2Q2019 Real Estate Performance City of Phoenix Employees Retirement - - PowerPoint PPT Presentation

2Q2019 Real Estate Performance

City of Phoenix Employees’ Retirement System (COPERS)

Data as of June 30, 2019 Presented by Mark Bartmann

Portfolio Overview

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Note: Table does not include COPERS’ recent commitments to Ascentris Value Add Fund III ($25M) and Wheelock Street VI ($20M), which had not closed as of June 30, 2019.

Investment COPERS Commitment Structure Investment Period Expiration Commitment Unfunded Commitment % Funded 1 Status 2 Morgan Stanley Prime 3Q 2006 Open N/A $90,500,000 $0 100.0% Stabilized JPMorgan SPF 2Q 2007 Open N/A $87,380,529 $0 100.0% Stabilized Total Core Portfolio $177,880,529 $0 100.0% JDM Partners I 1Q 2010 Closed Expired $20,000,000 $551,274 97.2% Harvesting RECAP III 1Q 2012 Closed Expired $30,000,000 $6,671,672 77.8% Nearly Liquidated Wheelock Street I 2Q 2012 Closed Expired $20,000,000 $3,724,018 81.4% Nearly Liquidated Northwood Series IV 1Q 2014 Closed Expired $20,000,000 $11,175,610 44.1% Harvesting Wheelock Street II 3Q 2014 Closed Expired $30,000,000 $8,700,665 71.0% Harvesting Northwood Series V 1Q 2015 Closed 2Q 2020 $30,000,000 $8,280,933 72.4% Investing RECAP IV 1Q 2015 Closed Expired $30,000,000 $6,750,669 77.5% Harvesting HSI V 2Q 2016 Closed Expired $25,000,000 $9,749,906 61.0% Harvesting SC Core Fund 3Q 2016 Closed 2Q 2020 $30,000,000 $8,303,686 72.3% Investing Wheelock Street V 4Q 2016 Closed 4Q 2020 $25,000,000 $10,827,749 56.7% Investing Focus Senior Housing I 2Q 2017 Closed 2Q 2021 $25,000,000 $20,571,861 17.7% Investing Hammes Partners III 2Q 2017 Closed 2Q 2022 $25,000,000 $23,220,048 7.1% Investing RECAP V 4Q 2018 Closed 4Q 2021 $25,000,000 $22,485,620 10.1% Investing Total Non-Core Portfolio $335,000,000 $141,013,711 57.9% Total Portfolio $512,880,529 $141,013,711 72.5% Core Non-Core

Performance Summary

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Notes:

• Sub-Portfolio and Total Portfolio composite performance figures include data from liquidated investments not shown in table.
• Table does not include COPERS’ recent commitments to Ascentris Value Add Fund III ($25M) and Wheelock Street VI ($20M), which had not closed as of June 30, 2019.

Investment Market Value % of RE Portfolio % Funded 1 % Realized3 SI IRR (Gross) 4 SI IRR (Net) 5 Net Equity Multiple 6 Morgan Stanley Prime $101,342,018 26.5% 100.0% 38.5% 6.4% 5.4% 1.67x JPMorgan SPF $96,176,115 25.2% 100.0% 32.3% 4.9% 4.2% 1.49x $197,518,133 51.7% 100.0% 35.6% 5.7% 4.8% 1.58x JDM Partners I $27,793,426 7.3% 97.2% 30.4% 10.5% 9.3% 2.02x RECAP III $4,223,967 1.1% 77.8% 88.9% 12.7% 9.0% 1.19x Wheelock Street I $3,161,744 0.8% 81.4% 92.0% 36.0% 25.2% 1.72x Northwood Series IV $19,470,908 5.1% 44.1% 42.9% 18.5% 13.2% 1.45x Wheelock Street II $11,735,862 3.1% 71.0% 70.0% 29.7% 19.4% 1.54x Northwood Series V $29,337,744 7.7% 72.4% 17.3% 11.5% 8.6% 1.27x RECAP IV $22,652,647 5.9% 77.5% 19.8% 12.2% 8.3% 1.20x HSI V $18,574,470 4.9% 61.0% 9.1% 30.9% 19.7% 1.26x SC Core Fund $23,695,064 6.2% 72.3% 4.2% 9.0% 8.2% 1.13x Wheelock Street V $14,269,847 3.7% 56.7% 3.7% 10.5% 2.0% 1.02x Focus Senior Housing I $5,843,078 1.5% 17.7% 0.3% 4.2%

