Morgan Stanley may reap double at Shanghai site

PUBLISHED : Thursday, 07 May, 2009, 12:00am
UPDATED : Thursday, 07 May, 2009, 12:00am

Morgan Stanley Real Estate is selling units at its luxury residential project in Shanghai for more than double what was paid three years ago as it takes advantage of a property recovery in the nation's richest city.

The property unit of the United States investment bank is offloading a 58-unit block at Chateau Pinnacle on Xingfu Road in the former French concession area to individual buyers.

More than 20 units had been sold so far at an average of about 60,000 yuan (HK$68,166) per square metre, a source said.

Another 20 units were expected to be sold in the coming weeks.

Taking advantage of improving market sentiment, Morgan Stanley is now considering selling another residential property, Shama Xujiahui, a modern complex of 219 apartments.

'The decision will be made in the next few weeks,' the source said.

Morgan Stanley was unavailable for comment yesterday.

Property consultants said the positive sales response reflected buyers' growing confidence in the market, which has seen an increase in sales and prices of residential units in the past two months.

Morgan Stanley bought two blocks in Tower A of Chateau Pinnacle for 800 million yuan in June 2006. The two blocks, comprising 116 units, have a total gross floor area of 28,760 square metres.

Morgan Stanley is selling only one block as tenants are occupying the other building, making it harder to sell, according to a source.

Assuming that all units are sold, the investment bank will reap a headline profit (excluding tax charges) of about 460 million yuan.

The property is managed by serviced apartment operator Shama, which will also help the new owners lease units with an estimated rental yield of about 4 per cent.

Clement Luk Shing, a director and assistant general manager at Centaline (China), said Chateau Pinnacle was in a traditionally upmarket area of the city and would draw more investor interest.

Mr Luk said the positive sales response reaffirmed the improving market sentiment in the city over the past two months.

Prices had risen about 10 per cent since the beginning of the year, he said.

CB Richard Ellis said in a research report that Shanghai's residential market began to pick up in February and received another boost in March.

Total transaction volumes in March rose to 1.54 million sq metres, 50 per cent greater than the period last year and almost the same level as in March 2007 when the market was still at its peak.

Transactions in the luxury residential market also enjoyed a rebound.

According to CBRE, total transaction volume of Shanghai luxury residential properties priced above 25,000 yuan per square metre in the first quarter of the year saw a year-on-year increase of 40 per cent.

With the surge in transaction activity, price reductions adopted by developers since the second half of last year began to decrease and property pricing has generally stabilised.