a supplement to may 2018 institutional investors real ... · pacific open-end real estate funds, we...

2018Institutional Investors Real Estate Trends

22nd Annual Investor Survey

Conducted by:

KINGSLEY ASSOCIATES

for and in association with

INSTITUTIONAL REAL ESTATE, INC.

A Supplement to Institutional Real Estate Americas, May 2018

9_WhoWeAre_PGIM_

1

StudioJob #Date

LiveTrimBleedGutterPubP. Date

Pamela StoeckelA48392-27-2018 3:10 PM

None8.75” x 11.25”NoneNoneIREI AmericaNone

__________ GCD__________ CD__________ AD__________ CW__________ AE__________ Traffic__________ Proof

Approvals:

NoneScaled

Prudential Advertising973-802-7361

© 2018 PGIM is the primary asset management business of Prudential Financial, Inc. (PFI). PGIM Real Estate is PGIM’s real estate investment advisory business and operates through PGIM, Inc., a registered investment advisor. Prudential, Pramerica, PGIM, their respective logos as well as the Rock symbol are service marks of PFI and its related entities, registered in many jurisdictions worldwide. PFI of the United States is not affiliated with Prudential plc, a company headquartered in the United Kingdom. Data as of December 31, 2017. *Total net assets under management equal $49.9 billion. PGIM’s total gross real estate assets under management or supervision, including PGIM Real Estate and PGIM Real Estate Finance, equal $160.8 billion. 18KESKO-AW7PTY

Rock Solid Innovation.PGIM Real Estate’s track record of innovation in real estate investment is more than 45 years in the making.

From the first U.S. open-end commingled real estate fund and European high-yield real estate debt fund to one of the largest Asia Pacific open-end real estate funds, we uncover new opportunities to deliver attractive risk-adjusted returns for our investors.

Joining deep local knowledge with global scale, we use a research-driven, disciplined investment process to create exceptional value for clients across economic cycles.

Learn more at pgimrealestate.com

$69.6 BILLION IN GROSS ASSETS UNDER MANAGEMENT*

$14 BILLION+ IN 2017 GLOBAL TRANSACTIONS

570 REAL ESTATE PROFESSIONALS

18 CITIES ACROSS THE AMERICAS, EUROPE AND ASIA PACIFIC

T:8.75”T:11.25”

9_WhoWeAre_PGIM_IREI_8.75x11.25.indd 1 2/27/18 3:11 PM

2018 Institutional InvestorsReal Estate Trends

22nd Annual Investor Survey

Published by

INSTITUTIONAL REAL ESTATE, INC.2274 Camino Ramon

San Ramon, CA 94583 USAPhone: +1 925-244-0500 • Fax: +1 925-244-0520 • Email: [email protected] • www.irei.com

Research conducted in partnership with

KINGSLEY ASSOCIATES44 Montgomery St., Suite 1430San Francisco, CA 94104 USA

Phone: +1 415-777-1140 • Fax: +1 415-777-0949 • www.kingsleyassociates.com

© 2018 Institutional Real Estate, Inc. All Rights Reserved

Look for challenges. See opportunities.

Experience the Heitman difference.

Navigating market cycles for more than 50 years has proven seeing around the corner is all about knowing the terrain.

Heitman.com

2018 Institutional Investors Real Estate Trends v

TA B L E O F

C o n t e n t s

Introduction ......................................................................................................... 1

Executive Summary ............................................................................................... 2

Purpose ............................................................................................................... 3

Survey Methodology ............................................................................................... 4

Sample Characteristics ........................................................................................... 5

Findings ............................................................................................................... 7

Portfol io Return Expectations .......................................................................... 7

Investment Portfol io Allocations .................................................................... 10

Target Allocations to Real Estate Strategies ................................................... 11

Capital Flows to Real Estate ......................................................................... 13

New Capital Allocations to Real Estate Strategies ......................................... 1 4

Relative Attractiveness of Property Types ..................................................... 15

Future Opportunities and Challenges ................................................................... 18

Survey Data Tables and Graphs .......................................................................... 27

Personnel ........................................................................................................ 39

List of Respondents .......................................................................................... 40

If you are interested in becoming a member, contact our president, Gunnar Branson at 312.884.5184 to start the discussion.

Isn’t this a good time to join the conversation?

A License to Think in Public

Find out how you can get involved with the National Association of Real Estate Investment Managers.

With us, it’s okay to think in public.

2018 Institutional Investors Real Estate Trends vii

INSTITUTIONAL REAL ESTATE, INC.Founded in 1987, Institutional Real Estate, Inc. (IREI) is an infor-

mation company focused on providing institutional real estate and

infrastructure investors with decision-making tools through its pub-

lications, conferences and consulting. IREI provides investment fidu-

ciaries with information and insights on the people, issues, ideas

and events driving the global investment marketplace. The firm pub-

lishes a number of special reports and directories, as well as seven

regular news publications. The firm’s flagship publication, Institu-

tional Real Estate Americas, has covered the industry for more than

25 years. Other IREI titles include Institutional Real Estate Europe,

Institutional Real Estate Asia Pacific, Institutional Real Estate News-

line, Institutional Investing in Infrastructure, Institutional Real

Estate FundTracker and Real Assets Adviser.

IREI also offers subscriptions to its proprietary FundTracker data-

base, which contains information on more than 4,500 real estate funds

and more than 600 infrastructure funds sponsored by investment man-

agers from across the globe.

In 2006, the firm launched a conference and seminar division.

IREI’s events have quickly gained a stellar reputation and solid

following within the industry. The firm’s menu of events includes

Visions, Insights & Perspectives (VIP) conferences in North America,

Europe and for Infrastructure, as well as a new event for young,

promising executives titled IREI Springboard.

On the consulting side, IREI has more than two decades of expe-

rience providing research and advice to the investment-management,

brokerage, development and technology communities. Services

include strategic information and advice on presentations, organi-

zational structures, product development, proposal responses, and

design and implementation of market research projects.

INSTITUTIONAL REAL ESTATE, INC.2274 Camino Ramon

San Ramon, CA 94583 USAPhone: +1 925-244-0500

Fax: +1 925-244-0520 www.irei.com

viii 2018 Institutional Investors Real Estate Trends

KINGSLEY ASSOCIATESBusiness Intelligence for the Real Estate Industry

The most successful firms in real estate rely on Kingsley Associates

for cutting-edge business intelligence solutions. Our comprehensive

suite of research and benchmarking tools assess firm performance

and competitive position based on direct feedback from key stake-

holders. For more than 30 years, Kingsley Associates has helped

elevate its clients’ portfolio and organizational performance through

a comprehensive suite of products, which include:

n Tenant and Resident Surveys

n Client and Investor Surveys

n Broker Perception Surveys

n Employee Engagement Surveys

In response to the need for performance-based benchmarks,

Kingsley Associates developed the Kingsley Index, which is now

the largest and most comprehensive database of customer satis-

faction metrics available to the real estate industry. Our sophisti-

cated reporting and analytics platform provides real estate firms

with performance dashboards and action plans tailored to users

at all levels of the organization.

With a depth and breadth of insight unmatched in the in-

dustry, Kingsley Associates brings thought leadership and excep-

tional client service to every engagement.

KINGSLEY ASSOCIATES44 Montgomery St., Suite 1430San Francisco, CA 94104 USA

Phone: +1 415-777-1140 Fax: +1 415-777-0949

www.kingsleyassociates.com

2018 Institutional Investors Real Estate Trends 1

Int roduct ion

On behalf of Institutional Real Estate, Inc. and Kingsley Associates,

we are pleased to present the results of our 2018 Annual Investor

Study. This year’s study is our 22nd annual joint effort to identify

and understand investment trends driving the decisions of the largest and most

influential real estate investors. The initiative collected responses from 129 U.S.

investors and 57 foreign investors between November 2017 and January 2018.

With 186 responses in total, this year marks the highest response count in the

history of the study.

We would like to thank everyone who responded to this survey. We know

how busy you are, and that you receive many questionnaires of this type each

year. Once you have reviewed this report, we believe you will find your efforts

have resulted in data that are valuable to your organization. This report will help

determine why and where changes in the industry are occurring, so that you

can appropriately anticipate and address them. In our continuing effort to refine

the survey to better capture trends in the market, we welcome your comments.

Geoffrey Dohrmann Jim WoidatChairman and CEO PrincipalInstitutional Real Estate, Inc. Kingsley Associates

This year’s survey is

our 22nd annual joint

effort to identify and

understand investment

trends driving the

most influential real

estate investors.

2 2018 Institutional Investors Real Estate Trends

Execut ive Summary

The 2018 Annual Investor Study, conducted

jointly by Institutional Real Estate, Inc. and

Kingsley Associates, assessed institutional inves-

tors’ fund allocations, risk and return assumptions,

expected capital flows, and real estate investment strate-

gies for the coming year. The initiative was launched on

November 7, 2017, and feedback was collected through

January 31, 2018. The 129 U.S. respondents manage

more than $454 billion in real estate holdings, and the 57

foreign respondents manage $527 billion in real estate

holdings. For the benefit of being able to see trends in

the data, much of the analysis and themes throughout

the report focus on feedback from the U.S. respondents.

Investors have moved into 2018 with a cautiously opti-

mistic view across their portfolios. Satisfaction with real estate

remains high and is in line with 2017 levels, with 81 percent

of U.S. respondents indicating they are satisfied with their

real estate investments. Respondents indicate that foreign and

domestic equities portfolios have outperformed expectations

in 2017, while the performance of their real estate portfolios

was largely in line with expectations in 2017. Looking ahead

to 2018, respondents anticipate a higher return environment

across the majority of their asset classes. When risk is factored

into the equation, real estate once again emerges as the most

attractive asset class on a risk-adjusted basis. Accordingly,

investors have increased their target allocations to real estate

to 9.8 percent, which results in their current real estate hold-

ings falling 30 basis points short of their target allocations.

Within their real estate portfolios, U.S. investors remain

heavily focused on domestic core strategies, and they are

ramping up their targets to domestic value-added and for-

eign real estate strategies. In an effort to close the gap to

target allocations, most respondents report a plan to deploy

additional capital to real estate in 2018. On a global basis,

respondents indicate plans to increase their 2018 new

capital flows by 2 percent over what they were able to

deploy in 2017. While their appetite for real estate remains

strong, investors increasingly express concerns regarding

deploying capital near the potential peak of the real estate

cycle. U.S. core continues to receive the largest portion of

this new capital, while allocations to U.S. value-added and

foreign investments increase compared to reported 2017

capital commitments. European assets continue to capture

the lion’s share of new capital flows to foreign investments,

with European value-added assets receiving more than half

of all new foreign capital commitments from U.S. respon-

dents. Foreign respondents also maintain their emphasis

on Europe for new capital, but assets in Asia Pacific garner

additional attention. U.S. and foreign respondents indicate

the overall attractiveness of U.S. investments is decreasing,

while all European regions are increasing in attractiveness.

Office and retail assets continue to decline in attractiveness

for U.S. investors, while industrial and multifamily remain

the most attractive assets for new investments. Senior hous-

ing is increasing in attractiveness globally, securing the sec-

ond most attractive spot for foreign investors.


Purpose

This report is prepared for the investment

managers and other real estate organizations

that sponsor Institutional Real Estate, Inc.

publications, and for the nonsponsoring Editorial

Advisory Board members of Institutional Real Estate

Americas, who support our efforts with their time

and advice. As a special thank you for contributing

their time and effort, we also will be sharing results

with the many investors who participated in this

year’s survey.

The purpose of our annual investor survey is to

provide relevant data and analysis to help tax-exempt

funds and the organizations that serve them (invest-

ment advisers, REITs and consultants) pinpoint and

understand the implications of the important investment

trends that are most likely to drive the markets during

the year ahead.

Although the information and analysis presented in

this report are based on data that its publishers believe to

be reliable, its accuracy cannot be guaranteed.