• 6.7%

0.96x Hammes Partners III $1,247,657 0.3% 7.1% 10.1% N/A N/A N/A RECAP V $2,814,933 0.7% 10.1% 16.1% N/A N/A N/A $184,821,347 48.3% 57.9% 49.9% 16.1% 11.9% 1.36x $382,339,480 100.0% 72.5% 43.4% 8.0% 6.5% 1.45x Core Total Core Portfolio Total Portfolio Total Non-Core Portfolio Non-Core

Performance Summary

4 2Q2019 1-Yr 3-Yr 5-Yr SI Core 1.6% 6.9% 8.2% 10.3% 7.7% 4.8% 1.58x Non-Core 3.4% 17.9% 14.5% 12.6% 15.5% 11.9% 1.36x Total Portfolio 2.5% 11.9% 11.0% 11.4% 8.6% 6.5% 1.45x NCREIF ODCE 1.0% 6.4% 7.6% 9.8% 6.3%

• Net IRR 4 Net EM 5

Time-Weighted Returns (Gross)

Diversification

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• Portfolio remains well diversified by both Geography and Property Type.
• Portfolio will continue to benefit from international diversification as HSI V, SC Core, and

RECAP V continue to call capital.

• Exposure to “niche” property types with defensible cash flow streams such as medical office

buildings and senior housing will increase as capital continues to be called in Focus Senior Housing Fund I and Hammes III.

Global United States

Leverage Profile

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• Very modest use of leverage across the

portfolio.

• Non-Core Portfolio LTV Ratio of less than

50% reflects a focus on managers and strategies that can perform without excess leverage risk.

Total Portfolio Loan-toValue (LTV) 7: 36.3% Core Portfolio LTV: 21.0% Non-Core Portfolio LTV: 47.0% Weighted-Average Interest Rate: 4.4%

Fee Summary 8

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• Gross-net return spread for 2Q2019 is above average, due to incentive fee

accruals based on outsized appreciation returns during the quarter.

• Management fees are in line with historical averages.
• Incentive fees for the quarter primarily represent accruals based on unrealized

appreciation in Northwood IV, Northwood V, and Wheelock II.

Type 2Q2019 Quarterly Avg. Asset Mgmt.

0.28% 0.29%

Incentive

0.21% 0.11%

Other

0.00% 0.00% Total 0.49% 0.40% RE Portfolio Fees (% of Market Value)

Cash Flow Bridge

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Note that figures may not sum to ending values due to differences in fee accruals and payment. Investment Opening Value Net Income Net Appreciation Capital Called Capital Distributed Ending Value Morgan Stanley Prime 100,501,768 $ 681,917 $ 1,147,112 $

• $

988,779 $ 101,342,018 $ JPMorgan SPF 95,966,791 $ 595,396 $ 258,049 $ 240,440 $ 884,392 $ 96,176,115 $ 196,468,559 $ 1,277,313 $ 1,405,161 $ 240,440 $ 1,873,171 $ 197,518,133 $ JDM Partners I 27,505,474 $ 287,952 $

• $
• $
• $

27,793,426 $ RECAP III 4,380,009 $ (75) $ (239,646) $ 181,471 $ 97,792 $ 4,223,967 $ Wheelock Street I 3,050,881 $ (12,956) $ 123,819 $

• $
• $

3,161,744 $ Northwood Series IV 20,925,206 $ 95,011 $ 933,351 $ 354,910 $ 2,837,570 $ 19,470,908 $ Wheelock Street II 15,375,048 $ (19,437) $ 579,312 $ 90,240 $ 4,199,061 $ 11,735,862 $ Northwood Series V 28,207,979 $ 85,298 $ 1,016,184 $ 486,209 $ 457,929 $ 29,337,744 $ RECAP IV 22,329,123 $ (132) $ (202,558) $ 1,163,703 $ 637,489 $ 22,652,647 $ HSI V 16,094,101 $ (62,139) $ 1,619,820 $ 922,688 $

