Understanding and Querying the NCREIF Database Jeff Fisher, Indiana University Dan Dierking, NCREIF

Transcription

1 Understanding and Querying the NCREIF Database Jeff Fisher, Indiana University Dan Dierking, NCREIF

2 What we will Discuss Review Calculation and Use of the NPI Other uses of the NCREIF database Cash flow and NOI Indices Custom indices and benchmarks Vacancy trends Appraisal based vs. Transaction indices IRRs (vs. time weighted returns) Valuation trends - e.g., capitalization (cap) rates Income and expense trends Risk analysis Derivative based on NPI Attribution analysis Query tool (New)

3 Where do the returns come from? Easy for publicly traded assets. E.g., for stocks: return = dividend yield + % change in price For bonds: return = interest + % change in price NCREIF formed to provide returns for private real estate held by institutional investors: return = cash flow yield + % change in value Change in value based on appraised values for private real estate NCREIF has traditionally used income rather than cash flow yield for the income return with the change in value being net This document of was capital presented during the expenditures 2009 NCREIF Annual Conference.

4 What s the NPI? The NCREIF Property Index (NPI) provides returns for real estate to compare to other asset classes It represents the return for institutionallyowned, private real estate The components of total return include: Income Appreciation / depreciation

5 NPI is Historical Returns These returns indicate what real estate actually earned in the past. The expected future return may be quite different. If investors require higher returns in the future (interest rates rising, additional risk), that can drive down current prices and historic returns (and vice versa).

6 Why NCREIF Index is Important 1. Track the historical performance of real estate investments. 2. Compare the performance of real estate with other asset classes like stocks and bonds. 3. Benchmark the performance of investment managers. 4. Do an attribution analysis as to why manager performed differently than the index. 5. Develop risk measures for real estate. 6. Research the historical relationship between the performance of the indices and economic events. 7. Forecast index for different property sectors and locations. 8. Asset Allocation (across asset classes, across borders and within the real estate asset class). 9. Use derivatives based on index as part of investment strategy. 10. Use the NCREIF database to analyze other trends factors underlying the NPI calculation, e.g. expenses, vacancy etc.

7 What is the Universe of Properties in the NPI? Operating properties only Property types - apartments, hotels, industrial properties, office buildings, and retail Can be wholly owned or in a joint venture structure and reported as if wholly owned. Reported on a non-leveraged basis even if property is leveraged. Owned/controlled by a qualified tax-exempt institutional investor or its designated agent Existing properties only (no development projects) The accounting of the property must be performed using market value accounting

8 What is an operating property? For a newly developed property, operating is defined as reaching 60% occupancy or having been available for occupancy for a year from its certificate of occupancy (CO). If a property has been recently purchased with a "redevelopment" strategy, and the property is undergoing substantial expansion or re-tenanting, rehabilitation or remodeling, the property is defined as operating when occupancy reaches 60%. All existing properties (not recently developed or undergoing redevelopment as covered above) that are purchased regardless of current occupancy are defined as operating properties. Note that once a property is in the index it stays in the index even if occupancy drops below 60% unless it is undergoing redevelopment and no longer considered an operating property.

9 NCREIF Database 1977Q4 to Present, Property Descriptor and Quarterly Financial Performance Data Currently 6,123 properties with a market value over $250 billion included in the NCREIF Property Index (NPI) Data on over 1,000 ($60 billion) of non NPI qualifying properties, Non- operating, e.g., pre-development land, development properties, properties in initial lease-up Non-core property types, e.g., senior living, parking, etc. Also over 7,000 ($72 billion) sold properties over time.

10 Descriptive Data Acquisition date and original investment cost Physical attributes (size, age, etc.) Location (address, region, division, CBSA or division, zip code) Sale date, gross sale price, net sales proceeds Fund type, e.g. open end fund, closed end fund, separate account Ownership structure, e.g., joint venture

11 Quarterly Performance Data Net operating income Detailed income and expense data starting first quarter of 2000 (base rent, reimbursements, property taxes, insurance etc. adding to NOI) Capital expenditures Detailed Capital Expenditures starting first quarter of 2000 (Tenant Improvements, Leasing Commissions, Building Improvements, Building Expansion) Current market value Percent of space leased Loan payment, interest, principal and balance for leveraged properties

12 What Happens to a Sold Property? Actual sale price used to calculate return in quarter sold (gory details later) Historic information remains in the database The sold property database includes more about 7,000 properties

