A NEW REPORT FROM the Comptroller and Auditor General highlights serious issues in the decision-making and assessment procedures of the Dublin Docklands Development Authority during its involvement in a joint bid for the Irish Glass Bottle site.
The Ringsend site set records when it was sold for €412 million. It is now part of NAMA’s portfolio.
The DDDA was part of a consortium which bought the undeveloped site through a company called Becbay Ltd. Although the site was sold for €412m, extra costs such as stamp duty and administrative fees pushed the final cost up to €431m.
In January 2011, the site was valued at €45m.
The C&AG report says that the DDDA’s financial exposure was limited to an equity investment of €33m and guarantees of borrowings up to €29.1m plus interest – a potential exposure up to the end of 2010 of €81.9m.
However, the Authority’s investment in Becbay Ltd has been fully written off and the company’s loans are now under NAMA. A settlement was agreed between the DDDA and NAMA under which the Authority transferred a portfolio of property assets worth €7.8 million at the end of 2010.
The final cost to the DDDA of the Glass Bottle deal was €52.1m.
The report also notes that although the Authority received authorisations for borrowing and for participation in the joint venture from the Department of the Environment and the Department of Public Expenditure and Reform, the C&AG found no evidence that the full scale of the planned payment for the site was made known to the departments at that time.
Although the Authority obtained ministerial approval to borrow up to €127m to participate in a joint venture bid of €220m, the C&AG says that there is no evidence suggesting that the Authority informed the departments when a decision was made to bid twice that price:
[T]he information submitted to the department requesting the approval of the minister did not reflect the planned scale of the project. The Authority informed the department that the expected bid for the site was approximately €220 million. No evidence was located on audit to indicate that the Authority formally updated the Department when the decision was made to bid double that amount for the site.
Overheated
The C&AG report says that the executive warned the board that the proposed bid being made for the Ringsend site was being done at the top of the market at a time when the general perception was that the commercial property market in Ireland was overheated.
“It also noted that, if the Authority were to get involved in the acquisition and development of the site with a partner, it would tie up a considerable portion of its equity and resources,” the report says.
While an assessment of the level of investment, benefits and risks of the project was presented to the board during the decision-making process, a detailed analysis of those factors does not seem to have been carried out by the board or management of the Authority.
The government announced tonight that the DDDA is being wound up over the next 18 months. A new board has been appointed to oversee that transition period.
The C&AG’s special report on the DDDA and the Irish Glass Bottle site purchase was compiled by the former C&AG John Buckly before his retirement in February.
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