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OFFICIAL PRIVILEGEDOCUMENTSPRODUCED 9/30 12010

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From:Sent:To:Cc:Subject:Attachments:Brad,

Carrillo, DiegoMonday, June 22, 2009 1:26 PMPacheco, BradWeir, LaurieFW: Scanned docDoC[1].pdf

Laurie has made some edits to the attached Pagemill document. Please review.Thanks,Diego

From: Rodrguez, BiancaSent: Monday, June 22,2OO9 11:39 AMTo: C.anilo, D,egoSubject: Scanned docHey Diego,Here is the document you requested-ffiDocll].pdf (32 KB)Thanks,

tbCalPF.RSBianca Rodriguezlnvestments - Global Real EstateTel: (916)[email protected]. gov

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Langhi, TarynFrom; Brand, DulcieD. [[email protected]]Sent: Tuesday, June 09, 2OO9 8:54 AMTo: Weir, Laurie; [email protected]: Warren Otto; Pottle, RandySubject: RE: Page Mill

Were you aware of this?h-tlp;/ryuu.n-ers.f yne-!v..o-!./brcaltnW9-wsl9iJ2-5-16?-Z

Dulcie D. Brand I PartnerPillsbury Winthrop Shaw Pittman LLPTel: 2'13.488.7244 | Fax: 213.226.4364725 South Figueroa Street, Suite 2800 | Los Angeles, CA 90017-4506Email: [email protected]

Fro m : Weir, La u re [ma ilto : La urie-Weir@ Ca |PERS.ca. gov]Sent: Monday, June 08,2009 5:24 PMTo: Brand, Dulce D.;'[email protected]'Cc: 'Warren Otto'; Pottlg RandySubject: FW: Page Millhere is warren's memo. he did a great job, but it needs to be edited for public consumption. if we could get thisby noon lomorrow pst, it would be greal. thanks LFrom: Warren Otto [mailto:[email protected]]Sent: Sunday, June 07,2009 6:41 PMTo; Weir, LaurieCc: Schlenker, Erc; Doug Sturiale; Josh CallahanSubject: Page MillLaurie, I've attached a word document entitled "Page Mll Summary" for your review and edting as need be. Ireally struggled with this document, ljust am not sure what its main purpose will be- So I wrote it as though itwere intended for an elected representative with a natural interest in CaIPERS and its investments, but also wthan interest in the weffare of the people of East Palo Alto.Itried to keep this document short, but it's impossible to do Page Mill justice without a fair amount of facts,background and context. As you can see, l've tried to make it as current as possible, so the reader willunderstand how precarious the investment s now, wth the portfolio performing so poorly and the debt paydown looming. Feel free to circulate this draft however you wish to solicit feedback from others you want toinvolve in the document.l'll be in all day Monday should you want to discuss this document at alf, but feel free to edit it however youwish to make t serve ts purpose. I'll be in our SF office Tuesday afternoon and all day Wednesday, and then in

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Page2 of2'your neck of the woods most of Thursday.Regards, W.

The contents of this message, together with any attachments, are intended only for the use of theindividual or entit5r to which they are addressed and may contain information that is legally privileged,confidential and exempt from disclosule. If you are not the intended recipient, you are hereby notifiedthat any dissemination, distribution, or copying of this message, or any attachment, is strictly prohibited.If you have received this message in error, please notify the original sender or the Pillsbury t/inthropShaw Pittman Help Desk at Tel: 800-477-0770 x4860 immediately by telephone orby retum E-mail anddelete this message, along with any attachments, from your computer. Thank you.+ Intemal Revenue Service regulations generallyprovide that, for the purpose of avoiding federal trpenalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any taxadvice in this message does not meet those requirements. Accordingly, any such tax advice was notintended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penaltiesthat may be imposed on you or for the purpose of promoting, marketing or recommending to anotherparty any tax-related matters-

-_.-_------

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Page I oflLanghi, TarynFrom: Wanen Otto [email protected]]Sent: Sunday, June 07,2009 6:41 PMTo: Weir, LaurieGc: Schlenker, Eric; Doug Sturiale; Josh CallahanSubject Page MillAttachments: Page Mill Summary - 09,06.08.docx

Laurie, l've attached a word document entitled "Page Mill Summary" for your review and editing as need be. Ireally struggled with this document. ljust am not sure what its main purpose will be. So I wrote t as though itwere intended for an elected representative with a natural interest in CaIPERS and its investrnents, but also withan interest in the welfare of the people of East Palo Alto.I tried to keep this document short, but it's impossible to do Page Mill justice without a fair amount of facts,background and context. As you can see, l've tried to make it as current as possible, so the reader willunderstand how precarious the investment is now, with the porl.folo performing so poorly and the debt paydown looming. Feel free to circulate this draft however you wish to solicit feedback from others you want toinvolve n the document.l'll be in all day Monday should you want to discuss this documeni at all, but feel free to edit it however youwish to make it serve its purpose. l'll be n our 5F office Tuesday afternoon and all day Wednesday, and then nyour neck of the woods most ofThursday.Regards, W.

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Page MilI Summary and UpdateJune 8,2009

ackground and ContextPage Mill Properties II (PMP-II) is a limited partnership, capitalized with $116 million ofcommitted equity an a8242 million loan from Wachovia (now V/ells Fargo), reflecting anoverall leverage rato of approximately 68 percent.PMP-II is managed and controlled by the general partner, Page Mill Properties (PM), a privatecompany controlled byDavid Taran.CaIPERS has committed $100 million, or 86 percent, of the total equity, $95 million of whichhas been funded as of June 8th, 2009. The remaining equity has come from a number of privatehigh-net-worth individuals and David Taran.Over a tv/o-year period ftom2006 to 2008, PMP-II acquired a lmge and diverse portfolio ofproperties in East Palo Alto in 101 separate transactions encompassing:a) 1 l4 parcels of land, dispersed throughout 180 acres in East Palo Altob) 185 buildings with an average age over 50 yearsc) 1,810 residential units of all shapes and sizes, including l7 single family resdencesAbout 1,600 of the 1,810 residential units are subject to East Palo Alto's Rent StabilizationOrdinance, which limits rent increases in occupied units to a rate roughly equivaent to the BayArea's overall rate of inflation.Since acqusition, PMP-II has spent about $14 million improving the properties and theWoodland Park neighborhood in which they are located.The properties were acquired as real estate values were peaking throughout the country. A year-end 2008 appraisal estimated the value of the properties at $250 million, representing a drip invalue of about 29 percent. This valuation reduces the value of the partnership's invested equityby 93 percent, from $ I l0 million to $8 million.A more recent discounted cash flow analyss of the portfolio, which takes nto account theportfoiio's recent operating performance and status, estimates its value at less than 8225 million,which would render the partnership's equity rvorthless, and indicate that the lender will notrecover its full loan principal.PMP-II's $242 million loan has a $50 million pay down due August 1,2009. The partnershipdoes not have the equity required to meet this obligation, which could throw the partnership intobankruptcy and ikely liquidation.

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Original StratewPM's original strategy was to aggregate a large number of properties in the Woodland Parkneighborhood of East Palo Alto and add value by:a) Improving the properties and neighborhoodb) Bringing below-market rents to market and raising overall rent levelsc) Evicting tenants engaged in drug-dealing or other criminal activities to improve the safetyand resident profile of the propertiesd) Controlling large contiguous land areas in East Palo Alto and change the zoning ifpossible to proftably redevelop some of the propertiese) Consolidating the ownership of many small properties into one large investment, forwhich a REIT or other institutional investor would pay a premiumPM believed it could successfirlly execute its strategy and exit the investment before thepartnership's loan became due in 201 l. lt believed a successful execution of this strategy wouldenable it to sell the portfolio for over $400 million and generate a retum of 13o/o to lTYo for itsinvestors.East Palo Alto's Rent Stabilization OrdinanceOne of the keys to PM's strategy was to boost revenues by brngng below-market-rents tomarket within the bounds of EPA's Rent Stabjlization Ordinance (RSO). This ordinance sets a"legal maximum rent" for each occupied unit which goes up every year, regardless of whetherthe landlord chooses to raise the rent or not. Over the years, many previous landlords did notraise rents, allowing the "legal maximum rent" to rise well above the actual rent being charged.PM's strategy was to raise the rents of these units to the maximum allowed, which, in manycases, resulted in dramatic rent increases and absolute rents which were beyond the ability of theexisting tenants to pay. As a result, many tenants vacated their units or were evicted when theycould no ionger afford the rent.PM did not anticipate the social and political fallout from its actions. As the evictions mounted,tenant groups formed to protest thc rent increases and the City of East Palo Alto began toactively resist PM's efforts to raise rents. The city and the Rent Stabilization Board took actionsto slow down and block PM's efforts to raise rents. PM fought back with a series of lawsuitswhich have all prevailed, and have cost EPA hundreds of thousands of dollars in legal fees,which the city cannot afford.However, these fghts have also cost PMP-II dearly. Not only has PMP-II incurred lcgal fees,but the city's tactics slowed PM's ability to rent units, as units carnot be improvecl or rentedwithout pennits. As a result, the partnership's vacancies have soared to over 400 units (22o/r),rvhich costs PMP-II over $500,000 per month in lost revenue-PM's most aggressivc tactic has been to sue the city to remove about 1,200 units from thejurisdiction of the RSO, under a provision of the RSO that allows units to be removed from itscontrol if a suffcient amount of capital has been spent rerlovating the unit. PM is arguing that thas spent the capital required to trigger this release.

