Soros builds stake in UK's "tortoise" developer

By Tom Bill LONDON, Jan 11 (Reuters) - Billionaire investor George Soroshas built a stake of more than 5 percent in the UK's only listedproperty company that produced a negative total return in 2012,due to its unfashionable bet on the long-term health of theeconomy outside London. The man who made his name and a reported 1 billion pounds($1.6 billion) by betting Britain would leave the EuropeanExchange Rate Mechanism in 1992, bought the stake in DevelopmentSecurities through his Quantum fund. Development Securities shares fell 4.7 percent in 2012 as itrefused to borrow excessively or chase central London deals, aspart of a strategy that Chief Executive Michael Marx has termed"more tortoise than hare". A source close to the situation told Reuters on FridayQuantum had built a 5.6 percent stake in the company, whoseshares were up 2.7 percent at 164.25 pence by 1238 GMT. The deal makes Soros, worth 19 billion dollars according toForbes magazine, one of the five biggest shareholders inDevelopment Securities, which has a market value of about 200million pounds ($322 million), alongside the likes ofinstitutional investors Fidelity and Blackrock. The developer, which has investments in Southampton, Sloughand Manchester, trades at a discount of about 34 percent to netasset value versus 5 percent or less for larger stocks like LandSecurities and British Land, both of which arebuilding London skyscrapers. UGLY FROGS "The Quantum Fund is looking for ugly frogs under stonesthat everyone's missed," said a source close to the deal. "Givenwhere the property market is, you could argue there is downsiderisk in London and upside risk everywhere else." Quantum Fund could not immediately be reached for commentoutside regular U.S. business hours. Prices for the best central London offices rose 3.6 percent i n the year to November 2012 as overseas funds clamoured for aslice of a market seen as a safe place to park money, said realestate consultant CBRE. Values fell 11.4 percent outside the southeast of thecountry due to the anaemic economy. Development Securities stock produced a total returnincluding dividends of minus 1.3 percent in 2012, versus 41percent for Hammerson L> and 37.4 percent for DerwentLondon, figures from brokerage Jefferies show. But as more money pours into central London, others arecoming around to Marx's way of thinking and there is growingtalk about the merits of riskier bets in search of investmentyields that can exceed 8 percent versus about 5 percent for thehottest areas of London. Axa is trying to raise 1 billion pounds to buybuildings around the UK with long leases and Aviva Investors has talked about opportunities beyond London. "Investors have wanted the immediate cashflow of centralLondon," said Matthew Richardson, director of European realestate research at Fidelity Worldwide Investments. "But theylost sight of the fact that outside London commercial propertyis driven by supply and demand and nothing is being built."($1 = 0.6209 British pounds) (Editing by David Holmes) Aviva British Land Land Securities