Fourth Quarter 2019 Real Estate Performance Update
Invesco US Income Fund I Greenfield Acquisition Partners VII CityScape Residences Inn of Sedona Phoenix, AZ Sedona, AZ
Santa Barbara County Employees’ Retirement System May 27, 2020
For Institutional Investor use only. Proprietary & Confidential.
Table of Contents
3 Real Estate Market Update
17 Fourth Quarter 2019 Real Estate Performance
30 Portfolio Summary
32 Detailed Portfolio Summary for the Period Ending December 31, 2019
For Institutional Investor use only. Proprietary & Confidential.
Real Estate Market Update
Prologis Targeted US Logistics Fund South Bay Distribution Center Rancho Dominguez, CA
Stockbridge Smart Markets Fund Novella Apartments Redondo Beach, CA
Walton Street Fund VII World Trade Center Long Beach, CA
For Institutional Investor use only. Proprietary & Confidential. 3
Market Overview
• NCREIF ODCE capital flows have continued to trend downward from its peak in 2015.
• Significant liquidity still remains for U.S. core / stabilized real estate.
NFI-ODCE Capital Flows
$25 $ Billions $ $20
$15
$10
$5
$- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$(5) Contributions Distributions & Redemptions Net Cash Flow
Source: NCREIF, as of 12/31/2019 For Institutional Investor use only. Proprietary & Confidential. 4
Market Overview
• Total real estate transaction volume increased approximately 5% in 2019 compared to 2018. Retail transactions decreased by 25.5% compared to 2018 while apartments, industrial and office were up approximately 17.5%, 17.7% and 3.8% respectively. The drop in retail transactions in 2019 is partially due to large REIT transactions that occurred in 2018.
$ Billions Office Industrial Retail Apartments $600.0
$500.0
$400.0
$300.0
$200.0
$100.0
$0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Real Capital Analytics, as of 12/31/2019 For Institutional Investor use only. Proprietary & Confidential. 5
Market Overview
• Despite central business district (CBD) office being the focus of many investors and ODCE Funds, recently suburban office has provided greater levels of liquidity.
U.S. Office Transaction Volume
$120 10.0%
$100 8.0% Billions $80 6.0% $60 4.0% $40
$20 2.0%
$- 0.0%
CBD Transaction Volume Suburban Transaction Volume CBD Cap Rate Suburban Cap Rate
Source: Real Capital Analytics, as of 12/31/2019 For Institutional Investor use only. Proprietary & Confidential. 6
Market Overview
• Office capitalization rates in gateway markets like San Francisco, CA, Los Angeles, CA, New York, NY and Boston, MA are still below 4.0% while much of the Midwest is above 5.5%.
Source: Green Street Advisors, as of 3/19/2020 For Institutional Investor use only. Proprietary & Confidential. 7
Market Overview
• However, office revenue growth is generally expected to decelerate in most U.S. markets in 2020 compared to 2019 growth rates.
Source: Green Street Advisors, as of 1/16/2020. For Institutional Investor use only. Proprietary & Confidential. 8 *Market-RevPAF growth combines changes in net effective rents and occupancies.
Market Overview
• Capital expenditures can significantly impair office cash flows. Office owners must re-invest meaningful capital to fund leasing costs and increasingly expensive maintenance repairs. The visualizations below show a typical office revenue distribution (according to Green Street Advisors) and the significant capital expense needs of office compared to other property types.
Source: NCREIF, Green Street Advisors, as of 1/16/2020. For Institutional Investor use only. Proprietary & Confidential. 9
Market Overview
• As a result of decreasing net cash flow in office investments, ORG opted to underweight office exposure relative to the ODCE benchmark in favor of more cash-flowing assets. As of 4Q 2019, the SBCERS portfolio was 25% office while ODCE was 33%.
• SBCERS investment in Rubenstein Properties Fund III, L.P. has made several value-added investments in the office space. In September 2016, the Fund purchased Junction, a vacant 188,000 square foot suburban office building in Reston, VA for $18.6 million. The Fund began a repositioning strategy for the office building complete with an expanded amenity package including a fitness center, conference center, and a tenant lounge area with limited food service. A rendering of the tenant lounge area is shown below.
• The Junction was sold to a prospective user in April 2019 and generated an 18% gross realized IRR and a 2.6x gross realized equity multiple.
Source: Rubenstein Partners, Bognet Construction For Institutional Investor use only. Proprietary & Confidential. 10
Market Overview - COVID-19 Impacts Subsequent to the Period Ended 12/31/2019
In late 4Q 2019, a novel coronavirus emerged from the Hubei province in China. Subsequent to 4Q 2019, COVID-19 has since spread to nearly every country in the world and was officially labeled a pandemic by the World Health Organization on March 11, 2020. Unfortunately, the highly contagious nature of the disease, lack of vaccine, limited testing capabilities and relatively high death rates have led governments to take significant and often severe action to protect their citizens and minimize strain on public health infrastructures. Measures that have been taken include restricting domestic and international travel, cancelling sporting events, concerts and other large gatherings, closing restaurants, stores and other gathering places and stay-at-home / lockdown orders. COVID-19 and the measures taken to combat its spread will have severe and detrimental impacts to the global economy. While the duration of this pandemic and potential “additional waves” are uncertain and difficult to estimate, as of late April 2020 the number daily infections worldwide appears to be declining from its peak in early April 2020. Again, due to limited testing capabilities, these figures may not be entirely accurate and a “second wave” of the virus could have a far more drastic effect, but a timeline of the COVID-19 outbreak as of April 22, 2020 is shown below.
Source: Investment Strategy Group, WHO, CDC, National Health Commission of People’s Republic of China, John Hopkins University, Worldometers, Goldman Sachs For Institutional Investor use only. Proprietary & Confidential. 11
Market Overview - COVID-19 Impacts Subsequent to the Period Ended 12/31/2019
COVID-19 and the resulting actions of local and national governments is likely to lead most economies into a recession in 2020. Where most economists differ is to what extent and for what duration? Some economists initially predicted a “V” shaped recession with a sharp decline followed in quick session with a sharp “bounce-back” but as the severity of the downturn becomes more clear, a sharp “bounce-back” becomes less likely. Record breaking increases in unemployment will cause severe disruptions to the global economy.
Commercial real estate will continue to be impacted by COVID-19 as lockdown orders and deteriorating economic conditions force landlords to shift business plans and focus on maintaining tenants and cash flow.
The real estate debt markets have largely been frozen due to the uncertainty surrounding COVID-19. For April 2020, the late payment rate on 2012-2020 vintage US CMBS loans that are 30 days or more late has increased from approximately 4.0% to 10%. (Trepp)
NCREIF April 2020 Rent Collection Rates U.S. Weekly Unemployment Claims 100% 8,000 91.7% 89.7% 90% 86.8% 7,000 81.2% 79.6% 80% 6,000
70% 5,000 Thousands 60% 4,000 50% 3,000 40% 36.1% 2,000 30% 1,000 20% - 10% 0% Apartment Industrial Office Retail Other Total U.S. Unemployment Claims Long Term Average Source: NCREIF (Value Weight Index), Data as 4/15/2020 Source: U.S. Employment and Training Administration. Long Term Average since 1967
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Market Overview - COVID-19 Retail Impacts Subsequent to the Period Ended 12/31/2019
Store closures and bankruptcies continue to plague the retail sector. Department stores in particular, which represent approximately 60% of mall anchor space, have been closing at an accelerating rate. Malls will continue to be severely impacted with multiple anchor vacancies. Currently, ORG anticipates that there will be fewer department stores in the future and malls will have to adapt to survive.
Mall vacancies have increased but the neighborhood and community shopping sector continue to remain resilient due to the necessity based tenants located in those centers such as grocery stores and pharmacies.
Weekly U.S. Grocery Store Sales Change From a Year Earlier
76.9%
43.5%
28.5% 27.5% 21.8%
6.5% 7.9%
March April Source: WSJ
Source: Green Street Advisors For Institutional Investor use only. Proprietary & Confidential. 13
Market Overview - COVID-19 Industrial Impacts Subsequent to the Period Ended 12/31/2019
The U.S. industrial market continues its strong run as the integration between retail and industrial continues and e-commerce rises. As e-commerce continues to grow and increase its market share, much of the value that was once placed on traditional retail has been transferred to industrial assets. In many ways, COVID-19 has accelerated as e-commerce becomes the safer alternative to shopping while consumers are in lockdown.
Each $1 billion in additional online sales is estimated to translate into an incremental 1.25 million square feet of industrial warehouse demand (CBRE Research). As shown in the chart below, E-commerce sales are projected to increase to 25% of overall sales by 2025.
Tenant quality remains a focus as there is certainly a concern that tenants with poor balance sheets or that rely on manufacturing supply chains such as automobile or aircraft assemblage could be impaired and face difficulties meeting their rent obligations.
Source: 1U.S. Census Bureau, Bloomberg and IMS Worldwide Inc. For Institutional Investor use only. Proprietary & Confidential. 14
Market Overview - COVID-19 Office Impacts Subsequent to the Period Ended 12/31/2019
The office sector has held-up fairly well on relative basis as a result of the strength of cash flow from longer duration leases relative to hotels and multifamily assets. However, there is some concern regarding poor tenant credit and weaker balance sheets among small office tenants and start-ups as well as tenants in the legal and leisure and hospitality sectors. Many office tenants are asking their landlords for rent relief or rent deferrals and there is uncertainty how each request will be met.
Office landlords that had underwritten short term lease-up strategies or capital intensive renovations may encounter distress as leasing will almost certainly be impaired as potential tenants cannot physically tour properties with stay-at-home orders in place. Additionally, the future of office may change significantly as tenants could look to reverse the trend of densification within office space due to concerns for future social distancing orders.
Occupied Office Square Foot per NYC Employee
Source: Investment Strategy Group, Goldman Sachs MBD, Cushman & Wakefield, JLL, Hodges Ward Elliot, REIS, ny.labor.gov, KPMG, “A Bridge Past COVID-19,” 4/1/2020, Rubenstein Partners For Institutional Investor use only. Proprietary & Confidential. 15
Market Overview - COVID-19 Multi-Family Impacts Subsequent to the Period Ended 12/31/2019
The April multi-family rent collections were expected to be low due an unprecedented spike in unemployment claims, however, due to government stimulus, unemployment benefits and other factors such as residents possibly tapping their savings, April rent collections were at a relatively healthy level. Naturally, as the resident’s lease continues these resources could be exhausted which could impact rent collections. A key figure that ORG has highlighted will be the August 2020 rent collections as this will mark the approximate end of the four month CARES Act $600 per week benefit program for those unemployed as a result of COVID-19.
As in-person tours are not possible due to lockdown orders, ORG expects a slowdown in multi-family leasing activity. Nevertheless, this could likely lead to higher renewal rates as residents who can afford the rent would hesitate to pack-up and move during a pandemic and landlords would slow rental growth in order to preserve occupancy.
