Appraiser Agosto, lectures on Complex Property Valuation-Valuation Masterclass II. The seminar workshop, held in Castlepeak Hotel in Cebu City, was organized by PAREB Cebu Real Estate Board.
The seminar participants reached to more than 80 real estate practitioners, including real estate appraiser and brokers not only from Cebu but also from Negros, Cagayan de Oro and Leyte.”I was stunned by the turnout of participants”, Gus told the organizers of the seminar. “It just showed that practitioners values the seminar”.
In the 2-day lecture, participants learned from different case studies actual application of solving appraisal problems using discounted cash flow method, opportunity cost, replacement value and market studies on township development.
“Thank you for sharing your expertise on us”, one of the participant shared in the lecture room. “Very knowledgeable in the topics discussed”, another participant shared.
The valuation masterclass is a project of PAREB Academy for its members. Its objective is to raise the level of PAREB Appraiser-members professional practice through seminars, workshop and provide linkages through appraiser’s directory.
Appraiser Gus Agosto has conducted lectures already in different areas of the country. Hosted by different local board, he traveled Iloilo City, Dipolog City, Cagayan de Oro, Pasig, Caloocan, Lucena, Puerto Princesa, Baguio, and other areas.
National Housing Authority’s (NHA) Estate Management Department, in coordination with the University of San Carlos Center for Continuing Education and Enterprise Development (CEED) conducted a seminar on Real Estate Management. It was held in the Law Building of the University of San Carlos in Cebu City.
Prof. Gus Agosto, faculty of Real Estate Management discussed topics on Cebu Property Market: Updates and Trends and Real Estate Valuation. The Seminar was attended by participants from the NHA’s Estate Management Department.
“I am glad our main government agency that provide housing to our people is providing seminars for the development of their employees,” Appraiser Gus Agosto said. “The participants were well versed in the disposition and provision of housing projects to the people.”
NHA was tasked to develop and implement a comprehensive and integrated housing program which shall embrace, among others, housing development and resettlement, sources and scheme of financing, and delineation of government and private sector participation.
Meanwhile, Center for Continuing Education and Enterprise Development (CEED) offer public and in-house training courses to make businesses competitive and sustainable, research for new theories and knowledge, and consultancy services to the industry, government, academe, and non-profit organisations.
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. #
Naga City, Cebu
AA 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.
I 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.
The following case studies will highlight the properties handled by AA Appraisal in its conduct of real estate valuation. AA Appraisal delivers well researched valuation of your properties. We operates fully objective and independent and is able to provide you with personalised and professional valuations.
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