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Own the Hard Assets Driving
the eCommerce Revolution
• Benchmark Indexes can serve as the basis for exchange traded funds (ETFs) and institutional asset mandates. • 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.• Benchmark Investments does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is
offered by third parties and that seeks to provide an investment return based on the performance of any index. • Please refer to the disclaimers at the end of this document for more information about Benchmark Investments relationship to such
third party product offerings.
• Benchmark Investments is an investment intelligence firm based in the Flatiron District in NYC
• Inaugural index series divides the real estate market into seven distinct and investable sectors by
property type, tenant type, and revenue type and not by tax classification.
• Allow investors to target or track specific real estate sectors using public real estate
Real Estate SCTR™ Indexes
Industrial
INDSSCTR
Office
DESKSCTR
Retail
RTLSCTR
Housing
PADSCTR
Healthcare
RXRESCTR
Hotel/ Lodging
HOTLSCTR
Data/ Infrastructure
SRVRSCTR
• Historical performance since March 2007
• Data available via Nasdaq, FactSet, BloombergIndex Calculation
Benchmark brings institutional
real estate to individual investors
INDS Index SRVR Index RTL Index
Three-Pronged Approach to e-Commerce: In order to succeed in the digital age, businesses must be able to network online
(SRVR), deliver products (INDS), and maintain brick-and-mortar storefronts (RTL),
all while extending their reach into similar industries to better meet the needs of the
consumer:
Industrial Real Estate Data & Infrastructure
Real EstateRetail Real Estate
ERE – eCommerce Real Estate
Industrial Warehouses, Logistics and
Distribution Centers
Class A Regional Malls and Shopping
CentersData Centers, Cellphone Towers, and Media
Infrastructure
INDS SRVR RTL
• Amazon has one of the most advanced
fulfillment networks in the world.
• Amazon's fulfillment centers pick, pack,
ship, and provide customer service for
Amazon and third party products.
• Prime members love free Two-Day
Shipping, and all Amazon.com customers
can get free shipping on eligible orders.
• Amazon Web Services (AWS) offers a broad set of
global compute, storage, database, analytics,
application, and deployment services that help
organizations move faster, lower IT costs, and
scale applications.
• AWS powers a wide variety of workloads including:
web and mobile applications, cost management,
customer engagement, data processing, artificial
intelligence, IoT and warehousing.
• Amazon has three physical retail avenues:
Amazon 4-Star, Amazon Pop-Up, and
Amazon Books with more than 100 Amazon
store locations in 22 states.
• Amazon bought Whole Foods for their 431
physical locations to fully offer doorstep
delivery and convenient pick up.
• Whole Foods Market offers free two-hour
delivery through Prime Now.
ERE – “Amazon Effect”
Indus t r i a lRea l Es ta te
INDS
INDS Index
Engines of eCommerce
Benchmark constituents are leaders in providing
high-quality, productivity-enhancing, best-in-class
warehouse/distribution facilities.
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.
INDS Index
UNPRECEDENTED
GROWTH
E-commerce as a % of Total Retail Sales
• Growth in e-commerce sales expected to double
over the next ten years – JLL
• e-commerce sales have gone up 15% every year since
2010 – CityLab
• Lack of new supply has driven industrial real estate
vacancy levels down to a historic low of 4.3% - CBRE
• Online sales grew 15.5% through the first three
quarters of 2018 - U.S. Commerce Dept.
• 2018 eCommerce sales during the five-day period from
Thanksgiving Day through Cyber Monday grew
19% - Internet Retailer
• November through the end of December 2018, online
shopping saw a 17.4% increase from 2017 - Internet
Retailer
INDS Index
3X Logistics Space• Product variety. Online retailers have significantly
greater product variety (stock keeping units) on
average, requiring a broader set of goods carried
within logistics facilities.
• Inventory levels. As the point of sale shifts from in-
store to the logistics facility, greater levels of buffer
stocks must be carried within logistics facilities,
requiring customized facilities.
• B2C shipping. Individual order picking, packing and
shipping direct to consumers requires more space
than store distribution. Instead of efficient palletizing
for store distribution, B2C requires an individual box
for each order.
• Reverse logistics. Many e-commerce logistics
facilities accept returns, and floor space must be
allocated to returns processing and restocking
activities.
E-commerce users require 3x the logistics
space, or more, as compared with brick-and-
mortar.
INDS Index EVOLUTION OF GROWTH
Amazon’s use of smaller deliver
stations and Prime Now Hubs
are growing, but are still a very
small part of their distribution
network. Growth opportunities
are still far larger in their more
traditional and larger
distribution centers.
