TIAA Real Estate

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grok87
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Re: TIAA Real Estate

Post by grok87 » Sat May 19, 2018 10:07 am

Kathys wrote:
Sat May 19, 2018 7:27 am
grok87 wrote:
Sat May 19, 2018 7:18 am
The Wizard wrote:
Fri May 11, 2018 6:58 am
It has been growing at close to the 4% level over the past year, but in the past few months, it has picked up to closer to 6% (0.5% per month).
JUst did the math on this. as far as i can figure for 2018 (i.e. since year end) the fund is growing at an annualized rate of 4.5%
Is that considered decent? Worth investing in?
I'm trying to think about the right way to answer that and not be too longwinded about it.
:)
I follow David Swensen who recommends:
55% stocks
15% real estate
15% treasuries
15% tips

so i'm always going to have a permanent allocation to real estate and for me the question mostly boils down to: TIAA Real estate or REITs or both.

Both TIAA Real estate and REITS are transparent and liquid. i.e. you can see what they own and you can get your money out quickly if you want/need to.

as of 3/31/18
TIAA Real estate's recent 1/3/5/10 year returns are: 4.2% 5.2%, 7.7%, 2.5%
Vanguard Real estate index's (VGSIX) 1/3/5/10 year returns are: -4.0% 3.0% 4.4% 5.9%

so arguably the returns are at similar levels but they are different from each other, one may zig while the other zags. Notably reits have better long term returns but TIAA Re has better near term returns.

With REITs you have leverage which increases risk. VGSIX lost 37% in 2008 and then lost 32% in Q1 2009. That was a cumulative 57% loss for those 5 quarters. Quite a ride.

TIAA Real estate does have manager risk. In particular they are doing like basically zero investing in the midwest right now
https://www.tiaa.org/public/pdf/ffs/878094200.pdf
if you look a this fact sheet you'll see they have 2.5% in the midwest.
Their managers seems to have a lot of conviction that midwest real estate sucks. Are they right? maybe? or maybe they are just following the crowd..

in short i think both TIAA Re and VGSIX are worth investing in. I wouldn't let either get to more than 10% each of my risk portfolio, i.e. 20% in total.

sorry to be longwinded after all...
:)
cheers,
grok
Keep calm and Boglehead on. KCBO.

tibbitts
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Re: TIAA Real Estate

Post by tibbitts » Sat May 19, 2018 10:24 am

Kathys wrote:
Sat May 19, 2018 7:27 am
grok87 wrote:
Sat May 19, 2018 7:18 am
The Wizard wrote:
Fri May 11, 2018 6:58 am
It has been growing at close to the 4% level over the past year, but in the past few months, it has picked up to closer to 6% (0.5% per month).
JUst did the math on this. as far as i can figure for 2018 (i.e. since year end) the fund is growing at an annualized rate of 4.5%
Is that considered decent? Worth investing in?
Maybe not decent, but you would have been glad for 4.5% (or even -4.5, or even -14.5%) from TIAA Real Estate a few years ago when the fund performed much worse. The current and projected returns on domestic or international stock or bonds, precious metals and commodities, or other real estate investments aren't appealing either, so unless you invent a time machine and go back to... oh, the '80s, you're stuck with that. Some of us just prefer to earn our pitiful returns from a diversified portfolio instead of a concentrated one, so we have TIAA Real Estate to help out with that. It's just more fun to not make money with thirty seven different funds than to not make money with only one. So I invest in it.

tibbitts
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Re: TIAA Real Estate

Post by tibbitts » Sat May 19, 2018 10:29 am

grok87 wrote: TIAA Real estate does have manager risk. In particular they are doing like basically zero investing in the midwest right now
https://www.tiaa.org/public/pdf/ffs/878094200.pdf
if you look a this fact sheet you'll see they have 2.5% in the midwest.
Their managers seems to have a lot of conviction that midwest real estate sucks. Are they right? maybe? or maybe they are just following the crowd..
This is an excellent point and I really do have serious doubts that the managers have any idea at all what they're doing. I sometimes think they just go looking for properties like the ones they live and work in. You have an entire world of property and they're fixated on a handful of zip codes.