Source: Green Street Advisors For Institutional Investor use only. Proprietary & Confidential. 16
Fourth Quarter 2019 Real Estate Performance
Abacus Core Income Fund I Patron Capital V Alexander at The District Apartments GSPP Cologne Office Atlanta, GA Cologne, Germany
Greenfield Acquisition Partners VI 413 Huron—Student Housing Ann Arbor, MI
For Institutional Investor use only. Proprietary & Confidential. 17
SBCERS Investment Return Snapshot As of December 31, 2019
Investment Returns—Time Weighted, Gross of Fees Investment Returns—Time Weighted, Net of Fees
SBCERS NFI ODCE, Gross SBCERS NFI ODCE, Net SBCERS Benchmark
Total Portfolio
10.6%
12.6% 10.3%
12.4% Since Inception 10.7%
Date: 1-1-2006 8.7%
8.0%
9.0%
8.7%
7.1%
6.9%
6.7% 6.6%
Gross IRR: 9.9% 6.5%
6.1%
7.1% 5.8%
6.8% Net IRR: 8.8%
5.3%
4.4%
2.8%
2.3%
1.5%
1.3% 1.2%
QTR 1 YEAR 3 YEARS 5 YEARS SINCE QTR 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION INCEPTION
Note: SBCERS Benchmark is a real rate of return (adjusted for inflation) of 4.5%, net of investment management fees. ORG /BNY Mellon Return Comparison—Time Weighted, Net of Fees (Mellon Report 3/31/2020)
8.7% 2.3% Private RE Private RE 8.0% 1.5%
0% 5% 10% 15% 0% 1% 2% 3% ORG BNY Mellon ORG BNY Mellon For Institutional Investor use only. Proprietary & Confidential. 18
SBCERS Real Estate Attribution Analysis Quarter Return data for December 31, 2019
Gross of Fees Total Return Attribution Net of Fees Total Return Attribution
Core 2.0% Core 1.7%
Opportunistic 0.5% Opportunistic 0.3%
Value Added 0.4% Value Added 0.2%
Overall 2.8% Overall 2.3%
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50%
• The attribution identifies the percent of each sector that contributes to the overall total return
• The Core sector, with 74% of the total portfolio, is the largest contributor to the total return of the portfolio.
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SBCERS Property Type vs Index Quarter Return data for December 31, 2019
Sector Returns—Time Weighted SBCERS—US Only Compared to Index
40%
13.6% 13.6% 13.4% 35% 34% 34% 30% 26% 25%
8.3% 25% 7.6%
7.4% 24% 6.7%
6.7% 20%
6.6% 6.5%
6.4% 20% 5.9% 5.5% 16%
15%
3.2%
3.2% 1.9%
1.7% 10%
1.6% 1.5%
9% 0.1% 5% 4%
QTR 1 YR 3 YRS 5 YRS 0.2%3% 1% 2% 2% 0% Office Retail Apartments Industrial Hotel Self Storage Assisted Other NPI Apartment Sub-Index Industrial Sub-Index Living
Office Sub-Index Retail Sub-Index NFI ODCE SBCERS
• Industrial sector returns are outperforming all other sectors. SBCERS portfolio is 34% industrial whereas the ODCE Index is 20%.
• SBCERS retail portfolio is 9% whereas the ODCE index is 16%.
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SBCERS Portfolio Snapshot As of December 31, 2019
Private Real Estate 12/31/2019 9/30/2019 Change • Of the $370.1 million committed to Private Real Funds Estate, 65.9% has been called through 12/31/2019. Number of Funds 35 33 2 Number of General Partner Relationships 20 18 2 • The equity multiple and the Since Inception Internal Rate of Return (“IRR”) had no change from the prior Capital Committed $370.1 $335.1 $35.0 quarter. Unfunded Commitment $126.1 $97.8 $28.3
Total Private Real Estate • Both the Contributions and Distributions include the Quarterly Contributions $10.2 $9.7 $0.5 impact of the dividend reinvestment programs in Quarterly Distributions ($21.9) ($11.3) ($10.6) many of the Core funds. Total Market Value $289.5 $294.5 ($5.0) Equity Multiple, Net of Fees 1.4x 1.4x (0.0x) Portfolio Since Inception of IRR, Net of Fees 8.8% 8.8% 0.0% Note: All dollars are in millions.
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Progress Towards 2019 Strategic Plan Goals
2019 Recommendation 2019 Action Plans Progress
ORG will target to increase the • Commit up to $20 million to Core investment strategies. portfolio with new commitments of • ORG believes the core risk/return attributes have become less favorable than value added $50 million opportunities. • Commit up to $40 million in Value Added and/or Opportunistic funds that will capitalize on distress or other unique market conditions and manager capabilities. • $10 million commitment to ABR Chesapeake Investors VI LP , Value-Added Fund, in July 2019. • $10 million commitment to Alcion Real Estate Partners Fund IV, L.P. , Opportunistic Fund, in July 2019. • $10 million commitment to Citymark Capital U.S. Apartment Fund II L.P. , Value-Added Fund, in December 2019. • $10 million commitment to Abacus Multi-Family Partners V, L.P. , Value-Added Fund, in December 2019. • $15 million commitment to High Street Real Estate Fund VI, L.P., Value-Added Fund, in December 2019. • As part of the new Value Added and/or Opportunistic funds, consider up to $20 million in international opportunities.
ORG will continue to actively • Considering redeeming out of selected open ended Core funds and reinvesting proceeds in new Core manage the portfolio within the Opportunities. guidelines of the Real Estate • Liquidated 90% of H/2 Credit Partners Ltd. for $13.8 million in November 2019 and remaining Investment Policy. balance was liquidated in April 2020. Original commitment was $10 million. • Evaluate and consider ending the dividend reinvestment program in certain Core funds. • ORG is evaluating the dividend reinvestment programs and has not elected to end any dividend reinvestment programs at this time.
Present additional educational • Details of educational seminars will be agreed upon at a future date. seminar for the Trustees during 2019.
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Progress Towards Strategic Plan for 2019
Commitment Activity - 2019 Commitments Closing Commitment Date Partnership Strategy Geographic Focus ($ millions)
7/1/2019 ABR Chesapeake Investors VI LP Value-Added United States $10.0
7/31/2019 Alcion Real Estate Partners Fund IV, L.P. Opportunistic United States $10.0
9/30/2019 H/2 Credit Partners Ltd. Core United States ($10.0)
Dec. 2019 Citymark Capital U.S. Apartment Fund II, LP Value-Added United States $10.0
Dec. 2019 Abacus Multi-Family Partners V, L.P. Value-Added United States $10.0
Dec. 2019 High Street Real Estate Fund VI, L.P. Value-Added United States $15.0
Total $45.0
2019 Strategic Plan Progress
Core Value Added Opportunistic ($10.0) $45.0 $10.0
-$10 -$5 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 Commitments in Millions
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Progress Towards 2020 Strategic Plan Goals
2020 Recommendation 2020 Action Plans Progress
ORG will target to increase the • No additional commitments to Core investment strategies due to concerns of pricing and core portfolio with new commitments of fundamentals. $60 million • ORG will consider redeeming existing Core funds and reallocation towards new or existing Core investment strategies. • Commit up to $60 million in Value Added and/or Opportunistic funds that will capitalize on distress or other unique market conditions and manager capabilities. • As part of the new Value Added and/or Opportunistic funds, consider up to $15 million in international opportunities.
ORG will continue to actively • Considering redeeming out of selected open ended Core funds and reinvesting proceeds in new Core manage the portfolio within the Opportunities. guidelines of the Real Estate • Evaluate and consider ending the dividend reinvestment program in certain Core funds. Investment Policy.
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Portfolio Summary As of December 31, 2019
Private Real Estate One Year Quarter Ending Ending in $ Millions 3/31/2019 6/30/2019 9/30/2019 12/31/2019 12/31/2019 Beginning Market Value $268.9 $273.1 $290.4 $294.5 $268.9 Contributions $6.4 $17.9 $9.7 $10.2 $44.2 Distributions ($6.4) ($7.7) ($11.3) ($21.9) ($47.2) Net Income/Appreciation $4.2 $7.2 $5.7 $6.6 $23.6 Ending Market Value $273.1 $290.4 $294.5 $289.5 $289.5 Unfunded Commitments $99.1 $84.4 $97.8 $126.1 $126.1 Since Inception IRR - Net 8.7% 8.8% 8.8% 8.8% 8.8%
• The Private Real Estate Since Inception IRR has stayed consistent over the last four quarters.
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Annual Cash Flow Summary
Projected Market Historical Market Value and Cash Flows Value
$500.0 $435.7 $407.9 $381.6 $400.0 $346.3
$289.5 $300.0 $268.9 $237.6 $238.6 $209.9 $187.8 $200.0 $126.9 $102.5 $47.3 $100.0 $50.5 $43.7 $57.3 $41.8 $58.4 $42.7 $33.4 $47.2 $29.1 $22.3 $34.2 $8.2 $17.2 $13.5 $19.5 $15.0 $15.5 $11.5 ($ ($ in Millions) $4.4 $2.4 $4.1 $1.4 $2.9 $0.0 ($4.1) ($4.7) ($4.3) ($18.8) ($29.4) ($28.3) ($28.2) ($31.5) ($38.9) ($46.8) ($38.0) ($35.2) ($42.2) ($54.4) ($44.2) ($55.2) ($28.0) ($54.4) ($100.0)
($200.0)
($300.0) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Capital Calls Distributions Market Value Net Cash Flow
• Between 2012 and the 4th Quarter 2019, the capital calls have outpaced the distributions by approximately $79.1 million.
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Strategy Diversification
100% 1% Strategy Diversification 4% By Market Value 10% 10% 12% 12% 13% As of December 31, 2019 16% 14% 15% 90% 19%
24% 14% 14% Value Added 33% 13% 13% 13% 13% 80% 12% 12%
25% 70% 11% 10% Core 14% 12% Opportunistic 74% 13% 14%
60% 11%
50%
40% 81% • The SBCERS Real Estate Investment policy 72% 74% 74% 55% 65% has an allocation range of 40-80% for the Core 58% 62% 65% 63% strategy. The total Core investments is 74% as 30% 60% of December 31, 2019. 20% • The remaining portion of the portfolio is divided between Value Added and Opportunistic investments. Both are within the 10% Policy ranges.
0% 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG's Target Portfolio Core Public Securities Value Added Opportunistic
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Property Type Diversification
100% 2% 2% Property Type Diversification 4% 4% 3% 4% 6% 6% 5% 1% 1% 7% 8% 1% 2% 1% 1% 4% 1% By Market Value 1% 4% 2% 4% 3% 4% 3% 4% 5% As of December 31, 2019 3% 4% 90% 4% 5% 5% 6% 7% 12% 4% 7% 6% 7%
Retail 80% 24% Office 9% 15% 24% 25% Hotel 18% Self 25% 22% 3% Storage 16% 20% 21% 25% 1% 70% Assisted 26% Living 2% 60%
29% 23% 21% 25% 24% 29% 34% Apartments 50% 27% 24% 28% 17% 26% Industrial 34% 40% Other 13% 2% 14% 16% 14% 10% 15% • Consistent with the SBCERS Real Estate 30% 9% 14% 11% Investment Policy, Office, Retail, Industrial and 13%
Apartments property types are within their 20% 25% range. 38% 30% 31% 25% 26% 25% 24% 22% 23% • Investing in several types of real estate 10% 20% minimizes the risk by diversification.
