London hot-bed for investors

PETALING JAYA: Malaysian funds and private sector have invested
close to £3bil in prime central London since September 2009, according
to sources.
The latest three purchases are said to be by
Malaysian public services sector Kumpulan Wang Persaraan (KWAP) and
pilgrims fund Lembaga Tabung Haji. Sources said this would be the first
foray into London for both of them.
If negotiations are
successful, KWAP's recent outing will result in its first two London
assets. It bought two Australian properties in the last two years.

[You must be registered and logged in to see this image.] Prime
property: 5 Aldermanbury Square, the building that KWAP is in advanced
stages of negotiations to buy, should provide an annual yield of 5.3%. KWAP's
interest is in 5 Aldermanbury Square, which was put on sale in July,
and 10 Gresham Street, both prime central London office buildings. The
two London properties were targeted within the span of a week.
A KWAP source said the negotiations were still pending.
Sources
in London said last week that KWAP was in advanced stages of
negotiations to buy 5 Aldermanbury Square from Teachers Insurance and
Annuity Association of America (TIAA) and Scottish Widows Investment
Partnership (SWIP) for £225mil, which would provide it with an annual
yield of 5.3%.
Aldermanbury Square comprises several office
buildings and No 5 is one of them. This block of asset is within
walking distance of The Museum of London and St Paul's Cathederal and
is accessible via three underground stations Banks, Moorgate and St
Paul. The main tenant for this building is international property
consultancy BNP Paribas
Real Estate which occupies 60% of the 270,000 sq ft building and it has
a lease of between 12 and 15 years. It moved into that building in
2010. RREEF is acting on behalf of KWAP while Jones Lang LaSalle is
acting for the sellers.
KWAP was also buying 10 Gresham Street, another office building, from Canadian Pension Plan Investment Board and Hammerson plc for £200mil, which would reflect a yield of 5.2% annually, the sources said. CBRE is acting on behalf of the vendors.
Tabung
Haji is considering Queen Steet Place, also in London, for £155mil from
Jaguar Capital which, if successful, will generate an annual yield of
5.5%. The purchase will be via syariah-compliant bank Gatehouse Bank and Savills. The 221,200 sq ft block is tenanted to international law firm SJ Berwin. The lease expires in December 2025.
The
recent interest by KWAP and Tabung Haji has send property consultancies
there aflutter as to the financial muscle of Malaysian pensions and
retirement funds.
Separately, in an interview, BNP Paribas Real
Estate chief executive office John Slade said: “We have been seeing a
lot of Middle Eastern investors (buying into London properties) but the
Far Eastern investors are the largest and the Middle Eastern investors
are not far behind.
“If the euro were to collapse, it will have
an effect on the London property market. London will be as attractive,
probably more so because whatever recession issues (we have) do pale in
comparison. But, having said that, European politicians will not allow
the euro to collapse. They will stumble through and (issues with)
Portugal and Spain would have been factored into.”
Slade said if the eurozone were to stabilise, Far Eastern Asian funds might go into Europe.
“You will get better yields but that is because it is very risky,” Slade said.
BNP Paribas Real Estate senior director Andrew Cruickshank
said: “The big story in current London property market are the South
Koreans and the Malaysians. The question is: what happens when London
becomes too expensive? Will these investors go to Birmingham,
Manchester?
“Asian investors prefer new build developments and
they are extremely knowledgeable and discerning on their requirements
from their investment assets.
“Long leases mean these yields can
be generated as leases cannot be broken. As rents generally only rise,
yields will further benefit.”
Cruickshank said currently London would continue to be a safe haven for foreign funds.
Savills
London office said the deteriorating situation in the eurozone the last
six months had resulted in investors flocking to buy into prime central
London properties.
Savills director Edward Lewis
said: “For the past six months, everybody have been coming into London.
The people who can afford to leave their countries are only the very
very rich. If the eurozone does fragmentise, it will not be good news
for the United Kingdom. It will be damaged but prime central London
will not be.
“The property market in prime central London is not representative of the overall UK situation.”
Savills'
director of research Mat Oakley said the commercial sector was
characterised by long leases that ccould go up for up to 15 years and
were dominated by globally-recognised businesses.
“It is such factors which make the commercial office sector so attractive to pension funds who want secured long-term income.”