EPF sells London property, earns good premium

PETALING JAYA: The Employees Provident Fund (EPF) has sold One Sheldon Square in London for £210mil (RM1.14bil), fetching a good premium for one of its earliest investments in the English capital city’s booming commercial property.

EPF paid £156mil back in 2010 to acquire the nine-storey office block. The 200,000 sq ft building is fully let out to Visa Europe Services until December 2022 with a rent review in December 2017.

“British Land Co plc won the bid through an open tender process designed in accordance with the fund’s strict corporate governance as well as adherence to the industry’s practices,” EPF said in a statement yesterday.

Commercial and residential property in London has become a popular investment for global investors chasing higher returns than government bonds in a low interest rate environment.

Central London office rents is projected to climb 17% this year, the most since 2000, according to a recent report by BNP Paribas.

But other reports suggested that the property market in London had cool down during the first quarter of this year ahead of the general election, which will be held on May 7.

EPF still owns significant real estate investments in the United Kingdom, the fund said in a statement yesterday. This includes a number of office buildings located around London and 12 hospitals that spreads around the UK purchased in 2013.

The fund also has property assets in Germany, France, Australia and Japan.

“The EPF continues to diversify its investments across markets, sectors and asset classes to provide optimal and long-term sustainable returns,” it said.

Property investment made up less than 5% of EPF’s total asset that had swelled to RM636.5bil as of end of last year, its chief executive Datuk Shahril Ridza Ridzuan told StarBiz in an interview last week.

The total value of its property assets in the UK stood at about £2bil (RM10.89bil).

Shahril had said that the fund was looking to sell “one or two” property assets in the UK and recycle proceeds from the disposal to acquire assets elsewhere.

In February, EPF made its maiden property acquisition in Japan with the 14 billion yen (RM427mil) purchase of five logistic facilities from Mitsubishi Corp.

Spreading its overseas investment to new markets will help the fund manage risk and find better value.

A Bloomberg report, quoting a top Japanese official, said global wealth funds are moving to buy more Tokyo properties to take advantage of rising prices in the Japanese capital and the weak yen.

Commercial property prices in Tokyo rose 2.9% last year, after a 2.3% gain in 2013. The UK property market, in the meantime, had recovered strongly from the downturn in 2009.

The EPF is targeting to increase its overseas investments to as much as 26% of its total assets within three years, up from the current level of about 24%, according to Shahril.

This is significantly higher compared with just 6% of total assets in 2009.

The move to aggressively expand its investments overseas over the last five years had paid handsome dividends for the fund. Global investments contributed a profit of RM13bil, or 33% of the fund’s total investment income in 2014.