0% 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG's Target Portfolio
Office Retail Industrial Apartments Hotel Assisted Living Self Storage Other
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Geographic Diversification
100% 1% 1% 1% 3% 2% 1% 3% Geographic Diversification 4% 4% 2% 5% 6% 1% By Market Value 1% 13% 5% 15% 13% As of December 31, 2019 11% 90% 18% 13%
24% 27% 80% 27% 22% 39% 21% 24% 27% 24% 22% 70% 22% 9% 7% 5%
5% 8% 60% 5% 6% 11% 2% 5% 3% 6% 10% 11%
6% 13% 10% 50% 12% 12% 9% 11% 13% 8% 15% 15% 15%
40% 4% 15% 14% 14% 14% 4% 13% 2% 2% 1% 14% 20% 7% 1% 8% 2% 7% 30% 1% 2% 2% 6% 8% 2% 8% 16% 6% 1% 8% 11% 7% 10% 3% 11% • The portfolio is well diversified across the 20% 8% 8% 11% 10% United States with additional diversification in 8% 12% 10%
Europe. 10% 16% 12% 14% 17% 18% 18% 18% 12% 13% • Unspecified U.S. indicates the manager is 8% 9% unable to easily identify the region such as 0% 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG's investments in debt mortgage tranches. Target Northeast Mideast E.N. Central W.N. Central Southeast Portfolio Southwest Mountain Pacific Unspecified US International
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Portfolio Summary
Abacus Multi-Family Fund IV Millennium West End Apartments St. Louis Park, MN
Rubenstein Properties Fund III Parkwood Crossing Office Building Indianapolis, IN
Stockbridge Value Fund II Preston Park Financial Center Plano, TX
For Institutional Investor use only. Proprietary & Confidential. 30
Portfolio Summary by Investments As of December 31, 2019
Vintage Investment Capital Total Total 12/31/2019 Net Equity Private Real Estate Investments Net IRR Year Strategy Committed Contributions Distributions Market Value Multiple Active Funds 2011 Core Prologis Targeted U.S. Logistics Fund, Inc. $15,000,000 $19,589,488 $7,549,722 $43,365,802 16.0% 2.6x Value Added Greenfield Acquisition Partners VI, L.P. 7,500,000 10,039,013 12,580,660 183,042 10.1% 1.3x Opportunistic Blackstone Real Estate Partners VII, L.P. 7,500,000 10,320,891 12,632,136 3,706,124 16.6% 1.7x 2012 Core Harrison Street Core Property, L.P. 10,000,000 15,084,562 5,173,765 18,398,667 9.0% 1.6x Stockbridge Smart Markets Fund, L.P. 20,000,000 29,172,454 9,172,454 40,896,707 10.3% 1.7x Value Added Miller Global Real Estate Fund VII, LLC 7,500,000 9,820,985 11,711,305 351,151 14.5% 1.3x Opportunistic Walton Street Fund VII, L.P. 10,000,000 9,141,673 9,759,361 3,062,599 11.5% 1.5x 2013 Core Invesco U.S. Income Fund, L.P. 20,000,000 28,364,265 8,802,439 36,467,928 11.7% 1.7x Mesa West Core Lending Fund, L.P. 10,000,000 14,288,791 4,479,537 14,293,010 6.7% 1.3x Mesa West Real Estate Income Fund III, L.P. 10,000,000 7,575,674 9,341,129 501,734 8.9% 1.3x Value Added Greenfield Acquisition Partners VII, L.P. 10,000,000 11,301,493 9,939,550 7,262,839 13.7% 1.5x Opportunistic Lubert-Adler Fund VII, L.P. 12,500,000 11,922,096 5,811,120 10,400,932 6.5% 1.3x 2014 Core Abacus Core Income Fund I, L.P. 10,000,000 8,913,368 2,548,734 10,855,699 10.4% 1.6x Prologis Targeted Europe Logistics Fund * 5,000,000 5,333,279 1,429,726 7,062,065 10.1% 1.6x Value Added Abacus Multi-Family Partners III, L.P. 7,500,000 8,119,851 11,950,260 458,445 26.1% 1.8x Stockbridge Value Fund II, L.P. 7,500,000 6,978,568 7,747,054 2,740,268 14.0% 1.4x Opportunistic Moorfield Real Estate Fund III, L.P. + 4,685,400 4,115,433 1,679,158 3,071,547 22.3% 1.6x 2015 Core Mesa West Real Estate Income Fund IV, L.P. 10,000,000 5,550,971 492,872 5,617,192 7.2% 1.1x Opportunistic Patron Capital, L.P. V * 5,457,000 3,315,770 1,189,006 2,807,995 13.4% 1.3x 2016 Value Added Lubert-Adler Fund VII-B, L.P. 10,000,000 6,750,000 233,464 7,818,689 11.4% 1.2x Opportunistic Rubenstein Properties III, L.P. 5,000,000 4,165,501 0 4,173,219 0.1% 1.0x 2017 Core Blackstone Property Partners 30,000,000 31,109,547 1,109,547 33,704,769 8.0% 1.1x Value Added Abacus Multi-Family Partners IV, L.P. 15,000,000 7,176,504 1,262,355 6,978,294 17.6% 1.2x Miller Global Real Estate Fund VIII, LLC 5,000,000 4,084,575 3,204,722 1,820,817 6.1% 1.1x Stockbridge Value Fund III, L.P. 10,000,000 6,379,147 138,719 6,245,264 0.1% 1.0x Opportunistic Walton Street Fund VIII, L.P. 10,000,000 8,022,484 2,886,574 6,554,310 11.6% 1.2x 2018 Core Walton Street Real Estate Debt Fund II, L.P. 10,000,000 500,000 27,957 505,680 14.3% 1.1x Value Added Longpoint Realty Fund I, L.P. 15,500,000 7,750,000 1,271,485 7,421,101 24.4% 1.1x Opportunistic Blackstone Real Estate Partners IX, L.P. 4,500,000 778,143 17,273 759,398 n/a n/a 2019 Value Added ABR Chesapeake Investors VI LP 10,000,000 500,000 0 500,000 n/a n/a Citymark Capital U.S. Apartment Fund II, L.P. 10,000,000 0 0 0 n/a n/a High Street Real Estate Fund VI, L.P. 15,000,000 0 0 0 n/a n/a Opportunistic Alcion Real Estate Partners Fund IV, L.P. 10,000,000 0 0 0 n/a n/a Private Real Estate Active Funds Total $350,142,400 $296,164,527 $144,142,084 $287,985,288 Inactive Funds 2009 Opportunistic Rockw ood Capital Real Estate Partners VIII, L.P. $10,000,000 $8,113,417 $15,044,705 $31,230 19.0% 1.9x 2010 Core H/2 Credit Partners, L.P. 10,000,000 10,000,000 0 1,530,458 5.0% 1.5x Private Real Estate Inactive Funds Total $20,000,000 $18,113,417 $15,044,705 $1,561,688 Grand Total $370,142,400 $314,277,944 $159,186,788 $289,546,975 8.8% 1.4x
* Euro to US Dollar exchange rate as of 12/31/2019: 1.1227 nm: Not Meaningful For Institutional Investor use only. Proprietary & Confidential. 31 + GBP to US Dollar exchange rate as of 12/31/2019: 1.3269
Detailed Portfolio Summary for the Period Ending December 31, 2019
Blackstone Real Estate Partners VII Greenfield Acquisition Partners VII The Cosmopolitan TriWest Plaza Las Vegas, NV Dallas, TX
Abacus Multi-Family Fund IV Sage Palmer Ranch Sarasota, FL
For Institutional Investor use only. Proprietary & Confidential. 32
Santa Barbara County Employees’ Retirement System Executive Summary
Investment Returns—Time Weighted, Gross of Fees Investment Returns—Time Weighted, Net of Fees
SBCERS NFI ODCE, Gross SBCERS NFI ODCE, Net SBCERS Benchmark Total Portfolio
Since Inception
12.6%
10.6% 12.4%
Date: 1-1-2006 10.3% 10.7%
Gross IRR: 9.9% 8.7%
8.0% 9.0%
8.7%
7.1%
6.9%
6.7% 6.6%
Net IRR: 8.8% 6.5%
6.1%
7.1%
5.8%
6.8%
5.3%
4.4%
2.8%
2.3%
1.5%
1.3% 1.2%
QTR 1 YEAR 3 YEARS 5 YEARS SINCE QTR 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION INCEPTION
Note: SBCERS Benchmark is a real rate of return (adjusted for inflation) of 4.5%, Financial Highlights Percent of net of investment management fees. at December 31, 2019 Market Value Fund Portfolio Market Value $289,546,975 8.7% ORG Portfolio Management Contact: Private $289,546,975 Edward Schwartz Phone: 216-910-9080 Public $0 Partner Current Unfunded Commitments $126,062,964 3733 Park East Dr. Suite 210 Total Market Value and Cleveland, OH 44122 Unfunded Commitments $415,609,939 12.5%
Total Fund Market Value $3,319,160,292 E-Mail: [email protected] Total Allocation to Real Estate $331,916,029 10.0%
Total Loan-to-Value Ratio 41.9%
For Institutional Investor use only. Proprietary & Confidential. 33
Santa Barbara County Employees’ Retirement System Executive Summary
Investment Policy Compliance Property Type Diversification by Market Values
Compliance Reference Page Retail Level Office 9% 25% Hotel Portfolio Diversification Page 56 Self ✓ 3% Storage 1% Property Type Diversification ✓ Page 57 Assisted Living Geographic Diversification ✓ Page 58 2% Investment Manager ✓ Page 59 Diversification Apartments Vintage Year Diversification ✓ Page 60 24% *OTHER: Total Portfolio Leverage Page 61 Industrial Mixed Use: 0.2% ✓ 34% Residential: 1.3% Other Mortgages: 0.1% Investment Size Limitation ✓ Page 62 2% Common Stock: 0.3% Investment Portfolio Commentary Geographic Diversification by Market Values • The portfolio continues to perform well with performance exceeding the benchmarks while maintaining low risks. • Property type and location diversification remain consistent with policy.
NOTE: Unspecified U.S. indicates the manager is unable to easily identify the region such as investments in debt tranches.
