New Mexico Educational Retirement Board is to invest $50m (€42.5m) in an opportunistic real estate fund, while selling a similar amount from its portfolio of real estate investment trusts (REITs).
According to sources familiar with the pension fund’s activities, New Mexico plans to make a $50m commitment to Raith Real Estate Fund II, which will make equity and debt investments in the US.
Raith Capital Partners did not respond to calls.
The equity deals will include properties that need significant capital expenditure and have leasing requirements in their business plans.
The debt investments will involve investment-grade and non-investment-grade securitised debt, whole loans and mezzanine debt.
New Mexico previously made a $50m commitment to the Raith Real Fund I.
According to industry sources, New Mexico’s decision to invest in the second fund is due to performance of the first fund, as well as the pension fund’s size and its desire to limit the number of third-party real estate managers it employs.
New Mexico has earned a 12.13% internal rate of return on its commitment to the Raith Real Estate Fund I, the pension fund reported for the second quarter of the year.
The sale of part of its in-house managed REIT portfolio is related to the commitment. The purpose of the REIT portfolio is to provide liquidity to fund private real estate opportunities as and when they arise.
At the end of June, the REIT portfolio was valued at $101m.