SHANGHAI—A luxury apartment building that is one of the most visible casualties of China's high-end property bust is up for auction in the northeast city of Dalian, after a bank foreclosed on the property.

    The 48-floor Park Central was owned by a fund run by J.P. Morgan Asset Management, which invested $80 million in the property. But the asset manager lost the property when U.K.-based lender Standard Chartered PLC, which provided the majority of a roughly $140 million loan, foreclosed over the summer after sluggish sales put it in violation of loan covenants, according to people with knowledge of the matter.

    The loss, which came after China tightened rules on buying luxury apartments, shows how exposed some European and U.S. investors are to Chinese real estate. Several potential investors have been offered the property, but no deal has been reached, the people said.

    Standard Chartered and J.P. Morgan Asset Management, a unit of J.P. Morgan Chase & Co., declined to comment.

    China recently has shown signs of revival in its property market, yet problems remain evident. Property developers such as Greentown China Holdings Ltd.and SPG Land Holdings Ltd.that had focused on high-end homes, have been offloading some of their assets to other developers as cash flow tightened due to government moves to cool the property market. In June, debt- laden Greentown China raised $657 million by selling stock and issuing convertible bonds to shareholder Wharf (Holdings) Ltd.

    The government moved in 2010 to slow construction of luxury housing— through credit curbs, limits on buying multiple properties and higher down-payment requirements—and sought to push developers toward building for first-time buyers and those upgrading to bigger homes.

    Like upwardly mobile Chinese, foreign investors have preferred luxury properties in China due to the higher margins they can fetch compared with the mass-market, cookie-cutter apartments.

    But skeptics warn that it will take years for the market to absorb an oversupply of fancy apartments and villas, many left empty by their investor buyers, and "ghost cities" of unoccupied blocks.

    "Around three to four years ago you could already see that the government was clamping down on the luxury sector, but some thought that the government was going to leave the top-tier residential sector untouched since it had nothing to do with the mass market. That was misguided," said one person with knowledge of the matter.

    The overall level of foreclosure activity in China is unclear. There is little information in the country regarding the volume of distressed real-estate assets.

    But high-end residential projects such as Park Central, one of the top buildings in seaside Dalian, have been among the hardest hit since China launched its property tightening campaign.

    J.P. Morgan Asset Management took over Park Central during its construction even as the market was showing signs of froth. The company had started a $600 million Greater China property fund in 2008 and has invested in projects across the country, including in Beijing, Shanghai and Nanjing. Its projects elsewhere in China don't appear to be in distress, the people said.

    The units in Park Central haven't sold well since they went on the market in September 2011. In addition to the government tightening measures, the sales weakness was partly because the units were too big and costly, according to the people with knowledge of the matter and real-estate agents in the city.

    "Although it's in a great location, the units were too large and it's difficult to split them into smaller units," said one of the people.

    Standard Chartered and Bank of East Asia Ltd.extended a loan of approximately $140 million to J.P. Morgan Asset Management for the project, one of the people said. Standard Chartered foreclosed on the property after J.P. Morgan breached some loan covenants due to poor sales. Deloitte & Touche Inc. has been appointed as the receiver of the project, the same person said. Bank of East Asia and Deloitte declined to comment.

    CBRE Group,the broker hired to market Park Central, is working with Standard Chartered to seek potential buyers, the people said.

    The project offers 270 one- to four-bedroom units that are between 110 and 519 square meters each.

    According to local property agency websites, at the time of its launch, the project carried asking prices of around 35,000 yuan ($5,595) per square meter. Calls to the project's sales office went unanswered and brokers in the city said there have been no signs of sales activity in the project for a number of months now.

    Other housing projects nearby have selling prices of around 19,000 yuan per square meter.

    A few private-equity players have submitted nonbinding bids for the distressed asset, and some of the bids have exceeded one billion yuan, one of the people said, without giving details.