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Monday, June 11, 2012

Malaysians in UK shopping spree

GOOD INVESTMENTS: Sime Darby and SP Setia join the likes of AirAsia and Berjaya Group owners to buy key British assets

AT last, it took two Malaysian giants to defeat Russian billionaire Roman Abra-movich's Chelsea for prized assets.

The mighty Barcelona and then German heavyweight Bayern Munich failed to beat Chelsea for the coveted Champions League trophy. Before that, British powerhouse Liverpool was frustrated by the Blues for the English FA Cup.

But Chelsea was denied another prestigious trophy, a non-footballing one though, by Sime Darby Bhd and SP Setia Bhd.

Malaysia's oldest conglomerate and largest property company, respectively, teamed up to shock Chelsea (and 14 other bidders, including British property magnet Godfrey Bradman) and win the tender for the iconic Battersea power station.

Sime Darby and SP Setia are the latest Malaysian investors who find Britain, especially London, extremely attractive as an investment (and playground) location.

Permodalan Nasional Bhd already has three properties in London in One Exchange Square, 90 High Holborn and Milton and Shire House.

Berjaya Group founder Tan Sri Vincent Tan has bought Cardiff City football club. So has AirAsia's Tan Sri Tony Fernandes with his Queens Park Rangers football club.

Tabung Haji is currently shopping for London assets as part of its plans to splash some RM1 billion on overseas investments.

But what makes Britain so compelling? Are Malaysian investors risking themselves too much? Are they paying too much for the assets? Why not invest in assets back home, which are cheaper, given the exchange rate factor?

Property experts say Britain is compelling because there are few barriers to buying and selling commercial and residential assets there. It also has a liquid market with good legal and regulatory infrastructure.

In short, buying and selling properties there are reliable and easy.

When you buy a building there, as the investor and owner of the building, your responsibility is just to make sure the building is there and collect your lease payment. The responsibility for maintaining the building, both inside and outside, rests with the tenant.

Back to the Sime Darby-SP Setia venture.

The RM2 billion price tag for the old power station that once graced the cover of British rock group Pink Floyd's "Animals" album in 1977 is surely hefty. But when comparing with other prime land parcels in London, it appears cheap.

The former parcels have transacted for more than STG1,000 (RM4,900) psf, but the Battersea power station, which sits on a 14.56ha site on the south bank of River Thames, works out to STG235 psf.

Despite the current economic contraction, UK properties remain favourable given the ultra-low interest rate environment, ongoing geo-economic uncertainties and relatively weak British pound.

According to the latest Nationwide House Price Index, British house prices rose 0.3 per cent quarter-on-quarter but were lower by 0.7 per cent year-on-year.

For office spaces, London properties earned an average rent of RM497.95 psf, the highest among 38 key European cities.

So aren't Sime Darby and SP Setia getting (or buying) a great trophy?

By Business Times

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