Morgan Stanley exits dormitory business

Business Times

Jul 23, 2010

 

Morgan Stanley is putting its portfolio of four majority-owned dormitories, which can house over 20,000 workers, up for sale.

An expression of interest (EOI) is believed to have closed for the portfolio earlier in July, receiving six bids at prices ranging between $375 million and $450 million. Among the bidders include a Singapore party, a Chinese party, a couple of funds, and a group with Middle Eastern support.

The four dormitories, which are being handled by Jones Lang LaSalle (JLL), have a total gross floor area of around 1.6 million sq ft, giving its new owner the biggest share in Singapore’s foreign worker dormitory market. Morgan Stanley Real Estate Fund VI currently has a majority share in them.

The company decided to leave the business as the portfolio could not be spun off into a dormitory real estate investment trust (REIT), according to industry watchers, adding that part of the problem was a shortage of sites intended for dormitory development released by authorities in the last few years.

Morgan Stanley appointed JLL to manage the sale of the properties due to approaches by interested buyers.

The company will leave with substantial profits from the investment. Avery Strategic Investments, its 97-percent owned subsidiary, ploughed around $260 to $270 million into the four properties. The company’s remaining three percent is owned by Averic Capital Management, which also serves as the asset manager.

One of the four assets is Avery Lodge, an 'upmarket' dormitory located on Jalan Papan in Jurong, which features bay windows, a canteen, gym, clinic, minimart and generous floor-to-ceiling heights and space for every worker, and can house approximately 8,000 workers. The other three properties are Tampines Dormitory, Woodlands Dormitory, and Kian Teck Dormitory located in Jurong.

Selection of the buyer is likely to be held by end-August.