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Jussi Vimpari
Real Estate Business, School of Engineering, Aalto University, Otakaari 4, 02150 Espoo, Finland

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Journal article
Published: 13 June 2021 in Energies
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European Union climate goals aim to increase waste incineration instead of landfills. Incineration of waste increases the mismatch between heat production and consumption since waste is generated constantly but energy demand varies significantly between seasons. Seasonal energy storage is suggested to alleviate this mismatch. However, traditional seasonal storage options have not been cost-effective investments for energy companies. This paper explores the feasibility of a large cavern thermal energy storage in a large district heating system with waste incineration. First, 62 one-year optimisations for seasonal storage with varying size and power were conducted to determine the economic performance of the system. Second, the annual system emissions were estimated. The results show that even small capacity seasonal storage reduces system emissions significantly. Return on investment for the most profitable storage with a capacity of 90 GWh and power of 200 MW range between 3.6% and 9.4%, and the investment varies between EUR 43–112 M depending on costs. Seasonal energy storages are still not as profitable as traditional energy investments. This might change due to growing waste heat recovery and the rising cost of carbon emissions. Further research is needed into new business models for implementing large seasonal storages.

ACS Style

Petri Penttinen; Jussi Vimpari; Seppo Junnila. Optimal Seasonal Heat Storage in a District Heating System with Waste Incineration. Energies 2021, 14, 3522 .

AMA Style

Petri Penttinen, Jussi Vimpari, Seppo Junnila. Optimal Seasonal Heat Storage in a District Heating System with Waste Incineration. Energies. 2021; 14 (12):3522.

Chicago/Turabian Style

Petri Penttinen; Jussi Vimpari; Seppo Junnila. 2021. "Optimal Seasonal Heat Storage in a District Heating System with Waste Incineration." Energies 14, no. 12: 3522.

Accepted manuscript
Published: 07 May 2021 in Environmental Research Letters
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Heat pumps are a key technology for improving energy efficiency as they can significantly reduce energy costs and emissions. Given the significant role of heat pumps in carbon neutrality pathways, and pressure for related national energy efficiency programs, it is important to examine economic profitability of heat pump investments and their relative environmental and social benefits. This paper aims to answer the following main research question: are areas with lower housing prices and income less likely to invest into energy efficiency? The paper finds that in Finland heat pumps are already very profitable and converting buildings' heating systems into heat pumps creates major environmental and economic benefits for the residents. The cost of heating and heat pump investment costs does not vary between locations whereas housing prices, rents and income do. Neighborhoods with lower housing prices have less motivation and capability to invest into heat pumps. Urban areas with positive housing price development, higher income and better financing options will likely invest into energy efficiency without subsidies. Potential subsidies should be allocated into areas with lower housing prices, because emissions are evenly distributed, and lower income areas pay relatively more for energy. Energy efficiency subsidies could be tied into housing prices or more specifically into property tax, which is universally collected in most countries. Property tax could be used to guide energy efficiency investments into locations where they would not be carried out otherwise. For areas that do not need subsidies, this paper recommends that awareness should be increased, because the economic and carbon emission reduction potential of energy efficiency measures is still not well understood.

ACS Style

Jussi Vimpari. Should energy efficiency subsidies be tied into housing prices? Environmental Research Letters 2021, 16, 064027 .

AMA Style

Jussi Vimpari. Should energy efficiency subsidies be tied into housing prices? Environmental Research Letters. 2021; 16 (6):064027.

Chicago/Turabian Style

Jussi Vimpari. 2021. "Should energy efficiency subsidies be tied into housing prices?" Environmental Research Letters 16, no. 6: 064027.

