Lend Lease shut out of extra London Olympic village profits

That leaves the British Government to fund the $2.76 billion project through its taxpayers.

The Olympic Delivery Authority, headed by the former Lend Lease chief executive David Higgins, rejected the Australian developer's offer of a $300 million injection.

The plan will now leave Lend Lease as a fee-based contractor that will design, develop and build the village, through its Bovis operations. But it will be unable to generate any further profits once the project has been completed.

Under its original plan, Lend Lease wanted to take an equity stake and then sell the village as apartments at the completion of the Games. That was the basis on which it and Mirvac built the Sydney 2000 Olympic Games village at Homebush Bay.

Lend Lease's securities were hard hit yesterday, falling 15c to $6.90, although analysts said most of the selling was from investors who were cashing out of some stocks to take up this week's $1.98 billion capital raising by Stockland.

The British Government said, through the Olympic Delivery Authority, that it would not seek private investment in the village because the "risk return criteria" in the current market was inappropriate.

Lend Lease's chief executive, Steve McCann, said: "Lend Lease . . . has today been advised by the Olympic Delivery Authority that the UK Government will fund development of the athletes' village, Stratford City, London, without sourcing private funding."

"Lend Lease will continue to design, develop and build the village, under an existing development management agreement, which was signed in August 2008."

Under the agreement, Lend Lease receives a fee for service, net of costs. Mr McCann said that profits, as the stages of development were completed, would begin to be realised from the 2010-11 financial year and would come in progressively over the life of the development.

"The UK Government and the [Olympic Delivery Authority] have decided that the overall risk return criteria for this type of project in the current market environment is not conducive to private funding," Mr McCann said.

"Regardless of the decision in relation to funding, Lend Lease will deliver a development of high architectural and design quality, both as a home for athletes in 2012 and as an iconic sustainable community beyond."