15. Presentation by StepStone Group – 2020 Real Estate ... · 26/2/2020 · The Plan’s...

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15. Presentation by StepStone Group – 2020 Real Estate Strategic Plan

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

2020 Real Estate Portfolio Strategic Plan

FEBRUARY 2020

Disclosure

This document is meant only to provide a broad overview for discussion purposes. All information provided here is subject to change. This document is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services by StepStone Group LP, StepStone Group Real Assets LP, StepStone Group Real Estate LP, Swiss Capital Invest Holding (Dublin) Ltd, Swiss Capital Alternative Investments AG or their subsidiaries or affiliates (collectively, “StepStone”) in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this document should not be construed as financial or investment advice on any subject matter. StepStone expressly disclaims all liability in respect to actions taken based on any or all of the information in this document.

This document is confidential and solely for the use of StepStone and the existing and potential clients of StepStone to whom it has been delivered, where permitted. By accepting delivery of this presentation, each recipient undertakes not to reproduce or distribute this presentation in whole or in part, nor to disclose any of its contents (except to its professional advisors), without the prior written consent of StepStone. While some information used in the presentation has been obtained from various published and unpublished sources considered to be reliable, StepStone does not guarantee its accuracy or completeness and accepts no liability for any direct or consequential losses arising from its use. Thus, all such information is subject to independent verification by prospective investors.

The presentation is being made based on the understanding that each recipient has sufficient knowledge and experience to evaluate the merits and risks of investing in private equity products. All expressions of opinion are intended solely as general market commentary and do not constitute investment advice or a guarantee of returns. All expressions of opinion are as of the date of this document, are subject to change without notice and may differ from views held by other businesses of StepStone.

All valuations are based on current values provided by the general partners of the Underlying Funds and may include both realized and unrealized investments. Due to the inherent uncertainty of valuation, the stated value may differ significantly from the value that would have been used had a ready market existed for all of the portfolio investments, and the difference could be material. The long-term value of these investments may be lesser or greater than the valuations provided.

StepStone is not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. Each prospective investor is urged to discuss any prospective investment with its legal, tax and regulatory advisors in order to make an independent determination of the suitability and consequences of such an investment.

An investment involves a number of risks and there are conflicts of interest. Please refer to the risks and conflicts disclosed herein.

Each of StepStone Group LP, StepStone Group Real Assets LP and StepStone Group Real Estate LP is an investment adviser registered with the Securities and Exchange Commission (“SEC”). StepStone Group Europe LLP is authorized and regulated by the Financial Conduct Authority, firm reference number 551580. Swiss Capital Invest Holding (Dublin) Ltd (“SCHIDL”) is an SEC Registered Investment Advisor and Swiss Capital Alternative Investments AG (“SCAI”) (together with SCHIDL, “Swiss Cap”) is registered as a Relying Advisor with the SEC. Such registrations do not imply a certain level of skill or training and no inference to the contrary should be made.

All data As of September 30, 2019 unless otherwise noted.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ACTUAL PERFORMANCE MAY VARY.

Confidential |

Table of Contents

I.  2020 Strategic Plan Overview 4

II.  2019 Commitment Review 6

III.  2020 Projected Income Returns 7

IV.  Proposed 2020 Strategic Plan 8

V.  Risk/Return Targets 9

VI.  Components of Return and Leverage 10

VII.  Property Type Diversification 11

VIII. Geographic Diversification 12

IX.  2020 Portfolio Model 13

X.  2020 Strategy Implementation/Action Plan 23

Appendix: Global Real Estate Market Conditions – 3Q 2019

Confidential |

Target Real Estate Allocation: •  8% of the total portfolio.

4

Performance Objective: To exceed the designated benchmark (NCREIF plus 50 basis points) in the Department of Water and Power Employees’ Retirement Plan’s (the “Plan”) Investment Policy for Real Estate. Based on the Plan’s long-term 70/20/10 (Core/Value/Opportunistic) allocation with the real estate portfolio assumed return of 7.3%1 and standard deviation of 8.7%¹.

Real Estate Portfolio Investment Objectives:

¹Basedonthetargetpolicyallocationof70/20/10core/value-add/opportunisticandcurrentnetreturnassumptionsof5.86%forcore,9.45%forvalue-add,and13.07%foropportunistic,andvolatility(standarddeviation)assumptionsof4.1%forcore,11.2%forvalue-add,and16.0%foropportunistic

•  Attractive Income and Total Returns. Historically, real estate has provided stable, long term income returns that comprise a significant portion of total return [e.g., the NCREIF Property Index (“NPI”) income return comprises more than 80% of the total NPI return since inception]. Significant income return increases the transparency and decreases the volatility of total return. Of note, real estate income returns compare favorably to those generated by public equity and fixed income assets.

•  Portfolio Diversification. Investment in real estate may enhance the diversification of the Plan’s total investment portfolio given the historically low or negative return correlation of real estate with other asset classes (e.g., equities and fixed

income).

•  Inflation-Hedge. Real estate has historically provided a reasonable hedge against inflation.

2020 Strategic Plan Overview

Confidential |

2020 Strategic Plan Overview

The following have been established as short and long term investment themes and initiatives:

5

TACTICAL INITIATIVES (Short-Term Goals)

Selectively allocate to high conviction income-oriented strategies

Continue to evaluate core-plus and attractive risk-adjusted strategies as opportunities arise

Evaluate investments in opportunistic strategies which benefit from market dislocations

Continued slight overweight of the non-core component of portfolio

Evaluate defensive opportunities across the capital stack, including niche strategies

Evaluate increasing non-core industrial exposure

Evaluate regional growth opportunities, e.g., U.S. South and Western European non-core

Continue to monitor and evaluate the Plan’s core portfolio positions

STRATEGIC INITIATIVES (Long-Term Plans)

Exceed benchmark: NCREIF + 50 basis points

Strategic target: 70/20/10 (core/value/opportunistic)

Maintain average commitment size of $60-$100 million

Maintain income and preservation of capital focus

Always consider follow-on funds with existing high conviction managers

Confidential |

2019 Commitment Review The Plan made the following real estate allocations in 2019 pursuant to the commitment amounts and risk strategies described in the 2019 Strategic Plan and other strategic opportunities that emerged in 2019.

6

INVESTMENTS DATE $ AMOUNT RISK PROFILE OBJECTIVES

Westbrook XI 2Q19 US$75 million Value Invest in small to medium sized assets, focusing on office, residential and debt assets in the gateway markets of North America, Europe and Asia.

Torchlight Debt Opportunity Fund VI

2Q19 US$15 million Opportunity Increase 2017 original commitment of $60 million to $75 million for this high conviction fund and to gain additional management fee savings.

Lone Star Real Estate Fund V

2Q19 US$39.8 million

Reduction Opportunity

43% ($39.8 million) of original 2016 commitment of $92.7 million released due to difficulty in finding investments suitable for the funds’ strategy.

DRA Growth and Income Fund X

4Q19 US$75 million Value Invest in a diversified portfolio of office, residential, industrial and retail assets in major markets in the U.S., with a focus on high current income generation.

ProLogis Targeted U.S. Logistics Fund

4Q19 US$25 million Core Increase 2015 original commitment of $25 million to $50 million for this high conviction fund and to increase core industrial exposure.

$1066.0$851.8

$266.1

$125.1

$73.3

BeginningValue (+)Contributions (-)Distributions (+)Gain/Loss (=)EndingValue

1YEARCHANGEINMARKETVALUE($millions)4Q18-3Q19

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Investment 2020 Expected

Income (%) 2020 Expected

Income ($) Core Brookfield Premier 4.50% 3,610,566 DFA 4.00% 1,483,991 FPA Core Plus III 4.00% 2,380,502 Harrison Street 4.00% 3,157,451 Heitman Securities 4.00% 1,390,693 INVESCO 4.00% 2,902,282 Jamestown 4.00% 2,228,437 JP Morgan SPF 4.00% 3,496,052 PRISA 4.00% 3,914,573 Prologis Industrial 4.00% 1,988,126 USAA Eagle 5.00% 2,723,076 Value Angelo Gordon 4.00% 137,995 Almanac VI 6.00% 327,039 Almanac VII 7.00% 956,604 Almanac VIII 8.00% 264,288 Bristol II 3.00% 606,095 DRA VII 9.00% 391,393 DRA VIII 9.00% 1,678,041 DRA IX 9.00% 4,756,886 DRA X 9.00% 1,125,000 Mesa West III 9.00% 186,045 Mesa West IV 8.00% 2,206,029 PRISA II 4.00% 1,790,958 Westbrook X 3.00% 1,287,604 Westbrook XI 3.00% 375,000 Opportunistic Blackstone VII 3.00% 434,779 Blackstone Europe IV 2.00% 249,276 LaSalle Asia V 4.00% 681,281 Lone Star REF II 8.00% 31,744 Lone Star REF IV 2.00% 390,671 Lone Star REF V 4.00% 341,422 Lone Star VII 7.00% 4,587 Torchlight IV 7.00% 427,129 Torchlight V 9.00% 1,464,967 Torchlight VI 7.00% 1,225,075 Total $47,892,532

2020 Projected Income Returns

•  Overall, core fund and value debt fund income returns have trended down over the past several years as core pricing and debt competition have escalated.

