Prime retail center near Westlake sells to giant conglomerate

The property is in the Westlake neighborhood and includes tenants such as SteinMart, Petco, CVS Pharmacy and Michaels. It was 98 percent occupied at the time of closing.
Global Retail Investors is a partnership of First Washington Realty Inc. and CalPERS, the giant pension fund.

The seller was Velocis, a Dallas-based private equity real estate fund manager, which had acquired the property in 2012.

“Over the course of our ownership, we unlocked its value by investing in property improvements and through strategic leasing and management efforts,” said Jim Yoder, Velocis principal.

In fact, the year that Velocis purchased the property from TR Austin Retail Corp., it was valued at $18,675,000, according to the Travis Central Appraisal District. Last year, TCAD valued the 189,340-square-foot center at $32,288,386.

Built in two phases — in 1981 and 1992 — the shopping center is spread out over some 13 acres.

HFF Inc. represented Velocis in the sale. Lincoln Property Co. handled property management and Bryan Dabbs of BKD Realty leased it.

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Velocis and Lincoln Purchases Key Charlotte Data Center Facility

“Velocis capitalized on a unique opportunity to secure this property for its important location at the cross roads of Charlotte’s colocation and connectivity network,” said Jim Yoder, Velocis Principal. “The asset’s status as a prime fiber optic hub combined with the abundant power and security the building offers tenants, creates a significant untapped opportunity.”

The two-story building, which offers expansion opportunities, was built in 1968 and is currently more than 80 percent leased. Significant long-haul fiber routes originate from all directions through the building and it draws a wide array of telecommunications and colocation data center users. Additionally, it is ideally located close to multiple data centers and telecommunication companies including the area’s main AT&T switch.

Velocis partnered with Lincoln Property Company on the acquisition. “Charlotte offers a dense telecommunication infrastructure that is on par with any Tier 1 city,” said Martin Peck of Lincoln’s data center division, Lincoln Rackhouse. The facility will be leased and managed by Lincoln Harris.

Dallas-based Velocis, has been active in real estate investment since 2011, purchasing 18 assets located in markets in Texas, Colorado, Georgia, Florida, North Carolina and Arizona. Launched in 2010, the Fund is led by principals Fred Hamm, Mike Lewis, Paul Smith, Jim Yoder and David Seifert.

About Velocis
Velocis consists of two entities: Velocis Fund, LP and Velocis Advisors, LLC. Velocis Funds are private equity real estate funds, active in the acquisition, operation/management, and disposition of commercial real estate in the United States. Additionally, Velocis Advisors provides asset management and advisory services to both investors and real estate clients.

About Lincoln Rackhouse
Lincoln Rackhouse is the data center division for Lincoln Property Company. Headquartered in Dallas, Texas, Lincoln Property Company is one of the largest and most respected diversified real estate services companies in the industry. The Company employs over 4,000 professionals in over 100 markets in the United States and Europe.

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Digital crossroads uptown acquired by private equity real estate manager.

Velocis and Lincoln Harris bought the building at 701 E. Trade Street in a deal that closed last week. The two-story building is a node in the invisible but all-important infrastructure web around us, housing major fiber optic lines and data switches.

“Velocis capitalized on a unique opportunity to secure this property for its important location at the cross roads of Charlotte’s colocation and connectivity network,” said Jim Yoder, Velocis principal, in a statement. “The asset’s status as a prime fiber optic hub combined with the abundant power and security the building offers tenants, creates a significant untapped opportunity.”

Lincoln Harris will lease and manage the center. The building was constructed in 1968 and is 80 percent leased.

“Charlotte offers a dense telecommunication infrastructure that is on par with any Tier 1 city,” said Martin Peck. He’s with Lincoln Harris’ data center division, Lincoln Rackhouse.

Here’s how Velocis described the building’s importance in a statement:

“Significant long-haul fiber routes originate from all directions through the building and it draws a wide array of telecommunications and colocation data center users. Additionally, it is ideally located close to multiple data centers and telecommunication companies including the area’s main AT&T switch.”

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Wedge Group Gives 2 Thumbs Up

The properties, Arboretum Atrium and Las Cimas I, total more than 170,000 square feet. Velocis purchased them in 2013 from its partner, Moore & Associates, which managed and leased the properties.

Arboretum Atrium is a 91,083-square-foot office building with a three-story atrium located at 9737 Great Hills Trails in Northwest Austin. Restaurants, retail venues, and hotels are nearby, and the building is one block from Highway 183, MoPac, and Loop 360. The area is a hub for leading technology companies that include Apple, Cisco, HP, Microsoft, and Google.

