June 7 (Bloomberg) -- SP Setia Bhd. and Sime Darby Bhd. of Malaysia agreed to buy Battersea Power Station for 400 million pounds ($623 million), six months after the London landmark’s owner failed to pay debts and was put into administration.
SP Setia, Malaysia’s biggest publicly traded property developer by sales, and Sime Darby plan to renovate the derelict 38-acre (15-hectare) site and retain the power plant’s iconic chimney stacks, according to a statement today. They also agreed to build a subway station as an extension to London Underground’s Northern Line.
The Battersea plant, with four 350-foot-high smokestacks, is Europe’s largest brick building. The site on the south bank of the River Thames has been vacant since its sale to a group led by entrepreneur John Broome in 1983, a year after the power station closed. Previous plans included a theme park and a mall that would have been suspended between the chimneys.
“It’s a well located site in a relatively affluent part of London,” said Tony Travers, a director of the LSE London research division of the London School of Economics and Political Science. “It ought to work as a major location both for residential and business property. It’s just that hitherto it’s defeated all of the developers who’ve tried.”
The site, about 2.2 miles (3.5 kilometers) by car from the Houses of Parliament, was put on sale in February after its owners failed to pay lenders owed more than 500 million pounds. At least 10 bids were submitted for the building, including one from Russian billionaire Roman Abramovich’s Chelsea Football Club Ltd., a person familiar with the matter said last month.
“We are disappointed not to be selected as the preferred bidder for Battersea Power Station,” the soccer club said in a statement on its website. “We have been clear throughout this process that Battersea is one of a limited number of options the club is considering.”
The station “is viewed as fundamental to the success of the regeneration project,” the Kuala Lumpur-based companies said. The site’s development will “create a vibrant center for southwest central London,” they said.
SP Setia is developing projects in Australia, Vietnam and China. Sime Darby is the world’s biggest listed palm-oil producer and also has real estate, automotive and industrial businesses. The companies have 28 days to carry out due diligence and agree on the transaction’s terms, according to today’s statement. They were advised by Deutsche Bank AG’s RREEF real estate affiliate.
“SP Setia has said it wants to have 50 percent of its sales from overseas within five years, from less than 20 percent now,” said Sean Lim, an analyst at Hong Leong Investment Bank Bhd. “This is part of that plan.”
Battersea Power Station, featured on the cover of the 1977 Pink Floyd album “Animals,” was designed by Giles Gilbert Scott and built in two stages starting in the 1930s. The plant supplied a fifth of London’s electricity in the early 1950s, according to the Battersea Power Station Community Group website. The group campaigns to preserve the Battersea building.
The dilapidated edifice is in the city’s Nine Elms area, which will be home to the new U.S. embassy after the current one on Grosvenor Square was bought by part of Qatar’s sovereign wealth fund. The regeneration of the district may provide as many as 25,000 jobs, according to Wandsworth Council.
“The power station is one of the biggest development opportunities in Nine Elms and key to extending the Northern Line,” Council Leader Ravi Govinda said in a statement.
Planning permission was granted to Real Estate Opportunities Plc, controlled by Irish developer Treasury Holdings Ltd., last year for a 5.5 billion-pound redevelopment of the power station. SP Setia tried to buy the debt related to the power station in November for 262 million pounds and the offer was rejected.
Creditors led by Lloyds Banking Group Plc and Ireland’s National Asset Management Agency put the REO units that owned the site into administration, a U.K. type of bankruptcy reorganization, in December after they failed to make loan payments.