We have restructured our information on the financial background to the Imperial West development, and combined our previous three sets of pages into one. This sets out the information we have been able to gather through reports and minutes of the Imperial College Council.
The key points are:
- Imperial operate with a ‘College Fund’ that adopts a very commercial approach to the maximisation of income from its various assets
- Most of the Imperial West project is commercial rather than education-led. It is about saving Imperial office rents elsewhere, and bringing in income from private flats, the hotel, and student housing.
- Imperial’s choice of partnering with Voreda Capital has shaped the decisions on the project.
- Although a public body and a charity, the College is not being open about the financial background to the project.
As a public body, the College Council publishes its minutes and agendas at this link. The College is also subject to Freedom of Information legislation (although our one request to date was rejected on grounds of commercial confidentiality).
The College has declined to answer a series of questions that we have asked on the financing of Imperial West (see IC Letter of March 2012). We hope that we have interpreted correctly the statements made in its own records, as set out below. If we have misinterpreted anything, we will gladly be corrected. Much of the information speaks for itself.
How did the Imperial West project start?
The College is based in South Kensington and had been looking for an expansion site for some time. When the BBC Woodlands site came on the market, Imperial moved swiftly to purchase the site. The BBC allowed Imperial to match a competing offer, and the 7.5 acre freehold site was acquired by the College for £28m in September 2009. This was described to the College Council as a ‘once in a lifetime opportunity’. As with other College assets, the site was handed on to the College Fund for development.
The College Fund – what is it?
The College Fund has been set up by Imperial ‘to secure its financial stability and independence by maximising the return from investment assets and providing a regular source of unfettered income to support the College’s objectives’. It manages the College’s assets and its declared aim is ‘to manage such assets with a pure investment focus, in order to provide steady capital growth and a regular income’.
The Fund has its own chief executive officer (John Anderson) and is overseen by a College Fund Board, chaired by Stewart Newton, founder and chairman of the Real Return Group and a non-executive director of HSBC. The Fund is described as a core part of Imperial College and remains within the same legal entity.
As the Imperial West project has shown, the ‘pure investment focus’ of the Fund has meant that anything other than maximising commercial gain from the landholding at Wood Lane has proved to be a secondary consideration.
The joint venture with Voreda Capital
Soon after the purchase of the site, the College Fund agreed initial terms with a developer and equity partner, to fund the preparation of a masterplan for the site, and to develop a first phase of postgraduate housing units.
College minutes show that Voreda Capital was selected as the best potential partner on the basis ‘that they agreed to investment terms that reflected the need to deliver a significant upfront return to the College Fund through the land sale; provided a preferential return to the Fund on an IRR of over 20% on the development and were also being willing and able to take the majority interest in the scheme, thus keeping it off the College balance sheet’.
Other partners were considered, including the Wellcome Trust, Generation Estates and Berkley First. Voreda Capital manage an investment fund of £50m of which LMS capital is a major shareholder. One of the non-executive members of the College Fund Board declared an interest as the chief executive of LMS Capital and absented himself from discussions on this issue.
Voreda and the College Fund commissioned an architectural competition for a masterplan for the Woodlands site. The brief for this competition, which determined the scale, building uses, and floorspace of the whole development, has not been made public and the College has refused a FoI request from us to have sight of a copy. It is hard to see why an architectural brief for what Imperial like to describe as an ‘academic campus’ should be so confidential.
The College Council noted in February 2010 that ‘a 600 bed development would drive a land value of £21m whilst only utilising approximately two ninths of the overall site, thereby allowing other College and commercial activity on the remainder of the land, 5.5 acres’.
The College had in 2009 agreed to the general principle of the College Fund investing in joint ventures to provide student accommodation. Such schemes have become a significant part of the property market in London.
From the College fund perspective, these joint ventures were to be ‘driven by investment returns’. In each case (and Imperial West is one of two developments so far) the College enters into a rental guarantee with the development partner but also expects to make a sizable investment return.
What are the details of the College’s agreement with Voreda?
The College will not provide details. It has insisted to us in a recent letter that delivering the ‘vision’ for Imperial West ‘remains absolutely the responsibility of the College, and this has not, and will not, be diluted or delegated in any way’.
We struggle to see how this can be so. It is clear from College records that a joint venture company was set up with Voreda Capital, which is responsible for 50.1% of the equity in the development. This majority holding was necessary to ensure that the Imperial West project was treated as as ‘off-balance sheet’ in the College’s accounts.
We know from the Phase 1 Section 106 Agreement signed between Hammersmith and Fulham Council and Imperial College that three parties are involved. These are the local authority, the College (defined as the ‘owner’ of the site), and a third party defined in the agreement as the ‘developer’.
