News reports on April 14 that Morgan Stanley expected to lose $5.4 billion, or 61%, of its $8.8 billion Real Estate Fund VI International were soon overshadowed by the SEC’s announcement of charges against Goldman Sachs and one of its vice presidents. Still, the reported loss was staggering: likely the second largest in the history of private equity real estate investing, according to The Wall Street Journal.

At the time Morgan raised the fund, toward the end of the property surge, it was the largest private fund focused on high-return real estate investments, according to Bloomberg. The vintage 2007 fund has investments in the U.S., Asia and Europe.

Morgan recently informed investors that it expected the fund to recover only $3.4 billion of its investments, Bloomberg reported. In 2009, the firm defaulted on a $2 billion loan to buy Crescent Real Estate Equities Co., and turned over 17 million square feet of office buildings to Barclays Capital, the lender. Last year as well, it relinquished five office buildings in San Francisco to its lender.

Soured investments around the world plague the fund. In several cases, according to The Wall Street Journal, Morgan is stuck with investments because of guarantees made by the fund. It is negotiating with lenders to reduce the fund’s obligations on its borrowings, interest payments, renovation costs and other expenses.

In the meantime, Morgan has tried with only middling success to raise a $10 billion follow-on fund, the The Wall Street Journal said.

Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.