Stockdale Capital Partners is launching a new business focused on providing flexible debt for distressed properties, filling a gap in the market for sub-$50M loans. The Los Angeles-based company, with $3 billion in assets under management, has traditionally focused on equity investment but is now expanding into senior bridge loans, mezzanine loans, note purchases, and special situation investments.
A Strategic Move in a Challenging Market
The new venture comes at a time when many lenders are steering away from flexible debt due to raised interest rates and global uncertainty. Stockdale’s managing partner, Dan Michaels, sees this as an opportunity to capture a part of the market that is underserved by larger lenders. The company is targeting loans between $15 million and $75 million on distressed assets such as office, life sciences, and hotel properties.
Michaels notes that the need for special situations debt is likely to persist as interest rates remain high. The Federal Reserve’s recent rate hike and the rise in 10-year Treasury bond yields above 5% will slow the return of real estate values to pre-pandemic levels, creating more opportunities for Stockdale’s new business.
Building a Team for the New Venture
To lead this initiative, Stockdale has hired Alec Maki as senior vice president. Maki joins from Fortress Investment Group, where he worked on debt originations. Stockdale plans to hire several dozen more employees to support this strategy, with an initial goal of deploying $300 million over the next 12 months.
Stockdale’s new investment thesis runs counter to how many firms react during times of global uncertainty, according to Michaels. He believes that market dislocations create opportunities for Stockdale to provide capital where others may not. “I honestly feel like people have PTSD still from the Global Financial Crisis,” Michaels said. “So when anything hits, correlation goes to one, everybody stops. That could be a war headline, or obviously a pause in overall market liquidity because of rate hikes, and so any dislocation that impacts liquidity flows is a benefit to us because that allows us an opportunity to step in and provide resources where others may not.”
Addressing a Market Need
Over the past few years, Stockdale kept running into a problem: it was searching for sub-$50M loans for struggling asset types but couldn’t find any lenders who would provide them. At the same time, the company was getting increasing requests to provide similar types of debt, which was outside its traditional business model. This gap in the market prompted Stockdale to develop a new investment thesis.
Stockdale’s new focus addresses a significant void in the market for smaller, more flexible loans. The company aims to provide support for assets that require more tailored financing solutions, positioning itself to capitalize on the growing demand for special situations debt in the current economic climate.
