INREV Guidelines

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Governance

G-P01 Act lawfully and ethically

G01

The investment manager should ensure that the vehicle complies with applicable laws and regulations.

Vehicles must comply with applicable laws and regulations. The investment manager should comply with, and act in the spirit of, (i) the applicable laws and regulations and (ii) the constitutional documents of the vehicle. The investment manager should have appropriate systems in place to monitor compliance with them.

G02

The investment manager should behave with integrity, trustworthiness and abstain from participating in unlawful transactions.

When entering into contractual arrangements, including the drafting and implementation of the constitutional documents of the vehicle, the investment manager should ensure that outcomes intended by the investors are protected. Documentation should be clear, comprehensible and not misleading.

G03

The investment manager should identify and formally document its core values and principles.

The core values, principles and code of ethics of the investment manager concerning how it acts toward the vehicle should be documented and communicated to investors and stakeholders. The governing body of the vehicle should oversee adherence to these values and principles. The investment manager should promote such values and principles on an ongoing basis and establish appropriate systems to enable individuals to report unethical behaviour. These systems should be designed to ensure any whistle-blower can act anonymously and without fear of reprisal.

G04

The investment manager should develop and implement a sustainable taxation policy.

An investment vehicle should follow a tax policy in relation to its structure and day-to-day transactions. The investment manager should operate an appropriate tax management framework and, together with the governing body of the vehicle, oversee the development of an effective application of tax structures, operations and compliance frameworks. Reference is made to the INREV recommendations and best practices regarding tax related matters included in Code of Tax Conduct module.

G-P02 Act in the best interests of investors and consider other stakeholders

G05

The investment manager should act in the best interests of both existing and new investors that have committed undrawn capital.

When making investment decisions, the investment manager should not pursue transactions which merely optimise its own outcomes, for example through enhanced management or performance fees, but should consider the best interests and reasonable expectations of both existing and committed investors.

The constitutional documents of the vehicle should also clearly state how the interests of those investors who have committed capital but whose capital is undrawn are fairly treated.

G06

The investment manager should set out in the constitutional documents of the vehicle the terms by which equity (or debt investments) is issued, transferred and redeemed, to ensure fair treatment of investors.

The investment manager should clearly state in the constitutional documents of the vehicle how equity (or debt investment) is issued and redeemed. In the case of closed end vehicles, the issue of equity (or debt investment) is likely to be through one initial or multiple closings where a number of investors subscribe at the same time, with distributions occurring towards the end of the vehicle’s life, as it sells its assets and winds down. Investors may have the ability to sell their investment on the secondary market but would not normally be expected to do so. The investment manager should clearly articulate the role that it provides in respect of secondary transfers, including any fees charged or interaction with third party trading platforms or placement agents.

In the case of open end vehicles, the process of issue and redemption of equity (or debt investment) would be on a periodic basis. This may be annually, quarterly, monthly or daily. The method of valuation of the equity (or debt investment) should be clearly set out, including the underlying valuation and accounting principles applied (see G09 for open end fund pricing best practices).

G-P03 Act with skill, care and diligence

G17

The governing body of the vehicle, together with the investment manager, should ensure that they have the appropriate skills, capacity and competence to act effectively in the best interests of investors.

The investment manager, together with the governing body of the vehicle, has a responsibility to assess whether the people involved in the vehicle are of sufficiently good repute, and possess sufficient knowledge, skills and experience to perform their duties. They should also be able to act with independence of mind to effectively assess and challenge the decisions of the management body in its management function, and to effectively oversee and monitor management decision-making. They should be able to commit sufficient time to perform their functions with respect to the vehicle.

The members of the governing body of the vehicle and the employees of the investment manager should actively engage in their duties and make their own sound, objective, and appropriate decisions and judgments when performing their functions and responsibilities.

The diversity, equity, and inclusion (DEI) of employees and members of the governing body of the vehicle should be considered.

For more information about integrating social aspects of ESG into investment decision-making processes, please refer to INREV’s Sustainability Guidelines.

G18

The governing body of the vehicle, supported by appropriate parties, should oversee and take responsibility for key judgments and estimates related to financial and performance reporting.

Changes in assumptions and key estimates have a significant impact on business performance and reporting. This requires setting clear expectations for transparency and quality and ensuring that the management’s judgments and estimates impacting key assumptions and the external audit processes are effective. Considerations included in the Reporting and Property Valuation modules of the INREV Guidelines should also be taken into account.

G19

The investment manager should ensure that all parties involved in the operations and management of the vehicle are adequately trained and have access to appropriate educational programmes.

It is important that all parties involved in the operations and management of the vehicle have an understanding of its structure, business model, risk profile and governance arrangements, which should be facilitated through relevant training programmes. The investment manager should allocate sufficient resources for education and training to such persons.

G20

Key members of the operational and management team, including the governing body of the vehicle, should have capacity and devote adequate time to effectively operate and oversee the vehicle.

This consideration is especially important for team members that are instrumental to the success and the execution of the strategy of the vehicle. The factors to take into account in this regard are, amongst others, the number of other directorships or similar management responsibilities held by such persons at the same time, and the nature and complexity of these other roles.

G-P04 Design and operate an adequate oversight and control framework

G21

The investment manager should document and communicate the operational, management and oversight structures related to the vehicles it manages.

