Real Estate Position Paper Part I: Understanding the Asset Class

Transcription

1 Real Estate Position Paper Part I: Understanding the Asset Class October 2010 PREPARED BY Peter J. Rogers, CFA Assistant Vice President Elizabeth Francis, CIMA Vice President, Senior Research Analyst Abstract PREPARED BY MARQUETTE ASSOCIATES 180 North LaSalle St, Ste 3500, Chicago, Illinois PHONE WEB marquetteassociates.com

2 Introduction Exhibit 1: PRIVATE PUBLIC DEBT Whole Loans EQUITY Direct Property Private Debt Public Debt 1 Investment Styles Real Estate Position Paper Part 1 2

3 Core Value-Added Opportunistic 3 Real Estate Position Paper Part 1 3

4 Property Types Core Property Types: Industrial Retail Multi-family (apartments) Non-Core Property Types: 4 5 Real Estate Position Paper Part 1 4

5 Property Type Characteristics Exhibit 2: Lease Term Return Risk (Std. Dev.) Return per Unit of Risk Multi-Family Industrial Retail Exhibit 3: # of Periods Apartment Industrial Retail Apartment Industrial Retail Real Estate Position Paper Part 1 5

6 Role of Commercial Real Estate in a Multi-Asset Portfolio Exhibit 4: 9 1. Large Investable Universe 4. Attractive risk-adjusted performance The Investment Universe: 6 7 Real Estate Position Paper Part 1 6

7 Exhibit 5: # of Periods NFI-ODCE NFI-ODCE N A R E I T Eq. REITs. NAREIT Eq. REITs. S&P 500 S&P 500 BarCap Agg BarCap Agg M S C I EAFE MSCI EAFE HFR FoFs HFR FoFs D J / U B S Commodity DJ/UBS Commodity Exhibit 6: CORRELATION YEAR 8 Real Estate Position Paper Part 1 7

8 Asset Allocation Software: Exhibit 7: A B Broad Fixed Income Broad U.S. Equity Core Real Estate Total A B Avg. Annualized 10 Yr. Return Avg. Annualized 10 Yr. Volatility Real Estate Position Paper Part 1 8

9 Strong Current Income: Exhibit 8: YEAR Source: NCREIF Exhibit 9: RETURN RETURN YEAR Source: EnCorr Analyzer Real Estate Position Paper Part 1 9

10 Attractive Risk-Adjusted Performance: Exhibit 10: Source: EnCorr Analyzer Average Return Risk (Std. Dev.) Return Per Unit of Risk NPI NFI-ODCE NAREIT Eq. REIT S&P 500 BarCap Aggregate Apartment Industrial Mall Retail Strip Retail Lease Term Rent Indexing Overall Protection Rents renegotiated to raise prices power Real Estate Position Paper Part 1 10

11 9 Risks: 9 Real Estate Position Paper Part 1 11

12 Open-End Commingled Fund: Exhibit 11: Core Core Plus Value-Added # of Managers # of Funds Source: NCREIF/Townsend Fund Indices 4th Quarter 2009 Report. Closed-End Fund (Limited Partnership): Real Estate Position Paper Part 1 12

13 Separate Accounts: Fund of Funds: 10 Real Estate Position Paper Part 1 13

14 Recommendation: Real Estate Position Paper Part 1 14

15 Appendix 1 NCREIF Real Estate Investment Styles: Asset Level Core Attributes Value-Added Attributes preferred position Opportunistic Attributes and land unsecured positions Real Estate Position Paper Part 1 15

16 Portfolio Level Core Value-Added Opportunistic Source: NCREIF, Real Estate Investment Styles: Trends From the Catwalk, October Appendix 2 Commercial Real Estate Indices: Commercial Real Estate Indices Property Indices Fund Indices Appraisal Based Indices Transaction Based Indices prices in actual transactions Core Value-Added / Opportunistic NPI TBI NFI-ODCE NCREIF / Townsend IPD US CPPI NCREIF / Townsend Real Estate Position Paper Part 1 16

17 PREPARED BY MARQUETTE ASSOCIATES 180 North LaSalle St, Ste 3500, Chicago, Illinois PHONE WEB marquetteassociates.com all of the information and its accuracy cannot be guaranteed. Opinions, estimates, projections and comments on securities are for illustrative purposes only and do not constitute recommendations. Past performance does not guarantee future results. Real Estate Position Paper Part 1 17