Flexibility and Real Estate Valuation under Uncertainty

15Timing Options in Development: Now we Turn to the Types of Timing Options

LEARNING OBJECTIVES

• Review project start‐timing flexibility, the delay option;
• Introduce project production timing flexibility;
• Understand the difference between the two forms of production timing flexibility—modular production and phasing;
• Understand parallel and sequential phasing;
• Characterize options as defensive or offensive according to their simulation target curve results.

OUTLINE OF THE CHAPTER

1. 15.1 Project Start‐Timing Flexibility (the Delay Option)
2. 15.2 Project Production Timing Flexibility
3. 15.3 Modular Production Timing Flexibility
4. 15.4 Phasing Timing Flexibility
5. 15.5 Types of Phasing
6. 15.6 Recognizing Defensive and Offensive Options in Simulation Results
7. 15.7 Conclusion

Broadly speaking, timing options are more common in development projects than are product options. Almost all development projects have at least some basic type of timing option. Here, we consider three types of timing options. For purposes of conceptual understanding, and to build your analytic intuition, the timing options we consider here effectively take the product as given. It is useful to distinguish relatively “pure” types of options. In reality, timing options will, of course, often exist simultaneously with product flexibility.

After discussing the types of timing options, this chapter concludes with a demonstration of how one can characterize options as defensive or offensive by what they do ...