The operational, management and oversight structures related to investment vehicles are often complex and involve a wide range of parties performing specific tasks. The investment manager should document and communicate the structure of the vehicle framework to potential and existing investors. This should include the identification of specific roles performed by the investment advisor, management company, administrator, custodian, external auditor and valuer, amongst others. It should also identify the existence and roles of oversight and advisory bodies, such as investment committees, management boards, valuation and pricing committees, investor representative committees and audit committees, amongst others.

G22

The investment manager should define an appropriate risk management framework.

This should include the definition of relevant risks and risk appetite. It should also define the roles, responsibilities and controls within the risk management function. The investment manager should ensure that the process and outcomes are aligned with the investment objectives of the vehicle, aligned with the identification of key and relevant risks and adapted to the specific needs of the vehicle. The resultant risk management framework should also be designed to operate in accordance with applicable regulations, e.g., AIFMD.

A risk management framework generally consists of implementing a policy that identifies relevant risks, establishes risk limits based on the investors’ risk appetites and expectations, gathers and analyses relevant information, and responds on a timely basis.

Risk management is a continuous process that should be monitored by the investment manager and the governing body of the vehicle. The results of this process should be reported to investors, taking account of applicable regulatory and financial reporting requirements.

See the Reporting module for specific reporting guidelines.

G23

The investment manager, together with the governing body of the vehicle, should design and operate an effective system of internal controls.

An effective internal control framework is adapted to the specific risks, processes and organisational structure supporting an investment vehicle. It includes consideration of the operating environment of the investment manager and all relevant service providers to the vehicle. The design of an internal control environment starts with the definition of control objectives.

Based on this, effective internal controls can be designed, documented, and implemented. This should include the segregation of incompatible responsibilities and an appropriate transaction approval process that prevents an individual from acting alone or overriding internal controls. An internal control system should be tested on a recurring basis (e.g. by internal and external auditors) and the results reported to the governing body of the vehicle. Control remediation action plans to improve the environment can then be effectively directed.

The internal control framework should be aligned with legal and regulatory compliance functions and the overall risk management framework.

G24

The investment manager, together with the governing body of the vehicle, should review the (vehicle) governance framework as part of any vehicle extension process.

Where the manager presents proposals for an extension of the life of the vehicle or a short run-off period to allow properties to be sold (which is not a fixed extension specified in the constitutional terms), this is in effect a new vehicle and provides an opportunity to review the constitutional terms of the vehicle.

G25

The governing body of the vehicle should undertake a review of the continuing appointment or re-appointment of the external auditor, valuer, depositary and other key service providers on a regular basis.

This review should be undertaken at least every three years.

See also PV04 of the Property Valuation module for guidelines on reviewing the performance of valuers.

G26

The investment manager, together with the governing body of the vehicle, should evaluate the need for independent non-executive directors.

Given the wide range of investment vehicles and their features (open/closed end, number of investors, size, duration, risk profile, etc.), the need for independent non-executive directors varies across the industry.

For smaller vehicles, where investors may be closer to its day-to-day operation, the role and value of independent non-executive directors may be limited. For larger or more complex vehicles, it may be appropriate to appoint independent non-executive directors, which may form the majority of the governing body or occupy the chairperson role, to ensure decision-making always reflects the best interests of investors.

Where a vehicle appoints independent non-executive directors, the selection criteria should be clearly defined and focus on skills, qualifications, and relevant experience. Independent non-executive directors should at all times be independent of the investment manager and accountable to investors. The term of appointment of independent non-executive directors should be fixed, but for a period long enough for them to gain appropriate knowledge and to effectively execute their responsibility without losing their independence.

G27

The investment manager, together with the governing body of the vehicle, should ensure that investor interests are adequately and appropriately represented.

This objective may be achieved through the constitution of various investor representative groups or committees, which generally have an advisory role in helping the investment manager and the governing body of the vehicle understand investor expectations.

Investor representative groups or committees should be able to convene meetings independently of the investment manager to enable them to exchange views or consider how to exercise their investor rights in relation to material matters.

In certain vehicles, depending on their legal structure, investors or their representative groups may need to be consulted and/or approve certain key decisions, e.g., vehicle liquidation or change of investment manager (see G30). Care should be exercised to ensure that the investors represented in these groups and committees do not gain an economic advantage over other investors.

G28

Independent non-executive directors, where appointed, should act on behalf of all investors.

Independent non-executive directors, where appointed as members of the governing body of the vehicle, should represent the best interests of all investors, collectively. In this capacity, they play an important role in scrutinising and approving key matters that are subjective, complex, and material to the outcomes for investors (see also RG14 and RG15 of the Reporting module).

For instance, particular areas of focus may include, but are not limited to:

Ensuring communications and reporting to investors are clear, accurate, and transparent;
Engaging with and reviewing reports from external auditors;
Reviewing proposed changes to constitutional documents;
Monitoring and approving any related- party transactions and conflicts of interest between investors and the investment manager;
Ensuring a fair implementation of management and performance fee structures;
Monitoring changes to pricing assumptions in open end vehicles;
Overseeing the transition process when a manager’s mandate is terminated, either during or at the end of the vehicle lifecycle;
Acting as a mediator between the investment manager and investors in certain circumstances, such as settling fee-related issues in the case of an investment manager termination;
Monitoring the internal control framework of the vehicle (see G23) by, for example, receiving regular reports from, and having regular meetings with, the investment manager.

G-P05 Be transparent while respecting confidentiality considerations

G31

The governing body of the vehicle should ensure that reporting to, and communication with investors is balanced and fairly represents the activities of the vehicle.

