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Morgan Stanley to Acquire Crescent Real Estate for $2.34 Billion

Real estate investment trust Crescent Real Estate Equities said it will be bought by another real estate investment firm, Morgan Stanley Real Estate, for about $2.34 billion.

Morgan Stanley will buy the company for $22.80 a share, according to Crescent , which has about 102.8 million shares outstanding.

The deal includes the assumption and refinancing of about $3.1 billion of the company's outstanding and unconsolidated debt and redemption of some $440 million in preferred shares. In addition, as part of the definitive agreement with Morgan Stanley, Crescent will not pay any further dividends on its common shares.

Crescent said the purchase price is a 12% premium over its prior 30-day average closing share price. The price is also a 6% premium to Tuesday's closing price of $21.62.

In 2006, Crescent's profit plunged by two-thirds, to $33.4 million, on revenue of $929 million, and it rejected a buyout offer from a Dubai investment firm.

Crescent lost $15 million in the first three months of this year.

The company has been selling properties as part of a restructuring announced March 1, which was designed to focus the company purely on its core office properties.

"The primary goal of the strategic plan we announced on March 1, 2007 was to maximize value for our shareholders," said John C. Goff, vice chairman and chief executive. "This transaction accelerates the realization of that goal by delivering value to our shareholders more quickly and with greater certainty."

Crescent owns or holds a stake in about 70 office buildings, mostly in Dallas and Houston. It also had invested in hotels and resort residential projects in the Southwest, including Vail, Colo., Scottsdale, Ariz., and Lake Tahoe, Calif.

The company has a contract to sell its hotels and an office building in Austin for $620 million, and an agreement to sell another Austin building for an unspecified price. It sold the Exchange Building in Seattle for $81 million.

Crescent planned to sell the residential developments, but now expects to transfer them to the Morgan Stanley real estate arm, a spokesman said.

Chairman Richard Rainwater owns 14.5% of Crescent's common shares, and Chief Executive John C. Goff owns 4.6%, according to a regulatory filing this month. Combined, insiders control 21.2% of the Crescent's shares.

Rainwater helped enlarge the Bass family fortune as chief financial adviser to the Fort Worth clan from 1970 to 1986, then created his own investment firm and Crescent. Forbes magazine recently estimated Rainwater's net worth at $2.5 billion.

Crescent officials declined interviews. A spokesman for the company, Jeremy C. Sweek, declined to say whether the deal would let Crescent shop for better offers, which is a common clause in buyout deals.

Sweek said some of those details would be disclosed when the company files a copy of the merger agreement with regulators in the next few days.

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