This Officer Key Decision meeting for Newham Council concerned a development agreement for the Bridge Road Quarter site in Stratford, behind the Rex Building. The meeting was convened to discuss and approve an uplift to the total development budget, changes to the draft development agreement, and a summary of activities undertaken since the cabinet's prior decision. The decision was delegated to the Corporate Director of Resources in consultation with the Cabinet Member for Finance and Corporate Resources and the Corporate Director of Inclusive Economy, Housing and Culture.

Bridge Quarter Development Agreement

The primary focus of the meeting was to review and approve amendments to the development agreement with Hollybrook for the Bridge Road Quarter, concerning land behind the Rex Building.

The key points for consideration were:

• Budget Uplift: A proposed increase of £3.3 million to the total development budget, raising it from £88.2 million to £91.5 million. This adjustment, representing a 3.7% increase, falls within the officer delegation approved by the cabinet.
• Change in Contracting Entity: A change in the contracting entity from Bridge Road Quarter Limited (BRQL) to Bridge Quarter Limited (BQL) was noted. According to the report pack, both entities share the same owners, and the change is considered a minor amendment to align with the Hollybrook group structure.

• Additional Conditions in the Development Agreement: The report pack outlined the addition of further conditions to the Development Agreement, allowing Bridge Quarter Ltd to withdraw from the agreement under specific circumstances:

  • Discovery of significant ground contamination on the Morgan Wealth land.
  • BQL's decision not to proceed with the development within 20 working days of a resolution to grant consent for the proposed development.

• Background: The initial cabinet decision in July 2024 approved entering into a conditional Development Agreement with Hollybrook, via its Special Purpose Vehicle, Bridge Road Quarter Limited, to purchase land from Hollybrook and Morgan Wealth and fund the development of up to 179 homes. The approved budget was up to £88.2 million.

• Reasons for Cost Increase: Hollybrook cited a reassessment of costs associated with the Building Safety Act, following detailed guidance issued by the Health and Safety Executive in the first half of 2024, as the reason for the increased build cost.

• Mitigation of Additional Costs: Hollybrook agreed to share the risk and reward on construction inflation by fixing inflation costs linked to the BCIS index up to a cap of 6%.

• Affordable Housing Tenure Mix: A change to the affordable housing tenure mix was proposed, maintaining 36% affordable housing but changing 20 homes to an intermediate affordable housing product, modelled as Affordable Rent[^1].

  [^1]: Affordable rent is a form of social housing where the rent is no more than 80% of the local market rent.

• Withdrawal Clause: A new clause was requested by Hollybrook, allowing them to withdraw from the construction of the development if inflation escalates beyond the cap, or for any other reason, with Newham Council obliged to purchase all land parcels with planning permission for £9 million.

• Land Contamination: Hollybrook requested a condition mirroring their land purchase agreement with Morgan Wealth, allowing them to exit both deals if early ground investigations reveal excessive contamination requiring costly remediation.

• Risk Assessment: The report pack outlined key risks associated with the development, including cost increases, Hollybrook's insolvency, planning permission, build quality, sales risk, GLA grant funding[^2], RTB receipts[^3], Discount Market Rent (DMR) assumptions, and rights of light and title risk.

  [^2]: GLA grant funding refers to funding provided by the Greater London Authority to support development projects in London. [^3]: Right to Buy (RTB) is a scheme in the United Kingdom which gives qualifying social tenants the right to buy their home at a discount.

• Alternative Options: The report pack noted that a deal with Hollybrook remains the only way to bring the whole site forward for development, as the Local Planning Authority is resistant to piecemeal development.

• Financial Implications: The report pack detailed the financial implications of the proposed changes, including the initial payment to BQL, payments upon completion of the land transfer, and the impact of changing 20 affordable units from social rent to discounted market rent.

• Legal Implications: The report pack outlined the legal implications of the transaction, including conditions for termination of the contract, the Council's deposit, and the use of a traditional form of JCT contract.

• Equalities Implications: The report pack referenced an Equalities Impact Assessment (EqIA) produced for a previous cabinet report, which remains relevant to all Populo Living activity.