MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 26, 2024 Present: Chair Johnathan Todd, Vice Chair Ronnie K. Baty. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Secretary/Treasurer Shayla Griggs, Trustee Joseph "Jody" Hudgins, and Trustee Tyler Rossnagle. 1. CALL MEETING TO ORDER: Presenter(s): Chair Todd. Chair Todd called the regular meeting of the City of Sarasota (City), Police Officers' Pension Plan (Plan) Board of Trustees to order at 8:15 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Pension Plans Administrator Martin. Pension Plans Administrator Martin led the Board and those in attendance in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Todd. Vice Chair Baty stated for the record, "We may disagree, but we will be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks." 4. ROLL CALL: Presenter: Pension Plans Administrator Martin. Pension Plans Administrator Martin called roll. Secretary/Treasurer: Griggs, Trustee Hudgins, and Trustee Rossnagle were not present. Attorney Christiansen advised that the Board did not have a quorum to conduct business. 5. PUBLIC INPUT: 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of June 28, 2024. Presenter(s): Chair Todd. Chair Todd asked for the approval of the minutes oft the. June 28, 2024, meeting to be placed on the September 27, 2024, Regular Meeting agenda. 7. RETIREMENT REQUESTS: None. 8. INVESTMENT PERFORMANCE REVIEW: Book 1 Page 411 07-26-2024 8:15 a.m. 8.1. Presentation and Discussion Re Franklin Templeton, Investment Performance Review for Period Ending June 30, 2024. Presenter(s): Ann Reitman, CFA, Institutional Portfolio Manager; Michael Agnello, Client Relations Manager, Client Services; Franklin Templeton. Ann Reitman and Michael Agnello of Franklin Templeton (Franklin) appeared before the Board and introduced themselves. Mr. Agnello thanked the Plan for its business, noted the Plan is invested in Franklin's Small Cap Growth strategy, and advised that, on January 1, 2024, Franklin completed its acquisition of Putnam Investments. Ms. Reitman reviewed Franklin's management team as listed on page 6 of the presentation materials, and its investment philosophy and approach, as detailed on page 8 of the materials. On the Investment performance page, Ms. Reitman reviewed the Average Annual Total Returns, noting the portfolio outperformed the index, both gross and net of fees over the 1-year and greater timeframes including Since Inception; she noted the challenges the market faced in 2022 which is reflected in the negative absolute 3- year returns. The portfolio outperformed the index in 12 of the 19 fiscal years since inception. She discussed the market influences since the COVID-19 pandemic, noting that mega-cap-stocks outperformed. She opined that, following periods when the spread between large cap and small cap equities is greater than 5% in a given 10-year period, as is currently occurring, small caps have outperformed. Stock selection drove the portfolio's performance, as should be expected from a bottom-up manager; Wing Stop, Onto Innovation, and Freshpet, Inc. were the 3 top performing stocks in the portfolio. The portfolio is diversified across all sectors but skewed towards growth; the portfolio currently has no utility stocks because Franklin is currently not finding utility stocks which meet its investment criteria. Ms. Reitman provided a market outlook. Franklin is confident in the portfolio's growth positioning; it asserts the market is anticipating the Federal Reserve (Fed) to reduce short-term interest rates only once by the end of the year, and the market has priced stocks accordingly. The Board had no questions for Ms. Reitman or Mr. Agnello and thanked them for their presentation. 8.2. Presentation and Discussion Re: JP Morgan, Investment Performance Review for Period Ending June 30, 2024. Presenter(s): Katie Hammond, Client Advisor; Lily Colley, Investment Specialist; Larry Ostow, Investment Specialist; JP Morgan (Telephonic). Katie Hammond, Lily Colley, and Larry Ostow of JP Morgan appeared before the Board telephonically and introduced themselves. Mr. Ostow reviewed the page of the materials titled 2024 Action Plan, noting that the 3 stated goals in the materials are a continuation of JP Morgan's Strategic Property Fund's (SPF's) multi-year portfolio repositioning to be closer to the ODCE Index, generate liquidity, and preserve alpha and asset selection. In liquidating Office sector assets, JP Morgan anticipates incrementally investing in extended sectors in Industrial, outdoor storage, truck terminals, and single-family, built-to-rent, housing. He asserted that JP Morgan is strategically selling off assets to address the $7.3 billion redemption queue while preserving the portfolio's most valued assets. On the page titled Elevated interest rates continue to impact values, Mr. Ostow advised that he will present 2Q 2024 performance results which are not stated in the materials. In Q2 2024, the SPF's levered return was 1.36%, which is 95 basis points (bps) of income, 25 bps of property depreciation, and 16 bps of debt marked to market. He noted this has been thet first quarter of positive performance since broad-based market repricing began in mid-2022; this may be a bottom of the market cycle and entry point to reprice the core portfolio. Retail, which had strong lease trade-outs, and industrial, which has strong rent growth and mark- to-market opportunities, were the biggest contributors to the portfolio's performance. Residential was flat and, although Office was negative as expected, it was less negative than had been seen previously; marks were found on the west coast in focused markets. In looking at the aggregate, 3Q 2022 to 2Q 2024 performance, the portfolio experienced approximately 28% depreciation on a levered basis; unlevered, the Book 1 Page 412 07-26-2024 8:15 a.m. Book 1 Page 413 07-26-2024 8:15 a.m. portfolio experienced approximately 22% depreciation. Rent growth continued to be solid in both