13 The Database: Beyond Core Historically data only collected on core properties (office, industrial, retail and apartment) plus hotels In 2002, NCREIF members began contributing data on: Entertainment Land Parking Senior Living Health Care Manufactured Housing Self-Storage

14 What Else is in the Database? Now includes properties owned by taxable entities. Also includes non-stabilized properties: Properties in initial lease-up Developments Redevelopments Expansions

15 What Can You Do With It? Compare performance of properties by property type, size, age, location, fund type and other characteristics Identify trends in cap rates Track vacancy rates over time and across property types Analyze trends in expenses, capital expenditures & net operating income And much more

16 Examples of Research Questions Do larger properties perform better than smaller properties? Do newer properties perform better than older properties? How does risk decrease as we add properties to a portfolio? Is it more important to diversify by property type or location? Do high growth areas perform better than lower growth areas? Do renovated properties perform better than ones not renovated? Does it pay to put additional capital expenditures into properties? What properties are more likely to sell in an up or down market? Do riskier properties perform better than less risky properties? Does location next to transit lines or urban regeneration zones matter? Do energy star properties perform better?

17 NPI Database Growth $254 billion $328 Billion Hotels 3% Apartments 24% Retail 20% $32.7 Billion $41.0 Billion Industrial 15% $1.2 Billion $11.5 Billion Office 38%

18 As of

19 Sector Allocation: Shifting Preferences 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Hotel Quarterly Shares of Period-End Market Values Retail Office Industrial Apartment Sources: NCREIF; Prudential Real Estate Investors

20 Allocation by CBSA Rank CBSAName MV Percent Cumulative Percent 1 NY - New York $36,326,907, % 10.37% 2 DC - Washington $27,411,519, % 18.19% 3 CA - Los Angeles $26,743,752, % 25.83% 4 IL - Chicago $18,622,650, % 31.14% 5 GA - Atlanta $14,501,716, % 35.28% 6 CA - San Francisco $13,975,123, % 39.27% 7 TX - Dallas $11,040,310, % 42.42% 8 TX - Houston $10,632,595, % 45.46% 9 CA - Santa Ana $9,390,801, % 48.14% 10 WA - Seattle $9,172,200, % 50.76% 11 CA - San Diego $9,027,036, % 53.34% 12 CA - Riverside $8,776,557, % 55.84% 13 MA - Boston $8,549,938, % 58.28% 14 AZ - Phoenix $8,408,024, % 60.68% 15 CA - Oakland $8,301,227, % 63.05% 16 CO - Denver $7,060,352, % 65.07% 17 CA - San Jose $6,477,783, % 66.92% 18 TX - Austin $5,207,086, % 68.40% 19 FL - Miami $5,170,977, % 69.88% 20 MA - Cambridge $4,931,718, % 71.29%

21 Simplified Total Return Formula (MV1 - CapX - MV0) + NOI Return = MV0 Return based on change in Value plus NOI (no leverage) Same as a single period IRR if all the NOI came at the end of the period, e.g. end of the quarter. Assumes property could be sold each period Appraised value used to estimate sale price Returns for year are based on chain linking quarterly returns, e.g., [(1 + R 1 ) x (1 + R 2 ) x (1 + R 3 ) x (1 + R 4 )] -1

22 Annualized Returns Returns for more than four quarters (more than one year) can be annualized as follows: 1. Chain link the quarterly returns for each of the N quarters, e.g., (1 + R 1 ) x (1 + R 2 ) x (1 + R 3 ) x. x (1 + R N ) 2. Calculate the N th root of the chain linked quarterly returns from step 1 and then subtract 1. This is the geometric mean of the chain linked returns, e.g., if for 12 quarters (3 years) take the 12 th root of the chain linked returns then subtract 1. This is the average quarterly return. 3. We can annualize the quarterly returns as follows: (1 + average quarterly return) 4 1

23 Arithmetic vs. Geometric TWRRs: Arithmetic average return over 4 quarters: = (r 1 + r 2 + r 3 + r 4 ) / 4 Geometric average return over 4 quarters : = [(1+r 1 )x(1+r 2 )x(1+r 3 )x(1+r 4 ) ] (1/4) 1 Geometric Mean reflects compounding ("chainlinking") of returns -- Earning of "return on return". Geometric Mean is the one most widely used in performance evaluation Each period treated equally regardless of $ invested

