Black Swan Events, the Impact on Appraisals

As we are deemed an essential service in supporting the banking and insurance sectors, we are still progressing with the completion of appraisals and risk management reporting. We have had to alter our inspection protocols to ensure the safety of our clients and staff, inclusive of having all of our appraisal/risk management staff working remotely. One of the questions that our clients have been asking is our thoughts on values post COVID.

There are so many factors in that single question, here are some of the factors we will be examining post COVID:

Cost of money, with prime interest rates in North America being nearly zero, will banking institutions lower their lending rates, thereby increasing “cheap” capital for investment and recovery activity;
How long will “cheap” capital be available, if the recovery period is accelerated, cost of funds may go up;
What types of government stimulus programs will there be, which, in turn, will affect construction activity and potentially impact the cost of construction;
Changes in demand, will remote working and the prolonged need for physical distancing change the demand for real estate which would impact market values and potentially insurable values;
Will we continue to focus on climate change initiatives that mean more “Green” buildings, will the potential changes in demand and the drive for innovation make these buildings more affordable;
Will oil prices and demand continue to sag, which in turn can affect the demand and values of “yellow iron” and other machinery?

In looking at these factors, we will look to examine other Black Swan events. Since 1997, we can look at 9 such events (1):

1997 – Asian Financial Crisis
2000 – The Dot-Com Crash
2001 – 9/11
2008 – Global Financial Meltdown
2009 – European Sovereign Debt Crisis
2011 – Fukushima Nuclear Disaster
2014 – Crude Oil Crisis
2015 – Black Monday China
2016 – Brexit

The current economic malaise is due to a non-economic event such as 9/11, the 2008 Global Financial Meltdown was due an economic event (bad credit, high debt loads). However, events like the 2008 Global Financial Meltdown provide us context for a recovery period. Running up to 2008 we saw a “complacency that emanated from years of stable growth, low inflation & high employment rates in the US which brought financiers to lend recklessly”. (1)

In 2020, we had a similar scenario, stability of growth, lower inflation and high rates of employment in the United States. We were seeing the impact in our appraisals as best illustrated by the following graphs:

Relative to insurable cost values on a generic basis:

Relative to market values for commercial real estate on a generic basis:
Green Street Commercial Property Price Index
Indexed to 100 in August 2007

All Property CPPI weights: retail (20%), office (17.5%), apartment (15%), health care (15%), industrial (10%), lodging (7.5%), net lease (5%), self storage (5%), manufactured home park (2.5%), and student housing (2.5%). Retail is mall (50%) and strip retail (50%). Core Sector CPPI weights: apartment (25%), industrial (25%), office (25%), and retail (25%). (2)

So what does this all mean for impact on values? It is important to note the distinction between insurable cost values and market values (we have posted to our web-site a previous blog on the distinctions between these two premies of value).

Prior to COVID 19 and the oil price crisis, we would look at some predictive models (as below from Science Direct) that provided trends for construction costs (3):

However given the unprecedented nature of the current Black Swan event no one can reasonably predict what the new trends will be, perhaps we will see no change, an increase or sharp drop for both construction costs and market values. However, government intervention may stave off sharp drops or at least shorten the effects of the Black Swan event. Again it is important to note the distinction between insurable cost values and market values, the trends for both are somewhat correlated over time (not perfectly), however in the current environment they could de-couple as governments look to financially support infrastructure projects as economy starters. Furthermore, we could see future insurable cost values and market value trends differ for component type, property type and regions.

Ultimately, we know we are in for periods of volatility (and that the volatility maybe based on geography), particularly until we have a vaccine for COVID 19. Accordingly, the only impact we can predict with some certainty is that we are going to have some volatility, and that we will need to build in some contingencies for this event and for future Black Swan events, time tells us they will occur and this latest event takes us to the extreme in terms of magnitude of impact. As below, some timelines that demonstrate potential impact due to COVID 19.

Timelines of Past Crises in the Stock Markets (4):
Crisis Pre-Crisis Peak Market Bottom
Great Depression August 1929 June 1932
Black Monday August 1987 November 1987
2000’s Recession December 1999 September 2002
Great Recession October 2007 February 2009

REFERENCES:

Faisal Khan (January 18, 2019). 9 Black Swan Events that changed the Financial World. Retrieved from https://www.datadriveninvestor.com/2019/01/18/9-black-swan-events-that-changed-the-financial-world/

Commercial Property Index. Retrieved from https://www.greenstreetadvisors.com/insights/CPPI.

