LOS ANGELES CITY EMPLOYEES' RETIREMENT SYSTEM

Transcription

1 LOS ANGELES CITY EMPLOYEES' RETIREMENT SYSTEM REAL ESTATE PORTFOLIO PERFORMANCE MEASUREMENT REPORT Third Quarter 2011 December 2011 COURTLAND PARTNERS, LTD. 200 PUBLIC SQUARE, SUITE 2530 CLEVELAND, OH WESTWOOD PLACE WILSHIRE BLVD., SUITE 830 LOS ANGELES, CA COURTLAND PARTNERS, LTD.

2 Los Angeles City Employees' Retirement System Third Quarter 2011 INVESTMENT SUMMARY TABLE OF CONTENTS Executive Summary... Summary of Portfolio Investment Net Returns... Gross Returns vs. Benchmarks... Risk/Return Review... Portfolio Property Type Diversification... Portfolio Geographic Diversification... Foreign Diversification... Portfolio Partner/Manager Concentration... Investment Leverage Review... Urban Exposure... Specialized Investment Review... Total Portfolio Investment Activity Statement... Significant Events Appendix Market Conditions COURTLAND PARTNERS, LTD.

3 Los Angeles City Employees' Retirement System Third Quarter 2011 EXECUTIVE SUMMARY Los Angeles City Employees' Retirement System PORTFOLIO SUMMARY (for period ended September 30, 2011) Current Portfolio Market Value: Current Portfolio, % of Total Plan Assets: 610,598, % Current Unfunded Investment Commitments: 242,548,939 Current Market Value + Unfunded Investment Commitments: 853,147,244 Current Capital Available for Investment: (165,026,933) Target Allocation to Real Estate: 688,120,311 Target Real Estate, % of Total Plan Assets: 7.0% Portfolio Inception Date: 1989 Total Number of Current Investments: 51 SUMMARY OF PORTFOLIO RETURNS (for period ended September 30, 2011) Quarter YTD 1Year 2Year 3Year 5Year Incept. Income 1.1% 3.2% 3.9% 3.9% 3.5% 3.4% 2.9% Appreciation 0.4% 5.9% 11.5% 1.4% 15.6% 7.9% 3.3% Total Gross Return 1.4% 9.3% 15.7% 5.3% 12.5% 4.7% 6.3% Total Net Return 1.2% 7.9% 13.4% 3.0% 14.4% 6.9% 5.0% Total Portfolio 610,598,305 Internal Rate of Return: 2.1% COURTLAND PARTNERS, LTD. PAGE 1

4 Los Angeles City Employees' Retirement System Third Quarter 2011 Investments Core CIM Urban REIT Hancock Forestree V Invesco Core RE USA JP Morgan SPF Value Buchanan III Buchanan V CBRE SP III CBRE SP IV CBRE SP V CBRE SP UK III DRA G&I VI Heitman VP IC Hospitality JP Morgan APF KB Opportunity IV Lowe Hospitality Mesa West RE Income II MGA DA PRISA II Prologis Japan Fund I RREEF America REIT III TA V TA VII TA IX UBS Allegis Value Trust UrbanAmerica II Urdang VA II SUMMARY OF PORTFOLIO INVESTMENT NET RETURNS (for period ended September 30, 2011) % of Target Total Net Returns Equity Market Value Portfolio Returns Quarter YTD 1Yr. 2Yr. 3Yr. 5Yr. 10Yr. Incept. IRR Multiple 171,603, % 1.7% 9.3% 15.9% 8.9% 4.8% 1.1% 5.8% 6.4% 5.7% ,621, % 11.0% 0.8% 2.5% 14.6% 4.0% 2.0% 4.5% 9.8% 4.4% ,987, % 8% IRR 0.5% 1.5% 3.4% 0.9% 0.8% 7.7% 10.2% 11.4% 11.7% ,660, % NCREIF+1% 2.0% 13.0% 18.1% 12.2% 6.8% 0.4% 5.1% 5.3% ,334, % 8.0% 3.0% 11.7% 16.9% 10.6% 5.8% 0.1% 3.5% 3.5% ,218, % 3.8% 10.9% 15.4% 3.1% 15.1% 7.2% 3.4% 4.1% 1.3% , % 18.0% 0.1% 2.0% 10.4% 8.4% 16.0% 6.0% 3.4% 17.5% ,175, % 12.0% 0.7% 3.9% 6.3% 5.2% 19.9% 20.8% 13.2% ,940, % 16.0% 0.2% 4.9% 9.6% 4.1% 12.8% 2.6% 1.2% 9.1% ,643, % 17.0% 0.1% 2.6% 9.4% 41.7% 38.8% 22.7% 25.0% 31.2% ,697, % 11.5% 0.4% 12.4% 27.6% 12.9% 1.6% 2.6% 23.2% ,297, % 15.0% 4.0% 2.3% 4.2% 6.3% N/M 76.2% 39.0% ,912, % 13.0% 22.9% 27.8% 29.8% 13.8% 1.3% 3.1% 6.7% ,901, % 15.0% 2.2% 11.7% 17.9% 18.1% 4.4% 2.3% 5.3% 1.4% ,669, % 16.0% 3.2% 41.7% N/M N/M ,771, % 9.5% 0.9% 6.3% 11.5% 2.3% 18.4% 10.1% 8.2% 10.1% , % 6.6% 5.0% 5.6% 9.4% 14.9% 17.4% 11.4% 4.4% 0.2% 4.7% ,308, % 15.8% 25.3% 33.3% 45.4% 12.1% 53.1% 32.9% 25.2% 28.6% ,017, % 12.0% 3.5% 10.3% 15.2% 6.0% 10.5% , % 18.7% 7.9% 3.4% 8.0% 30.3% 22.5% 23.4% 5.4% 5.4% 15.9% ,583, % 9.0% 4.8% 16.0% 23.5% 15.2% 13.9% 4.7% 2.2% 0.8% ,655, % 11.0% 6.9% 11.9% 16.2% 10.9% 8.5% 15.7% 14.0% 12.5% ,976, % 12.0% 5.6% 52.1% 51.5% 18.5% 26.3% 16.3% 11.8% 12.6% ,983, % Mid Teen 6.2% 16.2% 21.4% 20.8% 19.8% 6.9% 2.9% 3.7% 10.2% ,726, % Mid Teen 2.2% 6.5% 2.7% 11.7% 14.4% 3.2% 0.8% 0.6% ,038, % Mid Teen 2.4% 9.7% 16.5% 4.8% 12.8% , % 5.3% 7.7% 14.0% 12.1% 9.9% 5.8% 1.9% 2.7% 13.9% ,737, % 13.0% 2.0% 4.4% 4.1% 7.6% 12.6% 39.0% 13.6% ,596, % 13.0% 1.6% 18.0% 28.2% 16.4% 5.2% 7.9% 0.0% 1.00 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] COURTLAND PARTNERS, LTD. PAGE 2