•  Debt funds and income-focused value equity funds continue to bring strong current income returns to the Plan’s portfolio.

•  In 2019, the Plan’s portfolio is projected to generate a $47.9 million income return, a significant increase from last year, a

result of the recent focus on income-producing investments.

7

Confidential |

The Plan’s projected 12/31/19 real estate allocation is 7.1%. Based on an overall 7.00% Plan annual growth rate assumption, for 2020 StepStone recommends committing approximately $225 million to new real estate investments towards achieving the 8% target allocation in the near term:

8

StepStone further projects the following 2021 commitment amounts will be required to stabilize at the 8% target allocation to real estate by year end 2022:

Based on a 7.00% Plan growth rate, in the absence of new investments the real estate portfolio drops to 5.4% of total Plan assets by 2023.

•  Core: $60-100 million

•  Value: $60-100 million

•  Opportunistic: $60-100million

•  Core: Up to $75 million

•  Value: Up to $50 million

•  Opportunistic: Up to $50 million

Proposed 2020 Strategic Plan

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Risk/Return Targets

9

INVESTMENT AND PORTFOLIO RISK/RETURN RANGES

RISK/RETURN NOMINAL NET

RETURN¹ STANDARD DEVIATION² EXPOSURE 9-30-19

FULLY FUNDED EXPOSURE³

PROPOSED STRATEGY RANGE POLICY RANGE

Core 5.86% 4.1% 67.0% 48.7% 50.0-70.0% 50.0-100.0%

Value-Add 9.45% 11.2% 22.4% 32.7% 20.0-40.0% 0.0-40.0%

Opportunistic 13.07% 16.0% 10.6% 18.6% 10.0-20.0% 0.0-20.0%

•  For the core section of the portfolio, strong demand and recent run-up in valuations for institutional “trophy” real estate in major U.S. markets indicate “peak” or “near peak” pricing.

•  Continue to evaluate investments providing downside protection, including income-oriented and defensive equity strategies, and increasing non-core industrial exposure.

•  Given current market conditions, selectively evaluate core-plus strategies and value investments that emphasize strong current income and moderate use of leverage.

•  For non-core investments, continue to evaluate strategies that 1) look to take advantage of dislocations in the capital

markets, including niche strategies, and 2) target regions with strong economic and demographic drivers, such as the U.S. South, and regional opportunities in select European markets.

1:DataderivedfromStepStoneRealEstatereturnassumptionsbasedonthePREAConsensusSurveyasof9/30/19.2:BasedonhistoricalCourtlandPartnersIndexQuarterlyReturnInformationasof12/31/88-6/30/19,thenSREassumptionsthrough2020.3:Includesexposureasof9-30-19plusallunfundedcommitments.

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Leverage Review

10

LEVERAGE RANGES AND AVERAGE LOAN-TO-VALUE TARGET (AS OF 9-30-2019)

RISK ACTUAL STRATEGIC RANGES POLICY RANGE

Aggregate Core 28.3% 20.0-30.0% Up to 40.0%

Aggregate Value 56.9% 50.0-60.0% Up to 65.0%

Aggregate Opportunistic 59.0% 55.0-65.0% Up to 75.0%

Total Real Estate Portfolio 37.9% 25.0-40.0% Up to 50.0%

•  Over the past year, leverage on a portfolio basis, rose 200 basis points (35.9% to 37.9%), which is within the Strategic Range of 25%-40% and well below the Policy Range of up to 50%.

•  Core leverage increased 440 basis points (23.9% to 28.3%). An increase was expected given the significant commitment fundings over the past year to incrementally higher-leveraged core-plus investments (Brookfield Premier and USAA Eagle), and slightly higher permitted leverage utilization among the portfolio’s other core holdings. Despite these increases, overall core leverage remains below the strategic limit of 30% and well below the policy range limit of 40%.

•  The annual changes in non-core leverage were de minimus and the current ratios remain comfortably below the Strategic

Ranges and Policy Range.

•  The Plan’s and StepStone staff will consistently focus on strategies where leverage is not the primary driver of returns.

•  In 2020, the Plan’s and StepStone staff will continue to monitor the use of leverage, the debt maturity schedule, and debt composition (fixed vs. floating) to identify and avoid leverage related risks in case of market volatility.

Confidential |

Property Type Diversification Targets

11

PROPERTY TYPE DIVERSIFICATION (AS OF 9-30-2019)

PROPERTY TYPE ALLOCATION² POLICY RANGE NCREIF PROPERTY INDEX

Office 29.9% Up to 40.0% 35.3%

Industrial 17.2% Up to 35.0% 17.7%

Retail 13.0% Up to 40.0% 21.4%

Residential 28.1% Up to 40.0% 25.2%

Hotel 2.4% Up to 15.0% 0.4%

Other¹ 9.4% Up to 20.0% N/A

•  Notably, over the past year industrial exposure has increased 330 basis points (13.9% to 17.2%), while retail and hotel exposure decreased 240 basis points (15.4% to 13.0%) and 70 basis points (3.1% to 2.4%), respectively.

Proposed Recommendation for 2020:

•  Focus strategies which are diversified across property types as well as specific single property-type funds (i.e., non-core industrial, select workforce and B-quality multifamily).

•  Continue consideration of diversified portfolio investments that limit hotel exposure and retail shopping center and community center exposure, or target specific niche retail opportunities, such as grocer-anchored neighborhood centers and

ethnic-themed opportunities.

¹Mayincludeseniorliving,healthcare,studenthousing,land,selfstorage,andothernoncategorizedinvestments(i.e.,debtportfolio,non-allocatedCMBS,etc.).²Withpooled/diversifiedfundstrategies,itisdifficulttoprojectpropertytypeexposures.

Confidential |

Geographic Diversification Targets

12

GEOGRAPHIC DIVERSIFICATION (AS OF 9-30-2019)

SUB REGIONS ALLOCATION² POLICY RANGE NCREIF PROPERTY INDEX

West (1) 31.0% Up to 50.0% 39.5%

South (2) 16.1% Up to 40.0% 20.1%

Midwest (3) 10.2% Up to 40.0% 8.3%

East (4) 28.1% Up to 50.0% 32.2%

US Non Classified 4.4% N/A N/A

International* 10.1% Up to 20.0% N/A

•  Maintain and monitor the portfolio’s exposure to the historically stable and economically well-diversified coastal and gateway markets.

•  Consider other high growth/demographically favorable markets, such as select U.S. South markets where these drivers are increasing demand for tenant space in the STEM industries (science, technology, engineering, math).

•  Consider select tertiary markets very selectively, based on property type and strategy, as well as select international growth-oriented opportunities with specialist, high conviction managers.

*Note:Withpooled/diversifiedfundstrategies,itisdifficulttoprojectpropertytypeexposures.

Proposed Recommendation for 2020:

(1) Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming. (2) Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas. (3) Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin. (4) Connecticut, Delaware, District of Columbia, Kentucky, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia.

Confidential |

Current RE Portfolio at 0% Plan Growth

13Basedon3Q19data.Estimatedplanassetsandover/underallocationbasedonassumed0.00%totalportfolio-levelgrowthrate.

