Inside value creation and destruction: opportunism and risk management in development deal making strategies

This study extends award-winning research – prior papers were recognized with best paper awards at the ERES meeting and two ARES meetings – into the key drivers that create and destroy value in real estate development and deal making. Particularly illuminating is considering how findings as of 2017 compare results reported in 2004 in "Shifting Foundations of the Real Estate Knowledge Structure: Revisiting the Review of Real Estate Principles Texts." This investigation considers the assessment as of 2017 of research initially conducted a dozen plus years ago – prior to the 2008 capital markets crisis, people favoring urban places, pro-nationalist politics, challenging globalization and cross-border investing – to examine the commonalities and divergences between different approaches to development and deal-making. Through analyzing the relative contributions of major categories of activities and specific sub tasks to creating and destroying values in real estate development and deal making, insights emerge that can guide important strategic decisions. This research isolates tasks that are of common relative importance in deal making in contributing to value being created and value being destroyed. For property stakeholders (researchers and public officials, developers and investors, professionals and practitioners) understanding the relative contributions of different aspects of property projects, both development and existing properties, is important, essential knowledge. The results of the research provides guidance for opportunistic strategies to create value and to mitigate value loss. These findings have powerful applications to firms engaged in deal making activities, real estate development, and investment managers committing capital. Beyond comprehending the relative importance of the different value contributions of elements of the property ventures, it is most important to understand which factors have become more important and which factors have become less important in a post-crash, urban-focused nationalist prioritizing world. Insights into the behind-the-scenes, below-the-surface relationships of what is involved in creating and destroying value in development and deal making can enable market participants to pursue the rewards and protect against the downside of their property involvements.