Steve Mitchell responds to Ralph Lloyd's question re: real estate investing

From: Steve Mitchell

Sent: Monday, November 28, 2005

Subject: FW: Comment on November STRS Board Meeting

Mr. Lloyd:

Your question concerning our real estate program was referred to me. I thought I might answer in a bullet point format:

• Some Wall Street Strategists have been forecasting a bust in real estate for the past two or three years. During this time period, real estate has returned greater than 15% per year.
• The STRS Ohio real estate assets are in commercial properties. Most of the “balloon bursting” forecasts target residential real estate not commercial real estate.
• Given the excellent returns STRS Ohio’s real estate generated over the past several years, we have mostly been a seller, not a buyer. STRS has lowered the weighting in this asset class from 10% of assets to less than 8% of assets today. The Board’s targeted long-term weight for real estate is now 10% of assets; therefore, you can observe we are substantially underweighted and plan to remain underweighted given current market conditions.

Please let me know if this is helpful.

Steve Mitchell

Deputy Executive Director, Investments

STRS Ohio

From: Ralph Lloyd
Sent: Monday, November 28, 2005

Tom et.al.:

Why should we invest more into Real Estate when the gurus of the Stock Exchange predict that the building boom balloon will burst the first part of '06?

Ralph L Lloyd