Public Employees Retirement Association of New Mexico has begun to invest in core real estate for the first time.
The pension fund has entered into a joint venture with Sarofim Realty Advisors to invest $150m (€140m) in predominantly core and core-plus retail properties.
The investment marks a departure for New Mexico PERA, which has only ever invested in value-added and opportunistic real estate. Last year, IPE Real Estate reported on its plans to move into core.
Kristin Varela, portfolio manager of real returns, said: “We will be looking at making additional investments in core this year that could be as much as $300m.
“We will be looking at a variety of structures for this capital including core open-ended funds”
“We will be looking at a variety of structures for this capital including core open-ended funds.”
It is the first time that New Mexico has invested with Sarofim and the first time it has set up a separate account in real estate.
“Sarofim had contacted us in the past and we carefully evaluated their previous investment history and we were impressed with their investment performance,” said Varela.
Sarofim, which did not comment, will invest in predominantly retail assets in the US, anchored by grocery stores. The company will also be able to buy apartments in suburban markets.
“We believe in the property type and are currently under allocated to retail in our existing real estate portfolio and this commitment help us to fill the hole,” Varela said.
New Mexico PERA has a majority stake in the joint venture and Sarofim has full investment discretion.
Sarofim will look to create a portfolio of five to 10 properties and aim for gross returns of between 9% and 10%.
The manager will be able to use 50% debt, providing it with $300m of investment capacity.