Total returns for private equity real estate continued to be strong, at 2.7% in first quarter and 11.2% for the year-ending first quarter 2014. Returns were above the historic annual-average of 9.2% and have been relatively stable during the past three years. Leveraged core real estate funds, as measured by the NFI-ODCE index returned 13.8% during the yearending first quarter 2014, gross of fees.
Appreciation return for the NPI reached 5.4% during the year-ending first quarter 2014. Capital appreciation stemmed from cap rate compression, while the impact from NOI growth was minimal on average. Cap rates dropped 30 basis points from first quarter 2013 to first quarter 2014 on a market-value weighted basis.
Although they have compressed, income returns for real estate remained high at 5.5%. The yield spread to 10-year Treasuries continued to narrow during the first quarter, but remained above the long-term average of 270 basis points.
Source : Deutsche Asset & Wealth Management