4Q2019 Real Estate Performance & 2019 Annual Real Estate Portfolio Review

City of Phoenix Employees’ Retirement System (COPERS)

May 7, 2020

Presented remotely by Mark Bartmann & Dan Krivinskas

Table of Contents

Slide

COVID-19 Implications and Impact ………………….. 3

4Q2019 Real Estate Portfolio Performance……………. 6

2019 Annual Portfolio Review………………………….. 14

Appendix: 4Q2019 Portfolio NAV Summary ......................... 24

COVID-19 Short-Term Real Estate Implications

3

April Rent Collections Drastically Different Based Upon Property Type Industrial, datacenters, education, governmental, medical office, and most

multifamily in the 90%+ range

Traditional office and workforce multifamily in the 70-85% range

Retail in the 10-50% range (better positioned retail getting much higher collections than most malls and discretionary retail)

Rent Holidays in Some Markets Will Impact Income In some markets outside of the US, governments are imposing burden-sharing

laws to force landlords to not collect rent (e.g., Australia, Japan)

Even in US markets, some programs are in place to reduce collection activity on impacted groups (e.g., Fannie Mae and Freddie Mac prohibiting evictions)

Speed of “Reopening” of Economy Will Have Significant Impact If economies open up relatively quickly (like China and South Korea), potential

downside impact may be limited

COVID-19 Long-Term Real Estate Implications

4

Long-Term Valuation Impact Much More Uncertain In some property types (industrial, datacenters), we have seen valuations increase

since the onset of COVID-19 (“the Amazon effect”)

In the most economically-sensitive areas (retail, hotels), valuations have taken a hit and are likely to suffer in the coming quarters

Others will see some impact, but the level of impact is uncertain and dependent on specific property circumstances

Longer-Term Trends Likely to Accelerate Increased focus on industrial, datacenters, healthcare, and residential assets over

more challenged areas such as retail and hotels (which are likely to bounce back at some point, but at a slower rate than other asset classes)

Lower Interest Rates Are Likely to Buoy Values 10-Year Treasury rates at 0.6% (as of 4/22/2020) support lower cap rates

Low interest rate environment persisting over the longer-term should continue to benefit yield-producing assets

COVID-19 Impact on COPERS Real Estate Portfolio

5

Good 2019 Performance, With 2020 More of a Question Good performance by the COPERS real estate portfolio in 2019 will at least

partially reverse in 2020—by what amount is still a question

COPERS Has Increased Exposures to Less Economically-Sensitive Property Types in Recent Years, Although Legacy Hospitality Exposure Will Impact Performance Hammes Partners III in medical office; Focus Healthcare Partners I in senior

housing; and SC Core+ in Asian logistics, education, and governmental space

Significant short-term impact on hospitality and retail assets will result in lower valuations and extended holding periods

COVID-19 Impact Has Been Fairly Swift Compared to 2008 Downturn GDP growth likely to be the most negative in 2Q 2020, with some recovery

projected in 3Q 2020 and 4Q 2020

COPERS’ conservative leverage posture (below 40% LTV), should help to withstand the downturn

4Q2019 Real Estate Portfolio Performance

Portfolio Overview

7

InvestmentCOPERS

CommitmentStructure

Investment Period

ExpirationCommitment

Unfunded Commitment % Funded 1 Status 2

Morgan Stanley Prime 3Q 2006 Open N/A $90,500,000 $0 100.0% StabilizedJPMorgan SPF 2Q 2007 Open N/A $87,380,529 $0 100.0% StabilizedTotal Core Portfolio $177,880,529 $0 100.0%JDM Partners I 1Q 2010 Closed Expired $20,000,000 $551,724 97.2% HarvestingRECAP III 1Q 2012 Closed Expired $30,000,000 $6,339,855 78.9% Nearly LiquidatedWheelock Street I 2Q 2012 Closed Expired $20,000,000 $3,724,018 81.4% Nearly LiquidatedNorthwood Series IV 1Q 2014 Closed Expired $20,000,000 $13,577,934 32.1% HarvestingWheelock Street II 3Q 2014 Closed Expired $30,000,000 $8,700,665 71.0% HarvestingNorthwood Series V 1Q 2015 Closed 2Q 2020 $30,000,000 $9,927,051 66.9% InvestingRECAP IV 1Q 2015 Closed Expired $30,000,000 $5,847,781 80.5% HarvestingHSI V 2Q 2016 Closed Expired $25,000,000 $8,095,647 67.6% HarvestingSC Core Fund 3Q 2016 Closed 2Q 2020 $30,000,000 $8,303,686 72.3% InvestingWheelock Street V 4Q 2016 Closed 4Q 2020 $25,000,000 $5,880,097 76.5% InvestingFocus Senior Housing I 2Q 2017 Closed 2Q 2021 $25,000,000 $19,330,114 22.7% InvestingHammes Partners III 2Q 2017 Closed 2Q 2022 $25,000,000 $22,218,036 11.1% InvestingRECAP V 4Q 2018 Closed 4Q 2021 $25,000,000 $19,297,879 22.8% InvestingAscentris Value Add Fund III 3Q 2019 Closed 3Q 2023 $25,000,000 $25,000,000 7.6% InvestingWheelock Street VI 4Q 2019 Closed 1Q 2024 $20,000,000 $20,000,000 0.0% Recently ClosedTotal Non-Core Portfolio $380,000,000 $156,794,487 58.7%Total Portfolio $557,880,529 $156,794,487 71.9%

