Morgan Stanley Real Estate has written down the level of investments in its $8.8 billion global opportunistic fund by roughly two-thirds, according to a report in The Wall Street Journal.
Citing an investor letter, the report said MSREF Fund VI International, which has invested $6.5 billion of equity to date, had incurred the losses between the vehicle’s launch in June 2007 through December 2008.
MSREF VI invested its capital rapidly during the height of the real estate boom and was already 45 percent invested by the time it launched publicly, projecting annual returns of 22.4 percent.
The firm told investors to expect fourth quarter write-downs of as much as 60 percent, adding to a “$1 billion shortfall” in the first three quarters of 2008.
MSREF VI’s investments included the $5.5 billion take-private of Australian real estate investment trust, Investa Properties, which was closed with $1.6 billion of equity.
In February last year, Morgan Stanley acquired the eight-building Sony Center in Berlin along with Corpus Sireo and an affiliate of The John Buck Company. The same month, the firm picked up Citigroup’s Japan headquarters, paying ¥48 billion (at the time around $445 million; €302 million). Morgan Stanley declined at the time to reveal which real estate fund or funds made the investments.
Morgan Stanley continues driving towards a $10 billion target for MSREF VI’s successor fund, MSREF VII. The vehicle has raised $6 billion to date with an additional $2 billion in soft circled capital commitments. The intended close date was extended from September 2008 to the first quarter of 2009 at the request of limited partners. No final close has been announced to date.