Chelsfield announces that it has entered into binding agreements with Commerz Grundbesitz Investmentgesellschaft (CGI) in relation to the construction and funding of the White City development at Shepherd´s Bush in West London. The arrangements anticipate Chelsfield and CGI each retaining a 50% interest in the completed development. The development itself will be carried out by Chelsfield which will receive, over the life of the project, £22 million in project management fees, £18 million of which are to be placed in escrow.
CGI will meet all costs of construction, which are expected to be in the region of £1.15 billion including fees and accrued interest. Freeholders, London Underground and head lessors, Chelsfield, will grant a new lease to CGI as part of a composite set of new arrangements. In consideration for the initial transfer to CGI, Chelsfield will receive in cash £200 million plus reimbursement of development expenditure incurred by Chelsfield since the commencement of substantial construction in autumn 2003. £20 million of the amount receivable by Chelsfield is to be held in escrow with interest accruing to Chelsfield during the period of development.
The arrangements include a repurchase obligation upon Chelsfield in respect of a 50% interest in the completed White City development. Chelsfield has committed to repurchase it´s share of the project for a consideration fixed at £100 million, being one half of the initial transfer consideration for the new lease, plus 50% of actual development costs as funded by CGI. Accordingly the total repurchase consideration is expected to be of the order of £675 million. Chelsfield´s obligation to repurchase is to be secured by a bond of £200 million, plus the £38 million aggregate escrow amounts (in respect of land and project management fees) referred to above. Chelsfield´s absolute liability in respect to the undertaking given to repurchase is capped at £238 million.
In addition, Chelsfield and CGI have given completion guarantees to London Underground as is conventional for a project of the nature of White City involving major infrastructure works.