The entrenched States-owned developers have been defending their plans to build six office blocks on the Esplanade car park, but now face new questions over the valuation of the former JCG plot, which it bought from the public earlier this year for £1.5m – despite a local developer offering £5m for the site.
The latest concerns raised about the work of the JDC – a publicly-owned company that is responsible for property and land development – come as the company progresses with plans for its controversial flagship finance centre project.
The redevelopment of the former JCG site involves building 187 properties, but former Senator Ben Shenton has questioned the details of the JDC’s acquisition of the property on Mont Cantel.
Mr Shenton, who served as the Public Accounts Committee chairman during his time in the States, has called for politicians to ask questions about the sale price and the reasons behind what he described as the plot’s ‘deep discount’.
The former politician also reveals that a local developer had previously made an opening offer of £5 million for the site, but that the States refused to enter into talks.
He said that the public deserved assurances that the reduced cost of the grounds and building was not creating false profitability for the JDC, which could then be used as a reason to pay staff bonuses.
He also said that unless the valuation and sale of the site could be properly explained, the JDC should be shut down, with its ongoing projects sold to the highest bidder.
However, JDC managing director Lee Henry has defended the acquisition of the JCG site, saying that it was not sold at a discount, but valued independently and sold on the basis of that valuation.
Mr Henry said that the States had set out an explicit process in the proposition that created the JDC that outlined the way in which new assets were acquired by the company.
He said that profits were not linked ‘in their entirety’ to bonuses of the executive team and that once completed and sold, their £30 million JCG housing project would return £4 million to the States.
‘Bonuses paid to the executive are discretionary and are a matter for the remuneration committee – the JDC’s non-executive directors – who determine the level, if any, of bonuses to be paid.
‘Every year the company prepares a business plan for the year and bonuses depend on the performance of the company during that period. There is no specific bonus linked to achieving certain profits.’
Mr Henry said examples of goals set by the business plan could include preparing JCG for redevelopment, securing pre-sales of the units at the site, obtaining planning consent for the Jersey International Finance Centre and securing pre-let agreements for proposed office blocks.
There were concerns over the sale price of the JCG site in 2007 when the then Treasury Minister, Senator Terry Le Sueur, attempted to sell the plot for £1.8 million plus a profit share.
However, the proposal was withdrawn after a group of politicians led by Deputy Rob Duhamel, and including Mr Shenton, questioned whether the sale provided the best return for the States.
Mr Shenton said: ‘As someone with over 35 years in finance I can see no reason why an asset should be “sold” at such a deep discount.
‘This transaction has benefits to the JDC as it boasts profitability, but there is absolutely no advantage to the public of the Island.
‘If the rationale for this transaction cannot be properly explained, then the JDC should be wound up – with pipeline developments sold to the highest bidder.’
By former Senator Ben Shenton
I AM an investment manager and one of the skills required in my profession is to find where the bodies are buried in company accounts.
This is because no two businesses are identical and there is some flexibility in accounting standards to compensate for this.
To illustrate this I recount the tale of a chief executive officer of a very large US conglomerate.
When asked what the next quarter’s profit would be by an influential research analyst his reply was ‘what do you want it to be?’.
It is possible to make a subsidiary or department look worse than it is by loading it with costs.
Similarly you can inflate profitability if you are so inclined to do so. It can cross the line to fraud if, for example, you have a bonus related culture and deliberately inflate profitability to your own advantage.
And so ends this week’s lesson in accounting.
To change the subject slightly, recent events made me dig out some old papers in respect of the old Jersey College for Girls site in Rouge Bouillon. Back in 2007 a few politicians, including myself and led by Rob Duhamel, prevented the then Treasury Minister – Senator Le Sueur – from selling the old JCG property for £1.8 million plus a profit share that was anticipated to increase the value to £3.1 million – albeit not without risk.
Roll the clock forward to September 2014 and the States Treasury and Resources Department, via Jersey Property Holdings, received an offer of over £5 million from another local developer for the site. Cash in hand, no risk.
As you and I, as Islanders, own the property this increase in value probably warranted us all going down to our local shop and cracking open a bottle of bubbly. Sadly this no risk cash offer was not pursued by the government who, under the Chief Minister’s personal direction, refused to even enter into negotiations.
COMMERCIALLY sensitive information about the controversial Jersey International Finance Centre has been requested on a confidential basis by the Scrutiny panel that is reviewing the project.
Senior members of the States-owned Jersey Development Company, who are leading the multi-million-pound development, gave evidence before the Corporate Services Scrutiny Panel yesterday as the group continued its investigation of the plans.
The JDC agreed to a request to provide details of agreements about the first lease with Swiss investment bank UBS, their construction deal with local contractors Camerons Ltd, who are due to begin building on 22 June, and details of the loan agreement with HSBC.
Yesterday the Scrutiny panel questioned JDC managing director Lee Henry and JDC chairman Mark Boleat, who said that they were moving forward in accordance with their agreement with the States and the approved Esplanade Quarter Masterplan, which set a framework for developing the area.
Mr Boleat confirmed that the sinking of Route de la Libération – a major part of the long-term vision for the project – was still viable, but that the company had not really considered that aspect of the scheme, as it was years away from being done.
The panel also asked the JDC about comments made last year by the then Treasury Minister, Philip Ozouf, relating to the amount of pre-let agreements needed before building could begin. Last year the Senator told the States Assembly that following a meeting with the JDC board, he was ‘absolutely clear’ that their buildings were to be ‘progressed on a fully-let basis’. Those comments have since been labelled a mistake by Treasury Minister Alan Maclean. The JDC told the panel they would look at what happened at that meeting, but that they had understood that a sufficient level of pre-let agreements was all that was needed before building could begin.
Corporate Services Scrutiny Panel chairman Deputy John Le Fondré was joined by vice-chairman Deputy Simon Brée, Constable Christopher Taylor and Deputy Kevin Lewis. Joining Mr Henry and Mr Boleat was Simon Neal, the JDC’s finance director, and non-executive board members Roger Lewis, Ann Santry and Paul Masterton.