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Should PM prevail in this legal action, it would gut EPA's RSO, as it rvould remove a sizablemajority of the total number of units in EPA's rent stabilization program, and make it much moredifficult to administer as the program woulcl no longer generate sufficient fees to pay for thecosts of administering the ordinance. This lawsuit is still pending.What Went WrongBesides the legal troubles with EPA and the negative publicity from the tenant groups whichhave tarnished PM's reputation, the economic downtum and credit crisis have severely impactedthe partnership's strategy.The economic downturn has forced many lower-income households to double up or leave theBay Area altogether, reducing demand for housing and causing rents to drop- The rents forecastby PM to drive the value of its properties up are simply no longer achievable. A slow andgradual recovery in rents is now forecast for the Bay Area. Also, the reduced demand hascontributed to the porfolio's high vacancy rate whch is very costly to PMPJI. The highvacancy rate will contribute to PMP's very poor economic performance in2009, where propefyoperations are now expected to generate only S5.9 million in net operating income,77 percentbelow PM's budgeted-amount of $20.0 million.The credit crisis has dramatically increased the cost of credit and virhrally eliminated theavailabilty of credit for large real estate transactions. This development makes the looming S50million Wachovia loan pay down problematic, at best. Unless Wachova grants PMP-II anextension to this pay down, the lender will seize the property and likely proceed with aliquidation which, in today's environment, would generate proceeds of less than5225 million.And even if Wachovia grants the partnership an extension, the properties generate so little cashthat PMP-II wll eventually face a liquidity crisis and be forced to sell its properties at vaiuesinsufficient to repay the lender.CaIPERS's Rqhts, Position and StatuqAs a limited partner, CaIPERS has no rights to manage or direct the affairs of PMP-II. CaIPERSstaff llave met with PM on several occasions to voice their concems over PM's actions whichhave aggravated East Palo Alto and displaced many low-incorne residents. In addition, CaIPERSfonned a dedicated team of staff and consultants to evaluate PM and identifo steps required tomake well-informed decisions on the inveshnent. There has been no evidence of wrong-doing orillegal actions by PM, yet the manager's actions have and continue to aggravate EPA and createan impression of "predatory equity" investing, which brng it negative publicity and, by virtue ofCaIPERS's investment in the PMP-ll, bring CaIPERS adverse publicity.Per PMP-lI's limited partnership agreement, CaIPERS has no rights to direct or control theaffairs of the partnership as a limited partner. However, per the partnership's originaldocumentation, CaIPERS negotiated for, and was granted, the right to replace PM as thepartnership's general partner at ny time after January 28th , 2009. CaIPERS has carefully

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evaluated this right, and may yet exercise it if necessary, but to date has refrained from doing sodue to the potential liability which would come with such replacement and the risks of having totake over the operations of the partnership. Replacing PM is especially problematic now, giventhe $50 million loan pay down due August 1,2.009 and the partnership's poor operatingperformance and high rsk of bankruptcy-In the last month, PM has approached East Palo Alto and invited the city to engage in mediationto sort out their differences. Given the partnership's impending capital crisis, it is not clear whatcan be gained from this mediation, which will undoubtedly take many months and whoseoutcome is uncertain, at best. CaIPERS continues to believe that its interests are best served bymaintaining its status as a limited partner in the partnership and carefully monitoring thesituation as it develops-

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Langhi, TarynFrorn: WanenOtto[[email protected]]Sent: Tuesday, June 02, 2OO9 12:34 PMTo: Weir, Laurie; Schlenker, Erc;Stocking, Barbara; Yrure, Edward;Pottle, Randy;Eliopoulos,Theodore; Alexander, JudyCc: Mateo, Michele; Bow, SharolSubject: Page Mill,

I am working with Michele to coordinate meetngs in your offices next Thursday afternoon on Page Mill, ,; but ljust wanted to give all of you a heads up that we're hopng to meet with you then from 1 pmthrough 5 pm.Parts of each of these meetings will be mportant for Ted and Randy to attend, namely:1- Page Millvaluation and recommended strategy - say 20 minutes.

REGTEf}4,dri+'..;::

Additional ema regarlrrg these meetings will come from Michele as she and I work together to get themscheduled.

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CALIFORNIA PUBLIC EMPLOtrES,RETIREMENT SYSTEM"PAGE MILL PRO

INDEPENDENT AON APPLYING A

r+::_::r.ritr 'r,?rl -i'.BL' ;,\'.+r:.i':i'!. i if i"d6"igJiril:1" 'iitli'4..r :1.:r-':..-',' ': ...,.r' :... -,.:.;.r.:.:.,.i- ,l . r,.:. .. . ,-,: ''ii.. J: : ,

ANTS'REPORT

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CALIFORNIA PUBLI c. BtVl pr,oyEES' RETIREMENT sysrEM.: PAG-E MILL FROPERTIES II, L-P.INDEPENDENT ACCOUNTANTS, REPORT. ON APPLYING AGREED-UPON PROCEDURES

TABLE OF CONTENTSPaqet- 23- 78 - ll

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111:h4,-, -!1'.,,'. ',.,!::,.i:tlt',t,- t,.,,rt : ::.1 _ f! - -:'\::a-j -. ,-r:jia,:.::-,.1:. ,. i.i-,r_::!_;i.- Jr::.',,\ =..=''=ti:.:..';:'"::t- "f:-::,;. I .

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5'6,*rft Nl iLrnMr. LarryJensenChief Officer of Audit SelwiceCalifornia Public Employees' Retirrient SysternSacramento, CA

At the request of the Califomia Public Employees' Rhave performed the Real Estate Partner Programprogram on Exhibit I, with respect to Page MillIlly 26,2006 by and among Page Mllor "General Partner') and CaIPERS.The procedures, which were agreed to by C

9, dev-eJo, renovate, operate, manage, hold for''.4diigct inteests in real property located in therifl-,1rtial, industraJ, retail, hospitality, office and other

is July 2006 through Jnly 26,2009-attestation sta app.!$ agreed-upon procedures was performed in accordance with thels:i!stablished by the American lnstitute of Certified Public

The Partnership waslnUni Weof attotaJThis en

4100 r\cwport Placc f)rivc, -fhircl Floor: Ncwrort Beach, CA 9260Tel, 949.221.2999 i I: ax, 949 -222 -2989 Vjcisilc., .,t'..\,\r,.)-.:r:.lici:l ri,r.( 4,,ri

CaIPEBinvestm

Accountants. The iency of the procedures is solely the responsibility of CaIPERS.Consequently, we make no representation regarding the sufficiency of the proceduresether for the purpose for which ths report has been requested or for any other purpose.Findings and recommendations have been documented begrnning on page 3 of thisrepod.

Squln, MllNrn, Prrunso, Mlnlon r rLLrnvso, LLPLt::irj i:'ti,ti;i: ii:ir,1.'l'i, ; i:'"',:itti;i.:t',:t't,..\,:,:,;r,,,i .i;rl; -ii;,; ;1.;;3655 Nobcl Drive, Suitc 500: San D;ego, C 92t22

Tcl.858-597.a 100 i Fax: 858-597-4ttl

INDEPENDENT ACCOLINTANTS' REPORT

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lr- Larry Jensn.Chief Officcr of udit ServicePage2We were not engaged to, and did not perform an examination, the objective of whichwould be the expression of an opinion on the specjfied elements, accounts, or items of thePartnership. Accordingly, we do not express such an opinion. FIad we performedadditional procedures, other matters might have come to our attention that would havebeen reported to you.This report is intended solely for the use of CaIPERS and Page Mill and is not intended tobe, and should not be used by anyone other than those specified above.

Newport Beach, CaliforniaFebruary 29,2008

Squar Milner Rcal Estate Seryiccs, GP

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Executive SummaryofFindin gs and Recommeiafionsfor . :t:,'Page Milt Propeities.ll, L.p,,

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STATE OF CALIFORNI.A PUBLIC EMPLOYEES' RETIREMENT SYSTEMExecutive Summary of Findings and RecommendatiorxPaee Mill Properries II. L.p.I;evel 'Manager FundsJAssets ManagedManager PageMill @.

':'''..'. .:.':.CALIFORNIA'PUBTICEMP.LOYEES'RETIREMETSYSTEM ' ' J ' iPAGE MILL PROPERTIES II,L.P.INDEPENDENT ACCOUNTA'ITS] R.EPORT oN APPLYING AGREED-UPON PRocEDUREs

Investment Findngs/Recommendations Auditee Response AuditorComment

Page MillProperties II,L.P-

l) The Private PMemorandum (PPM) cinvestrnent diversification smore than 20% of imaximum commitrnents arrany one investnent. The Paacquired 89 assets in neighborhood. See Comnbelow for further informatic

the diversificationAdvisory CommitteeWe recommendapprove the apparent

lacementalls foro that norggregate: made inrtnershipr [email protected]",n. 'i,,i1:he LPfu.rnrallv$'ffis"s

The LPA and-.PPM make clearthat the G",jNqt Partner hasthe dis.s,f-fion formulateinvesd'fit#,b-rratesy and that":!l: rcr.*,i-'i-the ?:rtnerShi1.does not need'es lnof real propertyrkets orrmership iceeds2u/ti:qf aggr e9ate maximumcominittrents and there is nothe LPA or

':,* achieve. No one

#JJur "$'iegarding the=Pffigship's investmentdiviffih cation requirern enrs.

We concurwithmanagernent'scorrectiveaction plan.

I --vg=tl| ":&lu l'?e-g IInvestment Auditee Response AuditorComment

Page MillPropertiesL.P. II infonnation. that intent and to clarifo thatacquisitions would be below

1,2),,Thg Invi$rgnt ilightets in lThe lcns 't" intemutI each of :ttrq Investrngnt Committee I documents maintained by theI Memorarla;(l'IcMdi?:w reviewed I General Partrer and have notI include the oporhrnf to purchase I been distributed to or reliedf.ille property ,at: approximately 40% I upon by CaIPERS or otherI below markef:asking rates. Three of I thira parties. The languageI the six propefties selected for review I was meant to be a broad' were 'acquiied for prices slightly I description of the markerabove tlre appraised vaiue- See I oppornrnity. The ICMs haveComment (1) below for further I been updated to better reflectWe recomlnend that paee ,.,, I current or potential valueimprove the manner i" *ti"' iujr I (rather than belor'v marketICM is prcpared, using information I asking prices).and due diligence data specific to Ithe unique nature ofeach asset. I

We concurwithmanagement'scorrectiveaction pla.

