The appraisal of data centres: deconstructing the cash flow

This paper analyses the appraisal of a specialized form of real estate - data centres - that has a unique blend of locational, physical and technological characteristics that differentiate it from conventional real estate assets. Market immaturity, limited trading and a lack of pricing signals enhance levels of appraisal uncertainty and disagreement relative to conventional real estate assets. Given the problems of applying standard discounted cash flow, an approach to appraisal is proposed that uses pricing signals from traded cash flows that are similar to the cash flows generated from data centres. Based upon ‘the law of one price’, it is assumed that two assets that are expected to generate identical cash flows in the future must have the same value now. It is suggested that the expected cash flow of assets should be analysed over the life cycle of the building. Corporate bond yields are used to provide a proxy for the appropriate discount rates for lease income. Since liabilities are quite diverse, a number of proxies are suggested as discount and capitalisation rates including indexed-linked, fixed interest and zero-coupon bonds.

The use of public participation and economic appraisal for public involvement in large-scale hydropower projects: Case study of the Nam Theun 2 Hydropower Project

Gaining public acceptance is one of the main issues with large-scale low-carbon projects such as hydropower development. It has been recommended by the World Commission on Dams that to gain public acceptance, publicinvolvement is necessary in the decision-making process (WCD, 2000). As financially-significant actors in the planning and implementation of large-scale hydropowerprojects in developing country contexts, the paper examines the ways in which publicinvolvement may be influenced by international financial institutions. Using the casestudy of the NamTheun2HydropowerProject in Laos, the paper analyses how publicinvolvement facilitated by the Asian Development Bank had a bearing on procedural and distributional justice. The paper analyses the extent of publicparticipation and the assessment of full social and environmental costs of the project in the Cost-Benefit Analysis conducted during the projectappraisal stage. It is argued that while efforts were made to involve the public, there were several factors that influenced procedural and distributional justice: the late contribution of the Asian Development Bank in the projectappraisal stage; and the issue of non-market values and discount rate to calculate the full social and environmental costs.

The impact of price promotions on producer strategies in markets with large product heterogeneity

Although current research indicates that increasing the number of options has negative effects on the cognitive ability of consumers, little understanding has been given to the consequences on producers and their strategic behavior. This article tests whether a large portfolio of products is beneficial to producers by observing UK consumer response to price promotions. The article shows that discounts induce mainly segment switching (74% of the total impact), with a limited effect on stockpiling (26%) and no impact on purchase incidence. Consequently, consumers prefer to “follow the discount” rather than purchase multiple units of the same wine. This result seems to explain the current structure of the market, and suggests that discounts may conflict with segment loyalty, a situation that disfavors producers, particularly in very populated segments. Results also casts doubts on the economic sustainability of competition based on an intense product differentiation in the wine sector.

A unifying framework for metrics for aggregating the climate effect of different emissions

Multi-gas approaches to climate change policies require a metric establishing ‘equivalences’ among emissions of various species. Climate scientists and economists have proposed four kinds of such metrics and debated their relative merits. We present a unifying framework that clarifies the relationships among them. We show, as have previous authors, that the global warming potential (GWP), used in international law to compare emissions of greenhouse gases, is a special case of the global damage potential (GDP), assuming (1) a finite time horizon, (2) a zero discount rate, (3) constant atmospheric concentrations, and (4) impacts that are proportional to radiative forcing. Both the GWP and GDP follow naturally from a cost–benefit framing of the climate change issue. We show that the global temperature change potential (GTP) is a special case of the global cost potential (GCP), assuming a (slight) fall in the global temperature after the target is reached. We show how the four metrics should be generalized if there are intertemporal spillovers in abatement costs, distinguishing between private (e.g., capital stock turnover) and public (e.g., induced technological change) spillovers. Both the GTP and GCP follow naturally from a cost-effectiveness framing of the climate change issue. We also argue that if (1) damages are zero below a threshold and (2) infinitely large above a threshold, then cost-effectiveness analysis and cost–benefit analysis lead to identical results. Therefore, the GCP is a special case of the GDP. The UN Framework Convention on Climate Change uses the GWP, a simplified cost–benefit concept. The UNFCCC is framed around the ultimate goal of stabilizing greenhouse gas concentrations. Once a stabilization target has been agreed under the convention, implementation is clearly a cost-effectiveness problem. It would therefore be more consistent to use the GCP or its simplification, the GTP.

