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Home My WebLink AboutHandouts_Regular_Tab 14 _11/13/2014 �:i �$� What is Core Real Estate? - Characteristics �_ • Location • Diversified across the U.S. • Major established markets that are expected to be stable over time • Types of Properties • Existing buildings that do not need work • >80% Leased • Low-to-no debt (0-40%) • Sectors • Office • Apartments • Industrial • Retail • Hotels • PerFormance • Income driven (5-7%) • Marginal price gains (1-2%) • Correlation & benchmark • Low correlation to other asset classes � • Established benchmark: NCREIF ODCE ' ' � , : ; : , , .�_- J ��1 j l S� ,�-�-��'� ,��,t� � e�. `J � r� �� What is Core Real Estate? - Fees and Structure ., • Open-ended Commingled Fund o Entry and exit queues o Minimum typically $1 Million o Capital calls • Characteristics o Registered with the SEC o Will be a fiduciary to the plan • Fees 0 1.10 — 1.25% o Paid quarterly internally o No additional fees �.� 2 .� `� { Open-End Commingled Fund Structure - . .- ••- • -- . _ � � _ � � - . ��_ '••. . �� 3 . � �• � � �-� � - - � � • � � As of 9/30/14 $5.4 Billion (Gross) 211 Assets 15 U.S. Markets 15 Million SF • A division of ASB Capital Management founded in 1983 • A SEC registered investment advisor • Offices in Washington, D.C., San Francisco and New York — 35 employees • Two institutional funds and one separate account — 299 institutional investors • Invests in institutional quality office, industrial, retail and multifamily assets �....... qSB �III�� j ASB Allegiance Real Estate Fund 4 NL,',L f.SInIE �.IJVLSIr.1L�v'y � � � � � � � / � � � Established nearly three decades ago, the Allegiance Fund has grown into a well-diversified core platform, offering superior investment performance. The Fund is a member of the NCREIF-ODCE index. ' ' � � . • � . Gross Assets $4,821 million Inception Date June, 1984 Net Assets $3,781 million Portfolio Size (sf) 11.9 million Leverage 19.4% No. of Investments/Properties 70/172 Cash and Equivalents 0.4% Occupancy 89.0% .. . � . � ..�. . . � � : • . � Office 30% - 40% ALLEGIANCE FUND (%) NFI VALUE (%) Retail 20% - 30% Land Hotel Other Residential 15% - 25% 1,2% Offi o e i,9o� 2 4% Office 32.4 /o Industrial 15% - 20% � 5 �'• 36.0% Land 0% - 2% Reta i I Reta i I 27.3% 19.3% "� ` � Industrial 16.3% Industrial 14.7% Residential Residential 22.9% 25.3% Source: NCREIF 9/30/14 ,....... ASB �III� ASB Allegiance Real Estate Fund � k�,,� ��,��,��_ ��.��.,�.��,��_, 5 �� .. - -� , � y .... ... -- ..:.J -� - . _ ._..,,,, ._ r' - T .. . _. � w ° -. r . .. � r `° � • . r ° . � . . � .� � � ��."� �. �� 4 �;, , , �'� �., �- . i The Allegiance Fund focuses investments in primary markets with increasing exposure to stronger performing coastal cities. � ° � � � � � � - � � � • � � " � � MSA % MSA % � Boston 15.1 Dallas 9.9 ,� New York 15.0 Los Angeles 9.7 2 3C5FoC EASTCENTRAL Washington, D.C. 14.0 Chicago 7.1 � � $ ' 1 �° � San Francisco 10.6 Minneapolis 5.8 WEST CENTRAL 5 ' B �� O NORTHEAST MOUNTAIN � 30.9% � ' ' ' • ' � 5.7% �� Pacific 20% - 35% � MIDEAST Mountain 5% - 10% Q 14.0% ; , West Central 5% - 10% ��' - � East Central 5% - 15% SOUTHEAST � o _ o � 1.s�io Northeast 20 /0 35 /o SOUTHWEST Southwest 5% - 10% 10.4% Southeast 5% - 10% � Denotes target markets Q Mideast 10% - 15% '....... ASB IIII� ASB Allegiance Real Estate Fund ' 6 �:;.,� :.,,, ,,:�.��„_,,, ,, ' — � �� • • ' ' ��' � • • ' � ASB seeks top quartile performance through an investment strategy prioritizing long-term growth in net operating income. � .nd_. _ -- - � - � • � - � � ��I�', ��f��lV,��:�;��'I � � � , r:_rJ�; r�" I; iimJ�Ir� � ° . PRIMARY MARKETS ASSET ADVANTAGES LONG-TERM UPSIDE o Economic growth engines • Superior physical characteristics • Identified tenant demand drivers • Supply constraints • Abundant nearby amenities • Superior submarkets in core MSAs • Pedestrian vibrancy/mixed-use • Mass-transit proximity • Improvements in fundamentals anticipated within submarkets . � . .