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Are You Ready for Massive Disruptions?

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For Reference of NECA Now 2019 Attendees Only 1 Are You Ready for Massive Disruptions? Are You Ready for Massive Disruptions? Jeffrey Kanne National Real Estate Advisors This session is eligible for 1.25 Continuing Education Hours. To earn these hours you must: • Have your badge scanned in and out at the door • Attend 90% of this presentation • Fill out the online evaluation for this session: www.necanet.org/NNSurvey2019
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Page 1: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 1

Are You Ready for Massive Disruptions?

Are You Ready for Massive Disruptions?

Jeffrey KanneNational Real Estate Advisors

This session is eligible for 1.25 Continuing Education Hours.

To earn these hours you must:• Have your badge scanned in and out at the door• Attend 90% of this presentation• Fill out the online evaluation for this session:

www.necanet.org/NNSurvey2019

Page 2: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 2

www.na tadv i so r s . c omDisruptorsApril 2019

The Disruptors

I. Demographic Trends

II. Automation

III.Climate Change

Page 3: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 3

I. Demographics

Demographic Trends

I. Stage 1a. High birthrates, high death ratesb. Stable population

II. Stage 2a. High birthrates, low death ratesb. Population growth

III. Stage 3a. Low birthrates, low death ratesb. Population aging

IV. Stage 4a. Low birthrates, low death ratesb. Population decline

‐10% ‐5% 0% 5% 10%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

‐7% ‐2% 3%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Page 4: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 4

Population Comparisons: 1980United States China Europe

Source: United Nations Department of Economic and Social Affairs

5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Population: 224m Population: 1.0b Population: 74m

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

14% of population over 60 7% of population over 60 16% of population over 60

‐7% 0% 7%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Men Women Men Women Men Women

Population Comparisons: 2015United States China Europe

Source: United Nations Department of Economic and Social Affairs

Population: 322m Population: 1.4b Population: 740m

5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

21% of population over 60 15% of population over 60 24% of population over 60

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Men Women Men Women Men Women

Page 5: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 5

Population Comparisons: 2050United States China Europe

36% of the population over the age of 60

Source: United Nations Department of Economic and Social Affairs

Population: 389m Population: 1.4b Population: 705m

5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

34% of the population over the age of 60

28% of the population over the age of 60

Men Women Men Women Men Women

U.S. ImmigrationU.S. Population

Source: U.S. Census

Population: 322m

‐12 ‐6 0 6 12

100+

90‐94

80‐84

70‐74

60‐64

50‐54

40‐44

30‐34

20‐24

10‐14

0‐4

Millions21% of the population over the

age of 6029% of the population over the

age of 60

w/o Immigrants and their Children

Population: 255m

‐12 ‐6 0 6 12

100+

90‐94

80‐84

70‐74

60‐64

50‐54

40‐44

30‐34

20‐24

10‐14

0‐4

Millions

Page 6: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 6

China’s Population Problem• Population today – 1.4 billion

• U.N. Predictions:• 2030 – 1.4 billion• 2100 – 1.0 billion (lose entire U.S.)

• Causes:• Urbanization• Female education• Children no longer an asset • No Immigration• 1971: “Later, Longer, Fewer”• 1979: “One Child” policy

• An entire generation believes the ideal family has a single child

• 30 million “missing” women and 30 men without mates

• “Empty Planet” prediction: 750 million in 2100, 630 million less than today

Building entire cities on spec – will they all fill up?

Japan’s Smart-Aging Seniors

Source: Wall Street Journal

Japan - Today

33% of the population over the age of 60

16 million people under 14

Population: 125m

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Page 7: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 7

