Letter to the editor on Valuation Profession

Dear Editor,

This is in response to the article of Mr. Ramon Clarete  published on 6 January 2019 on Property Valuation Service: Are we losing competitiveness?

I thank Mr. Ramon Clarete for his interest in our work and for the stimulating comments which highlights our profession and offer a broader perspective. I am certainly in agreement with the writer  on the role of property valuation to economies in weathering crisis.  However, I was appalled on some points of his letter and allow me to comment. His assertion on the maturity of the real estate appraisal profession; quality of service and the valuation standards are quiet disturbing.

Real estate appraisal in the country is in its infancy stage, as a profession. Even though it started in 1961 but it was considered as a trade rather than a profession. However, on July 2009, the passage into law of the Republic Act 9646 or the Real Estate Service Act of the Philippines (RESA), real estate appraisal has been recognized as a profession and strengthened.

Mr. Clarete pointed his pen on the 90% of the appraisers. He consistently mixes the know-how in real estate practice and the quality of service. However, Mr. Clarete misses the point.  The number of appraisers might triple in number, but the question is do the opportunities to practice the profession also tripled?


To practice the profession, appraisers have been subjected to different barriers that only few can endure. Take for example the government projects under President Duterte, the Department of Public Works and Highways required appraisers to have an accreditation with the Bangko Sentral ng Pilipinas to qualify in a bidding.  BSP has its own criteria in evaluating of appraisers outlined in their guidelines “BSP Acceptable Appraisal Companies for Ocular Inspection and Appraisal of Real Estate Properties”. To be part of the list, the appraiser or the appraisal company must comply with certain criteria to be accredited. One of which is the setting of company net worth to P 4 Million; and the other one is the setting of ten (10) years’ experience in real estate appraisal business as a requirement to manage and sign the appraisal report.

Securities and Exchange Commission, Energy Regulatory Commission other government agencies and even commercial banks have their own guidelines and requirement. It is not surprising that only 11 companies, as of December 31, 2017, were accredited by the Securities and Exchange Commission, and 22 under the BSP.

In the broader context, these accreditation requirements and non-implementation of certain provision of Real Estate Service Act have a multiplier effect to appraisal practice. Negating the appraisers of the opportunity to participate in government projects and practice their profession. And it has been 10 years now.

On the International Standards.  Mr. Clarete should never forget that the International Valuation Standards was adopted and prescribed as the reference standards in the country only on October 2009, by prescribing the Philippine Valuation Standards. It is only since then that the country laid down the foundation, through education and training, in developing the capability of property appraisers in the country to be at par with other countries. Thus, appraisers now are attending international seminars and conferences to learn best practices of other countries and also share our situation and experiences. In an increasingly globalised world, the consistency and compatibility of standards across jurisdictions is an important issue

The valuation practice and standards in the appraisal are intertwined. Theories will remain a theory if it will not be applied. Provide the appraisers with the venue to practice their profession, and they will surely rise to a new and higher level of professional practice.

We should endeavour in helping real estate appraisers to developed and fulfil its role in the economy, society and our people and be globally competitive in professional practice and standards. #


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Valuation of batching plant by Income Approach (A Restrospect)

batching plantwAA Appraisal, the sought after provider of valuations and analytic solutions for real estate in the Visayas, look back at the completion of its assignment in valuing a batching plant in Cebu, Philippines.

Cordova Total Services was one of the most  high-profile client of AA Appraisal. Previously, the appraisal provider has appraised a 3-Star Hotel in the area.

“AA Appraisal  has built a reputation as the go-to valuations and analytics service provider in the Visayas” shared Gus Agosto, President and Owner of AA Appraisal Solutions. “The appraisal of a batching plant is quite challenging to us, but we have delivered the solution to our client expected from us.” The property is unusual, having been under a usufruct agreement with a local government unit. We have to employ not only cost approach method, but also the discounted cash flow method in arriving at a market value.

AA Appraisal Solutions we’re in a position to continue to develop improvements to the appraisal process and deploy meaningful solutions that benefit clients and make informed decision easier.”

Previously, AA Appraisal served clients such as Vivant Corporation, an energy firm, PTT Corporation, SteelAsia Corp., Avida Corp., Paramount Properties, and La Nueva Supermarket.

We have to provide our client an analysis that will be helpful in the decision making process.

Valuing Income Generating Properties

gocommercial-700x400I was commissioned to value an income generating property, a resort hotel for financial reporting purposes. The property  is income generating, thus I am aware that I should employ income approach in order to get the market value of the property. I asked the owner for the income statement and interviewed key personnel on the sources of income and expenses of the hotel.

Based on the experience, property owner will always ask for the true value of their properties that generates income. The investor on the other side, is less concerned about the actual physical property than the income stream it will generate in the economic life of the property.

In applying income approach, an appraiser will choose between the two basic methods. One is the Discounted Cash Flow Method and second, the direct capitalisation method that uses cap rate as helpful tool in converting cashflow into property value.

Discounted Cash Flow Analysis (“DCF”) is the foundation for valuing commercial real estate. The value of an asset is simply the sum of all future cash flows that are discounted for risk. Since the forecasted revenues and expenses vary from time to time, cap rate won’t be an accurate gauge to determine value of the property.

The hotel is in its early years, thus the revenue it generates remains small (35%) in compare to its potential gross income. However in appraisal, it is important to generate the potential income of the property, its optimum use, and proceed to cash flow analysis. This should be in accordance with the growth projection of the industry or the economy. Next, we have to reconstruct the income statement to check if which figures to use, verify or eliminate.

