Going concern ‘gold-mine’

PNB-EPF joint announcement last Friday on their investment in Phase II of the Battersea Power Station Development project worth GBP1.6 billion (RM8.6 billion) should be seen as a gold mine for depositors of both schemes.

Financial Times story:

 

Malaysian fund PNB buys Battersea Power Station stake

Cash injection will allow the building to be completed amid rising costs

https://www.ft.com/content/f0a0ed04-fc41-11e7-a492-2c9be7f3120aAime Wiliams in London

JANUARY 19, 2018 8 A Malaysian fund has agreed to buy a stake in London’s Battersea Power Station in a deal that values the building at £1.6bn.

Permodalan Nasional Berhad, a fund manager with £50bn of assets under management, will own the building jointly with Employees Provident Fund of Malaysia, which already owns a fifth of the wider Battersea development site.

PNB will buy its stake in the building from the Malaysian developers Sime Darby Property and SP Setia, which between them own 80 per cent of the 42-acre site.

The fund manager is a majority stakeholder in both developers, and therefore already indirectly owns a large proportion of the Battersea development.

An undisclosed percentage of the expected full sale price for the grade II* listed building will be paid to the developers in stages through construction, with the balance paid on completion.

According to people familiar with the matter, the cash injection will allow the development of the building, which will host Apple’s new UK headquarters, to be completed amid rising costs.

The Battersea Power Station building itself — which occupies about six acres of the site — had been derelict for roughly 30 years when the site was bought in 2012 for £400m by the consortium from Malaysia.

At the time, the group said it believed the whole development would be worth £8bn by the time it was completed in 2024. The refurbishment of the power station, which supplied one-fifth of London’s electrical power when in operation, is set to be completed in late 2020.

About a quarter of the building will be developed as homes, with a further quarter dedicated to offices. The remainder will be a mixture of retail and leisure space.

The developers are considering changes to their plans for the site following a downturn in the market for luxury homes. As many as 4,000 homes are planned for the 1930s’ landmark site, but that might be reduced to make way for extra office space.

In June, the developers of the scheme won approval to cut their affordable housing commitment by 40 per cent — citing a rise in building costs of more than 11 per cent over a year — as well as faltering sales values for luxury homes.

Battersea reduced its affordable housing commitment to between 9 and 15 per cent of all the housing produced on the scheme, subject to an “end of scheme review”.

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PNB and EPF would hold the biggest stake in London’s current most premier development scheme, where the GDV is expected to be GBP9 billion (RM45 billion).

Guardian story:

Inside the new Battersea Power Station

First 100 residents move in to first batch of swanky flats as vast £9bn development starts to rise from the rubble at the south London landmark

Pop veteran Sting, celebrity survival expert Bear Grylls and 1,400 Apple office workers will soon be neighbours – living and working alongside each other at Battersea Power Station.

Read more

The £9bn project to revamp the Grade II listed building – more than it cost to build the stadiums and stage the 2012 London Olympics – is the centrepiece of a mile-long development of offices and apartment towers on the south bank of the Thames stretching from Vauxhall to Chelsea bridge.

After four years of construction, the development is now starting to take shape and the first 100 residents have just moved in to a luxury apartment complex alongside the main building, called Circus West Village. And for the first time in 90 years the power station’s riverfront, with a new piazza and parkland, is now accessible to all.

The former power plant won’t open its doors to the public for shopping and leisure until 2020, when a new tube station, called Battersea Power Station, comes online to whisk workers, visitors and the development’s well-heeled residents into the West End or the City in less than 15 minutes.

A glass lift is to be built to take visitors to a viewing platform atop the power station’s landmark white chimneys, where they will have sweeping views across the river from a height of more than 100m (330ft).

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An artists’s impression of how the rooftop garden at Battersea Power Station will look when built. Photograph: Battersea Power Station development

The power station has lain empty since it was decommissioned in 1983. Seven separate plans – including turning the power station into a theme park, giant shopping mall or football stadium – fell apart before a Malaysian consortium bought the 17-hectare (42-acre) site for £400m in 2012.

The developers are now building at least 1.25m sq ft of office space and 4,239 swanky new homes. It is one of the biggest building sites in Europe, employing 3,000 construction workers. The project is scheduled for completion in 2026.

The Guardian gained a sneak preview last week of the work under way at the former coal-fired power station, which used to supply one-fifth of London’s electricity.

Most of the scaffolding erected inside the building – the biggest brick construction in Europe and vast enough to hold both St Paul’s Cathedral and Trafalgar Square – has now been removed, with work underway to refurbish the original 1930s features; the art deco balconies, windows and giant fluted pilasters in light grey marble are all being restored.

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Construction work within Battersea Power Station, a structure big enough to house both St Paul’s Cathedral and Trafalgar Square. Photograph: Anthony Coleman/VIEW

The original chimneys have been replaced with replicas. Two will even have steam coming out of them, from a new gas-powered energy centre.

