KWAP to sell London office building for RM1.7 billion, move assets home

Kumpulan Wang Persaraan (KWAP) is selling an office building at 88 Wood Street, London, for about RM1.7 billion and repatriating the funds. – Regus pic, December 30, 2015.

The country’s second-largest pension fund is planning a £270 million (RM1.72 billion) sale of an office building in central London, responding to a government call to repatriate funds to prop up the country’s ailing stock and currency markets.

Kumpulan Wang Persaraan (KWAP), which has about RM120 billion of assets, is finalising an agreement to sell an office building at 88 Wood Street in the City of London that it bought in 2013 for £215 million, according to the fund’s chief executive officer Wan Kamaruzaman Wan Ahmad.

As well as getting a higher sale price, the fund will benefit from the sharp rise in sterling against the ringgit over the past two years.

“We are selling the property because we stand to benefit from real estate and foreign-currency gains,” Wan Kamaruzaman said in an interview in Kuala Lumpur earlier this week.

“It’s also in line with the government call to repatriate gains back to invest in the domestic market.”

Bursa Malaysia and the ringgit have been hurt this year by investor worries about a political furore over Prime Minister Datuk Seri Najib Razak’s dealings with the state-owned 1Malaysia Development Bhd, and by concerns about the effect of higher US interest rates on Malaysia and other emerging markets.

In response, the government asked state organisations like KWAP in August to look for ways to sell overseas assets and repatriate the proceeds.

Najib said last month that government-linked companies plan to bring home assets worth a total RM627 million during 2015.

Repatriating funds

KWAP expects to be able to repatriate the funds back to Malaysia by the end of the first quarter to invest in local markets, Wan Kamaruzaman said.

He didn’t name the buyer of the London office building.

Malaysia’s stock market may recover next year as a result of recent government measures, Wan Kamaruzaman said.

As well as repatriating funds from the UK, KWAP is contributing to a RM20 billion capital injection into ValueCap Sdn Bhd, a fund-management company set up in 2002, which will be used to stabilize local markets.

Other contributors to ValueCap are sovereign wealth fund Khazanah Nasional Bhd and state-owned investment fund Permodalan Nasional Bhd.

“Our market looks reasonably attractive in 2016 after two negative years,” Wan Kamaruzaman said.

He said he expected ValueCap to become “a significant player in the local market as it supports undervalued shares”.

Markets swoon

The benchmark FTSE Bursa Malaysia index has fallen 4.3% so far this year after dropping 5.7% in 2014.

For foreign investors, the losses have been magnified by the 19% plunge in the ringgit against the US dollar this year, making it the worst-performing currency in Asia in 2015.

Overseas investors have pulled RM19.2 billion from local stocks so far this year, more than double the RM6.9 billion of outflows for the whole of 2014.

Wan Kamaruzaman said foreign investors would return to Malaysia next year because the market was cheap after the recent drop in the currency, which was also set for a rebound.

The Southeast Asian unit is trading in the 4.20 to 4.30 a dollar range and, if market conditions improve, it could strengthen to 3.80 to the dollar next year, he said.

Investment allocations

KWAP collected an average of about RM4 billion annually from its members in pension contributions, Wan Kamaruzaman said.

It reported a gross investment income of RM6.47 billion in 2014, with the largest contribution coming from equities at 39% of the total. – Bloomberg