04/03/2014 | By Allen Kenney
Tom Wilkin, real estate partner with accounting firm PwC, joined REIT.com for a video interview during REITWise 2014: NAREIT’s Law, Accounting and Finance Conference held in Boca Raton, Fla.
Wilkin was asked about the progress made by standard setters at the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) to converge financial reporting requirements.
“I think the angst, if anything, has gone up,” he said. “There’s certainly a degree of convergence fatigue that is continuing to build. You can just sense it at some of the joint meetings as to where it’s going.”
Wilkin noted that the boards have yet to reach an agreement regarding the treatment of leasing, a major issue for REITs and the real estate industry. “That doesn’t bode well for long-term complete convergence and may put a halt to it at some point,” he said.
Wilkin said that for the rest of the year, he’s keeping his eye on “the same laundry list” of financial standards projects that FASB has been working on. “On the positive side, there are some imminent improvements” forthcoming, he said, such as guidance on discontinued operations.
“As a practical matter, the property REITs are looking heavily at the leasing project, which is nearing completion, maybe,” Wilkin said. “Those are all out there percolating through the system, but I don’t think there’s anything imminent that’s going to be a groundswell change for the real estate world.”
Wilkin also offered his analysis of the wave of REIT spin-offs, which he called “an interesting dynamic.” More recently, according to Wilkin, REITs have spun off portions of their assets that don’t fit with the rest of their portfolios. The results of those moves are “two targeted, focused companies,” he said. Prior to that, the trend was to break apart diversified REITs, he said.
Wilkin pointed out that spinning off parts of these companies comes with a series of costs, such as adding infrastructure and duplicating management positions.
“All of these companies are betting that the market is going to reward them well in excess of the cost in the multiples on the stock,” he said.