Real Estate

Real estate IPOs

With fewer financing options available, companies increasingly are looking to IPOs to raise equity, using the proceeds to refinance portfolios, make new investments or to provide owners and investors with the opportunity to liquidate their holdings.

The IPO value journey

We can help you evaluate your options and assist you throughout the entire process, including working through the challenging accounting and tax issues. Although the IPO event itself generally lasts 90 to 120 days, the IPO value journey begins at least a year or two before the IPO and continues well beyond it.

Even when the financial climate is not ideal for fund raising, it could be a good time to begin planning for an IPO, while you wait for markets to settle.

The IPO journey is not easy, but with the right people and careful planning, real estate companies can navigate the long road from private to public ownership.

Related materials:

• Global IPO trends 2012
• Ernst & Young’s guide to going public
• Leading practices for a smooth IPO registration (Note: you may need to register to view this page. First-time visitors will be prompted to complete a brief registration form to access the AccountingLink site.)
• Webcast: IPO investors and analysts: early engagement generates value

Regulatory and technical accounting changes

Major regulatory and technical accounting changes are occurring in the US, Europe and other geographies, which has created a challenging environment for real estate. These include the Dodd-Frank Act, the Alternative Investment Fund Managers Directive (AIFMD) and proposed accounting changes for leases and revenue recognition from the Financial Accounting Standards Board and International Accounting Standards Board.

We are committed to helping our clients understand how to approach these changes. We advise funds on SEC examinations and help them assess, design and implement compliance programs. Effectively navigating the sophisticated marketing regime required by the AIFMD will be a key challenge and could lead to a competitive advantage for alternative investment groups. Considering the potential implications of leasing and revenue recognition early on is important, because what organizations do today in preparation can have a significant effect on their business tomorrow.

Related materials:

• Circling back to straight-line leases but with a twist
• The revised revenue recognition proposal – real estate
• Boards to reconsider key issues in revenue recognition project (Note: you may need to register to view this page. First-time visitors will be prompted to complete a brief registration form to access the AccountingLink site.)
• SEC private fund adviser exams: what to expect
• Would the proposed definition of an investment entity affect you?

Green buildings

The world is turning green, and as the benefits of going green become clearer and more affordable, tenant and investor demands for sustainable buildings are increasing. Construction and engineering companies around the world are building more and more environmentally friendly buildings, and existing buildings are being upgraded to meet these standards as well. Green buildings can also have a demonstrable impact on the corporate bottom line.

Our global team can advise you on:

• The cost and benefit analysis of energy applications
• Achieving specific green building certification standards, such as the Leadership in Energy and Environmental Design (LEED) green building rating system, which has been introduced around the globe
• Tax credits and incentives available – at the federal, state and local level in countries around the world – to improve the energy efficiency of buildings, which could possibly outweigh the cost of certification standards
• Cost reductions, operational efficiencies and other rewards that can have a direct impact on a company’s performance and results
  

Related materials:

• Six growing trends in corporate sustainability  
• Webcast: Bottom-line benefits of sustainable business practices
• Leading corporate sustainability issues in the 2012 proxy season 
• Working together: Linking sustainability and tax to reduce costs

Real estate private equity

The recession, financial crisis and pullbacks in the credit market have all impacted real estate private equity funds over the past several years. Given the challenging environment that still remains, it is more important than ever to understand the trends affecting the sector so you can respond effectively.

Key trends include:

• Distressed deal opportunities will continue, and convergence of the bid-ask spread will foster greater deal volumes.
• Due to regulatory and financial reporting changes, the fund operating models will change over the medium to long term.
• Overall, fund terms have not come back to where they were pre-crash, and many real estate fund managers have had to make investor concessions.
• Investors are now more focused on scrutinizing the real estate fund platforms where they are placing capital. More information will be needed to meet investors’ reporting requirements.

Related materials:

• Global market outlook: trends in real estate private equity
• Private equity capital confidence barometer
• Private equity: evolution of the operating model
• Ernst & Young 2012 real estate nonperforming loan investor survey