This article first appeared in The Edge Financial Daily on June 14, 2018 - June 20, 2018
KUALA LUMPUR: The Battersea Power Station is a prime central London development acquired by Sime Darby Property Bhd,
S P Setia Bhd and the Employees Provident Fund (EPF) through “a competitive tender process” in September 2012, said S P Setia and Sime Darby Property in a joint statement yesterday.
The statement was issued in response to reports quoting PKR de facto leader Datuk Seri Anwar Ibrahim that the Battersea Power Station deal and other major “dubious” property investments in the UK will be investigated by the new Malaysian government.
On Tuesday, shares in S P Setia and Sime Darby Property took a beating following Anwar’s statements. S P Setia shares fell 25 sen or 7.81% to RM2.95 from RM3.20 a day before, while Sime Darby Property’s stock sank eight sen or 6.2% from RM1.29 to RM1.21.
Yesterday, their shares rebounded: S P Setia was up five sen or 1.7% to RM3, with a market capitalisation of RM11.63 billion, while Sime Darby Property grew four sen or 3.31% to RM1.25, valuing the group at RM8.5 billion.
As for the proposed £1.608 billion (RM8.58 billion) divestment of the project’s commercial assets to the EPF and Permodalan Nasional Bhd (PNB) — who together, directly and indirectly, own about 67% of the equity in the power station development — the developers said the purchase price is still subject to further due diligence and on the basis that the development is completed and fully tenanted.
PNB holds majority stakes in S P Setia and Sime Darby Property, which jointly own 80% of the equity in the Battersea Power Station project. The EPF directly owns the remaining 20% stake in the project.
PNB and the EPF signed a heads of terms on Jan 18 this year with Battersea Phase 2 Holding Company Ltd, the joint-venture company tasked with developing the power station, to initiate preliminary negotiations to purchase the commercial assets.
“As previously assured by all parties, the decision to explore the potential reorganisation of ownership is purely an investment consideration initiated by the Battersea Power Station’s board and management team, together with the EPF and PNB,” said S P Setia and Sime Darby Property, adding that they are of the view that the transaction will enable them to continue to reallocate capital to other areas of their development businesses.
“PNB and the EPF view this as a strategic opportunity to secure ownership of a unique and iconic real estate asset, which will be able to deliver sustainable income streams into the future to meet their respective income needs,” they added.
They said the transaction is expected to generate an attractive long-term yield for investors, and the transaction has been extended to June 29, 2018.
“The parties are continuing to work positively and constructively together towards completing the proposed transaction and a further announcement will be made in due course,” they added.
The two property developers also provided updates such as work on the power station building itself is progressing well, and that it is scheduled to open to the public in late 2020, with some 40 million people expected to visit the power station annually when it opens.
The power station building will house 120 shops and restaurants, an event space and visitor attractions, as well as 253 residential apartments, which are currently 90% sold. Its approximately 1.8 million sq ft of space will include 500,000 sq ft of offices which have been pre-let to Apple Inc, they said, adding that it is one of London’s largest-ever office pre-lets.
Moreover, they said the development’s scheduled late-2020 opening will also benefit from the 3km extension of the Northern Line underground rail to a new Zone 1 station at the power station.
“This £1 billion investment by Transport for London will support the rejuvenation of the entire Nine Elms area, including the recently opened US embassy and a further 20,000 new homes,” they said.
The site acquisition and subsequent costs of the power station development have been fully funded by a combination of equity from shareholders, together with development debt provided on commercial terms by a mixed group of nine Malaysian and international lenders — of which more than 60% have been provided by international lenders, they said.
“The £458 million development loan for Phase 1 has been fully repaid ahead of schedule. The initial capital invested in the project by the developers and the profit from the first phase is now being reinvested in developing the subsequent phases,” they added.