Morgan Stanley has informed investors in Morgan Stanley Real Estate Fund VI to expect a loss from the fund, among the largest ever raised.
The firm delivered the news during an investor meeting in New York last week as well as in subsequent briefings.
According to sources close to the firm, Morgan Stanley expects the $8 billion fund – the largest ever private equity real estate fund ever raised when it closed in June 2007 – to provide an equity return of 0.7 times invested capital.
At the same time, investors were told that the firm’s ongoing strategy with the fund is to focus on preserving and generating liquidity, deleveraging and de-risking the portfolio and working through debt issues with lenders.
Morgan Stanley is seen as being a barometer for the health of large global real estate funds raised in and around 2007. Many others have been forced to write down the value of their assets under management.
The Wall Street bank is a 25 percent investor in MSREF VI. Upon closing, the firm touted the fund’s “record size” though Blackstone subsequently went on to raise a larger vehicle.
Morgan Stanley told investors at the time of closing that it would target assets, portfolios, and companies primarily in developed markets including Japan, Western Europe, and Australia, and emerging markets such as China, India, Russia, Turkey and Latin America. 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.