The RAEX rating agency (Expert RA) has compiled the ninth ranking of the business potential of Russia's largest appraisal companies. He showed that this market is gradually coming out of the crisis. A brake on the development of the sector of these services may be a change in the rules of the game, and a gradual return of business interest in investing may be a driver.
The current edition of the ranking differs from the previous ones in terms of the distribution of participants. Instead of one main list, two separate ones are now being compiled - in one, organizations are ranked, and in the other, groups of affiliated appraisal companies. Among the reasons for the revision of approaches to compiling rankings is the gradually increasing role of the state in controlling the activities of appraisal companies (see the table "Ranking of the business potential of appraisal organizations in Russia in 2016"), which are the executors of appraisal orders, unlike groups and partner associations with a much wider range of activities. As for the ranking of groups of affiliated companies (see the table Ranking of business potential of Russian appraisal groups based on the results of 2016), it provides more information about the scale of business of structures that include appraisal organizations, and, consequently, about their development potential.
The total revenue of the participants in the current ranking at the end of 2016 amounted to 5.5 billion rubles, which, according to comparable data, is 11.8 percent more than they earned in 2015. Against the backdrop of official inflation of 5.4 percent, this is a very worthy figure.
Many orders for the valuation of large assets (especially state property) are held through tenders, where the criteria are price and term
It is too early to talk about the final exit of appraisers from the crisis - the general economic situation does not contribute to solving the old problem of dumping, which, according to the participants themselves, deforms the market. "Many orders for the valuation of large assets (especially for state property) are held through tenders, where price and term are significant criteria. The appraisal companies that offer the lowest price win. This leads to a decrease in the quality of services, because in order to fit into the budget, contractors hire students without experience, do not conduct inspections, etc. There are real cases when, after bidding, the price of services even went negative.Most likely, appraisal companies that do this may have a hidden interest that the other party will pay, which will lead to non-transparent and low-quality evaluation," complains Irina Komar, vice president of SRO "Union" FSO "and managing partner of the company" Professional Group of Appraisal ".
Points for evaluation
Recently, the state has come to grips with the solution of the problem of the quality of assessment. According to the law 172-FZ, adopted in June 2016, all appraisers are required to pass the qualification exam and receive the appropriate certificate before April 1, 2018.
The obligation to confirm the status and qualifications in theory will increase the professional level of appraisers and will allow removing random companies from the market. In practice, evaluators are skeptical of these innovations. "The Ministry of Economic Development performs a duplicate function in terms of conducting a qualification exam in relation to the system of Independent Qualification Assessment, which has existed for almost 10 years within the framework of the SRO. Moreover, the standards for organizing and conducting the qualification procedure are significantly lowered. knowledge, and even more so will not solve the problems of professional ethics. This will not help to clear the market from non-professionals and poor-quality assessments," Irina Komar believes.
According to Kirill Kulakov, First Deputy General Director of the Center for Independent Property Expertise (CNES), according to 172-FZ and the order of the Ministry of Economic Development of the Russian Federation, it will now be necessary to take qualification exams every three years, and a single appraisal profession will be divided into three areas - real estate appraisal , machinery and equipment valuation and business valuation. These innovations can lead to an outflow of specialists from the industry, a redistribution of orders for appraisal, a shortage of appraisers and a sharp increase in the cost of services. An increase in the specific volume of work will not always mean a high quality of work.
Intangible Forces
The most significant share of income of the ranking participants traditionally falls on the assessment of real estate - almost half of their revenue (2.5 billion rubles) is concentrated here. The market valuation of real estate in order to challenge its cadastral price, as well as forensic examination of valuation reports, continues to be in high demand. "Changes in market value entail a stable demand for valuation in order to challenge the cadastral value of capital construction projects and land plots, as well as the work of appraisers in review commissions," explains Daniil Slutsky, CEO of Business Valuation and Consulting (OBIKS) .
Real estate valuation is also in demand in asset purchase and sale transactions and remains relevant for collateral purposes when obtaining loans. "Banks are concerned about improving the quality of collateral portfolios due to the likelihood of subsequent sale of collateral in case of bankruptcy of debtors. The valuation of collateral is initially initiated by the customer who wants to take a loan, but after declaring the borrower bankrupt, the bank raises the issue of valuation, for example, with a view to the subsequent sale of property," adds Daniel Slutsky.
Another significant revenue segment is valuation valuable papers and business, where ranking participants earned 1.6 billion rubles (29 percent of total revenue).
"According to our experience, most of the valuation of business and securities falls on raising financing and intra-group transactions. In general, the largest volume of valuation is done for banks on the market, while the share of valuations in the framework of enterprise restructuring has recently increased," says Arina Matveeva, partner of the consulting group "NEO Center".
Other areas of work brought less noticeable income to the ranking participants. Thus, in 2016, the participants in the list accounted for 464 million rubles in revenue from the assessment of equipment and transport; slightly less - 477.5 million rubles was brought by work in the field of asset revaluation. Another 218.4 million rubles was added by the assessment of investment projects and 120.5 million rubles - by the assessment of intangible assets and intellectual property.
According to the participants of the ranking, requests for evaluation of the effectiveness of investment projects are growing. "The largest share of requests falls on the development of commercial real estate. In addition, our company took an active part in the development of guidelines for evaluating the effectiveness of investment projects for government agencies. The number of applications from innovative companies with unique intangible assets is also growing," comments Alexey Savelyev, Director for ABN-GROUP estimate.
He also draws attention to the shift in the interests of customers from traditional forms of collateral to intangible assets. "Today, more and more transactions involve the pledge of rights to a trademark and other intangible assets to a bank. There is a growing demand from clients for consulting services regarding the correctness of the assessment, documentation, reflection in the financial statements of intangible assets, as well as in general ways to include them in business turnover," says Alexey Savelyev.
Interview with Vera Konsetova, CEO of AFK-Audit
Your company has long been one of the leaders in the appraisal services market. What are the benefits for your business?
Vera Konsetova:Our credo is continuous activity in all aspects related to the sustainable development of the company: activity in the search for new partners, in entering new markets and industries, activity in communications with customers, in the development of our professional potential. In addition, our three "whales" give us an advantage.
