Morgan Stanley unit mulls sale of Shanghai assets
Morgan Stanley Real Estate is considering selling some residential and commercial properties in Shanghai to realise the investments, but industry sources said a sale was unlikely because of the credit crunch and the wide gap between buying and asking prices.
The property arm of the United States investment bank, which has actively invested in the mainland's property sector since 2003, might sell the Shanghai Square - a commercial-retail complex at 138 Huai Hai Road Central that it bought for 846 million yuan (HK$959.96 million) in 2005.
Also on the list are some units of Chateau Pinnacle in Xingfu Road in the former French concession area of Shanghai and Century Park Serviced Apartment in Pudong district.
A source close to the fund said the investment bank had planned to sell certain mature properties in Shanghai as early as before the financial crisis started. Instead of and en bloc sale, it might sell the properties by strata title, he added. 'They are not actively selling now. They want to wait until the market stabilises.'
The investment bank had been approached by some investors including at least three international funds, but no deal had been clinched, sources said.
'There is a big gap between the asking price and the price tag offered by potential buyers,' said a banker advising an interested investor.
With falling prices and rents of high-end residential and office properties, the difference in pricing would become wider, an agent said.
A banker said tightening credit from lenders because of the financial crisis would also make it difficult for deals to happen.
Morgan Stanley was unavailable for comment yesterday.
The Morgan Stanley property unit was asking for about 50,000 yuan per square metre for its Chateau Pinnacle units, a source said. For the entire building, the asking price was about 40,000 yuan per square metre.
Industry observers said more foreign funds had started offloading assets because they were mature projects and could reap good returns.
Some said financing was another reason.
'For example, a loan arranged for Chateau Pinnacle needs to be repaid soon. Because of the deflation of the value of the property, [Morgan Stanley] will be required to top up with equities,' a source said.
That was similar to the investment by Macquarie Bank, whose property unit is offering to sell its 26-storey City Apartments in Shanghai below cost.
Sources say the Australian banking group has an asking price of 18,000 yuan per square metre, compared with the 25,000 yuan per square metre it paid for the property three years ago.
Another reason is a short-term yuan-denominated loan arranged for the property needs to be repaid soon.
Stumbling block
Tightening credit to make it difficult for deals to happen
Morgan Stanley bought Shanghai Square in 2005 for, in yuan: yuan 846m
