Morgan Stanley Real Estate Investing (MSREI), the real estate investment platform of Wall Street bank Morgan Stanley, is facing a loss of $5.4 billion from its sixth global fund.
The projected loss for the $8 billion vehicle, which closed in June 2007, would be the largest the sector has seen, the Wall Street Journal said in a report today. It comes off the back of poor performing investments in Europe and Asia, added the report.
The news comes just over a year since PERE reported how investors in MSREF VI faced getting back 0.7X equity committed. At the time, investors were told the firm’s ongoing strategy was to focus on preserving and generating liquidity, deleveraging and de-risking the portfolio and working through debt issues with lenders. The fund still has a number of years left to run.
A spokesperson defended the bank, telling the WSJ that MSREF funds invest “through the many different cycles” and that the bank was “committed to managing through this cycle and moving our real estate business forward.”
A report by Bloomberg yesterday added that the MSREF fund could well recoup $3.4 billion from its investments, citing a fourth quarter update to investors in recent weeks.
Morgan Stanley has already raised more than $6 billion of capital, albeit having initially targeted $10 billion, for its seventh global opportunity fund, though it has not been officially closed yet.
The reported losses, stemming from fund documents seen by the WSJ, also comes during a time of senior staff change at the platform.
At the end of 2008, joint global head John Carrafiell stepped down from his position, to be followed by co-head Sonny Kalsi last year. Their responsibilities have been assumed by Owen Thomas, a long-standing Morgan Stanley executive. Alongside MSREI’s head of Japan, Fred Schmidt, Carrafiell and Kalsi are in the midst of launching a new advisory and investment platform.
Yesterday PERE reported that Morgan Stanley had re-appointed Olivier de Poulpiquet as head of its European real estate investment business, following a stint as chief investment officer at Italy’s Pirelli Real Estate. He replaces Marco Polenta in May, who leaves the business to pursue other interests.
MSREF VI represented the largest fund closing in private equity real estate history but has since been passed by a latter effort by Blackstone.