Europe’s property companies need to move toward standard reporting practices to enable investors to compare firms transparently across the industry, according to Epra, the Amsterdam-based
Europe’s property companies need to move toward standard reporting practices to enable investors to compare firms transparently across the industry, according to Epra, the Amsterdam-based European Public Real Estate Association, as it launches its Best Practices Policy Recommendations.
‘Standard financial reporting practices are critical for allowing investors to compare the financial results of listed property companies across Europe,’ says Epra chief executive Philip Charls. ‘We hope that providing guidance in this important area will ultimately boost investment flows into the industry.’
While listed property firms in Europe report in accordance with International Financial Reporting Standards, Epra argues that specific additional guidance in some areas is needed to ensure uniform performance reporting and presentation between real estate companies. The association has tailored its guidance with the aim of achieving uniform accounting and valuation principles among its members.
IFRS is also ‘format free’ regarding the presentation of the balance sheet, profit and loss accounts and cash flow statements, the report notes, and Epra’s best practices committee recommends the use of standard formats for the presentation of these accounts. For the first time, these formats are shown with figures in order to make it easier for companies to adopt the recommendations.
Additional notes and disclosure items, based on uniform recommended standards, are often also needed, according to Hans Grönloh, the committee’s chairman, who says: ‘We aimed to provide guidance in those areas, as well as in the presentation of portfolio performance on rental data, valuation, like-for-like rental income, development and redevelopment property and lease expiry and renewal.’ The recommendations provide standard calculation methods for triple NAV and earnings per share.
The recommendations are effective for annual accounts for periods ending from December 31, 2008. ‘We hope these recommendations will significantly advance uniform financial reporting by European listed property firms,’ Grönloh says. ‘That would be a huge step forward for the direct comparability of financial reports in the industry.’
The release of the recommendations was Grönloh’s last major act as chairman of Epra’s best practices committee. ‘Hans has made a really major contribution to the industry over the past several years,’ Charls says. His successor as chairman is Gareth Lewis, who is currently with the British Property Federation but will join Epra in June as director of finance, where he will be responsible for tax and reporting issues.
Epra has more than 200 active members with more than EUR300bn in real estate assets and 85 per cent of the market capitalisation of the FTSE Epra/Nareit Europe Index. The association seeks to encourage greater investment in listed real estate companies in Europe through provision of better information to investors, improvement of the general operating environment and encouragement of best practices.