See Inclependent ccounloTtls' Report on pp lv i ng Agre ed - Upon Procei u res

Sqmr Milnr Ral Esrare Seryices, Gp

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T

CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEMPGE MILL PROPERTIES II, L.P.INDEPENDEN'T ACCOUNTAS' REPORT ON APPLYINC CNNTU-UPON PROCEDURESSTATE OF CALIFORNI.A PUBLIC EMPLOYEES' RETIREMENT SYSTEMExecutive Summary of Findings and Recommendations

Page Mill Properties II. L.p.lcontinued)

l.

3. We fbttg4 no exceptions as to the manner inreconciled (including records associateclallocations, o distributions).4. We founci no exceptions as to the manner in

renrs: ,t ='$|' "'i;.r.,;il:j,, =_,r;+ $.our review ""tt+itreo.."-t-ffii{ng the lffinership's (i) i nvestor capitat accounts,(ii)venctor""r*.i$lti.J50$n*ig.oi;ffi andlivu"quir"apropertes.z.!.1i,,Page Mill *o'nagem"n'1,;p.,gvded copies of porices and procedures for theaecounting and property miffient fuictions.2.

whch capital accounts are managed orwith booking capital contributions,which vendor contracts were managed.5' Our review of the Partnership's books and records for accuracy, cornpeteness,timeliness and general compliance with GAAP requirernents resulted in noexceptions-

See lndependent tlcco.tnlon' nepoil o,t

Investment Findi ngslRecommendations Auditee Response AuditorComment

Page MillProperties IIL.P.

I J) yage Mill charges the partnershipfor property management, leasingand redevelopment fees in additionto the Management Fees. TheAgreernent allows for these types offees subject to the review ofthe LpAdvisory Committee. See Comment(8) below for further information.We recommend that any fee chargeibeyond the Management Fees bedocumented in the next Lp AdvisoryCommittee meeting. ,,,r,ro_

I-'.ii_ "tll:,",.,.1

These fees were verba$approved by the CalpERSportfolio mana5er at an LpAdvisory Cornhee meetingheld at CIPERS offices in'We concurwithmanagement'scorrectiveaction plan.

Conrments: .:;-1, .ii* : ,

Squr Milncr Real Estre Scryiccs, Gp/1 pply n 9,1 grc cd- Upon p rcced ures

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CAIIFORNIA' PUB I ;I C EMPLOYEES''RETIREM ENT SYSTEMPAGE MILL PROPERTIES II, L.P.INDEPENDENT ACCOUNTa-lvrs] RXPORT ON Appl,yrNc cnnno_woN pRocEDURESSTATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEMExecutive Summary of Findings ancl Recommendations

Pase MiIl Pionerties II. L.p.lcontinueel)6' The PPM provides a definition of Fund Investments as follows: ..The Fund intendsto invest in and to acquire direct or indirect interests in a range of property types,including residential, industrial, retail, hospitality, office and other propefies,,. ThePPM provides a definition of Inveshnent Limitaiions as follows: ..unless otherwiseapproved in the discretion of the LP Advisory Committee,-lhe Fund will not investmoe than 20o/o of its commtments in uny n, Investmt".-As orr" may literalinterpret that none of the 89 residential ""qi*itioor, qll i" urt palo Alto, violate thediversification theshold, one may also nterpret: the';ll;ctive concentration ofinvestment assets in a single neighborhood does,'in fact, violate the threshold. AscalPERS holds voting rights on the Lp Advisory.committee,:t*apr;;;;;i;have zuggested that page.Min formalry gbl- I- eauisorf **iiri* ";;";;il;emedy the apparent ambiguity of the diversification anguage. .7. V/e seleCted six properties for review, .Address:1-8 Newell Ct.

#Units Annraisal221 $ 34,700,000 Acg- Priee'$ 35,411,s51s 5,:,945,439s 3,89s,000$ 2,0s1,842s 996,226s gt2,8g1

%o Above oZ BelowMarket Market _2.Lyo4.4%;o l6.2yo3.6yo

9.4yo33_6yo"'ii'''

f+e9 rirr provided its lniffil"irt committee Memoranda (..ICM') for each of the:tl_ Pi,:P"ttt"r'. . Tr. IClr-4sr'" were prepared by page vil prior ro individuaracquisiti-ons and included "boirer-plate,, ianguage (sarre write ui for each of the sixproperties) suggesting- that eacll of the investlnent assets were being purch ased 40Tobelow market value As reflected in our above analysis, three of the properties wereacguired at a price above the appraised fair market value and none were purchascdfor prices thar were 40%o beor.v the appraiseci value_ The use of ..boiler_prate,,.Ianguage is misleading when used in undlnvriting clocuments such as the ICMs. ThePPM provides that "Page Mill employs a thorough due diligcnce and conservativeundenvriting process to determin the value of potential nvestments, involvingasset lnanagement, leasing, devcloprlent, construction, property management, andfinance disciplines to examine "u" prorp"ctive irvestment to nsure that it meetsmjnimum underwrting standards, physical/structural, envjronmentar a'd legalrequirements". We obsetve that industry standard would call for each ICM to bedraftecl with inforrnation crescribin the u'ique nature of the asset, betterrepresenting the irigh level of ciue diligence the General Partner plecged to conductSee !ndependcnt /ccountants' Reton o,tpp l.vi ry greetl - tJpon pt oced u res

Squar Milner Reai Estate Senices, Gp -

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PIIGE MILL PROPERTIES II, L.P.INDEPEN DENT ACCOUN'I'ANTS' REPORT ON APPLYING AGREED- UPON PROCEDURESS',{]'E OF CAI-IFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEMExecutive Summary of l-indings and Recommenclations

Paee Mill Properties II. t.p.(continued)The PPM provides for an lnvestment Management Fee ad allows for other propertyrelated fees to the Advisor, or an affiliatq provided the terms are at least asfavorable to the Partnership as the terms reasonably-expected to be available in anarm's length transaction with an independent third ,p*y- The cumulative feesincured from JuIy26,2006 (inception) rhrough the of2007 are:

8.

Type ofFeeInvestment Managernent FeeProperty Management FeeLeasing FeeConstruction Management FeeRedevelopmentFee .:..:. ,j-:,r:..ri"

rr':, , .j',.,; :..1;r ...,r;;...:r..

Method ofl.5o/o of AvailGreater ofofprojGreater of3%o of aggregaleGreatcr of ,5% of cost oflabor or$10O

Amount in$1,000's$ 1,909r'l*-'.y revenuesii,.l::iji' 690

h's rent or

2784,019$ 7.137

241

,;,,., 3%o of the project budget..::: :: i:;rtjr.''. -i;,'i!r::i.'....i. :, .. ,..-....u. i!'.::.-r...::. !r i.',-;.:.' -.'ii 1;r:'=l

See lrulependen t,4 ccot n tan t.t' Repo onilppl-,tin g A grced-Upon Prccecl uresSguar Milner Real Brare Seryics, Gp

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ICALI FORNIA PU LI C EM PLO YEES' RBTIR-ET,'I TNi SYSTE MPACE MILL PROPERTIES II, L.P.INDEPENDENT CCOUNTANTS' REPOIT ON APPLYINC CNUBN-UPON PROCEDURESEXIIIBIT I

CatpERSREAL ESTATE PARTNER PROGRAM APPLIED TO PAGE MILI. PROPERTIES II, L.p. (..FLIND II'), AND RELATEDAGREEMENT OF LIMITED PARTNERSHIP(THE'?ARTNERSHIP AGREEMENT,)

The scope- of the agreed-upon procedures engagement to be conducted on page Millroperties II,L.P. ('.Fund II') is as follows:A. Matters Relating to partnership Govemance .. .,.,.il' Conduct an entrance conference with Page Mill officials to discuss thescope of the Agreed-upon- procedue.s, the, status of the existinginvestment properties and -those pr**" for purchase- ni."urr -tr,Etime1ineforcompIetionoftheeviw..:...-..2. obtain and review the partirrsip Agevment and a.amendments_ thereto_ Obtain and review 'the, Confidential privaie p";;;;Memorandum for Fud II (the "Ftind II ppM,). Note any inherentcontradictions and/eir terms of the Paftngrship Agreement that do notconfonrr to the Fund'II,ppM or industry.sr*au.ar; incrude ,u-*uryof findings.3- obtain,and-eview axy management'a-ereement between Fund Ir andPage Mi[ Advisors, LLC (the "Investrient Advisor"); through whichmana.gement'"agreement, Fund II may deregate certain of itsoperational d-rties and responsibilities ro,rt"u"rr-"ni""rr.r.Review the'duties ad responsibilities delegated to the Investment{d.ysor and,ote any inappropriate deregauoris; incrude a summary of' findings. observe the lever of asset -unug.rn"rrt, portforiomanagement or 'roan management fees payabre under trre Fund IIAgreemnt; reconcire fees paid to date andioiacc*ed to date.4- Review calpERs' capitar commitment to Funcr Ir, note amount fundedto date, remai'ing capital comlnitment, if any, and timetable ancrcondirions under which carpERS may be cailed'io advance ,lii*"rfunds In those instances where capital has been returned, examine theconditions, if any, under which the General partner may reca sucrrfunds; report findings.

See )ndepen


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'. .......:.- jr.'. .j .. .;,. I -.

PAGE MILL PROPERTIBS II, L.P.INDEPENDENT ACCOUNTANTS' REPOR'T ON PPLYING GREED-UPON PROCEDURESEXI.IIBITI5. obtain and review policies and procedures rerating to the managementof capital accounts and note inherent weaknesses; include u r**uryof findings and recommendations to strengthen procedures. Reviewmost recent reconciliation of capital accounts, noting capitalcontributions, allocations, parments made to the Investm"r,iAduisor,and appropriateness of same as called for in the partriershipAgreement; include a summary of findings. Obtain support forcontributions and distributions made by calpERS by/to Fund IIinvestors; veriff that base and/or incentive fees paid to the InvestnentAdvisor were calculated pursuant to the...p"-'iiitnership Agreernent;inspect financial model used to apportion* distrbutins o insureconsistency with the Partnership A

6. Obtain and review policies andof vendor serrices and note iof findings andrandom samplewith policies;findings.of thirdnote any affi

rt findings.

