Covid-19 to delay London's Battersea Power Station redevelopment?

An artist impression of the Battersea Power Station redevelopment, one of the largest regeneration projects in Europe. Image source from https://batterseapowerstation.co.uk/

Published in NST Property

The Battersea Power Station redevelopment, one of the largest regeneration projects in Europe could face a slight delay due to the Covid-19 pandemic, said sources familiar with the matter.

Sources said that whilst work has recommenced at the project last month, not all the workers are on site.

The £9 billion site was closed on March 24, just after UK prime minister Boris Johnson put the country into lockdown.

The Battersea site had over 4,300 workers before the Covid-19 crisis escalated.

UK media reported that the unprecedented large-scale stalling of projects and closure of sites like Battersea, HS2, and Crossrail due to Covid-19 had affected £26 billion worth of construction jobs in March.

Battersea Power Station Development Company Ltd (BPSDC) chief Simon Murphy said in a March statement that following the temporary closure of the site and in light of the government requirements and guidelines, the site should remain closed for a few weeks.

He promised a review of the position by April 17 and if deemed appropriate to reopen, the main site works would recommence on April 27.

Hopes that the construction site would be back up and running on April 27 were dashed with the reopening put back until May.

As a result, Apple's plan to move into its sprawling new U.K. headquarters could be delayed.

Apple is the largest tenant in Battersea Power Station and its office will account for circa 40 per cent of the total office space in the whole development.

The iPhone maker was set to move 1,400 staff from multiple Apple offices around London into the new 500,000 square foot space, which will occupy six floors of the central Boiler House inside the historic icon, in 2021.

Battersea Power Station Development Company Ltd chief Simon Murphy said it is too early to give a precise indication of the impact of Covid-19 on the development. Image source from https://batterseapowerstation.co.uk/

NST Property reached out to Murphy and was told that it is too early to give a precise indication of the impact of Covid-19 on the development.

Murphy said works recommenced at the beginning of May in stages and excellent progress has been made across the site in the past month.

"A large proportion of the workforce are back on site already with the numbers increasing every day," he said.

Murphy said whilst the site was temporarily shut, design and other offsite works continued to ensure the time is used effectively.

The project is master-planned by Rafael Viñoly Architects. It features buildings and exterior spaces designed by BIG, Gehry Partners, Foster + Partners, James Corner Field Operations, and LDA Design.

On the company's website, Murphy said it is making sure that both Circus West Village and the development of the power station and Electric Boulevard continue to run as efficiently as possible throughout this period.

"There are robust plans and procedures in place to ensure we remain resilient," he said.

Murphy said, following the temporary closure of the construction site on March 24, the company had spent a number of weeks working together with its construction managers, Mace and Sir Robert McAlpine, to test and develop new site processes that fully comply with the Covid-19 site operating procedures.

He said with the full support of the company's shareholders it will continue to deliver this iconic project through these unprecedented times and prepare to navigate the challenges ahead.

Phase 1, completed in 2017, is Circus West Village and worth an original £400 million. Image source from https://batterseapowerstation.co.uk/

Development progress

The 42-acre Battersea Power Station, poised to be one of the world's most innovative mixed-use developments is a project by a Malaysian consortium comprising S P Setia Bhd, the Employees Provident Fund (EPF) and Sime Darby Property Bhd.

The development, which anticipates 25,000 people to be living and working there, consists of eight phases, each designed by a range of renowned architects.

Phase 1, completed in 2017, is Circus West Village and worth an original £400 million. It consists of 11 blocks of apartments with 865 units housing more than 1,000 residents.

Phase 2 has about 253 units of apartments including penthouses at the main power station building, and the take-up rate is over 90 per cent.

BPSDC had targeted for Phase 2 to be completed in stages later this year.

The commercial assets (of Phase 2) is owned by EPF and Permodalan Nasional Bhd (PNB). They acquired the assets in 2019 for £1.58 million (RM8.51 billion).

