Morgan Stanley invests in Agile's Hainan project

The property arm of the US investment bank pays $770 million for a 30% stake in a resort development project in an upcoming tourism area in China.
Hong Kong-listed property developer Agile Property Holdings has sold a significant minority interest in its Hainan development project to a Morgan Stanley investment vehicle for Rmb5.28 billion ($770 million).

Morgan Stanley will make the investment by picking up a 30% stake in Crown Golden, a company created by Agile in February 2007 to develop the Hainan project, Agile said in a statement filed late on Thursday.

The project, a resort development in Lingshui in Hainan, near Sanya, will have a total floor area of 9.86 million square metres and will be developed in two phases. Morgan Stanley is investing in the first phase. The US investment bank has also negotiated a first right of refusal to participate in the second phase.

Lingshui is one of four tourism development areas in Hainan identified by China as a focus during the current plan period.

The price was agreed based on arms length negotiations between the parties, Agile said.

Agile is a property developer with a focus on residential properties in China. The target audience for its housing developments is middle- and upper-class buyers. Agile also develops commercial properties and hotels, and offers property management services.

MoodyÆs Investors Service on July 4 confirmed its Ba3 rating and stable outlook on AgileÆs bonds, commenting: "The sales proceeds will provide Agile with part of its funding needs and somewhat offset the cash flow impact of a slowdown in property sales."

Agile listed in December 2005, in an initial public offering led by Morgan Stanley. At the time, AgileÆs developments were focused on Guangzhou and the company benefited from huge brand awareness in Hong Kong where it was a large advertiser in the Chinese language media in its efforts to target Hong Kong property buyers. A combination of a healthy landbank and a reputation for high-quality developments saw the retail portion of its IPO oversubscribed 240 times and the institutional tranche 22 times.

The news of the Morgan Stanley deal, and the fact that Agile estimates it will result in a profit of Rmb4.2 billion, provided a fillip to AgileÆs share price, which has been battered by the prevailing negative sentiment for equities, and in particular Chinese property stocks. Agile gained more than 16% on Friday to close at HK$7.22 (93 US cents).
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