7..'';l;jii:

Obtain, review and do.crunent polcieJi!{ind*proceaures relating toaccounting methods, intemal. qentrols and:naintenance of Fund II'sbooks and records and note inhersnt woak;esses; include a summaryof finding qnd recommendations to strengthen procedures. obtain andreiew the 'prflrership's books and records and report conditions,Which contradict in-place procedures; focus on accuracy,completeness, timeliness and compliance with GAAP requirements.oblain and review policies and procedures rerating to the process usedto aprove portfolio investments; note any contradictions to industrystandids; note policy weaknesses and make recommendations asnecessair to strengthen policies and procedures.obtain and review policies and procedures rerating the management oftbe portfolio investments in Fund Il, noting *.kn.rr"s oi policiesinconsistent with industry standards; include a summary of findingsand make recommendations to strengthen policies found to be weak.

8.

9_

Su Inl ap entl e n t .,l ccotn tan t.t' Re lor. t o ntlpp lyi n 9 .4 grc ed - Upo n P roced u esSquar Milncr Real Estrtc Sclviccs. GP

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'., -:.j-'. , : {-'' :.-, ,, . : --:,TFORNIA PUIALI FORIN PUN I, T NNIiiO.VES' RNTTREMEN T SYS TEMPAGE MILL PROPERTItrS IL L.P.NDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED.UPON PROCEDURES

Review the portfolio inveshnents to assess consistency and compriancewith any investment-mix criteria estabrished urrdei te rarrershipAgreement; note inherent contradictions to the guidelines set fofh inthe Parrnership Agreement.9..91"i1 and review (i) rax firings, (ii) quarrerry financiar statemenrs,(iii) the two most recent quartrly r.prt, on Fund II activities andindividual investments' (iv) any investment taffic logs, (v) rist ofacquired/disposed assets, and (vi) quarterry statement of fees paid byFund II; note the Generar p*or'r timeliness. ir pr"pJ *"r,documents ard/or delivering same to interesied puii"r;'r"ponfindings. Review and recalculate managemert fees to tne lnestmentAdvisor and determine compriar"" wi the partnersh g.""rn*,.Review the detailed generar re{eer ai the portforio t"ua o, urg"and/or unusual transactions-

. . . ._",,. .'

Review the General partnei's"organizational chart to deteinnine if in-plac-e key managers ar consistentrwith those set forth in'tir" pirri *l-he nageShip Agreement; identifu kej managers not consistent withthose cited in the PpM or the partnrshi agr".*"nt; report findings.,1'Review insurance coverag maintained by Ftrnd II; report fndings.

ership's:general obligations and responsibilitjes underof Scotlrd subscription line of ;edir ($90 million)aster mortgage with Wachovja Bank- Focus on theFpliance rvith its obligations as a borrower, the

10.

11.

12.

13.14-

the loans and jts reationship with theltermjne the permitted level of mortgagePPM and the Partnership Agreement, -adip's compliance with the same.

.i.

See Indcpcnlenr ccountants' Report oSquar Mincr Rql Esrrc Scryices, Gp A pp ltin 9,1 greed- Upon proced u rcs

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B. Matters Relating to Asset and Loan Managementl. obtain and review lhe project file with focus on the process emproyedto underwrite the individual investments; note inconsistencies withFmd II's standard poricies and procedures used to underwritequaliffing investments. Focus on matters including the commitmentletter/memorandlm of understanding; purchu." * sare agreement;development or business plans; underwriting processj due dirigenceperformed; and closing process; sarnpre six- aquisitions and ,"po*findings. Interview the Fund II investment officei(s) who manage theinvesnents- -obtain and review Fund II abstract '(if uay) of the documentsevidencing the individual i tansactioir. Obtain and reviewthe asset management administration file for eachinvestment. Review Inmanagement and loaneach investment; report wih policies anit procedures.

2.

Advsors complianbe. with its assetlloi p$+f,.,,-"t as to the mnitoring ofFocus on matters includingadministration; site- spections; variance reports; drawtion of real estate taxperformance; and, sales a_qd/iif easingprogress. Interview theInvltrnerrt.t officer's in-charge of asiet management and roanadministrdtion functioni; report on sufficienJy of staff andqualilcations thereof; report on the investments' performance versusthe acqui sition underwriting.

See lndependcnt /ccountants Repu-t onppl.vitt g Agreetl -Upon prc ce th n esSquar Milncr ReJ Estarc Sen'ices, 6p

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Page I oflLanghi, TarynFrom: Wanen Otto [[email protected]]Sent: Monday, December0S, Z00g 12:31 pMTo: Weir, Laurie; Eliopoulos, TheodoreGc: Stocking, BarbaraSubject: Page Mill

I am scheduled to meet with David raran this wednseday at 2 pm in his palo Alto office. During my time withim, we'll take an hour or so to tour the properties. I understan t'iJ";;i;;ffiil;i;iJ#';i the mee.ns. Ithink we should coordinate our aclivities on'Page Mill as much "" p"riol". I think it is in calpERS,s best nterestlo fight this battle on one front, with us workingilosely togethet ruint we represent a united front to David.The main purpose of my meeting is to get as much nformation as t can out of David before the relationshipdeteriorates further- I want to better un-derstand the economics or wr,i page Mill owns and what David,sexpectations are' I'd also like to get him to tell me. what he thinks h piio" are in this situatin, if I can get himo put his suard down enoush to do so. lwittbe abte.to share everyth;it;;;;'i]"]i'Thursdayaflernoon in your offces. lf there is anything we want me to know 6eror.1 see David, please call me on my cell30 441-8387. I'm in chicago today, but *ii be in sF tomorrow and wednesday.

< t.rQ t1^t ^

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CalFER9GONFIDENTIAL

lnvestment OfficeP.O. Box2Z49Sacramento, CA 95912_27 49(e16) 795_3647FAX (916) 795_3e65. Telecommunications Device for the Deaf - (9i 6) 7gS_3240 Date: January 29,2OOBTo: Members of the lnvestment Committee

From: Ted Eriopouros, senior rnvestment officerBob Langhi, portfolio ManagerLaurie Weir, portfolio ManaierSubject: page Millproperties LitgationAttorney Client privileged CommunicationThe purpose of this memo is to provide background information on two investmentffXff^n,os that commttee memers may read about in te press or otherwise hear

R&&rHw

Galifornia public Employees, Retirement Systemincorn praza East - 400 e str"i,cuiiJE4g'' - sacramento, cA 9s8r4 i4lPM-0333


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PAGE MILL PROPERTIES II, L.P.ln 2006 CaIPERS Real Estate entered into an investment pgrtnership committing $100million to Page Mill Properties ll, L.P. Page Mill has amassed almost 100 existingapartment buildings in East Palo Alto aggregaling ovei' 1,800 units housing over 6,000residents. Page Mllembarked on a building rehabilitation program, including new roofs,sesmc upgrades, and mprovement to common areas and landscape.Page Mill has recently come under harsh criticism for raising rents on tenants who areprimarily low income and working familes. Community leaders have expressed fear thatPage Mill's strategy may include replacing some of the last available affordable housingwith more expensive housing stock.All of Page Mll's properties are under East Palo Alto's Rent Stabilization Board whichlimits frequency and size of rent increases. ln response to concems that Page Mill mightincrease rents, the city proposed to restrict the ability of Page Millto do so. (Allowablerent increases under the rent stabilization ordinance is in dispute.) Page Mill reacted byincreasing rents up to their understanding of allowable rents the week before Christmas.The City Council passed an urgency ordinance imposing a six-month retroactive renttreeze on rent controlled apartments. ln response, Page Mill has filed a lawsuit in SanMateo County Superior Court to force the city of East Palo Alto to rescind the urgencyordinance. The Court has agreed to hear the case and ordered an expedited process forreaching a conclusion. A hearing is scheduled for February 21,2007.Staff has conveyed concern and disappointment to Page Mll for their recent actons.Notably, staff has told Page Mill that the investment of CaIPERS funds should not resultin the involuntary displacement of low income or work force households. Staff scurrently seeking legal advice on CaIPERS' rights under the partnership agreement, andhas asked to meet with Page Mill to reiterate our concerns.The Page Mill rent increase and litigation has generated a lot of press, and a few calls toCaIPERS Office of Publc Affairs. Public Affairs has referred all calls to the Real EstateOffice. Staff has received a Public Records Act request which has been fonrarded toLegal for response.Questions regarding these issues should be directed to Ted Eliopoulos at (916)795-3647 and Pat Macht at (916) 795-3850.cc: Russell ReedAnne StausbollPat MachtPeter Mixon

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CaIPERSlnvestment OfficeP.O.Box2749Sacramento, CA gSB12-27 49(e16) 7es-3647FAX (916) 795-3965Telecommunications Device for the Deaf _ (916) 795_3240

To: Members of the lnvestment CommieeFrom: Ted Eliopoulos, Senior lnvestment Officer

Laurie Weir, portfolio ManagerSubject: Page Mill properties UpdateAttorney Client privileged Communication

CONFIDENTIAL

Date: December 2,200g

ln January of this year, staff provided the lnvestment Committee with a merno thatoutlined CaIPERS investment partnership with Page Mill Properties Fund ll (please seem"I9 attached). The memo summarized rent incieases, litigation between'age Milland the city of East Palo Alto, and critical pless resutting'fro-tr* r-tr*"t !ir"t"gy.The purpose of this memo is to update the lnvestment Cmmittee on recent eventsrelating to Page Mill.BACKGROUNDln 2006 CaIPERS Real Estate entered into an investment partnership committing $100million to Page Mill Properties ll, L.P. Page Mill has amassed almost 100 existingapartment buildings in East Palo Alto aqgregating ovel1,800 units housng ou"- 6,000residents' Page Mill embarked on a nuini rerruititaton program, including new roofs,seismic upgrades, and improvement to common areas and tanscape.Page Mill has come under critcism for raising rents on tenants who are primarily lowi199t" and working families. Community leders rrave expressed concern tha pageMill's strategy may include replacing some of the last availble affordable housing withmore expensive housing stock.

