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Vinny’s Other Play: Bay Area Real Estate

Vinny Smith is quietly stockpiling real estate in the Bay Area and bulking up his venture capital investment portfolio with the cash windfall he took home in Dell’s $2.4 billion buy of Quest Software Inc. last year.

His latest under-the-radar deal will certainly turn some heads: an acquisition of land owned Cisco Systems Inc. in Fremont, a 150-acre site once eyed as the future home of the Oakland Athletics.

Smith’s next play is just as eye-catching: He plans to buy a bundle of venture-backed companies for some $150 million.

“When we add this piece, we’ll be up to 20 investments,” said Smith, who launched Irvine-based Toba Capital with former Quest colleagues late last year. “We haven’t announced a lot of it. A lot of them aren’t public.”

The deal is expected to close in coming weeks, according to Smith, who said it will push Toba’s investments to about $180 million as it quickly builds a name for itself in the often-guarded sector.

Low Profile

Smith, who keeps a low public profile in OC, plans to put another $200 million into Toba’s inaugural fund.

“We haven’t figured out the total size, but it will be somewhere around $400 million,” he said. “Even though it’s an evergreen fund, I want to have a defined amount to be able to measure it up and compare it to other funds.”

Smith is funding Toba investments with his own money. He said he remains hesitant to seek outside capital.

“It comes with real responsibility,” said Smith, who cashed out some $800 million after his Aliso Viejo-based business software maker was acquired. “I would not sleep so well at night if I was investing other people’s money.”

Smith: “public markets are salivating” over real estate operations like Integral’s

Smith made a rare public appearance last month to deliver a keynote address at Octane’s VC in the OC conference.

They were his first public comments since the Quest deal, one of the largest sales in the tech industry last year. Most of his 40-minute talk at the Irvine Hyatt Regency focused on the Dell buy. Smith shed light on Toba’s pending deal and his real estate business in a later one-on-one interview.

Smith said he considers real estate a part-time hobby, striking deals when opportunity knocks.

“It’s a fun business, but it’s not nearly as fun as high tech,” he said.

You won’t find his name attached to any real estate deal or development company—he prefers to keep one or two degrees of separation.

Four years ago, he recapitalized Newport Beach-based developer Integral Communities as it struggled to survive the depths of the recession.

“I do business with friends, and I’m also a bit of a market timer,” said Smith, whose involvement with Integral was largely unknown to outsiders. “It’s a boom-and-bust business.”

It was Integral that closed the Cisco deal last month, fueling a comeback story that could culminate in an IPO.

Financial details of the former Cisco-owned land were not disclosed.

Integral, which has about 20 projects of that scale in the works, is on track to post $500 million in revenue and an operating profit of $250 million this year, according to Smith.

“Public markets are salivating at something like that,” he said. “When you go from $100 to $500 million in revenue, all the bankers in the world are coming after you. We’re trying to decide whether to take it public or not; I don’t think we will.”

Integral has tracts in the East Bay towns of Tracy and Livermore that can support up to 500 homes. It has a 300-unit luxury apartment project at Main and MacArthur in Santa Ana, in addition to others near Angel Stadium and in the San Diego market.

“The real way to make a lot of money in real estate is serving the masses,” said Smith, who began crafting his plans for life after Quest as the long negotiation process with Dell played out.

That’s one of the reasons Toba has been so active out of the gate growing its portfolio. It already has notched a successful exit, with another potentially on deck.

In mid-May, Toba-backed SignNow Inc., a Newport Beach company that provides digital notary and other signature services, was sold for more than $10 million to Campbell-based Barracuda Networks Inc.

Toba led a $9 million financing round for Codenvy in February, spearheading its relocation to San Francisco from France. The company provides cloud-based services to code, build and test apps.

It recently took a stake in Atlanta-based Liquidware Labs Inc., which makes software that helps businesses move operating system applications to devices and virtual platforms.

“Cool” Software

Smith said he’s invested in some “cool” software-as-a-service plays, the consumer segment, and companies that are bridging the old—such as filling out medical forms—with the new, via the cloud and medical sensors, in one example.

“We had some pent-up deals— because of the situation with Dell and Quest—that allowed us to flow very rapidly with some large transactions” once the sale was final, he said. “It will slow down, and we’ll maybe pick up two or three investments per quarter.”

Smith considers the SignNow deal a small exit. The next one in the hopper is projected to be much larger, but he’s keeping that deal under wraps for now.

“We have a big exit coming up, but we’ll see,” he said. “We may buy the company instead of letting it get acquired.”

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