24 Year Value Return Return % % % % % Arethmetic mean 0.16% Geometric mean 0.00%

25 Annualized Returns Example Quarter Return (1 + Return) Chain Link 1 2% % % % % % % % % % % % (1.02) x (1.03) An index (1.2267) (1/12) 1 = or % average quarterly return ( ) 4 1 =.0705 or 7.05% annualized Shortcut: (1.2267) (4/12) 1 =.0705 or 7.05% annualized

26 Income Return Return = NOI MV0 Analogous to a cap rate except actual accounting NOI (which can be noisy and seasonal) not projected stabilized NOI No allowance for replacements Some CapX may be expensed

27 Seasonality in Utilities peaks in 3 rd quarter Utilities $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $

28 Capital Return Return = (MV1 - MV0 - CapX ) MV0 Measures change in value (+/-) NET of Capital Expenditures Can not be used to calculate a Price Index need to use capital return before subtracting CapX (available on NCREIF website)

29 Actual formula Return = (MV1 - MV0) + NOI - CapX MV0-1/3 NOI + 1/2 CapX NOI received monthly CapX occurs mid quarter Partial sales omitted from above formula for simplicity (like negative CapX) This is the formula for unleveraged returns (even if property is leveraged) Designed to approximate an IRR for cash flows This document was presented received during the 2009 NCREIF during Annual Conference. the quarter

30 Assume 1/3 of NOI comes at beginning of the quarter and 2/3 of NOI comes at end. MV1 Move to beginning Move to end 1/3 NOI 1/3 NOI 1/3 NOI Month 3 MV0

31 Return = Return = (MV1 + 2/3 NOI) - (MV0-1/3 NOI) MV0-1/3 NOI MV1 - MV0 + NOI MV0-1/3 NOI MV1 1/3 NOI 1/3 NOI 1/3 NOI Month 3 MV0

32 IRR of the monthly cash flows is 1% per month.* 3 Quarterly IRR is (1.01) -1 = 3.03% Using NPI formula (to approximate IRR): Return = $30 / ($1,000 - $10) = 3.03% $1,000 $10 $10 $ Month 3 $1,000 *Could calculate IRR using a financial calculator or, since there is no change in value, the IRR is simply $10/1,000 = 1% per month. The IRR makes the present value of the monthly cash flows equal to the purchase price, i.e., $1,000 = $10/(1.01) + $10/(1.01) 2 + $1,010/(1.01) 3

33 Assume CapX occurs at the middle of the quarter. MV1 0 Move to beginning 1/2 CapX Move to end 1/2 CapX MV0

34 Return = Return = (MV1-1/2 CapX) - (MV0 + 1/2 CapX) MV0 + 1/2 CapX MV1 - MV0 - CapX MV0 + 1/2 CapX MV1 1/2 CapX 1/2 CapX MV0

35 Example Assume: MV0 = $1,000 MV1 = $1,300* CapX = $250 *Includes any increase in value due to CapX

36 IRR of the flows is 2.2% per half quarter. 2 Quarterly IRR is (1.022) -1 = 4.45% Using NPI formula (to approximate IRR)*: Return = (1,300-1, ) / (1, ) = 4.44% $1,300 $250 $1,000 *Return = MV1 - MV0 - CapX MV0 + 1/2 CapX

37 Returns are Value Weighted for NCREIF Index Return for each property weighted by it s beginning of quarter market value (actually the denominator in the formula). Same as adding all NOI s, adding all values, etc. and using totals in the previous formula. Gives the return for the portfolio of NCREIF properties. Another approach is to equal weight, i.e., give each property same weight (available on NCREIF website).

38 NCREIF Returns Return 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% Total Return Income Return Capital Return

39 25% Private Real Estate Returns (Unleveraged) Four Quarter Rolling Total 20% 15% 10% Return 5% 0% -5% -10% -15% -20% -25%

40 Sold Properties Real Nuts and Bolts Before the freeze of the NCREIF Property Index in the 4 th quarter of 2002, sale prices replaced appraised value the prior quarter Sold properties were treated the same as unsold properties in terms of the formula, i.e. in the ending market value Prior quarter return and index level was restated whenever a new quarter released

41 After the freeze NPI Frozen starting 4 th quarter of 2002 Sales starting 1 st quarter of 2003 treated as a partial sale in the NPI formula Sales now affect returns in the quarter the property sells Income, Cap Ex, etc. collected for the partial quarter

42 Comments When sold properties are a high percentage of the properties in a subindex being created The weighting will be dominated by the sold properties The returns will be quarterized as in the previous examples You don t want to calculate an index of just sold properties. But you can calculate an index excluding the sale quarter.

