The State's decision to embark on joint ventures with developers is a radical change of policy designed to cash in on the development value of sites rather than benefit from once-off sales, writes Jack Fagan

Dublin's most notorious office block - Hawkins House behind Burgh Quay - is to be demolished and replaced by a high density office complex to be owned jointly by the State and a private developer, Shelbourne Developments.

The choice of Garret Kelleher's Shelbourne Developments was taken because it already owns two adjoining properties - the Apollo House office block and car-park, and the site of a derelict petrol filling station on Tara Street. Under the terms of a deal due to be concluded shortly between the OPW and Shelbourne, Kelleher's company is to redevelop the enlarged 1.75-acre site and share the rental income with the State when the replacement buildings are eventually let.

The same revenue sharing formula is to be used by the OPW when it leases a number of other buildings and sites to development companies in Dublin's O'Connell Street and at Lower Hatch Street, Dublin 2. A former Garda office and an adjoining building at 44/45 O'Connell Street are being leased to Joe O'Reilly's company Chartered Land to allow it build a new public square along with shopping, leisure and residential facilities linking Upper O'Connell Street with Moore Street.

On the southside, the OPW is to allow Charlie Kenny's company Clancourt Developments to include a state building and site in an office scheme planned for the junction of Hatch Street and Earlsfort Terrace.

The State's decision to embark on joint ventures with private developers will be seen as a radical change of policy designed to cash in on the development value of sites rather than benefit from once-off sales. The new strategy comes after a huge volume of State buildings were sold in recent years for over €450 million.

There is now a general acceptance that with commercial property values up by 226 per cent in the last decade alone, some of the buildings should never have been sold, particularly the terrace of 13 Georgian houses opposite Government Buildings on Merrion Street which were sold after a four-year campaign for just under €5.5 million.

The Minister of State at the Office of Public Works, Noel Ahern, said yesterday that his department had been working closely with the Department of Finance to find a mechanism whereby the OPW could enter into negotiations with the owners of directly adjoining properties to facilitate joint development.

"Such developments would unlock marriage value and thereby yield a higher return than both portions being redeveloped on their own. In order to manage its risk on each transaction, the OPW has decided to put its sites into the deals by way of a long lease, share in planning, rental and void period liabilities but not construction risk."

The OPW's decision to embark on a joint venture with Shelbourne Developments on Hawkins House will bring to an end a long running debate on what to do with Dublin's most reviled office block.

Parts of the 12-storey block on Poolbeg Street have not been used in recent years because of ill fitting steel windows and the generally rundown state of the building.

The Department of Health and Children is expected to move to temporary accommodation before relocating to the current headquarters of the Department of Education on Marlborough Street when it moves to Athlone.