Malaysia’s Employees Provident Fund has appointed agents to sell two London trophy offices for a combined £380m.
Savills has been instructed to find a buyer for Tower Bridge House, E1, seeking offers in excess of £200m, reflecting a 4.5% net initial yield, and 11-12 St James’s Square, SW1, for £180m, a yield of 4.25%.
The two buildings are managed by Savills Investment Management.
The sales follow one sale and one attempted sale of London offices by the giant Asian fund last year.
EPF sold Visa Paddington’s headquarters at 1 Sheldon Square, W2, to British Land for £210m in April. In December, Hong Kong investor Joint Treasure was in advanced talks to buy Freshfields Bruckhaus Deringer’s headquarters at 65 Fleet Street, EC4, from EPF for circa £155m – a 5.75% yield. However, those talks did not progress and EPF is currently considering whether to continue marketing the building or undertake a redevelopment itself.
EPF is looking to cash in on the £1bn London investment push it committed to in 2010 as it seeks to diversify into alternative real estate assets across Europe. Its remaining London portfolio includes 40 Portman Square, W1, and a stake in the Battersea Power Station redevelopment, SW8.
The fund was among the first from Asia to plough cash into London during this cycle and the sales represent some of the first divestments.
Malaysian purchases of London property over the past five years peaked in 2012 at £1.5bn, slowing to just £59.1m last year, according to Real Capital Analytics. Over the same period disposals grew from £40.6m to £270m (see graph).
Malaysia’s economy has slowed gradually but gross domestic product grew more than expected in Q3 2016, up by 4.3% on the previous year.
Siobhan Godley, real estate tax partner at Deloitte, put the slowdown in investment partly down to the fact that a lot of the investors are government-backed institutions who “tend to be a little bit more cautious in a market where there’s political uncertainty and currency uncertainty”.
She said clients that had been looking at London offices a few years ago were now eyeing UK retail and logistics and opportunity areas.
Chris Brett, CBRE’s head of international capital market, said: “While selective disposals will exist, there will be strong interest from existing and new investors from Malaysia.”
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