AIB to end lease with Dunne on Merrion Road offices

ALLIED IRISH Banks (AIB) will vacate the four blocks at the front of the bank’s head office in Dublin in July 2011 after issuing a notice to terminate its lease on the buildings to Mountbrook, the group owned by developer Seán Dunne.

The bank has leased the blocks in front of AIB Bankcentre, opposite the RDS on Merrion Road, Dublin 4, since Mountbrook bought the buildings and adjoining land for €207 million in July 2006.

AIB’s solicitors AL Goodbody wrote to Mountbrook Merrion Road Development, the company behind the property, on December 23rd, 2009, saying the bank would terminate the lease on the property on July 10th, 2011.

The law firm wrote to Mountbrook on behalf of Kavwall, a property leasing firm owned by AIB.

The bank moved its head office to Bankcentre in 1980. In recent years it redeveloped a new headquarters building at the back of the site, facing on to Serpentine Avenue. This allowed the bank to sell off the lucrative part of the property facing on to Merrion Road.

AIB employs about 3,500 people at the bank centre in Ballsbridge, the majority of whom work in the new head office building at the back of the complex.

The bank will move the remaining several hundred staff working in the four blocks leased from Mountbrook into the new building in advance of the lease ending in just over a year.

AIB is also planning to announce a major cost-cutting programme later this year, which is expected to lead to substantial redundancies across the bank’s operations once the European Commission approves the bank’s viability plan under state aid rules.

The bank’s managing director Colm Doherty has said AIB will emerge a smaller bank after recapitalisation and restructuring, following the approval from the EU.

AIB had agreed to rent the four blocks from Mr Dunne’s company with a mutual break clause in the lease available to both sides.

There had been an expectation within the bank that Mr Dunne’s company would terminate the lease once planning permission was secured to redevelop the site.

Dublin City Council has yet to rule on Mountbrook’s proposal for the property, although the firm’s plans for a major office development were met with cross-party rejection from Dublin city councillors last autumn. They recommended that city planners refuse the application to demolish the four low-rise office blocks and replace them with six buildings, including one residential, up to nine storeys.

The plans involve a significant intensification of the current land use, with the floor area increasing from 15,700 sq m to 52,000 sq m.

A spokesman for the group said that it would be responding to information sought by the council “in the next couple of months”.

An AIB spokeswoman declined to comment on the termination of the lease by the bank.

AIB has challenged Mountbrook’s right to develop the plaza part of the site at the front of the property between the blocks.

Ulster Bank and Irish Nationwide Building Society provided about €165 million in loans for Mountbrook’s purchase of the Bankcentre buildings and land.

This could mean that some of the loans will be transferred to the National Asset Management Agency (Nama) through Irish Nationwide’s involvement in the Government’s toxic loan plan.

In a separate development, Bank of Ireland says it plans to sell its art collection and donate the proceeds to charity. The bank owns 2,000 pieces of art, one of the largest collections in the country.

Valued at €5 million, it will be sold on the open market. Works by Basil Blackshaw, Camille Souter and John Behan are included.

AIB has an art collection of more than 3,000 pieces which was valued at €15 million in 2008.