2Q2019 Real Estate Performance City of Phoenix Employees’ Retirement System (COPERS) Data as of June 30, 2019 Presented by Mark Bartmann
Portfolio Overview Investment COPERS Unfunded % Funded 1 Status 2 Investment Structure Period Commitment Commitment Commitment Expiration 3Q 2006 Open N/A Core Morgan Stanley Prime $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% 1Q 2010 Closed Expired JDM Partners I $20,000,000 $551,274 97.2% Harvesting 1Q 2012 Closed Expired RECAP III $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 3Q 2014 Closed Expired Wheelock Street II $30,000,000 $8,700,665 71.0% Harvesting Non-Core 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 2Q 2016 Closed Expired HSI V $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% 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. 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 Morgan Stanley Prime $101,342,018 26.5% 100.0% 38.5% 6.4% 5.4% 1.67x Core JPMorgan SPF $96,176,115 25.2% 100.0% 32.3% 4.9% 4.2% 1.49x Total Core Portfolio $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 Non-Core 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 Total Non-Core Portfolio $184,821,347 48.3% 57.9% 49.9% 16.1% 11.9% 1.36x Total Portfolio $382,339,480 100.0% 72.5% 43.4% 8.0% 6.5% 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 commitments to Ascentris Value Add Fund III ($25M) and Wheelock Street VI ($20M), which had not closed as of June 30, 2019. 3
Performance Summary Time-Weighted Returns (Gross) Net IRR 4 Net EM 5 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% - - 4
Diversification Global United States 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. 5
Leverage Profile Total Portfolio Loan-toValue (LTV) 7 : 36.3% Very modest use of leverage across the portfolio. Core Portfolio LTV: 21.0% Non-Core Portfolio LTV: 47.0% Non-Core Portfolio LTV Ratio of less than 50% reflects a focus on managers and Weighted-Average Interest Rate: 4.4% strategies that can perform without excess leverage risk. 6
Fee Summary 8 RE Portfolio Fees (% of Market Value) Quarterly Type 2Q2019 Avg. Asset 0.28% 0.29% Mgmt. Incentive 0.21% 0.11% 0.00% 0.00% Other Total 0.49% 0.40% 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. 7
Cash Flow Bridge Investment Opening Value Net Income Net Appreciation Capital Called Capital Distributed Ending Value Core $ 100,501,768 $ 681,917 $ 1,147,112 $ - $ 988,779 $ 101,342,018 Morgan Stanley Prime $ 95,966,791 $ 595,396 $ 258,049 $ 240,440 $ 884,392 $ 96,176,115 JPMorgan SPF Total Core Portfolio $ 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 $ 4,380,009 $ (75) $ (239,646) $ 181,471 $ 97,792 $ 4,223,967 RECAP III $ 3,050,881 $ (12,956) $ 123,819 $ - $ - $ 3,161,744 Wheelock Street I $ 20,925,206 $ 95,011 $ 933,351 $ 354,910 $ 2,837,570 $ 19,470,908 Northwood Series IV Wheelock Street II $ 15,375,048 $ (19,437) $ 579,312 $ 90,240 $ 4,199,061 $ 11,735,862 Non- Core Northwood Series V $ 28,207,979 $ 85,298 $ 1,016,184 $ 486,209 $ 457,929 $ 29,337,744 $ 22,329,123 $ (132) $ (202,558) $ 1,163,703 $ 637,489 $ 22,652,647 RECAP IV $ 16,094,101 $ (62,139) $ 1,619,820 $ 922,688 $ - $ 18,574,470 HSI V $ 21,881,093 $ 419,136 $ 150,786 $ 1,346,418 $ 102,369 $ 23,695,064 SC Core Fund 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 $ 407,233 $ (85,088) $ 15,465 $ 962,012 $ 51,965 $ 1,247,657 Hammes Partners III $ 3,093,516 $ 2,124 $ (689,389) $ 904,183 $ 515,450 $ 2,814,933 RECAP V $ 179,016,561 $ 592,688 $ 4,246,358 $ 10,495,818 $ 9,459,790 $ 184,821,347 Total Non- Core Portfolio Total Portfolio $ 375,485,120 $ 1,870,001 $ 5,651,519 $ 10,736,258 $ 11,332,961 $ 382,339,480 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 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
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