fourth quarter 2019 real estate performance update · 2019/12/31 · september 2016, the fund...

For Institutional Investor use only. Proprietary & Confidential. For Institutional Investor use only. Proprietary & Confidential.

Fourth Quarter 2019 Real Estate Performance Update

Santa Barbara County Employees’ Retirement System

May 27, 2020

Invesco US Income Fund I

CityScape Residences

Phoenix, AZ

Greenfield Acquisition Partners VII

Inn of Sedona

Sedona, AZ

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. 3

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


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.

$(5)

$-

$5

$10

$15

$20

$25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$ B

illi

on

s

NFI-ODCE Capital Flows

Contributions Distributions & Redemptions Net Cash Flow

Source: NCREIF, as of 12/31/2019


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.

Source: Real Capital Analytics, as of 12/31/2019

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$ Billions Office Industrial Retail Apartments


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.

Source: Real Capital Analytics, as of 12/31/2019

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

$-

$20

$40

$60

$80

$100

$120

Bill

ions

U.S. Office Transaction Volume

CBD Transaction Volume Suburban Transaction Volume

CBD Cap Rate Suburban Cap Rate


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


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.

*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.


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


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


Market Overview - COVID-19 Impacts


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)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Thousands

U.S. Weekly Unemployment Claims

U.S. Unemployment Claims Long Term Average

Source: U.S. Employment and Training Administration. Long Term Average since 1967

91.7%

81.2%86.8%

36.1%

89.7%

79.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Apartment Industrial Office Retail Other Total

NCREIF April 2020 Rent Collection Rates

Source: NCREIF (Value Weight Index), Data as 4/15/2020


Market Overview - COVID-19 Retail Impacts


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.

Source: Green Street Advisors

6.5%

43.5%

76.9%

28.5%21.8%

27.5%

7.9%

March April

Source: WSJ

Weekly U.S. Grocery Store Sales Change From a Year Earlier


Market Overview - COVID-19 Industrial Impacts


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.


Market Overview - COVID-19 Office Impacts


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.

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

Occupied Office Square Foot per NYC Employee


Market Overview - COVID-19 Multi-Family Impacts


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


Fourth Quarter 2019 Real Estate Performance

Abacus Core Income Fund I

Alexander at The District Apartments

Atlanta, GA

Greenfield Acquisition Partners VI

413 Huron—Student Housing

Ann Arbor, MI

Patron Capital V

GSPP Cologne Office

Cologne, Germany


SBCERS Investment Return Snapshot

As of December 31, 2019

Investment Returns—Time Weighted, Gross of Fees Investment Returns—Time Weighted, Net of Fees

ORG /BNY Mellon Return Comparison—Time Weighted, Net of Fees (Mellon Report 3/31/2020)

Note: SBCERS Benchmark is a real rate of return (adjusted for inflation) of 4.5%, net of investment management fees.

8.0%

8.7%

0% 5% 10% 15%

Private RE

ORG BNY Mellon

1.5%

2.3%

0% 1% 2% 3%

Private RE

ORG BNY Mellon

2.8

%

10.7

% 12.4

%

12.6

%

8.7

%

1.5

%

5.3

%

7.1

%

9.0

%

6.8

%

Q T R 1 YEAR 3 YEARS 5 YEARS S I NCEI NCEP T I O N

SBCERS NFI ODCE, Gross

2.3

%

8.7

%

10.3

%

10.6

%

7.1

%

1.3

%

4.4

%

6.1

%

8.0

%

5.8

%

1.2

%

6.9

%

6.7

%

6.5

%

6.6

%


SBCERS NFI ODCE, Net SBCERS Benchmark

Total Portfolio

Since Inception

Date: 1-1-2006

Gross IRR: 9.9%

Net IRR: 8.8%


SBCERS Real Estate Attribution Analysis

Quarter Return data for December 31, 2019

Gross of Fees Total Return Attribution Net of Fees Total Return Attribution

• 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.

1.7%

0.3%

0.2%

2.3%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50%

Core

Opportunistic

Value Added

Overall

2.0%

0.5%

0.4%

2.8%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%

Core

Opportunistic

Value Added

Overall


SBCERS Property Type vs Index

Quarter Return data for December 31, 2019

Sector Returns—Time Weighted SBCERS—US Only Compared to Index

• 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%.

