Key Takeaways
- • John Grayken is committing $330 million of personal capital to Lone Star Funds' new $6.6 billion commercial real estate fund, representing 5% of the fund and the largest individual commitment he has made to any Lone Star vehicle by both dollar amount and percentage.
- • Lone Star's fund is the largest global real estate private equity pool currently being raised, according to Preqin data, with the target increased from $6 billion in response to strong investor demand.
- • Approximately 50% of capital will deploy into Europe, 30–40% in the United States, and the remainder in Japan, with Lone Star management identifying Europe as an area of "extremely heavy" investment opportunity.
- • The Oregon Investment Council voted to commit $300 million to the fund, with initial capital closings scheduled for September 27, 2013, demonstrating institutional confidence in both the fund and its strategic geographic positioning.
- • Lone Star was simultaneously closing on the acquisition of 265 loans backed by 313 properties as of the announcement, signaling active deal execution alongside fundraising completion.
Summary
John Grayken, founder and chairman of Dallas-based Lone Star Funds, is making a substantial personal capital commitment to his firm's latest flagship offering. According to Bloomberg reporting disclosed at an Oregon Investment Council meeting on September 25, 2013, Grayken is investing $330 million of his own capital into Lone Star's new $6.6 billion commercial real estate fund. This personal pledge represents both his largest dollar commitment and highest percentage stake in any Lone Star fund to date, underscoring management's conviction in the fund's return potential.
The new fund has achieved critical mass as the largest global real estate private equity pool in fundraising, according to Preqin, the London-based alternative assets research firm. The fund's target was increased from an original $6 billion ceiling in response to robust investor demand. Lone Star's combined partnership will deploy an additional 1% of fund capital beyond Grayken's 5% personal commitment, bringing total GP co-investment to 6%. The Oregon pension system's $300 million commitment, voted on at the same meeting, validates institutional endorsement of the strategy. Initial capital calls are scheduled to commence on September 27, 2013.
Geographic diversification reflects Lone Star's assessment of current market dislocations. Nick Beevers, head of investor relations for Lone Star, told the Oregon trustees that approximately 50% of the fund will target European real estate, with 30–40% allocated to U.S. opportunities and the remainder deployed in Japan. Beevers characterized European investment prospects as "extremely heavy," while reiterating expectations for "continued substantial investment in the United States." This allocation indicates management's belief that European property markets present a concentrated window of opportunity, likely stemming from post-financial crisis distressed asset availability and pricing dislocation.
Concurrent with fundraising completion, Lone Star was closing on a significant loan portfolio acquisition. Andre Collin, head of North American commercial real estate acquisitions and investment committee member, confirmed the firm expected to close on the purchase of 265 loans backed by 313 properties as of the announcement date, demonstrating active capital deployment capability alongside ongoing capital raise execution.
The new fund has achieved critical mass as the largest global real estate private equity pool in fundraising, according to Preqin, the London-based alternative assets research firm. The fund's target was increased from an original $6 billion ceiling in response to robust investor demand. Lone Star's combined partnership will deploy an additional 1% of fund capital beyond Grayken's 5% personal commitment, bringing total GP co-investment to 6%. The Oregon pension system's $300 million commitment, voted on at the same meeting, validates institutional endorsement of the strategy. Initial capital calls are scheduled to commence on September 27, 2013.
Geographic diversification reflects Lone Star's assessment of current market dislocations. Nick Beevers, head of investor relations for Lone Star, told the Oregon trustees that approximately 50% of the fund will target European real estate, with 30–40% allocated to U.S. opportunities and the remainder deployed in Japan. Beevers characterized European investment prospects as "extremely heavy," while reiterating expectations for "continued substantial investment in the United States." This allocation indicates management's belief that European property markets present a concentrated window of opportunity, likely stemming from post-financial crisis distressed asset availability and pricing dislocation.
Concurrent with fundraising completion, Lone Star was closing on a significant loan portfolio acquisition. Andre Collin, head of North American commercial real estate acquisitions and investment committee member, confirmed the firm expected to close on the purchase of 265 loans backed by 313 properties as of the announcement date, demonstrating active capital deployment capability alongside ongoing capital raise execution.
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