Last month, Atlanta-based real estate investment firm VEF Advisors purchased 311 West Monroe, a 14-story office building in downtown Chicago, for $43 million (€37 million). It was the firm's first acquisition in many months, as well as their first equity investment from their most recent fund. But one thing about the deal wasn't new—its location. Over the years, VEF has made 17 investments in the Chicago area, a region often overlooked by high-yield fund operators.
“We've always had a position in Chicago,” says Howard Huang, chief investment officer of VEF. “And we've had a good track record and good experience there. We're diversified across properties and markets, but we feel there is always room in our portfolio for Chicago.”
Huang notes that almost all of the firm's investments in the city — including its most recent—have been in the West Loop area, due to its proximity to the city's commuter train stations and major highways. “We always like fundamental location and fundamental value below replacement cost,” says Huang. “311 Monroe met those requirements.”
The VEF series of funds began in 1993, when the current principals were part of Equitable Real Estate. In 1997, the group was sold to Lend Lease, who eventually shed their US operations six years later. Thus in 2004, the original principals, led by chief executive officer Jim Ryan, formed VEF Advisors—equity capital was provided by New York-based private equity real estate firm Apollo Real Estate Advisors.
VEF is currently raising its sixth value-added vehicle, Value Enhancement Fund VI, which has thus far raised approximately $250 million with a target of $400 million to $500 million, a size that Huang notes the firm is comfortable with. Though VEF has been an active seller of assets over the past 12 months, they did make a rather high-profile acquisition last summer: the Lodge at Cordillera, the hotel that was at the center of NBA star Kobe Bryant's sexual assault case.
“It was an off-market transaction brought to us by a group that had been in discussion with the owners for a year,” says Huang. “It was one of those deals where you say ‘gosh’—this is a great piece of real estate with a lot of intrinsic value.”
While the tribulation of the Colorado resort may be extreme, Huang notes that the firm does look to find assets that it can fix. And after focusing on selling a significant amount of its portfolio recently, it appears that they're beginning to find properties that meet their criteria— be it in Chicago or beyond.
“We've been lucky enough that we've sold off a bunch of assets over the past 12 months,” says Huang. “So we'll be a net buyer over the next 12 months. We have a bunch of money and we see a bunch of opportunities out there. If you turn over enough rocks, there are good properties to buy.”
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