Pension Reserves Investment Management Board

Transcription

1 Pension Reserves Investment Management Board 84 State Street Boston, Massachusetts Deborah B. Goldberg, Treasurer and Receiver General, Chair Michael G. Trotsky, CFA, Chief Investment Officer and Executive Director March 5, 2018 Dear Potential Provider: The Massachusetts Pension Reserves Investment Management Board ( PRIM ) is requesting responses from firms interested in providing Private Real Estate Investment Management Services. The Procurement Officer for this Request for Proposals (RFP) is Christina A. Marcarelli. For responses to be considered by PRIM, each prospective provider must respond to the RFP by submitting an electronic copy of its response, including attachments, via to rfpresponses@mapension.com. The response must be received by 3:00pm ET, Friday, April 13, Further instructions for response submission are included in the RFP. Questions concerning the RFP must be submitted to rfpresponses@mapension.com by 3:00pm ET, Friday, March 16, We appreciate the time and effort required to respond to this RFP. Each firm submitting a response to PRIM can be assured that commensurate time and effort will be expended in evaluating each response. We look forward to your response. Sincerely, Michael G. Trotsky, CFA Chief Investment Officer & Executive Director 1

2 REQUEST FOR PROPOSALS (RFP) Private Real Estate Investment Management Services March 5,

3 Table of Contents I. INTRODUCTION/PURPOSE... 4 II. BACKGROUND INFORMATION... 4 A. LEGAL STRUCTURE OF PRIM... 4 B. MASSACHUSETTS CONFLICT OF INTEREST LAW... 5 C. MASSACHUSETTS OPEN MEETING LAW... 5 D. TOBACCO, SUDAN, AND IRAN DIVESTITURE... 5 E. PRIM'S ADVISORS... 5 F. GENERAL DESCRIPTION OF PRIM'S ASSETS... 6 III. SCOPE OF SERVICES... 6 IV. RESPONSE SPECIFICATIONS... 6 A. DEADLINE FOR PROPOSALS B. REQUIRED ENCLOSURES AND ATTACHMENTS... 6 C. PUBLIC RECORD AND WEBSITE POSTING... 7 D. WITHDRAWAL/IRREVOCABILITY OF RESPONSES... 7 E. WAIVER/CURE OF MINOR INFORMALITIES, ERRORS AND OMISSIONS... 7 F. COMMUNICATIONS WITH PRIM... 8 G. QUESTIONS REGARDING THIS RFP... 8 H. INCURRING COSTS... 8 I. REJECTION OF RESPONSES; CANCELLATION... 8 V. SELECTION PROCESS AND SELECTION CRITERIA... 8 VI. MINIMUM QUALIFICATIONS... 9 VII. TENTATIVE TIME TABLE VIII. QUESTIONNAIRE IX. REPRESENTATIONS AND WARRANTIES FEE PROPOSAL X. FEE PROPOSAL XI. EXHIBITS A. PRIM ASSET ALLOCATION AND CURRENT REAL ESTATE INVESTMENT MANAGERS B. REAL ESTATE ALLOCATION C. PRIM DISCLOSURE STATEMENT D. SAMPLE INVESTMENT ADVISORY AGREEMENT E. PRIM INVESTMENT POLICY

4 I. INTRODUCTION/PURPOSE The Massachusetts Pension Reserves Investment Management Board ( PRIM ) is soliciting Responses from firms interested in providing Private Real Estate Investment Management Services. More detailed descriptions of these services are set forth in Section III of this RFP under the heading "SCOPE OF SERVICES." II. BACKGROUND INFORMATION A. Legal Structure of PRIM PRIM was created in 1983 by the Commonwealth of Massachusetts through legislation (Chapter 661 of the Acts of 1983, as amended by Chapter 315 of the Acts of 1996) to provide general supervision of the investments and management of the Pension Reserves Investment Trust (PRIT) Fund. The PRIT Fund was created by the same legislation and is the investment portfolio for the assets of the State Employees and State Teachers Retirement Systems, as well as local retirement systems that choose to invest in the PRIT Fund. PRIM is governed by a nine-member board of trustees (the Board ). The trustees include: (1) the Governor, ex officio, or his designee; (2) the State Treasurer, ex officio, or her designee, who shall serve as Chair of the PRIM Board; (3) a private citizen, experienced in the field of financial management, appointed by the State Treasurer; (4) an employee or retiree, who is a member of the State Teachers Retirement System, elected by the members of such system, for a term of three years; (5) an employee or retiree, who is a member of the State Employees Retirement System, elected by the members of such system for a term of three years; (6) the elected member of the State Retirement Board; (7) one of the elected members of the Teachers Retirement Board chosen by the members of the Teachers Retirement Board; (8) a person who is not an employee or official of the Commonwealth appointed by the Governor; and (9) a representative of a public safety union appointed by the Governor. Appointed members serve for a term of four years. The mission of the PRIT Fund is to ensure that current and future pension benefit obligations are adequately funded in a cost-effective manner. PRIM therefore seeks to maximize the total return on investments within acceptable levels of risk for a public pension fund. Under current law (as amended by Section 45 of Chapter 68 of the Acts of 2011), by the year 2040, the PRIT Fund will have grown, through annual payments in accordance with a legislatively approved funding schedule and through total investment return of the PRIT Fund, to an amount sufficient to meet the then existing pension obligations of the Commonwealth. The Commonwealth has adopted a schedule of state pension appropriations that assumes a long term actuarial rate of return for the PRIT Fund of 7.50%. The nine-member board of trustees, as trustees for each retirement system that invests in the PRIT Fund, has the authority: to employ an Executive Director, outside investment managers, custodians, legal counsel, consultants and others as it deems necessary; to formulate policies and procedures; and to take such other actions as necessary and appropriate to manage the assets of the PRIT Fund. PRIM is the legal custodian of the PRIT Fund and has fiduciary responsibility for the assets transferred to the PRIT Fund by state and local retirement systems. PRIM selects the PRIT Fund s investment managers and advisors, reviews and evaluates total PRIT Fund and individual investment manager performance, and performs various other activities in the daily management 4

