Bargain-hunting Shorenstein on a roll.

Shorenstein Properties has filled the coffers of its new investment fund and swooped down on a collection of recent deals in order to capitalize on the follies of the commercial real estate boom. As the credit crunch makes real estate acquisitions difficult to finance and the sagging economy makes building's tougher to fill, the company has stepped in to pick up the pieces of broken deals in the hopes that it is getting a relative bargain on real estate it can reap profits on over the long term.

"We made good money in 1992, '93, '94 and '98 and made some money after 9/11, hopefully we can do the same here," said Robert Underhill, an ex-executive at the firm, highlighting difficult years for the American economy that saw declines in real estate prices.

Amid the problems currently impacting the economy, such as high energy prices, a soft labor market and sinking residential home prices, Shorenstein thinks that commercial real estate is clearly in for another correction.

Underhill said that Shorenstein upped the size of its recent fund to $2.1 billion--its previous investment fund had been $1.1 billion--on the assumption that the tumult, which was only beginning to brew when the fund was raised last year, would blossom into opportunities to buy prime real estate on the cheap.

So far, the firm has been busy. It bought 850 Third Avenue and Park Avenue Tower last month for $930 million from Deutsche Bank, which had taken the two buildings and five other Manhattan office towers back from investor Harry Macklowe when he couldn't restructure the short term financing he had used to purchase the buildings due to the credit crisis.

Earlier this month, Shorenstein reached a deal to buy, Main Plaza, an office building in Orange County, California for $211 million from Maguire Properties, an office REIT that also bought big at the peak of the real estate market and has found itself now in distress.

Macklowe and Maguire in fact bought different portions of the same portfolio, a nationwide collection of office buildings that had been owned by the REIT Equity Office Properties.

The private equity firm, the Blackstone Group, purchased Equity Office Properties in 2007 and its massive real estate holdings were broken up geographically and sold in large portfolios at prices at or near the top of the market. Maguire bought Southern California and Macklowe purchased Manhattan, a $7 billion deal that was the most expensive piece of the portfolio.

Deutsche Bank was selling the buildings at an immediate discount because it was trying to recoup the value of its senior financing position in the buildings and not necessarily the equity, but there were also other contributing factors that influenced Shorenstein's deal.

Deutsche Bank according to sources, originally had an agreement with the M1 Group, a pool of Lebanese money based out of Monaco, to purchase 850 Third Avenue, Park Avenue Tower and another of the seven buildings that was seized from Macklowe, 1301 Avenue of the Americas.

But that deal fell apart and the bank became eager to unload the buildings and was willing to provide financing to the buyer.

Shorenstein grabbed Park Avenue Tower and 850 Third Avenue and the Paramount Group, a New York real estate firm that invests German money, purchased 1301 Avenue of the Americas for $1.45 billion.

"When there's a lender controlled sale going on that's going to be a situation that you should follow because the sale will occur and financing will be available," Underhill said. "They need certainty of execution and they need cash quick. That's an interesting opportunity for us with very high quality real estate."

Underhill estimated that the firm was able to buy the buildings for about 30% less than what Macklowe paid for the towers. Still $930 million is far from a pittance and doesn't seem much like a bottom for the market, which will likely continue soften if the economic slowdown persists. "Would you like to buy them tomorrow? Yeah I would prefer to buy them tomorrow, but unfortunately we're not dealing with commodities and you have to take advantage of the opportunity to buy a building like Park Avenue Tower when it arises because it won't necessarily be available when the market hits its low point," Underhill said.

Shorenstein purchased a majority stake in the two buildings. A minority interest is still owned by a New York real estate investor named George Klein, who structured his position when he sold 850 Third Avenue to Equity Office Properties to provide a tax shelter from the proceeds of that sale. Underhill said that Shorenstein plans to acquire Klein's piece of the deal and that shedding the two buildings' complex ownership structure alone will create value.

Underhill said that less than half of the company's $2.1 fund had been allocated and that it was on the lookout for other deals.