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Peggy Sito

Morgan Stanley was continuing to expand in Shanghai's property market with plans to jointly develop a commercial project with a value estimated at billions of yuan in the Luwan district, sources said.

The United States investment bank was in talks with Shanghai-based Yongye  Enterprise, which is already a strategic partner in other Shanghai developments, to build a project covering more than 100,000 square metres for office and retail use on Xujiahui Road, the sources said.

If the deal is finalised, it will be the first time that the bank  has bought land to develop a mainland project.

A Morgan Stanley spokesperson declined to comment yesterday.

The two parties recently joined forces to acquire the site, covering 24,000 square metres, for 1.3 billion yuan, mainland newspaper Oriental Morning Post reported yesterday, citing unnamed sources.

In 2003, Morgan Stanley invested in Yongye's Jinlin Tiandi serviced apartment project, near Xintiandi, Shanghai. It also bought a stake in the Yong Ye  Apartment project in the city in 2005.

'As many foreign funds are rushing to buy projects in Shanghai, it is not easy for them to find good opportunities for investment property,' said Lee Wee-liat, head of the research department at Jones Lang LaSalle.

That might be a reason urging Morgan Stanley to consider developing projects, Mr Lee said.

Since its first investment in Shanghai in 2003, the bank has been one of the largest international property investors in the city. Early this year it bought a 30-storey block in Novel City, a seven-tower residential project in Xuhui district.

Foreign companies have been showing growing interest in Shanghai's property sector even after the central government introduced austerity measures  to regulate the market in the middle of last year, according to property consultant CB Richard Ellis.

Singapore-based developer Ascendas has entered into an agreement with Sing-Mas Investment to acquire Ocean Towers, a 25-storey office building near People's Park, while a German fund bought Platinum Tower, near Xintiandi, from Macquarie Global Property Advisors, CB Richard Ellis said.

In the residential sector, US-based Carlyle Group bought 110 units in the Zhongfang Forest Villas in Minhang district for US$102.6 million, the consultant said.

Real estate push

US bank in talks with Yongye to build project in Luwan district

24,000 square metre site acquired for 1.3 billion yuan

Project will cover 100,000 square metres for office and retail use



Morgan Stanley eyes commercial project for Shanghai site