Communication
Published: 19 August 2020 in Energies
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Transition to a low carbon energy system requires extensive private investment and novel financing instruments. Corporate power purchase agreements (PPAs) have been proven effective in increasing renewables financing. The challenge is to scale this corporate model to smaller energy consumers that form a significant part of the global total energy demand and carbon dioxide emissions. This paper examines collateral strength and global potential of the real estate sector as an offtaker for PPAs. The strength is evaluated by constructing a detailed energy and economic model for 90,000 buildings in the Helsinki Metropolitan Area (HMA), Finland. The global potential is evaluated by creating country-level profiles with global data of interest rates, energy consumption, and energy costs. The results suggest that real estate is a strong offtaker as the HMA’s value of real estate collateral compared to required wind power capital expenditures (that could cover electricity demand of the buildings) is approximately 100:1, and for cash flows, the ratio is 70:1 between gross rents and PPA costs. Analysis of global data suggests that the majority of buildings’ energy consumption in OECD countries as well as a large part of China’s energy consumption could fall into low access finance under the presented concept.

ACS Style

Jussi Vimpari. Financing Energy Transition with Real Estate Wealth. Energies 2020, 13, 4289 .

AMA Style

Jussi Vimpari. Financing Energy Transition with Real Estate Wealth. Energies. 2020; 13 (17):4289.

Chicago/Turabian Style

Jussi Vimpari. 2020. "Financing Energy Transition with Real Estate Wealth." Energies 13, no. 17: 4289.

Review
Published: 31 March 2020 in Sustainability
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This study aims to review empirical research concerning the impact of green certificates on property cash flows and values, particularly from professional property investors’ perspective. The study uses discounted cash flows (DCF), a widely used property valuation method in income-generating properties, as a methodological framework. In this study, over 70 peer-reviewed studies were identified, categorized, and analyzed in the DCF framework. The reviewed studies indicated that certificates might increase the rental income and decrease the operating expenses, vacancy, and risks of a property. Together with the brand value of certificates, these enhancements should lead to an increase in property value. The number of studies has grown rapidly during the 2010s. Lately, studies have developed from asset-level to portfolio-level examinations. Although the reviewed studies found certification to be beneficial, the range of reported benefits was wide, and over half of the studies concentrated on U.S. commercial real estate markets, with a strong focus on LEED and ENERGY STAR certificates. From a property valuation perspective, applying these results to other markets and certificates might be challenging. Property values that fully reflect the environmental performance of properties would be a key to motivate mainstream investors to adopt sustainable property features.

ACS Style

Niina Leskinen; Jussi Vimpari; Seppo Junnila. A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties. Sustainability 2020, 12, 2729 .

AMA Style

Niina Leskinen, Jussi Vimpari, Seppo Junnila. A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties. Sustainability. 2020; 12 (7):2729.

Chicago/Turabian Style

Niina Leskinen; Jussi Vimpari; Seppo Junnila. 2020. "A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties." Sustainability 12, no. 7: 2729.

Journal article
Published: 01 December 2018 in Energies
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Demand side management can add flexibility to a district heating (DH) system by balancing the customer’s hourly fluctuating heat demand. The aim of this study is to analyze how different demand side management control strategies, implemented into different customer segments, impact DH production. A city scale heat demand model is constructed from the hourly heat consumption data of different customer segments. This model is used to build several demand side management scenarios to examine the effect of them on both, the heat producer, and the customers. The simulations are run for three different-sized DH systems, representing typical DH systems in Finland, in order to understand how the demand side management implementations affect the production. The findings imply that the demand side management strategy must be built individually for each specific DH system; the changing consumption profiles of different customer segments should be taken into consideration. The results show that the value of demand side management for a DH companies remains low (less than 2% in cost savings), having an effect mostly upon the medium loads without any significant decrease in annual peak heat loads. Also, the findings reflect that the DH pricing models should be developed to make demand side management more attractive to DH customers.

ACS Style

Kaisa Kontu; Jussi Vimpari; Petri Penttinen; Seppo Junnila. City Scale Demand Side Management in Three Different-Sized District Heating Systems. Energies 2018, 11, 3370 .

AMA Style

Kaisa Kontu, Jussi Vimpari, Petri Penttinen, Seppo Junnila. City Scale Demand Side Management in Three Different-Sized District Heating Systems. Energies. 2018; 11 (12):3370.