The first is the synergy that arises with the mutual support of the competencies of auditors, appraisers, lawyers, business analysts and marketers. All these professional areas are quite developed in our country, and specialized consulting services are provided on their basis. For example, when implementing complex tasks in the field of business valuation, distressed assets, due diligence, cross-connection and joint work of such specialists give the desired effect - an accurate and efficient solution of complex problems.
The second is the development of information technologies, automation and knowledge management. Thanks to the accumulation of large arrays of verified information on the real estate market, as well as on many sectors of the real sector, we have formed a database and a database management system, which helps us to perform current tasks more efficiently and quickly. It is no secret that the key to the effectiveness of the work of consultants and appraisers is the completeness of information about the object and the availability of tools to verify its reliability and relevance.
And finally, the third - competencies. Today we are able not only to continuously support and improve the level of our employees, but also to be a source of information and knowledge for colleagues in the shop - appraisers and auditors, as well as our clients. Therefore, we are actively developing the AFC Corporate University and all forms of training and advanced training within it. This gives an incredible impetus both to establishing new contacts with customers, generating new services, and to improving the reliability and quality of our services.
Vera Konsetova. Photo: "AFK-Audit"
For appraisal consumers, the qualifications and experience of appraisers are important criteria. How do you maintain the required level of competence of your specialists?
Vera Konsetova: We understand that qualifications in the future will become one of the main criteria for choosing a performer. Therefore, within the framework of our corporate university, several programs have now been developed in three areas: assessment of machinery and equipment, real estate and business. And most of the appraisers of our group of companies have already been trained in these programs.
Describe, please, the current state of the appraisal services market. What factors, in your opinion, favor the development of evaluation and, conversely, what factors hinder the development of this segment of professional services?
Vera Konsetova: The development of the appraisal market is largely facilitated by the development of the companies themselves who order appraisal services. Currently, the management of many of our clients is solving increasingly complex problems. There is a growing need for in-depth analysis and valuation of problematic objects, non-core and surplus assets, valuation for IFRS purposes is developing, new objects for valuation appear - for example, social networks.
The development is hampered by the insufficient regulation of the most professional valuation activities, unfair competition, closeness and limited market information.
In your opinion, what significant changes have recently taken place in the regulation of the appraisal industry? What do customers get from this assessment and how does this affect their performance?
Vera Konsetova: It's no secret that since July 1 of this year, quite significant changes in the legislation in the field of valuation activities have come into force, which require all appraisers to pass a qualification exam in areas of activity. At the moment, it is not yet completely clear how the procedure itself will be organized, but in the end, in our opinion, customers will receive a more qualified, but also more expensive service.
The qualifications of the appraisers themselves are the cornerstone that determines both the problems and trends of the industry. Strengthening the requirements for qualification will allow to streamline the market, leaving professional and reliable players on it.
Are current customer valuation needs different from past requests? What are the prospects for demand for the services of appraisal companies in the current economic situation?
Vera Konsetova: First of all, I would like to note that the customer has become more demanding and competent. The services of revaluation of the value of collateral and valuation of problem assets by banks, as well as valuation in the framework of the procedures for contesting the cadastral value, are still in demand, although the latter can no longer be called a growth driver.
And the prospects for demand may be associated with the analysis and evaluation of non-core and surplus assets due to the fact that many enterprises have programs for optimizing property complexes. In addition, our colleagues are seriously considering the use of valuation competencies in other consulting services, such as financial modeling, strategic and business planning, marketing, forensics, etc.
This year, the RAEX agency (Expert RA) has updated the methodology for ranking appraisal companies. In your opinion, how timely are these measures and what can they give to the market and its users?
Vera Konsetova: If we talk about the division into rankings of groups and individual organizations, then any clarification and detailing provide users with additional information and a more adequate idea of a market participant. We hope that the improvement of the methodology will have the same effect as the change in the methodology for ranking audit companies and groups, namely, the “cleansing” of the ranking from nominal associations and distorted revenue data, and will also provide market participants with the necessary information about direct counterparties - companies providing appraisal services.
Analytical center "Expert" has prepared an annual rating of appraisal companies in the Urals and Western Siberia. According to the participants of the study, their total nominal revenue for 2017 increased by 2.8% and amounted to 394.9 million rubles. But taking into account inflation, which amounted to 2.51% at the end of 2017, the dynamics is only 0.3%.
Of the 20 participants in the rating (25 companies were represented in the previous rating), twelve finished the year in positive territory, while the rest had a decrease in income. This year, two biggest player market assessment of the region - "RASTAM" and "Expert-Otsenka", which accounted for almost a quarter of the revenue in previous waves. The Apriori Group of Companies, which closed the top three in last year's study, came out on top this year, accounting for 13.5% of the total revenue of the rating participants. The Tyumen-based company Assotsiatsiya ALKO (8.9%) occupies the second position. The Metrix Group of Companies (8.4%) closes the top three. The Chelyabinsk company Tekhnokom-Invest became the leader in terms of revenue growth — the company's revenue quadrupled compared to 2016.
The leading position in the revenue structure of the rating participants in 2017 is still occupied by real estate valuation (52.7% of total revenue). The share of business and securities valuation accounts for 21.3%, which is the second largest share in the revenue structure of the rating companies. On the assessment of equipment and vehicles, participants earned about 12%.
High demand for real estate valuation is still provided by the contestation of its cadastral value. In 2017, the companies participating in the rating provided services for assessing the cadastral value of real estate when it was contested by 4.2% less than a year earlier. The share of services in total revenue from valuation services decreased from 13.7% in 2016 to 11.9% in 2017, in real estate valuation — from 23.9% to 22.6%, respectively. The number of prepared reports increased by 1.6% compared to 2016, but the average price of a report decreased by 5.8%.
The assessment situation is better in mortgage lending: revenue increased by 22.2% compared to 2016, and amounted to 29.2 million rubles, but the number of reports decreased by 14.0%, respectively. It should be noted that the average price of the report increased by 42.1%. At the same time, the volume of mortgage lending is growing: according to the Bank of Russia, in 2017, credit institutions of the Urals and Western Siberia issued 220.9 thousand mortgage loans to individuals for a total amount of almost 360 billion rubles, which is 38.5% more than a year earlier.
