Ex-Lone Star principal Short returns to the market

Ellis Short, who was a leading principal at private equity real estate titan Lone Star Funds, has formed a new firm and is aiming to corral $1 billion for investments in distressed real estate assets and non-performing debt in Europe.

Ellis Short, a former principal of Dallas-based private equity real estate titan Lone Star Funds, is planning a return to the market.

Short declined to comment when approached by PERE, but it is thought that, following a five-year absence since his retirement from Lone Star, he is putting together a firm called Kildare Partners and is expected to hit the capital-raising trail imminently. 

Kildare is understood to be targeting investments in distressed real estate assets and non-performing debt in Europe for which it is looking to raise more than $1 billion in discretionary capital. Several employees have already been hired for the new firm.

Short led Lone Star in Asia but retired from the business in May 2008, leaving founder John Grayken in sole charge. At the time, the firm had raised about $13 billion of equity and had closed on more than 900 deals valued at more than $61 billion.

Lone Star has since gone on to raise further equity for private equity and real estate strategies, including $5.5 billion for its second dedicated real estate fund, Lone Star Real Estate Fund II, in 2011. That vehicle is almost fully deployed and a third dedicated real estate fund is expected to arrive sometime over the next year.

Short’s entry to the market, if successful, could represent significant competition for opportunistic fund managers in Europe, given his fundraising target matches the size of the largest pan-Europe fund raised in 2012. The largest final closing in the region  last year was held by Patron Capital, which finished raising €880 million for its Patron Capital IV opportunity fund in September.

It comes at a time when many institutional investors are signalling their intent to focus the opportunistic part of their real estate allocations on distress in the region. In a report published by Ernst & Young last month it was estimated the non-performing loans still sitting on the balance sheets of Europe’s banks could be valued at approximately €1 trillion. A US investor-heavy poll recorded by the firm also revealed that a third expected Europe to be their primary strategic focus in the immediate future as problem banks stateside become fewer in number.