The European Association for Investors in Non-listed Real Estate Vehicles, more commonly known as INREV, has issued their Revised INREV Guidelines 2014 (White Paper) which is open for member consultation until 31 December 2013. The guidelines will not be officially launched until April 2014. After reviewing the revised guidelines it is apparent that changes are en route to the real estate industry, in particular the way that INREV net asset value (NAV) is calculated and financial reporting requirements.
The European Association for Investors in Non-listed Real Estate Vehicles, more commonly known as
Updates to the INREV NAV Calculation
The INREV NAV language has been considerably modified to assist the users of the financial statements to better understand the requirements of the INREV NAV computation.
A number of the below suggested changes would see INREV NAV increase compared to the current guidelines which is a welcome relief for most real estate market participants albeit with caution.
- Clarification of the timing of disposal cost accruals;
- Fund managers must now adjust the NAV for the effect of:
- Subsidiaries having a negative equity (non-recourse) when certain conditions are met
- Fair value measurement of other investments in real assets and of construction contracts for third parties;
- The Q&A on the effect of reclassifying shareholders’ loans and hybrid capital instruments (including convertible bonds) and revaluation to fair value of indirect investments not consolidated has been incorporated into the requirements (please refer to the INREV guidelines section 9.5 Q&A for more information);
- Removal of the distinction between the NAVs for open-ended and closed-ended funds.
Updates to Reporting Requirements
By popular demand (based on a survey of existing best practices) INREV has restructured and simplified the reporting requirements to better reflect the structure and content of the investor reports.
The main changes to the reporting requirements:
- Reporting module includes interim reporting requirements;
- Key Performance Indicators (KPIs) of the fund that are included in the Standard Data Delivery Sheet (SDDS) have been integrated as part of the reporting framework;
- The interim and annual reporting requirements stress the importance of providing explanations, comments and analysis to investors on the KPIs of the fund;
- Requirements have been aligned with the regulatory requirements, such as AIFMD, and recent trends in investor reporting.
The Next Steps
Along with the updates mentioned above, INREV also has updated guidelines on areas such as corporate governance, fund documentation, property valuation, fee metrics and liquidation. For these updates please refer to the White Paper that has been issued by INREV.
The issuance of this White Paper marks the beginning of the three month discussion period where INREV members should evaluate the proposed updates and then inform INREV of their questions and concerns. The project committees and groups will then review the feedback and make changes if appropriate. The INREV Guidelines 2014 will be launched at the Annual Conference in April 2014 pending the approval of the INREV Management Board.
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