Real-Time Valuation: Breathing New Life into Moribund DCF Modeling

Young Michael

Journal of Real Estate Practice and Education, 2007, vol. 10, issue 1, 25-40

Abstract: By using readily available daily information on the time value of money, namely the Treasury yield curve, and by applying risk premiums appropriate to commercial real estate tenant leases, the predominant single discount rate shortcut Discounted Cash Flow (DCF) models can be improved. By utilizing the Treasury yield curve, real-time valuation is possible. The Real-Time Valuation (RTV) model proposed here also produces useful statistics to aid portfolio construction and monitoring such as duration and explicit risk assessment. These statistics are unavailable in current formulations of real estate DCF models.

Date: 2007
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DOI: 10.1080/10835547.2007.12091621

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