UPDATE 1-Morgan Stanley to sell two China high-end properties

(Adds quotes, details and background)

By George Chen

SHANGHAI, June 13 (Reuters) - A property investment arm of Morgan Stanley (MS.N) plans to sell at least two high-end serviced apartment projects in Shanghai, which are wholly owned by the Wall Street bank, for several billion yuan, people familiar with the situation said on Friday.

Morgan Stanley Real Estate Fund has been approached by several potential buyers from Hong Kong and mainland China on the planned sales of Lanson Place in Shanghai's landmark Xintiandi bar and restaurant area and Chateau Pinnacle in the former French concession.

Local property brokers estimate the value of Lanson Place at no less than 1 billion yuan ($145 million) at present market prices, and Morgan Stanley purchased Chateau Pinnacle for about 800 million yuan in 2006, according to local media reports.

The bank aims to complete the two deals within this year, the sources told Reuters on condition of anonymity.

An official at Lanson Place's leasing office confirmed that the serviced apartment complex, one of the city's most expensive, may have a new owner but there would be no impact on its tenants.

Morgan Stanley is also reviewing other residential and commercial properties in China and may sell other similar projects in the near future, the sources said.

"These are very mature projects that Morgan Stanley has invested in and maintained for several years," said one of the sources.

"Since the (Morgan Stanley) fund is an opportunity fund, it will always seek better opportunities for higher returns for its investors," the source added.

A Morgan Stanley spokeswoman in Shanghai declined to comment.

SOME BUY, SOME SELL

Lanson Place, which Morgan Stanley bought about four years ago, is one of the bank's earliest property investments in Shanghai, China's financial hub.

Rent for a two bedroom unit at Lanson Place is roughly 50,000 yuan ($7,239) per month and most tenants are expatriate executives or business travellers.

Morgan Stanley came to Shanghai for property investments as early as 2003 and it had some joint real estate projects with local partners such as Forte (2337.HK) and Shanghai Dragon, an investment arm of the city government.

Global investors including Morgan Stanley and its rival Goldman Sachs (GS.N) see China as a top pick in Asia's property market after Japan, because the potential for profit more than compensates for the risk from regulatory uncertainties.

On Thursday, U.S. private equity firm Blackstone Group LP (BX.N), announced that it had agreed to pay 1.1 billion yuan for a high-end commercial building in downtown Shanghai, making it the first foray into China's hot property market.

Some industry watchers, including Andy Xie, formerly Morgan Stanley's Asia economist, have warned that market bubbles may be emerging in some first-tier Chinese cities such as Shanghai, where the price for a downtown apartment can exceed $20 million.

Morgan Stanley is selling some properties while buying others, which may be a natural adjustment of its China portfolio, said Steve Mooney, an executive director of Investment Properties at CB Richard Ellis in Shanghai.

"We're talking about billions of that money looking to come to this market. Many major players haven't got properties here yet, and they need to boost their exposure to Asia, especially China, to balance their portfolio," he added. (Additional reporting by Samuel Shen; Editing by Ken Wills) ($1=6.907 Yuan)