Chicago/Turabian Style

Kaisa Kontu; Jussi Vimpari; Petri Penttinen; Seppo Junnila. 2018. "City Scale Demand Side Management in Three Different-Sized District Heating Systems." Energies 11, no. 12: 3370.

Journal article
Published: 03 July 2017 in Journal of Property Investment & Finance
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PurposeRetail properties are a perfect example of a property class where revenues determine the rent for the property owners. Estimating the value of new retail developments is challenging, as the initial revenues can have a significant variance from the long-term revenue levels. Owners and tenants try to manage this problem by introducing different kind of options, such as overage rent and extension rights, to the lease contracts. The purpose of this paper is to value these options through time for different types of retailers, using real-life data with a method that can be easily applied in practice.Design/methodology/approachThis paper builds upon the existing papers on real option studies but has a strong practical focus, which has been identified as a challenge in the field. The paper presents simple mathematical equations for valuing overage rent and extension options. The equations capture the value related to uncertainty (volatility) that is missed by standard valuation practices.FindingsThe results indicate that overage and extension options can represent a significant proportion of retail lease contract’s value and their value is heavily time-dependent. The option values differ greatly between tenants, as the volatilities can have a large spread across tenants. The paper suggests that the applicability of option pricing theory and calculus should not be considered as an insurmountable barrier any more, rather a greater challenge for the practical adaptability of the method can be the availability of real-life data that is a common problem in real option analysis.Practical implicationsThe value of extension and overage options varies greatly between tenants. In general, the property owner can try balance the positive effects from the overage rents to the negative effects of tenant extensions. However, this study tries to highlight that, as usual, using the “law of averages” can result into poor valuation in this context as well. Even the data used in this study provide valuable findings for the property owner as an analytical deduction can be made that certain types of tenants have higher volatilities and this should be acknowledged when valuing options within lease contracts.Originality/valuePrevious literature in this topic often takes the input data for the option valuation as granted rather than trying to identify the real-life data available for the calculation. This is a common problem in real options valuation and it seems to be one of the reasons why option valuation has not been used widely in practice. This study has used real-life data to assess the problem and more importantly assessed the data across different types of tenants. The volatility spread between different types of tenants has not been discussed previously, even though it has a significant importance when using option pricing in practice.

ACS Style

Jussi Vimpari; Seppo Junnila. Valuing retail lease options through time. Journal of Property Investment & Finance 2017, 35, 369 -381.

AMA Style

Jussi Vimpari, Seppo Junnila. Valuing retail lease options through time. Journal of Property Investment & Finance. 2017; 35 (4):369-381.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2017. "Valuing retail lease options through time." Journal of Property Investment & Finance 35, no. 4: 369-381.

Journal article
Published: 01 April 2017 in Renewable and Sustainable Energy Reviews
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Today solar power is still dominantly presented to be expensive source of electricity. However, the profitability of solar and other electricity generation technologies is typically evaluated with the Levelized Cost of Electricity (LCOE) approach. This paper questions the traditional investment evaluation logics of power production (LCOE) in the interesting case of rooftop PVs and based on customer value generation logics presents a new approach for evaluating the profitability of rooftop PV investments. The approach recognizes the value that PVs produce to real estate owners and utilize basic real estate investment models to evaluate the profitability of PVs. The results imply that, if PVs are considered as a part of the underlying property, rooftop PV systems are already today profitable in many European cities and can provide substantial returns on investment for property owners. More interestingly, the results imply that rooftop PV investments are most profitable in the dense urban cores instead of more remote (industrial) locations, and thus the current trend of urbanization seems to further strengthen the profitability of rooftop solar power. This paper points out that spatial locations drive the economic analysis of real estate, and thus it is likely that it will drive the economic analysis of decentralized on-site energy investments as well.Peer reviewe

ACS Style

Jussi Vimpari; Seppo Junnila. Evaluating decentralized energy investments: Spatial value of on-site PV electricity. Renewable and Sustainable Energy Reviews 2017, 70, 1217 -1222.

