Binding funding arrangements between Clesfield and CGI in respect of White City, London (UK)

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.

Source: Chelsfield

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