The Olympic Village., A legacy of corruption or mismanagement?

The Olympic Village., A legacy of corruption or mismanagement?

Going once, going twice……

In August of 2011 before the Olympics and Paralympics were held the Olympic village was sold to a Qatari backed consortium for £557million. The consortium contains Qatar’s sovereign investment fund and the Delancey investment group. The Olympic village which cost £1.1billion to construct contains 2,800 homes of which the consortium purchased 1,439. The deal also includes six plots of land and ten hectares of parkland. The additional land could lead to a further development opportunity of 2000 more homes. The deal is expected to return three quarters of the £1.1billion spent by the taxpayer, so instead of losing £550million we would actually just lose £275million. However, at the moment it’s clear that the taxpayer has only received just over fifty percent of what it cost to construct the village.

The Olympic Delivery Authority who had responsibility for the sale of the Olympic village did suggest that the government would receive a slice of future profits from the development and that this would equate to millions. Apparently the champion of virtue Jeremy Hunt thought that the sale was a fantastic deal that would give the taxpayer a great return.

It might be worth mentioning at this point that Delancey and the Qatari diar have no concrete deadline to build any property on the plots of land they purchased.

The government has not ruled out selling the rest of the Olympic park. Now it wouldn’t be surprising if once again the Qatar backed consortium won that bid. So, let’s delve into why the consortium was successful.

Qatar Investment Fund:

As previously mentioned in my BAA blog Qatar has a growing influence in the UK. The list of assets in both property and shares within companies are impressive. Qatar started to really invest in the UK after the 2008 economic downturn. When prices fell and investors were looking for buyers, Qatar stepped in and made some very shrewd investments. In February 2011 David Cameron as part of his UK for sale tour visited Qatar in an effort to find investment for the UK. Qatar is a very important ally for the UK and is also the country’s biggest liquefied gas supplier.

It might also be worth mentioning that the company sponsoring the Paralympics namely Sainsbury’s is 50% owned by the Qatar investment authority.

The government has tried very hard to increase foreign investment in the UK. Qatar being one of the main investors it favours.

Bell Pottinger

According to the website PR Weekly, the Qatar foundation has been using the PR firm Bell Pottinger. The firm have been managing Qatar’s interests since 2006. Lord Bell a member of the board wouldn’t disclose what work was being done on behalf of Qatar but it was believed that strategic advice for global and regional issues was being sought.

According to the electoral commission Bell Pottinger have, given the conservative party the following donations:

£1,800 on the 16/05/2008

£1,490 on the 17/03/2009

£17,900 on the 29/06/2009

£7,700 on the 18/11/2009

£2,690 on the 17/12/2009

£11,900 on the 18/08/2010

£10,200 on the 17/08/2011

£3,300 on the 03/02/2012

That’s a total of £56,980 since 2008.

Articles from the Bureau of Investigative Journalism have revealed questionable actions and a lack of moral responsibility by the firm.

In the articles, Bell pottinger demonstrates that they are willing to represent countries with appalling human rights records, willing to edit information to improve the image of a client and finally willing to edit information in an attempt to criticise opponents.

It would also appear from some of the claims that Bell Pottinger has contacts within the very heart of the government, maybe even the cabinet. For a lobbying firm to have this kind of access raises serious questions about how much influence they hold and what exactly they are influencing.

I wouldn’t suggest for a moment that Bell Pottinger lobbied on behalf of Qatar for the Olympic village. I am sure they were hard at work lobbying for something else. I just thought it would be helpful to remind everyone that Bell Pottinger did represent Qatar and its interests and that they have strong ties to the conservative party and have donated to that party over many years.

