Council Nominations accepted through September 20, 2019

The nomination period to identify new NCREIF PREA Reporting Standards Council members is now open through September 20, 2019.  New appointees will serve an initial three-year term beginning November 1, 2019.

The mission of the Reporting Standards is to manage and promote transparent and consistent reporting standards for the real estate industry to facilitate investment decision-making.  We are nearing completion on projects which will result in the reissuance of the Reporting Standards for 2020. These projects include: our first global standard, the Total Global Expense Ratio (TGER); and addressing complex issues of particular importance to closed-end fund managers including performance measures and valuation practices. Our strategy going forward will include: working with INREV and ANREV to align global reporting standards; investor, investment manager, consultant and service provider outreach; and ongoing dialogue with our foundational standards organizations (FASB, GIPS, USPAP) and other related industry groups which engage in standard setting activities. We are also discussing ways to continue to evolve the Reporting Standards beyond our initial focus of fund reporting. We are proud of our accomplishments but there is much more to do.  The Reporting Standards Board is looking for candidates who want to take a leadership role in the industry and are ready to make an impact.

Seasoned institutional real estate professional members of NCREIF and PREA who possess discipline specific expertise and an interdisciplinary perspective are encouraged to complete the nomination form.  In addition, nominations for qualified candidates may be submitted from NCREIF committees and PREA affinity groups. Click here for more information about the qualifications and responsibilities of Council members.

The Reporting Standards Board is expected to complete the selection process by mid-October and nominees will be notified of the Board’s decision shortly thereafter.  New Council members will be asked to join the Council during its meetings at the November 18-21 NCREIF conference in Miami Beach, Florida.

Please submit completed nomination forms by September 20 or direct any questions relating to the nomination process to Marybeth Kronenwetter, Director, Reporting Standards.

More information on the Reporting Standards can be found at www.reportingstandards.info and by following our LinkedIn company page.

Valuation Exposure Draft: Proposed Changes to Valuation Requirements

Valuation Exposure Draft: Proposed changes to valuation requirements relating to policy and internal valuations for all funds and external valuation requirements for closed-end funds and single client accounts

Comments due by October 4, 2019

The NCREIF PREA Reporting Standards Board and Council invite all interested parties to comment on the exposure draft: Proposed changes to valuation requirements relating to policy and internal valuations for all funds and external valuation requirements for closed-end funds and single client accounts. A summary of the change and associated reason for the proposed changes are as follows:

  • To increase relevance and applicability of the Reporting Standards by closed-end funds and maintain existing integrity and quality of the Reporting Standards by:
    • Removing the requirement for annual external appraisals
    • Affirming the existing requirement for fair value audits for all funds.
  • To increase transparency surrounding valuation policy within close-end funds and single client accounts by: requiring specific disclosure of the use of external valuation policies in offering materials.
  • To foster increased transparency surrounding quarterly valuations which are required by: by adding rigor to internal valuation processes.
  • To acknowledge regular and active trading of open-end funds by: maintaining the requirement for annual external appraisals for open-end funds.
  • To maintain alignment with the recently released 2020 Global Investment Performance Standards (GIPS®)

The current strategy aims to expand the adoption of the Reporting Standards by improving the transparency and consistency of reporting across all funds, particularly closed-end funds. This effort, along with others nearing completion (including: the new Total Global Expense Ratio (TGER); enhanced disclosures surrounding gross net IRR) are expected to culminate in the reissuance of the Reporting Standards for 2020. With industry comment and the support of our sponsors, NCREIF and PREA, the Board and Council continues its mission to establish, manage and promote reporting standards for the industry to facilitate informed investment decision making.

The comment period for the above referenced exposure draft concludes on October 4, 2019.

NCREIF PREA Reporting Standards Council Issues Real Estate Supplement to ILPA Reporting Template

At the request of the investor community, the NCREIF PREA Reporting Standards Council developed a real estate supplement (“RS Supplement”) to the ILPA Reporting Template for Fees Expenses and Carried Interest. “The ILPA Reporting Template has gone a long way towards bringing standardization and transparency to the private equity industry. We are pleased that the Reporting Standards’ initiative expands that mandate to include specific real estate costs by providing a Real Estate specific supplement,” stated Mike DiRé, Director of Real Estate at California State Teachers’ Retirement System (“CalSTRS”).

