2.5 The pace of residential development on the rest of the Peninsula has been slower than forecast at the outset of the deal (see paragraph 2.9). MDL and EP initially expected that the first residential land would be sold for development in June 2005 and that by December 2007 this would have risen to almost 1.5 million sq. ft.16 MDL now acknowledges that these initial forecasts were overly optimistic and that the development is more difficult to deliver than it originally thought.
2.6 This has not been the only delay. MDL's 2005-06 business plan (created in April 2005) stated that the first residential developments (comprising 550,000 sq. ft) would be underway by March 2006 and by December 2007 this area would be just over 960,000 sq. ft.
2.7 In fact, conditions were not fulfilled for the first sale of land for development until July 2007, two years after the original plans. The first plot of residential land was drawn down in July 2007 and preliminary works on site have commenced. This first plot is expected to be completed in March 2010. The overall picture is thus one in which residential development on the Peninsula has been pushed back.
2.8 The context in which these delays took place is that the legal agreements do not give EP any levers with which to control the pace of development (see Part 1). EP is reliant on using its influence with MDL as part of its involvement in the Project Control Group without the support of contractually binding provisions to meet a specified timetable for development. This form of agreement is normal in similar, large scale regeneration developments and such delays are not untypical, including in other parts of the Thames Gateway, on which the NAO has previously reported.
2.9 An important - but not complete - explanation for the delay is that MDL made a false start in negotiating with a third party house builder, Wimpey, for the development of almost 500,000 sq. ft of land, equivalent to around 650 housing units, between June 2005 and February 2006. Wimpey were selected as preferred bidder for the plots, largely because the value of their bid was greatly in excess of others. Negotiations with Wimpey dragged on for nine months before they pulled out of the deal and eventually exited the London housing market (see Appendix 3). MDL said that it pursued the bid as long as it did because of its obligation to EP to obtain best value. MDL subsequently entered into a deal with Bellway Homes17 for residential development of part of that land. MDL told us that in response to this episode and to accelerate delivery it changed its strategy and now plan to carry out 45 per cent direct development compared to the 25 per cent anticipated in its original plans drawn up in 2004. EP and Greenwich Borough Council both consider they are well positioned to deal with the demands placed on them through accelerated delivery.
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16 As outlined in the financial model developed to assist with both parties' due diligence of the deal. See Part 3 for more information.
17 Wimpey and Bellway Homes are both major UK housebuilders.