REQUEST FOR PROPOSAL #2017-02 Real Estate Investment Consultant San Joaquin County Employees' Retirement Association 6 South El Dorado Street, Suite 400 Stockton, California 95202 Phone: (209) 468-2163 FAX: (209) 468-0480 REConsultRFP@sjcera.org www.sjcera.org NOVEMBER 3, 2017 PROPOSED FOR REVIEW BY REAL ESTATE COMMITTEE ON AUGUST 16, 2017
REQUEST FOR PROPOSAL #2017-02 Real Estate Investment Consultant SCHEDULE The following schedule for this RFP must be adhered to by all Proposers and may only be modified by SJCERA. Any schedule modification prior to the deadline for submission of proposals will be posted to SJCERA s website. Thereafter, schedule modifications will be communicated only to the contact person(s) identified in the proposals submitted in response to this RFP. EVENT DATE Request for Proposal Issued November 3, 2017 Written Questions from Proposers Due SJCERA s Responses to Written Questions Posted on Website Deadline for Submission of Proposals November 10, 2017 at 4:30 pm PDT On or about November 21, 2017 December 1, 2017 at 4:30 pm PDT Evaluation of Proposals On or about December 4 15, 2017 Semi-Finalists Notified of Date and Time of Interview (If necessary) Semi-Finalist Interviews with Evaluation Committee (If necessary) By December 20, 2017 January 3 9, 2018 Finalists Notified of Time of Interview By January 9, 2018 Finalist Interviews with Real Estate Committee Selection of Successful Proposer Notice to Proposers of Final Selection Contract Negotiations Week of January 2018 Board Meeting January 2018 Board Meeting After January 2018 Board Meeting After January 2018 Board Meeting Consultant Transition (if required) February 1 28, 2018 i
The San Joaquin County Employees' Retirement Association (SJCERA) is requesting proposals from real estate consultants concerning the management of its real estate investment program. SJCERA is seeking proposals from real estate consultants having experience in the institutional and public pension fund area. This RFP process may or may not result in a review and selection process to contract for real estate consulting services. Proposals will be reviewed by a Proposal Evaluation Committee. The following criteria will be used by the Proposal Evaluation Committee to score each written proposal: Organization/People 15% Philosophy 15% Real Estate Consulting Services 40% Fees 30% WRITTEN QUESTIONS Proposers requiring clarification of the RFP may submit written questions only via email to REConsultRFP@sjcera.org by 4:30 p.m. Pacific Daylight Time on November 10, 2017. All questions must identify the RFP section, page, and paragraph to which the question refers. Only written questions received by the deadline will be answered by SJCERA. The identity of the source of each question will not be included in SJCERA s response. All questions received by the deadline and SJCERA s written responses thereto will be posted on SJCERA s web site on or about November 21, 2017. It is incumbent on Proposers to obtain this information once posted to ensure submitted proposals are responsive. MINIMUM QUALIFICATIONS Real Estate Consulting firms wishing to respond to this RFP must meet the following minimum qualifications as of June 30, 2017: Advisor must be a registered investment advisor under the Investment Advisors Act of 1940. Please include copies of ADV I and II (with schedules). Advisor must have at least ten existing real estate portfolio consulting client relationships with large institutional clients, corporate pension plans or tax-exempt public funds. At least three of these clients must be a public pension plan. Advisor must have at least ten years of continuous experience in performing real estate consulting for tax-exempt public funds. In Exhibit A, please provide a statement substantiating how you satisfy each of the minimum qualifications and provide copy of ADV I and II (with schedules). 1
SUBMISSION INSTRUCTIONS To respond to this RFP, SJCERA must receive the completed Real Estate Consulting Questionnaire, along with all attachments specified in the questionnaire on or before 4:30 p.m. Pacific Daylight Time on Friday, December 1, 2017. Deliver six (6) hard copies of your response and an electronic (Microsoft Word) version of the response on a USB flash drive to: Greg Frank RFP Coordinator San Joaquin County Employees' Retirement Association 6 S. El Dorado Street, Suite 400 Stockton, CA 95202 Electronic responses will not be accepted as a primary form of submission. SCOPE OF SERVICES REQUIRED The purpose is to provide full-service retainer real estate consulting to SJCERA. The scope of real estate consulting services required by SJCERA includes but is not limited to the following: Act as a fiduciary to SJCERA in providing oversight and administration of SJCERA's real estate portfolio; Act as an agent of SJCERA in administering manager search processes to identify potential real estate managers and strategies for selection by SJCERA; Oversee real estate investment managers in conjunction with staff, including initial and ongoing due diligence, manager reviews and on-site visits; Advise on real estate capital market assumptions and SJCERA s allocations; Perform annual reviews of SJCERA's real estate investment policy and provide written recommendations for the amendment of or modification to SJCERA's real estate investment policy and minimum investment criteria and parameters, on an on-going basis; Review and make recommendations for modifications/updates to SJCERA s real estate annual investment plan and perform periodic reviews of SJCERA's real estate portfolio structure, portfolio strategy, property type exposure, and economic region diversification; 2
