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 while also providing a hedge against inflation.

    Performance highlights

    Sector selection continues to be a paramount investment decision in 2022 as the continued economic recovery is affecting sectors and industries by varying degrees. Nuveen Global Cities REIT’s portfolio consists of a combined 85% allocation to industrial, housing, and healthcare, all of which are best positioned for demand growth and outperformance given increased reliance on ecommerce, technology, healthcare, and housing.

    Investment Highlight – Floating Rate Mortgage Originations

    While Nuveen Global Cities REIT is primarily a direct private real estate vehicle, the REIT has a tactical allocation to investment in mortgages. Many investors and advisors are familiar with CMBS, but direct lending in real estate is a different type of investment. We make direct, floating rate property level loans to strong real estate sponsors in order to capture the stable income these loans provide. Debt investment provides stable income with a low correlation to the wider property and investment markets. This strategy acts as a diversifier to direct real estate and will provide cash flow and capital preservation. In a rising interest rate environment, the other benefit to investment in floating rate debt is it acts as a means to remain relatively interest rate neutral to rising costs our floating rate leverage as the income from debt investments rises in tandem as the REIT’s costs of debt rises.

    In Q1 2022, GCREIT originated a mortgage in which the REIT originates a floating rate whole loan and then sells the A-Note, retaining the higher yielding B-Note.

    The Tucson IV mortgage will provide financing for the acquisition and repositioning of a portfolio consisting of five garden-style apartment communities located in Tucson, AZ. The borrower will use proceeds to purchase the properties and will execute a capex value add business plan by renovating 75% of unit interiors. With other sunbelt metros experiencing significant valuation growth which exceeds replacement cost for similar vintage assets, the Tucson V provides an exceptional basis. Similar to Phoenix, Tucson experienced 20.4% YoY annual rent growth and there is robust rent growth forecasted for the Tucson metro over the next five years. Tucson, Arizona is a rapidly growing metro benefiting from coastal-market based corporate relocations, expansions of existing key employment sectors driven by the city’s highly educated populace, as well as ancillary in-migration from mid-western markets seeking the active and unique outdoor lifestyle offered. Tucson is set to experience continued demographic growth in the next five years which should sustain recent historical highs for rent and occupancy.

    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 $1.2 trillion of assets under management as of 30 Sep 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 liquidate. Past performance does not predict or guarantee future results. For the year ended 31 Dec 2021 the three months ended 31 Mar 2022, we reported GAAP net income (loss) of $19.1 million and $(7.8) 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 Mar 2022, our NAV per share was approximately $12.93, $12.97, $12.93 and $12.80, per Class I, Class D, Class T and Class S share, respectively, and total stockholders’ equity per share was approximately $10.04, $10.07, $10.04 and $9.94 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 2021 and the three months ended 31 Mar 2022 were covered 56% and 100%, respectively, from GAAP cash flow from operations and 44% and 0%, 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), any investments in commercial mortgage loans measured at fair value, plus cash and other assets, excluding restricted cash.

    5 GCREIT directly owns 315 properties, including 274 single family homes, and has exposure to 27 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 Mar 2022, 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.