1.6

%

6.4

%

6.7

% 8.3

%

1.5

%

5.5

%

5.9

% 7.4

%

3.2

%

13.4

%

13.6

%

13.6

%

1.7

%

6.6

%

6.5

% 7.6

%

0.1

%

1.9

% 3.2

%

6.7

%

Q T R 1 YR 3 YRS 5 YRS

NPI Apartment Sub-Index Industrial Sub-Index

Office Sub-Index Retail Sub-Index

34%

16%

26%

20%

0.2%

4%

25%

9%

24%

34%

3% 1% 2% 2%0%

5%

10%

15%

20%

25%

30%

35%

40%

Office Retail Apartments Industrial Hotel Self Storage AssistedLiving

Other

NFI ODCE SBCERS


SBCERS Portfolio Snapshot


• Of the $370.1 million committed to Private Real

Estate, 65.9% has been called through 12/31/2019.

• The equity multiple and the Since Inception Internal

Rate of Return (“IRR”) had no change from the prior

quarter.

• Both the Contributions and Distributions include the

impact of the dividend reinvestment programs in

many of the Core funds.

Note: All dollars are in millions.

Private Real Estate 12/31/2019 9/30/2019 Change

Funds

Number of Funds 35 33 2

Number of General Partner Relationships 20 18 2

Capital Committed $370.1 $335.1 $35.0

Unfunded Commitment $126.1 $97.8 $28.3

Total Private Real Estate

Quarterly Contributions $10.2 $9.7 $0.5

Quarterly Distributions ($21.9) ($11.3) ($10.6)

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%


Progress Towards 2019 Strategic Plan Goals

2019 Recommendation 2019 Action Plans Progress

ORG will target to increase the

portfolio with new commitments of

$50 million

• Commit up to $20 million to Core investment strategies.

• ORG believes the core risk/return attributes have become less favorable than value added

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

manage the portfolio within the

guidelines of the Real Estate

Investment Policy.

• Considering redeeming out of selected open ended Core funds and reinvesting proceeds in new Core

Opportunities.

• Liquidated 90% of H/2 Credit Partners Ltd. for $13.8 million in November 2019 and remaining

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

seminar for the Trustees during

2019.

• Details of educational seminars will be agreed upon at a future date.


Progress Towards Strategic Plan for 2019

Closing

Date Partnership Strategy Geographic Focus

Commitment

($ 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

Commitment Activity - 2019 Commitments

Core

($10.0)Value Added

$45.0

Opportunistic

$10.0

-$10 -$5 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55

Commitments in Millions

2019 Strategic Plan Progress


Progress Towards 2020 Strategic Plan Goals

2020 Recommendation 2020 Action Plans Progress

ORG will target to increase the

portfolio with new commitments of

$60 million

• No additional commitments to Core investment strategies due to concerns of pricing and core

fundamentals.

• 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

manage the portfolio within the

guidelines of the Real Estate

Investment Policy.

• Considering redeeming out of selected open ended Core funds and reinvesting proceeds in new Core

Opportunities.

• Evaluate and consider ending the dividend reinvestment program in certain Core funds.


Portfolio Summary


• The Private Real Estate Since Inception IRR has stayed consistent over the last four

quarters.

One Year

Ending

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%

Private Real Estate

Quarter Ending

in $ Millions


Annual Cash Flow Summary

Historical Market Value and Cash Flows Projected Market

Value

• Between 2012 and the 4th Quarter 2019, the capital calls have outpaced the distributions

by approximately $79.1 million.

($42.2)

($4.1) ($4.7) ($4.3)($18.8)

($28.0) ($54.4)($29.4)

($54.4)

($28.3) ($28.2) ($31.5) ($38.9) ($44.2) ($55.2)($46.8) ($38.0) ($35.2)

$4.4 $2.4 $4.1 $1.4 $2.9

$41.8

$8.2 $17.2 $13.5 $29.1 $22.3

$58.4

$34.2 $47.2

$19.5 $15.0 $15.5 $11.5

$42.7 $50.5 $43.7 $33.4

$57.3

$47.3 $102.5

$126.9

$187.8 $209.9

$237.6 $238.6

$268.9 $289.5

$346.3

$381.6 $407.9

$435.7

($300.0)

($200.0)

($100.0)

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

($ i

n M

illio

ns)

Capital Calls Distributions Market Value Net Cash Flow


Strategy Diversification

Strategy Diversification By Market Value


• The SBCERS Real Estate Investment policy

has an allocation range of 40-80% for the Core

strategy. The total Core investments is 74% as

of December 31, 2019.

• The remaining portion of the portfolio is

divided between Value Added and

Opportunistic investments. Both are within the

Policy ranges.