the Residential and Industrial sectors, which led to significant depreciation. Retail was down only 4% as it was the most resilient sector during the most recent, interest rate-driven repricing period as the real estate market recovers from the COVID-19 pandemic. Office saw the most significant repricing and remains the most operationally challenged sector because of slow fundamentals and impacts from capital market assumptions; he reiterated that the market cycle may have bottomed out and be in the process of rebounding. Turning to page 17 ofthe materials, Mr. Ostow discussed the portfolio's attribution during this repricing period in 2022. While the office sector underperformed, the outperforming Retail sector offset a large portion of those losses. The 2 key drivers of underperformance during this repriçing period were leverage and the Industrial marks relative to the peers. He explained that the SPF has traditionally kept higher leverage than the index; it is approximately 350 basis points, which is a conservative amount considering the portfolio's 31% loan-to-value. However, higher leverage during a period of repricing and volatility magnifies the downturn. Now that values are finding a bottom, Mr. Ostow predicted the portfolio's higher leverage will become a tailwind to drive performance. Regarding Industrial marks, the SPF has taken approximately 700 bps more than the benchmark. He asserted that either the portfolio's marks were too severe, and it will recover more quickly than the benchmark or the benchmark's marks were not deep enough, and the benchmark will need to recognize those marks as it begins transacting in the market. In either scenario, the Industrial sector will eventually tur and become a driver of performance in the portfolio. Referencing page 18 of the materials, Mr. Ostow compared the SPF's 4% mark when it sells properties to its peers' 15% ini the last quarter, and the SPF's 22% mark compared to its peers' 46% during the Q3 2022 to Q1 2024 timeframe; this suggests its. peers' marks do not reflect market realities. Mr. Ostow reviewed page 20 of the materials, noting that in 2020, the portfolio's Industrial allocation was approximately 18%; today it is nearly 34%, and the portfolio's largest sector. It is currently slightly underweight in Industrials due to a slight slowing in fundamentals; JP Morgan has sold approximately $1 billion in older Industrial properties during the past year where it found solid pricing. He reiterated that it is strategically positioning its Industrial allocation in advance of an anticipated market upswing to maintain control while being able to execute on the strategic disposition. It has sold over $5 billion in Office properties which reduces that allocation from 37% in 2020 to 16% as of now. JP Morgan has also sold $5 billion in Retail properties; while this provides more liquidity to satisfy its redemption queue, it also intends to grow its Residential allocation to focus its efforts on affordable housing and all of its assets are within the 65th percentile of rent within their respective markets. The SPF portfolio is healthy, as evidenced by a net operating income growth increase from 6.7% in 2022 to 11.6% by the end of 2023; it anticipates closing 2024 above 30%. On the page titled Balance sheet, Mr. Ostow explained that 88% of its debt is interest-rate protected. The portfolio has a contribution queue of approximately $796 million; the strategy recently received a $170 million reinvestment, which is in addition to the stated contribution queue amount. JP Morgan's stated goal is to issue $2 billion in redemptions in 2024, and an additional $2 billion in 2025. It is also offering a 30% fee credit to investors which have 20% or less of their net asset value in the redemption queue; the Plan is currently not eligible for the fee credit, and the deadline to participate during Q3 2024 is August 31, 2024. The Board had no questions for Mr. Ostow and thanked JP Morgan for their presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: 11. ATTORNEY MATTERS: Attorney Christiansen advised the City should be receiving Chapter 185 Share Plan money from the State of Florida within the next month; State law requires the City to relay the Share Plan money to the Plan within 5 days; as of July 25, 2024, the State has not advised how much money will be issued. There are 2 disability applications which will be reviewed by the Board at a Special Meeting scheduled for September 30, 2024; all of the respective records have been forwarded to Attorney Stuart Kaufman for his review and presentation. Attorney Tonya Oliver is representing both applicants and they had requested a delay to their respective hearing sO that the most trustees would be present for their hearing. To Trustee Baty's question, Attorney Christiansen advised that supplemental information for Officer Pangallo had been provided to the Independent Medical Examination physician for review; Attorney Christiansen has not received a response to date. The City Commission adopted the proposed ordinance which now affords the Board more authority to make investment decisions. He has notified the Plan's Investment Consultant, Larry Cole, and Pension Administration forwarded a copy of the ordinance to the State of Florida as required. As previously noted, Attorney Christiansen advised this is his last meeting with the Plan before his retirement and thanked the Board for the opportunity to serve. Chair Todd and Trustee Baty, on behalf of the Board, thanked Attorney Christiansen for his professional, comprehensive, and sound counsel to the Plan and presented a commemorative plaque of appreciation. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Asset Allocation as of July 15, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of July 15, 2024. The Board had no questions. 13. ADJOURN. Chair Todd adjourned the meeting at 8:54 a.m. Aas 2 Chair Johnathan Todd Secfetareaburer Shayla Griggs Book 1 Page 414 07-26-2024 8:15 a.m.