![]() ![]() The NPI measures returns for operating properties, defined as existing properties that are not undergoing redevelopment, plus newly developed and redeveloped properties that have achieved occupancy of at least 60%.The relationship between returns on the asset and returns on the equity invested is: %RoA = / where %WACD is the weighted average cost of debt and %L is leverage measured as debt divided by asset value. For properties purchased with debt, or held by investment managers who use debt, the NPI measures returns on the asset rather than on the equity invested. The NPI measures returns at the property level, meaning that it does not measure the effects of leverage, which increases returns (provided that returns are greater than the cost of debt) and also increases volatility and other forms of risk.commercial property market as well as for several important market segments. It is published quarterly based on reports submitted by NCREIF data contributing members for more than 7,000 properties worth nearly $400 billion owned at least in part by tax-exempt institutional investors such as pension funds. The NPI measures average capital appreciation, average gross income, and average gross total return at the property level. (The first article focused on two similar index families, the Moody’s/RCA Commercial Property Price Index (CPPI) and the CoStar Commercial Repeat-Sales Index (CCRSI), both of which measure monthly capital appreciation at the property level.) In this article I will focus on the NCREIF Property Index (NPI) published by the National Council of Real Estate Investment Fiduciaries. ![]() This is the second in a series of articles focusing on the strengths of different indices that are published regularly and may be appropriate for benchmarking, risk assessment, and other real estate investment purposes. ![]()
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