Harrison Street Real Estate Capital has raised $1bn (€890m) for its ‘alternatives’ opportunity fund.

The capital for the Harrison Street Real Estate Partners V fund was split, with $850m going directly into the fund and $160m raised for a co-investment vehicle.

With leverage at 65% to 70%, total capitalisation will be around $3.5bn. 

Harrison Street Capital has co-invested $17m in the fund, which is targeting net returns of 16% and gross returns of 21%.

Christopher Merrill, president of Harrison Street, said the capital raise was evidence of institutional interest in the niche property types being targeted by the opportunistic strategy.

The fund is buying existing US properties as well as making equity investments in developments in the student and senior housing, self-storage and medical office and healthcare sectors.

“We are projecting that around 80% to 90% of the fund will involve us investing or buying single properties,” said Merrill.

Kansas Public Employees Retirement System, which this month approved a $40m commitment to the fund, was one of the last investors to commit.

Oregon Public Employees Retirement Fund and the Public Employees Retirement Association of New Mexico made respective $150m and $45m commitments.

Harrison Street has closed on three deals for Partners V. It invested $11.5m of equity to build 375 housing beds for the West Main student housing project at the University of Virginia in Charlottesville. The gross cost of the project is $44.8m.

The fund has also completed a deal on 1111 Indiana near the University of Kansas in Lawrence. The 624-bed student housing project has an $19.4m equity investment from the fund and a $73.8m gross project cost.

A 44,000sqft independent rehabilitation facility in Norwood, Ohio will be developed with a $3.6m equity investment from Partners V at a gross cost of $16.2m.