The Times - UK (2022-01-13)

38 Thursday January 13 2022 | the times

Business

flicts of interest in property valuations.

He said the conflicts would “seriously

test the patience of the layman” and

were “really quite surprising in this day

and age”. One example was of valuation

fees being tied to the value of the asset,

providing an incentive for agents to

raise valuations. Another more com-

mon example was the length of time a

valuation firm or individual valuer

worked for a particular client.

Gray said that the findings of the

review should be a “wake-up call” to the

property industry, which needed to

place “far greater attention on conflicts

and their management”. His

recommendations include creating an

independently led panel at RICS to

oversee the regulation of valuations

and new standards around valuer rota-

tion, training and records of communi-

cations between valuers and clients.

Confidence in property valuations

plays an important role in supporting

sectors were the

most targeted by

activist campaigns, the

report found.

Legal & General

Investment Management

was the most supportive of

activists, supporting 78 per

cent of the campaigns

analysed. Active asset

managers, such as Capital

Group, Goldman Sachs

Asset Management and

ethe

ted by

ih

1

Bosses of water companies that

regularly breach permits by

discharging raw sewage into

rivers and the sea should be

stripped of their annual bonuses, a

Commons committee believes. The

environmental audit committee of

MPs is calling for an urgent review

of the system of self-monitoring by

water companies of their sewage

works. Page 12

2

The creation of an official

digital currency in Britain

could increase the risk of a

run on the banks in an economic

downturn, an influential House of

Lords committee has found. The

committee, whose members

include Lord King of Lothbury,

the former Bank of England

governor, expressed serious

reservations about introducing a

central bank digital currency,

dubbed “Britcoin” by Rishi Sunak,

the chancellor. Pages 37, 40

3

Three of Britain’s biggest

retailers — J Sainsbury, the

supermarket chain, JD Sports,

the trainers and tracksuits retailer,

and Dunelm, which sells

homewares — have increased

their annual profit forecasts after

making more money over

Christmas than they had expected.

Pages 37, 44-45

4

Inflation scaled fresh multi-

decade highs in the United

States last month as

policymakers scrambled to curb

surging prices in the world’s

largest economy. Page 37

5

Property valuers responsible

for making judgments

underpinning trillions of

pounds of land and buildings in

Britain and overseas face tougher

regulation after an independent

review found evidence of conflicts

of interest.

6

Morgan Stanley, the

American investment bank, is

expected to increase annual

bonuses for some of its investment

bankers by more than a fifth today,

after a record year of dealmaking.

7

Pratik Paw, a former junior

employee at KPMG accused

of fabricating documents

during an inspection of the firm’s

audit of Carillion, has cited his

position as a 25-year-old

unqualified accountant of

minority ethnicity to explain why

he failed to challenge instructions

from more senior colleagues.

Page 40

8

Whitbread, the FTSE 100

leisure group, claimed that its

Premier Inn chain had

“significantly outperformed” the

British hotel market, although

rising costs were putting pressure

on the business to raise its prices.

Page 42

9

Banks and insurers operating

in Britain must act urgently to

address the risks posed by a

warming climate, the Bank of

England has warned. Page 43

10

Administrators at Arena

Television are looking

into the possible role of

Sentinel Broadcast, a supplier of

audiovisual equipment, in an

alleged scam at the outside

broadcaster, which is accused of

borrowing £280 million against

thousands of non-existent assets.

Page 47

Need to know

Property valuers agree to

accept tougher regulation

Property valuers responsible for mak-

ing judgments underpinning trillions of

pounds of land and buildings in Britain

and overseas face tougher regulation

after an independent review found

evidence of conflicts of interest.

CBRE, Savills and Knight Frank are

among surveying firms that will have to

employ a “valuation compliance offi-

cer” to ensure that valuations are made

objectively and they will be governed

by a new regulatory panel under plans

announced today.

The Royal Institution of Chartered

Surveyors, the members’ association

that regulates the industry, has accept-

ed a series of recommendations for

improving standards from a review

commissioned in response to a series of

articles in The Times.

Concerns have been mounting that

stores and shopping centres were being

valued too optimistically amid warning

signs about the rising numbers of

empty shops, retailer insolvencies and

online competition.

