Morgan Stanley International Fund Sets Record with $8B in Equity Investments

June 21, 2007 By Gail Kalinoski, Contributing Editor

Increased interest in global investments is one of the reasons Morgan Stanley Real Estate is citing for raising a record $8 billion in equity commitments for its international fund.

Morgan Stanley said Tuesday it had completed fundraising for its MSREF VI, an international fund that has an enhanced return strategy and buying power of more than $30 billion. The fund will make investments in non-U.S. real estate assets, portfolios and companies in the developed markets of Japan, Western Europe and Australia as well as emerging markets in China, India, Russia, Turkey and Latin America.


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“We believe that attractive opportunities to invest in real estate around the globe will continue as demand for all asset types outpaces supply,” Sonny Kalsi, managing director and global co-head of Morgan Stanley Real Estate Investing, said in a release. “Global employment growth, an aging population in the west, a growing population in the east, and accelerating urbanization in many emerging markets will drive the need for all types of quality real estate.”

Those contributing to the fund include institutional and retail investors in North America, Europe, the Middle East and Asia. Morgan Stanley invested just over 20 percent of the equity raised, according to the company.

“The record size of this fund, both for Morgan Stanley Real Estate and among real estate investment managers, is indicative of strong capital flows into real estate as new investors seek exposure to the asset class and existing investors increase their allocations,” noted John Carrafiell, managing director and global co-head of Morgan Stanley Real Estate, in the release.

About 60 percent of the fund will be invested in Asia and about 30 percent in Europe, according to a Reuters report today by Dominic Whiting and Brian Kelleher. Japan will get the lion’s share, about two-thirds, of the Asia investments, Whiting and Kelleher reported. They noted that nearly half of the fund’s equity has been spent in the $2.4 billion acquisition of 12 hotels and two property management groups from All Nippon Airways.

CPN reported April 13 that the purchase was the largest hotel transaction in the Asia-Pacific market and one of the biggest real estate sales in the region. Morgan Stanley said at the time that the acquisition builds on the firm’s global hotel investment strategy. It also expands its portfolio of high-quality properties in key Japanese markets.

On May 31, CPN reported on another huge overseas acquisition by one of the investment firm’s funds. Funds advised by Morgan Stanley Real Estate signed an implementation agreement to acquire Investa, an Australian-based diversified real estate company, in an all cash deal that valued Investa at about $6.6 billion on an enterprise basis.

“Real estate is increasingly becoming an important component of an asset allocation strategy because it offers portfolio diversification and the ability to invest in ‘real’ assets, which provide uncorrelated investment returns when compared to other asset classes,” Carrafiell stated in Tuesday’s release about the MSREF VI fund.

The Morgan Stanley Real Estate funds have acquired $83.5 billion in real estate assets around the world and have $31.6 billion under management. Including its MSREF V U.S. fund, which closed in September at $1.75 billion, Morgan Stanley Real Estate funds have raised $9.75 billion of equity for global investment in the past year.

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