DEXUS reinvests funds from US sale into offices
DEXUS has exchanged contracts to acquire interests in a portfolio of three Sydney office properties, including a joint venture with the DEXUS Wholesale Property Fund.
The properties to be acquired include a 25 per cent interest in 225 George Street, a premium-grade office building known as Grosvenor Place, a 50 per cent interest in 2 and 4 Dawn Fraser Avenue at Sydney Olympic Park and the joint (50/50) purchase of 39 Martin Place with the property fund.
The portfolio has been acquired off-market from the Direct Property Investment Fund, a wholesale office fund managed by the property division of Colonial First State Global Asset Management. The Direct Property Investment Fund is a closed-end fund and is in a wind-down phase.
The chief executive of DEXUS, Darren Steinberg, said he was pleased to be able to announce the reinvestment of a significant portion of the proceeds from the sale of its US industrial portfolio into quality Australian office assets.
On Thursday, Mr Steinberg announced DEXUS had raised $561 million through the sale of the majority of its US industrial portfolio. The deal was done in two transactions, with 26 of 27 US properties sold, including 23 industrial properties and three land parcels in Texas.
He said an entity advised by Heitman LLC in Chicago exchanged contracts to acquire a portfolio of 25 properties.
Brokers said the deals were positive for DEXUS and the real estate investment trust sector, which is poised for a more active 2013.
The head of property research at Bank of America Merrill Lynch, Simon Garing, said he thought Mr Steinberg had done a great job in achieving several quick wins.
"The sale by DEXUS of the bulk of its US portfolio at a 13 per cent premium to book value would now set the stage for the next phase of growth," Mr Garing said.
"The company highlighted gearing will be 24 per cent post the sale, with management happy to ramp up to 35 per cent at this point in the cycle, giving the company about a $1 billion 'war chest' with the focus on Australian CBD office acquisitions."
An analyst at Moelis & Co, Simon Scott, says the deals were a good outcome for DEXUS, given the premium paid allowed the company to fund the transaction costs, breaking of swaps and the cost of setting US denominated debt into Australian dollars.
"The sale of the US assets improves the quality and risk profile of the group's earnings and allows it to focus on one geographic jurisdiction within its core asset classes," Mr Scott said.
"The resultant reduction in gearing and access to low-cost funding will allow the company to continue growing its portfolio domestically."
Frequently Asked Questions about this Article…
DEXUS exchanged contracts to acquire interests in a three‑property Sydney office portfolio for about $503.7 million. The deal includes a 25% interest in 225 George Street (Grosvenor Place), a 50% interest in 2 and 4 Dawn Fraser Avenue at Sydney Olympic Park, and a 50/50 purchase of 39 Martin Place with the DEXUS Wholesale Property Fund.
Yes. DEXUS reinvested a significant portion of proceeds from the sale of its US industrial portfolio to fund the Sydney purchases. The company raised about $561 million from selling the majority of its US industrial properties (26 of 27 assets) in two transactions.
DEXUS sold the bulk of its US industrial portfolio — 26 of 27 properties, comprising 23 industrial properties and three land parcels in Texas. An entity advised by Heitman LLC (Chicago) exchanged contracts to acquire a 25‑property portfolio, according to the article.
Following the sale, DEXUS highlighted gearing would be around 24% post‑sale. Management said it is comfortable ramping gearing up to 35% at this point in the cycle, which would provide about a $1 billion 'war chest' to focus on Australian CBD office acquisitions.
Brokers and analysts called the deals positive because the US portfolio was sold at a premium to book value and the proceeds let DEXUS reduce gearing, cover transaction costs, break swaps and convert US‑denominated debt. Analysts said the moves improve earnings quality and risk profile and enable a clearer domestic growth focus.
The Sydney portfolio was acquired off‑market from the Direct Property Investment Fund, a wholesale office fund managed by the property division of Colonial First State Global Asset Management. The Direct Property Investment Fund is a closed‑end fund that was in a wind‑down phase.
The sale of most US assets and reinvestment into premium Australian offices shifts DEXUS’s focus toward a single geographic jurisdiction — Australia — and toward its core asset class of CBD office assets. Analysts said this should simplify the group’s earnings profile and support domestic portfolio growth.
Everyday investors should note DEXUS sold the bulk of its US industrial portfolio at a premium to book value, raised meaningful capital, lowered gearing to around 24% and reinvested into high‑quality Sydney office assets. The strategy is intended to strengthen the balance sheet, focus growth domestically and create flexibility to pursue further Australian CBD office opportunities.
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