Real Estate Performance Report - Breakpoint...

THE NATIONAL COUNCIL OFREAL ESTATE INVESTMENTFIDUCIARIES

FIRSTQUARTER2019

Real EstatePerformance Report

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Property IndexReal Estate Performance Report

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N E W S A N D A N N O U N C E M E N T S . . .

n NCREIF SUMMER CONFERENCE 2019 – NCREIF will host its Annual Summer Conference 2019 June 18-21 in Washington, DC at The Conrad Hotel. Program details and registration information is available on the NCREIF website at www.NCREIF.org under the Conference tab.

n BE SURE TO TAKE A LOOK AT THE NCREIF FUND INDEX – DAILY PRICED (NFI-DP)! The NFI-DP is an open-end fund-level index comprising a small universe of funds that are priced daily, offer investors some degree of daily liquidity and invest predominantly in private real estate. Most, but not all, of the underlying funds also maintain a liquidity sleeve of predominately publicly listed REITs and cash to help facilitate the funds’ trading needs. The NFI-DP is an equal-weighted, net of advisory fees, time weighted return Index of daily total returns. It is published monthly with an inception date of October 2009.

n The NCREIF Indices reports and spreadsheets can be accessed, and the data can be queried, via our web site at www.NCREIF.org in the Member Log In area. Please contact the NCREIF office if you do not have a username and password.

n PLEASE NOTE: The NCREIF Property Index is a completely unleveraged Index. Leveraged properties are included in the Index, but are reported on an unleveraged basis.

n NOTE: The opinions expressed in the articles of this publication are solely those of the authors, and not necessarily those of NCREIF, its staff, its leadership, or its members.

N C R E I F P R O P E R T Y I N D E X

Quarterly Highlight 2

Total Returns 5

Property Subtype Definitions 7

Apartment 8

Industrial 10

Office 12

Retail 14

NFI-ODCE 16

MSA’s 18

S T A T I S T I C A L A P P E N D I X

Index Formulas 20

Regions & Divisions 21

Distribution of Properties 22

Annualized Returns 23

Rolling One-Year Returns 24

Mountain Chart 26

Property Sales 27

N C R E I F T I M B E R L A N D I N D E X 28

N C R E I F F A R M L A N D I N D E X 29

D A T A C O N T R I B U T O R S 6

I N T H I S I S S U E :

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A Tale of Two Indices

The flagship NCREIF Property Index (NPI) showed considerable strength in the first quarter with a 1.80% total return, up 43 basis points (bps) from the 1.37% total return last quarter. Conversely, the Open-end Diversified Core Equity (NFI-ODCE) index showed weakness, with a 1.42% total return, down 33 bps from 1.76% last quarter. While the NPI measures property level returns, and the NFI-ODCE measures fund level returns, it is unusual to have such divergence in these two indexes.

The two can be compared on a more ‘apples-to-apples’ basis by looking at the properties in ODCE funds that qualify for NPI. Here we see the same pattern, with ODCE properties down 31 bps to 1.31%, from 1.62% in Q4 2018.

Chart 1: NPI vs. ODCE, Unleveraged Property Total Returns

Both indices managed to continue the trend of positive capital appreciation returns (change in value, net of capex expenditures). The NPI had a capital return of 0.69% whereas the ODCE properties had a capital return of 0.24%. Thus, based on either index, on average, market values continued to increase during the quarter.

Retail Makes the Difference…….

Looking more closely, we see that the difference in performance of the NPI vs ODCE is due to retail properties. Returns for retail properties in the NPI rebounded during the quarter from a negative 0.43% last quarter to a positive 1.74%. Conversely, for ODCE retail properties, total return fell from a positive 0.85% last quarter to a negative 0.06%. As can be seen in Chart 2, returns in the other major property types for ODCE were similar to the NPI overall.

MIXED SIGNALS ON DIRECTION OF RETURNSB y J e ff r e y D. F i s h e r, P h . D.

Chart 2: Property Returns by Property Type for NPI vs ODCE: 2019-1

….and Drives the NPI Direction Reversal

The NPI had trending downward for the past couple of quarters, until the most recent period. This upswing in 2019 Q1 is entirely due to the improvement in retail returns, as the other four sectors all experienced flat to diminishing returns. For retail, several managers reported writeups in their retail properties this quarter. The strength was primarily in regional and super regional malls held in real estate separate accounts. One explanation for the writeups was greater optimism in external appraisals this quarter versus internal appraisals the previous quarter. While some retail properties have been hurt by store closings, other retail properties, especially well-located super regional malls in the higher value range appear to be doing quite well.

Chart 3: Returns by Property Type for 2019-1 vs. 2018-4

Industrial Properties Still Lead the Pack

Industrial properties, which are primarily warehouse, continue on average to be the strongest performers with a return of 3.02% for the quarter. While still strong, it is a decline from the prior quarter return of 3.40%. Retail

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follows this quarter, knocking office from its number two rank. As noted earlier, retail total return averaged 1.74%, a strong showing after last quarter’s -0.43%. Office follows with a return of 1.63% that was only 2 bps off of its 1.65% return last quarter. Apartment returns were unchanged at 1.35% while hotel returns dropped from 1.21% to 0.44%.

Cap Rates at Historic Lows While Occupancy Remains High

For the past two years, property cap rates have, on average, fluctuated up and down from quarter to quarter, with each uptick prompting suspicions of a new trend, and each subsequent downtick providing a new low. The pattern continues this quarter, with a 2018 Q4 uptick followed by a 2019 Q1 decline to the historic low of 4.69%. This also contributed to the rebound in the NPI for the quarter. Though quarter-to-quarter cap rates have shown directional volatility, a four-quarter moving average, shown in Chart 3, clearly indicates the continued downward momentum environment thus far since mid-2010.

Chart 4: Cap Rates, equal weighted, four-quarter rolling average

Occupancy was down just slightly to 93.8% from 94.0% last quarter; this continues to be at very high historic levels.

MIXED SIGNALS ON DIRECTION OF RETURNSB y J e ff r e y D. F i s h e r, P h . D.

Chart 4: Occupancy, by Property Type

Conclusion

The future course of the NPI appears to be dependent on industrial properties continuing to outperform and retail properties not reversing course again. Our investigation this quarter has shown that there are clearly differences of opinion as to the direction of retail properties. Occupancy continuing at near record highs coupled with cap rates continuing near all time lows will also be important to keeping returns steady for the rest of 2019.

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Returns Strong. First-quarter investment return data for the NCREIF-reported seniors housing properties equaled 1.17%, composed of a 1.36% income return a negative 0.19% capital return. It was the first negative capital return since the second quarter of 2012 and compared poorly to the 0.30% increase in apartments and 0.69% increase in the total NPI.

The annual total return through the first quarter of 2019 was 8.50%, exceeding the NCREIF Property Index (NPI) result of 6.83% and the apartment return of 5.90%. However, at 14.04%, industrial total returns outpaced seniors housing. Industrial continues to benefit from e-commerce which has increased demand for last-mile warehouse space. Despite the relatively strong showing for seniors housing, the total annual return has been trending down since mid-2014 when it peaked at 20.37%. This pattern can also be seen in the broader index and reflects where we are in the cycle.

These performance measurements reflect the returns of 122 seniors housing properties, valued at $6.0 billion in the first quarter. This is the first quarter that the market value of the NCREIF universe of seniors housing exceeded $6.0 billion.

Occupancy Rates Edge Higher but Remain Low. The seniors housing occupancy rate increased to 88.1% in the first quarter, up 20 basis points from the seven-year low of 87.9% in the second and third quarters of last year. This placed occupancy 1.2 percentage points above its cyclical low of 86.9% reached during the first quarter of 2010 and 2.1 percentage points below its most recent high of 90.2% in the fourth quarter of 2014. Meanwhile, asking rent growth increased at a slower pace than average hourly earnings for assisted living workers. As a result, some operators are having challenges growing NOI. For many operators, labor expenses amount to 60% of their expenses.

SENIORS HOUSING ANNUAL TOTAL RETURNS EQUAL 8.50% IN Q1 2019 B y B e t h B u r n h a m M a c e , C h i e f E c o n o m i s t , N a t i o n a l I n v e s t m e n t C e n t e r f o r S e n i o r s H o u s i n g & C a r e ( N I C )

TOTAL RETURNS

Total NPI

Total Apartment

Total Stabilized Senior Housing

1stQtr2019 1.80 1.35 1.174thQtr2018 1.37 1.35 2.63OneYear 6.83 5.90 8.50ThreeYears 7.07 6.34 11.10FiveYears 9.13 8.16 13.10TenYears 8.51 8.64 11.73

INCOME RETURNS

Total NPI

Total Apartment


1stQtr2019 1.11 1.05 1.364thQtr2018 1.11 1.05 1.40OneYear 4.55 4.27 5.53ThreeYears 4.65 4.40 5.67FiveYears 4.83 4.56 5.85TenYears 5.46 5.01 6.49

APPRECIATION RETURNS

Total NPI

Total Apartment


1stQtr2019 0.69 0.30 -0.194thQtr2018 0.26 0.30 1.22OneYear 2.20 1.58 2.83ThreeYears 2.34 1.88 5.21FiveYears 4.14 3.48 6.95TenYears 2.93 3.51 5.00

Source:NCREIF,NICResearch&Analytics

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SENIORS HOUSING ANNUAL TOTAL RETURNS EQUAL 8.50% IN Q1 2019 B y B e t h B u r n h a m M a c e , C h i e f E c o n o m i s t , N a t i o n a l I n v e s t m e n t C e n t e r f o r S e n i o r s H o u s i n g & C a r e ( N I C )

N P I – T O T A L R E T U R N S

N P I – T O T A L R E T U R N S S U M M A R Y PropertyCount MarketValue Total Income Appreciation

1stQ2019 7,913 630,016,911,934 1.80 1.11 0.694thQ2018 7,883 611,655,051,001 1.37 1.11 0.263rdQ2018 7,786 591,905,495,731 1.67 1.11 0.562ndQ2018 7,672 580,758,500,978 1.81 1.14 0.671Year 6.83 4.55 2.203Year 7.07 4.65 2.345Year 9.13 4.83 4.1410Year 8.51 5.46 2.9315Year 8.81 5.68 3.0120Year 8.93 6.34 2.47Inception 9.16 7.18 1.88

N P I – T O T A L R E T U R N S B Y P R O P E R T Y - T Y P E S U M M A R Y Apartment Hotel Industrial Office Retail

1stQ2019 1.35 0.44 3.02 1.63 1.744thQ2018 1.35 1.21 3.40 1.65 -0.433rdQ2018 1.55 3.22 3.36 1.69 0.562ndQ2018 1.54 1.95 3.58 1.54 1.321Year 5.90 6.98 14.04 6.66 3.213Year 6.34 5.48 13.25 6.33 5.175Year 8.16 8.17 13.65 8.45 8.4110Year 8.64 6.31 10.43 7.50 8.9015Year 8.27 7.30 9.97 8.30 9.6220Year 8.79 6.95 9.96 8.22 9.99Inception 8.76 8.12 9.89 8.40 9.52

N P I – T O T A L R E T U R N S B Y R E G I O N S U M M A R Y East Midwest South West

1stQ2019 1.43 1.01 1.93 2.224thQ2018 1.11 0.42 1.11 1.933rdQ2018 1.25 0.93 1.70 2.182ndQ2018 1.30 1.65 1.91 2.221Year 5.19 4.06 6.82 8.833Year 5.40 5.26 6.91 9.035Year 7.25 7.72 9.27 11.0810Year 7.46 7.46 8.73 9.6015Year 8.14 7.42 8.84 9.8720Year 8.76 7.41 8.52 9.95Inception 9.91 7.98 8.31 9.79

M A R K E T I N D E X C O M P A R I S O N S 1stQ2019 Changefrom Returns% 4thQ2018 1yr. 3yr. 5yr. 10yr. 15yr. 20yr. Inception

NPI 1.80 0.43 6.83 7.07 9.13 8.51 8.81 8.93 9.16S&P500Index 13.65 27.17 9.50 13.51 10.91 15.92 8.57 6.04 11.65T-Bills(90day) 0.61 0.06 2.07 1.15 0.98 0.54 1.37 1.85 4.64NAREITEquityREITIndex 17.17 23.24 20.02 7.71 9.92 18.76 8.81 11.07 12.42ConsumerPriceIndex 1.18 1.66 1.86 2.20 1.47 1.79 2.05 2.18 3.47

*BarclaysCapitalU.S.GovernmentBondIndex(formallyknownasLehmanBrothersU.S.GovernmentBondIndex)**BarclaysCapitalU.S.Government/CreditBondIndex(formallyknownasLehmanBrothersU.S.Government/CreditBondIndex)FormoreinformationreferencethedocumenttitledTHEBENCHMARKINFIXEDINCOME:BARCLAYSCAPITALINDICESREBRANDINGTHEUNIFIEDBARCLAYSCAPITALINDICESlocatedathttps://ecommerce.barcap.com/indices/index.dxml

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I N D E X D A T A C O N T R I B U T O R S

N P I I N D E X D A T A C O N T R I B U T O R S AEWCapitalManagement,L.P.AlaskaElectricalPensionFundAlaskaPermanentFundCorp.AlaskaRetirementManagementBoardAmCapInc.AmericanRealtyAdvisorsAmstarAdvisers,LLCAPGU.S.Investments,Inc.ASBCapitalManagementAscentrisBailard,Inc.BaringsRealEstateAdvisersBeaconCapitalPartnersBentallKennedy(U.S.)LPBerkshireGroupLLCBlackCreekGroupBlackRockRealtyBostonUniversityEndowmentBroadshoreCapitalPartnersBuchananStreetPartners,LPCalPERSCalSTRSCapriCapitalAdvisorsLLCCBREGlobalInvestorsCenturyLinkInvestmentManagementCignaRealtyInvestorsClarionPartnersCommonWealthPartners,LLCConsolidatedEdisonCortlandCSCapitalManagement,Inc.DakotaPacificRealEstateDeseretMutualBenefitAdministratorsDignityHealthDivcoWestRealEstateServicesDraperandKramerDWSEdensEverwestRealEstateCompanyFairfieldResidentialCompanyLLCFirstWashingtonRealty,Inc.FloridaStateBoardofAdministrationTheGeneralInvestmentandDevelopmentCompaniesGIPartnersGoldman,Sachs&Co.GreystarInvestmentGroupGrosvenorInvestmentManagementUSInc.HancockUSRealEstateGropuHartRealtyAdvisers,Inc.HeitmanCapitalManagementHinesIDSRealEstateGroupIntercontinentalRealEstateCorporationInvescoRealEstateIowaPublicEmployees’RetirementSystemJ.P.MorganAssetManagementJamestownLPTheJohnBuckCompanyKansasPublicEmployeesRetirementSystemKaustInvestmentManagementKBSRealtyAdvisorsL&BRealtyAdvisors,LLPLACERALaSalleInvestmentManagement,Inc.LincolnAdvisoryGroupTheLionstoneGroupMargaretA.CargillFoundationMassachusettsPRIMMetLifeMillerCapitalAdvisory,Inc.MissouriStateEmployees’RetirementSystemMorganStanleyNationalElectricalBenefitFundNationalRailroadRetirementInvestmentFund

NewYorkCommonRetirementFundNewYorkLifeInvestmentManagementNewYorkPresbyterianHospitalNewYorkState&LocalRetirementFundNewYorkStateTeachers’RetirementSystemNewportCapitalPartnersNokiaNuveenRealEstateOhioBureauofWorkersCompensationOPTrustOregonInvestmentCouncilPacificCoastCapitalPartnersPacificUrbanResidentialPGGMInvestmentsPNCRealtyInvestorsPrincipalGlobalInvestorsProLogisPrivateCapital,LLCPromarkPropertyReserve,Inc.PrudentialRealEstateInvestorsPublicEmployeesRetirementAssociationofColoradoPublicEmployeesRetirementSystemofOhioRegencyCentersAdvisors,LLCRegentsoftheUniversityofMichiganRockefellerFoundationSarofimRealtyAdvisorsSchoolEmployeesRetirementSystemofOhioSentinelRealEstateCorporationShellAssetManagementStateofMichiganRetirementSystemStateofWisconsinInvestmentBoardStateTeachersRetirementSystemofOhioStockbridgeTAAssociatesRealtyTeacherRetirementSystemofTexasTeachers’RetirementSystemofIllinoisTennesseeConsolidatedRetirementSystemTexasEducationAgencyTGMAssociatesTIAAUAWRetireeMedicalBenefitsTrustUBSRealtyInvestorsLLCUMWAHealthandRetirementFundsUniversityofCalifornia-OfficeoftheTreasurerUSDepartmentofStateUSAARealEstateUtahRetirementSystemsUVAInvestmentManagementCompanyVanbartonGroupLLCVirginiaRetirementSystemWafra,Inc.WashingtonCapitalManagement,Inc.WatertonAssociates

F A R M L A N D I N D E X D A T A C O N T R I B U T O R SGladstoneLandCorp.HancockAgriculturalInvestmentGroupPrudentialAgriculturalInvestmentsUBSFarmlandInvestorsLLCUSAgriculture,LLCWestchesterGroupInvestmentManagement,Inc.

