Despite losing billions in real estate investments during The Great Recession, Morgan Stanley (NYSE: MS), the New York financial services giant, is raising funds to start buying properties again.Global Real Estate Investing  

In a recent Wall Street Journal article by Craig Karmin, it was detailed how Morgan Stanley is "gearing up to raise a $1 billion to $3 billion global property fund..."  According to the Journal piece, "Real Effort at Morgan Stanley," the bank is pitching to pension funds and foreign investors, such as the China Investment Corp., the sovereign wealth fund for the People's Republic.

Morgan Stanley joins a long list of institutional investors who are piling back into real estate.  The Blackstone Group (NYSE: BX) has bought massive numbers of single family homes to be used as rental properties.  Seeking to profit from the natural gas boom in North Dakota, KKR & Co. LP (NYSE: KKR) is investing heavily in housing projects in the state to shelter the workers.

"If the truth be told, these institutional investors should have been buying during The Great Recession, as I was," observed Jerry Cohen, President and Founder of EquityBuild, a real estate investment.  "In my career investing in real estate that has spanned decades and encompassed over a thousand transactions in which I was a principal, I can tell you that the housing market in the United States always recovers.  It is like Warren Buffett wrote in a New York Times op-ed about investing, 'Be greedy when others are fearful, and fearful when others are greedy.'"

Over the last two centuries, real estate has created about 90% of the world's millionaires.  During The Great Recession when the stock and bond markets crashed, rental income in the United States actually rose. Historically, rental income increases about 5% a year for properties in the United States.

Shaun Cohen, President of Equity Finance, the funding arm of EquityBuild, commented that, "I applaud Morgan Stanley for returning to the real estate sector.  Our firms have generated an average return of 17% for flipping properties and 12% for financing private mortgage notes.  Returns like these are obviously what has attracted Morgan Stanley and other institutional investors to the housing market."

According to Jerry Cohen, the presence of institutional investors is especially notable in the Chicago market.  

"The real estate market in Chicago is booming, particularly for turnkey properties," Cohen noted.  "Sales and prices are up significantly from last year in Chicago.  Investors are realizing value of buying a turnkey property that have been professionally restored, rented out, and then managed by experienced groups to maximize the returns.  The buying by savvy institutional investors in the Chicago are taking the prices even higher.  The Illinois Association of Realtors just reported that median prices are 21.8% from last year." 

The last Morgan Stanley Fund, Msref VI Intl. returned just $0.26 to investors for every dollar, a loss of almost 75% produced by the vagaries of The Great Recession.