A journey towards greater transparency

In December 2015, EPRA Reporting & Accounting Committee implemented a strategic plan for 2016-2018 to increase the financial reporting compliance among the companies. According to the Best Practices Recommendations (BPR) survey conducted by Deloitte, the listed real estate industry has by far outperformed the targets set three years ago.

Emmanuel Proudhon

Emmanuel Proudhon is a partner at Deloitte in France. He has extensive experience in leading audit engagement of RE companies. He is the coordinator for Deloitte of the EPRA survey and is a member of the EPRA Reporting and Accounting Committee. He graduated from ESCP Europe and has the German Diplom-Kaufmann.

For the 18th consecutive year, Deloitte has carried out its survey on the implementation of the EPRA BPR to promote awareness and to encourage companies to recognise the value in consistent and transparent financial reporting. The company’s BPR compliance is recognised through three levels of Awards: Gold, Silver and Bronze. This year, the report covers 175 annual reports of EPRA members and FTSE EPRA Nareit Developed Europe Index constituents. Altogether, 87% of EPRA members by market capitalisation, achieved an Award, compared with 80% last year.
“This excellent result is a testament to the work and commitment of the Reporting & Accounting Committee as well as of the EPRA staff. This demonstrates how useful this survey was, both to create a challenge and measure the progress made by the industry,” said Emmanuel Proudhon, partner at Deloitte.
Deloitte’s analysis is focused on six BPR: Earnings per share, Net Asset Value (NAV), NNNAV (triple net asset value), Net Initial Yield (NIY), Vacancy Rate and Cost Ratios. It also examined information provided by companies on their investment properties: like-for-like rental growth and capital expenditures (Capex) reporting.
To more appropriately measure the progress made by the industry, Deloitte has reviewed the evolution on a like-for-like basis since the launch of EPRA’s three-year plan. It shows that continuous engagement, as well as the particular commitment given to the BPR by companies’ financial teams, have delivered great results. The number of gold Awards has increased from 30 in 2015 to 57 in 2019. Likewise, the proportion of awarded companies increased from 60% to 86%.
Although 124 companies earned an Award this year, there is still room for improvement. Even best in class companies should more carefully apply the EPRA BPR. They should specifically make sure that the market is provided with the reconciliations between IFRS figures and the EPRA metrics, and with the appropriate level of detail as recommended by the EPRA BPR. Specific comments (including bridges from one year to the other) could also be included in the annual reports to allow investors to better understand trends and changes in the EPRA metrics.
“The EPRA BPR are a cornerstone framework for our industry and their development has always followed extensive discussions with the investment community and property companies,” said Dominique Moerenhout, EPRA CEO. “EPRA continuously focuses on those areas of reporting that are seen to be of most relevance to investors and where more consistent reporting across Europe would bring the greatest benefits in the overall transparency of the sector. EPRA has already begun sharing more information about the changes to the metrics that have at their core the increase of the focus on the quality of the reporting.”