For Institutional Investor use only. Proprietary & Confidential. 34
Portfolio Summary, Gross of Fees For the Period Ended 12/31/2019
Time Weighted Returns - Gross of Fees Percent Remaining of Real Invested Capital to be Leverage Since Portfolio Investments Market Value Estate Amount Called Ratio Qtr. 1 Year 3 Years 5 Years Incept. Core Funds Abacus Core I $10,855,699 $8,807,059 $1,192,941 46.5% -2.9% 6.7% 9.5% 12.5% 12.5% Blackstone Property Partners 33,704,769 30,000,000 0 47.0% 3.1% 9.3% 9.5% H/2 Credit Partners 1,530,458 1,530,458 8,469,542 7.1% Harrison St. Core Property 18,398,667 10,000,000 0 26.6% 2.6% 7.9% 9.1% 9.6% 9.7% Invesco US Income 36,467,928 20,000,000 0 34.4% 2.3% 8.9% 11.5% 13.2% 12.4% Mesa West Core Lending 14,293,010 10,000,000 0 58.5% 1.6% 7.4% 7.6% 7.8% 8.0% Mesa West Fund III 501,734 8,000,000 2,000,000 100.0% 0.3% 4.2% 10.7% 11.3% 11.6% Mesa West Fund IV 5,617,192 5,500,000 4,500,000 59.4% 2.9% 12.4% 14.5% Prologis Europe Logistics + 7,062,065 5,000,000 0 19.7% 8.2% 13.9% 19.2% 13.6% 12.6% Prologis US Logistics 43,365,802 15,000,000 0 16.2% 4.9% 19.5% 20.7% 19.2% 18.4% Stockbridge Smart Mkts. 40,896,707 20,000,000 0 22.6% 1.9% 8.1% 8.1% 9.6% 11.3% Walton St. Debt II 505,680 472,068 9,527,932 59.5% 3.3% 9.3% Total Core $213,199,711 73.6% $134,309,585 $25,690,415 35.9% 2.6% 10.1% 11.4% 11.9% 7.3% Value Added Funds ABR Chesapeake VI 500,000 500,000 9,500,000 55.7% Abacus Multi-Family III 458,445 6,979,636 520,364 32.2% -2.6% 18.5% 29.2% 37.9% Abacus Multi-Family IV 6,978,294 6,731,839 8,268,161 55.9% -1.4% 23.8% 64.6% Abacus Multi-Family V*** 0 0 10,000,000 Citymark Capital U.S Apartment II*** 0 0 10,000,000 Greenfield Acq. Prtnrs. VI 183,042 7,194,872 305,128 87.0% -37.4% -51.3% -30.1% -16.4% -4.1% Greenfield Acq. Prtnrs. VII 7,262,839 8,556,885 1,443,115 38.0% 9.0% 21.9% 18.4% 18.8% 19.0% High Street VI*** 0 0 15,000,000 Longpoint I 7,421,101 7,280,990 8,219,010 44.0% 3.4% 38.7% Miller Global VII 351,151 6,006,795 1,493,205 76.3% -7.1% -26.3% 3.1% 9.9% 13.0% Miller Global VIII 1,820,817 3,854,641 1,145,359 48.7% 5.8% 7.5% 9.3% Rubenstein III 4,173,219 4,132,743 867,257 61.6% 2.2% 1.1% 7.5% Stockbridge Value II 2,740,268 6,882,216 617,784 53.0% 3.9% 14.7% 18.6% 19.0% Stockbridge Value III 6,245,264 6,376,056 3,623,944 60.7% 0.9% 9.5% 3.4% Total Value Added $38,134,440 13.2% $64,496,673 $71,003,327 52.0% 2.8% 17.0% 19.2% 19.6% 14.5% Opportunistic Funds Alcion IV*** 0 0 10,000,000 Blackstone RE Fund VII 3,706,124 6,450,329 1,049,671 58.8% 1.1% 11.9% 11.2% 10.9% 18.0% Blackstone RE Fund IX 759,398 766,100 3,733,900 76.2% -0.4% -0.4% Lubert-Adler VII 10,400,932 11,410,223 1,089,777 66.2% 1.1% 2.9% 9.3% 8.3% 6.2% Lubert-Adler VII-B 7,818,689 6,750,000 3,250,000 62.4% 8.2% 19.9% 13.4% Moorfield III * 3,071,547 4,685,400 0 42.0% 3.8% 2.9% 22.7% 21.5% Patron V* 2,807,995 3,257,907 2,199,093 46.0% 7.1% 11.2% 29.2% 22.0% Rockw ood Fund VIII 31,230 13.3% Walton St. VII 3,062,599 6,817,308 3,182,692 56.1% 0.9% 0.0% 4.6% 8.5% 14.1% Walton St. VIII 6,554,310 5,135,911 4,864,089 59.8% 3.2% 10.7% 15.8% Total Opportunistic 38,212,824 13.2% 45,273,178 29,369,222 59.5% 3.4% 8.4% 12.1% 12.4% 18.1%
Total Portfolio Investments $289,546,975 100.0% $244,079,436 $126,062,964 41.9% 2.8% 10.7% 12.4% 12.6% 8.7% NCREIF ODCE - Gross of Fees 1.5% 5.3% 7.1% 9.0% 6.8% EPRA/NAREIT All Equity REIT Total Return 0.1% 28.7% 10.2% 8.8% 7.5% *-GBP exchange rate as of 12-31-2019 - 1.3269 +-Euro exchange rate as of 12-31-2019 - 1.1227 See Glossary for Index Definitions ***No capital called as of 12/31/2019. For Institutional Investor use only. Proprietary & Confidential. 35
Portfolio Summary, Net of Fees For the Period Ended 12/31/2019
Time Weighted Returns - Net of Fees Manager Current Manager Current Projected Value Net Projected Value Net Equity Equity Since Portfolio Investments Market Value Net IRR Net IRR Multiple Multiple Qtr. 1 Year 3 Years 5 Years Incept. Core Funds Abacus Core I $10,855,699 8.9% 10.4% 1.7x 1.6x -2.1% 6.1% 8.3% 10.4% 10.4% Blackstone Property Partners 33,704,769 * 8.0% * 1.1x 2.3% 7.6% 8.0% H/2 Credit Partners Ltd. 1,530,458 * 5.0% * 1.5x 5.4% Harrison St. Core Property 18,398,667 * 9.0% * 1.6x 2.4% 7.1% 8.2% 8.8% 8.9% Invesco US Income 36,467,928 * 11.7% * 1.7x 2.1% 7.8% 10.4% 12.0% 11.3% Mesa West Core Lending 14,293,010 * 6.7% * 1.3x 1.4% 6.5% 6.8% 6.9% 7.1% Mesa West Fund III 501,734 9.0% 8.9% 1.3x 1.3x 0.3% 3.5% 8.4% 9.0% 6.5% Mesa West Fund IV 5,617,192 14.0% 7.2% 1.1x 1.1x 2.1% 8.2% 7.8% Prologis Europe Logistics + 7,062,065 * 10.1% * 1.6x 7.2% 11.0% 16.0% 10.7% 9.6% Prologis US Logistics 43,365,802 * 16.0% * 2.6x 4.3% 16.8% 17.7% 16.6% 16.0% Stockbridge Smart Mkts. 40,896,707 * 10.3% * 1.7x 1.7% 7.4% 7.5% 9.0% 10.6% Walton St. Debt II 505,680 9.0% 14.3% 1.3x 1.1x 2.5% 7.0% Total Core $213,199,711 * 7.3% * 1.4x 2.3% 8.6% 9.9% 10.4% 6.2% Value Added Funds ABR Chesapeake VI 500,000 12.0% n/a 1.7x n/a Abacus Multi-Family III 458,445 27.1% 26.1% 1.7x 1.8x -2.5% 12.8% 21.4% 3.0% Abacus Multi-Family IV 6,978,294 12.8% 17.6% 1.6x 1.2x -1.7% 15.0% 32.9% Abacus Multi-Family V# 0 Citymark Capital U.S Apartment II# 0 Greenfield Acq. Ptrnrs. VI 183,042 10.5% 10.1% 1.4x 1.3x -32.0% -47.2% -27.6% -15.3% -4.8% Greenfield Acq. Ptrnrs. VII 7,262,839 14.1% 13.7% 2.0x 1.5x 6.9% 16.5% 14.1% 14.3% 13.9% High Street VI# 0 Longpoint I 7,421,101 15.0% 24.4% 2.0x 1.1x 1.9% 26.5% Miller Global VII 351,151 14.9% 14.5% 1.4x 1.3x -5.4% -20.6% -7.5% -0.3% 3.3% Miller Global VIII 1,820,817 8.7% 6.1% 1.3x 1.1x 5.0% 4.0% 3.4% Rubenstein III 4,173,219 10.0% 0.1% 1.7x 1.0x 1.8% -1.0% -0.6% Stockbridge Value II 2,740,268 14.6% 14.0% 1.5x 1.4x 3.0% 11.5% 14.8% 13.7% Stockbridge Value III 6,245,264 19.9% 0.1% 0.9x 1.0x 0.2% 5.7% -1.9% Total Value Added 38,134,440 14.9% 1.4x 1.9% 11.4% 13.0% 13.6% 9.2% Opportunistic Alcion IV# 0 Blackstone VII 3,706,124 16.3% 16.6% 1.8x 1.7x 0.8% 10.7% 10.0% 9.7% 16.0% Blackstone IX 759,398 0.0% n/a 1.7x n/a -0.4% -0.4% Lubert-Adler VII 10,400,932 9.5% 6.5% 1.6x 1.3x 0.9% 2.0% 8.4% 5.9% -1.0% Lubert-Adler VII-B 7,818,689 18.0% 11.4% 1.9x 1.2x 5.3% 14.4% 11.0% Moorfield III ** 3,071,547 19.0% 22.3% 1.6x 1.6x 3.7% 2.5% 21.8% 20.3% Patron V 2,807,995 13.0% 13.4% 1.4x 1.3x 7.1% 7.1% 19.9% 6.2% Rockw ood Fund VIII 31,230 19.1% 19.0% 1.6x 1.9x 7.2% Walton St. VII 3,062,599 12.0% 11.5% 1.5x 1.5x 0.3% -2.2% 2.6% 6.6% 12.1% Walton St. VIII 6,554,310 14.0% 11.6% 1.5x 1.2x 2.8% 9.0% 13.4% Total Opportunistic 38,212,824 13.9% 1.5x 2.7% 6.3% 10.3% 10.4% 12.5%
Total Portfolio Investments $289,546,975 8.8% 1.4x 2.3% 8.7% 10.3% 10.6% 7.1% Total Net of ORG Fees 2.3% 8.6% 10.3% 10.5% SBCERS Benchmark 1.2% 6.9% 6.7% 6.5% 6.6% NCREIF ODCE Index - Net of Fees 1.3% 4.4% 6.1% 8.0% 5.8% NOTES: nm-Not meaningful # - No capital calls as of 12-31-2019 **-GBP exchange rate as of 12-31-2019 -1.3269 +-Euro exchange rate as of 12-31-2019 -1.1227 See Glossary for Index Definitions * - Open ended funds do not provide IRR or Equity Multiple data For Institutional Investor use only. Proprietary & Confidential. 36
Portfolio Summary, Distribution Yield For the Period Ended 12/31/2019
Distribution Yield—Core Funds Only SBCERS Current Portfolio-Based on Market Value
Distribution Yield Portfolio Investments Qtr. 1 Year Core Funds Abacus Core I 0.8% 3.7% Blackstone Property Partners 0.4% 1.8% Harrison Street Core 1.3% 5.0% Invesco US Income 1.3% 5.3% Mesa West Core Lending 1.3% 6.4% Mesa West Fund III 26.5% 29.5% Mesa West Fund IV 1.4% 5.8% Prologis US Logistics 0.7% 3.5% Prologis Europe Logistics 0.9% 4.3% Stockbridge Smart Markets 1.0% 4.2% Walton Street Debt II 0.0% 0.0% Total Core 1.0% 3.9%
Total Open End Funds/Investments 1.0% 3.9%
For Institutional Investor use only. Proprietary & Confidential. 37
Portfolio Cash Flows Summary For the Period Ended 12/31/2019
Portfolio Cash Flows Return of Return of Period Capital Operating Capital Capital Net Investments Ending Contributions Contributions (Temporary) (Permanent) Income Distributions Appreciation Market Value 2006 $42,184,771 $0 $0 $0 $1,871,724 ($4,417,748) $3,075,051 $42,713,798 2007 4,086,337 2,225,620 (2,427,596) 3,890,806 50,488,965 2008 4,734,386 2,108,439 (4,093,031) (9,489,764) 43,748,995 2009 4,356,984 2,053,150 (1,374,884) (15,384,842) 33,399,403 2010 18,773,803 (521,748) 2,391,605 (2,390,499) 5,636,060 57,288,624 2011 27,931,807 23,311 (1,037,506) (39,781,153) 1,225,424 (959,538) 2,588,270 47,279,239 2012 54,276,203 97,253 (4,209,254) (2,133,163) 2,600,909 (1,890,510) 6,506,565 102,527,242 2013 29,194,174 197,389 (3,151,978) (8,665,590) 3,994,179 (5,367,606) 8,183,268 126,911,078 2014 53,741,963 643,052 (1,805,721) (3,890,052) 5,795,686 (7,793,644) 14,208,696 187,811,058 2015 28,155,052 579,733 (4,542,776) (10,821,692) 8,708,663 (14,087,633) 14,084,085 209,869,392 2016 27,583,760 678,820 (2,823,237) (7,271,366) 10,270,678 (12,284,756) 11,531,295 237,554,586 2017 30,399,695 1,152,660 (2,466,319) (44,032,113) 10,977,757 (12,392,728) 17,493,838 238,614,136 2018 37,862,416 1,058,539 (4,059,778) (16,052,046) 9,513,447 (14,114,886) 16,119,688 268,941,517 Q1 2019 6,081,859 318,028 (262,639) (2,749,008) 1,482,039 (3,420,224) 2,674,123 273,065,695 Q2 2019 17,693,487 236,131 (1,165,846) (2,875,953) 2,025,175 (3,670,441) 5,125,272 290,433,520 Q3 2019 8,582,840 1,128,909 (332,248) (3,082,148) 2,187,746 (7,856,267) 3,487,290 294,549,642 Q4 2019 9,900,390 319,303 (1,302,823) (11,007,445) 2,015,909 (9,548,299) 4,620,298 289,546,975 Total for 2019 42,258,576 2,002,372 (3,063,556) (19,714,554) 7,710,870 (24,495,232) 15,906,983 289,546,975 Total Cash Flows $405,539,927 $6,433,129 ($27,160,124) ($152,883,476) $71,448,150 ($108,090,292) $94,349,999 $289,546,975
*Note: Totals prior to 2015 include CBRE Value 5. Starting in Q1 2015 the liquidated fund was removed.
