Real Estate · Funds · Due Diligence

Audit in real estate –
offices, shopping centres – and acquisition due diligence

I audit real estate companies and funds with full understanding of sector specifics: investment property valuation at fair value, IFRS 16 lease accounting and due diligence for portfolio acquisitions.

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Projects in the real estate sector

20+

Years of experience

Types: office, retail, mixed-use

100M+

PLN of real estate assets

Office real estate and office buildings

Shopping centres

Real estate funds

Acquisition due diligence

Fair value valuation

IFRS 16 – leasing

IAS 40 – investment property

Projects from the real estate sector

Selected case studies – real estate

Projects for funds, owners and industry investors in the commercial real estate sector.

Office real estate portfolio audit

Situation

Polish subsidiary of a large European real estate fund, holding a portfolio of Class A office buildings. IFRS financial reporting, investment property at fair value (IAS 40), complex lease agreements.

Action

Full audit of the financial statements under IFRS. Verification of investment property valuations (fair value model), review of lease agreements under IFRS 16, assessment of rental income presentation.

Result

Unqualified opinion for the European fund. Long-term audit cooperation with the portfolio entity.

Long-term cooperation – European fund

Shopping centre audit

Situation

SPV company owning a shopping centre in the Warsaw agglomeration. Rental income from dozens of tenants, complex lease agreements with turnover clauses, service costs and shared spaces.

Action

Audit of the financial statements with particular focus on lease agreement accounting (IFRS 16 classification on the lessor's side), investment property at fair value and tenant settlements.

Result

Full audit documentation. Recommendations on the presentation of service charges as agent vs. principal.

Recommendations implemented by the company's management board

Acquisition due diligence – real estate portfolio

Situation

An industry investor considering acquiring a company holding a portfolio of commercial properties. They needed independent verification of asset quality, lease agreement structure and hidden liabilities.

Action

Financial due diligence covering a review of the books, analysis of all lease agreements (WAULT, break options, indexation), identification of contingent liabilities and committed capex, NOI normalisation.

Result

DD report with assessment of rental cash flow quality and risk list. The buyer obtained a basis for transaction price negotiations and SPA structuring.

Report served as the basis for price negotiations

Industry challenges

Key accounting challenges in the real estate sector

Investment property valuation (IAS 40)

Fair value model vs. cost model – the choice of accounting policy and verification of valuers' assessments are key areas in real estate audit.

Lease agreement accounting under IFRS 16

Lease classification on the lessor's and lessee's side, recognition of right-of-use assets and lease liabilities – IFRS 16 revolutionised sector accounting.

Rental revenues – agent vs. principal

Service, utility and parking charges – correct classification as gross or net revenue materially affects the income statement.

Due diligence in portfolio acquisitions

Every property acquisition involves hidden risks: rental arrears, hidden capex, break options and environmental obligations – identifying them before transaction closing is critical.

Impairment tests

A slowdown in the rental market or rising capitalisation rates may require write-downs – the auditor verifies the assumptions of DCF models and comparability of market transactions.

SPV structures and consolidation

Funds operate through multiple SPV companies – assessment of whether an SPV is subject to consolidation (IFRS 10) and the correctness of eliminations is a constant challenge in the sector.