Exclusive: Malaysia pension fund to spend 500 million euros on German, French properties

Thu Jul 25, 2013 11:46pm EDT
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By Niluksi Koswanage and Yantoultra Ngui

KUALA LUMPUR (Reuters) - Malaysia's state pension fund will invest half a billion euros ($660 million) in industrial property in Germany and office space in France, according to sources familiar with the deals, signaling growing appetite for high-yielding property assets as Europe's main economies show signs of recovery.

The Employees Provident Fund (EPF), the world's sixth-largest pension pool with about $160 billion in assets, has been expanding its foreign portfolio as it seeks to maintain high dividends for Malaysian savers in the face of limited opportunities in the small Southeast Asian nation.

The EPF will expand an existing partnership with Australia's Goodman Group Pty Ltd (GMG.AX: Quote) to start a 250 million euro ($330 million) fund to buy seven industrial properties in the German cities of Berlin, Munich and Frankfurt, the sources said.

The pension fund will spend another 250 million euros to buy prime office space in Paris and capitalize on high rental yields there, said one of the sources, who asked not to be identified because he was not authorized to speak to the media. New York City properties are also being actively targeted, the source said.

Demand for industrial real estate is surging among global investors because of the relatively high yields on offer versus the bond market or offices and shops. The rapid growth of online retail has also helped put the sector in the spotlight as retailers and distributors become increasingly reliant on small and large warehouses.

"The EPF has been watching the European market for the past three years," the source told Reuters. "They have bought up London properties and are familiar with the laws. So the natural choice is to get into Europe itself. At the same time, New York City is definitely on the radar with its trophy properties."

The deal will mark the EPF's first foray into the euro zone.

An EPF official said on Friday: "It is our policy not to reveal our business strategy in public and not to comment on speculative news."   Continued...