Esplanade Quarter: deferment of works and endorsement of Development Agreement (P.136/2010) – comments.

STATES OF JERSEY

ESPLANADE QUARTER: DEFERMENT OF WORKS AND ENDORSEMENT OF DEVELOPMENT AGREEMENT (P.136/2010) – COMMENTS

Presented to the States on 2nd November 2010 by the Council of Ministers

STATES GREFFE

2010   Price code: A  P.136 Com.

COMMENTS

Part (a)

The Deputy of St. John asks the States to agree that the proposed sinking of La Route de la Libération should be deferred until there is a significant improvement in the Island's  economic  situation.  The  Council  of  Ministers  wishes  to  restate  that  the development of the Esplanade Quarter will only commence once there is a clear indication  of  demand  and  confidence  in  the  local  economy  by  major  financial institutions in advance of any construction.

The Board of WEB is proposing to develop the Esplanade Quarter in phases; and the first phase of the Esplanade Quarter will not involve the sinking of La Route de la Libération.  The  first  phase  will  comprise  new  office  accommodation  which  will provide  the  Island's  finance  industry  with  modern,  flexible,  efficient  and environmentally-friendly office space which can provide operating cost-efficiencies and allow for future growth.

The  sinking  of the  road will  be  undertaken  in  subsequent phases,  but  only  once Phase 1 has been completed and sufficient equity has been generated from the first phase to cover the construction costs of lowering the road. Accordingly, the sinking of the road is not reliant on States funding and will only commence once demand and confidence in the local economy has been substantiated by the private sector.

The Chief Minister has discussed its position with the Board of WEB, and they have reiterated that the development of the Esplanade Quarter will be undertaken in phases and they are committed to the Memorandum of Understanding enshrined in P.73/2010, recently adopted by the States, which confirms (inter alia) that –

"Where a specific development is undertaken directly, before committing to construction costs, the SoJDC will have to secure a sufficient level of legally binding pre-lets to fund the costs of constructing the first phase of a scheme.".

Phase 1 of the Esplanade Quarter will therefore only proceed once legally binding pre- let and pre-sale agreements are in place in respect of the development of office space. The pre-lets will therefore be a clear indication of confidence in the local economy by major financial institutions. The subsequent sinking of La Route de la Libération will, in turn, be dependent on the successful development of the first phase of the Esplanade Quarter and will be funded from the equity generated from the first phase.

Accordingly, the Council of Ministers consider this part of the proposition to be unnecessary and should be rejected.

Part (b)

The planning permission granted for the Esplanade Quarter is in outline only, and further details are still required to enable development to commence. No work can begin  on  site  without  further  detailed  planning  applications  being  submitted  and approved by the Minister, and no planning application in pursuance of the outline consent can be submitted (under the term of the Planning Obligation Agreement) without the Minister for Treasury and Resources giving his consent.

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As part of the Planning process, and as defined by the Planning and Building (Jersey) Law 2002, future proposals will automatically be subject to public consultation as part of the planning application process when they are received. There are no resource implications arising from part (b) of the proposition, as this consultation process is already built into the planning system. The Council of Ministers therefore questions the need for this part of the Deputy of St. John 's Proposition as the process already exists.

Part (c)

Part (c)  requests  the  Minister  for  Treasury  and  Resources  to  bring  forward  for approval any Development Agreements in respect of the Esplanade Quarter to be endorsed by the States prior to the commencement of any works on the site. The Council of Ministers urges States Members to oppose this part of the proposition as, if adopted, it could hold back the ability of SoJDC to deliver the Esplanade Quarter, whilst also setting a dangerous precedent for future development.

Since  2002,  in  accordance  with  P.45/2002,  in  the  event  that  WEB  has  sought  a development partner, it has been permitted to enter into a Development Agreement with  that  third  party  subject  to  the  approval  of  the  Minister  for  Treasury  and Resources. Since 2002, WEB has entered into a number of Development Agreements that have been approved by the Minister for Treasury and Resources.

One of the primary reasons for establishing WEB, and subsequently SoJDC, is to keep major development programmes and commercial activities at arm's length from the States  Assembly.  It  is  unlikely  that  WEB/SoJDC  would  attract  any  development partners were each Development Agreement to be taken to the States Assembly for approval.  Development  Agreements  are  legal  contacts,  which  generally  run  into hundreds of pages; it would simply not be realistic for the States to consider and approve these highly complex commercial legal contracts.

In  terms  of  the  Esplanade  Quarter,  since  WEB  terminated  its  relationship  with Harcourt,  there  will  be  no  Development  Agreement(s)  for  the  initial  phases  of development. The first phase of development, which comprises the proposed office content, will be developed by SoJDC, subject to the approval of the Minister for Treasury and Resources. The residential areas may, however, be undertaken via joint venture(s) in the future; and the Company would not want this Proposition to impact on any future ability to enter into such Development Agreement(s).

The  Council  of  Ministers  is  equally  unsure  about  what  the   Deputy  defines  as "Development Agreements". The Deputy may well be referring to any agreements pursuant to which SoJDC agrees to building a development for a prospective tenant, such as that proposed in the Esplanade Quarter. It would, however, be inappropriate for the States Assembly to agree any construction contracts, lease agreements, and funding  agreements  that  would  need  to  be  entered  into,  as  this  would  lead  to unacceptable delays and could jeopardise the development of the Esplanade Quarter.

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