Doctoral thesis of philosophy is there value in waiting an empirical study of real options application to australian property developments

Is there Value in Waiting? An Empirical Study of Real Options Application to Australian Property Developments A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Kwabena Mintah MSc Real Estate Economics –Aalto University, Finland BSc Land Economy- Kwame Nkrumah University of Science and Technology, Ghana School of Property, Construction and Project Management College of Design and Social Context RMIT University January, 2019 Declaration I certify that except where due acknowledgement has been made, the work is that of the author alone; the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; any editorial work, paid or unpaid, carried out by a third party is acknowledged; and ethics procedures and guidelines have been followed I acknowledge the support I have received for my research through the provision of an Australian Government Research Training Program Scholarship Kwabena Mintah 29th January 2019 ii | P a g e Dedication I dedicate this dissertation to my mother, Grace Mensah and my two Aunties, Akosua Tiwaa, Abena Konadu of blessed memory and my dear wife, Betty Norah Agyemang How I wish… iii | P a g e Acknowledgements First and foremost, my profound gratitude goes to all my supervisors, especially, Professor David Higgins, formerly of RMIT University and now at Birmingham City University for assuming the role of primary supervisor for this dissertation for two years David has been pivotal in completing this dissertation even as an external supervisor, particularly, comments and feedback for improving the dissertation, suggesting possible interview participants for its second phase and research training I am forever grateful to you for your contribution and motivation during this journey I am also grateful to Professor Ronald Wakefield who was an associate supervisor, and later became my primary supervisor, for the constructive criticisms and suggestions to improve the dissertation Your contribution in terms liaising with industry partners for the semistructured interviews was instrumental You provided insightful and thought-provoking comments to ensure that the dissertation is devoid of ambiguity Sir, your support and contribution towards its completion is greatly appreciated I also owe a special gratitude to Dr Judith Callanan for her role as a co-supervisor in shaping this dissertation Judith read every Chapter, the complete draft and provided very valuable and insightful comments to improve its practical relevance She also liaised with industry partners to access data on the selected case studies used in this dissertation Beyond research supervision, Judith has nurtured my passion for teaching and given me numerous opportunities to develop my teaching and research skills Truly, I am forever grateful to you The nature of research is such that the views of practitioners are always invaluable to validate findings As a result, my gratitude also goes to the numerous property practitioners in the Australian property industry who contributed in diverse ways including practitioners from Frasers Property, Oliver Hume Property, Ernst & Young, Knight Frank, JLL, Pointier Advisory, ISPT, Herron Todd White, CBUS Property, Mirvac and CBRE All other contributors from various organisations whose names are not mentioned are also acknowledged I am truly grateful to RMIT University for the research scholarship and technical training that has aided me in undertaking my doctoral studies The support of my PhD colleagues and staff of the School of Property, Construction and Project Management of RMIT University is greatly appreciated To my dearest wife, Betty Norah Agyemang and all family members (especially Akosua Tiwaa and Osei Kuffour), I appreciate your support, love, encouragement and patience during this incredible journey Finally, to everyone who contributed in any way towards my successful completion of this dissertation, I appreciate your support iv | P a g e Table of Contents Declaration ii Dedication iii Acknowledgements iv List of Figures xii List of Tables xiv List of Publications xvi Abbreviations xvii Abstract Introduction 1.1 Background