Reporting Standards 2020THURSDAY, JUNE 20, 2019

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Agenda

•Welcome and introduction:◦ Sally Ann Flood, US Real Estate Funds Leader, Deloitte & Touche, LLP

•2020 GIPS and impact on RS panel discussion: ◦ Moderator: Maritza Matlosz, Director/VP Performance Measure & Attributes, MetLife Investment

Management◦ Panelists: ▪ David DiPaolo, Senior Vice President, Clarion Partners

▪ Ken Robinson, Director, Investment Performance Standards, CFA Institute

▪ Diane Wild, Head of North America Investment Performance Reporting & Analysis, LaSalle Investment Management, Inc.

•TGER implementation◦ Barbara Flusk, Head of Real Assets Fund Services, Citco Fund Services (USA), Inc.◦ Constantin Sorlescu, Director of Professional Standards, INREV

•Review of other proposed changes to RS Checklists◦ James Allen, Managing Director and Fund Chief Financial Officer, Starwood Capital Group◦ Barry Johnson, Senior Vice President, Global Head of Real Assets, State Street Global Services

•Highlights of proposed changes to RS Manuals-Accounting, Performance and Valuation

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Strategy

MISSION

To establish, manage and promote transparent and consistent reporting

standards for the Real Estate Industry to facilitate informed investment decision-

making.

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ESTABLISH STANDARDS• Develop reporting standards

that are relevant to both open-end and closed-end funds that can improve the investment decision-making of investors.

GLOBAL ALIGNMENT• Converge investor reporting

standards globally.• Build a global platform for

transparent and consistent reporting for international investors and advisors.

Collaborate with Sponsors

Compliance

Promotion

2020 GIPS and Impact on RS

Panelists:

•Dave DiPaolo, Senior Vice President, Clarion Partners, LLC

•Ken Robinson, Director, CFA Institute

•Diane Wild, Head of North America Investment Performance Reporting & Analysis, LaSalle Investment Management, Inc.

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Moderator:

Maritza Matlosz, Director/VP Performance Measure & Attributes, MetLife Investment Management

Barbara Flusk, Citco Fund ServicesConstantin Sorlescu, INREV

NCREIF Conference

18 – 21 June 2019

Global best practices for fees and expense metrics

CLOSING FEE TRANSPARENCY GAP

Total Global Expense Ratio (TGER)

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• Global Standards initiative (NCREIF PREA INREV ANREV) to develop one ratio combining best features of both INREV TER

and RS REFER

• TGER measures fund fees and costs, regardless of domicile, structure and management activities

Aim 1 Establish Comparisons

Comparisons with other real estate funds…

Comparisons with other asset classes…

Aim 2 Improve transparency

Comparisons with budget/expected expense leakage...

Flow of services driving complexities

7* In case of REIT structures management fee

mechanics might be covered by staff costs

Main components of the ratio

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Comparability – consistent cost allocation independent of investment hierarchy

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Comparability – consistent treatment of services

10

Practical uses for the industry

Sharing TGER with potential investors / clarity in communication

Internal comparison of costs making up TGER across funds as part of cost optimization discussions

Use of consistent calculation allows for consistency in comparison across peers and (global)

market insights

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Investors

Managers

Industry

Trends in Management Fees and Terms

• Fee and Expense Metrics in the top 3

most used INREV modules with 80%

adoption*

• INREV fee research study - 418 funds

included;155 funds delivering TER data

➢ Insights by style, strategy, structure,

gearing and vintage

➢ Management fees – dominant

component of expense ratio (+60%

of total)

12* 2019 INREV Membership Survey

Source: 2018 INREV Management fees and terms study

Next steps

Integration into RS manuals and INREV Guidelines Estimated Timing

o Final TGER paper Jul 2019

o Implement TGER principles into standards and guidelines Jan 2020

o Start reporting on new global metricDec 2020 onwards

(early adoption encouraged)

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Takeaways

• Investors require consistent standards to compare running costs of real estate

investments funds.

• TGER delivers a single number to easily assess the levels of charges payable by

a fund and compare them with other similar funds.

• Monitoring of the costs associated with income tax and vehicle structuring is

now possible through TGER.

• Consistent treatment and improved disclosure of fees and costs drive

transparency and cost control.

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NCREIF PREA Reporting Standards Open-end fund Checklist as proposed

Disciplines Element description FrequencyRequired or

recommended element

Handbook Reference

Portfolio management

Name or identifier Quarterly Required PM.01

Contact Quarterly Required PM.02

Inception date Quarterly Required PM.03

Structure Annually Required PM.04

Style and strategy Annually Required PM.05

Portfolio diversification by:

Quarterly Required PM.06

· Investment/property type

· Region/location

· Nature of investment (life cycle)

· Investment structure

Management discussion of performance relative to objective

Quarterly Recommended PM.09

Who determines application of NCREIF PREA Reporting Standards policy

Quarterly Recommended PM.10

6/20/2019 15DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

NCREIF PREA Reporting Standards Open-end fund Checklist as proposed

Disciplines Element description FrequencyRequired or

recommended elementHandbook Reference

Performance and Risk

Total and Component Time-Weighted Return (TWR) - Gross and Net of Fees

Quarterly Required PR.01

Disclosures accompanying TWR (modified)

Quarterly Required PR.01.1-01.6

Benchmark comparisons Annually Required PR.02Net Asset Value Quarterly Required PR.03Fund Tier 1 (T1) Total Leverage- at cost Quarterly Required PR.04Fund T1 Leverage Percentage Quarterly Required PR.05

