Lionstone Joins Forces with Teacher Retirement System of Texas on Half-Billion CRE Fund

May 17, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user rcbodden

Private real estate investment firm Lionstone Group has joined forces with Teacher Retirement System of Texas to invest as much as $250 million of equity in a new commercial real estate fund. With leveraged buying power of approximately $500 million, the team will comb the country for office, multifamily, retail and industrial properties. However, the partners are not going on a discount-buying binge; properties in the country’s multi-billion-dollar pool of distressed assets are not on their target list.

Austin, Tex.-headquartered TRS is the majority investor in the venture, and Houston-based Lionstone, in its capacity as general partner, will spearhead the acquisition efforts. In lieu of following the current investment trend of snapping up assets in the distressed commercial real estate market–which is now valued at $187.4 billion, according to a recent report by research firm Delta Associates–Lionstone will focus on high-quality cash flow properties that will remain in the portfolio for the long term.

“There are good investments to be made during this period, but our timing is less about distressed assets and more about the evolution of our program and TRS’s desire to invest,” Lionstone CEO Glenn Lowenstein told CPE.

As for geographic preferences, Lionstone will peruse areas across the U.S., with an eye on certain market traits. “We want locations where we can see high demand with constraints on new supply,” Lowenstein said. “We’ll go anywhere as long as we see those characteristics.” The company is already scouring the market, but has not yet made any commitments to acquire.