With a surge in senior-level hires, an upcoming fund, and the strategic integration of artificial intelligence, Westwood-based Stockdale Capital Partners is positioning itself for aggressive, large-scale growth across the national real estate landscape.

Founded in 2010, the firm has grown to roughly 110 employees and has $3.2 billion in assets under management – figures that the firm projects will rise, said Dan Michaels, managing partner at Stockdale Capital Partners.

Stockdale is rapidly scaling its operations.

The firm’s employee count may surpass 300-400 in the next few years, with a major hiring push focused on expanding its in-house property management team, Michaels said.

Backing this expansion, the firm is preparing to launch a flagship third fund next year alongside new sector-specific vehicles. Its second fund, which closed last year, is continuing to raise co-investment capital and is slated to be fully invested by the end of this year.

The second fund raised $700 million, according to Institutional Real Estate Inc. Stockdale did not comment on an exact figure but said it was 50% larger than its predecessor fund.

“What we want to be able to do is have one flagship vehicle that focuses on opportunistic investments, and then asset class-specific vehicles that focus on more core plus value add, and do that nationally,” Michaels said, adding that the company is interested in properties with “a pretty significant value-add business plan.”

This could come in the form of adaptive reuse, repositioning or leasing. Stockdale targets returns of 18-20% for its opportunistic fund series in addition to core-plus and value-add returns for sector-specific funds..

Setting itself apart

Michaels said it is the firm’s willingness to invest in a range of asset types, as well as its vertical integration, that sets it apart. While the firm does not invest in every asset class, some it has invested in include retail, office, multifamily and social clubs.

He started the firm with a family office and the idea of creating “an owner operator that funds managed, asset managed and property managed (a variety of) asset classes, which is a little unique.”

There are often large allocator funds that partner with local operators, but not many companies “that do it all at once,” and those that do are often asset-class-specific, he said.

“We wanted to be the operator that could control our own destiny in terms of performance, largely because most of what we had done was distress turnaround, and when the house is on fire, and you’re there to try to turn it around, you want to be able to be the one that has full control at the property level all the way up, to make sure that you could effectuate change as quickly as possible,” Michaels said.

He added that he was cutting out additional operators and situations in which a lender gives money to a real estate owner who, in turn, passes it on to a property manager, which is expensive and involves a number of fees.

“We told our investors, we’re going to consolidate the control,” Michaels said. “We’re going to be the fiduciary; we’re going to be the operator. We’re going to be the manager, and we’re going to do it for less fees.”

According to Michaels and Michael Lewis, the firm’s managing director of capital formation, this is part of what sets the firm apart in fundraising. Real estate fundraising and the infrastructure of capital have “changed significantly over the past 20 or 30 years,”
Michaels said.

“The real estate fundraising market today is a (roughly) $200 billion a year market,” Lewis added. “There (are) hundreds, if not thousands, of market participants that are fighting for this capital, us being one of them. I think, frankly, we’ve probably punched above our weight.”

‘Beefed up’ internal capital

The firm has “beefed up” its internal capital formation efforts, bringing on additional people and forming relationships with advisers around the globe, Lewis said.

Gina Abbott, one of the firm’s newer hires, joined the firm last year as its president of property management. She was previously an executive with Lincoln Property Co. Abbott said she and her team come in when Stockdale is first looking at acquisitions. She will look at operational and staffing needs and what the investment will mean to the company. This can mean adding additional team members if assets are in newer markets.

Michaels said there was “no comparison in terms of execution” between having Abbott and her in-house team run a property and having a third party run one.

“You don’t get that attention. You don’t get that time during your due diligence process,” Abbott said. “In that position, somebody’s jumping in, they’ve never seen the asset, they don’t have the experience or the expertise of it. We’re ahead of all of that. The whole idea of being vertically integrated and being able to work with your asset management team that’s right in the same office with you, to be able to work through the business plan and making sure execution is on point, is really the ideal situation in our eyes.”

Charlie Smith, the executive managing director and broker lead for the region at Jones Lang LaSalle Inc., said he was seeing some companies interested in working with one firm for multiple services. For instance, some companies were working with JLL for both leasing and property management rather than using different companies for each, appreciating that they were “under one umbrella and talking to one another,” Smith said.

“Right now, what we’re doing when we go into our pitches is making sure all service lines are coordinated and talking to one another,” he said.

Stockdale executives agreed that having multiple parts of the business working together was key to its growth.

Biggest projects

Stockdale opened several new offices, including outposts in Dallas and New York last year.

Both markets were primed for growth. “There are markets that we like in terms of investment, and markets that we like in… terms of talent,” Michaels said of the markets the firm is interested in for additional offices and assets.

Regarding investing, Michaels said the firm is interested in markets with strong migration. In L.A., Michaels said there are “always investment opportunities in something as large as Los Angeles,” but that political environment has made it “a very difficult place to invest in.”

Still, its assets in the area include The Oaks, a large retail center in Thousand Oaks; 656 South San Vicente, a medical office building that will be West L.A.’s only medical office development in more than 20 years; and The Los Angeles Athletic Club, which it purchased in 2022.

AI and future growth

Stockdale is eyeing more growth and projects ahead. Brian Grefsrud, the firm’s chief financial officer and a former Oaktree Capital Management executive, said it was important, as the firm staffed up and grew, to create synergies and have departments work together.

“We have the opportunity to connect everything on the ground floor and make sure that data flow is working and making sure that everybody is looking at the future of Stockdale in one vision,” he said.

Some of that comes from the use of artificial intelligence and the flows put in place to ensure everything is cohesive, he added.

Michaels said the firm is investing in an AI company, Zinq AI, that is integrating its functionality across Stockdale. He called it a “unique ecosystem,” adding that it would automate a number of processes, therefore saving time and money.

Grefsrud said the system will ensure data flows correctly and that all departments operate with the same data and knowledge. JLL’s Smith added that AI was a huge part of the brokerage as well. JLL uses its own platform to utilize and compile its own information, Smith said.

In addition to AI, new offices and team members, and a third fund, some of Stockdale’s future growth could come from acquisitions, Michaels said.

“We’ve had discussions with various platforms to acquire in different regions, and we will actually be a beneficiary of growth as we look to scale,” he said. “To stay relevant to your LPs, you have to scale.”