I promise there will be no Greek symbols in this article. In fact, there is virtually no mathematics at all. Rather, this column is going to try to deconstruct just what real estate professionals mean when they talk about risk-adjusted returns and provide some commentary on the various uses.
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NCREIF is renowned for its historical real estate performance data. The Altus Group has developed a strong reputation for its forward-looking valuation data. Together, the organizations believe they have created the best package of attribution analysis products in the real estate business.
Ever since humans invented seafaring vessels, they have set sail for distant shores in search of untold riches — risking life and limb to claim the booty. Many considered this game of high-seas jeopardy well worth taking because the treasures could be so lavish.
With real estate–rich defined benefit plans shrinking and real estate–poor defined contribution plans expanding rapidly, the real estate investment industry is feeling a sense of urgency to make deeper DC plan inroads. It might have just got some valuable help.
The battle over whether private real estate or publicly traded REITs are a better investment carries on. But the REIT side of the debate just got some additional bragging rights from a newly released 14-year study of asset classes based on actual return and fee data provided by more than 300 U.S. defined benefit plans with $2.8 trillion of assets under management.
After a blazing second quarter with U.S. commercial property sales growth of 27.5 percent year-over-year, third quarter sales settled into a brisk 12.3 percent gain over third quarter 2013.
When discussing real estate due diligence, people in the industry typically think of property condition assessments, environmental site assessments, title insurance and appraisals. Often absent from the discussion are zoning compliance reviews. This can be a critical oversight, as nonconformance or noncompliance with zoning ordinances or other municipal codes can result in higher costs, delayed closings and impairment of an asset’s value.
Already holders of €18 billion ($22.3 billion) in European real estate, AEW Europe is looking to add to its cache to the tune of $5 billion during the next three years, and expects to spend $4 billion of that by the end of 2015.
One of the hottest topics in commercial real estate, especially for open-end funds, is performance attribution. Investopedia defines it as “a performance-evaluation tool used to analyze the abilities of portfolio or fund managers. Attribution analysis uncovers the impact of the manager’s investment decisions with regard to overall investment policy, asset allocation, security selection and activity. A fund or portfolio’s returns are compared to a benchmark in order to determine whether a manager is actually skilled or just lucky.”
At 63 years of age, I’m still spending a good deal of my time on airplanes. Right now, rather late on a Thursday evening, I’m sitting in a plane at 30,000 feet somewhere over the heartland of America on my way back to San Francisco, after a week of meetings and conferencing in New York City and Montreal.
U.S. farmland has been growing profits for investors by the bushel. Until the most recent quarter, that is. The NCREIF Farmland Index reports third quarter 2014 produced the lowest quarterly return since third quarter 2010. The total return for the quarter was 1.45 percent, comprised of 0.48 percent appreciation and 0.97 percent income return. This was below total returns of 2.94 percent for third quarter 2013 and 1.73 percent for second quarter 2014.
It is an annual ritual. As the year winds down, there is always an avalanche of forecasting as we try to figure out what the year ahead will bring. Tea leaves are read, and experts are consulted. Of the dominant trends in 2014, which will continue into next year?
Fundraisers had a hotter hand during third quarter than the second quarter — but not as hot as the first quarter. Such is the ups and downs of fundraising in 2014.
The common goal for hotel operators and those who provide asset management on behalf of owners and investors is generally to maximize income with the minimal capital necessary to maintain the quality and value of the hotel. Typically this entails effectively marketing the property, driving revenue per available room and investing wisely. This is a sound strategy for a long-term owner such as a public REIT, which typically holds an asset for a minimum of seven to 10 years.