Dexus has sold its 50 per cent interest in the Grosvenor Place building in Sydney CBD, signalling one of the largest office transactions of 2020.
The existing co-owner of the landmark Sydney tower, China Investment Corporation, boosted its stake and acquired the additional half interest for $925 million.
Reflecting the current vacancy and short-term leasing risk, the building was sold at a discount of around 5 per cent to the property’s book value at the end of June.
Dexus chief investment officer Ross Du Vernet said the sale proceeds will initially be used to repay debt.
“This transaction continues our asset recycling strategy, realising value for both Dexus and our Dexus Office Partner,” Vernet said in a statement to the ASX.
“The sale further strengthens our balance sheet and enables us to organically fund higher return growth initiatives in our funds and development businesses.”
Prior to snapping up a half share in Atlassian's $1 billion timber tower in Sydney's new tech precinct in September, Dexus put its half stake in the Harry Seidler designed tower on the market earlier this year.
The Grosvenor Place building, a 44-level prime office tower, was 89 per cent occupied as of the end of June. Major tenants include Deloitte and Wilsons Parking.
The deal was negotiated by CBRE’s Flint Davidson, Simon Rooney and Stuart McCann and JLL’s Luke Billiau, Simon Storry and Rob Sewell.
Davidson said offshore investors are taking a positive view of the Sydney market, as international investors and capital search for quality property offerings abroad.
“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,” he said.
The latest CBRE Capital Flows report found offshore investors comprise 66 per cent of office acquisitions in the Australian property market for this year.
“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 products in gateway cities,” Rooney said.
Dexus acquired the initial interest in the Grosvenor Place tower in 2013, with the investment generating an annualised return of around 12 per cent since acquisition.
The half share comprises 25 per cent owned by Dexus and 25 per cent owned by the Dexus Office Partnership, in which Dexus holds a 50 per cent interest.
Subject to the FIRB approval, settlement is expected in early 2021.
In September Dexus offloaded its A-grade tower at 452 Flinders Street in Melbourne CBD to German investor Deka Immobilien for $450 million.