Question 59 (Mr Williams)
1. This note responds to the request made at the meeting of the Public Accounts Committee on Monday 17 January 2005 for an explanation of why the transaction between English Partnerships (EP) and Meridian Delta Limited (MDL) and the Anschutz Entertainment Group (Anschutz) is of a greater value than alternatives if the Dome was removed, and how this can be explained by reference to transport constraints. It expands on the explanation provided in paragraphs 3.27 to 3.33 of the NAO Report and has been seen by the NAO and by the London Borough of Greenwich.
2. The reasons for the difference in value are based on advice provided by Jones Lang LaSalle in respect of the value of the MDL/Anschutz deal and Benchmark Appraisals with and without the Dome, prepared before and in order to inform decisions leading to the signing of contracts between EP and MDL and Anschutz in May 2002. That advice is supported by decisions made by the relevant public authorities (London Borough of Greenwich, Transport for London and the Mayor of London) involved in the planning process leading to the granting of planning permission for the MDL/Anschutz development in February 2004.
3. The key elements explaining the comparison are as follows:
(a) Prior to the MDL transaction that part of the Greenwich Peninsula owned by English Partnerships which has been included within the MDL deal had an extant planning permission for 1.7m sq ft of leisure, mixed use and central business district uses, 1,623 homes, and 100,000 sq ft of employment space.
(b) As a result of the revised planning consent obtained by EP, MDL and Anschutz the same part of the site now has permission for 5.213m sq ft of leisure, entertainment, retail and commercial office space, 7,300 homes (the other 2,700 being on Quintain and other private sector land), 200,000 sq ft of light industrial business park and a hotel. This is a substantial increase overall from the earlier planning permission, and 1.352m sq ft is situated within the Dome. The new consent reflects the "Flexible Framework" masterplan that EP had developed (see paragraph 3.3 of NAO report) and updated central and local planning policies (see also (f) below).
(c) The ability to obtain planning permission for the amount of the accommodation referred to above, together with the balance of the EP/MDL/Anschutz consent on Quintain's and other privately owned land to the west of the Dome, was largely determined by the transportation capacity both on the Peninsula and in relation to the approaches to the Peninsula. Consultants for both MDL and EP came to the conclusion that without the third Blackwall-Silvertown Crossing (land for which is currently "reserved" on the Peninsula) the development for which planning consent was obtained was the maximum possible given a certain modal split in terms of method of travel, eg private car v public transport, and given predicted trip generation rates and timings.
(d) The consent obtained was only achievable because vehicular and London Underground movements to and from many of the uses on the Peninsula will not be taking place at the same time as, or in the same direction as, the prevailing flow of travel movements. In the morning peak rush hours the direction of public transport journeys from the homes on the Peninsula will be mainly westwards against the main flow. In the evening rush hours on the underground the majority of the general flow will be westwards, into central London (for commuters to West London and those transferring onto suburban rail services), whereas the majority of visitors to the Dome (who will be travelling by Tube) will be travelling eastwards.
(e) The achievement of this level of development on the Dome site in the planning consent was a direct function of the precise mix of uses proposed within the Dome-that is, the uses combining to create a major leisure destination, generating substantial leisure trips mainly requiring travel to the site at different times to those travelling to and from the Peninsula for other purposes.
(f) Had the Dome been removed (at EP's expense), although this might appear to free up an area of land for further valuable business uses, it would not in fact have created any additional capacity on the Peninsula for such uses. The site occupied by the Dome could not have been developed to any greater density or for an alternative use because the Blackwall Tunnel is already at peak capacity in the morning and evening rush hours. All that would have been possible was a redistribution of the total amount of space now consented. Such a redistribution was reflected in the updated development assumptions referred to in (b) above, for the purpose of VFM benchmarking before the MDL/Anschutz transaction was signed in May 2002.
(g) The majority of the remainder of the northern site immediately around the Dome is undevelopable either because it is reserved as public open space under the Section 106 planning agreement or because of the presence of the northbound and southbound Blackwall Tunnels. Moreover any proposal to amend the existing mix of uses by increasing the amount of any residential development on the site of the Dome if the Dome had been demolished would not have been permitted because of the increased traffic movements at peak hours.
(h) In addition, the cost of the demolition and removal of the Dome-which prior to completion of the transaction with MDL and Anschutz would have fallen to EP-will now be borne by Anschutz/MDL if they decide to demolish the Dome structure in 2018, as is provided for in the contracts and referred to in the NAO Report at paragraph 3.32. The cost risk attached to that possibility therefore has been transferred from the public to the private sector, a factor that will have been taken into account by the private sector partners in negotiating the contracts, and yet the value of the MDL/Anschutz deal still compared positively with the benchmark appraisals in May 2002, and still exceeds the appropriate land value comparator, as is shown in figure 18 of the NAO Report. EP will, as stated in the NAO Report at paragraph 3.33, receive a 50% share of profits on subsequent redevelopment if the Dome is removed.
4. Further evidence that the scale of development allowed under the planning permission granted for the MDL/Anschutz proposals is limited by the transport constraints and is higher than what would have been allowed without a major leisure destination at the Dome is as follows:
(a) Jones Lang LaSalle's Value for Money and Benchmark assessment in May 2002 reported that even with consultants' projections concerning the directions and times of travel movements on and off the Peninsula there would need to be, to accommodate the development now with consent:
(i) Signalling improvements to the A102.
(ii) Implementation of the Greenwich Waterfront Transit or improved bus services.
(iii) Uprating of the Jubilee Line from six to seven carriages per train and more frequent services (rising from 24 to 30 per hour).
(b) To restrict the number of traffic movements, the London Borough of Greenwich as planning authority only allowed 2,200 car parking spaces for use by the Dome Arena and Dome Waterfront, 0.7 space per dwelling in the residential element of the permitted development, and one space per 1,000 sq m of commercial office space. In the Section 106 agreement they required six road junctions off site to be improved including an improvement on the north side of the River to the southbound Blackwall Tunnel approach. A condition was also included within the planning permission that prevents more than 100,000 sq m of office accommodation being built until 30 trains per hour are running on the Jubilee Line and seven carriage trains are provided (as is and was planned already under Transport for London's improvement programme for the Jubilee Line). There are also conditions limiting the amount of residential development until improvements are made to the Bus Interchange at North Greenwich.
(c) The Mayor of London, in deciding not to direct refusal of the planning permission, stated that in his view "there is no doubt that the Master Plan seeks to maximise land use opportunities on the Peninsula".
10 February 2005