Dallas-based private equity real estate fund manager Velocis will launch its second offering in July, PERE has learned. The firm has moved principal Paul Smith from its advisory group, Velocis Advisors, to the Fund II team in order to help with the initiative.
With a targeted capital raise of $300 million, Velocis Fund II will pursue a similar strategy as the firm’s previous vehicle, investing in office, medical office and retail properties in select US growth markets. However, Fund II will be a value-added vehicle, whereas Fund I pursued a core-plus approach.
Many existing investors have soft-circled commitments, and Velocis anticipates a first close for Fund II around September or October, according to co-founder and managing principal Fred Hamm. Potential investors include institutional investors, large family offices and high-net-worth individuals from the US, Mexico and Europe.
“We were very pleased that at our annual meeting one of our most frequently asked questions was ‘When are you going to launch Fund II?’” Hamm told PERE. “We’re moving straight into it with no delay at all.”
The vehicle will focus on the major markets in Texas and Colorado, as well as Atlanta, southern Florida, Charlotte and Raleigh-Durham, North Carolina. In addition, the fund’s larger size will allow Fund II to invest in portfolio acquisitions and deals in Washington, DC, which Velocis did not do for Fund I. The firm already has identified a pipeline of attractive opportunities, including medical office properties in the DC area and office properties in Denver.
“We’re focused on growth markets that are pro-business,” commented Smith. “We have experience working in all of those markets, and each of those will have very solid job growth characteristics going forward.”
Using leverage of up to 65 percent, Velocis anticipates that Fund II will have purchasing power of $800 million. The vehicle will target financially distressed or under-managed US real estate assets in the $20 million to $70 million range where Velocis can “unlock value.” The firm anticipates securing 25 or more properties for the fund, which is targeting a net IRR of 18-plus percent.
Velocis Fund I, which held its final closing in March 2013 on $150 million, has performed beyond underwriting expectations, returning a 30 percent net IRR to investors and a 2x equity multiple. Currently, Velocis has deployed 77 percent of the capital from Fund I and expects to invest the balance by the end of the summer.
Founded in 2010, Velocis is comprised of two entities: Velocis Fund and Velocis Advisors. Its advisory services group works on separate accounts with real estate investors in the core space.