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M'sian JV buys Battersea Station

CHANNEL ISLAND (July 5): S P Setia Bhd and Sime Darby Bhd, together with the Employees Provident Fund (EPF), have acquired London's Battersea Power Station for £400 million (RM1.98 billion).

The three parties entered into a joint venture agreement on Wednesday in Jersey, Channel Islands to form the Battersea Project Holding Co Ltd (BPHCL). Subsequently, BPHCL's wholly-owned subsidiary Battersea Project Land Co Ltd signed the sales and purchase agreement with the Joint Administrators and Receiver, Alan Bloom and Alan Hudson of Ernst & Young LLP (EY). S P Setia and Sime Darby own a 40% stake each in BPHCL, and the EPF has the remaining 20%.

On June 7, 2012, S P Setia and Sime Darby signed an exclusivity agreement with the joint administrators and Receiver after they were identified as the preferred bidders for the Battersea project following an international bidding process conducted by EY and Knight Frank LLP, United Kingdom.

"London is a strategic and important target destination for property investment and development. As such, the Battersea project represents an excellent opportunity for us and our partners to expand our footprint into a key international market," said Sime Darby president and group chief executive Datuk Mohd Bakke Salleh in a Bursa announcement on Thursday.

S P Setia president and CEO Tan Sri Liew Kee Sin said, "The Battersea Power Station site is undoubtedly London's most important and central urban regeneration site. This is truly a golden opportunity for the partners to make our mark as global property players."

The 39.1-acre Battersea Power Station site is located in the heart of London, on the south bank of the River Thames in the vicinity of Westminster. The site is situated in the north east corner of the London Borough of Wandsworth and represents possibly one of the last few opportunities for such an important development in London.

The approved master development plan for the Battersea site by award-winning architect Rafael Viñoly includes a sustainable mixed development comprising residential and commercial units. The power plant with its iconic will be conserved and preserved. The 15-year project has an estimated gross development value (GDV) of about £8 billion.

The project is expected to see strong capital growth as it will be part of the strategic Vauxhall Nine Elms Battersea Opportunity Area Planning Framework, the largest urban redevelopment area in central London. An extension of the Northern Line underground network will also transform the area with two new stations within the development.

"The Opportunity Area is expected to create 25,000 new jobs and the Power Station building will be at the heart of it all, so it is important that this iconic and renowned Grade II-listed structure is properly restored and brought back to its old grandeur," said Liew.

Liew believed that the construction of the Northern Line extension is fundamental to the success of this regeneration project.

"As such we intend to actively support Transport for London and Wandsworth Council in their efforts to implement and make this essential infrastructure a reality," he added.

According to Mohd Bakke , the joint venture is part of the Sime Darby Group's strategy to strengthen its Property Division as a core business by embarking on niche developments in high growth international markets.

"The Battersea project will drive Sime Darby Property's effort to achieve 20% income contribution from its overseas operations," said Mohd Bakke.

The Battersea acquisition is part of S P Setia's strategy to seek out good opportunities in selected international markets to expand its operations, in line with its long-term objective to become a global property player. At present, the developer has presence in Vietnam, Singapore, Australia, China and Indonesia.

Liew said the current dynamics of the London real estate market was extremely attractive and the city is close to the hearts of many Malaysians. "We are optimistic that the Battersea project, which we hope to develop over the next 15 years, is going to be a significant success and that the development will be the catalyst for strong rental and capital growth in the area."

The joint venture with Sime Darby and EPF, both of whom have their own wide network of customers and strong following, further improves the project's prospects.

"With the combined strong branding and impeccable reputation of our joint venture partners, I am confident that much of the first launch, which we hope will take place during the first half of 2013, will be taken up by our own customers and network of supporters," Liew said.

"This will give other buyers, both from within and outside the UK, the confidence to invest in future phases of the project. From there, we intend to build a truly cosmopolitan customer base thereby further strengthening S P Setia's branding in international markets and extending our market reach" he added.

"The joint venture allows the two development partners to leverage on their individual strengths acquired over years of experience both in their home market in Malaysia and the various foreign countries the two companies have operated in," Mohd Bakke concurred.

He added that wiith the EPF's involvement, the joint venture has the additional financial muscle required to deliver this complex project in London. The EPF is the world's ninth biggest pension fund in 2010 according to a Towers Watson report. It has investment assets of RM489 billion as at 31 March 2012.

"With Sime Darby and EPF as partners we have a consortium which is highly reputable and financially sound. More importantly, we all share a common vision for the redevelopment of Battersea together with a deep understanding of what is required to fully maximise and extract value from the redevelopment of this historic and iconic site," said Liew.

Meanwhile, in LONDON, Reuters reported that the JV said the site will be worth £8 billion (RM billion) after 15 years of building work, though it conceded the time line for the 39-acre project may slip.

The Channel island of Jersey is commonly used as a tax haven and base for investors seeking anonymity.

"There is no assurance that (the) external factors may not delay completion of the project," the companies said in a statement, referring to typical delays that can occur during construction work but that have added resonance for a site that has been the subject of repeated failed redevelopment attempts in the 30 years since it closed.

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