International Finance Centre: Second business set to sign, and negotiations taking place with 13 more prospective tenants

  • Controversial Jersey International Finance Centre could be about to sign second business
  • UBS signed up as the development’s first tenant last week
  • Jersey Development Company say negotiations taking place with 13 prospective tenants
  • Your view – read Letters to the Editor and web comments below

A SECOND business could be signed to move into the controversial Jersey International Finance Centre within the next six to eight weeks while negotiations are taking place with a further 13 prospective tenants, the finance director of the Jersey Development Company has said.

Last week, Swiss investment bank UBS signed up as the development’s first tenant, which has been hailed as an important step by supporters of the scheme.

The proposed Esplanade Quarter development, which is being overseen by the States-owned JDC, has come under significant criticism, with a protest due to take place at the site on Sunday and a petition to stop the development gathering over 1,000 signatures since it was launched last Thursday.

Simon Neal, finance director at the JDC, has said that other companies had expressed interest since the announcement on Friday that the first tenant had been secured.

He said: ‘A lot of potential tenants have been holding back and may not have wanted to be the first but now that we have committed to start then more are calling.’

Treasury Minister Alan Maclean was expected to be quizzed about the finance centre during today’s States sitting after two Members lodged urgent questions following the announcement that UBS would move into the offices.

UBS has signed a deal to lease 16,500 sq ft of office space at the Esplanade development, which has been deemed sufficient to allow building work to begin.

Mr Neal, who has previously been managing director of development company the JCN group which oversaw construction of the Ogier offices, said that reports that 200,000 sq ft of space had to be pre-let are wrong and related to previous proposals to develop the site.

Senator Philip Ozouf, in his role as Treasury Minister, last year said in the States that agreements for 200,000 sq ft needed to be agreed before building work could begin – a statement which has since been described as ‘an error’ by Senator Maclean.

Mr Neal said: ‘The figure of 200,000 sq ft was not in our memorandum of understanding.

‘We had to demonstrate a sufficient level of legally-binding pre-lets.

‘It appears Senator Ozouf got it wrong.

Mr Neal said that regardless of which company carried out the work, the site would be developed for office space.

He said: ‘These offices will be much more like you would see in London. A lot of businesses want to be in a central location near other similar businesses.

‘The bank are providing the funding, not the taxpayer.

‘They have valued it with only UBS as a tenant and are happy to fund it – that should provide reassurance that this is scheme will work.’

He added that the negotiation process and terms offered to tenants were confidential and that despite the planned protest, he believed that a lot of Islanders supported the development.’

Click here to view the petition. [/breakout]

WITH the announcement that work is set to start on the Jersey International Finance Centre, Islanders have been having their say on the controversial project.

The JEP has been inundated with letters as well as web comments after States-owned developers, the Jersey Development Company, announced on Friday that it could begin construction on the Esplanade scheme following the signing of the first tenant.

UBS, an investment banking company, has agreed to lease 16,500 sq ft of office space – around a quarter of the total floor space offered by the building – which JDC project leaders say is enough to fulfil the terms of their agreement with the States.

However, there has previously been public concern over the amount of pre-lease deals needed before work can begin.

The announcement comes as public opposition to the scheme gathers pace, with plans to form a human chain around the proposed building site to show politicians the strength of public opposition to the scheme, along with the launch of a new online petition.

From Derek Wallis.

WITH over 80% of the population against the proposed finance centre, what gives our ministers the right to totally ignore the feelings of the public? Do our elected Members realise that there is over 9.5 million sq ft of office space under construction in London with the developers struggling to find tenants?

An artist's impression of the Jersey International Finance Centre showing the use of the retained seawall

Jersey must be the only place in the world where the government is prepared to gamble vast sums of public money on such a project other than places like Dubai and Qatar, which are cash rich. We are told that the scheme will be self-funding with no risk to the States. Even if the banks have first call on the properties I can’t imagine them being prepared to lend this amount without a guarantee, especially as the first tenants could possibly be not paying any rent for two years, which apparently, is normal.

The risk should be left with private developers. One only has to examine Jersey’s track record to see the huge expensive mistakes that have been made with the Waterfront, the incinerator and, more recently, the new police station to name but a few. We were promised that no construction could commence until 200,000 sq ft had been let. Is 16,500 sq ft even getting close?

Senator Alan Maclean stated at a recent public meeting that there would not be any increase in immigration as the majority of offices would be taken by local companies. He later contradicted himself and said there were other outside companies showing interest! Where will the staff for these come from?

Lee Henry said at the same meeting that the underground car parks would be one metre above the water table. In answer to a later question, he stated that a two-storey car park would be built under a new public open space and that would entail the sealing of all the fissures in the surrounding rock formations!

How can we have confidence in this project with answers like these?

Yes, there is a need for more top-class office space, but not with so much risk and uncertainty to our Island.

From Trevor Brown.

IT appears that Senator Philip Ozouf, while Treasury Minister, made a mistake when he informed the States Assembly of the level of pre-lease agreements which needed to be in place before building of the first element of the International Finance Centre complex could begin.

