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Merger may account for development deals

A PRELIMINARY agreement struck between Andersen and Ernst & Young in Australia has major implications for commercial development in Perth.

It’s understood merger talks between the two accounting firms are at an advanced stage and industry insiders are predicting the resultant firm will provide a major new tenant for the CBD.

This would be the case even if the current proposal fails to eventuate, as Andersen will need to combine its operations with another business.

It might even be enough to get one of the commercial developments proposed for the city over the line. But there are still existing lease agreements to consider and the impact of Woodside Petroleum’s new $245 million development at the west end of St Georges Terrace.

Andersen currently inhabits the rear ground floor in St Georges Square at 225 St Georges Terrace and Ernst & Young is situated over five floors in Central Park.

As the market currently stands there isn’t the capacity in the premium building market to house a new major tenant.

However, the completion of Wood-side’s new head office, which is scheduled for September 2003, will free up 10,000sqm in Central Park.

“Potentially it (a merger between Andersen and Ernst & Young) could be enough to get one of the proposals off the ground,” an industry analyst said.

“Particularly Bishop’s See (Project Future 239), which needs a smaller pre-commitment to go ahead.”

Lead time will be a major obstacle to any commitment to one of the four major developments proposed for the city.

Industry analysts have speculated that only one of the four major commercial developments, including Kerry Packer’s Westralia Square, Hawaiian Management Group’s Project Future 239, Ralph Sarich’s Mounts Bay Road development and Futuris Corporation’s St Georges Terrace proposal will get off the ground.

It’s understood Ernst & Young’s lease at Central Park expires around 2005. If the expanded accounting operation is looking for new space after this date it could fit in with one of the new developments.

It’s understood that, when Ernst & Young put together proposal documents earlier this year to meet its leasing needs after 2005, the business was seeking up to 8,000sqm.

“Some of the new buildings’ timeframe could be too far away,” an industry source said.

“It (the new organisation) might need something quite quickly, and they have both also got leases that they can’t just bail out of.”

Industry analysts agree only one of the four proposed commercial developments is likely to go ahead in the city.

Hawaiian Management Group’s Project Future 239 is being touted as the current favourite, due to its low tenancy pre commitment level and Multiplex Construction’s equity stake in the development.

But it’s too early to dismiss any of the other players.

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