The Study On Investment Decision-making In Sustained Operating Developers

As real estate is becoming one of the pillar industries in China, the influence of real estate cycle on national economy is growing. The influence of enterprise" investment decision-making on real estate cycle can't be ignored. Sustained operating is the most important subject in current enterprises. Nowadays sustained operating is one of the main subjects for developers. Therefore, the study on investment decision-making of sustained operating developer is important.Other than those developers who are established only for one project, sustained operating developers refer to those who have several projects at the same time and won't be closed when the projects complete. While deciding to invest a new project, such developers usually consider it from such aspects as the existing asset, manage experience, sale system and so on. Nevertheless, long-term strategy should be placed on a more important place. After analyzing the new project's economic data, the developers consider the new investment based on their existing asset under the framework of investment strategy. The investment decision-making in sustained operating developers is based on merging effect, that is, how much profit it will produce when the new project is merged into the existing asset. Among so much decision objectives Enterprise's Value-Added (EVA) is suited to the decision-making of sustained operating developers. EVA is composed of changing value of enterprise's managing ability, of sale ability, of creativeness, of duplicatableness, of profitableness, of dealing with uncertainty, and of circulating funds. EVA is a weighted average of such 7 changing values. The decision-making process around EVA must be conducted by a group consisted of those persons at every value-creative point in the enterprise.The investment strategy is important for sustained operating developers. The enterprises' orientation in market includes enterprises' market role and their products' objective market. Choosing right moment to invest is decided by corporate life cycle and real estate cycle. Choosing right region to invest is decided by policy, marketlevel, economy, supply-demand for real estate, and consumption level in that region. When project's scale is not enough large to influence the gross supply in the region, the volume of investment is decided only by self-economy of the project. Otherwise, the equilibrium between loss for shortage and oversupply must be considered. The investment volume of developers depends on the marginal cost of fund and the marginal return of investment.In sustained operating developers, the Market Gross Value (MGV), development cost and cycle of investment opportunity are analyzed by focusing on the influence of developers' own factors on the new project. While judging the MGV of a new project, the research should combine a thorough investigation with sale ability of the developer. The analysis of the development cost is on the basis of investigation in regional market and management ability of the developer. The research of the development cycle depends on required cycle of project, market wave, and the available support of fund and management force of the developer. One decision-making model for sustained operating developer is established with thedecision goal------whether EVA is satisfied when choosing an investment opportunity.Using this model, we can calculate out EVA when choosing a new project, after calculating out change value of expected return, of standard deviation, and of circulating fund using Markowitz's model (M-V Model), and, getting the other 4 indices by experts' analysis. Then, whether EVA is satisfied is the foundation of'yes or no'. After studying and choosing each parameter in this model, we have discussed the calculation, premise, hypothesis, and some existing problems. Finally, the problems requiring further studies are briefly discussed.