Drivers of Public and Private Real Estate Values

Transcription

1 Drivers of Public and Private Real Estate Values NCREIF Winter Meeting February 28, 2013 Jim Clayton Bill Hughes

2 Allocations private & public

3 U.S. investor allocations by strategy Percent of Total Real Estate Assets (%) Target Real Estate Allocation by Strategy* Private Equity (Core / Core Plus) Private Equity (Value-Added) Private Equity (Opportunistic) Foreign Real Estate REITs *As reported in a survey by a subset of plan sponsors that set targets by strategy/style. Source: Institutional Real Estate Inc. and Kingsley Associates 2012 Investor Survey.

4 A global perspective data from a recent RERI study Source: Andonov, A., Eichholtz, P. and Kok, N., Value Added from Money Managers in Private Markets? An Examination of Pension Fund Investments in Real Estate (Feb. 2012). Available at SSRN:

5 A global perspective data from a recent RERI study Source: Andonov, A., Eichholtz, P. and Kok, N., Value Added from Money Managers in Private Markets? An Examination of Pension Fund Investments in Real Estate (Feb. 2012). Available at SSRN:

6 Evolution of the Public Equity REIT Sector Stock Mkt Capitalization Number of Traded REITs $ Billions # Source: NAREIT

7 REITs in a mixed asset portfolio REITs smell like real estate, look like bonds and walk like equity Greg Whyte, Analyst, Morgan Stanley

8 Performance

9 5 year rolling total returns 30% 25% Russell 2000 DJ US Select REIT ODCE 20% 15% 10% 5% 0% -5% -10% -15% 1Q86 1Q88 1Q90 1Q92 1Q94 1Q96 1Q98 1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12

10 Public and private real estate performance Private - NCREIF 35 Public - NAREIT NCREIF returns (%) NAREIT equity returns (%) Total NPI Apartment Industrial Office All Equity Apartment Industrial Office Source: Morning star and NCREIF as of December 2012 Updated: February 27, 2013

11 Public vs. private market pricing of CRE 40% Green Street REIT NAV Premium/Discount 30% 20% 10% 0% -10% -20% -30% -40% -50% PREM = ( P NAV ) REIT NAV Source: Green Street Advisors.

12 Public REITs? Private Real Estate?

13 Tyler Brown s Question

14 Revenue source Private Funds Appreciation Public REIT Service Fees Development Fees Management Fees Business Enterprise Rental Income Appreciation Rental Income Updated: February 27, 2013

15 Price Discovery???

16 Calendar year returns Annual returns (%) DJ US Select REIT ODCE Source: Morning star and NCREIF as of December 2012 Updated: February 27,

17 Public vs. Private Market Pricing of CRE Moody's/RCA Commercial Property Price Index (CPPI) FTSE/NAREIT Equity REIT Price Index Index (Dec. 2000=100) Source: Moody's Investor Services, NAREIT.

18 Public vs. Private Market Pricing of CRE Green Street Public REIT vs. Property Pricing 40% 11% 30% 10% 20% 10% 9% 0% -10% -20% -30% -40% NAV Premium Implied Cap Rate 8% 7% 6% 5% Implied Cap Rate -50% % Source: Green Street Advisors.

19 Jim Clayton Vice President - Research Cornerstone Real Estate Advisers Hartford, CT jclayton@cornerstoneadvisers.com Bill Hughes Global Head of Research & Strategy UBS Realty Investors LLC Hartford, CT William.Hughes@ubs.com