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MSREI nears end of G7 with $175m India deal

The real estate investment arm of the global bank is committing about $175 million of equity in a development project in central Mumbai in one of the final transactions out of its MSREF VII Global opportunistic fund.

Morgan Stanley Real Estate Investing (MSREI) is close to inking its first India deal in more than a year with a $175 million investment in an office development near the heart of Mumbai, using some of the last capital from its Morgan Stanley Real Estate Fund (MSREF) VII Global.

The 1.6 million-square-foot project, named One BKC and located in the Bandra Kurla Complex business district, currently is under construction and is expected to be completed by 2014, according to the office building’s website. It is being designed and constructed by Mumbai developer Wadhwa Group.

The outlay gives MSREI a 51 percent stake in the building, and the firm is understood to expect to be invested in the project for three to four years after the deal closes in August. Morgan Stanley has added no leverage at this point, but it is thought to have reserved the possibility of injecting debt at a later stage. Even without leverage, MSREI’s One BKC investment is expected to reap the firm’s target 20 percent to 23 percent returns over its lifetime. 

The deal is understood to be the first in India for MSREI in a year. The firm’s previous investment in India – an approximately $100 million residential investment in Mumbai called Vasant Oasis, which closed last year – also is expected to generate similar returns and already has started to monetize.

Although the firm has retained a presence in India since it entered the country in 2005, it halted investments after the onset of the global financial crisis and only began investing again last year.To date, the real estate firm has invested about $850 million in India.

One BKC is likely to be one of the last of a late flurry of acquisitions made on behalf of MSREF VII Global. The fund originally closed on $4.7 billion from investors in 2010, but it struck a compromise with its investors at the end of 2011 after requiring an extension on its investment period, which saw it cancel $700 million in commitments. That compromise enabled MSREI to continue to invest through to the end of June, when the extension also expired. At that stage, PERE understands there were about 10 deals sufficiently advanced for the firm to see them through to completion.

As of March, the fund had invested $3.7 billion in equity, although this India deal and these others would add to that total. Despite rumors last year of setting up region-specific funds, MSREI has continued to invest out of a global funds mandate in Asia, and this year the firm also launched marketing for the eighth fund in the series, for which it is understood to be targeting about $2.5 billion.

In November 2011, MSREI hired Shirish Godbole as its head of India, and last year it relocated its co-chief executive officer and co-chief investment officer Olivier de Poulpiquet to Singapore to ramp up its investment efforts in Asia. MSREI declined to comment.