Morgan Stanley’s head of real estate in Germany, James Lapushner, has left the company and plans to set up a fund himself.
Lapushner joined Morgan Stanley from Credit Suisse in 2006 to head the US bank’s buying spree for its MSREF funds in Germany.
He bought more than €10bn of stock in the German market on the assumption that rents would increase, and paid relatively high prices for the assets.
In an interview with EuroProperty in the summer of 2007, he said: “You can’t look at yields independently. They are a function of rents. If yields fall further, people believe in rental increases.
“I’m a huge believer in the German economy. Rents will rise, but I don’t think yields will fall to 3%.”
Lapushner was also persuaded by German property’s relative value. “You’re buying at a relatively low square metre price, compared to anywhere in the world,” he said. Local property experts, however, were doubtful that higher rents would be achievable.
Even as the subprime crisis was reaching Europe, Lapushner insisted that Morgan Stanley would keep buying as much high-quality real estate as possible. He downplayed the coming crisis by saying it just added “another layer of complexity”.
But the portfolios the bank bought also contained older, non-prime assets. Last year, Morgan Stanley became locked in a battle with its lender, RBS, over the €2.1bn Pegasus portfolio. Morgan Stanley had been threatening to hand back the keys to the bank or look after the assets for a fee.
Morgan Stanley bought the Pegasus portfolio from Union Investment, previously Difa, with €1.9bn of debt on an interest cover below 1x from RBS in May 2007.
