NCREIF launches transaction index

Beginning this quarter, the Chicago-based real estate association will publish an index based on income-producing properties in the US that have seen transaction movement. The index was originally published by the MIT Center for Real Estate.

The National Council of Real Estate Investment Fiduciaries (NCREIF) has taken over publishing of a quarterly index to track and asses the transaction movement on investment-grade properties across the US. 

According to the Chicago-based real estate association, the NCREIF Transaction Based Index (NTBI) monitors properties in the NCREIF Property Index (NPI) – a database of 6,267 income-producing properties in the apartment, office, retail, industrial and hotel sectors – that are sold every quarter. The NCREIF extracts transactions from the NPI and places them into the NTBI, then publishes the results on a quarterly basis. 

“The NTBI is not intended to be a performance benchmark, but rather provide additional information for investors as to how an index based solely on transactions would perform,” said Jeff Havsy, director of research at NCREIF. He added that the NTBI will not replace the NPI, but rather serve as a complementary index.

Initially, the NTBI began as a research project launched by the MIT Center for Real Estate, a real estate research organisation formed by the Cambridge, Massachusetts-based school. The index, originally called the TBI, used the data from the NCREIF's NPI to monitor transacted properties. However, as the project grew and became too time-consuming for the centre, it asked the NCREIF to take over the publication of the index. 

“We had worked with them by providing data for the initial index. So it made sense to come back to us,” said Havsy. “Once they decided to stop producing it, they gave it over to us.” Upon taking over the reigns, the NCREIF simplified the index's methodology and changed its name to the NTBI. 

David Geltner, director of research at the MIT Center for Real Estate said in a statement that the NCREIF's new methodology was designed to “stay true to the original TBI, while creating a more transparent methodology and one which would provide more reliable results at the property and regional level”.

The findings of the incoming quarterly index will be published 45 days after each quarter ends, similar to past indexes. The NTBI will remain an equal-weighted index as was calculated by MIT, but the methodology used to compute the results will adjust slightly.