Investors have approved a year-long extension of a $4.7 billion property megafund from Morgan Stanley, a company spokesman told Reuters on Friday.

The spokesman said the investment bank's property asset-management arm had agreed to a "trimming of fees" in the fund, known as Morgan Stanley Real Estate Fund VII Global.

Morgan Stanley Real Estate Investing had also agreed to reduce the fund's size by $700 million, the spokesman said, adding that since the fund had not yet drawn down all the cash from investors, it had agreed to a reduction in commitments rather than returning cash.

The fund's life was due to end this June, but only 40 percent or about $1.9 billion of the money had been put to work. The fund will now have until June 2013 to invest the rest of what is now $4 billion in committed capital.

Morgan Stanley's property team has said they feel the time is right to strike deals in depressed property markets globally.

The team has sent a letter confirming the extension to investors, who had to vote to approve it. Government of Singapore Investment Corp Pte Ltd has a stake in the fund, along with China Investment Corp, General Motors Co and Canada Pension Plan Investment Board.

MSREF VII is now less than half the size of its predecessor, MSREF VI, which raised $8.8 billion in 2007. Fundraising for the seventh fund came amid media reports that MSREF VI was facing a loss of as much as $5.4 billion.

One investor told Reuters in Hong Kong that he had lost $20 million out of $25 million invested in the sixth fund.

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