5 Los Angeles City Employees' Retirement System Third Quarter 2011 SUMMARY OF PORTFOLIO INVESTMENT NET RETURNS (for period ended September 30, 2011) % of Target Total Net Returns Equity Investments Market Value Portfolio Returns Quarter YTD 1Yr. 2Yr. 3Yr. 5Yr. 10Yr. Incept. IRR Multiple Opportunistic Bryanston Retail Opp CJ Urban II CIM III CityView LA Urban I Colony Investors VIII CPI CPE DLJ II DLJ IV ING Realty Partners LaSalle Asia Opportunity II Lone Star VII Lone Star REF II MacFarlane Urban REF II Next Block Medical I California SGF IV Southern California SGF I Paladin Latin America III Genesis WFH II Stockbridge II Tuckerman RIVA Tuckerman MFDP III Walton Street RE V Walton Street RE VI Westbrook III 194,776,065 1,910,557 5,296,962 10,551,058 19,229,339 7,507,300 7,930,326 3,982,958 19,765,711 20,095 9,214,958 2,689,236 1,519,612 11,340, ,976 17,470,396 3,947,531 8,007,075 11,445,617 7,253,906 12,838, ,598 14,786,941 16,049, , % 0.3% 0.9% 1.7% 3.2% 1.2% 1.3% 0.7% 3.2% 0.0% 1.5% 0.4% 0.3% 1.9% 0.1% 2.9% 0.7% 1.3% 1.9% 1.2% 2.1% 0.2% 2.4% 2.6% 0.1% 20.0% 20.0% 20.0% 20.0% 18.0% 20.0% 20.0% 18.0% 8.0% 20.0% 20.0% 16.0% 18.0% 18.5% 13.0% 25.0% 15.0% 16.0% 20.0% 20.0% 18.0% 18.0% 2.6% 0.4% 4.4% 1.8% 18.2% 32.3% 14.6% 2.4% 0.8% 0.4% 0.4% 32.3% 21.6% 9.2% 3.1% 4.0% 1.6% 20.7% 2.6% 3.1% 4.6% 3.1% 1.9% 0.7% 0.1% 3.1% 0.8% 3.4% 2.2% 17.1% 32.2% 5.5% 3.5% 0.1% 9.5% 32.6% 13.1% 52.0% 11.8% 7.8% 25.7% 6.0% 28.0% 1.1% 3.9% 2.2% 4.6% 6.9% 8.9% 3.3% 8.9% 9.2% 5.8% 38.0% 6.1% 31.8% 13.5% 6.9% 14.5% 38.8% 48.2% 1.3% 17.6% 29.7% 16.2% 22.9% 29.4% 3.5% 2.2% 16.8% 27.7% 77.4% 5.1% 3.5% 15.0% 11.9% 9.9% 25.0% 7.4% 22.8% 1.9% 7.8% 8.5% 25.5% N/M 55.4% 20.9% 12.4% 12.4% 77.4% 32.2% 11.3% 5.4% 57.4% 31.8% 1.2% 24.2% 18.1% 16.2% N/M 37.6% 33.4% 24.9% 13.9% 31.4% 2.8% 8.6% N/M 48.4% 16.2% 23.2% 9.9% 71.6% 55.9% 17.7% 4.8% 10.8% 3.9% 15.3% 21.1% 11.5% 14.1% 3.8% 45.6% 1.0% 17.0% 7.7% 40.4% 8.5% 6.7% 8.6% 13.1% 1.3% 9.9% 25.4% 4.1% 1.9% 29.0% 15.5% N/M 48.4% 41.8% 14.1% 6.5% 32.3% 20.8% N/M N/M N/M N/M 35.8% 17.0% 6.0% 9.9% 96.9% 48.9% 3.1% 19.4% 9.4% 75.9% 6.3% 9.5% 85.7% 13.3% 3.3% 0.6% 33.6% 21.7% 16.8% 12.4% 7.2% 3.9% N/M N/M 45.9% 51.1% 9.3% 4.9% 8.3% 36.5% 40.1% 7.3% 27.9% 11.8% 5.7% 7.6% Total Portfolio 610,598, % 1.2% 7.9% 13.4% 3.0% 14.4% 6.9% 3.2% 5.0% 2.1% 1.06 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] COURTLAND PARTNERS, LTD. PAGE 3

6 Los Angeles City Employees' Retirement System Third Quarter % TOTAL GROSS RETURNS vs. BENCHMARKS (for period ended September 30, 2011) 20.0% 15.0% 10.0% 5.0% 0.0% 5.0% 10.0% 15.0% Current YTD 1yr. 2yr. 3yr. 5yr. Inception LACERS 1.4% 9.3% 15.7% 5.3% 12.5% 4.7% 6.3% NCREIF+1% 3.5% 11.7% 17.1% 11.8% 0.4% 4.4% 8.1% Courtland(2Q11) 3.8% 7.8% 20.1% 7.9% 8.7% 0.2% 7.4% PORTFOLIO PERFORMANCE COMMENTS (for period ended September 30, 2011) The National Council of Real Estate Investment Fiduciaries ( NCREIF ) Index contains 6,489 U.S.only commercial real estate investments with total net market value of approximately billion. The NCREIF Index provides unleveraged, propertylevel return data dating back to Individual components of the NCREIF Index include office, retail, industrial, apartment and hotel properties and are well diversified by geographic region. The Courtland Partners Index (CPI) refers to investments reported in Courtland's Quarterly Performance Measurement databases. It contains 436 active investments of pooled funds, separate accounts, direct investments, and real estate securities in which public and ERISA pension funds, endowments and/or foundations currently have investments since The Courtland Index has a total net asset value of billion with a total gross real estate value of billion and 45.8% leverage weighted by the market value of Courtland's clients. It includes three risk/return categories: 24% core, 42% value and 34% opportunistic. The Courtland Index differs from NCREIF because it includes leverage and higher risk/return investments (i.e., value and opportunistic). The Fund underperformed its benchmark, the NCREIF Index plus 100 basis points, by 2.1%, 2.4%, 1.4%, 6.5%, 12.1%, 9.1% and 1.8% for the currentquarter, yeartodate, oneyear, twoyear, threeyear, fiveyear and since inception periods, respectively. COURTLAND PARTNERS, LTD. PAGE 4

7 Los Angeles City Employees' Retirement System Third Quarter 2011 R ISK /R ETURN R EVIEW RISK/RETURN REVIEW MARKET VALUES AND INVESTMENT COMMITMENTS (for period ended September 30, 2011) Investment Commitments Summary Client Original Inv. Remaining Unfund. % of Current and Investments Incept. Market Value % of Port. Commitment Commitment Unfunded Port. Core CIM Urban REIT CIM VI Cornerstone Enhanced Mortgage I 6/06 171,603,617 39,621, % 6.5% 0.0% 0.0% 193,867,553 40,000,000 25,000,000 25,000,000 25,000,000 25,000, % 4.6% 2.9% 2.9% Hancock Forestree V Invesco Core RE USA 9/99 10/04 11,987,733 85,660, % 14.0% 10,000,000 63,867, % 10.0% JP Morgan SPF Value Bristol Value Fund II Buchanan III Buchanan V CBRE SP III CBRE SP IV CBRE SP V CBRE SP UK III DRA G&I VI DRA G&I VII Heitman VP IC Hospitality JP Morgan APF KB Opportunity IV Lowe Hospitality Mesa West RE Income II MGA DA PRISA II Prologis Japan Fund I RREEF America REIT III TA V TA VII TA IX Tuckerman MultiFamily V UBS Allegis Value Trust UrbanAmerica II Urdang VA II Opportunistic Bryanston Retail Opp CJ Urban II CIM III CityView LA Urban I Colony Investors VIII CPI CPE DLJ II DLJ IV 7/05 2/04 4/07 12/03 12/05 6/08 4/07 1/08 5/04 5/09 3/06 3/97 3/04 1/10 3/98 9/04 6/05 10/05 5/99 12/04 8/08 9/99 1/07 2/08 10/04 5/05 10/07 5/07 9/07 9/06 9/99 9/08 34,334, ,218, ,079 18,175,605 4,940,891 5,643,940 30,697,396 6,297,821 14,912,176 10,901,100 2,669,264 10,771,711 30,064 2,308,183 11,017,814 7,037 28,583,552 39,655,051 6,976,449 3,983,108 10,726,850 15,038, ,642 5,737,585 14,596, ,776,065 1,910,557 5,296,962 10,551,058 19,229,339 7,507,300 7,930,326 3,982,958 19,765, % 40.0% 0.0% 0.1% 3.0% 0.8% 0.9% 5.0% 1.0% 2.4% 0.0% 1.8% 0.4% 1.8% 0.0% 0.4% 1.8% 0.0% 4.7% 6.5% 1.1% 0.7% 1.8% 2.5% 0.0% 0.0% 0.9% 2.4% 31.9% 0.3% 0.9% 1.7% 3.2% 1.2% 1.3% 0.7% 3.2% 30,000, ,976,639 20,000,000 4,886,365 30,000,000 25,000,000 25,000,000 30,000,000 26,089,742 25,000,000 25,000,000 15,000,000 10,000,000 25,000,000 7,500,000 25,000,000 20,000,000 26,153,846 30,000,000 24,540,168 15,000,000 20,000,000 15,000,000 15,000,000 15,000,000 21,806,518 10,000,000 20,000, ,898,000 10,000,000 10,000,000 15,000,000 25,000,000 30,000,000 26,898,000 40,000,000 40,000,000 89,447,017 20,000,000 3,000,000 1,358,130 3,000,000 25,000, ,306 6,895,801 9,052,324 1,200,000 15,000, ,974 4,110, ,101,921 6,034,914 1,011,296 5,085,604 5,906,864 3,107,600 7,760,975 2,075,147 14,803, % 39.1% 2.3% 0.1% 2.5% 0.6% 0.7% 3.8% 0.7% 2.1% 2.9% 1.3% 1.1% 1.3% 0.0% 0.3% 2.4% 0.0% 3.4% 4.7% 0.8% 0.5% 1.3% 1.9% 1.8% 0.0% 0.8% 2.2% 34.9% 0.9% 0.7% 1.8% 3.0% 1.2% 1.8% 0.7% 4.1% COURTLAND PARTNERS, LTD. PAGE 5