Dec-19 Mkt. Value Dec-20 Mkt. Value Dec-21 Mkt. Value Dec-22 Mkt. Value Dec-23 Mkt. Value

Cor

e

Dimensional Global RE 37,099,787 37,841,783 38,598,618 39,370,591 40,158,003

FPA Core Plus III 59,512,539 56,512,539 52,312,539 46,912,539 40,912,539

Harrison Street Core Property 78,936,270 82,093,721 85,377,470 88,792,568 92,344,271

Heitman REIT 34,767,313 35,462,659 36,171,912 36,895,351 37,633,258

Invesco Core Real Estate 73,140,375 76,065,990 79,108,630 82,272,975 85,563,894

Jamestown Premier 55,710,917 55,817,754 55,928,864 56,044,418 56,164,595

JP Morgan SPF 87,401,300 90,065,903 92,787,494 95,565,395 98,398,723

Prologis Industrial Fund 49,996,930 65,009,110 77,870,112 80,984,917 84,224,313

Prudential PRISA 97,864,324 101,778,897 105,850,053 110,084,055 114,487,417

Brookfield Premier Real Estate Partners 80,234,794 83,444,186 86,781,953 90,253,231 93,863,361

USAA Eagle Real Estate Fund 60,512,806 79,209,200 82,377,568 85,672,670 89,099,577

Total 715,177,356 763,301,741 793,165,213 812,848,710 832,849,950

66% 61% 63% 70% 77%

Val

ue

AG Core Plus Realty Fund III 3,448,984 0 0 0 0

Almanac Realty Securities VI 5,450,642 2,700,642 0 0 0

Almanac Realty Securities VII 15,289,473 17,216,973 17,798,112 16,739,270 14,021,987

Almanac Realty Securities VIII 3,303,604 24,381,542 43,702,985 60,937,418 55,337,418

Bristol Value II 20,203,155 6,802,220 0 0 0

DRA Growth and Income Fund VII 4,348,695 140,506 0 0 0

DRA Growth and Income Fund VIII 18,644,895 12,879,202 4,223,619 0 0

DRA Growth and Income Fund IX 52,854,288 47,516,500 42,178,711 22,013,732 1,848,754

DRA Growth and Income Fund X 0 23,875,000 45,500,000 64,875,000 64,875,000

Mesa West Income Fund III 2,067,170 940,562 0 0 0

Mesa West Income Fund IV 27,575,359 52,295,360 47,895,360 29,745,360 11,595,360

Prudential PRISA II 44,773,958 46,117,177 47,500,692 48,925,713 50,393,484

Westbrook X 42,920,127 44,789,847 23,917,223 2,637,223 0

Westbrook XI 0 23,500,000 44,000,000 56,800,000 48,400,000

Total 240,880,350 303,155,531 316,716,702 302,673,716 246,472,002

22% 24% 25% 26% 23%

Opp

ortu

nist

ic

Blackstone BREP VII 14,503,036 8,820,056 3,087,236 0 0

Blackstone Europe IV 12,684,336 8,468,767 2,169,274 0 0

LaSalle Asia V 17,032,033 33,689,341 48,712,951 26,529,618 4,346,285

Lone Star Fund VII 65,524 0 0 0 0

Lone Star Real Estate Fund II 396,795 217,365 180,424 180,424 180,424

Lone Star Real Estate Fund IV 19,533,557 16,231,848 9,353,267 0 0

Lone Star Real Estate Fund V 9,693,219 34,692,008 26,375,146 5,072,694 0

Torchlight Debt Opportunity IV 6,101,848 2,971,108 0 0 0

Torchlight Debt Opportunity V 16,277,412 15,295,805 6,295,805 3,063,916 0

Torchlight Debt Opportunity VI 32,332,551 56,478,650 48,778,650 15,378,650 0

Total 128,620,311 176,864,946 144,952,751 50,225,301 4,526,709

12% 14% 12% 4% 0%

Total Real Estate 1,084,678,017 1,243,322,218 1,254,834,666 1,165,747,728 1,083,848,661

% of Plan Assets 7.1% 8.1% 8.2% 7.6% 7.1%

Plan Assets (0% Growth) 15,302,456,284 15,302,456,284 15,302,456,284 15,302,456,284 15,302,456,284

Over/Under Funded -139,518,486 19,125,715 30,638,163 -58,448,775 -140,347,842

Confidential |

Current RE Portfolio at 7.00% Plan Growth



Cor

e


FPA Core Plus III 59,512,539 56,512,539 52,312,539 46,912,539 40,912,539


Heitman REIT 34,767,313 35,462,659 36,171,912 36,895,351 37,633,258



JP Morgan SPF 87,401,300 90,065,903 92,787,494 95,565,395 98,398,723





Total 715,177,356 763,301,741 793,165,213 812,848,710 832,849,950

66% 61% 63% 70% 77%

Val

ue





Bristol Value II 20,203,155 6,802,220 0 0 0








Westbrook X 42,920,127 44,789,847 23,917,223 2,637,223 0

Westbrook XI 0 23,500,000 44,000,000 56,800,000 48,400,000

Total 240,880,350 303,155,531 316,716,702 302,673,716 246,472,002

22% 24% 25% 26% 23%

Opp

ortu

nist

ic



LaSalle Asia V 17,032,033 33,689,341 48,712,951 26,529,618 4,346,285




Lone Star Real Estate Fund V 9,693,219 34,692,008 26,375,146 5,072,694 0




Total 128,620,311 176,864,946 144,952,751 50,225,301 4,526,709

12% 14% 12% 4% 0%


% of Plan Assets 7.1% 7.6% 7.2% 6.2% 5.4% Plan Assets (7.25% Growth) $15,302,456,284 $16,373,628,224 $17,519,782,200 $18,746,166,954 $20,058,398,640

Over/Under Funded -139,518,486 -66,568,040 -146,747,910 -333,945,629 -520,823,230

Confidential |

Current & New RE Commitments at 0.00% Plan Growth



Cor

e


FPA Core Plus III 59,512,539 56,512,539 52,312,539 46,912,539 40,912,539


Heitman REIT 34,767,313 35,462,659 36,171,912 36,895,351 37,633,258



JP Morgan SPF 87,401,300 90,065,903 92,787,494 95,565,395 98,398,723





Core 2020 0 24,375,000 47,500,000 69,375,000 65,625,000

Core 2021 0 0 24,375,000 47,500,000 69,375,000

Total 715,177,356 787,676,741 865,040,213 929,723,710 967,849,950

66% 60% 60% 63% 66%

Val

ue





Bristol Value II 20,203,155 6,802,220 0 0 0








Westbrook X 42,920,127 44,789,847 23,917,223 2,637,223 0

Westbrook XI 0 23,500,000 44,000,000 56,800,000 48,400,000

Value 2020 0 23,000,000 44,000,000 64,000,000 58,000,000

Value 2021 0 0 16,000,000 30,666,667 44,000,000

Total 240,880,350 326,155,531 376,716,702 397,340,382 348,472,002

22% 25% 26% 27% 24%

Opp

ortu

nist

ic



LaSalle Asia V 17,032,033 33,689,341 48,712,951 26,529,618 4,346,285




Lone Star Real Estate Fund V 9,693,219 34,692,008 26,375,146 5,072,694 21,676,095




Opportunistic 2020 0 24,750,000 49,000,000 72,750,000 71,250,000

Opportunistic 2021 0 0 16,500,000 32,666,667 48,500,000

Total 128,620,311 201,614,946 210,452,751 155,641,968 145,952,804

12% 15% 14% 10% 10%


% of Plan Assets 7.1% 8.6% 9.5% 9.7% 9.6% Plan Assets (0% Growth) 15,302,456,284 15,302,456,284 15,302,456,284 15,302,456,284 15,302,456,284

Over/Under Funded -139,518,486 91,250,715 228,013,163 258,509,558 238,078,253

Confidential |

Current & New RE Commitments at 7.00% Plan Growth


Dec-19 Mkt. Value Dec-20 Mkt. Value Dec-21 Mkt. Value Dec-22 Mkt. Value Dec-23 Mkt. Value C

ore


FPA Core Plus III 59,512,539 56,512,539 52,312,539 46,912,539 40,912,539


Heitman REIT 34,767,313 35,462,659 36,171,912 36,895,351 37,633,258



JP Morgan SPF 87,401,300 90,065,903 92,787,494 95,565,395 98,398,723





Core 2020 0 24,375,000 47,500,000 69,375,000 65,625,000

Core 2021 0 0 24,375,000 47,500,000 69,375,000

Total 715,177,356 787,676,741 865,040,213 929,723,710 967,849,950

66% 60% 60% 63% 66%

Val

ue





Bristol Value II 20,203,155 6,802,220 0 0 0








Westbrook X 42,920,127 44,789,847 23,917,223 2,637,223 0

Westbrook XI 0 23,500,000 44,000,000 56,800,000 48,400,000

Value 2020 0 23,000,000 44,000,000 64,000,000 58,000,000

Value 2021 0 0 16,000,000 30,666,667 44,000,000

Total 240,880,350 326,155,531 376,716,702 397,340,382 348,472,002

22% 25% 26% 27% 24%

Opp

ortu

nist

ic



LaSalle Asia V 17,032,033 33,689,341 48,712,951 26,529,618 4,346,285




Lone Star Real Estate Fund V 9,693,219 34,692,008 26,375,146 5,072,694 21,676,095




Opportunistic 2020 0 24,750,000 49,000,000 72,750,000 71,250,000

Opportunistic 2021 0 0 16,500,000 32,666,667 48,500,000

Total 128,620,311 201,614,946 210,452,751 155,641,968 145,952,804

12% 15% 14% 10% 10%


% of Plan Assets 7.1% 8.0% 8.3% 7.9% 7.3% Plan Assets (7.25% Growth) 15,302,456,284 16,373,628,224 17,519,782,200 18,746,166,954 20,058,398,640

Over/Under Funded -139,518,486 5,556,960 50,627,090 -16,987,295 -142,397,135

Confidential |

Risk/Return Allocation

17Theaboveproperty-typediversificationtables/chartsarebasedoncurrentportfoliowithnoproposedallocations.Proposedallocationdiversificationinformationisnotincludedasitisdifficulttopredictthenatureoffuturecommitments.