T I M B E R L A N D I N D E X D A T A C O N T R I B U T O R SBrookfieldTimberlandsManagement,LPBrookfieldTimberlandsManagement,LPBTGPactualCampbellGlobalLLCConservationForestryPartnersForestInvestmentAssociatesGlobalForestPartnersLPHancockTimberResourceGroupLymeTimberCompanyTheMolpusWoodlandsGroupOlympicResourceManagementResourceManagementService,LLCTimberlandInvestmentResources,LLC

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N C R E I F P R O P E R T Y S U B - T Y P E D E F I N I T I O N S

A P A R T M E N T

n High-rise Elevator Projects: Buildings which are four stories or more in height.n Low-rise Projects: Walk-up buildings and elevator buildings three stories or less.n Garden-type Projects: Low-rise apartments situated on a sizable landscaped plot, under one management.

I N D U S T R I A L

n Flex Space: Single story buildings 10-18 foot ceilings with both floor height and dock height loading. Includes wide variation

in office space utilization, ranging from retail and personal service through distribution, light industrial and occasional heavy industrial use.

n R&D (Research and Development): One and two story, 10-15 foot ceiling heights with up to 50% office/dry lab space (remainder in wet lab,

workshop, storage and other support), with dock height and floor height loading.n Warehouse: 50,000 square feet or more with up to 15% office space, the balance being 18-30 foot ceiling height.

All loading is dock height.n Other: Includes Manufacturing and Office Showroom Manufacturing: Buildings with 10-16 foot ceilings or sufficient height for overhead cranes. Provides floor height and

dock height loading. Office Showroom: Single story (or mezzanine) with 10-16 foot ceilings with frontage treatment on one side and dock

height loading or grade level roll-up doors on the other. Less than 15% office.

O F F I C E

n CBD (Central Business District)}Zip code areas as defined by Torto Wheaton Researchn Suburban

R E T A I L

n Neighborhood Center: Provides for the sale of daily living needs of the immediate area. Typical area is 30,000 to 150,000 square feet with

at least one anchor tenant.n Community Center: In addition to convenience goods, provides for the sale of goods such as apparel or furniture. Typical area is

100,000 to 350,000 square feet with two or more anchor tenants.n Regional Center: Provides a variety of goods comparable to those of a central business district in a small city, including general

merchandise, apparel and home furnishings, as well as a variety of services and perhaps recreational facilities. Two or more full-line department stores anchor a total area of 400,000 to 800,000 square feet.

n Super-Regional Center: Provides an extensive variety of shopping goods comparable to those of the central business district of a major

metropolitan area. The anchors are three or more full-line department stores, with a total area in excess of 800,000 square feet.

n Single-Tenant: Free-standing structure with no additional anchor stores.

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ALL SIGNS SAY GO…SLOW: FLAT APARTMENT RETURNS BELIE STRONG UNDERLYING FUNDAMENTALS

If we look at the NPI first quarter return for the apartment sector relative to historical performance, the data suggests that conditions remained soft through the first three months of 2019. Apartments posted a total return of only 1.35% in 1Q2019, unchanged quarter-over-quarter yet down 15 basis points year-over-year, with an annualized total return of 5.90%. This marks the lowest return since 2009, when the total return was negative. Of the annualized 5.90%, appreciation comprised 1.58%, while income comprised 4.27%. These appreciation/income allocations are also unchanged from the prior quarter. In comparison, the overall NPI posted a quarterly total return of 1.80% (an improvement from a total return of 1.37% in 4Q2018), with an annualized total return of 6.83%. The apartment sector was bested in 1Q by the industrial, office, and retail sectors.

According to the most recent results, top performing metros in 1Q2019 were Columbus, OH (6.46% percent); Riverside, CA (3.63% percent); Phoenix, AZ (3.35% percent); Tampa, FL (2.77% percent); and Charleston, SC (2.57% percent). Laggards included the Baltimore and Dallas metro areas (0.61% and 0.47% percent, respectively), with Chicago, Ventura County, and Baton Rouge posting negative returns.

NPI apartment performance in the first quarter was undoubtedly affected by the fear of ongoing interest rate hikes and general uncertainty surrounding the U.S. economy, due in large part to talks of trade wars. However, the Federal Reserve has most recently pledged to take a “patient” approach to further rate hikes and has indicated that no increases in 2019 are likely unless the data changes significantly. But the current strength of the national economy is a double-edged sword: “full” employment amplifies the universe of potential tenants but also fuels increased construction costs and strains the qualified labor pool.

And yet, while the apartment NPI is the lowest its been in the past eight years, the multifamily sector remains attractive to investors, touted by many as a defensive investment strategy thanks to strong renter demand and waning fears of declining rent growth. Though millennials are increasingly embracing homeownership, boomers and other “by choice” renters are making up a historically larger share of the apartment tenant demographic. Scarcity of affordable single-family homes, relatively low new condominium construction, and ongoing rigid mortgage guidelines persist as tailwinds, and the decline in construction starts should bring balance to those submarkets experiencing elevated vacancy.

Lastly, as Real Capital Analytics notes, “Greater stability in the financing markets for apartments seems to have put a floor under the deal activity for this sector.” Forecasts are for increased sales activity of multifamily properties in the coming months. Case in point, Nuveen Real Estate is planning a significant expansion of its multifamily real estate business in the U.S. Recently announced in February 2019, Nuveen’s “U.S. Cities Multifamily Fund” just closed on its first investment round, which raised $550 million to invest in multifamily real estate. With that capital on hand, the fund will seek to acquire “well-located properties with high, stable occupancy levels located in top-tier cities and select growth markets across the U.S.”

Caitlin Bevis, MAIManaging PrincipalBreakpoint Advisors, LLC

5TH PERCENTILE LOWER MEDIAN UPPER 95TH PERCENTILE

153 154 161 162 163 164 171 172 173 174 181 182 183 184 191

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A P A R T M E N T I N D E X — Q U A R T I L E R A N G E O F R E T U R N S

A P A R T M E N T T O T A L R E T U R N S

Total TotalNPI Apartment East Midwest South West

1stQ2019 1.80 1.35 1.30 0.29 1.43 1.604thQ2018 1.37 1.35 1.12 0.51 1.54 1.63OneYear 6.83 5.90 4.89 2.94 6.35 7.32ThreeYears 7.07 6.34 5.13 4.19 6.17 8.15FiveYears 9.13 8.16 6.29 6.62 8.36 10.32TenYears 8.51 8.64 7.21 8.36 8.92 10.01TwentyYears 8.93 8.79 8.26 7.92 8.88 9.92

A P A R T M E N T I N C O M E R E T U R N S



A P A R T M E N T A P P R E C I A T I O N R E T U R N S


1stQ2019 0.69 0.30 0.28 -0.76 0.32 0.574thQ2018 0.26 0.30 0.10 -0.53 0.42 0.60OneYear 2.20 1.58 0.73 -1.23 1.79 2.99ThreeYears 2.34 1.88 0.87 -0.18 1.45 3.66FiveYears 4.14 3.48 1.90 1.99 3.34 5.60TenYears 2.93 3.51 2.42 3.06 3.36 4.90TwentyYears 2.47 2.99 2.66 2.06 2.75 4.18

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TOTAL APARTMENT

A P A R T M E N T S U B - T Y P E S I N D E X

Low-Rise$16,536.1 million10.21%

Garden$45,642.1 million28.18%

High-Rise$99,777.7 million61.61%

153 154 161 162 163 164 171 172 173 174 181 182 183 184 191

G A R D E N T O T A L R E T U R N S G A R D E N I N C O M E R E T U R N S G A R D E N A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Apartment Garden NPI Apartment Garden NPI Apartment Garden

1stQ2019 1.80 1.35 1.81 1stQ2019 1.11 1.05 1.18 1stQ2019 0.69 0.30 0.624thQ2018 1.37 1.35 2.12 4thQ2018 1.11 1.05 1.21 4thQ2018 0.26 0.30 0.91OneYear 6.83 5.90 8.61 OneYear 4.55 4.27 4.92 OneYear 2.20 1.58 3.56ThreeYears 7.07 6.34 8.91 ThreeYears 4.65 4.40 5.07 ThreeYears 2.34 1.88 3.71FiveYears 9.13 8.16 10.56 FiveYears 4.83 4.56 5.25 FiveYears 4.14 3.48 5.12TenYears 8.51 8.64 9.65 TenYears 5.46 5.01 5.58 TenYears 2.93 3.51 3.91TwentyYears 8.93 8.79 9.40 TwentyYears 6.34 5.67 6.05 TwentyYears 2.47 2.99 3.20

H I G H - R I S E T O T A L R E T U R N S H I G H - R I S E I N C O M E R E T U R N S H I G H - R I S E A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Apartment High-Rise NPI Apartment High-Rise NPI Apartment High-Rise


L O W - R I S E T O T A L R E T U R N S L O W - R I S E I N C O M E R E T U R N S L O W - R I S E A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Apartment Low-Rise NPI Apartment Low-Rise NPI Apartment Low-Rise

1stQ2019 1.80 1.35 1.23 1stQ2019 1.11 1.05 1.07 1stQ2019 0.69 0.30 0.164thQ2018 1.37 1.35 1.28 4thQ2018 1.11 1.05 1.06 4thQ2018 0.26 0.30 0.22OneYear 6.83 5.90 5.97 OneYear 4.55 4.27 4.32 OneYear 2.20 1.58 1.60ThreeYears 7.07 6.34 6.73 ThreeYears 4.65 4.40 4.41 ThreeYears 2.34 1.88 2.24FiveYears 9.13 8.16 8.47 FiveYears 4.83 4.56 4.59 FiveYears 4.14 3.48 3.75TenYears 8.51 8.64 9.35 TenYears 5.46 5.01 5.03 TenYears 2.93 3.51 4.16TwentyYears 8.93 8.79 TwentyYears 6.34 5.67 TwentyYears 2.47 2.99

ApartmentProperties 1,773

GardenProperties 642

HighRiseProperties 930

LowRiseProperties 201

Total Market Value $161,955.9 M

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I N D U S T R I A L I N D E X — Q U A R T I L E R A N G E O F R E T U R N S

153 154 161 162 163 164 171 172 173 174 181 182 183 184 191

E-VOLUTION: CITIES CONTINUE TO ADAPT TO INDUSTRIAL SECTOR GROWTH

As the world transforms around us, the industrial markets continue to adapt and grow to make it possible. In the first quarter of 2019, the Industrial NPI outperformed all major property types at 3.02%, down just slightly from the 3.4 NPI in the last quarter of 2018. Apartment returns remained the same, Hotels were down by more than 50%, Office was nearly the same, and Retail saw the biggest gain from -0.43 in Q418 to 1.74 in Q119. The Western region was the highest return at 3.46%, edging out the East from last quarter. All regions were down with the exception of the Midwest with a modest gain of .03%.

In 2018, the total Industrial return for the calendar year was 14.30%, nearly double the return of the next highest sector (Hotel), and nearly seven times higher than Retail returns overall. Industrial returns have been in the double digits since 2011.

This sector has been the most consistent of all the major sectors in the past five years, with only a 2% delta, while Apartments saw a spread of 5.92% between the highest return rate and the lowest, Office 6.47%, Hotel 8.49%, and Retail a staggering 13.1% difference in annual returns.

Costar reports that the industrial market is showing strong fundamentals, driven primarily by demand for infill and regional distribution centers. 2018 saw leasing volume top a billion square feet, a new annual record. The change in how consumers shop has not reduced demand, as goods consumption grew more than 5% in 2018.

The total supply delivered in 2018, 215 million square feet, was down from 2017’s 242 million square feet, but Costar is predicting a record 276 million square feet to deliver in 2019. The Inland Empire is leading this supply addition with 26 million square feet currently under construction. DFW, Atlanta and Houston are the next highest additions to supply with 22.5, 16.0, and 12.9 million square feet, respectively, but the Lehigh Valley is adding the most space as a percent of supply at 9 million square feet, almost 7% of its total supply.

Nationally, rents for industrial space continue to grow more than 5% year-over-year, with the highest rent growth taking place in the California markets and the lowest rates in the Midwest. Fueling the increases across the board is strong consumer spending, with e-commerce now capturing 12% of core retail sales and growing between 15 to 20% each year.

US Trade is showing strength in both exports and imports. Local production is on the rise to help offset recent increases in transit and labor costs world-wide. These factors are driving logistics hiring to new level. One in five job openings is now within the trade, transportation, and utilities industry. New technology will continue to disrupt the market as the forces of demand for speed and labor shortages affect the design of industrial space. In short, the robots are coming for these jobs, and it’s a good thing they are.

Michele WoodDirector of ResearchValbridge Property Advisors

I N D U S T R I A L T O T A L R E T U R N S

Total TotalNPI Industrial East Midwest South West


I N D U S T R I A L I N C O M E R E T U R N S



I N D U S T R I A L A P P R E C I A T I O N R E T U R N S



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* Other includes manufacturing and office showroom. Other categories are not included in the subtype property returns below due to the small sample size.

TOTAL INDUSTRIAL

I N D U S T R I A L S U B - T Y P E S I N D E X

Other $2,462.0 million2.34%

Warehouse$98,125.8 million93.23%

Flex $3,865.1 million3.67%

R&D $798.5 million0.76%

W A R E H O U S E T O T A L R E T U R N S W A R E H O U S E I N C O M E R E T U R N S W A R E H O U S E A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Industrial Warehouse NPI Industrial Warehouse NPI Industrial Warehouse


R & D T O T A L R E T U R N S R & D I N C O M E R E T U R N S R & D A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Industrial R&D NPI Industrial R&D NPI Industrial R&D


F L E X S P A C E T O T A L R E T U R N S F L E X S P A C E I N C O M E R E T U R N S F L E X S P A C E A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Industrial Flex NPI Industrial Flex NPI Industrial Flex


IndustrialProperties 3,412

R&DProperties 30

FlexSpaceProperties 219

OtherProperties 86

WarehouseProperties 3,077


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Total office sector returns begin 2019 by continuing the trend of positive but lower returns. Everyone likes higher returns, but it could be argued that the office sector is mirroring transitions that are occurring in the economy and behaving in a way that could be expected at this point in the real estate cycle.

