Integrating the Capital Asset Pricing Model with the Analytic Hierarchy Process and the Delphi Method: a proposed method for estimating the discount rate in constrained real estate development initiatives

The legislative framework on territorial and urban planning has become increasingly rich and complex in the European Union, particularly Italy. The structured – and often hindering – system of division of responsibilities between the central State, Regions, local institutions, and organisms generates different levels of administrative verification. The environmental and landscape constraints by which each Public Administration with jurisdiction over the territory exercises its powers strongly impact territorial management and negatively affect investments. Over the years, this has been one of the main reasons behind the significant dilation of the risk and the time required to obtain the necessary authorizations to start construction, producing “business risk.” Based on this premise, this work presents a methodological investigation of the relationships between environmental and landscape constraints, the regulatory framework involving the building, and its Market Value. This is finally aimed at finding suitable methods and procedures to formulate a reasonable discount rate considering the constraints and the related regulations that operate on an asset. A multi-step method integrating the Capital Asset Pricing Model, Analytic Hierarchy Process, and Delphi Method is proposed to assess the discount rate component related to urban risk.