In terms of the purposes of the assessment, services related to the assessment of “other situations” (forensic examination, damage assessment, etc.) became the most popular in 2017 — they account for 34.3% of the total revenue of the rating participants (growth compared to 2016 amounted to 38.9%). The second position is for services related to the assessment of the “current situation” (crediting, insurance and rent) - 31.4%, while the demand for these services for the year decreased by 11.7% compared to 2016.
Compared to 2016, the demand for sales contract evaluation services fell by almost a quarter. Revenue from valuation services aimed at organizing and restructuring a business increased by 2.5 times, thus the share of services almost reached 8% in the structure of total revenue. Closes the list as before privatization (1.2% of revenue) - for the year the volume of revenue increased by 23.3%.
Methods and information
The rating of appraisal companies in the Urals and Western Siberia (Sverdlovsk, Chelyabinsk, Orenburg, Kurgan, Tyumen regions, Perm Territory, the republics of Bashkortostan and Udmurtia, the Khanty-Mansiysk and Yamalo-Nenets Autonomous Okrugs) was prepared by the Expert Analytical Center. The study is based solely on information officially provided by companies (questionnaire survey). The absence of a company in the tables may be due to the fact that it did not disclose data. The correctness of the information is guaranteed by the signature of the first person and the seal, as well as the financial statements of the organization. Companies from other regions, due to various forms of branch formation, cannot always confirm the data with financial documents, therefore their data is certified by the signature of the first person and the seal. The main criterion for ranking participants is the company's revenue from the provision of valuation services in 2017. The company, whose parent organization is registered in the Ural-West Siberian region, provided data on all enterprises. If the parent company is registered outside the region, then the data on branches and representative offices in its territory were taken into account.
AC "Expert" has prepared an annual rating of appraisal companies in the Urals and Western Siberia. Nominally, the total revenue of the study participants in 2017 increased by 2.8% to 394.9 million rubles, but taking into account inflation (2.5%) - only by 0.3%. Of the 20 companies (there were 25 in the previous rating), twelve completed the year plus. The two largest players, Rastam and Expert-Otsenka, which accounted for almost a quarter of total revenue in previous years, did not participate in this rating. The group of companies Apriori, which closed the top three in last year's study, came out on top with a result of 13.5% of total revenue. In second place is the Tyumen Association ALCO (8.9%). The group of companies "Metrix" closes the avant-garde (8.4%). Chelyabinsk Tekhnokom-Invest became the best in terms of income growth dynamics - its revenue grew four times compared to 2016.
Credit gives work
The leading position in the structure of the total revenue of the rating participants is still occupied by real estate valuation (52.7%). The share of business and securities valuation accounts for 21.3%. On the assessment of equipment and vehicles, participants earned about 12%.
We can explain the high demand for real estate valuation: the subjects of the federation continue to switch to calculating the property tax for certain categories of legal entities at the cadastral value, and business owners, dissatisfied with the amounts, are trying to challenge these calculations. However, services for assessing the cadastral value of real estate in case of its contestation were already rendered 4.2% less, the share in total revenue decreased from 13.7% to 11.9%, in real estate valuation - from 23.9% to 22.6% ( hereinafter - comparison to the same period last year, unless otherwise indicated). The number of reports increased by 1.6%, but the average price of a report fell by 5.8%.
But the demand for business valuation for bank lending, primarily in the mortgage segment, is returning. According to the Bank of Russia, in 2017, credit institutions in the Urals and Western Siberia issued 220.9 thousand mortgage loans for a total amount of almost 360 billion rubles - an increase of 38.5%. The revenue of the rating participants for this type of service increased by 22.2% to 29.2 million rubles, while the number of reports decreased by 14%. The average report price rose by 42.1%.
Evaluation is born in a dispute
Expertise in court, evaluation accounts receivable, damage assessment and finished product assessment, collected in the “other situations” category (34.3% of the total revenue of the rating participants), turned out to be the most in demand in 2017 - an increase of 38.9%.
Denis Syukosev, director of the Profit Expertise Center, notes an increase in the share of forensic expertise in the total revenue of appraisers in property disputes. “In our company, the number of projects on forensic examination, cost consulting, reviewing reports and expert opinions has increased,” confirms Yegor Churin, General Director of Invest-audit. “Disputes about the value of property are often resolved in court. Opponents' points of view on the disputed value of the object are very far from each other, and the price of the issue can be high, the procedure of forensic appraisal in this case is necessary to prove the value of the value, ”explains Artur Mosgold, director of Invest-Aktiv-Otsenki.
The second most demanded range of services is the assessment of the "current situation" (crediting, insurance, rent) - its share in revenue is 31.4%, although demand fell by 11.7%. The demand for sales contract evaluation services decreased by almost a quarter. Revenue from valuation services aimed at organizing and restructuring a business increased by 2.5 times, thus their share almost reached 8% of total revenue. Closes the list, as before, the assessment for registration of privatization (1.2% of revenue), for the year the volume of revenue increased by 23.3%.
back to school
Indirectly, the dynamics of income was affected by the difficult procedure for passing the qualification exam: in order to prepare for it, company executives were forced to release valuable employees from the execution of certain orders. Conducting a qualification exam is another attempt by the state to restore order in the appraisal industry, getting rid of unscrupulous or illiterate representatives of the profession, and to eradicate dumping that has flourished for many years. For this, a new filter was invented. In order to obtain the status of a member of the SRO and the opportunity to provide valuation services, it is necessary to pass an exam before April 1 this year, and separately in three categories - valuation of real estate, movable property and business valuation. After April 1, appraisers will be able to sign reports only in the direction in which the certificate was received. Those who do not pass the exam for three years are deprived of the right to provide assessment services.
In the professional community, the attitude towards legislative innovation is contradictory. There are many supportive changes among our study participants. Vitaly Shulgin, Executive Director of the engineering company Shulgin and Partners, sees the expediency in the requirement to separate appraisers into categories (movable property, real estate, business): in determining the value of real estate. The picture was extremely sad: significant errors were already detected in the design of the assignment for evaluation. With government innovation, the situation should improve radically.”
According to Alla Plesovskikh, Executive Director of EKO-N, the preparation for the qualification exam revealed the strengths and weaknesses of the company as a whole and of each employee individually: “Dramatic changes in the requirements for appraisers helped to take a fresh look at the prospects for the development of our business areas.”