Total returns of 1.63% in the first quarter resulted in a 1 year return of 6.66%. Appreciation returns were 0.53% for the quarter and 2.10% for the year, while the income component came in at 1.09% for the quarter with the 1 year return of 1.63%. Total and appreciation returns were down slightly from the final quarter of 2018. Income returns were up slightly quarter over quarter, but still trailed the 2018 annual average.

While there has been a significant amount of discussion about how this economic/real estate cycle has been different, office sector returns have behaved in a fairly traditional fashion. The office sector delivered an average return of nearly 11.5% in the recovery years of 2010 – 2015 as confidence in the economy and the sector rebounded from the Global Financial Crisis. The drop in the average total office return to 6.4% for the last three years could be attributed to a natural transition into the next phase of the real estate cycle, but is it more than just the expected slowdown in demand and increase in supply that is slowing income and appreciation return growth?

In a typical cycle, if there is such a thing, we would begin to see demand slow at this point, and the new supply would begin to outpace demand pushing up rents and creating headwinds for rent growth. From 2010 – 2015, when the office sector experienced double digit returns, demand averaged around 3.9 million square feet a year. Demand during the recent period of slowing returns, however, have been higher, averaging an annual 4.7 million square feet. New supply, which certainly has a built-in lag period, is increasing. From 2010 – 2015, new supply averaged 2.1 million square feet of new supply. Well below the pace of demand. While over the last three years, new supply has matched the pace of demand at an average of 4.7 million square feet. The dynamic between demand and supply has resulted in rising occupancy rates and real rent growth. Looking at this evidence, fundamentals aren’t the whole story behind recent slower returns.

Office investors will have a lot to ponder over the investment horizon. As we begin 2019, there are a number of significant issues beyond fundamentals to consider. How will the sector respond to the consensus forecasts for slower economic and employment growth? What will the ultimate impact be from the rise of co-working locations? Not to mention what will monetary policy do in the coming years. Against a background of past stability, investors will need to be diligent in their analysis of the future.

Andy Warren, CFA, CREDirector, Real Estate ResearchPricewaterhouseCoopers, LLP


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O F F I C E T O T A L R E T U R N S

Total TotalNPI Office East Midwest South West


O F F I C E I N C O M E R E T U R N S



O F F I C E A P P R E C I A T I O N R E T U R N S


1stQ2019 0.69 0.53 0.17 0.23 0.79 0.924thQ2018 0.26 0.58 0.25 -0.10 -0.09 1.29OneYear 2.20 2.10 0.55 0.59 2.34 4.12ThreeYears 2.34 1.73 0.70 -0.08 1.01 3.51FiveYears 4.14 3.63 2.42 1.83 2.79 5.72TenYears 2.93 2.05 1.87 -0.69 1.14 3.15TwentyYears 2.47 1.79 2.34 -1.00 0.38 2.67

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TOTAL OFFICE

O F F I C E S U B - T Y P E S I N D E X

CBD$131,167.7 million59.91% Suburban

$87,771.8 million40.09%

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Total Total Total Total Total Total Total Total Total NPI Office CBD NPI Office CBD NPI Office CBD


S U B U R B A N T O T A L R E T U R N S S U B U R B A N I N C O M E R E T U R N S S U B U R B A N A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Office Suburban NPI Office Suburban NPI Office Suburban


OfficeProperties 1,420

CBDProperties 449

SuburbanProperties 971


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R E T A I L T O T A L R E T U R N S

Total TotalNPI Retail East Midwest South West

1stQ2019 1.80 1.74 1.62 0.63 1.95 1.944thQ2018 1.37 -0.43 -0.71 -1.49 -0.73 0.15OneYear 6.83 3.21 2.51 0.21 2.98 4.50ThreeYears 7.07 5.17 4.01 3.31 5.36 6.33FiveYears 9.13 8.41 7.38 6.89 8.99 9.15TenYears 8.51 8.90 8.07 7.78 9.44 9.50TwentyYears 8.93 9.99 9.60 8.59 9.83 10.89

R E T A I L I N C O M E R E T U R N S



R E T A I L A P P R E C I A T I O N R E T U R N S


1stQ2019 0.69 0.58 0.45 -0.49 0.71 0.834thQ2018 0.26 -1.60 -1.91 -2.62 -1.94 -0.97OneYear 2.20 -1.42 -2.21 -4.25 -1.83 0.01ThreeYears 2.34 0.44 -0.77 -1.40 0.51 1.70FiveYears 4.14 3.35 2.26 1.80 3.80 4.22TenYears 2.93 3.08 2.26 1.84 3.44 3.84TwentyYears 2.47 3.25 2.85 1.82 3.05 4.23

A BROAD-BRUSH HIDES OPPORTUNITYRetail rebounded in the first quarter with a total return

of 1.74%, up from (0.43%) last quarter. For the first time in almost two years, the appreciation component for retail was not the weakest among the property types and was a small but positive 0.58%, beating out that for apartment and office property. Despite the rebound, returns for the year were lowest among the property types and included an appreciation component of (1.42%). Returns on retail have been volatile, reflecting the turmoil in the industry.

The Retail Index is concentrated geographically in the West region, which accounts for 42.5% of its capitalization, and more particularly the larger Regional/Super Regional investments in the West, which alone account for 23.6%. Returns in the West have topped the Index for all subtypes except Single Tenant for the year, and Super Regional for the quarter. The South has also done relatively well, most likely due to positive demographic trends which have significant impact for retail.

The Index also has a subtype concentration in larger properties with Regional and Super Regional properties representing 52% of the capitalization. Returns on these types were the highest among the sub-types for the quarter but lagged all others for the year, including the lowest appreciation components of (1.95%) and (2.83%) for Super Regional and Regional, respectively. Returns on these properties in the West, which is the only regional data available, remain above the sub-index for the year.

Neighborhood Centers, which are the next largest subtype by capitalization, ranked second among the subtypes for the quarter’s returns, and first for the year. Returns have been higher in the West and South with the Midwest a notable laggard. The West’s total return of 6.05% for the year reveals that the impact of the challenges facing the industry are not equal among the subtypes or the markets. With a greater emphasis on necessity, neighborhood centers appear to have a relative advantage.

Power Centers and Community Centers have had a negative appreciation component in each of the past four quarters. Next to mall anchors, the big box tenants typically found in these centers can be the most challenging to lease today. Despite the challenges, returns on these subtypes in the West and the South performed better than their counterparts with returns for the year of 5.14% and 6.04%, respectively.

While the turmoil in the retail industry is having an impact on retail property, not all properties and markets are feeling it equally. The metro data that is available reflects a wide variation in performance from (5.5%) for the year in Baltimore to over 7.0% in Anaheim and Austin. Bricks and mortar stores are still generating most sales and have proven to be critical to sales in a market however they are eventually consummated. This is an opportune time for savvy investors that understand the nuances and may be able to take advantage of weakness in values.

Kim DiPietroManaging DirectorHart Realty Advisers, LLC

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Fashion/Specialty Center $13,894.3 million9.86%

TOTAL RETAIL

R E T A I L S U B - T Y P E S I N D E X

Other $3,897.2 million2.77%

Regional $18,607.1 million13.20%

Super Regional$53,806.8 million38.19%

Community$16,003.9 million11.36%

Power Center$15,766.1 million11.19%

Neighborhood$18,934.7 million13.44%

C O M M U N I T Y T O T A L R E T U R N S C O M M U N I T Y I N C O M E R E T U R N S C O M M U N I T Y A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Retail Community NPI Retail Community NPI Retail Community

1stQ2019 1.80 1.74 0.86 1stQ2019 1.11 1.16 1.30 1stQ2019 0.69 0.58 -0.434thQ2018 1.37 -0.43 0.52 4thQ2018 1.11 1.16 1.31 4thQ2018 0.26 -1.60 -0.79OneYear 6.83 3.21 3.93 OneYear 4.55 4.67 5.39 OneYear 2.20 -1.42 -1.41ThreeYears 7.07 5.17 5.58 ThreeYears 4.65 4.72 5.33 ThreeYears 2.34 0.44 0.23FiveYears 9.13 8.41 8.26 FiveYears 4.83 4.95 5.49 FiveYears 4.14 3.35 2.66TenYears 8.51 8.90 8.27 TenYears 5.46 5.69 6.08 TenYears 2.93 3.08 2.10TwentyYears 8.93 9.99 9.54 TwentyYears 6.34 6.58 6.92 TwentyYears 2.47 3.25 2.49

N E I G H B O R H O O D T O T A L R E T U R N S N E I G H B O R H O O D I N C O M E R E T U R N S N E I G H B O R H O O D A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Retail Neighborhood NPI Retail Neighborhood NPI Retail Neighborhood

1stQ2019 1.80 1.74 1.58 1stQ2019 1.11 1.16 1.21 1stQ2019 0.69 0.58 0.374thQ2018 1.37 -0.43 0.98 4thQ2018 1.11 1.16 1.21 4thQ2018 0.26 -1.60 -0.23OneYear 6.83 3.21 5.32 OneYear 4.55 4.67 4.96 OneYear 2.20 -1.42 0.35ThreeYears 7.07 5.17 6.85 ThreeYears 4.65 4.72 5.05 ThreeYears 2.34 0.44 1.73FiveYears 9.13 8.41 9.75 FiveYears 4.83 4.95 5.32 FiveYears 4.14 3.35 4.27TenYears 8.51 8.90 8.89 TenYears 5.46 5.69 5.99 TenYears 2.93 3.08 2.77TwentyYears 8.93 9.99 10.00 TwentyYears 6.34 6.58 6.91 TwentyYears 2.47 3.25 2.94

R E G I O N A L T O T A L R E T U R N S R E G I O N A L I N C O M E R E T U R N S R E G I O N A L A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Retail Regional NPI Retail Regional NPI Retail Regional

1stQ2019 1.80 1.74 2.26 1stQ2019 1.11 1.16 1.15 1stQ2019 0.69 0.58 1.124thQ2018 1.37 -0.43 -1.28 4thQ2018 1.11 1.16 1.19 4thQ2018 0.26 -1.60 -2.47OneYear 6.83 3.21 1.70 OneYear 4.55 4.67 4.63 OneYear 2.20 -1.42 -2.83ThreeYears 7.07 5.17 3.78 ThreeYears 4.65 4.72 4.68 ThreeYears 2.34 0.44 -0.87FiveYears 9.13 8.41 7.61 FiveYears 4.83 4.95 4.89 FiveYears 4.14 3.35 2.62TenYears 8.51 8.90 8.73 TenYears 5.46 5.69 5.63 TenYears 2.93 3.08 2.98TwentyYears 8.93 9.99 10.17 TwentyYears 6.34 6.58 6.46 TwentyYears 2.47 3.25 3.55

S U P E R R E G I O N A L T O T A L R E T U R N S S U P E R R E G I O N A L I N C O M E R E T U R N S S U P E R R E G I O N A L A P P R E C I A T I O N R E T U R N S

Total Total Total Total Total Total Total Total Total NPI Retail Super Regional NPI Retail Super Regional NPI Retail Super Regional

1stQ2019 1.80 1.74 2.16 1stQ2019 1.11 1.16 1.08 1stQ2019 0.69 0.58 1.084thQ2018 1.37 -0.43 -1.45 4thQ2018 1.11 1.16 1.07 4thQ2018 0.26 -1.60 -2.52OneYear 6.83 3.21 2.26 OneYear 4.55 4.67 4.28 OneYear 2.20 -1.42 -1.95ThreeYears 7.07 5.17 4.97 ThreeYears 4.65 4.72 4.35 ThreeYears 2.34 0.44 0.60FiveYears 9.13 8.41 8.62 FiveYears 4.83 4.95 4.58 FiveYears 4.14 3.35 3.91TenYears 8.51 8.90 10.11 TenYears 5.46 5.69 5.40 TenYears 2.93 3.08 4.53TwentyYears 8.93 9.99 10.93 TwentyYears 6.34 6.58 6.31 TwentyYears 2.47 3.25 4.41

RetailProperties 1,232CommunityProperties 254Fashion/SpecialtyCenter

Properties98

NeighborhoodProperties 479PowerCenterProperties 192RegionalProperties 61SuperRegionalProperties 63OtherProperties 85Total Market Value $140,910.1 M

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NFI-ODCE: GROWTH IN ASSETS AS RETURN PERFORMANCE CYCLES

The NFI-ODCE generated positive returns in the first quarter of 2019, posting a 1.42% gross return (1.20% net of fees) comprised of a 1.02% income return and a 0.40% appreciation return. This marks the 35th consecutive quarter of positive appreciation and the 36th consecutive quarter of positive total returns. While real estate values continue to rise, the speed of growth continues to moderate. Average appreciation per quarter was roughly 2% from the GFC to 2017. Since then, appreciation has slowed down to 0.40% as of the first quarter. We would expect this trend to continue for the foreseeable future.

Using NPI data as a proxy, industrial assets (14.0% trailing 1-year) and assets in the west (8.83% trailing 1-year) continue to significantly outperform the rest of the market. More interestingly, the 1Q 2019 saw retail assets and the south region return from negative appreciation to positive appreciation (-1.60% to 0.58% and -0.09% to 0.71%, respectively in 4Q 2018 to 1Q 2019) and the midwest write downs appear to be slowing down with 1Q 2019 appreciation posting -0.09%. It appears that one of the largest drivers for appreciation continues to be NOI growth. As of 1Q 2019, NOI growth has slowed down the greatest for midwest (-1.29% on a rolling 4Q basis) and retail (-0.2% on a rolling 4Q basis), which is reflected in their 1-year return performance.

A more interesting observation is that between the NFI-ODCE value weight and equal weight index performance. Post GFC, the performance trend had generally been more favorable for the value weight index. As a result of larger NFI-ODCE funds outperforming the broader universe, the value weight index generally outperformed the equal weight index from 2010-2015. However, in 2015, the performance dynamic began to change. Smaller NFI-ODCE funds began to outperform their larger counterparts and the equal weight index has been outperforming the value weight index for the last several years. Over the past 3-year and 5-year periods, the value weight index has outperformed in 91.7% and 75.0% of quarters.

The performance dynamic between larger and smaller NFI-ODCE funds should be interesting to monitor on a go-forward basis. The NFI-ODCE has grown significantly since the year 2000 when it had $19.2 billion of net assets in 11 funds. As of the 1Q 2019, NFI-ODCE has grown to $200.9 billion in 25 funds. Given the recent inclusion notices in ODCE, we should expect one new fund to enter the index next quarter and potentially others over the next year. As the universe expands, the dynamic of smaller funds versus their larger established counterparts may provide insights into valuation trends and the impact of property types, asset size, leverage and the ability to more quickly change portfolio weightings on fund performance.

