evaluations on each property. again, this is all subject to determination of how to approach it. but it would be reasonable estimates of value as opposed to trading value. we don't know what they will ultimately sell for but try to arrive at a reasonable estimate of value. >> the estimate value to take zillow -- >> i wouldn't quote zillow or t rulia, do we do that for every single property. is that a fair way to get an appraisal other than a full walk through? >> because we are not making a new loan, we could not do a full appraisal because we can't walk through

the property. we can't walk onto the property. we can't enter the home. the only appraisal available to us would be a drive by. >> there are some limitations on assessing a complete value of the property not knowing what's interested or what sort of problems there maybe? >> that's correct. >> gentlemen, what happens to your entire rate of return? >> it declines. well, it's unknown. it very much depends on the path of future price appreciation in san francisco. suppose that rate is very stable over a reasonable time period is is the rate of return does decline over time because that embedded gain of

about 55% is that now gets amortized over a long period of time. it would slightly decline every year. >> although it sounds like there is a very large profit number already baked in, the reality is, the longer these people hold properties, the longer the irr will be? >> it could be. >> assuming it does not continue great appreciation for property values. >> that would be correct. >> i'm sorry for the lengthy list of questions. but there is important things to think about that is important and one very last important point beyond the financial issues which i think are rather large. is a policy perspective. do we really want to be in the business of engaging this sort of relationship with the city. this is unprecedented. never in the

pension history that i know of that we have engaged in a relationship where we are giving money to the city and the guise of being an investment for social objectives. i actually think this is a great program and i think the city should put more money into it but i don't think using the retirement system is a way to do it. i have people that have benefitted from it, but for us i don't think we should use the pension system. we should weigh this heavy and in my mind, should this be a good system. if it goes bad, are we going after people in the community to recover a loss from the community that gives us our power, makes contribution to our system. it's a lose

lose, it doesn't make sense. these are all things we need to look at. thank you very much. >> pass skin jordan? >> could you to further that, can you tell us what happens to the person when defaulted. does the bank hold this on the books for a long time? >> i would go back to a comment made by president cohen that there has been less than 1% default. of the 21 transactions that have been realized only 36% resulted in the dult funds. no return, just the capital. in each case there was enough owner down payment that we received full refunds.

i was unaware that those transaction involved default but the 1% that was likely the case. i wasn't aware of that. it goes through a normal default process. >> right, which could take a long time. i'm thinking of the return on capital again and the risk associated on that and the down side. i know we can't discuss that here but if you own stock, you are willing to give up some of the upside if you protect yourself on the down side and you quantify that. it seems there are a lot of people that are very nervous about what the down side could be and not just for the pension funds, but we need to investigate a way to come back to us like a protection like a collars on a stock. if 7% is that number, maybe we can do 6.5% and knot -- put

that risk on somebody else. as a lawyer, if we can analyze it that we can put some protection valve on it. so coming back to us would be very good on that. >> the list of items that you are working on, i would suggest a rules written by the mayor's that we would not be satisfied with a drive by appraisal and we don't have perfect alignment with the city on this. so drive by appraisal on a refinance should not work. we should not accept it. >> i have spent a considerable amount of time in the mayor's office wrrd to these programs. i have not

completely evaluated the procedures that are in place of an appraisal of a property where the homeowner is buying back the position. i imagine there are procedures. but i'm not sure what they are. >> in this procedure we would have an accurate appraisal. >> that is correct. >> i appreciate the comments. i just wanted to rebut a few of them. regarding the stable value fund there were no loses by any member of the pension fund. the underlying asset if they were getting 84 $0.84 to the dollar. i just want to bring that point to the table. no. 2, we've tossed around the 7.5% number. let me also add 7.5% is about our interest for common stock. i want to put that in

the agenda that we are in a lower yielding environment. we are going to have to get used to a lower yield. 4-5% is our long-term expectation for our investment grade bonds. i think we should keep these items in perspective. this isn't the go go years. i remember the treasury had a 2014 coupon. i know there is a lower interest in return for all classes. i think we should temper comments with that. >> i think too to add to that, that's one perspective on it but commissioner stans bury brought the issue of liquidity and the length of duration. that would affect the return. you want an ill liquidity premium.

