Regeneration. Regenerating communities

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1 Financial institutions Energy Infrastructure, mining and commodities Transport Technology and innovation Life sciences and healthcare Regeneration Regenerating communities

2 Norton Rose Fulbright Norton Rose Fulbright is a global legal practice. We provide the world s pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia. Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare. Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact. Canada Calgary Montréal Ottawa USA Austin Dallas Denver Houston Los Angeles Minneapolis New York Pittsburgh- Southpointe San Antonio St Louis Washington DC Québec Toronto Africa Cape Town Casablanca Dar es Salaam Durban Johannesburg Europe Amsterdam Athens Brussels Frankfurt Hamburg London Milan Moscow Munich Paris Piraeus Rome Warsaw Kazakhstan Almaty Middle East Abu Dhabi Bahrain Dubai Riyadh* Asia Bangkok Beijing Hong Kong Jakarta* Shanghai Singapore Tokyo Australia Brisbane Melbourne Perth Sydney Latin America Bogotá Caracas Rio de Janeiro *associate office Clear, commercial advice, provided within tight deadlines. Chambers UK, 2015 A well-regarded firm in the London investment and development market. Noted for high quality individual lawyers You re made to feel like their favourite client. You re made to feel special and that you are the only one. Chambers UK, 2014 Norton Rose Fulbright stands out for its professionalism and industry knowledge. Legal 500, Norton Rose Fulbright

3 Our regeneration practice Regeneration schemes are part of the continuing cycle of development and renewal of derelict sites, rundown housing and former centres of industry and commerce. They bring vacant land or buildings back into use for the benefit of the community. A key feature of regeneration projects and their principal challenge is the achievement of a successfully rebuilt community, or a successfully redeveloped centre of business and trade. Regeneration often involves the wholesale co-ordinated redevelopment of a large part of a town or city. It is not simply developing housing or retail space; it involves creating an integrated plan which will meet the employment, entertainment, mobility and lifestyle needs of the community. The principles of good urban design, the requirements of local planning authorities, the needs of the community and the commercial aspirations of scheme stakeholders must all be brought together and balanced. Alternatively, a regeneration scheme may take an area of land which was previously used for traditional heavy industry, for instance, and regenerate it in line with modern and economically viable requirements, such as light industry or logistics. Here, issues associated with environmental remediation are often key. The drivers for any regeneration scheme will centre on a core set of common principles, requirements and objectives, which will reflect and straddle national, regional and local needs. However, whereas the location of any given regeneration project will typically be concentrated on one, albeit large, area of land, the skills required to advise on all the various issues involve very diverse product areas. For example, a single regeneration project may require legal advice on areas such as: integrated transport, whether applying to roads, rail, ports or airport links; housing, including the mix of private and public housing types; technology, as witnessed by the increasing use of congestion charging for managing traffic in city centres; and large scale commercial property development. Global expertise used locally The legal skills required to assist those engaged in urban regeneration projects are varied and rarely found in adequate depth in any one legal practice. Norton Rose Fulbright is, however, an exception in that our lawyers have a pool of relevant skills and experience globally which can be drawn upon for urbanisation or regeneration projects anywhere in the world. Our experience includes construction contracts, financing, transport supply agreements, ticketing and maintenance agreements, traffic management and control technologies together with local and public authority regulations and procurement requirements. The skills involved are therefore highly portable across our global practice. From a property-specific perspective, we have particular skills in development and acquisition agreements, planning, rights of light issues, compulsory purchase, highways and infrastructure, environmental impact (including the legal regimes governing the protection of habitats and species) and housing development including social housing projects. Handling large regeneration schemes therefore requires diverse skills and significant, in depth, and specialised resources. Norton Rose Fulbright 03

