LEHMAN Brothers Holdings Inc's real estate assets may offer attractive returns, said John Kessler, who helps oversee more than US$50 billion in global real estate at Morgan Stanley.

"I think there are potentially some interesting opportunities to invest there," Kessler, chief operating officer of Morgan Stanley Real Estate Investing, said at a conference last week in Wisconsin, sponsored by the Wisconsin Real Estate Alumni Association Inc. "They have a big portfolio comprising commercial and residential debt and equity," Bloomberg News reported.

Lehman's assets are being sold as commercial real estate prices are falling and office vacancy rates are rising worldwide as financial institutions cut jobs. Commercial real estate has already slid about 10 to 15 percent from its peak, and could fall as much again, Kessler said.

Because few transactions have taken place, he said it was hard to quantify the decline.

"I think maybe we're halfway there in terms of the move," Kessler said. "When will it stabilize? It all goes back to the credit markets and the availability of debt. Values are not going to stabilize until the debt markets do and I don't think the markets are going to stabilize until the housing market does. I don't think it's this year hopefully, it's next year."

Lehman had tried to sell parts of its commercial mortgages and related assets to private equity firms and real estate companies before it filed for bankruptcy protection last Monday. After its sales efforts foundered, the firm proposed spinning off as much as US$30 billion of commercial real estate assets to shareholders in the first quarter.