TIAA-CREF Real Estate Fund Commentary – Q3 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 third quarter of 2021, TIREX underperformed the benchmark (FTSE Nareit All Equity REITs Index) by 53bps, almost entirely due to a single position: GDS Holding. During the quarter, the fund continued to reduce its lodging and resort sector exposure and reallocate into industries and sectors that are expected to benefit from economic recovery, such as apartment REITs. In general, REITs underperformed the U.S. equity indexes during the quarter. Manufactured homes and single-family home rental performed best, while data centers and infrastructure took a hit.
Q3 2021 Summary
- TIREX returned (0.30%), while the FTSE Nareit All Equity REITs Index returned 0.23%
- Contributors
- Underweight to Crown Castle International Corp (wireless infrastructure REIT)
- Not owning Americold Realty Trust (temperature-controlled warehouse operator)
- Owning AvalonBay Communities (apartment REIT)
- Detractors
- Out of benchmark holding of GDS Holdings Ltd. (China-based data center)
- Owning Wynn Resorts Limited and Las Vegas Sands Corp. (resort and casino operators)
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
- The portfolio is remains focused on REITs that will take advantage of the economic rebound
[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