Weekly Update 2/5/2022

Welcome to this week’s property news.

The battle for AMP Capital Real Estate platform appears over now with Dexus agreeing to pay between $250m and $550m for the platform.  Swallowing the once formidable platform will be challenging for Dexus as it doubles Dexus’ funds under management to $55 billion and introduces a new class of infrastructure assets.

The move will cause disruption to staff, clients and assets along the way (either by choice or otherwise), creating a range of opportunities for the industry. Dexus’ first task will be to convince the AWOF investors to stay with the Dexus platform as opposed to move to the alternative offer being out forward by Mirvac.

Dexus appear to paying a heavy price for the portfolio – the $250m upfront fee equates to around 8.9% of the AUM with a further 10% payable subject to earn out arrangements. By comparison, Dexus paid $320m for $2.9bn of AUM, reflecting 11% of AUM. 

Also this week, Charter Hall & GIC appear to have ploughed another $2.1bn into the Melbourne Office market acquiring the Southern Cross buildings from Brookfield and Blackstone on a yield of 4.5% – a very sharp cap rate in an environment of rising inflation and interest rates – perhaps a show of confidence that rental growth in Melbourne will be above average.

However, with official inflation spiking this week to 5.1% for the March quarter, the likelihood of an official rate rise in May is much greater. Continued shortages of building supplies and labour, disruptions from weather, heightened freight costs and ongoing strong demand contributed to price rises across the market. To avoid inflation reverberating through the economy in step with higher wages, the RBA will move without regard to politics to quash demand. The choice Australians make in the next election will be critical for the short term outlook. An irresponsible Federal Government could fuel wages growth and ramp up spending at a time when the economy actually requires the opposite.   

Never a dull moment in Australian Property Markets !

Until next week

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