MSREI readies plans for pan-European core fund

US investor poaches Invesco’s Paddy Bingham to run new vehicle.

Morgan Stanley Real Estate Investing (MSREI) is putting plans in place to launch an evergreen, pan-European core/core-plus real estate fund.

In an indication of its intent, the US banking group subsidiary is believed to have poached the head of one of the top open-ended European funds to run the new strategy.

The new recruit is Paddy Bingham, who is currently a managing director and head of European fund management at Invesco Real Estate Europe.

His main role there is leading a team of four which runs the Invesco Real Estate European Fund (IREEF), the US fund manager’s flagship European real estate vehicle.

MSREI is better known as an opportunistic real estate investor, but this latest move is similar to those made by peers such as Blackstone and others, which have broadened their focus to raising and managing capital for lower-risk investing as the real estate cycle moves into a more mature stage globally.

At same time, establishing open-ended, pan-European funds of scale has been a holy grail for the biggest property fund managers. There are a handful of existing vehicles which are probably more than €3 bn in size, including those managed by CBRE Global Investors and M&G Real Estate, as well as IREEF. M&G European Property Fund has reached €3.43 bn assets under management.

Invesco does not publish information about IREEF. However, the fund is likely to be approaching €3 bn, because in 2016, Invesco arranged a €610 mln loan facility for the fund with Aareal Bank and Allianz with the option to expand to €1 bn – and typical core fund gearing now is 25%-35% loan to value.

Open-ended funds generate substantial fees – tens of millions a year when they reach scale – which can be less volatile than other funds during downturns. In the US the so-called ‘ODCE’ funds (Open-ended Diversified Core Equity), named for the NCREIF index which benchmarks them, are many times larger, owning more than $190 bn of assets (June 2018).

MSREI is run in Europe by Brian Niles.

Both MSREI and Invesco declined to comment.

This article first appeared in EuroProperty, the weekly publication of PropertyEU.


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