MSREI finishes fundraising for G9 at $2.7bn – Exclusive

The investment bank platform has outraised its predecessor fund by $1bn thanks in part to returning investors.

Morgan Stanley Real Estate Investing, the real estate unit of investment bank Morgan Stanley, has taken a major step in returning as a fundraising force in the world of opportunistic private real estate investment after closing the latest vehicle in its flagship fund series.

PERE can reveal the New York-based firm has closed fundraising for its North Haven Real Estate Fund IX Global, known in the market as G9, on $2.73 billion, $1 billion more than the firm raised for its predecessor fund, G8, in 2015. A spokeswoman for MSREI declined to comment on the capital raising.

The fund took approximately 11 months to raise, including a first closing at $1.9 billion last February.

It is understood every G8 institutional investor returned to commit capital to G9. These include China Investment Corporation, China’s sovereign wealth fund, and Future Fund, a state fund from Australia, as well as Copenhagen’s PFA Pension, among others. The fund series’ investor base encompasses public and private pension funds, sovereign wealth funds, insurance companies, family offices and individual investors.

The final closing for G9 marks another important step in the re-emergence of MSREI as a credible global property investor operating higher risk and return strategies. The unit was once a trailblazing investor in the market and in 2007 closed its biggest fund, G6, which corralled $8 billion of equity, then a sector-wide record.

But since the crisis, MSREI’s fund series, then known as Morgan Stanley Real Estate Funds, took a reputational nosedive after G6 performed poorly in the grips of the global financial crisis. The consequence of that was a smaller G7 fund that closed in 2010, and of the $4.7 billion raised for that vehicle, $700 million of uncalled commitments were canceled as part of a deal with investors to give the unit more time to invest about half the remaining money.

Since then, however, the series’ performance has picked up in keeping with a global property market recovery following the crisis. That form has continued, prompting investors which kept faith to continue their support for G9. Indeed, according to one source familiar with the matter, G8 was currently projecting a gross IRR of 28 percent as of last September – higher than the typical 20 percent gross IRR targeted for opportunity real estate funds.

Also, while certain cornerstone investors backed G8 with certain conditions, no such conditions were agreed for G9’s raising.

MSREI managed $33 billion in assets as of September 30, according to its website. About 21 percent of those assets are currently held via opportunistic strategies. The comparably bigger part of the platform’s asset base is held via core investment strategies.

With additional reporting by Meghan Morris