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Performance Summary

8

Note: Sub-Portfolio and Total Portfolio composite performance figures include data from liquidated investments not shown in table

Investment Market Value% of RE Portfolio % Funded 1 % Realized3 SI IRR (Gross) 4 SI IRR (Net) 5

Net Equity Multiple 6

Morgan Stanley Prime $82,323,513 23.3% 100.0% 50.9% 6.4% 5.4% 1.70xJPMorgan SPF $76,675,524 21.7% 100.0% 46.8% 4.9% 4.2% 1.51x

$158,999,037 45.1% 100.0% 49.0% 5.7% 4.9% 1.60xJDM Partners I $26,578,181 7.5% 97.2% 32.2% 9.9% 8.8% 1.98xRECAP III $4,352,092 1.2% 78.9% 88.6% 12.3% 8.6% 1.18xWheelock Street I $2,240,162 0.6% 81.4% 94.4% 35.8% 24.9% 1.71xNorthwood Series IV $17,933,343 5.1% 32.1% 49.6% 18.2% 12.9% 1.48xWheelock Street II $10,585,775 3.0% 71.0% 73.1% 28.8% 18.7% 1.55xNorthwood Series V $30,457,855 8.6% 66.9% 21.9% 13.0% 9.9% 1.36xRECAP IV $22,127,784 6.3% 80.5% 27.6% 12.4% 8.9% 1.25xHSI V $18,543,271 5.3% 67.6% 17.3% 24.0% 15.5% 1.26xSC Core Fund $23,692,222 6.7% 72.3% 5.7% 7.8% 6.9% 1.14xWheelock Street V $19,556,138 5.5% 76.5% 5.3% 8.9% 2.9% 1.03xFocus Senior Housing I $6,212,091 1.8% 22.7% 7.4% 16.5% 7.9% 1.09xHammes Partners III $2,113,435 0.6% 11.1% 12.0% 15.7% -26.1% 0.86xRECAP V $7,960,406 2.3% 22.8% 12.7% N/A N/A N/AAscentris Value Add Fund III $1,502,681 0.4% 7.6% 32.0% N/A N/A N/AWheelock Street VI $0 0.0% 0.0% N/A N/A N/A N/A

$193,855,436 54.9% 56.4% 50.8% 15.9% 11.7% 1.37x$352,854,473 100.0% 70.8% 50.0% 8.0% 6.5% 1.46x

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Total Core Portfolio

Total PortfolioTotal Non-Core Portfolio

Non

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Performance Summary

9

4Q2019 1-Yr 3-Yr 5-Yr SICore 2.0% 6.0% 7.7% 9.5% 7.7% 4.9% 1.60x

Non-Core 5.0% 14.1% 14.6% 12.5% 15.3% 11.7% 1.37xTotal Portfolio 3.6% 9.8% 10.8% 11.0% 8.6% 6.5% 1.46xNCREIF ODCE 1.3% 5.6% 7.3% 9.3% 6.3% - -

Net IRR 4 Net EM 5Time-Weighted Returns (Gross)

Diversification

10

Portfolio is well diversified by both Geography and Property Type Portfolio will continue to be primarily focused in North America (U.S.), with recent

commitments to Ascentris VA III and Wheelock VI Exposure to “niche” property types with defensive cash flows such as medical office

buildings and senior housing will increase as capital continues to be called in Hammes III and Focus Senior Housing Fund I

Global United States

Leverage Profile

11

Modest use of leverage across the Real Estate Portfolio

Non-Core Portfolio LTV Ratio of less than 50% reflects a focus on managers and strategies that can perform without excess leverage risk

Total Portfolio Loan-toValue (LTV) 7: 39.9%Core Portfolio LTV: 20.9%Non-Core Portfolio LTV: 49.3%