Kingsley Associates and Institutional Real Estate,

Inc. worked together to design and implement

the 2018 Annual Investor Study. The question-

naire included quantitative, open-ended and categorical

questions focusing on the following topics

n Plan type and fund size

n Allocations and risk/return assumptions for

investment vehicles

n Allocations and risk/return assumptions for real

estate investments

n Satisfaction with and future plans for real estate

investments

n Expected capital flows to real estate and search

plans for investment managers

n New capital allocations by global real estate

strategies

n Property type and region interest for real estate

investments

Institutional Real Estate, Inc. established a database

of potential respondents. On November 7, 2017, Kingsley

Associates distributed an invitation email with a link to the

web survey to potential respondents. Kingsley Associates

distributed several reminder emails from November 2017

to January 2018 to those contacts who had not responded

to the survey. As the survey responses were collected,

Institutional Real Estate, Inc. and Kingsley Associates veri-

fied the responses. In addition, Institutional Real Estate,

Inc. made follow-up phone calls to many respondents

to clarify their answers. Survey responses were collected

through January 31, 2018.

Institutional Real Estate, Inc. and Kingsley Associates

received 186 responses to the 2018 survey. Upon com-

pletion of the survey efforts, Kingsley Associates cleaned

and reviewed the data to ensure the validity of responses.

Kingsley Associates comprehensively analyzed the results

and presented the findings to clients of Institutional Real

Estate, Inc. at the Sponsor Briefing on February 16, 2018.

Survey Methodology


2018 is a record year for participation, with 186 respons-

es from key decision makers involved in investment

planning at both U.S. and foreign institutions. 129

responses are from U.S. investors, and 57 responses are from

foreign respondents. Total assets under management from the

respondent pool exceed $10 trillion this year, with U.S. inves-

tors representing $5.04 trillion and foreign investors represent-

ing $5.02 trillion. The average foreign investor is significantly

larger than the average U.S. investor, with $88.1 billion under

management compared to $39.0 billion for U.S. respondents.

Our respondents’ aggregate real estate assets under manage-

ment are $981 billion this year, $454 of which is owned by

U.S. respondents, and $527 billion by foreign respondents. The

average foreign respondent manages more than $9.2 billion in

real estate assets under management, while the average U.S.

investor manages $3.5 billion. Over half of U.S. respondents

represent public pensions, and similarly account for the major-

ity (62 percent) of the total U.S. assets under management.

Twenty-eight percent of foreign respondents are from public

pensions, and 14 percent of foreign respondents are from

insurance companies. Together, public pensions and insur-

ance companies comprise the majority of foreign AUM with

34 percent coming from public pensions and 36 percent from

insurance companies.

Sample Characteristics

52%

12%

12%

7%

5%

5%

3%3%

1%

1%

1.011U.S.

129 investors

Distribution of Investors by Fund Type

Total U.S. AUM Distribution: $5.04 T Total Foreign AUM Distribution: $5.02 T

28%

11%

4%14%

11%

12%

2%

11%

4% 5%

1.03

Public pension

Corp. pension

Endowment

Insurance co.

Family office

Other

Foundation

Fund of funds

Multi-employer

Sovereign wealth

Foreign57 investors

62% 8% 4%11%13% 34% 3% 36% 5% 16%


Total Assets Under Management Real Estate Assets Under Management

2018$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

$1,000.0

$1,100.0

$ bi

llions

$454.1

$526.6Average foreign

investor:$9.2 billion

Average U.S.investor:

$3.5 billion

TotalR.E. AUM: $981B

2018$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$ tri

llions

$5.04

$5.02

U.S. investors Foreign investors

Average foreigninvestor:

$88.1 billion

Average U.S.investor:

$39.0 billion

TotalAUM: $10.06T

MECHJOB INFORMATION

PROJ. NO.: 9172584 / 604262755

JOB NAME: IM Sun MSREI Qtr Page CorpAd

DESCRIPTION: IM Sun MSREI Qtr Page CorpAd

CLIENT NAME: Weijia SunPROJECT MGR.: Byrne, ChrisCOST CENTER: 9163

DUE DATE: 03/16/2018 04:30

SPECIFICATIONSTRIM SIZE: 3.375" × 4.625"

FINISHED SIZE: 3.375” × 4.625”BLEED: 0.125"

POST-PROD.: NA

PAPER: TBD

PRINTING: Offset/Digital

COLORS: CMYK

NOTESDupe and update:8667006

TMPL: 7557225-Spon_Ad Template 8.5x5.5 m1

PICKUP:

MODIFIED BYCH MS 02-22-18, CH NS 03-01-18, CH AP 03-06-18

QC MANAGER APPROVAL

CREATIVE STUDIO1585 Broadway, 23rd FloorNew York, NY 10036

750 Varick Street, 3rd FloorNew York, NY 10014

m4FILENAME: 9172584 MSREI Qtr Page m4 LAST MODIFIED: March 6, 2018 1:57 PM

Global Perspective, Access and ExpertiseTo learn more about Morgan Stanley Real Estate Investing, visit morganstanley.com/im.

Real estate values are affected by many factors including interest rates and property tax rates, zoning laws, changes in supply and demand, and in the local, regional and national economies.© 2018 Morgan Stanley & Co. LLC. Member SIPC. CRC 2047782 08/18 Not FDIC Insured — Offer Not Bank Guaranteed — May Lose Value Not Insured By Any Federal Government Agency — Not A Deposit

Get in contact with real expertise: www.patrizia.ag/en

OUR EUROPEAN VISION: BRING TOGETHER PEOPLE FROM ACROSS

LOCAL MARKETS. CREATE TRUSTING RELATIONSHIPS AND SHARE

PASSION FOR WHERE WE LIVE. LET THAT BE AT THE HEART OF

WHAT WE DO. We work for PATRIZIA. WE ARE PART OF THE EUROPEAN

NETWORK OF REAL LOCAL EXPERTS.

001665_PAT_AZ_Europa_UK_85,725x117,475_rz2.indd 1 20.03.18 10:43


Portfolio Return ExpectationsU.S. and Foreign Stocks Outperform Expectations,

Real Estate Largely in Line

Nearly two-thirds (63 percent) of U.S. respon-

dents indicate real estate performed in line

with their expectations, and an additional

33 percent of U.S. respondents indicate real estate out-

performed their expectations. This represents a slight

decline from the 49 percent of U.S. respondents indi-

cating outperformance in last year’s study. Across other

asset classes, U.S. and foreign equities both largely

outperformed expectations in 2017. Sixty-five percent

of U.S. respondents indicate domestic equities outper-

formed their expectations, and 64 percent report foreign

equities outperformed expectations.

U.S. respondents indicate satisfaction levels with

real estate are in line with 2017, with 81 percent indicat-

ing they are satisfied with real estate compared to 86

percent in 2017. Nearly 9 percent of U.S. respondents

indicate they are “dissatisfied” or “very dissatisfied” with

real estate. Investors voice concerns over the difficulty

Findings

Real Estate U.S. Stocks ForeignEquities

FixedIncome

VC/PrivateEquity

Cash HedgeFunds

Other RealAssets

Perc

enta

ge o

f Res

pond

ents

(%)

Below In line Exceeding

4%

63%

33%

35%

17%

65%

34%

64%

6%

77%

17%

25%

58%

29%

32%

42%

65%

6%

11%

84%

5%

26%

Performance Against Expectations (U.S. Respondents)


Real Estate

8.3%

U.S. Stocks

9.3%

Foreign Equities

12.1%

Fixed Income

4.8%

VC /Private Equity

11.0%

Cash

2.2%

Hedge Funds

5.8%

Other RealAssets

8.1%

0

2

4

6

8

10

12

Exp

ecte

d N

omin

al T

otal

Rat

e of

Ret

urn

(%)

7.7

8.7

7.4

8.6

7.4

6.8 7.

2

8.2

7.2 7.

6

7.3

9.5

4.0

3.6

3.2 4.

0

9.4 10

.4

9.8

11.3

1.4

1.1

1.1

1.1

6.3

6.3

5.5

6.7

8.7

7.1

6.7

7.7

2015 2016 2017 2018

ForeignRespondents

Historical Return Expectations (U.S. Respondents)

2014 2015 2016 2017 2018 US 2018 Foreign

Perc

enta

ge o

f Res

pond

ents

(%)

Very satisfied Somewhat satisfied Neutral Somewhat dissatisfied Very dissatisfied

25%

32%

43%

7%

11%

41%

42%

8%

31%

58%

12%

31%

54%

10%

43%

43%

10%

39%

43%

6%

Investors’ Satisfaction with Real Estate

of finding accretive deals at this point in the real estate

cycle, as well as core fund performance falling short of

some investors’ expectations. Despite these concerns,

investor return expectations for real estate increased to

8.6 percent, compared to 7.4 percent expected in 2017.

Investors tend to be optimistic in their return expecta-

tions indicating higher return expectations across all asset

classes globally, except for cash, which remains flat. For-

eign equities experienced the most notable increase from

7.3 percent expected in 2017 to 9.5 percent expected in

2018 for U.S. respondents.

When the associated risk level is factored in for

each asset class, real estate maintains its rank as the

most attractive asset class on a risk-adjusted basis. This

represents the eighth year in a row that investors have

ranked real estate as the most attractive asset class.


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Sha

rpe

Rat

io (b

ased

on

expe

cted

ret

urns

and

ris

k)

All Real Estate U.S. Stocks Foreign Equities Fixed Income VC / Private Equity Other Real Assets

Historical Sharpe Ratios (U.S. Respondents)

LIONSTONEINVESTMENTS.COM

REALTYALADINP

Investing institutional capital throughout Latin America since 1998

Los Angeles ▪ Bogotá ▪ Mexico City ▪ São Paulo ▪ Lima

» 20 Years of Fiduciary Experience

» Localized Expertise

» Proven Results

C

M

Y

CM

MY

CY

CMY

K

Paladin Realty - Why Latin America Ad (TIREL)_Quarter Page Test 2.ai 1 4/4/2018 10:58:04 AM


Driven largely by the positive performance experienced

during 2017, U.S. investors report ramping up their target allo-

cations to foreign equities to 20.2 percent, which is the highest

allocation to that asset class in the survey history. U.S. investors

also increased their target allocations to U.S. stocks from 23.8

percent to 24.7 percent and fixed income from 22.5 percent to

23.5 percent. To make way for these increases, U.S. investors

have pulled back their target allocations to hedge funds from

7.7 percent in 2017 to 4.1 percent in 2018. This represents the

lowest hedge fund allocation since 2005. VC/private equity

also drops from 10.5 percent in 2017 to 8.8 percent in 2018.

Investment Portfolio AllocationsTarget Allocations to Real Estate Near 10 Percent

U.S. investors report an average target allocation to real estate

of 9.8 percent. This marks a notable increase from 8.5 percent

in 2017, and is the highest recorded target allocation for this

asset class since 2011. Actual real estate holdings also increased

from 8.8 percent in 2017 to 9.5 percent for the average inves-

tor portfolio in 2018. This results in an under-allocation to real

estate of 30 basis points, a reversal from the over-allocation of

30 basis points to real estate reported in 2017.

RealEstate

15.0%

U.S.Stocks

10.6%

ForeignEquities

34.6%

FixedIncome

13.6%

VC/PrivateEquity

7.8%

Cash

6.0%

HedgeFunds

1.0%

OtherReal Assets

8.8%

0

5

10

15

20

25

30

Per

cent

of T

otal

Rea

l Est

ate

Ass

ets

(%)

2014 2015 2016 2017 2018

8.9

8.8

8.5

8.5

24.725

.526

.423

.1

20.2

17.5 18

.617

.7

23.5

27.5

22.2

25.0

8.8

7.8 8.5 9.