to the Dissertation 1.2 Problem Statement 1.3 Scope of the Dissertation 10 1.4 Research Questions 12 1.5 Objectives of the Dissertation 12 1.6 Research Framework 15 1.7 Limitations of the Dissertation 17 1.8 Dissertation Outline 18 Literature Review 21 2.1 Introduction 21 2.2 Property Development 22 Definition of Property Development 22 Property Development Process 24 Stages of Property Development 29 2.3 Property Market 40 Space Market 40 Asset Market 41 DiPasquale and Wheaton’s Model 41 Real Estate System 43 2.4 Risks and Uncertainty in Property Development 45 Definition of Risk and Uncertainty 45 Sources of Risk and Uncertainty in Property Development 47 Dealing with Risks in Property Development 49 2.5 Property Valuation 52 v|Page Residual Valuation Method 53 Discounted Cash Flow Technique 54 2.6 Real Options/Flexibility 58 Definition of Real Options/Flexibility 58 Terminologies in Real Options 59 When is Real Options Analysis Needed? 60 Typology of Real Options/Flexibilities 62 Real Options “in” and “on” Projects 67 Real Options/Flexibility Applications in Property 68 2.7 Summary 76 Research Methodology 78 3.1 Introduction 78 3.2 Research Design 79 3.3 Research Assumptions and Methodology 81 Research Paradigms 81 Methodological Fit for Different Research Worldviews/Paradigms 83 3.4 Research Methodology (strategy/enquiry) Justification for Using Mixed Methodology 3.5 Method 85 87 88 Mixed Methods Typologies 88 Case Study Research 93 3.6 Data Collection Strategies 94 Types of Data 95 Sources of Data/Evidence for Case Study Research 96 3.7 Sampling Techniques 100 3.8 Data Analysis 103 3.9 Ethics Approval 104 3.10 Summary 104 Systematising Real Options in Property Development: A Conceptual Framework 107 4.1 Introduction 107 4.2 Four-Stage Property Development Process 108 4.3 Real Options Embedded in Property Development 110 4.4 Conceptual Framework 110 North West Quadrant 111 vi | P a g e North East Quadrant 113 South West Quadrant 117 South East Quadrant 119 Middle Circle 120 4.5 Real Options as a Strategic Tool for Property Development under Uncertainty Conditions 121 (FPOM) Case Study 1-Staging Option Using Fuzzy Pay Off Method 128 5.1 Introduction 128 5.2 Evaluation of Staging Options on Residential Project 128 Description of Large-Scale Residential Case Study 130 Features of Townhouses 131 Features of the Apartments 132 Data on the Case Study Project 133 5.3 DCF modelling (base case scenario of 10.23% required rate of return) Sensitivity Analysis 136 138 DCF Modelling (worst-case scenario using 20% required rate of return) 141 Sensitivity Analysis for Worst Case Scenario 5.4 Real Options Modelling 142 144 Modelling Uncertain Sensitive Variables 147 Data and Methodology for Real Options Modelling 148 The Value of Staging Flexibility 151 Methodology 154 Results and Discussion of Staging Real Option Valuation (base and worst cases) 157 5.5 Summary 170 Case Study 2-Evaluation of Option to Delay in a Brownfield Residential Development 174 6.1 Introduction 174 6.2 Case Study Description 175 Features of the Apartment Building 177 Data on the North Melbourne Case Study Project 178 6.3 DCF Modelling Sensitivity Analysis 6.4 Real Option Modelling 180 182 186 vii | P a g e Data and Methodology for Real Options Modelling 188 Volatility 188 Risk Free Rate (rf) 190 Consumer Price index 190 Modelling Uncertain Variables (Value and Cost) 191 Costs 191 Modelling the Value Evolution (Binomial Tree) 192 Model and Real Option Value (ROV) Computation 194 6.5 Results and Discussion 195 6.6 Summary 210 Case Study 3-A Switching Output Option Application to a Mixed-Use Development 213 7.1 Introduction 213 7.2 Case Study Description 215 7.3 Data on the Project and Location 217 7.4 DCF Modelling 218 Results from DCF 222 Sensitivity Analysis 223 7.5 Issues with the Project 225 7.6 Real Option Modelling 227 Switching Proposal 227 Justification for the Proposal 231 7.7 DCF Evaluation of the Switching Option 232 7.8 Methodology for Real Options Modelling 234 Data for Real Options Modelling 235 Investment Required for Switching Option (Cost) 236 Current Value 237 Volatility 238 Risk Free Rate 240 7.9 Results and Discussion 240 7.10 Summary 245 Integrating Real Options Theory into Practice: Requirements and