Saturday, July 27, 2013

EPF eyes Germany, France

A file picture shows the interior of Whitefriars at 65, Fleet Street London, which has been purchased by EFP. The fund has invested at least RM279bil in the United Kingdom.
A file picture shows the interior of Whitefriars at 65, Fleet Street London, which has been purchased by EFP. The fund has invested at least RM279bil in the United Kingdom.

KUALA LUMPUR: The Employees Provident Fund (EPF) will invest 500 million euros (RM2.13bil) in industrial property in Germany and office space in France, according to sources familiar with the deals, signalling growing appetite for high-yielding property assets, as Europe’s main economies show signs of recovery.

EPF, the world’s sixth-largest pension pool with about US$160bil (RM513bil) in assets, has been expanding its foreign portfolio, as it seeks to maintain high dividends for Malaysian savers in the face of limited opportunities in the small South-East Asian nation.
The EPF would expand an existing partnership with Australia’s Goodman Group Pty Ltd to start a 250-million-euro (RM1.07bil) fund to buy seven industrial properties in the German cities of Berlin, Munich and Frankfurt, the sources said.
The pension fund would spend another 250 million euros to buy prime office space in Paris and capitalise on high rental yields there, said one of the sources, who asked not to be identified because he was not authorised to speak to the media.
New York City properties were also being actively targeted, the source said. Demand for industrial real estate is surging among global investors because of the relatively high yields on offer versus the bond market or offices and shops.
The rapid growth of online retail has also helped put the sector in the spotlight, as retailers and distributors become increasingly reliant on small and large warehouses.
“The EPF has been watching the European market for the past three years,” the source told Reuters.
“They have bought up London properties and are familiar with the laws. So, the natural choice is to get into Europe itself. At the same time, New York City is definitely on the radar with its trophy properties.”
The deal will mark the EPF’s first foray into the eurozone. An EPF official said yesterday: “It is our policy not to reveal our business strategy in public and not to comment on speculative news.” Goodman in Germany declined to comment.
The EPF-Goodman deal would be the latest in a string of tie-ups focused on industrial property in Europe, including a venture between Prologis and Norway’s sovereign wealth fund, a venture between Segro and a Canadian pension fund, and Brookfield’s acquisition of Gazeley.
US private equity giant Blackstone has also bet heavily on the sector and rapidly become one of Europe’s largest owners of industrial property.
The EPF has invested at least £565mil (RM2.79bil) in the United Kingdom, including a 20% stake in the US$12bil redevelopment of London’s Battersea power station that was inaugurated by Prime Minister Datuk Seri Najib Tun Razak this month.
The fund aims to lift overseas investments to 23% of total assets from 18% now within two years.
Currently, 5% of the EPF’s investments are channelled into real estate, including in Australia and Britain, with about 35% in equities and 55% in bonds.
The EPF initially looked at buying an industrial area in Birmingham in the UK Midlands, but found better yields in Germany of 7% to 9%, a second source told Reuters.
Average yields for the best industrial real estate in western Europe stood at 7.6% versus 5.4% for offices and 4.8% for shops, said property consultant CBRE. Ten-year German bond yields are about 1.6%, according to Thomson Reuters data. — Reuters

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