CapStreet hits $100M

Taking advantage of a brightening fund-raising scene, CapStreet Group expects a mid-year close for its long-stalled third fund that will exceed its target.

Commitments to CapStreet III now top $100 million, with an April closing that brought on several new investors and appeared to shake the fund loose from the $80-million mark where it seemed to have been stuck since November 2008.

Katherine Kohlmeyer, partner and CFO of Houston-based CapStreet, confirmed that the firm expects to hold a final close on the fund by June 30. She also confirmed a target that now stands at $250 million, above its reduced $200 million target from 18 months ago.

“2009 was a very challenging fund-raising year. A lot of investors were not active,” Kohlmeyer said. “We have seen more interested investors in 2010. It seems to be loosening up somewhat.”

Kohlmeyer said she was “optimistic that we will reach our $250 million target,” and she added that the firm closing date could galvanize investors to commit. The firm, which focuses on lower mid-market investments in Texas and the Sun Belt, has committed $14 million of the new fund.

CapStreet retained Knight Capital Partners in the fourth quarter to act as its fund placement agent, which also has helped drive commitments, as have a series of liquidity events this year. Kohlmeyer said the firm has realized and distributed $170 million so far in 2010 from CapStreet II, a $370 million vehicle that closed in 2000. That fund is in its final stages of winding down, with only two portfolio companies remaining.

Among its current holdings is Cardtronics (Nasdaq: CATM), a nationwide operator of ATMs and which anticipates a $65 million distribution in the third quarter by way of a stock sale. CapStreet said it had already returned $100.3 million on its original $17.5 million investment in Cardtronics, and the firm anticipates a 9.2x return when it exits the investment.

Another company in the firm’s portfolio from fund II is Worldwise Holdings, a maker of environmentally responsible pet products. The firm anticipates an exit from Worldwise in 2011. —Steve Bills