Challenges 247 8.1 Introduction 247 8.2 Accounting for Risks in Property Development 253 viii | P a g e Discount Rate as the Main Risk Measure (Changes in rents, demand, supply, interest rates, property values and costs of development) 253 Dealing with Risks as Opportunities (views on Shortened Lease Lengths, Future Proofing, Flexibility of Buildings, Value Appreciation Opportunities and Potential Technical Variations) 256 Risks Contingency as the Risk Management Tool for Potential Uncertainties and 259 Emerging Opportunities and Risks after Project Commencement 260 8.3 Justifying Initial Expenditure in Flexibility: is Flexibility Valuable? A Case of Vertical Residential Development Determining the value of Flexibility: Practitioners’ perspective 263 266 8.4 Receptiveness of Flexibility by Key Stakeholders 269 Acceptance and Adoption of Real Options Theory in Practice 270 Practical Cases of Flexibility 273 8.5 Requirements for integrating ROV/ROA into Property Decision-Making Process 274 Education and Training 275 Highlight Benefits of ROA and ROV over Existing Valuation Models 276 Involvement of other Stakeholders 276 8.6 Barriers to Adoption of Flexibility and ROV Models in Residential Development Decision-Making in Australia 278 A Vicious Cycle of Blame? 279 Financing 282 Planning Issues and Disturbance to Existing Tenants 284 Design Obsolescence 284 8.7 Summary 285 Practical Implications and Application of Real Options to Australian Residential Property Development Market 287 9.1 Introduction 287 9.2 Conceptual Framework 290 9.3 Results of DCF Financial Evaluation of Case Studies 290 9.4 Results of ROV Financial Evaluation of Case Studies 291 Staging Option 291 Delay/Deferral Option 292 Switching Output Option 293 9.5 Requirements for Integration 294 9.6 Implications for Practice 296 ix | P a g e 9.7 Summary 301 Conclusions 304 10.1 Introduction 304 10.2 Summary of Research 304 10.3 Conclusions 307 Objective I-To review and establish the nexus between real option theory, valuation and property development 307 Objective II- To develop real option conceptual model for categorising flexibilities embedded in the property development process to enhance risk management 308 Objective III- To examine how Australian residential property developers currently deal with uncertainty and risks in feasibility analysis 311 Objective IV- To apply real option models to feasibility evaluation of selected practical case studies using empirical data and to compare the results with conventional property development evaluation technique 311 Objective V – To suggest ways of justifying investment in building flexibility in Australian residential property development 313 Objective VI- To evaluate the requirements for integrating real option techniques into Australian residential property development decision-making 314 Objective VII- To determine any potential barrier(s) to adoption of real option theory in practical decision making in Australian residential property development 315 10.4 Contribution to Knowledge 316 10.5 Validity of the Research 322 Choice of Methodology 322 Reliability 322 External Validity 323 Internal Validity 324 Construct Validity 324 10.6 Recommendations 325 Education and Training of Practitioners 325 Harmonisation of ROV Models 326 Support from Regulatory Institutions 326 10.7 Areas for Further Research 327 Further Applications from Different Parts of the World for More Evidence 327 Datasets from New Projects 327 Unit of Analysis Using “Developer-Traders” 328 x|Page ROSSMAN, G B & WILSON, B L 1985 Numbers and words: combining quantitative and qualitative methods in a single large-scale evaluation study Evaluation Review, 9, 627-643 ROUMBOUTSOS, A., PELLEGRINO, R., VAJDIC, N & CARBONARA, N 2013 Real option theory for risk mitigation in transport PPPs Built Environment Project and Asset Management, 3, 199-213 RUNESON, P & HÖST, M 2009 Guidelines for conducting and reporting case study research in software engineering Empirical Software Engineering, 14, 131-164 SAGALYN, L 1990 Real estate risk and the business cycle: evidence from security markets Journal of Real Estate Research, 5, 203-219 SAMUELSON, P A 1965 Proof that properly anticipated prices fluctuate randomly Industrial