The governing body of the vehicle has an obligation, including applicable regulatory and legal obligations, to ensure that all forms of reporting by the vehicle to its investors are appropriate in the circumstances. In pursuing this responsibility, the governing body of the vehicle should always consider the best interests of investors.

G32

The investment manager should ensure the constitutional documents set out clear obligations of confidentiality assumed by the vehicle and its investors.

The investment manager is aware of information relating to the vehicle, some of which will be disclosed to investors, either through regular reporting obligations or on an ad-hoc basis. Information that is commercially sensitive to the vehicle, should be treated as confidential and investors should refrain from acting on it. The constitutional terms of the vehicle should contain appropriate undertakings to ensure confidentiality of such commercially sensitive information.

The need to maintain confidentiality should be balanced by the need to ensure transparency; if there is a conflict, the need for transparency should prevail. Confidentiality provisions should not effectively prohibit investors exercising their rights under the constitutional documents, such as when engaging third- party advisors.

An investor may also be required to share confidential information related to the vehicle with a third party. In such a case, the investor should provide a notice to such third parties that such disclosure is made in confidence and should be kept in confidence. The investor remains responsible and accountable for the compliance of the third party to whom confidential information is disclosed.

G33

The investment manager should ensure the constitutional documents of the vehicle include a clear and accurate description of the management and performance fee structures.

Management and performance fee structures, whilst being a key tool to align interests, (see G16), are often based on complex mathematical formulas which are subject to interpretation. The constitutional documents of the vehicle should clearly describe in detail how such fees are calculated over time. Best practice would be to include worked examples to ensure that subjective interpretation is limited.

The investment manager should also describe in detail the services to which the fees relate. For instance, there should be a clear distinction between a management fee and other charges and activities related to the administration of the vehicle, commonly conducted by third parties.

G34

Where the investment manager has the right to make certain amendments to the constitutional documents of the vehicle without investor approval or through a power of attorney, such changes should be fully communicated and disclosed to investors.

If the investment manager has the right to amend certain elements of the constitutional documents of the vehicle, it should proactively communicate to investors the purpose and the intended results of any proposed changes and provide the amended documents on a timely basis. The constitutional documents of the vehicle should clearly describe the scope of such rights. (see G29 on voting thresholds).

G35

The investment manager should disclose the existence and terms of side letters entered into with investors.

There may be circumstances in which different investors will have different arrangements, financial or otherwise, with a vehicle. For example, larger investors may receive a discount on fees payable to the investment manager and have the right to be represented in investor advisory groups. The investment manager should disclose how side letters and similar individual investor agreements are negotiated and implemented. The manager should also disclose the scope and terms of such side letters from a vehicle-wide perspective.

G36

Investors should provide the investment manager on a timely basis with information legitimately required by the investment manager, such as for tax compliance purposes and anti-money laundering procedures.

Investors should respond in a timely manner to legitimate requests by the investment manager or service providers related to the vehicle to enable them to comply with certain legal or regulatory requirements such as tax compliance and anti-money laundering obligations. In addition, investors should provide other legitimate, non-statutory information, such as that related to conflicts of interest that they may have with the vehicle.

G37

The investment manager should clearly define the annual and interim reporting requirements towards investors in the constitutional documents of the vehicle.

In accordance with INREV’s Reporting Guidelines, the constitutional documents of the vehicle should define the content and timing of investor reporting.

The investment manager should disclose relevant information periodically in a clear and concise manner under internationally accepted reporting standards and alongside the audited annual financial statements.

The annual report should describe the governance framework defined in the constitutional documents of the vehicle in accordance with applicable regulations (see also RG14 of the Reporting module).

The annual report should also include information such as the risk framework of the vehicle, its portfolio strategy and objectives, its sustainability strategy, and the economic outlook. It should further describe how the investment manager has complied with its business objectives and policies.

G-P06 Be accountable

G42

The investment manager, together with the governing body of the vehicle, should demonstrate how they are actively engaged with and accountable to investors.

The investment manager and the governing body of the vehicle are accountable to the investors of the vehicle as a whole. Demonstration of this accountability could include, for example, being available upon reasonable notice, defining the specific role of independent non-executive directors towards investors where applicable and meeting investors and investor representative groups to review and discuss matters relating to the vehicle.

The investment manager and the governing body of the vehicle are also expected to maintain relations with and oversee the work of external advisers and service providers, including external auditors, valuers, portfolio and property managers and risk managers.

G43

The investment manager and the governing body of the vehicle should be willing to accept a certain level of liability subject to reasonable indemnifications.

There should be a fair allocation of risk between the investment manager, the governing body of the vehicle and the investors. The extent of the liability should be in accordance with the relevant laws and regulations and described in the constitutional documents of the vehicle. At the same time, the investment manager and the governing body of the vehicle can expect to be indemnified by the vehicle for losses, except in cases of fraud and culpable behaviours such as wilful misconduct or gross negligence.

G44

The investment manager should enable investors to perform compliance audits, where appropriate.

Investors should have the right, in appropriate circumstances, to request an inspection of the books and records of the vehicle or have a third-party auditor conduct an audit.

Where multiple investors acting together through investor representative groups or committees, or the governing body of the vehicle, request and agree on an independent audit, the cost should be borne by the vehicle.

