The Daily Mail says Tottenham are demanding young Real striker Morata as part of the package and are refusing to compromise.
He has been compared to former Real great Fernando Morientes and it will be a huge blow to Carlo Ancelotti's long-term plans if he is included in the package.
The Spain Under 21 striker, 20, has come through the Real youth ranks and is destined to be a first-team player.
Tottenham's technical director Franco Baldini - who worked at Real in a similar capacity until his dismissal with Fabio Capello in 2007 - has a working knowledge of the player.
Baldini wanted to sign the forward when he returned to Roma as technical director, but Real refused to release him.