43 Two major types of return measures used in the investment industry: Time-weighted returns (TWRs) constructed from periodic (e.g. quarterly) returns. Dollar-weighted (money-weighted) returns, in particular, the Internal Rate of Return (IRR).

44 The TWRR: Independent of the magnitude of capital invested at each point in time: Not affected by the timing of capital flows into or out of the investment. Is the generally accepted measure of investment performance for the mainstream core portfolio asset classes (stocks & bonds).

45 Another Multi-period Return Measure: The IRR... 0 = CF 0 + CF1 (1+ IRR) + CF 2 (1+ IRR ) CF N (1+ IRR ) N The single rate that discounts all the net cash flows back to a zero NPV. IRR is dollar-weighted It reflects the effect of capital flow timing i.e., the amount of capital invested each period

46 IRR vs. TWR Example Year Market Return Return Relative % % % geom mean 6.32% since inception TWR Investor 1: Invests $4,000 beginning of year 1 and lets it ride (including reinvestment of cash flow). IRR is 6.32%. Investor 2: Invests $1,000 beginning of year 1, $4,000 beginning of year 2 and takes $1,000 off table at beginning of year 3. Income paid to investor. IRR is 4.10%. Investor 3: Invests $2,000 beginning of year 1, takes $1,000 off table at beginning of year 2 and invests $3,000 beginning of year 3. Income paid to investor. IRR is 10.11%.

47 Investor 1 Year Mkt Ret Investment Value Cash flow % % % IRR 6.32%

48 Investor 2 Year Mkt Ret Investment Value Cash flow % % % Investor 3 IRR 4.10% Year Mkt Ret Investment Value Cash flow % % % IRR 10.11%

49 Price Index Return

50 35% NCREIF Returns by Property Type Four Quarter Rolling Total Return (Annual) 30% 25% 20% 15% 10% 5% 0% -5% Year -10% -15% Office Retail Industrial Apartment

51 40% NCREIF Returns by Selected MSA (4 qtr rolling total) Dallas Chicago LA Atlanta Boston 30% Annual Return 20% 10% 0% Atlanta -10% -20% Dallas LA Year -30% Boston

52 NPI provides diversification 40% 30% NCREIF Property Index vs Individual MSAs Dallas Chicago LA Atlanta Boston NPI - All MSAs Annual Return 20% 10% 0% -10% -20% Year -30%

53 Leveraged Returns

54 Leveraged Returns vs NPI 15% Favorable leverage 10% Return 5% 0% -5% % Unfavorable leverage NPI Leveraged Return Year -15%

55 LTV 60% 50% Loan to Value Ratio (Properties with Leverage) 40% 30% 20% 10% Year 0%

56 Percent using Leverage and Implied Interest Rate Percent using leverage 70% 60% 50% 40% 30% 20% 10% Percent (based on MV) using leverage Implied Interest Rate Year 0% % 12% 10% 8% 6% 4% 2% Interest Rate 0%

57 NOI is not Cash Flow Tenant improvements Leasing commissions Building improvements Expansion of building Additional acquisition costs (after quarter purchased) Other capital expenditures TI, Leasing commissions and building improvements averaged about 21% of NOI since the first quarter of 2001.

58 NOI is not Cash Flow Return (annual) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Income Return vs Cash Flow Return (4 quarter running total) NOI Return Cash Flow Return Year-quarter

59 Cap Ex Breakdown BldExp 7% BldImp 27% OtherCapX 9% AcqCost 27% LeaseComm 9% AcqCost LeaseComm TI BldImp BldExp OtherCapX TI 21%

60 Sold Properties in NCREIF Database Property Sales Properties # of Properties Market Value ,000 5,000 4,000 3,000 2,000 1,000 Market Value (millions) 0 Year

61 Properties More likely to Sell Winners (Since inception return for property vs. NPI) Older properties Smaller properties Properties NOT in joint ventures Leveraged properties Based on An Analysis of Determinants of Transaction Frequency of Institutional Commercial Real Estate Investment Property by Fisher, Gatzlaff, Geltner, and Haurin. Real Estate Economics, March 2004.

