Putting a price on it

Wondering what your house is worth? Vigers has you covered, the group’s Director and General Manager of Macau, Franky C.H. Wong tells Business Daily. Having worked with integrated resorts, the government, and recently evaluated the HK$250 million Lilau Square property, the group operates in China in four first-tier cities, as well as Hong Kong and Macau, and across the globe.

Given its headquarters are in Hong Kong, what first brought Vigers to the MSAR?
Around 2003 many people from Hong Kong came to Macau, when the casino business was developing, and we had so many bankers from Hong Kong coming to Macau to conduct business. So then, given that they were used to having independent valuation services for property operators, when they came to Macau from Hong Kong they tried to ‘copy and paste’ [the model]. That’s why we also came to Macau, formally, and opened a branch here [in 2007], to have a business here to work with the banks. Vigers Macao Company Limited is our wholly-owned subsidiary registered in Macau. It is recognized by the Macau Government and local banks as a professional independent valuer. There are increasing disputes over land matters in Macau, very often resulting in attendance at Court, which require independent valuation services with international experience.

What are the main services Vigers currently provides and when did the company start?
Our main business units are property appraisal and consulting, building consultancy, business valuation, facilities management, hospitality consulting, and realty services. We serve clients around the globe. Like many other surveyor firms, Vigers was originally from the UK and started operations nearly a hundred years ago. We set up our Hong Kong office in 1975, when Vigers was employed by Mass Transit Railway Corporation (MTR) as its appraiser. With the setting up of the Hong Kong office in 1975, Vigers officially entered the Asia Pacific market and later Mainland China, in the 1980s. Today, Vigers has subsidiaries in four first-tier Chinese cities – Beijing, Shanghai, Guangzhou, Shenzhen – and we have also set up the office in Macau to take care of the regional projects, which account for a quite big piece of Vigers’ business. Currently, our management portfolio includes residential, commercial, industrial, retail, hotels, car park slots, and so on.

Where are your main clients located?
For overseas projects, most likely, the clients are PRC (People’s Republic of China) companies, or the listed companies in Hong Kong, because now you can see so many listed companies in Hong Kong that go outside Hong Kong, Macau, and China to develop overseas property investments. So, we have the chance to have valuation tasks outside Hong Kong, Macau, and China. We grow with our clients as well.

One of the most controversial land dispute matters that have taken place in Macau recently have involved the Polytec Group. Was Vigers involved in the Pearl Horizon project?
No. I know [about it], but we are not the valuer of the government or the developer on that piece of land.

In the Pearl Horizon case, clients had already bought residential units before the land concession expired and the land was recovered by the government. Could a similar case happen in Hong Kong?
That is not the case in Hong Kong. In Hong Kong, when I buy land it depends on whether the land is what we call an owned ‘government lease’ or a ‘lease ground’. This will have an impact on whether, when they want to pre-sell the residential flats, it will come under what we call a consent scheme or a non-consent scheme, governed by the land ground contract.
In the older type of government lease in Hong Kong, you could apply to have a pre-sale – this is under the non-consent scheme – then, the responsibilities and the rules will be held liable by the solicitors. This is not the case in Macau. [In Hong Kong] you could say that we don’t have a ‘land law,’ because we have the conveyance law, that is, the title of the law is not land law, it is about conveyance. Another law [we have] regards the government lease, and from the bottom part of it, we say that the government lease itself is a contract. So it would be governed by the contract law as well. Because, as you may know, Hong Kong applies the common-law system, while Macau is continental law.

Different judicial systems apply here and in Hong Kong. How does that work for you in terms of regulation? Is there conflict or complementarity across the regions?
We are professionally self-regulated, and, personally, I am a professional member of RICS, the Royal Institute of Chartered Surveyors from the UK, and also a professional member of the Hong Kong Institute of Surveyors (HKIS). There are two institutions, one in Hong Kong and one in the UK. And both institutions are members of the International Valuation Standards Council. So, now, effective since 2017, there is an update on the International Valuation Standards (IVS). Market approach, income approach, and cost approach are the three main approaches recognized by the new IVS 2017. So, we have to follow both institutions’ standards, that is RICS and the HKIS, which, in turn, incorporate the international valuation standards. Here, in Macau, we also apply the IVS, so that our services offered to clients are consistent across Hong Kong, Macau, or even the PRC [People’s Republic of China], and overseas countries.

