3Q2019 Real Estate Performance City of Phoenix Employees Retirement - - PowerPoint PPT Presentation

3Q2019 Real Estate Performance

City of Phoenix Employees’ Retirement System (COPERS)

Data as of September 30, 2019 Presented by Mark Bartmann

Portfolio Overview

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Note: Table does not include COPERS’ recent commitment Wheelock Street VI ($20M), which had not closed as of September 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 $6,501,860 78.3% 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 $12,310,840 38.5% 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 $9,844,158 67.2% Investing RECAP IV 1Q 2015 Closed Expired $30,000,000 $6,491,840 78.4% Harvesting HSI V 2Q 2016 Closed Expired $25,000,000 $8,907,033 64.4% 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 $11,369,128 54.5% Investing Focus Senior Housing I 2Q 2017 Closed 2Q 2021 $25,000,000 $18,868,335 24.5% 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 $20,990,476 16.0% Investing Ascentris VA III 3Q2019 Closed TBD $25,000,000 $25,000,000 0.0% Recently Closed Total Non-Core Portfolio $360,000,000 $164,783,361 54.2% Total Portfolio $537,880,529 $164,783,361 69.4% 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 commitment to Wheelock Street VI ($20M), which had not closed as of September 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 $101,773,413 28.4% 100.0% 38.8% 6.4% 5.4% 1.68x JPMorgan SPF $75,611,923 21.1% 100.0% 46.9% 4.9% 4.2% 1.49x $177,385,336 49.5% 100.0% 42.5% 5.7% 4.8% 1.59x JDM Partners I $27,167,368 7.6% 97.2% 30.8% 10.1% 8.9% 1.99x RECAP III $4,208,059 1.2% 78.3% 88.9% 12.4% 8.7% 1.18x Wheelock Street I $2,558,191 0.7% 81.4% 93.6% 35.9% 25.1% 1.72x Northwood Series IV $18,501,540 5.2% 38.5% 46.4% 18.0% 12.8% 1.46x Wheelock Street II $11,001,955 3.1% 71.0% 71.9% 29.1% 19.0% 1.54x Northwood Series V $28,168,429 7.9% 67.2% 21.7% 11.2% 8.4% 1.29x RECAP IV $22,170,552 6.2% 78.4% 20.9% 10.6% 6.9% 1.18x HSI V $18,467,886 5.2% 64.4% 15.9% 28.9% 19.1% 1.29x SC Core Fund $23,075,326 6.4% 72.3% 5.8% 7.3% 6.5% 1.12x Wheelock Street V $13,672,071 3.8% 54.5% 7.4% 8.3% 1.3% 1.02x Focus Senior Housing I $6,621,739 1.8% 24.5% 0.2% 18.9% 8.9% 1.08x Hammes Partners III $1,173,040 0.3% 7.1% 15.4% N/A N/A N/A RECAP V $3,968,873 1.1% 16.0% 12.0% N/A N/A N/A $180,755,029 50.5% 54.2% 51.4% 15.7% 11.5% 1.36x $358,140,365 100.0% 69.4% 47.4% 7.9% 6.4% 1.45x Core Total Core Portfolio Total Portfolio Total Non-Core Portfolio Non-Core

Performance Summary

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3Q2019 1-Yr 3-Yr 5-Yr SI Core 1.2% 6.0% 7.8% 9.9% 7.6% 4.8% 1.59x Non-Core 0.4% 16.4% 14.1% 12.5% 15.2% 11.5% 1.36x Total Portfolio 0.8% 10.7% 10.5% 11.1% 8.5% 6.4% 1.45x NCREIF ODCE 1.3% 5.6% 7.3% 9.3% 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.
• International exposure will increase as capital is called to RECAP V and SC Core
• Investments in Focus Senior Housing I and Hammes III will continue to increase property

type exposure to niche property types such as senior housing and medical office.

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.

