Dexus portfolio carve-up puts offices on the agenda

Sydney offices in play include a half share of 309/321 Kent St – in which Dexus will keep management – 383 Kent St, 100-130 Harris St in Pyrmont and 130 George St, Parramatta. Picture: Hollie Adams

Property group Dexus has confirmed the strength in the office market by splitting up a portfolio it put on the block as part of more than $1.5bn worth of disposals it is close to finalising at higher than expected prices.

As workers stream back into offices around the nation, big investors are trying to get ahead of an expected leasing upswing, which includes CBD assets, after a period of low occupancy.

Dexus put about $1.3bn worth of Sydney buildings up for sale and, in a separate move, also ­offered Brisbane’s Blue Tower and an adjoining building, with biding for these at about $420m.

The offers drew strong interest from local and offshore groups and talks are coming to a head with knockout results on a number of assets.

The Sydney offices in play include a half share of 309/321 Kent St – in which Dexus will keep management – 383 Kent St, 100-130 Harris St in Pyrmont and 130 George St, Parramatta.

The half share in the Kent St building is being chased by property house AsheMorgan, which has a record of buying CBD buildings, while Charter Hall is believed to be locking at 383 Kent St, as it could create a much larger site for the company, which owns a neighbouring Market St tower.

The combined land parcel would amount to 8000sq m, which would give it the largest commercial site in Sydney at a time when office markets are again taking off.

US firm Goldman Sachs Asset Management is aiming at the Pyrmont asset in a return to ­direct property locally. The deal could lead to it co-investing with Dexus in the distinctive complex before taking full control in coming years.

The Parramatta asset could be dealt with separately as few buildings in the western Sydney hub have traded this year.

Dexus is selling 12 Creek St Brisbane as part of a $1.5bn sell down.

Dexus tapped real estate agents Josh Cullen of Cushman & Wakefield and Rob Sewell of McVay Real Estate, but they declined to comment on the prime Sydney portfolio.

The building at 383 Kent St is in the heart of Sydney’s CBD between Town Hall and Wynyard train stations. It has 12 levels of A-grade office space with 1577sq m floor plates. The nearby 309-321 Kent St is part of a two-tower complex near Darling Harbour. The glass facade marks out the building that spans 17 levels of A-grade offices.

The Harris St boutique complex spans more than 24,000sq m of A-grade space. Originally a wool store building with ornate brick facades, it has been redone with expansive floor plates of up to 5026sq m.

In Brisbane, the striking Blue Tower and The Annex, both at 12 Creek St, are under offer from a local investment house backed by an offshore investment group, with deal at close to book value among the largest to be struck in the city in this cycle. They are being sold by Dexus and an office fund partner.

Sydney-based firm Arrow Capital Partners emerged at the head of the field in the race to buy the office skyscraper in a sign of its belief in Brisbane’s leasing ­recovery.

However, the fund manager and selling agents – CBRE’s Bruce Baker and Flint Davidson and Knight Frank’s Justin Bond and Paul Roberts – declined to ­comment.

There has been a surge of buildings offered in the Queensland capital as the market has been less affected by the coronavirus crisis and the sale also provides confidence they will also trade.

Brisbane offices have been a big focus for investors this year with Fortius Funds Management and PGIM Real Estate buying. Ashe Morgan is also seeking a partner in the Rio Tinto headquarters and a Dexus-run fund is selling Milton Green.

City leasing markets remain tough but have stabilised and big property companies such as Dexus, which has pushed deeper into logistics and funds management, are focused on building next generation towers.