Return to search

EXCLUSIVE: MSREI closes G8 on $1.7bn

The real estate investment management business of US investment bank Morgan Stanley has brought to a close capital raising for its eighth global opportunistic real estate fund.

Morgan Stanley Real Estate Investing (MSREI), the real estate investment management business of US investment bank Morgan Stanley, has brought to a close the fundraising for its eighth global opportunistic real estate fund, PERE can reveal.

The firm has closed the North Haven Real Estate Fund VIII Global (G8) after raising approximately $1.7 billion for the fund and associated sidecar vehicles from an array of public and private pension funds, sovereign wealth funds, insurance companies, family offices and individual investors.

The capital raising represents the first time MSREI has received capital backing for an opportunistic real estate strategy since it held a final closing on Morgan Stanley Real Estate Fund VII Global (G7) on $4.7 billion in 2010.

Significantly, it is also the first opportunistic real estate fundraising led by MSREI’s current leadership of co-chief executive officers and co-chief investment officers Olivier de Poulpiquet and John Klopp.

PERE further understands that though MSREI has held a final closing for G8, the final capital raising total could extend to well beyond $2 billion should certain fund investors exercise their co-investment rights on deals.

The firm’s strategy for G8 is to invest in already cash-flow generating assets that offer high going-in yields and long-dated income in Europe and Asia, and pursue repositioning opportunities in the US.

MSREI already has been actively deploying G8’s capital. To date, the firm has invested about $450 million across 12 transactions including deals in Europe, Asia and, to a lesser extent, North America.

In addition to being on the cusp of announcing this fundraise, the firm is also soon to confirm it has completed one of the biggest outlays in Hungary in recent years, acquiring MOM Park, a retail and office property, West End Business Center Offices, a large office, and EMKE, a smaller office, all in Budapest. That transaction is understood to have been capitalized with €125 million of equity and the same amount in debt.

The biggest outlay so far for the fund, however, was the August 2014 acquisition of the Millennium Tower office in Vienna in a deal valued at €320 million.

Other transactions have occurred in markets including the UK, Australia, Japan and the US.

Collectively and to date, these outlays are thought to be tracking IRRs of more than 20 percent although the firm is ultimately aiming for high-teen to low 20s percent returns from the fund.

MSREI’s opportunistic fundraising series has attracted almost $27 billion since its inception more than two decades ago, with one fund, G6 attracting more than $8 billion from investors.

The series, and subsequently the firm, suffered reputational damage after that fund performed poorly. Reeling from that and changes within its senior ranks, MSREI’s capital-pulling prowess was dented, but the final closing for G8 has demonstrated it once again has supporters willing to back its opportunistic strategies.

Though unrelated to its prior performances, MSREI also changed the name of the fund following the enforcement of sponsorship stipulations laid out within the Volcker Rule of the Dodd-Frank Act. The Act also restricts US financial institutions’ co-investment in third-party funds to just three percent of total equity, a far cry from the 10 percent-plus co-investment Morgan Stanley and its contemporaries used to commit.