Dáil Éireann Debate, Wednesday - 20 July 2016
35. Deputy Catherine Connolly asked the Minister for Jobs, Enterprise and Innovation if she is aware that IDA Ireland incurred expenditure totalling €10.4 million on a lease, comprising €1 million for rent and associated costs for office space, for a property that was not occupied during 2015, and that €9.4 million was paid in 2015 to exit the lease; and if she will make a statement on the matter. [23054/16]
View answerWhat awareness did the Minister, Deputy Mitchell O'Connor, have of the expenditure by IDA Ireland of €10.4 million, €1 million of which was spent on rent for a property that was unoccupied and €9 million of which was spent on breaking the lease?
I understand the Deputy is referring to Carrisbrook House, the lease on which was taken over by IDA Ireland from September 2013 on the assignment of properties from Forfás to the IDA. Prior to this, the lease had passed through number of State agencies since a 65-year lease was first taken out in 1969. Carrisbrook House was 85% vacant for a number of years, despite having been actively marketed by Forfás and the IDA. The building was difficult to sublet, partly on account of the high cost of refurbishment. The IDA also did not have vacant possession of the entire property due to an existing lease with a tenant which runs until 2025, thereby limiting its marketability further.
After carefully considering the best course forward, the IDA decided to exit the lease with effect from December 2015 as it was the least costly option for the State. The alternative was continuing to meet contractual obligations to pay rent over the remaining lifetime of the lease until 2034, together with meeting additional liabilities that arise in the context of the full repairing and insuring lease. While the payment of €9.4 million to exit the lease was a significant amount, it represents a saving to the State of an estimated €13.65 million in comparison to maintaining the lease until completion.
I thank the Minister. It would represent a saving, but how was this allowed to happen? What was the Minister's knowledge of it? When did it come to her attention or that of the previous Minister? How could something like this be allowed to happen, where €10.4 million of taxpayers' money was spent on a property that is empty?
The Minister has given me the background to the case, which I appreciate. I appreciate that she is trying to do her best, but is she standing over this waste of taxpayers' money? When did the Department become aware of it? What have we learned from it? Is this being repeated in other buildings? We had this experience with the HSE in Galway, where it had to break a lease and pay almost €1 million. There is something seriously wrong with Government Departments that tolerate this type of policy.
The decision to exit the lease was not made lightly. The IDA commissioned the services of a professional property company to review a number of options, including the early surrender of the lease. The agency carefully considered this advice, along with that of a real estate company and a financial services consultancy which also provided professional options. After almost two years of discussions, and following intensive negotiations, the agency and landlord came to an agreement in late 2015. Had the IDA decided to remain in the lease, it would have continued for an additional 19 years. A tenant was in place that could not be moved. The IDA tried to lease the building but failed to do so. The building was vacant.
At this point, words fail me. In addition to this waste of money, consultants were paid more taxpayers' money. When did the Minister become aware of the situation? What did she learn and how will this situation be avoided in the future?
This happened in September 2013 when the IDA acquired the building on the assignment of properties from Forfás. I became aware of the situation in the past number of weeks. The decision to enter into this lease was taken a very long time ago, in 1969. Given the nature of the lease and its terms, the State's hands were very much tied in terms of options to exit its contractual obligations.
Clearly, there is a need to prevent such a scenario from happening again. I am confident that through the lessons learned we will make sure that this does not happen in the future.
