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19 December 2001
British Government selects Lend Lease Joint Venture with Quintain Estates for Greenwich Peninsula Urban Regeneration Proposal
The British Government announced today that it has chosen to enter into exclusive negotiations with Meridian Delta Ltd ("Meridian Delta") for the management of the regeneration of the Greenwich Peninsula on the River Thames in East London.
Meridian Delta is a joint venture owned by Lend Lease Europe Limited, a wholly owned subsidiary of Lend Lease Corporation Limited ("Lend Lease"), and British developer Quintain Estates and Development Plc ("Quintain"). The joint venture brings together Lend Lease’s global expertise in large scale land and community regeneration, and Quintain, which controls 18 acres (7.3 hectares) of the peninsula. Lend Lease will hold a 51 per cent stake in Meridian Delta and Quintain will hold 49 per cent.
The proposal for Greenwich Peninsula is one of the largest regeneration opportunities in recent years for London, covering some 200 acres (81 hectares). The Meridian Delta proposal envisages a 25 year partnership with the Government to deliver a significant mixed use development, with emphasis on creating a world-class arena, new homes and jobs for Londoners. The regeneration is projected to include 5,000 new homes and circa 3.5 million square feet (325,160 square metres) of mixed use commercial floor space. Meridian Delta will attain planning consent for the master plan, deliver infrastructure to facilitate the sale or development of serviced land, and share the value created through the process with the Government. The land will be drawn down and paid for when required to meet the regeneration program. Lend Lease will be providing development and project management services to Meridian Delta.
Under the Meridian Delta proposal, Anschutz Entertainment Group ("AEG"), a leading US stadium operator, will create, operate and carry financial responsibility for a world-class entertainment and sports arena within the Millenium Dome structure which is situated on the Greenwich Peninsula. It is also proposed that the ancillary area of the Dome that is not occupied by the AEG arena will be operated as a restaurant, leisure/retail facility by a separate joint venture between AEG and MDL.
The expected capital commitment for Lend Lease to achieve planning approval for an implementable land sale and development program is approximately £20 million. The level of any further capital commitment is subject to the grant of a minimum planning consent and the ultimate scale of the development. Such commitments will be consistent with Lend Lease’s development model. The first profit generating land sales are anticipated in 2004/2005.
The final agreement with the Government is subject to detailed resolution of commercial terms, which is anticipated by May 2002. This agreement will be conditional on attaining planning permission, which is anticipated 12 months later. Dependent on the ultimate scale of the development over the 25-year partnership, the whole peninsula could benefit from up to £4 billion of new investment from incoming occupants, external investors and Lend Lease managed funds.
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Summary of Discussion and Questions Raised at Lend Lease Briefing on the ASX Announcement: British Government Selects Lend Lease Joint Venture with Quintain Estates for Greenwich Peninsula Urban Regeneration Proposal
David Hutton, senior Lend Lease executive based in London and spokesman for the Meridian Delta joint venture began the briefing by reviewing the overall Meridian Delta proposal.
As referenced in the media release above, the British Government selected Meridian Delta as preferred bidder for the urban regeneration development of the Greenwich Peninsula in London. Meridian Delta is a joint venture owned by Lend Lease (51%) and Quintain Estates and Development Plc (49%).
The Meridian Delta proposal for Greenwich Peninsula is one of the largest regeneration opportunities in London and will cover approximately 200 acres (81 hectares). Greenwich Peninsula is located only one Tube stop away from Canary Wharf, directly across the Thames River. The proposal envisages a 25-year partnership with the Government to deliver a large-scale mixed use development to include 5,000 new homes, approximately 3.5 million square feet of mixed use commercial floor space, as well as a world class arena. Under the proposal, Anshutz Entertainment Group (AEG), a leading US stadium operator, will create, operate and carry financial responsibility for the world class entertainment and sports arena within the Millenium Dome structure which is situated on the Greenwich Peninsula.
The final agreement with the Government is subject to resolution of commercial terms which is expected in May 2002 and will be conditional on attaining planning permissions.
The Meridian Delta proposal was selected because of its plan to deliver an integrated master plan for the Greenwich Peninsula, its world class solution for the Dome and the companies involved strong track records of delivery. Lend Lease has significant experience in developing large-scale mixed use projects like this. Lend Lease developed Bluewater in Kent – 10 miles to the east – and is now starting a similar 20 year waterside project with the redevelopment of Victoria Harbour in Melbourne’s Docklands. Quintain has been a landowner on the Greenwich Peninsula for five years. AEG is one of the world’s leading live entertainment companies and is a major investor in entertainment facilities, including the Staples Centre in Los Angeles, as well as sports franchises.
David indicated that the Greenwich Peninsula project is a great opportunity for Lend Lease. In addition to the share in profit arising from enhancement to the value of the land, there will be opportunities for Lend Lease services through our construction and project management business, as well as investment opportunities for our commingled funds comprised of third party investors.
Questions:
How will Lend Lease earn a profit?
Lend Lease will earn profit by sharing in the increase in value of the land through applying its skills in master planning, project management and development fees, as well as fees for the introduction of 3rd party capital and ongoing asset management.
What will Lend Lease’s capital commitment be?
The expected maximum capital commitment for Lend Lease to achieve planning approval for an implementable land sale and development program is £20 million. This commitment is consistent with Lend Lease’s development model.
Did the Millenium Dome have to be part of the overall Greenwich Peninsula Urban Regeneration Proposal?
It is fair to assume that the British Government would not have considered any proposal had it not included the Millenium Dome. Anshutz Entertainment Group (AEG), a leading US stadium operator, will create, operate and carry financial responsibility for a world-class 20,000 seat entertainment and sports arena within the Millenium Dome structure. We see this as a viable solution for the Dome.
Have you considered the environmental issues in the vicinity?
English Partnerships and the British Government have done extensive work on this issue and we have allowed for considerable due diligence on this issue between now and financial close.
What is the target return for the capital invested in project?
This is a land management proposal that will eventually utilize 3rd party investment so calculating an internal rate of return on capital is not the right way to look at the proposal. The actual Lend Lease capital invested will be quite modest in relation to the size of the project. In land area it is around three times the size of Melbourne’s Victoria Harbour.
Can you target a profit contribution for the project?
We see this as a great opportunity but again, we have only entered exclusive negotiations with the British Government. The final agreement is anticipated by May 2002. Profit contributions will depend on final scale of the masterplan, planning approvals and contract terms with the Government. The first profits are expected to emerge in 2004/05.
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