Star Performance
Jul 1, 2007 12:00 PM, By Elaine Misonzhnik
Real estate continues to be a favored investment vehicle, with real estate funds of several global investment firms raising record amounts of equity in 2007.
On June 20, Morgan Stanley announced that it raised $8 billion for its MSREF VI International Fund, currently the largest property fund ever. MSREF VI, which, when leveraged, will be able to acquire up to $30 billion worth of properties. The fund will focus on overseas assets and look for properties in markets such as Australia, Asia, Europe and Latin America.
Morgan Stanley did not return calls seeking comment.
So far in 2007, fund managers have raised a whopping $69 billion, according to Private Equity Intelligence, Ltd. Earlier this year, Private Equity Real Estate magazine estimated that private equity real estate funds will spend up to $80 billion in new capital in 2007, a 34 percent increase over last year's $59.5 billion.
“Our survey respondents continue to rate real estate above stocks, bonds or cash as an investment alternative,” wrote researchers from the Real Estate Research Corp. (RERC) in their Spring 2007 RERC Real Estate Report.
Other fund mangers with big announcements in recent weeks include Goldman, Sachs & Co., which says it raised more than $4 billion for its Whitehall Street Global Real Estate LP fund. Also, Credit Suisse Group says it is in the planning stages on a $2.5 billion real estate fund.
Meanwhile, the biggest player of them all, Blackstone Group, is coming off its high-profile IPO in June during which it raised $4.1 billion. Though its stock didn't appreciate as much as expected, the firm is moving ahead and continuing to raise funds. It is in the process of finishing its sixth global fund. So far it has raised about $6 billion and has a target of $10 billion, which will surpass Morgan Stanley's as the biggest fund yet.
What's unclear is how much of this money will be steered toward retail. Retail REITs have been exempt from the buyout trend that has taken dozens of REITs in other sectors private. Most recently, a spate of apartment REITs have been acquired. For its part, a spokesperson from Blackstone says the company will continue to focus on hotels and office buildings.
Meanwhile, in a survey conducted earlier this year, RERC found that institutional investors gave apartment and industrial properties the highest “return vs. risk” rating in 2007, at 5 on a scale from 1 to 10, with 10 being the highest. Retail properties got a rating of 4.6.
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