8 Los Angeles City Employees' Retirement System Third Quarter 2011 R ISK /R ETURN R EVIEW RISK/RETURN REVIEW MARKET VALUES AND INVESTMENT COMMITMENTS (for period ended September 30, 2011) Investment Commitments Summary Client Original Inv. Remaining Unfund. % of Current and Investments Incept. Market Value % of Port. Commitment Commitment Unfunded Port. ING Realty Partners 10/98 20, % 20,000, % LaSalle Asia Opportunity II 8/05 9,214, % 25,000, % Lone Star VII 4/11 2,689, % 15,000,000 12,555, % Lone Star REF II 4/11 1,519, % 15,000,000 13,203, % MacFarlane Urban REF II 9/07 11,340, % 40,000,000 1,923, % Next Block Medical I 6/07 345, % 10,000, , % California SGF IV 10/06 17,470, % 30,000,000 2,812, % Southern California SGF I 9/04 3,947, % 10,000, , % Paladin Latin America III 11/08 8,007, % 20,000,000 10,377, % Genesis WFH II 1/07 11,445, % 20,000,000 4,987, % Stockbridge II 9/06 7,253, % 30,000, , % Tuckerman RIVA 10/04 12,838, % 25,000, % Tuckerman MFDP III 12/02 913, % 15,000, % Walton Street RE V 8/06 14,786, % 25,000, % Walton Street RE VI 4/09 16,049, % 25,000,000 10,088, % Westbrook III 9/98 758, % 20,000, % Total Portfolio 610,598, % 1,261,742, ,548, % SUMMARY OF PORTFOLIO RISK/RETURN PROFILE Weighted by Market Value Market Value plus Unfunded Commitments Opp. 31.9% Core 28.1% Opp. 34.9% Core 26.0% Value 40.0% Value 39.1% RISK/RETURN COMMENTS The current Portfolio composition, as depicted in the table entitled Risk/Return Review Market Values and Investment Commitments set forth on the prior page, produces an average expected return within the value risk/return range. The current exposures are 28% core and 72% noncore. The total potential exposure, including unfunded commitments, would be 26% core and 74% noncore upon funding all remaining commitments. COURTLAND PARTNERS, LTD. PAGE 6

9 Los Angeles City Employees' Retirement System Third Quarter 2011 P ORTFOLIO C OMPOSITION R EVIEW PORTFOLIO PROPERTY TYPE DIVERSIFICATION (for period ended September 30, 2011) Land 2.9% Healthcare 0.7% Hotel 6.0% Timber 2.0% Resid'l 28.0% Other 10.1% Retail 7.4% Office 30.6% Industrial 12.5% Type Diversification Guideline Office Industrial Retail Residential Hotel Healthcare Land Timber Other Total 30.6% 0%40% 12.5% 0%35% 7.4% 0%40% 28.0% 0%40% 6.0% 0%15% 0.7% 0%30% 2.9% 0%30% 2.0% 0%30% 10.1% 0%30% 100.0% 40.0% PROPERTY TYPE DIVERSIFICATION vs. BENCHMARKS (for period ended September 30, 2011) 35.0% 30.6% 34.9% 30.0% 28.0% 26.1% 25.0% 22.5% 20.0% 15.0% 13.8% 12.5% 10.0% 7.4% 6.0% 5.0% 0.0% Office Industrial Retail Residential Hotel 2.7% LACERS NCREIF Maximum PROPERTY TYPE DIVERSIFICATION COMMENTARY In comparison to the NCREIF Index, the portfolio is overweighted in the residential and hotel sectors by 1.9% and 3.3%, respectively. The portfolio is underweighted in the office, industrial and retail sectors by 4.3%, 1.3% and 15.1%, respectively. The portfolio falls within the investment guidelines. COURTLAND PARTNERS, LTD. PAGE 7

10 Los Angeles City Employees' Retirement System Third Quarter 2011 PORTFOLIO GEOGRAPHIC DIVERSIFICATION (for period ended September 30, 2011) Region Diversification Guideline US Not Allocated 1.8% Foreign 14.1% East 29.3% East Midwest South 29.3% 0%50% 3.4% 0%40% 14.3% 0%40% West 37.0% South 14.3% Midwest 3.4% West Foreign Other 37.0% 0%50% 14.1% 0%40% 1.8% Total 100.0% 50.0% GEOGRAPHIC DIVERSIFICATION vs. BENCHMARKS (for period ended September 30, 2011) 45.0% 40.0% 35.0% 30.0% 29.3% 32.9% 37.0% 34.6% 25.0% 22.0% 20.0% 15.0% 10.0% 5.0% 3.4% 10.5% 14.3% 0.0% East Midwest South West Maximum LACERS NCREIF GEOGRAPHIC DIVERSIFICATION COMMENTARY In comparison to the NCREIF Index, the Portfolio is overweighted in the West by 2.4%. The Portfolio is underweighted in the East, Midwest and South sectors by 3.6%, 7.1% and 7.7%, respectively. The Portfolio falls within the investment guidelines. COURTLAND PARTNERS, LTD. PAGE 8

11 Los Angeles City Employees' Retirement System Third Quarter 2011 PORTFOLIO GEOGRAPHIC DIVERSIFICATION FOREIGN INVESTMENTS PORTFOLIO GEOGRAPHIC DIVERSIFICATION ASIAN INVESTMENTS Latin America 10.3% Australia/ Pacific 0.4% Foreign Other 1.2% Europe 20.7% Korea 1.1% Singapore 1.8% China 10.3% Hong Kong 6.8% India 5.7% Asia 67.4% Japan 74.2% PORTFOLIO DIVERSIFICATION EUROPEAN INVESTMENTS Ukraine 3.6% Europe Other 2.8% Czech Republic 1.4% France 12.1% U.K. 42.1% Germany 22.6% Hungary 0.5% Latvia 0.2% Switzerland 4.9% Russia 3.1% Romania 0.6% Poland 4.4% Netherlands 1.7% COURTLAND PARTNERS, LTD. PAGE 9