62 Based on sold props 11% Transaction Cap Rates 4 Qtr Moving Average 10% Cap Rates 9% 8% 7% 6% 5% 4% Year-Quarter

63 Transaction vs Current Value Cap Rates 11% 10% Cap Rates 9% 8% 7% 6% 5% Cap Rates - All Sold Props Current Value (Appraisal) Cap Rates 4% Year

64 NCREIF Current Value Cap Rates by Property Type Cap Rates 12% 11% 10% 9% 8% 7% 6% 5% 4% Apartment Retail Industrial Office Year

65 NCREIF Current Value Cap Rates by Region Cap Rates 12% 11% 10% 9% 8% 7% 6% 5% 4% East West South Midwest Year-Quarter

66 NCREIF NOI Growth (4 quarter moving average) 15% Annual % Change 10% 5% 0% -5% -10% Year-Quarter

67 NCREIF Vacancy by Property Type Vacancy (%) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Office Retail Apartment Industrial Year-quarter

68 NCREIF Vacancy by Region Vacancy (%) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% East West South Midwest Year-quarter

69 NPI Capital Returns vs. Occupancy Return 6% 4% 2% 0% -2% -4% 98% 96% 94% 92% 90% 88% -6% -8% -10% -12% Capital Return Occupancy 86% 84% 82% 80%

70 Operating Data Base rent, overage rent, etc. Property taxes, insurance, maintenance, management, utilities, etc. Operating data includes EOP (before Blackstone) and Prologis 1.4 billion s.f. of properties Accounting data used for audited financial statements NOT survey data 100% coverage no selectivity bias

71 Expenses as % of Income 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% EXP_OTHER EXP_TAX EXP_MGTFEE EXP_INSUR EXP_MNT EXP_UTIL EXP_MKTNG EXP_ADMIN 0.00%

72 Holding Periods Holding Periods for Sold Properties

73 Risk Measures using NPI Standard deviation of returns over time Higher standard deviation means greater risk Correlation of returns, e.g., between real estate and stocks A low correlation indicates diversification benefits

74 Normal Distribution Based on actual returns from 1979 to 2003 Probability Stocks Real Estate -21.5% -18.5% -15.5% -12.5% -9.5% -6.5% -3.5% -0.5% 2.5% 5.5% 8.5% 11.5% 14.5% 17.5% 20.5% 23.5% 26.5% 29.5% 32.5% 35.5% 38.5% 41.5% 44.5% 47.5% Return There is a 68% chance that returns will range from +/- 16.0% from the average return of 14.9% for Stocks, and +/- 6.1% from the average return of 9.3% for Real Estate. 50.5% Note that in a normal distribution, 68% of data points will fall within +/- 1 standard deviation from the mean; 95% within 2 standard deviations; and 99% within 3 standard deviations.

75 Risk vs. Return Risk versus Return Return 3.00% 2.80% 2.60% 2.40% 2.20% 2.00% 1.80% 1.60% 1.40% 1.20% Apartment Industrial Retail Office 1.00% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 2.20% 2.40% 2.60% 2.80% Source: NCREIF Risk

76 Appraisal based indices vs. Transactions based indices Indices like the NCREIF Property Index tend to have less volatility and lag changes in the market because: All properties are not revalued each quarter The appraisals tend to lag transaction price This causes appraised values to be less then transaction prices in an up market and vice versa. This does not mean the appraisal is wrong can t put all weight on most recent comparable sale need confirmation of market shifts

77

78 Value Transaction Prices vs Appraised Values Transaction Appraisal Period

79 Price Change 35% 30% 25% 20% 15% 10% 5% 0% NPI Price Appreciation vs. Transaction Based Index Four Quarter Rolling Total NPI TBI -5% % -15% Year

80 Some observations Should compare your (manager s) returns with an index that has the same appraisal frequency. If you appraise more frequently you will look better in an up market but worse in a down market. If you appraise less frequently you will look worse in an up market but better in a down market.

