Valuing options to renew at future market value:the case of commercial property leases

In this study,we develop and empirically test a valuation model for a commonly encountered option in office leases:a tenant’s option to renew at future market rent(a fair market value)with lease termination as the maturity date.The model integrates decision analysis with real options analysis and market risk with private risks.“Option value”is defined as the private value of the option to either party pre-contract,while“option price”assumes a fair agreement between transacting parties and can be positive(rental premium paid)or negative(rental discount offered).Without manifest expectations,an analysis of a sample of office leases supports the model’s logic with price estimates in a practical range.The tenants’option price/value is shown to have a negative relationship with the original/renewal lease term;conversely,the landlords’option value is positively related to the original/renewal term.Comparative analyses show that transaction costs have a positive effect on tenants’option value and on prices,while vacancy costs and the vacancy period are both positively related to the landlords’option value and negatively related to price.Market rent is found to have a negative relationship with option price.Overall,this study provides a theoretical analysis and empirical tests of the value of a real option that allows option holders to renew/extend their contracts at a fair market value.

Controlled synthesis of CO_2-diol from renewable starter by reducing acid value through preactivation approach

Synthesis of polyols from carbon dioxide（CO2） is attractive from the viewpoint of sustainable development of polyurethane industry;it is also interesting to adjust the structure of the CO2-polyols for versatile requirement of polyurethane.However,when renewable malonic acid was used as a starter,the copolymerization reaction of CO2 and propylene oxide（PO） was uncontrollable,since it proceeded slowly（13 h） and produced 40.4 wt%of byproduct propylene carbonate（PC） with a low productivity of 0.34kg/g.A careful analysis disclosed that the acid value of the copolymerization medium was the key factor for controlling the copolymerization reaction.Therefore,a preactivation approach was developed to dramatically reduce the acid value to 0.6mg（KOH）/gby homopolymerization of PO into oligo-ether-diol under the initiation of malonic acid,which ensured the controllable copolymerization,where the copolymerization time could be shortened by 77%from 13 to 3 h,the PC content was reduced by 76%from 40.4 wt%to 9.4 wt%,and the productivity increased by 61%from 0.34 to 0.55 kg/g.Moreover,by means of preactivation approach,the molecular weight as well as the carbonate unit content in the CO2-diol was also controllable.