Real estate executives, investors and analysts seem to agree on one thing -- the traditional (mostly financial) indicators used to tell a company´s full story do not give adequate insight into its capacity to grow profitably and adapt to change.
That´s one of the key findings of Firm Foundations: Building Public Trust in the Real Estate Sector, PricewaterhouseCoopers´ newly-published survey of how real estate industry professionals representing real estate companies, investors and analysts view their respective financial reporting needs.
'According to the survey, nine out of ten real estate executives believe their company´s share price does not reflect its intrinsic value,' said Nick Cammarano, PricewaterhouseCoopers´ global real estate leader. At the same time, however, the reporting practices of real estate companies fall short of what investors and analysts say they need to properly assess companies for investment purposes.
'As the markets come to terms with the post-Enron world, forward-looking companies continue to establish high standards for transparency,' noted Tom Kirtland, PricewaterhouseCoopers´ ValueReporting(TM) Global Champion for Real Estate. 'They are abandoning the discredited practices of the past: no more starting with a number and working backwards, no more hiding behind the intricacies of GAAP and no more burying important information where investors are less likely to notice it.'
The survey suggested that investors tend to take a much broader view about which measures accurately demonstrate value creation in the real estate sector, he said. Of the thirty potential value indicators identified by the survey, investors said that 18 were particularly important to them. In contrast, real estate executives cited just seven measures as particularly important. Understanding gaps carry fundamental implications for the effectiveness of dialogue between companies and their investors.
'As investor cynicism about short-term earnings numbers remains high, the shift to more comprehensive reporting will help companies move away from the treadmill of the quarterly ´earnings game´ to focus on creating value over the longer term,' Kirtland says. For their part, investors and analysts agree that this approach is likely to produce significant benefits for real estate companies, including greater credibility, lower costs of capital and higher share values.
For a copy of Firm Foundations: Building Public Trust in the Real Estate Sector please visit www.uk.pwcglobal.com.
(source: Source: PricewaterhouseCoopers)