Management Review, 6, 41-49 SATTARNUSART, W 2012 Real options in real estate development investment Master of Science MSc, Royal Institute of Technology,KTH SAVILLS 2016 Quarter times: Melbourne retail Q2/2016 Melbourne: Savills SCHULMERICH, M 2010 Real options valuation:the importance of interest rate modelling in theory and practice, London, Springer Heidelberg Dordrecht SCHWARTZ, E S 2003 Patents and R&D as real options Economics Notes, 33, 23-54 SHAPIRO, E., MACKMIN, D & SAMS, G 2013 Modern methods of valuation, New York, NY., Taylor & Francis SHEN, J & PRETORIUS, F 2013 Binomial option pricing models for real estate development Journal of Property Investment & Finance, 31, 418-440 SING, T F 2012 A real option approach to pricing embedded options in retail leases Pacific Rim Property Research Journal, 18, 197-211 SING, T F & PATEL, K 2001 Empirical evaluation of the value of waiting to invest Journal of Property Investment & Finance, 19, 535-553 SING, T F & TANG, L W 2004 Valuing leasing risks in commercial property with a discrete-time binomial tree option model Journal of Property Investment & Finance, 22, 173-191 SIRMANS, C F 1997 Research on discounted cash flow models Real Estate Finance, 13, 93–95 SLOMAN, J 1995 Economics, London, Prentice-Hall SMALL, M L 2009 How many cases I need?' On science and the logic of case selection in field-based research Ethnography, 10, 5-38 SQUIRES, G & HEURKENS, E 2015 International approaches to real estate development, New York, NY, Routledge STAKE, R 1995 The art of case research, Newbury Park, CA, Sage Publications SYMS, P 2010 Land, development and design, Chischester, West Sussex, UK, WileyBlackwell TASHAKKORI, A & TEDDLIE, C 2003 Handbook of mixed methods in social & behavioral research, Thousand Oaks, California, Sage Publications 339 | P a g e TASHAKKORI, A & TEDDLIE, C 2009 Integrating qualitative and quantitative approaches to research In: BICKMAN, L & ROG, D (eds.) Handbook of applied social research methods California: SAGE Publications Inc TASHAKKORI, A & TEDDLIE, C 2010 Sage handbook of mixed methods in social & behavioral research, California, Sage Publications TEACH, E 2003 Will real options take root CFO Magazine, 19, 73-75 TEDDLIE, C & TASHAKKORI, A 2009 Foundations of mixed methods research: Integrating quantitative and qualitative approaches in the social and behavioral sciences, Thousand Oaks, California, Sage Publications TEDDLIE, C & TASHAKKORI, A 2010 Overview of contemporary issues in mixed methods research Sage handbook of mixed methods in social and behavioral research Thousand Oaks, California: Sage Publications TEDDLIE, C & YU, F 2007 Mixed methods sampling a typology with examples Journal of Mixed Methods Research, 1, 77-100 THROUPE, R., STEPHEN, S., ZHONG, J & CHEN, H 2012 Real option analysis: a switching application for mixed-use real estate development Pacific Rim Property Research Journal, 18, 277-291 TIESDELL, S & ADAMS, D (eds.) 2011 Urban design in the real estate development process, Chichester, West Sussex: John Wiley & Sons TITMAN, S 1985 Urban land prices under uncertainty The American Economic Review, 75, 505-514 TRIGEORGIS, L 1988 A conceptual options framework for capital budgeting Advances in Futures and Options Research, 3, 145-167 TRIGEORGIS, L 1991 A log-transformed binomial numerical analysis method for valuing complex multi-option investments Journal of Financial and Quantitative Analysis, 26, 309-326 TRIGEORGIS, L 1993a The nature of option interactions and the valuation of investments with multiple real options Journal of Financial and Quantitative Analysis 28, 1-20 TRIGEORGIS, L 1993b Real options and interactions with financial flexibility Financial Management, 22, 202-224 TRIGEORGIS, L 1995 Real options in capital investment: models, strategies, and applications, Westport, CT, Praeger Publishers TRIGEORGIS, L 1996 Real options: managerial flexibility and strategy in resource allocation, Cambridge, MA, MIT press TRIGEORGIS, L 2005 Making use of real options simple: an overview and applications in flexible/modular decision making The Engineering Economist, 50, 25-53 TRIGEORGIS, L & MASON, S P 1987 Valuing managerial flexibility Midland Corporate Finance Journal, 5, 14-21 TSENG, C.