Ten days on from sacking the developers planning the £4bn Stratford City Olympic Village, London & Continental Railways managing director Stephen Jordan is relaxed.
“The next week, when I returned to the office, I had already received two calls from developers interested in the scheme,” he says.
The dapperly dressed Jordan is clearly not expecting there to be a shortage of interest in replacing the Reuben brothers, Australian retail giant Westfield, Stanhope and Sir Stuart Lipton on the 13.5m sq ft project.
The letter of termination that site owner LCR served on its development partners on 28 April leaves the door open for an 11th-hour compromise – what Jordan terms a “42-day cure period” – during which the partners can resolve their much-publicised differences. But he says: “I’m not holding my breath.”
In fact, he is more interested in reassuring all concerned that the all-important Olympic Village site remains in safe hands.
As things stand, LCR will not be compensating its former partners for the loss of development rights that are thought to be worth as much as £200m.
LCR’s development partners Chelsfield and Stanhope are believed to have spent £14m on the project between 1997 and 2004, when Chelsfield’s stake was split between Westfield, the Reubens and Multiplex. Since then, a further £3m has been poured into the project.
“We may not owe them anything, though, because there are a number of points where under the terms of the development agreement there has been a breach of their obligations,” says Jordan. These points relate to what he refers to as “the ability and readiness to deliver”.
In a letter to EG this week (p54), the Reuben brothers say they have made “repeated offers of funding”, but that they “have been consistently told by one member of the consortium that they would not be prepared to work with us on the project”.
Jordan admits that the big beasts that make up the Stratford City development consortium are unlikely to suffer rejection without a fight.
“One presumes that they may pursue legal action, but we will cross that bridge when we come to it. We can’t be worried about that sort of thing, as we have a huge scheme and the Olympics to deliver. We can’t be frightened of our own shadow.”
If anyone knows why things have gone so awry at Stratford, it is Jordan. He has been at the heart of plans for the 170-acre site since LCR bought it from the Department for Transport in 1996 for what he calls a “base value”.
In 1998 the Channel Tunnel Rail Link builder signed an open-ended development contract for a scheme of around 4m sq ft with Chelsfield and Stanhope, beginning more than five years of harmonious work on the plans.
So when did the troubles begin? “November 2004,” Jordan says, without hesitation. That was the date of the Duelguide consortium’s £585m takeover of Chelsfield. The deal gave Westfield, Multiplex and the Reubens equal stakes in Chelsfield’s 75% share of Stratford City, and in so doing eliminated the idea of a lead development partner.
“The root of the problem was the Chelsfield buyout. Up to then, our work with Nigel Hugill at Chelsfield and Stuart Lipton at Stanhope and their teams had been very productive.
“We got a fantastic consent – over twice as big as the original concept – for what is a great new metropolitan centre.”
But the intervening period did not see progress grind to a complete halt. “There are some things that have not slowed down,” says Jordan. “We continued to make very good progress on technical work, and the past year has been characterised by some good practical masterplanning work.”
Nevertheless, difficulties between the partners became a matter of national importance on 6 July, when London was selected to host the 2012 Olympics. Stratford City will house most of the Olympic Village and, as Jordan says, “there is no rehearsal time for that”.
He is adamant that mayor for London Ken Livingstone’s well-reported interventions in March this year were unhelpful.
“NM Rothschild was brought in to mediate in February. Their representative, Robert Leitao, had worked with us and Westfield and the Reuben brothers in the past. We were all comfortable with the choice.
“The mayor’s comments were unhelpful. They were inaccurate and included deeply personal comments about individuals.”
Of more significance was a meeting “behind closed doors” at the beginning of March, at the offices of Newham council mayor Sir Robin Wales, in which Michael Gutman, Westfield’s UK managing director, said the group could no longer work with the Reuben brothers.
Jordan refuses to discuss the details of a meeting that “should remain private between the parties”, but describes Wales’ intervention as “a very positive initiative”.
While Jordan plays down speculation that the highest echelons of central government have been tightening the screws, LCR has been keeping Westminster – the Department for Transport and the DCLG – well briefed.
In March, Rothschild suggested a “shoot-out” auction that would leave one party in control, a move that had the backing of LCR.
“In terms of deadlines, it wasn’t as exciting as I’ve read,” says Jordan. “We had hoped that all the legal issues would have been resolved before the Easter and Passover breaks, which coincided this year, to enable the auction.
“Some things weren’t sorted out by then and we were hoping that we would resume immediately after the holiday break. But when it became apparent that there was a lack of progress, we felt that we couldn’t go beyond the end of the month.”
The most important factor was what he calls the “ticking clock”.
“There is a point in time, let’s say it’s early August next year, when we need to be on site,” he explains. “Our concern was that we were going to use up all of the float and not make sure that zone one of Stratford City – the shopping centre, the offices and some housing – opened in time to become established before the Games. That is vital, because it takes some of the risk away from the Olympics by letting us take our time delivering the Village.”
And as Jordan says, the process of finding someone else to do the job could not begin without the termination getting under way. If LCR is guilty of anything, Jordan says, it is procrastination while it allowed its partners “every opportunity” to resolve their problems. “We are no starry-eyed optimists,” he says. “But the business rationale for wanting to work on Stratford City is so obvious that we always thought that would win through.”
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The Reuben brothers and Westfield remained convinced this week that they would take control of the project via auction. In an open letter to the government, the Reubens wrote: “We stand ready and are willing to participate in that auction and we require no preconditions.” Although LCR welcomes the comments, it is pushing on with its scheme regardless. It lodged the first detailed plans this week, increasing the amount of housing on the first phase from 500 to 1,140. It has also appointed Jones Lang LaSalle and UBS to draw up a shortlist of replacement partners. LCR managing director Stephen Jordan is not ruling out having one of the Stratford partners involved again. “If one party came back after the auction, we would certainly consider it and make a judgment as to whether they had cured the breach,” he says. But he dismisses suggestions that the project will be parcelled up and offered to developers separately. “I can’t prejudge whether there is going to be one or more parties selected, but if there were more than one, then their delivery proposals would have to be very tightly integrated.” Should the 42-day period end without resolution, a shortlist will be announced almost immediately, Jordan says. He refuses to be drawn on who has shown interest, but does provide an insight into the type of developer LCR is interested in. “Even now there aren’t many companies around who have really done the big mixed-use schemes. Grosvenor is doing great things in Liverpool and elsewhere, and Land Securities, Lend Lease and Quintain have all done great stuff. Those businesses have been on the same learning curve that we have.” |
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“We too share your frustration over the lack of progress between the SCDL partners, but we are extremely surprised by the contents and tone of your editorial. “You write that the Reuben brothers made their money trading metal in Russia, implying that they lack experience in dealing with the world of property. You should be aware that the Reubens have been in the UK property business since 1970, and very successfully, having sold their first development company to Bovis in 1972. “Your speculative comments on Stratford do not represent the facts. Although due to confidentiality obligations we have not made public declarations, had you enquired with Rothschild, who have been mediating, they would have confirmed that, since becoming partners in SCDL, we have been committed to the Stratford project. There is surely no better way of showing our commitment than by our repeated offers of funding in order to move the project forward on a fair and equitable basis. We have consistently been told by one member of the Stratford consortium, since October last year, that they would not be prepared to work with us on this project.” David and Simon Reuben |
