Construction work

Description

Variation to an existing development agreement awarded in 2015 for the provision of multi-dwelling buildings and individual houses, leisure and retail facilities and related infrastructure in the East Wick and Sweetwater area of Queen Elizabeth Olympic Park. The contract variation is being implemented in order to maximise the financial returns from the scheme in the current market and thereby enhance the payments to be made to the Contracting Authority under its long-term investment in the development scheme. The variations will: a) Amend the payment and long-term ownership provisions relating to the delivery of the private rental units ("PRS Units") to be constructed by the Developer. In summary, the changes will provide LLDC with a higher proportion of rental income from a smaller number of units. Currently, the Agreement provides the LLDC with a smaller percentage from all PRS Units. The changes also replace (only in specific circumstances) an obligation upon the Developer and/or the long leaseholder of the PRS Units to pay to LLDC 2.75 % of any disposal of the PRS units if disposed of within 15 years (none thereafter) with a payment to LLDC (for LLDC to retain) upon completion of each of the long leases of the PRS Units insofar as this obligation relates to Phase 1 and Phase 2 only. There are no changes to this obligation for subsequent phases; b) Amend the conveyancing structure in respect of the site so that construction will take place under licence rather than a building lease; with head lease and subleases still being granted thereafter; c) Amend the management provisions relating to the private rental units that LLDC will have an interest in by moving from a structure based upon operating leases between East Wick and Sweetwater Projects (Holdings) Limited and Places For People Homes Limited (“PfP”) (pursuant to which PfP had various direct obligations to LLDC) in the original winning consortium to a separate management services arrangement (pursuant to which PfP has similar direct obligations to LLDC) and in relation to their PRS Units which LLDC will not have an economic interest a structure where a management agreement from PfP is provided in the alternative to an operating lease; d) As a direct consequence of the Developer being granted licences rather than leases, until the Developer contracts with the local planning authority to adhere to planning obligations relating to the Site (which it shall be obliged to do when such licences are entered into), the Developer will not have a direct obligation to the local planning authority albeit that the Developer will be obliged to indemnify LLDC against all liability resulting from any breach of such obligations; e) Amendments to the payment arrangements for the specified infrastructure works to change from a target cost model to a lump sum model but without amending the original estimated range of the overall price for specified infrastructure works to LLDC as envisaged by the original procurement and also amendments in respect of permitted cost reimbursement in relation to party wall issues; and e) A number of minor drafting changes facilitating and ancillary to these amendments will also be necessary.