G45

The investment manager should ensure that the constitutional documents of the vehicle include clear provisions for the rights and obligations of all relevant parties involved in the removal of the investment manager and the early termination of the vehicle.

The constitutional documents may provide that the investors, through the governing body of the vehicle, have the right to replace the investment manager. This may occur in a range of situations which include but are not limited to key changes of control in the investment manager organisation, un-resolvable performance issues or conflicts of interest.

For cause removal: Vehicles should have a ‘removal for cause’ clause in place that gives investors, dependent on a defined threshold, the right to call at any time for a vote to remove the investment manager. The vehicle documentation should clearly describe how cause can be established. The documentation should clearly disclose the investment manager’s rights regarding management fees and reasonable expenses, including consideration of the transition period in such situations.

No fault removal: The constitutional documents of the vehicle should contain a removal at will or ‘no fault removal’ clause, whereby the manager’s mandate can be terminated due to the request of a majority or qualified majority of investors (see G29). The documentation should clearly disclose the investment manager’s rights regarding management fees and reasonable expenses, including consideration of the transition period in such situations.

Termination of the vehicle: The constitutional documents of the vehicle should provide the right for investors to terminate and dissolve the vehicle in certain circumstances. This decision is generally subject to a qualified majority vote of investors. The documentation should clearly disclose the manager’s rights regarding management fees and reasonable expenses, including consideration of the transition period in such situations.

For specific guidelines related to the wind up of a vehicle, see the Liquidity module.

G-P07 Be sustainable: Evaluate and manage sustainability impacts

G46

The investment manager, together with the governing body of the vehicle, should consider and develop a strategy to address sustainability impacts.

The investment manager should identify material sustainability aspects, including impacts and risks, and develop a sustainability strategy, with clear and measurable goals, to mitigate environmental concerns and consider social impact, as appropriate to the overall strategy of the vehicle. This may include, among others, sustainability requirements of the real estate assets the vehicle may invest in, and any additional ESG investment criteria. The investment manager should regularly report to investors on how the relevant ESG factors of the investments made have been addressed.

The investment manager should consider abstaining from making investments related to the vehicle that, on balance, are likely to adversely affect desired sustainable outcomes.

G47

The investment manager, together with the governing body of the vehicle, should establish a framework which defines how the vehicle will act as a ‘responsible owner’ of real estate assets.

The investment manager should act as a responsible owner by engaging with tenants, property companies, and other stakeholders related to the vehicle and developing programmes and policies that seek to improve the social and environmental performance of the real estate assets held by the vehicle. These programmes should be aligned with the overall sustainability strategy of the vehicle, as appropriate. Considerations driving the development of such programmes could include, among others, property types and uses, and cooperation, and forms of engagement with tenants and community interests. The investment manager should clearly describe the sustainability criteria, targets, and the expected impact of such programmes.

G48

The investment manager, together with the governing body of the vehicle, should implement INREV’s Guidelines on sustainability, as appropriate.

The INREV sustainability best practice recommendations aim to provide a coherent framework for sustainability reporting in line with annual financial reporting and present a clear picture from the vehicle’s strategy through environmental key performance indicators.

The investment manager should adopt INREV’s Guidelines, as appropriate, when including sustainability in a long-term strategy and translating it into objectives and annual targets for implementation.

More information on the areas to be considered will be included in the new Sustainability module (end of 2022 release).

For more information on sustainability reporting guidelines see the Reporting module of the INREV Guidelines.

Further guidance and interpretation

Club deals and joint ventures

In this section, we deal with variations in the application of the (Vehicle) Governance Guidelines to club deals and joint ventures. In practice, there can be many forms of regulated and unregulated vehicles including a range of separate accounts with single investors, club deals with a limited number of investors, and joint ventures where investors share control. In these situations, contractual arrangements, and in particular management and performance fees, tend to be very specific and customised to the circumstances and to the parties involved.

Control over investments

Investors participating in club deals and joint ventures are usually seeking greater control over the strategy and activities of the vehicle. They generally set more focused investment strategies and seek greater control of investment decisions. In addition to the matters set out in G30 of the Guidelines normally reserved for investors, investors are therefore likely to want to control the other matters such as the timing of acquisition and disposal of real estate assets.

The role of independent non-executive directors in club deals and joint ventures

In circumstances where a small number of investors are actively involved in the running of a vehicle, it would be expected that investors who participate in club deals and joint ventures would have the personnel resources to engage fully in the activities of the vehicle, without creating any management inefficiencies, such as delay in ratifying decisions. In these circumstances, the role of the independent non-executive directors may not be relevant.

Reporting

General vehicle information, organisation, and governance

1.1 Vehicle documentation for reporting framework

RG01

The basis, frequency and timing of delivery of the audited and non-audited financial statements, and management reporting for investors should be defined in the vehicle documentation.

The investment manager should provide at least one interim report to its investors, in addition to the annual report.

Annual

Interim

RG02

For annual reports, define any terms or KPIs not already included in Definitions.

Annual

1.2 Content and frequency of reporting

RG03

The quantitative information presented in the SDDS should be provided either using the SDDS template proposed by INREV or otherwise disclosed in annual and interim reporting to investors.

Annual

Interim

RG04

The financial statements provided in the annual report to investors should be audited.

Annual

RG05

Elements of the overall package of annual and interim reporting to investors, however configured, should be internally consistent.

