EPRA net tangible assets
Sector Deep DivesThe European industry standard net asset measure, adjusting reported net assets for intangibles, derivative marks and deferred tax that will not crystallise.
Also written: EPRA NTA, net tangible assets
EPRA net tangible assets is the balance sheet figure European listed property companies report alongside statutory net assets. The definition comes from the European Public Real Estate Association, and the point of having a common definition is that companies in different markets, with different tax regimes and different hedging policies, can be compared on the same basis.
The adjustments are all in the same spirit. Intangibles and goodwill come out because they are not property. The fair value of derivatives comes out because a swap mark tells you about interest rates, not about buildings. Deferred tax is added back to the extent it would not crystallise given how the company expects to realise its assets, because a theoretical tax charge on a sale that is not going to happen is not a real reduction in value.
EPRA defines more than one net asset measure, sitting on a spectrum from a reinstatement view to a liquidation view, with net tangible assets the usual headline in between. Companies differ in which they lead with, so the reconciliation table in the report is more informative than the label on the highlights page.
It matters practically because it is the denominator of the discount or premium the market quotes. Knowing what has been stripped out tells you what a 30% discount is and is not saying about the underlying property.
Worked example
Reported net assets are 1,000. Goodwill of 20 and other intangibles of 10 are removed. The fair value of interest rate swaps is a liability of 40, which is reversed and added back.
Deferred tax of 60 sits on the balance sheet, of which 45 relates to assets management expects to hold rather than sell, so 45 is added back.
EPRA net tangible assets is 1,000 less 30 plus 40 plus 45, so 1,055. The share price is quoted as a premium or discount against that, not against the 1,000.