State Universities Retirement System of Illinois

Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
OCTOBER 2009
State Universities Retirement System of Illinois
Marc Weidner
Managing Director
Danita Johnson
Investment Manager
Larissa Herczeg
Vice President
Allison Shaw
Vice President
Global Consultant Relations
This material is intended solely for the recipient, and should not be reproduced, copied, or re-transmitted.
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Table of Contents
Franklin Templeton Investments
Page 2
Franklin Templeton Real Estate Advisors
Page 3
Proposed Program
Page 10
Investment Process
Page 13
Performance: Track Record
Page 15
Appendix
Page 16
This presentation is intended only as a general overview of the Franklin Templeton Private Real Estate strategy and is for informational purposes only and should not be construed or relied upon as investment advice. It has been
provided to the recipient to discuss a potential or existing investment advisory relationship and may not be reproduced or used for any other purpose. It is intended only for institutional investment consultants or institutional
investors. It is not meant for the general public. Information provided in this presentation is as of 6.30.09 unless otherwise indicated.
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Franklin Templeton Institutional—Firm Overview
Franklin Templeton Institutional offers a full range of institutional investment capabilities from six distinct investment management platforms.
FRANKLIN TEMPLETON INVESTMENTS
Total Combined Assets Under Management (AUM): US$451.2 Billion1
Franklin
Global Advisers
Templeton
Mutual Series
Franklin Templeton
Fixed Income
Franklin Templeton
Real Estate Advisors
Darby
19472
1940
1949
19713
19844
1994
Focus
Global, International,
& U.S. Equity
Global, International, &
Emerging Markets
Equity
Global & U.S. Equity;
Distressed Debt
Global & Regional
Fixed Income
Global Real Estate
Emerging Markets
Private Equity &
Mezzanine Finance
Style
Growth, Core
Core Value
Deep Value
Single Sector,
Multi-Sector
Multi-Sector,
Multi-Region
Multi-Sector
AUM1
US$96.1 Billion
US$115.4 Billion
US$51.7 Billion
US$155.4 Billion
US$3.7 Billion
US$1.7 Billion
Established
FRANKLIN TEMPLETON INSTITUTIONAL
Institutional AUM: US$132.4 Billion1
Single Business Development, Relationship Management, and Consultant Relations Platform
1. Source: Franklin Templeton Investments, as of 6.30.09. Assets under management (AUM) combine the institutional and non-institutional AUM of U.S. and non-U.S. investment management subsidiaries of the parent
company, Franklin Resources, Inc. [NYSE: BEN], a global investment organization operating as Franklin Templeton Investments. Institutional AUM is the combined institutional assets of Franklin Templeton Institutional, LLC,
and its affiliates. Figures for the assets under management above may not correspond precisely to the assets under management for the units of Franklin Templeton Investments as defined for purposes of the Global
Investment Performance Standards (GIPS®). For GIPS® purposes, Franklin Global Advisers and Franklin Templeton Fixed Income are both units of the firm Franklin. Numbers may not equal 100% due to rounding. Please
note that the table above does not include Bissett Asset Management or Bissett’s SMA business (combined AUM of US$10.7 billion as of 6.30.09), Fiduciary Trust Company International (AUM of US$8.2 billion as of
6.30.09), or Franklin Advisory Services LLC (AUM of US$8.4 billion as of 6.30.09). The firms are wholly owned subsidiaries of Franklin Templeton Investments and offer solutions to Canadian (Bissett), high net-worth
(Fiduciary), and U.S. value-oriented mutual fund (Franklin Advisory Services) investors.
2. Franklin Global Advisers, a unit of Franklin, combines the expertise of the Franklin Advisers, Inc., and Fiduciary Global Advisors (formerly Fiduciary Trust Company International) equity teams (with origins dating back to 1947
and 1931, respectively).
3. Franklin Templeton Fixed Income, a unit of Franklin, combines the expertise of the Franklin Advisers, Inc., and Fiduciary Trust Company International fixed income teams (originating in 1971 and 1973, respectively).
4. Franklin Templeton Real Estate Advisors originated in 1984 as the global real estate team of Fiduciary Trust Company International.
2
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Why Franklin Templeton Real Estate Advisors?
Experienced Real Estate Team
Multinational investment team averaging 12 years of global real estate experience
Investment Capabilities
As of June 30, 2009, FTREA has committed $3.8 billion to approximately 80
private real estate funds worldwide on behalf of over 40 major pension fund
clients,1 including 36 first-time funds
Emerging Manager Capabilities
Pipeline of over 70 Emerging Managers;2 similar investment program for a major
U.S. institutional investor
Investment Selection Process
Strong sourcing and selection capabilities of established sponsors, emerging
managers and co-investment opportunities
Established Track Record
12-year track record
Dedication to Emerging Managers
Active participation in numerous women and minority organizations; formation of
diversity committee with FTREA
Guidance Process
Typically offer Emerging Managers input on strategy, resources and presentations,
along with other feedback
Alignment of Interest
Our success is directly dependent upon the success of our clients
Diligent Risk Management
An emphasis on risk management and downside protection in every step of the
investment process
Efficient Administration
Franklin Templeton strives to provide investors with cost-effective administration
and reporting for their indirect private real estate investments
As of 6.30.09.
1. A detailed client list is available upon request.
2. All references to Emerging Managers are as defined in Illinois Public Act 096-0006, unless otherwise indicated.
Please see accompanying GIPS® package in the Appendix for further description of track record calculation methodology.
3
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Illinois Consortium Emerging Manager Portfolio Management Team (Please Refer to
Appendix for Complete Biographies)
Marc Weidner, Managing Director, Member of the Global Investment Committee of Franklin
Templeton Real Estate Advisors
• Over 17 years of investment experience in sourcing, valuing, structuring and transacting global real estate
• Member of INREV and PREA
• Faculty member in the M.S. in Real Estate Development Program at Columbia University
Larissa Herczeg, Vice President
• Joined Franklin Templeton in April of 2008, and is responsible for sourcing and conducting due diligence
on private real estate fund investments primarily in the Americas
• Member of PREA
• Co-founder of New York Women in Real Estate
• Mentor for the Toigo Foundation
• Member of the National Association of Securities Professionals
• Member of New York Private Equity Network Real Estate Women’s Steering Committee
Danita Johnson, Investment Manager
• Joined Franklin Templeton in October of 2007 and is actively involved in sourcing and underwriting
global private real estate investment vehicles
• Chairperson for the FTREA Diversity Committee
• Prior to joining Franklin Templeton, was an investment officer with the New York City Comptroller’s
Office where she assisted with the oversight of the New York City Retirement Systems’ private equity real
estate investment portfolio
• While at the New York City Comptroller’s Office, Ms. Johnson assisted with the implementation of the
Real Estate Emerging Manager Program
• Member of PREA
• Member of the Real Estate Executive Council
• Member of the National Association of Securities Professionals
4
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Franklin Templeton Real Estate Advisors and Support
FRANKLIN TEMPLETON REAL ESTATE ADVISORS MANAGEMENT AND INVESTMENT COMMITTEE
Jack Foster
Raymond Jacobs
Glenn Uren
Marc Weidner
LEGAL
PRIVATE INVESTMENTS
OPERATIONS/ACCOUNTING
Lionel Fantauzzo (Luxembourg)
Managing Directors
Jack Foster, Head of Real Estate
Raymond Jacobs
Glenn Uren
Marc Weidner
Elizabeth De Oliveira (Fort Lauderdale)
Vice Presidents
Larissa Herczeg
Wenning Jung
Ilkka Tomperi, Ph.D.