9

1.2

1.1 1.9

1.1

4.1

6.8

6.7 7.3

4.0

3.6 4.6

ForeignTargets

9.8

23.8

16.8

22.5

10.5

1.8

7.7

4.2

Historical Target Allocations (U.S. Respondents)


U.S.—Core/Core-Plus

27.4%

U.S.—Value-Added

6.4%

U.S.—Opportunistic

3.7%

ForeignReal Estate

61.5%

U.S.—REITs

0.5%

U.S.—RealEstate Debt

0.5%

0

10

20

30

40

50

60

Per

cent

of T

otal

Rea

l Est

ate

Ass

ets

(%)

2015 2016 2017 2018

50.35

2.1 53.3

2.4

9.1

7.3

3.3 6

.1

3.7

2.4

20.9

16.9

22.5

12.4 1

5.7

11.0

6.5

54.0

18.4

10.5

3.1

3.7

7.7

3.3

ForeignTargets

Historical Real Estate Target Allocations (U.S. Respondents)

Target Allocations to Real Estate StrategiesReal Estate Portfolio Targets Shift Modestly Toward

Value-Added and Foreign Strategies

Sixty-three percent of U.S. investors indicate they set invest-

ment allocation targets within their real estate portfolios.

Of those investors who set allocation targets, U.S. core and

core-plus assets continue to capture the majority (50.3 per-

cent) of their real estate target allocation, although this is a

decline from 54.0 percent in 2017. Concurrently, U.S. inves-

tors report increasing their target allocations to domestic val-

ue-added strategies, from 18.4 percent in 2017 to 22.5 per-

cent in 2018, and foreign real estate strategies, which nearly

tripled from 3.1 percent in 2017 to 9.1 percent in 2018. This

marks a historic high in allocations to both U.S. value-added

and foreign real estate, as investors look for opportunities

beyond core. U.S. investors also report decreasing already

modest target allocations to U.S. real estate debt and REITs,

reflecting the relatively poor performance of REITs in 2017.

The majority of respondents indicate the performance across

the various real estate strategies was generally in line with

expectations. However, there is an increase in the percentage

of respondents indicating perceived underperformance for

core, value-added, opportunistic and, especially, REIT strate-

gies in 2017. Real estate debt performance moved in a posi-

tive direction with 38 percent of respondents indicating the

strategy outperformed expectations compared to 15 percent

in the previous year.


2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Per

cent

age

of R

espo

nden

ts (%

)

Exceeding In-line Below

60%

31%

63%

24%31%

18%

59%

23% 25%

12%

73%61%

14%

15%

40%

U.S.—Core/Core-Plus

U.S.—Value-Added

U.S.—Opportunistic

U.S.—REITs U.S.—Debt

59%

10% 6% 9%

67%

19%

60%

21%13%

57%

30%

63%

38%

Performance Against Expectations (U.S. Respondents)

900 CongressOffice

Austin, TX

The ParkerMultifamily

Portland, OR

Homewood SuitesHotel

Aliso Viejo, CA

Opportunistic investments in the lower middle market

www.argosyrealestate.com

PHILADELPHIA DENVER SAN FRANCISCOREAL ESTATE

usrealco.com

Value-investing across the capital stackwith more than 100 investment partners.

INVESTEDTOGETHERInvesting alongside ourinstitutional partners,the way it should be.


flows declining by 3 percent. Overall, these responses

signal that capital flows will be largely in line with

what investors actually deployed in 2017. In addition

to these new capital plans for 2018, investors continue

to report a large overhang in terms of uncalled capital.

The average uncalled capital levels for U.S. respondents

increased from $685 million in 2017 to $814 million

in 2018. Across foreign and U.S. respondents, the sum

of uncalled capital is $86.6 billion, compared to $58.7

billion in 2017.

Capital Flows to Real EstatePlanned New Capital Up 2 Percent from 2017

Commitments

Respondents indicate that planned new real estate

capital commitments in 2018 will increase 2 percent

globally from 2017 actual commitments. This modest

increase is driven by foreign investors who indicate

capital flows increasing by 6 percent over their actual

allocation in 2017, while U.S. investors indicate capital

2017 Actual 2018 Expected$0

$10

$20

$30

$40

$50

$60

$70

$80

$ B

illion

s

36.79

34.36

35.80

36.51

U.S. Investors Foreign Investors

New capital flows in 2018expected to increase 2%from 2017 actualcommitments reportedglobally

Capital Flows to Real Estate


capital targeting foreign investments, U.S. respondents

maintain their focus on Europe as a primary target for

deploying new capital. Within their European invest-

ments, U.S. investors have shifted their focus from core

strategies (dropping from 29 percent in 2017 to a pro-

jected 9 percent in 2018) to value-added (up from 25

percent in 2017 to 51 percent in 2018) and opportunis-

tic (up from 8 percent in 2017 to a projected 19 percent

in 2018). Foreign respondents also plan to focus on

Europe in deploying new capital with more than 52

percent of projected foreign investment in 2018 flow-

ing to Europe. Foreign respondents indicate plans of

an increased focus on Asia Pacific, which is expected

to garner 26 percent of new investment in 2018, com-

pared to 17 percent put out in 2017.

New Capital Allocations to Real Estate Strategies2018 New Capital Allocations to Strategies Mirror

2017 Allocations

Investors’ 2018 new capital allocations across the various

real estate strategies will largely mirror their behavior in

2017. U.S. investors maintain their emphasis on domes-

tic investments, with 87 percent of new capital flowing

to domestic core, value-added and opportunistic assets.

While survey results indicate U.S. investors’ emphasis on

domestic core strategies declined slightly from 39 per-

cent to 35 percent, domestic value-added and foreign

real estate investments each received a higher allocation

of new capital in 2018. Among the 7 percent of new

2018 Projected

2017 Actual

U.S. Core

U.S. Value-Added

U.S. Opportunistic

Real Estate Securities (Listed, REITs, REOCs)

U.S. Private Real Estate Debt / CMBS

Foreign Investments

39% 29% 23% 3%

35% 32% 20% 7%3%

5%

Expected Capital Flows to Real Estate (U.S. Respondents)


ciency and nontraditional office spaces. The attractive-

ness of retail assets also continued to decline, reflecting

the ongoing impact of e-commerce. Foreign investors

mirror U.S. respondents’ emphasis on multifamily, senior

housing and industrial, securing the top spots for most

attractive property types and increasing in attractiveness

from the prior year. Student housing rounds out foreign

investors’ top four with a slight drop in attractiveness

from 2017. Next most attractive for foreign investors

are office and retail assets. While retail experienced a

similar drop as seen from U.S. respondents, office assets

increased in attractiveness by 16 basis points. Foreign

investors indicate a 44 basis point increase in the attrac-

tiveness of senior housing assets, which moved from

the fourth to the second most attractive property type

for foreign investors.

Relative Attractiveness of Property TypesIndustrial and Multifamily Assets Remain

Most Attractive

For the fifth year in a row, U.S. investors view indus-

trial assets as the most attractive property type for new

investments. Multifamily, self-storage and senior hous-

ing follow, maintaining their respective ranks from

2017. The biggest year-over-year increase in investor

sentiment is in the attractiveness rating for infrastruc-

ture, which increased 69 basis points and moved up

four spots to the fifth most attractive property type for

U.S. investors. The attractiveness of office properties

dropped to its lowest point since 2009, which is likely

attributable to relatively stagnant office vacancy and

rental rates and the increasing emphasis on space effi-

Industrial / R&D Multifamily Self-Storage Senior Housing Infrastructure Medical Office Student Housing Office Retail Hotel1

1.5

2

2.5

3

3.5

4

Att

ract

iven

ess

for

New

Inve

stm

ents

3.51

3.79

3.95

3.32 3.

41

3.62

3.15

3.39

3.58

3.05

3.20

3.49

2.65 2.

73

3.41

3.36

3.04

3.30

2.89

3.13

3.14

3.13

2.84

2.68

3.11

2.93

2.52

2.49

2.36 2.

42

2016 2017 2018

Relative Attractiveness of Property Types for New Investments (U.S. Respondents)

Foreign Average

3.82 ▲ 3.95 ▲ 3.06 ▼ 3.90 ▲ 3.07 ▲ 2.83 ▼ 3.57 ▼ 3.45 ▲ 3.17 ▼ 2.60 ▼


top spot as the most attractive region for new invest-

ments among foreign investors with a 49 basis point

increase. U.S. investors reported a similarly positive

outlook on Northern Europe with a 37 basis point

increase. Globally, all European regions gained popu-

larity, along with all Asia Pacific regions except for

Japan, which had a 32 basis point drop for foreign

investors. Despite an increase in attractiveness from

2017, Russia remains the least attractive region for

new investments for both U.S. and foreign investors.

Attractiveness of U.S. for New Investments Drops

in Favor of Europe

United States investments remained most attractive to

U.S. investors this year, though, globally, sentiment for

investments in the United States declined. This drop in

attractiveness of investments in the United States was

more pronounced with foreign investors at 21 basis

points, but domestic investors also dropped 7 basis

points compared with 2017. Northern Europe took the

Attractiveness of Real Estate by Region — U.S. vs. Foreign Respondents

Region U.S. Foreign

Japan 2.78 ▲ 3.00 ▼

Australia/New Zealand 2.89 ▲ 3.61 ▲

China 2.37 ▲ 2.59 ▲

India 2.23 ▲ 2.06 ▲

Region U.S. Foreign

Brazil 2.32 ▲ 2.00 ▼

South America 2.17 ▼ 1.77 ▲

Central America 1.76 ▼ 1.57 ▼

Region U.S. Foreign

United Kingdom 3.22 ▲ 3.35 ▲

Northern Europe 3.53 ▲ 4.00 ▲

Southern Europe 3.00 ▲ 3.37 ▲

Central/Eastern Europe 2.52 ▲ 2.79 ▲

Russia 1.44 ▲ 1.28 ▲

Region U.S. Foreign

United States 4.23 ▼ 3.67 ▼

Canada 2.69 ▲ 2.88 ▲

Mexico 1.96 ▼ 2.10 ▲

▲ Increase from 2017 ▼ Decrease from 2017

Landmark Partners specializes in secondary market transactions of private equity, real estate and real assets investments, with approximately US22.0 billion of committed capital. Founded in 1989, the firm has one of the longest track records in the industry and is a leading source of liquidity to owners of interests in real estate, real asset, venture, mezzanine and buyout limited partnerships.

Landmark Partners has more than 100 professionals across five offices in Boston, Dallas, London, New York and Simsbury, Connecticut.

Boston | Dallas | London | New York | Simsbury landmarkpartners.com

Celebrating 25 years as the global leader in rental housing.

INVESTMENT MANAGEMENT

PROPERTY MANAGEMENT

DEVELOPMENT & CONSTRUCTION

016-18_2018 IREI Ad_3375x4625.indd 1 4/11/18 2:11 PM

With an 18-year track record specializing in build-to-core investing, National Real Estate Advisors

develops and owns modern, state-of-the-art buildings in high-demand urban locations which can

outcompete older assets for tenants, and can drive income and appreciation for our clients.

A LEADER IN BUILD-TO-CORE

As of 12/31/2017. Copyright 2018 National Real Estate Advisors, LLC.

For more information, please contact:Heather Fernstrom BorderManaging Director, Investor [email protected]

w w w. n a t a d v i s o r s . c o m

FOCUSED STRATEGY ENDURING RESULTS

Samuel BendixManaging Director, Investor [email protected]


This survey, now in its 22nd year, could be

considered the granddaddy of all institutional

real estate investor intentions or sentiment

surveys. To the best of our knowledge, it’s the longest

running continuous annual survey of institutional

investor sentiment on real estate investing and, since

inception, continues to be the most in depth and

detailed survey of investor intentions.

Tracking the survey results over time and comparing

prior year actuals against the previous year’s intentions, the

survey appears to have been remarkably accurate in pre-

dicting investors’ following year’s actual investment activity.

