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State Universities Retirement System of Illinois

Serving Illinois Community Colleges and Universities 1901 Fox Drive • Champaign, IL 61820-7333

(217) 378-8800 • (217) 378-9802 (FAX)

Investment Department

To: Investment Committee

From: Joseph M. Duncan and Shane P. Willoughby, CFA, CAIA

Date: January 22, 2015

Re: Non-Core Real Estate Manager Search Additional Information

After a thoughtful discussion during the December 2014 Investment Committee meeting, the

Board requested detailed information on minority-, female-, or persons with a disability-

owned (MFDB) responses as well as implementation approaches to the non-core real estate

manager search.

Responses

Of the 64 direct fund and fund-of-funds responses to the search, eight of the direct fund

managers and two fund-of-funds managers have been determined to be MFDB-owned as

those terms are defined in the Business Enterprise for Minorities, Females, and Persons with

Disabilities Act, 30 ILCS 575.

Five of the MFDB funds are highly concentrated in either geographic or property type focus

(in some cases, both). In addition, the targeted fund size is such that it may be difficult for

SURS to make a meaningful commitment within the bounds of proper risk management.

Three of the MFDB firms are targeting diversified portfolios. Two of these firms are raising

first time funds. The third firm has a longer track record and is currently fund-raising for its

fifth fund. SURS is currently invested in the firm’s fourth fund through an existing fund-of

funds relationship.

Please see the appendix that follows for additional information on each of these respondents.

MFDB Opportunities

Given our desire for a diversified real estate portfolio while also looking to increase

participation among MFDB managers, a fund-of-funds approach may best achieve these

goals. More specifically, a fund-of-one separate account approach within a fund-of-funds

mandate would be ideal.

A fund-of-one separate account structure would allow SURS the ability to customize the

mandate’s investment guidelines to ensure a composition of MFDB and other emerging

managers (including the possibility of manager seeding opportunities) to meet SURS goals.

It is envisioned that a fund-of-one mandate would include a combination of investments in

10-15 underlying direct funds, co-investment funds, and secondary funds, providing

significant diversification.

Exhibit 10

Twelve fund-of-fund managers responded to the search including:

Courtland Partners

Franklin Templeton

Grosvenor Real Estate

LGT Capital Partners

Metropolitan Real Estate

Oak Street Real Estate Capital

Partners Group

Perennial Capital Advisors

Portfolio Advisors

Sigular Guff

StepStone Group

Townsend Group

Four managers (Franklin Templeton, Grosvenor, Partners Group and Portfolio Advisors)

have meaningful MFDB fund-of-funds investment experience. However, none of these firms

qualify as MFDB-owned managers themselves. Franklin Templeton is an existing SURS

real estate fund-of-funds manager and is considered the most experienced of the four

managers. Grosvenor has substantial experience in MFDB/emerging manager selection and

a solid universe of such managers. Partners Group has the worst track record of the four

managers and has experienced organizational changes over the recent past. Portfolio

Advisors didn’t provide any information on their universe of managers and has made the

fewest MFDB commitments of the four.

Two fund-of-funds managers (Oak Street and Perennial) do qualify as MFDB-owned

managers. Of the two, Oak Street has MFDB investment experience and a solid track record.

Perennial reported that it has not made any commitments to MFDB managers in the past five

years. In addition, Perennial reported real estate assets under management of approximately

$132 million, limiting their experience, size, and scope in real estate investing.

Three managers, LGT, Metropolitan and Sigular Guff all have limited or no experience

investing with MFDB firms over the past five years. Of the remaining three managers,

StepStone and Townsend are raising vehicles (or have experience) that do not fit the target

strategy for the mandate (co-investment or secondary strategies only). Courtland did not

provide the requested track record data regarding past investments.

Given the MFDB experience referenced above and a review of manager experience, staff and

NEPC believe three managers are worthy of further consideration: Franklin Templeton,

Grosvenor, and Oak Street. As a result, staff proposes interviewing the three managers in

NEPC’s Chicago office. The date of February 17 has been selected. Staff encourages full

Investment Committee participation in these interviews.

After these interviews, it is anticipated that the list of potential MFDB fund-of-one managers

would be further narrowed to two. These two firms would then be invited to participate in

finalist interviews at the March Investment Committee meeting.

Exhibit 10

Staff and NEPC would recommend one manager ultimately be hired for this fund-of-one

separate account mandate. To achieve our goals of MFDB participation in a meaningful

way, staff and NEPC recommend a $90 million commitment to this mandate to be invested

over the upcoming 3-year investment cycle. By securing $90 million upfront, the manager

would have the scale and flexibility to make fund commitments as opportunities become

available over the coming three years. Such a sizable commitment would equate to 30% of

our upcoming commitments being made in the MFDB space.

Other Non-Core Opportunities

As a reminder, the Real Estate Funding Plan presented at the September 2014 Investment

Committee meeting, calls for $300 million to be allocated over the upcoming three years as

we look to achieve our 10% target to real estate. With $90 million recommended to be

deployed to MFDB opportunities, the remaining $210 million would be earmarked for other

non-core real estate opportunities over the next three years. In order to maintain a consistent

vintage year pacing, $70 million is needed to be deployed in 2015.

After consideration of all the options and after input from the December 2014 Investment

Committee meeting, staff and NEPC propose making total commitments of $70 million to

non-core direct funds that are diversified by geography and property type in 2015. To ensure

proper diversification and risk management, commitments to at least two funds are expected

to be made. Given the perceived opportunities in both European and the U.S. real estate,

these are anticipated to be the primary geographies targeted for commitments.

Staff and NEPC would work to narrow the list of direct fund responses to a manageable level

for semifinalist interviews to take place at a to-be-determined date in March, again inviting

Investment Committee participation. At the April Investment Committee meeting, finalists

would be brought in to interview.

Rationale

A hybrid model of investing through a fund-of-one separate account for MFDB exposure and

direct fund commitments for other non-core opportunities would decrease the number of

relationships of an exclusive direct funds model and lessen the overall impact of fees from an

exclusive fund-of-funds model.

It is important to ultimately select the highest quality managers with the best opportunity for

long-term success in order to maintain a real estate portfolio of manageable proportions.