Weighted-Average Interest Rate: 3.8%

Fee Summary 8

12

Gross-net return spread for 4Q2019 is above average, due to incentive fee accruals based on outsized appreciation returns during the quarter

Incentive fees for the quarter primarily charged in Northwood IV, Northwood V, Wheelock II and Morgan Stanley Prime

Type 4Q2019Quarterly

Avg.AssetMgmt. 0.32% 0.29%

Incentive 0.28% 0.11%Other 0.00% 0.00%

Total 0.60% 0.40%

RE Portfolio Fees(% of Market Value)

Subsequent Events

Below are some key portfolio updates that occurred subsequent to the end of 4Q2019:

1Q2020 Core Portfolio Flash Returns:

JP Morgan SPF: +1.6% (gross)

Morgan Stanley Prime: +1.5% (gross)

Ascentris Value Added Fund III

In March, the fund acquired Summit V, a Class A office property located in Aliso Viejo, CA

Focus Senior Housing I

The fund called approximately $3.4 million from COPERS in March to fund renovations projects at several properties

Hammes Partner III

In March, the fund called approximately $1.7 million of capital from COPERS to repay the subscription line utilized to acquire several medical office properties during the second half of 2019

SC Core

During Q1 2020, the fund called approximately $8.3 million from COPERS to fund the acquisition of Project Chicago (office in Sydney), Project Royal (office in Sydney), and Project Republic (logistics in Seoul)

Wheelock Street Real Estate Fund II

In January, the fund sold land in Boston that had previously been planned for development of a new multifamily property. The fund also fully realized the New England Office portfolio investment in January, resulting in a 73% Gross IRR and a 1.7x EM. Approximately $1.3 million was distributed in February to COPERS as a result of these dispositions

Wheelock Street Real Estate Fund VI

The fund made its first capital call to COPERS in April for the acquisition of an industrial property in Boston, MA

13

2019 Annual Real Estate Portfolio Review

2019 Activities

15

The portfolio generated over $27 million of gain during 2019 Distributions outweighed contributions during the year, due to strong disposition

activity as well as partial redemptions of JP Morgan SPF and Morgan Stanley Prime

Portfolio Growth & Timeline

16REC

AP II

JDM

I

JP Morgan SPF

Morgan Stanley Prim

e

Wheelock Street I

Northw

ood Series IV

Wheelock Street II

Northw

ood Series V

RECA

P IV

HSI V

SC C

ore FundW

heelock Street V

Ham

mes III

Focus Senior Housing I

TA Realty IX

RECA

P III

Wrightw

ood HYP II

RECA

P V

Ascentris V

A III

Wheelock Street V

I

Performance Summary(Returns as of 12/31/2019)

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InvestmentCOPERS Vintage

% of RE Portfolio % Funded 1 % Realized 3 SI IRR (Net) 5

Net Equity Multiple 6

Performance Compared to

Expectations 9

Morgan Stanley Prime 2006 23.3% 100.0% 50.9% 5.4% 1.70xJPMorgan SPF 2007 21.7% 100.0% 46.8% 4.2% 1.51x

45.1% 100.0% 49.0% 4.9% 1.60x

Wrightwood HYP II 2009 0.0% 100.0% 100.0% 7.5% 1.20xRECAP II 2009 0.0% 100.0% 100.0% 15.1% 1.30xTA Realty IX 2010 0.0% 100.0% 100.0% 10.4% 1.60xJDM Partners I 2010 7.5% 97.2% 32.2% 8.8% 1.98xRECAP III 2012 1.2% 78.9% 88.6% 8.6% 1.18xWheelock Street I 2012 0.6% 81.4% 94.4% 24.9% 1.71xNorthwood Series IV 2014 5.1% 32.1% 49.6% 12.9% 1.48xWheelock Street II 2014 3.0% 71.0% 73.1% 18.7% 1.55xNorthwood Series V 2015 8.6% 66.9% 21.9% 9.9% 1.36xRECAP IV 2015 6.3% 80.5% 27.6% 8.9% 1.25xHSI V 2016 5.3% 67.6% 17.3% 15.5% 1.26xSC Core Fund 2016 6.7% 72.3% 5.7% 6.9% 1.14xWheelock Street V 2016 5.5% 76.5% 5.3% 2.9% 1.03x TBDFocus Senior Housing I 2017 1.8% 22.7% 7.4% 7.9% 1.09x TBDHammes Partners III 2017 0.6% 11.1% 12.0% -26.1% 0.86x TBDRECAP V 2018 2.3% 22.8% 12.7% N/A N/A TBDAscentris Value Add Fund III 2019 0.4% 7.6% 32.0% N/A N/A TBDWheelock Street VI 2019 0.0% 0.0% N/A N/A N/A TBD