INDS Index
“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
REACHING CUSTOMERS IN 2 HOURS OR LESS
INDS Index
Holdings & Characteristics
Symbol Security Name Weight
PLD Prologis Inc 14.89%
DRE Duke Realty 14.74%
LPT Liberty Property 12.66%
IIPR Innovative Industrial Properties 5.19%
LXP Lexington Realty Trust 4.62%
EGP EastGroup Properties 4.54%
COLD Americold Realty 4.53%
REXR Rexford Industrial 4.53%
STAG Stag Industrial 4.52%
TRNO Terreno Realty 4.47%
Weighted Average Market Cap ($mil) 8,897.13
Dividend Yield (%) 3.88
Price to Funds from Operations (FFO) 18.01
As of 2/18/19
As of 12/31/18
12
Techno logy Rea l Es ta te
SRVR
SRVR Index
Foundation of Tech
Our economy depends on an increasingly
sophisticated backbone of servers, fiber optic
cable, satellites and network switches to move
critical information and analytic algorithms in
and out of the citadels of digital power
including data centers, wireless towers, and
fiber optic networks.
SRVR Index
UNPRECEDENTED
DEMAND • 75 Billion Internet of Things Devices by 2025 –
Gartner
• 94% of workloads and compute instances will be
processed by cloud data centers by 2021 – Cisco
• 4000 Data Centers needed by 2020 to meet
current demand – Bisnow
• The cloud accounts for only 5% of the $3.7
Trillion spent on IT around the world – Microsoft
An eight-rack pod of Google's liquid-cooled TPU version 3 servers
for artificial intelligence workloads
FOUNDATION OF THE
FUTURE FOUR HORSEMEN
• Pokemon Go got 50 million users in 19 days.
• Amazon Sumerian creates and runs virtual reality (VR), augmented
reality (AR), and 3D applications quickly and easily without
requiring any specialized programming or 3D graphics expertise.
• iOS 12 and ARKit 2 take advantage of the powerful hardware in the
iPhone.
• IKEA Place AR: Lets users imagine how products will look, feel, and
fit in the home.
SRVR Index
• As more data gets generated, processed and analyzed at the edge, there
will be a direct impact on AI architectures.
• Amazon has excelled at AI in bringing voice technology to the home via
Alexa and plans on turning Alexa into a massive developer platform
making it the de facto voice technology for future apps.
• AI-powered, customer-service chatbots are better equipped to meet the
expectations of customers for a real-time touchpoint and customized
assistance, while fulfilling a company’s need to cut costs.
• Autonomous driving vehicles, watches, refrigerators are going to
lead to unparalleled connectivity as we already have more than four
billion internet users globally.
• Telematics-based car insurance, in which insurance rates are
influenced by a customer’s actual driving frequency and habits
(reckless vs. safe), relies on IoT sensors to supply the data for the
analytics to help determine “good driver” rates.
• Smart home monitoring systems enable homeowners to optimize
security.
• Equifax will not be hacked going forward if they use multiple cloud
datacenters to validate user permissions.
• Blockchain will be used in expediting multi-party transactions, as well as
providing a secure, private meeting place.
• New innovative products like Equinix SmartKey.
• For instance, a life insurance smart contract could immediately release
funds to a beneficiary upon the death of a policyholder through electronic
checking of death certificates.
Virtual Reality /
Augmented Reality
Artificial
Intelligence
Blockchain / Distributed
Ledgers (Private)
The Internet of
Things / 5G
SRVR Index EVOLUTION OF GROWTH
SRVR Index
“What we're seeing is a
transition, the beginning of
an S curve of growth for the
data center industry.”
Dave Crowley, Microsoft Chief Technical Advisor
INVESTING IN THE INTELLIGENCE REVOLUTION
SRVR Index
Holdings & Characteristics
Symbol Security Name Weight
EQIX Equinix Inc 15.57%
AMT American Tower Corp 15.45%
CCI Crown Castle International 14.93%
QTS QTS Realty 4.68%
SBAC SBA Communications 4.63%
COR Coresite Realty 4.50%
INXN Interxion Holding 4.45%
IRM Iron Mountain 4.44%
OUT Outfront Media 4.40%
LAMR Lamar Advertising 4.39%
Weighted Average Market Cap ($mil) 26,099.15
Dividend Yield (%) 3.67
Price to Funds from Operations (FFO) 16.57
As of 2/18/19
As of 12/31/18
Reta i l Rea l Es ta te
RTL
RTL Index
Gateway to the Consumer
The storefront is the gateway to the consumer with
commercial real estate serving as an ideal medium
for connecting with established shoppers and
attracting new ones.
The fusion of retail and entertainment has
increasingly been taken on in the digital age. This
fusion is making tenants utilize the experiential
concept to compel consumers to visit their stores.
