MSREF VII Global extension confirmed

Morgan Stanley Real Estate Investing (MSREI) has confirmed it has received an approval from the investors of its latest global opportunity real estate fund to extend its investment period.

According to a note to the investors, seen by PERE, more than 90 percent of the investors in the Morgan Stanley Real Estate Fund (MSREF) VII Global fund, approved an extension of 12 months for MSREI to invest $2 billion of the fund’s equity that was un-invested.

MSREI initially requested an 18 months extension of the acquisition period of the fund, originally due to come to an end in June, and to invest all the remaining $2.7 billion of the fund’s original $4.7 billion raised in May 2010. Nonetheless, it is understood to regard the compromise extension as a telling endorsement of its efforts for the vehicle so far.

Indeed, PERE understands that MSREI’s early forays for the fund have yielded IRRs of approximately 20 percent, in line with its target returns and a far cry from the prospects of its previous two funds which were raised and deployed during the lead up to and onset of the global financial crisis.

Large investors in the fund, also known as G7, include General Motors, Government of Singapore Investment Corporation, Canada Pension Plan Investment Board, and the China Investment Corporation.

Their positive vote will now enable MSREI to add to its early fund investments including more than 20 transactions in the US including comprising condominiums, single-family residential properties and non-performing loan portfolios. In Europe it was recently named preferred bidder for a large Spanish loan book being sold by Santander and in Australia it has just agreed the purchase of the fund management business of Orchard Capital Investments.

In the note, signed by MSREI co-chief executive officers and co-chief investment officers Olivier de Poulpiquet (pictured) and John Klopp, the firm said: “The general partner of Morgan Stanley Real Estate Fund VII Global has received approval…for a 12 month extension of the investment period of the partnership and the general partner's authority to call capital for new investments.   A quorum of investors returned votes by the deadline, and over 90 percent of this quorum consented to the amendment.”

“In addition to the 12 month extension, the proposed modifications to the current terms of the MSREF VII Global Partnership Agreement have been approved. In your first quarter 2012 partner capital statement, you will see the reduction of your capital commitment reflecting the reduced $4bn fund size.”

MSREI declined to comment.

To read PERE's previous analysis of the G7 investor vote, published this month, click here.