Exhibit 10

Appendix – Non-Core Real Estate Search Additional Information

The following provides further information on each of the MFDB candidates within the non-

core real estate search:

Nam

e o

f Fu

nd

Re

al E

stat

e

AU

M (

$mm

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pe

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ard

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m)

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mm

itm

en

ts

to D

ate

($m

m)

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rera

Re

alty

Fu

nd

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11%

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.75x

U.S

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ive

rsif

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80 /

20

(par

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pat

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mo

rtga

ges)

No

$15-

$50

eq

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0-$1

00

gro

ss

$300

-$50

0

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5 as

of

9/30

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3/31

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par

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alu

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% /

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U.S

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% W

est

targ

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90-1

00%

mu

ltif

amil

y (5

-

10%

reta

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Equ

ity

No

$25

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$50

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Firs

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$35-

$50

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en

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Asi

a Fu

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-18%

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mar

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(pri

mar

ily)

,

reta

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ote

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Equ

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$15-

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eq

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750

$100

-$20

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Oct

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2014

clo

se

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PO

Fu

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po

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22-2

6% /

2.0

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30-4

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700

No

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90 /

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Str

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apit

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% /

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.S.

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ase

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ice

,

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rial

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No

$10-

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$40

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wit

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Str

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ly

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, SA

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Exhibit 10

MFDB-Owned Direct Funds

Cabrera Realty Fund

Background

Cabrera Capital Partners is a Chicago-based money manager founded by Martin Cabrera. In

2012, Cabrera integrated an existing real estate team from New Vista Investment Group.

Three of the senior management members have worked together since 1995 while at New

Vista and formerly at Commonwealth Realty Advisors.

Strategy

The value-add fund is targeting a diversified portfolio of office, industrial, retail, multifamily,

and mixed-use assets in need of lease-up and/or renovation located in primary and secondary

U.S. markets. Cabrera expects a net IRR of 11% and a 1.75x equity multiple over the life of

the fund. Assets are anticipated to be in a range of $30-$100 million in gross equity. The

fund may invest directly or through joint ventures with operating partners. Applying

anticipated leverage of 50%, Cabrera expects the fund to contain approximately 15-20 assets.

Performance

Cabrera, through its prior entities, raised two funds shown below. Both funds have negative

IRRs and are generally 3rd

/ 4th

quartile performers relative to the applicable vintage year

index. From an underlying investment perspective, these funds made 24 investments ($156

million of equity capital invested) that have an average multiple on invested capital (TVPI

multiple) of 0.8x with 71% of the investments having a multiple below 1.0x. On a relative

basis, 75% of these investments have underperformed the median of the vintage year

benchmark.

The top chart below shows the individual investment TVPI multiples for each Fund. The size

of the bubble on the chart indicates the relative size of the equity commitment to a given

investment. The bottom charts show the relative investment performance as compared to the

vintage year benchmark in which an investment was made.

Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI

Multiple Current Net IRR

Workers Retail Trust, LP 2003 $46 $46 $29 $11 $40 0.9x 0.2x (1.9%)

Workers Realty Trust II, LP 2005 $87 $86 $38 $2 $40 0.5x 0.0x (11.0%)

Vintage Year Benchmarking Analysis

Net IRR Cabrera Capital Partners, LLC Vintage Year Benchmark Net IRR Comparison

Vintage Year Fund Current Net IRR Quartile # Funds

Upper

Quartile Median Quartile

Lower

Quartile

2003 Workers Retail Trust, LP (1.9%) 3 20 20.0% 8.7% (1.9%)

2005 Workers Realty Trust II, LP (11.0%) 4 46 2.0% (1.1%) (6.0%)

DPI Multiple Cabrera Capital Partners, LLC Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI

Multiple Quartile # Funds

Upper


Lower

Quartile

2003 Workers Retail Trust, LP 0.2x 4 20 1.6x 1.3x 0.6x

2005 Workers Realty Trust II, LP 0.0x 4 46 0.7x 0.3x 0.2x

TVPI Multiple Cabrera Capital Partners, LLC Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2003 Workers Retail Trust, LP 0.9x 4 20 1.6x 1.4x 0.9x

2005 Workers Realty Trust II, LP 0.5x 4 46 1.1x 0.9x 0.7x

Note: Benchmark data as of 06/30/2014. Benchmark is the Cambridge Associates US Value-Add & Opportunistic Closed-End Real Estate fund benchmark.

Exhibit 10

Note: $ in millions; Fund level data as of June 30, 2014 and provided by the Manager. IRRs are net and are calculated after the deduction of

carried interest and expenses charged directly to the respective Fund. TVPI multiples are calculated using Fund level contributions and Fund level distributions to date as well as the respective Fund's equity balance, net of promote. GREEN shaded cells indicate that the Fund

outperformed the benchmark. RED shaded cells indicate that the Fund underperformed the benchmark. For benchmarking purposes, we

compared fund performance to the Cambridge Associates US Value-Add & Opportunistic Closed-End Real Estate fund benchmark (data as

of June 30, 2014). Both strategies were included in order to create a meaningful sample size.

Additional Comments

While the team is experienced and cohesive, this is a first-time fund for the recently formed

Cabrera with a targeted fund raise of $300 million and only one commitment to date, $12.5

million from Chicago Teachers. The smaller expected fundraise potentially limits SURS’

ability to make a meaningful commitment while still exercising prudent risk management.

Capri Apartment Fund IV

Background

Capri Capital Partners, headquartered in Chicago, was originally established in 2000 under the

name Capri Capital Advisors as a business combination of the investment advisory activities

of Capri Capital LP and Capital Associates Group. Quintin E. Primo III co-founded Capri

Capital LP in 1992 as a commercial real estate advisory firm, initially focused on debt and

structured finance transactions. Capital Associates, established in 1977 as a real estate

development and property management company, was a provider of equity investment

advisory services to institutional investors. The firm was renamed Capri Capital Partners in

2006.

4% of Deals

>3.0x TVPI

Multiple

0% of Deals

>2.0-3.0x TVPI

Multiple

25% of Deals

>1.0-2.0x TVPI

Multiple

71% of Deals

0.0-1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gro

ss T

VP

I M

ult

iple

Initial Investment Date

Investment-Level Gross TVPI Multiple History

Workers Retail Trust, LP Workers Realty Trust II, LP

UnderWater

AboveWater

25% of Deals Outperform vs.

Vintage Year Benchmark

75% of Deals Underperform vs.

