Dexus Seizes Whole Block in $1.48bn Deal

Listed office giant Dexus has confirmed the details of its $1.476 billion acquisition of the 80 Collins Street precinct in a note to the ASX on Thursday.

Rumours started earlier this year about what is likely Melbourne’s largest ever property deal, forcing Dexus to confirm it was in the early stages of due diligence to acquire 80 Collins Street from funds giant QIC.

The fund manager has acquired a 75 per cent stake in the site worth $1.107 billion, while the Dexus Wholesale Property Fund will share the remaining 25 per cent.

The mammoth deal requires Dexus to tap the market for a fully-underwritten $900 million institutional placement and a non-underwritten security purchase plan for up to $50 million.

Dexus will now control about 20 per cent of the tightly-held eastern core of Melbourne’s CBD. The property giant acquired two separate sites totalling 35,000sq m at 52 Collins Street and 60 Collins Street in 2018.

The billion-dollar precinct developed by QIC comprises an existing 52-storey A-grade office tower, as well as a 39-storey building under construction which is currently 63 per cent pre-committed with 24 per cent of net lettable area currently under negotiation.

Twenty-one retail tenancies and a 255-room Next boutique hotel will make up the remainder of the 5,169sq m site.

QIC will remain on board to manage the development of the 39-storey tower, retail podium and hotel. Interim completion is expected by July 2020.

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A dearth of short term supply has pushed vacancy rates in Melbourne’s CBD to 3.7 per cent.

In its quarterly real estate review, Dexus said that the Melbourne CBD office market is well placed to absorb new supply but it expects the vacancy rate to increase from next year.

Dexus chief executive Darren Steinberg said that the acquisition further enhances the group’s presence in the tightly-held “Paris end” of Melbourne’s CBD.

“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,” Steinberg said.

The first two of four tranches, totalling $833 million, will be paid by June 2019, while the third and fourth tranche — totalling $274 million — will be paid in July and August 2020.

Dexus shares went into a trading halt prior to the announcement on Tuesday.