The Battersea Power Station building which includes Apple’s new London HQ is to be bought by two of its existing Malaysian investors in a £1.6bn forward funding deal.
Permodalan Nasional Berhad and the Employees Provident Fund of Malaysia have agreed to forward fund the 2.5m sq ft Grade II listed redevelopment, which represents phase 2 of the power station project, and will take long term ownership upon completion.
The deal is one of the largest ever transactions for a property asset in the UK – dwarfing Hong Kong group LKK’s £1.3bn acquisition of the Walkie Talkie, EC3, last year.
The ownership of the rest of the wider Battersea Power Station development remains unchanged.
Currently it is owned and being developed by the consortium of investors that bought it in 2012 for £400m through the Battersea Power Station Holding Company. Malaysian developers SP Setia and Sime Darby each own 40%, while EPF directly owns 20%.
However, both EPF and PNB own shares in SP Setia and Sime Darby, which gives them a current total ownership of around 70% of the entire project.
Alongside the power station building, the redevelopment of the 42-acre site includes around 4,300 flats across multiple phases being sold on the private market.
The power station building includes the main commercial elements of the scheme, and is split roughly 75% commercial and 25% residential. It is currently about 50% complete. Apple has agreed to take 500,000 sq ft from 2021 – about 25% of its space – and most of the 250 flats have been sold. Much of the remainder will be retail and leisure.
The deal is a show of confidence in the station from its existing investors, and provides the funding for its continued construction.
The development project has had its fair share of problems. Alongside fears of oversupply in the Battersea/Vauxhall residential market, which has seen flat flipping and price cuts, the power station has had issues with construction costs and contractors.
Last year it shifted the development of some of its affordable homes to latter stages of the scheme, citing concerns about overall IRR, earning the ire of mayor Sadiq Khan who said he was “furious” at the potential reduction in social housing.
The £1.6bn will be paid in stages through the rest of the construction phase of the power station building, which should complete in 2020.
Battersea Project Holding Company approved the deal, which it said was “aimed at reorganising the ownership of the power station building to create a long-term asset management and ownership structure”.
A BPSDC spokesman said: “With the conclusion of the proposed transaction, BPSDC will remain the active manager of the development. This creates a solid platform that will ensure the protection, active management and control of the historically important building are maintained.”
Battersea Power Station became operational in 1953 and supplied one fifth of London’s electrical power. After its closure in 1983 it became one of the city’s most famous white elephants.
The proposed new structure will not affect the shareholdings of Sime Darby Property, SP Setia and EPF in the Battersea Project Holding Company. Discussions are at a preliminary stage and a further announcement will be made in due course.
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