Presentation to: Department of Water and Power Employees Retirement Plan (the Plan )

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2 Courtland Partners, Ltd. Presentation to: Department of Water and Power Employees Retirement Plan (the Plan ) 2018 Real Estate Portfolio Strategic Plan February Public Square, Suite 5050 Cleveland, OH Tel Wilshire Blvd., Suite 830 Los Angeles, CA Tel Portland House, Bressenden Place London SW1 E5RS, United Kingdom Tel +44 (0)

3 Table of Contents I Strategic Plan Overview 2 II Commitment Review 4 III Projected Income Returns 5 IV. Proposed 2018 Strategic Plan 6 V. Risk/Return Targets 7 VI. Components of Return and Leverage 8 VII. Property Type Diversification 9 VIII. Geographic Diversification 10 IX Portfolio Model 11 X Strategy Implementation/Action Plan 21 1

4 2018 Strategic Plan Overview Target Real Estate Allocation: 8% of the total portfolio. Performance Objective: To exceed the designated benchmark (NCREIF plus 50 basis points) in the Plan s Investment Policy for Real Estate. Based on the Plan s long-term 70/20/10 (Core/Value/Opportunistic) allocation with the 1 real estate portfolio assumed return of 7.3% and standard deviation of 8.4%. Real Estate Portfolio Investment Objectives: Attractive Income and Total Returns. Historically, real estate has provided stable, long term income returns that comprise a significant portion of total return [e.g., the NCREIF Property Index ( NPI ) income return comprises more than 80% of the total NPI return since inception]. Significant income return increases the transparency and decreases the volatility of total return. Of note, real estate income returns compare favorably to those generated by public equity and fixed income assets. Portfolio Diversification. Investment in real estate may enhance the diversification of the Plan s total investment portfolio given the historically low or negative return correlation of real estate with other asset classes (e.g., equities and fixed income). Inflation-Hedge. Real estate has historically provided a reasonable hedge against inflation. 1 Based on the target policy allocation of 70/20/10 core/value-add/opportunistic and net return assumptions of 6.5% for core, 8.5% for value-add, and 10% for opportunistic. 2

5 2018 Strategic Plan Overview The following have been established as short and long term investment themes and initiatives: TACTICAL INITIATIVES (Short-Term Goals) Continue to focus on income-oriented returns Evaluate defensive opportunities across the capital stack, including niche strategies Selectively allocate to core-plus and other attractive strategies as opportunities arise Continue to slightly overweight non-core component of portfolio, given market opportunity set Evaluate investments in opportunistic category which benefit from market dislocation Evaluate Western European and Asian core market opportunities Continue to evaluate core portfolio positions STRATEGIC INITIATIVES (Long-Term Plans) Exceed benchmark: NCREIF + 50 basis points Strategic target: 70/20/10 (core/value/opportunistic) Maintain average commitment size of $60-$90 million Maintain income and preservation of capital focus Consider follow-on funds with existing high conviction managers 3

6 2017 Commitment Review The Plan made the following real estate allocations in 2017 to satisfy certain initiatives of the 2017 Strategic Plan. Investments Date $ Amount Risk Profile Objectives Torchlight Debt Opportunity Fund VI LaSalle Asia Opportunity V 3Q17 $60.0 million Opportunistic 3Q17 $60.0 million Opportunistic Exposure to investments across the debt capital stack in the United States. Exposure to income producing assets in developed economies and liquid markets in Asia. 4

