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Real estate investor profile: Morgan Stanley’s biggest calls

Morgan Stanley’s real estate investing business has grown explosively by backing its founders’ ballsy, counter-consensus calls in Germany, Japan, and hotels and developers in emerging markets. While the firm seeks to implant this can-do spirit into its other investing businesses, the real estate arm wants to continue its outperformance in tougher market conditions. Peter Lee reports.

Customers want more exposure

When Morgan Stanley CEO John Mack decided this spring that the time had come to kick-start the firm’s asset management business, he turned to its industry-leading real estate investment group to deliver the kick.

Previously this had sat, somewhat oddly it appeared to outsiders, within Morgan Stanley’s investment bank. More significantly to Mack, it had been a huge success, growing from a $450 million opportunistic fund set up to acquire value from the wreckage of the US real estate crash in 1991 into a global business, with more than $56 billion of third-party assets under management and control over more than $82 billion of real estate assets, including equity stakes in public real estate companies.

Although it might have looked an oddity to outsiders, this explosive growth of the real estate asset investment business – it almost doubled assets under management last year – has been a natural accompaniment to the similarly rocket-fuelled performance of Morgan Stanley’s real estate investment banking group. Morgan Stanley is the leading M&A adviser to the real estate industry, the top IPO underwriter and the leading arranger of CMBS.

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