5 of the PRIT Fund. As of December 31, 2017, the PRIT Fund had net assets totaling approximately $72 billion. PRIM is governed by Massachusetts General Laws, Chapter 32 and oversees the PRIT Fund under the terms of its Operating Trust dated July 15, 1988 and amended on September 22, 1998 (a copy of which is available at The members of the Board, in conjunction with the Executive Director, who serves at the pleasure of the Board, determine policies and make decisions concerning the administrative and investment operations of the PRIT Fund. PRIM has established advisory committees (Investment, Administration & Audit, Real Estate & Timber and Compensation) to provide a broad range of input to the Board. These committees are generally composed of several Board members and several non-board members having investment and/or business and/or other relevant expertise. Significant policies and investments are ultimately approved by the Board. B. MGL Chapter 268A The Massachusetts Conflict of Interest Law (web link: applies to PRIM and can have application to persons performing services to PRIM by contract. C. Chapter 30A, Sections The Massachusetts Open Meeting Law (MGL Chapter 30A, Sections 18-25, web link: is designed to ensure transparency in public policy deliberations. The Open Meeting Law requires, with some exceptions, that meetings of public bodies such as PRIM be open to the public. D. Tobacco, Sudan and Iran Divestiture On October 7, 1997, the Massachusetts legislature enacted, and the Governor signed into law, Chapter 199 of the Acts of 1997, which forbids the PRIT Fund from purchasing securities of any company which derives more than 15 percent of its revenues from the sale of tobacco products. The legislation also required that the PRIT Fund divest itself of all such securities within three years. PRIM provides investment managers with a quarterly listing of these restricted securities. On November 2, 2007, the Massachusetts legislature enacted, and the Governor signed into law, Chapter 151 of the Acts of 2007, which forbids the PRIT Fund from purchasing the securities of companies determined to be doing business in the Sudan. The legislation required that the PRIT Fund divest itself of all such securities within 12 months. PRIM provides investment managers with a quarterly listing of these restricted securities. On August 4, 2010, the Massachusetts legislature enacted, and the Governor signed into law, Chapter 232 of the Acts of 2010, which forbids the PRIT Fund from purchasing the securities of companies determined to be doing business in Iran. The legislation required the PRIT Fund to divest itself of all such securities within 12 months. PRIM provides investment managers with a quarterly listing of these restricted securities. E. PRIM s Advisors Outside advisors and managers (some of whom are identified in Exhibit A) are engaged for their particular expertise and retained to assist PRIM in the areas of general portfolio strategy and investments and related services. BNY Mellon is the PRIT Fund's custodian and is responsible for providing record-keeping and analytic performance valuations for the PRIT Fund. 5

6 F. General Description of PRIM s Assets Exhibit A includes a description of PRIM s approved long-term target asset allocation, as of December 31, III. SCOPE OF SERVICES The purpose of this RFP is to select one or more investment manager(s) to manage a separate account with an initial allocation of approximately $300 to $500 million. The specific allocation is to be determined. The overall objective for the investment manager is to acquire, manage and dispose of real estate assets diversified by property type (predominantly office, industrial, retail and multifamily) and location across the United States. The mandate will focus on core, substantially leased assets with the potential to make selective non-core investments. The PRIM Board will accept proposals to manage these assets only through separate account vehicles. Proposals submitted for other investment forms (e.g., pooled funds, joint ventures with a public or private REIT, etc.) will NOT be considered. The PRIM Board may select one or more investment manager(s) based on the Board s evaluation of the Proposals in accordance with the Selection Criteria contained in Section V of this RFP. IV. RESPONSE SPECIFICATIONS A. Deadline for Proposals Proposals, including all attachments, must be delivered electronically via to Christina A. Marcarelli at rfpresponses@mapension.com, by 3:00p.m. ET, April 13, 2018 (the RFP Response Deadline ). The subject header should be in the following format: PRIM Private Real Estate Investment Management Services RFP Response Name of Responding Firm. In addition, please your proposal to the following representative of PRIM s Real Estate consultant. Mr. Dan Stenger, Principal The Townsend Group dstenger@townsendgroup.com The questions and/or requests made in this RFP should be duplicated in their entirety in the respondent s proposal, with each question and/or request repeated before the answer or response. Any Response received after the Response Deadline will not be considered. All electronic ( ) documents submitted must be 50MB or smaller in size. If necessary, the Respondent should separate the RFP submission into multiple s to ensure the 50 MB size requirement is not exceeded. The Respondent is responsible for ensuring that a complete electronic RFP Response is received prior to the Response Deadline. Copies of this RFP can be obtained electronically on the PRIM website at B. Required Enclosures and Attachments 1. Cover Letter The Response must be accompanied by a cover letter, which will be considered an important 6

