The array of initiatives launched last year by INREV make it easy to see why CEO Lisette van Doorn is so highly regarded by the investment community. She won the prize for Outstanding Industry Contribution at the 2007 IPE Real Estate Awards in Amsterdam for the second year in succession. She talks to Steve Hays
Sitting in INREV's office in one of Amsterdam's World Trade Center towers overlooking the Dutch capital from the heart of the city's major South Axis development, chief executive Lisette van Doorn has good reason to be satisfied with the association's progress in 2007. The body representing investors in Europe's non-listed real estate funds industry saw its net membership climb by nearly 25% to about 265 institutions and companies at the end of December, from 214 at the end of 2006.
Although the Netherlands and the UK are still relatively over-represented, INREV's membership is becoming more geographically balanced and it saw an influx of nine new members from Germany - bringing the total to 30 - where it had made a particular effort last year. By the end of November, the total number of investor members had also risen, to 62 from 51 in 2006.
"I think we've attracted so many new members because we launched a large number of new guidelines and professional standards in 2007 and in general these have been well communicated and taken up enthusiastically by the industry, as well as covered extensively in the press," Van Doorn says.
She reels off an impressive list of guidelines that INREV launched last year, from January's corporate governance and core definitions - which ensure people in the industry are using the same terminology and agree on its meaning, from as basic a level as "what is a fund?" - through to reporting and due diligence in March and April.
The due diligence protocol in particular has been very well received by the industry because of the rapid improvement in efficiency and cost savings that can be achieved by fund managers and investors agreeing on a standard approach for large parts of this labour-intensive process. Investors even seem to carry the protocol with them when investing outside Europe, by requiring fund managers in Asia to respond to the due diligence questionnaire, for example.
September's INREV NAV (net asset value) and fee metrics initiatives represented a new level of complexity and sophistication in the association's approach.
"The NAV initiative is also a complicated product. We're asking people to change how they calculate the net asset value of their funds through the use of a standard calculation methodology. We think this is instrumental in future performance measurement as it will give investors the opportunity to compare ‘apples with apples' for the first time," Van Doorn says.
"This is really important because people may not have realised they have been comparing ‘apples with pears' and that two funds' NAVs can be completely different, so the INREV model represents a vital building block for the future," she adds.
INREV ended the year with the production of a white paper on property valuations that is also likely to be an important theme in 2008.
The second main tranche of the association's work is on research into the non-listed real estate funds industry.
This encompasses regular studies such as investment intentions, capital raising and the quarterly research reports. During 2007, major reports were also produced on fund terminations and management fees, and the first funds of funds directory was launched.
"I think the fund terminations study was important for the future outlook of the industry, as people were concerned that as vehicle terms expired investors would switch to other asset classes, but the results highlighted that most capital will be recycled, helping the market to consolidate and reach maturity," Van Doorn says.
At the heart of INREV's research structure lies its vehicles database, which now totals 476 funds with a gross asset value (GAV) of €350bn. The INREV Index, derived from the database, is being developed to become the performance benchmark for the industry and has reached 206 funds with an NAV of €153bn.
The industry networking opportunities provided by INREV events are consistently cited by members as an extremely important aspect of the organisation. The flagship annual conference has gone from strength to strength, with last year's meeting in Madrid judged to be the most successful ever in terms of speakers and content, according to participants' feedback.
Another notable event in 2007 was the first CFO conference in Berlin in September, which attracted 125 of the CFOs and portfolio managers who are most actively engaged with INREV's output.
Last year also saw the start in November of the association's training and education programme, with four different courses on three subjects, including reporting, regulatory, tax and legal issues.
"The training courses have seen a lot of interest, particularly the reporting standards course. We normally have around 25 people participating in each course and we had 36 on that one, with another 15 on the waiting list. This shows how seriously people are considering INREV's output and guidelines. They really want to see what these are all about and to integrate them into their workflows," Van Doorn says.
This year, portfolio construction, financial analysis, performance measurement and a foundation course for non-listed real estate funds will be added to the training programme.
"For us 2007 was the production stage, where we created and launched the guidelines. We also put the building blocks in place so people start to become aware of them through communication and the establishment of training courses. The third part of the jigsaw is zero-setting or fit-gap analysis, where we look at current market practice," Van Doorn adds.
"So this year, implementation is our main focus. As a first step, we're analysing 30 to 40 annual reports from individual fund manager members to get a feeling of current market practice for reporting and corporate governance in comparison to what the INREV guidelines prescribe. We will provide each participating fund manager with feedback on how the content of his annual report compares with INREV guidelines. People may find they are already using them without realising it," she says.
As INREV prepares to celebrate its fifth anniversary at the 2008 annual conference in Istanbul in April, Lisette van Doorn pays tribute to the contribution of the association's membership in enabling it to have achieved so much in a relatively short period of time.
"We're definitely seeing more and more members willing to actively contribute to INREV. Without this enthusiasm we couldn't have achieved what we have. We ask a lot in terms of participation in committees or in interviews, answering surveys, contributing data, etcetera, so I find it amazing that whenever we launch a new initiative we still find people who want to become actively involved. They really believe in what INREV is trying to do in improving transparency and professional standards within the non-listed real estate funds industry," she concludes.
Steve Hays is a founding director of Bellier Financial based in Amsterdam