Joshua Kaye, Senior Vice PresidentBrian Bowman, Senior AnalystInvestors Diversified Realty

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N C R E I F - A B R I E F H I S T O R Y

The National Council of Real Estate Investment Fiduciaries (NCREIF) is an association of

institutional real estate professionals who share a common interest in their industry. Although

June 17, 1982, marks the official beginning of NCREIF, the difficult task of uniting a highly

competitive industry actually began in the late 1970’s. Following several meetings, 14 investment

managers agreed in principle to form a nonprofit entity to foster research on the asset class. This

led to the development of a database consisting of property operating information which evolved

into what has now become the NCREIF Property Index. On January 1, 1995, thirteen years after its

inception, NCREIF assumed full responsibility for the Index, its publication and distribution.

N C R E I F M E M B E R S H I P

Our membership is comprised of:

n Data Contributing Members:Investment managers or plan sponsors who manage or own

institutional real estate with a market value of at least $50 million are eligible to become Data

Contributing Members. Responsibility to report qualifying assets to the applicable indexes and

other research projects is a part of membership; all data is held in strict confidence. NCREIF

provides data-training and ongoing assistance to members.

n Professional Members: Companies with significant involvement in the institutional real estate

industry are eligible to become Professional Members. Professional Members include, but are

not limited to, accountants, appraisers, and consultants.

n Academic Members: Full-time academic appointees who have significant and ongoing

academic interest in research activities are eligible to become Academic Members.

Members participate in nine working committees: Accounting, Defined Contribution, Farmland,

Performance Measurement, Plan Sponsor, Portfolio Management, Research, Timberland and

Valuation. Each committee follows a stated mission and meets three times a year to address and

solve industry issues. These peer group interactions, as well as quarterly updates on the index, pro-

vide members with access to the institutional real estate industry that no other association can offer.

A B O U T N C R E I F

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N P I M E T R O P O L I T A N S T A T I S T I C A L A R E A ( M S A ) P R O F I L EMetropolitan Numberof EndingMarket %ofTotalNPI 1-yearReturnStatisticalArea(MSA) Properties Value($millions) MarketValue 1stQ2019AZ-Phoenix-Mesa-Scottsdale(38060) 170 9,970 1.58 6.69AZ-Phoenix-Mesa-Scottsdale/Apartment 37 2,743 .44 14.22AZ-Phoenix-Mesa-Scottsdale/Apartment-Garden 24 1,520 .24 15.70AZ-Phoenix-Mesa-Scottsdale/Industrial 64 1,060 .17 10.31AZ-Phoenix-Mesa-Scottsdale/Industrial-Warehouse 54 885 .14 9.28AZ-Phoenix-Mesa-Scottsdale/Office 41 1,692 .27 4.18AZ-Phoenix-Mesa-Scottsdale/Office-Suburban 39 1,637 .26 4.47AZ-Phoenix-Mesa-Scottsdale/Retail 25 4,364 .69 3.13CA-Anaheim-SantaAna-Irvine(11244) 194 13,795 2.19 8.77CA-Anaheim-SantaAna-Irvine/Apartment 33 3,789 .60 8.06CA-Anaheim-SantaAna-Irvine/Industrial 91 3,472 .55 15.84CA-Anaheim-SantaAna-Irvine/Industrial-Warehouse 69 2,966 .47 15.81CA-Anaheim-SantaAna-Irvine/Office 44 3,427 .54 4.23CA-Anaheim-SantaAna-Irvine/Office-Suburban 44 3,427 .54 4.23CA-Anaheim-SantaAna-Irvine/Retail 26 3,106 .49 7.80CA-LosAngeles-LongBeach-Glendale(31084) 518 46,814 7.43 8.09CA-LosAngeles-LongBeach-Glendale/Apartment 105 11,072 1.76 6.03CA-LosAngeles-LongBeach-Glendale/Apartment-HighRise 74 8,088 1.28 5.28CA-LosAngeles-LongBeach-Glendale/Industrial 252 10,732 1.70 15.33CA-LosAngeles-LongBeach-Glendale/Industrial-Warehouse 227 10,312 1.64 15.30CA-LosAngeles-LongBeach-Glendale/Office 86 16,887 2.68 7.77CA-LosAngeles-LongBeach-Glendale/Office-Suburban 77 13,909 2.21 7.64CA-LosAngeles-LongBeach-Glendale/Retail 73 8,064 1.28 2.83CA-LosAngeles-LongBeach-Glendale/Retail-Neighborhood 25 1,484 .24 4.60CA-LosAngeles-LongBeach-Glendale/Retail-PowerCenter 21 1,601 .25 6.51CA-Oakland-Hayward-Berkeley(36084) 211 16,073 2.55 10.71CA-Oakland-Hayward-Berkeley/Apartment 35 3,188 .51 8.02CA-Oakland-Hayward-Berkeley/Industrial 97 4,077 .65 16.85CA-Oakland-Hayward-Berkeley/Industrial-Warehouse 83 3,502 .56 17.29CA-Oakland-Hayward-Berkeley/Office 45 4,487 .71 11.86CA-Oakland-Hayward-Berkeley/Office-Suburban 38 3,465 .55 10.67CA-Oakland-Hayward-Berkeley/Retail 34 4,319 .69 4.85CA-Riverside-SanBernardino-Ontario(40140) 253 17,213 2.73 13.55CA-Riverside-SanBernardino-Ontario/Industrial 218 13,301 2.11 15.55CA-Riverside-SanBernardino-Ontario/Industrial-Warehouse 206 13,062 2.07 15.66CA-Sacramento--Roseville--Arden-Arcade(40900) 21 1,643 .26 7.00CA-SanDiego-Carlsbad(41740) 174 15,726 2.50 7.65CA-SanDiego-Carlsbad/Apartment 34 4,183 .66 7.79CA-SanDiego-Carlsbad/Industrial 55 1,833 .29 12.48CA-SanDiego-Carlsbad/Industrial-Warehouse 39 1,278 .20 12.25CA-SanDiego-Carlsbad/Office 47 3,996 .63 6.17CA-SanDiego-Carlsbad/Office-Suburban 40 3,013 .48 5.06CA-SanDiego-Carlsbad/Retail 37 5,693 .90 7.11CA-SanFrancisco-RedwoodCity-SouthSanFrancisco(41884) 175 29,073 4.61 9.62CA-SanFrancisco-RedwoodCity-SouthSanFrancisco/Industrial 38 1,355 .22 22.54CA-SanFrancisco-RedwoodCity-SouthSanFrancisco/Industrial-Wareh 24 932 .15 23.39CA-SanFrancisco-RedwoodCity-SouthSanFrancisco/Office 80 20,891 3.32 10.58CA-SanFrancisco-RedwoodCity-SouthSanFrancisco/Office-CBD 39 12,572 2.00 10.76CA-SanFrancisco-RedwoodCity-SouthSanFrancisco/Office-Suburban 41 8,319 1.32 10.32CA-SanJose-Sunnyvale-SantaClara(41940) 141 16,618 2.64 8.94CA-SanJose-Sunnyvale-SantaClara/Apartment 23 3,516 .56 7.80CA-SanJose-Sunnyvale-SantaClara/Industrial 43 1,370 .22 12.54CA-SanJose-Sunnyvale-SantaClara/Industrial-Warehouse 38 1,142 .18 13.41CA-SanJose-Sunnyvale-SantaClara/Office 63 8,362 1.33 10.28CA-SanJose-Sunnyvale-SantaClara/Office-Suburban 58 7,526 1.19 9.96CO-Denver-Aurora-Lakewood(19740) 263 19,263 3.06 6.08CO-Denver-Aurora-Lakewood/Apartment 86 7,980 1.27 7.32CO-Denver-Aurora-Lakewood/Apartment-Garden 32 2,961 .47 8.71CO-Denver-Aurora-Lakewood/Apartment-HighRise 42 3,986 .63 6.21CO-Denver-Aurora-Lakewood/Industrial 86 1,651 .26 14.61CO-Denver-Aurora-Lakewood/Industrial-Warehouse 84 1,574 .25 14.92CO-Denver-Aurora-Lakewood/Office 54 5,678 .90 4.70CO-Denver-Aurora-Lakewood/Office-Suburban 31 1,892 .30 7.54CO-Denver-Aurora-Lakewood/Retail 34 3,780 .60 2.62DC-VA-MD-WV-Washington-Arlington-Alexandria(47894) 368 46,850 7.44 4.90DC-VA-MD-WV-Washington-Arlington-Alexandria/Apartment 106 12,049 1.91 5.87DC-VA-MD-WV-Washington-Arlington-Alexandria/Apartment-HighRise 81 9,611 1.53 5.52DC-VA-MD-WV-Washington-Arlington-Alexandria/Industrial 55 1,444 .23 11.01DC-VA-MD-WV-Washington-Arlington-Alexandria/Industrial-Warehou 49 1,107 .18 11.72DC-VA-MD-WV-Washington-Arlington-Alexandria/Office 134 24,241 3.85 3.71DC-VA-MD-WV-Washington-Arlington-Alexandria/Office-CBD 64 17,428 2.77 3.72DC-VA-MD-WV-Washington-Arlington-Alexandria/Office-Suburban 70 6,812 1.08 3.67DC-VA-MD-WV-Washington-Arlington-Alexandria/Retail 70 8,837 1.40 5.85DC-VA-MD-WV-Washington-Arlington-Alexandria/Retail-Neighborhood 34 1,749 .28 5.20FL-FortLauderdale-PompanoBeach-DeerfieldBeach(22744) 133 6,711 1.07 7.84FL-FortLauderdale-PompanoBeach-DeerfieldBeach/Apartment 36 2,963 .47 6.25FL-FortLauderdale-PompanoBeach-DeerfieldBeach/Apartment-Garden 21 1,588 .25 8.08FL-FortLauderdale-PompanoBeach-DeerfieldBeach/Industrial 60 1,377 .22 12.95FL-FortLauderdale-PompanoBeach-DeerfieldBeach/Industrial-Wareh 58 1,317 .21 12.75FL-Miami-MiamiBeach-Kendall(33124) 161 13,575 2.15 6.83FL-Miami-MiamiBeach-Kendall/Apartment 30 3,100 .49 4.62FL-Miami-MiamiBeach-Kendall/Industrial 87 3,502 .56 14.13FL-Miami-MiamiBeach-Kendall/Industrial-Warehouse 80 3,391 .54 14.28FL-Miami-MiamiBeach-Kendall/Retail 26 4,501 .71 4.57FL-Orlando-Kissimmee-Sanford(36740) 97 5,875 .93 7.79FL-Orlando-Kissimmee-Sanford/Apartment 22 1,407 .22 9.45FL-Orlando-Kissimmee-Sanford/Industrial 45 887 .14 15.66FL-Orlando-Kissimmee-Sanford/Industrial-Warehouse 45 887 .14 15.66FL-Orlando-Kissimmee-Sanford/Retail 24 3,236 .51 5.28FL-Tampa-St.Petersburg-Clearwater(45300) 45 2,695 .43 9.87FL-Tampa-St.Petersburg-Clearwater/Apartment 25 1,724 .27 11.79FL-WestPalmBeach-BocaRaton-DelrayBeach(48424) 61 4,684 .74 6.40FL-WestPalmBeach-BocaRaton-DelrayBeach/Apartment 32 2,681 .43 7.00GA-Atlanta-SandySprings-Roswell(12060) 405 17,452 2.77 7.00GA-Atlanta-SandySprings-Roswell/Apartment 82 6,508 1.03 6.76GA-Atlanta-SandySprings-Roswell/Apartment-Garden 26 1,714 .27 8.95GA-Atlanta-SandySprings-Roswell/Apartment-HighRise 47 4,109 .65 5.48GA-Atlanta-SandySprings-Roswell/Industrial 218 3,619 .57 12.90GA-Atlanta-SandySprings-Roswell/Industrial-Warehouse 208 3,547 .56 12.99GA-Atlanta-SandySprings-Roswell/Office 47 4,100 .65 8.73GA-Atlanta-SandySprings-Roswell/Office-Suburban 33 2,472 .39 8.06GA-Atlanta-SandySprings-Roswell/Retail 55 3,178 .50 -.16IL-Chicago-Naperville-ArlingtonHeights(16974) 478 36,530 5.80 3.61IL-Chicago-Naperville-ArlingtonHeights/Apartment 79 10,598 1.68 2.21IL-Chicago-Naperville-ArlingtonHeights/Apartment-HighRise 57 8,676 1.38 1.15IL-Chicago-Naperville-ArlingtonHeights/Industrial 266 6,193 .98 9.62IL-Chicago-Naperville-ArlingtonHeights/Industrial-Warehouse 257 5,731 .91 9.36IL-Chicago-Naperville-ArlingtonHeights/Office 46 10,800 1.71 5.41IL-Chicago-Naperville-ArlingtonHeights/Office-CBD 33 10,321 1.64 5.52IL-Chicago-Naperville-ArlingtonHeights/Retail 80 8,610 1.37 -.60IL-Chicago-Naperville-ArlingtonHeights/Retail-Neighborhood 37 1,100 .17 3.60IL-Elgin(20994) 29 819 .13 3.89IL-Elgin/Industrial 27 690 .11 7.36IL-Elgin/Industrial-Warehouse 27 690 .11 7.36IL-WI-LakeCounty-KenoshaCounty(29404) 54 1,654 .26 5.69IL-WI-LakeCounty-KenoshaCounty/Industrial 32 799 .13 10.51IL-WI-LakeCounty-KenoshaCounty/Industrial-Warehouse 32 799 .13 10.54IN-Indianapolis-Carmel-Anderson(26900) 52 1,190 .19 9.96IN-Indianapolis-Carmel-Anderson/Industrial 36 734 .12 12.17IN-Indianapolis-Carmel-Anderson/Industrial-Warehouse 35 728 .12 12.17KY-IN-Louisville/JeffersonCounty(31140) 39 812 .13 9.98KY-IN-Louisville/JeffersonCounty/Industrial 37 621 .10 11.52KY-IN-Louisville/JeffersonCounty/Industrial-Warehouse 34 587 .09 11.69