Inside, the two turbine halls – one built in the 1930s with bronze doors, marble floors and staircases, the other a more austere 1950s construction – will eventually be lined with shops, restaurants, cafes and cinemas.

The biggest tenant will be Apple, whose decision to locate its new European HQ in London was seen as a huge boost for the UK after the Brexit vote. The US tech giant will move 1,400 staff into five floors of the former boiler house in 2021.

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Looking south-west from Westminster Cathedral towards Battersea Power Station. Photograph: Arcaid Ltd – Corbis/Corbis via Getty Images

A new concert venue for 2,000 people is also in the works, while the former control room A will be marketed as a cultural venue.

Most of the 253 luxury apartments atop the power station have already been sold off-plan. Studio flats – with no separate bedroom – started at £800,000. One-bed flats started at £1m while four-bedroomed family apartments cost at least £4m.

The three penthouses have yet to be priced, although the rumoured £25m-£30m price tag may have to be scaled back as demand for high-end property in the capital dips.

To the south of the power station, a cluster of sculptural blocks designed by US architect Frank Gehry and Britain’s Foster + Partners – including a titanium-clad building called The Flower – will line a new high street, called the Electric Boulevard. This is where Sting and his wife have invested. Studio flats there started at £495,000, rising to £3.2m for a four-bedroom apartment when put on sale in 2014.

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Battersea Power Station starts to take shape. Photograph: Anthony Coleman/View

Bear Grylls, the TV adventurer, has bought an apartment where he plans to live with his wife and three sons. He said the family had lived in Battersea for many years and “didn’t just want a run-of-the-mill townhouse or riverside development … It was our chance to own a little bit of history that we could pass on down through the family.”

About 85% of the 2,481 marketed homes have been sold so far, although the developers have recently been affected by the slump in the luxury home market. Some apartments, they said, would now be downsized . They might also replace planned apartments with up to 1m sq ft of office space, about twice the floorspace of 30 St Mary Axe in the City, better known as The Gherkin.

The overall development includes 636 affordable homes, just 15% of the total . None are located in the actual power station. The number is far less than is usually demanded but the local council Wandsworth agreed to a lower proportion because the development will improve the area and the developer is contributing to the tube extension. Local residents will get an average market rent discount of 40%.

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An artist’s impression of the Gehry designed residents’ lounge. Photograph: Battersea Power Station development

Ravi Govindia, the Conservative leader of Wandsworth council, has praised the project. He said it “will deliver hundreds of new homes at prices that low and middle-income households can genuinely afford … without a single penny of taxpayers’ subsidy”.

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The towering chimneys rise again. Photograph: Leon Neal/Getty Images

Some locals, however, have strongly criticised the project, questioning the social and economic benefits to the area.

Keith Garner, a local architect and member of the Battersea Power Station Community Group, described the power station plan as “soulless and generic”. He wanted more affordable homes included, and to see cultural and educational institutions included – like an annexe to the South Kensington museums or top-level sports facilities such as an Olympic-size pool.

However, Rob Tincknell, who runs the Battersea Power Station Development Company, says the luxury homes are necessary to pay for the former power plant’s restoration.

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The Battersea Powerstation Project has been described as “It is simply being concluded to create a long-term stable asset management and ownership platform going forward.”

 

The Reuters story:

London’s Battersea Power Station project in proposed sale for £1.6 billion

Estelle Shirbon

4 MIN READ

LONDON (Reuters) – The owners of Battersea Power Station, a huge industrial building in London currently being turned into homes, offices and shops by a Malaysian consortium, are in talks to sell it for 1.6 billion pounds, the redevelopers said on Thursday.

A new chimney is seen with the three dismantled to their bases at Battersea Power Station in London, Britain, March 7, 2016. Developers are demolishing the corroded chimneys of the art deco landmark and will replace them with replicas, as part of the re-development of the area. REUTERS/Toby Melville

With its four giant chimneys, the disused electricity generating plant on the south bank of the River Thames was pictured on the cover of Pink Floyd’s album “Animals” and is one of the best-known silhouettes on the London skyline.

Built in the 1930s, the coal-fired power station stopped operating in 1983 and gradually fell into disrepair, with multiple attempts to redevelop it floundering due to costs and practical difficulties in converting the gigantic site.

It was eventually sold to a Malaysian consortium led by property developer SP Setia (SETI.KL) in 2012, for 400 million pounds, and since then has been undergoing construction work on a vast scale. The project is due to be completed in late 2020.

SP Setia said in an announcement to the Malaysian Stock Exchange that it was in discussions about a potential sale with Permodalan Nasional Berhad (PNB), a Malaysian government-linked investment firm, and Employees Provident Fund Board (EPF), a state pension fund.

The proposal is to sell Phase 2 of the project, the building itself, but not the surrounding land which is also in the process of being redeveloped.

Through their holdings in the current developers and through direct stakes, PNB and EPF already own about 70 percent of the project as a whole.