Since Inception Internal Rate of Return (IRR) -Gross and Net of Fees

Quarterly Recommended PR.06

Disclosures accompanying IRR Quarterly Required PR.06.1-.06.3

6/20/2019 16DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

NCREIF PREA Reporting Standards Open-end fund Checklist as proposed

Disciplines Element description FrequencyRequired or

recommended element

Handbook Reference

Performance and Risk (cont’d)

Fund T1 Leverage Yield Quarterly Recommended PR.14

Weighted average interest rate of Fund t1 Leverage

Quarterly Recommended PR.15

Weighted average remaining term of fixed-rate Fund T1 Leverage

Quarterly Recommended PR.16

Weighted average remaining term of floating rate Fund T1 Leverage

Quarterly Recommended PR.17

Real Estate fee and expense ratio (REFER)

Quarterly Recommended PR.18

Total Global Expense Ratio (TGER) AnnuallyRequired/ recommended?

TBD

Redemptions for quarter Quarterly Recommended PR.20Total subscribed commitments Quarterly Recommended PR.21Total redemption requests Quarterly Recommended PR.22

6/20/2019 17DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

NCREIF PREA Reporting Standards Open-end fund Checklist as proposed

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Disciplines Element description FrequencyRequired or

recommended element

Handbook Reference

Asset managementOccupancy level by property type Quarterly Required AM.01Portfolio lease expiration statistics Quarterly Required AM.02Top 10 tenants Quarterly Recommended AM.03

Financial

Condensed Fair Value (FV) GAAP based financial reporting

Quarterly Required FR.01

Fair Value (FV) GAAP based financial statements

Annually Required FR.02

Financial statement audits Annually Required FR.03Schedule of investments Annually Required FR.04

Valuation

Valuation policy statement (modified):

Annually Required VA.01

Internal Valuations Quarterly

Required (in all quarterly periods where there are no externals)

TBD

External Appraisals Annually Required VA.01

DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

Reporting Standards Closed-end Fund Checklist

Disciplines Element description FrequencyRequired or

recommended element

Handbook Reference

Portfolio management

Name or identifier Quarterly Required PM.01Contact Quarterly Required PM.02Inception date Quarterly Required PM.03Structure Annually Required PM.04Style and strategy Annually Required PM.05Portfolio diversification by:

Quarterly Required PM.06

· Investment/property type· Region/location· Nature of Investment (life cycle) · Investment structure

Final closing dateScheduled termination date

6/20/2019 19DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

Reporting Standards Closed-end Fund Checklist

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Disciplines Element description FrequencyRequired or

recommended elementHandbook Reference

Portfolio management (cont’d)

Management discussion of performance relative to objective

Annually Required PM.07

Who determines application of Reporting Standards policy

Annually Required PM.08

Total Time-Weighted Return (TWR) - Gross and Net of Fees

QuarterlyRequired Available upon request

PM.09

Disclosures accompanying TWR Quarterly Required PM.10

DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

Reporting Standards Closed-end Fund Checklist

Disciplines Element description FrequencyRequired or

recommended element

Handbook Reference

Performance and risk

Benchmark comparisons Quarterly Required PR.01Net Asset Value Quarterly Required PR.01.1-01.6Fund Tier 1 (T1) Total Leverage- at cost Annually Required PR.02Fund T1 Leverage Percentage Quarterly Required PR.03Since Inception Internal Rate of Return (IRR) – Gross and Net of Fees

Quarterly Required PR.04

Disclosures accompanying IRR (modified)

Quarterly Required PR.05

Paid in capital multiple Quarterly Required PR.06Investment multiple Quarterly Required PR.06.1-06.3Realization multiple Quarterly Required PR.07Residual multiple Quarterly Required PR.08

6/20/2019 21DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

Reporting Standards Closed-end Fund ChecklistDisciplines Element description Frequency

Required or recommended element

Handbook Reference

Performance and risk (cont’d)

Distributions since inception Quarterly Required PR.09Aggregate capital commitments Quarterly Required PR.10Since inception paid in capital Quarterly Required PR.11Fund T1 Leverage Yield Quarterly Required PR.12Weighted average interest rate of Fund T1 Leverage

Quarterly Required PR.13

Weighted average remaining term of fixed-rate Fund T1 Leverage

Quarterly Recommended PR.14

Weighted average remaining term of floating rate Fund T1 Leverage

Quarterly Recommended PR.15

Real estate fee and expense ratio (REFER)

Quarterly Recommended PR.16

Total Global Expense Ratio (TGER) AnnuallyRequired/ recommended?

TBD

Unfunded commitments Quarterly Recommended PR.17Occupancy level by property type Quarterly Recommended PR.18Portfolio lease expiration statistics Quarterly Recommended PR.19

6/20/2019 22DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

Reporting Standards Closed-end Fund ChecklistDisciplines Element description Frequency

Required or recommended element

Handbook Reference

Asset management

Top 10 tenants Quarterly Required AM.01Condensed Fair Value (FV) GAAP-based financial reporting

Quarterly Required AM.02

Fair Value (FV) GAAP-based financial statements

Quarterly Recommended AM.03

FinancialFinancial statement audits Quarterly Required FR.01Schedule of investments Annually Required FR.02

ValuationValuation policy statement (modified)

Annually Required VA.01

Internal Valuations QuarterlyRequired (in all quarterly periods where there are no externals)

TBD

External Appraisals

Annually As stipulated in fund governing documents

Required If required by fund governing documents

TBD

6/20/2019 23DELETIONS ARE SHOWN AS STRIKE OUTS. ADDITIONS ARE SHOWN IN RED.

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