For instance, information presented in the manager, property and other reports should be consistent with information in the SDDS template, if separate, and the financial statements. Also, the basis of preparation of information contained in interim reporting to investors should be consistent with annual reporting to investors. Any differences or exceptions should be explained.

Annual

Interim

RG06

Full year-end audited financial statements should be provided to investors. These should contain:

Balance sheet;
Income statement;
Statement of changes in equity;
Statement of cash flows;
Notes to the financial statements.

SDDS references:

1.13 Accounting standards, 1.15 Vehicle Auditor, 3.3 Cash and cash equivalents, 3.4 Total Number of Outstanding Shares, Section 11. details of fees paid to the manager and affiliates, 13.6 Net Capital Contributed – During the Reporting Period.

Annual

RG06 - Debt funds

Full year-end audited financial statements should be provided to investors. These should contain:

Balance sheet;
Income statement;
Statement of cash flows;
Notes to the financial statements.

SDDS references:

Annual

RG07

Abridged interim financial statements should be provided to investors. Investment managers and investors should agree on the format of the interim financial statements.

Interim

RG08

For interim reports, use the same terminology and KPIs as used in the annual report. If new terms or KPIs are used, the investment manager should explicitly define them.

SDDS references:

Same as RG06

Interim

RG09

For annual reports, describe the overall status of the vehicle’s INREV compliance.

The governing body of the vehicle, in collaboration with the investment manager, should thereafter, periodically, perform a self-assessment against the intended reporting framework and take actions as appropriate. The level of adoption of the guidelines and the annual score representing implementation effectiveness should be disclosed to investors in the annual report. This process is facilitated by using INREV’s self-assessment tool, the use of which is described in more detail in the Adoption and Compliance Framework of the INREV Guidelines.

In doing so, disclose the level of compliance with INREV Guidelines by module. Include any relevant explanations, reconciliations and calculations as appropriate. Additionally, disclose the result of the INREV self-assessment tool with commentary on how the self-assessment score compares to the level of compliance assessed by the investment manager.

Management (in the event that, for instance, the INREV Governance framework is not being adopted) and/or independent non-executive directors/those in charge of governance should review this statement and the basis for making it.

Annual

RG10

For interim reports, disclose the level of compliance with INREV interim reporting guidelines. Reference should be made to the annual report for detailed description of the level of compliance with reporting requirements.

Interim

RG11

Disclose that the interim report should be read in conjunction with year-end investor report.

Interim

1.3 Vehicle characteristics and governance

RG12

General information on the vehicle characteristics including, among others, name, domicile, legal form, vehicle style (by reference to INREV’s vehicle style definitions), description of vehicle structure, vehicle currency, vehicle year-end.

SDDS references:

1.1 Vehicle Name, 1.7 Vehicle Jurisdiction, 1.8 Legal Vehicle Structure, 1.9 Vehicle Structure, 1.12 Vehicle Reporting Currency, 1.6 Vehicle Financial Year-end

Annual

Interim

Describe material changes

RG13

Contact details of the vehicle.

SDDS references:
1.3 Contact Person Name and 1.4 Contact Person Telephone

Annual

Interim

Describe material changes

RG14

Describe the vehicle’s governance framework and the organisation of management and administration. For example, identify the AIFM, administrators, trustees, depositories, general partners, risk managers, investment advisors, portfolio managers, asset and property managers, valuers and other key functions as appropriate.

Identify and discuss vehicle governance and oversight frameworks such as the use of independent non-executive directors and investor or other special committees, and how they operate.

SDDS references:
1.2 Investment Manager

Annual

Interim

Describe material changes

RG15

Describe the structure and governance principles of the investment manager organisation (rather than the vehicle), for instance on potential areas of conflict between alternative capital sources under management, conflict management processes, investment committee composition and processes, alignment through promote distribution etc.

Annual

Interim

Describe material changes

RG16

Describe the level of adoption of the INREV governance best practices.

Annual

Interim

Describe material changes

RG17

Annual and interim reports should describe any material changes to the level of compliance with the (vehicle) governance framework defined in the vehicle documentation.

Annual

Interim

Describe material changes

RG18

Present a short, high-level summary of the vehicle strategy.

SDDS references:
1.10 Style – defined by investment manager, 1.11 Style of the vehicle according to the INREV Style Classification

Annual

Interim

Describe material changes

RG19

Describe key milestone dates in the life of the vehicle (including vehicle term, investment period, closing dates, etc).

SDDS references:
Section 2 Critical Dates

Annual

Interim

Describe material changes

RG20

Describe the investment stage of the vehicle in the context of key milestone dates, by sector/geography.

SDDS references:
Same as RG19

Annual

Interim

Describe material changes

Vehicle performance and investors position

2.1 Capital structure and vehicle-and asset-level returns

RG21

Annual and interim reports should disclose any changes to the capital structure of the vehicle.

Annual

Interim

Describe material changes

RG22

In a tabular format, disclose the status of investor commitments and capital invested in the vehicle, and in particular:

Undrawn commitments;
Commitment drawn during the period (linkage should be made with underlying transactions);
Returns of capital/redemptions in the period;
Capital calls or subscriptions recorded subsequent to the period-end but before the release of the report;
Details of redemption requests received but not processed as at the date of the report and plans to meet these requests.

In addition, the investment manager should disclose the expected drawn commitments, returns of capital/redemptions, capital calls and redemption requests for the following period. The investment manager may include assumptions used to determine these projections.

