2010AWARDS & AnnuAL REVIEW - PERE

In June, Morgan Stanley Real Estate Investing (MSREI) closed
its latest global fund, Morgan Stanley Real Estate Fund Global
VII, on $4.7 billion. As the largest private real estate vehicle to
close following the collapse of Lehman Brothers, it cemented
the firm’s position as the second largest private equity real
estate firm in the world, according to PERE’s ranking of the
industry, and equipped the platform with an arsenal of dry
powder most firms could only dream of.
Yet, despite that, MSREI was not in a triumphant, self-congratulatory
mode. After being publicly chastised for investing
tens of billions of dollars at the height of the market in 2006
and 2007 – something that prompted hefty write-downs for
its 2006 and early 2008 vintage funds – MSREI was treading
extremely cautiously as it looked to the future.
Jay Mantz, then vice-chairman and chief investment officer
who has since left the group, accepted that the performance of
two funds, MSREF Fund V US and MSREF Fund VI International,
was below par. “People are allowed to be disappointed,
and they are allowed to be vocal about it,” he said at the time.
Of course, the attention afforded MSREI was – and still is –
due to the fact the firm has been around so long and is such an
establishment name on the private equity real estate circuit.
The Morgan Stanley real estate franchise started in 1969, with
the MSREF fund series created in 1991. During that time, MS-
REI has raised 10 opportunistic funds totalling more than $25
billion in commitments, in addition to separate accounts and
seven core and special situation funds.
In growing out the business in terms of geographies and
products, Mantz said MSREI achieved top quartile performance
and benefitted from having a globally diverse portfolio.
“We made some big strategic decisions when we went interna-
BluePrint | AMeriCAs
Thomas, Mantz, Klopp: insight into MSREI
MSREI’s mission
in an excerpt from one of our Blueprint interviews, Msrei discussed the challenges it
faced during the credit crisis and how it was refocusing attention on the future
tional, first to Europe and then to Asia,” he added.
However, Mantz admitted that MSREI’s timing was off in
its most recent vintage funds. “We bought at the top of the
market,” he said. “We did not anticipate the level of dislocation
and repricing that would occur in a very short timeframe.”
In looking to the future, MSREI highlighted its new appointments,
including former Capital Trust founder John
Klopp and ex-Pirelli Real Estate chief investment officer and
former co-head of MSREI Europe Olivier de Poulpiquet.
Klopp and de Poulpiquet were promoted to co-chief executive
officers and co-chief investment officers in September.
At the time of the interview, Klopp, then head of MSREI
Americas, accepted there was a perception that MSREI was
“not in business for a while”. But he stressed the firm had
been “actively getting back into the marketplace and putting
our name out there as ready, willing and able to make new
investments”.
When it came to the US, Klopp said “the entry point for
opportunities … is to get to the equity through the debt. That
can take a variety of different forms, whether it’s partnering
with existing borrowers to recapitalise projects or portfolios
or buying the debt and taking control of a property if that’s
what makes the most sense. But everything we are doing today
starts with debt.”
Klopp noted that the US real estate markets in 2010 had
“only seen the tip of the iceberg in terms of opportunities and,
for [MSREF Global VII], right now the most active marketplace
is the US. Over-leveraging is very widespread, the market
is just beginning to turn in terms of fundamentals and the
logjam is beginning to break. We believe, as a team, the US
will be very fertile turf for investing.”
2010 AwArds & AnnuAl review | PERE 37