Last year, former hedge fund chairman John Mack blasted hedge funds for their "outrageous, immoral, illegal" shorting of his beloved Morgan Stanley.
It may have been all of those things. It may also have had something to do with those hedge funds getting a look at Morgan's priceless real-estate portfolio.
Just a couple of weeks ago, Morgan turned over a real-estate company to its lenders and the guy it paid $6.5 billion for the properties, simply to keep its write-downs on the disaster under $1 billion. Now, it's trying to restructure mortgage-backed securities totaling more than half the value of one of its real-estate funds.
Now, MSREF V isn't worth much anymore. One of its investors, CalSTRS, said its $137 million investment was worth all of $300,000 last year. But the properties it owns are still mortgaged to the hilt, and the servicer of that mortgage has made a "determination of imminent default."
Well, Morgan Stanley's already seen one of the eight resorts it bought in 2007 go into foreclosure. It would prefer that five others, whose cash flow has fallen by almost half, not do likewise. So it has asked that kindly mortgage servicer, PNC's Midland Loan Services, to give it some "extension options."
Outrageous and immoral, indeed.
Morgan Stanley Looks to Restructure CMBS [WSJ]