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Friday, March 9, 2012

PNB buys two London properties for RM2.6bil

PETALING JAYA: Permodalan Nasional Bhd (PNB) has joined the ranks of global investors to buy into prime London commercial offices with its latest purchase of two properties, 90 High Holborn and One Exchange Square, bringing to four its portfolio of properties in the international financial centre.

The two buildings, which come with single tenancies, were bought from German fund manager KanAm for £550mil (RM2.6bil), offering PNB an annual yield of 5.25%, a source said.

One Exchange Square is tenanted by the European Bank for Reconstruction and Development, a quasi public organisation, while 90 High Holborn is the headquarters of law firm Olswang.

The deals are the latest in a series of purchases by PNB since late last year. A local Malay daily reported group president and chief executive officer Tan Sri Hamad Kama Piah Che Othman as saying PNB needs to diversify its investments, instead of solely relying on the equities market.

In December, PNB bought a 12-storey office space in Milton & Shire House on 1 Silk Street for £350mil from US investor Beacon Capital.

In January, it bought Woolgate Exchange, on 25 Basinghall Street, a nine-storey commercial office with a basement floor for £270mil from Irish development and investment company D2, a source said. Woolgate Exchange offers an annual yield of 5.7% compared with the average annual yield of 5.25%.

PNB's first foreign foray was in Australia where it bought Santos Place in Brisbane for A$290mil in August 2010 from Nilson Properties.

The Employees' Provident Fund is the other fund that is buying into London. Prior to PNB's entry into foreign property investment, the EPF has been the most aggressive among Malaysia-based funds, with most, if not all, its overseas investments in Britain. In 2010, EPF said it was putting aside £1bil (RM4.85bil) for its British property investments. EPF has so far spend more than £600mil (RM3.1bil) in London purchases, with most of the properties offering a yield exceeding 5% a year.

Besides PNB and EPF, Tabung Haji may be the other fund seeking investments abroad. Its overseas property assets are located in the Middle East. In the case of Tabung Haji, whatever it purchases must be syariah-compliant, which means the building must be used for halal activities.

PNB manages a fund size of over RM190bil while Tabung Haji manages funds totalling about RM30bil.

London has been considered a “safe haven” with investors from Europe, mainland China, Middle East and Russian investors buying into its commercial office space sector of late.

By The Star

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