Frequently Asked Questions
JDC the organisation
1. Why is government developing real estate? Why not let a private developer do it?
The public owns considerable land holdings either directly though the SoJ, or through JDC. Our purpose is to manage and develop property on behalf of Jersey in order to:
- Provide returns to the taxpayer that are overall at least 150% higher than direct land sales – for example if we were to simply to sell the land at the Esplanade we would probably get about £15 million back for the taxpayer, but no longer own the land, and have much less control over the public spaces. By developing the land ourselves we would have assets worth more like £50 million, along with rental income, while creating lasting, appropriate public spaces.
- Develop attractive community spaces that will stand the test of time – something that private developers are under much less of an obligation to do.
- Support the economy by generating work and infrastructure for businesses to grow and providing alternative schemes for tenants to choose from.
It is true that JDC must make a profit, but because we are owned by SoJ we are not purely profit driven – it is our job to carefully balance development and community space, and to ensure that what we will build will stand the test of time. A good example of this is to compare the quality of the community open space around the Cineworld complex that was delivered by a private developer, versus Weighbridge Square that was delivered by JDC.
2. This all seems too risky! Is it?
No, not particularly. There is always some risk when making investments, but there is a lot that we have already done, and will continue to do, to reduce this including:
1. Entering into fixed price construction contracts so that costs don't spiral. a.) Only proceeding with construction when there are legally binding pre-lets in place.
2. Progressing the work in a phased way one building at a time, so we always limit exposure and so that we can evolve the plan to suit the island's needs and market demands.
3. Why are there more planning permissions for new office space in Jersey than there is demand?
It has been widely accepted for some time that there are more planning permissions for new office space in Jersey than there is demand. This has been a subject for public debate on several occasions over the last few years.
The market position for new office space in Jersey has changed significantly since the global recession several years ago and the general outlook is very positive.
This will ensure that there is competition within the market and importantly, it will provide potential tenants with a choice of new office space. This will also ensure that there is a long pipeline of newly built office space to answer the needs of the Island’s growing industries for many years to come.
1. Aren't there better ways to spend these public funds?
Just like any other developer, we have secured third party private funding to cover the costs of the construction, this means that no public funds are being used for the construction. This also means that there aren't actually 'funds that could be spent elsewhere' as is perceived. JDC could sell the land now for the sum of £15m or JDC could use private funding to develop the land to make a return of £50m.
2. Why does it have to be an International Finance Centre, why not something else?
The local finance industry has made it very clear that new premises are needed for them to grow. New prospective finance firms and employers considering the island have also made it clear they need Grade A accommodation. Here are a few facts, which illustrate the importance of supporting the needs of our finance industry:
- The finance industry accounts for approximately 50% of total tax revenue in Jersey
- The finance industry spent £310 million on goods and services in 2014, much of which will have been payments to local non-financial businesses, generating further economic activity, and ultimately tax revenue, for the Island
- 90% of all finance employees are local
- The Global Financial Centres Index names 'infrastructure' in its top 5 competitiveness criteria
3. Why do we need more office accommodation?
There is currently only 15,000 sq feet of Grade A office space available in Jersey and this is spread across 4 buildings. The vacancy rate for this type of accommodation is less than 1%!
This means that there is nowhere for existing local businesses to expand and grow. It also means that new businesses thinking about moving to Jersey have very little choice, which puts us at a competitive disadvantage, at a very critical time for the Island where employers, both new and existing, are needed to create local jobs.
There are some new buildings being developed, however a significant proportion of this new space is already pre-let.
4. There are lots of empty offices across town - can't these be refurbished?
Larger businesses generally require Grade A space; that is modern accommodation of the right level, in a good location with appropriate space for open plan floor layouts. Unfortunately many of the vacant offices are not able to provide this due to their structural design or layout and they are now technologically out-of-date and unsuitable.
This isn't something that can be solved with refurbishment. However, this does not mean that these office spaces will be wasted, they are suitable for smaller businesses, which also make up a vibrant part of the business community in Jersey and are now returning to growth. Alternatively they could provide opportunities for residential development.
