Maybe The Market Isn’t So Tough: Lone Star Ups Fund Size And Raises $3.6B

The Eastgate Centre In Gloucester

Lone Star has raised $3.6B for a new real estate fund and is targeting a total fundraising of $4.5B, just months after saying it was only targeting $3B because the market is not looking great for opportunistic investing.

In December, Lone Star did something rare among big private equity firms: It said its next real estate fund would be a lot smaller than the previous one.

The lack of distressed opportunities and the appearance that real estate is late in the cycle prompted the firm to seek $3B for Lone Star Real Estate Fund VI, around half of the $5.9B it raised for its fifth fund. The trend among big global players like Lone Star, Blackstone, Brookfield and Starwood has been to raise ever-bigger funds.

But maybe the market opportunity is not so bad after all. According to a Securities and Exchange Commission document filed last month, Lone Star has increased the size of the fund to $4.5B, and has already raised $3.6B of that. Some of the uninvested capital from the fifth fund will be rolled into the sixth, according to reports after the smaller fundraising was announced.

The fund will invest in Asia, North America and Western Europe. Lone Star has typically targeted distressed loan portfolios, but as the sale of those has dried up, it has bought big portfolios of assets and even taken listed companies private. It has been buying up nonperforming loans in China.

It has sold more than 14,000 apartments this year, in a series of deals that netted it more than $3B, including the sale of a portfolio to the Kushner family company for $1.1B.

But it has not all been plain sailing. In March this year it emerged that a UK shopping centre portfolio bought by Lone Star for £260M in 2014 had been taken over by one of its lenders after the value of the assets dropped significantly. The portfolio, which includes the Eastgate Centre in Gloucester, has about £200M of debt secured against it.

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