Updated with correction.
Los Angeles Fire & Police Pension System agreed to invest up to $3.75 million to recapitalize the $1 billion Stockbridge Real Estate Partners II, stated Michael Perez, general manager of the $12.3 billion system in an e-mailed response to inquiries.
The investment fund, closed in 2006, has $1.02 billion in outstanding debt on its properties: $221 million is recourse debt.
Mr. Perez, in an Aug. 19 memo to the board, cited the investment fund's vintage, heavy exposure to development projects and its “recourse debt/fund guarantee,” which allows a lender to go beyond the individual property and go after the Stockbridge fund's other assets for any unpaid balance, as among the reasons contributing to its problems.
The board of the Los Angeles Fire & Police fund agreed to join other limited partners to recapitalize the fund, giving them rights to be paid back their $30 million commitment before those who don't participate in the recapitalization. LAFPP officials also negotiated a 33% fee reduction.
Based on projections by its real estate consultant, Townsend Group, the LAFPP might recover $10.5 million of its investment if it participates, compared with $3 million if it does not.
Separately, the board renewed the contract, for three years, of Delta Asset Management, which manages a $355 million active domestic large-cap growth equity portfolio. The contract was to expire in September.