For additional reading on Bell Pottinger please have a look at these articles from the Bureau of Investigative Journalism:

How the Bureau investigated Bell Pottinger
http://www.thebureauinvestigates.com/2011/12/05/how-the-bureau-investigated-bell-pottinger/
Bell Pottinger targeted campaigner on Wikipedia
http://www.thebureauinvestigates.com/2011/12/08/bell-pottinger-targeted-environmental-campaigners-website/
PR Uncovered: What Bell Pottinger said
http://www.thebureauinvestigates.com/2011/12/07/pr-uncovered-what-they-said/
PCC rejects Bell Pottinger’s complaint against Bureau investigation
http://www.thebureauinvestigates.com/2012/07/26/pcc-rejects-bell-pottingers-complaint-against-bureau-investigation/

Delancey:

The Delancey group is owned by the property tycoon James Ritblat. James made a £50,000 donation to the conservative party in April of 2011 and a few months later he was lucky enough to secure along with the Qatar investment fund the Olympic village bid. The Olympic Delivery Authority who is chaired by Sir John Armitt believed that the bid represented good value for money.

Sir John Armitt was nott the first choice as chairman of the Olympic Delivery Authority, they did ask one other person before hand and that was James Ritblats father. Sir John Ritblat. John declined to take that position and instead was appointed to be the chairman of the Olympics Oversight Committee by David Cameron. That’s probably quite lucky because if Sir John Ritblat was the chair of the Olympic Delivery Authority then there would be a direct conflict of interest in the bid as opposed to an indirect conflict.

Rival bidder:

The consortium of Delancey and Qatar managed to beat rival bids from both Hutchison Whampoa and the UK Charity, The Wellcome Trust.

The Wellcome Trust offered £1billion to purchase the Olympic park, on the condition that their Olympic Village bid was accepted by the ODC.

The wellcome trust wanted to turn the Olympic park into a science and technology hub creating 7000 new jobs and providing further investment into the Olympic park area, in the process creating a provision for social housing and social infrastructure. This would have been highly beneficial as unemployment in east London can be considered the highest in London and as a whole the need for social housing is a high priority for the government.

The ODA rejected the welcome trusts bid on the grounds that the offer did not represent value for money for the taxpayer. The welcome trust published a response on their website (According to the spectator) to the ODA’s decision.

‘The Wellcome Trust is disappointed that the Government and the Mayor of London did not wish to take our proposals for the Olympic Park further. If our bid had been successful, our holistic vision for the Olympic Park and the legacy would have delivered a world-class centre for technology and innovation and up to 7000 high-quality new jobs, and it would have made a substantial contribution to the regeneration of East London’

A good deal

Delancey and the Qatar consortium won the Olympic village bid. They paid 50% (£557million) of what it cost the taxpayer (£1.1billion) to build and while we are expected to believe that a further quarter of a billion is in the pipeline the reality is that we will not see that money any time soon. Remember that the consortium has no deadline for construction and therefore, no obligation to develop that area until it sees fit.

Questionable Influence!

The consortium won the bid under more then suspicious circumstances, both Qatar’s overall influence in the UK and James Riblat’s donation of £50,000 to the conservative party would have raised concerns on their own but with his father Sir John Ritblat chairing the Olympic Oversight Committee. It would be impossible to not conclude that a conflict of interests, whether direct or indirect did not occur.

The taxpayer’s choice

The Wellcome trust’s bid provides far more value for money to the taxpayer then the bid of the Delancey and Qatar consortium. The Wellcome trust did not disclose their bid for the Olympic Village. However, it would be safe to assume that the bid must have been in the region of £200 to £500million. This would have been followed up by an additional bid of £1billion in an effort to secure the remaining assets of the Olympic park.

The Wellcome Trusts Vision:

“Our vision is predicated on the premise that the whole of the Olympic Park is substantially bigger than the sum of the parts. At the heart of our proposal is the creation of an iconic hub – the Life Sciences Innovation Centre. This would be the anchor to support jobs, create new businesses, and enable us to develop residential accommodation across the Park to provide homes for the workers and others who want to live there. It could become the Silicon Valley of Europe.”

