Global Credit Crisis Affects London’s 2012 Olympic M-F Construction

The Australian-based developer building the Olympic Village for the 2012 Summer Games in London is having trouble getting loans to fund the construction because of the global credit crunch. Lend Lease Corp. has been seeking a debt-equity deal for the project but has been unable to find one because of the financial crisis, Mark Gell, a Land Lease official, told Bloomberg News today. In an effort to keep the construction schedule on track, the British government has used 95 million pounds from a contingency fund, according to the Bloomberg story by Rebecca Keenan and Brian Lysaght. The number of units in the 4.5 million-square-foot village has already been trimmed from 4,200 to 3,000 to make it easier to finance. Lend Lease and its partners, First Base Ltd. and East Thames, were selected by the Olympic Delivery Authority (ODA) and London & Continental Railways Ltd. In March 2007 as the preferred developer for Stratford City, which is the site of the Olympic Village. The agreement calls for the site to be developed in two phases; the residences and related accommodations needed for the athletes during the 2012 Olympics and refurbishing the site after the Olympics to be sold as housing to individual buyers. Phase I was initially estimated to cost about 2 billion pounds, but that was before the development was scaled back. New estimates for the 3,000-unit complex were not available. The second phase was expected to take up until 2020 to complete and cost up to 3.5 billion pounds, according to March 2007 release from Lend Lease Corp. No updated figures have been released for that project. Stratford City is comprised of former railway yards located about five miles northeast of Central London. It is considered one of the largest and most significant urban regeneration zones in Europe, according to Lend Lease. “The Stratford City project provides us with the exciting challenge of delivering a successful Olympic Village for 2012, as well as creating a long-term sustainable community for London,” Greg Clarke, managing director and Group CEO, said at the time Lend Lease was selected as the preferred developer. In its 2008 annual report issued this week, Clark noted that conditions “remain very challenging” in the U.K. market, but added that the company was moving ahead with residential projects there including the Olympic Village. Overall, he said Lend Lease “continues to focus on areas where we have strong market positions and competitive advantage.” He added that the company has lowered short-term earnings expectations, but added that the firm’s “diverse development pipeline and [Australian] $9.3 billion in assets under management give the company flexibility in business planning.” Lend Lease, headquartered in Sydney, is a 50-year-old property group that operates three core businesses: project management and construction, property investment management and property development. It focuses on three key areas within those businesses, retail, communities and public private partnerships, and operates in the United Kingdom, other parts of Europe the United States, Asia Pacific and the Middle East. Projects in the U.S. have included military housing projects. Operating as Actus Land Lease, the company was selected earlier this year to develop a $420 million housing project for the U.S. Army at Forts Wainwright and Greely in Alaska