1Q2019 Real Estate Performance City of Phoenix Employees’ Retirement System (COPERS) Data as of March 31, 2019 Presented by Mark Bartmann
Portfolio Overview Investment COPERS Unfunded % Funded 1 Status 2 Investment Structure Period Commitment Commitment Commitment Expiration Core 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 TA Realty IX 2Q 2010 Closed Expired $9,000,000 $0 100.0% Nearly Liquidated RECAP III 1Q 2012 Closed Expired $30,000,000 $6,853,143 77.2% 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 2Q 2019 $20,000,000 $8,692,952 56.5% Investing Wheelock Street II 3Q 2014 Closed Expired $30,000,000 $8,700,665 71.0% Harvesting Non-Core Northwood Series V 1Q 2015 Closed 2Q 2020 $30,000,000 $8,309,216 72.3% Investing RECAP IV 1Q 2015 Closed Expired $30,000,000 $7,914,372 73.6% Harvesting HSI V 2Q 2016 Closed 2Q 2019 $25,000,000 $10,672,595 57.3% Investing SC Core Fund 3Q 2016 Closed 2Q 2020 $30,000,000 $9,609,533 68.0% Investing Wheelock Street V 4Q 2016 Closed 4Q 2020 $25,000,000 $12,838,532 48.7% 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 $24,182,060 3.3% Investing RECAP V 4Q 2018 Closed 4Q 2021 $25,000,000 $22,884,340 8.5% Recently Closed Total Non-Core Portfolio $353,000,000 $145,504,561 58.8% Total Portfolio $530,880,529 $145,504,561 72.6% Note: Table does not include COPERS’ recent $25M commitment to Ascentris Value Add Fund III, which had not closed as of March 31, 2019. 2
Performance Summary Net Equity % of RE SI IRR (Gross) 4 SI IRR (Net) 5 % Funded 1 % Realized 3 Investment Market Value Multiple 6 Portfolio Core Morgan Stanley Prime $100,501,768 26.8% 100.0% 38.3% 6.4% 5.4% 1.65x JPMorgan SPF $95,966,791 25.6% 100.0% 31.9% 4.9% 4.2% 1.48x Total Core Portfolio $196,468,559 52.3% 100.0% 35.4% 5.7% 4.8% 1.57x JDM Partners I $27,505,474 7.3% 97.2% 30.6% 10.6% 9.4% 2.00x TA Realty IX $0 0.0% 100.0% 100.0% 13.2% 10.4% 1.60x RECAP III $4,380,009 1.2% 77.2% 88.5% 13.1% 9.3% 1.20x Wheelock Street I $3,050,881 0.8% 81.4% 92.2% 36.0% 25.2% 1.73x Northwood Series IV $20,925,206 5.6% 56.5% 36.1% 18.1% 12.8% 1.42x Wheelock Street II $15,375,048 4.1% 71.0% 60.1% 29.9% 19.6% 1.52x Non-Core Northwood Series V $28,207,979 7.5% 72.3% 16.7% 10.9% 8.0% 1.24x RECAP IV $22,329,123 5.9% 73.6% 18.2% 13.6% 9.5% 1.22x HSI V $16,094,101 4.3% 57.3% 10.4% 28.5% 15.7% 1.18x SC Core Fund $21,881,093 5.8% 68.0% 4.1% 8.6% 7.9% 1.11x Wheelock Street V $11,667,851 3.1% 48.7% 0.0% 5.1% -4.6% 0.96x Focus Senior Housing I $4,099,047 1.1% 17.7% 0.0% 1.7% -11.2% 0.93x Hammes Partners III $407,233 0.1% 3.3% 17.7% N/A N/A N/A RECAP V $3,093,516 0.8% 8.5% 0.8% N/A N/A N/A Total Non-Core Portfolio $179,016,561 47.7% 58.8% 49.3% 16.2% 11.9% 1.36x Total Portfolio $375,485,120 100.0% 72.6% 42.9% 7.9% 6.4% 1.45x Notes: - Sub-Portfolio and Total Portfolio composite performance figures include data from liquidated investments not shown in table. - Table does not include COPERS’ recent $25M commitment to Ascentris Value Add Fund III, which had not closed as of March 31, 2019. 3
Performance Summary Time-Weighted Returns (Gross) Net IRR 4 Net EM 5 1Q2019 1-Yr 3-Yr 5-Yr SI Core 1.0% 7.2% 8.4% 10.6% 7.7% 4.8% 1.57x Non-Core 4.5% 14.6% 13.8% 12.8% 15.6% 11.9% 1.36x Total Portfolio 2.7% 10.6% 10.8% 11.7% 8.5% 6.4% 1.45x NCREIF ODCE 1.4% 7.5% 8.0% 10.2% 6.4% - - 4
Diversification Global United States Portfolio is 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 flows 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. 5
