Mixed reactions to PNB, EPF’s Battersea asset acquisitions


Analysts are divided over Permodalan Nasional Bhd (PNB) and Employees Provident Fund’s (EPF) proposed asset purchases in the London-based Battersea Power Station project.

While some viewed the deal as a good investment, many are concerned about the long-term effect, especially with the current slowdown in the London property market.

“Newsflow coming from London’s property market indicates that the high-end segment is in a downturn where developers are finding it difficult to secure take-up of projects,” an analyst who spoke under condition of anonymity told The Malaysian Reserve (TMR) when contacted.

“If there was no slowdown in the market, it is unlikely the parties would undertake such a move, so the proposal maybe for the benefit of the listed companies involved in the deal.”

It was announced last Thursday that PNB and EPF entered into a heads of terms (HoT) agreement to purchase RM8.8 billion worth of commercial assets in the second phase of the Battersea Power Station from SP Setia Bhd.

The redevelopment project is being undertaken by Battersea Project Holding Co Ltd, of which SP Setia holds a 40% stake, alongside fellow property developer Sime Darby Property Bhd who also has a 40% stake.

EPF holds the remaining 20% interest in the joint venture which is, in turn, the holding company of Battersea Phase 2 Holding Co Ltd.

PNB has an indirect interest in the project via its 28.03% shareholding in SP Setia. The proposed asset purchases are aimed at reorganising the ownership of the commercial portion of the Battersea project under PNB and EPF who are long0term investor in the redevelopment, while Sime Darby Property and SP Setia are principally property developers.

If successful, the respective shareholdings in Battersea Project Holding Co will remain unchanged.

Pheim Asset Management Sdn Bhd CEO Leong Hoe Kit said the deal is likely beneficial to both parties though details of the agreement are sketchy at the moment.

“From SP Setia and Sime Darby Property’s perspective, it is a positive move as it would enable them to monetise on their assets from the sale and utilise the proceeds to complete the Battersea project.

“The deal is also positive for EPF and PNB as there is a need for institutional investors to diversify abroad and look outside of Malaysia for investments. Battersea is a good asset to help these companies diversify their revenue streams,” Leong told TMR.

He said there is no certainty that the transaction would go through, as it is only a HoT agreement, even though it is likely that the involved parties have already agreed on principle terms. Apple Inc is presently the main tenant of the Battersea development, having taken up 90% of the residential portion of the project.

Known as “Circus West Village”, the first phase of redevelopment was fully completed last year, with the 12 residential blocks and 100,000 sq ft of mixed-development handed over to the respective purchasers and tenants.

The entire project is due for completion in 2028 and covers 42 acres (17ha), which includes 3.5 million sq ft of mixed-commercial space and 4,364 new homes.