Vintage Year Benchmark-3.00x

-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gro

ss T

VP

I M

ult

iple


Investment-Level Relative Gross TVPI Multiple History

Workers Retail Trust, LP Workers Realty Trust II, LP

Under-Performing

Out-Performing

Exhibit 10

Strategy

The value-add Fund IV is targeting multifamily (90-100%) and a limited amount of retail

assets (5-10%) located in primary and secondary markets throughout the U.S. These assets will

have the potential for value creation through lease-up, capital investment programs, and/or

aggressive property and asset management. Capri expects a net IRR of 9-11% and 1.45x-

1.60x equity multiple over the life of the fund. Assets are anticipated to be $25 million in

average equity size after accounting for an expected leverage level of 65%. The fund will

invest directly or through joint venture partnerships with strategic and qualified project

sponsors that have meaningful alignment of interests.

Performance

Capri has raised six funds/large separate accounts since 2000, shown below. These vehicles

have had mixed performance and are generally 3rd

/ 4th

quartile performers relative to the

applicable vintage year index. From an underlying investment perspective, these vehicles

made 86 investments ($1,789 million of equity capital invested) that have an average multiple

on invested capital (TVPI multiple) of 1.1x with 36% of the investments having a multiple

below 1.0x. On a relative basis, 53% of these investments have underperformed the median of

the vintage year benchmark.



investment. The bottom charts shows the relative investment performance as compared to the


Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


Capri Select Income 2001 $115 $112 $0 $154 $154 1.4x 1.4x 12.6%

Capri Apartment Fund III 2002 $178 $208 $205 $212 $415 2.0x 1.0x 9.3%

LACERA 2003 $504 $504 $347 $230 $577 1.1x 0.5x 5.8%

Carpi Select Income II 2005 $313 $305 $64 $86 $149 0.5x 0.3x (11.6%)

Capri W Portfolio 2007 $120 $120 $0 $72 $72 0.6x 0.6x (9.0%)

Capri Urban Investors 2008 $538 $523 $390 $0 $390 0.7x 0.0x (6.9%)


Net IRR Capri Capital Partners Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2001 Capri Select Income 12.6% 3 16 22.6% 18.2% 8.5%

2002 Capri Apartment Fund III 9.3% 4 23 23.2% 13.9% 10.1%

2003 LACERA 5.8% 3 20 20.0% 8.7% (1.9%)

2005 Carpi Select Income II (11.6%) 4 46 2.0% (1.1%) (6.0%)

2007 Capri W Portfolio (9.0%) 4 49 7.4% 4.2% (2.9%)

2008 Capri Urban Investors (6.9%) 4 29 13.1% 9.6% 7.0%

DPI Multiple Capri Capital Partners Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2001 Capri Select Income 1.4x 3 16 1.7x 1.5x 1.1x

2002 Capri Apartment Fund III 1.0x 4 23 1.7x 1.4x 1.3x

2003 LACERA 0.5x 4 20 1.6x 1.3x 0.6x

2005 Carpi Select Income II 0.3x 3 46 0.7x 0.3x 0.2x

2007 Capri W Portfolio 0.6x 2 49 0.7x 0.4x 0.2x

2008 Capri Urban Investors 0.0x 4 29 1.0x 0.5x 0.4x

TVPI Multiple Capri Capital Partners Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2001 Capri Select Income 1.4x 3 16 1.7x 1.5x 1.3x

2002 Capri Apartment Fund III 2.0x 1 23 1.7x 1.6x 1.4x

2003 LACERA 1.1x 3 20 1.6x 1.4x 0.9x

2005 Carpi Select Income II 0.5x 4 46 1.1x 0.9x 0.7x

2007 Capri W Portfolio 0.6x 4 49 1.3x 1.1x 0.9x

2008 Capri Urban Investors 0.7x 4 29 1.5x 1.4x 1.2x


Exhibit 10




compared fund performance to the Cambridge Associates US Value-Add & Opportunistic Closed-End Real Estate fund benchmark (data as of June 30, 2014). Both strategies were included in order to create a meaningful sample size.

Additional Comments

Fund III, with a similar strategy as the proposed Fund IV, raised $177.5 million and was

dominated by Illinois-based public plan participants, with Illinois Teachers being the majority

investor at 56% of total commitments. The fund will be heavily concentrated in multifamily, a

property type where SURS is currently in line with its benchmark.

Gerding Edlen Green Cities III

Background

The firm was originally founded by Mark Edlen (currently CEO) and Bob Gerding (who

retired in 2003 and is now deceased) and is headquartered in Portland, OR. Mr. Edlen and Mr.

Gerding originally began as build to suit developers and transitioned the firm in 2000 to

developing urban infill office and apartments properties financed primarily by high net worth

individuals. In 2009, the firm established its investment management group and began

investing on behalf of U.S. tax-exempt clients. In 2012, the investment management group

was renamed, Gerding Edlen Investment Management and, through succession planning,

became a minority owned firm with Kelly Saito, President of Gerding Edlen assuming

majority ownership.

Strategy

The value-add/opportunistic Fund III will seek to acquire well-located but undercapitalized or

under managed apartment and/or office properties for income and value growth through

1% of Deals

>3.0x TVPI

Multiple

6% of Deals

>2.0-3.0x TVPI

Multiple

57% of Deals

>1.0-2.0x TVPI

Multiple

36% of Deals

0.0-1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gro

ss T

VP

I M

ult

iple



Capri Select Income Capri Apartment Fund III LACERA Carpi Select Income II Capri W Portfolio Capri Urban Investors

UnderWater

AboveWater





-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gro

ss T

VP

I M

ult

iple



Capri Select Income Capri Apartment Fund III LACERA Carpi Select Income II Capri W Portfolio Capri Urban Investors

Under-Performing

Out-Performing

Exhibit 10

enhanced management, capital improvements, and superior marketing and leasing capabilities.

The fund will also target new apartment development opportunities in key urban markets

where demand is outpacing future supply. The firm has a track record of creating high quality,

sustainable properties including developing or retrofitting more than 60 LEED registered

properties with the majority certified as either LEED Platinum or Gold. Development of new

assets is anticipated to comprise 50% of the fund. Target markets for the fund are Boston,

Seattle, Portland, LA, San Francisco, and Chicago. Gerding Edlen expects a net IRR of 14%

and equity multiple of 1.5x over the life of the fund. Assets are anticipated to be in a range of

$35-$50 million in average equity size after accounting for an expected 55-65% of leverage.