5. Won't we lose parking? Will moving the parking have a negative impact on local retailers?
There will be absolutely no loss of public parking spaces - all 525 spaces will be available, but some will simply be moved 170 metres during construction to a new car park in front of the Radisson Hotel. As construction progresses, spaces will be closed in the Esplanade car park and new spaces will be opened in the new Les Jardins car park. More spaces will continue to be transferred as each building starts, so that there are always 525 public parking spaces kept available.
We've looked into the main reason why people currently use the Esplanade car park and have learned that it is mainly used during the week, not by shoppers but by commuters. During construction of the first building, 376 spaces are being kept in the Esplanade car park, with 149 spaces available in the new Les Jardins car park, only 170 metres away. When the Jersey International Finance Centre is complete, all 525 spaces will be transferred to a new underground car park to be located beneath the public park.
6. Won't parts of town 'die' when the clusters of offices move to the Esplanade?
Businesses have been migrating to the Esplanade since the 1990s and this trend is set to continue. The Esplanade is the one area of town that provides the space that is needed by larger, locally based international finance companies. Two things generally happen at the moment when companies move out from smaller offices to larger ones at the Esplanade, namely;
- In the case of good quality offices, the landowner refurbishes the building and lets the office accommodation to other, smaller business such as Ogier's former premises at Waverly Place and Whiteley Chambers; or
- In the case of poor quality offices, the landowner secures a change of use to residential and either redevelops the building or sells it to a developer. In the last 18 months this has happened at PwCs former premises on Colomberie, RBSi's former offices on Bath Street (opposite their headquarters) and Voisin / Volaw's former premises on Don Street.
We believe that the end result will actually be more people living and working in town, which should create a more vibrant St. Helier and solve some of the Island's issues around housing.
7. What about the impact on the environment?
JDC has carried out detailed site investigations. We have found that the contamination level will be 4%, as opposed to the Victoria & Albert Pier apartments, which had a contamination level of 25%. Nearly all the contamination is below 4.5m which is below the ground that is to be removed. All material that is being removed is also being scanned for visible contamination and this will be removed before dumping at La Collette.
8. What would happen if we didn't build the centre at all?
Put very simply:
- There would be considerable financial losses to JDC, which is owned by the public
- There would ultimately be only one major developer on the island, meaning there would be no significant competition
- Because of this, prices for office accommodation, would probably go up and community open space would not be delivered in the same quantity, or at as high a quality
- Businesses looking to relocate would continue to find it challenging to choose Jersey with such little Grade A office accommodation available
- If businesses choose other jurisdictions over Jersey this will limit tax revenues, which may ultimately increase taxes
9. Aren't we going to end up with an empty parking lot, or worse, too few spaces?
Our planning conditions state that prior to any construction we must create a temporary car park to ensure there is no loss of public car parking spaces during the entire development of the Esplanade Quarter. This is to ensure that the public are not inconvenienced and people can go about their business in the normal way.
The planning condition also states that JDC have to maintain 525 public parking spaces during the construction and once the full development is complete. We are not permitted to increase the number of public car parking spaces as TTS are concerned this will increase traffic on the road network.
We have prepared the temporary car park so that when construction does commence on the first building, public car parking spaces taken from the Esplanade Car Park can be replaced on a like for like basis in the temporary car park. Access will still be via the Esplanade Car Park and if that is full, drivers can use the 'underpass' exit that will take them directly to the temporary car park without having to go around Cineworld / Waterfront Car Park.
Full details of these changes will be provided on leaflets and advertised in the Jersey Evening Post when the changes are due to be made. Marshalls will also be at the Esplanade Car Park when these changes occur to direct drivers.
10. Are JDC breaching planning law?
There have been some allegations from C Le Masurier Ltd and SoS that Planning Laws have been breached by JDC. There is a third party appeal now filed by C Le Masurier Ltd against the decision on Building 5 and it accuses the Planning Department of breaching laws and not JDC. These are allegations by a rival developer that has vehemently opposed every application JDC has submitted on the JIFC.
We and the Planning Department do not believe this is correct and will be defending our positions. On closer inspection of the claims made by C Le Masurier Ltd, we do not consider any laws have been breached by either the Planning Department or JDC. However, we must wait for the decision of the planning inspectorate / Royal Court in due course.
