New $300M Fund to Target U.S. Assets Overlooked by the Competition

The number of new funds created to take advantage of U.S. properties with little hope of securing refinancing continues to grow, but the recently created Valeo Fund will not be looking for the most coveted opportunities.

March 5, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user JohnE777

The number of new funds created to take advantage of U.S. properties with little hope of securing refinancing continues to grow, but the recently created Valeo Fund will not be looking for the most coveted opportunities. The Dallas-based investment vehicle is luring investors in the U.S., Europe and Latin America to snap up moderate-sized assets across the country that aren’t being heavily pursued by the big boys.

“The Fund is designed for the sophisticated investor seeking to participate in the coming opportunities in U.S. commercial real estate, but who does not want to make direct investments or be part of a much larger institutional fund,” Valeo Fund co-founder Fred Hamm noted in a prepared statement.

The objective is to target those assets that are over the heads of most individual buyers and under the radar of institutional investors. Property types up for consideration include retail, office and medical office–as well as debt instruments secured by such assets–carrying price tags ranging from $15 million to $55 million in demand-driven and supply constrained markets. Valeo Fund has an equity goal of $150 million, which, when leveraged, will provide more than $300 million in buying power.

Valeo joins a long list of new funds formed to capitalize on the depressed real estate market in the U.S. Within the last month alone, New York City-based Eastgate Property L.L.C. teamed with Tel Aviv’s Elbit Imaging Ltd. and Amsterdam’s Plaza Centers N.V. to launch a $200 million co-investment fund targeting distressed and non-distressed retail properties and Atlanta-based Regent Partners L.L.C. and Dallas-based TriGate Capital L.L.C. created a $400 million fund to invest in various property types in the southeast.

Valeo Fund and all the other funds that have recently cropped up should have a fairly large group of financially troubled assets to consider for acquisition. Global commercial real estate research and consulting firm Real Capital Analytics expects commercial mortgage default rates to increase to 5.1 percent by the end of 2010, and reach a peak of 5.4 percent by the close of 2011 before dropping to 5 percent at the end of 2012.