Esplanade: States agreed to £75m profits - then braced for £50m loss

Friday 14 July 2017

Proposals to revamp the Esplanade that were said to generate around £75million for the Island were amended to predict a loss of £50million – right after States members had agreed on them, according to a new report.

The 2008 Waterfront Masterplan laid the foundations for the eventual construction of the Jersey Development Company’s International Finance Centre (IFC) – a controversial development that divided islanders and politicians, and sparked protests.

A Corporate Affairs Scrutiny Report published today showed that States members had agreed to the original Esplanade “Masterplan” on the basis that it would generate a nine-figure sum. But this figure was amended “soon after these proposals were approved” to be £125million lower than first suggested.

“This emphasises the importance of clear and realistic appraisals being available for States members prior to decisions being made,” Panel Chairman Deputy John Le Fondré wrote in a foreword to the report.

But it appears that alleged lack of 'realism' persisted in the States, with the Panel criticising the Treasury Minister for having “stretched” a rule set by the States in order to build the IFC. 

The Assembly had agreed that enough tenants should be secured before the building goes ahead to ensure that the project was economically sound. But the Panel found that construction commenced when just 24% of the space had been pre-let.

Pictured: The IFC construction was found to have gone ahead when just 24% had been pre-let.

The States began reviewing the construction of the IFC in October 2014 following a number of concerns over Waterfront development. Since commencing their review, however, the Panel complained that there had been “resistance in being provided with important confidential information” including contracts relating to “construction, financing and pre-letting.”

In one instance, Treasury were found to have breached the Scrutiny Code of Practice by withholding a document that “could have been provided at an earlier stage.”

In a statement, Lee Henry, Managing Director of the Jersey Development Company, which has responsibility for the IFC, agreed with the Panel’s concerns over the apparently vague wording of the pre-let clause, but added that it was satisfied with its progress on renting space within the facility. Moreover, Mr Henry expressed frustration over the conduct of other developers. 

“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,” he commented.