New Mexico State Investment Council is investing $75m (€67m) in a US apartments strategy, its first in an open-ended structure.
The sovereign wealth fund is investing in Berkshire’s Multifamily Income Realty Fund.
Vince Smith, deputy investment officer for New Mexico said the demographics for apartments are “still very strong from a demand perspective”.
”There are a great deal of young people who have no interest in owning a single-family home and many older people are looking at selling their homes and moving into apartments,” Smith said.
The fund is thought to be the only open-ended, core/core-plus fund that invests solely in US apartments.
New Mexico is getting a fee break for being an initial investor in the fund.
“The fee for our commitment will 65 basis points,” Smith said. “After the initial capital raise, the fee charged to investors will be 115 basis points.”
Berkshire is initially aiming to raise $500m, according to a board meeting document by The Townsend Group, with leverage to 40% of gross asset value.
Berkshire has seeded the fund with 11 properties. The assets, worth $677m, are in San Jose, Dallas, Atlanta, Houston and Denver.
“This gives us a true indication of the kinds of investments the fund will be making,” said Smith.
According to a board meeting document, 80% of the fund will be core assets – recently built and newer vintage product, offering lifestyle amenities and proximity to public transport, employment and retail.
The remaining 20% of the fund will be in value-add, non-stabilised investments, such as developments, to enhance returns.