Massachusetts Pension Reserves Investment Management Board (Mass PRIM) is to invest in residential land as part of its emerging manager programme.
The pension fund has approved a $50m (€44.2m) commitment to JEN Partners V, a fund that will provide short-term financing for US home builders and purchase land for repositioning.
According to a Mass PRIM board meeting document, JEN Partners is seeking to raise a total of $250m from investors.
The majority (70%) of the fund will be invested in residential-lot banking deals – a high-yield short-duration form of off-balance sheet financing for home builders.
JEN expects to generate mid-teen unlevered returns with this strategy. With the use of 50% leverage, the returns could be increased to a 20% gross IRR.
The fund will also buy land for repositioning, targeting mismanaged, partially-entitled parcels that the manager can develop into shovel-ready land.
JEN would look to acquire assets at up to 60% of replacement cost, targeting gross IRRs of more than 25%.
JEN has already completed some investments for Partners V, acquiring eight assets accounting for $75m of equity.
Mass PRIM said this seed portfolio made the fund attractive, allowing investors to validate the investment process and strategy.