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 REIT, Inc.’s strategy continues to focus on durable income, diversification across global cities and property sectors, and achieving long-term appreciation through active investment and asset management.

    Performance highlights
    • Nuveen Global Cities REIT’s Class I shares total net return in March was 1.21% and year-to-date was 4.00%.1,2
    • The change from the previous month was from increased valuations in our properties driven by our industrial assets and unrealized gains in our listed REIT portfolio.
    • Current monthly distribution rate is 5.31% (Class I shares).3
    • The portfolio has grown to $707m in gross asset value, consisting of direct and indirect investments in 44 properties located across leading global cities.4,5
    • We achieved these returns all while conservatively managing risk in the portfolio, with leverage of 20.13% for the month end.6

    Portfolio update

    Sector selection continues to be a paramount investment decision in 2021 as the continued economic recovery is affecting sectors and industries by varying degrees. Nuveen Global Cities REIT’s portfolio consists of a combined 69% allocation to industrial, apartments, and healthcare, all of which are best positioned for demand growth and outperformance given increased reliance on ecommerce, technology, healthcare, and housing.

    City selection is another area of investment focus as population migration continues to trend away from urban centers and into the Sun Belt, mountain west, and suburbs. The GCREIT is well positioned to capture the demand growth and economic benefit of this population with 74% of the U.S. regional allocation in the sunbelt and mountain west, as well as, 74% suburban vs. 26% urban exposure.

    In terms of operations, the REIT’s U.S. portfolio is now 99% leased7 and rent collections remain strong in the upper 90%’s of rent collected in March. The operational stability supports the important features of the Nuveen Global Cities REIT: stable, tax-efficient yields and strong relative value.

    Additionally, the portfolio continues to benefit from moderate leverage, which equates to less volatility and less downside risk8; high occupancy rates; very limited lease expirations over the next 12 months; overweighting industrial with an underweighting to retail and office; no material exposure to hospitality, gaming, leisure, or senior housing, which are anticipated to be the most negatively affected sectors in the near term; and disciplined city selection, which improves liquidity and resiliency through cycles.

    How do rising interest rates affect real estate?

    The rising interest rate environment raises concern about the potential impact on U.S. commercial real estate property values and investment performance. This is causing real estate investors to fear that rising interest rates will cause capitalization rates to rise and property values to fall, resulting in weaker total returns. Historical data show that higher interest rates do not necessarily result in lower property values and total returns. A number of factors may help to protect overall real estate performance, including capitalization rate spreads over the U.S. 10-year Treasury yield, and the outlook for economic growth and real estate market fundamentals. If interest rates are rising because of stronger economic growth, as is currently the case, real estate demand will also likely be growing. The recent rise in interest rates appears attributable to both higher inflation expectations and higher economic growth expectations, both of which positively impact real estate cash flow streams and then real estate valuations, which is the value of investing in a real asset. Expectations are now rising towards 5% GDP growth for 2021 on the heels of the new round of stimulus. Historically real estate net operating income follows GDP growth with a one year lag, so this would be a very positive indication for the sector next year. Higher growth is an all-around benefit for the economy and investments.

    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 $1 trillion of assets under management as of 31 Dec 2020. 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 2019, 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 years ended 31 Dec 2019 and 31 Dec 2020, we reported GAAP net income (loss) of $5.7 million and $0.7 million, respectively.
    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 31 Dec 2020, our NAV per share was approximately $10.63, $10.61, $10.53 and $10.50, per Class I, Class D, Class T and Class S share, respectively, and total stockholders’ equity per share was approximately $8.95, $8.92, $8.84 and $8.82 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 years ended 31 Dec 2019 and 31 Dec 2020 were covered 93% and 69%, respectively, from GAAP cash flow from operations and 7% and 31%, 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 and other assets.
    5 GCREIT directly owns 18 properties 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 and other assets.
    7Reflects directly-owned real estate property investments only and does not include investments in debt securities. Percentage leased is weighted by the total real estate asset value of all directly-owned real estate properties and includes all leased square footage as of the date indicated.
    8 There is no assurance that downside protection will be achieved.

    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 Mar 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.