AMA Style

Jussi Vimpari, Seppo Junnila. Evaluating decentralized energy investments: Spatial value of on-site PV electricity. Renewable and Sustainable Energy Reviews. 2017; 70 ():1217-1222.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2017. "Evaluating decentralized energy investments: Spatial value of on-site PV electricity." Renewable and Sustainable Energy Reviews 70, no. : 1217-1222.

Conference paper
Published: 01 January 2017 in 24th Annual European Real Estate Society Conference
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In 2016 China’s house prices achieved record growth in some cities and negative growth in others. This paper studies both induced and imposed institutional changes in China’s housing market that give rise to the formation of the national housing investment market (NHIM), using Suzhou, a rapidly emerging industrial city neighbouring Shanghai, as a case study. It argues that NHIM, an induced institutional change, offers opportunities to the private sector and local governments for profits and revenues by generating housing price inflation. On the other hand, the state has been reluctant to hamper NHIM and only imposes rules to restrict their activities when it sees the need. The Suzhou case illustrates that NHIM has been effective in supporting surplus building activities and is powerful enough to cause hyper house price inflation in cities it sees potential. The paper concludes that housing policies in countries with NHIM or without barriers to foreign investment need to take account of the impact of external purchasing power to avoid the excessive house price inflation generated by inward housing investment.,,,

ACS Style

Yunqing Xu; Jussi Vimpari; Seppo Junnila. Housing investment and house prices in China: an institutional analysis with Suzhou as a case study. 24th Annual European Real Estate Society Conference 2017, 1 .

AMA Style

Yunqing Xu, Jussi Vimpari, Seppo Junnila. Housing investment and house prices in China: an institutional analysis with Suzhou as a case study. 24th Annual European Real Estate Society Conference. 2017; ():1.

Chicago/Turabian Style

Yunqing Xu; Jussi Vimpari; Seppo Junnila. 2017. "Housing investment and house prices in China: an institutional analysis with Suzhou as a case study." 24th Annual European Real Estate Society Conference , no. : 1.

Conference paper
Published: 01 January 2017 in 24th Annual European Real Estate Society Conference
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Building integrated renewable energy production, such as solar energy solutions, reduce the greenhouse gas emissions (GHG) caused by operational energy consumption of buildings. What is less understood, however, is how the investment in these sort of energy solutions affects the overall GHG emissions caused by the person or the company that makes the investment. In general, all economic activities cause environmental impacts. Thus, it has been suggested that the boundaries of environmental assessments should not be based on physical boundaries, but rather monetary budgets. For example, carbon footprints of consumers have revealed that investments in energy efficiency do not only reduce the GHG emissions caused by energy consumption, but also the emissions caused by consumption of other goods and services. This is due to the reality that consumers must withdraw the funds for the investment from some other purposes. However, when the investment in energy efficiency starts to make profit, the situation is reversed. The money saved from declining energy consumption is used on goods and services, which again increases the GHG emissions. The phenomenon is called "the environmental rebound effect". The rebound effect caused by an investment is usually negative, meaning additional GHG reductions. The rebound effect caused by (energy) savings is usually positive, meaning additional GHG emissions prompted by the new consumption enabled by the savings. The purpose of this study is to assess the carbon footprint, and demonstrate the rebound effects over time, caused by investments in large scale building integrated solar energy production. The study takes into account the embodied GHG emissions in the new energy system. The rebound effects are estimated with various assumptions about the alternative consumption or investment. The study highlights why the monetary and time dimensions are important, when considering the overall environmental impacts of green investments.,,,

ACS Style

Seppo Junnila; Juudit Ottelin; Jussi Vimpari. Carbon footprint and rebound of large scale building integrated energy production. 24th Annual European Real Estate Society Conference 2017, 1 .

AMA Style

Seppo Junnila, Juudit Ottelin, Jussi Vimpari. Carbon footprint and rebound of large scale building integrated energy production. 24th Annual European Real Estate Society Conference. 2017; ():1.