Core74%

Value Added13%

Opportunistic13%

81%

55%58% 62%

65%65% 63%

72% 74% 74%

60%

11%

14%

14%11% 10% 12%

19%

33%

24%14% 14%

13% 13%

12%12% 13%

25%

1%4%

10% 10%12% 12%

16% 14% 13%15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG'sTarget

PortfolioCore Public Securities Value Added Opportunistic


Property Type Diversification

• Consistent with the SBCERS Real Estate

Investment Policy, Office, Retail, Industrial and

Apartments property types are within their

range.

• Investing in several types of real estate

minimizes the risk by diversification.

Property Type Diversification By Market Value


38% 25% 30% 31%25%

22%20%

23%26% 25% 24%

17%

16%

14% 13%

14%

14%

13%11%

10%9%

15%

26%

29% 23%21%

24%27%

26%28%

29% 34% 25%

12%

15%18%

16% 20% 21%25%

25%

24%

24%

22%

6%4%

7%7%

7% 6%

5%4%

3%

5%

3%

3% 4%4%

4% 5%4%

4%2%

4%2%1%

1% 1%1%

1% 1%1%

7% 6%8%

6% 5% 4% 4% 3% 2% 2%4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG'sTarget

Portfolio

Office Retail Industrial Apartments Hotel Assisted Living Self Storage Other

Industrial34%

Office25%

Retail9%

Hotel3%

Self Storage

1%

Assisted Living

2%

Apartments24%

Other2%


Geographic Diversification

Geographic Diversification By Market Value


• The portfolio is well diversified across the

United States with additional diversification in

Europe.

• Unspecified U.S. indicates the manager is

unable to easily identify the region such as

investments in debt mortgage tranches.

18%16% 12% 14%

12%

8% 9%

17%13%

18% 18%

16%

8%

8%8% 11%

12% 10%

11%

10%

10% 11%

4%

6%

3%

6%8%

8%7%

8%

8%

7%7%

4%

1%

1%

2%

1%

2%2%

2%

2%

2% 1%

8%

14%

20%

13%

14%14%

14%

15%

15%

15% 15%

6%

9%12%

11%

13%

12%13%

11%

10%

10% 11%2% 5%3% 6%

5%

5% 6%

9%

8%

7% 5%

39%

27%

22%24%

21%24%

22%

24%

27%

27%

22%

3%

13%

18%15% 13%

11%13%

2%

1%

1%

5%

1% 1% 1% 2%4% 4%

1%6%

3%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 ORG's

Target

PortfolioNortheast Mideast E.N. Central W.N. Central Southeast

Southwest Mountain Pacific Unspecified US International


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


Portfolio Summary by Investments As of December 31, 2019

* Euro to US Dollar exchange rate as of 12/31/2019: 1.1227 nm: Not Meaningful + GBP to US Dollar exchange rate as of 12/31/2019: 1.3269

Vintage

Year

Investment

StrategyPrivate Real Estate Investments

Capital

Committed

Total

Contributions

Total

Distributions

12/31/2019

Market ValueNet IRR

Net Equity

Multiple

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

$350,142,400 $296,164,527 $144,142,084 $287,985,288

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

$20,000,000 $18,113,417 $15,044,705 $1,561,688

$370,142,400 $314,277,944 $159,186,788 $289,546,975 8.8% 1.4xGrand Total

Private Real Estate Active Funds Total

Active Funds

Inactive Funds

Private Real Estate Inactive Funds Total


Detailed Portfolio Summary for the Period Ending December 31, 2019

Blackstone Real Estate Partners VII

The Cosmopolitan

Las Vegas, NV

Abacus Multi-Family Fund IV

Sage Palmer Ranch

Sarasota, FL

Greenfield Acquisition Partners VII

TriWest Plaza

Dallas, TX



Executive Summary

Investment Returns—Time Weighted, Gross of Fees Investment Returns—Time Weighted, Net of Fees

ORG Portfolio Management Contact:

Edward Schwartz Phone: 216-910-9080

Partner

3733 Park East Dr.

Suite 210

Cleveland, OH 44122

E-Mail: [email protected]

Market Value

Portfolio Market Value $289,546,975 8.7%

Private $289,546,975

Public $0

Current Unfunded Commitments $126,062,964

$415,609,939 12.5%

$3,319,160,292

Total Allocation to Real Estate $331,916,029 10.0%

Total Loan-to-Value Ratio 41.9%

Financial Highlights

at December 31, 2019

Total Market Value and

Unfunded Commitments

Total Fund Market Value

Percent of

Fund

Note: SBCERS Benchmark is a real rate of return (adjusted for inflation) of 4.5%,

net of investment management fees.

