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SAN FRANCISCO-Locally based fund sponsor and office developer Shorenstein Properties LLC has purchased at a discount a $51.1 million mezzanine loan backed by McCandless Towers, a 418,884-sf, two-building office property located in Santa Clara, CA, that is owned by Tishman Speyer. The loan, the junior tranche of an approximately $168-million financing package for Tishman’s $225-million acquisition of McCandless Towers in June 2007, was purchased for Shorenstein’s ninth investment fund, a $2.062 billion private commingled fund formed in the spring of 2007.

McCandless Towers sits within Silicon Valley’s “Golden Triangle” between Highway 101, Route 237 and Interstate 880. The building is 89% leased. Anchor tenants include security software developer McAfee Inc. and Amkor Technologies, a supplier of outsourced semiconductor interconnect services.

The cost to acquire the mezzanine loan was not disclosed by the parties involved and not immediately available. An industry source with knowledge of the transaction tells GlobeSt.com that the debt was purchased at a discount but couldn’t say exactly how much. Similar deals by Shorenstein and others have traded at anywhere from a 5% discount to a 25% discount, he says.

Shorenstein chairman Douglas Shorenstein says the opportunity to acquire these types of debt interests—ones with “attractive risk-adjusted yields in prominent and well located Class A assets in key markets”—is due to the ongoing dislocation of the credit markets. The company has acquired eight such loans in the last nine months, bringing its subordinated debt total for the ninth fund to $435 million.

Among its subordinated debt holdings is part of the construction loan for part of a construction loan for the development of Moffett Towers, a 900,000-sf office campus now being built in Sunnyvale, CA; mezzanine loans on the MTV Building in Santa Monica, CA; two office properties in Washington, DC; and four office buildings in New York, including 650 Madison Ave. and its neighbor, 660 Madison Ave.

Back on the Peninsula, Shorenstein owns under various funds several other properties on a fee simple basis. Those include the nearby WebEx Tower in Santa Clara, 1400/1500 Seaport Boulevard in Redwood City, and 601 California Avenue, located within the Stanford Research Park in Palo Alto.

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