The Appraisal Institute has formally expressed its support for some changes in the Global Investment Performance Standards, which are international standards used to guide investment firms in the calculation of the performance of their investments including real property investments.
Among the key changes supported by the Appraisal Institute is the increase in the frequency of the appraisal of real estate investments from at least once for every 3 years to at least once every year. The property appraisal must also be done by external appraisal parties.
GIPS standards are being administered by CFA Institute, the international nonprofit organization of investment professionals that grants the Certificate in Investment Performance Measurement and Chartered Financial Analyst designations.
According to the CFA Institute, GIPS standards enable companies to compete in the global marketplace and enable investors to make comparisons.
Investment management companies will be able to benefit from complying with GIPS standards by obtaining the ability to reassure current and prospective investors of the companies? strong track record and performance.
Jim Amorin, head of the Appraisal Institute, said that the regular and ongoing assessment of real estate values will advance transparency in the investment market and will protect the interests of investors.
The Chicago-based Appraisal Institute is an international organization of certified real property appraisers, with 91 chapters around the world and 25,000 members. It was launched in 1932 to promote professionalism, international standards and ethical practices in the appraisal sector.
Members of the institute may hold three professional designations, namely MAI, SRA and SRPA, depending on members? appraisal specialties, training, education and experiences.
Amorin also said that the new GIPS standards will help in the recovery of many real property markets battered by high vacancy rates, high unemployment rates, lack of real estate loans, increase in bankruptcy filings and rigorous lending requirements.
Analysts said that regular assessment and monitoring commercial real property investments are needed as commercial properties continue to be clobbered by vacancies and declining prices.
According to a report issued by Deutsche Bank in July, losses by commercial properties and construction projects could reach $300 billion. The bank estimated that losses from commercial mortgage-backed securities from 2005 to 2008 could reach 15 percent of their total values while losses from construction loans may reach 25 percent of their total values.
Among the American appraisal organizations that submitted comments on the new GIPS standards were the Appraisal Institute, the American Society of Farm Managers and Rural Appraisers, the National Association of Independent Fee Appraisers and the American Society of Appraisers.
