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Recent Searches
In this video, Matt Williams and Victor Chan discuss the findings of our survey of the financial statements of over 50 real estate companies.
The discounted cash flow (DCF model) was the dominant valuation method for the investment portfolios of over 90% companies surveyed. Average market capitalisation was 74% of the IFRS net asset value, with the range between 27% and 126%; and there was also a focus on risk strategies to manage debt exposure as property values fell in many regions. Three quarters of companies disclosed APMs of some type, with most following some industry guidance.
A more detailed analysis of the survey results can be found in the slides. Click the link for the slides located after the video.
A Luxembourg perspective
A quick glance at the EY IFRS Real Estate Survey 2024
The year 2024 remains challenging for the Real Estate Industry. Despite inflation moderation in most of the economies and decrease in interest rate, transactions are not yet at the level of several years ago.
IFRS issuers are showing great efforts in making financials more detailed and transparent. Recent trends in financial reporting for real estate reveal a shift towards longer financial statements. There is constant encouragement for document length to be controlled and content to be more concise, considering that regulations tend to require greater disclosure.
Valuation practices show that around 90% of preparers utilize the fair value model, with most relying on external valuers, albeit not all. The two primary valuation methods - discounted cash flow and income capitalization - reflect differing opinions on market alignment, but there is no one dominant method. Key inputs for valuations include discount rates, transaction costs, market rents, and rental growth. We also infer that investors appear to be actively managing their debt levels as a result of a fall in gearing and fall in values.
Beyond financial statements, companies are increasingly providing alternative performance measures (APMs), as it would be EPRA or INREV standards and ESG-related disclosures in annual reports. Notably, there has been growth in financing arrangements linked to ESG targets, with entities focusing on energy efficiency and sustainable investments.
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