Expense ratio cost classification
Fees and costs should be classified consistently for the purpose of calculating the INREV fee and expense metrics.
They should be classified as follows:
Vehicle fees included in the TER comprise:
- Asset management fees (certain services);
- Fund management fees;
- Performance fees (including carried interest);
- Wind-up fees.
Vehicle costs included in the TER comprise:
- Audit costs;
- Bank charges;
- Custodian costs;
- Dead deal costs;
- Other/miscellaneous vehicle costs;
- Other professional service costs;
- Transfer agent costs;
- Valuation costs;
- Vehicle administration costs;
- Vehicle formation costs (amortisation for the period).
The costs incurred by Special Purpose Vehicles (“SPVs”), which sit above the acquisition structure in the holding structure, are included in vehicle expenses. Costs of this nature that are charged to the acquisition vehicle should also be included in this category.
Property fees included in the REER are directly attributable to the management and the maintenance of specific properties. These fees comprise:
- Asset management fees (certain services not included in the TER);
- Internal leasing commissions;
- Property acquisition fees (amortisation for the period);
- Property management fees.
Property costs included in the REER are directly attributable to the management and the maintenance of specific properties. These costs comprise:
- External leasing commissions;
- Property acquisition costs (amortisation for the period);
- Other/miscellaneous/sundry costs;
- Property insurance costs;
- Property management costs;
- Repairs and maintenance costs;
- Taxes on property-related activities;
- Utilities costs (non-rechargeable portion).
Fees and costs excluded from the TER and REER comprise:
- Deferred taxes on property-related activities
- Development costs;
- Disposition costs;
- Fair value adjustments;
- Financing costs;
- Financing fees charged by managers;
- Gain/loss on currency exchange rates;
- Gain/loss on investment disposition;
- Goodwill write-off;
- Impairment of goodwill;
- Losses on disposal of subsidiaries;
- Payments related to financial derivatives;
- Project management fees;
- Provisions and allowances;
- Receivables write-off costs;
- Rent free/discounts;
- Securities handling charges;
- Share of losses of associates and joint ventures;
- Taxes on real estate transactions;
- Unwinding of discounts and effect of changes in discount rate on provisions.