DRA builds a $2.75B fund one $50M state ticket at a time

The $150 million the New Mexico Educational Retirement Board approved for real estate funds splits into two desks' worth of news: $100 million to Varde Partners' Asia Credit Fund III for an Asia-Pacific opportunistic private credit strategy, which sits with our sister desk, and $50 million to DRA Advisors' Growth and Income Fund XIII, a closed-end value-added vehicle buying office, industrial, multifamily and retail properties in US primary and secondary markets.

Weigh Fund XIII's $2.75 billion maximum against the $808.5 million DRA Growth and Income Fund XII raised in equity, and filling the new vehicle means raising roughly three and a half times the last vintage — through state pension boards writing $50 million tickets.

New Mexico's is the second such ticket in under three weeks. Montana board committed $50 million to a DRA value-add fund on September 4, though the report at the time did not name the vehicle, leaving it unconfirmed whether the check went into Fund XIII. DRA reports $14.4 billion in regulatory assets under management and 99 employees, which puts a single $2.75 billion fund at roughly a fifth of the firm's reported book on a straight comparison.

New Mexico's own arithmetic explains why it keeps writing checks while its real estate sleeve runs hot. The board reported $20 billion in total assets, $1.9 billion in real estate assets and an 8 percent real estate target as of March 31. Eight percent of $20 billion is $1.6 billion, which leaves the reported real estate sleeve roughly $300 million above target; a commitment that funds over years rather than on signature is one way to hold a growing sleeve near a fixed percentage. Ask IRE.IQ, cited in the IREI report, has the portfolio climbing from $1.1 billion in 2022 to nearly $1.6 billion in 2025.

The cap is the part to be skeptical of, and the office inside it is why. Office only finds a clearing price where a trade prints, and a fund spread across four property types in primary and secondary markets can avoid printing one for a long while — which suits a board that wants the exposure without the mark, and complicates anyone trying to appraise the sleeve between reporting dates. Raising three and a half times a predecessor's equity for that mandate is a heavier lift than the pitch implies, and if it works it will work because state boards keep writing the same check.

At New Mexico's ticket size, the cap is 55 commitments; the next few state dockets will show whether DRA can collect them.