4 Regeneration: The core elements Port redevelopment Developing ports and their surrounding areas is a key link in the transport flow to, and around, city centres. Port development and privatisation is a fundamental aspect of our practice. We are advising DP World in relation to the development of London Gateway, a major new container port and associated Logistics Park on the Thames Estuary. City centre development schemes Mixed-use developments provide positive benefits to the town centre. We advised on the Westfield White City retail centre development in West London. Station and depot development Some financing techniques for developing stations and depots are more appropriate than others. We are actively involved in discussions between key industry players in the UK. Housing Providing a mix of housing types, including affordable housing, is increasingly important in cities worldwide. We have been involved in many housing developments internationally and in the UK, including advising on the largest residential development in the City of London for over 30 years (Milton Court). Technology The use of congestion charging is a trend set to continue as a technique for managing traffic congestion in city centres. We advised Capita Group on the GBP230 million outsourcing of the administration, technology build and integration of the Transport for London congestion charging scheme. 04 Norton Rose Fulbright

5 Metro / light rail The development of metro or light rail schemes is a crucial aspect of city centre transport systems. We have advised on metro and light rail schemes in cities in Europe, Canada and Asia. Rail Integrating transport planning and land / city centre planning is essential for long-term success. We have a long history of working with clients in the rail sector and have been legal adviser to the UK rail regulator, the ORR, since Airport links Achieving quick and easy access to airports from city centres is vital if cities are to remain attractive to visitors. The airport rail links we have advised on include the Gautrain Rapid Transport Project (built for the Soccer World Cup 2010 in South Africa). Norton Rose Fulbright 05

6 UK Regeneration: Current Questions The number of regeneration schemes, their scale and, in particular, the breadth of the issues they give rise to have all grown materially in recent years. Whole tracts of urban land and specific localities in London and the rest of the UK have been regenerated or earmarked for redevelopment. At the same time, the parties who have become involved in the execution of these projects now include some of the world s largest real estate developers and investors. Such parties naturally need their legal advisers to be able to address the complete spectrum of issues and product specialisations involved. It is our size and subject reach and flexible way of working which enable us to fulfil these requirements. We review the key product areas and related issues below. Managing the planning stage Ongoing planning reforms in the UK have made an already convoluted system more difficult to navigate. The emphasis is on regional and integrated planning, with a top-down approach to policy-making and regulation. Public enquiries or judicial reviews can last for several months, causing further delays. The decision-making process contained within the regeneration of large, complex areas is, in our experience, always elaborate and often fragmented. One planning issue which is of key current importance to regeneration projects is the Community Infrastructure Levy (CIL). This is a charge that local authorities in England and Wales can apply to developments in their area. The proceeds go towards investment in local infrastructure. The principle underlying the CIL is that developments require supporting infrastructure and it is appropriate for developers to bear some of the cost. This used to be one of the functions of section 106 agreements which were criticised for, amongst other things, a lack of transparency in respect of how proceeds were invested. The CIL applies to developments consented on or after the date upon which a charging schedule is adopted in a particular area. Creating new developments A solid partnering framework is key to sustainable regeneration schemes. The main document governing the commercial relationship between the key parties, being a developer and the landowner, plus often other parties such as a local authority, the community, and funder, is the development agreement. This agreement maps the way the scheme must be created and delivered. The participation of all parties, the balancing of civic, housing and commercial components, and the integration of a stakeholder approach, are all issues to be addressed. The development agreement often dictates how land is assembled through a vacant possession strategy. The developer is encouraged to gain satisfactory planning permission, offer comfort on environmental care, provide a CPO indemnity and satisfy itself as to the profit level generated and funding costs incurred. Permission for the development of land under a lease or licence structure is then given. The development agreement defines processes for works to be carried out, including allowances for testing and substitution of building materials. The developer must meet specific milestones and timetables, or face penalties associated with defaults. The development, design quality and need to create focal points are also addressed by the agreement. These must also be within the context of affordable housing and balanced against standards such as those set by the Code for Sustainable Homes and BREEAM. 06 Norton Rose Fulbright

