New Year sale for the IFC?

Tuesday 26 September 2017

The Jersey Development Company (JDC) could see in the New Year by selling the first building of the controversial International Finance Centre, the Treasury Minister has said.

The news emerged at a Scrutiny Hearing yesterday, in which the Minister, Senator Alan Maclean, refused to rule out that construction would begin on a third building – IFC6 – before the first one had been sold.

IFC1 - as the first building in the international finance complex is known - has come under intense scrutiny after it emerged that construction had begun when less than a quarter of its rental space had been let, rather than all of it as previously suggested.

Packages of incentives have been offered to companies to encourage them to move into the facility, with JDC having spent more than three quarters of a millionon moving into UBS’ former offices in a bid to secure a lease with the Swiss bank.

Then it emerged that the JDC had extended a £2.5million loan with HSBC because they were concerned about selling IFC1 before it had been filled.

Pictured: Construction began on IFC1 before the whole building had been fully let, as the States Assembly had been told would be the case.

But Senator Maclean advised against negativity yesterday, describing the situation as “extraordinarily positive.”

He said that IFC1 would be more than 90% let by the end of the year, and would be sold in the first quarter of next year – potentially as early as January. The JDC had already received “a very attractive offer” for the building, he said, but felt that risk would be minimised if a sale were to occur when it had secured more tenants.

He added that the emerging IFC5 building was already 56% pre-let, with “a lot of demand coming through.” “[That] reflects the fact that the economy is also performing well, and long may that last,” Senator Maclean commented.

Before construction began on IFC1, it had been claimed that current demand for office space was around 25% higher than the 470,000sqft. Constable Chris Taylor questioned why, if demand was allegedly so high, that the available building hadn’t been completely rented already. Senator Maclean explained that this may have been due to tenants being unwilling to commit prior to the building’s completion. He maintained, however, that “the level of interest has increased significantly” after the construction phase ended.

Pictured: The Panel were visibly unsettled by Senator Maclean's refusal to rule out starting construction on IFC6 - a third building - before IFC1 had been sold.

Deputy Simon Bree pressed the Minister on whether the decision to not pay off the £2.5m loan until 2020 was linked with “cash flow problems”, which he strongly denied. He claimed that JDC “could have repaid” the loan, but had felt that it wouldn’t be prudent to do so given their other ongoing projects, which he did not mention in detail.

However, Scrutiny Panel Chairman Deputy John Le Fondré drew attention to the fact that JDC had around £3million in its reserves at the end of 2016, which would have left the taxpayer-subsidised company with just £500,000 had it repaid the loan in full.

During the hearing, the Panel also raised concerns over whether the JDC were complying with principles put in place when the property management and development company was set up. Money obtained through the sales of assets was supposed to be returned to the Treasury, the Panel explained, but they claimed this had not occurred in recent cases. “In other words, they’re receiving a direct subsidy from the States of Jersey,” Constable Taylor opined, adding that this meant the company would not be competing “on a level playing field” with other island developers.