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August 2000.

The mission statement for the National Council of Real Estate Investment Fiduciaries (NCREIF) valuation committee is, "To represent the various member constituencies in the promotion of credible valuation standards and techniques for the appraisal of institutional real estate, foreign and domestic, by working with the industry associations and professionals who respectively set standards and follow generally accepted techniques, and by publishing and disseminating information useful to the industry in the valuation of such assets." As chairman, this mission statement guides my opinions and my selection of topics and speakers for the valuation committee.

One theme we've pursued this year has been an ongoing discussion of selecting appropriate rates of returns for core properties in major U.S. markets. At the winter 2000 conference in San Antonio, TX, a publications panel moderated by Ross Prindle, MAI; Arthur Andersen, LLP; and consisting of Don Spradlin, MAI, representing CB Richard Ellis' National Investors Survey; Bruce Kellogg, MAI, with Cushman & Wakefield Real Estate Outlook; Peter Korpacz, MAI, with PricewaterhouseCoopers Korpacz Real Estate Investor Survey; and Peter Goodell, MAI, CRE, with Landauer Real Estate Market Forecast; discussed their survey and forecast findings and opinions. Appraisers will frequently refer to these publications when estimating appropriate capitalization and discount rates. Having representatives from four of the primary real estate survey publications led to an informative panel discussion.

At the spring 2000 conference in Washington, D.C., a panel of property acquisition and portfolio specialists followed the publications panel discussion. We have an idea what the publications say, and wanted to hear from people on the front lines who are actually making deals. To this end, Chuck Dannis, MAI, SRA, with Crosson Dannis, Inc. moderated a panel discussion titled, "Pricing Considerations for Institutional Real Estate Investors." Panelists included Robert Cook, Portfolio Manager with The RREEF Funds; Jim Halliwell, Director of Acquisitions, Principal Capital Management, LLC; and James Ryan, MM, CRE, portfolio manager, with Lend Lease Real Estate Investments. The panelists shared their insights on pricing, market locations, opportunistic plays, and return parameters. This panel discussion and the publisher discussion in San Antonio helped the appraisers, portfolio managers, and analysts understand the dynamics of institutional real estate.

The Committee for the Advancement of Research and Technology is a standing subcommittee within the valuation committee, and began the morning session with a panel discussion titled, ", Valuation/Consulting practices in the New Information Age." The discussion was moderated by Joe ladorola, MAI, with David L. Babson & Co., Inc.; and included Quentin Ball, MAI, with The Kirkland Co.; Margaret Williams with Realty Services International Inc.; Scott Rando, MAI, with Cushman & Wakefield; and Kevin Nunnick, MAI, with Integra Nunnink & Assoc. The panelists represented a cross-section of independent fee appraisers; they discussed how their companies have embraced e-commerce in their valuation and consulting practices. Discussion also focused on how institutional users of appraisal services have adjusted their operations to address e-commerce.

Mr. Bob Dombal, MAI, CRE, has been working on a NCREIF "Net Lease Valuation" Whitepaper and presented a draft of the paper to the valuation committee. The paper addresses valuation issues surrounding net lease properties and includes discussions of credit vs. non-credit tenants, investor parameters, and residual value insurance. The draft paper will be presented to the NCREIF Editorial Board for approval and official publication.

Tony DiNicola, of URS Greiner Woodward Clyde; and Steve Levine, of National Association of Environmental Risk Auditors; presented a discussion on, "The Importance of Engineering & Environmental Due Diligence in Property Valuations." Tony and Steve shared examples of engineering and environmental issues and discussed the potential impact on property valuations. Their expert comments and photo examples certainly helped the valuation committee grasp the importance of these issues.

Other items of business included an on-going discussion led by Jeffrey D. Fisher, PhD NCREIF/Indiana University; on property value trends. The primary purpose of the NCREIF database is to produce the NGREIF Property Index (NPI), but Fisher presented examples of the wealth of information in the database and how appraisers, investors, and consultants might use this data. The results have been NGREIF's introduction of the Property Value Trends Report.

Bruce Kellogg, MAI, reported on activities of The Appraisal Foundation Advisory Council (TAFAC), a review of exposure draft for US PAP 2001, and an update of temporary practice permits. NGREIF's valuation committee has been interested in and vocal about the topic of temporary practice permits due to the composition of its members (i.e., some of the largest real estate appraisal firms in the country). The member firms arguably account for a large percentage of temporary practice permits issued because of their need to cross state lines. The valuation committee, by unanimous vote, passed a motion supporting a national temporary practice permit program and has requested that this motion be forwarded to other national appraisal organizations by NCREIF.

Topics for the annual conference in Palm Beach, FL, October 18-20, 2000, will include a presentation by Peter Korpacz, MAI, on the Price water house Coopers publication Real Estate Value Cycles. Peter Goodell, MAI, CRE, will moderate a panel discussion on "Prophesying, Prevaricating or Posturing, Appraisers: Look into Their Crystal Balls to Answer the Ultimate Real Estate Question." Richard Entin, Investment Banker with Houlihan Lokey Howard & Zukin, will present a discussion on valuation issues related to public and private real estate companies and their underlying securities. Joe Senko with The RREEF Funds will moderate a joint presentation with the accounting committee on debt adjustment impact on value. Don Morse with CB Richard Ellis Investors will discuss ideas for a real estate appraisal standardized executive summary report. Bruce Kellogg, MAI, and Ben Henson, Executive Director of the Appraisal Subcommittee, will address the national temporary appraisal practice permit program. A subcommittee will be formed to organize a symposium for the June 2001 NCREIF conference.

Ted E. McWilliams, MAI is chair of the NCREIF Valuation Committee and Director, Appraisal Services, Commercial Real Estate Equity Investments for Principal Capital Management in Des Moines, Iowa. He specializes in pension fund, REOC, and institutional asset valuations, consultations, and portfolio analysis.
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Author:McWilliams, Ted E.
Publication:Appraisal Journal
Date:Oct 1, 2000
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