Listed property giant Dexus, along with equal joint owner Perron Group, has struck an off market deal to sell an Elizabeth Street office tower in Sydney for $630 million to Charter Hall and Abacus Property Group.
The off market transaction, struck on a yield of 5 per cent, will be split in two tranches with three quarters being paid by mid-November this year and the remaining 25 per cent subject to a “put and call” option expiring in October 2020.
Abacus Property Group will capture 32 per cent of the 201 Elizabeth Street tower, while Charter Hall's 68 per cent will be made through existing partnerships and a new partnership formed with one of Canada’s largest pension fund-owned property groups, Quadreal.
The A-Grade tower comprises 36,983sq m over a lower ground food court with 12 tenancies and two levels of basement parking for 169 cars.
“This off market transaction reflects the deep relationships we have across our platform with our investor customers, with capacity to fund major transactions in the Australian market whilst continuing our partnership relationship with Abacus,” Charter Hall managing director David Harrison said.
Abacus, led by Steven Sewell, has had its eye on institutional grade property plays after filling its coffers with a $250 million equity raising last month.
The ASX-listed property investor plans to use the funds to further invest in new opportunities with a focus on office markets and self-storage.
The deal comes after Dexus ditched $426 million plans to turn the 38-storey tower at 201 Elizabeth Street into a luxury hotel and apartment complex.
“We are pleased to have achieved an excellent outcome for our investors without taking on any development risk,” Dexus chief executive Darren Steinberg said.
“We added significant value by securing approval for a State significant development application on the site and expect to recycle the capital realised from the divestment into higher return opportunities.”
The sale is expected to contribute about $34 million in trading profits pre-tax for Dexus' fiscal 2020 result and a further $34 million the following year in the event either option is exercised.