81 Real Estate vs. Other Asset Classes Cumulative Total Returns NCREIF Equity REITs S&P 500 Government Bonds T-Bills Year

82 CPI Bonds S&P 500 T-Bills NCREIF REITs CPI 1 Bonds S&P T-Bills NCREIF REITs

83 NCREIF vs NAREIT Quarterly Returns NCREIF Returns 8% 6% 4% 2% 0% 85-2% % -6% Year 40% 30% 20% 10% 0% -10% -20% -30% NAREIT Returns -8% -10% NCREIF Equity REITs -40% -50%

84 Derivatives based on NPI Derivatives based on the NPI allow you to receive a return (long) or pay a return (short) based on the performance of the index. Use of Derivatives Get initial or additional real estate exposure to a welldiversified portfolio without purchasing properties Hedge existing real estate investment or lock in profits by shorting the index Adjust allocations by property type by property type swaps

85 Querying the NCREIF Database Yea! The spread is positive over the custom index I created. We need to show a client that we outperformed the NCREIF index. No problem. I will use the new NCREIF query tool. Research Marketing

86 Two Versions of Database Frozen NPI data only. History never changed (unless a significant error found) Research History is revised for Historical data that might be added from a new member Revisions submitted by the manager after the data release Includes non-npi data (other property types and lifecycles Both databases can be queried

87 Examples of Queries Give me returns for properties over 100,000 s.f. Give me returns for properties that are less than 10 years old. Give me cap rates for office properties. Give me the returns for each possible CBSA. What are the returns for properties that have income returns less than 1% each quarter? What are the returns for properties acquired since the year 2000? What are the returns if no sales quarters are included? What is the standard deviation of the returns for properties in the database last quarter?

88 Select Clause Components of a Query Select NOI, MarketValue Select Avg(NOI/MarketValue) as IncomeReturn Select Sum(NOI)/Sum(MarketValue) as IncomeReturn Where Clause Where PropertyType = Office Where Region = E Where PropertyType = Office and Region = E GroupBy Clause GroupBy Year, ProperType, Region

89

90

91 The normal mode is the most user friendly no need to understand the format of queries.

92 Let s skip to step 5 and run the Default Query

93 Results for default query is NPI for nation

94 MVLag1 is the market value last quarter for the same properties. MV will change each quarter because of acquisitions and dispositions. Denom is the denominator used for the NPI. It is precalculated to make queries easier to create.

95 Export results to Excel

96 Export to Excel You can now sort, reformat, export to a database, Word, etc. But don t accidently change any numbers!

97 Return since First Quarter of 2005 (Annualized)

98 Return since First Quarter of 2005 (Annualized) using Index Same answer as before

99 Calendar Year Returns (annualized)

100 Export results to an XML file (see next slide)

101 XML is a way of storing data that can be easily exchanged with other systems (databases, Excel, etc. because it is a text file with the data fields described along with the data.

102 The XML file can be opened into Excel

103 You can save the query to your computer especially if you have made changes to the query (discussed later)

104

105 Select folder and file name to save the file. Type must be XML which is the default.

106 File saved as an XML file You don t have to ever look at this! The select portion of the query Query results Grouped for each quarter of each year.

107 Slightly Simplified Example

108 Could Edit the XML file with an XML editor or even Word Really advanced users only.

109 How it appears in Word.

110 Load a Saved Query

111 Loading multiple saved queries as a batch to run all at once.

112

113 Back to the steps on the main menu Select Research (live) or Frozen NPI database Property Data NPI is official frozen data Property Data Research has historical revisions

114 My manager and all properties but my manager are for data contributing members.

115 Query templates are generic queries set up for the most common types of queries.

116 The NCREIF Library has additional queries and new ones will be added over time to meet user needs.

117 Where clause criteria let you filter the query in a number of different ways.

118 Select combinations of property types and / or subtypes.

119

120 Groupby criteria gives you every possible combination of the specified criteria. If property type is selected you get returns for office and for retail etc.

121 Grouped by Property Type. Returns for each property type for each quarter. Note that the query already had a group by Year and Quarter in it by default.

