Wunderlich Securities Provides Color on REITs

Wunderlich Securities provided color on REITs. In a research report published today, Wunderlich speculated about the changes Financial Accounting Standards Board might make when it issues its report in June.

In the report, Wunderlich states, "We believe one key provision would require an investment property entity to measure real estate investment properties at "fair value" if criteria are met. We believe this would represent a significant change from today's accounting for industries like REITs where real estate investments are often recorded on the balance sheet at historical cost, adjusted for accumulated depreciation or impairment. Currently, the trigger point to record these assets at fair value usually occurs when a property is moved to assets held for sale, or when a property is acquired and fair value accounting is used at the acquisition date. Properties held for sale are carried at the lower of cost or fair value (less cost to sell). Although this proposal may or may not get finalized, investors should start thinking about how changes could impact valuations and company-reported financial metrics."