Japan’s Smart-Aging Seniors

Source: Wall Street Journal

Japan - 2050

43% of the population over the age of 60

13 million people under 14

Population: 107m

Robear - Lifter

Pepper – Entertainer/Assistant

Telenoid – Remote Presence

Paro – Calming Therapeutic Robot

‐5% 0% 5%

100+

95‐99

90‐94

85‐89

80‐84

75‐79

70‐74

65‐69

60‐64

55‐59

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

20‐24

15‐19

10‐14

5‐9

0‐4

Japanese GDP

Source: World Bank

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

Per Capita

Japan United States

0.90

1.00

1.10

1.20

1.30

1.40

1.50

Per Worker

Japan United States

Page 8: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 8

IBEW Workforce

Source: IBEW10.0% 5.0% 0.0% 5.0% 10.0%

60+

55‐60

50‐54

45‐49

40‐44

35‐39

30‐34

25‐29

18‐25

IBEW Workforce

 60,000

 80,000

 100,000

 120,000

 140,000

 160,000

 180,000

 200,000

IBEW Pensioners

II. Automation

Page 9: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 9

Long-Term Productivity

Source: Fred.stlouisfed.org

0

5

10

15

20

25

30

Growth in U.S. GDP per Hour Worked

0

50

100

150

200

250

300

350

400

450

500

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Out

put I

ndex

Agr

icul

ture

Em

ploy

men

tEmployment in U.S. Agriculture

Automation – The Challenge

Source: Fred.stlouisfed.org

An automated auto assembly line in a Hyundai plant.

250

450

650

850

1,050

1,250

1,450

1,650

1,850

2,050

2,250

-

5

10

15

20

25

Out

put

Inde

x

Mill

ions

of

Jobs

U.S. Manufacturing

Employment Output

Page 10: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 10

Automation – The Challenge

Source: U.S. Bureau of Labor Statistics

Candidates for Automation:• 4.3 million drivers

• 3.9 million warehouse workers

• 3.5 million cashiers

• 4.6 million retail sales people

• …

White-Collar Automation – Call Centers

Page 11: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 11

Automation – The Opportunity

Automation – The Opportunity

Electrical infrastructure in Sabey Data Center Property 

-

5.0

10.0

15.0

20.0

25.0

Zet

taby

tes

per

Yea

r

Data Center IP Traffic

Source: Cisco Global Cloud index

Cisco projects 13% annual growth in data center traffic

Page 12: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 12

III. Climate Change

Climate Change Consensus

1. Scientists: 97% of scientists agree that the climate is warming due to human activity.

2. Department of Defense: Climate change threatens the majority of mission critical bases.

3. Trump Administration: In November 2018, the Trump administration released reported that climate change is already causing damage to American’s health and the economy and is intensifying.

Source: climate.nasa.gov, www.militarytimes.com

Page 13: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 13

Challenge – Climate Change

Source: NASA

200

250

300

350

400

450

(0.80)

(0.60)

(0.40)

(0.20)

-

0.20

0.40

0.60

0.80

1.00

1.20

CO

2 C

once

ntra

tion

Deg

rees

Cel

sius

abo

ve m

ean

Average Global Termperature

Temperature CO2 Concentration

Sea Level Chart

Page 14: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 14

Sea Level RiseSea Level Rise

NOAA: Sea level risen 8 inches since 1900

NOAA: Currently rising 3mm per Year

NOAA: Potential to rise up to 6 feet by 2100

Rise is likely already “Locked In”

7.7 million people currently live within 6 feet of high tide in the U.S.

– 4 million in Florida

Source: National Oceanic and Atmospheric Administration, IOP Science: 2012 Environ. Res. Lett.

The Front Lines of Climate ChangeAlaska

Several towns in Alaska have voted to relocate

Cost estimates ~ $100 million for several hundred people

None have so far been able to raise funding to move

Louisiana Community on Isle de Jean

Charles in 2016 received $48 million HUD grant to relocate 30 miles inland

Kivalina, AK – Voted to relocate in 2015

Shishmaref, AK – Voted to relocate in August 2016

U.S. 1.4 million people live on barrier

islands in the U.S. usually just a few feet above sea level

Page 15: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 15

Miami Beach – Barrier IslandMiami Beach Population – 90,000

Average Elevation – 4.4 feet

50% below 2.2 ft. – below current high tide

Commercial RE – 70 million SF

NPI assets – $700 million

2015 Hired a Chief Resilience Officer

Currently spending $400 million to raise streets, improve pumping and drainage

Limestone limits use of pumps and seawalls

Defenses

South Florida/Miami

Sources: NOAA, Costar GroupProjects Under Development

Page 16: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 16

Climate Change – Challenge

$-

$10

$20

$30

$40

$50

$60

PG&E Stock Price

PG&E Stock Price Camp Fire

Bankruptcy

Climate Change - Challenge

• Dust storms in Arizona

Page 17: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 17

Climate Change – Challenge

Climate Change – Challenge

Page 18: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 18

Climate Change – SolutionParis Agreement Goal: Keep global temperature rise

below 2 degrees Celsius

195 signatories

Every country sets own goals in order to reduce emissions

Emissions Goals Zero Emissions targets:

Europe

Canada

Mexico

New Zealand

Near-term goals:

