The Million-Dollar View From the Sixth Floor

Who says there's a credit crunch? A global financial crisis? Nonsense. A setback for the hedge fund industry? Never heard of such a thing.

At least, not in the West End of London, anyway.

Permal Group, a $35 billion hedge fund of funds run by Legg Mason, has agreed to lease office space in that neighborhood for what is being called the most expensive rent in the world. The fund has taken the top two floors of Twelve St. James's Square for 140 pounds per square foot, which translates to a whopping $273. By comparison, the average square foot of office space in midtown Manhattan in September cost $87.22, according to a recent report in the New York Observer.

You can see what Permal gets for its money here.

It's interesting timing. Permal did the real estate deal during the same week that Merrill Lynch analysts cut their forecasts for growth in the London rental market from nine percent to zero, according to the Financial Times. Just two years ago, the ceiling for rents in the West End area was around 100 pounds, or about 29 percent less than Permal's deal.

It also comes the same week that Permal announced it hired Glyn Clark, a former executive director of compliance for Goldman Sachs, to run its U.K. operations. Although the real estate deal was in the works for weeks, one wonders if Clark gave the nod as soon as he saw the corner office.

And Permal, although it had stellar returns for the period that ended in June, has not been immune from the credit crisis and the August chaos that caught so many funds off guard. According to a New York Post report last week, Permal had significant exposure to at least one fund that was down 20 percent at the end of August.

But evidently there's nothing to worry about when you can greet your clients in a space that's advertised as "a light, airy, and highly-specified contemporary office building in a classic London square" that promises to "answer the most rigorous demands of modern international business."

Really, what more do you need?

by Megan Barnett

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