11. The image of the new finance centre from Fort Regent looks terrible! Is this what we can expect?
No. The image that has been produced by C Le Masurier Ltd is extremely misleading and incorrect. The view shown in that image it is not the finance centre, it is all of the Esplanade Quarter, Zephyrus and Castle Quay Phase 2. It also depicts the Masterplan as passed which had building 5 at 8 stories, JDC only has planning approval for 6 stories. The Castle Quay model is also not correct, there are 3 buildings at different heights and the picture displays only 1 height (and is designed by Dandara, not JDC).
This image includes Castle Quay 1 in white, which has already been built. The 3 buildings that have planning permission are lower than 37 Esplanade built by Dandara. It is also worth noting that the designs being put forward are similar to those of other private developers and what was approved in the Masterplan. Finally, the white masses shown in the C Le Masurier Ltd image do not show the character of the buildings.
12. What happens if only 2 or 3 buildings are built?
The completion, letting and sale of three office buildings will produce enough net revenue to fund the creation of a new 525 space underground public car park with a public park on top. By phasing the delivery of the Masterplan in response to demand and in a logical manner, provides flexibility for alternative uses on the site to be considered in the future in the event demand for new office space dries up.
13. How many buildings will fund the underground public car park?
Two with some borrowing or three which would leave some surplus funds.
14. Could the private sector meet the current demand for office space?
No, the private sector has not kept up with the demand for office space which is why there is currently a shortage of Grade A office space. This lack of available Grade A space is negative for the Island's economy as existing on-island tenants looking to expand or move into more modern premises are unable to and inward business is unable to relocate to the Island due to a lack of suitable available office space. JDC is in contact with 14 prospective tenants requiring in excess of 350,000 sq. ft. within the next 5 years. It is unlikely the private sector is able to deliver this level of space as there are some sites (a large one in particular) that have planning permission for new offices but have existing tenants in place on live leases and therefore construction on these sites cannot be commenced for several years.
15. What does success look like in 2 – 5 years times?
Building No.4 completed, fully let and sold. Building No.5 completed and fully let. Sufficient pre-lets on Buildings No.3 and No.6 to allow construction to commence with one of those buildings nearing completion.
16. Why not wait for Scrutiny’s “red book” valuation of the scheme and accompanying report?
JDC operations were set by the States Assembly in 2010 when Proposition P.73/2010 was adopted. The Proposition directs JDC: ‘to promote, co-ordinate and implement a comprehensive strategy for the development of the whole of the St. Helier Waterfront area’. JDC has been carrying out States Assembly wishes by signing up Heads of Terms last year and this year with prospective tenants. It would be difficult (unless the States adopted another Proposition requesting JDC to cease operations) to put everything on hold each time individual States Members attempt to change the States Assembly’s original wishes.
Also, JDC's private funder (HSBC) commissioned an independent “red book” valuation on Building No.4. The valuation of the completed building with only the UBS pre-let exceeded the borrowing being taken out to fund the construction. JDC has acted in accordance with P73/2010 and had all the necessary Ministerial Decisions to commence the project.
17. What action will be taken if Scrutiny’s report does not match the projections of the JDC and the claimed £50m return?
That would be up to the Corporate Services Scrutiny Panel and the States to decide. Projections are made using the best and most accurate information available at a particular point in time. The JIFC is a 10-year project and therefore these projections include assumptions on cost inflation, rent increases, future demand and yields. The current “red book” valuation that HSBC has commissioned was prepared using all relevant information. Technically, Scrutiny’s valuation should be materially the same as that prepared by the bank, however as Scrutiny's valuation is on the entire JIFC development it will be dependent to a greater extent on assumptions which may differ from those of JDC.
18. If such demand for Grade A offices truly exist, why not advance on a fully let basis?
The timing of securing pre-lets is primarily driven by the prospective tenants themselves based on their own lease and timing requirements. In a multi-let building it is unusual and not practically feasible to line up 100% pre-lets as each tenant will have a slightly different timeline. Furthermore tenants require certainty of delivery before they spend considerable fees with professional advisors. It would not be possible to sign a significant pre-let where JDC had to wait to sign up further tenants as other tenants may not sign and that tenant that has signed is then exposed and risks not having new accommodation resulting in JDC being exposed to penalty clauses, as it had not completed the new accommodation within the timescales set down in that pre-let.
