Docklands Development: McCann Fizgerald will have to find a replacement tenant for its existing HQ in the IFSC when it moves across the quays to Grand Canal Docks - and more companies may leave the IFSC now that many tax breaks have run out, says Gretchen Friemann
Originally the DDDA selected software company Novell to develop Riverside One as the flagship office block for the Grand Canal Docks area. It's understood Novell agreed to pay €25.4 million for a larger site with completion due sometime during 2002.
But the technology meltdown forced the company to withdraw its offer to construct a six to seven-storey building featuring a restaurant on the ground floor and 55 parking spaces at basement level.
Market experts believe the DDDA negotiated a "competitive" price with McCann Fitzgerald for Riverside One in order to attract a high profile tenant.
One agent, who preferred to remain anonymous, said: "This deal has worked out well for McCann FitzGerald. The DDDA was keen to secure a high-profile tenant in one of its most prestigious sites and if any developer had come in to buy it they would have been looking at a price tag of €20 million upwards." The DDDA declined to comment on the exact sale figure but a spokeswoman said the organisation was "delighted to have them [McCann Fitzgerald] here".
She claimed such a "high-calibre tenant would inevitably lead to more interest from other companies for the surrounding sites".
The new McCann Fitzgerald headquarters is due for occupation at the beginning of 2006. In the meantime the company must find a new tenant for its existing 5,760 sq m (62,000 sq ft) of offices in the Harbourmaster 2 building in the IFSC.
One well-placed source doubted whether the law firm could attract "such a good covenant as themselves". It's understood McCann FitzGerald pays €484 per sq m (€45 per sq ft) for the Harbourmaster 2 building, which is jointly owned by Hibernian Investment Mangers and property developer Bernard McNamara.
McCann FitzGerald's present lease does not run out until 2026, which means the company will have a further 20 years of rent when it moves into its new headquarters unless it finds an acceptable replacement tenant. According to the source "it's likely to be difficult for McCann FitzGerald to find a tenant willing to pay such a high rent for that amount of space and for that length of time". However, another property expert disagreed, claiming the €28 million-plus bonus from the sale and leaseback would leave enough money to "persuade a new tenant to accept the lease".
Mr Molony also dismissed the suggestion that the Harbourmaster 2 lease would be difficult to assign, pointing out the Riverside One building is not due for completion for another two years.
He said: "We will have to wait until 2006 to judge the market conditions. It's pointless speculating now about what demand will be like two years down the line."
Mr Molony and senior partner Mr Timothy Bouchier-Hayes, who specialises in construction law, are understood to have spearheaded negotiations for the pre-sale and leaseback of Riverside One with Mr Adrian Trueick, director of investments at DTZ Sherry FitzGerald.
The company bought the site because of space shortage at the IFSC. Mr Molony, who at the age of 44 is considered relatively young to be a chairman of a top law firm, explained that McCann Fitzgerald has more than doubled in size since its move to the Harbourmaster 2 building 13 years ago.
He said: "When we first moved here we rented out 4,645 sq m (50,000 sq ft) and sublet 1,114 sq m (12,000sq ft) on a short-term basis but as the business has grown we've had to gradually take back all of that space. So although the firm has doubled in size over the last 13 years we've actually only added 1,114 sq m (12,000 sq ft) to our office space." He claimed the acquisition of the Grand Canal Docks site is about "forward planning" and said the company would adopt the same subletting strategy it had at the IFSC in the new headquarters.
Although Mr Molony declined to comment on the proposed rent at Riverside One, property experts believe the firm has agreed the same rate of €484 per sq m (€45 per sq ft). As the current rent roll is on 5,760 sq m (62,000 sq ft), McCann Fitzgerald stands to save €2.2 million under the new covenant.
The firm intends to initially lease 7,432 sq m (80,000 sq ft) of the building and sublet the rest on a short-term basis.
The Riverside One Building is part of a massive €1.9 billion rejuvenation of the Grand Canal Docks area which will feature U2's new studio in the twisting tower building as well as a number of apartment blocks, retail units, offices, a five-star hotel, restaurants and an arts/cultural building.