7 2018 Projected Income Returns Investment 2018 Expected Income (%) 2018 Expected Income ($) Core DFA 2.00% $599,995 FPA Core Plus III 3.00% $1,260,034 Harrison Street 4.00% $2,767,233 Heitman Securities 2.00% $575,334 INVESCO 4.00% $2,501,523 Jamestown 4.00% $2,414,501 JP Morgan SPF 4.00% $3,176,385 PCCP II 4.00% $63,520 PRISA 4.00% $1,495,933 Prologis Industrial 4.00% $3,428,268 Value Angelo Gordon 4.00% $278,726 Almanac VI 6.00% $1,274,110 Almanac VII 8.00% $269,942 Bristol II 3.00% $437,753 DRA VII 7.00% $806,146 DRA VIII 9.00% $2,080,864 DRA IX 9.00% $1,874,524 Mesa West III 7.00% $833,174 Mesa West IV 8.00% $1,484,547 PRISA II 4.00% $1,552,009 Westbrook X 2.00% $306,079 Opportunistic Blackstone VII 2.00% $468,306 Blackstone Europe IV 3.00% $825,463 LaSalle Asia V 4.00% $163,294 Lone Star REF II 0.00% $0 Lone Star REF IV 1.00% $12,905 Lone Star REF V 1.00% $349,265 Lone Star VII 4.00% $233,188 Torchlight IV 6.00% $1,281,150 Torchlight V 8.00% $2,029,329 Torchlight VI 8.00% $800,000 Total $35,643,499 Overall market income returns have trended down over the past several years as asset pricing has escalated, particularly for core investments. In 2018, the Plan s portfolio is projected to generate $35.6 million in income returns, reflecting an increase from last year, based on a recent focus on income-producing investments investments: Torchlight VI and LaSalle Asia V both have a high current income focus. Debt funds continue to bring strong current income returns to the Plan s portfolio. 5

8 Proposed 2018 Strategic Plan As of , the Plan s real estate allocation was 5.8%. Based on an overall 7.25% Plan annual growth rate assumption, for 2018 Courtland recommends committing approximately $180 million to real estate investments towards achieving the 8% target real estate allocation in 2019: Core: $60-90 million Value: $60-90 million Opportunistic: Up to $90 million Courtland further projects the following 2019 commitment amounts will be required to achieve the 8% target allocation to real estate by year end 2019: 2019 Core: $60 million 2019 Value: $60 million 2019 Opportunistic: $60 million Real estate drops to 5.2% by 2021 in the absence of new commitments based on 7.25% growth rate (actuarial return). 6

9 Risk/Return Targets Risk/Return Nominal Net Return Investment and Portfolio Risk/Return Ranges 1 Standard 2 Deviation Exposure Fully Funded Exposure 3 Proposed Strategy Range Policy Range Core 6%-7% 6.6% 61.6% 44.1% 50%-60% 50%-100% Value-Add 8%-9% 11.1% 21.7% 30.0% 25%-35% 0%-40% Opportunistic 10%+ 16.0% 16.7% 25.9% 15%-20% 0%-20% For the core section of the portfolio, strong demand and recent run-up in valuations for institutional trophy real estate in major U.S. markets (from domestic and offshore) continues to be concerning, causing issues of potential pricing bubbles. Continue to evaluate strategies currently providing downside protection, including debt-oriented and defensive strategies as well as specific international opportunities. Given current market conditions, selectively evaluate core-plus/value strategies that emphasize strong current income and modest use of leverage. For opportunistic investments, continue to evaluate strategies that look to take advantage of dislocation in the capital markets, including niche and secondary strategies. 1: Data based on 9/30/17 valuations and managers in place at that time. 2: Based on historical Courtland Partners Index Quarterly Return Information as of 12/31/88-6/30/17, and assumptions for : Includes exposure as of plus all unfunded commitments. 7

10 Leverage Review Leverage Ranges and Average Loan-To-Value Target (as of ) Risk Actual Strategic Ranges Policy Range Aggregate Core 24.4% 20%-30% Up to 40% Aggregate Value 48.3% 50%-60% Up to 65% Aggregate Opportunistic 47.8% 55%-65% Up to 75% Total Real Estate Portfolio 33.5% 25%-35% Up to 50% Leverage, on a portfolio basis, rose 110 basis points over the past 12 months (32.4% in 3Q2016 to 33.5% in 3Q2017), but is well within the Policy Range of up to 50%. The Plan s recent tactical focus on non-core assets is consistent with the slight increase in leverage. The Plan s Staff and Courtland have continued to focus on strategies where leverage is not the primary driver of returns. Leverage within the Opportunistic risk/return category remains below the strategic range of 55%-65% and decreased from 54.6% in 3Q2016 to 47.8% in 3Q2017 as managers have worked to find distressed deals without using leverage as a main driver of return. In 2018, the Plan s Staff and the Courtland will closely monitor the use of leverage, the debt maturity schedule, and debt composition (fixed vs. floating) for investments that comprise the Real Estate Portfolio to avoid leverage related risks in case of market volatility. 8

