Property gets in on the mega-deal act as Dexus bids to sell $1.3bn of towers

Supplied Editorial Dexus is selling 383 Kent Street, Sydney

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.

Property group Dexus is kicking off the largest office sale of the year, with its move to sell about $1.3bn worth of Sydney office towers confirming the swing ­towards mega-deals in commercial property.

Real estate sales are now looking more like corporate transactions due to their rising scale and ability to change a company’s course in a single transaction.

The Dexus portfolio is the latest and spans offices in the CBD, Pyrmont and Parramatta, with the properties to be chased by the big players looking to gain ­immediate scale by buying into Australia.

Dexus is selling the buildings because it is looking to fund its own massive growth program, including the backing of the development of Atlassian’s $1.4bn Sydney headquarters and a neighbouring $2.5bn block, Central Place Sydney, in the city’s new technology precinct that it is developing with Frasers.

Despite the current woes of CBDs, the company is a strong believer in offices and has been buying assets, including a 49 per cent stake in the Woodside headquarters in Perth. Its development plans includes projects such as the $2.1bn Waterfront Brisbane and 60 Collins St in Melbourne.

Dexus has tapped real estate agents Josh Cullen of Cushman & Wakefield and Rob Sewell of McVay Real Estate, which will market the prime Sydney portfolio.

Other big portfolios changing hands include GPT buying the $825m Ascot logistic properties. Earlier this year, US private equity group Blackstone put a rocket under the property market when it sold a logistics portfolio to Asian group ESR for $3.8bn. For ESR, the buy has helped propel its local operation towards $10bn, putting it among the industry’s top ranks.

Other big offers in the market include Lendlease’s retail property fund looking to sell a ­series of properties, including a half stake in the $700m-plus Harbour Town Gold Coast complex via Simon Rooney of CBRE and Sam McVay of McVay Real Estate.

US fund manager AEW Capital Management is also weighing up its portfolio, with its $200m Pyrmont complex going on the block through JLL’s Luke Billiau.

The Dexus buildings have been dubbed the Sydney prime portfolio and are hitting the block at the same time as other major offices are shifting. Investa is looking for a partner on a $2.2bn portfolio of five prime Sydney and Melbourne towers, and Middle Eastern fund ADIA is selling a stake in the $1bn-plus Darling Quarter complex.

Sydney assets have been tightly held this year, with only Mirvac and M&G buying a large tower when they picked up a half interest in the $1.15bn 200 George St.

Sunsuper also partnered with Mirvac by acquiring a 49 per cent interest in the landmark heritage conversion of the Locomotive Workshop in South Eveleigh. The deal was done at the start of the month for $231m, representing a sharp 4.7 per cent cap rate, via Colliers and Knight Frank.

The latest Sydney offer comes as major landlords find that tenants are moving to higher-quality offices, and top-class towers are holding up in the face of the coronavirus pandemic.

The Dexus portfolio comprises Sydney offices including 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 buildings are billed as well-positioned to come out of the pandemic. They span more than 110,000sq m and are likely to attract a premium above the $1.3bn value.

The average portfolio occupancy is 98 per cent and each asset is underpinned by strong tenants. The buildings sit in markets that will directly benefit from major infrastructure projects.

Both 383 Kent St and 130 ­George St have development ­potential, and the portfolio could be split up, allowing developers to take these assets.

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 offices are in the fringe office market of Pyrmont. It 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.