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Metropolitan Numberof EndingMarket %ofTotalNPI 1-yearReturnStatisticalArea(MSA) Properties Value($millions) MarketValue 1stQ2019MA-Boston(14454) 120 24,751 3.93 7.29MA-Boston/Apartment 24 4,158 .66 6.50MA-Boston/Office 67 18,665 2.96 7.45MA-Boston/Office-CBD 57 18,145 2.88 7.37MA-Cambridge-Newton-Framingham(15764) 105 13,180 2.09 9.90MA-Cambridge-Newton-Framingham/Apartment 44 4,601 .73 7.90MA-Cambridge-Newton-Framingham/Office 39 6,020 .96 12.42MA-Cambridge-Newton-Framingham/Office-Suburban 39 6,020 .96 12.42MD-Baltimore-Columbia-Towson(12580) 103 6,546 1.04 2.73MD-Baltimore-Columbia-Towson/Industrial 57 2,076 .33 10.04MD-Baltimore-Columbia-Towson/Industrial-Warehouse 56 2,055 .33 10.40MD-Baltimore-Columbia-Towson/Retail 21 2,231 .35 -5.50MD-SilverSpring-Frederick-Rockville(43524) 50 3,648 .58 3.41MD-SilverSpring-Frederick-Rockville/Apartment 23 2,355 .37 4.68MN-WI-Minneapolis-St.Paul-Bloomington(33460) 105 5,238 .83 4.04MN-WI-Minneapolis-St.Paul-Bloomington/Apartment 34 1,861 .30 6.58MN-WI-Minneapolis-St.Paul-Bloomington/Apartment-HighRise 23 1,160 .18 4.47MN-WI-Minneapolis-St.Paul-Bloomington/Industrial 32 342 .05 5.81MN-WI-Minneapolis-St.Paul-Bloomington/Industrial-Warehouse 26 247 .04 6.70MN-WI-Minneapolis-St.Paul-Bloomington/Retail 24 1,560 .25 .14MO-IL-St.Louis(41180) 38 1,044 .17 4.45MO-KS-KansasCity(28140) 56 1,247 .20 4.52MO-KS-KansasCity/Industrial 40 427 .07 7.22MO-KS-KansasCity/Industrial-Warehouse 39 394 .06 7.54NC-Durham-ChapelHill(20500) 33 1,197 .19 7.12NC-Raleigh(39580) 54 2,967 .47 7.28NC-SC-Charlotte-Concord-Gastonia(16740) 116 5,007 .79 6.41NC-SC-Charlotte-Concord-Gastonia/Apartment 32 2,095 .33 6.11NC-SC-Charlotte-Concord-Gastonia/Industrial 43 498 .08 13.31NC-SC-Charlotte-Concord-Gastonia/Office 23 1,384 .22 7.25NJ-Camden(15804) 46 1,776 .28 8.60NJ-Camden/Industrial 39 1,044 .17 18.63NJ-Camden/Industrial-Warehouse 38 1,017 .16 18.78NJ-PA-Newark(35084) 43 2,885 .46 -.76NV-LasVegas-Henderson-Paradise(29820) 70 7,168 1.14 5.09NV-LasVegas-Henderson-Paradise/Industrial 60 1,057 .17 12.93NV-LasVegas-Henderson-Paradise/Industrial-Warehouse 53 1,042 .17 12.84NV-Reno(39900) 21 1,018 .16 12.83NY-NassauCounty-SuffolkCounty(35004) 26 1,072 .17 5.99NY-NJ-NewYork-JerseyCity-WhitePlains(35614) 431 71,220 11.30 3.92NY-NJ-NewYork-JerseyCity-WhitePlains/Apartment 126 16,436 2.61 3.52NY-NJ-NewYork-JerseyCity-WhitePlains/Apartment-HighRise 108 15,532 2.47 3.59NY-NJ-NewYork-JerseyCity-WhitePlains/Industrial 159 6,913 1.10 16.39NY-NJ-NewYork-JerseyCity-WhitePlains/Industrial-Warehouse 150 6,881 1.09 16.45NY-NJ-NewYork-JerseyCity-WhitePlains/Office 89 41,293 6.55 3.04NY-NJ-NewYork-JerseyCity-WhitePlains/Office-CBD 72 38,848 6.17 2.90NY-NJ-NewYork-JerseyCity-WhitePlains/Retail 54 6,442 1.02 -1.04OH-KY-IN-Cincinnati(17140) 30 1,611 .26 7.15OH-KY-IN-Cincinnati/Industrial 25 570 .09 13.69OH-KY-IN-Cincinnati/Industrial-Warehouse 25 570 .09 13.69OR-WA-Portland-Vancouver-Hillsboro(38900) 174 8,181 1.30 7.18OR-WA-Portland-Vancouver-Hillsboro/Apartment 30 2,501 .40 3.65OR-WA-Portland-Vancouver-Hillsboro/Industrial 104 1,917 .30 17.39OR-WA-Portland-Vancouver-Hillsboro/Industrial-FlexSpace 24 206 .03 11.42OR-WA-Portland-Vancouver-Hillsboro/Industrial-Warehouse 65 1,506 .24 16.96OR-WA-Portland-Vancouver-Hillsboro/Office 23 2,410 .38 7.41PA-Harrisburg-Carlisle(25420) 27 1,522 .24 8.91PA-MontgomeryCounty-BucksCounty-ChesterCounty(33874) 37 2,151 .34 2.99PA-Philadelphia(37964) 40 2,108 .33 4.39RI-MA-Providence-Warwick(39300) 21 743 .12 7.48TN-MS-AR-Memphis(32820) 21 824 .13 10.01TN-Nashville-Davidson--Murfreesboro--Franklin(34980) 74 3,098 .49 9.51TN-Nashville-Davidson--Murfreesboro--Franklin/Industrial 32 723 .11 12.41TN-Nashville-Davidson--Murfreesboro--Franklin/Industrial-Wareh 32 723 .11 12.41TX-Austin-RoundRock(12420) 201 11,730 1.86 10.07TX-Austin-RoundRock/Apartment 71 4,901 .78 7.77TX-Austin-RoundRock/Apartment-Garden 32 1,658 .26 7.80TX-Austin-RoundRock/Industrial 57 849 .13 12.32TX-Austin-RoundRock/Industrial-Warehouse 53 712 .11 12.73TX-Austin-RoundRock/Office 48 4,535 .72 12.83TX-Austin-RoundRock/Office-Suburban 35 1,733 .28 10.53TX-Austin-RoundRock/Retail 25 1,443 .23 7.39TX-Dallas-Plano-Irving(19124) 382 25,253 4.01 6.82TX-Dallas-Plano-Irving/Apartment 102 8,470 1.34 3.70TX-Dallas-Plano-Irving/Apartment-Garden 35 2,219 .35 5.38TX-Dallas-Plano-Irving/Apartment-HighRise 47 3,727 .59 2.15TX-Dallas-Plano-Irving/Industrial 186 5,071 .81 11.87TX-Dallas-Plano-Irving/Industrial-Warehouse 180 4,945 .79 12.02TX-Dallas-Plano-Irving/Office 52 5,748 .91 7.90TX-Dallas-Plano-Irving/Office-Suburban 43 3,536 .56 7.13TX-Dallas-Plano-Irving/Retail 39 5,776 .92 5.99TX-FortWorth-Arlington(23104) 92 3,586 .57 9.39TX-FortWorth-Arlington/Industrial 72 2,452 .39 10.47TX-FortWorth-Arlington/Industrial-Warehouse 54 2,281 .36 10.58TX-Houston-TheWoodlands-SugarLand(26420) 286 22,521 3.57 4.86TX-Houston-TheWoodlands-SugarLand/Apartment 85 5,445 .86 7.29TX-Houston-TheWoodlands-SugarLand/Apartment-Garden 30 1,506 .24 9.26TX-Houston-TheWoodlands-SugarLand/Apartment-HighRise 47 3,424 .54 6.30TX-Houston-TheWoodlands-SugarLand/Industrial 116 2,685 .43 11.50TX-Houston-TheWoodlands-SugarLand/Industrial-Warehouse 106 2,516 .40 11.74TX-Houston-TheWoodlands-SugarLand/Office 47 6,924 1.10 4.76TX-Houston-TheWoodlands-SugarLand/Office-Suburban 39 4,368 .69 4.90TX-Houston-TheWoodlands-SugarLand/Retail 38 7,465 1.18 1.12TX-SanAntonio-NewBraunfels(41700) 43 893 .14 9.75TX-SanAntonio-NewBraunfels/Industrial 27 226 .04 13.50TX-SanAntonio-NewBraunfels/Industrial-Warehouse 24 155 .02 17.10WA-Seattle-Bellevue-Everett(42644) 342 26,071 4.14 9.85WA-Seattle-Bellevue-Everett/Apartment 77 7,272 1.15 6.17WA-Seattle-Bellevue-Everett/Apartment-HighRise 47 4,873 .77 4.91WA-Seattle-Bellevue-Everett/Industrial 145 4,546 .72 18.22WA-Seattle-Bellevue-Everett/Industrial-Warehouse 133 4,078 .65 18.48WA-Seattle-Bellevue-Everett/Office 81 11,467 1.82 10.43WA-Seattle-Bellevue-Everett/Office-CBD 43 8,262 1.31 11.17WA-Seattle-Bellevue-Everett/Office-Suburban 38 3,205 .51 8.50WA-Seattle-Bellevue-Everett/Retail 38 2,754 .44 4.31WA-Seattle-Bellevue-Everett/Retail-Neighborhood 24 1,126 .18 7.21WA-Tacoma-Lakewood(45104) 46 2,899 .46 17.74WA-Tacoma-Lakewood/Industrial 44 2,819 .45 18.22WA-Tacoma-Lakewood/Industrial-Warehouse 44 2,819 .45 18.22

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T H E N C R E I F P R O P E R T Y I N D E XM E T H O D O L O G Y

n This Index is set at 100 for the fourth quarter of 1977. Calculations are based on quarterly returns of individual properties before deduction of portfolio-level management fees.

n Each property’s return is weighted by its market value.n Income and Capital Appreciation changes are also calculated.

U N I V E R S E O F P R O P E R T I E S

n All properties have been acquired on behalf of tax exempt institutions and held in a fiduciary environment.

U N I V E R S E I N C L U D E S

– Wholly owned and joint venture investments. – Existing properties only—no development projects. – Only investment-grade, non-agricultural, income-producing properties: apartments, hotels,

office, retail, office showroom/R&D and warehouses.n The database increases quarterly as participants acquire properties and as new members join NCREIF.n Sold properties are included as partial sales from the Index in the quarter the sales take place (historical data remains).n Each property’s market value is determined by real estate appraisal methodology, consistently applied.n All Data Contributing Members of NCREIF must submit all of their properties held in the U.S., including taxable properties

and “alternative” property types, but only qualififying properties actually enter the NPI.”

R a t e s o f R e t u R n

n Total Return: includes appreciation (or depreciation), realized capital gain (or loss) and income. It is computed by adding the Income return and Capital Appreciation return on a quarterly basis.

n Income Return:measures the portion of total return attributable to each property’s net operating income or NOI. It is computed by dividing NOI by the average quarterly investment for the quarter.

NOI

Beginning Market Value + 1/2 Capital Improvements - 1/2 Partial Sales - 1/3 NOI

n Capital Appreciation Return: measures the change in market value adjusted for any capital improvements or partial sales for the quarter.

(Ending Market Value - Beginning Market Value) + Partial Sales - Capital Improvements

Beginning Market Value + 1/2 Capital Improvements - 1/2 Partial Sales - 1/3 NOI

n Annual and Annualized Returns: are computed by chain linking quarterly rates of return to calculate time-weighted rates of return for the annual and annualized periods under study. For periods over one year, returns are expressed on a return-per-year basis.

n Quartile Ranges: the distribution of annual total returns by property is characterized by calculating quartiles and percentiles. The lower quartile break is the property return in the Index such that one-fourth of the properties in the Index are below it; the upper quartile break is the return in the Index such that three-fourths of the property returns in the Index are below it.

The quartile range line graphs show the range of annual returns over rolling quarters for each property type. These graphs allow for quick comparison of the range of returns across time and by property type.

n Mean and Median Returns: the median is the exact midpoint of the distribution whereby one-half of the properties have a better return and the other half a poorer return. The mean is the equal-weighted average and is determined by summing the one-year returns and dividing by the number of properties in the Index.

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THE NCREIF PROPERTY INDEX REGIONAL AND DIVISIONAL SUBINDEXES

PROPERTIES BY REGION MARKET VALUE BY REGION ($ millions)

MARKET VALUE BY TYPE ($ millions)PROPERTIES BY TYPE

East 1,886 23.83%

Midwest 949 11.99%

South 2,137 27.01%

Retail 1,232 15.57%

Apartment 1,773 22.41%

Hotel 76 0.96%

Office 1,420 17.95%

Industrial 3,412 43.12%

Apartment $161,955 25.71%

Office $218,939 34.75%

Hotel $2,960 0.47%

Industrial $105,251 16.71%

Retail $140,910 22.37%

East $202,918 32.21%

Midwest $52,441 8.32%

South $126,261 20.04%

West $248,395 39.43%

West 2,941 37.17%

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THE NCREIF PROPERTY INDEX

D I S T R I B U T I O N O F P R O P E R T I E S B Y S T A T E , D I V I S I O N A N D R E G I O N

*Asterisksrepresentdatathatdoesnotmeettheexistingmaskingcriteria

nTotal Index: 7,913 properties, $630,016.91 million

E a s t : 1 , 8 8 6 p r o p e r t i e s , $ 2 0 2 , 9 1 8 . 2 9 m i l l i o n

MIDEAST STATE COUNT VALUE($M) NORTHEAST STATE COUNT VALUE($M)Delaware * * Connecticut 38 2934.00Kentucky 53 1162.74 Maine * *Maryland 204 12380.49 Massachusetts 253 38875.60NorthCarolina 211 9907.89 NewHampshire 6 757.02SouthCarolina 48 1706.27 NewJersey 303 20393.81Virginia 236 22973.69 NewYork 268 58538.87WashingtonDC 116 22896.27 Pennsylvania 143 8002.75WestVirginia * * RhodeIsland 4 278.29

Vermont * *

TotalMideast 871 $73,137.95 TotalNortheast 1,015 $129,780.34

We s t : 2 , 9 4 1 p r o p e r t i e s , $ 2 4 8 , 3 9 5 . 9 2 m i l l i o n

MOUNTAIN STATE COUNT VALUE($M) PACIFIC STATE COUNT VALUE($M)Arizona 179 10297.36 Alaska 6 302.14Colorado 289 21210.30 California 1,756 161593.00Idaho * * Hawaii 11 7527.21Montana * * Oregon 181 8344.82Nevada 93 8211.04 Washington 401 29422.36NewMexico * *Utah 21 1366.63Wyoming * *

TotalMountain 586 $41,206.39 TotalPacific 2,355 $207,189.53

M i d w e s t : 9 4 9 p r o p e r t i e s , $ 5 2 , 4 4 1 . 0 7 m i l l i o n

E.N. CENTRAL STATE COUNT VALUE($M) W.N. CENTRAL STATE COUNT VALUE($M)Illinois 564 39107.25 Iowa * *Indiana 74 1598.62 Kansas 48 733.80Michigan 32 1049.26 Minnesota 105 5238.83Ohio 47 2363.69 Missouri 47 1361.74Wisconsin 27 760.65 Nebraska * *

NorthDakota * *SouthDakota * *

TotalEastNorthCentral 744 $44,879.49 TotalWestNorthCentral 205 $7,561.59

S o u t h : 2 , 1 3 7 p r o p e r t i e s , $ 1 2 6 , 2 6 1 . 6 3 m i l l i o n

SOUTHEAST STATE COUNT VALUE($M) SOUTHWEST STATE COUNT VALUE($M)Alabama 12 1047.07 Arkansas * *Florida 551 36588.62 Louisiana 8 113.47Georgia 421 18070.55 Oklahoma 8 152.13Mississippi 14 409.42 Texas 1,021 65142.48Tennessee 99 4534.49

TotalSoutheast 1,097 $60,650.14 TotalSouthwest 1,040 $65,611.49

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ANNUALIZED RETURNS BY PROPERTY TYPE

APARTMENT HOTEL INDUSTRIAL OFFICE RETAIL

Period TOT INC APP TOT INC APP TOT INC APP TOT INC APP TOT INC APP

1Year 5.90 4.27 1.58 6.98 8.37 -1.30 14.04 4.83 8.90 6.66 4.49 2.10 3.21 4.67 -1.423Years 6.34 4.40 1.88 5.48 8.18 -2.54 13.25 5.03 7.92 6.33 4.54 1.73 5.17 4.72 0.445Years 8.16 4.56 3.48 8.17 8.16 0.01 13.65 5.25 8.09 8.45 4.69 3.63 8.41 4.95 3.3510Years 8.64 5.01 3.51 6.31 7.44 -1.06 10.43 5.91 4.32 7.50 5.37 2.05 8.90 5.69 3.0815Years 8.27 5.07 3.08 7.30 7.48 -0.14 9.97 6.17 3.63 8.30 5.63 2.56 9.62 5.92 3.5420Years 8.79 5.67 2.99 6.95 7.89 -0.87 9.96 6.81 2.99 8.22 6.34 1.79 9.99 6.58 3.25Inception 8.76 6.71 1.95 8.12 8.18 -0.04 9.89 7.65 2.11 8.40 7.10 1.24 9.52 7.17 2.23