-L., ZHAO, T & FU, C C 2009 Contingency estimation using a real options approach Construction Management and Economics 27, 1073-1087 UHER, T E & TOAKLEY, A R 1999 Risk management in the conceptual phase of a project International Journal of Project Management, 17, 161-169 340 | P a g e URBAN MELBOURNE 2015 The Principal: Flemington road's latest addition [Online] Urban Melbourne Available: https://urban.melbourne/development/2015/09/30/principal-flemington-roads-latestaddition [Accessed 4/11/ 2016] VAN DER MAATEN, E 2010 Uncertainty, real option valuation, and policies toward a sustainable built environment Journal of Sustainable Real Estate, 2, 161-181 VIMPARI, J 2014 Is There Hidden Value in Real Estate Investments?-Real Options Analysis Provides Rationale to Contingent Investment Decisions PhD, Aalto University VIMPARI, J & JUNNILA, S 2014a Value of waiting–option pricing as a tool for residential real estate fund divestment management Property Management, 32, 400-414 VIMPARI, J & JUNNILA, S 2014b Valuing green building certificates as real options Journal of European Real Estate Research, 7, 181-198 VIMPARI, J & JUNNILA, S 2016 Theory of valuing building life-cycle investments Building Research & Information, 44, 345-357 VIMPARI, J., KAJANDER, J.-K & JUNNILA, S 2014 Valuing flexibility in a retrofit investment Journal of Corporate Real Estate, 16, 3-21 VIMPARI, J & SEPPO, J 2015 Real options analysis as a decision-making tool - A preliminary investigation of the real estate investment executive perspective ed Espoo, Finland: Aalto University Publications VOSS, C., TSIKRIKTSIS, N & FROHLICH, M 2002 Case research in operations management International Journal of Operations & Production Management, 22, 195-219 WANG, K & ZHOU, Y 2006 Equilibrium real options exercise strategies with multiple players: The case of real estate markets Real Estate Economics, 34, 1-49 WANG, T & DE NEUFVILLE, R 2005 Real Options "in" Projects In: TRIGEORGIS, L (ed.) 9th Annual International Conference on Real Options Paris, France WARD, C & FRENCH, N 1997 The valuation of upwards-only rent reviews: An option pricing model Journal of Property Valuation and Investment, 15, 171-182 WARD, C., HENDERSHOTT, P H & FRENCH, N 1998 Pricing upwards-only rent review clauses: An international perspective Journal of Property Valuation and Investment, 16, 447-454 WELCH, C 2000 The archaeology of business networks: the use of archival records in case study research Journal of Strategic Marketing, 8, 197-208 WILLIAMS, J T 1991 Real estate development as an option Journal of Real Estate Finance and Economics, , 4, 191-208 YAO, H & PRETORIUS, F 2014 Demand uncertainty, development timing and leasehold land valuation: empirical testing of real options in residential real estate development Real Estate Economics, 42, 829-868 YEO, K T & QIU, F 2003 The value of management flexibility—a real option approach to investment evaluation International Journal of Project Management, 21, 243-250 YIN, R 1994 Case study research: design and methods, Thousand Oaks, California, Sage Publications 341 | P a g e YIN, R 2003 Applications of case study research (applied social research methods), Thousand Oaks: California, Sage Publications YIN, R 2014 Case study research: design and methods, Thousand Oaks, California, Sage Publications YU, S M., SING, T F & ONG, S E 2002 “White” site valuation: A real option approach Pacific Rim Property Research Journal, 8, 140-157 ZADEH, L A 1965 Fuzzy sets Information and control, 8, 338-353 342 | P a g e College Human Ethics Advisory Network (CHEAN) College of Design and Social Context NH&MRC Code: EC 00237 Appendix A: Ethics Approval Notice of Approval Date: 26 November 2015 Project number: CHEAN A&B 0000019763-11/15 Project title: application to Is there value in waiting? An empirical study of real options property developments Risk classification: Low risk Chief investigator: A/Professor David Higgins Status: Approved Approval period: 2019 From: 26 November 2015 The following documents have been reviewed and approved: Title Version Risk Assessment and Application form Participant Information and Consent Form Research Questions To: 31 March Date 26.11.2015 26.11.2015 26.11.2015 The above application has been approved