2.8

%

10.7

% 12.4

%

12.6

%

8.7

%

1.5

%

5.3

%

7.1

%

9.0

%

6.8

%


SBCERS NFI ODCE, Gross

2.3

%

8.7

%

10.3

%

10.6

%

7.1

%

1.3

%

4.4

%

6.1

%

8.0

%

5.8

%

1.2

%

6.9

%

6.7

%

6.5

%

6.6

%


SBCERS NFI ODCE, Net SBCERS Benchmark

Gross IRR: 9.9%

Net IRR: 8.8%

Total Portfolio

Since Inception

Date: 1-1-2006


Property Type Diversification by Market Values

Geographic Diversification by Market Values

Compliance

Level

Reference Page

Portfolio Diversification ✓ Page 56

Property Type Diversification ✓ Page 57

Geographic Diversification ✓ Page 58

Investment Manager

Diversification ✓ Page 59

Vintage Year Diversification ✓ Page 60

Total Portfolio Leverage ✓ Page 61

Investment Size Limitation ✓ Page 62

Investment Policy Compliance

Investment Portfolio Commentary

• 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.


Executive Summary

Industrial34%

Office25%

Retail9%

Hotel3%

Self Storage

1%

Assisted Living

2%

Apartments24%

Other2%

*OTHER:

Mixed Use: 0.2% Residential: 1.3% Mortgages: 0.1% Common Stock: 0.3%


Portfolio Summary, Gross of Fees For the Period Ended 12/31/2019

Market Value

Percent

of Real

Estate

Invested

Amount

Remaining

Capital to be

Called

Leverage

Ratio Qtr. 1 Year 3 Years 5 Years

Since

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%

+-Euro exchange rate as of 12-31-2019 - 1.1227 See Glossary for Index Definitions

***No capital called as of 12/31/2019.

Time Weighted Returns - Gross of Fees

Portfolio Investments

*-GBP exchange rate as of 12-31-2019 - 1.3269


Portfolio Summary, Net of Fees For the Period Ended 12/31/2019

Market Value

Manager

Projected

Net IRR

Current

Value

Net IRR

Manager

Projected

Net Equity

Multiple

Current

Value Net

Equity

Multiple Qtr. 1 Year 3 Years 5 Years

Since

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

Time Weighted Returns - Net of Fees



Distribution Yield—Core Funds Only

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%

Portfolio Investments Distribution Yield

SBCERS Current Portfolio-Based on Market Value

Portfolio Summary, Distribution Yield For the Period Ended 12/31/2019


Portfolio Cash Flows Summary For the Period Ended 12/31/2019

Return of Return ofPeriod Capital Operating Capital Capital Net InvestmentsEnding 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

Portfolio Cash Flows

*Note: Totals prior to 2015 include CBRE Value 5. Starting in Q1 2015 the liquidated fund was removed.


Investments Cash Flows Summary For the Period Ended 12/31/2019

Quarterly Investment Cash Flows

Return of Return ofBeginning 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


Management Fee Savings

One Time

Savings

Annual

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

ABR Chesapeake VI

69,300 Fee reduction of 0.37% of committed capital and invested

capital.

Abacus Multi-Family III

Abacus Multi-Family IV

Abacus Multi-Family V

37,500 First close investors will pay no management fees for the

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

ORG Selected Investments

Management Fee Savings For the Period Ended 12/31/2019


Management Fee Savings—Continued

One Time

Savings

Annual

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

ORG Selected Investments

Management Fee Savings For the Period Ended 12/31/2019


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

par with the third quarter 2.1% GDP growth.

Core real estate returns continue to be increasingly income dependent as

seen with the NFI-ODCE where the 1.51% gross return for the fourth quarter

was comprised of 1.04% income return and 0.47% appreciation return. The

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.

During the fourth quarter, NFI-ODCE investor net cash flows from

contributions, distributions, and redemptions was approximately $2.5 million.

This was the first quarter of positive net cash flow after four consecutive

quarters of negative net investor cash flows. Distributions and redemptions

for the quarter were $4.92 billion, which represents a $751.6 million decrease

from last quarter.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19

U.S. Real GDP: Percent Change From Preceding Quarter

Source: U.S. Bureau of Economic Analysis

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1Q15 4Q15 3Q16 2Q17 1Q18 4Q18 3Q19

NFI-ODCE Quarterly Returns

Gross Income Return Gross Appreciation ReturnSource: NCREIF

-16.0%

-12.0%

-8.0%

-4.0%

0.0%

4.0%

8.0%

-$3,000

-$2,000

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

OD

CE

Quart

erly G

ross T

ota

l R

etu

rn

Net O

DC

E C

apital F

low

s ($ in

mill

ions)

