Controversy
According to tenants and advocates in New York City, Lone Star's Lone Star Real Estate Fund II (LSREF II) has been irresponsibly purchasing distressed debt on rent regulated low-income multi-family buildings across New York City. In December, 2011, Lone Star Funds purchased several portfolios of distressed debt from failed Anglo-Irish Bank, including the debt on over a dozen buildings in Washington Heights and Inwood. Currently, this group of buildings is owned by Vantage Properties, a notorious landlord that was sued in 2010 by then Attorney General Andrew Cuomo for harassment. In April 2012, this group of buildings fell into foreclosure as a result of predatory lending practices. Tenants living in these buildings, located in neighborhoods Washington Heights and Inwood, have made several attempts to reach out to Lone Star Funds for a meeting and to ensure another predatory landlord like Vantage does not purchase their buildings, but there has been no response.
In April 2012, two public employees in Oregon filed a lawsuit on behalf of the Oregon Public Employees Retirement Funds for fraud. The employees also accuse the pension fund of risky investments, particularly after 2008 in which Lone Star’s top executive in South Korea was imprisoned for stock manipulation.
On December 10, 2012, tenants in 1507 St. Johns Place, a building located in Crown Heights Brooklyn, sued Wells Fargo Bank and Lone Star Funds (as the lone servicer) demanding additional funding directed towards maintaining the buildings. Lone Star Funds acquired the debt on the building and immediately sold it to Wells Fargo, but continues to service the mortgage and has taken over the foreclosure. “Lone Star must bring relief to tenants and immediately release funds to make much needed repairs in this building,” said City Council Speaker Christine C. Quinn. “The courts have confirmed that lenders can be held responsible for conditions at buildings like these, but Lone Star shouldn’t wait for tenants to file actions or judges to make decisions. They should fix the building now.”
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