Shadow of conflict looms large over Battersea

By Khairie Hisyam

The grand plans at Battersea Power Station were the culmination of Liew Kee Sin’s glittering career in property development. Yet the man’s trail of conflicts has long cast a shadow over the project.

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When the Battersea Power Station (BPS) redevelopment was officially launched in London in July 2013, project chairman Liew Kee Sin was firmly in the spotlight amidst an ambitious transformation project for one of the city’s more iconic landmarks.

More than two years on, the man remains in focus yet for the wrong reasons – Liew’s continuing presence in the Nine Elms district, going from BPS chairman to competitor, has cast a shadow over the project even before his conflict with the project vis-a-vis a rival development emerged.

Hogging the limelight

For Londoners, the redevelopment of the long-derelict city landmark holds special interest. Likewise for Liew, it seemed, when it first launched.

BPS is under the care of Historic Buildings and Monuments Commission for England, or more commonly known as English Heritage, a statutory body that advises on the care of the historic environment in England.

This is by virtue of the structure’s status as a Grade II* listed building on UK’s Statutory List of Buildings of Special Architectural or Historic Interest, which was conferred on Oct 14, 1980.

The iconic power station, with history dating back to the 1930s, had been the subject of a number of proposed revitalisation projects that had failed to take off over the years. Derelict for the past three decades, this led to it being listed for sale on the open market for the first time in its long history in February 2012.

The Malaysian consortium of SP Setia, Sime Darby and the Employees Provident Fund (EPF) eventually won the bidding, edging out other contenders such as London Stock Exchange-listed Berkeley Group, Livingstone Brothers’ London and Regional as well as the Chelsea Football Club.

The scale of the project itself, with an estimated gross development value (GDV) of GBP8 billion (over RM53 billion) – potentially rising to GBP10 billion by the end of the 15-year timeline – is remarkably ambitious for a Malaysian undertaking.

And so it was launched in grand style in July 2013. Both the Malaysian prime minister and his British counterpart, along with the London mayor, were in attendance. The Malaysian partners flew several hundred guests from Kuala Lumpur in business class to be at the event.

Unmistakably, Liew, then-chief executive of 40% shareholder SP Setia and project chairman, was firmly centre stage as the man of the hour according to those present, basking in the glorious triumph of launching such a momentous undertaking.

“It was all about him (Liew) basically, not so much Battersea,” said one newsman who attended to KINIBIZ previously. “Would there have been so much expenditure if Liew was not leaving (SP Setia), and if it was his own company or if he had more than his two odd percent (at the time)?”

At the time, the clinching of the BPS site and the subsequent unveiling of its ambitious 15-year redevelopment would have seemed the apotheosis of Liew’s roughly two decades as a property developer, having risen to the top in Malaysia and now making waves in the world’s top property market.

However, the tail end of his journey up to that time, marking the beginning of a winding trail of conflicts, cast a stark shadow over the project.

Door out of SP Setia

When BPS redevelopment was launched in July 2013, Liew was on a ticking clock for his exit from SP Setia. And the market back in Malaysia was stirring with speculation that a remarkably fast-emerging developer, featuring a host of former SP Setia bigwigs alongside Liew’s own son, was to be his second coming after leaving SP Setia.

Events came to a head when he left SP Setia only to emerge in Eco World almost immediately, all the time remaining chairman of the BPS redevelopment. This in turn raised the first questions of a potential conflict of interest given he had a foot in two separate property developers, both listed on Bursa Malaysia.

The countdown to Liew’s exit from SP Setia was the aftermath of a takeover exercise by Permodalan Nasional Bhd (PNB) of SP Setia launched in late 2011. At the time, it seemed to have taken Liew by surprise.

Liew had been helming SP Setia since 1996, when a takeover of his own company by PNB resulted in him becoming a shareholder and taking management leadership.

PNB was already SP Setia’s largest shareholder with a 32.9% stake prior to the exercise and it remains unclear why it felt a majority stake was needed. It is also a major shareholder in Sime Darby, essentially making the fund a controlling stakeholder in the BPS redevelopment project.

