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.

✉ Book a free consultation ▶ See industry projects

No obligation • 20 minutes • quick assessment

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 IFRS consolidation and the correctness of eliminations is a constant challenge in the sector.

Do you have a real estate fund or company requiring an audit or due diligence?

The first conversation is free. I will discuss the specifics of your portfolio and propose the scope.

✉ Book a free consultation 📞 +48 502 960 170

FAQ

Frequently asked questions

Accounting questions specific to real estate – property valuation, developer revenue, and audit obligation.

When must a developer or real estate company have a statutory audit?▾

A real estate company is subject to mandatory audit when it meets at least 2 of 3 Polish Accounting Act thresholds for the prior year: assets >PLN 17m, revenue >PLN 34m, or headcount >50. Many developers exceed the asset threshold (land, properties under construction) even with low revenue, because revenue is only recognised upon handover or title transfer. Real estate companies forming part of a group may also be subject to audit due to the parent's consolidation requirements, regardless of their own size.

How should investment property be valued – cost model or fair value?▾

Under Polish GAAP, investment property is typically measured at cost less accumulated depreciation and impairment. Under IFRS (IAS 40), the fair value model may be applied – without depreciation, with changes recognised in the income statement. The choice of model significantly affects reported profit and asset values. The auditor assesses the reliability and methodology of the fair value measurement (comparable sales or income approach) and its consistency with prior-year treatment.

How does an auditor verify a developer's revenue from apartment sales?▾

The timing of revenue recognition is a critical issue in developer audits. Under Polish GAAP, revenue is recognised on transfer of legal title (notarial deed). Under IFRS 15, recognition over the construction period (percentage-of-completion) may be applicable. The auditor verifies the consistency of the accounting policy with the method applied, the completeness and accuracy of development agreements, compliance with the Developer Act, and the correct accounting for open and closed escrow accounts.

What does an auditor check in commercial real estate and rental portfolios?▾

For entities managing rental portfolios, the auditor focuses on: completeness of lease recognition (ROU assets under IFRS 16 for tenants, or straight-line income under Polish GAAP for landlords), valuation of investment properties, correct treatment of tenant incentives (rent-free periods, fit-out contributions), and completeness of provisions for future dilapidations and exit costs. Sale-and-leaseback transactions require particular legal and accounting analysis.

Knowledge base