Capital Markets Board of Turkey annulled the License of an Appraisal Company: What about their reports?

CMB delisted an appraisal company namely TURYAP, and annulled the licenses of 8 experts.

Two different cases are in question. One of them is as follows: according to Vatan Newspaper of Turkey, one of the banks in Turkey, namely Halkbank, wrote a complaint letter to Capital Markets Board of Turkey about an appraisal report of a building which is accepted as collateral for a given credit. The point is that the building was sold at a price of 5 Million USD to close the credit as it became nonperforming. What bank complained is that TURYAP, which was in the list of licensed real estate appraisal companies, prepared a report stating that the value of that building was 19 Million USD. Another one is a report accusing TURYAP of appraisal fraud at 03.12.2005 by High Audit Board. In the investigation report, High Audit Board demand CMB to annul the license of TURYAP.

TURYAP prepared 50.000 appraisal reports for major REITs and Banks says Vatan Newspaper. In Turkey, without TURYAP, only 12 appraisal companies are licensed to operate with 300 professionals. The public announcement made after the penalty, is very critical of CMB’s fashion and contrary to the reasons of penalty: “Problem was not the defective reports, but the format we used”. Actually answer is not satisfactory and explicit, in fact CMB is one of the serious instutions in Turkey, and the action taken for TURYAP is dramatic and unique.

The question is that from the minority shareholder’s perspective, independent appraisal is an added layer of protection in case of a conflict of interest with management and controlling shareholders. But if the independent appraisal company is announced to be incompetent by the authority, how will the REIT’s portfolio valuation will be affected? Frıom our point of view the appraisal companies that the REIT’s are working should be disclosed and the reports should be renewed.