PNB: Battersea Power Station set to be London’s new growth area

One of the value propositions for Battersea is its good connectivity


PERMODALAN Nasional Bhd (PNB) believes that the extended public transportation connectivity and appeal of high-profile tenants will propel the Battersea Power Station development as UK capital’s new growth area.

Chairman Tan Sri Abdul Wahid Omar (picture) said the value proposition for the revamped Grade II-listed building could outweigh the concerns on a lacklustre demand for office space in London.

“At the moment, the demand is largely focused on the West End area, therefore, many are concerned about office spaces in the London financial district area.

“Since it is a new growth area, one of the value propositions for Battersea is its good connectivity, as the Northern Line stretches are there, the Thames River taxi services are also there, as well as the new US Embassy,” Abdul Wahid told reporters at the Malaysia Leadership Succession Summit in Kuala Lumpur yesterday.

He added that with Apple Inc’s 500,000 sq ft tenancy in the former boiler house, the £9 billion (RM49.2 billion) development has all the merits to attract global investments into the South Bank area.

The sovereign wealth fund and the Employees Provident Fund (EPF) announced last month that for the second phase of the Battersea Power Station, they plan to purchase about RM8.8 billion worth of commercial assets.

The proposed asset purchases are aimed at reorganising the ownership of the commercial portion of the Battersea project.

The project is currently undertaken by Battersea Project Holding Co Ltd, of which SP Setia Bhd holds a 40% stake alongside fellow property developer Sime Darby Property Bhd who also has a 40% stake. The remaining 20% interest in the joint venture is owned by EPF.

However, amid reports of cost overruns in the redevelopment of the iconic London landmark, the mega deal had drawn some flak from various quarters who viewed the purchase as a “bailout”.

Both PNB and EPF rebutted the claim stating that the potential acquisition is seen as a strategic opportunity to secure ownership of a unique real estate asset that will deliver a sustainable income stream.

The Malaysian Reserve had previously reported that analysts had mixed views over the proposed assets purchases by PNB and EPF.

Although some regarded the deal as a good investment, given the current slowdown in London’s property market, many remain concerned about the long-term effect.

One analyst, who prefer to remain anonymous, said the movement of the segment points to a downturn in the high-end segment where developers are struggling to secure project take-ups.

“The proposal may only benefit the listed companies involved in the deal, otherwise it is unlikely the parties would undertake such a move,” the analyst said.

Pheim Asset Management Sdn Bhd CEO Leong Hoe Kit, meanwhile, said though details of the agreement are unclear, the deal would be beneficial to both parties.

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

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