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HomeMy WebLinkAboutMinutes Police Pension 120811City of Palm Beach Gardens Po /ice Officers' Pension Fund Minutes of the SPECIAL Meeting Held December 8, 2011 The special meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers' Pension Fund was called to order at 9:01 AM by Wayne Sidey in the Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail, Palm Beach Gardens, Florida. TRUSTEES PRESENT OTHERS PRESENT Jay Spencer, Chair Audrey Ross (Resource Centers) David Pierson, Secretary Bonni Jensen (Law Offices of Perry & Jensen) Brad Seidensticker, Trustee John McCann (Thistle Asset Consulting) Michael Dunigan (JP Morgan Chase & Co.) Greg Pittenger (JP Morgan Chase & Co.) Richelle Hayes (American Realty Advisors) Jay Butterfield (American Realty Advisors) INVESTMENT MANAGER PRESENTATIONS: REAL ESTATE ]P Morgan Chase & Company — Presented by Michael Dunigan & Greg Pittenger Mr. Dunigan introduced himself and Mr. Pittenger to the Board and commented that he is a senior portfolio manager that has been with JP Morgan for 15 years. He explained that JP Morgan has 41 institutional clients in Florida that represent over $5.6B in assets. JP Morgan has over 16,000 employees that service over 200 public pension funds all over the United States. Mr. Dunigan reviewed the Real Estate platform and stated that they are a very diversified solid business that has been in the game for over 40 years. JP Morgan has a total of $56.9B in assets under management with 405 investment portfolio managers, in which 13 of those are dedicated to this product along. Mr. Pittenger explained to the board that their firm has their own risk management that they run internally, and in addition they do annual appraisals on all their properties. This Real Estate fund is an open end fund where investors can go in and out as they choose too, as this is buy and sell active management. In addition this is a commingled pension trust fund where there is no liability to the investor if something were to happen to a building that is being held in the portfolio. Also there is insurance that would cover the damage as well. This portfolio occupancy rate is 92% when the US is only 82 %, and most of the buildings have lease structure agreements in which the tenate would pay an increase each year. Mr. Dunigan reviewed the type of properties that they own in their portfolio and explained that they do own some residential real estate which consist of multifamily rental homes only. In addition to residential they also have 4 other property types they own; office, industrial, retail and land. Mr. Pittenger did explain that currently there is a queue to get into this fund which is $1.8B and will take about 6 -9 months to get into. Proceeds are distributed on a quarterly basis if requested and they are the most illiquid fun around. There are 273 investors in this fund and most plans invest in this type of product to add diversification to their portfolio and to also mover separate from the market. Mr. Dunigan stated that their annual fee is 1% of the net asset value of the fund and their break point for investors is $100M. There are several hundred properties Minutes 12 -8 -11 (SM).dc Page 1 of 3 in the portfolio and they are not closing this fund anytime soon. Lastly he commented that their next capital call would be from July to September of 2012. American Realty Advisors — Presented by Richelle Hayes & ]ay Butterfield Ms. Hayes introduced herself and Mr. Butterfield. American Realty is a private held firm owned by their senior investors. They are a core equity domestic real estate manager and this is their only line of business. They currently have over $4B in assets under management with over 275 institutional clients. There are 153 properties in the fund and they have been running this product for 23 years now. Mr. Butterfield explained that their long term focus is on risk control and he reviewed the items and the processes they go through to measure their risks. Also Mr. Butterfield stated that this firm does not have any conflicts of interest, they do not have any litigation regulatory issues, nor do they have any debt on their balance sheets. He commented that they have low leverage and have limited range of debt as their max leverage is about 40 %, although they have never reached that. In addition about 80% of their loans are fixed with the other 20% variable. Ms. Hayes reviewed the reasons why you would want to add real estate into your portfolio. Real Estate focuses on the stronger markets with higher returns and it also provides some kind of income just as fixed income would. All properties in this portfolio receive an add on appraisal every quarter and then are fully appraised once a year. She reviewed the property types that they hold in their portfolio such as office properties, industrials, retail and multifamily. They look for buildings that are in a high transit stand point, and their occupancy rate is 90 %. She commented that they will be looking to inquire more in industrials in 2012. Mr. Butterfield then reviewed the firms investment procedures and stated that their firm has an investment committee which is made up of 7 employees that make all the decisions. These 7 employees have been working together for over 10 years and they make all the decisions unanimously. He also commented that currently there is no queue to get out, although there is a queue to get in which is about $140M and will take about 2 quarters to pay down. In addition Mr. Butterfield explained that there are 5 owners of the Company and there would be no impact if one of the owners were to leave. American Realty is fully insured and would be fully covered if anything were to happened. Lastly he explained that there is a $1M minimum to invest, and the fee is 1.1% annually on all assets. BOARD DISCUSSION: The board discussed both presentations and noted that their philosophies regarding investment are quite similar. Mr. McCann noted that we would need to amend the investment policy guidelines to include an allocation to real estate. MOTION: Mr. Seidensticker made a motion to amend the investment policy guidelines to include up to 10% investing in Real Estate, with authorization for the Chair and Secretary to execute in between meetings. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 3 -0. MOTION: Mr. Seidensticker made a motion to hire American Realty Advisors as their Real Estate Manger and to transfer $1M from ICC Capital's fixed income account to the new American Realty account, once the queue has opened. SECOND: Mr. Pierson seconded the motion. Minutes 12 -8 -11 (SM).doc Page 2of3 CARRIED: The motion carried unanimously 3 -0. Mr. McCann noted that he would recommend having the income that is generated from the Real Estate to be deposited back into the fund on a quarterly basis. The board agreed with his recommendation. OTHER BUSINESS The board reviewed the City's proposal and discussed the fact that the City is aiming to opt out of the 185 State Monies. It was noted that the board has reached out to the City numerous times to try to schedule a meeting to discuss their intents, but they have not received a response. The board directed Ms. Jensen to draft a letter to the City staff requesting a meeting. MOTION: Mr. Seidensticker made a motion to direct Ms. Bonni Jensen to draft a letter to the City staff requesting a meeting with the Pension Board. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 3 -0. PUBLIC COMMENTS N/A AJOURN There being no further business, and the future meetings are scheduled for the 3rd Thursday of the first month proceeding the quarter. The next regular meeting is scheduled for Thursday January 19, 2012 at 9AM; the Trustees officially adjourned the meeting at 12:12PM. Respectfully submitted, DAVID PIERSON, Secretary Minutes 12 -8 -11 (SM).doc Page 3of3