There is no onus on the Manx Development Corporation to return a profit, the Treasury Minister has said.
Dr Alex Allinson told the Public Accounts Committee that its role is development and “not necessarily, in some ways, even making a profit.”
The tax payer-owned arms length organisation has drawn down £11 million from a Treasury-backed revolving credit facility to fund projects including the conversion of Douglas’s former nurses’ home into flats and retail space.
This is despite the shareholder agreement with Treasury making it clear that that the company will deliver a return on investment.
Cost
PAC members questioned the financial model, with chair Juan Watterson SHK noting the nurses’ home project cost of £11m.
He said: “That would be £300,000 per unit for a flat, not a house, and that’s flat with no parking, that’s without any profit without any return or yield on it.”
However, Dr Allinson said that the business case was to return a “reasonable yield” which was better served by the flats being rented out over 10 to 15 years
The minister also defended the expenditure, citing “planning restrictions and increased costs”, and emphasised the MDC’s focus on “societal benefits” over commercial returns.
Legal
Concerns were raised about the legal basis for the MDC’s £100 million credit facility, with no Tynwald approval being granted under the Loans Act.
Chief Financial Officer Caldric Randall said clarification would be provided, while Dr Allinson stressed the importance of developing “problematic sites that private developers wouldn’t touch.”
Ann Corlett MHK also questioned the likelihood of the MDC delivering a dividend to the Treasury and whether it could do this at the same time as servicing its loan.
Dr Allinson said: “At the moment, no. Should they realise the assets through a sale, then obviously some of that money, rather than sitting in a bank account of MDC, would come back.
“Certainly from my point of view, in terms of dividends from the MDC, there is no intention to ask for one.”
The MDC’s future plans include Westmoreland Village and other brownfield developments, with potential asset sales to reduce debt.
However, Dr Allinson admitted that Treasury and the MDC “are at the early stages” of establishing the corporation’s financial sustainability.
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