7 part of the Response, and which shall be signed by at least one individual authorized to bind the Respondent contractually. This cover letter must include: (a) the Respondent s name and address; (b) name, phone number, and address of the person proposed to be the principal client contact; (c) the title or position which the signer of the cover letter holds in the firm; and (d) a statement to the effect that the Response is a firm and irrevocable offer of the Respondent. 2. Responses to Minimum Qualifications (Section VI) The respondent must describe in sufficient detail how the firm meets the Minimum Qualifications. 3. Responses to Questions (Section VIII) The respondent must provide complete response to the questions contained within this RFP. 4. Representations and Warranties The Representations and Warranties contained in Section IX hereof, signed by an authorized officer of the Respondent, must be included as an attachment to the cover letter referenced in Section IV.B.1 above. 5. Disclosure Statement Attached to this RFP as Exhibit C is a PRIM Disclosure Statement. Each firm submitting a response must complete the PRIM Disclosure Statement and submit it as an attachment to the cover letter referenced in Section IV.B.1 above. YOU MUST COMPLETE THE PRIM DISCLOSURE STATEMENT OR YOUR SUBMISSION MAY NOT BE CONSIDERED. 6. Fee Proposal The fee proposal of the proposing firm must be submitted on the form contained in Section X hereof (the Fee Proposal). 7. Form ADV The firm must submit to PRIM in electronic form its full Form ADV (Parts I and II). C. Public Record and Website Posting In accordance with Chapter 66, Section 10 and Chapter 4, Section 7(26) of the Massachusetts General Laws, upon the expiration of the Response Deadline, Responses to this RFP could be deemed to be public records, and as such could be subject to requests for public disclosure. Additionally, in accordance with Chapter 66, Section 19(b)(v) of the Massachusetts General Laws, the RFP Response that is submitted by the Respondent(s) selected to provide services to PRIM will be posted on PRIM s website ( D. Withdrawal/Irrevocability of Responses Respondents may withdraw and resubmit Responses prior to the Response Deadline. No withdrawals or re-submissions will be allowed after the Response Deadline. E. Waiver/Cure of Minor Informalities, Errors and Omissions PRIM reserves the right to waive or permit cure of minor informalities, errors or omissions prior to the selection of finalists, and to conduct discussions with any qualified proposers and to take any other measures with respect to this RFP in any manner necessary to serve the best interest of PRIM and its beneficiaries. 7

8 F. Communications with PRIM Respondents may withdraw and resubmit Responses prior to the Response Deadline. No withdrawals or re-submissions will be allowed after the Response Deadline. The Procurement Officer for this RFP is: Christina A. Marcarelli Real Estate and Timberland Pension Reserves Investment Management Board 84 State Street Boston, Massachusetts Telephone: (617) As of March 5, 2018, persons and entities intending to submit a Response should not contact any PRIM staff, members of the Real Estate and Timber Committee or any other PRIM committees, members of the PRIM Board, or employees of the Massachusetts Treasury, other than the Procurement Officer identified above. An exception to this rule applies to persons and entities currently doing business with PRIM, but any such contact made with persons other than the Procurement Officer must be limited to that business, and must not relate to this RFP. In addition, Respondents should not discuss this RFP with any employee of PRIM s custodian, other PRIM managers, consultants, PRIM s legal counsel or other PRIM advisors. FAILURE TO OBSERVE THIS RULE IS GROUNDS FOR DISQUALIFICATION G. Questions Regarding this RFP All questions concerning this RFP must be received by the Procurement Officer by 3:00 p.m. ET, March 16, 2018 (the "Question Deadline"), in writing, via sent to rfpresponses@mapension.com. Questions received before the deadline will be answered and circulated by to all Respondents who have proposed a question. Respondents that have requested prior to the deadline, in writing, a copy of the questions and the responses will also receive them. Questions, or requests for a copy of the questions and the responses, that are received after the Question Deadline will not be considered. H. Incurring Costs PRIM will not be liable for any costs incurred prior to entering a contract with the selected proposer or proposers. I. Rejection of Responses; Cancellation PRIM reserves the right in its sole discretion to reject any Response, as well as the right to reject all Responses submitted in response to this RFP, and to cancel and rescind the procurement at any time, for any reason or for no reason. V. SELECTION PROCESS AND SELECTION CRITERIA PRIM will evaluate each Response to determine if it was submitted in accordance with the requirements set forth in this RFP, including whether the proposing firm meets the Minimum Qualifications of Section VI. 8

9 Proposals will be evaluated by an Evaluation Committee which may include members of the PRIM Board, its advisory committees, and staff (the Evaluation Committee ). If helpful to PRIM s evaluation, the Evaluation Committee may invite one or more Respondents to PRIM for an interview. The Evaluation Committee will assess the respondent s qualifications based on the following criteria: 1. Stability and experience of the firm and the proposed team dedicated to PRIM. 2. Capabilities of the firm. 3. Investment philosophy and process. 4. Client references. 5. Fee proposal. The Evaluation Committee will then submit its results and make its recommendation to the PRIM Real Estate and Timberland Committee, which will make a recommendation to the PRIM Board. The Real Estate and Timberland Committee may accept the recommendations of the Evaluation Committee, and/or may recommend other or additional respondent(s) to the PRIM Board. The selections(s) will ultimately be made by the PRIM Board. VI. MINIMUM QUALIFICATIONS A Respondent must meet the following minimum qualifications to be given further consideration in PRIM s search. Failure of a firm to meet the minimum qualifications will result in the Response s rejection. Please describe how your firm meets the Minimum Qualifications as outlined below: 1. The performance history submitted must be specific to the firm proposed to be responsible for the management of the PRIM account. 2. The firm must have at least $750 million in total (taxable and tax exempt) core real estate assets under management net of debt as of December 31, The firm must have prior experience in providing separate account real estate investment management services to institutional clients. 4. The firm must be SEC-registered or exempt from registration with the nature of the exemption provided. The firm must submit its Form ADV (Parts I and II). 5. No single client shall comprise more than 50% of the firm s gross AUM. 9