>> one other clarifying point. the reason we didn't lose any money is it was insured by a third party. >> i don't think the insurance paid off. that suggest the insurance brought us from 84 to 100. we stayed in the game long enough to get back to 100. we shouldn't temper it. we should not mislead. >> i think they are two very different things here.

>> any other discussion? >> i'm concerning about the duration of the 40-year period. that's come up over and over. i won't be labor this point. >> why don't we go to public comment. i will call john first, mr. david walker mr. williams, herbert weiner. >> john steno son. i have been a pension member for 40 years. i am opposed to this loan program.

no. 1, it's very high risk. it's like private equity. for i risk investment, as you all know you expect high retains. what's the retain he says you only get 7.5%. you can get 11% investing in the snp 500 before the american depression, instead of having $20 billion now, you would have $100 billion. what's wrong with saving for a down payment like i did. why should we assist people with down payments? if you can't afford to save up for a down payment, you shouldn't afford to buy a house. i have lived in this city for 50

years. the day i will be living in the city. the people like policemen, some make a quarter of a million dollars. you think they can't make a down payment. you think the owner can't save for a down payment? thank you. >> >> public speaker: staff of isbc local 21. we are with sound principals in the management of our pension. we believe in analysis and critical thinking around critical decisions with the pensions. we believe this should be vetted and more time is needed to evaluate this proposal so the

board can be clear of the risk and possibility of benefits before making this decision and ensure that our members retirements are protected. investment should meet the fiduciary duty that these types of position require. we look forward to seeing an in depth analysis of this proposal and will review it carefully. thank you. >> next speaker. >> public speaker: good afternoon commissioners, i won't repeat what i said earlier. i want to thank you all for the line of questioning, especially commissioner stans bury, you brought up practical considerations. it's been a long time since i have been in the real estate market but the secondary loan market is not a good place to be and it's very high risk and you don't the protections that you get with

the primary market. i found it concerning that the comment was that the primary loans don't come from financial institutions, but come from individuals who have been qualified on especially somehow selected to participate in this program. that just raised a lot of red flags. if i miss understood the comment, i apologize but i understand that it's the individuals that hold the contract on the loans. discussions are very significant and helpful. we had gi bills that helped individuals to acquire properties that are unable to afford it. i think it's very important to have these kind of programs to encourage home ownership because we have loans and variable ones that led

to the demise of ownership and shouldn't have happened and that financial institution should have rectified that. there are a number of issues that are raised here and you need to continue to ask those questions, the timeline, the percentages, this is i think not a place where maybe our pension funds should be. it might be a great city program and a great social program, but i think the issue again is the pension funds. i want to thank you for your comments. thank you very much.

>> public speaker: i also want to thank mr. stans bury. i don't see how you can look at this investment. it's built on the housing crisis that we have now and he's asking this because of the housing crisis. he intends to because of his promise to use it for below market, not affordable, low and moderate housing cost. that's like something he said to the public as a trade off. it sound like and i talked to the mayor's office of housing about this and what you are discussing is the market rate and the investment is only based on market rate which is a different ball game. now, when that

money is freed $126 million, will the mayor really use it for below market rate? that maybe what people are referring to when they say blank check. not a real blank check, but will he add here to his promise. i am verdict -- very concerned about that. whether you look at it in a pragmatic way or only an investment. you need to look at a better yield. i'm suggesting that you do this. maybe you can be looking for something with a better yield, less cumbersome, less complicated and less political. that's it. >> thank you.

mr. minutesha followed by mr. williams. >> public speaker: thank you, after reading the investment staff memo to the board. i wrote my secondary analysis of the outstanding and repaid loans portfolio that i e-mailed to each of you which i hope you have taken the time to read. page 1 indicates it will be non-below market rate loans. but the two files that i converted from the pdf files appear that the loans are below market. i don't know that moa cd provided you with any market rate data to do due diligence on it. one

of the files had 157 repaid loans and the other one had 391 outstanding loans. it looks like 57% of the loans were awarded to the buyers earning less than 87% of ami and they can't after the to purchase these process. i would ask you to analyze that. based on the observation the commissioner made. instead you should focus on the investments then. i strongly urge you to table this investment in this proposal.

