Project valuation and interaction between financial decisions and investment in real estate projects

: the case of Merrifield Center

Abstract

Project Valuation is a fundamental key for shareholders like investors and developers of a real estate project, due to the ability to identify its potential. Each real estate project has a significant relevance for the society because it provides infrastructures that improve the community' life. This valuation can be forecast by several factors: market analysis, feasibility analysis and financial valuation. The valuation models can be realized by abundant systems, like the reference of data of an appropriate asset’ benchmark, like what happens in Arbitrage Pricing Models, as else can be realized with base of ratios of the asset in analysis, through the Relative Valuation models. Besides, in this thesis I will focus on valuation models on Discounted Cash Flow format that compute the cash flow along the project’ life with a specific discount rate that differs in each model. The cash flow can be used to calculate some financial valuation indicators, like Net Present Value, based on which investors make decisions. Along this thesis, I will use with a base of financial data from a real case study, the Merrifield Center project, that today it’s still active, to determine the project’ value through the different Discounted Cash Flow valuation models. Afterwards, comparing the results of each model, I will explain what are the limitations and advantages of each model can bring to the project. After the identification of the best valuation model of each project, it can be concluded how the investment can be realized by shareholders, according to initial decisions and along the asset’ maturity. The investor’ decision can be positive or negative, due to the economic, political, and social conditions in the world we live in.

Date of Award	7 Jul 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)