Provide SJCERA with at least quarterly performance analyses that should include: ú a report on SJCERA's overall real estate portfolio performance and risk relative to a broad market benchmark(s) and on a gross and net basis; ú an evaluation report on the performance of SJCERA's various real estate managers; ú a summary of investment management fees and incentive fees accrued and paid and, ú property by property summary statistics to track investment value, mortgage balances (if applicable), cash flows and other critical information. Provide information and research on real estate investment topics that may affect SJCERA's real estate portfolio, as may be requested by SJCERA or developed in the normal course of business operations; Provide information and recommendations for new investment opportunities for consideration by SJCERA; Attend Real Estate Committee and/or Board meetings as requested, typically six meetings per year; Work collaboratively with SJCERA's general investment consultant, currently PCA, to meet the overall investment objectives as approved by the Board; and Other duties or activities as may be required consistent with and contemplated by the foregoing. 3
SJCERA REAL ESTATE CONSULTANT QUESTIONNAIRE Responses Due By: Friday, December 8, 2017 by 4:30PM Section I - Profile Name of firm Address of servicing office Primary Contact Name Telephone number Fax number Email Address Year firm was founded Year firm began offering real estate consulting services Number of employees on staff Number of real estate professional employees on staff Has the firm been censured by the SEC or other regulatory agency? Yes No Total Number of Current Relationships: Section II - Organization / People A. Briefly describe your firm s ownership structure and business plan. B. State the overall business objective of your real estate consulting service with respect to future growth during the next five years. Note any planned areas of emphasis in the near future, including the total number of consulting relationships that will be accepted. 4
C. Provide the percentage of total firm revenues that came from the categories listed below for each year: 2014 2015 2016 2017 Consulting to Plan Sponsors % % % % Broker/Dealer Activities % % % % Money Management Activities % % % % Services to Money Managers % % % % Other (Please describe) % % % % 100% 100% 100% 100% D. Questions in the following section require a yes, no or N/A. If yes, please provide a further explanation. D.1 Does or has your firm, or an affiliate, manage investments for clients or accept fees based on fund raising activities? D.2 Have you ever accepted payment, in any form, from an investment manager whom you later included in a recommendation to a client? D.3 Have you ever, for a fee, advised an investment manager regarding the best approach to be followed in selling services to your clients? D.4 Does the firm, its affiliates, or the ultimate parent of the firm receive pecuniary or non-pecuniary benefit from investment managers for consulting services provided, software sold, attendance at conferences, access to manager databases, or for any other reason? D.5 Does the firm receive fees or some other benefit from a third party for making investment recommendations for a client? If yes, does the firm disclose this fact to the client in advance, and in what manner? D.6 Does the firm or employees of the firm invest in assets that the firm recommends to clients? D.7 Does the firm recommend investment management organizations with which it is affiliated? D.8 Have you ever made a campaign contribution to an elected official who is positioned, or might prospectively be positioned, to vote on approving your contract with a client? YES NO N/A E. Does your firm offer any real estate investment opportunities such as a subadvisory relationship for a commingled real estate fund? If yes, please describe how resources are segregated between consulting and investment management functions. F. Describe the financial condition of your firm and include a copy of the firm s financial statements in Exhibit B for the most recent annual reporting period. 5
G. Briefly describe your firm's strengths, weaknesses and competitive advantages. H. Who will be the primary consultant assigned to SJCERA? How many years of real estate consulting experience do they have and how long have they been with your firm? I. Indicate the number of real estate consulting client relationships gained and lost: 2017 2016 2015 2014 Institutional Funds Public Funds # Gained # Lost # Gained # Lost J. Provide the name and dollar amount of assets of all full-service retainer real estate consulting clients that terminated their relationship with the firm. Provide the reason for each termination. Year Terminated Client Name MV of Assets Reason for Termination 2017 2016 2015 2014 K. Complete the following as it pertains to senior real estate consulting personnel: Average number of years of real estate related experience? Average number of years tenure with your firm? L. Complete the following table regarding senior real estate consulting personnel who left or joined your firm within the last three years. Include anticipated personnel changes for the next year. 6
Name and title Date terminated or hired Reason Left: Joined: M. Provide as Exhibit C an organization chart of your firm and describe the relationship between the real estate consulting group and any other components of the firm. N. Attach as Exhibit D brief resumes of senior personnel associated with real estate consulting. Resumes should include work experience as well as academic credentials. Other qualifying experience, such as published articles, speeches, or participation on panel discussions in professional real estate forums should also be included. O. Describe any potential conflicts of interest your firm may have in the servicing of a real estate consulting relationship. Include activities of affiliated or parent organizations, money management activities, services to money managers, broker/dealer activities, or investment banking activities. Include any other pertinent activities or relationships not specifically outlined in this question. Please include as Exhibit E the firm s conflict of interest policy and Code of Ethics. P. Briefly describe your firm's compensation system for senior real estate consulting personnel, and indicate what specific incentives are utilized to ensure key professionals do not leave the firm either as a group or individually. How does the firm tie client performance and satisfaction to a consultant s evaluation? Q. List the dollar amounts of errors and omissions insurance and any other fiduciary bonding coverage carried by your firm, as follows: Insurance carrier providing coverage Type of coverage Dollar amount R. Has your firm been subject to or is currently being reviewed/audited by the SEC or other regulatory agencies? If yes, please describe the nature of the investigation. 7