Mace is carrying out work on the second phase of the scheme, estimated to be worth £1.15 billion. This phase will include retail and food space as well as an events venue and park and is due to complete by the end of this year.

For Phase 3A, also known as the Electric Boulevard, it will comprise 539 residential units with the main building, designed by Norman Foster and another three flower-inspired buildings by architect, Frank Gehry.

The residential units at Phase 3A were sold at an average price of £1,700 per sq ft, and the take-up rate is over 70 per cent.

The completion of Phase 3A is expected in 2021.

According to UK media reports, the second phase of the scheme and the third phase of the scheme had around 2,800 workers and 1,500 workers on it before the sites were shut.

Property sector may lag, despite ERP incentives

Higher unemployment and pay cuts brought about by the Covid-19 pandemic will dampen property transactions. File Photo

By NST Property, Published June 16, 2020

The Short-Term Economic Recovery Package (ERP) valued at RM35 billion may boost the country's economy but there are concerns that the property sector will lag amid larger unemployment and pay cuts brought about by the Covid-19 pandemic.

"A lot of small-medium enterprises, government-linked firms, and public-listed companies (PLC) are retrenching or asking their employees to go on unpaid leave until the situation improves. They are also cutting staff salary by up to 40 per cent and terminating contracts.

"So who will benefit from this stimulus package and who is addressing the issue of people losing their jobs or getting pay cuts? There are more than one million job losses now since the outbreak of the Covid-19.

"With the unemployment rate set to rise by the end of this year, more people will be skeptical to do anything concerning a big-ticket item like property. These include buying, selling, renting a new property and renovation. This will dampen property transactions," said the ex-chief executive officer and chief operating officer of several PLCs.

The measures introduced under the ERP for the property sector include the reintroduction of the Home Ownership Campaign (HOC) and revised Real Property Gains Tax (RPGT).

Gains arising from the disposal of residential properties by Malaysian citizens between June 1, 2020, to December 31, 2021, will be exempted from RPGT. The exemption is given up to three residential properties per individual.

Currently, the applicable RPGT rates for Malaysian citizens and permanent residents range from five per cent to 30 per cent depending on the holding period.

The existing financing limit of 70 per cent margin on housing loan for a third residential property valued at RM600,000 and above will also be lifted.

"These incentives are supposed to ease the challenges faced by developers during this difficult time and to provide financial relief to buyers. But if people do not have income, how are they suppose to buy a property and get a loan? The assessment of the bank is so stringent. There is no loan without proper income.

"While the HOC is a good thing, it will only benefit people with money. A cash-rich person will buy a property and keep it until it reaches a certain value and years down the road will flip it, make money, and walk away. I know cash is king now but if I have a lot of cash, I still won't buy a property as there are so many uncertainties right now. I would rather hold on to my cash," said the ex-property chief.

On RPGT, the ex-chief said that while it is a good move to boost property transactions, nobody will sell in a slumping market unless they are desperate, as they will not get the value their property deserves.

"If I bought my property for RM1 million, and a year ago it was worth RM1.5 million, I am not going to sell it today when the price has dropped to RM1.2 million. I will weight it out even if it takes three years or more for the price to get back to RM1.5 million. By then the RPGT exemption will no longer be applicable. I would still sell if I want to in three years.

"Unless I bought my property 20 years ago and if I sell now under the current market conditions and still make a lot of money, I would consider it.

"Regarding the third house financing with up to 90 per cent loan, I feel you are just going to create more debts in the market. I think the government didn't address the problem. Overall, I believe the housing market will continue to suffer," said the ex-chief.

A silver lining for property?

PropertyGuru Malaysia country manager Sheldon Fernandez said that property provisions in the ERP serve to unlock the demand for high-rise and landed residential.

Fernandez said while Gross Domestic Product (GDP) projections have gone from 4.6 per cent to -4.7 per cent for 2020, the deficit spending approach taken in the ERP is an established strategy in addressing potential recession trends, laying the foundation for a return to pre-Covid-19 levels for the market.

