Urban renewal projects: detecting optimal public-to-private benefit ratio through Discounted Cash Flow Analysis

During the past quarter century, urban renewal programs have been carried out ever more frequently under the umbrella of Public-Private Partnerships. A considerable widespread of collaboration forms between public bodies and entrepreneurial entities has occurred; hence, agreements, mixed equity companies, and concession-based project finance contracts have been intensely used in order to develop transactions concerning recovery, renewal and regeneration of urban fabrics. Negotiating public-private agreements, while pursuing sustainability objectives, entails the need to compare the yield expected by private stakeholders with the communities’ requirements. In accordance with the research branch investigating the meaning of sustainability within the built environment, this study aims to discuss the potential of an evaluation approach based on Discounted Cash Flow analysis, in order to detect the optimal public-to-private benefit ratio. A case study analysis is performed upon two ongoing urban renewal transactions in Italy. The approach discussed here allows identifying the value of additional burdens, in the form of public works, that private partners may be asked to pay for in behalf of the communities. Therefore, it gives a valuable support in searching for an appropriate and satisfactory overall balance between the developers’ fair market profit and the communities’ expected benefits.