Private equity property funds run by Blackstone and Morgan Stanley have agreed to pay A$640 million ($621 million) to acquire a A$1.9 billion portfolio of distressed property loans in Australia from a unit of Lloyds Banking Group, two sources with knowledge of the transaction said.

The deal is the latest in a series of portfolio sales of loans extended before the global financial crisis that then went bad when property prices plunged. Morgan Stanley and Blackstone, two of the largest property funds, are among a group of global real estate investors looking to pick up loans on the cheap as sellers seek to shed debt and store cash.

The Blackstone-Morgan Stanley consortium outbid several high-profile rivals, one of the sources said on Friday, including Australian investment bank the Macquarie Group , another investor team made up of Goldman Sachs, Brookfield and Singapore sovereign wealth fund GIC, and the hedge funds Pacific Alliance and Elliot Associates.

The Blackstone Real Estate Property Fund VII and the Morgan Stanley Real Estate Fund VII, backed by financing from Deutsche Bank, are acquiring the distressed debt at around 34 cents on the dollar.

Lloyds put the Australian portfolio on the block in March, looking to wind down its non-core assets. It had inherited the assets when it bought HBOS in 2008, including the Bank of Scotland and its international unit, BOS International.

The sale of this portfolio follows Lloyds's move to offload A$1.7 billion in distressed property loans to Morgan Stanley and Goldman Sachs in November last year.

Nearly all the loans are in default, one of the sources said, explaining the deep discount on the purchase. The bulk of the debt is on property in New South Wales, Victoria and Queensland, including residential property, offices, retails, hotels, a marina, and a retirement village.

The deal is being signed on Friday, the source said. Morgan Stanley and Blackstone were not immediately available for comment.