HomeMy WebLinkAbout2007 03 29 Handout Given By Bogdahn Consulting for Agenda Item 301March 29, 2007
Handouts given to Board of Trustee
members from Bogdahn Consulting, LLC
at the March 29, 2007 Special Meeting
regarding Agenda Item 3 O 1.
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Table of Contents
Search Overview Page: 2
Definitions Pages: 3-4
Analysis Pages: 5-19
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Search Overview
As a part of our search fora "core" real estate manager, Bogdahn Consulting posted the following announcement on Public
Pensions Online:
The City of Winter Springs Employees Retirement System (Florida) RFP
The City of Winter Springs Employees Retirement System (Florida) is searching for a institutional, managed direct Real Estate
product to fill a mandate totaling approximately $1 million. Response inquiries should be addressed to Bogdahn Consulting, LLC.
Attention: Rob Little (robl@bogdahnconsulting.com). Completed responses should be received by close of business March 16, 2007.
Four firms responded to announcement. Only two of the firms (American Realty and Intercontinental Real Estate
Corporation) proposed adirect-investment, core real estate strategy; however, Intercontinental's U.S. Real Estate
Investment Fund's (US REIF) inception date was July 2006, it only has two assets, and does not have any performance
history. BCOM, Inc. and Naples Asset Management Company, LLC also responded to the RFP, but each firm proposed a
mezzanine loan (mortgage) strategy and BCOM also proposed a "developmental" real estate strategy, which are not what
we are recommending at this time.
In addition to posting the search, Bogdahn also screened the PSN REIT/Real Estate Universe for strategies that would
meet the requirements of the proposed mandate. As of 12/31/06, there were only 17 core, non-REIT real estate strategies
in the universe that consisted of 109 investment products. American Realty's core product was in the database. Based on
our review of the 17 products in the universe, ASB Capital Management was the only firm that did not respond to the RFP
that would accept the Plan's $1 million mandate size .
BlackRock did not populate the Granite Property Fund in the PSN universe, but we knew they had adirect-investment,
core real estate strategy and they acknowledged they would accept a $1 million mandate.
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American Realt .10%~ $11,000.UU; ~~ ,uuu
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ASB Capital Management ___-______ ~ ~ ~
1.25%~ $12,500.001
$1,000
BlackRock 1.10%~ $11,000.00 $1,000
Bogdahn Consulting, LLC.
Delaware LLC
Ma land Trust
commingled Private REIT
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Index Definitions
NCREIF Property Index: The NCREIF Property Index is a quarterly time series
composite total rate of return measure of investment performance of a very
large pool of individual commercial real estate properties acquired in the
private market for investment purposes only.
NCREIF ODCE: Short for NCREIF Fund Index -Open End Diversified Core
Equity and is the first of the NCREIF Fund Database products and is an index
of investment returns reporting on both a historical and current basis the
results of 26 open-end commingled funds pursuing a core investment
strategy, some of which have performance histories dating back to the 1970s.
The NFI-ODCE Index is capitalization-weighted and is reported gross of fees.
Measurement is time-weighted. NCREIF will calculate the overall aggregated
Index return.
Source: National Council of Real Estate Investment Fiduciaries (NCREIF)
Bogdahn Consulting, LLC. 3
Institutional Managed Real Estate: Product Option Investment Profiles
Security of Income
C
C7
Growth Oriented
Qpportunisti
value-added
Around Situation
'I -Some Lease-up Risk
REITS ~ -Rising i'darkets
-Redevelopment or Expansion Potential
f -Attractive Returns - 1Z.2°.~~ over Last 20 Years
Core --ligh C-ash Dividend - 213 of Tctal Return
-maw Correlation to Cther Assek Classes
Income -Broad Diversification b}~ Property Type and Geography
-tfulti-tenant
,Credit) -Strang PAarkets
-High Quality Construction
Corporate bonds
-Single Tenant Long-teem Leases (investment grade a•edit tenants)
1Q Year TrE~lsll ry -Return reflective of corporate risk Premium
Risklessl
Rate
-Guaranteed neturr ar investment with U.S. government guarantee of repayment
Risk
Source: ING Clarion Partners
Bogdahn Consulting, LLC. 4
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American Real#v: Core Realty
- Location ---Glendale, California
- Corporate History --- American Realty Advisors was founded over 18 years ago.
- Firm Assets --- The firm manages over $4.0 billion in institutional real estate assets.
- Firm Management --- Domestic real estate focus. Senior management owns 100% of the firm. In addition to the
headquarters in Glendale, the firm also has an office in Atlanta, GA and Santa Fe, NM.
