HomeMy WebLinkAboutMinutes Fire Pension 060806PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF SPECIAL MEETING HELD
June 8, 2006
A meeting of the Board of Trustees was called to order at 1:30 P.M. at Station 3, Palm
Beach Gardens, Florida. Those persons present were:
TRUSTEES OTHERS
Richard Beladino
Tom Murphy
Ed Morej on
Steve Rogers
ADMINISTRATIVE REPORT
Margie Adcock and Denise Clougherty, Administrator
Bob Sugarman, Attorney
Mike Welker, Investment Monitor
Margie Adcock provided the Board with a copy of the Ordinance that passed on June 1,
2006. Mike Welker advised the Trustees that the Ordinance was reviewed by Bob
Sugarman's office and noted that they were comfortable with the wording in the
Ordinance.
Ms. Adcock presented the list of disbursements to be made. A motion was made,
seconded and carried 4 -0 to approve the disbursements listed.
Ms. Adcock provided the Board with copies of individual employee benefit statements
prepared by the Actuary. The Board discussed the possibility of having their benefit
information available online with the Administrator's website. Ms. Adcock noted that
Mr. Baur had made a presentation to the Board a couple years ago to provide
recordkeeping services and the Board declined as there was not much interest to warrant
the expense. It appears that there might be more interest now. Additionally, Ms. Adcock
advised that they were taking over the administration of the Police Pension Plan and
would be providing recordkeeping services to them. As such, this might be the
appropriate time for the Board to revisit this matter. Ms. Adcock stated that they would
provide the Board with a proposal at a future meeting.
INVESTMENT MONITOR REPORT
Mike Welker advised that all of the presenters submitted contracts to the Attorney which
have been reviewed and approved prior to the meeting. Mr. Welker explained the
concept of Core Real Estate to the Trustees pointing out that 95% of real estate holdings
are leased when they are purchased which decreases the overhead of an unleased real
estate acquisition. He explained that would return about 6% to 8 %. He stated that real
estate would not provide a big return but he was not looking for that right now. He was
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looking to reduce the risk of the portfolio and looking for a stabilizing component. There
was discussion on the timing of getting in to real estate once the Board makes a decision.
Mr. Welker discussed the queue process and stated that each product is different so the
parameters will have to be asked.
Mr. Welker reported that Freedom Capital outperformed Dana on the international
equities. He noted that for a long term investment he thinks Freedom is going to do well. .
There was discussion on the Board's preference of who attends the meetings from
Bogdahn Consulting. The Trustees emphasized the importance of their history with both
Mr. Welker and Mr. Bogdahn The Board requested having Mr. Welker or Mr. Bogdahn
attend all of the meetings of the Board. Mr. Welker stated that this would not be a
problem and that they would accommodate the Board.
PRESENTATIONS BY REAL ESTATE MANAGERS
AMERICAN REALTY ADVISORS
Peter Hapgood and Scott Darling appeared before the Board. Mr. Hapgood gave a brief
overview of their business. He stated that they were members of the FPPTA. He stated
that he represents American Realty Advisors as a third party marketer which is included
in the fee. He stated that real estate gives diversification for long term growth. The firm
accepts fiduciary responsibility. He stated that their product was built for institutional
clients. He stated that they have two Florida clients. Mr. Darling stated that he was the
managing director for the portfolio management and was principal of the firm. He stated
that they are an independently owned and privately held company and are 100% owned
by senior management. He stated that they invest in domestic private market real estate
transactions only. They focus exclusively on real estate investment management. They
have no other business interests. They manage over $3.3 billion in assets under
management in core and value added investment strategies. They were formed in 1988
and have offices in Glendale, CA and Atlanta, GA. Mr. Darling advised the Board that
they have never been involved in any litigation and never been the subject of any
investigation or regulatory sanctions against their company whatsoever. They have never
been terminated by a client. Mr. Darling stated that they have three groups of strategies:
core, value added and opportunistic. They believe that they should stick strictly so a core
discipline here as it will give the Plan diversification and growth. Mr. Darling discussed
their investment philosophy. Every real estate investment is a unique operating business
that must be actively managed in order to add value. They buy individual assets and
actively manage those assets. He discussed their American Stable Value Fund. It is a low
risk open -end core commingled fund with 123 investors. Their investment strategy is to
invest in existing institutional quality office, retail, industrial and multi - family properties
in strong growing and diversified metropolitan areas nationwide and they maintain
geographic, property type and economic diversification to reduce risk. He noted that the
objectives are for steady income returns; long term appreciation; and exceeding the
NCREIF benchmark. He discussed the valuation process and noted that dividends are
distributed quarterly with reinvestment options. Mr. Darling advised that they have
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quarterly transactions. He noted that the next capital calls are July 1 followed by October
1. They take one -fourth of the amount each quarter for a year when they have the full
amount. Mr. Darling reviewed the portfolio. Since inception they are up 14.20 %. The
performance for the one year as of March 31, 2006 is 19.81 %. He stated that they have
diversification exposure to each of the four main geographic areas and four major
property areas. Mr. Darling then discussed fees. The fee is 110 basis points up to $25
million. There are no other fees. The Board had various questions for Mr. Darling and
Mr. Hapgood to which they responded accordingly.
Peter Hapgood and Scott Darling departed the meeting.
