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Open AccessArticle

Enhanced Cash Flow Valuation in Real Estate Management by Integrating Innovative Materials and Risk Assessment

1
Faculty of Business and Economics, Technische Universität Dresden, Münchner Platz 1/3, 01187 Dresden, Germany
2
FutureValue Group AG, Obere Gärten 18, 70771 Leinfelden-Echterdingen, Germany
3
Institute for Integrated Management of Material Fluxes and of Resources (UNU-FLORES), United Nations University, Ammonstrasse 74, 01067 Dresden, Germany
*
Authors to whom correspondence should be addressed.
Sustainability 2020, 12(6), 2201; https://doi.org/10.3390/su12062201
Received: 30 December 2019 / Revised: 3 March 2020 / Accepted: 10 March 2020 / Published: 12 March 2020
Environmental criteria have become a critical issue for the evaluation of projects and products, particularly for businesses with extensive life cycles. Sustainability criteria and project risk management are underexplored in real estate development, and thus endanger business survival. The aim of this article is to improve the understanding of uncertainties in the real estate industry by using a stochastic risk assessment approach and to broaden the risk assessment methodology. Thus, this article investigates the importance of material selection regarding external and project risk for real estate development. Aside from conventional projects, risks are analyzed for projects with high-quality materials (HQMs) that are characterized by environmental benefits. In following a mixed method approach, we began by conducting interviews with developers about the most important risks, and later incorporating these factors into a stochastic cash-flow model. Finally, we illustrated our findings in a case study. Overall, the highest risks were shown from resource prices and changing regulations, while the rankings of the two materials differ slightly; HQMs rank higher on the created risk index than conventional materials. The cash-flow model shows that conventional materials perform slightly better than HQMs, although uncertainties within the calculations are similar. The article contributes to risk management and decision-making for real estate projects by providing insights into the discussion and analysis of the financial performance of sustainable construction material and design that might be crucial for disruptive innovations. We present a model that integrates environmental and long-term effects in the cash-flow evaluation of real estate projects, thereby increasing managerial flexibility. View Full-Text
Keywords: risk analysis; economic–environmental sustainability evaluation; material selection; decision making; green construction; real estate development; cash flow model risk analysis; economic–environmental sustainability evaluation; material selection; decision making; green construction; real estate development; cash flow model
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Bergmann, P.; Kamarás, E.; Gleißner, W.; Guenther, E. Enhanced Cash Flow Valuation in Real Estate Management by Integrating Innovative Materials and Risk Assessment. Sustainability 2020, 12, 2201.

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