New York State Common Retirement Fund, Albany, reneged on a $300 million commitment to Morgan Stanley's real estate investing group after the business reported losses and managers left, two people with knowledge of the matter said.
The $124.8 billion fund is still extricating itself after telling the bank last year that it wanted to back out of a 2008 commitment to the $4.7 billion Morgan Stanley Real Estate Fund VII, part of a group that manages $43.6 billion, according to the people, who asked not to be named because the decision wasn't made public.
The pension plan wrote down an undisclosed amount of cash it had already contributed to Fund VII to about zero, one of the people said. Sonny Kalsi, Morgan Stanley's former head of real estate, left in 2009, and Morgan Stanley has changed the leadership three times in the past two years.
Morgan Stanley's real estate group told investors it expects to lose $5.4 billion of an earlier $8.8 billion international fund, called Fund VI, a person familiar with the matter said in April. Performance figures for Fund VII couldn't be obtained.
The New York plan committed $500 million to international Fund VI in 2007, according to a report on the plan's website. The pension plan, overseen by State Comptroller Thomas DiNapoli, began negotiating an exit from Fund VII last year, according to the people, and is in the process of completing an agreement with Morgan Stanley.
Morgan Stanley had planned to raise about $10 billion for Fund VII, according to minutes from a June 2008 meeting of the $1.6 billion Contra Costa County Employees' Retirement Association, Concord, Calif. It fell short of its target by more than half, saying it raised a total of $4.7 billion earlier this year. In September, the bank named John Klopp and Olivier de Poulpiquet as co-CEOs of its real estate investing business, replacing Owen Thomas, who remained chairman of the group.