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
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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.
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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.
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9. ADJOURN
There being no further business, Chairman Jay Spencer adjourned the meeting at 11:24 AM.
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