Sergey Lobanov, General Director of the consulting and analytical center "Russian Standard", believes that the introduction of a qualification exam will contribute to the enlargement of valuation organizations.
Tamara Kasyanova, General Director of JSC 2K, sees both negative and positive aspects in this: a reduction in the number of market participants will ultimately lead to an increase in prices for services, but at the same time, quality will increase, dumping will go away, and responsibility for the results of the assessment will increase.
Vladislav Bakhtin, a leading specialist in evaluating the Taxes of Russia association, sees behind the innovation a further increase in state pressure on the industry through excessive regulation: “The consequence is centralization, consolidation and displacement of regional companies by Moscow or St. Petersburg”.
Digital poses a threat
Forecasts for the development of the appraisal industry for the current year are ambiguous. Alla Plesovskikh believes that further changes in the legislation in the field of regulation of valuation activities will greatly affect the dynamics of revenue: “A mobile response to legislative changes, as well as a strategy of reorientation towards forensic expert assessment, will help to maintain positions.”
Galina Alibayeva, Executive Director of the Apriori Group of Companies, is sure that the demand for services will depend on the state and pace of development of the real sectors of the economy, on activity in the lending system: “We expect an increase in capital investments in investment projects due to the obsolescence of fixed assets at enterprises, reorganizations in due to the growing benefits from the development of outsourcing. The participation of appraisers in these processes is objectively necessary.”
Ilya Simkin, Chairman of the NP Ural Chamber of Ready-Made Business, finds the preconditions for further development of the market segment by evaluating real estate (capital buildings) for the purpose of establishing a market value (less than the cadastral one) and reducing the tax base. In addition, in his opinion, due to the growth of litigation, the need for forensic examinations will increase.
General Director of ENSO Appraisal Marina Golovchenko believes that the revenue dynamics of appraisal companies will be affected by a further increase in the number of bankruptcies (including bankruptcies of individuals) and tax disputes (including those related to the cadastral valuation of objects).
Meanwhile, in addition to standard external demand factors, new circumstances are beginning to influence the industry, in particular, the advent of digital technologies. Many companies, primarily state corporations and large private holdings, already practice placing orders for independent assessments in the form of auctions on electronic trading platforms (ETPs).
Ilya Simkin sees many disadvantages in this technology, despite its progressive nature:
This will affect the quality of reports for the worse, because in this case the main task of the "supplier", that is, the appraisal company, is to receive a more or less large order for the minimum possible amount and make it as soon as possible, specified in the application for participation or in the tender documentation.
Information technologies come to the industry and are influenced by the activities of related segments, in particular banks. For example, Sberbank has already started looking for solutions to use artificial intelligence to assess real estate. Arthur Mosgold believes that the experiments may well result in a practical result:
To do this, it is necessary to find ways to cheaply train the appropriate neural network for evaluation activities. All technologies capable of replacing the work of an appraiser are currently known. Modern automation is able to collect the necessary information from the relevant sites, store it and systematize it; process images of analogues and the object of evaluation; if necessary, even make a voice call to the representative and recognize his answers.
So in the future, the development of machine learning is quite capable of leaving some appraisers without work.
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The next, tenth edition of the rankings of Russian appraisal companies, compiled by the RAEX rating agency (RAEX-Analytics), revealed a stagnation in the growth of income in this market. The demand for mass types of valuation and its cost are falling, and new large-scale niches that can expand the market are not visible yet. On the contrary, people - the farther, the more - will be replaced by information technologies, which are already capable of evaluating typical objects.
The total income of the largest Russian appraisal organizations participating in the current ranking amounted to 5.929 billion rubles at the end of 2017, having increased by 2.4 percent over the year. If we adjust for inflation (2.5 percent per year, according to Rosstat), we see a complete stagnation in this market. Recall that in the last year's edition of the ranking, we recorded a more rapid growth of its participants - in 2016 they amounted to 12 percent with inflation of 5.4 percent.
Among the factors that caused such a slowdown in the appraisal market are the general investment and economic background (GDP growth in 2017 amounted to 1.5 percent), a decrease in the cost of appraisers' services, and in some cases, demand for them. The total number of appraisal reports based on comparable data of ranking participants amounted to 122.2 thousand pieces, having increased by 10 percent over the year - that is, the volume of work performed in 2017 grew much more than the corresponding income. As a result, out of a hundred companies participating in the ranking, almost half (40 companies) ended the year with a decrease in revenue.
It is not necessary to expect a sharp turning point in the development of the market. Moreover, the demand for mass valuation types will begin to decline over time. This will be facilitated by the development of information technologies with the gradual displacement of typical IT-based assessments. Already today they are used by valuation customers, for example, banks, as well as valuation companies themselves.
Skilled sweep
One of the main events for the market over the past year was the change in the rules of the game associated with amendments to the law on valuation activities (172-FZ), which came into force in the summer of 2016. Starting from April 2018, an appraiser is recognized as a subject of appraisal activity, who, in addition to membership in an appraisal SRO, as it was before, must have at least one qualification certificate in the direction of appraisal (real estate / movable property / business), obtained as a result of passing a special exam. You will need to take qualifying exams every three years.
Mandatory qualification is designed to confirm the professional status of the appraiser and remove casual players from the market. "The tightening of requirements for appraisers is due to distrust of the appraisal community on the part of appraisal consumers. To clear the market of non-professionals, the Ministry of Economic Development introduced a qualification exam," explains Irina Komar, managing partner of Professional Group Appraisal LLC.
Infographics "RG": RAEX / Vladimir Kuznetsov
However, the appraisers themselves perceive the legislative innovation ambiguously. "The introduction of qualification certificates made it possible to clear the market of one-day firms and " dead souls", as well as reduce the number of self-regulatory organizations, which, in competition with market leaders, were forced to "trade" positive conclusions. But for assessors, the exam procedure is stressful, because preparation for it takes a lot of time. In addition, many exam questions and tasks have nothing to do with practice do not have, and the wording itself is often confusing. And the division of certificates into three areas is costly for appraisers, "complains Daniil Slutsky, CEO of Business Valuation and Consulting (OBIKS).