For Institutional Investor use only. Proprietary & Confidential. 38
Investments Cash Flows Summary For the Period Ended 12/31/2019
Quarterly Investment Cash Flows Return of Return of Beginning Capital Operating Capital Capital Net Ending Investment Market Value Contributions Contributions (Temporary) (Permanent) Income Distributions Appreciation Market Value Core Funds Abacus Core I $11,175,073 $0 $0 $0 $0 $110,724 ($87,059) ($343,039) $10,855,699 Blackstone Property Partners 32,941,636 146,785 - - - 35,333 (146,785) 727,800 33,704,769 H/2 Credit Partners 15,304,581 - - - (8,469,542) - (5,304,581) - 1,530,458 Harrison St. Core Prop. 17,990,417 178,383 34,497 - - 197,818 (232,101) 229,653 18,398,667 Invesco US Income 35,722,205 382,986 92,319 - - 387,659 (459,543) 342,302 36,467,928 Mesa West Core Lending 14,053,945 230,593 - - - 199,292 (190,746) (74) 14,293,010 Mesa West Fund III 826,868 - - (194,034) - 1,662 (132,898) 136 501,734 Mesa West Fund IV 4,595,893 1,000,000 - - - 102,833 (76,041) (5,493) 5,617,192 Prologis Europe Logistics 6,621,770 28,940 - - - 73,645 (65,105) 402,815 7,062,065 Prologis US Logistics 41,877,808 - - - - 434,578 (299,136) 1,352,553 43,365,802 Stockbridge Smart Mkts. 40,200,115 412,750 - - - 412,750 (412,750) 283,842 40,896,707 Walton St. Debt II 494,845 - - - (1,377) 12,237 (25) - 505,680 Total Core $221,805,156 $2,380,437 $126,816 ($194,034) ($8,470,919) $1,968,531 ($7,406,771) $2,990,495 $213,199,711 Value Added Funds ABR Chesapeake VI 0 500,000 - - - (21,398) - 21,398 500,000 Abacus Multi-Family III 1,013,450 - 134,259 - - (55,632) (671,296) 37,664 458,445 Abacus Multi-Family IV 5,488,564 1,668,325 - - - (40,932) (62,928) (74,735) 6,978,294 Greenfield Acq. Prtnrs. VI 366,083 - - - (41,689) (13,008) (41,370) (86,974) 183,042 Greenfield Acq. Prtnrs. VII 6,867,084 - - - (37,344) (6,044) (41,098) 480,241 7,262,839 Longpoint Realty I 5,802,349 1,550,000 - - - 32,493 (55,282) 91,541 7,421,101 Miller Global VII 377,256 - - - - (6,488) (6,022) (13,595) 351,151 Miller Global VIII 2,818,584 84,375 - - (962,815) (32,514) (261,308) 174,495 1,820,817 Rubenstein III 4,097,924 - - - - (23,829) - 99,124 4,173,219 Stockbridge Value II 4,286,231 - - - (1,004,231) 47,012 (647,110) 58,366 2,740,268 Stockbridge Value III 3,754,863 2,500,000 - - - 15,877 (16,769) (8,707) 6,245,264 Total Value Added $34,872,388 $6,302,700 $134,259 $0 ($2,046,079) ($104,463) ($1,803,183) $778,818 $38,134,440 Opportunistic Blackstone RE Fund VII 4,130,708 - 10,681 - (206,198) 24,715 (262,723) 8,942 3,706,124 Blackstone RE Fund IX 306,881 463,356 - (12,043) - (25,877) (5,230) 32,310 759,398 Lubert-Adler VII 10,309,003 - - - - (6,055) - 97,984 10,400,932 Lubert-Adler VII-B 7,423,090 - - - - 56,989 - 338,611 7,818,689 Moorfield III 2,961,278 - - - - 77,613 - 32,656 3,071,547 Patron V 2,299,880 357,850 - - (20,908) (33,436) - 204,610 2,807,995 Rockwood Fund VIII 33,636 - - - - (297) - (2,109) 31,230 Walton Street VII 3,366,899 - 20,798 - (263,342) 36,776 (70,392) (28,140) 3,062,599 Walton Street VIII 7,040,724 396,047 26,749 (1,096,746) - 21,414 - 166,122 6,554,310 Total Opportunistic $37,872,098 $1,217,253 $58,228 ($1,108,789) ($490,448) $151,841 ($338,345) $850,986 $38,212,824
Total Portfolio $294,549,642 $9,900,390 $319,303 ($1,302,823) ($11,007,445) $2,015,909 ($9,548,299) $4,620,298 $289,546,975
For Institutional Investor use only. Proprietary & Confidential. 39
Management Fee Savings For the Period Ended 12/31/2019
Management Fee Savings
One Time Annual ORG Selected Investments Savings Savings Comments Core Funds Abacus Core I $25,000 $0 Three month fee break. Blackstone Property Partners H/2 Credit Partners Harrison Street Core 30,000 30% reduction in fees over life of investment. Invesco US Income 40,000 20% reduction in fees over life of investment. Mesa West Core Lending 30,000 Founding investor fee of 0.75% on investeed capital for initial 2 years and 0.80% on invested capital thereafter. Standard fee is 1.10% on invested capital. Mesa West Fund III 15,000 Reduced management fees by 0.15% over life of investment. Savings of $15,000 per year during investmet period and up to $10,000 per year afterwards. Mesa West Fund IV 15,000 Reduced management fees by 0.15% over life of investment. Savings of $15,000 per year during investmet period and up to $10,000 per year afterwards. Prologis US Logistics Prologis Europe Logistics Stockbridge Smart Markets 80,000 40% reduction in fees over life of investment. Walton Street Debt II 306,025 No fees on commitment equals a savings of $270,000 and .25 basis point discount for 3 years equals a savings of $36,096. Total Core $331,025 $210,000 Value Added Funds 69,300 Fee reduction of 0.37% of committed capital and invested ABR Chesapeake VI capital. Abacus Multi-Family III Abacus Multi-Family IV 37,500 First close investors will pay no management fees for the Abacus Multi-Family V first 3 months. Greenfield Acquisition Partners VI 18,750 Founding investor fee reduction for first year of 0.25% of committed capital. Greenfield Acquisition Partners VII 18,750 Founding investor fee reduction for first year of 0.25% of committed capital. High Street VI Longpoint Realty Fund I 77,500 Fee reduction of 0.50% of committed capital and invested capital. Miller Global VII Miller Global VIII Rubenstein III Stockbridge Value II Stockbridge Value III 35,000 Reduced management fees annually by 0.35% over life of investment. Total Value Added $144,300 $112,500 For Institutional Investor use only. Proprietary & Confidential. 40
Management Fee Savings For the Period Ended 12/31/2019
Management Fee Savings—Continued One Time Annual ORG Selected Investments Savings Savings Comments Opportunistic Funds Alcion IV Blackstone RE Fund VII 17,500 Three month fee break. Blackstone RE Fund IX 50,000 Four month fee break. Lubert-Adler VII 56,250 Reduced management fees by 0.25% during 3 year commitment period. Lubert-Adler VII-B 225,000 No fees on commitment for 18 months. Moorfield III 37,500 50% reduction in fees over life of investment. Patron V 96,200 Founding investor fee break and will not pay fees for the first year (€87,500 with an exchange rate of 1.0994 as of 5/31/2015) Walton Street VII 40,000 One time fee savings. Walton Street VIII Total Opportunistic $484,950 $37,500
Total Portfolio $960,275 $360,000
For Institutional Investor use only. Proprietary & Confidential. 41
Market Overview For the Period Ended 12/31/2019
During the fourth quarter of 2019, U.S. Real GDP grew by 2.1% which was on NFI-ODCE Quarterly Returns par with the third quarter 2.1% GDP growth. 4.5% Core real estate returns continue to be increasingly income dependent as 4.0% seen with the NFI-ODCE where the 1.51% gross return for the fourth quarter 3.5% was comprised of 1.04% income return and 0.47% appreciation return. The 3.0% total 5.34% one year gross return, marking the lowest one year gross return since ODCE returned –6.0% in the second quarter of 2010. 2.5% 2.0%
1.5% During the fourth quarter, NFI-ODCE investor net cash flows from contributions, distributions, and redemptions was approximately $2.5 million. 1.0% This was the first quarter of positive net cash flow after four consecutive 0.5% quarters of negative net investor cash flows. Distributions and redemptions 0.0% for the quarter were $4.92 billion, which represents a $751.6 million decrease 1Q15 4Q15 3Q16 2Q17 1Q18 4Q18 3Q19 from last quarter. Gross Income Return Gross Appreciation Return Source: NCREIF U.S. Real GDP: Percent Change From Preceding Net ODCE Flows vs. ODCE Performance Quarter 6.0% $4,000 8.0%
5.0% $3,000 4.0% $2,000 4.0% 0.0% 3.0% $1,000 -4.0% 2.0% millions) $0 -8.0% -$1,000 1.0% -$2,000 -12.0% 0.0% Net ODCE Capital Flows ($ in in ($ Flows Capital ODCE Net -$3,000 -16.0%
-1.0% ODCE Quarterly Gross Total Return Total GrossQuarterly ODCE -2.0% 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 Net Cash Flow Gross Total Return Source: U.S. Bureau of Economic Analysis Source: NCREIF
For Institutional Investor use only. Proprietary & Confidential. 42
Market Overview For the Period Ended 12/31/2019
As of year-end, the debt markets continue to remain more accommodative to industrial and apartment assets. According to the Mortgage Bankers Association, commercial and multifamily mortgage bankers closed a record $600.6 billion of loans in 2019. Commercial bank portfolios were the leading capital source for originated loans in 2019 with $179.8 billion of originations. The government sponsored enterprises (GSEs - Fannie Mae and Freddie Mac) had the second highest volume at $139.1 billion, followed by commercial mortgage-backed securities issuers, life insurance companies and pension funds, and REITS, mortgage REITS and investment funds.
