THE UNIVERSITY OF Limerick (UL) did not obtain a formal valuation of a multimillion-euro property it purchased above market rates, according to an official report which also found other “significant failures in due diligence” on the part of the institution.
The findings come following a series of controversies over the university’s property acquisitions in Limerick city.
In April 2019, UL applied to the Higher Education Authority for capital funding towards the development of a €45.2 million city centre campus.
That included an estimated €3 million towards the purchase of a site in Limerick’s Opera quarter.
However, just three days later, the university approved the purchase of a property at the nearby Honan’s Quay area for €8.3 million.
A report by the Comptroller and Auditor General (C&AG) into the matter has found that “there is no evidence of any additional benefits” of the Honan’s Quay property compared with the Opera site which would warrant the increased purchase cost.
The C&AG report said: “It is difficult to see how the purchase represented value for money.”
A retrospective valuation conducted last year found that UL paid approximately one third above the market value of the property in 2019.
The university has proposed that a €3 million write-down loss be recognised in its 2022/2023 financial statements.
The C&AG added: “The university remains without a clear development and funding plan for the Honan’s Quay property.”
The report also found that while UL had received some valuation advice prior to the purchase, it “did not obtain a formal valuation report”.
This was against the public spending code.
Despite this, the proposal was presented to UL’s Governing Authority as if a valuation report had been obtained.
Elsewhere, the C&AG examined the circumstances around a proposal for student accommodation on a site at Rhebogue – three kilometres away from UL’s main campus.
The report found that there were “significant failures in the due diligence” associated with the development, which would have included 20 houses.
The purchase price proposed to the Governing Authority was based on the net rental yield method for valuing the property.
Even though the accommodation was generally configured as a standard housing development, information on the sales price comparison method for valuing property, which would have yielded a much lower valuation, was not provided to the Governing Authority.
The university completed the purchase of the houses in October 2023 at a cost of €11.4 million, representing an average purchase price of almost €572,000 per unit.
UL had not identified that the purchase was liable to stamp duty, resulting in an additional unanticipated cost of just over €1 million.
The C&AG said: “Prior to the purchase, planning advice from relevant professionals was not conclusive but the university did not seek clarification from the local authority.
“In December 2023, after the purchase had been completed, the university received a warning letter from Limerick City and County Council stating that the change of use to student accommodation without planning permission may represent an unauthorised development.”
A March 2024 valuation of the Rhebogue property indicates that UL is likely to have paid “significantly more” than it should have, the report said.
UL has proposed to write down €5.2 million in its financial statements over the development.
The C&AG report said: “The university’s system of control and decision making were not adequately considered or investigated.
“A further investigation commissioned by the Governing Authority found credible evidence that legitimate counterarguments to the Rhebogue acquisition by relevant staff in the university had been dismissed or ignored.”
UL’s acting president Professor Shane Kilcommins said the university “fully accepts the findings and the recommendations” of the report.
In an email to the university community, he said: “I want to assure everyone – staff, students, and external stakeholders, as well as our funders through the state – that we will implement these recommendations without delay, incorporating them into our larger recovery plan.
“The report’s findings are very disappointing and are an understandable cause for anger and upset amongst our community.
“These events should never have occurred, and the university has paid a considerable price both in financial terms, due to the impairments carried on our accounts from both transactions, and in reputational terms.
“The issues surrounding the city centre campus purchase cast a long shadow over UL’s reputation.”
He added: “The institution recognises the damage that has been caused: to the university’s standing, to the trust placed in us by the public, and to the morale of UL staff and students.
“I deeply regret that this is the case.”
Prof Kilcommins said “many corrective actions” had already been taken but acknowledged there were “no quick solutions to win back trust”, adding that achieving accountability will take time.
To embed this post, copy the code below on your site
have your say