ANNUALIZED RETURNS BY REGION

EAST MIDWEST SOUTH WEST

Period TOT INC APP TOT INC APP TOT INC APP TOT INC APP

1Year 5.19 4.37 0.79 4.06 4.72 -0.64 6.82 4.95 1.80 8.83 4.46 4.223Years 5.40 4.40 0.97 5.26 4.99 0.26 6.91 5.09 1.75 9.03 4.55 4.335Years 7.25 4.58 2.58 7.72 5.22 2.40 9.27 5.30 3.82 11.08 4.71 6.1510Years 7.46 5.22 2.16 7.46 5.87 1.52 8.73 5.85 2.76 9.60 5.35 4.0915Years 8.14 5.48 2.56 7.42 6.09 1.27 8.84 6.02 2.70 9.87 5.55 4.1520Years 8.76 6.24 2.41 7.41 6.68 0.69 8.52 6.59 1.83 9.95 6.21 3.57Inception 9.91 7.23 2.55 7.98 7.38 0.57 8.31 7.25 1.01 9.79 7.06 2.59

ANNUALIZED RETURNS BY DIVISION

NORTHEAST MIDEAST EAST NORTH CENTRAL WEST NORTH CENTRAL


1Year 5.27 4.10 1.14 5.04 4.85 0.19 4.08 4.60 -0.50 3.95 5.44 -1.433Years 5.54 4.14 1.36 5.14 4.87 0.26 5.44 4.87 0.55 4.28 5.65 -1.315Years 7.85 4.35 3.39 6.30 4.99 1.26 8.01 5.08 2.83 6.20 5.98 0.2110Years 7.66 5.03 2.53 7.16 5.52 1.57 7.76 5.76 1.91 6.01 6.42 -0.3915Years 8.02 5.31 2.60 8.33 5.76 2.47 7.62 6.00 1.55 6.47 6.52 -0.0520Years 8.53 6.06 2.36 9.08 6.49 2.47 7.56 6.57 0.94 6.70 7.14 -0.42Inception 9.61 6.98 2.50 9.42 7.36 1.95 8.18 7.28 0.85 7.30 7.71 -0.39

ANNUALIZED RETURNS: INDEX AND ALTERNATIVE INVESTMENTS

INDEX ALTERNATIVE

Period TOT INC APP CPI S&P LB G/C T-BILLS NAREIT

1Year 6.83 4.55 2.20 1.86 9.50 2.07 20.023Years 7.07 4.65 2.34 2.20 13.51 1.15 7.715Years 9.13 4.83 4.14 1.47 10.91 0.98 9.9210Years 8.51 5.46 2.93 1.79 15.92 0.54 18.7615Years 8.81 5.68 3.01 2.05 8.57 1.37 8.8120Years 8.93 6.34 2.47 2.18 6.04 1.85 11.07Inception 9.16 7.18 1.88 3.47 11.65 4.64 12.42

SOUTHEAST SOUTHWEST PACIFIC MOUNTAIN


1Year 7.01 5.05 1.88 6.64 4.86 1.71 9.34 4.39 4.79 6.31 4.82 1.433Years 7.52 5.21 2.23 6.35 4.99 1.31 9.36 4.47 4.73 7.40 4.94 2.385Years 10.19 5.40 4.61 8.44 5.20 3.12 11.24 4.62 6.39 10.31 5.19 4.9410Years 8.60 5.96 2.52 8.96 5.75 3.08 9.71 5.26 4.27 9.10 5.77 3.1915Years 8.72 6.03 2.57 9.07 6.02 2.92 10.00 5.48 4.34 9.26 5.92 3.2020Years 8.47 6.58 1.80 8.63 6.62 1.91 10.18 6.15 3.86 9.03 6.50 2.41Inception 9.03 7.34 1.59 7.65 7.18 0.45 10.20 7.05 2.98 8.61 7.17 1.37

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Distribution of One Year Total Returns: Rolling by QuarterT O T A L I N D E X a n d P R O P E R T Y T Y P E S

R O L L I N G O N E Y E A R T O T A L R E T U R N Quartile Breakpoints Numberof YrEnded: 5th Lower Upper 95th Mean Standard Properties Yr:Qtr Percentile Break Median Break Percentile Return Deviation

T O T A L I N D E X

6,097 20153 -1.95 7.57 12.41 18.81 32.44 13.56 12.416,029 20154 -1.69 7.51 12.40 18.35 32.50 13.49 12.436,054 20161 -2.14 6.97 11.88 17.37 29.74 12.65 10.876,060 20162 -2.57 6.38 10.92 16.35 28.13 11.76 10.816,316 20163 -4.21 5.76 9.82 14.81 26.47 10.37 10.276,442 20164 -4.65 5.01 8.87 13.52 23.68 9.36 10.066,350 20171 -4.93 4.72 8.46 12.85 24.05 9.04 10.466,409 20172 -4.86 4.52 8.16 12.81 24.82 8.92 10.096,416 20173 -4.17 4.49 7.96 12.54 25.72 9.04 10.256,433 20174 -3.53 4.45 7.89 12.54 24.97 8.92 9.446,434 20181 -3.87 4.50 8.00 12.94 25.50 9.19 9.716,481 20182 -3.46 4.66 8.14 13.27 26.18 9.50 10.176,848 20183 -3.44 4.89 8.46 13.77 25.35 9.67 10.256,897 20184 -4.09 4.79 8.56 13.88 25.59 9.58 10.207,030 20191 -3.42 4.79 8.41 13.78 25.54 9.53 10.03

A P A R T M E N T I N D E X

1,284 20153 0.72 6.81 11.30 17.07 27.67 12.44 9.401,294 20154 0.36 6.83 11.66 16.68 27.84 12.42 8.961,312 20161 -0.66 5.89 10.73 15.55 25.51 11.32 8.891,319 20162 -1.84 5.52 9.37 14.36 23.79 10.17 8.581,309 20163 -2.82 4.98 8.54 12.67 21.15 8.91 8.031,313 20164 -4.56 3.92 7.39 11.41 17.69 7.28 7.121,373 20171 -4.41 3.64 6.94 10.84 17.77 7.03 7.031,403 20172 -4.45 3.44 6.66 10.67 18.15 6.99 7.011,370 20173 -2.83 3.37 6.41 9.93 17.40 6.75 6.401,372 20174 -1.96 3.43 6.12 9.31 15.53 6.46 5.671,364 20181 -1.42 3.73 6.11 9.37 15.34 6.61 5.531,370 20182 -1.06 3.80 6.09 9.45 16.00 6.64 5.441,361 20183 -1.94 3.56 6.03 9.30 15.72 6.59 6.711,359 20184 -2.17 3.53 5.93 9.10 15.38 6.29 5.961,392 20191 -2.84 3.33 5.85 8.82 14.62 6.06 5.97

H O T E L I N D E X

116 20153 -9.79 6.88 12.02 18.24 33.40 13.04 12.59110 20154 -2.69 6.05 11.12 16.89 26.98 11.70 10.57109 20161 -5.09 6.01 10.85 16.01 26.07 11.60 10.51110 20162 -7.66 4.82 11.31 16.44 28.86 11.24 11.11107 20163 -15.12 3.58 10.70 16.35 26.45 9.82 11.59101 20164 -11.91 2.61 9.44 14.24 25.28 8.64 10.83104 20171 -12.03 2.81 9.51 13.55 22.86 7.46 10.65100 20172 -8.42 2.00 7.95 11.52 21.12 7.17 9.09

99 20173 -11.11 1.37 6.27 10.92 17.82 5.46 8.5098 20174 -15.35 0.73 5.99 9.77 17.45 4.96 8.8383 20181 -12.67 2.40 7.40 11.45 18.71 5.99 9.2777 20182 -12.07 1.68 7.92 10.53 18.45 5.91 9.0976 20183 -15.38 3.66 7.39 10.89 20.12 6.79 9.0575 20184 -17.26 1.72 6.32 10.07 16.44 5.74 8.6174 20191 -12.31 1.63 6.08 9.37 15.05 5.48 7.74

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NSS T A T I S T I C A L A P P E N D I X

R O L L I N G O N E Y E A R T O T A L R E T U R N Quartile Breakpoints Numberof YrEnded: 5th Lower Upper 95th Mean Standard Properties Yr:Qtr Percentile Break Median Break Percentile Return Deviation

I N D U S T R I A L I N D E X

2,514 20153 -0.01 9.09 14.38 20.69 34.58 15.52 11.682,495 20154 -0.62 8.49 13.68 20.13 35.14 14.99 12.022,469 20161 -1.43 8.55 13.54 19.08 32.81 14.41 11.232,461 20162 -0.93 8.14 12.65 18.68 31.73 13.83 11.142,731 20163 -2.71 7.24 11.16 16.85 28.59 12.16 10.692,805 20164 -2.62 6.74 10.88 15.81 27.89 11.76 11.122,623 20171 -1.93 6.78 10.76 15.59 28.02 11.85 10.932,645 20172 -1.97 6.73 10.79 16.43 29.16 12.07 10.652,694 20173 -1.70 6.92 10.89 16.66 31.30 12.65 11.442,677 20174 -0.97 7.01 11.21 17.07 30.11 12.65 10.302,708 20181 -0.87 7.26 11.63 18.09 31.95 13.16 10.662,751 20182 -0.04 7.64 12.06 18.68 32.14 13.69 10.713,079 20183 0.89 8.07 12.48 18.36 29.51 13.69 10.383,132 20184 1.55 8.55 12.82 18.45 29.91 14.01 10.383,162 20191 2.43 8.36 12.79 18.27 29.57 13.97 10.22

O F F I C E I N D E X

1,193 20153 -9.18 5.74 10.57 16.48 29.51 11.15 16.051,142 20154 -8.27 5.92 10.60 16.15 29.78 11.34 16.191,144 20161 -6.35 5.66 10.27 15.65 27.25 10.53 11.431,155 20162 -5.89 4.96 9.03 14.25 26.08 9.76 11.751,139 20163 -8.16 3.32 7.98 12.65 23.63 8.15 11.611,188 20164 -9.36 3.04 7.20 11.37 19.82 6.86 9.981,186 20171 -8.58 2.74 6.59 10.21 18.41 6.49 11.191,186 20172 -7.99 2.39 6.21 9.88 19.87 6.19 10.911,196 20173 -8.32 2.36 6.19 9.81 20.17 6.06 9.551,212 20174 -7.99 2.94 6.38 9.84 18.09 6.34 9.121,200 20181 -6.92 2.89 6.48 10.10 18.05 6.46 8.881,194 20182 -6.91 3.14 6.81 10.50 19.03 6.80 9.221,244 20183 -6.20 3.39 6.80 10.75 20.10 7.03 9.061,236 20184 -6.45 3.08 6.84 10.49 19.96 6.92 9.131,250 20191 -6.45 3.25 6.88 10.54 20.00 7.04 10.10

R E T A I L I N D E X

988 20153 -1.76 7.65 11.98 17.62 31.08 12.99 11.86981 20154 -0.68 7.99 12.57 18.63 33.60 13.88 12.04

1,010 20161 -1.11 7.16 11.68 16.93 28.61 12.66 11.031,009 20162 -1.67 6.43 10.62 15.51 25.43 11.23 10.571,025 20163 -3.32 6.02 9.25 14.20 25.61 10.06 9.041,027 20164 -4.23 5.26 8.19 12.02 19.24 8.45 8.601,053 20171 -6.24 4.86 7.65 10.89 18.77 7.71 10.481,067 20172 -7.49 4.55 7.06 10.14 17.22 6.87 9.191,052 20173 -6.06 3.93 6.57 9.37 15.70 6.44 9.111,072 20174 -7.29 3.57 6.51 9.14 16.22 6.04 8.231,076 20181 -6.29 3.10 6.13 8.71 15.01 5.78 8.701,077 20182 -6.34 2.66 5.99 8.58 15.10 5.70 10.641,082 20183 -8.79 2.26 5.93 8.64 14.93 5.31 10.721,092 20184 -12.63 1.02 5.42 8.22 14.42 4.21 9.751,150 20191 -9.90 1.96 5.49 8.15 13.96 4.49 8.30

26

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AL

L N

PI

TO

TA

LS

S T A T I S T I C A L A P P E N D I X MOUNTAIN CHART OF THE OVERALL NPI TOTALS

The

num

bers

con

tain

ed in

the

mou

ntai

n ch

art a

bove

are

tota

l ann

ualiz

ed re

turn

figu

res f

or a

ll pr

oper

ties i

n th

e N

CRE

IF P

rope

rty In

dex

(NPI

) as o

f the

four

th q

uarte

r of e

ach

resp

ectiv

e ca

lend

ar y

ear.

The

char

t is i

nter

pret

ed th

e sa

me

way

as a

city

-to-c

ity m

ileag

e ta

ble.

For

exa

mpl

e, to

de

term

ine

the

tota

l ann

ualiz

ed re

turn

for t

he N

PI fr

om 1

978

thro

ugh

1987

, sim

ply

follo

w th

e fir

st c

olum

n of

num

bers

dow

n to

the

tent

h ro

w. T

he re

sulti

ng fi

gure

repr

esen

ts th

e re

turn

an

inve

stor

wou

ld h

ave

achi

eved

if h

e w

as h

oldi

ng a

por

tfolio

rep

rese

ntat

ive

of th

e N

CRE

IF “

bas-

ket o

f pro

perti

es”

for 1

0 ye

ars b

egin

ning

in th

e in

cept

ion

year

of t

he N

PI.

The

figu

res

illus

trat

ed in

the

mou

ntai

n ch

art b

elow

are

the

tota

l com

poun

ded

retu

rn fi

gure

s fo

r al

l pro

pert

ies

in th

e N

PI. U

sing

the

sam

e ex

ampl

e as

abo

ve, d

eter

min

ing

the

tota

l co

mpo

unde

d re

turn

for

the

NPI

from

197

8 th

roug

h 19

87 s

impl

y re

quir

es fo

llow

ing

the

first

col

umn

of n

umbe

rs d

own

to th

e te

nth

row.

All

retu

rns

are

com

poun

ded

quar

terl

y an

d ar

e no

min

al (

not a

djus

ted

for

infla

tion)

.