S. If your firm has been censured by the SEC or other regulatory agency, please explain below. If not, write "n/a" here. T. During the last five years, has your firm or any principal of the real estate consulting professionals been involved in any litigation or other legal proceeding? Yes No If yes, attach a brief explanation and indicate the current status of the litigation. U. Describe your firm s disaster recovery plan. V. Provide as Exhibit F a list of the firm s real estate consulting clients as of June 30, 2017. Categorize each client by type (public, corporate, foundation, Taft- Hartley, private, etc.). For each client, provide the approximate size of the relationship (6/30/17 market value of assets), the number of years the firm has provided services to the client, and the type of relationship (retainer or special projects only). Please provide subtotals by each client type. Client Client Type MV of Assets # of Years Relationship Type Section III Philosophy A. Describe the firm s philosophy as it pertains to real estate investment consulting for a defined benefit pension fund client such as SJCERA. B. Explain the firm s views on the use of separate account versus commingled fund investment structures, public versus private investment mandates and domestic versus international investment mandates. C. Explain the firm s views on risk management. What does your firm see as the key risks that should be managed in a real estate program, and how does your firm recommend a public fund manage those risks? D. Explain the firm s approach to balancing your real estate consulting fee while providing pertinent real estate investment advice to make portfolio management decisions to achieve the best net return for your client. 8
Section IV Services Offered A. Review the SCOPE OF SERVICES REQUIRED beginning on page two and explain which of the services your firm has experience providing. Service Yes No Explain Act as fiduciary Administer manager searches Oversee managers Advise on capital market assumptions Review policies Develop annual implementation plan Provide quarterly performance analyses Provide information and research that may affect real estate portfolio Recommend new investment opportunities Attend Board/Committee meetings Work collaboratively with general investment consultant Provide other duties as requested by SJCERA B. Indicate any special resources, software programs or tools utilized in providing the above identified services that would give your firm a competitive advantage over other real estate consulting firms. C. Describe your firm s recommended process for assisting clients with policy guideline development and review. What specifically would the firm do to develop or review the client s policies? How frequently would this process occur? What client-specific factors would be considered? D. Describe the firm s recommended process for analyzing manager structure. 9
E. Describe how the firm monitors a client s investment managers. List and discuss the key criteria your firm considers in the review of an investment manager? At what point would your firm recommend termination of a manager or strategy? F. Describe how the firm conducts research on real estate investment management firms and their products. How many research analysts are dedicated to this function? How often will a representative of the firm s manager search group typically perform an on-site visit to an investment management firm? G. What research reports does the firm produce for clients? How frequently are reports issued? Provide a sample research report in Exhibit G. H. Describe the firm s manager search process. What are the key criteria your firm believes should be emphasized in a search? I. When conducting a manager search, explain the interaction and process between your firm s manager search group and your consultants who have the on-going relationships with the clients. J. Provide a sample client performance report as Exhibit H. Are the performance reports customizable? K. Describe how benchmarks are chosen or developed. What criteria do you consider in selecting a benchmark? Has the firm developed custom benchmarks for clients? Section V References and Sample Contract A. List references for real estate consulting services as Exhibit I. Provide the name, title, address, and phone number for the three largest clients as references utilizing your firm's real estate consulting services. Indicate the scope of services provided to these clients. B. Exhibit J should contain the Proposer s standard form of contract for real estate consulting services to institutional clients. Section VI Fees A. Provide proposed fee schedule for the five-year term of the contract as Exhibit K. The proposed fee must include all costs and expenses related to providing fullservice real estate consulting as described in this RFP to SJCERA, including travel. Other unusual or extraordinary expenses may be allowed, but only if requested by the Consultant and authorized by SJCERA in advance. The proposed fee must be guaranteed for the initial five-year term of the contract. 10
Section VII Checklist of Items to be Included in your Response Please provide written responses to Sections I - VI of this questionnaire and include Exhibits A K. PLEASE SUBMIT Six (6) Copies of Your Response And one (1) electronic (Microsoft Word) version of your Response. SJCERA must receive your submission by 4:30 pm Pacific Daylight Time, Friday, December 1, 2017 To: GREG FRANK RFP COORDINATOR SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOC. 6 S. EL DORADO STREET, SUITE 400 STOCKTON, CA 95202 NOTE: This RFP is available at SJCERA s website, www.sjcera.org, and should be downloaded for preparation of proposals. 11