Morgan Stanley Ramps up Brazil Real Estate

Morgan Stanley will likely deploy some $800m in new equity to Brazilian real estate in the coming few years through various vehicles, Alfonso Munk, executive director at the shop’s Brazil merchant banking office, tells LatinFinance. Morgan Stanley plans to set up a joint venture with Brazilian Securities – to be called Brazilian Capital – to provide alternative financing products such as mezzanine debt and preferred equity for real estate projects. “This will be a new product for Brazilian real estate,” says Munk, who adds that only a handful of subordinated debt deals have been done in Brazil to date. The venture will invest from a fund worth up to $100m, with 90% or so of the capital coming from Morgan Stanley. The shop is also closing a seventh global fund, called MSREF VII, expected to be worth $9bn-$11bn. Up to 5% of that will be allocated to LatAm, with roughly 80% going to Brazil, says Munk. For Brazil, that would mean roughly $450m. Funds would also be drawn from Morgan Stanley’s special situations fund, which focuses on minority stakes. One likely possibility is upping the shop’s 20% stake in Abyara to 30%, and increasing a 12% stake in Bracor, a commercial developer, to 18%. The two investments and others from the special situations fund could amount to $200-$300m in the next 3 years, with the Abyara stake worth up to $100m, notes Munk.