- Strategy Process --- American Realty Advisors focuses on quality core investment properties that have the
following characteristics: stable income, low risk, long-term appreciation potential. The combination of targeting
properties with high current cash flow and acquiring properties at prices below their estimated intrinsic value
results in arisk-controlled investment portfolio. Leverage is targeted to be between 20% to 40%.
The income component has averaged 5.4% per year for the three-year period ended 12/31 /06.
Their most recent allocations to property types were:
Office 34%
Industrial 29
Multi-family 22
Retail 15
12.7% of the properties are in the Mid West, 32.1 % in the West, 29% in the East, and 26.2% in the South.
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ASB Capital: Open-End Commingled Real Estate Fund
- Location --- Bethesda, Maryland
Corporate History --- ASB Capital Management, LLC, was founded in 1984, first as a part of American Security Bank,
and later was acquired in 1997 by the Chevy Chase Bank, aclosely-held institution. The latter acts as Trustee and
fiduciary.
Y Firm Assets --- Total assets under management are $8.8-billion. Of this total, $1.4-billion are in the ASB Real Estate
Fund, and the remaining $7.4-billion are invested in stock and bond portfolios.
Firm Management --- The RE Fund owns nearly 50 properties, reflecting a growth rate of 100% over the past three
years. They have 88 client accounts, and the RE management team numbers 24 professionals.
- Strategy Process --- The Fund employs 100% union labor on its sites. They have three key investment strategies:
1). to create value by investing in ground-up development projects or existing assets, which can be enhanced and
repositioned into Class Ainstitutional-quality investments,
2). to target proven, in-fill, urban locations with substantive barriers to entry, and
3). to limit the use of leverage to 20% to 30% of portfolio gross asset value to minimize the negative impact of
cyclical swings.
The income component of recent returns has averaged 6.1 % for the three-year period ended 12/31 /06.
Their most recent allocations to property types were:
Offices 50%
Industrial 18
Retail 14
Apartments 13
Land 5
Hotels 0
21 % of their properties are in the Midwest, 30% in the West, 24% in the East, and 25% in the South.
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BlackRock: Granite Property Fund
Location --- New York, New York (the headquarters for the real estate group is Florham Park, NJ).
Corporate History ---Established in 1988, BlackRock is a publicly traded company with over 4,500 employees. In
February 2006, BlackRock and Merrill Lynch announced the two firms approved a merger.
Y Firm Assets ---Total firms assets were approximately $1.1 trillion as of December 31, 2006, with approximately
$21 billion in real estate assets under management.
y Firm Management --- BlackRock has over 25 years experience investing in real estate in the US and Europe. The
real estate team is organized to act quickly on perceived opportunities with more than 75 senior professionals
generating quality deal flow and over 270 people with on-the-ground experience in the local markets.
- Strategy Process ---The BlackRock Granite Property Fund focuses on quality, income producing properties in four
major property types (office, retail, apartments, and industrial). Risk is controlled through diversification by property
type, geography, economic base and life cycle. Investments are primarily in major and regional markets, with
limited secondary market investments. Property fundamentals are important when evaluating properties, as well
as financing and structuring. Leverage is targeted at 25%, but can reach 40% with short term exceptions.
The income component of recent returns has averaged 5.4% per year for the three-year period ended 12/31/06.
Their most recent allocations to property types were:
Offices 44.5%
Industrial 11.4
Retail 26.7
Apartments 17.4
2% of their properties are in the Midwest, 54% in the West, 32% in the East, and 12% in the South.