(The only exceptions have come during years when unan-

ticipated events have disrupted investor plans, such as the

tech market meltdown and post 9/11 market corrections of

2001, and the global financial crisis of 2008.)

Over the past several years, we have noted a mild

tempering of investor activity. If anything, however,

recent survey results have slightly under-estimated

the amount of capital investors eventually allocated to

real estate.

The survey produces a lot of quantifiable data but

doesn’t capture everything. To uncover what’s capturing

the attention of investors’ minds over the years as they

attempt to formulate and implement their investment

plans, we tend to rely on the topics submitted by the

investor members of our annual editorial advisory boards.

Each year, between 15 and 20 Asian investors meet

together with the sponsors of our Asia Pacific publication

to discuss these kinds of issues. In the United States, two

different groups of 35–40 investors meet together with the

sponsors of our Americas publication on two separate

occasions each year. And in Europe, between 20 and 30

investors meet together with the sponsors of our Euro-

pean publication to explore similar issues.

Each of these investors is nominated either by IREI staff,

or by one of our sponsoring firms. All of those investors col-

lectively represent the readership of each of those regional

editions. And so, what’s on their minds tells us a lot about

what’s on the minds of the readers in each of those regions.

What’s interesting is that while investors around the

globe often share similar concerns, the issues on each

region’s board members’ minds also can differ consider-

ably at any given time.

Investors in Europe, for example, tend to be much

more conservative in their outlook, in their investment

preferences, and in the issues that concern them. Mean-

while, investors in the Asia Pacific region tend to be much

more aggressive (although this is changing as these inves-

tors’ experience with the asset class grows). And investors

in the Americas tend to be somewhere in between these

two extremes.

Investor mindsets throughout Europe and the

Asia Pacific region vary considerably depending upon

Future Opportuni t ies and Chal lenges


sellers. Although most appreciate the opportunity to capi-

talize on record-high pricing, most of these also are equally

concerned about the dearth of opportunities to prudently

reinvest their net proceeds from sales. Still others continue

to dollar cost average in order to maintain their allocations.

Meanwhile, uninvested, unspent, uncalled capital commit-

ments to fund offerings continue to pile up.

Interest ratesClosely related to the pricing concerns are concerns about

the gradual upward trend in interest rates. The current prop-

erty markets clearly have been propped up in part by the

availability of abundant, relatively inexpensive capital. All

assets appear costly in this kind of low interest rate environ-

ment. Most believe rates will rise; the question is, how fast

and how dramatically? Some are concerned that, if rates rise

to as high as 4 percent or more, asset allocation patterns

could shift dramatically. (The last time AAA corporate rates

were at 8 percent or higher was 1995. At that time, allocations

to fixed-income investments ranged between 40 percent and

60 percent, and allocations to alternatives like real estate,

less than 3 percent.) Despite these concerns, the prevailing

sentiment appears to be that increases will be implemented

gradually, and moderately. Consequently, most don’t expect

rate increases to have much immediate effect on cap rate

pricing mechanisms. On the other hand, recessions often are

triggered by a series of repeated interest rate hikes. In the

United States, the Fed already has raised rates three times

and seems to be signaling that it expects to make at least

two more before the end of 2018. But some investors draw

comfort from the fact that the overhang of the nation’s huge

national debt places limits on how high the Fed can really

afford to allow interest rates to rise. Worry warts, however,

point out that despite recent rate increases, the fact is, rates

remain fairly low. And this means that the Fed really won’t

have much runway left in terms of rate reductions, should the

economy stall. All of these conflicting points of view do little

to alleviate investor anxiety.

nationality. This is also true when it comes to the legal and

regulatory regimes under which each group operates. The

decision-making process for Japanese investors tends to

be more consensus oriented. The decision-making process

in most other Asian countries tends to be more central-

ized, more hierarchical and top down. U.K. investors tend

to be polite but more blunt than most of their continental

European counterparts. German investors tend to be more

methodical and measured in just about everything they do.

One thing that seems to unite investors across the

globe is the importance of and reliance upon relationships,

although brand awareness seems to be more important to

the investors throughout the Asia Pacific region than else-

where around the globe.

In the United States, investors have the luxurious

option to remain domestically focused if they decide to

do so. Most investors from Canada, Latin America, Europe

and the Asia Pacific regions don’t have this luxury. Their

domestic economies (and their domestic real estate mar-

kets) tend to be too small to absorb all of their capital

allocations, so consequently, most eventually find them-

selves competing globally for their investment managers’

time and attention.

So, what have been some of the most pressing con-

cerns on investors’ minds of late?

To answer that question, we did a review of all of

the “food for thought” topics submitted over the past 12

months by each of our investor board members for each

of our three regional real estate investment publications.

PricingThe issue that seems to be most top of mind, no matter in

which region investors seem to be operating these days,

is pricing. Despite the fact that some feel they can justify

pricing from a fundamental and on a relative-value basis,

everyone seems concerned about how you make money

in a market that increasingly appears to be priced to per-

fection. Lots of investors are attempting to become net


InstituteFor

Real EstateOperating Companies

A division of Institutional Real Estate, Inc.

EXECUTIVE MEMBERSINVESTORSAlaska Electrical Pension Fund BLG Capital Advisors California Institute of TechnologyCalifornia Public Employees’ Retirement System California State Teachers’ Retirement System The Collegiate Church Corporation Colorado Public Employees’ Retirement Association Harvard Management Company Jasper Ridge PartnersMakena Capital Management, LLCMoDOT & Patrol Retirement System New Mexico Educational Retirement Board Oregon State Treasury Rice Management Company Teacher Retirement System of Texas The Townsend GroupUniversity of California Regents UPS Group Trust Utah Retirement SystemWillett Advisors LLC

INVESTMENT MANAGERS Alcion Ventures Almanac Realty Investors Artemis Real Estate Partners Belay Investment Group Bentall Kennedy Crow Holdings Capital Partners Forum Partners Hart Realty Advisers, Inc.Invesco Real EstateLionstone InvestmentsMesa West Capital USAA Real Estate Co.Walton Street Capital

REAL ESTATE OPERATING COMPANIES Bixby Land Co.bkm Capital PartnersCarson Companies CA Ventures Christina Development CorporationContraVest Development Partners The Davis CompaniesEmmes Realty Advisors, LLCFirst Washington Realty, Inc.

Gerrity GroupGrosvenor Americas IDS Real Estate Group Lincoln Advisory GroupLloyd Jones CapitalMosser Capital Management Newport Capital PartnersRedBridge Capital Redcar Properties Ltd.RedHill Realty InvestorsShopOne Centers REIT, Inc.Skyline Pacifi c Properties TGM Associates University Communities UpEquityWestern National Group Westport Properties | US Storage Centers

ASSOCIATE MEMBERS

Accord Group Holdings LLCBlueprint EquityJLLJuniper SquareKAP Group, LLCNational Council of Real Estate Investment Fiduciaries

(NCREIF)Park Hill Real Estate Group, LLC

The Institute for Real Estate Operating Companies (iREOC) is an exclusive membership organization and newly formed division of Institutional Real Estate, Inc. (IREI). We are proud to recognize the iREOC’s charter members.

FOR MEMBERSHIP INFORMATION, CONTACT:

David “Mac” McWhorterExecutive DirectorEmail: [email protected]: +1 970-300-8024www.ireoc.com

FOUNDING STRATEGIC SPONSOR

homebuilding sector). But midterm elections are com-

ing up soon. Should the Democrats wrest control of

the House and Senate from the Republicans, many of

these policies could be reversed. Meanwhile, the Trump

White House has been rocked over the past year by a

wave of resignations, and the administration’s relation-

ships with Vladimir Putin and Russia with regard to pos-

sible electoral manipulation continue to be under inves-

tigation. To make matters worse, the President himself

is under attack from a bevy of women all claiming to

have had sexual encounters or suffered sexual intimida-

tion or harassment at the hands of Donald Trump. A

midterm victory by the Democrats could eventually lead

to impeachment proceedings against the president and

possibly even members of his cabinet and staff. All of

these concerns have investors around the globe worried

about whether there is anywhere on earth these days

that represents a safe haven for their investment capital.

Capital flowsThis past recovery has been characterized first by a

relatively brief retreat to domestic markets, followed by

yet another robust acceleration of a renewed wave of

cross-border capital flows. Yet, the growth of populism

around the globe threatens to potentially put the brakes

on the flow of cross-border capital. The initiation of capi-

tal controls in China, coupled with fears of new tariffs

that could trigger trade wars, again, has investors nervous

about the sustainability of the current property market

and economic recovery.

CyclesCycles are also on investors’ minds these days — eco-

nomic cycles and property market cycles. Most believe

we’re closer to the end than the beginning, but view-

points as to when this particular market cycle will end

are widely divergent. Most, however, seem to feel that

PoliticsGeopolitics continue to worry investors. Brexit, Trump-

ism and the drift toward populist political solutions

around the globe are troubling to many. Continued

tensions between the United States and North Korea,

China, Taiwan and Japan, Russia and the Ukraine, as

well as various players in the Middle East, all are con-

tributing to a climate of uncertainty, making investment

decisions all that more stressful for everyone involved.

The U.S. president has proposed stiff tariffs on steel

and aluminum and has threatened to extend these pro-

tectionist measures to other goods as well. For years,

the nation’s posture has been in favor of open markets

and free trade. The American business and consumer

markets are among the largest in the world, and the

American economy continues to be the preferred mar-

ket for manufacturers and service providers around the

globe. But not all of the United States’ trading partners

have been providing as open a market as it has been

offering. The rationale for the introduction of these new

tariffs has been to force America’s trading partners into

creating an internationally more level playing field. The

Trump White House also has been relaxing the govern-

ment regulators’ control over business, while tighten-

ing up the enforcement of its immigration laws to slow

the influx of illegal immigrants over the U.S. borders.

Critics of these policies point out that a return to this

kind of protectionism could trigger a disastrous trade

war, slowing cross-border flows of goods, services and

capital, and ultimately leading to a global recession or

worse. And critics of the White House’s stance on immi-

gration argue that most of the U.S.’s GDP growth rests

on continued liberal policies that encourage rather than

discourage immigration. On a more positive note, the

recently introduced revisions in the tax code — the first

in several decades — appears to bode well for most

of real estate (with the exception of the single-family

InstituteFor

Real EstateOperating Companies

A division of Institutional Real Estate, Inc.

EXECUTIVE MEMBERSINVESTORSAlaska Electrical Pension Fund BLG Capital Advisors California Institute of TechnologyCalifornia Public Employees’ Retirement System California State Teachers’ Retirement System The Collegiate Church Corporation Colorado Public Employees’ Retirement Association Harvard Management Company Jasper Ridge PartnersMakena Capital Management, LLCMoDOT & Patrol Retirement System New Mexico Educational Retirement Board Oregon State Treasury Rice Management Company Teacher Retirement System of Texas The Townsend GroupUniversity of California Regents UPS Group Trust Utah Retirement SystemWillett Advisors LLC

INVESTMENT MANAGERS Alcion Ventures Almanac Realty Investors Artemis Real Estate Partners Belay Investment Group Bentall Kennedy Crow Holdings Capital Partners Forum Partners Hart Realty Advisers, Inc.Invesco Real EstateLionstone InvestmentsMesa West Capital USAA Real Estate Co.Walton Street Capital

REAL ESTATE OPERATING COMPANIES Bixby Land Co.bkm Capital PartnersCarson Companies CA Ventures Christina Development CorporationContraVest Development Partners The Davis CompaniesEmmes Realty Advisors, LLCFirst Washington Realty, Inc.