Risk/Return Strategy 2019 2020 2021 2022 2023 Core 66% 61% 63% 70% 77%Value 22% 24% 25% 26% 23%Opportunistic 12% 14% 12% 4% 0%Total 100% 100% 100% 100% 100%

66%

22%

12%

2019

Core

Value

Opportunistic

77%

23%

0%

2023

Core

Value

Opportunistic

Confidential |

Property Type Diversification

18

(1)IncludesMixed-Use,SelfStorage,OperatingCompanies,SeniorHousing,Healthcare,CMBSandPrivateDebt,LandandHealthcareTheaboveproperty-typediversificationtables/chartsarebasedoncurrentportfoliowithnoproposedallocations.Proposedallocationdiversificationinformationisnotincludedasitisdifficulttopredictthenatureoffuturecommitments.

Property Type 2019 2020 2021 2022 2023 Office 27% 26% 25% 25% 24%Retail 13% 12% 12% 12% 12%Residential 25% 25% 24% 23% 22%Industrial 17% 19% 21% 23% 24%Hotel 3% 3% 3% 3% 3%Other (1) 15% 15% 15% 15% 15%Total 100% 100% 100% 100% 100%

27%

13%

25%

17%

3%

15%

2019

Office

Retail

Residential

Industrial

Hotel

Other (1)

24%

12%

22%

24%

3%

15%

2023

Office

Retail

Residential

Industrial

Hotel

Other (1)

Confidential |

Geographic Diversification

19

1IncludesLatinAmerica,SouthAmericaandother(non-allocated).Theabovegeographicdiversificationtables/chartsarebasedoncurrentportfoliowithnoproposedallocations.Proposedallocationdiversificationinformationisnotincludedasitisdifficulttopredictthenatureoffuturecommitments.

Geographic Diversification 2019 2020 2021 2022 2023 East 29% 28% 28% 29% 29%West 32% 31% 31% 33% 34%Midwest 11% 11% 11% 11% 10%South 17% 18% 19% 21% 21%International 10% 12% 11% 6% 4%Other (1) 1% 0% 0% 0% 0%Total 100% 100% 100% 100% 100%

29%

32%

11%

17%

10% 1%

2019

East

West

Midwest

South

International

Other (1)

29%

34%

10%

21%

4% 0%

2023

East

West

Midwest

South

International

Other (1)

Confidential |

Other Portfolio Structure Diversification

20Theaboveproperty-typediversificationarebasedoncurrentportfoliowithnoproposedallocations.Proposedallocationdiversificationinformationisnotincludedasitisdifficulttopredictthenatureoffuturecommitments.

Non-Development/Development 2019 2020 2021 2022 2023 Development 6% 7% 8% 8% 8%Non-Develop 94% 93% 92% 92% 92%

Total 100% 100% 100% 100% 100%

Public vs. Private 2019 2020 2021 2022 2023 Public 10% 9% 8% 7% 7%Private 90% 91% 92% 93% 93%Total 100% 100% 100% 100% 100%

Debt vs. Equity (Portion of Capital Structure) 2019 2020 2021 2022 2023 Debt 13% 17% 15% 11% 7%Equity 87% 83% 85% 89% 93%Total 100% 100% 100% 100% 100%

Confidential |

Projected Changes in Portfolio Value

21Theaboveprojectedchangesinportfoliovaluearebasedoncurrentportfoliowithnoproposedallocations.Proposedallocationdiversificationinformationisnotincludedasitisdifficulttopredictthenatureoffuturecommitments.

In the absence of new commitments, the portfolio begins to decline in value starting in 2020.

Cash Flow out of/into Fund

2019-2020 Change 2020-2021 Change 2021-2022 Change 2022-2023 Change Return of Capital (68,586,244) (108,733,898) (152,139,120) (140,875,063) Capital Calls 166,787,971 86,917,190 49,409,433 - Total 98,201,728 (21,816,707) (102,729,687) (140,875,063)

(200,000,000)

(150,000,000)

(100,000,000)

(50,000,000)

-

50,000,000

100,000,000

150,000,000

200,000,000

2019-2020 Change 2020-2021 Change 2021-2022 Change 2022-2023 Change

Return of Capital Capital Calls Total

Retu

rn o

f Cap

ital

Cap

ital C

alls

Confidential |

Projected Changes in Portfolio Value

22Theaboveprojectedchangesinportfoliovaluearebasedoncurrentportfoliowithnoproposedallocationsandbasedon7.00%portfoliogrowthrate(actuarialreturn).

Financial Model Projected Allocation to Real Estate

Assuming No Additional Investment Commitments Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

Total Plan Assets 15,302,456,284 16,373,628,224 17,519,782,200 18,746,166,954 20,058,398,640

Real Estate Investments 1,084,678,017 1,243,322,218 1,254,834,666 1,165,747,728 1,083,848,661

Allocation to Real Estate 7.1% 7.6% 7.2% 6.2% 5.4%

8% Target Allocation to Real Estate 1,224,196,503 1,309,890,258 1,401,582,576 1,499,693,356 1,604,671,891

Remaining Commitments 327,360,546 238,707,177 18,934,056 (52,013,903) (54,347,237)

Over/(Under) Allocation - Gross (139,518,486) (66,568,040) (146,747,910) (333,945,629) (520,823,230)

Over/(Under) Allocation - Net 187,842,060 172,139,137 (127,813,854) (385,959,532) (575,170,467)

Confidential |

2020 Strategy Implementation/Action Plan

23

RISK/RETURN ACTION PLAN OBJECTIVES

Core $60-100 million

•  Selectively allocate to core-plus strategies. •  Consider alternative core strategies (e.g., stabilized non-traditional property types). •  Place continued emphasis on current income and preservation of capital/ downside

protection.

Value $60-100 million

•  Place continued emphasis on high income with potential for value creation. •  Focus on managers that acquire assets below market value and discounts to replacement

cost and subsequently “manufacture” class A and B assets. •  Consider debt portion of capital structure. •  Focus on top performing follow-on managers if their strategies are consistent and continue to

be a portfolio fit. •  Consider strategies that focus on high growth and demographically favorable markets,

including the U.S. South and specific European markets.

Opportunistic $60-100 million

•  Focus on investments that target distressed capital structures as opposed to distressed Focus on strategies that provide basis protection in order to minimize downside volatility.

•  Consider strategies that focus on high growth and demographically favorable markets, including the U.S. South and specific European markets.

•  Consider investments in secondary strategies. •  Focus on investments that are not generating returns solely through the use of financial

engineering.

GLOBAL REAL ESTATE MARKET CONDITIONS – 3Q 2019

|

Global Economic Expansion

25Source: Bloomberg As of September 30, 2018

FORECASTS

•  Government bond yields rose in the quarter due to positive economic data •  Italian bonds increased 40+ bps over deficit concerns •  Economic growth is occurring across all major economies, but the rate of growth is projected to slow in

countries like France, Germany, Japan and the United States

TOTAL INCOME PRODUCING REAL ESTATE

$57.0 TRILLION

GDP Unemployment 10YearGovYield 2018F 2019F 2020F 2018F 2019F 2020F 3Q18 2018F 2019F Australia 3.2% 2.8% 2.7% 5.4% 5.1% 5.0% 2.6% 2.8% 3.0%Brazil 1.3% 2.3% 2.5% 12.2% 11.4% 10.8% 10.1% 10.0% 10.4%Canada 2.1% 2.1% 1.7% 5.9% 5.8% 5.9% 2.2% 2.5% 2.9%China 6.6% 6.2% 6.0% 4.0% 4.0% 4.0% 3.4% 3.5% 3.4%France 1.6% 1.6% 1.6% 9.1% 8.7% 8.3% 0.7% 0.8% 1.2%Germany 1.8% 1.7% 1.5% 5.2% 4.9% 4.8% 0.3% 0.6% 1.0%India 7.5% 7.4% 7.5% -- -- -- 7.8% 8.0% 7.9%Indonesia 5.2% 5.1% 5.2% 5.4% 5.3% 5.2% 8.0% 8.1% 8.1%Italy 1.0% 1.0% 0.9% 10.5% 10.4% 10.2% 3.2% 3.4% 3.6%Japan 1.0% 1.1% 0.8% 2.4% 2.3% 2.3% 0.1% 0.1% 0.2%Mexico 2.1% 2.1% 2.2% 3.4% 3.5% -- 9.0% 8.5% 8.0%SouthAfrica 0.7% 1.7% 2.1% 27.3% 27.7% 27.6% 8.7% 9.1% 9.0%SouthKorea 2.7% 2.6% 2.5% 3.8% 3.8% 3.8% 2.2% 2.4% 2.7%Turkey 3.5% 0.8% 3.0% 11.0% 12.2% 11.9% 17.0% 20.7% 14.9%UnitedKingdom 1.3% 1.5% 1.6% 4.1% 4.0% 4.1% 1.8% 1.5% 2.0%UnitedStates 2.9% 2.6% 1.9% 3.9% 3.6% 3.7% 2.9% 3.2% 3.5%

|

Real Estate Transaction Volume: Global

26Source: Real Capital Analytics As of September 30, 2019 Current year data are year-to-date.