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

1978

16.1

1979

18.3

20.5

1980

18.2

19.3

18.1

1981

17.8

18.4

17.3

16.6

1982

16.1

16.1

14.6

13.0

9.4

1983

15.6

15.5

14.3

13.0

11.3

13.1

1984

15.3

15.2

14.2

13.2

12.1

13.5

13.8

1985

14.8

14.6

13.7

12.8

11.9

12.7

12.5

11.2

1986

14.1

13.8

12.9

12.1

11.2

11.6

11.1

9.8

8.3

1987

13.4

13.2

12.3

11.5

10.6

10.9

10.3

9.2

8.1

8.0

1988

13.1

12.8

12.0

11.2

10.5

10.7

10.2

9.3

8.6

8.8

9.6

1989

12.6

12.3

11.5

10.8

10.1

10.2

9.8

9.0

8.4

8.5

8.7

7.8

1990

11.8

11.5

10.7

10.0

9.2

9.2

8.7

7.8

7.2

6.9

6.5

5.0

2.3

1991

10.5

10.0

9.2

8.4

7.7

7.5

6.8

5.8

4.9

4.3

3.4

1.3

-1.7

-5.6

1992

9.4

9.0

8.1

7.3

6.5

6.2

5.5

4.5

3.6

2.8

1.8

-0.1

-2.6

-4.9

-4.3

1993

8.9

8.4

7.6

6.9

6.1

5.8

5.1

4.1

3.3

2.6

1.7

0.2

-1.6

-2.9

-1.5

1.4

1994

8.7

8.3

7.5

6.8

6.1

5.8

5.2

4.4

3.6

3.1

2.4

1.2

-0.1

-0.6

1.1

3.9

6.4

1995

8.7

8.3

7.5

6.9

6.2

6.0

5.4

4.6

4.0

3.5

3.0

2.1

1.2

0.9

2.7

5.1

7.0

7.5

1996

8.8

8.4

7.7

7.1

6.5

6.3

5.8

5.1

4.6

4.2

3.8

3.1

2.4

2.4

4.1

6.4

8.1

8.9

10.3

1997

9.0

8.7

8.0

7.5

6.9

6.8

6.3

5.8

5.3

5.0

4.8

4.2

3.8

4.0

5.7

7.8

9.5

10.5

12.1

13.9

1998

9.3

9.0

8.5

7.9

7.4

7.3

7.0

6.5

6.1

5.9

5.8

5.4

5.1

5.5

7.2

9.2

10.8

11.9

13.5

15.1

16.2

1999

9.4

9.1

8.6

8.1

7.7

7.6

7.2

6.8

6.5

6.3

6.2

5.9

5.7

6.1

7.7

9.5

10.9

11.8

12.9

13.8

13.8

11.4

2000

9.6

9.3

8.8

8.3

7.9

7.8

7.5

7.1

6.9

6.8

6.7

6.4

6.3

6.7

8.2

9.8

11.1

11.9

12.8

13.4

13.3

11.8

12.3

2001

9.5

9.2

8.7

8.3

7.9

7.8

7.5

7.1

6.9

6.8

6.7

6.5

6.4

6.8

8.1

9.5

10.6

11.2

11.9

12.2

11.7

10.3

9.7

7.3

2002

9.4

9.1

8.6

8.2

7.8

7.7

7.5

7.1

6.9

6.8

6.7

6.5

6.4

6.8

8.0

9.3

10.2

10.7

11.1

11.2

10.7

9.4

8.7

7.0

6.7

2003

9.3

9.1

8.6

8.2

7.9

7.8

7.5

7.2

7.0

6.9

6.9

6.7

6.6

6.9

8.0

9.2

10.1

10.5

10.8

10.9

10.4

9.3

8.8

7.7

7.9

9.0

2004

9.5

9.3

8.9

8.5

8.1

8.1

7.9

7.6

7.4

7.3

7.3

7.1

7.1

7.5

8.5

9.7

10.5

10.9

11.2

11.4

11.0

10.2

9.9

9.3

10.0

11.7

14.5

2005

9.9

9.7

9.3

8.9

8.6

8.6

8.4

8.1

8.0

8.0

8.0

7.9

7.9

8.2

9.3

10.4

11.2

11.7

12.1

12.3

12.1

11.5

11.5

11.4

12.5

14.4

17.2

20.1

2006

10.1

9.9

9.5

9.2

8.9

8.9

8.7

8.5

8.4

8.4

8.4

8.3

8.4

8.8

9.8

10.9

11.6

12.1

12.5

12.7

12.6

12.1

12.3

12.3

13.3

15.0

17.0

18.3

16.6

2007

10.3

10.1

9.8

9.5

9.2

9.2

9.0

8.8

8.7

8.7

8.8

8.7

8.8

9.2

10.2

11.2

11.9

12.4

12.8

13.0

12.9

12.5

12.7

12.8

13.7

15.1

16.7

17.5

16.2

15.8

2008

9.7

9.5

9.1

8.8

8.6

8.5

8.4

8.1

8.0

8.0

8.0

7.9

7.9

8.2

9.1

10.0

10.6

10.9

11.2

11.2

11.0

10.5

10.4

10.2

10.6

11.2

11.7

11.0

8.1

4.1

-6.5

2009

8.8

8.5

8.2

7.8

7.5

7.5

7.3

7.0

6.8

6.8

6.7

6.6

6.5

6.7

7.5

8.2

8.6

8.8

8.9

8.8

8.4

7.7

7.3

6.8

6.7

6.7

6.3

4.8

1.2

-3.4

-11.

8-1

6.8

2010

8.9

8.7

8.3

8.0

7.7

7.7

7.5

7.2

7.1

7.0

7.0

6.9

6.8

7.0

7.8

8.5

8.9

9.1

9.2

9.1

8.7

8.1

7.8

7.4

7.4

7.5

7.3

6.1

3.5

0.5

-4.2

-3.0

13.1

2011

9.1

8.8

8.5

8.2

7.9

7.9

7.7

7.5

7.3

7.3

7.3

7.2

7.1

7.4

8.1

8.8

9.2

9.4

9.5

9.4

9.1

8.6

8.3

8.0

8.1

8.2

8.1

7.2

5.2

3.1

0.1

2.4

13.7

14.3

2012

9.1

8.9

8.6

8.3

8.0

8.0

7.8

7.6

7.5

7.4

7.4

7.3

7.3

7.5

8.2

8.9

9.3

9.4

9.5

9.5

9.2

8.7

8.5

8.2

8.3

8.4

8.4

7.6

6.0

4.3

2.1

4.4

12.6

12.4

10.5

2013

9.1

9.0

8.6

8.4

8.1

8.1

7.9

7.7

7.6

7.6

7.5

7.5

7.4

7.7

8.3

9.0

9.3

9.5

9.6

9.6

9.3

8.9

8.7

8.4

8.5

8.7

8.6

8.0

6.6

5.2

3.6

5.7

12.2

11.9

10.8

11.0

2014

9.2

9.0

8.7

8.5

8.2

8.2

8.0

7.8

7.7

7.7

7.7

7.6

7.6

7.8

8.5

9.1

9.5

9.6

9.7

9.7

9.5

9.0

8.9

8.7

8.8

8.9

8.9

8.4

7.2

6.0

4.7

6.7

12.1

11.9

11.1

11.4

11.8

2015

9.3

9.1

8.8

8.6

8.4

8.3

8.2

8.0

7.9

7.9

7.9

7.8

7.8

8.1

8.7

9.3

9.6

9.8

9.9

9.9

9.7

9.3

9.2

9.0

9.1

9.3

9.3

8.8

7.8

6.8

5.7

7.6

12.3

12.2

11.7

12.0

12.6

13.3

2016

9.3

9.1

8.8

8.6

8.4

8.3

8.2

8.0

7.9

7.9

7.9

7.8

7.8

8.0

8.6

9.2

9.6

9.7

9.8

9.8

9.6

9.2

9.1

8.9

9.0

9.2

9.2

8.8

7.8

6.9

6.0

7.7

11.7

11.5

10.9

11.0

11.0

10.6

8.0

2017

9.2

9.1

8.8

8.5

8.3

8.3

8.1

8.0

7.9

7.9

7.9

7.8

7.8

8.0

8.6

9.1

9.5

9.6

9.7

9.7

9.4

9.1

9.0

8.8

8.9

9.0

9.0

8.6

7.7

6.9

6.1

7.6

11.1

10.8

10.2

10.2

10.0

9.4

7.5

7.0

2018

9.2

9.0

8.7

8.5

8.3

8.2

8.1

7.9

7.8

7.8

7.8

7.8

7.8

8.0

8.5

9.0

9.3

9.5

9.6

9.5

9.3

9.0

8.9

8.7

8.7

8.9

8.9

8.5

7.6

6.9

6.1

7.5

10.6

10.3

9.7

9.6

9.3

8.7

7.2

6.8

6.7

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

1978

16.1

1979

39.9

20.5

1980

65.2

42.2

18.1

1981

92.6

65.9

37.7

16.6

1982

110.

881

.550

.727

.69.

419

8313

8.4

105.

470

.544

.423

.813

.119

8417

1.4

133.

894

.164

.440

.928

.813

.819

8520

1.9

160.

011

5.9

82.8

56.8

43.2

26.6

11.2

1986

227.

018

1.6

133.

898

.069

.855

.137

.120

.58.

319

8725

3.1

204.

115

2.5

113.

883

.367

.548

.130

.117

.08.

019

8828

7.2

233.

417

6.8

134.

410

1.0

83.7

62.4

42.6

28.2

18.4

9.6

1989

317.

225

9.3

198.

315

2.6

116.

697

.975

.053

.738

.227

.618

.17.

819

9032

6.8

267.

620

5.1

158.

412

1.6

102.

579

.057

.241

.330

.520

.810

.22.

319

9130

2.9

247.

018

8.0

144.

010

9.2

91.1

69.0

48.4

33.4

23.2

14.1

4.1

-3.4

-5.6

1992

285.

723

2.2

175.

813

3.6

100.

383

.061

.842

.127

.818

.09.

2-0

.4-7

.5-9

.6-4

.319

9329

1.1

236.

817

9.6

136.

810

3.0

85.5

64.0

44.1

29.5

19.6

10.7

1.0

-6.3

-8.4

-2.9

1.4

1994

316.

025

8.3

197.

415

1.9

116.

097

.474

.553

.337

.827

.217

.87.

5-0

.3-2

.53.

37.

96.

419

9534

7.4

285.

321

9.8

170.

913

2.3

112.

287

.664

.848

.236

.826

.715

.57.

24.

811

.016

.014

.47.

519

9639

3.4

325.

025

2.8

198.

815

6.2

134.

110

6.9

81.8

63.4

50.9

39.7

27.5

18.3

15.6

22.5

27.9

26.2

18.6

10.3

1997

462.

038

4.0

301.

824

0.3

191.

816

6.6

135.

710

7.1

86.1

71.9

59.2

45.2

34.7

31.7

39.5

45.7

43.7

35.1

25.6

13.9

1998

553.

446

2.7

367.

129

5.6

239.

221

0.0

174.

014

0.7

116.

499

.885

.068

.856

.653

.162

.269

.467

.157

.146

.132

.416

.219

9962

7.6

526.

642

0.2

340.

627

7.8

245.

220

5.1

168.

114

1.0

122.

510

6.0

87.9

74.4

70.5

80.6

88.6

86.1

74.9

62.7

47.5

29.5

11.4

2000

716.

860

3.4

483.

939

4.6

324.

028

7.5

242.

520

0.9

170.

514

9.8

131.

311

1.0

95.8

91.4

102.

711

1.7

108.

996

.382

.665

.545

.325

.012

.320

0177

6.2

654.

652

6.4

430.

635

4.9

315.

726

7.5

222.

819

0.2

168.

014

8.1

126.

311

0.0

105.

311

7.5

127.

212

4.1

110.

695

.977

.655

.934

.120

.47.

320

0283

5.3

705.

556

8.7

466.

438

5.6

343.

729

2.3

244.

620

9.8

186.

016

4.9

141.

612

4.2

119.

213

2.2

142.

513

9.2

124.

810

9.1

89.6

66.4

43.2

28.5

14.5

6.7

2003

919.

577

8.0

628.

951

7.3

429.

338

3.7

327.

527

5.6

237.

721

1.8

188.

716

3.3

144.

413

8.9

153.

016

4.3

160.

714

5.1

127.

910

6.6

81.4

56.0

40.1

24.8

16.3

9.0

2004

1067

.290

5.2

734.

560

6.7

506.

045

3.7

389.

533

0.0

286.

625

6.9

230.

520

1.5

179.

817

3.5

189.

720

2.6

198.

518

0.6

160.

913

6.5

107.

778

.660

.442

.933

.224

.814

.520

0513

01.3

1106

.990

1.9

748.

562

7.5

564.

848

7.7

416.

336

4.1

328.

629

6.8

262.

023

5.9

228.

424

7.8

263.

325

8.3

236.

821

3.3

184.

014

9.3

114.

592

.671

.659

.949

.837

.520

.120

0615

33.9

1307

.210

68.1

889.

374

8.3

675.

158

5.2

502.

044

1.2

399.

736

2.7

322.

029

1.6

282.

930

5.5

323.

631

7.8

292.

826

5.2

231.

119

0.7

150.

112

4.6

100.

086

.574

.760

.340

.016

.620

0717

92.9

1530

.212

53.3

1046

.188

2.7

798.

069

3.8

597.

352

6.9

478.

943

6.0

388.

935

3.7

343.

536

9.8

390.

738

4.0

355.

032

3.1

283.

623

6.8

189.

716

0.1

131.

811

6.0

102.

485

.762

.235

.115

.820

0816

70.6

1424

.911

65.9

972.

181

9.3

740.

064

2.6

552.

348

6.4

441.

540

1.4

357.

332

4.4

314.

933

9.5

359.

135

2.8

325.

629

5.8

258.

821

5.0

171.

014

3.3

116.

810

2.1

89.3

73.7

51.7

26.4

8.4

-6.5

2009

1372

.311

68.0

952.

679

1.5

664.

459

8.5

517.

544

2.4

387.

635

0.3

316.

928

0.3

252.

924

5.0

265.

428

1.7

276.

525

3.9

229.

119

8.4

162.

012

5.3

102.

380

.368

.057

.444

.426

.15.

1-9

.9-2

2.2

-16.

820

1015

65.4

1334

.310

90.7

908.

476

4.6

690.

159

8.4

513.

645

1.6

409.

337

1.6

330.

229

9.2

290.

231

3.4

331.

832

5.9

300.

327

2.3

237.

519

6.3

154.

912

8.9

103.

990

.178

.163

.442

.718

.81.

9-1

2.0

-5.9

13.1

2011

1802

.915

38.8

1260

.410

52.2

887.

980

2.7

698.

060

1.0

530.

248

1.9

438.

839

1.5

356.

134

5.9

372.

339

3.3

386.

635

7.4

325.

428

5.6

238.

619

1.2

161.

513

3.0

117.

210

3.4

86.7

63.0

35.8

16.5

0.5

7.5

29.2

14.3

2012

2003

.517

11.6

1403

.911

73.7

992.

189

7.9

782.

267

5.0

596.

754

3.3

495.

744

3.3

404.

239

2.9

422.

144

5.4

437.

940

5.6

370.

232

6.3

274.

322

2.0

189.

115

7.5

140.

112

4.9

106.

380

.250

.128

.711

.118

.842

.926

.310

.520

1322

34.6

1910

.615

69.1

1313

.611

12.1

1007

.687

9.1

760.

167

3.2

614.

056

1.1

503.

045

9.6

447.

047

9.4

505.

349

7.0

461.

242

1.9

373.

131

5.4

257.

322

0.9

185.

816

6.4

149.

612

9.0

100.

066

.642

.923

.331

.858

.640

.222

.711

.020

1425

10.5

2148

.217

66.3

1480

.712

55.3

1138

.499

4.8

861.

776

4.6

698.

363

9.2

574.

352

5.7

511.

754

7.9

576.

856

7.5

527.

548

3.5

429.

036

4.5

299.

525

8.8

219.

619

7.9

179.

