I N D S INVESTING IN THE ENGINES OF ECOMMERCE I N D E X
WHY INDS INDEX? ENGINE OF ECOMMERCE The insatiable e - commerce demand to receive packages in a day or less has led to an era of ‘ last mile ’ revolution . It ’ s an arms race for space . Companies have to satisfy consumer ' s insatiable appetite for rapid delivery right to their doorstep . INDS meets those needs along with being able to serve more traditional tenants in light manufacturing and distribution . Our constituents are leaders in providing high - quality , productivity - enhancing industrial properties . They own and manage best - in - class warehouse / distribution facilities . They ’ ve been expanding their portfolios to satisfy the strong warehouse demand for years , positioning themselves near , or around , high - population cities where the entitlement process can take significant time and consideration .
ECOMMERCE GROWTH: 15% ANNUALLY E - COMMERCE AS A % OF GROWTH RATE : E - TOTAL RETAIL SALES COMMERCE VS . IN - STORE
THINK ABOUT IT: Tenants want to be as close to major metropolitan areas as possible , so they logistically can get product to their customers as quickly as possible - in many instances , in less than an hour JIM CONNOR , DUKE REALTY CHAIRMAN AND CEO
INDS INDEX ECOMMERCE ENGINE 3X FLOOR SPACE NEEDED FOR E - FULFILLMENT VS . BRICK - AND - MORTAR Shipping parcels vs . pallets High inventory turn levels Reverse logistics Broader product variety
INDS INDEX LAND SCARCITY LOCATION DEMAND In the New Jersey Meadowlands , for example , less than 10 miles from midtown Manhattan , there isn ’ t much land left to develop . Office buildings are either being razed or converted to make space for warehouses . HIGHER TRANSPORTATION COSTS Van rates ( an industry measure of enclosed tractor trailers ) rose to $ 2 . 16 per mile in April 2018 , up 49 cents from the same period a year earlier , a 29 percent increase , according to DAT Solutions . Higher transportation costs coupled with worsening traffic has led many industrial tenants demanding more than one distribution center per city . CUSTOMIZATION Special features and amenities tailored to modern tenants are important to incorporate into the facility design including clear heights , mezzanine space , rooftop solar to meet higher power demands , and secure , attractive grounds .
INDS INDEX RISING RENTS TOTAL SUPPLY CHAIN COSTS " It ' s all about the need for speed " Thomas Olinger , Prologis CFO , June 2018 Noting why his company ' s portfolio rents are 18 % below market levels is because they ' ve been rising so fast over the past few years . Meaning there is huge built - in net operating income growth potential over the next 3 , 5 , 10 years as rents rollover . Source : Prologis , 2018 Furthermore , rents are set to accelerate as RENT ACCOUNTS FOR < 5 % customers seek quality locations near major population centers to meet consumer delivery requirements .
E-COMMERCE VALUE-ADD BRONX, NY CASE STUDY
2012 WATERSHED MOMENT AMAZON OPENS FIRST WAREHOUSE IN NEW JERSEY ECOMMERCE SALES WERE LESS THAN 5 % OF OVERALL RETAIL SALES 2019 Amazon now has 9 warehouses in NJ Home Depot will add 170 distribution facilities so that it can reach 90 % of the U . S . population in one day or less Home Depot to more closely integrate its growing online business with its network of about 2 , 280 brick - and - mortar stores Over the next five years Home Depot plans to build around 7 e - commerce fulfillment centers that stock hundreds of thousands of products for shipment to consumers ’ homes or job sites
THINK ABOUT IT: Customers expect delivery to be free , they expect it to be timely […] Sometimes they want it fast , and are willing to pay for that . Sometimes they want it free , and they ’ re willing to wait for it . We need to have the right options there . MARK HOLIFIELD , HOME DEPOT EXECUTIVE VICE PRESIDENT OF SUPPLY CHAIN AND PRODUCT DEVELOPMENT
INVESTMENT RESULTS PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS . It is not possible to invest directly in an index . Exposure to an asset class represented by an index is available through investable instruments based on that index . Presentations are communication tools that can be Benchmark Investments does not sponsor , endorse , sell , promote or manage any used as demonstrations , lectures , speeches , reports , investment fund or other investment vehicle that is offered by third parties and and more . Most of the time , they ’ re presented that seeks to provide an investment return based on the performance of any index . before an audience . Please refer to the disclaimers at the end of this document for more information about Benchmark Investments relationship to such third party product offerings .
Portfolios & Strategies INDS INDEX XLI SPX Benchmark Industrial Real Estate SCTR Industrial Select Sector SPDR Fund S & P 500 Index Measures the performance of Seeks to provide exposure to The S & P 500 Index is a diversified exchange listed companies in the U . S . Industrial Select Sector Index which large cap U . S . index that holds that primarily own and manage comprises the following industries : companies across all eleven GICS industrial real estate and rent space in aerospace and defense ; industrial sectors . It is a market - capitalization those properties to tenants . The conglomerates ; marine ; transportation weighted index of the 500 largest securities include REITs that focus , infrastructure ; machinery ; road and U . S . publicly traded companies by own and manage industrial properties rail ; air freight and logistics ; market value , The index is widely and facilities including commercial services and supplies ; regarded as the best single gauge of warehouse / industrial and storage . professional services ; electrical large - cap U . S . equities . equipment ; construction and engineering ; trading companies and distributors ; airlines ; and building products .
Market Exposures INDS INDEX TOP TEN XLI TOP TEN Source : Bloomberg Time Period : 1 / 12 / 2019
Why the 5 YEAR INDEX TOTAL RETURNS Divergence ? The XLI ( S & P 500 Industrial Sector ) does NOT own a single name in the industrial warehouse space . Benchmark Industrial SCTR ( INDS Index ) owns ALL the publicly traded warehouses that benefit from e - Commerce . Time Period : 1 / 1 / 2014 to 12 / 31 / 2018
ANNUALIZED INDS INDEX 13 . 30 RETURNS Benchmark Industrial SCTR Index Net of Fees Return is the amount of money an investment made for a portfolio . Return is given as a percentage . XLI 6 . 42 SPDR S & P Industrial ETF SPX 8 . 50 S & P 500 Total Return Index Source : Morningstar Direct Time Period : 1 / 1 / 2014 to 12 / 31 / 2018
UP/DOWN UPSIDE DOWNSIDE CAPTURE RATIO CAPTURE RATIO INDS CAPTURE RATIOS INDEX 87 . 42 37 . 87 Upside / downside capture ratio show whether a given strategy has outperformed , gained more or lost less than , a Benchmark Industrial SCTR broad market benchmark during periods of market strength and weakness , and if so , by how much . Index Net of Fees Upside capture ratios for strategy ' s are calculated by taking the strategy ' s monthly return during months when the benchmark had a positive return and dividing it by the benchmark return during that same month . Downside XLI 98 . 80 115 . 71 capture ratios are calculated by taking the fund ' s monthly return during the periods of negative benchmark performance and dividing it by the benchmark return . SPDR S & P Industrial ETF 100 100 SPX S & P 500 Total Return Index Source : Morningstar Direct Time Period : 1 / 1 / 2014 to 12 / 31 / 2018
BETA INDS INDEX 0 . 62 Beta is a measure of a strategy ' s sensitivity to market Benchmark Industrial SCTR movements . Index Net of Fees It measures the relationship between a fund ' s excess return over T - bills and the excess return of the benchmark index . Equity funds are compared with the S & P 500 index . Morningstar calculates beta using the same regression equation as the one used for alpha , which regresses excess return for the fund against excess XLI 1 . 13 return for the index . This approach differs slightly from other methodologies that rely on a regression of raw SPDR S & P Industrial ETF returns . SPX 1 . 00 S & P 500 Total Return Index Source : Morningstar Direct Time Period : 1 / 1 / 2014 to 12 / 31 / 2018
ALPHA INDS INDEX 7 . 88 A measure of the difference between a strategy ' s actual Benchmark Industrial SCTR returns and its expected performance , given its level of Index Net of Fees risk as measured by beta . A positive alpha figure indicates the strategy has performed better than its beta would predict . In contrast , a negative alpha indicates the strategy ' s underperformance , given the expectations established by XLI - 2 . 66 the strategy ' s beta . SPDR S & P Industrial ETF SPX 0 . 00 S & P 500 Total Return Index Source : Morningstar Direct Time Period : 1 / 1 / 2014 to 12 / 31 / 2018
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