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HomeMy WebLinkAboutMinutes Police Pension 091423Palm Beach Gardens Police Officers' Pension Fund Minutes of the Meeting Held: September 14, 2023 1. Chair Jay Spencer called the regular Quarterly Meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers' Pension Fund to order at 9:02 AM in the Council Chambers and called roll. Those persons present included: 2. TRUSTEES PRESENT Jay Spencer, Chairman Brad Seidensticker, Secretary Marc Glass, Trustee Greg Mull, Trustee Sean O'Brien 3. REPORTS American Realty Advisors (Richelle Cook) OTHERS PRESENT Scott Baur & A.C. Lovingood (Resource Centers) Bonni Jensen (Klausner Kaufman Jensen & Levinson) Jennifer Gainfort, Consultant (AndCo Consulting) Steve Stack, Investment Manager (Highland Capital) Richelle Cook, Investment Manager (American Realty) Richelle Cook thanked the Board for allowing her to come and provide the Board with an update to the American Realty Core Property Fund. Ms. Cook reported the following: American Realty Advisors has 35 years of operating history with six offices nationwide and currently has $12.3 Billion in assets under management. American Realty is 100% employee -owned with real estate being their only business. The ARA Core Property Fund and American Strategic Value Realty Fund were reviewed in detail with the Board of Trustees. For the Quarter ending June 30, 2023, the Plan's ARA Core Property Fund earned a net return of-2.49%, which outperformed the net benchmark rate of-2.88%. The Year -To -Date returns were at net-5.95%, compared to the benchmark rate of-6.16%. The Five - Year returns were 6.04%, beating the benchmark rate of 5.56%, and since inception, the fund has earned 7.94% compared to the benchmark net rate of 8.10%. Trustee Brad Seidensticker asked if the net contributions to the Fund are reinvestments, which Ms. Cook clarified that they are the capital calls for the fund. Ms. Cook then reviewed the Fund Snapshot with the board, noting that they were not clients of Silicon Valley Bank or First Republic Bank and that their Firm does not work with any community Banks. The Fund currently has 10 office buildings nationwide with 2 of the buildings that are not performing well, and American Realty is in the process of deciding what to do with those properties. The distribution que was reviewed in detail, and it was noted that distributions have started to be paid out to investors. The real estate sectors were then reviewed with Ms. Cook noting that both industrial and residential real estate continue to outperform. Trustee Brad Seidensticker inquired about the news reports of people moving out of California to other states. Ms. Cook stated that in California, industrial is doing very well due to major shipping ports. The tenancy and lease roll exposure were reviewed with the Board which included the percentage of total base rent by business segments. 54% of commercial base rents are attributed to tenants who have in excess of $1 Billion in annual revenue. The 10 largest tenants are: Amazon, Fed Ex, IBM, Neustar, PATH, PTC, Safeway, UNIS, UPS, and Visa. The industrial real estate sector makes up 89% of 2023 lease expirations; industrial leases 35% below market creates embedded revenue upside. The commercial lease expiration schedule is staggered to minimize concentration risk. Ms. Cook then reported that the fund consistently has high leasing rates with the Five -Year average leased percentage at 93.8% and noted that the Fund has the fifth lowest leverage ratio within the ODCE peer group. This enables the Fund to raise leverage consistent with the Fund's investment strategy. The Fund's target weights were then reviewed in detail with the Trustees, noting that cold storage is in high demand. Ms. Cook then reviewed the American Strategic Value Realty Fund with he Board and reported that for the Quarter ending June 30, 2023, the Fund earned a net-2.26%, beating the benchmark rate of-2.88%. The Year -To -Date returns were -4.66% compared to the benchmark rate of -6.16% and since inception, the Fund has earned 6.43% compared to the benchmark rate of 7.09%. The Fund snapshot was reviewed in detail, Trustee Brad Seidensticker inquired if the Fund is fully drawn on commitments, which Ms. Cook confirmed that they are and that the fund is very active with 86.8% leased rate. The value creation strategy of the Fund was reviewed in detail with Ms. Cook report that the strategies include 34.04% in development, 40.49% in restore to core, 12.96% in portfolio repositioning, 7.67% in land assemblage and entitlement, and 3.88% in lease up. Ms. Cook concluded her presentation by reviewing the debt profile of the American Strategic Value Realty Fund in detail with the Board, noting that the fund has 37.8% LTV with $1.3 Billion in total debt, with 0% of that being portfolio debt, and $490 Million of available funds under their leverage credit. Highland Capital Investment Manager (Steve Stack, Highland Capital) Steven Stack started his presentation by reviewing a memo regarding a tender offer error that had occurred at Highland Capital that should never have been accepted. 