NCREIF Indicators: Capital Performance and Property Operations

NCREIF introduced three new indicators to compliment the NPI by providing measures of values changes, cash flows, and capital expenditure trends for properties with consistent characteristics.  

The first which is referred to as a Market Value Index (MVI) is designed to reflect how property values are changing over time and be an alternative to the NCREIF capital index. 

The second is referred to as a Free Cash Flow Yield (FCFY) and is designed to indicate what the cash flow yield is on properties.  

The third indicator is the Capex Ratio (CXR) which is designed to give us insight in to how much capex is typically incurred on properties.  In effect, this is what explains the difference between an income return and the Free Cash Flow Yield.


This quarterly series consists of three separate, but related, sets of data derived from properties that qualify for inclusion in the NCREIF Property Index (NPI). The three sets are named the Market Value Index (MVI), the Free Cash Flow Yield (FCFY), and the Capital Expense Ratio (CXR). They are designed to complement the NPI by providing better indications of changes in value, cash flow available to investors and trends in capital expenditures excluding new investment.

These series include the same property types as the NCREIF Property Index whence they are derived, namely Apartment, Industrial, Office, Retail, and Hotel. Also, because NPI qualifying properties are included in these series, the characteristics and requirements of NPI properties described above apply to these series as well.

These series are intended to capture performance from a set of properties that maintain their physical, functional, and financial economic characteristics over time. While the NPI focus on returns to investors and owners of commercial property, the MVI, FCFY, and CXR series focus on market value change (price changes due to valuation or sale) over time,on quarterly net cash flow from operations including accounting for ordinary or routine capital expenditures, and on quarterly measurement of the amount of ordinary or routine capital expenditures as a fraction of value.

These series are intended to capture performance from a set of properties that maintain their physical, functional, and financial economic characteristics over time. In the NPI, properties may, from time to time, undergo substantial capital expenditures to expand the property or to alter its character in a material way. The MVI, FCFY, and CXR exclude NPI properties in quarters where substantial capital expenditures occur. Accordingly, the number of properties whose data are used in any quarter may be fewer than included in the NPI.

Each property that qualifies for inclusion in the series in any quarter the computational formulas are as follows:

The Market Value Index (MVI) for unsold properties is the change in Market Value in quarter plus Partial Sales all divided by Market Value at the beginning of the quarter. For properties having a full sale in a quarter, the change in value is based on the difference between the sale price and the beginning of quarter market value.

The Free Cash Flow Yield (FCFY) is the quarterly Net Operating Income minus ordinary or routine Capital Expenses all divided by the beginning Market Value in the quarter.

The Capital Expense Ratio (CXR) is the quarterly Capital Expenses for leasing commissions, tenant improvements and other ordinary capital costs, divided by beginning Market Value.

Equal weighted computations, i.e., averages of all individual property computations in a particular quarter, are presumed to represent a sample from a universe of similar commercial properties.