Real Estate Investment Trusts: An Industry Perspective

Transcription

1 Real Estate Investment Trusts: An Industry Perspective October 6, 2015 Naples, FL National Association of Real Estate Investment Trusts REITs: Building Dividends & Diversification 1875 I St, NW Suite 600, Washington, DC

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4 What in the World? Is up with the first 2 slides? $1,000,000,000,000 $2,000,000,000,000 70,000,000 1,000,000 4

5 The Purpose The potential for U.S. REITs was created in 1960 by an act of Congress Real Estate Investment Trust Act of 1960 Part of the Cigar Excise Tax Extension of 1960 signed by President Eisenhower September 14, 1960 Allows all types of investors to benefit from real estate investment in the same manner as might be obtained by direct ownership, while also potentially diversifying their risks and obtaining professional management 5

6 The Diversity of U.S. REITs Public REITs and Private REITs Stock Exchange-Listed REITs and Non-Listed REITs Equity REITs and Mortgage REITs Single Property Sector REITs and Multiple Property Sector REITs 6

7 Stock Exchange-Listed U.S. REITs Largest part of the U.S. REIT industry Registered with the United States Securities and Exchange Commission (SEC) Securities trade on major securities markets (NYSE, NASDAQ) Subject to listing requirements of relevant markets Required to use Generally Accepted Accounting Principles (GAAP) Required to publish regular financial statements 7

8 Listed U.S. Equity REIT Industry Broad Diversification by Property Type and Geography Property Sector Residential Diversified Regional Malls Health Care Office Buildings Infrastructure Shopping Centers Lodging/Resorts Self-Storage Industrial Facilities Timber Free Standing Retail Mixed Industrial/Office Percent Total 100 Data as of August 31, 2015 Source: NAREIT 8

9 Real Estate Investment through Listed REITs REITs are Real Estate equities REITs deliver competitive long-term performance REITs provide portfolio diversification REITs are a complement to private investment in the real estate portfolio REITs are an efficient way to gain global real estate exposure 9

10 Importance of Investment Horizon Correlation of Exchange-Traded U.S. Equity REIT Returns with U.S. Stock Returns and U.S. Private Equity Real Estate Returns over Increasing Investment Horizons Core Properties (NPI) with 4-qtr lag Core Funds (ODCE) with 4-qtr lag Core Properties (NPI) Core Funds (ODCE) S&P Financial Sector Dow Jones U.S. Total Market S&P 500 U.S. Stocks Graph shows correlation of total returns computed over rolling one-quarter periods, rolling two-quarter periods, etc. Data begin in 1978Q1 for NCREIF Property Index, NCREIF ODCE Index, FTSE NAREIT All Equity REITs Index, S&P 500 Stock Index, and Dow Jones U.S. Total Market indexes, and in 1989Q4 for S&P Financial Sector Index. Source: NAREIT analysis of data from NCREIF (NPI and ODCE) and FactSet. 10

11 Historical Compound Annual Performance (%) FTSE NAREIT U.S. Equity REITs TR FTSE EPRA/NAREIT Developed TR S&P 500 TR MSCI EAFE TR Barclays Capital U.S. Aggregate Bond Index Barclays Capital Global Aggregate Bond Index 1-Year Year Year Year Year Year Year Year N/A N/A 35-Year N/A N/A 40-Year N/A N/A N/A Note: Monthly data as of August 2015 Sources: NAREIT analysis of data from IDC accessed through FactSet. 11

12 Net Total Return (%) : REITs and Real Estate Funds Through the Real Estate Market Cycle, 1989/ /08 Unlevered Core Properties (NPI) Value-Add Funds Equity REITs Core Funds (ODCE) Opportunistic Funds Income Component Income Component Total Return (net) Income (net) Capital Appreciation Sources: NAREIT analysis of data from NCREIF Property Index (unlevered core properties, NCREIF ODCE Index (core funds), NCREIF/Townsend Fund Indices (value added and opportunistic funds), and FTSE NAREIT All Equity REITs Index (equity REITs). Expenses for equity REITs are estimated at 50 bps per year, distributed equally across all months; expenses for unlevered core properties are assumed to equal 100 bps per year, distributed equally across all quarters. Expenses are attributed to income returns only, in accordance with ODCE. Assumes full reinvestment of net income. 12

