Dexus announces that it has conditionally exchanged contracts to sell a 50% interest in Grosvenor Place, Sydney. The 50% interest comprises 25% owned by Dexus and 25% owned by the Dexus Office Partnership, in which Dexus holds a 50% interest.
The sale will realise total net proceeds of $925 million, for the 50% interest or $694 million for Dexus, representing a circa 5% discount to the property’s book value at 30 June 2020, reflecting the current 11% vacancy and short term leasing risk in the asset with 60% of leases expiring over the next 3 years.
The transaction was concluded following an on-market campaign and follows $803 million of recent sales for Dexus, consistent with or above book values held prior to the sales.
The purchaser is an existing co-owner of the property, China Investment Corporation, who are advised by Mirvac, and funds manager Arcadia, and the sale is subject to FIHB approval, with settlement expected in early 2021.
Grosvenor Place is a 44-level, Premium grade office tower with ground floor retail, designed by Harry Seidler and built in 1988. The property interest is leasehold with 78 years remaining on the ground lease.
At 30 June 2020, the property was 89% occupied and had a weighted average lease expiry of 3.4 years.
Major customers include Deloitte and Wilsons Parkinu. Dexus acquired an initial interest in Grosvenor Place in 2013, with the investment generating an unlevered annualised total return of circa 12% since acquisition.
Dexus has not had property management control of the asset, which has limited its ability to leverage its asset management platform to drive investment performance.
Dexus Chief Investment Officer, Ross Du Vernet said: “This transaction continues our asset recycling strategy, realising value for both Dexus and our Dexus Office Partner.
“The sale further strengthens our balance sheet and enables us to organically fund higher return growth initiatives in our funds and development businesses. It also provides improved capacity to undertake capital management initiatives should there be a continued disconnect between public and private markets.”
The net sale proceeds will initially be used to repay debt.
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