Mills Oakley
Office Precommitment –2018
By 2017, Mills Oakley's swift rise among Australia's top 10 law firms meant they outgrew their Sydney location. Needing 60% more premium CBD office space by 2018, they considered either acquiring short-term space near 400 George St or relocating to a 5,500sqm office long-term.
Client need
Mills Oakley’s four existing leases at 400 George Street over 3,600sqm expired in 2022 (a further 5 years).
The alternative options Mills Oakley considered included 1 Barrack Place, which was being developed by its existing landlord, Investa Property Group (IPG). IPG had offered to lease Mills Oakley 5 floors in the new development however, after more than a year, the parties had not reached agreement.
Mills Oakley engaged Counsel to consider all options including 1 Barrack St. Mills Oakley would not accept an unmanaged position in relation to the existing lease tail and its internal financial modelling had determined strict limits on financial commitments. In the prevailing market conditions, these limits were extremely challenging.
Our approach
Counsel reviewed all alternative options from long term, whole office relocations to short term additional space, close to 400 George St and provided Mills Oakley with a summary of its options. We also reviewed Mills Oakley’s existing leases which included a capped market review in late 2017 and concluded that the capped market review represented an opportunity because it resulted in 5 years of below market rent in a market of short supply.
The remaining lease term could be attractive to a third-party subtenant or to the landlord, given the potential for reversion. We leveraged the value of competitive tension, by engaging directly with landlords who could offer, either short or long term solutions for our client including IPG.
Our value
Counsel negotiated an agreement for lease on behalf of Mills Oakley for the lease of levels 7-12, 1 Barrack Place (approximately 5,600sqm).
On an adjusted basis, we negotiated savings of approximately $10.1 million (12%) over the term of the lease compared with the proposal at the time we were appointed and resolved the lease legacy at 400 George Street (approximately $15 mill), at no risk to Mills Oakley. The total cost was also approximately $3.75 million lower than Mills Oakley’s pre-determined, acceptable financial threshold.
Counsel’s fee represented less than 2% of the value created.
“Emil saved us significant time and money, helping us to navigate the issues in a professional and highly proactive manner. The deal was “dead” on a number of occasions but the Counsel Team’s innovative structuring and tenacity eliminated the roadblocks and they were instrumental in us achieving an outstanding outcome for our new Sydney Office. We are grateful. At Mills Oakley, our people are incisive, accountable and fearless in our commitment for our clients and we found the Counsel team was exactly the same.”