Chicago/Turabian Style

Seppo Junnila; Juudit Ottelin; Jussi Vimpari. 2017. "Carbon footprint and rebound of large scale building integrated energy production." 24th Annual European Real Estate Society Conference , no. : 1.

Journal article
Published: 01 November 2015 in Sustainable Cities and Society
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ACS Style

Matti Christersson; Jussi Vimpari; Seppo Junnila. Assessment of financial potential of real estate energy efficiency investments–A discounted cash flow approach. Sustainable Cities and Society 2015, 18, 66 -73.

AMA Style

Matti Christersson, Jussi Vimpari, Seppo Junnila. Assessment of financial potential of real estate energy efficiency investments–A discounted cash flow approach. Sustainable Cities and Society. 2015; 18 ():66-73.

Chicago/Turabian Style

Matti Christersson; Jussi Vimpari; Seppo Junnila. 2015. "Assessment of financial potential of real estate energy efficiency investments–A discounted cash flow approach." Sustainable Cities and Society 18, no. : 66-73.

Journal article
Published: 07 October 2015 in Building Research & Information
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The physical adaptability of buildings is very important in today's fast-changing business environment. The actors who invest in long-term adaptability are positioned better to the changes during the life cycle of a building. This conceptual paper argues that the current dominating real estate (property) investment analysis theories do not accommodate enough building design-related information (i.e. physical asset characteristics), which results in long-term loss of competitiveness and unsustainable use of built environment resources. It is demonstrated that physical asset characteristics can create valuable real options that should be acknowledged in real estate investment analysis and management. The real estate investment literature has not so far been able to produce a widely accepted financial model for justifying life-cycle investments. A theory is proposed here that can be used to value life-cycle investments in buildings. This new theory combines of real options valuation, investment analysis and building component life-cycle design. These themes are used to formulate a conceptual framework for valuing life-cycle investments. The framework is intuitive and transparent, and it can be easily added to current spreadsheet investment analysis tools.Peer reviewe

ACS Style

Jussi Vimpari; Seppo Junnila. Theory of valuing building life-cycle investments. Building Research & Information 2015, 44, 345 -357.

AMA Style

Jussi Vimpari, Seppo Junnila. Theory of valuing building life-cycle investments. Building Research & Information. 2015; 44 (4):345-357.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2015. "Theory of valuing building life-cycle investments." Building Research & Information 44, no. 4: 345-357.

Journal article
Published: 14 October 2014 in Property Management
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Purpose – The value of waiting to invest has been acknowledged in management of real capital investments. Investment decision should be undertaken only if it can justify giving up the value of the option to wait; the same logic is proposed here to be applicable on divestment management of a real estate fund. The purpose of this paper is to test option pricing to quantify the option to wait in a residential real estate fund divestment. It is argued that standard industry valuation practices miss the value of active fund management that should be included when planning a fund divestment strategy. Design/methodology/approach – Dynamic programming, specifically binomial option-pricing model is suggested to complement the current industry standard valuation approaches. The approach is tested in an embedded case study where assets of a residential real estate fund are valuated using the model. Findings – Option pricing can provide risk-neutral quantified value whether an apartment building portfolio should be divested in a single transaction or in multiple transactions over time. In the case study, an option value of 6.6 per cent was found for a residential real estate portfolio. Originality/value – This study is the first of its kind to propose that value of waiting to divest is an important element when planning a real estate fund divestment. The approach proposed in this study risk-neutrally calculates the value appreciation from the range of the potential values. This provides the decision-maker a deeper understanding of the implications regarding the chosen line of action.

ACS Style

Jussi Vimpari; Seppo Junnila. Value of waiting – option pricing as a tool for residential real estate fund divestment management. Property Management 2014, 32, 400 -414.

AMA Style

Jussi Vimpari, Seppo Junnila. Value of waiting – option pricing as a tool for residential real estate fund divestment management. Property Management. 2014; 32 (5):400-414.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2014. "Value of waiting – option pricing as a tool for residential real estate fund divestment management." Property Management 32, no. 5: 400-414.