12 Los Angeles City Employees' Retirement System Third Quarter 2011 PORTFOLIO PARTNER/MANAGER CONCENTRATION CURRENT INVESTMENTS Hancock 2.0% Other Managers 18.8% Invesco 14.0% Tuckerman 2.3% Urdang CM 2.4% DRA 2.4% CIM 8.2% CBRE 7.8% Buchanan 3.0% CityView 3.2% Pacific Coast 3.5% DLJ RECP 3.9% Prudential 4.7% TA 4.9% JP Morgan 7.4% Prologis 6.5% Walton Street 5.1% PORTFOLIO PARTNER/MANAGER CONCENTRATION POTENTIAL EXPOSURE Paladin 2.2% Other Managers 16.1% Invesco 10.0% Urdang CM 2.2% Bristol 2.3% Mesa West 2.4% Buchanan 2.5% Pacific Coast 2.9% Cornerstone 2.9% CityView 2.9% Prudential 3.4% Tuckerman 3.4% Hudson 3.5% TA 3.6% CIM 9.4% Prologis 4.6% CBRE 5.7% JP Morgan 5.3% DRA 5.0% Walton Street 4.8% DLJ RECP 4.8% COURTLAND PARTNERS, LTD. PAGE 10

13 Los Angeles City Employees' Retirement System Third Quarter 2011 Current Investments Current Investments and Remaining Commitments Managers % Managers % Invesco 85,660, % Invesco 85,660, % CIM 50,172, % CIM 80,257, % CBRE 47,580, % CBRE 48,938, % JP Morgan 45,106, % JP Morgan 45,106, % Prologis 39,655, % DRA 42,912, % Walton Street 30,836, % Walton Street 40,924, % TA 29,748, % DLJ RECP 40,627, % Prudential 28,583, % Prologis 39,655, % DLJ RECP 23,748, % TA 30,948, % Pacific Coast 21,417, % Hudson 29,967, % CityView 19,229, % Tuckerman 28,751, % Buchanan 18,585, % Prudential 28,583, % DRA 14,912, % CityView 25,136, % Urdang CM 14,596, % Cornerstone 25,000, % Tuckerman 13,751, % Pacific Coast 24,798, % Hancock 11,987, % Buchanan 21,585, % Phoenix 11,445, % Mesa West 20,070, % MacFarlane 11,340, % Bristol 20,000, % Mesa West 11,017, % Urdang CM 18,707, % Heitman 10,901, % Paladin 18,384, % LaSalle 9,214, % Phoenix 16,432, % Paladin 8,007, % Apollo 15,691, % Apollo 7,930, % MacFarlane 13,264, % Colony 7,507, % Hancock 11,987, % Stockbridge 7,253, % Heitman 11,020, % RREEF 6,976, % Colony 10,614, % UrbanAmerica 5,737, % Integrated Capital 9,565, % CanyonJohnson 5,296, % LaSalle 9,214, % Hudson 4,208, % Bryanston 7,945, % Integrated Capital 2,669, % Stockbridge 7,412, % Lowe 2,308, % RREEF 6,976, % Bryanston 1,910, % UrbanAmerica 6,448, % Westbrook 758, % CanyonJohnson 6,308, % Hunt Realty 345, % Lowe 2,308, % UBS 137, % Hunt Realty 988, % KB Schreiber 30, % Westbrook 758, % ING 20, % UBS 137, % Miller Global 7, % KB Schreiber 30, % Bristol 0 0.0% ING 20, % Miller Global 7, % Total 610,598, % Total 853,147, % [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] COURTLAND PARTNERS, LTD. PAGE 11

14 Los Angeles City Employees' Retirement System Third Quarter 2011 INVESTMENT LEVERAGE REVIEW (for period ended September 30, 2011) Investment Market Value Leverage Next Block Medical I Opportunistic 345, % Buchanan III Value 410, % Lone Star VII Opportunistic 2,689, % CPI CPE Opportunistic 7,930, % Tuckerman MFDP III Opportunistic 913, % MacFarlane Urban REF II Opportunistic 11,340, % Walton Street RE V Opportunistic 14,786, % Paladin Latin America III Opportunistic 8,007, % DRA G&I VI Value 14,912, % Tuckerman RIVA Opportunistic 12,838, % LaSalle Asia Opportunity II Opportunistic 9,214, % Colony Investors VIII Opportunistic 7,507, % CJ Urban II Opportunistic 5,296, % UrbanAmerica II Value 5,737, % Stockbridge II Opportunistic 7,253, % Lone Star REF II Opportunistic 1,519, % Lowe Hospitality Value 2,308, % California SGF IV Opportunistic 17,470, % RREEF America REIT III Value 6,976, % CBRE SP IV Value 5,643, % Walton Street RE VI Opportunistic 16,049, % JP Morgan APF Value 10,771, % Prologis Japan I Value 39,655, % IC Hospitality Value 2,669, % Mesa West RE Income II Value 11,017, % Urdang VA II Value 14,596, % Heitman VP Value 10,901, % TA VII Value 10,726, % DLJ II Opportunistic 3,982, % CityView LA Urban I Opportunistic 19,229, % Buchanan V Value 18,175, % Genesis WFH II Opportunistic 11,445, % PRISA II Value 28,583, % CBRE SP V Value 30,697, % Bryanston Retail Opp Opportunistic 1,910, % CBRE SP UK III Value 6,297, % Southern California SGF I Opportunistic 3,947, % CBRE SP III Value 4,940, % CIM III Opportunistic 10,551, % JP Morgan SPF Core 34,334, % DLJ IV Opportunistic 19,765, % TA V Value 3,983, % TA IX Value 15,038, % Invesco Core RE USA Core 85,660, % CIM Urban REIT Core 39,621, % Hancock Forestree V Core 11,987, % Westbrook III Opportunistic 758, % UBS Allegis Value Trust Value 137, % KB Opportunity IV Value 30, % ING Realty Partners Opportunistic 20, % MGA DA Value 7, % * Core 171,603, % * Value 244,218, % * Opportunistic 194,776, % * Total 610,598, % * Weighted by market value. COURTLAND PARTNERS, LTD. PAGE 12

15 Los Angeles City Employees' Retirement System Third Quarter 2011 P ORTFOLIO C OMPOSITION R EVIEW U RBAN E XPOSURE Urban Exposure * 2.0% 0.9% 1.9% 9.0% 1.6% Outer Urban Inner Non Urban 2.3% 0.2% 0.6% 0.8% 0.9% PreDevelopment Development Leasing 20.4% Operating ReDevelopment 58.8% Other 90.0% 80.0% 70.0% 60.0% 50.0% 20.4% Non Urban 40.0% 30.0% 20.0% 10.0% 0.0% 0.6% 0.8% 0.9% 1.9% Pre Re Development Development Leasing Operating Development Other Urban 1.9% 9.0% 1.6% 58.8% 2.0% 0.9% NonUrban 0.6% 0.8% 0.9% 20.4% 0.2% 2.3% Total 2.5% 9.8% 2.5% 79.1% 2.2% 3.2% Los Angeles 2.4% LA County total 8.7% California total 27.2% Total number of investments with an office in California: 39 * Excluding Lone Star funds. Pre Development 9.0% 1.6% 58.8% Development Leasing Operating Re Development 0.2% 2.3% 2.0% 0.9% Other Urban COURTLAND PARTNERS, LTD. PAGE 13