And Dmitry Kuvaldin, Chairman of the Board of Directors of the company "RUSSIAN APPRAISAL", believes that the tightening of requirements for appraisers - individuals is primarily a consequence of the fact that legal entities that actually provide valuation services are practically removed from the law on appraisal activities. “The regulator over and over again tries, as they say, to “look under the lantern, and not where it is lost.” That is, the “underregulation” of legal entities leads to the “overregulation” of individuals. It would be much more useful for both suppliers and customers of appraisal services not to introduce more and more new requirements for appraisers, but to legislate the principles of qualification selection of appraisal companies.It is obvious that selection at the lowest price and time for the provision of services leads to a decrease in quality, no matter how qualified the performers are," Dmitry Kuvaldin believes.
Real estate fades into the background
The decrease in dynamics in the appraisal services market is largely due to trends in the real estate appraisal sector, which over the past year, with a formal growth of 1 percent (to 2.4 billion rubles), decreased taking into account inflation (see Charts 1 and 2).
The ranking participants explain this by the development of their own collateral and asset valuation practices among the main customers of valuation services - the largest banks and corporations are switching to internal valuation for their own needs, creating appropriate divisions in their structures. "Many banks do not prepare a full-fledged Valuation Report in accordance with the norms of 135-FZ and FSO. In practice, they draw up the so-called brief "judgment on the value of the collateral", which, according to formal features, is not subject to official examination in the SRO of appraisers and which often does not is provided to the borrower because it is internal in nature.Thus, in the valuation segment for collateral purposes, appraisers are left to cooperate only with those banks that continue to use the results of an independent appraisal in their work through preliminary selection or accreditation of appraisal companies, "explains Kirill Kulakov, First Deputy General Director of LLC "Center for Independent Property Expertise" (CNES).
The indicators of the "real estate" sector were also influenced by the fact that the state cadastral valuation of real estate objects is now carried out only by specialized state budgetary institutions. "In accordance with the 237-FZ, independent appraisers retained only the right to participate in the procedures for challenging the results of determining the cadastral value by establishing the market value of the property, including as forensic experts," Kirill Kulakov adds.
The qualification certificate will remove random players from the market
The further, the more information technologies are used in standard mass assessment procedures, as the ranking participants note. After all, it is no secret that the assessment, for example, of apartments in order to identify the cadastral value is, in most cases, the collection of information on the cost of similar objects from open sources, followed by its systematization and the introduction of minimum correction factors. Not the most complex program can easily cope with such work.
Slightly better, as the ranking analysis shows, are the business and securities valuation sectors (1.8 billion rubles, an increase of 5 percent over the year). But the proceeds from the evaluation of investment projects grew over the year by only 1 percent (that is, adjusted for inflation went into the red), to 231.9 million rubles.
The composition of the most valuable customers of appraisal works remains quite stable - these are big business, state and quasi-state companies. "In the corporate sector in 2017, the growth of the valuation market was associated with the deoffshorization of the economy, challenging the results of the cadastral valuation, property transactions, the purchase and sale of businesses. In the public sector, the valuation of assets for privatization is in demand. In addition, the implementation infrastructure projects requires an appraisal to compensate right holders when assets are seized. Such large-scale projects as the construction of the Power of Siberia gas pipeline, the reconstruction of the road transport network in Moscow, the construction of the Central Ring Road cannot be implemented without the preliminary work of appraisers,” explains Roman Chibisov, CEO of Swiss Appraisal Russia and the CIS.
According to Garegin Grigoryan, General Director of the Center for Corporate Solutions, development projects in the capital region and large Russian cities were also in demand for appraisal in 2017: evaluation was given by venture projects. Evaluation of investment projects is needed to distribute the shares of investors at the stage of initial financing, subsequent additional financing and exit from the project. Evaluation is also required for investors to track the progress of the project."
Infographics "RG": RAEX / Vladimir Kuznetsov
Offshore intelligence pledged
Other areas of appraisal work brought less noticeable income to the ranking participants than business and real estate appraisals, but showed rapid growth. In 2017, the participants of the list accounted for 524.9 million rubles in the assessment of equipment and transport, the growth rate was 14 percent.
Increased demand in this segment is associated with an increase in the volume of non-core property of banks - they open showcases of collateral or sell it at electronic auctions. “You can buy a car or other equipment that is pledged through an auction or auction, when the bank and the debtor sell property before the appearance of accounts payable; or in court, when enforcement proceedings have already been opened against the debtor; or from the bank’s property register (into the property the value of the rights of claim and collateral property - in particular, vehicles and equipment - is established on the basis of a valuation report prepared by a valuation company or on the basis of a decision of a forensic expert. In 2017, our company carried out such an valuation movable property under agreements with the largest banks: PJSC Sberbank, VTB Bank (PJSC), as well as for Rosagroleasing JSC, - talks about growth factors Natalia Almazova, CEO of ADN Consult - International Center for Valuation and Financial Consulting.
A little less, namely 500.8 million rubles, brought the work of appraisers in the field of revaluation of fixed assets, but the increase in revenue here amounted to 19 percent. Market participants associate it with requests for this type of valuation from the financial sector. "We see an increased interest in the services of appraisers from banks and other financial organizations. This is due to the actions of the Bank of Russia aimed at increasing the transparency of the financial system. Thus, banks bring their balance sheets and balance sheets of controlled entities (for example, closed-end real estate investment funds) compliance with the new requirements of the regulator.In addition, banks continue to get rid of problem assets inherited from bankrupt borrowers, which also requires a revaluation of fixed assets and rights of claim, "says Pavel Lazarev, CEO of the LL-Consult appraisal company.
As for the valuation of intangible assets and intellectual property, here, despite the smallest amount of revenue (196.4 million rubles), last year there were the highest growth rates - a record 49 percent. "The development of the intellectual property market affects the income of appraisers. For example, the Federal Law of July 18, 2017 N166-FZ encourages owners to legalize and more actively put on the balance sheet objects of intangible assets, which in turn leads to their more active involvement in the economic turnover. This leads to an increase in demand for the valuation of intangible assets," says Sergey Silantyev, director of the VIP client department at Price Inform.
