This article first appeared in The Edge Financial Daily on January 19, 2018

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) and the Employees’ Provident Fund (EPF) intend to buy commercial assets in Phase 2 of the Battersea Power Station development in London for £1.61 billion (RM8.8 billion).

To explore the potential sale, PNB and EPF have inked a heads of terms with Battersea Phase 2 Holding Co Ltd, a wholly-owned unit of Battersea Project Holding Co Ltd, in which S P Setia Bhd and Sime Darby Property Bhd own a 40% stake each, with the EPF holding the remaining 20%.

“The proposed transaction is to reorganise the ownership of the Battersea Power Station’s commercial property under PNB and EPF, who are long-term investors, while Sime Darby Property Bhd and S P Setia are principally property developers. The Power Station’s commercial property represents Phase 2 of the enlarged Battersea Power Station rejuvenation project,” said Sime Darby Property in a statement yesterday.

The proposed transaction, it added, would provide increased certainty of investment return to Sime Darby Property and S P Setia as development partners, “earlier than would otherwise be the case, and would enable both parties to focus on securing the development profit and investment returns from the remaining development in Phases 3 to 7 of the Battersea Power Station, which is estimated to be completed in 2028”.

The proposed transaction is subject to certain conditions, including a satisfactory due diligence and the requisite approvals being obtained. PNB and EPF are expected to form a joint-venture company to undertake the proposed buy.

The heads of terms, which are non-binding, provides an exclusivity period of up to April 30, for the parties to conclude the proposed transaction.

In a separate statement, S P Setia said the expression of interest from PNB and EPF to be long-term asset holders in the Battersea Power Station project is very timely, considering the residential pre-sales of over 90% and Apple Inc’s lease of the entire 470,000 sq ft of office space in the Battersea Power Station building.

“The shareholdings in Battersea Project Holding Co will remain unchanged among Sime Darby Property, S P Setia and EPF. S P Setia remains committed to and is positive on long-term prospects of the Battersea Power Station project,” S P Setia said.

“The proposed transaction, once completed, would augur well with our business plans as it will enhance our investment returns and allow S P Setia to capitalise on arising opportunities as a property developer while continuing to play a significant role in the overall development of the project,” it added.

The Battersea Power Station project covers 42 acres (17ha) and includes 3.5 million sq ft of mixed commercial space, together with 4,364 new homes.

Phase 1 of the Battersea development, which is known as Circus West Village and consists of 12 residential blocks and 100,000 sq ft of restaurants, shops, offices and leisure accommodation, has been fully completed and handed over to the purchasers and tenants over the course of last year.

Sime Darby Property shares rose four sen or 2.58% to close at RM1.59 yesterday, with a market capitalisation of RM10.81 billion. S P Setia slid 11 sen or 3.33% to RM3.19, which gave it a market value of RM10.94 billion.