PISCES links Quintain Data for Faster Valuations
Copyright: David Lawson - first published Property Week Sept 2005
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Do you know what your property is worth? The accountant will have a fat file of figures, but they refer to the end of the last financial year. Whoever looks after the day-to-day running could concoct another set which are more up-to-date. Then along comes an external valuer with yet another view based on all sorts of esoteric formulae and secret market knowledge.
Who is right? They all are correct in their own way but that’s no comfort to the bank manager, under pressure from head office for an immediate update on a loan. Or a major investor looking to buy a share stake. Or even the new chairman deciding whether management is up to scratch. Developers, managers, investors and even occupiers are losing patience with producing a seemingly simple thing like definitive net worth for a hard, physical asset like bricks and mortar.
Public companies are being pressed for more frequent valuations but most still rely on annual audits. Next year the pressure could become unbearable with the expected go-ahead for real estate investment trusts. Many, if not most, will look to transform into a REIT. That could demand a major shake-up in management systems, as investors will require almost daily indications of asset values.
Some big names are already removing barriers by integrating valuation and management software systems more closely. It won’t be long before lenders, potential investors and chairmen ask why they can’t get similar accurate, immediate information from the smallest private concern. Quintain has set a benchmark. Renown for its eclectic, innovative approach to investment ranging from re-shaping icons like Wembley and the Dome, the company is also a fund manager and stock picker. Many rivals have flashy ideas: few can back them up like Quintain with such fierce management efficiency.
That rests on a clear picture of the disparate portfolio based on frequent valuations. Quintain had already instigated informal quarterly valuations rather than relying on more conventional annual statements. It is a simple idea but hard to implement when, like most firms, information is scattered around in different formats. Even when assembled, it had to be sent to external valuers, then passed to the Investment Property Databank [IPD] to provide an objective take on performance and value.
Software consultant Calvis was called in and has rebuilt and rationalised the firm’s reporting procedures via its pioneering work with PISCES, the electronic data exchange standard. In simple terms, it has created a ‘hub’ through which all information flows to and from the property management system [Horizon], accounting [Navision] and document management [Hummingbird]. When a valuation is required, it controls the whole process so each can read the other’s data, as well as providing summaries. Quarterly informal valuations now take place with minimal manual input and Quintain has a central store of proven, authoritative information
Rachel Candy, group analyst at Quintain, says that to be competitive, the firm needed to know instantly the value of its assets. Finding a solution was not necessarily a question of going for the cheapest but the best, most value-added, long-term solution. That may be something even smaller companies and cost-conscious occupiers should consider. Calvis executive director Chris Lees points out that such an exercise could set them back between £20,000 and £50,000 yet could pay for itself within a year or two for anyone with demanding clients looking for fast appraisals.
While Quintain voluntarily took the step, others could be forced to transform the way information is handled. PISCES has been touted as a solution for integration and fast analysis for close to a decade and has built a formidable list of users. Yet only one of the seven valuers feeding into the Quintain system had come on board. This will be a common problem for others adopting PISCES DataCentre but the protocol has the inbuilt flexibility to deal with this. It can produce reports in Excel, as it did for the non-compliant Quintaiun valuers.
Lees believes internal pressure as much as the move to REITs will be a key to further takeup. In a small firm, most of the information is inside the owner’s head. Once two or three managers are involved it gets more complicated and Excel spreadsheets come into play. Past a dozen or so, more sophisticated methods are needed. ‘It is all about getting more information in timely way,’ he says. ‘Managers want a more immediate feel to indicate how they are performing.’ Layered on this will be the demand by shareholders, clients and lenders for simple, easily absorbed information that takes everything into account rather than a snapshot, over-simplified net asset value.
Owner-occupiers face just as much pressure as they struggle to show lenders and shareholders they are sweating assets. Some of the key takeover battles have hinged on bidders surprising targets by showing how much added value they could squeeze from operational property. Lees equates the application of PISCES compliant systems not to a radical clearout but easing the way information could be moved and analysed. ‘Quintain was well equipped with detailed financial information, management systems and external valuations. We have made the system more homogeneous and added the ability to drill down to find information. In simple terms, we changed the plumbing.’
‘It wasn’t an easy implementation for Calvis,’ says Candy. ‘ As we had embarked on a change management programme we were asking people to do a number of things completely differently. However, we now have a system in place which has automated the valuation reporting and performance measurement procedure saving us time and money. ‘In addition, as a business, we have access to more accurate and richer data which enables us to view our property portfolios at a glance, understand more clearly the differences between the property and accounting reporting and use soft data such as informal valuations in a meaningful way.’