Net ODCE Flows vs. ODCE Performance

Net Cash Flow Gross Total ReturnSource: NCREIF


Market Overview


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

5.2%1

4.2%2

10.3%1

1.1%2

4.0% 1.9%

Overall 5.0% 4.3%

Office 4.7% 4.1%

Industrial 5.8% 4.4%

Retail 5.8% 4.6%

Apartments 4.4% 4.2%

190 basis points 230 basis points

LTV: Commercial Loans5

70-75% 62%

DSCR: Debt Service Coverage Ratio5

1.3x 1.9x

$510 Billion $600 Billion

Office 89% 90%

Industrial 93% 97%

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

Debt Originations6

Occupancy7

Income Return

Appreciation Return

10 Year Treasury Rate3

Cap Rates4

Cap Rate Spread over Treasuries


Market Overview - Multi-Family


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.

60%

61%

62%

63%

64%

65%

66%

67%

68%

69%

70%

U.S. Homeownership

U.S. Howeownership Rate Long Term Average

Source: U.S. Census Bureau


Market Overview - Multi-Family


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

$950

$1,050

$1,150

$1,250

$1,350

$1,450

Vacan

cy

Multi-

Fam

ily M

ark

et R

ent ($

/Unit)

Vacancy and Market Rent

Market Rent Vacancy 15-Year Historical VacancySource: Costar

0

50

100

150

200

250

300

350

400

1Q

04

4Q

04

3Q

05

2Q

06

1Q

07

4Q

07

3Q

08

2Q

09

1Q

10

4Q

10

3Q

11

2Q

12

1Q

13

4Q

13

3Q

14

2Q

15

1Q

16

4Q

16

3Q

17

2Q

18

1Q

19

4Q

19

Units (in

Thousands)

Multi-Family Supply and Demand

12 Mo. Supply 12 Mo. Demand 15-Year Average DemandSource: Costar

$-

$50

$100

$150

$200

$250

Bill

ion

s

U.S. Multi-Family Transaction Volumes

Garden Style Transaction Volume Mid/Highrise Transaction Volume

Source: Real Capital Analytics


Market Overview - Industrial


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.


Market Overview - Industrial


4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

$5.00

$6.00

$7.00

$8.00

$9.00

Vacancy

Inustr

ial M

ark

et R

ent ($

/SF

)


Market Rent Vacancy 15-Year Average VacancySource: Costar

-300

-200

-100

0

100

200

300

400

1Q04 3Q05 1Q07 3Q08 1Q10 3Q11 1Q13 3Q14 1Q16 3Q17 1Q19

Million SF Industrial Supply and Demand

12 Mo. Supply 12 Mo. Demand 15-Year Average Demand

Source: Costar

$-

$20

$40

$60

$80

$100

$120

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Bill

ion

s

U.S. Industrial Transaction Volumes

Flex Industrial Transaction Volume Warehouse Transaction Volume



Market Overview - Office


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)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Jan

-48

Aug

-51

Mar-

55

Oct-

58

May-6

2

De

c-6

5

Jul-

69

Feb-7

3

Sep

-76

Apr-

80

No

v-8

3

Jun

-87

Jan

-91

Aug

-94

Mar-

98

Oct-

01

May-0

5

De

c-0

8

Jul-

12

Feb-1

6

Sep

-19

U.S. Unemployment

Unemployment Rate Historical Average

Source: U.S. Bureau of Labor Statistics


Market Overview - Office


4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$22.00

$26.00

$30.00

$34.00

$38.00

1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19

Vacancy

Offic

e M

ark

et R

ent ($

/SF

)



-60

-40

-20

0

20

40

60

80

100

120

140

1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19

Million SF Office Supply and Demand


Source: Costar

$-

$50

$100

$150

$200

$250

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Bill

ion

s

U.S. Office Transaction Volumes

CBD Transaction Volume Suburban Transaction Volume



Market Overview - Retail


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.

0%

2%

4%

6%

8%

10%

12%

$-

$30

$60

$90

$120

$150

$180

Quart

erly E

-Com

merc

e S

ale

s

($B

illio

ns)

Quarterly E-Commerce Sales

E-Commerce Sales E-Commerce as a % of Total Retail Sales


$-

$10

$20

$30

$40

$50

$60

$70

Bill

ion

s

Quarterly Department Store Sales


-42.3% Decrease since 1Q 2000


Market Overview - Retail


4.0%

5.0%

6.0%

7.0%

8.0%

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19

Vacancy

Reta

il M

ark

et R

ent ($

/SF

)



0

50

100

150

200

250

1Q06 3Q07 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 1Q18 3Q19

Million SF Retail Supply and Demand


Source: Costar

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Bill

ion

s

U.S. Retail Transaction Volumes

Shop Transaction Volume Center Transaction Volume



Property Type Diversification—Compared to Indexes

Portfolio Composition by Market Values For the Period Ended 12/31/2019

SBCERS Current Portfolio

• The portfolio is well diversified by property type.