Benefits to investors and investment managers include:

  • For investors, the RS Supplement:
    • Fosters comparability within real estate specific programs as well as more broadly across private market investment programs, as an asset class
    • Provides investor specific reporting with flexibility on frequency of receipt of information from investment managers as well as the extent of information provided
    • Facilitates reporting to executive leadership, government and regulatory organizations
  • For investment managers, the RS Supplement:
    • Starts with the capture of fees, costs and related party information already needed to satisfy fund reporting requirements
    • Supports apples to apples comparison within a peer group

The RS Supplement does not change the existing ILPA Reporting Template which was created to respond to investor demand for improved disclosures surrounding fees, expenses and carried interest within private equity investment. Private real estate and private equity have unique structural and strategic attributes and represent different risk/return profiles within an investor’s portfolio. Although performance may differ, the costs associated with achieving that performance should be comparable. Investors receiving disparate information surrounding fees, expenses and carried interest from their real estate find it challenging to aggregate or develop meaningful comparisons of this information across their program. Accordingly, the NCREIF PREA Reporting Standards Council felt it was critical to address the investor’s need for consistent and transparent information across their private market investment portfolios. “This ensures consistent apples to apples reporting across our Real Estate portfolio. We look forward to this implementation which will greatly improve our analysis of our portfolio as well as transparency within our industry,” concluded Mr. DiRé.

“We believe transparency and consistent access to high quality fee and expense data is foundational to the success of long-term partnerships in the private markets and support this effort by the Council to raise the bar in the Real Estate realm,” said Steve Nelson, CEO of ILPA.

The RS Supplement is available for immediate use and can be found here. An instructional video on how to complete the RS Supplement will be available in July 2019. The ultimate success of this tool depends upon the support of the investor community. Since its release, the ILPA Reporting Template has been adopted by hundreds of LP and GP organizations. Investors are encouraged to adopt and utilize the RS Supplement to capture and report information for real estate.

Questions surrounding the use and applicability of the template should be addressed to administrator@reportingstandards.info or by consulting the frequently asked questions section on the Reporting Standards website. A link to the RS Supplement can also be found on the ILPA website at www.ilpa.org.

Exposure Draft: Proposed changes to time-weighted return and related disclosure requirements for closed-end funds

Comments due by January 31, 2019

Question: Should the Reporting Standards requirement for TWR reporting be changed from requiring TWR reporting in all cases to making TWR reporting (including disclosures) available upon request only?

The NCREIF PREA Reporting Standards Board and Council invite closed-end fund investors, investment managers and other interested parties to comment on the amended and reissued exposure draft: Proposed changes to time-weighted return and related disclosure requirements for closed-end funds. The Reporting Standards requirement for closed-end funds to report time-weighted return in all cases was reported by investment managers as an issue for claiming compliance. However, the majority of investors wanted TWR reporting to remain a requirement within the Reporting Standards. A public comment process which proposed a solution was concluded earlier this year and results were mixed.  This amended and reissued exposure draft considered: comments received; recent activities to change NFI-CEVA; the proposed 2020 edition of the Global Investment Performance Standards (GIPS®); and further outreach to propose a more streamlined requirement.  We expect this proposed requirement will effectively balance the reporting objectives for investors and investment managers.

The current strategy aims to expand the adoption of the Reporting Standards by improving the transparency and consistency of reporting across closed-end funds. These efforts are expected to culminate in the reissuance of the Reporting Standards for 2020. With industry comment and the support of our sponsors, NCREIF and PREA, the Board and Council continues its mission to establish, manage and promote reporting standards for the industry to facilitate informed investment decision making.

The comment period for the above referenced exposure draft concludes on January 31, 2019.

What Ever Happened to Apples-to-Apples Comparisons?