10 6. The firm shall have a proven and verifiable record of competitive real estate performance returns over a minimum of five years. VII. TIME TABLE The following is the tentative time schedule for the RFP. All dates are subject to modification by PRIM with notice, and any such modifications will be posted on PRIM s website. Issuance of RFP: March 5, 2018 RFP Question Deadline: RFP Response Deadline: March 16, 2018, 3:00 p.m. ET April 13, 2018, 3:00 p.m. ET Notification of Finalists: June 6, 2018 Evaluation Committee Interviews*: June 13-15, 2018 Real Estate and Timber Committee Meeting: August 1, 2018 PRIM Board Meeting: August 14, 2018 Projected Commencement Date: October 1, 2018 *Any interviews conducted will be held at PRIM s offices in Boston, MA. Any questions should be directed to the Procurement Officer at: rfpresponses@mapension.com. 10

11 VIII. QUESTIONNAIRE RESPONDENT: ADDRESS: TELEPHONE #: ADDRESS: CLIENT CONTACT: SIGNED: Name (print): Title: Date: A. COMPANY BACKGROUND AND GENERAL DESCRIPTION. 1. Indicate your firm s fiduciary classification: Bank Insurance Company Registered Investment Advisor (Investment Advisors Act of 1940) Affiliate of Fiduciary (Name and Classification) Other (Please explain) 2. Please provide the following information with respect to the firm: (a) a brief history of the firm, including its year of organization including dates and types of registration with any regulatory agencies (1940 Act Registration, IMRO, etc.). (b) the location of your headquarters and branch offices including number of employees at each office location. (c) the number of years the firm has provided private real estate investment management services to institutional clients and to public pension funds, and a description of the categories of services provided to clients during this period. (d) Is your organization a Minority Business Enterprise, a Women Business Enterprise or a Veteran Business Enterprise, certified by the Massachusetts Supplier Diversity Office 11

12 (SDO) or by an agency equivalent to the SDO (and if so please indicate the name of the equivalent agency)? (e) Is your organization a Disability-Owned Business Enterprise, an LGBT-Owned Business Enterprise, a Veteran-Owned Business Enterprise or a Service-Disabled Veteran-Owned Business Enterprise appearing in either: a. The Directory of Certified Businesses maintained by the Massachusetts Supplier Diversity Office (SDO) and its certifying partner organizations (the U. S. Business Leadership Network, the National Gay and Lesbian Chamber of Commerce, and the U. S. Department of Veterans Affairs); or b. The directory of an equivalent certifying agency (and if so please indicate the name of the equivalent certifying agency)? (f) The PRIM Board believes that diversity of thought leads to better decision making. With that in mind, please describe how your organization has worked to foster diversity of thought. Please describe ways your firm seeks out diverse employees, ensures wageequality within your organization and the diversity of your top management or, if applicable, your board. Please limit your response to no more than one page. 3. Firm structure: (a) What is the ownership structure of the firm, including any parent, affiliated companies or joint ventures? (b) If owned by another firm, what percentage of the parent company s revenue does your firm contribute? Indicate how the percentage of revenue has changed over the life of the arrangement or the last 10 years. (c) Identify any affiliated companies, joint ventures and other entities that contribute in some way to your firm s investment and operational management. (d) List all firm owners, whether they are individuals, employees, or partnerships, and percentage ownership held by each. If employee-owned, discuss how the equity is distributed, and what, if any, plans your firm has to further distribute equity to your key professionals. (e) Provide an organizational chart diagramming the relationships between the professional staff as well as the parent-subsidiary, affiliate, or joint venture entities. 4. Describe any material developments in your organization (changes in ownership, staff, business, etc.) over the past three years in detail. 5. Are there any structural or financial changes contemplated in the next year (e.g., ownership change, merger and/or acquisition, new product offerings, etc.)? If yes, please explain. 12

13 6. Indicate U.S. Dollar amounts of coverage for SEC-required (17g-1) fidelity bonds, errors and omissions coverage and any other fiduciary coverage, which your firm carries. List the insurance carriers supplying the coverage. 7. Describe in detail any potential conflicts of interest your firm may have in providing to PRIM the services described in this RFP. Include potential conflicts posed by any activities of affiliated or parent organizations, brokerage activities, investment banking activities, or any past or current relationships with PRIM Board members, PRIM Committee members and/or PRIM investment staff, investment managers or investment consultants. 8. Describe your policies and procedures to prevent possible conflicts of interest with other client interests, or which may result from other investment products or services provided by your firm or affiliated organizations. 9. Please provide your firm s latest SAS 70 report. B. ASSETS UNDER MANAGEMENT 1. Historical Assets Under Management. Refer to and complete Appendix A, tab B Current Real Estate Assets Under Management by Strategy. Refer to and complete Appendix A, tab B Recent Capital Allocations. Refer to and complete Appendix A, tab B Terminated Capital Allocations. Refer to and complete Appendix A, tab B Describe the objectives of your firm with respect to future growth in Separate Account Real Estate Management, commenting on: (a) Maximum capacity, projected timeframe to reach capacity. How did you arrive at these limits? (b) Additional resources for portfolio management, research, transactions, client service and tools to enhance the investment process or manage growth; and, (c) How will back office operations be affected in the event of a significant increase in assets under management? What actions will be taken? 6. Provide references for three existing clients invested in a core real estate strategy with your firm. Include client name, address, phone number, contact name and title, and account type (e.g. defined benefit, defined contribution, endowment, etc.). Indicate length of the relationship and assets under management for each reference. 7. Property type and location diversification. Refer to and complete Appendix A, tab B.7. 13

