UPDATE 2-Morgan Stanley's China property head resigns

(Adds Morgan Stanley confirmation)

By George Chen

HONG KONG, Dec 31 (Reuters) - Morgan Stanley's (MS.N) top property dealmaker in China, Garth Peterson, has resigned, sources with direct knowledge of the matter told Reuters on Wednesday.

Peterson, a Shanghai-based managing director of Morgan Stanley Real Estate, who headed its China operations, resigned last week and his departure has been announced internally to property investment-related staff in Asia, the sources said.

A Morgan Stanley spokesman confirmed that Peterson was no longer with the bank.

Morgan Stanley Real Estate set up its Shanghai office responsible for China deals in 2006.

Peterson was promoted to become a managing director at Morgan Stanley in 2007 after he led several landmark deals of top-end residential projects in China for the real estate fund of Morgan Stanley in the past few years.

"He was a kind of rising star at the bank by winning the MD level promotion so quickly as he is also the only foreign dealmaker who can speak fluent Mandarin in Morgan Stanley's real estate team," said one source.

PROPERTIES FOR SALE

One of the sources said Peterson resigned last week after he declined a new job offer at Morgan Stanley which required him to relocate to Singapore.

Peterson's replacement for his role in charge of China's property deals for Morgan Stanley has not yet been appointed, the sources said.

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.

Morgan Stanley plans to sell at least two high-end serviced apartment projects in Shanghai, which are wholly owned by its real estate fund, for several billion yuan, Reuters reported in June. [ID:nSHA23929])

Some potential buyers including a major Chinese private equity fund were invited by Morgan Stanley to review these projects for sale in the past few months. However, so far no deal has been made due mainly to price concerns, said the sources.

House prices have dropped by more than 30 percent in some Chinese cities and industry analysts have warned of more falls as the global financial crisis deepens.

The price for a downtown apartment in some first-tier Chinese cities such as Shanghai can still exceed $20 million currently.

But some global investors including Goldman Sachs (GS.N) and Blackstone Group LP (BX.N) see China as a top pick in Asia's property market after Japan, partly due to China's urbanizations. (Additional reporting by Samuel Shen in SHANGHAI; Editing by Anshuman Daga)