This ‘developer’ within the S106 Agreement is the company Woodlands 1 LLP, which shares its directors with Voreda Capital, and which we
assume to be the joint venture vehicle. Woodlands 1 LLP was formed as a company in late 2010 and was described on the former King Sturges property website as ‘a vehicle established by Voreda Real Estate Fund LP and Imperial College London to undertake a mixed-use development
on the former Woodlands site’.
The Financial Statement for Woodlands 1 LLP, available from Companies House and covering the period December 2009 to March 2011, ends by stating ‘There is not deemed to be one controlling party’ for the company. This suggests that control of decisions by the joint venture vehicle (i.e the ‘developer’ of Imperial West) is shared and that the College has by no means complete control. This would be unsurprising, as Voreda Capital and its investors will wish to ensure they get the financial return expected from the completed development.
Moving on from Phase 1 to Phase 2 of the development
Imperial and Voreda had originally hoped to gain outline planning permission for the entire development in 2010. Advice from LBHF and GLA officers was that this would prove a bridge too far, given that the very tall buildings in the scheme would prove controversial. So Imperial/Voreda settled for a Phase 1 application for the 4 blocks of student housing, to be followed by a second ‘hybrid’ application for the remainder of the site, as approved by LBHF on July 25th 2012.
Once the phase 1 scheme had planning approval, the College decided to continue its partnership and joint venture with Voreda, in order to deliver the remainder of the masterplan.
The Imperial College Council in May 2011 decided it should try to ‘obtain planning consent at the upper end of the original scale at c.1,200,000 sq.ft with a target to achieve consent by spring 2012’.
A further paper on the same agenda stated that ‘the arrangements in place with Voreda as development partner have been subject to further negotiation to align the interests while ensuring that there is no absolute commitment to partnering with them in the ultimate development of each property. This approach ensures enables (sic) the success and momentum of Phase 1 to be maintained ensuring continuity in relation to the understanding of the site and the planning context vital to ensuring that we capitalise on the favourable planning environment and avoid possible delays caused by the May 2012 Mayoral election. Voreda will again commit to 50% of the planning cost at risk, based on the same, capped success fee as established for Phase 1 for delivered consents’.
From this we learned that:
- The College took a decision to go for the upper end of density of
development (and hence tall buildings squeezed onto the 5.5 acres available for Phase 2 of the masterplan).
- The timetable was being driven by London’s political context. This was seen in 2011 as being a ‘favourable planning environment’, with Conservative leadership at both the GLA and the Borough, but one potentially at risk of change after the 2012 London Mayoral elections.
Some questions over the direction of the project appear to have surfaced at this May 2011 Imperial Council meeting. The minutes of the next meeting (in July) refer back to the ‘extended discussion’ at the May meeting and to the fact that ‘it had become clear that the governance arrangements for this major project needed to be clarified’.
A paper was presented proposing the establishment of an Imperial West
Syndicate, to be chaired by council member Jeremy Newsum. The aim was to provide a way of managing ‘the complex combination of significant academic and commercial interests involved in the Woodlands development.’ The minutes record that the Chairman welcomed these proposals which would ‘provide more transparent governance for this important project’.
The slide presentation on the setting up of the Imperial West Syndicate notes that Imperial West is a core College development (that needs to be managed as such). It has potential commercial/entrepreneurial activities that may not necessarily be compatible with the academic mission (Imperial’s emphasis).
A progress report notes ‘the added benefit of building on the success of Phase 1 and capitalising on the relationships established with key stakeholder groups in the area, including the GLA and local council, meaning that the deal proposed is far more likely to lead to planning success being achieved by the May 2012 Mayoral elections than with another development partner. Time is clearly of the essence, both in terms of the ability actually to deliver the vision, but also to minimise the period for which risk capital for planning is applied.
From these documents we learned that:
- College Council discussions on plans for Imperial West have not always been straightforward, leading to a need to strengthen governance arrangements.
- The College recognised at this stage that the academic and commercial aspects of the development may not be compatible.
- Jeremy Newsum and Stewart Newton have been the key Imperial Council members involved. The former has extensive experience and wide contacts in the property world, and the latter in investment finance.
- Imperial were explicit about their desire to get Phase 2 plans
approved before the May 2012 Mayoral elections, at which time
the political alliances between Hammersmith & Fulham Council might have changed. In the event, the College and its consultants failed to make this deadline, not least because of the local campaign to get the plans changed. The decision on the planning application was postponed in March, in June and for a third time in early July.
