Just two months after extended the life of its $4.7 billion Morgan Stanley Real Estate Fund (MSREF) VII Global, Morgan Stanley Real Estate Investing (MSREI) reportedly is eyeing a new US-focused fund. According to the Wall Street Journal, the New York-based real estate investment platform is targeting $1 billion in equity for the new vehicle.
While that may be a tough call, given one of the most challenging fundraising environments in the history of private equity real estate, the fund would be much smaller than MSREI’s other real estate vehicles. For example, MSREF VI International, the private equity real estate division’s largest property fund to date, raised $8.8 billion in 2007.
One reason for launching a new US real estate fund – even while it still has some $2 billion in uncommitted capital to invest on behalf of MSREF VII Global, also known as G7 – is that MSREI is reaching the limit for what G7 can invest in US real estate, which is around 25 percent of the fund’s assets, according to the WSJ article. As of December, the fund had closed on more than 20 investments in the US, including acquisitions of condominiums, single-family homes and nonperforming loan portfolios, before switching its investment activities to Europe and Asia, PERE reported last year.
Although the firm is known for its global MSREF series, the new US real estate fund could be an indicator that MSREI is exploring more regionally-focused opportunity funds.
In December, MSREI reached a compromise with G7 investors to extend the fund’s investment period by 12 months to June 2013. In exchange, the firm agreed to cancel $700 million of the fund’s approximately $2.7 billion in uncommitted capital and cut various fund fees.