Esplanade Quarter developments: approval by the States (P.15/2014) – addendum.

STATES OF JERSEY

ESPLANADE QUARTER DEVELOPMENTS: APPROVAL BY THE STATES (P.15/2014) – ADDENDUM

Presented to the States on 14th March 2014 by Senator A. Breckon

STATES GREFFE

2014   Price code: B  P.15 Add.

COMMENTS

On 10th February 2014 I lodged a Proposition (P.15/2014), the essence of which was that none of the new developments currently proposed for the area known as the Esplanade  Quarter,   St. Helier ,  should  be  progressed  until  their  details  have  been presented to and endorsed by the States Assembly. I should say that it is not a first for the States to debate what does and does not happen on this site.

In  the  report  accompanying  the  Proposition,  I  set  out  a  brief  description  of  the Masterplan  which  was  originally  drawn  up  for  the  site  and,  after  2 years  of consultation and debate, this was then approved by the States (i.e. the Masterplan – P.60/2008). In my original Report I listed the many and complex issues that have arisen following the proposed developers' (Harcourt) withdrawal from that plan. I also set out the nature of the some of the information that I believe is now required in greater detail in respect of the new' Masterplan. I believe that this is a reasonable request, as perhaps some of the most important aspects are the financial implications of the development's totality in the form of a properly constructed, intelligible and comprehensive  business  plan,  inclusive  of  other  aspects  such  as  economic  and business forecasts, and a meaningful risk analysis, as well as the effects that such a massive development will have on St. Helier .

I say this because the development of the Esplanade Quarter/Waterfront is about much more than securing tenants for a couple of office blocks and building them.

Having said that, I am reliably informed that the total office space contained in the Masterplan for the Esplanade Quarter will provide a working environment for up to 2,000 workers – is this an over-supply? Because I understand that there are a number of other proposed private sector office developments in various stages of planning and financing along the Esplanade.

The (new) Masterplan consists of a number of elements (or Phases) and it is now estimated that this will happen over a 20 year period: the previous estimate was 7 to 10 years, which was perhaps a bit ambitious.

Housing gain!

One of the major "selling points" of the development of the reclaimed land that used to be known as "West of Albert" was the housing/residential gain, and a number of things were said –

• "The Masterplan provides for nearly 400 new apartments for local residents. New homes that will help meet Jersey's ongoing housing needs and relieve pressure to open up Greenfield sites for development."

So this raises a number of questions that require answers –

• Is this true?
• Are there still applications for Greenfield sites?
• Would any apartments built be affordable for Jersey residents or would they be marketed and sold to off-Island investors?
• If and when will they be built?

I say that because it could be about 15 years away, because the current proposal (Masterplan) is to build them after the road is "sunk"! Indeed, they are built where the road is now – so they may never be built!

Why haven't the States of Jersey Development Company (SoJDC) built housing on the  old  Jersey  College  for  Girls  site?  They  appear  to  be  both  unwilling  to  and incapable of doing so. There will be no shortage of tenants for this development.

Sinking the road

The updated (from 2007) estimate for sinking the road is £54 million; if this is a further 10 years away, the inflated costs could be closer to £60 million.

In 2008, the States were told that we would receive at least £50 million from the development of the Esplanade Quarter, and that that there would be no cost to the Public purse; however, now we are told we are making "an investment from the States of Jersey Currency Fund (£13 million)"; and also that –

"The investment from the Currency Fund is in effect bridging finance up and until the completion and sale of Building 4. This funding was required to assist with the delivery of a key piece of public infrastructure as one of the first  phases.  This  is  the  only  public  investment  envisaged  to  deliver  the Esplanade Quarter Masterplan".

However, this may not be factually correct, because it is also said that –

"On completion and sale of Buildings 2, 3, 5 and 6 the net receipts from these office buildings will be used to contribute the majority of the funding to lower La Route de la Libération which will be the start of Phase 2.

It is estimated that Phase 1 will generate in the order of £40 million in net receipts  (based  on  today's  values)  together  with  an  unencumbered underground  520 space  public  car  park  which  has  a  value  today  of c. £10 million.

The estimated cost of lowering La Route de la Libération was £45 million in 2007  (£54 million  indexed  in  today's  values).  It  is  therefore  likely  that additional funding will be required."