16 Los Angeles City Employees' Retirement System Third Quarter 2011 S PECIALIZED I NVESTMENT R EVIEW Specialized Investments ("S.I.") Buchanan III CanyonJohnson Urban II * CityView LA Urban I * Genesis Workforce Housing II * Southern California SGF I * UrbanAmerica II * Next Block Medical I Total Specialized Investments S.I.Market Value (In 1,000) S.I. MV + Commit.(In 1,000) ,297 6,308 19,229 25,136 11,446 16,433 3,948 4,515 5,738 6, S.I. M.V. + Commit. as % of RE Portfolio + Commit. S.I. as % of Total S.I. as % of RE Specialized Funds Portfolio 0.9% 0.1% 0.1% 11.4% 0.9% 0.8% 41.4% 3.2% 3.2% 24.6% 1.9% 2.1% 8.5% 0.7% 0.6% 12.4% 0.9% 0.8% 0.8% 0.1% 0.1% 46,413 60, % 7.6% 7.6% Maximum Allocation to S.I million 10.0% of million Potential Exposure Available Allocation to S.I million 2.4% * Jcurve affecting fund due to Predevelopment/Development prior to realization of proceeds. SPECIALIZED INVESTMENTS ("S.I.") 3.5% 3.2% 3.2% 3.0% 2.5% 2.0% 1.9% 2.1% 1.5% 1.0% 0.5% 0.9% 0.8% 0.7% 0.6% 0.9% 0.8% 0.0% 0.1% 0.1% 0.1% 0.1% S.I. as % of Fund's Real Estate Portfolio S.I. M.V. + Commits. as % of Fund's Real Estate Portfolio plus Commits. COURTLAND PARTNERS, LTD. PAGE 14

17 Los Angeles City Employees' Retirement System Third Quarter 2011 Qtr. Total Portfolio Investment Activity Statement Gross * Return of * * Net * Unrealized * Realized Ending Contributions Fees Capital Distributions Income Appreciation Gain Market Value Q189 6,666, ,417 6,772,083 Q289 16,183,829 (17,514) 276,401 Q389 10,965,597 (116,007) 530,669 23,214,799 34,595,058 Q489 13,175,966 (49,135) 1,204,187 48,926,076 Q190 (4,345) 832,861 49,754,592 Q290 6,116,389 (22,812) 591,846 Q390 23,715,922 (4,610) (224,628) 3,254 1,020,622 56,440,014 80,955,184 Q490 23,370,015 (12,770) (482,821) 14,287 1,620, ,477,457 Q191 1,812,459 (18,882) (698,592) 42,429 1,130, ,764,022 Q291 2,302,062 (20,328) (799,573) 51, ,551 Q391 5,314,656 (31,640) (893,346) 75,570 (2,631,311) 110,232, ,098,150 Q491 4,926,980 (38,572) (996,894) 96,881 (8,704,967) 107,420,150 Q192 6,677,360 (45,789) (1,294,589) 4, , ,777,746 Q ,780 (52,952) (1,220,670) 73, ,096 Q392 5,800,000 (49,332) (1,189,162) 208,724 (2,951,498) 113,880, ,748,724 Q492 7,084,000 (45,698) (1,828,227) (1,354,744) 101,618 (2,645,505) 117,105,867 Q193 5,565,634 (61,091) (2,775,002) 254,439 1,625, ,776,914 Q293 1,317,888 (68,340) (8,888,858) 130,403 1,155,359 Q393 5,711,040 (54,882) (3,117,924) 212,121 2,203, ,491, ,500,380 Q493 1,520,000 (45,974) (3,213,455) 140,607 (402,264) 118,545,268 Q194 (36,292) (2,449,234) (2,411,803) 95,529 3,710, ,490,508 Q ,936 (27,127) (1,489,385) (2,358,305) 82,420 1,773,562 Q394 (24,611) (3,557,069) 31,325 1,200, ,118, ,793,726 Q494 (6,856) (2,489,417) 87,364 1,572, ,963,704 Q195 1,240,000 (10,870) (1,338,631) (1,638,981) 74,406 3,404, ,704,905 Q295 (2,916,963) (1,733,284) 2,120 2,806,145 Q395 (95,000) (1,564,781) 30,460 1,025, ,862, ,259,298 Q495 8,664,000 (336,300) (1,776,069) 287 2,403, ,215,100 Q ,238 (46,947) (289,059) (2,527,453) 1,358 2,506, ,086,942 Q ,240 (23,474) (2,021,136) 2,039 3,043,170 Q ,903 (23,474) (1,654,961) (1,656) 2,377, ,767, ,739,201 Q496 1,738,763 (20,795) (9,694,242) (2,035,967) (76,598) 3,999, ,670,249 Q197 2,444,843 (24,653) (1,374,917) (1,891,872) 42,771 3,207, ,098,875 Q297 3,226,772 (35,837) (3,466,319) (6,116,979) 85,647 2,870,022 Q397 4,580,158 (3,813) (17,767,335) (4,515,694) 193,533 2,231, ,698, ,420,485 Q497 3,656,237 (145,935) (2,552,185) (5,646,928) (234,751) 9,637, , ,412,340 Q198 3,207,120 (40,919) (10,469,992) (6,098,501) 81,022 3,234,509 96,366,499 Q298 4,973,606 (28,715) (2,081,030) (4,890,599) 40,147 1,721,655 Q398 8,405,955 (348,470) (11,201,819) (5,468,681) (123,468) 2,351, ,125 63,252 96,193,530 90,559,333 Q498 10,916,389 (341,255) (585,882) (4,610,925) (408,281) 3,500, ,835 99,731,451 Q199 15,157,950 (234,399) (651,568) (1,084,788) 507,214 1,808,352 42, ,511,356 Q299 9,921,244 (375,964) (781,122) (7,915,633) 1,172, ,572 Q399 32,948,471 (634,739) (4,879,676) (1,853,483) 947, , , , ,913, ,527,081 Q499 25,643,364 (650,654) (17,136,360) (1,489,950) (2,276,372) 3,765,172 2,952, ,985,740 Q100 11,519,453 (634,490) (6,198,749) (1,291,019) 1,832, , , ,994,595 Q200 8,707,177 (651,741) (2,711,155) (1,974,044) 4,450,532 (2,026,502) Q300 18,520,760 (539,418) (4,673,760) (8,617,581) 1,376,616 29, , , ,058, ,402,158 Q400 31,162,476 (967,307) (2,492,390) (3,316,566) 648,715 2,554, , ,838,448 COURTLAND PARTNERS, LTD. PAGE 15