U.S.: 26% cut by 2025

Europe: 40% cut by 2030, 100% by 2050

China: Emission peak in 2030

Climate Change – SolutionActual Results Coal usage has been falling

worldwide

Not as fast as goals require

CO2 emissions rose everywhere in the world—except Europe

2018 set a record high for CO2 emissions

Radical change needed to avoid worst aspects of climate change

China

Advanced Economies

Other Emerging

Meg

aton

s of

coa

l

Global Coal Demand

4.7

9.2

2.1

4.0

11.1

4.8

9.4

2.2

3.9

11.2

-

2.0

4.0

6.0

8.0

10.0

12.0

U.S. China India Europe Rest ofWorld

Bill

ion

s o

f To

ns

of C

O2

CO2 Emissions

2017 2018

Page 19: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 19

Climate Change – Converting the Grid

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500Te

raw

att-

Hou

rsU.S. Electrical Energy Production

Fossil Fuels Nuclear Hydro Other Renewable

Sources: U.S. Energy Information Administration

Climate Change – Changing Grid

Sources: U.S. Energy Information Administration

0

50

100

150

200

250

Tera

wat

t-H

ours

Wind Power

Page 20: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 20

Climate Change – Changing Grid

0

10

20

30

40

50

60

Tera

wat

t-H

ours

Solar Energy Growth

Sources: U.S. Energy Information Administration

Climate Change – Changing Grid

Page 21: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 21

Climate Change – Changing Grid

Climate Change – Changing Grid

Page 22: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 22

Climate Change – Changing Grid

Climate Change – Nuclear

Sources: U.S. Energy Information Administration

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Tril

lion

Btu

Total Nuclear Energy Usage in U.S.

Page 23: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 23

Climate Change – Electric Vehicles

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Tril

lion

Btu

U.S. Energy Usage

Electricity Gasoline

Challenge – Electric Vehicle Infrastructure

Page 24: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 24

Climate Change – Home Energy

Climate Change – Electric Planes

Existing Electric Aircraft

Future Electric Aircraft

Status Existing electric planes can hold two

adults and fly for an hour

Recharge fully in 45 minutes

Used primarily for teaching and demonstration

Goals

Norway expects to have all short hall flights to be electric by 2040

Airbus would like to manufacture and electric short-hall plane by 2030

Page 25: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 25

Climate Change – New horizons

Electricity Generating Speed Bumps

Sidewalks

New Transportation

Solar Pan Skin

Desalination PlantsTampa Bay One of the largest desalination plant

in the U.S.

Produces 10% of region’s water

14 megawatt peak power demand

Located adjacent to existing power plant – uses excess heat from cooling water

Climate Change

Climate change will force more cities in deserts and near coasts to rely on sea water –

Under Construction in California, Florida, Texas and Arizona

Page 26: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 26

Carbon Capture

Carbon Bricks could be outputClimeworks carbon capture turbines in Switzerland

Status There is no significant market or

mandate for carbon capture

Startups are busily lowering the cost of the process hoping a market will emerge

Carbon Capture – Synthetic Oil

Status Carbon Engineering producing small

amounts of synthetic fuel in British Columbia

Could be economical with a $200/ton of carbon tax

Carbon Engineering Plan, BC

Page 27: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 27

Challenge – Opportunity

-

20,000

40,000

60,000

80,000

100,000

120,000T

rillio

n B

tuTotal Energy Usage in U.S.

Electricity All Other Usage

62%

38%

Sources: U.S. Energy Information Administration

Climate Change – Moving Cities

Miami

New York

Boston

Seattle

Page 28: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 28

The Disruptors

I. Demographic Trendsa. Challenge – aging workforceb. Opportunity – robotics and automation

II. Automationa. Challenge – unemploymentb. Opportunity – more electrical work, data centers

III. Climate Changea. Challenge – sea level rise, storms, diseaseb. Opportunity – massive rebuilding and expansion of electrical infrastructure

Page 29: Are You Ready for Massive Disruptions?

