Transcript US Commercial Real Estate Markets

What is NCREIF?
National Council of
Real Estate Investment Fiduciaries
NCREIF Mission

NCREIF is a not-for-profit trade association that serves its membership
and the academic and investment community’s need for improved
commercial real estate data, performance measurement, investment
analysis, information standards, education, and peer group interaction
by:






Collecting, processing and reporting data in a secure environment;
Producing performance measurement indices;
Encouraging academic and member use of NCREIF data for
objective research;
Providing forums with strong educational content to address
industry issues;
Publishing informed industry related articles and reports; and
Contributing to the development of Real Estate Information
Standards.
What NCREIF Does Not Do

Promote


Opine


Real Estate Investment
Real Estate Investment Values
Render

Real Estate Investment Advice
NCREIF Membership
Institutional Real Estate Investment Managers
 Major Pension Funds
 Service Providers (e.g., Appraisers, Accountants,
Consultants/Analysts, etc.)
 Academics – Professors of Real Estate at major
universities.

NCREIF Structure
REIS Structure
NCREIF
Board
PREA
Board
Budget Only
Information
Management
Accounting
Valuation
Plan
Sponsor
Portfolio
Management
Board &
Staff
REIS Board
Performance
Measurement
Farmland
REIS Council
Timber
Industry
Committees
Research
Data Products
Council
NCREIF’s Professional Staff
Executive Director – Roy Rendino
Chief Operating Officer – Stacy Gaskins
Chief Information Officer – Daniel Dierking
NCREIF Founder and Senior Advisor – Blake Eagle
Support Staff –
Tamara Pendley – Member Services
Jeanine Olson – Database Manager
James Lenon – SQL Programmer
Julie Grand – Web Programmer
NCREIF Committees
Accounting
 Data Products Council
 Farmland
 Information Management
 Performance Measurement
 Plan Sponsor
 Portfolio Management
 Research
 Timberland
 Valuation




Committees meet during each
NCREIF conference and work
between meetings.
Produce industry guidance
papers, workbooks and seminars.
Provide valuable guidance and
work products to the Real Estate
Information Standards (REIS).
NCREIF Data Products

NCREIF Property Index (NPI)



Fund Indices





Several Report and Spreadsheet products.
Derivatives being traded based on the NPI returns.
Open End Diversified Core Equity (NFI-ODCE)
NCREIF Townsend Fund Indices
NCREIF Farmland Index
NCREIF Timberland Index
Custom Data Products



Property Database Query Tool
Operating Database Query Tool
Special Data Runs Specified by Members
NCREIF Overview
Current Quarter Index Composition
NPI
NFI-ODCE
Farmland
Timberland
70
16
4
11
6,066
16
451
378
$235 Billion
$51 Billion
$2 Billion
$23 Billion
Inception Data
1978 Q4
1978 Q4
1990 Q4
1987 Q1
Sold Properties
58
N/A
0
4
Unlevered
<40%
Unlevered
Unlevered
Quarter Total
Return
3.31%
4.32%
0.67%
.99%
One Year Total
Return
-1.38%
-6.00%
-5.61%
-3.58%
Contributors
Properties/Funds
Market Value
Leverage
NCREIF Property Index (NPI)
Return Composition
4%
2%
0%
-2%
-4%
-6%
-8%
Income
Capital
Total
2009 Q2
2009 Q3
2009 Q4
2010 Q1
2010 Q2
30%
20%
10%
Income
Capital
Total
0%
-10%
-20%
-30%
2006 Q2
2007 Q2
2008 Q2
2009 Q2
2010 Q2
NCREIF Indices Composition
2010 Second Quarter Market Value
NFI-ODCE
20%
2%
36%
19%
20%
3%
Retail
Other
Apartment
Hotel
Industrial
Office
19%
38%
10%
33%
West
East
Mid-West
South
NPI
35% 24%
24%
15%
2%
Retail
Apartment
Hotel
Industrial
Office
22% 33%
34%
11%
West
East
Mid-West
South
0%
2010 Q1
2009 Q1
2008 Q1
2007 Q1
2006 Q1
2005 Q1
2004 Q1
2003 Q1
2002 Q1
2001 Q1
2000 Q1
1999 Q1
1998 Q1
Transaction Cap Rates
1997 Q1
1996 Q1
1995 Q1
1994 Q1
1993 Q1
1992 Q1
12%
1991 Q1
1990 Q1
1989 Q1
1988 Q1
1987 Q1
1986 Q1
1985 Q1
1984 Q1
1983 Q1
NCREIF Property Index (NPI)
Transaction Cap Rate vs. Implied Appraisal Cap Rate
Appraisal Cap Rates
10%
8%
6%
4%
2%
NCREIF Conferences





Three full membership conferences per year.
All Standing Committees meet for several hours during each
conference.
Interest Group and General Sessions – local markets
presentations, forecaster panels, etc.
Interactive working sessions, attendees are expected to
actively participate in discussions and
committee/subcommittee work.
Peer interaction and exchanging of ideas and information.
NCREIF Education Programs

Performance Returns Calculations Seminar



Hands-on computer seminar that walks students through the
NCREIF Performance Returns Calculations Workbook
NCREIF Database Query Tool and Data Uses Seminars
Nuts and Bolts of Institutional Real Estate

3 day seminar consisting of classes in key disciplines
represented at NCREIF (Accounting, Index/Data, Performance
Measurement, Portfolio Management, Research and Valuation)
Current NCREIF Initiatives





Development of a new website with enhanced
interactive features for members.
Increased education programs offered regionally
throughout the United States.
Additional fund-level indices.
Enhanced data products.
Ambassador’s Club
Future Initiatives
 Enhanced Data Query Tools
 Additional Fund Data Reports
 New and Expanded Educational
Programs
NCREIF APPRAISAL NEEDS
 Pension


Comingled Accounts
Separate Accounts
 Uses



Funds-The Client
for Appraisal Services
Reporting to Investors (Appraisals)
Acquisition Due Diligence (Appraisals)
Appraisal Consulting (Reviews, Appraisal
System Management, etc.)
VALUATION TRENDS AFFECTING THE
PENSION FUND INDUSTRY

Global Information Performance Standards
(GIPS)
 Increasing Transparency of Real Estate
Industry
 Appraisal Frequency reduced from once
every 3 year to annually
 FASB-Accountants Moving toward Fair Value
 FAS 157
 FAS 159
EDUCATIONAL CHALLENGES FOR
APPRAISERS

It’s Not Just Leased Fee Valuations




Partnership Valuations
Debt Valuation
Business Valuations
Partial Interests
 SUCCESS
WILL COME TO THOSE WHO
ARE PREPARED