ASIA NEWS: A more conservative tack

Within the slew of senior hierarchical changes that took place at the end of September at the Asia division of Morgan Stanley Real Estate Investing (MSREI) there were two that really caught the eye.

According to an internal memo seen by PERE, the investment bank platform has transformed its Asia operation to ensure more leadership and day-to-day management responsibilities are assumed at the country-level, rather than at the regional level as before.

In so doing, it has promoted long-serving executives into market head roles for China, Hong Kong, Singapore and Japan. Susan Sun was made head of China and will be based in Shanghai; Noah Wangh was made Hong Kong head; Kevin Kow became head of Singapore and Toru Bando became head of Japan, based in Tokyo. 

The shift led to another of its long-serving executives, Calvin Chou, who was head of Greater China, leaving the firm. After 16 years with Morgan Stanley, Chou is expected now to form his own private equity real estate firm.
MSREI declined to comment further than confirming the contents of the memo. 

It is understood, however, that Chou’s departure reflected not just the firm’s operational shift but also its current strategy of acquiring primarily assets that bring with it recurring revenues. 

Indeed, the firm’s latest opportunity fund, Morgan Stanley Real Estate Global VIII, for which it raised approximately $1 billion this summer, is expected to be deployed in accordance with a “cash-flow defensive” mantra, effectively ruling out many of the speculative development investments it has undertaken in the past.

The second senior change of note was also in keeping with the firm’s lower-risk strategy. MSREI hired Paul Keogh from Australian superannuation fund AustralianSuper to spearhead its upcoming Asia core fund, a vehicle expressly aimed at already income-generating properties.

The fund is expected to be launched shortly after Keogh joins at the end of the year. He will be making the most of MSREI’s new country leadership as investments for the fund are expected in Tokyo, Shanghai, Singapore and Hong Kong as well as other mature markets in the region. 

The fund will be open-ended in structure and, over time, it is meant to emulate MSREI’s long-running US core fund which has grown to $11 billion in net asset value. The firm is understood to be targeting between $500 million and $1 billion in the first instance for the incoming Asia vehicle. 

“With our recent successes in fundraising now in hand and multiple products to roll out, MSREI is once again poised for growth,” the firm stated in its memo. Only this time its growth has assumed an altogether more conservative tack.