E mploye e s R e tir e me nt Syste m of R hode Island Re a l E - PowerPoint PPT Presentation

E mploye e s’ R e tir e me nt Syste m of R hode Island Re a l E sta te Re vie w Pre se nte d b y: Pe nsio n Co nsulting Allia nc e , L L C No ve mb e r 16, 2016 0

ERSRI Real Estate Portfolio: Performance R e al E state Por tfolio Pe r for manc e De tail – Ne t of F e e s Cur r e nt Ne t 2Q-16 2Q-16 2Q-16 Asse t Value Inc ome Appr e c . T otal 1-Ye ar 3-Ye ar 5-Ye ar F und ($) (% ) (% ) (% ) (% ) (% ) (% ) E R SR I Cor e Por tfolio 396,430,061 0.9 1.1 2.0 11.0 12.2 12.2 AE W Co re Pro pe rty T rust 89,661,874 1.1 1.2 2.2 10.9 11.4 11.3 He itma n Ame ric a Re a l E sta te T rust 73,924,304 0.9 1.2 2.1 11.5 n/ a n/ a JP Mo rg a n Stra te g ic Pro pe rty F und 100,968,151 0.9 0.9 1.8 10.0 11.7 11.9 Mo rg a n Sta nle y Prime Pro pe rty F und 58,763,133 0.9 1.5 2.4 11.4 13.6 13.9 Prude ntia l PRI SA 73,112,599 1.0 0.8 1.7 11.9 12.7 12.1 E R SR I Non-Cor e Por tfolio 111,550,091 1.1 1.7 2.9 17.3 16.1 12.3 Cro w Ho lding s Re ta il F und 11,986,797 2.2 -0.1 2.1 n/ a n/ a n/ a E xe te r I ndustria l Va lue F und I I I 18,247,855 2.2 2.2 4.4 20.0 n/ a n/ a GE M Re a lty F und V 25,802,455 0.8 2.4 3.2 23.3 n/ a n/ a I C Be rke le y Pa rtne rs I I I 15,101,639 -0.2 4.5 4.3 11.7 n/ a n/ a I C Be rke le y Pa rtne rs I V 2,932,214 n/ a n/ a n/ a n/ a n/ a n/ a JP Mo rg a n Alte rna tive Pro pe rty F und 189,400 -4.0 2.0 -2.0 2.4 3.7 9.4 L o ne Sta r Re a l E sta te F und I V 6,763,509 0.6 4.3 4.9 n/ a n/ a n/ a Ma g na Ho te l F und I I I 1,745,654 3.5 -23.7 -20.2 -21.6 5.6 8.4 T riCo n Ca pita l F und VI I 1,319,598 -0.1 2.7 2.6 2.6 -13.3 -8.9 Wa te rto n F und XI I 27,460,971 1.5 1.5 3.0 22.1 n/ a n/ a E R SR I T otal R e al E state Por tfolio 507,980,152 1.0 1.2 2.2 12.0 12.6 11.7 Ne t NF I-ODCE 0.9 1.0 1.9 10.8 12.0 11.7 Ove r or (Unde r ) Pe r for manc e 0.3 1.2 0.6 0.0 As of June 30, 2016 1

