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£4.9B Of Malaysian Property Investment In U.K. Under Scrutiny By New Government As Battersea Deal Deadline Extended

Battersea Power Station

The leader of Malaysia’s new coalition government has said that investment by the country’s state-backed funds into U.K. real estate will be investigated as part of an anti-corruption drive.

Anwar Ibrahim told the Guardian deals including the purchase of a majority stake in Battersea Power Station would be investigated to see if they could be considered “dubious”. 

He said the need for an investigation was prompted by the allegations that one state investment vehicle, 1MDB, saw officials steal as much as $4B from the fund. The former prime minister Najib Razak is accused of having $681M in his personal bank account. He denies any wrongdoing.

1MDB did not invest in U.K. real estate, but Malaysian sovereign and state-backed funds have invested £4.9B in U.K. real estate since 2007, according to data from Real Capital Analytics. The largest deal was the purchase of One Exchange Square in the City and 90 High Holborn in Midtown for £524M from German fund KanAm in 2012.

The purchase of the Battersea Power Station development site for £400M was the third-largest by any Malaysian state fund, and has drawn particular scrutiny from Ibrahim.

In January state funds PNB and EPF announced a deal to buy the 1M SF office and retail element of Battersea Power Station, which will include a new 500K SF U.K. headquarters for Apple, for £1.6B from Malaysian developers Sime Darby and SP Setia.

“All these deals which are considered dubious, including investments in housing in London, will have to be investigated,” he told the Guardian. “Yes, that includes Battersea. Because they were made using state funds. We have to be convinced that this was the right investment decision and that there was no political influence or direction [within Malaysia].

“It’s clearly a political decision to invest. If there is something wrong then we will want to renegotiate.”

He did not specify what was meant by “renegotiate”, and for deals already completed that is clearly not an option. But the Battersea deal is still ongoing. The January announcement was the start of an exclusivity period for PNB and EPF, due to expire on 30 April.

On 15 May Setia announced that this period would be extended until 29 June, meaning the deal is still not completed. It was not clear whether the Malaysian government was actively pushing for the terms of the deal to be renegotiated.