14 8. Core and non-core separate accounts and commingled funds currently under management. Refer to and complete Appendix A, tab B Asset-level detail. Refer to and complete Appendix A, tab B Have any properties managed by your organization or any of its affiliates been the subject of any foreclosure proceedings or deeds-in-lieu? C. PEOPLE / ORGANIZATION 1. Provide a list of all branch offices, describing primary functions of each. Identify where primary acquisitions/dispositions, asset management, property management, accounting, research, and portfolio management activities take place. 2. Please refer to and complete Appendix A, tab C.2. as it relates to the number of staff members in key roles. 3. Please indicate the proposed personnel that would manage the PRIM relationship. 4. Does your firm have an internal research team? If so, describe how the research team interacts with acquisitions/dispositions, asset management and portfolio management staff on a regular basis. If your firm does not have an internal research team, describe how your firm obtains current and relevant market data. Please specify all research and data sources used and to which your firm subscribes. 5. Describe the compensation and incentive program for professionals directly involved in investing and managing real estate. How are they evaluated and rewarded? What incentives are provided to attract and retain superior individuals? 6. Provide biographies (no longer than one page each) for each of the persons listed in Question C What has been the firm s attrition rate over the past five years? Discuss the causes and impact of any major departures over the past five years. What was each individual s job responsibilities? Indicate years with the firm and how each was replaced. D. INVESTMENT PHILOSOPHY, POLICY AND PROCESS 1. Describe the key attributes of attractive core and non-core investments. 2. Please describe your portfolio construction philosophy. Comment on geographic and property type diversification and asset size concentration. 3. Briefly describe your acquisition process, including procedures for sourcing, underwriting, and analysis. 4. How long do you anticipate it would take your firm to invest a $300 million cash commitment from PRIM using a core strategy? How long would it take to invest $300 14

15 million using a non-core strategy? In addition, please refer to Appendix A, tab D.4. and provide a current acquisition pipeline. 5. Provide detail on your firm s investment committee. Who are the members of investment committee? How often does the investment committee meet? 6. Describe your firm s investment approval process for both acquisitions and dispositions. At what stage(s) does a potential transaction receive approval by Investment Committee? 7. Please refer to and complete Appendix A, tab D.7. as it relates to available capital to invest. 8. Describe how potential investments are allocated among your clients and if any clients or funds have preference or priority. If any clients or funds have similar or overlapping investment strategies, please indicate specifically how any potential acquisitions are allocated among your clients. 9. Please describe your previous asset management takeover experience and process. E. ASSET MANAGEMENT PROCESS AND PROCEDURES 1. Describe your firm's asset management approach and process, including planning and budgeting. Please provide detail on staff involvement in various areas of the asset management process, e.g., budget preparation, approval of leases and major capital expenditures. 2. Briefly describe your internal and external valuation processes. How often are assets appraised by a third-party appraiser and/or internally valued? 3. Describe your firm s hold/sell process. How is it determined that disposition of an asset may be warranted? What factors are evaluated? Please provide, as an attachment, an example of a recent disposition analysis your firm has prepared. 4. What is your firm's expected disposition volume for and how much of those proceeds are estimated to be available for re-investment? 5. Does your firm utilize internal or affiliated property management and/or leasing services? Where are property management and leasing staff located? Have you ever had to replace internal management or leasing with external, third-party management or leasing? Does your use of internal/affiliated services limit the markets in which you acquire properties? 6. If your firm does not have internal property management and/or leasing capabilities, how are third-party services sourced? Please provide detail regarding minimum qualifications, interview and due diligence process, including any checklists developed for purposes of hiring/retaining third-party leasing and management services. 15

16 7. Please provide detail on any other third-party vendors that your firm utilizes to help monitor valuations, tenants, property managers, etc. and how long your firm has utilized these vendors. F. ACCOUNTING AND BACK OFFICE CAPABILITIES 1. Are any of your accounting or back-office functions outsourced to third-party vendors/administrators? If yes, name the provider and describe the services they provide. 2. Which portfolio accounting and property management accounting systems does your firm use? Do you require all property managers to use the same software? G. COMPLIANCE 1. Provide a detailed summary of your firm's compliance regime. Identify senior or key personnel in the firm's compliance process. 2. Please provide your firm's code of ethics. 3. Have there ever been any investment guideline breaches within your firm? If so, briefly describe the breach, how it went undetected and the ultimate cure. 4. During the past five years, has your firm or any of its affiliates, or the owners or employees of any of them, been the subject of any of the following (whether resolved, pending or threatened): (a) any examination (routine or otherwise) by the SEC or any other governmental regulator, agency or self-regulatory body? (b) any investigation or proceeding by any governmental regulatory or law enforcement agency, including, but not limited to any SEC or state investigations? (c) any litigation or other proceeding alleging fraud, breach of fiduciary duty, bad faith, willful misconduct or breach of any investment advisory, investment management or similar agreement? If the answer to any of the foregoing is "yes", please provide a description of each relevant matter, including dates, parties, nature of the matter and current status. To the extent not included in your response to the foregoing questions, during the past ten years, has your firm or any of its affiliates, or the owners or employees of any of them, been the subject of any conviction, plea of nolo contendere, judgment, administrative action, consent decree, sanction, license suspension or revocation, damages award, reparations, arbitral award or negotiated settlement in connection with any examination, investigation, litigation or proceeding of a type described in (a)-(c) above? If the answer to the foregoing is "yes", please provide a description of each relevant matter, including dates, parties, nature of the matter and the resulting resolution. 16

