Total returns for private equity real estate continued to be strong, at 2.5% in fourth quarter and 11.0% for all of 2013. Returns are above the historic average of 9.1% and have been relatively stable during the past three years. Leverage core real estate funds, as measured by the NFI-ODCE index returned 12.9% during 2013.
Appreciation return for the NPI reached 5.2% during 2013. Capital appreciation stemmed from cap rate compression, while NOI growth was flat on average. Cap rates dropped 30 basis points from fourth quarter 2012 to fourth quarter 2013.
Income returns and cash yields remain robust at 5.6%. The yield spread to 10-year Treasuries narrowed, but remained above the long-term average during 2013. Cap rates continue to compress, and the Treasury rate increased during the fourth quarter, ending the year near 3%.
Source : Deutsche Asset & Wealth Management