§ Mr. McNulty
On 29 May 2002, English Partnerships entered into legally binding contracts with Meridian Delta Ltd. (MDL), a consortium consisting of Lendlease plc and Quintain Estates and Development, and with the Anschutz Entertainment Group, for the redevelopment of the dome and approximately 170 acres of land on the Greenwich peninsula. Under the deal, Anschutz will construct a world-class standard 20,000 seat arena inside the dome, capable of hosting a wide range of entertainment and sporting events. No specific price is being paid for the land under the arena, but its value is reflected in the deal as a whole with MDL. Anschutz is committed to investing £135 million, and English Partnerships will be entitled to a share of profits made by the arena, after a priority return to Anschutz.
In the outer rim of the dome, and spilling out into the northern tip of the peninsula, MDL and Anschutz plan to construct a mix of eating, entertainment and leisure facilities—this part of the development is known as the dome waterfront. Again, the land value is reflected in the deal as a whole with MDL. MDL and Anschutz are committed to investing at least £65 million. Again English Partnerships will share in profits.
All risk in respect of the dome will transfer to Anschutz and MDL, who are required to maintain the dome until 2018. Should they decide at that time to remove the dome structure and redevelop the land, English Partnerships will be entitled to a 50 per cent. share of redevelopment proceeds. This protects English Partnerships' position on the redevelopment value of the land.
In respect of the rest of the peninsula land in the deal (around 146 acres), English Partnerships and MDL have agreed that they will develop the site jointly. Development is to take place over the next 20 to 25 years, with an end date of 2025. The detailed terms provide for English Partnerships to retain ownership of its land until individual plots are required for development. The payout will work as follows: first, an agreed minimum land value, on the sale of any parcel of land—this protects against any downturn—secondly, the uplift in the value of land, 1034W after planning permission and at the point of sale to a developer, to reflect development value. Calculation of the split varies across the phases of development, but broadly evens out to 50:50—after costs—assuming development of about 14 million square feet. Where MDL develops land itself, English Partnerships will receive the agreed minimum land value plus a share of sale proceeds, or the value of the development—both after costs—once the development is complete.
Under the terms of the original acquisition of the land, British Gas is entitled to 7.5 per cent. of sale proceeds or open market value across the site. This would apply in relation to any onward sale of land on the Greenwich peninsula by English Partnerships.
No negotiations between English Partnerships and British Gas have yet taken place on how exactly British Gas's entitlement is to be interpreted in the context of the deal with MDL and Anschutz. English Partnerships will ensure that the outcome of those negotiations represents good value for money for the public purse.
The deal's three parts—dome, dome waterfront, and the rest of the land—are subject to the grant of planning permission. Participants envisage making an application in the autumn. Until planning permission is granted the site will remain the responsibility of English Partnerships.
In agreeing to accept the terms of this deal, the Government have focused on four main aspects: value for money; regeneration benefits for the area; deliverability and a proper use for the dome.
As regards value for money, we have made it clear that we would only proceed with any deal if it provided proper value for money for the Government. That included comparison with the value for money which could be delivered by demolishing the dome, or by alternative development scenarios retaining the dome. The net present value of the agreements that I have just outlined to English Partnerships, assuming the full scheme is developed, is around £240 million as estimated by independent advisers. The expected cash to be received over a period of around 20 years will be up to £550 million.
The division of these proceeds between the Millennium Commission and English Partnerships has not been finally agreed. At the time of the Legacy deal a formula was agreed. Because that deal was of an entirely different sort to this one, the precise application of the formula to this deal needs to be considered further. But a fair split will be worked out. The process of working out that split does not affect the deal English Partnerships has done with MDL and Anschutz. On the basis of independent advice, we are satisfied that the deal is good value for money.
If the site had been sold outright now with no joint development agreement, the estimated value of the site—the amount we would have obtained in the market—was considerably less than the net present value of the deal of around £240 million. This is so whether the dome was there or not.
The other main comparator that we have considered is whether this current deal would have produced a higher return had the dome been demolished and the land under it dealt with in the same way as the wider peninsula lands. Independent advice from Jones Lang Lasalle satisfies us 1035W that the value to the Government of demolishing the dome would produce a lower return for the Government than preserving the dome, and developing the site in the agreed way. To make available more land by the demolition would not increase the amount of land which could be developed because the constraints on development over the period of the development are not the amount of land but planning and transport.
Moreover, we have received professional advice that the establishment of a successful and iconic venue enhances the value of the rest of the development.
These agreements allow the Government to participate in the increasing value of the land across the peninsula. This is sensible, and in the public interest. As the development proceeds, land values will increase. This will be reflected in the land value element in the payment to English Partnerships when the land is sold for development.
The deal also ensures a return to English Partnerships if the dome site is redeveloped at some point in the future. In addition, English Partnerships will share in profits from the arena and from the dome waterfront development.
The deal contains no promise by the Government to a particular crossing across the Thames. There is no commitment of any sort in the deal or associated with it. MDL has confirmed this.
The issue of enhancing the transport infrastructure is of huge importance to many communities in and around London. The increased activity on the Greenwich peninsula which comes from this development will inevitably be a factor which will bear on those decisions. But there is no promise on this issue in connection with the deal. The question of river crossings is a very complex regional issue, extending well beyond the Greenwich peninsula and relating to traffic flows across the region, not just in respect of individual developments.
As regards regeneration benefits, the Greenwich peninsula has for decades been contaminated and badly connected to the rest of London. It has been de-contaminated and the Jubilee line extension brings with it good transport links. This development will bring tens of thousands of jobs and up to 7,000 new homes, many of them affordable. We believe that it will have a significant regeneration effect. It will create a new mini city. The MDL scheme outperforms any other scheme in regeneration benefits.
As regards deliverability, the participants in the development include players with established records in delivering developments of the size and quality this project requires. This is their core business.
Anschutz Entertainment Group is part of the Anschutz Corporation, one of the largest private corporations in the United States of America. It has world-wide sporting and entertainment interests including the Staples Centre arena in Los Angeles. It has the resources to develop and the track record which shows that it can do it. It has the energy and commitment to deliver.
Lendlease is a major development company. It is quoted on the Australian stock exchange, operates in 40 countries and has a market capitalisation of around £2 billion. Quintain is quoted on the London stock exchange and has gross assets of £637 million.1036W
Lendlease owns Bovis in the UK and has successfully developed the Sydney Olympic village and Bluewater shopping centre. It is currently project manager for the ground zero project in New York.
These players have the resources, the experience and the ability to deliver.
As regards a suitable use for the dome, by creating an arena and associated entertainment and leisure facilities we have found an appropriate use for what is widely acknowledged to be a high quality landmark building. Public access is assured. Keeping the dome as the lynchpin of the development has been welcomed by the London borough of Greenwich and the Mayor's office.
The agreements represent excellent value for money. The deal brings substantial regeneration benefits for the immediate area and beyond. It brings into the development players of proven ability and resource. It ensures that the public sector can participate in the increase in value of the whole estate as the development proceeds. It represents a fitting use for the dome which will enhance the value of the whole project and attract people and economic activity.
A huge amount of work has gone into this deal. It represents a very secure foundation on which the Government and their private-sector partners can proceed to deliver the benefits that are available to be harvested from the dome, and for the peninsula. We considered all other options but none offered comparable benefits.
The deal will deliver excellent value for money, thousands of jobs and homes, an exciting use of one of London's landmark buildings and the continued regeneration of a key site in the evolution of Greenwich, London and the Thames Gateway.