Back to school for Morgan Stanley
Pennsylvania Public School Employees‚ Retirement System has issued a commitment of up to $150m (e123.4m) for Morgan Stanley’s Real Estate Fund V U.S (MSREF V U.S).
The pension fund said it felt “very comfortable” with the track record of the real estate manager. Morgan Stanley’s seven previous investment funds have raised in excess of $8bn of equity commitments.
The pension fund is also appreciative of the alignment of interests. Morgan Stanley has committed to investing 10% of the total capital raised by MSREF V U.S. There is also a large portion of the fund’s senior management compensation tied-in to the long-term performance of the fund.
The overall investment strategy is an opportunistic one. Transactions will include development, redevelopment, repositioning and releasing. There will be diversification by property type, geography and deal structure. While covering the four main property sectors, the fund will invest in some specialised property types such as the hotel sector.
Morgan Stanley will be seeking assets in the US’ major markets. These locations need to show positive population growth, household formation and employment growth. No more than 25% of the fund’s capital commitments can be allocated in any one investment.
Some properties will be acquired on an individual basis. Portfolio and company purchase deals will also be considered. Pennsylvania Public Schools has an opportunistic real estate program with a current value of $1.8bn. The pension fund has a targeted real estate allocation of 7%. It is currently slightly underweight with 6.7% of its $53.8bn of total assets invested in the sector.
n Morgan Stanley’s former head of real estate, Owen Thomas, has become president of Morgan Stanley Investment Management. The 44-year-old has been at the firm since 1987 and has led the real estate division for the last five years. Morgan Stanley Real Estate’s AUM have grown from $2bn (e1.6bn) in 1994 to more than $30bn today. Thomas and his team have increased real estate revenues by more than two-and-a-half times since 1999. In September last year Thomas was made acting head of investment. In his new role he will report to Zoe Cruz, Morgan Stanley’s acting president. He will be succeeded by John Carrafiell and Jay Mantz who will become co-heads of real estate.