Las Cimas I is located at 804 Las Cimas Blvd. in Southwest Austin, at the corner of Bee Caves and Loop 360. It comprises 82,787 square feet of space in its three stories. Both properties were fully leased at the time of the sale.

Hale Umstattd and Leah Gallagher of Transwestern represented the seller in the transaction.

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Velocis Arranges Sale of Two Austin Office Buildings

AUSTIN, TEXAS — Velocis, a private equity real estate manager, has sold two Class A Austin office buildings to Wedge Group, a Houston-based private equity firm. Totaling more than 170,000 square feet, the assets are Arboretum Atrium and Las Cimas I. They were purchased by Velocis in 2013 from Moore & Associates, an investor, owner and operator of commercial office properties. Arboretum Atrium is a 91,083-square-foot, Class A office building. Located in the Arboretum area in northwest Austin, the area serves as a hub for companies including Apple, Cisco, HP, Microsoft and Google. The building is located near restaurants, shops, hotels and other amenities and is one block from Hwy 183, MoPac and Loop 360. The asset is 100 percent leased. Las Cimas I is an 82,787-square-foot, three-story office building located in the center of the four-building Las Cimas office park. Built in 1999, the limestone building includes views of downtown Austin, on-site amenities and proximity to the Village of West Lake shopping center. The asset is 100 percent leased. Hale Umstattd and Leah Gallagher of Transwestern represented the seller in the transaction. Dallas-based Velocis has been active in real estate investment since 2011, purchasing 17 assets located in markets in Texas, Colorado, Georgia, Florida, North Carolina and Arizona. In the Austin market, Velocis’ portfolio also includes West Woods Shopping Center, an 189,340-square-foot shopping center in the West Lake Hills neighborhood.

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How the Velocis Gamble Has Paid Off

After spending years building fortunes for other private and institutional commercial real estate investors, four top industry players in the Dallas market got together in 2010 to see what they could build for themselves.

Fred Hamm had been an executive at Keystone Group, a private wealth management firm. Mike Lewis was managing director at Crescent Real Estate. Paul Smith was chief operating officer of Brook Partners, heading up advisory and asset management services. And Jim Yoder was managing director of JLL’s investor services group.

A fifth colleague, David Seifert, was promoted to principal in 2014. Before joining Velocis as an associate in 2010, he had worked in the acquisitions group of L&B Realty Advisors, a $6 billion real estate investment manager.

Velocis targets financially distressed or undermanaged assets in the $15 million to $70 million range. Five years later, the partners’ risk has been rewarded. Velocis’ first $150 million fund, which closed in March 2013, has exceeded expectations, the partners say. (For example, one Fund I property, 3131 McKinney, which Velocis sold late last year after acquiring it in May 2013, generated an internal rate of return of more than 36 percent.) The success of Fund I led to the launch of a second fund last June, with a targeted capital raise of $300 million. Velocis currently has $448.2 million in assets under management.

We recently sat down with two of the company’s principals, Hamm and Lewis, to get an update on activity.

D CEO: What led to the launch of Velocis?

FRED HAMM: Post-2008, with the repricing of real estate, we thought that—although it would be a challenging time to launch a new fund in the Great Recession—we recognized the opportunity. So we all quit our very significant jobs and came together.

D CEO: Had you all worked together before? How did you partner up?

HAMM: Well, we’ve known each other our entire adult lives, socially and professionally. We all went to the University of Texas, we belong to the same country club, and are members of Dallas Salesmanship Club. We’ve just had so many interactions with each other, respected one another, and admired what we each had done in our respective careers.

MIKE LEWIS: Our discussions really started in 2008. We began formulating a plan prior to our launch in 2010.

D CEO: How did you figure out who was going to play which role?

HAMM: I think that’s what has made us so successful—we all have different skill sets. We liken this to a baseball team, where there are nine positions, and it’s important that all nine players are on the field doing what they do.

LEWIS: Even though our skills are different, we’re all philosophically aligned. That foundation has been critical to our success. When we launched, one of the things we did was all agree to look at the fund from an investor’s point of view, because we’re investors as well. You get farther, faster when you’re all rowing in the same direction. It also makes it a lot more fun.

HAMM: We trust each other, and we’re aligned. But we also challenge one another. We have very healthy partnership discussions. There aren’t any “yes men” in this group. You can be aligned and still have different views.