11 Property Type Diversification Targets Property Type Diversification (as of 9/30/2017) Property Type Allocation** Policy Range NCREIF Property Index Office 31.0% Up to 40% 36.8% Industrial 14.1% Up to 35% 14.6% Retail 15.7% Up to 40% 23.7% Residential 26.5% Up to 40% 24.1% Hotel 3.3% Up to 15% 0.8% Other* 9.4% Up to 20% N/A Proposed Recommendation for 2018: Pursue strategies which are diversified across property types as well as single property-type funds. Consider non-traditional property types (e.g., medical office, storage, senior housing, and student housing), as these property types are generally not fully priced and are typically more immune to market downturns. Consider investments with traditional property types generally more immune to market downturns (e.g., grocery-anchored retail). *May include senior living, healthcare, student housing, land, self storage, and other non categorized investments (e.g., debt portfolio). **Due to pooled fund investments, it is difficult to project property type exposures. 9

12 Geographic Diversification Targets Geographic Diversification (as of 9/30/2017) Sub Regions Allocation* Policy Range NCREIF Property Index West (1) 28.1% Up to 50% 38.5% South (2) 18.9% Up to 40% 19.8% Midwest (3) 9.5% Up to 40% 8.5% East (4) 28.0% Up to 50% 32.2% US Non Classified 4.5% N/A N/A International* 11.0% Up to 20% N/A (1) Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming. (2) Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas. (3) Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin. (4) Connecticut, Delaware, District of Columbia, Kentucky, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia. Proposed Recommendation for 2018: Maintain and monitor the portfolio s exposure to coastal and gateway markets (i.e., East, West) and consider emerging secondary cities (e.g., Seattle, Portland, Denver) where pricing can still be found at relatively attractive levels. Avoid regions where oversupply has been an issue recently (e.g., Houston, Austin) and cyclically (e.g., Atlanta, Dallas). Consider select tertiary markets very selectively based on property type and strategy. Consider select international opportunities with specialist, high conviction managers. *Note: Due to pooled fund investments, it is difficult to project geographic exposures. 10