Construction cost index prediction using neural networks. Retrieved from https://www.sciencedirect.com/science/article/pii/S1110016819300316#f0025

Trefis Team (March 13, 2020). Market Crashes Compared:-28% Coronavirus Crash Vs. 3 Historic Market Crashes. Retrieved from https://www.forbes.com/sites/greatspeculations/2020/03/13/market-crashes-compared28-coronavirus-crash-vs-4-historic-market-crashes/#5112cdd14ee8

Sports Franchises

The One Asset Class that keeps growing in value…but real estate is still a great hold!

As a full service appraisal company completing engagements around the world, we often get involved in unique valuations. Recently, we have been involved with or proposed on the valuation of facilities for sports franchises. Taking out the political issues around funding of these facilities and whether or not the investment on the tangible asset side is worthwhile, we definitely see that the value of the franchises themselves appear to be have some immunity from economic cycles and downward pressure on values.

Traditionally, we see economic cycles having 5 distinct phases (1):

During these cycles we see fluctuations in market value and insurable values, often in recessions we see market values dive while insurable values can stay the same or increase due to pressures as we are experiencing right now with shrinking capacity in the insurance market(s).

Interestingly, sports franchises seem to have immunity from these cycle forces, even if the team(s) are not successful in the field of play. Underlying the immunity is the strength of earnings for these franchises, no matter the general economic circumstance these franchises have expanded their earnings which in turn drives up values.“The discount bin is empty when shopping for teams in the major sports leagues. Every NFL, NBA and MLB franchise is now worth at least $1 billion.”(2)

Consider that Jerry Jones (Owner of the Dallas Cowboys) paid $140 million USD for the franchise in 1989. That converts to around $300 million USD in today’s dollars, annual inflation was around 2.5% over that timeframe. “In the last decade the Dallas Cowboys franchise value has increased by 220% (see below graph), even the lesser known NFL franchises have grown significantly. “(3) As the graph illustrates the value trend has stayed upward trending.

 

 

As comparative, let us look at an index of US Real Estate market values since 1998.

 

 

All Property CPPI weights: retail (20%), office (17.5%), apartment (15%), health care (15%), industrial (10%), lodging (7.5%), net lease (5%), self storage (5%), manufactured home park (2.5%), and student housing (2.5%). Retail is mall (50%) and strip retail (50%).
Core Sector CPPI weights: apartment (25%), industrial (25%), office (25%), and retail (25%). (4)

As you can see Commercial Real Estate in the US over time has increased but is subject to fluctuations based on economic cycles.

In looking at the volatility in general economic cycles, recessionary times can mean opportunities in real estate. Correlating the below graph on recessionary periods to the Green Street Commercial Property Price Index, we see a similar dip in real estate market values but values have had a general increasing trend. (5)

 

If you cannot own a sports franchise, commercial real estate is still a great hold!

 

REFERENCES:

5 Phases of Business Cycle

Kurt Badenhausen (July 22,2019). The World’s 50 Most Valuable Sports Teams 2019.

Cork Gaines (September 26, 2017). Jerry Jones paid a record $140 million for the Dallas Cowboys — the team is now worth $4.8 billion.

Commercial Property Index.

Jason Kirby (December 5, 2017). The 91 most important economic charts to watch in 2018.

Valuation Consultant VC-BC-19-16

Valuation Consultant

1 Full Time Permanent Valuation Consultant

Vancouver Office

Competition Number: VC-BC-19-16

Headquartered in Saskatoon, Suncorp Valuations is a dynamic growth-oriented leader in the global valuation industry.  Through offices in Canada and the U.S.A, we offer a full range of valuation, consulting and costing services for land, buildings, machinery and equipment, and for intangible assets such as patents, copyrights and franchises.

