Our client, a major real estate asset manager, suffered a significant flood in one of its buildings under construction in the Paris region, causing major delays and negatively affecting the commercialisation of the building.
The non-physical damage caused by this incident mainly corresponded to lost profits due to delays in the delivery of the building and its commercialisation. To assess the damage financially, we created a but-for counterfactual scenario that excluded the effects of the incident and compared the discounted cash flows generated in this but-for scenario with those generated in the actual scenario (including the incident). The lost profit, corresponding to the difference in the discounted cash flows between the two scenarios, was mainly explained by a loss of rent collection and an indexation effect in the building’s selling price.