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RECENT EVENTSPage Mill and the city of East Palo Alto have sued and countersued one another fivetimes thus far. The stanford community Law clinicrepresented the tenants in one ofthe court cases against bolh Page Miil nd east pan li, page Milt has prevaited ineach case' ln response, East po Rtto has partnereo wn the city of Berkeley foradvice and assistance on.how to improve the administration of East pato Alto,s rentstabilization ordinance. The stanfoid communtt ; il"ic intends to press their casefurther in new litigation efforts- The teants "re lso represented by Tenants Together, atenant rights group headquartered in San Francir"o.'--.-

staff has mantained open communication with Page Mill and all interested parties. lnAugust of this year staff met with Tenants Togethei and tenants from the apartments tohear their comments and concerns. The tents relate sues including high rentincreases, lack of timely responses to requests for maintenance and repairs, and injuriesthat have occurred resulting from lack of ppropriat mintunance. They provided staff abooklet titled Homeless Now that outlines rent ncreases and habitabilty issues.over the past three months, staff has had several conversations with a tenant whoappears to be a stanford law student that is involved with the stanford Comunity Lawclinic' He informed staff that there are calPERs systm members living in some of thePage Mll apartment units. He also stated that the Law cini" is drafting a letter tocalPERS warning.against predatory investment practices. The letter is based on a NewYork city comptroller letter to invesiors-regarding the peter cooper Village proiect.inNew York city (as you are aware, calPERb s a investor n the peter cooper projectthrough our partnership with Blackrock). The Law clinc xpects the letter will be signedby congresswoman Anna G- Eshoo, oi california's 14th c.irrgrri"*iirir'i tr,-vope the letter will atso be signed by Senators Boxer and Feinstein, and other localelected officals such as the Mayor t rast Palo Alto. th.letter wilt most likely befl[o;utu"o to Board President Rob Feckner and tnvestmnt committee chair'ieorgeon August 18, 2008 ReaJ Estate staff presented the Strategic plan lmplementationupdate to the lnvestment Committee in closed session. Th"e update included stafsidentification of Page Mll as a non-strategic urban Program partnership that is identifiedfor evaluation' The agenda item noted investment purtiur" to act as consultant advisorsto assist staff with this process. Subsequently, staff has retained the services ofstockbridge as consultant, and Pillsbury wnt-hrop as outsde legal counsel for page Mill.The consultant and counsel will advise rtuff on ialPERS' rights under the partnershipagreement_

startng in November 2008, staff has spoken several times with representatives fromsElU that state that their members are tenants in Page Mill owned properlies. SEIUintends to participate in efforts to raise awareness of tenant rights and demands. SEIUnotes that this effort will be coordinated around the horiday season.

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The other Page Mill investors consist of a parallel fund that is a group of high net worthindividuals. Staff has spoken with several of these investors, each of which hasexpressed support for Page Mill's strategy-On severaloccasions, mindful of CaIPERS role as limited partner, staff has spoken wthand conveyed concem and disappointment to Page Mill foi their recent actions. Notably,staff has told Page Millthat the investment of CaIPERS funds are not intended to resultin the involuntary displacement of low income or workforce households. page Millcontends that they have done nothing inappropriate, all of their actions are lgal, andtheir investment strategy is performing as anticipated.ln conclusion, staff has met wth and heard the concerns from interested parties. Staffhas hired consultants for evaluaton and recommendation of the page Miil investmentpartnership. Staff continues to work closely with the Legal and Communicatons officeson the Page Millmatter. Staff will keep the lnvestment Commttee informed as actonsare taken relating to the Page Mill investment partnership.Q-ue-stions regarding these issues should be directed to Ted Eliopoulos at (g16) 7gS-3647.cc: Anne StausbollPat MachtPeter Mixon

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5itus [ompaniesSuulany RpoRrorrxe Due Drucrnce onPeer Mrl pRopERrEs Fur,p IfpRepRro ron CrlpERS ns or 27 fuw 2OO6

OverviewcalPERs'shift in philosophical and strategic real estate portfolio allocation ls atthe vanguard of building what might terme as the Modern Rear EstatePortfolio- These strategies are incrusrve of Emerging Managers nJimergingMarkets.Long ago adjudicated as an Altemative Asset Class, real estate has only recenybeen more abre to standardrze and gain cerbin efficiencies:whidr have thecapabilites of being quantifled and du-pricated. However, the fact i tuon-coreexceedrng @re invesrments adds a more comprex ;r;"1;;;;g;ment anmonitoring dimension. we have approached the assignment with this in mind.The scope of situs' due dirrgence conducted on page Miil propeftres Fund IIincluded review and anals of rerevant documents pertaining to the page MiilFund II; discussion with page Miil properes, cro .g"i'th;, b"ground,fund strategies and_ .operauons; atong with the formation of ourrecommendations pertaining to fund manag;ment and investment.In.conducting the due dirlgence of page Miil Fund II, we began with a review ofsubscrption documents for the fund includlng:1) sunstar-Propertes, L.p. confidentiar private pracement Memorandum datedlpril ZO00 (earlter proposed Fund name of page Mill nroperties fl, Ln. "2) The Pag-e Miil properties II updated rxecTive summary or'xey'erms anlyTruw oJ prncipal Terms as of July 2006; and3) Page Mill Properties Investment nund power point presentaton documet.

Additionally, we compared the strategic plans for page Mll Fund II to thegraphical anarvses compreted by carpERS as of 1n qJurt"i zooo lEis, n"urEstate Poricy Ranges and Ailocaton Estmated Net Return universe. we:oip1gg the targeted prans foi page Miil Fund II to the broad nges idenneoby caIPERS regarding reverage, risklnd brget retums and benchmarks.we.compiled certain topics for discussion with the cFo of page Miil propertiesand dlscussed those ponts with Terry Lee, on July 21,2006. We ,.qriJadditional supporting documentation'and current refeiences ro, p"q" Miri-"principals for our review and anarysis. These additionar documents included arepresentative investment committee memo/ business plan for a oscreerfunonvestment and a staffnq chart for Rage t"tit properties derineating tne particuta,functions and ti0es for direct emproyees, consurtants and conactors.

we conducted research on page Miil propertes and Divco west properties, aswell as on affriated frms and ndividuars wth which page Mill h., ,trut"i -relationships.

Situs S a teg ic A d vsors Page I Condtiat

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[!e !itul fompanierwe reviewed the history and current performance of page Miil Fund I aspresented in the ls quader 2006 nvestor report.our summary report presents signicnt highrights of our due dirigence findingsand recommendations to GIpERS pertainig io consideration ofi prospectivenvestment n Page Mfll Fund IL

Situs Sateg Advisors Page 2

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Ihe Jitu [rrrnpanies

Our due diligence findings are presented in the following sections:Executive SummaryOverall Fund Strategic plansFund Tactical Plans nd Methods of ExecutionAffliates to the Fund and IntenelationshipsHistory and Track Record of Fund principals and ManagersTransaction Sourcing Methods and Market AccessOrganizational and Reporting structure

our abstract document of prmary fund subscrrptton docurnents and summary ofkey terms is included in the Appendix to this report

I.II.il.IV.V.VI.vII.

Sit us Stra tegic A d visors Page 3

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(

L Executive SummarySummary of FndinqsPage Mifl has deveroped an above average and welr documented strategy in thesubsiption documents provided. rne pt"r is very articurate and werr thoughtout.Page Mill management describes a competitive advanbage due to a deveropedexternal network for sourcing of-transactions.lhe eage Mill strategy ls predrcated on the continuation of a successful rocus oncore Plus assets and realizing- varue through creave tactcar programs andplans.It s 'mportant to note that the length of rime proposed for nvestments sconsistent with prudent pranning for thrs asset dass-s opposed to not travingadequabe Ume for a project to mature.The representative invesbnent committee memq which also acts as a businessplan is very complete, professional and depicts a great measure of are.Fund subscripton documents present a reasonabre and consistent managementand investment phirosophy with similarry pranned JV investment suuures anolong-term value.added approach to eage t iilt Fund I.Summarv of Conclusions and RecomrnendationsThe FundS defined focus on ereven tecfnorogy drrven markets may regurebroader overall backing of market trends and rei estate martet rJndailentars inorder to make investment decisions and source opportunities broadry throughoutthis range of target markets.The addition of Fund staff wth sore focus on the asset-specific strategies mayprove benefcial as investments are added to the portfoiio; tnerery-seningrelanee on externar parties for imprementation' o, .nito-g oi ass"tperformance.Proactive discussion and marketing of the Fund,s nvesbnent critera maygenerate a stronger flow of potential deals from the rgeted tecr,ntoty-orivenmarkets in which Fund principals have not yet invested.Due to the limited staFf resources on the Fund team, a strategy of consistentmonitoring of market fundamentals and real estate trends wtin te targetedmarkets rnay prove benefcial to an efficient evaluation of specfic proposals forinvestment and risk management of on_going investments.Broader strategic partnershps for fnanciar consurtng and asset managementshould be proactivery investigated as part of thJ market oniio,ig u"transaction sourcing process across the ereven targeted technorogy rivenmarkets.

