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Thursday, Dec 8, 2022

Stockdale Capital Sets $550 Million Fund

The commercial real estate industry may be slowing, but not all companies are shying away from investing in commercial properties.

Westwood-based Stockdale Capital Partners recently secured a $550 million real estate opportunity fund called SCP Real Estate Opportunities Fund I.

The fund, which originally had a target of $300 million, was backed by pension plans, foundations, individuals and endowments.

And the company is aggressively looking at new opportunities.

“We’re out there playing offense when a lot of people aren’t in a position to buy,” said Stockdale Capital Managing Director Dan Michaels. “We are out trying to capitalize on the market dislocation.”

The fund will be doing adaptive reuse projects that entail converting the property, for example turning a former shopping center into office space, and “express turnaround buys,” Michaels said.

Express turnaround buys are properties a company can purchase and quickly flip.

Michaels added that the fund has led to some new opportunities. “We weren’t expecting a global pandemic. It does create an environment where we can invest in turnaround opportunities, things like hospitality. Interesting situations in retail and potentially office places. Recently we bought a distressed mall in downtown San Diego called Horton Plaza. We are turning that around much like what is being done at Westside Pavilion to creative office,” he said.

The former Westside Pavilion mall is being converted by Hudson Pacific Properties Inc. and Macerich Co. into creative office space. Google has leased the project, dubbed One Westside.

Michaels said Stockdale Capital is interested in all asset classes and will be taking on more adaptive reuse projects, creating medical and creative office spaces.

Late last year, the company announced plans to build a 145,000-square-foot medical office building at 656 S. San Vicente Blvd. in Beverly Grove.

The property is slated to have 5,000 square feet of retail space. It is expected to open in 2022. According to the company, it is the area’s first new major outpatient medical office facility in nearly 20 years.

Also in 2019, the company sold the 147,000-square-foot 3rd Street Medical Center to Healthcare Trust of America Inc. for $85 million.

Stockdale’s medical offices in L.A. include 9090 Wilshire Blvd. in Beverly Hills, which fully leased to Cedars-Sinai Health System, and 2825 Santa Monica Blvd. in Santa Monica, which is mostly leased to UCLA Health.

“We’re still very much focused on medical office. This health crisis made it clear we need more services. We are still looking for medical office in and around Southern California,” Michaels said.

Instead of just working on ground-up developments, though, Michaels said Stockdale Capital would be focused more on value-add projects and properties that can be repositioned.

Michaels said financing can be hard to find right now and that having capital puts Stockdale at an advantage.

The company is focused on assets in the West and Southwest regions but is selective about the types of properties it will pursue.

Industrial, for instance, may be enticing to many investors at the moment, but Stockdale Capital sees a downside to the category.

“Industrial will prove defensive. It’s very attractive,” he said. “(But) for us, there’s better value opportunities elsewhere. We’re not big proponents of buying when it is extremely competitive, and there are many people chasing the same deal or asset class.”

“That’s why we really like the opportunity in hospitality and even in retail,” he added.

Right now, Michaels said, the company can “cherry-pick some unique assets.”

“We think there’s a pretty unique opportunity in select service or independent hotels.”

He said Stockdale Capital would likely link some of these properties to hotel brands to add value as the company has “had success in doing that previously.”

“The hospitality industry is going to be severely challenged. I do think the big companies will be successful long term, but there will be some independent hotels that will suffer,” he said.

Stockdale Capital’s fund recently closed. Michaels said the company has used about 20% of the fund so far but still has “a good amount of capital still available and will be raising more to meet the market opportunities.”

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans covers real estate for the Los Angeles Business Journal. A USC grad, Madans has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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