Another factor stimulating demand, according to Alexei Zhuravlev, CEO of Everest Consulting, is the deoffshorization process. "By returning assets from offshore companies, Russian companies increase their balance sheet, which has a positive effect on the investment attractiveness and rating of companies. In addition, the growth of the information technology market, the emergence of new software products and the need for procedures to protect intangible assets also have a positive effect on this direction of assessment. Growth in it in the structure of our company's revenue is due to the fact that, having extensive experience in the direction of valuation for IFRS, we have accumulated an extensive portfolio of projects for the distribution of the price of transactions in the M&A market. An integral part of these projects is the identification and valuation of intangible assets," Alexey shares his experience Zhuravlev.
Interview with Roman Chibisov, CEO / Russia and CIS Swiss Appraisal
An essential legislative norm for the appraisal industry has become the requirement that appraisers have a specialized qualification certificate. What, in your opinion, is the reason for the tightening of requirements for the subjects of valuation activities? What are the main objectives of introducing a qualifying examination?
Roman Chibisov: Over the past decade, the number of certified appraisers in Russia has grown significantly. The fact is that yesterday's student has only basic knowledge and often lacks practical skills, but under the law they could immediately begin to put them into practice by joining the SRO and insuring their professional activities. For more effective work industry The Ministry of Economic Development has introduced a qualification exam, as well as a requirement to have at least 3 years of practical appraisal work experience. On the one hand, such a requirement increases the prestige and respect for the profession. The objectives of the introduction of the qualification exam are to restore order in the market for valuation services in the field of business and investment projects, reduce the number of non-professional appraisers, increase the responsibility of the professional community, combat unfair valuation, raise the status of the appraiser profession, and finally, eradicate the practice of dumping in asset valuation.
Roman Chibisov, CEO of Swiss Appraisal/Russia and CIS. Photo: Provided by the press service of Swiss Appraisal / Russia and CIS
But on the other hand, such close attention to a specialist not only bureaucratizes the process of becoming a "full-fledged" appraiser, but also shows the regulator's distrust of his professional opinion. For example, abroad, in addition to the professional skills acquired during training and in practice, appraisers are guided by strict standards and ethical norms, knowledge of which is a condition for passing the exam. At the same time, Western certification is a bonus for the reputation of the appraiser and the company in which he works, but not a prerequisite for doing business.
In my opinion, a competent appraiser is not someone who can answer the questions of a qualifying exam, similar to passing a session at a university, but someone who understands the market as a whole, knows what methods and approaches to use, how to effectively build a financial model and how to come to the results of the value of the object of evaluation.
On what professional standards is the qualification examination based and what areas of assessment does it cover? Does the implemented system of qualifications correspond to the global evaluation market? What certifications today allow an appraiser to fulfill orders from foreign companies, including when working outside the Russian Federation? What are the benefits for the valuation customer, applying for the services of a certified appraiser?
Roman Chibisov: The Russian appraiser qualification exam currently exists in three areas - business valuation, movable and immovable property, and also requires knowledge of laws and regulations, methods and technologies for valuation and calculations. It is probably still premature to compare Russian and, for example, Western systems of qualifications, since the former is currently being created, while the latter have existed for decades. In countries with a developed market economy, professional communities of appraisers have authority, reliability and status, a high level of professional requirements, for example, in the USA it is The American Society of Appraisers (ASA), in the UK it is the Royal Institution of Chartered Surveyors (RICS). They are trusted by the business community and government agencies, their qualifications are confirmed by cooperation with banks, insurance companies, non-state pension funds, and the judiciary.
In Russia, however, the trust in the community of appraisers is at a low level, both on the part of regulators and on the part of customers. The topic of organizing professional communities and committees, as well as legislation in the field of valuation activities, is in constant change, which also reduces the dynamics of the development of the industry in the country. From the point of view of doing business and transactions, today it is not so much the appraiser's certificate that is important, but professionalism in solving the goals and objectives of the appraisal, although undoubtedly the use of a certified appraiser reduces risks for the client, since he has legitimacy in the market. Usually this is a company with a long history of high reputation in the market, and most importantly, it is a working practitioner, not an armchair theorist. As a result, the customer receives a reliable supplier.
Roman Chibisov: De jure control over the appraiser is carried out by the expert council. De facto, the main control of the function of appraisers is carried out by the customer - the bank and its regulator, the Central Bank, the insurer, the lessor, the tax authorities, the Federal Property Management Agency, the forensic expert, and other users of the appraisal report.
In your opinion, despite the difference in the purposes of evaluation, within which it is carried out, what are the main factors over the past year and now that determine the demand for evaluation? Who is the main customer of the assessment today - the state or the private sector? What services are most in demand on their part and why?
Roman Chibisov: The assets of the Russian office of the Swiss appraisal company Swiss Appraisal include clients from large businesses and state and quasi-state companies - their shares in the project portfolio are approximately equal. It can be noted that in 2017, the growth drivers of the valuation market in the corporate sector were associated with the deoffshorization of the economy, challenging the results of the cadastral valuation, property transactions, and the purchase and sale of businesses. In the public sector, the appraisal of assets for privatization purposes remains. In addition, the implementation processes of infrastructure projects require evaluation in order to compensate right holders when assets are seized. Such large-scale projects as the construction of the Power of Siberia gas pipeline, the reconstruction of the Moscow road and transport network, the construction of the Central Ring Road cannot be implemented without the preliminary work of appraisers and the preparation of the necessary documentation and reports.
What innovations in legislation or changes in the economic situation can you relate to the demand for valuation of business and shares, valuation of intangible assets and intellectual property, valuation of investment projects?
Roman Chibisov: Within the framework of several projects, we evaluated the company's software for inclusion in the authorized capital as an intangible asset. In the future, the development of technologies and Internet models, I think, will lead to an increase in cost, which means an assessment of software in the field of IT security, financial and banking processes, money transfers and payments, and various technical platforms and Internet resources.
Give examples of the largest projects that your company implemented last year or continues to implement today? What does your customer get from their implementation?
Roman Chibisov: In 2017, appraisers from the Russian office of Swiss Appraisal worked on projects in the field of construction, fuel and energy complex, IT and mechanical engineering. Of the interesting projects, I can mention the shipbuilding industry - we assessed the cost of sea vessels as part of leasing transactions at the construction stage, which allowed us to competently carry out the procedure for registering collateral and obtaining state funding. And, for example, in the fuel and energy complex, we evaluated assets in a transaction for the sale and purchase of an energy business, including 14 power plant facilities for Kuzbassenergo, as a result, a complex transaction with a large number of assets was completed. Finally, in our international practice, we conducted a resource assessment for the international divisions of the largest Russian steel company in West Africa and South America.