13 Diversification: REITs in a Mixed Asset Portfolio The Role of REITs in a Portfolio Potential to increase returns or reduce risk, Source: 13

14 Diversification: REITs & Private Real Estate Funds in a Real Estate Portfolio 100% Optimal Portfolio Allocation 90% 80% 70% 60% 50% 40% 30% 20% Minimum- Volatility Portfolio 4.7% REITs, 95.3% ODCE Average Net Return 7.11%/yr Maximum Sharpe Ratio Portfolio 23.0% REITs, 38.0% ODCE, 39.1% Opportunistic Average Net Return 9.64%/yr 10% 0% 7.11% 7.42% 7.73% 8.04% 8.35% 8.66% 8.97% 9.28% 9.59% 9.91% 10.22% 10.54% 10.85% 11.17% 11.48% 11.80% 12.12% 12.44% 12.76% 13.08% 13.40% Portfolio Annual Average Net Return Listed Equity REITs Core Funds (ODCE) Value Added Funds Opportunistic Funds Note: Based on quarterly net total returns for NCREIF/Townsend Fund Indices (ODCE, Value Added, and Opportunistic) and FTSE NAREIT Equity REITs Index for 1992q1 2013q3. Fees and expenses are assumed to be 50 bps per year for publicly traded equity REITs; fees and expenses for core, value added, and opportunistic funds are as reported by NCREIF. Source: NAREIT analysis of data from NCREIF and FTSE NAREIT Equity REITs Index 14

15 U.S. REITs Have Delivered Strong Returns with Low Investment Costs 15

16 Global Expansion of the REIT Model Increasing Investment Opportunity 16

17 Public Pension Funds Investing in Real Estate Exposure to REITs 61% 37% Asset Weighted # Plans Source: Preqin Real Estate On-line March

18 REITS House the U.S. economy Historically have persistently outperformed other forms of commercial real estate investment while offering liquidity, transparency and comparatively low costs Provide access to the types of real estate and to the markets where you want to own Are owned by more than one-half of all pension, endowment and foundation funds investing in commercial real estate 18

19 Disclaimer NAREIT is the worldwide representative voice for REITs and listed real estate companies with an interest in U.S. real estate and capital markets. Members are REITs and other businesses that own, operate and manage income-producing real estate, as well as those firms and individuals who advise, study and service those businesses. NAREIT is the exclusive registered trademark of the National Association of Real Estate Investment Trusts, Inc., 1875 I St., NW, Suite 600, Washington, DC Follow us on REIT.com. Copyright 2015 by the National Association of Real Estate Investment Trusts, Inc. All rights reserved. This information is solely educational in nature and is not intended by NAREIT to serve as the primary basis for any investment decision. NAREIT is not acting as an investment adviser, investment fiduciary, broker, dealer or other market participant, and no offer or solicitation to buy or sell any security or real estate investment is being made. Investments and solicitations for investment must be made directly through an agent, employee or representative of a particular investment or fund and cannot be made through NAREIT. NAREIT does not allow any agent, employee or representative to personally solicit any investment or accept any monies to be invested in a particular security or real estate investment. All REIT data are derived from, and apply only to, publicly traded securities. While such data are believed to be reliable when prepared or provided, such data are subject to change or restatement. NAREIT does not warrant or guarantee such data for accuracy or completeness, and shall not be liable under any legal theory for such data or any errors or omissions therein. See for important information regarding this data, the underlying assumptions and the limitations of NAREIT s liability therefore, all of which are incorporated by reference herein. Performance results are provided only as a barometer or measure of past performance, and future values will fluctuate from those used in the underlying data. Any investment returns or performance data (past, hypothetical or otherwise) shown herein or in such data are not necessarily indicative of future returns or performance. Before an investment is made in any security, fund or investment, investors are strongly advised to request a copy of the prospectus or other disclosure or investment documentation and read it carefully. Such prospectus or other information contains important information about a security s, fund s or other investment s objectives and strategies, risks and expenses. Investors should read all such information carefully before making an investment decision or investing any funds. Investors should consult with their investment fiduciary or other market professional before making any investment in any security, fund or other investment. For more information please visit: 19