Shorenstein Increases New Fund

February 4, 2008
Bloomberg

Shorenstein Properties LLC, a U.S. owner of office buildings, increased its newest fund by $700 million to $2 billion to take advantage of the market slump triggered by the subprime mortgage collapse.

“We made a decision late in the year when we saw the market turmoil and saw there would be more opportunities,” Shorenstein President Glenn Shannon said. “Having committed equity would be particularly valuable, given the disruptions in the debt market.”

The San Francisco-based firm initially closed Shorenstein Realty Investors Nine LP at $1.3 billion last May. Since then, tighter lending standards and declining property values slowed the pace of commercial real estate acquisitions.

Shorenstein responded by stepping up investments in mezzanine loans, a type of subordinated debt financing that gives holders a claim on the property if the equity owner defaults. The firm has acquired six mezzanine loans totaling about $258.5 million since the beginning of September.

Four of the loans, totaling $186 million, were acquired on 1180 Avenue of the Americas, a 22-story building at 46th Street in midtown Manhattan; 660 Madison Ave, the building at 61st Street that houses retailer Barneys New York; the Moffett Towers development in Sunnyvale, California; and two office buildings in Washington D.C.