Performance

Gerding has raised two funds since 2000, shown below. At the fund-level, these vehicles have

had slightly below average performance and are generally 3rd

quartile performers relative to

the applicable vintage year index. From an underlying investment perspective, these vehicles

made 14 investments ($312 million of equity capital invested) that have an average multiple

on invested capital (TVPI multiple) of 1.4x with 29% of the investments having a multiple at

or below 1.0x (these are generally recent investments that are still marked at about cost). On a

relative basis, 79% of these investments have outperformed the median of the vintage year

benchmark which is good. It is important to note that Gerding’s track record dates back to

2010 and only one of the firm’s 14 investments have been realized so ultimate performance is

still early. Also, Fund II is still in the J-curve which has negatively impacted fund-level to

investment-level performance.





Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


Gerding Edlen Green Cities I 2009 $182 $169 $243 $13 $233 1.5x 0.1x 15.9%

Gerding Edlen Green Cities II 2012 $234 $124 $140 $0 $138 1.1x 0.0x 15.8%


Net IRR Gerding Edlen Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2009 Gerding Edlen Green Cities I 15.9% 3 18 20.0% 16.3% 5.7%

2012 Gerding Edlen Green Cities II 15.8% 2 22 16.8% 12.9% 6.9%

DPI Multiple Gerding Edlen Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2009 Gerding Edlen Green Cities I 0.1x 4 18 0.7x 0.6x 0.3x

2012 Gerding Edlen Green Cities II 0.0x 4 22 0.2x 0.1x 0.0x

TVPI Multiple Gerding Edlen Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2009 Gerding Edlen Green Cities I 1.5x 3 18 1.6x 1.5x 1.1x

2012 Gerding Edlen Green Cities II 1.1x 3 22 1.3x 1.2x 1.1x


Exhibit 10





Additional Comments

Fund III has a target size of $300 million, potentially limiting SURS’ ability to make a

meaningful commitment within the bounds of prudent risk management. The fund is also

concentrated in its projected property type (office/multifamily) and geographic (primarily west

coast) distributions.

GreenOak Asia Fund II

Background

GreenOak is a partner owned, real estate focused, principal investing and advisory firm led by

Fred Schmidt, Sonny Kalsi and John Carrafiell. GreenOak was formed in 2010, but its

partners have worked together for an average of over 20 years. GreenOak has offices in New

York, Tokyo, Seoul, Los Angeles, and London.

Strategy

The value-add/opportunistic Fund II will focus primarily on office assets in Japan, pursuing

transactions where a combination of the following elements exists: (i) off-market/exclusively

negotiated; (ii) limited competition; (iii) properties where GreenOak personnel have detailed

knowledge; and (iv) investment pricing that the firm believes reflects attractive value for the

fund. GreenOak will look to identify deals with forcing mechanisms including near term debt

maturities, near term fund maturities and motivated sellers. GreenOak expects a 15-18% net

IRR for the fund while using leverage of 65-70%. The fund plans to use a variety of structural

0% of Deals

>3.0x TVPI

Multiple

7% of Deals

>2.0-3.0x TVPI

Multiple

64% of Deals

>1.0-2.0x TVPI

Multiple

29% of Deals

0.0-1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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Gerding Edlen Green Cities I Gerding Edlen Green Cities II

UnderWater

AboveWater





-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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Gerding Edlen Green Cities I Gerding Edlen Green Cities II

Under-Performing

Out-Performing

Exhibit 10

approaches that include direct ownership, joint ventures, minority interests and debt financings

that it believes will optimize investment performance.

Performance

GreenOak has raised one prior Japan-focused fund (2011 vintage), shown below. At the fund-

level, this vehicle has done well from an IRR perspective (1st quartile) but lagged from a

multiple perspective (3rd

quartile). From an underlying investment perspective, this fund has

made 11 investments ($216 million of equity capital invested) that have an average multiple

on invested capital (TVPI multiple) of 1.6x with 45% of the investments having a multiple at

or below 1.0x (all of these investments are basically held at investment cost). On a relative

basis, 82% of these investments have outperformed the median of the vintage year benchmark

which is good. It is important to note that GreenOak’s fund track record in Japan dates back to

2011 so ultimate performance is still early. Also, Fund I is still in the J-curve which has

negatively impacted fund-level to investment-level performance.





Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


GreanOak Japan 2011 $260 $229 $193 $81 $274 1.2x 0.4x 20.0%


Net IRR GreenOak Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2011 GreanOak Japan 20.0% 1 63 19.8% 12.7% 7.6%

DPI Multiple GreenOak Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2011 GreanOak Japan 0.4x 1 63 0.3x 0.1x 0.0x

TVPI Multiple GreenOak Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2011 GreanOak Japan 1.2x 3 63 1.3x 1.2x 1.1x

Note: Benchmark data as of 06/30/2014. Benchmark is the Cambridge Associates Global Value-Add & Opportunistic Closed-End Real Estate fund benchmark.

9% of Deals

>3.0x TVPI

Multiple

18% of Deals

>2.0-3.0x TVPI

Multiple

27% of Deals

>1.0-2.0x TVPI

Multiple

45% of Deals

0.0-1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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GreanOak Japan

UnderWater

AboveWater

Exhibit 10




compared fund performance to the Cambridge Associates Global Value-Add & Opportunistic Closed-End Real Estate fund benchmark (data as of June 30, 2014). Both strategies were included in order to create a meaningful sample size.

Additional Comments

The fund will be heavily concentrated both geographically and by property type, with its focus

on Japanese office investments. SURS is invested in the GreenOak U.S. Fund, through the

Franklin Templeton Emerging Manager Real Estate Fund of Funds product.

HYPO Fund

Background

Corpelligence Investments, the fund’s sponsor, is a private real estate firm that pursues

opportunistic investments in distressed assets, equity, and high yield structured debt. The firm

started as a buyout firm. Given its team members experience in real estate debt, the firm has

diversified its strategy by concentrating in real estate investments. Corpelligence has offices in

New York and Washington DC.

