Research is fundamental to Principal Real Estate Investors’ investment strategy and process, as well as its risk management activities. The real estate research group is comprised of six professionals with an average of 14 years of industry experience. The research group conducts both macroeconomic and microeconomic research, including economic, political, technological, property trend and capital market analyses. The group provides market demand and supply analyses and insight to our investment professionals and to our clients. Key elements of our firm’s research capabilities and how they are applied in the investment process are outlined below: Macroeconomic and Capital Markets Research This is a top-down process using the most recent global and domestic economic forecasts provided by Economy.com and Principal Global Investors’ Economic Resource Group (ERG). The ERG consists of the research heads from equities, fixed income, and real estate. These professionals meet on a monthly basis to share views and outlooks and to determine a firm-wide consensus outlook for the domestic and global economies and capital markets. Microeconomic (MSA level) Research In this step, the macroeconomic research is applied to the 60-plus metropolitan statistical areas (MSAs) that we cover. We incorporate our macro view and outlook at the MSA level to determine the relative strength of the individual markets. The primary results are an outlook for economic and employment growth and the relative risks associated with such forecasts. Market Level Real Estate Supply and Demand Research (EBA Process) Once the macroeconomic and MSA-level forecasts have been established, the real estate research group creates real estate supply and demand models for each of the markets we cover. These models primarily focus on projected employment, population, income, and household formation on the demand side and anticipated new construction on the supply side. Supply projections are based on local and national sources and are combined with subjective insight provided by the research analysts and the firm’s staff of over 224 investment professionals in the following areas: acquisitions, dispositions, asset management, and mortgage underwriting. They have extensive first-hand knowledge of the markets in which we operate. The economic and real estate research culminates in the annual Economic Base Analysis (EBA) report for each market.