Journal article
Published: 18 September 2014 in International Journal of Strategic Property Management
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The market value of green properties is already acknowledged in scientific literature, but it has still remained unclear how green certificates are incorporated into property valuation. In this study, value influencing mechanism of green certificates in property investment is studied. A widely used discounted cash flow (DCF) model for property valuation was constructed and communicated with spreadsheet to industry professionals for valuing an office property in metropolitan Finland. The goal was to understand the value influencing mechanism and even deeper to identify the differences in DCF parameters between certified properties and non-certified properties. The results show that a green certificate increases on average the property value with 9.0% in the DCF valuation model. Improved yield and net rental income were the main reasons for the higher property value. Interestingly, this is the first known study to empirically open the value influencing mechanisms of green properties presented in earlier theoretical studies.

ACS Style

Jussi Vimpari; Seppo Junnila. VALUE INFLUENCING MECHANISM OF GREEN CERTIFICATES IN THE DISCOUNTED CASH FLOW VALUATION. International Journal of Strategic Property Management 2014, 18, 238 -252.

AMA Style

Jussi Vimpari, Seppo Junnila. VALUE INFLUENCING MECHANISM OF GREEN CERTIFICATES IN THE DISCOUNTED CASH FLOW VALUATION. International Journal of Strategic Property Management. 2014; 18 (3):238-252.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2014. "VALUE INFLUENCING MECHANISM OF GREEN CERTIFICATES IN THE DISCOUNTED CASH FLOW VALUATION." International Journal of Strategic Property Management 18, no. 3: 238-252.

Journal article
Published: 29 July 2014 in Journal of European Real Estate Research
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Purpose – The purpose of this study is first to evaluate whether real options analysis (ROA) is suitable for valuing green building certificates, and second to calculate the real option value of a green certificate in a typical office building setting. Green buildings are demonstrated as one of the most profitable climate mitigation actions. However, no consensus exists among industry professionals about how green buildings and specifically green building certificates should be valued. Design/methodology/approach – The research design of the study involves a theoretical part and an empirical part. In the theoretical part, option characteristics of green building certificates are identified and a contemporary real option valuation method is proposed for application. In the empirical part, the application is demonstrated in an embedded multiple case study design. Two different building cases (with and without green certificate) with eight independent cash flow valuations by eight industry professionals are used as data set for eight valuation case studies and analyses. Additionally, cross-case analysis is executed for strengthening the analysis. Findings – The paper finds that green certificates have several characteristics similar to real options and supports the idea of using ROA in valuing a green certificate. The paper also explains how option pricing theory and discounted cash flow (DCF) method deal with uncertainty and what shortcomings of DCF could be overcome by ROA. The results show that a mean real option value of 985,000 (or 8.8 per cent premium to the mean property value) was found for a Leadership in Energy and Environmental Design Platinum certificate in the Finnish property market. The main finding of the paper suggests that the contemporary real option valuation methods are appropriate to assess the monetary value and the uncertainty of a green building certificate. Originality/value – This is the first study to argue that option-pricing theory can be used for valuing green building certificates. The identification of the option characteristics of green building certificates and demonstration of the ROA in an empirical case makes questions whether the current mainstream investment analysis approaches are the most suitable methods for valuing green building certificates.

ACS Style

Jussi Vimpari; Seppo Junnila. Valuing green building certificates as real options. Journal of European Real Estate Research 2014, 7, 181 -198.

AMA Style

Jussi Vimpari, Seppo Junnila. Valuing green building certificates as real options. Journal of European Real Estate Research. 2014; 7 (2):181-198.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2014. "Valuing green building certificates as real options." Journal of European Real Estate Research 7, no. 2: 181-198.

