The government today said it would fully fund the 2012 Olympic Village and Lend Lease, which has ended immediate plans to inject £150m equity into the project, will continue in its role as development manager.
It follows a a decision by the government’s ‘Ministerial Funders’ Committee’ and the Olympic Delivery Authority (ODA) today that it would not seek private funding for the village in Stratford City. A further £324m of contingency funding has been released to be invested in the Olympic Village.
Today’s decision means that just under £1.3bn of the £2bn of the contingency fund available to the ODA remains unspent. New figures published today also show that due to cost savings the forecast total cost of the ODA’s Olympic programme has been reduced by £179m.
The government said it had decided that the ‘Lend Lease deal is not in the best interests of the taxpayer and that it would cost more public money in the long term’.
It said: ‘Over the medium to long term as the market improves the ODA will seek private investment for the Village on terms more favourable to the taxpayer.
‘With the Olympic Village now publicly owned, the public sector will receive returns from sales after the Games. All of the additional £324m public investment being made today from contingency and savings is expected to be returned after the Games when the flats are sold.
Lend Lease said it will continue to design, develop and build the Village, under an existing development management agreement which was signed in August 2008. The construction of the village is on schedule and Lend Lease is confident it will be successfully delivered on time.
‘Under the terms of the agreement Lend Lease will receive a fee for service, net of costs. Profits will start to be realised in the financial year 09/10 and emerge progressively over the lifecycle of the development,’ it said.
Dan Labbad, chief executive officer of Lend Lease Europe, said: ’Lend Lease submitted a highly competitive bid which offered to invest equity of £150m in the project but the government and the ODA have decided that the overall risk return criteria for this type of project in the current market environment is not conducive to private funding.
‘The Athletes Village team has done extremely well in mobilising nearly 300 people from a standing start in just 18 months. We're on schedule to deliver ahead of time under an attractive fee deal and we remain prepared to invest equity in the project.
‘Our focus continues to be on successfully delivering a world class development of high architectural and design quality, both as a home for athletes in 2012 and as an iconic sustainable community beyond.
‘Lend Lease has always maintained that the opportunities presented by the regeneration of Stratford City extend beyond the Olympic Games and we will continue to explore options for our long term involvement.’
However, it is thought Lend Lease could consider injecting the £150m of equity in the future if appropriate.
Minister for the Olympic and Paralympic Games Tessa Jowell said:
'After careful assessment it is clear that investing in the Olympic Village now will save public money in the long term. A private sector deal was available, but because of the credit crunch it was not a good deal. By funding the entire project the Village will become publicly owned and the public purse will receive substantial returns from sales. The ODA will make a fresh assessment of the market nearer to completion with a view to pursuing deals with other possible investors.
'A third of the way through construction there remains nearly £1.3bn of contingency left. Forecast costs have come down and the overall budget of £9.3bn remains unchanged. It will not be exceeded. '