GIC, Dexus scoops Melbourne skyscraper stake for US$392m

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A joint venture between Singaporean sovereign wealth fund GIC and Australian REIT Dexus has acquired a 50% interest in Melbourne’s Rialto Towers for A$644m (US$392m).

The 55-storey prime-grade asset is one of the largest office buildings in Melbourne’s CBD, with the buyers betting on “positive supply-demand dynamics of Melbourne’s office market over the long term”.

The transaction is a big bet at a challenging time for commercial landlords, with many businesses forced to keep their workers at home amidst the COVID-19 outbreak.

GIC will hold a 90% share in the JV, while Dexus will hold the remaining stake as the investment manager and manager of the entire complex.

Dexus and GIC have worked together previously, including the formation of a A$2bn unlisted Australian logistics trust, Dexus Australian Logistics Trust (DALT), in late 2018.

“We are pleased to continue to grow our relationship with GIC, enabling them to extend their investments into the Australian office market,” said Dexus CEO Darren Steinberg in a statement.

“In the current environment, we are focused on business continuity, and pleasingly were able to close this off-market transaction within our targeted timeframes.”

Located on Collins Street, the property is 91.7% occupied with a weighted average lease expiry (WALE) of 4.6 years.

Dexus said the deal reflects its objective of being a wholesale partner of choice, providing the group with various capital sources through economic cycles.

The firm added that it continued to focus on preserving capital during these times of elevated uncertainty, while selectively investing in assets with long-term value and strong fundamentals.

The deal is expected to close in May 2020, and Dexus will fund its portion of the transaction through existing debt facilities.

The transaction follows Dexus’ A$1.476bn acquisition of the 80 Collins Street precinct in Melbourne, comprising 105,000 sq.m. of net lettable area, in May last year.

In November last year, GIC formed a joint venture with Australian property group Charter Hall to purchase a 15-storey grade A office building in Parramatta CBD, in Sydney’s west reportedly for more than A$400m.

Dexus invests only in Australia and owns A$16.8bn of properties, with a further A$17bn of assets under management on behalf of third party clients.

GIC is headquartered in Singapore and has more than US$100bn in assets under management.