Carol O’Neill (San Mateo)
Sara MacIntosh (Edinburgh)
Dawn Pettersson (New York)
Jonathan Dulberg (New York)
CLIENT SERVICE
Matthew Head (London)
Senior Investment Managers
Caroline Demol
Karim Hassouna
Greg Wilkinson (Melbourne)
Rob Wilmoth (New York)
Reed Hutchens (Fort Lauderdale)
Investment Managers
Christopher Guerette
Danita Johnson
Felix Lempert
Wonkyo Seo
PUBLIC INVESTMENTS
BUSINESS DEVELOPMENT
John Gall (Melbourne)
Joachim Nolte (London)
David Levy
Donna Ming-Yuan Lee
Daniel Pettersson
Daniel Scher
PRODUCT STRATEGY
Ryan Dunham (Fort Lauderdale)
Ulri Mammadev (Fort Lauderdale)
Megan McGonigle (New York)
Michael Stewart (Fort Lauderdale)
Laurent Cacciatore (Luxembourg)
Aurore Fonfreide (Luxembourg)
Francois Pires (Luxembourg)
Julie Harnett (Luxembourg)
Dina Damayanti (Melbourne)
Tim Kelly (Melbourne)
Tania Lawson (Melbourne)
Claudette Sam (Melbourne)
Joanne Tan (Melbourne)
SUPPORT STAFF
Liliana Wrzalek (New York)
Justine Johnson (New York)
Alejandro Lendeborg (New York)
Dan Fulop
Tracey Hanfling
Shira Goldman
As of 9.30.09.
This page includes individuals who are members of Franklin Templeton Real Estate Advisors (“FTREA”) or provide support to FTREA with respect to its private real estate and global REIT strategies. It is not meant to depict
the management or investment team of any account.
5
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
FTREA Implementation Process¹
Form onboarding team
• Portfolio Management
• Internal Legal
• Tax
• Fund Accounting
• Treasury
• Client
Onboarding team begins
to transition daily
responsibilities to
operations team beginning
on the first close and
ending the process on the
final close
Weekly onboarding
update meetings
Execution of legal
documentation
• Outside service
provider agreements
• Acceptance of client
documents and KYC
information
Draft internal fact sheet
and draft documents
Annual audit coordination
and execution by Fund
Accounting with support
from Internal Legal and
Portfolio Management
Fund Accounting
reconciles quarterly
transactions and
valuations
Fund Administration
receives and processes
capital call and distribution
notices from underlying
funds. Portfolio
Management is copied
and approves
Coordination and
execution of
ad-hoc requests
CLOSE FUND and official
hand-off to Client
Service team
ONBOARDING
PROCESS BEGINS
Form email and contact
distribution lists
Engage outside service
providers
• Custodian
• Trustee
• Administrator
• Outside counsel & Tax
• Auditor
Legal documentation
including investor requests
are handled by
onboarding team
FINAL LIQUIDATION
OF FUND
Client Service coordinates
capital call and distribution
notices with investors and
Portfolio Management is
copied and approves
Fund Accounting, Internal
Legal and outside counsel
assist Portfolio
Management with
operational due diligence
of underlying funds
Reporting coordinated by
Client Service with
information received from
Fund Accounting and
Portfolio Management
Fund Accounting and
Franklin Templeton
Corporate Accounting
calculate bills and process
fees and expenses
FRANKLIN TEMPLETON PRIMARY CONTACTS:
Portfolio Management: Marc Weidner, Larissa Herczeg, Danita Johnson
Fund Accounting & Administration: Michael Stewart
Client Service: Carter Bailey, Dan Fulop
Real Estate Operations: Felix Lempert
On-Boarding Coordination: Carol O’Neill
As of 9.30.09.
1. The above FTREA Implementation Process for a U.S. private real estate fund of fund strategy is for illustrative and discussion purposes only and is subject to change.
6
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
FTREA Commitment to Emerging Manager Activities
FTREA Continues to Strengthen Its Commitment to the Emerging Manager Space and
Remains Excited about the Prospect of Potentially Partnering with the Consortium
FTREA sources new opportunities, networks, obtains research and receives feedback on sponsors through its
active participation in organizations focused on real estate and Emerging Managers, including:
Emerging
ManagerFocused
Real EstateFocused
Real Estate Executive Council
X
X
NYC Women in Real Estate
X
X
X
X
A not-for-profit organization co-founded by Herczeg with over 170 members; website
launch and incorporation in progress
NYPEN Real Estate/Women’s Steering Committee
X
X
X
X
Herczeg is an active member of the Women’s Steering Committee; FTREA hosted a
women’s breakfast for 35 attendees in June 2009
Organization
Mentoring
Sourcing
Research
Diligence/
Screening
X
X
X
X
Limited Partners Investment Council (LPIC)
X
X
Comments
Johnson has been accepted as a member and moderated a panel at the September
Chairman’s Forum; Herczeg also attended the Forum
Weidner, Herczeg and Johnson continue to play an active role in this LP group
comprised of major institutional investors
NY Governor David Patterson’s MWBE Programs
X
Robert A. Toigo Foundation
X
Emerging Manager Conferences
X
X
X
Herczeg was a panelist at the IMN Illinois Public Employees Retirement System
Conference in June 2009; FTREA actively participates in other Emerging
Manager conferences
National Association of Securities Professionals
X
X
X
FTREA continues to play an active role and Johnson is participating in
various committees
Weidner, Herczeg and Johnson continue to play an active role in this organization.
X
X
FTREA actively participates in this and related MWBE conferences in New York
X
Herczeg continues to act as a mentor and attended the annual Toigo gala and related
Emerging Manager activities
Pension Real Estate Association
X
X
X
Institutional Real Estate Investor
X
X
X
New America Alliance
Graduate Programs in Real Estate, Business
and Law
X
X
FTREA is actively involved in this institutional real estate organization
Herczeg has attended conferences
X
X
X
X
Weidner serves as an adjunct professor at Columbia University's Real Estate
Program; Herczeg was a guest professor at the University of California-Berkeley
As of 9.30.09.
The above includes the names and/or description of various organizations and groups of which individual members of the Franklin Templeton Real Estate Advisors team may be members or participants. Such organizations
and groups are not affiliated with Franklin Templeton Real Estate Advisors or any Franklin Templeton entity. The above is not intended to be an endorsement by or of Franklin Templeton with respect to any organization or
group mentioned.