By Sally Ann Flood, Deloitte & Touche LLP, Chair of the Reporting Standards Council

For years, real estate investors have struggled to make sense of the various data points and reports they receive from investment managers. How do investors analyze different managers reporting similar data in diverse ways, using key terminology with slightly different meanings and performance or operating metrics calculated employing different methodologies? Such inconsistencies can result in frustration when investors analyze their existing portfolios or evaluate new investment offerings for inclusion in their real estate portfolios. The evolution into a global investment landscape magnifies these differences, making an insightful comparison of investments in the US, Europe, and Asia a challenging task. Similar challenges exist when trying to select from competing investment options from numerous investment managers, whether foreign or domestic. Some investors have set up internal teams, at great expense, to try to reconcile these differences. But what if investors could receive standardized data and reporting for their real estate investments?

…continue reading

Source: PREA Quarterly Fall 2018

Council Nominations accepted through August 31, 2018

​The nomination period to identify new NCREIF PREA Reporting Standards Council members is now open through August 31, 2018. New appointees will serve an initial three-year term beginning November 1, 2018.

The mission of the Reporting Standards is to manage and promote transparent and consistent reporting standards for the real estate industry to facilitate investment decision-making. Our current initiatives include: working with INREV and ANREV to align global reporting standards; providing standards and guidance in areas of particular interest to closed-end fund stakeholders; addressing complex valuation issues for real estate investments; investor, investment manager, consultant and service provider outreach; and ongoing dialogue with our foundational standards organizations (FASB, GIPS, USPAP) and other related industry groups which engage in standard setting activities. The Reporting Standards Board is looking for candidates who want to take a leadership role in the industry and are ready to make an impact.

Seasoned institutional real estate professional members of NCREIF and PREA who possess discipline specific expertise and an interdisciplinary perspective are encouraged to complete the nomination form. In addition, nominations for qualified candidates may be submitted from NCREIF committees and PREA affinity groups. Click here for more information about the qualifications and responsibilities of Council members.

The Reporting Standards Board is expected to complete the selection process by early October and nominees will be notified of the Board’s decision shortly thereafter. New Council members will be asked to join the Council during its meetings at the November NCREIF conference in Orlando, Florida.

Please submit completed nomination forms by August 31 or direct any questions relating to the nomination process to Marybeth Kronenwetter, Director, Reporting Standards.

Total Global Expense Ratio Fee and Cost Transparency Adding Light to the Opaque

By John Caruso, Managing Director, TH Real Estate and Barbara Flusk, Head of Real Estate Fund Services, Citco Fund Services

What are the fees and costs associated with participation in a fund? How does fund A compare to fund B? The diversity of investment mandates (sector, geography, structure, etc.) coupled with various types of fees and costs associated with fund participation make it difficult to determine total cost load related to a particular fund much less compare costs across funds. The topic of fund fee and cost transparency is garnering substantial attention from State legislatures, country regulators, investor management boards and investment manager organizations both domestically and around the world who want more information to ensure consistency, comparability and transparency on fee and cost load within the private equity industry, including real estate.

The growing need for increased transparency led to the creation of the global fee and expense standards initiative – an industry-wide collaboration jointly sponsored by the NCREIF, PREA, INREV and ANREV. After nearly two years of ongoing collaboration, the Total Global Expense Ratio (TGER) is ready for publication and available for public comment through June 14, 2018.

As a global metric, the objective is for all investors and investment managers to share a consistent methodology for the measurement of fees and costs, terminology, and disclosure requirements associated with the nature of a particular fee or cost. The basic calculation for the ratio is straightforward: fees, plus costs divided by gross asset value. The calculation further expands to fees, plus costs, plus taxes divided by gross asset value to account for varying tax structures.

For TGER, all costs are assessed based on the type of service to which they should be attributed, no matter where that expense sits in the investment structure. As a simplified example, consider audit costs relating to the annual audit of the fund. In some cases, these costs are allocated to each investment by the investment manager; in other cases, a manager may not allocate these costs to the investment but hold them at the fund level. TGER looks at the nature of the cost rather than where the cost is recorded in the accounts and captures the costs of the annual audit in relation to the fund, accordingly.

