Deals

Morgan Stanley acquires 25% stake in Russian developer

The investment bank has invested in retail and residential developer RBI Holdings, which has already formed a separate $500m joint venture with RREEF, as Morgan Stanley marks its first property investment in St. Petersburg.

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Morgan Stanley Real Estate has acquired a 25 percent stake in St. Petersburg real estate developer RBI Holdings as the investment bank continues to build its presence in the Russian market. Terms of the transaction were not disclosed.

RBI focuses on the residential sector, primarily in Russia’s second largest city, but according to RBI chief executive Edward Titinsky, in a statement released by Morgan Stanley, the company is beginning to expand its presence in the retail sector, as well as in other cities across Russia. RBI has already built more than 500,000 square meters of residential property and currently has more than 418,000 square meters in design or under construction.

Last year, RREEF, the real estate and infrastructure arm of Deutsche Bank, entered into a joint venture with RBI to build approximately $500 million (€385 million) worth of medium- to high-end residential projects in St. Petersburg. After the deal, the firm’s first in Russia, David Brush, the head of RREEF’s global opportunity funds, told PERE that St. Petersburg was a much more attractive market than Moscow, which had already attracted a significant amount of foreign and domestic capital.

Morgan Stanley made the investment in RBI via Morgan Stanley Real Estate Special Situations Fund III, which makes minority investments in both public and private equity estate companies. Last year, the open-ended vehicle closed on $2.2 billion, with Morgan Stanley contributing 25 percent of the capital.

The US investment bank has been active in the Russian property market, particularly via its Special Situations fund. Last year, the vehicle acquired a 20 percent stake in Russian retail and industrial developer RosEvro Development and a 15 percent stake in Moscow-based residential developer RGI International.

Morgan Stanley has pursued a similar strategy in other emerging markets such as India and China, where it has acquired stakes in real estate developers rather than making direct property investments. Last year in India, for example, the firm invested approximately $68 million in Indian developer Alpha:G Corp and approximately $68 million in Bangalore-based firm Mantri Developers.