D CEO: It seems like 2010 was a risky time to start a new venture.

HAMM: It was a huge risk. We launched in February of 2010, and we didn’t have a first closing for Fund I until July of 2011. So, it was an 18-month slog to get us to our first closing.

LEWIS: When we launched, there were plenty of people—especially coming out of the positions we came out of—who questioned why we would take the risk. Some may have even snickered.

D CEO: What was happening during those first 18 months?

HAMM: In the fund business, you’re wearing a lot of hats. You’re raising capital, you’re deploying capital, you’re managing your portfolio, and doing them all simultaneously. That being said, you’re not doing anything until you’ve raised the capital. So raising capital is step one. Raising more capital is step two. And deploying it effectively is step three. … We raised, frankly, a lot more than what we thought we would. The target was $150 million, and we raised $141 million, in a very difficult time.

D CEO: Did it help that the partners were also investors?

HAMM: Absolutely. We have significant skin in the game. We have a large percentage of the total capital in both Fund I and Fund II.

LEWIS: That is precisely why, when we built it, we did so from an investor’s point of view.

D CEO: What was your first acquisition?

LEWIS: The Jefferson, a medical office building in Austin. We actually bought it prior to our first close, which helped us raise more money. Then we started layering acquisitions on top of that.

D CEO: What’s your target?

LEWIS: We target medical, office, and retail. We look for good real estate that’s broken in some way, either financially or poorly managed, where there’s a value-add opportunity. We initially looked in Texas, Colorado, Georgia, Florida, the Carolinas, and the greater Washington, D.C., area. We were successful in buying in all of those, except D.C. We’ve since added Phoenix. We all have extensive backgrounds in those markets, with key relationships there. And we like those markets because they are high-growth and have good demographics.

HAMM: In terms of pricing, we target properties with a range of $15 million to $70 million.

D CEO: How does North Texas fit into things?

LEWIS: It’s certainly one of our primary focuses. We’ve had assets here and have assets here. We love the long-term prospects for Dallas-Fort Worth. The job growth here is among the best in the country, and there’s nothing to indicate that things are going to change anytime soon.

D CEO: Where do things stand with Fund I?

HAMM: We purchased 16 assets: eight office, four medical-office, and four retail. We are 92 percent deployed. We might do one more small deal in Fund I, but for the most part, we are fully deployed. We have sold four of those deals, and we have exceeded expectations on all four. We have another two to four assets that we’ve identified to sell in the early part of this year. We expect to be wound down in Fund I in 2016 or 2017.

D CEO: What has been the buyer appetite, as you take some of these assets to market?

LEWIS: The buyer interest has also exceeded expectations. I take it back to what we target as properties, and those are buildings with a value-add opportunity. We have the relationships to get to those properties, but we’re also very active managers. That’s what we do and have done for years. We like to take those properties and fix them to where they’re more on the level of a core-type property. When you do that, the buyer pool widens. Going in, it may be a private equity-type purchase. When we sell, 50 percent of the interest is coming from institutional investors.

D CEO: How are things going with Fund II?

HAMM: In this current fund, our target raise is $300 million of equity; we’re about a third of the way there. The makeup of that is high-net-worth investors, family offices, and institutions. Our posted minimum is $500,000, but our average investor is significantly above that. Our first deal is under contract—an office building in Scottsdale, Arizona.

D CEO: We talked about what it’s like out there as a seller. What’s it like as a buyer?

HAMM: It’s challenging. Everyone is talking about how frothy the market is. We concur with that, but we strongly believe there are opportunities in every cycle. We have deep relationships across all of these markets. We’re on a lot of airplanes, we’re working relationships, we’ve got boots on the ground. We’re focused on off-market deals.

LEWIS: I don’t care what kind of market it is, you can find opportunities. Three of our best assets to date, we bought in frothy markets in late 2013.

D CEO: What has surprised you most, since launching Velocis five years ago?

LEWIS: Taking constraints off and letting the athlete run—that, I have really loved. There’s nothing holding us back—no Wall Street or anything like that.

HAMM: It has been extremely rewarding to take a concept, come together, and watch it develop into a successful platform—taking the first fund from $150 million in equity to $300 million in the second fund and doubling the size of the portfolio. I think that’s our sweet spot in terms of what this team can effectively raise and manage. The partners all agreed early on to keep the shop boutique-like. We are proud of what we’ve built and don’t want to lose that by scaling up.

LEWIS: We want to stay boutique, even though we manage institutionally.