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jjustice
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Re: TIAA Real Estate

Post by jjustice » Sat May 19, 2018 4:19 pm

tibbitts wrote:
Sat May 19, 2018 10:03 am
I hate to break it to you but the returns already have dropped below Traditional, dramatically in some cases, depending on the time period you choose to measure.
?? You would have to do some very motivated cherry picking to find a recent period where TIAA Real Estate has returned less than illiquid Traditional's 4%. For the past 3 months, 4 months, 6 months, and one year its annualized return has been over 4%. Perhaps you are thinking of its performance during the great recession?

John

tibbitts
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Re: TIAA Real Estate

Post by tibbitts » Sun May 20, 2018 5:56 pm

jjustice wrote:
Sat May 19, 2018 4:19 pm
tibbitts wrote:
Sat May 19, 2018 10:03 am
I hate to break it to you but the returns already have dropped below Traditional, dramatically in some cases, depending on the time period you choose to measure.
?? You would have to do some very motivated cherry picking to find a recent period where TIAA Real Estate has returned less than illiquid Traditional's 4%. For the past 3 months, 4 months, 6 months, and one year its annualized return has been over 4%. Perhaps you are thinking of its performance during the great recession?

John
I'd say 2.5% over ten years through the last month or so is less than Traditional of any form.

The Wizard
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Re: TIAA Real Estate

Post by The Wizard » Sun May 20, 2018 6:21 pm

grok87 wrote:
Sat May 19, 2018 7:18 am
The Wizard wrote:
Fri May 11, 2018 6:58 am
It has been growing at close to the 4% level over the past year, but in the past few months, it has picked up to closer to 6% (0.5% per month).
JUst did the math on this. as far as i can figure for 2018 (i.e. since year end) the fund is growing at an annualized rate of 4.5%
I monitor month by month, from the 20th to the 20th, since my monthly adjusted annuity payout uses the 20th.
TREA closed at 402.98 on 4/20/2018 and at 405.04 on last Friday, 5/18. This is an increase of around 0.51% for the month, or around 6.1% annualized, so I'll be getting a modest increase in my June 1st paycheck, $20 or so.

Will the 6% annualized increases for the past two months continue going forward?
We'll see...
Attempted new signature...

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jjustice
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Re: TIAA Real Estate

Post by jjustice » Sun May 20, 2018 6:48 pm

tibbitts wrote:
Sun May 20, 2018 5:56 pm
jjustice wrote:
Sat May 19, 2018 4:19 pm
tibbitts wrote:
Sat May 19, 2018 10:03 am
I hate to break it to you but the returns already have dropped below Traditional, dramatically in some cases, depending on the time period you choose to measure.
?? You would have to do some very motivated cherry picking to find a recent period where TIAA Real Estate has returned less than illiquid Traditional's 4%. For the past 3 months, 4 months, 6 months, and one year its annualized return has been over 4%. Perhaps you are thinking of its performance during the great recession?

John
I'd say 2.5% over ten ynears through the last month or so is less than Traditional of any form.
Well, I wondered what you were thinking of. Seven or eight posts preceding yours had referenced the 2008-2009 recession, and Oldzey had even posted a chart. Your post looked like you were suggesting something that had not yet been discussed. I thought that 2008-2009 was the only possible justification for your comment, but it sounded as if you were talking about some recent performance that others had not mentioned.