The consultants acting for the College Fund and Voreda
The team of consultants retained by Imperial/Voreda are led by Jones Lang La Salle This ‘global real estate property services’ company bought out King Sturge (another major planning/property consultancy) in 2011. King Sturge in turn had been working with major land-holders in the White City area since earlier masterplan proposals, in 2005.
Jones Lang Salle is currently also acting for Helical Bar/Aviva, on the redevelopment of the former Dairy Crest site, off Wood Lane. The PR consultancy used by Imperial (Quattro) is also being used on the Helical Bar proposals as well as the Imperial development.
Major planning consultancies wield significant influence, on how developments are approached and on how returns can be maximised from any one site. They also work to influence the planning policies that local councils adopt.
Both Jones Lang LaSalle and King Sturges were active in submitting a series of comments to LBHF as part of the 2010 consultation process on the Borough’s Draft Core Strategy. These submissions proposed detailed revisions to the new Core Strategy text, suggesting (amongst other things) that affordable housing policy as applied to the White City OAPF should be made more flexible.
One of the Woodlands LLP/Jones Lang La Salle proposed additions to the LBHF Core Strategy read ‘Adjacent to the A40 (one of the main arterial roads into the capital from the north and northwest), the Woodlands site provides a suitable location for creating an attractive landmark cluster of tall buildings to mark the entrance to Central London’. The requested change to the Core Strategy text was that Council should drop the statement in the document that it “expects most of the new development to be low to medium rise”.
To be fair to Hammersmith & Fulham Council, its planners did not agree to adopt all the changes proposed by Jones Lang LaSalle or King Sturges. But the final wording of the Core Strategy was indeed drafted so as to open up the possibility of very tall buildings on the Woodlands site.
As pointed out elsewhere on this site, and in many objections to the
Imperial planning application, this is a reversal of the position the Borough took in its 2004 Supplementary Planning Guidance (the original White City OAPF). After attempts by this Association to cla\rify the status of this 2004 document, the council has been forced to admit that it remains ‘extant’ and has never been rescinded or revoked. LBHF now argues that the 2004 document carries ‘no material weight’ in decisions on planning applications, for reasons which we do not believe will stand up to legal scrutiny.
As many Hammersmith residents will know, it is Helical Bar who has a development agreement with the Borough Council for the highly
controversial riverside development at King Street, next to the Town Hall. Who was it in 2010 that was acting as agent for Helical Bar, and submitting relevant recommendations on the wording of the Borough’s Core Strategy? King Sturges again. On this scheme, public opposition was sufficient to prompt intervention by the Mayor of London. In July 2012 Hammersmith & Fulham announced a major rethink of the project.
The many links within this incestuous world of landholders, consultants and advisers creates a planning juggernaut that is very difficult for the general public to take on. It also raises questions of whose interests are being promoted on any individual scheme. Helical Bar has in July 2012 submitted an outline application for a major development on the former Dairy Crest site, just the other side of Westway. This also involves a very tall residential tower (30 storeys). Now it becomes clear to all why this group of developers and consultants have been promoting the idea of a ‘Gateway to London’ for five years or more.
Why should a group of consultants and landowners be in a position to shape the Borough’s Core Strategy, when the voice of the public goes unheard? In the initial public consultation on the draft 2011 WCOAPF there was vociferous public opposition to the idea of a cluster of tall towers at this location. But you can lay bets that this proposition will resurface, more or less unscathed, in the revised version of the White City OAPF (now promised for late September 2012 and after probably all three of the key sites in the area will have received planning permission).
Over the past two years, we have had growing concerns that Imperial College Council members have not in reality calling all the shots on the Imperial West proposals. They have become pawns in a wider game being played out by the London property industry, which has long had its eyes on the profits to be made from the undeveloped land at White City.
How much of the Imperial West development is commercial, and how much for academic use?
The College has provided a set of figures designed to support its assertion that ‘a minimum of two thirds of the development will be for Imperial use’. But this is not the same thing as the question above.
Although portrayed as an ‘academic campus’, when examined more closely much of the scheme is in practice commercial. The completed scheme is planned to include the following:
1. Four blocks of postgraduate student accommodation. Such accommodation is hardly ‘non-commercial’. Students pay rent and there is currently a flourishing private sector market in London for building or converting premises to provide student housing, as a profitable form of development. Imperial negotiated the S106 agreement on this Phase 1 development so as to ensure that the accommodation can be let to any postgrad from any educational establishment across London. It sold a 150 year lease on the site, and who knows which students will occupy the buildings in a few years time. The cheapest units are £214 a week.
2. Office and administrative buildings for College use. Having these
on the Imperial West site relieves the College of having to occupy commercial office floorspace elsewhere. These buildings should also be counted as ‘commercial’ use.
