Key Takeaways
- • Lone Star Funds' founder John Grayken is committing $330 million of personal capital to the firm's new $6.6 billion global commercial real estate fund, representing 5% of the fund and the largest personal investment he has made in any of his funds to date.
- • The fund is the largest global pool being raised for real estate private equity according to Preqin, with the target increased from $6 billion to $6.6 billion in response to strong investor demand; first capital pledges are scheduled for completion on September 27, 2013.
- • Approximately 50% of the fund will be deployed in Europe, 30-40% in the United States, and the remainder in Japan, reflecting Grayken's conviction that European real estate presents substantial investment opportunities.
- • Oregon's pension fund voted to commit $300 million to the vehicle, and Lone Star is closing on the purchase of 265 loans backed by 313 properties, demonstrating active capital deployment at fund inception.
- • Grayken's combined personal and partner commitments (5% personal plus 1% from firm partners) exceed typical general partner co-investment levels, signaling high confidence in the fund's strategy.
Summary
John Grayken, founder and chairman of Dallas-based Lone Star Funds, is making a substantial personal capital bet on European commercial real estate. 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 global commercial real estate fund. This personal commitment represents 5% of the total fund and is the largest percentage and dollar amount Grayken has personally invested in any Lone Star fund to date—a notable signal of conviction from the seasoned distressed real estate investor.
The fund has emerged as the largest global pool being raised for real estate private equity, according to London-based research firm Preqin. Management increased the target from an original $6 billion to $6.6 billion in response to strong investor demand. Oregon's public pension system voted to commit $300 million to the vehicle. First capital closings are scheduled for September 27, 2013. In addition to Grayken's personal pledge, Lone Star's partnership will commit a combined 1% of the fund, bringing total general partner commitments to 6%—substantially above typical industry levels for co-investment.
The geographic allocation reflects management's strategic assessment of global opportunities. Nick Beevers, head of investor relations at Lone Star, disclosed to Oregon pension trustees that approximately 50% of the fund will be invested in Europe, 30-40% in the United States, and the remainder in Japan. "We see the investment opportunities being extremely heavy in Europe," Beevers stated during the meeting in Tigard, Oregon. "We expect continued substantial investment in the United States." The fund is already operationalizing its strategy: Andre Collin, head of North American commercial real estate acquisitions for Lone Star, reported that the firm expected to close on the purchase of 265 loans backed by 313 properties around the meeting date, demonstrating immediate capital deployment at fund inception.
The fund has emerged as the largest global pool being raised for real estate private equity, according to London-based research firm Preqin. Management increased the target from an original $6 billion to $6.6 billion in response to strong investor demand. Oregon's public pension system voted to commit $300 million to the vehicle. First capital closings are scheduled for September 27, 2013. In addition to Grayken's personal pledge, Lone Star's partnership will commit a combined 1% of the fund, bringing total general partner commitments to 6%—substantially above typical industry levels for co-investment.
The geographic allocation reflects management's strategic assessment of global opportunities. Nick Beevers, head of investor relations at Lone Star, disclosed to Oregon pension trustees that approximately 50% of the fund will be invested in Europe, 30-40% in the United States, and the remainder in Japan. "We see the investment opportunities being extremely heavy in Europe," Beevers stated during the meeting in Tigard, Oregon. "We expect continued substantial investment in the United States." The fund is already operationalizing its strategy: Andre Collin, head of North American commercial real estate acquisitions for Lone Star, reported that the firm expected to close on the purchase of 265 loans backed by 313 properties around the meeting date, demonstrating immediate capital deployment at fund inception.
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