DALLAS-After setting a goal of $150 million in 2010 for a fund capital raise, Velocis leaders began recruiting potential investors. Close to three years after the fund's launch, Velocis is preparing for its final closing date, with company executives telling GlobeSt.com that the fund's result should surpass the original 2010 goal.

"We have the fund's investors, and the co-investors," comments Steve Lipscomb, principal with Velocis. "By the time we''ve closed this first fund, and by the time you add the co-investment, we'll surpass the $150 million."

The Velocis fund targets U.S. real estate assets in demand driven/supply constrained markets in the $10 to $50 million range, focusing on core-plus office, medical office and retail properties. The Fund is specifically sized to acquire a diversified portfolio of assets that may be too large for individual investors, but too small for many large institutional investors.

Velocis currently owns seven assets in Texas and one in Colorado. The portfolio includes two office buildings in Houston; a medical office building in Austin; two shopping centers in Austin; a medical office building in Fort Worth; a shopping center in Fort Worth; and an office building in Denver.

However, with capital starting to be more plentiful on both the debt and equity side, investors are starting to come back into the market. Velocis managing principal Fred Hamm allows there is more competition for commercial real estate product, but points out that the nature of the fund means it can be patient. "As opposed to some of the larger funds that have to move lots of money, we have the luxury of being disciplined and patient, and going after assets that meet our criteria," he says.

But one aspect that the Velocis fund is more than ready for is the anticipated debt that will soon mature. "If you bought something, or refinanced it, in the first half of 2008, before the downturn hit, it's five-year money," Lipscomb explains. "It's coming due this spring." Same thing with seven-year loans that may have been signed in 2006 – that's set to mature this year as well. Lipscomb goes on to say that, while fewer assets are facing foreclosure these days because values have gotten a little better, there is still a gap between what a sponsor needs to refinance and the value of the actual asset.

"The debt problem has not gone away," Hamm observes. "Certainly everyone is feeling good in this frothy market, but the debt issues are still there."

And it's those debt issues that Velocis is counting on. "That was our strategy when we launched, and we're pleased that we're almost two years into this, and everything has progressed as planned," Hamm notes. "Our strategy was to take advantage of opportunistic investments arising from the debt issue and we're doing that." He goes on to say that the deals closed by the fund had some kind of debt issue associated with them.

And there's even more deals in the pipeline. "We have a number of deals we're very close on; we sent out several LOIs," Hamm says. "In the next 90 days, we'll be ready to talk about some closings."