REAL ESTATE- The Washington State Investment Board has taken action to place more than $800m (€601.4m) into new real estate investments. The pension fund made these investment decisions at its board meeting recently.
One decion was a follow-on to invest up to $200m into the Morgan Stanley Real Estate Special Situations Fund III. This commingled fund, managed by Morgan Stanley Real Estate, is an open-ended fund not always open to new investors.
In September last, the real estate manager decided to close money raising for a while. At that time, the total commitments was $2.24bn. Morgan Stanley recently decided to open the fund again for new commitments, which is a pretty unique situation for open-ended commingled funds.
Another manager operating in much the same way is Pramerica Real Estate Investors with its PRISA II commingled fund.
Special Situations Fund III attracts a wide range of institutional investors both in the United States and around the world. Morgan Stanley has co-invested to the amount of 25% of the total capital raised.
The commingled fund makes non-controlling investments in securities of real estate companies around the world.
A number of the transactions could be with companies that are in emerging markets, such as China, India, Russia and central and eastern Europe. These would be with firms that are looking for growth capital.
Special Situations Fund III also looks at placing some investments in developed markets, covering the US, Japan, UK, western Europe, Hong Kong and Korea. Morgan Stanley believes in these areas are financial restructuring opportunities exist and there continues to be arbitrage possibilities with public and private real estate company valuations.
Washington State also made a $211.8m investment into Pacific Properties, SC. This was an entity level kind of commitment in a real estate operating company. Pacific Properties focuses on making investments on resort properties in the French Polynesia area of the world.
The other real estate investment made by the pension fund was a $400m investment for the Emerging Markets Fund-of-Funds, LLC. This entity will be making commitments to other commingled funds that have an investment strategy of placing capital into emerging markets around the world.
Washington State will be managing this investment entity in-house through its own investment staff. The due diligence could be done by a variety of companies. It will be assigned on a bid process. Some of this work could be done by the pension fund’s real estate consultant, Courtland Partners, but other outside firms could be part of the process, as well.
