The Investment Program Association (IPA) has released guidelines today for valuing publicly registered, non-listed real estate investment trusts (REITs).
Unanimously adopted by its 24-person board of directors, The IPA Practice Guideline seeks to provide investors with objective valuation information by establishing standards in several areas. The guideline:
• Establishes net asset value (NAV) as the basis of per-share reporting. This is consistent with valuation reporting for institutional real estate funds, separate accounts and other private, non-traded real estate investment vehicles.
• Calls for an independent committee to oversee the valuation process. This is intended to eliminate any potential conflict of interest when the party performing the valuation is the REIT’s external real estate advisor.
• Accelerates the timeline for valuations. It also recommends they be determined as of December 31 of each year.
Recommends more disclosure on valuations that is beyond what is required in regulatory reporting. A 17-point list of disclosure items seeks to better inform the public on the valuations process.
The Financial Standards Subcommittee of the IPA REIT Committee developed the new guideline over a two-year period. The IPA is a national trade association representing companies that offer direct investments in real estate.