UK agency to set up RM500m London property fund in Labuan

KUALA LUMPUR: London-based Saffron International, a boutique property service agency that focuses on prime central London properties, is setting up an offshore private London property fund based in Labuan.

Datuk Yusli Yusoff, ex-Bursa Malaysia CEO and now a director of the agency, is tasked with raising RM500 million for the fund, said Saffron CEO Monty Nawaz.

“We will invest in existing properties that are priced 20% below market value and add value through in-house, high-end design and built turnkey solutions to add further value. The initial 30 investors have almost been secured and the fund will start in the second quarter,” he told The Edge Financial Daily.

The value-add process will involve adding floor space, enhancing interior design and layout, with returns on investment targeted at 25% to 30%, Yusli said.

Besides offering premarket opportunities to more serious investors, the agency also sells, leases and manages central London homes, which Nawaz described as the “backbone” of the business.

“It takes usually seven to 10 years before you exit the UK market, so your most important relationship is with your property manager who is going to look after your tenants and your investment,” he said.

The agency plans to give talks on investing in central London, with the first slated in February at the branch office in Bangsar.

Yusli said there is a need for greater awareness of investing in London properties, as investors typically do not carry out enough due diligence before making their purchases. They may feel pressured into making snap purchases at new launches.
“We want to educate Malaysians on buying London property because there are a lot of gaps in how these products are marketed,” he said.

For instance, potential buyers may not be familiar with central London addresses and fall for misleading claims, overpaying as a result, Yusli said.

While prices differ among the districts and types of market, benchmark prices are usually around £1,200 (RM5,778) to £1,500 in key areas such as Notting Hill, Bayswater, Lancaster Gate, St John’s Hill and South Kensington, which are familiar places to Malaysians, said Nawaz.

Gross yields can touch 4% to 5%, subject to cycles such as the beginning of university semesters from June to August, when students usually look for accommodation.

Nawaz (left) and Yusli plan to introduce different property investment opportunities in Central London through Saffron.

There are three types of Asian buyers. Some buy properties for their children studying or working there, real investors who seek rental returns and educated investors, who are usually “elderly professionals” and understand the central London market, said Nawaz.

Saffron will allow Malaysian investors to have the first pick of the new launches, instead of offering units not sold to investors in Hong Kong, China and Singapore, who are some of the biggest buyers of London properties, he said.

The agency will also introduce subsale market properties to Malaysians, offering a bigger variety of deals, said Nawaz.

The opening of Saffron’s KL office on Jan 30 is aimed at servicing the over 200 local clientele, Nawaz said. Malaysians have emerged as among the top buyers of London properties in recent years attracted by the vibrant market, good yields and strong rental rates.

Besides Yusli, the other Malaysian on the board of Saffron is Super Car Club Global CEO Shaz Amin.

Currently, Saffron has its headquarters in London while its other offices are in Singapore, Hong Kong and Beijing.

The property agency is planning to open another office in Bukit Timah, Singapore, as the republic is among the top investors of London real estate.

“We are not a corporation and our growth is organic. We are looking at Jakarta and Mumbai,” Nawaz said.

He estimated that about 70% of clients are Asians, with investors from China and the Middle East buying properties at the top end, worth at least £10 million.

This article first appeared in The Edge Financial Daily, on Jan 25, 2013.