Morgan Fund May Lose $5.4B: Report

Morgan Stanley informed investors in its $8.8 billion real estate fund that it may lose nearly $5.4 billion from bum property investments, a report says.
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NEW YORK (

TheStreet

) --

Morgan Stanley

(MS) - Get Report

has informed investors in its $8.8 billion real estate fund that it may lose nearly $5.4 billion from bum property investments, the biggest dollar loss in the history of private-equity real-estate investing, the

Wall Street Journal

reports, citing fund documents.

The losses stem from investments in properties such as the European Central Bank's Frankfurt headquarters, a big development project in Tokyo and InterContinental hotels across Europe, among others, the newspaper says.

The fund can't walk away from the deal as it has made billions of dollars in guarantees. It is now negotiating with lenders to reduce the fund's obligations on the money it borrowed, its interest payments, renovation costs and other expenses, the

Journal

says.

Not commenting on the losses, a Morgan Stanley spokeswoman told the

Journal

, "The company's real-estate group has a longstanding history of investing through many different business cycles over the past two decades."

"We are committed to managing through this cycle and moving our real-estate business forward," she added.

The returns of the fund could still improve if the global economy recovers faster than expected, the

Journal

reports.