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REPORT: Lone Star corrals $725m for real estate fund

The Dallas-based private equity firm has reportedly raised $1.2bn for its two new funds, including $500m for Lone Star Fund VII and $725m for Lone Star Real Estate Fund II.

Lone Star Funds has raised $725 million from investors for its latest real estate fund, according to Bloomberg.

According to the report, which cited unnamed sources, Lone Star has also secured pledges of more than $500 million for its buyout vehicle, Lone Star Fund VII.

In the summer, Bloomberg reported that Lone Star had hoped to garner $2 billion in commitments by the end of August.

Declining property prices, and continued writedowns in private equity real estate portfolios, is being blamed for a general reluctance among limited partners, particularly in the US, to rush into new commitments.

The real estate fund, which began fundraising in April, is targeting $10 billion of commitments, and will focus on distressed commercial real estate and debt globally. It expects IRRs of about 25 percent. Fund VII will target distressed residential mortgages, defaulting corporate bonds and loans and acquisitions of “real estate rich entities such as banks”, according to US pension fund documents.

In October, Oregon Investment Council approved a $300 million commitment to Lone Star Real Estate Fund II and $100 million to Lone Star Fund VII after Lone Star altered its fee structures and governance procedures to make their funds more “LP friendly”.

Oregon has committed $1.37 billion to Lone Star over the past few years, about $162 million of which remains undrawn. Lone Star is Oregon’s largest real estate investment manager, representing about 16.5 percent of the real estate holdings.