2007 2019 Income Return 5.2%1 4.2%2 Appreciation Return 10.3%1 1.1%2 10 Year Treasury Rate3 4.0% 1.9% Overall 5.0% 4.3% Office 4.7% 4.1% Cap Rates4 Industrial 5.8% 4.4% Retail 5.8% 4.6% Apartments 4.4% 4.2% Cap Rate Spread over Treasuries 190 basis points 230 basis points LTV: Commercial Loans5 70-75% 62% DSCR: Debt Service Coverage Ratio5 1.3x 1.9x Debt Originations6 $510 Billion $600 Billion Office 89% 90% Industrial 93% 97% Occupancy7 Retail 94% 93% Apartments 92% 94% 12007 Net ODCE Returns - 1 year ending 12/31/2007 22019 Net ODCE Returns - 1 year ending 12/31/2019 3Data Provided by Board of Governors of the Federal Reserve System 4Data Provided by NCREIF as of 12/31/2007 and 12/31/2019 5Data Provided by Real Capital Analytics, MSREI Strategy, as of 12/31/2019 6Data Provided by Mortgage Bankers Association, as of 12/31/2019
For Institutional Investor use only. Proprietary & Confidential. 43
Market Overview - Multi-Family For the Period Ended 12/31/2019
Apartment demand has continued as the unemployment rate for December 2019 was 3.5% as compared to 3.9% at the same point in 2018. The labor force participation rate was 63.2% increasing slightly from 63.0% over the same twelve-month period. (U.S. Bureau of Labor Statistics) The increases in employment levels are generally accretive to the apartments sector as it increases the number of people who can afford apartments. While job growth saw an increase, the U.S. homeownership rate stayed relatively flat at 64.9% from 64.6% in December 2018. (U.S. Census Bureau) While this level is below the historical average of 65.6%, the homeownership rate has increased significantly since the low point of 63.7% in 2015. All else being the same, increasing levels of homeownership decreases multifamily demand and poses a threat to the sector. As a result, ORG focuses on multifamily assets with price points that are significantly more attractive than comparable housing alternatives.
Rental growth for the fourth quarter was –0.1% which was lower than the 0.7% figure reported for 3Q 2019 but slightly higher than the –0.2% figure reported for 4Q 2018. This was the fourth consecutive fourth quarter to generate negative rent growth. (CoStar)
A significant demand driver for multifamily this cycle has been the large amount of student loans that are delaying many Americans from purchasing homes. The amount of student loans outstanding was $480 billion as of 4Q 2005. As of 4Q 2019, the figure is now $1.64 trillion. (Board of Directors of the Federal Re- serve System) ORG believes student loan debt will continue to delay homeownership and support multifamily demand into the near-term future. U.S. homeownership has been below the long term average since the Great Recession in 2008/2009.
U.S. Homeownership 70% 69% 68% 67% 66% 65% 64% 63% 62% 61% 60%
U.S. Howeownership Rate Long Term Average
Source: U.S. Census Bureau
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Market Overview - Multi-Family For the Period Ended 12/31/2019
Vacancy and Market Rent Multi-Family Supply and Demand $1,450 8.0% 400 350 7.5% $1,350 300 7.0% 250 $1,250 200 6.5%
$1,150 150 Vacancy 6.0% 100
$1,050 5.5% Thousands)(in Units 50 Family Market Rent ($/Unit) Rent Market Family
- 0
$950 5.0%
Multi
1Q04
4Q04
3Q05
2Q06
1Q07
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
1Q19 4Q19 Market Rent Vacancy 15-Year Historical Vacancy 12 Mo. Supply 12 Mo. Demand 15-Year Average Demand Source: Costar Source: Costar U.S. Multi-Family Transaction Volumes $250
$200 Billions
$150
$100
$50
$-
Garden Style Transaction Volume Mid/Highrise Transaction Volume
Source: Real Capital Analytics
For Institutional Investor use only. Proprietary & Confidential. 45
Market Overview - Industrial For the Period Ended 12/31/2019
The U.S. industrial market continues its strong run as the integration between retail and industrial continues and e-commerce rises. As e-commerce continues to grow and increase its market share, much of the value that was once placed on traditional retail has been transferred to industrial assets. In order to stay competitive retailers must continue to adapt and modernize their supply chains in accordance. E-commerce retail sales as a percentage of total retail sales continues to climb as the figure reached 11.4% during 4Q 2019. (U.S. Census Bureau)
Third quarter transaction activity for industrial increased to $36.4 billion representing a 12% increase from 4Q 2018, according to Real Capital Analytics.
ORG is monitoring the ongoing tension between the U.S. and many of its trading partners in the so-called “Trade War” as 2019 U.S. imported goods decreased 1.7% to $2.52 trillion (U.S. Census Bureau). A global trade war could significantly impair industrial real estate, especially distribution centers located near large ports. The chart below of a sample supply chain provided by Green Street Advisors highlights industrial real estate’s key roles in both e-commerce as well as in-store retail and its reliance on both global and domestic trade.
For Institutional Investor use only. Proprietary & Confidential. 46
Market Overview - Industrial For the Period Ended 12/31/2019
Vacancy and Market Rent Million SF Industrial Supply and Demand $9.00 11.0% 400 10.0% 300 $8.00 9.0% 200 8.0% $7.00
7.0% 100 Vacancy 0 $6.00 6.0% 1Q04 3Q05 1Q07 3Q08 1Q10 3Q11 1Q13 3Q14 1Q16 3Q17 1Q19
5.0% -100 Inustrial Market Rent ($/SF) RentMarket Inustrial $5.00 4.0% -200
-300 Market Rent Vacancy 15-Year Average Vacancy 12 Mo. Supply 12 Mo. Demand 15-Year Average Demand Source: Costar Source: Costar
U.S. Industrial Transaction Volumes $120
$100 Billions $80
$60
$40
$20
$-
2002 2004 2006 2011 2013 2015 2017 2001 2003 2005 2007 2008 2009 2010 2012 2014 2016 2018 2019 Flex Industrial Transaction Volume Warehouse Transaction Volume
Source: Real Capital Analytics
For Institutional Investor use only. Proprietary & Confidential. 47
Market Overview - Office For the Period Ended 12/31/2019
The office market continues to show strength but there has been signs that indicate the momentum is starting to shift. For example, leasing over the past couple of years has been driven by large technology companies and the emergence of coworking as a significant source of demand. Since the beginning of 2017, 22% of net absorption was attributable to either coworking or the 15 largest tech firms. Coworking in particular has seen more than a third of the exposure in the gateway markets. The coworking net absorption continues to increase but still remains under 2% of the overall office occupancy (CoStar). ORG continues to monitor the impact of coworking and minimize client exposure due to the inherent risks of mismatched asset and liability terms and durations.
The U.S. Unemployment rate hit a low of 3.5% as of December 2019. This is the lowest reported figure since December of 1969 and highlights significant demand for office space. (U.S. Bureau of Labor Statistics) Vacancy rates continue to remain at record lows with the current vacancy rate at 9.8% compared to the 13-year historical average 11.2%. Market rents continue to increase and ended the quarter at $34.23 per square foot compared to the 13-year historical av- erage of $28.50 per square foot. (CoStar)
The national office transaction volume continues to decrease since the previous high at $43.3 million in the fourth quarter of 2015. The current quarter transaction volume was $41.7 billion, marking a decreased of 2% compared to the same quarter a year ago. Suburban transactions continue to outpace urban with an approximately 64% / 36% split during the fourth quarter. (Real Capital Analytics)
U.S. Unemployment 12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Jul-12 Jul-69
Oct-01 Oct-58 Apr-80
Jan-48 Jun-87 Jan-91
Mar-55 Mar-98
Feb-73 Feb-16
Dec-65 Sep-76 Nov-83 Aug-94 Sep-19 Aug-51 Dec-08
May-62 May-05 Unemployment Rate Historical Average Source: U.S. Bureau of Labor Statistics
For Institutional Investor use only. Proprietary & Confidential. 48
Market Overview - Office For the Period Ended 12/31/2019
Vacancy and Market Rent Million SF Office Supply and Demand $38.00 14.0% 140 120 12.0% $34.00 100 80 10.0% $30.00 60 40
8.0% Vacancy 20 $26.00 6.0% 0
Office Market Rent ($/SF)Rent Market Office -201Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19 $22.00 4.0% -40 1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19 -60 Market Rent Vacancy 13-Year Average Vacancy 12 Mo. Supply 12 Mo. Demand 13-Year Average Demand Source: Costar Source: Costar
U.S. Office Transaction Volumes $250
$200 Billions
$150
$100
$50
$-
2002 2004 2006 2011 2013 2015 2017 2001 2003 2005 2007 2008 2009 2010 2012 2014 2016 2018 2019 CBD Transaction Volume Suburban Transaction Volume
Source: Real Capital Analytics
For Institutional Investor use only. Proprietary & Confidential. 49
Market Overview - Retail For the Period Ended 12/31/2019
Fourth quarter U.S. retail sales increased by 0.4% compared to the third quarter and 3.8% compared 4Q 2018. (U.S. Census Bureau)
Retail store closures and bankruptcies continue to plague the sector. During the quarter, Destination Maternity, the world’s largest retailer for maternity wear filed for bankruptcies, adding so a list of 2019 retail bankruptcies that includes Forever 21 and Barneys New York. (CNBC) Department stores sales volume con- tinue their decline with 4Q 2019 posting a –5.1% year-over-year decrease. (U.S. Census Bureau) ORG has taken many calculated steps to limit client exposure to retail that competes directly with e-commerce and as a result has avoided malls.
Despite deteriorating fundamentals, CoStar reports that retail vacancies remained at 4.5% during the fourth quarter.
Quarterly Department Store Sales Quarterly E-Commerce Sales $70 $180 12%
$60 $150 10% Billions $50 $120 8% $40 $90 6% -42.3% Decrease since 1Q 2000 $60 4%
$30 Sales Commerce - $20 ($Billions) $30 2% $10 $- 0%
$- E Quarterly
E-Commerce Sales E-Commerce as a % of Total Retail Sales
Source: U.S. Census Bureau Source: U.S. Census Bureau
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Market Overview - Retail For the Period Ended 12/31/2019
Vacancy and Market Rent Million SF Retail Supply and Demand $22.00 8.0% 250
$21.00 7.0% 200
$20.00 150 6.0% $19.00 Vacancy 100 5.0% $18.00
50 Retail Market Rent ($/SF) Rent MarketRetail $17.00 4.0% 1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19 0 1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19 Market Rent Vacancy 13-Year Average Vacancy 12 Mo. Supply 12 Mo. Demand 13-Year Average Demand Source: Costar Source: Costar
U.S. Retail Transaction Volumes $200 $180 $160 Billions $140 $120 $100 $80 $60 $40 $20
$-
2002 2004 2006 2011 2013 2015 2017 2001 2003 2005 2007 2008 2009 2010 2012 2014 2016 2018 2019 Shop Transaction Volume Center Transaction Volume
Source: Real Capital Analytics
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Portfolio Composition by Market Values For the Period Ended 12/31/2019
Property Type Diversification—Compared to Indexes
SBCERS Current Portfolio SBCERS—US Only Compared to Indexes
Retail 40% Office 9% 35% 34% 25% Hotel Self 3% 34% Storage 30% 1% 26% Assisted 25% 25% Living 24% 20% 2% 20% 16% 15%
10% Apartments 9% 24% 5% 4%
Industrial 0.2%3% 1% 2% 2% 0% 34% Office Retail Apartments Industrial Hotel Self Storage Assisted Other Other Living 2% NFI ODCE SBCERS
Other Diversification—2% Comments Residential: 1.3% Mixed Use: 0.2% • The portfolio is well diversified by property type. Mortgages: 0.1% Common Stock: 0.3% • Compared to the NCREIF - ODCE, SBCERS’ portfolio is overweighed in the Industrial sector and underweighted in Office and Retail sectors. • ORG expects to maintain overweight to industrial and underweight to retail and office due to sector outlooks. • ORG is considering increasing apartment exposure due to relative attractions of the sector.
