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.
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.