SWUTC Research Project Description
Title of Project: Accounting for Real Estate Externalities in Valuation of Transit System Projects
Project Number: 169112
Principal Investigator:
Ivan Damnjanovic
(979) 862-6616
P.I. Affiliation: Texas A&M University
idamnjanovic@civil.tamu.edu
Project Monitor:
George Adams
Assistant Director
City of Austin
Neighborhood Planning & Zoning Department
(512) 074-2146
george.adams@ci.austin.tx.us
Project Status: Active
Date Started: 9/1/08
Estimation Completion Date: 8/31/09
Estimated Cost - Current Fiscal: $50,000
Estimated Cost - Total Planned: $50,000
Project Summary:
Project Abstract:
Capital-intensive transit projects such as light rail, monorail, or rapid transit systems are inherently difficult to develop and deliver. These projects rely on strong public support and availability of funds. While in the past, there were some hesitation and opposition to development of transit systems, in recent years (and with increase in price oil and congestion on the existing roadways), the general public has become a strong advocate for these systems. The public, or at least a majority of the people in large metropolitan areas, now see a value of having an efficient system to move large number of people over large distances in a short period of time. However, while the support of the public for such systems grew, the capability of the public sector to fund and finance infrastructure projects including transit projects has declined. The goal of this project is to investigate contracting instruments (real options for developer as well as real estate owners) that can potentially add value, hence make transit projects more economically feasible from the perspective of all participants: general public, real estate owners - residents, private sector, and others.
Project Objectives:
There are two main objectives of this research project: 1) to develop a methodological framework for designing real estate options as value externalities in development of transit project, and 2) to evaluate such externality-based contingency claims and determine their value.
Task Descriptions:
Task 1. Conduct Literature Review
The objective of this task is to undertake a series of activities to identify the stakeholders and the critical issues pertinent to the development of transit projects and their impact as externality to residents in servicing areas. This includes survey the literature related to valuation of real estate, models for contingency claim analysis, and management of transit system development both in the U.S. and abroad.
Task 2. Develop Methodological Framework
The objective of this task is to develop a methodological framework for designing contingency claims (real options) for development of transit projects. Much like in studies of social or natural phenomena, systems theory can be used to develop a descriptive model that can be further used as a tool for designing these real options.
Task 3. Develop Model for Estimating Contingency Claim (Real Option)
The objective of this task is to develop a model to quantify the value of the contingency claims (real options) for development of transit projects. More specifically, this includes development of a heuristic and validation of such heuristic using a risk-neural option valuation approach.
Task 4. Test the Model for Selected Urban Area
The objective of this task is to test the develop model on a real example of transit system development project. Since development of sustainable transit systems is a priority of many metropolitan planning organizations, the study will consider one large metropolitan area such as Austin to illustrate the developed model. This would allow for showcasing the results to both academic audience and policymakers.
Task 5. Prepare Reports and Disseminate Major Findings
The objective of this task is to document the performed research and disseminate the project findings.
Index Terms:
Public transit, Transit operating agencies, Real property, Real estate development, Externalities, Accounting, Research projects