Pre-crisis asking prices were on the uptrend, with the PropertyGuru Malaysia Property Market Index rising by 0.63 per cent to 89.46 in the first quarter of 2020, along with a strong interest in the central region.

In May, web traffic for properties priced RM501,000 to RM700,000 and RM701,00 to RM1 million saw the highest increase on the property portal, at 10.4 per cent and 12.7 per cent respectively, he said.

Fernandez said similar increases were seen in condominiums (23.5 per cent), service residences (19.2 per cent), 3.5-storey terraced homes (28 per cent), and SOHO units (20 per cent), indicating healthy demand for these property types as property bounces back post-crisis.

However, search patterns moved away from the central region, with Johor (22.5 per cent) and Penang (19.3 per cent) as prime beneficiaries.

On the HOC, Fernandez said that it could help address ongoing residential overhang concerns, having sold 31,415 units worth RM23.2 billion in 2019.

"The overhang declined to 30,664 units worth RM18.82 billion in the same year, though this downward trend will likely be impacted by the Covid-19 crisis.

"However, some clarity is required when executing these provisions. Do stamp duty exemptions apply to new launches as well as overhang units? If so, it may be difficult to reduce the overhang even with HOC 2020," he said.

Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum said 60 per cent of its sales in 2019 was derived from the previous home ownership campaign. File Photo

Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum said the reintroduction of the HOC bodes well for the group to work towards achieving its 2020 sales target of RM1.6 billion.

The developer secured 60 per cent of its sales in 2019 from the previous HOC campaign.

Additionally, the government's move to uplift the 70 per cent margin of financing limit for the third housing loan onward for properties valued at RM600,000 and above during the HOC period will encourage upgrade of homes, he said.

"The previous HOC introduced in 2019 has proven to be effective as it has garnered positive results in terms of sales and most importantly, increasing the country's home ownership level, particularly first-time homebuyers. Malaysia still has a large population of youths whom have yet to own their first homes and thus, the HOC will help provide first-time homebuyers the opportunity to own their ideal home," he said.

Lower appetite for sub-sale market

Joe Hock Thor, CEO of MyProperty Data, operator of the PropertyAdvisor platform said more than 60 per cent of the sub-sale market in 2019 consisted of first-time buyers.

He said with so much uncertainty, he does not expect to see demand returning to pre-Covid-19 levels among first-time buyers in the sub-sale market until at least the fourth quarter of 2020.

He also believes that buyers looking to purchase a home at this current juncture might be greeted with better options, but that it is vital to undertake due research.

BCorp moving forward, cautiously

By Sharen Kaur
Published in NST Property, June 16, 2020

Berjaya Corp Bhd (BCorp) said almost all business operations of the group in Malaysia, including hotels and malls have resume partially or fully but going forward their performance will be affected mainly due to the expected liquidity squeeze arising from the contraction of the economy.

The group's property development business segment is expected to be impacted by slower property sales, it said.

Berjaya Corp Bhd founder Tan Sri Vincent Tan. File Photo

BCorp, which is founded by Tan Sri Vincent Tan said the lockdown measure will also affect the construction progress of the group's ongoing projects.

As for shopping malls, BCorp expects that the footfall will continue to remain low due to the general public still being wary of the Covid-19 infection despite the implementation of preventive standard operating procedures.

"The low footfall may create downward pressure on rental collections and revenue," it said in a filing with Bursa Malaysia today.

The group's shopping mall and complexes had granted rental relief (of which a 14-day relief period fell in the third quarter and the balance 14-day relief falls in the fourth quarter) to eligible tenants during this challenging time.

As for the hotels and resorts business segment, BCorp also expects that the occupancy rates and the revenue from events will remain low arising from low tourist arrivals coupled with new social distancing rules during the recovery movement control order period.

