Investment firm gets $35M

Austin Business Journal - September 8, 2003

Real estate purchaser pursues buildings in Austin, elsewhere

A local real estate investment firm has raised $35 million from investors and is seeking to buy properties in Austin.

Austin-based Asset Investment Corp., which does business as AIC Ventures, was planning to raise about $20 million for its fourth fund. However, interest was so high that it increased the amount of the fund, says Paul Robshaw, chairman and CEO of AIC.

"Our track record is the principal reason we have been able to raise the money," Robshaw says. "We have generated a 15 percent return, and people cannot get that kind of return in today's environment."

AIC buys buildings from small public or large private companies and then leases those buildings back to the companies in a transaction known as a sale/leaseback. AIC hasn't purchased any buildings in Central Texas, but Robshaw says the firm is in talks with a couple of undisclosed local businesses.

With the sale/leaseback setup, AIC offers businesses another way to protect their cash flow and provides an 11 percent return to its investors. Robshaw says after the 11 percent is distributed to investors, the firm's partners take their share and offer additional returns to the limited partners as well.

Robshaw says that by coupling the $35 million fund with bank loans featuring capped interest rates, AIC will be able to purchase about $100 million worth of property. AIC plans to use the money to complete about six transactions, with deals ranging from $4 million to $20 million each.

AIC buys a building from a company and then negotiates a long-term lease with an accelerating annual rental rate. The goal: The difference between the lease rate and the mortgage rate will generate enough money for a substantial return.

Robshaw says AIC pursues property from middle-market businesses with a net worth of $10 million to $200 million each. AIC buys properties in the East, Midwest and Southwest.

AIC has more than 15 holdings, including five in Texas. Recent investments include the purchase of two buildings of supply chain firm ADS Logistics LLC in Hammond, Ind., and Charlotte, N.C.

AIC was founded in 1990 by Robshaw, who has formed or assembled 35 real estate partnerships or ventures raising $61 million in equity. He has invested more than $380 million worth of real estate.

When AIC becomes interested in a deal, it performs real estate due diligence -- which includes looking at a building and the local real estate market -- as well as financial due diligence, which gauges whether the company can stay in business throughout the life of the lease. The largest risks facing AIC's investments are that the company paying off the lease will go out of business.

Now that AIC has raised a $35 million fund, AIC will look toward a fifth fund of about $50 million or $60 million, Robshaw says. If the firm manages to raise that much, AIC will consider adding to its staff. It now employs seven people in Austin and a total of eight in AIC's Dallas and Chicago offices.

Mark Powell, senior vice president in the Austin office of wealth management bank Atlantic Trust NA, says investors are growing more interested in real estate as an investment.

"It's value is subject to ups and downs, but there's not a daily barometer," Powell says. "People have had a hard time lately. Maybe their plates were a little too full of equities in the last two or three years, and now they have looked for alternative investments."

Bob Martin, president and CEO of Austin venture consulting firm JumpStart Partners, says he invested in the AIC fund because the firm's returns were impressive and because AIC's management is forthright with its limited partners, such as providing monthly updates and paying quarterly dividends.

"AIC Ventures offers one of the best returns I have seen recently. They also have a phenomenal management team and the patience that is the hallmark of a great investment group," Martin says.

"I am also impressed by their basic reporting structure and their ability to pass information along to their shareholders, which I have not seen with every fund."