Investors’ capital can take various forms aside from equity – examples include shareholders' loans and hybrid capital instruments such as convertible bonds. Some vehicles are structured via a combination of equity participations and shareholders' loans.
Shareholder loans and hybrid capital instruments are generally seen as part of the investors’ overall interest in the vehicle. They should be included as a component of equity in the INREV NAV and reclassified as such if they have been classified as liabilities in the financial statements of the vehicle. The amount to be reclassified should reflect the corresponding carrying value of the liabilities in the financial statements.
The existence of such instruments as part of the capital structure of a vehicle at its origination, or investor loans that are pari-passu to their equity stake and at off market loan terms, are indicators, among others, that these items should be reclassified as part of the INREV NAV.
The reclassification should also take account of accrued interest, which is treated in a similar fashion to dividends.