MD1488 Legal agreements for the development of land at Silvertown Way, Canning Town

Type of decision: 
Mayoral decision
Code: 
MD1488
Date signed: 
18 June 2015
Decision by: 
Boris Johnson MP (past staff), Mayor of London

Executive summary

The Housing and Land Directorate, using the GLA’s London Development Panel (LDP) has selected a preferred partner to develop 2.56 ha of land within Canning Town, London Borough of Newham. Approval is sought to appoint the selected partner to deliver 1,117 homes and create a high quality residential-led development at Silvertown Way (see plan at Appendix 1).

Silvertown Way will lead the way in the delivery of 348 homes for the Private Rented Sector (PRS) led by Galliford Try Partnerships Limited and Linden Limited, which has attracted an institutional investment partner Fizzy Living meeting the required minimum 10 year hold period.

Decision

That the Mayor approves the recommendation to select Galliford Try Partnerships Limited and Linden Limited as the preferred tenderer for the Silvertown Way project.

Part 1: Non-confidential facts and advice

Introduction and background

1.1    The Mayor has publically expressed a desire to encourage institutional investment in the private rented sector as a way to increase the supply and choice of housing in the capital. The Mayor’s Housing Strategy sets out that, where appropriate, the Mayor of London shall seek to use land assets to encourage institutional investment in the private rented sector and improvements in the design and management of this tenure.
1.2    In September 2013 the GLA’s Housing Investment Group (HIG), supported the option to dispose of sites, including Silvertown Way, with a key requirement to deliver a significant proportion of Private Rented Sector (PRS) homes.
1.3    The developer selection for Silvertown Way from the LDP framework was endorsed by the GLA’s Housing Investment Group (HIG).
1.4    The purpose of this decision paper is to set out the competitive procurement process undertaken to date, to identify the preferred bidder and to gain a Mayoral Decision to approve the preferred bidder and approve the entering into the requisite agreements to proceed with the development.

The Site 

1.5    The GLA Land and Property Limited (GLAP) land is a 2.56 ha site located in Canning Town, within the London Borough of Newham.  It is situated adjacent to Canning Town station and the site acts as a gateway location to the Royal Docks.  A red line boundary plan of the site is included at Appendix 1.

1.6    The site is effectively bounded by road or rail infrastructure on all sides: bound to the west by Victoria Dock Road and the Docklands Light Railway and to the east by Silvertown Way.  In addition, five smaller roads cross the site in an east to west direction joining Victoria Dock Road with Silvertown Way.  Permanent road closures were secured for roads within and adjacent to the site including (from the north) Sabbarton Street, Hallsville Road, Victoria Dock Road, Brunel Street, George Street, Willian Street and Nelson Street.  

1.7    The developer appointed will create a high quality residential-led development incorporating a significant proportion of Private Rented Sector (PRS) homes and a mix of units, including a policy compliant 35% provision of affordable homes.

    Disposal Strategy

1.8    In September 2013 a report which recommended the disposal of the site via the London Development Panel (LDP) for residential led development was endorsed by the Housing Investment Group (HIG)

1.9    The developer selection process was based on a three stage approach incorporating Expression of Interest (EOI), Sifting Brief and Invitation to Tender (ITT). The process was supported by Legal and Procurement Teams at different stages. The EOI was issued to all 25 members of the LDP in March 2014 and following receipt of EOIs the Sifting Brief was issued to all interested LDP members in April 2014.  The ITT was issued in May 2014 to the bidders shortlisted through the Sifting Brief evaluation and received by the prescribed deadline of 14 July 2014.

1.10    The preferred bidder was endorsed by HIG in September 2014 on the basis that its bid represents the most economically advantageous tender (MEAT) using the evaluation criteria published in the ITT documentation. This paper seeks approval of the selection of the preferred bidder.

1.11    A summary of commercially sensitive aspects of this tender bid and approval are set out in the confidential part 2 of this MD.

Objectives and expected outcomes

2.1    The project aims and objectives are to create a unique high quality residential-led development, which achieves the following:

•    Delivery of New Housing
In accordance with London Plan Policy 3.3 – Increasing Housing Supply; the key objective of this project is to deliver much needed private for sale, private rented and affordable homes that meet the requirements of Londoners;

•    Tenure Split and Housing Mix
Tenure split for the affordable residential homes – 60% Affordable Rent: 40% Shared-Ownership, (to allow for a minimum requirement of 35% affordable housing overall based on number of residential homes);

•    Housing Quality
All homes on the development will comply with the London Housing Design Guide and meet Code for Sustainable Homes Level 4;

