Economic Evaluation of Projects Lecture PDF - Politecnico di Milano 2024

AUIC A.A. 2024/2025 Course of Economic Evaluation of Projects prof. Giulia Datola The market value 3_October 09, 2024  Program of the course ECONOMIC EVALUATION OF PROJECTS A.Y. 2024/2025 18-set-24 8:15 - 11:15 L1_ Introduction to t...

AUIC A.A. 2024/2025 Course of Economic Evaluation of Projects prof. Giulia Datola The market value 3_October 09, 2024  Program of the course ECONOMIC EVALUATION OF PROJECTS A.Y. 2024/2025 18-set-24 8:15 - 11:15 L1_ Introduction to the course and project work L2_The Nature of the Real Estate Market. Information on Real Estate Market. How to Theoretical + practical 25-set-24 8:15 - 11:15 develop Market Analysis example T1 Theoretical + exercise 02-ott-24 8:15 - 11:15 L3_ Basics of financial math and exercises in class L4_Market Value definitions and Market Value estimation: Sales Comparison Theoretical + exercise 09-ott-24 8:15 - 11:15 Approach (SCA) + Income Approach in class Theoretical + exercise T2 16-ott-24 8:15 - 11:15 L5_Market Value estimation: Cost approach + cost analysis in class Theoretical + practical 23-ott-24 8:15 - 11:15 L6_Private feasibility: Criteria and decision rules example 30-ott-24 8:15 - 11:15 L7_Project work revision I: Cost Analysis I revision Workshop in class for 06-nov-24 8:15 - 11:15 L8_Private feasibility: Business Plan - workshop "how to develop a business plan" PW 13-nov-24 8:15 - 11:15 L9_Public feasibility: Stakeholders Analysis and Multicriteria Analysis Theoretical + practical example T3 20-nov-24 8:15 - 11:15 L10__Project work revision II: Business plan II revision Workshop in class for 27-nov-24 8:15 - 11:15 L11_Public feasibility: Community Impact Evaluation (CIE) method + workshop PW 04-dic-24 8:15 - 11:15 L12_Project work revision III: final review III revision 18-dic-24 8:15 - 11:15 L13_Project work revision IV: final review IV revision  The market value: L4 09/10 definition and approaches to evaluate it. List of contents/Learning goals 1_Definition of Market Value 2_Evaluation Report 3_How to appraise the Market Value 4 Definition of Market Value 5  Basic reference https://tegova.org/valuation-standards  Basic reference https://www.ivsc.org/  EVS 1_ Market Value Definition of Market Value EVS, 2020  EVS 1_ Market Value Definition of Market Rent EVS, 2020  EVS 1_ Market Value § Result § Real property being valued § Transaction § Valuation date § Nature of the hypothetical parties as willing and competitive § Consideration by the parties EVS 1_ Market Value The result  EVS 1_ Market Value The real property being valued  EVS 1_ Market Value Concept of highest and best use EVS 1_ Market Value The transaction EVS 1_ Market Value The valuation date (1/2) EVS 1_ Market Value The valuation date (2/2)  EVS 1_ Market Value The nature of the hypothetical parties as willing and competitive 1/3  EVS 1_ Market Value The nature of the hypothetical parties as willing and competitive (2/3)  EVS 1_ Market Value The nature of the hypothetical parties as willing and competitive (3/3)  EVS 1_ Market Value The consideration by the parties EVS 1_ Market Value Assumptions Evalutation Report 23 24 25 26 27 28 29 30 31 32 33 How to appraise the Market Value 34  Methods to appraise Market Value Both the sales comparison approach and the cost approach are based on the economic principle of substitution, when 1 thing can be substituted for another, then their values will be comparable. Hence, the value of property will be comparable to either comparable properties with similar qualities or what it would cost to build an equivalent property. There are 3 conventional methods to determine the market value of real estate § the sales comparison approach § the cost approach RECONCILIATION § the income approach ü direct capitalizazion ü yield capitalization Not every property’s market value can be determined by all 3 approaches; usually, there will be a best method, but the other methods may narrow the range of the estimated market value. Specific types of property will usually have the same best method. The sales comparison approach is considered the best method for appraising single family homes. The cost approach is used to appraise special purpose buildings such as churches, schools and public buildings. The income approach is used to estimate the market value of income producing properties such as office buildings, warehouses, apartment buildings and shopping centers. When adequate financial data for recent sales of similar income producing properties is unavailable, appraisers may use all three approaches.