Journal article
Published: 01 April 2014 in Journal of Corporate Real Estate
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Purpose – The need for flexibility between organisational units is well established in corporate real estate. While the cost of flexibility is rather straightforward to approximate, measuring economical value of the flexibility is not straightforward. The purpose of this paper is to explore how real options analysis can be used for valuing flexibility in a real retrofit investment case, present a research process for valuing the flexibility in the retrofit investment case, and evaluate the empirical usability of real options valuation results compared with traditional discounted cash flow valuation results. Design/methodology/approach – The research is conducted as a case study. A newly introduced real options valuation method, the fuzzy pay-off method is used for analysing data from a Finnish office building retrofit investment case. The major difference in the selected method is that it uses fuzzy set theory instead of probabilistic theory, and the main advantage is the practical applicability, i.e. only three scenarios (minimum, best guess, and maximum) are needed for the valuation of flexibility. In the case, the scenarios are determined using a seven-phase research process that incorporates data available (e.g. rental agreements, building information) to a corporate real estate unit. The research process involves defining vacancy scenarios for rental agreements, transforming them into potential income achievable with flexibility, estimating cost of flexibility, comparing the potential income with the costs, and valuing the real options. Findings – The main finding of this paper is that real options analysis; especially the fuzzy pay-off method can be used for assessing the monetary value of flexibility. The applicability of the fuzzy pay-off method into a practical investment case was found straightforward because assignment of probabilities into different uncertainty scenarios was unnecessary. In the empirical case, it was found that flexibility investments were profitable only when parts of the building instead of the whole building were designed flexible. The present value of the pay-off from flexibility ranged from negative 58/sqm to positive 130/sqm, depending on the tenant. Originality/value – Real options literature, especially in the real estate and construction sector, has requested for new applications of real options analysis in practical setting. This paper adds to that request with an example of evaluating flexibility in a retrofit investment case. The empirical analysis produced in this paper was perceived valuable by case study investor and can be used as a guidance and motivation for further applications of real options in the industry.

ACS Style

Jussi Vimpari; Juho-Kusti Kajander; Seppo Junnila. Valuing flexibility in a retrofit investment. Journal of Corporate Real Estate 2014, 16, 3 -21.

AMA Style

Jussi Vimpari, Juho-Kusti Kajander, Seppo Junnila. Valuing flexibility in a retrofit investment. Journal of Corporate Real Estate. 2014; 16 (1):3-21.

Chicago/Turabian Style

Jussi Vimpari; Juho-Kusti Kajander; Seppo Junnila. 2014. "Valuing flexibility in a retrofit investment." Journal of Corporate Real Estate 16, no. 1: 3-21.

Conference paper
Published: 03 July 2013 in Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria
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It seems that there is not a clear consensus among industry professionals on how green certificates should be valued, even though, there seems to be a consensus that certified properties are potentially valued higher than non-certified properties. This study aims to find out whether the potential extra value of a green certificate could be measured with real option valuation (ROV). Data was gathered from industry professionals using a standard discounted cash flow valuation method constructed in a spreadsheet. ROV was applied in the data using Collan's pay-off method. The results show that an average real option value of 985,000 Euro (or 8.8% premium to the average property value) was found for the green certificate. The main finding is that by examining the certificate as a real option, the potential extra value of a green certificate could be added into min and max case scenarios, thus, making it not necessary to alter the normal cash-flow scenario that should be based on the comparable data available from the market which is scarcely available for certified buildings.,,,

ACS Style

Jussi Vimpari; Seppo Junnila; Jim Berry; Jasmine Lim. Real Options Approach for Valuing Green Certificates. Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria 2013, 1 .

AMA Style

Jussi Vimpari, Seppo Junnila, Jim Berry, Jasmine Lim. Real Options Approach for Valuing Green Certificates. Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria. 2013; ():1.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila; Jim Berry; Jasmine Lim. 2013. "Real Options Approach for Valuing Green Certificates." Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria , no. : 1.

