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“White” Site Valuation: A Real Option Approach Care

Author/s: Sing Tien Foo, Yu Shi Ming, Ong Seow Eng

Date Published: 1/01/2002

Published in: Volume 8 - 2002 Issue 2 (pages 140 - 157)

Abstract

The “white-site ” zoning concept was introduced in Singapore to give developers more flexibility in the use of the sites they bought via the government’s sale of sites program. Endowed with the switch use options, developers can respond to the market demand and supply conditions more effectively by instantly adjusting and optimizing the space among different uses without having to pay a hefty differential premium. This study proposes a two-stage sequential real option model to jointly estimate the premiums for the flexibilities in switching use and selecting the most favorable timing for a white site development. The proposed real option models are then applied to empirically estimate the premiums for five selected white sites.

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Keywords

Optimal Development Timing Option - Option Premium - Switch Use Option - White Site

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