Please evaluate the prospects for the transformation of valuation activities under the influence of advanced information technologies. What solutions and innovations are you familiar with? Is this trend in line with global trends? In your opinion, how can "digitalization" affect the quality of the assessment?
Roman Chibisov: Today it is impossible to imagine the daily work of the team and each employee without new technologies, devices, data transmission and storage programs. The realities of today are the active development of digital technologies, in which the creation of cloud solutions and computing, the multiple increase in data volumes, the use of gadgets in the corporate sphere and promotion, customer service and project processes will have a decisive impact on business.
At Swiss Appraisal, we make the most of the opportunities offered by our international technology platform. Our clients and partners have the opportunity to gain competitive advantages through speed and professionalism, as well as the active use of a large amount of accumulated data. Thus, the development of databases and cloud solutions contributes to the efficiency and speed of our work, we can confidently compete with other companies in the value consulting market in Russia and abroad.
Development of the appraisal services market in Russia
Kirill Kulakov, First Deputy General Director of Center for Independent Property Expertise LLC (CNES)
Center of Independent Expertise LLC (CNES) is one of the leading Russian companies providing a wide range of services in the field of appraisal, cost consulting, investment design, judicial, legal, construction and technical and cost expertise, financial and technical supervision and construction audit.
For the high quality of services and significant contribution to the development of appraisal and consulting activities, CNES was repeatedly awarded a number of professional awards: Golden LOGODA, Golden Equivalent, Golden PerOO, Gold Medal and Golden Certificate of UNIPRAEX Uni, National Award in the field of audit, evaluation, expertise and consulting.
The First Deputy Director General of the Central Scientific and Technical Commission, a member of the Council for Valuation Activities under the Ministry of Economic Development of the Russian Federation, Doctor of Economics, Professor of Moscow State University of Civil Engineering, Kirill Yuryevich Kulakov answered the questions of our correspondent and spoke about the main trends in the development of the market for valuation services in Russia.
Kirill Yurievich Kulakov. Photo: Provided by CNES
In your opinion, what factors over the past year have affected the decline in income in the appraisal segment?
Kirill Kulakov: Rather, not a decrease, but the absence of growth in these incomes. This was primarily due to the ongoing post-crisis situation, as well as the difficult foreign policy environment, during which the economic activity of most business processes and investment projects is significantly reduced, especially in the private sector of the economy. The main customer of assessment services in such conditions is the state, which pays albeit stably, but not much.
In addition, the appraisal services market itself is shrinking. Many of the largest banks and corporations have also switched to the so-called. "internal" assessment for their own needs, creating appropriate units in their structures. Or, for example, the state cadastral valuation of real estate will now be done not by independent appraisers, but by specialized state budgetary institutions.
Thus, in these sectors, appraisers can only examine the reports prepared by banks and challenge the results of the cadastral valuation?
Kirill Kulakov: Banks that switched to the so-called. "internal assessment", will not prepare a full-fledged Assessment Report in accordance with the norms of 135-FZ and FSO. In practice, they draw up the so-called. a brief "judgment on the value of the collateral", which, according to formal features, is not subject to official examination in the SRO of appraisers, and which is often not provided to the borrower at all, because is internal. Thus, in the valuation segment for collateral purposes, appraisers are left with cooperation only with those banks that continue to use the results of an independent valuation in their work, through the preliminary selection (accreditation) of valuation companies.
As for the sphere of cadastral valuation, then, in accordance with 237-FZ, independent appraisers have, indeed, retained only the right to participate in the procedures for challenging the results of determining the cadastral value by establishing the market value of the property, incl. as forensic experts.
When will the state carry out the next work to determine the cadastral value of real estate? Should appraisers then expect a wave of demand to challenge the cadastral value?
Kirill Kulakov: Work on the next (new) state cadastral valuation is already being carried out in several constituent entities of the Russian Federation, incl. in Moscow and the Moscow Region, and will be completed by the end of this year. Some subjects of the Russian Federation, for example, the Krasnodar Territory and the Kaluga Region, have already published reports on the determination of the cadastral value.
Taking into account the fact that all previous estimates of the cadastral value had a trend towards an increase in the final indicators, with a high degree of probability this can be expected even now. And since the real market value of real estate in last years practically does not grow, and in a number of regions it even decreases, then the demand from taxpayers for contestation services can only grow.
An exception may be individuals, for whom a law will soon be adopted to reduce the tax base by 30%, as well as to freeze the growth rate of property taxes at a level of no more than 10% per year.
Separately, it is worth noting that, unfortunately, the new cadastral valuation does not take into account the fact of contesting the results of the previous valuation. The cadastral value of all objects is again calculated by mass valuation methods, without any adjustments. It turns out that there is a kind of cyclical error that the taxpayer encounters again and again. If it were eliminated, then there would be much less disputes.
What areas of assessment over the past year and now were most in demand by the state customer? What is the reason for the need for services in these areas?
Kirill Kulakov: At the level of the central bodies of the federal executive power and the largest state corporations, first of all, the valuation of blocks of shares for the purposes of privatization, purchase and sale, additional emission, and contribution to the authorized capital is in demand. Valuation of large property complexes and fixed assets is also in demand.
At the municipal level, most often the state orders an assessment of rental rates, as well as an assessment of individual, small-sized, real estate objects for the purpose of priority redemption by small and medium-sized businesses. In large cities, there is also a share of assessments of the rights to implement investment and construction projects on municipal lands.
In the private sector, what types of valuation were most in demand last year, and why?
Kirill Kulakov: Last year, the greatest demand, as a year earlier, fell on the valuation of real estate in order to challenge their cadastral value and, accordingly, reduce the amount of property taxes, as well as on the valuation commissioned by state bodies, state corporations and natural monopolies for the purposes of privatization, purchase sale, lease, contribution to the authorized capital, additional issue of shares, etc.
What development prospects do you associate with these areas for the next year?