7
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
FTREA Diversity Committee
FTREA Is Committed to Expanding Its Focus and Deepening Its Understanding of Emerging Managers
Understand the Investment Universe
• Collaborate to understand the comparison of Emerging Managers with the wider opportunity set of
comparable strategies
• Assess the growing importance of Emerging Managers and diversity within mainstream institutional investment
• Discuss and define market opportunities and emerging trends
Broaden Guidance Process
• Establish a framework for providing feedback to Emerging Managers
• Determine criteria relevant for selecting Emerging Managers to participate in guidance process
• Review materials and offer constructive advice
Incorporation within Investment Process
• Identify Emerging Manager real estate investments and assess their potential returns and risk factors
• Continuous enhancement of proprietary real estate manager database to include Emerging
Manager opportunities
Educate and Communicate
• Integration with firm-wide diversity efforts
• Provide networking opportunities and access to mentor firms, organizations and industry groups
• Seek to ensure real estate investment teams are well versed in Emerging Manager initiatives
• Attend industry conferences dedicated to the topic to provide additional educational opportunities
Monitor Developments
• Continuously identify Emerging Manager investment opportunities and new Emerging Managers
• Examine the inclusion of Emerging Managers within real estate allocations nationwide
8
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
We Believe FTREA’s History of Investing with Small and First-Time Funds Provides
Skills and Experience Necessary for Diligencing Emerging Managers1
• FTREA has committed to 24 U.S. funds for total commitments of $725 million since 1996
• Almost 90% of FTREA’s 75 investments have been with first-time or upcoming managers
• Forty-nine investments have been with funds of less than $750 million in size
Invested Funds by Series Number
Invested Funds by Underlying Fund Size
40
25
35
20
21
20
30
25
Number of Underlying Funds
Number of Underlying Funds
35
22
20
15
8
10
4
5
17
15
10
9
8
5
3
1
2
0
0
1st
2nd
3rd
4th
5th
6th
Underly ing Fund Series Number
As of 9.30.09.
1. Based on 75 underlying funds invested from 1996–2009. Excludes six co-investments.
7th
$0–$249
$250–$499
$500–$749
$750–$1,000
ov er $1,000
Size of Underly ing Fund ($ in millions)
9
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Summary of Proposed Key Terms
Size of Mandate
$190 million
Target Number of Investments
8–12 underlying funds
Target Investments
Emerging Manager private real estate
Property Type Focus
Office, retail, industrial and residential
Investment Period
2 years with a 1-year extension
Performance Fee
10% over a 9% hurdle return
Management Fee
0.50%
Nothing herein should be taken as an offer or solicitation of any type of securities or any investment management or advisory service. Past performance does not guarantee future results and results may differ over future
time periods, and there is no assurance that the Fund’s investment objectives will be achieved. Please see page 1 and the Important Information Page for additional important information.
10
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Sample Recommended Portfolio1,2
U.S. Geographic Breakdown
Sector Breakdown
Northeast
30%
West
30%
South
25%
Midw est
15%
Residential/Multifamily
30%
Office
25%
Retail
15%
Debt/Other
15%
Hospitality
10%
Industrial
5%
Investment Strategy
Fund Size
$500 Million–$1 Billion
40%
< $500 Million
50%
> $1 Billion
10%
Primary Inv estments
75%
Co-Inv estments³
25%
1. The recommended portfolio will seek to maintain adequate geographic, property-type and fund size diversification on these broad allocation guidelines. Due to the nature of the private real estate market, these are
guidelines rather than requirements, and may not necessarily be achieved over the life of the portfolio. Specific allocation ranges would be set in the client’s investment management agreement with Franklin Templeton
Institutional. Given the nature of value-added and opportunistic underlying real estate funds, the managers of such underlying funds will seek opportunities in regions and property types that they believe offer high riskadjusted return potential at the time of investment. Franklin Templeton Real Estate Advisors does not typically invest in property type-specific underlying real estate funds.
2. Percentages may not equal 100% due to rounding.
3. Up to 25%.
11
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Emerging Manager Market
FTREA Remains Committed to Sourcing and Seeking to Invest with the Best
Emerging Managers
• Since January 1, 2009, FTREA has met with approximately 19 new Emerging Manager funds
• The Emerging Manager market has continued to grow
– FTREA currently has 74 Emerging Managers in its pipeline
• Largely due to continued market dislocation, FTREA has not invested in any U.S. funds, including
Emerging Manager funds since October 2007
FTREA Believes the Emerging Managers Opportunities in the U.S. Have Significantly
Expanded and Are Increasingly Attractive
• FTREA expects that many existing real estate funds may dissolve or experience significant turnover,
creating both challenges and opportunities
– Existing managers who are “out of the money” may have difficulty retaining top talent, including
women and minorities
– May provide opportunities for new management teams to emerge and raise funds free of legacy issues
• Corporate and government initiatives that focus on women and minority funds have become more
widespread and may offer additional competitive advantages for Emerging Managers
• Because Emerging Managers have historically had difficulty obtaining leverage, they may be well
positioned to weather the current economic environment and add value through asset management and
cost savings
• FTREA expects that co-investment opportunities may be particularly attractive as Emerging Managers
look to bridge investments prior to, or during, their fundraising processes
As of 9.30.09.
12
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Due Diligence and Guidance Process: A Focus on Downside Protection at Every Step¹
Potential Emerging Manager investments may undergo three parallel tracks of analysis by the Americas team: (1) FTREA’s standard due
diligence process, (2) additional Emerging Manager-focused scrutiny and (3) FTREA’s guidance process
Step 1 (2–4 weeks)
Initial Review and Meeting
Guidance
Process
Step 3 (1–2 months)
Interim Discussions
Step 4 (1–2 months)
Comprehensive
Due Diligence
• Management
• Investment strategy/
competitive advantages
• Team/size/deal flow
• Comparable funds
analysis
• Discussed at Americas
pipeline meeting
• Structure
• Fees/expenses
• Assess alignment of
interest
• Present to Investment
Committee
• Sponsor credentials/
reference calling
• Completion of due
diligence questionnaire
required
• Analysis of team
dynamic and history
• Examine budget and
proposed resources
• Determine qualification as
Emerging Manager
• Compare track record against
both established and Emerging
Managers
• Discuss proposed budget and
allocation of resources
• Feedback on legal/tax structure
• Feedback on GP commitment
and initial terms
• Review of corporate
governance documents
• Background checks
• Additional reference calling
• Feedback provided on
presentation and materials
• Feedback on presentation
of track record
• Discuss deal attribution
• Input on
market/comparable
strategies
• Continue or terminate
guidance process
• Arrange introductions
• Assess fundraising
strategies and relevant
organizations
• Feedback on
governance/risk issues
Standard
Due Diligence
Process
Additional
Emerging
ManagerFocused
Scrutiny
Step 2 (1–2 months)
Preliminary Due Diligence
• Input on strategy and
resources
• Continued input on terms
1. The above chart is for illustrative and discussion purposes only and is subject to change. The way we implement our investment strategy and process may change due to factors such as market and economic conditions.
As part of the investment process, certain legal and tax review is typically conducted by outside counsel, the aspects of which will be discussed with the Consortium during the implementation of the mandate.
13
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Due Diligence and Guidance Process¹ (continued)
Step 5 (1–2 months)
Onsite Due Diligence Meeting
Standard
Due Diligence
Process
Additional
Emerging
ManagerFocused
Scrutiny
Guidance
Process
Step 6 (1 month)
Approval
Step 7 (ongoing)
Ongoing Monitoring and
Risk Management
• Meet with team, in a
group and individually
• Examine deal flow/
investment memos
and process
• Check risk management
systems
• Final meeting
• Investment Committee vote
to approve or decline
• Analyze capital calls
and distributions
• Request quarterly
questionnaire and update
call
• Attention to back-office
infrastructure, risk monitoring,
compliance
• Examine accounting systems and
prior/sample reports
• Assess institutional quality
of systems
• Seek advisory board seat
• Condition approval on
sufficient size
• Additional, regular contact with
Emerging Manager to
troubleshoot issues
• Feedback on systems
and infrastructure
• Advice on potential sale
of sponsor
• Feedback on modeling and
sophistication of reporting
• If decline, provide concrete
feedback
• Remain involved in Emerging
Manager’s efforts
• Provide continued feedback on
strategy, reporting, other issues
1. The above chart is for illustrative and discussion purposes only and is subject to change. The way we implement our investment strategy and process may change due to factors such as market and economic conditions.
