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S&P Launches New Way To Track Changing Core CRE Securities Values

January 2, 2013
Standard & Poor’s Dow Jones Indices recently launched the Dow Jones Townsend Core U.S. REIT Index. Designed in collaboration with Cleveland-based The Townsend Group, the new index aims to provide risk and return characteristics typical of direct core real estate investments through a basket of liquid publicly traded REITs.

"The Dow Jones Townsend Core U.S. REIT Index is designed to serve as an investable proxy for privately held core real estate investments," said Michael Orzano, associate director of global equity indices at S&P Dow Jones Indices, adding the index is intended to provide a representative measure of the characteristics of core property investments, constructed using liquid, publicly-traded REITs.

The index constituent companies are members of the Dow Jones U.S. Select REIT Index. The property types eligible for inclusion are limited to companies involved in activities that are focused on longer-term rent generation.

Property types that tend to include shorter lease-term focused REITs, such as retail factory outlets, hotels, manufactured homes, mixed industrial/office and suburban office are excluded. The index uses a capping scheme to limit single stock concentration.

As such, the new index is intended to measure the performance of securities that would reflect a public market analog for privately-held institutional “core” real estate investments. That makes it similar to other securities-based indices, such as the Dow Jones Industrial Average.

Tracking the change of share price of REITs differs substantially from other CRE indices, such as the CoStar Commercial Repeat Sale Indices (CCRSI), which analyzes pricing changes among commercial property throughout the U.S.

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