Purchase of the US$288 million London office block marks the oil-rich country’s debut in the European property market.
Banking on London’s safe-haven appeal, Azerbaijan’s US$33 billion sovereign fund purchased a 188,600-square-foot building in the upscale St James’s district from RREEF Real Estate, the property arm of Deutsche Bank.
The purchase of the US$288 million office block marks the oil-rich nation’s debut in the European property market.
In a statement, Deutsche Bank said the building, which is let to banking giant HSBC until 2023, gives an investment yield of about 5.4%.
According to data from Real Capital Analytics (RCA), Azerbaijan is also looking into buying the Actor Gallery shopping complex in Moscow for US$102.5 million.
Seeing the UK capital as a safe haven where to park assets, sovereign wealth funds from other countries, such as Qatar, Malaysia and Norway, have spent billions of dollars on offices and shops in central London in recent years. This has helped buoy prices for the most sought-after commercial properties in London.
According to RCA’s Joseph Kelley, the list of countries buying European real estate is likely to grow. ‘There’s a lot of emerging market investors like Brazil and Malaysia that are looking at Europe to put their money after making it in their home countries.’
London’s St James’s area is particularly popular with hedge funds and private wealth managers. Office rents in the area, about US$163 per square foot, are among the highest in the world.
Data from the RCA show that Qatar was the top sovereign wealth buyer of European property in the 12 months through August 2012, spending US$4.6 billion on eight deals, including the London Olympic athletes’ village, upmarket department store Harrods, and a mall on Paris’ Champs Elysees.
By Rodel Ambas Jr
19 December 2012