Joh

tibbitts
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Joined: Tue Feb 27, 2007 6:50 pm

Re: TIAA Real Estate

Post by tibbitts » Sun May 20, 2018 7:05 pm

jjustice wrote:
Sun May 20, 2018 6:48 pm
tibbitts wrote:
Sun May 20, 2018 5:56 pm
jjustice wrote:
Sat May 19, 2018 4:19 pm
tibbitts wrote:
Sat May 19, 2018 10:03 am
I hate to break it to you but the returns already have dropped below Traditional, dramatically in some cases, depending on the time period you choose to measure.
?? You would have to do some very motivated cherry picking to find a recent period where TIAA Real Estate has returned less than illiquid Traditional's 4%. For the past 3 months, 4 months, 6 months, and one year its annualized return has been over 4%. Perhaps you are thinking of its performance during the great recession?

John
I'd say 2.5% over ten ynears through the last month or so is less than Traditional of any form.
Well, I wondered what you were thinking of. Seven or eight posts preceding yours had referenced the 2008-2009 recession, and Oldzey had even posted a chart. Your post looked like you were suggesting something that had not yet been discussed. I thought that 2008-2009 was the only possible justification for your comment, but it sounded as if you were talking about some recent performance that others had not mentioned.

Joh
No not at all, but I'd call 10 years "recent." I honestly don't know what my own performance in the fund during that period was since I did try to time it somewhat, although certainly not with the precision that many here apparently did. But I think it's a huge jump to just assume everyone timed the fund just right the way so many here do, and particularly I don't want the OP to think that will be possible in the future.

I'm not an expert on managing real estate investments by any means but I'm not completely convinced the managers navigated the downturn as well as they might have - or even close.

tibbitts
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Joined: Tue Feb 27, 2007 6:50 pm

Re: TIAA Real Estate

Post by tibbitts » Sun May 20, 2018 7:07 pm

The Wizard wrote:
Sun May 20, 2018 6:21 pm
grok87 wrote:
Sat May 19, 2018 7:18 am
The Wizard wrote:
Fri May 11, 2018 6:58 am
It has been growing at close to the 4% level over the past year, but in the past few months, it has picked up to closer to 6% (0.5% per month).
JUst did the math on this. as far as i can figure for 2018 (i.e. since year end) the fund is growing at an annualized rate of 4.5%
I monitor month by month, from the 20th to the 20th, since my monthly adjusted annuity payout uses the 20th.
TREA closed at 402.98 on 4/20/2018 and at 405.04 on last Friday, 5/18. This is an increase of around 0.51% for the month, or around 6.1% annualized, so I'll be getting a modest increase in my June 1st paycheck, $20 or so.

Will the 6% annualized increases for the past two months continue going forward?
We'll see...
There was certainly a lot of doom-and-gloom over at Mornginstar, and people seemingly bailing out right and left starting last year, so it will be interesting to see how things turn out going forward.

The Wizard
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Location: Reading, MA

Re: TIAA Real Estate

Post by The Wizard » Sun May 20, 2018 7:16 pm

tibbitts wrote:
Sun May 20, 2018 7:07 pm

There was certainly a lot of doom-and-gloom over at Mornginstar, and people seemingly bailing out right and left starting last year, so it will be interesting to see how things turn out going forward.
I was one of the partial bailers, moving a part of my accumulation mode TREA into restricted Trad paying 4.0% presently.
If/when TREA gets back toward the 8% annual level, I may move some $$ from stock funds back into it.

I'm just glad TREA doesn't own any malls with Sears stores in them...
Attempted new signature...

tibbitts
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Re: TIAA Real Estate

Post by tibbitts » Sun May 20, 2018 7:29 pm

The Wizard wrote:
Sun May 20, 2018 7:16 pm
tibbitts wrote:
Sun May 20, 2018 7:07 pm

There was certainly a lot of doom-and-gloom over at Mornginstar, and people seemingly bailing out right and left starting last year, so it will be interesting to see how things turn out going forward.
I was one of the partial bailers, moving a part of my accumulation mode TREA into restricted Trad paying 4.0% presently.
If/when TREA gets back toward the 8% annual level, I may move some $$ from stock funds back into it.

I'm just glad TREA doesn't own any malls with Sears stores in them...
It is amazing what's happened to Sears. I used to work for them frequently as a contractor at their headquarters. Actually now that I think about it I have a history of working for companies that then go out of business or get bought for pennies on the dollar, etc. - Kodak, etc. I worked a lot for the military too; hope that won't apply to them!

folkher0
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Re: TIAA Real Estate

Post by folkher0 » Wed May 23, 2018 7:51 am

tibbitts wrote:
Sun May 20, 2018 7:05 pm
jjustice wrote:
Sun May 20, 2018 6:48 pm
tibbitts wrote:
Sun May 20, 2018 5:56 pm
jjustice wrote:
Sat May 19, 2018 4:19 pm
tibbitts wrote:
Sat May 19, 2018 10:03 am
I hate to break it to you but the returns already have dropped below Traditional, dramatically in some cases, depending on the time period you choose to measure.
?? You would have to do some very motivated cherry picking to find a recent period where TIAA Real Estate has returned less than illiquid Traditional's 4%. For the past 3 months, 4 months, 6 months, and one year its annualized return has been over 4%. Perhaps you are thinking of its performance during the great recession?

John
I'd say 2.5% over ten ynears through the last month or so is less than Traditional of any form.
Well, I wondered what you were thinking of. Seven or eight posts preceding yours had referenced the 2008-2009 recession, and Oldzey had even posted a chart. Your post looked like you were suggesting something that had not yet been discussed. I thought that 2008-2009 was the only possible justification for your comment, but it sounded as if you were talking about some recent performance that others had not mentioned.

Joh
No not at all, but I'd call 10 years "recent." I honestly don't know what my own performance in the fund during that period was since I did try to time it somewhat, although certainly not with the precision that many here apparently did. But I think it's a huge jump to just assume everyone timed the fund just right the way so many here do, and particularly I don't want the OP to think that will be possible in the future.

I'm not an expert on managing real estate investments by any means but I'm not completely convinced the managers navigated the downturn as well as they might have - or even close.
So 10 year return (May 2008-May 2018) starts at the funds peak, then captures its subsequent slow decline and recovery. It is probably the most negative light the fund can be viewed in. That's fair, of course, but its not the way I use the fund. I first bought after the recovery. Every month I compare its returns to TIAA TRAD. Every month it beats TRAD, so I stay in. At some point, it won't, and I will get out. I pay particular attention at the end of the quarter as that is an opportunity to withdraw or re-balance before the quarterly restrictions reset. The value of the fund changes so slowly that I don't think I'll lose much using it this way. People talk about using the Green Street CPI as a reliable leading indicator of the trajectory of the fund. I don't have much of an opinion about that, as the entire time I've owned the fund, they have both gone up...

Its not a "boglehead" fund. To some degree, I don't think boglehead principles really serve you very well in using the fund. Sure you can just buy and hold and probably do ok with it. But if you are willing to pay a little attention, I think you can minimize the downsides in a a way that is just not comparable to more commonly used funds. People compare it to REITs. I think that's a very bad comparison. REITs are stock funds and display even higher volatility than the stock market. Just like the stock market, good luck with timing them. TIAA real estate directly owns commercial real estate. I don't own my home and I don't have any interest in being a landlord. The fund allows me to hold real estate without leverage and limiting my exposure to a small part of my portfolio.

It won't make me rich. Last year it felt like a drag that would be better placed in equities (like most of my fixed income). But in the first quarter this year, when stocks and bonds were wilting, it was sure nice to see QREARX and TRAD chugging along. For the year to date, its returns have been pretty similar to the total stock market.

I guess that's the power of diversification.

Valuethinker
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Re: TIAA Real Estate

Post by Valuethinker » Thu May 24, 2018 7:51 am

The Wizard wrote:
Sun May 20, 2018 7:16 pm
tibbitts wrote:
Sun May 20, 2018 7:07 pm

There was certainly a lot of doom-and-gloom over at Mornginstar, and people seemingly bailing out right and left starting last year, so it will be interesting to see how things turn out going forward.
I was one of the partial bailers, moving a part of my accumulation mode TREA into restricted Trad paying 4.0% presently.
If/when TREA gets back toward the 8% annual level, I may move some $$ from stock funds back into it.