The correlation of ULF waves and auroral intensity before, during and after substorm expansion phase onset

We present case studies of the evolution of magnetic wave amplitudes and auroral intensity through the late growth phase and the expansion phase of the substorm cycle. We present strong evidence that substorm-related auroral enhancements are clearly and demonstrably linked to ULF wave amplitudes observed at the same location. In most cases, we find that the highest correlations are observed when the magnetometer time series is advanced in time, indicating that the ULF wave amplitudes start to grow before measured auroral intensities, though interestingly this is not always the case. Further we discuss the four possible reasons that may be able to explain both the timing and the high correlations between these two phenomena, including: a simple coincidence, an artifact of instrumental effects, the response of the ionosphere to magnetic waves and auroral particle precipitation, and finally that ULF waves and auroral particle precipitation are physically linked. We discount coincidence and instrumental effects since in the studies presented here they are unlikely or in general will contribute negligible effects, and we find that the ionospheric response to waves and precipitation can explain some, but not all of the results contained within this paper. Specifically, ionospheric response to substorm waves and auroral precipitation cannot explain that the result that previous studies have shown, that onset of ULF wave activity and the onset of auroral particle precipitation occur at the same time and in the same location. This leaves the possibility that ULF waves and auroral particles are physically linked.

Accounting for risk aversion in repeated prisoners’ dilemma games: an experimental test

We apply experimental methods to study the role of risk aversion on players’ behavior in repeated prisoners’ dilemma games. Faced with quantitatively equal discount factors, the most risk-averse players will choose Nash strategies more often in the presence of uncertainty than when future profits are discounted in a deterministic way. Overall, we find that risk aversion relates negatively with the frequency of collusive outcomes.

Nonlocal office investors: anchored by their markets and impaired by their distance

Nonlocal investors purchase and sell investment property in a distant metropolitan area. In this study, we identify capital value underperformance for nonlocal investors on both sides of the transaction, when they purchase and when they sell. The commercial real estate transactions data include a national sample of office property occurring in more than 100 U.S. markets. Using propensity-score matched sample to control for selection bias, we find that nonlocal investors overpay on the purchase by an estimated 13.8 % and sell at an estimated 7 % discount. These disadvantages relative to local investors expand with the geographic distance separating investor and asset. Nonlocal investors fundamentally overvalue similar assets sold to each other relative to assets transacted between locals, and are less patient as sellers. The positive bias in overpayment is directly tied to office rent differentials between the asset and investor markets.

Housing or property? The dynamics of housing policy and property principles in the right to buy

This paper examines the interplay and tension between housing law and policy and property law, in the specific context of the right to buy (RTB). It focuses on funding arrangements between the RTB tenant and another party. It first examines how courts determine the parties' respective entitlements in the home, highlighting the difficulty of categorising, under traditional property law principles, a contribution in the form of the statutory discount conferred on the RTB tenant. Secondly, it considers possible exploitation of the RTB scheme, both at the macro level of exploitation of the policy underpinning the legislation and, at the micro level, of exploitation of the tenant. The measures contained in the Housing Act 2004 intended to curb exploitation of the RTB are analysed to determine what can be considered to be legitimate and illegitimate uses of the scheme. It is argued that, despite the government's implicit approval, certain funding arrangements by non-resident relatives fail to give effect to the spirit of the scheme.

Testing for bubbles in indirect property price cycles

Speculative bubbles are generated when investors include the expectation of the future price in their information set. Under these conditions, the actual market price of the security, that is set according to demand and supply, will be a function of the future price and vice versa. In the presence of speculative bubbles, positive expected bubble returns will lead to increased demand and will thus force prices to diverge from their fundamental value. This paper investigates whether the prices of UK equity-traded property stocks over the past 15 years contain evidence of a speculative bubble. The analysis draws upon the methodologies adopted in various studies examining price bubbles in the general stock market. Fundamental values are generated using two models: the dividend discount and the Gordon growth. Variance bounds tests are then applied to test for bubbles in the UK property asset prices. Finally, cointegration analysis is conducted to provide further evidence on the presence of bubbles. Evidence of the existence of bubbles is found, although these appear to be transitory and concentrated in the mid-to-late 1990s.