3. The proposed hotel, with retail on the ground floor is clearly for commercial use.
4. A total of 133 of the housing units in the 35 storey tower will be for private sale or rental. This is a clear commercial use and a hugely valuable one in this part ofLondon.
5. The remaining 59 housing units in the tower will be reserved for Imperial ‘key workers’, defined by Imperial as ‘those at the post-doctoral stages of their careers’. College staff and Imperial NHS staff with incomes up to £67,000 a year will be eligible. The new housing in Shinfield Street will also go to Imperial staff.
6. A part 6 and part 12 storey office building, part to be leased on the open market and part as ‘incubator office space’ for start up businesses ‘emanating from Imperial College research’. Again it is not clear to what extent this floorspace will be let at subsidised rents. On enquiry, Imperial has told us that they will ‘underwrite the operational risk’. But this does not mean that rents will be much below commercial levels.
7. Building C will be the main ‘academic’ building, scheduled to include 23,000 sq. metres of ‘office, research, education and and computation space’. It is not clear how much (if any) actual teaching of students will go on here, or whether Imperial’s description is a fancy label for what other organisations would call ‘back office, admin and IT support’ space’.
6. Associated with the Phase 2 buildings will be some ground floor retail use (commercial), one community room, and some other facilities open to the public (cafes, and restaurant, and a few places in a staff day nursery). But there is as yet no guarantee of the GP centre, polyclinic, or day nursery for public use, that have been promised as ‘community benefits’ from the scheme.
At the very last minute, a late ‘addendum’ was added to the LBHF committee report, adding extra terms to the proposed Section 106 agreement between the council and the College. These additions mean that the College makes ‘a commitment to continue to work with the council’ on how these community benefits should be provided. This could mean nothing, in terms of real outcomes down the track. And even these commitments were added only after continued pressure on the issue from the St Helens Residents Association.
So overall, Imperial may be able to argue that two thirds of the floorspace will be for ‘Imperial use’. But this is hardly the point. The non-academic uses which Imperial proposes, for its own offices and other functions, would all have to be paid for at commercial rates elsewhere in London if the College has not been able to purchase this freehold site.
What commercial gains will Imperial be making from this development?
This is the big question and one that Imperial has so far declined to answer. The information that can be drawn from College reports and minutes suggests that the College is looking for a very healthy financial return, and Voreda likewise.
The question is important for two reasons:
- If the College had lowered its financial aspirations from the site, neighbouring residents would not be facing buildings of the height and density proposed.
- Alternatively, if the density and heights had remained the same there might at least be a substantial element of affordable housing in the scheme, helping to meet the acute housing needs of this area. London-wide and LBHF policies for the sites in White City require a significant level of affordable housing.
A report to the Imperial College Council in November 2011, only recently published, states:
‘The scheme has the flexibility to deliver either future academic buildings or profitable development sites. The brief of 2/3 academic and 1/3 commercial use delivers an indicative post planning land value of £58m versus the £28m cost – a net uplift of £24m after planning costs of £6m’.
This seems a pretty worthwhile ‘net uplift’.
The report goes on to say: ‘£12m of land gain has already been secured through Phase 1′ and the planning work undertaken will remain valuable for any future schemes for the site’.
We are pretty sure that this £12m of ‘land gain’ relates to the statement in the College’s 2010/11 accounts which states ‘The College, through the College Fund, sold a 150-year lease over land at the Imperial West site for cash proceeds of £22 million and generating a profit on disposal of £18.2 million’.
It looks as though the College has sold a lease on that part of the site on which Phase 1 has been built, to Woodlands LLP the joint venture. This goes back to the statement about Voreda being selected as partner because it would agree to investment terms that reflected the need to deliver a significant upfront return to the College Fund through the land sale. Hence the College seems to have recovered much of its initial £28m outlay on the site by selling off only a modest part of it. And the College Fund now stands to make a great deal more by building on the remainder.
At the end of the day, it is not clear why the activities of the Imperial College Fund should be shrouded in secrecy. Nor is it clear why the public should not know all the details of the pre-application negotiations between Imperial/Voreda and Hammersmith and Fulham Council. Both Imperial and the council are public bodies and not-for-profit institutions.
Both have no ultimate purpose other than to contribute to the greater public good. The public should have more opportunity to weigh up the benefits and detriments of the Imperial West proposals, without these being hidden by claims of commercial confidentiality.
The BBC sold a piece of land at what many saw as a relatively generous price, partly because it saw wider public benefits in Imperial coming to the borough. Too many of these wider public benefits have been lost on the way as a result of the ‘asset-maximising’ approach adopted by the College Fund. The outcome does little credit to the College, and much harm to residents of the surrounding area.