Is it not strange, however, that no-one who might be thought to have been aware of the correct figure noticed the mistake? Is it not strange that not the Chief Minister, not Senator Ozouf’s own then Assistant Ministers, not any other member of the then Council of Ministers, not his then Chief Officer, not any of his other senior departmental officers, not even anyone from the Jersey Development Company, noticed the mistake?

Is it not strange that if any one of these people did, perhaps, notice the mistake, they did not themselves make a statement correcting the information, or did not inform the then Treasury Minister of his mistake, so that he could make a correction at the next sitting of the Assembly? Would I be making a mistake if I believed that it suits the purpose of some people that such a great deal of misinformation exists about this matter?

In order to help avoid any further mistakes, I would take this opportunity to clearly state that I do not believe that our government should be involved in the business of providing commercial property development. I do not believe that concentrating financial services businesses on one small site will add to Jersey’s advantages in attracting or retaining that business. I do not believe that the demand for grade-A office space cannot be adequately met by private developers. I do not believe that the JDC will make their claimed level of profit on the development or that all of the proposed buildings will actually be completed. I do not believe that the Esplanade site needs to be built on at all. Most importantly, I do not believe that people who are paid by me and my fellow taxpayers should be allowed to mislead us in this way.

What I do believe, though, is that many other Islanders share views similar to mine.

From Simon Crowcroft, Constable of St Helier.

YOUR editorial (JEP 29 May), ‘A battle to save democracy’, makes a number of unsubstantiated assertions.

The opening paragraph states that ‘Public confidence in the States to deliver the Jersey International Finance Centre could hardly be any lower.’ I would be grateful if you could provide some evidence that this is the case when we have recently had public elections in which the Islandwide election returned eight Senators, the majority of whom have made no secret of their commitment to ongoing plans to create a new financial services quarter. Admittedly, there was recently a public meeting in St Brelade, convened by Deputy Montfort Tadier, where a show of hands from the 40 or so members of the audience indicated opposition to the proposals, and where three failed election candidates, among others, urged the (elected) Treasury Minister to halt the project, but this hardly represents ‘a groundswell of public opposition’, as stated on your front page.

The second paragraph of your editorial states that nobody supports the proposals to build the Jersey International Finance Centre at the Esplanade, ‘apart from the odd politician and members of the Jersey Development Company’. If memory serves, every one of five attempts to derail the proposal to build the JIFC in the States, i.e., the assembly of democratically elected politicians, has failed, including the one I myself tabled back in 2011. So it is hardly a case of ‘the odd politician’ wishing to let the development company set up by the States get on with the job of creating the JIFC; it is, actually, a majority of States Members which, time and time again, have voted to continue down this path. And what is the JEP trying to suggest in the phrase, ‘the odd politician’, given that the headline for the leader is ‘A battle to save democracy’? Do we not elect – democratically – members of our community to act as politicians and to vote for or against propositions in our parliament?

The leader continues in its third paragraph, ‘Many would rather have a car park – or even just a park’: this disingenuously omits to mention three things: first, the proposed JIFC will provide the same number of public parking spaces as are currently available; but they will be underground, i.e., in the dry, serviced by lifts, lighting, CCTV and public toilets – how is such a facility considered worse than what currently exists? Second, there will also be private underground parking for all of the businesses located in the Esplanade Quarter, and this means there will be a net increase in parking, as presumably a fair few of those who currently park on the site work in the very finance houses that will be relocating to the new financial services quarter. Third, the proposed site will provide three public squares each of which will be bigger than the Royal Square; this is a significant amount of new public amenity space. Of course, in an ideal world, one in which bills don’t have to be paid, it would be preferable to give the whole area over to a park – indeed, this was the proposal I tabled in 2011 and which was defeated (democratically), in the States Assembly. But we don’t live in an ideal world; we live in a global community in which dozens of jurisdictions are seeking to attract the financial services businesses currently located in Jersey to their territories.

The leader goes on to criticise the States for ‘political in-fighting, indecision and several million pounds of expenditure on plans and professional fees’; in due course, perhaps the Corporate Services Panel could examine usefully what the actual reasons have been for the delay in the States’ development agency, the Jersey Development Company, in signing up businesses to take on leases in JIFC. I suspect no small part of the delay, and the increased costs, will be found to be due to the interference of the ‘odd politician’ – and I use the term advisedly, to denote the fact that opposition to the scheme is a minority pursuit in the democratically elected States Assembly.

Fortunately, for an Island with large and rising bills to pay for social and public services, and in spite of ‘a groundswell of public opposition’ to the development of a financial services quarter, we now have the first tenant for the new buildings in the shape of UBS. I take my hat off to the firm, as I am sure its staff will do when they move into the grade-A office accommodation that does not presently exist in St Helier, and which private-sector developers have been unable to provide on their rival sites. I look forward to using the secure underground public car park and to enjoying the green space with water features to be provided in and around the new buildings, and to the other features of the JIFC which will, I hope, result from my decision in 2011, having seen my alternative scheme defeated democratically in the States, to work with the Jersey Development Company to make sure that the Esplanade Quarter provides the best environment possible for its users.

