A record number of listed real estate companies may have received gold stars for the quality of their financial reporting, but there’s still more work to be done, according to Christopher Cuvillier, EPRA’s chairman and CEO of Europe’s largest listed real estate company Unibail-Rodamco.
Despite the ‘significant improvement’ in the number of companies complying with EPRA’s BPRs, 35% still don’t comply, Cuvillier pointed out during his introductory address at the annual conference of the European Public Real Estate Association (EPRA) in Paris this week. ‘There’s more to be done on this front. It is unacceptable that EPRA has board members from companies that do not comply.'
Two thirds of Europe's listed real estate companies by market capitalisation in the EPRA Index received Gold Awards this year for the quality of their financial reporting. In other words, 46 gold award winners emerged this year compared to 33 last year. The awards were determined following an analysis by Deloitte Real Estate of how the companies' 2015 annual reports measured up to the Best Practice Recommendations (BPR) as drawn up by the European Public Real Estate Association (EPRA).
Commenting on the results, Emanuel Proudhon, director at Deloitte France, said 14 new companies out of 46 adopted the BPR standards this year. ‘There were 76 companies with an award this year, compared to 60 last year. That’s a big improvement and the improvement has been spread across Europe.’
Cuvillier noted that in future all board members will come from the ranks of gold award winners. ‘We have new selection criteria for board members. We also want to see more diversity in terms of size, sectors and region. We need to get a better balance between larger and smaller concerns.’
Europe's listed sector has come of age
But there was also plenty to celebrate at the EPRA conference. Since hitting its lowest point ever during the financial crisis, Europe’s listed sector has moved in one direction: up, EPRA’s CEO Philip Charls told the conference. ‘We have a very good year behind us, the sector is becoming mature. Europe’s listed real estate sector has come of age.’
The FTSE-NAREIT-EPRA index now has 101 constituents and the European listed sector is good for a market capitalization of some €200 bn, Charls noted. Recognition as a standalone sector by a global benchmark such as GICS – the reference for equity indices compiled by MSCI and Standard & Poor’s - is also ‘very important’, he said. The reason why many investors have not turned to this index is due to its volatility, he added. ‘The fact that real estate is no longer grouped with the banks means it will see its volatility go down.’
There is huge potential to attract more generalist investors, he said. Of the total universe, only 2.5% invest in real estate he pointed out. Indeed, EPRA studies show that potentially some €75 bn could flow into the sector. ‘This is a good perspective for us going forward. But it requires world-class reporting.’
But Charls still has his work cut out for him, he said. While EPRA has recently booked successes with the introduction of REIT regimes in Ireland and Spain, it is now pushing for Italy, he said. ‘We now hope for new developments there and we definitely see some traction,’ he said, pointing to the recent flotation of Coima Res. ‘We now have REIT regimes in 12 countries which account for 83% of the European economy. We are also pushing for Sweden and Poland, and the first drafts for legislation are in the works.’