13 Current RE Portfolio at 0% Plan Growth Dec 17 Mkt. Value Dec 18 Mkt. Value Dec 19 Mkt. Value Dec 20 Mkt. Value Dec 21 Mkt. Value Core: Dimensional Global RE 29,999,746 29,999,746 29,999,746 29,999,746 29,999,746 FPA Core Plus III 42,001,147 54,001,147 51,001,147 48,001,147 45,001,147 Harrison Street Core Property 69,180,821 69,180,821 69,180,821 69,180,821 69,180,821 Heitman REIT 28,766,717 28,766,717 28,766,717 28,766,717 28,766,717 Invesco Core Real Estate 62,538,065 62,538,065 62,538,065 62,538,065 62,538,065 Jamestown Premier 60,362,516 60,362,516 60,362,516 60,362,516 60,362,516 JP Morgan SPF 79,409,622 79,409,622 79,409,622 79,409,622 79,409,622 PCCP First Mortgage II 1,588, Prologis Industrial Fund 37,398,320 37,398,320 37,398,320 37,398,320 37,398,320 Prudential PRISA 85,706,688 85,706,688 85,706,688 85,706,688 85,706,688 Total 496,951, ,363, ,363, ,363, ,363,642 59% 56% 52% 53% 59% Value: AG Core Plus Realty Fund III 6,968,155 4,668,155 3,518,155 3,518,155 2,668,155 Almanac Realty Securities VI 16,154,953 22,167,953 20,627,953 17,137,953 8,837,953 Almanac Realty Securities VII 3,374,270 6,548,156 11,775,656 15,356,794 15,297,952 Bristol Value II 14,591,751 17,833,176 16,945,415 14,366,237 8,669,868 DRA Growth and Income Fund VII 15,511,819 11,443,592 4,854,357 3,238,396 3,065,745 DRA Growth and Income Fund VIII 23,120,710 19,697,930 13,981,553 6,600,617 2,600,617 DRA Growth and Income Fund IX 20,828,044 34,921,858 47,054,974 45,180,940 26,099,464 Mesa West Income Fund III 11,902,490 5,624,606 3,115,959 3,115,959 3,115,959 Mesa West Income Fund IV 18,556,835 32,853,398 46,099,126 26,474,751 7,955,377 Prudential PRISA II 38,800,224 38,800,224 38,800,224 38,800,224 38,800,224 Westbrook X 15,303,938 36,303,938 53,103,938 60,146,043 60,146,043 Total 185,113, ,862, ,877, ,936, ,257,356 22% 25% 27% 25% 21% Opportunistic: Blackstone BREP VII 23,415,317 16,373,134 8,327,209 2,850,147 2,145,144 Blackstone Europe IV 27,515,439 21,018,855 16,803,286 10,503,793 3,695,688 LaSalle Asia V 14,082,340 25,958,237 37,958,237 59,958,237 59,958,237 Lone Star Fund VII 176, ,535 60,697 60,697 60,697 Lone Star Real Estate Fund II 1,290, , , , ,089 Lone Star Real Estate Fund IV 34,926,526 28,599,528 23,748,685 8,860,560 4,105,287 Lone Star Real Estate Fund V 5,829,705 29,163,408 55,586,277 52,356,070 32,356,070 Torchlight Debt Opportunity IV 21,352,501 9,352,501 4,352,501 1,543,139 0 Torchlight Debt Opportunity V 25,366,610 30,057,800 18,057,800 13,748,615 6,737,525 Torchlight Debt Opportunity VI 0 10,000,000 40,000,000 60,000,000 60,000,000 Total 153,955, ,279, ,356, ,340, ,326,736 18% 19% 21% 22% 20% Total Real Estate 836,020, ,506, ,597, ,640, ,947,734 % of Plan Assets 6.3% 6.8% 7.3% 7.1% 6.3% Plan Assets (0% Growth) 13,333,159,034 13,333,159,034 13,333,159,034 13,333,159,034 13,333,159,034 Over/Under Funded 230,632, ,146,472 97,054, ,012, ,704,988 Note: Based on 3Q17 data. Note: Estimated plan assets and over/under allocation based on assumed 0% total portfolio-level growth rate. 11

