Optimization modeling offers a holistic approach to asset valuation, allowing you to weigh all the alternatives, consider risks and produce defensible valuations on a repeatable basis for optimal return.
Whether for the purpose of acquisition or divesture, knowing the long-term financial value of a forested property is crucial to making sound financial decisions. However, getting an accurate picture of value that accounts for all management objectives can be challenging. Asset managers need to provide quality wood products while accounting for habitat, environmental regulations and alternative income sources such as carbon credits. Accounting for all of these factors quickly, and with precision, can be further complicated by the need to valuate multiple properties or compare different potential investments.
Optimization Modeling: A Holistic Approach for Valuation Analysis
Using optimization modeling, asset managers can account for all necessary variables and business objectives when assessing value. This holistic approach enables rapid, repeatable and complete valuation whether evaluating an existing property or a potential land acquisition.
An optimization model allows for structured, transparent calculations that are defendable and enable investment decisions to be made with confidence.
Optimization models generate activity schedules that maximize returns on a given property, while meeting other objectives defined by the user. Models allow for a wide variety of metrics, related both to the activities performed and the inventory of the land base, to be calculated and analyzed. Any of these metrics can be set as constraint to ensure values are met. The variety of indicators and the combination of constraints mean that the solution generated can be tailored to meet all demands placed on the property.
Analyzing even a single possible outcome using manual methods requires a significant amount of time. Optimization modeling allows for the creation of multiple scenarios each with different constraints, growth and yield assumptions and market parameters. This allows for indicators to be compared across multiple potential outcomes.
Selecting the Right Solution for Your Valuation Needs
When assessing solutions for your acquisition and valuation needs, two considerations are: feature set (does it offer the functionality you need) and usability (can it be used by business users as well as modelers).
Optimization models require an investment in time and good data to produce meaningful results. Having the right software solution can help to improve both efficiency and outcome quality,
Models require a significant amount of data in order to produce meaningful results, and data tasks like collecting, processing and coding data can be time consuming. The ability to make changes to your model and add constraints is important, as is usability by diverse stakeholders with varying degrees of modeling skills.
Remsoft optimization analytics solutions enable users to load data, run the model, view results and adjust constraints without needing to write a single line of code.
Model building can be complex, and once created for one property you’ll want to be able to repeat it for other properties and be able to compare different opportunities.
With Remsoft software, a single model can be re-used for every new acquisition eliminating the need for a model to be rebuilt each time. Because data is handled through input tables, running the model with a new property is as simple as changing the data in the tables. Multiple acquisitions can be compared with one another as the underlying model and its assumptions don’t change.
End-to-End Decision Support
Being able to manage all the complexities of asset valuation within one solution is key for efficiency and accuracy.
Remsoft offers a complete decision support solution for all aspects of land valuation. All data necessary for the model can be loaded quickly and easily including property specific data, growth and yield information and local market prices. Loan interest and equity payments can be added to the model and sensitivity analysis performed on variables such as interest rates and repayment schedules. Additional requirements such as organizational objectives and regulatory restrictions can be added via user defined constraints.
With the right solution, optimization modeling can help you adopt a holistic approach to asset valuation that’s efficient, repeatable and effective whether you’re evaluating an existing property or a potential land acquisition.