Battersea Power Station Development Company Ltd, the UK-based structure managing the project, described the proposed transaction as a re-organisation of the ownership of the building that would create a long-term asset management and ownership structure.

“Subject to further due diligence and negotiations, the transaction sum is estimated to be 1.6 billion pounds, which is contemplated to be paid in stages through the rest of the construction phase of the Power Station building,” it said in a statement.

Apple (AAPL.O) announced in September 2016 that it would be moving its London headquarters to the former central boiler house of the power station — a commercial and public relations success for the redevelopers.

S P Setia Bhd3.26

SETI.KLKUALA LUMPUR STOCK EXCHANGE

+0.02(+0.62%)

• SETI.KL
• AAPL.O

London’s Evening Standard newspaper reported that the proposed sale came after the costs of transforming the brick structure doubled from an initial forecast of about 750 million pounds to around 1.5 billion.

It said the spiralling costs had meant the profit return on the scheme had been cut from 20 percent to 8.2 percent.

A spokesman for the Battersea Power Station Development Company denied that the transaction was in response to an increase in costs.

“Whilst there have been cost increases across the industry and at Battersea Power Station, this transaction is not in reaction to costs,” he said.

“It is simply being concluded to create a long-term stable asset management and ownership platform going forward.”

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The duo Malaysian investment firms is said to be 80% in holding of the RM45 billion premier property development project. If the returns is at a mere 20% of GDV, then that is a forecast of RM9 billion.

It is a goldmine potential for initial investment of RM8.6 for land acquisition.

PNB Chairman Tan Sri Abdul Wahid Omar is absolutely spot on in attacking the lies being spread for the Battersea Property Development Project.

The Malay Mail Online story:

Wahid Omar: ‘Mischievous’ to say PNB, EPF to pay 1,000 times more for the Battersea project

Kuala Lumpur 20 Jan – It is “mischievous” to claim that Permodalan Nasional Berhad (PNB) and the Employees Provident Fund (EPF) will be paying 1,000 times more than the original price to acquire the Battersea Power Station (BPS) in London, PNB Chairman Tan Sri Abdul Wahid Omar has said.

The former Cabinet minister said that he believed those who were against Malaysian firms buying over the decommissioned power station were the ones alleging so and have shopped such a narrative to news organisations.

“The reference to 1,000 times the original price is mischievous. I believe the (news report) piece was propagated by some people in UK who are unhappy with the iconic Battersea Power Station regeneration being successfully developed by Malaysian consortium of Sime Property, SP Setia and EPF [sic],” he said in a statement.

Abdul Wahid, however, did explain the differences nor did he state the exact amount EPF and PNB will be paying for the takeover.

According to news reports, both EPF and PNB will be paying £1.6 billion (RM8.76 billion) to buy out the stakes of Sime Darby Bhd and SP Setia after the derelict power station is transformed into a mixed development that is set to gentrify the area.
Read more at http://www.themalaymailonline.com/malaysia/article/wahid-omar-mischievous-to-say-pnb-epf-to-pay-1000-times-more-for-battersea#fMeSVZdbMPOfFbUo.99

PNB is already an indirect stakeholder in the ambitious project via its equity in both Sime Darby and SP Setia while the EPF currently owns 20 per cent of the project.

Under the deal, the EPF will also drop its role as a developer to become the asset manager of the partnership with PNB.

Explaining further about the project, Abdul Wahid said the main commercial BPS building will include a shopping mall and offices.

He said Apple Inc will be among the main tenants, adding that the US-based company has already signed up a 500,000 square foot tenancy space at the upcoming development.

“This is potentially the future happening place in London. The American Embassy has just moved into the adjacent Nine Elms neighbourhood,” he said.

In terms of connectivity, Abdul Wahid said the Thames water taxi service is already operational while construction for an underground Battersea station was underway.

Construction officially began on July 2013, with the overall development anticipated to finish by 2025, although the Battersea Power Station will open to the public in 2019.
Read more at http://www.themalaymailonline.com/malaysia/article/wahid-omar-mischievous-to-say-pnb-epf-to-pay-1000-times-more-for-battersea#fMeSVZdbMPOfFbUo.99

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The fact that the forecasted return for the Battersea Project would bring good fortune yield, where currently PNB and EPF has already invested in RM170 billion and RM310 billion worth of portfolio respectively in the Malaysian equity market.

It is a policy that PNB and EPF diversify their investments abroad, to ensure ‘all the eggs are not in one basket’. This is on top taking opportunity from gains of very good potential investments, upon the completion of the necessary diligence and risk evaluation.

The project could be viewed simply as Malaysians harvesting from fortune made in Britain where once, slightly over sixty years ago it was the other way around.

This is definitely a far advancement from the infamous ‘Dawn Raid’ more than thirty six years ago, where PNB recovered a Malaysian-based British plantation firm Guthrie.

The combined investment and value of both firms are worth more than RM1 trillion, had never failed its depositors and are some of the best managed GLCs in the country.

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