Steve Steppe, managing partner of San Francisco-based Stockbridge Capital Partners, has made some expensive acquisitions since he left the chairmanship of RREEF North America in 2007, and another shopping spree lies ahead.

In late June 2009, Steppe oversaw a $400 million deal for 90 industrial properties, the costliest transaction in the U.S. industrial sector over a 12-month period, according to New York-based data firm Real Capital Analytics.

It was a healthy transaction. “The assets were 95% occupied so they certainly were not distressed, and they're 94% occupied six months later,” says Steppe. “They were acquired at over a 9% unlevered return. So we're pleased that the performance has slightly exceeded what we anticipated.”

The 90 properties are located in industrial parks, mainly small distribution spaces of under 100,000 sq. ft. The average age of the assets is 10 years, and Stockbridge plans to hold onto the properties for 10 years, says Steppe.

It was the largest deal in Stockbridge's history, and represented a change in company strategy. “Stockbridge traditionally has just been an investment manager in the opportunity fund space,” says Steppe. “Nine of us came to Stockbridge a little over two years ago to build the core and value-added side of the business, and this was a core acquisition.”

The aim was to create a separate account business to take advantage of the price correction of distressed assets. Stockbridge concentrates on acquiring industrial, multifamily and retail properties. “We think we're probably a year to 18 months away from buying office buildings again because of the decline in fundamentals,” says Steppe.

Stockbridge's strategy calls for more acquisitions, though individual deals are not likely to be on the scale of the one completed in 2009. “I think the June acquisition was a unique opportunity in the marketplace, and I don't see that large of a transaction in the future.”

But the Stockbridge growth plan is impressive. “We expect we'll probably acquire $500 to $600 million of core assets in 2010,” Steppe projects. And that pace may not let up next year. “It will increase in 2011.”