On a spring day in 2011, a mysterious email popped into Richard Armalavage's inbox.
The message was from Stephen Bullock, a Boston appraiser he had never met. Armalavage says he's gotten his share of business pitches over the decades he's been in business in Naples, but they'd never amounted to much.
Still, Bullock had an intriguing proposal: To build a national network of independently owned appraisal firms to counter the growing influence of appraisal firms owned by national commercial brokers.
Armalavage found the email curious enough that he agreed to fly to Boston to meet with Bullock and 18 others who had responded positively. Still, he had bought some Red Sox baseball tickets just in case the meeting didn't rise to his expectations.
That initial meeting turned into what would become Valbridge Property Advisors two years later, the nation's third-largest appraisal firm with 600 employees in 59 offices from California to Florida. Richard Armalavage is the CEO and his wife, Geri Armalavage, is chairwoman of the board and the headquarters is now in Naples. The new company was formally launched in March.
Bullock says he decided to create Valbridge after viewing sophisticated software used by the large commercial brokerage firms. “They'd spent $4 million developing it and it greatly accelerated the time and hours an appraiser used to make a report,” he says.
“We felt like there was a shift going on in the industry,” says Michael Twitty, senior managing director with Valbridge in St. Petersburg. “With the downturn, we were having to compete with firms that we never used to have to compete with.”
The 42 firms that agreed to form Valbridge now have the wherewithal to fund big investments in technology. “We have a very strong push toward productivity-enhancing tools and software,” Bullock says. “It was the biggest motivator for firms joining.”
Valbridge adopted the franchise model, selling territories to well-established and reputable appraisal firms. Valbridge executives decline to cite the required initial capital investment, but Armalavage acknowledged it approaches seven figures in total. “We hope to expand overseas, and we could accommodate another dozen or 15 offices in the U.S.,” says Bullock.
Robert Beaumont, Valbridge's chief financial officer, says the plan is to compete head-on with large commercial real estate brokerage firms. “Wherever CBRE and Cushman & Wakefield are, we will be too.”
First meeting in Boston
In late 2010, Bullock spent two months compiling a list of the best independent appraisal firms in the U.S. “If I didn't recruit the best firms, there would be nothing special,” he reasoned.
The idea was to have appraisal firms own a share of Valbridge yet retain control of their own independent appraisal companies. Bullock himself would be an equal owner in Valbridge even though he had founded the company. “In late February 2011, I began sending out emails with a brief overview of the business plan,” he says.
Beaumont was the first to respond. The Orlando appraiser whose firm is Beaumont, Matthes & Church, says he was immediately struck by the idea. “I saw the same trend that many of us did,” he says, namely that commercial brokerage firms were taking a growing share of the business and appraisers had to make big investments in technology to remain competitive.
Beaumont agreed to attend Valbridge's first planning meeting with 17 other firms in Boston in June 2011. “I'd never been to Boston, so I said what the heck, if nothing else I'll see Boston,” he recalls.
The first meeting proved to be a success. “We sat there the first day for 13 hours,” says Richard Armalavage, whose firm, Armalavage Valuation, has operated in Naples since 1987. “We all anticipated leaving, but none of us did.”
At one point, 20 committees made up of various firms were drafted to help put together the company. “Knowing what I know now, I might not have done it again,” laughs Bullock. “It's a grueling process. We were kind of naÃ¯ve at first thinking we could snap our fingers and be a national firm overnight.”
A national reach
Appraisal firms have traditionally operated independently because of the local nature of the business. After all, appraisers have deep knowledge of a local territory or specialty, but because of potential conflicts of interest they generally steer clear of partnering with real estate brokers or banks.
But large national commercial real estate brokerage firms have increasingly taken business from local appraisal firms by creating separate appraisal divisions. Because of their reach, they win business appraising multiple buildings in different locations. For example, a large retailer might need appraisals on several hundred buildings in multiple states and finding a qualified appraiser in each location would be inefficient.
Now Valbridge executives say they can act as the single point of contact for a company that needs a portfolio of many buildings appraised. Plus, every appraisal report will have an identical format.
“Not only are we getting a seat at the table for large portfolio assignments, but by making those investments in technology, we're driving down our costs to be more competitive and taking market share from less efficient appraisal firms,” says Bullock.
The undisclosed investment in technology is substantial, Bullock says. “None of us could afford to make it individually,” he says.
It's a work in progress. Although the company formally began operations in March, the technology continues to evolve. For now, the company's intranet system allows each firm to refer business to one another. “Bob Beaumont and I have exchanged countless jobs,” says Twitty, whose own firm operates as Entreken Associates in St. Petersburg. “To me the biggest value is the existing client base we already have, not the prospective portfolio work.”
For example, one of Twitty's specialties is appraising marinas. A Valbridge colleague in Arizona recently asked him for help to evaluate a marina on a lake formed by the Colorado River.
Bullock estimates that larger firms that are part of the Valbridge system could see a 20% increase in business while smaller firms could see their volume double. “We are the third largest in our sector, but our goal is to be the best,” says Bullock. “If we didn't all believe we could do that, we wouldn't have stuck together through this long process.”