Smithfield Birmingham - Variation of Joint Venture Development Agreement

Tender description

This notice concerns the intended variation of a Joint Venture Development Agreement ("JVA") covering the development of the scheme known as Smithfield Birmingham that was awarded to Lendlease Smithfield Development LLP (JVA PSP) (a subsidiary of Lendlease Europe, guaranteed by Lendlease's Australian parent company, Lendlease Corporation Limited) ("Lendlease") pursuant to a procurement carried out under the Public Contracts Regulations 2015 ("PCR 2015") that was advertised via a contract notice with reference 2017/S 148-305798 on 4 August 2017. The JVA was entered into between BCC and JVA PSP on 28 June 2021. Details of the intended variation are given in sections II.2.4 and IV below. Birmingham City Council ("BCC") considers that the variation of the JVA is permitted without requiring a new procurement procedure in accordance with Regulation 72(1)(e) of the PCR 2015 for the reasons set out in this notice. Lot 1: Lendlease announced a strategic restructure of its business on 27 May 2024 to simplify business operations and reduce debt. To align to its new corporate strategy Lendlease is seeking to reduce capital exposure in Smithfield, its funding strategy transitioning from a balance sheet-driven approach, to a private sector partnership model with a 50/50 joint venture proposed with The Crown Estate (TCE). The proposed modifications to the JVA set out below have been agreed between the parties in order to implement this new funding strategy, ensure efficient and proper operation of the JVA in light of the new funding strategy, and mitigate risks that may result from this. Details of the intended variation and of the reasons for it are explained below and in the BCC Cabinet Report dated 17 March 2026 accessible via this link: https://birmingham.cmis.uk.com/Birmingham/Document.ashx?czJKcaeAi5tUFL1DTL2UE4zNRBcoShgo=7ow6+lFnNRpr6KET1Il63EOL8MZhrdGQqcErlyiyTWH+lx2pooI5TA==&rUzwRPf+Z3zd4E7Ikn8Lyw===pwRE6AGJFLDNlh225F5QMaQWCtPHwdhUfCZ/LUQzgA2uL5jNRG4jdQ==&mCTIbCubSFfXsDGW9IXnlg===hFflUdN3100=&kCx1AnS9/pWZQ40DXFvdEw===hFflUdN3100=&uJovDxwdjMPoYv+AJvYtyA===ctNJFf55vVA=&FgPlIEJYlotS+YGoBi5olA===NHdURQburHA=&d9Qjj0ag1Pd993jsyOJqFvmyB7X0CSQK=ctNJFf55vVA=&WGewmoAfeNR9xqBux0r1Q8Za60lavYmz=ctNJFf55vVA=&WGewmoAfeNQ16B2MHuCpMRKZMwaG1PaO=ctNJFf55vVA= Abbreviated terms used in this Notice have the meanings given to them in that Cabinet Report. The intended modifications to the JVA will: Equity ownership 1. Permit sale of up to 50% of JVA PSP equity to a third party with BCC's prior consent. 2. Allow TCE/Lendlease to increase its interest in JVA PSP to up to 75% without further BCC consent and, in the event that Lendlease defaults under its JV Agreement with TCE, allow TCE to acquire all of the JVA PSP's interest. 3. Require BCC's consent, acting reasonably, to sale of TCE's interest to a third party, with consent deemed unreasonably withheld where the proposed investor provides long term capital, has a market capitalisation or net assets of £1bn or more, and is of good standing. 4. Require LL/TCE (or any future third party investor) to provide guarantees tracking their equity interest in JVA PSP or Phase PSP (as appropriate). 5. Permit substitution of JVA and Development Agreement (DA) guarantors, subject to acceptability criteria. Phase to plot master developer structure 6. Allow a concurrent LLP/ELP structure with grant of Phase DA's to the Phase PSP and plot leases to Plot ELP's; (subject to conditions) allow individual buildings within phases to form single plots. 7. Amend the Phase DA to reflect that the Phase PSP may not itself build out all plots, and plots may be drawn down into vertical developer SPVs for delivery. 8. Require Plot SPVs to covenant directly with BCC to comply with Phase DA obligations, so far as they relate to the relevant plot. 9. Remove dependency on milestones for plots sold to third parties for further Developer drawdowns. 10. Subdivide phases into plots and permit drawdown of headleases for individual plots. Increase flexibility around timing for satisfaction of Phase Conditions and land drawdown. 11. Amend the JVA so that, on a 100% plot sale, only the receipt attributable to that plot sale is reflected in the Financial Appraisal Model. 12. Amend the JVA to vary the circumstances where termination or breach of the JVA or SAA triggers termination of granted Phase DA's, and so that termination or breach of the JVA or SAA does not trigger termination of Plot Leases. Clarifications 13. Clarify matters including: not double counting surplus returns; waivers relating to Phase 1 land assembly; treatment of receipt shares as development costs for profit overage; conditionality and programming of infrastructure works; EZ funding scope; mechanisms to agree Phase DA specifications; JVA PSP approval of third party acquisitions; provision of future security by guarantee; deadlock matters. Other amendments and timetable 14. Extend lease terms to 999 years (predominantly residential) and 255 years (commercial). 15. Modify BCC's right of first offer. 16. Provide for capped and collared indexation where land value is converted to rent. 17. Introduce Developer indemnity for loss in land value acquired by BCC if project aborts. 18. Reduce IRR Hurdle at which Developer must progress, increase BCC overage %. 19. Require Developer to deliver temporary market. 20. Permit grant of the first Phase 1 plot leases before satisfaction of the site wide planning condition; extend the target dates for site wide planning and unconditionality.