54.9% 56.4% 50.8% 11.7% 1.37x100.0% 70.8% 50.0% 6.5% 1.46x

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Total Core Portfolio

Total PortfolioTotal Non-Core Portfolio

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Portfolio Storylines

Reduced Investment Velocity as Portfolio Achieves Target Allocation₋ Made only one new commitment during CY 2019:

Wheelock VI: Re-up with one of COPERS’ best performing managers, focused on diversified U.S. real estate strategies including industrial, multifamily, single-family residential, office, hospitality and retail

₋ Redeemed $40M from core portfolio holdings to rebalance

Non-Core Portfolio Investments Drove Returns as Core Portfolio Provided Consistent, But Reduced Performance₋ Non-Core Portfolio returned 14.1% for calendar year 2019, driven by an annual

appreciation return of 11.7% ₋ Core Portfolio returned 6.0% for 2019, a notable reduction from 2018 (+8.5%)

U.S. core valuations remain near or at all-time highs in most markets

Non-Core Investments Actively Returning Capital₋ Over $32 million in distributions from Non-Core Portfolio in 2019 (up from $25M in

2018)₋ TA Realty IX fully liquidated in 1Q 2019₋ RECAP III (89%) and Wheelock Street I (94%) are substantially realized

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Projected Geographic Diversification

19

Portfolio Expected to Remain Well-Diversified Approximately 2/3 of unfunded commitments in domestic strategies

₋ While maintaining allocation to international markets to diversify risk₋ Will consider re-allocating to strategies focused on Europe market in the

coming years as conditions warrant Portfolio will continue to focus primarily on the U.S. market

Real Estate Investment Pacing Study

20

COPERS Real Estate Portfolio has achieved its long-term allocation target of 12% However, new investments are necessary to replace capital being returned by mature funds Pacing analysis calls for approximately $20-$25 million of new investments per year over

the next several years, a reduction from the approximately $50 million / year pace achieved in recent years

Real Estate Investment Pacing Study

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The pacing analysis was substantially impacted by COPERS portfolio value declines during 1Q2020

The projected Real Estate Portfolio allocation is more in-line with the target allocation (12%) when utilizing the 12/31/2019 COPERS Total Portfolio Value

2019 COPERS Real Estate Goals Met

22

Actively Monitor Investments and Maintain “Steady State” Portfolio has achieved its long-term target allocation

Selectively Make New Non-Core Commitments as Opportunities Arise Around the World Committed $20 million to Wheelock Street Capital RE Fund VI in December 2019,

one of COPERS’ best performing real estate managers

Perform Fee Reconciliations on Recently-Liquidated Investments TA Realty IX fully liquidated during 1Q2019; memo presented in May 2019

No other full portfolio liquidations occurred in 2019

Maintain Active Engagement with Managers to Identify and Avoid Any Investment Pitfalls Alignium remains in constant communication with COPERS’ real estate

managers through regular update meetings, as well as representation on fund advisory boards

COPERS Real Estate Priorities for 2020 and Beyond

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Actively Engage with Managers to Review Business Plans as Result of COVID-19 The current situation is dynamic, requiring active engagement with managers to

address COVID-19 impacts in real time

Selectively Make New Commitments as Opportunities Arise Focus on sectors and strategies that will benefit in face of long-term implications

of COVID-19, such as select industrial strategies, datacenters, and multifamily residential

While the portfolio has reached its long-term allocation target, COPERS needs to invest capital on a yearly basis to maintain a “steady state” of investment

Active Engagement with Board, Staff, and Managers to Troubleshoot Potential Problems in Real Estate Portfolio Alignium remains in constant communication with COPERS’ real estate

managers through regular update meetings, as well as representation on fund advisory boards

Push managers to raise adequate property-level reserves, work with lenders and de-risk portfolios

Appendix

4Q2019 Portfolio NAV Summary

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Note that figures may not sum to ending values due to differences in fee accruals and payment

Investment Opening Value Net Income Net Appreciation Capital Called Capital Distributed Ending Value

Morgan Stanley Prime 101,773,413$ 683,927$ 870,900$ -$ 21,004,727$ 82,323,513$

JPMorgan SPF 75,611,923$ 542,866$ 986,400$ 191,689$ 657,354$ 76,675,524$ 177,385,336$ 1,226,793$ 1,857,300$ 191,689$ 21,662,081$ 158,999,037$