5tus fompanies

Situs Slrtegi. Advsors Page 4 Conldeitidl

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f itus [ompaniel

Si Ius S ra tegic A d uisots Page 5

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The lirus [ompaniesi:g ,'

II. Overall Fund Strategic plansIn consideration of the overall strategc plans of the Fund, we evaluated thefollowing criteria:- investment strategy and mrket niche- cornpetitive advantage ofthe partnership- expected returns- ability to execute the strategy- plan to add vlue to investments on strdtegc, financial and operatingbasis- prior investments sourced and performance in previous investmenLs- level of competition for lnvestments withln markets- planned average holdlng period for investments- ldentlfled risks and planned management of risks- long term vision and mission

'HtohllqhtsThe planned focus on_technology drlven markets orlginated over 15 years agowith Davd raran, cEo of page Mill properties, through his recognition ofdynamc u.s. markets affected by the trajectory of technlogy broadly and theresulting real esrdte investment opportunib'es due to shifu in demand ano zupptywithin these technology driven markets, as well as the growth and dislocation ofparticipants in the technology sectors.The fund will focus on new opportunties created from growth in 11 rargetedbechnology driven markets across the u.s., with focus o changing real estaterequ,rements among companles involved in blotechnolog healthcaretechnology, consumer technology, and the network of suppliers to acr, of thesesectors.The Fund's goal is to target coreplus nvestrnents which the cFo defines as"less speculative or opportunistic" and more basic opportunties to create valuethrough focus on repositloning, redevelopment or conversion along with actualdevelopment of real estate assets n order to create additonal value. Throughclosely associated sourcing channels, most opportunities are identjfied through anetwork of local market contacts wth awareness of off-market opportunitiessuch as local governmental representatives, corporate leaders, real estateowners and investment brokers. As such, compeb'ton for targeted investmentopportunities is described by the CFO as minimal.

The planned term for nvestments is an average eight to ten year horizon, with atargeted IRR of t2 to 14 percent achieved through adding value to core assetsacquired and repositioned or realigned over the holding period.The fund structure is similar to the page Mill Fund I in terms of a limited numberof investors, traditonal General parlner/ Lmited partner format, andmonetization of investmenls over the life cycle of the Fund. The previouslyproposed public exit or conversion to a REIT is not part of the current Fundstrategy.

Situs Strategk Advtso Page 6 Conrtddl

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/R.Y

Management is cunently in discussions with calpERS as a strategic investor inthe Fund as well as three or four addtional investors, curreni plans are tofinalize the Fund structure with calpERS, prior to further discussions wthadditional lnvestors. The target of g300 miliion will be acquired in stages, asinvestment opportunties are identified and funds can be deployed.The long term vlsion and mission of the managemenl team is to contnue theirsuccess from Page Miil Fund I with a consisteni investment strategy of appryingtheir on-gong entrepreneurial approach to value creation in bevelopmentopportuntes in technology driven U.S. markets.ConclusionsPage Mill has deveroped an above average and welr documented strategy insubscription documents provided.Page Mill management describes a competitive advantage due to a developedextemal network for sourcing of-transactions.The Page Mill strategy is predlcated on the continuaUon of a successful focus onCore Plus assets.The targeted leverage and returns of the Fund are consistent witl calpERS'expected net return universe for core plus and Value Added investments whichlie in the range of 7.5 to 15 percent, based on leverage within a range of 25 to65 percent.3 out of 5 team members in management for page Mill Fund II were newly hiredin 2006.The Fund's defned focus on eleven technology driven markets may requirebroader overall backing of market trends and rel estate market fundamentals inorder to make investment declsions and source opportunities broadly throughoutths range of target markets.Fund subscrption documents present a reasonable and consistent managementand investment philosophy wth similarly planned JV lnvestnent structus andlong-term value-added approach to page Mill Fund L

e Situs [rrrnpanies

Stus Strategic Advkon Page 7 Condslidl

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tIII. Fund Tactlcal Plans and Methods of Execution

In consderation of the tacUcal plans and methods of execution for page MillFund II, we evaluated the following critera:- investmentguidelines- planned deal pipeline- leverage targets- financial modeling and anal;als of proposed deals- preparation of buslness plans on prospective investments- review of investrnent approach and decision making on proposednvestments- approach to value cJeation- monitoring and management of investmentsHlohliqhtsThe fund rgets lnvesnents with a total potential vatue range of g25 to g50mllllon, Minimum equity investment parameters are not prescribed, with theexception of a general contribution threshold of greater than g5 milllon.The management team has an established deal pipeline of investnents androutinely reviews nvestment opportunities generated from a variety of sources.Management descrlbes the lnvesbnent review and acquisition process as adisciplined approaci to consider the investmen development, managernent anddlsposition horlzon. Leverage is planned not to exceed 50 percent of the assets'stabilized values.Potential acquisitions are evaluated through a formal written investmentcommittee memo/business plan, which includes analysis of the marketopportunity, the specific lnvestment opportunty and the financial structure of thedeal, fnancial modeling and underwriting. Busness plans focus on theconseryatve case with evaluation of both down side and up side scenarios. Theprocess for decding to invest will involve the agreement and sign off of the threesenior leaders of the management team - David Taran, Terry Lee, and JimThompson.Preparation of financal modeling, deal undenrrriung and developmentmanagement s a collaborative effort with two external entities. A consultingflrm led by scott Smithers, previously Director of Development with Rage MiilFund I, and Mariposa Real Estate Advisors are the two frms, which support thefnancial analysis, development and asset monitoring for page Mill properties.significant management time is dedicated to narrowing the pipeline down to anestimated unlverse of deals the fund would closely consider. The cFo repoasthat out of an estimated 100 deals considered, approximately 20 deals areexamined more closely, 5 are intensely evaluated, and an estimated 2 deals maybe consummated.

litut Iornpanies

St us S rd tegk A d visors Pdge I Connddttidl

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fht 5itus fompanielThe Fund does not plan to add staff pursuant to new investments, but rather relyon external strategc partners to support on-going investment analytics andmonitoring requirements.ConclusionsThe management team reviews a signifcant number of potential investments,which may or may not meet their investment parameters, due to the flow ofdeals from a variety of sources withn their target markets.Financial modeling and development expertise ls provided by entities external tothe current Fund management team.we have reviewed a representative business plan for a prospective lnvestment,provided by Page Mill propertes, basect on our reques to review the methods ofexecuuon for prospective lnvesnents. we were provided with the nvestmentcommittee memo for one asset, the. clift Hotel. The presentation appearedcomplete and well docurnented, ying out a due diligen.u ,rr'nry, ,"structure and plan of implement the transacton, a market verview for the hotelas well as an altematlve use plan.The investment decision-making process is described as thorough . andcollaborativg with focus on opportunities to add value through develpment,redevelopment, management and leasing sbategies, and prnctive piopertvmanagement.The addition of Fund staff with sole focus on the asset-specifc strategies mayprove beneficlal as investinents are added to the poroilo; thereby sseningreliance on external parties for implementation' or monitorinj of assetperformance.

Si tus Sdtegic A dvsots Pdge g Conlidtdl

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The Situs fompanier

IV. Affiliates to the Fund and InterrelationshipsIn considertion of affiliates to the Fund and interrelationships, we evaluated thefollowing criteria:- General Parher commitment to the Fund- alignment oF interests with partners- strucfure of the managemen advisory fee- flow of disblbutions to the Limited padners- information regarding the principar Terms of the Fund and partnershipgovemance issues- investor reporng criteria and schedule- enUties octemal to the Fund requrng flme of Fund principals

HiqhliqhtsThe Geneml Partner will commit 3 percent of the aggregate commitments of theumited Parrers, not to e


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e Iitu [ompanesConclusionscurrent responsibirities of David raran and page Miil management invorve theon-going moneUzation ol'the page Mill porolio.The structure of the page Milr Fund II has been revrsed based on negotiationwith CaIPERS fo a formaisimtlar to the fun l. --.

Although Page Milr has on-going responsibirifles to prior and rerated entities, theovenll activities of nvestment, monitorlng, varue creaton, management anddisposition reman the consisteni objective.

Situs Strtegk Adwsors Page I I

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he fitu [ornpanierV. History and Track Record of Fund principals and Managerc

In consderation of the history and track record of Fund prrncipars and Managers,we evaluated the following criteria:- current performance of page Mill Fund Ibacround and references for Fund prlncipals- prior en$ties led by Fund principals- references provided by Fund management- potential conflicts of lnteest between the General partner, InvestmentAdvisor and earlier invesbnen and the FundHiohliohtsAccording to Fund manage.ment and page Miil properties Investor Report as ofls.Quarter 2006, page l'rlt nao 13 inriesbnents under runugur"nl, four ofwhch are scheduled for sale ln the second quarter of 2006.The Page Mill properties lnvestor Report as of ld euarte r 2o06 presents nunrealized IRR on current investments that range between 19.6 to fi.+ percentand a realized IRR on four investments ranging irom 3r.7 to gi.l p".-."r,t.Page Mill investments are concenated rn the san Francisco Bay area, Denverand suburban Boston and are characterized as office/ R&D and noieLuits.= -'*t:tTpg^Tent fees paid to the General partner, as Investment Advisor, forI"'quarter 2006 were 9529K versus 9610K for 1* quarter 2005.Property management, _leasing commissons and construction management feesare also paid to DWPS, an affliate of the General partner. Feei earned byaffliates of the General partner are subject to review by the Lp Advisorycommittee to ensure charges are at leait as favorabre as an arm,s rengthtransaction with independent third parties.The following references for David Taran and page Mirr properties were providedto us for contact:- Tad Taube, president, Taube Investments Inc.Diane Ferguson, Senior Vce president, Royal Bank of Scofland- Michael McCool Former Director of Real Estate, CalpERS.

Additional famliar individuals were also contacted as well as public data beingcollected on Fund.principars through research services such as Lexus Nexus.Prior entities led by David raran include Divco west properties, various jointventures wth fnsiltutional investors and opportunity funds, eage Mitt properties,Page Mill Fund I, among other investments_Page Mill Properties, Lp or page Mil Fund I was page Miil,s frst institutionalprvate real estate fund whose read investors inclu-ded CarpERS, cqLsrns,OPERF, Yenzon, SpMT, and TNO.