As part of the investment process, certain legal and tax review is typically conducted by outside counsel, the aspects of which will be discussed with the Consortium during the implementation of the mandate.
14
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Franklin Templeton Real Estate Advisors: Established Track Record
Investment Performance—Highlights (USD)
Global Private Equity Value-Added Real Estate (1997) Composite1,2,3
Committed Capital:
$1.33 billion
Underlying Funds:
504
Investment Period:
June 16, 1997–December 31, 2008
Since Inception Annualized IRR:5
13.54% Gross of Fees
13.08% Net of Fees
1. Franklin Templeton Real Estate Advisors (“FTREA”) claims compliance with the Global Investment Performance Standards (GIPS®).
2. Past performance does not guarantee future results and results may differ over future time periods.
3. Effective January 1, 2007, the global REIT and private equity real estate assets of the firm known previously as Fiduciary Global Advisors (and, prior to January 1, 2006, as Fiduciary Trust Company International) were
redefined to comprise their own firm, Franklin Templeton Real Estate Advisors (“FTREA”). The real estate investment team formerly associated with Fiduciary Global Advisors remains in place. Please see accompanying full
performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®) and the Important Information page in the Appendix.
4. Total assets for the Vintage Year 1997 Composite exclude three fund investments made by the client whose account is in the composite prior to FTREA’s engagement as advisor. Those investments are not included as those
investments were not selected by FTREA.
5. Gross of fees performance has been presented as gross of investment advisory fees paid to FTREA but is net of transaction expenses, administrative, legal and accounting expenses, and all fees and expenses related to the
constituent funds in the portfolio, including carried interest paid to the general partners of those funds. Net of fees performance reflects these same expenses and in addition reflects investment advisory fees, including
performance fees or carried interest, paid to FTREA. With respect to performance fees or carried interest which may be earned over and above the base investment advisory fee, FTREA collects such fees only when
distributions are made to investors and only if such distributions result in a rate of return that exceeds the contracted hurdle rate. The net of fees performance presented only includes carried interest that has actually been paid
and does not include carried interest that may be applicable if the account in the composite were liquidated as of the end of the period presented.
15
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Case Study: Sample Emerging Manager Fund
As of September 30, 2009
Profile
Rationale
Strategy
Acquisition,
Redevelopment or
Development
Asset Focus
Diversified
Geographic Focus
United States
Target Size
$250 million
Fund Review Process
• Conducted several due diligence meetings and met entire
investment team
• Performed an onsite visit and review of administrative and support
functions
• Reviewed the prior fund’s investment summaries and
business plans
• Reviewed the prior fund’s most recent quarterly and
annual reports
• Met with additional team members as they were brought on
• Evaluated Fund I’s performance against other funds of its vintage
• Assessed most recent asset valuations, valuation memos and
portfolio roll-up for the prior fund
• Held discussions with manager regarding leverage, debt maturities
for the prior fund and the status of upcoming maturities
• Focused, opportunistic, value-creation investment thesis
• The Fund uses a research-driven approach to identify trends and target
investment opportunities
• Risk-mitigating strategy through low-cost bases, optionality and
multiple liquidity points
• Targets markets are high barrier-to-entry markets throughout the
United States
• The Fund benefits from significant experience, relationships and
investment opportunities brought by the principals
• The team has developed strategic relationships with a diverse group of
operating partners experienced in value-added and opportunistic real
estate strategies
• The Fund has a strong pipeline and deal-sourcing capabilities
• Alignment—the principals will make a significant commitment to
the Fund.
• The manager’s first fund is performing well relative to other funds of
its vintage
• The Fund was conservative in its use of leverage in the prior fund and,
to date, has had favorable refinancing negotiations with its lenders
Fund Guidance Process
•
•
•
•
Introduced the manager to potential investors
Provided feedback on the team and targeted fund size
Provided background on public pension fund investment process
Provided feedback on quarterly and annual reporting
The information mentioned above is for illustration only. It is not intended to represent an actual or future portfolio holding. Instead it is intended to illustrate an example of the types of portfolio investments we have looked to for
our Private Real Estate strategy. Please see page 1 and the Important Information Page for additional important information.
16
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Sample Emerging Manager Pipeline¹
As of September 30, 2009
Fund
Anticipated
Fund Size Investment Focus
Manager 1—Fund II
$250 million Diversified
The Fund utilizes several strategies designed to create value and mitigate risk by identifying high-margin real estate opportunities, working with expert, local
operating partners to execute in high barrier-to-entry markets, and mitigating risk through an intensive management process.
Manager 2—Fund II
$200 million Diversified
The Fund has a value-added strategy to acquire a diversified portfolio of properties with long-term consistent cash flow. United States locations focus on six key
markets and consider the top-30 major U.S. real estate markets.
Manager 3—Fund II
$200 million Mixed Use, Office, Residential,
Retail; Southeastern U.S.
The Fund, leveraging its experience in the real estate advisory, development, construction and property management businesses, invests in value-added and
distressed assets primarily in the southeastern region of the United States.
Manager 4—Fund II
$700 million Diversified
Plans to acquire or make investments in well-located, supply-constrained urban markets where demand-supply imbalances exist. The Fund has identified 15 major
metropolitan markets within the U.S. that it believes possess more than $400 billion in aggregate projected urban capital investment potential.
Manager 5—Fund II
$300 million Diversified in Medical
Environments
The firm's unique strategy is to buy, assemble and reposition real estate around dynamic and growing medical environments. Target locations identified are in both
high-density urban and suburban community growth areas with the presence of dynamic and growing medical demand driver(s). The Fund focuses on unimproved
properties with redevelopment potential.
Manager 6—Fund I
$100 million Affordable Housing
The Fund will focus on the acquisition of portfolios of general partnership interests in existing Low Income Housing Tax Credit partnerships and also direct
investments of multifamily properties with affordable features, including workforce housing and projects utilizing tax-exempt bond financing.
Manager 7—Fund I
$150 million Hospitality
A real estate private equity group with a focus on the acquisition, development and operations of hotel assets.
Manager 8—Fund I
$150 million Distressed Multifamily
The sponsor will selectively acquire underperforming and distressed multifamily assets. Acquisition targets are properties that are underperforming or distressed due
to poor management, high debt service or upcoming loan maturities.
Manager 9—Fund I
$400 million Distressed Residential—Sunbelt The manager has extensive experience in repositioning and home building, and intends to work in partnership with select home builders to acquire and reposition
Region
distressed properties in supply-constrained metropolitan areas to create quality housing for working households.
Manager 10—Fund I
$150 million Green Office
The Fund will make value-added debt and equity-like investments in tax-exempt real estate held by nonprofit institutions. The strategy will be to acquire and retrofit
commercial real estate for nonprofit organizations who are committed to owning green real estate as an owner-occupant or nonprofit landlord in gateway cities.
Manager 11—Fund I
$200 million Office—Western U.S.
