Malaysian pension funds finalise Battersea Power Station deal

Building includes six floors let to Apple

The transaction suggests that the two investors see Battersea Power Station as a long-term holding, despite concerns about “financial strain” on the development.

The transaction suggests that the two investors see Battersea Power Station as a long-term holding, despite concerns about “financial strain” on the development.

 

Two Malaysian funds have finalised a repeatedly delayed deal to take a £1.6 billion stake in the long-running £9 billion (€10.2 billion) redevelopment of London’s Battersea Power Station.

The transaction suggests that the two investors see Battersea as a long-term holding, despite concerns about “financial strain” on the development.

Permodalan Nasional Berhad, Malaysia’s largest asset manager, and the Employees Provident Fund, a state pension fund, have formed a joint venture to buy the commercial part of the power station building from Battersea Phase 2 Holding Company.

The building includes six floors that have been let to Apple, and space that has been let to Number 18, a business members’ club owned by IWG. It also includes 420,000sq ft of retail space that has yet to be let.

The deal does not include any of the residential space in the building or the developments in the surrounding area.

It was first mooted in January, but postponed three times, with the funds citing its “complexity” for the delay. Management changes at PNB and EMP following the Malaysian general election in May are thought to have contributed to the slow progress.

Battersea Phase 2 Holding Company is a wholly owned subsidiary of Battersea Project Holding Company, in which EPF owns 20 per cent. The other shareholders are Malaysian developers Sime Darby Property and SP Setia, which each own 40 per cent. Both funds own substantial holdings in the property companies.

The latest deal will allow PNB and EPF to move those holdings from their development capital funds into funds that focus on long-term holdings.

Treasury Holdings

Battersea Power Station was bought for the guts of €600 million by Johnny Ronan’s Treasury Holdings in 2006.

Following the crash, EY was appointed as an administrator by the National Asset Management Agency and Lloyds Bank in December 2011. The power station company owed both parties about €380 million, with almost a third of that due to the State agency.

The property was sold by Nama and Lloyds in 2012 for €600 million to a Malaysian consortium of SP Setia, Sime Darby and the Employees’ Pension Fund of Malaysia after a legal battle with Treasury Holdings.

Datuk Wong, chairman of the Battersea Power Station Development Company, said: “This transaction is a further sign of Malaysia’s long-term commitment to Battersea Power Station. We are incredibly proud to be stewards of this iconic project. There is a real momentum on site and we look forward to working with all our partners to complete this significant redevelopment.”

There were warnings last year from one of the developers that the project was under “financial strain” but Simon Murphy, who took over as chief executive of the development company in May, has said that the problems have been resolved.

The main part of site – including an extension of London Underground’s Northern Line – is due to be completed in 2020, and is due to open to the public the following year.

The first phase of the development – called Circus West Village – is already open. But Carillion, the bankrupt contractor made a loss on the work. The second phase is due to be finished by the end of 2020.

The deal announced on Monday is expected to be completed in the first quarter of 2019, the parties said. – Copyright The Financial Times Limited 2018