ERSRI Real Estate Portfolio: Capital Activity R e al E state Por tfolio Commitme nts and R e tur ns on F unde d Commitme nts T otal F unde d Unfunde d Commitme nt Commitme nt Commitme nt T otal Distributions Sinc e Inc e ption Sinc e Inc e ption Par tne r ship ($) ($) ($) ($) IRR (% ) Multiple Cor e rust (1) AE W Co re Pro pe rty T 60,000,000 60,000,000 0 10,480,447 12.7% 1.7 He itma n Ame ric a Re a l E sta te T rust 60,000,000 60,000,000 0 4,726,288 13.6% 1.2 JP Mo rg a n Stra te g ic Pro pe rty F und 75,000,000 75,000,000 0 22,218,543 6.2% 1.5 Mo rg a n Sta nle y Prime Pro pe rty F und 35,000,000 35,000,000 0 18,186,006 7.1% 1.9 Prude ntia l PRI SA 50,000,000 50,000,000 0 15,937,240 5.1% 1.6 Non-Cor e Cro w Ho lding s Re ta il F und 24,000,000 11,861,234 12,138,766 0 n/ a n/ a E xe te r I ndustria l Va lue F und I I I 30,000,000 16,500,000 13,500,000 1,012,285 16.9% 1.2 GE M Re a lty F und V 50,000,000 23,809,133 26,190,867 4,385,000 14.9% 1.2 GE M Re a lty F und VI 20,000,000 0 20,000,000 0 n/ a n/ a I C Be rke le y Pa rtne rs I I I 18,000,000 16,038,326 1,961,674 4,361,760 22.4% 1.2 I C Be rke le y Pa rtne rs I V 30,000,000 3,087,000 26,913,000 0 n/ a n/ a JP Mo rg a n Alte rna tive Pro pe rty F und 20,000,000 20,000,000 0 14,727,125 -4.6% 0.7 L o ne Sta r Re a l E sta te F und I V 24,260,817 6,723,540 17,537,277 0 n/ a n/ a Ma g na Ho te l F und I I I 4,000,000 3,403,043 596,957 4,413,302 16.8% 1.8 T riCo n Ca pita l F und VI I 15,000,000 14,571,533 428,467 3,692,644 -19.8% 0.3 Wa te rto n F und XI I 35,000,000 23,644,184 11,355,816 1,772,825 26.0% 1.2 T otal 550,260,817 419,637,993 130,622,824 105,913,465 As of June 30, 2016 (1) An additional $10 million was committed in the fourth quarter of 2016. 2

ERSRI Real Estate Portfolio: Vintage Year Exposure Vintage Aggr e gate Inve stme nts Ye ar Commitme nts Magna Hote l F und III: Ho spitality inve stme nt, 2008 $4,000,000 de ve lo pme nt & manag e me nt AE W Cor e Pr ope r ty 2009 $25,000,000 T r ust: Ope n-e nd dive rsifie d c o re fund JP Mor gan GE M R e alty He itman Ame r ic a R e al Str ate gic Pr ope r ty Wate r ton F und XII: und V: De b t & F 2013 $205,000,000 AE W Cor e Pr ope r ty T r ust E state T r ust: Ope n-e nd F und: Ope n-e nd Value -add value -add dive rsifie d c o re fund dive rsifie d c o re multifamily pro pe rtie s fund E xe te r Industr ial Value F und III: Big -b o x IC Be r ke le y Par tne r s III: 2014 $48,000,000 ware ho use & multi- Multi-te nant industrial te nant lo g istic s state IV : L one Star R e al E Cr ow Holdings R e tail Glo b al distre sse d 2015 $48,260,817 F und: Small c o mme rc ial re al e state ne ig hb o rho o d re tail. & lo ans GE M R e alty F und VI: AE W Cor e Pr ope r ty IC Be r ke le y Par tne r s IV: ust ( 1) 2016 $60,000,000 De b t & value -add T r Multi-te nant industrial pro pe rtie s Cor e (1) An a ppro xima te $10 millio n c o mmitme nt was ma de in the fo urth q ua rte r o f 2016. Non-Cor e 3

ERSRI Real Estate Portfolio: Diversification NF I-ODCE E R SR I Por tfolio Pr ope r ty Se c tor Dive r sific ation Pr ope r ty Se c tor Dive r sific ation Othe r 2.9% Othe r 6.2% Ho te l 0.7% Ho te l 1.8% Apa rtme nt Offic e 30.9% Apa rtme nt Offic e 38.3% 24.4% 25.2% Re ta il 20.3% I ndustria l Re ta il 19.9% I ndustria l 16.8% 12.6% E R SR I Por tfolio NF I-ODCE Ge ogr aphic Dive r sific ation Ge ogr aphic Dive r sific ation E uro pe Asia Othe r U.S. 1.0% 0.2% 0.2% US E a st US E a st 32.4% 25.0% US We st US We st 38.6% 34.1% US Midwe st 10.4% US Midwe st US So uth 9.6% US So uth 29.1% 19.4% Sources: NCREIF; As of June 30, 2016 4