798 shares of Home Depot were sold at $280.00 per share and purchased back at 314.20 per share, with $27,291.60 due to the Plan. Mr. Stack stated the issuing the reimbursement as a credit to the Plan's Quarterly Invoice would be the cleanest way to correct this issue. Chairman Jay Spencer thanked Mr. Stack for the transparency, honestly, and the fast correction of the error. Greg Mull made a motion to accept the reimbursement of the funds owed as a statement credit. The Motion received a second from Marc Glass, approved by the Board 5-0. Mr. Stack reviewed the total return summary of the Growth, Fixed Income, and 1-3 Year Fixed Income Funds in detail with the Board of Trustees. The recession history since 1980 was reviewed with Mr. Stack stating that mid to late fall could be the timing of a possible recession. The Trustees and Mr. Stack had a detailed conversation regarding the risks of a recession with Chairman Jay Spencer inquiring if any future interest rate hikes are expected? Mr. Stack stated that he expects the Federal Reserve to raise rates one more time; however, the Federal Reserve may hold the rates where they are. Investment Consultant (Jennifer Gainfort, AndCo) Jennifer Gainfort started her report by reviewing the Plan's asset allocation summary in detail with the Board of Trustees, noting that the allocations are similar as they were the last Quarterly Performance Report. The Plan's allocations are inline with the Plan's Investment Policy Statement and Ms. Gainfort stated that she does not see the need to rebalance at this time. The Plan's financial reconciliation for the quarter was reviewed along with the Fiscal - Year -To -Date reconciliation report. Ms. Gainfort then reported the following: For the quarter ending June 30, 2023, the net returns were 3.38% compared to the benchmark of 3.11%. The Fiscal -Year -To -Date returns were 12.74% compared to the benchmark rate of 14.21%. The Three -Year trailing returns were 8.70% compared to the benchmark of 8.55%. The Five -Year returns were 6.97%, compared to the benchmark rate of 7.54%, and since inception the Plan has a 7.60% net return on investments compared to the benchmark rate of 8.47%. Ms. Gainfort then presented the Board with an updated Investment Policy Statement. Ms. Gainfort informed the Board that the updated Investment Policy Statement includes added language that complies with the recently passed House Bill 3 that requires the Pension Plan to only make investment decisions based solely on pecuniary factors. Ms. Gainfort then reviewed the changes within the IPS in detail with the Board of Trustees. Attorney Bonni Jensen informed the Board that she spoke with Steve Barden who stated that the rules on the Bi-Annual Report are out there; however, he has not seen them. Mrs. Jensen informed the Board that hopefully she will know what those rules are at a conference she will be attending at the end of the month. Marc Glass made a motion to approve the Revised Investment Policy Statement as presented. The Motion received a second from Brad Seidensticker, approved by the Board 5-0. Ms. Gainfort then presented the Board with the AnclCo Large Cap Core Manager Analysis for the period Ending June 30, 2023. Ms. Gainfort reviewed the TWIN Capital Management TWIIN Prime Fund and compared it to three other investment options that included MFS Investment Management's MFS Massachusetts Investors Trust R6 Mutual Fund, the JP Morgan Investment Management JP Morgan US Researched Enhanced Equity R6 Mutual Fund, and the AQR Capital Management AQR Large Cap Defensive Style R6 Mutual Fund. The management fees, investment minimums, and vestment option comparisons were reviewed in detail with Ms. Gainfort noting that both TWIN and the JP Morgan Fund are similar to one another. The current and historical portfolio style comparisons were reviewed in detail with Ms. Gainfort concluding her analysis by reviewing each fund's calendar year performance. The Board discussed the Large Cap Core Manager Analysis in detail comparing TWIN Capital Management to the alternative Mutual Fund options. There was consideration of placing the City's annual contribution into one of these Page 2 investment options which resulted in the Board deciding not to make an investment decision at this time. The Board then discussed where the City's contributions should be placed, which resulted in the Board discussing having the funds in the Highland Capital 1-3 Year Treasuries Short Term Fixed Income Fund. Brad Seidensticker made a motion to invest the City's Annual Contributions into the Highland Capital 1-3 Year Treasuries Short Term Fixed Income Fund. The Motion received a second from Greg Mull, approved by the Board 5- 0. Attorney Report (Bonni Jensen, Klausner Kaufman Jensen & Levinson) Jensen Memo — California Man Hid Mother's Death for 3 Decades to Collect Her Benefits: Attorney Bonni Jensen reviewed the New York Times article regarding a California man hiding his mother's death from the Federal Government for over three decades so that he could collect more than $800,000.00 in benefits intended for her. Mrs. Jensen stated that this individual was able to hide his mother's death due to her passing way in Japan and that the fraud was uncovered with Medicare performed an audit on retirees over the age of 90 who have not been utilizing their health benefits. Mrs. Jensen recommended that in addition to using enhanced death search and notification products, the Plan should stay in constant communication with any retiree who lives outside of the Country as an additional safeguard to mitigate pension payments being made to a deceased member. Mr. Lovingood informed the Board that the Plan currently has one member who currently lives in Germany that he is in constant contact with. Mr. Lovingood also reported that the Plan may have a second retiree who may move outside of the United States and will ensure that constant contact is kept with that member when they move. Mrs. Jensen also noted a case that she is following where funds in a 401K had been stolen. All parties involved are deflecting blame and Mrs. Jensen