>> thank you. >> public speaker: david williams. thank you for all the information. i am more informed. i do think that creating opportunities for poor people, low income people, middle income people, workers and union members to get housing is great. however, given all the risk factors in this program that have been discussed, given the limitation on the investment being 7.5% yield as i understand it and given the questions about the time element and timeline of returns, it all

seems highly risky and unknown and we'll find out the negative impacts as well as the housing market goes under or the bubble burst so to speak. until more of these questions happen, more discussion . at this point i don't think they are prepared to support it. thank you for the discussion and we'll see where it goes. >> thank you, mr. herb ert weiner? >> public speaker: i have to confess that i'm ignorant to all of this. it's hard to conceive of it. i'm going to mention my concerns. i was concerned there there was no advance document. it's completely about this issue in the packet we received. why wasn't someone from the mayor's office of housing here to advocate their point? i

think that would have helped greatly and how does this investment compare against others and is this investment going to protect against down turns. the housing market is the very center of our economy. this is shunned by the down turn of 2008. now, also you cited the risk especially about no income during the duration of the loan. and i think that's a valid consideration because those concerns about the sooner lvency of the funds in recent years and how will this affect the solvency of the funds. so,

these are concerns i have. i think there could be other sources of funds than this agency. i don't think this agency should be a flush fund and i don't think we should set a precedent through this. if you pass on this, the mayor maybe tapping this source of income and i don't think it's a good idea. we are an independent agency. thank you. >> thank you, the next speaking is ms. sylvia lynch. >> public speaker: i agree this pension should not be used as a shrub -- slush fund. thank you for the questions. one of the things that really an annoys me that for a very long duration and term of the loan we have no income. it was interesting that the below market rate is involved in

the report for the board and i question why, and no. 2, i strongly urge that the sf urge not consider getting $125 million for the following reasons. the mayor's office of housing to date, by numerous financial record request cannot to date provide any accurate records from monies the developers are required to pay to bill for affordable housing from the office. >> as attending other neighborhood organizations fighting for housing, we ask christina logey served as president for years, why were there no records, her answers were she repeatedly asked for records and the mayor's office of housing said they had no staff to produce it and could not give her any records and we also asked for

financial records and it's not been given any accurate information from staff. the san francisco civil grand jury reported january 2013 reported that the lack of transparency at the mayor's office of housing in continued development. harvey rose and president chiu in the office of housing of a $500 portion to service and advocacy organizations. four, i ask before you give any monies to the mayor's office that you ask for an audit of the hundreds of millions of dollars that have been given this organization and find out where the monies are truly being funneled

to, obviously not just below market rate housing. thank you. >> hi. my name is john. no. 1, the most generic risk is the assets that are correlated with the liabilities in funding of pension. that's the bottom line. no. 2, on the 7.5% benchmark, i agree that it's quite low for a highly ill liquid non-diversified investment. no. 3, we've also seen what's going on in europe when you see finance and

politics. i fear this can be the camel nose under the tent when you see what takes up far more time and effort than are comes rat. i think you have bigger issues right now. >> thank you. is there any additional public comment? seeing none, public comment is closed. colleagues are there any other last comments or questions or directions you want to give to staff? no. okay, seeing none. i would like to direct staff to come back with answers to the questions that you heard from the commissioners to come back to report to us at the next board meeting. thank you. >> this item is just a discussion item. mr. clerk, could you please call the next item please.

city clerk: item no. 6. review and approval to invest up to $100 million in the one or more ex-fossil fuel index funds. >> manager director of public markets. before you is the recommendation for the ex-fossil fuel index funds. this area of fossil fuels is new. there is few products out there. secondly with $100 million investments given the number of securities in the countries in a global benchmark is highly -- very inefficient in perspective to global and we are looking at an ex-

fossil fuel fund. the corporate account would make the most sense and that would be our recommendation to the board. >> thank you, colleagues, any questions on this report. >> thank you, madam president. a few questions you mentioned the global aspect. you said it was very expensive. can you expand on what you mean by that? >> absolutely. if you take a look at the bottom of the memorandum. these are cost that i received from large index providers. there is a comparison to what we are paying which is about 1-2 basis point. the global index fund would cost us $100,000. the

mandated process would be 1 basis point. >> 100 basis points for 100% and roughly $33,000. >> that's correct. >> how much cost? >> less than a basis point to implement. and in terms of the new portfolio versus the old portfolio what would be the funding, no. 1 and no. 2 if you can give us an indication of how much dollar amount in oil stocks you will be selling to maintaining the free index? >> i have not given much thought to sourcing. we have just received the annual contribution from the city. so