The Fund focuses on investments in western U.S. markets with strong projected job creation and significant barriers to entry. The Fund will pursue a flexible
investment strategy including discounted note purchases, recapitalization of distressed assets and the acquisition of value-added properties.
Manager 12—Fund I
$100 million Multifamily—Western U.S.
The sponsor, a multifamily real estate investor and operator, will acquire multifamily housing complexes located in metropolitan areas and in proximity to
employment centers and public transportation routes, primarily in the western United States.
Manager 13—Fund I
$150 million Diversified—Brownfields
Redevelopment
This Fund has been identified as a potential co-investment opportunity. The Fund will use environmentally and socially responsible technology and construction
practices to acquire, remediate and redevelop properties into community-supported highest- and best-use projects.
Investment Strategy
1. The above information is for illustrative and discussion purposes only and reflects our initial analysis and opinions as of 9.30.09. It is not intended to represent any actual or past portfolio holdings. Franklin
Templeton Institutional (“FTI”) is not the placement agent for any of the above investments. There is no assurance that FTI will have access to these investment opportunities or that FTI will be able to implement its
investment strategy to achieve its investment objectives. Various factors including market conditions, fund size and closing dates may also impact any proposed investment. These opinions may not be relied upon as
investment advice or an offer for a particular security. Statements of fact are from sources considered to be reliable, but no representation or warranty is made as to their completeness or accuracy.
Past performance does not guarantee future results and results may differ over future time periods. This information is being provided to the Illinois Consortium upon request for due diligence purposes.
17
R13689
Illinois Consortium Emerging Manager Program
Exhibit 10
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Important Information
Franklin Templeton Real Estate Advisors claims compliance with the Global Investment Performance Standards (GIPS®). Please see accompanying full performance presentation prepared in accordance with the
Global Investment Performance Standards (GIPS®).
Franklin Templeton Real Estate Advisors (“FTREA” or the “firm”) encompasses the global REIT and private equity real estate institutional accounts (“real estate assets”) managed by the Real Estate Group of Franklin Templeton
Institutional, LLC or its affiliates (together, “FTI”). Prior to January 1, 2007, these assets were part of the firm Fiduciary Global Advisors, which also included the institutional equity assets managed by FTI transferred on that date
to the Franklin Global Advisers unit of Franklin. Prior to January 1, 2006, the real estate assets under FTREA were managed by Fiduciary Trust Company International – Institutional Division, which included both the equity assets
that are now part of the Franklin Global Advisers unit of Franklin effective January 1, 2007 and the fixed income assets that were transferred to the Franklin Templeton Fixed Income unit of Franklin effective January 1, 2006. The
primary reason for establishing FTREA as a separate firm was to create greater focus for the real estate effort.
Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. As a firm that offers mutual funds with unique investment objectives that are subject
to varying regulatory requirements based on domicile of jurisdiction, FTREA may consider some of its mutual funds to be single account composites, for which the objective is as stated in each respective fund’s prospectus. To
receive a complete list and description of FTREA composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS® standards for any composite, contact your Franklin Templeton
institutional representative at 1.800.321.8563.
This publication is intended only as a general overview of the Franklin Templeton Real Estate Advisors private equity real estate management team and philosophy and is for informational purposes only. It has been prepared
solely for the use of the person to whom it has been delivered and may not be reproduced or used for any other purpose. It is not meant for the general public.
The risks associated with a private equity real estate strategy includes, but is not limited to various risks inherent in the ownership of real estate property, such as fluctuations in lease occupancy rates and operating expenses,
variations in rental schedules, which in turn may be adversely affected by general and local economic conditions, the supply and demand for real properties, zoning laws, rent control laws, real property tax rates, the availability
and costs of financing, environmental laws, and uninsured losses (generally from catastrophic events such as earthquakes, floods, and wars).
The global real estate market has historically been significantly and adversely impacted by economic recession. The effects of ongoing credit market challenges, combined with the ongoing correction in real estate market prices
and reduced levels of real estate sales, could result in further price reductions in real estate values, potentially adversely affecting the value of an account’s investments in underlying funds.
The success of private real estate funds in general is subject to risks related to (i) the quality of the management of the private real estate funds and of the projects in which the private real estate funds invest, (ii) the ability of the
management of the private real estate funds to successfully select investment opportunities, (iii) general market and economic conditions and (iv) the ability of the real estate funds to profitably make and liquidate
their investments.
Acquisitions of real estate investments by underlying private real estate funds entail the risk that such investments will fail to perform in accordance with expectations, including operating and leasing expectations. Redevelopment
and new project developments are subject to numerous risks, including construction delays, cost overruns or force majeure events that may increase project costs, new project commencement risks, such as receipt of zoning,
occupancy and other required approvals and permits and development costs associated with projects which are not pursued to completion.
An investment in an underlying private real estate fund will generally be illiquid and long term in nature and a client’s obligations (including capital contributions) to an underlying fund will not terminate upon the termination of an
investment management agreement with Franklin Templeton.
Performance will also be dependent on the ability of an underlying private real estate fund to access both debt and equity capital at rates and on terms that are acceptable. In addition, even if the underlying private real estate
funds are able to access debt capital initially, increased volatility in asset pricing increases the risk of margin calls, where applicable, or that the underlying private real estate funds will be unable to maintain compliance with their
various debt covenants, increasing the risk of default or the need to keep high reserve capacity, when available, which can adversely impact returns.
The information contained in this piece is not a complete analysis of every material fact regarding the market and any industry sector, a security, or a portfolio. Statements of fact cited by the manager have been obtained from
sources considered reliable but no representation is made as to the completeness or accuracy. Because market and economic conditions are subject to rapid change, opinions provided are valid only as of the date of the
material. Portfolio holdings and the manager’s analysis of these issuers, market sectors, and of the economic environment may have changed since the date of the material. The manager’s opinions are intended solely to provide
insight into how the manager analyzes securities and are not a recommendation or individual investment advice for any particular security, strategy, or investment product.
This presentation contains certain performance and statistical information. There is no assurance that investment objectives or intended results will be achieved. Past performance does not guarantee future results and
results may differ over future time periods.
Indices are unmanaged and one cannot invest directly in an index. The performance of an individual portfolio may differ from that of a benchmark, representative account or composite included herein for various reasons,
including but not limited to, the objectives, limitations or investment strategies of a particular portfolio. Management fees will reduce the rate of return on any particular account or portfolios.
All investments are subject to certain risks. Generally, investments offering the potential for higher returns are accompanied by a higher degree of risk. Bond prices are affected by interest rate changes. High-yield, lower-rated
(junk) bonds generally have greater price swings and higher default risks. Foreign investing, especially in developing countries, has additional risks such as currency and market volatility and political or social instability.
This piece is intended for institutional investment management consultants or investors interested in institutional products and services available through Franklin Templeton Institutional and its affiliates. Various account
minimums or other eligibility qualifications apply depending on the investment strategy or vehicle.