• $

18,574,470 $ SC Core Fund 21,881,093 $ 419,136 $ 150,786 $ 1,346,418 $ 102,369 $ 23,695,064 $ Wheelock Street V 11,667,851 $ (109,835) $ 875,512 $ 2,380,458 $ 544,139 $ 14,269,847 $ Focus Senior Housing I 4,099,047 $ (7,171) $ 63,702 $ 1,703,526 $ 16,026 $ 5,843,078 $ Hammes Partners III 407,233 $ (85,088) $ 15,465 $ 962,012 $ 51,965 $ 1,247,657 $ RECAP V 3,093,516 $ 2,124 $ (689,389) $ 904,183 $ 515,450 $ 2,814,933 $ 179,016,561 $ 592,688 $ 4,246,358 $ 10,495,818 $ 9,459,790 $ 184,821,347 $ 375,485,120 $ 1,870,001 $ 5,651,519 $ 10,736,258 $ 11,332,961 $ 382,339,480 $ Core Total Core Portfolio Total Non- Core Portfolio Total Portfolio Non- Core

Subsequent Events

Below are some key portfolio updates that occurred subsequent to the end of 2Q2019:

3Q2019 Core Portfolio Flash Returns:

• JP Morgan SPF: +0.5% (gross)
• Morgan Stanley Prime: +1.7% (gross)

Northwood Series IV & V

• The funds distributed approximately $3.0M to COPERS in August primarily comprised of proceeds from the

realization of investments in the NW UK Portfolio and the Sears Redevelopment Portfolios. RECAP V

• In September, the fund called approximately $1.5M from COPERS primarily to fund follow-on investments in Project

Eagle (senior housing in Australia) and Project Gear (logistics in China).

• The fund closed on the disposition of its first investment (Project Tango) in October. The investment resulted in a gross

IRR of 70% and a 1.6x gross equity multiple for the 17-month holding period.

• In October, the fund acquired three (3) prime retail assets in downtown Sydney, Australia for A$174.5 million.

Wheelock V

• The fund distributed approximately $550,000 to COPERS in August primarily comprised of proceeds from the

refinancing of Hyatt House. 9

Definitions & Footnotes

1 Commitment Funded Percentage (“% Funded”) – The percentage of the investor’s commitment that has been called by the manager to date, less any

capital returned during the investment period that is deemed to be recallable.

2 Investment Status Definitions:

• Recently Closed-Investment is awaiting first capital call designated for investment purposes
• Investing- Investment actively making commitments to new underlying investments; within stated investment period
• Stabilized- Investment is fully invested and unlikely to make near-term return of capital distributions
• Harvesting- Investment is actively divesting
• Nearly Liquidated- Investment is substantially divested of assets (typically > 80% realized)
• Liquidated- Investment has divested of all assets and either holds cash or no balance at all

3 Realization Percentage (“% Realized”) – The percentage of an investment’s cumulative distributions to date relative to the total value of the fund,

measured as a sum of the cumulative distributions to date and the remaining investment value.

4 Since Inception Gross Internal Rate of Return (“SI-IRR GROSS”) – Reflects the implied discount rate equating the present value of an investment’s

cash outflows and the remaining market value to the present value of the investment’s cash inflows, excluding any impact of fees charged or accrued.

5 Since Inception Net Internal Rate of Return (“SI-IRR NET”) - Reflects the implied discount rate equating the present value of an investment’s cash

• utflows and the remaining market value to the present value of the investment’s cash inflows, accounting for the impact of fees.

6 Net Equity Multiple (“NET EM”) – The sum of cumulative distributions and remaining investment value divided by total paid-in-capital, accounting

for the impact of fees.

7 Loan-to-Value Ratio (“LTV %”) – Ratio of all outstanding direct debt obligations divided by the fair value of the fund’s gross real estate asset value. 8 Fee Summary – Fees percentages shown reflect fees paid relative to beginning portfolio market value.

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Disclaimer of Warranties and Limitation of Liability

This document was prepared by Alignium, LLC (“Alignium”) and includes information and data from some or all of the following sources: investment managers, custodian banks, client staff, specialty investment consultants, actuaries, plan administrators/record-keepers, index providers, as well as other third-party sources as directed by the client or as we believe necessary or appropriate. Alignium makes no warranties and disclaims responsibility for the accuracy or completeness of information or data provided or methodologies employed by any external source. Alignium has taken reasonable care to ensure the accuracy of the information or data but disclaims responsibility for the accuracy of information or data received from outside sources. This document is provided for the client’s internal use only and does not constitute a recommendation by Alignium or an offer of, or a solicitation for, any particular security and it is not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets.

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