Gmail - Earls Court Loan Notes - FOI-2451-1516 - email 1 of 2.pdf ...

Viewer
Transcript

Richard Osband

Earls Court Loan Notes FOI24511516 email 1 of 2 Craig Graeme To: "[email protected]"

15 April 2016 at 16:53

Dear Mr Osband, I refer to your recent emails dated 12 March, addressed to me, and your emails dated 16 and 24 March and 4 April addressed to Howard Carter. I am responding to all of your emails as Mr Carter is currently out of the office. There are a number of attachments to this email. Due to their size we need to send the email in two parts of which this is the first. The Earls Court joint venture is a joint venture arrangement where the freeholder of the site (TfL) and the leaseholder (Capco)  have brought together their assets, interests and expertise to create extra value for the benefit of both parties. The only element of note is that  TfL made the decision that it wished to participate in the development via a joint venture rather than sell its land to someone else to develop. TfL took this course of action having taken advice from its commercial property advisers.  The ownership of the JV company was negotiated at length and it was finally agreed that Capco would own 63% and TfL 37% of the JV company.  This reflected various factors, including the relative value of each party’s existing land interests and the work undertaken by Capco in achieving outline planning consent at their risk before the partnership was established. For further details on the transaction, please see the TfL Board Paper called  “Earls Court – Proposed Joint Venture” which can be found on the TfL website for the for the meeting held on 5 February 2014  [Board Paper]. TfL has taken commercial and property advice every step of the way and is confident that the partnership with Capco represents best value for TfL.  The work of the partnership in securing detailed planning and progressing the preparation of the site has added value to the partnership and TfL enjoys 37% of that gain in value through its shareholding. This work also brings TfL a step closer to delivering thousands of new homes that London so clearly needs. In relation to the loan notes, it is normal practice for shareholders in joint venture companies, such as Earls Court Partnerships Limited, to put in their money through a mixture of buying shares the company issues and acquiring loan notes which the company issues. This is just a mixture of investing in the company’s equity and lending the company money. Doing this provides the company and its owners greater flexibility to invest more or return money to the owners because it is easier to loan or repay money than it is to issue more equity or pay dividends. It is also not uncommon for loans to be

noninterest bearing since shareholders would otherwise be paying themselves out of company funds. The loan notes which have been issued to TfL & Capco as shareholders are on identical terms and for amounts proportionate to their respective shareholding percentages.  The detail and structure of the deal is detailed in the transaction documents, copies of which, with appropriate redactions, have been on the TfL website since March 2014 [Transaction documents].   There are two Loan Note Instruments constituted by Earls Court Partnership Limited, one for £325,000,000 dated 13 November 2014 and one for £895,000,000 dated 2 April 2015. These sums have been committed by the shareholders for the completion of the land transactions and for project expenditure. In accordance with normal practice in developments of this kind, TfL analysed the proposals from a state aid perspective before it entered into the agreements with Capco; this included consideration of the loan note arrangements.  Although TfL is not expressly subject to section 123 of the Local Government Act 1972 or section 333ZC of the Greater London Authority Act 1999, TfL nevertheless sought to maximise its financial return from the Earls Court development.  Having considered its fiduciary duties and the rules on state aid, and after taking proper professional advice, TfL is satisfied that the Earls Court transaction was state aid compliant and accordingly, there was no requirement to obtain clearance from the European Commission.    You have asked TfL to supply you with the legal document or documents which the loan note contract or contracts and I enclose the Loan Instrument and Certificates. These are in substantially the same form as the form attached to the Implementation Agreement that was published on the TfL website in March 2014 [Transaction documents]. Please note that in accordance with TfL’s obligations under the Data Protection Act 1998 (DPA) some personal data has been removed, as required by section 40(2) of the FOI Act. This is because disclosure of this personal data would be a breach of the DPA, specifically the first principle of the DPA which requires all processing of personal data to be fair and lawful. It would not be fair to disclose this personal information when the individuals have no expectation it would be disclosed and TfL has not satisfied one of the conditions of Schedule 2 of the Data Protection Act which would make the processing ‘fair’. At our meeting on 10 March you also requested a copy of the valuation and I enclose a copy of a report on the proposed transaction produced by our commercial property advisors Cushman and Wakefield. Please note that in accordance with the FOI Act, we are not obliged to supply some of the information within the report as it is subject to a statutory exemption to the right of access to information under Section 43(2). The redacted information is confidential information which would prejudice the economic interests of Cushman and Wakefield, CapCo and TfL if it were to be disclosed, including information disclosed to TfL by a third party under a duty of confidence. The advice also details the progress of negotiation and the negotiating strategies pursued by TfL, showing the opening positions of both parties and the degree to which both parties were willing to compromise. Disclosure would cause prejudice to the economic interests of both parties when they enter into similar negotiations because the other party would be

better able to predict their negotiating strategy. The economic interests of Transport for London would also be prejudiced by disclosure of some financial information and strategic options relating to the future of London Underground’s Lillie Bridge Depot site next door, which does not form part of the Joint Venture. The use of this exemption is subject to an assessment of the public interest in relation to the disclosure of the information concerned.  We recognise the need for openness and transparency by public authorities, and we have applied the exemption as sparingly as possible, but in this instance the degree of prejudice to economic interests of TfL and CapCo, and the potential loss of revenue to TfL that would need to be found from other sources outweighs the public interest in disclosure of the relatively small amount of information redacted from the documents. Please see the attached information sheet for details of your right to appeal as well as information on copyright and what to do if you would like to reuse any of the information we have disclosed.    Your email of 12 March also states that we confirmed that no partnership deal on Lillie Bridge Depot would be done with Capco without competition.  To clarify the position and as discussed at the meeting, TfL has not yet reached a decision on the site.  A decision will be taken in due course as to the most advantageous development or disposal option for TfL. Your email of 24 March queries the various legal powers that was mentioned in Howard Carter’s email of 12 February.  TfL has taken extensive professional advice on the Earls Court arrangements and I can confirm that we are satisfied that TfL has the necessary legal powers to enter into the joint venture arrangements with Capco to develop Earls Court, including legal power to fund the joint venture entity. Your email of 24 March also requested a copy of TfL’s Investment Strategy. We are currently dealing with your request and will respond to you separately.

Regards Graeme

Graeme Craig | Director of Commercial Development Transport for London | 5th Floor West Wing, 55 Broadway, London, SW1H 0BD Tel: 020 3054 3417 | Mobile: 07894 785 346 | email: [email protected]

*********************************************************************************** The contents of this e-mail and any attached ﬁles are conﬁdential. If you have received this email in error, please notify us immediately at [email protected] and remove it from your system. If received in error, please do not use, disseminate, forward, print or copy this email or its content. Transport for London excludes any warranty and any liability as to the quality or accuracy of the contents of this email and any attached ﬁles. Transport for London is a statutory corporation whose principal ofﬁce is at Windsor House, 42-50 Victoria Street, London, SW1H 0TL. Further information about Transport for London’s subsidiary companies can be found on the following link: http://www.tfl.gov.uk/corporate/abouttfl/ Although TfL have scanned this email (including attachments) for viruses, recipients are advised to carry out their own virus check before opening any attachments, as TfL accepts no liability for any loss, or damage which may be caused by viruses. ***********************************************************************************

2 attachments [email protected]_20160414_092003_Redacted.pdf 6028K ECPL loan notes 3 part 1_Redacted.pdf 12240K

Gmail Account recovery email address changed -