Nuveen Global Cities REIT Portfolio Update

Richard Kimble
Lead Portfolio Manager, Global Cities REIT
  • Managing Director, Portfolio Management, Nuveen
  • Gracie Coburn
    Assistant Portfolio Manager, Global Cities REIT
  • Director
  • Vienna city skyline

    Nuveen Global Cities continues to post outsized positive performance which can largely be attributed to the REIT’s strategic overweight to the best performing sectors in real estate: industrial, housing, and healthcare. As of September 2021, the Nuveen Global Cities REIT had year-to-date Class I net total return of 18.75% and a trailing 12 month return of 22.34%.

    The REIT has executed its strategy focused on diversification across global cities and property sectors in order to create a defensive cash flow poised for long term income growth and appreciation and resiliency through market cycles. With an emphasis on quality and durability, the portfolio focuses on long term leases and well occupied properties, resulting in a defensive cash flow, steady income growth, and strong capital appreciation.

    Performance highlights

    Acquisitions update

    In September, the Nuveen Global Cities REIT invested over $37m in single family rentals (SFR), which now represents 4% of our allocation. Our single family rental home strategy is focused on the fastest growing metros in Sun Belt markets. We aim to capture strong future demand driven by the growth in the single family renter demographic, those aged 35-44 years, projected to grow 1.3% per annum during the next 10 years, compared to 0.6% per annum for the U.S. population overall.

    There are existing barriers to entry for both acquisitions and operations in single family rentals that create immediate alpha to traditional sectors. Nuveen has the capability, capacity, and strategic partnerships to execute in this strategy. To operate in this highly fragmented segment of the housing market, we partner with Sparrow, an asset manager who offers a fully-integrated platform with expertise across the investment life cycle. Nuveen Global Cities REIT’s SFR portfolio has been achieved by purchasing one-off assets and aggregating a portfolio creating a yield premium for investors, rather than paying up for existing SFR portfolios.

    Nuveen Real Estate remains fully capable of investing and supporting all of its client portfolios and is committed to the welfare of its employees and clients. We have the benefit of the resources, preparations, and strategy across Nuveen Real Estate and its parent, TIAA, a 100-year-old company with more than a $1.2 trillion of assets under management as of 30 Jun 2021. TIAA’s $300 million investment into the Nuveen Global Cities REIT remains a key feature, providing true co-alignment and attention from Nuveen Real Estate and its leadership team.

    A note on China

    With the news of Evergrade’s high risk of default and the resulting ripples through the global economy, it is important for investors to rest assured about the impact on Nuveen Global Cities REIT. An Evergrande collapse, even a managed one, would reverberate through the Chinese economy given the company’s liabilities is equal to 2% of the country’s GDP. However, Nuveen Global Cities REIT has no current exposure to China, directly or indirectly. We do not expect meaningful consequences in our Asia Pacific property portfolio given the strong occupancy rate, high quality asset pool, and diversified investments across the leading markets in the region: Sydney, Seoul, Tokyo, and Osaka.

    Nuveen Real Estate remains fully capable of investing and supporting all of its client portfolios and is committed to the welfare of its employees and clients. We have the benefit of the resources, preparations, and strategy across Nuveen Real Estate and its parent, TIAA, a 100-year-old company with more than a $1.2 trillion of assets under management as of 30 Jun 2021. TIAA’s $300 million investment into the Nuveen Global Cities REIT remains a key feature, providing true co-alignment and attention from Nuveen Real Estate and its leadership team.

    We believe that the Nuveen Global Cities REIT’s commitment to quality, diversification, and strategic portfolio construction will continue to offer investors a competitive advantage and value for stockholders.

