By Art Patnaude

An Abu Dhabi investment company notched a huge discount Monday when it closed a London property deal first agreed to nearly two years ago.

It has Brexit to thank.

In December 2014, Abu Dhabi Financial Group LLC agreed to buy New Scotland Yard, the former headquarters of London's police force, for GBP370 million ($451 million). A new development with high-end condominiums, offices and shops is in the works for the central London site.

The deal officially closed Monday, when 90% of the money was paid to the Metropolitan Police, according to a spokesman for ADFG. The two-year gap cameabout because the police had to move into a new space.

A 10% deposit was paid when ADFG first agreed to the sale. Over those 22 months, sterling has fallen 22.7% against the United Arab Emirates dirham, mostly because the pound has plummeted since Britons voted to leave the European Union in late June.

"When you're transferring 90% of a big number, you're saving quite a lot, " said Niccolò Barattieri di San Pietro, chief executive of Northacre, the U.K. developer that will be spearheading construction.

For investors that agreed to buy U.K. real estate before Brexit, the discount from weakened sterling has been significant.

Wells Fargo & Co. completed the purchase of a London office building in July, just weeks after the Brexit vote, for nearly GBP300 million. The price was slightly below what was agreed to before the vote. But the drop in sterling knocked off another 12% off the price.

The post-Brexit fall in sterling has spurred bargain hunting among foreign real-estate investors. But new deals remain limited. Real-estate investment volumes in the U.K. were down 51% between July and September compared with the period in 2015, according to property data company Real Capital Analytics.

While the initial panic that rattled the real-estate sector in the weeks after the referendum has subsided, uncertainty about how the U.K. government will extricate itself from the EU--and the potential for sterling to fall further--has limited deal making.

In 2014, when the London property market was booming, ADFG paid around GBP120 million above the projected price for the New Scotland Yard site.

The new development in Westminster will include six buildings with homes and commercial space. ADFG and London-based Northacre plan to complete the project by 2021.

The sale was part of a drive by London officials to reduce costs. By selling the old headquarters and moving into a new space, "we have been able to make savings to invest in front-line policing, improving the technological capability of the force and develop facilities," said Helen King, assistant commissioner of the Metropolitan Police, in a statement Tuesday.

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(END) Dow Jones Newswires

November 01, 2016 12:38 ET (16:38 GMT)

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