PNB & EPF Buying Battersea Power Plant For RM8.76 billion – Channel W

PNB & EPF Buying Battersea Power Plant For RM8.76 billion

LONDON – Amidst spiralling project cost, two Malaysian giants stepped up to provide solid financial stability to the Battersea redevelopment project in London.

On Thursday, 18 January 2018, the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB) announced that they have signed a Heads of Terms (HoT) with Battersea Phase 2 Holding Co Ltd to purchase Phase 2 development assets in the project for RM8.76 billion. This is believed to be the biggest ever real estate deal in UK.

What is interesting is that both EPF and PNB already owned a big stake in the project. EPF is already 20% owner of the entire development whilst PNB is the major shareholder of Sime Darby Property and SP Setia, who in turn are shareholders of the vendor.

Rob Ticknell, CEO of the Battersea Power Station Development Company (Photo: the Telegraph)

What they are actually buying is Phase Two of the Battersea project, which includes the Power Station building itself, 470,000 sq ft of new headquarters for Apple, and 250 apartments that are mostly sold. Phase Two is expected to be completed in 2020 whilst Phase One of the project, known as Circus West Village, has already been completed.

Why would EPF and PNB willing to pay such an amount? It is believed that the recurring steady stream of income from the Apple’s lease is the main attraction for these fund managers. Both EPF and PNB have large hoard of cash but it is very tricky to get steady cash flow that they need to pay the famously high dividends they pay out to their members.

It seems like a win-win situation for everyone. EPF and PNB could productively utilise their cash on a high yielding property in a premium location. With the secured funding from the deal, SP Setia can now complete the development and is expected to earn RM400 million profit (PublicInvest Research).

Some Trivia Facts

  • Battersea power station first opened in 1933 and used to supply 20% of total electricity power for London.
  • The power station has been left derelict for 30 years before the SP Setia, Sime Darby & EPF consortium bought it in 2012 for £400 million.
  • The price now paid by PNB & EPF for the building is 1,000 times more than the £1.5 million paid by the original purchaser, theme park entrepreneur John Groome, to the UK’s Central Electricity Generating Board back in 1987.
  • The lease for Apple’s new UK headquarters is London’s largest ever office pre-let deal.
  • The Heads of Terms agreement is a non-binding agreement and its terms will be subjected to further due diligence and negotiations.

 

 

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