The key elements of the proposition are as follows:

• Purchase of the freehold.
• Purchase of the Athletes' Village.
• Conversion of the Media Centre into an international hub for world-class research and innovation. Its focus would be technology, application of research for health and innovation, and sports science. It would introduce potentially two academic facilities, a central auditorium and conference centre, shared meeting places, incubator space, space for small and medium-sized businesses, a data centre, and shops and restaurants. It would create up to 7000 jobs within the new facility and stimulate additional new jobs elsewhere on the Park and across east London.
• The financing of the first phase of residential development on the Park.
• Recognition of the needs of the community by establishing a community endowment, to be agreed, to support the wider Park.
• Support for commercial applications of scientific research by establishing venture capital funds targeted on the Olympic Park and health and technology businesses.
• Using our extensive connections across the sciences and the arts to create a visitor experience bringing sport, health and science to life.

At a minimum the Wellcome trusts bid must be worth £1.2billion to the taxpayer, at a maximum £1.5billion. (Please be aware this is an estimate) The creation of jobs in the construction industry, in addition to the 7000 jobs promised by the trust and the additional jobs created as a result of their investment would provide substantial returns to the taxpayer that would only increase year upon year.

In my personal opinion, I feel the entire process needs to be re-evaluated.

All information in this blog is accurate to the best of my knowledge. Sources can be supplied on request.

David Cameron, Heathrow’s third runway and the Qatar Sovereign Investment Fund.

David Cameron, Heathrow’s third runway and the Qatar Sovereign Investment Fund.


Cabinet Reshuffle - all hands on deck:


Recently in the news there has been much talk over David Cameron’s controversial change of heart on the third runway at Heathrow. Speculation was charged when in September former transport Secretary Justine Greening was replaced by Patrick McLoughlin in the cabinet reshuffle. (Justine Greening was opposed to an additional runway at Heathrow)


According to the Financial Times, sources within the aviation industry believed Mr. McLloughlin’s appointment was a positive step, prompting the idea of a government u-turn on the issue. This will have buoyed BAA and itts shareholders who have been dogged in their pursuit of the third runway. But why now?


BAA Background:


BAA was purchased in June 2006 by a consortium of companies. The Consortium FGP TopCo Limited is led by –
Ferrovial, a Spanish firm specialising in infrastructure.
CDPQ (La Caisse de dépôt et placement du Québec)
GIC (the Government of Singapore).

In October 2011 Allinda Capital Partners joined the group and in August of this year so did the Qatar Investment Fund.


According to the Guardian, The Qatar investment fund purchased a 20% stake in BAA (10.9% from the Spanish company Ferrovial and 9.1% from the other partners within the consortium.) It has been suggested that Ferrovial was looking to exit the BAA franchise, a claim Ferrovial denies. However, the purchase proved to be a risky investment. The BAA franchise which cost the foreign consortium €16billion experienced a number of difficulties including new security measures and a downturn in the economy. The 20% stake cost the Qatar Investment Fund just £900million (€1.13billion), valuing BAA at €5.65billion, a loss of €10.35billion.

Cameron Tour:

In February 2011 David Cameron and his band of merry business advisors went on a whistle stop tour trying to persuade foreign investors to part with their money and invest in the UK. One of the countries he visited was Qatar (the gas and oil rich state). He met his Highness Emir (Sheikh Hamad bin Khalifa Al Thani) Qatar’s head of state and also owner of the Qatar Sovereign investment Fund and its subsidiaries.

During his visit the Prime Minister exchanged views on developments in the region and explored the scope for strengthening further bilateral co-operation in business, education, culture and sport. The visit also reflected the importance of the strategic partnership between the United Kingdom and the State of Qatar, a major emerging player in the middle-east both financially and diplomatically.


Qatar Shopping List:

Every year Qatar gives its investment fund £30 to £40billion to invest and I have no doubt that the PM wanted to ensure part of that investment went into the UK. Qatar over the last several years have established stakes in:


· Harrods (owner)


· The Shard (owner)


· No 1 Hyde Park (owner)


· The London Stock Exchange (20% stake)


· Camden Market (20% stake)


· The Olympic Village (shared ownership)


· Sainsbury’s (major investor)


· Barclays (major investor)


· Total (3% stake)


· Royal Dutch Shell (3 – 5% stake)


· Xstrata (12% stake)


· Songbird Estates (A large portion of the Canary Wharf business district (24% stake))


