LONDON, Sept 5 The new owners of London's Battersea power station must sell homes at more than double the average rate for the capital to hit financial targets, raising doubts about their plans for the site with a track record as a developers' graveyard.
The crumbling riverside edifice with its quartet of art deco chimneys has been derelict for 29 years, defeating a series of redevelopment attempts that included a theme park and a plan to put a restaurant table at the top of a chimney.
Its latest owner, a Malaysian consortium, bought the protected 39-acre landmark site for 400 million pounds ($635 million) in July.
The consortium is planning to build apartments, 1.7 million square feet of offices, shops and a hotel and must sell 3,400 homes to help the development reach a value of 8 billion pounds in 15 years' time.
That equates to selling 227 homes per year versus an average in London of 100, a number cited by property developers and brokers including consultant Savills. The first batch of homes goes on sale next Spring and the consortium aims to sell 800 by September, ploughing the proceeds back into the scheme.
"I think 800 homes is ambitious," Ravi Govindia, leader of Wandsworth council, told Reuters on the sidelines of a launch event on Wednesday, adding he would keep a close eye on sales rates. The council has planning powers over the site, a major part of the wider area's regeneration.
The owners, developers SP Setia and Sime Darby and government-run Employees Provident Fund pension fund, are betting on the buoyancy of the central London housing market and buyers wanting a piece of a building that has adorned a Pink Floyd album cover and featured in the Beatles film Help!
Prices for the best London homes have risen 49 percent since March 2009 said consultancy Knight Frank, mainly driven by foreign buyers investing in London property as a safe haven from the financial crisis and because of the weakness of sterling.
But they will have to contend with a huge batch of high-quality London homes hitting the market in the next decade. A report this week by consultancy EC Harris said 15,500 homes were planned, a 70 percent jump on last year that could hit developers as they flood the market by trying to cash in on the boom in luxury property.
The owners will also have to pay 203 million pounds to help fund the extension of London's tube network to Battersea as well as preservation costs that include rebuilding its chimneys, a fixture on the skyline for 80 years.
"The location sells itself," said Dato' Mohd Bakke Salleh, the chief executive of Sime Darby, who studied at the London School of Economics. "We have no problem selling 200 or 300 units in one go."
"All my friends have apartments in London and we will sell strongly in the UK and the Far East," added Tan Sri Liew Kee Sin, the chief executive of SP Setia who personally owns London property.
The site came onto the market after a 5.5 billion pound plan by Irish developer Treasury Holdings for homes, shops and offices collapsed in December. It was placed into administration by Lloyds Banking Group and Ireland's "bad bank" the National Asset Management Agency.
The Malaysian team, which beat a bid from Chelsea Football club, appointed Rob Tincknell - who spearheaded the failed Treasury scheme - to lead its UK-based operation.
Tincknell defended his track record at Wednesday's launch saying the Treasury team did "an incredible job" getting the scheme approved in a short space of time and that he had a good record of delivering large projects in the UK.
($1 = 0.6295 British pounds) (Additional reporting by Alex Frew McMillan in Hong Kong; Editing by Erica Billingham)