What primarily do the international standards consist of, and what types of valuation does Vigers carry out?
The standards are only available to members. For example, the standards set out the most common values and what you have to include in your valuation report, and even in your engagement matter. Now, the IVS 2017 not only includes property issues, but also business valuation and the plant and machinery (P&M) valuation. We also offer business valuation and P&M valuation as well, but I focus on property valuation.
We also have team members for business valuation and P&M valuation, but business valuation is less common in Macau. What they do is, for example: I have a company, which does active business, and I want to transfer the company to you. Then [we work on] how to determine the consideration, the price, and the fair price for me to transfer the company to you – on how to value this business. Otherwise, in some cases – in Hong Kong, there are thousands of companies listed – for senior management, they usually grant share options to the senior management or the staff, in which case we have to value the market price of the share options. This is a very common type of business valuation. Sometimes, they value the patent, trademark, or even the license. For example, in Hong Kong, taxi licenses or mini-bus licenses can be valued. All these are intangible assets, and intellectual property [-related assets]. This is now what the Hong Kong Government is encouraging, to have business in intellectual property.

Your focus in Macau is on property valuation. Who are your main clients here?
Our main clients are banks, developers, government departments, and property funds.
We have also worked for the Housing Bureau, to evaluate the rental price of retail shops on the ground floor of the government’s residential projects in Seac Pai Van. Some of the local developers appoint us as well. When they are planning to build a building, they want us to advise on the value of the project, so that they can have a report for financial purposes, or for their own investment purposes. For example, the owners of The Residencia, a residential project in the north of Macau, hired us. At the time they developed the project, we provided a report to them, and they used the report to submit to the bank for financing, for the building mortgage. We provided them the gross development value, that is, the value after completion, the market value. Because the project at that moment was under construction, there was a difference between the value after completion and before completion.

Vigers produces valuations for the hotel business as well. Which integrated resorts have you worked with?
At the time Galaxy Entertainment and others were building the casino mega-projects [in Cotai], in 2007 to 2008, we also had a chance to work with those mega-projects, on some company issues. For example, when they buy the land, they have to report the market value on their bank sheets, and that’s what we did for Galaxy Entertainment Group. We have worked mainly with Galaxy, both the StarWorld and [the one in] Cotai. We also have some hotel values and experience here, for example, the Lan Kwai Fong, near Waldo [casino]. Now, we are working with the owner of China Hotel, just opposite the airport. The owner just wants to know how much [the property] is worth.

Apart from the private sector, do you continue to provide valuations for the local government?
Yes. One of the reasons why the company is registered in Macau is because we also provide valuation services to the Macau Government. Last time – it should be two to three years ago, when they sold the economic housing – we advised them on how much each residential flat could be sold for on the open market. For example, if I tell them the [open market price] is MOP1 million, then they may offer it to residents at a discount, maybe for only MOP700,000, for example. So, they wanted us to advise them about what the price was on the open market.

What kinds of criteria would be involved for the valuation of that type of (public housing) property?
The main criteria would be the location, the facilities offered, compared to other private residential estates, whether there is a swimming pool, a landscaped garden – because most units for the residential estates now have a gymnasium room, a swimming pool, a clubhouse, a landscaped garden – and we compare all these facilities with the government’s project. Then, there is the location – whether it is located in the centre or not – and then we compare the size and the floor level of each building, because we value every residential unit in the project. For example, if you take unit A on the tenth floor, and then you take unit A on the eleventh floor, the eleventh floor [price] should be a bit higher than the tenth floor.

With regard to the high-end, luxury property segment, would the house in Lilau Square, that you have valued at MOP250 million, be the most expensive residential estate in Macau?
Not really. Lilau is still an expensive area to buy property in Macau, but so is Sai Van Lake area, which would be the most prime, luxury houses area in Macau, with some of the houses [worth] around HK$400 million or HK$500 million. But they are also bigger, and mostly family-owned properties. Honestly, they won’t trade out, because you can just value, but when you own this kind of house, they won’t sell. Because if they sell, then, of course, they will cash back several hundred millions, but nowhere could they buy [a similar property]. If you go to Hong Kong and want to buy a house of such a type, it costs at least HK$1 billion. For example, at the Peak, you can enjoy the Victoria Harbour view, and that is the most expensive area in Hong Kong. Your neighbours are top government officials or the consulates. Similarly, in Macau, in the Penha area, there are also top governmental officials and big families, so the nature of the neighbourhood is nearly the same. There is nowhere else in Macau where you have a similar environment. And this area is close to the central area of Macau, the same as in Hong Kong. Likewise, from the Peak area, you can go down to the central area of Hong Kong. So this is the case, when you buy property, that the most important thing is the location. [Penha] is already preferred as a prime, luxury area in Macau. Similar to the Peak in Hong Kong.