by the RMIT University CHEAN as it meets the requirements of the National statement on ethical conduct in human research (NH&MRC, 2007) Terms of approval: Responsibilities of chief investigator It is the responsibility of the above chief investigator to ensure that all other investigators and staff on a project are aware of the terms of approval and to ensure that the project is conducted as approved by CHEAN Approval is valid only whilst the chief investigator holds a position at RMIT University Amendments Approval must be sought from CHEAN to amend any aspect of a project To apply for an amendment use the request for amendment form, which is available on the HREC website and submitted to the CHEAN secretary Amendments must not be implemented without first gaining approval from CHEAN Adverse events You should notify the CHEAN immediately (within 24 hours) of any serious or unanticipated adverse effects of their research on participants, and unforeseen events that might affect the ethical acceptability of the project Annual reports Continued approval of this project is dependent on the submission of an annual report 343 | P a g e College Human Ethics Advisory Network (CHEAN) College of Design and Social Context NH&MRC Code: EC 00237 Annual reports must be submitted by the anniversary of approval of the project for each full year of the project If the project is of less than 12 months duration then a final report only is required Final report A final report must be provided within six months of the end of the project CHEAN must be notified if the project is discontinued before the expected date of completion Monitoring Projects may be subject to an audit or any other form of monitoring by the CHEAN at any time Retention and storage of data The investigator is responsible for the storage and retention of original data according to the requirements of the Australian code for the responsible conduct of research (section 2) and relevant RMIT policies Special conditions of approval Nil In any future correspondence please quote the project number and project title above Professor Joseph Siracusa Deputy Chairperson RMIT DSC CHEAN A cc: Ms Suzana Kovacevic (Ethics Officer/CHEAN secretary), Kwabena Mintah I:\Research\Ethics\2015\Letters\Final Approval\Higgins, D CHEAN A&B 0000019763-11-15.doc 344 | P a g e Appendix B: Interview question guide School of Property, construction and Project Management GPO Box 2476 Melbourne, VIC ,3001 Australia Tel +61 9925 2230 Fax +61 99251939 Title Is there Value in Waiting? An Empirical Study of Real Options Valuation (ROV) Application to Property Developments Interview Questions for the semi-structured interviews Information about participant 1) Can you briefly introduce yourself? 2) What is your role within your organisation and how long have you been in this role? 3) What type of development/investment project you frequently analyse in your organisation? 4) Do you carry out the analysis alone or with other professionals? If not alone, what is your role in the team? Current financial evaluation methods for property development and investment 5) What method(s) of valuation is/are frequently employed in your evaluation analysis within the specific market your organisation operates (retail, apartments, office)? 6) How are uncertainties and variability related to rents, demand, supply, interest rates, property values, and costs of development treated during feasibility evaluation of projects? 7) How about changing lease lengths, technological changes, flexibility and adaptability of buildings, long term performance of assets, value appreciation opportunities, technical variations etc.? 345 | P a g e 8) Is the discount rate a suitable measure of all risks and uncertainties? Real options analysis/methods and potential integration into mainstream valuation techniques 9) Does your organisation consciously seek flexibility and adaptability of use of floor plans in real estate projects to better prepare for future uncertainties? If yes, how? If no, why not? 10) Do you make a conscious effort to determine embedded real options (flexibility and future opportunities) in your projects? If yes, how? If no, please explain? 