COLUMN: Making INREV Guidelines fit-for-purpose

A number of regulatory changes have been introduced in the real estate sector since the publication of the first edition of INREV Guidelines in 2008. During that period, INREV’s remit has also broadened to cover an expanding range of non-listed real estate investment products such as debt funds, joint ventures, separate accounts and club deals. The revised Guidelines for members of the European association of non-listed investment vehicles (INREV) takes these developments into account, writes outgoing director of professional standards Lonneke Löwik.

The first edition of the complete set of INREV Guidelines was published in 2008. The original Guidelines were an integral part of INREV’s drive to improve transparency and professionalism across the non-listed real estate industry. Since then, a lot has happened - a global financial crisis, an extended period of market instability and, more recently, signs of economic recovery. But the principle of the Guidelines remains as relevant as ever.

The financial crisis was a stark reminder of how crucial professional standards are to properly functioning financial markets and it is encouraging to see that there has been a renewed focus on this area. The real estate sector should be no different if it wants to remain an attractive asset class for investors.

With this in mind, and having now been through a full cycle since they were introduced, this is an opportune time to bring the INREV Guidelines up to date. The review exercise began in mid 2012 and the INREV Guidelines 2014 will be published this month (April). This draws together the threads of an extensive consultation with input from over 300 INREV members.

The INREV Guidelines are designed for non-listed real estate vehicles for institutional investors. Since non-listed vehicles can differ considerably, the updated Guidelines provide a modular approach to help investors and managers to agree on the appropriate level of adoption of INREV best practices and to decide on the level of compliance with the INREV requirements.

The changes to the Guidelines reflect a number of key developments in both the real estate and the wider financial services sectors, over the last five years, including recent regulatory changes.

Some of the key highlights of the INREV Guidelines 2014 relate to:
• Corporate Governance – the Guidelines acknowledge and reference AIFMD where needed;
• Frequency and level of disclosure of reporting – the guidance around this topic has been increased;
• Liquidity – the Guidelines have been extended to cover issues, redemptions, fund wind-ups and extensions;
• Compliance – the Guidelines include an adoption and compliance framework to help managers and investors access and understand Guidelines compliance

There have been internal changes too. Over the years, INREV’s remit has broadened to cover an expanding range of non-listed real estate investment products driven by investors’ growing appetite for debt funds, joint ventures, separate accounts and club deals. So the new Guidelines have been revised to accommodate these products where possible. However further guidance applicable to specific investment vehicles will be added over time.

As investment strategies and markets, including real estate, become more and more globalised, the importance of international co-ordination and collaboration is only increasing. Some important first steps have been taken toward globalisation of reporting standards. The new integrated framework includes a number of updates and amendments made following comparative analysis with the REIS in the US. And the perspective of investors based in Asia was taken account of at a Guidelines workshop that took place during the ANREV Conference in October 2013 in Singapore.

Structurally, the content of the Guidelines has been designed for on-line use and reorganised for easier navigation enabling users to find the content more applicable to their business needs. The Guidelines no longer follow the life cycle of a fund, but are divided by modules, each dealing with a different topic.

This work has been a key priority for INREV. And there has been a determination to make the INREV Guidelines 2014 as useful and applicable as possible for all users.

The Guidelines review has highlighted the fact that the non-listed real estate sector has already made huge progress as an industry. The latest INREV member survey showed that nearly 80% of the members use the Guidelines as a reference, for implementation or both. By sharing best practice and promoting the highest levels of professionalism, the industry will continue to go from strength to strength.

Lonneke Löwik is director of professional standards at INREV