Dexus to buy Melbourne office for US$1bn

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Australian REIT Dexus and the Dexus Wholesale Property Fund have teamed up to buy an office asset in Melbourne from Brisbane-based QIC Global Real Estate for A$1.476bn (US$1.03bn).

The 80 Collins Street precinct comprises 105,000 sq.m. of net lettable area in the CBD, including an existing 47-storey grade A office tower, the buyer said in a press release.

The complex also features a new 35-level office tower, a new retail podium with 21 occupiers and a 255-room boutique hotel.

Last week, Dexus successfully raised A$900m in an institutional placement to partly fund its share of the purchase.

Under the deal, Dexus will own a 75% stake and DWPF will hold the outstanding 25% interest.

80 Collins Street (image: Dexus)

The buyer said the precinct was acquired at a 5.3% equivalent yield and a circa 8% IRR.

“Following the acquisition of 52 and 60 Collins Street last year, this acquisition further enhances our scale and presence in the tightly held ‘Paris end’ of the Melbourne CBD, a prime location where our customers want to be,” said Dexus CEO Darren Steinberg.

“Importantly, vacancy in the Melbourne CBD office market is nearing an all-time low, supported by strong population growth and significant pre-commitments across the upcoming supply pipeline.”

Dexus noted it will own or manage about 20% of the total office stock in the Eastern Core of Melbourne’s CBD following the acquisition.

The REIT acquired prime development sites at 52 and 60 Collins Street for a combined A$230m in September last year, with plans to create a prime office complex.

The buyers are forecasting positive rental reversions on the existing office tower, driven by Melbourne CBD’s 3.7% office vacancy rate.

The transaction comes after the duo gained full control of the MLC Centre, a landmark office and retail complex, in Sydney after buying the outstanding 50% stake in the asset for A$800m.

Dexus is listed on the Australian stock exchange, and has A$28.9bn of assets under management.