I N D S INVESTING IN THE ENGINES OF ECOMMERCE I N D E X WHY INDS - - PowerPoint PPT Presentation

INVESTING IN THE ENGINES OF ECOMMERCE I N D S I N D E X

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.

ENGINE OF ECOMMERCE

WHY INDS INDEX?

ECOMMERCE GROWTH: 15% ANNUALLY

E-COMMERCE AS A % OF TOTAL RETAIL SALES GROWTH RATE: E- COMMERCE VS. IN-STORE

JIM CONNOR, DUKE REALTY CHAIRMAN AND CEO

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

THINK ABOUT IT:

Shipping parcels vs. pallets High inventory turn levels Reverse logistics Broader product variety

INDS INDEX ECOMMERCE ENGINE

3X FLOOR SPACE

NEEDED FOR E-FULFILLMENT

• VS. BRICK-AND-MORTAR

INDS INDEX 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.

LAND SCARCITY

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.

HIGHER TRANSPORTATION COSTS

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.

CUSTOMIZATION

"It's all about the need for speed"

INDS INDEX RISING RENTS

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. Furthermore, rents are set to accelerate as customers seek quality locations near major population centers to meet consumer delivery requirements.

Source: Prologis, 2018

Thomas Olinger, Prologis CFO, June 2018

RENT ACCOUNTS FOR <5% TOTAL SUPPLY CHAIN COSTS

E-COMMERCE VALUE-ADD CASE STUDY

BRONX, NY

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

WATERSHED MOMENT

2012

AMAZON OPENS FIRST WAREHOUSE IN NEW JERSEY ECOMMERCE SALES WERE LESS THAN 5% OF OVERALL RETAIL SALES

2019

MARK HOLIFIELD, HOME DEPOT EXECUTIVE VICE PRESIDENT OF SUPPLY CHAIN AND PRODUCT DEVELOPMENT

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.

THINK ABOUT IT:

Presentations are communication tools that can be used as demonstrations, lectures, speeches, reports, and more. Most of the time, they’re presented before an audience. 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. 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.

INVESTMENT RESULTS

Portfolios & Strategies

Measures the performance of exchange listed companies in the U.S. that primarily own and manage industrial real estate and rent space in those properties to tenants. The securities include REITs that focus,

• wn and manage industrial properties

and facilities including warehouse/industrial and storage. Benchmark Industrial Real Estate SCTR Seeks to provide exposure to Industrial Select Sector Index which comprises the following industries: aerospace and defense; industrial conglomerates; marine; transportation infrastructure; machinery; road and rail; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies and distributors; airlines; and building products. Industrial Select Sector SPDR Fund

XLI

The S&P 500 Index is a diversified large cap U.S. index that holds companies across all eleven GICS

• sectors. It is a market-capitalization

weighted index of the 500 largest U.S. publicly traded companies by market value, The index is widely regarded as the best single gauge of large-cap U.S. equities.

SPX

S&P 500 Index

INDS INDEX

INDS INDEX TOP TEN XLI TOP TEN

Market Exposures

Source: Bloomberg Time Period: 1/12/2019

5 YEAR INDEX TOTAL RETURNS

Time Period: 1/1/2014 to 12/31/2018

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.

Why the Divergence?

ANNUALIZED RETURNS

13.30

Benchmark Industrial SCTR Index Net of Fees

6.42 8.50 INDS INDEX

XLI SPX

Source: Morningstar Direct Time Period: 1/1/2014 to 12/31/2018

SPDR S&P Industrial ETF S&P 500 Total Return Index

Return is the amount of money an investment made for a portfolio. Return is given as a percentage.

Upside/downside capture ratio show whether a given strategy has outperformed, gained more or lost less than, a broad market benchmark during periods of market strength and weakness, and if so, by how much. 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 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.

87.42

Benchmark Industrial SCTR Index Net of Fees

98.80 100

XLI SPX

Source: Morningstar Direct Time Period: 1/1/2014 to 12/31/2018

SPDR S&P Industrial ETF S&P 500 Total Return Index

UP/DOWN CAPTURE RATIOS

37.87

UPSIDE CAPTURE RATIO

115.71

DOWNSIDE CAPTURE RATIO

100 INDS INDEX

BETA

Beta is a measure of a strategy's sensitivity to market movements. 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 return for the index. This approach differs slightly from

• ther methodologies that rely on a regression of raw

returns.

0.62

Benchmark Industrial SCTR Index Net of Fees

1.13 1.00

XLI SPX

Source: Morningstar Direct Time Period: 1/1/2014 to 12/31/2018

SPDR S&P Industrial ETF S&P 500 Total Return Index

INDS INDEX

ALPHA

A measure of the difference between a strategy's actual returns and its expected performance, given its level of 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 the strategy's beta.

7.88

Benchmark Industrial SCTR Index Net of Fees

• 2.66

0.00

XLI SPX

Source: Morningstar Direct Time Period: 1/1/2014 to 12/31/2018

SPDR S&P Industrial ETF S&P 500 Total Return Index

INDS INDEX

SHARPE RATIO

This risk-adjusted measure was developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance. It is calculated for the past 36-month period by dividing a portfolios' annualized excess returns over the risk-free rate by its annualized standard deviation. The Sharpe ratio can be used to compare directly how much risk two funds each had to bear to earn excess return over the risk-free rate.

1.00

Benchmark Industrial SCTR Index Net of Fees

0.54 0.76

XLI SPX

Source: Morningstar Direct Time Period: 1/1/2014 to 12/31/2018

SPDR S&P Industrial ETF S&P 500 Total Return Index

INDS INDEX

DISCLAIMERS

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: January 2019