In the aftermath, Liew became a joint offeror alongside PNB, who gained substantial control by 2012. Part of the deal was Liew would stay at most for three years, setting him for an eventual exit by March 2015 at the latest. He also got a put option for his then-11.27% stake, or 200.5 million shares, in SP Setia at RM3.95 per share, the takeover price.

Liew’s resignation eventually came in January 2014, with his time at SP Setia slated for an end by April 30 that year. He cited a desire to retire and spend more time with his children, “mentoring and guiding them.”

However, it did not escape notice of many market observers that Liew would continue on as BPS redevelopment chairman as well as managing director of another SP Setia project in China for continuity reasons as requested by the company, SP Setia said.

Eco World rises

In turn, his resignation came several months after a high-profile reverse takeover (RTO) of little-known developer Focal Aims Holdings by a private outfit called Eco World Development Sdn Bhd (EWDSB) in September 2013, acquiring 65.05% stake in the former for RM230.7 million.

The purpose of that RTO exercise seemed to fast track the creation of a listed property developer – by the time Liew announced in January 2014 of his coming retirement, Focal Aims had been renamed as Eco World Development Group Bhd.

EWDSB had already been causing a stir in the market even before the RTO exercise given the presence of a host of Liew’s known associates formerly of SP Setia as well as his own son Liew Tian Xiong, aged 22 at the time, as executive director.

Liew Tian Xiong was a joint offeror with the company in the RTO exercise and his part in the deal amounting to RM124 million – based on his personal stake of 35% post-takeover, though this was diluted later by asset injections – was financed by his parents, based on regulatory filings to Bursa Malaysia.

In a response to KINIBIZ at the time, Liew denied any link to the emerging outfit, saying it was his former associates and not him. “I want to retire, enough of work!” said Liew when KINIBIZ asked whether he would end up at the new outfit after leaving SP Setia.

Despite that unequivocal statement, however, it was somehow unsurprising when the freshly listed Eco World Development Group announced that Liew had joined its board of directors in early May 2014, less than a week after he left SP Setia.

This development immediately raised concerns. Could he remain focused on upholding SP Setia’s best interests as chairman of BPS redevelopment in particular while also sitting on the board of a rival property developer, which market observers have widely commented as bearing remarkable similarity to SP Setia?

However one SP Setia official, who KINIBIZ spoke to in passing previously, defended the dual connection, saying that since BPS redevelopment and Eco World were in different markets, direct conflicts did not arise.

Even at the time, the spectre of potential conflict and the massive interest in the ascendant Eco World, which observers dubbed as having “SP Setia genetics”, began overshadowing the BPS redevelopment with Liew firmly under the spotlight.

Conflict comes to Nine Elms

Half a year after leaving SP Setia and joining rival Eco World, Liew caused another stir in the market: he mooted a special purpose acquisition company (Spac) focusing on international property markets. The immediate question was whether he would become a direct competitor to BPS.

Essentially a blank-cheque listing, a Spac is a shell company with no business operations but seeking investor monies banking on the track record of its management team to utilise proceeds for buying assets that can become a core business activity, called a qualifying acquisition.

A Spac normally has three years from listing to complete such an acquisition; failing otherwise it would have to return what is left of shareholder funds and disband. In Liew’s case, he sought to raise some RM1.89 billion, based on the already-listed Eco World’s plans to subscribe to 30% in the initial public offering (IPO) for RM562.5 million.

The plan itself raised questions of conflict within Eco World apart from existing conflicts with Liew’s roles linked to SP Setia. Could Liew, a director of the existing Eco World, start another listed property developer, especially doing so with the Eco World brand through a Spac called Eco World International?

While the proposed Spac had been scrapped in favour of a traditional IPO route, which is in the process of application to the Securities Commission, it was in January 2015 that Liew officially became a direct competitor to the BPS redevelopment project where he is board chairman.

Early that month, Reuters reported that his personal investment vehicle Eco World Investment Co Ltd had signed a joint venture with Irish developer Ballymore Group for three residential property projects in London, totalling nearly GBP2.2 billion in GDV.

And one of them, Embassy Gardens, is located a stone’s throw away from BPS in the Nine Elms district. A week later on Jan 19, 2015, Business Times reported that Liew had tendered his resignation as BPS redevelopment chairman.