18
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Investment Performance (USD)
Global Private Equity Value-Added Real Estate (1997) Composite1
Committed Capital
(USD Millions)
$30.0
$58.7
$155.7
$209.4
$227.9
$257.9
$323.8
$577.1
$1,006.8
$1,034.3
$1,240.7
$1,333.0
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Year
2002
2003
2004
2005
2006
2007
2008
Paid-In Capital
(USD Millions)
$190.5
$228.3
$303.6
$555.8
$702.7
$975.7
$1,168.2
Invested Capital
(USD Millions)4
$429.7
$561.0
$707.6
Annualized
Since-Incept IRR
(Gross of Fees)2
-3.79%
-9.29%
1.87%
-3.54%
13.48%
12.60%
10.55%
11.67%
14.31%
21.86%
22.47%
13.54%
Cumulative
Distributions
(USD Millions)
$65.2
$105.8
$189.3
$302.1
$482.3
$845.3
$901.9
Annualized
Since-Incept IRR
(Net of Fees)2
-3.79%
-10.49%
1.03%
-4.95%
12.20%
11.71%
9.80%
11.04%
13.77%
21.40%
21.90%
13.08%
Residual Value or
Terminal Value
(USD Millions)5
$178.0
$183.8
$227.5
$419.8
$670.6
$710.2
$594.3
Composite Assets
(USD Millions)
$3.0
$16.0
$54.7
$100.2
$158.8
$178.0
$183.8
$227.5
$419.8
$670.6
$710.2
$594.3
Total Value =
Residual Value plus
Investment Multiple =
Cumulative
Total Value/Paid-In
Distributions
Capital (TVPI)
(USD Millions)
$243.2
1.28
$289.6
1.27
$416.8
1.37
$721.9
1.30
$1,152.9
1.64
$1,555.6
1.59
$1,496.2
1.28
Total Firm Assets
(USD Millions)3
$189.1
$138.9
$165.6
$264.8
$411.5
$496.2
$557.0
$622.4
$1,461.5
$2,136.5
$4,677.6
$4,250.4
Realisation Multiple =
Cumulative
Distributions/Paid-In
Capital (DPI)
0.34
0.46
0.62
0.54
0.97
0.87
0.77
Paid-In Capital/
Committed
Capital (PIC
Multiple)
73.87%
70.51%
52.61%
55.20%
67.94%
78.64%
87.39%
Residual
Value/Paid-In
Capital (RVPI)
93.43%
80.52%
74.93%
75.53%
95.43%
72.79%
50.87%
1. Franklin Templeton Real Estate Advisors (“FTREA”) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
2. Gross of fees performance has been presented as gross of investment advisory fees paid to Franklin Templeton Real Estate Advisors (“FTREA”) but is net of transaction expenses, administrative, legal and accounting expenses,
and all fees and expenses related to the constituent funds in the portfolio, including carried interest paid to the general partners of those funds. Net of fees performance reflects these same expenses and in addition reflects
investment advisory fees, including performance fees or carried interest, paid to FTREA. With respect to performance fees or carried interest which may be earned over and above the base investment advisory fee, FTREA
collects such fees only when distributions are made to investors and only if such distributions result in a rate of return that exceeds the contracted hurdle rate. The net of fees performance presented only includes carried interest
that has actually been paid and does not include carried interest that may be applicable if the account in the composite were liquidated as of the end of the period presented.
3. Firm assets are presented based on the current definition of Franklin Templeton Real Estate Advisors, formerly the Real Estate Group of Fiduciary Global Advisors and, before that, of Fiduciary Trust Company International.
Please see footnote 1 in the attached disclosure for further information on changes to the firm definition that have occurred historically. Assets transferred from Franklin Advisers, Inc., an affiliated but separate firm, are included
only from the date of any such transfer.
4. Figures for invested capital are not available prior to January 2006, as the underlying investments in the fund of funds structure did not provide this information prior to that date.
5. Unrealized appreciation/depreciation, defined to be Residual Value less Invested Capital, was ($113.3) million as of the end of December 2008.
Past performance does not guarantee future results and results may differ over future time periods.
See the accompanying Definitions page for an explanation of the ratios presented.
19
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Supplemental Information (All Figures in USD): IRR Performance by Vintage Year
Global Private Equity Value-Added Real Estate (1997) Composite1
Year
1997
Annualized
Committed
Period IRR2
Capital
(Gross of Fees)3 (USD Millions)
5.55%
$30.0
Paid-In Capital
(USD Millions)
$30.1
Invested
Cumulative
Capital
Distributions
(USD Millions)4 (USD Millions)
$2.2
$35.1
Residual Value
or Terminal
Value
(USD Millions)
$4.7
Total Value = Residual
Value plus Cumulative
Distributions
(USD Millions)
$39.8
Investment
Multiple = Total
Value/Paid-In
Capital (TVPI)
1.32
Realization Multiple
= Cumulative
Distributions/Paid-In
Capital (DPI)
1.17
Paid-In Capital/
Committed
Capital (PIC
Multiple)
100.22%
Residual
Value/Paid-In
Capital (RVPI)
15.59%
14.30%
1998
13.73%
$34.3
$30.5
$3.5
$46.3
$4.4
$50.7
1.66
1.52
89.05%
1999
14.43%
$100.0
$83.7
$3.8
$130.5
$7.8
$138.3
1.65
1.56
83.67%
9.30%
2000
16.47%
$61.4
$51.8
$8.5
$77.4
$15.5
$92.9
1.79
1.49
84.34%
29.89%
2001
21.89%
$20.0
$20.0
$4.9
$28.0
$4.9
$32.8
1.64
1.40
99.94%
24.45%
2002
27.15%
$26.9
$26.9
$1.3
$43.7
$9.3
$53.1
1.97
1.62
100.15%
34.65%
2003
24.37%
$65.1
$54.3
$24.5
$67.3
$22.1
$89.4
1.65
1.24
83.39%
40.75%
2004
20.12%
$214.6
$209.5
$110.6
$193.1
$96.4
$289.5
1.38
0.92
97.63%
46.03%
2005
11.40%
$472.9
$486.4
$410.1
$268.0
$303.8
$571.8
1.18
0.55
102.84%
62.47%
2006
-27.49%
$35.0
$14.9
$6.1
$5.2
$5.4
$10.6
0.72
0.35
42.49%
36.48%
2007
-33.64%
$145.9
$98.1
$80.4
$7.2
$60.6
$67.8
0.69
0.07
67.22%
61.79%
20085
-5.54%
$126.9
$62.0
$51.8
–
$59.3
$59.3
0.96
–
48.87%
95.65%
1. Internal Rates of Return (IRRs) by year of initial capital drawdown (“Vintage Year”) for the constituent investments in the composite are provided as supplemental information to the performance presentation for
the Franklin Templeton Real Estate Advisors Global Private Equity Value-Added Real Estate (1997) Composite that has been prepared in accordance with the GIPS® standards.
2. The annualized period IRRs indicated on this page are calculated in a different manner on this page vs. the since-inception IRRs in the performance presentation presented in accordance with GIPS®. On this page, the IRRs for
each period shown are calculated using just the cash flows related to the investments initially funded in each “vintage” year up through to the present, including the residual or terminal value for just those investments funded in a
given year. The annualized period IRR for the year 1997, for example, includes only the cash flows through December 31, 2008 (contributions and disbursements) plus the terminal value as of December 31, 2008 for just the
investments initially funded in 1997. Similarly, the annualized period IRR for the year 1998 includes only the cash flows through December 31, 2008 plus the terminal value as of December 31, 2008 for just the investments funded
in 1998. If no investments were funded in a given period (e.g., the first six months of 2008), then no figures are shown for that period.
