State loses cash windfall in swap for affordable homes

Occiasionally you come across an article in the press and wonder what's going on there?

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1687959&issue_id=14640

1. The initial price was well in excess of market value.

Broc House in Donnybrook was bought by the Office of Public Works (OPW) in 2000 for €9.2m for asylum seekers, but was never used.

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But if Broc House was sold on the open market it would be expected (today) to sell for well over €9.36m.

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So in the 6 years which have seen unprecedented growth in the Irish property market a site in D4 has appreciated by 1.74%


2. More money was spent in the interim on security (5% of the initial purchase price!!)

It was even fitted with a €500,000 security system and was one of the €19m worth of properties bought by the State for asylum seekers never used for its intended purpose.

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Thats's some security expenditure.


3. What kind of deal is this?

Under the deal, property company Alanis got Broc House on Nutley Lane for €9.36m. The property was given by the OPW to the Affordable Homes Partnership, which has been in talks with developers and builders on erecting affordable houses on 370 acres across Dublin.
No cash will change hands, but in exchange the firm is building 89 houses at Ongar Village in Clonsilla, Dublin 15. These will be sold at a discount to the value of the Broc House sale. The houses will sell from between €227,000 to €330,000 - at least 25pc below their normal market value

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Ok this averages at a discount of E105,168 per unit (9.36M / 89).

This equates to 25% of the "normal" value of the units giving each one a purchase price of E315,505 and a real value of E420,673!!!

* The houses will sell from between €227,000 to €330,000 - it seems most will sell at the higher end of that scale.

* Looking at MyHome the average price in Ongar is FAR less than E420K. Here's a 3 bed semi for 379K
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The developer is saying what the normal price will be for these properties and it seems far in excess of what it actually should be.

* There may also be VAT implications here. The developer is left with a much smaller VAT bill as a result of selling these properties at a lower value.


The criticism of this deal comes from the Green Party who don't even mention (or picked up on) the absurdity of the numbers involved.

The Green Party accused the State of ghettoising housing policy. Environment spokesman Ciaran Cuffe said: "This is a disturbing change in policy. We are concerned these swaps may increase ghettoisation in urban areas."

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I gotta agree, when i heard about this yesterday it struck me as ridiculous - in heralding the deal, Noel Ahern(?) emphasised the value that had been obtained as now they could get 4 times as many houses as they would have on the original site. This would indicate that the same house in Donnybrook is only worth approx. x4 an identical property in Ongar - now maybe I'm wrong but this doesn't seem too accurate to me.
In addition, Greens are correct, do we really want social housing schemes to become the Council Estates of yesteryear (not all of them problematic, but there were undeniably problems in many underserviced areas - and to my mind Ongar is ripe for problems in the future - haven't been up there in a yr or so though)

Well I wouldn't want to comment on the social aspect to putting affordable housing in Ongar, as things like that can be very divisive and bitter, but the numbers just don't addd up.

The developer is being given the D4 site for FREE.

In return he's giving a nominal discount on a completely different developement of his. Well hold on, the price he's going to offer the Ongar units looks like more or less market value, he won't have to do any sales/marketing for this development as the council will take care of that, in fact he's virtually guarenteed it will sell out straight away which is a pretty sweet deal considering current market conditions. And his tax bill on that developement will be substantially lower.

The discount that he's come up with has been picked out of thin ait to make up a 9.36M value. HE SHOULD STILL MAKE A PROFIT ON THIS DEVELOPMENT.

This is a sweetheart deal if ever I saw one.

This is a sweetheart deal if ever I saw one.

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It certainly is IMO. I can't make sense of it at all. Isn't Noel Ahearne the one who wants to take speculators out of the market?

How much profit do you reckon the developer will make out of the D4 site on top of what he'll make in Ongar?

liteweight said:

It certainly is IMO. I can't make sense of it at all. Isn't Noel Ahearne the one who wants to take speculators out of the market?

How much profit do you reckon the developer will make out of the D4 site on top of what he'll make in Ongar?

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Again, it doesn't bother me developers making a profit per se, this just seems to be legitimising the brown paper bag practicies of the 80s.