7 The development agreement explains how scheme stakeholders approve practical completion, address defects and assess ongoing developer / contractor liability. If a local authority is involved in the regeneration scheme, the structuring of landholdings is of fundamental importance as is the delivery of a capital and/or receipt via a leasehold or freehold structure, so allowing a local authority to participate in the scheme s commercial success. The delivery of social and economic benefits will be of equal importance. New forms of structuring Increasingly alternative structures are being used to progress regeneration projects in a timely fashion. The market remains challenging, with a funding gap caused by depressed levels of traditional bank lending (particularly for larger schemes). More often, developers have had to look beyond the debt markets. Equity has filled some of the gap, with higher levels of investment from overseas. In addition, developers have made greater use of joint ventures. In pooling resources, developers can provide the higher levels of equity required to fund developments, sharing the equity upside but reducing their exposure to risk. In the UK, levels of forward funding are increasing. This involves the sale of a bare site to a purchaser who will provide the developer with funding to finance the development of the site. An advantage of this approach is that the SDLT liability relates to the value of the bare site, rather than the completed development. Any regeneration programme, whatever its location, needs to be tax-efficient, and the way it is structured is critical to that process. This involves designing the investment and gearing framework to minimise tax leakage, using real estate investment trusts (REITs), property unit trusts or limited liability partnerships. It also involves making sure that all capital allowances can be accessed, as well as mitigating stamp duty land tax and conducting thorough VAT planning. Setting environmental priorities In regeneration projects, it is important to strike a balance between environmental and economic priorities. If economic and environmental priorities collide the result is often cost, confusion and delay. The potential for collision between environmental and regeneration interests is even greater in the face of rigorous EU-led controls which govern site clearance, decontamination and the protection of habitats and species. Together with the growing influence of vocal, well-organised local interest groups, it is now more difficult to clear regulatory hurdles. Building design and construction generally is a high-risk sector in terms of liabilities. This is compounded when older structures are demolished by the added risk of historical contaminants such as asbestos, lead or mercury - substances which are now subject to strict regulatory regimes and need to be controlled and remediated carefully. Integrating transport and infrastructure Transport is a vital element of many regeneration schemes. Integrating all transport modes and enabling goods and people to move freely are essential requirements for lasting regeneration. Transport options should therefore be factored in early in the planning stage during the scoping process. Norton Rose Fulbright 07

8 The legal activity behind the delivery of each stage of a transport system requires specialist legal skills and knowledge. Every aspect of the system has to be tendered competitively through an appropriate procurement process. The assets and the infrastructure forming the hardware of the system need to be acquired and built. Franchised operators of any part of the public elements of the system need some regulatory control over their performance, particularly if they are responsible for maintenance of the system. In operation, the flow of traffic needs to be controlled by effective traffic management systems, such as congestion charging. The contracts for the traffic management system must deliver a regime which ensures the supply of the correct and accurate software. Getting the construction right Well negotiated construction documentation can be critical to the delivery of regeneration schemes on time, on budget and to specification. There are various approaches to managing time-related risk just as there are a variety of contract structures that ensure appropriate safeguards are in place. A liquidated damages regime, an incentive mechanism (which encourages co-operation not obstruction) and an early intervention system with escalating remedial programmes all contribute. There are also structures for construction risk that provide for integrated responsibility within a consortium. Private sector financing can be vital. Public / private sector partnerships can free up the investment and skills required for large-scale regeneration projects. The long-term aspect of these partnerships means that whole-life asset maintenance and efficiency of use of the asset plays a significant part in ensuring value for money for the public sector. Financing covers a host of issues such as the funding arrangements, the use and availability of grants, the project finance documentation and any legal safeguards or structures needed for future financing (such as a refinancing or change in equity ownership). Disputes are a common risk in any construction contract. Potential damage is mitigated where there is a system in place that resolves the dispute quickly and efficiently without delaying the contract programme. Community needs A redeveloped community has various needs which will contribute to its future success and cohesiveness. Education, retail and leisure provisions need to be carefully designed within the parameters of all applicable legislation. The role of the local authority in affordable housing schemes needs to be carefully managed and we have extensive experience of negotiation with local authorities and other public bodies. A diverse community will have many different types of occupant and we have dealt with a wide range of residential schemes, ranging from affordable housing and student accommodation to luxury apartment projects and hotels. Sustainable energy One of the cornerstones of the UK Government s carbon reduction policy is the requirement for all new buildings to be zero carbon (meaning zero net emissions of carbon dioxide from all energy use over the course of a year) by 2016 (in the case of new homes) and 2019 (in the case of nonresidential buildings). 08 Norton Rose Fulbright

