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Moore Stephens Olympic Stadium Review November 2017

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Moore Stephens Olympic Stadium Review November 2017 ----------------------------------------- Moore Stephens Olympic Stadium Review November 2017 Moore Stephens Olympic Stadium Review Contents Glossary 2 Introduction 4 Timeline of events 11 Executive Summary 14 Phase 1 – The ODA athletics legacy plan 21 Phase 2 – OPLC re-establish the legacy plan 37 A – OPLC’s re-examination of legacy options 42 B – First competition resulting in selection of West Ham 54 United / Newham as preferred bidders Phase 3 – Legacy plan changed again 64 A – Cancellation of West Ham/Newham bid and decision 71 to keep the Stadium in public hands B – Evaluation of legacy options 86 C – Second competition resulting in selection of West Ham 93 United as preferred bidder Phase 4 – Transforming the Stadium 121 Phase 5 – Operating the Stadium 138 Conclusion 161 Lessons Learned 163 Appendix 1 – Interviews, submissions and those who did not respond 166 We believe the information contained herein to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed and published by © Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority for investment business. DPS34063 November 2016 1 Moore Stephens Olympic Stadium Review Glossary Bodies BOA British Olympic Association CAFC Charlton Athletic Football Club DCLG Department for Communities and Local Government DCMS Department for Culture, Media & Sport E20 E20 Stadium Limited Liability Partnership FAPL Football Association Premier League GLA Greater London Authority GOE Government Olympic Executive HMT Her Majesty’s Treasury IAAF International Association of Athletics Federations IOC International Olympic Committee LBN London Borough of Newham LLDC London Legacy Development Corporation LOCOG London Organising Committee of the Olympic Games and Paralympic Games Limited LOFC Leyton Orient Football Club LS185 LS185 LLP (stadium operator, subsidiary of Vinci) MCFC Manchester City Football Club MDC Mayoral Development Corporation MLB Major League Baseball NLI Newham Legacy Investments ODA Olympic Delivery Authority OPLC Olympic Park Legacy Company OPRG Olympic Park Review Group THFC Tottenham Hotspur Football Club UKA UK Athletics WAC World Athletics Championships WHU West Ham United Football Club WHU-LBN Consortium of West Ham United Football Club and London Borough of Newham 2 Moore Stephens Olympic Stadium Review Terms Business Case A Business Case is used as a basis for making decisions regarding options. There are two stages: an early stage evaluation covering the first stages of the appraisal process (Outline Business Case) A Full Business Case which goes further than the Outline Business Case in recommending an option for the project. Net Present Cost (NPC) or Net Present Value The value, as of a specified date, of future (NPV) cash inflows less all cash outflows (including the cost of investment) calculated using an appropriate discount rate. (Definition from International Valuation Standards Council) Business Plan A business plan sets out forecasts for income and expenditure for a defined period, and the assumptions that support these. First competition The bid process, run by OPLC from September 2010, seeking an anchor tenant on a leasehold basis Second competition The bid process run, by OPLC and subsequently LLDC from December 2011, seeking a tenant on a concession basis Optimism bias The demonstrated systematic tendency for appraisers to be over-optimistic about key project parameters, including capital costs, operating costs, works duration and benefits delivery. (Definition taken HM Treasury Green Book) 3 Moore Stephens Olympic Stadium Review Introduction Disclaimer This report is made solely to the Greater London Authority (GLA). Our work has been undertaken so that we might investigate and report to the GLA those matters we are required to report to them pursuant to our Letter of Appointment dated 22 February 2017 (our “Review”) and for no other purpose. This report is not intended for use by any other party (and has not been prepared nor our work conducted with any other party in mind). To the fullest extent permitted by law, neither we, nor or partners or staff accept or assume responsibility or liability to anyone other than the GLA, for our work, for this report and the contents therein, or for the opinions we have formed. This report contains information obtained or derived from a variety of sources. The scope of our work has been limited by the restricted access to information and management, the limited time available and unaudited information being made available to us. We have not sought to establish the reliability of those sources nor verified the information so provided. Accordingly no representation or warranty of any kind (whether express or implied) is given