Strategy

The opportunistic/debt fund’s strategy is to acquire (i) distressed commercial real estate assets

(principally debt) that are in need of workout, refinancing and repositioning, (ii) purchase and

originate CMBS subordinate bonds, and (iii) operate a special servicing platform that bids,

manages, and resolves distressed securitized commercial mortgages. The fund will focus on

high-yielding, non-investment grade securities. As a full-service commercial mortgage

company, Corpelligence believes they have a competitive advantage over other securitized

lenders in terms of level of service provided to mortgage loan borrowers and flexibility in

addressing borrower needs over the term of their loans. The fund is expecting a 22-26% net

IRR and 2.0x-3.0x multiple while targeting 65% leverage.

Performance

Corpelligence Investments reported that it does not have prior track record data that the firm

could provide.

Additional Comments

This is a first time fund from a firm that appears to have changed its investment model from

private equity buyouts to real estate debt. The firm has previous real estate debt experience,





-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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GreanOak Japan

Under-Performing

Out-Performing

Exhibit 10

but currently has no assets under management. The strategy is anticipating returns of 22%+

that are significantly higher than most real estate funds.

Long Wharf Real Estate Partners V

Background

Long Wharf, based in Boston, was established following the spin-out of the Fidelity Real

Estate Group (“FREG”) from Fidelity Investments. FREG began investing in value-added real

estate on behalf of institutional clients in 1995. In late 2008, the process began for FREG to

spin-out into an independent investment manager. The team began operating autonomously as

a stand-alone business inside of Fidelity in 2009, and Long Wharf was formally established as

a fully independent firm in 2011. Long Wharf is 100% partner-owned.

Strategy

Fund V will utilize a broad-based value-added strategy targeting multiple property sectors and

markets across the U.S. and is expected to provide a 12-15% net IRR and 1.5x-1.6x equity

multiple. The fund anticipates making 20-30 investments in properties, with each having an

equity size of $10-$20 million. Leverage is anticipated to be 50-65%. Long Wharf generally

acquires assets with local operating partners who not only represent a source of investment

opportunities, but also provide experience and expertise in the specific market and property

sector.

Performance

Long Wharf has raised four funds since 2000, shown below. Outside of Fund II, these

vehicles have generally had slightly below average performance relative to the applicable

vintage year index. From an underlying investment perspective, these vehicles have made 117

investments ($1,926 million of equity capital invested) that have an average multiple on

invested capital (TVPI multiple) of 1.2x with 36% of the investments having a multiple below

1.0x. On a relative basis, 50% of these investments have underperformed the median of the

vintage year benchmark. From a team perspective, the Long Wharf team has meaningfully

changed since 2010 and recent performance has improved.

Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


FREG I 2001 $321 $261 N/A $393 $393 1.5x 1.5x 17.5%

FREG II 2003 $626 $626 $13 $405 $418 0.7x 0.6x (8.3%)

FREG III 2007 $875 $782 $384 $512 $895 1.1x 0.7x 4.3%

FREG IV 2012 $253 $107 $112 $6 $116 1.1x 0.1x 11.7%


Net IRR Long Wharf Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2001 FREG I 17.5% 3 16 22.6% 18.2% 8.5%

2003 FREG II (8.3%) 4 20 20.0% 8.7% (1.9%)

2007 FREG III 4.3% 2 49 7.4% 4.2% (2.9%)

2012 FREG IV 11.7% 3 22 16.8% 12.9% 6.9%

DPI Multiple Long Wharf Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2001 FREG I 1.5x 3 16 1.7x 1.5x 1.1x

2003 FREG II 0.6x 3 20 1.6x 1.3x 0.6x

2007 FREG III 0.7x 2 49 0.7x 0.4x 0.2x

2012 FREG IV 0.1x 3 22 0.2x 0.1x 0.0x

TVPI Multiple Long Wharf Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2001 FREG I 1.5x 3 16 1.7x 1.5x 1.3x

2003 FREG II 0.7x 4 20 1.6x 1.4x 0.9x

2007 FREG III 1.1x 3 49 1.3x 1.1x 0.9x

2012 FREG IV 1.1x 3 22 1.3x 1.2x 1.1x


Exhibit 10









Additional Comments

Fund V has a targeted fund size of $350 million, following the $253 million raised for Fund

IV. SURS is invested in Fund IV through the Franklin Templeton Emerging Manager Real

Estate Fund of Funds product.

Newport Capital Partners II

Background

Newport Capital Partners is a boutique real estate investment management firm headquartered

in Chicago whose focus is on properties whose tenants provide convenience and necessity-

based products to local consumers. From 2004 through 2008, Newport acquired

approximately $100 million of real estate investments on behalf of high net worth investors

and a family office utilizing a similar investment strategy. In 2008, Newport began

transforming into a vertically integrated institutional platform and currently has $148.5 million

in real estate AUM.

2% of Deals

>3.0x TVPI

Multiple

8% of Deals

>2.0-3.0x TVPI

Multiple

55% of Deals

>1.0-2.0x TVPI

Multiple

36% of Deals

0.0-1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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FREG I FREG II FREG III FREG IV

UnderWater

AboveWater





-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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FREG I FREG II FREG III FREG IV

Under-Performing

Out-Performing

Exhibit 10

Strategy

Newport Fund II’s value-add strategy is focused on neighborhood and community retail/mixed

use properties with a convenience/necessity based merchandising mix located within high

population density, in-fill submarkets in the central U.S. These will be middle market

investments requiring $5-$10 million in equity, after using 65% leverage. Property level value

creation is expected via (1) leasing, (2) repositioning tenant/merchandising mix, (3) physical

redevelopment; and (4) upgrading tenant credit. Target markets will include Chicago,

Minneapolis, Cincinnati, Indianapolis, Nashville, St. Louis, Austin, Kansas City, and

Oklahoma City metro areas. In addition the Fund may selectively invest in multi-tenant

industrial properties with similar locational attributes. Newport is targeting a 13% net IRR and

a 1.6x multiple.

Performance

Newport has raised one fund in 2012 shown below. At the fund-level, this fund is a 3rd

quartile performer versus other 2012 vintage year funds however given the recent vintage of

the fund and the associated J-curve ultimate performance is still early. From an underlying

investment perspective, the fund has made five investments ($30 million of equity capital

invested) which are projected to do well. Newport is projecting an average multiple on

invested capital (TVPI multiple) of 1.9x for these investments. It is important to note that

Newport provided projected return data for underlying investments versus return data based on

current marks. As such, it is not possible to compare Newport’s investment-level performance

versus the other firms.