Autonomy and the socialisation of architects

The socio-cultural production of architects' identities, and their professional personas, is a lively source of continuing debate. At one extreme, there is the claim to autonomy that highlights the distinctiveness of architecture and its cultural and disciplinary specificity. This view is challenged by those who emphasise architects' dependence, for acting and actions, on their embeddedness into collective, social, settings and relationships. In the paper, we consider what it may mean to be ‘autonomous of’ and ‘dependent on’ in relation to the actions of architects. There is limited specification in architectural writings about what autonomy and dependence are, and we suggest that there is a need not to discount such terms, but to reformulate them by recognising that the socially constructed self is an integral part of individual action. In this respect, we seek to amplify, and evaluate, the concept of relational autonomy that distances the notion of autonomy from individualistic, under-socialised, accounts of architects and their practices. Referring to three empirical examples of practice, we amplify this understanding by, first, outlining what a relational autonomous approach to architecture might entail, and, secondly, assessing how far it may enable a conception of the practices of architects in ways whereby, following Tony Fry's observations, they are conceived as much broader than ‘the specificity of any particular activity’ that expresses their existence.

Investigating preferences for dynamic electricity tariffs: the effect of environmental and system benefit disclosure

Dynamic electricity pricing can produce efficiency gains in the electricity sector and help achieve energy policy goals such as increasing electric system reliability and supporting renewable energy deployment. Retail electric companies can offer dynamic pricing to residential electricity customers via smart meter-enabled tariffs that proxy the cost to procure electricity on the wholesale market. Current investments in the smart metering necessary to implement dynamic tariffs show policy makers’ resolve for enabling responsive demand and realizing its benefits. However, despite these benefits and the potential bill savings these tariffs can offer, adoption among residential customers remains at low levels. Using a choice experiment approach, this paper seeks to determine whether disclosing the environmental and system benefits of dynamic tariffs to residential customers can increase adoption. Although sampling and design issues preclude wide generalization, we found that our environmentally conscious respondents reduced their required discount to switch to dynamic tariffs around 10% in response to higher awareness of environmental and system benefits. The perception that shifting usage is easy to do also had a significant impact, indicating the potential importance of enabling technology. Perhaps the targeted communication strategy employed by this study is one way to increase adoption and achieve policy goals.

Energy performance ratings and house prices in Wales: an empirical study

This paper investigates the price effect of EPC ratings on the residential dwelling prices in Wales. It examines the capitalisation of energy efficiency ratings into house prices using two approaches. The first adopts a cross-sectional framework to investigate the effect of EPC band (and EPC rating) on a large sample of dwelling transactions. The second approach is based on a repeat-sales methodology to examine the impact of EPC band and rating on house price appreciation. The results show that, controlling for other price influencing dwelling characteristics, EPC band does affect house prices. This observed influence of EPC on price may not be a result of energy performance alone; the effect may be due to non-energy related benefits associated with certain types, specifications and ages of dwellings or there may be unobserved quality differences unrelated to energy performance such as better quality fittings and materials. An analysis of the private rental segment reveals that, in contrast to the general market, low-EPC rated properties were not traded at a significant discount, suggesting different implicit prices of potential energy savings for landlords and owner-occupiers.

Collusion in a Bertrand duopoly model with decreasing returns and product differentiation

We study cartel stability in a differentiated price-setting duopoly with returns to scale. We show that a cartel may be equally stable in the presence of lower differentiation, provided that the decreasing returns parameter is high. In addition we demonstrate that for a given factor of discount, there are technologies that can have decreasing returns to scale where the cartel always is stable independent of the differentiation degree.

Energy performance ratings and house prices in Wales: an empirical study

This paper investigates the effect of Energy Performance Certificate (EPC) ratings on residential prices in Wales. Drawing on a sample of approximately 192,000 transactions, the capitalisation of energy efficiency ratings into house prices is investigated using two approaches. The first adopts a cross-sectional framework to investigate the effect of EPC rating on price. The second approach applies a repeat-sales methodology to investigate the impact of EPC rating on house price appreciation. Statistically significant positive price premiums are estimated for dwellings in EPC bands A/B (12.8%) and C (3.5%) compared to houses in band D. For dwellings in band E (−3.6%) and F (−6.5%) there are statistically significant discounts. Such effects may not be the result of energy performance alone. In addition to energy cost differences, the price effect may be due to additional benefits of energy efficient features. An analysis of the private rental segment reveals that, in contrast to the general market, low-EPC rated dwellings were not traded at a significant discount. This suggests different implicit prices of potential energy savings for landlords and owner-occupiers.

El papel de los rendimientos y la diferenciacion de productos como determinantes de la estabilidad del cartel

We study cartel stability in a differentiated quantity-setting duopoly with decreasing returns to scale. We show that a cartel may be equally stable in the presence of lower differentiation, provided that the decreasing returns parameter is higher. Furthermore, we show that, above a given discount rate, a cartel may be stable for any degree of product differentiation.