Multiplex also-ran for GamesThere seems to be very little chance...

Multiplex also-ran for Games
There seems to be very little chance Multiplex will get a slice of the Olympic spending in London, writes Peter Wilson
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15apr06

IT was news guaranteed to buck up the spirits of Multiplex's forlorn shareholders but worry the h*ll out of the organisers of London's 2012 Olympics.

The story in London newspapers this week was that the Australian construction firm was looking to shake off some of the embarrassment caused by its handling of the disastrous Wembley stadium project by being involved in the lucrative and high-profile building of Olympic facilities in east London.
Multiplex's reputation could hardly be worse in London, but the Olympic door appeared to have been opened to it by a row between several firms, including the Australian shopping centre developer Westfield, over the rights to develop an $8.3 billion regeneration scheme known as Stratford City.

Multiplex insists that when it sold its 25 per cent stake in the 73ha development to billionaires David and Simon Reuben last year to bolster a balance sheet depleted by Wembley's delays and cost overuns it also signed a deal with the Reubens giving it the right to be involved in the project as a "preferred supplier".

The Reubens are jostling with Westfield for control of Stratford City, and if the financier brothers triumph they would certainly need to bring in construction firms and developers to run the project, which will involve a 140,000sqm shopping centre, 4850 homes, 2000 hotel rooms and 465,000sqm of office space.

But sadly for Multiplex, there seems to be extremely little chance it will get a slice of the Olympic spending.

A private auction is due to settle ownership of the project soon after Easter.

The Reubens, who now own 50 per cent of the project, will go up against 25 per cent-holder Westfield to see who buys the 25 per cent stake now held by the British property magnate Sir Stuart Lipton, with the winner possibly buying out all other partners.

When the "Multiplex for the Olympics" headlines came out this week, a spokeswoman for Multiplex was quick to point out that it could be involved at Stratford City without having anything to do with the Olympics.

The project will house the 2012 media centre and three-quarters of the competitors' village but several other elements will not even be built until well after the Olympics. The Reubens' camp was even more negative, with one insider saying flatly that "Multiplex will not be involved in any way".

"People are greatly exaggerating the significance of the rights retained by Multiplex," said one source.

The fact that the Reubens lent Multiplex money as well as buying its stake in Stratford City did not mean there was any special bond between the two former partners, he said, as the loan had been made at commercial rates.

"The truth is that the rights Multiplex has retained are quite wishy-washy.

"In any case, they disappear when there is a change of ownership and, one way or another, the ownership is about to change," he said.

It is the hot contest for that ownership that has the mayor of London Ken Livingstone and David Higgins, the Australian chief of the new Olympic Delivery Authority, looking on with growing concern.

The ownership row is not yet threatening any 2012 schedules - the first Olympic-related construction work began just a week ago with the start of tunnelling to put power lines underground - but Livingstone is already muttering ominously that if the dispute does cause delays he will initiate the compulsory acquisition of any assets needed for the Games.

Livingstone has further flexed his political muscles by making it clear he wants the Reubens out of the project.

The mayor's aides say he has been told by Michael Gutman, Westfield's managing director for UK and Europe, that the Australian firm can no longer work with the Reubens after lengthy internal disputes about the timing of the project.

Westfield has refused to comment on the acrimony between the joint-venture partners.

Praising Westfield's track record of delivering major projects on time and on budget, Livingstone has grabbed every opportunity publicly to whack the Reubens. If they didn't like the pressure he was putting on them, Livingstone said, they could "go back to Iran and try their luck with the yatollahs".

When it was pointed out that the Reubens were actually born in India to Iraqi Jewish parents, the unrepentant mayor's response was to apologise to the people of Iran for associating them with the Reubens.

The Reubens were metal traders and property investors who made billions of dollars in the 1990s by investing in the formerly state-owned aluminium industry in the former Soviet Union and then somehow managed to get their money out of Russia.

The bad blood between the Reubens and Westfield has led to a widely held assumption that the auction, which is being conducted by merchant bank NM Rothschild, will see one partner completely buy out the other, but that is not a foregone conclusion. Both camps have told The Australian that it is still possible that they could continue to share the development.

Even if the Reubens did get a controlling 75 per cent stake by buying out Lipton, they would still need to bring in at least one major developer to actually carry out the work.

Westfield would be an obvious candidate to develop the planned retail centre, and a deal could be reached which allowed it to own and operate the shopping centre.

"The relationship between the Reubens and Westfield has not completely broken down despite what you are hearing from Livingstone and others and you have to remember all of these people are in this for commercial reasons, not to make friends," said a Reubens insider.

A Westfield spokeswoman agreed that the Australian firm might stay involved with the Reubens and concentrate on the retail centre.

"Westfield's business is shopping centres - they build, own and operate retail centres and that's why people invest in them," she said.

"They don't want to diversify too much so even if they came out of the auction with 100 per cent (of the project) they would not be looking to go through with it all as a sole operator and they would need to bring in other partners."

The auction had originally been expected before Easter but the latest delay appears to be caused by a demand by Lipton that whoever buys his stake gives him total indemnity from any future legal actions relating to the site.

Lipton's firm, Stanhope, "is trying to set terms that are unreasonable", said an executive with one of the other partners.

"In this sort of development there is always the danger that legal problems may arise at some stage and they are pushing their luck by trying to get total legal protection."