Real options: An alternative valuation model for the U.S. REIT Market

REITs are alternative investments that offer asset managers high returns and diversification opportunities. In an active management process, securities selection and more specifically their valuation is a key component of future performance. In this paper, we propose a model that combines a Discount...

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Bibliographic Details
Published inInternational journal of business Vol. 21; no. 1; pp. 42 - 54
Main Authors Dubreuille, Stephane, Cherif, Mondher, Bellalah, Mondher
Format Journal Article
LanguageEnglish
Published Fresno Premier Publishing, Inc 2016
Subjects
Capital expenditures
Cash flow
Cash flow forecasting
Discounted cash flow
Equity capital
Fair value
Financial statements
Hypotheses
Institutional investments
Market potential
Options (Finance)
Portfolio management
Real estate investment trusts
REITs
Rentals
Securities markets
Stock exchanges
Trusts
Valuation
United States > US
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Summary:REITs are alternative investments that offer asset managers high returns and diversification opportunities. In an active management process, securities selection and more specifically their valuation is a key component of future performance. In this paper, we propose a model that combines a Discounted Cash Flow model with real options in order to take into account the different drivers of real estate investment value, such as net asset value, future rentals income and capital expenditures policy. Our theoretical model for Real Estate Investment Trusts provides an average spread around 16% compared with the market value.
ISSN:1083-4346