By Tom Bill
LONDON, May 14 (Reuters) - The majority of bidders for London’s Battersea power station would need to flatten the landmark chimneys to create a financially viable scheme, experts familiar with the city’s most famous derelict building told Reuters.
About 15 bidders including Chelsea Football Club submitted plans this month to buy the protected 15 hectare site in southwest London, the subject of repeated failed redevelopment attempts in the three decades since it shut.
Selling agent Knight Frank is sifting through the bids and could draw up a short-list as early as this month. The price tag is in the region of 300-400 million pounds ($483-$644 million).
Before seeing a return, any successful bidder would also need to spend several hundred million pounds extending the tube train network to Battersea and preserve the huge crumbling brick edifice and quartet of art-deco white chimneys that have been a silhouette on the London skyline for 80 years.
“Many of the bidders will want to explore a more flexible planning consent that reduces the amount of capital lock-up in the project,” said Clive Pane, partner and head of planning and development at property consultant Drivers Jonas Deloitte.
Pane has one of the most intimate understandings of the site in British property circles, having advised various interested parties in the last few years, including local authority bodies and potential buyers from the UK and overseas.
A very small number of wealthy overseas buyers have the ability and appetite to inject the required upfront capital, another source close to the bidding process told Reuters.
“The majority would like to knock the thing down as it’s the only way to make the site work,” he said. “They will include options to demolish or part-demolish in their bids and try to start further discussions about the various possibilities by keeping their numbers vague,” he added.
One option to lower the upfront costs would be for Lloyds and NAMA to swap debt for equity in a new joint vehicle with the successful bidder, though it was unlikely as the lenders’ overriding priority was to recover their debt, he said.
The May 4 deadline for submissions was a problem as the London Mayoral elections took place the day before and uncertainty over who would win power meant bidders couldn’t easily take soundings as to how much opposition there would be to demolition, the source said.
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. The site was placed into administration by Lloyds Banking Group and Ireland’s National Asset Management Agency, or “bad bank”, which are reportedly owed about 400 million pounds between them.
In addition to Chelsea, which does not propose demolition, bidders linked to the site include Malaysian developer SP Setia , the state of Qatar, Chinese firm Gingko Capital, Hong Kong-based conglomerate Hutchison Whampoa and British developers Berkeley and Argent.
The site would be worth an extra 470 million pounds to a developer that could demolish the building and replace it with 1,200 apartments, calculations done for Reuters by property consultancy EC Harris showed.
The extra cash would boost the viability of a stalled scheme central to the creation of 25,000 jobs in the wider area after Britain recently entered its first double-dip recession since the 1970s.
There would be a strong public backlash to demolishing the riverside site, however.
Its architect, Sir Giles Gilbert Scott, also designed London’s famous red telephone boxes. Europe’s biggest brick structure featured in the Beatles’ film Help! and on the cover of 1977 Pink Floyd album Animals.
A spokeswoman for English Heritage, which advises the government on protected buildings, said the problem with the scheme’s viability was not the power station but the inflated value of the land due to its purchase at the top of the last property cycle in 2007.
The grade two star listed structure should be preserved as “a masterpiece of industrial design” it said in a statement.
Any final decision on whether the power station could be demolished would be taken by the government.
A spokesman for local government authority Wandsworth council said any new owner would need to “(secure) the future of this iconic building”. Along with other developers in the area, they would also need to create new jobs, homes and two new underground stations.
A spokesman for the London Mayor’s office said there would be a “strong presumption against demolition” based on the planning vision for the wider Nine Elms district.
Knight Frank declined to comment.