Real Estate as a Financial Asset
GRIN Verlag, 2009 - 62 pages
Seminar paper from the year 2008 in the subject Business economics - Investment and Finance, grade: 90%, University of Wuppertal, language: English, abstract: A developer named Jemima bought a plot of land. She acquired this in order to develop the land, want to erect an office-building complex and to sell this one after completion of constructions. The question is, at which point of time should she starts the construction works with the aim to maximize the surplus of the property development, when she going to sell it. Based on a few key assumptions, it should be examined, what could be possible strategies and how the uncertainties of future expectations can influence these decisions. The assignment transfers the share market instrument of "options" to the real estate market investment process.
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Real Estate as a Financial Asset: Office building investment decision
Limited preview - 2009
1,05127 Probability Downward 1,05127 Surrounding facts 40 Table 5,00 years Risk Alternative project Appendix B extra Appendix C changing based on constr Binominal Calculations Land Calculations Land Value changing in land changing in property changing volatility correlation Compounded Risk free Construction Cost 70,00 debt service effects Decision status decrease Ulf Klose Develop Wait Wait Development surplus Eur Volatility 5,00 extra holding cost facts Period 5,00 free rate 5,00 incl increase and debt interest rate 5,00 Klose Appendix page land increasing rates Loan interest rate Management Cost constant office property pay-off p.a. Holding p.a. Loan interest p.a. Risk neutral possible development value Probability Downward movement Probability Upward movement property value volatility Risk free rate Risk neutral probability Selling Pay-off expected Surplus of Development Surrounding facts Period Table 2 Alterantive Table 5 Alternative Ulf Klose Appendix University of Reading value an options Volatility 5,00 Wait Develop Wait Wait Wait Develop Wuppertal year(s