Elena Moya guardian.co.uk, Monday 24 August 2009 21.31 BST
Libya is preparing to pour millions of pounds into the London property market in the latest sign of burgeoning business links between the two countries. The Libyan Investment Authority (LIA), which manages the country’s $65bn (£40bn) oil wealth, has bought two buildings in recent months worth a combined £275m and instructed real estate advisers to look for more.
The Guardian has also learned that the Tripoli-based LIA, a so-called sovereign wealth fund which looks after long-term state reserves, is looking to open its first branch in London – paving the way for billions of dollars worth of investment to be channelled through the City. Existing British investments in Libya have raised questions about whether business interests are dictating the pace of diplomatic detente.
Libya is estimated to be the most oil-rich country in Africa, with around 44bn barrels of reserves, and companies such as BP and Shell have been investing heavily there since 2004, although Libyan investment in London has been largely absent for more than a decade. But commercial ties have strengthened over the past few months – including meetings held between the business secretary, Lord Mandelson, and Saif Gaddafi, son of the Libyan ruler, Muammar Gaddafi, at a villa in Corfu owned by the Rothschild banking family over the summer.
In July, LIA bought Portman House, on Oxford Street, for £155m from Land Securities. The 146,550 sq ft building hosts retailers, such as Boots and New Look, who pay an annual rent of £11.5m. In December, LIA also purchased an office building at 14 Cornhill – opposite the Bank of England in the heart of the City and occupied by firms such as Aviva Investors – for £120m.
“They are looking for more properties in London, mainly in commercial real estate, as they are not affected by the credit crunch,” said Jeremy Grey, a managing director at James Andrew, the property consultants that advised LIA over the purchase on Oxford Street. “They buy when prices are low and they don’t sell. They are long-term investors.”
The London commercial property market has plunged about 30% from its peak, as the recession has cut demand for shops and offices. The pound’s recent fall is also making UK investments more attractive to foreign investors.
“The LIA are serious investors who are looking for significant investments in London,” said Eric Shapiro, director of valuations at Chesterton and Humberts, which advised LIA on the purchase of the Cornhill building. LIA, which manages $65bn, according to the Sovereign Wealth Fund Institute, also owns some London properties bought in the 1990s, such as Jardine House, on Crutched Friars, in the City, according to Grey.
The fund is now looking for a building to set up an office in London. At the moment business is conducted via telephone calls and trips to and from Tripoli, or through LIA’s lawyers, Berwin Leighton, which has had staff on secondment at the LIA offices in Tripoli recently.
“Apparently they are going to open an office in London, but they haven’t found the right building yet,” Grey said. He added that he was looking for a suitable building, most likely in Mayfair, St James or Kensington.
LIA officials Mustafa Zarti and Mohammed Layas did not return repeated phone calls seeking comment, and the Libyan embassy declined to comment.
LIA has investments in Italy, including the Italian state-controlled defence and aerospace company Finmeccanica SpA, according to a press report posted on LIA’s website, which does not give details about its assets.