§ The Minister for Housing and Planning (Keith Hill)On 29 May 2002 my noble Friend Lord Falconer of Thoroton advised the House of Lords that English Partnerships had entered into legally binding conditional contracts with Meridian Delta Ltd (MDL), a consortium consisting of Lend Lease and Quintain Estates and Development plc, and Anschutz Entertainment Group (Anschutz), for the future use of the dome and development of approximately 190 acres of land on the Greenwich Peninsula. Since then, planning permission and other consents have had to be secured under the terms of the May 2002 contracts but I am pleased to be able to advise the House today that 63WS the conditions attached to those contracts have been satisfied and the overall transaction has gone unconditional. This is a major milestone in the regeneration of the Greenwich Peninsula and the growth of the Thames gateway.
The long-term benefits we have secured for future generations of Londoners are a fitting legacy for the dome project and for the public investment that has gone into the Greenwich Peninsula.
Four billion pounds of private sector investment, including a £550 million cash return over the next 20 years, will bring new jobs, new homes, new services and infrastructure to London. This is a fantastic result, and reflects the commitment and vision of all our private and public sector partners. Every £1 of public money on the Peninsula has attracted over £6 from the private sector.
The timetable going forward is now as follows. During the summer Anschutz will appoint a contractor for the construction of the new arena inside the dome, for work to start in spring 2005. At the same time MDL will submit to Greenwich Council a planning application for Millennium Square, the major new public space proposed next to the dome. MDL expect contractors to start delivering early infrastructure works to facilitate the wider development late in 2004 and, once detailed planning permission has been secured for the first phases, start of work on the housing and other facilities is expected in late 2005 or early 2006.
Construction of the arena is expected to be completed in spring 2007, together with other leisure uses under the dome roof, the plans for which Anschutz will be working up in the coming months. Millennium Square will be completed within the same timescale, and the residential development will be well under way by the time the new arena opens for business in 2007.
This stage has been achieved only through a considerable effort and close co-operation amongst a number of private and public sector partners. English Partnerships (EP) has secured contracts that are set to deliver an exemplar sustainable community and a fabulous addition to London's entertainment offer. EP will continue to work in partnership with the developers as work progresses and EP's, Quintain's and other third parties' land is drawn down for development. The London Borough of Greenwich granted planning permission on 23 February 2004 for the development, and was robust in securing a highly valuable package of measures of public benefit through the section 106 agreement negotiations and related matters. The Mayor of London, through various of his functions and organisations (primarily Transport for London), has been instrumental both in facilitating the planning permission and in completing elements of the contractual negotiations. MDL and Anschutz have both invested substantial time and considerable money already in preparing the physical plans and developing other matters in preparation for a long period of activity in developing out the site and creating the sustainable community and a magnificent new entertainment hub for London.
The development will see: the creation of an estimated 24,000 new jobs; the building of over 10,000 new homes, 3,800 of which will be social rented, low cost and family units; significant infrastructure improvements; 48 acres of open spaces and parkland; and the building of new 64WS community and health care facilities including new schools, all of which will lead to the wider regeneration of the local area and beyond. Some £4 billion of private sector investment is expected from this transaction alone; and across the Peninsula, every £1 of public sector investment will be levering in over £6 of private sector money.
This development will continue the innovation and high quality established at the Millennium Village and elsewhere on the Peninsula. The Village is already paving the way on high density living, achieving new levels of energy efficiency, creating the high quality environment that is needed, and providing integrated services through the new school and health centre that are at the heart of the development. It is setting standards from which important lessons can be learned, and establishing best practice that will influence wider development, on the Peninsula and elsewhere. The development enabled by the completion of the transaction being announced today will deliver a community several times the size of the Millennium Village while incorporating the type and variety of public facilities and infrastructure that are required of a 21st century sustainable community. The numbers of new homes will also make a substantial contribution to delivering the step change announced in the Sustainable Communities Plan, particularly for the Thames gateway growth area.
Anschutz will transform the inner part of the dome into a world-class 26,000 capacity entertainment and sports arena. Anschutz is committed to investing at least £120 million in the Arena, with EP receiving, after a priority return to Anschutz, 15 per cent. of the profits. We cannot reveal the details of the priority return, as it impacts on Anschutz's ongoing business and is commercially confidential.
The arena is only part of the story. In the outer rim of the dome, Anschutz will construct a mixture of retail, entertainment and leisure facilities—this part of the development is currently known as the dome waterfront. EP will receive at least a third share of the profits, after the developer's priority return. At least a further £65 million will be invested in this area by the private sector. EP will also receive payment for the hotel site next to the dome.
On the rest of the land EP and MDL have agreed that they will develop the site jointly over the next 20 or so years, with an end date of 2025. The detailed terms provide for EP to remain ownership of its land until individual plots are required for development. The payout will work as follows: first EP will receive an agreed, indexed, minimum land value, on the sale of any parcel of land—this protects against any downturn in the market; secondly, a share of MDL's profits after deduction of development costs to reflect the enhanced planning consent and the market value at the time of sale to the developer. The share to be received by EP increases over time throughout the development phases from 40 per cent. to 75 per cent.