HAMM: We work hard, but we enjoy the challenge, and we don’t really think of this as work.

LEWIS: I feel like the hours I put in prior to Velocis were just building up to this opportunity.

HAMM: Exactly. We’ve spent our whole careers preparing for this.

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Valeo Purchases 97,552 SF Austin Medical Office Building

Dallas-based Valeo Commercial Real Estate, LLC, an affiliate of Valeo Real Estate Fund, has purchased the Jefferson Building, a 97,552-square-foot medical office building in Austin, Texas. The purchase price was $13.5 million.

Hale Umstattd of Transwestern Austin represented Valeo in the transaction, and Doug Rauls of The Kucera Company represented the seller. Valeo Real Estate Fund Advisory Board Member Webber W. Beall III provided strategic counsel on the transaction, and JPMorgan Chase Dallas provided financing.

This is the first investment by Valeo Commercial Real Estate, which was launched in 2010.

Previously owned by The Kucera Companies, an Austin-based commercial real estate firm, The Jefferson Building is in the Austin Medical District. Built in 1972, it is currently 85 percent leased by tenants including Seton Healthcare, Austin Radiological Association, Austin Neuropsychiatric Clinic as well as private doctors and medical service firms.

Valeo’s immediate plans for the facility include making renovations to common areas and increasing tenant occupancy rates.

“We expect to see more of this type of opportunity moving forward as the U.S. real estate market recovers,” said Steve Lipscomb, Valeo Real Estate Fund Co-founder and Managing Director.

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Upswing in Old Town Scottsdale: Velocis Purchases Camelback Square

The sale underscores the attractiveness of the project and Old Town Scottsdale.

“The Old Town Scottsdale office market is an extremely popular area that is experiencing steadily rising rents and values,” said Velocis Principal Paul Smith. “Camelback Square is our first acquisition in the Phoenix market, and one we hope to build on as we pursue additional assets in the Southwest region.”

The project buyer, Dallas-based Velocis, has been active in real estate investment since 2011, purchasing 16 assets located in markets in Texas, Colorado, Georgia, Florida and North Carolina. Velocis is led by a team of five seasoned principals who are directly responsible for the acquisition, asset management and disposition of assets.

LPC will continue to manage the property for the new owner.

“Over the last few years, we’ve witnessed a strong tenant demand in Old Town Scottsdale due to the surrounding amenity base of high-end residential, luxury shopping, hotels and entertainment options,” said Oaktree Managing Director Mark Jacobs. “We believe the tenant demand will continue and are looking to make additional investments in Old Town Scottsdale along with other areas of Phoenix.”

The 174,917-square-foot Camelback Square is located at 6991 E. Camelback Rd., at the southwest corner of Camelback and Goldwater roads. It is currently 95 percent leased to tenants including Mastro’s City Hall Steakhouse, ZocDoc, Regus, Ashton Woods, Echo Global Logistics and Digital Airstrike. The project’s on-site amenities include the award-winning Mastro’s (a top 10 steakhouse in the U.S.), a bistro, tenant collaboration space and common area Wi-Fi.

“Old Town Scottsdale is an example of the new creative office environment, with the amenities investors look for to deliver solid rent growth, rising values and strong tenants year after year,” said Lincoln Property Company’s Executive Vice President David Krumwiede, who completed the deal along with Vice President Amr Ceran. “We recognized this when we purchased Camelback Square almost four years ago, and that foundation is even more evident today – following the execution of a repositioning plan that re-energized this asset as a long term centerpiece project.”

LPC and Oaktree purchased Camelback Square out of special servicing in June 2011. Since that time, they have completed a major renovation including new building entrances, modern lobby and common area finishes, a courtyard water feature and patio furniture, and upgraded building signage. They also initiated an aggressive leasing plan that – in partnership with Bill Blake, Craig Coppola, Andrew Cheney, Colton Trauter and Gregg Kafka of Lee & Associates – moved the project from just 50 percent occupied to almost 100 percent occupied.

Barry Gabel, Chris Marchildon, Kevin Shannon, Ken White and Paul Jones of CBRE led the project’s investment sales listing campaign.

Camelback Square sits adjacent to the 2 million-square-foot Scottsdale Fashion Square regional shopping center featuring the state’s only Barney’s New York and Neiman Marcus. It is located in the heart of Old Town Scottsdale, a submarket that consistently attracts forward-thinking companies seeking the area’s contemporary mix of office, residential, dining, arts and entertainment destinations.

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