Morgan Stanley Real Estate, one of San Francisco’s largest office landlords, plans to give back to its lender five downtown office buildings acquired in 2007 at the apex of the boom.

The properties were part of Morgan Stanley’s $2.43 billion portfolio purchase from the Blackstone Group, the largest real estate transaction in San Francisco history.

The properties will be given to the property arm of New York private equity firm Apollo Global Management in a consensual transfer, a complex transaction that has been nearly a year in the making.

In a statement this week, Morgan Stanley said the company is in “ongoing discussions with its lenders regarding the orderly transfer of five of the office properties acquired in May 2007 from Blackstone.” Morgan Stanley is current on the loan and has never been in default.

The properties, totaling 1.2 million square feet, are One Post St., 201 California St., Foundry Square 1, 60 Spear St. and 188 Embarcadero. All five are part of a $1.75 billion opportunistic fund, MSREF V US.

Morgan Stanley will continue to own One Market Plaza, One Maritime Plaza, 150 California St., 75 Howard St., Hills Plaza and 33 New Montgomery St., which are part of a separate core fund, according to the company.

“While we remain committed to the San Francisco property market, the Fund is currently taking the appropriate action to fulfill its fiduciary obligations to its investors,” stated Morgan Stanley.

All the properties were part of Sam Zell’s national Equity Office Propertiesportfolio that Blackstone snapped up in 2007 for $39 billion. The majority of the San Francisco EOP properties, some 3.9 million square feet, were almost immediately sold off to Morgan Stanley for $2.43 billion. Based on recent sales figures, many of the buildings are now worth approximately half that price.

Apollo’s Area Property Partners, which owns the junior mezzanine debt on the portfolio, will assume control of the buildings.

The transaction is the latest in the shake-out of a global commercial real estate crash that has driven institutional owners to hand marquee towers back to lenders after rents dove and property values plummeted 40 to 50 percent. Last week Brookfield Properties foreclosed on 333 Bush St., a 543,000-square-foot San Francisco property (see story, Page 1). In another distressed transaction, Lincoln Property Co. handed 250 Montgomery St. over to its lender in lieu of foreclosure, and the property was then sold for 57 percent less than it had sold for in 2006.

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