L9 Valuation of Land and Redevelopment

Noi property life n rk r c 1 t ln noi 1 e

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Unformatted text preview: 1 T= ln⎜ ⎜ NOI (1 − e −( k − g ) N ) ⎟ ⎟ g −r ⎝ ⎠ * R Valuation C Factors NOI Value of Land at Different N Time of Development for T* ∈ [0, τ] V= T* T* T* T* C NOI 1 − e − ( k − g ) N e − ( k − g )T * − 1 - e -(k - c)T * − (Re rT * ) e − kT * k −c k−g ( ) ( ) Evaluate the impact on optimal timing of development of the following valuation factors Construction Cost (R) Maintenance cost (C ) Operating income (NOI) Property life (N) ⎛ R(k − r ) − C ⎞ 1 T= ln⎜ ⎜ NOI (1 − e −( k − g ) N ) ⎟ ⎟ g −r ⎝ ⎠ * Case Analysis The attachment below presents the land auction outcome in 1995 in HK. Apply the DCF approach to valuing the land site Tuen Mun (Section 16) Case Analysis Contd Construction (Development) Cost = $0.5 bill We are going to analyze the value of the land site assuming monthly rental income per sf ranges from $7 to $10. Case Analysis: DCF Approach Tuen Mun (16th District) Usa ge: Com m er cia l a nd P a r kin g Usa ble Ar ea a ft er Const r u ct ion : 510,369 Assu m e C = 0 g r NOI N k (bill) (yr) 0% 0.0429 50 15% 6% 0% 0.0490 50 15% 6% 0% 0.0551 50 15% 6% 0% 0.0612 50 15% 6% g 7% 7% 7% 7% r 0% 0% 0% 0% NOI (bill) 0.0429 0.0490 0.0551 0.0612 N (yr) 50 50 50 50 k 15% 15% 15% 15% sq. ft . T* 9.5 7.3 5.3 3.6 T* 8.3 6.3 4.7 3.2 V(T*) 0.080 0.112 0.150 0.195 V(T*) 0.127 0.169 0.217 0.272 V(T=0) NA 0.038 0.106 0.173 V(T=0) 0.026 0.101 0.176 0.252 $Rent per sf 7 8 9 10 $Rent per sf 7 8 9 10 R (bill) 0.5 0.5 0.5 0.5 R (bill) 0.5 0.5 0.5 0.5 T* = ...
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