Waterfront Leisure Complex - sale of Head Lease

STATES OF JERSEY

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WATERFRONT LEISURE COMPLEX: SALE OF HEAD LEASE

Lodged au Greffe on 25th November 2003 by the Finance and Economics Committee

STATES GREFFE

PROPOSITION

THE STATES are asked to decide whether they are of opinion

(a ) to agree that they do not wish to exercise their right under the terms of the Overage Agreement

with CTP (Jersey) Limited to negotiate with the Company with a view to agreeing terms for the purchase of the Company's leasehold interest in the St Helier Waterfront Leisure Complex development; and

(b ) to request the Greffier of the States to inform the Company of the decision.

FINANCE AND ECONOMICS COMMITTEE

REPORT

1. B a c kground

1. T h e construction ofthe leisure complex on land West of Albert is being undertaken byCTP(Jersey) Limited (the Developer')underthetermsof a developmentagreement dated 14th September 2001.
2. T h e developmentagreementprovidesthetermsandconditionsfortheconstructionofcertain premises. To facilitate this process,thePublicof Jersey has let thesiteto the Developerfor a period of 150 years for a cash premium of £620,000 and an annualpaymentof£93,000.
3. A s is normal in such transactions, the Developer intends to sellon the completeddevelopmentto the investment market.
4. T h e Developer's profit onsaleof this leasehold interest is limited by the termsofan Overage Agreement with thePublicof the Island. Anyprofitabove the determined limit will belong totally tothePublic.

2. P r o posal to sell

1. T h e OverageAgreementcontains the following clauses whichenable the Publicofthe Island (Owner') to purchasetheDeveloper's leasehold interest –

" 5 .1 0.1 Upon forming the intention to Sell and before entering into any negotiation for a Sale with a third party the Developer will first permit to the Owner the exclusive opportunity to negotiate with the Developer with a view to agreeing terms for a Sale acceptable to the Owner and the Developer.

In th e e v en t that such terms have not been agreed before the expiration of one month from the date

of notice to the Owner of the Developer's intention to Sell the Developer shall be free to negotiate with third parties for the Sale but will continue to negotiate non exclusively with the Owner if the Owner wishes to seek to agree terms for a Sale."

2. T h e Waterfront Enterprise Board (WEB) received formal notice of the Developer's intention to sell by letter on 29th November2002; the letter beingforwardedto the Treasuryundercovering letter from WEB dated 3rd December 2002.
3. A s notification was receivedat a time when States Committeeswerebeingdissolved and reformed,itwas not possibletoprepare,lodgeand discuss a proposition in the States in the monthfollowing receipt of the WEB letter of3rdDecember2002todeterminewhether the option for exclusive negotiationwastobe exercised.
4. T h e OverageAgreement provides the Public of the Island with the opportunity to negotiate thepurchase of the Developer's leasehold interest in a non-exclusive capacity after this one-month period.
5. In the event, theDeveloper informed WEB that its Board had decided not to offer thescheme for saleat that time. This decisionwasconfirmedin a letter toWEBdated7thApril 2003.
6. T h e Developer has now indicated its intention to remarket the schemeandthe States are asked to consider whether they wish to purchase the Developer's leasehold interest.
7. T h e Finance and Economics Committee has considered this investment opportunity for the States and does notrecommend that the Public enter into negotiationstopurchasetheDeveloper's leasehold interest.
8. T h e holding ofJersey-basedcommercialpropertyfor strategic investment purposes isnot in line with States investment policy.
9. T h ereisno current or future budget provision for the cost of such purchasewithin the States forward

financial forecast.

3. C  o nclusion

1. It wasnever envisaged that the States wouldstep into the role oflandlordofthecommercial interests within the Waterfront Leisure Development.
2. T h e Finance and Economics Committee strongly recommends that the Public does not enter into negotiations withtheDeveloper to purchasetheDeveloper's leasehold interest in the Waterfront Leisure Complex Development.

4. F i n ancialandManpowerImplications

1. T h is proposition hasno implications for the financial ormanpowerresourcesof the States.
2. S h ould the States wish the Public to enter into negotiations, significant funding wouldbe required to purchasetheDeveloper's leasehold interest, for which there is no identified budget.