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Articles:
Tenant Management and Lease Valuation for Retail Properties: A Real Options Approach Authors: Takeaki Kariya, Yasuyuki Kato, Tomonori Uchiyama and Takashi Suwabe Start Page:44
Abstract: In this paper, we
formulate a tenant management problem for retail properties, such as
shopping centers, provide an analytical framework for deriving the
probability distribution of the sum of discounted future cash flows
stochastically generated through tenant management, and find an optimal
lease agreement structure and strategy for tenant-replacement management.
More specifically, we formulate the problem of valuing the net present value
of future net income from a retail property with tenant management and
provide a valuation model for management decision making. The income
fluctuates with market rent variations and management processes. In our
framework, a property manager is required to choose an optimal mix of fixed
rent and variable rent linked to tenant sales, and one of two
tenant-replacement rules for return and risk enhancement. Finally, we
provide an optimal strategy for this problem using Monte Carlo simulation,
through which we value the real options of adopting an optimal strategy for
percentage rent and tenant replacement made available by the New House Lease
Law in Japan. |
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