Stockbridge closes value-added fund on $220m

The San Francisco-based real estate investment manager has wrapped up fundraising for its debut value-added fund. The firm also recently made its fourth acquisition on behalf of the vehicle.

Stockbridge Capital Group has held a final close for its first value-added real estate fund, Stockbridge Value Fund I, raising $220 million in commitments. The vehicle attracted capital from institutional investors such as the Texas Municipal Retirement System and the Santa Barbara County Employees’ Retirement System (SBCERS).

Stockbridge held a first close of $64.77 million on Value Fund I, which had a hard cap of $400 million, in June 2011, according to a filing with the US Securities and Exchange Commission. The firm originally had been marketing a value-added fund by the same name, targeting $600 million to $800 million, in 2008, according to documents from the Pennsylvania Public School Employees’ Retirement System (PSERS). However, Stockbridge took that fund off the market in the wake of global financial crisis and launched the current fund last year.

Value Fund I will pursue office, industrial, retail and multifamily real estate investments in major US markets, with a focus on distressed properties and portfolios that are undervalued or underutilised. Stockbridge, which is led by founder Terry Fancher and former RREEF North America chairman Steve Steppe, plans to execute a value-added strategy for the fund through the management, leasing, recapitalisation, renovation and repositioning of properties. The vehicle is seeking investments in the $20 million to $50 million range and targeting gross returns of 12 percent to 15 percent, according to SBCERS documents.

Stockbridge made its first two investments on behalf of the fund in the second quarter of 2011, purchasing Central Park Plaza, a six-building office park in San Jose requiring $21 million of fund equity, and Landmark I and II, two Dallas office buildings that required $13.7 million of fund equity. The firm followed those two investments with the acquisition of Century Perimeter, a 298-unit apartment complex in Atlanta, in October 2011, and it recently closed on its fourth deal for the fund, a 68,000-square-foot office building at 246 First Street in San Francisco.

Stockbridge, which was founded in 2003, previously sponsored three opportunistic funds and related co-investment vehicles totalling $2.6 billion in equity. Its last opportunistic fund, Stockbridge Real Estate Fund III, was launched in 2007 and raised $1 billion.