ERSRI Real Estate Portfolio: Other Characteristics E R SR I R e al E state Por tfolio L e ve r age E R SR I R e al E state Por tfolio Manage r Dive r sific ation 80.0% Othe r: Cro w Ho lding s, 70.0% E xe te r, GE M, I ndustry Ca pita l, L o ne Sta r, V) JP Mo rg a n 60.0% Ma g na , T riCo n & T 19.9% Wa te rto n atio (L 21.8% 50.0% oan-to-Value R 40.0% 30.0% Mo rg a n Sta nle y AE W 11.6% 20.0% 17.7% L 10.0% Prude ntia l 0.0% 14.4% He itma n Co re No n-Co re T o ta l Po rtfo lio 14.6% Po rtfo lio L e ve ra g e L e ve ra g e L imit As of June 30, 2016 5

Market Dynamics: Core Cap Rates ate s 1 Cor e R e al E state Cur r e nt Value Cap R 10.0% Core real estate cap rates remain low 9.0% by historical standards (expensive). 8.0% 7.0% ate 6.0% Cap R 5.0% Ca p Ra te 4.0% Spre a d 3.0% Co re Ca p Ra te 2.0% L T Ave ra g e Ca p Ra te 10 Ye a r T re a sury Ra te 1.0% 0.0% Cor e Cap R ate Spr e ad ove r 10-Ye ar T r e asur y Spre a d to the 10-ye a r T re a sury tic ke d up due to a de c line in the 10-ye a r yie ld. 5.0% 4.0% e ad ate Spr 3.0% 2.0% Cap R Co re Ca p Ra te Spre a d to T re a surie s 1.0% L T Ave ra g e Spre a d 0.0% 1 A c a p ra te is the c urre nt a nnua l inc o me o f the pro pe rty divide d b y a n e stima te o f the c urre nt va lue o f the pro pe rty . I t is the c urre nt yie ld o f the pro pe rty. L o w c a p ra te s indic a te hig h va lua tio ns. So urc e s: NCRE I F , www.ustre a s.g o v 6

Market Dynamics: Property Type Cap Rates 4.5 5.5 6.5 7.5 4 5 6 7 8 20082 So urc e : NCRE 20083 20084 20091 I F 20092 20093 20094 20101 Apa rtme nt 20102 Cur 20103 20104 r e nt Value Cap R 20111 20112 20113 20114 I ndustria l 20121 20122 20123 ate s by Pr 20124 7 20131 20132 Offic e ope r 20133 20134 ty T 20141 20142 ype 20143 Re ta il 20144 20151 20152 20153 20154 20161 20162

Market Dynamics: Transaction Volume Pr ope r ty Sale s Volume (Annualize d) 1,000 40,000,000,000 900 35,000,000,000 800 30,000,000,000 700 25,000,000,000 600 500 20,000,000,000 400 15,000,000,000 300 10,000,000,000 200 5,000,000,000 100 0 0 19992 19994 20002 20004 20012 20014 20022 20031 20033 20041 20043 20051 20053 20061 20063 20071 20073 20081 20083 20091 20093 20101 20103 20111 20113 20121 20123 20131 20133 20141 20143 20151 20153 20161 Pro ps So ld 4Q Mo v T o ta l MV So ld 4Q Mo v T o ta l So urc e : NCRE I F 8

Market Dynamics: Real Estate Fundamentals Additions to Stoc k Ove r Pr ior 4 Quar te r s as a Shar e of T otal Stoc k U.S. Ave r age Vac anc y R ate 10.0% 18.0% 9.0% 16.0% 8.0% 14.0% 7.0% 12.0% 6.0% 10.0% 5.0% 8.0% 4.0% 6.0% 3.0% 4.0% 2.0% 2.0% 1.0% 0.0% 0.0% Office Industrial Retail Apartment Office Industrial Retail Apartment So urc e : AE W 9

Market Dynamics: Expected Population Growth U.S. Population by F ive -Ye ar Age Cohor ts U.S. E xpe c te d Population Gr owth 2015-2050 (millions) 450 24 25% 400 23 20% 350 22 300 21 15% 250 20 200 19 10% 150 18 100 17 5% 50 16 0 15 0% U.S. Po pula tio n (Millio ns, L e ft Axis) 2015 2025 10 Ye a r Pe rc e ntag e I nc re a se (Rig ht Axis) So urc e : AE W 10