17 H. PERFORMANCE 1. Refer to and complete Appendix A, tab H.1. Provide composite returns for all discretionary accounts as of December 31, Returns should be in compliance with NCREIF standards. 2. Refer to and complete Appendix A, tab H.2. Provide returns for all discretionary core accounts as of December 31, Returns should be in compliance with NCREIF standards. 3. Refer to and complete Appendix A, tab H.3. Provide returns for all discretionary noncore accounts as of December 31, Returns should be in compliance with NCREIF standards 4. Refer to and complete Appendix A, tabs H.4.(a) through H.4.(d). Please provide individual returns for all discretionary core and non-core accounts (separate accounts and funds) as of December 31, Returns should be in compliance with NCREIF standards. 5. Refer to and complete Appendix A, tabs H.5.(a) and H.5.(b). Please provide returns by Property Type as of December 31, Returns should be in compliance with NCREIF standards. 6. Refer to and complete Appendix A, tab H.6. as it relates to geographic and sector diversification percentages on a quarterly basis for all discretionary accounts as of December 31,

18 I. EXECUTIVE SUMMARY Please submit an executive summary consisting of not more than two one-sided pages which summarizes the contents of the Proposal. The firm s name should be identified on the top of the first page. The executive summary shall be suitable for distribution to PRIM Board and Committee Members; please be sure that your executive summary identifies the relevant connections between the description of your firm and its personnel provided in the executive summary, and should discuss your firm, its history, capabilities, competitive advantages, personnel, and understanding of PRIM s needs. If the firm is selected for a finalist interview, this summary will be provided to the Real Estate and Timberland Committee in advance of an interview, if applicable. Please be aware that all members of the Real Estate and Timberland Committee may not have read your complete Proposal, which will be reviewed by the Evaluation Committee. 18

19 IX. REPRESENTATIONS AND WARRANTIES All Respondents are required to submit an executed copy of the following Representations and Warranties as an attachment to the cover letter described in Section IV.B. of this RFP: A. Respondent warrants that all the information it provides in the Response to this RFP is true and correct and does not omit any material facts or responsive information. B. Respondent warrants that it will not delegate its responsibilities without prior approval from PRIM. C. Respondent warrants that it has not been in bankruptcy and/or receivership. D. Respondent warrants that it has completed, obtained, and performed any and all necessary registrations, filings, approvals, authorizations, consents or examinations required by a government or governmental authority for provision of the proposed services. E. Respondent warrants that it will adhere to its fee proposal outlined in the Fee Proposal of Section X. F. Respondent warrants that it meets all the Minimum Qualification requirements set forth in Section VI of this RFP. G. Respondent warrants that it will agree to the provisions of the Investment Management Agreement, a sample of which is set forth in Exhibit D of this RFP. If there are provisions of the agreement that are of concern, please highlight those areas for further discussion. Signature Print Name Title 19

20 X. FEE PROPOSAL Please provide your most competitive fee proposal. Please note that once a manager has been selected, negotiations of the fee may be necessary to account for the size of funding, the increments of funding, etc. The negotiations will not result in a fee higher than the fee proposed below. For purposes of the fee proposal below, assume an account size of a minimum of $300 million in some combination of takeover assets and cash. Responding Firm: Proposed Fees: 20

21 XI. EXHIBITS EXHIBIT A PRIM s Strategic Asset Allocation and Current Real Estate Investment Managers 1. PRIM s Strategic Asset Allocation (as of December 31, 2017) Pension Reserves Investment Management Board Target Asset Allocation Asset Class Long Term Target Allocation Global Equity 40.6% Core Fixed Income 12.0% Value-Added Fixed Income 10.0% Private Equity 11.0% Real Estate 10.0% Timberland 4.0% Portfolio Completion Strategies 12.4% 2. PRIM s Real Estate Investment Managers Private Real Estate Real Estate Securities Real Estate Funds AEW Capital Management Brookfield Asset Management Carlyle Group Invesco Real Estate Center Square Investment Management DivcoWest LaSalle Investment Management Presima, Inc. New Boston Fund J.P. Morgan Investment Management 21

22 EXHIBIT B PRIM s Real Estate Allocation 1. PRIM s Real Estate Allocation (All $ amounts in thousands) The current target allocation to real estate is 10%. Each strategy within the real estate portfolio is measured against a relevant benchmark. The private real estate portfolio, and its managers, are benchmarked against the NCREIF Property Index and the public real estate securities mandates are benchmarked against the FTSE EPRA NAREIT Developed Index. The benchmark for the total real estate portfolio is a blended return of 80% NCREIF Property Index / 20% FTSE EPRA NAREIT Developed Index. To meet the Board s return and diversification objectives, the targeted long-term strategic real estate portfolio structure is as follows: Strategy Target Range Core Real Estate 70% 60-80% Non-Core Real Estate 10% 0-15% Public Real Estate (REITs) 20% 10-30% Real Estate Allocation as of December 31, 2017: Private Real Estate (Net Leverage) Current $ Current % Allocation Range Total Private Real Estate $4,347,025, % Core Real Estate $3,874,863,653 89% 85% to 100% Non-Core Real Estate $472,161,977 11% 0% to 15% The PRIM Board desires its real estate portfolio to be diversified by investment in different property types, in a variety of geographic locations, and with different managers. The diversification and target ranges for the private real estate allocation (excluding commingled funds) are as follows: Equity Value (%) Max Allocation (%) Property Type Office 29.4% 40% Retail 17.7% 40% Industrial 21.7% 40% Apartments 28.4% 40% Other 2.8% 20% Total 100% Region Equity Value (%) Max Allocation (%) Northeast 10.8% 40% Mideast 16.7% 30% Southeast 14.0% 25% Southwest 12.8% 20% Mountain 6.1% 20% Pacific 31.8% 45% West No. Central 0.0% 15% East No. Central 7.8% 20% Ex. U.S. 0% 10% Total 100% 22