19. What will the £50m dividend be worth in 20 years?
The £50 million estimate has been based on today's costs and values and in 20 years it will have increased (provided increases in property values outstrip increases in build costs).
20. Can assurances be given that La Route de La Liberation will be lowered as per the approved Masterplan?
This is ultimately a political decision. The current position is for the road to be lowered. The JDC are ensuring that Phase 1 of the Esplanade Quarter does not inhibit the lowering of the road and indeed provides the financial wherewithal for the road to be lowered. That said, the Masterplan is a living document and given the strategic position of the Esplanade Quarter site, it needs to be flexible. For example the western part of the Esplanade Quarter site, Zephyrus and Les Jardins de la Mer is currently being assessed as a potential site for the new general hospital. If this was the preferred site it would be very unlikely that the road would be lowered.
21. If no more lettings are achieved for the JIFC’s first building, what is the expected profit / loss of the sale of the unit after the bank loan has been paid off?
JDC is in contact with 14 prospective tenants requiring in excess of 350,000 sq. ft. within the next 5 years so it is unlikely not to achieve anymore lettings. However, an independent "red book” valuation of the competed building with only the UBS lease in place exceeds the bank loans being raised to fund the construction of the building. Under this scenario there would be a surplus of approximately £4.2million.
22. Is there asbestos and ash contamination at the JIFC Building 4 development site?
As part of our site investigations, experts took a total of 108 samples from 32 trial pits on the development site, the samples were collected at 1m, 2m and 3m below ground level. Out of the 108 samples taken, 24 identified traces of asbestos, these sample were tested for concentration levels. 18 of the samples detected 0.001% concentration. The highest concentration of the remaining six samples detected just 0.013%, which is well below the 0.1% criteria for La Collette.
Our tests identified a greater presence of ash than we previously expected, with contamination at around 20%. However, we expect this figure will be greatly reduced once large stone/concrete is removed. We have also been informed by our sub-contractor that a lot of these materials could be recycled, so we hope that the figure will drop to around 13%. Any contaminated material will be deposited in a lined ash cell at La Collette. Public safety is extremely important to us, and we have hired experts who adhere to UK best practice for the safe removal of any contaminated materials. Our site investigations and reporting of results have been undertaken in accordance with UK Environment Agency best practice and the requirements of the States of Jersey Environment Department and Transport and Technical Services Department.
23. We don’t want it! Why can’t JDC simply cease the JIFC development?
There have been suggestions from those opposing to the JIFC that the development should be stopped and that it would only cost £5million to do so. Whilst there has been just £5million spent in pre-development costs on the JIFC, that figure ignores the build costs that have been incurred or committed on No.4 JIFC to date, and the damages that would need to be paid for breaches of contracts. JDC estimates that these costs would be in the region of £20million and that is before we take into account the reputational damage this would cause for the Island if a government owned company was to renege on contracts. Whilst unquantifiable, this damage would be more significant and would far surpass the immediate financial cost. At a time when the Island should be focussing on economic recovery these actions would have the opposite effect.
24. The Scrutiny Report stated that the JIFC isn’t viable - is this true?
Yes - However, attached to Scrutiny’s Report was a further report from the Scrutiny Panel’s own independent advisors, Ernst & Young (EY), who have stated that the first building will make a profit of £3m and that the first two buildings should proceed. The main difference between the valuation undertaken by EY and the one from DTZ, who were valuing the first building for the bank, is that EY applied a yield of 7% as opposed to 6.5%. JDC do not know the reasons why Scrutiny is not following the recommendations from their own independent expert advisors who have seen all confidential information.
25. Will the JIFC really help Jersey’s economy?
Scrutiny’s own advisor, Ernst & Young, has confirmed that the project will generate a profit and that the first building (No.4 JIFC) should be progressed "as a catalyst to the commencement of this regeneration project, which is so important to Jersey". The scheme will generate economic growth for the Island and will secure and create jobs, especially for pre-existing Jersey-based firms who need office space to grow into. This important project will therefore support and underpin the Island’s economic recovery, a recovery that is vital to maintain our current level and quality of government services.