Bogdahn Consulting, LLC. '
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Correlation Matrix
For the Seven-Year Period Ended 12/31/06
Returnset and Index ^ ^ ^ O • O
^ American Realt -American Stable Value/Core Com osite 1.00 0.47 0.55 0.74 0.29 -0.34
^ ASB -Real Estate Fund 0.47 1.00 0.48 0.74 0.23 -0.20
^ BlackRock -Granite Pro ert Fund 0.55 0.48 1.00 0.76 0.15 -0.21
O NCREIF NPI 0.74 0.74 0.76 1.00 0.19 -0.18
• S&P500 0.29 0.23 0.15 0.19 1.00 -0.52
O ~gqg -0.34 -0.20 -0.21 -0.18 -0.52 1.00
Timeframe: 7 Years Trailing
Topic: Correlation
For the Three-Year Period Ended 12/31 /06
Returnset and Index ^ ^ ^ O • O
^ American Realt -American Stable Value/Core Com osite 1.00 0.30 0.36 0.79 0.19 -0.27
^ ASB -Real Estate Fund 0.30 1.00 0.26 0.59 0.03 0.29
^ BlackRock -Granite Pro ert Fund 0.36 0.26 1.00 0.53 0.23 -0.25
O NCREIF NPI 0.79 0.59 0.53 1.00 0.28 0.04
• S&P500 0.19 0.03 0.23 0.28 1.00 0.08
O ~gqg -0.27 0.29 -0.25 0.04 0.08 1.00
Timeframe: 3 Years Trailing
Topic: Correlation
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Risk vs. Return
Benchmark Index: NCREIF National Property Index
3 Years Trailing ending 12131/2006
N
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1
1
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c
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1
ZV
19
18
17
16
15 ~
14
0 1 2 3 4
Standard Deviation
7 Years Trailing ending 12131/2006
1.5 2.0 2.5 3.0 3.5
Standard Deviation
5
4
3
2 i
^
1
0
5 Years Trailing ending 12131/2006
16
15
14
N
` 13
iu
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11 ~
10
1.0 1.5 2.0 2.5 3.0 3.5 4.0
Standard Deviation
10 Years Trailing ending 12/31/2006
c
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0
Standard Deviation
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14
13
12
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Yr Yr r 1 Yr
Returns Standard Retums Standard Retums Standard Retums Standard
Deviation Deflation Deviation Deviation
American Realty 14.07 3.51 11.98 3.01 11.23 2.73
ASB Capital Management 16.90 2.35 13.35 3.18 12.44 2.82 11.73 2.49
Black Rock 15.22 3.40 10.78 3.78 10.49 3.42 11.36 2.95
NCREIF National Property Index 17.02 1.76 13.27 2.55 12.25 2.43 12.72 2.19
+ NCREIF National Property Index ^ ASB -Real Estate Fund - Gross Size
^ American Realty -American Stable Value/Core Composite -Goss Size ^ BlackRock -Granite Property Fund - Gross Size
F~rformance Ca~ulations by PSWIv1-Search using Quarterly Data
Bogdahn Consulting, LLC.
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Performance: Risk Analysis
Benchmark: NCREIF National Property Index
For the 6 Years Trailing Period Ended 12/31/2006
Returns
o. i
0.0
a
3
2
1
0
Standard Deviation
6Yr
a
3
2
1
0
s
s
a
3
2
1
0
Sharpe Ratio
Returns Standard
Deviation Sharpe Ratio Negative
Quarters Worst
Quarter Worst4
Quarters
^ American Realty -American Stable Value/Core Composite -Gross Size
^ ASB -Real Estate Fund -Gross Size 11.15
12.91 2.94
2.96 2.84
3.40 0
0 0.66
0.92 5.61
4.78
^ BlackRock -Granite Property Fund -Gross Size 9.94 3.60 1.99 0 0.03 1.91
NCREIF National Property Index _ _ 12.25 2.62 3_61 0 _ 0.68 5.51
Timeframe: 6 Years Trailing
Performance Calculations by PSWtvt-Search using Quarterly Daia
Bogdahn Consulting, LLC. ~ 10
6Yr
Worst 4 Quarters
6Yr
Worst Quarter
6Yr
Negative Quarters
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Performance: Calendar-Year
Benchmark: NCREIF National Property Index
I~rformance Calculations by PSWA4Search using Quarterly Data
Bogdahn Consulting, LLC. ~ 11
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
^ American Real -American Stable Value/Core Com site -Gross Size 11.04 19.26 12.09 10.32 7.50 7.09 11.71 9.88 15.52
^ ASB -Real Estate Fund -Gross Size 18.10 18.63 14.01 11.79 4.78 10.72 9.68 10.61 10.13 9.50
^ BlackRock -Granite Pro a Fund -Gross Size 18.69 20.92 6.58 7.04 _ 1.91 5.83 13.83 12.72 15.29 12.23
O NCREIF National Property Index 16.59 20.06 14.48 8.98 6.74_ 7.29_ _ 12.24 11.36 _16.24 13.90
Returns
Performance: Trailing Performance
Benchmark: NCREIF National Property Index
Trailing periods ending 12/31/2006
Data calculated using Quarterly returns
Qtr tYr 2Yr 3Yr 4Yr 5Yr 6Yr 7Yr 10Yr
^ American Realt -American Stable Value/Core Com osite -Gross Size 1.91 11.04 15.08 14.07 13.12 11.98 11.15 11.23
