Lenders could take ownership stakes in some of Dallas' top buildings

Ownership stakes in some of the Dallas area's biggest office projects could be handed over to lenders.

Wall Street firm Morgan Stanley – which paid $6.5 billion to buy Fort Worth-based Crescent Real Estate Equities two years ago – is scrambling to meet $2 billion in debt requirements due next month.

One option being considered is to turn over a share of the properties – including several of Dallas' most prominent buildings – to lender Barclays Capital, The Wall Street Journal reported Wednesday.

Morgan Stanley's purchase included stakes in Dallas' Crescent complex in Uptown and downtown's Fountain Place and Trammell Crow Center. Suburban office buildings were also in the deal.

Morgan Stanley doesn't own all of the properties.

In 2004, Crescent sold a 60 percent stake in the Crescent complex to a JPMorgan Chase & Co. subsidiary. JPMorgan Chase bought a 76 percent share of the Trammell Crow Center and Fountain Place.

Morgan Stanley representatives wouldn't talk about the Crescent debt issues Wednesday. "There's lot of speculation going on, and obviously there's no comment," said spokeswoman Alison Barnes.

Crescent representatives didn't respond to requests for information.

The original purchase from Crescent included more than 50 office buildings nationwide.

Morgan Stanley has already written down hundreds of millions of dollars in value on the Crescent properties.

Barclay's $2 billion loan on the real estate is due Nov. 2. The debt was originally due in August but was extended.

Commercial real estate values have plummeted since Morgan Stanley made the Crescent buy in August 2007. And lenders have all but closed the window on making additional loans for commercial properties.

Morgan Stanley reported Wednesday that it has taken a further $251 million write-down of the Crescent properties for the quarter that ended Sept. 30.

Another high-profile Dallas real estate deal wound up in the hands of lenders last summer.

In July, developer Hillwood handed over its ownership share of buildings in Victory Park to a German investment group that had provided funding for the developments.

"It is apparent that any purchase with high leverage conducted in the past four years is likely upside down on value relative to the in-place debt," said John Alvarado, managing director in Jones Lang LaSalle's Capital Markets Group. "This phenomenon is not unique to the Dallas market; it is happening everywhere.

"It is also not a reflection of weaker real estate fundamentals as much as a liquidity shortfall in the debt markets and a higher risk premium desired by capital sources today as compared to two years ago," Alvarado said.

"The Crescent properties do hold a unique position in the market – particularly the Crescent and Trammell Crow Center – and should retain more of their original values than almost any other properties in the market."