Report slams IDB on Campsie

A scathing new report by the independent Northern Ireland Audit Office (NIAO) says the lease on the two office blocks in Londonderry was “clearly not value for money” as no tenants were ever found and no jobs ever created as a result of the misdeal.

The report published this morning also shows how the IDB’s successor Invest NI managed to unfetter taxpayers to some degree by paying a “surrender premium” of 180,000 to the developer behind Unit B in January 2008 to break the lease nine years early.

Invest NI efforts to release the taxpayer from rental obligations for Unit A are ongoing. In December 2009 the state body paid 88,000 in previously withheld rent to the second developer securing commitments to properly fit the unit out.

Last month Invest NI also reached an agreement “in principle” with the developer for the surrender of the Unit A lease.

The report states: “If this is formally agreed, this will result in savings of up to 267,864. This means that total savings of up to 639,114 will have been achieved through the negotiation process.”

Despite this progress the overall costs incurred by Invest NI for both buildings are put in the region of 1,768,386.

This strain on the public purse was initiated when the IDB signed a lease for 20,000 square feet of office accommodation under its Industrial Property Development Scheme (IPDS) after being approached by two developers in 1989 with proposals to establish a large office block for potential client investors.

The scheme proved a singular failure for everyone besides the two developers. Invest NI told the NIAO that apart from Campsie there had been only one other IPDS in Northern Ireland and that a client had been found on that scheme and no costs were incurred.

Kieran Donnelly, Comptroller and Auditor General, states that lessons should be learned from the Campsie debacle.

Principal amongst these was that “project risks had been flagged up at early stages and should have been more fully acted on.”

The new report points out that: “the Valuation and Lands Office (VLO) had expressed concerns to IDB on a number of occasions before the leases were signed about the scale, locations and demand for the project.”

It says: “VLO specifically suggested that the project should be restricted to a single 10,000 square feet unit to minimise cost and assess demand, but IDB opted to proceed with the full 20,000 square feet project as it considered this to be consistent with its objective to stimulate economic development in areas of deprivation, where clear market failure existed.”

Mr Donnelly is also of the opinion that “ongoing project monitoring and management should have been more robust.”

“Whilst the failure of IDB in 1996 to break from the leases appears to have been attributable to an oversight which proved very costly, we found no evidence of an inquiry by IDB to determine the circumstances surrounding the events at the time, or establish whether any individuals within the organisation were culpable,” the report says.

It continues: “Significant issues arose over the condition of the units. Although IDB was initially aware in 1998 that the units had been in a poor state of repair, decisive action to ensure that the developers maintained the units properly was not commenced by Invest NI until mid-2005.”

The NIAO says that: “By this time one of the buildings was in a very poor state of repair, and the other had deteriorated to a lesser extent through vandalism.”

Equally the report finds that the units had been only constructed to a “shell finish” without ceilings, floors, facilities or services despite the developers being paid rental of 45,000 per annum for fully fitted-out units.

“Whilst fit-out appears to have been deferred until tenants could be found, the obligation for the developers to complete this has remained throughout the lease period.” the audit reports.

“The absence of tenants has meant that IDB and Invest NI have not taken steps to require developers to complete the fit-out, and the units have remained on their shell condition.”