SP Setia cancels London project

PETALING JAYA: SP Setia Bhd confirmed that it was in talks with Irish group Real Estate Opportunities (REO) to acquire a stake in the redevelopment of the Battersea Power Station in south London but the deal had fallen through as the creditors of REO had rejected its preliminary offer.

In an announcement to Bursa Malaysia yesterday, SP Setia said the lenders, Lloyds Banking Group Plc (Lloyds) and the National Asset Management Agency (NAMA), had in a letter dated Nov 23, informed SP Setia that they did not intend to engage further on SP Setia's preliminary offer.

The property group said it had on Nov 18 instructed its investment adviser to submit a conditional non-binding preliminary offer to acquire from Lloyds and NAMA, the senior debt facilities and the swap exposure and other related claims in the Battersea Power Station site and its holding company for 262mil (RM1.3bil).

“The preliminary offer was conditional upon satisfactory results from a technical, environmental, financial, corporate, tax and legal due diligence exercise to be carried out on the opportunity, and results of the detailed due diligence being presented to SP Setia's board and shareholders for approval,” it added.

SP Setia said its preliminary offer was made in the ordinary course of the group's activities to always seek out good opportunities in both local and selected international markets to expand its operations.

An official from SP Setia told StarBiz that the group had decided not to pursue the deal or make another offer.

Despite the deal having fallen through, SP Setia said it still believed that property development prospects in London were positive and would continue to look out and assess other possibilities to invest via strategic partnerships and landbanking opportunities there.

“Our recent success in penetrating the competitive Australian property market with the launch of our Fulton Lane project in Melbourne's central business district has also given us the confidence to explore other strategic global cities where the group's branding and strong customer base can be effectively deployed.”

An analyst with a bank-backed brokerage said the redevelopment of the Battersea power station would continue to be challenging given the need to set aside funds to conserve the derelict power station.

“There is a plan to link the site to the London Underground station, of which REO must agree on a 600mil financing terms. It is not certain whether the funding for the London Underground station has been sorted out.

“Plus the presence of a waste transfer station and a cement plant on the river frontage would make the development even more challenging,” he added.

Another analyst said if SP Setia had clinched the deal, it would be a shot in the arm for the group to take its brand to the global market.

“The location of the site in the border of London's Zone 1 and Zone 2 is strategic, given that London is still attracting massive foreign funds to invest in its real estate market.” The analyst said SP Setia could still shop around for other development opportunities in London.

Its healthy financial position with a net gearing ratio of only 0.2 times would afford it the opportunity to leverage on more bank borrowings for its expansion to the United Kingdom, he added.

By The Star