INREV and its partner organisations are working to harmonise global reporting standards. The non-listed sector is an increasingly busy place for capital of all origins, be it pension funds from Canada, sovereign wealth funds from Middle East, or investment from Asia.
The amount of global capital currently earmarked for real estate investment is huge, as institutional investors compete for core assets in cities all over the world. Many of them are arriving in domestic markets for the first time and venturing to territories far and wide.
This tremendous variety of interest, and the increased allocations to real estate that this has resulted in, have created a set of new challenges for the non-listed real estate industry.
One of them is that as institutional investors explore investment routes in unfamiliar markets, they are presented with fund management reporting standards that could be quite different from those back in their home markets. This has thereby created a pressing need for a more globalised language of vehicle reporting.
Therefore, to aid greater understanding and highlight where practices between different markets vary, INREV, ANREV, NCREIF and PREA signed an agreement earlier this year to tackle ways that will converge reporting standards across regions.
‘As consolidation increases and so does investing cross-border, it makes sense to converge guidelines.’
The move further builds on the work already undertaken by INREV and NCREIF and PREA to improve vehicle reporting standards in recent years.
Maurits Cammeraat, INREV’s Director of Professional Standards, who is overseeing this new project for INREV, explains: ‘Many investors are coming to Europe from the US, for instance, and they want to know more about the non-listed industry in Europe. As consolidation increases and so does investing cross-border, it makes sense to converge guidelines.’
A Global Standards Steering Committee (SSC) will tackle those next steps. Established this summer, the group of senior industry professionals (see left), from Europe, North America and Asia, will work on clarifying the differences between the standards, and to attempt to align them. Where possible the committee will look for quick wins because in a lot of areas the standards are aligned already.
With that long-term aim in mind, the group’s first project is to review the gap research undertaken by Deloitte Netherlands that showed the differences between INREV Guidelines and NCREIF/PREA Reporting Standards (formerly known as REIS). Various task-force groups will work to review the comparisons and identify priority areas to focus on.
An early stage project will be to reconcile definitions and a dedicated definition task force will undertake this.
A second task force will explore the differing approaches to fees and expense ratios, with the aim of aligning the varying definitions embraced by INREV and the NCREIF PREA Reporting Standards.
Further task forces will be set up to explore areas where reporting requirements don’t match and the varied regional approaches to property valuation standards.
Results of the task forces’ exploratory work will be reported to the SSC, which will then be responsible for aligning the results and steering regional standards towards one common goal.
John Ravoisin, PwC Partner, who is participating in the task forces, says: ‘It is critical for investors to be able to compare the performance of funds located in different jurisdictions. This project aims to provide more transparency and comparability and will improve the reliability of global performance indexes.’
Where harmonisation is not possible in certain instances, the aim is to generate greater consistency: ‘The ultimate ambition is to have one reporting standard document but in some cases the terms are just different and they can’t be overcome,’ says Cammeraat. ‘At a minimum, however, we can explain the differences that do exist and create a better understanding for everyone.’
For further information please contact Maurits Cammeraat firstname.lastname@example.org