For Reference of NECA Now 2019 Attendees Only 29

Company End Notes1. National commenced operations on January 1, 2010. National was the result of a spin-out of an internal division of the NEBF. Substantially all personnel, including all senior management,

transitioned from NEBF Real Estate to National. 2. Registration as an investment adviser does not imply any level of skill or training. National is a registered investment adviser with the United States Securities and Exchange Commission

(SEC). The SEC does not endorse, indemnity or guarantee National’s business practice, selling methods, the class or types of securities offered, or any specific security. 3. Property-Level Gross Asset Value (GAV) is based on property-level unleveraged values for real estate investments. The reported GAV is based on the "as is" value (including properties in

development) per the most recent property appraisal, and includes working capital and other adjustments such as lender and capital reserves and construction costs spent. However, the GAV for debt (senior and subordinate loans) investments is reported as the fair value of the loan, as opposed to the fair value of the underlying collateral (property). The GAV (Pro Rata) at Market is the ownership % interest of the Property-Level GAV.

a. Fund’s Share Property-Level GAV: The Fund’s share of GAV is reported at the Fund’s economic interest in the investment, which takes into consideration any applicable preferred returns and/or promoted interests, per the partnership operating agreements (if not wholly owned).

b. Fund-level GAV: Fund-Level GAV represents the Fund's economic interest in real estate investments, cash, cash equivalents, and other Fund assets as defined by National. More information can be provided upon request.

4. Net Asset Value (NAV): Net assets under management are calculated using the Fund’s Share Property-Level NAV of investments, plus cash and other assets and liabilities. The calculation is explained further below:

a. Property-Level NAV for Equity Investments: For equity investments, the Property-Level NAV equals the Property-Level GAV less marked-to-market debt.

b. Property-Level NAV for Debt Investments: The NAV for mezzanine and debt (senior and subordinate loans) investments is reported as the fair value of the loan.

c. Fund’s Market Value aka Fund’s Share Property-Level NAV: The Fund’s share of NAV is reported at the Fund’s economic interest in the investment, which takes into consideration any applicable preferred returns and/or promoted interests, per the partnership operating agreements (if not wholly owned).

5. Property-Level Loan-to-Value Ratio (LTV): For equity investments, the LTV reflects the aggregate of the property-level debt divided by the aggregate of the Property-Level GAV as previously defined.

6. National Real Estate Development, LLC is a subsidiary of National Real Estate Advisors, LLC and was established in June 2013 to offer a full spectrum of development related services as well as consulting and advisory services to investors, joint venture partners, and developers, and to provide technical expertise and project oversight capabilities.

7. National is an independently operated subsidiary of the National Electrical Benefit Fund, a substantial pension trust with a significant amount of assets managed by National on a discretionary basis.

8. Leverage percentage is calculated using NCREIF PREA Reporting Standards for Fund T1 Leverage. This calculation includes debt investments, cash and other net assets. The NCREIF PREA Reporting Standards are co-sponsored by the National Council of Real Estate Investment Fiduciaries (NCREIF) and the Pension Real Estate Association (PREA).

9. National defines Operating Properties as defined by NCREIF PREA Reporting Standards: All existing properties that are purchased, regardless of current occupancy, are defined as operating properties. For a newly developed property, operating is defined as reaching 60% occupancy or having been available for occupancy for a year from its certificate of occupancy. If a property has been recently purchased with a "redevelopment" strategy and the property is undergoing substantial expansion, re-tenanting, rehabilitation or remodeling, the property is defined as operating when occupancy reaches 60%.

10. The particular investments identified and described herein do not represent all of the investments purchased, sold or recommended for the Fund. The reader should not assume an investment in the assets identified was or will be profitable.

Performance End Notes1. The INDURE Real Estate Asset Return is different than the INDURE Fund Return as it is calculated before factoring in other assets and liabilities on INDURE’s balance sheet.

INDURE Real Estate Asset Returns are reported gross of fees only as INDURE fees are deducted at the Fund level and are not allocated at the individual asset level. Performance includes reinvestment of all income. INDURE real estate investments are valued in accordance with the Global Investment Performance Standards (GIPS) and NCREIF PREA Reporting Standards.

2. National compares the Fund’s performance and property returns to three indices (the “Blended Benchmark”). INDURE equity returns are compared to the National Property Index (NPI) prepared by NCREIF; INDURE permanent loan returns are compared to the Giliberto-Levy Commercial Mortgage Performance Index (Aggregate Sector); and INDURE construction loan returns are compared to 30-day LIBOR rates +150 bps. Please note an investor cannot invest in any of the indices.

3. INDURE Equity is comprised of mezzanine and direct equity investments in joint ventures, commingled funds, and 100% owned assets with varying amounts of leverage. INDURE Equity, Permanent Loans and Construction Loans are sub-categories of INDURE Real Estate Assets.

