
= $12.5M
2 May 2007

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

25 of 31

Results
Other valuation attributes, in Millions $:

Expected initial investment


Expected NPV
Minimum NPV
Maximum NPV
DR)

2 May 2007

Inflexible
$27.35
$3.17
-$60.56
$77.91
12%

Flexible
$21.35
$15.67
-$42.94
$94.19
73%

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

Better?
Flex. Better
Flex. Better
Flex. Better
Flex. Better
Flex. Better

26 of 31

Results
Static, certain case: with pre-investment in park
NPV = $14.69M

Inflexible case: with pre-investment in park


ENPV = $10.21M

Flexible case: pre-investment and timing flexibilities


ENPV = $15.67M

Value of flexibility due to strategic timing:


E[VFlexibility] = $(15.67 10.21)M = $5.46M
Deduced value of pre-investment in park:
$12.5M - $5.5M = $7.0M
2 May 2007

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

27 of 31

Results
Other valuation attributes, in Millions $:

Expected initial investment


Expected NPV
Minimum NPV
Maximum NPV
Return over initial cost (incl.
DR)

2 May 2007

Inflexible
$28.13
$10.21
-$57.79
$95.46

Flexible
$21.35
$15.67
-$42.94
$94.19

Better?
Flex. Better
Flex. Better
Flex. Better
Inflex. Better

36%

73%

Flex. Better

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

28 of 31

Take-Aways
Easy method to deal with uncertainty
No special software required

Important to recognize uncertainty


Its reality!

Recognizing uncertainty leads to flexible


design and management
Improve expected NPV and other desirable
attributes
2 May 2007

Richard de Neufville / Michel-Alexandre Cardin


Draft Presentation for MIT Center for Real Estate

29 of 31

Questions/Comments?