SDDS references
Section 12 Capital Commitments & Secondary Market Activity, Section 13 Capital Contributions & Other Payments to Investors and Section 15 Capital Flows of the Vehicle (for calculation of the INREV Index)

Annual

Interim

Describe material changes

RG23

Summarise and comment on key investor returns and related metrics which are defined in Section 7 of the SDDS (including comparison with targets, points of reference and indices when relevant).

SDDS references:
Section 7 Performance (according to INREV Performance Measurement module)

Annual

Interim

In addition, the investment manager may also analyse the performance at an aggregated asset level for a group of assets or for each operating asset during the period by reference to relevant asset-level KPIs defined by INREV as well as the currency used in the performance measurement of each asset.

INREV Performance Measurement module reference:
PM03, PM19

Annual

RG24

Disclose and discuss details of share class NAVs (accounting NAVs, trading NAVs, INREV NAVs as applicable) and variances since prior period-end.

Annual

Interim

RG25

Disclose and discuss distributions made during the period and subsequent to the period-end (link with underlying transactions such as property disposals where relevant).

SDDS references:
Section 14 Distributions

Annual

Interim

RG26

Summarise how the vehicle’s fee structure impacts the vehicle’s capital structure and vehicle-level returns; for instance, describe any fee capitalisation arrangements.

SDDS references:
Section 18 Investor’s Portion of Fees to the Manager and Affiliates

Annual

Interim

Describe material changes

RG27

INREV NAV disclosure requirements

Investment managers should make the following disclosures related to the NAV computation:

The reconciliation between GAAP NAV and INREV NAV should be presented in line with guideline NAV 2;
Investment managers should explain material estimates and computation methodologies to enable investors to understand the components of the reconciliation between GAAP NAV and INREV NAV

Explanatory notes to the reconciliation should describe key assumptions, methods used, and in particular:

The basis for reclassifying certain shareholder loans or hybrid capital instruments as a component of equity;
The basis for the determination of fair value of investment property, self-constructed or developed investment property, property that is leased to tenants under finance lease, investment property held for sale and real estate held as inventory;
The basis of the estimate of other investments in real estate assets;
The basis for the determination of the fair value of indirect investments not consolidated;
Details of the methodology used to calculate the fair value of financial assets and liabilities;
The basis of the estimate of the fair value of construction contracts with third parties;
The basis of the estimate of the fair value of contractual fees;
Details of the assumptions used to estimate the fair value of deferred tax and the tax effect of INREV NAV adjustments.
Such disclosure gives an overview of the tax structure including, for instance, details of the property ownership structure, key assumptions and broad parameters used for estimating deferred taxes for each country, the maximum deferred tax amount estimated assuming only asset sales (eg, without taking into account the intended method of disposal) and the approximate tax rates used;
Reasons for making adjustments to the carrying value of subsidiaries having negative equity (non-recourse);
Under IFRS, the fair value of investment properties does not take into account the expenses incurred by the seller when selling a property. As with IFRS, no adjustment is required to include a provision for such costs in the INREV Guidelines, unless they are held for sale.

The investment manager should, however, estimate and disclose the amount of disposal costs likely to be incurred on the sale of properties, taking account of the intended method of exit, assuming an exit without duress and in the current market environment;

Set-up costs – description of impairment and reasons for booking if applicable;
Set-up costs – description of the reasons for departure from the five year amortisation period if applicable;
Acquisition expenses – description of impairment and reasons for booking if applicable;
Acquisition expenses – description of the reasons for departure from the five year amortisation period if applicable.

Annual

Interim

Describe material changes

RG28

The constituent elements of the fee and expense metrics calculation should be disclosed in the annual report.

Annual

RG29

The information in the following tables should be disclosed in the annual report.

See table in Fee and expense metrics module.

Annual

RG30

A disclosure table should be presented that provides an analysis of all the components of the fees charged by the investment manager, including any element of performance fee or carried interest or any other such arrangement, or by any other affiliate or related party of the investment manager.

See table in Fee and expense metrics module.

SDDS references:
11.17 -11. 20 INREV Expense Ratio, 11.23 REER, and Section 18 Investor’s Portion of Fees to the Manager and Affiliates

Annual

Manager's report

RG31

Summarise and discuss macro-economic factors which have, or may have, a material impact on the results of the vehicle.

This should include information such as economic growth factors and their impact on the demand for new rentals, the supply of property or availability of development opportunities. Include also details of material changes in the tax and regulatory environment and debt financing conditions, such as movements in interest rates and financing terms.

Annual

RG32

Tabulate for clarity a summary of significant events affecting the vehicle during the period as well as significant events anticipated in the 12 months from the balance sheet date. Provide a brief commentary on significant activities of the vehicle including acquisitions, disposals, distributions to investors, and changes to the overall financing or capital structure during the period.

Annual

Interim

RG33

Analyse the performance of the vehicle during the period by reference to relevant vehicle-level KPIs defined in sections 3.1, 3.2 and 5 of the SDDS, which include information such as the NAV, key financial ratios, valuation results, realised gains and losses and information related to operating results.

SDDS references:
3.1 Gross Asset Value of Vehicle (GAV), 3.2 Net Asset Value of Vehicle (NAV) and Section 5 Result of Vehicle per Accounting Standards

Annual

Interim

RG34

Describe and comment on the structure of fee arrangements with investment managers and affiliates (including details of any relevant capitalisation or disbursement programs, year-end balances, amounts earned, accrued, paid or clawed back). Link accrued and un-accrued amounts with the realisation of performance criteria.