The top chart below shows the individual investment TVPI multiples for each Fund (based on

projected returns). The size of the bubble on the chart indicates the relative size of the equity

commitment to a given investment. The bottom charts shows the relative investment

performance as compared to the vintage year benchmark in which an investment was made.

Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


Newport Capital Partners Fund I 2012 $43 $30 $31 $1 $32 1.1x 0.0x 9.5%


Net IRR Newport Capital Partners Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2012 Newport Capital Partners Fund I 9.5% 3 22 16.8% 12.9% 6.9%

DPI Multiple Newport Capital Partners Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2012 Newport Capital Partners Fund I 0.0x 3 22 0.2x 0.1x 0.0x

TVPI Multiple Newport Capital Partners Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2012 Newport Capital Partners Fund I 1.1x 3 22 1.3x 1.2x 1.1x


Exhibit 10





Additional Comments

The prospective fund is targeting a small fund raise, with $200 million in total commitments

targeted. The fund will be heavily concentrated both geographically and by property type,

with its focus on central U.S. retail investments. SURS is invested in Newport’s first fund

through the Franklin Templeton Emerging Manager Real Estate Fund of Funds product.

Oak Street Real Estate Capital Fund III

Background

Oak Street Real Estate Capital was founded in 2009 as a private equity real estate firm under

the name Oak Street Partners. Oak Street Partners was rebranded as Oak Street Real Estate

Capital in September 2011. Headquartered in Chicago and managed by its three managing

partners, Oak Street remains 100% employee-owned. Oak Street offers a platform combining

direct and indirect real estate perspectives in its two lines of business, a net lease platform and

a fund of funds platform.

Strategy

Oak Street’s value-add strategy targets U.S. single-tenant properties net leased to investment

grade companies with a target lease term of 15 years. Oak Street further defines its strategy by

focusing on tenants operating recession-resistant businesses. Oak Street believes the long-term

in-place cash flow backed by investment grade credits offers an attractive risk-adjusted current

return with capital appreciation potential upon exit. Fund III seeks a current yield of 8%

0% of Deals

>3.0x TVPI

Multiple

40% of Deals

>2.0-3.0x TVPI

Multiple

60% of Deals

>1.0-2.0x TVPI

Multiple

0% of Deals 0.0-

1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Newport Capital Partners Fund I

UnderWater

AboveWater





-3.00x

-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

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Newport Capital Partners Fund I

Under-Performing

Out-Performing

Exhibit 10

generated from contractual lease obligations and a total net IRR of 12% and 1.6x multiple.

Oak Street’s strategy is based upon: a) focused investment parameters with strict credit

underwriting; b) structuring acquisitions to provide operating cash flow in excess of the

preferred return; c) a philosophy of active management; and d) a focus on downside

protection. Oak Street expects an average equity deployment of $10-$20 million per

investment, using an anticipated 60% leverage.

Performance

Oak Street has raised two direct funds and a large separate account since 2000, shown below.

These vehicles have had generally good performance and are mostly 1st / 2

nd quartile

performers relative to the applicable vintage year index (excluding the 2013 vehicle which is

very early). From an underlying investment perspective, these vehicles made 34 investments

($164 million of equity capital invested) that have an average multiple on invested capital

(TVPI multiple) of 1.3x with all of the investments having a multiple above 1.0x. On a

relative basis, 71% of these investments have outperformed the median of the vintage year

benchmark.





Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value,

Net of Carry

TVPI

Multiple

DPI


Oak Street Partners RE Fund I 2010 $20 $20 $15 $18 $32 1.6x 0.9x 20.1%

Oak Street Real Estate Capital Fund II 2012 $136 $124 $146 $12 $152 1.2x 0.1x 18.1%

MAI Wealth Income and Growth Fund 2013 $36 $19 $18 $1 $19 1.0x 0.1x 3.0%


Net IRR Oak Street Real Estate Capital Vintage Year Benchmark Net IRR Comparison


Upper


Lower

Quartile

2010 Oak Street Partners RE Fund I 20.1% 2 23 22.4% 15.9% 11.6%

2012 Oak Street Real Estate Capital Fund II18.1% 1 22 16.8% 12.9% 6.9%

2013 MAI Wealth Income and Growth Fund 3.0% 3 23 20.8% 5.0% (6.1%)

DPI Multiple Oak Street Real Estate Capital Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper


Lower

Quartile

2010 Oak Street Partners RE Fund I 0.9x 1 23 0.5x 0.4x 0.2x

2012 Oak Street Real Estate Capital Fund II 0.1x 2 22 0.2x 0.1x 0.0x

2013 MAI Wealth Income and Growth Fund 0.1x 1 23 0.0x 0.0x 0.0x

TVPI Multiple Oak Street Real Estate Capital Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper


Lower

Quartile

2010 Oak Street Partners RE Fund I 1.6x 1 23 1.5x 1.4x 1.3x

2012 Oak Street Real Estate Capital Fund II 1.2x 2 22 1.3x 1.2x 1.1x

2013 MAI Wealth Income and Growth Fund 1.0x 3 23 1.2x 1.0x 1.0x


0% of Deals

>3.0x TVPI

Multiple

3% of Deals

>2.0-3.0x TVPI

Multiple

97% of Deals

>1.0-2.0x TVPI

Multiple

0% of Deals 0.0-

1.0x TVPI

Multiple

0.00x

1.00x

2.00x

3.00x

4.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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Oak Street Partners RE Fund I Oak Street Real Estate Capital Fund II MAI Wealth Income and Growth Fund

UnderWater

AboveWater

Exhibit 10





Additional Comments

Fund III is targeting $300 million in total commitments. The fund’s strategy is unique in that

it is focused exclusively on net lease investments.





-2.00x

-1.00x

0.00x

1.00x

2.00x

3.00x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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Oak Street Partners RE Fund I Oak Street Real Estate Capital Fund II MAI Wealth Income and Growth Fund

Under-Performing

Out-Performing

Exhibit 10

MFDB-Owned Fund of Funds

Oak Street Real Estate Capital

Background

Oak Street Real Estate Capital was founded in 2009 as a private equity real estate firm under

the name Oak Street Partners. Oak Street Partners was rebranded as Oak Street Real Estate

Capital in September 2011. Headquartered in Chicago and managed by its three managing

partners, Oak Street remains 100% employee-owned. Oak Street offers a unique platform

combining direct and indirect real estate perspectives in its two lines of business, a net lease

platform and a fund of funds platform. In October 2012, Larissa Herczeg, Managing Partner,

and Laura Hyde, Senior Analyst, joined Oak Street to launch the fund of funds platform

targeting investments in private real estate funds.

