Morgan Stanley has been getting nibbles from multiple U.S. private equity firms looking to take on a stake in the bank’s beleaguered real estate funds management business, sources told the Financial Times. Among those who are interested: KKR and TPG, both of which currently have little in the way of property operations, and Colony Capital, which yesterday handed over its stalled, $2 billion Xanadu complex in New Jersey’s the Meadowlands to creditors. Despite the number of suitors lining up for a share, each has proposed only a relatively small investment in the $8.8 billion fund, which is not expected to return much in the way of fees or profits, the paper reported. Morgan Stanley, which may need to cut its stakes in real estate investments anyway in order to comply with the Volcker rule, said it has not made any decisions so far. [Financial Times via CNBC]

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A massive U.S. commercial real estate crash is in its beginning stages, billionaire Wilbur Ross said today. The WL Ross & Co. CEO, who is also working on a government program to rid banks of their toxic assets, said he is practicing extreme caution on the commercial real estate investments front, especially with regard to office spaces, which are rapidly shedding tenants. Though the Public-Private Investment Program has made $1.5 billion in pooled government and private funds available to his company for purchasing banks’ distressed assets, Ross said he had used less than $100 million of those funds by Oct. 15, and that the money he spent went toward residential mortgage-backed securities rather than commercial properties. Earlier this month, WL Ross, along with several other firms led by Starwood Capital Group and TPG, agreed to buy $4.5 billion in real estate from the seized Corus Bankshares, after the bank’s investments in construction loans for condominiums went sour. [Bloomberg]