NFI ODCE Performance Attribution Webinar

Transcription

1 NFI ODCE Performance Attribution Webinar First Quarter 2018 Review NCREIF Performance Attribution Webinar 1

2 Panelist Overview Joe D Alessandro NCREIF Director of Real Estate Performance Measurement David DiPaolo Senior Vice President, Clarion Partners Investment Performance Analytics NCREIF Performance Attribution Webinar

3 Total Returns by Asset Class Current Quarter and One Year Ended March 31, 2018 Source: FRED (BofA Merrill Lynch) NCREIF Performance Attribution Webinar 3 Joe to introduce slide and explain different indices. Joe to highlight that the NCREIF indices showed positive returns for both time periods whereas the other asset classes had at least one period with negative returns. David to provide some insights regarding NCREIF and other asset class results. Examples; 1) 2.2% ODCE current quarter return is the long term average since inception ) Daily Price return lower than ODCE. Could be due to DP higher cash reserves (5%) and public equity allocation (10%) 3) NPI leverage return slightly lower than ODCE for the quarter, but higher for the year. NPI is approximately 42% levered, close to its long term average. 64% of NPI properties have leverage. Implied interest rate is 3.9% 4) NAREIT current quarter 8.2% loss is significant. Retail, Healthcare and Specialty are culprits. 5) S&P 500 likely driven by FAANG (facebook, apple, amazon, net flix and google) 6) Corporate bonds negatively affected by rising interest rates. 3

4 Total Returns by Asset Class Last Three Year Annual Returns Source: FRED (BofA Merrill Lynch) NCREIF Performance Attribution Webinar 4 Joe to introduce the slide. David to offer comments. Example; 1) Real Estate performing well and as expected, somewhere between stocks and bonds. Although, depends on what type of stocks. Looking at NAREIT, NCREIF indices outperformed. 2) Added 10 yearaverageon chart 4

5 Quarterly Attribution Impact Trends for the one year ended March 31, 2018 Page 4 of Report NCREIF Performance Attribution Webinar 5 Joe to introduce the slide and comment that quarterly ODCE performance is trending up. Similar pattern in property unleveraged performance, with significant contribution to return from leverage. David to offer comments. Example; 1) Driver of ODCE performance vs. last quarter appears to be leverage impact, as a result of rising interest rates, which will be looked at more closely on the next slide. Also interesting to note that cash balances have a 30 bp impact on the one yea, the second largest after leverage. Other includes JV Leakage of 14 bps offset by true Other of 7 bps. 5

6 Quarterly Leverage Impact Trends for the one year ended March 31, 2018 Page 4 of Report Change in 10yr Treasury Rate.09% +.02% +.07% +.34% End of Qtr 10yr Treasury Rate: % 6/7/18 NCREIF Performance Attribution Webinar 6 David to lead right into this slide from the previous slide. Explain that 10 yr treasuries are usually a good gauge for real estate borrowings and an increase in rates means that lower fixed rate debt on the books is more favorable and therefore results in debt appreciation for ODCE funds that use market value accounting. 6

7 Percentiles: Returns and Leverage Page 5 of Report LTV% Impacts NCREIF Performance Attribution Webinar 7 7

8 NCREIF Fund Analytics (available late 2018) NCREIF Performance Attribution Webinar 8 8

9 NCREIF Fund Analytics (available late 2018) NCREIF Performance Attribution Webinar 9 9

10 One Year Total Returns by Property Type as of March 31, 2018 Page 4 of Report NCREIF Performance Attribution Webinar 10 Joe to introduce this slide. David to make comments. Examples, 1) Industrial has the smallest exposure or allocation at 14.1%, but provides the second largest contribution to return due to its outsized return %. 2) Other allocation of 2.8% has the second highest annual return! 10

11 One Year Total Returns by Property Type (ODCE & NPI) 16% 14% 14.3% 14.3% 13.5% 12% 10% 8% 6% 7.3% 7.3% 7.1% 5.9% 6.4% 6.3% 6.4% 7.9% 6.2% 6.8% 6.9% 6.6% 5.3% 5.4% 4.8% 8.5% 8.2% 4% 2% 0% All Properties Apartment Hotel Industrial Office Retail Other "Operating" ODCE, at ownership share ODCE, 100% ownership NPI, 100% ownership NCREIF Performance Attribution Webinar 11 Joe to introduce this slide. Explain that Other for NPI is really other property types in the NCREIF property database (not in NPI). David to comment. Example, 1) Retail sector underperforming other main property types. 2) Office outperforming apartments. 3) Other outperforms the overall return. We will dive into more details of Other in the upcoming slides. 4) For the one year, NPI has underperformed ODCE properties in all categories except Apartment. This hasn t been the trend over time as we will see on the next slide. 11