Gerrity GroupGrosvenor Americas IDS Real Estate Group Lincoln Advisory GroupLloyd Jones CapitalMosser Capital Management Newport Capital PartnersRedBridge Capital Redcar Properties Ltd.RedHill Realty InvestorsShopOne Centers REIT, Inc.Skyline Pacifi c Properties TGM Associates University Communities UpEquityWestern National Group Westport Properties | US Storage Centers

ASSOCIATE MEMBERS

Accord Group Holdings LLCBlueprint EquityJLLJuniper SquareKAP Group, LLCNational Council of Real Estate Investment Fiduciaries

(NCREIF)Park Hill Real Estate Group, LLC

The Institute for Real Estate Operating Companies (iREOC) is an exclusive membership organization and newly formed division of Institutional Real Estate, Inc. (IREI). We are proud to recognize the iREOC’s charter members.

FOR MEMBERSHIP INFORMATION, CONTACT:

David “Mac” McWhorterExecutive DirectorEmail: [email protected]: +1 970-300-8024www.ireoc.com

FOUNDING STRATEGIC SPONSOR


Upcoming EventsContacts

IREI delivers quality content and exceptional networking opportunities with the right investors

Institutional Real Estate, Inc. has earned a reputation for producing events that are now staples in our industry. Our unique platform of candid discussions, no-marketing and exceptional content have created an exclusive following of loyal attendees. See what we have coming up and mark your calendar.

To learn more about these events, visit www.irei.com/events or contact us below.

Logistics information:Melissa Benson [email protected] +1 925-244-0500, ext. 139

Speaking opportunities:John Hunt [email protected]+1 925-244-0526

Sponsorship opportunities:Randy Schein [email protected]+1 212-706-7023

Registration information:Jenny Krasnovskaya [email protected] +1 925-244-0500, ext. 145

INSTITUTIONALREAL ESTATE, INC.

2274 Camino Ramon, San Ramon, CA 94583 USAPhone: +1 925-244-0500 • Fax: +1 925-244-0520 • www.irei.com people data insights

2018 iREOC Annual MeetingMay 8–10, 2018

Park City, UT USA

2018 Visions, Insights & Perspectives (VIP)Infrastructure

(formerly i3 conference)June 12–14, 2018

Toronto, ON Canada

2018 Editorial Advisory Board MeetingReal Assets Adviser

July 11–12, 2018New York, NY USA

2018 Fall Editorial Advisory Board MeetingInstitutional Real Estate Americas

September 12-14, 2018Blu� ton, SC USA

2018 Europe Editorial Advisory Board MeetingInstitutional Real Estate Europe

September 25-27, 2018Amsterdam, The Netherlands

2018 IREI SpringboardOctober 2–4, 2018

Laguna Beach, CA USA

implementation of the investor intentions uncovered in

this year’s survey.

StrategiesInvestors around the globe have been intently search-

ing for effective strategies that will perform in this kind

of uncertain economic environment. Some are retreat-

ing to core, others redefining core to include property

types and property markets that used to be considered

noncore. Others are turning to build-to-core strategies,

and still others, niche strategies thought to be driven

more by demographic rather than economic factors.

Seniors housing, student housing and self-storage in par-

ticular have increasingly been drawing investor attention.

the current bull market in both equities and properties

could continue under its own momentum for as long as

three or more years. What’s missing from this particu-

lar prolonged market cycle has been what one Federal

Reserve chairman once labeled as “irrational exuber-

ance.” This may be one of the longest recoveries on

record, but it’s probably also been the most joyless of

recoveries on record as well. People around the globe

continue to make investments, but no one anywhere on

earth appears to be having much fun doing so. Mean-

while, the equities markets suffered a severe correction

in March that, at current writing, showed little signs of

abating. Should the current downturn persist, denomi-

nator problems almost assuredly will undermine the

WWW.HARRISONST.COM | 312.920.0500

EDUCATION | HEALTHCARE | STORAGE

LEADINGthe wayIn a market with increased competi t ion, our investment

exper t ise and exclus ive focus in Educat ion, Healthcare

and Storage provides conf idence of execut ion.

With more than $19 bi l l ion in investments

across 793 proper t ies, we have the

competi t ive edge to not only

s tay ahead, but cont inue

to lead the way.

PERFORMANCE IS OUR MISSIONPRIVATE REAL ESTATE

LISTED REAL ESTATE SECURITIES

INFRASTRUCTURE

cbreglobalinvestors.com

Upcoming EventsContacts

IREI delivers quality content and exceptional networking opportunities with the right investors

Institutional Real Estate, Inc. has earned a reputation for producing events that are now staples in our industry. Our unique platform of candid discussions, no-marketing and exceptional content have created an exclusive following of loyal attendees. See what we have coming up and mark your calendar.

To learn more about these events, visit www.irei.com/events or contact us below.

Logistics information:Melissa Benson [email protected] +1 925-244-0500, ext. 139

Speaking opportunities:John Hunt [email protected]+1 925-244-0526

Sponsorship opportunities:Randy Schein [email protected]+1 212-706-7023

Registration information:Jenny Krasnovskaya [email protected] +1 925-244-0500, ext. 145



2018 iREOC Annual MeetingMay 8–10, 2018

Park City, UT USA

2018 Visions, Insights & Perspectives (VIP)Infrastructure

(formerly i3 conference)June 12–14, 2018

Toronto, ON Canada

2018 Editorial Advisory Board MeetingReal Assets Adviser

July 11–12, 2018New York, NY USA

2018 Fall Editorial Advisory Board MeetingInstitutional Real Estate Americas

September 12-14, 2018Blu� ton, SC USA

2018 Europe Editorial Advisory Board MeetingInstitutional Real Estate Europe

September 25-27, 2018Amsterdam, The Netherlands

2018 IREI SpringboardOctober 2–4, 2018

Laguna Beach, CA USA


potentially putting an end to millions of jobs. As with

most technological threats of the past, many of these

threats most likely are being overhyped. But still, inves-

tors are struggling to understand which kinds of invest-

ments are likely to continue to be attractive under the

pressure from all of this change. Meanwhile, investment

in real estate tech ventures also has been on the rise.

Investors are scratching their heads as they attempt to

determine whether this is a signal that the real estate

markets are finally embracing technological change, or

whether this is a signal that the venture capital markets

have reached an inflection point and are poised to turn

downwards. The recent downturn in the equities mar-

kets also is undermining the public exit window for ven-

ture capital backed ventures of all kinds, placing more

emphasis on generating cash flow, profits and growth. In

a marginally scalable market like real estate technology,

this is not necessarily a positive indicator.

Black swansIn addition to the foreseeable threats to market stability,

investors are worried about the possibility of disruptions

from highly impactful events that they can’t foresee and

can’t anticipate. The things that go “bump” in the night, so

to speak.

ESGIn Europe and Asia more so than in the Americas,

investors increasingly are focusing on the softer side

of the investment equation: environmental, social and

governance-related issues. In Europe, adherence to

ESG principals already has become more of a hygiene

item — more meaningful in its absence rather than as

a requirement when considering potential investment

manager hires. Asian investors are becoming increas-

ingly focused on these issues, and to a lesser extent,

so are American investors. Regulators and investors in

Meanwhile, in Asia, we’ve witnessed the emergence of

a tradable core property market and, along with it, a

whole new crop of core open-end funds focusing on

that opportunity. And, many investors have been invest-

ing in debt real estate investment opportunities in an

effort to fill the gap left by the retreat of the banks and

insurers from some sectors of the real estate lending

markets. Increasingly, some of these investors are look-

ing to debt as a solution to the uncertainty surrounding

the prospect for near-term growth in the private equity

real estate markets. If there’s little or no upside to be

gained from investing in real estate equity over the near

term, these investors reason, why not lock in an attrac-

tive yield by investing in leveraged debt positions and

surrendering the upside that most believe no longer is

likely to be realized on the equity side of the market?

RiskOne of the prime considerations associated with inves-

tor concerns about pricing is risk. Investors are struggling

to rationalize their investment decisions and, at the same

time, are struggling to understand the risks that they’re tak-

ing, and how those risks may be changing as we continue

our journey through the tail end of this particular property

market cycle.

DisruptersInvestors also are concerned about disruptive forces

such as the emergence and spread of the shared econ-

omy business model, the acceleration of e-commerce

that has been threatening and undermining the viability

of so many traditional bricks and mortar retailers, the

acceleration of advances in artificial intelligence, deep

learning, robotization and automation that appear to

be threatening the future of the job market, as well as

self-driving automotive technology, which also threat-

ens to undermine the meaning of place, as well as


The shift to defined contribution pension plan structuresIn Europe and the United States, the shift from defined

benefit to defined contribution funding mechanisms con-

tinues. This shift has all but been completed in Australia

and several Asian nations, and it is accelerating in the

United States, the United Kingdom, and elsewhere around

Europe. In the United States, nearly 95 percent of all cor-

porate defined benefit pension plans have frozen to new

participants. When a defined benefit plan is frozen, assets

continue to grow through investment gains and new con-

tributions to fund grandfathered participants’ pensions. As

those participants age in place or leave the plan, eventu-

ally asset growth begins to plateau. When this happens,

Europe have been considering mandating compliance

with ESG-related policies. Only a handful of U.S. inves-

tors have been mandating compliance with these kinds

of policies, but the employment of such policies, while

still not widespread, does appear to be on the rise.

ConsolidationThe continued march of consolidation within the invest-

ment manager and consultant sectors of the industry

has been raising concerns among investors — mostly

in the Americas. What does it all mean? and How

should our organization respond? seem to be the most

important questions many are asking, around this issue

of consolidation.

Investor focused.Connecting People, Data, Insights


2274 Camino Ramon, San Ramon, CA 94583 USAPh: +1 925-244-0500 • Fax: +1 925-244-0520 • www.irei.com

Investor focused.

Providing trusted news and information to investors

around the globe

Institutional Real Estate, Inc.’s family of publications provide institutional investors with the latest news, insights and market

perspectives on the global real estate and infrastructure markets. In addition, our newest publication, Real Assets Adviser, delivers news and information to help registered investment advisers and

wealth managers navigate this relatively new asset category.

To learn more about our publications, go to www.irei.com.

The investor-focused global infrastructure investment publication

www.i3-infrastructure.com

JANUARY 2018

INSTITUTIONAL INVESTING IN INFRASTRUCTURE3

22

How to invest in infrastructureAn introduction to the asset classby Keith Black

A conversation with Jenine HulsmannThe U.K. government has strengthened its powers to potentially block investments based on national security with Drew Campbell

19

14 The road aheadInfrastructure investing issues and trends for 2018by Tyson Freeman

COMMENTARY

1 › Market perspective Succeeding within the world’s largest emerging market by Michael Likosky

DEPARTMENTS

4 › Up front

6 › People

8 › News

26 › Infrastructure fundraising

28 › Photo finish

Next up for dead mallsThere are new uses for defunct shopping centers

Interval funds rising Semi-liquid product attempts to offer best of both strategies

Predictions for 2018What private wealth executives are forecasting for the new year

J A N U A R Y 2 0 1 8 | A PUBLICATION OF INSTITUTIONAL REAL ESTATE, INC.

