Manx Development Corporation (MDC) will get a long-term return on its investment in the former Nurses’ Home, the Treasury Minister believes.

Dr Alex Allinson was quizzed about the MDC’s business model by Tynwald’s Public Accounts Committee.

The development firm has a revolving credit facility for up to £100m and has so far drawn down £11m, which is backed by Treasury.

PAC chairman Juan Watterson queried the numbers for the MDC’s first project, the redevelopment of the former Nurses’ Home, where flats are currently being offered for rent.

Mr Watterson asked: ‘That would be £300,000 per unit for a flat with no parking. That's without any profit, without any return or yield. What is the exit strategy?’

Dr Allinson replied: ‘The overall business case was quite clear that to get a reasonable return, the best way was rental for a decent period of time. I think it was 10-15 years.

‘It also includes a retail area which will be rented out and get some additional revenue.

‘They have refurbished it to a very high standard, particularly in terms of environmental and energy efficiency. MDC have had to deal with a range of planning restrictions and also a range of increased costs.

‘But in terms of the long-term viability of the scheme, I think it still remains. I think the return on the investment is there, but also it's actually the return of a building to social use and economic benefit for the island.’

Dr Allinson said one of the principles of having a development company was that it will be able to raise private finance.

He said it had entered into an arrangement with Lloyds after a procurement exercise, with the loan guaranteed by Treasury and so attracting a better interest rate.

Dr Allinson described MDC as a ‘start-up company’.

He said: ‘I think we are at the early stages.

‘I'm hoping that when the Nurses’ Home is fully let out and they then develop other brownfield sites, particularly the Douglas area, that there will be more income coming in, and therefore they'll be on a more secure basis.’

He said MDC has further plans to develop Westmoreland Village and other sites.

‘Most of them are technically difficult sites, which is why they've been empty for some time. And most of them also would not necessarily be attractive to a private developer,’ he said.

‘What we're keen on doing is maximising the economic and social potential.’

He said the total liability will start to reduce once income starts coming in but will increase once MDC begins developing other sites.

One of the longer-term strategies, he said, could be to sell-off the former Nurses’ Home as a going concern to either a private company or a pension fund in order to realise the asset and reduce the overall loan.

Mr Watterson said he understood the revolving loans facility had been issued to MDC under the IoM Loans Act which he said would need Tynwald approval but believed this had not been sought.