12 ODCE Property Types Item ALL ODCE Props ANNUALIZED CASH FLOW RETURNS SubType less Prop Type NPI Qualifying NPI Qualify less ALL Cash Flow Return NPI Qualifying Cash Flow Return vs.10 yr Treasury QUARTERLY STATISTICS Quarterly Avg Std Dev Avg Count Avg Denom ($ millions) Total 7.31% 7.11% 0.20% 2.88% 0.14% 0.71% 0.10% 2,291 $196,856 A 5.91% 5.48% 0.43% 3.27% 0.53% 0.81% 0.06% 533 $48,681 H 6.37% 6.37% 0.00% 6.08% 3.34% 1.49% 0.60% 12 $1,347 I 14.31% 13.82% 0.49% 3.36% 0.62% 0.83% 0.12% 867 $28,477 O 6.76% 6.76% 0.00% 2.67% 0.07% 0.66% 0.11% 494 $79,199 R 5.29% 5.10% 0.19% 2.34% 0.40% 0.58% 0.12% 386 $39,153 NCREIF Performance Attribution Webinar12 12

13 ODCE Property SubTypes Item ALL ODCE Props ANNUALIZED CASH FLOW RETURNS SubType less Prop Type NPI Qualifying NPI Qualify less ALL Cash Flow Return NPI Qualifying Cash Flow Return vs.10 yr Treasury QUARTERLY STATISTICS Quarterly Avg Std Dev Avg Count Avg Denom ($ millions) AG 7.88% 1.97% 7.79% 0.09% 3.52% 0.78% 0.87% 0.06% 133 $9,739 AH 5.37% 0.55% 4.73% 0.63% 3.13% 0.39% 0.77% 0.08% 338 $34,631 AL 6.43% 0.52% 6.31% 0.12% 3.83% 1.09% 0.94% 0.03% 61 $4,310 IW 13.97% 0.35% 13.49% 0.48% 3.31% 0.57% 0.82% 0.13% 782 $25,975 OCB 6.24% 0.52% 6.32% 0.08% 2.44% 0.30% 0.60% 0.11% 186 $47,080 OSU 7.52% 0.75% 7.41% 0.11% 3.02% 0.28% 0.75% 0.12% 308 $32,119 RC 6.25% 0.96% 6.23% 0.02% 3.48% 0.74% 0.86% 0.09% 78 $5,743 RF 5.40% 0.11% 5.17% 0.23% 0.90% 1.84% 0.23% 0.93% 40 $5,885 RN 7.43% 2.14% 6.94% 0.49% 4.50% 1.76% 1.11% 0.21% 116 $4,310 RP 4.72% 0.57% 4.53% 0.19% 4.77% 2.03% 1.17% 0.25% 55 $5,361 RR 3.53% 1.76% 3.53% 0.00% 2.52% 0.22% 0.62% 0.05% 20 $4,787 RS 5.66% 0.37% 5.66% 0.00% 0.44% 2.30% 0.11% 0.10% 24 $10,149 RT 0.18% 5.11% 0.22% 0.04% 1.40% 1.34% 0.35% 0.08% 46 $2,057 NCREIF Performance Attribution Webinar 13 13

14 Property SubType Cash Flow Performance Percentiles Group Item Total NPI Qualifying Property Subtype (NPI Qualifying) ONE YEAR CASH FLOW RETURNS 75th Percentile Median 25th Percentile Equal Avg Std Dev Fund Count A 3.27% 3.76% 3.35% 2.60% 3.08% 0.86% 18 I 3.36% 4.28% 3.94% 2.68% 3.26% 1.54% 18 O 2.67% 3.48% 2.71% 2.44% 2.79% 0.89% 18 R 2.34% 4.60% 3.64% 2.37% 3.21% 1.78% 18 AG 3.52% 4.18% 3.82% 3.28% 3.72% 0.67% 14 AH 3.13% 3.76% 3.25% 2.26% 2.93% 1.12% 18 IW 3.31% 4.12% 4.01% 3.26% 3.45% 1.41% 18 OCB 2.44% 3.13% 2.89% 2.10% 2.53% 1.94% 17 OSU 3.02% 3.51% 3.00% 2.53% 2.91% 0.94% 18 RC 3.48% 4.75% 4.14% 3.11% 3.56% 2.27% 14 RN 4.50% 5.26% 4.92% 4.29% 5.49% 3.20% 13 NCREIF Performance Attribution Webinar14 14

15 ODCE Exposures (All Properties & Other Detail) NCREIF Performance Attribution Webinar 15 15

16 Other Operating Property Types ($6.5 billion)* PropertySubtype2 Total Weight% Annual Return% # Fundsroperties Self Storage $5, % 8.46% Healthcare $ % 9.91% 5 9 Parking $ % 7.04% 5 8 Other $ % 11.07% 2 6 Grand Total $6, % 8.51% % of ODCE MV 3.0% Annual Returns by Region East MidWest South Self Storage 8.46% 4.84% 6.80% Self Storage Performance by Region *Some data not shown due to masking criteria NCREIF Performance Attribution Webinar16 Joe to introduce the slide. David to do more in depth analysis 16

17 Ideas for upcoming webinars Vintage Year Property Performance Analysis Fund Performance by Fund Size Fund Performance Percentiles Other Topics of Interest? Send your ideas to NCREIF Performance Attribution Webinar 17 17

18 This concludes today s Webinar. Thank you for joining us! Upcoming Events: NCREIF Summer Conference in Charlotte, NC, June NCREIF Certificate Courses in Dallas, TX at SMU July NCREIF Fall Conference in Lake Buena Vista, FL, November 6 9 Visit for more information NCREIF Performance Attribution Webinar Joe to read this slide and close the session. 18