· Credit Suisse (owner)


· BAA (20% stake)


· Liquified Natural Gas (The UK’s Biggest Supplier)



UK Resources:

In April of this year the Financial Times ran a piece on Centrica, the owner of British Gas, who were prepared to give Qatar a stake in the business and a seat on its board in return for a 20 year gas supply deal worth up to a possible £30billion. At the moment Qatar are putting a potential deal on hold and have suggested that in the future they might buy a small stake in the company. At present Qatar are more interested in potential markets in the middle-east. They have invested $3.7billion into an Egyptian oil refinery and there is talk of Qatar eyeing up investment opportunities in Libyan oil.


(In addition, it may be worth pointing out that Iran threatening to blockade the Strait of Hormuz would have a significant impact on the UK as Qatar uses the strait to transport the liquefied gas to the UK, not to mention any potential oil imports.)


Qatar, the Middle-East and UK relations:


Relations between Qatar and The UK go back to the 1800’s. Great Britain itself was a protectorate of Qatar from 1916 until 1971 and relations between the two countries have always been close. In 1991 during the Persian Gulf War Qatar played a vital role supporting Saudi Arabia (along with the USA and UK) against Iraq. In 2003, Qatar allowed launching sites for the US/UK invasion of Iraq on their soil. It also holds a defence co-operation agreement with Saudi Arabia.


Qatar supported and recognised the Libyan transitional army as the legitimate government of Libya and they have built a reputation in the middle- east as mediators.


Qatar’s current stance towards countries in the region:


Israel – Fair relations and diplomatic connections.


Bahrain – Slightly Strained diplomatic relations


Saudi Arabia – Good diplomatic relationship and a joint defence commitment.


Egypt – Solid and stable diplomatic relationship.


Iran – Strong and stable diplomatic relationship.


Libya – Slightly Strained diplomatic relations


Turkey – A good diplomatic relationship based on co-operation.


Syria – Very strained diplomatic relationship based on the civil war currently taking place between the Syrian government and the Syrian rebels.


Iraq – Very strained diplomatic relations based on past conflict.


The UK enjoys a healthy trading relationship with Qatar and British exports to Qatar have more than doubled in the last few years. Designated as one of UK’s Trade Investment High Growth Markets, Qatar has one of the highest rates of GDP per capita in the world and a high rate of economic growth.


Qatar’s economic diversification and investment in human capital in accordance with the Qatar Vision 2030 continues to generate opportunities for UK businesses across a wide range of sectors.


Cameron’s change of heart:

Qatar bought their 20% stake in BAA in August of this year. Less then a month later the cabinet reshuffle took place and David Cameron was sending signals about a U-Turn. This decision was greeted with dismay from some Conservatives, opposition parties, and public groups. David Cameron then went on to suggest a few days later that an independent report would review all of the options on the table and that this would be ready by 2015.


One last hurdle:

The only potential competition to the third runway at Heathrow and BAA’s expansion came to light in the Independent on Sunday. A rival business consortium is looking to invest £60billion in order to build a four runway airport west of Heathrow. This would obviously provide a significant financial boost to the economy in the south east.


The aviation report will not be due until 2015, the real questions are:


· Will the rival business consortium be considered as a viable option?


· Will the consortium wait until 2015 to see if they get an opportunity to invest?


· Would it make sense to turn down the £60billion investment that a new airport would offer, for a smaller investment of an additional runway at Heathrow?


· Did David Cameron reverse his decision as a result of Qatar investment in BAA?


· What possible changes of policy may have be made in relation to Qatar investments in the UK?


· Was the decision to wait until 2015 designed to ensure there was only one main option left? Namely BAA.


Qatar is a big player for the UK in both the Middle-East and at home in the economy. With the government looking to persuade Qatar to invest more money into the UK and with the need to maintain strong diplomatic links with Qatar it would seem to be a question of when, not if, Heathrow’s third runway gets the green light.


(Please follow @redblackpaws on twitter for more updates)


All information in this blog is accurate to the best of my knowledge. Sources can be supplied upon request.