Was the sale of the old Mijnbouw building loss-making? ‘It is hard to compare costs and benefits’

‘TU Delft sold a listed building to a company, losing millions. The deal was done behind closed doors’, was the headline of a long background article (in Dutch) in the NRC on Saturday 28 October.

The newspaper had access to ‘hundreds of internal documents’, spoke to people who were ‘directly involved’, and drew on these to sketch a picture of a Rector Magnificus and a Mayor that would do anything to sell the historic building at Mijnbouwstraat 120 to the Royal HaskoningDHV engineering company.

The NRC asserts that the building was sold below its market value, because of which TU Delft made a loss of millions of euros after ignoring negative internal advice, other potential buyers, and a risk of state support. In doing so, the Student Council, Works Council, and Supervisory Board were put on the spot at the very last minute. On top of this, the Science Centre and the Mineralogical Geological Museum lost their premises, against prior agreements that they could stay there.

‘Unique opportunity’

For a municipality that sees itself as a ‘city of innovation’, RoyalHaskoningDHV (RHDHV) is an attractive prospect. This became abundantly clear when the sale was made widely known in March 2020. In Delta, Bas Vollebregt, the then Alderman of Economics, Culture, Land Use and Real Estate, called it “a unique opportunity for the city” that such a renowned engineering firm had its sights set on Delft. “This may only happen once in 30 years.”

Rector Magnificus Tim van der Hagen viewed the arrival of Royal Haskoning as having direct advantages for TU Delft, he said in a written statement in the same article. ‘They are already involved in several research projects, various field labs (practical spaces where students, researchers, companies and knowledge institutions can develop, test and roll out solutions, Eds.), in the start-up incubator YES!Delft and in course content. The future physical proximity will ensure that we can further build on this intensive collaboration.’

Vollebregt told Delta that RoyalHaskoning had expressed an interest a year and a half earlier and had viewed various buildings, “but that the building on the Mijnbouwstraat emerged as the best option”. At the time, TU Delft did not announce the purchase price other than saying that it was ‘in line with the market’ and appropriate ‘for the location and quality of the building’.

In line with the market

The term ‘in line with the market’ has come under a magnifying glass because of the NRC article. According to the newspaper, the Mijnbouwstraat 120 building was valued at EUR 8.7 million in 2011. Internal TU Delft advisors had said that this is in line with the market. The building should not be sold for less, was NRC’s interpretation of the advice, as any risk to state support should be avoided.

On top of that, in the purchase, Royal Haskoning did not even want to commit to plans for a closer collaboration with TU Delft, writes the newspaper, even though internally that would have been ‘the justification for giving Haskoning priority in the sale of the building’.

In the end, according to the newspaper, TU Delft was paid ‘a little more than EUR 3 million’ for the building. On top of this, TU Delft also incurred ‘additional costs such as moving the occupants, maintenance costs up to the point of delivery, asbestos removal, and work on the foundations’ writes the NRC.

Costs and benefits

In the meantime, the Executive Board has drawn up a document answering questions for internal use. This was also given to Delta. In the document is both a statement that TU Delft has given to the NRC and six points from the article that it addresses. Several of these refer to ‘incorrect assumptions’ made by the NRC.

It starts with the article’s main conclusion that the Mijnbouw building was sold below its market value, leading to a loss of millions of euros for TU Delft. TU Delft reports that it had not taken the EUR 8.7 million market value into account. “Given legal accounting principles, the Ministry of Education, Culture and Science does not value TU Delft’s assets at their market value, but against the historic construction costs reduced in line with the accumulated amortisation (= carrying value).”

TU Delft informed Delta that the agreed sales prices was thus EUR 4 million, and another EUR 975,000 went on renovations and the removal of asbestos. In the end, RHDHV paid EUR 3,015,000 for the building.

Delta also requested TU Delft to list any other costs, such as for moving the Science Centre and the extra year’s worth of maintenance because of the later sale of Mijnbouwstraat 120. It did not receive the figures.

This means that Delta is not able to compare the revenues and expenses. TU Delft says that this would, in any case, be complicated. Through a spokesperson, the Campus and Real Estate Department let it be known that “costs and benefits are hard to compare. Costs are direct while benefits only transpire over time”.

Better decision

TU Delft also says that the NRC made another error in judgement in saying that during the process the Executive Board pressured the internal accountant into bending the negative advisory about possible state support. ‘During a decision-making process, it is not unusual that advice from accountants is adjusted’, it states, along with ‘By being critical and asking for additional information and substantiation, a better decision is ultimately taken’.

TU Delft also states that ‘the high costs of the building given its poor state’ were also considered in the decision-making process, just as information about what other potential buyers had offered for the Mijnbouw building

Three other potential buyers preceded RHDHV. They had signed up for a competitive tendering procedure to ‘create an incubator for robotic start-ups’ in the Mijnbouw building. NRC wrote that this procedure was stopped to allow Royal Haskoning to continue. It would have led to a year’s delay in the sale, which would have meant additional maintenance costs.

TU Delft says that this was not the case and can be proven by the timeline. “The procedure was stopped at the end of 2018. There was contact with the bidders about their offers. Discussions with RHDHV started at the beginning of 2019. In March 2019, while there was as yet no agreement with RHDHV, the procedure was stopped to provide clarity to the other bidders. TU Delft had clearly stated in the terms and conditions of the competitive tendering procedure that it had the right to end the procedure in the interim.”

According to TU Delft, none of the other interested parties have raised any objections. And despite their dissatisfaction about the speed at which they were asked to consent, the Student Council, Works Council and the Supervisory Board agreed and the accountant approved the 2020 annual account.

‘Not an everyday transaction’

Then there is the role of Rector Magnificus Tim van der Hagen who, according to the NRC, meddled ‘intensively’ with the deal and ‘had contact with Oostwegel (the top man at Haskoning) at crucial points in time, while another TU Delft Board Member officially carried out the negotiations’. Looking at the internal documents, the newspaper calls Van der Hagen ‘the driving force’.

TU Delft states that this is based on an incorrect assumption and ‘for questions about the progress of the sale’ Van der Hagen referred to the Board Member responsible, the then Vice President of Operations, and he himself ‘was not involved in the substantive preparations of the decision’. TU Delft points out that the decision to sell was ultimately taken ‘by the entire Executive Board’.

In its statement, TU Delft writes that the sale of the Mijnbouw building ‘was not an everyday transaction’ and was ‘therefore internally evaluated’. This should show that the sale was done according to ‘relevant procedures’. A TU Delft spokesperson does not want to speculate why confidential internal items then landed on the desk of a journalist. He only says that it is ‘unusual’.

Lessons

TU Delft also wrote to the NRC saying that it ‘has learned lessons’ from the evaluation of the Mijnbouw building sale. ‘It would have been more transparent for everyone involved if the steps in the sales process had been notarised in advance. The steps to be taken by potential stakeholders would then have been clearer.’

In a written response to Delta, TU Delft states a couple of other lessons: ‘such as recording a possible delay in the planning for the sale agreement; better noting of internal financial agreements; strictly separating tasks between the Board and executors; and, involving a notary public in sales processes’.

It will be years before those lessons come in handy. In the TU Delft campus strategy, one of the options is that after Mijnbouw, the nearby former main building, now the Faculty of Architecture and the Built Environment, will be sold too. However, there are no concrete plans as yet.