Lone Star Funds Closes $2.7B to buy “Deep Value” Real Estate

Lone Star Funds CEO Donald Quintin has accumulated more dry powder for his firm to capitalize on distress sweeping across the commercial real estate sector on three continents.

The Dallas-based private equity giant has secured $2.7 billion in capital after closing its latest fund, the Lone Star Real Estate Fund VII LP, which will focus on “deep-value and special situation investment opportunities across Europe, North America and Japan,” the Dallas Business Journal reported.

This the firm’s second fund to close since Quintin took over as CEO in April. The first, a $5.3 billion fund focusing on distressed assets, closed in June.

“Lone Star has been investing in the broader commercial real estate sector for nearly 30 years, and we believe that the current environment is likely to play to our strengths as a disciplined and flexible opportunistic investor,” Quintin said.

The size of the fund reflects the broader challenges facing commercial real estate. At $2.7 billion, it is 41 percent smaller than its predecessor, which closed at $4.6 billion in 2019. The sector faces headwinds from lower demand for office space and high interest rates.

Twenty percent of the nation’s $4.7 trillion in commercial mortgage debt is due to mature by the end of this year, according to the Mortgage Bankers Association, which likely will lead to distress in the market.

Lone Star had $36 billion in assets under management at the end of last year. Founded in 1995, the firm has organized 25 private equity funds with commitments totaling $95 billion. Lone Star’s investors include pension funds, sovereign wealth funds, and philanthropic foundations, many of which support education and medical research.

— Andrew Terrell