NEW YORK CITY-Morgan Stanley Real Estate Investing said Tuesday it had acquired a loan portfolio with a $196-million balance in a partnership with Los Angeles-based Kearny Real Estate Co. Terms of the deal were not disclosed; the portfolio, bought from an offshore bank, consists of 45 assets.

In a release, MSREI says the portfolio comprises a combination of performing, sub-performing and non-performing loans. Underlying collateral includes residential condominiums, apartments, office, industrial and residential land, located primarily in California, Nevada, Washington, New Jersey and New York, according to MSREI.

John Klopp, co-CEO and co-chief investment officer with MSREI, says in a statement that his company is  “delighted” another portfolio buy with Kearny, “one of the longest-standing operating partners of MSREI.” He adds, “We believe our firms’ combined expertise in portfolio acquisitions and loan resolutions make us well-positioned to maximize the value of these assets.”

For the nation’s major bank holding companies, deals such as the Morgan Stanley/Kearny acquisition may signal an improved outlook for commercial real estate plays. A year ago, the Wall Street Journal reported that Morgan Stanley’s real estate funds, which had invested $174 billion since 1991, faced a $5.4-billion loss.

In 2009, the bank handed over the keys to a 17-million-square-foot portfolio to Barclays Capital, while last month, the Financial Times reported that the Blackstone Group and China Investment Corp. had acquired a Morgan Stanley loan portfolio backed by Japanese office assets for 35 cents on the dollar. The portfolio had a face value of $1.1 billion, according to the FT. CIC is among Morgan Stanley’s biggest stakeholders, having bought $5 billion of mandatory convertible notes in 2007. 

As a measure of the turnaround, Morgan Stanley in January of this year reported greatly improved results in its real estate operations, as part of a 2010 full-year report of $4.5 billion in net income compared to $1.3 billion for ’09. On the asset management side, consolidated real estate funds helped drive a $431-million gain in merchant banking, while the company’s institutional securities line reflected a realized gain of $313 million, due in large measure to real estate-related activities. That compared to an $864-million loss for the segment in ’09.

Another banking giant that lost billions on its real estate portfolio during the depths of the downturn, JPMorgan Chase, is gearing up for the opportunities of the current market. In January, J.P. Morgan Asset Management announced the launch of a new opportunistic real estate investment division in the US, Junius Real Estate Partners. The new division, based in New York, will manage assets separately from J.P. Morgan’s existing real estate asset management business, according to a release. Heading up the new business is John Fraser, formerly co-head of real estate at Investcorp, where he worked for 15 years.

In a release, Joe Azelby, head of J.P. Morgan Asset Management–Global Real Assets, says his company believes “the timing is right for this segment of the market, as owners, operators, banks and special servicers look to restructure or sell over-leveraged real estate assets. Institutional investors who have been focused on adding core real estate exposure will be increasingly interested in taking advantage of the investment opportunities currently unfolding.”