•    Private-Rented-Sector (PRS) Homes
The site is to deliver a significant proportion of private rented sector homes and for these to be retained as PRS for a minimum period of 10 years;  

•    Long Term Management 
Provision of high-quality and efficient long-term management for the development and improved overall experience for tenants by introducing management standards benchmarked in the London Rental Standard (LRS);

•    Exceptional Urban Design 
A development that addresses the sites unique attributes and enhances the character of the local area through use of appropriate materials.  Awareness of the linear nature of the site and the approach to public/ private areas; 

•    Understanding of the Local Context and Propose Connections
The development will improve connection to Canning Town Station and incorporate connection from the site to the Limmo Site (Area 9).  Connectivity to the new Town Centre (Area 7) will also be established alongside opportunities to connect beyond the Limmo Site and the Leaway.  To the west of the site an area is to be safeguarded for a bridge that accommodates cyclists and pedestrians;

•    Delivery of Non-Residential Floorspace
8,000 sq m non-residential floor space is to be provided within the development and achieve the same standards of exceptional urban design and to generate employment.

2.2    The expected outcome of this disposal is a residential-led scheme of a high quality with a minimum development of 1,117 residential homes, incorporating 35% affordable housing provision and 8,000 sq m of non-residential floorspace.  Under the key terms and conditions of this appointment the developer shall:

•    Enter into a Development Agreement (DA) and Building Lease, both based on a standard form,  and a Head Lease.  The DA is conditional on the delivery partner securing a detailed planning permission (which is subject to the approval of GLAP) and will need to provide evidence of funding delivery.

•    Submit a detailed planning application within:
Submission Target Date:    9 months from the date of the Development Agreement
Submission Longstop Date:    18 months from the date of the Development Agreement

•    Pay a guaranteed minimum land value (net of all costs) on the basis of the financial offer, submitted as part of the ITT, for the transfer of long-term leasehold interest in the site;

•    Provide a payment of 20% of the land value to GLA when the delivery partner enters into the Building Lease and all conditions are therefore settled within the Development Agreement

•    Assume control of the site and be responsible for all estate management requirements, including health and safety and security following entering into the Development Agreement, but not in relation to the existing community nursery occupation which it is the GLA’s responsibility to determine.

Equality comments

3.1          The scheme will be fully assessable and DDA compliant.  The proposal will meet this requirement and will be addressed in more detail as the detailed design progresses.

Other considerations

4.1       Key risks and issues:

 

Key Risks

Mitigation Strategy

The developer fails to gain a suitable planning permission

 

The developer participated in a formal pre-application meeting with the local planning authority on the scheme submitted as part of the tender.  A requirement of the Development Agreement is the development partner will enter into a Planning Performance Agreement (PPA) with LBN, which will specify milestones for submission of planning application and timescales for borough response.

 

The developer defaults on the offer, which would delay delivery of the project

 

The purchase price within the Development Agreement is a guaranteed minimum sum.

Unforeseen ground conditions impacting on the design and construction of the scheme.

The developer was provided with all technical site reports and ground condition assessments that were available to GLAP at the time the ITT was issued.  In addition, the developer has undertaken a suite of further surveys in advance of signing up to the Development Agreement.

 

Withdrawal or lack of interest from occupiers, in particular in relation to the non-residential floor-space

 

Support the developer in preparation of the sales and marketing strategy.  Current market discussion with potential occupiers is positive and created confidence in relation to securing users.  Flexibility built into proposal regarding non-residential floor space.

 

Withdrawal or unable to secure long-term institutional investment or PRS investor funding package

The competitive LDP launch and site dispoal for PRS development has encouraged and engaged with a range of long-term institutional investors attracting potential funding sources. The GLA and the preferred development partner have worked closely to ensure the suitability of the development agreement for a long—term partner and have worked closely throughout the process with Fizzy Living.

The procurement process is challenged

As set out on previous HIG reports a transparent, fair and equal procurement process has been undertaken, supported by a procurement agent.

Financial comments

5.1       Provided in Part 2

Investment and Performance Board

7.1    On 10 September 2014 Housing Investment Group received a report outlining the results of a competitive tender exercise to develop the land at Silvertown Way. The Group endorsed the preferred development partner and noted the receipt for the sale of the site.

Planned delivery approach and next steps

8.1       The next steps are summarised below:

Activity

Timeline

Mayoral Decision

April 2015

Enter into the Development Agreement

June 2015

Submission of Planning Application

December 2015

Planning Approval/ Signed s106

June 2016

Start on Site (Longstop)

January 2017

Completion

April 2022

Appendices and supporting papers

Appendix 1 – Red line boundary plan of the site