Dallas execs' Valeo Fund aims to invest in undervalued properties starting this year

Four of Dallas' top commercial real estate executives have set up a company to invest in undervalued properties.

Valeo Fund is raising money in Europe, Latin America and at home to make a play in the expected sell-off of billions in U.S. properties.

"We think this is going to be a generational opportunity to buy real estate," said Valeo Fund co-founder Mike Lewis, previously a top officer at Crescent Real Estate Equities. "It's no secret that the banks have over $1 trillion in loans coming due over the next four years.

"We think the opportunity to start acquiring some of these properties will begin this year," he said.

Fred Hamm, a veteran Dallas-based money manager, teamed up with Lewis; Jim Yoder, former managing director at Jones Lang LaSalle; and Steve Lipscomb, previously a national director of Goldman Sachs' Archon Group real estate division.

Valeo Fund plans to raise about $150 million for its first investment fund by this spring and plans to start buying $300 million worth of properties in the fall.

With many commercial real estate values around the country down by more than 40 percent, Valeo Fund is one of a number of new investment groups targeting discount property purchases.

"We believe the time is right to launch our company," said Hamm, who's been working to set up the operation for more than a year. "It takes a long time to build a private equity real estate company.

"We have already made headway with a group of investors, primarily high-net-worth individuals who are looking for the opportunity to come into the U.S. real estate market."

Valeo plans to focus on office and retail buildings priced from $15 million to more than $50 million. It is shopping for building buys in markets stretching from Washington, D.C., to Florida, Georgia, Texas, Colorado and California.

"We want to go to markets where the job growth is going to be," Hamm said.

The latest real estate forecasts say that the worst of the commercial property price shakeout is probably over. And many analysts expect the market to be in recovery by late this year and into 2011.

Billions of dollars in potential investment funds are sitting on the sidelines waiting for lenders and investors to decide to begin unloading properties.

So far, most lenders have opted to delay foreclosing on commercial properties that have lost value and can't be refinanced.

"We think the lenders are going to cease kicking that can down the road," Hamm said. "We think that's is going to start unfolding in 2010."

Dallas Morning News