Kirill Kulakov: The volume of assessment services for government needs will remain approximately the same, but some increase is possible. This is primarily due to the mandatory assessment of state facilities. In addition, the state continues to increase its influence and control in almost all sectors, most large and especially infrastructure projects are carried out by order or with the participation of state structures.
As for services for the purposes of contesting the cadastral value of real estate, this segment will have an expected pause for one year, and in some regions for a longer period, associated with the next state cadastral valuation (GKO). At the same time, this GKO will be carried out according to the new rules in accordance with 237-FZ, namely, not by independent appraisers, but by specialized state budgetary institutions. And the potential volume of services for contesting the cadastral value in subsequent years also depends on how correct the results of this T-bills turn out to be.
Kirill Kulakov: It influences in different directions. On the one hand, this leads to an acceleration of the document flow between appraisers and customers, as well as the search for the necessary information for the assessment. On the other hand, this trend may eventually lead to the replacement of a classic appraiser with some kind of IT application, at least in the segment of evaluating similar or simple objects. By analogy with a taxi, there will be a Yandex appraiser who will answer the question faster and cheaper: "how much does an object cost?"
What are the most important regulatory and legislative changes in appraisal activities that you would note in terms of their impact on the development of the appraisal market?
Naturally, the most important change that has recently taken place in appraisal activities is the requirement that all appraisers must pass qualification exams in three areas. After 04/01/2018, an appraiser who has not passed the relevant exam loses his professional status. At the moment, out of 23 thousand appraisers who are members of the SRO, approximately 10 thousand people have passed the exam, i.e. about 40%. In a number of regions, a shortage of appraisers, especially business appraisers, began to be felt, some appraisal firms cease to provide services in one direction or another of appraisal. Moreover, several self-regulatory organizations of appraisers may cease to exist, whose members may temporarily lose their professional status because of this.
All of the above will lead to a certain concentration and even greater centralization of the appraisal services market, as well as self-regulation in the field of appraisal activities. Small and many regional appraisal companies, as well as SROs of appraisers, will have to merge with the largest market representatives in order to maintain their status and be able to function in the future.
In your opinion, what is the reason for the tightening of requirements for the subjects of valuation activities? What are the main objectives for the requirement to pass a qualifying exam?
Kirill Kulakov: The state has long wanted to put things in order in valuation activities. In fact, the evaluation community itself wanted this, though not quite by such methods ...
The results of appraisers' activities are involved in most of the most important economic state processes, projects and transactions. In recent years, a social component has been added to this in the form of property taxation of individuals and legal entities. Unfortunately, the model of regulation and responsibility of independent appraisers that existed until recently did not practically work. The low quality, and sometimes "custom-made" nature of many assessments has led to distrust of appraisers, both by the state and by many customers. In this situation, the state decided, without inventing a "new bicycle", to clean up the market of appraisers through an examination filter, as it had already done with auditors and cadastral engineers.
Another question is that the exam itself will not solve the above problems of appraisal activities ... We need a systematic and comprehensive approach, moreover, controlled not by the state, but on the basis of self-regulatory organizations of appraisers. Otherwise, the institution of self-regulation will be practically overthrown and there will be another return to state regulation and licensing.
On what professional standards is the qualification exam based, what areas of assessment does it cover?
Kirill Kulakov: Questions from the general and theoretical part of the exam are based, of course, on the current Russian legislation, incl. 135-FZ and Federal Valuation Standards. The nuance is that the same legal issues clearly go beyond the normal range of functioning of the appraiser and do not even relate to his jurisdiction and area of responsibility. The same can be said about a number of theoretical issues, sometimes of a highly specialized focus, rarely encountered in practice, for example, knowledge of the characteristics of pastures in the regions of the Kaine North, etc. Many practical tasks are also divorced from real practice and, in fact, are aimed at testing readiness for a purely mechanical, template calculation, without checking the real level of professionalism and erudition of the appraiser.
The qualifying exams themselves are taken in three areas: real estate valuation, movable property valuation and business valuation. At the same time, the regulator (Ministry of Economic Development of the Russian Federation) has not yet given clear explanations on the distribution of the most common types of appraisal objects in the indicated areas, for example: rights of claim, bills of exchange, property complexes, lost profits, damage, etc. This can cause certain problems with significant consequences for both appraisers and appraisers. After all, the Valuation Report, signed by an improper appraiser, may be recognized as null and void and, accordingly, this may lead to the nullity of the transactions themselves and other processes.
Please rate how close the Russian system of qualifications is to the world practice in the field of assessment? Will other qualifications be introduced depending on the direction of valuation, for example, in the field of valuation of intellectual property and intangible assets?
Kirill Kulakov: This system with three types of written test exams, which, moreover, must be retaken every 3 years, is more distant than close to the world's leading practice. Both in RICS and TEGoVA entrance examinations consist of several stages, each of which is clearly regulated and, most importantly, has a specific practice-oriented character. So, at the initial stage, the level of education, length of service and real work experience in the relevant direction are analyzed. Next, the examiner prepares several real cases, with various practical situations and tasks. The final stage is an oral exam-interview, which is taken individually by a panel of three (at RICS) experienced examiners for one hour. In this exam, the applicant for membership answers questions about himself, questions on prepared cases, as well as questions on knowledge of the organization's standards (for example, Red Book RICS), incl. ethics standards and evaluation standards. And such an exam is taken once, after which it is only necessary to gain a certain number of hours of professional development every year, moreover, at various professional events, and not only in educational institutions. As we can see, this model of entrance examinations to the profession is more adapted to practice and reveals the real knowledge of the applicant.
IN Russian Federation, in fact, in the near future, a new system of independent assessment of professional qualifications in accordance with 238-FZ should also be fully operational. In addition, this system will apply to almost all industries and professions in the Russian Federation, incl. and for appraisers who, since 2015, have their own professional standard "Specialist in appraisal activities". According to this standard, appraisers' qualifications will be confirmed at 8 levels with corresponding sublevels, depending on the category of complexity of the appraisal objects, as well as the set of professional functions performed. And the process of assessing qualifications will already be very similar to world practice and will include both a theoretical exam and the implementation of practical cases and the preparation of sample reports.
In this regard, it remains a particularly urgent task to synchronize the current system with three mandatory examinations with the future system of independent assessment of qualifications. These systems should complement each other, and not contradict or mislead consumers of the appraiser's services.