26. How is the JDC ensuring the JIFC development will not lose money?
This is not a speculative development; the JIFC is being progressed on a building-by-building basis and each building will only be constructed after there are sufficient legally binding pre-lets in place that supports the funding required to pay for the construction costs. As an example, the value of the first building (No.4 JIFC) when completed with the UBS pre-let is greater than the total funding that JDC has committed for this phase of the development and therefore even if no other tenant signed up, the building could still be sold on completion and the debt cleared. However, JDC is in final discussions with two tenants to take the majority of the remaining space left in this building.
27. How has the removal of contaminated materials at No.4 JIFC progressed?
Construction of the No.4 JIFC is progressing well. Excavations and piling is complete and concrete works for the basement have commenced. We did encounter more contaminated material than the Site Investigations predicted. The contamination of the site is a legacy issue that would need to be dealt by whoever was developing the site. The bulk excavation was carefully carried out in accordance with best environmental practice and whilst there were unforeseen extra costs, they are projected to be within our level of contingency and the project remains viable.
28. Isn’t it a drain on public resources if government owns and develops extensive amounts of property?
Actually, the opposite is true. The way in which JDC operates ensures that no public funds are used. JDC has to secure a sufficient level of legally binding pre-lets / pre-sales to cover the cost of construction and then uses private bank funding to fund the cost of construction.
The JIFC development is a recent example of this in action, JDC has been able to develop No.4 JIFC by creating value through the pre-let, which is in excess of the cost of construction. All costs are being advanced by a private bank, not the States of Jersey.
This strategy aligns with the purpose of the JDC since its inception; to be a States-owned development company that maximises the profits made from publicly owned land and puts back into the public purse. JDC was voted into existence by the States Assembly to do just this, and Members have supported it through six separate States debates.
The profits from the JIFC will be used to regenerate St Helier. If this development was undertaken by a private developer, this simply wouldn’t be the case.
29. What is being done to ensure that the community, not just the finance industry, can enjoy the land?
As a government owned development company, JDC is dedicated to making sure that its developments include attractive spaces for the community. The JIFC is no exception, with 50% of the site being used for high quality open space. JDC has already successfully created new areas of open space at the Waterfront including Les Jardins de la Mer, the Weighbridge and Marina Gardens. These areas have a significant impact on our community, playing host to a number of community events and JDC will ensure that the community areas of the JIFC will live up to the same high standards.
30. Would stopping the build improve public finances?
As the JIFC is entirely funded by bank lending, no public money is being used to fund the build, nor is money being taken from a States ‘spending pot’, which could be allocated elsewhere. In fact, there is no link between the JIFC and government spending plans.
Despite this, there have been suggestions from those opposing the JIFC that the development should be stopped and that it would only cost £5million to do so. Whilst there has been just £5million spent in pre-development costs on the JIFC, that figure ignores the build costs that have been incurred or committed on No.4 JIFC to date, and the damages that would need to be paid for breaches of contracts. JDC estimates that these costs would be in the region of £15-£20million and this figure is before we take into account the reputational damage this would cause for the Island if a government owned company was to renege on contracts. Whilst unquantifiable, this damage would be more significant and would far surpass the immediate financial cost. At a time when the Island should be focussing on economic recovery, these actions would have the opposite effect.
31. How has the Treasury Minister responded to Scrutiny's conclusions following EY's JIFC viability report?
You can read the full statement here.
32. Which local contractors are being used for the development?
As a States-owned development company, JDC has a social responsibility to give back to our economy by employing local wherever possible.
The JIFC development has provided work for the following local contractors:
- AA Langlois
- Granite Le Pelley
- V&V Stonemasons
- Brady & Gallagher
- Coppolo & Coyde
- Allteck Roofing
- Bob Le Nevue Ltd
- Drain it
33. How many enquiries so far have you had about tenancies?
JDC has accumulated substantial interest from both local business and new business from overseas. Overall, JDC has 20 live enquiries and has issued proposals that would fill the remaining space in No.4 JIFC and part of No.5 JIFC.