Jeff Rosenthal, CEO of Triad Advisors, argues that real power for wealth advisory firms comes from being a house undivided

The hybridhybridhybrid

investor

FundTrackerInstitutional Real Estate

Q2/2016 Fundraising Summary

Inside2

4Q/14 Fundraising summary 27 private equity real estate fund recorded final closings during fourth quarter 2014

4

Trends & analysis A measure of recent fundraising activity and trends

5

4Q/14 Fund Closings A detailed list of funds closed during fourth quarter 2014

7

new Funds 42 new investment funds were launched during fourth quarter 2014

8

Funds in The markeT A detailed sampling of commingled funds currently seeking capital

17

Fund news News of recent fund launches and capital-raising activity

Institutional Real Estate

Q3/2016 Fundraising Summary

Inside2

Q3/16 shows weakness Fundraising activity continues to trend downward

4

Trends & analysis A measure of recent fundraising activity and trends

5

Q3/16 Fund Closings A detailed list of funds closed during third quarter 2016

8

new Funds 40 new investment funds were launched during third quarter 2016

10

Funds in The markeT A detailed sampling of commingled funds currently seeking capital

24

Fund news News of recent fund launches and capital-raising activity

FundTTrackerrackerFundTracker

weakness

4

Trends & analysis

A measure of recent fundraising activity and trends

5

Q3/16 Fund Closings

A detailed list of funds closed during third quarter 2016

40 new investment funds were launched during third

10

Funds in The markeT

A detailed sampling of commingled funds currently seeking capital

24

Fund news

News of recent fund launches and capital-raising activity

TrackerTTTrackerrackerrackerracker

33

24

39

49

Starting upInvestment in early-stage real estate tech

by Steve Bergsman

The year aheadInvestors are exercising caution, post-election

by Loretta Clodfelter

Political scenariosEconomic relevance for the White House?

by Christopher Macke

Natural interest ratesImplications for property

by Asieh Mansour

COMMENTARY1 › EditorialA dent in the universeby Geoffrey Dohrmann

5 › Market PerspectiveSell everything!by David Lynn

DEPARTMENTS 9 › Market Pulse

13 › People

15 › News & Views

67 › Data Bank

69 › By the Numbers

72 › Photo Finish

Institutional Real EstateAmericas

Investor focused — connecting people, data, insights

www.irei.com An Institutional Real Estate, Inc. publication January 2017

59Unlocking a pent-up demandShariah-compliant investment

by Hamel Shah

www.i3-infrastructure.com

22 A conversation with Jenine HulsmannThe U.K. government has strengthened its powers to potentially block investments based on national security with Drew Campbell

COMMENTARY

1 › Market perspectiveSucceeding within the world’s largest emerging marketby Michael Likosky

DEPARTMENTS

4 › Up front

6 › People

8 › News

26 › Infrastructure fundraising

28 › Photo finish

25

28

COMMENTARY

1 › Notes & TrendsVery thin ice indeed by Geoffrey Dohrmann

4 › Speaker’s CornerThe need for speedby Jakob Mähren

DEPARTMENTS

8 › Market Pulse

11 › People

12 › News & Views

39 › The Last Word

40 › Photo Finish

www.irei.com An Institutional Real Estate, Inc publication January 2018

Institutional Real EstateEurope

The investor-focused global real estate publication

18 More than just roomsThe short-stay living market has long-term attractions for investorsby James Buckley

Bright lightsDealing with the necessary cost of sustainability and certification by Jennifer Bollen

Time to ask questionsReal estate markets across Europe are biding time as possible disrupters lie ahead by Sabina Kalyan

False hope?Logistics is not the new retail by José Pellicer and Radu Mircea

32

Next up for dead mallsThere are new uses for defunct shopping centers

Interval funds rising Semi-liquid product attempts to offer best of both strategies

Jeff Rosenthalargues that real power for wealth advisory firms comes from being a house undivided

TheTheTheThehybridhybridThehybridTheThehybridThehybridinvestorinvestorinvestor

hybridinvestor

hybrid

Institutional Real EstateAsia Pacific

The investor-focused global real estate publication

www.irei.com An Institutional Real Estate, Inc publication January 2018

COMMENTARY

1 � Notes & TrendsA tale of two marketsby Geoffrey Dohrmann

4 � Market PerspectiveDigital disruptionby Chua Chor Hoon and Lee Lay Keng

DEPARTMENTS

10 � Market Pulse

12 � People

14 � News & Views

36 � Photo Finish

31Outlook 2018What Asia Pacific property markets hold for investors

by Victor Yeung

23The central issueWill central banks rein in Asian institutional property?

with Benjamin Cole

16MegatrendsForces propelling property performance in Asia Pacific

by Alex Frew McMillan

WASHINGTON, DC

NEW YORK

LOS ANGELES

ATLANTA


Real Estate/Nuveen, among others, have been developing

products and distribution channels targeting the private

wealth advisory and individual investor markets. Mean-

while, a growing number of defined benefit pension fund

staff members are being laid off or facing layoffs in the

relatively near term. (To date, the shift to defined contri-

bution plans has been largely a private market phenom-

enon. Only a handful of public plans and a handful of

Taft-Hartley plans have closed their defined benefit plans

to further participants. But the pressures on plan sponsors

obligated to fund these expensive plans is likely to lead to

more closures as the years continue to unfold.)

As you can see from scanning the above list, there’s a

lot on investors’ minds these days. The predominant theme

underlying all of these issues appears to be the accelerat-

ing pace of change and the uncertainty it’s creating. And

the times today appear to be particularly unsettling. (It’s

difficult enough to have to try to make sense out of such

a confusing and fast-changing investment landscape with-

out having to add job security to your list of worries.) At

the same time, investors almost everywhere around the

globe seem to be searching for answers, which is creating

opportunities for those who are paying attention.

Meanwhile, as we’ve noted so many times before, it’s

important to be careful. Be very, very careful. It’s a wacky

world out there.

Geoffrey Dohrmann

March 27, 2018

Danville, California

most plan sponsors shift to a more liability-driven invest-

ment scheme, with a dedicated bond portfolio covering

most of the liabilities, together with a real asset alloca-

tion to hedge the remaining assets against inflation. At

this point, real estate allocations disappear, and real

estate now must compete with other real assets (timber,

agriculture, energy, infrastructure and commodities) for

shelf space in the portfolio. Eventually, as liabilities con-

tinue to emerge, asset growth slows and turns negative.

When this starts to happen, plan sponsors often elect

to outsource the entire plan administration and invest-

ment function to independent third parties. This explains

in part the rapid rise in recent years of the outsourced

CIO function. All of these changes threaten the viability

of the real estate investment management business. The

defined benefit cow that these managers have been milk-

ing for so long has been and will continue to get skinnier

and skinnier. Meanwhile, the consolidation noted above

is creating larger and larger enterprises with larger and

larger numbers of mouths to feed. Consequently, some

of these managers have been focusing on the develop-

ment of new investment capital raising channels. A hand-

ful, for example, including JPMorgan, PGIM, UBS and

Heitman, have been mounting efforts to create vehicles

that will enable defined contribution pension plans to

invest a portion of their custom target date fund capi-

tal into real estate programs managed by these invest-

ment managers. Others, including Deutche Asset Man-

agement, LaSalle Advisers, Blackstone, Starwood and TH


Survey Data Tables

Your Profile

I am employed by a(n):

Type of Company U.S. Count U.S. Percent Int'l Count Int'l Percent

Public Pension Fund/Scheme 67 51.9 16 28.1

Corporate Pension Fund/Scheme 16 12.4 6 10.5

Labor Union, Taft Hartley or Multi-employer Sponsored Fund/Scheme 1 0.8 2 3.5

Insurance Company 9 7.0 8 14.0

Sovereign Wealth Fund 1 0.8 3 5.3

Foundation 4 3.1 1 1.8

Endowment 15 11.6 2 3.5

Family Office 6 4.7 6 10.5

Manager of Managers /Fund of Funds 4 3.1 6 10.5

Other (please specify): 6 4.7 7 12.3

If you are employed by a pension fund/scheme, please indicate the benefit:

Pension Fund Structure U.S. Count U.S. Percent Int'l Count Int'l Percent

Defined Benefit 36 75.0 9 69.2

Defined Contribution 0 0.0 2 15.4

Both 12 25.0 2 15.4

Other (please specify): 0 0.0 0 0.0


Investment Allocations and Expectations

My fund/scheme/organization has approximately $______ million in total assets under management.

Fund Assets Under Management ($m) U.S. Sum

U.S. Mean

U.S. Min.

U.S. Max.

Int'l Sum

Int'l Mean

Int'l Min.

Int'l Max.

AUM 5,036,162 39,040 50 421,700 5,023,786 88,137 78 600,000

My fund/scheme/company's real estate portfolio is currently valued at $______ million.

Value of Fund's Real Estate Porfolio ($m)

U.S. Sum

U.S. Mean

U.S. Min.

U.S. Max.

Int'l Sum

Int'l Mean

Int'l Min.

Int'l Max.

Value 454,093 3,520 12 58,500 526,566 9,238 9 46,000

U.S. Percentiles

5 10 25 50 75 90 95

Fund Assets Under Management ($m) 325 990 2,500 15,000 46,072 95,000 196,130

Int'l Percentiles

5 10 25 50 75 90 95


U.S. Percentiles

5 10 25 50 75 90 95

Fund Assets Under Management ($m) 60 90 244 1,150 2,776 7,581 14,950

Int'l Percentiles

5 10 25 50 75 90 95


Does your fund/scheme/company set real estate investment targets by strategy?

Real Estate Investment Targets by StrategyU.S.

CountU.S. %

Int'lCount

Int'l%

Yes 57 63.3 25 69.4

No 33 36.7 11 30.6


Our current portfolio allocations for each of the following sectors are as follows:

Actual Allocations (%)U.S.

MeanU.S. Min.

U.S.Max.

Int'lMean

Int'lMin.

Int'lMax.

All Real Estate 9.49 3.20 36.00 11.78 4.00 29.00Other Real Assets 3.11 0.00 15.00 3.88 0.00 12.00U.S. Equities 22.42 0.00 63.00 12.02 0.00 25.00Non-U.S. Equities 18.33 0.00 57.80 26.50 6.00 77.00High- and Low-Yield Bonds (Fixed Income) 25.65 0.00 79.00 26.24 0.00 75.00Venture Capital/Private Equity 8.02 0.00 22.00 7.91 0.00 30.00Money Market Funds/Cash Equivalents 3.66 0.00 80.00 7.71 0.00 33.00Hedge Funds 5.54 0.00 35.00 1.75 0.00 15.00Other 3.79 0.00 20.00 2.21 0.00 10.51

Target Allocations (%)U.S.

MeanU.S. Min.

U.S.Max.

Int'lMean

Int'lMin.

Int'lMax.

All Real Estate 9.79 4.00 15.00 15.00 10.00 20.00Other Real Assets 3.97 0.00 12.50 8.80 0.00 20.00U.S. Equities 24.68 0.00 60.00 10.60 0.00 23.00Non-U.S. Equities 20.24 0.00 53.00 34.60 10.00 70.00High- and Low-Yield Bonds (Fixed Income) 23.53 0.00 54.00 13.60 0.00 25.00Venture Capital/Private Equity 8.83 0.00 23.00 7.80 0.00 13.00Money Market Funds/Cash Equivalents 1.22 0.00 18.00 6.00 0.00 25.00Hedge Funds 4.12 0.00 18.00 1.00 0.00 5.00Other 3.61 0.00 15.00 2.60 0.00 13.00

For 2017, our portfolio performance across the following sectors is as follows:

2017 Performance (U.S.)Below Count

Below %

In line Count

In line %

Exceeding Count

Exceeding %

All Real Estate 3 4% 42 63% 22 33%Other Real Assets 12 32% 16 42% 10 26%U.S. Equities 0 0% 19 35% 35 65%Non-U.S. Equities 1 2% 17 34% 32 64%High- and Low-Yield Bonds (Fixed Income) 3 6% 40 77% 9 17%Venture Capital/Private Equity 3 6% 31 65% 14 29%Money Market Funds/Cash Equivalents 2 5% 32 84% 4 11%Hedge Funds 9 25% 21 58% 6 17%Other 4 13% 23 72% 5 16%

2017 Performance (Int'l)Below Count

Below %

In line Count

In line %

Exceeding Count

Exceeding %

All Real Estate 0 0% 20 77% 6 23%Other Real Assets 0 0% 12 80% 3 20%U.S. Equities 1 7% 6 43% 7 50%Non-U.S. Equities 0 0% 7 50% 7 50%High- and Low-Yield Bonds (Fixed Income) 1 7% 8 57% 5 36%Venture Capital/Private Equity 0 0% 10 77% 3 23%Money Market Funds/Cash Equivalents 3 23% 10 77% 0 0%Hedge Funds 0 0% 6 100% 0 0%Other 0 0% 4 67% 2 33%


