Stockbridge spends $62m on two West Coast deals

The firm has acquired a 44% leased office property out of foreclosure after Seattle developer Michael Mastro was forced into bankruptcy, as well as a fully leased industrial asset in Fremont, California.

Stockbridge Real Estate Funds has invested $62 million to acquire two properties in Seattle and San Francisco, one of which was bought out of foreclosure.

901 Page

The firm said it had bought the fully leased industrial property of solar-cell manufacturer Solyndra, in Fremont, near San Francisco. The firm acquired the 506,490-square-foot property, known at 901 Page Avenue, for $42.5 million from Overton Moore Properties, according to data provider Real Capital Analytics. Overton acquired the property for approximately $14 million in December 2008, RCA added.

Stockbridge also acquired a 111,304-square-foot office property at 837 North 34th Street, in the Fremont area of Seattle, which is only 44 percent completed and leased.

The office property, which includes 5,000-square-feet of retail, was purchased out of foreclosure from Bank of America. The lender had taken back the property from Seattle developer Michael Mastro, after the 84-year-old borrowed heavily to finance his projects. According to local media reports, creditors forced Mastro into bankruptcy, after he ran up liabilities of around $587 million against assets of $249 million.

Mastro is believed to have refinanced the property with a $30.4 million first mortgage in September 2007. However at the time of foreclosure the property was valued at just $16.6 million. According to RCA, Stockbridge bought the office development for $19.5 million.

Stockbridge is believed to have made the investments through its latest real estate opportunity vehicle, the $1.15 billion Fund III, which closed in 2008. A spokesman for Stockbridge was unavailable for additional comment at press time.

In August, the San Francisco-based manager corralled at least $128 million of recapitalisation equity from LPs in its $1 billion Fund II, after the vehicle was written down to 24.9 percent of cost but with outstanding asset-level debts of $1 billion.

According to investment committee reports from the Los Angeles Fire and Police Pensions (LAFPP) fund at the time, Stockbridge spent much of the first half of 2010 urging LPs – and third party equity – to back various recapitalisation proposals for Fund II without success.

However in July, a major pension fund provided $125 million of rescue financing, with LAFPP agreeing on 19 August to commit an additional $3.75 million on top of their initial $30 million commitment in the 2006 vehicle. The LPs taking part in the recapitalisation expect to achieve a return of 69 cents on the dollar compared to 53 cents for those not participating. As part of the recapitalisation plan, Stockbridge agreed to reduce its fees by 33 percent.