The industry is dominated by a small

number of surveying firms, which have

come under fire for potential conflicts

of interest, such as where they are hired

to assess the value of a fund manager or

property company’s property assets

while also charging them fees for other

consultancy services.

Peter Pereira Gray, chief executive of

the investment division of the Well-

come Trust, the biggest charity in

Britain with £36.3 billion in net assets,

who led the review commissioned by

the institution, found evidence of con-

markets and economic stability. Valua-

tion assessments of offices, shopping

centres and blocks of flats made by sur-

veyors underpin financial reporting

and investment decisions related to

trillions of pounds of land and property

assets. A significant proportion of in-

vestments in those assets are funded

through the pensions and savings of

consumers. Gray said that “unchecked

loss of confidence in the valuation of

investment properties” could give rise

to “national-level systemic risk”.

He found that a wide range of valua-

tion methods were used and recom-

mended new guidance that a uniform

primary methodology should be adopt-

ed, whereby the expected cashflows of

an asset are determined and discounted

at a target rate of return.

The creation of a formal valuation

compliance officer role at surveying

firms would ensure that services were

delivered to standards observed across

the financial services industry, the

review found.

The institution’s independently led

Standards and Regulation Board said it

“unequivocally accepted” all 13

recommendations made in the review.

Dame Janet Paraskeva, the board’s

chairwoman, said: “These changes are

critical to ensure that RICS-regulated

professionals and firms operating in

this sector remain relevant and

trusted.”

Nick Knight, head of valuation and

advisory services at CBRE, Britain’s

biggest valuer, said: “The review aligns

with our own objectives to continually

evolve and evaluate our processes to

provide the most robust, transparent

and market-facing valuations.”

Louisa Clarence-Smith

Chief Business Correspondent Behind the story

T

he review into

property

valuations was

commissioned

in 2020 after

reporting in The

Times about potential

conflicts of interests

among valuers

working for property

companies or funds

that also paid for

other services.

There are

about

14,000

property

valuers in

Britain at

2,000 firms.

However, the industry

is dominated by a

small number of

firms, including

CBRE, JLL, Knight

Frank and Cushman

& Wakefield, which

makes it difficult to

avoid the selling of

multiple services to

one client.

Providing

valuations and other

consultancy services

such as leasing,

investment and

planning advice is an

accepted and

widespread practice

in the industry. Under

present RICS rules,

valuers must ensure

that there is a

“Chinese wall”

between its team and

any other

departments that

could pose a conflict.

Surveying firms

have argued that it is

not in their interests

to overvalue property.

However, some

senior surveyors have

admitted to The Times

that there is potential

for

“uncon-

scious

bias” in a

low-

trans-

action

market

and cited instances of

being pressured by

clients to deliver a

more positive

valuation.

C

hange in the

boardroom is

the single

biggest demand

made by activist

investors when they take a

stake in a company,

according to new research

(Robert Miller writes).

In a study of the 100

largest activist campaigns,

conducted against 90

individual companies,

SquareWell Partners, a

shareholder advisory firm,

found that 64 per cent

primarily demanded a

change to board

composition, whether that

be an activist gaining

board seats or the removal

of incumbent directors.

The second biggest

change demanded by

activist investors related

to mergers and

acquisitions activity, such

as blocking the sale of a

company or pushing for

the disposal of assets.

The SquareWell report,

entitled Activists Go Big,

found that activism at

American companies

dominated, with 60

campaigns taking

place. Japan and

Britain were the

second and

third most

active

countries,

with eleven

and nine

campaigns,

respectively.

Within the

top 100

campaigns

analysed between

September 2019 and

December 2021, ten

companies were subject to

repeat campaigns — and

in some cases were

attacked by multiple

activists, each with

different demands.

During the period under

scrutiny, Toshiba, the

Japanese conglomerate,

was targeted by three

activists resulting in three

separate campaigns.

Companies within the

industrial and financial

Activist investors

set their sights on

shaking up boards

b

indut

king

and

he

ween

1 9 and

21 , ten

ere subject to

A recent campaign forced out

Harley-Davidson’s boss. Also

under attack have been Dame

Emma Walmsley, of GSK,

Alison Brittain, of Whitbread,

and Jes Staley, at Barclays