Morgan Stanley's Real Estate Push

Last year alone, Morgan Stanley made $27 billion worth of acquisitions across the world, it says.

"The strategy here is fairly straightforward for Morgan Stanley -- essentially people believe there is an arbitrage for the public market and private market" in real estate, says Barry Vinocur, CEO and founder of REIT Zone Publications.

But Kalsi says it's important that the business make strategic acquisitions that could potentially help other parts of the firm as well as catering to both short-term and long-term investing philosophies.

"There are a lot individual deals that we could do on a one-off basis in places around the world, but I think that it's more important for us in terms of setting strategy to make sure that the top-down story makes sense," Kalsi says. "And that's led us into some of our big calls."

While Morgan Stanley is "underrepresented" in Latin America and other emerging markets, he says, that shouldn't offset more deals in hotels and office complexes in the U.S. this year.

Morgan Stanley's most recent real estate deal was announced in January, a sale of REIT CNL Hotels & Resorts for $6.6 billion. The company is selling the bulk of the properties -- about 51 -- to Ashford Hospitality Trust(AHT Quote) for $2.4 billion. But after the deal is completed, it will own eight luxury properties under the Hilton, Waldorf-Astoria, Ritz-Carlton and Marriott(MAR Quote) brands. The deal is expected to close next quarter.

The strategy might be a good one. Private equity firms typically charge management fees of 1% to 2% and can skim off up to 20% of the profit a fund generates from its investments.

Still, it's no secret that private equity real estate investments can be risky.

Brad Hintz, an analyst at Sanford Bernstein, says the business creates a competition problem with one of Morgan Stanley's bread-and-butter businesses -- investment banking.

"Mack has to deliver improving performance while he is addressing the fundamental long-term problems of the business. Purcell pushed out higher-risk positions," whereas Mack is adding them back, he says. "Fundamentally, those two are competing for the same trough."