reported that she is closely monitoring the case to see who is found liable. Proposed Language Change to Definition of Salary: Mrs. Jensen presented the Board with an amendment to the Plan Ordinance that clarifies the Plan's definition of Pensionable Salary to include the one-time lump sum payment representing an annual salary increase in lieu of an increase to base pay was reviewed in detail. Mrs. Jensen noted that as long as the City's pay code for this lump sum payment is coded as pensionable, it will be reported as such to the Plan. Sec 50-135 Annual Adjustments: Mrs. Jensen reviewed Section 50-135 of the Penson Plan Ordinance regarding Annual Adjustments with the Board and presented the Trustees with the follow-up letter that was sent to the Palm Beach County Police Benevolent Association and the City's Finance Administrator on the request of clarification regarding the threshold as the 8.5% listed was the Plan's Assumed Rate of Return when this section was written and that the Plan would like clarification if the City's and bargaining parties intent was to set the threshold target to the assumed rate of return, and if so, does the bargaining parties want to request a Plan amendment to change the retirement of a rate return of 8.5% to a more generic "the assumed rate of return?" Mrs. Jensen also reported that the City Finance Administrator made an acknowledgement and concurred that the Gain Share COLA is indeed a topic that must be addressed through collective bargaining. Collective Bargaining Agreement: Mrs. Jensen inquired on the status of the Collective Bargaining Agreement with the City, noting that the new agreement does have COLA increased for pensions, which will also require the Pension Ordinance to be updated. Mrs. Jensen noted that Police Officers leaving will get small increases, depending on when they separate from service. Mrs. Jensen also reminded the Board that the 13' Check still requires clarification since the Collective Bargaining Agreement did not include any clarification regarding the rate of return, therefore, the Board will continue to rely on the current ordinance language. The Board and Mrs. Jensen discussed the Supplemental Benefit, noting that it has remained unchanged since 1992. Administrator Report (Scott Baur & AC Lovingood, Resource Centers) 2024 Board Meeting Schedule: Albert Lovingood provided the Board with the proposed 2024 Calendar Year Board Meeting Schedule for the Trustees to review and approve. The Board discussed the Board Meeting Dates, and it was noted that the March Board Meeting Date will need to be changed as there will not be a quorum. Mr. Lovingood stated that he would review the calendar for alternative dates for the March Board Meeting and follow up to see what dates will work for the Board and Service Providers. Page 3 Chapter 185 2022 Premium Tax Dollars: Mr. Lovingood informed the Board that the State has released the Chapter 2022 Premium Tax Dollars Allocation Amounts and has started to issue payments to the Pension Plans. Historically, the City has received these funds, and the City has forwarded those funds to the Pension Plan via ACH Transfer. Mr. Lovingood reported that the Plan's 2022 Chapter 185 Allocation was $993,453.03. 2023 Board Meeting Schedule: Mr. Lovingood provided the Board with the 2023 Board Meeting Schedule. Mr. Lovingood reported that the 2023 schedule follows the historical meeting dates of the Plan. Active DROP Participants: Mr. Lovingood provided the Board with the list of active DROP Participants for review. Annual Benefit Statement Summary: Mr. Lovingood presented the Board with the Annual Benefit Statement Summary Report that was included with the October 1, 2022, Annual Benefit Statements for review. 4. MINUTES The Trustees reviewed the draft Minutes for the June 8, 2023, Quarterly Board Meeting. Marc Glass made a motion to approve the Minutes for the June 8, 2023, Quarterly Board Meeting as amended, The Motion received a second from Sean O'Brien, approved by the Board 5-0. The Trustees reviewed the draft Minutes for the June 23, 2023, Special Board Meeting. Marc Glass made a motion to approve the Minutes for the June 23, 2023, Special Board Meeting as amended, The Motion received a second from Sean O'Brien, approved by the Board 5-0. DISBURSEMENTS AND FINANCIAL STATEMENTS The Board reviewed the Warrant dated September 14, 2023, for payment of expenses. Marc Glass made a motion to approve the expenses on the Warrant dated September 14, 2023, as presented. The Motion received a second from Brad Seidensticker, approved by the Board 3-0. The Board received, reviewed, and filed the interim financial statement through July 31, 2023. 6. BENEFIT APPROVALS The Benefit Approvals Dated September 14, 2023, were presented for review. Greg Mull made a motion to approve the Benefit Approvals dated September 14, 2023. The Motion received a second from Marc Glass, approved by the Board 5-0. 7. OTHER BUSINESS Salem Trust Letter - Money Market Fund Summary Prospectus: Mr. Lovingood presented the Board with a letter from Salem Trust along with Summary Prospectus for the Goldman Sachs Financial Square Government fund. Mr. Lovingood stated that no action is required on this matter and that the prospectus is in reference to the Money Market Fund that is used as the sweep vehicle by the Plan. 8. PUBLIC COMMENTS No members of the public had any comment. 9. ADJOURN There being no further business, Chairman Jay Spencer adjourned the meeting at 11:24 AM. Page 4 9. ADJOURN There being no further business, Chairman Jay Spencer adjourned the meeting at 11:24 AM. =ensticker,�Secre4tar4yd� Page 5