• 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.

Residential: 1.3% Mixed Use: 0.2%

Mortgages: 0.1% Common Stock: 0.3%

Other Diversification—2% Comments

SBCERS—US Only Compared to Indexes

Industrial34%

Office25%

Retail9%

Hotel3%

Self Storage

1%

Assisted Living

2%

Apartments24%

Other2%

34%

16%

26%

20%

0.2%

4%

25%

9%

24%

34%

3% 1% 2% 2%0%

5%

10%

15%

20%

25%

30%

35%

40%

Office Retail Apartments Industrial Hotel Self Storage AssistedLiving

Other

NFI ODCE SBCERS


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%


Geographic Diversification—Compared to Indexes

• The portfolio is well diversified by geographic location.

• The International category should increase as capital is called. Uncalled capital

for Patron V is $2.2 million.

Europe: 0.7% Multiple Countries: 1.5%

India: 0.2% United Kingdom: 0.8%

International Diversification—3%


SBCERS—Current Portfolio SBCERS—US Only to Compare to Indexes

Comments

22%

9%

7%

1%

10%9%

6%

36%

18%

10%

7%

2%

16%

11%

7%

28%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Northeast Mideast EN Central WN Central Southeast Southwest Mountain Pacific

NFI ODCE SBCERSUnspecified US: 1%


Investments Property Type Diversification by Percent For the Period Ended 12/31/2019

Geographic Diversification (%)

East North West North UnspecifiedInvestment 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%


Portfolio Diversification

SBCERS Investment Life Cycle Diversification SBCERS Investment Structure Diversification

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.


72%

25%

1% 1% 1%

0%

20%

40%

60%

80%

100%

Wh

olly

Ow

ne

d

Join

t V

en

ture

s

Bo

nd

s

Sr.

De

bt

Su

bo

rdin

ate

dD

eb

t

Me

zza

nin

e D

eb

t

Pa

rtic

ipa

ting

Mo

rtg

ag

es

CM

BS

Pu

blic

RE

Se

curi

ty

Pri

vate

RE

OC

84%

2%7%

1%6%

0%

20%

40%

60%

80%

100%

Op

era

ting

or

Sta

bili

zed

Ren

ova

tion

Con

vers

ion

Exp

ansi

on

Initi

al L

eas

ing

Pre

-de

velo

pm

ent

Dev

elo

pm

ent

Fo

rwar

dP

urc

hase


Portfolio Diversification–Compared to Policy Target

SBCERS Current Portfolio—Based on Market Value

Compliance with

Policy:

Policy Target Compliance For the Period Ended 12/31/2019

Comments

• The portfolio is in compliance with its sector diversification and property type targets.

• All property types are within their range except for Retail. ORG has deliberately and systematically reduced the retail exposure in

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 .

Property Type Diversification–Compared to Policy Target

SBCERS Current Portfolio—Based on Market Value

74%

13% 13%

92%

8% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Core Value Added Opportunistic RE Funds CommingledMortgages

PublicSecurities

Target Investment Range Current Investments

Investment Vehicle Sector Diversification

25%

9%

24%

34%

8%

0%

10%

20%

30%

40%

50%

Office Retail Apts. Industrial Other

Target Investment Range Current Investments


Geographic Diversification–Compared to Policy Target of 85% in U.S. Markets

SBCERS Current Portfolio–Based on Market Value—U.S. 97%


Compliance with

Policy:

Comments

• The portfolio is in compliance with the property location limits.

• ORG anticipates that there should be an increase in the international component with future capital calls. Uncalled

capital for Patron V is $2.2 million.


Investment Manager Diversification–Compared to Policy Target of 20% Committed to One Manager

SBCERS Current Portfolio–Based on Current Commitments

Portfolio Composition by Commitments For the Period Ended 12/31/2019

Compliance with

Policy:

Comments

• No investment manager exceeds the limit of

20% of the total commitment to real estate.

