Land Securities Trillium's bid is robust
3.24 The Department assessed the financial robustness of Land Securities Trillium's bid through assessing the financial impact on profitability and funding requirements of changes to assumptions relating to a number of key risks, both individually and collectively. It shared and agreed the results of the analysis with Land Securities Trillium to ensure that the changes to the bid model had been correctly undertaken and for confirmation of the results. The analysis showed Land Securities Trillium's financial bid to be very robust in that it would take a fairly extreme set of circumstances to drive the project to losses.
10 | Land Securities Trillium's price became lower than the should cost model price |
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Source: Department for Work and Pensions |
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11 |
Changes in Land Securities Trillium's bid and the should cost model prices between May, July and September 2003 |
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Area of change |
LST bid £ million (NPV) |
Department's should cost model £ million (NPV) |
LST reason |
Department reason |
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May 2003 prices |
1,462 |
1,372 |
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Jobcentre Plus refurbishment removed from deal |
(383) |
(383) |
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Rent |
(34) |
(5) |
As should cost model with additional reduction in rent net of sublet income due to rental indexation changes |
Reduction to freehold values agreed in negotiations with LST |
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Overheads |
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86 |
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Overhead costs not included before |
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Security |
63 |
64 |
As should cost model |
Change in scope from PRIME. Neutralised to LST price based on detailed review of LST cost assumptions |
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Life cycle capital expenditure |
48 |
(10) |
Life cycle upgrade to meet statutory costs |
Net reduction in life cycle capital expenditure as costs included elsewhere in model |
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Change in expected vacation profile |
86 |
86 |
As should cost model |
Profile of expected vacation revised to latest Departmental forecast |
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Other |
(36) |
(100) |
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July 2003 prices |
1,206 |
1,110 |
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Rent |
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17 |
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Change in impact of market downturn scenario, Refined dilapidation assumptions |
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Service charge |
(3) |
9 |
Updated to reflect new departmental data |
Updated analysis based on latest PRIME expansion estate service charge data |
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Cleaning |
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20 |
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Costs updated against benchmark data |
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Security |
(12) |
7 |
Revised data on TUPE transfer numbers |
Further change to equalise with Land Securities Trillium's updated costs |
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Funding |
(14) |
8 |
LST cost of capital reduced in negotiation |
Cost of capital assumption updated to reflect market changes in interest rates since PRIME |
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Unavoidable costs |
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15 |
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Previously based on a PRIME benchmark; now equalised with Land Securities Trillium's price |
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Change to timing of NPV calculations |
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17 |
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General assumptions of mid-year cashflows refined for large cost items with different timings |
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Other |
(1) |
17 |
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September price |
1,176 |
1,220 |
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Source: Department for Work and Pensions |
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