by Moore Stephens to any person (except to GLA under the relevant terms of the Engagement) as to the accuracy or completeness of the report. Moreover the report is not intended to form the basis of any investment decisions and does not absolve any third party from conducting its own due diligence in order to verify its contents. For the avoidance of doubt this Engagement is not an assurance engagement or an audit and Moore Stephens is not providing assurance nor are the services being performed in accordance with the International Standard on Assurance Engagements 3000 (ISAE 3000) or the International Standards on Auditing. Once we have provided our report to the GLA in respect of the Review and Moore Stephens will have no further direct responsibility to report in relation to those matters. We shall not be under any obligation to update the report or to take account of events occurring after the report has been issued in its final form. We have no responsibility to respond to questions on the contents of this report, other than at the direction of the GLA. The content included within this report represents facts at the time, not the current position. This is especially relevant in the earlier stages of the project, where references are to facts relevant at the time decisions were made. Scope of work The Greater London Authority (GLA) on behalf of the Mayor of London commissioned a detailed investigation into the London Stadium in light of the real cost of transforming the Stadium from a temporary athletics venue into a permanent venue capable of hosting football and other sporting and cultural events, and the cost of operating the venue. The purpose of the investigation is: • To provide a narrative explanation of the history of the London Stadium, including all relevant construction, financial and operational arrangements, with a particular focus on the stadium’s conversion into a multi-use arena and the subsequent negotiations and arrangements • To confirm the key decision points and contractual commitments made, including the financial and operational projections that informed the significant investment of public money into transformation works and who was responsible for them • To assess whether the work leading to the decisions and commitments made was sufficiently robust and subject to appropriate levels of due diligence and negotiation to ensure that value for money was achieved for the taxpayer after taking into account the legacy objectives and expected benefits • To report on the stadium’s financial viability in terms of an assessment of the ongoing and future operating costs and income of the current working arrangements 4 Moore Stephens Olympic Stadium Review • To identify any lessons that can be learned • To work with all relevant organisations to obtain evidence for this work, reporting any lack of co- operation to the Mayor’s office • To produce a report for publication. The GLA required the report to cover three distinct phases in the genesis and life of the Stadium: 1. The Olympic bodies’ original decision making in determining the design and nature of the Stadium built for the Games and what thought was given to how the Stadium would be used post-Games 2. The decision making of the London Legacy Development Corporation (LLDC) and its forebears in the tendering for and delivery of the Stadium transformation in light of the original design and its legacy objectives 3. Decisions pertaining to the current operational arrangement for the Stadium, including those made by LLDC, London Borough of Newham (LBN) and E20 Stadium LLP (E20), and those taken by Her Majesty’s Government and the GLA such as hosting the 2015 Rugby World Cup and the 2017 World Athletics. In order to provide additional clarity and to identify the key decision and transition points in the process, we have subdivided these phases into five phases. These map into the GLA’s three phases as follows: Table 1 – Comparison of project phases GLA Moore Stephens 1. The Olympic bodies’ original decision making Phase 1 - The ODA athletics legacy plan in determining the design and nature of the Stadium built for the Games and what thought was given to how the Stadium would be used post-Games 2. The decision making of LLDC and its forebears Phase 2 – Olympic Park Legacy Company (OPLC) re- in the tendering for and delivery of the establish the legacy plan Stadium transformation in light of the original A – OPLC’s re-examination of legacy options design and its legacy objectives B – First competition resulting in selection of West Ham United (WHU) / LBN as preferred bidders Phase 3 – Legacy plan changed again A – Abortion of first competition and decision to keep Stadium in public hands B – Evaluation of legacy options C – Second competition resulting in selection of WHU as first ranked bidder Phase 4 – Transforming the Stadium 3.
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