SAN FRANCISCO—Mixed-use multi-family andretail investor VeritasInvestments is one of the most active in the San FranciscoBay Area market, and recently concluded one of the largestrefinancings in that city's history. recentlycaught up with Veritas CEO Yat-PangAu to talk about current trends and opportunities amid afast maturing investment cycle.

| Observers of the current real estatecycle say the nation's top-ten investment markets are gettingoverheated. With San Francisco apartments topping mosteveryone's list in recent years, what's the situationthere?


Yat-Pang Au: As a global city and WestCoast gateway to Asia, San Francisco is always a top 10 investmenttarget, and the rebound from the recession has expanded the pool ofinvestors. Prices have gone up significantly of course, butthat just makes things more interesting for an experienced localfirm like us in finding the right opportunities. The firstround of investors post-recession grabbed incredible discounts;now, as the months pass by, you've seen investors with differentobjectives buying along the yield curve, such as large pensions andsovereign wealth funds with lower, longer-term return targets. Onthe other hand, opportunistic buyers with double-digit yieldobjectives have pretty much left San Francisco and are moving tosecondary and tertiary markets.


GlobeSt.Com: How is Veritas able to perform amid thecompetition?


Yat-Pang Au: Gone are the days of justbuying discounted properties that rely on cap rate compression.It's getting back to fundamentals of operating the real estate, andknowing what to do with these classic, older San Franciscoapartments over ground floor retail, to meet our investmentobjectives. We're finding a good reception to our business model,which tailors to the idiosyncrasies of San Francisco and respondsto the market. As we expanded our portfolio coming out of therecession, we scaled our organization to match our growth, both ininvestment expertise and management capabilities. Our focus remainson acquiring smaller and mid-sized rental properties and creatingvalue that we deliver to all our partners. We have equal focus onthe retail in our properties, to custom curate ground floor shopsand cafes that speak to the unique nature of the building andpotentially transform the neighborhood. Retail contributes to thespecial character and amenities within walking distance of ourproperties, and that in turn adds synergistic value to theapartments.


GlobeSt.Com: So what's next on the horizon forinvesting in the Bay Area?


Yat-Pang Au: San FranciscoMayor Ed Lee is working hard to increase thesupply with his target of 30,000 new units, especially in workforcehousing for teachers, police, fire fighters, and mid-levelworkers--in-between luxury and subsidized affordable housing. I'msometimes asked if we're worried about a coming oversupply, andwe're not. We actually see additional housing as an opportunity toperpetuate the virtuous cycle of housing the world's best andbrightest in San Francisco, which in turn draws employers likeSalesforce, Zendesk, Twitter and others who have all locatedthemselves in San Francisco to access this brain trust. Couplingthese demand drivers with the Mayor's housing initiative, we see afuture rich in housing demand and job creation. We're alsoexpanding our sights beyond the classic San Francisco neighborhoodsthat we've been operating and are considering investing inneighborhoods around San Francisco that offer similar opportunitieswithin our model and strategy.

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Natalie Dolce

Natalie Dolce, editor-in-chief of and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel,, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including and Museums New York magazine.