[On April 15th, Morgan Stanley couldn't pay the debt on a large Tokyo skyscraper ($3.3B worth) so just walks away from it. Here's the keys, Tokyo. Good luck with that building. PLUS "the refinanced debt was sold in six different tranches by Morgan Stanley to investors". WHAT? They LOSE over 3 BILLION DOLLARS and then just sell the crap off to investors?? Are you SHITTING me?
PLUS, on April 21st, they post a 1.7 BILLION DOLLAR LOSS.
Anyone else out here think this is TOTALLY crazy???]
Morgan Stanley fund fails to repay debt on Tokyo property
By Junko Fujita – Fri Apr 15
TOKYO (Reuters) – A Morgan Stanley property fund failed to make $3.3 billion in debt payments by a deadline on Friday, handing over the keys to a central Tokyo office building to Blackstone (BX.N) and other investors, the largest repayment failure of its kind in Japan.
It marks the latest fallout from a series of highly leveraged investments by Morgan Stanley (MS.N), one of the most aggressive investors in worldwide property markets before the global financial crisis.
The $4.2 billion MSREF V real estate fund missed its April 15 deadline to repay 278 billion yen($3.3 billion) worth of debt packaged in commercial mortgage-backed securities on the 32-storey Shinagawa Grand Central Tower, a property which has seen its value plunge, two people involved in the transaction said.
They spoke on condition of anonymity due to the sensitive nature of the matter.
A Morgan Stanley spokeswoman in Tokyo declined to comment. A New York based spokesman for Blackstone [Wow, sounds like Blackwater.], which holds the most junior portion of the debt and gains the right to market the building for seven months, was not immediately available for comment.
This is the largest repayment failure of debt packaged in CMBS in Japan, according to analysts and industry experts, bigger than the 112 billion yen that real estate investor K.K. daVinci Holdings failed to pay on the Pacific Century Place office building.
MSREF V bought the Shinagawa property for 140 billion yen in 2004 from Mitsubishi Corp (8058.T) and Mitsubishi Motors (7211.T). The building now houses Microsoft's Japan offices among other tenants.
Morgan Stanley repackaged the loans into 125 billion yen worth of CMBS in 2005, according to a website for Morgan Stanley.
Taking advantage of a run-up in property prices, MSREF V refinanced its debt on the Shinagawa property in 2007 with new debt worth 278 billion yen, twice the value of its purchase and likely yielding a tidy profit for the fund.
The refinanced debt was sold in six different tranches by Morgan Stanley to investors.
UPDATE 2-Morgan Stanley, MUFG JV to book $1.7 bln loss, hit by bad market bet
Thu Apr 21, 2011
* JV did not have sufficient detailed supervision of losses-exec
* Trades were made by Mitsubishi UFJ traders
* To raise 30 bln yen through capital injection (Recasts, adds details and quotes)
By Taiga Uranaka and Emi Emoto
TOKYO, April 21 (Reuters) – A Morgan Stanley securities joint venture in Japan with Mitsubishi UFJ Financial Group (MUFG) said it will lose nearly $2 billion after its fixed income traders took market positions which were larger than its "financial fitness" and then made wrong bets.
Mitsubishi UFJ Morgan Stanley Securities, 60 percent owned by Japan's MUFG and 40 percent by the Wall Street firm, said on Wednesday it would post a net loss of 145 billion yen ($1.7 billion) for the year ended March due to the trades.
It will also raise 30 billion yen through a capital injection from its parent Mitsubishi UFJ Securities Holdings.
The company said on Thursday it had been holding the trading positions which resulted in the loss at what was formerly Mitsubishi UFJ Securities, prior to its merger with Morgan Stanley.
Both banks had discussed these positions as part of its due diligence, and had agreed to keep it within a certain limit.
"But the losses kept growing bit by bit," Managing Director Fumio Yoshimatsu told reporters. "We did not have sufficiently detailed supervision of such things," he said.
He declined to give further details on what type of financial instruments were traded, but said they were incurred in January-March, and did not result from the March 11 magnitude 9.0 earthquake in northern Japan.
The company said the trades were made by Mitsubishi UFJ traders.
The unit is one of two securities ventures formed between MUFG and Morgan Stanley after Japan's largest lender acquired a 21 percent stake in the Wall Street firm for $9 billion in 2008.
It has been shedding staff since its start in May 2010, and said it will have lost 750 people by the end of this financial year.
Though the company did not say immediately whether heads will roll as a result of this loss, Yoshimatsu said any such decisions would be communicated when it reports earnings on April 28. It will however drastically cut back on proprietary trading in fixed income markets, executives said.
They also said that since its inception in May last year, the venture would have cut its headcount by 750 in the financial year started in April, including some who have already accepted early retirement. The venture had about 7,000 employees at the time of the start.
Yoshimatsu said the company will improve its risk management skills by "learning from Morgan Stanley."
Another venture, Morgan Stanley MUFG Securities (MSMS), is made up of Morgan Stanley's sales, trading and capital markets divisions.
MUFG has 60 percent of economic interest and Morgan Stanley has 40 percent in MSMS. ($1 = 82.465 Japanese Yen)
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