What is the NCREIF?
NCREIF is an abbreviation of the National Council of Real Estate Investment Fiduciaries It operates as a non-profit corporation. The principal goal of NCREIF is to inform interested individuals about the efficiency of the market in order to help them utilize the data to make educated decisions. The organization fulfills its mission by collecting pertinent data and analyzing it, and the presentation of that data in appropriate ways to its intended audience.The NCREIF attempts to inform real estate investors about the risk of returning on the market as well in the latest trends investors need to know about. The association also enhances visibility of the market by releasing various statistics it publishes in the market. For instance the property index as well as other analyses of statistics released by the association aid investors gain a better understanding of the processes in the real estate investment market while also highlighting potential weaknesses and opportunities that investors could make use of.
NCREIF Membership
The NCREIF includes around 215 members, mainly educational institutions and academic groups. The NCREIF is classified into three types of members. The first is data-related members that are institution management firmsthat supervise real estate investments that have an estimated market value of $50 million.
The second group is comprised of professionals who are members of the profession such as Information brokers, pension advisors appraisers, and pension consultants. They are involved in various aspects of the real-estate industry although they may not have any funds under administration. The third category consists of members of academic groups who have a major research role in the property industry.
The NCREIF members must follow the rules and regulations imposed by the organization. For example, each type of members has to perform their duties within the specified timeframes in order to avoid resulting with their membership cancelled.
For instance, if an individual is data contributors and submits the required data each quarter. If they fail to submit the required data, it could lead to the dissolution the membership. The NCREIF also restricts those who belong to more than three categories or changing their membership to another category.
The NCREIF Property Index (NPI)
The NCREIF Property Index evaluates how well real estate investments on a monthly basis, and analyzes the amount of return in the market. The NPI is a measure of properties purchased by institutional investors, which are exempt from taxation within the fiduciary setting. The NPI makes use of the value of the property in the market, instead of using the cost at the beginning of building the property.
The properties within the NPI are to be appraised as often at least every 3 months. An appraisal could be conducted in-house or through an external source, but it should be evaluated by an outsider at least every three years.
NPI Inclusion Attributes
In order for a property to be considered part of an NPI the property must meet the requirements of setting out.
Properties that are operating should have at least 60% occupancy when participating in the NPI. The types of properties that are eligible for the NPI include office buildings, hotels industrial buildings, apartments, industrial property as well as other retail properties. All permitted properties may be fully owned by the owner or jointly owned by the owners. Investment returns are required to be reported with no leverage.
Index Data Validation
The NCREIF utilizes a validating procedure that is comprised of three steps. The process is fast in order to make sure that mistakes in the data submitted are identified and rectified. The process of submission is carried out using a special software designed specifically to perform the task. The program performs tests on the submitted data in order to identify any irregularities in compliance with the established standards.
Corrections for errors should be made prior to the submission deadline. Warnings from the system identify any deviations from the normal standards. Any sudden changes to the worth of property from one time to the next are an anomaly, and it will be a warning in the event of the occasion.
The NCREIF also has its own method of validation upon the submission has been made to eliminate any obvious deviations. Validation is two-step process. The first step is to repeat the tests conducted by people who contributed the data, while the second stage is to compare results of a contributor to result of others who contributed to the project.
The Index Oversight Committee (IOC)
The Index Oversight Committee (IOC) is charged with the duty of ensuring integrity within the directors’ board through making recommendations for changes, if needed. It also evaluates the policies and quarterly indices in order to ensure the highest degree of transparency. The committee may also discipline the board for inconsistent reporting, such as late submission of the reports required by law.
The IOC is comprised of five top researchers with sufficient knowledge of database of member companies. They have a thorough knowledge of current market trends, indices and the methodologies they employ. The IOC always has a vote to adopt policies, make recommendations for directors modifications, or to release any indexes. A majority vote is the winner which is why there’s an oddly-sized amount of membership.
