Economic Fundamentals, Capital Expenditures and Asset Dispositions

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


The real estate literature recognizes the real option to invest in capital expenditures (CAPEX) or sell a property but treats these options as independent. We show that these real options are interconnected. We provide empirical evidence that, consistent with the real option framework, CAPEX increases in income growth expectations but declines in their volatility; that CAPEX are partially capitalized into property market values; and that CAPEX significantly reduce the subsequent likelihood of sale. We also present evidence that, controlling for market timing, past property performance influences CAPEX but not disposition choices, consistent with a value-add investment strategy.

Original languageEnglish (US)
Pages (from-to)361-378
Number of pages18
JournalJournal of Real Estate Finance and Economics
Issue number3
StatePublished - Apr 2022

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


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