Monday, November 22, 2010

FÁS fed made at least one property developer very rich

FASFÁS agreed to spend €275,000 per acre for a 5.6 acre site in Birr in November 2004 that the agency’s own professional advisors valued at €140,000 three months earlier to facilitate the transfer of its head office from Dublin 4 under the Irish Government’s public sector decentralisation programme.  The value of commercial sites in locations such as Portlaoise, Tullamore and Athlone is currently between €70,000 - €110,000 – although there are very few transactions.

The Irish Government’s staff decentralisation programme played a significant cameo role in the property bubble.

The decentralisation plan was to relocate 11,000 civil and public servants to 95 locations outside Dublin. By April 2010, 3,148 persons has relocated. 2,430 of these were in permanent office accommodation and 718 were in new offices but the full decentralisation programme had been deferred to properties in 34 locations. The decentralisation of 6,583 posts at 61 proposed locations have now been deferred.

The Government seriously weakened its own negotiating position with property vendors for three principal reasons

  • The entire decentralisation programme was to have been accomplished within 3 years - by 2006
  • The destination locations were announced in advance by Finance Minister Charlie McCreevy which immediately triggered price inflation.
  • The State had no authority to make compulsory acquisitions for the decentralisation programme.

Rody Molloy, then Director General until he was fired in November 2008 is a native of Birr. The board of FÁS approved the purchase of a 5.6 acre site in December 2004 at a cost of €1.5 million, or €275,000 per acre. The site had originally been part of a 25-acre site owned by a voluntary housing charity who sold it to a developer.

Respond Housing Association made a planning application to Birr Town Council on 19 March 2004 for a major housing development of 224 dwelling, eight apartments, a community building, and two group homes in three and two storey blocks, on Banagher Road, Town Park on the north side of Birr. The proposed housing development caused uproar in Birr among local councillors and the Northside Residents Committee.  The planning permission was appealed to An Bord Pleanála who approved the scheme on 28 September 2005. The housing development did not proceed.

Property consultants were retained by FÁS in August 2004 to assess the value of the site proposed and they concluded that given its particular characteristics the site was worth approximately €700,000, or €140,000 per acre. The site was landlocked although the vendor agreed to provide road access after the contract was signed. FÁS put forward a revised offer of €150,000 per acre which the vendor rejected. The property consultants then apparently raised the valuation of the site to €300,000 per acre following further work and analysis and a deal was done in October 2006 to buy the site for €275,000 per acre.  The vendor was Finbarr McLoughlin (66), a property developer from Kilshane House Tipperary,  who wanted the FÁS deal secured before he purchased the 25-acre site from the housing charity.

This transaction was undertaken independently of the Office of Public Works.  The former Minister with responsibility for the Office of Public Works, Tom Parlon, a native of Birr and former TD for Laois-Offaly, was involved in direct discussions about this transaction at the offices of the solicitor acting for the original vendor, Respond Housing Association on 10 November 2006 concerning road access to the landlocked site.  Parlon contacted the Manager of Offaly County Council in the course of this meeting to clarify the Council’s attitude to providing planning permission for an access road – which was subsequently approved in Parlon is currently the Director General of the Construction Industry Federation.

While this spending splurge was taking place the 400 FÁS employees destined to move form Dublin to Birr refused to budge while only 6 agreed.

Industrial sites with a 999 year lease located in Tullamore, Portlaoise and Athlone are currently on offer for between €78,000 and €117,000 per acre.

FÁS also took a 10-year lease from Birr Technology Investment Consortium on a 708 metre2 building at Mill Island, Birr in 2007 at an annual cost of €99,000 that was to accommodate up to 40 staff but just 20 moved so far.  This is a development that qualifies for urban renewal scheme tax breaks.

The agency entered into a contract in December 2006 valued at just over €1 million for the fit-out of this leased building. The landlord’s company was the only vendor invited to provide a quotation – on the basis that this proposal ‘compared favourably with a cost plan developed by the quantity surveyor employed by FÁS’. The total cost of this fit-out cost over a 10-year time frame was 77% higher than the upper benchmark established by the Office of Public Works, according to the Comptroller & Auditor General.

No work has been undertaken on this site pending the review of the national decentralisation programme in 2011 – that will now happen in the context of the IMF having sovereign control of the country.

FÁS has several other offices in Co. Offaly at Edenderry, Portloaise and Mount Lucas, a former briquette factory.  The latter was bought for €281,000 in 2006 and a further  €1.474 million was spent on adaptation and the construction of classrooms which was to function as a ‘centre of excellence’ for the construction sector.

The national decentralisation programme is on ice until 2011 but €43.8 million has been spent on 12 sites in locations where the decentralisation programme is not being advanced. Those sites acquired at a relatively low cost were already in the ownership of a local authority but private vendors with properties in town centres were able to demand premium payments for properties during the era of peak activity.

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