3Q2019 Real Estate Performance City of Phoenix Employees’ Retirement System (COPERS) Data as of September 30, 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 2Q 2007 Open N/A JPMorgan SPF $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 RECAP III 1Q 2012 Closed Expired $30,000,000 $6,501,860 78.3% Nearly Liquidated 2Q 2012 Closed Expired Wheelock Street I $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 3Q 2014 Closed Expired Wheelock Street II $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 Non-Core RECAP IV 1Q 2015 Closed Expired $30,000,000 $6,491,840 78.4% Harvesting 2Q 2016 Closed Expired HSI V $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% Note: Table does not include COPERS’ recent commitment Wheelock Street VI ($20M), which had not closed as of September 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 Core 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 Total Core Portfolio $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 Non-Core 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 Total Non-Core Portfolio $180,755,029 50.5% 54.2% 51.4% 15.7% 11.5% 1.36x Total Portfolio $358,140,365 100.0% 69.4% 47.4% 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 commitment to Wheelock Street VI ($20M), which had not closed as of September 30, 2019. 3
Performance Summary Time-Weighted Returns (Gross) Net IRR 4 Net EM 5 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% - - 4
Diversification Global United States 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. 5
Leverage Profile Very modest use of leverage across the Total Portfolio Loan-toValue (LTV) 7 : 36.8% portfolio. Core Portfolio LTV: 20.9% 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: 4.1% strategies that can perform without excess leverage risk. Fixed- Rate, 40.8% Floating- Rate, 59.2% 6
Fee Summary 8 RE Portfolio Fees (% of Market Value) Quarterly Type 3Q2019 Avg. Asset 0.31% 0.29% Mgmt. Incentive 0.02% 0.11% 0.00% 0.00% Other Total 0.33% 0.40% Management fees are in line with historical averages. Overall fees are below historical average due to reduced incentive fee accruals during 3Q2019. 7
Cash Flow Bridge Investment Opening Value Net Income Net Appreciation Capital Called Capital Distributed Ending Value Core $ 101,342,018 $ 659,447 $ 771,359 $ 999,411 $ 101,773,413 Morgan Stanley Prime JPMorgan SPF $ 96,176,115 $ 555,446 $ (406,852) $ 188,895 $ 20,901,681 $ 75,611,923 Total Core Portfolio $ 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 $ 3,161,744 $ (12,491) $ 2,614 $ 148,419 $ 742,095 $ 2,558,191 Wheelock Street I $ 19,470,908 $ 107,058 $ 58,803 $ 228,344 $ 1,363,574 $ 18,501,540 Northwood Series IV $ 11,735,862 $ 113,037 $ (15,561) $ - $ 831,383 $ 11,001,955 Wheelock Street II Non- Core 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 $ 18,574,470 $ (77,746) $ 756,832 $ 842,875 $ 1,628,544 $ 18,467,886 HSI V $ 23,695,064 $ (716,237) $ 435,003 $ 44,861 $ 383,365 $ 23,075,326 SC Core Fund $ 14,269,847 $ (46,052) $ - $ - $ 551,724 $ 13,672,071 Wheelock Street V $ 5,843,078 $ (586) $ 779,247 $ - $ - $ 6,621,739 Focus Senior Housing I Hammes Partners III $ 1,247,657 $ (58,529) $ 57,638 $ - $ 73,726 $ 1,173,040 $ 2,814,933 $ (419) $ (340,785) $ 1,495,144 $ - $ 3,968,873 RECAP V $ 184,821,347 $ (1,245,396) $ 1,387,259 $ 3,312,999 $ 7,521,180 $ 180,755,029 Total Non- Core Portfolio Total Portfolio $ 382,339,480 $ (30,503) $ 1,751,766 $ 3,501,894 $ 29,422,272 $ 358,140,365 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 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
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