Silvertown Quays, Royal Docks

Concepts

• urban development
• silvertown quays
• silvertown partnership llp
• royal docks
• construction work
• mda
• target date
• new masterplan
• minimum phase value
• additional changes

Location

London

Description

Silvertown Quays (SQ) is a 50-acre brownfield site in Royal Docks, London owned by GLA. In June 2013, following a procurement for a development partner, GLA entered into a Master Development Agreement (MDA) with the developer, The Silvertown Partnership LLP (TSP). In June 2018, a joint venture of Starwood (SOF-11 Developments UK Holdco Lux S.à r.l.) (SW) and a group company of Lendlease Europe Holdings Ltd (LL) acquired control of TSP. The parties entered into documents including a Deed of Variation of the MDA; see Mayoral Decision 2280 30/05/2018 (https://www.london.gov.uk/decisions/md2280-silvertown-quays), VEAT notice published 09/06/2018 (https://ted.europa.eu/udl?uri=TED:NOTICE:247611-2018:HTML:EN:HTML&tabId=1&am...), CAN notice published 26/06/2018 (https://ted.europa.eu/udl?uri=TED:NOTICE:272398-2018:HTML:EN:HTML&tabId=1&am...). The parties now intend to make additional changes to the MDA, considered permissible under regulation 72.

Total Quantity or Scope

A fuller explanation of the changes summarised below is in Part 1 of the associated Mayoral Decision 2784, which is publicly available on the GLA’s website https://protect-eu.mimecast.com/s/CTonCKLMGtLmEyPFMagEl?domain=london.gov.uk: Minimum Requirements and associated financial changes 1. GLA wishes to increase the quantum of Affordable Housing (AH) delivered as part of the development of SQ under the MDA (the Scheme) so that it meets current Mayoral planning policy relating to GLA owned land. This requires TSP to submit a planning application for a new Masterplan complying with two new “Minimum Requirements” (effective once a satisfactory new planning permission has been secured): a. 50% Affordable Housing - 50% of the residential space (by habitable room) must be AH. There is no equivalent Minimum Requirement or anticipated percentage in the current MDA but the existing outline planning permission for SQ provides for 35%. TSP will be obliged to ensure that at least 50% of the scheme's affordable homes (by habitable room) are delivered prior to delivery of 85% of total homes (by habitable room) in the Scheme as a whole. Restrictive covenants will be imposed in the Headleases securing the AH use. b. Non-residential area – the Scheme must include at least 167,225 m2 of non-residential floor space, to maintain a balance of mixed uses. The various specific Minimum Requirements in relation to non-residential floor space currently total 78,090 m2. 2. The changes at para 1 above have led to consequential amendments to the financial provisions of the MDA as follows: a. The Minimum Phase Value payable to GLA as part of each Headlease premium for the Scheme will now be calculated as follows psf GEA (the existing provisions are detailed in brackets): i. The first 1,831,818 sq ft (now excluding AH): £1 (£1) ii. The next 658,434 sq ft: £37 (now excluding AH) (£66) iii. In excess of 2,490,252 sq ft (now excluding AH): £46 (£81) iv. AH: £6.53 (previously within the above thresholds) b. GLA’s Phase Premium Share, the other component of each Headlease premium, is calculated as 50% of the Phase Premium Uplift Sum (a product of subtracting the Minimum Phase Value from the Revised Phase Value). This calculation will now take into account previously completed Phases rather than the Phase in isolation. c. The Developer’s Profit Rate for the purposes of the overage calculation will be fixed at 13% for all Phases as opposed to the current variable rate which is capped at 22%. This lowers the threshold at which overage would be due to GLA. d. Expenditure not attributable to any specific Phase will now be apportioned between the Phases on a fair and reasonable basis rather than being attributed to Phase 1. 3. If the new Masterplan consent materially departs from the assumed development strategy of 1.8m sq ft non-residential use, c.6,100 residential units with 50% being affordable in tenure with associated AH grant provision, GLA may propose revised financial arrangements to be agreed by TSP acting reasonably. Milestone Events 4. The MDA specifies project milestones (Milestone Events) which each have associated Milestone Dates, namely a Target Date, a Long Stop Date (extendable for Delay Events) and an ultimate Drop Dead Date (which are also extendable in the absolute discretion of the parties). Failure to achieve a Long Stop Date or a Drop Dead Date entitles GLA to terminate the MDA. The following changes are being made to the Milestone Events and associated Milestone Dates: a. a new Milestone Event for submission of the new Masterplan planning application; b. revising the Milestone Dates for implementation of Phase 1 works, originally drafted by reference to certain periods after detailed planning permission for Phase 1, to be fixed dates calculated by reference to the “Planning Unconditional Date” under the MDA which the parties agreed (by a letter of 29/03/2021) occurred on 30/06/2020; and Continued at section II.2.14 below.