When applicable, this description should include details of:

Vehicle management fees;
Asset management fees;
Performance fees;
Property management fees;
Acquisition fees;
Disposal fees;
Development fees;
Financing fees;
Other related-party fee arrangements.

Refer to the relevant sections of the financial statement disclosures for details as appropriate.

SDDS references:
Section 18 Investor’s Portion of Fees to the Manager and Affiliates

Annual

Interim

Describe material changes

RG35

Disclose the NAV of the vehicle and the basis of calculating it. Disclose to what extent the INREV NAV guidelines have been used to determine such NAV, and include details of adjustments made to reconcile the NAV with the financial statements. Include a description of the judgments and estimates used when determining the INREV or other NAV.

SDDS references:
Section 4 Reconciliation from Reported Net Assets to Fair Value (according to INREV Guidelines)

See G09 for Open end fund pricing best practice

Annual

Interim

Disclose the NAV and material changes

RG36

Discuss the current period performance in the context of the track record of the vehicle (for instance, over the last five years).

Annual

RG37

Describe all significant subsequent events affecting the vehicle since the period-end and comment on their impact on vehicle performance. Information at the asset level may be disclosed, if relevant.

Annual

Interim

RG38

Describe the likely developments in the vehicle’s activities and operations in the foreseeable future and how this is aligned with achieving the overall vehicle objectives.

Annual

RG39

Describe the impact of potential or implemented regulatory changes that affect or may affect the vehicle’s and assets’ operations and performance.

Annual

RG40

Describe and comment on any significant one-off events having an impact on the results for the period. This disclosure should include, for instance, costs related to litigation, abort deal costs, one-off property related expenses and any other extraordinary or exceptional items.

Annual

Interim

Property report

RG41

Describe and comment on current developments in the vehicle’s investment property portfolio by reference to, for example, occupancy level, tenant profile by area occupied, average rent, the percentage of newly developed property that has been let or sold, etc.

The following information may be disclosed for each asset, including but not limited to:

Net leasable area;
Weighted average (unexpired) lease term (years);
Occupancy rate;
Rental income;
Market rent;
Fair Market Value.

See RG23 for financial performance returns recommended at asset level.

SDDS references:
9.4 Total Number of Properties, 9.9 Lease Expiries < 2 years (based on rent) and 9.10 Weighted Average Unexpired Lease Term (WAULT)

INREV Asset Level Index references/ identifiers:
X2 Net leasable area, AF2 Weighted average unexpired lease term (years), AG2 Occupancy rate (%), AP2 Total rental income for the period, AQ2 Total market rent for the year (ERV).

Annual

Interim

RG42

Describe the business rationale for any significant acquisitions or disposals during the period, and their impact on the vehicle’s financial position and results.

SDDS references:
Section 8 Investment Activity during the Reporting Period, 5.9 Unrealised Capital Gain/(Loss) and 5.10 Realised Capital Gain/(Loss)

Annual

Interim

RG43

For interim reports, show a summary of the portfolio allocation by sector and geography.

SDDS references:
Portfolio allocation sheet

Interim

RG44

For annual reports, show a summary of the portfolio allocation by sector and geography and comment on it in the context of the investment strategy of the vehicle (refer to the detailed portfolio allocation sheet in the SDDS).

SDDS references:
Portfolio allocation sheet, number and amount of acquisitions and disposals (8.1, 8.2, 8.4 and 8.5)

Annual

RG45

Disclose the nature and frequency of property valuations, explaining how they reflect the expectations of investors and ongoing business needs of the vehicle (refer to PV15 of the Property Valuation module).

Describe the procedures and internal controls put in place to appoint external valuers and oversee the valuation process to ensure it is objective and free from any bias and not influenced by potential conflicts of interest.

At a minimum, disclose:

The valuation standards (such as RICS), methodologies and frameworks used in arriving at an opinion of value;
The identity and compensation of the external valuer and confirmation that fees are not linked to the outcome of the valuation;
Backtesting procedures for valuation (eg number of valuation reports backtested out of the total asset portfolio);
Number of years of collaboration with the external valuers and results of the last appointment review process;

Summarise and comment on the current property valuation methods and outcomes.. Include information on the methodologies used and the key market inputs and assumptions such as yields, discount or capitalisation rates. Describe any specific or special assumptions used in the property valuations such as assumed disposal scenarios, assumed capital expenditure and the treatment of transfer taxes.

At a minimum disclose (refer to PV21):

Information relevant to the approach taken across portfolios with different asset types and potentially different valuation methodologies;
Disclosures of market assumptions and their related explanations. The information regarding applicable market assumptions could, for example, include sensitivity analysis of rent movements and yield changes;
Disclosure of any limitations or reservations made by the external valuer in the valuation report;
Disclosure of significant issues related to valuation outcomes, eg covenant breaches and liquidity issues;
Disclosure and explanation of deviations from the underlying appraised value, either related to vehicle-specific circumstances or disagreements with the external valuer (refer to PV22 and PV23);
Disclosure of sustainability factors that have been taken into account when arriving at valuation outcomes;
In the event of significant changes in market value resulting from a rotation of the external valuer, the investment manager must perform an assessment of the main underlying assumptions and provide full disclosure of the rationale for such changes; and,
Disclose any disagreements between the investment manager and the valuer on the underlying market value of certain individual assets, including deviation from the market value.