34. Why have JDC submitted a second planning application for No.5 JIFC?
JDC recently submitted a second planning application for No.5 JIFC, despite the original application having already been approved.
There are 3 significant reasons why JDC has chosen to submit the second planning application.
1. Prospective tenants: JDC is in detailed discussions with and has already issued proposals to tenants that would fill the remaining space in No.4 JIFC and half of No.5 JIFC. This said, JDC could not risk losing these tenants while fighting the lengthy appeals process. In order to continue negotiations with these prospective tenants, JDC required an unchallengeable planning consent to take forward negotiations
2. Further delays: On 20 August 2015, rival developer C Le Masurier Ltd lodged a third party appeal against No.5 JIFC. The new appeal process promised to be faster, cheaper and to eliminate the need for lawyers. Appeals under the old system took at least 6 months and were very expensive. 6 months since the initial appeal was lodged and JDC had only just received details of the submission from C Le Masurier Ltd. Furthermore, from the outset C Le Masurier Ltd had deployed lawyers in this appeal’s process forcing JDC to do the same.
The inspector’s hearing has been delayed to w/c 7 March 2016 to hear the evidence and then it is likely to be a further 2 months before the inspector’s report is provided to the Minister and a decision is given. If JDC win the appeal, there would still be nothing stopping C Le Masurier Ltd from appealing against the inspector’s decision, which would delay development further. JDC could therefore find itself being delayed for between 9-15 months as a result of the appeal from C Le Masurier Ltd.
For the avoidance of doubt, the position of the building in the new application is exactly the same as the first application and has not been moved; the development simply has slightly less landscaping that is outside of the 50m boundary that C Le Masurier Ltd has appealed against.
No.4 JIFC is within this 50m boundary and is directly opposite the C Le Masurier Ltd property, yet C Le Masurier Ltd did not appeal against this development. No 5 JIFC will not be seen from C Le Masurier Ltd’s property once No 4 JIFC is built. The public must consider C Le Masurier Ltd’s own intentions by submitting this appeal. It is a rival developer to JDC and due to existing leases it cannot commence the development of its building until March 2017. With this considered, it’s clear that this appeal has been lodged with the sole aim of gaining a commercial advantage against JDC by delaying JDC’s delivery of No 5 JIFC.
JDC is simply protecting its own commercial interests by countering C Le Masurier Ltd using commercial tactics. While the £100,110 cost is unfortunate, the true financial loss would be if JDC could not secure tenants that create the investment value in these buildings. The quicker JDC can secure tenants, the quicker the JIFC will be completed and the profits returned to the States Treasury or invested in public infrastructure. Ultimately, JDC has not directly opposed any third party developers plans for additional office space. This is contrasted by third party developers, Dandara and C Le Measurer Ltd, that have opposed JDC's plans by lodging Third Party Appeals in a direct attempt to prevent JDC from delivering No.5 JIFC.
3. It’s the cheaper option: The Board of JDC decided that if there was a way to progress the development then that option should be explored and acted upon if it was commercially viable to do so and would be in the best interests of the company, the States of Jersey and our economy as a whole. While the submission of the second application has come at the cost of £100,110, this is actually the cheaper option. Defending C Le Masurier Ltd’s appeal is likely to cost a considerable amount more as fees would have to be paid to third parties such as lawyers.
1. When will College Gardens (the former Jersey College for Girls) development be completed and will it be profitable?
JDC is in the process of developing the former Jersey College for Girls building into the College Gardens residential development. Blocks 4 and 5 of College Gardens will be completed by the end of 2017, and the remaining blocks will be completed by the end of 2018. The benefits of the scheme can be summarised as follows:
- College Gardens will deliver 187 new residential units within a disused urban site in St. Helier (parts of which have remained unoccupied since 2003)
- The development will deliver 80 new affordable (Category A) residential units: 40 of these units will be Social Rented for the over 55s and a further 40 units will be Shared Equity for first time buyers
- The project includes the retention and regeneration of the Listed Building that will secure its future in perpetuity
- The estimated build costs of £30+m will be predominantly tendered in the local market
- As part of the scheme, JDC has created 57 extra car parking spaces for Janvrin School
- In addition to the environmental and social benefits listed, all profits from the development will be returned to the States Treasury.