Private equity real estate fund manager Velocis has closed on its latest fund after raising more than $170 million, exceeding its target by more than 70% and putting it in a position to buy a stake in real estate in high-growth markets throughout the world.
The Dallas-based firm's newly raised fund, Velocis Secondary Partners III, gives it capital to acquire limited partnership interests or stakes in real estate funds and assets through the private secondary market, in which another investor sells a stake in its existing funds and assets. Like other real estate investors, Velocis has a history of investing in high-growth cities throughout the United States.
The decision to deploy this "secondary strategy," as the firm's partners reference it, comes as the real estate industry has been upended by rising interest rates and an increasingly difficult lending environment, especially for office properties. In raising this fund, Velocis plans to leverage its expertise and underwriting process to acquire limited partnership interests at favorable prices from sellers in need of liquidity.
Velocis plans to work with its "vast network of real estate managers and secondary advisors" to uncover dislocation and provide investors with "unique opportunities," Velocis Partner David Seifert told CoStar News.
The newly raised fund is expected to invest in industrial, apartments, office, retail, data centers, hospitality, life science, senior housing, medical office and single-family residential properties in the U.S., Asia, Europe and Latin America. Velocis raised the fund from partners, including corporate pension funds, insurance firms, endowments, foundations, registered investment advisors, family offices and high-net-worth individuals.
Fifth Fund
The Velocis Secondary Partners III is the fifth fund the firm has closed in the past 24 months. The firm's last value-add fundraise a year ago with a target raise of $300 million went "remarkably well" during a tough capital environment that began early in the pandemic, said Fred Hamm, co-founder and managing partner at Velocis.
Hamm and other partners at the firm have experienced tough times in commercial real estate and the gray hair that comes along with it, he told CoStar News, adding, "We've seen this before and, as I like to say, if you own good real estate, you can work your way through it."
Unlike the mid-1980s, when the Lone Star State was cast in "dark days," Hamm said Texas is now "the shining star," with the firm having a development fund focused solely on working in the state along with its other value-add funds which it invests primarily in the Sun Belt and high-growth U.S. markets.
"Everything is still unfolding," he said, adding "It's not like it was in the 1980s, where it will be hard for 6 to 8 years. We think the next 12 months will be challenging, but we see beyond it. There's opportunity out there in the market."
Velocis plans to finish deploying capital from its last value-add fundraise after “values settle” and the partners of the firm have more clarity in the marketplace, said Hamm, who oversees the firm’s strategy with partners Jim Yoder and Mike Lewis. The co-founders are helped by the decades of experience each partner has in his background.
Beyond the 13-year-old firm's newly launched "second strategy," Hamm said Velocis has been focused on buying assets priced between $40 million and $80 million, with a bent on purchasing industrial and multifamily properties for its value-add fund, which has been on pause, waiting for a settling of values.
“We’ve been intentional about creating diversification to satisfy our investors, so if one property type is out of favor, another one might be more favored,” he added. “Every real estate manager is challenged with capital markets being problematic and locked up, which is why we’ve built a diversified multi-strategy platform.”