Enhanced Related Party Fees and Affiliate Transactions for implementation in 2017 annual audit reports

In response to a call from Institutional Investors, the NCREIF PREA Fair Value Accounting Manual now has enhanced footnote disclosure guidance for Related Party Fees and Affiliate Transactions. The new disclosures can be found at: www.reportingstandards.info

Dave Gillan, Managing Director, Global Real Estate Investments & Commercial Lending at New York State Teachers Retirement System (NYSTRS) stated the following:

“Disclosure of all fees and expenses has clearly become a focal point of investors for transparency and disclosure to our constituents. We appreciate the pro-active efforts of the NCREIF PREA Reporting Standards Council and the NCREIF Accounting Committee. We are greatly encouraging our investment partners to work with the CPA firms to focus on this all- important disclosure.” 

“I’ve spoken with a great number of our peer investors that also feel quite strongly about this provision. The incremental cost and time to produce this disclosure on behalf of the investors will provide great efficiencies and benefits for all industry participants.”

A number of large Investment Managers and General Partners have also already formally committed to the new format for their 2017 year-end audit reports.

Highlights important about the new footnote disclosures include:      

  • Groups major categories of Related Party Fees and Affiliate Services in a concise format to build consistency of disclosure across Investment Advisors.
  • Disclosure examples directionally aligned with SEC guidance on appropriate level of transparency to investors.
  • Content and general format of example disclosures has been approved by the NCREIF Accounting Committee and NCREIF PREA Reporting Standards Council including involvement of the Public Accounting Firms.
  • The Industry considers this to be an acceptable and preferable presentation of related party information for the various property types, risk profiles (core through opportunistic) and fund structures (separate accounts, open-ended and closed-ended funds).
  • Additional audit costs, if any, not anticipated to be significant.

Applicability of disclosure for each type of fee and/or affiliate transaction will need to be interpreted and applied properly to each product.
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The Reporting Standards Council and Accounting Committee Chairs highly recommend that you review the new disclosure template and implement it, as appropriate, in your year end 2017 reporting. Please direct any questions or comments to Marybeth Kronenwetter, Director, Reporting Standards at NCREIF.

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

​The NCREIF PREA Reporting Standards Board and Council invite all interested parties to comment on the 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 was reported by investment managers as an issue for claiming compliance. However, the majority of investors wanted TWR to remain a requirement within the Reporting Standards. The project included researching and analyzing these differing views with a goal to support a position as to the appropriateness of the requirement within the Reporting Standards which balances best reporting practices and reporting requirements.

The 2018 strategy aims to expand the adoption of the Reporting Standards by improving the transparency and consistency of reporting across closed-end funds. 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 22, 2018.

Reporting Standards: Importance of Compliance – Video

Jerry Silvey, CFO of Starwood Capital Group and NCREIF PREA Reporting Standards Board vice-chair recently sat down with Eric Lang, Senior Managing Director Private Markets for Teacher Retirement System of Texas to discuss the importance of compliance with the Reporting Standards for both investors and investment managers. Seeking compliance within closed-end funds is a top priority for the Reporting Standards initiative. Jerry and Eric support this compliance effort which aims to provide transparency, consistency and comparability within and across real estate investments in order to facilitate informed decision making in an increasingly complex and competitive marketplace. The video can be viewed by clicking here.

NCREIF, PREA, INREV and ANREV Announce Joint Global Definitions Database (GDD)

NCREIF, PREA, INREV and ANREV are pleased to jointly unveil the Global Definitions Database (GDD).  The GDD represents one unique depository of definitions comprising almost 400 real estate market related terms. A common glossary of terms is a critical step towards convergence of reporting standards for institutional real estate investment vehicles and creates a one-stop resource that has not existed until now.

Many of the terms contained in the GDD have been agreed to globally. Additionally, there are also terms specific to Asian, European and North American standards, guidelines and data products. New terms will be added as the Global Definitions Database is embraced by industry participants.

“This is an important step towards achieving a set of global reporting standards and guidelines that would eliminate a major pain point for both investors and investment managers alike,” said John Caruso, Managing Director, Head of Finance TH Real Estate – Americas and Co-Chair of the Global Standards Steering Committee.

The need for a common set of terms is a critical component of the global initiative and the fact that it is available as an interactive online tool makes it easily assessable to everyone.

“As real estate continues to go digital, offering a common data dictionary is a key stepping stone in the process of developing global standards, as all real estate players seek alignment and improved efficiency of their operations. The Global Definitions Database will speed up this process and lead to more data quality and consistency in the areas of reporting and performance,” commented John Ravoisin, PwC Partner and member of the Global Definitions Task Force.

The Global Definitions Database can be found by clicking here or through the NCREIF PREA Reporting Standards website.

The GDD is an initiative of the Global Standards Steering Committee, established as a collaboration between ANREV, INREV, NCREIF and PREA to jointly develop uniform market standards for institutional real estate investment vehicles on a global basis.

For further information please contact Marybeth Kronenwetter, NCREIF PREA Reporting Standards.

Reporting Standards Council members discuss global standardization at recent PERE COO CFO Forum

During the May PERE CFO COO Forum, NCREIF PREA Reporting Standards Council members John Caruso (TH Real Estate), and Barbara Flusk (Citco), and Marybeth Kronenwetter, (NCREIF), spoke about the critical need for global reporting standards.  John co-leads the Global Standards Steering Committee of INREV, ANREV, NCREIF and PREA and Barbara chairs the global fee and expense measures project. ​Click here for PERE News article.