Strategy

Oak Street’s fund of fund (FOF) strategy seeks added alpha through investments in best-in-

class private real estate funds with an emphasis on first, second or third institutional funds

generally targeting less than $500 million, which Oak Street believes outperform larger, more

established funds. As a subset of the strategy, Oak Street focuses on investing with first-time

funds and anchoring first closes. 80-85% of investments are anticipated to be equity

investments, with the balance being debt investments. The vast majority of investments will

be made in the U.S., but a minimal portion may be Central and South American or European.

Oak Street will also pursue co-investments alongside managers and opportunistic secondary

opportunities, but believes these opportunities are cyclical and not attractive at all points in the

cycle. As a result, Oak Street only charges one fee structure regardless of investment type.

Oak Street is targeting a 13-15% net IRR and 1.5x+ multiple. The Fund would generally

commit $5-$15 million per investment.

Performance

Oak Street has raised one prior large fund-of-fund separate account, shown below. This

vehicle has had roughly average performance relative to the applicable vintage year index (this

is mainly due to the J-curve associated with the fund). From an underlying investment

perspective, the vehicle has made eight primary fund investments that have a weighted average

multiple on invested capital (TVPI multiple) of 1.3x. On a relative basis, 96% of these

primary fund investments are 1st or 2

nd quartile performers, which is very strong (albeit still

early in their respective investment lifecycles). Regarding the deal-level performance, Oak

Street has invested additional capital in these funds beyond the separate account capital which

creates the difference between fund capital invested and deal capital invested.

Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value, Net

of Carry

TVPI

Multiple

DPI


ERS Private Real Estate Emerging Manager I, L.P.2011 $51.5 $27.7 $27.4 $6.3 $33.8 1.2x 0.2x 15.6%

Exhibit 10

Note: $ in millions; Fund level data as of June 30, 2014 and provided by the Manager. IRRs are net and are calculated after the deduction of carried interest and expenses charged directly to the respective Fund. TVPI multiples are calculated using Fund level contributions and Fund

level distributions to date as well as the respective Fund's equity balance, net of promote. GREEN shaded cells indicate that the Fund



Net IRR Oak Street Vintage Year Benchmark Net IRR Comparison


Upper

Quartile Median

Lower

Quartile

2011 ERS Private Real Estate Emerging Manager I, L.P.15.6% 3 36 20.7% 16.0% 9.3%

DPI Multiple Oak Street Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper

Quartile Median

Lower

Quartile

2011 ERS Private Real Estate Emerging Manager I, L.P.0.2x 2 36 0.3x 0.2x 0.1x

TVPI Multiple Oak Street Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper

Quartile Median

Lower

Quartile

2011 ERS Private Real Estate Emerging Manager I, L.P.1.2x 2 36 1.4x 1.2x 1.1x

Note: Benchmark data as of 06/30/2014. Benchmark is the Thomson One VA & Opp Closed-End Real Estate fund benchmark.

Gross TVPI Multiple Dispersion All Investments

Avg. Multiple: 1.1x

Wtd. Avg. Multiple: 1.3x

Standard Deviation: 0.2x

Investment Number Equity Amount Current Total Wtd. Average Wtd. Average

Status of Capital Distributed Reported Equity Gross Gross

Investments Invested Equity Value Value DPI Multiple TVPI Multiple

Primary Fund Investment 8 $83 $24 $81 $104 0.28x 1.26x

Secondary Fund Investment0 $0 $0 $0 $0 NA NA

Co-Investment 0 $0 $0 $0 $0 NA NA

Direct Investment 0 $0 $0 $0 $0 NA NA

Total 8 $83 $24 $81 $104 0.28x 1.26x

Note: Manager has not made any

Secondary Investments to date


Direct- or Co-Investments to date

0%

38%

0% 0% 0% 0% 0%0%

15%

30%

45%

60%

<= 0.50x 0.51x to <1.00x 1.00x 1.01x to 1.50x 1.51x to 2.00x 2.01x to 2.50x 2.51x to 3.00x > 3.00x

All Investments

0% 0% 0% 0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Direct- and Co-Investments

0%

38%

0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Primary Fund Investments

0% 0% 0% 0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Secondary Fund Investments

Gross DPI and TVPI Multiples by Quartile Invested Capital Split

Quartile Number Equity Amount Current Total Wtd. Average Wtd. Average

of Capital Distributed Reported Equity Gross Gross


First Quartile 2 $30 $9 $30 $39 0.32x 1.33x

Second Quartile 3 $50 $14 $48 $62 0.28x 1.24x

Third Quartile 0 $0 $0 $0 $0 NA NA

Fourth Quartile 3 $3 $0 $3 $3 0.08x 0.92x

Total 8 $83 $24 $81 $104 0.28x 1.26x

Fund Quartiles by Vintage Year

First Quartile

36%

Second Quartile

60%

Third Quartile

0%

Fourth Quartile

4%

First Quartile Second Quartile Third Quartile Fourth Quartile

0.32x 0.28x

0.00x

0.08x

1.33x

1.24x

0.00x

0.92x

0.00x

0.20x

0.40x

0.60x

0.80x

1.00x

1.20x

1.40x


DPI Multiple TVPI Multiple

-100%

-50%

0%

50%

100%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pe

rce

nt

of

Fu

nd

s

Vintage Year

First Quartile

Second Quartile

Third Quartile

Fourth Quartile

Exhibit 10

compared fund performance to the Cambridge Associates US Value-Add & Opportunistic Closed-End Real Estate fund benchmark (data as of

June 30, 2014). Both strategies were included in order to create a meaningful sample size.

Additional Comments

Oak Street anticipates 70% of capital to be deployed in fund investments, 20-30% in co-

investments, and 0-5% each in secondary fund and direct investments. Oak Street has offered

either a fund of one product or their Added Alpha Real Estate fund of funds product for our

consideration.

