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.
The Investors in Non-listed Real Estate Vehicles association (INREV) gathered last year to discuss the future of investor reporting within the annual financial statements.
There were some lively debates and strong
views shared at the conference with a consensus that current reports of non-listed real estate
vehicles (NLREV) were considerably lacking in information.
The objective of the INREV Reporting Committee, led by PricewaterhouseCoopers, is to improve the consistency in accounting and presentation of information by NLREVs and to encourage greater transparency in investor reporting within the annual report.
Judy Hill, chief executive of INREV, said: “The work done by our committees is vital as we move fast on the road to transparency of this market. Data on vehicles, indices of performance, better reporting and governance are all essential if the market is to attract more investment. We have made excellent progress on all these fronts.”
International Financial Reporting Standards (IFRS) set the scene for improving consistency in financial accounting for listed companies across Europe from 1 January 2005, with pressure on non-listed companies to follow suit. However, IFRS does not require an entity to present, outside the financial statements, a financial review by management that describes and explains the main features of the entity’s financial performance and financial position and the principal uncertainties that it faces. Such requirements are generally determined by local laws and regulations and best practice.
The Reporting Committee has issued a draft annual report for NLREVs to provide guidance on best practice disclosures. The manager’s report includes suggested commentary and charts on the vehicle’s performance and an analysis of the property results. The sample pages (left) show some of the dislosures that are recommended by the reporting committee.
The report is a live document in order to continue to improve on the suggested
disclosures and further comments on it are encouraged.
The managers have challenged whether further disclosures in the annual report would add value, citing that investors receive information on a quarterly basis and certain of the disclosures could result in a competitive disadvantage. However, investors have indicated that they would welcome a timely annual review and commentary by management. In addition, investors are weary of management hiding behind the ‘competitive disadvantage’ argument as a means of concealing their poor performance.
The conclusion from the INREV Reporting Committee project is that those managers who are willing to work with investors to provide transparent and relevant disclosures in the annual report will benefit from a stronger reputation in the market and a resulting increase in available funds.
For further information on the INREV Reporting Committee best practice
reporting, please contact: or
Sandra Dowling is a senior manager at PricewaterhouseCoopers