Morgan Stanley reported losses of $374 million on its real estate investments and losses of $56 million on private equity investments during the first quarter.
Morgan Stanley Investment Management posted overall losses of $559 million in the first three months of this year compared with losses of $112 million in the first quarter of 2008. The merchant banking unit lost $319 million, compared to gains of $31 million in last year’s first quarter “primarily driven by losses on principal investment in the real estate and private equity businesses”, the firm said in a statement.
“Asset management continues to be constrained by poor performance and the downturn in real estate,” Morgan Stanley chief financial officer Colm Kelleher said on the firm’s earnings call. “Turning around this business remains a top priority. We are upgrading investment talent and have implemented a number of cost initiatives.”
Real estate losses firmwide aggregated roughly $1 billion, which Kelleher said made a “sizeable impact” on revenues. That figure includes losses on Crescent Real Estate and other consolidated interests, real estate funds and real estate bridge financing.
Struggling real estate investments are not new to Morgan Stanley which recently told investors in its $8 billion international opportunistic fund MSREF VI International 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, as reported in the Wall Street Journal last month.
Morgan Stanley overall lost $177 million for the quarter, or 57 cents per share, and cut its dividend to five cents.