The State Oil Fund of Azerbaijan (SOFAZ) confirmed on Monday that it had acquired a £180m office block on St James`s Street as the maiden purchase in its bid to build a European real estate portfolio.
The deal is the latest example a foreign government becoming a landlord in one of London`s most expensive postcodes. The high-end property markets of the City, the West End and Mayfair, have attracted billions of pounds of investment in 2012 from Asia, the Middle East and Europe.
The Grade II listed office building at 78 St James`s Street had been owned by RREEF Real Estate, Deutsche Bank`s real estate arm, since 2002 and is the headquarters of HSBC Private Bank. The 119,000 sq ft office is let to HSBC until 2023 and produces annual rent of £9.65m.
“This newly acquired office building in London is the first in a series of planned property acquisitions in prime business districts of major cities around the world,” Sofaz`s Executive Director Shahmar Movsumov said. “The secure income that this type of investment will generate over the years coupled with strong fundamentals of prime office spaces in major world capitals are the determining factors in our investment rationale.”
The fund, established in 1999 to manage the Caspian Sea nation`s state income from oil and natural gas sales, had $33.9 billion of assets as of December 1. President of Azerbaijan Ilham Aliyev decreed in October 2011 that Sofaz may invest a maximum 5 percent of the value of its portfolio each in gold, equities and real estate.

AzerTAc