What is the state of the real estate industry in Europe? Ask EPRA, the European Public Real Estate Association.

Founded just over a year ago in November, 1999, Amsterdam-based EPRA has so far attracted 78 members, established the first real time index of public real estate companies across Europe, and laid a foundation for promoting a pan-European public real estate industry.

The public real estate business in Europe remains a small part of European industry. EPRA estimates that approximately 1,000 property companies, including 300 public companies, currently do business in 14 European countries. The market capitalization of the public real estate sector totals about E80 billion, compared to a total stock market capitalization of E7 trillion.

The EPRA real estate index, however, suggests that this small group of companies represents a vital and growing segment of European industry. "Our index follows 85 companies and shows growth far greater than other indices," says Quinton Hill-Lines, deputy chief executive of EPRA.

According to EPRA's web site (www.epra.com), European real estate stocks are currently out-performing general equities. For the year ended September, 2000, real estate stocks returned 21 percent, compared to nine percent for the general stock market.

EPRA seeks to build on this performance with a variety of initiatives. The organization's literature contends that the sector contains a number of excellent companies providing regional and sectional real estate investment opportunities, while noting that problems arise from fragmented practices, regulations and reporting standards. One of EPRA's key initiatives involves harmonizing the standards by which companies in different countries, with different tax structures, develop financial reports available to investors.

Importantly, harmonization does not mean standardization, which is practically impossible given the variety of government interests in the mix. "We have GAAP and international accounting standards and various other standards," says Hill-Lines. "If you compare reports from say the UK and Portugal, the different reports made at the statutory level is absolutely phenomenal. To continue this example, there is no requirement in Portugal to have board members from outside the company, whereas the UK does require this. We need to develop transparent reporting standards. "In doing this, we are not trying to change government statutes, but we are trying to develop a parallel reporting device which uses commonly accepted EPRA terms and definitions."

Companies that adopt the dual reporting recommended by EPRA will issue two reports, one that satisfies governmental requirements and one that investors might use to compare real estate companies operating in, say, England and Portugal.

According to Hill-Lines, the association will issue a reporting model designed for investors by the end of next year. Will EPRA members accept and use the harmonized reporting concept? EPRA believes they will. Given the common need to communicate benefits to investors, once several companies begin to issue transparent reports, other companies will feel pressure to submit their data in the same format.

EPRA also takes an interest in promoting the adoption of real estate friendly business structures, such as the U.S. REIT structure, that may attract wider investments in real estate. "As a pan-European organization, we will be looking at REIT concepts for Europe," Hill-Lines says. "But it will be very difficult, and this goal is very far away. Our immediate goals include tasks such as setting up the EPRA index and an EPRA reporting format that we can deal with relatively quickly."