New York State reportedly reneges on MSREF commitment

The New York State Common Retirement Fund is trying to pull out of a $300 million commitment to Morgan Stanley Real Estate Investing’s latest global opportunity fund, according to a report by Bloomberg.

The $125 billion public pension reportedly told the Morgan Stanley team it wanted out of its commitment to MSREF Global VII last year, having initially committed $300 million in 2008.

The pension has met some draw down requests from the $4.7 billion vehicle, but it is now in the process of completing an agreement with Morgan Stanley to extricate itself from the fund, the report said.

Morgan Stanley spent much of the 18 months talking to investors following the poor performance of its 2006 and 2007 vintage funds, MSREF Fund V US and MSREF Fund VI International.

Speaking to PERE in June, Owen Thomas and Jay Mantz, MSREI’s then chief executive officer and chief investment officer, respectively, said the group had offered existing investors in Funds V US and VI International “significant” concessions relating to management fees, waiving some and materially reducing others.

Meanwhile investors in Fund VII – which had originally targeted $10 billion when it was launched in 2007 – were allowed to reduce their commitments to the fund. “We did everything we could to listen to our partners and make accommodations to help them,” said Thomas at the time. “We were very active with investors.”

Morgan Stanley and New York Common declined to comment, although Bloomberg cited a MSREF spokesperson as saying the bank “reached an agreement on a capital modification programme with investors in MSREF VII in the third quarter of 2009 and all negotiations with investors were factored into the $4.7 billion fund raise announced in May 2010.”

Last month, MSREI named John Klopp and Olivier de Poulpiquet as joint chief executive officers and joint chief investment officers reporting to Mantz, who became vice chairman as part of a senior reshuffle of the platform.

Thomas has relinquished his chief executive officer capacity, concentrating solely on his other position as head of Asia for the investment bank’s wider operation. He remains chairman of the real estate platform.