COVID-19 Impact Webinar: Key Takeaways & Call for Questions

Earlier this month, Benay Kirk, Managing Director at Alter Domus and Co-Chair of the NCREIF Accounting Committee, took part in NCREIF’s webinar covering the impact of COVID-19 on the US real estate market. If you missed the webinar, we’ve rounded up the key takeaways of the discussion between committee co-chairs and market leaders.

US Real Estate Market

The current crisis has already impacted the US real estate market in a variety of ways, including but limited to:

• Remote working and reduced corporate travel is equating to decreased costs for companies;
• Congress’ recently passed Coronavirus Aid, Relief and Economic Security (“CARES”) Act will greatly support the real estate industry as a whole, although it remains to be seen exactly where the gaps will lie;
• Retail being pushed further into distress;
• Rent deferral or forgiveness for tenants is growing, with the following percentage of landlords having been asked for rent relief:
• Two-thirds of managers are now providing 2-3 months of rent relief, though landlords and tenants will need to work together going forward; and
• Landlords are slowing down payments to vendors as a result of decreased cash flow.

Financial Reporting: 2019 Impact & 2020 Considerations

The impact of COVID-19 on 2019 financial reports is minimal. However, subsequent event disclosures of COVID-19 appear to range from a few sentences to very detailed explanations. Considerations for 2020 will include:

• Looking at Global Financial Crisis disclosures from 2008-2010 reports for guidance;
• Consider promote fee clawbacks in agreements and determine if there are any financial statement disclosures or potential impacts to financial statements; and
• Uncertainty remains surrounding the placement of Fair Value disclosures in either Risks & Uncertainties or Commitments & Contingencies sections of the footnotes.

2020 Operational Concerns
With no historical example to use as reference, and in spite of Business Continuity Plans being used by firms, many issues have begun to crop up and others are to be expected. As we move through the crisis, planning, communication, and flexibility will be critical factors to success. Key considerations during this period include:

• Firms may need to adjust security restrictions to facilitate workflows;
• Some may consider deferring projects or other meetings that are not directly related to completing quarterly reporting;
• Unexpected events can impede processes, so building in extra time for the various levels of review and approvals is advised;
• Prepare for economic condition changes and new SEC or tax updates which could impact financial statements at the last minute;
• Flexibility will be paramount as we navigate through our daily tasks as processes and priorities change; and
• It’s important to be prepared for team members who may be unable to work due to health issues, and communicate regularly via video conferencing where possible.

 
Do you have questions about any of the above that you’d like to have answered during NCREIF’s next webinar on Wednesday, April 29th at 2:00pm CST? If so, send Benay a message with your questions for a chance to have them explored by NCREIF’s Accounting Committee Chairs during the Hot Topics webinar next week. To register for the webinar, visit NCREIF’s registration page.