Partner Valuation Advisors is a “Natural Extension” of Due Diligence Platform
In launching Partner Valuation Advisors in late August, Partner Engineering & Science, Inc. sought to extend its engineering, environmental and energy consulting platform into the dollars-and-cents realm of buying and selling commercial real estate. “Partner’s goal is to make real estate investing easier, faster, and safer for our clients,” said Joe Derhake, founder and CEO of Los Angeles-based Partner. “Bundling the appraisal with the Phase I Environmental Site Assessment and Property Condition Assessment makes the process easier and faster. When the reports match and address issues in a concerted way, the client will see more intelligent advice.”
Overseeing the new Partner Valuation Advisors business are two valuation and advisory veterans, Brandon Nunnink, CFA, and Eric Enloe, MAI, CRE, FRICS. Based in Chicago, Nunnink and Enloe will serve as co-founders and Senior Managing Directors in the national practice.
Connect CRE sounded out Derhake, Nunnink and Enloe to discuss Partner Valuation Advisors’ points of differentiation, its tech-forward approach and how the new business integrates with Partner’s existing service lines. Here’s what they told us.
Q: What does the formation of Partner Valuation Advisors mean to the CRE industry?
Enloe: We started Partner Valuation Advisors to do things differently – the world doesn’t need another valuation firm doing things the way they’ve always been done. There’s significant demand out there for modernizing the appraisal business and creating a better client experience and providing valuation professionals with tools to streamline the process using better data and analytics. We also see a lot of inefficiency in how portfolios are valued and clients are demanding more consistent results. We are taking large swaths of data and using it to our advantage to create a portfolio experience that will be world class. That’s what we are driven to deliver.
Nunnink: For the CRE industry, this means a tech-forward approach to streamline the valuations process and especially delivery. For appraisers, this means creating a good home and a fun culture that fosters collaboration, innovation, and growth.
Derhake: We think the CRE industry is eager for a high-quality bundle of all third-party due diligence services, and now Partner will be able to provide a more comprehensive package than anywhere else.
Q: How long has this been in the works?
Derhake: Partner has continued to successfully expand our suite of services over our 15-year history to better support our client’s needs. Appraisal is a natural extension of our existing services and we have considered entering the space for almost 10 years, but we only wanted to get into the space if we could do it with best-in-class leadership. I felt that Brandon and Eric represented a unique opportunity to enter the valuation space with leaders with a proven track record of building a national valuation business, and who are also committed to the Partner culture of creating the best home for talented professionals in the industry. In valuation, that means embracing technology, and our new leaders are fully committed to be at the cutting edge in this respect, just as Partner already is.
Q: You are calling this a tech-forward endeavor. Can you explain what you mean by that?
Nunnink: We’re all about using technology to improve the valuation process, both from a speed of delivery perspective but also as a means to eliminate pain points for our clients. Appraisals take too long to deliver; we see a huge opportunity to create efficiencies in the process and deliver faster while limiting the burden on our clients’ time.
For example, we can do this by easing the transfer of data between the client and Partner through user friendly technology and by eliminating the need to read lengthy valuation reports and rekeying pertinent data into clients’ systems and reports. We can also pair our valuation inspection with other due diligence inspections provided simultaneously by Partner and ensure consistency of information across third party due diligence reports to eliminate time consuming report revisions. Lastly, the way clients want to receive information is shifting so we have invested in dashboards to deliver live, actionable data in a more digestible way. Many firms are talking about this, but Partner is already doing it across its other services lines, so we look forward to bringing that to the valuation space very quickly.
This is one of the key reasons we chose to build this business with Partner – they’re a large firm with solid infrastructure and a very startup entrepreneurial mindset that fosters tech innovation. This has been very well received by its institutional client base. We have a dozen coders on staff that are already building solutions to execute projects more efficiently and have invested heavily in user-friendly, information transfer technology and client dashboard deliverables.
Q: What does the market look like for valuations presently and are we heading for a major value correction?
Enloe: It is a really fascinating time currently. You have a lot of different factors impacting markets and specific property types. First and foremost, you have higher interest rates which have put pressure on valuations. When borrowing costs rise (as they have) then investors demand higher returns which comes in the form of higher cap rate and yields. The flip side of the coin is that investors continue to have cash available to invest and the demand for many property types like multifamily and industrial remains strong, but underwriting is being scrutinized.
The other major demand factor is employment. The recent employment numbers showed a slowdown of new job creation, but overall were good. However, companies like Meta, Salesforce, and Netflix have had either job freezes or layoffs so cracks are beginning to show. Office continues to be the asset type with the greatest uncertainty because tenants continue to try to work through their space needs. Companies are unsure what the right blend is of in-office or remote. Until more certainty exists around those space decisions, we will see a divergence in regards to buyer and seller expectations. Retailers are starting to feel the impact of inflation both on controlling costs internally, excess inventory, and also the consumer is moderating spending. It is early, but some concern is mounting over holiday sales and what that could mean for retail values.
Q: How does this service line align with the existing ones at Partner?
Derhake: Appraisal is a natural part of the due diligence bundle along with Property Condition Assessments, Phase I Environmental Site Assessments, Zoning Reports, ALTAs and so on. Partner’s goal is to make real estate investing easier, faster, and safer for our clients. Bundling all the due diligence reports makes the process easier and faster. When the reports match and address issues in a concerted way, clients receive more intelligent advice. We also support the entire real estate lifecycle – both on the ESI side and the valuation side – from transaction through asset management and disposition. For example, investors with large real estate portfolios have reporting obligations both on portfolio valuation and ESG goals – we can now support both in tandem.