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Founder John Grayken Commits $350M to Lone Star Fund IX

06.17.14

Lone Star Buys Big in Europe, particularly Spain

According to published reports, famed distressed investor and Lone Star Funds founder John Grayken committed $350 million of the $7 billion of capital for Lone Star Fund IX. Grayken, a collegiate hockey player while at the University of Pennsylvania, reportedly committed $330 million to Lone Star Real Estate Fund III in 2013 that ultimately raised $7 billion. Lone Star Fund VIII raised $5.1 billion in 2013.

Lone Star Fund IX reportedly will invest 40% in the U.S., 50% in Europe and 10% in Asia. Grayken’s commitment of $350 million to Lone Star Fund IX exceeds the total committed capital of $250 million for Lone Star’s first fund (1995), and is not much below the $396 million of committed capital for its second fund (1997). Lone Star rarely publicly discloses the companies in its investment portfolio. Since its founding in 1995, Lone Star has organized twelve private equity funds with aggregate capital commitments of over $45 billion.

Funds affiliated with the State of Oregon had, as of mid-2013, reportedly invested almost $1.9 billion with Lone Star and roughly doubled its money for an internal rate of return of approximately 18%. Oregon has reportedly committed $300 million to Lone Star Fund IX.

Lone Star and J.P. Morgan Chase recently teamed up to win an auction process called “Project Octopus” to buy a huge portfolio of Spanish real estate loans backed by shopping centers, hotels, and offices. Loan Star reportedly offered just over $5 billion or between 82.2% and 86.7% of the face value of the loans. Other bidders included teams from Blackstone/Deutsche Bank, Apollo/Santander and Cerberus/Goldman Sachs/Orion Capital Managers.

Private equity firms have focused on distressed real estate assets in Europe since the financial crisis. Spain in particular has seen significant private equity real estate activity in the last year.

Lone Star is reportedly the largest purchaser of legacy subordinated and non-performing European commercial property loans since the financial crisis.

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