Morgan Stanley's Special Situations Fund III, a global fund that buys non-controlling stakes in real estate companies, bought the stake in RosEuroDevelopment via a dedicated capital increase, Morgan Stanley said in a statement.

No terms for the transaction were disclosed. Russia's real estate sector is booming, with local and international property funds moving in and developers looking to raise new funding by coming to the stock market.

John Carrafiell, global co-head of Morgan Stanley Real Estate, said that they believe that Russia's strong economic growth and its fundamental undersupply of quality real estate provide an attractive opportunity to expand their investment platform.

Carrafiell added that RosEuroDevelopment would use the capital injection to invest in several projects in Moscow and other parts of Russia. The developer, part of a conglomerate called RosEuroGroup, specialises in building shopping and entertainment centres, business centres, logistics parks and residential complexes.

It has 1.8 million square metres of land on its books and plans to develop over 2 million square metres of real estate over the next five years, the statement said.

Among other deals, Britain's Raven Russia, established by developer Raven Mount, raised over 150 million pounds ($280 million) in an initial public offering in July 2005.

The Russian property arm of Fleming Family & Partners recently pulled its planned IPO due to market weakness, but bankers say Sistema-Hals, the property arm of conglomerate AFK Sistema, is still on course to float this year.

By M. Sese
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