23 EXHIBIT C PRIM Disclosure Statement 23

24 COMMONWEALTH OF MASSACHUSETTS PENSION RESERVES INVESTMENT MANAGEMENT BOARD DISCLOSURE STATEMENT FIRM: ADDRESS: Firms seeking to provide investment management, consulting, custody, recordkeeping, auditing, and other professional services (the engagement ) to the Commonwealth of Massachusetts Pension Reserves Investment Management ( PRIM ) Board and/or the Pension Reserves Investment Trust ( PRIT ) Fund must complete a disclosure statement providing complete and accurate responses to the questions below. Firms selected to provide such services to the PRIM Board and/or the PRIT Fund have a continuing obligation to update responses to these questions, in writing, immediately upon any change to such responses. The questions in this Disclosure Statement should be read broadly, and any perceived ambiguity should be resolved in favor of disclosure. Any questions concerning the disclosures required should be directed to the PRIM Board. 1. Provide a general description of your firm s organizational structure, identify any managing partner(s), members of the management committee, officers and/or directors, and, for any affiliate entities, the managing partners, officers, and directors (all such individuals or entities hereinafter collectively referred to as the Firm ). [Insert response here.] 2. Identify any relationship of the firm, its joint ventures, consultants, lobbyists, subcontractors or third-party contractors that relate in any way to the engagement. [Insert response here.] 3. Aside from the engagement, describe any services provided by the Firm to the PRIM Board and/or the PRIT Fund. [Insert response here.] 4. Aside from the services described in response to Question 3, above, describe any services and/or donations provided by the Firm to the Office of the State Treasurer and Receiver General or any trust, board, commission or authority of which the State Treasurer and Receiver-General is a member or trustee by virtue of her office. (A list of such entities is attached.) [Insert response here.] 5. Aside from the services and/or donations described in responses to Questions 3 and 4, above, describe any services provided by the Firm to any of the political subdivisions of the Commonwealth. 24

25 [Insert response here.] 6. Did or will the Firm provide or share, agree to provide or share, or arrange to provide or share any compensation or benefit, direct or indirect, to any individual or entity for assisting the Firm in: a) Obtaining the engagement; or, b) Performing the services required by the engagement. If the answer to Question 6 is yes, provide for each the individual or entity a) The name and address of such individual or entity; b) A description of the assistance provided; and c) The compensation or benefit. [Insert response here.] 7. Does the Firm have any ongoing relationship, arrangement or agreement with any individual or entity with respect to sharing compensation for services to: a) The PRIM Board and/or the PRIT Fund; b) Any trust, board, commission, or authority of which the Treasurer is a member or trustee by virtue of her office; or c) The Commonwealth of Massachusetts or its political subdivisions? If the answer to Question 7 is yes, provide for each such individual or entity a) The name and address of such individual or entity; b) A description of the relationship, arrangement or agreement; and, c) The compensation shared. [Insert response here.] Signed under the penalties of perjury this day of, Name: Signature: (Print) Title: 25

26 TREASURER S PRINCIPAL BOARDS, COMMISSIONS AND AUTHORITIES* 1. Advisory Board to the Comptroller M.G.L. c. 7A, 2 2. State Retirement Board M.G.L. c. 10, State Lottery Commission M.G.L. c. 10, Board of Bank Incorporation M.G.L. c. 26, 5 (Division of Banks and Loan Agencies) 5. Water Pollution Abatement Trust (now known as the Clean Water Trust) M.G.L. c. 29C, 2 6. Pension Reserves Investment Management Board M.G.L. c. 32, 23(2A) 7. Massachusetts Convention Center Authority Chapter 190 of the Acts of Massachusetts School Building Authority M.G.L. c. 70B, 1A & 3A; see also M.G.L. c. 10, 35BB 9. Teachers Retirement Board M.G.L. c. 15, Alcoholic Beverages Control Commission M.G.L. c. 10, Health Care Security Trust M.G.L. c. 29D, Commissioners on Fireman s Relief M.G.L. c. 10, Economic Empowerment Trust Fund M.G.L. c. 10, 35QQ * The above-listed Boards, Commissions or Authorities are any which are a Treasury Department, Division or Affiliated Entity or by statute have a position which may be held by the State Treasurer and Receiver General or her designee. 26

