$5.4 billion Morgan Stanley loss is the largest in history

Making history in a bad way

Of the $8.8 billion private-equity real estate investment (PERI) fund held by Morgan Stanley, nearly two thirds will be lost due to bad real estate investments, making it the largest PERI loss in American history, according to Wall Street Journal’s review of Morgan Stanley fund documents.

To put that in perspective, if you printed every dollar being lost and laid them next to each other, it would reach Jupiter and back three times. For $5.4 billion, you could buy every single person in Santa Barbara a brand new Escalade.

WSJ noted that Morgan Stanley is one of the largest global property buyers having done $174 billion in deals since 1991 and this loss is unfortunately timed with Morgan Stanley’s attempt to revitalize their Real Estate Funds sector.

Where did the money go?

Many of the losses come from very large, international deals with $69.3 million expected to be lost on European Central Bank’s Frankfurt headquarters. That’s 90% of the entire Eurobank deal they’ll take a hit on. Other losses are on European InterContinental Hotels and several deals in Tokyo.

Despite the historic loss, Morgan Stanley plans to launch a new $10 billion fund called Msref VII Global, The Journal reports, but investors remain hyperprotective over their money, slowing the fund launch.

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