14 Core Value Opportunistic Current RE Portfolio at 7.25% Plan Growth Dec 17 Mkt. Value Dec 18 Mkt. Value Dec 19 Mkt. Value Dec 20 Mkt. Value Dec 21 Mkt. Value Dimensional Global RE 29,999,746 30,599,741 31,211,736 31,835,970 32,472,690 FPA Core Plus III 42,001,147 54,001,147 51,001,147 48,001,147 45,001,147 Harrison Street Core Property 69,180,821 71,948,054 74,825,976 77,819,015 80,931,776 Heitman REIT 28,766,717 29,342,051 29,928,892 30,527,470 31,138,020 Invesco Core Real Estate 62,538,065 65,039,588 67,641,171 70,346,818 73,160,691 Jamestown Premier 60,362,516 61,053,737 61,772,606 62,520,230 63,297,760 JP Morgan SPF 79,409,622 81,754,558 84,143,695 86,575,844 89,049,590 PCCP First Mortgage II 1,588, Prologis Industrial Fund 37,398,320 38,860,002 40,414,402 42,030,978 43,712,217 Prudential PRISA 85,706,688 89,134,956 92,700,354 96,408, ,264,703 Total 496,951, ,733, ,639, ,065, ,028,592 59% 56% 53% 55% 61% AG Core Plus Realty Fund III 6,968,155 4,668,155 3,518,155 3,518,155 2,668,155 Almanac Realty Securities VI 16,154,953 22,167,953 20,627,953 17,137,953 8,837,953 Almanac Realty Securities VII 3,374,270 6,548,156 11,775,656 15,356,794 15,297,952 Bristol Value II 14,591,751 17,833,176 16,945,415 14,366,237 8,669,868 DRA Growth and Income Fund VII 15,511,819 11,443,592 4,854,357 3,238,396 3,065,745 DRA Growth and Income Fund VIII 23,120,710 19,697,930 13,981,553 6,600,617 2,600,617 DRA Growth and Income Fund IX 20,828,044 34,921,858 47,054,974 45,180,940 26,099,464 Mesa West Income Fund III 11,902,490 5,624,606 3,115,959 3,115,959 3,115,959 Mesa West Income Fund IV 18,556,835 32,853,398 46,099,126 26,474,751 7,955,377 Prudential PRISA II 38,800,224 39,964,230 41,163,157 42,398,052 43,669,993 Westbrook X 15,303,938 36,303,938 53,103,938 60,146,043 60,146,043 Total 185,113, ,026, ,240, ,533, ,127,126 22% 25% 26% 24% 20% Blackstone BREP VII 23,415,317 16,373,134 8,327,209 2,850,147 2,145,144 Blackstone Europe IV 27,515,439 21,018,855 16,803,286 10,503,793 3,695,688 LaSalle Asia V 14,082,340 25,958,237 37,958,237 59,958,237 59,958,237 Lone Star Fund VII 176, ,535 60,697 60,697 60,697 Lone Star Real Estate Fund II 1,290, , , , ,089 Lone Star Real Estate Fund IV 34,926,526 28,599,528 23,748,685 8,860,560 4,105,287 Lone Star Real Estate Fund V 5,829,705 29,163,408 55,586,277 52,356,070 32,356,070 Torchlight Debt Opportunity IV 21,352,501 9,352,501 4,352,501 1,543,139 0 Torchlight Debt Opportunity V 25,366,610 30,057,800 18,057,800 13,748,615 6,737,525 Torchlight Debt Opportunity VI 0 10,000,000 40,000,000 60,000,000 60,000,000 Total 153,955, ,279, ,356, ,340, ,326,736 18% 19% 21% 21% 19% Total Real Estate 836,020, ,040,448 1,001,237, ,940, ,482,455 % of Plan Assets 6.3% 6.5% 6.5% 6.0% 5.2% Plan Assets (7.25% Growth) 13,333,159,034 14,299,813,064 15,336,549,511 16,448,449,351 17,640,961,929 Over/Under Funded 230,632, ,944, ,686, ,935, ,794,500 Note: Based on 3Q17 data. Note: Estimated plan assets and over/under allocation based on assumed 7.25% total portfolio-level growth rate. 12

