Wednesday, April 20, 2011

Morgan Stanley defaults on Tokyo Property

This is interesting & curious. I am not quite sure what to make of this news?
First, thanks to John @ Paintings Art Etc. for passing it along. It was originally posted by a blogger Sherrie Questioning All.

This is the original news story -Morgan Stanley fund fails to repay debt on Tokyo property

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, 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.

Was this due to the Fukushima catastrophe? Is this just another part of the mortgage backed securities scam? Bundling debt and selling it, that went sour? Is Morgan Stanley in some sort of major trouble? Requiring another bail-out?

Interesting and puzzling.


  1. NONE of these banks have anything except taxpayer bailout money (and the interest made on low-cost government bonds), and it's still a casino.

    In spades now.

    As they know they will be bailed out again and again.

  2. Hey Suzan!

    "NONE of these banks have anything except taxpayer bailout money"

    that much is true.

    "As they know they will be bailed out again and again."

    which is why I wondered...knowing they would be bailed out, would this be the reason they would simply walk away from this property?

  3. Everyone, who can, getting out of Tokyo!

    - Aangirfan

  4. I agree with aangirfan. It does look like everybody who can is getting out. It must be very serious for these big banks and suchlike to be walking away from Tokyo which has always been a global hub of commerce, a bit like walking away from London or New York and almost unthinkable.

    The american navy etc disappearing rapidly over the horizon wasn't exactly an encouraging look.

  5. Hey Aangirfan and John:

    good points from both of you.


    I did hear mention of the American Navy hightailing it out of Japan.

    The came to measure radiation outputs?

    Is this the story to which you are referring?

  6. Hi Penny

    I was thinking of the Us Seventh Fleet leaving on the 14th March. from Russia Today:

    US navy leaves Japan’s vicinity due to radiation

    The US Seventh Fleet says it has moved its ships and aircraft away from a quake-stricken Japanese nuclear power plant Monday after discovering low-level radioactive contamination.

    The aircraft carrier USS Ronald Reagan was about 160 kilometers off Japan when its instruments detected the radiation. However the dose of radiation was about the same as one month's normal exposure to natural background radiation in the environment, the fleet officials stated.

    But they then carried on evacuating US military personnel and ships right the way through March. A google search for american navy leaves japan brings up plenty.

    19 Mar 2011 ... First military evacuation flight leaves Japan ... YOKOTA AIR BASE, Japan — The first flight carrying U.S. military family members out of ...

    22 Mar 2011 ... U.S. Aircraft Carrier Leaves Japan Port of Yokosuka as Precautionary Step