Consultants: Right timing for PNB's RM1.74bil London property buy

PETALING JAYA: Permodalan Nasional Bhd's (PNB) reported 350mil (RM1.74bil) purchase of Milton & Shire House building in London is a good move owing to the weak pound sterling and the European economic woes, said property consultants.

The Times reported recently that PNB had bought the 15-floor complex from US-based fund manager Beacon Capital Partners.

The complex is said to have 460,000 sq ft of office space, and houses global law firm Linklaters which is paying RM100mil in rental annually on a lease that expires in 2026.

CB Richard Ellis executive chairman Christopher Boyd said that it was a unique time to buy real estate in London, as traditional major funds from the United States and Europe were not in the market due to the global economic slowdown.

“So you have less competition for buildings like this. The downside risk is minimal as PNB bought the building with a long lease,” he said.

Property consultancy DTZ Nawawi Tie Leung executive director Brian Koh pointed out that London was a global financial and commercial centre, and had some of the most expensive real estate in the world.

“In good times, it is very difficult to penetrate the London market due to high competition for prime properties, which accounted for its low historical yield,” he said.

Koh said the weak pound and the liquidity crunch in Europe, due to the eurozone debt crisis, had made it easier for players from the Middle East, South Korea and Malaysia, among others, to enter the London real estate market at reasonable prices.

The Times said it was the “largest single asset transaction in central London this year”.

It also said PNB was believed to have allocated 1bil (RM4.98bil) for London investments.

The daily quoted PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman as saying the transaction was “part of a strategic plan in acquiring premium assets in major cities globally after the acquisition of our maiden overseas property, Santos Place in Brisbane last year”.

PNB reportedly bought the upmarket office block in Brisbane for more than A$290mil (RM931mil).

The 37-storey building has 373,508 sq ft of lettable space with about two-thirds of that leased to Australian oil and gas giant, Santos.

A recent StarBiz report quoted sources as saying PNB was looking to invest in properties primarily in London, Sydney, Melbourne and Perth.

PNB's management could not be reached for comments at press time.

By The Star