NFI ODCE Performance Attribution Webinar...NFI‐ODCE Performance Attribution Webinar Third Quarter...

NFI‐ODCE Performance Attribution Webinar

Third Quarter 2019 Review

Panelist Overview

Joe D’AlessandroNCREIF Director of Real Estate Performance Measurement

Rob Maroldi, CIPMVice President Investment Risk

PGIM Real Estate

Agenda

• Current quarter results and long term trends• Build‐up of property to fund returns• Impacts of leverage and volatile debt markets• Quartile dispersion analysis of line items• Retail subtype return differences• Operating vs. Non‐operating property performance

Total Returns by Asset Class

0%2%4%6%8%

10%12%14%16%

Qtr 1 year 3 year 5 year 7 year 25 year

NPI ODCE‐VW NAREIT S&P 500 Barclay's Agg.

Source: PGIM/Bloomberg

Total Returns by Asset Class Rolling 10 Year Returns

NPI NAREIT Equity REIT Index ODCE‐VW S&P 500 Index

of Report

Build‐up of Returns (Impact Analysis)

Historical data reconciled back to 2015!

of Report

Quarterly Attribution Impact Trends

Leveraged Fund Returns Lower Than Unlevered Property

of Report

Change in 10yr Treasury Rate ‐0.36% ‐0.28% ‐0.41% ‐0.32% ‐1.37%End of Qtr 10yr Treasury Rate 2.69% 2.41% 2.00% 1.68%

10 yr. Treasury Rate on 12/16/19 1.90%

Quarterly Leverage Impact Trends‐0.68% Debt Mark, largest negative to date for ODCE

Total Mark to Market ‐.009% ‐0.18% ‐0.25% ‐0.13% ‐0.68%

Fund Returns

2016 2017 2018 4q 9/30/19

Avg Dispersion

Total Fund (Gross of Fees)

2016 2017 2018 4q 9/30/19

Avg 75% 50% 25%

Total Fund (Gross of Fees)

Dispersion Avg ODCE‐VW 75% 50% 25%2015 1.2% 15.1% 15.0% 15.9% 15.3% 14.4%2016 1.5% 9.3% 8.8% 10.1% 9.2% 8.7%2017 1.3% 7.8% 7.6% 8.5% 7.8% 7.2%2018 1.0% 8.2% 8.3% 8.8% 8.2% 7.7%4q 9/30/19 2.0% 6.3% 3.8% 7.5% 6.8% 5.5%

Total Fund (Gross of Fees) Percentiles

Property Unleveraged Returns

2016 2017 2018 4q 9/30/19Avg Dispersion

Property Unleveraged

Dispersion AvgProp UL‐

VW 75% 50% 25%2015 1.2% 13.0% 13.1% 13.9% 12.9% 12.4%2016 1.0% 8.1% 7.9% 8.6% 8.1% 7.6%2017 1.1% 7.2% 7.2% 7.8% 7.3% 6.7%2018 1.3% 7.2% 7.3% 8.0% 7.5% 6.6%4q 9/30/19 1.7% 6.6% 4.3% 7.8% 7.0% 5.8%

Property UnleveragedPercentiles

2016 2017 2018 4q 9/30/19

Avg 75% 50% 25%

Property Unleveraged

Annual 2016 Annual 2017 Annual 2018 YTD 2019

Avg 75% 50% 25%

LTV% Dispersion Avg 75% 50% 25%Annual 2015 4.7% 23.3% 26.2% 23.0% 19.9%Annual 2016 4.7% 23.7% 26.4% 23.8% 20.9%Annual 2017 3.5% 22.4% 24.4% 22.4% 20.4%Annual 2018 4.3% 22.9% 24.6% 22.7% 20.3%YTD 2019 4.6% 23.1% 24.8% 22.5% 20.2%

Annual 2016 Annual 2017 Annual 2018 YTD 2019

Avg Dispersion ‐‐‐‐‐ Long Term Avg since 2000.

Unleveraged Property Type Returns (Rolling 1 Year)

Dispersion2016 2.3%2017 3.8%2018 4.5%

4q 9/19 5.6%

Property Type Returns at 100%

‐4.00%

‐2.00%

10.00%

12.00%

14.00%

16.00%

Apartment Industrial Office Retail Total

Total Return

1 Year 3 Year 5 Year 7 Year

‐8.00%‐6.00%‐4.00%‐2.00%0.00%2.00%4.00%6.00%8.00%

10.00%

Appreciation Return

Income Return

of Report

Contribution to Unlevered Return by Property Type

Historical data reconciled back to 2015!

of Report

Contribution to Unlevered Return by Property Type

Industrial out‐contributes office!

Another negative contribution for Retail

Public REIT Retail Returns

‐0.3

‐0.2

‐0.1

312/31/20

133/31

412/31/20

143/31

512/31/20

153/31

612/30/20

163/31

712/29/20

173/30

812/31/20

183/29

Rolling 1 year total return

Public Malls NCREIF Malls

-11.4%

-12.9%

-24.6%

YTD 1 Year 3 Year 5 Year 7 Year

Strip Centers(Non-Malls)Malls

Property Subtype Retail Returns

‐6.00%

‐4.00%

‐2.00%

10.00%

1 Year 3 Year 5 year 7 Year

Total Return

Mall Non‐Mall

Income Return

Mall Non‐Mall Total Retail

‐10.00%

‐8.00%

‐6.00%

‐4.00%

‐2.00%

Appreciation Return

‐30%‐20%‐10%0%10%20%30%

Rolling 1 year

Public REIT vs. NCRIEF Rolling 1 Year Returns

‐10%‐5%0%5%

10%15%20%25%30%35%40%45%

12/31/20

12/30/20

12/29/20

12/31/20

Public Apt NCREIF Apt Linear (Public Apt)

‐5%0%5%

10%15%20%25%30%35%40%45%

12/31/20

143/31

12/31/20

612/30/20

12/29/20

12/31/20

Public Ind NCREIF Ind Linear (Public Ind)

‐0.2‐0.15‐0.1

‐0.050

0.050.1

0.150.2

0.250.3

12/31/20

412/31/20

12/31/20

153/31

12/30/20

12/29/20

12/31/20

Public Off NCREIF Off Linear (Public Off)

OFFOver the long term, public REITS performance reflects the underlying real estate returns

Operating vs. Non‐Operating Performance

‐0.8%

‐0.6%

‐0.4%

‐0.2%

Non‐operating Spreads in 1 yr Rolling

Apt Ind Ret Off Other

$ Billion

MV in Non‐Operating

Apt Ind Ret Off Other

This concludes today’s Webinar. Thank you for joining us!Upcoming Events:

NCREIF Winter Conference in Phoenix, AZ, March 9 – 12, 2020

NCREIF Academy Course: Structuring Institutional Investment VehiclesMonday March 9

Visit www.ncreif.org for more information

NFI ODCE Performance Attribution Webinar...NFI‐ODCE Performance Attribution Webinar Third Quarter...

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