Lee Henry's Statement following the Corporate Services Scrutiny Panel's report on IFC Jersey.
The Scrutiny Panel questions whether JDC should be competing with the private sector by developing properties.
P73/2010 (the States Assembly’s proposition that established JDC) is very clear that it could do so “where it would prove financially and strategically beneficial ... to undertake a development directly in order to fully control what is delivered and to take full advantage of the profits generated thereon provided risk is minimal.”
The clear intention was to maximise the returns from States-owned property and land assets for the eventual benefit of taxpayers, provided that there was minimal risk of loss of public money.
The fact that competing developers have sought to frustrate JDC at every stage of the IFC project is because they are well aware that there are significant profits to be made from commercial development on this site. JDC believes it has a duty to ensure that this profit, derived from public assets, benefits Islanders rather than the shareholders of one or two private businesses. JDC believes it has achieved that with IFC 1 - which is complete, and will soon be 70% let with considerable interest in the remaining 30% - and is on course to deliver with IFC 5.
We agree that the wording regarding the exact level of pre-lets required prior to commencing a development could be clearer, but the evident intention of the States was to ensure that JDC does not commit to a construction contract until the value of the completed asset will be more than the construction costs.
JDC’s Memorandum of Understanding with the Treasury Minister (a draft of which was attached to P73) states the following:-
“...before committing to construction costs, SoJDC will have to secure a sufficient level of legally binding pre-lets to fund the costs of constructing the first phase of a scheme.”
Construction on IFC 1 did not commence until a pre-let was in place with UBS. The value of IFC 1 at completion, assuming no other lettings would be secured, was independently appraised and exceeded the value of the construction contract. JDC had therefore met the requirements of P73. Furthermore, the construction costs were not funded by the States, but by bank loans – the risk of failure of the project therefore lay with the bank, and not the States.
JDC notes the comments of the Scrutiny Panel regarding the Masterplan. It is of course open to the States to change the Masterplan and JDC are happy to provide any assistance it can in relation to a debate on the subject, including sharing its views on the best ways to ensure connectivity with the Waterfront, but ultimately this is a decision for the States and not the company. Nothing that has been done to date within the IFC, or that is currently been approved by planning, precludes such a review taking place. We agree that it would be helpful for that to be done, in a timely manner.