Summary: Reporting processes for institutional real estate are evolving. With new NCREIF PREA Reporting Standards in place, many firms are being asked to do more than simply check a compliance box. With this industry-wide shift, firms will need to focus on tracking clearer, more consistent data and adopting automated reporting tools that keep up with the pace of change. In this article, Aprio unpacks these changes and provides actionable advice to help firms adapt.
A pivotal shift is underway for the institutional real estate space, ushered in by the release of new NCREIF/PREA Reporting Standards. The updated standards are raising the bar for transparency, consistency, and data quality across the industry. While these changes will affect compliance, they also will require firms to modernize their reporting process and embrace automation as the new industry standard.
In this article, we’ll unpack some of the most profound changes real estate firms face and provide actionable advice to adapt.
About NCREIF and PREA
Before we discuss the actual standards, it’s important to understand how NCREIF and PREA interact as governing bodies.
NCREIF, or the National Council of Real Estate Investment Fiduciaries, is a leading association focused on serving institutional real estate investors and managers. NCREIF’s mission is to provide reliable data, benchmarks, and best practices that promote transparency and informed decision making in real estate investment.
On the other hand, PREA, or the Pension Real Estate Association, represents pension funds, investment managers, consultants, and service providers in the real estate sector. PREA’s focus is on education, research, and the advancement of professionalism and integrity within the industry.
Together, NCREIF and PREA have developed the Reporting Standards to unify and elevate how institutional real estate performance is measured and communicated industry-wide. The organizations’ mission is to establish, manage, and enhance transparent and consistent reporting standards for the real estate industry, fostering comparability and informed investment decision-making.
What Do PREA/NCREIF Reporting Standards Require?
The most recent NCREIF/PREA Reporting Standards update represents a fundamental change in how the industry measures and communicates institutional real estate performance. For the first time ever, the industry is moving toward a unified, asset-level approach to reporting. This shift is designed to give investors, real estate managers, and advisors more detailed and consistent views of their real estate portfolios, and assuring the highest levels of data quality and transparency.
With that said, the new standards require real estate firms to provide new types of information, data, and metrics in their reporting:
Asset-Level Data
Firms must now provide detailed information for each of their properties, including characteristics, valuations, income, expenses, and capital activity. This level of granularity is a significant departure from the more aggregated reporting standards of the past. Here are a few specific examples of asset-level data:
- Trailing Twelve Month (TTM) Net Operating Income (NOI): This is now a standardized requirement for each property and helps ensure that all commercial real estate managers report recent property performance in a comparable way.
- Capital Activity: Real estate firms must now provide more granular data on capital expenditures, improvements, and capital events for each property.
- Loan-to-Value (LTV): Firms must now report LTV at the property level, with clear calculation methods.
- Occupancy and Leasing Data: Firms must perform up-to-date, property-level reporting of occupancy rates, lease expirations, and tenant concentration.
Standardized Metrics
The updated standards introduce uniform definitions for key performance indicators, such as internal rate of return, equity multiples, fees, and expenses. These new definitions will help firms ensure that they can compare results across managers and vehicles with confidence. The new definitions include:
- ESG Metrics: The new definition includes expanded requirements for environmental, social, and governance data, such as energy usage and sustainability certifications.
- Standardized Income and Expense Categories: The new Standards encompass uniform breakdowns and definitions for comparability across managers and portfolios.
- Standardized Calculation Methodology: The new standards require all managers to use a uniform methodology for IRR and other return calculations, including clear guidance on the treatment of fees, expenses, and capital events.
Quarterly Digital Reporting
Under the old standards, real estate firms delivered their reports as static PDFs or Excel files, in which they aggregated the data at the fund or portfolio level in various formats depending on the manager’s preference. However, with the new NCREIF/PREA standards, managers must submit their reports in standardized, machine-readable digital formats, such as XML or CSV, and at the asset level. This shift empowers firms and managers to embrace automation, real-time analytics, and direct comparability, which naturally leads to more accurate, faster reporting.
Why Automation Is Essential for Commercial Real Estate Firms
For modern real estate firms, investors, and developers, manual spreadsheets and disconnected systems are no longer sufficient. In today’s day and age, commercial real estate portfolios are complex, and the volume and frequency of the data firms collect on them require new standards and reporting tools.
Fortunately, automation enables firms to centralize data, automate and standardize calculations, and generate reports quickly and accurately. Real-time data integration and automated workflows help real estate firms reduce errors and speed up their processes without adding more strain to their already-strained accounting teams.
What’s more, firms that embrace automation will also gain a powerful competitive edge in addition to meeting the new standards. By implementing automated reporting, firms can build more trust with their investors and deliver greater transparency and accuracy. Automation also frees up staff to focus on higher-value activities, such as data analysis and strategy, which only enables the firm to grow more efficiently as a whole.
Early adopters of automated reporting are the ones who will stand out to institutional investors, better positioning them to attract capital, win new mandates, and build lasting relationships with their stakeholders.
Action Steps for a Tech-Forward Transition
If you’re a commercial real estate firm or leader looking to adopt to the new standards, here are a few realistic steps you can take imminently:
- Assess Your Current Process: Take a close look at your existing workflows, especially where your team is still updating tables and information manually. Manual processes are often a sign that your systems are not fully optimized for the new standards and can create bottlenecks or errors.
- Maximize Your Current Tech Stack Capabilities: Determine whether you are using your existing technology to its full potential. Consider if additional modules, integrations, or custom reporting features could make your reporting processes easier and more automated.
- Invest in Modern Reporting Tools: If your current systems can’t meet the new requirements, explore other reporting tools and solutions. There are affordable tech tools available in the marketplace that can automate data collection, standardize reporting, and simplify compliance.
- Train and Empower Your Team: Provide your team with training on the new standards and any new tools you adopt. Encourage them to share their insights and suggestions; remember that the best ideas for process improvement often come from those who work with the data every day.
- Share Your Plans and Progress with Investors: Keep your investors informed about your transition to the new standards. Regularly communicate your plans, milestones, and improvements to demonstrate your commitment to transparency and industry leadership.
Final Thoughts
Aside from an important compliance exercise, the new NCREIF/PREA Reporting Standards offer an opportunity for real estate firms to modernize, differentiate, and future proof their businesses. If you are a real estate firm leader and you’re ready to take the next step, Aprio is here to help assess your readiness and implement the right solutions for your business.