This, to me, clearly indicates a shortfall, and the States could once again be the provider  of  funding.  A  view  has  been  expressed  that  is  an  unfair  competitive advantage over private developers seeking private capital for development.

In order for the residential accommodation to be built –

• 6  office  blocks,  a  total  of  470,000 square  feet  (buildings 1 to 6  in  the Masterplan) with underground parking have to be pre-let and built, which from now (as Phase 1), it is estimated will take 10 years to complete (SoJDC's estimate).
• It is envisaged that Phase 2 will then start with the sinking of La Route de la Libération, followed by buildings 7 to 13.

• Earlier estimates show that it will take around 2 years to sink the road.
• Buildings 7, 8, 9, 14 and part of 13 are dependent on sinking the road.

Previous States debate

In Comments presented in relation to P.24/2011 "Esplanade Quarter: deferment of works" (lodged by the Deputy (now Connétable ) of St. John ), the Council of Ministers had this to say –

"The Council also recognises that the underground road agreed as part of the Esplanade Quarter Masterplan is an important issue for Islanders. It therefore accepts paragraph (b) and wishes to re-assure States Members that any modification of La Route de la Libération will be brought to the States for approval as landowner before being commenced."

So this could still be a debate for another day; however, I believe that the current view of SoJDC should be shared with the States, not just the Minister for Treasury and Resources.

• So buildings 7 to 13 could be at least 12 years away from starting and may be a further 10 years away from completion – if at all?

So what are buildings 7 to 13?

• Office  Development  (Buildings 7 and 8):  office  developments  of 80,000 square feet, occupying 5 floors above unspecified ground floor use, no basement parking.
• Residential development (Building 9): this is on 8 floors: 7 for residential above unspecified ground floor use, no basement parking.
• 100 bed Hotel (Building 10): ground floor + 6 hotel floors, no basement parking.
• Office development (Building 11): is primarily an office development of 70,000 square feet, occupying 4 floors above unspecified ground floor use, with basement parking.
• Self-catering  (Building 12):  this  is  on  6 floors,  5  for  residential  above unspecified ground floor use, no basement parking.
• Residential  development  (Building 13):  this  is  estimated  to  deliver 300 apartments on 6 levels with retail/restaurants on the ground floor, set amongst winter gardens, with basement parking.
• Residential development (Building 14): this is on 9 floors, 8 for residential above unspecified ground floor use, no basement parking.

(It is envisaged that Buildings 9 and 14 will deliver 100 apartments with no basement parking.)

• Buildings 7, 8, 9, 14 and part of 13 are dependent on sinking the road.

Included  in  the  above  are  areas  of  public  realm,  as  well  as  some  retail, restaurants, etc.

The land that is required for the above developments (Phase 2) consists of what's left of the Esplanade Quarter (after Phase 1), then developing over the sunken road (that is why some developments have no underground parking); and the area that is now Les Jardins de la Mer, and the area towards the Radisson Hotel.

So,  as  can  be  seen  from  the  above,  we  are  talking  about  a  massive development  over  a  significant  area  in  a  very  prominent  place  over  a considerable period of time – perhaps 20 years or more, with many unknowns in both timescale and cost.

The residential element may be 15 years away! – so much for much-needed affordable housing!

Hotel

Will there be a taker for the 100 bed hotel on this site?

Recently, the Minister for Treasury and Resources said, in a response to a question from Deputy J.A.N. Le Fondré of St. Lawrence (4th February 2014).

"There may be transfer of land at zero cost but the company (SoJDC) has to reflect an appropriate valuation and value of that land and we have  moved  on  massively  from  a  world  in  which  previously,  for example, the Radisson Hotel what I think was zero return for the taxpayers."

So this raises questions about what deal was done with the Radisson, what is a zero return for the taxpayers – the Minister for Treasury and Resources needs to expand on this.

Would a similar deal need to be done in future to attract an international hotel group?

I know from experience that no local hoteliers were interested in building and/or operating a hotel on the Waterfront: indeed, they expressed concern that the building of one could threaten their own viability.

So this begs the question – as part of this development – would another hotel be  viable  on  this  office/residential  site,  with  no  discernable  locational advantages, save attracting business travellers who would presumably have stayed in existing hotels within walking distance. Any attraction for leisure visitors and the benefit to tourism is not obvious to me.

