Morgan Stanley, seeking US$3 billion for its fifth global real estate fund, got a preliminary pledge of as much as US$440 million from the Washington State Investment Board to invest in Asia and Europe.
The New York-based firm said it is betting on economic recovery in those regions lifting property values as well as capitalizing on banks' efforts to shed problem mortgages and companies selling real estate to reduce debt.
"There's a tremendous amount of ownership transformation right now in real estate internationally," Jay Mantz, president of Morgan Stanley's real estate funds, told Washington's private markets committee at a fund-raising pitch in Olympia.
"In most cases we feel the fundamentals have bottomed and in one area where we're very focused, in Tokyo, we've seen an increase in rental rates in that market in residential and office for the first time in 14 years," Mantz said.
The committee recommended the board ratify the investment in the Morgan Stanley Real Estate Fund V International LP at its Dec. 16 meeting.
Morgan Stanley is working on about US$20 billion of acquisitions, including more than US$9 billion of deals where Morgan Stanley has been chosen by the seller or is in the process of closing, Mantz told the committee. About 60 percent of those transactions are in Japan, he said.
Morgan Stanley is focused on eight markets: Japan, Hong Kong, China, Germany, France, the UK, Spain and Italy, said Owen Thomas, head of Morgan Stanley's real estate business.