Morgan Stanley RE Closes Third Phase of $5.9B Fund

Morgan Stanley Real Estate has announced the closing of the third offering for its Special Situations Fund III; the offering raised $2.5 billion of equity commitments, bringing the fund to a total of $5.9 billion.  In all, 63 percent of the third offering came from investors based outside the United States, according to a prepared statement, and Morgan Stanley itself represents 23 percent of the total commitments.  Structured as an open-ended fund, Special Situations III primarily targets “non-controlling investments in an array of real estate securities in growth/emerging, developed and distressed markets around the world,” according to the statement. As of the end of 2007, the fund had committed approximately $4.8 billion of equity, with 62 closed investments in China, Australia, India, Russia, Poland, Brazil, Mexico, the U.S., Japan, Western Europe and other areas. In the statement, Willem de Geus, London-based managing director & global portfolio manager of Special Situations, described the fund’s strategy as centering on “heavy emphasis on the high growth emerging economies (China, India, Russia, Poland, Mexico and Brazil), the flexibility to invest across the capital structure of real estate companies, and the ability to invest in developments and recurring income-producing assets in all real estate sectors….” Special situations managing director and chief investment officer Tim Morris said, “Special Situations will continue to provide dynamic real estate companies in the emerging markets with pre-IPO capital, as well as increase its allocation to distressed opportunities, focusing on the debt markets particularly in the developed economies.”  Special Situations Fund I, which is fully liquidated, launched in 1997 and invested primarily in the United States and Asia. Special Situations Fund II launched in 2000 and invested solely in Europe.  Since 1991, Morgan Stanley Real Estate has acquired $165 billion of real estate assets worldwide and currently manages $94.4 billion in real estate assets on behalf of its clients. The company has offered approximately $210.9 billion of CMBS through the capital markets since 1997, including $44.9 billion in 2007.