New valuation report finds University of Limerick paid €1.5m over market value for former supermarket

UNIVERSITY of Limerick (UL) bosses paid more than €1.5m over the market value of a former supermarket building in the city centre.

That's according to a valuation ordered by the college amid controversy over the fact the site was purchased for €8m in 2019.

Then, the third level institution took over the former Dunnes Stores building in Sarsfield Street which had lain largely idle since 2008.

Its plans involved opening a city centre campus, which, although delayed by Covid-19, is operational today.

However, the sum the college paid has attracted widespread controversy, especially given the fact a valuation by Limerick City and County Council had the complex as being worth just €3.5m.

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It saw senior executives of UL brought before the Public Accounts Committee.

And off the back of this, the college's Strategic Governance Committee, which exists to oversee the activities of management, ordered fresh valuations of the landmark site, located just off Sarsfield Bridge.

O'Connell Street-based firm Power Property Ltd, was appointed to do this job, and its valuers completed a major report on the price of the building last month.

Now, in a letter to staff and students at UL, college president Professor Kerstin Mey has said its appraisers decreed that the property had a market value of €6m before VAT at the time of its purchase on April 5, 2019.

Prof Mey added that Power Property Ltd also "considered it appropriate" to add €500,000 onto this valuation, since UL had a "special interest" in the premises, meaning overall its valuation stood at €6.5m.

However, the sale was completed for a total of €8m - €1.5m over the retrospective valuation.

Back in 2019, Prof Mey said, the valuers determined the commercial property market as being "strong".

Four years on, in September 2023, however, this had changed, with the rise of working-from-home brought about by the Covid-19 pandemic.

It led the valuers to write down the estimated value of the property by 10% to €5.4m.

Referring to Power Property's survey, Prof Mey wrote in a letter to staff and students at UL: "In their opinion, the prospects for Ireland's commercial real estate market had come under pressure from increased interest rates and the downward pressure on the international economies in the intervening period."

As a result of this, Power Property ruled that the value of the old Dunnes Stores building in September 2023 was €5.4m - or €5.85m once the value was adjusted to reflect UL's status as a "special purchaser".

"They arrived at the figure by making an appropriate deduction of circa 10% on the €6.5m reported as at April 5, 2019, to reflect current market conditions at September 30, 2023," added Prof Mey.

Since its purchase of the building in 2019, UL has paid almost €500,000 to improve the interior and exterior of the complex, alongside legal and other professional costs.

This means the value it records the building at on its own books stands at €8.706m once VAT is taken into account.

The figure reflects what UL paid for the building and the cost of the subsequent works involved once it did this.

Under accounting rules, the college is required to declare an 'impairment'.

This reflects the difference between what has been paid on the project overall, and the value the building could fetch now if it were to go back on the market.

As a result, there is now a so-called 'impairment charge' of €3.043,748.

"UL is working with PWC on reflecting this transition in the financial statements to September 30, 2023. This will also be agreed with the Comptroller and Auditor General before submission of the financial statements to the March meeting of the governing authority for approval," Prof Mey added.

She pointed out the purchase of the old Dunnes building had taken place using the university's own cash reserves.

A review will now take place to look at ways of funding that 'impairment charge'.

The area around the former Dunnes Stores building, now UL's city centre campus, has been earmarked for major redevelopment under the World Class Waterfront project.

The strategy, due out in March, is something officials from UL are feeding into through a working group alongside Limerick City and County Council.

"As owners of this strategic city centre site, it presents an excellent development opportunity for the university," Prof Mey concluded.