Morgan Stanley

Prime Property Fund Acquires New York Marriott East Side for $287 Million

Nov 14, 2005

New York —

Morgan Stanley Real Estate's Prime Property Fund® (PRIME) announced today that it has acquired the 646-room New York Marriott East Side in Midtown Manhattan from SHC New York Eastside II, LLC for $287 million. SHC New York Eastside II, LLC is a subsidiary of Strategic Hotel Capital, LLC, a private company whose principal shareholders are affiliates of Goldman, Sachs & Co. and investors advised by Prudential Real Estate Investors.

"The addition of this premier hotel property to the PRIME portfolio increases the Fund's exposure to the lodging sector, which is experiencing significant growth in occupancy, average daily rates (ADR) and revenue per available room (RevPAR)," said Dave Hardman, Managing Director and Head of U.S. Real Estate Investing at Morgan Stanley. "Additionally, it allows PRIME to gain entry into the supply-constrained New York market with Marriott International's leading full service brand."

The New York City lodging market is experiencing falling supply and rising demand with one of the highest increases in RevPAR among the top 24 hotel markets in the nation. Supply has been contracting due to residential conversions and future growth is limited by the lack of available land and the high cost of development.

The New York Marriott East Side is located on Lexington Avenue at 49th Street and is central to New York businesses and attractions. The 35-story hotel has a unique modern style and decor, with an understated reference to the hotel's magnificent art deco past. It features 629 rooms, 17 suites and 19 meeting rooms, whose versatility can accommodate everything from an intimate executive gathering, to a social gala for 300.

PRIME, a $4.5 billion diversified core real estate fund, is managed by Morgan Stanley Real Estate. PRIME's assets include office, retail, multifamily, industrial, self storage and hotel properties and are located in major real estate markets throughout the United States. Morgan Stanley Real Estate is comprised of three major global businesses: Investing, Banking, and Lending. Since 1991, Morgan Stanley has acquired more than $68.7 billion of real estate assets worldwide and currently manages $38.0 billion in real estate assets on behalf of its clients. Using its own capital, Morgan Stanley also originates upwards of $11 billion in commercial mortgages annually. In addition, Morgan Stanley Real Estate provides a complete range of investment banking services including merger, acquisition and restructuring advisory and recapitalizations, as well as public and private debt and equity financing. Morgan Stanley established its real estate organization in 1969.

Morgan Stanley (NYSE: MWD) is a global financial services firm and a market leader in securities, investment management, and credit services. With more than 600 offices in 28 countries, Morgan Stanley connects people, ideas and capital to help clients achieve their financial aspirations.