ANNUAL VOLUME

•  Global transaction volume was $226 billion in the quarter, up from $210 billion. •  Quarterly volume was down -7% from 3Q18 to 3Q19. •  EMEA and Asia volumes were each down -10% compared to the year ago, while the Americas were down 5%

over that period.

BY REGION

$1027

$446

$239

$414

$533$583

$726

$837

$975

$872$914

$999

$635

$

$200

$400

$600

$800

$1000

$1200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TransactionVo

lume($billion)

50%

34%

24%

34%41%

47% 46% 45%49% 50%

45%49% 53%

13%

19%

26%

26%21%

20% 20% 18%16% 17%

18%17%

17%

37%

47% 50%

39% 38%33% 35% 37% 36% 34% 37% 33% 30%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Americas Asia EMEA

|

Real Estate Transaction Volume: Americas


ANNUAL VOLUME

•  There was $130 billion of transaction volume in the Americas for the quarter. •  The annualized rate of $446 billion is approximately 90% of the 2018 volume. •  Year-over-year volume in Industrial transactions is up 78%.

BY PROPERTY TYPE

$516

$152

$57

$143

$220

$271

$332

$375

$474

$433$411

$493

$334

$

$100

$200

$300

$400

$500

$600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TransactionVo

lume($billion)

41% 42%33% 37%

32% 32% 32% 33% 31% 32% 32%26% 28%

10%13%

13%14%

15% 12% 13% 11% 14% 11% 15%18%

20%

14%14%

24% 17% 20%19% 20% 20%

16%15%

13% 15% 9%

18%

24%25%

22% 23% 29% 28% 27%30% 34% 34% 33% 36%

16%

7% 5%10% 9% 7% 8% 9% 10% 8% 6% 8% 6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Office Industrial Retail Apartment Hotel

|

Real Estate Transaction Volume: EMEA


ANNUAL VOLUME BY PROPERTY TYPE

•  There was $66 billion of transaction volume in EMEA for the quarter. •  The annualized rate of $256 billion is approximately 77% of the 2018 volume. •  Year-over-year volume in Industrial transactions is down – 22%.

50%44% 47%

40%44% 44% 43% 45% 43% 43% 43% 43% 45%

10%

11% 10%

10%10% 10% 10%

11%10% 11%

15% 12% 11%

26%29% 28%

30%29%

25% 24%24%

25% 23% 19%18% 14%

6% 9% 9%11%

10%14% 16% 12% 13% 14% 16%

19%21%

8% 7% 7% 9% 7% 7% 7% 8% 9% 8% 7% 8% 9%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


$381

$210

$118

$162

$200 $193

$250

$308

$348

$293

$339 $334

$192

$

$50

$100

$150

$200

$250

$300

$350

$400

$450

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TransactionVo

lume($billion)

|

Real Estate Transaction Volume: Asia


ANNUAL VOLUME BY PROPERTY TYPE

•  There was $31 billion of transaction volume in Asia for the quarter. •  The annualized rate of $145 billion is approximately 84% of the 2018 volume. •  The Office sector transaction volume is down -19% year-over-year.

$130

$83

$63

$109$113

$119

$143

$154 $153$146

$163

$172

$109

$

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TransactionVo

lume($billion)

41% 42%33% 37%

32% 32% 32% 33% 31% 32% 32%26% 28%

10%13%

13%14%

15% 12% 13% 11% 14% 11% 15%18%

20%

14%14%

24% 17% 20%19% 20% 20%

16%15%

13% 15% 9%

18%

24%25%

22% 23% 29% 28% 27%30% 34% 34% 33% 36%

16%

7% 5%10% 9% 7% 8% 9% 10% 8% 6% 8% 6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


|

Comparing Yield Spreads

30Cap Rate Spreads are Office cap rates minus the 10 year government debt from each respective country Source: Bloomberg, Real Capital Analytics As of September 30, 2019

•  Negative rates in Europe and Japan have led to wide yield spreads in Tokyo, Paris and Frankfurt. •  US yield spreads rose 14 bps as rates fell. •  Hong Kong Office cap rates have widened 75 bps from 3Q19 amid political unrest, raising the spread to 1.00%.


$57.0 TRILLION

CAP RATE SPREAD: PAST 3 YEARS CAP RATE SPREAD: 3Q19

3.64%

4.37%

1.00%

3.45%

2.61%

4.17%

5.54%5.72%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Sydney Tokyo HongKong Toronto

NewYork London Paris Frankfurt

5.72%5.54%

4.37%4.17%

3.64%3.45%

2.61%

1.00%

Frankfurt Paris Tokyo London Sydney Toronto NewYork HongKong

|

Global Fundraising

31Source: Preqin As of November 2019

•  There were 243 funds closed through November 2019, which is on pace to fall well below 2018 levels. •  $140 billion was raised through November, which is also on pace to exceed 2018 levels.

FUNDS CLOSED BY YEAR

1923

15 16

48

80

105

141148

5360

78

92

111

121

145

134 136

147140

0

50

100

150

200

250

300

350

400

450

500

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ThruNov2019

Num

bero

fFun

dsClosed

CapitalRaisedAn

nually($

Bln)

CapitalRaised FundsClosed

|

Dry Powder

32Source: Preqin As of November 2019

•  Dry powder levels have declined in all major regions. •  Value Add and Debt strategies have seen a drop in dry powder in 2019.


$57.0 TRILLION

BY REGION BY STRATEGY

207

84.7

34.3

0

50

100

150

200

250

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

ThruNov2019

NORTHAMERICA EUROPE ASIA

86.3

137.2

53.7

0

20

40

60

80

100

120

140

160

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

ThruNov2019

VALUEADDED OPPORTUNISTIC DEBT

|

Cap Rate Spread

33Source: NCREIF, Bloomberg As of September 30, 2019

NPI CAP RATE & 10 YEAR US TREASURY BOND YIELDS

•  NCREIF cap rates have been in a saw tooth motion of up one quarter and down the next since 1Q17. •  US interest rates fell 34 bps in the quarter, and are down 140 bps since the end of 3Q18. •  Cap rate spreads widened to 2.66%, 16 basis points above the 20 year average spread.


$57.0 TRILLION

2.66%

4.32%

1.66%

2.50%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Dec-99

Jun-00

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Spread

Rates

Spread(Right) CapRate(Left) 10YrUST(Left) 20YrAvgSpread(Right)

|

Core Contributions & Redemptions

34Source: StepStone Real Estate manager surveys As of September 30, 2019

ODCE FUND QUEUES ($ BILLIONS)

•  Redemption queues grew after lagging contribution queues last quarter •  Redemption queues are at their cycle high •  Of the 25 ODCE funds, 13 have contribution queues and 4 have redemption queues •  Morgan Stanley Prime has the largest contribution queue ($1.4 bil., 5.4% of NAV) and UBS Trumbull Property

has the largest redemption queue ($3.8 bil., 22.0% of NAV).


$57.0 TRILLION

$1.5

$3.1

$4.2

$5.6

$6.2

$7.4

$7.7

$6.5

$7.5

$8.2

$6.7

$6.9

$7.0

$6.8

$8.4

$8.3

$10.

6

$10.

3

$9.9

$10.

9

$10.

8

$9.9

$10.

0

$10.

7

$8.9

$7.0

$5.1

$5.0

$6.1

$7.1

$6.5

$7.5

$6.2

$6.7

$4.7

$3.8

$3.8

$3.1

$4.5

$3.7

($6.

2)

($4.

