Bank pays record penalty of £1.5m to walk away from lease

THE Bank of Nova Scotia has paid a penalty of £1.5 million to withdraw from its leasehold interest in Canada House at St Stephen's Green, Dublin 2. The payment has been made to Equity Bank, which takes over the head lease with another 10.5 years to run.

The reverse premium, easily the highest paid in Dublin, equates to more than three times the annual rent. The Bank of Nova Scotia had overall responsibility for the annual rent of £430,000 under a 35-year lease dating back to 1972.

The bank moved to Dublin's International Financial Services Centre two years ago and sub-let its accommodation of 6,750 square feet to Equity Bank, a subsidiary of the Bank of Scotland. Equity has since increased its space to 13,000 square feet by taking over the offices of the aircraft manufacturer McDonnell Douglas.

Equity's agents, Davin and Co, handled the negotiations with the Bank of Nova Scotia, which was anxious to assign its responsibilities for the four-storey building located at the junction of St Stephen's Green and Earlsfort Terrace.

Equity's acquisition of the head lease on particularly attractive terms will be seen as a logical move given its rapid expansion in the Irish market in recent years. The bank is active in trade finance, treasury banking, asset finance and corporate tele-banking, where its parent company is one of the European market leaders. Last month, the group opened offices in Belfast.

The best-known tenant in the building is the Canadian Embassy, with about 7,300 square feet of space. The other tenants include advertising agency McCann Erickson, estate agents Palmer McCormack and management consultants McKinsey. There are about 60 car-parking places at basement level.

Canada House was built by Hardwicke and sold two years ago to Standard Life Assurance for around £6 million. The investment is yielding 7 per cent.

While the Bank of Nova Scotia forfeited £1.5 million to surrender its interest in Canada House, the Bank of Ireland has been seeking key money of more than £1 million to vacate office space in the Earlsfort Centre on the opposite side of the road.

Solicitors Arthur Cox is negotiating to take over 55,000 square feet of office space occupied by Lifetime Assurance, a subsidiary of the Bank of Ireland.

It is understood that rather than pay over a substantial premium, Arthur Cox will have to purchase the existing furnishings, fittings and filing system which are probably worth more than £500,000. The Bank of Ireland's lease in the Earlsfort Centre has another 20 years to run and even though third-generation office space is in short supply in the city, there are few takers for 55,000 square feet.

Last March, the Irish Medicines Board paid a premium of £150,000 for over 22,000 square feet of space in the Earlsfort Centre vacated by computer software. company ACT Kindle.

The Bank of Ireland's decision to move its assurance company staff back to headquarters in Baggot Street is part of a number of cutbacks planned over the next year. It will save annual rent of more than £800,000 in the Earlsfort Centre - the equivalent of £15.25 per square foot - as well as service and car-parking charges.

Apart from assigning the Lifetime lease, the bank is also selling a 23,000-square-foot office building at Burlington Road, which will be occupied until next October by Bank of Ireland Finance. The block is expected to make about £4 million.

Early next year, the bank plans to sell a 25,000-square-foot modern building occupied by Irish Civil Service Building Society at Westmoreland Street and D'Olier Street.

Ian French of Hamilton Osborne King is handling negotiations for the Bank of Ireland and Bill Nowlan is representing Arthur Cox.