You basically have one site here which has passed through a number a of hands with the state footing the bill on each occaision. Overpaying on the original site for no apparent reason (who really thought we'd be housing refugees in a 9.2M site in D4? Like how many could possibly stay in the place, 20? You could have bought them each a 5 bed detached in the suburbs at the time.) And then giving the site away for FREE to another developer for what? A notional discount on properties which he may have found hard to shift otherwise.

I always wondered why nobody said anything when certain politicians and developers were carving up the country in the 80s. I always assumed there was just so little money about that people didn't really care and that people could be corrupted so much easier. Being "one of the wealthiest countries in the world" doesn't appear to have made much of a difference.

Howitzer said:

Again, it doesn't bother me developers making a profit per se, this just seems to be legitimising the brown paper bag practicies of the 80s.

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No the profit doesn't bother me either, it's a free market. I was just trying to guage how large the brown paper bag is!!

Looks like the facts of the story are now being jumbled up to make it sound better

http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1693517&issue_id=14682

The McCormack family have agreed to swop the Ongar homes for a site at Broc House near the RTE studios in Dublin 4 where they are expected to build apartments which could sell for between €600,000 and more than €1m.

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The affordable houses AREN'T being swopped for the D4 site, a nominal price discount is being offered as outlined in the posts above.

And Liteweight I guess if the apartments are going for 1 million a pop and all the developer has to worry about are construction costs then I guess the size of this brown paper bag would be in the order of maybe E50 million.

They've done the exact same thing a number of times before over the last few years; exchange prime sites in the city centre for slow moving residential units just inside the dublin county lines.

Only thing I can't understand is why it isn't picked up by the press or Labour/Socialist party - perhaps they aren't financially savvy enough to figure it out.

This is just another scam by this government, whereby the developer gets a good deal, and then makes a donation to Fianna fail.

Will they ever stop? No, they won't.........because they don't see anything wrong with it.

Dipole said:

Only thing I can't understand is why it isn't picked up by the press or Labour

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Rainyday, according to that post the Labour councillor expected it to be sold to the "Highest bidder"!
How difficult would it have been for them to go up the road to the estate agents in Ballsbridge and issue instructions for an Auction or sealed bid tender on the property. It's not as though the estate agents in the area don't have a track record of securing record sale prices for humble lots in the area.

RainyDay said:

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This piece is from Sept 2005 so obviously the latest twist to the rather curious history of Broc house is not examined. Given the fact that Councillor Dermot Lacey noted this development originally I would have expected him to follow up on it given the glaring financial irregularities involved.

Maybe if there was someone associated with the Labour party reading this thread they could point him in it's direction ......

On another thread people allege that a Sunday newspaper is lifting it's articles from their comments. Who knows?? Still, in light of the fact that two journalists have recently posted on AAM looking for information, it surprises me that the media have not followed this story. Indeed where is the Opposition? In an election year I would have imagined they'd be all over this story like the proverbial flies on .....

Howitzer said:

Maybe if there was someone associated with the Labour party reading this thread they could point him in it's direction ......

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Why would it have to be someone associated with Labour? Maybe if someone who felt strongly about the issue and had followed it closely could point Dermot towards the thread and engage in a meaningful discussion with him on this matter?

Another one just announced (not sure how long link will work)

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The value attached to the site and the notional discount on the properties is E31.4M. For 215 units this works out at 146K each. It's not stated what % this is meant to represent of the final sale price but a price range of 165K - 235K is given. More are likely to be at the top end of this range so the average price is likely to be around 200K. So the 146K works out to be 42.2% of the notional developers price of 346K.

This 346K still looks a big number for duplexs and apartment in Lucan, Tallaght, Citywest, Clondalkin and Rathcoole (346 is the average price, assuming a 42.2% discount the upper end is 406.5K).

A Duplex in Clondalkin for over 400K!

The only units I've seen in those areas going for anything close to those numbers have been S23 units which obviously have a tax break built into their price. Is this the way the Govt is effectively going to replace the S23 schemes, the deadline for which runs out next July?

Whilst I can see the benefit of this scheme the prices being paid just seem like an enormous subsidy to the developers.

Two of the country's biggest property developer dynasties ended up with prime city sites in return for discounts on housing, writes Roisin Burke

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In 2006, the State-owned Broc House on Nutley Lane, Donnybrook, Dublin 4, just opposite Elm Park Golf Club, was swapped with Alanis for discounts totalling €9.05m on 89 affordable three-bed homes at Phibblestown Wood, Ongar, Dublin 15.

