£760k leases revealed as part of IFC deal

Tuesday 27 June 2017

More than three quarters of a million has been spent on moving the Jersey Development Company (JDC) into UBS’ former offices – part of a package of incentives to get the Swiss bank into the International Finance Centre, which was a key part of the development going ahead.

UBS agreed to lease 16,500 square feet in Building Four in 2015. Construction of the IFC’s buildings, which are looked after by the States-owned JDC, were only able to begin after tenancies were announced.

States members pressed the Treasury Minister, Senator Alan Maclean, over what “incentives or inducements” were offered to UBS, but he declined to reveal what he dubbed “commercially sensitive information.”

 But now, more than two years later, it’s emerged that JDC have agreed to rent UBS’ former premises – effectively covering the money they would have spent on rent had they not moved to the IFC.

Then known as the BankAmerica Trust Company, UBS signed two 21-year leases in 1998 for floors one and two of 28 New Street and floor three of the same.

In Royal Court transactions obtained by Express, JDC agreed in May to take over the premises until June 2019 at a cost of £380,000 annually - £258,000 for the first and second floors, and £122,000 for the third – meaning that the States-owned company will have shelled out £760,000 in total for the move. 

Pictured: The contracts stated that, as part of the two-year lease agreement, JDC would have to cover all "dilapidations".

But that cost could still go even higher, with both contracts clearly specifying that the States company will have to cover maintenance and repairs on the building, “…without limitation.”

In a statement on their Facebook page, political pressure group JAG (Jersey Action Group) hit out at the decision, which they claimed would cost in the region of half a million pounds, stating: “[JDC] are mandated by the States to undertake development in the most risk averse manner, have the ability to take back leases (including dilapidations liabilities which are un-costed)… Certainly it’s a sign of how desperate they are to get the JIFC development going at any cost (to the taxpayer).” 

But JDC Managing Director Lee Henry flatly denied that taxpayers’ money was at stake, as the group had claimed, stating that it had come from “third party funding.”

Describing the lease takeback and maintenance contract as “commonplace”, he told Express:

“This is all part and parcel of commercial office development and there isn’t anything unusual here. In the vast majority of instances, leases that commercial tenants take on are fully repairing and insuring leases so therefore the tenant is responsible for any dilapidations on the building. That’s the same across all new-build offices. Effectively by assigning the leases to JDC, we are now responsible for the dilapidations,” he said.

The company have now moved into one of the floors of the New Street building, and say that they’ll have completed refurbishment on floors one and two by the end of the week at a cost of around £250,000 – half of what JAG had alleged.

Moreover, Mr Henry added that the company is likely to recover some of the £760,000 sum. Bedells are already subletting the £122k per year top floor, while the company have already had viewings for floors one and two. “We’re hopeful that there will be someone looking to move out of tertiary office space that would take this on,” he commented.

He later added: “I know some of our opponents suggesting that this is a waste of public money and a waste of taxpayers’ money... It isn’t taxpayers’ money. If it wasn’t for UBS taking space in the IFC, there would be no IFC and we wouldn’t be able to get the sorts of returns that we’re predicting from that development.

“The company fully anticipates returning in excess of £7.5 million on that first building and we stand by that today.”