Fixed- Rate, 40.8% Floating- Rate, 59.2%

Total Portfolio Loan-toValue (LTV) 7: 36.8% Core Portfolio LTV: 20.9% Non-Core Portfolio LTV: 47.0% Weighted-Average Interest Rate: 4.1%

Fee Summary 8

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• Management fees are in line with historical averages.
• Overall fees are below historical average due to reduced incentive fee accruals

during 3Q2019.

Type 3Q2019 Quarterly Avg. Asset Mgmt.

0.31% 0.29%

Incentive

0.02% 0.11%

Other

0.00% 0.00% Total 0.33% 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 101,342,018 $ 659,447 $ 771,359 $ 999,411 $ 101,773,413 $ JPMorgan SPF 96,176,115 $ 555,446 $ (406,852) $ 188,895 $ 20,901,681 $ 75,611,923 $ 197,518,133 $ 1,214,893 $ 364,507 $ 188,895 $ 21,901,092 $ 177,385,336 $ JDM Partners I 27,793,426 $ (626,058) $

• $
• $
• $

27,167,368 $ RECAP III 4,223,967 $ (913) $ (184,806) $ 169,811 $

• $

4,208,059 $ Wheelock Street I 3,161,744 $ (12,491) $ 2,614 $ 148,419 $ 742,095 $ 2,558,191 $ Northwood Series IV 19,470,908 $ 107,058 $ 58,803 $ 228,344 $ 1,363,574 $ 18,501,540 $ Wheelock Street II 11,735,862 $ 113,037 $ (15,561) $

• $

831,383 $ 11,001,955 $ Northwood Series V 29,337,744 $ 74,140 $ 319,769 $ 124,716 $ 1,687,940 $ 28,168,429 $ RECAP IV 22,652,647 $ (600) $ (481,495) $ 258,829 $ 258,829 $ 22,170,552 $ HSI V 18,574,470 $ (77,746) $ 756,832 $ 842,875 $ 1,628,544 $ 18,467,886 $ SC Core Fund 23,695,064 $ (716,237) $ 435,003 $ 44,861 $ 383,365 $ 23,075,326 $ Wheelock Street V 14,269,847 $ (46,052) $

• $
• $

551,724 $ 13,672,071 $ Focus Senior Housing I 5,843,078 $ (586) $ 779,247 $

• $
• $

6,621,739 $ Hammes Partners III 1,247,657 $ (58,529) $ 57,638 $

• $

73,726 $ 1,173,040 $ RECAP V 2,814,933 $ (419) $ (340,785) $ 1,495,144 $

• $

3,968,873 $ 184,821,347 $ (1,245,396) $ 1,387,259 $ 3,312,999 $ 7,521,180 $ 180,755,029 $ 382,339,480 $ (30,503) $ 1,751,766 $ 3,501,894 $ 29,422,272 $ 358,140,365 $ 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 3Q2019:

4Q2019 Core Portfolio Flash Returns:

• JP Morgan SPF: +2.3% (gross)
• Morgan Stanley Prime: +1.8% (gross)

Morgan Stanley Prime

• COPERS received its $20M partial redemption distribution on December 31, 2019.

Ascentris Value Add Fund III

• The fund called approximately $2.6 million from COPERS to fund pre-acquisition costs associated with the fund’s

initial investments, including office properties in Alexandria, VA and Aliso Viejo, CA. Northwood Series IV

• The fund distributed approximately $1.3 million to COPERS in October primarily comprised of proceeds from the

realization of Pointe Metro (office in Paris) and Templar House (office in London). RECAP V

• In December, the fund called approximately $2.2 million from COPERS primarily to fund follow-on investments in

Project Eagle (senior housing in Australia), Project Gear (logistics in China), and Project Tsukiji (office in Japan). SC Core

• The fund closed on the acquisition of Project Royal, a Grade A office building in Sydney, Australia in December.

Wheelock V

• The fund called approximately $5.4 million from COPERS in to fund several investments including Hilton Atlanta

Airport, the Boston Industrial Platform, and Parkway Tower (office in Nashville). 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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