Dexus sells Grosvenor Place half-stake to co-owner for $925m

The 44-level Grosvenor Place has large c2000 square metre office floorplates.

Chinese Investment Corporation is paying $925 million for a half share of Sydney’s Harry Seidler designed Grosvenor Place, adjacent to Circular Quay.

The sovereign wealth fund already owned a quarter of 225 George Street – picked up five years ago as part of a $2.5 billion takeover of Investa Property Group assets.

It acquired the latest interest from Dexus which held a 37.5 per cent stake – 25pc individually and the rest as part of its managed Dexus Office Fund, controlled equally with Canada Pension Plan Investment Board (CPP Investments) – the other vendor.

Arcadia retains the balance of the distinctive 44-level, 84,000 square metre office with ground floor retail, developed in 1988. Mirvac is the manager.

Deloitte and Wilson Parking are amongst its major occupiers however the former will in early 2022 relocate to AMP Capital’s Quay Quarter Tower, contributing to Grosvenor Place’s short Weighted Average Lease Expiry (3.4 years).

The investment was already 11pc vacant when CBRE’s Flint Davidson, Simon Rooney and Stuart McCann listed it in July.

The property is leasehold, with 78 years remaining on the ground contract.

Dexus acquired its stake in 2013; it produced an annualised 12pc return since.

Purchase price a discount, settlement expected early next year

The half share purchase of Grosvenor Place by CIC – which needs Foreign Investment Review Board permission – is Australia’s biggest commercial property transaction agreed this year (it is due to settle in 2021).

Mr Rooney said the deal is also one of the most valuable recently sealed globally (story continues below).

However the sale price is five per cent lower than the June 30, 2020 book value – caused by a variety of factors including the COVID backdrop, vacancy and short-term leasing risk (sublease office space has been increasing in most of the country’s major capitals as this year has progressed).

Two months ago Australia entered recession after 29 years, too.

Dexus repaying debt, reweighting

Dexus will repay debt with proceeds.

In an ASX statement, the group’s chief investment officer Ross Du Vernet said the sale “continues [its] asset recycling strategy, realising value for both Dexus and our Dexus Office Partner [CPIB]”.

In September the trust acquired a half share in a 40-storey 66,000 sqm Sydney office which will be Atlassian’s headquarters.

Next to that site, near Central station, Dexus is developing a $2.5b project with two more towers.

Also two months ago Dexus Wholesale Property Fund sold a Melbourne CBD commercial building to Deka Immobilien for c$440m.

CPP Investments meanwhile, with Goodman Group, in February, committed $US2.5b to a logistics focused trust.

Kicked off eight years ago with a $US890m outlay, that fund, Goodman North American Partnership, was worth $US3b at the start of 2020.

The north facing view from an upper level Grosvenor Place office.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco