February 2, 2016

AEW Core Property Trust faces headwinds from energy industry distress

Uncertain impact of new entrants into core RE and proposed FIRPTA changes


In marketing materials as recent as June 2015, AEW highlights CPT’s exposure to the energy industry and the Houston market. However, as oil and natural gas prices hit multi-year lows in January 2016, this exposure may deserve particular attention.

Full report available here.

Screen Shot 2016-01-31 at 3.16.19 PMKey points:

  • Over the most recent five years,[1] AEW Core Property Trust’s (CPT’s) performance has been mixed as the fund outperformed the income returns of its benchmark but underperformed the appreciation returns and total returns.
  • The fund appears to face headwinds in the Houston market as conditions in the energy industry have deteriorated at the same time as the pipeline for new office construction looks robust. There is also a question of possible spillover effects into multifamily residential demand.
  • Alternative asset managers have increasingly focused on core-plus strategies, raising the question of whether or not a continuation of this trend will result in a meaningful increase in competition for core properties. Additionally, proposed changes to FIRPTA could further heighten competition for core real estate assets in the U.S.

[1] As of 2Q 2015.


Questions to Consider