Dexus today confirmed it is paying Queensland Investment Corporation Global Real Estate $1.476 billion for four adjoining commercial investments in Melbourne’s Collins Street.
The deal, reported by us and other media outlets in March as worth shy of $1.4 billion, comprises:
- The 47-storey former Nauru House office;
- A 35-level premium-grade office, which is under construction;
- An unbuilt retail podium, split into 21 tenancies; and
- An unbuilt 255-room hotel, to be managed by Silverneedle’s NEXT Hotels brand (interestingly, NEXT operates at Dexus’ Grounds of Alexandria development in Sydney).
The QIC portfolio listing was first mooted late last year. At that time, the four properties were loosely valued at about $1.8 billion. It was also reported QIC might seek a joint-venture partner, rather than an entire sell-down.
“Dexus Funds Management Limited (DXFM) as responsible entity of Dexus today announced that it has agreed to acquire the 80 Collins Street precinct, alongside Dexus Wholesale Property Fund (DWPF) for a total acquisition cost of $1.476 billion from QIC Global Real Estate,” the purchaser said in a statement.
Dexus will acquire 75 per cent ownership interest – the balance will be held by DWPF.
“New components of the 80 Collins Street precinct are currently being developed. Dexus’ contribution to the development is limited to the acquisition price,” Dexus said in an ASX-statement, also posted on its website.
It described the offering as a “rare opportunity to invest in a whole block precinct, strategically located in Melbourne CBD’s tightly held Eastern Core”.
The parcel, on the north-west corner of Exhibition Street, benefits from considerable foot traffic, proximity to public transport hubs and access to a deep pool of quality tenants, Dexus said.
“Dexus will own or manage circa 20 per cent of the total office stock (by area) in the Eastern Core post the acquisition of the 80 Collins Street precinct and the development of the neighbouring Dexus-owned 52 and 60 Collins Street”.
Dexus outlaid $230 million for 52 and 60 Collins Street late last year.
The acquisitions increase Dexus’ office portfolio weighting in the Melbourne CBD office market from 9 per cent to 17 per cent.
“Melbourne has the fastest growing population of any capital city in Australia,” Dexus said, adding that the “Melbourne CBD office vacancy rate of 3.7 per cent supports significant rental increases”.
Dexus also acknowledged that “Melbourne office capital values per square metre compare favourably with global gateway markets”.
Dexus is now responsible for leasing outcomes within the 80 Collins Street precinct.
The equivalent yield for the portfolio is 5.3 per cent, it said.