Investment ManagersCapital

Committed

Commitment

Percentage

Abacus Capital Group $42,500,000 12%

Alex Brow n Realty $10,000,000 3%

Alcion Ventures $10,000,000 3%

Blackstone Group 42,000,000 11%

Citymark Capital 10,000,000 3%

Greenfield Partners 17,500,000 5%

H/2 Capital Partners 10,000,000 3%

Harrison Street Real Estate 10,000,000 3%

High Street Equity Advisors 15,000,000 4%

Invesco Real Estate 20,000,000 5%

Longpoint Realty Partners 15,500,000 4%

Lubert-Adler Group 22,500,000 6%

Mesa West Capital 30,000,000 9%

Miller Global Properties 12,500,000 3%

Moorfield Group 4,685,400 1%

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%

Abacus Capital Group12%

Alex Brown Realty3%

Alcion Ventures3%

Blackstone Group11%

Citymark Capital3%

Greenfield Partners5%

H/2 Capital Partners3%

Harrison Street Real Estate

3%High Street Equity

Advisors4%

Invesco Real Estate5%

Longpoint Realty Partners

4%

Lubert-Adler Group6%

Mesa West Capital9%

Miller Global Properties

3%

Moorfield Group1%

Patron Capital Advisors

1%

Prologis 5%

Rubenstein Properties

1%

Stockbridge Core Value Advisors

9%

Walton Street Capital9%


Vintage Year Diversification—Compared to Policy Target of 25% Maximum Commitment Per Year

SBCERS Current Portfolio–Based on Current Real Estate Allocation


Compliance with

Policy:

Comments

• Vintage Year represents the year SBCERS made its commitment to the investment based upon 12/31 portfolio real estate allocation.

• The over commitment in 2012 and 2013 resulted from the reinvestment of proceeds from the RREEF II liquidation in 2011.

• In 2019, $55.0 million in new commitments were made or 16.6% of the current real estate allocation.

Target 25%

14.7%

23.0%

30.7%

28.0%

22.6%

8.0% 7.7%

18.4%

15.5%16.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


Leverage Ratio–Compared to Policy Target of 65% Aggregate Leverage

Leverage

Ratio

Policy

Maximum

Core Funds

Abacus Core I 46.5%

Blackstone Property Partners 47.0%

Harrison Street Core 26.6%

Invesco US Income 34.4%

Mesa West Core Lending 58.5%

Mesa West Fund III 100.0%

Mesa West Fund IV 59.4%

Prologis Targeted Europe I 19.7%

Prologis US Logistics 16.2%

Stockbridge Smart Markets 22.6%

Walton Street Debt II 59.5%

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%

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%

Blackstone RE Fund IX 76.2%

Lubert-Adler VII 66.2%

Lubert-Adler VII-B 62.4%

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%


SBCERS Current Portfolio Leverage vs. Industry Standards

Comments

• The Portfolio is within the Leverage Policy’s Maximum levels for all

categories as well as the overall portfolio.


Compliance with

Policy:

SBCERS Current Portfolio-Based on Market Value

35.9

%

52.0

% 59.5

%

41.9

%50.0

%

65.0

% 75.0

%

65.0

%

C O R E V A L U E A D D E D O P P O R T U N I S T I C T O T A L

SBCERS Industry Benchmark


Investment Size Limitation—Compared to Policy Target of 15% Total Real Estate Allocation

SBCERS Current Portfolio–Based on Current Commitments


Compliance with

Policy:

• Investment size represents an investment to

an individual commingled fund or separate

account.

• No portfolio investment exceeds 15% of the

total real estate allocation.