These were mostly three-bed homes sold at their discounted price for between €227,000 and €330,000.

Even if the discounts were good value, a price tag of €9.05m for Broc House was a bit of a steal for the developer, zoned as it was for residential use, with agent Jackson Colliers Stops promoting it as perfect for high-end residential development.

Alanis didn't respond to a request for comment on how well it had done out of this exchange. The AHP didn't respond to a request for comment on Friday on the extraordinarily good value both this and the Harcourt deal gave the developers involved.

Broc House had been bought by the State for a reported €9.02m five years before. Just a year earlier, the Office of Public Works sold the former Veterinary College at Ballsbridge, also Dublin 4, a two-acre site, for €171.5m, and it sold nearby property at Lad Lane, Dublin 2 for €22.5m.

House prices in Ongar were already dropping by 2007, and affordable housing buyers complained that some of the Broc House exchange discounted units were too highly priced. The developer reduced the price, then the AHP paid it an extra €3m to make up the difference -- our taxes compensating the developer for the market risks that arguably should have been all its own.

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Only 4 years late there Roisin. Any chance of a wave?

I always thought it was strange that affordable houses and refugee centres were build in poorer areas and the well to do areas could buy their way out of having to rub shoulders with the hoi polloi. For all the D4 socialists and bleeding hearts in Foxrock and Dalkey I never heard one of them say that there should be an asylum centre built on their road.

It’s easy to be egalitarian when you can exclude yourself from those you talk about (and down to) via good old fashioned economic apartheid.

Broc House was always a mystery to me.

Nutley Lane is *about* as desirable an area as you can get. Elm Park golf club 20m across the road. DART station 4-5 minutes walk away. St Vincents hospital 3-4 minutes walk away. A QBC straight into town at the top of the road and a QBC straight into town at the bottom of the road. Primary & secondary school right beside the hospital, which is right beside the shopping centre. UCD about 10 minutes walk.

This particular thing is another in the series of unusual property issues involving the state.

We started with a building in a good location which functioned well. As far as I remember it was a residential centre associated with a religious order so we have to assume it had all the things required to house groups of people in a communal environment from day 1. Then it was bought. And decomissioned. And sat idle. And monitored by security people. For years. Meantime people were building extra houses on any teeny tiny plot of land they could squeeze in beside their own house. And people were moving out to Longford because they couldn't buy closer to Dublin because of the prices. And still Broc House stood idle. And then it was sold for a fraction of what it ought to have been sold for based on the increase in prices everywhere else in the country.

I imagine that at least some of the people who got that affordable housing in Ongar might have voted to take the affordable housing in D4 had they been given a choice in the matter.

Come the revolution, comrades . . . there's going to be an enquiry and harsh words shall be said about this issue and the waste of money and resources it involved.

z

Purple said:

I never heard one of them say that there should be an asylum centre built on their road.

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Purple, you can quit with that populist line right now. Unless you happened to talk to all the bleeding hearts, etc . . . then it's unfair to make everyone out to be as unwilling to share the load as you indicate.

Sure, some people would have fought to stop Broc House ever being used to house asylum seekers but some people on that road would also have fought for it and supported it. It's easy to take a dig at people who appear to be one big blob of D4-ness, but they're not all the same you know.

z

zag said:

Purple, you can quit with that populist line right now. Unless you happened to talk to all the bleeding hearts, etc . . . then it's unfair to make everyone out to be as unwilling to share the load as you indicate.

Sure, some people would have fought to stop Broc House ever being used to house asylum seekers but some people on that road would also have fought for it and supported it. It's easy to take a dig at people who appear to be one big blob of D4-ness, but they're not all the same you know.

z

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Well if you can’t make sweeping generalisations about groups of people on the internet then where can you make them?

By the way, the centre was in D4, in the heart of the stereotypical D4 land, it was bought and left vacant for years and not a peep was heard from the smoked salmon socialists. It was then sold off and again not a peep was heard. The morally righteous and pure of virtue remained silent then the issue upon which they could have pontificated would have actually had an impact on them.
In a few months of years Fintan O’Toole may write an epic about it, after the fact, as it were.