3. Gross of fees performance has been presented as gross of investment advisory fees paid to Franklin Templeton Real Estate Advisors (FTREA) but is net of transaction expenses, administrative, legal and accounting expenses,
and all fees and expenses related to the constituent funds in the portfolio, including carried interest paid to the general partners of those funds. Net of fees performance is not available by vintage year carve-out. Actual net of fees
performance will be impacted by investment management fees, including performance-based fees, the effect of which will be to reduce performance. This data is presented as supplemental information to the performance
presentation prepared in accordance with the GIPS® standards.
4. Figures for invested capital are as of December 2008 for the constituent investments in the composite according to the year in which the initial capital drawdown occurred.
5. The IRR presented for the 2008 vintage year carve-out represents an investment period less than one full year. Therefore, the IRR for the 2008 vintage year carve-out is not annualized.
Past performance does not guarantee future results and results may differ over future time periods.
See the accompanying Definitions page for an explanation of the ratios presented.
20
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Investment Performance (USD)—Definitions
Global Private Equity Value-Added Real Estate (1997) Composite
Definitions:
Committed Capital:
Since-Incept IRR:
Annualized Period IRR:1
Paid-In Capital:
Invested Capital:
Cumulative Distributions:
Residual Value:
Total Value:
Pledges of capital to a private equity fund. This figure is typically drawn down over a period of years, starting when the private equity fund was first formed.
The since-inception internal rate of return (SI-IRR) represents the annualized implied discount rate that equates the present value of all the cash inflows (drawdowns of capital) associated with the
investments in the portfolio with the sum of the present value of all the cash outflows (such as distributions or return of capital) accruing from those investments and the present value of the unrealized
residual value (unliquidated positions) as of the end of the period. Cash flows are day weighted according to the actual date of each cash flow. SI-IRRs for the different time periods are calculated from all
such cash flows starting from inception (6/16/97)) through to the end of each calendar year or time period presented. The SI-IRR for 2005, for example, is calculated from just the cash flows from inception
(6/16/97) through to the end of calendar year 2005, excluding cash flows from following years.
The vintage year annualized period IRRs for each period shown are calculated using just the cash flows related to the investments initially funded in each “vintage” year up through to the present, including
the residual or terminal value for just those investments funded in a given year. The annualized period IRR for the year 1997, for example, includes only the cash flows through December 31, 2008
(contributions and disbursements) plus the terminal value as of December 31, 2008 for just the investments initially funded in 1997. Similarly, the annualized period IRR for the year 1998 includes only the
cash flows through December 31, 2008 plus the terminal value as of December 31, 2008 for just the investments funded in 1998. If no investments were funded in a given period (e.g., the first six months of
2008), then no figures are shown for that period. The annualized period IRRs shown for each vintage year are gross of all investment management fees, including any performance-based fees.
The amount of committed capital an investor has actually transferred to a private equity fund. Also known as cumulative drawdown amount.
The amount of paid-in capital that has been invested in portfolio investments.
Cash or the value of stock disbursed (cumulatively) to the investors of the private equity fund.
The remaining equity that an investor has in the fund, i.e., the value of the investments within the fund as of a certain date. Also referred to as the ending market value.
Residual value of the portfolio plus cumulative distributed capital.
1. Provided as Supplemental Information to show IRR performance by vintage year.
21
Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Notes to Performance Presentation for Franklin Templeton Real Estate Advisors
Global Private Equity Value-Added Real Estate (1997) Composite
1. Firm Definition—Franklin Templeton Real Estate Advisors (“FTREA” or the “firm”) encompasses the global REIT and private equity real estate institutional accounts (“real estate assets”) managed by the Real
Estate Group of Franklin Templeton Institutional, LLC or its affiliates (together, “FTI”). Prior to January 1, 2007, these assets were part of the firm Fiduciary Global Advisors, which also included the institutional
equity assets managed by FTI transferred on that date to the Franklin Global Advisers unit of Franklin. Prior to January 1, 2006, the real estate assets under FTREA were managed by Fiduciary Trust Company
International—Institutional Division, which included both the equity assets that are now part of the Franklin Global Advisers unit of Franklin effective January 1, 2007 and the fixed income assets that were transferred to the
Franklin Templeton Fixed Income unit of Franklin effective January 1, 2006. The primary reason for establishing FTREA as a separate firm was to create greater focus for the real estate effort.
2. Figures presented for total firm assets include only the global REIT and private equity real estate assets transferred from Fiduciary Global Advisors effective January 1, 2007 to Franklin Templeton Real Estate
Advisors, which became its own firm on that date. Substantially all the investment decision makers employed previously by Fiduciary Global Advisors (formerly part of Fiduciary Trust Company International—
Institutional Division) joined FTREA. In addition, the staff and decision-making process remained intact and independent, and the records that document and support performance of the accounts at the
predecessor firms are available for all accounts. As such, the performance portability provisions of the Global Investment Performance Standards (GIPS®) apply, and the performance track record of the firm’s
composites goes back to the inception of the respective accounts. Assets transferred from Franklin Advisers, Inc., to FTREA are added to firm’s assets under management from the date of any such transfer
and the performance portability provisions of the GIPS® standards apply in any such case as well. Both Fiduciary Global Advisors and Franklin as defined claimed compliance with the GIPS® standards
effective January 1, 2000 prior to each transfer. The assets under management figure is based on fair market value for internally administered accounts and on assets upon which investment management fees
are collected for externally administered funds.
3. Composite Description—The FTREA Global Private Equity Value-Added Real Estate (1997) Composite consists of all portfolios managed with an investment objective that seeks to provide above-average returns by
investing in closed-end tax-efficient private equity real estate funds where the first year of capital takedown to invest in such funds was 1997 (known as the “vintage year”). The strategy pursues this objective by seeking to
source, select and monitor the best real estate managers capable of exploiting local inefficiencies in real estate markets, applying a value-added approach that seeks to identify undervalued investments with capital
appreciation potential. The value-added strategy encompasses redevelopment, releasing and/or repositioning of properties, and is applied to existing multifamily, commercial, retail, industrial and hotel/leisure properties in
primary and secondary markets. The composite consists of one fee-paying account, which is legally advisory due to the nature of private equity separate accounts (where clients need to sign off on capital drawdowns) but is
deemed discretionary for composite purposes. The account invests in closed-end private equity funds and seeks to maintain an invested capital based of approximately 500 million AUD (or 350 million USD at prevailing
foreign exchange rates). There are other accounts managed by FTREA that pursue the same strategy, but their initial takedown of capital occurred in later years, so they are not included in this composite for vintage year
1997. The inception date of the composite is June 16, 1997. The composite creation date is April 30, 2006. The composite performance is in compliance with GIPS® from January 1, 2000 to the present. The closed-end private
equity real estate funds that the strategy invests in employ leverage, averaging approximately 50–70% of assets of the underlying funds.