15 Core Value Opportunistic: Current & New RE Commitments at 0% Plan Growth Dec 17 Mkt. Value Dec 18 Mkt. Value Dec 19 Mkt. Value Dec 20 Mkt. Value Dec 21 Mkt. Value Dimensional Global RE 29,999,746 30,070,137 30,070,137 30,070,137 30,070,137 FPA Core Plus III 42,001,147 54,001,147 51,001,147 48,001,147 45,001,147 Harrison Street Core Property 69,180,821 61,921,935 61,921,935 61,921,935 61,921,935 Heitman REIT 28,766,717 28,354,493 28,354,493 28,354,493 28,354,493 Invesco Core Real Estate 62,538,065 58,139,599 58,139,599 58,139,599 58,139,599 Jamestown Premier 60,362,516 58,570,663 58,570,663 58,570,663 58,570,663 JP Morgan SPF 79,409,622 74,543,156 74,543,156 74,543,156 74,543,156 PCCP First Mortgage II 1,588, Prologis Industrial Fund 37,398,320 30,054,498 30,054,498 30,054,498 30,054,498 Prudential PRISA 85,706,688 80,060,161 80,060,161 80,060,161 80,060,161 Core ,000,000 60,000,000 60,000,000 60,000,000 Core ,000,000 60,000,000 60,000,000 Total 496,951, ,715, ,715, ,715, ,715,790 61% 54% 48% 46% 47% AG Core Plus Realty Fund III 6,968,155 4,668,155 3,518,155 3,518,155 2,668,155 Almanac Realty Securities VI 16,154,953 22,167,953 20,627,953 17,137,953 8,837,953 Almanac Realty Securities VII 3,374,270 6,548,156 11,775,656 15,356,794 15,297,952 Bristol Value II 14,591,751 17,833,176 16,945,415 14,366,237 8,669,868 DRA Growth and Income Fund VII 15,511,819 11,443,592 4,854,357 3,238,396 3,065,745 DRA Growth and Income Fund VIII 23,120,710 19,697,930 13,981,553 6,600,617 2,600,617 DRA Growth and Income Fund IX 20,828,044 34,921,858 47,054,974 45,180,940 26,099,464 Mesa West Income Fund III 11,902,490 5,624,606 3,115,959 3,115,959 3,115,959 Mesa West Income Fund IV 18,556,835 32,853,398 46,099,126 26,474,751 7,955,377 Prudential PRISA II 38,800,224 39,964,230 41,163,157 42,398,052 43,669,993 Westbrook X 15,303,938 36,303,938 53,103,938 60,146,043 60,146,043 Value ,000,000 40,000,000 60,000,000 60,000,000 Value ,000,000 40,000,000 60,000,000 Total 185,113, ,026, ,240, ,533, ,127,126 23% 27% 29% 29% 29% Blackstone BREP VII 23,415,317 16,373,134 8,327,209 2,850,147 2,145,144 Blackstone Europe IV 27,515,439 21,018,855 16,803,286 10,503,793 3,695,688 LaSalle Asia V 4,082,340 15,958,237 17,145,827 17,145,827 17,145,827 Lone Star Fund VII 176, ,535 60,697 60,697 60,697 Lone Star Real Estate Fund II 1,290, , , , ,089 Lone Star Real Estate Fund IV 34,926,526 28,599,528 23,748,685 8,860,560 4,105,287 Lone Star Real Estate Fund V 530,685 29,870,155 55,198,731 59,387,214 21,676,095 Torchlight Debt Opportunity IV 21,352,501 9,352,501 4,352,501 1,543,139 0 Torchlight Debt Opportunity V 25,366,610 30,057,800 18,057,800 13,748,615 6,737,525 Torchlight Debt Opportunity VI 0 10,000,000 40,000,000 60,000,000 60,000,000 Opportunistic ,000,000 40,000,000 60,000,000 60,000,000 Opportunistic ,000,000 40,000,000 60,000,000 Total 137,595, ,986, ,156, ,559, ,834,351 17% 19% 23% 25% 24% Total Real Estate 819,660, ,729,153 1,169,112,963 1,281,809,340 1,244,677,268 % of Plan Assets 6.1% 7.0% 8.8% 9.6% 9.3% Plan Assets (0% Growth) 13,333,159,034 13,333,159,034 13,333,159,034 13,333,159,034 13,333,159,034 Over/Under Funded 246,992, ,923, ,460, ,156, ,024,545 Note: Based on 3Q17 data. Note: Estimated plan assets and over/under allocation based on assumed 0% total portfolio-level growth rate. 13