Your editorial lurches from its unsubstantiated opinions into unfounded personal criticism towards its close, asking, ‘Where is Senator Philip Ozouf now?’ The Senator in question is visiting some of Jersey’s Overseas Aid projects in Africa, projects, one might add, that are paid for from the taxation that arises, in large part, from Jersey’s successful operation of financial services and related industries. We are then bundled forwards into dystopia in which ‘the chasm between elected and elector… is growing ever wider’. Chasm? Six months after a General Election?

Come on, the JEP, you can do better than this. Disagree with what’s happening on the Waterfront if you will, but please don’t pretend that our democracy is at risk.

From Ed Lamond.

UBS has agreed to rent only 25% of Building 4 at the Esplanade car park. Significantly more space, approximately three more floors, will have to be rented out if the project is not to become a blind punt into a thoroughly uncertain future.

The net construction cost is over £20 million, using the Jersey Development Company’s own figures, to which can be added architectural, legal and other costs of approximately £4 million, for a total building cost of £24 million.

In comparison, UBS will presumably pay market-related rents around £34 per sq ft per annum; this values UBS’s one and a half floors of the building at £8.6 million, on a rental yield of 6.5%.

This falls so far short of the total building costs of £24 million, that more tenants are essential before building commences, to reduce the risk by covering the costs.

It should be added that the building will take two years to construct, and that UBS will probably have a rent-free period of an additional two years. So no income will accrue until 2020.

Since the public were given assurances by the previous Treasury Minister that each building would be fully let before any work commenced, I am concerned that these promises have been forgotten. More importantly, the States mandate, P73/2010, for JDC to limit the risk to the public for the construction costs to be covered, is not being adhered to.

From John Boothman.

I SUPPOSE it would be churlish not to congratulate the Jersey Development Company on attracting its first pre-tenant to the grandly named International Financial Services Centre. Unfortunately, from a risk perspective, the project is very far from being out of the woods.

These risks fall under three main headings: letting, development and market. The UBS lease goes some way to mitigate the first, but there is no certainty that other tenants will appear, or that if they do they will be prepared to pay the same rents. These doubts increase the likelihood that an investor looking to acquire the block will be less ready to pay a full price, given that the building could be half empty for years.

Secondly, there is the risk that building costs overrun. Jersey already has a poor reputation for bringing in lavish projects on time and budget. Delays in starting work mean that construction costs have risen. Have rents risen in proportion? The evidence suggests they have not, so profit margins look likely to be squeezed, and possibly eliminated.

Thirdly, the return to the States – including the much-touted yet hypothetical £50 million profit – will only be realised once all the blocks are sold. But the appetite of potential buyers will be conditioned by factors beyond the developer’s control – in particular, the rate of return compared to other investments, and the risk that Jersey’s frail economic recovery may falter or go into reverse.

At present, record low interest rates and bond yields make commercial property an attractive investment for income-hungry funds. But as rates gradually revert to more normal levels, it is quite likely that investors will seek higher-yield targets, and that means lower prices. The same applies to any fall in confidence about our future.

None of these gloomy outcomes is a certainty – indeed it is uncertainty that makes this kind of big-ticket development unsuitable for a government that has got so many States spending projects wrong in the past. If they persist with this one, and the outcome is financially disastrous, they will be shown no mercy by a public increasingly exasperated with such folies de grandeur. I do hope that is clearly understood, not least by our well-meaning and likeable Treasury Minister.

From Denise Shrives.

OK! If Jersey really needs this then let the companies who want these buildings lease the land from the States then pay for the buildings to be built, not make everyone else in Jersey pay for it.

These buildings should only be built if companies are willing to build them. As for the first building to be built, only 200 people moving in for sure. It shouldn’t be built until it’s capacity is full and signed for.

With the announcement that work is set to start on the scheme, Islanders have taken to the JEP website and Facebook page to have their say:

Alan1963: ‘Stop wasting yet more money and throw this application in the bin and sack the politicians who set out to bankrupt the Island. People are angry, believe me, more than you can ever imagine!’

Greg Sanderson: ‘So someone has signed up for a quarter of the first block…how many blocks are there? I thought it was six.’

Willy Nieuwburg: ‘UBS has signed up for 16,500 sq ft of a 470,000 total = 3.5%. They just had to make some kind of announcement in the face of pressure from all sides, a pending protest and a petition!’

Phil McLaughlin: ‘This announcement of the leading of a paltry amount of space in one building seems to have triggered an indecent haste to start building immediately. Presumably no need to wait for tenders etc to come in… deals already in place?’

Sharon Cox: ‘Some States Members are taking notice of public opinion. Deputy Monty Tadier with Reform Jersey are listening and did have a public meeting in St Brelade. Others need to listen to their voters.’

Melanie Luce: ‘I hope the sea wall is retained in full. It is part of our heritage and history and would make a good fun run/charity/event area.’

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