9 The objective of zero-carbon development also represents design challenges to ensure fabric efficiency (to reduce the demand for carbon) and meeting energy demand with a low carbon solution. It also represents legal challenges. Local authorities already account for the zero carbon requirement in their planning regulations. The developer will also need to consider the relationship between the requirements of planning and those of building regulations (changes to Part L of the Building Regulations have recently been finalised). Our recent Regeneration experience We have an extensive regeneration track record. Below is a selection of recent major regeneration transactions in the UK which we have advised on. Silvertown Advising Australian bank Macquarie Capital Group Limited in relation to their involvement in the 2.5 billion Silvertown Quays development in London s Royal Docks. This major mixed use regeneration scheme is to be developed by The Silvertown Partnership and will include business and leisure space as well as 1500 new homes on a brownfield site. London Gateway, London Advising DP World on the 1.5 billion development, assembly and establishment of London Gateway, a 1500 acre site and the UK s largest container port, including 800 acres of high class logistics park, the largest in Europe. Advising on logistics, as well as lettings, port matters, planning, and environmental aspects of the project. This project is located on the former Shellhaven Oil Refinery site, and so the work has involved a number of complex land remediation issues which are common to many brownfield regeneration projects. Battersea Power Station, London Advising a joint venture, comprised of SP Setia Berhad, Sime Darby Berhad and the Employees Provident Fund of Malaysia, on the 400 million purchase of Battersea Power Station in London. The landmark 39 acre site is being redeveloped to provide 3,700 homes and other commercial and retail facilities, as part of the long-awaited regeneration of this post-industrial site. This was named deal of the year at the Property Awards The Shard, London Advising Qatari Diar in relation to the financing of the Shard skyscraper in London which, at 72 storeys, is the tallest building in Europe. The Shard contains premium office space, a hotel, luxury residences, retail space, restaurants, a five-story public viewing gallery and a spa, and is key to the regeneration of the London Bridge Quarter in London. Westfield White City, London Advising Commerz Real Investmentgesellschaft mbh, the German investment fund, on its 1.5 billion investment in the White City retail centre in the UK. The centre houses over one million square feet of retail space, plus associated leisure space. The project also involved the redevelopment of local transport infrastructure, including the relocation of a London Underground tube station. The Embankment, Manchester Advising Ask Real Estate on a joint venture with Tristan Capital Partners to bring forward the 75 million first phase of a seven phase development framework agreement with Network Rail for the redevelopment of the former Exchange Station in Manchester. The 525 million development is the centrepiece of the plans to regenerate the Salford-Manchester boundary and will comprise more than three million square feet across five phases for office, retail, residential and leisure use. Norton Rose Fulbright 09

10 The Embankment, Manchester 10 Norton Rose Fulbright

11 Contacts Our key real estate contacts are listed below. They can also refer you to our experts in other related specialist areas such as transport, financing and sustainable energy. David Sinclair Partner, Real Estate Tel Dan Wagerfield Partner, Real Estate Tel Lindsay Morgan Partner, Real Estate Tel Wasim Khan Partner, Real Estate Tel Donald Warnock Partner, Construction Tel Caroline May Partner, Environment, health and safety Tel Duncan Field Partner, Planning Tel Norton Rose Fulbright 11

12 nortonrosefulbright.com Norton Rose Fulbright Norton Rose Fulbright is a global legal practice. We provide the world s preeminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia. Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare. Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact. Norton Rose Fulbright US LLP,, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. References to Norton Rose Fulbright, the law firm, and legal practice are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together Norton Rose Fulbright entity/entities ). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright. NRF /15 (UK) Extracts may be copied provided their source is acknowledged.