Morgan Could Give Up Crescent Portfolio

NEW YORK (TheStreet) -- Morgan Stanley(MS) is under pressure to give up the properties of Crescent Real Estate Equities to Barclays Capital, a report says.

Barclays Capital, a unit of U.K.'s bank Barclays(BCS), provided a $2 billion loan to help Morgan buy Crescent in 2007 for $6.5 billion. The debt is due on Nov. 2, the Wall Street Journal reports.

Morgan has taken about $700 million in writedowns and other losses from Crescent, an owner of office buildings, resorts and housing projects, according to the Journal.

Morgan likely will give up the Crescent properties to Barclays as commercial-property values continue to tumble, the Journal reports, citing people familiar with the matter.

Morgan, however, also is considering other options such as putting in more capital to keep the investment afloat, the newspaper said. Negotiations with Barclays could extend beyond the Nov. 2 deadline.

Morgan's remaining equity in the deal is about $300 million. The firm, as of the end of the second quarter, carried the Crescent properties on its books with a value of $2.8 billion and debt of $2.5 billion, according to a research report from Citigroup. That remaining equity would be wiped out if it hands over Crescent to Barclays, the Journal notes.

Morgan Stanley reports third-quarter earnings before trading begins on Wednesday.

-- Reported by Joseph Woelfel in New York .

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