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Amirtash, P, Majid Parchami, J and Jelodar, M B (2021) Integration of project management services for International Engineering, Procurement and Construction projects. Built Environment Project and Asset Management, 11(2), 330-49.
Bhattacharya, S, Momaya, K S and Iyer, K C (2021) Bridging the gaps for business growth among Indian construction companies. Built Environment Project and Asset Management, 11(2), 231-50.
Cevikcan, E and Kose, Y (2021) Optimization of profitability and liquidity for residential projects under debt and equity financing. Built Environment Project and Asset Management, 11(2), 369-91.
- Type: Journal Article
- Keywords: optimization; residential projects; cash flow; linear programming; integer programming; net present value; financial management; profitability; financing; USA
- ISBN/ISSN:
- URL: http://dx.doi.org/10.1108/BEPAM-01-2020-0016
- Abstract:
An appropriate space allocation among different residence types gives higher profitability and liquidity for cash flow management in real estate projects for developers. Thereby, a balance between debt and equity should be kept for capital formation in developers where high level of cost, profit and risk exists. The purpose of this paper is to provide cash flow optimization under debt and equity financing while providing an appropriate space allocation of residence types via synchronous consideration of profitability and liquidity. A novel optimization methodology that includes project financing, optimization and experimental design modules is proposed. The first module, project financing, considers the flexibility of utilizing one or both of debt financing and equity financing when making capital. The optimization module addresses space allocation among different residence types for a construction while maximizing profitability and liquidity using two mixed-integer linear programming models in a pre-emptive manner. The experimental design module assesses the effects of decisive parameters within the methodology via multivariate analysis of variance (MANOVA). The proposed methodology is applied to a real-life residential project in Istanbul. The optimization module yielded 42.5% profitability via the first linear programming model and 2.2% trade-off between liquidity and profitability while minimizing the payback period by the second linear programming model. Meanwhile, MANOVA results showed that profit per square meter and sale rate trends are the most prominent factors considering their significant effects on net present value and payback period. To the best knowledge of the author, related papers focused only on profitability under equity financing. Liquidity (as an objective) and equity financing (as a financing method) have not been handled. Hence, this paper not only performs profitability and liquidity-oriented cash flow optimization under debt and equity financing but also optimizes space allocation of residences for the first time.
Isuri Anuradha, A, Soorige, D and Geekiyanage, D (2021) Comparative study on life cycle assessment of buildings in developed countries and Sri Lanka. Built Environment Project and Asset Management, 11(2), 304-29.
Moyo, T, Crafford, G and Emuze, F (2021) People-centred management for improving construction workers' productivity in Zimbabwe. Built Environment Project and Asset Management, 11(2), 350-68.
Ottou, J A, Baiden, B K, Nani, G and Martin Morgan, T (2021) Benefits of implementing Six Sigma in competitive tendering process. Built Environment Project and Asset Management, 11(2), 214-30.
Safapour, E, Kermanshachi, S and Kamalirad, S (2021) Analysis of effective project-based communication components within primary stakeholders in construction industry. Built Environment Project and Asset Management, 11(2), 157-73.
Sekar, G, Sambasivan, M and Viswanathan, K (2021) Does size of construction firms matter? Impact of project-factors and organization-factors on project performance. Built Environment Project and Asset Management, 11(2), 174-94.
Sun, J, Balakrishnan, S and Zhang, Z (2021) A resource allocation framework for predisaster resilience management of interdependent infrastructure networks. Built Environment Project and Asset Management, 11(2), 284-303.
Tuffaha, F M, Assaf, S, Yasar Zakaria, Z and Hadidi, L A (2021) A framework for the performance assessment of construction contractors in Saudi Arabia. Built Environment Project and Asset Management, 11(2), 195-213.
Verma, S, Mandal, S N, Robinson, S, Bajaj, D and Saxena, A (2021) Investment appraisal and financial benefits of corporate green buildings: a developing economy case study. Built Environment Project and Asset Management, 11(2), 392-408.
Zarghami, S A and Gunawan, I (2021) The emergence and evolution of reliability theory for water distribution networks. Built Environment Project and Asset Management, 11(2), 251-65.