16 Core Value Opportunistic Current & New RE Commitments at 7.25% Plan Growth Dec 17 Mkt. Value Dec 18 Mkt. Value Dec 19 Mkt. Value Dec 20 Mkt. Value Dec 21 Mkt. Value Dimensional Global RE 29,999,746 30,599,741 31,211,736 31,835,970 32,472,690 FPA Core Plus III 42,001,147 54,001,147 51,001,147 48,001,147 45,001,147 Harrison Street Core Property 69,180,821 71,948,054 74,825,976 77,819,015 80,931,776 Heitman REIT 28,766,717 29,342,051 29,928,892 30,527,470 31,138,020 Invesco Core Real Estate 62,538,065 65,039,588 67,641,171 70,346,818 73,160,691 Jamestown Premier 60,362,516 61,053,737 61,772,606 62,520,230 63,297,760 JP Morgan SPF 79,409,622 81,754,558 84,143,695 86,575,844 89,049,590 PCCP First Mortgage II 1,588, Prologis Industrial Fund 37,398,320 38,860,002 40,414,402 42,030,978 43,712,217 Prudential PRISA 85,706,688 89,134,956 92,700,354 96,408, ,264,703 Core ,000,000 60,000,000 60,000,000 60,000,000 Core ,000,000 60,000,000 60,000,000 Total 496,951, ,733, ,639, ,065, ,028,592 61% 56% 51% 49% 51% AG Core Plus Realty Fund III 6,968,155 4,668,155 3,518,155 3,518,155 2,668,155 Almanac Realty Securities VI 16,154,953 22,167,953 20,627,953 17,137,953 8,837,953 Almanac Realty Securities VII 3,374,270 6,548,156 11,775,656 15,356,794 15,297,952 Bristol Value II 14,591,751 17,833,176 16,945,415 14,366,237 8,669,868 DRA Growth and Income Fund VII 15,511,819 11,443,592 4,854,357 3,238,396 3,065,745 DRA Growth and Income Fund VIII 23,120,710 19,697,930 13,981,553 6,600,617 2,600,617 DRA Growth and Income Fund IX 20,828,044 34,921,858 47,054,974 45,180,940 26,099,464 Mesa West Income Fund III 11,902,490 5,624,606 3,115,959 3,115,959 3,115,959 Mesa West Income Fund IV 18,556,835 32,853,398 46,099,126 26,474,751 7,955,377 Prudential PRISA II 38,800,224 39,964,230 41,163,157 42,398,052 43,669,993 Westbrook X 15,303,938 36,303,938 53,103,938 60,146,043 60,146,043 Value ,000,000 40,000,000 60,000,000 60,000,000 Value ,000,000 40,000,000 60,000,000 Total 185,113, ,026, ,240, ,533, ,127,126 23% 26% 28% 28% 27% Blackstone BREP VII 23,415,317 16,373,134 8,327,209 2,850,147 2,145,144 Blackstone Europe IV 27,515,439 21,018,855 16,803,286 10,503,793 3,695,688 LaSalle Asia V 4,082,340 15,958,237 17,145,827 17,145,827 17,145,827 Lone Star Fund VII 176, ,535 60,697 60,697 60,697 Lone Star Real Estate Fund II 1,290, , , , ,089 Lone Star Real Estate Fund IV 34,926,526 28,599,528 23,748,685 8,860,560 4,105,287 Lone Star Real Estate Fund V 530,685 29,870,155 55,198,731 59,387,214 21,676,095 Torchlight Debt Opportunity IV 21,352,501 9,352,501 4,352,501 1,543,139 0 Torchlight Debt Opportunity V 25,366,610 30,057,800 18,057,800 13,748,615 6,737,525 Torchlight Debt Opportunity VI 0 10,000,000 40,000,000 60,000,000 60,000,000 Opportunistic ,000,000 40,000,000 60,000,000 60,000,000 Opportunistic ,000,000 40,000,000 60,000,000 Total 137,595, ,986, ,156, ,559, ,834,351 17% 18% 21% 23% 22% Total Real Estate 819,660, ,747,196 1,230,037,152 1,358,159,392 1,336,990,070 % of Plan Assets 6.1% 6.9% 8.0% 8.3% 7.6% Plan Assets (7.25% Growth) 13,333,159,034 14,299,813,064 15,336,549,511 16,448,449,351 17,640,961,929 Over/Under Funded 246,992, ,237,850 3,113,192 42,283,444 74,286,885 Note: Based on 3Q17 data. Note: Estimated plan assets and over/under allocation based on assumed 7.25% total portfolio-level growth rate. 14

17 Risk/Return Allocation Risk/Return Strategy Core 60% 57% 54% 57% 64% Value 22% 25% 27% 25% 21% Opportunistic 17% 18% 19% 18% 15% Total 100% 100% 100% 100% 100% % 15% 22% 60% 27% 64% Core Value Opportunistic Note: The above risk/return levels are based on current portfolio with no proposed allocations. 15

18 Property Type Diversification Property Type Office 28% 28% 29% 30% 30% Retail 16% 16% 17% 17% 16% Residential 23% 24% 23% 22% 22% Industrial 13% 13% 14% 14% 14% Hotel 3% 2% 2% 2% 2% Other* 17% 16% 15% 15% 17% Total 100% 100% 100% 100% 100% *Includes Mixed-Use, Self Storage, Operating Companies, Senior Housing, Healthcare, CMBS and Private Debt, Land, and Healthcare % 17% 28% 2% 17% 29% 13% 14% 23% 16% 22% 16% Office Retail Residential Industrial Hotel Other* Note: The above property-type diversification tables/charts are based on current portfolio with no proposed allocations. Proposed allocation diversification information is not included as it is difficult to predict the nature of future commitments. 16

