EPF buys RM1.1 bil worth of assets in the UK

KUALA LUMPUR (April 9): The Employees Provident Fund (EPF) has bought a portfolio of industrial and logistics assets in the United Kingdom from IM Properties plc, one of the largest British privately owned property groups, for close to £200 million (RM1.1 billion).

The Birmingham Mail reported on Tuesday that the provident fund had acquired The Hub in Witton, along with a host of other industrial and distribution sites from IM Properties.

The publication also indicated that the properties bought by the EPF would serve as the new home for Birmingham’s Wholesale Markets, which is the largest combined wholesale food markets in the UK.

However in an email response to The Edge Financial Daily yesterday, the EPF confirmed that it was buying properties in the UK, but the fund denied the report on the acquired assets to be the new site for Birmingham’s Wholesale Markets.

“I can confirm that we purchased a portfolio of industrial and logistics assets from IM Properties for close to £200 million, [and] these assets are at good locations and generating strong cash flows.

“[However] none of the assets are developmental in nature and they are not part of Birmingham’s Wholesale Markets as what was claimed,” commented a spokesperson from the EPF.

The purchase of foreign assets may raise some eyebrows at a time when the ringgit has depreciated substantially. Nonetheless, it is worth noting that the EPF sold the One Sheldon Square at Paddington Central, London to British Land Co plc for £210 million in April last year. The property was acquired by the EPF in 2010.

The sale proceeds may be handy to finance the acquisition spree now.

Real estate deals in the UK are not unchartered waters for the EPF. Besides the UK, the EPF also has real estate investments in Germany, France, Australia and Japan.

In 2015, the real estate and infrastructure asset class contributed RM1.7 billion in investment income, up 22.2% from 2014.

This asset class — which includes foreign investments and was initiated in 2010 — reportedly accounts for about 4% of the EPF’s total earnings, while making up 3% of its total assets.

Meanwhile, The Telegraph reported that the portfolio acquired by the EPF is the largest sold in the Midlands, which is an area spanning central England with Birmingham as its largest city.

The portfolio, according to the British newspaper, comprises 18 separate assets in business parks and industrial estates stretching from Heathrow to Birmingham.

The Telegraph added that this includes buildings in IM Properties’ Birch Coppice business park, which is the Midlands’ largest industrial development site served by a rail link, that houses companies such as British independent online grocer Ocado, logistics company UPS Inc, The UK’s largest van and car parts distributor Euro Car Parts and UK water company Severn Trent plc.

The Telegraph reported that the EPF was keen to move into the UK’s industrial properties sector, as the rise in Internet retailing has caused a boom in demand for warehouse space.

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This article first appeared in The Edge Financial Daily, on April 7, 2016. Subscribe to The Edge Financial Daily here.