Utilizing robust research methodologies, valuation consultants develop reports that provide an opinion of value for assessed property and other assets.  Clients utilize reports for a variety of requirements including regulatory compliance, financing, litigation support, mergers and acquisitions, purchase price allocation, insurance placement and claim settlements.  Risk Management Services assist clients by identifying and mitigating risks such as the potential for accidents, property damage and theft.  For further details please refer to our website at www.suncorpvaluations.com.

The Role.

We are seeking a Valuation Consultant to join our Private Sector Team in Vancouver, BC.  The role reports to the Managing Director, Private Sector located in Vancouver.  Through site inspections, research, expert analysis and collaboration, the Valuation Consultant develops a solid and defendable rationale for the final value assigned to a property.

This information is presented to clients in a valuation report.  A large percentage of the work involves establishing the cost for the reconstruction of existing buildings for insurance placement.

The Ideal Candidate.

Along with the required credentials, you enjoy working with a group of professionals and excel at research and analysis.  Although you are able to work independently, you enjoy leveraging the knowledge of coworkers to complete accurate assignments.  You have no problem working independently, while collaborating with stakeholders in other offices.  You easily manage multiple projects and are naturally focused on providing internal stakeholders and external clients with high levels of service to meet our Brand Promise of ON TIME, CREDIBLE, PROFESSIONAL.  You have solid construction knowledge, ability to gather thorough information while at the same time finding efficient ways to complete assignments.   

The Requirements.

  • Degree or Diploma in Engineering, Architecture, Construction, Finance, Architectural Technology or a related field;
  • Must have solid construction knowledge;
  • Previous appraisal experience, an understanding of building design and the ability to read blueprints is an asset;
  • Appraiser designation will be considered an asset;
  • Willingness to travel to client sites, including extended stays and possible international travel;
  • Valid Driver’s License, clean driving abstract ,and access to safe and reliable transportation;
  • Provision of a satisfactory criminal background check;
  • Valid passport or ability to obtain a passport and no restrictions in obtaining a valid VISA for travel. 

The Competencies. 

  • A genuine desire to go above and beyond to provide excellence in client service;
  • Proactive, with a desire to drive results and exceed goals;
  • Strong planning, organizational and time management skills;
  • Solid computer skills, including advanced knowledge of Microsoft Office Suite;
  • Able to work with complex spreadsheets;
  • Excellent oral and written communication skills with acute attention to detail;
  • Expert project planning skills with the ability to work on multiple tasks;
  • Able to collaborate, share knowledge and leverage expertise as needed;
  • Self-directed with the desire and ability to work independently. 

We pride ourselves in offering flexible work arrangements that allow our employees to balance work and life commitments.

THE APPLICATION PROCESS: 

Please send your resume, cover letter and compensation expectations via email and include in the subject line the competition number, followed by your first and last name.

  • E-mail: HR@suncorpvaluations.com
  • Comp #: VC-BC-19-16
  • Deadline: Open 

We thank all applicants for their interest in this position, however, only those selected for interviews will be contacted.  Please note that we do not accept phone or email inquiries in regards to open positions.

 

Apply Now

  • File types permitted for upload are: doc, docx, txt, rtf, pdf

Data Management Coordinator DC-SK-19-15

Data Management Coordinator

SUNCORP VALUATIONS

1 Full Time Permanent Data Management Coordinator

Saskatoon Office

Competition Number:  DC-SK-19-15 

Headquartered in Saskatoon, Suncorp Valuations is a dynamic growth-oriented leader in the global valuation industry.  Through offices in Canada and the U.S.A, we offer a full range of valuation, consulting and costing services for land, buildings, machinery and equipment, and for intangible assets such as patents, copyrights and franchises. 

Utilizing robust research methodologies, valuation consultants develop reports that provide an opinion of value for built property and other assets.  Clients utilize reports for a variety of requirements including regulatory compliance, financing, litigation support, mergers and acquisitions, purchase price allocation, insurance placement and claim settlements.  Risk Management Services assist clients by identifying and mitigating risks such as the potential for accidents, property damage and theft.  For further details please refer to our website at www.suncorpvaluations.com

The Role.

We are seeking a Data Management Coordinator to join our Professional Services team.  The role reports to the Vice President, Professional Services in Saskatoon. 

