(NEW YORK, NY) -- This is a momentous day for Morgan Stanley, one of the most active real estate fund managers in the U.S.
Matthew Anderson
If the company walks from the investment, it could lose its remaining $300 million equity in the deal, according to The Wall Street Journal and Matthew Anderson, a partner at Oakland, CA-based Foresight Analytics.
Morgan Stanley bought the properties in August 2007 from Texas billionaire Richard Rainwater's Crescent Real Estate Equities for $6.5 billion. Barclays provided a two-year, $2 billion loan to help finance the deal.
The loan was scheduled to be paid off Aug. 3, 2008 but Barclays agreed to a three-month extension, according to the WSJ.
Morgan Stanley has been selling off various Crescent properties to reduce its debt to Barclays. The firm already has taken about $700 million in write-downs and other losses from the deal.
The WSJ reports that as of June 30, 2009, Morgan Stanely carried the Crescent properties on its books with a value of $2.8 billion and debt of $2.5 billion.
The WSJ says those numbers came from a research report by analysts at Citigroup Inc. after Citi analysts had meet in July of this year with Morgan Stanley chief finance officer Colm Kelleher.
The WSJ notes Moran Stanley originally planned to put the properties in one of the real estate funds it manages for institutions and wealthy individuals.
"But fund investors balked at buying the buildings at top-of-the-market prices," the WSJ states. That forced Morgan Stanley to keep the properties on its own balance sheet.
Morgan Stanley shareholders are expected to get a more detailed picture of the firm's Crescent position Wednesday. That's when Morgan Stanley formally reports third-quarter earnings.
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