� � .. • Be proactive: Acknowledge new threats • Don't be greedy: Respond to irrational pricing • Admit mistakes: Divest uncompetitive assets '....... ASB IIII� ASB Allegiance Real Estate Fund ; � E�n� LSrnt� �rdvUV.u.'��'S � ' � . ' � The Allegiance Fund has avoided suburban locations, strategically focusing Fund investments in select ��growth-engine" urban/infill markets primarily in the nation's leading gateway/24-hour cities. • Protected by barriers to entry �; ��,�i�i�l�� I d ii i�l l�� I� � � .. ,, „ �,. - �, � , , • Rent growth above inflation • Vibrant locations with multifaceted amenities '� J �:::. - (cultural, entertainment, retail) '�, r ,�„� � � � � 4 � ' � � W � � — ��■ � �.� �... + � ,• �� ' � . � • Businesses seeki '!'' �� "��"""' - ng and sought after by highly - ��••�••� � � : ,� � � •:... ......,�....... : r � ....... i� .�....�....... , ,. . educated workforces with multi-generational, - ;;��;�;;;;�� ' ,� � � .. . . . .:; ,� �'�' diverse demographics ' • • • Convenient access between neighborhoods and H/ashington, D.C. Boston, MA commercial districts � �. �. . -� . �."�-� : _ , o Mass transportation; alternatives to the car ► i i ,� : • Pedestrian friendly environments _ � � ;:�� . � � ; ., -� � ut� : I � _- � _ �! , i` __ �� t' - �� F -�� @�� I ��r � 4 -_ - !iay;t;�--�t��:s"Va.=._3.... 'f4 . �4T ! .� � • "" � � `- � ^" 'i�� `�� New York, NY � San Francisco, CA '....... ASB IIII�I j ASB Allegiance Real Estate Fund � $ F,�r,� tSiN_ �r�vU�rnL;d��; . � . .� The Allegiance Fund has not experienced a� foreclosures, defaults or renegotiated debt covenants. A stringent risk management process helps to avoid asset distress. P . , , � �, • Adhere to Board-approved strategic • Rigorous investment process • Portfolio management parameters — Collaborative vetting • Compliance • Restrict leverage — Structured due diligence • External valuation process • Staggered loan maturities — Investment team continuity • Investment committee • Transfer risk to third parties . portfolio management — Independent majority — Partner recourse for financing — Business plans • Audit — Capital structure — Hold/Sell Analysis — Internaf — Completion guarantees — Stress testing — External • JV agreement affording control . Sales discipline — Investment-level • Ongoing tenant credit analysis • Maintain liquidity • ASB Board oversight • Manage lease rollover • Regulatory oversight — SEC — Department of Labor '� AS B �III� �� j ASB Allegiance Real Estate Fund / RtM �t-li rdvl_�,Ir.�L':��_. � � • . • � With a target annual return of 7% to 9% gross of fees, the Allegiance Fund has consistently exceeded the NCREIF Fund Index-ODCE for the one, three, five, seven and 10-year periods. � � � • � � � ��i �.�;'�I�� ° r ° ` � � � � ' ' � � � _ t� _ 9/30/14 9/30/14 ; • Inception to date' � income return is � ; 12.9D% a 13.$5 /o '�� 6. 52 �,o ' 15�,0 � � 1� �,o � 15% � ♦ ♦ � 10% � 8.34% ! 4,5$% �� 10% I 5o� � �� 5% � �% � 1-Yr 3-Yr 5-Yr 7-Yr 10-Yr � -5% I �% ' QTR ; YTD 1 YR i 3 YR � 5 YR 7 YR i 10 YR j !�ASB AllegianCe Fund !. 3.85% I 9.53% '� 12.90%'� 13.85%,' 12.98%'� 4.58% � 8.34% I, i�NFI-ODCE EW ; 3.46% ; 8.99% ! 