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London 2012 Olympic Village to be public funded after Lend Lease bid rejected

The Australian developer, which admits it is suffering from lack of finance due to the global property downturn, will continue as construction and development manager of the village.

The UK government will now invest a further £324 million in the £1.1 billion project. Olympics Minister Tessa Jowell said it plans to recoup the money when the flats are sold after the Games. The money will come from the Olympic contingency fund cash savings.

Lend Lease and its banking consortium had put up £150 million in equity and £225 million of bank debt to finance part of the construction and development costs but the deal was rejected due to the risks associated with a private funding package.

'A private sector deal was available but because of the credit crunch it was not a good deal. By funding the entire project the village will become publicly owned and the public purse will receive substantial returns from sales,' Jowell said.

She added that the Olympic Delivery Authority could look for other sources of private investment in the project in the medium to long term.

'Lend Lease submitted a highly competitive bid which offered to invest equity of £150 million in the project but the government and the ODA have decided that the overall risk return criteria for this type of project in the current market environment is not conducive to private funding,' said Dan Labbad, chief executive officer at Lend Lease Europe.

'Our focus continues to be on successfully delivering a world-class development of high architectural and design quality, both as a home for athletes in 2012 and as an iconic sustainable community beyond,' he added.

The Olympic village was originally intended to be wholly private-funded, but the credit crunch made it impossible for Lend Lease, the ODA's project partner, to raise funds.