Each year Deloitte grants awards to recognise companies' efforts to improve reporting. Its Gold, Silver and Bronze awards recognise three levels of BPR adoption. The 2018 awards are based on Deloitte's survey of the 2017 annual reports of the 145 EPRA member companies and ten constituents of the FTSE EPRA Nareit Developed Europe Index. This year, Deloitte found a total of 83 companies complied with the BPR, with 26 reaching a higher award level in 2018, including a dozen companies who obtained an award for their BPR compliance for the first time.
“This is the result of hard work in education, providing feedback reports and proactively helping no-award or low-scoring companies in improving their reporting. What is particularly pleasing is that five out of the seven winners of this year’s Most Improved Awards are companies with whom EPRA has been actively engaged with in our BPR compliance drive,” said Jean-Michel Gault, outgoing Chairman of EPRA’s Reporting & Accounting Committee and Deputy CEO of Klépierre. “EPRA will continue to further improve this industry-leading initiative, primarily by continuing to enhance BPR adoption and by improving BPR updates and associated disclosure.”
Deloitte's analysis focuses on six BPR: Earnings Per Share (EPS), 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 the rental growth performance of properties and capital expenditure (Capex) reporting. NAV was the most widely used BPR metric is NAV, with 99% EPRA members reporting it. EPS and NNNAV followed. The Cost Ratio metric continues to be at a lower level of adoption, with only 67% of all assessed companies disclosing it. Gaining in popularity are NIY and 'topped up' NIY disclosures.
Overall, compliance rose to a record 79% of the market capitalisation of the Developed Europe Index benchmark last year, while the number of companies winning top Gold and Silver Awards for achieving these standards jumped 17%. Among the index constituents, 75% of the companies assessed won Gold and Silver Awards for the highest BPR compliance in 2018.
Award winners represented 89% of the market capitalisation of the 155 companies surveyed by Deloitte. A total of 121 listed property companies won BPR Awards in 2018, compared to 106 in 2017. There were 76 Gold Awards winners in 2018, compared with 65 in 2017, representing a 17% increase. Silver Award winners totalled 30, an increase of one from 2017. And 15 companies received Bronze Awards (a dozen in 2017).
“This year’s results are a remarkable achievement and anchor the BPR as the industry-leading standard for disclosure and transparency in financial reporting," said Dominique Moerenhout, EPRA CEO. “Investors and stakeholders need transparency to assess the relative qualities of listed property companies. The BPR are a vital foundation to the success of the sector, and I salute the efforts of EPRA’s Reporting & Accounting Committee and the finance team in lifting the number of award winners.”
EPRA’s Reporting & Accounting Committee started the programme in 2016 to increase BPR compliance for disclosure and transparency in financial reporting. This came after the Association’s members expressed concern a year earlier in a Strategy Review about low levels of adoption. The programme aimed to have 90 companies BPR compliant by 2018. But 121 companies won awards this year, exceeding its target by 34%.
Of the companies surveyed by Deloitte in all of the past five years, the number of Gold Award winners on a like-for-like basis has almost doubled from 24 in 2013 to 47 in 2018. Emmanuel Proudhon, Partner at Deloitte France, concluded: “Our like-for-like analysis highlights the significant progress made by EPRA in raising reporting standards in the real estate industry. In the UK and Germany, existing award winners and new survey entrants contributed to this year’s impressive results, while there was clear progress in Ireland, Norway and Sweden. There is still work to be done. Deloitte will be assisting EPRA to increase disclosure of NIY, which is too low. We will also be looking to encourage more companies to improve reporting in Capex tables, provide like-for-like rental growth for each of their business segments and to be more transparent in their explanatory notes on metric calculations.”
