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Real Estate Investing “ Now More Than Ever”

Real Estate Investing “ Now More Than Ever”. 2013 IBEW Eighth District Progress Meeting Jackson Hole, Wyoming May 28 - 30. A New Reality. World Emerging from the Worst Economic Crisis Since the Inception of “Globalization” Most Developed and Developing Economies Inextricably Linked

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Real Estate Investing “ Now More Than Ever”

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  1. Real Estate Investing“Now More Than Ever” 2013 IBEW Eighth District Progress Meeting Jackson Hole, Wyoming May 28 - 30

  2. A New Reality • World Emerging from the Worst Economic Crisis Since the Inception of “Globalization” • Most Developed and Developing Economies Inextricably Linked • Prosperity Lifts All Boats but No One is Immune From Geo-political and/or Financial Contagions

  3. The Search for a New Equilibrium • U.S. Economy is Facing a Protracted Economic Slump, One that Could Last a Decade or More • The Recent Rally in the “Dow” has been Accompanied by the Weakest U.S. GDP Growth of All the Bull Markets since 1949 • Paul Volcker Predicts that U.S. Structural Employment will Eventually Stabilize Significantly Above the Historical* Rate of 5.81% • Warren Buffett Warns that Bond Prices are a Terrible Investment Today with Prices Artificially Inflated due to the FED Buying $85 Billion of Bonds a Month • This Suggests a Challenging Investment Environment Especially for Those Programs with Actuarial Targets such as Pension Funds * Year 1948 through 2012

  4. Not-So-Great Expectations Expected Real Returns on 60/40 Equity/Bond Portfolios (%) Source: AQR Capital Management

  5. Typical Pension Fund Asset Allocation FIXED INCOME PRIVATE EQUITY ALTERNATIVES REAL ESTATE PUBLIC EQUITY OTHER ALTERNATIVES

  6. 10-Year Forward* Inflation-adjusted ReturnsAnnual % Change, Low/High * 12/31/12 ** Investment-grade Corporate Bonds Source: Standard Life Investments

  7. Volatility* Private Real Estate has Lower Expected Risk/Return Profile than Publically Traded Equities Source: FTSE NAREIT All REITS, NCREIF (Open-end CORE Equity Index), Morningstar, as of 9/30/12 * METRIC: Units of Return for Unit of Risk

  8. Diversification Low Correlations to Publicly Traded Equities and Fixed income Source: Morningstar, Data as of 9/30/12

  9. Inflation Hedge Total Return is a Function of Income + Appreciation Construction Costs Tend to Increase with Inflation Lease Provisions Tend to Allow Rents to Move with Inflation

  10. Collateral Benefits Job Creation for Plan Beneficiaries Support for Contributing Employers Contributions to Benefit Plans

  11. A Significant Asset Class • 2012 Total US Real Estate Investing and New Construction Equals $2.3 Trillion • This Activity Created Jobs for 6.9 Million Domestic Workers in 2012 • This Activity Generates 15% of US Gross Domestic Product Sources: U.S Bureau of Economic Analysis / U.S. Bureau of Labor Statistics

  12. Pension Fund Commitments Increase • In 2012 US Pension Funds Increased Equity Commitments to Real Estate Investments by 29% • This Represents a $31 Billion Increase in Total Investment over 2011 • Commingled Funds Accounted for 58% of all Equity Committed • Commingled, Open-ended Funds Became Much More Popular in Second-half of 2012 When They Accounted for 20% of All Investments Source: FPL Associates Consulting

  13. Progressive • NEBF Pension has been Investing in Real Estate since 1947 • This is 20 years before Real Estate was Recognized as an Acceptable “Asset Class” for Pension Plans • NEBF Real Estate, an In-house team of Real Estate Professionals, was established in 2000

  14. Foresight • In 2010 NEBF Real Estate Transitioned to National Real Estate Advisors LLC • NREA is a Wholly-owned Subsidiary of NEBF • NREA Now is Able, Under SEC Regulations, to Offer its Advisor Services to the Electrical Industry At-large • This includes IBEW Local Plans

  15. $1.4 Billion

  16. 12.04% * * Past Performance is No Guarantee of Future Success

  17. $5.25 Billion in New Construction 14 Million SF of New Projects 27 Million Man-hours of Work

  18. $1.0 Billion

  19. BUILD-TO-CORE

  20. HEALTH PLAN GENERAL FUND PENSION PLAN

  21. The Confluence • Denver, CO • 34-story High-Rise • 291-Unit Class A Units • 8,300 GF Retail • 300 Above Ground Parking Spaces • NREA = $34.5 Million Equity • TPC = $98.6 Million

  22. Sabey Data Centers • Across the U.S.A. • Largest Privately Held Domestic Data Center Company • 1.5 Million SF of Stabilized Property • 2.0 Million SF under Development • $125 Million Preferred-Equity Investment • $100 Million Debt Investment

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