For 2018, our expected gross nominal returns and risk assumptions for the following sectors are as follows:

2018 Return ExpectationsU.S.

MeanU.S. Min

U.S. Max

Int'lMean

Int'lMin

Int'lMax

All Real Estate 8.56 3.50 25.00 8.30 5.00 25.00

Other Real Assets 7.75 3.00 15.63 8.08 6.00 10.00

U.S. Equities 8.25 4.70 18.00 9.33 5.00 18.00

Non-U.S. Equities 9.54 3.40 27.09 12.14 7.00 25.00

High- and Low-Yield Bonds (Fixed Income) 4.00 2.10 7.99 4.79 3.50 8.00

Venture Capital/Private Equity 11.26 3.20 26.20 11.00 9.00 13.00

Money Market Funds/Cash Equivalents 1.09 0.00 3.00 2.20 1.00 4.00

Hedge Funds 6.74 3.00 14.00 5.80 5.00 8.00

Other 6.19 0.00 11.80 7.50 7.00 8.00

2018 Risk AssumptionsU.S.

MeanU.S. Min

U.S. Max

Int'lMean

Int'lMin

Int'lMax

All Real Estate 9.87 1.00 18.00 12.56 5.00 24.00

Other Real Assets 11.77 4.60 19.00 10.25 7.00 14.00

U.S. Equities 13.89 2.00 22.00 9.80 1.00 22.00

Non-U.S. Equities 16.04 2.00 26.00 15.60 7.00 22.00

High- and Low-Yield Bonds (Fixed Income) 6.76 2.00 12.20 6.20 3.00 9.00

Venture Capital/Private Equity 21.49 7.80 32.90 18.00 10.00 27.00

Money Market Funds/Cash Equivalents 0.93 0.00 2.00 0.50 0.00 1.00

Hedge Funds 9.20 5.00 20.00 8.00 4.00 12.00

Other 10.13 6.50 20.00 12.50 8.00 17.00

Our FundTracker Alerts take your business to a whole new level



FundTracker subscribers receive email alerts on the following:

• More than 400 Commitments

• More than 3,000 Transactions

• More than 400 New Funds

• More than 100 Organizations Created

IREI’s FundTracker Database contains more than 4,500 real estate and more than 600 infrastructure funds. The database includes detailed fi rm information on institutional investors, investment managers, placement agents and consultants. With data tracked since 1996, we can confi dently say that there is not a more comprehensive database on the market today.

Your subscription to IREI’s FundTracker Database includes our bimonthly FundTracker TrendWatch report and a subscription to our quarterly FundTracker publication.

Sign up for a Demo at www.irei.com/demo

Example ofdaily alert


Real Estate Investment Allocations and Expectations

Our current real estate portfolio allocations for each of the following strategies are as follows:

United StatesActual Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 51.62 0.00 100.00 26.53 0.00 100.00

Value-Added 20.26 0.00 80.00 3.00 0.00 25.00

Opportunistic 11.72 0.00 35.00 5.67 0.00 80.00

Real Estate Securities (Listed, REITs, REOCs) 5.45 0.00 80.00 3.33 0.00 50.00

Real Estate Debt 3.98 0.00 40.00 1.33 0.00 20.00

Commercial Mortgage-Backed Securities 0.43 0.00 20.00 0.00 0.00 0.00

Continental Europe and U.K.Actual Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.46 0.00 19.00 16.07 0.00 96.00

Value-Added 3.11 0.00 100.00 13.27 0.00 80.00

Opportunistic 0.85 0.00 6.60 3.33 0.00 30.00


Real Estate Debt 0.01 0.00 0.50 3.67 0.00 50.00


Asia PacificActual Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.62 0.00 16.60 6.13 0.00 50.00

Value-Added 0.50 0.00 11.70 6.00 0.00 50.00

Opportunistic 0.48 0.00 5.00 2.33 0.00 35.00


Real Estate Debt 0.00 0.00 0.10 1.33 0.00 20.00


South America/Central AmericaActual Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.00 0.00 0.00 0.00 0.00 0.00

Value-Added 0.06 0.00 1.60 0.00 0.00 0.00

Opportunistic 0.02 0.00 0.50 0.00 0.00 0.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00



United StatesTarget Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 50.32 0.00 100.00 27.40 0.00 100.00

Value-Added 22.50 0.00 80.00 6.40 0.00 30.00

Opportunistic 11.04 0.00 75.00 3.70 0.00 20.00


Real Estate Debt 3.29 0.00 40.00 0.50 0.00 5.00


Continental Europe and U.K.Target Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 2.13 0.00 33.50 11.20 0.00 100.00

Value-Added 1.89 0.00 20.00 4.50 0.00 30.00

Opportunistic 1.25 0.00 20.00 3.40 0.00 20.00


Real Estate Debt 0.54 0.00 10.00 0.50 0.00 5.00


Asia PacificTarget Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 1.64 0.00 30.00 8.35 0.00 32.50

Value-Added 0.82 0.00 20.00 9.45 0.00 40.00

Opportunistic 0.61 0.00 10.00 7.70 0.00 35.00


Real Estate Debt 0.00 0.00 0.00 3.00 0.00 20.00


South America/Central AmericaTarget Real Estate Allocations (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.00 0.00 0.00 0.20 0.00 2.00

Value-Added 0.07 0.00 2.00 1.10 0.00 10.00

Opportunistic 0.18 0.00 5.00 0.10 0.00 1.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00



For 2017, the performance of our portfolio across the following strategies was:

2017 Performance (U.S.)Below Count

Below %

In line Count

In line %

Exceeding Count

Exceeding %

Core/Core-Plus 6 10% 35 59% 18 31%

Value-Added 5 9% 36 67% 13 24%

Opportunistic 9 19% 28 60% 10 21%

Real Estate Securities (Listed, REITs, REOCs) 7 30% 13 57% 3 13%

Real Estate Debt 0 0% 15 63% 9 38%

Commercial Mortgage-Backed Securities 1 10% 6 60% 3 30%

2017 Performance (Int'l)Below Count

Below %

In line Count

In line %

Exceeding Count

Exceeding %

Core/Core-Plus 0 0% 13 72% 5 28%

Value-Added 1 6% 11 61% 6 33%

Opportunistic 1 8% 8 62% 4 31%

Real Estate Securities (Listed, REITs, REOCs) 3 33% 5 56% 1 11%

Real Estate Debt 0 0% 6 100% 0 0%

Commercial Mortgage-Backed Securities 0 0% 3 100% 0 0%

Our current leverage percentages for our real estate portfolio are:

Leverage (%)U.S.

MeanU.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 30.32 7.80 65.00 40.78 25.00 60.00

Value-Added 49.05 20.20 70.00 48.25 20.00 60.00

Opportunistic 55.26 24.50 75.00 51.20 25.00 65.00

How satisfied is your fund/scheme/company with real estate investment in general?

Satisfaction with Real Estate InvestmentU.S.

CountU.S. %

Int'lCount

Int'l%

Very satisfied 30 42.9 12 42.9

Somewhat satisfied 27 38.6 9 32.1

Neutral 7 10.0 7 25.0

Somewhat dissatisfied 4 5.7 0 0.0

Very dissatisfied 2 2.9 0 0.0


Expected Real Estate Capital Flows and Search Plans

Real Estate Capital Flows for 2017:

U.S. Real Estate Capital Flows for 2017 ($m)

U.S.New Capital Committed

in 2017

U.S.Amount Invested/

Called in 2017

U.S.Amount Sold

in 2017

Sum 51,496.70 31,622.00 22,492.00

Mean 422.10 445.38 299.89

Minimum 0.00 0.00 0.00

Maximum 9,921.90 9,921.90 3,320.00

Int'l Real Estate Capital Flows for 2017 ($m)

Int'lNew Capital Committed

in 2017

Int'lAmount Invested/

Called in 2017

Int'lAmount Sold

in 2017

Sum 37,989.78 16,123.29 7,687.87

Mean 808.29 488.58 240.25

Minimum 0.00 1.00 0.00

Maximum 4,700.00 3,000.00 1,600.00

At this point in time, the amount of capital:

Amount of Capital ($m)U.S. Committed, but not yet capitalized

Foreign Committed, but not yet capitalized

Sum 67,550.50 19,000.02

Mean 1,089.52 826.09

Minimum 10.00 6.15

Maximum 10,507.00 8,610.00

Are you committing any additional funds to real estate in 2018?

2018 New Commitments to Real EstateU.S.

CountU.S. %

Int'lCount

Int'l%

Yes 99 79.2 48 88.9

No 26 20.8 6 11.1

Expected real estate capital flows for 2018:

Expected New Capital Allocations for 2018 ($m) U.S. Int'l

Sum 40,911.50 37,961.54

Mean 498.92 903.85

Minimum 6.00 0.00

Maximum 8,000.00 8,437.80


For 2017 and 2018, our new capital real estate allocations will be distributed across regional strategies as follows:United StatesNew Capital Real Estate Allocations in 2017 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 38.73 0.00 100.00 12.87 0.00 80.00

Value-Added 29.40 0.00 100.00 8.33 0.00 40.00

Opportunistic 22.55 0.00 100.00 9.00 0.00 100.00


Real Estate Debt 2.86 0.00 40.00 1.33 0.00 20.00


Continental Europe and U.K.New Capital Real Estate Allocations in 2017 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 1.42 0.00 20.00 20.67 0.00 100.00

Value-Added 1.26 0.00 20.00 18.00 0.00 80.00

Opportunistic 0.41 0.00 10.00 9.00 0.00 80.00


Real Estate Debt 0.29 0.00 9.00 0.67 0.00 10.00


Asia PacificNew Capital Real Estate Allocations in 2017 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.48 0.00 15.00 9.47 0.00 57.00

Value-Added 0.52 0.00 10.00 2.67 0.00 30.00

Opportunistic 0.34 0.00 10.00 3.67 0.00 20.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00


South America/Central AmericaNew Capital Real Estate Allocations in 2017 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.00 0.00 0.00 0.00 0.00 0.00

Value-Added 0.00 0.00 0.00 0.00 0.00 0.00

Opportunistic 0.01 0.00 0.17 0.00 0.00 0.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00



United StatesNew Capital Real Estate Allocations in 2018 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 35.24 0.00 100.00 7.12 0.00 70.00

Value-Added 32.25 0.00 100.00 9.41 0.00 50.00

Opportunistic 19.71 0.00 100.00 3.24 0.00 20.00


Real Estate Debt 2.33 0.00 40.00 1.18 0.00 20.00


Continental Europe and U.K.New Capital Real Estate Allocations in 2018 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.66 0.00 20.00 25.29 0.00 100.00

Value-Added 3.79 0.00 100.00 16.76 0.00 65.00

Opportunistic 1.40 0.00 33.00 7.94 0.00 80.00


Real Estate Debt 0.00 0.00 0.00 1.18 0.00 10.00


Asia PacificNew Capital Real Estate Allocations in 2018 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.07 0.00 2.50 11.71 0.00 69.00

Value-Added 0.55 0.00 10.00 3.82 0.00 30.00

Opportunistic 0.60 0.00 12.50 7.94 0.00 80.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00


South America/Central AmericaNew Capital Real Estate Allocations in 2018 (%)

U.S.Mean

U.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Core/Core-Plus 0.00 0.00 0.00 0.00 0.00 0.00

Value-Added 0.00 0.00 0.00 0.00 0.00 0.00

Opportunistic 0.14 0.00 5.00 0.00 0.00 0.00


Real Estate Debt 0.00 0.00 0.00 0.00 0.00 0.00



For 2018, our new capital real estate allocations will likely be distributed to managers as follows:

New Capital Real Estate Allocations to Managers (%)U.S.

