Morgan Stanley Sells Shanghai Office

The real-estate investment arm of US bank Morgan Stanley (MS) recently agreed to sell its top-end office building in Shanghai to Soho China for 2.45 billion yuan or nearly $359 million.

The Exchange, a 52-storey office and retail complex also known as Dong Hai Plaza, is situated on the edge of one the main business districts in Shanghai. About 30% of the building was already rented, with the remaining portion to be sold or leased by Soho China in the coming months.

Morgan Stanley Real Estate bought The Exchange for about 2 billion yuan or $245 million in 2006 and completed construction of the building with suitable additions later. The divestment to Soho would be profitable for the company.

Morgan Stanley began investing in Shanghai properties in 2003 and undertook real-estate projects with local partners like Shanghai Forte Land and Shanghai Dragon, an investment arm of the city government. The company’s real-estate funds have a large portfolio of commercial and residential properties in Shanghai, much of it accumulated during the property boom that ended in late 2007.

Over the last decade, expansion of international companies in China has boosted office rents in big cities like Shanghai and Beijing but the global financial crisis has forced some firms to shut down offices. Though long-term prospects for the office-leasing market in Shanghai look attractive, there are more immediate challenges related to the global economy.

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