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Thursday, 17 December 2015

Lone Star Gears Up for Another Mega-Fund

Just seven months after raising $5.8 billion of equity commitments for Lone Star Real Estate Fund IV, its sponsor, Lone Star Funds, is gearing up to raise a targeted $5 billion for a follow-up. The quick turnaround is necessitated by the large portfolios that Fund IV has acquired in recent months.

Commercial Real Estate Direct Staff Report

Lone Star Funds is getting its capital-raising machine back into gear to raise a projected $5 billion for a follow-up opportunistic real estate fund.

The Dallas investment manager, which only in May completed raising $5.8 billion for its Lone Star Real Estate Fund IV, is already laying the groundwork for Fund V, according to a regulatory filing.

Fund IV, like previous Lone Star vehicles, was designed to pursue opportunistic returns from the purchase of commercial real estate debt and equity. In a presentation before the Rhode Island State Investment Commission, among its investors, Lone Star said it would pursue an internal rate of return of 25 percent. It aimed to invest up to 80 percent of its capital in Europe, with the remainder split roughly evenly between Japan and the United States.

The 25 percent IRR is not outrageous, given that Fund III generated a 23.7 percent gross IRR and 19.4 percent net IRR as of the end of last...

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