The quarterly NFI-ODCE total return gross of fees edged higher in the first quarter 2018, to 2.20 percent, from 2.07 percent in the fourth quarter 2017, and was well above the 1.77 percent return in the first quarter 2017, according to the National Council of Real Estate Investment Fiduciaries’ first quarter 2018 results.
The NFI-ODCE consists of 24 funds, totaling $229.8 billion of gross real estate assets and $190.3 billion of net real estate assets.
The income return for the quarter was 1.04 percent, the lowest since inception, down slightly by 0.02 percent from the previous quarter. Appreciation jumped to 1.16 percent for the quarter, the highest since the fourth quarter of 2015, and up 0.15 percent and 0.45 percent from the previous quarter and first quarter 2017, respectively.
For the trailing four quarters, the NFI-ODCE total return gross of fees was 8.07 percent, down from 8.34 percent for the year ended first quarter 2017 and below the annualized since inception return of 8.72 percent. The annual total return was comprised of a 4.32 percent income return and 3.62 percent appreciation.
NFI-ODCE returns measure fund-level performance and therefore can reflect other investments beyond properties, including cash balances and leverage. Leverage is conservative among these funds given their core strategies, ranging from 15 percent to 34 percent over the quarterly series history beginning in 2000. NFI-ODCE leverage remains below the 21.8 percent average since 2000 and had a slight decrease in the first quarter 2018, to 21.1 percent, from 21.4 percent last quarter.
Quarterly NFI-ODCE investor net cash flows were positive $74 million, a significant turnaround from last quarter’s negative $1.1 billion and first quarter 2017’s negative $700 million. For the trailing year, contributions were $16.0 billion and distributions/redemptions were $16.3 billion for an annual negative net cash flow of $300 million.