Comments

Abacus Capital Group12%

Alex Brown Realty3%

Alcion Ventures3%

Blackstone Group11%

Citymark Capital3%

Greenfield Partners5%

H/2 Capital Partners3%

Harrison Street Real Estate

3%High Street Equity

Advisors4%

Invesco Real Estate5%

Longpoint Realty Partners

4%

Lubert-Adler Group6%

Mesa West Capital9%

Miller Global Properties

3%

Moorfield Group1%

Patron Capital Advisors

1%

Prologis 5%

Rubenstein Properties

1%

Stockbridge Core Value Advisors

9%

Walton Street Capital9%

Private Real Estate InvestmentsCapital

Committed

Commitment

Percentage

Abacus Core Income Fund I, L.P. $10,000,000 3%

Abacus Multi-Family Partners III, L.P. 7,500,000 2%

Abacus Multi-Family Partners IV, L.P. 15,000,000 4%

Abacus Multi-Family Partners V, L.P. 10,000,000 3%

ABR Chesapeake Investors VI, LP 10,000,000 3%

Alcion Real Estate Partners Fund IV, L.P. 10,000,000 3%

Blackstone Property Partners 30,000,000 8%

Blackstone Real Estate Partners VII, L.P. 7,500,000 2%

Blackstone Real Estate Partners IX, L.P. 4,500,000 1%

Citymark Capital U.S. Apartment Fund II, L.P. 10,000,000 3%

Greenfield Acquisition Partners VI, L.P. 7,500,000 2%

Greenfield Acquisition Partners VII, L.P. 10,000,000 3%

H/2 Credit Partners, L.P. 10,000,000 3%

Harrison Street Core Property, L.P. 10,000,000 3%

High Street Real Estate Fund VI, L.P. 15,000,000 4%

Invesco U.S. Income Fund, L.P. 20,000,000 5%

Longpoint Realty Fund I, L.P. 15,500,000 4%

Lubert-Adler Fund VII, L.P. 12,500,000 3%

Lubert-Adler Fund VII-B, L.P. 10,000,000 3%

Mesa West Core Lending Fund, L.P. 10,000,000 3%

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%

Miller Global Real Estate Fund VII, LLC 7,500,000 2%

Miller Global Real Estate Fund VIII, LLC 5,000,000 1%

Moorfield Real Estate Fund III, L.P. 4,685,400 1%

Patron Capital, L.P. V 5,457,000 1%

Prologis Targeted Europe Logistics Fund 5,000,000 1%

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%


Real Estate Fund/Manager Monitoring

Fund Name

Certification

Checked

(Yes/No)

Significant

Events

(Yes/No)

Strategy

Change in

Investment

Last Meeting

by RE

Consultant

Comments

ABR Chesapeake Investors VI,

LP Yes No No 3/26/2020 COVID-19 Fund Update Call.

Abacus Core Income

Fund I, L.P. Yes No No 1/14/2020 Update meeting.

Abacus Multi-Family

Partners III, L.P. Yes No No 1/14/2020 Update meeting.

Abacus Multi-Family

Partners IV, L.P. Yes No No 1/14/2020 Update meeting.

Blackstone Property Partners Yes No No 4/23/2020 COVID-19 Fund Update Call.

Blackstone Real Estate

Partners VII, L.P. Yes No No 4/23/2020 COVID-19 Fund Update Call.

Greenfield Acquisition

Partners VI, L.P. Yes Yes No 4/30/2020 COVID-19 Fund Update Call.

Greenfield Acquisition

Partners VII, L.P. Yes Yes No 4/30/2020 COVID-19 Fund Update Call.

Harrison Street Core

Property, L.P. Yes No No 4/16/2020 COVID-19 Fund Update and 1Q 2020 Quarterly Update Webinar.

Invesco U.S. Income

Fund, L.P. Yes No No 3/25/2020 COVID-19 Fund Update Call.


Fund Name

Certification

Checked

(Yes/No)

Significant

Events

(Yes/No)

Strategy

Change in

Investment

Last Meeting

by RE

Consultant

Comments

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

Lending Fund, L.P. Yes No No 4/14/2020 COVID-19 Fund Update Call.

Mesa West Real Estate

Income Fund III, L.P. Yes No No 4/14/2020 COVID-19 Fund Update Call.

Mesa West Real Estate

Income Fund IV, L.P. Yes No No 4/14/2020 COVID-19 Fund Update Call.

Miller Global Real

Estate Fund VII, L.P. Yes No No 4/7/2020 Annual Meeting (Video Conference).

Miller Global Real

Estate Fund VIII, L.P. Yes No No 4/7/2020 Annual Meeting (Video Conference).

Moorfield Real

Estate Fund III, L.P. Yes No No 5/1/2019 Update meeting.

Patron Capital, L.P. V Yes No No 3/26/2020 COVID-19 Fund Update Call.

Prologis European Logistics

Fund Yes No No 9/5/2019 Update meeting.




Fund Name

Certification

Checked

(Yes/No)

Significant

Events

(Yes/No)

Strategy

Change in

Investment

Last Meeting

by RE

Consultant

Comments

Prologis Targeted

U.S. Logistics Fund, Inc. Yes No No 11/18/2019 Update meeting.

Rubenstein Properties Fund

III, LP Yes No No 3/27/2020 COVID-19 Fund Update Call.

Stockbridge Smart

Markets Fund, L.P. Yes No No 4/24/2020 COVID-19 Fund Update and 1Q 2020 Quarterly Update Webinar.

Stockbridge Value Fund II,

L.P. Yes No No 3/19/2020 COVID-19 Fund Update Call.

Stockbridge Value Fund III,

L.P. Yes No No 3/19/2020 COVID-19 Fund Update Call.

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.

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fourth quarter 2019 real estate performance update · 2019/12/31 · september 2016, the fund...

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