NEW YORK (CNNMoney.com) -- Morgan Stanley has told investors that its real estate fund may suffer a $5.4 billion loss on bad bets in the commercial property market, according to a report published Wednesday.
The loss would be the largest in the history of private-equity real-estate investing, according to the Wall Street Journal, which cited fund documents.
The newspaper said the $8.8 billion fund, known as Morgan Stanley Real Estate Funds, or Msref, had been one of the biggest buyers of property around the world over the last two decades.
The fund had done about $174 billion in deals since 1991, the Journal said, mostly with money raised from pension funds, college endowments and foreign investors.
The losses stem from soured investments in properties such as the European Central Bank's Frankfurt headquarters, a big development project in Tokyo and InterContinental hotels across Europe, according to the report.
Morgan Stanley is working to renegotiate its ties to the money-losing investments, but the bank is unable to walk away from many of the deals, the report said.
The bank has sought to launch a new, $10 billion fund, Msref VII Global, according to the report. But the weak economy and losses in the real estate market have made it difficult to attract investors.
The report said a Morgan Stanley spokeswoman declined to comment about the losses, but stressed that the bank has a long-term approach to the real estate market. 
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