122

123 I can now add my own WHERE and GroupBy criteria

124

125 Examples of WHERE criteria

126 Using Square Feet Criteria SqFt > 0 AND SqFt < SqFt >1000 AND SqFt < MV / SqFt > 300 AND SqFt > 1000

127 Specifying Geographic Areas Using IN or OR Operators Zip IN ('94132', '90017', '92806', '94089') zip = '94132' OR zip = '90017' OR zip = '92806' OR zip = '94089' Specifying Census Divisions CensusDivFips IN ('09','23','25','33','44','50')

128 Calculations in the Filter Criteria CapEx <.25 * [MVLag1] BalLag1 <.50 * [MVLag1]

129 Unleveraged Returns for Properties with or without Leverage INCL_LV IS NULL INCL_LV = 1 BalanceLag1 = 0 BalanceLag1 / MVLag1 >.90

130 Eliminating Outliers Abs (Totret) < 0.05 Totret > AND Totret < 0.075

131 Same Store (Constant Properties) Analysis [YYYYQ] >= AND [YYYYQ] <= AND StartDate < and EndDate >= If you add NPI=1 to the filter criteria, the result will include only NPI properties. The problem is that the StartDate variable is when the property started in the database whether it is NPI qualifying or not. There is not currently a variable that can be used to indicate when NPI returns start and querying for this would require a subquery that is not possible with the current version of the query tool. So the property count will change for a property that was in the database before it qualified to be in the NPI, or a property that did qualify for the NPI but later did not qualify and was still being reported.

132 Vintage Year Analysis Properties Acquired within a Certain Period [YYYYQ] > AND StartDate >= AND StartDate <=20063 AND EndDate >=20081 AND AcqDate >= and AcqDate <= AND SaleCode <> 'S' AND NPI=1

133 Selecting Properties by Occupancy (Percent Leased) Ranges PercentLeased >.90 PercentLeased >=.70 AND PercentLeased <=.90 PercentLeased <.70 and PercentLeased > 0

134 Using CBSAs and CBSA Divisions CBSAorDiv = CBSA = CBSAorDiv = CBSADiv = Important for GroupBy as well. Do you want just CBSA or just divisions or which ever is available?

135 Combining AND and OR Operators ((PropertyType='O' AND PropertySubtype = 'SU') OR PropertyType = A ) AND ( [MVLag1] < ) AND State = 'CA' AND NPI = 1

136 Returns with No Sale Quarter SaleQtr = 0 You could also create a query that include only properties that have been sold (i.e., only those with a value in the sale quarter field). However, this would be extremely misleading because of the way sales are treated as a partial sale post freeze of the NPI which works for a relatively small number of sales from a portfolio of properties like the NPI but not when there are only sales that are assumed to occur mid quarter.

137 Properties within a Certain Age [Year]-[YrBuilt]<=5 Range

138 Appendix: Fields in the Database YYYYQ Character Year and quarter, e.g., for 2 nd quarter of 2008 Year Character Year, e.g Quarter Character Quarter, e.g., 4 for fourth quarter Period Number Periods start with 1 in and increase each quarter

139 Inc_BRent Number Detail Operating Data Base rent Inc_Cntgnt Number Detail Operating Data Contingent income Inc_Other Number Detail Operating Data other Inc_Reimb Number Detail Operating Data Reimbursement income Inc_Total Number Detail Operating Data calculated total of the income detail

140 Exp_Admin Number Detail Operating Data administrative expense Exp_Insur Number Detail Operating Data insurance Exp_MgtFee Number Detail Operating Data management fee Exp_Mktng Number Detail Operating Data marketing expense Exp_Mnt Number Detail Operating Data maintenance Exp_Other Number Detail Operating Data other Exp_Payrol Number Detail Operating Data payroll Exp_ProFee Number Detail Operating Data property management fee Exp_Tax Number Detail Operating Data property taxes Exp_Total Number Detail Operating Data calculated total of the expense detail Exp_Util Number Detail Operating Data utilities

141 CapEx Number Total capital expenditures CapEx_AddAcqCost Number Cap Ex Detail additional acquisition costs CapEx_BldExpan Number Cap Ex Detail Building expansion CapEx_BldImp Number Cap Ex Detail Building improvements CapEx_LeaseComm Number Cap Ex Detail Leasing commissions CapEx_Other Number Cap Ex Detail Other CapEx_TI Number Cap Ex Detail Tenant improvements CapEx_Tot_Calc Number Cap Ex Detail Calculated sum of the above detail cap ex CapExLag1 Number Cap Ex lagged 1 quarter CapExLag2 Number Cap Ex lagged 2 quarters CapExLag3 Number Cap Ex lagged 3 quarters CapExLag4 Number Cap Ex lagged 4 quarters

142 NOI Number Net operating income reported for NPI NOI_Calc Number Net operating income calculated from detail income and expenses reported NOILag1 Number NOI lagged one quarter NOILag2 Number NOI lagged two quarters NOILag3 Number NOI lagged three quarters NOILag4 Number NOI lagged four quarters