Award Detail

CPV Codes

• 45211360 - Urban development construction work

Indicators

Legal Justification

The procurement falls outside the scope of application of the directive Explanation: In GLA's view, the changes described in sections II.2.4 and II.2.14 above and section VI.3 below do not amount to a "substantial modification" of the MDA under Regulation 72(1)(e) of the PCR 2015 and so do not require GLA to put the contract back out to tender. In particular, considering the relevant paragraphs of Regulation 72(8): (a) The scheme remains a mixed-use regeneration scheme in line with the original OJEU notice. The need for AH was contemplated in the tender documents and the character of the MDA remains the same notwithstanding the proposed revisions to the Scheme. Whilst the configuration of Brand Pavilions is to be updated, the associated minimum floor-space across the Scheme is not being varied. (b) The changes would be very unlikely to have attracted additional tenderers or to have changed the outcome of the procurement. AH (required to be increased under the amended contract – see para 1 of section II.2.4 above) would typically be expected to be less profitable for developers than private market housing. (c) GLA is satisfied, having received professional advice, that the economic balance has not been changed in favour of the contractor within regulation 72(8)(c). Instead, the overall economic balance will be broadly neutral following the changes. (d) The original scope of the MDA will be unaffected by the proposed changes. The original MDA did not limit the density or balance of the Scheme, nor did it prescribe the phasing. Even if, contrary to the contracting authority’s view, the changes were deemed to be substantial, they would be justified under: (i) Regulation 72(1)(b) PCR, as the additional AH has become necessary and the requirements of that Regulation are met, and/or (ii) Regulation 72(1)(c) PCR, as the need to provide for additional AH has been brought about by circumstances which a diligent authority could not have foreseen; namely, a change in Mayoral planning policy as first set out in the draft new London Plan in December 2017 and through subsequent iterations, up to the adopted London Plan 2021. This now sets a strategic target for public sector land to deliver at least 50 per cent AH on each site and for public sector landowners with agreements with the Mayor to deliver at least 50 per cent AH across their portfolio and does not result in any increase in price in excess of 50% of the value of the original contract. GLA will also publish a modification notice giving more details.

Other Information

c. in relation to the Covid-19 pandemic, recording an extension of 6 months to the Drop Dead Dates for satisfaction of remaining conditions precedent and for Phase 1. A Covid-19 Delay Event extension of 14 months to the Long Stop Dates for those Milestone Events has been recorded separately under the existing MDA provisions. Continued at section VI.3 below Sub-Phases 5.The MDA divides the Scheme into Phases. Each Phase will now be capable of being divided into Sub-Phases, each Sub-Phase comprising at least two Plots (independent buildings). GLA intends to pre-approve Sub-Phases for Phase 1, to enable Sub-Phase 1.1 to be brought forward under the existing outline planning permission. The use of Sub-Phases for future Phases will require GLA’s approval and the conditions that need to be satisfied under the MDA for TSP to commence works and draw down a Headlease interest will then need to be met for the relevant Sub-Phase rather than the Phase as a whole. The Headlease premium will continue to be calculated on a whole Phase basis and will be payable on drawdown of the first Sub-Phase Headlease. Overage will still be calculated on a Phase basis following completion of the final Sub-Phase. Phase-related Milestone Events will still generally apply to the Phase as a whole rather than each Sub-Phase. Conditions 6. Funding Condition: GLA is to clarify the evidence it will require to satisfy the Funding Condition under the MDA, including that where Phase 1 has been divided into Sub-Phases, evidence of sufficient and available funds from committed sources to construct all of the works within Phase 1 will be satisfied by TSP demonstrating that funding is in place for at least 1 plot in the first Sub-Phase and that a funding strategy is in place for the rest of the scheme. 7. Headlease Grant Conditions: One of the conditions to the grant by GLA to TSP of the Headlease for Phase 1 in the existing MDA is that the Developer has either made a “Substantial Commencement of Works” or that the “Phase 1 Pre-let/Occupancy Condition” has been satisfied. The schedule of “Milestone Events” in the MDA referred to the satisfaction or waiver of the Pre-let/Occupancy Condition and the parties intend to record that this condition has been waived. Re the Substantial Commencement of Works condition, rather than requiring £2.5 million of expenditure by the Developer on qualifying costs re the relevant works, the amended MDA permits GLA to approve another sum (in GLA’s absolute discretion) which allows the £2.5 million figure to be adjusted to reflect the introduction of Sub-Phases. Brand Pavilions 8. One of the Development Objectives in the MDA is the creation of an avenue of Brand Pavilions (BPs). The MDA will now require a cluster rather than an avenue. In addition, the MDA requires TSP to obtain GLA's approval if the number of BPs is to be reduced to fewer than 15. GLA will approve a minimum of 5 BPs. 9. TSP is obliged to include at least 66,750 sq m of BPs in the Scheme. The “Minimum Requirements” for BPs in relations to Phases 2 and 3 will be amalgamated (the aggregate requirement for those Phases remaining the same) and education, making, manufacturing, logistics and performance will be added to the list of potential primary uses. Other Minor Changes 10. GLA will confirm that the only dock wall works required as part of Phase 1 will be those within the Phase 1 boundary, not wider dock wall works to other areas. 11. GLA will support TSP in reaching an agreement with the Royal Docks Management Authority in relation to the proposed in-filling of Pontoon Dock and the surrender of its lease of that area. 12. The MDA does not currently specify the measurement basis for all measurements referred to. It will be confirmed that all are GEA. 13. GLA and TSP will clarify the process involved in establishing a Delay Event extension to Long Stop Dates. 14. The original MDA required the Scheme to include the retention, refurbishment and restoration of Millennium Mills which included the Rank Hovis building (RHB). Following a fire on 23/06/2019 and having taken expert advice, GLA is intending to arrange for the demolition of RHB and TSP will therefore no longer be obliged to retain, refurbish and restore RHB. TSP will instead reimburse GLA for demolition costs (up to £3m) on draw-down of the Headlease of the relevant area.