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Investment Screening |
| An analytical process
of sorting capital asset opportunities that
best satisfy investment goals with the
ultimate objective to acquire individual
projects (specific properties), that
maximize returns in relations to such
goals. |
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| Simply put,
investment screening establishes a short
list of investment possibilities. From that
short list, the investor must decide which
of the acceptable projects (ranked in order
from highest to lowest), is preferred given
financial resources available to acquire and
operate these projects. |
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| Capital projects can
be examined based on three headings; |
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| Mutually
Exclusive |
| Project or property
that is being selected to perform a specific
function. The screening activity results in
the selection of one property from a group
of possibilities. The selection of one
property, will eliminate all the others. |
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| A good example would
be, a Franchise that requires only one site
in particular geographic location, although
may sites will be analyzed, however the
selection of one, will automatically
eliminate all the others. |
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| Mutually
Inclusive |
| Project or properties
that are selected given their interrelated
nature. The selection of one property,
requires that all other mutually inclusive
projects would also be included in the
purchase decision. |
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| For example, an
investor would only acquire the specific
tract of land based on the assumption that
other adjacent properties can also be
acquired. |
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| If all the lands can
not be purchased than the investor's plan
for development of the lands would be
impractical and/or not economically
justified. |
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| Land assembly schemes
and large scale-developments are typically
mutually inclusive projects. |
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| Independent
Projects |
| Unlike mutually
inclusive projects, the purchase of an
independent project has no direct bearing on
the acquisition of other properties. For
example, a builder may acquire individual
building lots. The viability of each
purchase is directly tied to the terms
concerning that specific purchase. The
limiting factor, is the amount of available
resources to acquire properties, not the
decision to acquire one property over
another. |
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Investment Trust |
| A trust established
to act as an investment conduit that enables
investors to pool financial resources and
participate in various forms of investment. |
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| The most common type
of investment trust is the
real estate investment trust or
the REIT, this type of
trust is specifically designed to acquire
income producing properties, as well as
speculative real estate with the hopes of
providing an ongoing return to participating
investors. |
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Investment Value |
| Investment value is
defined as the value of an investment
property from the point of a specific
investor. Investment value must be clearly
differentiated from a
market value. Market value focuses on
the most probable price that the property
will sell based on a typical buyer and
seller (also know as the value in the market
place). |
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| Both Market Value and
the Investment Value flow from the present
value of future anticipated benefits. |
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| Investment value is
based on the individual's objectives and
unique investment circumstances that can
effect yield; for example, marginal tax
rate. Forecasted cash-flows will vary based
on the extend and weighting of these factors
and these in turn, impact the valuation
process. |
