Morgan StanleyHomeowners aren't the only ones seeing plummeting property values. A Morgan Stanley (MS) real estate fund is taking a big hit too -- to the tune of $5.4 billion, according to a Wall Street Journal report.

Investors may hear more on this issue when the company reports its first-quarter results on Apr. 21. The investment bank is expected to earn 58 cents a share.

The Morgan Stanley Real Estate Funds business expects to lose close to two-thirds of its $8.8 billion Msref VI International fund, as investments in the Frankfurt headquarters of Europe's central bank, European InterContinental hotels and a Tokyo development project go south, according to the report.

Potential Investors Shy Away

Limited partners in several venture-capital firms across the country are seeking ways to minimize or exit their financial commitments to venture funds these days, but Morgan Stanley may not be as fortunate. The real estate fund, in a number of cases, can't untangle itself from guarantees that run into the billions of dollars, according to the report.

Morgan Stanley's real estate funds business, however, mimics venture-capital firms in that past performance of a fund can greatly affect the ability to secure financial commitments for a following fund.

For example, the investment bank's effort to raise a $10 billion Msref VII Global fund was reportedly sliced in half, according to the report, as potential investors grew leery and weakening economic forces weighed in.

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