For Institutional Investor use only. Proprietary & Confidential. 52
Investments Property Type Diversification by Percent For the Period Ended 12/31/2019
Property Type Diversification (%)
Investment Apartments Industrial Office Retail Hotel Other
Core Funds Abacus Core I 100% 0% 0% 0% 0% 0% Blackstone Property Partners 27% 26% 38% 9% 0% 0% Harrison St. Core Property 22% 0% 39% 0% 0% 39% Invesco US Income 29% 24% 31% 16% 0% 0% Mesa West Core Lending 32% 0% 63% 3% 2% 0% Mesa West Fund III 100% 0% 0% 0% 0% 0% Mesa West Fund IV 32% 8% 52% 6% 2% 0% Prologis US Logistics 0% 100% 0% 0% 0% 0% Prologis Europe Logistics 0% 100% 0% 0% 0% 0% Stockbridge Smart Mkts. 20% 36% 26% 18% 0% 0% Walton Street Debt II 30% 41% 20% 0% 9% 0% Total Core 23% 40% 25% 8% 0% 4% Value Added Funds ABR Chesapeake VI 0% 100% 0% 0% 0% 0% Abacus III 100% 0% 0% 0% 0% 0% Abacus IV 100% 0% 0% 0% 0% 0% Greenfield Acq. Ptrns. VI 0% 0% 100% 0% 0% 0% Greenfield Acq. Ptrns. VII 4% 36% 14% 0% 5% 41% Longpoint Realty I 0% 69% 0% 31% 0% 0% Miller Global VII 0% 0% 100% 0% 0% 0% Miller Global VIII 0% 0% 79% 0% 21% 0% Rubenstein III 0% 0% 99% 0% 0% 1% Stockbridge Value II 18% 41% 29% 12% 0% 0% Stockbridge Value III 35% 41% 15% 9% 0% 0% Total Value Added 26% 31% 24% 9% 2% 8% Opportunistic Funds Blackstone RE Fund VII 0% 2% 33% 6% 46% 13% Blackstone RE Fund IX 0% 79% 5% 0% 12% 4% Lubert-Adler VII 27% 0% 31% 15% 25% 2% Lubert-Adler VII-B 35% 0% 8% 33% 11% 13% Moorfield III 84% 8% 0% 0% 0% 8% Patron V 0% 0% 16% 7% 13% 64% Rockwood Fund VIII 0% 0% 0% 100% 0% 0% Walton Street VII 0% 3% 47% 19% 19% 12% Walton Street VIII 16% 5% 32% 8% 31% 8% Total Opportunistic 24% 4% 24% 15% 22% 11%
Total Portfolio 24% 34% 25% 9% 3% 5% NFI ODCE 26% 20% 34% 16% 0% 4% For Institutional Investor use only. Proprietary & Confidential. 53
Portfolio Composition by Market Values For the Period Ended 12/31/2019
Geographic Diversification—Compared to Indexes
SBCERS—Current Portfolio SBCERS—US Only to Compare to Indexes
40%
36% 35%
30%
28% 25% 22%
20%
18% 15% 16%
10% 10% 9% 9% 11% 10% 7% 6% 5% 7% 7%
1% 2% 0% Northeast Mideast EN Central WN Central Southeast Southwest Mountain Pacific NFI ODCE SBCERS Unspecified US: 1%
International Diversification—3% Comments
Europe: 0.7% Multiple Countries: 1.5% • The portfolio is well diversified by geographic location. India: 0.2% United Kingdom: 0.8% • The International category should increase as capital is called. Uncalled capital for Patron V is $2.2 million.
For Institutional Investor use only. Proprietary & Confidential. 54
Investments Property Type Diversification by Percent For the Period Ended 12/31/2019
Geographic Diversification (%) East North West North Unspecified Investment Northeast Mideast Central Central Southeast Southwest Mountain Pacific U.S. International
Core Funds Abacus Core I 0% 0% 17% 0% 27% 0% 48% 8% 0% 0% Blackstone Property Partners 28% 2% 1% 0% 5% 4% 2% 45% 0% 13% Harrison St. Core 28% 11% 11% 9% 8% 11% 8% 14% 0% 0% Invesco US Income 8% 12% 2% 0% 18% 20% 15% 25% 0% 0% Mesa West Core Lending 37% 24% 8% 0% 1% 2% 0% 28% 0% 0% Mesa West Fund III 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% Mesa West Fund IV 12% 13% 5% 6% 7% 18% 13% 26% 0% 0% Prologis Targeted Europe 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% Prologis US Logistics 13% 4% 12% 0% 10% 12% 4% 45% 0% 0% Stockbridge Smart Mkts. 4% 22% 4% 0% 20% 10% 0% 40% 0% 0% Walton Street Debt II 10% 0% 0% 0% 11% 39% 20% 20% 0% 0% Total Core 18% 10% 6% 1% 12% 10% 8% 33% 0% 2% Value Added Funds ABR Chesapeake VI 0% 0% 0% 0% 100% 0% 0% 0% 0% 0% Abacus III 0% 0% 0% 1% 1% 80% 1% 17% 0% 0% Abacus IV 9% 11% 5% 11% 12% 15% 4% 33% 0% 0% Greenfield Acq. Ptrns. VI 65% 20% 15% 0% 0% 0% 0% 0% 0% 0% Greenfield Acq. Ptrns. VII 10% 7% 0% 0% 42% 6% 17% 8% 10% 0% Longpoint Realty I 29% 18% 0% 0% 37% 16% 0% 0% 0% 0% Miller Global VII 0% 0% 0% 0% 0% 0% 46% 54% 0% 0% Miller Global VIII 0% 0% 0% 0% 0% 27% 21% 52% 0% 0% Rubenstein III 38% 8% 30% 0% 24% 0% 0% 0% 0% 0% Stockbridge Value II 0% 13% 7% 8% 30% 8% 13% 21% 0% 0% Stockbridge Value III 6% 0% 25% 0% 22% 25% 0% 22% 0% 0% Total Value Added 14% 9% 9% 3% 26% 14% 7% 16% 2% 0% Opportunistic Funds Blackstone RE Fund VII 7% 2% 7% 0% 3% 3% 30% 18% 0% 30% Blackstone RE Fund IX 13% 6% 5% 3% 14% 14% 13% 26% 0% 6% Lubert-Adler VII 48% 5% 9% 4% 20% 2% 7% 5% 0% 0% Lubert-Adler VII-B 2% 7% 9% 6% 54% 6% 0% 3% 13% 0% Moorfield III 0% 0% 0% 0% 0% 0% 0% 0% 0% 100% Patron V 0% 0% 0% 0% 0% 0% 0% 0% 0% 100% Walton Street VII 24% 14% 4% 16% 16% 3% 2% 18% 3% 0% Walton Street VIII 0% 15% 9% 14% 21% 23% 6% 12% 0% 0% Total Opportunistic 17% 7% 8% 6% 23% 7% 7% 8% 3% 14%
Total Portfolio 18% 10% 7% 2% 15% 10% 7% 27% 1% 3% NFI ODCE 22% 9% 7% 1% 10% 9% 6% 36% 0% 0%
For Institutional Investor use only. Proprietary & Confidential. 55
Portfolio Composition by Market Values For the Period Ended 12/31/2019
Portfolio Diversification
SBCERS Investment Life Cycle Diversification SBCERS Investment Structure Diversification
100% 100% 84% 80% 80% 72%
60% 60%
40% 40% 25% 20% 20% 7% 6% 2% 1% 1% 1% 1%
0% 0%
Bonds
CMBS
Sr. Debt Sr.
Forward
Security
Debt
Purchase
Public RE Public
Expansion
Stabilized
Renovation
Conversion
Mortgages
Operatingor
Participating
Development
Subordinated
Initial Leasing Initial
Private REOC Private
Joint Ventures Joint
WhollyOwned
Mezzanine Debt Mezzanine Pre-development Comments • The portfolio’s stability is shown by 84% being invested in operating or stabilized properties. • The structure of the portfolio is well diversified with Wholly Owned and Joint Ventures comprising 97% of the portfolio.
For Institutional Investor use only. Proprietary & Confidential. 56
Policy Target Compliance For the Period Ended 12/31/2019
Portfolio Diversification–Compared to Policy Target Property Type Diversification–Compared to Policy Target SBCERS Current Portfolio—Based on Market Value SBCERS Current Portfolio—Based on Market Value
Sector Diversification Investment Vehicle 100% 50% 90% 92% 80% 40%
70% 74% 34% 60% 30% 50% 25% 24% 40% 20% 30%
20% 10% 9% 10% 13% 13% 8% 8% 0% 0% 0% Core Value Added Opportunistic RE Funds Commingled Public Mortgages Securities Office Retail Apts. Industrial Other Target Investment Range Current Investments Target Investment Range Current Investments
Comments • The portfolio is in compliance with its sector diversification and property type targets. Compliance with • All property types are within their range except for Retail. ORG has deliberately and systematically reduced the retail exposure in Policy: order to hedge against the decline that is currently plaguing the sector. As a result, SBCERS has no regional mall exposure and the retail that SBCERS owns is limited to primarily grocery anchored shopping centers and urban lifestyle centers. ORG believes that these retail assets provide SBCERS with defensive income and are more isolated to volatility in the retail sector than regional malls or high street retail .
For Institutional Investor use only. Proprietary & Confidential. 57
Portfolio Composition by Market Values For the Period Ended 12/31/2019
Geographic Diversification–Compared to Policy Target of 85% in U.S. Markets
SBCERS Current Portfolio–Based on Market Value—U.S. 97%
Comments • The portfolio is in compliance with the property location limits. Compliance with • ORG anticipates that there should be an increase in the international component with future capital calls. Uncalled Policy: capital for Patron V is $2.2 million.
