State Investment Council approves $550M commitments
Apr. 26—The New Mexico State Investment Council approved three real estate commitments totaling $550 million this month.
At the agency's April 23 meeting, council members voted unanimously to send the money to companies that specialize in housing, cold storage and niche segments like outdoor storage.
The largest commitment went to the Carlyle Group, a global alternative investment manager that had $382 billion in assets under management, or AUM, in 2023.
The SIC previously made three separate commitments in $100 million increments to the Carlyle Group.
The manager plans to focus on multifamily, industrial, apartments and single-family rentals, according to an SIC memorandum.
"We believe development achieves the highest risk-adjusted returns available and estimate roughly two-thirds of profit is captured from delivering the property and leasing at today's rents," a presentation from Carlyle states.
Carlyle plans to work with local, regional and national real estate operators, according to an investment summary of the plan. It says Carlyle's typical hold period of an asset is between three to five years, and properties are sold upon stabilization.
"The fund's value creation mechanism is a mix of greenfield development, renovation, and redevelopment activities targeted at mid-market opportunities across the top 30 metropolitan areas in the United States," the memorandum states.
The returns are primary appreciation-based, according to the summary.
The council also approved a $150 million commitment to WCP NewCold III LP, a Connecticut-based Westport Capital with $4.7 billion AUM as of 2023. This is the first investment the SIC has made with the agency.
NewCold has built 14 cold storage warehouses across seven countries since 2012, according to an SIC memorandum on the project, and is the fourth-largest global cold storage provider. Westport Capital wants to develop a pre-specified pipeline of 31 additional locations with the fund, according to the memorandum, and may also recapitalize some early investors in NewCold.
"The fund is targeting net returns among the highest in the opportunistic universe," the memorandum states.
SIC staff noted in the memorandum the investment opportunity is unique because the fund will hold direct equity interest in the underlying operating company, making entry and prospective exit valuations important.
The final commitment is $100 million for Jadian Real Estate Fund II LP, another new relationship for the council. The company has about $1.4 billion AUM.
Jadian plans to focus on "niche segments characterized by under-capitalization and inefficient operations," according to the memorandum, such as industrial outdoor storage, commercial self-storage, manufactured home sites and hanger real estate.
"Each of these niches is characterized by secular growth, comparatively high development yields on cost and high (net operating income) growth compared to required capex," the memorandum states.