^ ASB -Real Estate Fund -Gross Size 4.28 18.10 18.37 16.90 15.60 13.35 12.91 12.44 11.73
^ BlackRock -Granite Pro ert Fund -Gross Size 4.30 18.69 19.80 15.22 13.12 10.78 9.94 10.49 11.36
O NCREIF National Property Index 4.51 16.59 18.31 17.02 14.96 13.27 12.25 12.25 12.72
Returns
Performance Calculations by PSWAMSearch using Quarterly Data
Bogdahn Consulting, LLC. ~ ><2
Performance: Rolling Three-Year Statistic
Benchmark: NCREIF National Property Index
10 Years Trailing
Returns
Analysis Period: 01101/1997 - 1213112006
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D99 J00 D00 J01 D01 J02 D02 J03 D03 J04 D04 J05 D05 JO6 D06
12 Quarters Ending
O NCREIF National Property Index ^ ASB -Real Estate Fund -Gross Size
^ American Realty -American Stable Value/Core Composite -Gross Size ^ BlackRock -Granite Property Fund -Gross Size
F~rforrrrance Calculations by PSWNFSearch using Quarterly 0.~ta
Bogdahn Consulting, LLC. 13
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Performance: Rolling Three-Year Risk Statistic
Benchmark: NCREIF National Property Index
10 Years Trailing
Standard Deviation
Analysis Period: 0110111997 - 1213112006
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D99 J00 D00 J01 DOt J02 D02 J03 D03 J04 D04 JOS D05 JO6 DO6
12 Quarters Siding
O NCREIF National Property Index ^ ASB -Real Estate Fund -Gross Size
^ American Realty -American Stable Value/Core Composite -Gross Size ^ BlackRock -Granite Property Fund -Gross Size
F~rformance Calculations by PSWtut-Search using Quarterly Data
Bogdahn Consulting, LLC.
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Performance: Rolling Three-Year Statistics
Benchmark: NCREIF National Property Index
10 Years Trailing
Up-Market Ratio
Index: NCREIF National Property Index
Analysis Period: 01/0111997 - 1213112006
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D99 J00 D00 J01 D01 J02 002 J03 D03 J04 D04 J05 DOS J06 DO6
12 Quarters Ending
^ American Realty -American Stable Value/Core Composite -Gross Size ^ BlackRock -Granite Property Fund -Gross Size
^ ASB -Real Estate Fund -Gross Size
F~rformance Calculations by PSWtvt•Search using Quarterly Dala
Bogdahn Consulting, LLC.
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Bogdahn Consulting, LLC.
Performance: Rolling Three-Year "Income" Returns (Real Estate)
Benchmark: NCREIF National Property Index (Income)
10 Years Trailing
Returns
Analysis Period: 01/01/1997 - 12/31/2006
1
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S00 MJ1 S01 M02 S02 MD3 S03 tvU4 S04 MJ5 SOS M06 SO6
C99 J00 D00 J01 D01 J02 D02 J03 D03 J04 004 Jos w~ dvo wo
12 Quarters Ending
o NCREIF National Property Index (Income) ^ ASB -Real Estate Fund-Income Return -Gross Size
^ American Realty -American Stable Value/Core-Income Component -Gross Size ^ BlackRock -Granite Property Fund-Income Component (g) -Gross Size
F~rformance Calculations by PSWIvt-Search using Quarterly Data
Bogdahn Consulting, LLC.
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Performance: Calendar-Year
Benchmark: NCREIF National Properly Index (Income)
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
^ American Realt -American Stable Value/Core-Income Com Went -Gross Size 5.44 5.58 5.09 8.72 8.69 9.49 9.49 9.05 10.07
^ ASB -Real Estate Fund-Income Return -Gross Size 5.14 5.95 7.12 7.13 7.23 8.41 8.15 6.67 7.66 7.65
^ BlackRock -Granite Pro a Fund-Income Com onent -Gross Size 4.35 5.02 6.88 7.04 8.01 9.02 8.97 8.60 8.60 8.17
O NCREIF National Property Index (Income) 6.22 6.76 7.46 7.97 8.42 8.68 8.56_ 8.39 _
Returns
F2rformance Calculations by PSWtvFSearch using Quarterly Data
Bogdahn Consulting, LLC.
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Performance: Trailing Performance
Benchmark: NCREIF National Property Index (Income)
Trailing periods ending 12/31/2006
Data calculated using Quarterlvreturns
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^ ASB -Real Estate Fund-Income Return -Gross Size 1.25 5.14 5.54 6.07 6.33 6.51 6.83 7.01 7.11
^ BlackRock -Granite Pro er Fund-Income Com onent -Gross Size 1.23 4.35 4.68 5.41 5.82 6.25 6.71 7.03 7.46
O NCREIF National Property Index (Income) 1.48 6.22 6.49 6.81 7.10 7.36 7.58 7.72
Returns
F~rformance Calculations by PSWNFSearch using Quarterly Data
Bogdahn Consulting, LLC.
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