Leverage Profile Total Portfolio Loan-toValue (LTV) 7 36.7% Very modest use of leverage across the portfolio. Core Portfolio LTV: 21.0% Non-Core Portfolio LTV: 47.6% Non-Core Portfolio LTV Ratio of less than 50% reflects a focus on managers and Weighted-Average Interest Rate: 4.3% strategies that can perform without excess leverage risk. 6
Fee Summary 8 RE Portfolio Fees (% of Market Value) Quarterly Type 1Q2019 Avg. Asset 0.32% 0.29% Mgmt. Incentive 0.17% 0.11% 0.00% 0.00% Other Total 0.49% 0.40% Gross-net return spread for 1Q2019 is above average, due to incentive fee accruals based on outsized appreciation returns during the quarter. Incentive fees for the quarter primarily due to accruals in Northwood IV and V. 7
Cash Flow Bridge Investment Opening Value Net Income Net Appreciation Capital Called Capital Distributed Ending Value $ 100,218,583 $ 649,735 $ 622,229 $ - $ 988,779 $ 100,501,768 Core Morgan Stanley Prime $ 96,465,497 $ 660,260 $ (467,273) $ 239,917 $ 931,610 $ 95,966,791 JPMorgan SPF Total Core Portfolio $ 196,684,080 $ 1,309,995 $ 154,956 $ 239,917 $ 1,920,389 $ 196,468,559 JDM Partners I $ 25,900,055 $ 1,605,419 $ - $ - $ - $ 27,505,474 $ 4,860 $ (841) $ - $ - $ 4,019 $ - TA Realty IX $ 4,370,811 $ (120) $ 9,318 $ - $ - $ 4,380,009 RECAP III $ 3,434,065 $ (13,982) $ 2,796 $ 93,000 $ 464,998 $ 3,050,881 Wheelock Street I $ 21,252,522 $ 1,057 $ 496,126 $ 197,521 $ 1,022,019 $ 20,925,206 Northwood Series IV $ 18,830,746 $ 72,609 $ 30,676 $ 356,172 $ 3,860,413 $ 15,375,048 Wheelock Street II Non- Core $ 26,647,806 $ 4,156 $ 1,585,431 $ 255,842 $ 285,255 $ 28,207,979 Northwood Series V $ 23,383,584 $ (949) $ (98,941) $ 137,760 $ 1,092,331 $ 22,329,123 RECAP IV $ 14,167,403 $ (63,418) $ 579,876 $ 1,410,240 $ - $ 16,094,101 HSI V $ 14,176,050 $ 825,199 $ 186,116 $ 6,928,132 $ 234,404 $ 21,881,093 SC Core Fund Wheelock Street V $ 10,053,614 $ (114,816) $ - $ 1,729,053 $ - $ 11,667,851 Focus Senior Housing I $ 4,093,287 $ 5,760 $ - $ - $ - $ 4,099,047 $ 506,052 $ (83,481) $ 11,628 $ - $ 26,966 $ 407,233 Hammes Partners III $ - $ (6,833) $ 970,652 $ 2,154,163 $ 24,466 $ 3,093,516 RECAP V $ 166,820,855 $ 2,229,760 $ 3,773,678 $ 13,261,883 $ 7,014,871 $ 179,016,561 Total Non- Core Portfolio Total Portfolio $ 363,504,935 $ 3,539,755 $ 3,928,634 $ 13,501,800 $ 8,935,260 $ 375,485,120 Note that figures may not sum to ending values due to differences in fee accruals and payment. 8
Subsequent Events Below are some key portfolio updates that occurred subsequent to the end of 1Q2019: 2Q2019 Core Portfolio Flash Returns: JP Morgan SPF: +1.2% (gross) Morgan Stanley Prime: +2.1% (gross) Hammes III The fund recently closed on three (3) new investments located in Texas, Arizona and Washington, D.C. totaling approximately $55 million of gross acquisition cost. Northwood IV The fund distributed over $2.8 million to COPERS during 2Q2019, primarily comprised of proceeds related to the refinancing of The Domain investment as well sale of the French Industrial Portfolio and 123 Mission Street. RECAP III The fund is currently exploring the realization of substantially all of its hospitality portfolio via public listing on the Bangkok Stock Exchange. Wheelock II The fund distributed approximately $4.1 million to COPERS, comprised of proceeds from the sale of the New Jersey Housing Portfolio. Wheelock V The fund is under contract to acquire three (3) additional assets representing $67 million of peak equity. These transactions include a Tampa, FL Area golf course, a Hilton branded hotel in Atlanta, GA and an office building in downtown Nashville, TN. 9
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