Category: Velocis News

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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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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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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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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Terms of the acquisition were undisclosed. Velocis bought the property from a joint venture between Dallas-based Lincoln Property Co. and a fund managed by Oaktree Capital Management LP.

The three-story, 174,917-square-foot office building, called Camelback Square, sits at the southwest corner of Camelback and Goldwater roads at 6991 E. Camelback Road in Scottsdale. The property is 95 percent leased, with tenants including Ashton Woods, Mastro’s City Hall Steakhouse and Digital Airstrike.

Along with the steakhouse, the property also has a bistro, tenant meeting space and a common area outfitted with Wi-Fi for tenants. In the past few years, the property has undergone a series of renovations, including new building entrances, a modern lobby, a courtyard water feature and patio feature and updated common area finishes.

The Old Town Scottsdale office market has been extremely popular, with steadily rising rents and property values, Velocis Principal Paul Smith said.

“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,” Smith said.

Since becoming active in real estate investment in 2011, Velocis has bought 16 office properties in Texas, Colorado, Florida, Georgia and North Carolina.

In June 2011, the previous ownership group bought the property from a special servicer and with the help of brokers from Lee & Associates has leased up the building from 50 percent to now about 95 percent of the property leased by tenants.

CBRE’s Barry Gabel, Chris Marchildon, Kevin Shannon, Ken White and Paul Jones led the marketing of the building.The Old Town Scottsdale property will continue to be managed by Lincoln Property Co. for Velocis.

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Lincoln Property Co reaped the benefit of good timing and capital improvements with the sale of Camelback Square in Old Town Scottsdale to Dallas-based Velocis, a private equity real estate fund that paid over $42M. Lincoln Property and Oaktree Capital Management acquired Camelback Square out of special servicing back in 2011 for a reported $19M. They then followed a repositioning plan that re-energized the 175k SF asset as a centerpiece project, EVP David Krumwiede tells us (snapped with his daughter at the Cubs spring training facility). Also, Old Town Scottsdale is the revitalized kind of place investors look for, because tenants want to be there now. David completed the deal along with VP Amr Ceran.

Since ’11, Lincoln Property completed new building entrances, modern lobby and common area finishes, a courtyard water feature and patio furniture, and upgraded building signage. The company also initiated an aggressive leasing plan in partnership with Lee & Associates that moved the building from 50% occupied to 95%. Velocis has been a real estate investor since 2011, acquiring 16 assets in markets in Texas, Colorado, Georgia, Florida and North Carolina. The buyer cites the steadily rising rents and values in Old Town Scottsdale as proof that the market’s getting even stronger.

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New contributing editors for 2015 include company presidents Charlie Myers of MYCON General Contractors, Scott Beck of Beck Ventures, Greg Miller of Henry S. Miller Cos., and Justin Keane of Wynmark Commercial. Joseph Cahoon, director of SMU’s Folsom Institute for Real Estate also is on board, as are research experts Walter Bialas of JLL, Chris Summers of Xceligent Inc., and Ian Pierce of The Weitzman Group.

Here’s more information on all 20 new contributors. Watch for their posts in the coming weeks, and see the full lineup of D Real Estate Daily contributing editors here.

Paul Smith. A principal at Velocis, Paul Smith has nearly three decades of experience in dealing with institutional real estate clients, including portfolio management, marketing, financing, acquisitions and dispositions involving nearly every product type. He previously was chief operating officer of Brook Partners in Dallas and managing director at Crescent Real Estate. Prior to that, he was with Invesco Real Estate. Smith is a graduate of Harvard University and received his MBA from The University of Texas-Austin.

Jim Yoder. A founding principal at Velocis, Jim Yoder has more than 30 years of commercial real estate experience in leasing, asset management, acquisition, disposition, due diligence and market intelligence. He previously was managing director of JLL’s investor services group, serving both institutional and private clients, and prior to that was a principal at Trammell Crow Co., where he directed both the corporate advisory services division and the office buildings group.

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Dallas-based Velocis’ private equity real estate fund and its investors have bought Town Center Colleyville for an undisclosed sum.

The 138,000-square-foot grocery-anchored, shopping center is Velocis’ 15th purchase and brings the funds total assets under management to more than $303 million.

The Market Street-anchored shopping center is in an attractive demographic area and offers quality retail to Colleyville residents, said Steve Lipscomb, the firm’s principal and co-founder.

Lipscomb says Velocis plans to spend money upgrading the center for tenants. The shopping center, which soon will be home to a Studio Movie Grill, is 93 percent occupied.

Clay Smith and Lance Taylor of JLL represented the buyer and seller. Easley Waggoner Jr. and Amy Pjetrovic of Venture Commercial was awarded the leasing of the property.

Along with the Colleyville shopping center, Velocis owns eight properties in Texas, one in Colorado, one in Florida, one in Georgia and one in North Carolina. The firm was launched in Dallas in 2010.

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The Texas private equity fund Velocis Fund has bought two medical office buildings near Rex Hospital in Raleigh for nearly $5 million.

Velocis acquired the Sunset One and Sunset Two office buildings on Sunset Ridge Road from a local real estate investment group, JDL Investments LLC, led by Rick Polm of Cary. The buildings have a combined 36,000 square feet and were 82 percent leased at the time of the deal to several local physician practices.

The deal was the first in North Carolina for Velocis Fund, which was formed in 2010. It also owns real estate properties in Texas, Colorado, Florida and Georgia.

Gary Lyon and Michael Vulpis of Avision Young in Raleigh represented the seller in the deal. The Lincoln Harris real estate firm will take over leasing and management of the properties.

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Velocis Advisors, the asset management and advisory service division of Dallas-based Velocis Partners, acquired 5775 Flatiron Pky. in Boulder, CO’s Flatiron Business Park on behalf of its client, a Dallas-based family office.
Constructed in 1987, 5775 Flatiron Pky. is a 96,000-square-foot office complex anchored by global financial information services provider Markit On Demand. The two-story, fully-leased property is located minutes away from the University of Colorado and downtown Boulder, just off major thoroughfare Foothills Pky. Additional features of the property include a full-height glass atrium lobby, nine-foot ceilings and renovated common areas.
“This was a broadly-marketed asset that we were able to secure on behalf of our client by leveraging our long-standing industry relationships. We were drawn to the asset’s strong tenancy and how well it fit our client’s income-oriented investment needs,” said Paul Smith, Velocis Advisors principal. “With its strong credit tenants and high occupancy rate, we anticipate the building will provide our client dividend-like returns for many years.”