EUROPE NEWS: MSREF’s old hand

With so many organisations having downsized, it should be a head-hunter’s paradise. It should also be a great time for firms wanting to hire. However, the reality is that it is hard to find, not just good people, but people who haven’t been tainted by mistakes of the recent past.

In the case of Morgan Stanley Real Estate Investing, the bank-sponsored platform has found a neat solution in rehiring Olivier de Poulpiquet to replace Marco Polenta as head of Europe. De Poulpiquet left MSREF in 2003 to join Pirelli Real Estate.

As the front page of the Wall Street Journal reported on 14 April, Morgan Stanley’s flagship $8.8 billion opportunity fund, MSREF VI, faces a record $5.4 billion loss. Europe is partly to blame for that poor performance, evidenced in part by the fact the fund handed back the keys to a $2.9 billion portfolio of German offices to lender Royal Bank of Scotland earlier this year. MSREF is also planning to return an $800 million portfolio of 10 European hotels to Barclays Capital, according to the Wall Street Journal, citing MSREF Fund VI’s 2009 third quarter report to investors.

By hiring de Poulpiquet, Morgan Stanley has someone that can’t be linked to MSREF VI, which was raised in 2007, four years after he left as co-head of Europe. That separation is helpful, according to a Morgan Stanley insider, because the firm now has someone who can bring a “fresh approach” to the business and can be “objective” when it comes to dealing with legacy assets. At the same time, the bank has the comfort of being led by someone who has already proved himself capable and an asset during his previous time at MSREF. De Poulpiquet was employed by Morgan Stanley for almost a decade in various roles before his departure.

But his rehiring also highlights a truism in the pursuit of talent in today’s market: it is hard to find anyone of substance that does not have what could be termed “legacy issues by association” or can point to a spotless track record during the peak of the market.

De Poulpiquet left Morgan Stanley to join Italy’s Pirelli Real Estate in 2003, where he became general manager of investment and asset management. In 2008, he was elevated to chief investment officer and head of fundraising. One of his ostensible tasks was to raise an opportunity fund as Pirelli expanded further into Germany and into parts of Central and Eastern Europe.

This was also the year Pirelli made a large investment alongside Deutsche Bank’s property investment arm RREEF, Generali and the Borletti Group, when the partners took a 49 percent stake in a portfolio of predominantly Karstadt German department stores operated by Arcandor.

Two years after closing the Arcandor deal, the outcome of this high profile move by Pirelli and its partners has been less than great. The investment is rumbling along, even though Arcandor and its subsidiary Karstadt filed for insolvency in June 2009. Since that time, a receiver has put into place an insolvency plan involving an option to sell the chain to a third party.

Pirelli’s plan for an opportunity fund has also evaporated, with the company retrenching back to its core markets, costs being cut and now Pirelli Real Estate in the process of being spun off.

In his new job, de Poulpiquet is inheriting what one private equity real estate veteran described to PERE as a European “mess”. However, it is hard not to feel de Poulpiquet leaves behind him a firm with its own issues. The good news is that Morgan Stanley is engaged in making fresh investments as well as dealing with existing investments. De Poulpiquet will hope that gradually he can focus on putting the past behind him and succeeding in this new era. Morgan Stanley will be hoping for the same thing.