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 million1 for the 50% interest or $694 million1 for Dexus, representing a circa 5% discount to the property’s book value at 30 June 2020, reflecting the current vacancy and short term leasing risk in the asset2.

The deal was negotiated by CBRE’s Flint Davidson, Simon Rooney and Stuart McCann, in conjunction with Rob Sewell, Luke Billiau and Simon Storry from JLL.

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 and the sale is subject to FIRB approval, with settlement expected in early 2021.

Mr Billiau told WILLIAMS MEDIA the transaction marked "one of the largest office deals on record" and will be seen regionally "as a vote of confidence for the Australian capital markets".

Flint Davidson told WILLIAMS MEDIA “More so than ever, offshore investors have a positive view of the Sydney market on a regional and global basis. An attractive yield spread, historically low financing costs, low vacancy levels on a relative basis and a resilient economy are all key factors driving strong offshore engagement and cross border capital inflows.”

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 lease3. 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 Parking. 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. 

Stuart McCann told WILLIAMS MEDIA “The Grosvenor process uncovered several new offshore entrants to the Australian office market. These investors are actively seeking strategic and long term partnership stakes in core Sydney office property, a trend we see continuing as assets which have traditionally been tightly held continue to become available.”

“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.

Simon Rooney told WILLIAMS MEDIA “The Grosvenor Place transaction is one of the largest and most competitive office transactions to occur globally in 2020 and demonstrates the strong underlying investor appetite, particularly from foreign capital, for core product in gateway cities.”

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