For Institutional Investor use only. Proprietary & Confidential. 58
Portfolio Composition by Commitments For the Period Ended 12/31/2019
Investment Manager Diversification–Compared to Policy Target of 20% Committed to One Manager SBCERS Current Portfolio–Based on Current Commitments Walton Street Capital Abacus Capital 9% Group 12% Capital Commitment Stockbridge Core Investment Managers Value Advisors Committed Percentage 9% Alex Brown Realty 3% Rubenstein Abacus Capital Group $42,500,000 12% Properties Alcion Ventures 1% 3% Alex Brow n Realty $10,000,000 3% Prologis 5% Alcion Ventures $10,000,000 3% Blackstone Group Patron Capital 11% Advisors Blackstone Group 42,000,000 11% 1% Citymark Capital 10,000,000 3% Moorfield Group 1% Greenfield Partners 17,500,000 5% Miller Global Properties Citymark Capital 3% H/2 Capital Partners 10,000,000 3% 3% Greenfield Partners Harrison Street Real Estate 10,000,000 3% 5% Mesa West Capital High Street Equity Advisors 15,000,000 4% 9% H/2 Capital Partners 3% Harrison Street Real Invesco Real Estate 20,000,000 5% Estate Lubert-Adler Group 3% Longpoint Realty Partners 15,500,000 4% 6% Longpoint Realty High Street Equity Partners Invesco Real Estate Advisors Lubert-Adler Group 22,500,000 6% 4% 5% 4% Mesa West Capital 30,000,000 9% Comments Miller Global Properties 12,500,000 3% • No investment manager exceeds the limit of Compliance with Moorfield Group 4,685,400 1% 20% of the total commitment to real estate. Policy: Patron Capital Advisors 5,457,000 1% Prologis 20,000,000 5% Rubenstein Properties 5,000,000 1% Stockbridge Core Value Advisors 37,500,000 9% Walton Street Capital 30,000,000 9% $370,142,400 100%
For Institutional Investor use only. Proprietary & Confidential. 59
Portfolio Composition by Commitments For the Period Ended 12/31/2019
Vintage Year Diversification—Compared to Policy Target of 25% Maximum Commitment Per Year
SBCERS Current Portfolio–Based on Current Real Estate Allocation
35.0%
30.7% 30.0% 28.0%
25.0% Target 25% 23.0% 22.6%
20.0% 18.4% 16.6% 15.5% 14.7% 15.0%
10.0% 8.0% 7.7%
5.0%
0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Comments • Vintage Year represents the year SBCERS made its commitment to the investment based upon 12/31 portfolio real estate allocation. Compliance with • The over commitment in 2012 and 2013 resulted from the reinvestment of proceeds from the RREEF II liquidation in 2011. Policy: • In 2019, $55.0 million in new commitments were made or 16.6% of the current real estate allocation.
For Institutional Investor use only. Proprietary & Confidential. 60
Portfolio Composition by Market Values For the Period Ended 12/31/2019
Leverage Ratio–Compared to Policy Target of 65% Aggregate Leverage
SBCERS Current Portfolio-Based on Market Value SBCERS Current Portfolio Leverage vs. Industry Standards
Leverage Policy Portfolio Investments Ratio Maximum SBCERS Industry Benchmark Core Funds Abacus Core I 46.5% Blackstone Property Partners 47.0% Harrison Street Core 26.6% 75.0%
Invesco US Income 34.4% 65.0% Mesa West Core Lending 58.5% 65.0%
Mesa West Fund III 100.0% 59.5%
Mesa West Fund IV 59.4% 52.0%
Prologis Targeted Europe I 19.7% 50.0% Prologis US Logistics 16.2%
Stockbridge Smart Markets 22.6% 41.9%
Walton Street Debt II 59.5% 35.9% Total Core 35.9% 50.0% Value Added Funds ABR Chesapeake VI 55.7% Abacus III 32.2% Abacus IV 55.9% Greenfield Acquisition Partners VI 87.0% Greenfield Acquisition Partners VII 38.0% Longpoint Realty I 44.0% Miller Global VII 76.3% Miller Global VIII 48.7% Rubenstein III 61.6% CORE VALUE ADDED OPPORTUNISTIC TOTAL Stockbridge Value II 53.0% Stockbridge Value III 60.7% Total Value Added 52.0% 65.0% Opportunistic Funds Blackstone RE Fund VII 58.8% Comments Compliance with Blackstone RE Fund IX 76.2% Policy: Lubert-Adler VII 66.2% • The Portfolio is within the Leverage Policy’s Maximum levels for all Lubert-Adler VII-B 62.4% categories as well as the overall portfolio. Moorfield III 42.0% Patron V 46.0% Walton Street VII 56.1% Walton Street VIII 59.8% Total Opportunistic 59.5% 75.0% + Total Portfolio 41.9% 65.0%
For Institutional Investor use only. Proprietary & Confidential. 61
Portfolio Composition by Commitments For the Period Ended 12/31/2019
Investment Size Limitation—Compared to Policy Target of 15% Total Real Estate Allocation
SBCERS Current Portfolio–Based on Current Commitments Walton Street Capital Abacus Capital 9% Group Capital Commitment 12% Private Real Estate Investments Stockbridge Core Committed Percentage Value Advisors 9% Alex Brown Realty Abacus Core Income Fund I, L.P. $10,000,000 3% 3% Rubenstein Abacus Multi-Family Partners III, L.P. 7,500,000 2% Properties Alcion Ventures 3% Abacus Multi-Family Partners IV, L.P. 15,000,000 4% 1% Abacus Multi-Family Partners V, L.P. 10,000,000 3% Prologis ABR Chesapeake Investors VI, LP 10,000,000 3% 5% Blackstone Group Patron Capital Alcion Real Estate Partners Fund IV, L.P. 10,000,000 3% 11% Advisors Blackstone Property Partners 30,000,000 8% 1%
Blackstone Real Estate Partners VII, L.P. 7,500,000 2% Moorfield Group Blackstone Real Estate Partners IX, L.P. 4,500,000 1% 1% Miller Global Citymark Capital U.S. Apartment Fund II, L.P. 10,000,000 3% Properties Citymark Capital Greenfield Acquisition Partners VI, L.P. 7,500,000 2% 3% 3% Greenfield Acquisition Partners VII, L.P. 10,000,000 3% Greenfield Partners 5% H/2 Credit Partners, L.P. 10,000,000 3% Mesa West Capital Harrison Street Core Property, L.P. 10,000,000 3% 9% H/2 Capital Partners 3% High Street Real Estate Fund VI, L.P. 15,000,000 4% Harrison Street Real Invesco U.S. Income Fund, L.P. 20,000,000 5% Estate 3% Longpoint Realty Fund I, L.P. 15,500,000 4% Lubert-Adler Group 6% Longpoint Realty High Street Equity Partners Invesco Real Estate Advisors Lubert-Adler Fund VII, L.P. 12,500,000 3% 4% 5% 4% Lubert-Adler Fund VII-B, L.P. 10,000,000 3% Mesa West Core Lending Fund, L.P. 10,000,000 3% Comments Mesa West Real Estate Income Fund III, L.P. 10,000,000 3% Mesa West Real Estate Income Fund IV, L.P. 10,000,000 3% • Investment size represents an investment to Compliance with Miller Global Real Estate Fund VII, LLC 7,500,000 2% an individual commingled fund or separate Miller Global Real Estate Fund VIII, LLC 5,000,000 1% account. Policy: Moorfield Real Estate Fund III, L.P. 4,685,400 1% Patron Capital, L.P. V 5,457,000 1% • No portfolio investment exceeds 15% of the Prologis Targeted Europe Logistics Fund 5,000,000 1% total real estate allocation. Prologis Targeted U.S. Logistics Fund, Inc. 15,000,000 4% Rubenstein Properties III, L.P. 5,000,000 1% Stockbridge Smart Markets Fund, L.P. 20,000,000 4% Stockbridge Value Fund II, L.P. 7,500,000 2% Stockbridge Value Fund III, L.P. 10,000,000 3% Walton Street Debt II, L.P. 10,000,000 3% Walton Street Fund VII, L.P. 10,000,000 3% Walton Street Fund VIII, L.P. 10,000,000 3% $370,142,400 100% For Institutional Investor use only. Proprietary & Confidential. 62
Real Estate Fund/Manager Monitoring
Certification Significant Strategy Last Meeting Fund Name Checked Events Change in by RE Comments (Yes/No) (Yes/No) Investment Consultant
ABR Chesapeake Investors VI, Yes No No 3/26/2020 COVID-19 Fund Update Call. LP
Abacus Core Income Yes No No 1/14/2020 Update meeting. Fund I, L.P.
Abacus Multi-Family Yes No No 1/14/2020 Update meeting. Partners III, L.P.
Abacus Multi-Family Yes No No 1/14/2020 Update meeting. Partners IV, L.P.
Blackstone Property Partners Yes No No 4/23/2020 COVID-19 Fund Update Call.
Blackstone Real Estate Yes No No 4/23/2020 COVID-19 Fund Update Call. Partners VII, L.P.
Greenfield Acquisition Yes Yes No 4/30/2020 COVID-19 Fund Update Call. Partners VI, L.P.
Greenfield Acquisition Yes Yes No 4/30/2020 COVID-19 Fund Update Call. Partners VII, L.P.
Harrison Street Core Yes No No 4/16/2020 COVID-19 Fund Update and 1Q 2020 Quarterly Update Webinar. Property, L.P.
Invesco U.S. Income Yes No No 3/25/2020 COVID-19 Fund Update Call. Fund, L.P.
For Institutional Investor use only. Proprietary & Confidential. 63
Real Estate Fund/Manager Monitoring
Certification Significant Strategy Last Meeting Fund Name Checked Events Change in by RE Comments (Yes/No) (Yes/No) Investment Consultant
Longpoint Realty Fund I, L.P Yes No No 4/21/2020 COVID-19 Fund Update Video Call.
Lubert-Adler Fund VII, L.P. Yes No No 4/3/2020 COVID-19 Fund Update Call.
Lubert-Adler Fund VII-B, L.P. Yes No No 4/3/2020 COVID-19 Fund Update Call.
Mesa West Core Yes No No 4/14/2020 COVID-19 Fund Update Call. Lending Fund, L.P.
Mesa West Real Estate Yes No No 4/14/2020 COVID-19 Fund Update Call. Income Fund III, L.P.
Mesa West Real Estate Yes No No 4/14/2020 COVID-19 Fund Update Call. Income Fund IV, L.P.
Miller Global Real Yes No No 4/7/2020 Annual Meeting (Video Conference). Estate Fund VII, L.P.
Miller Global Real Yes No No 4/7/2020 Annual Meeting (Video Conference). Estate Fund VIII, L.P.
Moorfield Real Yes No No 5/1/2019 Update meeting. Estate Fund III, L.P.
Patron Capital, L.P. V Yes No No 3/26/2020 COVID-19 Fund Update Call.
Prologis European Logistics Yes No No 9/5/2019 Update meeting. Fund
For Institutional Investor use only. Proprietary & Confidential. 64
Real Estate Fund/Manager Monitoring
Certification Significant Strategy Last Meeting Fund Name Checked Events Change in by RE Comments (Yes/No) (Yes/No) Investment Consultant
Prologis Targeted Yes No No 11/18/2019 Update meeting. U.S. Logistics Fund, Inc.
Rubenstein Properties Fund Yes No No 3/27/2020 COVID-19 Fund Update Call. III, LP
Stockbridge Smart Yes No No 4/24/2020 COVID-19 Fund Update and 1Q 2020 Quarterly Update Webinar. Markets Fund, L.P.
Stockbridge Value Fund II, Yes No No 3/19/2020 COVID-19 Fund Update Call. L.P.
Stockbridge Value Fund III, Yes No No 3/19/2020 COVID-19 Fund Update Call. L.P.
Walton Street Fund VII, L.P. Yes No No 4/2/2020 COVID-19 Fund Update Call.
Walton Street Fund VIII, L.P. Yes No No 4/2/2020 COVID-19 Fund Update Call.
For Institutional Investor use only. Proprietary & Confidential. 65
For Institutional Investor use only. Proprietary & Confidential.