27 EXHIBIT D Sample Investment Management Agreement 27

28 COMMONWEALTH OF MASSACHUSETTS PENSION RESERVES INVESTMENT MANAGEMENT BOARD INVESTMENT MANAGEMENT AGREEMENT [Standard Form-Real Estate] THIS INVESTMENT MANAGEMENT AGREEMENT ( Agreement ), dated as of [date], is made by and between the Pension Reserves Investment Management Board ("PRIM"), as trustee of the Pension Reserves Investment Trust ( PRIT ), and [ ] (the "Manager"). Introduction. Under Massachusetts General Laws, Chapter 32, Section 23, PRIM has general supervision of the investment and reinvestment of the PRIT Fund created by Chapter 32, Section 23 of such laws. PRIT has been established for the purpose of depositing, investing and disbursing amounts set aside to meet further liabilities of various public retirement systems in Massachusetts. PRIM, acting on behalf of PRIT, enters into this Agreement appointing the Manager as investment manager of certain assets of PRIT pursuant to PRIM s authority under Massachusetts General Laws, Chapter 32, Section 23, subdivision (2A), paragraph (e), clause (iii). PRIM has entered into an agreement with BNY Mellon to act as custodian for all investment assets of PRIT. The entity serving as such custodian from time to time is herein referred to as the Custodian. 1. Appointment of the Manager. PRIM hereby appoints and retains the Manager, and the Manager agrees to serve as investment manager, upon and subject to the terms hereof, beginning at the opening of business on [date] (the Effective Date ) and continuing until this Agreement is terminated in accordance with the terms hereof. The Manager hereby accepts appointment as such investment manager and will have full responsibility to invest the Account (as defined in Section 2 hereof) in interests in [describe property types] ( Properties ) in accordance with (a) this Agreement, (b) the investment objectives and investment guidelines set forth in Schedule A hereto (the Investment Objectives and Guidelines ) and (c) Schedule C to this Agreement (the Reporting Requirements ). The Investment Objectives and Guidelines and the Reporting Requirements may be modified from time to time by PRIM, upon notice to the Manager. Subject to the Investment Objectives and Guidelines and the terms of this Agreement, the Manager shall use its best efforts to increase the value of the Account by causing the Properties and other assets in the Account (collectively, the Assets ) to be invested and reinvested from time to time. The Manager shall allocate such personnel and devote such efforts as are necessary for it to carry out its duties under this Agreement. 2. The Account. The responsibilities and duties of the Manager are limited to the Assets (and related liabilities) now or hereafter contained in that certain account or accounts listed on Schedule A to this Agreement, as such Schedule may be modified or supplemented by PRIM from time to time (collectively, the Account ), which Assets constitute only a portion of the assets of PRIT. Subject to the terms of this Agreement (including, without limitation, PRIM s right to terminate this Agreement at any time), PRIM shall cause funds to be made available in the Account upon five business days prior written request to PRIM from the Manager, in each case in such amounts as are deemed necessary or appropriate by the Manager for bona fide business purposes to purchase Properties and to pay expenses as set forth in this Agreement. Each such request from the Manager shall include such information as is reasonably requested by PRIM including, without 28

29 limitation, information regarding any Properties to be acquired using the funds to be made available. All funds requested by the Manager with respect to a particular Property shall be applied to the acquisition, holding and disposition of such Property. From time to time, upon notice to the Manager, PRIM may designate other assets of PRIT to be part of the Account, or withdraw any Assets from the Account. Nothing in this Agreement will constitute a commitment by PRIM to maintain any minimum amount of assets in the Account and a reduction in the amount of assets in the Account shall not be considered a termination of this Agreement. In addition to performing the Reporting Requirements, the Manager shall furnish to PRIM necessary assistance in the preparation of all reports relating to the Account now or hereafter required by applicable law. Except as otherwise previously agreed by PRIM in writing, no Assets may be delivered or paid to the Manager, and the Account shall not be commingled with the other accounts of Manager s clients. Upon notice to the Manager and with the Manager s consent, PRIM may establish additional Accounts with the Manager. Each additional Account shall have separate investment objectives and guidelines, a separate fee schedule, and applicable Reporting Requirements. This Agreement shall apply to each such Account, with any reference herein to Account referring to each such Account and its related Schedules hereto. 3. Investment Authority, Objectives and Guidelines. The Manager will have full responsibility and discretion to invest and reinvest the Account in Properties in accordance with this Agreement (including, without limitation, the Investment Objectives and Guidelines), and in compliance with the Operating Trust of the Pension Reserves Investment Management Board, as amended (the Operating Trust ) and the constituent documents of each Holding Entity (as hereinafter defined) through which PRIT holds any Property or other Assets, directly or indirectly, and all applicable laws and regulations, including without limitation all laws and regulations applicable to PRIT. 4. Manager s Responsibility. With respect to the Account, the Manager will have only those powers that are consistent with the Operating Trust, which powers are explicitly granted to the Manager by PRIM in this Agreement and all powers which are not so granted shall be exercised only by PRIM. Pursuant to Section 9.2(h) of the Operating Trust, PRIM authorizes the Manager to invest the Account in accordance with this Agreement (including, without limitation, the Investment Objectives and Guidelines). PRIM reserves the right to control and invest all cash balances that may exist in the Account. In carrying out its responsibilities as investment manager, and subject to this Section 4, the Investment Objectives and Guidelines and the other terms and conditions of this Agreement, and in compliance with this Agreement, the Operating Trust and all applicable laws and regulations, the Manager shall have full and complete discretion to manage the Assets and is hereby authorized, for and on behalf of PRIT but only with respect to the Account, to: (a) (b) Identify, evaluate, acquire, operate, finance, lease, manage and dispose of Properties for the Account as the Manager may select, perform the day-to-day investment operations of the Account, and perform the day-to-day administrative operations of the Account; establish, in the discretion of the Manager but in consultation with PRIM s legal counsel and tax advisor, one or special purpose entities formed as indirect 29