KUALA LUMPUR: The shareholders and management of Battersea Power Station (“BPS”) refer to the media article on 11 June 2018 relating to BPS and make the following statement.
Overview of Battersea Power Station
BPS is a prime central London development that was acquired by Sime Darby Property, SP Setia and the Employees Provident Fund (“EPF”) through a competitive tender process in September 2012.
Since 2012 the transformation of the site into one of the world’s most iconic and prestigious mixed-use locations has been underway creating in the process a profitable and highly valuable asset for the shareholders.
More than 99% of the residential units in the first Phase, Circus West Village, have been profitably sold and today more than 1,000 people and a range of businesses call the Battersea Power Station development home.
Work on the Power Station building itself is progressing well and is scheduled to open to the public in late 2020. Its c1.8m sqft of space will include 500,000 square feet of offices which have been pre-let to Apple, one of the world’s leading technology companies. This represents one of London’s largest ever office pre-lets. In addition the Power Station will house 120 shops and restaurants, event space and visitor attractions, creating a new town centre for London.
In addition there will be 253 residential apartments (currently 90% sold).
The take-up of the space bodes well for potential investors as it is seen as a precursor to an exciting future for the Battersea Power Station development.
The development will also benefit from the opening in late 2020 of the 3km extension of the Northern Line underground to a new Zone 1 station at Battersea Power Station. This £1bn 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.
It is currently expected that when it opens 40 million people will visit Battersea Power Station annually.
Funding of Battersea Power Station
The site acquisition and the subsequent costs of the Battersea Power Station development have been fully funded by a combination of equity from the shareholders together with development debt provided on commercial terms by a mixed group of nine Malaysian and international lenders (of which more than 60% has been provided by the international lenders).
The £458m development loan for Phase 1 has been fully repaid ahead of schedule.
The initial capital invested into the project by the developers and the profit from the first Phase is now being reinvested into developing the subsequent phases.
Potential reorganisation of the ownership of Commercial Assets (being the Office, Retail, Food & Beverage and other commercial uses) within the Power Station building to Permodalan Nasional Berhad (“PNB”) and the EPF.
In January 2018 it was announced that the shareholders and management of Battersea Power Station were considering a divestment of the Commercial Assets and had initiated conversations with the EPF and PNB.
Currently PNB and the EPF together own approximately directly and indirectly 67% of the equity in the Battersea Power Station development. PNB holds majority stakes in S P Setia and Sime Darby Property which jointly own 80% of the equity in the Battersea Power Station development whilst the EPF directly owns 20% of the Battersea Power Station development.
On 18 January 2018 PNB and the EPF signed a Heads of Terms with Battersea Phase 2 Holding Company Limited to initiate preliminary negotiations to purchase the Commercial Assets for an estimated total consideration of £1.608 billion. The purchase price is subject to further due diligence and on the basis that the development is completed and fully tenanted.
As previously assured by all parties the decision to explore the potential reorganisation of ownership is purely an investment consideration initiated by the BPS Board and management team, together with the EPF and PNB.
From the perspective of Sime Darby Property and S P Setia, as property developers, 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. The transaction is expected to generate an attractive long term yield for the investors.
As announced on 15 May 2018 the exclusivity period for the transaction has been extended to 29 June 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.