$2bn on the table as Sydney’s Grosvenor Place hits market
Property group Dexus will put a stake in Sydney’s landmark Grosvenor Place on the block, with expectations that it will approach pre-crisis pricing on the $2bn-plus asset as deal-making on high-quality office towers picks up.
The move will be a key test of global demand for the country’s best office stock in the wake of the coronavirus pandemic, in which top-end office values have held up while lower-end stock comes under pressure.
Dexus has tapped real estate agents Simon Rooney and Flint Davidson of CBRE and Rob Sewell and Simon Storry of JLL to offer a slice of the building, which it holds with the backing of the Canada Pension Plan Investment Board.
A quarter-interest is expected to be formally offered but the process could generate bids for the half-stake the pair together own.
Putting the stake on the open market marks the largest commercial property offering of the year and comes after Dexus received approaches from other offshore groups before the crisis.
A Dexus-controlled trust owns a half-interest in Grosvenor Place. It has an economic interest of 37.5%, with the Canadian group at about 12.5%. The tower is co-owned by sovereign wealth fund China Investment Corporation, advised by Mirvac, and funds manager Arcadia. The groups have upgraded the plaza of the Harry Seidler-designed tower in recent years.
Office occupancy has been hit by the crisis and conditions are tough as vacancies are rising. But there has been little sign of distress at the top end of the office market, with blue-chip corporations paying rent and the pressure likely to fall on smaller buildings and new developments that may find it harder to get off the ground.
The Dexus process is likely to provide further support for the argument of top landlords that office values have held at the premium end of the market.
The company last month sold a long-held Clarence Street office block in the Sydney CBD for $530 million — its December book value — to Singaporean investment group Peakstone and flagged a 1.5% dip in office valuations.
“Our high-quality property portfolios were in a strong position as we entered into a period of uncertainty driven by the onset of the COVID-19 pandemic, with their high occupancy levels, diversified tenant base, and limited new supply coming online in our key office markets,“ Dexus chief executive Darren Steinberg said after that sale.
Dexus has declined to comment on the Grosvenor process but previously pointed to a pick-up in offshore interest in local towers. “Investment demand for quality assets is expected to remain positive, with Australia well-positioned for a recovery in foreign investment due to efforts relating to the control of the COVID-19 pandemic ahead of other countries and our longer-term economic growth prospects,“ Steinberg said last month.
Larger deals are getting under way.
Investment bank Macquarie Group is back negotiating to sell a Sydney skyscraper it is developing above the new Martin Place metro station, with local office funds manager Investa Property in talks to buy it.
Investa, potentially with the backing of German group Allianz, is looking at the project for more than $800 million, shy of the near-$1 billion price tag before the coronavirus crisis struck and a cut from an earlier deal with super fund back manager ISPT that fell away.
Grosvenor Place carries long leases to top tenants, while a deal on the Martin Place tower would show the impact of the crisis on new office projects that carry substantial leasing risk.
The George Street tower sits on a major site adjoining Circular Quay, in the northern part of the Sydney CBD, and the complex has 44 levels of prime office space.
This article originally appeared on www.theaustralian.com.au/property.