SDDS references:
1.17 RICS Rules Compliant, 9.1 Total Fair Value of Investment & Development Portfolio, 9.2 Fair Value of Investment Portfolio, 9.3 NOI Yield and 9.5 Gross Leasable Area

Annual

Interim

Describe material changes

RG46

Disclose the proportion of the property portfolio which has been subject to an independent external valuation along with references to the name and qualifications of the valuers, and the date of such valuations. Include details of any modifications or reservations disclosed in the valuers’ reports.

See also RG14. Disclose the qualifications of the members of the governing body of the vehicle, who oversee the valuation process (refer to PV11 of the Property Valuation module).

SDDS references:
3.5. % of Real Estate Assets Valued during the Reporting Period, Externally and 3.6. % of Real Estate Assets Valued during the Reporting Period, Internally

Annual

RG47

Provide an analysis of like-for-like movements in the market value and rental income of properties held in the current and prior periods.

Annual

RG48

Comment on the development of rental growth and expected rental values by sector/geography. The market data provided should be relevant to the specific activities of the vehicle.

Annual

Interim

Describe material changes

RG49

Describe recent leasing renewal activity, including incentives given, rent-free periods and tenant improvement programs and expected future changes by reference to market trends in new lease terms.

Annual

Interim

Describe material changes

RG50

Summarise and comment on the development of vacancy rates and its impact on vehicle performance and future prospects.

SDDS references:
9.6 Net Leasable Area, 9.7 and 9.8 Occupancy, 9.16 Top Tenants (percentage of gross rental income)

Annual

Interim

Describe material changes

RG51

Discuss the development of property yields, including yields by sector and geography.

SDDS references:
9.3 NOI Yield

Annual

Interim

Describe material changes

RG52

Discuss the development of other key property information by sector and geography, when relevant.

Annual

Interim

Describe material changes

RG53

Identify and comment on rental concentration risk (either by expected rental value or actual rental value).

Annual

Interim

Describe material changes

RG54

Describe and comment on the level of property operating costs and, if significant, discuss the impact of specific factors such as service charge recoveries, bad debt write-offs and other property operating costs related to the vehicle’s performance.

Annual

Interim

RG55

If material, describe the impact of development activities on the vehicle by reference to, among other things, its investment strategy, development pipeline, stage of completion of developments, status of the sale of units or rental strategies.

Annual

Interim

RG56

Discuss and quantify significant capital expenditure programs either planned or being undertaken during the period for existing properties, such as renovations, extensions and improvements.

SDDS references:
8.3 Amount of Capital Expenditure

Annual

Interim

RG57

Quantify the amount of property development being undertaken during the period. Include details of the number of properties completed and either transferred to investment properties or sold during the period. Include details of development costs, related commitments, and the method of accounting for properties under development.

SDDS references:
9.11 Fair Value of Development Portfolio, 9.12 Current Development Exposure as % of GAV, 9.13 Projected Percentage of Current Remaining Undrawn Commitments to be Invested in Future Development Projects and 9.14 Cost of Development Portfolio

Annual

Interim

RG58

Describe and quantify the vehicle’s position in joint ventures and associate investments. Include details of, among other things, the methods of accounting for such positions, how they impact the overall financial and risk profile of the vehicle, and their business prospects.

Annual

Interim

RG59

Summarise and comment on returns from non-property investments such as positions in other vehicles, listed securities and other assets.

Annual

Interim

RG60

In exceptional circumstances, deviations by investment managers from property valuations as determined by external property valuers should be clearly explained and disclosed.

If there is a disagreement between the investment manager and the property valuer on the market value parameters, these parameters must be clearly explained and disclosed.

See more details at PV23 of the Property Valuation module.

Whatever the circumstances, appropriate internal procedures (including escalation measures) should be followed by the management in the event of valuation adjustments.

Annual

Interim

Risk management

RG61

Describe the principal risks faced by the vehicle. Describe and analyse the vehicle’s current exposure to such risks. Principal risks will cover, among others, areas such as:

Market risks (yield shifts, rental income, voids, etc.);
Credit and counterparty risks (exposure to tenant debtors, financial institutions etc.);
Liquidity risks (including debt maturity, covenant breaches, redemption requests and the financing of future contractual commitments);
Interest rate risks (exposure to floating vs. fixed rate debts);
Foreign exchange risks (including details of hedging strategy and unhedged exposures);
Operational risks (tax, regulation, key employees, reliance on service providers or key advisors, etc.); and,
Physical or transition risks related to climate change.

As an integral part of the disclosure of the description and analysis of principal risks and their current status, the specific ESG considerations and risks should be included – see ESG15 of the Sustainability module.

Exposure to shareholder loans should be analysed separately from external loans.

Annual

Interim

Describe material changes

RG62

Describe the overall organisation of the risk management function and refer to key policies and procedures to monitor and mitigate exposures to key risks and uncertainties.

This description should include details of how the management of ESG-related risks is integrated into the overall risk management function.

Annual

Interim

Describe material changes

RG63

Summarise the vehicle’s current risk appetite and tolerance levels.

Describe the level of compliance with this framework and comment on any specific breaches and remedial plans.

Annual

Interim

Describe material changes

RG64

In a tabular form, give details of the overall financing structure of the vehicle. Include information such as financing costs, lender, security arrangements, recourse arrangements, maturity, and interest and loan amortisation terms. Refer to the financial statement disclosures as appropriate.