Real Estate Investment Funds: Financial reporting - Alfi

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how does increased valuation uncertainty affect fund NAV production? 1. With respect to investee property portfolios a. Some valuations of real estate are uncertain and may be subjective due to a lack of comparable transactions for appraisers to consider. Valuers, for example, may draw attention to the increased uncertainty in their reports or even caveat the valuation amount calculated. The reliability of "investee" property valuations may impact the reliability of the NAVs reported by these "investee" funds on which FOREFs base the valuation of their investments. 2. With respect to financial position of investee funds a. As well as the additional increased inherent uncertainties in respect of property valuations, current market conditions may have had further impacts on the financial position, and hence the valuation, of "investee" funds. These include "going concern" and liquidity issues due to: Breaches of loan covenants; Q Q The need to re-finance expiring facilities; Q Q Default of investors in terms of capital calls; Q Q Unavailability of capital from new investors; Q Q Default of lenders in respect of undrawn credit facilities; Q Q Increased difficulties in the rental markets in terms of achieving target rents and occupancy; and Increased requests for redemptions by investors. b. OREFs themselves, as well as "investee" investments, may be affected by the above factors. These, for example, may lead to uncertainties with respect to the "going concern" assumption that will need to be addressed in the FOREFs <strong>reporting</strong>. 3. With respect to delayed information from investee funds The inherent valuation uncertainty is further exacerbated by the fact that there is a time lag between the <strong>reporting</strong> date of the FOREF and the receipt of information relevant to that date from "investee" funds. If valuations of "investee" investments are not based on up to date information there is a risk that these will be unreliable and potentially materially misstated given volatility of pricing due to current market conditions. 34
chapter X what options do FOREFS have in respect of the issues identified above?
Page 1: guidelines Real Estate Investment F
Page 5 and 6: table of contents chapter I - PROPE
Page 7 and 8: property valuation chapter I
Page 9 and 10: y the seller. The assessment of the
Page 11 and 12: valuation uncertainty chapter II
Page 13 and 14: 3. How recent should a valuation be
Page 15 and 16: accounting chapter III
Page 17 and 18: discussed above in Chapter III.2.c
Page 19 and 20: understand the nature and potential
Page 21 and 22: f. INREV guidance states that in ca
Page 23 and 24: net asset value calculation chapter
Page 25 and 26: financial statements and disclosure
Page 27 and 28: 3. What are the typical contents of
Page 29 and 30: 1. What specific issues arise with
Page 31 and 32: In general, a FOREF invests in illi
Page 33 and 34: What information in respect of inve
Page 35: chapter IX how does increased valua
Page 39 and 40: 3. Continue to produce Fund NAVs/fi
Page 41 and 42: In general, auditors will have to p
Page 43 and 44: Glossary of terms 91/75 The IML Cir

Real Estate Investment Funds: Financial reporting - Alfi

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