EPF invests RM842m in UK real estate company

KUALA LUMPUR: The Employees Provident Fund (EPF) has made its latest overseas acquisition by buying a 50% stake in UK-based Arena Trust, which owns three Tesco-anchored retail parks, for £156.5 million (RM842 million) from Aviva Investors.

The Arena Trust assets are the 138,000 sq ft Arena Shopping Park, located to the north of Coventry city centre; the 116,000 sq ft Broadstairs Retail Park in Thanet, on the north east coast of Kent; and the Clifton Retail Park, located to the south east of Blackpool town centre.

The 711,600 sq ft Arena Trust portfolio has an aggregate annual rent roll of £17.5 million, according to a report by CoStar News dated Jan 7.

Arena Trust is anchored by long-dated Tesco leases, reflecting around 60%, or £10.5 million of the annual rent roll, with the balance on varied duration leases let to retailers including Marks & Spencer, Matalan, Curries, PC World and Next.

The deal reflects an initial net yield of 5.4%, according to CoStar News, which describes itself as the leading provider of commercial real estate information in the UK and US.

EPF general manager for public relations, Nik Affendi Jaafar, told The Edge Financial Daily yesterday that EPF had conducted a thorough study on the investment and believes that the investment in Arena Trust is highly beneficial as it reflects a core-income play investment.

“The EPF is always looking for opportunities to invest in real estate globally, which could provide a steady sustainable income in a low risk environment in the interest of our members’ retirement well-being.

“This is in line with the Ministry of Finance’s approval that allows EPF to invest up to 23% of its asset under management in the overseas market. For real estate opportunities, we are focused on the attractiveness risk adjusted returns and strength of the assets’ cash flow,” said Nik Affendi.

Fund managers view the EPF acquisition as positive, as diversification to other regions is crucial for the local pension fund.

Areca Capital director Danny Wong said that EPF’s tie-up with Tesco is beneficial in the long run as Tesco is a global player.

He said investing in retail properties would bring positive yield in the long run.

Philip Capital fund manager Ang Kok Heng said that unlike investing in bonds, which comes with a fixed yield, investing in properties might see appreciation in the future.

“Generally, the UK is getting out of recession and it is likely that its properties will appreciate in the future,” Ang said.

The EPF has bought a 50% stake in a UK property firm which owns three shopping centres with Tesco as anchor tenant.

EPF’s latest acquisition is its biggest after acquiring a 20% stake in London’s Battersea Power Station, a mammoth project which also involves Malaysia’s two biggest property developers, Sime Darby Property Bhd and S P Setia Bhd.

The three parties formed the Battersea Project Holding Co Ltd (BPHCL) after inking a joint venture agreement in July 2012. Sime Darby and S P Setia equally hold a 40% stake in BPHCL.

As at third quarter (3Q) 2013, EPF’s total overseas exposure constituted 20.39% of its total investment assets based on book value, a rise from 18.97% in 2Q.

During the quarter, EPF made an additional US$2.5 billion in overseas investments, of which US$2.25 billion was channelled into global equity mandates and the balance invested in global bonds, infrastructure and private equities.

This article first appeared in The Edge Financial Daily, on January 09, 2014.


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