Starwood Capital’s $6bn (€5.4bn) fund has been backed by the Public Employees Retirement System of New Mexico (New Mexico PERA).
The opportunistic fund is chasing a net 14-16% IRR from major property types including hotels.
The $75m commitment from New Mexico PERA will be part of a first close, due soon.
The company is planning to co-invest 1% of total commitments to the fund, which is investing in North America and Europe.
Kristen Varela, real estate portfolio manager at New Mexico PERA, said the pension fund had backed Starwood backed three times, allocating a total of $110m.
“They have produced strong returns,” she said, citing a 31% net IRR from a $25m investment in Starwood IX, a 2011 vintage fund.
“Starwood has been following the Brexit situation in the UK for the past six months. The manager is of the opinion that there might be some investment opportunities to take advantage in that region in the future.”
New Mexico PERA is planning to expand into core real estate for the first time, allocating as much as 10% of its real estate portfolio.
As of April, the pension fund had a real estate portfolio valued at $1.1bn.
“We will be considering a variety of structures for our entry into core,” Varela said. “This would include closed and open-ended funds and separate accounts.
“All of our real estate investing to this point has been in a mixture of value-add and opportunistic strategies.”
New Mexico PERA has invested some capital in REITs.
The current value of the REIT portfolio is $240m.
Some capital will be taken out of REITs and used to add core to the real estate portfolio.
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