TIAA-CREF Real Estate Fund Commentary – Q2 2021
Thesis
TIREX utilizes fundamental research to find properties in high barrier markets, with higher occupancy and rent growth. By focusing on quality companies and avoiding unnecessary risks, the fund obtains a strong track record that has outperformed the benchmark and REIT ETF over time. We continue to hold TIREX because of the team’s growth focus with asset concentrations in supply constrained markets. Lastly, TIREX was the lowest cost active manager screened, at 49bps.
[more]
Overview
In the second quarter of 2021, TIREX outperformed the benchmark (FTSE Nareit All Equity REITs Index) by 19bps, due in large part vy strong stock selection within regional malls, health care, and office industries. The fund maintained a large allocation in commercial real estate, which they saw would continue to recover and rebound. The profits achieved in this sector were then used to increase exposure in single-family home rentals and data centers. In general, returns were positive for the most part across sectors, and a recovery in apartments and retail continued to contribute to performance. Lodging and timber were the only industries with negative returns for the quarter.
Q2 2021 Summary
- TIREX returned 12.22%, while the FTSE Nareit All Equity REITs Index returned 12.03%
- Contributors
- Megaport Ltd. – out-of-benchmark position in an Australian data center
- Medical Properties Trust – not owning the medical facility operator
- Macerich Company – allocation to a regional mall REIT
- Detractors
- GDS Holdings Ltd – out-of-benchmark position in China-based data center
- Las Vegas Sands Corp. – out-of-benchmark position in a resort and casino operator
- Marriot International, Inc. – out-of-benchmark position in resort operator
Optimistic Outlook
- We continue to hold this fund and believe in our thesis due to the fund’s goal to obtain long-term alpha through capital appreciation and current income
- By having a research-oriented investment process that focuses on cash flows and asset values we believe TIREX will continue to outperform its benchmark long-term
- The managers are effective when it comes to understanding and preparing for changes to the REIT landscape and where long-term sustainable growth exists
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109