4. Basis of Presentation and Calculation Methodology—The composite performance results are presented in U.S. dollars (USD) and have been expressed as cumulative since inception internal rates of return (SI-IRR) based
on the aggregation of all the cash flows related to the constituent funds in the portfolio, as if from one investment. The SI-IRR represents the annualized implied discount rate that equates the present value of all the cash
inflows (drawdowns of capital) associated with the investments in the portfolio with the sum of the present value of all the cash outflows (such as distributions or return of capital) accruing from those investments and the
present value of the unrealized residual value (unliquidated positions) as of the end of the period. Cash flows are day weighted according to the actual date of each cash flow. SI-IRRs for the different time periods are
calculated from all such cash flows starting from inception through to the end of each calendar year or time period presented. The SI-IRR for 2005, for example, is calculated from just the cash flows from inception through to
the end of calendar year 2005, excluding cash flows from following years. Gross of fees performance has been presented as gross of investment advisory fees paid to Franklin Templeton Real Estate Advisors (FTREA) but is
net of transaction expenses, administrative, legal and accounting expenses, and all fees and expenses related to the constituent funds in the portfolio, including carried interest paid to the general partners of those funds. Net
of fees performance reflects these same expenses and in addition reflects investment advisory fees, including performance fees or carried interest, paid to FTREA. With respect to performance fees or carried interest which
may be earned over and above the base investment advisory fee, FTREA collects such fees only when distributions are made to investors and only if such distributions result in a rate of return that exceeds the contracted
hurdle rate. The net of fees performance presented only includes carried interest that has actually been paid and does not include carried interest that may be applicable if the account in the composite were liquidated as of the
end of the period presented. This report is intended for one-on-one presentations. The terminal value for the funds in the portfolio are valued at fair market value, using either valuations supplied by the fund management
companies or, where available, independent appraisals performed by external auditors as published in the financial statements of the funds. Such independent appraisals are available at least annually and, in some cases,
semiannually, but on varying dates depending on the fiscal years of the underlying funds. Valuation review procedures include sending a questionnaire to each fund management company and cross-checking the valuations
and cash flows supplied by each fund management company against the books and records maintained by FTREA for the one account in the composite. Additional information on valuation review procedures is available upon
request. The base currency of the account in the composite is Australian dollars (AUD), although most of the funds in the portfolio are USD based. Terminal values not in AUD are valued by the custodian using its foreign
exchange rates. Cash flows from each of the underlying funds in the portfolio were obtained directly from the fund management companies in the base currency of each fund. The resulting cash flows, including the terminal
values, have been, for purposes of this presentation, converted to U.S. dollars as needed using foreign exchange rates supplied by FactSet. Past performance does not guarantee future results and results may differ
over future time periods.
5. Description of Index—The composite is not compared to an index since no appropriate index exists that encompasses private equity real estate investments on a global basis.
6. Minimum Account Size—The minimum account size required to be included in this composite is currently $50 million (or its equivalent in Australian dollars) based on committed capital. Prior to January 1, 1998, the minimum
account required to be included in this composite was $30 million, based on committed capital.
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Exhibit 10
R13689
Illinois Consortium Emerging Manager Program
FRANKLIN TEMPLETON REAL ESTATE ADVISORS
Notes to Performance Presentation for Franklin Templeton Real Estate Advisors
Global Private Equity Value-Added Real Estate (1997) Composite (continued)
7. Investment Advisory Fees—The current investment management fee schedule for separate accounts within this mandate is as follows: 0.50% on committed capital during the commitment period, 0.50% on the invested
capital thereafter, plus a 20% performance fee over a 10% hurdle rate. The current investment management fee schedule for separate accounts is not used in calculating the net of fees performance for this composite. Please
refer to Footnote 4 that discusses the Basis of Presentation and Calculation Methodology for composite performance net and gross of fees. The actual management fees paid in the composite is different than the current
investment management fee schedule for separate accounts.
8. Measure of Dispersion—Dispersion represents the consistency of FTREA’s results with respect to individual portfolio internal rates of return within the composite. Since the composite consists of only one account, there is no
dispersion to measure.
9. Additional Information—Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. As a firm that offers mutual funds with unique
investment objectives that are subject to varying regulatory requirements based on domicile of jurisdiction, FTREA may consider some of its mutual funds to be single account composites, for which the objective is as stated in
each respective fund’s prospectus. To receive a complete list and description of FTREA composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS® standards for any
composite, contact your Franklin Templeton institutional representative at 1.800.321.8563.
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Exhibit 10
FRANKLIN TEMPLETON REAL ESTATE
Franklin Templeton Real Estate Advisors
MARC WEIDNER
Managing Director
Franklin Templeton Real Estate Advisors
New York, New York, United States
Marc Weidner has over 17 years of investment experience in sourcing, valuing, structuring and transacting global real estate. Mr. Weidner
joined Franklin Templeton in early 2002 and is a member of the Global Investment Committee of Franklin Templeton Real Estate Advisors.
In addition, he is a member of its Management Committee and in this capacity serves as Head of Investments. Prior to joining Franklin
Templeton, he worked in the investment banking group of DLJ/Credit Suisse First Boston in London and New York where he originated,
structured and underwrote real estate private equity funds in Europe and the United States. Prior to joining DLJ/CSFB, he was with Security
Capital Group in London where he worked on origination and business development for the private equity fund of Security Capital. Mr.
Weidner holds an M.B.A. from Cornell University where he was a Fulbright scholar. He holds a Master’s degree in Political Science and
International Relations, magna cum laude, and a B.A. in Business Management, magna cum laude, from Louvain-la-Neuve, Belgium. Mr.
Weidner is a member of INREV and PREA, and is a faculty member in the M.S. in Real Estate Development program at Columbia
University.
24
Exhibit 10
FRANKLIN TEMPLETON REAL ESTATE
Franklin Templeton Real Estate Advisors
LARISSA HERCZEG
Vice President
Franklin Templeton Real Estate Advisors
New York, New York, United States
Larissa Herczeg joined Franklin Templeton in April of 2008, and is responsible for sourcing and conducting due diligence on private real
estate fund investments primarily in the Americas. Prior to joining Franklin Templeton, Ms. Herczeg was employed with the Credit Suisse
Customized Fund Investment Group (CFIG). While at CFIG, Ms. Herczeg was responsible for sourcing, conducting due diligence on, and
monitoring the real estate portfolio of direct and indirect real estate investments, and was also involved in relationship management and
business and product development for private equity and real estate clients. Prior to joining Credit Suisse, Ms. Herczeg was an associate in
the corporate finance group of the global law firm Clifford Chance US LLP from 2000 to 2005. Ms. Herczeg received a B.A. with honors in
Government and Economics from the University of Notre Dame, a Master’s degree with honors in International Affairs from Columbia
University’s School of International and Public Affairs and a Juris Doctor degree with honors from Columbia University Law School. Ms.
Herczeg is a member of PREA, a co-founder of New York Women in Real Estate, a mentor for the Toigo Foundation and a member of the
National Association of Securities Professionals.
25
Exhibit 10
FRANKLIN TEMPLETON REAL ESTATE
Franklin Templeton Real Estate Advisors
DANITA JOHNSON
Investment Manager
Franklin Templeton Real Estate Advisors
New York, New York, United States
Danita Johnson joined Franklin Templeton in October of 2007 and is actively involved in sourcing and underwriting global private real
estate investment vehicles. Prior to joining Franklin Templeton Investments, Ms. Johnson worked as an investment officer for the New
York City Comptroller’s Office where she assisted with the oversight of the New York City Retirement Systems’ private equity real estate
investment portfolio. She previously worked with Prudential Financial in the Equity Research Group where she was involved with the
research and analysis of publicly traded corporations in the Healthcare sector and with Credit Suisse First Boston in the Credit Risk
Management Division where she facilitated the development and implementation of a global credit exposure and risk monitoring business
application system. Ms. Johnson holds a B.A. in Economics from the University of North Carolina at Chapel Hill and is a member of the
Real Estate Executive Council and the National Association of Securities Professionals.
26