Green Street 101
Methodology
Public/Private Arbitrage
Green Street delivers unique comparative insights for capital allocation across both publicly listed and private assets, providing our clients with a 360-degree view of commercial real estate. Private-market participants can benefit by paying close attention to the public market, which offers signals that can yield directional insight for future property pricing.
What Public REIT Valuations Tell Us About Private Markets
The aggregate NAV premiums ascribed to REITs by the public market serve as a decent, albeit imperfect, predictor of what lies ahead for property pricing. Property prices have almost always appreciated in the twelve months subsequent to times when listed REITs traded at NAV premiums.
Capital Allocation Signals from Listed REITs
Aggregate NAV premiums also contain valuable information that should help property investors decide how to best allocate capital between the public market and the private market. Listed REITs have almost always delivered superior five-year returns vs. private vehicles following times when they have traded at discounts.
Green Street’s Commercial Property Price Index® (CPPI®)
Built on REIT-owned asset valuations, our CPPI® delivers monthly updates that reflect where the commercial real estate market currently is—well ahead of traditional transaction data. Green Street’s CPPI® is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted.
Institutional Quality
The index is based on Green Street’s estimated price appreciation of the property portfolios owned by the REITs in its U.S. coverage universe. It is driven by the NAV models maintained by the research team, which, in turn, are primarily determined by changes in market cap rates and NOI growth. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate.
Timeliness
Other indexes, based on either closed transactions or formal appraisals, reflect market prices from several months earlier. Also, the Green Street index value for a given month is released within days of month-end, whereas other indexes have a sizable lag.
Gauge of Aggregate Values
Akin to familiar stock price indexes (e.g., S&P 500), asset value weighting provides a gauge of aggregate (as opposed to average) values. Equal-weighted indexes, by contrast, put the same emphasis on a small suburban strip center as they do a Manhattan office building.
MONTHLY INSIGHTS STRAIGHT TO YOU
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