Consortium may extend Battersea timeline

KUALA LUMPUR: The consortium comprising S P Setia Bhd, Sime Darby Property Bhd and the Employees Provident Fund (EPF) involved in the redevelopment of the Battersea Power Station in London may consider extending the project from its proposed eight years to 12 to increase shareholder value.

S P Setia chief executive Tan Sri Liew Kee Sin told the media yesterday after a signing ceremony for a £790.2 million (RM4.13 billion) financing facility for the Battersea project that with the appreciation in value of its phase 1 since the launch, the consortium “would definitely love to slow down the project to maximise shareholder value” either by delaying certain phases or by extending their timelines.

“We have to do a risk analysis first. If we finish it faster, we recoup our money earlier. But if we delay the project, we may get a lot more money. In 2019, once the infrastructure and the Northern Line of the London underground have been completed and the shops and offices are ready, the value can only go up.”

Liew said he expects the initial gross development value of £8 billion to escalate to a minimum of £12 billion.

“We first estimated a price of £800 per sq ft (psf), but now we’re selling for £1,100 psf. Phase 2, which consists of 250 apartment units atop the historic power plant itself, will sell for £2,500 psf, and phase 3 for £1,800 psf. The market has bounced back in London and we are lucky to have got the project when it was at its bottom,” he said.

According to Liew, the consortium paid £50 psf of useable space but a neighbouring space was recently sold for five times higher or £250 psf. He said the consortium would not sell part of the land even if the price is right.

“In any case, we will only decide on the pace of the project once we have fully paid off the bridging loan, the term loan, and the land loan. Once we have paid off the infrastructure costs, profit will start flowing in. Until then, the goal is to move as fast as possible and to lock in all the sales, so that we will be able to pay the land and infrastructure costs,” Liew said.

The consortium secured the £790.2 million development and land refinancing facility yesterday for the project through a group of banks led by CIMB Bank Bhd as the coordinating lead arranger and book runner. Oversea-Chinese Banking Corp Ltd, Standard Chartered Bank, Maybank International and HSBC Bank are the joint lead arrangers.

The facility is one of the largest real estate financing transactions this year. It consists of a £532 million five-year development loan to support phase 1 of the development and the refurbishment of the Power Station façade over the next 3½ years, as well as a £258.2 million land loan to refinance the initial two-year loan obtained in 2012, used to fund the acquisition of the site, into a longer period of five years.

The signing ceremony was witnessed by Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, who quoting Jones Lang LaSalle, said as at September 2012, nearly a sixth of all recent buyers of the new central London property were Malaysians.

The project will consist of residential, commercial, and entertainment units serving as the town centre for the rejuvenated Nine Elms area. Phase 1 of the project was launched in January this year and 99% of its residential units were  taken up. Phase 2 will be launched in April next year and phase 3 in September. There may be as many as seven phases.

The consortium won the bid for the project in July 2012. It is Malaysia’s largest overseas property development and the largest project by value in Europe.

(From left) Maybank managing director (corporate banking) Hasli Hashim, HSBC managing director Andy Grisdale, CIMB CEO (corporate banking) Kong Sooi Lin, S P Setia Bhd CFO Datuk Teow Leong Seng, Liew, Abdul Rahman Dahlan, CIMB Group Holdings Bhd group CEO Datuk Seri Nazir Razak, Sime Darby managing director (property division) Datuk Abd Wahab Maskan, EPF deputy CEO (investment) Mohamed Nasir Ab Latif, OCBC head of business banking division Ong Eng Bin and Standard Chartered Bank Malaysia managing director (client coverage) Saif Malik after the Battersea Power Station signing ceremony.

This article first appeared in The Edge Financial Daily, on November 26, 2013.

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