12.39%: 12.21%'i 12.10%i 2.31% I 6.810�0 ; �ASB ■First Quartile Second Quartile Third Quartile Fourth Quartile � NFI-ODCE VW� � 3.24% � 8.94% � 12.40% � 12.34% I 12.40% I 2.63% ; 7.14% � 1 The NFI-ODCE Equal-Weight is a fund level equally-weighted return index and includes property investments at ownership share, cash balances and leverage (i.e. returns reflect each member fund's actual asset ownership positions and financing strategy. zThe NFI-ODCE Value-Weight is a fund level value-weighted return index and includes property investments at ownership share, cash balances and leverage (i.e. returns reflect each member fund's actual asset ownership positions and financing strategy. 3 Please see the ASB Core Real Estate Composite GIPS compliant presentation located in the Appendix section of this presentation. �....... IIII�� j s B ASB Allegiance Real Estate Fund � 10 kLnl (>INt rJVL>v.1L�d��S � �i . — � �. . • . • � Fund Structure: A Limited Partnership, with investment primarily through one or more REIT subsidiaries Performance Objective: 7%-9% on investment equity gross of fees, with majority of return through income. The Fund will seek to achieve top-quartile performance among NFI-ODCE Index Fundsl. Terms: Perpetual-life, open-end fund Commitments: $1 million minimum; commitments accepted quarterly subject to capacity. Dividend: Target annual dividend payment range of 3-5% Redemptions: Quarterly, with 30 days notice prior to quarter, and subject to GP's discretion as liquid assets permit Asset Management Fees: 1.25% (125 basis points) on the first $5 million 1.00% (100 basis points) on the next $10 million 0.90% (90 basis points) on the next $60 million 0.75% (75 basis points) on the balance (over $75 million) Other Fees: None Exclusivity: The Fund is the Sponsor's exclusive core investment vehicle. LNo assurance can be given that these return objectives can be met. � ....., i III��II AS B ASB Allegiance Real Estate Fund ( REAL ESTATE WVESTMENTS � 11 � '� . ' �'. . ' • . • � Investment Limitations: Investment: At least 80% of Fund NAV in private equity real estate properties Domain: At least 95% of Fund NAV in the United States Diversification: No more than 55% of Fund NAV in a single property type Leverage: No more than 40% on a portfolio level Single Investment: No more than 10% of Fund NAV in a single new investment Investment Guidelines: Life Cycle: At least 90% of Fund NAV in core properties Property Types: At least 80% of Fund NAV in core property types Key Service Providers: Legal Counsel: Mayer Brown REIT Counsel: DLA Piper Auditor: Deloitte & Touche Appraisal Management Firm: Altus Group U.S. Fund Administrator: State Street (,....... i pll� �S � ; ASB Allegiance Real Estate Fund ' 12 REAtESTATf WVESTMENTS � Growth of $1 ' Open-End Core Real Estate Since Inception Ending June 30, 2014 Open-End Core Real Estate $30.00 $27.00 $24.00 $21.00 � r � $18.00 � a $15.00 $12.00 � � $9.00 �/ / ! � � $6.00 ` .-.�'i� � $3.00 "\��_� _ _. $0.00 ($3.00) 9/84 12/85 3/87 6/88 9/89 12/90 3/92 6/93 9/94 12/95 3/97 6/98 9/99 12/00 3/02 6/03 9/04 12/05 3/07 6/08 9/09 12/10 3/12 6/13 6/14 Open-End Core Real Estate REITs U.S. Equity U.S. Fixed Income — ASB Allegiance Fund Calculafion based on quartedy periodicity. . " �� BOGDAI-IN 13 _ GROUP Risk and Return ' Open-End Core Real Estate October 1, 1984 To June 30, 2014 Risk and Return 12.5 12.0 11.5 U.S. Equity O 11.0 10.5 10.0 REITs O 9.5 � 0 c � 9.0 d � 8.5 ASB Allegiance Fund 8.0 • U.S. Fixed Income 0 7.5 7.0 Open-End Core Real Estate O 6.5 6.0 5.5 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 Risk (Standard Deviation %) Calculation based on quarterly periodicity. .'.,"' �� BOGDAHN �a GROUP , Actual Correlation Matrix � Open-End Core Real Estate • October 1,1984 To June 30, 2014 Actual Correlation Matrix Open-End Core Real Estate REITs U.S. Equity U.S. Fixed Income ASB Allegiance Fund Open-End Core Real Estate 1.00 REITs 0.16 1.00 U.S. Equity 0.12 0.59 1.00 U.S. Fixed Income -0.10 0.05 -0.05 1.00 ASB Allegiance Fund 0.88 0.20 0.14 -0.01 1.00 � Tt�r: � BOGDAHN 15 ��' GROUP