18 Los Angeles City Employees' Retirement System Third Quarter 2011 Qtr. Total Portfolio Investment Activity Statement Gross * Return of * * Net * Unrealized * Realized Ending Contributions Fees Capital Distributions Income Appreciation Gain Market Value Q101 6,539,840 (795,671) (1,259,667) (4,464,695) 3,305, , , ,135,304 Q201 9,611,649 (643,416) (2,243,042) (7,112,641) 2,608,985 1,986,480 Q301 1,106,714 (739,763) (5,617,139) (7,588,396) 4,005,923 1,757, ,958 Total 1,354,095,960 (91,411,227) (422,097,431) (399,247,631) * Restated. 436, ,423, ,564,644 Q401 6,919,811 (873,835) (2,265,492) (9,611,092) 3,495,620 5,484, , ,295,330 Q102 7,747,001 (709,223) (2,732,250) (4,359,820) 4,168,110 1,794, , ,212,048 Q202 1,728,816 (833,445) (11,439,943) (8,486,231) 4,998,433 1,017,155 Q ,226 (707,728) (18,229,419) (1,845,593) 1,759,761 1,661, , , ,909, ,117,682 Q402 12,829,964 (894,709) (1,506,490) (8,646,747) 1,074,779 (2,994,283) 655, ,529,915 Q103 1,643,080 (664,700) (2,260,651) (3,787,902) 2,898,985 (708,202) 1,279, ,594,889 Q203 6,899,945 (880,614) (1,371,675) (3,812,529) 2,423, ,893 Q303 13,291,056 (672,973) (12,050,620) (4,310,596) 2,367,771 (2,508,604) 1,072,378 2,266, ,153, ,015,213 Q403 1,790,079 (1,534,008) (20,617,326) (4,392,970) 677,938 6,862,054 2,928, ,263,706 Q104 5,193,015 (753,824) (23,262,472) (7,525,464) 1,794,190 (1,412,059) 2,621, ,672,191 Q204 6,398,177 (1,556,935) (5,664,120) (2,409,649) 869,635 3,260,929 Q304 5,613,819 (723,477) (10,359,164) (10,218,940) 1,480,586 18,788 3,181,915 2,003, ,130, ,847,779 Q404 88,426,537 (3,566,054) (16,628,261) (12,671,261) 1,777,768 9,315,560 9,173, ,241,950 Q105* 19,507,910 (485,465) (11,274,539) (22,628,991) 1,961,875 (3,980,450) 8,695, ,523,535 Q205* 21,073,449 (1,609,345) (13,601,695) (11,155,757) 1,648,066 2,637,565 Q305 49,913,944 (419,824) (18,835,163) (14,804,339) 2,156,368 3,799,450 7,676,919 4,435, ,560, ,467,385 Q405 34,999,808 (4,363,134) (10,782,174) (4,677,490) 1,742,343 15,187,209 5,916, ,853,733 Q106 29,089,752 (919,741) (8,050,402) (8,430,533) 2,815,633 3,643,730 4,358, ,280,862 Q206 39,421,969 (1,471,956) (5,047,599) (4,292,366) 3,899,227 8,484,040 Q306 39,441,024 (1,425,131) (7,613,004) (5,167,405) 1,310,794 2,109,153 2,199,345 4,293, ,039, ,319,682 Q406 35,847,974 (5,357,288) (11,432,520) (8,916,259) 1,391,274 24,163,893 3,350, ,724,281 Q107* 20,422,438 (2,239,979) (5,101,227) (7,556,750) 3,588,672 5,002,091 2,132, ,212,417 Q207 35,453,280 (4,834,597) (10,383,825) (14,111,359) 1,960,104 11,503,312 Q307 20,374,060 (2,667,147) (6,344,997) (8,744,696) (531,436) 9,857,607 5,726,076 2,692, ,325, ,662,588 Q407 32,574,314 (3,930,960) (13,731,407) (8,846,691) (1,484,295) 6,112,159 8,049, ,336,323 Q108* 43,543,634 (2,851,281) (2,068,865) (3,345,498) 54,201 (1,717,921) 1,977, ,779,649 Q208* 45,597,001 (1,491,327) (6,478,662) (3,763,435) 1,561,572 (8,595,857) Q308* 42,370,079 (2,846,368) (3,366,277) (3,811,605) 475,511 (38,236,349) 2,366,496 3,069, ,169, ,967,588 Q408* 27,416,180 (1,140,952) (35,039) (4,097,733) (604,094) (105,690,476) 883, ,839,472 Q109 23,653,512 (2,619,139) (649,910) (1,922,807) 1,365,783 (70,180,264) (1,470,913) 484,634,873 Q209 35,037,583 (3,429,183) (654,118) (1,304,930) 715,953 (71,576,246) Q309* 16,704,327 (2,630,131) (410,095) (2,011,684) 1,878,357 (24,876,888) (2,253,640) 247, ,100, ,131,263 Q409* 25,420,037 (2,399,012) (1,267,646) (1,901,922) 2,765,821 (45,414,744) (3,824,661) 411,908,149 Q110* 14,249,356 (2,920,101) (520,965) (2,093,224) (349,365) 6,428,723 (7,880,792) 421,741,881 Q210* 31,211,418 (2,576,159) (532,362) (4,079,765) 2,362,760 3,327,607 Q310* 40,616,797 (2,556,281) (5,264,009) (3,219,233) 1,394,224 21,025,410 (3,714,383) (1,479,130) 452,552, ,391,214 Q410* 38,059,245 (4,080,875) (16,994,630) (9,338,706) (505,029) 29,545,506 (3,194,538) 540,963,062 Q111* 8,969,755 (2,025,834) (3,069,054) (2,599,585) 3,181,725 9,467,926 3,257, ,171,693 Q211* 25,086,538 (3,464,388) (5,557,727) (6,128,819) 2,808,198 26,671,731 Q311 24,464,547 (1,675,640) (6,060,489) (9,138,985) 4,851,147 (1,761,641) 92,197,416 (92,597,617) 78,247,607 (8,712,933) 594,338,683 3,905, ,598,305 COURTLAND PARTNERS, LTD. PAGE 16

19 Los Angeles City Employees' Retirement System Third Quarter 2011 Significant Events CBRE Strategic Partners III During the quarter, the fund sold The Summit, an office building in Las Colinas, Texas. CBRE Strategic Partners IV During the quarter, approximately 350 million of Partnership recourse exposure was eliminated due to refinancing activity on Office Holdings Portfolios. CBRE Strategic Partners V During the quarter, the fund sold an apartment community in Maryland, Cambridge Court, for 9.4 million gross, generating a 36.5% prefee, leveraged IRR. The disposition of the Partnership s 51% interest in 1540 Broadway was also completed. CityView LA Urban Fund I During the quarter, the fund acquired a 110 unit apartment project in Toluca Terrace, a 250 unit apartment project in Covina, a 45 unit luxury apartment in Sherman Oaks, and a three story 36 unit fully stabilized apartment building in North Hollywood Arts District. The fund also purchased a note secured by a completed apartment building with 68 units in North Hollywood. IC Hospitality Fund The fund acquired its second hotel, the Holiday Inn Oceanfront Hotel in Hilton Head, South Carolina during the quarter. Invesco Core Real EstateUSA During the quarter, the fund acquired IE Logistics, a 1.4 million square foot, Class A industrial property which is 100% occupied by Hewlett Packard in Southern California. The fund also experienced significant writeups on the following properties: 55 Cambridge, Parkside Office Towers, One Liberty Square and Valencia Town Center in the office portfolio. The largest positive variances occurred in the Milestone Portfolio and Stoneridge Apartments in the apartment portfolio due to rent growth, increased occupancy and reductions/eliminations in concessions. JP Morgan Alternative Property Fund During the quarter, the fund completed the disposition of a Chicago selfstorage portfolio with the foreclosure of four properties that have been in default since April JP Morgan Strategic Property Fund The fund invested 1.5 billion of equity to acquire nine investments in the residential, office and retail sector as well as a partner s interest in the Crescent Portfolio. Additionally, disposition activities yielded total net proceeds of million. LaSalle Asia Opportunity Fund II During the quarter, the fund sold the Crowne Plaza Changi hotel in Singapore. Lowe Hospitality Investment The fund had 9 million of unrealized appreciation during the quarter. The value of the Driskill Hotel appreciated by 8 million and the Miramonte Resort appreciated by 1 million. Next Block Medical I During the quarter, 4540 Worth, an Industrial property in Los Angeles was sold. Paladin Realty Latin America Investors III During the quarter, the fund committed 82% of the 454 million total capital to fourteen investments which included two public Brazilian homebuilders and twelve programmatic joint ventures in Brazil, Mexico, Peru and Costa Rica. The fund also sold all of its Even stock holdings (11.25 million shares) during the quarter. COURTLAND PARTNERS, LTD. PAGE 17