I'm just glad TREA doesn't own any malls with Sears stores in them...
Sear is a symptom of a broader disease in the retail mall sector. There are unique attributes to Sears re bad management, the problems of financiers running businesses, etc.

But fundamentally the world is changing. Online sales, but also more spending on services (mobile phones etc.) than on goods by an aging population. Average family income has not done well. Malls work well in areas where there are lots of young people, with families, who need to buy a lot of stuff.

Big box stores are also taking a pounding (some). The US has something like the highest retail square footage per person in the world. So it has more to cut.

The mall, a 70 year old phenomenon in North American history, is on its way out -- or rather, it is transforming & reshaping - some formats and locations will prosper.

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oldzey
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Re: TIAA Real Estate

Post by oldzey » Thu May 24, 2018 9:26 am

aristotelian wrote:
Fri May 11, 2018 7:53 am
Like your questions about TIAA Traditional, their Real Estate fund is a unique investment. As a one of a kind investment, it is very hard to evaluate. You kind of have to trust that TIAA knows what they are doing. Although I do have a large % of my fixed income in TIAA Traditional, I personally avoid Real Estate. I do not like investing in instruments that I do not understand, and TIAA is not very transparent in how this fund works or how it is priced. It still lost bigtime in 2008, so it is at least as risky as investing in index funds.

I will say that the high expense ratio is not inherently problematic since the fund directly invests in real estate and there are management costs associated with that. It is more like investing in a real estate investment company rather than a mutual fund, so the costs are not apples to apples. Still, I avoid it due to risk and lack of transparency. (If you do elect to invest in it, I would suggest treating it as stock or "alternative" asset class, i.e. do not reduce your bond/fixed income allocation).
I concur with the highlighted points above.

"As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run.” –- David Swensen
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

squidfather
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Re: TIAA Real Estate

Post by squidfather » Thu May 24, 2018 9:50 am

oldzey wrote:
Thu May 24, 2018 9:26 am

"As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run.” –- David Swensen
Interestingly, TIAA Real Estate is one of the investments that David Swensen specifically recommends in his book "Unconventional Success" as a good candidate for the real estate portion of one's portfolio (Vanguard REIT index is the other).

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oldzey
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Re: TIAA Real Estate

Post by oldzey » Thu May 24, 2018 9:58 am

squidfather wrote:
Thu May 24, 2018 9:50 am
oldzey wrote:
Thu May 24, 2018 9:26 am

"As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run.” –- David Swensen
Interestingly, TIAA Real Estate is one of the investments that David Swensen specifically recommends in his book "Unconventional Success" as a good candidate for the real estate portion of one's portfolio (Vanguard REIT index is the other).
Swensen (a trustee of TIAA) also states, “With its inflation-sensitive nature, real estate provides powerful diversification to investor portfolios.”

Kind of ironic, isn't it?
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

beardsworth
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Re: TIAA Real Estate

Post by beardsworth » Thu May 24, 2018 4:05 pm

oldzey wrote:
Thu May 24, 2018 9:58 am
Swensen (a trustee of TIAA) also states, “With its inflation-sensitive nature, real estate provides powerful diversification to investor portfolios.”

Kind of ironic, isn't it?
Just a point of clarification on the phrase I've boldfaced, although not on the subject of TIAA Real Estate itself: David Swensen was indeed a trustee of TIAA but has not been so since mid-2011. See, for example, the paragraph beginning "TIAA separately announced" in this contemporaneous news item:

https://www.businesswire.com/news/home/ ... al-Meeting

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oldzey
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Re: TIAA Real Estate

Post by oldzey » Thu May 24, 2018 9:42 pm

Thanks for the clarification, beardsworth!

Best,
oldzey
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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