Belfast Telegraph

Wednesday 23 April 2014

Disused Belfast army base sold for £1m less than its value... and then re-sold by the buyer on the very same day

A former military site gifted to the Executive was sold off to a private developer in a cut-price deal which left the taxpayer short-changed, a damning report has revealed.

The Malone Road Barracks site was sold without planning permission for £1m below its estimated value in October 2003 — only to be resold on the same day by its new owner.

Luxury apartments which were subsequently built on the site — located in the affluent suburbs of south Belfast — set a new high for property pricing at the time.

The case is detailed in an Audit Office report examining the cost of one-time military sites which have been gifted to the Executive by the Ministry of Defence.

It reveals how £48m has been pumped into the sites — even though little restoration work has taken place.

The report by Comptroller and Auditor General Kieran Donnelly also outlines:

  • How the bill for decontaminating the former Maze Prison site is expected to top £8.5m, prompting warnings about the importance of carrying out due diligence to avoid extra financial burdens;
  • A key piece of legislation dealing with decontamination — adopting a polluter should pay policy — has not been brought into force in Northern Ireland 14 years after its introduction. It has left the province out of step with other UK regions;
  • Concerns over how proceeds from the sale of two sites were used. Profits generated from land at Malone Road and Magherafelt was to be used specifically to benefit the peace process. Yet the report states it is “unclear” how the proceeds have been used;
  • Unease at the slow pace of regeneration. While there have been some “quick-win” projects such as the opening of Crumlin Road Gaol and the construction of the Peace Bridge in Londonderry, other cases have not been so quick.

The handover of one-time military bases and sites to the Office of First Minister and Deputy First Minister (OFMDFM) was part of an initiative aimed at improving public infrastructure and addressing a backlog of underinvestment.

Sites were transferred in 2003 and 2004, including the sprawling Maze/Long Kesh base, Crumlin Road Gaol and barracks at Ebrington, Malone and Magherafelt.

They were gifted on the condition that they were used for purposes to benefit the peace process and that the cost of making the sites ready for use would be borne by the Executive.

Around £20.8m has been spent on the Maze/Long Kesh site, £12.9m on Ebrington Barracks and £12.3m on the Crumlin Road base. The costs have mainly consisted of infrastructure and capital works, demolition and/or clearance of sites, decontamination costs and professional fees.

Two sites were subsequently sold on — at Magherafelt last year for £1.2m and, controversially, at Malone in 2003 for £3.8m.

Seven months earlier, when the site had been transferred to OFMDFM, a valuation estimated it was worth between £4.3m and £4.6m, with a possible maximum sale value of £5m.

No attempt was made to enhance the value of the site by obtaining planning permission, despite being situated in a highly desirable area.

On the same day it was sold off at a potential £1m-plus loss, the successful bidder resold it to another development company. The Audit Office was unable to establish the onward sale price.

Yet two years later, in December 2005, the purchaser was granted full planning permission and 74 apartments and penthouses were built on the land. “The development was reported as setting a new high for property pricing per square foot in Belfast at £500,” the report adds.

Despite the site's potential, no clawback provisions were built into the contract ensuring the public sector could share in future development gains or profits.

According to the report, OFMDFM contested the criticism.

“They contend that, in the absence of any hard evidence such as a higher onward sale price, or whether the onward sale was to a connected or unconnected party, our concerns that best value was not obtained for the site are unsupported,” it states. “They also added that the selling on to another developer is not an unusual occurrence in the marketplace.”

Sinn Féin MP Paul Maskey, who chairs the Assembly’s Public Accounts Committee, said the report highlighted important issues.

Mr Maskey said the Committee would hold an evidence session on the report in the new year.



Case study 1: Malone Road Barracks

Located in the leafy suburbs of South Belfast, Malone Road Barracks was sold for £3.8million in October 2003 – despite having a possible maximum sale value of £5 million.

The successful bidder sold it on to another development company on the same day.

Although the Audit Office was unable to establish the onward sale price, it noted how, in December 2005, that company was granted full planning permission.

Construction work was completed on 74 apartments and penthouses in June 2007.

“The development was reported as setting a new high for property pricing per square foot in Belfast at £500,” it states.

No attempt had been made to enhance the value of the site by obtaining planning permission prior to sale, despite its location in “a highly desirable area of South Belfast where development opportunities are limited”.

