MD3337 London City Island Covenant

1.1.    On 31 March 1998 the land which is now known as London City Island was transferred from London Docklands Development Corporation (LDDC) to Wallworths Limited for consideration of £65,000 plus VAT. The transfer imposed a restrictive covenant on the property, for the benefit of land retained by LDDC. The covenant stated that the property could not be used for any purpose other than a combined heat and power plant.
1.2.    On 25 February 2008 the Commission for the New Towns (the Commission) entered into a Deed of Release of Covenant with Clearstorm Limited. In consideration of a payment of £330,000, plus VAT, the deed varied the permitted use of the land, to the following uses:
•    a combined heat and power plant
•    a community centre/sports hall
•    a marketing suite 
•    an electricity substation.
1.3.    The deed provided that, if Clearstorm uses the land for any other use within 21 years of 25 February 2008, it must pay the Commission £7m plus VAT for the full release of the covenant.
1.4.    GLA Land and Property Limited (GLAP) is a successor in title to part of the land previously owned by the Commission. Together with other parties (LB Tower Hamlets, LB Newham, and Transport for London), it has the benefit of a restrictive covenant on the land at City Island. EcoWorld Ballymore (Ballymore) is the successor to Wallworths and Clearstorm.
1.5.    Since the covenant was imposed, Ballymore has built out the whole of City Island. This area has established itself as a significant residential community on the border of Tower Hamlets and Newham. The covenant now relates to one part of the development (Building N). There was a previous proposal (approved under MD2101, attached as Appendix One) for the building to be used by the London Film School. For various reasons this is not proceeding. Ballymore has now presented proposals for use of the building by the Royal Academy of Music (RAM), for an educational and performance facility.
1.6.    RAM’s proposal is to open an educational space that will support its outreach programme and provide space for performances. This will build on the existing success of the English National Ballet’s educational and performance space, which is already at City Island. The two facilities would represent a significant cultural hub for east London. This will help to support the Mayor’s objectives for the Thames Estuary Production Corridor and the Good Growth agenda.
1.7.    Ballymore is not seeking a full release of the covenant. It has asked GLAP to sign a Deed of Consent, enabling Ballymore to sign a lease with RAM without triggering the overage payment. It should be noted that GLAP can only issue a consent that relates to the part of the property with the benefit of the restrictive covenant retained by GLAP. Other parties with the benefit of the restrictive covenant will also need to give their consent. The terms of the proposed lease between Ballymore and RAM are for 100 years at no rent, but with a service charge contribution. 
 

2.1.    The intention of the covenant was to restrict the use of part of the City Island site to a series of specified uses, unless a payment was made. This was to ensure there were some non-commercial uses on the development that either provided energy infrastructure or served some community purpose. 
2.2.    The proposal from RAM is not one of those specific uses, but it will achieve the original objective by providing a new educational and performance space. This will not only provide a space for local residents and Londoners to access and experience RAM’s output, but also support wider cultural infrastructure in east London. This, in turn, will support London’s creative economy, and contribute to wider policy objectives (such as the Thames Estuary Production Corridor).
 

3.1.    Under section 149 of the Equality Act 2010, as a public authority, the GLA must have due regard to the need for to eliminate unlawful discrimination, harassment and victimisation, and to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Protected characteristics under the Equality Act comprise age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation and marriage or civil partnership status.
3.2.    This decision will unlock the use of the building for which there have been few deliverable proposals. The proposed educational and performance space will provide increased access to art and culture for the residents of Newham and Tower Hamlets (as well as other Londoners). Newham and Tower Hamlets have some of the most deprived communities in London, and the RAM facility will provide them with local art and cultural facilities.
3.3.    The RAM facility is located on City Island, a short distance from Canning Town station. There is step-free access along the route and within the station, giving access to the Jubilee Line, the Docklands Light Railway and local bus services. This means the facility will be accessible to many Londoners.
 

4.1.    This decision relates to a historic covenant on a legacy site. However, the covenant’s impact has been to provide a space for digital arts on what may otherwise have been standard commercial or retail space. It is an example of how GLAP can use its property rights to secure policy outcomes. Securing the arrangements for the RAM facility will provide long-term space for the arts sector. The mechanism requiring Ballymore to pay £7m if a use breaches the covenant expires at the end of the decade; but the RAM lease is for 100 years.
4.2.    There are no conflicts of interest to note for any of those involved in the drafting or clearance of the decision.
Key risks
4.3.    The main risk is that Ballymore and RAM cannot finalise the deal. This building has been subject to several previous proposals; but these projects are financially and operationally challenging. It is positive that Ballymore has worked so hard to deliver additional cultural infrastructure at City Island.
 

5.1.    Request for the waiver of the restrictive covenant became necessary as, the breach would have triggered £7m clawback payment to which GLAP would have been entitled to some share, this will now not be the case.
5.2.    The consent and waiver request allowing Building N to be used as an educational and performance space although for a longer term of 100 years, is along the same lines as a similar previous proposal, which is not one of the permitted uses. This waiver allows RAM to use the building without triggering the clawback clause.  
5.3.    As Building N will be used for educational purpose upon the grant of the waiver of the covenant, without the £7m clawback clause being triggered, no income is due to GLAP as a result. Without this agreement, it is likely no development would come forward on the site until the expiry of the covenant, meaning that GLAP would receive no income from this site in any event.
 

6.1.    Section 30 of the Greater London Authority Act 1999 (as amended) (GLA Act) gives the Mayor a general power to do anything that he considers will further one or more of the principal purposes of the GLA as set out in section 30(2). These are:
•    promoting economic development and wealth creation in Greater London
•    promoting social development in Greater London 
•    promoting the improvement of the environment in Greater London.
6.2.    In formulating the proposals in respect of which a decision is sought, officers confirm they have complied with the GLA’s related statutory duties to:
•    pay due regard to the principle that there should be equality of opportunity for all people
•    consider how the proposals will promote the improvement of health of persons in Greater London; promote the reduction of health inequalities between persons living in Greater London; contribute towards the achievement of sustainable development in the UK; and contribute towards the mitigation of or adaptation to climate change in the UK
•    consult with appropriate bodies.
6.3.    Sections 1-3 of this report indicate that the decision requested of the Mayor falls within the GLA’s statutory powers.
 

7.1.    The work will be delivered according to the following timetable: 

Appendix 1 - MD2101 City Island London Film School relocation.