A methodology for determining the profitability index of real estate initiatives involving public-private partnerships. A case study: The integrated intervention programs in Rome

In the European Union, real estate initiatives involving public-private partnerships (PPPs) are characterized by the payment of a charge, which is generally used for public purposes (and works). In Italy, since the 1990s, PPPs have also been used to start negotiated initiatives giving the possibility of modifying town planning forecasts. Such initiatives are aimed at increasing the value of private properties and, through the charge, financing public works. This charge was regulated only in 2014 with the change of Article 16, paragraph 4, point d-ter of the Presidential Decree 380/2001 (Consolidated building law) and was named the "extraordinary urbanization contribution" (or simply the "extraordinary contribution"). The extraordinary contribution makes it possible to finance public works with private monetary resources. The amount of the extraordinary contribution is not less than 50% of the capital gain that is produced by real estate initiatives concerning modifications to town planning forecasts. A crucial issue of the this kind of PPPs has always been the appraisal of the capital gain of real estate initiatives due to changes in town planning forecasts. The factors to be considered while evaluating the extraordinary contribution, the appraisal tools and procedures to be used in assessing the capital gain are not indicated at regulatory level. However, an over 20 years' practice has been consolidating the use of an analytical procedure for the appraisal of the transformation value to be used in evaluating the extraordinary contribution. In this procedure, the evaluation of the profitability index of real estate initiatives appears critical: in fact, the capital gain depends upon this element. At the same time, this topic is substantially neglected by the scientific debate. In this paper, a methodology has been defined, which is structured on the Build-Up Method and allows the profitability index (or rate of return) of a real estate initiative to be evaluated. Through a test, the developed methodology has been used in a case study: the appraisal of the extraordinary contribution in three integrated intervention programs in the city of Rome.