MeanU.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

Separate Account Managers/JVs 25.27 0.00 100.00 21.14 0.00 100.00

Pooled Fund Managers 63.03 0.00 100.00 45.00 0.00 100.00

Fund of Funds/Manager of Managers 1.30 0.00 65.00 5.23 0.00 85.00

Not Determined/Unknown 10.40 0.00 100.00 28.64 0.00 100.00

New Capital Real Estate Allocations to Managers (%)U.S.

MeanU.S. Min.

U.S. Max.

Int'lMean

Int'lMin.

Int'lMax.

New Account Managers 11.83 0.00 80.00 21.59 0.00 100.00

Existing Account Managers 57.81 0.00 100.00 38.41 0.00 100.00

Not Determined/Unknown 30.35 0.00 100.00 40.00 0.00 100.00

Real Estate Attractiveness by Country/Region

What is the relative attractiveness for new investments into each of the following countries/regions?

Attractiveness for New Investments

U.S.Relative Attractiveness

Int'lRelative Attractiveness

Count Mean Rank Count Mean Rank

Canada 26 2.69 7 16 2.88 7

Mexico 28 1.96 13 10 2.10 10

United States 52 4.23 1 21 3.67 2

United Kingdom 32 3.22 3 20 3.35 5

Northern Europe 32 3.53 2 22 4.00 1

Southern Europe 30 3.00 4 19 3.37 4

Central and Eastern Europe 29 2.52 8 19 2.79 8

Russia 27 1.44 15 14 1.29 15

China 27 2.37 9 17 2.59 9

India 26 2.23 11 16 2.06 11

Japan 27 2.78 6 17 3.00 6

Australia/New Zealand 27 2.89 5 18 3.61 3

Brazil 25 2.32 10 15 2.00 12

South America (exc. Brazil) 24 2.17 12 13 1.77 13

Central America 25 1.76 14 14 1.57 14


Real Estate Attractiveness by Property Type

What is the relative attractiveness for new investments into each of the following property types?

Attractiveness for New Investments

U.S.Relative Attractiveness

Int'lRelative Attractiveness

Count Mean Rank Count Mean Rank

Office 50 2.68 9 22 3.45 5

Medical office 44 3.30 6 18 2.83 11

Logistics/R&D 44 3.95 1 22 3.82 3

Self-storage 43 3.58 3 17 3.06 10

Retail 48 2.52 11 23 3.17 7

Residential/multifamily 45 3.62 2 21 3.95 1

Student housing 43 3.14 7 21 3.57 4

Senior/retirement housing 41 3.49 4 21 3.90 2

Single-family residential 31 2.48 12 16 3.13 8

Triple net lease 33 3.12 8 17 3.24 6

Hotel 38 2.42 13 20 2.60 12

Infrastructure 29 3.41 5 14 3.07 9

Land 28 2.07 15 15 2.20 14

Agriculture 28 2.57 10 15 1.93 15

Timber 29 2.28 14 13 2.23 13


Institutional Real Estate, Inc.Geoffrey Dohrmann, President and CEO

Survey design and analysis

Denise DeChaine, Special Projects Editor

Project management, editing

Larry Gray, Editorial Director

Editing and proofreading

Susan Sharpe, Art Director

Design, layout and production

Karen Palma, Data Services Manager

Project management, questionnaire distribution, survey

research, quality control, telephone follow-up and report

production process

Jennifer Babcock, Copyeditor

Proofreading

Kingsley AssociatesJim Woidat, Principal

Primary report author and overall project management,

including questionnaire design, research process,

respondent interviews and data analysis

Brandon Campen, Vice President

Project management, report production, data analysis,

questionnaire design and distribution

Eric Lytle, Project Manager

Project management, report production, data analysis,

questionnaire design and distribution

Alora Wogsland, Analyst

Report production, data analysis, questionnaire design

and distribution

Ryan Smith, Analyst

Report production, data analysis, questionnaire design

and distribution

Personnel

Copyright © 2018 by Institutional Real Estate, Inc., 2274 Camino Ramon, San Ramon, CA 94583. Material may not be reproduced in whole or in part without the express written permission of the publisher.

The publisher of this special report, Institutional Real Estate, Inc., is not engaged in rendering tax, accounting or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment.


Accord Equity Advisors

Alan Biller & Associates

Alaska Electrical Pension Fund

Alaska Retirement Management Board

Allstate Investments

Am Alpha GmbH

Art of the World

ATP Real Estate

Australian Government Future Fund

AustSafe Super

AVIVA Investors

Bank of Ireland Private Banking

Bayerische Versorgungskammer

Blue Cross Blue Shield Assoc. Nat’l Rtrmt Trust

Blue Sky Group

Board of Pensions, Presbyterian Church

Bouwinvest

California Public Employees’ Retirement System

California State Teachers’ Retirement System

Canada Pension Plan Investment Board

Canada Post Corp. Pension Plan

Cargill

Catholic Order of Foresters

CenturyLink Investment Management

Chapel Hill Foundation Real Estate Holdings

Chevron Corp.

Church Commissioners for England

The Church Pension Fund

Citi U.S. Pension Investments

City of Austin Employees’ Retirement System

City of Knoxville Employees’ Pension Fund

City of Milwaukee Employes’ Retirement System

City of Phoenix Employees Retirement System

CNP Assurances

The Collegiate Church Corp.

Colorado Public Employees Retirement Association

The Crown Estate

Dallas-Fort Worth Airport Employees Pension Plan

Deseret Mutual Benefit Administrators

Deutsche Finance Group

Development Bank of Japan

DNB Real Estate Investment Management

E.ON SE

Employees Retirement System of Texas

Employees Retirement System of the City of Baton

Rouge & Parish of East Baton Rouge

Employees’ Retirement System of the State of Hawaii

Erie Insurance Group

Etablissement Retraite Additionnelle de la Fonction Publique

Exelon Corp.

Farmers Insurance Group

Fiat Chrysler Automobiles N.V.

Florida Retirement System Pension Plan

Fort Worth Employees’ Retirement Fund

Fresno County Employees’ Retirement Association

GCM Grosvenor

Generali Real Estate SGR S.p.A

Government Pension Fund (Thailand)

Harding University

The Harry and Jeanette Weinberg Foundation

Hawkeye Partners

HB Capital Group

Healthcare of Ontario Pension Plan

HESTA Super Fund

List of Respondents


North Carolina Retirement Systems

Northwestern University

Nuclear Electric Insurance

Oak Street Real Estate Capital

Ohio Bureau of Workers’ Compensation

Ontario Teachers’ Pension Plan

Oorah Endowment Fund

Oregon Public Employees Retirement Fund

Oregon State Treasury

Oxford Properties Group

Partners Group

Pennsylvania Public School Employees’ Retirement System

Pennsylvania State Employees’ Retirement System

PensionDanmark

PFA Pension

PGGM Investments

Public Employee Retirement System of Idaho

Public Employees Retirement System of Nevada

Public School Retirement System of Missouri

Public Sector Pension Investment Board

Quilvest and Partners France

Régime de rentes du Mouvement Desjardins

The Regents of the University of Michigan

Retirement Plan for Employees of Aetna Master Trust

Rhea Capital Partners

Richard King Mellon Foundation

Roosevelt University Endowment

Royal Neighbors of America

San Diego City Employees’ Retirement System

San Joaquin County Employees’ Retirement Association

San Luis Obispo County Pension Trust

School Employees Retirement System of Ohio

Seattle City Employees’ Retirement System

SEI Investments Co.

Sentinel Trust Co.

Sonoma County Employees’ Retirement Association

South Dakota Investment Council

Southern Co.

Sparinvest Property Investors A/S

State of Idaho Endowment Fund Investment Board

Honeywell International Pension Fund

Hong Kong Baptist University

IBM Personal Pension Plan Trust

Inarcassa

Indiana Public Retirement System

Iowa Public Employees’ Retirement System

Irish Life Investment Managers

Ivanhoe Cambridge (real estate arm of Caisse de Depot

et de Placement du Quebec)

Jasper Ridge Partners

Jen Capital Advisors

Kansas City Police Employees’ Retirement Systems

Local Pensions Partnership

Los Angeles City Employees’ Retirement System

Los Angeles County Employees Retirement Association

Los Angeles Department of Water & Power Employees

Retirement Plan

Los Angeles Fire & Police Pensions

Maine Public Employees Retirement System

Manulife Financial

Marin County Employees Retirement Association

Maryland State Retirement and Pension System

Meag Munich Ergo

Meiji Yasuda Realty USA

Mercy Health

MetLife Investment Management

Migros-Pensionskasse

Minnesota State Board of Investment

Missouri Department of Transportation and Highway

Patrol Employees’ Retirement System

Montana Board of Investments

National Pension Service of Korea

Nationwide Insurance Co.

New Mexico Educational Retirement Board

New Mexico State Investment Council

New York City Retirement Systems

New York State Common Retirement Fund

Newport Wealth Management

New York Presbyterian Hospital

Nokia


Institutional Real Estate, Inc.’s website at www.irei.com has a new look showcasing more news,a modern, mobile-friendly designand improved functionality.

New Site Features:• News-based homepage with fresh

news daily

• Improved navigation with top and footer menus

• Filter functionality on our Institutional Real Estate Newsline, podcast and video pages

• New digital advertising opportunities

• Mobile-friendly platform for easy viewing on a smartphone or tablet



Institutional Real Estate, Inc.has a new website

Experience these features fi rst-hand by visitingwww.irei.com

State of Michigan Retirement Systems

State of Wisconsin Investment Board

State Oil Fund of the Republic of Azerbaijan

State Teachers Retirement System of Ohio

StepStone Real Estate

Sun Hung Kai Properties

Swiss Federal Pension Fund PUBLICA

Swiss Federal Social Security Funds

Syntrus Achmea Vastgoed

Tacoma Employees’ Retirement System

Teacher Retirement System of Texas

Teachers’ Retirement System of Louisiana

Temasek Holdings

The Tennessee Consolidated Retirement System

Texas Christian University

Texas Municipal Retirement System

Texas Permanent School Fund

The Pension Boards – UCC

Universiti Teknologi MARA

University of California Regents

University of Chicago Endowment

University of Florida Investment Corp.

University of San Diego

University of Texas Investment Management Co.

UPS Group Trust

Utah State Retirement System

Varma Mutual Pension Insurance Co.

Versicherungskammer Bayern

Virginia Retirement System

Washington State Investment Board

West Virginia Investment Management Board

Yale University

Zurich Insurance Co.

Institutional Real Estate, Inc.’s website at www.irei.com has a new look showcasing more news,a modern, mobile-friendly designand improved functionality.

New Site Features:• News-based homepage with fresh

news daily

• Improved navigation with top and footer menus

• Filter functionality on our Institutional Real Estate Newsline, podcast and video pages

• New digital advertising opportunities

• Mobile-friendly platform for easy viewing on a smartphone or tablet



Institutional Real Estate, Inc.has a new website

Experience these features fi rst-hand by visitingwww.irei.com

ENGAGE YOUR CUSTOMERS

On average, Kingsley clients see a 4% increase in tenant

renewal intention, substantially increasing asset

ASSESS YOUR PERFORMANCE

The chosen survey partner

of over 200 real estate firms.

TENANT & RESIDENT SURVEYS | CLIENT & INVESTOR SURVEYSEMPLOYEE ENGAGEMENT STUDIES | BROKER PERCEPTION STUDIES

Since 1985, real estate leaders have turned to Kingsley Associates to provide actionable intelligence through proven survey programs and proprietary industry benchmarks. Our tools and insights drive smarter and more informed decisions focused on enhancing operations, developing customer loyalty, and increasing property and portfolio returns.

www.kingsleyassociates.com | 770.908.1220 | [email protected]

Proud partner on the Annual Investor Survey

ELEVATE YOUR BUSINESS

and portfolio value.

a supplement to may 2018 institutional investors real ... · pacific open-end real estate funds, we...

Documents