11) Real option values are realized later in the life of a project/investment However, they need to be considered at early stages of developments/investments Do you think this approach to risk management is feasible and persuasive in practice within your specific market? 12) Have you encountered any risks/opportunities that were not examined at the inception of a project but occurred later during the implementation phase due to uncertainties? 13) Can you mention some of the opportunities and risks encountered and how were you able to deal with them? 14) How can new and emerging opportunities be justified to management for investments in flexibility, for example expanding a building later when uncertainties are resolved by investing into it initially? 15) Do you think ROA and ROV provide enough justification for strategic property investments that can be profitable in the future but may be deemed unprofitable today? Please explain? 16) Do you think uncertainties are resolved by the ROA/ ROV methods better, as compared to standard evaluation methods (DCF)? 17) Would it be valuable to incorporate real options models into standard evaluation models in practice? If yes, why? How can it be done and what could be the likely barriers? If no, please explain? 18) Which of the ROV method(s) you think has the potential to be adopted by practitioners and why? Thank you CRITERIA FOR SELECTING PARTICIPANTS 346 | P a g e 1) Must be a developer, investor, financier or a valuer involved in property developments/investments or performing financial feasibility evaluation of property developments 2) Must be involved in the development / investment decision making process 3) Must have considerable experience in the field of real estate development and investments (would be desirable to have participants with between 5-15 years of experience in order to have a blend of knowledge from old and new generation) 4) Selected from major players (companies) in the industry 347 | P a g e Appendix C: Visual Aid Design Flexibility Property operating options Switch output After Completion Success (Execute) Expand Gather information Flexible leases Switch output Land Acquisition Waiting option Staging option Temporary shutdown Uncertainty Failure (hold) Contraction Abandon Initial works stage Design & Construction After completion 348 | P a g e Appendix D: Visual Aid j periods: 10 11 12 $97.99 $96.72 $95.47 $94.23 $93.01 $91.80 $90.61 $89.44 $88.28 $87.14 $86.01 $84.89 $83.79 $84.92 $83.82 $82.73 $81.66 $80.62 $83.84 $78.57 $77.55 $75.58 $73.65 $81.73 $75.62 $73.68 $74.67 $73.70 $72.74 $71.80 $70.87 $69.95 $77.62 $76.62 $74.64 $72.72 $80.70 $79.65 $78.62 $76.59 $71.78 $83.89 $82.81 $77.60 $75.60 $74.62 $86.08 $80.67 $79.63 $77.58 $87.22 $84.97 $83.87 $78.59 $76.57 $88.33 $82.78 $80.65 $90.67 $89.49 $87.19 $81.71 $79.60 $91.83 $86.06 $84.94 $82.76 $81.68 $79.58 $88.31 $86.03 $93.04 $90.64 $89.47 $87.16 $94.26 $71.82 $70.89 $69.97 $69.07 $68.17 $69.09 $68.19 $67.31 $66.43 $66.45 $65.59 $64.74 $63.92 $63.09 $61.49 349 | P a g e Appendix E: Visual Aid LEVEL 21-30 EXPANSION LEVEL 11-20 LEVEL 1-10 STAGING/ABANDON/ TEMPORARY SHUT DOWN STAGING STAGING BASEMENT REQUIRED STRENGTH EXCESS STRENGTH 350 | P a g e Appendix F: Participant’s Matrix-Interviewed Property Professionals Role in organization Type of organization Location/Coverage Code for data analysis Director/ Owner Small private financial advisory services Melbourne and inner suburbs Local independent financial advisor Senior advisor Large projects financing company Melbourne and Nationally Financial advisor Managing partner Large private property Nationally and globally advisory services company Global property advisor Senior property advisor Large property advisory services firm Melbourne and nationally Local advisor Senior investment analyst Real estate investment trust-residential developments Melbourne and nationallyMedium to high rise residential apartments REIT Investment director Large listed property Melbourne and nationally-High Large super fund investment company rise residential apartments Development director Global property development company with offices in Melbourne Melbourne and nationally- land Large banking, Medium and high-rise development company apartments Investment director Large private