Stockbridge sells stake to CITIC – Exclusive

Stockbridge Capital Group has sold a 48 percent stake in the firm to CITIC Capital Holdings Limited, a Hong Kong-based alternative investment management and advisory company, PERE has learned.

Prior to January 1, Stockbridge co-head and executive managing director Terrence Fancher had owned 100 percent of the firm. On January 1, Fancher sold 48 percent of the company to Gryphon, a CITIC subsidiary, according to a filing with the Securities and Exchange Commission. As part of the transaction, a Stockbridge board was appointed, consisting of Fancher as chairman; Kristin Renaudin, managing director at Stockbridge; Yichen Zhang, chairman and chief executive officer at CITIC; and Annie Fung, chief operating officer at CITIC. 

Stockbridge made the filing in February but the ownership change was not previously reported. Financial terms of the deal were not disclosed.

The corporate transaction follows a joint venture that CITIC formed with Stockbridge last year, investing capital in US real estate. Fancher was said to have been seeking and courting new equity sources for some time.

The firm’s portfolio includes core, value-added and opportunistic strategies. Founded in April 2003, Stockbridge had approximately $10.9 billion of assets under management as of December 30, spanning all major real estate property types and certain specialty property types throughout the US.

In 2010, Stockbridge and a number of managing directors spun out the firm’s core and value-add real estate businesses to form an affiliate known as Core and Value Advisors. CVA is 50 percent owned by eight managing directors that are dedicated to the core and value-add businesses, with Stockbridge and Fancher owning the remaining 49 percent and 1 percent, respectively. Through its investment in Stockbridge, CITIC now owns a less than 25 percent interest in CVA.  

The opportunistic funds managed by Stockbridge include Stockbridge Real Estate Fund, which attracted $612 million in 2003; Stockbridge Real Estate Fund II, which netted $1 billion in 2005; and Stockbridge Real Estate Fund III, which came in at $909 million in 2007. All of the opportunistic funds are now fully invested or committed.

The core and value-add funds managed by CVA include Stockbridge Value Fund III, which was launched this year and has attracted $50 million to date, according to PERE data. Previously, CVA raised $320.5 million for Stockbridge Value Fund II in 2014, against a $500 million target, and $217.9 million for Stockbridge Value Fund I in 2011, against a $250 million target.

Since 2005, CITIC Capital Real Estate Group, CITIC’s real estate investment management and advisory arm, has managed six funds and one co-investment vehicle. Through six of those vehicles, the firm has targeted Chinese real estate. However, it also invests in the London property market through CITIC Capital London Property Fund, which is mainly focused on a high-end residential development project located at 60 Curzon Street in the UK capital.

To date, CCREG has invested in more than 20 projects in China spanning more than 43 million square feet in residential, retail and commercial properties and valued in aggregate at more than $8 billion. The firm is looking to expand its presence in Europe and the US, and increase its investments in logistics properties and student housing, according to its website.

CITIC Capital currently manages $19.3 billion of capital from international and Chinese investors. Its primary businesses include real estate, private equity, real estate, structured investment and finance, and asset management. CITIC Capital currently employs more than 200 staff throughout its offices in Hong Kong, Shanghai, Beijing, Shenzhen, Tokyo and New York.

CITIC’s investment in Stockbridge marks yet another corporate transaction involving an Asian investor acquiring a full or partial interest in a US real estate-related manager. In February, SoftBank Group, the Japanese multinational telecommunications and internet corporation, disclosed that it was buying New York-based private equity and real estate firm Fortress Investment Group for $3.3 billion. Later that month, Mitsui and CIM Group announced that the Japanese conglomerate was set to buy a 20 percent stake in the Los Angeles-based real estate and infrastructure fund manager, and intended to also commit capital to certain CIM funds, for a total of investment of $450 million to $550 million.