INVESCO
Jerome Garffer appeared before the Board. He stated that he was going to discuss their
core real estate fund which is managed out of their Dallas office. He stated that Invesco
Real Estate is part of AMVESCAP. Invesco Real Estate has $24.6 billion in assets under
management with 184 employees worldwide. They have a strong global presence. He
stated that they offer an open end core real estate strategy which is a diversified portfolio
that allows 30% maximum leverage. They offer no international investments. He stated
that they could offer a separate account which has a minimum of $5 million. Mr. Garffer
discussed their investment strategy. They invest in four property groups — industrial,
multi - family, retail and office. Their objective is to exceed NCREIF over a three and five
year rolling basis. Mr. Garffer further reported that the queue is about 3 to 6 months with
September 1, 2006 being the earliest. The Plan would be 100% invested right away. He
reviewed the portfolio as of March 31, 2006. They have 40 assets with 36 investors. He
discussed their portfolio diversification. He explained that they invest in fully listed
properties with established tenants as anchors. He explained that they lowered their
exposure to office because the risk/return is not there. They are underweighted because
of the long term historical track records of office space. It is the most volatile of all real
estate classes. They remain neutral on the retail side. They buy rent only multi - family
properties. They prefer industrial where there is more potential for return. He stated that
they will take regional bets but will not over focus on any one area. However within the
region they will. As of March 31, 2006 they were up 21.08% for the one year. He
advised that the fee is 1.1% up to $15 million. There are no other fees. He provided the
Board with a quarterly report. The Board has various questions for Mr. Garffer to which
he responded accordingly
Jerome Garffer departed the meeting.
PRINCIPAL GLOBAL INVESTORS
Jennifer Perkins appeared before the Board. She stated that her firm was headquartered in
Des Moines, Iowa. She stated that she has been with the real estate group for 11 years.
She stated that Principal is a diversified global asset management organization. It has
$166.7 billion in assets under management with $34.2 billion in real estate assets alone.
They are the fourth largest manager of real estate investments in the US. They have both
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tax as well as tax - exempt investors and offer many different commingled funds. They
have 405 real estate employees including 195 investment professional. They offer daily
liquidity and only need one business days notice. She provided a representative client
list. Ms. Perkins provided an overview of the fund. She stated that it started in 1982. They
have $4.5 billion in net assets with 146 properties in 44 different markets across the
country. They are not highly leveraged having only about 19% as of March 31, 2006.
She reviewed the investment locations. She noted that they have good exposure in the
State of Florida where 9% of their investments are located. They are well diversified by
all four property types and geographic location and property size and strategy mix. She
reviewed their current positions and strategic direction. She noted that office is the most
volatile of the property types and they have an underweight to the index in that property
type. Grocery is the most stable. They have an overweight to industrial as they view that
as very stable property type. They continue to urbanize the portfolio. She stated that they
have roughly about 12% turnover per year and think that will increase slightly over the
next few years to about 15 %. Ms. Perkins stated that the fee is 110 basis points up to
$10 million. She discussed the valuation. She stated that she believes they have the assets
valued at the correct amount with annual valuations. They have quarterly looks by Price
Waterhouse and monthly looks by the management staff. She reviewed some of their
recent acquisitions and 2005 activity. The Board asked several questions of Ms. Perkins,
to which she responded accordingly.
Jennifer Perkins departed the meeting.
DISCUSSION ON PRESENTATIONS
Mr. Sugarman stated that the Monitor did a good job in bringing a diverse choice of
managers to the Board. He noted that American Realty is small enough where they send
the principal down to meet the Board. Principal is so large that they may get the first
choice on good investments. He discussed the timing of getting in and out of the various
funds. He noted that with American Realty it will take one year to get fully invested.
Principal has daily liquidity both in and out.
The Board had an in -depth and lengthy discussion on the real estate presentations noting
some pros and cons of each organization in relation to the Fund's needs. They noted that
Principal Global Investors was very big, although some of the best deals might go to the
big companies. Mr. Welker stated that American Realty made the best presentation and
their queue is one year. Invesco and Principal had the best income return for this year,
though that is never a guarantee of future performance. Mr. Welker advised that
personally, he does not prefer the insurance set up for a real estate investment. It was
noted that American Realty might provide a better relationship and a better fit for the
Fund. There was a lengthy discussion. A motion was made, seconded and carried 4 -0 to
invest 10% of the portfolio or $1.4 million with American Realty Investors. The Board
asked that every attempt be made to get in for the July 1st queue.
OTHER BUSINESS
A motion was made, seconded and carried 4 -0 to send a thank you letter to the City
Council for their support in the real estate venture.
Mr. Welker noted that the Board is doing exactly what they should be doing with the
Fund growing to the size it is now. The addition of a core real estate investment actually
lowers the risk by diversifying the portfolio. He noted that the only missing thing is some
small cap exposure although he did not recommend the Fund look into that at this time.
He stated that he also did not want to go into emerging markets at this time either. The
only other area to possibly discuss is growth stocks. He noted that Dana is core with a
value tilt. He stated that the Board could consider an index fund for some small exposure.
Mr. Morejon stated that his concern is still with the bonds. Mr. Welker stated that they
were going to go to Milwaukee to visit Dana. They will ask Dana if they feel they have
the capabilities to run this portfolio and if they are the best manager for this style. He will
make them aware that they are being watched very carefully. He will report back to the
Board their findings.
There being no further business, the meeting adjourned at 4:35 p.m.
Respectfully submitted,
Ed Morejon, Secretary