During 2017, ASX listed Yancoal Australia, the country’s largest pure coal producer, employing 4,000 people, had undergone a significant M&A driven expansion.
The Group’s head office lease at 363 George Street, Sydney was due to expire in mid-2018. At the time, the decline in the prime office vacancy rate for the Sydney CBD had begun to accelerate rapidly with available large options in Premium and A Grade buildings, in very short supply.
our client’s need
Yancoal engaged Counsel as Tenant Representative to provide a “Stay vs Go” analysis, and to identify potential new premises solutions if required.
Our analysis demonstrated that Yancoal would be able to reduce its footprint by between 15-20% and, subject to being highly responsive and acting quickly, it would achieve the optimum financial outcome by moving to a similar or better quality building and in addition, achieve the benefit of providing existing and new employees with a brand new, bespoke fitout. The existing fitout had started to show signs of significant wear.
Achieving the targeted financial outcome was highly dependant on careful cost control including real estate costs (eg rent), fitout and other costs. We recommended the appointment of a skilled designer (Hammond Studio) and a highly experienced project manager (Generate Property), who would manage the tender of the construction contract. Based on our experience, the early appointment of a skilled and cohesive project team added significant value during the building selection process.
After further developing the project brief, we used our propriety database of landlords and leasing agents active in the Sydney CBD, to start a competitive market search.
After receiving financial proposals, undertaking extensive comparative modelling and engaging in negotiation with various landlords, Yancoal accepted our recommendation and executed heads of agreement over approximately 1,850 sqm at Darling Park 2, Sydney, all within five weeks of our initial appointment. We worked closely with Yancoal’s legal representatives and co-ordinated the negotiation and execution of a lease shortly thereafter.
Nine months after our appointment, Yancoal moved into its new office in April 2018. The project team recommended by Counsel achieved an outstanding result by delivering a high-quality bespoke fitout, on time and on budget.
Compared with exercising its option for a further lease term at 363 George Street, our analysis indicated that Yancoal saved several million dollars.