DCREC Identifies 10 Key Principles For The Daily Valuation of Private Real Estate Investment

Monday, October 17, 2016 3:50 PM | Anonymous

Daily valuation seen as a vital to further establishing real estate as a fundamental part of defined contribution plans

NEW YORK, (October 17, 2016) – As part of its ongoing mission to advocate for the inclusion of real estate as an essential asset class within defined contribution (DC) plans, the Defined Contribution Real Estate Council (DCREC) announced the publication of 10 Key Principles Recommended for Daily Valuation of Private Real Estate Investments.

“Our 10 Key Principles is designed to act as a guide for establishing a transparent and objective process for pricing real estate assets on a day-to-day basis,” said Michael O’Connor at DCREC. “We believe that the ability to provide daily valuation of private real estate assets held in a portfolio is one of the keys to expanding the use of real estate in DC plans. Valuation is linked to liquidity, and that’s an important concern of plan sponsors and participants.”

This publication offers guidance on topics including:

  • Understanding currently accepted methods of daily valuation and establishing an objective daily valuation process;
  • Incorporating third-party appraisals of individual assets;
  • Recognizing the impact of material events;
  • Establishing property-level debt valuation.   

“Multiple DC plan sponsors in the market today have added private real estate to their plans and have a successful daily valuation process in place,” O’Connor said.  “Our publication identifies best practices and makes recommendations to those firms considering offering or evaluating this asset class.”

The DCREC notes that its research has shown that incorporating real estate into a DC plan can improve outcomes for plan participants.  A survey conducted in 2015 by DCREC found approximately $18 billion in daily value real estate is already held within DC plans, with eight managers offering an existing product. Four others anticipated adding a DC-friendly real estate option in the near future.

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