Financial scandals forcing state investors to sell London properties, says FT

by **Cals** Tue 02 Feb 2016, 12:16

Financial scandals forcing state investors to sell London properties, says FT

By The Malaysian Insider / themalaysianinsider.com | February 2, 2016 : 11:00 AM MYT

KUALA LUMPUR (Feb 2): Retirement Fund Inc (KWAP) and other state investors are cashing out of the London property market and being forced to repatriate funds home as the country grapples with financial scandals linked to 1Malaysia Development Bhd (1MDB), the Financial Times (FT) reported today.

The sale of KWAP’s 18-storey office building at 88 Wood Street, for which it paid £215 million in 2013, is under way, and comes as Malaysia struggles with plunging oil prices and a battered ringgit, the financial daily says.

Last year, KWAP sold One Sheldon Square in Paddington, owned jointly with the Employees Provident Fund (EFP), for £210 million (RM1.26 billion).

EPF is also selling a Fleet Street building which it bought in 2011 for £148 million.

The FT report said the sales highlighted the health of Malaysia’s state sector, still reeling from the 1MDB scandal, and now dealing with revelations that Swiss authorities are investigating some US$4 billion (RM16.8 billion) misappropriated from Malaysian state companies.

“The London property investors are also taking the chance to bank big gains, as evidence mounts that prices for commercial buildings are coming off highs,” FT said, adding that Malaysian institutions had invested almost £2.4 billion in the city since 2011.

Richard Divall, head of cross-border capital markets at Colliers, the real estate advisers, was quoted as saying in FT: “It’s no secret that Malaysian funds are having to repatriate money. We’ve definitely seen a trend of them selling… they got into London very, very early (after the 2008 financial crisis), so they are making huge profits.”

Tabung Haji, the pilgrims’ fund, also sold an office building at 151 Buckingham Palace Road in October for about £250 million, making a 22% profit for the property it bought in 2013.

In September, at the height of the 1MDB scandal, the government announced the injection of RM20 billion into state equity investment firm ValueCap to shore up the stock market. KWAP is one of three shareholders.

EPF held nearly RM2 billion bonds in 1MDB as at March 2015 while Tabung Haji bought a parcel of land from 1MDB’s Tun Razak Exchange (TRX) project for RM188.5 million.

Last week, Bank Negara warned that Tabung Haji’s reserve levels were in negative territory and that it risked being unable to pay out dividends to its 8.8 million depositors.

On the last day of 2015, 1MDB announced the sale of its 60% stake in Bandar Malaysia to a consortium for RM7.41 billion, as part of its debt rationalisation plan.

The asset sales over the past few months to has staved off a cash flow crisis and cut its RM45 billion debt.

1MDB is the brainchild of Prime Minister Datuk Seri Najib Razak, who is himself embroiled in a controversy over a RM2.6 billion donation from Saudi royals. Last week, the attorney-general said there was “insufficient evidence” to prosecute Najib over the funds channelled into his bank accounts.