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Ihe Siru (ompanies

Potential conflicts of interest between the General partner, the InvestmentAdvlsor and earller investments and the Fund may arise ln connection with theallocation of investment opportunities among various enuties and the Fund ILconfllcts may arise due to competition for tenants, buyers of fund invesEnents,or services offered by service providers to any partiqJlar invesbnent. conflctsmay arise due to e allocauon of managemenls ume, services and functionsbetween the Fund and other investments and projects.ConclusionsInvestigation into the history and track record of Fund princpals fndlcated thatas experlenced GB and Investrnent Advisors, they understand the various issuesof confllct of interest as regards fidudary responsibilities and have adeguate legalrepresentation to guide the process of conflicl adjudication. AddtionaV. the -LpAdvisory committee establlshment allows for forum to deal with'knornnconfllcts.The current performance of page Mill tund I and on-going consistenry ofleadershlp by Davld raran, wlth his prior educaon, trainrng and experienceshould mitigate any stgnificant problems which may become ,alnfest.conflicts of interest may an'se and should be monitored uy ine InvestmentAdvlsory committee as approprrate. These types of conflrcts ay not be uniqueto the initiation of tund II, and page Mill has a track record of chieving abovetarget returns for lnvestors irrespective of these potential conflicts and dmandsof Ume for various proJects extema to fund invesbnents,

Situs Strategrc Advisors Page 13 Conintiat

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lhe 5itul [ornpanirs

W. Transaction Sourcing Methods and Market ccessIn consideration of the transaction sourcing methods and market access, weevaluated the following criteria:- strategy for identifoing metro regions/ areas for rear estte investrnent- network for deal flow and expected competition for deals- development of concts within target markets- proactive sourcing of real estate investment opportunies- marketing of lnvestment criteria for the Fund- monitoring of technology developments withln target markets- monitortng of real estate fundamentals withln targret markets

'Hlohllqhtsarget markets lnclude eleven regons/ areas which are characterized byinformaon and biotechnology companies and actvities. t"tanagementb goal ito maintain strong partners and relationships with parties in tese areas whodeliver otenal t-ansactions as well as off-market del prospects to eag r,riil.Management acknowledges the strongest bias and deepest relationships arelocated within northem california, which aliows page Mill to maximize theeffciency and effectiveness of thelr investment activiuel in that region.Due to recognizable, high profile investments in other markets and indusbyawards which have been.received, page Mill also has strong relationships withbusiness partners and deal sourcing contacLs in southem califrnia and Denver.The Fund will focus on mantaning a network of contacts and partners within theareas where Page Mill would consder investment. These contacts includefinancial institutions, brokerage and agency representatives, corporaterelationships, and public aovernmental officials. The Fund wll sek to sourceoff-market deals with superior tnvestment potental via these contacts in targetedmarkets, whlch often are not competitively bid and enable in-depth plannlng andanalysis of the situation.Management admits to a lack of high level monitoring of overall marketfundamentals or real etate market conditions within ihe eleven targetedtechnology driven metro regons for real estate investment. Due to the nature oftransaction sourcing methods, deal flow to page Mill is based on existingrelationships. we would also suggest additional proactve evaluation of market-wide trends and events as well as identification of additional local and regionalproperty owners previously unknown to page Mill.

Transaction sourcing methods are reportedry substance focused, not marketfocused; the Fund will often create investment strategies due to theopportunities determined through discussions with the exisring contact networkwithin the targeted markets.SitDs Strdtegk Advtsors Pdge 14 Con/&ntidl

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(.

The Fund does not activery engage in the marketing of their nvestment strategyor real estate investment criteria.ConclusionsFund principals maintin strong visbirty in the markets in which page Mill andpredecessor entities have participated ln significant real estate nvestrnentactivlties.In the remander of the targted technorogy driven markets, a more proactiveapproach to networking and deveropment of a broad bas or con-tcts muypresent new opportunities to page Mill Fund II.Proactive discussion and -markeng of the Fund,s investment criteria maygenerae a sbonger flow of potentiar dears from the targeted technorogy drivenmarkets in which fund principals have not yet invested.Due to the limited staff resources on the Fund team, a strategy of consistentmonitoring of market fundamentals and real estate bends wthi; the targetedmarkets may prove beneficiar to an effcient evaruation or spenc piJsats rorinvesbnent and risk management of on-going invesbnents.Markets whch are new. target.markets to page Miil, based on the technorogylriven focus phirosophy, wirl require extnsive proactive research andinvestigation to develop a network of proprietary contacts on which the Fund cnrely to deliver a broader breadth of off-market opportunitiei wor,y orconsideration.In many u.s. real estate markets, management views the abundance of capibalpursuing few high quality deals as a significant risk. The pund needi ho unrrr"strategic advantage in the participation of off-market invesbnens, *ict ae notaggressively seller marketed.

The demonsbated success of.tJ'e. Fund in gaining market access and developngthe transaction sourcin! methods within certai-n markets rristoritf-sucn asDenver and san Francisco, should be discussed to determine 'i, o,ortadvantageous methods for efficientry and effectivery sourcing dears i n* turg"tmarkets.

e Situ [ompanies

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[!e 5itus (ompaniesVII. Organizational and Reporting Structure

In consideration of the organizationar and reporting structure of the Fund, weevaluated the following criteria:- organizaUonal structure of Fund staff and management- roles and responsibirities for staff and principars-or tne run- work frow and division of responsrbilities among the statf of the Fund- hiring plans and key posion successon plans- structure of reporting on fund rnvestments to umited partners and nvestorsHiqhliohbPage Mrll saff consists.of a team of approximatery ten coleagues incrusive ofthree principars, certain support o the core team is achieved from externaroutsourced.service provders and consurtants. page Mirr run it ,nurgur"ntdoes not plan to add signrflcant staff over le rund nvestmeni oizon, anoseeks to mainbain a strong core team supported uv .onruml;"rb.,u "Review and discusslon of the Fund's staffing pran rndicated that no Futurestaffng plan was available.

Management has a history bf maintaining parbrers for deveropment, assetmanagement and property management *rrough the structuring r tniro partycontractors and JV nvestors relationships.Maintenance of a strong and- smail core team, with reriance on extemar partners,is perceived to allow page Mirl to manage perations in a frexrbr, ecnomcarand effective manner.Preparatlon of fnanciar modering, dear underwriting and deveropmentmanagement is a collaboration effort with two extemal etties. A califomia _based consulting firm red by scott smithers and Mariposa neal staie-dvisorsare two firms which support the financiar anarysis, oevetofmni'Jnd assetmonitoring for Page Mill properUesRepresentative partnerships for_ asset management have historically includedrelationships with RREEF North America, us *!il as rocar market-bas rorrymanagement firms.Formar hiring plans or key positon succession prans have not been prepared byPage Mill for the Fund.The planned reporting structure for the Fund to Lmted partners incrudes annuaraudited financlal statements and a statement of changes in the net asset valueof Fund; quarterly reporting of the Fundt brance sheet, varue -oi eachinvestment, distributions to the Generar partner, performance mesurementretums; and monthly reporting on operatons and cash flow.Third party appraisars are contracted at the discretion of the Generar partner andare provided to Limted partners as received.

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i3ConclusionsPage Mill plans for marntaining a small core tem with reriance on externalconsultants and partners allow for intense focus on new deal evaruation andsbategc focus of adding value to core challenged assets.Requirements for Fund staffing should be evaruated as assets are added to theFund portforio andl or as rnvestments are rgeted from certan technorogydriven markets, which are new to page Mill.strategic partnerships for financiar consurting and asset management shourd beproactvely invesUgated as part of the riarket monitoringi and hinsactionsourcjng process in technology driven markes new to page Mill.Key positlon successron prans shourd be discussed as part of the ptannrng for theoverall lnvesbnent horzon for the Fund.The^ reporting sucture outlrned for fund investments appears consstent withfund investrnent repordng and lnstitubonal reporting guidelines.on-site.rgvtgw of the operations, work flow and staffing of the Fund was notincluded in the due diligence process.

lhe Sirus [ompanies

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,ltj9

Appnx To rHESuMMnny Rrponr oF THE Due DucrNcE oNPaee Mru- pRoprnrrs Fuwo IfPnrpenro ron CalpERS ns or 27 Juw 2OO6

litul (onrpanies

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MaIPERSMernorandumCaljfomia Public Employees' Rerement System

To: lnvestment CommitteeFrom: Theodore EliopoulosSenior lnvestment OfficerReal Estate

Subject: PAGE MILL PROPERTTES il, Lp

CONFIDENTIALDate: January 13,2O10

The purpose of this memo is to update the lnvestment Committee on recentevents regarding Page Mill properties in East palo Alto_ln September, a receiver was appointed by the San Mateo Superior Court at therequest of Wells Fargo Bank to oversee the management of Pge Mill Froperties'rental units- The receiver, David wald, hired lnvestors' property services iomanage the property. Our consultant, Warren Otto, of Stockbrige Capital Groupreports that Page Mill management claims that it is not making ay further effortsto regain control of the properties and has no involvement in the aisets n any wayother than to respond to occasional informational nquiries from the receiver.ln October 2009, Page Mill inquired whether CaIPERS would consider committing$25 million of additional capitatto the page Mill investment (beyond the g100million already funded) which they represented would be neessary to negotiatewith Wells Fargo on the maturity of the existing $240 million loan. CalpES staff,with the concurrence of its consultants, decide against investing additional moneyin Page Mill.on January 6, 2010, notces of rrustee sales were posted for each of the 101properties owned by Page Mill properties Fund ll (pMp ll). Each notice listsindebtedness of $239 million whch is the total outstanding principal balance of theWells Fargo (Wachovia) loan as of August, when the loan went into default. All ofthe properties are cross-collateralized.