Additionally, fees charged by the investment manager must be transparent and include any relevant adjustments such as reductions, waivers and transaction offsets, that might have been agreed between manager and investor.

To meet the all-important objective of comparability, a critical part of developing TGER was establishing a shared set of terms and definitions. Commonality of meaning around key concepts such as asset management fees, performance fees, carried interest, transaction-based management fees, professional services costs, vehicle administration costs and many others, was vital. All of these terms are defined in the Global Definitions Database, a cornerstone project of the collaboration efforts.

All comments received on TGER from the consultation period will be carefully considered. It is anticipated that there will be broad consensus and support for the ratio and its transparency principles. If so, TGER will likely be embedded within the INREV Guidelines and the NCREIF PREA Reporting Standards by the start of 2019.

Originally published in the First Quarter 2018 NCREIF Performance Report.

Global Best Practices for Fees and Expense Metrics Webinar

Register now for this webinar on global best practices for fees and expense metrics.

This session, led by Renaud Breyer, EY, and Barbara Flusk, Citco Fund Services, will examine the current market practices in fees and expense metrics and their related disclosures as well as presenting the new Total Global Expense Ratio (TGER) – the first globally consistent measure for real estate investment vehicle fees and costs which INREV, ANREV, NCREIF and PREA jointly developed.

In Europe and Asia, the INREV Fee and Expense Metrics module clarifies the calculation and disclosure of key fee and expense metrics: the Total Expense Ratio (TER) and the Real Estate Expense Ratio (REER). The module is accompanied by an online assessment to allow users to quantify their level of compliance with the INREV Guidelines.

In the US, the NCREIF PREA Reporting Standards Real Estate Fees and Expenses Ratio (REFER) measures the total fee load of a fund.

The webinar will cover:

  • INREV Guidelines for calculation and disclosure of fees and expense metrics
  • NCREIF PREA Reporting Standards measure of fund fee load
  • Global initiative on Total Global Expense Ratio
  • Benefits of implementing these guidelines

Who should attend the webinar?

The webinar will be of interest for investors, fund managers as well as advisors. It will be of particular interest for investment managers who work in fund reporting and those on the product development side who are interested in trends in fee terms and structures. NCREIF, ANREV and PREA members can register by sending an email to training@inrev.org.

Introducing the First Global Expense Ratio

​NCREIF, PREA, INREV, and ANREV are pleased to jointly release for industry consultation the first globally comparable measure of fees and costs named Total Global Expense Ratio (TGER).

The new proposed global standard measures the fees and costs related to participation in a real estate investment vehicle and enables comparison across products, regardless of the vehicle domicile, structure and management activities.

Barbara Flusk, Citco Fund Services, Co-chair Global Fee and Expense Metrics task force:

“TGER provides investors with the ability to compare fee and expense burden of funds they invest in across the globe. It provides transparency into costs associated with investing and operating in different regions.”

The Total Global Expense Ratio incorporates definitions from the Global Definitions Database, bringing consistent terminology for the most widely used vehicle fees and costs that may be charged directly and indirectly by investment managers and service providers.

Renaud Breyer, EY, Co-chair Global Fee and Expense Metrics task force:

“I am very excited about this project as it is a significant step ahead in our journey towards converged best practices for the real estate investment industry. We look forward to receiving the feedback of industry professionals on these proposed reporting measures.”

The consultation process for TGER runs until June 21 to provide the industry with the opportunity to help design a global standard that is simple, practical and facilitates comparison and consistent reporting of fees and costs.

TGER and the GDD are initiatives of the Global Standards Steering Committee, established as a collaboration between INREV, ANREV, NCREIF and PREA to jointly develop comparable reporting standards for institutional real estate investment vehicles on a global basis.

John Caruso, TH Real Estate, Co-chair Global Standards Steering Committee: 

“TGER represents a major step forward towards the overall goal to level the playing field for global real estate investors.”

For further information please contact:
Amelie Delaunay, ANREV
Constantin Sorlescu, INREV
Marybeth Kronenwetter, NCREIF PREA Reporting Standards