EPF confirms buying London office block for RM740m

Another investment: D2 Private sold the office block in St James’s Square to the EFP for £150mil.

(The Star) – The Employees’ Provident Fund (EPF) has confirmed that it has purchased an office block in St James’s Square, London, where one of the tenants has one of London’s highest rents.

The EPF told StarBizWeek that it bought 12 St James’s Square for 150mil (about RM740mil) from D2 Private, the leading Dublin-based Irish property investment company. The deal was completed on Aug 11.

This marks the EPF’s fourth property investment in London since announcing an allocation of 1bil for British property purchases about a year ago. Including this latest purchase, it has spent 634mil.

The latest purchase is centrally located in one of London’s most elegant West End squares. The seller D2 bought the building in 2006 for 60mil and refurbished the classic 81,500 sq ft Georgian building for another 20mil.

Eighteen months after buying it, D2 rented the top two floors to hedge fund Permal Investment Management Services at what was then considered the world’s highest rental ever at between 140 and 130 per sq ft.

The West End market has failed to reach rents of that level since. Only earlier this year did they pass 100 per sq ft.

D2 is founded by Deirdre Foley, and David Arnold. Foley was previously a director of the Quinlan Partnership and is D2’s managing director while Arnold is a well-known Irish property developer and investor.

The EPF last year handed ING Real Estate Investment Management and RREEF the mandate to invest 500mil each in central London on its behalf.

So far the fund has invested outside the core West End in a bid to find investments that yield more than 5%.

The EPF’s three other property assets include commercial building Whitefriars in central London which it bought from Union Investment for 148mil in March. Whitefriars has a annual yield of 5.75%. Property consultancy Savills brokered that deal.

Prior to Whitefriars, the EPF bought One Sheldon Square in Paddington Central for 156mil, and 40 Portman Square near Oxford Street for 180mil. The two properties have yields of 5.75% and 5.55% respectively.

Properties in the city of London was among the first to start recovering from the financial crisis, rising in the second half of 2009 after two years of declines erased 50% of its value from city-centre office values.

The pound sterling’s 22% drop since September 2007 had helped make property more attractive to foreign buyers, according to a report by Bloomberg.

Since 2009, when prices of London assets begin its uptrend, spending in London’s prime real estate shows no sign of abating, a deep contrast to the overall state of the UK property market which has been soft until today.

In the city, investors are turning to more affordable markets or riskier properties because of the shortage of prime real estate for sale and the high prices it commands.

For the first half of this year, about $12.3 billion has been spent on prime offices, shops and homes in London, the most of any city, Real Capital Analytics’s research shows.

Last week’s disorder and looting in London has not diminished the appeal of investing in the city, according to Jeremy Helsby, chief executive officer of Savills Plc.

“There’s no evidence of an unwillingness to invest in London,” Helsby says after the property broker reported a 52% increase in first-half profit.

“I can’t think of any set of circumstances of London not retaining its status as a destination for international capital,” he told Bloomberg.