20 Los Angeles City Employees' Retirement System Third Quarter 2011 Significant Events Prudential PRISA II During the quarter, 41.4 million was funded to commence the development of four new apartment projects. Dispositions totaled 19.3 million. Stockbridge Real Estate II The fund sold its retail component of THE 88 during the quarter. Tuckerman Residential Income and Value Added During the quarter, a 280unit residential joint venture investment located in Arizona was sold for 32.3 million. The fund received 9.3 million from the sales proceeds yielding a 0.9X gross equity multiple. Urdang ValueAdded Fund II During the quarter, the fund acquired the following assets: Centre at La Quinta, Villas at Hermann Park, Yakima Vistas and Eureka Drive. Walton Street Real Estate Fund V The fund sold Denver Marriott City Center in Colorado, Paramount Hotel in New York, London Hotel assets in London, England and Sheffield Square in Texas. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] COURTLAND PARTNERS, LTD. PAGE 18

21 Real Estate Market Conditions 3Q 2011

22 U.S. Foreclosure Activity 2011 Midyear Top 10 Metro Areas with the Highest Foreclosure Rates 2010 Midyear vs Midyear 2010 Midyear % Households 2011 Midyear % Households Metro Area, State in Foreclosure Metro Area, State in Foreclosure Las VegasParadise, NV 6.60 Las VegasParadise, NV 5.36 Cape CoralFort Myers, FL 4.98 PhoenixMesaScottsdale, AZ 3.51 Modesto, CA 4.59 Modesto, CA 3.32 Merced, CA 4.47 Stockton, CA 3.24 RiversideSan Bernardino, CA 4.37 RiversideSan Bernardino, CA 3.21 Stockton, CA 4.37 VallejoFairfield, CA 3.09 PhoenixMesa, AZ 4.28 RenoSparks, NV 2.96 OrlandoKissimmee, FL 4.15 Bakersfield, CA 2.78 VallejoFairfield, CA 3.91 Merced, CA 2.78 MiamiFt Lauderdale, FL 3.89 Sacramento, CA 2.53 Note: The Foreclosure Heat Map is for the month of July Source: RealtyTrac; July 2011

23 U.S. Unemployment and Job Loss Jan07 Feb07 Mar07 Apr07 May07 Jun07 Jul07 Aug07 Sep07 Oct07 Nov07 Dec07 Jan08 Feb08 Mar08 Apr08 May08 Jun08 Jul08 Aug08 Sep08 Oct08 Nov08 Dec08 Jan09 Feb09 Mar09 Apr09 May09 Jun09 Jul09 Aug09 Sep09 Oct09 Nov09 Dec09 Jan10 Feb10 Mar10 Apr10 May10 Jun10 Jul10 Aug10 Sep10 Oct10 Nov10 Dec10 Jan11 Feb11 Mar11 Apr11 May11 Jun11 Jul11 Aug11 Sep U.S. Unemployment Rate (%) (100) (200) (300) (400) (500) (600) (700) (800) (900) Monthly Change in Total Employment (000s) Monthly Change in Total Employment (000s) Total Employment Private Sector Employment Unemployment Rate Underemployment Rate Sep11 9.1% 16.5% Aug11 9.1% 16.2% Jul11 9.1% 16.1% Jun11 9.2% 16.2% May11 9.1% 15.8% Apr11 9.0% 15.9% Mar11 8.8% 15.7% Feb11 8.9% 15.9% Jan11 9.0% 16.1% Dec10 9.4% 16.7% Nov10 9.8% 17.0% Oct10 9.7% 17.0% U.S. Underemployment Rate (%) Recession Underemployment 3 Source: U.S. Bureau of Labor Statistics; As of September 30, 2011

24 Cap Rates, Vacancy, Flows & Yields Cap Rates U.S. Net Capital Flows 11% 10% 9% 8% 7% 6% 5% 4% Apartment Industrial Office Retail 20% 18% 16% 14% Vacancy Rates 18% 16% 14% Income vs. Treasury Yields 12% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% 0% Apartment Industrial Office Retail 2% 0% 4 NPI Income NAREIT Equity Dividend Yield 10Year Treasury Source: NAREIT, NCREIF; As of September 30, 2011

25 U.S. Cap Rates and Returns Transaction vs. Current Value Cap Rates 5 Source: NCREIF; As September 30, 2011

26 CRE Cap Rate Spread over U.S.T. 10yr 8% 6% 4% 2% 0% 2% 4% 6% NPI Cap Rate less 10Yr U.S. Treas. 3Q11 Avg. CRE Cap Rate: 6.5% 3Q11 Avg. U.S.T. 10Yr.: 1.9% Current Spread: High Spread: Low Spread: Average Spread: +463 bps +538 bps 606 pbs +177 bps 8% Spread LongTerm Average Note: Current spread as of November 2, Source: NCREIF, Courtland Partners, Ltd.; As of September 30, 2011

27 Private/Public Real Estate Buy/Sell Periods NCREIF All Property Cap Rates NAREIT Equity Index Dividend Yields 11% 9.78% 2Q95 14% 13% 13.07% May74 10% 9% 8.64% 1Q02 12% 11% 11.12% Oct % Feb09 10% 8% 9% 7% 6.95% 1Q10 8% 7% 6% 5% 4% 6.32% 4Q89 Average: 7.54% Standard Deviation: 1.06% Green Line: One Standard Deviation Yellow Line: Two Standard Deviations 5.37% 1Q % 3Q11 6% 5% 4% 3% 2% Average: 7.19% Standard Deviation: 1.76% Green Line: One Standard Deviation Yellow Line: Two Standard Deviations 5.85% Sep % Sep % Jan % May % Oct11 NCREIF data as of September 30, 2011 NAREIT data as of October 31, Source: NCREIF, NAREIT, Courtland Partners, Ltd

28 1990 Global Real Estate Securities Regional Performance EPRA Index Performance (rebased to 100) January 1, 1990 October 31, ,600 1,400 1,200 1,000 Peak to Trough: 67.70% Asia 71.56% Europe 69.12% North America 67.25% Global Trough to Current: 84.37% Asia 83.91% Europe % North America % Global Peak to Current 40.45% Asia 47.69% Europe 20.46% North America 30.17% Global ` Asia Europe North America Global 8 Source: EPRA/NAREIT

29 Debt Market Conditions

30 Commercial Real Estate Mortgage Debt Maturing Approximately 2.5 Trillion in Commercial Real Estate Debt is Expected to Roll Analysts estimate 50% will not qualify for refinancing due to LTV in excess of 90% are pivotal years: over 300 billion of loans maturing each year Source: Mortgage Bankers Association, Trepp, Federal Reserve Flow of Funds and KBW Research 10

31 Mortgage Resets, Delinquencies, Home Prices Adjustable Rate Mortgage Reset Schedule ( bil.) Home Price Percentage Decline From Market Peak Dallas Denver Boston Charlotte Cleveland New York Atlanta Washington Portland Seattle Chicago Minneapolis San Francisco San Diego Los Angeles Detroit Tampa Miami Phoenix Las Vegas Composite10 Composite20 S&P CaseShiller Home Prices Source: Credit Suisse Delinquency Rates: Residential vs. Commercial (60+ day) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% Source: S&P CaseShiller Index; August 2011 Residential Delinquencies by Loan Number Source: CMSA, JPMorgan, LoanPerformance, Trepp, Inc. Source: MBA National Delinquency Survey, CMSA 11