Where MDL develops land itself, English Partnerships will receive the agreed indexed minimum land value plus a share of sale proceeds, or the value of the development—both after costs—once the development is complete. This share ranges from 15 to 20 per cent. depending on timing.
65WSOver the period of the deal, EP expects to receive a financial return in the order of £550 million in cash terms. This is based on a validated assessment of expectation from the sale of the land, and does not include any additional return which may flow from the profit shares in respect of the dome, nor any redevelopment proceeds in the event that the dome is demolished after 2018. Up to that date Anschutz and MDL are contractually required to maintain the dome. Should the dome structure ever be removed and the land redeveloped, EP will be entitled to a 50 per cent. share of redevelopment proceeds. This protects English Partnerships' position on the redevelopment value of the land.
With the completion of the contracts English Partnerships costs incurred in respect of the sale process and decommissioning of the dome site have now ceased. The total costs incurred by English Partnerships in those areas that have now concluded are as follows:
First dome sale competition £6.7 million Latest sale process £9.0 million Decommissioning £6.7 million Total £22.4 million In addition, EP has already incurred costs of £8.2 million on the management, maintenance, security and insurance of the dome site up to 31 May, offset by income from events and lettings of £1.4 million. These figures have been regularly reported to Parliament. As previously reported to Parliament EP will continue to meet the dome's necessary management, maintenance, security and insurance costs until Anschutz completes the construction of the arena. However, those costs will gradually reduce as preliminary works start before the main contract commences. EP estimates its average monthly cost will fall from the recent £190,000 to around £60,000 when the main arena contract starts in spring 2005.
All of EP's costs from when it took ownership of the dome (in July 2001) to the completion of the arena's construction, and including the costs of the entire sale process, will be recovered from sale proceeds. Based on the above figures to date, and an estimate of the likely future management, maintenance, security and insurance costs, the total costs that EP expects to incur in relation to the dome project, over six years and after taking account of offsetting income from events and lettings, is around £33 million.
The Government, in recognition of the leading role played by the Lottery, through the Millennium Commission, in helping to regenerate the Greenwich Peninsula, has consistently stated that it will receive a fair share of proceeds from the sale and development of the dome. The division of proceeds with the Lottery has now been agreed. EP will retain all of the first £30 million of development receipts, to cover most of those dome-related costs described above, as a first call on proceeds. Thereafter, EP will retain 87 per cent. of receipts and the remaining 13 per cent. will be passed to the Lottery in recognition of the contribution of the dome. This share will be reflected in a new legal agreement between EP and the New Millennium Experience Company, which will bind the parties to the respective shares of proceeds over the period covered by EP's contracts with MDL and Anschutz.
66WSUnder the terms of the original acquisition of the land EP paid British Gas £20 million, for the original transfer of the land, plus £4.3 million as a share of EP's sale receipts to date on the southern part of the Greenwich Peninsula as required in the original purchase transaction, which entitled British Gas to 7.5 per cent. of all open market value land sales. British Gas has also received a further £10 million in respect of the enhanced value of Greenwich Peninsula due to MDL's proposals and the retention of the dome. This represents good value for money and reduces EP's liability under the original purchase agreement.
In agreeing this deal, the Government focused on four main aspects: value for money; regeneration benefits for the area; deliverability and an innovative use for the dome.
With regard to value for money, we made clear throughout that we would only proceed with the deal if it provided value for money for the Government. That included comparison with the value for money that could be delivered by demolishing the dome, or by alternative development scenarios retaining the dome. The currently estimated value of the development to EP, assuming the full scheme is developed, of around £550 million will depend on market fluctuations over 20 years for the eventual outturn, but we are confident that the structure of the deal will deliver excellent financial returns for the taxpayer as well as enormous public benefits on the ground.
This deal enables the Government to benefit from the increasing value of the land across the peninsula both now and over time. 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 EP when the land is sold for development. In turn, this will enable EP to reinvest more money in creating sustainable communities; in new housing, including for key workers; in environmental improvements; and in supporting the delivery of regeneration and best practice throughout England.
With regard to regeneration benefits, these are described briefly above. There is much more, which will only become apparent once the development has begun, environmental improvements are being made, jobs are being filled and homes are being built. It is a programme of fitting scale and quality for a site that was the centrepiece of the Millennium celebrations and is now a flagship project for London and the Thames gateway.
As regards deliverability and sustainability, the participants in the development include players 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 worldwide sporting and entertainment interests, including the Staples centre arena in Los Angeles and the new arena it is building in Berlin. Lend Lease is a major development company, quoted on the Australian stock exchange and operating in 40 countries. It owns Bovis in the UK and has successfully developed the Sydney Olympic village and Bluewater shopping centre. Quintain is a significant player that is quoted on the 67WS London stock exchange. It is also involved in Wembley, and several other large mixed use developments and regeneration schemes.
These players have the resources, the experience and the ability to deliver.
Finally, in relation to the use of the dome, the arena and associated entertainment and leisure facilities will be a highly appropriate use for what is widely acknowledged to be a world class 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.
The Government believes that the regeneration programme now secured for the Greenwich peninsula amply satisfies all four of the criteria that were set out for it.
We look forward to work starting on site in the near future, leading to the delivery of the continued regeneration of a key site in the evolution of Greenwich, London and the Thames gateway.