Оценка недвижимости методом реальных опционов (на примере российской компании)

Every company that invests in any activity seeks to maximize its value and profit, while facing the need to overcome and minimize risks. Investment in construction is no exception. This industry is characterized not only by a large number of risks related to Finance, market, design and technical aspects of the project, legislation, etc., but also by the uncertainty that exists in the market where it operates.
The Russian real estate market has recently seen a lot of changes that have affected the entire industry as a whole. Changes in 214- FZ (Federal law of the Russian Federation of December 30, 2004 No. 214-FZ “About participation in shared-equity construction of apartment houses and other real estate objects and about modification of some legal acts of the Russian Federation”) provide that from July 1, 2019, developer companies must operate under the new rules. Developers have to switch from shared -equity construction to project-based construction (Consultant+, 2020).
All developers who attract citizens’ funds for construction will be obliged to work with the use of escrow account mechanism. During the use of escrow-accounts money of people, involved in shared equity construction purchase, are transferred to special bank accounts and stored there until construction is completed. The developer will be able to receive money from these accounts only after transfer ownership rights to buyers. Construction will be conducted at the developer’s own expense or at the expense of Bank loans. In case of problem with completing the construction by developer, the buyer can claim a refund of the amount paid. Thus, the risks of unfinished construction are transferred from home buyers to professional market participants-developers and banks, (the problem of deceived shareholders is still quite relevant, only in St. Petersburg and the Leningrad region there were about 15 thousand people in 2019) Banks started to use a fairly strict system of selecting companies to provide loans.
According to the requirements of banks, the developer company must invest at least 14- 15% of the construction cost from its own funds, the remaining 85-86% is provided by the Bank as a loan. The construction period should not exceed 5 years (7 in the case of complex development). The developer company is required to provide a list of documents, which should include information about the company’s status, legal rights to the development, justification of the project, technical characteristics and many other documents.
According to experts, due to this change in legislation some companies will leave the market, and prices for primary housing will also increase. At the same time, developer companies will incur higher expenses in comparison with previous periods related to the need to pay interest on loans to banks. The situation is also complicated by the pandemic, part of the construction is
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suspended, and the market behavior, in particular demand, that has jumps because people start to invest in premises to save money, competitors changes prices, that carries even more uncertainty. In these conditions the search for ways to maximize profits for developer companies can become the most relevant. A possible option to increase profitability is the sale of real estate at later stages of construction at prices corresponding to the construction stage or delay start of construction works. Moreover, it can help to obtain more information to make a better decision. Also, in the case of a negative scenario of market development, it is possible to stop construction
and minimize losses.
In this regard, the paper offers an analysis of projects based on real options, which helps to
incorporate managerial flexibility and maximize value in case of high risks and future uncertainty. In the paper two variants of project valuation are considered: the first, traditional methods for the company and the industry when sales are planned at all acceptable stages of construction; the second, real option approach to evaluate benefits from the sale at the different stages and
possibility to abandon and delay the project.
The research goal is to find the best solution for project realization using real option
approach.
Research questions of the thesis are the following:
– What are the peculiarities of the real estate industry are and how they influence on the project valuation?
– What are existing ways/methods of real estate projects valuation?
– Which types of real options do exist to evaluate real estate projects? Which type of real
option should be used in the thesis?
– How to evaluate the project in real estate with the use of real option approach? What are
limitations of the approach?
– At which stages of construction selling is more profitable?
– In what case company should delay or abandon the project?
To answer the research questions stated above the analysis suggest achieving the next research objectives:
– To conduct a literature review of project valuation methods in real estate industry.
– To conduct an analysis of real estate market situation, identify existing risks and
uncertainty, understand the necessity to use ROA.
– To conduct the project valuation with the use of traditional method (DCF analysis), apply
ROA, compare results of analysis.
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– To use different sales distribution at stages, recalculate the model to understand whether it influences project’s value.
– To develop a system of recommendations for a given project to maximize value.
A large number of papers have been devoted to the issue of using the real options method, but those used in real estate industry were mainly related to the issue of feasibility of investments in land or exiting from the project. This paper will consider the interaction of several options and sales at different stages, which was not taken into account earlier. From the point of view of practical applicability, the result of the analysis will be a set of recommendations how to implement the project depending on the situation for managers of this industry. Thus, analysis is proposed to be useful both from a theoretical point of view and from a practical point of view.