The public response by BPS shareholders to this report, however, raised eyebrows. Four days later the EPF, responding to KINIBIZ queries, stated there had been no decision yet concerning the reported resignation, implying that the report was true.

Yet a month later, on Feb 26, Sime Darby – another shareholder – refuted this news when asked by assembled media at a press conference. “As far as I’m concerned nothing official came to us,” said president and group chief executive Mohd Bakke Salleh.

Why didn’t Liew leave?

On at least two separate occasions, Liew admitted on record that there was conflict between his role in the larger Eco World realm and his position as BPS redevelopment chairman, first to The Sun Daily in March 2015 and later to The Star in April 2015.

“There is conflict but I declared (to the authorities) and I’m transparent about it,” The Sun reported Liew as saying on March 20, 2015. “It is up to the shareholders (to decide).”

Raising further eyebrows were his remarks to The Star, reported on April 25, 2015, that he had wanted to leave his role at Battersea multiple times only to be asked to stay.

“When I resigned from SP Setia in April 2014, the Battersea board suggested I wait till September 2015. At that time, there was no Eco World Ballymore (Holding Co Ltd, a developer of the three projects) yet,” said Liew to The Star.

He further said that when he announced the Ballymore joint venture, he felt “obligated to resign” but was again told to wait. “We have three projects which may seem to be competing with BPS, although in terms of price point, they are priced differently,” Liew was quoted as saying.

“I am under a lot of pressure… morally, I should resign. But when I bought (my land in London), I also declared (to the board). I am duty-bound to declare on the grounds of good governance. At the same time, I am also duty-bound as chairman because this year is crucial for Battersea.

“I am trying to get out of this (situation) because I want to reduce the areas of conflict between myself, the government and everybody else,” added Liew in the interview with The Star.

In any case, the ongoing saga over what was now a tangle of conflicts with Liew at the heart of it had crept into a defining aspect for the BPS redevelopment project for observers based in Malaysia.

While he had suggested that he felt obligated to resign, however, it is unclear what was stopping him from following his conscience regarding the conflicting interests he needed to uphold despite pleas from BPS redevelopment shareholders.

The question is especially glaring considering his previous insinuations that the BPS redevelopment holds special interest for Malaysians, flying the flag so to speak on the global scene. “Battersea is Malaysia’s pride and joy and it is an iconic project,” said Liew previously to The Star.

Reluctance to show the door?

Privately, sources close to the BPS redevelopment shareholders told KINIBIZ that there was concern over news that he had become a direct competitor to the project vis-a-vis the Ballymore deal. However, no action to remove him followed, at least publicly.

“The (Ballymore) deal would have implications on his position,” said one source to KINIBIZ at the time of announcement.

Throughout the unfolding trail of growing conflicts, from the final days leading up to Liew’s exit from SP Setia up to his joint venture with Ballymore, BPS redevelopment shareholders seemed content to keep him as chairman.

It is an understandable stance given the man’s reputation. Having led SP Setia’s rise since he came on board in 1996 to become arguably Malaysia’s premier property brand up to his departure, Liew is widely credited with great vision and marketing ability as a property developer.

In respect of BPS redevelopment, the “Liew factor” was arguably present, noted observers to KINIBIZ, as seen from phenomenal responses to the first two phases which strongly riposted initial criticism over the viability and ambition in the redevelopment plans.

Therefore the concern would be on whether the vision and belief would remain in BPS once Liew left. This was a question posed to Liew himself in an interview with business radio station BFM in September 2014.

“I’m sure they will,” said Liew to BFM. “The shareholders will have to find the best guys available in Malaysia or otherwise to continue.”

However, the question then arises on whether the qualities Liew brought to the project justify him staying amidst rising concerns over the conflict of interest which came to a head when he signed the deal with Ballymore to compete directly with BPS.

And now that he has left, the project will have to find its way forward without him, though the dark clouds long overshadowing BPS from his trail of conflicts remain.

In the next article, KINIBIZ speaks to analysts and Battersea Power Station Development Co CEO Rob Tincknell on what lies ahead for the Battersea Power Station project.

Yesterday: Times a-changing at Battersea

Tomorrow: Can Battersea power ahead in a problematic market without Liew?