32 CMBS Issuance & Spreads NonU.S. U.S. Annual CMBS Issuance (US bil.) Source: Commercial Mortgage Alert, CMSA The collapse in investor demand caused CMBS spreads to widen dramatically across the risk spectrum. CMBS issuance is down more than 90% from 2007 peak levels. CMBS issuance is projected to total 4060 billion in 2011, up substantially from 12 billion in AAA CMBS spreads are back to prelehman levels. CMBS spreads widen out since July CMBS Spreads to 10Yr Treasury AAA Rated AA Rated A Rated , , , , ,067 1, ,649 2, ,085 4,120 4, ,235 5, ,173 4,423 5, ,181 4,631 5, ,619 5, ,981 6, ,739 4, ,147 5, ,504 4, ,267 3, ,965 3, ,707 3, ,890 3, ,188 3, ,232 3, ,258 3, ,238 3, ,875 3, ,129 3, ,137 3, ,189 3, ,766 3, ,716 3, ,219 2, ,150 2, ,729 2, ,355 1, ,062 1, ,226 1, ,112 1, ,356 1, ,096 2, ,092 2, ,334 2, ,413 3,328 Source: JPMorgan as of October 31, 2011

33 GLOSSARY OF TERMS

34 GLOSSARY OF TERMS (continued) GLOSSARY OF TERMS Appreciation Return: Expressed as a percentage, the return generated by the Capital Appreciation of a property or portfolio over the period of analysis. (See formula in Appendix II) Capital Appreciation: The change in market value of property or portfolio over the period of analysis, adjusted for Capital Improvements and Partial Sales for the period. (See formula in Appendix II) Capital Expenditures: Investment of cash or the creation of a liability to acquire or improve an asset, e.g., land, buildings, building additions, site improvements, machinery, equipment; as distinguished from cash outflows for expense items that are normally considered part of the current period's operations. [Appraisal Institute] Capital Improvements: Expenditures that cure or arrest deterioration of property or add new improvements and appreciably prolong its life. By comparison, repairs merely maintain property in an efficient operating condition. [Wurtzebach/Miles] Commingled Funds: A term applied to all openend and closedend pooled investment vehicles designed for institutional taxexempt investors. A commingled fund may be organized as a group trust, partnership, corporation, insurance company separate account or other multiple ownership entity. [NAREIM] Openend Fund: A commingled fund with no finite life, that allows continuous entry and exit of investors, and typically engages in ongoing investment purchase and sale activities. Closedend Fund: A commingled fund with a stated maturity (termination) date, with few or no additional investors after the initial formation of the fund. Closedend funds typically purchase a portfolio of properties to hold for the duration of the fund and, as sales occur, typically do not reinvest the sales proceeds. Diversification Attributes: Risk Strategy: Core investments typically consist of stabilized, institutional quality Class A or B buildings in good to excellent condition. Occupancy is at market level, there is little upcoming tenant rollover, and the property has a strong current income usually constituting 70% or more of the total return. Low leverage, between 4050% is utilized. Value investments are functional, high quality assets with specific property issues, such as high vacancy, significant upcoming lease expirations, or below market rents. Value properties tend to be undermanaged and/or underperforming and have some current income from existing leases. Through management and repositioning, there is significant appreciation potential. Moderate leverage, between 6075% is utilized.

35 GLOSSARY OF TERMS (continued) Opportunistic strategies seek to exploit inefficiencies in the capital and real estate markets and can involve financing or acquisition of real estate assets, real estate operating companies, portfolios of real estate assets, and public and private REITs. A Jcurve return is typical. Higher leverage. Investment Structure: Equity: Direct undivided ownership in real estate that has not been financed using borrowed funds. Leveraged Equity: Direct undivided ownership in real estate that has been financed using borrowed funds. Equity Oriented Debt: A mortgage loan with a stated interest rate in addition to equity participation by the lender via annual cash flow and/or sale proceeds or refinancing proceeds. Traditional Debt: A mortgage loan payable at one or more stated interest rates. Life Cycle: Predevelopment: Raw land. Development: Properties under construction including preparation and installation of infrastructure. Leasing: Operating: Redevelopment: Completed construction that is less than 60% leased and that has been available for occupancy one year or less. Properties with greater than 60% average leasing, or that have been available for occupancy for more than one year. Properties that are undergoing substantial expansion or retenanting, rehabilitation or remodeling.

36 GLOSSARY OF TERMS (continued) Property Location: Northeast Mideast E. North Central W. North Central Connecticut District of Columbia Illinois Iowa Massachusetts Delaware Indiana Kansas Maine Kentucky Michigan Minnesota New Hampshire Maryland Ohio Missouri New Jersey North Carolina Wisconsin Nebraska New York South Carolina North Dakota Pennsylvania Virginia South Dakota Rhode Island Vermont West Virginia Southeast Southwest Mountain Pacific Alabama Arkansas Arizona Alaska Florida Louisiana Colorado California Georgia Oklahoma Idaho Hawaii Mississippi Texas Montana Oregon Tennessee New Mexico Washington Nevada Utah Wyoming Property Size: Property size categories refer to gross asset value of each property. The dollar amount entered in each category should reflect net asset value within each category. Property Type: Office: Industrial: Retail: Residential: Hotel/Motel: Timberland: Agriculture: Vacant Land: Other: Lowrise, midrise and highrise office buildings and office parks. Warehouse, manufacturing, office showroom, flex space and research and development. Neighborhood center, community center, regional center, super regional center, fashion/specialty center, power center, theme/festival center and outlet center. Highrise elevator projects, lowrise projects and garden type projects. Hotels, resorts and motels. Timber, timberland and mineral rights. Row crops, permanent crops, pasture/ranch and agribusiness. Undeveloped land. Mobile home parks, self storage facilities, etc.

37 GLOSSARY OF TERMS (continued) Gross Asset Value: The fee simple or leased fee market value of an investment, without regard to the debt balance or ownership percentages. Gross Income: The income or loss of a portfolio or entity resulting after deducting all expenses, except for portfolio and asset management fees, but before realized and unrealized gains and losses on investments. Income Return: Expressed as a percentage, the component of return derived from property operations during the period of analysis. (See formula in Appendix II) Lease Expiration Exposure Schedule: A tabulation listing the total leasable square footage of all current leases that expire in each of the next five years, without regard to renewal options. Net Assets: Total Assets on a market value basis less total liabilities on a market value basis. Net Investment Income (Net Income): The income or loss of a portfolio or entity resulting after deducting all expenses, including portfolio and asset management fees, but before realized and unrealized gains and losses on investments. Net Operating Income: Rental and other income of property, less operating expenses other than Capital Expenditures and mortgage debt service. Net Sales Proceeds: Proceeds from the sale of an asset or part of an asset less brokerage commissions, closing costs, and marketing expenses. [NAREIM] (See formula in Appendix II) Partial Sales: The sale of an interest in real estate which is less than the whole property. This may include, for example, a sale of easement rights, parcel of land or retail pad, or a single building of a multibuilding investment. [NCREIF] (See Net sales Proceeds) Principal Payments: The return of invested capital to the lender, as compared to interest payments, which represents a return on invested capital. Timeweighted Annual Rate of Return: The yield for a year calculated by geometrically compounding the previous four quarters' returns. (See formula in Appendix II) Total Assets: The sum of all gross investments, cash and equivalents, receivables, and other assets presented on the Statement of Assets and Liabilities. Total Return: The sum of the quarterly income and appreciation returns. (See formula in Appendix II) Weighted Average Equity: The denominator of the fraction used to calculate investment level Income, Appreciation, and Total returns on a quarterly basis, consisting of the Net Assets at the beginning of the period adjusted for Weighted Contributions and Distributions. (See formulas in Appendix II)