Is the Esplanade project unravelling? Who’s saying what?

Friday 30 October 2015

The Jersey International Finance Centre project has been in the works for more than eight years now, and work has only recently started on the first of a planned six office blocks.

But throughout the project, it has been dogged by rumour, suspicion and controversy. Some of that has been fuelled by competitors seeking to undermine the scheme and some by politicians trying to score political points – but some of it has been fuelled by entirely reasonable questions that the developers and the ministers in charge of the scheme have been unable or unwilling to answer properly.

The confusion around the project has been made worse by the fact that mixed and changing messages have been coming out since the whole thing started. Here, Bailiwick Express looks at the big questions, and the answers from both sides…

Is the Jersey International Finance Centre viable?

- The States of Jersey Development Company and the Treasury Minister say it is. They say that the JIFC will ultimately comprise six office buildings with underground parking, and an underground car park with 520 spaces beneath a public park. But the minister said earlier this month that “plans for the future will be clarified as the project progresses” – the closest any minister has come to saying that the full project (including sinking a road and building on top of it) will never happen.

- The Corporate Services Scrutiny Panel (whose report released this morning is backed by an independent review by consultants EY) say that the JIFC is clearly not viable, that it will never make enough money to pay for the public spaces and parking that has been promised. They say that the reason is that there’s nothing like the demand for office space that the project will supply – effectively, that there’s not enough businesses who want to move into it. EY say that the whole project should be reviewed after the first two buildings are done, and that the plans to sink the road and build over the top of it in a second phase are “commercially unrealistic”.

How much profit will the full Jersey International Finance Centre make 

- On 19 October the Treasury Minister said an updated valuation had put the profit of the entire scheme at more than £90 million, on top of the creation of parking and public spaces.

- This morning, the independent report by EY said they doubted whether there was sufficient demand, and questioned the ability of the market to fill the development.

When will the development be finished?

- The States of Jersey Development Company described the JIFC as a “ten-year project” in the FAQ section on their website, and say that within two to five years the first two buildings will be complete and another building will be near completion. That amounts to half of the first phase of six planned buildings.

- Independent advisers EY told the Scrutiny panel that they had “severe reservations” as to whether there was sufficient demand to complete the project over the next five to ten years 

Is the project risky for the public?

- The SOJDC say it’s not. They say there’s always some risk with any investment, but that they’ve entered into fixed price construction contracts, that they’ve only proceeded with legally-binding pre-let agreements, and that the phasing of the plan limits exposure.

- The Scrutiny panel say that the development is being done speculatively – against the undertakings of having little or no risk. Work started on the first building with only a quarter of the total floorspace let out, with other companies interested in another quarter. Last year the former Treasury Minister Philip Ozouf said no work would go ahead until 200,000 square feet of pre-let agreements had been signed – work is now starting without anything like that amount, but the new Treasury Minister Alan Maclean says that Senator Ozouf made a mistake and shouldn’t have promised a 200,000 square foot threshold.