Perennial Real Estate Fund III

Background

Perennial Capital Advisors was founded by Leslie Greis in 2004 to provide high quality global

private real estate fund of funds products for institutional investor. The firm is headquartered

in Boston and closed its first fund in July 2007. Fund II closed in February 2011.

Strategy

Fund III will provide an investment in top-tier institutional private real estate funds that invest

in real estate and real estate-related assets in the U.S. and internationally. The Fund will invest

in value add and opportunistic strategies that have been determined through Perennial research

and analysis to have the potential to provide superior risk-adjusted returns that are not highly

correlated to other capital markets and are expected to exceed the returns of many other asset

classes. The Fund will target both debt (~30% of the fund) and equity investments (~70%)

involving considerable active management that brings considerable property improvement.

Investors can expect a portfolio of 9-11 underlying funds creating a global exposure. Holdings

in the U.S. will include most major geographic regions. Investments outside of the U.S., in

markets such as Europe, Asia and Latin America, may represent up to 50% of the portfolio.

Fund III is targeting a 13-15% net IRR and 1.5x+ multiple.

Performance

Perennial has raised two prior fund-of-funds, shown below. These vehicles have had average

to slightly below average performance relative to the applicable vintage year index. From an

underlying investment perspective, these vehicle have made 23 primary fund investments that

have a weighted average multiple on invested capital (TVPI multiple) of 1.3x. On a relative

basis, 52% of these primary fund investments are 1st or 2

nd quartile performers, which is not

very strong (albeit still early in their respective investment lifecycles).

Fund-Level Returns

Fund Vintage Year

Capital

Committed

Capital

Funded

Reported

Value

Amount

Distributed

Total Value, Net

of Carry

TVPI

Multiple

DPI


Perennial Real Estate Fund, LP 2007 $65.8 $61.8 $47.2 $26.8 $74.0 1.2x 0.4x 4.8%

Perennial Real Estate Fund, II LP 2010 $65.9 $41.3 $42.5 $4.9 $47.4 1.1x 0.1x 8.8%


Net IRR Perennial Capital Advisors Vintage Year Benchmark Net IRR Comparison


Upper

Quartile Median

Lower

Quartile

2007 Perennial Real Estate Fund, LP 4.8% 2 56 8.0% 4.4% (2.8%)

2010 Perennial Real Estate Fund, II LP 8.8% 4 21 16.4% 12.0% 9.9%

DPI Multiple Perennial Capital Advisors Vintage Year Benchmark DPI Multiple Comparison

Vintage Year Fund

DPI


Upper

Quartile Median

Lower

Quartile

2007 Perennial Real Estate Fund, LP 0.4x 2 56 0.7x 0.4x 0.2x

2010 Perennial Real Estate Fund, II LP 0.1x 4 21 0.6x 0.4x 0.1x

TVPI Multiple Perennial Capital Advisors Vintage Year Benchmark TVPI Multiple Comparison

Vintage Year Fund

TVPI


Upper

Quartile Median

Lower

Quartile

2007 Perennial Real Estate Fund, LP 1.2x 3 56 1.3x 1.2x 0.9x

2010 Perennial Real Estate Fund, II LP 1.1x 4 21 1.4x 1.3x 1.2x

Note: Benchmark data as of 06/30/2014. Benchmark is the Thomson One VA & Opp Closed-End Real Estate fund benchmark.

Exhibit 10





Additional Comments

Perennial has just $131.6 in real estate AUM and Fund III is targeting just $100 million in total

commitments, but could raise more capital if there is investor demand. The firm was a finalist

for the 2012 SURS real estate FOF search but was not selected by the Board. Fund III

Gross TVPI Multiple Dispersion All Investments

Avg. Multiple: 1.2x

Wtd. Avg. Multiple: 1.3x

Standard Deviation: 0.3x

Investment Number Equity Amount Current Total Wtd. Average Wtd. Average

Status of Capital Distributed Reported Equity Gross Gross


Primary Fund Investment 23 $110 $52 $88 $139 0.47x 1.27x

Secondary Fund Investment0 $0 $0 $0 $0 NA NA

Co-Investment 0 $0 $0 $0 $0 NA NA

Direct Investment 0 $0 $0 $0 $0 NA NA

Total 23 $110 $52 $88 $139 0.47x 1.27x


Secondary Investments to date


Direct- or Co-Investments to date

0%

13%

0%

4%

0% 0% 0%0%

15%

30%

45%

60%

<= 0.50x 0.51x to <1.00x 1.00x 1.01x to 1.50x 1.51x to 2.00x 2.01x to 2.50x 2.51x to 3.00x > 3.00x

All Investments

0% 0% 0% 0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Direct- and Co-Investments

0%

13%

0%4%

0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Primary Fund Investments

0% 0% 0% 0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

<= 0.50x 0.51x to

<1.00x

1.00x 1.01x to

1.50x

1.51x to

2.00x

2.01x to

2.50x

2.51x to

3.00x

> 3.00x

Secondary Fund Investments

Gross DPI and TVPI Multiples by Quartile Invested Capital Split

Quartile Number Equity Amount Current Total Wtd. Average Wtd. Average

of Capital Distributed Reported Equity Gross Gross


First Quartile 6 $40 $25 $37 $62 0.63x 1.53x

Second Quartile 4 $16 $7 $14 $22 0.46x 1.33x

Third Quartile 10 $42 $17 $30 $47 0.39x 1.10x

Fourth Quartile 3 $11 $3 $7 $9 0.24x 0.89x

Total 23 $110 $52 $88 $139 0.47x 1.27x

Fund Quartiles by Vintage Year

First Quartile

37%

Second Quartile

15%

Third Quartile

39%

Fourth Quartile

9%


0.63x

0.46x 0.39x

0.24x

1.53x

1.33x

1.10x

0.89x

0.00x

0.20x

0.40x

0.60x

0.80x

1.00x

1.20x

1.40x

1.60x

1.80x


DPI Multiple TVPI Multiple

-100%

-50%

0%

50%

100%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pe

rce

nt

of

Fu

nd

s

Vintage Year

First Quartile

Second Quartile

Third Quartile

Fourth Quartile

Exhibit 10

anticipates 85-100% of capital to be deployed in fund investments, 0-10% in secondary

investments, and 0-5% in secondary fund and direct investments.

Exhibit 10

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