The report also noted the initial bidding process, where one party offered £4.7m before withdrawing the bid, showed evidence that “the market was willing to pay considerably more than the final settlement”.

Despite the site's potential, no clawback provisions were built into the contract preserving the public sector's rights to share in future gains or profits from development, sale or transfer of the site.

The report was unable to establish how the proceeds of the Malone sale were spent, despite a pledge to use the fund to regenerate the site of Belfast's historic Crumlin Road Gaol.

Case study 2: Maze/Long Kesh

The 347 acre Maze site, including the 90 acre army base at Long Kesh and the former top security prison, was transferred to OFMDFM in March 2003.

Like the other sites, no significant contamination issues were apparent at the time of the transfer.

But serious issues were later found, and the report notes that total costs for decontaminating the site are likely to exceed £8.5m.

The report notes this is a key issue, warning it may mean the costs of decontamination outweigh the commercial value of a site.

“The sites were transferred free of charge,” it states. “However, the experience from the Maze/Long Kesh site, where the cost of decontamination is expected to exceed £8.5m, demonstrates the importance of carrying out due diligence to protect the Northern Ireland Executive from the financial burden of remediation and the cost of maintaining and in making sites safe and secure.”

The report recommends that future decisions to take on responsibility for sites are informed by independent professional advice and full assessment of risks.

So far £20.8m has been spent on the Maze/Long Kesh site. This includes £8.8m on “professional fees”, £2.8m on demolition and clearance and £2m on site management.

Case study 3: Magherafelt Barracks

The 7.6-acre site, situated on the outskirts of the Mid-Ulster town, was transferred to OFMDFM in 2003 – and is noted as an example of the slow pace of regeneration at some sites.

In February 2003 the North Eastern Education and Library Board confirmed an interest in the site for a replacement building for Magherafelt Primary School.

The following year it was proposed to offer the site to the Board to take forward their plans for the relocation of the local primary and nursery schools and for a new pre-school facility.

This agreement was dependant on the current primary school site, or proceeds from its sale, being passed to OFMDFM.

However, OFMDFM considered that under government accounting rules it was not possible to give the Board the site and receive the proceeds from the sale of the old school site as reimbursement.

In February 2006 OFMDFM discussed a straight sale of the site to the Board at current market value and with the proceeds from the sale being deployed for other regeneration purposes.

Two years later the land was valued at £1.5m for educational use and £7.5m for residential use.

To ensure the land could not be resold for profit, the sale to the Board was by way of a 999-year lease restricting the use of the land to educational purposes only.

The sale was eventually completed in February 2010 for £1.2m.

Case study 2: Army barracks, Magherafelt

The 7.6-acre site, situated on the outskirts of the mid-Ulster town, was transferred to OFMDFM in 2003 — and is noted as an example of the slow pace of regeneration.

In February 2003, North Eastern Education and Library Board confirmed interest in the site for a new building for Magherafelt Primary School.

The following year it was proposed to offer the site to the board. This agreement was dependent on the current primary school site, or proceeds from its sale, being passed to OFMDFM.

However, under government rules it was not possible to give the board the site and receive the proceeds from the sale of the old school.

In February 2006, OFMDFM discussed a straight sale to the board.

In 2008, the land was valued at £1.5m for educational use and £7.5m for residential use. To ensure the land could not be re-sold for profit, the sale to the board was by way of a 999-year lease which restricted the use of the land to educational purposes.

The sale was completed in February 2010 for £1.2m.

Case study 3: Maze prison

The 347-acre Maze site, including the 90-acre Army base at Long Kesh and the former top security prison, was transferred to OFMDFM in March 2003.

Like the other sites, no significant contamination issues were apparent at the time of the transfer.

But serious issues were later found, and the report notes that total costs for decontaminating the site are likely to exceed £8.5m.

The report notes this is a key issue, warning it may mean the costs of decontamination outweigh the commercial value of a site.

“The sites were transferred free of charge,” it states. “However, the experience from the Maze/Long Kesh site demonstrates the importance of carrying out due diligence to protect the Northern Ireland Executive from the financial burden of remediation.”

The report recommends that future decisions to take on responsibility for sites are informed by independent professional advice and full assessment of risks.

So far £20.8m has been spent on the Maze/Long Kesh site.

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