Sustainable Investment Project Evaluation

Tadeusz A. Grzeszczyk , Małgorzata Waszkiewicz

Abstract

This paper concerns a current problem of multifaceted evaluation of investment projects. Information that contains the actual value of the initiated investment is often the basis for making decisions regarding its further implementation, especially when significant changes occur in the project’s environment. The process of project evaluation should therefore include all factors that may affect its value. However, there is a research gap regarding the insufficient development of methods of commercial real estate investment evaluation that integrate quantitative (financial) approaches and qualitative factors that influence the value of project, and also refer to the achievements in the scope of project management. The purpose of this paper is to introduce the integrated method of investment project evaluation based on the common valuation method (an income approach), supplemented by the results of the implementation of the Real Options Method (ROM) and complemented by the project sustainability factor. Case studies were carried out to prove that an exit option (resignation) can support the ongoing evaluation of the investment. Individual in-depth interviews (IDI) were conducted to examine the sustainability impact on its value. Three case studies involving commercial properties have verified the possibility of applying the proposed integrated method. The following findings were discovered as a result: nowadays, in the turbulent project environment, the common investment project valuation methods need to be extended to support the managerial decision regarding their further implementation and the securing of their flexibility. Also, sustainability has been recognized as a factor that increases the project value, which should be taken into account during the evaluation process. A comparative analysis indicates that the accuracy of the proposed new method delivers a more precise determination of the investment value than the common valuation methods.