IPD Real Estate Investment Forum: Behavior of U.S. Open End Core Funds April 2, 2014 Index Composition PREA | IPD U.S. Property Fund Index a.k.a. Core Diversified Open End Funds (“ACOE”) fund statistics Benchmark Summary Statistics Gross Asset Value $137.73B Net Asset Value $106.15B Number of Assets 2,348 Avg. Asset Size $57.0M Occupancy 92.70% Leverage % 22.88% Cash % 3.05% Constituent Funds 20 ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 2 ipd.com Inclusion Rules Core diversified open-end funds • Open-end funds • GAV > $150 million or that of the 9th decile of the current index sample • 95% of GAV within U.S. • 85% of GAV in real estate • 70% of GAV in private equity real estate • All assets and liabilities revalued quarterly • 80% of GAV invested in “core” property types • 80% of all assets invested in “stabilized” assets • No more than 50% of GAV in one property type • LTV of fund not to exceed 40% over any six quarter rolling period ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 3 ipd.com Concentrations by Market 8.3% 2.1% 6.5% Atlanta 7.1% 10.2% Boston Chicago 4.2% 2.9% 9.1% Dallas / Ft. Worth Denver Houston LA / OC / Riverside 4.0% NY / NNJ / LI / CT San Diego 4.4% Seattle 12.1% SF Bay Area South Florida 8.7% Washington DC Next 10 Markets 4.5% 2.9% ©2013 Investment Property Databank Ltd. All rights reserved. 13.0% Rest of Country ©2013 Investment Property Databank Ltd. All rights reserved. 4 ipd.com Concentrations by Property Sector Super/Regional Mall 0.6% 1.8% 1.9% 5.7% Community/Neighborhood 8.9% 8.4% 2.3% Power Center Other Retail 2.7% 2.0% CBD Office Suburban Office Warehouse 14.8% Flex/R&D Other Industrial 0.5% 23.9% High Rise Apartments 1.2% Low Rise Apartments 11.9% Garden Apartments Self Storage 13.4% Hotel Other ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 5 ipd.com Concentrations by Active Status Purchased Held - Stabilized 2.5% Held - Unstabilized Sold 0.9% 7.4% ©2013 Investment Property Databank Ltd. All rights reserved. 89.3% ©2013 Investment Property Databank Ltd. All rights reserved. 6 ipd.com Headline Numbers ACOE Annualized performance of index Net Fund Return 4Q 2013 1 Yr 2.95% 12.92% 3 Yr 12.57% 5 Yr 2.77% Gross Fund Return 4Q 2013 1 Yr 3.18% 13.94% 3 Yr 13.64% 5 Yr 3.74% Direct Real Estate Return 4Q 2013 1 Yr 2.71% 11.58% 3 Yr 11.95% 5 Yr 5.24% ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 7 ipd.com Distribution of Fund and Direct Real Estate Performance Gross fund returns vs. direct real estate return 20% 20% 16% 16% 12% 8% 4% 4% ©2013 Investment Property Databank Ltd. All rights reserved. 5-Year 3-Year 1-Year 4Q 2013 5-Year 3-Year 5th % 0% 1-Year 25th % 0% 4Q 2013 75th % 12% 8% Fund Median Benchmark 95th % Direct Real Estate Return Total Return Total Return Gross Fund Return ©2013 Investment Property Databank Ltd. All rights reserved. 8 ipd.com High Level Look Through at the Top Performers Core diversified open-end funds • Nine (9) funds have out-performed the ACOE in the last five years, returning +3.74% • Average leverage position is 24.83% • Average cash position is 5.08% • Average standard deviation is 5.89% • Average annualized return is 4.88% ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 9 ipd.com Distribution of Gross Fund and Direct Real Estate Performance Five year annualized gross fund returns vs. direct real estate return: leaders and laggards Gross Fund Return Fund Median Benchmark Direct Real Estate Return 9% 9% 7% 7% 5% 5% 3% 3% 1% 1% 95th % 75th % 25th % -1% Leaders Laggards 5th % ©2013 Investment Property Databank Ltd. All rights reserved. -1% Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 10 ipd.com Distribution of Standard Deviations Five year annualized standard deviation gross fund vs. direct real estate Gross Fund Std. Deviation Direct RE Std. Deviation 8% 8% 6% 6% 4% 4% 2% 2% Fund Median Benchmark 95th % 75th % 25th % 0% 0% Leaders Laggards Leaders Laggards 5th % ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 11 ipd.com Relative Structural Impact Distributions Relative structural impact distributions universe, leaders, and laggards Relative Portfolio Structure 200 100 0 -100 -200 -300 All ©2013 Investment Property Databank Ltd. All rights reserved. Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 12 ipd.com Long-term leverage and cash ratio trends Calendar year average leverage and cash position: universe Average Leverage Position 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2012 2013 Average Cash Position 12% 10% 8% 6% 4% 2% 0% 2009 2010 ©2013 Investment Property Databank Ltd. All rights reserved. 2011 ©2013 Investment Property Databank Ltd. All rights reserved. 13 ipd.com Distribution of Leverage and Cash balances Five year average leverage and cash balances: leaders and laggards Average Leverage Average Cash 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Fund Median Benchmark 95th % 75th % Leaders Laggards Leaders Laggards 25th % 5th % ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 14 ipd.com Property Score Distributions Property score distributions for allocation and selection: universe, leaders, and laggards Property Allocation Score Property Selection Score 200 100 0 -100 -200 -300 All Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. All Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 15 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards CBD Suburban Warehouse High Rise Garden 35% 30% 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 16 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards Comm./Neigh Malls Power Center Hotel Low Rise 35% 30% 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Leaders ©2013 Investment Property Databank Ltd. All rights reserved. Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 17 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards Flex/R&D Other Retail Self-Storage Other Other Industrial 35% 30% 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 18 ipd.com Market Score Distributions Market score distributions for allocation and selection: universe, leaders, and laggards Market Allocation Score Market Selection Score 400 300 200 100 0 -100 -200 -300 -400 All Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. All Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 19 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards LA/OC Next 10 NY/NNJ/LI Rest of Country D.C. 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 20 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards San Fran. Chicago Boston So. FL Dallas/Ft.W 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 21 ipd.com Distributions by Property Subtype of Average Capital Employed Property Subtype average capital employed over the last five years: leaders and laggards Seattle Houston San Diego Denver Atlanta 25% 20% 15% 10% 5% 0% Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 22 ipd.com Active Status Segmentation Market Score Distributions Distributions of contribution to return by active status segmentation: leaders and laggards Purchased Held-Stabilized Held-Not Stabilized Sold 200 100 0 -100 -200 Leaders Laggards Leaders Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 23 ipd.com Buying, Holding, Selling? Active status average capital employed over the last five years: leaders and laggards Purchased Held-Stabilized Leaders Leaders Sold Held-Not Stabilized 80% 70% 60% 50% 40% 30% 20% 10% 0% Laggards ©2013 Investment Property Databank Ltd. All rights reserved. Laggards Leaders Laggards Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 24 ipd.com Distribution of Gross Fund and Direct Real Estate Performance Five year annualized gross fund returns vs. direct real estate return: leaders and laggards Gross Fund Return Fund Median Benchmark Direct Real Estate Return 9% 9% 7% 7% 5% 5% 3% 3% 1% 1% 95th % 75th % 25th % -1% Leaders Laggards 5th % ©2013 Investment Property Databank Ltd. All rights reserved. -1% Leaders Laggards ©2013 Investment Property Databank Ltd. All rights reserved. 25 ipd.com Thank you! Elizabeth Francis, CAIA, CIMA® Vice President 311 S Wacker Drive, Suite 1600 Chicago, IL 60606 Tel. +1 312.461.4381 Email: [email protected] www.ipd.com/us ‹#› ©2013 Investment Property Databank Ltd. All rights reserved. ‹#› ©2013 Investment Property Databank Ltd. All rights reserved. ©2013 Investment Property Databank Ltd. All rights reserved. 26 ipd.com
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