MD1626 Development of Land at Stephenson Street, West Ham

Type of decision: 
Mayoral decision
Code: 
MD1626
Date signed: 
31 March 2016
Decision by: 
Boris Johnson MP (past staff), Mayor of London

Executive summary

The Housing and Land Directorate has selected Berkeley Homes (South East London) Limited (BHSEL) as the preferred development partner, using the GLA’s London Development Panel, to develop a 10.62Ha brownfield site at Stephenson Street, West Ham, in the London Borough of Newham.  Following a three-stage procurement Berkeley Homes successfully responded to the tender requirements to deliver a high quality residential-led mixed use scheme incorporating significant transport and access upgrades.  Terms have been agreed for a Development Agreement (and ancillary documents) which will deliver a minimum of 3,500 homes, of these 35% are to be affordable, 32.5% PRS and 32.5% private development.  The scheme will also deliver road upgrades and a new station entrance as a minimum requirement, as well as circa 5Ha of public realm.  The selection of BHSEL as preferred bidder was endorsed at HIG in November 2015 and this Mayoral Decision seeks approval to enter into the development agreements and other ancillary agreements required to deliver the scheme.

 

Decision

That the Mayor approves:

•    The selection of Berkeley Homes (South East London) Limited as preferred development partner by entry into the Development Agreement which will signal the closure of the procurement process;
•    GLA Land and Property Limited’s entry into the Development Agreement with Berkeley Homes (South East London).

 

Part 1: Non-confidential facts and advice

Introduction and background

Procurement and Evaluation

1.1    The Mayor’s Housing Strategy sets out that he will encourage institutional investment in the private rented sector as a way to increase the supply and choice of housing in the capital, as well as promoting the accelerated delivery of much needed houses.

1.2    In September 2013 the GLA’s Housing Investment Group (HIG), supported the option for GLA land and Property Ltd (GLAP) to dispose of the site at Stephenson Street for a residential-led mixed use scheme, along with sites at Pontoon Dock and Silvertown Way.  The site at Stephenson Street had a number of complexities to overcome and subsequently taken longer to prepare for disposal than the other two sites.

1.3    The developer selection process was based on the standard LDP three stage mini-competition process, which involves an ‘Expression of Interest’ (EOI), ‘Sifting Brief’ (SB) and ‘Invitation to Tender’ (ITT). 

1.4    A sifting brief was sent to all interested LDP panel members in April 2015, providing further information about the project. It also included a set of questions to evaluate the applicants, in order to identify a shortlist to be invited to the third stage ‘Invitation to Tender’. 

1.5    An Invitation to Tender (ITT) was issued in May 2015 to the bidders shortlisted through the sifting brief evaluation. The ITT provided detailed information on the site and set out the delivery requirements and strategic objectives for the development opportunity, which are as follows: 

•    A residential-led development with approximately equal proportions of PRS, private for sale, and affordable in an appropriate range of accommodation and sizes;
•    A high-quality and effective management proposition for the private-rented homes with a guaranteed retention as private-rented tenure for a minimum 10 year period, commencing at practical completion;
•    Provision of a significant proportion of non-residential floorspace;
•    Provision of enhanced access to and from the site, to overcome its isolated position;
•    The identification of a suitable site of 1.17 Ha to be set aside for the construction of a free school on the site following agreement from the Education Funding Agency; 
•    Delivery of a new western station entrance to connect into West Ham station.

1.6    An evaluation methodology was provided as part of supporting documentation issued with the ITT.  This set out how the tenders would be assessed, including the evaluation criteria to be applied to each part of the bid. This was reviewed and approved by TfL Procurement, acting as the procurement agent for the tender.  

1.7    Following careful assessment of the tender responses using set evaluation criteria, BHSEL were assessed to be the highest scoring bidder..  This decision to appoint BHSEL as the preferred development partner for the scheme was endorsed at HIG in November 2015.  Since the November HIG GLAP and BHSEL have been populating the standard form LDP documents and finalising the other contractual arrangements required to accommodate their bid. 

1.8    Key terms of the arrangements with BHSEL are included in the confidential part 2 of this decision along with the details of the various associated legal documents that have been agreed required for the delivery of such a large and complicated site.

 

Objectives and expected outcomes

2.1    In accordance with BHSEL’s tender proposal the development will deliver (as a minimum standard):

•    3500 new homes.
•    35% of these to be affordable up to this threshold, 32.5% to be privately rented, and 32.5% to be private for sale.
•    A new station entrance to the west of the Jubilee and DLR lines to connect to West Ham Station.
•    A new pedestrian bridge across Manor Road to link the site to Milner Road.
•    Upgrades to the Stephenson Street road bridge structure
•    A new large public plaza to form an entrance to the site.
•    Extensive green open space comprising no less than [5ha] of public realm.
•    13,000 sqm of commercial space.
•    Site assembly and third party land acquisition.

Further details of the programme are contained in part 2.

 

Equality comments

The scheme will need to be fully accessible and/or DDA compliant in respect to Wheelchair accessible housing for the development and public realm.  The proposal meets this requirement and will be addressed in more detail as the detailed design progresses.

 

Other considerations

a) key risks and issues

Key Risks

Mitigation Strategy

The bidder fails to gain a suitable planning permission

 

Ensure the bidder implements the strategy submitted as part of the tender.  Work closely with LBN’s planning and regeneration teams to ensure the proposal meets their requirements. 

 

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

 

There is an under bidder, we have undertaken due diligence, and have obtained a parent company guarantee.  The standard documentation contains provisions for repossession of the site in the event of breach or default of payment.

The price offered is a guaranteed minimum sum and will not be subject to any renegotiation.

Failure to reach agreement with key stakeholders on key aspects of the delivery of the site.

Wherever possible we have sought agreement from the parties involved in advance.  The GLA has also indicated we will consider the use of statutory powers as a last resort.

 b) Mayoral Strategies:
The Mayoral Housing Strategy sets out a long-term ambition to increase the supply to at least 42,000 new
homes per annum.  Of these, at least 17,000 should be affordable with 5,000 for purpose built long-term market rent.  The proposed development at Stephenson Street will make a substantial contribution to this.

c) Impact Assessments and Consultations 
As part of the planning process BHSEL will be undertaking extensive impact assessment and stakeholder consultation.

 

Financial comments

5.1    GLAP has completed its procurement process for the selection of a developer to develop the Stephenson Street site.  Berkeley Homes (South East London) Limited was selected as the successful bidder.  GLAP is now seeking approval for Berkeley Homes (South East London) Limited, BHSEL, to be the development partner for Stephenson Street, and for GLAP to enter into a development agreement with Berkeley Homes South East London) Limited.  

5.2    The consideration offered and accepted was not only based on the financial value,  but also on the prospective developer providing the most economical advantages to the development. 

 

Investment and Performance Board

The following decisions were noted at HIG from 10th November 2015:

(a)    That the competitive procurement process taken and the subsequent outcome of the process be noted;

(b)    That the selection of the preferred bidder identified in the paper be endorsed, following which the Executive Director of Housing and Land would, under delegated authority, complete legal negotiations relating to the development agreement. Subject to a Mayoral Decision (MD), GLAP would then enter into contract with the preferred bidder based upon the financial and commercial terms set out in the MD; and

(c)    That the selection of an under-bidder to be appointed only in the event of failure to enter into the development agreement with the preferred bidder, be endorsed.

 

Planned delivery approach and next steps

Activity

Timeline

Signing of Contract

March 2016

Grant of Planning

December 2016

Delivery Start Date

 2017