Teacher Retirement System of Texas has formed a $450m (€380.9m) joint venture to invest in US residential real estate.

The US pension fund is investing in Camden Property Trust’s Multifamily Fund III vehicle, supplying $144m in equity.

Camden will invest $36m in the fund, which has a value-add approach.

The 80/20 split will also apply at asset-ownership level.

Ric Campo, chairman and chief executive at Camden, said there were “many value-add opportunities in the US”.

“We could buy existing properties we can renovate and improve, and we could also develop new properties,” he added.

Targeted returns for the investment fund are a 12% net IRR, with a maximum 60% leverage component.

Camden has full investment discretion on the fund, which will last until 2026.

Targeted markets will include Texas, Georgia, North and South Carolina, Washington, DC, and Florida, as well as Southern California, Phoenix and Denver.

Most of the transactions will be with properties of around 250 units and in the investment range of $40m to $50m.

Camden and Texas Teachers also agreed to extend the life of the Camden Multifamily Value Fund I and II by nine years.

“The properties in the funds have moved from a value-add to its current status of a core asset,” Campo said.

“We and Texas Teachers are enjoying the cash flow these properties are producing.”

By increasing the life of the two funds from 2017 to 2026, investors will have “much more flexibility” to sell the assets, which have a gross market value of $1.1bn, Campo added.

The funds own 22 communities totalling 7,278 apartment units in a variety of US markets.

Ownership is split 68.7% to Texas Teachers and 31.3% to Camden.