9)

($2.

4)

($.2

)

($.3

)

($.2

)

($.3

)

($.3

)

($.4

)

($.6

)

($.2

)

($.1

)

($.1

)

($.2

)

($.3

)

($.2

)

($.1

)

($.1

)

($.0

)

($.1

)

($.0

)

($.1

)

($.1

)

($.2

)

($.2

)

($.8

)

($1.

7)

($1.

7)

($1.

9)

($1.

7) ($

.5)

($.4

)

($.3

)

($.7

)

($1.

5)

($1.

8)

($2.

3)

($3.

8)

($3.

7)

($4.

4)

$211.5

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Dec

-16

Mar

-17

Jun-

17

Sep-

17

Dec

-17

Mar

-18

Jun-

18

Sep-

18

Dec

-18

Mar

-19

Jun-

19

Sep-

19

Contribution Queue Redemption Queue Total Net Assets in Core Funds

|

NCREIF Trends

35Source: NCREIF. Data reflect the prior 40 quarters. As of September 30, 2019


$57.0 TRILLION

4 QUARTER NOI GROWTH

CAP RATE VACANCY

•  Vacancy is at a 10-year low for NPI, driven by a low in Office.

•  Industrial NOI growth has been above 5% for 21 of the past 22 quarters.

•  Cap rates ticked up slightly in all property types bringing NPI cap rates down 5 bps to 4.32%.

4.3% 4.2%

4.4% 4.2%

4.6%

4%

5%

6%

7%

8%

NPI Apartment Industrial Office Retail

Cap

Rate

Average Current Prior 4 Qtrs

6.2% 6.8% 8.0%

7.0%

3.5%

-10% -8% -6% -4% -2% 0% 2% 4% 6% 8%

10% 12% 14%


4 Q

uart

er N

OI G

row

th R

ate

5.8% 5.8%

3.4%

9.6%

7.1%

2%

4%

6%

8%

10%

12%

14%

16%


Vaca

ncy

|

Change in Valuation

36Source: Moody’s CPPI. The “Major Markets” are six gateway metropolitan areas: Boston, Chicago, Los Angeles, New York, San Francisco and Washington D.C. As of September 30, 2019

MAJOR VS NON MAJOR MARKETS

•  Major markets (+1.8%) lagged non-major markets (+2.2%). •  Apartments had the largest value change for the quarter (2.9%), slightly edging out Industrials for the 3-years. •  Industrials have the largest 1-year gain (12.7%), followed by Apartments (8.2%).

PROPERTY TYPE

120.5

122.6

95

100

105

110

115

120

125

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Inde

xVa

lue

MajorMarkets

NonMajorMarkets

131.1

130.6

116.6

106.0

95

100

105

110

115

120

125

130

135

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Inde

xVa

lue

ApartmentIndustrialOfficeRetail

|

Periodic Chart of Returns

37Note: 2019 data reflects the trailing 12 months Source: NCREIF As of September 30, 2019

•  Industrial has been best performing sector since 2016, after being second worst in 2010 •  Suburban Office has outperformed CBD Office since 2016


$57.0 TRILLION

NCREIF ANNUAL RETURNS

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019HighRiseApart.

GardenApart.

SuperReg.Mall

SuperReg.Mall

SuperReg.Mall

SuperReg.Mall Industrial Industrial Industrial Industrial

19.7% 15.6% 14.1% 14.2% 15.2% 16.8% 12.3% 13.1% 14.3% 13.6%

GardenApart.

CBDOffice

NghbrhdRetail

RegionalMall

NghbrhdRetail

RegionalMall

SuperReg.Mall

GardenApart.

GardenApart.

GardenApart.

16.8% 15.4% 11.4% 13.6% 13.4% 16.4% 10.3% 8.9% 8.9% 8.0%

CBDOffice

HighRiseApart.

HighRiseApart. Industrial Industrial

NghbrhdRetail

GardenApart. NCREIF

SubOffice

SubOffice

16.1% 14.9% 11.1% 12.3% 13.4% 15.0% 9.5% 7.0% 7.4% 7.5%

SuperReg.Mall

NghbrhdRetail

GardenApart.

NghbrhdRetail

RegionalMall Industrial

RegionalMall

NghbrhdRetail NCREIF NCREIF

16.0% 14.7% 10.9% 11.5% 13.4% 14.9% 9.5% 6.5% 6.7% 6.2%

RegionalMall

SuperReg.Mall Industrial NCREIF

SubOffice

GardenApart.

NghbrhdRetail

SubOffice

CBDOffice

CBDOffice

14.5% 14.6% 10.7% 11.0% 12.3% 14.6% 9.2% 6.3% 6.5% 5.9%

NCREIF Industrial NCREIFGardenApart. NCREIF NCREIF NCREIF

SuperReg.Mall

NghbrhdRetail

NghbrhdRetail

13.1% 14.6% 10.5% 10.7% 11.8% 13.3% 8.0% 5.9% 5.5% 4.6%

NghbrhdRetail NCREIF

RegionalMall

HighRiseApart.

GardenApart.

CBDOffice

SubOffice

CBDOffice

HighRiseApart.

HighRiseApart.

9.9% 14.3% 10.4% 10.2% 11.3% 13.1% 6.6% 5.8% 4.7% 4.2%

IndustrialRegionalMall

CBDOffice

CBDOffice

CBDOffice

SubOffice

HighRiseApart.

HighRiseApart.

SuperReg.Mall

SuperReg.Mall

9.4% 13.3% 10.4% 10.0% 10.9% 11.6% 6.1% 4.7% 0.6% 0.6%

SubOffice

SubOffice

SubOffice

SubOffice

HighRiseApart.

HighRiseApart.

CBDOffice

RegionalMall

RegionalMall

RegionalMall

8.8% 12.4% 8.6% 9.7% 9.6% 10.6% 5.9% 4.4% -1.5% -0.3%

|

Office Fundamentals – US Metro

38

•  Completions in 2019 are trending slightly below 2018 levels and below 20 year average. •  Rents have grown for 8 straight years, but rate of growth about of half of the 2015 levels.


$57.0 TRILLION

NEW CONSTRUCTION EFFECTIVE RENTS

Source: Reis. 2019 – 2023 Estimates provided by REIS. As of September 30, 2019

20

40

60

80

100

120

140

160

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

Completions(M

il.Sq.Ft.)

Completions 10YrAvgComp. 20YrAvgComp

-10%

-5%

0%

5%

10%

15%

$18

$20

$22

$24

$26

$28

$30

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

RentChange(YOY)

EffectiveRe

nt

EffectiveRent RentChg

|

Office Fundamentals – Class A vs Class BC

39Source: Reis. Current year information reflects the last four quarters. As of September 30, 2019

ASKING RENTS SUPPLY & DEMAND


•  Class A Completions on pace to lag 2018 and 2017

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20

40

60

80

100

120

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

il.Sq.Ft.)

ClassA

Completions 15YrAvg Vacancy%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

$28

$30

$32

$34

$36

$38

$40

$42

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

ClassA

AskingRent RentChg

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

5

10

15

20

25

30

35

40

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

ill.Sq.Ft.)

ClassBC


-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

$18

$20

$22

$24

$26

$28

$30

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

ClassBC

AskingRent RentChg

|

Apartment Fundamentals – US Metro

40Source: Reis. 2019 – 2023 Estimates provided by REIS. As of September 30, 2019

•  Projected completions for 2019 have increased in 3Q •  Future completions estimated to decline below the 10 year average. •  Rents continue to grow, but rate of growth has fallen for five straight quarters.


$57.0 TRILLION

EFFECTIVE RENTS NEW CONSTRUCTION

50

100

150

200

250

300

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

Completions(T

hous.U

nits)

Completions 10YrAvgComp. 20YrAvgComp

-4%

-2%

0%

2%

4%

6%

8%

10%

$750

$850

$950

$1,050

$1,150

$1,250

$1,350

$1,450

$1,550

$1,650

$1,750

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

RentChange(YOY)

EffectiveRe

nt


|

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

-

50,000

100,000

150,000

200,000

250,000

300,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(U

nits)

ClassA


-4%-3%-2%-1%0%1%2%3%4%5%6%7%

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

ClassA


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(U

nits)

ClassBC


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

$700

$800

$900

$1,000

$1,100

$1,200

$1,300

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

ClassBC


Apartment Fundamentals – Class A vs Class BC

41Source: Reis. Current year information reflects the last four quarters. As of September 30, 2019



•  Vacancies are moving down in Class A and Class BC •  Rent growth is falling in A and BC

|

Industrial Fundamentals – US Metro

42Source: Reis. 2019 – 2023 Estimates provided by REIS. As of September 30, 2019

•  Completions are projected to decline over coming years. •  Industrial rent growth is projected to accelerate in 2020.


