2012 OLYMPIC BLACK BLANK BANK HOLE

2012 Olympic village may have to be nationalised

* Nick Mathiason
* The Observer,
* Sunday October 5 2008


A crucial funding meeting chaired by Chancellor Alistair Darling, will next week hear proposals to nationalise the Olympic village.

The move would create a £750m black hole in Olympic finances, putting pressure not just on the £9.35bn budget for 2012, but also on other government departments to make up the shortfall.

The ministerial meeting on 15 October will hear funding options from Partnerships UK, the Treasury agency. Other possibilities to be discussed include postponing a funding decision until bank debt becomes cheaper. A decision will be made at the end of the year.

Current funding for the £1bn development envisages Australian property giant Lend Lease, which built the Sydney Olympic facilities, committing £250m of its own money towards the cost with a similar amount coming from government. But Lend Lease has struggled this year to secure the remaining £500m from banks amid the worsening financial crisis and all the money might now have to come from government - in which eventuality it would take total control of the development.

Lend Lease has a legally binding contract to fund the village that, according to Whitehall sources, expires in three months. The Olympic village is hard to finance because after the Games 3,200 homes in east London will go on the market simultaneously. Such a large number could depress property prices, despite a housing shortage in the area.

The Olympic financial crisis has not delayed construction of the village. Lend Lease has a separate contract to manage the project and is ahead of schedule.

The Treasury is reluctant to make up any shortfall entirely from the £2.7bn Olympic contingency fund. Options include raising money from the Homes and Communities Agency and London Mayor Boris Johnson's housing budget.

The Australian property giant, like most companies in the property sector, is facing problems in the wake of the global financial crisis.

A Treasury spokesman said: 'Given the impact of the global economic downturn in the UK, additional public investment may be needed to help fund the Olympic village.'
--http://www.guardian.co.uk/business/2008/oct/05/olympics.2012.funding

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