Malaysia’s KWAP exchanges on £200m London office

Kumpulan Wang Amanah Pencen has exchanged contracts to buy 10 Gresham Street from a JV between CPPIB and London-REIT Hammerson as it looks to build on its early international forays.

Kumpulan Wang Amanah Pencen (KWAP), the Malaysian state pension fund, has exchanged contracts to buy a large office in the City of London in a deal valued at £200 million (€249.6 million; $322 million).

The seller of the 245,000 square foot property at 10 Gresham Street is a joint venture between London-listed REIT Hammerson and the Canada Pension Plan Investment Board (CPPIB).

The pair acquired the asset in 30:70 for $175 million in 2010, and, according to an announcement by Hammerson, a sale would reflect an initial yield of 5.25 percent.

KWAP, which was formerly Malaysia’s Pensions Trust Fund, was incorporated in March 2007 with initial equity if MYR500 million (€126.6 million; $163.4 million) from Malaysia’s Federal Government. According to PEREConnect, the state fund, which is charged with funding its pension liability, has since grown to control MYR84.92 billion of assets.

The state fund’s allocation to alternative investments is currently only 2.54 percent, 1.28 percent of which is allocated to real estate.

A relative newcomer to international real estate investing, KWAP has previously made a handful of investments in Australia’s office market, namely 737 Bourke Street in Melbourne and the ASX Building in Sydney.

The state fund also invested on one of Malaysia’s first private real estate funds, CIMB-Mapletree Real Estate Fund 1, a MYR1.5 billion, closed-ended vehicle managed by a joint venture between Singapore’s Mapletree Investments and CIMB, the Malaysian investment bank.

KWAP has also previously mandated third party real estate investment managers to expand its property holdings. In 2010, it mandated RREEF to invest in select Asian markets. For this deal with Hammerson and CPPIB, it was advised by CBRE Global Investors.

KWAP joins a growing number of international institutional investors that have parked their capital in the world’s prime property markets in something of a prolonged, perceived flight to safer investments following the start of the global financial crisis. London has proved a popular destination for Asian capital in particular.