LONDON.- A gust of wind howls around Battersea Power Station, an industrial wasteland by the Thames whose coal-fired furnaces were once used by the Bank of England to burn millions of pounds worth of banknotes.

A couple of tourists who have ventured off the beaten track around Buckingham Palace stand on tiptoe as they strain to photograph the gargantuan structure over a high screen.

As debt-laden developers face the ruins of recent extravagance, the Power Station -- Europe's largest brick building -- is a decrepit symbol of the past profligacy and present pain in Britain's real estate market.

In World War Two the central bank turned to Battersea to burn 120 million pounds of notes it had not had time to cancel as it introduced a new design against feared enemy forgeries.

Now Battersea must consume much larger sums if it is to remain standing.

The art-deco icon, which won global recognition through appearances in movies such as Stanley Kubrick's "Full Metal Jacket" and on the cover of Pink Floyd's 1977 album "Animals," has been derelict for over a quarter of a century.

It has already passed through numerous developers' hands since stopping power production in 1983 as Britain shifted to oil, gas and nuclear.

Developers now are courting investors for a 5.5 billion pound ($8.9 billion) redevelopment just as banks remain focused on unscrambling exposure to commercial real estate. The market has shown signs of recovery recently but is still treacherous.

"The building is likely to suffer major structural damage in five years if full repairs don't start before then," said Jeremy Castle, chief planning director at Treasury Holdings UK, the power station's current developers, referring to damage sustained after the roof was removed 20 years ago.

"We need to move fast to redevelop the site because the building is deteriorating quickly," he said.

The two-year downturn in Britain sliced almost 45 percent off average commercial property values. The Power Station's owners, who bought it for 400 million pounds in 2006, say its value fell by 15 percent in the six months to end-June 2009, causing the company to breach terms on some of its loans.

Battersea's imposing white brick chimneys have been a popular feature of London's skyline for almost 80 years, but its brickwork is held together by metal straps. Many bankers and financiers say plans to redevelop it are a commercial anachronism in a city obsessed with skyscrapers.

Years of Deleveraging

For Nick Collins, English Heritage's team leader for the east and south London, the listed Power Station is "one of the most important buildings at risk in the country.

"It stands in splendid isolation, it's seen and known and recognized so easily," he said.

Castle's employer Treasury Holdings is an Irish property firm that controls the Battersea site through a 67 percent share in debt-laden Real Estate Opportunities.

REO says the debt taken out to buy the station is still performing, but part of it, along with the majority of its loan book, will be transferred to Ireland's bad bank, or the National Asset Management Agency (NAMA) next year.

The Irish government is paying 54 billion euros ($78 billion) to buy risky commercial property loans with a combined book value of 77 billion from banks to clean up the legacy of excessive lending.

Of an estimated 280 billion pounds worth of unpaid commercial property loans in the UK, more than a quarter are tied to poorer-quality assets, a problem also faced by other European countries, according to CB Richard Ellis, the world's largest real estate consultancy.

Sector experts say until banks have unwound their exposure to commercial real estate -- particularly smaller loans taken out by amateur investors which may have gone unnoticed in 2009 -- their ability to resume anything close to pre-crisis lending to property investors will be limited.

The process may take five years or longer, they add.

Ambition and Controversy

The power station is no stranger to controversy. When construction began in 1929 it sparked protest from people who thought it would be an eyesore and damage local buildings, parks and even paintings in the nearby Tate Gallery.

Sir Giles Gilbert Scott, the architect behind the red telephone box and the Bankside power station -- now the Tate Modern -- was drafted in to boost its appeal for local residents.

The "upside-down table" of four white chimneys, each a third of the height of the Eiffel Tower, was built over a 20-year period to form two separate power stations in one building.

Situated a stone's throw from a famous home for unwanted pets, the site passed into the hands of private developer John Broome for 1.5 million pounds in 1987 but costs escalated and it was later sold to Hong Kong-based development company Parkview International.

A one-table restaurant atop a 100 meter-high chimney was just one idea put forward by previous developers: an indoor theme park and high-class shopping mall have been others that generated little more than critical headlines for the site.

REO's plans -- central London's largest ever planning application -- were submitted in October 2009. At more than double the cost of a previous developer, they include an emphasis on residential and commercial office space including 3,700 new homes and 1.6 million square feet (149,000 square meters) of office space.

Financial crisis had put paid to earlier, more extravagant ideas including an "eco dome" and 300-meter (1,000 ft) tower.

Adventurous schemes have long been derided in Britain.

"Faneuil Hall in Boston city center was an example of how our American cousins can redevelop a historic building and turn it into a great marketplace," said Chris Johnson, managing partner at architects firm Gensler, and the creator of the Gate in Dubai which houses the Dubai stock exchange.

"You can look at the Piers in San Francisco and see how they have been transformed into a great attraction."

Hard to Reach

Part of the problem is that while the Power Station may be very easy to see, it is poorly served by public transport.

"You can build great things but no-one will go to them if it's too hard to get there," said Johnson, whose company is not involved with Battersea. "You will constantly keep increasing the cost of the overall project."

Developers are promising that a surrounding industrial area, one of few pockets of undeveloped land in central London, will by 2020 be transformed into a new business hub similar to Canary Wharf in London's east, with the extension of the Underground network. The area will also house the U.S. embassy.

"Previous projects for the Power Station site failed because they underestimated the costs of repairing the existing building, the transport links didn't deliver the capacity required and they failed to encompass the entire area," said Treasury's Castle.

Fueled by Recession

Local resident Brian Barnes says the economic downturn has, ironically, contributed to the enlarged scale of the latest plans.

"They bought it for 400 million pounds, that was the high end before the recession, they've had to revalue it downwards so its not worth what they paid for it, now they've got to do this over-the-top scheme to realize any profit," he said.

Johnson, the architect, said the difficulty with sites needing infrastructure is that commercial projects must help fund them, but prospective commercial tenants demand residential development to create a market for their goods and services.

"It's a spiraling problem which eventually gets so monumental that nothing gets built," he said. "We can make any building work in this city, we're a nation of inventors.

"But someone has to help, someone has to help Battersea to get it moving. Whether it is the mayor (of London) or the government. It is that important."

(Writing by Lorraine Turner; Additional reporting by Daryl Loo; Editing by Sara Ledwith)