October 14, 2009
Morgan Stanley was one of the most aggressive investors during this last boom cycle. Their activities included the acquisition of the EOP San Francisco portfolio for some $2.5B, and the August 2007 purchase of Crescent Real Estate Equities for $6.5B (if you include the debt), and other smaller deals such as providing the debt on projects such as Moffett Towers.
Morgan Stanley has a lot of exposure to real estate, and they are preparing to take a hit on a number of deals, including the giant Crescent deal. Morgan was afforded an extension of three-months in August by Barclays on the Crescent deal while it figured out what to do, but that extension is up November 2, 2009 and Morgan Stanley is in the process of handing back the keys and writing off Crescent.
Their last 10-Q hinted at the direction they were heading in, but it seems fairly certain now that the portfolio is going.
A subsidiary of the Company has loans outstanding of approximately $2.5 billion under third party financing related to Crescent Real Estate Equities Limited Partnership (“Crescent”). These loans are non-recourse and are secured only by Crescent’s assets. Approximately $2.0 billion of the third party financing is with a single lender (the “Lender”) to whom the Company has provided credit support with respect to limited exceptions to the non-recourse provisions for the maximum amount of $125 million. Such Lender financing, which was originally scheduled to mature on August 3, 2009, has been extended until November 2, 2009. The subsidiary is currently in discussions with the Lender regarding the orderly transfer of collateral and asset operations and other related matters.
Do the math on these deals and the amount of equity that has literally gone up in smoke is absolutely staggering. The Crescent portfolio originally encompassed some 25M+ square feet, but has since shrank as Morgan did manage to offload a small portion of the portfolio after the acquisition.
Other deals Morgan completed included its acquisition of San Mateo-based Glenborough for some $1.9B, and CNL Hotels for $6.6B (these numbers are inclusive of assumed debt).
- Round Trip For 17M SF of Property as Morgan Stanley Hands Back The Keys
- Update on Morgan Stanley and Crescent Real Estate Deal
- More News About Morgan Stanley’s SF Woes
- Crescent Down, San Francisco EOP Assets To Go
- Clock Ticking For Morgan Stanley Fund V