Controversial University of Limerick site valued €3m under purchase price

Dunnes Stores, Sarsfield St, Limerick City, was brought by the University of Limerick in 2019.

A valuation of a site controversially purchased by the University of Limerick (UL) has found that it is now worth €5.4m — almost €3m less than the university paid for it in 2019.

UL purchased the old Dunnes Stores building in Limerick City for €8.3m in 2019. 

However, it subsequently emerged that the property had not been formally valued prior to the sale.

It further emerged at the time that the site, which is envisaged to become a city centre campus, had been valued at just €3m in 2017.

Last year, UL president Professor Kerstin Mey told the Public Accounts Committee that UL “very regrettably fell into error” in the governance associated with the purchase while due diligence surrounding the purchase “appeared to be lacking in certain respects”.

In an email to staff on Wednesday, Ms Mey said a Red Book valuation instigated by the strategic governance committee in August valued the property more than €2m below what it was purchased for in 2019. 

Valuations were sought for when it was purchased in 2019 and its current market value.

“In the valuer’s professional opinion, the property had a market value of €6m (excluding Vat) as of April 5, 2019,” she said.

The valuation carried out by Power Property found that the commercial property market in Limerick in 2019 was considered strong at that time, “particularly the office sector". 

“In the valuer’s opinion, the purchase of the former Dunnes Stores building was successful in meeting many of the selection criteria set out by UL for a city centre campus, noting the size of the premises and its potential to accommodate students and practitioners,” she said.

Power Property was also of the opinion that UL can be described as a “special purchaser” which is a buyer for whom a particular asset has special value because of advantages arising from its ownership that would not be available to other buyers in the market.

“Allowing for the fact that UL had a special interest in the premises, they considered it appropriate to apply a premium of €500k to their opinion of the market value. They suggested an appropriate special purchaser value of €6.5m (excluding Vat) for this building,” she said.

For a current market value, Power Property valued the site at €5.4m in September 2023 and adjusted the value by €450,000 to reflect UL as a special purchaser, bringing it to €5.85m.

UL president Kerstin Mey told the Public Accounts Committee that UL 'very regrettably fell into error' in the governance associated with the purchase. Picture: Sean Curtin/True Media.

“In 2023, the impact of the changes in the world economy presented challenges for property in the short to medium term,” she said.

“They arrived at the figure by making an appropriate deduction of 10% on the €6.5m reported as at 5 April 2019 to reflect current market conditions as at 30 September 2023,” she said.

The site’s net book value, which includes costs associated with legal and other professional reports and the cost of works completed since acquisition, was €8.706m on September 30, 2023.

“At that date, the net book value of the subject property excluding Vat is €8,443,748 and the market value excluding Vat (without the special purchaser value) is €5,400,000 giving rise to an impairment charge of €3,043,748,” she said.

Ms Mey said UL is now working with PWC on reflecting the transaction in the financial statements to September 30, 2023.

“The preliminary business case aims to ensure that the future envisaged by the university for this location is reflected in any evolving plans. This is expected to be completed in March 2024.

“As owners of this strategic city centre site, it presents an excellent development opportunity for the university,” she said.