Rio Tinto had leased 20,000 sqm at 123 Albert Street Brisbane since 2009 and engaged us in 2018 ahead of the 2021 expiry to provide a property solution that would meet their strategic goals for the proceeding 10 years. The requirement was for a total of 20,000 sqm of which flexibility was incorporated into 7,000 sqm of the space that could be released early without penalties. We executed the deal with total confidentiality in the market. Property Beyond procured space to enable Rio Tinto to create a new innovative head office with large floor plates, which supported new agile working and a best in class of their various worldwide head offices.
" I would like to thank you for all the hard work you did in getting the deal to the stage you did. I know how much work you did preparing the comprehensive HoA and building up the rapport with the boys from AM. If it wasn't for your hard work, the time and effort necessary to close the deal in our AFL and lease negotiations would have been significantly harder. "
James Hunt, Rio Tinto
Our key activities included the following:
Market analysis:
Within a three-month window, we completed the feasibility study on available properties and those that were in the development pipeline. We delivered the client more than 15 options to consider for a short-list, that included a summary of the key characteristics of the buildings/ developments and landlords.
Financial Analysis:
Providing in-depth analysis on each of the lease options, we gave Rio an insight into the forecasted cashflow, the P&L implications with the proper accounting treatment of each transaction and occupancy cost. Our modelling allowed:
- Forecasting over the life of the project, modelling the capital expenditure, fitout contributions and total cost of occupation.
- Analysis on a month-by-month and year-on-year basis allowing accurate cost forecasting which supported the decision process and approvals.
- The rent was analysed using the IFRS 16 accounting standards.
The negotiations:
With the existing Rio Tinto lease expiry date driving the tight timeframes, we ensured that we had the Heads of Agreement signed and the complex Agreement for Lease executed within two and half months. This efficiency was achievable because we understood the:
- True non-negotiables on both sides.
- Where concessions could be made.
- The ROI requirements for both sides.
The negotiations were robust at times, but they were truly constructive, collaborative and respectful. We also ensured the intricacies of the legalities were correct leaving no room for lawyers to claw back concessions. Taking the lead in the roundtable negotiations saved Rio on legal fees and provided certainty that Rio were left with the right deal, and a constructive landlord tenant relationship.
The outcome - A deal negotiated in total confidentially that delivered applicable ROI for the landlord and provided Rio Tinto with a property and lease that not only met their flexibility needs but their commercial expectations as well.
Due Diligence:
We coordinated the due diligence review of the preferred option which included a full cost and building performance review and a programme review of the development process.
We were working to an incredibly tight timescale because of the time needed to complete the development and the lease expiry date of the existing premises. Because the timescales were so tight we didn’t want any external factors slowing down the negotiations and decision process. As a result we signed heads of agreement and an AFL without the market being aware, including the existing landlord who were negotiating a ‘renewal of the existing lease’ option.
Under pressure from tight timescales we confirmed the requirements, went to market, identified a shortlist, undertook a full evaluation including a financial analysis, undertook due diligence and signed heads of terms for the preferred option within 6 months with a further 3 months to agree the lease and agreement for lease and execute all documentation. The whole transaction was kept confidential from the market until after the Agreement for lease was executed. Property Beyond were able to foster and establish a lasting partnership with the selected building’s owner/developer for Rio Tinto so that the relationship will continue during the lease term.
