Investment manager Alpaca VC is broadening its exposure to commercial real estate.
The New York venture capital firm, an investor in about 100 startup technology firms, has launched Alpaca Real Estate.
Alpaca VC is looking to build a multibillion-dollar, property-purchasing affiliate to create synergies with the investments and partnerships it has already made. The company backs multiple firms focused on residential property systems, including smart entry, package delivery and short-term rentals.
Venture capital firms typically invest in a portfolio of startups, hoping some will break out and become successful. But it's relatively rare for a venture capital firm to branch out and purchase real estate directly.
Alpaca Real Estate intends to use Alpaca VC’s affiliated technologies to enhance efficiencies and generate incremental value. Its initial property targets include industrial and build-to-rent residential, Daniel Carr, co-founder of Alpaca Real Estate, said in an interview with CoStar News.
Alpaca Real Estate closed on an unspecified amount of seed money recently from Chicago-based alternative investment firm GCM Grosvenor. Carr and co-founder Peter Weiss are leading the new firm.
The pair aims to focus on investment opportunities that require recapitalization, repositioning, strategic capital and/or physical transformation.
Industrial, Build-to-Rent
High interest rates and falling property values have cut into financing for commercial real estate over the past year and a half. Still, Alpaca Real Estate is pursuing properties in which fundamentals have held up better than others and that many lenders continue to support. Carr and Weiss said Alpaca VC’s investments give them an advantage in trying to compete in the industrial and build-to-rent sectors.
“One way that we can differentiate ourselves from competition is by integrating those innovative operating companies that Alpaca VC has knowledge of or has invested in into our real estate business plans,” Carr said. “So, there are certainly folks that are looking at similar types of assets, but there are much fewer folks who are looking to innovate within those asset classes.”
In the industrial sector, Alpaca VC has made investments in electric vehicle charging businesses. Weiss said that gives Alpaca Real Estate an advantage when it comes to seeking out industrial properties that could be turned into charging locations.
Weiss is now looking at industrial properties in Nashville, Tennessee, along the Interstate 24 corridor, where vacancy is about 3%. Because there is still strong population growth in the area, properties offer strong baseline returns with potential upside, he said.
Residential markets on Alpaca Real Estate’s radar include Florida and greater Dallas. For industrial, it's Austin, Texas, along with Nashville.
“The reason we like the infill last mile, multitenant stuff is you have natural land constraints where you really can't build,” Carr said. “You've got really tight vacancies. A lot of these markets, demographically, continue to be really strong. And then you've got the backdrop of a capital markets where institutional investors aren't putting as much capital to work. They're spending a lot of time on their existing portfolios, whereas we have no legacy asset management issues. And so, it allows us to price things at lower leverage and to a higher risk premium.”
Carr and Weiss bring over a dozen years of experience investing in real estate transactions. Prior to co-founding Alpaca Real Estate, Carr was a principal at Ares Management, primarily focused on securing joint venture equity.
Weiss has a combined 10 years at private equity firm Prospect Ridge, an AllianceBernstein spinout, where he was most recently a managing director responsible for all aspects of real estate acquisitions and investment management. Previously, the pair worked together in the real estate investment banking division at JPMorgan Chase.