MSREI snaps up $196m US loan portfolio

Morgan Stanley Real Estate Investing has acquired a US real estate loan book with a ‘principal balance’ of $196m with operating partner Kearny. The deal aligns with the firm’s strategy articulated to PERE in an interview last year.

Morgan Stanley Real Estate Investing (MSREI) has purchased the loan book behind a portfolio of 45 properties with a ‘principal balance’ of $196 million from an unnamed offshore bank.

MSREI purchased the loans in a joint venture with Kearny Real Estate Company, according to a statement by the firm. The details of the transaction were also not disclosed.

According to MSREI, the loan book comprises performing, non-performing and sub-performing loans made to owners of residential condominiums, apartments, offices industrial properties and residential land. The majority of the assets are spread across California, Nevada, Washington, New Jersey and New York.

The transaction is the latest in a series of loan acquisitions made between MSREI and Kearny, a Los Angeles-based real estate development and investment firm which has historically participated in approximately $2 billion worth of distressed loan transactions.

John Klopp, who became co-chief executive officer and co-chief investment officer of MSREI in September last year, described Kearny as one the firm’s longest standing operating partners. “We believe our firms’ combined expertise in portfolio acquisitions and loan resolutions make us well-positioned to maximise the value of these assets.”

MSREI closed its latest opportunity fund, MSREF VII Global, on $4.7 billion last summer. In an exclusive interview with PERE shortly following the closing, Klopp said US debt would be a major focus of the vehicle and firm. He said then: “Virtually everything we are doing is debt related in one way or another, that’s just the shape of the world today.”

Klopp told PERE he believed the current opportunity was one that would last a number of years: “We have only seen the tip of the iceberg in terms of opportunities, and for G7 right now, the most active marketplace is the US,” he said then. “Over-leveraging is very widespread, the market is beginning to turn in terms of fundamentals and the logjam is beginning to break. We believe, as a team, the US will be very fertile turf for investing.”

To read more about MSREI and the G7 fund, click here.