Preprint
Published: 01 January 2013
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It seems that there is not a clear consensus among industry professionals on how green certificates should be valued, even though, there seems to be a consensus that certified properties are potentially valued higher than non-certified properties. This study aims to find out whether the potential extra value of a green certificate could be measured with real option valuation (ROV). Data was gathered from industry professionals using a standard discounted cash flow valuation method constructed in a spreadsheet. ROV was applied in the data using Collan's pay-off method. The results show that an average real option value of 985,000 Euro (or 8.8% premium to the average property value) was found for the green certificate. The main finding is that by examining the certificate as a real option, the potential extra value of a green certificate could be added into min and max case scenarios, thus, making it not necessary to alter the normal cash-flow scenario that should be based on the comparable data available from the market which is scarcely available for certified buildings.

ACS Style

Jussi Vimpari; Seppo Junnila. Real Options Approach for Valuing Green Certificates. 2013, 1 .

AMA Style

Jussi Vimpari, Seppo Junnila. Real Options Approach for Valuing Green Certificates. . 2013; ():1.

Chicago/Turabian Style

Jussi Vimpari; Seppo Junnila. 2013. "Real Options Approach for Valuing Green Certificates." , no. : 1.

Research
Published: 03 August 2012 in Building Research & Information
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The possible connection between sustainability innovations and the market capitalization of construction sector companies is examined. This is the first known study to test statistically the connection between sustainability innovations and the market value of companies in the construction sector. An event study model is used to analyse sustainability innovation announcements and financial information of large construction sector companies in a number of countries. The main finding of the analysis is that a positive and statistically significant association exists between sustainability innovation announcements and the market value of companies in the construction sector. According to the results, sustainability innovation announcements explain an increase of 0.82% in the market capitalization of the studied companies. The findings are in line with earlier studies suggesting that investments of construction sector companies in sustainability can lead to the creation of economic value. The results imply that sustainability innovations are relevant to the top management of companies operating in the construction sector regarding business development. In addition, information on sustainability innovations can be useful to stock market investors for assessing the future growth potential of construction companies. Le rapport possible entre les innovations en matière de durabilité et la capitalisation des entreprises du secteur du bâtiment est examiné. Il s'agit de la première étude connue qui cherche à vérifier statistiquement le rapport entre les innovations dans le domaine de la durabilité et la valeur marchande des entreprises du secteur du bâtiment. Un modèle d'étude événementielle est utilisé pour analyser les annonces d'innovations ayant trait à la durabilité et les informations financières des grandes entreprises du secteur du bâtiment dans un certain nombre de pays. Le résultat principal de l'analyse est qu'il existe un lien positif et statistiquement significatif entre les annonces d'innovations ayant trait à la durabilité et la valeur marchande des entreprises du secteur du bâtiment. D'après les résultats, les annonces d'innovations ayant trait à la durabilité expliquent un accroissement de 0,82 % de la capitalisation boursière des sociétés étudiées. Ces constatations sont conformes aux études antérieures suggérant que les investissements des entreprises du secteur du bâtiment en matière de durabilité peuvent conduire à la création de valeur économique. Ces résultats impliquent que les innovations ayant trait à la durabilité sont des éléments pertinents en termes de développement d'entreprises pour les dirigeants des sociétés travaillant dans le bâtiment. De plus, les informations relatives aux innovations ayant trait à la durabilité peuvent être utiles aux investisseurs du marché boursier pour évaluer les possibilités de croissance future des entreprises du bâtiment. Mots clés: performances commerciales, entreprises du bâtiment, secteur du bâtiment, innovation, valeur marchande, durabilité

ACS Style

Juho-Kusti Kajander; Matti Sivunen; Jussi Vimpari; Lauri Pulkka; Seppo Junnila. Market value of sustainability business innovations in the construction sector. Building Research & Information 2012, 40, 665 -678.

AMA Style

Juho-Kusti Kajander, Matti Sivunen, Jussi Vimpari, Lauri Pulkka, Seppo Junnila. Market value of sustainability business innovations in the construction sector. Building Research & Information. 2012; 40 (6):665-678.

Chicago/Turabian Style

Juho-Kusti Kajander; Matti Sivunen; Jussi Vimpari; Lauri Pulkka; Seppo Junnila. 2012. "Market value of sustainability business innovations in the construction sector." Building Research & Information 40, no. 6: 665-678.