Ingrid Fuary-Wagner and Nick Lenaghan
May 2, 2019 – 10.33am
Dexus has undertaken the biggest capital raising in the property sector since the global financial crisis to back its $1.476 billion acquisition of the 80 Collins Street mixed use precinct in Melbourne’s CBD from Queensland funds giant QIC.
The development at 80 Collins Street. Supplied
Dexus will split the ownership of the precinct – 105,000 square metres of net lettable area at the Paris end of Collins Street – with its balance sheet taking 75 per cent and its wholesale property fund taking the remaining 25 per cent stake.
The acquisition boosts Dexus’s office portfolio weighting to the Melbourne CBD office market to 17 per cent from 9 per cent. Chief executive Darren Steinberg said the deal, following Dexus’ purchase of 52 and 60 Collins Street in 2018, further enhanced the landlord’s scale and presence at the city’s east end.
“Importantly, vacancy in the Melbourne CBD office market is nearing an all-time low, supported by strong population growth and significant pre-commitments across the upcoming supply pipeline,” Mr Steinberg said.
To fund the stake held on balance sheet Dexus launched a fully underwritten $900 million placement to institutional investors at $12.10 per share.
The 25 per cent share held by the Dexus Wholesale Property Fund will initially be debt-funded.
Darren Steinberg, chief executive of Dexus, said this record sale will allow Dexus to build a flagship office in Melbourne. Daniel Munoz
The precinct includes an existing 47-storey A-grade office tower, as well as a 35-storey premium office building under construction – with 63 per cent of tenancy pre-committed – and a new 255 room boutique hotel and retail complex.
JLL’s Rob Sewell, Simon Rooney and Nick Rathgeber brokered the deal along with Ian Hetherington, Ben Azar and James Girvan of Savills.
Mr Steinberg told The Australian Financial Review that Dexus had waited a long time to find the right site in the Melbourne CBD.
“We’ve looked for a site where we can construct the equivalent of 1 Farrer Place, our Sydney flagship. With the completion of this deal and the opposite corner at 60 Collins Street, we’ll have the ability to build a flagship office precinct, which is where our customers want to be positioned,” he said.
“We’ve been able to improve the quality of our portfolio through an acquisition of a very good quality asset, improve our weighting to Melbourne where we were underweight and strengthen our balance sheet while growing our earnings at circa 5 per cent,” he added.
The raising, which closed oversubscribed on Thursday night, was led and underwritten by JPMorgan, Citi and BAML. JPMorgan’s Simon Ranson said it had broad support from Australian and offshore investors.
“Investors are pleased that Dexus is increasing its exposure to the Melbourne market and doing it with a very high-quality asset. The earnings growth that Dexus is able to deliver as well, at 5 per cent, that is a really good number in the ASX 200,” he said.
Last month the hustle for the prime real estate site came down to three listed fund managers, Dexus, Charter Hall and Mirvac.