4. INDURE Permanent Loans are comprised of investments in permanent mortgages and commingled funds secured by a first lien position on commercial, income producing properties.

5. INDURE Construction Loans are comprised of investments in senior loans secured by the first lien on an unbuilt, partially built or finished property where the collateral does not generate sufficient income to support a permanent, senior mortgage.

6. The Blended Benchmark is calculated by weighting the corresponding time-weighted capital for the quarter. Prior to 4Q10, the blended benchmark used 30 day LIBOR instead of 30 day LIBOR + 150 bps.

7. The INDURE Fund Return is calculated after factoring in other assets and liabilities on INDURE’s balance sheet. The INDURE Fund Return is calculated both gross of fees and net of fees. These fees include the management fee and incentive fee paid to National.

8. An Internal Rate of Return (IRR) is calculated on all assets within the INDURE Build-to-Core Fund. IRR Definition: The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero.

9. Past performance does not indicate, predict, or guarantee future results.

10. Performance returns: The annualized time-weighted returns are calculated using quarterly investment level data geometrically linked to form annual returns and based on the INDURE ownership interests plus cash and other non-real estate assets and liabilities. The quarterly return calculations use the Modified Dietz formula and are consistent with the time-weighted return methodologies prescribed by GIPS. INDURE performance calculations are based on the NCREIF PREA Reporting Standards (Reporting Standards) guidelines for performance returns calculation and presentation. The Reporting Standards are co-sponsored by the National Council of Real Estate Investment Fiduciaries (NCREIF) and the Pension Real Estate Association (PREA).

11. National’s GIPS Compliance has been independently verified for the periods January 1, 2010 through December 31, 2017. The verification report is available upon request.

12. To obtain a compliant presentation and/or the firm’s list of composite descriptions, please contact Sam Bendix, Managing Director, Investor Relations (847.271.7735 | [email protected]) or Heather Fernstrom Border, Managing Director, Investor Relations (202.997.4844 | [email protected]).

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DisclaimerFor the avoidance of doubt, this information is confidential and proprietary and is neither an offer to sell nor a solicitation of any offer to buy any securities, investment product or investment advisory services, including interests in National’s INDURE Build-to-Core Fund (the “Fund”). This presentation is subject to a more complete description and does not contain all of the information necessary to make an investment decision, including, but not limited to, the risks, fees and investment strategies of the Fund. Any offering is made only pursuant to the relevant information memorandum, together with the current financial statements of the respective Fund, if available, and a relevant subscription application, all of which must be read in their entirety. No offer to purchase interests will be made or accepted prior to receipt by an offeree of these documents and the completion of all appropriate documentation. All investors must be “accredited investors” and “qualified purchasers” as defined in the securities laws before they can invest in the Fund. This presentation is not an advertisement and is not intended for public use or distribution and is intended exclusively for the use of the person to whom it has been delivered by National. Distribution of this material to any person other than the person to whom this material was originally delivered and to such person’s advisors is unauthorized and any reproduction of this material, in whole or in part, or the divulgence of any of this content, without the prior consent of National is expressly prohibited.This material has been prepared from original sources and data believed to be reliable. No representations are made as to the accuracy or completeness thereof. An investment in the Fund involves a high degree of risk and is suitable only for sophisticated investors. No representation is being made that any investor or account will or is likely to achieve profits or losses similar to those shown. Past performance is not a guarantee of future performance. The value of investments can go down as well as up. A loss of principal can occur.The information provided herein has been obtained from sources believed to be reliable. National does not assume any responsibility for, or make any representation or warranty, express or implied as to the adequacy, accuracy or completeness of any information contained herein or for the omission of any information relating thereto and nothing contained herein shall be relied upon as a promise or representation as to past or future performance. We assume no obligation to provide you with updates or changes to this data asassumptions, economic and market conditions, models or other matters change.National Real Estate Advisors, LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser. The SEC does not endorse, indemnity or guarantee National’s business practice, selling methods, the class or types of securities offered, or any specific security. Registration of an investment adviser does not imply any level of skill or training.All information is sourced from National Real Estate Advisors, LLC unless otherwise noted.

Questions? Thank you!

Up Next: 11:45 amLunch in Ballroom Lawn

Plenary Session: 12:45 – 1:45 pmWhen Good Jobs Go Bad - Neil Swidey

in Grand Canyon Ballroom

Please fill out the online evaluation for this session: www.necanet.org/NNSurvey2019

www.na tadv i so r s . c om


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