companyinvests pension fundsMelbourne and nationally Melbourne and nationally Large fund developer Director/Owner Private independent company-Small residential developments Melbourne and inner suburbs Small independent developer Senior valuer Large property valuation company Melbourne and nationally Local property valuer Director Small valuation company Focusing on Melbourne market Independent property valuer Managing partner Large valuation company specializing in valuing different assets including property, businesses, machinery Globally with offices in Melbourne Global property valuer property Source: Author 351 | P a g e Appendix G: Publications and Conference Papers Mintah, K (2016), 'Real options and application to Australian property development: a conceptual analysis', paper presented to 22nd Annual Pacific-Rim Real Estate Society Conference, Sunshine Coast, Queensland, Australia, 17-20 January 2016 Mintah, K, Higgins, D, Callanan, J & Wakefield, R (2017), 'A real option approach to valuing the option to defer in a residential project in Melbourne, Australia', paper presented to 23rd Annual Pacific-Rim Real Estate Society Conference, Sydney, New South Wales, Australia, 15-18 January 2017 Mintah, K, Higgins, D, & Callanan, J (2017), 'A Review of real option models for real estate decision making', paper presented to 23rd Annual Pacific-Rim Real Estate Society Conference, Sydney, New South Wales, Australia, 15-18 January 2017 Mintah, K., Higgins, D., Callanan, J & Wakefield, R (2018), 'Staging option application to residential development: Real options approach', International Journal of Housing Markets and Analysis, Vol 11, No 1, pp 101-116 Mintah, K., Higgins, D., & Callanan, J (2018), ‘A Real Option Approach for the Valuation of Switching Output Flexibility in Residential Property Investment’, Journal of Financial Management of Property and Construction, Vol 23, No 2, https://doi.org/10.1108/JFMPC05-2017-0017 Mintah, K, & Baako, K., (2018), 'Conceptualising Real Options Analysis for Risk and Uncertainty Management in Australian Property Developments’, paper presented to 1st Real Estate & Land Planning International Conference, Mykonos, Greece, 04-08th September 2018 Mintah, K (2018), ‘Integrating Real Options Analysis into Practical Property Development Decision Making: Practitioners’ Receptiveness and Acceptance’, paper presented to 1st Real Estate & Land Planning International Conference, Mykonos, Greece, 04-08th September 2018 Citations for doctorial colloquium presentations include: Mintah, K., (2016) ‘Is there value in Waiting? An Empirical Study of Real Options application to Australian Property Developments’, PhD Colloquium, 22nd Annual PacificRim Real Estate Society Conference, Sunshine Coast, Queensland, Australia, 17-20 January 2016 Mintah, K (2017) ‘Is there value in Waiting? An Empirical Study of Real Options application to Australian Property Developments’, PhD Colloquium, 23rd Annual Pacific-Rim Real Estate Society Conference, Sydney, New South Wales, Australia, 15-18 January 2017 Mintah, K (2018) ‘Is there value in Waiting? An Empirical Study of Real Options application to Australian Property Developments’, PhD Colloquium, 1st Real Estate & Land Planning International Conference, Mykonos, Greece, 04-08th September 2018 352 | P a g e Appendix H: Awards RMIT University International Postgraduate Research Scholarship-PhD Scholarship Pacific Rim Real Estate Society Postgraduate Research Scholarship-Best PhD paper presented at the 23rd Annual Pacific-Rim Real Estate Society Conference, Sydney, New South Wales, Australia, 15 -18 January 2017 353 | P a g e ... Citations for doctorial colloquium presentations include: Mintah, K., (2016) ? ?Is there Value in Waiting? An Empirical Study of Real Options application to Australian Property Developments? ??, PhD... Mintah, K (2018) ? ?Is there Value in Waiting? An Empirical Study of Real Options application to Australian Property Developments? ??, PhD Colloquium, 1st Real Estate & Land Planning International Conference,... Terminologies in Real Options 59 When is Real Options Analysis Needed? 60 Typology of Real Options/ Flexibilities 62 Real Options ? ?in? ?? and “on” Projects 67 Real Options/ Flexibility Applications in