BCorp expects that the recent incentives announced under the Short-term Economic Recovery Plan, particularly for the hotels and resorts, motor industry, and property development business segments, may partly mitigate the adverse impact of the Covid-19 pandemic.

The group registered revenue of RM6.13 billion and pre-tax profit of RM522.04 million for the cumulative nine-month period ended March 31, 2020, largely contributed by the group's gaming and motor distribution businesses.

The property development segment reported higher revenue in the third quarter ending March 31, mainly due to the completion of Kensington Gardens in Penang and sales of units from previously completed local projects.

The hotels and resorts business segment had registered lower occupancy rates mainly due to the lower demand from the leisure and corporate markets and lower revenue from events arising from the low influx of tourists as the tourism industry was severely affected by the Covid-19 pandemic since January 2020.

Prior to the imposition of the global lockdown, the segment was already affected by lower sales, cancellation of events, and room sales primarily due to the growing concerns and uncertainties created by the Covid-19 pandemic.

The segment had also written off about RM7.06 million in respect of certain property, plant, and equipment which were destroyed in a fire at Berjaya Tioman Beach Resort, Pahang.

The adverse results in the segment, however, were overshadowed by the exceptional gain from the disposal of a property in Japan.

BCorp recently concluded the sale of the trust beneficial interest on the hotel component of the Four Seasons Hotel and Hotel Residences Kyoto, and recorded a significant gain of about RM662.11 million.

YTL Hospitality REIT bullish on long term prospects of the hospitality sector

The new rooms at JW Marriott Kuala Lumpur following the asset enhancement. File Photo

By Sharen Kaur, Published in NST Property, June 16, 2020

YTL Hospitality Real Estate Investment Trust (YTL Hospitality REIT) says the Covid-19 pandemic has adversely impacted the group's operations but it remains confident of the long term prospects of the hospitality sector.

The World Health Organization declared the Covid-19 outbreak a global pandemic while the International Monetary Fund (IMF) adjusted global economic growth projection to contract by three per cent this year, much worse than the 2008/2009 global financial crisis.

"The unprecedented pandemic has adversely impacted the tourism, travel, and hospitality industries worldwide and business recovery is expected to take a longer period given the uncertainties and challenges that are ahead.

"Notwithstanding the short term challenges, the Manager (Pintar Projek Sdn Bhd) remains confident of the long term prospects of the hospitality sector," it said in a filing with Bursa Malaysia today.

As at March 31, 2020, YTL Hospitality REIT has 15 properties under its portfolio, worth RM4.62 billion. It operates 10 luxury hotels and serviced residences in Malaysia, three in Australia and two in Japan,

For the nine months ended March 31, 2020, YTL Hospitality REIT recorded revenue and net property income (NPI) of RM356.67 million and RM190.94 million, respectively, as compared to RM372.24 million and RM193.02 million, respectively, recorded in the same period a year ago. This represented a decrease of 4.18 per cent and 1.08 per cent respectively.

The group recorded a pre-tax profit of RM135.16 million for the nine months, an increase of 61.19 per cent as compared to a pre-tax profit of RM83.85 million recorded in the preceding year corresponding period, mainly due to the unrealised foreign currency translation gain on borrowings denominated in foreign currencies.

The increase in revenue and net property income was mainly due to the additional rentals recorded from JW Marriot Hotel Kuala Lumpur following the refurbishment completed in June 2019.

Additionally, the acquisition of The Green Leaf Niseko Village in Japan in September 2018 contributed to the increase in revenue and net property income for the current financial period ended March 31, 2020.

Pintar Projek Sdn Bhd executive chairman Tan Sri Francis Yeoh Sock Ping said it took immediate measures to review business continuity plans, tighten cost-saving measures and delay non-essential capital expenditures to mitigate the financial impact. File Photo

Pintar Projek executive chairman Tan Sri Francis Yeoh Sock Ping said that revenue and NPI from the Sydney Harbour, Brisbane, and Melbourne Marriott hotels in Australia were impacted by the Covid-19 pandemic from February 2020.

