Morgan Stanley To Launch Major New Fund As Bank Looks To Grow Asset Management Business
Morgan Stanley is the latest opportunistic investor raising a big pot of new capital to try and take advantage of opportunities thrown up by the dislocation in the real estate market.
As well as a chance to make strong returns in the real estate sector, the equity raise forms part of Morgan Stanley’s drive to grow its asset management business, which it has diversified into different types of real estate investing in recent years.
In June, bank chief executive James Gorman said growing its asset management business was a strategic priority for the business.
The SEC filing did not specify how much equity Morgan Stanley is targeting for the new fund, but it is likely to exceed the $2.7B raised for its predecessor, North Haven IX, in 2017, since investment managers typically look to raise larger and larger funds.
The new fundraising will cement Morgan Stanley’s comeback in the real estate opportunity fund world. The funds it was investing in in the run-up to the 2007 crisis performed badly, and the bank had to fight to turn around overleveraged deals and maximise returns for investors. Since then, the funds it raised in 2015 and 2017 have performed well, regaining investor trust.
Like its predecessors, North Haven X will invest in North America, Europe and Asia, targeting returns ranging from 12% to more than 15%.
Unlike peers such as Blackstone, Brookfield and Lone Star, which manage larger funds, Morgan Stanley typically targets individual assets rather than large platforms, with its deals ranging from $100M to $500M of equity.
Its ninth opportunity fund was invested in a wide range of deals, buying logistics assets in the UK, India and Australia, multifamily in Australia and offices in Romania.
One standout deal was the purchase of Premier Place, a vacant 230K SF office building in the City of London financial district. Morgan Stanley bought it for £140M a year after the Brexit vote amid uncertainty about the future of office demand in London, redeveloped and leased the building and three years later sold it for £325M, netting a profit of at least £100M.
One of its largest recent deals was the 2018 purchase of the 1.1M SF Itis shopping mall in Helsinki for $592M. This week it also bought 1,600 apartments in the Finnish capital.
Morgan Stanley joins other veteran investors like Starwood in raising capital for large opportunity funds as the real estate market is undergoing its most severe period of stress in more than a decade.
But in recent years, in line with other investment banks and private equity investors, it has broadened its real estate activities beyond its opportunity fund management business.
In 2017 Morgan Stanley bought real estate debt and credit specialist Mesa West. And in 2019 it began raising equity for its first European open-ended fund buying core property, to complement its $30B U.S. open-ended fund.
Morgan Stanley declined to comment.