US banks deny real estate sell-off

By Wang Ying (China Daily)
Updated: 2008-10-08 08:14

SHANGHAI: Major US financial institutions yesterday denied reports that they are planning to sell lucrative properties in Shanghai in order to maintain an adequate cash flow during the ongoing global credit crunch.

After taking a hit from the biggest financial turmoil in recent memory, Morgan Stanley has moved to put its Shanghai properties up for sale, including Jinlin Tiandi Residences, Pinnacle Century Park, and Anxin Business Plaza, according to a report in the Wall Street Journal.

In addition, local newspaper Oriental Morning Post reported that Citibank has decided to sell two apartment buildings in Minhang district, Lehman Brothers intended to market Fu Hai Tower, which was co-purchased with Hong Kong-listed Capital Strategic Investment Ltd, and Merrill Lynch is looking for buyers for its projects on Nanjing Road West.

But when contacted by China Daily, Morgan Stanley said the reports were "rumors", and refused to make further comment.

American International Group (AIG) also denied a report that it will sell the Shanghai Center, a project combining commercial, residential and hotel services. Located on Nanjing Road West, it is one of Shanghai's landmark properties.

If the sale takes place, it will be the first time in five years that Morgan Stanley has decided to sell its Shanghai property, stoking rumors that Shanghai's residential property market may see a downturn. With Morgan Stanley yet to find buyers, uncertainty reigns in the market.

However, Regina Yang, head of research at property consultant Knight Frank, said it would be a mistake to read too much into the possible sale.

For an international investment bank like Morgan Stanley, the ultimate goal of purchasing a property is to sell it, said Yang. "This rule applies to all investment banks," she said.

Jinlin Tiandi was Morgan Stanley's first official property in Shanghai. Jinlin Tiandi has two buildings - one is a 90-suite hotel, while the other has 106 serviced apartments and a business area of 5,000 sq m. The company decided to sell the serviced apartment section months ago, but no deals have been struck yet.

But Yang cast doubt on the reports. "It is not a wise decision to sell properties at this moment, which may result in a market panic," she said. "The most possible situation is that these investment banks are contacting some interested investors privately."

"Early entrants to Shanghai are currently seeking to divest their assets, but only if the right offer comes along. This is considered a normal practice as funds are approaching the end of their set length," Greg Hyland, head of investment for Jones Lang LaSalle Shanghai, said.

(China Daily 10/08/2008 page13)