$57.0 TRILLION

EFFECTIVE RENTS NEW CONSTRUCTION

0%

2%

4%

6%

8%

10%

12%

14%

16%

20

40

60

80

100

120

140

160

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

Vacancy

Completions(M

il.Sq.Ft.)

Completions 9YrAvgComp. Vacancy%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

$4.00

$4.20

$4.40

$4.60

$4.80

$5.00

$5.20

$5.40

$5.60

$5.80

$6.00

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019-E

2020-E

2021-E

2022-E

2023-E

RentChange(YOY)

EffectiveRe

nt


|

0%

2%

4%

6%

8%

10%

12%

5

10

15

20

25

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

il.Sq.Ft.)

Community


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

$16

$17

$18

$19

$20

$21

$22

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

Community

AskingRent RentChg

0%

2%

4%

6%

8%

10%

12%

14%

2

4

6

8

10

12

14

16

18

20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

ill.Sq.Ft.)

Neighborhood


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

$14

$15

$16

$17

$18

$19

$20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

Neighborhood

AskingRent RentChg

Retail Fundamentals – Community vs Neighborhood*

43Source: Reis. Current year information reflects the last four quarters. *- ICSC defines “Community” centers as typically having of 15-40 stores consisting of discount store, supermarket, drug, large-specialty discount (toys, books, electronics, home improvement/furnishings or sporting goods, etc.). ICSC defines “Neighborhood” centers as typically having of 5-20 stores consisting mostly of a supermarket. As of September 30, 2019



•  Both Community and Neighborhood retail centers have vacancy falling in 2019

|

0%

2%

4%

6%

8%

10%

12%

5

10

15

20

25

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

il.Sq.Ft.)

Community


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

$16

$17

$18

$19

$20

$21

$22

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

Community

AskingRent RentChg

0%

2%

4%

6%

8%

10%

12%

14%

2

4

6

8

10

12

14

16

18

20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vacancy

Completions(M

ill.Sq.Ft.)

Neighborhood


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

$14

$15

$16

$17

$18

$19

$20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

RentChange(YOY)

AskingRen

t

Neighborhood

AskingRent RentChg

Retail Fundamentals – Community vs Neighborhood*

44Source: Reis. Current year information reflects the last four quarters. *- ICSC defines “Community” centers as typically having of 15-40 stores consisting of discount store, supermarket, drug, large-specialty discount (toys, books, electronics, home improvement/furnishings or sporting goods, etc.). ICSC defines “Neighborhood” centers as typically having of 5-20 stores consisting mostly of a supermarket. As of September 30, 2019



•  Both Community and Neighborhood retail centers have vacancy falling in 2019

|

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

04Q1

04Q4

05Q3

06Q2

07Q1

07Q4

08Q3

09Q2

10Q1

10Q4

11Q3

12Q2

13Q1

13Q4

14Q3

15Q2

16Q1

16Q4

17Q3

18Q2

10YrTreas. CapRate

144bps

368bps

-

50

100

150

200

250

300

350

400

450

500

0%

1%

2%

3%

4%

5%

6%

7%

8%

04Q1

04Q4

05Q3

06Q2

07Q1

07Q4

08Q3

09Q2

10Q1

10Q4

11Q3

12Q2

13Q1

13Q4

14Q3

15Q2

16Q1

16Q4

17Q3

18Q2

Spread(b

ps)

Rate(%

)

MortgageRate MortgageSpread

11%

12%

13%

14%

15%

16%

17%

18%

04Q1

04Q4

05Q3

06Q2

07Q1

07Q4

08Q3

09Q2

10Q1

10Q4

11Q3

12Q2

13Q1

13Q4

14Q3

15Q2

16Q1

16Q4

17Q3

18Q2

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

04Q1

04Q4

05Q3

06Q2

07Q1

07Q4

08Q3

09Q2

10Q1

10Q4

11Q3

12Q2

13Q1

13Q4

14Q3

15Q2

16Q1

16Q4

17Q3

18Q2

Real Estate Financing

45Source: Real Capital Analytics As of September 30, 2018

MORTGAGE RATE CAP RATES

DEBT COVERAGE MORTGAGE CONSTANT

•  Mortgage rates have declined since the GFC but are now increasing in lock step with the yield on the 10 year UST

|

•  Europeanrealestatetransactionvolumesdeclinedbyamoderate4.6%forthefullyear2018,thoughremainedatelevatedpre-GFClevels

•  Thedeclinehasbeenmorepronouncedinthefirstthreequartersof2019,withvolumesfallingapproximately7.0%year-on-year

•  Therehavebeennonoticeablechangesininvestorcomposition,withdomesticinvestorsaccountingforapproximately50%ofmarketvolumes

•  Similarly,individualassettradesaccountedforapproximately65%ofvolumesinthefirstthreequartersof2019,onlyslightlyabovethesameperiodin2018

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Individual Asset Portfolio Entity

% TRANSACTION VOLUMES BY TYPE EUROPEAN TRANSACTION VOLUME (EUR BILLION)

European Investment Activity I

46Source:RCA,3Q2019

131

87 57

83 89 92 116

134 166 163 161 156

0

103 100

107

45

17

28 28 32

33

40

65 62 67 76

0

48 43

66

27

14

20 32

37

52

71

100

65

100 81

0

52 47

0

50

100

150

200

250

300

350

Domestic Continental Global

|

European Investment Activity II

47

% TRANSACTION VOLUMES BY SECTOR % TRANSACTION VOLUMES BY COUNTRY

•  TheUKlostapproximately500bpsofEuropeaninvestmentmarketshareinthefirstthreequartersof2019,withBrexituncertaintyweighingonvolumes,whichinabsolutetermsfell27%

•  AcrossEurope,theretailsectorhasgainedsomeshareinthefirstthreequartersof2019,accountingfor14%ofvolumesyear-to-dateascomparedto12%overthesameperiodlastyear.However,retail’sshareoftotalvolumesremainswellbelowits10yearaverageofapproximately23%.

26% 20%

31% 30% 28% 29% 32% 31% 31% 22% 23% 22% 25%

20%

24%

15%

15% 16% 21% 24%

23% 22% 23%

22% 22% 24% 23%

22%

11%

9%

12% 14% 14% 13% 10% 11% 11%

12% 12% 12% 10%

12%

7%

8%

7% 5% 4%

4% 5% 6% 6%

8% 8% 9% 10% 9%

10%

15%

8% 12% 11%

13% 9% 10% 10%

12% 11% 9% 10% 12%

10%

14% 10%

8% 6% 3% 5% 8% 8%

10% 11% 11% 11% 12%

9% 15% 8%

10% 11% 8% 10% 6% 6% 7% 7% 6% 6% 6%

3% 4% 9%

4% 4% 5% 5% 6% 5% 7% 6% 6% 5% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

United Kindom Germany France Benelux

Nordics Southern Europe CEE Other

46% 40% 44%

38% 42% 41% 40% 43% 40% 40% 40% 40% 40% 41%

10%

10% 9%

10% 10% 9% 10%

11% 9% 11% 14% 12% 11% 11%

23% 26%

26% 28%

27% 24% 22%

22% 24% 22% 18%

16% 17% 13%

6% 8%

9% 11% 9% 14% 15% 12% 13% 14% 15% 18% 17% 19%

7% 6%

6% 8% 7% 6% 6% 7% 8% 7% 7% 7% 8% 8%

8% 11% 6% 5% 5% 6% 6% 5% 5% 6% 7% 7% 7% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Office Industrial Retail Apartment Hotel Other

Source:RCA,3Q2019

|

PRIME OFFICE VACANCY RATES – CURRENT VS 10 YEAR HIGH-TO-LOW RANGE

48

Source:KnightFrank,3Q2019

Office Market Fundamentals

•  Currentvacancysitsatthelowerendofthe10-yearrangeinmostEuropeanmarkets

0%

5%

10%

15%

20%

25%

10-YrHightoLowVacancy Sep-19

|

2.5% 2.8% 2.8%

3.0% 3.0% 3.0% 3.0% 3.1%

3.5% 3.8% 3.8% 3.8% 3.8% 3.8%

4.0% 4.0% 4.0% 4.0% 4.3%

4.5% 4.5%

5.8%

5.4%

3.2%

3.9% 4.1% 4.2%

4.7% 4.8% 5.1%

5.7%

6.6% 6.6% 6.9% 6.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Prime Yields Average Transaction Yields

EUROPEAN PRIME AND ‘AVERAGE TRANSACTION’ YIELDS

Office Sector Pricing

Source: Knight Frank, RCA 3Q 2019

Prime yields in major markets remain at historically low levels reflecting strong investor demand for stabilized income and the low interest rate environment