Physical retail stores are transitioning from being
primarily a distribution channel for products to
becoming a powerful media channel for branded
experiences and stories.
RTL Index
UNPRECENDENTED
TURNAROUND• June 16, 2017: Amazon buys Whole Foods for $13.2 billion, plus $22
billion in future contract obligations, because of the irreplaceable 431
upper-income, prime real estate locations.
• July 9, 2018: Nordstrom expands inventory-free retail stores called
Nordstrom Local. In lieu of stocked shelves, clients shop at home or on
their mobile phone and pick up their online orders.
• July 17, 2018: Walmart establishes strategic partnership with Microsoft
to further accelerate digital innovation in retail leveraging a broad
base of cloud, AI and IoT solutions.
• U.S. retail real estate has posted 20 consecutive quarters of rent
growth despite the gloom-and-doom narrative about bricks and mortar.
- CBRE
• 95% of Gen Z consumers had visited a mall in the previous three
months as of January 2019. Gen Z will represent 40% of all consumers
by 2020. – ICSC
• Over the next five years, about 850 stores with roots as digitally native
brands will open brick-and-mortar shops nationwide. - JLL
West Hollywood Nordstrom Local experiential location (above)
offers: Tailoring, Manicures, Returns, Same-day Online Pick-Up, and
Personal Stylists.
“Smart retailers are turning their stores into beloved gathering points at
the hearts of their communities” - Doug Stephens, Retail Prophet
RTL Index
RETAIL
RENAISSANCEOMNICHANNEL MAKING EVERYTHING POSSIBLE
RTL Apocalypse
In 2012, Best Buy lost $1.2 Billion - The problem was the Internet.
Customers were comparison shopping and finding lower prices online.
Sometimes they checked from a smartphone right in the aisles of a Best
Buy store after sizing up the real merchandise. Analysts predicted that the
phenomenon, dubbed "showrooming,” could destroy Best Buy.
RTL Renaissance
By December 2018, Best Buy was selling 2 of the top 5 televisions on
Amazon.com. The TV deal gave Best Buy access to Amazon’s massive
online customer base, while Amazon gains a brick-and-mortar presence
and additional products that can attach to its Alexa home assistant, which
competes against similar devices from Google and Apple. The two Fire TVs,
one made by Toshiba and the other from Best Buy house brand Insignia,
are also available in Best Buy stores and on their website.
Best Buy has managed to repair their online stores and tie their online
presence more tightly to their network of more than 1,400 locations, in
ways that it may have neutralized the "showrooming" threat.
The idea in omnichannel is to reach customers wherever they are - in a
store, online or via their phones—and use technology to turn costly
physical stores into an advantage. One deceptively simple step Best Buy
took was to add a “Store Pickup” button to its online shop.
RTL Index
“Our local market strategy is reflective of that more
often today, customers don’t see Nordstrom as a
website or a store or a salesperson. They see
Nordstrom as a combination of all three of those.
Our ambition is to serve customers in the local
markets where they live and work, really agnostic of
channel store–digital or physical.”
SHEA JENSEN, NORDSTROM
SENIOR VICE PRESIDENT OF CUSTOMER EXPERIENCE
STORE FRONT AS THE GATEWAY TO THE CONSUMER
RTL Index
Holdings & Characteristics
Symbol Security Name Weight
O Realty Income 15.85%
SPG Simon Property 14.31%
REG Regency Centers 9.76%
BRX Brixmor Property 4..73%
KIM Kimco Realty 4.72%
NNN National Realty 4.55%
FRT Federal Realty 4.46%
WRI Weingarten Realty 3.97%
MAC Macerich 3.78%
TCO Taubman Centers 3.17%
Weighted Average Market Cap ($mil) 13,993.59
Dividend Yield (%) 5.59
Price to Funds from Operations (FFO) 12.15
As of 2/18/19
As of 12/31/18
25
Data quoted represents past performance, which is no guarantee of future results. The information presented above does not reflect
the performance of any fund or account managed or serviced by Benchmark Investments, and there is no guarantee that investors will
experience the type of performance reflected above. There is no guarantee that any historical trend illustrated herein will be repeated
in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any market forecast
made in this commentary will be realized. The mention of specific securities is not a recommendation or solicitation for any person to
buy, sell or hold any particular security and should not be relied upon as investment advice. The views and opinions in the preceding
commentary are as of the date of publication and are subject to change without notice. This material represents an assessment of the
market environment at a specific point in time, should not be relied upon as investment advice, is not intended to predict or depict
performance of any investment and does not constitute a recommendation or an offer for a particular security. We consider the
information in this presentation to be accurate, but we do not represent that it is complete or should be relied upon as the sole source
of suitability for investment.
Publication Date: Spring 2019
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