Leverage Applet

This dashboard lets you explore how capital structure choices affect historical benchmark performance for U.S. institutional real estate. Using NCREIF index history and a user-chosen base rate plus spread, it compares unlevered versus levered outcomes and highlights when leverage added value (asset return > cost of debt) or destroyed value (negative leverage).

How to use it

Assumptions (auto-apply):

• Period Start / Period End: Choose period start and end dates from 03/31/78 to 09/30/25.
  
• NCREIF Property Type Subindex: Choose the benchmark segment (for example, NCREIF Index, Apartment, Warehouse, Office variants, Retail categories).
• T-Bill/Bond Base: Select the risk-free or Treasury tenor used to build the debt cost series.
• Debt Spread: Set a fixed spread (0% to 10% in 0.25% steps) over the chosen base.
• Leverage Ratio: Set the gross LTV (0% to 75% in 5% steps).

What the results show

• Average Risk Free Rate: Period average of the selected base rate.
• Avg Spread Over T-Bill/Bond: The constant spread you selected.
• Average Estimated Cost of Debt: Base rate plus spread over the period.
• Volatility of Debt: Dispersion of the debt cost through time.
• Unlevered NCREIF Return: Benchmark asset-level return for the chosen subindex.
• Levered NCREIF Return: Return after applying your leverage settings.
• Return Spread over Levered NCREIF: Levered minus unlevered return.
• Unlevered and Levered Volatility: Dispersion of annual returns. The Volatility Spread shows how leverage changes risk.
• Positive Leverage Diagnostics: Share and count of periods where asset return exceeded the cost of debt (that is, k_a > k_d).

A time-series panel lists the annual observations across the period you selected so you can see how rates, costs of debt, and benchmark returns evolved, and when leverage helped or hurt.

What to keep in mind

• The tool reflects historical relationships and assumes debt is rolled at a constant spread to the selected base through time.
• Results are benchmark level. They do not incorporate fees, taxes, amortization, prepayment frictions, or idiosyncratic asset effects.
• If (a big “if”) history is informative and the NCREIF series are representative of institutional asset characteristics, the dashboard helps reveal how often and by how much leverage has historically amplified or dampened returns, and how sensitive those outcomes are to period selection, rate base, spread, LTV, and property type.

Sources: NCREIF; KAS Computer Sciences, LLC; Citadel Realty, Inc.