Morgan Stanley Real Estate Investing, the real estate investment management business of investment bank Morgan Stanley, has exited a 2005 investment it made in the UK serviced office sector to a new London-based, family office-backed private investment firm.
No price was revealed by the parties, however the buyer – Queensgate Investments – said it had exchanged contracts to buy the central London serviced office business which has been trading for more than 20 years.
MSREI took over the company in June 2005 via Morgan Stanley Real Estate Fund (MSREF) V International which closed on $4.2 billion of equity commitments a year later. The bank has controlled it ever since then, capitalising on 28 high-quality serviced offices, totalling around 513,700 square feet in Mayfair, Belgravia and the City of London. Key assets include 33 St James’s Square, 78-79 Pall Mall, 53 Davies Street, and 84 Brook Street. The group owns many of the properties and leases others.
Property Week, the UK magazine, reported in March this year that the bank was putting Executive Offices Group up for sale for around £250 million (€290 million; $374 million) and today reported the sale price as being £260 million. Morgan Stanley’s announcement at the time of its acquisition in 2005 said it had bought the company for $368.8 million, which at exchange rate levels in that year equalled £203 million. It is not known how much capital expenditure MSREI made.
The acquisition was made when John Carrafiell was head of MSREI in Europe, who has since gone on to found GreenOak Real Estate. He said at the time: “Executive Offices Group offers Morgan Stanley Real Estate Funds a prime opportunity to enter the UK's business centre market through a well-managed and dynamic business, at a time when market forecasts indicate strong growth in the sector. Over 65 percent of the value of EOG is in prime West End and Central London real estate where we think the growth will occur.”
Queensgate is making the investment through Queensgate Investments Fund I, a Luxembourg regulated fund which has around £500 million of equity. The general partner is Queensgate Investments LLP that was set up last year by Jason Low, a former head of special situations for London & Regional Properties, and LJ Group, a multi-family office which advises approximately 200 families and more than $6.5 billion of asset
Its first investment is a $450 million riverfront development on London’s Greenwich peninsula comprising a 452-room luxury hotel, around 30,000 square feet of conference space and 100 private serviced residences next to the O2 arena, the most visited music venue in the world.