49

|


Industrial & Logistics Sector Pricing

Low yields in London reflect very limited supply and the sector is sought by investors seeking the available yield premia over office and retail, together with healthy fundamentals

3.9% 4.0% 4.0% 4.1% 4.3% 4.5% 4.5%

5.0% 5.0% 5.0% 5.3% 5.3% 5.3% 5.3% 5.3%

5.5% 5.8%

6.0% 6.3%

6.5%

5.9%

6.9%

3.9%

5.0% 5.1% 5.4%

5.7% 5.9%

6.5% 6.8%

7.3% 7.7%

8.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Prime Yields Average Transaction Yields

Source: Knight Frank, RCA 3Q 2019

50

|

2.3% 2.5% 2.5%

2.9% 2.9% 3.0% 3.0% 3.0% 3.3%

3.4% 3.5% 3.5% 3.5% 3.6% 3.8% 3.8% 3.8% 3.8%

4.0% 4.0%

4.8%

6.2% 5.9%

3.9%

4.7% 4.9%

5.5% 5.6%

6.0% 6.0% 6.3% 6.3% 6.5%

7.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%


Retail Sector Pricing

European Prime Yield – High Street Assets Average Transaction Yield – All Retail Assets

There is much greater convergence in prime high street yields when contrasted with other property types

Source: Knight Frank, RCA 1Q 2019 51

|

EUROPEAN PRIME LIVING SECTOR YIELDS

Living Sector Pricing

52Source:Savills,KnightFrank,RCA,3Q2019

3.7%

4.0% 4.0%

4.3% 4.3%

4.5%

4.8% 4.8%

5.0%

3.5% 3.5%

4.0% 4.2% 4.2%

5.0%

2.1%

2.6% 2.8%

3.0% 3.0%

3.5% 3.5%

3.8%

4.0%

4.4%

4.1%

3.1%

0%

1%

2%

3%

4%

5%

6%

Prime Multifamily Yield

Prime Senior Housing Yield

Prime Student Housing Yield

Average

•  Livingsectoryieldsarewellpositionedrelativeto‘traditional’commercialpropertytypes,especiallywhenconsideringthedemographictrendsunderlyingtheirgenerallylessvolatileincomestreams

•  Outsidetheprimedefinitionfurtheryieldenhancementprovidesattractiverisk-adjustedreturnse.g.‘Core’UKseniorhousingprovidesfora5.5%incomeyieldaccordingtoKnightFranksvs4%forprime

|

LOCAL CURRENCY TOTAL RETURNS (ORDERED BY ONE-YEAR ROLLING RETURNS)

European Real Estate Fund Performance

53Source:INREV,3Q2019Note,2Q19returnshavenotbeenannualized

2.6%

3.7%

1.8% 1.8% 1.5%0.9% 1.3%

0.5% 0.2%

-1.4%-2.3%

12.9%

8.4% 8.4% 8.2%

7.0% 7.0%6.4%

4.4%

2.6%

0.9%

-0.1%

14.8%

9.8%8.8% 9.2%

7.8%

10.0%

8.1%

2.5%

5.3%

9.4%

4.0%

11% 28% 35% 24% 24% 35% 16% 42% 7% 34% 37%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-5%

0%

5%

10%

15%

Netherlands France Germany ContinentalEurope

Pan-European Nordic WesternEurope

CEE UK SouthernEurope

Italy

TotalReturn(%

)

2Q19(un-annualized) 1Year 3Year CurrentLTV

LTV

•  Onaone-yearrollingbasis,fundsfocusedonNetherlands,FranceandGermanyhaveoutperformedfundsfocusedonContinentalEurope,albeitFranceandGermanyathigherleveragelevels

•  UK-focusedfundscontinuetounderperformdrivenbyBrexit-leduncertainty,withItalian-focusedfundsdraggingdownSouthernEuropeanperformanceowingtopoliticalandfinancialvolatility

Confidential | 54As of June 30, 2019

Risks and Other Considerations

Risks Associated with Investments. Identifying attractive investment opportunities and the right underlying fund managers is difficult and involves a high degree of uncertainty. There is no assurance that the investments will be profitable and there is a substantial risk that losses and expenses will exceed income and gains.

Restrictions on Transfer and Withdrawal; Illiquidity of Interests; Interests Not Registered. The investment is highly illiquid and subject to transfer restrictions and should only be acquired by an investor able to commit its funds for a significant period of time and to bear the risk inherent in such investment, with no certainty of return. Interests in the investment have not been and will not be registered under the laws of any jurisdiction. Investment has not been recommended by any securities commission or regulatory authority. Furthermore, the aforementioned authorities have not confirmed the accuracy or determined the adequacy of this document.

Limited Diversification of Investments. The investment opportunity does not have fixed guidelines for diversification and may make a limited number of investments.

Reliance on Third Parties. StepStone will require, and rely upon, the services of a variety of third parties, including but not limited to attorneys, accountants, brokers, custodians, consultants and other agents and failure by any of these third parties to perform their duties could have a material adverse effect on the investment.

Reliance on Managers. The investment will be highly dependent on the capabilities of the managers.

Risk Associated with Portfolio Companies. The environment in which the investors directly or indirectly invest will sometimes involve a high degree of business and financial risk. StepStone generally will not seek control over the management of the portfolio companies in which investments are made, and the success of each investment generally will depend on the ability and success of the management of the portfolio company.

Taxation. An investment involves numerous tax risks. Please consult with your independent tax advisor.

Conflicts of Interest. Conflicts of interest may arise between StepStone and investors. Certain potential conflicts of interest are described below; however, they are by no means exhaustive. There can be no assurance that any particular conflict of interest will be resolved in favor of an investor.

Allocation of Investment Opportunities. StepStone currently makes investments, and in the future will make investments, for separate accounts having overlapping investment objectives. In making investments for separate accounts, these accounts may be in competition for investment opportunities.

Existing Relationships. StepStone and its principals have long-term relationships with many private equity managers. StepStone clients may seek to invest in the pooled investment vehicles and/or the portfolio companies managed by those managers.

Carried Interest. The entitlement of StepStone and the underlying portfolio fund managers to carried interest over and above their basic management fees could create an incentive for StepStone and the portfolio fund managers to make investments that are riskier or more speculative than would otherwise be the case.

Other Activities. Employees of StepStone are not required to devote all of their time to the investment and may spend a substantial portion of their time on matters other than the investment.

Material, Non-Public Information. From time to time, StepStone may come into possession of material, non-public information that would limit their ability to buy and sell investments.

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Global Offices

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BEIJING Kerry Centre, South Tower, 16th Floor 1 Guang Hua Road Chaoyang District Beijing, China 100020 +86.10.8529.8784

LA JOLLA 4275 Executive Square, Suite 500 La Jolla, CA 92037 +1.858.558.9700

PERTH Level 24, Allendale Square 77 St George’s Terrace Perth, WA 6000, Australia +61.410.715.656

SYDNEY Level 43 Governor Phillip Tower One Farrer Place Sydney NSW 2000 Australia +61.404.343.774

CLEVELAND 127 Public Square, Suite 5050 Cleveland, Ohio 44114 +1.216.522.0330

LONDON 2 St James’s Market London SW1Y 4AH +44.207.647.7550

SAN FRANCISCO Two Embarcadero Center, Suite 480 San Francisco, CA 94111 +1.415.318.7980

TOKYO Level 1 Yusen Building 2-3-2 Marunouchi Chiyoda-ku, Tokyo 100-0005, Japan +81.3.5533.8558

DUBLIN Newmount House 22-24 Lower Mount Street Dublin 2, Ireland +353.1.536.1400

LUXEMBOURG 124 Boulevard de la Pétrusse L-2330 Luxembourg

SÃO PAULO Rua Samuel Morse 120 Cj. 83 04576-060 São Paulo SP, Brazil +55.11.5105.1510

TORONTO 130 King Street West, Suite 1205 Exchange Tower Toronto, ON Canada M5X 1A9

HONG KONG Level 15 Nexxus Building 41 Connaught Road Central Central, Hong Kong +852.3757.9898

NEW YORK 885 Third Avenue, 17th Floor New York, NY 10022 +1.212.351.6100

SEOUL Three IFC Level 43 10 Gukjegeumyung-ro Yeoungdeungpo-gu, Seoul 07326 Korea +82.2.6138.3474

ZURICH Klausstrasse 4 CH-8008 Zurich, Switzerland +41.44.226.52.52

15. Presentation by StepStone Group – 2020 Real Estate ... · 26/2/2020 · The Plan’s...

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