Morgan Stanley Hands Off Crescent to Barclays Venture (Update1)

Nov. 20 (Bloomberg) -- Morgan Stanley agreed to hand over a real-estate business acquired in 2007 to Barclays Capital, ending the New York firm’s obligation on a $2 billion loan after taking almost $1 billion in losses.

Barclays Capital, the investment banking unit of London- based Barclays Plc, formed a joint venture with Goff Capital Inc. to acquire Crescent Real Estate Equities, the companies said today in a statement. Morgan Stanley has been in negotiations since last month with Barclays Capital over the loan, which originally was $3.3 billion.

A Morgan Stanley real-estate investment fund acquired Fort Worth, Texas-based Crescent, which owns and manages more than 17 million square feet of commercial properties, for $6.5 billion in cash and assumed debt. The 2007 purchase came as property prices peaked and the firm sold some of the assets to pay debt.

Morgan Stanley has taken about $950 million in write-downs and losses on Crescent, including $251 million last month.

John C. Goff, who led Crescent as vice chairman and chief executive officer until the 2007 sale, will return as the business’s chairman and CEO, today’s statement said. Goff co- founded the firm in the 1990s and took it public in 1994.

Goff Capital, which he founded in 1998, is a closely held real-estate investment firm with more than $5 billion under management.

“Given his extensive knowledge of the Crescent portfolio, John is well suited to manage the company,” Haejin Baek, Barclays Capital’s head of commercial real estate capital markets, said in the statement.

Offices, Resorts

When Morgan Stanley Real Estate Funding II acquired it, Crescent owned 54 office buildings in cities including Dallas, Houston, Denver, Miami and Las Vegas. It also owned the Canyon Ranch spa and resort residential developments in Scottsdale, Arizona; Vail Valley, Colorado; and Lake Tahoe, California.

“We’ve agreed to transfer Morgan Stanley Real Estate Funding II’s interest in Crescent Real Estate Equities Limited Partnership to Barclays Capital in exchange for a full release of liability on the loans,” said Alyson Barnes, a spokeswoman for Morgan Stanley in New York.

Morgan Stanley’s stock fell 21 cents to $32.10 in New York Stock Exchange composite trading. The shares have doubled since the start of this year.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net