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There has always been a demand placed on companies to disclose relevant, timely and useful information and at a recent conference in Paris investors in non-listed real estate vehicles were very vocal about their wishes.
European unlisted real estate funds body INREV last month published its indices for the first time, showing historical data gathered covering the 2001-2003 period.
The first new data are due to be presented at the INREV conference in April, with annual results for 2004. The indices will be published annually initially, but may become more frequent.
The indices are NAV-based indices to measure the aggregate performance of European indirect non-listed real estate vehicles. The indices are structured to include the country, sector, pan-European and all-vehicles level. The indices are unfrozen, which means that additional vehicles and their history can be added and or modified until further notice.
INREV says the consultation release is intended to provide the market with a preliminary overview of the historical performance of the European unlisted real estate vehicles market, and to invite parties to comment on the methodology of the calculation, the structure and the information content of the indices.
Phillip Rose of ABN AMRO, co-chairman of INREV’s benchmarking and performance measurement committee, commented: “The launch of the INREV Index is a major evolutionary step for the industry. The consultation release for the index shows that institutional investors have earned an average return of 10.2% pa from 2001 to 2003 and the forthcoming 2004 figures are expected to further confirm the attraction of non-listed real estate vehicles to investors.”
Judy Hill, INREV’s chief executive, added: “It has been clear from the outset that the indices will need to be flexible to suit the investors’ and fund managers’ increasingly sophisticated requirements. For this reason, we have ensured that the indices can be ‘sliced and diced’ in many ways in order to provide meaningful benchmarks. The key next step thereafter will be to work towards reporting the INREV Index on a quarterly basis from 2006 onwards. This obviously depends on the managers’ ability to deliver the necessary information in a timely fashion.”
The INREV Indices currently include 75 vehicles, with an aggregate net asset value (NAV) of €68bn as at 31 December 2003, which translates into 49% of the NAV covered by the INREV database universe at the same date, which stands at €138bn.
The headline INREV Index is the comprehensive all-vehicles index, which includes the aggregate NAV weighted performance of every vehicle included in the INREV indices.
Those vehicles that meet the criterion of being a specialist vehicle are included in the relevant sub-indices. Sub-indices are only provided when sufficient data (ie, three or more vehicles and no vehicle with a weighting of 50% or over) is available to create such an index.
Specifically, three types of sub-indices of the all-vehicles index have been created:
n Country/region indices; these indices capture the performance of specialist vehicles investing in a certain geographical area. Vehicles investing 75% of gross asset value or more in one country will be included in that country’s index. Vehicles investing in more than one country are included in the European index;
n Sector indices; these indices measure the performance of specialist vehicles investing in a certain sector. Vehicles investing 75% of gross asset value or more are included in a sector index. Vehicles that fail to meet this criterion are included in the diversified index;
n Retail-investor vehicle indices; these indices split-up the performance of the generic indices between those vehicles targeted at institutional investors and those targeted at individual investors.
Those vehicles that do not meet the aggregation criterion are included in the aggregated European all-vehicles indices. This implies that the European domestic vehicle index can have more constituents than the sum of the constituents of the national vehicle indices; the difference being those vehicles included in the database that do not meet the aggregation criterion.
Besides performance data, the weighted average gearing and distribution levels for the indices are provided in the consultation release. The gearing level is defined as the nominal value of debt as a percentage of net asset value. The distribution level is the sum of all dividends pertaining to a measurement period divided by the net asset value at the end of the measurement period.
The results from the preliminary INREV Indices show that the German and Swiss vehicles for retail investors dominate the European markets in terms of size. The institutional vehicles are largely concentrated in the UK and the Netherlands. Data on southern European markets and Scandinavian countries is
thinner.
The performance of the European all-vehicles index over the measurement period has been relatively stable, with the all-vehicles index posting a 7.52% return over the 2000-2003 period and 10.23% excluding the retail-investor vehicles (both figures in local currencies). The national Index for the Netherlands has shown the highest average performance over the 2000-2003 measurement period, generating an average 14.37% return. German vehicles, unsurprisingly, showed the weakest performance.
The availability of sector indices at this point in time is limited to the Netherlands, Italy and the UK. A growing sample will allow for more detail at the sector level, says INREV.
For more information see www.inrev.org

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