The most important part in DCF Method is how to determine the discount rate. It should answer the return on risks that motivates the investor. The timing of the future cash flows it will generate and the likelihood that it will occur greatly influences the investor’s willingness to pay for an asset today. Riskier cash flow streams are discounted higher rates, while more certain cash flows are discounted at lower rates.

Our valuation of the hotel indicates different value estimate. Income approach thru discounted cash flow is higher by 15% in contrast to cost approach. DCF analysis is the most comprehensive method utilised to evaluate all of the risk factors that are considered in commercial valuation. As a valuer, we understand the weight of an approach to value better than most.



AA Appraisal value Condominium Buildings in Cebu

download (1)Cebu, September 2018 — AA Appraisal is pleased to announce that it has recently completed the work with an Ayala-owned company, a leading developer of residential condominiums in Cebu. AA Appraisal value Avida’s property portfolio in Cebu, which comprises of different tower condominiums, machines, and equipment.

EnP Gus Agosto, Head of Valuation at AA Appraisal, said: “’We are delighted to secure the valuation of the Avida Cebu. Our strength in Cebu market means that we were able to provide them with a wealth of expertise from our local valuation teams. We are looking forward to working with Avida and Ayala,  and to develop a long-standing business relationship.”

Recently, AA Appraisal also value properties of PTT Corporation, a multinational energy firm in the country. Prior to that, one of the major clients it render an appraisal service was La Nueva Supermarket, which owns a chain of supermarkets in Metro Cebu.

“Our strength lies on our knowledge of the local market and expertise in appraisal of commercial properties.” With the expansion of our market base, we have to widen also our capabilities and brand of services in valuation.

AA Appraisers attended a seminar on complex properties valuation in Bangkok, Thailand. The seminar was hosted by Thai Real Estate Business School, under Dr. Sopon Pornchokchai.

AA Appraisal began its operations in 2013. It specializes in litigation appraisal, commercial and residential. Some of its corporate clients were Vivant Corporation, Pilipinas Water Inc., Miraizo Group of Hongkong, SMC Lighterage Corporation, General Milling Corporation, University of the Philippines, Southwestern University and many more. It also represents clients abroad through Mark Grotewohl Law Firm of California and Finemore Walters and Story of Australia.




MAKATI or BGC? Tale of two CBDs

ayala-centerIn the past few weeks, AA RealtyPro Solutions have been given opportunities to value condominium properties in the two most prestigious and prime location in the country- Makati Business District and Bonifacio Global City. Both have been the center of high commercial centers, land values, and property development.

AA RealtyPro Solutions have observed the differences among the luxury condominium units in BGC start at 218,693.22 per sq.m. and go for as much as P231,554per sq.m. Residential units in Makati City price ranges between P275,362.32 to P320,855.60 per sq.m.

Previous projections have set Fort Bonifacio, the new city that has risen from a former military camp in just a decade, to become the country’s top commercial business district, eclipsing the Ayala Center in nearby Makati City. But latest figures culled in research by AA RealtyPro Solutions have shown the dominance of Makati in terms of condominium prices.

Based on research, state pension fund Government Service Insurance System sold its two lots in Fort Bonifacio with land areas of 1,600 square meters (sq.m) each to Focus Palantir, Inc. and Goldenwill Inc. with a price of P500,000 per sq.m and P458,000 sq.m, respectively.

While property developer Ayala Land, Inc. also bought the JAKA Tower in Makati for an undisclosed amount, the price range of which is estimated to be between P500,000 and P560,000 per sq.m.

As a result of these transactions, average land values have climbed in the three business districts.

Makati remains the dominant CBD, while BGC will keep on challenging it not only as the premier business district but also the center of most expensive real estate development in the country.



raffles makati 2

      Raffles Makati



The Beaufort

AA Appraisal attended seminar on complex property valuation in Bangkok

AA Appraisers attended the seminar on complex property valuation in Bangkok, Thailand. The seminar was hosted by Thai Real Estate Business School, under Dr. Sopon Pornchokchai.

Dr. Sopon Pornchokchai has had experience in real estate research and valuation since 1982. He is an experienced valuer and lecturer on valuation at the undergraduate and graduate levels and in training courses in Thailand and abroad. He was a consultant to the ESCAP, UN-Habitat, World Bank and other international organizations. He gained a Ph.D. in land and housing from the Asian Institute of Technology (AIT) and had further property valuation training from LRTI-Lincoln Institute of Land Policy and in housing development from Katholieke Universeit Leuven (Belgium).

The seminar includes topic on valuation of Agarwood plantation in Cambodia;   small commercial airport valuation;  An irrigation & electricity generation dam;  A green building of USD 300 million; A 5-star hospital in Thailand; A Business Hotel in Brazil; Wholesales fresh market;   gold mine valuation; Market feasibility study of a new township; Pipeline valuation; A valuation case of pretties;  A public park and opportunity costs in Nepal; A resort in Vietnam; A gigantic shopping mall of 4.3 million sq.feet; A rundown shopping centre in Laos; Valuing a slum in Jakarta; A toll road valuation case study in Bangkok; and valuation of train stations.

During the conference, along with his PAREB delegates, Prof. Gus connected with other participants and engaged in conversations about the practice of valuation in their own countries.

The conference also provided the participants with an opportunity to hear about the different approaches in income valuation like the residual method, Corregidor factor, free cash flow enterprise, free cash flow equity, capital factor derivation, cap rates, weighted quality scores, weighted average cost of capital and capm.

“These learnings have increased my knowledge and elevated to a new and higher level on the value of income approach and other method.” The owner of AA RealtyPro Solution have said. “It connects my professional practice and academe life. Having taught finance and economics, I appreciate the application of different tools in solving practical problems in complex property valuation”.


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