JDM Partners I 27,167,368$ (163,697)$ 105,014$ -$ 530,504$ 26,578,181$ RECAP III 4,208,059$ (2,048)$ 18,910$ 166,825$ 39,653$ 4,352,092$ Wheelock Street I 2,558,191$ (1,347)$ (100,566)$ 54,029$ 270,145$ 2,240,162$ Northwood Series IV 18,501,540$ 73,998$ 624,899$ 357,957$ 1,625,053$ 17,933,343$ Wheelock Street II 11,001,955$ 92,799$ 93,930$ -$ 602,909$ 10,585,775$ Northwood Series V 28,168,429$ (27,361)$ 2,399,680$ 618,375$ 701,271$ 30,457,855$ RECAP IV 22,170,552$ (736)$ 1,866,285$ 644,059$ 2,552,376$ 22,127,784$ HSI V 18,467,886$ (1,587,418)$ 1,235,712$ 811,385$ 384,295$ 18,543,271$ SC Core Fund 23,075,326$ 836,425$ (264,697)$ 45,168$ -$ 23,692,222$ Wheelock Street V 13,672,071$ (57,406)$ 452,442$ 5,489,031$ -$ 19,556,138$ Focus Senior Housing I 6,621,739$ 41,795$ 26,362$ -$ 477,805$ 6,212,091$ Hammes Partners III 1,173,040$ (64,916)$ 79,173$ 1,002,012$ 75,874$ 2,113,435$ RECAP V 3,968,873$ (730)$ 2,299,666$ 2,307,981$ 615,385$ 7,960,406$ Ascentris Value Add Fund III -$ (256,547)$ (128,549)$ 2,593,910$ 706,134$ 1,502,681$

180,755,029$ (1,117,189)$ 8,708,261$ 14,090,732$ 8,581,404$ 193,855,436$

358,140,365$ 109,604$ 10,565,561$ 14,282,421$ 30,243,485$ 352,854,473$

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Total Core Portfolio

Total Non- Core PortfolioTotal Portfolio

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Definitions & Footnotes

1 Commitment Funded Percentage (“% Funded”) – The percentage of the investor’s commitment that has been called by the manager to date, less any capital returned during the investment period that is deemed to be recallable.

2 Investment Status Definitions:

Recently Closed-Investment is awaiting first capital call designated for investment purposes

Investing- Investment actively making commitments to new underlying investments; within stated investment period

Stabilized- Investment is fully invested and unlikely to make near-term return of capital distributions

Harvesting- Investment is actively divesting

Nearly Liquidated- Investment is substantially divested of assets (typically > 80% realized)

Liquidated- Investment has divested of all assets and either holds cash or no balance at all

3 Realization Percentage (“% Realized”) – The percentage of an investment’s cumulative distributions to date relative to the total value of the fund, measured as a sum of the cumulative distributions to date and the remaining investment value.

4 Since Inception Gross Internal Rate of Return (“SI-IRR GROSS”) – Reflects the implied discount rate equating the present value of an investment’s cash outflows and the remaining market value to the present value of the investment’s cash inflows, excluding any impact of fees charged or accrued.

5 Since Inception Net Internal Rate of Return (“SI-IRR NET”) - Reflects the implied discount rate equating the present value of an investment’s cash outflows and the remaining market value to the present value of the investment’s cash inflows, accounting for the impact of fees.

6 Net Equity Multiple (“NET EM”) – The sum of cumulative distributions and remaining investment value divided by total paid-in-capital, accounting for the impact of fees.

7 Loan-to-Value Ratio (“LTV %”) – Ratio of all outstanding direct debt obligations divided by the fair value of the fund’s gross real estate asset value.

8 Fee Summary – Fees percentages shown reflect fees paid relative to beginning portfolio market value.

9 Performance Compared to Expectations – Alignium’s assessment of the investment’s performance to date relative to the original investment strategy and target returns.

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Disclaimer of Warranties and Limitation of Liability

This document was prepared by Alignium, LLC (“Alignium”) and includes information and data from some or all of the following sources: investment managers, custodian banks, client staff, specialty investment consultants, actuaries, plan administrators/record-keepers, index providers, as well as other third-party sources as directed by the client or as we believe necessary or appropriate. Alignium makes no warranties and disclaims responsibility for the accuracy or completeness of information or data provided or methodologies employed by any external source. Alignium has taken reasonable care to ensure the accuracy of the information or data but disclaims responsibility for the accuracy of information or data received from outside sources. This document is provided for the client’s internal use only and does not constitute a recommendation by Alignium or an offer of, or a solicitation for, any particular security and it is not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets.

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