19 Geographic Diversification Geographic Diversification East 29% 28% 29% 30% 31% West 29% 29% 29% 31% 33% Midwest 10% 9% 9% 8% 8% South 19% 18% 17% 17% 17% International 11% 13% 15% 13% 11% Other* 2% 2% 1% 1% 0% Total 100% 100% 100% 100% 100% % 2% 11% 0% 19% 29% 17% 31% 10% 8% 29% 33% East West Midwest South International Other* Note: The above geographic diversification tables/charts are based on current portfolio with no proposed allocations. Proposed allocation diversification information is not included as it is difficult to predict the nature of future commitments. 17

20 Other Portfolio Structure Diversification Non-Development/Development Development 3% 4% 4% 4% 4% Non-Develop 97% 96% 96% 96% 96% Total 100% 100% 100% 100% 100% Public vs. Private Public 15% 13% 11% 10% 9% Private 85% 87% 89% 90% 91% Total 100% 100% 100% 100% 100% Debt vs. Equity (Portion of Capital Structure) Debt 20% 21% 22% 17% 12% Equity 80% 79% 78% 83% 88% Total 100% 100% 100% 100% 100% Note: The above property-type diversification are based on current portfolio with no proposed allocations. Proposed allocation diversification information is not included as it is difficult to predict the nature of future commitments. 18

21 Projected Changes in Portfolio Value Cash Flow out of/into Fund Change Change Change Change Return of Capital (52,759,756) (58,241,785) (79,135,143) (105,128,459) Capital Calls 113,719,477 75,016,803 10,623,244 - Total 60,959,721 16,775,018 (68,511,899) (105,128,459) Return of Capital Capital Calls 150,000, ,000,000 50,000,000 (50,000,000) (100,000,000) (150,000,000) Change Change Change Change Return of Capital Capital Calls Total In the absence of new commitments, the portfolio begins to decline in value starting in Note: The above projected changes in portfolio value are based on current portfolio with no proposed allocations. 19

22 Projected Changes in Portfolio Value Courtland Financial Model Projected Allocation to Real Estate Assuming No Additional Investment Commitments Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Total Plan Assets $13,333,159,034 $14,299,813,064 $15,336,549,511 $16,448,449,351 $17,640,961,929 Real Estate Investments $836,020,462 $925,040,448 $1,001,237,109 $993,940,658 $910,482,455 Real Estate Percent of Total 6.3% 6.5% 6.5% 6.0% 5.2% Allocation to Real Estate $1,066,652,723 $1,143,985,045 $1,226,923,961 $1,315,875,948 $1,411,276,954 Remaining Commitments $386,058,893 $252,200,775 $105,441,950 $33,790,207 $30,887,039 Over/(Under) Allocation - Gross -$230,632,261 -$218,944,597 -$225,686,852 -$321,935,291 -$500,794,500 Over/(Under) Allocation - Net $155,426,632 $33,256,178 -$120,244,902 -$288,145,083 -$469,907,461 Note: The above projected changes in portfolio value are based on current portfolio with no proposed allocations based on 7.25% growth rate (actuarial return). 20

23 2018 Strategy Implementation/Action Plan Risk/Return Action Plan Focus Core $60-90 million Selectively allocate to core-plus strategies. Consider alternative core strategies (e.g., stabilized non-traditional property types). Place continued emphasis on current income and preservation of capital/ downside protection. Consider investments in specific international markets. Value $60-90 million Place continued emphasis on high income with potential for value creation. Focus on managers that acquire assets below market value and discounts to replacement cost and subsequently manufacture class A and B assets. Consider debt portion of capital structure. Focus on top performing follow-on managers if their strategies continue to be a portfolio fit. Consider strategies that focus on secondary markets. Opportunistic Up to $90 million Focus on investments that target stressed/distressed capital structures as opposed to stressed/distressed assets. Consider investments in secondary strategies. Focus on strategies that provide basis protection in order to minimize downside volatility. Consider investments in international markets that currently lag the market recovery recently experienced in the U.S. Focus on investments that are not generating returns solely through the use of financial engineering. 21