California Public Employees' Retirement Systemwww.calpers.ca.gov

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lnvestment CommitteeJanuary 13,2A1OPage 2

The Trustee Sale is scheduled for February 1,2a1o. The bank may choose to bidits loan balance at the sale and if it is not outbid, it could take ownership of theproperties which would terminate any Page Mill properties Fund ll (includingCaIPERS) ownership of the properties.We understand that Wells Fargo is in dscussions with Bridge Housing to managethe property following the Trustee Sale. As one of the leading affordable housingproviders in the state, Bridge has the capability to effectively manage this projeci.CaIPERS has no involvement in these discussions.Staff and its consultants will continue to monitor this investment through itsresolution. Staffwill update the lnvestment Committee as soon as more completeinformation is availablePlease contact Ted Eliopoulos at (916)795-3647 wtth any questions that you haveregarding this matter.

cc: Anne StausbollPeter MixonPat MachtJoe DearKen Marzion

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CONFIDENTIALlnvestment OfficeP.O,Box2749Sacramento, CA 9581 2-27 49(916) 79$3647FAX (916) 795-3965Telecommunicalions Devce for the Deaf - (916) 795-3240

To: Members of the lnvestment CommitteeFrom: Ted Eliopoulos, Senior lnvestment Officer

Subject: Page Mill Properties ll, LPAttorney Client Prvileged Communication

cc: Peter Mixon

Date: January 8,.?91.Q ffi

Detetd: OnXX Page Mitlnquiredwhether CaIPERS would consdermmting addtional.ptat to thePage Mill Inveslrnent (bend the$100 mlllion already funded) whtchthey represenled would be necessryto negotiate with Wells Fargo on lhemturity of the existjng $240 mil[onloan- CaIPERS staff, on therecomrendaon of ts consultants.did not seejusliflcation in invesngany addtifiel money in lhisInveslmeri. f'tl

The purpose of this memo is lo update the lnvestment committee on recent eventsregarding Page Mill Properties in East Palo Alto.BackgroundJ.l gple.T9r, .?-.rgggiver-was appointed. y lhe spn Va!e.o_ $yp99q p_uf*allbesg!g9!. _of Wells Farqo Bank to oversee the manaqement of Paoe Mill Proeities' rental unils. ' -The receiver. David Wald, hired lnvestors' Propertv Services to manaqe lhe properlv.our consultant, warren otto, of Stockbridge Gapital Group reports that page Millmanagement claims that it is not making any further efforts to regain control of thepropertes and has not involvement in the assets in any way other than lo respond tooccasonal informational inquiries from the receiver-ln October 2009, Paqe Mill inquired whether CaIPERS would consider committinq S25million of additional capital to the Paoe Mill inveslment (bevond the g.t00 million alreadvfunded) which thev represented would be necessarv to neqotate with Wells Faroo on thematuritv of the existinq $240 million loan. CaIPERS staff, on the recommendation of ts

California Public Employees' Retirement SystemLncoln Plaza East - 400 Q Street, Suite E4800 - Sacramenlo, CA 9SBi4

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Recent Eventson January 6,20'10, notices of rrustee sales were posted for each of the 101 propertiesowned by PMP ll- Each notice lists ndebtedness of $239 million which is the totalortstanding principal balanc.e of the wells Fargo (wachovia) loan as of August, when theloan went into default. All of the propertis re ross-collateralized.The Truslee Sale is scheduled for February 1,z}rc- lf the bank chooses to credit bid itsloan balance at the sale, it could take ownrship of lhe properties which would terminateany PMP ll ownershp of the propeies- calpERS owns e or pt\4p ll which wouldexlirpush.any of our equity in the project since the v?e of t pbelow the loan balance-we understand that wells Fargo is in discussions with Bridge Housing to manage theProperty following the Trustee Sale. As one of the leading ffordable-housing piovdersintheSanFranciscoBayArea,Brid.geJpsl.:eepabili(vIo_effectivety_r_npfrgthig _ -property which would greafly benefr the residenti ano $eairiommliniry. ' r - -Althouoh Bridge Housng. is one of manaqers in its urban proqram. carpERS_is l-,g!. .. . ..pursuinganyfurtherinvo|vementintheproperty.-

,i1."_T.r19 -"r .qoJ!.rl,gn,*.ryJ'ol,in.u. tg,,r,pn',o. tni" ,nu".,mqn, ,l.rorg,l !, ,go,u,jp!. _ _ - -StaffwillupdatethelnvestmentiommiieeIbonJffi--.'..available.Please contact Ted Eliopoulos at (916)795-3647 with any questions that you haveregarding this matter.

Deltedr

Deletd: AttH ptee fnd anB story lhat appeared in TheMercury Neffi on June 3 reoardlmPage Mitl. The article stateithat -Page Mill lEs sent lease temnationnotices to sevtraltmanls imludnolisl aod organzer Ctris Lurxt. -flDeleted: has strted an Nesttoetionof lhe lcts

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From:Sent:To:Subject:Wanen Otto [Otto@sbfnd-com]Tuesday, December 29, 2009 3:S2 pMWeir, LaurieRE: Follow up on public cornment - page Mll / PCV-ST

Laurie, I caught up wich .rim shore yesterday and have an update for you. There's reallynot much t.o report. !e1ls Fargo is proceeding cauLiously and has noi sought ownership fthe property. The bank has also t.oned down the licigatin activity, as you would expct,but has not uniformly given up on the various lawsuiLs initiated y-page Mill againri epe.operaEions at the property leve1 appear poor, wi.th all the at.tendnt problems: crime,t.rash, vanda.ism, etc. . '

Don' hesitate to ask for anythingr else you need on page MilI or anyLhing e1se.Happy New Year, tr.P-s. Hope you're feling better; you sounded very congested last time we talked.-----Original Message- ----From: hleir, Laure [nailto :Laurie_Vrleir@CalpERs. ca. gov]Sent: Monday, December 28, 2009 2:43 pMTo: arren Ot,toSubject: RE: Fo11ow up on public comment. - pag,e Mill / PCV-STHi tarren,{ope you had a great christmas holiday! r look forward to discussing page Mlt er al inthe New Year- Best and thaks for all yor great work. L-----Original Message- ----F'rom: Varren Ot.t.o lmailLo:OttoGsbfund.com]Sent.: Thursday, December L'7, 2OO9 9:57 ptuTo: Veir, LaurieCc: Schlenker, EricSubject.: RE: Follorr up on public cornent - page Mil / PCV_STSure. 'tl get an update-from-Page-Mil1 as best r can- 'fhey haven,t been real frien1ysince we told them you had no interest in losing any more money.

-----Original Message.-----From: leir, Laurie Imailto:Laurie_!rteir@Ca]-pERS. ca. govJSent: lvednesday, December l-6, ZOOq 1:50 pMTo: lIarren Otto; Schlenker, Ericsubject: Ftt: Fol-low up on public conment - page rill / pcv-srHi t^rarren,r know Eric has asked you for draft Page Mill update for L.he Board. rf you coutd put a fehparagraphs together we w11 take it from there. (l know you have nothing better io do.-.)Thanks L-----Original Message- ----'rom: Pottle, RandySent: Ttesday, December 15, 2OOg B:12 pM

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Call in infonnation for Pagemill meeting Page I of2

l-anghi, TarynFrom: WanenOtlo[[email protected]: Tuesday, Decernber 16,200S 7:09 PMTo: Weir, LaurieSubject: RE: Page MillAgenda

Laurie, I'll lead or follow, as you prefer. I heard from Page Mill about the East Palo Alto group that appeared inSacramento yesterday. Needless to say, Page Mill is concerned about all of this, as they should be (a lttle late,maybe?). Page Mill called me to ask if I had heard anything about it, and expressed their concern. lt was easyfor me to tell them I knew nothing about it, as I had not heard anything about it until they called.

Feel free to call me at any time or look for me before the meeting, as I will be in your offices no later than g:30am. See you then, W.

From : Weir, Lau rie [ma ilto : La u rie_Wer@Cal PERS. ca.gov], Senh Tuesday, December 16,2008 6;48 PMTo: Warren Otto; Carrillo, Diego; [email protected]; Plasencia, Javier; Pechtel, Patricia' Cc: Mateo, MicheleSubjech RE: Page MillAgendaWe appreciate your willingness to lead the dscussion. I think Ted will want to take the lead based on disiussionsthat occurred in lC yesterday. Thanks again. LFrom: Warren Otto [mailto:[email protected]]Sent: Tuesday, December 16, 2008 6:38 PMTo: Carrillo, Diego; [email protected]; Plasenca, Javier; Pechtel, PatriciaCc: Weir, Laure; Mateo, MicheleSubject: Page Mill AgendaAttached hereto is the agenda for tomonow's meeting with Page Mill Properties- I will be.arriving in CaIPERS'soffices around 9 am to prepare for the meeting, which is scheduled to start at 10 am. I intend tomoderate/orchestrate the meeting to make sure we get through the agenda by noon, when an investor'sconference call with Phoenix regarding the San Diego Smart Growth Fund is scheduled to begin. I intend to keepthe meeting on a good pace so we don't dwell too long on some of these issues, which could be discussedendlessly if we let them drag on.Should any of you need to talk to me before the meeting, I can be reached on my cell phone at 630 441-8387. )From: Carrilfo, Diego Imailto:[email protected]]Sent: Tuesday, December 16,2008 5:42PMTo: [email protected]; Warren Otto; Plasencia, Javier; Pechtel, patriciaCc: Weir, Laurie; Mateo, Michele

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Call in information for Pagemill meeting

Subject: Call in information for Pagemill meetingFor those who may be calling in, l've placed the inlormation needed below:Callin # - 80G3693190Pass code - 27788

Thanks,Diego Carrillo'lnvestment OfficerGlobal Real EstateCaIPEBS400 Q sl. LPE 4800Sacramenlo, CA 95811(91 6) 795-9236 (direct)(e1 6) 7e5-3965 (fax)

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