"Australia's borders were closed to all non-residents from March 20, 2020, as the government implemented stricter social distancing measures to contain the pandemic. However, the three hotels participated in the Australian government's programme for self-isolating guests and remained in operation throughout, and we took immediate measures to review business continuity plans, tighten cost-saving measures and delay non-essential capital expenditures to mitigate the financial impact."

In Japan, the Japanese government declared a one-month state of emergency in April 2020, which was extended to May 31, 2020. The lifting of the state of emergency was declared on May 25, 2020 as the implementation of emergency measures is deemed no longer necessary.

In a separate announcement, YTL Hospitality REIT said that Pintar Projek has carried out revaluations of its real estate assets in Japan and Australia.

The assets are Hilton Niseko Village, The Green Leaf Niseko Village, Sydney Harbour Marriott, Brisbane Marriott, and Melbourne Marriott.

All the assets, except for The Green Leaf Niseko Village had decreased in market value. The decrease, however, was marginal.

The revaluations decreased the unaudited net asset value per unit of YTL REIT and its subsidiaries from RM1.6028 per unit as at April 30, 2020 (before the revaluations) to RM1.5030 per unit upon incorporation of the aggregate revaluation decrease of RM170.103 million.

The revaluations of YTL REIT's remaining real estate assets in Malaysia are being carried out and will be announced in due course, it said.

The different valuation dates were necessitated by the Malaysian Movement Control Order which were introduced on March 18, 2020.

Khazanah to decide whether to reopen or close KidZania KL

Khazanah Nasional Bhd’s leisure and tourism arm Themed Attractions and Resorts Sdn Bhd is mulling whether to reopen KidZania Kuala Lumpur post-Covid-19 or close it for good, sources said.

By NST Business, June 17, 2020

KUALA LUMPUR: Khazanah Nasional Bhd's leisure and tourism arm Themed Attractions and Resorts Sdn Bhd is mulling whether to reopen KidZania Kuala Lumpur post-Covid-19 or close it for good, sources said.

They said KidZania KL was not profitable and that its cumulative losses had been increasing since the movement control order was in place on March 18.

"The management is looking for an immediate solution," one of the sources said.

When contacted, a spokesperson from the company told the New Straits Times that at this moment, KidZania KL was not yet allowed to reopen as it is a family entertainment centre. The spokesperson declined to comment further.

KidZania KL opened nine years ago in Curve NX in the Mutiara Damansara township here.

The total cost of investment for the theme park is around RM80 million, but it has increased over the years due to upgrading works.

The project marked Khazanah's second investment in theme parks after its earlier investment of RM750 million for the development of Legoland in Iskandar Malaysia, Johor.

Themed Attraction also operates Kidzania Singapore but the educational and entertainment theme park in Sentosa is being closed down permanently after four years.

In a statement, Kidzania Singapore said business-wise, it had been a challenge for the theme park to achieve the returns needed over the years, and this had been exacerbated by the ongoing Covid-19 pandemic and its consequential economic fallout.

Aside from zero ticket revenue due to the temporary closure since early April, its revenue has also been impacted as commercial partners reduced their participation due to financial constraints and cost control efforts.

The decision to not reopen KidZania Singapore would affect about 103 employees, and they would receive appropriate severance packages with salaries, medical and other benefits paid up till their last day of service, it said.

The KidZania brand is an international franchise with 29 facilities in 22 countries worldwide.

Kids choose from over 100 different role-playing activities to earn money to spend or save as KidZania educates through experience, fostering the development of life skills without sacrificing fun.

Due to the coronavirus outbreak, all its facilities, except for those in South Korea and Japan, are currently closed to the public.

In Malaysia, the brand has been franchised to a joint venture between Khazanah and Boustead Holdings Bhd through Rakan Riang Sdn Bhd, in which the former holds an 80 per cent stake and the latter holds 20 per cent.