143 NRA Number Net rentable area SqFt Number The greater of net rentable area or gross square feet. Units Number Number of units, e.g. for an apartment property

144

145 Balance Number Loan balance at end of quarter BalanceLag1 Number Loan balance at end of last quarter (beginning of current quarter) DebtServiceLag1 Number Mortgage payment lagged one quarter DebtServiceLag2 Number Mortgage payment lagged two quarters DebtServiceLag3 Number Mortgage payment lagged three quarters Interest Number Interest payment on loans for leveraged properties Principal Number Principal payment on loans for leveraged properties LoanProceeds Number Proceeds from new financing LevIncRet Number Leveraged income return LevAppRet Number Leveraged appreciation (capital) return LevTotRet Number Leveraged total return INCL_LV Number Property has leverage during the quarter LevDenom Number Denominator used for leveraged return calculations

146 MV Number Market Value as of the end of the quarter BFMV Number Market value at the beginning of the current quarter MVLag1 Number Market value lagged one quarter MVLag2 Number Market value lagged two quarters NetSalePrice Number The net sale price for sold properties PSales Number Partial sales (entire sale price after the freeze) SaleCode Character The sale code for sold properties SalePrice Number The sale price for sold properties lower of net sale price or gross sale price SaleQtr True if the quarter the property sold GrossSalePrice Number The gross sale price for sold properties

147 Region Character The NCREIF Region, e.g., E for east Division Character The NCREIF Division, e.g,. NE for NorthEast City Character The City County Character The county code Zip 5 Digit The zip code State 2 Char The state, e.g., TX for Texas MSA Number The MSA code CBSA Number The CBSA code CBSADiv Number The Division code for CBSAs that have divisions CBSAName Character The name of the CBSA or division CBSAorDIV Number The CBSA code for CBSAs without divisions but the division code for CBSAs with divisions CensusDivFips Number The Fips code used for Census divisions

148 TransQtr Character True if a quarter the property sold. Differs from SaleQtr pre freeze of the NPI because it uses property records added for the purposes of getting transaction cap rates and sale prices without having a missing quarter with no sales due to the transition to the freeze. This variable should only be used for sales summaries and transaction cap rates.

149 StartDate Character The start date (YYYYQ) for a property in the database which is one quarter before returns start Yrbuilt Character The year the property was built FirstReturnQtr True or False First quarter of returns whether NPI qualifying or not EndDate Character The end date (YYYYQ) for a property in the database. AcqDate Character The acquisition date for the property PartialSaleQtr Indicates a quarter the property sold if the sale was after the freeze of the NPI in the 4 th quarter of 2002.

150 ValuePerSF Number Market Value per Square Foot (calculated when SF available) ValuePerUnit Number Market Value per Unit (calculated when units available, e.g,. for apartments.

151 AppCapRate Number The cap rate using current quarter NOI for appraisals only AppCapRate4QNOI Number The cap rate for appraisals only using trailing 4 quarter NOI Appraisal 1 Char The type of appraisal, e.g., I for internal, E for external TransCapRate Number The cap rate using NOI the quarter prior to the sale quarter for sold properties TransCapRate4QNOI Number Transaction cap rate based on four quarter trailing NOI CapRate Number The cap rate for the property (transaction or appraisal) CapRate4QNOI Number The cap rate using 4 quarter trailing NOI (appraisal or sale)

152 PropertyType Character Property type such as O for Office, R for Retail, etc. PropertySubType Character The property subtype, e.g., CB for CBD, R for Regional Mall FundType Character Fund type, e.g., O for Open End funds

153 JV True or False True if a joint venture NPI True or False True if property is included in the NPI CVA CVI True if a reappraisal that quarter (sales excluded) True if either a reappraisal or a sale

154 Denom Number The denominator used in the NPI formula PercentLeased Between The percent leased (occupancy) InitAcqCost Number The initial acquisition cost of the property LifeCycle Character The property lifecycle, e.g., S for stabilized

155 Conclusions NPI a valuable measure of historical institutional real estate performance useful for benchmarking, attribution analysis, risk analysis etc. NCREIF database has lots of uses in addition to the NPI including trends in cap rates, vacancy rates, operating expenses, etc. Derivatives based on the NPI can be used as a risk management tool NCREIF query tool make additional data available for research, custom benchmarks, etc.