ELF Capital to Focus on Minority Stakes

A former Los Angeles commercial real estate executive and Internet entrepreneur is trying something new: buying non-controlling or minority interests in individual properties such as office buildings, apartments or shopping centers.

ELF Capital Partners is the only private equity firm in the United States dedicated to acquiring such assets, said founder John Stanfill, the former president of the investment property sales division of Los Angeles real estate firm CB Richard Ellis. He left that firm in 1998 to form an online commercial real estate listing service, which later merged with competitor Loopnet in 2002.

At CB Richard Ellis, Stanfill recalled, “we were frequently asked by clients if they could sell a non-controlling interest” in a property and get their money out early. “It was always in the back of my mind that there was an opportunity.”

Now, at ELF Capital Partners, Stanfill intends to use money from both individual investors and institutions. He’ll look for partnerships that plan to sell their properties in four to six years and have minority partners who want to get out early. He expects to invest between $25 million and $40 million in his first year of operation and $200 million per year after that.

ELF Capital appears to have created a new niche, said Wayne M. Brandt, managing director of real estate finance for RBS Greenwich Capital in Los Angeles.

One drawback, Brandt said, is that controlling partners in such investments generally handpick their partners and might not be open to letting a different party into the deal

“They want investors who are like-minded and are often friends and family,” Brandt said.

Still, said Brandt, if ELF Capital “can bring more liquidity to a less-liquid corner of the market, that’s clearly a positive.”