German fund KanAm is in talks with the real estate arm of Kuwait about the sale of a 1 billion pound portfolio of four London properties that includes Deutsche Bank's UK base, a source close to the matter told Reuters.

The sale by the German open-ended fund includes buildings occupied by the European Bank for Reconstruction and Development and Thomson Reuters , underlining the strength of London's safe-haven appeal for real estate investors.

Kuwait's St Martins property investment company has carried out detailed due diligence on the portfolio, in addition to Malaysian investment fund Permodalan Nasional Berhad (PNB), the source told Reuters.

On Wednesday, Reuters reported PNB was in talks with KanAm for some or all of the portfolio, alongside at least one other bidder.

About 10 companies did due diligence but these two spent more time and money than the rest, the source said, adding a completed deal may be several weeks away.

One possibility under discussion was the sale of three of the buildings to PNB, though nothing had been finalised, the source said.

A KanAm spokesman declined to comment on the identity of the bidders.

German open-ended property funds, which allow investors to withdraw money any time, will sell more assets after legislative changes last year made it difficult for large investors to exit at short notice, property broker CBRE said in June.

The KanAm fund, which has some 4 billion euros ($5.1 billion) of assets under management, is closed for a second time.

It has until May to decide whether to allow investors to withdraw money or liquidate, Iryna Pylypchuk, an associate director at CBRE, told Reuters.

Its London portfolio represents a large chunk of real estate for sale in London's City and Canary Wharf financial districts.

A series of high-profile properties came to market in the autumn as owners looked to capitalise on prices.

The IPD benchmark said prices rose 34 percent between June 2009 and September 2011, fuelled by demand from cash-rich overseas investors looking for a safe-haven investment.

About 5.75 billion pounds of property was on the market in September, CBRE said.

Other buildings for sale include Goldman Sachs' Peterborough Court UK home and a 300 million pound-plus building that is home to Credit Suisse in Canary Wharf.

Lukewarm demand and an absence of finalised large deals would likely force sellers to cut prices by up to 15 percent to more realistic levels, Franco Sidoli, co-founder of property agent Franc Warwick, told Reuters.

(Reporting by Tom Bill; Editing by Chris Wickham and David Hulmes)