PNB-EPF acquires Battersea Phase 2 commercial units for RM8.4b

This is an important milestone in the Battersea Power Station development, says group MD


Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) have jointly acquired the commercial properties in Phase 2 of the Battersea Power Station development in London from Battersea Phase 2 Holding Co Ltd (BP2H) for £1.58 billion (RM8.35 billion).

A special-purpose vehicle (SPV) — PNB-Kwasa International 2 Ltd — was formed to undertake the acquisition with PNB holding a 65% stake in the SPV, and the EPF, the remaining 35%.

Under the terms of the deal, PNB-Kwasa International 2 is given a minimum guaranteed yield by Battersea Power Station throughout the construction period and up to five years post-completion with a price adjustment mechanism to account for any difference in actual rental income earned compared to forecast.

It will ensure downside protection for PNB and the EPF, while enabling the seller to earn-out upside in the development — should the actual rental income perform better than expected, a statement yesterday noted.

BP2H is a wholly owned subsidiary of Battersea Project Holding Co Ltd, which is jointly owned by Sime Darby Property Bhd and SP Setia Bhd — each holding a 40% stake — while the EPF has the remaining 20%.

“This is an important milestone in the development of the Battersea Power Station site, and it is a strong sign of confidence in the long-term success of this global property icon,” Sime Darby Property group MD Datuk Seri Amrin Awaluddin said in a statement yesterday.

“We are pleased to have secured this commitment from two of Malaysia’s leading institutions,” he added.

SP Setia president and CEO Datuk Khor Chap Jen said the company is positive on the long-term prospects of the project.

“We are pleased with the sale of the Phase 2 commercial assets. It will bode well with our business plans as we continue to play a major role in the overall development of this iconic project,” he said.

The transaction is expected to be completed in the first quarter of 2019.

London-based Battersea Power Station Development Co will continue to manage the project, while Battersea Power Station Asset Management Ltd and Battersea Power Station Estate Management Ltd will be appointed as the asset manager and property manager after practical completion of the power station building for an initial term of 10 years.

Sime Darby Property’s shares closed unchanged at 95 sen yesterday, giving it a market capitalisation of RM6.46 billion.

Meanwhile, SP Setia closed down one sen at RM2.39, giving it a market capitalisation of RM9.46 billion.

The Battersea Power Station project’s first phase consisted largely of residential units that were completely sold, while the residential component of Phase 2 has almost fully been taken up.

The commercial units in Phase 2 have been pre-let to anchor tenants such as technology giant Apple Inc for a 500,000 sq ft tenancy, according to recent news reports.

The second phase, however, has been hit by cost overruns — which are expected to hit returns on the project.