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    Certain information contained in this document constitutes “forward-looking statements” within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “likely,” or the negative versions of these words or other comparable words thereof. These may include our ability to successfully navigate through the current economic uncertainty, our financial projections and estimates and their underlying assumptions, statements about plans, objectives and expectations with respect to future operations, and statements regarding future performance. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. We believe such factors include the financial condition of our company and our portfolio in light of the COVID-19 pandemic, the state of financial markets, and the impact of the pandemic on our tenants and the general economy. We believe these factors also include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended 31 Dec 2020, and any such updated factors included in our periodic filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

    Past performance is no guarantee of future results.
    1 Returns shown are preliminary. Net total returns are calculated by share class using the time weighted return formula and derived by dividing (1) the respective aggregate share class’s monthly net operating income (after appreciation, fees and expenses) by (2) the share class’s previous month’s ending NAV plus the proceeds from share issuances for the current month. Actual individual investor performance may differ from the aggregated share class performance. All returns shown assume reinvestment of distributions pursuant to Nuveen Global Cities REIT Inc’s (“GCREIT” or “NREIT”) distribution reinvestment plan, are derived from unaudited financial information and are net of all GCREIT expenses, including general and administrative expenses, transaction related expenses, management fees, and share class specific fees, but exclude the impact of early repurchase deductions on the repurchase of shares that have been outstanding for less than one year. Class T shares and Class S shares listed as (With sales load) reflect the returns after the maximum upfront selling commission and dealer manager fees of 3.5%. Class T shares and Class S shares listed as (No sales load) exclude up-front selling commissions and dealer manager fees. Returns are annualized for periods longer than one year. The returns have been prepared using unaudited data and valuations of the underlying investments in GCREIT’s portfolio, which are estimates of fair value and form the basis for GCREIT’s NAV. Valuations based upon unaudited reports from the underlying investments may be subject to later adjustments, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated. Past performance is historical and not a guarantee of future results. For the year ended 31 Dec 2020 and the six months ended 30 Jun 2021, we reported GAAP net income (loss) of $0.7 million and $3.9 million, respectively.
    2 2 NAV is calculated in accordance with the valuation guidelines approved by our board of directors. NAV is not a measure used under generally accepted accounting principles in the United States (“GAAP”), and you should not consider NAV to be equivalent to stockholders’ equity or any other GAAP measure. As of 30 Jun 2021, our NAV per share was approximately $11.30, $11.30, $11.22 and $11.15, per Class I, Class D, Class T and Class S share, respectively, and total stockholders’ equity per share was approximately $9.21, $9.21, $9.13 and $9.06 per Class I, Class D, Class T and Class S share, respectively. For a full reconciliation of NAV to stockholders’ equity and a discussion of the limitations and risks associated with our valuation methodology, please see the “Management’s Discussion and Analysis of Financial Condition and Results of Operation—NAV Per Share” section of our annual and quarterly reports filed with the SEC, which are available at www.nuveen.com/gcreit. For information on how we calculate NAV, see the “Net Asset Value Calculation and Valuation Guidelines” section of our prospectus.
    3 Distribution rate reflects the most recently approved monthly annualized distributions divided by the prior month’s net asset value. Distributions paid during the year ended 31 Dec 2020 and the six months ended 30 Jun 2021 were covered 69% and 74%, respectively, from GAAP cash flow from operations and 31% and 26%, respectively, from debt and financing proceeds.
    4 Total asset value is measured as the gross asset value of real estate properties (based on fair value), the investment in our real estate-related securities measured at fair value, the equity investment in unconsolidated International Affiliated Funds (which includes the allocable share of the International Affiliated Funds’ income and expense, realized gains and losses and unrealized appreciation or depreciation), plus the investment in commercial mortgage loans measured at fair value, plus cash, other assets and excluding restricted cash.
    5 GCREIT directly owns 128 properties, including 101 single family homes, and has exposure to 26 additional properties owned by the International Affiliated Funds in which we have made an investment.
    6 Leverage is measured using, as the numerator, property-level and entity-level debt and as the denominator, the gross asset value of real estate assets (calculated using the greater of fair value and cost of gross real estate assets including investment in our securities portfolio, our loan portfolio, and our allocable share of investments in unconsolidated International Affiliated Funds), inclusive of property-level and entity-level debt, plus cash, other assets and excluding restricted cash.

    The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. All information is as of 31 Aug 2021, unless otherwise disclosed.

    Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). Nuveen Securities, LLC, member FINRA and SIPC, is the dealer manager for the Nuveen Global Cities REIT, Inc. offering.