The Data Management Coordinator is responsible for the acquisition, verification, analysis, and storage of a variety of data types.   The data is utilized by the Professional Services teams to develop credible professional estimates, opinions, and consulting services.  This data includes (but is not limited to) real estate transactional data in select markets (sale data, lease data, community socio-economic profiles and trends, etc.), building cost data, machinery & equipment cost and sale data, etc. 

A variety of tools are utilized in this role including internet search techniques as well as building and managing a network of industry stakeholders both locally and regionally.

If you are inquisitive in nature, have strong attention to detail and dedication to factual accuracy, this could be the opportunity for you. 

The Ideal Candidate.

Along with the required credentials, you enjoy working with a group of professionals and excel at research and data management.  Although you are able to work independently, you enjoy leveraging the knowledge of coworkers.  You have no problem working independently, while collaborating with stakeholders in other offices.  You easily manage multiple projects and are naturally focused on providing internal stakeholders and external clients with high levels of service to meet our Brand Promise of ON TIME, CREDIBLE, PROFESSIONAL.  You have solid ability to gather thorough information while at the same time finding efficient ways to complete assignments.  

The Requirements.

  • Certificate or Diploma from a recognized institution in research and/or data management, or equivalent complementary discipline.
  • 1+ years of relevant experience.
  • Expertise with MS Office, particularly with Word and Excel.
  • Excellent interpersonal skills and the ability to work well with all levels of internal management and staff, and external stakeholders.
  • Excellent project management and time management skills including the ability to manage multiple tasks and meet deadlines.
  • Basic understanding of building design, real estate terminology, and financial analysis is an asset.

The Competencies. 

  • A genuine desire to go above and beyond to provide excellence in support services;
  • Proactive, with a desire to drive results and exceed goals;
  • Strong planning, organizational and time management skills;
  • Solid computer skills, including advanced knowledge of Microsoft Office Suite;
  • Able to work with complex spreadsheets;
  • Excellent oral and written communication skills with acute attention to detail;
  • Expert project planning skills with the ability to work on multiple tasks;
  • Able to collaborate, share knowledge and leverage expertise as needed;
  • Self-directed with the desire and ability to work independently.

We pride ourselves in offering flexible work arrangements that allow our employees to balance work and life commitments.

THE APPLICATION PROCESS: 

Please send your resume, cover letter and compensation expectations via email and include in the subject line the competition number, followed by your first and last name.

E-mail:             HR@suncorpvaluations.com  

Comp #:           DC-SK-19-15

Deadline:         October 18, 2019 

We thank all applicants for their interest in this position, however, only those selected for interviews will be contacted.  Please note that we do not accept phone or email inquiries in regards to open positions.

 

Apply Now

  • File types permitted for upload are: doc, docx, txt, rtf, pdf

Visit Suncorp at the Risk Insurance Managers Conference in Edmonton 2019

We are attending the next RIMS Canada Conference, the preeminent convention and trade show for risk insurance managers and Insurance Brokers from Canada.The conference is being held in Edmonton, AB from September 8-11th, 2019.

Event Location & Dates

Address: Shaw Conference Centre – 9797 Jasper Avenue, Edmonton, AB, Canada, T5J 1N9

Dates: Sunday September 8th to Wednesday September 11th, 2019

Visit Us At Booth #200

We have a stand booked for booth #200, so come on down to visit us and speak to one of our knowledgeable representatives!  Booth #200 is close to the entrances. Just turn left when you walk into the booths area, and you should see our team!  See the map below to get a better idea of where you’ll find us.

We Have Prizes!

We are going to do a Plinko style game with prizes! Come have some fun with our reps.

Share On Social

We encourage attendees to share their experience across social media channels! If you do so, feel free to use hashtags like #Appraisers, #ValuationServices, #ExpertTestimony, #FinancialServices, #RiskControl, #LossControl, and #SafetyServices etc. to further your reach to relevant viewers.

Event Organizers Video

Below is a fun video made by the event organizers to give you a better idea of what the conference is all about and why one should attend!

We Hope To See You There!

We hope to see you at the event in September. Remember, come visit us at Booth #200 to speak to any one of our awesome reps. Make sure you participate in our Plinko style game for your chance to win some nice prizes too! We are always here to answer any questions you may have, so feel free to contact us if you need to speak to one of our reps prior to the event.

Contact Suncorp Now