Lee Henry responds to JEP article by Michael du Pré
Lee Henry of JDC responds to inaccuracies from a recent article published in the JEP by Michael du Pré titled: 'Gravy train just rolls on'.
JEP published date: 16 June 2017.
I’d like to set the record straight on the inaccurate information written by your columnist and arch critic of Jersey Development Company Michael du Pré.
Set out below are the corrections to Mr. du Pré’s inaccuracies.
1) Mr du Pré claims Senator Ozouf “hijacked” the Masterplan. The truth is that the Esplanade Masterplan was approved by the States Assembly in 2008 and made provision for 620,000 sq. ft. of office accommodation. JDC is tasked to deliver up to 470,000 sq. ft. in the first phase.
2) Mr du Pré ignores JDC’s first planning application in 2012 which included an Environmental Impact Statement estimating 15% of occupiers in the IFC would be new entrants to the Island and 85% would be displaced businesses from other parts of town. If the entire development was filled by new business, then the Island’s population would grow by 5,500 workers excluding dependents!
The finance industry is Jersey’s primary industry and employs more than 13,000 people. It is essential to ensure existing established businesses can operate as efficiently as possible if they’re to remain on the Island. RBC, UBS and BNP Paribas operated out of multiple premises making their operations inefficient. These companies have a global footprint and it is vitally important that the Island retains these businesses and provides them with the best opportunities for growth. Having efficient, flexible and modern office accommodation greatly promotes that opportunity.
3) Incentives in commercial office lettings are industry standard. Tenants put these incentives towards their cost of fit-out. Since 2014 there have been six major lettings (RBC, Deloitte, UBS, JTC, BNP Paribas and SANNE). JDC was successful in three of these meaning that the financial deals offered to the other three was more competitive.
4) JDC has been established by the States as a property development company. Instead of selling sites to third-party developers, JDC directly develops tax-payer owned sites and, in doing so, secures 100% of the profits which will be either paid as a dividend to the Treasury, invested by JDC in public infrastructure or retained by JDC for investment into other development projects.
5) As a qualified accountant, Mr du Pré will know that property in the course of construction (which is classified as inventory) is held at the lower of cost and net realisable value. This means that no profit will be accounted for until the development is complete and sold. I can confirm that once the first IFC building is sold and the end value crystalised, the realised profit will be publicly disclosed.
6) JDC (formerly WEB) was formed with £20m of cash from the States of Jersey in 1996 and £20m of land holdings were transferred into the Company in 2004. These land holdings were independently and professionally valued at the point of transfer – there were no “artificially undervalued properties” as purported by Mr. du Pré. The £20m cash injection was spent on public infrastructure such as the waterfront road network, utility services, Les Jardins de la Mer, promenades around the marina and the construction of the Waterfront car park.
7) The Waterfront car park was not transferred into the Company at an undervalue – the car park was actually constructed by JDC in 2000!
8) The Board of JDC has not paid itself £3.5m in the six years since it was established as JDC. The actual figure is almost half that amount (£1.97m). The Non-Executive Directors’ pay has not increased since JDC came into existence and is lower than other comparable companies. The Executive Directors’ pay is determined by the Company’s Remuneration Committee and is regularly benchmarked by independent consultants to assist in determining pay levels.
I do hope Mr du Pré’s columns reflect more accuracy in the future.
Article by Michael du Pré- published in the JEP on Friday 9 June 2017
Titled: Gravy train just rolls on
The hospital funding fiasco has prompted me to have a good look at the Jersey Development Company’s latest accounts.
Six or so years ago, Assistant Chief Minister Ozouf hijacked the Waterfront masterplan and, based on his rosy finance industry forecasts and to the exclusion of less glamorous priorities, decided that six Finance Centre office blocks should be built.
These would ‘attract’ overseas firms and the resulting profits ’would fill the Treasury’s coffers and the ‘black hole’. Unlike the current hospital plans, no more financial information was provided for States approval.
Fast-forward six years. One building has been built and JDC struggled to pre-let 60 per cent of the space despite offering tenants eye-watering incentives. Encouragingly, a second building, justified by a 50 per cent taxpayer incentivised pre-let, is now under way. Neither of these tenants was enticed abroad.
A third block has already obtained planning permission and building could start before the election, in the hope of creating a de facto situation - it is unlikely that new Members will be well enough informed to oppose it.
In her 2016 accounts ‘Introductory Message’ to the sole shareholder representative (Senator Alan Maclean), the JDC Chairman highlights her company’s achievement in increasing its total assets by £27 million – not such a feat when it can borrow £26 million on a whim, using taxpayers’ property as security for its overdraft.
These borrowings contributed to a further increase in the ever mounting accumulation of JDC’s development costs – currently £66 million. If JDC is to realise the significant returns promised in this paper five years ago, it will have not only to stop providing heavy up-front sweeteners, but also ensure that each building provides its share of the cost of the underground replacement car park (£30 million). Perhaps now that the first building is complete, its end shareholders (the public) might be informed as to the financial result of its first completed project? The taxpayer funded JDC with £40 million plus a number of artificially undervalued properties, such as the Waterfront Car Park.
The upwards revaluation of such properties (£7 million) has annually enhanced the board’s image through its publication of a small ‘profit’ (eg £2 million in 2016). Although revaluations generate no cash, the board has still managed to pay itself £3.5 million since 2011. Nice work if you can get it and, because JDC trumps any Scrutiny panel, the added bonus is that, as long as Gorst, Ozouf and Maclean remain in power, the gravy train will keep rolling at taxpayers’ expense.