Major office deals for banks in doubt

Developer Liam Carroll looks like missing out on two blue-chip tenants for massive office schemes in the north docklands

TWO OF THE largest ever office lettings planned for the North Lotts area of the Dublin docklands are now unlikely to proceed because of legal disputes.

Bank of Ireland has pulled out of discussions to locate its new back office along Mayor Street while AIB Capital Markets is also expected to announce that it will not be proceeding with a major new headquarters on the former Brooks Thomas site.

The cancellation of both deals would be a major blow to Liam Carroll, Dublin's most prolific developer, whose company Danninger had been involved in "exclusive talks" with both banks for several months and had been expected to complete legal contracts within weeks.

However, Mr Carroll could still have a chance of doing a deal with the Bank of Ireland should it opt for the former Hammond Lane site on the opposite side of the city quays at Sir John Rogerson's Quay. He is currently developing a block of 15,793sq m (170,000sq ft) on that site for the State Street Bank.

The Bank of Ireland is also likely to consider Heuston South Quarter, a high quality mixed-use development opposite Heuston Station which is being carried out by Galway developer Padraic Rhatigan. It adjoins the new Eircom headquarters and is served by the Luas. East Point Business Park is also likely to be on the shortlist because it is already served by a Dart station and the Port Tunnel and will be within easy walking distance of the planned docklands Luas service.

Bank of Ireland's original plan to lease 27,870sq m (300,000sq ft) at the rear of the Brooks Thomas site along Mayor Street was apparently derailed by a legal dispute over title to part of an additional piece of land acquired by Mr Carroll to facilitate the large development. There was also some unease over the fact that the bank building would be located behind the proposed new headquarters of Anglo Irish Bank.

When a site is eventually agreed on, the bank will then start looking for a front office of 23,225sq m (250,000sq ft) to replace its existing headquarters on Baggot Street which was sold in 2007 for €200 million. Owners Quinlan Private and Paddy Shovlin's Landmark Development were recently refused planning permission to enlarge the listed building.

There has been considerable speculation in the Dublin property industry in recent days that Mr Carroll's proposed deal with AIB Capital Markets has also gone west - also because of a legal dispute. Rival developer Sean Dunne has taken High Court proceedings challenging a decision by the Dublin Docklands Development Authority that a €200 million development on Dublin's north quays, which surrounds on three sides development lands owned by Mr Dunne, is exempted development. The action has been taken by Mr Dunne and North Wall Property Holdings Company Ltd against the DDDA and a company called North Quay Investments Ltd, a company controlled by Liam Carroll.

It was not clear yesterday whether AIB Capital Markets will be looking for an alternative site or moving to AIB's extended headquarters in Ballsbridge if it does not proceed with the Liam Carroll transaction. One bank source said that it would be no surprise if AIB Capital Markets "was brought in-house" because of the dramatic fall in the bank's share price.

Though AIB has secured planning permission for an additional 18,600sq m (200,209sq ft) of offices in Ballsbridge, it is not clear whether it can accommodate the full AIB Capital Markets team which originally sought a whopping 37,160sq m (400,000 sq ft). Should AIB Capital Markets persist in seeking a new headquarters, the obvious alternative will be either Spencer Dock or the former Tedcastles site in the same area which are owned by Treasury Holdings.

Mr Carroll's initial success in organising "exclusive talks" with both Bank of Ireland and AIB Capital Markets came after he offered exceptionally favourable terms which could not be matched by rival developers. The deal with AIB is believed to have included a substantial rent-free period and a rent after that time span "in the €50s per sq ft" (more than €538 per sq m).

Even wealthy developers, like Treasury, were not tempted to match such concessions because of the huge investment involved in building a substantial high-rise block that would not start showing a decent return for at least five years - and then at a level that will probably be below open market value.

To provide AIB Capital Markets with such a large headquarters, Mr Carroll was expected to avail of proposed changes in planning proposed for the North Lotts by the DDDA. The DDDA has recommended that the maximum height for new building should increase from seven to 20 storeys.