Has the view of the Jersey Hospitality Association been sought?

The Minister for Treasury and Resources, Senator P.F.C. Ozouf , has seen fit to issue a public statement in response to P.15/2014 saying that no doubt' my proposition is well intentioned' but that, should it go ahead , the resulting 3 week delay to the office development project, in which he himself passionately believes, would also not [be] in the public interest'.

However,  his  comments  are  seriously  lacking  in  facts  about  the  entirety  of  the Esplanade Quarter and Waterfront Development.

However, what exactly is the "public interest", and who and why can anybody make the claim to represent it? I believe States Members would always claim to have the public interest at the centre of their actions; however, it is open to interpretation!

• In 2008, in the Masterplan, when the proposals were "sold" to the States they were to be delivered by a developer (Harcourt).
• The States were told that we would receive over £50 million.
• There was no cost to the Public purse.
• The States were told that the scheme would be delivered in 7 to 10 years.

Now we are in a very different situation.

The  Minister  for  Treasury  and  Resources,  who  undoubtedly  wishes  to  place  the interests of Islanders above his own, appears to misunderstand the purpose of my Proposition. A large number of ordinary Jersey people, rightly or wrongly, see the development of the Esplanade Quarter as a massive project. Those who took part in the great Masterplan 2008 consultation and debate are, of course, aware of many of the issues involved. Many, however, did not engage, including some of the present States members. Neither of these groups have ever had an independently validated, comprehensive or intelligible financial proposition put to them which showed the short, medium and long-term forecasts of the totality of the scheme.

Those present in 2008 were promised one by the then Senator T.A. Le Sueur (before any deal was signed – with Harcourt), but the independent report (which is believed to indicate a loss of £50 million) is still being withheld from the Public, although it would help in many ways: to act as a basis in constructing and evaluating the most recent (new) proposals; nothing of a similar nature has been in evidence since or is transparent today to support any new' plan. Such a plan would set out projections indicating and explaining the financial viability of the project weighed against any major risk factors and, in combination with the building proposals and timescale and other major implications, would enable the States Assembly and Islanders to obtain an informed opinion.

It should be noted that the presentations' like the recently issued Statement of the Minister for Treasury and Resources have represented unilateral lobbying outside the Assembly, and were not part of the official States agenda. The glossy presentations' given to invited States members are described in the Statement' as keeping Members regularly informed' and it should, in no way, be inferred from this that a complete picture (e.g. including financials) was presented or that such presentation' negated the need for a full debate in the States. It is interesting also to note that the Statement ends by offering briefings outside the full Assembly to States members, thus negating the need to make a comprehensive business plan to a full and perhaps more critical States Assembly.

It is interesting to note, in this connection, the Minister's Statement that the phased approach followed by SoJDC' is in line with its risk mitigation obligations. Whilst one is pleased to read this, nowhere is it explained what Plan B would be if demand for premium  office  space  were  to  suddenly  dry  up,  and  one  imagines  that  serious repercussions  could  result.  Neither  is  it  explained  what  the  reasoning  is  behind diminishing risk mitigation by setting the first two buildings at opposite ends of the site; should there be difficulty in obtaining pre-lets for a third building (as may be the current situation with the second building), and the first two buildings were to be adjacent, all might not be lost – at least there would be a mini office centre.

A  proper  plan  would  also  enable  critical  data  to  be  compared  with  alternative assertions for validity purposes. For instance, it is known that leading local experts totally disagree as to what office space is available and required within St. Helier . They may well be wrong, but the assertions are just too great to ignore.

In conclusion, my strong belief that this is indeed a massive project in financial and logistical terms, and that the SoJDC have projections that they have shared with the Minister for Treasury and Resources, therefore these could easily be provided to States Members,  with  all  the  necessary  information  and  explanations  my  Proposition requests; and this could be done in a written Report to make the case, on which Members can make an informed decision, instead of the present practice of doing so orally. I would suggest that this could be done so without undue delay if the Minister for Treasury and Resources wishes to act in the true public interest of the people.

I believe that we all need to understand all the aspects of, and issues relating to, this project and make proper informed decisions, based on best available evidence, even if a short delay is involved at this stage. The stakes are far too high.