Dexus has purchased 120 apartments in two new Melbourne buildings for its Real Estate Partnership 1 (DREP1) opportunity fund, which closed calling for investors last December with an investment capacity of c$1 billion.
On making the announcement, the manager also launched DREP2 – set to be “substantially larger”.
For wholesale investors only, the first capital close is expected from next quarter.
Dexus will target properties with repositioning or development potential, and special situation investments – commercial and residential.
“Responding to market conditions and continued demand for opportunity-style investments, we expect DREP2 will attract substantial investor interest from domestic and international investors, particularly from high net-worth investors and family offices looking for enhanced returns from Australian real estate investments,” DREP fund manager, Jason Howes, said.
DREP1 invests again
DREP1 will hold the 120 Melbourne apartments.
Forty one are in the first stage of a completed CBD project with the balance in a recently completed inner city complex (story continues below).
The outlay is undisclosed but assuming an average individual value of $500,000 – could total $60 million.
“We continue to see attractive entry points in the residential market, which presents further opportunity for the fund in a capital constrained investment environment,” Mr Howes said.
“DREP1 has adopted a disciplined and rigorous deal assessment process, with only four per cent of potential opportunities moving to execution” he added.
That fund, split across credit (with 38pc), repositioning (27pc), development (23pc) and special situations (12pc), is set to deliver a net equity internal rate of return of c15pc.
Its first investment was a loan to Pitard Group for a 99-unit Elsternwick complex.
It also funded a Richmond office and later, spent over $100m for a 46ha Ravenhall industrial site abutting Dexus’ Horizon 3023, which is more than twice the size.
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