real estate investing “ now more than ever”

Real Estate Investing“Now More Than Ever”

2013 IBEW Eighth District Progress MeetingJackson Hole, Wyoming

May 28 - 30

A New Reality

• World Emerging from the Worst Economic Crisis Since the Inception of “Globalization”

• Most Developed and Developing Economies Inextricably Linked

• Prosperity Lifts All Boats but No One is Immune From Geo-political and/or Financial Contagions

The Search for a New Equilibrium• U.S. Economy is Facing a Protracted Economic Slump, One that Could Last a

Decade or More

• The Recent Rally in the “Dow” has been Accompanied by the Weakest U.S. GDP Growth of All the Bull Markets since 1949

• Paul Volcker Predicts that U.S. Structural Employment will Eventually Stabilize

Significantly Above the Historical* Rate of 5.81%

• Warren Buffett Warns that Bond Prices are a Terrible Investment Today with Prices Artificially Inflated due to the FED Buying $85 Billion of Bonds a Month

• This Suggests a Challenging Investment Environment Especially for Those Programs with Actuarial Targets such as Pension Funds * Year 1948 through 2012

Not-So-Great Expectations

Expected Real Returns on 60/40 Equity/Bond Portfolios (%)

Source: AQR Capital Management

Typical Pension Fund Asset Allocation

HEDGE FUNDS

FIXED INCOME

PUBLIC EQUITY

ALTERNATIVES

PRIVATE EQUITY

REAL ESTATE

OTHER ALTERNATIVES

10-Year Forward* Inflation-adjusted ReturnsAnnual % Change, Low/High

ASSET UNITED STATES EUROPE BRITAIN

Cash -0.25/1.50 0.50/1.75 0.75/2.50

Government Bonds -4.00/1.25 -2.50/1.25 -3.75/0.50

Credit ** -3.00/3.25 -2.75/3.00 -3.50/2.50

Equities -1.00/8.00 0.75/9.50 1.00/9.00

Property 0.25/8.75 1.00/9.50 0.65/8.00

* 12/31/12** Investment-grade Corporate BondsSource: Standard Life Investments

Volatility*

20 YEAR PERFORMACE & RISK

NCREIF ODCE

NAREIT S&P 500

Return 7.9% 10.7% 8.5%

Risk 7.0% 22.3% 18.2%

Private Real Estate has Lower Expected Risk/Return Profile than Publically Traded Equities

Source: FTSE NAREIT All REITS, NCREIF (Open-end CORE Equity Index), Morningstar, as of 9/30/12* METRIC: Units of Return for Unit of Risk

Diversification

Correlation Coefficient

Large CAP Stocks .17

Core Bonds (.07)

T-Bills .37

Commodities .22

Low Correlations to Publicly Traded Equities and Fixed income

Source: Morningstar, Data as of 9/30/12

Inflation Hedge

Total Return is a Function of Income + Appreciation

Construction Costs Tend to Increase with Inflation

Lease Provisions Tend to Allow Rents to Move with Inflation

Collateral Benefits

Job Creation for Plan Beneficiaries

Support for Contributing Employers

Contributions to Benefit Plans

A Significant Asset Class

• 2012 Total US Real Estate Investing and New Construction Equals $2.3 Trillion

• This Activity Created Jobs for 6.9 Million Domestic Workers in 2012

• This Activity Generates 15% of US Gross Domestic Product

Sources: U.S Bureau of Economic Analysis / U.S. Bureau of Labor Statistics

Pension Fund Commitments Increase • In 2012 US Pension Funds Increased Equity Commitments to

Real Estate Investments by 29% • This Represents a $31 Billion Increase in Total Investment over

2011

• Commingled Funds Accounted for 58% of all Equity Committed

• Commingled, Open-ended Funds Became Much More Popular in Second-half of 2012 When They Accounted for 20% of All Investments

Source: FPL Associates Consulting

Progressive

• NEBF Pension has been Investing in Real Estate since 1947

• This is 20 years before Real Estate was Recognized as an Acceptable “Asset Class” for Pension Plans

• NEBF Real Estate, an In-house team of Real Estate Professionals, was established in 2000

Foresight

• In 2010 NEBF Real Estate Transitioned to National Real Estate Advisors LLC

• NREA is a Wholly-owned Subsidiary of NEBF

• NREA Now is Able, Under SEC Regulations, to Offer its Advisor Services to the Electrical Industry At-large

• This includes IBEW Local Plans

$1.4 Billion

12.04% *

* Past Performance is No Guarantee of Future Success

$5.25 Billion in New Construction

14 Million SFof New Projects

27 MillionMan-hours of Work

$1.0 Billion

BUILD-TO-CORE

PENSION PLANHEALTH PLAN GENERAL FUND

The ConfluenceDenver, CO

• 34-story High-Rise• 291-Unit Class A Units• 8,300 GF Retail• 300 Above Ground

Parking Spaces• NREA = $34.5 Million

Equity• TPC = $98.6 Million

Sabey Data CentersAcross the U.S.A.• Largest Privately Held Domestic

Data Center Company• 1.5 Million SF of Stabilized

Property• 2.0 Million SF under

Development• $125 Million Preferred-Equity

Investment• $100 Million Debt Investment