115

6.1

123.

786

.359

.837

.947

.477

.356

.737

.224

.111

.820

1528

58.5

2448

.020

15.2

1691

.414

36.0

1303

.611

40.7

990.

087

9.9

804.

873

7.8

664.

260

9.1

593.

263

4.3

667.

065

6.5

611.

256

1.3

499.

642

6.4

352.

830

6.6

262.

223

7.6

216.

319

0.2

153.

511

1.1

81.1

56.3

67.1

100.

977

.655

.540

.626

.713

.320

1630

94.3

2651

.021

83.7

1834

.115

58.4

1415

.412

39.6

1076

.895

7.9

876.

980

4.5

725.

166

5.6

648.

569

2.8

728.

171

6.8

667.

861

4.0

547.

446

8.3

388.

933

9.0

291.

126

4.5

241.

521

3.3

173.

712

7.9

95.5

68.8

80.4

117.

091

.867

.951

.936

.822

.48.

020

1733

16.5

2842

.423

42.6

1968

.716

73.8

1520

.913

32.8

1158

.710

31.6

944.

886

7.5

782.

571

8.9

700.

574

8.0

785.

877

3.7

721.

366

3.7

592.

450

7.9

422.

936

9.6

318.

328

9.9

265.

323

5.1

192.

714

3.8

109.

180

.593

.013

2.0

105.

179

.562

.446

.330

.915

.57.

020

1835

46.1

3040

.125

06.7

2107

.717

93.0

1629

.814

29.1

1243

.311

07.6

1015

.093

2.5

841.

877

3.9

754.

380

5.0

845.

383

2.4

776.

471

5.0

638.

954

8.7

458.

040

1.1

346.

431

6.1

289.

825

7.6

212.

416

0.2

123.

292

.610

5.9

147.

611

8.9

91.6

73.3

56.2

39.7

23.2

14.1

6.7

27

ST

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n TOTAL PROPERTY SALES 1ST QUARTER, 2019: 92

Last Reported Net Sales Market Value Proceeds Difference

TOTAL 5,540,532,253 5,543,647,304 3,115,051

Average 60,223,177 60,257,036 33,859

n TOTAL SALES WITHIN PROPERTY TYPE

Gross Net Sales Total Last Reported Net Sales Square MV/Sqft Proceeds/Sqft Number Market Value Proceeds Difference Feet or Units or Unit or Unit of Sales

APARTMENTTOTAL 2,266,580,865 2,261,431,798 -5,149,067 6,407 353,766 352,963 29Average 78,157,961 77,980,407 -177,554

INDUSTRIALTOTAL 545,900,000 553,716,841 7,816,841 3,671,317 149 151 19Average 28,731,579 29,142,992 411,413

OFFICETOTAL 2,045,669,295 2,057,731,463 12,062,168 3,145,212 650 654 29Average 70,540,321 70,956,257 415,937

RETAILTOTAL 653,882,093 642,789,461 -11,092,632 2,623,149 249 245 14Average 46,705,864 45,913,533 -792,331

28

NC

RE

IF

TI

MB

ER

LA

ND

IN

DE

X

T I M B E R L A N D I N D E X

STEADY TIMBERLAND INCOME OFFSET BY APPRECIATION IN FIRST QUARTER 2019

The NCREIF Timberland Property Index (TPI) posted a 0.11% return for the first quarter of 2019, decreasing 64 basis points from the previous quarter. Income (EBITDDA) returns made up 0.71% of the return, while appreciation accounted for -0.59%. The first quarter saw most of the income return offset by a decreasing return in appreciation.

First Quarter ResultsMarket value for the total NCREIF TPI

increased in the first quarter of 2019, from $23.1 billion to $23.7 billion. The primary gains in market value came from the South region, with a 3.12% increase to $14.9 billion from the previously reported ending market value. The Northwest and Northeast both saw small decreases in market value in the period. Even with the overall increase in market value, there were 6 properties fewer than the prior quarter in the total timberland index, with $322M of land sales during the period. With the increase in market value quarter over quarter, and the impact from these sales, as well as potential movement of properties within the index, are likely drivers for the negative appreciation found in the South and Northeast regions at -0.65% and -1.02%, respectively.

Income returns across each region were within 15 basis points of the 0.71% total timberland return. The Northeast region saw the largest quarter-over-quarter change, going from 1.53% to 0.60%. The Lake States region was the only region to improve (23 basis points) in the quarter, reporting a 0.57% income return.

One Year Rolling ReturnsThe TPI reported a year-over-year total return of 2.38% for the first quarter of 2019. The index was brought

down by low returns found within the South region, posting a 0.14% return over the past year. The South region consisted of a 62% average market value of the TPI over the stated period. The Northwest region presented the best total returns at 7.75%.

Over the past year, appreciation return provided a larger impact between the two components of returns. The Northwest recognized a 3.38% appreciation return, while the other regions experienced flat or negative appreciation returns. Income returns had around a 100 basis points spread when regional returns were compared to the TPI at 3.07%. The Northwest and Northeast posted Income returns of 4.27% and 4.19%, respectively.

Evan AmanoSenior Performance AnalystCampbell Global

T I M B E R L A N D T O T A L R E T U R N S

Total Property NPI Timberland Count South Northwest Northeast Lake States

1stQtr2019 1.80 0.11 447 0.04 0.25 -0.42 0.734thQtr2018 1.37 0.75 453 0.12 2.06 2.72 -1.22OneYear 6.83 2.38 0.14 7.75 4.56 0.35ThreeYears 7.07 3.27 2.08 6.85 1.53 1.85FiveYears 9.13 4.63 3.81 7.39 2.60 3.40TenYears 8.51 3.74 2.30 7.94 1.66 4.18

T I M B E R L A N D E B I T D D A R E T U R N S

Total NPI Timberland South Northwest Northeast Lake States

1stQtr2019 1.11 0.71 0.70 0.77 0.60 0.574thQtr2018 1.11 0.77 0.70 0.90 1.53 0.33OneYear 4.55 3.07 2.58 4.27 4.19 2.06ThreeYears 4.65 2.90 2.61 3.77 3.01 2.04FiveYears 4.83 2.83 2.63 3.43 2.85 2.18TenYears 5.46 2.67 2.38 3.57 2.08 1.33

T I M B E R L A N D A P P R E C I A T I O N R E T U R N S

Total NPI Timberland South Northwest Northeast Lake States

1stQtr2019 0.69 -0.59 -0.65 -0.52 -1.02 0.174thQtr2018 0.26 -0.02 -0.58 1.16 1.19 -1.56OneYear 2.20 -0.67 -2.39 3.38 0.37 -1.68ThreeYears 2.34 0.36 -0.52 2.99 -1.45 -0.19FiveYears 4.14 1.76 1.15 3.86 -0.24 1.20TenYears 2.93 1.06 -0.08 4.26 -0.40 2.82

29

The NCREIF Farmland Index (“NFI”) ended the first quarter 2019 with 901 properties and a new record market value of $10.35 Billion. Over the past decade, the index has experienced an impressive growth in total market value increasing fivefold from $1,798 billion at the end of 2008 to $10.35 billion at the end of 1Q 2019. The increase has been driven by the net addition of new properties (+500) coupled with a

healthy annualized appreciation level of 4.50% over the past decade.

The first quarter of the year is normally a slow quarter for the harvest of many agricultural commodities. For this past quarter, the NFI had total quarter returns of 0.70% compared to 1.32% the first quarter a year ago. While the income for the first quarter was 0.54% and slightly higher than the 0.51% last year’s same quarter, appreciation returns were lower at 0.16% versus 0.81% the same time last year.

The permanent crops sub-index, which accounted for 37% of the total NFI value as of the end of March 2019, continued

delivering stable total annualized returns of 6.44% (6.16% income and 0.30% appreciation returns). While the properties in the Pacific West have generated high single digit returns in the past years, prices for some of the commodities grown on this region, such as tree nut crops (i.e. almonds, walnuts), are returning to long-term averages which may reduce future quarterly income returns at the property level.

The annual cropland category posted total annual returns of 5.90%, driven by income and appreciation returns of 3.49% and 2.35%, respectively. On a regional basis, the Pacific Northwest has continued generating strong total returns over the past quarters driven by higher valuations. In fact, this region posted a 17.24% total return over the past year of which 13.85% was related to appreciation returns. As of the end of March 2019, annual cropland in the Southeast generated the second strongest total annual returns at 10.53% (4.01% income and 6.33% appreciation returns). On the other hand, lower commodity prices for annual row crops (i.e. corn,

soybeans), as compared to prior years, continue to put downward pressure on farmers’ operating margins and land values in the Corn Belt Region, especially for land with below average productivity levels. This region has seen declines in appreciation rates for the past five years and this trend may continue in future quarters. On-going trade disputes with key trading partners, higher beginning inventories, and projected ample global supplies are expected to keep grain prices stagnant. Additional reductions in land values for this region could be expected for the foreseeable future.

The U.S. agricultural economy may face short-term challenges in some commodity sectors, but the long-term international and domestic fundamentals remain strong.

Juan David Castro-AnzolaDirector – Eastern RegionPGIM Agricultural Investments

NC

RE

IF

FA

RM

LA

ND

IN

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XF A R M L A N D I N D E X

NFI CONTINUES TO DELIVER STABLE RETURNS AMID STRONG MARKET VOLATILITY

C R O P T Y P E D I ST R I B U T I O N

1 year returns ending 3/31/2019

Crop Type Number of Properties

Market Value $ Millions

Income Return

Appreciation Return Total Return

Annual-Commodity 469 3578 3.1% 1.28% 4.41%Annual-FreshProduce 44 832 3.55% -10.29% -7.02%Annual-AllOther 155 2140 4.05% 4.68% 8.87%Annual-Total 668 6551 3.49% 2.35% 5.9%

Permanent-Apples 20 172 -4.44% -2.19% -6.59%Permanent-Almonds 62 954 6.06% -0.8% 5.23%Permanent-Citrus 14 226 5.67% 0.38% 6.08%Permanent-Pistachios 18 532 14.67% -2.06% 12.56%Permanent-WineGrapes 75 1565 5.51% 2.19% 7.69%Permanent-AllOthers 45 355 2.36% -0.18% 2.17%Permanent-Total 233 3804 6.16% 0.3% 6.44%

TOTAL 901 10354 4.5% 1.54% 6.08%

*IncludesCorn,Soybean,Cotton,Wheat,Rice**Includesgroundprimarilyusedtoproducefreshvegetablesorfreshfruit***IncludesAllvarietiesofOranges(FreshandJuice),Lemons,andAvocados

FARMLAND PROPERTY DISTRIBUTION BY PROPERTY TYPE AND REGION

Property TypeNumber of Properties

Market Value $ Millions

AnnualCropland 668 6,551PermanentCropland 233 3,804

Total 901 10,354

PacificWest 224 4,159PacificNorthwest 55 647CornBelt 245 1,044DeltaStates 137 2,169Southeast 64 632Mountain 75 902SouthernPlains 22 248LakeStates 44 274Other 35 279

Total 901 10,354

F A R M L A N D I N C O M E A N D A P P R E C I A T I O N R E T U R N S

Total Property Market Income Appreciation Return Count Value

1stQtr2019 0.54 0.16 0.70 901 10,354,420,2364thQtr2018 2.19 0.66 2.85 900 10,169,500,380OneYear 4.50 1.54 6.08ThreeYear 4.77 1.60 6.43FiveYear 5.49 2.62 8.21SevenYear 6.29 4.70 11.17TenYear 6.42 4.50 11.10Inception 6.76 4.29 11.21

F A R M L A N D T O T A L R E T U R N S

Total Total Regional Farmland NPI Farmland Index Pacific West Pacific Northwest Corn Belt Delta Southeast

1stQtr2019 1.80 0.70 (0.16) 0.35 0.56 1.02 3.714thQtr2018 1.37 2.85 5.23 (0.27) 0.53 2.06 1.00OneYear 6.83 6.08 6.99 7.79 2.53 5.91 10.35ThreeYear 7.07 6.43 8.44 9.71 1.33 4.38 7.86FiveYear 9.13 8.21 12.88 7.32 0.38 4.63 7.73SevenYear 9.61 11.17 16.37 10.29 4.64 7.73 9.28TenYear 8.51 11.10 14.92 7.92 8.07 9.06 7.50Inception 9.16 11.21 13.53 7.15 10.13 9.78 8.82

Published by

The National Council of Real Estate Investment Fiduciaries

Copyright © 2019 by the National Council of Real Estate Investment Fiduciaries. All rights reserved.

This information is proprietary and may not be reported in whole or in part without written permission. The underlying data and text has been obtained from sources considered to be reliable; the information is believed to be accurate, but is not guaranteed. This report is for information purposes only and is not to be an offer, solicitation, or recommendation with respect to the purchase or sale of any security or a recommendation of the services supplied by any money management organization.

For information contact:

NCREIFAon Center200 E. Randolph Street, Suite 5135Chicago, IL 60601Telephone: (312) 819-5890Facsimile: (312) 819-5891Internet Address: www.NCREIF.org

NCREIF Staff and Consulting StaffDan Dierking – PresidentStacy A. Gaskins – Chief Operating OfficerJeanine Olson – Project ManagerAmy Hannon – Data Products ManagerJoe D’Alessandro – Director of Real Estate Performance MeasurementRay Belliveau – Director of Member ServicesFabiana Lotito – Program ManagerMarybeth Kronenwetter – Director, Reporting Standards James Lenon – Sr. SQL/ Business Intelligence DeveloperPaul Abhishek – Data ArchitectTamara Pendley – Meeting and Membership Services Brianne Schultz – Administrative AssistantJeffrey Fisher – Consulting Education and Research AdvisorKevin Scherer – Consulting Product Development AdvisorJamie Kingsley – Consulting Performance Reporting Advisor

Effective November 2018NCREIF Board of DirectorsOfficersBoard Chair James Strezewski – Blue Vista Capital Management, LLCChair-Elect Charles G. Dannis – National Valuation Consultants, Inc.Treasurer Neal Armstrong – BNY Mellon Secretary Candice W. Todd – Morgan Stanley Real Estate

DirectorsStephanie H. Brower – Russell Investments Tyler Brown – Barings, LLCJohn Ehli – DWSBlake Eagle – FounderThomas Lee – NYSTRSSimon Mallinson – Real Capital AnalyticsMaritza Matlosz – MetLifePaul Mouchakkaa – CalPERSCatherine Polleys – Aon Service Corporation

NCREIF AmbassadorsTom AnathanDavid BradfordBarbara CambonJoyce FraterJim O’KeefeBill Ramseyer

NCREIF Standing Committee ChairsAccounting Benay Kirk, Alter Domus US

Eric Mack, USAA Real Estate Company

Daily Pricing Meighan Phillips, Principal Real Estate Investors Sarah Gal, Callan LLC

Farmland Rich Matheson, Utah Retirement Systems

Information Management Maritza Matlosz, MetLife Investment Management

Performance Measurement Matthew Gilbert, UBS Realty Investors Brandon Millen, Intercontinental Real Estate Corp. Erik Gilliland, Invesco Real Estate

Plan Sponsor Greg Arendt, CalSTRS Devon Olson, Utah Retirement Systems

Research Richard Kleinman, LaSalle Investment Management, Inc. Chris Fruy, Heitman Capital Management

Timberland Evan Amano, Campbell Global LLC

Valuation Amy White, Invesco Real Estatel

www.agreenresult.com

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